ARKANSAS | | | | ARKANSAS | | 71-0556208 | (State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification Number) |
| | | 17901 CHENAL PARKWAY, LITTLE ROCK, ARKANSAS | | 72223 | (Address of principal executive offices) | | (Zip Code) |
Registrant’s telephone number, including area code: (501) 978-2265 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨o Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨o Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. | | | | | | | Large accelerated filer | | x | | Accelerated filer | | ¨ | | | | | | | | Non-accelerated filer | | ¨ (Do not check if a smaller reporting company) | | Smaller reporting company | | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨o No x Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practical date. | | | Class | | | | Outstanding at July 31, 201529, 2016 | | Common Stock, $0.01 par value per share | | 86,813,057121,108,258 |
BANK OF THE OZARKS, INC. FORM 10-Q June 30, 20152016 INDEX
PART I. FINANCIALFINANCIAL INFORMATION Item 1. | Financial Statements |
BANK OF THE OZARKS, INC. CONSOLIDATED BALANCE SHEETS | | | Unaudited | | | | | Unaudited | | | | | | | | June 30, | | December 31, 2014 | | | June 30, | | | December 31, | | | | 2015 | | 2014 | | | 2016 | | | 2015 | | | | (Dollars in thousands, except per share amounts) | | | (Dollars in thousands, except per share amounts) | | ASSETS | | | | | | | | | | | | | | | Cash and due from banks | | $ | 512,908 | | | $ | 107,240 | | | $ | 147,751 | | | $ | 800,583 | | | $ | 89,122 | | Interest earning deposits | | | 1,982 | | | 3,448 | | | 2,452 | | | | 5,943 | | | | 1,866 | | | | | | | | | | | | | Cash and cash equivalents | | | 514,890 | | | 110,688 | | | 150,203 | | | | 806,526 | | | | 90,988 | | Investment securities - available for sale (“AFS”) | | | 782,277 | | | 892,129 | | | 839,321 | | | | 824,399 | | | | 602,348 | | Non-purchased loans and leases | | | 4,767,123 | | | 3,171,585 | | | 3,979,870 | | | | 8,214,900 | | | | 6,528,634 | | Purchased loans | | | 1,826,848 | | | 1,404,069 | | | 1,147,947 | | | | 1,515,104 | | | | 1,806,037 | | | | | | | | | | | | | Total loans and leases | | | 6,593,971 | | | 4,575,654 | | | 5,127,817 | | | | 9,730,004 | | | | 8,334,671 | | Allowance for loan and lease losses | | | (56,749 | ) | | (46,958 | ) | | (52,918 | ) | | | (65,133 | ) | | | (60,854 | ) | | | | | | | | | | | | Net loans and leases | | | 6,537,222 | | | 4,528,696 | | | 5,074,899 | | | | 9,664,871 | | | | 8,273,817 | | Federal Deposit Insurance Corporation (“FDIC”) loss share receivable | | | 0 | | | 50,679 | | | 0 | | | Premises and equipment, net | | | 285,087 | | | 265,061 | | | 273,591 | | | | 305,475 | | | | 296,238 | | Foreclosed assets | | | 25,973 | | | 56,356 | | | 37,775 | | | | 23,328 | | | | 22,870 | | Accrued interest receivable | | | 26,345 | | | 21,143 | | | 20,192 | | | | 35,256 | | | | 25,499 | | Bank owned life insurance (“BOLI”) | | | 269,311 | | | 179,277 | | | 182,052 | | | | 348,033 | | | | 300,427 | | Intangible assets, net | | | 151,150 | | | 108,640 | | | 105,576 | | | | 149,904 | | | | 152,340 | | Other, net | | | 118,180 | | | 85,306 | | | 82,890 | | | | 121,787 | | | | 114,932 | | | | | | | | | | | | | Total assets | | $ | 8,710,435 | | | $ | 6,297,975 | | | $ | 6,766,499 | | | $ | 12,279,579 | | | $ | 9,879,459 | | | | | | | | | | | | | | | | | | | | | | | LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | | | | | | | | Deposits: | | | | | | | | | | | | | | | Demand non-interest bearing | | $ | 1,320,779 | | | $ | 1,058,210 | | | $ | 1,145,454 | | | $ | 1,647,825 | | | $ | 1,515,482 | | Savings and interest bearing transaction | | | 3,645,551 | | | 2,748,929 | | | 2,892,989 | | | | 5,135,981 | | | | 4,017,504 | | Time | | | 2,120,969 | | | 1,176,758 | | | 1,457,939 | | | | 3,411,266 | | | | 2,438,482 | | | | | | | | | | | | | Total deposits | | | 7,087,299 | | | 4,983,897 | | | 5,496,382 | | | | 10,195,072 | | | | 7,971,468 | | Repurchase agreements with customers | | | 70,011 | | | 55,999 | | | 65,578 | | | | 53,997 | | | | 65,800 | | Other borrowings | | | 161,931 | | | 280,875 | | | 190,855 | | | | 42,053 | | | | 204,540 | | Subordinated notes | | | | 222,324 | | | | — | | Subordinated debentures | | | 117,403 | | | 64,950 | | | 64,950 | | | | 117,962 | | | | 117,685 | | FDIC clawback payable | | | 0 | | | 26,533 | | | 0 | | | Accrued interest payable and other liabilities | | | 61,033 | | | 32,063 | | | 36,892 | | | | 88,059 | | | | 52,172 | | | | | | | | | | | | | Total liabilities | | | 7,497,677 | | | 5,444,317 | | | 5,854,657 | | | | 10,719,467 | | | | 8,411,665 | | | | | | | | | | | | | | | | | | | | | | | Commitments and contingencies | | | | | | | | | | | | | | | | | | | | | | | | | Stockholders’ equity: | | | | | | | | | | | | | | | Preferred stock; $0.01 par value; 1,000,000 shares authorized; no shares outstanding at June 30, 2015 and 2014 or at December 31, 2014 | | | 0 | | | 0 | | | 0 | | | Common stock; $0.01 par value; 125,000,000 shares authorized; 86,811,457, 79,662,150 and 79,924,350 shares issued at June 30, 2015, June 30, 2014 and December 31, 2014, respectively | | | 868 | | | 797 | | | 799 | | | Preferred stock; $0.01 par value; 1,000,000 shares authorized; no shares outstanding at June 30, 2016 or December 31, 2015 | | | | — | | | | — | | Common stock; $0.01 par value; 300,000,000 and 125,000,000 shares authorized at June 30, 2016 and December 31, 2015, respectively; 90,745,002, and 90,612,388 shares issued at June 30, 2016 and December 31, 2015, respectively | | | | 907 | | | | 906 | | Additional paid-in capital | | | 566,320 | | | 315,267 | | | 324,354 | | | | 755,782 | | | | 755,995 | | Retained earnings | | | 633,998 | | | 524,134 | | | 571,454 | | | | 785,126 | | | | 706,628 | | Accumulated other comprehensive income | | | 8,068 | | | 10,006 | | | 14,132 | | | | 15,106 | | | | 7,959 | | Treasury stock, at cost, none at June 30, 2015 or June 30, 2014, 72,268 shares at December 31, 2014 | | | 0 | | | 0 | | | (2,349 | ) | | | | | | | | | | | | | Treasury stock, at cost, none at June 30, 2016 and 133,492 shares at December 31, 2015 | | | | — | | | | (6,857 | ) | Total stockholders’ equity before noncontrolling interest | | | 1,209,254 | | | 850,204 | | | 908,390 | | | | 1,556,921 | | | | 1,464,631 | | Noncontrolling interest | | | 3,504 | | | 3,454 | | | 3,452 | | | | 3,191 | | | | 3,163 | | | | | | | | | | | | | Total stockholders’ equity | | | 1,212,758 | | | 853,658 | | | 911,842 | | | | 1,560,112 | | | | 1,467,794 | | | | | | | | | | | | | Total liabilities and stockholders’ equity | | $ | 8,710,435 | | | $ | 6,297,975 | | | $ | 6,766,499 | | | $ | 12,279,579 | | | $ | 9,879,459 | | | | | | | | | | | | |
See accompanying notes to consolidated financial statements. 3
BANK OF THE OZARKS, INC. CONSOLIDATED STATEMENTS OF INCOME Unaudited | | | Three Months Ended | | Six Months Ended | | | Three Months Ended | | | Six Months Ended | | | | June 30, | | June 30, | | | June 30, | | | June 30, | | | | 2015 | | 2014 | | 2015 | | 2014 | | | 2016 | | | 2015 | | | 2016 | | | 2015 | | | | (Dollars in thousands, except per share amounts) | | | (Dollars in thousands, except per share amounts) | | Interest income: | | | | | | | | | | | | | | | | | | | | | | | | | Non-purchased loans and leases | | $ | 56,637 | | | $ | 36,833 | | | $ | 107,069 | | | $ | 70,247 | | | $ | 98,036 | | | $ | 56,637 | | | $ | 185,046 | | | $ | 107,069 | | Purchased loans | | | 35,762 | | | 25,128 | | | 68,622 | | | 42,013 | | | | 26,711 | | | | 35,762 | | | | 55,734 | | | | 68,622 | | Investment securities: | | | | | | | | | | | | | | | | | | | | | | | | | Taxable | | | 3,230 | | | 2,790 | | | 6,715 | | | 5,149 | | | | 2,442 | | | | 3,230 | | | | 4,712 | | | | 6,715 | | Tax-exempt | | | 4,456 | | | 4,974 | | | 9,125 | | | 9,371 | | | | 3,727 | | | | 4,456 | | | | 7,159 | | | | 9,125 | | Deposits with banks and federal funds sold | | | 18 | | | 35 | | | 27 | | | 38 | | | | 13 | | | | 18 | | | | 19 | | | | 27 | | | | | | | | | | | | | | | | Total interest income | | | 100,103 | | | 69,760 | | | 191,558 | | | 126,818 | | | | 130,929 | | | | 100,103 | | | | 252,670 | | | | 191,558 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest expense: | | | | | | | | | | | | | | | | | | | | | | | | | Deposits | | | 3,917 | | | 1,827 | | | 7,454 | | | 3,408 | | | | 10,214 | | | | 3,917 | | | | 18,063 | | | | 7,454 | | Repurchase agreements with customers | | | 19 | | | 13 | | | 36 | | | 25 | | | | 22 | | | | 19 | | | | 42 | | | | 36 | | Other borrowings | | | 1,443 | | | 2,692 | | | 3,146 | | | 5,347 | | | | 293 | | | | 1,443 | | | | 595 | | | | 3,146 | | Subordinated notes | | | | 283 | | | | — | | | | 283 | | | | — | | Subordinated debentures | | | 968 | | | 427 | | | 1,676 | | | 840 | | | | 1,079 | | | | 968 | | | | 2,132 | | | | 1,676 | | | | | | | | | | | | | | | | Total interest expense | | | 6,347 | | | 4,959 | | | 12,312 | | | 9,620 | | | | 11,891 | | | | 6,347 | | | | 21,115 | | | | 12,312 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net interest income | | | 93,756 | | | 64,801 | | | 179,246 | | | 117,198 | | | | 119,038 | | | | 93,756 | | | | 231,555 | | | | 179,246 | | Provision for loan and lease losses | | | (4,308 | ) | | (5,582 | ) | | (10,623 | ) | | (6,887 | ) | | | 4,834 | | | | 4,308 | | | | 6,851 | | | | 10,623 | | | | | | | | | | | | | | | | Net interest income after provision for loan and lease losses | | | 89,448 | | | 59,219 | | | 168,623 | | | 110,311 | | | | 114,204 | | | | 89,448 | | | | 224,704 | | | | 168,623 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Non-interest income: | | | | | | | | | | | | | | | | | | | | | | | | | Service charges on deposit accounts | | | 7,088 | | | 6,605 | | | 13,715 | | | 12,244 | | | | 8,119 | | | | 7,088 | | | | 15,776 | | | | 13,715 | | Mortgage lending income | | | 1,772 | | | 1,126 | | | 3,279 | | | 2,080 | | | | 2,057 | | | | 1,772 | | | | 3,341 | | | | 3,279 | | Trust income | | | 1,463 | | | 1,364 | | | 2,895 | | | 2,681 | | | | 1,574 | | | | 1,463 | | | | 3,080 | | | | 2,895 | | BOLI income | | | 1,785 | | | 1,278 | | | 5,407 | | | 2,408 | | | | 2,745 | | | | 1,785 | | | | 5,605 | | | | 5,407 | | Net amortization of FDIC loss share receivable and FDIC clawback payable | | | 0 | | | (741 | ) | | 0 | | | (49 | ) | | Other income from purchased loans, net | | | 6,971 | | | 3,629 | | | 15,879 | | | 6,940 | | | | 4,599 | | | | 6,971 | | | | 7,651 | | | | 15,879 | | Gains on sales of other assets | | | | 998 | | | | 2,557 | | | | 2,025 | | | | 5,385 | | Net gains on investment securities | | | 85 | | | 18 | | | 2,618 | | | 23 | | | | — | | | | 85 | | | | — | | | | 2,618 | | Gains on sales of other assets | | | 2,557 | | | 1,448 | | | 5,385 | | | 2,422 | | | Gain on merger and acquisition transaction | | | 0 | | | 0 | | | 0 | | | 4,667 | | | Other | | | 1,549 | | | 2,661 | | | 3,159 | | | 4,333 | | | | 2,641 | | | | 1,549 | | | | 5,119 | | | | 3,159 | | | | | | | | | | | | | | | | Total non-interest income | | | 23,270 | | | 17,388 | | | 52,337 | | | 37,749 | | | | 22,733 | | | | 23,270 | | | | 42,597 | | | | 52,337 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Non-interest expense: | | | | | | | | | | | | | | | | | | | | | | | | | Salaries and employee benefits | | | 22,646 | | | 18,831 | | | 45,243 | | | 36,520 | | | | 24,921 | | | | 22,646 | | | | 48,282 | | | | 45,243 | | Net occupancy and equipment | | | 7,344 | | | 5,707 | | | 14,635 | | | 10,751 | | | | 8,388 | | | | 7,344 | | | | 16,918 | | | | 14,635 | | Other operating expenses | | | 13,734 | | | 13,340 | | | 34,030 | | | 28,062 | | | | 17,619 | | | | 13,734 | | | | 33,414 | | | | 34,030 | | | | | | | | | | | | | | | | Total non-interest expense | | | 43,724 | | | 37,878 | | | 93,908 | | | 75,333 | | | | 50,928 | | | | 43,724 | | | | 98,614 | | | | 93,908 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Income before taxes | | | 68,994 | | | 38,729 | | | 127,052 | | | 72,727 | | | | 86,009 | | | | 68,994 | | | | 168,687 | | | | 127,052 | | Provision for income taxes | | | 24,190 | | | 12,251 | | | 42,330 | | | 20,981 | | | | 31,514 | | | | 24,190 | | | | 62,497 | | | | 42,330 | | | | | | | | | | | | | | | | Net income | | | 44,804 | | | 26,478 | | | 84,722 | | | 51,746 | | | | 54,495 | | | | 44,804 | | | | 106,190 | | | | 84,722 | | Earnings attributable to noncontrolling interest | | | (28 | ) | | 8 | | | (52 | ) | | 16 | | | | (21 | ) | | | (28 | ) | | | (28 | ) | | | (52 | ) | | | | | | | | | | | | | | | Net income available to common stockholders | | $ | 44,776 | | | $ | 26,486 | | | $ | 84,670 | | | $ | 51,762 | | | $ | 54,474 | | | $ | 44,776 | | | $ | 106,162 | | | $ | 84,670 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Basic earnings per common share | | $ | 0.52 | | | $ | 0.35 | | | $ | 0.99 | | | $ | 0.69 | | | $ | 0.60 | | | $ | 0.52 | | | $ | 1.17 | | | $ | 0.99 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Diluted earnings per common share | | $ | 0.51 | | | $ | 0.34 | | | $ | 0.98 | | | $ | 0.68 | | | $ | 0.60 | | | $ | 0.51 | | | $ | 1.16 | | | $ | 0.98 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Dividends declared per common share | | $ | 0.135 | | | $ | 0.115 | | | $ | 0.265 | | | $ | 0.225 | | | $ | 0.155 | | | $ | 0.135 | | | $ | 0.305 | | | $ | 0.265 | | | | | | | | | | | | | | | |
See accompanying notes to consolidated financial statements. 4
BANK OF THE OZARKS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Unaudited | | | Three Months Ended | | Six Months Ended | | | | | June 30, | | June 30, | | | Three Months Ended | | | Six Months Ended | | | | 2015 | | 2014 | | 2015 | | 2014 | | | June 30, | | | June 30, | | | | (Dollars in thousands) | | | 2016 | | | 2015 | | | 2016 | | | 2015 | | | | | (Dollars in thousands) | | Net income | | $ | 44,804 | | | $ | 26,478 | | | $ | 84,722 | | | $ | 51,746 | | | $ | 54,495 | | | $ | 44,804 | | | $ | 106,190 | | | $ | 84,722 | | Other comprehensive income (loss): | | | | | | | | | | | | | | | | | | | | | | | | | Unrealized gains and losses on investment securities AFS | | | (10,091 | ) | | 11,199 | | | (7,600 | ) | | 22,529 | | | | 6,187 | | | | (10,091 | ) | | | 10,382 | | | | (7,600 | ) | Tax effect of unrealized gains and losses on investment securities AFS | | | 3,844 | | | (4,393 | ) | | 3,157 | | | (8,837 | ) | | | (1,512 | ) | | | 3,844 | | | | (3,235 | ) | | | 3,157 | | Reclassification of gains and losses on investment securities AFS included in net income | | | (85 | ) | | (18 | ) | | (2,618 | ) | | (23 | ) | | | — | | | | (85 | ) | | | — | | | | (2,618 | ) | Tax effect of reclassification of gains and losses on investment securities AFS included in net income | | | 33 | | | 7 | | | 997 | | | 9 | | | | — | | | | 33 | | | | — | | | | 997 | | | | | | | | | | | | | | | | Total other comprehensive income (loss) | | | (6,299 | ) | | 6,795 | | | (6,064 | ) | | 13,678 | | | | 4,675 | | | | (6,299 | ) | | | 7,147 | | | | (6,064 | ) | | | | | | | | | | | | | | | Total comprehensive income | | $ | 38,505 | | | $ | 33,273 | | | $ | 78,658 | | | $ | 65,424 | | | $ | 59,170 | | | $ | 38,505 | | | $ | 113,337 | | | $ | 78,658 | | | | | | | | | | | | | | | |
See accompanying notes to consolidated financial statements. 5
BANK OF THE OZARKS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Unaudited | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Common Stock | | | Additional Paid-In Capital | | | Retained Earnings | | | Accumulated Other Comprehensive Income (Loss) | | | Treasury Stock | | | Non- Controlling Interest | | | Total | | | | (Dollars in thousands) | | | | | | | | | | Balances – January 1, 2014 | | $ | 737 | | | $ | 143,017 | | | $ | 488,978 | | | $ | (3,672 | ) | | $ | 0 | | | $ | 3,470 | | | $ | 632,530 | | Net income | | | 0 | | | | 0 | | | | 51,746 | | | | 0 | | | | 0 | | | | 0 | | | | 51,746 | | Earnings attributable to noncontrolling interest | | | 0 | | | | 0 | | | | 16 | | | | 0 | | | | 0 | | | | (16 | ) | | | 0 | | Total other comprehensive income | | | 0 | | | | 0 | | | | 0 | | | | 13,678 | | | | 0 | | | | 0 | | | | 13,678 | | Common stock dividends paid | | | 0 | | | | 0 | | | | (16,606 | ) | | | 0 | | | | 0 | | | | 0 | | | | (16,606 | ) | Issuance of 185,000 shares of common stock for exercise of stock options | | | 2 | | | | 1,570 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 1,572 | | Forfeiture of 400 shares of unvested restricted common stock | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | Excess tax benefit on stock-based compensation | | | 0 | | | | 1,373 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 1,373 | | Stock-based compensation expense | | | 0 | | | | 3,050 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 3,050 | | Issuance of 5,765,846 shares of common stock for acquisition of Summit Bancorp, Inc., net of issuance costs of $88,000 | | | 58 | | | | 166,257 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 166,315 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balances – June 30, 2014 | | $ | 797 | | | $ | 315,267 | | | $ | 524,134 | | | $ | 10,006 | | | $ | 0 | | | $ | 3,454 | | | $ | 853,658 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balances – January 1, 2015 | | $ | 799 | | | $ | 324,354 | | | $ | 571,454 | | | $ | 14,132 | | | $ | (2,349 | ) | | $ | 3,452 | | | $ | 911,842 | | Net income | | | 0 | | | | 0 | | | | 84,722 | | | | 0 | | | | 0 | | | | 0 | | | | 84,722 | | Earnings attributable to noncontrolling interest | | | 0 | | | | 0 | | | | (52 | ) | | | 0 | | | | 0 | | | | 52 | | | | 0 | | Total other comprehensive income (loss) | | | 0 | | | | 0 | | | | 0 | | | | (6,064 | ) | | | 0 | | | | 0 | | | | (6,064 | ) | Common stock dividends paid | | | 0 | | | | 0 | | | | (22,126 | ) | | | 0 | | | | 0 | | | | 0 | | | | (22,126 | ) | Issuance of 99,050 shares of common stock for exercise of stock options | | | 1 | | | | 996 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 997 | | Issuance of 245,300 shares of unvested restricted common stock | | | 2 | | | | (2,351 | ) | | | 0 | | | | 0 | | | | 2,349 | | | | 0 | | | | 0 | | Excess tax benefit on stock-based compensation | | | 0 | | | | 791 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 791 | | Stock-based compensation expense | | | 0 | | | | 4,220 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 4,220 | | Forfeiture of 29,875 shares of unvested restricted common stock | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | Issuance of 7,657 shares of common stock to non-employee directors | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | Issuance of 6,637,243 shares of common stock for acquisition of Intervest Bancshares Corporation, net of issuance costs of $100,000 | | | 66 | | | | 238,310 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 238,376 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balances – June 30, 2015 | | $ | 868 | | | $ | 566,320 | | | $ | 633,998 | | | $ | 8,068 | | | $ | 0 | | | $ | 3,504 | | | $ | 1,212,758 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Stock | | | Additional Paid-In Capital | | | Retained Earnings | | | Accumulated Other Comprehensive Income | | | Treasury Stock | | | Non- Controlling Interest | | | Total | | | | (Dollars in thousands, except per share amounts) | | Balances – December 31, 2014 | | $ | 799 | �� | | $ | 324,354 | | | $ | 571,454 | | | $ | 14,132 | | | $ | (2,349 | ) | | $ | 3,452 | | | $ | 911,842 | | Net income | | | — | | | | — | | | | 84,722 | | | | — | | | | — | | | | — | | | | 84,722 | | Earnings attributable to noncontrolling interest | | | — | | | | — | | | | (52 | ) | | | — | | | | — | | | | 52 | | | | — | | Total other comprehensive income (loss) | | | — | | | | — | | | | — | | | | (6,064 | ) | | | — | | | | — | | | | (6,064 | ) | Common stock dividends paid, $0.265 per share | | | — | | | | — | | | | (22,126 | ) | | | — | | | | — | | | | — | | | | (22,126 | ) | Issuance of 99,050 shares of common stock for exercise of stock options | | | 1 | | | | 996 | | | | — | | | | — | | | | — | | | | — | | | | 997 | | Issuance of 245,300 shares of unvested restricted common stock | | | 2 | | | | (2,351 | ) | | | — | | | | — | | | | 2,349 | | | | — | | | | — | | Excess tax benefit on exercise and forfeiture of stock options and restricted common stock | | | — | | | | 791 | | | | — | | | | — | | | | — | | | | — | | | | 791 | | Stock-based compensation expense | | | — | | | | 4,220 | | | | — | | | | — | | | | — | | | | — | | | | 4,220 | | Forfeiture of 29,875 shares of unvested restricted common stock | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | Issuance of 7,657 shares of common stock to non-employee directors | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | Issuance of 6,637,243 shares of common stock for acquisition of Intervest Bancshares Corporation, net of issuance costs of $100,000 | | | 66 | | | | 238,310 | | | | — | | | | — | | | | — | | | | — | | | | 238,376 | | Balances – June 30, 2015 | | $ | 868 | | | $ | 566,320 | | | $ | 633,998 | | | $ | 8,068 | | | $ | — | | | $ | 3,504 | | | $ | 1,212,758 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balances – December 31, 2015 | | $ | 906 | | | $ | 755,995 | | | $ | 706,628 | | | $ | 7,959 | | | $ | (6,857 | ) | | $ | 3,163 | | | $ | 1,467,794 | | Net income | | | — | | | | — | | | | 106,190 | | | | — | | | | — | | | | — | | | | 106,190 | | Earnings attributable to noncontrolling interest | | | — | | | | — | | | | (28 | ) | | | — | | | | — | | | | 28 | | | | — | | Total other comprehensive income | | | — | | | | — | | | | — | | | | 7,147 | | | | — | | | | — | | | | 7,147 | | Common stock dividends paid, $0.305 per share | | | — | | | | — | | | | (27,664 | ) | | | — | | | | — | | | | — | | | | (27,664 | ) | Issuance of 53,770 shares of common stock for exercise of stock options | | | — | | | | 756 | | | | — | | | | — | | | | — | | | | — | | | | 756 | | Issuance of 213,907 shares of unvested restricted common stock | | | 1 | | | | (6,858 | ) | | | — | | | | — | | | | 6,857 | | | | — | | | | — | | Excess tax benefit on exercise and forfeiture of stock options and restricted common stock | | | — | | | | 763 | | | | — | | | | — | | | | — | | | | — | | | | 763 | | Stock-based compensation expense | | | — | | | | 5,126 | | | | — | | | | — | | | | — | | | | — | | | | 5,126 | | Forfeiture of 13,986 shares of unvested restricted common stock | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | Issuance of 12,415 shares of common stock to non-employee directors | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | Balances – June 30, 2016 | | $ | 907 | | | $ | 755,782 | | | $ | 785,126 | | | $ | 15,106 | | | $ | — | | | $ | 3,191 | | | $ | 1,560,112 | |
See accompanying notes to consolidated financial statements statements.6
BANK OF THE OZARKS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Unaudited | | | Six Months Ended | | | Six Months Ended | | | | June 30, | | | June 30, | | | | 2015 | | 2014 | | | 2016 | | | 2015 | | | | (Dollars in thousands) | | | (Dollars in thousands) | | Cash flows from operating activities: | | | | | | | | | | | | | Net income | | $ | 84,722 | | | $ | 51,746 | | | $ | 106,190 | | | $ | 84,722 | | Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | | | | | | Depreciation | | | 4,575 | | | 3,816 | | | | 6,048 | | | | 4,575 | | Amortization | | | 3,236 | | | 1,932 | | | | 3,569 | | | | 3,236 | | Earnings attributable to noncontrolling interest | | | (52 | ) | | 16 | | | | (28 | ) | | | (52 | ) | Provision for loan and lease losses | | | 10,623 | | | 6,887 | | | | 6,851 | | | | 10,623 | | Provision for losses on foreclosed assets | | | 2,427 | | | 863 | | | | 1,260 | | | | 2,427 | | Net (accretion) amortization of investment securities AFS | | | (51 | ) | | 301 | | | Net amortization (accretion) of investment securities AFS | | | | 866 | | | | (51 | ) | Net gains on investment securities AFS | | | (2,618 | ) | | (23 | ) | | | — | | | | (2,618 | ) | Originations of mortgage loans held for sale | | | (136,267 | ) | | (90,110 | ) | | | (122,523 | ) | | | (136,267 | ) | Proceeds from sales of mortgage loans held for sale | | | 127,302 | | | 83,337 | | | | 112,901 | | | | 127,302 | | Accretion of purchased loans | | | (68,622 | ) | | (42,013 | ) | | | (18,694 | ) | | | (29,288 | ) | Net amortization of FDIC loss share receivable and FDIC clawback payable | | | 0 | | | 49 | | | Gains on sales of other assets | | | (5,385 | ) | | (2,422 | ) | | | (2,025 | ) | | | (5,385 | ) | Gain on merger and acquisition transaction | | | 0 | | | (4,667 | ) | | Prepayment penalty on Federal Home Loan Bank of Dallas advances | | | 2,480 | | | 0 | | | | — | | | | 2,480 | | Deferred income tax expense (benefit) | | | 2,252 | | | (3,407 | ) | | Deferred income tax expense | | | | 564 | | | | 2,252 | | Increase in cash surrender value of BOLI | | | (3,119 | ) | | (2,408 | ) | | | (5,605 | ) | | | (3,119 | ) | BOLI death benefits in excess of cash surrender value | | | (2,289 | ) | | 0 | | | | — | | | | (2,289 | ) | Stock-based compensation expense | | | 4,220 | | | 3,050 | | | | 5,126 | | | | 4,220 | | Excess tax benefit on stock-based compensation | | | (791 | ) | | (1,373 | ) | | | (763 | ) | | | (791 | ) | Changes in assets and liabilities: | | | | | | | | | | | | | Accrued interest receivable | | | (4,420 | ) | | (2,049 | ) | | | (9,757 | ) | | | (4,420 | ) | Other assets, net | | | 28,658 | | | 3,449 | | | | (10,379 | ) | | | 28,658 | | Accrued interest payable and other liabilities | | | (1,951 | ) | | 13,094 | | | | (5,349 | ) | | | (1,951 | ) | | | | | | | | | Net cash provided by operating activities | | | 44,930 | | | 20,068 | | | | 68,252 | | | | 84,264 | | | | | | | | | | Cash flows from investing activities: | | | | | | | | | | | | | Proceeds from sales of investment securities AFS | | | 32,777 | | | 48,394 | | | | — | | | | 32,777 | | Proceeds from maturities/calls/paydowns of investment securities AFS | | | 81,532 | | | 29,706 | | | | 83,365 | | | | 81,532 | | Purchases of investment securities AFS | | | (37,522 | ) | | (35,109 | ) | | | (268,513 | ) | | | (37,522 | ) | Net increase of non-purchased loans and leases | | | (800,061 | ) | | (539,695 | ) | | | (1,672,874 | ) | | | (800,061 | ) | Payments received on purchased loans | | | 462,027 | | | 207,403 | | | Payments received from FDIC under loss share agreements | | | 0 | | | 16,076 | | | Other net decreases in assets covered by FDIC loss share agreements and FDIC loss share receivable | | | 0 | | | 9,246 | | | Net payments received on purchased loans | | | | 305,336 | | | | 422,693 | | Purchases of premises and equipment | | | (9,720 | ) | | (4,586 | ) | | | (15,323 | ) | | | (9,720 | ) | Purchase of BOLI | | | (85,000 | ) | | 0 | | | Purchases of BOLI | | | | (42,000 | ) | | | (85,000 | ) | Proceeds from BOLI death benefits | | | 3,149 | | | 0 | | | | — | | | | 3,149 | | Proceeds from sales of other assets | | | 40,018 | | | 30,166 | | | | 11,333 | | | | 40,018 | | Cash invested in unconsolidated investments | | | (639 | ) | | (2,320 | ) | | Net cash received in merger and acquisition transactions | | | 274,235 | | | 121,918 | | | | | | | | | | | Cash received from (invested in) unconsolidated investments and noncontrolling interest | | | | 478 | | | | (639 | ) | Net cash received in merger and acquisition transaction | | | | — | | | | 274,235 | | Net cash used by investing activities | | | (39,204 | ) | | (118,801 | ) | | | (1,598,198 | ) | | | (78,538 | ) | | | | | | | | | Cash flows from financing activities: | | | | | | | | | | | | | Net increase in deposits | | | 406,269 | | | 41,190 | | | | 2,223,604 | | | | 406,269 | | Net repayments of other borrowings | | | (31,404 | ) | | (464 | ) | | | (162,487 | ) | | | (31,404 | ) | Net increase (decrease) in repurchase agreements with customers | | | 4,434 | | | (13,619 | ) | | Net (decrease) increase in repurchase agreements with customers | | | | (11,803 | ) | | | 4,434 | | Proceeds from exercise of stock options | | | 997 | | | 1,572 | | | | 756 | | | | 997 | | Proceeds from issuance of subordinated notes | | | | 222,315 | | | | — | | Excess tax benefit on stock-based compensation | | | 791 | | | 1,373 | | | | 763 | | | | 791 | | Cash dividends paid on common stock | | | (22,126 | ) | | (16,606 | ) | | | (27,664 | ) | | | (22,126 | ) | | | | | | | | | Net cash provided by financing activities | | | 358,961 | | | 13,446 | | | | 2,245,484 | | | | 358,961 | | | | | | | | | | Net increase (decrease) in cash and cash equivalents | | | 364,687 | | | (85,287 | ) | | Net increase in cash and cash equivalents | | | | 715,538 | | | | 364,687 | | Cash and cash equivalents – beginning of period | | | 150,203 | | | 195,975 | | | | 90,988 | | | | 150,203 | | | | | | | | | | Cash and cash equivalents – end of period | | $ | 514,890 | | | $ | 110,688 | | | $ | 806,526 | | | $ | 514,890 | | | | | | | | | |
See accompanying notes to consolidated financial statements. 7
BANK OF THE OZARKS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Unaudited 1. | Organization and Principles of Consolidation |
Bank of the Ozarks, Inc. (the “Company”) is a bankfinancial holding company headquartered in Little Rock, Arkansas, which operates under the rules and regulations of the Board of Governors of the Federal Reserve System. The Company owns a wholly-owned state chartered bank subsidiary – Bank of the Ozarks (the “Bank”), eight 100%-owned finance subsidiary business trusts – Ozark Capital Statutory Trust II (“Ozark II”), Ozark Capital Statutory Trust III (“Ozark III”), Ozark Capital Statutory Trust IV (“Ozark IV”), Ozark Capital Statutory Trust V (“Ozark V”) (collectively, the “Ozark Trusts”), Intervest Statutory Trust II (“Intervest II”), Intervest Statutory Trust III (“Intervest III”), Intervest Statutory Trust IV (“Intervest IV”) and Intervest Statutory Trust V (“Intervest V”), (collectively, the “Intervest Trusts”; and together with Ozark Trusts, the “Trusts”) and, indirectly through the Bank, a subsidiary that holds the Company’s investment securities, a subsidiary engaged in the development of real estate, a subsidiary that owns private aircraft and various other entities that hold foreclosed assets or tax credits or engage in other activities. The Company and Bank are subject to the regulation of certain federal and state agencies and undergo periodic examinations by those regulatory authorities. The consolidated financial statements include the accounts of the Company, the Bank, the investment subsidiary, the real estate subsidiary, the aircraft subsidiary and certain of those various other entities in accordance with accounting principles generally accepted in the United States (“GAAP”). Significant intercompany transactions and amounts have been eliminated in consolidation. At June 30, 2015,2016, the Company had 164177 offices, including 8083 in Arkansas, 28 in Georgia, 21 in Texas, 1625 in North Carolina, 1122 in Texas, 10 in Florida, three in Alabama and two offices each in South Carolina, and New York and oneCalifornia. On July 15, 2016, the Company closed its office in California.Greensboro, North Carolina. Additionally, as discussed in Note 16 to these financial statements, on July 20, 2016, the Company completed its acquisition of Community & Southern Holdings, Inc. (“C&S”) whereby it acquired 46 Georgia banking offices and one Florida banking office; and on July 21, 2016, the Company completed its acquisition of C1 Financial, Inc. (“C1”) whereby it acquired 33 Florida banking offices. As of July 22, 2016, the Company had 256 banking offices. The accompanying consolidated financial statements have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) in Article 10 of Regulation S-X and in accordance with the instructions to Form 10-Q and GAAP for interim financial information. Certain information, accounting policies and footnote disclosures normally included in complete financial statements prepared in accordance with GAAP have been condensed or omitted in accordance with such rules and regulations. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.2015. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. In the opinion of management, all adjustments considered necessary, consisting of normal recurring items, have been included for a fair presentationstatement of the accompanying consolidated financial statements. Operating results for the three months orand six months ended June 30, 20152016 are not necessarily indicative of the results that may be expected for the full year or future periods. Certain reclassifications of prior period amounts have been made to conform with the current period presentation. These reclassifications had no impact on previously reported net income.
During the fourth quarter of 2014, the Bank and the Federal Deposit Insurance Corporation (“FDIC”) entered into agreements terminating the loss share agreements for all seven of its FDIC-assisted acquisitions. As a result of entering these termination agreements, the Company reclassified its loans previously reported as covered by FDIC loss share to purchased loans for all periods presented, and it has reclassified all interest income on loans previously reported as covered by FDIC loss share to interest income on purchased loans for all periods presented.
During the second quarter of 2015, the Company revised its initial estimates and assumptions regarding the recovery of certain acquired loans and acquired deferred tax assets from its acquisition of Intervest Bancshares Corporation (“Intervest”). As a result, certain amounts previously reported in the Company’s consolidated financial statements have been recast.
Intervest
On February 10, 2015, the Company completed its previously announced acquisition of Intervest and its wholly-owned bank subsidiary Intervest National Bank, for an aggregate of 6,637,243 shares of its common stock (plus cash in lieu of fractional shares) in a transaction valued at approximately $238.5 million. The acquisition of Intervest provided the Company with a banking office in New York City and expanded its service area in Florida by adding five banking offices in Clearwater, Florida and one office in South Pasadena, Florida.
During the second quarter of 2015, management revised its initial estimates and assumptions regarding the recovery of certain acquired loans and acquired deferred tax assets. Because such revision occurred during the first 12 months following the date of acquisition and was not the result of a change in circumstances, management has recast the first quarter 2015 consolidated financial statements to decrease the goodwill recorded in the Intervest acquisition by $2.7 million to reflect this change in estimate.
The following table provides a summary of the assets acquired and liabilities assumed as recorded by Intervest, the estimates of the fair value adjustments necessary to adjust those acquired assets and assumed liabilities to estimated fair value, the recast adjustment described above and the estimates of the resultant fair values of those assets and liabilities as recorded by the Company. As provided for under GAAP, management has up to 12twelve months following the date of the acquisition to finalize the fair values of the acquired assets and assumed liabilities. Once management has finalized the fair values of acquired assets and assumed liabilities within this 12-month period, management considers such values to be the day 1 fair values (“Day 1 Fair Values”). The fair value adjustments and
Certain reclassifications of prior period amounts have been made to conform with the resultant fair values shown in the following table continue to be evaluated by management and may be subject to further adjustment.current period presentation. These reclassifications had no impact on previously reported net income. | | | | | | | | | | | | | | | | | | | February 10, 2015 | | | | As Recorded by Intervest | | | Fair Value Adjustments(1) | | | Recast Adjustment | | | As Recorded by the Company(1) | | | | (Dollars in thousands) | | Assets acquired: | | | | | | | | | | | | | | | | | Cash, due from banks and interest earning deposits | | $ | 274,343 | | | $ | 0 | | | $ | 0 | | | $ | 274,343 | | Investment securities | | | 21,495 | | | | 321 | a | | | 0 | | | | 21,816 | | Loans | | | 1,108,439 | | | | (33,868 | ) b | | | 4,393 | | | | 1,078,964 | | Allowance for loan losses | | | (25,208 | ) | | | 25,208 | b | | | 0 | | | | 0 | | Premises and equipment | | | 4,357 | | | | 2,256 | c | | | 0 | | | | 6,613 | | Foreclosed assets | | | 2,350 | | | | (1,710 | ) d | | | 0 | | | | 640 | | Accrued interest receivable and other assets | | | 34,076 | | | | (4,091 | ) e | | | (689 | ) | | | 29,296 | | Core deposit intangible asset | | | 0 | | | | 4,595 | f | | | 0 | | | | 4,595 | | Deferred income taxes | | | 11,758 | | | | 8,082 | g | | | (985 | ) | | | 18,855 | | | | | | | | | | | | | | | | | | | Total assets acquired | | | 1,431,610 | | | | 793 | | | | 2,719 | | | | 1,435,122 | | | | | | | | | | | | | | | | | | | | | | | | Liabilities assumed: | | | | | | | | | | | | | | | | | Deposits | | | 1,162,437 | | | | 22,211 | h | | | 0 | | | | 1,184,648 | | Subordinated debentures | | | 56,702 | | | | (4,463 | ) i | | | 0 | | | | 52,239 | | Accrued interest payable and other liabilities | | | 3,608 | | | | 358 | j | | | 0 | | | | 3,966 | | | | | | | | | | | | | | | | | | | Total liabilities assumed | | | 1,222,747 | | | | 18,106 | | | | 0 | | | | 1,240,853 | | | | | | | | | | | | | | | | | | | Net assets acquired | | $ | 208,863 | | | $ | (17,313 | ) | | $ | 2,719 | | | | 194,269 | | | | | | | | | | | | | | | | | | | Consideration paid: | | | | | | | | | | | | | | | | | Cash in lieu of fractional shares | | | | | | | | | | | | | | | (7 | ) | Stock | | | | | | | | | | | | | | | (238,476 | ) | | | | | | | | | | | | | | | | | | Total consideration paid | | | | | | | | | | | | | | | (238,483 | ) | | | | | | | | | | | | | | | | | | Goodwill | | | | | | | | | | | | | | $ | 44,214 | | | | | | | | | | | | | | | | | | |
8
(1)3. | Management is continuing to evaluate each of these fair value adjustments and may revise one or more of such fair value adjustments in future periods. To the extent that any of these fair value adjustments are revised in future periods, the resultant fair values and the amount of goodwill may be subject to further adjustment. |
Explanation of preliminary fair value adjustments
a- | Adjustment reflects the fair value adjustment based on the pricing of the acquired investment securities portfolio. |
b- | Adjustment reflects the fair value adjustment based on the evaluation of the acquired loan portfolio and to eliminate the recorded allowance for loan losses. |
c- | Adjustment reflects the fair value adjustment based on the evaluation of the premises and equipment acquired. |
d- | Adjustment reflects the fair value adjustment based on the evaluation of the acquired foreclosed assets. |
e- | Adjustment reflects the fair value adjustment based on the evaluation of accrued interest receivable and other assets. |
f- | Adjustment reflects the fair value adjustment for the core deposit intangible asset recorded as a result of the acquisition. |
g- | This adjustment reflects the differences in the carrying values of acquired assets and assumed liabilities for financial reporting purposes and their basis for federal income tax purposes. |
h- | Adjustment reflects the fair value adjustment based on the evaluation of the acquired deposits. |
i- | Adjustment reflects the fair value adjustment of these assumed liabilities based on a valuation of such instruments by an independent, third party valuation firm. |
j- | Adjustment reflects the amount needed to adjust other liabilities to estimated fair value and to record certain liabilities directly attributable to the Intervest acquisition. |
As a result of the recast adjustment described above, certain amounts previously reported in the Company’s consolidated financial statements as of March 31, 2015 have been recast. The following is a summary of those financial statement captions that have been impacted by the recast adjustment.
| | | | | | | | | | | | | | | As Previously Reported | | | Recast Adjustment | | | As Recast | | | | (Dollars in thousands) | | | | | | Purchased loans | | $ | 2,042,164 | | | $ | 4,393 | | | $ | 2,046,557 | | Net deferred tax asset | | | 63,483 | | | | (985 | ) | | | 62,498 | | Goodwill | | | 125,603 | | | | (2,719 | ) | | | 122,884 | | Income taxes receivable | | | 689 | | | | (689 | ) | | | 0 | |
Goodwill of $44.2 million, which is the excess of the merger consideration over the fair value of net assets acquired, was recorded in the Intervest acquisition and is the result of expected operational synergies, expansion of full service banking in New York City and other factors. This goodwill is not expected to be deductible for tax purposes. To the extent that management further revises any of the above fair value adjustments as a result of its continuing evaluation, the amount of goodwill recorded in the Intervest acquisition may be subject to further adjustment.
The Company’s consolidated results of operations include the operating results of Intervest beginning February 11, 2015 through the end of the reporting period. For the three months ended June 30, 2015, Intervest contributed $14.9 million of net interest income and $8.6 million of net income to the Company’s operating results. For the six months ended June 30, 2015, Intervest contributed $23.8 million of net interest income and $13.5 million of net income to the Company’s operating results.
The following unaudited supplemental pro forma information is presented to show the estimated results assuming Intervest was acquired as of the beginning of the earliest period presented, adjusted for estimated potential costs savings. These unaudited pro forma results are not necessarily indicative of the operating results that the Company would have achieved had it completed the acquisition as of January 1, 2014 or 2015 and should not be considered as representative of future operating results.
| | | | | | | | | | | Six Months Ended | | | | June 30, | | | | 2015 | | | 2014 | | | | (Dollars in thousands, except per share amounts) | | | | | Net interest income – pro forma (unaudited) | | $ | 186,428 | | | $ | 143,484 | | Net income – pro forma (unaudited) | | $ | 88,745 | | | $ | 62,949 | | Diluted earnings per common share – pro forma (unaudited) | | $ | 1.01 | | | $ | 0.76 | |
Summit Bancorp, Inc.
On May 16, 2014, the Company completed the acquisition of Summit Bancorp, Inc. (“Summit”) and Summit Bank, its wholly-owned bank subsidiary, for an aggregate of $42.5 million in cash and 5,765,846 shares of its common stock. The acquisition of Summit expanded its service area in Central, South and Western Arkansas by adding 23 banking locations and one loan production office in nine Arkansas counties. During the second quarter of 2014, the Company closed one of the banking offices and the one loan production office acquired in the Summit acquisition. During the fourth quarter of 2014 and the second quarter of 2015, the Company closed eight additional banking offices, including six that were acquired from Summit, in markets where the Company had excess branches as a result of the Summit acquisition. Goodwill of $73.4 million, which is the excess of the merger consideration over the fair value of net assets acquired, was recorded in the Summit acquisition and is the result of expected operational synergies and other factors. This goodwill is not expected to be deductible for tax purposes.
Bancshares, Inc.
On March 5, 2014, the Company completed its acquisition of Bancshares, Inc. (“Bancshares”) and OMNIBANK, N.A., its wholly-owned bank subsidiary, for an aggregate of $21.5 million in cash. The Company recognized a bargain purchase gain of $4.7 million during the first quarter of 2014 as a result of the Bancshares acquisition. The acquisition of Bancshares expanded the Company’s service area in South Texas by adding three offices in Houston and one office each in Austin, Cedar Park, Lockhart, and San Antonio.
4. | Earnings Per Common Share (“EPS”) |
Basic EPS is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding. Diluted EPS is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding after consideration of the dilutive effect, if any, of outstanding common stock options using the treasury stock method. No options to purchase shares of common stock forFor the three months ended June 30, 2015 and 2014 or the six months ended June 30, 2014 were excluded from the diluted EPS calculations as all2016, options were dilutive. Options to purchase 531,500648,293 shares of the Company’s common stock at a weighted-average exercise price of $40.34$53.80 were outstanding but not included inexcluded from the computation of diluted EPS calculations as inclusion of these options would have been anti-dilutive. No options were excluded from the diluted EPS calculations for the three months ended June 30, 2015. For the six months ended June 30, 2016 and 2015, becauseoptions to purchase 654,076 shares and 531,500 shares, respectively, of the optionsCompany’s common stock at a weighted-average exercise price was greater thanof $54.92 and $40.30, respectively, were excluded from the average market price of the common shares and inclusion would have been antidilutive.diluted EPS calculations.
The following table presents the computation of basic and diluted EPS for the periods indicated. | | | Three Months Ended | | | Six Months Ended | | | Three Months Ended | | | Six Months Ended | | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | | 2015 | | | 2014 | | | 2015 | | | 2014 | | | 2016 | | | 2015 | | | 2016 | | | 2015 | | | | (In thousands, except per share amounts) | | | (In thousands, except per share amounts) | | Numerator: | | | | | | | | | | | | | | | | | | | | | | | | | Distributed earnings allocated to common stockholders | | $ | 11,713 | | | $ | 8,497 | | | $ | 22,126 | | | $ | 16,606 | | | $ | 14,061 | | | $ | 11,713 | | | $ | 27,664 | | | $ | 22,126 | | Undistributed earnings allocated to common stockholders | | | 33,063 | | | | 17,989 | | | | 62,544 | | | | 35,156 | | | | 40,413 | | | | 33,063 | | | | 78,498 | | | | 62,544 | | | | | | | | | | | | | | | | Net income available to common stockholders | | $ | 44,776 | | | $ | 26,486 | | | $ | 84,670 | | | $ | 51,762 | | | $ | 54,474 | | | $ | 44,776 | | | $ | 106,162 | | | $ | 84,670 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Denominator: | | | | | | | | | | | | | | | | | | | | | | | | | Denominator for basic EPS – weighted-average common shares | | | 86,786 | | | | 76,743 | | | | 85,251 | | | | 75,281 | | | | 90,730 | | | | 86,786 | | | | 90,708 | | | | 85,251 | | Effect of dilutive securities – stock options | | | 729 | | | | 723 | | | | 750 | | | | 700 | | | | 558 | | | | 729 | | | | 560 | | | | 750 | | | | | | | | | | | | | | | | Denominator for diluted EPS – weighted-average common shares and assumed conversions | | | 87,515 | | | | 77,466 | | | | 86,001 | | | | 75,981 | | | | 91,288 | | | | 87,515 | | | | 91,268 | | | | 86,001 | | | | | | | | | | | | | | | | Basic EPS | | $ | 0.52 | | | $ | 0.35 | | | $ | 0.99 | | | $ | 0.69 | | | $ | 0.60 | | | $ | 0.52 | | | $ | 1.17 | | | $ | 0.99 | | | | | | | | | | | | | | | | Diluted EPS | | $ | 0.51 | | | $ | 0.34 | | | $ | 0.98 | | | $ | 0.68 | | | $ | 0.60 | | | $ | 0.51 | | | $ | 1.16 | | | $ | 0.98 | | | | | | | | | | | | | | | |
5.4. | Investment Securities |
At June 30, 20152016 and 2014 and at December 31, 2014,2015, the Company classified all of its investment securities portfolio as AFS. Accordingly, investment securities are stated at estimated fair value in the consolidated financial statements with unrealized gains and losses, net of related income tax, reported as a separate component of stockholders’ equity and included in accumulated other comprehensive income (loss).income. 9
The following table presents the amortized cost and estimated fair value of investment securities AFS as of the dates indicated. The Company’s investment in the “CRA qualified investment fund” includes shares held in a mutual fund that qualifies under the Community Reinvestment Act of 1977 for community reinvestment purposes. The Company’s holdings of “other equity securities insecurities” include Federal Home Loan Bank of Dallas (“FHLB”) and First National Banker’s Bankshares, Inc. (“FNBB”) shares which do not have readily determinable fair values and are carried at cost. | | | | | | | | | | Amortized Cost | | | Gross Unrealized Gains | | | Gross Unrealized Losses | | | Estimated Fair Value | | | | Amortized Cost | | | Gross Unrealized Gains | | | Gross Unrealized Losses | | | Estimated Fair Value | | | (Dollars in thousands) | | | | (Dollars in thousands) | | | June 30, 2015: | | | | | | | | | | June 30, 2016: | | | | | | | | | | | | | | | | | | Obligations of state and political subdivisions | | $ | 496,777 | | | $ | 11,768 | | | $ | (1,630 | ) | | $ | 506,915 | | | $ | 584,184 | | | $ | 18,921 | | | $ | (15 | ) | | $ | 603,090 | | U.S. Government agency securities | | | 257,849 | | | | 4,627 | | | | (1,723 | ) | | | 260,753 | | | | 206,234 | | | | 4,382 | | | | (60 | ) | | | 210,556 | | Corporate obligations | | | 3,574 | | | | 0 | | | | 0 | | | | 3,574 | | | | 3,554 | | | | — | | | | — | | | | 3,554 | | CRA qualified investment fund | | | 1,028 | | | | 0 | | | | (8 | ) | | | 1,020 | | | | 1,049 | | | | 12 | | | | — | | | | 1,061 | | FHLB and FNBB equity securities | | | 10,015 | | | | 0 | | | | 0 | | | | 10,015 | | | | | | | | | | | | | | | | | Other equity securities | | | | 6,138 | | | | — | | | | — | | | | 6,138 | | Total | | $ | 769,243 | | | $ | 16,395 | | | $ | (3,361 | ) | | $ | 782,277 | | | $ | 801,159 | | | $ | 23,315 | | | $ | (75 | ) | | $ | 824,399 | | | | | | | | | | | | | | | | | December 31, 2014: | | | | | | | | | | December 31, 2015: | | | | | | | | | | | | | | | | | | Obligations of state and political subdivisions | | $ | 555,335 | | | $ | 18,267 | | | $ | (393 | ) | | $ | 573,209 | | | $ | 415,095 | | | $ | 12,321 | | | $ | (138 | ) | | $ | 427,278 | | U.S. Government agency securities | | | 245,854 | | | | 6,144 | | | | (765 | ) | | | 251,233 | | | | 146,265 | | | | 1,720 | | | | (1,035 | ) | | | 146,950 | | Corporate obligations | | | 654 | | | | 0 | | | | 0 | | | | 654 | | | | 3,562 | | | | — | | | | — | | | | 3,562 | | FHLB and FNBB equity securities | | | 14,225 | | | | 0 | | | | 0 | | | | 14,225 | | | | | | | | | | | | | | | | | CRA qualified investment fund | | | | 1,038 | | | | — | | | | (10 | ) | | | 1,028 | | Other equity securities | | | | 23,530 | | | | — | | | | — | | | | 23,530 | | Total | | $ | 816,068 | | | $ | 24,411 | | | $ | (1,158 | ) | | $ | 839,321 | | | $ | 589,490 | | | $ | 14,041 | | | $ | (1,183 | ) | | $ | 602,348 | | | | | | | | | | | | | | | | | June 30, 2014: | | | | | | | | | | Obligations of state and political subdivisions | | $ | 603,533 | | | $ | 15,536 | | | $ | (2,504 | ) | | $ | 616,565 | | | U.S. Government agency securities | | | 254,878 | | | | 5,613 | | | | (2,180 | ) | | | 258,311 | | | Corporate obligations | | | 685 | | | | 0 | | | | 0 | | | | 685 | | | FHLB and FNBB equity securities | | | 16,568 | | | | 0 | | | | 0 | | | | 16,568 | | | | | | | | | | | | | | | | | Total | | $ | 875,664 | | | $ | 21,149 | | | $ | (4,684 | ) | | $ | 892,129 | | | | | | | | | | | | | | | | |
The following table shows estimated fair value of investment securities AFS having gross unrealized losses and the amount of such unrealized losses, aggregated by investment category and length of time that individual investment securities have been in a continuous unrealized loss position, as of the dates indicated. | | | | | | | | | | | | | | Less than 12 Months | | | 12 Months or More | | | Total | | | | Less than 12 Months | | | 12 Months or More | | | Total | | | Estimated Fair Value | | | Unrealized Losses | | | Estimated Fair Value | | | Unrealized Losses | | | Estimated Fair Value | | | Unrealized Losses | | | | Estimated Fair Value | | | Unrealized Losses | | | Estimated Fair Value | | | Unrealized Losses | | | Estimated Fair Value | | | Unrealized Losses | | | (Dollars in thousands) | | June 30, 2016: | | | | | | | | | | | | | | | | | | | | | | | | | | Obligations of state and political subdivisions | | | $ | 12,007 | | | $ | 3 | | | $ | 4,747 | | | $ | 11 | | | $ | 16,754 | | | $ | 14 | | U.S. Government agency securities | | | | 16,959 | | | | 55 | | | | 150 | | | | 6 | | | | 17,109 | | | | 61 | | Total temporarily impaired securities | | | $ | 28,966 | | | $ | 58 | | | $ | 4,897 | | | $ | 17 | | | $ | 33,863 | | | $ | 75 | | | | (Dollars in thousands) | | | | | | | | | | | | | | | | | | | | | | | | | | June 30, 2015: | | | | | | | | | | | | | | December 31, 2015: | | | | | | | | | | | | | | | | | | | | | | | | | | Obligations of state and political subdivisions | | $ | 104,621 | | | $ | 1,532 | | | $ | 7,515 | | | $ | 98 | | | $ | 112,136 | | | $ | 1,630 | | | $ | 18,018 | | | $ | 114 | | | $ | 6,167 | | | $ | 24 | | | $ | 24,185 | | | $ | 138 | | U.S. Government agency securities | | | 76,252 | | | | 1,534 | | | | 7,181 | | | | 189 | | | | 83,433 | | | | 1,723 | | | | 72,671 | | | | 930 | | | | 4,381 | | | | 105 | | | | 77,052 | | | | 1,035 | | CRA qualified investment fund | | | 1,020 | | | | 8 | | | | 0 | | | | 0 | | | | 1,020 | | | | 8 | | | | 1,029 | | | | 10 | | | | — | | | | — | | | | 1,029 | | | | 10 | | | | | | | | | | | | | | | | | | | | | | Total temporarily impaired securities | | $ | 181,893 | | | $ | 3,074 | | | $ | 14,696 | | | $ | 287 | | | $ | 196,589 | | | $ | 3,361 | | | $ | 91,718 | | | $ | 1,054 | | | $ | 10,548 | | | $ | 129 | | | $ | 102,266 | | | $ | 1,183 | | | | | | | | | | | | | | | | | | | | | | | December 31, 2014: | | | | | | | | | | | | | | Obligations of state and political subdivisions | | $ | 29,174 | | | $ | 75 | | | $ | 34,414 | | | $ | 318 | | | $ | 63,588 | | | $ | 393 | | | U.S. Government agency securities | | | 9,630 | | | | 25 | | | | 47,626 | | | | 740 | | | | 57,256 | | | | 765 | | | | | | | | | | | | | | | | | | | | | | | Total temporarily impaired securities | | $ | 38,804 | | | $ | 100 | | | $ | 82,040 | | | $ | 1,058 | | | $ | 120,844 | | | $ | 1,158 | | | | | | | | | | | | | | | | | | | | | | | | June 30, 2014: | | | | | | | | | | | | | | Obligations of state and political subdivisions | | $ | 60,769 | | | $ | 386 | | | $ | 79,000 | | | $ | 2,118 | | | $ | 139,769 | | | $ | 2,504 | | | U.S. Government agency securities | | | 15,227 | | | | 67 | | | | 58,608 | | | | 2,113 | | | | 73,835 | | | | 2,180 | | | | | | | | | | | | | | | | | | | | | | | Total temporarily impaired securities | | $ | 75,996 | | | $ | 453 | | | $ | 137,608 | | | $ | 4,231 | | | $ | 213,604 | | | $ | 4,684 | | | | | | | | | | | | | | | | | | | | | | |
In evaluating the Company’s unrealized loss positions for other-than-temporary impairment of its investment securities portfolio, management considers the credit quality of the issuer, the nature and cause of the unrealized loss, the severity and duration of the impairments and other factors. At June 30, 2016 and December 31, 2015, management determined the unrealized losses were the result of fluctuations in interest rates and did not reflect deteriorations of the credit quality of the investments. Accordingly, management considers these unrealized losses to be temporary in nature. The Company does not have the intent to sell these investment securities with unrealized losses and, more likely than not, will not be required to sell these investment securities before fair value recovers to amortized cost. 10
The following table shows the amortized cost and estimated fair value of investment securities AFS by maturity or estimated date of repayment as of the date indicated. | | | June 30, 2015 | | | June 30, 2016 | | Maturity or Estimated Repayment | | Amortized Cost | | | Estimated Fair Value | | | Amortized Cost | | | Estimated Fair Value | | | | (Dollars in thousands) | | | (Dollars in thousands) | | One year or less | | $ | 36,133 | | | $ | 36,619 | | | $ | 36,283 | | | $ | 36,803 | | After one year to five years | | | 139,079 | | | | 140,690 | | | | 128,770 | | | | 131,296 | | After five years to ten years | | | 189,702 | | | | 192,251 | | | | 181,074 | | | | 186,674 | | After ten years | | | 404,329 | | | | 412,717 | | | | 455,032 | | | | 469,626 | | | | | | | | | | Total | | $ | 769,243 | | | $ | 782,277 | | | $ | 801,159 | | | $ | 824,399 | | | | | | | | | |
For purposes of this maturity or repayment distribution, all investment securities AFS are shown based on their contractual maturity date or estimated date of repayment, except (i) FHLB and FNBB equity securities and the CRA qualified investment fund with no contractual maturity date are shown in the longest maturity category and (ii) U.S. Government agency securities and municipal housing authority securities backed by residential mortgages are allocated among various maturities or repayment categories based on an estimated repayment schedule utilizing Bloomberg median prepayment speeds or other estimates of prepayment speeds and interest rate levels at the measurement date. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. The following table is a summary of sales activities in the Company’s investment securities AFS for the periods indicated. | | | Three Months Ended June 30, | | | Six Months Ended June 30, | | Three Months Ended June 30, | | | Six Months Ended June 30, | | | | 2015 | | | 2014 | | | 2015 | | | 2014 | | 2016 | | | 2015 | | | 2016 | | | 2015 | | | | (Dollars in thousands) | | (Dollars in thousands) | | Sales proceeds | | $ | 2,660 | | | $ | 47,170 | | | $ | 32,777 | | | $ | 48,394 | | $ | — | | | $ | 2,660 | | | $ | — | | | $ | 32,777 | | | | | | | | | | | | | | | | | Gross realized gains | | $ | 85 | | | $ | 18 | | | $ | 2,619 | | | $ | 23 | | | | | | | 85 | | | | | | | | 2,619 | | Gross realized losses | | | 0 | | | | 0 | | | | (1 | ) | | | 0 | | | — | | | | — | | | | — | | | | (1 | ) | | | | | | | | | | | | | | | Net gains on investment securities | | $ | 85 | | | $ | 18 | | | $ | 2,618 | | | $ | 23 | | $ | — | | | $ | 85 | | | $ | — | | | $ | 2,618 | | | | | | | | | | | | | | | |
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6.5. | Allowance for Loan and Lease Losses (“ALLL”) and Credit Quality Indicators |
Allowance for Loan and Lease Losses The following table is a summary of activity within the ALLL for the periods indicated. | | | Three Months Ended June 30, | | | Six Months Ended June 30, | | | Three Months Ended June 30, | | | Six Months Ended June 30, | �� | | | 2015 | | | 2014 | | | 2015 | | | 2014 | | | 2016 | | | 2015 | | | 2016 | | | 2015 | | | | (Dollars in thousands) | | | (Dollars in thousands) | | Beginning balance | | $ | 54,147 | | | $ | 43,861 | | | $ | 52,918 | | | $ | 42,945 | | | $ | 61,760 | | | $ | 54,147 | | | $ | 60,854 | | | $ | 52,918 | | Non-purchased loans and leases charged off | | | (1,496 | ) | | | (1,650 | ) | | | (5,575 | ) | | | (2,569 | ) | | | (1,218 | ) | | | (1,496 | ) | | | (2,565 | ) | | | (5,575 | ) | Recoveries of non-purchased loans and leases previously charged off | | | 198 | | | | 247 | | | | 506 | | | | 982 | | | | 191 | | | | 198 | | | | 444 | | | | 506 | | | | | | | | | | | | | | | | Net non-purchased loans and leases charged off | | | (1,298 | ) | | | (1,403 | ) | | | (5,069 | ) | | | (1,587 | ) | | | (1,027 | ) | | | (1,298 | ) | | | (2,121 | ) | | | (5,069 | ) | Purchased loans charged off, net | | | (408 | ) | | | (1,082 | ) | | | (1,723 | ) | | | (1,287 | ) | | | | | | | | | | | | | | | | Net charge-offs – total loans and leases | | | (1,706 | ) | | | (2,485 | ) | | | (6,792 | ) | | | (2,874 | ) | | Purchased loans charged off | | | | (470 | ) | | | (702 | ) | | | (535 | ) | | | (2,115 | ) | Recoveries of purchased loans previously charged off | | | | 36 | | | | 294 | | | | 84 | | | | 392 | | Net purchased loans charged off | | | | (434 | ) | | | (408 | ) | | | (451 | ) | | | (1,723 | ) | Net charge-offs - total loans and leases | | | | (1,461 | ) | | | (1,706 | ) | | | (2,572 | ) | | | (6,792 | ) | Provision for loan and lease losses: | | | | | | | | | | | | | | | | | | | | | | | | | Non-purchased loans and leases | | | 3,900 | | | | 4,500 | | | | 8,900 | | | | 5,600 | | | | 4,400 | | | | 3,900 | | | | 6,400 | | | | 8,900 | | Purchased loans | | | 408 | | | | 1,082 | | | | 1,723 | | | | 1,287 | | | | 434 | | | | 408 | | | | 451 | | | | 1,723 | | | | | | | | | | | | | | | | Total provision | | | 4,308 | | | | 5,582 | | | | 10,623 | | | | 6,887 | | | | 4,834 | | | | 4,308 | | | | 6,851 | | | | 10,623 | | | | | | | | | | | | | | | | Ending balance | | $ | 56,749 | | | $ | 46,958 | | | $ | 56,749 | | | $ | 46,958 | | | $ | 65,133 | | | $ | 56,749 | | | $ | 65,133 | | | $ | 56,749 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ALLL allocated to non-purchased loans and leases | | | $ | 63,933 | | | $ | 56,749 | | | $ | 63,933 | | | $ | 56,749 | | ALLL allocated to purchased loans | | | | 1,200 | | | | — | | | | 1,200 | | | | — | | Total ALLL | | | $ | 65,133 | | | $ | 56,749 | | | $ | 65,133 | | | $ | 56,749 | |
As of June 30, 2015, the Company had identified purchased loans where it had determined it was probable that the Company would be unable to collect all amounts according to the contractual terms thereof (for purchased loans without evidence of credit deterioration at date of acquisition) or the expected performance of such loans had deteriorated from its performance expectations established in conjunction with the determination of the Day 1 Fair Values or since our most recent review of such portfolio’s performance (for purchased loans with evidence of credit deterioration at date of acquisition). As a result, the Company recorded partial charge-offs totaling $0.4 million and $1.1 million during the second quarter of 2015 and 2014, respectively, and $1.7 million and $1.3 million during the first six months of 2015 and 2014, respectively. The Company also recorded provision for loan and lease losses of $0.4 million and $1.1 million during the second quarter of 2015 and 2014, respectively, and $1.7 million and $1.3 million during the first six months of 2015 and 2014, respectively. At June 30, 2015, the Company had $12.3 million of impaired purchased loans compared to $21.2 million at June 30, 2014 and $14.0 million at December 31, 2014.
