Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
☒ | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
March 31, 2020
☐ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
94-2792841 | ||||||||
(State or Other Jurisdiction of
| (I.R.S. Employer
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Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Common Stock | TCBK | The NASDAQ Stock Market |
Large accelerated filer | ☐ | |||||||||||||||||||
☐ | Non-accelerated filer | ☐ | Smaller reporting company | |||||||||||||||||
☐ | Emerging growth company | |||||||||||||||||||
May 8, 2020.
Page | ||||||||
This report on Form10-Q contains forward-looking statements about TriCo Bancshares (the “Company”) that are subject to the protection
At September 30, | At December 31, | |||||||
2017 | 2016 | |||||||
Assets: | ||||||||
Cash and due from banks | $ | 86,815 | $ | 92,197 | ||||
Cash at Federal Reserve and other banks | 101,219 | 213,415 | ||||||
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Cash and cash equivalents | 188,034 | 305,612 | ||||||
Investment securities: | ||||||||
Available for sale | 678,236 | 550,233 | ||||||
Held to maturity | 536,567 | 602,536 | ||||||
Restricted equity securities | 16,956 | 16,956 | ||||||
Loans held for sale | 2,733 | 2,998 | ||||||
Loans | 2,931,613 | 2,759,593 | ||||||
Allowance for loan losses | (28,747 | ) | (32,503 | ) | ||||
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Total loans, net | 2,902,866 | 2,727,090 | ||||||
Foreclosed assets, net | 3,071 | 3,986 | ||||||
Premises and equipment, net | 54,995 | 48,406 | ||||||
Cash value of life insurance | 97,142 | 95,912 | ||||||
Accrued interest receivable | 12,656 | 12,027 | ||||||
Goodwill | 64,311 | 64,311 | ||||||
Other intangible assets, net | 5,513 | 6,563 | ||||||
Mortgage servicing rights | 6,419 | 6,595 | ||||||
Other assets | 86,936 | 74,743 | ||||||
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Total assets | $ | 4,656,435 | $ | 4,517,968 | ||||
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Liabilities and Shareholders’ Equity: | ||||||||
Liabilities: | ||||||||
Deposits: | ||||||||
Noninterest-bearing demand | $ | 1,283,949 | $ | 1,275,745 | ||||
Interest-bearing | 2,643,507 | 2,619,815 | ||||||
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Total deposits | 3,927,456 | 3,895,560 | ||||||
Accrued interest payable | 867 | 818 | ||||||
Reserve for unfunded commitments | 2,989 | 2,719 | ||||||
Other liabilities | 62,850 | 67,364 | ||||||
Other borrowings | 98,730 | 17,493 | ||||||
Junior subordinated debt | 56,810 | 56,667 | ||||||
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Total liabilities | 4,149,702 | 4,040,621 | ||||||
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Commitments and contingencies (Note 18) | ||||||||
Shareholders’ equity: | ||||||||
Common stock, no par value: 50,000,000 shares authorized; issued and outstanding: | ||||||||
22,941,464 at September 30, 2017 | 255,231 | |||||||
22,867,802 at December 31, 2016 | 252,820 | |||||||
Retained earnings | 256,114 | 232,440 | ||||||
Accumulated other comprehensive loss, net of tax | (4,612 | ) | (7,913 | ) | ||||
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Total shareholders’ equity | 506,733 | 477,347 | ||||||
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Total liabilities and shareholders’ equity | $ | 4,656,435 | $ | 4,517,968 | ||||
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The accompanying notes are an integral part of these consolidated financial statements.
TRICO BANCSHARES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data; unaudited)
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Interest and dividend income: | ||||||||||||||||
Loans, including fees | $ | 37,268 | $ | 35,769 | $ | 108,600 | $ | 104,845 | ||||||||
Investment securities: | ||||||||||||||||
Taxable | 7,011 | 6,297 | 20,617 | 19,377 | ||||||||||||
Tax exempt | 1,041 | 978 | 3,124 | 2,850 | ||||||||||||
Dividends | 301 | 390 | 1,020 | 1,175 | ||||||||||||
Interest bearing cash at | ||||||||||||||||
Federal Reserve and other banks | 292 | 275 | 1,080 | 846 | ||||||||||||
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Total interest and dividend income | 45,913 | 43,709 | 134,441 | 129,093 | ||||||||||||
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Interest expense: | ||||||||||||||||
Deposits | 1,028 | 875 | 2,896 | 2,611 | ||||||||||||
Other borrowings | 149 | 2 | 164 | 7 | ||||||||||||
Junior subordinated debt | 652 | 562 | 1,870 | 1,643 | ||||||||||||
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Total interest expense | 1,829 | 1,439 | 4,930 | 4,261 | ||||||||||||
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Net interest income | 44,084 | 42,270 | 129,511 | 124,832 | ||||||||||||
Provision (Reversal of provision) for loan losses | 765 | (3,973 | ) | (1,588 | ) | (4,537 | ) | |||||||||
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Net interest income after reversal of provision loan losses | 43,319 | 46,243 | 131,099 | 129,369 | ||||||||||||
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Noninterest income: | ||||||||||||||||
Service charges and fees | 9,475 | 8,022 | 27,861 | 23,426 | ||||||||||||
Gain on sale of loans | 606 | 953 | 2,293 | 2,645 | ||||||||||||
Commissions on sale ofnon-deposit investment products | 672 | 747 | 1,984 | 1,890 | ||||||||||||
Increase in cash value of life insurance | 732 | 709 | 2,043 | 2,086 | ||||||||||||
Gain on sale of investments securities | 961 | — | 961 | — | ||||||||||||
Other | 484 | 635 | 2,401 | 2,054 | ||||||||||||
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Total noninterest income | 12,930 | 11,066 | 37,543 | 32,101 | ||||||||||||
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Noninterest expense: | ||||||||||||||||