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The following tables are a summary of the Company’s ALLL for the periods indicated. | | | | | | | | | | | | Beginning Balance | | | Charge-offs | | | Recoveries | | | Provision | | | Ending Balance | | | | Beginning Balance | | | Charge-offs | | Recoveries | | | Provision | | Ending Balance | | | (Dollars in thousands) | | | | (Dollars in thousands) | | | Three months ended June 30, 2015: | | | | | | | | | | | | Three months ended June 30, 2016: | | | | | | | | | | | | | | | | | | | | | | Real estate: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Residential 1-4 family | | $ | 5,657 | | | $ | (92 | ) | | $ | 10 | | | $ | 26 | | | $ | 5,601 | | | $ | 9,429 | | | $ | (13 | ) | | $ | 13 | | | $ | 670 | | | $ | 10,099 | | Non-farm/non-residential | | | 17,766 | | | | (119 | ) | | 5 | | | | 580 | | | 18,232 | | | | 18,761 | | | | — | | | | — | | | | 357 | | | | 19,118 | | Construction/land development | | | 17,580 | | | | (469 | ) | | 0 | | | | 2,037 | | | 19,148 | | | | 15,259 | | | | — | | | | 49 | | | | 2,188 | | | | 17,496 | | Agricultural | | | 2,526 | | | | 0 | | | 0 | | | | (66 | ) | | 2,460 | | | | 3,684 | | | | — | | | | — | | | | 71 | | | | 3,755 | | Multifamily residential | | | 2,423 | | | | (208 | ) | | 0 | | | | 671 | | | 2,886 | | | | 3,914 | | | | — | | | | 14 | | | | (267 | ) | | | 3,661 | | Commercial and industrial | | | 3,301 | | | | (93 | ) | | 23 | | | | 18 | | | 3,249 | | | | 3,399 | | | | (31 | ) | | | 6 | | | | 416 | | | | 3,790 | | Consumer | | | 824 | | | | (24 | ) | | 21 | | | | 4 | | | 825 | | | | 707 | | | | (35 | ) | | | 2 | | | | 38 | | | | 712 | | Direct financing leases | | | 3,258 | | | | (155 | ) | | 7 | | | | 444 | | | 3,554 | | | | 4,235 | | | | (808 | ) | | | 5 | | | | 660 | | | | 4,092 | | Other | | | 812 | | | | (336 | ) | | 132 | | | | 186 | | | 794 | | | | 1,172 | | | | (331 | ) | | | 102 | | | | 267 | | | | 1,210 | | Purchased loans | | | 0 | | | | (408 | ) | | 0 | | | | 408 | | | 0 | | | | 1,200 | | | | (470 | ) | | | 36 | | | | 434 | | | | 1,200 | | | | | | | | | | | | | | | | | | | Total | | $ | 54,147 | | | $ | (1,904 | ) | | $ | 198 | | | $ | 4,308 | | | $ | 56,749 | | | $ | 61,760 | | | $ | (1,688 | ) | | $ | 227 | | | $ | 4,834 | | | $ | 65,133 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Six months ended June 30, 2015: | | | | | | | | | | | | Six months ended June 30, 2016: | | | | | | | | | | | | | | | | | | | | | | Real estate: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Residential 1-4 family | | $ | 5,482 | | | $ | (621 | ) | | $ | 21 | | | $ | 719 | | | $ | 5,601 | | | $ | 8,672 | | | $ | (256 | ) | | $ | 37 | | | $ | 1,646 | | | $ | 10,099 | | Non-farm/non-residential | | | 17,190 | | | | (324 | ) | | 17 | | | | 1,349 | | | 18,232 | | | | 16,796 | | | | (12 | ) | | | — | | | | 2,334 | | | | 19,118 | | Construction/land development | | | 15,960 | | | | (771 | ) | | 37 | | | | 3,922 | | | 19,148 | | | | 18,176 | | | | (20 | ) | | | 51 | | | | (711 | ) | | | 17,496 | | Agricultural | | | 2,558 | | | | (13 | ) | | 0 | | | | (85 | ) | | 2,460 | | | | 3,388 | | | | (7 | ) | | | — | | | | 374 | | | | 3,755 | | Multifamily residential | | | 2,147 | | | | (208 | ) | | 0 | | | | 947 | | | 2,886 | | | | 3,031 | | | | — | | | | 14 | | | | 616 | | | | 3,661 | | Commercial and industrial | | | 4,873 | | | | (2,540 | ) | | 39 | | | | 877 | | | 3,249 | | | | 2,574 | | | | (42 | ) | | | 39 | | | | 1,219 | | | | 3,790 | | Consumer | | | 818 | | | | (69 | ) | | 42 | | | | 34 | | | 825 | | | | 707 | | | | (68 | ) | | | 14 | | | | 59 | | | | 712 | | Direct financing leases | | | 2,989 | | | | (341 | ) | | 13 | | | | 893 | | | 3,554 | | | | 3,835 | | | | (1,468 | ) | | | 16 | | | | 1,709 | | | | 4,092 | | Other | | | 901 | | | | (688 | ) | | 337 | | | | 244 | | | 794 | | | | 2,475 | | | | (692 | ) | | | 273 | | | | (846 | ) | | | 1,210 | | Purchased loans | | | 0 | | | | (1,723 | ) | | 0 | | | | 1,723 | | | 0 | | | | 1,200 | | | | (535 | ) | | | 84 | | | | 451 | | | | 1,200 | | | | | | | | | | | | | | | | | | | Total | | $ | 52,918 | | | $ | (7,298 | ) | | $ | 506 | | | $ | 10,623 | | | $ | 56,749 | | | $ | 60,854 | | | $ | (3,100 | ) | | $ | 528 | | | $ | 6,851 | | | $ | 65,133 | | | | | | | | | | | | | | | | | | | | Year ended December 31, 2014: | | | | | | | | | | | | Real estate: | | | | | | | | | | | | Residential 1-4 family | | $ | 4,701 | | | $ | (577 | ) | | $ | 135 | | | $ | 1,223 | | | $ | 5,482 | | | Non-farm/non-residential | | | 13,633 | | | | (1,357 | ) | | 33 | | | | 4,881 | | | 17,190 | | | Construction/land development | | | 12,306 | | | | (638 | ) | | 11 | | | | 4,281 | | | 15,960 | | | Agricultural | | | 3,000 | | | | (214 | ) | | 14 | | | | (242 | ) | | 2,558 | | | Multifamily residential | | | 2,504 | | | | 0 | | | 0 | | | | (357 | ) | | 2,147 | | | Commercial and industrial | | | 2,855 | | | | (720 | ) | | 808 | | | | 1,930 | | | 4,873 | | | Consumer | | | 917 | | | | (222 | ) | | 80 | | | | 43 | | | 818 | | | Direct financing leases | | | 2,266 | | | | (602 | ) | | 49 | | | | 1,276 | | | 2,989 | | | Other | | | 763 | | | | (793 | ) | | 266 | | | | 665 | | | 901 | | | Purchased loans | | | 0 | | | | (3,215 | ) | | 0 | | | | 3,215 | | | 0 | | | | | | | | | | | | | | | | | | | | Total | | $ | 42,945 | | | $ | (8,338 | ) | | $ | 1,396 | | | $ | 16,915 | | | $ | 52,918 | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | Beginning Balance | | | Charge-offs | | | Recoveries | | | Provision | | | Ending Balance | | | | (Dollars in thousands) | | Three months ended June 30, 2014: | | | | | | | | | | | | | | | | | | | | | Real estate: | | | | | | | | | | | | | | | | | | | | | Residential 1-4 family | | $ | 4,622 | | | $ | (142 | ) | | $ | 49 | | | $ | 231 | | | $ | 4,760 | | Non-farm/non-residential | | | 14,013 | | | | (1,181 | ) | | | 1 | | | | 2,003 | | | | 14,836 | | Construction/land development | | | 12,828 | | | | (14 | ) | | | 0 | | | | 2,650 | | | | 15,464 | | Agricultural | | | 3,018 | | | | 0 | | | | 6 | | | | (116 | ) | | | 2,908 | | Multifamily residential | | | 2,429 | | | | 0 | | | | 0 | | | | (657 | ) | | | 1,772 | | Commercial and industrial | | | 2,738 | | | | (48 | ) | | | 135 | | | | 23 | | | | 2,848 | | Consumer | | | 831 | | | | (56 | ) | | | 18 | | | | 133 | | | | 926 | | Direct financing leases | | | 2,438 | | | | (121 | ) | | | 8 | | | | 247 | | | | 2,572 | | Other | | | 944 | | | | (88 | ) | | | 30 | | | | (14 | ) | | | 872 | | Purchased loans | | | 0 | | | | (1,082 | ) | | | 0 | | | | 1,082 | | | | 0 | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 43,861 | | | $ | (2,732 | ) | | $ | 247 | | | $ | 5,582 | | | $ | 46,958 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Six months ended June 30, 2014: | | | | | | | | | | | | | | | | | | | | | Real estate: | | | | | | | | | | | | | | | | | | | | | Residential 1-4 family | | $ | 4,701 | | | $ | (341 | ) | | $ | 71 | | | $ | 329 | | | $ | 4,760 | | Non-farm/non-residential | | | 13,633 | | | | (1,254 | ) | | | 4 | | | | 2,453 | | | | 14,836 | | Construction/land development | | | 12,306 | | | | (14 | ) | | | 8 | | | | 3,164 | | | | 15,464 | | Agricultural | | | 3,000 | | | | (15 | ) | | | 11 | | | | (88 | ) | | | 2,908 | | Multifamily residential | | | 2,504 | | | | 0 | | | | 0 | | | | (732 | ) | | | 1,772 | | Commercial and industrial | | | 2,855 | | | | (422 | ) | | | 763 | | | | (348 | ) | | | 2,848 | | Consumer | | | 917 | | | | (97 | ) | | | 36 | | | | 70 | | | | 926 | | Direct financing leases | | | 2,266 | | | | (267 | ) | | | 14 | | | | 559 | | | | 2,572 | | Other | | | 763 | | | | (159 | ) | | | 75 | | | | 193 | | | | 872 | | Purchased loans | | | 0 | | | | (1,287 | ) | | | 0 | | | | 1,287 | | | | 0 | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 42,945 | | | $ | (3,856 | ) | | $ | 982 | | | $ | 6,887 | | | $ | 46,958 | | | | | | | | | | | | | | | | | | | | | | |
| | Beginning Balance | | | Charge-offs | | | Recoveries | | | Provision | | | Ending Balance | | | | (Dollars in thousands) | | Three months ended June 30, 2015: | | | | | | | | | | | | | | | | | | | | | Real estate: | | | | | | | | | | | | | | | | | | | | | Residential 1-4 family | | $ | 5,657 | | | $ | (92 | ) | | $ | 10 | | | $ | 26 | | | $ | 5,601 | | Non-farm/non-residential | | | 17,766 | | | | (119 | ) | | | 5 | | | | 580 | | | | 18,232 | | Construction/land development | | | 17,580 | | | | (469 | ) | | | — | | | | 2,037 | | | | 19,148 | | Agricultural | | | 2,526 | | | | — | | | | — | | | | (66 | ) | | | 2,460 | | Multifamily residential | | | 2,423 | | | | (208 | ) | | | — | | | | 671 | | | | 2,886 | | Commercial and industrial | | | 3,301 | | | | (93 | ) | | | 23 | | | | 18 | | | | 3,249 | | Consumer | | | 824 | | | | (24 | ) | | | 21 | | | | 4 | | | | 825 | | Direct financing leases | | | 3,258 | | | | (155 | ) | | | 7 | | | | 444 | | | | 3,554 | | Other | | | 812 | | | | (336 | ) | | | 132 | | | | 186 | | | | 794 | | Purchased loans | | | — | | | | (702 | ) | | | 294 | | | | 408 | | | | — | | Total | | $ | 54,147 | | | $ | (2,198 | ) | | $ | 492 | | | $ | 4,308 | | | $ | 56,749 | | | | | | | | | | | | | | | | | | | | | | | Six months ended June 30, 2015: | | | | | | | | | | | | | | | | | | | | | Real estate: | | | | | | | | | | | | | | | | | | | | | Residential 1-4 family | | $ | 5,482 | | | $ | (621 | ) | | $ | 21 | | | $ | 719 | | | $ | 5,601 | | Non-farm/non-residential | | | 17,190 | | | | (324 | ) | | | 17 | | | | 1,349 | | | | 18,232 | | Construction/land development | | | 15,960 | | | | (771 | ) | | | 37 | | | | 3,922 | | | | 19,148 | | Agricultural | | | 2,558 | | | | (13 | ) | | | — | | | | (85 | ) | | | 2,460 | | Multifamily residential | | | 2,147 | | | | (208 | ) | | | — | | | | 947 | | | | 2,886 | | Commercial and industrial | | | 4,873 | | | | (2,540 | ) | | | 39 | | | | 877 | | | | 3,249 | | Consumer | | | 818 | | | | (69 | ) | | | 42 | | | | 34 | | | | 825 | | Direct financing leases | | | 2,989 | | | | (341 | ) | | | 13 | | | | 893 | | | | 3,554 | | Other | | | 901 | | | | (688 | ) | | | 337 | | | | 244 | | | | 794 | | Purchased loans | | | — | | | | (2,115 | ) | | | 392 | | | | 1,723 | | | | — | | Total | | $ | 52,918 | | | $ | (7,690 | ) | | $ | 898 | | | $ | 10,623 | | | $ | 56,749 | |
14
The following table is a summary of the Company’s ALLL for non-purchased loans and leases and recorded investment in non-purchased loans and leases as of the dates indicated. | | | | | | | | | | | | | | ALLL for Non-Purchased Loans and Leases | | | Non-Purchased Loans and Leases | | | | ALLL | | | Non-Purchased Loans and Leases | | | ALLL for Individually Evaluated Impaired Loans and Leases | | | ALLL for All Other Loans and Leases | | | Total ALLL(1) | | | Individually Evaluated Impaired Loans and Leases | | | All Other Loans and Leases | | | Total Loans and Leases | | | | ALLL for Individually Evaluated Impaired Loans and Leases | | | ALLL for All Other Loans and Leases | | | Total ALLL | | | Individually Evaluated Impaired Loans and Leases | | | All Other Loans and Leases | | | Total Loans and Leases | | | (Dollars in thousands) | | | | (Dollars in thousands) | | | June 30, 2015: | | | | | | | | | | | | | | June 30, 2016: | | | | | | | | | | | | | | | | | | | | | | | | | | Real estate: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Residential 1-4 family | | $ | 345 | | | $ | 5,256 | | | $ | 5,601 | | | $ | 1,908 | | | $ | 316,328 | | | $ | 318,236 | | | $ | 267 | | | $ | 9,832 | | | $ | 10,099 | | | $ | 2,092 | | | $ | 406,142 | | | $ | 408,234 | | Non-farm/non-residential | | | 3 | | | | 18,229 | | | | 18,232 | | | | 809 | | | | 1,687,994 | | | | 1,688,803 | | | | 21 | | | | 19,097 | | | | 19,118 | | | | 1,033 | | | | 2,619,419 | | | | 2,620,452 | | Construction/land development | | | 49 | | | | 19,099 | | | | 19,148 | | | | 9,065 | | | | 1,890,960 | | | | 1,900,025 | | | | 46 | | | | 17,450 | | | | 17,496 | | | | 280 | | | | 3,600,475 | | | | 3,600,755 | | Agricultural | | | 470 | | | | 1,990 | | | | 2,460 | | | | 1,450 | | | | 49,333 | | | | 50,783 | | | | 468 | | | | 3,287 | | | | 3,755 | | | | 1,328 | | | | 88,979 | | | | 90,307 | | Multifamily residential | | | 0 | | | | 2,886 | | | | 2,886 | | | | 345 | | | | 296,529 | | | | 296,874 | | | | — | | | | 3,661 | | | | 3,661 | | | | — | | | | 591,792 | | | | 591,792 | | Commercial and industrial | | | 487 | | | | 2,762 | | | | 3,249 | | | | 547 | | | | 259,073 | | | | 259,620 | | | | 508 | | | | 3,282 | | | | 3,790 | | | | 709 | | | | 254,003 | | | | 254,712 | | Consumer | | | 3 | | | | 822 | | | | 825 | | | | 33 | | | | 25,499 | | | | 25,532 | | | | 5 | | | | 707 | | | | 712 | | | | 45 | | | | 28,492 | | | | 28,537 | | Direct financing leases | | | 0 | | | | 3,554 | | | | 3,554 | | | | 0 | | | | 137,146 | | | | 137,146 | | | | — | | | | 4,092 | | | | 4,092 | | | | — | | | | 133,775 | | | | 133,775 | | Other | | | 0 | | | | 794 | | | | 794 | | | | 7 | | | | 90,097 | | | | 90,104 | | | | — | | | | 1,210 | | | | 1,210 | | | | 6 | | | | 486,330 | | | | 486,336 | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 1,357 | | | $ | 55,392 | | | $ | 56,749 | | | $ | 14,164 | | | $ | 4,752,959 | | | $ | 4,767,123 | | | $ | 1,315 | | | $ | 62,618 | | | $ | 63,933 | | | $ | 5,493 | | | $ | 8,209,407 | | | $ | 8,214,900 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2014: | | | | | | | | | | | | | | December 31, 2015: | | | | | | | | | | | | | | | | | | | | | | | | | | Real estate: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Residential 1-4 family | | $ | 356 | | | $ | 5,126 | | | $ | 5,482 | | | $ | 2,734 | | | $ | 280,519 | | | $ | 283,253 | | | $ | 297 | | | $ | 8,375 | | | $ | 8,672 | | | $ | 2,030 | | | $ | 348,224 | | | $ | 350,254 | | Non-farm/non-residential | | | 18 | | | | 17,172 | | | | 17,190 | | | | 2,507 | | | | 1,501,034 | | | | 1,503,541 | | | | 31 | | | | 16,765 | | | | 16,796 | | | | 940 | | | | 2,009,926 | | | | 2,010,866 | | Construction/land development | | | 68 | | | | 15,892 | | | | 15,960 | | | | 14,304 | | | | 1,397,534 | | | | 1,411,838 | | | | 48 | | | | 18,128 | | | | 18,176 | | | | 5,556 | | | | 2,820,019 | | | | 2,825,575 | | Agricultural | | | 6 | | | | 2,552 | | | | 2,558 | | | | 365 | | | | 46,870 | | | | 47,235 | | | | 475 | | | | 2,913 | | | | 3,388 | | | | 1,313 | | | | 73,127 | | | | 74,440 | | Multifamily residential | | | 0 | | | | 2,147 | | | | 2,147 | | | | 0 | | | | 211,156 | | | | 211,156 | | | | — | | | | 3,031 | | | | 3,031 | | | | 83 | | | | 440,745 | | | | 440,828 | | Commercial and industrial | | | 644 | | | | 4,229 | | | | 4,873 | | | | 623 | | | | 287,084 | | | | 287,707 | | | | 487 | | | | 2,087 | | | | 2,574 | | | | 714 | | | | 230,567 | | | | 231,281 | | Consumer | | | 3 | | | | 815 | | | | 818 | | | | 34 | | | | 25,635 | | | | 25,669 | | | | 2 | | | | 705 | | | | 707 | | | | 24 | | | | 27,721 | | | | 27,745 | | Direct financing leases | | | 0 | | | | 2,989 | | | | 2,989 | | | | 0 | | | | 115,475 | | | | 115,475 | | | | — | | | | 3,835 | | | | 3,835 | | | | — | | | | 147,735 | | | | 147,735 | | Other | | | 0 | | | | 901 | | | | 901 | | | | 8 | | | | 93,988 | | | | 93,996 | | | | — | | | | 2,475 | | | | 2,475 | | | | 7 | | | | 419,903 | | | | 419,910 | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 1,095 | | | $ | 51,823 | | | $ | 52,918 | | | $ | 20,575 | | | $ | 3,959,295 | | | $ | 3,979,870 | | | $ | 1,340 | | | $ | 58,314 | | | $ | 59,654 | | | $ | 10,667 | | | $ | 6,517,967 | | | $ | 6,528,634 | | | | | | | | | | | | | | | | | | | | | | | June 30, 2014: | | | | | | | | | | | | | | Real estate: | | | | | | | | | | | | | | Residential 1-4 family | | $ | 411 | | | $ | 4,349 | | | $ | 4,760 | | | $ | 3,245 | | | $ | 263,252 | | | $ | 266,497 | | | Non-farm/non-residential | | | 13 | | | | 14,823 | | | | 14,836 | | | | 2,363 | | | | 1,287,811 | | | | 1,290,174 | | | Construction/land development | | | 2 | | | | 15,462 | | | | 15,464 | | | | 9,738 | | | | 1,039,420 | | | | 1,049,158 | | | Agricultural | | | 200 | | | | 2,708 | | | | 2,908 | | | | 845 | | | | 44,696 | | | | 45,541 | | | Multifamily residential | | | 0 | | | | 1,772 | | | | 1,772 | | | | 491 | | | | 136,462 | | | | 136,953 | | | Commercial and industrial | | | 553 | | | | 2,295 | | | | 2,848 | | | | 689 | | | | 166,195 | | | | 166,884 | | | Consumer | | | 3 | | | | 923 | | | | 926 | | | | 42 | | | | 28,632 | | | | 28,674 | | | Direct financing leases | | | 0 | | | | 2,572 | | | | 2,572 | | | | 0 | | | | 98,768 | | | | 98,768 | | | Other | | | 0 | | | | 872 | | | | 872 | | | | 9 | | | | 88,927 | | | | 88,936 | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 1,182 | | | $ | 45,776 | | | $ | 46,958 | | | $ | 17,422 | | | $ | 3,154,163 | | | $ | 3,171,585 | | | | | | | | | | | | | | | | | | | | | | |
(1) Excludes $1.2 million of ALLL allocated to the Company’s purchased loans at both June 30, 2016 and December 31, 2015. 15
The following table is a summary of impaired non-purchased loans and leases as of and for the three months and six months ended June 30, 2015.2016. | | | Principal Balance | | | Net Charge-offs to Date | | Principal Balance, Net of Charge-offs | | | Specific ALLL | | | Weighted Average Carrying Value – Three Months Ended June 30, 2015 | | | Weighted Average Carrying Value – Six Months Ended June 30, 2015 | | | Principal Balance | | | Net Charge-offs to Date | | | Principal Balance, Net of Charge-offs | | | Specific ALLL | | | Weighted Average Carrying Value – Three Months Ended June 30, 2016 | | | Weighted Average Carrying Value – Six Months Ended June 30, 2016 | | | | (Dollars in thousands) | | | (Dollars in thousands) | | Impaired loans and leases for which there is a related ALLL: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Real estate: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Residential 1-4 family | | $ | 3,147 | | | $ | (1,859 | ) | | $ | 1,288 | | | $ | 345 | | | $ | 1,299 | | | $ | 1,362 | | | $ | 2,766 | | | $ | (1,763 | ) | | $ | 1,003 | | | $ | 267 | | | $ | 1,256 | | | $ | 1,207 | | Non-farm/non-residential | | | 145 | | | | (142 | ) | | 3 | | | | 3 | | | | 22 | | | | 196 | | | | 1,087 | | | | (914 | ) | | | 173 | | | | 21 | | | | 113 | | | | 93 | | Construction/land development | | | 115 | | | | 0 | | | 115 | | | | 49 | | | | 66 | | | | 1,414 | | | | 118 | | | | — | | | | 118 | | | | 46 | | | | 119 | | | | 120 | | Agricultural | | | 1,148 | | | | 0 | | | 1,148 | | | | 470 | | | | 574 | | | | 413 | | | | 1,145 | | | | — | | | | 1,145 | | | | 468 | | | | 1,147 | | | | 1,149 | | Commercial and industrial | | | 672 | | | | (185 | ) | | 487 | | | | 487 | | | | 244 | | | | 343 | | | | 829 | | | | (321 | ) | | | 508 | | | | 508 | | | | 514 | | | | 511 | | Consumer | | | 40 | | | | (23 | ) | | 17 | | | | 3 | | | | 18 | | | | 18 | | | | 49 | | | | (15 | ) | | | 34 | | | | 5 | | | | 22 | | | | 18 | | | | | | | | | | | | | | | | | | | | | | Total impaired loans and leases with a related ALLL | | | 5,267 | | | | (2,209 | ) | | 3,058 | | | | 1,357 | | | | 2,223 | | | | 3,746 | | | | 5,994 | | | | (3,013 | ) | | | 2,981 | | | | 1,315 | | | | 3,171 | | | | 3,098 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Impaired loans and leases for which there is not a related ALLL: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Real estate: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Residential 1-4 family | | | 731 | | | | (111 | ) | | 620 | | | | 0 | | | | 910 | | | | 1,022 | | | | 1,568 | | | | (479 | ) | | | 1,089 | | | | — | | | | 981 | | | | 961 | | Non-farm/non-residential | | | 999 | | | | (193 | ) | | 806 | | | | 0 | | | | 651 | | | | 1,089 | | | | 1,058 | | | | (198 | ) | | | 860 | | | | — | | | | 861 | | | | 869 | | Construction/land development | | | 9,440 | | | | (490 | ) | | 8,950 | | | | 0 | | | | 9,174 | | | | 9,514 | | | | 925 | | | | (763 | ) | | | 162 | | | | — | | | | 1,926 | | | | 3,096 | | Agricultural | | | 518 | | | | (215 | ) | | 303 | | | | 0 | | | | 304 | | | | 293 | | | | 392 | | | | (209 | ) | | | 183 | | | | — | | | | 183 | | | | 175 | | Multifamily residential | | | 686 | | | | (341 | ) | | 345 | | | | 0 | | | | 173 | | | | 115 | | | | 133 | | | | (133 | ) | | | — | | | | — | | | | 41 | | | | 55 | | Commercial and industrial | | | 158 | | | | (98 | ) | | 60 | | | | 0 | | | | 95 | | | | 90 | | | | 251 | | | | (50 | ) | | | 201 | | | | — | | | | 201 | | | | 204 | | Consumer | | | 19 | | | | (5 | ) | | 14 | | | | 0 | | | | 15 | | | | 15 | | | | 16 | | | | (5 | ) | | | 11 | | | | — | | | | 11 | | | | 11 | | Other | | | 8 | | | | 0 | | | 8 | | | | 0 | | | | 8 | | | | 8 | | | | 6 | | | | — | | | | 6 | | | | — | | | | 6 | | | | 7 | | | | | | | | | | | | | | | | | | | | | | Total impaired loans and leases without a related ALLL | | | 12,559 | | | | (1,453 | ) | | 11,106 | | | | 0 | | | | 11,330 | | | | 12,146 | | | | 4,349 | | | | (1,837 | ) | | | 2,512 | | | | — | | | | 4,210 | | | | 5,378 | | | | | | | | | | | | | | | | | | | | | | Total impaired loans and leases | | $ | 17,826 | | | $ | (3,662 | ) | | $ | 14,164 | | | $ | 1,357 | | | $ | 13,553 | | | $ | 15,892 | | | | | | | | | | | | | | | | | | | | | | | Total impaired non-purchased loans and leases | | | $ | 10,343 | | | $ | (4,850 | ) | | $ | 5,493 | | | $ | 1,315 | | | $ | 7,381 | | | $ | 8,476 | |
16
The following table is a summary of impaired non-purchased loans and leases as of and for the year ended December 31, 2014.2015. | | | | | | | | | | | | | | | | | | | | | | | Principal Balance | | | Net Charge-offs to Date | | | Principal Balance, Net of Charge-offs | | | Specific ALLL | | | Weighted Average Carrying Value – Year Ended December 31, 2014 | | | | (Dollars in thousands) | | Impaired loans and leases for which there is a related ALLL: | | | | | | | | | | | | | | | | | | | | | Real estate: | | | | | | | | | | | | | | | | | | | | | Residential 1-4 family | | $ | 3,163 | | | $ | (1,674 | ) | | $ | 1,489 | | | $ | 356 | | | $ | 1,457 | | Non-farm/non-residential | | | 762 | | | | (220 | ) | | | 542 | | | | 18 | | | | 211 | | Construction/land development | | | 4,656 | | | | (545 | ) | | | 4,111 | | | | 68 | | | | 1,040 | | Agricultural | | | 105 | | | | (12 | ) | | | 93 | | | | 6 | | | | 217 | | Commercial and industrial | | | 1,233 | | | | (691 | ) | | | 542 | | | | 644 | | | | 554 | | Consumer | | | 41 | | | | (23 | ) | | | 18 | | | | 3 | | | | 20 | | | | | | | | | | | | | | | | | | | | | | | Total impaired loans and leases with a related ALLL | | | 9,960 | | | | (3,165 | ) | | | 6,795 | | | | 1,095 | | | | 3,499 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Impaired loans and leases for which there is not a related ALLL: | | | | | | | | | | | | | | | | | | | | | Real estate: | | | | | | | | | | | | | | | | | | | | | Residential 1-4 family | | | 1,373 | | | | (128 | ) | | | 1,245 | | | | 0 | | | | 1,581 | | Non-farm/non-residential | | | 2,676 | | | | (711 | ) | | | 1,965 | | | | 0 | | | | 1,988 | | Construction/land development | | | 10,378 | | | | (185 | ) | | | 10,193 | | | | 0 | | | | 7,600 | | Agricultural | | | 474 | | | | (202 | ) | | | 272 | | | | 0 | | | | 383 | | Multifamily residential | | | 133 | | | | (133 | ) | | | 0 | | | | 0 | | | | 123 | | Commercial and industrial | | | 264 | | | | (183 | ) | | | 81 | | | | 0 | | | | 75 | | Consumer | | | 81 | | | | (65 | ) | | | 16 | | | | 0 | | | | 18 | | Other | | | 8 | | | | 0 | | | | 8 | | | | 0 | | | | 8 | | | | | | | | | | | | | | | | | | | | | | | Total impaired loans and leases without a related ALLL | | | 15,387 | | | | (1,607 | ) | | | 13,780 | | | | 0 | | | | 11,776 | | | | | | | | | | | | | | | | | | | | | | | Total impaired loans and leases | | $ | 25,347 | | | $ | (4,772 | ) | | $ | 20,575 | | | $ | 1,095 | | | $ | 15,275 | | | | | | | | | | | | | | | | | | | | | | |
| | Principal Balance | | | Net Charge-offs to Date | | | Principal Balance, Net of Charge-offs | | | Specific ALLL | | | Weighted Average Carrying Value – Year Ended December 31, 2015 | | | | (Dollars in thousands) | | Impaired loans and leases for which there is a related ALLL: | | | | | | | | | | | | | | | | | | | | | Real estate: | | | | | | | | | | | | | | | | | | | | | Residential 1-4 family | | $ | 2,914 | | | $ | (1,804 | ) | | $ | 1,110 | | | $ | 297 | | | $ | 1,279 | | Non-farm/non-residential | | | 962 | | | | (907 | ) | | | 55 | | | | 31 | | | | 129 | | Construction/land development | | | 121 | | | | — | | | | 121 | | | | 48 | | | | 896 | | Agricultural | | | 1,153 | | | | — | | | | 1,153 | | | | 475 | | | | 479 | | Commercial and industrial | | | 825 | | | | (322 | ) | | | 503 | | | | 487 | | | | 404 | | Consumer | | | 26 | | | | (15 | ) | | | 11 | | | | 2 | | | | 16 | | Total impaired loans and leases with a related ALLL | | | 6,001 | | | | (3,048 | ) | | | 2,953 | | | | 1,340 | | | | 3,203 | | | | | | | | | | | | | | | | | | | | | | | Impaired loans and leases for which there is not a related ALLL: | | | | | | | | | | | | | | | | | | | | | Real estate: | | | | | | | | | | | | | | | | | | | | | Residential 1-4 family | | | 1,306 | | | | (386 | ) | | | 920 | | | | — | | | | 955 | | Non-farm/non-residential | | | 1,083 | | | | (198 | ) | | | 885 | | | | — | | | | 1,137 | | Construction/land development | | | 7,873 | | | | (2,438 | ) | | | 5,435 | | | | — | | | | 8,255 | | Agricultural | | | 362 | | | | (202 | ) | | | 160 | | | | — | | | | 261 | | Multifamily residential | | | 216 | | | | (133 | ) | | | 83 | | | | — | | | | 155 | | Commercial and industrial | | | 261 | | | | (50 | ) | | | 211 | | | | — | | | | 141 | | Consumer | | | 18 | | | | (5 | ) | | | 13 | | | | — | | | | 14 | | Other | | | 7 | | | | — | | | | 7 | | | | — | | | | 7 | | Total impaired loans and leases without a related ALLL | | | 11,126 | | | | (3,412 | ) | | | 7,714 | | | | — | | | | 10,925 | | Total impaired non-purchased loans and leases | | $ | 17,127 | | | $ | (6,460 | ) | | $ | 10,667 | | | $ | 1,340 | | | $ | 14,128 | |
The following table is a summary of impaired non-purchased loans and leases as of and for the three months and six months ended June 30, 2014.
| | | | | | | | | | | | | | | | | | | | | | | | | | | Principal Balance | | | Net Charge-offs to Date | | | Principal Balance, Net of Charge-offs | | | Specific ALLL | | | Weighted Average Carrying Value – Three Months Ended June 30, 2014 | | | Weighted Average Carrying Value – Six Months Ended June 30, 2014 | | | | (Dollars in thousands) | | Impaired loans and leases for which there is a related ALLL: | | | | | | | | | | | | | | | | | | | | | | | | | Real estate: | | | | | | | | | | | | | | | | | | | | | | | | | Residential 1-4 family | | $ | 3,294 | | | $ | (1,721 | ) | | $ | 1,573 | | | $ | 411 | | | $ | 1,505 | | | $ | 1,642 | | Non-farm/non-residential | | | 186 | | | | (142 | ) | | | 44 | | | | 13 | | | | 52 | | | | 50 | | Construction/land development | | | 38 | | | | (22 | ) | | | 16 | | | | 2 | | | | 16 | | | | 16 | | Agricultural | | | 336 | | | | (12 | ) | | | 324 | | | | 200 | | | | 336 | | | | 380 | | Commercial and industrial | | | 838 | | | | (278 | ) | | | 560 | | | | 553 | | | | 562 | | | | 579 | | Consumer | | | 102 | | | | (79 | ) | | | 23 | | | | 3 | | | | 23 | | | | 23 | | Other | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 5 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total impaired loans and leases with a related ALLL | | | 4,794 | | | | (2,254 | ) | | | 2,540 | | | | 1,182 | | | | 2,494 | | | | 2,695 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Impaired loans and leases for which there is not a related ALLL: | | | | | | | | | | | | | | | | | | | | | | | | | Real estate: | | | | | | | | | | | | | | | | | | | | | | | | | Residential 1-4 family | | | 2,094 | | | | (421 | ) | | | 1,673 | | | | 0 | | | | 2,023 | | | | 2,059 | | Non-farm/non-residential | | | 3,444 | | | | (1,125 | ) | | | 2,319 | | | | 0 | | | | 1,942 | | | | 1,999 | | Construction/land development | | | 9,803 | | | | (81 | ) | | | 9,722 | | | | 0 | | | | 5,015 | | | | 3,417 | | Agricultural | | | 554 | | | | (33 | ) | | | 521 | | | | 0 | | | | 494 | | | | 468 | | Multifamily residential | | | 624 | | | | (133 | ) | | | 491 | | | | 0 | | | | 246 | | | | 164 | | Commercial and industrial | | | 288 | | | | (159 | ) | | | 129 | | | | 0 | | | | 95 | | | | 88 | | Consumer | | | 33 | | | | (14 | ) | | | 19 | | | | 0 | | | | 22 | | | | 24 | | Other | | | 8 | | | | 0 | | | | 8 | | | | 0 | | | | 9 | | | | 9 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total impaired loans and leases without a related ALLL | | | 16,848 | | | | (1,966 | ) | | | 14,882 | | | | 0 | | | | 9,846 | | | | 8,228 | | | �� | | | | | | | | | | | | | | | | | | | | | | | | Total impaired loans and leases | | $ | 21,642 | | | $ | (4,220 | ) | | $ | 17,422 | | | $ | 1,182 | | | $ | 12,340 | | | $ | 10,923 | | | | | | | | | | | | | | | | | | | | | | | | | | |
Management has determined that certain of the Company’s impaired non-purchased loans and leases do not require any specific allowance at June 30, 2015 and 20142016 or at December 31, 20142015 because (i) management’s analysis of such individual loans and leases resulted in no impairment or (ii) all identified impairment on such loans and leases hashad previously been charged off. Interest income on impaired non-purchased loans and leases is recognized on a cash basis when and if actually collected. Total interest income recognized on impaired non-purchased loans and leases for the three months and six months ended June 30, 20152016 and 2014 and for the year ended December 31, 20142015 was not material.
17
Credit Quality Indicators Non-Purchased Loans and Leases The following table is a summary of credit quality indicators for the Company’s non-purchased loans and leases as of the dates indicated. | | Satisfactory | | | Moderate | | | Watch | | | Substandard | | | Total | | | | (Dollars in thousands) | | June 30, 2016: | | | | | | | | | | | | | | | | | | | | | Real estate: | | | | | | | | | | | | | | | | | | | | | Residential 1-4 family (1) | | $ | 399,027 | | | $ | — | | | $ | 4,095 | | | $ | 5,112 | | | $ | 408,234 | | Non-farm/non-residential | | | 2,270,225 | | | | 265,385 | | | | 79,323 | | | | 5,519 | | | | 2,620,452 | | Construction/land development | | | 3,302,321 | | | | 286,631 | | | | 10,362 | | | | 1,441 | | | | 3,600,755 | | Agricultural | | | 51,010 | | | | 28,270 | | | | 9,362 | | | | 1,665 | | | | 90,307 | | Multifamily residential | | | 542,211 | | | | 46,668 | | | | 1,857 | | | | 1,056 | | | | 591,792 | | Commercial and industrial | | | 165,438 | | | | 84,965 | | | | 3,017 | | | | 1,292 | | | | 254,712 | | Consumer (1) | | | 28,101 | | | | — | | | | 221 | | | | 215 | | | | 28,537 | | Direct financing leases | | | 132,887 | | | | 170 | | | | 160 | | | | 558 | | | | 133,775 | | Other (1) | | | 480,365 | | | | 5,650 | | | | 207 | | | | 114 | | | | 486,336 | | Total | | $ | 7,371,585 | | | $ | 717,739 | | | $ | 108,604 | | | $ | 16,972 | | | $ | 8,214,900 | | | | | | | | | | | | | | | | | | | | | | | December 31, 2015: | | | | | | | | | | | | | | | | | | | | | Real estate: | | | | | | | | | | | | | | | | | | | | | Residential 1-4 family (1) | | $ | 342,083 | | | $ | — | | | $ | 2,946 | | | $ | 5,225 | | | $ | 350,254 | | Non-farm/non-residential | | | 1,692,632 | | | | 235,999 | | | | 73,788 | | | | 8,447 | | | | 2,010,866 | | Construction/land development | | | 2,553,368 | | | | 256,655 | | | | 8,916 | | | | 6,636 | | | | 2,825,575 | | Agricultural | | | 40,538 | | | | 22,799 | | | | 8,909 | | | | 2,194 | | | | 74,440 | | Multifamily residential | | | 400,848 | | | | 35,080 | | | | 4,079 | | | | 821 | | | | 440,828 | | Commercial and industrial | | | 179,797 | | | | 47,802 | | | | 1,854 | | | | 1,828 | | | | 231,281 | | Consumer (1) | | | 27,219 | | | | — | | | | 276 | | | | 250 | | | | 27,745 | | Direct financing leases | | | 146,934 | | | | 201 | | | | 190 | | | | 410 | | | | 147,735 | | Other (1) | | | 415,686 | | | | 4,027 | | | | 182 | | | | 15 | | | | 419,910 | | Total | | $ | 5,799,105 | | | $ | 602,563 | | | $ | 101,140 | | | $ | 25,826 | | | $ | 6,528,634 | |
| | | | | | | | | | | | | | | | | | | | | | | Satisfactory | | | Moderate | | | Watch | | | Substandard | | | Total | | | | (Dollars in thousands) | | June 30, 2015: | | | | | | | | | | | | | | | | | | | | | Real estate: | | | | | | | | | | | | | | | | | | | | | Residential 1-4 family(1) | | $ | 308,914 | | | $ | 0 | | | $ | 3,830 | | | $ | 5,492 | | | $ | 318,236 | | Non-farm/non-residential | | | 1,442,958 | | | | 169,776 | | | | 67,722 | | | | 8,347 | | | | 1,688,803 | | Construction/land development | | | 1,653,991 | | | | 223,812 | | | | 10,207 | | | | 12,015 | | | | 1,900,025 | | Agricultural | | | 24,997 | | | | 14,457 | | | | 9,088 | | | | 2,241 | | | | 50,783 | | Multifamily residential | | | 252,433 | | | | 40,802 | | | | 1,646 | | | | 1,993 | | | | 296,874 | | Commercial and industrial | | | 185,737 | | | | 70,305 | | | | 2,092 | | | | 1,486 | | | | 259,620 | | Consumer(1) | | | 25,022 | | | | 0 | | | | 214 | | | | 296 | | | | 25,532 | | Direct financing leases | | | 136,605 | | | | 297 | | | | 100 | | | | 144 | | | | 137,146 | | Other(1) | | | 84,271 | | | | 5,648 | | | | 93 | | | | 92 | | | | 90,104 | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 4,114,928 | | | $ | 525,097 | | | $ | 94,992 | | | $ | 32,106 | | | $ | 4,767,123 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2014: | | | | | | | | | | | | | | | | | | | | | Real estate: | | | | | | | | | | | | | | | | | | | | | Residential 1-4 family(1) | | $ | 271,576 | | | $ | 0 | | | $ | 4,082 | | | $ | 7,595 | | | $ | 283,253 | | Non-farm/non-residential | | | 1,300,582 | | | | 142,688 | | | | 53,863 | | | | 6,408 | | | | 1,503,541 | | Construction/land development | | | 1,190,005 | | | | 192,046 | | | | 11,135 | | | | 18,652 | | | | 1,411,838 | | Agricultural | | | 22,446 | | | | 12,375 | | | | 10,226 | | | | 2,188 | | | | 47,235 | | Multifamily residential | | | 171,806 | | | | 37,886 | | | | 713 | | | | 751 | | | | 211,156 | | Commercial and industrial | | | 208,054 | | | | 59,967 | | | | 18,310 | | | | 1,376 | | | | 287,707 | | Consumer(1) | | | 25,267 | | | | 0 | | | | 141 | | | | 261 | | | | 25,669 | | Direct financing leases | | | 114,586 | | | | 715 | | | | 117 | | | | 57 | | | | 115,475 | | Other(1) | | | 89,364 | | | | 4,312 | | | | 286 | | | | 34 | | | | 93,996 | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 3,393,686 | | | $ | 449,989 | | | $ | 98,873 | | | $ | 37,322 | | | $ | 3,979,870 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | June 30, 2014: | | | | | | | | | | | | | | | | | | | | | Real estate: | | | | | | | | | | | | | | | | | | | | | Residential 1-4 family(1) | | $ | 258,098 | | | $ | 0 | | | $ | 2,620 | | | $ | 5,779 | | | $ | 266,497 | | Non-farm/non-residential | | | 1,090,525 | | | | 139,080 | | | | 53,478 | | | | 7,091 | | | | 1,290,174 | | Construction/land development | | | 846,365 | | | | 176,977 | | | | 12,078 | | | | 13,738 | | | | 1,049,158 | | Agricultural | | | 22,766 | | | | 9,785 | | | | 10,388 | | | | 2,602 | | | | 45,541 | | Multifamily residential | | | 105,366 | | | | 29,954 | | | | 385 | | | | 1,248 | | | | 136,953 | | Commercial and industrial | | | 127,935 | | | | 35,769 | | | | 1,768 | | | | 1,412 | | | | 166,884 | | Consumer(1) | | | 28,244 | | | | 0 | | | | 132 | | | | 298 | | | | 28,674 | | Direct financing leases | | | 97,967 | | | | 727 | | | | 34 | | | | 40 | | | | 98,768 | | Other(1) | | | 85,684 | | | | 3,036 | | | | 189 | | | | 27 | | | | 88,936 | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 2,662,950 | | | $ | 395,328 | | | $ | 81,072 | | | $ | 32,235 | | | $ | 3,171,585 | | | | | | | | | | | | | | | | | | | | | | |
(1) | (1) | The Company does not risk rate its residential 1-4 family loans, its consumer loans, and certain “other” loans. However, for purposes of the above table, the Company considers such loans to be (i) satisfactory – if they are performing and less than 30 days past due, (ii) watch – if they are performing and 30 to 89 days past due or (iii) substandard – if they are nonperforming or 90 days or more past due. |
The following categories of credit quality indicators are used by the Company. Satisfactory – Loans and leases in this category are considered to be a satisfactory credit risk and are generally considered to be collectible in full.
Moderate – Loans and leases in this category are considered to be a marginally satisfactory credit risk and are generally considered to be collectible in full.
Watch – Loans and leases in this category are presently protected from apparent loss; however, weaknesses exist which could cause future impairment of repayment of principal or interest.
Substandard – Loans and leases in this category are characterized by deterioration in quality exhibited by a number of weaknesses requiring corrective action and posing risk of some loss. 18
The following table is an aging analysis of past due non-purchased loans and leases as of the dates indicated. | | | | | | | | | | | | | | | | | | | | | | | 30-89 Days Past Due (1) | | | 90 Days or More (2) | | | Total Past Due | | | Current(3) | | | Total | | | | (Dollars in thousands) | | June 30, 2015: | | | | | | | | | | | | | | | | | | | | | Real estate: | | | | | | | | | | | | | | | | | | | | | Residential 1-4 family | | $ | 4,642 | | | $ | 1,031 | | | $ | 5,673 | | | $ | 312,563 | | | $ | 318,236 | | Non-farm/non-residential | | | 2,672 | | | | 1,180 | | | | 3,852 | | | | 1,684,951 | | | | 1,688,803 | | Construction/land development | | | 906 | | | | 9,119 | | | | 10,025 | | | | 1,890,000 | | | | 1,900,025 | | Agricultural | | | 516 | | | | 1,426 | | | | 1,942 | | | | 48,841 | | | | 50,783 | | Multifamily residential | | | 1,042 | | | | 0 | | | | 1,042 | | | | 295,832 | | | | 296,874 | | Commercial and industrial | | | 737 | | | | 115 | | | | 852 | | | | 258,768 | | | | 259,620 | | Consumer | | | 225 | | | | 35 | | | | 260 | | | | 25,272 | | | | 25,532 | | Direct financing leases | | | 140 | | | | 106 | | | | 246 | | | | 136,900 | | | | 137,146 | | Other | | | 98 | | | | 85 | | | | 183 | | | | 89,921 | | | | 90,104 | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 10,978 | | | $ | 13,097 | | | $ | 24,075 | | | $ | 4,743,048 | | | $ | 4,767,123 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2014: | | | | | | | | | | | | | | | | | | | | | Real estate: | | | | | | | | | | | | | | | | | | | | | Residential 1-4 family | | $ | 6,352 | | | $ | 1,536 | | | $ | 7,888 | | | $ | 275,365 | | | $ | 283,253 | | Non-farm/non-residential | | | 2,708 | | | | 1,445 | | | | 4,153 | | | | 1,499,388 | | | | 1,503,541 | | Construction/land development | | | 3,520 | | | | 12,881 | | | | 16,401 | | | | 1,395,437 | | | | 1,411,838 | | Agricultural | | | 1,680 | | | | 304 | | | | 1,984 | | | | 45,251 | | | | 47,235 | | Multifamily residential | | | 0 | | | | 0 | | | | 0 | | | | 211,156 | | | | 211,156 | | Commercial and industrial | | | 586 | | | | 94 | | | | 680 | | | | 287,027 | | | | 287,707 | | Consumer | | | 161 | | | | 55 | | | | 216 | | | | 25,453 | | | | 25,669 | | Direct financing leases | | | 39 | | | | 54 | | | | 93 | | | | 115,382 | | | | 115,475 | | Other | | | 58 | | | | 12 | | | | 70 | | | | 93,926 | | | | 93,996 | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 15,104 | | | $ | 16,381 | | | $ | 31,485 | | | $ | 3,948,385 | | | $ | 3,979,870 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | June 30, 2014: | | | | | | | | | | | | | | | | | | | | | Real estate: | | | | | | | | | | | | | | | | | | | | | Residential 1-4 family | | $ | 2,890 | | | $ | 1,521 | | | $ | 4,411 | | | $ | 262,086 | | | $ | 266,497 | | Non-farm/non-residential | | | 1,714 | | | | 1,693 | | | | 3,407 | | | | 1,286,767 | | | | 1,290,174 | | Construction/land development | | | 49 | | | | 10,060 | | | | 10,109 | | | | 1,039,049 | | | | 1,049,158 | | Agricultural | | | 269 | | | | 436 | | | | 705 | | | | 44,836 | | | | 45,541 | | Multifamily residential | | | 491 | | | | 0 | | | | 491 | | | | 136,462 | | | | 136,953 | | Commercial and industrial | | | 674 | | | | 0 | | | | 674 | | | | 166,210 | | | | 166,884 | | Consumer | | | 139 | | | | 54 | | | | 193 | | | | 28,481 | | | | 28,674 | | Direct financing leases | | | 10 | | | | 30 | | | | 40 | | | | 98,728 | | | | 98,768 | | Other | | | 0 | | | | 0 | | | | 0 | | | | 88,936 | | | | 88,936 | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 6,236 | | | $ | 13,794 | | | $ | 20,030 | | | $ | 3,151,555 | | | $ | 3,171,585 | | | | | | | | | | | | | | | | | | | | | | |
| | 30-89 Days Past Due (1) | | | 90 Days or More (2) | | | Total Past Due | | | Current(3) | | | Total | | | | (Dollars in thousands) | | June 30, 2016: | | | | | | | | | | | | | | | | | | | | | Real estate: | | | | | | | | | | | | | | | | | | | | | Residential 1-4 family | | $ | 4,677 | | | $ | 1,585 | | | $ | 6,262 | | | $ | 401,972 | | | $ | 408,234 | | Non-farm/non-residential | | | 2,258 | | | | 1,145 | | | | 3,403 | | | | 2,617,049 | | | | 2,620,452 | | Construction/land development | | | 3,531 | | | | 224 | | | | 3,755 | | | | 3,597,000 | | | | 3,600,755 | | Agricultural | | | 1,372 | | | | 183 | | | | 1,555 | | | | 88,752 | | | | 90,307 | | Multifamily residential | | | 736 | | | | — | | | | 736 | | | | 591,056 | | | | 591,792 | | Commercial and industrial | | | 309 | | | | 740 | | | | 1,049 | | | | 253,663 | | | | 254,712 | | Consumer | | | 219 | | | | 22 | | | | 241 | | | | 28,296 | | | | 28,537 | | Direct financing leases | | | 419 | | | | 492 | | | | 911 | | | | 132,864 | | | | 133,775 | | Other | | | — | | | | 108 | | | | 108 | | | | 486,228 | | | | 486,336 | | Total | | $ | 13,521 | | | $ | 4,499 | | | $ | 18,020 | | | $ | 8,196,880 | | | $ | 8,214,900 | | | | | | | | | | | | | | | | | | | | | | | December 31, 2015: | | | | | | | | | | | | | | | | | | | | | Real estate: | | | | | | | | | | | | | | | | | | | | | Residential 1-4 family | | $ | 2,793 | | | $ | 1,507 | | | $ | 4,300 | | | $ | 345,954 | | | $ | 350,254 | | Non-farm/non-residential | | | 1,881 | | | | 777 | | | | 2,658 | | | | 2,008,208 | | | | 2,010,866 | | Construction/land development | | | 1,043 | | | | 5,645 | | | | 6,688 | | | | 2,818,887 | | | | 2,825,575 | | Agricultural | | | 1,780 | | | | 243 | | | | 2,023 | | | | 72,417 | | | | 74,440 | | Multifamily residential | | | — | | | | 83 | | | | 83 | | | | 440,745 | | | | 440,828 | | Commercial and industrial | | | 823 | | | | 751 | | | | 1,574 | | | | 229,707 | | | | 231,281 | | Consumer | | | 248 | | | | 33 | | | | 281 | | | | 27,464 | | | | 27,745 | | Direct financing leases | | | 517 | | | | 321 | | | | 838 | | | | 146,897 | | | | 147,735 | | Other | | | 8 | | | | 7 | | | | 15 | | | | 419,895 | | | | 419,910 | | Total | | $ | 9,093 | | | $ | 9,367 | | | $ | 18,460 | | | $ | 6,510,174 | | | $ | 6,528,634 | |
(1) | Includes $0.7 million, $0.9$1.4 million and $1.8$1.9 million at June 30, 2015,2016 and December 31, 2014 and June 30, 2014,2015, respectively, of loans and leases on nonaccrual status. |
(2) | All loans and leases greater than 90 days past due were on nonaccrual status at June 30, 2015 and 20142016 and December 31, 2014.2015. |
(3) | Includes $2.5 million, $0.4$1.9 million and $2.8$2.3 million of loans and leases on nonaccrual status at June 30, 2015,2016 and December 31, 2014 and June 30, 2014,2015, respectively. |
19
Purchased Loans As of June 30, 2016, the Company had identified purchased loans where it had determined it was probable that the Company would be unable to collect all amounts according to the contractual terms thereof (for purchased loans without evidence of credit deterioration at date of acquisition) or the expected performance of such loans had deteriorated from its performance expectations established in conjunction with the determination of the Day 1 Fair Values or since its most recent review of such portfolio’s performance (for purchased loans with evidence of credit deterioration at date of acquisition). At June 30, 2016, the Company had $6.4 million of impaired purchased loans compared to $8.1 million at December 31, 2015. The following table is a summary of credit quality indicators for the Company’s purchased loans as of the dates indicated. | | | | | | | | | | | | | | | | | | Purchased Loans Without Evidence of Credit Deterioration at Acquisition | | | Purchased Loans With Evidence of Credit Deterioration at Acquisition | | | Total Purchased | | | | Purchased Loans Without Evidence of Credit Deterioration at Acquisition | | | Purchased Loans With Evidence of Credit Deterioration at Acquisition | | | Total Purchased Loans | | | FV 33 | | | FV 44 | | | FV 55 | | | FV 36 | | | FV 77 | | | FV 66 | | | FV 88 | | | Loans | | | | FV 33 | | | FV 44 | | | FV 55 | | | FV 36 | | | FV 77 | | | FV 66 | | | FV 88 | | | | (Dollars in thousands) | | | | (Dollars in thousands) | | | June 30, 2015: | | | | | | | | | | | | | | | | | | June 30, 2016: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Real estate: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Residential 1-4 family | | $ | 61,886 | | | $ | 88,824 | | | $ | 30,228 | | | $ | 58,905 | | | $ | 83 | | | $ | 85,917 | | | $ | 1,888 | | | $ | 327,731 | | | $ | 53,349 | | | $ | 88,447 | | | $ | 33,412 | | | $ | 73,753 | | | $ | 72 | | | $ | 68,805 | | | $ | 1,516 | | | $ | 319,354 | | Non-farm/non-residential | | | 209,433 | | | | 702,962 | | | | 119,491 | | | | 3,780 | | | | 255 | | | | 119,406 | | | | 6,778 | | | | 1,162,105 | | | | 181,990 | | | | 615,083 | | | | 111,291 | | | | 3,926 | | | | 422 | | | | 81,111 | | | | 4,149 | | | | 997,972 | | Construction/land development | | | 18,084 | | | | 9,638 | | | | 3,397 | | | | 8,724 | | | | 0 | | | | 19,420 | | | | 2,695 | | | | 61,958 | | | | 11,660 | | | | 9,356 | | | | 5,960 | | | | 3,366 | | | | 22 | | | | 6,822 | | | | 88 | | | | 37,274 | | Agricultural | | | 6,903 | | | | 13,465 | | | | 1,901 | | | | 865 | | | | 108 | | | | 6,377 | | | | 0 | | | | 29,619 | | | | 3,353 | | | | 4,889 | | | | 999 | | | | 472 | | | | — | | | | 3,522 | | | | — | | | | 13,235 | | Multifamily residential | | | 23,260 | | | | 117,586 | | | | 25,968 | | | | 706 | | | | 65 | | | | 12,555 | | | | 0 | | | | 180,140 | | | | 16,641 | | | | 59,309 | | | | 24,998 | | | | 824 | | | | 13 | | | | 2,661 | | | | — | | | | 104,446 | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total real estate | | | 319,566 | | | | 932,475 | | | | 180,985 | | | | 72,980 | | | | 511 | | | | 243,675 | | | | 11,361 | | | | 1,761,553 | | | Commercial and industrial | | | 10,126 | | | | 17,812 | | | | 4,316 | | | | 5,722 | | | | 20 | | | | 8,179 | | | | 449 | | | | 46,624 | | | | 6,803 | | | | 10,287 | | | | 7,077 | | | | 3,560 | | | | 25 | | | | 5,693 | | | | 72 | | | | 33,517 | | Consumer | | | 793 | | | | 261 | | | | 213 | | | | 7,775 | | | | 2 | | | | 310 | | | | 4 | | | | 9,358 | | | | 551 | | | | 125 | | | | 29 | | | | 3,757 | | | | — | | | | 200 | | | | — | | | | 4,662 | | Other | | | 4,247 | | | | 3,558 | | | | 288 | | | | 462 | | | | 0 | | | | 758 | | | | 0 | | | | 9,313 | | | | 3,051 | | | | 838 | | | | 143 | | | | 93 | | | | 8 | | | | 511 | | | | — | | | | 4,644 | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 334,732 | | | $ | 954,106 | | | $ | 185,802 | | | $ | 86,939 | | | $ | 533 | | | $ | 252,922 | | | $ | 11,814 | | | $ | 1,826,848 | | | $ | 277,398 | | | $ | 788,334 | | | $ | 183,909 | | | $ | 89,751 | | | $ | 562 | | | $ | 169,325 | | | $ | 5,825 | | | $ | 1,515,104 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2014: | | | | | | | | | | | | | | | | | | December 31, 2015: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Real estate: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Residential 1-4 family | | $ | 73,196 | | | $ | 81,840 | | | $ | 30,180 | | | $ | 71,687 | | | $ | 151 | | | $ | 96,752 | | | $ | 1,899 | | | $ | 355,705 | | | $ | 59,497 | | | $ | 117,498 | | | $ | 38,888 | | | $ | 85,684 | | | $ | 351 | | | $ | 82,862 | | | $ | 2,172 | | | $ | 386,952 | | Non-farm/non-residential | | | 166,754 | | | | 180,522 | | | | 32,157 | | | | 4,906 | | | | 505 | | | | 114,217 | | | | 5,828 | | | | 504,889 | | | | 209,542 | | | | 693,707 | | | | 122,652 | | | | 5,039 | | | | 363 | | | | 99,681 | | | | 4,563 | | | | 1,135,547 | | Construction/land development | | | 21,803 | | | | 26,858 | | | | 4,312 | | | | 13,708 | | | | 0 | | | | 28,497 | | | | 4,598 | | | | 99,776 | | | | 13,121 | | | | 12,511 | | | | 7,137 | | | | 4,771 | | | | 22 | | | | 10,224 | | | | 37 | | | | 47,823 | | Agricultural | | | 10,444 | | | | 25,187 | | | | 2,409 | | | | 1,525 | | | | 0 | | | | 8,331 | | | | 92 | | | | 47,988 | | | | 4,825 | | | | 7,963 | | | | 1,456 | | | | 797 | | | | — | | | | 4,877 | | | | — | | | | 19,918 | | Multifamily residential | | | 22,731 | | | | 11,646 | | | | 1,971 | | | | 884 | | | | 67 | | | | 4,823 | | | | 312 | | | | 42,434 | | | | 20,347 | | | | 86,588 | | | | 27,818 | | | | 896 | | | | 13 | | | | 3,835 | | | | — | | | | 139,497 | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total real estate | | | 294,928 | | | | 326,053 | | | | 71,029 | | | | 92,710 | | | | 723 | | | | 252,620 | | | | 12,729 | | | | 1,050,792 | | | Commercial and industrial | | | 20,340 | | | | 23,048 | | | | 4,900 | | | | 10,659 | | | | 22 | | | | 9,297 | | | | 559 | | | | 68,825 | | | | 8,912 | | | | 29,001 | | | | 9,244 | | | | 5,649 | | | | 20 | | | | 7,185 | | | | 511 | | | | 60,522 | | Consumer | | | 1,605 | | | | 272 | | | | 420 | | | | 12,538 | | | | 3 | | | | 426 | | | | 4 | | | | 15,268 | | | | 726 | | | | 205 | | | | 185 | | | | 6,106 | | | | 2 | | | | 263 | | | | — | | | | 7,487 | | Other | | | 4,845 | | | | 5,830 | | | | 597 | | | | 945 | | | | 0 | | | | 845 | | | | 0 | | | | 13,062 | | | | 3,944 | | | | 3,316 | | | | 212 | | | | 243 | | | | — | | | | 576 | | | | — | | | | 8,291 | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 321,718 | | | $ | 355,203 | | | $ | 76,946 | | | $ | 116,852 | | | $ | 748 | | | $ | 263,188 | | | $ | 13,292 | | | $ | 1,147,947 | | | $ | 320,914 | | | $ | 950,789 | | | $ | 207,592 | | | $ | 109,185 | | | $ | 771 | | | $ | 209,503 | | | $ | 7,283 | | | $ | 1,806,037 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | June 30, 2014: | | | | | | | | | | | | | | | | | | Real estate: | | | | | | | | | | | | | | | | | | Residential 1-4 family | | $ | 81,102 | | | $ | 84,839 | | | $ | 32,286 | | | $ | 79,449 | | | $ | 10 | | | $ | 111,106 | | | $ | 2,306 | | | $ | 391,098 | | | Non-farm/non-residential | | | 211,896 | | | | 198,937 | | | | 40,193 | | | | 3,704 | | | | 0 | | | | 148,491 | | | | 10,249 | | | | 613,470 | | | Construction/land development | | | 32,850 | | | | 37,840 | | | | 12,447 | | | | 10,878 | | | | 9 | | | | 36,031 | | | | 6,032 | | | | 136,087 | | | Agricultural | | | 15,058 | | | | 29,337 | | | | 3,185 | | | | 1,744 | | | | 0 | | | | 10,984 | | | | 323 | | | | 60,631 | | | Multifamily residential | | | 10,505 | | | | 13,418 | | | | 7,453 | | | | 1,030 | | | | 67 | | | | 8,754 | | | | 1,090 | | | | 42,317 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total real estate | | | 351,411 | | | | 364,371 | | | | 95,564 | | | | 96,805 | | | | 86 | | | | 315,366 | | | | 20,000 | | | | 1,243,603 | | | Commercial and industrial | | | 27,269 | | | | 49,175 | | | | 9,702 | | | | 14,637 | | | | 0 | | | | 11,371 | | | | 1,119 | | | | 113,273 | | | Consumer | | | 3,215 | | | | 1,165 | | | | 670 | | | | 20,204 | | | | 0 | | | | 615 | | | | 0 | | | | 25,869 | | | Other | | | 5,762 | | | | 9,292 | | | | 935 | | | | 4,391 | | | | 0 | | | | 944 | | | | 0 | | | | 21,324 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 387,657 | | | $ | 424,003 | | | $ | 106,871 | | | $ | 136,037 | | | $ | 86 | | | $ | 328,296 | | | $ | 21,119 | | | $ | 1,404,069 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following grades are used for purchased loans without evidence of credit deterioration at the date of acquisition. FV 33 – Loans in this category are considered to be satisfactory with minimal credit risk and are generally considered collectible. FV 44 – Loans in this category are considered to be marginally satisfactory with minimal to moderate credit risk and are generally considered collectible. FV 55 – Loans in this category exhibit weakness and are considered to have elevated credit risk and elevated risk of repayment. FV 36 – Loans in this category were not individually reviewed at the date of purchase and are assumed to have characteristics similar to the characteristics of the aggregate acquired portfolio. FV 77 – Loans in this category have deteriorated since the date of purchase and are considered impaired. 20
The following grades are used for purchased loans with evidence of credit deterioration at the date of acquisition. FV 66 – Loans in this category are performing in accordance with or exceeding management’s performance expectations established in conjunction with the determination of Day 1 Fair Values. FV 88 – Loans in this category have deteriorated from management’s performance expectations established in conjunction with the determination of Day 1 Fair Values. The Company had no allowance at June 30, 2015 and 2014 or December 31, 2014 for its (i) purchased loans without evidence of credit deterioration at the date of acquisition as management’s analysis of such individual loans resulted in no impairment or all identified impairment on such loans had been charged off, or (ii) purchased loans with evidence of credit deterioration at the date of acquisition as all such loans were performing in accordance with management’s expectations established in conjunction with the determination of the Day 1 Fair Values or all losses had been charged off on such loans whose performance had deteriorated from management’s expectations established in conjunction with the determination of the Day 1 Fair Values. The following table is an aging analysis of past due purchased loans as of the dates indicated.
| | | | | | | | | | | | 30-89 Days Past Due | | | 90 Days or More | | | Total Past Due | | | Current | | | Total Purchased Loans | | | | 30-89 Days Past Due | | | 90 Days or More | | | Total Past Due | | | Current | | | Total Purchased Loans | | | (Dollars in thousands) | | | | (Dollars in thousands) | | | June 30, 2015: | | | | | | | | | | | | June 30, 2016: | | | | | | | | | | | | | | | | | | | | | | Real estate: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Residential 1-4 family | | $ | 6,476 | | | $ | 5,975 | | | $ | 12,451 | | | $ | 315,280 | | | $ | 327,731 | | | $ | 6,492 | | | $ | 5,094 | | | $ | 11,586 | | | $ | 307,768 | | | $ | 319,354 | | Non-farm/non-residential | | | 16,737 | | | | 9,191 | | | | 25,928 | | | | 1,136,177 | | | | 1,162,105 | | | | 1,578 | | | | 5,931 | | | | 7,509 | | | | 990,463 | | | | 997,972 | | Construction/land development | | | 1,045 | | | | 2,715 | | | | 3,760 | | | | 58,198 | | | | 61,958 | | | | 412 | | | | 816 | | | | 1,228 | | | | 36,046 | | | | 37,274 | | Agriculture | | | 291 | | | | 166 | | | | 457 | | | | 29,162 | | | | 29,619 | | | | 130 | | | | 353 | | | | 483 | | | | 12,752 | | | | 13,235 | | Multifamily residential | | | 408 | | | | 709 | | | | 1,117 | | | | 179,023 | | | | 180,140 | | | | — | | | | 13 | | | | 13 | | | | 104,433 | | | | 104,446 | | Commercial and industrial | | | 936 | | | | 611 | | | | 1,547 | | | | 45,077 | | | | 46,624 | | | | 661 | | | | 1,084 | | | | 1,745 | | | | 31,772 | | | | 33,517 | | Consumer | | | 111 | | | | 68 | | | | 179 | | | | 9,179 | | | | 9,358 | | | | 52 | | | | 29 | | | | 81 | | | | 4,581 | | | | 4,662 | | Other | | | 40 | | | | 11 | | | | 51 | | | | 9,262 | | | | 9,313 | | | | — | | | | — | | | | — | | | | 4,644 | | | | 4,644 | | | | | | | | | | | | | | | | | | | Total | | $ | 26,044 | | | $ | 19,446 | | | $ | 45,490 | | | $ | 1,781,358 | | | $ | 1,826,848 | | | $ | 9,325 | | | $ | 13,320 | | | $ | 22,645 | | | $ | 1,492,459 | | | $ | 1,515,104 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Purchased loans without evidence of credit deterioration at date of acquisition | | | $ | 4,246 | | | $ | 3,193 | | | $ | 7,439 | | | $ | 1,332,515 | | | $ | 1,339,954 | | Purchased loans with evidence of credit deterioration at date of acquisition | | | | 5,079 | | | | 10,127 | | | | 15,206 | | | | 159,944 | | | | 175,150 | | Total | | | $ | 9,325 | | | $ | 13,320 | | | $ | 22,645 | | | $ | 1,492,459 | | | $ | 1,515,104 | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2014: | | | | | | | | | | | | December 31, 2015: | | | | | | | | | | | | | | | | | | | | | | Real estate: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Residential 1-4 family | | $ | 8,088 | | | $ | 9,043 | | | $ | 17,131 | | | $ | 338,574 | | | $ | 355,705 | | | $ | 9,042 | | | $ | 6,293 | | | $ | 15,335 | | | $ | 371,617 | | | $ | 386,952 | | Non-farm/non-residential | | | 8,907 | | | | 12,439 | | | | 21,346 | | | | 483,543 | | | | 504,889 | | | | 3,435 | | | | 6,837 | | | | 10,272 | | | | 1,125,275 | | | | 1,135,547 | | Construction/land development | | | 1,197 | | | | 5,464 | | | | 6,661 | | | | 93,115 | | | | 99,776 | | | | 919 | | | | 1,255 | | | | 2,174 | | | | 45,649 | | | | 47,823 | | Agriculture | | | 237 | | | | 875 | | | | 1,112 | | | | 46,876 | | | | 47,988 | | | | 106 | | | | 356 | | | | 462 | | | | 19,456 | | | | 19,918 | | Multifamily residential | | | 515 | | | | 67 | | | | 582 | | | | 41,852 | | | | 42,434 | | | | 299 | | | | — | | | | 299 | | | | 139,198 | | | | 139,497 | | Commercial and industrial | | | 863 | | | | 751 | | | | 1,614 | | | | 67,211 | | | | 68,825 | | | | 714 | | | | 924 | | | | 1,638 | | | | 58,884 | | | | 60,522 | | Consumer | | | 199 | | | | 103 | | | | 302 | | | | 14,966 | | | | 15,268 | | | | 101 | | | | 41 | | | | 142 | | | | 7,345 | | | | 7,487 | | Other | | | 0 | | | | 31 | | | | 31 | | | | 13,031 | | | | 13,062 | | | | 10 | | | | 11 | | | | 21 | | | | 8,270 | | | | 8,291 | | | | | | | | | | | | | | | | | | | Total | | $ | 20,006 | | | $ | 28,773 | | | $ | 48,779 | | | $ | 1,099,168 | | | $ | 1,147,947 | | | $ | 14,626 | | | $ | 15,717 | | | $ | 30,343 | | | $ | 1,775,694 | | | $ | 1,806,037 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | June 30, 2014: | | | | | | | | | | | | Real estate: | | | | | | | | | | | | Residential 1-4 family | | $ | 10,866 | | | $ | 14,074 | | | $ | 24,940 | | | $ | 366,158 | | | $ | 391,098 | | | Non-farm/non-residential | | | 4,929 | | | | 25,570 | | | | 30,499 | | | | 582,971 | | | | 613,470 | | | Construction/land development | | | 1,146 | | | | 9,766 | | | | 10,912 | | | | 125,175 | | | | 136,087 | | | Agriculture | | | 165 | | | | 2,260 | | | | 2,425 | | | | 58,206 | | | | 60,631 | | | Multifamily residential | | | 0 | | | | 2,594 | | | | 2,594 | | | | 39,723 | | | | 42,317 | | | Commercial and industrial | | | 392 | | | | 1,733 | | | | 2,125 | | | | 111,148 | | | | 113,273 | | | Consumer | | | 170 | | | | 183 | | | | 353 | | | | 25,516 | | | | 25,869 | | | Other | | | 16 | | | | 19 | | | | 35 | | | | 21,289 | | | | 21,324 | | | | | | | | | | | | | | | | | | | | Purchased loans without evidence of credit deterioration at date of acquisition | | | $ | 7,972 | | | $ | 2,743 | | | $ | 10,715 | | | $ | 1,578,536 | | | $ | 1,589,251 | | Purchased loans with evidence of credit deterioration at date of acquisition | | | | 6,654 | | | | 12,974 | | | | 19,628 | | | | 197,158 | | | | 216,786 | | Total | | $ | 17,684 | | | $ | 56,199 | | | $ | 73,883 | | | $ | 1,330,186 | | | $ | 1,404,069 | | | $ | 14,626 | | | $ | 15,717 | | | $ | 30,343 | | | $ | 1,775,694 | | | $ | 1,806,037 | | | | | | | | | | | | | | | | | | |
At June 30, 2015 and 20142016 and December 31, 2014,2015, a portion of the Company’s purchased loans with evidence of credit deterioration at the date of acquisition were past due, including many that were 90 days or more past due. Such delinquencies were included in the Company’s performance expectations in determining the Day 1 Fair Values. Additionally, in accordance with GAAP, the Company continues to accrete into earnings income on such loans.
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7.6. | Income TaxesSubordinated Notes |
On June 23, 2016, the Company completed an underwritten public offering of $225 million in aggregate principal amount of its 5.50% Fixed-to-Floating Rate Subordinated Notes due 2026 (the “Notes”) for net proceeds of $222.3 million. The following table is a summaryNotes were issued pursuant to the Subordinated Indenture, dated as of June 23, 2016 (the “Base Indenture”), between the Company and U.S. Bank National Association, as trustee (the “Trustee”), as supplemented by the First Supplemental Indenture, dated as of June 23, 2016 (the “Supplemental Indenture”), between the Company and the Trustee. The Base Indenture, as amended and supplemented by the Supplemental Indenture, governs the terms of the typesNotes and provides that the Notes are unsecured, subordinated debt obligations of temporary differences between the taxCompany and will mature on July 1, 2026. From and including the date of issuance to, but excluding July 1, 2021, the Notes will bear interest at an initial rate of 5.50% per annum. From and including July 1, 2021 to, but excluding the maturity date or earlier redemption, the Notes will bear interest at a floating rate equal to three-month London Interbank Offered Rate (“LIBOR”) as calculated on each applicable date of determination plus a spread of 442.5 basis points; provided, however, that in the event three-month LIBOR is less than zero, then three-month LIBOR shall be deemed to be zero. Debt issuance costs of assets$2.7 million are being amortized, using a level-yield methodology over the estimated holding period of seven years, as an increase in interest expense on the Notes. The Company may, beginning with the interest payment date of July 1, 2021, and liabilitieson any interest payment date thereafter, redeem the Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the Notes to be redeemed plus accrued and their financial reporting amountsunpaid interest to but excluding the date of redemption. The Company may also redeem the Notes at any time, including prior to July 1, 2021, at the Company’s option, in whole but not in part, if: (i) a change or prospective change in law occurs that give rise to deferredcould prevent the Company from deducting interest payable on the Notes for U.S. federal income tax assets and liabilities and their approximate tax effectspurposes; (ii) a subsequent event occurs that could preclude the Notes from being recognized as Tier 2 capital for regulatory capital purposes; or (iii) the Company is required to register as an investment company under the Investment Company Act of 1940, as amended; in each case, at a redemption price equal to 100% of the dates indicated.principal amount of the Notes plus any accrued and unpaid interest to but excluding the redemption date. | | | | | | | | | | | | | | | June 30, | | | December 31, | | | | 2015 | | | 2014 | | | 2014 | | | | (Dollars in thousands) | | Deferred tax assets: | | | | | | | | | | | | | Allowance for loan and lease losses | | $ | 21,617 | | | $ | 18,116 | | | $ | 20,324 | | Differences in amounts reflected in the financial statements and income tax basis of purchased loans not previously covered by FDIC loss share agreements | | | 28,605 | | | | 26,024 | | | | 20,444 | | Differences in amounts reflected in the financial statements and income tax basis for deposits assumed in acquisitions | | | 7,703 | | | | 2,405 | | | | 1,337 | | Stock-based compensation | | | 4,477 | | | | 3,364 | | | | 3,268 | | Deferred compensation | | | 2,092 | | | | 1,890 | | | | 1,991 | | Foreclosed assets | | | 3,111 | | | | 5,624 | | | | 3,503 | | Deferred fees and costs on loans and leases | | | 6,405 | | | | 2,059 | | | | 4,785 | | Differences in amounts reflected in the financial statements and income tax basis of assets acquired and liabilities assumed in FDIC-assisted acquisitions | | | 8,032 | | | | 7,397 | | | | 8,098 | | Acquired net operating losses | | | 13,456 | | | | 13,662 | | | | 13,332 | | Other, net | | | 1,949 | | | | 1,486 | | | | 2,568 | | | | | | | | | | | | | | | Total gross deferred tax assets | | | 97,447 | | | | 82,027 | | | | 79,650 | | Less valuation allowance | | | (474 | ) | | | (474 | ) | | | (474 | ) | | | | | | | | | | | | | | Net deferred tax asset | | | 96,973 | | | | 81,553 | | | | 79,176 | | | | | | | | | | | | | | | Deferred tax liabilities: | | | | | | | | | | | | | Accelerated depreciation on premises and equipment | | | 18,921 | | | | 18,028 | | | | 18,653 | | Investment securities AFS | | | 3,798 | | | | 5,022 | | | | 7,692 | | Acquired intangible assets | | | 10,407 | | | | 10,847 | | | | 9,743 | | | | | | | | | | | | | | | Total gross deferred tax liabilities | | | 33,126 | | | | 33,897 | | | | 36,088 | | | | | | | | | | | | | | | Net deferred tax assets | | $ | 63,847 | | | $ | 47,656 | | | $ | 43,088 | | | | | | | | | | | | | | |
Net operating losses were acquired in the Bancshares, Summit and Intervest acquisitions and the Company’s 2013 acquisition of The First National Bank of Shelby (“FNB Shelby”). The net operating losses from the Bancshares transaction total $15.7 million at June 30, 2015 and will expire at various dates from 2030 through 2034. The net operating losses acquired from the Summit transaction were utilized during 2014. The net operating losses acquired in the Intervest transaction totaled $6.3 million at June 30, 2015 and will expire at various dates from 2030 through 2035. The net operating losses from the FNB Shelby transaction totaled $20.0 million at June 30, 2015, of which $12.5 million will expire in 2032 and $7.5 million will expire in 2033.
At June 30, 2015 and 2014 and December 31, 2014, the Company had a deferred tax valuation allowance of approximately $0.5 million to reflect its assessment that the realization of the benefits from the recovery of certain acquired net operating losses are expected to be subject to limitations under section 382 of the Internal Revenue Code.
To the extent that additional information becomes available regarding the settlement or recovery of acquired net operating loss carryforwards or assets with built-in losses acquired in any of the Company’s previous acquisitions, management may be required to make adjustments to its deferred tax asset valuation allowance, which adjustments could affect goodwill or deferred income tax expense (benefit).
8.7. | Supplemental Data for Cash Flows |
The following table provides supplemental cash flow information for the periods indicated. | | | Six Months Ended | | | | | June 30, | | | Six Months Ended June 30, | | | | 2015 | | | 2014 | | | 2016 | | | 2015 | | | | (Dollars in thousands) | | | (Dollars in thousands) | | Cash paid during the period for: | | | | | | | | | | | | | Interest | | $ | 13,031 | | | $ | 9,808 | | | $ | 20,073 | | | $ | 13,031 | | Taxes | | | 34,024 | | | | 17,690 | | | | 71,904 | | | | 34,024 | | Supplemental schedule of non-cash investing and financing activities: | | | | | | | | | | | | | Net change in unrealized gains/losses on investment securities AFS | | | (10,218 | ) | | | 22,506 | | | | 10,382 | | | | (10,218 | ) | Loans and premises and equipment transferred to foreclosed assets | | | 9,797 | | | | 31,013 | | | Loans transferred to foreclosed assets | | | | 10,236 | | | | 9,797 | | Loans advanced for sales of foreclosed assets | | | 0 | | | | 258 | | | | 127 | | | | — | | Unsettled AFS investment security purchases | | | 4,453 | | | | 1,465 | | | | 27,388 | | | | 4,453 | | Unsettled AFS investment security sales | | | 0 | | | | 1,815 | | | Unsettled loan sales | | | 14,361 | | | | 0 | | | | — | | | | 14,361 | | Unsettled loan purchases | | | 18,269 | | | | 0 | | | | 14,428 | | | | 18,269 | | Common stock issued in merger and acquisition transactions | | | 238,476 | | | | 166,315 | | | Common stock issued in merger and acquisition transaction | | | | — | | | | 238,476 | |
9.8. | Guarantees and Commitments |
Outstanding standby letters of credit are contingent commitments issued by the Company generally to guarantee the performance of a customer in third party arrangements. The maximum amount of future payments the Company could be required to make under these guarantees at June 30, 20152016 was $13.3$17.3 million. The Company holds collateral to support guarantees when deemed necessary. Collateralized commitments at June 30, 20152016 totaled $13.2$16.2 million. At June 30, 2015,2016, the Company had outstanding commitments totaling $7.35 billion to extend credit, excludingconsisting primarily of loans closed but not yet funded. The following table shows, as of the date indicated, the contractual maturities of such outstanding commitments.
Contractual Maturities at June 30, 2016 | | Maturity | | Amount | | (Dollars in thousands) | | 2016 | | $ | 200,997 | | 2017 | | | 1,010,841 | | 2018 | | | 2,603,175 | | 2019 | | | 2,123,899 | | 2020 | | | 1,286,274 | | Thereafter | | | 124,541 | | Total | | $ | 7,349,727 | |
Additionally, the Company had commitments to extend credit under mortgage interest rate lock commitments totaling $4.0 billion. The following table shows$28.2 million at June 30, 2016 and $15.7 million at December 31, 2015 that expire in one year or less and are not included in the contractual maturities of outstanding commitments to extend credit as of the date indicated.above table. | | | | | Contractual Maturities at June 30, 2015 | | Maturity | | Amount | | (Dollars in thousands) | | 2015 | | $ | 91,624 | | 2016 | | | 358,317 | | 2017 | | | 1,715,962 | | 2018 | | | 1,356,777 | | 2019 | | | 170,419 | | Thereafter | | | 312,844 | | | | | | | Total | | $ | 4,005,943 | | | | | | |
10.9. | Subordinated DebenturesStock-Based Compensation |
At June 30, 2015, the Company had the following issues of trust preferred securities and subordinated debentures owed to the Trusts.
| | | | | | | | | | | | | | | | | | | | | | | Subordinated Debentures Owed to Trust | | | Unamortized Discount at June 30, 2015 | | | Carrying Value of Subordinated Debentures at June 30, 2015 | | | Trust Preferred Securities of the Trusts | | | Contractual Interest Rate at June 30, 2015 | | | | (Dollars in thousands) | | Ozark II | | $ | 14,433 | | | $ | 0 | | | $ | 14,433 | | | $ | 14,000 | | | | 3.18 | % | Ozark III | | | 14,434 | | | | 0 | | | | 14,434 | | | | 14,000 | | | | 3.24 | | Ozark IV | | | 15,464 | | | | 0 | | | | 15,464 | | | | 15,000 | | | | 2.50 | | Ozark V | | | 20,619 | | | | 0 | | | | 20,619 | | | | 20,000 | | | | 1.89 | | Intervest II | | | 15,464 | | | | (678 | ) | | | 14,786 | | | | 15,000 | | | | 3.23 | | Intervest III | | | 15,464 | | | | (785 | ) | | | 14,679 | | | | 15,000 | | | | 3.07 | | Intervest IV | | | 15,464 | | | | (1,428 | ) | | | 14,036 | | | | 15,000 | | | | 2.68 | | Intervest V | | | 10,310 | | | | (1,358 | ) | | | 8,952 | | | | 10,000 | | | | 1.94 | | | | | | | | | | | | | | | | | | | | | | | | | $ | 121,652 | | | $ | (4,249 | ) | | $ | 117,403 | | | $ | 118,000 | | | | | | | | | | | | | | | | | | | | | | | | | | |
On February 10, 2015, in conjunction with the Intervest acquisition, the Company acquired the Intervest Trusts with outstanding subordinated debentures totaling $56.7 million and related trust preferred securities totaling $55.0 million. On the date of such acquisition, the Company recorded the assumed subordinated debentures owed to the Intervest Trusts at estimated fair value of $52.2 million, based on an independent third party valuation, to reflect a current market interest rate for comparable obligations. The fair value adjustment of $4.5 million is being amortized, using a level-yield methodology over the estimated holding period of approximately eight years, as an increase in interest expense of the subordinated debentures owed to the Intervest Trusts. In addition to the subordinated debentures of the Intervest Trusts, the Company also acquired $1.7 million of trust common equity issued by the Intervest Trusts.
The trust preferred securities issued by Intervest Trust II and the related subordinated debentures bear interest, adjustable quarterly, at 90-day London Interbank Offered Rates (“LIBOR”) plus 2.95% and contain a final maturity of September 17, 2033. The trust preferred securities issued by Intervest Trust III and the related subordinated debentures bear interest, adjustable quarterly, at 90-day LIBOR plus 2.79% and contain a final maturity of March 17, 2034. The trust preferred securities issued by Intervest Trust IV and the related subordinated debentures bear interest, adjustable quarterly, at 90-day LIBOR plus 2.40% and contain a final maturity of September 20, 2034. The trust preferred securities issued by Intervest Trust V and the related subordinated debentures bear interest, adjustable quarterly, at 90-day LIBOR plus 1.65% and contain a final maturity of December 15, 2036.
At June 30, 2015, the Company had an aggregate of $121.7 million of subordinated debentures outstanding (with an aggregate carrying value of $117.4 million) and had an asset of $3.7 million representing its investment in the common equity issued by the Trusts. The sole assets of the Trusts are the adjustable rate debentures and the liabilities of the Trusts are the trust preferred securities. At June 30, 2015 and 2014, the Trusts had aggregate common equity of $3.7 million and $1.9 million, respectively, and did not have any restricted net assets. The Company has, through various contractual arrangements or by operation of law, fully and unconditionally guaranteed all obligations of the Trusts with respect to the trust preferred securities. Additionally, there are no restrictions on the ability of the Trusts to transfer funds to the Company in the form of cash dividends, loans or advances. The Company has the option to defer interest payments on the subordinated debentures from time to time for a period not to exceed five consecutive years. These trust preferred securities generally mature at or near the 30th anniversary date of each issuance. However, the trust preferred securities and related subordinated debentures may be prepaid at par, subject to regulatory approval.
11. | Stock-Based Compensation |
The Company has a nonqualified stock option plan for certain employees of the Company. This plan provides for the granting of nonqualified options to purchase shares of common stock in the Company. No option may be granted under this plan for less than the fair market value of the common stock, defined by the plan as the average of the highest reported asked price and the lowest reported bid price, on the date of the grant. The benefits or amounts that may be received by or allocated to any particular officer or employee of the Company under this plan will be determined in the sole discretion of the personnel and compensation committee of the Company’s board of directors. While the vesting period and the termination date for the employee plan options are determined when options are granted, all suchAll employee options outstanding at June 30, 20152016 were issued with a vesting date three years after issuance and an expiration date seven years after issuance. All shares issued in connection with options exercised under the employee non-qualified stock option plan were in the form of newly issued shares.During the second quarter of 2015,In addition, the Company adopted the Bank of the Ozarks, Inc. Non-Employee Director Stock Planhas a non-employee director stock plan (the “Director Plan”) that provides for awards of common stock to eligible non-employee directors. The Director Plan grants to each director who is not otherwise an employee of the Company, or any subsidiary, shares of common stock on the day of his or her election as director of the Company at each annual shareholders meeting, or any special meeting called for the purpose of electing a director or directors of the Company, and upon appointment for the first time as a director of the Company. The number of shares of common stock to be awarded will be the equivalent of $25,000$35,000 worth of shares of common stock based on the average of the highest reported asked price and lowest reported bid price on the grant date. The common stock awarded under this plan is fully vested on the grant date. The aggregate number of shares of common stock which may be issued as awards under this plan will not exceed 50,000 shares, subject to certain adjustments. For the three months ended June 30, 2015, theThe Company issued 12,415 shares and 7,657 shares of common stock under the Director Plan during the six months ended June 30, 2016 and incurred $0.3 million in stock-based2015, respectively. Stock based compensation expense related to common-stock awardsfor shares of common stock issued under the Director Plan.Plan included in non-interest expense was $0.5 million for both the three months and six months ended June 30, 2016 and $0.3 million for the three and six months ended June 30, 2015.
Prior to the adoption of the Director Plan, the Company had a nonqualified stock option plan for non-employee directors. No options were granted under this plan during the six months ended June 30, 2016 or 2015. All options previously granted under this plan were exercisable immediately and expire ten years after issuance. All shares issued in connection with options exercised under both the employee and non-employee director stock option plans were in the form of newly issued shares.23
The following table summarizes stock option activity for both the employee and non-employee director stock option plans for the period indicated. | | | | | | | | | | | | | | | | | | | Options | | | Weighted- Average Exercise Price/Share | | | Weighted-Average Remaining Contractual Life (in years) | | | Aggregate Intrinsic Value (in thousands) | | | | | | | Six Months Ended June 30, 2015: | | | | | | | | | | | | | | | | | Outstanding – January 1, 2015 | | | 1,859,350 | | | $ | 23.49 | | | | | | | | | | Granted | | | 2,000 | | | | 40.82 | | | | | | | | | | Exercised | | | (99,050 | ) | | | 10.06 | | | | | | | | | | Forfeited | | | (74,350 | ) | | | 26.13 | | | | | | | | | | | | | | | | | | | | | | | | | | | Outstanding – June 30, 2015 | | | 1,687,950 | | | | 24.18 | | | | 5.3 | | | $ | 36,400 | (1) | | | | | | | | | | | | | | | | | | Fully vested and exercisable – June 30, 2015 | | | 315,550 | | | $ | 14.17 | | | | 4.6 | | | $ | 9,966 | (1) | | | | | | | | | | | | | | | | | | Expected to vest in future periods | | | 1,248,680 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fully vested and expected to vest – June 30, 2015(2) | | | 1,564,230 | | | $ | 23.58 | | | | 5.2 | | | $ | 34,676 | (1) | | | | | | | | | | | | | | | | | |
| | Options | | | Weighted- Average Exercise Price/Share | | | Weighted-Average Remaining Contractual Life (in years) | | | Aggregate Intrinsic Value (in thousands) | | | Six Months Ended June 30, 2016: | | | | | | | | | | | | | | | | | | Outstanding – December 31, 2015 | | | 2,034,476 | | | $ | 34.50 | | | | | | | | | | | Granted | | | 6,683 | | | | 45.89 | | | | | | | | | | | Exercised | | | (53,770 | ) | | | 16.76 | | | | | | | | | | | Forfeited | | | (63,125 | ) | | | 39.35 | | | | | | | | | | | Outstanding – June 30, 2016 | | | 1,924,264 | | | | 34.94 | | | | 5.2 | | | $ | 14,822 | | (1) | Fully vested and exercisable – June 30, 2016 | | | 402,855 | | | $ | 15.03 | | | | 3.7 | | | $ | 9,061 | | (1) | Expected to vest in future periods | | | 1,428,628 | | | | | | | | | | | | | | | Fully vested and expected to vest – June 30, 2016(2) | | | 1,831,483 | | | $ | 34.38 | | | | 5.1 | | | $ | 14,707 | | (1) |
(1) | Based on closing price of $45.75$37.52 per share on June 30, 2015.2016. |
(2) | At June 30, 2015,2016, the Company estimated that outstanding options to purchase 123,72092,781 shares of its common stock would not vest and would be forfeited prior to their vesting date. |
Intrinsic value for stock options is defined as the amount by which the current market price of the underlying stock exceeds the exercise price. For those stock options where the exercise price exceeds the current market price of the underlying stock, the intrinsic value is zero. The total intrinsic value of options exercised during the three months ended June 30, 2016 and 2015 and 2014 was $1.4$0.7 million and $0.2$1.4 million, respectively. The total intrinsic value of options exercised during the six months ended June 30, 2016 and 2015 was $1.5 million and 2014 was $2.8 million, and $4.1 million, respectively. Options to purchase 2,000 shares and 52,000 split-adjusted shares of the Company’s stock were issued during the six months ended June 30, 2015 and 2014, respectively. Stock-basedStock based compensation expense for stock options included in non-interest expense was $0.6$1.0 million and $0.8$0.6 million for the three months ended June 30, 2016 and 2015, respectively, and 2014, respectively,$2.0 million and $1.2 million for boththe six month periodsmonths ended June 30, 2016 and 2015, and 2014.respectively. Total unrecognized compensation cost related to non-vested stock option grants was $3.7$8.8 million at June 30, 20152016 and is expected to be recognized over a weighted-average period of 2.02.1 years.
The Company has a restricted stock and incentive plan whereby all officers and employees of the Company are eligible to receive awards of restricted stock, restricted stock units or performance awards. The benefits or amounts that may be received by or allocated to any particular officer or employee of the Company under this plan will be determined in the sole discretion of the Company’s board of directors or its personnel and compensation committee. Shares of common stock issued under the plan may be shares of original issuance or shares held in treasury that have been reacquired by the Company. While theThe vesting period for awards under the plan is determined by the personnel and compensation committee at the time of grant, all restricted stock awards granted under the plan have a vestingshall be not less than three years from the date of three years after issuance.grant, subject to limited exceptions. The following table summarizes non-vested restricted stock activity for the period indicated. | | | | Six Months Ended June 30, 2016 | | | | Six Months Ended June 30, 2015 | | | Outstanding – January 1, 2015 | | | 444,700 | | | Outstanding – December 31, 2015 | | | | 435,475 | | Granted | | | 245,300 | | | | 213,907 | | Forfeited | | | (29,875 | ) | | | (13,986 | ) | Vested | | | 0 | | | | — | | | | | | | Outstanding – June 30, 2015 | | | 660,125 | | | | | | | | Outstanding – June 30, 2016 | | | | 635,396 | | | | | | | | Weighted-average grant date fair value | | $ | 25.27 | | | $ | 35.08 | | | | | | |
The fair value of the restricted stock awards is amortized to compensation expense over the vesting period and is based on the market price of the Company’s common stock at the date of grant multiplied by the number of shares granted that are expected to vest. Stock-based compensation expense for restricted stock included in non-interest expense was $1.4 million and $0.9$1.7 million for the quarters ended June 30, 2015three months and 2014, respectively, and $2.7 million and $1.8 million for the six months ended June 30, 20152016, compared to $1.4 million for the three months and 2014, respectively.$2.7 million for the six months ended June 30, 2015. Unrecognized compensation expense for non-vested restricted stock awards was $9.5$12.6 million at June 30, 20152016 and is expected to be recognized over a weighted-average period of 2.22.1 years. 24
12.10. | Fair Value Measurements |
The Company measures certain of its assets and liabilities on a fair value basis using various valuation techniques and assumptions, depending on the nature of the asset or liability. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, fair value is used either annually or on a non-recurring basis to evaluate certain assets and liabilities for impairment or for disclosure purposes. The Company had no liabilities that were accounted for at fair value at June 30, 20152016 or 2014 or at December 31, 2014.2015. The Company applies the following fair value hierarchy. | | | Level 1 –− | | Quoted prices for identical instruments in active markets. | | | Level 2 –− | | Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable. | | | Level 3 –− | | Instruments whose inputs are unobservable. |
The following table sets forth the Company’s assets, as of the dates indicated, that are accounted for at fair value. | | | | | | | | | | Level 1 | | | Level 2 | | | Level 3 | | | Total | | | | Level 1 | | | Level 2 | | | Level 3 | | | Total | | | (Dollars in thousands) | | | | (Dollars in thousands) | | | June 30, 2015: | | | | | | June 30, 2016: | | | | | | | | | | | | | | | | | | Investment securities AFS(1): | | | | | | | | | | | | | | | | | | | | | | | | | Obligations of state and political subdivisions | | $ | 0 | | | $ | 488,158 | | | $ | 18,757 | | | $ | 506,915 | | | $ | — | | | $ | 585,199 | | | $ | 17,891 | | | | 603,090 | | U.S. Government agency securities | | | 0 | | | | 260,753 | | | | 0 | | | | 260,753 | | | | — | | | | 210,556 | | | | — | | | | 210,556 | | Corporate obligations | | | 0 | | | | 3,574 | | | | 0 | | | | 3,574 | | | | — | | | | 3,554 | | | | — | | | | 3,554 | | CRA qualified investment fund | | | 1,020 | | | | 0 | | | | 0 | | | | 1,020 | | | | 1,061 | | | | — | | | | — | | | | 1,061 | | | | | | | | | | | | | | | | Total investment securities AFS | | | 1,020 | | | | 752,485 | | | | 18,757 | | | | 772,262 | | | | 1,061 | | | | 799,309 | | | | 17,891 | | | | 818,261 | | Impaired non-purchased loans and leases | | | 0 | | | | 0 | | | | 12,807 | | | | 12,807 | | | | — | | | | — | | | | 4,178 | | | | 4,178 | | Impaired purchased loans | | | 0 | | | | 0 | | | | 12,347 | | | | 12,347 | | | | — | | | | — | | | | 6,387 | | | | 6,387 | | Foreclosed assets | | | 0 | | | | 0 | | | | 25,973 | | | | 25,973 | | | | — | | | | — | | | | 23,328 | | | | 23,328 | | | | | | | | | | | | | | | | Total assets at fair value | | $ | 1,020 | | | $ | 752,485 | | | $ | 69,884 | | | $ | 823,389 | | | $ | 1,061 | | | $ | 799,309 | | | $ | 51,784 | | | $ | 852,154 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2014: | | | | | | | | | | December 31, 2015: | | | | | | | | | | | | | | | | | | Investment securities AFS(1): | | | | | | | | | | | | | | | | | | | | | | | | | Obligations of state and political subdivisions | | $ | 0 | | | $ | 553,808 | | | $ | 19,401 | | | $ | 573,209 | | | $ | — | | | $ | 408,774 | | | $ | 18,504 | | | $ | 427,278 | | U.S. Government agency securities | | | 0 | | | | 251,233 | | | | 0 | | | | 251,233 | | | | — | | | | 146,950 | | | | — | | | | 146,950 | | Corporate obligations | | | 0 | | | | 654 | | | | 0 | | | | 654 | | | | — | | | | 3,562 | | | | — | | | | 3,562 | | | | | | | | | | | | | | | | CRA qualified investment fund | | | | 1,028 | | | | — | | | | — | | | | 1,028 | | Total investment securities AFS | | | 0 | | | | 805,695 | | | | 19,401 | | | | 825,096 | | | | 1,028 | | | | 559,286 | | | | 18,504 | | | | 578,818 | | Impaired non-purchased loans and leases | | | 0 | | | | 0 | | | | 19,480 | | | | 19,480 | | | | — | | | | — | | | | 9,327 | | | | 9,327 | | Impaired purchased loans | | | 0 | | | | 0 | | | | 14,040 | | | | 14,040 | | | | — | | | | — | | | | 8,054 | | | | 8,054 | | Foreclosed assets | | | 0 | | | | 0 | | | | 37,775 | | | | 37,775 | | | | — | | | | — | | | | 22,870 | | | | 22,870 | | | | | | | | | | | | | | | | Total assets at fair value | | $ | 0 | | | $ | 805,695 | | | $ | 90,696 | | | $ | 896,391 | | | $ | 1,028 | | | $ | 559,286 | | | $ | 58,755 | | | $ | 619,069 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | June 30, 2014: | | | | | | | | | | Investment securities AFS(1): | | | | | | | | | | Obligations of state and political subdivisions | | $ | 0 | | | $ | 595,965 | | | $ | 20,600 | | | $ | 616,565 | | | U.S. Government agency securities | | | 0 | | | | 258,311 | | | | 0 | | | | 258,311 | | | Corporate obligations | | | 0 | | | | 685 | | | | 0 | | | | 685 | | | | | | | | | | | | | | | | | Total investment securities AFS | | | 0 | | | | 854,961 | | | | 20,600 | | | | 875,561 | | | Impaired non-purchased loans and leases | | | 0 | | | | 0 | | | | 16,240 | | | | 16,240 | | | Impaired purchased loans | | | 0 | | | | 0 | | | | 21,205 | | | | 21,205 | | | Foreclosed assets | | | 0 | | | | 0 | | | | 56,356 | | | | 56,356 | | | | | | | | | | | | | | | | | Total assets at fair value | | $ | 0 | | | $ | 854,961 | | | $ | 114,401 | | | $ | 969,362 | | | | | | | | | | | | | | | | |
(1) | Does not include $10.0$6.1 million at June 30, 2015; $14.22016 and $23.5 million at December 31, 2014 and $16.6 million at June 30, 20142015 of FHLB and FNBB equity securities that do not have readily determinable fair values and are carried at cost. |
25
The following table presents information related to Level 3 non-recurring fair value measurements as of the date indicated. | Description | | Fair Value at June 30, 2015 | | | Technique | | Unobservable Inputs | | Fair Value at June 30, 2016 | | | Technique | | Unobservable Inputs | (Dollars in thousands) | (Dollars in thousands) | (Dollars in thousands) | Impaired non-purchased loans and leases | | $ | 12,807 | | | Third party appraisal(1) or discounted cash flows | | 1. | | Management discount based on underlying collateral characteristics and market conditions | | $ | 4,178 | | | Third party appraisal (1) or discounted cash flows | | 1. Management discount based on underlying collateral characteristics and market conditions 2. Life of Loan | | | | | | | 2. | | Life of loan | | | | | | | | | | Impaired purchased loans | | $ | 12,347 | | | Third party appraisal(1)and/or discounted cash flows | | 1. | | Management discount based on underlying collateral characteristics and market conditions | | $ | 6,387 | | | Third party appraisal (1) and/or discounted cash flows | | 1. Management discount based on underlying collateral characteristics and market conditions 2. Life of Loan | | | | | | | 2. | | Life of loan | | | | | | | | | | Foreclosed assets | | $ | 25,973 | | | Third party appraisal,(1) broker price opinions and/or discounted cash flows | | 1. | | Management discount based on asset characteristics and market conditions | | $ | 23,328 | | | Third party appraisal, (1) broker price opinions and/or discounted cash flows | | 1. Management discount based on underlying collateral characteristics and market conditions 2. Discount rate 3. Holding period | | | | | | | 2. | | Discount rate | | | | | | | | 3. | | Holding period | |
(1) | (1) | The Company utilizes valuation techniques consistent with the market, cost, and income approaches, or a combination thereof in determining fair value. |
The following methods and assumptions are used to estimate the fair value of the Company’s assets and liabilities that are accounted for at fair value. Investment securities – The Company utilizes independent third parties as its principal pricing sources for determining fair value of investment securities which are measured on a recurring basis. As a result, the Company receives estimates of fair values from at least two independent pricing sources for the majority of its individual securities within its investment portfolio. For investment securities traded in an active market, fair values are based on quoted market prices if available. If quoted market prices are not available, fair values are based on quoted market prices of comparable securities, broker quotes, comprehensive interest rate tables and pricing matrices or a combination thereof. For investment securities traded in a market that is not active, fair value is determined using unobservable inputs. All fair value estimates of the Company’s investment securities are reviewed and approved on a quarterly basis by its Investment Portfolio Manager and its Chief Financial Officer.basis. The Company has determined that certain of its investment securities had a limited to non-existent trading market at June 30, 2015.2016. As a result, the Company considers these investments as Level 3 in the fair value hierarchy. Specifically, the fair values of certain obligations of state and political subdivisions consisting primarily of certain unrated private placement bonds (the “private placement bonds”) in the amount of $18.8$17.9 million at June 30, 20152016 were calculated using Level 3 hierarchy inputs and assumptions as the trading market for such securities was determined to be “not active.” This determination was based on the limited number of trades or, in certain cases, the existence of no reported trades for the private placement bonds. The private placement bonds are generally prepayable at par value at the option of the issuer. As a result, management believes the private placement bonds should be individually valued at the lower of (i) the matrix pricing provided by the Company’s third party pricing services for comparable unrated municipal securities or (ii) par value. At June 30, 2015,2016, the third parties’ pricing matrices valued the Company’s portfolio of private placement bonds at $18.8$17.9 million which was equal to the aggregate par value of the private placement bonds. Accordingly, at June 30, 2015,2016, the Company reported the private placement bonds at $18.8$17.9 million. Impaired non-purchased loans and leases – Fair values are measured on a nonrecurring basis and are based on the underlying collateral value of the impaired loan or lease, net of holding and selling costs, or the estimated discounted cash flows for such loan or lease. At June 30, 20152016 the Company had reduced the carrying value of its impaired non-purchased loans and leases (all of which are included in nonaccrual loans and leases) by $5.0$6.2 million to the estimated fair value of $12.8$4.2 million. The $5.0$6.2 million adjustment to reduce the carrying value of such impaired loans and leases to estimated fair value consisted of $3.6$4.9 million of partial charge-offs and $1.4$1.3 million of specific allowance allocations for loan and lease loss allocations.losses. 26
Impaired purchased loans – Impaired purchased loans are measured at fair value on a non-recurring basis. As of June 30, 2015,2016, the Company had identified purchased loans where the expected performance had deteriorated from management’s performance expectations established in conjunction with the determination of the Day 1 Fair Values or where current information indicates it is probable that (i) the Company will not be able to collect all amounts according to the contractual terms thereof (for purchased loans without evidence of credit deterioration at date of acquisition) or (ii) the expected performance of such loans had deteriorated from management’s performance expectations established in conjunction with the determination of the Day 1 Fair Values or since management’s most recent review of such portfolio’s performance (for purchased loans with evidence of credit deterioration at date of acquisition). As a result, the Company recorded partial charge-offs totaling $0.4 million and $1.1 million during the second quarter of 2015 and 2014, respectively, and $1.7 million and $1.3 million during the first six months of 2015 and 2014, respectively. The Company also recorded provision for loan and lease losses of $0.4 million and $1.1 million during the second quarter of 2015 and 2014, respectively, and $1.7 million and $1.3 million during the first six months of 2015 and 2014, respectively, to cover such charge-offs. In addition to these charge-offs, the Company transferred certain of these purchased loans to foreclosed assets. As a result of these actions, atAt June 30, 2015,2016, the Company had $12.3$6.4 million of impaired purchased loans. Foreclosed assets – Repossessed personal properties and real estate acquired through or in lieu of foreclosure are measured on a non-recurring basis and are initially recorded at the lesser of current principal investment or fair value less estimated cost to sell (generally 8% to 10%) at the date of repossession or foreclosure. Purchased foreclosed assets are initially recorded at Day 1 Fair Values. In estimating such Day 1 Fair Values, management considered a number of factors including, among others, appraised value, estimated selling price, estimated holding periods and net present value (calculated using discount rates generally ranging from 8.0% to 9.5% per annum) of cash flows expected to be received. Valuations of these assets are periodically reviewed by management with the carrying value of such assets adjusted to the then estimated fair value net of estimated selling costs, if lower, until disposition. Fair values of foreclosed and repossessed assets are generally based on third party appraisals, broker price opinions or other valuations of the property. The following table presents additional information for the periods indicated about assets measured at fair value on a recurring basis and for which the Company has utilized Level 3 inputs to determine fair value. | | | | Investment Securities AFS | | | | Investment Securities AFS | | | (Dollars in thousands) | | | | (Dollars in thousands) | | | | Balance – January 1, 2015 | | $ | 19,401 | | | Balance – December 31, 2015 | | | $ | 18,504 | | Total realized gains (losses) included in earnings | | | 0 | | | | — | | Total unrealized gains (losses) included in comprehensive income | | | (271 | ) | | | (48 | ) | Paydowns and maturities | | | (373 | ) | | | (565 | ) | Sales | | | 0 | | | | — | | Transfers in and/or out of Level 3 | | | 0 | | | | — | | Balance – June 30, 2016 | | | $ | 17,891 | | | | | | | | | | Balance – June 30, 2015 | | $ | 18,757 | | | | | | | | | Balance – January 1, 2014 | | $ | 18,682 | | | Balance – December 31, 2014 | | | $ | 19,401 | | Total realized gains (losses) included in earnings | | | 0 | | | | — | | Total unrealized gains (losses) included in comprehensive income | | | 403 | | | | (271 | ) | Acquired | | | 1,907 | | | Paydowns and maturities | | | (392 | ) | | | (373 | ) | Sales | | | 0 | | | | — | | Transfers in and/or out of Level 3 | | | 0 | | | | — | | | | | | | Balance – June 30, 2014 | | $ | 20,600 | | | | | | | | Balance – June 30, 2015 | | | $ | 18,757 | |
13.11. | Fair Value of Financial Instruments |
The following methods and assumptions were used to estimate the fair value of financial instruments. Cash and due from banks – For these short-term instruments, the carrying amount is a reasonable estimate of fair value. Investment securities – The Company utilizes independent third parties as its principal pricing sources for determining fair value of investment securities which are measured on a recurring basis. As a result, the Company receives estimates of fair values from at least two independent pricing sources for the majority of its individual securities within its investment portfolio. For investment securities traded in an active market, fair values are based on quoted market prices if available. If quoted market prices are not available, fair values are based on quoted market prices of comparable securities, broker quotes, comprehensive interest rate tables, pricing matrices or a combination thereof. For investment securities traded in a market that is not active, fair value is determined using unobservable inputs. All fair value estimates of the Company’s investment securities are reviewed and approved on a quarterly basis by its Investment Portfolio Manager and its Chief Financial Officer.basis. The Company’s investments in FHLB and FNBB equity securities totaling $10.0$6.1 million at June 30, 2015, $14.22016 and $23.5 million at December 31, 2014 and $16.6 million at June 30, 2014,2015 do not have readily determinable fair values and are carried at cost. Loans and leases – The fair value of loans and leases, including purchased loans, is estimated by discounting the contractual cash flows to be received in future periods using the current rate at which similar loans or leases would be made to borrowers or lessees with similar credit ratings and for the same remaining maturities. 27
Deposit liabilities – The fair value of demand deposits, savings accounts, money market deposits and other transaction accounts is the amount payable on demand at the reporting date. The fair value of fixed maturity time deposits is estimated using the rate currently available for deposits of similar remaining maturities. Repurchase agreements – For these short-term instruments, the carrying amount is a reasonable estimate of fair value. Other borrowed funds – For these short-term instruments, the carrying amount is a reasonable estimate of fair value. The fair value of long-term instruments is estimated based on the current rates available to the Company for borrowings with similar terms and remaining maturities. Subordinated notes and debentures – The fair values of these instruments are based primarily upon discounted cash flows using rates for securities with similar terms and remaining maturities. Off-balance sheet instruments – The fair values of commercial loan commitments and letters of credit are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements, and were not material at June 30, 2015 and 20142016 or at December 31, 2014.2015. The fair values of certain of these instruments were calculated by discounting expected cash flows, which contain numerous uncertainties and involve significant judgments by management. Fair value is the estimated amount at which financial assets or liabilities could be exchanged in a current transaction between willing parties other than in a forced or liquidation sale. Because no market exists for certain of these financial instruments and because management does not intend to sell these financial instruments, the Company did not know whether theestimated fair values representmay differ materially from the values at which the respective financial instruments could be sold individually or in the aggregate. The following table presents the carrying amounts and estimated fair values foras of the dates indicated and the fair value hierarchy of the Company’s financial instruments. | | | June 30, | | | | | | | 2015 | | 2014 | | December 31, 2014 | | | | | June 30, 2016 | | | December 31, 2015 | | | | Fair Value Hierarchy | | Carrying Amount | | Estimated Fair Value | | Carrying Amount | | Estimated Fair Value | | Carrying Amount | | Estimated Fair Value | | | Fair Value Hierarchy | | Carrying Amount | | | Estimated Fair Value | | | Carrying Amount | | | Estimated Fair Value | | | | | | | | (Dollars in thousands) | | | | | | | | | (Dollars in thousands) | | Financial assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash and cash equivalents | | Level 1 | | $ | 514,890 | | | $ | 514,890 | | | $ | 110,688 | | | $ | 110,688 | | | $ | 150,203 | | | $ | 150,203 | | | Level 1 | | $ | 806,526 | | | $ | 806,526 | | | $ | 90,988 | | | $ | 90,988 | | Investment securities AFS | | Levels 1, 2 and 3 | | 782,277 | | | 782,277 | | | 892,129 | | | 892,129 | | | 839,321 | | | 839,321 | | | Levels 1, 2 and 3 | | | 824,399 | | | | 824,399 | | | | 602,348 | | | | 602,348 | | Loans and leases, net of ALLL | | Level 3 | | 6,537,222 | | | 6,469,690 | | | 4,528,696 | | | 4,480,221 | | | 5,074,899 | | | 5,042,831 | | | Level 3 | | | 9,664,871 | | | | 9,556,453 | | | | 8,273,817 | | | | 8,165,123 | | FDIC loss share receivable | | Level 3 | | 0 | | | 0 | | | 50,679 | | | 50,600 | | | 0 | | | 0 | | | | | | | | | | | | | | | | | | | | | | | | Financial liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Demand, savings and interest bearing transaction deposits | | Level 1 | | $ | 4,966,330 | | | $ | 4,966,330 | | | $ | 3,807,139 | | | $ | 3,807,139 | | | $ | 4,038,443 | | | $ | 4,038,443 | | | Level 1 | | $ | 6,783,806 | | | $ | 6,783,806 | | | $ | 5,532,986 | | | $ | 5,532,986 | | Time deposits | | Level 2 | | 2,120,969 | | | 2,142,807 | | | 1,176,758 | | | 1,177,108 | | | 1,457,939 | | | 1,463,590 | | | Level 2 | | | 3,411,266 | | | | 3,433,352 | | | | 2,438,482 | | | | 2,456,323 | | Repurchase agreements with customers | | Level 1 | | 70,011 | | | 70,011 | | | 55,999 | | | 55,999 | | | 65,578 | | | 65,578 | | | Level 1 | | | 53,997 | | | | 53,997 | | | | 65,800 | | | | 65,800 | | Other borrowings | | Level 2 | | 161,931 | | | 171,614 | | | 280,875 | | | 304,381 | | | 190,855 | | | 203,493 | | | Level 2 | | | 42,053 | | | | 43,420 | | | | 204,540 | | | | 205,918 | | FDIC clawback payable | | Level 3 | | 0 | | | 0 | | | 26,533 | | | 26,533 | | | 0 | | | 0 | | | Subordinated notes | | | Level 2 | | | 222,324 | | | | 232,446 | | | | — | | | | — | | Subordinated debentures | | Level 2 | | 117,403 | | | 66,679 | | | 64,950 | | | 32,554 | | | 64,950 | | | 39,103 | | | Level 2 | | | 117,962 | | | | 91,037 | | | | 117,685 | | | | 77,534 | |
14.12. | Repurchase Agreements With Customers |
At June 30, 2015 and 20142016 and December 31, 2014,2015, securities sold under agreements to repurchase (“repurchase agreements”) totaled $70.0 million, $56.0$54.0 million and $65.6$65.8 million, respectively. Securities utilized as collateral for repurchase agreements are primarily U.S. Government agency mortgage-backed securities and are maintained by the Company’s safekeeping agents. These securities are reviewed by the Company on a daily basis, and the Company may be required to provide additional collateral due to changes in the fair market value of these securities. The terms of the Company’s repurchase agreements are continuous but may be cancelled at any time by the Company or the customer. 28
15.13. | Changes In and Reclassifications From Accumulated Other Comprehensive Income (“AOCI”) |
The following table presents changes in AOCI for the periods indicated. | | | Three Months Ended | | | Six Months Ended | | | | | June 30, | | | June 30, | | | Three Months Ended June 30, | | | Six Months Ended June 30, | | | | 2015 | | | 2014 | | | 2015 | | | 2014 | | | 2016 | | | 2015 | | | 2016 | | | 2015 | | | | (Dollars in thousands) | | | (Dollars in thousands) | | Beginning balance of AOCI – unrealized gains and losses on investment securities AFS | | $ | 14,367 | | | $ | 3,211 | | | $ | 14,132 | | | $ | (3,672 | ) | | $ | 10,431 | | | $ | 14,367 | | | $ | 7,959 | | | $ | 14,132 | | Other comprehensive income (loss): | | | | | | | | | | | | | | | | | | | | | | | | | Unrealized gains and losses on investment securities AFS | | | (10,091 | ) | | | 11,199 | | | | (7,600 | ) | | | 22,529 | | | | 6,187 | | | | (10,091 | ) | | | 10,382 | | | | (7,600 | ) | Tax effect of unrealized gains and losses on investment securities AFS | | | 3,844 | | | | (4,393 | ) | | | 3,157 | | | | (8,837 | ) | | | (1,512 | ) | | | 3,844 | | | | (3,235 | ) | | | 3,157 | | Amounts reclassified from AOCI | | | (84 | ) | | | (18 | ) | | | (2,618 | ) | | | (23 | ) | | | — | | | | (85 | ) | | | — | | | | (2,618 | ) | Tax effect of amounts reclassified from AOCI | | | 32 | | | | 7 | | | | 997 | | | | 9 | | | | — | | | | 33 | | | | — | | | | 997 | | | | | | | | | | | | | | | | Total other comprehensive income (loss) | | | (6,299 | ) | | | 6,795 | | | | (6,064 | ) | | | 13,678 | | | | 4,675 | | | | (6,299 | ) | | | 7,147 | | | | (6,064 | ) | | | | | | | | | | | | | | | Ending balance of AOCI – unrealized gains and losses on investment securities AFS | | $ | 8,068 | | | $ | 10,006 | | | $ | 8,068 | | | $ | 10,006 | | | $ | 15,106 | | | $ | 8,068 | | | $ | 15,106 | | | $ | 8,068 | | | | | | | | | | | | | | | |
Amounts reclassified from AOCI are included in net gains on investment securities and the tax effect of amounts reclassified from AOCI are included in provision for income tax in the consolidated statements of income. The amounts reclassified from AOCI relate entirely to unrealized gains/losses on investment securities AFS.AFS that were sold during the periods indicated. 16.14. | Other Operating Expenses |
The following table is a summary of other operating expenses for the periods indicated. | | | Three Months Ended | | | Six Months Ended | | | | | June 30, | | | June 30, | | | Three Months Ended June 30, | | | Six Months Ended June 30, | | | | 2015 | | | 2014 | | | 2015 | | | 2014 | | | 2016 | | | 2015 | | | 2016 | | | 2015 | | | | (Dollars in thousands) | | | (Dollars in thousands) | | Salaries and employee benefits | | $ | 22,646 | | | $ | 18,831 | | | $ | 45,243 | | | $ | 36,520 | | | $ | 24,921 | | | $ | 22,646 | | | $ | 48,282 | | | $ | 45,243 | | Net occupancy and equipment | | | 7,344 | | | | 5,707 | | | | 14,635 | | | | 10,751 | | | | 8,388 | | | | 7,344 | | | | 16,918 | | | | 14,635 | | Other operating expenses: | | | | | | | | | | | | | | | | | | | | | | | | | Professional and outside services | | | | 4,342 | | | | 2,526 | | | | 7,563 | | | | 6,912 | | Postage and supplies | | | 1,014 | | | | 852 | | | | 1,929 | | | | 1,623 | | | | 1,073 | | | | 1,014 | | | | 2,131 | | | | 1,929 | | Advertising and public relations | | | 586 | | | | 636 | | | | 1,169 | | | | 1,036 | | | | 1,486 | | | | 586 | | | | 2,602 | | | | 1,169 | | Telecommunication services | | | 1,616 | | | | 1,191 | | | | 2,964 | | | | 2,207 | | | | 1,703 | | | | 1,616 | | | | 3,456 | | | | 2,964 | | Professional and outside services | | | 2,526 | | | | 2,353 | | | | 6,912 | | | | 4,526 | | | Software and data processing | | | 766 | | | | 1,662 | | | | 1,515 | | | | 2,799 | | | | 1,087 | | | | 766 | | | | 1,593 | | | | 1,515 | | ATM expense | | | | 830 | | | | 543 | | | | 1,709 | | | | 1,251 | | Travel and meals | | | 821 | | | | 629 | | | | 1,617 | | | | 1,169 | | | | 1,568 | | | | 821 | | | | 3,072 | | | | 1,617 | | FDIC insurance | | | 900 | | | | 555 | | | | 1,650 | | | | 1,105 | | | | 1,200 | | | | 900 | | | | 2,400 | | | | 1,650 | | FDIC and state assessments | | | 331 | | | | 218 | | | | 641 | | | | 431 | | | | 340 | | | | 331 | | | | 679 | | | | 641 | | ATM expense | | | 543 | | | | 307 | | | | 1,251 | | | | 516 | | | Loan collection and repossession expense | | | 1,020 | | | | 1,528 | | | | 2,753 | | | | 1,987 | | | | 683 | | | | 1,020 | | | | 1,720 | | | | 2,753 | | Writedowns of foreclosed and other assets | | | 235 | | | | 798 | | | | 2,427 | | | | 877 | | | | 590 | | | | 235 | | | | 1,260 | | | | 2,427 | | Amortization of intangibles | | | 1,640 | | | | 1,119 | | | | 3,236 | | | | 1,932 | | | | 1,557 | | | | 1,640 | | | | 3,283 | | | | 3,236 | | FHLB prepayment penalty | | | 0 | | | | 0 | | | | 2,480 | | | | 0 | | | | — | | | | — | | | | — | | | | 2,480 | | Other | | | 1,736 | | | | 1,492 | | | | 3,486 | | | | 7,854 | | | | 1,160 | | | | 1,736 | | | | 1,946 | | | | 3,486 | | | | | | | | | | | | | | | | Total non-interest expense | | $ | 43,724 | | | $ | 37,878 | | | $ | 93,908 | | | $ | 75,333 | | | $ | 50,928 | | | $ | 43,724 | | | $ | 98,614 | | | $ | 93,908 | | | | | | | | | | | | | | | |
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On August 5, 2015, the Company completed the acquisition of Bank of the Carolinas Corporation (“BCAR”) and its wholly-owned subsidiary Bank of the Carolinas for an aggregate of approximately 1.4 million shares of common stock (plus cash in lieu of fractional shares) in a transaction valued at approximately $65.4 million. The acquisition of BCAR expands the Company’s operations in North Carolina by adding eight full service branch locations in Advance, Asheboro, Concord, Harrisburg, Landis, Lexington, Mocksville and Winston-Salem. At June 30, 2015, BCAR had approximately $345 million of total assets, $277 million of loans, $296 million of deposits and $48 million of total common stockholders’ equity.