Salaries and related benefits | 20,933 | 20,860 | 62,320 | 60,170 | ||||||||||||
Other | 16,289 | 16,556 | 46,628 | 49,264 | ||||||||||||
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Total noninterest expense | 37,222 | 37,416 | 108,948 | 109,434 | ||||||||||||
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Income before income taxes | 19,027 | 19,893 | 59,694 | 52,036 | ||||||||||||
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Provision for income taxes | 7,130 | 7,694 | 22,129 | 19,758 | ||||||||||||
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Net income | $ | 11,897 | $ | 12,199 | $ | 37,565 | $ | 32,278 | ||||||||
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Earnings per share: | ||||||||||||||||
Basic | $ | 0.52 | $ | 0.53 | $ | 1.64 | $ | 1.42 | ||||||||
Diluted | $ | 0.51 | $ | 0.53 | $ | 1.62 | $ | 1.40 |
March 31, 2020 | December 31, 2019 | ||||||||||
Assets: | |||||||||||
Cash and due from banks | $ | 95,364 | $ | 92,816 | |||||||
Cash at Federal Reserve and other banks | 90,102 | 183,691 | |||||||||
Cash and cash equivalents | 185,466 | 276,507 | |||||||||
Investment securities: | |||||||||||
Marketable equity securities | 3,007 | 2,960 | |||||||||
Available for sale debt securities, net of allowance for credit losses of $— | 1,001,999 | 950,138 | |||||||||
Held to maturity debt securities, net of allowance for credit losses of $— | 359,770 | 375,606 | |||||||||
Restricted equity securities | 17,250 | 17,250 | |||||||||
Loans held for sale | 2,695 | 5,265 | |||||||||
Loans | 4,379,062 | 4,307,366 | |||||||||
Allowance for credit losses | (57,911) | (30,616) | |||||||||
Total loans, net | 4,321,151 | 4,276,750 | |||||||||
Premises and equipment, net | 86,304 | 87,086 | |||||||||
Cash value of life insurance | 118,543 | 117,823 | |||||||||
Accrued interest receivable | 18,575 | 18,897 | |||||||||
Goodwill | 220,872 | 220,872 | |||||||||
Other intangible assets, net | 22,126 | 23,557 | |||||||||
Operating leases, right-of-use | 30,221 | 27,879 | |||||||||
Other assets | 86,330 | 70,591 | |||||||||
Total assets | $ | 6,474,309 | $ | 6,471,181 | |||||||
Liabilities and Shareholders’ Equity: | |||||||||||
Liabilities: | |||||||||||
Deposits: | |||||||||||
Noninterest-bearing demand | $ | 1,883,143 | $ | 1,832,665 | |||||||
Interest-bearing | 3,519,555 | 3,534,329 | |||||||||
Total deposits | 5,402,698 | 5,366,994 | |||||||||
Accrued interest payable | 1,986 | 2,407 | |||||||||
Operating lease liability | 30,007 | 27,540 | |||||||||
Other liabilities | 96,560 | 91,984 | |||||||||
Other borrowings | 19,309 | 18,454 | |||||||||
Junior subordinated debt | 57,323 | 57,232 | |||||||||
Total liabilities | 5,607,883 | 5,564,611 | |||||||||
Commitments and contingencies (Note 7) | |||||||||||
Shareholders’ equity: | |||||||||||
Preferred stock, 0 par value: 1,000,000 shares authorized, 0 issued and outstanding at March 31, 2020 and December 31, 2019 | — | — | |||||||||
Common stock, 0 par value: 50,000,000 shares authorized; 29,973,516 and 30,523,824 issued and outstanding at March 31, 2020 and December 31, 2019, respectively | 534,623 | 543,998 | |||||||||
Retained earnings | 356,935 | 367,794 | |||||||||
Accumulated other comprehensive income (loss), net of tax | (25,132) | (5,222) | |||||||||
Total shareholders’ equity | 866,426 | 906,570 | |||||||||
Total liabilities and shareholders’ equity | $ | 6,474,309 | $ | 6,471,181 |
Three months ended March 31, | |||||||||||||||||||||||||||||
2020 | 2019 | ||||||||||||||||||||||||||||
Interest and dividend income: | |||||||||||||||||||||||||||||
Loans, including fees | $ | 56,258 | $ | 54,398 | |||||||||||||||||||||||||
Investments: | |||||||||||||||||||||||||||||
Taxable securities | 8,211 | 10,555 | |||||||||||||||||||||||||||
Tax exempt securities | 904 | 1,073 | |||||||||||||||||||||||||||
Dividends | 361 | 360 | |||||||||||||||||||||||||||
Interest bearing cash at Federal Reserve and other banks | 783 | 1,071 | |||||||||||||||||||||||||||
Total interest and dividend income | 66,517 | 67,457 | |||||||||||||||||||||||||||
Interest expense: | |||||||||||||||||||||||||||||
Deposits | 2,551 | 2,719 | |||||||||||||||||||||||||||
Other borrowings | 5 | 13 | |||||||||||||||||||||||||||
Junior subordinated debt | 769 | 855 | |||||||||||||||||||||||||||
Total interest expense | 3,325 | 3,587 | |||||||||||||||||||||||||||
Net interest income | 63,192 | 63,870 | |||||||||||||||||||||||||||
Provision for (reversal of) credit losses | 8,000 | (1,600) | |||||||||||||||||||||||||||
Net interest income after credit loss provision (reversal) | 55,192 | 65,470 | |||||||||||||||||||||||||||
Non-interest income: | |||||||||||||||||||||||||||||
Service charges and fees | 9,126 | 9,070 | |||||||||||||||||||||||||||
Gain on sale of loans | 891 | 412 | |||||||||||||||||||||||||||
Gain on sale of investment securities | — | — | |||||||||||||||||||||||||||
Asset management and commission income | 916 | 642 | |||||||||||||||||||||||||||
Increase in cash value of life insurance | 720 | 775 | |||||||||||||||||||||||||||
Other | 167 | 904 | |||||||||||||||||||||||||||
Total non-interest income | 11,820 | 11,803 | |||||||||||||||||||||||||||
Non-interest expense: | |||||||||||||||||||||||||||||
Salaries and related benefits | 27,272 | 25,128 | |||||||||||||||||||||||||||
Other | 17,547 | 20,324 | |||||||||||||||||||||||||||
Total non-interest expense | 44,819 | 45,452 | |||||||||||||||||||||||||||
Income before provision for income taxes | 22,193 | 31,821 | |||||||||||||||||||||||||||
Provision for income taxes | 6,072 | 9,095 | |||||||||||||||||||||||||||
Net income | $ | 16,121 | $ | 22,726 | |||||||||||||||||||||||||
Per share data: | |||||||||||||||||||||||||||||
Basic earnings per share | $ | 0.53 | $ | 0.75 | |||||||||||||||||||||||||
Diluted earnings per share | $ | 0.53 | $ | 0.74 | |||||||||||||||||||||||||
Dividends per share | $ | 0.22 | $ | 0.19 |
(LOSS)
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net income | $ | 11,897 | $ | 12,199 | $ | 37,565 | $ | 32,278 | ||||||||
Other comprehensive (loss) income, net of tax: | ||||||||||||||||
Unrealized (losses) gains on available for sale securities arising during the period | (166 | ) | (1,193 | ) | 3,137 | 6,514 | ||||||||||
Change in minimum pension liability | 55 | 74 | 164 | 222 | ||||||||||||
Change in joint beneficiary agreement liability | — | (1 | ) | — | (5 | ) | ||||||||||
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Other comprehensive (loss) income | (111 | ) | (1,120 | ) | 3,301 | 6,731 | ||||||||||
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Comprehensive income | $ | 11,786 | $ | 11,079 | $ | 40,866 | $ | 39,009 | ||||||||
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Three months ended March 31, | |||||||||||||||||||||||||||||
2020 | 2019 | ||||||||||||||||||||||||||||
Net income | $ | 16,121 | $ | 22,726 | |||||||||||||||||||||||||
Other comprehensive income (loss), net of tax: | |||||||||||||||||||||||||||||
Unrealized gains (losses) on available for sale securities arising during the period | (20,822) | 8,952 | |||||||||||||||||||||||||||
Change in minimum pension liability | 912 | — | |||||||||||||||||||||||||||
Other comprehensive income (loss) | (19,910) | 8,952 | |||||||||||||||||||||||||||
Comprehensive income (loss) | $ | (3,789) | $ | 31,678 |
statements
Shares of Common Stock | Common Stock | Retained Earnings | Accumulated Other Comprehensive Income (loss) | Total | ||||||||||||||||
Balance at December 31, 2015 | 22,775,173 | $ | 247,587 | $ | 206,307 | $ | (1,778 | ) | $ | 452,116 | ||||||||||
Net income | 32,278 | 32,278 | ||||||||||||||||||
Other comprehensive income | 6,731 | 6,731 | ||||||||||||||||||
Stock option vesting | 455 | 455 | ||||||||||||||||||
RSU vesting | 440 | 440 | ||||||||||||||||||
PSU vesting | 183 | 183 | ||||||||||||||||||
Stock options exercised | 132,700 | 2,908 | 2,908 | |||||||||||||||||
RSUs released | 20,529 | |||||||||||||||||||
Tax effect of stock option exercise | (183 | ) | (183 | ) | ||||||||||||||||
Tax effect of RSU release | 1 | 1 | ||||||||||||||||||
Repurchase of common stock | (101,125 | ) | (1,101 | ) | (1,673 | ) | (2,774 | ) | ||||||||||||
Dividends paid ($ 0.45 per share) | (10,265 | ) | (10,265 | ) | ||||||||||||||||
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Balance at September 30, 2016 | 22,827,277 | $ | 250,290 | $ | 226,647 | $ | 4,953 | $ | 481,890 | |||||||||||
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Balance at December 31, 2016 | 22,867,802 | $ | 252,820 | $ | 232,440 | $ | (7,913 | ) | $ | 477,347 | ||||||||||
Net income | 37,565 | 37,565 | ||||||||||||||||||
Other comprehensive income | 3,301 | 3,301 | ||||||||||||||||||
Stock option vesting | 211 | 211 | ||||||||||||||||||
RSU vesting | 657 | 657 | ||||||||||||||||||
PSU vesting | 316 | 316 | ||||||||||||||||||
Stock options exercised | 133,850 | 2,418 | 2,418 | |||||||||||||||||
RSUs released | 28,397 | |||||||||||||||||||
PSUs released | 18,805 | |||||||||||||||||||
Repurchase of common stock | (107,390 | ) | (1,191 | ) | (2,663 | ) | (3,854 | ) | ||||||||||||
Dividends paid ($ 0.49 per share) | (11,228 | ) | (11,228 | ) | ||||||||||||||||
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Balance at September 30, 2017 | 22,941,464 | $ | 255,231 | $ | 256,114 | $ | (4,612 | ) | $ | 506,733 | ||||||||||
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Shares of Common Stock | Common Stock | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total | |||||||||||||||||||||||||
Balance at January 1, 2019 | 30,417,223 | $ | 541,762 | $ | 303,490 | $ | (17,879) | $ | 827,373 | ||||||||||||||||||||
Net income | 22,726 | 22,726 | |||||||||||||||||||||||||||
Other comprehensive income | 8,952 | 8,952 | |||||||||||||||||||||||||||
Stock options exercised | 41,000 | 647 | 647 | ||||||||||||||||||||||||||
RSU vesting | 278 | 278 | |||||||||||||||||||||||||||
PSU vesting | 119 | 119 | |||||||||||||||||||||||||||
RSUs released | 355 | — | |||||||||||||||||||||||||||
PSUs released | — | — | |||||||||||||||||||||||||||
Repurchase of common stock | (26,159) | (466) | (569) | (1,035) | |||||||||||||||||||||||||
Dividends paid ($0.19 per share) | (5,782) | (5,782) | |||||||||||||||||||||||||||
Three months ended March 31, 2019 | 30,432,419 | $ | 542,340 | $ | 319,865 | $ | (8,927) | $ | 853,278 | ||||||||||||||||||||
Balance at January 1, 2020 | 30,523,824 | $ | 543,998 | $ | 367,794 | $ | (5,222) | $ | 906,570 | ||||||||||||||||||||
Cumulative change from adoption of ASU 2016-13 | — | — | (12,983) | — | (12,983) | ||||||||||||||||||||||||
Balance at January 1, 2020 (as adjusted for change in accounting principle) | 30,523,824 | $ | 543,998 | 354,811 | (5,222) | 893,587 | |||||||||||||||||||||||
Net income | 16,121 | 16,121 | |||||||||||||||||||||||||||
Other comprehensive loss | (19,910) | (19,910) | |||||||||||||||||||||||||||
Stock options exercised | 8,000 | 148 | 148 | ||||||||||||||||||||||||||
RSU vesting | 297 | 297 | |||||||||||||||||||||||||||
PSU vesting | 142 | 142 | |||||||||||||||||||||||||||
RSUs released | 362 | — | |||||||||||||||||||||||||||
PSUs released | — | — | |||||||||||||||||||||||||||
Repurchase of common stock | (558,670) | (9,962) | (7,333) | (17,295) | |||||||||||||||||||||||||
Dividends paid ($0.22 per share) | (6,664) | (6,664) | |||||||||||||||||||||||||||
Three months ended March 31, 2020 | 29,973,516 | $ | 534,623 | $ | 356,935 | $ | (25,132) | $ | 866,426 | ||||||||||||||||||||
For the nine months ended September 30, | ||||||||
2017 | 2016 | |||||||
Operating activities: | ||||||||
Net income | $ | 37,565 | $ | 32,278 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation of premises and equipment, and amortization | 5,089 | 4,870 | ||||||