18. | Recent Accounting Pronouncements |
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09,“Revenue from Contracts with Customers.”ASU 2014-09 provides guidance that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. In August 2015, the FASB issued ASU 2014-09 is2015-14, which defers the effective fordate of this standard to annual and interim periods beginning after December 15, 2017.2017; however, early adoption is permitted for annual and interim reporting periods beginning after December 15, 2016. The Company is currently evaluating the impact, if any, ASU 2014-09 will have on its financial position, results of operations, and its financial statement disclosures. In June 2014, the FASB issued ASU 2014-11“Transfers and Servicing (Topic 860).”ASU 2014-11 amends the accounting guidance for repo-to-maturity transactions and requires such transactions to be accounted for as secured borrowings. In addition, ASU 2014-11 requires enhanced disclosures related to the collateral pledged, maturity and risk associated with repurchase agreements. The Company adopted the provision of ASU 2014-11 beginning April 1, 2015. The adoption of ASU 2014-11 had no significant impact on the Company’s financial position or results of operations; however, the additional disclosures required by ASU 2014-11 are included in Note 14-Repurchase Agreement with Customers. In January 2015, the FASB issued ASU 2015-01, “Income Statement – Extraordinary and Unusual Items (Subtopic 225-20) – Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items.” ASU 2015-01 eliminates from GAAP the concept of extraordinary items, which, among other things, required an entity to segregate extraordinary items considered to be unusual and infrequent from the results of ordinary operations and show the item separately in the income statement, net of tax, after income from continuing operations. ASU 2015-01 is effective for interim and annual periods beginning after December 15, 2015. ASU 2015-01 is not expected to have a significant impact on the Company’s financial position, results of operations and its financial statement disclosures.
In February 2015, FASB issued ASU 2015-02,“Consolidation (Topic 810): Amendments to the Consolidation Analysis” which amends the consolidation requirements of ASU 810 by changing the consolidation analysis required under GAAP. The revised guidance amends the consolidation analysis based on certain fee arrangements or relationships to the reporting entity and, for limited partnerships, requires entities to consider the limited partner’s rights relative to the general partner. ASU 2015-02 is effective for annual and interim periods beginning after December 15, 2015. The Company is currently evaluating the impact, if any, ASU 2015-02 will have on its financial position, results of operations, and its financial statement disclosures.
In April 2015, the FASB issued ASU 2015-03,“Interest – Imputation of Interest (Subtopic 835-30) – Simplifying the Presentation of Debt Issuance Costs.”ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in ASU 2015-03. In August 2015, the FASB issued ASU 2015-15 to clarify the SEC staff’s position on presenting and measuring debt issue costs related to line-of-credit arrangements. ASU 2015-03 isand ASU 2015-15 were effective for interim and annual periods beginning after December 15, 2015. The adoption of ASU 2015-03 isand ASU 2015-15 did not expected to have a significant impact on the Company’s financial position, results of operations, or its financial statement disclosures.
In January 2016, FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU 2016-01 revises the accounting for the classification and measurement of investments in equity securities and revises the presentation of certain fair value changes for financial liabilities measured at fair value. For equity securities, the guidance in ASU 2016-01 requires equity investments be measured at fair value with changes in fair value recognized in net income. For financial liabilities that are measured at fair value in accordance with the fair value option, the guidance requires presenting, in other comprehensive income, the change in fair value that relates to a change in instrument-specific credit risk. ASU 2016-01 also eliminates the disclosure assumptions used to estimate fair value for financial instruments measured at amortized cost and requires disclosure of an exit price notion in determining the fair value of financial instruments measured at amortized cost. ASU 2016-01 is effective for interim and annual periods beginning after December 15, 2017. The Company is evaluating the impact, if any, that ASU 2016-01 will have on its financial position, results of operations, and its financial statement disclosures. In February 2016, FASB issued ASU 2016-02, “Leases (Topic 842).” ASU 2016-02 requires lessees to recognize a right-of-use asset and a lease liability on their balance sheet. The right-of-use asset and related lease liability will be initially measured at the present value of the remaining lease payments; however, if the original term of the lease is less than twelve months and the lease does not contain a purchase option that is reasonably certain to be exercised, a lessee may account for the lease as an operating lease under ASU 840. ASU 2016-02 is effective for interim periods and fiscal years beginning after December 15, 2018. The Company is evaluating the impact that ASU 2016-02 will have on its financial position, results of operations, and its financial statement disclosures. In March 2016, FASB issued ASU 2016-09 “Improvements to Employee Share-Based Payment Accounting.” ASU 2016-09 requires entities to record all of the tax effects related to share-based payments at settlement (or expiration) through the income statement. In addition, all tax-related cash flows, such as excess tax benefits, should be reported as operating activities rather than financing activity in the statement of cash flows. Also, entities are allowed to make a policy election related to forfeitures to either estimate the number of awards expected to vest or account for forfeitures when they occur. ASU 2016-09 is effective for interim and annual periods beginning after December 15, 2016 with early adoption permitted. The Company is evaluating the impact that ASU 2016-09 will have on its financial position, results of operations, and its financial statement disclosures. In June 2016, FASB issued ASU 2016-13 “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” which significantly reverses the guidance related to impairment of financial instruments. The new guidance replaces the current incurred loss model that is utilized in estimating the allowance for loan and lease losses with a model that requires management to estimate all contractual cash flows that are not expected to be collected over the life of the loan. This revised model is what FASB describes as the current expected credit loss (“CECL”) model and FASB believes the CECL model will result in more timely recognition of credit losses since the CECL model incorporates expected credit losses versus incurred credit losses. The scope of ASU 2016-13 includes loans, including purchased loans with credit deterioration, available-for-sale debt instruments, lease receivables, loan commitments and financial guarantees that are not accounted for at fair value. ASU 2016-13 is effective for interim and annual periods beginning after December 15, 2019, with early adoption permitted for interim and annual periods beginning after December 15, 2018. The Company is evaluating the impact that ASU 2016-13 will have on its financial position, results of operations, and its financial statement disclosures. 30
On July 20, 2016, the Company completed its acquisition of C&S and its wholly-owned bank subsidiary, Community & Southern Bank, in a transaction valued at approximately $800.3 million. Pursuant to the terms of the merger agreement, the Company issued approximately 20,200,000 shares of its common stock (plus cash in lieu of fractional shares) to C&S stockholders. Additionally, the Company issued approximately 784,000 shares of its common stock (net of shares withheld for taxes) to holders of outstanding C&S stock options, restricted stock units, deferred stock units and warrants in satisfaction of all outstanding C&S equity awards. The acquisition of C&S provides the Company with 46 banking offices throughout Georgia and one banking office in Jacksonville, Florida. At June 30, 2016, C&S had approximately $3.9 billion in total assets, approximately $3.1 billion in total loans, approximately $3.3 billion in total deposits and approximately $490 million in total stockholders’ equity. Due to the timing of the C&S acquisition, the Company is continuing its evaluation of the fair value adjustments necessary to adjust the acquired assets and assumed liabilities to estimated fair value, as well as the related intangible assets associated with the transaction. The acquired assets and assumed liabilities, fair value adjustments and required supplemental pro forma information will be disclosed in subsequent filings. On July 21, 2016, the Company completed its acquisition of C1 and its wholly-owned bank subsidiary, C1 Bank, in a transaction valued at approximately $376.1 million. Pursuant to the terms of the merger agreement and the subsequent sale of certain C1 Bank loans, the Company issued approximately 9,371,000 shares of its common stock (plus cash in lieu of fractional and de minimis shares). The acquisition of C1 provides the Company with 33 banking offices throughout the west coast of Florida and in Miami-Dade and Orange counties. At June 30, 2016, C1 had approximately $1.7 billion in total assets, approximately $1.4 billion in total loans, approximately $1.3 billion in total deposits and approximately $210 million in total stockholders’ equity. Due to the timing of the C1 acquisition, the Company is continuing its evaluation of the fair value adjustments necessary to adjust the acquired assets and assumed liabilities to estimated fair value, as well as the related intangible assets associated with the transaction. The acquired assets and assumed liabilities, fair value adjustments and required supplemental pro forma information will be disclosed in subsequent filings. 31
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Unless this quarterly report on Form 10-Q indicates otherwise, or the context otherwise requires, the terms “we,” “our,” “us,” and “the Company,” as used herein refer to Bank of the Ozarks, Inc. and its subsidiaries, including Bank of the Ozarks, which we sometimes refer to as “Bank of the Ozarks,” “our bank subsidiary,” or “the Bank.” FORWARD-LOOKING INFORMATION This quarterly report on Form 10-Q, including Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), other filings made by us with the Securities and Exchange Commission (“SEC”) and other oral and written statements or reports by us and our management include certain forward-looking statements that are intended to be covered by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on management’s expectations as well as certain assumptions and estimates made by, and information available to, management at the time. Those statements are subject to certain risks, uncertainties and other factors that may cause actual results to differ materially from those expressed in forward-looking statements. Forward-looking statements include, without limitation, statements about economic, real estate market, competitive, employment, credit market and interest rate conditions, including expectations for further changes in monetary and interest rate policy by the Federal Reserve; our plans, goals, beliefs, expectations, thoughts, estimates and outlook for the future with respect to our revenue growth; net income and earnings per common share; net interest margin; net interest income; non-interest income, including service charges on deposit accounts, mortgage lending and trust income, bank owned life insurance income, gains (losses) on investment securities and sales of other assets; gains on merger and acquisition transactions; other income from purchased loans; non-interest expense;expense, including acquisition-related, systems conversion and contract termination expenses; efficiency ratio; anticipated future operating results and financial performance; asset quality and asset quality ratios, including the effects of current economic and real estate market conditions; nonperforming loans and leases; nonperforming assets; the impact from termination of the loss share agreement; net charge-offs and net charge-off ratios; provision and allowance for loan and lease losses; past due loans and leases; current or future litigation; interest rate sensitivity, including the effects of possible interest rate changes; future growth and expansion opportunities including plans for making additional acquisitions; problems with obtaining regulatory approval of or integrating or managing acquisitions; the effect of the announcements or completionannouncement of any pending or future mergers or acquisitionsacquisition on customer relationships and operating results; plans for opening new offices or relocating or closing existing offices; opportunities and goals for future market share growth; expected capital expenditures; loan, lease and deposit growth, including growth from unfunded closed loans; changes in the volume, yield and value of our investment securities portfolio; availability of unused borrowings, the need to issue debt or equity securities and other similar forecasts and statements of expectation. Words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “goal,” “hope,” “intend,” “look,” “may,” “plan,” “project,” “seek,” “target,” “trend,” “will,” “would,” and similar expressions, as they relate to us or our management, identify forward-looking statements. Actual future performance, outcomes and results may differ materially from those expressed in forward-looking statements made by us and our management due to certain risks, uncertainties and assumptions. Certain factors that may affect our future results include, but are not limited to, potential delays or other problems in implementing our growth and expansion strategy, including delays in identifying satisfactory sites, hiring or retaining qualified personnel, obtaining regulatory or other approvals, obtaining permits and designing, constructing and opening new offices; the ability to enter into and/or close additional acquisitions; problems with, or additional expenses relating to, obtaining regulatory approval of or integrating or managing acquisitions; the availability of capital; the ability to attract new or retain existing or acquired deposits; the ability to achieve growth in loans and leases, including growth from unfunded closed loans; the ability to generate future revenue growth or to control future growth in non-interest expense; interest rate fluctuations, including changes in the yield curve between short-term and long-term interest rates; competitive factors and pricing pressures, including their effect on our net interest margin; general economic, unemployment, credit market and real estate market conditions, and the effect of such conditions on the creditworthiness of borrowers and lessees, collateral values, the value of investment securities and asset recovery values; changes in legal and regulatory requirements;requirements, including additional legal, financial and regulatory requirements to which we are subject as a result of our total assets exceeding $10 billion; recently enacted and potential legislation and regulatory actions, and the costs and expenses to comply with new legislation and regulatory actions, including legislation and regulatory actions intended to stabilize economic conditions and credit markets, strengthen the capital of financial institutions, increase regulation of the financial services industry and protect homeowners or consumers; changes in U.S. government monetary and fiscal policy; possible further downgrade of U.S. Treasury securities; the ability to keep pace with technological changes, including changes regarding cyber security; an increase in the incidence or severity of fraud, illegal payments, security breaches and other illegal acts impacting our bank subsidiary or our customers; adoption of new accounting standards or changes in existing standards; and adverse results in current or future litigation or regulatory examinations as well as other factors described in this quarterly report on Form 10-Q or as detailed from time to time in the other reports we file with the SEC, including those factors included in the disclosures under the heading “Forward-Looking Information” and “Item 1A. Risk Factors” in our most recent Annual Report on Form 10-K for the year ended December 31, 2014.2015 and under “Part II, Item 1A. Risk Factors” in this Quarterly Report on Form 10-Q. Should one or more of the foregoing risks materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those described in the forward-looking statements. We disclaim any obligation to update or revise any forward-looking statement based on the occurrence of future events, the receipt of new information or otherwise.
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SELECTED AND SUPPLEMENTAL FINANCIAL DATA The following tables set forth selected unaudited consolidated financial data as of and for the three months and six months ended June 30, 20152016 and 20142015 and supplemental unaudited quarterly financial data for each of the most recent eight quarters beginning with the third quarter of 20132014 through the second quarter of 2015.2016. These tables are qualified in their entirety by our consolidated financial statements and related notes presented elsewhere in this quarterly report on Form 10-Q. The calculations of our tangible book value per common share and our annualized returns on average tangible common stockholders’ equity and the reconciliations to generally accepted accounting principles (“GAAP”) are included in this MD&A under “Capital Resources and Liquidity” in this quarterly report on Form 10-Q. Selected Consolidated Financial Data -– Unaudited | | | Three Months Ended | | Six Months Ended | | | | | June 30, | | June 30, | | | Three Months Ended June 30, | | | Six Months Ended June 30, | | | | 2015 | | 2014 | | 2015 | | 2014 | | | 2016 | | | 2015 | | | 2016 | | | 2015 | | | | (Dollars in thousands, except per share amounts) | | | (Dollars in thousands, except per share amounts) | | Income statement data: | | | | | | | | | | | | | | | | | | | | | | | | | Interest income | | $ | 100,103 | | | $ | 69,760 | | | $ | 191,558 | | | $ | 126,818 | | | $ | 130,929 | | | $ | 100,103 | | | $ | 252,670 | | | $ | 191,558 | | Interest expense | | | 6,347 | | | 4,959 | | | 12,312 | | | 9,620 | | | | 11,891 | | | | 6,347 | | | | 21,115 | | | | 12,312 | | Net interest income | | | 93,756 | | | 64,801 | | | 179,246 | | | 117,198 | | | | 119,038 | | | | 93,756 | | | | 231,555 | | | | 179,246 | | Provision for loan and lease losses | | | 4,308 | | | 5,582 | | | 10,623 | | | 6,887 | | | | 4,834 | | | | 4,308 | | | | 6,851 | | | | 10,623 | | Non-interest income | | | 23,270 | | | 17,388 | | | 52,337 | | | 37,749 | | | | 22,733 | | | | 23,270 | | | | 42,597 | | | | 52,337 | | Non-interest expense | | | 43,724 | | | 37,878 | | | 93,908 | | | 75,333 | | | | 50,928 | | | | 43,724 | | | | 98,614 | | | | 93,908 | | Net income available to common stockholders | | | 44,776 | | | 26,486 | | | 84,670 | | | 51,762 | | | | 54,474 | | | | 44,776 | | | | 106,162 | | | | 84,670 | | Common share and per common share data: | | | | | | | | | | | | | | | | | | | | | | | | | Earnings – diluted | | $ | 0.51 | | | $ | 0.34 | | | $ | 0.98 | | | $ | 0.68 | | | $ | 0.60 | | | $ | 0.51 | | | $ | 1.16 | | | $ | 0.98 | | Book value | | | 13.93 | | | 10.67 | | | 13.93 | | | 10.67 | | | | 17.16 | | | | 13.93 | | | | 17.16 | | | | 13.93 | | Tangible book value | | | 12.19 | | | 9.31 | | | 12.19 | | | 9.31 | | | | 15.51 | | | | 12.21 | | | | 15.51 | | | | 12.21 | | Dividends | | | 0.135 | | | 0.115 | | | 0.265 | | | 0.225 | | | | 0.155 | | | | 0.135 | | | | 0.305 | | | | 0.265 | | Weighted-average diluted shares outstanding (thousands) | | | 87,515 | | | 77,466 | | | 86,001 | | | 75,981 | | | | 91,288 | | | | 87,515 | | | | 91,268 | | | | 86,001 | | End of period shares outstanding (thousands) | | | 86,811 | | | 79,662 | | | 86,811 | | | 79,662 | | | | 90,745 | | | | 86,811 | | | | 90,745 | | | | 86,811 | | Balance sheet data at period end: | | | | | | | | | | | | | | | | | | | | | | | | | Total assets | | $ | 8,710,435 | | | $ | 6,297,975 | | | $ | 8,710,435 | | | $ | 6,297,975 | | | $ | 12,279,579 | | | $ | 8,710,435 | | | $ | 12,279,579 | | | $ | 8,710,435 | | Non-purchased loans and leases | | | 4,767,123 | | | 3,171,585 | | | 4,767,123 | | | 3,171,585 | | | | 8,214,900 | | | | 4,767,123 | | | | 8,214,900 | | | | 4,767,123 | | Purchased loans(1) | | | 1,826,848 | | | 1,404,069 | | | 1,826,848 | | | 1,404,069 | | | Purchased loans | | | | 1,515,104 | | | | 1,830,424 | | | | 1,515,104 | | | | 1,830,424 | | Allowance for loan and lease losses | | | 56,749 | | | 46,958 | | | 56,749 | | | 46,958 | | | | 65,133 | | | | 56,749 | | | | 65,133 | | | | 56,749 | | Foreclosed assets(1) | | | 25,973 | | | 56,356 | | | 25,973 | | | 56,356 | | | Foreclosed assets | | | | 23,328 | | | | 25,973 | | | | 23,328 | | | | 25,973 | | Investment securities | | | 782,277 | | | 892,129 | | | 782,277 | | | 892,129 | | | | 824,399 | | | | 782,277 | | | | 824,399 | | | | 782,277 | | Goodwill | | | | 126,289 | | | | 120,670 | | | | 126,289 | | | | 120,670 | | Other intangibles - net of amortization | | | | 23,615 | | | | 28,266 | | | | 23,615 | | | | 28,266 | | Deposits | | | 7,087,299 | | | 4,983,897 | | | 7,087,299 | | | 4,983,897 | | | | 10,195,072 | | | | 7,087,299 | | | | 10,195,072 | | | | 7,087,299 | | Repurchase agreements with customers | | | 70,011 | | | 55,999 | | | 70,011 | | | 55,999 | | | | 53,997 | | | | 70,011 | | | | 53,997 | | | | 70,011 | | Other borrowings | | | 161,931 | | | 280,875 | | | 161,931 | | | 280,875 | | | | 42,053 | | | | 161,931 | | | | 42,053 | | | | 161,931 | | Subordinated notes | | | | 222,324 | | | | — | | | | 222,324 | | | | — | | Subordinated debentures | | | 117,403 | | | 64,950 | | | 117,403 | | | 64,950 | | | | 117,962 | | | | 117,403 | | | | 117,962 | | | | 117,403 | | Total common stockholders’ equity | | | 1,209,254 | | | 850,204 | | | 1,209,254 | | | 850,204 | | | | 1,556,921 | | | | 1,209,254 | | | | 1,556,921 | | | | 1,209,254 | | Loan and lease (including purchased loans) to deposit ratio | | | 93.04 | % | | 91.81 | % | | 93.04 | % | | 91.81 | % | | | 95.44 | % | | | 93.09 | % | | | 95.44 | % | | | 93.09 | % | Average balance sheet data: | | | | | | | | | | | | | | | | | | | | | | | | | Total average assets | | $ | 8,283,023 | | | $ | 5,660,136 | | | $ | 7,945,178 | | | $ | 5,247,221 | | | $ | 11,447,316 | | | $ | 8,283,023 | | | $ | 10,957,821 | | | $ | 7,945,178 | | Total average common stockholders’ equity | | | 1,191,798 | | | 749,692 | | | 1,121,225 | | | 696,360 | | | | 1,526,828 | | | | 1,191,798 | | | | 1,505,742 | | | | 1,121,225 | | Average common equity to average assets | | | 14.39 | % | | 13.25 | % | | 14.11 | % | | 13.27 | % | | | 13.34 | % | | | 14.39 | % | | | 13.74 | % | | | 14.11 | % | Performance ratios: | | | | | | | | | | | | | | | | | | | | | | | | | Return on average assets(2) | | | 2.17 | % | | 1.88 | % | | 2.15 | % | | 1.99 | % | | Return on average common stockholders’ equity(2) | | | 15.07 | | | 14.17 | | | 15.23 | | | 14.99 | | | Return on average tangible common stockholders’ equity(2) | | | 17.27 | | | 15.41 | | | 17.43 | | | 15.90 | | | Net interest margin – FTE(2) | | | 5.37 | | | 5.62 | | | 5.39 | | | 5.55 | | | Return on average assets (1) | | | | 1.91 | % | | | 2.17 | % | | | 1.95 | % | | | 2.15 | % | Return on average common stockholders’ equity (1) | | | | 14.35 | | | | 15.07 | | | | 14.18 | | | | 15.23 | | Return on average tangible common stockholders’ equity (1) | | | | 15.92 | | | | 17.24 | | | | 15.76 | | | | 17.40 | | Net interest margin – FTE (1) | | | | 4.82 | | | | 5.37 | | | | 4.87 | | | | 5.39 | | Efficiency ratio | | | 36.56 | | | 44.60 | | | 39.67 | | | 47.05 | | | | 35.41 | | | | 36.56 | | | | 35.46 | | | | 39.67 | | Common stock dividend payout ratio | | | 26.20 | | | 33.82 | | | 26.10 | | | 33.09 | | | | 25.81 | | | | 26.16 | | | | 26.06 | | | | 26.13 | | Asset quality ratios: | | | | | | | | | | | | | | | | | | | | | | | | | Net charge-offs to average total loans and leases(2) (3) | | | 0.12 | % | | 0.19 | % | | 0.24 | % | | 0.11 | % | | Nonperforming loans and leases to total loans and leases(4) | | | 0.34 | | | 0.58 | | | 0.34 | | | 0.58 | | | Nonperforming assets to total assets(4) | | | 0.49 | | | 0.62 | | | 0.49 | | | 0.62 | | | Net charge-offs to average non-purchased loans and leases (1) (2) | | | | 0.05 | % | | | 0.12 | % | | | 0.06 | % | | | 0.24 | % | Net charge-offs to average total loans and leases (1) | | | | 0.06 | | | | 0.11 | | | | 0.06 | | | | 0.22 | | Nonperforming loans and leases to total loans and leases (3) | | | | 0.09 | | | | 0.34 | | | | 0.09 | | | | 0.34 | | Nonperforming assets to total assets (3) | | | | 0.25 | | | | 0.49 | | | | 0.25 | | | | 0.49 | | Allowance for loan and lease losses as a percentage of: | | | | | | | | | | | | | | | | | | | | | | | | | Total loans and leases(4) | | | 1.19 | % | | 1.48 | % | | 1.19 | % | | 1.48 | % | | Total non-purchased loans and leases (4) | | | | 0.78 | % | | | 1.19 | % | | | 0.78 | % | | | 1.19 | % | Nonperforming loans and leases(4) | | | 349 | % | | 255 | % | | 349 | % | | 255 | % | | | 830 | % | | | 349 | % | | | 830 | % | | | 349 | % | Capital ratios at period end: | | | | | | | | | | | | | | | | | | | | | | | | | Tier 1 leverage | | | 14.41 | % | | 14.31 | % | | 14.41 | % | | 14.31 | % | | | 13.26 | % | | | 14.41 | % | | | 13.26 | % | | | 14.41 | % | Common equity tier 1 | | | 11.18 | | | N/A | | | 11.18 | | | N/A | | | | 9.70 | | | | 11.18 | | | | 9.70 | | | | 11.18 | | Tier 1 capital | | | 12.43 | | | 13.40 | | | 12.43 | | | 13.40 | | | | 10.45 | | | | 12.43 | | | | 10.45 | | | | 12.43 | | Total capital | | | 13.03 | | | 14.19 | | | 13.03 | | | 14.19 | | | | 12.48 | | | | 13.03 | | | | 12.48 | | | | 13.03 | |
(1) | Prior periods have been adjusted to include loans and/or foreclosed assets previously covered by Federal Deposit Insurance Corporation (“FDIC”) loss share. |
(2)(1) | Ratios annualized based on actual days. |
(3) | (2) | Excludes purchased loans and net charge-offs related to such loans. |
(4) | (3) | Excludes purchased loans, except for their inclusion in total assets. |
N/A – Ratio not applicable for period indicated.
Supplemental Quarterly Financial Data - Unaudited
(Dollars in thousands, except per share amounts)
| (4) | Excludes purchased loans and any allowance for such loans. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 9/30/13 | | | 12/31/13 | | | 3/31/14 | | | 6/30/14 | | | 9/30/14 | | | 12/31/14 | | | 3/31/15 | | | 6/30/15 | | Earnings Summary: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net interest income | | $ | 50,633 | | | $ | 55,282 | | | $ | 52,396 | | | $ | 64,801 | | | $ | 74,621 | | | $ | 78,675 | | | $ | 85,489 | | | $ | 93,756 | | Federal tax (FTE) adjustment | | | 2,161 | | | | 2,372 | | | | 2,424 | | | | 2,737 | | | | 2,892 | | | | 2,690 | | | | 2,570 | | | | 2,552 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net interest income (FTE) | | | 52,794 | | | | 57,654 | | | | 54,820 | | | | 67,538 | | | | 77,513 | | | | 81,365 | | | | 88,059 | | | | 96,308 | | Provision for loan and lease losses | | | (3,818 | ) | | | (2,863 | ) | | | (1,304 | ) | | | (5,582 | ) | | | (3,687 | ) | | | (6,341 | ) | | | (6,315 | ) | | | (4,308 | ) | Non-interest income | | | 22,102 | | | | 18,592 | | | | 20,360 | | | | 17,388 | | | | 19,248 | | | | 27,887 | | | | 29,067 | | | | 23,270 | | Non-interest expense | | | (32,208 | ) | | | (34,728 | ) | | | (37,454 | ) | | | (37,878 | ) | | | (42,523 | ) | | | (48,158 | ) | | | (50,184 | ) | | | (43,724 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Pretax income (FTE) | | | 38,870 | | | | 38,655 | | | | 36,422 | | | | 41,466 | | | | 50,551 | | | | 54,753 | | | | 60,627 | | | | 71,546 | | FTE adjustment | | | (2,161 | ) | | | (2,372 | ) | | | (2,424 | ) | | | (2,737 | ) | | | (2,892 | ) | | | (2,690 | ) | | | (2,570 | ) | | | (2,552 | ) | Provision for income taxes | | | (10,224 | ) | | | (11,893 | ) | | | (8,730 | ) | | | (12,251 | ) | | | (15,579 | ) | | | (17,300 | ) | | | (18,139 | ) | | | (24,190 | ) | Noncontrolling interest | | | (33 | ) | | | 8 | | | | 8 | | | | 8 | | | | 13 | | | | (11 | ) | | | (24 | ) | | | (28 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net income available to common stockholders | | $ | 26,452 | | | $ | 24,398 | | | $ | 25,276 | | | $ | 26,486 | | | $ | 32,093 | | | $ | 34,752 | | | $ | 39,894 | | | $ | 44,776 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Earnings per common share – diluted(1) | | $ | 0.36 | | | $ | 0.33 | | | $ | 0.34 | | | $ | 0.34 | | | $ | 0.40 | | | $ | 0.43 | | | $ | 0.47 | | | $ | 0.51 | | Non-interest Income: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Service charges on deposit accounts | | $ | 5,817 | | | $ | 6,031 | | | $ | 5,639 | | | $ | 6,605 | | | $ | 7,356 | | | $ | 7,009 | | | $ | 6,627 | | | $ | 7,088 | | Mortgage lending income | | | 1,276 | | | | 967 | | | | 954 | | | | 1,126 | | | | 1,728 | | | | 1,379 | | | | 1,507 | | | | 1,772 | | Trust income | | | 1,060 | | | | 1,289 | | | | 1,316 | | | | 1,364 | | | | 1,419 | | | | 1,493 | | | | 1,432 | | | | 1,463 | | BOLI income | | | 1,179 | | | | 1,164 | | | | 1,130 | | | | 1,278 | | | | 1,390 | | | | 1,385 | | | | 3,623 | | | | 1,785 | | Net accretion (amortization) of FDIC loss share receivable and FDIC clawback payable | | | 1,396 | | | | 901 | | | | 692 | | | | (741 | ) | | | (562 | ) | | | — | | | | — | | | | — | | Other income from purchased loans | | | 2,484 | | | | 4,825 | | | | 3,311 | | | | 3,629 | | | | 3,369 | | | | 4,494 | | | | 8,908 | | | | 6,971 | | Gains on investment securities | | | — | | | | 4 | | | | 5 | | | | 18 | | | | 43 | | | | 78 | | | | 2,534 | | | | 85 | | Gains on sales of other assets | | | 2,501 | | | | 1,801 | | | | 974 | | | | 1,448 | | | | 1,688 | | | | 1,912 | | | | 2,829 | | | | 2,557 | | Gains on merger and acquisition transactions | | | 5,163 | | | | — | | | | 4,667 | | | | — | | | | — | | | | — | | | | — | | | | — | | Gain on termination of FDIC loss share agreements | | | — | | | | — | | | | — | | | | — | | | | — | | | | 7,996 | | | | — | | | | — | | Other | | | 1,226 | | | | 1,610 | | | | 1,672 | | | | 2,661 | | | | 2,817 | | | | 2,141 | | | | 1,607 | | | | 1,549 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total non-interest income | | $ | 22,102 | | | $ | 18,592 | | | $ | 20,360 | | | $ | 17,388 | | | $ | 19,248 | | | $ | 27,887 | | | $ | 29,067 | | | $ | 23,270 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Non-interest Expense: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Salaries and employee benefits | | $ | 16,456 | | | $ | 17,381 | | | $ | 17,689 | | | $ | 18,831 | | | $ | 20,876 | | | $ | 19,488 | | | $ | 22,597 | | | $ | 22,646 | | Net occupancy expense | | | 4,786 | | | | 5,039 | | | | 5,044 | | | | 5,707 | | | | 6,823 | | | | 6,528 | | | | 7,291 | | | | 7,344 | | Other operating expenses | | | 10,178 | | | | 11,427 | | | | 13,908 | | | | 12,221 | | | | 13,292 | | | | 20,610 | | | | 18,700 | | | | 12,094 | | Amortization of intangibles | | | 788 | | | | 881 | | | | 813 | | | | 1,119 | | | | 1,532 | | | | 1,532 | | | | 1,596 | | | | 1,640 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total non-interest expense | | $ | 32,208 | | | $ | 34,728 | | | $ | 37,454 | | | $ | 37,878 | | | $ | 42,523 | | | $ | 48,158 | | | $ | 50,184 | | | $ | 43,724 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Allowance for Loan and Lease Losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at beginning of period | | $ | 39,372 | | | $ | 41,660 | | | $ | 42,945 | | | $ | 43,861 | | | $ | 46,958 | | | $ | 49,606 | | | $ | 52,918 | | | $ | 54,147 | | Net charge-offs | | | (1,530 | ) | | | (1,578 | ) | | | (388 | ) | | | (2,485 | ) | | | (1,039 | ) | | | (3,029 | ) | | | (5,086 | ) | | | (1,706 | ) | Provision for loan and lease losses | | | 3,818 | | | | 2,863 | | | | 1,304 | | | | 5,582 | | | | 3,687 | | | | 6,341 | | | | 6,315 | | | | 4,308 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at end of period | | $ | 41,660 | | | $ | 42,945 | | | $ | 43,861 | | | $ | 46,958 | | | $ | 49,606 | | | $ | 52,918 | | | $ | 54,147 | | | $ | 56,749 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Selected Ratios: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net interest margin – FTE(2) | | | 5.55 | % | | | 5.63 | % | | | 5.46 | % | | | 5.62 | % | | | 5.49 | % | | | 5.53 | % | | | 5.42 | % | | | 5.37 | % | Efficiency ratio | | | 43.00 | | | | 45.55 | | | | 49.82 | | | | 44.60 | | | | 43.95 | | | | 44.08 | | | | 42.85 | | | | 36.56 | | Net charge-offs to average loans and leases(2)(3) | | | 0.10 | | | | 0.14 | | | | 0.03 | | | | 0.19 | | | | 0.06 | | | | 0.17 | | | | 0.37 | | | | 0.12 | | Nonperforming loans and leases to total loans and leases(4) | | | 0.41 | | | | 0.33 | | | | 0.42 | | | | 0.58 | | | | 0.49 | | | | 0.53 | | | | 0.33 | | | | 0.34 | | Nonperforming assets to total assets(4)(5) | | | 1.33 | | | | 1.22 | | | | 1.44 | | | | 1.19 | | | | 0.92 | | | | 0.87 | | | | 0.56 | | | | 0.49 | | Allowance for loan and lease losses to total loans and leases(4) | | | 1.65 | | | | 1.63 | | | | 1.58 | | | | 1.48 | | | | 1.36 | | | | 1.33 | | | | 1.26 | | | | 1.19 | | Loans and leases past due 30 days or more, including past due non-accrual loans and leases, to total loans and leases(4) | | | 0.54 | | | | 0.45 | | | | 0.75 | | | | 0.63 | | | | 0.63 | | | | 0.79 | | | | 0.57 | | | | 0.50 | |
| | 9/30/14 | | | 12/31/14 | | | 3/31/15 | | | 6/30/15 | | | 9/30/15 | | | 12/31/15 | | | 3/31/16 | | 6/30/16 | | Earnings Summary: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net interest income | | $ | 74,621 | | | $ | 78,675 | | | $ | 85,489 | | | $ | 93,756 | | | $ | 96,387 | | | $ | 106,518 | | | $ | 112,517 | | $ | 119,038 | | Federal tax (FTE) adjustment | | | 2,892 | | | | 2,690 | | | | 2,570 | | | | 2,552 | | | | 2,368 | | | | 2,092 | | | | 1,911 | | | 2,067 | | Net interest income (FTE) | | | 77,513 | | | | 81,365 | | | | 88,059 | | | | 96,308 | | | | 98,755 | | | | 108,610 | | | | 114,428 | | | 121,105 | | Provision for loan and lease losses | | | (3,687 | ) | | | (6,341 | ) | | | (6,315 | ) | | | (4,308 | ) | | | (3,581 | ) | | | (5,211 | ) | | | (2,017 | ) | | (4,834 | ) | Non-interest income | | | 19,248 | | | | 27,887 | | | | 29,067 | | | | 23,270 | | | | 22,138 | | | | 30,540 | | | | 19,865 | | | 22,733 | | Non-interest expense | | | (42,523 | ) | | | (48,158 | ) | | | (50,184 | ) | | | (43,724 | ) | | | (45,428 | ) | | | (51,646 | ) | | | (47,686 | ) | | (50,928 | ) | Pretax income (FTE) | | | 50,551 | | | | 54,753 | | | | 60,627 | | | | 71,546 | | | | 71,884 | | | | 82,293 | | | | 84,590 | | | 88,076 | | FTE adjustment | | | (2,892 | ) | | | (2,690 | ) | | | (2,570 | ) | | | (2,552 | ) | | | (2,368 | ) | | | (2,092 | ) | | | (1,911 | ) | | (2,067 | ) | Provision for income taxes | | | (15,579 | ) | | | (17,300 | ) | | | (18,139 | ) | | | (24,190 | ) | | | (23,385 | ) | | | (28,740 | ) | | | (30,984 | ) | | (31,514 | ) | Noncontrolling interest | | | 13 | | | | (11 | ) | | | (24 | ) | | | (28 | ) | | | (3 | ) | | | (6 | ) | | | (7 | ) | | (21 | ) | Net income available to common stockholders | | $ | 32,093 | | | $ | 34,752 | | | $ | 39,894 | | | $ | 44,776 | | | $ | 46,128 | | | $ | 51,455 | | | $ | 51,688 | | $ | 54,474 | | Earnings per common share – diluted | | $ | 0.40 | | | $ | 0.43 | | | $ | 0.47 | | | $ | 0.51 | | | $ | 0.52 | | | $ | 0.57 | | | $ | 0.57 | | $ | 0.60 | | Non-interest Income: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Service charges on deposit accounts | | $ | 7,356 | | | $ | 7,009 | | | $ | 6,627 | | | $ | 7,088 | | | $ | 7,425 | | | $ | 7,558 | | | $ | 7,657 | | $ | 8,119 | | Mortgage lending income | | | 1,728 | | | | 1,379 | | | | 1,507 | | | | 1,772 | | | | 1,825 | | | | 1,713 | | | | 1,284 | | | 2,057 | | Trust income | | | 1,419 | | | | 1,493 | | | | 1,432 | | | | 1,463 | | | | 1,500 | | | | 1,508 | | | | 1,507 | | | 1,574 | | BOLI income | | | 1,390 | | | | 1,385 | | | | 3,623 | | | | 1,785 | | | | 2,264 | | | | 2,412 | | | | 2,861 | | | 2,745 | | Other income from purchased loans | | | 3,369 | | | | 4,494 | | | | 8,908 | | | | 6,971 | | | | 5,456 | | | | 4,790 | | | | 3,052 | | | 4,599 | | Gains on investment securities | | | 43 | | | | 78 | | | | 2,534 | | | | 85 | | | | — | | | | 2,863 | | | | — | | | — | | Gains on sales of other assets | | | 1,688 | | | | 1,912 | | | | 2,829 | | | | 2,557 | | | | 1,905 | | | | 7,463 | | | | 1,027 | | | 998 | | Gain on termination of FDIC loss share agreements | | | — | | | | 7,996 | | | | — | | | | — | | | | — | | | | — | | | | — | | | — | | Other | | | 2,255 | | | | 2,141 | | | | 1,607 | | | | 1,549 | | | | 1,763 | | | | 2,233 | | | | 2,477 | | | 2,641 | | Total non-interest income | | $ | 19,248 | | | $ | 27,887 | | | $ | 29,067 | | | $ | 23,270 | | | $ | 22,138 | | | $ | 30,540 | | | $ | 19,865 | | $ | 22,733 | | Non-interest Expense: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Salaries and employee benefits | | $ | 20,876 | | | $ | 19,488 | | | $ | 22,597 | | | $ | 22,646 | | | $ | 21,207 | | | $ | 21,504 | | | $ | 23,362 | | $ | 24,921 | | Net occupancy expense | | | 6,823 | | | | 6,528 | | | | 7,291 | | | | 7,344 | | | | 8,076 | | | | 8,537 | | | | 8,531 | | | 8,388 | | Other operating expenses | | | 13,292 | | | | 20,610 | | | | 18,700 | | | | 12,094 | | | | 14,448 | | | | 19,879 | | | | 14,067 | | | 16,062 | | Amortization of intangibles | | | 1,532 | | | | 1,532 | | | | 1,596 | | | | 1,640 | | | | 1,697 | | | | 1,726 | | | | 1,726 | | | 1,557 | | Total non-interest expense | | $ | 42,523 | | | $ | 48,158 | | | $ | 50,184 | | | $ | 43,724 | | | $ | 45,428 | | | $ | 51,646 | | | $ | 47,686 | | $ | 50,928 | | Allowance for Loan and Lease Losses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at beginning of period | | $ | 46,958 | | | $ | 49,606 | | | $ | 52,918 | | | $ | 54,147 | | | $ | 56,749 | | | $ | 59,017 | | | $ | 60,854 | | $ | 61,760 | | Net charge-offs | | | (1,039 | ) | | | (3,029 | ) | | | (5,086 | ) | | | (1,706 | ) | | | (1,313 | ) | | | (3,374 | ) | | | (1,111 | ) | | (1,461 | ) | Provision for loan and lease losses | | | 3,687 | | | | 6,341 | | | | 6,315 | | | | 4,308 | | | | 3,581 | | | | 5,211 | | | | 2,017 | | | 4,834 | | Balance at end of period | | $ | 49,606 | | | $ | 52,918 | | | $ | 54,147 | | | $ | 56,749 | | | $ | 59,017 | | | $ | 60,854 | | | $ | 61,760 | | $ | 65,133 | | Selected Ratios: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net interest margin – FTE (1) | | | 5.49 | % | | | 5.53 | % | | | 5.42 | % | | | 5.37 | % | | | 5.07 | % | | | 4.98 | % | | | 4.92 | % | | 4.82 | % | Efficiency ratio | | | 43.95 | | | | 44.08 | | | | 42.85 | | | | 36.56 | | | | 37.58 | | | | 37.12 | | | | 35.51 | | | 35.41 | | Net charge-offs to average non-purchased loans and leases (1) (2) | | | 0.06 | | | | 0.17 | | | | 0.37 | | | | 0.12 | | | | 0.05 | | | | 0.22 | | | | 0.06 | | | 0.05 | | Net charge-offs to average total loans and leases (1) | | | 0.09 | | | | 0.24 | | | | 0.36 | | | | 0.11 | | | | 0.08 | | | | 0.17 | | | | 0.05 | | | 0.06 | | Nonperforming loans and leases to total loans and leases (3) | | | 0.49 | | | | 0.53 | | | | 0.33 | | | | 0.34 | | | | 0.26 | | | | 0.20 | | | | 0.15 | | | 0.09 | | Nonperforming assets to total assets (3) | | | 0.92 | | | | 0.87 | | | | 0.56 | | | | 0.49 | | | | 0.41 | | | | 0.37 | | | | 0.29 | | | 0.25 | | Allowance for loan and lease losses to total non-purchased loans and leases (4) | | | 1.36 | | | | 1.33 | | | | 1.26 | | | | 1.19 | | | | 1.08 | | | | 0.91 | | | | 0.80 | | | 0.78 | | Loans and leases past due 30 days or more, including past due non-accrual loans and leases, to total loans and leases (3) | | | 0.63 | | | | 0.79 | | | | 0.57 | | | | 0.50 | | | | 0.41 | | | | 0.28 | | | | 0.23 | | | 0.22 | |
(1) | Adjusted to give effect to 2-for-1 stock split on June 23, 2014. |
(2)(1) | Ratios annualized based on actual days. |
(3) | (2) | Excludes purchased loans and net charge-offs related to such loans. |
(4) | (3) | Excludes purchased loans, except for their inclusion in total assets. |
(5) | Ratios(4) | Excludes purchased loans and any allowance for prior periods have been recalculated to include foreclosed assets previously covered by FDIC loss share agreements as nonperforming assets.such loans. |
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The following selected consolidated financial data is derived from our audited financial statements as of and for the five years ended December 31, 2015 and should be read in conjunction with Management’s Discussion and Analysis of Financial Conditions and Results of Operations and the Consolidated Financial Statements and footnotes included in our Annual Report on Form 10-K for the year ended December 31, 2015 previously filed with the SEC. | | Year Ended December 31, | | | | 2015 | | | 2014 | | | 2013 | | | 2012 | | | 2011 | | | | (Dollars in thousands, except per share amounts) | | Income statement data: | | | | | | | | | | | | | | | | | | | | | Interest income | | $ | 409,719 | | | $ | 291,449 | | | $ | 212,153 | | | $ | 195,946 | | | $ | 199,169 | | Interest expense | | | 27,568 | | | | 20,955 | | | | 18,634 | | | | 21,600 | | | | 30,435 | | Net interest income | | | 382,151 | | | | 270,494 | | | | 193,519 | | | | 174,346 | | | | 168,734 | | Provision for loan and lease losses | | | 19,415 | | | | 16,915 | | | | 12,075 | | | | 11,745 | | | | 11,775 | | Non-interest income | | | 105,015 | | | | 84,883 | | | | 76,039 | | | | 62,860 | | | | 117,083 | | Non-interest expense | | | 190,982 | | | | 166,015 | | | | 126,069 | | | | 114,462 | | | | 122,531 | | Net income available to common stockholders | | | 182,253 | | | | 118,606 | | | | 91,237 | | | | 77,044 | | | | 101,321 | | Common share and per common share data: | | | | | | | | | | | | | | | | | | | | | Earnings – diluted | | $ | 2.09 | | | $ | 1.52 | | | $ | 1.26 | | | $ | 1.10 | | | $ | 1.47 | | Book value | | | 16.16 | | | | 11.37 | | | | 8.53 | | | | 7.18 | | | | 6.16 | | Tangible book value(1) | | | 14.48 | | | | 10.04 | | | | 8.27 | | | | 7.03 | | | | 5.98 | | Dividends | | | 0.55 | | | | 0.47 | | | | 0.36 | | | | 0.25 | | | | 0.19 | | Weighted-average diluted shares outstanding (thousands) | | | 87,348 | | | | 78,060 | | | | 72,702 | | | | 69,776 | | | | 68,964 | | End of period shares outstanding (thousands) | | | 90,612 | | | | 79,924 | | | | 73,712 | | | | 70,544 | | | | 68,928 | | Balance sheet data at period end: | | | | | | | | | | | | | | | | | | | | | Total assets | | $ | 9,879,459 | | | $ | 6,766,499 | | | $ | 4,791,170 | | | $ | 4,040,207 | | | $ | 3,841,651 | | Non-purchased loans and leases | | | 6,528,634 | | | | 3,979,870 | | | | 2,632,565 | | | | 2,115,834 | | | | 1,880,483 | | Purchased loans | | | 1,806,037 | | | | 1,147,947 | | | | 724,514 | | | | 637,773 | | | | 811,721 | | Allowance for loan and lease losses | | | 60,854 | | | | 52,918 | | | | 42,945 | | | | 38,738 | | | | 39,169 | | FDIC loss share receivable | | | — | | | | — | | | | 71,854 | | | | 152,198 | | | | 279,045 | | Foreclosed assets | | | 22,870 | | | | 37,775 | | | | 49,811 | | | | 66,875 | | | | 104,669 | | Investment securities | | | 602,348 | | | | 839,321 | | | | 669,384 | | | | 494,266 | | | | 438,910 | | Deposits | | | 7,971,468 | | | | 5,496,382 | | | | 3,717,027 | | | | 3,101,055 | | | | 2,943,919 | | Repurchase agreements with customers | | | 65,800 | | | | 65,578 | | | | 53,103 | | | | 29,550 | | | | 32,810 | | Other borrowings | | | 204,540 | | | | 190,855 | | | | 280,895 | | | | 280,763 | | | | 301,847 | | Subordinated debentures | | | 117,685 | | | | 64,950 | | | | 64,950 | | | | 64,950 | | | | 64,950 | | Total common stockholders’ equity | | | 1,464,631 | | | | 908,390 | | | | 629,060 | | | | 507,664 | | | | 424,551 | | Loan and lease, including purchased loans, to deposit ratio | | | 104.56 | % | | | 93.29 | % | | | 90.32 | % | | | 88.80 | % | | | 91.45 | % | Average balance sheet data: | | | | | | | | | | | | | | | | | | | | | Total average assets | | $ | 8,621,334 | | | $ | 5,913,807 | | | $ | 4,270,052 | | | $ | 3,779,831 | | | $ | 3,755,291 | | Total average common stockholders’ equity | | | 1,217,475 | | | | 786,430 | | | | 560,351 | | | | 458,595 | | | | 374,664 | | Average common equity to average assets | | | 14.12 | % | | | 13.30 | % | | | 13.12 | % | | | 12.13 | % | | | 9.98 | % | Performance ratios: | | | | | | | | | | | | | | | | | | | | | Return on average assets | | | 2.11 | % | | | 2.01 | % | | | 2.14 | % | | | 2.04 | % | | | 2.70 | % | Return on average common stockholders’ equity | | | 14.97 | | | | 15.08 | | | | 16.28 | | | | 16.80 | | | | 27.04 | | Return on average tangible common stockholders’ equity(1) | | | 17.02 | | | | 16.63 | | | | 16.73 | | | | 17.22 | | | | 27.87 | | Net interest margin – FTE | | | 5.19 | | | | 5.52 | | | | 5.63 | | | | 5.91 | | | | 5.84 | | Efficiency ratio | | | 38.45 | | | | 45.35 | | | | 45.32 | | | | 46.58 | | | | 41.56 | | Common stock dividend payout ratio | | | 25.83 | | | | 30.46 | | | | 28.22 | | | | 22.44 | | | | 12.50 | | Asset quality ratios: | | | | | | | | | | | | | | | | | | | | | Net charge-offs to average non-purchased loans and leases(2) | | | 0.18 | % | | | 0.12 | % | | | 0.14 | % | | | 0.30 | % | | | 0.69 | % | Nonperforming loans and leases to total loans and leases(3) | | | 0.20 | | | | 0.53 | | | | 0.33 | | | | 0.43 | | | | 0.70 | | Nonperforming assets to total assets(3) | | | 0.37 | | | | 0.87 | | | | 1.22 | | | | 1.88 | | | | 3.07 | | Allowance for loan and lease losses as a percentage of: | | | | | | | | | | | | | | | | | | | | | Non-purchased loans and leases(4) | | | 0.91 | % | | | 1.33 | % | | | 1.63 | % | | | 1.83 | % | | | 2.08 | % | Nonperforming loans and leases(4) | | | 452 | % | | | 251 | % | | | 492 | % | | | 425 | % | | | 297 | % | Capital ratios at period end: | | | | | | | | | | | | | | | | | | | | | Tier 1 leverage | | | 14.96 | % | | | 12.92 | % | | | 14.19 | % | | | 14.40 | % | | | 12.06 | % | Common equity tier 1 | | | 10.79 | | | N/A | | | N/A | | | N/A | | | N/A | | Tier 1 risk-based capital | | | 11.62 | | | | 11.74 | | | | 16.15 | | | | 18.11 | | | | 17.67 | | Total risk-based capital | | | 12.12 | | | | 12.47 | | | | 17.18 | | | | 19.36 | | | | 18.93 | |
| (1)The calculations of tangible book value per common share and return on average tangible common stockholders’ equity and the reconciliations to GAAP are included in this MD&A under “Capital Resources and Liquidity” in this Quarterly Report on Form 10-Q. |
| (2) | Excludes purchased loans and net charge-offs related to such loans. |
| (3) | Excludes purchased loans, except for their inclusion in total assets. |
| (4) | Excludes purchased loans and any allowance for such loans. |
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OVERVIEW The following discussion explains our financial condition and results of operations as of and for the three months and six months ended June 30, 2015.2016. The purpose of this discussion is to focus on information about our financial condition and results of operations which is not otherwise apparent from the consolidated financial statements. The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes presented elsewhere in this report and our Annual Report on Form 10-K for the year ended December 31, 20142015 previously filed with the SEC. Annualized results for these interim periods may not be indicative of results for the full year or future periods. Bank of the Ozarks, Inc. is a bankfinancial holding company whose primary business is commercial banking conducted through its wholly-owned state chartered bank subsidiary – Bank of the Ozarks.Ozarks and various subsidiaries of the Bank. Our results of operations depend primarily on net interest income, which is the difference between the interest income from earning assets, such as loans, and leases and investments, and the interest expense incurred on interest bearing liabilities, such as deposits, borrowings, subordinated notes and subordinated debentures. We also generate non-interest income, including, among others, service charges on deposit accounts, mortgage lending income, trust income, bank owned life insurance (“BOLI”) income, other income from purchased loans and gains on investment securities and from sales of other assets, and gains on merger and acquisition transactions.assets. Our non-interest expense consists primarily of employee compensation and benefits, net occupancy and equipment expense and other operating expenses. Our results of operations are significantly affected by our provision for loan and lease losses and our provision for income taxes. CRITICAL ACCOUNTING POLICIES The preparation of financial statements in conformity with GAAP requires management to make estimates, assumptions and judgments that affect the amounts reported in the consolidated financial statements. Our determination of (i) the provisions to and the adequacy of the allowance for loan and lease losses (“ALLL”), (ii) the fair value of our investment securities portfolio, (iii) the fair value of foreclosed assets and (iv) the fair value of the assets acquired and liabilities assumed pursuant to business combination transactions all involve a higher degree of judgment and complexity than our other significant accounting policies. Accordingly, we consider the determination of (i) provisions to and the adequacy of the ALLL, (ii) the fair value of our investment securities portfolio, (iii) the fair value of foreclosed assets and (iv) the fair value of the assets acquired and liabilities assumed pursuant to business combination transactions to be critical accounting policies. A detailed discussion of each of these critical accounting policies is included in our Annual Report on Form 10-K for the year ended December 31, 2014.2015 previously filed with the SEC. There has been no change in our critical accounting policies and no material change in the application of critical accounting policies as presented in our Annual Report on Form 10-K for the year ended December 31, 2014.2015. ANALYSIS OF RESULTS OF OPERATIONS General During the fourth quarter of 2014, we entered into agreements with the Federal Deposit Insurance Corporation (“FDIC”) terminating the loss share agreements for all seven of our FDIC-assisted acquisitions. As a result of entering these termination agreements, we reclassified loans previously reported as covered by FDIC loss share to purchased loans for all periods presented. Additionally, we reclassified all interest income on loans previously reported as covered by FDIC loss share to interest income on purchased loans for all periods presented.