Amortization of intangible assets | 1,050 | 1,017 | ||||||
Benefit from reversal of provision for loan losses | (1,588 | ) | (4,537 | ) | ||||
Amortization of investment securities premium, net | 2,431 | 3,625 | ||||||
Gain on sale of investment securities | (961 | ) | — | |||||
Originations of residential mortgage loans for resale | (83,907 | ) | (101,206 | ) | ||||
Proceeds from sale of residential mortgage loans originated for resale | 85,846 | 97,056 | ||||||
Gain on sale of loans | (2,293 | ) | (2,645 | ) | ||||
Change in market value of mortgage servicing rights | 795 | 2,198 | ||||||
Provision for losses on foreclosed assets | 162 | 40 | ||||||
Gain on sale of foreclosed assets | (308 | ) | (218 | ) | ||||
Write down of fixed assets held for sale | — | 716 | ||||||
Loss on disposal of fixed assets | 61 | 52 | ||||||
Gain on sale of premises held for sale | (3 | ) | — | |||||
Increase in cash value of life insurance | (2,043 | ) | (2,086 | ) | ||||
Life insurance proceeds in excess of cash value | (108 | ) | (238 | ) | ||||
Equity compensation vesting expense | 1,184 | 1,078 | ||||||
Tax effect of equity compensation exercise or release | — | 182 | ||||||
Change in: | ||||||||
Reserve for unfunded commitments | 270 | 433 | ||||||
Interest receivable | (629 | ) | (33 | ) | ||||
Interest payable | 49 | — | ||||||
Other assets and liabilities, net | 3,155 | 6,302 | ||||||
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Net cash from operating activities | 45,817 | 38,884 | ||||||
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Investing activities: | ||||||||
Proceeds from maturities of securities available for sale | 46,646 | 47,722 | ||||||
Proceeds from maturities of securities held to maturity | 64,969 | 83,665 | ||||||
Purchases of securities available for sale | (195,465 | ) | (160,787 | ) | ||||
Loan origination and principal collections, net | (174,914 | ) | (198,366 | ) | ||||
Loans purchased | — | (22,503 | ) | |||||
Proceeds from sale of loans other than loans originated for sale | — | 32,029 | ||||||
Proceeds from sale of other real estate owned | 1,787 | 3,375 | ||||||
Proceeds from sale of premises and equipment | — | 1,231 | ||||||
Proceeds from the sale of premises held for sale | 3,338 | — | ||||||
Purchases of premises and equipment | (10,874 | ) | (10,048 | ) | ||||
Life insurance proceeds | 649 | — | ||||||
Cash acquired in acquisition | — | 156,316 | ||||||
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Net cash used by investing activities | (263,864 | ) | (67,366 | ) | ||||
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Financing activities: | ||||||||
Net increase in deposits | 31,896 | 43,515 | ||||||
Net change in other borrowings | 81,237 | 6,907 | ||||||
Tax effect of equity compensation exercise or release | — | (182 | ) | |||||
Repurchase of common stock | (1,629 | ) | (384 | ) | ||||
Dividends paid | (11,228 | ) | (10,265 | ) | ||||
Exercise of stock options | 193 | 518 | ||||||
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Net cash provided by financing activities | 100,469 | 40,109 | ||||||
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Net change in cash and cash equivalents | (117,578 | ) | 11,627 | |||||
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Cash and cash equivalents and beginning of year | 305,612 | 303,461 | ||||||
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Cash and cash equivalents at end of period | $ | 188,034 | $ | 315,088 | ||||
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Supplemental disclosure of noncash activities: | ||||||||
Unrealized gain (loss) on securities available for sale | $ | 5,411 | $ | 11,240 | ||||
Loans transferred to foreclosed assets | $ | 726 | $ | 1,953 | ||||
Fixed assets transferred to held for sale | — | $ | 1,934 | |||||
Due from broker | $ | 25,757 | — | |||||
Market value of shares tenderedin-lieu of cash to pay for exercise of options, release of RSUs, and/or related taxes | $ | 3,854 | $ | 2,774 | ||||
Supplemental disclosure of cash flow activity: | ||||||||
Cash paid for interest expense | $ | 4,881 | $ | 4,261 | ||||
Cash paid for income taxes | $ | 15,450 | $ | 15,515 | ||||
Assets acquired in acquisition | — | $ | 161,231 | |||||
Liabilities assumed in acquisition | — | $ | 161,231 |
For the three months ended March 31, | |||||||||||||||||
2020 | 2019 | ||||||||||||||||
Operating activities: | |||||||||||||||||
Net income | $ | 16,121 | $ | 22,726 | |||||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||||
Depreciation of premises and equipment, and amortization | 1,618 | 1,838 | |||||||||||||||
Amortization of intangible assets | 1,431 | 1,431 | |||||||||||||||
Provision for (reversal of) credit losses | 8,000 | (1,600) | |||||||||||||||
Amortization of investment securities premium, net | 509 | 571 | |||||||||||||||
Originations of loans for resale | (28,394) | (18,119) | |||||||||||||||
Proceeds from sale of loans originated for resale | 31,629 | 16,689 | |||||||||||||||
Gain on sale of loans | (891) | (412) | |||||||||||||||
Change in market value of mortgage servicing rights | 1,258 | 645 | |||||||||||||||
Gain on transfer of loans to foreclosed assets | — | (98) | |||||||||||||||
Gain on sale of foreclosed assets | (41) | (99) | |||||||||||||||
Operating lease expense payments | (1,237) | (1,218) | |||||||||||||||
Loss on disposal of fixed assets | — | 38 | |||||||||||||||
Increase in cash value of life insurance | (720) | (775) | |||||||||||||||
Gain on life insurance death benefit | — | (32) | |||||||||||||||
Gain on marketable equity securities | (47) | (36) | |||||||||||||||
Equity compensation vesting expense | 439 | 397 | |||||||||||||||
Change in: | |||||||||||||||||
Interest receivable | 322 | (1,019) | |||||||||||||||
Interest payable | (421) | 198 | |||||||||||||||
Amortization of operating lease ROUA | 1,362 | 480 | |||||||||||||||
Other assets and liabilities, net | 2,609 | 450 | |||||||||||||||
Net cash from operating activities | 33,547 | 22,055 | |||||||||||||||
Investing activities: | |||||||||||||||||
Proceeds from maturities of securities available for sale | 20,212 | 15,133 | |||||||||||||||
Proceeds from maturities of securities held to maturity | 15,592 | 13,684 | |||||||||||||||
Purchases of securities available for sale | (101,899) | (1,238) | |||||||||||||||
Loan origination and principal collections, net | (70,833) | (11,351) | |||||||||||||||
Proceeds from sale of other real estate owned | 353 | 278 | |||||||||||||||
Proceeds from sale of premises and equipment | — | 11 | |||||||||||||||
Purchases of premises and equipment | (761) | (1,650) | |||||||||||||||
Net cash from (used by) investing activities | (137,336) | 14,867 | |||||||||||||||
Financing activities: | |||||||||||||||||
Net change in deposits | 35,704 | 63,796 | |||||||||||||||
Net change in other borrowings | 855 | (3,373) | |||||||||||||||
Repurchase of common stock, net of option exercises | (17,147) | (388) | |||||||||||||||
Dividends paid | (6,664) | (5,782) | |||||||||||||||
Net cash used from financing activities | 12,748 | 54,253 | |||||||||||||||
Net change in cash and cash equivalents | (91,041) | 91,175 | |||||||||||||||
Cash and cash equivalents, beginning of period | 276,507 | 227,533 | |||||||||||||||
Cash and cash equivalents, end of period | $ | 185,466 | $ | 318,708 | |||||||||||||
Supplemental disclosure of noncash activities: | |||||||||||||||||
Unrealized gain (loss) on securities available for sale | $ | (29,561) | $ | 12,710 | |||||||||||||
Market value of shares tendered in-lieu of cash to pay for exercise of options and/or related taxes | 148 | 647 | |||||||||||||||
Obligations incurred in conjunction with leased assets | 3,393 | 32,006 | |||||||||||||||
Loans transferred to foreclosed assets | — | 116 | |||||||||||||||
Supplemental disclosure of cash flow activity: | |||||||||||||||||
Cash paid for interest expense | 3,746 | 3,389 | |||||||||||||||
Cash paid for income taxes | — | — |
For purposes of the consolidated statements of cash flows, cash and cash equivalents include cash on hand, amounts due from banks, and federal funds sold.
Investment For purposes of the consolidated statement of cash flows, cash, due from banks with original maturities less than 90 days, interest-earning deposits in other banks, and Federal funds sold are considered to be cash equivalents.
The Company assesses other-than-temporary impairment (“OTTI”) based on whether it intends to sellover a security or if it is likelyperiod of time spanning nearly 50 years. As a result of this evaluation, management determined that the Company would be required to sell the security before recovery of the amortized cost basis of the investment, which may be maturity. For debtexpected credit losses associated with these securities if we intend to sell the security or it is more likely than not that we will be required to sell the security before recovering its cost basis, the entire impairment loss would be recognized in earnings as an OTTI. If we do not intend to sell the security and it is not likely that we will be required to sell the security but we do not expect to recover the entire amortized cost basis of the security, only the portion of the impairment loss representingsignificant for financial reporting purposes and therefore, no allowance for credit losses would be recognized in earnings. The credit loss on a security is measured as the difference between the amortized cost basis and the present value of the cash flows expected to be collected. Projected cash flows are discounted by the original or current effective interest rate depending on the nature of the security being measured for potential OTTI. The remaining impairment related to all other factors, the difference between the present value of the cash flows expected to be collected and fair value, is recognized as a charge to other comprehensive income (“OCI”). Impairment losses related to all other factors are presented as separate categories within OCI. The accretion of the amount recorded in OCI increases the carrying value of the investment and does not affect earnings. If there is an indication of additional credit losses the security isre-evaluated according to the procedures described above. No OTTI losses were recognized during the nine months ended September 30, 2017 or the year ended December 31, 2016.
Restricted Equity Securities
Restricted equity securities represent the Company’s investment in the stock of the Federal Home Loan Bank of San Francisco (“FHLB”) and are carried at par value, which reasonably approximates its fair value. While technically these are considered equity securities, there is no market for the FHLB stock. Therefore, the shares are considered as restricted investment securities. Management periodically evaluates FHLB stock for other-than-temporary impairment. Management’s determination of whether these investments are impaired is based on its
assessment of the ultimate recoverability of cost rather than by recognizing temporary declines in value. The determination of whether a decline affects the ultimate recoverability of cost is influenced by criteria such as (1) the significance of any decline in net assets of the FHLB as compared to the capital stock amount for the FHLB and the length of time this situation has persisted, (2) commitments by the FHLB to make payments required by law or regulation and the level of such payments in relation to the operating performance of the FHLB, (3) the impact of legislative and regulatory changes on institutions and, accordingly, the customer base of the FHLB, and (4) the liquidity position of the FHLB.