Net income available to our common stockholders was $54.5 million for the second quarter of 2016, a 21.7% increase from $44.8 million for the second quarter of 2015, a 69.1% increase from $26.5 million for the second quarter of 2014. Diluted earnings per common share were $0.51 for the second quarter of 2015, a 50.0% increase from $0.34 for the second quarter of 2014. For the first six months of 2015, net2015. Net income available to our common stockholders was $84.7 million, a 63.6% increase from $51.8$106.2 million for the first six months of 2014. Diluted earnings per common share2016, a 25.4% increase from $84.7 million for the first six months of 20152015. Diluted earnings per common share were $0.98,$0.60 for the second quarter of 2016, a 44.1%17.6% increase from $0.68$0.51 for the second quarter of 2015. Diluted earnings per common share were $1.16 for the first six months of 2014.2016, an 18.4% increase from $0.98 for the first six months of 2015. Our ratios of annualized return on average assets waswere 1.91% for the second quarter and 1.95% for the first six months of 2016 compared to 2.17% for the second quarter of 2015 compared to 1.88%and 2.15% for the second quarterfirst six months of 2014.2015. Our ratios of annualized return on average common stockholders’ equity waswere 14.35% for the second quarter and 14.18% for the first six months of 2016 compared to 15.07% for the second quarter of 2015 compared to 14.17%and 15.23% for the second quarterfirst six months of 2014.2015. Our ratios of annualized return on average tangible common stockholders’ equity was 17.27%were 15.92% for the second quarter of 2015 compared to 15.41% for the second quarter of 2014. Our annualized return on average assets was 2.15%and 15.76% for the first six months of 20152016 compared to 1.99%17.27% for the second quarter and 17.40% for the first six months of 2014. Our annualized return on average common stockholders’ equity was 15.23% for the first six months of 2015 compared to 14.99% for the first six months of 2014. Our annualized return on average tangible common stockholders’ equity was 17.43% for the first six months of 2015 compared to 15.90% for the first six months of 2014.2015. The calculation of our ratios of annualized return on average tangible common stockholders’ equity and the reconciliation to GAAP isare included elsewhereunder the heading “Capital Resources and Liquidity” in this MD&A. Total assets were $8.71$12.28 billion at June 30, 20152016 compared to $6.77$9.88 billion at December 31, 2014.2015. Non-purchased loans and leases were $4.77$8.21 billion at June 30, 20152016 compared to $3.98$6.53 billion at December 31, 2014.2015. Purchased loans were $1.83$1.52 billion at June 30, 20152016 compared to $1.15$1.81 billion at December 31, 2015. Total loans and leases were $6.59$9.73 billion at June 30, 20152016 compared to $5.13$8.33 billion at December 31, 2014.2015. Deposits were $7.09$10.20 billion at June 30, 20152016 compared to $5.50$7.97 billion at December 31, 2014.2015. Common stockholders’ equity was $1.21$1.56 billion at June 30, 20152016 compared to $908 million$1.47 billion at December 31, 2014.2015. Tangible common stockholders’ equity was $1.06$1.41 billion at June 20, 201530, 2016 compared to $803 million$1.31 billion at December 31, 2014.2015. Book value per 36
common share was $13.93$17.16 at June 30, 20152016 compared to $11.37$16.16 at December 31, 2014.2015. Tangible book value per common share was $12.19$15.51 at June 30, 20152016 compared to $10.04$14.48 at December 31, 2014.2015. The calculation of our tangible common stockholders’ equity and tangible book value per common share and the reconciliation to GAAP isare included elsewhereunder the heading “Capital Resources and Liquidity” included in this MD&A. On March 5, 2014,July 20, 2016, we completed our acquisition of Bancshares,Community & Southern Holdings, Inc. (“Bancshares”C&S”). Our consolidated results and its wholly-owned bank subsidiary, Community & Southern Bank, in a transaction valued at approximately $800.3 million. Pursuant to the terms of operations include the acquired operationsmerger agreement, we issued approximately 20,200,000 shares of Bancshares beginning March 6, 2014.our common stock (plus cash in lieu of fractional shares) to C&S stockholders. Additionally, we issued approximately 784,000 shares of our common stock (net of shares withheld for taxes) to holders of outstanding C&S stock options, restricted stock units, deferred stock units and warrants in satisfaction of all outstanding C&S equity awards. The acquisition of C&S provides us with 46 banking offices throughout Georgia and one banking office in Jacksonville, Florida. At June 30, 2016, C&S had approximately $3.9 billion in total assets, approximately $3.1 billion in total loans, approximately $3.3 billion in total deposits and approximately $490 million in total stockholders’ equity. On May 16, 2014,July 21, 2016, we completed our acquisition of Summit Bancorp,C1 Holdings, Inc. (“Summit”). Our consolidated results of operations include the acquired operations of Summit beginning May 17, 2014. On February 10, 2015, we completed our acquisition of Intervest Bancshares Corporation (“Intervest”). Our consolidated results of operations include the acquired operations of Intervest beginning February 11, 2015. During the second quarter of 2015, we revised our initial estimates regarding the recovery of certain acquired loans and acquired deferred tax assets in the Intervest acquisition. Because such revision occurred during the first 12 months following the date of acquisition and was not the result of a change in circumstances, management has recast the consolidated financial statements as of and for the three months ended March 31, 2015 to decrease the goodwill recorded in the Intervest acquisition by $2.7 million to reflect this change in estimate. The fair value adjustments and resultant fair values recorded in the Intervest acquisition continue to be evaluated and may be subject to further adjustments.
A summary of the Bancshares, Summit and Intervest acquisitions is included in Note 3 to the Consolidated Financial Statements included elsewhere in this quarterly report on Form 10-Q.
On August 5, 2015, we completed our acquisition of Bank of the Carolinas Corporation (“BCAR”C1”) and its wholly-owned bank subsidiary, C1 Bank, in a transaction valued at approximately $376.1 million. Pursuant to the terms of the Carolinas.merger agreement and the subsequent sale of certain C1 Bank loans, we issued approximately 9,371,000 shares of our common stock (plus cash in lieu of fractional and de minimis shares). The acquired operationsacquisition of BCARC1 provides us with 33 banking offices throughout the west coast of Florida and in Miami-Dade and Orange counties. At June 30, 2016, C1 had approximately $1.7 billion in total assets, approximately $1.4 billion in total loans, approximately $1.3 billion in total deposits and approximately $210 million in total stockholders’ equity.
On June 23, 2016, we completed an underwritten public offering of $225 million in aggregate principal amount of its 5.50% Fixed-to-Floating Rate Subordinated Notes due 2026 (the “Notes”) for net proceeds of $222.3 million. The Notes are unsecured, subordinated debt obligations and mature on July 1, 2026. From and including the date of issuance to, but excluding July 1, 2021, the Notes will bear interest at an initial rate of 5.50% per annum. From and including July 1, 2021 to, but excluding the maturity date or earlier redemption, the Notes bear interest at a floating rate equal to three-month London Interbank Offered Rate (“LIBOR”) as calculated on each applicable date of determination plus a spread of 442.5 basis points; provided, however, that in the event three-month LIBOR is less than zero, then three-month LIBOR shall be includeddeemed to be zero. Debt issuance costs of $2.7 million are being amortized, using a level-yield methodology over the estimated holding period of seven years, as an increase in interest expense on the Notes. We may, beginning with the interest payment date of July 1, 2021, and on any interest payment date thereafter, redeem the Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the Notes to be redeemed plus accrued and unpaid interest to but excluding the date of redemption. We may also redeem the Notes at any time, including prior to July 1, 2021, at our operating results beginning August 6, 2015.option, in whole but not in part, if: (i) a change or prospective change in law occurs that could prevent us from deducting interest payable on the Notes for U.S. federal income tax purposes; (ii) a subsequent event occurs that could preclude the Notes from being recognized as Tier 2 capital for regulatory capital purposes; or (iii) we are required to register as an investment company under the Investment Company Act of 1940, as amended; in each case, at a redemption price equal to 100% of the principal amount of the Notes plus any accrued and unpaid interest to but excluding the redemption date. Net Interest Income Net interest income is a significant source of our earnings and represents the amount by which interest income on earning assets exceeds the interest expense paid on liabilities. The volume of interest earning assets and the related funding sources, the overall mix of these assets and liabilities, and the rates paid on each affect net interest income. Net interest income and net interest margin are analyzed in this discussion and the following tables on a fully taxable equivalent (“FTE”) basis. The adjustment to convert certain income to a FTE basis consists of dividing federal tax-exempt income by one minus our statutory federal income tax rate of 35%. The FTE adjustments to net interest income were $2.6$2.1 million and $2.7$2.6 million for the quartersthree months ended June 30, 20152016 and 2014,2015, respectively, and $5.1$4.0 million and $5.2$5.1 million for the six months ended June 30, 20152016 and 2014,2015, respectively. No adjustments have been made in this analysis for income exempt from state income taxes or for interest expense deductions disallowed under the provisions of the Internal Revenue Code (the “Code”) as a result of investment in certain tax-exempt securities. Net interest income for the second quarter of 20152016 increased 42.6%25.7% to $96.3$121.1 million compared to $67.5$96.3 million for the second quarter of 2014.2015. Net interest income for the first six months of 20152016 increased 50.7%27.8% to $184.4$235.5 million compared to $122.4$184.4 million for the first six months of 2014. This increase2015. The increases in net interest income for the second quarter and first six months of 20152016 compared to the same periods in 2014 was2015 were primarily due to the increaseincreases in average earning assets, which increased 49.2%40.5% to $10.11 billion for the second quarter of 2016 compared to $7.20 billion for the second quarter of 2015, and 55.0%increased 41.2% to $9.73 billion for the first six months of 2016 compared to $6.89 billion for the first six months of 2015, compared to $4.82 billion for the second quarter and $4.45 billion for the first six months of 2014, partially offset by decreases in our net interest margin. 37
The increase in average earning assets was primarily due to an increase in the average balances of non-purchased loans and leases which increased 74.4% for the second quarter and 72.9% for the first six months of 2016 compared to the same periods in 2015 as we continued to experience strong growth in our originations of non-purchased loans and leases. Our net interest margin for the second quarter of 20152016 decreased 2555 basis points (“bps”) to 5.37%4.82% compared to 5.62%5.37% for the second quarter in 2014.2015. This decrease was primarily due to a 3143 bps decrease in the yield on interest earning assets partially offset byand a seven14 bps reductionincrease in ratesthe rate paid on interest bearing liabilities. Our net interest margin for the first six months of 20152016 decreased 1652 bps to 5.39%4.87% compared to 5.55%5.39% for the first six months of 2014.2015. This decrease was primarily due to a 2345 bps decrease in the yield on interest earning assets partially offset byand a nine bps reductionincrease in the ratesrate paid on interest bearing liabilities. YieldsYield on interest earning assets decreased to 5.29% for the second quarter and 5.30% for the first six months of 2016 compared to 5.72% for the second quarter and 5.75% for the first six months of 2015, comparedprimarily due to 6.03%the increases in our non-purchased loan and lease portfolio as a percentage of average interest earning assets and decreases in yields associated with both our purchased loan portfolio and our aggregate investment securities portfolio. Our portfolio of non-purchased loans and leases comprised 77.1% of average interest earning assets for the second quarter and 5.98%76.1% for the first six months of 2014 primarily due2016 compared to 62.1% of average interest earning assets for both the decrease in yields on our purchased loan portfoliosecond quarter and decreases in the yield on our aggregate investment securities portfolio.first six months of 2015. The yield on our purchased loan portfolio decreased 17367 bps for the second quarter and 15694 bps for the first six months of 20152016 compared to the same periods in 2014.2015. These decreases were partially offset by the increase in the average balance of purchased loans which comprised 27.0% and 26.2%, respectively, of average earning assets for the second quarter and six months ended June 30, 2015, compared to 22.9% and 20.7%, respectively, of average earnings assets for the same periods in 2014. The decreases in yield on purchased loans were primarily attributable to the loans acquired in the Summit and Intervest transactions,our recent acquisitions, many of which did not contain evidence of credit deterioration on the datedates of purchaseacquisition and were priced at a lower yield compared to the then existing yield on our purchased loan portfolio. This decrease in yield onportfolio, and the continued paydowns and payoffs of purchased loans was partially offset by the increaseacquired in the yield on certain purchased loans withour earlier acquisitions, many of which contained evidence of credit deterioration onat the datedates of acquisition due to upward revisions of estimated cash flows as a result of recent evaluations of the expected performance of such loans.and were priced with higher yields. The yield on our aggregate investment securities portfolio decreased 1353 bps for
the second quarter and 1539 bps for the first six months of 20152016 compared to the same periods in 2014. This decrease was2015. These decreases were primarily the result of (i) a change in the composition of our investment securities portfolio to include a larger percentage of lower yielding taxable investment securities, which comprised 45.8% of total average investment securities for the second quarter of 2015 and 44.6% for the first six months of 2015 compared to 40.5% for the second quarter in 2014 and 40.6% for the first six months of 2014 and (ii) the current low interest rate environment which has resulted in many issuers of investment securities, particularly tax-exempt municipal bonds,securities, calling higher-rate investment securities and refinancing such securities at lower interest rates. Assuming this current low interest rate environment continues, we would expect additional higher-rate tax-exempt investment securities to be called by their issuers and be refinanced at lower interest rates, likely resulting in continued decreases on thein yield ofon our tax-exempt investment securities portfolio. The overall decreaseincrease in rates on average interest bearing liabilities, was primarily due to a shift in the composition of total interest bearing liabilities to include a larger percentage of lower rate interest bearing deposits, which comprised 94.0% of total average interest bearing liabilitiesincreased 14 bps for the second quarter and 93.6%nine bps for the first six months of 20152016 compared to 89.6% for the second quarter and 88.7% for the first six months of 2014, partially offset bysame periods in 2015, was primarily due to an increase in rates on interest bearing time deposits. The increase in interest bearing deposits, as a percentage of total interest bearing liabilities is primarily due to interest bearing deposits assumed in the Summit and Intervest transactions, growth in interest bearing deposits as a result ofwhich increased deposit pricing in several target markets and the prepayment of $120 million of other borrowings, partially offset by the assumption of $52.2 million of subordinated debentures assumed in the Intervest transaction. The eight22 bps increase in rates on interest bearing time deposits for the second quarter of 2015 and first six months of 2015 compared to the second quarter of 2014 and first six months of 2014 is primarily due to a shift in the composition of interest bearing deposits to a larger percentage of higher rate time deposits as a result of the Intervest acquisition. The average balance of time deposits increased from 28.6% of total average interest bearing deposits for the second quarter of 2014 to 39.8% for the second quarter of 2015 and 28.6%19 bps for the first six months of 20142016 compared to 38.8% for the first six months of 2015. Additionally, throughout much of 2014, we increasedsame periods in 2015, partially offset by a decrease in rates on other borrowings. The increase in rates on our interest bearing deposits was primarily due to our deposit pricinggathering initiatives that were implemented in several target markets to fund growth in loans and leases. To the extent we have future growth in loans and leases, we would expect to increase deposit pricing in certain target markets to fund such growth. Any such increase in deposit pricing is expected to result in increased deposit costs in future periods. Our other borrowing sources include (i) repurchase agreements with customers (“repos”), (ii) other borrowings comprised primarily of Federal Home Loan Bank of Dallas (“FHLB”)FHLB advances, and, to a lesser extent, Federal Reserve Bank (“FRB”) borrowings and federal funds purchased, (iii) subordinated notes and (iii)(iv) subordinated debentures. The rates on repos increased twofour bps for the second quarter and three bps the first six months of 20152016 compared to the same periods of 2014.2015. The rates on our other borrowing sources, which consist primarily of fixed rate callable FHLBFederal Home Loan Bank Dallas (“FHLB”) advances, decreased 2678 bps in the second quarter and 22105 bps for the first six months of 20152016 compared to the same periods of 2014.2015. This decrease in rates on other borrowings is primarily the result of our prepaying $90$150 million ($30 million in the first quarter of 2015 and $120 million during the fourth quarter of 2015) of fixed rate callable FHLB advances with a weighted average interest rate of 4.13% during3.85%. On June 23, 2016, the fourth quarterCompany completed an underwritten public offering of 2014, and$225 million in aggregate principal amount of our prepaying $30 million of fixed5.50% fixed-to-floating rate callable FHLB advances with a weighted average interest rate of 4.07% during the first quarter of 2015.subordinated notes. The weighted average interest rate on our remaining $160 millionthese subordinated notes, including amortization of fixed rate callable FHLB advances is approximately 3.54%.debt issuance costs, using a level-yield methodology over the estimated holding period of seven years, was 5.83% during both the second quarter and first six months of 2016. The rates paid on our subordinated debentures, which are tied to a spread over the 90-day London Interbank Offered Rate (“LIBOR”)LIBOR and reset periodically, increased 6737 bps in the second quarter and 6043 bps for the first six months of 2015 compared to the same periods of 2014. This increase in rates on our subordinated debentures is primarily due to the $52.2 million of subordinated debentures assumed in the Intervest transaction, which, net of amortization of the discount of the purchase accounting adjustments, had a weighted average interest rate of 4.13% at June 30, 2015. The increase in average earning assets for the second quarter and first six months of 20152016 compared to the same periods in 2014 was2015, primarily due to an increaseincreases in the average balances of non-purchased loans and leases of $1.56 billion for the second quarter and $1.49 billion for the first six months of 2015 compared to the same periods in 2014. Additionally, the average balance of purchased loans increased $0.84 billion for the second quarter and $0.89 billion during the first six months of 2015 compared to the second quarter and first six months of 2014, primarily as a result of the Intervest acquisition.LIBOR.
38
The following table sets forth certain information relating to our net interest income for the periods indicated. The yields and rates are derived by dividing interest income or interest expense by the average balance of the related assets or liabilities, respectively, for the periods shown.respectively. Average balances are derived from daily average balances for such assets and liabilities. The average balances of investment securities are computed based on amortized cost adjusted for unrealized gains and losses on investment securities AFS and other-than-temporary impairment writedowns. The yields on investment securities include amortization of premiums and accretion of discounts. The average balance of non-purchased loans and leases includes non-purchased loans and leases on which we have discontinued accruing interest. The yields on non-purchased loans and leases and purchased loans without evidence of credit deterioration at date of acquisition include late fees and amortization of certain deferred fees, origination costs and, for such purchased loans, accretion or amortization of any purchase accounting yield adjustment, which are considered adjustments to yields.adjustment. The yields on purchased loans with evidence of credit deterioration at date of acquisition consist of accretion of the net present value of expected future cash flows using the effective yield method over the term of the loans and include late fees. Interest expense and rates on our other borrowingsborrowing sources are presented net of interest capitalized on construction projects.projects and include the amortization of debt issuance costs, if any. The interest expense on the subordinated debentures assumed in theour acquisition of Intervest transaction Bancshares Corporation (“Intervest”)includes the amortization of purchase accounting adjustments, using the level yield method, over the estimated holding period of eight years.adjustments. Average Consolidated Balance Sheets and Net Interest Analysis – FTE | | | Three Months Ended June 30, | | Six Months Ended June 30, | | | Three Months Ended June 30, | | | Six Months Ended June 30, | | | | 2015 | | 2014 | | 2015 | | 2014 | | | 2016 | | | 2015 | | | 2016 | | | 2015 | | | | Average Balance | | Income/ Expense | | Yield/ Rate | | Average Balance | | Income/ Expense | | Yield/ Rate | | Average Balance | | Income/ Expense | | Yield/ Rate | | Average Balance | | Income/ Expense | | Yield/ Rate | | | Average Balance | | | Income/ Expense | | | Yield/ Rate | | | Average Balance | | | Income/ Expense | | | Yield/ Rate | | | Average Balance | | | Income/ Expense | | | Yield/ Rate | | | Average Balance | | | Income/ Expense | | | Yield/ Rate | | | | (Dollars in thousands) | | | (Dollars in thousands) | | ASSETS | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Earning assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest earning deposits and federal funds sold | | $ | 2,898 | | | $ | 18 | | | 2.51 | % | | $ | 12,398 | | | $ | 35 | | | 1.14 | % | | $ | 2,716 | | | $ | 27 | | | 2.01 | % | | $ | 6,770 | | | $ | 38 | | | 1.14 | % | | $ | 6,048 | | | $ | 13 | | | | 0.85 | % | | $ | 2,898 | | | $ | 18 | | | | 2.51 | % | | $ | 4,517 | | | $ | 19 | | | | 0.82 | % | | $ | 2,716 | | | $ | 27 | | | | 2.01 | % | Investment securities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Taxable | | 358,907 | | | 3,230 | | | 3.61 | | | 320,298 | | | 2,790 | | | 3.49 | | | 358,163 | | | 6,715 | | | 3.78 | | | 298,551 | | | 5,149 | | | 3.48 | | | | 293,981 | | | | 2,442 | | | | 3.34 | | | | 358,907 | | | | 3,230 | | | | 3.61 | | | | 279,040 | | | | 4,712 | | | | 3.40 | | | | 358,163 | | | | 6,715 | | | | 3.78 | | Tax-exempt – FTE | | 424,553 | | | 6,856 | | | 6.48 | | | 471,001 | | | 7,652 | | | 6.52 | | | 444,781 | | | 14,038 | | | 6.36 | | | 437,364 | | | 14,416 | | | 6.65 | | | | 415,473 | | | | 5,733 | | | | 5.55 | | | | 424,553 | | | | 6,856 | | | | 6.48 | | | | 377,127 | | | | 11,014 | | | | 5.87 | | | | 444,781 | | | | 14,038 | | | | 6.36 | | Non-purchased loans and leases – FTE | | 4,468,971 | | | 56,789 | | | 5.10 | | | 2,913,816 | | | 36,892 | | | 5.08 | | | 4,280,175 | | | 107,278 | | | 5.05 | | | 2,785,645 | | | 70,358 | | | 5.09 | | | | 7,794,654 | | | | 98,096 | | | | 5.06 | | | | 4,468,971 | | | | 56,789 | | | | 5.10 | | | | 7,401,860 | | | | 185,168 | | | | 5.03 | | | | 4,280,175 | | | | 107,278 | | | | 5.05 | | Purchased loans | | 1,941,271 | | | 35,762 | | | 7.39 | | | 1,105,244 | | | 25,128 | | | 9.12 | | | 1,809,016 | | | 68,622 | | | 7.65 | | | 919,404 | | | 42,013 | | | 9.21 | | | | 1,599,013 | | | | 26,711 | | | | 6.72 | | | | 1,941,271 | | | | 35,762 | | | | 7.39 | | | | 1,669,920 | | | | 55,734 | | | | 6.71 | | | | 1,809,016 | | | | 68,622 | | | | 7.65 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total earning assets – FTE | | 7,196,600 | | | 102,655 | | | 5.72 | | | 4,822,757 | | | 72,497 | | | 6.03 | | | 6,894,851 | | | 196,680 | | | 5.75 | | | 4,447,734 | | | 131,974 | | | 5.98 | | | | 10,109,169 | | | | 132,995 | | | | 5.29 | | | | 7,196,600 | | | | 102,655 | | | | 5.72 | | | | 9,732,464 | | | | 256,647 | | | | 5.30 | | | | 6,894,851 | | | | 196,680 | | | | 5.75 | | Non-interest earning assets | | 1,086,423 | | | | | | | 837,379 | | | | | | | 1,050,327 | | | | | | | 799,487 | | | | | | | | 1,338,147 | | | | | | | | | | | | 1,086,423 | | | | | | | | | | | | 1,225,357 | | | | | | | | | | | | 1,050,327 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total assets | | $ | 8,283,023 | | | | | | | $ | 5,660,136 | | | | | | | $ | 7,945,178 | | | | | | | $ | 5,247,221 | | | | | | | $ | 11,447,316 | | | | | | | | | | | $ | 8,283,023 | | | | | | | | | | | $ | 10,957,821 | | | | | | | | | | | $ | 7,945,178 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest bearing liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Deposits: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Savings and interest bearing transaction | | $ | 3,261,928 | | | $ | 1,638 | | | 0.20 | % | | $ | 2,484,649 | | | $ | 1,271 | | | 0.21 | % | | $ | 3,182,841 | | | $ | 3,188 | | | 0.20 | % | | $ | 2,291,407 | | | $ | 2,337 | | | 0.21 | % | | $ | 4,742,475 | | | $ | 4,063 | | | | 0.34 | % | | $ | 3,261,928 | | | $ | 1,638 | | | | 0.20 | % | | $ | 4,668,940 | | | $ | 7,780 | | | | 0.34 | % | | $ | 3,182,841 | | | $ | 3,188 | | | | 0.20 | % | Time deposits of $100,00 or more | | 1,254,844 | | | 1,373 | | | 0.44 | | | 488,265 | | | 281 | | | 0.23 | | | 1,181,143 | | | 2,671 | | | 0.46 | | | 435,850 | | | 516 | | | 0.24 | | | Time deposits of $100,000 or more | | | | 1,935,241 | | | | 4,139 | | | | 0.86 | | | | 1,254,844 | | | | 1,373 | | | | 0.44 | | | | 1,778,972 | | | | 7,087 | | | | 0.80 | | | | 1,181,143 | | | | 2,671 | | | | 0.46 | | Other time deposits | | 900,283 | | | 906 | | | 0.40 | | | 505,260 | | | 275 | | | 0.22 | | | 835,968 | | | 1,595 | | | 0.38 | | | 481,887 | | | 555 | | | 0.23 | | | | 1,312,153 | | | | 2,011 | | | | 0.62 | | | | 900,283 | | | | 906 | | | | 0.40 | | | | 1,149,692 | | | | 3,196 | | | | 0.56 | | | | 835,968 | | | | 1,595 | | | | 0.38 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total interest bearing deposits | | 5,417,055 | | | 3,917 | | | 0.29 | | | 3,478,174 | | | 1,827 | | | 0.21 | | | 5,199,952 | | | 7,454 | | | 0.29 | | | 3,209,144 | | | 3,408 | | | 0.21 | | | | 7,989,869 | | | | 10,213 | | | | 0.51 | | | | 5,417,055 | | | | 3,917 | | | | 0.29 | | | | 7,597,604 | | | | 18,063 | | | | 0.48 | | | | 5,199,952 | | | | 7,454 | | | | 0.29 | | Repurchase agreements with customers | | 68,656 | | | 19 | | | 0.11 | | | 58,607 | | | 13 | | | 0.09 | | | 73,091 | | | 36 | | | 0.10 | | | 61,808 | | | 25 | | | 0.08 | | | | 58,284 | | | | 22 | | | | 0.15 | | | | 68,656 | | | | 19 | | | | 0.11 | | | | 63,293 | | | | 42 | | | | 0.13 | | | | 73,091 | | | | 36 | | | | 0.10 | | Other borrowings | | 161,652 | | | 1,443 | | | 3.58 | | | 281,009 | | | 2,692 | | | 3.84 | | | 175,148 | | | 3,146 | | | 3.62 | | | 280,968 | | | 5,347 | | | 3.84 | | | | 42,021 | | | | 293 | | | | 2.80 | | | | 161,652 | | | | 1,443 | | | | 3.58 | | | | 46,537 | | | | 595 | | | | 2.57 | | | | 175,148 | | | | 3,146 | | | | 3.62 | | Subordinated notes | | | | 19,557 | | | | 283 | | | | 5.83 | | | | — | | | | — | | | | — | | | | 9,778 | | | | 283 | | | | 5.83 | | | | — | | | | — | | | | — | | Subordinated debentures | | 117,325 | | | 968 | | | 3.31 | | | 64,950 | | | 427 | | | 2.64 | | | 105,431 | | | 1,676 | | | 3.21 | | | 64,950 | | | 840 | | | 2.61 | | | | 117,887 | | | | 1,079 | | | | 3.68 | | | | 117,325 | | | | 968 | | | | 3.31 | | | | 117,818 | | | | 2,132 | | | | 3.64 | | | | 105,431 | | | | 1,676 | | | | 3.21 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total interest bearing liabilities | | 5,764,688 | | | 6,347 | | | 0.44 | | | 3,882,740 | | | 4,959 | | | 0.51 | | | 5,553,622 | | | 12,312 | | | 0.45 | | | 3,616,870 | | | 9,620 | | | 0.54 | | | | 8,227,618 | | | | 11,890 | | | | 0.58 | | | | 5,764,688 | | | | 6,347 | | | | 0.44 | | | | 7,835,030 | | | | 21,115 | | | | 0.54 | | | | 5,553,622 | | | | 12,312 | | | | 0.45 | | Non-interest bearing liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Non-interest bearing deposits | | 1,279,202 | | | | | | | 964,935 | | | | | | | 1,225,379 | | | | | | | 878,349 | | | | | | | | 1,635,697 | | | | | | | | | | | | 1,279,202 | | | | | | | | | | | | 1,572,247 | | | | | | | | | | | | 1,225,379 | | | | | | | | | | Other non-interest bearing liabilities | | 43,837 | | | | | | | 59,311 | | | | | | | 41,471 | | | | | | | 52,180 | | | | | | | | 53,987 | | | | | | | | | | | | 43,837 | | | | | | | | | | | | 41,625 | | | | | | | | | | | | 41,471 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total liabilities | | 7,087,727 | | | | | | | 4,906,986 | | | | | | | 6,820,472 | | | | | | | 4,547,399 | | | | | | | | 9,917,302 | | | | | | | | | | | | 7,087,727 | | | | | | | | | | | | 9,448,902 | | | | | | | | | | | | 6,820,472 | | | | | | | | | | Common stockholders’ equity | | 1,191,798 | | | | | | | 749,692 | | | | | | | 1,121,225 | | | | | | | 696,360 | | | | | | | | 1,526,828 | | | | | | | | | | | | 1,191,798 | | | | | | | | | | | | 1,505,742 | | | | | | | | | | | | 1,121,225 | | | | | | | | | | Noncontrolling interest | | 3,498 | | | | | | | 3,458 | | | | | | | 3,481 | | | | | | | 3,462 | | | | | | | | 3,186 | | | | | | | | | | | | 3,498 | | | | | | | | | | | | 3,177 | | | | | | | | | | | | 3,481 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total liabilities and stockholders’ equity | | $ | 8,283,023 | | | | | | | $ | 5,660,136 | | | | | | | $ | 7,945,178 | | | | | | | $ | 5,247,221 | | | | | | | $ | 11,447,316 | | | | | | | | | | | $ | 8,283,023 | | | | | | | | | | | $ | 10,957,821 | | | | | | | | | | | $ | 7,945,178 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net interest income – FTE | | | | $ | 96,308 | | | | | | | $ | 67,538 | | | | | | | $ | 184,368 | | | | | | | $ | 122,354 | | | | | | | | | $ | 121,105 | | | | | | | | | | | $ | 96,308 | | | | | | | | | | | $ | 235,532 | | | | | | | | | | | $ | 184,368 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net interest margin – FTE | | | | | | 5.37 | % | | | | | | 5.62 | % | | | | | | 5.39 | % | | | | | | 5.55 | % | | | | | | | | | | | 4.82 | % | | | | | | | | | | | 5.37 | % | | | | | | | | | | | 4.87 | % | | | | | | | | | | | 5.39 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
39
The following table reflects how changes in the volume of interest earning assets and interest bearing liabilities and changes in interest rates have affected our interest income - FTE, interest expense and net interest income - FTE for the periods indicated. Information is provided in each category with respect to changes attributable to (1) changes in volume (changes in volume multiplied by prior yield/rate); (2) changes in yield/rate (changes in yield/rate multiplied by prior volume); and (3) changes in both yield/rate and volume (changes in yield/rate multiplied by changes in volume). The changes attributable to the combined impact of volume and yield/rate have all been allocated to the changes due to volume. Analysis of Changes in Net Interest Income – FTE | | | Three Months Ended June 30, 2015 Over Three Months Ended June 30, 2014 | | Six Months Ended June 30, 2015 Over Six Months Ended June 30, 2014 | | | | | | | Yield/ | | Net | | | | Yield/ | | Net | | | Three Months Ended June 30, 2016 Over Three Months Ended June 30, 2015 | | | Six Months Ended June 30, 2016 Over Six Months Ended June 30, 2015 | | | | Volume | | Rate | | Change | | Volume | | Rate | | Change | | | Volume | | | Yield/ Rate | | | Net Change | | | Volume | | | Yield/ Rate | | | Net Change | | | | (Dollars in thousands) | | | (Dollars in thousands) | | Increase (decrease) in: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest income – FTE: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest earning deposits and federal funds sold | | $ | (59 | ) | | $ | 42 | | | $ | (17 | ) | | $ | (40 | ) | | $ | 29 | | | $ | (11 | ) | | $ | 7 | | | $ | (12 | ) | | $ | (5 | ) | | $ | 7 | | | $ | (15 | ) | | $ | (8 | ) | Investment securities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Taxable | | | 347 | | | 93 | | | 440 | | | 1,118 | | | 448 | | | 1,566 | | | | (539 | ) | | | (249 | ) | | | (788 | ) | | | (1,336 | ) | | | (667 | ) | | | (2,003 | ) | Tax-exempt – FTE | | | (750 | ) | | (46 | ) | | (796 | ) | | 235 | | | (613 | ) | | (378 | ) | | | (125 | ) | | | (998 | ) | | | (1,123 | ) | | | (1,976 | ) | | | (1,048 | ) | | | (3,024 | ) | Non-purchased loans and leases – FTE | | | 19,762 | | | 135 | | | 19,897 | | | 37,458 | | | (538 | ) | | 36,920 | | | | 41,854 | | | | (547 | ) | | | 41,307 | | | | 78,093 | | | | (203 | ) | | | 77,890 | | Purchased loans | | | 15,401 | | | (4,767 | ) | | 10,634 | | | 33,745 | | | (7,136 | ) | | 26,609 | | | | (5,717 | ) | | | (3,334 | ) | | | (9,051 | ) | | | (4,642 | ) | | | (8,246 | ) | | | (12,888 | ) | | | | | | | | | | | | | | | | | | | | | Total interest income – FTE | | | 34,701 | | | (4,543 | ) | | 30,158 | | | 72,516 | | | (7,810 | ) | | 64,706 | | | | 35,480 | | | | (5,140 | ) | | | 30,340 | | | | 70,146 | | | | (10,179 | ) | | | 59,967 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest expense: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Savings and interest bearing transaction | | | 390 | | | (23 | ) | | 367 | | | 893 | | | (42 | ) | | 851 | | | | 1,268 | | | | 1,157 | | | | 2,425 | | | | 2,476 | | | | 2,116 | | | | 4,592 | | Time deposits of $100,000 or more | | | 839 | | | 253 | | | 1,092 | | | 1,686 | | | 469 | | | 2,155 | | | | 1,455 | | | | 1,311 | | | | 2,766 | | | | 2,381 | | | | 2,035 | | | | 4,416 | | Other time deposits | | | 398 | | | 233 | | | 631 | | | 675 | | | 365 | | | 1,040 | | | | 631 | | | | 474 | | | | 1,105 | | | | 872 | | | | 729 | | | | 1,601 | | Repurchase agreements with customers | | | 3 | | | 4 | | | 7 | | | 6 | | | 5 | | | 11 | | | | (4 | ) | | | 7 | | | | 3 | | | | (6 | ) | | | 12 | | | | 6 | | Other borrowings | | | (1,065 | ) | | (185 | ) | | (1,250 | ) | | (1,900 | ) | | (301 | ) | | (2,201 | ) | | | (833 | ) | | | (317 | ) | | | (1,150 | ) | | | (1,643 | ) | | | (908 | ) | | | (2,551 | ) | Subordinated notes | | | | 283 | | | | — | | | | 283 | | | | 283 | | | | — | | | | 283 | | Subordinated debentures | | | 432 | | | 109 | | | 541 | | | 642 | | | 194 | | | 836 | | | | 5 | | | | 106 | | | | 111 | | | | 224 | | | | 232 | | | | 456 | | | | | | | | | | | | | | | | | | | | | | Total interest expense | | | 997 | | | 391 | | | 1,388 | | | 2,002 | | | 690 | | | 2,692 | | | | 2,805 | | | | 2,738 | | | | 5,543 | | | | 4,587 | | | | 4,216 | | | | 8,803 | | | | | | | | | | | | | | | | | | | | | | Increase (decrease) in net interest income – FTE | | $ | 33,704 | | | $ | (4,934 | ) | | $ | 28,770 | | | $ | 70,514 | | | $ | (8,500 | ) | | $ | 62,014 | | | $ | 32,675 | | | $ | (7,878 | ) | | $ | 24,797 | | | $ | 65,559 | | | $ | (14,395 | ) | | $ | 51,164 | | | | | | | | | | | | | | | | | | | | | |
Non-Interest Income Our non-interest income consists primarily of, among others, service charges on deposit accounts, mortgage lending income, trust income, BOLI income, other income from purchased loans and gains on investment securities and on sales of other assets and gains on merger and acquisition transactions. assets. Non-interest income for the second quarter of 2015 increased 33.8%2016 decreased 2.3% to $23.3$22.7 million compared to $17.4$23.3 million for the second quarter of 2014.2015. Non-interest income for the first six months of 2015 increased 38.6%2016 decreased 18.6% to $52.3$42.6 million compared to $37.7$52.3 million for the first six months of 2014. Non-interest income for the first six months of 2014 included $4.7 million of tax-exempt bargain purchase gain from the acquisition of Bancshares. There were no bargain purchase gains during the first six months of 2015. Service charges on deposit accounts increased 7.3%14.5% to $8.1 million for the second quarter of 2016 compared to $7.1 million for the second quarter of 2015 compared to $6.6 million for the second quarter of 2014.2015. Service charges on deposit accounts increased 12.0%15.0% to $15.8 million in the first six months of 2016 compared to $13.7 million in the first six months of 2015 compared to $12.2 million in the first six months of 2014.2015. The increase in service charges on deposit accounts was primarily a result of growth in the number of transaction accounts and, to a lesser extent, the addition of deposit customers from our Summit acquisition, and, to a lesser extent, our IntervestAugust 5, 2015 Bank of the Carolinas Corporation acquisition. Mortgage lending income increased 57.4%16.1% to $2.1 million for the second quarter of 2016 compared to $1.8 million for the second quarter of 2015 compared to $1.1 million for the second quarter of 2014.2015. Mortgage lending income increased 57.6%1.9% to $3.3 million infor the first six months of 20152016 compared to $2.1$3.3 million infor the first six months of 2014.2015. The volume of originations of mortgage loans available for sale increased 43.5%2.0% to $75.2 million for the second quarter of 2016 compared to $73.8 million for the second quarter of 2015 compared to $51.4 million for the second quarter of 2014.2015. The volume of originations of mortgage loans available for sale increased 51.2%decreased 10.3% to $122.5 million for the first six months of 2016 compared to $136.3 million for the first six months of 2015 compared2015. 40
Trust income increased 7.6% to $90.1$1.6 million for the first six monthssecond quarter of 2014. Trust income increased 7.3%2016 compared to $1.5 million for the second quarter of 2015 compared2015. Trust income increased 6.4% to $1.4$3.1 million for the second quarterfirst six months of 2014. Trust income increased 8.0%2016, compared to $2.9 million for the first six months of 2015, compared to $2.7 million for2015. The increase in trust income is primarily the first six monthsresult of 2014.growth in both corporate trust and personal trust income.
BOLI income increased 39.7%53.8% to $1.8$2.7 million for the second quarter of 20152016 compared to $1.3$1.8 million for the secondfirst quarter of 2014, primarily due to $85 million of BOLI purchased in May 2015. BOLI income increased 124.5%3.7% to $5.4$5.6 million forin the first six months of 20152016 compared to $2.4$5.4 million forin the first six months of 2014, primarily2015. The increase in BOLI income for the second quarter and first six months of 2016 was due to $2.3income earned on the purchase of (i) $85 million of BOLI in May 2015, (ii) $15 million of BOLI death benefits received in November 2015 and (iii) $42 million of BOLI in January 2016. Additionally, during the first quarter of 2015, and $85we received $2.3 million of BOLItax-exempt death benefits received compared to no death benefits received during the second quarter or first six months of 2016. Other income from purchased loans was $4.6 million in May 2015. During the fourthsecond quarter of 2014, we entered into agreements with2016 compared to $7.0 million in the FDIC terminatingsecond quarter of 2015 and $7.7 million during the loss share agreements for all sevenfirst six months of our FDIC-assisted acquisitions. As a result, we had2016 compared to $15.9 million during the first six months of 2015. Other income from purchased loans consists primarily of income recognized on purchased loan prepayments and payoffs that are not considered yield adjustments. Because other income from purchased loans may be significantly affected by purchased loan payments and payoffs that are not considered yield adjustments, this income item may vary significantly from period to period.
There were no net accretion (amortization) of the FDIC loss share receivable and FDIC clawback payablegains on investment securities in the second quarter and first six months of 20152016 compared to ($0.7) million of net amortization expense in the second quarter of 2014 and ($49,000) of net amortization expense for the first six months of 2014. Other income from purchased loans was $7.0$0.1 million in the second quarter of 2015 compared to $3.6 million in the second quarter of 2014 and $15.9 million during the first six months of 2015 compared to $6.9 million during the first six months of 2014. Net gains on sales of other assets were $2.6 million in the second quarter of 2015 compared to $1.4 million in the second quarter of 2014 and $5.4 million during the first six months of 2015 compared to $2.4 million during the first six months of 2014. The increases in other income from purchased loans and net gains on sales of other assets are, in part, attributable to our having terminated the loss share agreements with the FDIC. Subsequent to the termination of such loss share agreements, all recoveries, gains, charge-offs, losses and expenses related to the previously covered assets are recognized entirely by us, since the FDIC no longer shares in such items. Accordingly, our earnings are positively impacted to the extent we recognize recoveries in excess of the carrying value of such assets and gains on any sales. Conversely, our earnings are negatively impacted to the extent we recognize charge-offs, losses on any sales and expenses related to such assets.
Net gains on investment securities were $85,000 in the second quarter of 2015 compared to $18,000 in the second quarter of 2014 and $2.6 million during the first six months of 2015 compared to $23,000 during2015. Gains on sale of other assets were $1.0 million in the second quarter and $2.0 million in the first six months of 2014. During2016 compared to $2.6 million in the second quarter and $5.4 million for the first quartersix months of 2015, we sold certain of our longer term municipal bonds resulting in proceeds of $30.1 million and the net gains of $2.5 million. We utilized such proceeds to prepay $30.0 million of our highest rate callable FHLB advances resulting in prepayment penalties of $2.5 million. These transactions were executed for various reasons, including reducing interest rate risk, increasing secondary sources of liquidity and more efficiently allocating capital.2015.