As a member of the FHLB system, the Bank is required to maintain a minimum level of investment in FHLB stock based on specific percentages of its outstanding mortgages, total assets, or FHLB advances. The Bank may request redemption at par value of any stock in excess of the minimum required investment. Stock redemptions are at the discretion of the FHLB.
been recognized.
Mortgage loans held for sale are generally sold with the mortgage servicing rights retained by the Company. Gains or losses on the sale of loans that are held for sale are recognized at the time of the sale and determined by the difference between net sale proceeds and the net book value of the loans less the estimated fair value of any retained mortgage servicing rights.
Loans and Allowance for Loan Losses
Loans originated by the Company, i.e., not purchased or acquired in a business combination, are referred to as originated loans. Originated loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principalprinciple amount outstanding, net of deferred loan fees and costs. Loan origination and commitment fees and certain direct loan origination costs are deferred, and the net amount is amortized as an adjustment of the related loan’s yield over the actual life of the loan. Originated loans on which the accrual of interest has been discontinued are designated as nonaccrual loans.
Originated loansLoans are placed in nonaccrual status when reasonable doubt exists as to the full, timely collection of interest or principal, or a loan becomes contractually past due by 90 days or more with respect to interest or principal and is not well secured and in the process of collection. When an originateda loan is placed on nonaccrual status, all interest previously accrued but not collected is reversed.reversed against interest income. Income on such loans is then recognized only to the extent that cash is received and where the future collection of principal is considered probable. Interest accruals are resumed on such loans only when they are brought fully current with respect to interest and principal and when, in the judgment of Management, the loan is estimated to be fully collectible as to both principal and interest.
An Accrued interest receivable is not included in the calculation of the allowance for loan lossescredit losses.
In situations related to originated loans where, for economic or legal reasons related to a borrower’sexperiencing financial difficulties, the Company grants a concession for other than an insignificant period of timeis considered to the borrower that the Company would not otherwise consider, the related loan is classified asbe a troubled debt restructuring (TDR). The Company strives to identify borrowers in financial difficulty early and work with them to modify to more affordable terms before their loan reaches nonaccrual status. These modified terms may includeACL on a TDR is measured using the same method as all other portfolio loans, except when the value of a concession cannot be measured using a method other than the discounted cash flow method. When the value of a concession is measured using the discounted cash flow method, the ACL is determined by discounting the expected future cash flows at the original interest rate reductions, principal forgiveness, payment forbearance and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. In cases where the Company grants the borrower new terms that result in the loan being classified as a TDR, the Company measures any impairment on the restructuring as noted above for impaired loans. TDR loans are classified as impaired until they are fully paid off or charged off. Loans that are in nonaccrual status at the time they become TDR loans, remain in nonaccrual status until the borrower demonstrates a sustained periodloan.
Credit risk is inherent in the business of lending. As a result, the Company maintains an allowance for loan losses to absorb probable incurred losses inherent in the Company’s originated loan portfolio. This is maintained through periodic charges to earnings. These charges are included in the Consolidated Statements of Income as provision for loan losses. All specifically identifiable and quantifiable losses are immediately charged off against the allowance. However, for a variety of reasons, not all losses are immediately known to the Company and, of those that are known, the full extent of the loss may not be quantifiable at that point in time. The balance of the Company’s allowance for originated loan losses is meant to be an estimate of these probable incurred losses inherent in the portfolio.
Contents
The Company’s method for assessing the appropriateness of the allowance for originated loan losses includes specific allowances for impaired originated loans, formula allowance factors for pools of credits, and allowances for changing environmental factors (e.g., interest rates, growth,business owner, general economic conditions etc.). Allowance factors for loan pools were based on historical loss experience by product type and prior risk rating.
Loans purchased or acquired in a business combination are referred to as acquired loans. Acquired loans are valued as of the acquisition date in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Topic 805,Business Combinations. Loans acquired with evidence of credit deterioration since origination for which it is probable that all contractually required payments will not be collected are referred to as purchased credit impaired (PCI) loans. PCI loans are accounted for under FASB ASC Topic310-30,Loans and Debt Securities Acquired with Deteriorated Credit Quality. Under FASB ASC Topic 805 and FASB ASC Topic310-30, PCI loans are recorded at fair value at acquisition date, factoring in credit losses expected to be incurred over the life of the loan. Accordingly, an allowance for loan losses is not carried over or recorded as of the acquisition date. Fair value is defined as the present value of the future estimated principal and interest payments of the loan, with the discount rate used in the present value calculation representing the estimated effective yield of the loan. Default rates, loss severity, and prepayment speed assumptions are periodically reassessed and our estimate of future payments is adjusted accordingly. The difference between contractual future payments and estimated future payments is referred to as the nonaccretable difference. The difference between estimated future payments and the present value of the estimated future payments is referred to as the accretable yield. The accretable yield represents the amount that is expected to be recorded as interest income over the remaining life of the loan. If after acquisition, the Company determines that the estimated future cash flows of a PCI loan are expected to be more than originally estimated, an increase in the discount rate (effective yield) would be made such that the newly increased accretable yield would be recognized, on a level yield basis, over the remaining estimated life of the loan. If, thereafter, the Company determines that the estimated future cash flows of a PCI loan are expected to be less than previously estimated, an allowance for loan loss would be established through a provision for loan losses charged to expense to decrease the present value to the required level. If the estimated cash flows improve after an allowance has been established for a loan, the allowance may be partially or fully reversed depending on the improvement in the estimated cash flows. Only after the allowance has been fully reversed may the discount rate be increased. PCI loans are put on nonaccrual status when cash flows cannot be reasonably estimated. PCI loans on nonaccrual status are accounted for using the cost recovery method or cash basis method of income recognition. The Company refers to PCI loans on nonaccrual status that are accounted for using the cash basis method of income recognition as “PCI – cash basis” loans; and the Company refers to all other PCI loans as “PCI – other” loans PCI loans are charged off when evidence suggests cash flows are not recoverable. Foreclosed assets from PCI loans are recorded in foreclosed assets at fair value with the fair value at time of foreclosure representing cash flow from the loan. ASC310-30 allows PCI loans with similar risk characteristics and acquisition time frame to be “pooled” and have their cash flows aggregated as if they were one loan. The Company elected to use the “pooled” method of ASC310-30 for PCI – other loans in the acquisition of certain assets and liabilities of Granite Community Bank, N.A. (“Granite”) during 2010 and Citizens Bank of Northern California (“Citizens”) during 2011.
Acquired loans that are not PCI loans are referred to as purchased not credit impaired (PNCI) loans. PNCI loans are accounted for under FASB ASC Topic310-20,Receivables – Nonrefundable Fees and Other Costs,in which interest income is accrued on a level-yield basis for performing loans. For income recognition purposes, this method assumes that all contractual cash flows will be collected, and no allowance for loan losses is established at the time of acquisition. Post-acquisition date, an allowance for loan losses may need to be established for acquired loans through a provision charged to earnings for credit losses incurred subsequent to acquisition. Under ASC310-20, the loss would be measured based on the probable shortfall in relation to the contractual note requirements, consistent with our allowance for loan loss policy for similar loans.
Throughout these financial statements, and in particular in Note 4 and Note 5, when we refer to “Loans” or “Allowance for loan losses” we mean all categories of loans, including Originated, PNCI, PCI – cash basis, and PCI - other. When we are not referring to all categories of loans, we will indicate which we are referring to – Originated, PNCI, PCI – cash basis, or PCI - other.
When referring to PNCI and PCI loans we use the terms “nonaccretable difference”, “accretable yield”, or “purchase discount”. Nonaccretable difference is the difference between undiscounted contractual cash flows due and undiscounted cash flows we expect to collect, or put another way, it is the undiscounted contractual cash flows we do not expect to collect. Accretable yield is the difference between undiscounted cash flows we expect to collect and the value at which we have recorded the loan on our financial statements. On the date of acquisition, all purchased loans are recorded on our consolidated financial statements at estimated fair value. Purchase discount is the difference between the estimated fair value of loans on the date of acquisition and the principal amount owed by the borrower, net of charge offs, on the date of acquisition. We may also refer to “discounts to principal balance of loans owed, net of charge-offs”. Discounts to principal balance of loans owed, net of charge-offs is the difference between principal balance of loans owed, net of charge-offs, and loans as recorded on our financial statements. Discounts to principal balance of loans owed, net of charge-offs arise from purchase discounts, and equal the purchase discount on the acquisition date.
Loans are also categorized as “covered” or “noncovered”. Covered loans refer to loans covered by a Federal Deposit Insurance Corporation (“FDIC”) loss sharing agreement. Noncovered loans refer to loans not covered by a FDIC loss sharing agreement.
Foreclosed Assets
Foreclosed assets include assets acquired through, or in lieu of, loan foreclosure. Foreclosed assets are held for sale and are initially recorded at fair value less estimated costs to sell at the date of foreclosure, establishing a new cost basis. Physical possession of residential real estate property collateralizing a consumer mortgage loan occurs when legal title is obtained upon completion of foreclosure or when the borrower conveys all interest in the property to satisfy the loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Any write-downs based on the asset’s fair value less costs to sell at the date of acquisition are charged to the allowance for loan and lease losses. Any recoveries based on the asset’s fair value less estimated costs to sell in excess of the recorded value of the loan at the date of acquisition are recorded to the allowance for loan and lease losses. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense. Operating costs after acquisition are expensed. Revenue and expenses from operations and changes in the valuation allowance are included in other noninterest expense. Gain or loss on sale of foreclosed assetsbusiness cycles. When default is included in noninterest income. Foreclosed assets that are not subject to a FDIC loss-share agreement are referred to as noncovered foreclosed assets.
Foreclosed assets acquired through FDIC-assisted acquisitions that are subject to a FDIC loss-share agreement, and all assets acquired via foreclosure of covered loans are referred to as covered foreclosed assets. Covered foreclosed assets are reported exclusive of expected reimbursement cash flows from the FDIC. Foreclosed covered loan collateral is transferred into covered foreclosed assets at the loan’s carrying value, inclusive of the acquisition date fair value discount.
Covered foreclosed assets are initially recorded at estimated fair value less estimated costs to sell on the acquisition date based on similar market comparable valuations less estimated selling costs. Any subsequent valuation adjustments due to declines in fair value will be charged to noninterest expense, and will be mostly offsetdriven by noninterest income representing the corresponding increaseissues related specifically to the FDIC indemnification assetbusiness owner, collateral values tend to provide better repayment support and may result in little or no loss. Alternatively, when default is driven more by general economic conditions, the underlying collateral may have devalued more and thus result in larger losses in the event of default. The terms on these loans at origination typically have maturities from five to ten years with amortization periods from fifteen to thirty years.
Premises and Equipment
Land is carried at cost. Land improvements, buildings and equipment, including those acquired under capital lease, are stated at cost less accumulated depreciation and amortization. Depreciation and amortization expenses are computed using the straight-line method over the shorter of the estimated useful lives of the related assets or lease terms. Asset lives range from3-10 years for furniture and equipment and15-40 years for land improvements and buildings.
Goodwill and Other Intangible Assets
Goodwill represents the excess of costs over fair value of net assets of businesses acquired. Goodwill and other intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but instead tested for impairment at least annually. Intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment.
The Company has an identifiable intangible asset consisting of core deposit intangibles (CDI). CDI are amortized over their respective estimated useful lives, and reviewed for impairment.
Impairment of Long-Lived Assets and Goodwill
Long-lived assets, such as premises and equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever eventsprimarily driven by general economic changes or changes in circumstances indicate thatregional economies and the carrying amountimpact of an asset may not be recoverable. Recoverabilitysuch on a tenant’s ability to pay. Ultimately this can affect occupancy, rental rates, or both. Additional risk of assets to be held and used is measured by a comparison ofloss can come from new construction resulting in oversupply, the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposed group classified as held for sale would be presented separately inhold or operate the appropriate asset and liability sections of the consolidated balance sheet.