The following table presents non-interest income for the periods indicated. Non-Interest Income | | | Three Months Ended June 30, | | | Six Months Ended June 30, | | | Three Months Ended June 30, | | | Six Months Ended June 30, | | | | 2015 | | | 2014 | | | 2015 | | | 2014 | | | 2016 | | | 2015 | | | 2016 | | | 2015 | | | | (Dollars in thousands) | | | (Dollars in thousands) | | Service charges on deposit accounts | | $ | 7,088 | | | $ | 6,605 | | | $ | 13,715 | | | $ | 12,244 | | | $ | 8,119 | | | $ | 7,088 | | | $ | 15,776 | | | $ | 13,715 | | Mortgage lending income | | | 1,772 | | | | 1,126 | | | | 3,279 | | | | 2,080 | | | | 2,057 | | | | 1,772 | | | | 3,341 | | | | 3,279 | | Trust income | | | 1,463 | | | | 1,364 | | | | 2,895 | | | | 2,681 | | | | 1,574 | | | | 1,463 | | | | 3,080 | | | | 2,895 | | BOLI income | | | 1,785 | | | | 1,278 | | | | 5,407 | | | | 2,408 | | | | 2,745 | | | | 1,785 | | | | 5,605 | | | | 5,407 | | Net accretion of FDIC loss share receivable and FDIC clawback payable | | | — | | | | (741 | ) | | | — | | | | (49 | ) | | Other income from purchased loans, net | | | 6,971 | | | | 3,629 | | | | 15,879 | | | | 6,940 | | | | 4,599 | | | | 6,971 | | | | 7,651 | | | | 15,879 | | Gains on investment securities | | | 85 | | | | 18 | | | | 2,618 | | | | 23 | | | Gains on sales of other assets | | | 2,557 | | | | 1,448 | | | | 5,385 | | | | 2,422 | | | Gain on merger and acquisition transaction | | | — | | | | — | | | | — | | | | 4,667 | | | Net gains on investment securities | | | | — | | | | 85 | | | | — | | | | 2,618 | | Net gains on sales of other assets | | | | 998 | | | | 2,557 | | | | 2,025 | | | | 5,385 | | Other | | | 1,549 | | | | 2,661 | | | | 3,159 | | | | 4,333 | | | | 2,641 | | | | 1,549 | | | | 5,119 | | | | 3,159 | | | | | | | | | | | | | | | | Total non-interest income | | $ | 23,270 | | | $ | 17,388 | | | $ | 52,337 | | | $ | 37,749 | | | $ | 22,733 | | | $ | 23,270 | | | $ | 42,597 | | | $ | 52,337 | | | | | | | | | | | | | | | |
Non-Interest Expense Our non-interest expense consists of salaries and employee benefits, net occupancy and equipment and other operating expenses. Non-interest expense increased 15.4%16.5% to $50.9 million for the second quarter of 2016 compared to $43.7 million for the second quarter of 2015 compared2015. Non-interest expense increased 5.0% to $37.9$98.6 million for the second quarterfirst six months of 2014. Non-interest expense increased 24.7%2016 compared to $93.9 million for the first six months of 2015 compared to $75.32015. During the second quarter of 2016, our non-interest expense included approximately $0.8 million for the first six months of 2014.acquisition-related and systems conversion expenses. During the second quarter of 2015, our non-interest expense included approximately $1.6 million of acquisition-related and systems conversion expenses. During the second quarterfirst six months of 2014,2016, our non-interest expense included approximately $0.8 million of acquisition-related and systems conversion expenses. During the first six months of 2015, our non-interest expense included $2.5 million in FHLB advance prepayment penalties, $2.8$1.3 million of acquisition-related and systems conversion expenses and $0.7$0.1 million of software and contract termination charges. During the first six months of 2014,2015, our non-interest expenseexpenses included $1.5$2.8 million of acquisition-related and systems conversion expenses, and $5.0$0.7 million of software and contract termination charges. The softwarechanges and contract termination charges are included in other non-interest expense in$2.5 million of penalties from the table below.prepayment of FHLB advances. Salaries and employee benefits, our largest component of non-interest expense, increased 20.3%10.0% to $24.9 million in the second quarter of 2016 compared to $22.6 million in the second quarter of 2015 compared to $18.8 million in the second quarter of 2014.2015. Salaries and employee benefits increased 23.9%6.7% to $48.3 million for the first six months of 2016 compared to $45.2 million for the first six months of 20152015. We had 1,662 full-time equivalent employees at June 30, 2016 compared to $36.5 million for the first six months of 2014. We had 1,572 full-time equivalent employees at June 30, 2015 compared to 1,528 full-time equivalent employees at June 30, 2014. The increase in our salaries and employee benefits for both the second quarter and first six months of 2015 compared to the same periods in 2014, despite the decrease in number of full-time equivalent employees at June 30, 2015 compared to June 30, 2014, is primarily attributable to the timing of acquisitions and subsequent reductions or eliminations of personnel upon completion of acquired systems conversions.2015. 41
Net occupancy and equipment expense for the second quarter of 20152016 increased 28.7%14.2% to $7.3$8.4 million compared to $5.7$7.3 million for the second quarter of 2014.2015. Net occupancy and equipment expense for the first six months of 20152016 increased 36.1%15.6% to $14.6$16.9 million compared to $10.8$14.6 million for the first six months of 2014.2015. At June 30, 2015 and 2014,2016, we had 164 offices. The increase in net occupancy and equipment expense for the second quarter and first six months of 2015177 offices compared to the same periods in 2014, despite having the same number of164 offices at both June 30, 2015 and 2014, is primarily attributable to the timing of acquisitions, any subsequent office closures and the effect of such on net occupancy and equipment expense.2015. Our efficiency ratio (non-interest expense divided by the sum of net interest income – FTE and non-interest income) was 35.4% for the second quarter and 35.5% for the first six months of 2016 compared to 36.6% for the second quarter and 39.7% for the first six months of 2015 compared to 44.6% for the second quarter and 47.1% for the first six months of 2014.2015. The following table presents non-interest expense for the periods indicated. Non-Interest Expense | | | Three Months Ended | | | Six Months Ended | | | Three Months Ended | | | Six Months Ended | | | | June 30, | | | June 30, | | | June 30, | | | June 30, | | | | 2015 | | | 2014 | | | 2015 | | | 2014 | | | 2016 | | | 2015 | | | 2016 | | | 2015 | | | | (Dollars in thousands) | | | (Dollars in thousands) | | Salaries and employee benefits | | $ | 22,646 | | | $ | 18,831 | | | $ | 45,243 | | | $ | 36,520 | | | $ | 24,921 | | | $ | 22,646 | | | $ | 48,282 | | | $ | 45,243 | | Net occupancy and equipment | | | 7,344 | | | | 5,707 | | | | 14,635 | | | | 10,751 | | | | 8,388 | | | | 7,344 | | | | 16,918 | | | | 14,635 | | Other operating expenses: | | | | | | | | | | | | | | | | | | | | | | | | | Professional and outside services | | | | 4,342 | | | | 2,526 | | | | 7,563 | | | | 6,912 | | Postage and supplies | | | 1,014 | | | | 852 | | | | 1,929 | | | | 1,623 | | | | 1,073 | | | | 1,014 | | | | 2,131 | | | | 1,929 | | Advertising and public relations | | | 586 | | | | 636 | | | | 1,169 | | | | 1,036 | | | | 1,486 | | | | 586 | | | | 2,602 | | | | 1,169 | | Telecommunication services | | | 1,616 | | | | 1,191 | | | | 2,964 | | | | 2,207 | | | | 1,703 | | | | 1,616 | | | | 3,456 | | | | 2,964 | | Professional and outside services | | | 2,526 | | | | 2,353 | | | | 6,912 | | | | 4,526 | | | Software and data processing | | | 766 | | | | 1,662 | | | | 1,515 | | | | 2,799 | | | | 1,087 | | | | 766 | | | | 1,593 | | | | 1,515 | | ATM expense | | | | 830 | | | | 543 | | | | 1,709 | | | | 1,251 | | Travel and meals | | | 821 | | | | 629 | | | | 1,617 | | | | 1,169 | | | | 1,568 | | | | 821 | | | | 3,072 | | | | 1,617 | | FDIC insurance | | | 900 | | | | 555 | | | | 1,650 | | | | 1,105 | | | | 1,200 | | | | 900 | | | | 2,400 | | | | 1,650 | | FDIC and state assessments | | | 331 | | | | 218 | | | | 641 | | | | 431 | | | | 340 | | | | 331 | | | | 679 | | | | 641 | | ATM expense | | | 543 | | | | 307 | | | | 1,251 | | | | 516 | | | Loan collection and repossession expense | | | 1,020 | | | | 1,528 | | | | 2,753 | | | | 1,987 | | | | 683 | | | | 1,020 | | | | 1,720 | | | | 2,753 | | Writedowns of foreclosed and other assets | | | 235 | | | | 798 | | | | 2,427 | | | | 877 | | | | 590 | | | | 235 | | | | 1,260 | | | | 2,427 | | Amortization of intangibles | | | 1,640 | | | | 1,119 | | | | 3,236 | | | | 1,932 | | | | 1,557 | | | | 1,640 | | | | 3,283 | | | | 3,236 | | FHLB prepayment penalties | | | — | | | | — | | | | 2,480 | | | | — | | | | — | | | | — | | | | — | | | | 2,480 | | Other | | | 1,736 | | | | 1,492 | | | | 3,486 | | | | 7,854 | | | | 1,160 | | | | 1,736 | | | | 1,944 | | | | 3,486 | | | | | | | | | | | | | | | | Total non-interest expense | | $ | 43,724 | | | $ | 37,878 | | | $ | 93,908 | | | $ | 75,333 | | | $ | 50,928 | | | $ | 43,724 | | | $ | 98,612 | | | $ | 93,908 | | | | | | | | | | | | | | | |
Income Taxes The provision for income taxes was $31.5 million for the second quarter and $62.5 million for the first six months of 2016 compared to $24.2 million for the second quarter and $42.3 million for the first six months of 2015 compared to $12.3 million2015. The effective income tax rate was 36.6% for the second quarter and $21.0 million37.0% for the first six months of 2014. The effective income tax rate was2016 compared to 35.1% for the second quarter and 33.3% for the first six months of 2015 compared to 31.6% for the second quarter and 28.8% for the first six months of 2014.2015. The increase in the effective tax rate for the second quarter and first six months of 20152016 compared to the second quarter and first six months of 20142015 was due primarily to the significant growth in income that is subject to federal and/or state income taxes. Also, we have had substantial growth in taxable income in states with higher statutory income tax rates. The effective tax rates were also affected by various other factors including non-taxable income and non-deductible expenses. 42
ANALYSIS OF FINANCIAL CONDITION Loan and Lease Portfolio At June 30, 2015,2016, our total loan and lease portfolio was $6.59$9.73 billion including $4.76 billion of non-purchased loans and leases and $1.83 billion of purchased loans, compared to $5.13$8.33 billion of total loans and leases at December 31, 2014, including $3.98 billion of non-purchased loans and leases and $1.15 billion of purchased loans, and $4.57 billion of total loans and leases at June 30, 2014, including $3.17 billion of non-purchased loans and leases and $1.40 billion of purchased loans.2015. Real estate loans, our largest category of loans, consist of all loans secured by real estate as evidenced by mortgages or other liens, including all loans made to finance the development of real property construction projects, provided such loans are secured by real estate. Total real estate loans were $6.02$8.78 billion at June 30, 20152016 compared to $4.51$7.43 billion at December 31, 2014 and $4.03 billion at June 30, 2014.2015. The amount and type of loans and leases outstanding as of the dates indicated, and their respective percentage of the total loan and lease portfolio, are reflected in the following table. Total Loan and Lease Portfolio | | | June 30, | | December 31, | | | | | | | | | | | | | | | 2015 | | 2014 | | 2014 | | | June 30, 2016 | | | December 31, 2015 | | | | (Dollars in thousands) | | | (Dollars in thousands) | | Real estate: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Residential 1-4 family | | $ | 645,967 | | | | 9.8 | % | | $ | 657,595 | | | | 14.4 | % | | $ | 638,958 | | | | 12.5 | % | | $ | 727,588 | | | | 7.5 | % | | $ | 737,206 | | | | 8.8 | % | Non-farm/non-residential | | | 2,850,908 | | | | 43.2 | | | 1,903,644 | | | | 41.6 | | | 2,008,430 | | | | 39.2 | | | | 3,618,424 | | | | 37.2 | | | | 3,146,413 | | | | 37.8 | | Construction/land development | | | 1,961,983 | | | | 29.8 | | | 1,185,245 | | | | 25.9 | | | 1,511,614 | | | | 29.5 | | | | 3,638,029 | | | | 37.4 | | | | 2,873,398 | | | | 34.5 | | Agricultural | | | 80,402 | | | | 1.2 | | | 106,172 | | | | 2.3 | | | 95,223 | | | | 1.9 | | | | 103,542 | | | | 1.1 | | | | 94,358 | | | | 1.1 | | Multifamily residential | | | 477,014 | | | | 7.2 | | | 179,270 | | | | 3.9 | | | 253,590 | | | | 4.9 | | | | 696,238 | | | | 7.1 | | | | 580,325 | | | | 7.0 | | | | | | | | | | | | | | | | | | | | | | Total real estate | | | 6,016,274 | | | | 91.2 | | | 4,031,926 | | | | 88.1 | | | 4,507,815 | | | | 88.0 | | | | 8,783,821 | | | | 90.3 | | | | 7,431,700 | | | | 89.2 | | Commercial and industrial | | | 306,244 | | | | 4.6 | | | 280,157 | | | | 6.1 | | | 356,532 | | | | 7.0 | | | | 288,229 | | | | 3.0 | | | | 291,803 | | | | 3.5 | | Consumer | | | 34,890 | | | | 0.5 | | | 54,543 | | | | 1.2 | | | 40,937 | | | | 0.8 | | | | 33,199 | | | | 0.3 | | | | 35,232 | | | | 0.4 | | Direct financing leases | | | 137,146 | | | | 2.1 | | | 98,768 | | | | 2.2 | | | 115,475 | | | | 2.2 | | | | 133,775 | | | | 1.4 | | | | 147,735 | | | | 1.8 | | Other | | | 99,417 | | | | 1.6 | | | 110,260 | | | | 2.4 | | | 107,058 | | | | 2.0 | | | | 490,980 | | | | 5.0 | | | | 428,201 | | | | 5.1 | | | | | | | | | | | | | | | | | | | | | | Total loans and leases | | $ | 6,593,971 | | | | 100.0 | % | | $ | 4,575,654 | | | | 100.0 | % | | $ | 5,127,817 | | | | 100.0 | % | | $ | 9,730,004 | | | | 100.0 | % | | $ | 8,334,671 | | | | 100.0 | % | | | | | | | | | | | | | | | | | | | | |
Included in “other” loans at June 30, 2016 and December 31, 2015 are loans totaling $459 million and $394 million, respectively, that were originated to acquire promissory notes from non-depository financial institutions and are typically collateralized by an assignment of the promissory note and all related note documents including mortgages, deeds of trust, etc. While the loans are considered “other” loans in accordance with Federal Deposit Insurance Corporation (“FDIC”) Call Report instructions, we underwrite these lending transactions based on the fundamentals of the underlying collateral, repayment sources and guarantors, among others, consistent with other similar lending transactions. 43
The amount and type of our total real estate loans at June 30, 2015,2016, based on the metropolitan statistical area (“MSA”) and other geographic areas in which the principal collateral is located, are reflected in the following table. Data for individual states and MSAs is separately presented when aggregate real estate loans in that state or MSA exceed $10.0 million. Geographic Distribution of Total Real Estate Loans | | | | | | | | | | | | | | | | | | | | | | | | | | | Residential 1-4 Family | | | Non- Farm/Non- Residential | | | Construction /Land Development | | | Agricultural | | | Multifamily Residential | | | Total | | | | (Dollars in thousands) | | Arkansas: | | | | | | | | | | | | | | | | | | | | | | | | | Little Rock–North Little Rock–Conway, AR MSA | | $ | 162,692 | | | $ | 284,226 | | | $ | 99,893 | | | $ | 9,895 | | | $ | 27,005 | | | $ | 583,711 | | Hot Springs, AR MSA | | | 55,239 | | | | 99,121 | | | | 21,355 | | | | 536 | | | | 15,923 | | | | 192,174 | | Fayetteville–Springdale–Rogers, AR–MO MSA | | | 12,448 | | | | 65,258 | | | | 16,962 | | | | 3,932 | | | | 3,219 | | | | 101,819 | | Fort Smith, AR–OK MSA | | | 21,860 | | | | 50,694 | | | | 8,308 | | | | 1,786 | | | | 6,864 | | | | 89,512 | | Southern Arkansas(1) | | | 35,714 | | | | 32,340 | | | | 3,901 | | | | 10,750 | | | | 2,180 | | | | 84,885 | | Western Arkansas(2) | | | 22,555 | | | | 36,230 | | | | 13,714 | | | | 7,015 | | | | 1,356 | | | | 80,870 | | Northern Arkansas(3) | | | 35,397 | | | | 19,909 | | | | 4,864 | | | | 13,546 | | | | 964 | | | | 74,680 | | All other Arkansas(4) | | | 17,309 | | | | 20,371 | | | | 7,996 | | | | 15,932 | | | | 2,877 | | | | 64,485 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total Arkansas | | | 363,214 | | | | 608,149 | | | | 176,993 | | | | 63,392 | | | | 60,388 | | | | 1,272,136 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | New York: | | | | | | | | | | | | | | | | | | | | | | | | | New York–Newark–Jersey City, NY–NJ–PA MSA | | | 2,742 | | | | 589,518 | | | | 343,962 | | | | — | | | | 147,943 | | | | 1,084,165 | | All other New York(4) | | | 102 | | | | 3,882 | | | | — | | | | — | | | | 1,796 | | | | 5,780 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total New York | | | 2,844 | | | | 593,400 | | | | 343,962 | | | | — | | | | 149,739 | | | | 1,089,945 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Texas: | | | | | | | | | | | | | | | | | | | | | | | | | Dallas–Fort Worth–Arlington, TX MSA | | | 21,565 | | | | 110,632 | | | | 271,080 | | | | — | | | | 10,529 | | | | 413,806 | | Houston–The Woodlands–Sugar Land, TX MSA | | | 6,572 | | | | 49,740 | | | | 129,790 | | | | — | | | | 16,501 | | | | 202,603 | | Austin–Round Rock, TX MSA | | | 8,988 | | | | 18,974 | | | | 85,901 | | | | — | | | | — | | | | 113,863 | | San Antonio–New Braunfels, TX MSA | | | 1,620 | | | | 5,814 | | | | 27,614 | | | | — | | | | 1,209 | | | | 36,257 | | Texarkana, TX–AR MSA | | | 9,486 | | | | 10,599 | | | | 995 | | | | 878 | | | | 1,028 | | | | 22,986 | | College Station–Bryan, TX MSA | | | 169 | | | | — | | | | — | | | | — | | | | 17,350 | | | | 17,519 | | Beaumont–Port Arthur, TX MSA | | | — | | | | — | | | | — | | | | — | | | | 15,200 | | | | 15,200 | | Corpus Christi, TX MSA | | | — | | | | 5,813 | | | | 9,345 | | | | — | | | | — | | | | 15,158 | | All other Texas(4) | | | 1,212 | | | | 20,401 | | | | 3,210 | | | | — | | | | 658 | | | | 25,481 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total Texas | | | 49,612 | | | | 221,973 | | | | 527,935 | | | | 878 | | | | 62,475 | | | | 862,873 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | California: | | | | | | | | | | | | | | | | | | | | | | | | | Los Angeles–Long Beach–Anaheim, CA MSA | | | — | | | | 207,563 | | | | 50,549 | | | | — | | | | — | | | | 258,112 | | San Francisco–Oakland–Hayward, CA MSA | | | — | | | | 135,169 | | | | 112,171 | | | | — | | | | — | | | | 247,340 | | Sacramento–Roseville– Arden–Arcade, CA MSA | | | — | | | | — | | | | 52,935 | | | | — | | | | — | | | | 52,935 | | Riverside–San Bernardino–Ontario, CA MSA | | | — | | | | 12,416 | | | | 25,780 | | | | — | | | | — | | | | 38,196 | | San Jose–Sunnyvale–Santa Clara, CA MSA | | | — | | | | — | | | | 27,991 | | | | — | | | | — | | | | 27,991 | | All other California(4) | | | 414 | | | | 4,969 | | | | 15,276 | | | | — | | | | — | | | | 20,659 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total California | | | 414 | | | | 360,117 | | | | 284,702 | | | | — | | | | — | | | | 645,233 | | | | | | | | | | | | | | | | | | | | | | | | | | |
Geographic Distribution of Total Real Estate Loans (continued)
| | Residential 1-4 Family | | | Non-Farm/ Non-Residential | | | Construction/ Land Development | | | Agricultural | | | Multifamily Residential | | | Total | | | | (Dollars in thousands) | | New York: | | | | | | | | | | | | | | | | | | | | | | | | | New York–Newark–Jersey City, NY–NJ–PA MSA | | $ | 1,003 | | | $ | 860,963 | | | $ | 1,150,274 | | | $ | — | | | $ | 151,798 | | | $ | 2,164,038 | | All other New York(1) | | | 497 | | | | 4,408 | | | | — | | | | — | | | | — | | | | 4,905 | | Total New York | | | 1,500 | | | | 865,371 | | | | 1,150,274 | | | | — | | | | 151,798 | | | | 2,168,943 | | Arkansas: | | | | | | | | | | | | | | | | | | | | | | | | | Little Rock–North Little Rock–Conway, AR MSA | | | 158,693 | | | | 314,639 | | | | 64,523 | | | | 14,229 | | | | 22,244 | | | | 574,328 | | Hot Springs, AR MSA | | | 55,428 | | | | 91,342 | | | | 18,932 | | | | 1,017 | | | | 4,199 | | | | 170,918 | | Fayetteville–Springdale–Rogers, AR–MO MSA | | | 14,981 | | | | 64,487 | | | | 27,103 | | | | 9,916 | | | | 1,053 | | | | 117,540 | | Fort Smith, AR–OK MSA | | | 25,358 | | | | 62,810 | | | | 6,589 | | | | 2,812 | | | | 12,700 | | | | 110,269 | | Southern Arkansas(2) | | | 30,754 | | | | 20,966 | | | | 2,285 | | | | 20,315 | | | | 1,074 | | | | 75,394 | | Western Arkansas(3) | | | 21,904 | | | | 34,658 | | | | 5,971 | | | | 5,422 | | | | 1,205 | | | | 69,160 | | Northern Arkansas(4) | | | 33,106 | | | | 14,385 | | | | 4,269 | | | | 12,730 | | | | 2,790 | | | | 67,280 | | All other Arkansas(1) | | | 20,029 | | | | 18,155 | | | | 7,643 | | | | 16,064 | | | | 4,526 | | | | 66,417 | | Total Arkansas | | | 360,253 | | | | 621,442 | | | | 137,315 | | | | 82,505 | | | | 49,791 | | | | 1,251,306 | | Texas: | | | | | | | | | | | | | | | | | | | | | | | | | Dallas–Fort Worth–Arlington, TX MSA | | | 30,075 | | | | 108,556 | | | | 287,126 | | | | 196 | | | | 60,121 | | | | 486,074 | | Houston–The Woodlands–Sugar Land, TX MSA | | | 6,077 | | | | 47,010 | | | | 211,499 | | | | — | | | | 47,276 | | | | 311,862 | | Austin–Round Rock, TX MSA | | | 11,387 | | | | 20,609 | | | | 155,926 | | | | — | | | | 30,799 | | | | 218,721 | | San Antonio–New Braunfels, TX MSA | | | 1,243 | | | | 5,341 | | | | 2,783 | | | | — | | | | 19,274 | | | | 28,641 | | Texarkana, TX–AR MSA | | | 10,823 | | | | 11,125 | | | | 1,154 | | | | 928 | | | | 785 | | | | 24,815 | | College Station–Bryan, TX MSA | | | — | | | | 1,451 | | | | — | | | | — | | | | 16,993 | | | | 18,444 | | Corpus Christi, TX MSA | | | — | | | | 2,924 | | | | 10,726 | | | | — | | | | — | | | | 13,650 | | All other Texas(1) | | | 922 | | | | 32,966 | | | | 9,052 | | | | 342 | | | | 210 | | | | 43,492 | | Total Texas | | | 60,527 | | | | 229,982 | | | | 678,266 | | | | 1,466 | | | | 175,458 | | | | 1,145,699 | | North Carolina/South Carolina: | | | | | | | | | | | | | | | | | | | | | | | | | Charlotte–Concord–Gastonia, NC–SC MSA | | | 60,278 | | | | 136,092 | | | | 92,078 | | | | 733 | | | | 16,237 | | | | 305,418 | | Winston–Salem, NC MSA | | | 47,791 | | | | 37,627 | | | | 5,883 | | | | — | | | | 972 | | | | 92,273 | | North Carolina Foothills(5) | | | 36,552 | | | | 21,655 | | | | 3,745 | | | | 1,700 | | | | 1,184 | | | | 64,836 | | Raleigh, NC MSA | | | 177 | | | | 3,451 | | | | 59,009 | | | | — | | | | 31 | | | | 62,668 | | Greensboro–High Point, NC MSA | | | 16,964 | | | | 19,610 | | | | 1,894 | | | | 247 | | | | 2,137 | | | | 40,852 | | Wilmington, NC MSA | | | 9,029 | | | | 20,427 | | | | 6,398 | | | | 437 | | | | — | | | | 36,291 | | Charleston–North Charleston, SC MSA | | | 920 | | | | 1,123 | | | | 15,866 | | | | — | | | | 5,369 | | | | 23,278 | | Hilton Head Island–Bluffton–Beaufort, SC MSA | | | 4,992 | | | | 8,913 | | | | 5,764 | | | | — | | | | 2,972 | | | | 22,641 | | Myrtle Beach–Conway–North Myrtle Beach, SC–NC MSA | | | 3,523 | | | | 15,106 | | | | 1,949 | | | | — | | | | 24 | | | | 20,602 | | Columbia, SC MSA | | | — | | | | 17,272 | | | | 1,019 | | | | — | | | | — | | | | 18,291 | | All other North Carolina(1) | | | 15,659 | | | | 31,439 | | | | 29,968 | | | | 1,544 | | | | 1,185 | | | | 79,795 | | All other South Carolina(1) | | | 1,447 | | | | 15,687 | | | | 1,820 | | | | — | | | | 582 | | | | 19,536 | | Total North Carolina / South Carolina | | | 197,332 | | | | 328,402 | | | | 225,393 | | | | 4,661 | | | | 30,693 | | | | 786,481 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Residential 1-4 Family | | | Non- Farm/Non- Residential | | | Construction /Land Development | | | Agricultural | | | Multifamily Residential | | | Total | | | | (Dollars in thousands) | | Florida: | | | | | | | | | | | | | | | | | | | | | | | | | Miami–Fort Lauderdale–West Palm Beach, FL MSA | | | 300 | | | | 94,339 | | | | 85,775 | | | | — | | | | 16,930 | | | | 197,344 | | Tampa–St. Petersburg–Clearwater, FL MSA | | | 9,661 | | | | 37,418 | | | | 5,615 | | | | — | | | | 18,110 | | | | 70,804 | | North Port–Sarasota–Bradenton, FL MSA | | | 9,800 | | | | 16,227 | | | | 5,549 | | | | — | | | | 240 | | | | 31,816 | | Orlando–Kissimmee–Sanford, FL MSA | | | 4,715 | | | | 23,110 | | | | 3,797 | | | | — | | | | 58 | | | | 31,680 | | Tallahassee, FL MSA | | | — | | | | — | | | | 25,130 | | | | — | | | | — | | | | 25,130 | | Jacksonville, FL MSA | | | 555 | | | | 20,839 | | | | 1,761 | | | | 19 | | | | 1,902 | | | | 25,076 | | Sebring, FL MSA | | | — | | | | 22,347 | | | | — | | | | — | | | | 17 | | | | 22,364 | | Lakeland–Winter Haven, FL MSA | | | — | | | | 12,909 | | | | 6,602 | | | | — | | | | 95 | | | | 19,606 | | Deltona–Daytona Beach–Ormond Beach, FL MSA | | | 2,575 | | | | 15,868 | | | | 505 | | | | — | | | | — | | | | 18,948 | | Crestview–Fort Walton Beach–Destin, FL MSA | | | 1,096 | | | | 2,595 | | | | 14,434 | | | | 476 | | | | — | | | | 18,601 | | Palm Bay–Melbourne–Titusville, FL MSA | | | 4,704 | | | | 4,505 | | | | — | | | | — | | | | 4,428 | | | | 13,637 | | All other Florida(4) | | | 10,136 | | | | 93,337 | | | | 10,897 | | | | 1,082 | | | | 5,882 | | | | 121,334 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total Florida | | | 43,542 | | | | 343,494 | | | | 160,065 | | | | 1,577 | | | | 47,662 | | | | 596,340 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | North Carolina/South Carolina: | | | | | | | | | | | | | | | | | | | | | | | | | Charlotte–Concord–Gastonia, NC–SC MSA | | | 44,260 | | | | 102,095 | | | | 42,886 | | | | 315 | | | | 8,978 | | | | 198,534 | | North Carolina Foothills(5) | | | 48,736 | | | | 32,036 | | | | 6,741 | | | | 4,157 | | | | 2,827 | | | | 94,497 | | Wilmington, NC MSA | | | 4,905 | | | | 21,942 | | | | 5,503 | | | | 447 | | | | 273 | | | | 33,070 | | Myrtle Beach–North Myrtle Beach–Conway, SC–NC MSA | | | 2,167 | | | | 6,705 | | | | 22,504 | | | | — | | | | 24 | | | | 31,400 | | Charleston–North Charleston, SC MSA | | | 1,680 | | | | 4,757 | | | | 4,846 | | | | — | | | | 5,585 | | | | 16,868 | | Columbia, SC MSA | | | — | | | | 2,993 | | | | 12,135 | | | | — | | | | — | | | | 15,128 | | Florence, SC MSA | | | — | | | | 3,203 | | | | 8,853 | | | | — | | | | — | | | | 12,056 | | Hilton Head Island–Bluffton–Beaufort, SC MSA | | | 4,428 | | | | 5,082 | | | | 1,584 | | | | — | | | | — | | | | 11,094 | | All other N. Carolina(4) | | | 4,372 | | | | 40,672 | | | | 35,151 | | | | — | | | | 923 | | | | 81,118 | | All other S. Carolina (4) | | | 1,133 | | | | 15,105 | | | | 141 | | | | — | | | | 7,273 | | | | 23,652 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total N. Carolina/S. Carolina | | | 111,681 | | | | 234,590 | | | | 140,344 | | | | 4,919 | | | | 25,883 | | | | 517,417 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Georgia: | | | | | | | | | | | | | | | | | | | | | | | | | Atlanta–Sandy Springs–Roswell, GA MSA | | | 20,918 | | | | 117,743 | | | | 25,293 | | | | 3,864 | | | | 28,263 | | | | 196,081 | | Savannah, GA MSA | | | 5,865 | | | | 24,849 | | | | 1,406 | | | | — | | | | — | | | | 32,120 | | Brunswick, GA MSA | | | 10,500 | | | | 3,701 | | | | 727 | | | | — | | | | — | | | | 14,928 | | Valdosta, GA MSA | | | 7,110 | | | | 1,650 | | | | 622 | | | | 490 | | | | 727 | | | | 10,599 | | All other Georgia(4) | | | 11,688 | | | | 34,074 | | | | 5,405 | | | | 3,108 | | | | 222 | | | | 54,497 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total Georgia | | | 56,081 | | | | 182,017 | | | | 33,453 | | | | 7,462 | | | | 29,212 | | | | 308,225 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Tennessee: | | | | | | | | | | | | | | | | | | | | | | | | | Nashville–Davidson–Murfreesboro–Franklin, TN MSA | | | 429 | | | | 65,231 | | | | 10,829 | | | | — | | | | — | | | | 76,489 | | Memphis, TN–MS–AR MSA | | | 281 | | | | 9,225 | | | | — | | | | 370 | | | | 11,052 | | | | 20,928 | | All other Tennessee(4) | | | 96 | | | | 4,144 | | | | 93 | | | | — | | | | — | | | | 4,333 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total Tennessee | | | 806 | | | | 78,600 | | | | 10,922 | | | | 370 | | | | 11,052 | | | | 101,750 | | | | | | | | | | | | | | | | | | | | | | | | | | |
Geographic Distribution of Total Real Estate Loans (continued)44
Geographic Distribution of Total Real Estate Loans (continued) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Residential 1-4 Family | | | Non-Farm/ Non-Residential | | | Construction/ Land Development | | | Agricultural | | | Multifamily Residential | | | Total | | | | (Dollars in thousands) | | California: | | | | | | | | | | | | | | | | | | | | | | | | | Los Angeles–Long Beach–Anaheim, CA MSA | | | — | | | | 211,417 | | | | 164,832 | | | | — | | | | — | | | | 376,249 | | San Francisco–Oakland–Hayward, CA MSA | | | — | | | | 70,121 | | | | 79,092 | | | | — | | | | — | | | | 149,213 | | Sacramento–Roseville–Arden–Arcade, CA MSA | | | — | | | | — | | | | 59,142 | | | | — | | | | — | | | | 59,142 | | Riverside–San Bernardino–Ontario, CA MSA | | | — | | | | 35,945 | | | | 21,131 | | | | — | | | | | | | | 57,076 | | San Jose–Sunnyvale–Santa Clara, CA MSA | | | — | | | | 12,726 | | | | — | | | | — | | | | 37,673 | | | | 50,399 | | Oxnard–Thousand Oaks–Ventura, CA MSA | | | — | | | | — | | | | 44,087 | | | | — | | | | — | | | | 44,087 | | San Diego–Carlsbad, CA MSA | | | — | | | | — | | | | 19,649 | | | | — | | | | — | | | | 19,649 | | Stockton–Lodi, CA MSA | | | — | | | | — | | | | 11,976 | | | | — | | | | — | | | | 11,976 | | All other California(1) | | | — | | | | 4,873 | | | | — | | | | — | | | | — | | | | 4,873 | | Total California | | | — | | | | 335,082 | | | | 399,909 | | | | — | | | | 37,673 | | | | 772,664 | | Florida: | | | | | | | | | | | | | | | | | | | | | | | | | Miami–Fort Lauderdale–West Palm Beach, FL MSA | | | 3,201 | | | | 122,408 | | | | 82,627 | | | | — | | | | 34,610 | | | | 242,846 | | Tampa–St. Petersburg–Clearwater, FL MSA | | | 263 | | | | 44,735 | | | | 1,291 | | | | — | | | | 22,592 | | | | 68,881 | | Orlando–Kissimmee–Sanford, FL MSA | | | 218 | | | | 22,366 | | | | 38,200 | | | | — | | | | 57 | | | | 60,841 | | North Port–Sarasota–Bradenton, FL MSA | | | 8,424 | | | | 18,774 | | | | 16,907 | | | | — | | | | 230 | | | | 44,335 | | Tallahassee, FL MSA | | | — | | | | — | | | | — | | | | — | | | | 42,590 | | | | 42,590 | | Jacksonville, FL MSA | | | 533 | | | | 36,843 | | | | 361 | | | | — | | | | 1,880 | | | | 39,617 | | Crestview–Fort Walton Beach–Destin, FL MSA | | | 3,870 | | | | 39 | | | | 26,319 | | | | 194 | | | | — | | | | 30,422 | | Sebring, FL MSA | | | — | | | | 21,689 | | | | — | | | | — | | | | 17 | | | | 21,706 | | Lakeland–Winter Haven, FL MSA | | | — | | | | 15,837 | | | | 1,193 | | | | — | | | | 20 | | | | 17,050 | | Palm Bay–Melbourne–Titusville, FL MSA | | | 4,632 | | | | 4,377 | | | | — | | | | — | | | | 4,335 | | | | 13,344 | | Deltona–Daytona Beach–Ormond Beach, FL MSA | | | 310 | | | | 10,520 | | | | 471 | | | | — | | | | — | | | | 11,301 | | All other Florida(1) | | | 8,639 | | | | 93,754 | | | | 364 | | | | 952 | | | | 2,856 | | | | 106,565 | | Total Florida | | | 30,090 | | | | 391,342 | | | | 167,733 | | | | 1,146 | | | | 109,187 | | | | 699,498 | | Georgia: | | | | | | | | | | | | | | | | | | | | | | | | | Atlanta–Sandy Springs–Roswell, GA MSA | | | 20,561 | | | | 120,396 | | | | 80,069 | | | | 3,205 | | | | 10,561 | | | | 234,792 | | Savannah, GA MSA | | | 4,314 | | | | 41,907 | | | | — | | | | — | | | | — | | | | 46,221 | | Brunswick, GA MSA | | | 11,034 | | | | 4,710 | | | | 456 | | | | — | | | | — | | | | 16,200 | | Gainesville, GA MSA | | | 1,610 | | | | 5,531 | | | | 3,688 | | | | 185 | | | | — | | | | 11,014 | | All other Georgia(1) | | | 20,031 | | | | 33,003 | | | | 4,902 | | | | 3,034 | | | | 598 | | | | 61,568 | | Total Georgia | | | 57,550 | | | | 205,547 | | | | 89,115 | | | | 6,424 | | | | 11,159 | | | | 369,795 | | Illinois: | | | | | | | | | | | | | | | | | | | | | | | | | Chicago–Naperville–Elgin, IL–IN–WI MSA | | | 2,206 | | | | 40,279 | | | | 132,688 | | | | — | | | | — | | | | 175,173 | | Bloomington, IL MSA | | | — | | | | 11,978 | | | | — | | | | — | | | | — | | | | 11,978 | | All other Illinois(1) | | | — | | | | 1,386 | | | | — | | | | 1,229 | | | | — | | | | 2,615 | | Total Illinois | | | 2,206 | | | | 53,643 | | | | 132,688 | | | | 1,229 | | | | — | | | | 189,766 | | Tennessee: | | | | | | | | | | | | | | | | | | | | | | | | | Nashville–Davidson–Murfreesboro–Franklin, TN MSA | | | 116 | | | | 104,945 | | | | 66,602 | | | | — | | | | — | | | | 171,663 | | Memphis, TN–MS–AR MSA | | | 626 | | | | 3,890 | | | | — | | | | — | | | | 5,508 | | | | 10,024 | | All other Tennessee(1) | | | 93 | | | | 5,765 | | | | 122 | | | | — | | | | — | | | | 5,980 | | Total Tennessee | | | 835 | | | | 114,600 | | | | 66,724 | | | | — | | | | 5,508 | | | | 187,667 | | Arizona: | | | | | | | | | | | | | | | | | | | | | | | | | Phoenix–Mesa–Scottsdale, AZ MSA | | | — | | | | 39,212 | | | | 127,668 | | | | — | | | | — | | | | 166,880 | | All other Arizona(1) | | | — | | | | 2,624 | | | | — | | | | — | | | | — | | | | 2,624 | | Total Arizona | | | — | | | | 41,836 | | | | 127,668 | | | | — | | | | — | | | | 169,504 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Residential 1-4 Family | | | Non- Farm/Non- Residential | | | Construction /Land Development | | | Agricultural | | | Multifamily Residential | | | Total | | | | (Dollars in thousands) | | Arizona: | | | | | | | | | | | | | | | | | | | | | | | | | Phoenix–Mesa–Scottsdale, AZ MSA | | | — | | | | 87,535 | | | | 3 | | | | — | | | | — | | | | 87,538 | | All other Arizona(4) | | | — | | | | 2,676 | | | | — | | | | — | | | | — | | | | 2,676 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total Arizona | | | — | | | | 90,211 | | | | 3 | | | | — | | | | — | | | | 90,214 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Pennsylvania: | | | | | | | | | | | | | | | | | | | | | | | | | Philadelphia–Camden–Wilmington, PA–NJ–DE–MD MSA | | | — | | | | — | | | | — | | | | — | | | | 57,731 | | | | 57,731 | | All other Pennsylvania(4) | | | — | | | | 7,299 | | | | — | | | | — | | | | — | | | | 7,299 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total Pennsylvania | | | — | | | | 7,299 | | | | — | | | | — | | | | 57,731 | | | | 65,030 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Colorado: | | | | | | | | | | | | | | | | | | | | | | | | | Denver–Aurora–Lakewood, CO MSA | | | 13 | | | | 12,111 | | | | 17,153 | | | | — | | | | 1 | | | | 29,278 | | All other Colorado(4) | | | 1,405 | | | | — | | | | 22,644 | | | | — | | | | — | | | | 24,049 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total Colorado | | | 1,418 | | | | 12,111 | | | | 39,797 | | | | — | | | | 1 | | | | 53,327 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Las Vegas–Henderson–Paradise, NV MSA | | | — | | | | — | | | | 52,621 | | | | — | | | | — | | | | 52,621 | | | | | | | | | Illinois: | | | | | | | | | | | | | | | | | | | | | | | | | Chicago–Naperville–Elgin, IL–IN–WI MSA | | | 2,251 | | | | 1,931 | | | | 42,424 | | | | — | | | | — | | | | 46,606 | | All other Illinois(4) | | | — | | | | — | | | | 5,233 | | | | — | | | | — | | | | 5,233 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total Illinois | | | 2,251 | | | | 1,931 | | | | 47,657 | | | | — | | | | — | | | | 51,839 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Washington–Arlington–Alexandria, DC–VA–MD–WV | | | — | | | | 4,332 | | | | 41,635 | | | | — | | | | — | | | | 45,967 | | | | | | | | | Missouri: | | | | | | | | | | | | | | | | | | | | | | | | | St. Louis, MO–IL MSA | | | 242 | | | | 425 | | | | 6,511 | | | | — | | | | 19,333 | | | | 26,511 | | All other Missouri(4) | | | 524 | | | | 6,567 | | | | 7,163 | | | | 979 | | | | — | | | | 15,233 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total Missouri | | | 766 | | | | 6,992 | | | | 13,674 | | | | 979 | | | | 19,333 | | | | 41,744 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Alabama: | | | | | | | | | | | | | | | | | | | | | | | | | Mobile, AL MSA | | | 3,133 | | | | 13,372 | | | | 735 | | | | — | | | | 1,907 | | | | 19,147 | | All other Alabama(4) | | | 8,689 | | | | 4,498 | | | | 4,793 | | | | 825 | | | | 3,558 | | | | 22,363 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total Alabama | | | 11,822 | | | | 17,870 | | | | 5,528 | | | | 825 | | | | 5,465 | | | | 41,510 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Seattle–Tacoma–Bellevue, WA MSA | | | — | | | | — | | | | 40,451 | | | | — | | | | — | | | | 40,451 | | | | | | | | | Providence–Warwick, RI–MA MSA | | | — | | | | 26,669 | | | | — | | | | — | | | | — | | | | 26,669 | | | | | | | | | Oklahoma | | | 677 | | | | 2,175 | | | | 13,706 | | | | — | | | | 4,053 | | | | 20,611 | | | | | | | | | Portland–Vancouver–Hillsboro, OR–WA MSA | | | — | | | | — | | | | 16,166 | | | | — | | | | 1 | | | | 16,167 | | | | | | | | | Kentucky | | | — | | | | 16,086 | | | | — | | | | — | | | | — | | | | 16,086 | | | | | | | | | Ohio | | | — | | | | 6,655 | | | | 6,729 | | | | — | | | | — | | | | 13,384 | | | | | | | | | Connecticut | | | — | | | | 12,397 | | | | — | | | | — | | | | 728 | | | | 13,125 | | | | | | | | | All other states(6) | | | 839 | | | | 23,840 | | | | 5,640 | | | | — | | | | 3,291 | | | | 33,610 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total real estate loans | | $ | 645,967 | | | $ | 2,850,908 | | | $ | 1,961,983 | | | $ | 80,402 | | | $ | 477,014 | | | $ | 6,016,274 | | | | | | | | | | | | | | �� | | | | | | | | | | | | |
45
Geographic Distribution of Total Real Estate Loans (continued) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Residential 1-4 Family | | | Non-Farm/ Non-Residential | | | Construction/ Land Development | | | Agricultural | | | Multifamily Residential | | | Total | | | | (Dollars in thousands) | | Colorado: | | | | | | | | | | | | | | | | | | | | | | | | | Denver–Aurora–Lakewood, CO MSA | | | 11 | | | | 10,241 | | | | 63,774 | | | | — | | | | — | | | | 74,026 | | Boulder, CO MSA | | | — | | | | — | | | | 35,706 | | | | — | | | | — | | | | 35,706 | | All other Colorado(1) | | | 1,361 | | | | — | | | | 35,060 | | | | — | | | | — | | | | 36,421 | | Total Colorado | | | 1,372 | | | | 10,241 | | | | 134,540 | | | | — | | | | — | | | | 146,153 | | | | | | | | | | | | | | | | | | | | | | | | | | | Las Vegas–Henderson–Paradise, NV MSA | | | — | | | | 97,010 | | | | — | | | | — | | | | 38,202 | | | | 135,212 | | | | | | | | | | | | | | | | | | | | | | | | | | | Seattle–Tacoma–Bellevue, WA MSA | | | — | | | | 34,305 | | | | 94,137 | | | | — | | | | — | | | | 128,442 | | | | | | | | | | | | | | | | | | | | | | | | | | | Cayman Islands | | | — | | | | 113,770 | | | | — | | | | — | | | | — | | | | 113,770 | | | | | | | | | | | | | | | | | | | | | | | | | | | Portland–Vancouver–Hillsboro, OR–WA MSA | | | — | | | | — | | | | 70,281 | | | | — | | | | 17,407 | | | | 87,688 | | | | | | | | | | | | | | | | | | | | | | | | | | | Urban Honolulu, HI MSA | | | — | | | | — | | | | 56,580 | | | | — | | | | — | | | | 56,580 | | | | | | | | | | | | | | | | | | | | | | | | | | | Washington DC / Maryland: | | | | | | | | | | | | | | | | | | | | | | | | | Washington–Arlington–Alexandria, DC–VA– MD–WV MSA | | | — | | | | 4,237 | | | | 45,963 | | | | — | | | | — | | | | 50,200 | | All other Maryland(1) | | | — | | | | 2,933 | | | | — | | | | — | | | | — | | | | 2,933 | | Total Washington DC / Maryland | | | — | | | | 7,170 | | | | 45,963 | | | | — | | | | — | | | | 53,133 | | Missouri: | | | | | | | | | | | | | | | | | | | | | | | | | St. Louis, MO–IL MSA | | | — | | | | 410 | | | | 15,500 | | | | — | | | | 19,346 | | | | 35,256 | | All other Missouri(1) | | | 506 | | | | 14,023 | | | | 1,244 | | | | 915 | | | | — | | | | 16,688 | | Total Missouri | | | 506 | | | | 14,433 | | | | 16,744 | | | | 915 | | | | 19,346 | | | | 51,944 | | | | | | | | | | | | | | | | | | | | | | | | | | | Minneapolis–St. Paul–Bloomington, MN MSA | | | — | | | | 27,588 | | | | 20,885 | | | | — | | | | — | | | | 48,473 | | | | | | | | | | | | | | | | | | | | | | | | | | | Alabama: | | | | | | | | | | | | | | | | | | | | | | | | | Mobile, AL MSA | | | 4,692 | | | | 20,140 | | | | 713 | | | | — | | | | 1,729 | | | | 27,274 | | All other Alabama(1) | | | 9,230 | | | | 2,500 | | | | 2,652 | | | | 464 | | | | 3,406 | | | | 18,252 | | Total Alabama | | | 13,922 | | | | 22,640 | | | | 3,365 | | | | 464 | | | | 5,135 | | | | 45,526 | | Pennsylvania: | | | | | | | | | | | | | | | | | | | | | | | | | Philadelphia–Camden–Wilmington, PA–NJ–DE– MD MSA | | | — | | | | — | | | | — | | | | — | | | | 38,077 | | | | 38,077 | | All other Pennsylvania(1) | | | 116 | | | | 6,190 | | | | — | | | | — | | | | — | | | | 6,306 | | Total Pennsylvania | | | 116 | | | | 6,190 | | | | — | | | | — | | | | 38,077 | | | | 44,383 | | | | | | | | | | | | | | | | | | | | | | | | | | | Providence–Warwick, RI–MA MSA | | | — | | | | 26,057 | | | | — | | | | — | | | | — | | | | 26,057 | | | | | | | | | | | | | | | | | | | | | | | | | | | Ohio: | | | | | | | | | | | | | | | | | | | | | | | | | Columbus, OH MSA | | | — | | | | 7,101 | | | | 4,150 | | | | — | | | | — | | | | 11,251 | | All other Ohio(1) | | | — | | | | 12,763 | | | | — | | | | — | | | | — | | | | 12,763 | | Total Ohio | | | — | | | | 19,864 | | | | 4,150 | | | | — | | | | — | | | | 24,014 | | | | | | | | | | | | | | | | | | | | | | | | | | | Virginia | | 795 | | | | 10,684 | | | | 3,900 | | | | — | | | 77 | | | | 15,456 | | | | | | | | | | | | | | | | | | | | | | | | | | | Oklahoma | | | 312 | | | | 3,157 | | | | 30 | | | | 3,713 | | | | 6,078 | | | | 13,290 | |
Geographic Distribution of Total Real Estate Loans (continued) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Residential 1-4 Family | | | Non-Farm/ Non-Residential | | | Construction/ Land Development | | | Agricultural | | | Multifamily Residential | | | Total | | | | (Dollars in thousands) | | | | | | | | | | | | | | | | | | | | | | | | | | | Connecticut | | | — | | | | 12,059 | | | | — | | | | — | | | | 649 | | | | 12,708 | | | | | | | | | | | | | | | | | | | | | | | | | | | All other states(6) | | | 272 | | | | 26,009 | | | | 12,369 | | | | 1,019 | | | | — | | | | 39,669 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total Real Estate Loans | | $ | 727,588 | | | $ | 3,618,424 | | | $ | 3,638,029 | | | $ | 103,542 | | | $ | 696,238 | | | $ | 8,783,821 | |
(1) | These geographic areas include all MSA and non-MSA areas that are not separately reported. |
(2) | This geographic area includes the following counties in southern Arkansas: Clark, Columbia, Hempstead and Hot Spring. |
(2)(3) | This geographic area includes the following counties in western Arkansas: Johnson, Logan, Pope and Yell. |
(3)(4) | This geographic area includes the following counties in northern Arkansas: Baxter, Boone, Marion, Newton, Searcy and Van Buren. |
(4)(5) | These geographic areas include all MSA and non-MSA areas that are not separately reported. |
(5) | This geographic area includes the following counties in the North Carolina foothills:Carolina: Cleveland, Rutherford and Lincoln. |
(6) | Includes all states not separately presented above. |
The amount and type of total non-farm/non-residential loans, as of the dates indicated, and their respective percentage of the total non-farm/non-residential loan portfolio are reflected in the following table. Total Non-Farm/Non-Residential Loans | | | June 30, | | December 31, | | | | | | | | | | | | | | | 2015 | | 2014 | | 2014 | | | June 30, 2016 | | | December 31, 2015 | | | | (Dollars in thousands) | | | (Dollars in thousands) | | Retail, including shopping centers and strip centers | | $ | 527,343 | | | | 18.5 | % | | $ | 386,362 | | | | 20.3 | % | | $ | 346,925 | | | | 17.3 | % | | $ | 555,738 | | | | 15.4 | % | | $ | 557,528 | | | | 17.7 | % | Churches and schools | | | 117,913 | | | | 4.1 | | | 130,751 | | | | 6.9 | | | 104,746 | | | | 5.2 | | | | 163,743 | | | | 4.5 | | | | 164,011 | | | | 5.2 | | Office, including medical offices | | | 788,346 | | | | 27.7 | | | 484,970 | | | | 25.5 | | | 621,729 | | | | 31.0 | | | | 844,812 | | | | 23.3 | | | | 996,793 | | | | 31.7 | | Office warehouse, warehouse and mini-storage | | | 215,629 | | | | 7.6 | | | 172,283 | | | | 9.1 | | | 169,176 | | | | 8.4 | | | | 246,563 | | | | 6.8 | | | | 225,417 | | | | 7.2 | | Gasoline stations and convenience stores | | | 46,076 | | | | 1.6 | | | 55,528 | | | | 2.9 | | | 47,465 | | | | 2.4 | | | | 53,536 | | | | 1.5 | | | | 47,196 | | | | 1.5 | | Hotels and motels | | | 379,285 | | | | 13.3 | | | 290,184 | | | | 15.2 | | | 328,507 | | | | 16.4 | | | | 897,718 | | | | 24.8 | | | | 373,272 | | | | 11.9 | | Restaurants and bars | | | 50,398 | | | | 1.8 | | | 54,404 | | | | 2.9 | | | 43,084 | | | | 2.1 | | | | 108,796 | | | | 3.0 | | | | 72,784 | | | | 2.3 | | Manufacturing and industrial facilities | | | 58,929 | | | | 2.1 | | | 65,996 | | | | 3.5 | | | 76,897 | | | | 3.8 | | | | 69,166 | | | | 1.9 | | | | 53,092 | | | | 1.7 | | Nursing homes and assisted living centers | | | 59,465 | | | | 2.1 | | | 54,221 | | | | 2.8 | | | 52,409 | | | | 2.6 | | | | 55,913 | | | | 1.5 | | | | 58,498 | | | | 1.9 | | Hospitals, surgery centers and other medical | | | 72,355 | | | | 2.5 | | | 54,954 | | | | 2.9 | | | 54,469 | | | | 2.7 | | | | 75,836 | | | | 2.1 | | | | 88,180 | | | | 2.8 | | Golf courses, entertainment and recreational facilities | | | 14,614 | | | | 0.5 | | | 17,883 | | | | 0.9 | | | 16,729 | | | | 0.8 | | | | 13,140 | | | | 0.4 | | | | 18,182 | | | | 0.6 | | Other non-farm/non residential | | | 520,555 | | | | 18.2 | | | 136,108 | | | | 7.1 | | | 146,294 | | | | 7.3 | | | | | | | | | | | | | | | | | | | | | | | Other non-farm/non-residential (1) | | | | 533,463 | | | | 14.8 | | | | 491,460 | | | | 15.5 | | Total | | $ | 2,850,908 | | | | 100.0 | % | | $ | 1,903,644 | | | | 100.0 | % | | $ | 2,008,430 | | | | 100.0 | % | | $ | 3,618,424 | | | | 100.0 | % | | $ | 3,146,413 | | | | 100.0 | % | | | | | | | | | | | | | | | | | | | | |
| (1) | Includes non-farm/non-residential loans collateralized by other miscellaneous real property, including loans where the collateral is “mixed use” real property. |
47
The amount and type of total construction/land development loans, as of the dates indicated, and their respective percentage of the total construction/land development loan portfolio are reflected in the following table. Total Construction/Land Development Loans | | | June 30, | | December 31, | | | | | 2015 | | 2014 | | 2014 | | | June 30, 2016 | | | December 31, 2015 | | | | (Dollars in thousands) | | | (Dollars in thousands) | | Unimproved land | | $ | 303,901 | | | | 15.5 | % | | $ | 194,816 | | | | 16.4 | % | | $ | 272,197 | | | | 18.0 | % | | $ | 180,333 | | | | 5.0 | % | | $ | 237,138 | | | | 8.3 | % | Land development and lots: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1-4 family residential and multifamily | | | 387,568 | | | | 19.8 | | | 277,195 | | | | 23.4 | | | 322,698 | | | | 21.3 | | | | 559,075 | | | | 15.4 | | | | 494,704 | | | | 17.2 | | Non-residential | | | 143,197 | | | | 7.3 | | | 102,799 | | | | 8.7 | | | 133,137 | | | | 8.8 | | | | 538,011 | | | | 14.8 | | | | 172,268 | | | | 6.0 | | Construction: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1-4 family residential: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Owner occupied | | | 30,163 | | | | 1.5 | | | 21,006 | | | | 1.8 | | | 25,482 | | | | 1.7 | | | | 19,272 | | | | 0.5 | | | | 33,120 | | | | 1.2 | | Non-owner occupied: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Pre-sold | | | 35,946 | | | | 1.8 | | | 13,908 | | | | 1.2 | | | 19,664 | | | | 1.3 | | | | 42,167 | | | | 1.2 | | | | 26,538 | | | | 0.9 | | Speculative | | | 70,698 | | | | 3.6 | | | 69,781 | | | | 5.9 | | | 75,252 | | | | 5.0 | | | | 151,304 | | | | 4.2 | | | | 130,966 | | | | 4.6 | | Multifamily | | | 503,826 | | | | 25.7 | | | 304,637 | | | | 25.6 | | | 354,966 | | | | 23.5 | | | | 1,223,344 | | | | 33.6 | | | | 809,063 | | | | 28.2 | | Industrial, commercial and other | | | 486,684 | | | | 24.8 | | | 201,103 | | | | 17.0 | | | 308,218 | | | | 20.4 | | | | 924,523 | | | | 25.3 | | | | 969,601 | | | | 33.6 | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 1,961,983 | | | | 100.0 | % | | $ | 1,185,245 | | | | 100.0 | % | | $ | 1,511,614 | | | | 100.0 | % | | $ | 3,638,029 | | | | 100.0 | % | | $ | 2,873,398 | | | | 100.0 | % | | | | | | | | | | | | | | | | | | | | |
Many of our construction and development loans provide for the use of interest reserves. When we underwrite construction and development loans, we consider the expected total project costs, including hard costs such as land, site work and construction costs and soft costs such as architectural and engineering fees, closing costs, leasing commissions and construction period interest. For any construction and development loan with interest reserves, we also consider the construction period interest in our underwriting process (otherwise, our underwriting of such loans with and without interest reserves is virtually identical). Based on the total project costs and other factors, we determine the required borrower cash equity contribution and the maximum amount we are willing to loan. In the vast majority of cases, we require that all of the borrower’s cash equity contributionand all other required subordinated elements of the capital structure be contributedfully funded prior to any materialsignificant loan advances. This ensures that the borrower’s cash equity required to complete the project will be available for such purposes. As a result of this practice, the borrower’s cash equity typically goes toward the purchase of the land and early stage hard costs and soft costs. This results in usour funding the loan later as the project progresses, and accordingly, we typically fund the majority of the construction period interest through loan advances. However, whenGenerally, as part of our underwriting process, we initially determinerequire the borrower’s cash equity requirement, we typically require borrower’s cash equity in an amount to cover a majority, or all, of the soft costs, including an amount equal to construction period interest and an appropriate portion of the hard costs. We advanced construction period interest on construction and development loans totaling $12.2 million in the second quarter and $22.2 in the first six months of 2015. While we had advanced these sumsinterest reserves as part of the funding process, we believe that the borrowers in effect had in most cases already provided for these sums as part of their initial equity contribution. Specifically,During the six months ended June 30, 2016, there were no situations where additional interest reserves were advanced on a loan to avoid such loan from becoming nonperforming, and at June 30, 2016, we had no construction and development loans with interest reserves that were nonperforming. During the second quarter and first six months of 2016, we recognized $26.1 million and $51.9 million, respectively, of interest income on construction and development loans from the advance of interest reserves, and we advanced construction period interest on construction and development loans totaling $25.0 million and $44.0 million, respectively, in the second quarter and first six months of 2016. The maximum committed balance of all construction and development loans which provide for the use of interest reserves at June 30, 20152016 was approximately $4.9$9.52 billion, of which $1.7$3.28 billion was outstanding at June 30, 20152016 and $3.2$6.24 billion remained to be advanced. The weighted average loan-to-cost on such loans, assuming such loans are ultimately fully advanced, will be approximately 54%50%, which means that the weighted average cash equity contributed on such loans, assuming such loans are ultimately fully advanced, will be approximately 46%50%. The weighted average final loan-to-value ratio on such loans, based on the most recent appraisals and assuming such loans are ultimately fully advanced, is expected to be approximately 45%43%. 48
The following table reflects total loans and leases as of June 30, 20152016 grouped by expected amortizations, expected paydowns or the earliest repricing opportunity for floating rate loans. This cash flow or repricing schedule approximates our ability to reprice the outstanding principal of total loans and leases either by adjusting rates on existing loans and leases or reinvesting principal cash flow in new loans and leases. For non-purchased loans and leases and purchased loans without evidence of credit deterioration on the date of purchase,acquisition, the table below reflects the earliest contractual repricing period. For purchased loans with evidence of credit deterioration at the date of purchase,acquisition, the table below reflects estimated cash flows based on the most recent evaluation of each individual loan. Because income on purchased loans with evidence of credit deterioration on the date of acquisition is recognized by accretion of the discount of estimated cash flows, such loans are not considered to be floating or adjustable rate loans and are reported below as fixed rate loans. Loan and Lease Cash Flows or Repricing | | | | | Over 1 | | Over 2 | | | | | | | | | | | Over 1 | | | Over 2 | | | | | | | | | | | | 1 Year | | Through | | Through | | Over | | | | | 1 Year | | | Through | | | Through | | | Over | | | | | | | | or Less | | 2 Years | | 3 Years | | 3 Years | | Total | | | or Less | | | 2 Years | | | 3 Years | | | 3 Years | | | Total | | | | (Dollars in thousands) | | | (Dollars in thousands) | | Fixed rate | | $ | 397,973 | | | $ | 389,435 | | | $ | 506,604 | | | $ | 1,456,184 | | | $ | 2,750,196 | | | $ | 694,391 | | | $ | 558,193 | | | $ | 464,177 | | | $ | 1,091,921 | | | $ | 2,808,682 | | Floating rate (not at a floor or ceiling rate) | | | 830,196 | | | 6,816 | | | 1,916 | | | 3,721 | | | 842,649 | | | | 4,438,544 | | | | 3,901 | | | | 2,752 | | | | 11,756 | | | | 4,456,953 | | Floating rate (at floor rate)(1) | | | 2,940,503 | | | 12,617 | | | 9,073 | | | 38,933 | | | 3,001,126 | | | | 2,389,568 | | | | 6,866 | | | | 9,794 | | | | 57,897 | | | | 2,464,125 | | Floating rate (at ceiling rate) | | | — | | | | — | | | | — | | | | — | | | | — | | | | 244 | | | | — | | | | — | | | | — | | | | 244 | | | | | | | | | | | | | | | | | | | Total | | $ | 4,168,672 | | | $ | 408,868 | | | $ | 517,593 | | | $ | 1,498,838 | | | $ | 6,593,971 | | | $ | 7,522,747 | | | $ | 568,960 | | | $ | 476,723 | | | $ | 1,161,574 | | | $ | 9,730,004 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Percentage of total | | | 63.2 | % | | 6.2 | % | | 7.8 | % | | 22.8 | % | | 100.0 | % | | | 77.3 | % | | | 5.9 | % | | | 4.9 | % | | | 11.9 | % | | | 100.0 | % | Cumulative percentage of total | | | 63.2 | | | 69.4 | | | 77.2 | | | 100.0 | | | | | | 77.3 | % | | | 83.2 | % | | | 88.1 | % | | | 100.0 | % | | | | |
(1) | (1) | We have included a floor rate in many of our loans and leases. As a result of such floor rates, many loans and leases willmay not immediately reprice in a rising rate environment if the interest rate index and margin on such loans and leases continue to result in a computed interest rate less than the applicable floor rate. The earnings simulation model results included elsewhere in this MD&A include consideration of the impact of all interest rate floors and ceilings in loans and leases. |
At June 30, 2016, approximately 77% of our floating rate loans are tied to three major benchmark interest rates, the 1-month LIBOR, 3-month LIBOR and Wall Street Journal Prime interest rate. The following table is a summary of our floating rate loan portfolio and contractual interest rate indices. Contractual Indices of Floating Rate Loans Contractual Interest Rate Index | | Floating Rate (at floor rate) | | | Floating Rate (not at a floor or ceiling rate) | | | Floating Rate (at ceiling rate) | | | Total Floating Rate | | | | (Dollars in thousands) | | 1-month LIBOR | | $ | 1,081,246 | | | $ | 3,277,993 | | | $ | — | | | $ | 4,359,239 | | 3-month LIBOR | | | 546,759 | | | | 636,992 | | | | — | | | | 1,183,751 | | Wall Street Journal Prime | | | 724,299 | | | | 445,156 | | | | 244 | | | | 1,169,699 | | Other contractual interest rate indices | | | 111,821 | | | | 96,812 | | | | — | | | | 208,633 | | Total | | $ | 2,464,125 | | | $ | 4,456,953 | | | $ | 244 | | | $ | 6,921,322 | |
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Purchased Loans The following table presents the amount of unpaid principal balance, the valuation discount and the carrying value of purchased loans as of the dates indicated. Purchased Loans | | | | | | | | June 30, | | | December 31, | | | | June 30, | | | December 31, | | | 2016 | | | 2015 | | | | 2015 | | | 2014 | | | 2014 | | | (Dollars in thousands) | | | | (Dollars in thousands) | | | Loans without evidence of credit deterioration at date of purchase: | | | | | | | | Loans without evidence of credit deterioration at date of acquisition: | | | | | | | | | | Unpaid principal balance | | $ | 1,586,661 | | | $ | 1,079,330 | | | $ | 889,218 | | | $ | 1,358,513 | | | $ | 1,613,563 | | Valuation discount | | | (24,549 | ) | | | (24,676 | ) | | | (17,751 | ) | | | (18,559 | ) | | | (24,312 | ) | | | | | | | | | | | | Carrying value | | | 1,562,112 | | | | 1,054,654 | | | | 871,467 | | | | 1,339,954 | | | | 1,589,251 | | | | | | | | | | | | | Loans with evidence of credit deterioration at date of purchase: | | | | | | | | Loans with evidence of credit deterioration at date of acquisition: | | | | | | | | | | Unpaid principal balance | | | 355,028 | | | | 482,272 | | | | 374,001 | | | | 228,814 | | | | 284,410 | | Valuation discount | | | (90,292 | ) | | | (132,857 | ) | | | (97,521 | ) | | | (53,664 | ) | | | (67,624 | ) | | | | | | | | | | | | Carrying value | | | 264,736 | | | | 349,415 | | | | 276,480 | | | | 175,150 | | | | 216,786 | | | | | | | | | | | | | Total carrying value | | $ | 1,826,848 | | | $ | 1,404,069 | | | $ | 1,147,947 | | | $ | 1,515,104 | | | $ | 1,806,037 | | | | | | | | | | | | |
On February 10, 2015, the date we closed our Intervest acquisition, each outstanding loan in Intervest’s loan portfolio was categorized into (i) a loan without evidence of credit deterioration or (ii) a loan with evidence of credit deterioration. The following table presents, by risk rating, the unpaid principal balance, fair value adjustment, Day 1 Fair Value and the weighted-average fair value adjustment applied to the purchased loans without evidence of credit deterioration in the Intervest acquisition.
Fair Value Adjustments for Purchased
Loans Without Evidence of Credit Deterioration
at Date of Intervest Acquisition
| | | | | | | | | | | | | | | | | Risk Category | | Unpaid Principal Balance | | | Fair Value Adjustment | | | Day 1 Fair Value | | | Weighted Average Fair Value Adjustment (in bps) | | | | (Dollars in thousands) | | | | | | | FV 33 | | $ | 83,210 | | | $ | (690 | ) | | $ | 82,520 | | | | 83 | | FV 44 | | | 804,604 | | | | (10,961 | ) | | | 793,643 | | | | 136 | | FV 55 | | | 144,195 | | | | (3,109 | ) | | | 141,086 | | | | 216 | | FV 36 | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | Total | | $ | 1,032,009 | | | $ | (14,760 | ) | | $ | 1,017,249 | | | | 143 | | | | | | | | | | | | | | | | | | |
The following grades are used for purchased loans without evidence of credit deterioration at date of acquisition.
FV 33 – Loans in this category are considered to be satisfactory with minimal credit risk and are generally considered collectible.
FV 44 – Loans in this category are considered to be marginally satisfactory with minimal to moderate credit risk and are generally considered collectible.
FV 55 – Loans in this category exhibit weakness and are considered to have elevated credit risk and elevated risk of repayment.
FV 36 – Loans, if any, in this category were not individually reviewed at the date of purchase and are assumed to have characteristics similar to the characteristics of the aggregate acquired portfolio.
The following table is a summary of the loans acquired in the Intervest acquisition with evidence of credit deterioration at the date of acquisition.
Fair Value Adjustments for
Purchased Loans With Evidence of
Credit Deterioration at Date of Intervest Acquisition
| | | | | | | As of February 10, 2015 | | | | (Dollars in thousands) | | | | Contractually required principal and interest | | $ | 88,490 | | Nonaccretable difference | | | (16,649 | ) | | | | | | Cash flows expected to be collected | | | 71,841 | | Accretable difference | | | (10,126 | ) | | | | | | Day 1 Fair Value | | $ | 61,715 | | | | | | |
The following table presents a summary, for the periods indicated, of the activity of our purchased loans with evidence of credit deterioration at the date of acquisition. Activity in Purchased Loans With Evidence of Credit Deterioration at Date of Acquisition | | | | | | | | | | | Six Months Ended June 30, | | | | 2015 | | | 2014 | | | | (Dollars in thousands) | | Balance – beginning of period | | $ | 276,480 | | | $ | 392,421 | | Accretion | | | 21,496 | | | | 22,650 | | Purchased loans acquired | | | 61,715 | | | | 40,035 | | Transfer to foreclosed assets | | | (4,395 | ) | | | (25,325 | ) | Payments received | | | (89,289 | ) | | | (75,600 | ) | Charge-offs | | | (1,497 | ) | | | (5,237 | ) | Other activity, net | | | 226 | | | | 471 | | | | | | | | | | | Balance – end of period | | $ | 264,736 | | | $ | 349,415 | | | | | | | | | | |
| | Six Months Ended June 30, | | | | 2016 | | | 2015 | | | | (Dollars in thousands) | | Balance – beginning of period | | $ | 216,786 | | | $ | 276,480 | | Accretion | | | 12,648 | | | | 21,496 | | Purchased loans acquired | | | — | | | | 61,715 | | Transfer to foreclosed assets | | | (2,041 | ) | | | (4,395 | ) | Payments received | | | (51,981 | ) | | | (89,289 | ) | Charge-offs | | | (497 | ) | | | (1,497 | ) | Other activity, net | | | 235 | | | | 226 | | Balance – end of period | | $ | 175,150 | | | $ | 264,736 | |
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A summary of changes in the accretable difference on purchased loans with evidence of credit deterioration at the date of acquisition is shown below for the periods indicated. Accretable Difference on Purchased Loans With Evidence of Credit Deterioration | | | | | | | | | | | Six Months Ended June 30, | | | | 2015 | | | 2014 | | | | (Dollars in thousands) | | Accretable difference at January 1 | | $ | 74,167 | | | $ | 83,455 | | Transfer to foreclosed assets | | | (308 | ) | | | (771 | ) | Purchased loans paid off | | | (12,423 | ) | | | (8,479 | ) | Cash flow revisions as a result of renewals and/or modifications | | | 19,212 | | | | 31,125 | | Accretable difference acquired | | | 10,126 | | | | 6,732 | | Accretion | | | (21,496 | ) | | | (22,650 | ) | Other, net | | | — | | | | (508 | ) | | | | | | | | | | Accretable difference at June 30 | | $ | 69,278 | | | $ | 88,904 | | | | | | | | | | |
at Date of Acquisition | | Six Months Ended June 30, | | | | 2016 | | | 2015 | | | | (Dollars in thousands) | | Accretable difference - beginning of period | | $ | 59,176 | | | $ | 74,167 | | Transfer to foreclosed assets | | | (248 | ) | | | (308 | ) | Purchased loans paid off | | | (3,818 | ) | | | (12,423 | ) | Cash flow revisions as a result of renewals and/or modifications | | | 17,449 | | | | 19,212 | | Accretable difference acquired | | | — | | | | 10,126 | | Accretion | | | (12,648 | ) | | | (21,496 | ) | Accretable difference - end of period | | $ | 59,911 | | | $ | 69,278 | |
Nonperforming Assets Non-Purchased Loans and Leases and Foreclosed Assets Our nonperforming assets consist of (1) nonaccrual loans and leases, (2) accruing loans and leases 90 days or more past due, (3) certain troubled and restructured loans for which a concession has been granted by us to the borrower because of a deterioration in the financial position of the borrower (TDRs) and (4) real estate or other assets that have been acquired in partial or full satisfaction of loan or lease obligations or upon foreclosure. Purchased loans are not included in the following table as nonperforming assets, except for their inclusion in total assets for purposes of calculation of certain asset quality ratios, but are analyzed and discussed separately elsewhere in this MD&A. The accrual of interest on non-purchased loans and leases is discontinued when, in management’s opinion, the borrower or lessee may be unable to meet payments as they become due. We generally place a loan or lease on nonaccrual status when such loan or lease is (i) deemed impaired or (ii) 90 days or more past due, or earlier when doubt exists as to the ultimate collection of payments. We may continue to accrue interest on certain loans or leases contractually past due 90 days or more if such loans or leases are both well secured and in the process of collection. At the time a loan or lease is placed on nonaccrual status, interest previously accrued but uncollected is reversed and charged against interest income. Nonaccrual loans and leases are generally returned to accrual status when payments are less than 90 days past due and we reasonably expect to collect all payments. If a loan or lease is determined to be uncollectible, the portion of the principal determined to be uncollectible will be charged against the ALLL. Loans for which the terms have been modified and for which (i) the borrower is experiencing financial difficulties and (ii) we have granted a concession to the borrower are considered troubled debt restructurings (“TDRs”) and are included in impaired loans and leases. Income on nonaccrual loans or leases, including impaired loans and leases but excluding certain TDRs which may continue to accrue interest, is recognized on a cash basis when and if actually collected.
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The following table presents a summary of nonperforming assets, excluding purchased loans, as of the dates indicated. Nonperforming Assets | | | June 30, | | December 31, | | | June 30, | | | December 31, | | | | 2015 | | 2014 | | 2014 | | | 2016 | | | 2015 | | | | (Dollars in thousands) | | | (Dollars in thousands) | | Nonaccrual non-purchased loans and leases | | $ | 16,281 | | | $ | 18,393 | | | $ | 21,085 | | | $ | 7,700 | | | $ | 13,194 | | Accruing non-purchased loans and leases 90 days or more past due | | | — | | | | — | | | | — | | | | — | | | | — | | TDRs | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | Total nonperforming non-purchased loans and leases | | | 16,281 | | | 18,393 | | | 21,085 | | | | 7,700 | | | | 13,194 | | Foreclosed assets(1) (2) | | | 25,973 | | | 20,581 | | | 37,775 | | | | 23,328 | | | | 22,870 | | | | | | | | | | | | | Total nonperforming assets(2) | | $ | 42,254 | | | $ | 38,974 | | | $ | 58,860 | | | $ | 31,028 | | | $ | 36,064 | | | | | | | | | | | | | | Nonperforming loans and leases to total loans and leases(3) | | | 0.34 | % | | 0.58 | % | | 0.53 | % | | Nonperforming assets to total assets(2) (3) | | | 0.49 | | | 1.19 | | | 0.87 | | | Nonperforming loans and leases to total loans and leases (2) | | | | 0.09 | % | | | 0.20 | % | Nonperforming assets to total assets (2) | | | | 0.25 | | | | 0.37 | |
(1) | (1) | Repossessed personal properties and real estate acquired through or in lieu of foreclosure are initially recorded at the lesser of current principal investment or estimated market value less estimated cost to sell at the date of repossession or foreclosure. Valuations of these assets are periodically reviewed by management with the carrying value of such assets adjusted through non-interest expense to the then estimated market value net of estimated selling costs, if lower, until disposition. |
(2) | As a result of terminating our loss share agreements with the FDIC during the fourth quarter of 2014, we reclassified foreclosed assets previously reported as covered by FDIC loss share to foreclosed assets for all prior periods. All prior period ratios of nonperforming assets to total assets have been recalculated to include foreclosed assets previously covered by FDIC loss share as nonperforming assets. |
(3)(2) | Excludes purchased loans except for their inclusion in total assets. |
If an adequate current determination of collateral value has not been performed, once a loan or lease is considered impaired, we seek to establish an appropriate value for the collateral. This assessment may include (i) obtaining an updated appraisal, (ii) obtaining one or more broker price opinions or comprehensive market analyses, (iii) internal evaluations or (iv) other methods deemed appropriate considering the size and complexity of the loan and the underlying collateral. On an ongoing basis, typically at least quarterly, we evaluate the underlying collateral on all impaired loans and leases and, if needed, due to changes in market or property conditions, the underlying collateral is reassessed and the estimated fair value is revised. The determination of collateral value includes any adjustments considered necessary related to estimated holding periods and estimated selling costs. At June 30, 2015,2016, we had reduced the carrying value of our non-purchased loans and leases deemed impaired (all of which were included in nonaccrual loans and leases) by $5.0$6.2 million to the estimated fair value of such loans and leases of $12.8$4.2 million. The adjustment to reduce the carrying value of such impaired loans and leases to estimated fair value consisted of $3.6$4.9 million of partial charge-offs and $1.4$1.3 million of specific loan and lease loss allocations. These amounts do not include our $12.3$6.4 million of impaired purchased loans at June 30, 2015.2016. The following table is a summary of the amount and type of foreclosed assets as of the dates indicated. Foreclosed Assets | | | June 30, | | | December 31, | | | June 30, | | | December 31, | | | | 2015 | | | 2014 | | | 2014 | | | 2016 | | | 2015 | | | | (Dollars in thousands) | | | (Dollars in thousands) | | Real estate: | | | | | | | | | | | | | | | Residential 1-4 family | | $ | 4,597 | | | $ | 9,109 | | | $ | 7,909 | | | $ | 2,458 | | | $ | 3,030 | | Non-farm/non-residential | | | 10,984 | | | | 25,401 | | | | 17,305 | | | | 6,275 | | | | 7,174 | | Construction/land development | | | 9,857 | | | | 21,280 | | | | 10,998 | | | | 14,269 | | | | 11,858 | | Agricultural | | | 405 | | | | 452 | | | | 728 | | | | — | | | | 492 | | Multifamily residential | | | — | | | | — | | | | 772 | | | | | | | | | | | | | | Total real estate | | | 25,843 | | | | 56,242 | | | | 37,712 | | | | 23,002 | | | | 22,554 | | Commercial and industrial | | | 130 | | | | 103 | | | | 56 | | | | 326 | | | | 316 | | Consumer | | | — | | | | 11 | | | | 7 | | | | | | | | | | | | | | Total foreclosed assets | | $ | 25,973 | | | $ | 56,356 | | | $ | 37,775 | | | $ | 23,328 | | | $ | 22,870 | | | | | | | | | | | | |
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The following table presentstables present information concerning the geographic location of nonperforming assets, excluding purchased loans, at June 30, 2015. Nonaccrualas of the dates indicated. Nonperforming loans and leases are reported in the physical location of the principal collateral. Foreclosed assets are reported in the physical location of the asset. Repossessions are reported at the physical location where the borrower resided or had its principal place of business at the time of repossession. Geographic Distribution of Nonperforming Assets | | | | | | | | | | | | | | | Nonperforming Loans and Leases | | | Foreclosed Assets and Repossessions | | | Total Nonperforming Assets | | | | (Dollars in thousands) | | | | | | Arkansas | | $ | 12,893 | | | $ | 10,095 | | | $ | 22,988 | | Georgia | | | 334 | | | | 7,322 | | | | 7,656 | | North Carolina | | | 1,067 | | | | 4,641 | | | | 5,708 | | Florida | | | 1,653 | | | | 1,664 | | | | 3,317 | | Texas | | | 231 | | | | 1,143 | | | | 1,374 | | Alabama | | | 20 | | | | 778 | | | | 798 | | South Carolina | | | — | | | | 310 | | | | 310 | | All other | | | 83 | | | | 20 | | | | 103 | | | | | | | | | | | | | | | Total | | $ | 16,281 | | | $ | 25,973 | | | $ | 42,254 | | | | | | | | | | | | | | |
Purchased Loans
Purchased loans without evidence of credit deterioration at the date of acquisition are reviewed subsequent to the date of acquisition any time a loan is renewed or extended or at any time information becomes available to us that provides material insight regarding the loan’s performance, the borrower or the underlying collateral. To the extent that current information indicates it is probable that we will collect all amounts according to the contractual terms thereof, such loan is not considered impaired and is not considered in the determination of the required ALLL. To the extent that current information indicates it is probable that we will not be able to collect all amounts according to the contractual terms thereon, such loan is considered impaired and is considered in the determination of the required level of ALLL.
Purchased loans with evidence of credit deterioration on the date of purchase are reviewed (i) any time a loan is renewed or extended, (ii) at any other time additional information becomes available to us that provides material additional insight regarding a loan’s performance, the status of the borrower, or the quality or value of the underlying collateral, or (iii) in conjunction with the annual review of projected cash flows of each acquired portfolio. We separately review the performance of the portfolio of purchased loans with evidence of credit deterioration on an annual basis, or more frequently to the extent that material information becomes available regarding the performance of an individual loan, to make determinations of the constituent loans’ performance and to consider whether there has been any significant change in performance since our initial expectations established in conjunction with the determination of the Day 1 Fair Values or since our most recent review of such portfolio’s performance. To the extent that a purchased loan with evidence of credit deterioration on the date of purchase is performing in accordance with or exceeding our performance expectation established in conjunction with the determination of the Day 1 Fair Values, such loan is rated FV66, is not included in any of the credit quality ratios, is not considered to be a nonaccrual, nonperforming or impaired loan, and is not considered in the determination of the required ALLL. To the extent that the performance of a purchased loan with evidence of credit deterioration on the date of purchase has deteriorated from our expectation established in conjunction with the determination of the Day 1 Fair Values, such loan is rated FV88, is included in certain of our credit quality metrics, is considered an impaired loan, and is considered in the determination of the required level of ALLL.
The following table presents a summary of our impaired purchased loans as of the dates indicated.
Impaired Purchased Loans
| | Nonperforming Loans and Leases | | | Foreclosed Assets and Repossessions | | | Total Nonperforming Assets | | June 30, 2016: | | (Dollars in thousands) | | Arkansas | | $ | 5,375 | | | $ | 12,869 | | | $ | 18,244 | | North Carolina | | | 1,412 | | | | 5,452 | | | | 6,864 | | Georgia | | | 106 | | | | 3,288 | | | | 3,394 | | Texas | | | 444 | | | | 360 | | | | 804 | | Florida | | | 37 | | | | 420 | | | | 457 | | South Carolina | | | 24 | | | | 374 | | | | 398 | | Alabama | | | 38 | | | | 304 | | | | 342 | | All other | | | 264 | | | | 261 | | | | 525 | | Total | | $ | 7,700 | | | $ | 23,328 | | | $ | 31,028 | |
| | | | | | | | | | | | | | | June 30, | | | December 31, | | | | 2015 | | | 2014 | | | 2014 | | | | (Dollars in thousands) | | Impaired purchased loans without evidence of credit deterioration (rated FV 77) | | $ | 533 | | | $ | 86 | | | $ | 748 | | Impaired purchased loans with evidence of credit deterioration (rated FV 88) | | | 11,814 | | | | 21,119 | | | | 13,292 | | | | | | | | | | | | | | | Total impaired purchased loans | | $ | 12,347 | | | $ | 21,205 | | | $ | 14,040 | | | | | | | | | | | | | | | Impaired purchased loans to total purchased loans | | | 0.68 | % | | | 1.51 | % | | | 1.22 | % |
| | Nonperforming Loans and Leases | | | Foreclosed Assets and Repossessions | | | Total Nonperforming Assets | | March 31, 2016: | | (Dollars in thousands) | | Arkansas | | $ | 8,731 | | | $ | 9,847 | | | $ | 18,578 | | North Carolina | | | 1,700 | | | | 6,323 | | | | 8,023 | | Georgia | | | 376 | | | | 313 | | | | 689 | | Texas | | | 67 | | | | 506 | | | | 573 | | Florida | | | 36 | | | | 4,412 | | | | 4,448 | | South Carolina | | | 32 | | | | 453 | | | | 485 | | Alabama | | | 24 | | | | 374 | | | | 398 | | All other | | | 408 | | | | 20 | | | | 428 | | Total | | $ | 11,374 | | | $ | 22,248 | | | $ | 33,622 | |
As of June 30, 2015 and 20142016 and December 31, 2014,2015, we had identified purchased loans where we had determined it was probable that we would be unable to collect all amounts according to the contractual terms thereof (for purchased loans without evidence of credit deterioration at date of acquisition) or the expected performance of such loans had deteriorated from our performance expectations established in conjunction with the determination of the Day 1 Fair Values or since our most recent review of such portfolio’s performance (for purchased loans with evidence of credit deterioration at date of acquisition). AsThe following table presents a result, we recorded partial charge-offs totaling $0.4 million forsummary of such loans during the second quarter and $1.7 million for the first six months of 2015 compared to $1.1 million during the second quarter and $1.3 for the first six months of 2014. We also recorded provision for loan and lease losses of $0.4 million during the second quarter and $1.7 million during the first six months of 2015 compared to $1.1 million during the second quarter and $1.3 million during the first six months of 2014 to cover such charge-offs. In addition to these charge-offs, we transferred certain of these purchased loans to foreclosed assets. As a result of these actions, we had $12.3 million of impaired purchased loans at June 30, 2015, compared to $21.2 million at June 30, 2014 and $14.0 million at December 31, 2014.as of the dates indicated. Impaired Purchased Loans | | June 30, | | | December 31, | | | | 2016 | | | 2015 | | | | (Dollars in thousands) | | Impaired purchased loans without evidence of credit deterioration at date of acquisition (rated FV 77) | | $ | 562 | | | $ | 771 | | Impaired purchased loans with evidence of credit deterioration at date of acquisition (rated FV 88) | | | 5,825 | | | | 7,283 | | Total impaired purchased loans | | $ | 6,387 | | | $ | 8,054 | | Impaired purchased loans to total purchased loans | | | 0.42 | % | | | 0.45 | % |
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Allowance and Provision for Loan and Lease Losses At June 30, 2016, our ALLL was $65.3 million, including $63.9 million allocated to our non-purchased loans and leases and $1.2 million allocated to our purchased loans. At December 31, 2015, our ALLL was $60.9 million, including $59.7 million allocated to our non-purchased loans and leases and $1.2 million allocated to our purchased loans. Our ALLL was $56.7 million, or 1.19%allocated to non-purchased loans and leases as a percent of total non-purchased loans and leases was 0.78% at June 30, 2015,2016 compared to $52.9 million, or 1.33%0.91% at December 31, 2015. Our ALLL allocated to purchased loans as a percent of total purchased loans was 0.08% at June 30, 2016 and 0.07% at December 31, 2015. Our ALLL allocated to non-purchased loans and leases at December 31, 2014 and $47.0 million, or 1.48% of total non-purchased loans and leases at June 30, 2014. We had no ALLL at June 30, 2015 and 2014 or December 31, 2014 for our (i) purchased loans without evidence of credit deterioration at the date of acquisition as management’s analysis of such individual loans resulted in no impairment or all identified impairment on such loans had been charged off, or (ii) purchased loans with evidence of credit deterioration at the date of acquisition as all such loans were performing in accordance with management’s expectations established in conjunction with the determination of the Day 1 Fair Values or all losses had been charged off on such loans whose performance had deteriorated from management’s expectations established in conjunction with the determination of the Day 1 Fair Values. Our ALLL was equal to 349%830% of our total nonperforming non-purchased loans and leases at June 30, 2015,2016 compared to 251%452% at December 31, 2014 and 255% at June 30, 2014.2015. The amount of provision to the ALLL is based on our analysis of the adequacy of the ALLL utilizing the criteria discussed in the Critical Accounting Policies section of our Annual Report on Form 10-K for the year ended December 31, 2014. 2015. As a final validation for our overall ALLL, we review peer group data, primarily the historical net charge-off ratios and the ratio of the ALLL as a percentage of total loans and leases. We then compare such peer group data to our historical net charge-off ratios and our ratio of ALLL to non-purchased loans and leases. This comparison is intended to identify any (i) inconsistencies in trends of our ratio of ALLL as a percentage of total loans and leases or (ii) differences in our ratio of ALLL to total loans and leases given our historical net charge-off ratios compared to the peer groups ratio of ALLL to total loans and leases given their historical net charge-off ratios. In recent years, we have focused on loan transactions that include various combinations of (i) marquee properties, (ii) strong and capable sponsors or borrowers, (iii) low leverage, and (iv) defensive loan structure. At the same time, our loan portfolio has expanded throughout the United States and consists of a very diversified portfolio in terms of geographic location. We consider this geographic diversification to be a substantial source of strength in regard to portfolio credit quality. Additionally, we have continued to focus on originating high quality loans at low leverage. At June 30, 2016, our ratios of weighted-average loan-to-cost and weighted-average loan-to-value on construction loans with interest reserves were 50% and 43%, respectively. Each of these factors mentioned above has contributed to our favorable asset quality ratios and net charge-off ratios in recent years. In addition, these factors have also helped to contribute to recent decreases in (i) our ratio of ALLL to total non-purchased loans and leases and (ii) our provision for non-purchased loan and lease losses needed to cover both our nonperforming loans and the losses inherent in our existing non-purchased loan and lease portfolio. The provision for loan and lease losses for the second quarter of 20152016 was $4.3$4.8 million, including $3.9$4.4 million for non-purchased loans and leases and $0.4 million for purchased loans, compared to $5.6$4.3 million for the second quarter of 2014,2015, including $4.5$3.9 million for non-purchased loans and leases and $1.1$0.4 million for purchased loans. The provision for loan and lease losses for the first six months of 20152016 was $6.9 million, including $6.4 million for non-purchased loans and $0.5 million for purchased loans, compared to $10.6 million, including $8.9 million for non-purchased loans and $1.7 million for purchased loans, compared to $6.9 million forloans. During the first six months (first quarter) of 2014, including $5.62015, we sold $15.9 million for non-purchasedof performing loans, and $1.3with deteriorating credit trends, from our Corporate Loan Specialties Group, or CLSG, resulting in net charge-offs of $2.4 million, for purchased loans. The decreasecompared to no sales of loans that resulted in the provision for loan and lease lossnet charge-offs during the second quarter of 2015 compared to the second quarter of 2014 was primarily due to a decrease in charge-offs associated with our non-purchased and purchased loans. The increase in the provision for loan and lease loss during the first six months of 2015 compared to the first six months of 2014 was due to an increase in charge-offs experienced during the first quarter of 2015 as well as the provision necessary to cover the growth of our non-purchased loan and lease portfolio.2016. Our provision to the ALLL for non-purchased loans and leases for the second quarter of 2015 is primarily the result of provision necessary to cover the growth of our non-purchased loan and lease portfolio, which increased $456.0 million during the second quarter of 2015. Our practice is to charge off any estimated loss as soon as we are able to identify and reasonably quantify such potential loss. Accordingly, only a small portion of our ALLL is needed for potential losses on non-performing loans. Our ALLL allocated to non-purchased loans and leases hasas a percent of total non-purchased loans and leases decreased to 1.19%0.78% at June 30, 2015,2016 compared to 1.33%0.91% at December 31, 2014 and 1.48% at June 30, 20142015, primarily as a result of the low level of net charge-offs in recent quarters, our conservative underwriting practices, our general trends in recent years of lower loan-to-cost and due toloan-to-value returns in our construction and development portfolio and generally improving economic conditions in many of our markets. These factors have also contributed to the recent decreases in our provision for loan and lease losses needed to cover nonperforming loans. While we believe theour ALLL at June 30, 20152016 and related provision for the second quarter and first six months of 20152016 were appropriate, changing economic and other conditions may require future adjustments to the ALLL or the amount of provision thereto.
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An analysis ofActivity within the allowance for loan and lease losses for the periods indicated is shown in the following table.
Analysis of
Activity Within the Allowance for Loan and Lease Losses | | | Six Months Ended June 30, | | Year Ended December 31, | | | Six Months Ended June 30, | | | | 2015 | | 2014 | | 2014 | | | 2016 | | | 2015 | | | | (Dollars in thousands) | | | (Dollars in thousands) | | | | | | | | | | | | Balance, beginning of period | | $ | 52,918 | | | $ | 42,945 | | | $ | 42,945 | | | $ | 60,854 | | | $ | 52,918 | | Non-purchased loans and leases charged off: | | | | | | | | | | | | | | | Real estate: | | | | | | | | | | | | | | | Residential 1-4 family | | | (621 | ) | | (341 | ) | | (577 | ) | | | (256 | ) | | | (621 | ) | Non-farm/non-residential | | | (324 | ) | | (1,254 | ) | | (1,357 | ) | | | (12 | ) | | | (324 | ) | Construction/land development | | | (771 | ) | | (14 | ) | | (638 | ) | | | (20 | ) | | | (771 | ) | Agricultural | | | (13 | ) | | (15 | ) | | (214 | ) | | | (7 | ) | | | (13 | ) | Multifamily residential | | | (208 | ) | | | — | | | | — | | | | — | | | | (208 | ) | | | | | | | | | | | | Total real estate | | | (1,937 | ) | | (1,624 | ) | | (2,786 | ) | | | (295 | ) | | | (1,937 | ) | Commercial and industrial | | | (2,540 | ) | | (422 | ) | | (720 | ) | | | (42 | ) | | | (2,540 | ) | Consumer | | | (69 | ) | | (97 | ) | | (222 | ) | | | (68 | ) | | | (69 | ) | Direct financing leases | | | (341 | ) | | (267 | ) | | (602 | ) | | | (1,468 | ) | | | (341 | ) | Other | | | (688 | ) | | (159 | ) | | (793 | ) | | | (692 | ) | | | (688 | ) | | | | | | | | | | | | Total non-purchased loans and leases charged off | | | (5,575 | ) | | (2,569 | ) | | (5,123 | ) | | | (2,565 | ) | | | (5,575 | ) | | | | | | | | | | | | Recoveries of non-purchased loans and leases previously charged off: | | | | | | | | | | | | | | | Real estate: | | | | | | | | | | | | | | | Residential 1-4 family | | | 21 | | | 71 | | | 135 | | | | 37 | | | | 21 | | Non-farm/non-residential | | | 17 | | | 4 | | | 33 | | | | — | | | | 17 | | Construction/land development | | | 37 | | | 8 | | | 11 | | | | 51 | | | | 37 | | Agricultural | | | — | | | 11 | | | 14 | | | | | | | | | | | | | | Multifamily residential | | | | 14 | | | | — | | Total real estate | | | 75 | | | 94 | | | 193 | | | | 102 | | | | 75 | | Commercial and industrial | | | 39 | | | 763 | | | 808 | | | | 39 | | | | 39 | | Consumer | | | 42 | | | 36 | | | 80 | | | | 14 | | | | 42 | | Direct financing leases | | | 13 | | | 14 | | | 49 | | | | 16 | | | | 13 | | Other | | | 337 | | | 75 | | | 266 | | | | 273 | | | | 337 | | | | | | | | | | | | | Total recoveries of non-purchased loans and leases previously charged off | | | 506 | | | 982 | | | 1,396 | | | | 444 | | | | 506 | | | | | | | | | | | | | Net non-purchased loans and leases charged off | | | (5,069 | ) | | (1,587 | ) | | (3,727 | ) | | | (2,121 | ) | | | (5,069 | ) | Purchased loans charged off, net | | | (1,723 | ) | | (1,287 | ) | | (3,215 | ) | | | | | | | | | | | | | Purchased loans charged off | | | | (535 | ) | | | (2,115 | ) | Recoveries of purchased loans previously charged off | | | | 84 | | | | 392 | | Net purchased loans charged off | | | | (451 | ) | | | (1,723 | ) | Net charge-offs – total loans and leases | | | (6,792 | ) | | (2,874 | ) | | (6,942 | ) | | | (2,572 | ) | | | (6,792 | ) | Provision for loan and lease losses: | | | | | | | | | | | | | | | Non-purchased loans and leases | | | 8,900 | | | 5,600 | | | 13,700 | | | | 6,400 | | | | 8,900 | | Purchased loans | | | 1,723 | | | 1,287 | | | 3,215 | | | | 451 | | | | 1,723 | | | | | | | | | | | | | Total provision | | | 10,623 | | | 6,887 | | | 16,915 | | | | 6,851 | | | | 10,623 | | | �� | | | | | | | | | | Balance, end of period | | $ | 56,749 | | | $ | 46,958 | | | $ | 52,918 | | | $ | 65,133 | | | $ | 56,749 | | | | | | | | | | | | | Net charge-offs of non-purchased loans and leases to average non-purchased loans and leases(1) | | | 0.24 | %(2) | | | 0.11 | %(2) | | 0.12 | % | | Net charge-offs of purchased loans to average purchased loans | | | 0.19 | %(2) | | | 0.28 | %(2) | | 0.29 | % | | Net charge-offs of total loans and leases to average loans and leases | | | 0.22 | %(2) | | | 0.16 | %(2) | | 0.16 | % | | ALLL to non-purchased loans and leases(3) | | | 1.19 | % | | 1.48 | % | | 1.33 | % | | ALLL to nonperforming loans and leases(3) | | | 349 | % | | 255 | % | | 251 | % | | ALLL allocated to non-purchased loans and leases | | | $ | 63,933 | | | $ | 56,749 | | ALLL allocated to purchased loans | | | | 1,200 | | | | — | | Total ALLL | | | $ | 65,133 | | | $ | 56,749 | |
(1) |
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A summary of our net charge-off ratios and certain other ALLL ratios, as of and for the periods indicated, is presented in the following table. Net Charge-off and ALLL Ratios | | As of and for the Six Months Ended June 30, | | | As of and for the Year Ended December 31, | | | | 2016 | | | 2015 | | | 2015 | | | | (Dollars in thousands) | | Net charge-offs of non-purchased loans and leases to average non-purchased loans and leases (1)(2) | | | 0.06% | | | | 0.24% | | | | 0.18% | | Net charge-offs of purchased loans to average purchased loans (1) | | | 0.05% | | | | 0.19% | | | | 0.14% | | Net charge-offs of total loans and leases to average total loans and leases (1) | | | 0.06% | | | | 0.22% | | | | 0.17% | | | | | | | | | | | | | | | ALLL for non-purchased loans and leases to total non-purchased loans and leases (3) | | | 0.78% | | | | 1.19% | | | | 0.91% | | ALLL for purchased loans to total purchased loans | | | 0.08% | | | | 0.00% | | | | 0.07% | | ALLL to total loans and leases | | | 0.67% | | | | 0.86% | | | | 0.73% | | ALLL to nonperforming loans and leases (3) | | | 830% | | | | 349% | | | | 452% | |
(1) Ratios for interim periods annualized. (2) Excludes purchased loans and net charge-offs related to purchased loans. |
(3) | Excludes purchased loans. |
Our net charge-offs increasedrelated to $6.8 million for the first six months of 2015, including $5.1 million for non-purchasedpurchased loans.
(3) Excludes purchased loans and leases and $1.7 million for purchased loans, comparedALLL allocated to $2.9 million for the first six months of 2014, including $1.6 million for non-purchased loans and leases and $1.3 million for purchasedsuch loans. The increase in our net charge-offs for non-purchased loans and leases was primarily due to our sale during the first quarter of 2015 of $15.9 million of performing loans, with deteriorating credit trends, from our Corporate Loan Specialty Group resulting in net charge-offs of $2.4 million. Our net charge-offs for purchased loans increased during the first six months of 2015, in part, due to our having previously terminated the loss share agreements on our FDIC-assisted acquisitions. Investment Securities At June 30, 20152016 and 2014 and at December 31, 2014,2015, we classified all of our investment securities portfolio as AFS. Accordingly, our investment securities are stated at estimated fair value in the consolidated financial statements with the unrealized gains and losses, net of related income tax, reported as a separate component of stockholders’ equity and included in accumulated other comprehensive income. The following table presents the amortized cost and estimated fair value of investment securities AFS as of the dates indicated. The Company’s investment in the CRA“CRA qualified investment fundfund” includes shares held in a mutual fund that qualifiesqualify under the Community Reinvestment Act of 1977 for community reinvestment purposes. Our holdings of “other equity securities insecurities” include FHLB and First National Banker’s Bankshares, Inc. (“FNBB”)shares which do not have readily determinable fair values and are carried at cost. Investment Securities | | | June 30, | | | December 31, | | | | | | | | | | 2015 | | | 2014 | | | 2014 | | | June 30, 2016 | | | December 31, 2015 | | | | Amortized | | | Fair | | | Amortized | | | Fair | | | Amortized | | | Fair | | | Amortized | | | Fair | | | Amortized | | | Fair | | | | Cost | | | Value | | | Cost | | | Value | | | Cost | | | Value | | | Cost | | | Value | | | Cost | | | Value | | | | (Dollars in thousands) | | | (Dollars in thousands) | | Obligations of state and political subdivisions | | $ | 496,777 | | | $ | 506,915 | | | $ | 603,533 | | | $ | 616,565 | | | $ | 555,335 | | | $ | 573,209 | | | $ | 584,184 | | | $ | 603,090 | | | $ | 415,095 | | | $ | 427,278 | | U.S. Government agency securities | | | 257,849 | | | | 260,753 | | | | 254,878 | | | | 258,311 | | | | 245,854 | | | | 251,233 | | | | 206,234 | | | | 210,556 | | | | 146,265 | | | | 146,950 | | Corporate obligations | | | 3,574 | | | | 3,574 | | | | 685 | | | | 685 | | | | 654 | | | | 654 | | | | 3,554 | | | | 3,554 | | | | 3,562 | | | | 3,562 | | CRA qualified investment fund | | | 1,028 | | | | 1,020 | | | | — | | | | — | | | | — | | | | — | | | | 1,049 | | | | 1,061 | | | | 1,038 | | | | 1,028 | | FHLB and FNBB equity securities | | | 10,015 | | | | 10,015 | | | | 16,568 | | | | 16,568 | | | | 14,225 | | | | 14,225 | | | | | | | | | | | | | | | | | | | | | | | Other equity securities | | | | 6,138 | | | | 6,138 | | | | 23,530 | | | | 23,530 | | Total | | $ | 769,243 | | | $ | 782,277 | | | $ | 875,664 | | | $ | 892,129 | | | $ | 816,068 | | | $ | 839,321 | | | $ | 801,159 | | | $ | 824,399 | | | $ | 589,490 | | | $ | 602,348 | | | | | | | | | | | | | | | | | | | | | |
Our investment securities portfolio is reported at estimated fair value, which included gross unrealized gains of $16.4$23.3 million and gross unrealized losses of $3.4$0.1 million at June 30, 2015; gross unrealized gains of $21.1 million and gross unrealized losses of $4.7 million at June 30, 2014;2016 and gross unrealized gains of $24.4$14.0 million and gross unrealized losses of $1.2 million at December 31, 2014. Management believes2015. We believe that all of its unrealized losses on individual investment securities at June 30, 2016 and December 31, 2015 are the result of fluctuations in interest rates and do not reflect deterioration in the credit quality of these investments. Accordingly, management considerswe consider these unrealized losses to be temporary in nature. We do not have the intent to sell these investment securities with unrealized losses and, more likely than not, will not be required to sell these investment securities before fair value recovers to amortized cost. 56
The following table presents unaccreted discounts and unamortized premiums of our investment securities as of the dates indicated. Unaccreted Discounts and Unamortized Premiums | | | | | | | | | | Amortized Cost | | | Unaccreted Discount | | | Unamortized Premium | | | Par Value | | | | Amortized Cost | | | Unaccreted Discount | | | Unamortized Premium | | | Par Value | | | (Dollars in thousands) | | | | (Dollars in thousands) | | | June 30, 2015: | | | | | | | | | | June 30, 2016: | | | | | | | | | | | | | | | | | | Obligations of states and political subdivisions | | $ | 496,777 | | | $ | 6,912 | | | $ | (6,539 | ) | | $ | 497,150 | | | $ | 584,184 | | | $ | 5,801 | | | $ | (16,075 | ) | | $ | 573,910 | | U.S. Government agency securities | | | 257,849 | | | | 3,177 | | | | (5,582 | ) | | | 255,444 | | | | 206,234 | | | | 159 | | | | (6,503 | ) | | | 199,890 | | Corporate obligations | | | 3,574 | | | | 48 | | | | (11 | ) | | | 3,611 | | | | 3,554 | | | | — | | | | (7 | ) | | | 3,547 | | CRA qualified investment fund | | | 1,028 | | | | — | | | | — | | | | 1,028 | | | | 1,049 | | | | — | | | | — | | | | 1,049 | | FHLB and FNBB equity securities | | | 10,015 | | | | — | | | | — | | | | 10,015 | | | | | | | | | | | | | | | | | Other equity securities | | | | 6,138 | | | | — | | | | — | | | | 6,138 | | Total | | $ | 769,243 | | | $ | 10,137 | | | $ | (12,132 | ) | | $ | 767,248 | | | $ | 801,159 | | | $ | 5,960 | | | $ | (22,585 | ) | | $ | 784,534 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2014: | | | | | | | | | | December 31, 2015: | | | | | | | | | | | | | | | | | | Obligations of states and political subdivisions | | $ | 555,335 | | | $ | 7,976 | | | $ | (7,662 | ) | | $ | 555,649 | | | $ | 415,095 | | | $ | 6,165 | | | $ | (4,747 | ) | | $ | 416,513 | | U.S. Government agency securities | | | 245,854 | | | | 3,916 | | | | (3,953 | ) | | | 245,817 | | | | 146,265 | | | | 227 | | | | (4,363 | ) | | | 142,129 | | Corporate obligations | | | 654 | | | | — | | | | (13 | ) | | | 641 | | | | 3,562 | | | | 25 | | | | (9 | ) | | | 3,578 | | FHLB and FNBB equity securities | | | 14,225 | | | | — | | | | — | | | | 14,225 | | | | | | | | | | | | | | | | | CRA qualified investment fund | | | | 1,038 | | | | — | | | | — | | | | 1,038 | | Other equity securities | | | | 23,530 | | | | — | | | | — | | | | 23,530 | | Total | | $ | 816,068 | | | $ | 11,892 | | | $ | (11,628 | ) | | $ | 816,332 | | | $ | 589,490 | | | $ | 6,417 | | | $ | (9,119 | ) | | $ | 586,788 | | | | | | | | | | | | | | | | | June 30, 2014: | | | | | | | | | | Obligations of states and political subdivisions | | $ | 603,533 | | | $ | 8,625 | | | $ | (8,762 | ) | | $ | 603,396 | | | U.S. Government agency securities | | | 254,878 | | | | 4,561 | | | | (4,191 | ) | | | 255,248 | | | Corporate obligations | | | 685 | | | | — | | | | (15 | ) | | | 670 | | | FHLB and FNBB equity securities | | | 16,568 | | | | — | | | | — | | | | 16,568 | | | | | | | | | | | | | | | | | Total | | $ | 875,664 | | | $ | 13,186 | | | $ | (12,968 | ) | | $ | 875,882 | | | | | | | | | | | | | | | | |
We had no net gains or sales of investment securities in the second quarter of 2016 compared to net gains of $0.1 million from the sale of $2.6 million of investment securities in the second quarter of 2015 compared to2015. We had no net gains of $18,000 from the sale of $47.0 millionor sales of investment securities in the second quarterfirst six months of 2014. We had2016 compared with net gains of $2.6 million from the sale of $30.2 million of investment securities in the first six months of 2015 compared with net gains of $23,000 from the sale of $48.0 million of investment securities in the first six months of 2014.2015. During the second quarter of 20152016 and 2014,2015, respectively, investment securities totaling $31.3$25.2 million and $16.0$31.3 million matured, were called or were paid down by the issuer. During the first six months of 20152016 and 2014,2015, respectively, investment securities totaling $81.5$83.4 million and $29.7$81.5 million matured, were called or were paid down by the issuer. We purchased $37.5$188.7 million in investment securities during the second quarter of 2015 and first six months of 2015 compared to $16.8$268.5 million of investment securities purchased during the second quarter of 2014 and $35.1 million of investment securities during the first six months of 2014. On February 10, 2015, we acquired $21.82016 compared to $37.5 million ofin investment securities as a resultpurchased for both the second quarter and first six months of our Intervest acquisition.2015. We invest in securities we believe offer good relative value at the time of purchase, and we will, from time to time, reposition our investment securities portfolio. In making decisions to sell or purchase securities, we consider credit quality, call features, maturity dates, relative yields, current market factors, interest rate risk and other relevant factors.
57
The following table presents the types and estimated fair values of our investment securities at June 30, 20152016 based on credit ratings by one or more nationally-recognized credit rating agency. Credit Ratings of Investment Securities | | | AAA(1) | | AA(2) | | A(3) | | BBB(4) | | Non- Rated(5) | | Total | | | | | (Dollars in thousands) | | | AAA (1) | | | AA (2) | | | A (3) | | | BBB (4) | | | Non- Rated (5) | | | Total | | | | | (Dollars in thousands) | | Obligations of states and political subdivisions | | $ | 10,218 | | | $ | 172,453 | | | $ | 116,583 | | | $ | 22,214 | | | $ | 185,447 | | | $ | 506,915 | | | $ | 77,917 | | | $ | 225,855 | | | $ | 119,358 | | | $ | 13,524 | | | $ | 166,436 | | | $ | 603,090 | | U.S. Government agency securities | | | — | | | 260,753 | | | | — | | | | — | | | | — | | | 260,753 | | | | — | | | | 210,556 | | | | — | | | | — | | | | — | | | | 210,556 | | Corporate obligations | | | — | | | | — | | | 621 | | | | — | | | 2,953 | | | 3,574 | | | | — | | | | — | | | | 3,554 | | | | — | | | | — | | | | 3,554 | | CRA qualified investment fund | | | — | | | | — | | | | — | | | | — | | | 1,020 | | | 1,020 | | | | — | | | | — | | | | — | | | | — | | | | 1,061 | | | | 1,061 | | FHLB and FNBB equity securities | | | — | | | | — | | | | — | | | | — | | | 10,015 | | | 10,015 | | | | | | | | | | | | | | | | | | | | | | | Other equity securities | | | | — | | | | — | | | | — | | | | — | | | | 6,138 | | | | 6,138 | | Total | | $ | 10,218 | | | $ | 433,206 | | | $ | 117,204 | | | $ | 22,214 | | | $ | 199,435 | | | $ | 782,277 | | | $ | 77,917 | | | $ | 436,411 | | | $ | 122,912 | | | $ | 13,524 | | | $ | 173,635 | | | $ | 824,399 | | | | | | | | | | | | | | | | | | | | | | Percentage of total | | | 1.3 | % | | 55.4 | % | | 15.0 | % | | 2.8 | % | | 25.5 | % | | 100.0 | % | | | 9.5 | % | | | 52.9 | % | | | 14.9 | % | | | 1.6 | % | | | 21.1 | % | | | 100.0 | % | Cumulative percentage of total | | | 1.3 | % | | 56.7 | % | | 71.7 | % | | 74.5 | % | | 100.0 | % | | | | | 9.5 | % | | | 62.4 | % | | | 77.3 | % | | | 78.9 | % | | | 100.0 | % | | | | |
(1) | Includes securities rated Aaa by Moody’s, AAA by Fitch or Standard & Poor’s (“S&P”) or a comparable rating by other nationally-recognized credit rating agencies. |
(2) | Includes securities rated Aa1 to Aa3 by Moody’s, AA+ to AA- by Fitch or S&P or a comparable rating by other nationally-recognized credit rating agencies. |
(3) | Includes securities rated A1 to A3 by Moody’s, A+ to A- by Fitch or S&P or a comparable rating by other nationally-recognized credit rating agencies. |
(4) | Includes securities rated Baa1 to Baa3 by Moody’s, BBB+ to BBB- by Fitch or S&P or a comparable rating by other nationally-recognized credit rating agencies. |
(5) | Includes all securities that are not rated or securities that are not rated but that have a rated credit enhancement where we have ignored such credit enhancement. For these securities, we have performed our own evaluation of the security and/or the underlying issuer and believe that such security and/or its issuer has credit characteristics equivalent to those which would warrant a credit rating of investment grade (i.e., Baa3 or better by Moody’s or BBB- or better by Fitch or S&P or a comparable rating by another nationally-recognized credit rating agency). |
Deposits Our lending and investment activities are funded primarily by deposits. The amount and type of deposits outstanding, as of the dates indicated, and their respective percentage of the total deposits are reflected in the following table. On February 10, Deposits | | | | | | | | | June 30, 2016 | | | December 31, 2015 | | | | (Dollars in thousands) | | Non-interest bearing | | $ | 1,647,825 | | | | 16.2 | % | | $ | 1,515,482 | | | | 19.0 | % | Interest bearing: | | | | | | | | | | | | | | | | | Transaction (NOW) | | | 1,812,597 | | | | 17.8 | | | | 1,398,104 | | | | 17.5 | | Savings and money market | | | 3,323,384 | | | | 32.6 | | | | 2,619,400 | | | | 32.9 | | Time deposits less than $100,000 | | | 1,252,515 | | | | 12.3 | | | | 921,680 | | | | 11.6 | | Time deposits of $100,000 or more | | | 2,158,751 | | | | 21.1 | | | | 1,516,802 | | | | 19.0 | | Total deposits | | $ | 10,195,072 | | | | 100.0 | % | | $ | 7,971,468 | | | | 100.0 | % |
The increase in our deposits from December 31, 2015 we assumed $1.18 billion of deposits as ato June 30, 2016 was primarily the result of our acquisition of Intervest. On May 16, 2014, we assumed $970 million of deposits as a result of our acquisition of Summit. Additionally, we continued to grow our existingincreased deposit base including growth in deposits of $406 milliongathering initiatives during the second quarter and first six months of 2015,2016 in several target markets to fund growth in loans and leases. At June 30, 2016 brokered deposits totaled $1.50 billion, or 14.8% of which, $28total deposits, compared to $677 million, and $378 million were added during the first and second quartersor 8.5% of 2015, respectively. Depositstotal deposits, at December 31, 2015.
| | | | | | | | | | | | | | | | | | | | | | | | | | | June 30, | | | December 31, | | | | 2015 | | | 2014 | | | 2014 | | | | (Dollars in thousands) | | Non-interest bearing | | $ | 1,320,779 | | | | 18.6 | % | | $ | 1,058,210 | | | | 21.2 | % | | $ | 1,145,454 | | | | 20.8 | % | Interest bearing: | | | | | | | | | | | | | | | | | | | | | Transaction (NOW) | | | 1,240,787 | | | | 17.5 | | | | 1,173,404 | | | | 23.6 | | | | 1,031,255 | | | | 18.8 | | Savings and money market | | | 2,404,764 | | | | 33.9 | | | | 1,575,525 | | | | 31.6 | | | | 1,861,734 | | | | 33.9 | | Time deposits less than $100,000 | | | 930,640 | | | | 13.1 | | | | 557,632 | | | | 11.2 | | | | 660,711 | | | | 12.0 | | Time deposits of $100,000 or more | | | 1,190,329 | | | | 16.9 | | | | 619,126 | | | | 12.4 | | | | 797,228 | | | | 14.5 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total deposits | | $ | 7,087,299 | | | | 100.0 | % | | $ | 4,983,897 | | | | 100.0 | % | | $ | 5,496,382 | | | | 100.0 | % | | | | | | | | | | | | | | | | | | | | | | | | | |
We use brokered deposits, subject to certain limitations and requirements, as a source of funding to augment deposits generated from our branch network, which are our principal source of funding. Our board of directors has established policies and procedures with respect to the use of brokered deposits. Such policies and procedures require, among other things, that we (i) limit the amount of brokered deposits as a percentage of total deposits and (ii) our ALCO Committee (“ALCO”), which reports to the board of directors, monitor our use of brokered deposits on a regular basis, including interest rates and the total volume of such deposits in relation to our total liabilities. ALCO has typically approved the use of brokered deposits when (i) such deposits are from respected and stable funding sources and (ii) such deposits are less costly to the Company than the marginal cost of additional deposits generated from our branch network. 58
The amount and percentage of our deposits attributable to offices, by state, as of the dates indicated, are reflected in the following table. Deposits by State | Deposits Attributable to Offices In | | June 30, | | December 31, 2014 | | | | 2015 | | 2014 | | | June 30, 2016 | | | December 31, 2015 | | | | (Dollars in thousands) | | | (Dollars in thousands) | | Arkansas | | $ | 3,335,900 | | | | 47.1 | % | | $ | 2,736,653 | | | | 54.9 | % | | $ | 2,912,291 | | | | 53.0 | % | | $ | 5,404,235 | | | | 53.0 | % | | $ | 3,783,703 | | | | 47.5 | % | Texas | | | 1,151,556 | | | | 16.3 | | | 728,073 | | | | 14.6 | | | 996,908 | | | | 18.1 | | | | 1,683,172 | | | | 16.5 | | | | 1,312,538 | | | | 16.5 | | Florida | | | 738,494 | | | | 10.4 | | | 120,677 | | | | 2.4 | | | 124,469 | | | | 2.3 | | | | 883,648 | | | | 8.7 | | | | 739,955 | | | | 9.3 | | North Carolina | | | | 858,588 | | | | 8.4 | | | | 838,361 | | | | 10.5 | | Georgia | | | 692,837 | | | | 9.8 | | | 636,950 | | | | 12.8 | | | 675,801 | | | | 12.3 | | | | 747,699 | | | | 7.3 | | | | 722,675 | | | | 9.1 | | North Carolina | | | 582,449 | | | | 8.2 | | | 596,180 | | | | 12.0 | | | 599,184 | | | | 10.9 | | | New York | | | 419,037 | | | | 5.9 | | | | — | | | | — | | | | — | | | | — | | | | 420,164 | | | | 4.1 | | | | 399,933 | | | | 5.0 | | Alabama | | | 116,031 | | | | 1.6 | | | 132,271 | | | | 2.6 | | | 141,266 | | | | 2.6 | | | | 111,735 | | | | 1.1 | | | | 110,283 | | | | 1.4 | | South Carolina | | | 50,995 | | | | 0.7 | | | 33,093 | | | | 0.7 | | | 46,463 | | | | 0.8 | | | | 85,831 | | | | 0.9 | | | | 64,020 | | | | 0.7 | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 7,087,299 | | | | 100.0 | % | | $ | 4,983,897 | | | | 100.0 | % | | $ | 5,496,382 | | | | 100.0 | % | | $ | 10,195,072 | | | | 100.0 | % | | $ | 7,971,468 | | | | 100.0 | % | | | | | | | | | | | | | | | | | | | | |
Other Interest Bearing Liabilities We rely on other interest bearing liabilities to supplement the funding of our lending and investing activities. Such liabilities consist of repurchase agreements with customers, other borrowings (FHLB advances and, to a lesser extent, FRB borrowings and federal funds purchased), subordinated notes and subordinated debentures. The following table reflects the average balance and rate paid for each category of other interest bearing liabilities for the periods indicated. Average Balances and Rates of Other Interest Bearing Liabilities | | | Three Months Ended June 30, | | Six Months Ended June 30, | | | Three Months Ended June 30, | | | | Six Months Ended June 30, | | | | 2015 | | 2014 | | 2015 | | 2014 | | | 2016 | | | 2015 | | | | 2016 | | | 2015 | | | | Average Balance | | | Rate Paid | | Average Balance | | | Rate Paid | | Average Balance | | | Rate Paid | | Average Balance | | | Rate Paid | | | Average Balance | | | Rate Paid | | | Average Balance | | | Rate Paid | | | | Average Balance | | | Rate Paid | | | Average Balance | | | Rate Paid | | | | (Dollars in thousands) | | | (Dollars in thousands) | | Repurchase agreements with customers | | $ | 68,656 | | | | 0.11 | % | | $ | 58,607 | | | | 0.09 | % | | $ | 73,091 | | | | 0.10 | % | | $ | 61,808 | | | | 0.08 | % | | $ | 58,284 | | | | 0.15 | % | | $ | 68,656 | | | | 0.11 | % | | | $ | 63,293 | | | | 0.13 | % | | $ | 73,091 | | | | 0.10 | % | Other borrowings(1) | | | 161,652 | | | | 3.58 | | | 281,009 | | | | 3.84 | | | 175,148 | | | | 3.62 | | | 280,968 | | | | 3.84 | | | | 42,021 | | | | 2.80 | | | | 161,652 | | | | 3.58 | | | | | 46,537 | | | | 2.57 | | | | 175,148 | | | | 3.62 | | Subordinated notes | | | | 19,557 | | | | 5.83 | | | | — | | | | — | | | | | 9,778 | | | | 5.83 | | | | — | | | | — | | Subordinated debentures | | | 117,325 | | | | 3.31 | | | 64,950 | | | | 2.64 | | | 105,431 | | | | 3.21 | | | 64,950 | | | | 2.61 | | | | 117,887 | | | | 3.68 | | | | 117,325 | | | | 3.31 | | | | | 117,818 | | | | 3.64 | | | | 105,431 | | | | 3.21 | | | | | | | | | | | | | | | | | | | | | | | | Total other interest bearing liabilities | | $ | 347,633 | | | | 2.80 | % | | $ | 404,566 | | | | 3.11 | % | | $ | 353,670 | | | | 2.77 | % | | $ | 407,726 | | | | 3.10 | % | | $ | 237,749 | | | | 2.84 | % | | $ | 347,633 | | | | 2.80 | % | | | $ | 237,426 | | | | 2.59 | % | | $ | 353,670 | | | | 2.77 | % | | | | | | | | | | | | | | | | | | | | | | |
(1) | Included in other borrowings at June 30, 20152016 are FHLB advances that contain quarterly call features and mature as follows: 2017, $140.0$20.0 million at 3.70% weighted-average interest rate3.13% and 2018, $20.0 million at 2.52% weighted-average interest rate.. |
The decrease in other borrowings for the three and six monthsquarter ended June 30, 20152016 compared to the same period in 20142015 is due to our prepaying $90 million of fixed rate callable FHLB advances during the fourth quarter of 2014 and prepaying $30 million of fixed rate callable FHLB advances during the first quarter of 2015 and prepaying $120 million of fixed rate callable FHLB advances during the fourth quarter of 2015. The increase in subordinated debentures for the six months ended June 30, 2016 compared to the same period in 2015 is primarily due to the $52.2 million (net of purchase accounting adjustments) of subordinated debentures assumed in the Intervest transaction. During the second quarter of 2016, the Company issued $225 million in aggregate principal amount of subordinated notes with a 5.50% fixed-to-floating rate that mature on July 1, 2026. The rate on such subordinated notes includes amortization of debt issuance costs. 59
CAPITAL RESOURCES AND LIQUIDITY Capital Resources Subordinated Debentures.Notes. On June 23, 2016, we completed an underwritten public offering of $225 million in aggregate principal amount of our 5.50% Fixed-to-Floating Rate Subordinated Notes due 2026 (the “Notes”) for net proceeds of $222.3 million. The Notes are unsecured, subordinated debt obligations and mature on July 1, 2026. From and including the date of issuance to, but excluding July 1, 2021, the Notes bear interest at an initial rate of 5.50% per annum. From and including July 1, 2021 to, but excluding the maturity date or earlier redemption, the Notes will bear interest at a floating rate equal to three-month LIBOR as calculated on each applicable date of determination plus a spread of 442.5 basis points; provided, however, that in the event three-month LIBOR is less than zero, then three-month LIBOR shall be deemed to be zero. We may, beginning with the interest payment date of July 1, 2021, and on any interest payment date thereafter, redeem the Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the Notes to be redeemed plus accrued and unpaid interest to but excluding the date of redemption. We may also redeem the Notes at any time, including prior to July 1, 2021, at our option, in whole but not in part, if: (i) a change or prospective change in law occurs that could prevent us from deducting interest payable on the Notes for U.S. federal income tax purposes; (ii) a subsequent event occurs that could preclude the Notes from being recognized as Tier 2 capital for regulatory capital purposes; or (iii) we are required to register as an investment company under the Investment Company Act of 1940, as amended; in each case, at a redemption price equal to 100% of the principal amount of the Notes plus any accrued and unpaid interest to but excluding the redemption date. The Notes provide us with additional Tier 2 regulatory capital to support our expected future growth. Subordinated Debentures. We own eight 100%-owned finance subsidiary business trusts – Ozark Capital Statutory Trust II (“Ozark II”), Ozark Capital Statutory Trust III (“Ozark III”), Ozark Capital Statutory Trust IV (“Ozark IV”), Ozark Capital Statutory Trust V (“Ozark V”) (collectively, the “Ozark Trusts”), and as a result of our Intervest acquisition, Intervest Statutory Trust II (“Intervest II”), Intervest Statutory Trust III (“Intervest III”), Intervest Statutory Trust IV (“Intervest IV”) and Intervest Statutory Trust V (“Intervest V”), (collectively, the “Intervest Trusts”; and together with Ozark Trusts, the “Trusts”). At June 30, 2015,2016, we had the following issues of trust preferred securities and subordinated debentures owed to the Trusts. | | | Subordinated Debentures Owed to Trust | | | Unamortized Discount at June 30, 2015 | | Carrying Value of Subordinated Debentures at June 30, 2015 | | | Trust Preferred Securities of the Trusts | | | Contractual Interest Rate at June 30, 2015 | | | | | (Dollars in thousands) | | | Subordinated Debentures Owed to Trust | | | Unamortized Discount at June 30, 2016 | | | Carrying Value of Subordinated Debentures at June 30, 2016 | | | Trust Preferred Securities of the Trusts | | | Contractual Interest Rate at June 30, 2016 | | | Final Maturity Date | | | | (Dollars in thousands) | | | | Ozark II | | $ | 14,433 | | | $ | — | | | $ | 14,433 | | | $ | 14,000 | | | | 3.18 | % | | $ | 14,433 | | | $ | — | | | $ | 14,433 | | | $ | 14,000 | | | | 3.53 | % | | September 29, 2033 | Ozark III | | | 14,434 | | | | — | | | 14,434 | | | | 14,000 | | | | 3.24 | | | | 14,434 | | | | — | | | | 14,434 | | | | 14,000 | | | | 3.58 | | | September 25, 2033 | Ozark IV | | | 15,464 | | | | — | | | 15,464 | | | | 15,000 | | | | 2.50 | | | | 15,464 | | | | — | | | | 15,464 | | | | 15,000 | | | | 2.87 | | | September 28, 2034 | Ozark V | | | 20,619 | | | | — | | | 20,619 | | | | 20,000 | | | | 1.89 | | | | 20,619 | | | | — | | | | 20,619 | | | | 20,000 | | | | 2.52 | | | December 15, 2036 | Intervest II | | | 15,464 | | | | (678 | ) | | 14,786 | | | | 15,000 | | | | 3.23 | | | | 15,464 | | | | (589 | ) | | | 14,875 | | | | 15,000 | | | | 3.61 | | | September 17, 2033 | Intervest III | | | 15,464 | | | | (785 | ) | | 14,679 | | | | 15,000 | | | | 3.07 | | | | 15,464 | | | | (682 | ) | | | 14,782 | | | | 15,000 | | | | 3.45 | | | March 17, 2034 | Intervest IV | | | 15,464 | | | | (1,428 | ) | | 14,036 | | | | 15,000 | | | | 2.68 | | | | 15,464 | | | | (1,240 | ) | | | 14,224 | | | | 15,000 | | | | 3.05 | | | September 20, 2034 | Intervest V | | | 10,310 | | | | (1,358 | ) | | 8,952 | | | | 10,000 | | | | 1.94 | | | | 10,310 | | | | (1,179 | ) | | | 9,131 | | | | 10,000 | | | | 2.30 | | | December 15, 2036 | | | | | | | | | | | | | | | | | $ | 121,652 | | | $ | (3,690 | ) | | $ | 117,962 | | | $ | 118,000 | | | | | | | | | | $ | 121,652 | | | $ | (4,249 | ) | | $ | 117,403 | | | $ | 118,000 | | | | | | | | | | | | | | | | | | | | |
On February 10, 2015, in conjunction with the Intervest acquisition, the Company acquired the Intervest Trusts with outstanding subordinated debentures totaling $56.7 million and related trust preferred securities totaling $55.0 million. On the date of such acquisition, the Company recorded the assumed subordinated debentures owed to the Intervest Trusts at estimated fair value of $52.2 million, based on an independent third party valuation, to reflect a current market interest rate for comparable obligations. The fair value adjustment of $4.5 million is being amortized, using a level-yield methodology over the estimated holding period of approximately eight years, as an increase in interest expense of the subordinated debentures owed to the Intervest Trusts.
TheseOur subordinated debentures and securities generally mature 30 years after issuance and may be prepaid at par, subject to regulatory approval, on or after approximately five years from the date of issuance, or at an earlier date upon certain changes in tax laws, investment company laws or regulatory capital requirements. These subordinated debentures and the related trust preferred securities provide us additional regulatory capital to support our expected future growth and expansion.
Other Sources of Capital. We may need to raise additional capital in the future to provide us with sufficient capital resources and liquidity to meet our commitments and business needs. As a publicly traded company, a likely source of additional funds is the capital markets, which can provide us with funds through the public issuance of equity, both common and preferred stock, and the issuance of senior debt and/or subordinated debentures. We have an effective shelf registration statement on file with the SEC which provides us increased flexibility and more efficient access to the public debt and equity markets if needed.markets. Our ability to raise additional capital, if needed, will depend on, among other things, conditions in the capital markets at that time, which are outside of our control, and our financial performance. 60
Common Stockholders’ Equity and Reconciliation of Non-GAAP Financial Measures.We use non-GAAP financial measures, specifically tangible common stockholders’ equity to total tangible assets, tangible book value per common share and return on average tangible common stockholders’ equity as important measures of the strength of our capital and our ability to generate earnings on tangible common equity invested by our shareholders. We believe presentation of these non-GAAP financial measures provides useful supplemental information that contributes to a proper understanding of our financial results and capital levels. These non-GAAP disclosures should not be viewed as a substitute for financial results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the following tables. Calculation of the Ratio of Total Tangible Common Stockholders’ Equity to Total Tangible Assets | | | June 30, | | December 31, 2014 | | | June 30, | | | | 2015 | | 2014 | | | 2016 | | | 2015 | | | | (Dollars in thousands) | | | (Dollars in thousands) | | Total common stockholders’ equity before noncontrolling interest | | $ | 1,209,254 | | | $ | 850,204 | | | $ | 908,390 | | | $ | 1,556,921 | | | $ | 1,209,254 | | Less intangible assets: | | | | | | | | | | | | | | | Goodwill | | | (122,884 | ) | | (78,669 | ) | | (78,669 | ) | | | (126,289 | ) | | | (120,670 | ) | Core deposit and bank charter intangibles, net of accumulated amortization | | | (28,266 | ) | | (29,971 | ) | | (26,907 | ) | | | (23,615 | ) | | | (28,266 | ) | | | | | | | | | | | | Total intangibles | | | (151,150 | ) | | (108,640 | ) | | (105,576 | ) | | | (149,904 | ) | | | (148,936 | ) | | | | | | | | | | | | | Total tangible common stockholders’ equity | | $ | 1,058,104 | | | $ | 741,564 | | | $ | 802,814 | | | $ | 1,407,017 | | | $ | 1,060,318 | | | | | | | | | | | | | | Total assets | | $ | 8,710,435 | | | $ | 6,297,975 | | | $ | 6,766,499 | | | $ | 12,279,579 | | | $ | 8,710,435 | | Less intangible assets: | | | | | | | | | | | | | | | Goodwill | | | (122,884 | ) | | (78,669 | ) | | (78,669 | ) | | | (126,289 | ) | | | (120,670 | ) | Core deposit and bank charter intangibles, net of accumulated amortization | | | (28,266 | ) | | (29,971 | ) | | (26,907 | ) | | | (23,615 | ) | | | (28,266 | ) | | | | | | | | | | | | Total intangibles | | | (151,150 | ) | | (108,640 | ) | | (105,576 | ) | | | (149,904 | ) | | | (148,936 | ) | | | | | | | | | | | | | Total tangible assets | | $ | 8,559,285 | | | $ | 6,189,335 | | | $ | 6,660,923 | | | $ | 12,129,675 | | | $ | 8,561,499 | | | | | | | | | | | | | | Ratio of total common stockholders’ equity to total assets | | | 13.88 | % | | 13.50 | % | | 13.42 | % | | | 12.68 | % | | | 13.88 | % | | | | | | | | | | | | Ratio of total tangible common stockholders’ equity to total tangible assets | | | 12.36 | % | | 11.98 | % | | 12.05 | % | | | 11.60 | % | | | 12.38 | % | | | | | | | | | | | |
Calculation of the Ratio of Tangible Book Value Per Common Share | | | June 30, | | | December 31, 2014 | | | June 30, | | | December 31, | | | | 2015 | | | 2014 | | | | 2016 | | | 2015 | | | 2015 | | | 2014 | | | 2013 | | | 2012 | | | 2011 | | | | (In thousands, except per share amounts) | | | | | | (In thousands, except per share amounts) | | | | | | | | | | Total common stockholders’ equity before noncontrolling interest | | $ | 1,209,254 | | | $ | 850,204 | | | $ | 908,390 | | | $ | 1,556,921 | | | $ | 1,209,254 | | | $ | 1,464,631 | | | $ | 908,390 | | | $ | 629,060 | | | $ | 507,664 | | | $ | 424,551 | | Less intangible assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Goodwill | | | (122,884 | ) | | | (78,669 | ) | | | (78,669 | ) | | | (126,289 | ) | | | (120,670 | ) | | | (125,442 | ) | | | (78,669 | ) | | | (5,243 | ) | | | (5,243 | ) | | | (5,243 | ) | Core deposit and bank charter intangibles, net of accumulated amortization | | | (28,266 | ) | | | (29,971 | ) | | | (26,907 | ) | | | (23,615 | ) | | | (28,266 | ) | | | (26,898 | ) | | | (26,907 | ) | | | (13,915 | ) | | | (6,584 | ) | | | (6,964 | ) | | | | | | | | | | | | Total intangibles | | | (151,150 | ) | | | (108,640 | ) | | | (105,576 | ) | | | (149,904 | ) | | | (148,936 | ) | | | (152,340 | ) | | | (105,576 | ) | | | (19,158 | ) | | | (11,827 | ) | | | (12,207 | ) | | | | | | | | | | | | Total tangible common stockholders’ equity | | $ | 1,058,104 | | | $ | 741,564 | | | $ | 802,814 | | | $ | 1,407,017 | | | $ | 1,060,318 | | | $ | 1,312,291 | | | $ | 802,814 | | | $ | 609,902 | | | $ | 495,837 | | | $ | 412,344 | | | | | | | | | | | | | | Shares of common stock outstanding | | | 86,811 | | | | 79,662 | | | | 79,924 | | | | 90,745 | | | | 86,811 | | | | 90,612 | | | | 79,924 | | | | 73,712 | | | | 70,544 | | | | 68,928 | | | | | | | | | | | | | Book value per common share | | $ | 13.93 | | | $ | 10.67 | | | $ | 11.37 | | | $ | 17.16 | | | $ | 13.93 | | | $ | 16.16 | | | $ | 11.37 | | | $ | 8.53 | | | $ | 7.18 | | | $ | 6.16 | | | | | | | | | | | | | Tangible book value per common share | | $ | 12.19 | | | $ | 9.31 | | | $ | 10.04 | | | $ | 15.51 | | | $ | 12.21 | | | $ | 14.48 | | | $ | 10.04 | | | $ | 8.27 | | | $ | 7.03 | | | $ | 5.98 | | | | | | | | | | | | |
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Calculation ofAnnualized Return on Average Tangible Common Stockholders’ Equity | | Three Months Ended | | | Six Months Ended | | | | June 30, | | | June 30, | | | | 2016 | | | 2015 | | | 2016 | | | 2015 | | | | (Dollars in thousands) | | Net income available to common stockholders | | $ | 54,474 | | | $ | 44,776 | | | $ | 106,162 | | | $ | 84,670 | | Average common stockholders’ equity before noncontrolling interest | | $ | 1,526,828 | | | $ | 1,191,798 | | | $ | 1,505,742 | | | $ | 1,121,225 | | Less average intangible assets: | | | | | | | | | | | | | | | | | Goodwill | | | (125,873 | ) | | | (120,670 | ) | | | (125,660 | ) | | | (111,156 | ) | Core deposit and bank charter intangibles, net of accumulated amortization | | | (24,468 | ) | | | (29,162 | ) | | | (25,317 | ) | | | (28,988 | ) | Total average intangibles | | | (150,341 | ) | | | (149,832 | ) | | | (150,977 | ) | | | (140,144 | ) | Average tangible common stockholders’ equity | | $ | 1,376,487 | | | $ | 1,041,966 | | | $ | 1,354,765 | | | $ | 981,081 | | Return on average common stockholders’ equity (1) | | | 14.35 | % | | | 15.07 | % | | | 14.18 | % | | | 15.23 | % | Return on average tangible common stockholders’ equity (1) | | | 15.92 | % | | | 17.24 | % | | | 15.76 | % | | | 17.40 | % |
(1) | Ratios annualized based on actual days. |
Calculation of Return on Average Tangible Common Stockholders’ Equity | | | Three Months Ended | | Six Months Ended | | | | | June 30, | | June 30, | | | Year Ended December 31, | | | | 2015 | | 2014 | | 2015 | | 2014 | | | 2015 | | | 2014 | | | 2013 | | | 2012 | | | 2011 | | | | (Dollars in thousands) | | | (Dollars in thousands) | | Net income available to common stockholders | | $ | 44,776 | | | $ | 26,486 | | | $ | 84,670 | | | $ | 51,762 | | | $ | 182,253 | | | $ | 118,606 | | | $ | 91,237 | | | $ | 77,044 | | | $ | 101,321 | | | | | | | | | | | | | | | | | Average common stockholders’ equity before noncontrolling interest | | $ | 1,191,798 | | | $ | 749,692 | | | $ | 1,121,225 | | | $ | 696,360 | | | $ | 1,217,475 | | | $ | 786,430 | | | $ | 560,351 | | | $ | 458,595 | | | $ | 374,664 | | Less average intangible assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Goodwill | | | (122,884 | ) | | (44,083 | ) | | (112,883 | ) | | (24,770 | ) | | | (118,013 | ) | | | (51,793 | ) | | | (5,243 | ) | | | (5,243 | ) | | | (5,243 | ) | Core deposit and bank charter intangibles, net of accumulated amortization | | | (29,161 | ) | | (16,033 | ) | | (28,996 | ) | | (14,973 | ) | | | (28,660 | ) | | | (21,651 | ) | | | (9,661 | ) | | | (5,989 | ) | | | (5,932 | ) | | | | | | | | | | | | | | | | Total average intangibles | | | (152,045 | ) | | (60,116 | ) | | (141,879 | ) | | (39,743 | ) | | | (146,673 | ) | | | (73,444 | ) | | | (14,904 | ) | | | (11,232 | ) | | | (11,175 | ) | | | | | | | | | | | | | | | Average tangible common stockholders’ equity | | $ | 1,039,753 | | | $ | 689,576 | | | $ | 979,346 | | | $ | 656,617 | | | $ | 1,070,802 | | | $ | 712,986 | | | $ | 545,447 | | | $ | 447,363 | | | $ | 363,489 | | | | | | | | | | | | | | | | | Return on average common stockholders’ equity | | | 15.07 | % | | 14.17 | % | | 15.23 | % | | 14.99 | % | | | 14.97 | % | | | 15.08 | % | | | 16.28 | % | | | 16.80 | % | | | 27.04 | % | | | | | | | | | | | | | | | Return on average tangible common stockholders’ equity | | | 17.27 | % | | 15.41 | % | | 17.43 | % | | 15.90 | % | | | 17.02 | % | | | 16.63 | % | | | 16.73 | % | | | 17.22 | % | | | 27.87 | % | | | | | | | | | | | | | | |
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Common Stock Dividend Policy. During the quarter ended June 30, 2015 we paid a dividend of $0.135quarterly cash dividends per common share compared to $0.115of $0.13 in the first quarter, $0.135 in the second quarter, $0.14 in the third quarter and $0.145 in the fourth quarter. During 2016 we paid quarterly cash dividends per common share of $0.15 in the first quarter ended June 30, 2014.and $0.155 in the second quarter. On July 1, 2015,2016, our board of directors approved a cash dividend of $0.14$0.16 per common share that was paid on July 24, 2015.22, 2016. The determination of future dividends on our common stock will depend on conditions existing at that time and approval of our board of directors. Regulatory Capital Compliance
BankRegulatory Capital. We are subject to various regulatory capital requirements administered by federal and bank holding company regulatory authorities in the United States imposestate banking agencies. Failure to meet minimum capital requirements can initiate certain capital standardsmandatory and discretionary actions by regulators that, if undertaken, could have a direct material effect on all bank holding companiesour financial condition and banks. These capital standards require compliance withresults of operations. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, regulations andwe must meet specific capital guidelines that involve quantitative measures of our assets, liabilities and certain off-balance-sheetoff-balance sheet items whichas calculated under regulatory accounting practices. Our capital amounts and classification are also subject to qualitative judgments by the regulators about component risk weightings and various other factors.
On July 9, 2013, theThe FDIC and other federal banking regulators issued a final rule that substantially revised the risk-based capital requirements applicable to bank holding companies and insured depository institutions, including the Company and the Bank, to make them consistent with agreements that were reached by the Basel Committee on Banking Supervision (“Basel III”) and certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Basel III Rules”). The Basel III Rules became effective for the Company and the Bank on January 1, 2015 (subject to a phase-in period for certain provisions). The Basel III Rules require the maintenance of minimum amounts and ratios (set forth in the table below) of common equity tier 1 capital, tier 1 capital and total capital (as defined in the regulations) to risk-weighted assets, (as defined), and of tier 1 capital to adjusted quarterly average assets (as defined).assets.
Under the new Basel III Rules, common equity tier 1 capital consists of common stock and paid-in capital (net of treasury stock) and retained earnings. Common equity tier 1 capital is reduced by goodwill, certain intangible assets, net of associated deferred tax liabilities, deferred tax assets that arise from tax credit and net operating loss carryforwards, net of any valuation allowance, and certain other items as specified by the Basel III Rules. Tier 1 capital includes common equity tier 1 capital and certain additional tier 1 items as provided under the Basel III Rules. The tier 1 capital for our holding company consists of common equity tier 1 capital and $118 million of trust preferred securities issued by the Trusts. The Basel III Rules include certain provisions that would require trust preferred securities to be phased out of qualifying tier 1 capital. Currently,At June 30, 2016, our trust preferred securities are grandfathered under the Basel III Rules and will continue to be included as tier 1 capital. However, shouldas a result of our acquisition of C&S on July 20, 2016 and C1 on July 21, 2016, we continue to grow andexpect our total assets will exceed $15 billion in total assets, the grandfather provisions applicable tobillion. Accordingly, our trust preferred securities mayare no longer apply, depending on whether we cross the $15 billion threshold through organic growth or by acquisition.expected to be included as tier 1 capital for reporting periods subsequent to June 30, 2016, but will continue to be included in total capital. The common equity tier 1 capital and the tier 1 capital are the same for our bank subsidiary. Basel III Rules allow for insured depository institutions to make a one-time election not to include most elements of accumulated other comprehensive income in regulatory capital and instead effectively use the existing treatment under the general risk-based capital rules. Insured depository institutions, including the Company and Bank, must make their accumulated other comprehensive income opt-out election in the first Consolidated Reports of Condition and Income (“Call Report”), Consolidated Financial Statements for Bank Holding Companies (“FR Y-9C”) and Parent Company Only Financial Statements for Large Bank Holding Companies (“FR Y-9LP”) reports that are filed for the first quarter of 2015. We made this opt-out election in our Call Report, FR Y-9C and FR Y-9LP filed for the first quarter of 2015 to avoid significant variations in the level of capital depending upon the impact of interest rate fluctuations on the fair value of our investments securities portfolio.
Total capital includes tier 1 capital and tier 2 capital. Tier 2 capital includes, among other things, the allowable portion of the ALLL, and, for the Company, any trust preferred securities that are excluded from tier 1 capital.capital and the subordinated notes issued in June 2016. The Basel III Rules also changed the risk-weights of assets in an effort to better reflect credit risk and other risk exposures. These include a 150% risk weight (up from 100%) for certain high volatility commercial real estate acquisition, development and construction loans and the unsecured portion of non-residential mortgage loans that are 90 days past due or otherwise on nonaccrual status; a 20% (up from 0%) credit conversion factor for the unused portion of a commitment with an original maturity of one year or less that is not unconditionally cancellable; a 250% risk weight (up from 100%) for mortgage servicing rights and deferred tax assets that are not deducted from capital; and increased risk weights (from 0% to up to 600%) for equity exposures. The common equity tier 1 capital, tier 1 capital and total capital ratios are calculated by dividing the respective capital amounts by risk-weighted assets. The leverage ratio is calculated by dividing tier 1 capital by adjusted quarterly average total assets. The Basel III Rules limit capital distributions and certain discretionary bonus payments if the banking organization does not hold a “capital conservation buffer” consisting of 2.5% of common equity tier 1 capital, tier 1 capital and total capital to risk-weighted assets in addition to the amount necessary to meet minimum risk-based capital requirements. The capital conservation buffer will be phased in beginning January 1, 2016, at 0.625% of risk-weighted assets, increasing each year until fully implemented at 2.5% on 63
January 1, 2019. When fully phased in on January 1, 2019, the Basel III Rules will require us and our subsidiary bank to maintain (i) a minimum ratio of common equity tier 1 capital to risk-weighted assets of at least 4.5%, plus a 2.5% capital conservation buffer, which effectively results in a minimum ratio of 7.0% upon full implementation, (ii) a minimum ratio of tier 1 capital to risk-weighted assets of at least 6.0%, plus thea 2.5% capital conservation buffer, which effectively results in a minimum ratio of 8.50% upon full implementation, (iii) a minimum ratio of total capital to risk-weighted assets of at least 8.0%, plus thea 2.5% capital conservation buffer, which effectively results in a minimum ratio of 10.5% upon full implementation and (iv) a minimum leverage ratio of 4.0%. Additionally, in order to be considered well-capitalized under the Basel III Rules, we must maintain (i) a ratio of common equity tier 1 capital to risk-weighted assets of at least 6.5%, (ii) a ratio of tier 1 capital to risk-weighted assets of at least 8.0%, (iii) a ratio of total capital to risk-weighted assets of at least 10.0% and (iv) a leverage ratio of at least 5.0%. The following table presents actual and required capital ratios as ofat June 30, 2016 and December 31, 2015 for the Company and the Bank under the Basel III Rules. The minimum required capital amounts presented include the minimum required capital levels as of June 30, 2015 based on the current phase-in provisions of the Basel III Rules and the minimum required capital levels as of January 1, 2019 when the Basel III Rules have been fully phased-in. Capital levels required to be considered well capitalized are based upon prompt corrective action regulations, as amended to reflect the changes under the Basel III Rules. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Actual | | | Minimum Capital Required – Basel III Phase-In Schedule | | | Minimum Capital Required – Basel III Fully Phased-In | | | Required to be Considered Well Capitalized | | | | Capital Amount | | | Ratio | | | Capital Amount | | | Ratio | | | Capital Amount | | | Ratio | | | Capital Amount | | | Ratio | | | | (Dollars in thousands) | | | | | | | | | | | June 30, 2015: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Common equity tier 1 to risk-weighted assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Company | | $ | 1,054,014 | | | | 11.18 | | | | 424,366 | | | $ | 4.50 | % | | $ | 660,124 | | | | 7.00 | % | | | N/A | | | | N/A | | Bank | | | 1,148,610 | | | | 12.20 | | | | 423,547 | | | | 4.50 | | | | 658,850 | | | | 7.00 | | | $ | 611,789 | | | | 6.50 | % | | | | | | | | | | Tier 1 capital to risk-weighted assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Company | | | 1,172,014 | | | | 12.43 | | | | 565,821 | | | | 6.00 | | | | 801,579 | | | | 8.50 | | | | N/A | | | | N/A | | Bank | | | 1,148,610 | | | | 12.20 | | | | 564,729 | | | | 6.00 | | | | 800,032 | | | | 8.50 | | | | 752,972 | | | | 8.00 | | | | | | | | | | | Total capital to risk-weighted assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Company | | | 1,228,763 | | | | 13.03 | | | | 754,428 | | | | 8.00 | | | | 990,186 | | | | 10.50 | | | | N/A | | | | N/A | | Bank | | | 1,205,359 | | | | 12.81 | | | | 752,972 | | | | 8.00 | | | | 988,275 | | | | 10.50 | | | | 941,215 | | | | 10.00 | | | | | | | | | | | Tier 1 leverage to average assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Company | | | 1,172,014 | | | | 14.41 | | | | 325,434 | | | | 4.00 | | | | 325,434 | | | | 4.00 | | | | N/A | | | | N/A | | Bank | | | 1,148,310 | | | | 14.13 | | | | 325,111 | | | | 4.00 | | | | 325,111 | | | | 4.00 | | | | 406,389 | | | | 5.00 | |
The following table presents actual and required capital ratios as of December 31, 2014 for the Company and the Bank under the regulatory capital rules then in effect.Regulatory Capital Ratios
| | | | | | | | | | | | | | Actual | | | Minimum Capital Required – Basel III Phase-In Schedule | | | Minimum Capital Required – Basel III Fully Phased-In | | | Required to be Considered Well Capitalized | | | | | | | | | Required | | | Capital Amount | | | Ratio | | | Capital Amount | | | Ratio | | | Capital Amount | | | Ratio | | | Capital Amount | | | Ratio | | | | Actual | | For Capital Adequacy Purposes | | To Be Well Capitalized Under Prompt Corrective Action Provisions | | | (Dollars in thousands) | | | | Amount | | | Ratio | | Amount | | | Ratio | | Amount | | | Ratio | | | | | (Dollars in thousands) | | | December 31, 2014: | | | | | | | | | | | | | | June 30, 2016: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Common equity tier 1 to risk-weighted assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Company | | | $ | 1,385,651 | | | | 9.70 | % | | $ | 732,358 | | | | 5.125 | % | | $ | 1,000,294 | | | | 7.00 | % | | N/A | | | N/A | | Bank | | | | 1,689,336 | | | | 11.83 | | | | 729,166 | | | | 5.125 | | | | 995,934 | | | | 7.00 | | | | 924,796 | | | | 6.50 | % | Tier 1 capital to risk-weighted assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Company | | $ | 851,682 | | | | 11.74 | % | | $ | 290,213 | | | | 4.00 | % | | $ | 435,319 | | | | 6.00 | % | | | 1,493,179 | | | | 10.45 | | | | 946,707 | | | | 6.625 | | | | 1,214,642 | | | | 8.50 | | | N/A | | | N/A | | Bank | | | 824,120 | | | | 11.37 | | | 290,130 | | | | 4.00 | | | 435,194 | | | | 6.00 | | | | 1,689,336 | | | | 11.83 | | | | 942,581 | | | | 6.625 | | | | 1,209,349 | | | | 8.50 | | | | 1,138,211 | | | | 8.00 | % | | Total capital to risk-weighted assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Company | | | 904,600 | | | | 12.47 | | | 580,425 | | | | 8.00 | | | 725,532 | | | | 10.00 | | | | 1,783,312 | | | | 12.48 | | | | 1,232,505 | | | | 8.625 | | | | 1,500,441 | | | | 10.50 | | | N/A | | | N/A | | Bank | | | 877,038 | | | | 12.10 | | | 580,259 | | | | 8.00 | | | 725,324 | | | | 10.00 | | | | 1,754,469 | | | | 12.29 | | | | 1,227,133 | | | | 8.625 | | | | 1,493,902 | | | | 10.50 | | | | 1,422,763 | | | | 10.00 | % | | Tier 1 leverage to average assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Company | | | 851,681 | | | | 12.92 | | | 197,711 | | | | 3.00 | | | 329,518 | | | | 5.00 | | | | 1,493,179 | | | | 13.26 | | | | 450,530 | | | | 4.00 | | | | 450,530 | | | | 4.00 | | | N/A | | | N/A | | Bank | | | 824,120 | | | | 12.52 | | | 197,465 | | | | 3.00 | | | 329,108 | | | | 5.00 | | | | 1,689,336 | | | | 15.00 | | | | 450,372 | | | | 4.00 | | | | 450,372 | | | | 4.00 | | | | 562,965 | | | | 5.00 | % | December 31, 2015: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Common equity tier 1 to risk-weighted assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Company | | | $ | 1,316,373 | | | | 10.79 | % | | $ | 549,200 | | | | 4.50 | % | | $ | 854,311 | | | | 7.00 | % | | N/A | | | N/A | | Bank | | | | 1,385,192 | | | 11.36 | | | | 548,840 | | | | 4.50 | | | | 853,752 | | | | 7.00 | | | $ | 792,769 | | | | 6.50 | % | Tier 1 capital to risk-weighted assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Company | | | | 1,417,940 | | | | 11.62 | | | | 732,267 | | | | 6.00 | | | | 1,037,378 | | | | 8.50 | | | N/A | | | N/A | | Bank | | | | 1,385,192 | | | | 11.36 | | | | 731,787 | | | | 6.00 | | | | 1,036,698 | | | | 8.50 | | | | 975,716 | | | | 8.00 | | Total capital to risk-weighted assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Company | | | | 1,478,794 | | | | 12.12 | | | | 976,356 | | | | 8.00 | | | | 1,281,467 | | | | 10.50 | | | N/A | | | N/A | | Bank | | | | 1,446,046 | | | | 11.86 | | | | 975,716 | | | | 8.00 | | | | 1,280,627 | | | | 10.50 | | | | 1,219,645 | | | | 10.00 | | Tier 1 leverage to average assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Company | | | | 1,417,940 | | | | 14.96 | | | | 379,116 | | | | 4.00 | | | | 379,116 | | | | 4.00 | | | N/A | | | N/A | | Bank | | | | 1,385,192 | | | | 14.62 | | | | 378,900 | | | | 4.00 | | | | 378,900 | | | | 4.00 | | | | 473,625 | | | | 5.00 | |
As of
At June 30, 2016 and December 31, 2015, capital levels at both the Company and the Bank exceed all minimum capital adequacy requirements under the Basel III Rules on a fully phased-in basis. Based on the ratios presented above, capital levels as of June 30, 2015 exceed the minimum levels necessary to be considered “well capitalized.” 64
Liquidity Bank Liquidity.General.Liquidity represents an institution’s ability to provide funds to satisfy demands from depositors, borrowers and other creditors by either converting assets into cash or accessing new or existing sources of incremental funds. Liquidity risk arises from the possibility we may be unable to satisfy current or future funding requirements and needs. The ALCO and Investments Committee (“ALCO”), which reports to the board of directors, has primary responsibility for oversight of our liquidity, funds management, asset/liability (interest rate risk) position and investment portfolio functions.capital.
The objective of managing liquidity risk is to ensure the cash flow requirements resulting from depositor, borrower and other creditor demands are met, as well as operating cash needs of the Company, and the cost of funding such requirements and needs is reasonable. We maintain an interest rate risk, liquidity and funds management policy and a contingency funding plan that, among other things, include policies and procedures for managing liquidity risk. Generally we rely on deposits, repayments of loans and leases, and repayments of our investment securities as our primary sources of funds. Our principal deposit sources include consumer, commercial and public funds customers in our markets. We have used these funds, together with wholesale deposit sources such as brokered deposits, along with FHLB advances, federal funds purchased and other sources of short-term borrowings, to make loans and leases, acquire investment securities and other assets and to fund continuing operations. Deposit levels may be affected by a number of factors including rates paid by competitors, general interest rate levels, returns available to customers on alternative investments, general economic and market conditions and other factors. Loan and lease repayments are generally a relatively stable source of funds but are subject to the borrowers’ and lessees’ ability to repay the loans and leases, which can be adversely affected by a number of factors including changes in general economic conditions, adverse trends or events affecting business industry groups or specific businesses, declines in real estate values or markets, business closings or lay-offs, inclement weather, natural disasters and other factors. Furthermore, loans and leases generally are not readily convertible to cash. Accordingly, we may be required from time to time to rely on secondary sources of liquidity to meet growth in loans and leases and deposit withdrawal demands or otherwise fund operations. Such secondary sources include wholesale deposit sources, FHLB advances, secured and unsecured federal funds lines of credit from correspondent banks, FRB borrowings and/or accessing the capital markets. At June 30, 2015,2016, we had $7.35 billion in unfunded balances on loans already closed, the vast majority of which is attributable to construction loans for which construction has already commenced. In most cases the borrower’s equity and all other required subordinated elements of the capital structure must be fully funded before we advance funds. Typically we are the last to advance funds and the first to be repaid. In many cases we do not advance funds on loans for many months after closing because the borrower’s equity and other funding sources must fund first. This conservative practice for handling construction loans has led to the large unfunded balance of closed loans. As a result, we maintain a detailed 36-month forward funding forecast projecting all loan fundings and loan pay downs and pay offs. Our ability to project monthly net portfolio growth with a substantial degree of accuracy is an important part of our liquidity management process. At June 30, 2016, we had substantial unused borrowing availability. This availability was primarily comprised of the following four options: (1) $1.66$3.0 billion of available blanket borrowing capacity with the FHLB, (2) $137$211 million of investment securities available to pledge for federal funds or other borrowings, (3) $170 million of available unsecured federal funds borrowing lines and (4) up to $149$152 million of available borrowing capacity from borrowing programs of the FRB. As a result of our C&S acquisition on July 20, 2016 and our C1 acquisition on July 21, 2016, we expect our available blanket borrowing capacity with the FHLB to increase significantly in future periods. We anticipate we will continue to rely primarily on deposits, repayments of loans and leases and repayments ofcash flows from our investment securities portfolio to provide liquidity, as well as other funding sources as appropriate. Additionally, where necessary, the sources of borrowed funds described above will be used to augment our primary funding sources. Sources and Uses of Funds.Operating activities provided net cash of $44.9$68.3 million for the first six months of 20152016 and $20.1$84.3 million for the first six months of 2014.2015. Net cash used or provided by operating activities is comprised primarily of net income, adjusted for non-cash items and for changes in various operating assets and liabilities. Investing activities used net cash of $39.2$1.60 billion in the first six months of 2016 and $78.5 million in the first six months of 2015 and used $118.8 million in the first six months of 2014.2015. The decreaseincrease in net cash used by investing activities of $79.6 million was primarily the result of the increase in net cash of $274.3 million receivedused to fund non-purchased loan and lease growth in the Intervest acquisition.first six months of 2016 and, to a lesser extent, to purchase investment securities. Additionally, thewe received net activity incash from our investment securities portfolio provided $76.8Interest acquisition totaling $274 million during the first six months of 2015 comparedcomponent to $43.0 million duringnone in the first six months of 2014. The current low interest rate environment has resulted2016. Financing activities provided $2.25 billion in many issuers of investment securities, particularly tax-exempt municipal securities, to call higher rate securities and refinance such securities at lower interest rates. The investing cash flow provided by our Intervest transaction and investment securities portfolio was partially offset by investing activities cash flow used to purchase $85.0 million in BOLI policies during the first six months of 2015 compared to no BOLI purchases during the first six months of 20142016 and investing activities cash flow used to fund the continued growth in our loan and lease portfolio, which used $338.0$359 million in the first six months of 2015 compared to $332.3 million in the first six months of 2014. Financing activities provided $359.0 million and $13.4 million in the first six months of 2015 and 2014, respectively.2015. The increase in net cash provided by financing activities was primarily the result of an increase in net cash provided by our deposit activities, which provided $406.3 million$2.22 billion during the first six months of 20152016 to help fund our loan and lease growth, compared to $41.2 millionas well as net proceeds received from the issuance of net cashour subordinated notes which provided during the first six months of 2014. This increase in financing activities cash flows provided by our deposit activities was partially offset by our repayment of other borrowings, which used $31.4 million during the first six months of 2015. $222 million.65
Off-Balance Sheet Commitments.We are party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers. These financial instruments primarily include commitments to extend credit (most of which are in the form of unfunded balances on loans already closed) and standby letters of credit. See Note 98 to the Consolidated Financial Statements for more information about our outstanding guarantees and commitments as of June 30, 2015.2016. Growth and Expansion De Novo Growth.In 2014 During the first quarter of 2016, we opened loan productionour first retail banking offices for ourin Siloam Springs in northwest Arkansas and a Real Estate Specialties Group, or RESG, loan production office in Houston, Texas and in Los Angeles,San Francisco, California. We alsoDuring the second quarter of 2016, we opened aour third retail banking office in Bradenton, Florida, aFayetteville, Arkansas. In the third quarter of 2016, we closed our office in Greensboro, North Carolina, and we plan to open our third retail banking office in Cornelius, North Carolina and a retail banking office in Hilton Head Island, South Carolina.Springdale, Arkansas. In the second halffirst quarter of 2015, we expect to open our fourth retail banking office in Houston, Texas and a loan production office in Greensboro, North Carolina. During 2016,2017, we expect to open our first retail banking office in Siloam Springs in northwest Arkansas, our second retail banking office in Springdale, Arkansas, our third retail banking office in Fayetteville, Arkansas and our first retail banking office in McKinney, Texas. We intend to continue our growth andde novo branching strategy in the future years through the opening of additional branchesretail banking and loan production offices. Opening new offices is subject to local banking market conditions, availability of suitable sites, hiring qualified personnel, obtaining regulatory and other approvals and many other conditions and contingencies that we cannot predict with certainty. We may increase or decrease our expected number of new office openings as a result of a variety of factors including our financial results, changes in economic or competitive conditions, strategic opportunities or other factors. During the first six months of 2015,2016, we spent $9.7approximately $15 million on capital expenditures for premises and equipment. Our capital expenditures for 2015the full year 2016 are expected to be in the range of $15$28 million to $25$42 million, including progress payments on construction projects expected to be completed in 2015 and 2016,future periods, furniture and equipment costs and acquisition of sites for future development. Actual expenditures may vary significantly from those expected, depending on the number and cost of additional branch offices acquired or constructed and sites acquired for future development, progress or delays encountered on ongoing and new construction projects, delays in or inability to obtain required approvals, potential premises and equipment expenditures associated with acquisitions, if any, and other factors. Acquisitions.We have shown substantial growth through a combination of organic growth and acquisitions. Since 2010, we have completed 1315 acquisitions, including seven FDIC-assisted transactions.transactions, and we recently closed two acquisitions during the third quarter of 2016. On February 10, 2015,July 20, 2016, we completed our acquisition of IntervestC&S and its wholly-owned bank subsidiary, Intervest NationalCommunity & Southern Bank, headquartered in New York, New York.a transaction valued at $800.3 million. Pursuant to the terms of the merger agreement, we issued approximately 20,200,000 shares of our common stock (plus cash in lieu of fractional and shares) to C&S stockholders. Additionally, we issued approximately 784,000 shares of our common stock (net of shares withheld for taxes) to holders of outstanding C&S stock options, restricted stock units, deferred stock units and warrants in satisfaction of all outstanding C&S equity awards. The acquisition of Intervest added seven full serviceC&S provides us with 46 banking offices including one in New York City, five in Clearwater, Floridathroughout Georgia and one banking office in Pasadena,Jacksonville, Florida. On August 5, 2015,July 21, 2016, we completed our acquisition of Bank of the Carolinas Corporation (“BCAR”)C1 and its wholly-owned bank subsidiary, C1 Bank, in a transaction valued at $376.1 million. Pursuant to the terms of the Carolinas, headquarteredmerger agreement and the subsequent sale of certain C1 Bank loans, we issued approximately 9,371,000 shares of our common stock (plus cash in Mocksville, North Carolina.lieu of fractional and de minimis shares). The acquisition of BCAR added eight full serviceC1 provides us with 33 banking offices throughout the west coast of Florida and in North Carolina, including one each in Advance, Asheboro, Concord, Harrisburg, Landis, Lexington, MocksvilleMiami-Dade and Winston-Salem.Orange counties. Future Growth Strategy.We expect to continue growing through both ourde novo branching strategy and traditional acquisitions. With respect to ourde novo branching strategy, futurede novo branches are expected to be focused in states where we currently have banking offices and we expect to begin focusing onin larger markets and MSAs across the U.S. where we currently do not have offices.retail banking offices and believe we can generate significant growth from one or two strategically located offices in each such market. Future RESG loan production offices are expected to be focused in strategically important markets (most likely offices in Seattle, Washington, D.C., Seattle, Boston and Chicago). With respect to traditional acquisitions, we are seeking acquisitions that are either immediately accretive to book value, tangible book value, and diluted earnings per share, or strategic in location,to our business, or both. RECENTLY ISSUED ACCOUNTING STANDARDS See Note 1815 to the Consolidated Financial Statements for a discussion of certain recently issued and recently adopted accounting pronouncements. 66
Item 3. | Quantitative and QualitativeQualitative Disclosures about Market Risk |
Interest rate risk results from timing differences in the repricing of assets and liabilities or from changes in relationships between interest rate indexes. Our interest rate risk management is the responsibility of ALCO, which reports to the board of directors.ALCO. We regularly review our exposure to changes in interest rates. Among the factors considered are changes in the mix of interest earning assets and interest bearing liabilities, interest rate spreads and repricing periods. Typically, ALCO reviews on at least a quarterly basis our relative ratio of rate sensitive assets (“RSA”) to rate sensitive liabilities (“RSL”) and the related cumulative gap for different time periods. However, the primary tool used by ALCO to analyze our interest rate risk and interest rate sensitivity is an earnings simulation model. This earnings simulation modeling process projects a baseline net interest income (assuming no changes in interest rate levels) and estimates changes to that baseline net interest income resulting from changes in interest rate levels. We rely primarily on the results of this model in evaluating our interest rate risk. This model incorporates a number of additional factors including: (1) the expected exercise of call features on various assets and liabilities, (2) the expected rates at which various RSA and RSL will reprice, (3) the expected growth in various interest earning assets and interest bearing liabilities and the expected interest rates on new assets and liabilities, (4) the expected relative movements in different interest rate indexes which are used as the basis for pricing or repricing various assets and liabilities, (5) existing and expected contractual cap and floor rates on various assets and liabilities, (6) expected changes in administered rates on interest bearing transaction, savings, money market and time deposit accounts and the expected impact of competition on the pricing or repricing of such accounts, (7) the timing and amount of cash flows expected to be received on purchased loans, (8) the need for additional capital to support continued growth and (8)(9) other relevant factors. Inclusion of these factors in the model is intended to more accurately project our expected changes in net interest income resulting from interest rate changes. We typically model our change in net interest income assuming interest rates go up 100 bps, up 200 bps, up 300 bps, up 400 bps, up 500 bps, down 100 bps, down 200 bps, down 300 bps, down 400 bps and down 400500 bps. Based on current conditions, we believe that modeling our change in net interest income assuming interest rates go down 100 bps, down 200 bps, down 300 bps, down 400 bps and down 400500 bps is not meaningful. For purposes of this model, we have assumed that the change in interest rates phases in over a 12-month period. While we believe this model provides a reasonably accurate projection of our interest rate risk, the model includes a number of assumptions and predictions which may or may not be correct and may impact the model results. These assumptions and predictions include inputs to compute baseline net interest income, growth rates, expected changes in administered rates on interest bearing deposit accounts, competition and a variety of other factors that are difficult to accurately predict. Accordingly, there can be no assurance the earnings simulation model will accurately reflect future results. The following table presents the earnings simulation model’s projected impact of a change in interest rates on the projected baseline net interest income for the 12-month period commencing July 1, 2015.2016. This change in interest rates assumes parallel shifts in the yield curve and does not take into account changes in the slope of the yield curve or the impact of any possible future acquisitions. | | | Shift in Interest Rates (in bps) | | % Change in
Projected Baseline
Net Interest Income | | +500 | | 15.6% | | +400 | | 11.6% 12.4 | | +300 | | 8.3 | 9.1 | | +200 | | 5.0 | 5.9 | | +100 | | 2.2 | 2.8 | | -100 | | Not meaningful | | -200 | | Not meaningful | | -300 | | Not meaningful | | -400 | | Not meaningful | | -500 | | Not meaningful | |
In the event of a shift in interest rates, management may take certain actions intended to mitigate the negative impact to net interest income or to maximize the positive impact to net interest income. These actions may include, but are not limited to, restructuring of interest earning assets and interest bearing liabilities, seeking alternative funding sources or investment opportunities and modifying the pricing or terms of loans, leases and deposits. 67
Item 4. | ControlsControls and Procedures |
(a) Evaluation of Disclosure Controls and Procedures. An evaluation as of the end of the period covered by this quarterly report was carried out under the supervision and with the participation of our management, including our Chairman and Chief Executive Officer and our Chief Financial Officer and Chief Accounting Officer, of the effectiveness of the design and operation of our “disclosure controls and procedures,” which are defined in Rule 13a-15(e) under SEC rulesthe Exchange Act as controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within required time periods. Based upon that evaluation, our Chairman and Chief Executive Officer and our Chief Financial Officer and Chief Accounting Officer concluded that our disclosure controls and procedures were effective. (b) Changes in Internal Control over Financial Reporting. Our management, including our Chairman and Chief Executive Officer and our Chief Financial Officer and Chief Accounting Officer, has evaluated any changes in our internal control over financial reporting that occurred during the quarterly period covered by this report and has concluded that there were no changes during the quarterly period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 68
PART II. OTHER INFORMATION Item 1. | PART II.
| OTHER INFORMATIONLegal Proceedings |
On January 5, 2012,December 19, 2011, the Company and the Bank were served withnamed as defendants in a summons and complaintpurported class action lawsuit filed on December 19, 2011, in the Circuit Court of Lonoke County, Arkansas, Division III, styledRobert Walker, Ann B. Hines and Judith Belk vs. Bank of the Ozarks, Inc. and Bank of the Ozarks, Case No. CV-2011-777. In addition, on. On December 21,20, 2012, the Bank was served withnamed as a summons and complaintdefendant in a purported class action lawsuit filed on December 20, 2012, in the Circuit Court of Pulaski County, Arkansas, Ninth Division, styledAudrey Muzingo v. Bank of the Ozarks, Case No. 60 CV-12-6043.. The complaint in each case alleges thatchallenges the Company and/or Bank have harmed the plaintiffs, current or former customers of the Bank, by improper, unfair, and unconscionable assessment and collection of excessivemanner in which overdraft fees fromwere charged and the plaintiffs. Accordingpolicies related to the complaints, plaintiffs claim that the Bank employs sophisticated software to automate its overdraft system, and that this system unfairly and inequitably manipulates and alters customers’ transaction records inposting order to maximize overdraft penalties, particularly utilizing a practice of posting of items in “high-to-low” order, despite the actual sequence in which such items are presented for payment. Plaintiffs claim that the Bank’s deposit agreements with customers do not adequately disclose the Bank’s overdraft assessment policies and are ambiguous, deceptive, unfair, and misleading. Theon payments. In addition, each complaint in each case alleges that these actions and omissions constitute breach of contract, breach of the implied covenant of good faith and fair dealing, unconscionable conduct, conversion, unjust enrichment, and violationviolations of the Arkansas Deceptive Trade Practices Act. The complaint in theWalker case also includes a count for conversion. Each of the complaints seeks to have the cases certified by the court as a class action for all Bank account holders located in the State of Arkansas similarly situated, and seeks (1) a declaratory judgment as to the wrongful nature of the Bank’s overdraft fee policies, (2) restitution of overdraft fees paid by the plaintiffs and the putative class (defined as all Bank customers residing in Arkansas) as a result of the actions cited in the complaints, (3) disgorgement of profits as a result of the alleged wrongful actions, and(4) unspecified compensatory and statutory or punitive damages, together withand (5) pre-judgment interest, costs, and plaintiffs’ attorneys’ fees. The Company and the Bank filed a motion to dismiss and to compel arbitration inpursuant to theWalker case. The trial court denied terms of the motion and found that the arbitration provision containedconsumer deposit account agreement in the controlling Consumer Deposit Account AgreementWalker case, which was unconscionable and thus unenforceable ondenied by the grounds that the provision was the result of unequal bargaining power.trial court. The Company and Bank appealed the trial court’s ruling to the Arkansas Court of Appeals on an interlocutory basis. On September 18, 2013, a three-judge panel of the Arkansas Court of Appeals reversed the trial court’s ruling and remanded the case to the trial court for the purpose of entering an order compelling arbitration. On October 7, 2013, the plaintiffs filed petitions for reconsideration and review before the Arkansas Court of Appeals and Arkansas Supreme Court, respectively. On October 30, 2013, the Arkansas Court of Appeals denied the plaintiffs’ petition for reconsideration. In January 2014, the Arkansas Supreme Court granted the plaintiff’s petition for review. Oral arguments were presented to the Arkansas Supreme Court on May 1, 2014. On May 15, 2014, the Arkansas Supreme Court vacated the Arkansas Court of Appeals’ decision, reversing and remanding the case to the trial court to determine, in the first instance, whether there is a valid agreement to arbitrate disputes between the named plaintiffs and the Bank. An evidentiary hearing was conducted by the trial court on the arbitration issue on October 1, 2014, and the trial court took the matter under advisement. On October 30, 2014, the trial court issued an order once again denying the Company and Bank’s motion to dismiss and to compel arbitration. The trial court ruled that the Consumer Deposit Account Agreement containing the arbitration provision was not enforceable because of a lack of mutual agreement and lack of mutual obligation. The Company and Bank have appealed the trial court’s ruling to the Arkansas Supreme Court on an interlocutory basis. The Arkansas Supreme Court recently affirmed the trial courts’ decision to deny the Company and Bank’s motion to compel arbitration, finding that there was no mutual agreement or obligation to arbitrate under the terms of the subject deposit account agreement. On June 13, 2016, counsel for the Company and Bank caused to be filed their initial appellate brief on April 14, 2015. The plaintiffs filed their appellate brief on May 14, 2015, andwith the Company and the Bank filed their reply brief on May 29, 2015. The Arkansas Supreme Court has determinedof the United States a Petition for Writ of Certiorari requesting that oral arguments are unnecessary. A ruling fromthe Supreme Court of the United States review the Arkansas Supreme Court is expected in September or October of 2015.Court’s decision.
The Plaintiffplaintiff in theMuzingo case has agreed to stay the proceedings in that case pending the outcome of the appealappeals in theWalker case. TheAlthough there are significant uncertainties involved in any purported class action litigation, the Company and the Bank believe that the Plaintiffs’plaintiffs’ claims in each of these cases are unfounded and subject to meritorious defenses and intend to vigorously defend against these claims. The Company is partyand/or the Bank are parties to various other legal proceedings, as both plaintiff and defendant, arising in the ordinary course of business, including claims of lender liability, broken promises, and other similar lending-related claims. While the ultimate resolution of thesethe various claims and proceedings described above cannot be determined at this time, management of the Company believes that such claims and proceedings, individually or in the aggregate, will not have a material adverse effect on the future results of operations, financial condition, or liquidity of the Company. There were no material changes fromThe discussion of the Company’s business and operations should be read together with the risk factor described below and the risk factors set forth under Part I,contained in Item 1A of the Company’sits Annual Report on Form 10-K for the year ended December 31, 2014.2015, previously filed with the SEC, which describes various risks and uncertainties to which the Company is or may be subject. These risks and uncertainties have the potential to affect the Company’s business, financial condition, results of operations, and prospects in a material adverse manner.
We may use brokered deposit which may be an unstable and/or expensive deposit source to fund growth asset growth. We use brokered deposits, subject to certain limitations and requirements, as a source of funding to augment deposits generated from our branch network, which are our principal source of funding. Our board of directors has established policies and procedures with respect to the use of brokered deposits. Such policies and procedures require, among other things, that we (i) limit the amount of brokered deposits as a percentage of total deposits and (ii) our ALCO monitor our use of brokered deposits on a regular basis, including interest rates and the total volume of such deposits in relation to our total liabilities. ALCO has typically approved the use of brokered deposits when (i) such deposits are from respected and stable funding sources and (ii) such deposits are less costly to us than the marginal cost of additional deposits generated from our branch network. In the event that our funding strategies call for the use of brokered deposits, there can be no assurance that such sources will be available, or will remain available, or that the cost of such funding sources will be reasonable. Additionally, should our bank subsidiary no longer be considered well-capitalized, our ability to access new brokered deposits or retain existing brokered deposits could be affected by market conditions, regulatory requirements or a combination thereof, which could result in most, if not all, brokered deposit sources being unavailable. The inability to utilize brokered deposits as a source of funding could have an adverse effect on our financial position, results of operations and liquidity. Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
We had no unregistered sales of equity securities and did not purchase any shares of our common stock during the period covered by this report. 69
Item 3. | Defaults UponUpon Senior Securities |
Not Applicable. Item 4. | Mine Safety Disclosures |
Not Applicable. None. Reference is made to the Exhibit Index set forth immediately following the signature page of this report. 70
SIGNATURESIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. | | | | | | | | | Bank of the Ozarks, Inc. | | | | DATE: August 7, 20158, 2016 | | | | /s/ Greg McKinney | | | | | Greg McKinney | | | | | Chief Financial Officer and | | | | | Chief Accounting Officer | | | | | (Principal Financial Officer and Authorized Officer) |
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Bank of the Ozarks, Inc. Exhibit Index Exhibit Number | | | Exhibit
Number
2.1 | | | | | 2.1 | | Agreement and Plan of Merger among Bank of the Ozarks, Inc., Bank of the Ozarks, Summit Bancorp, Inc. and Summit Bank, dated as of January 30, 2014 (previously filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the Commission on January 30, 2014, and incorporated herein by this reference). | 2.2 | | 2.2 | | Agreement and Plan of Merger among Bank of the Ozarks, Inc., Bank of the Ozarks, Intervest Bancshares Corporation and Intervest National Bank, dated as of July 31, 2014 (previously filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the Commission on July 31, 2014, and incorporated herein by this reference). | 2.3 | | Agreement and Plan of Merger among Bank of the Ozarks, Inc., Bank of the Ozarks, Community & Southern Holdings, Inc. and Community & Southern Bank, dated as of October 19, 2015 (previously filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the Commission on October 19, 2015, and incorporated herein by this reference). | 3.12.4 | | Agreement and Plan of Merger among Bank of the Ozarks, Inc., Bank of the Ozarks, C1 Financial, Inc. and C1 Bank, dated as of November 9, 2015 (previously filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the Commission on November 10, 2015, and incorporated herein by this reference). | 3.1 | | Amended and Restated Articles of Incorporation of Bank of the Ozarks, Inc., dated May 22, 1997 (previously filed as Exhibit 3.1 to the Company’s Registration Statement on Form S-1 filed with the Commission on May 22, 1997, as amended, Commission File No. 333-27641, and incorporated herein by this reference). | 3.2 | | 3.2 | | Articles of Amendment to the Amended and Restated Articles of Incorporation of Bank of the Ozarks, Inc. dated December 9, 2003 (previously filed as Exhibit 3.2 to the Company’s Annual Report on Form 10-K filed with the Commission on March 12, 2004 for the year ended December 31, 2003, and incorporated herein by this reference). | 3.3 | | 3.3 | | Articles of Amendment to the Amended and Restated Articles of Incorporation of Bank of the Ozarks, Inc. dated December 10, 2008 (previously filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Commission on December 10, 2008, and incorporated herein by this reference). | 3.4 | | 3.4 | | Articles of Amendment to the Amended and Restated Articles of Incorporation of Bank of the Ozarks, Inc. dated May 19, 2014 (previously filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Commission on May 20, 2014)2014, and incorporated herein by this reference). | 3.5 | | Articles of Amendment to the Amended and Restated Articles of Incorporation of Bank of the Ozarks, Inc., dated May 16, 2016 (previously filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Commission on May 17, 2016 and incorporated herein by reference). | 3.53.6 | | Amended and Restated Bylaws of Bank of the Ozarks, Inc., dated November 18, 2014 (previously filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Commission on November 21, 2014, and incorporated herein by this reference). | 4.1 | | Instruments defining the rights of security holders, including indentures. The Registrant hereby agrees to furnish to the Commission upon request copies of instruments defining the rights of holders of long-term debt of the Registrant and its consolidated subsidiaries; no issuance of debt exceeds ten percent of the assets of the Registrant and its subsidiaries on a consolidated basis. | 10.1* | | Second Amended and Restated Bank of the Ozarks, Inc. Amended2009 Restricted Stock and Restated Stock OptionIncentive Plan, effective May 18, 201516, 2016 (previously filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on May 18, 201517, 2016 and incorporated herein by this reference). | 10.2* | | 10.2* | | Form of Notice of Grant of Restricted Stock Option Grantand Award Agreement, effective May 18, 2015,16, 2016, for employeesgrants under the Second Amended and Restated Bank of the Ozarks, Inc. 2009 Restricted Stock Optionand Incentive Plan, effective May 16, 2016 (previously filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on May 18, 201517, 2016 and incorporated herein by this reference). | 10.3* | | 10.3* | | Bank of the Ozarks, Inc. Non-Employee Director Stock Plan, as amended, effective May 18, 201516, 2016 (previously filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the Commission on May 18, 201517, 2016 and incorporated herein by this reference). | 11.1 | | 11.1 | | Earnings Per Share Computation (included in Note 43 to the Consolidated Financial Statements). | 12.1 | | 12.1 | | Computation of Ratios of Earnings to Fixed Charges, filed herewith.herewith. | 31.1 | | 31.1 | | Certification of Chairman and Chief Executive Officer, pursuant to Section 302 of the Sarbanes Oxley Act of 2002, filed herewith. | 31.2 | | 31.2 | | Certification of Chief Financial Officer and Chief Accounting Officer, pursuant to Section 302 of the Sarbanes Oxley Act of 2002, filed herewith. | 32.1 | | 32.1 | | Certification of Chairman and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished herewith. | 32.2 | | 32.2 | | Certification of Chief Financial Officer and Chief Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished herewith. |
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101.INS | | | | | 101.INS | | XBRL Instance Document | 101.SCH | | 101.SCH | | XBRL Taxonomy Extension Schema | 101.CAL | | 101.CAL | | XBRL Taxonomy Extension Calculation Linkbase | 101.DEF | | 101.DEF | | XBRL Taxonomy Definition Linkbase | 101.LAB | | 101.LAB | | XBRL Extension Label Linkbase | 101.PRE | | 101.PRE | | XBRL Taxonomy Extension Presentation Linkbase |
| | * | Management contract or a compensatory plan or arrangement.arrangement |
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