As of December 31 of each year, goodwill is tested for impairment, and is tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the asset’s fair value. This determination is made at the reporting unit level. The Company may choose to first assess qualitative factors to determine whether the existence of eventsproperty, or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, the Company determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then goodwill is deemed not to be impaired. However, if the Company concludes otherwise, or if the Company elected not to first assess qualitative factors, then the Company performs the first step of atwo-step impairment test by calculating the fair value of the reporting unit and comparing the fair value with the carrying amount of the reporting unit. Second, if the carrying amount of the reporting unit exceeds its fair value, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation. The residual fair value after this allocation is the implied fair value of the reporting unit goodwill. Currently, and historically, the Company is comprised of only one reporting unit that operates within the business segment it has identified as “community banking”. Goodwill was not impaired as of December 31, 2016 because the fair value of the reporting unit exceeded its carrying value.
Mortgage Servicing Rights
Mortgage servicing rights (MSR) represent the Company’s right to a future stream of cash flows based upon the contractual servicing fee associated with servicing mortgage loans. Our MSR arise from residential and commercial mortgage loans that we originate and sell, but retain the right to service the loans. The net gain from the retention of the servicing right is included in gain on sale of loans in noninterest income when the loan is sold. Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses. Servicing fees are recorded in noninterest income when earned.
The Company accounts for MSR at fair value. The determination of fair value of our MSR requires management judgment because they are not actively traded. The determination of fair value for MSR requires valuation processes which combine the use of discounted cash flow models and extensive analysis of current market data to arrive at an estimate of fair value. The cash flow and prepayment assumptions used in our discounted cash flow model are based on empirical data drawn from the historical performance of our MSR, which we believe are consistent with assumptions used by market participants valuing similar MSR, and from data obtained on the performance of similar MSR. The key assumptions used in the valuation of MSR include mortgage prepayment speeds and the discount rate. These variables can, and generally will, change from quarter to quarter as market conditions and projected interest rates change. The key risks inherent with MSR are prepayment speed and changes in interest rates. The terms on these loans at origination typically have maturities from five to ten years with amortization periods from fifteen to thirty years.
Indemnification Asset/Liability
The Company accounts for amounts receivable or payable under its loss-share agreements entered intothe acquisition of these commercial properties, loans secured by farmland represent unique risks that are associated with the FDICoperation of an agricultural businesses. The valuation of farmland can vary greatly over time based on the property's access to resources including but not limited to water, crop prices, foreign exchange rates, government regulation or restrictions, and the nature of ongoing capital investment needed to maintain the quality of the property. Loans secured by farmland typically represent less risk to the Company than other agriculture loans as the real estate typically provides greater support in connectionthe event of default or need for longer term repayment.
Reserve for Unfunded Commitments
default. The reserve for unfunded commitments is established through a provision for losses – unfunded commitments charged to noninterest expense. The reserve for unfunded commitments is an amount that Management believes will be adequate to absorb probable losses inherentmaintained on the balance sheet in existing commitments, including unused portions of revolving lines of credits and other loans, standby letters of credits, and unused deposit account overdraft privilege. The reserve for unfunded commitments is based on evaluations of the collectability, and prior loss experience of unfunded commitments. The evaluations take into consideration such factors as changesliabilities.
Low Income Housing Tax Credits
The Company accounts for low income housing tax credits and the related qualified affordable housing projects using the proportional amortization method. Under the proportional amortization method,2020
Income Taxes
The Company’s accounting for income taxes is based on an asset and liability approach. The Company recognizes the amount of taxes payable or refundable for the current year, and deferred tax assets and liabilities for the future tax consequences that have been recognized in its financial statements or tax returns. The measurement of tax assets and liabilities is based on the provisions of enacted tax laws. A valuation allowance, if needed, reduces deferred tax assets to the expected amount most likely to be realized. Realization of deferred tax assets is dependent upon the generation of a sufficient level of future taxable income and recoverable taxes paid in prior years. Although realization is not assured, management believes it is more likely than not that all of the deferred tax assets will be realized. Interest and/or penalties related to income taxes are reported as a component of noninterest income.
Off-Balance Sheet Credit Relatedadopted ASU 2016-03
In the ordinary course of business, the Company has entered into commitments to extend credit, including commitments under credit card arrangements, commercial letters of credit, and standby letters of credit. Such financial instruments are recorded when they are funded.
Geographical Descriptions
For the purpose of describing the geographical location of the Company’s loans, the Company has defined northern California as that area of California north of, and including, Stockton; central California as that area of the state south of Stockton, to and including, Bakersfield; and southern California as that area of the state south of Bakersfield.
Reclassifications
During the three months ended September 30, 2017, the Company changed its classification of 1st lien and 2nd liennon-owner occupied1-4 residential real estate mortgage loans from commercial real estate mortgage loans to residential real estate mortgage loans and consumer home equity loans, respectively. This change in loan category classification was made to better align the Company’s financial reporting classifications with regulatory reporting classifications, and to properly classify these loans for regulatory risk-based capital ratio calculations. As a result of these reclassifications, at September 30, 2017, loans with balances of $60,957,000, and $5,620,000, that would have been classified as commercial real estate mortgage loans prior to this change, were classified as residential real estate mortgage loans, and consumer home equity loans, respectively; and the Company’s, and the Bank’s, Total risk based capital ratios, Tier 1 capital ratios, and Tier 1 common equity ratios were all recalculated to be0.10%-0.20% higher than they would have been prior to this change. Certain amounts reported in previous consolidated financial statements have been reclassified and recalculated to conform to the presentation in this report. These reclassifications did not affect previously reported net income or total shareholders’ equity.
Recent Accounting Pronouncements
FASB Accounting Standards Update (ASU)No.2014-09,Revenue from Contracts with Customers(Topic 606):ASU2014-09 is intended to clarify the principles for recognizing revenue, and to develop common revenue standards and disclosure requirements that would: (1) remove inconsistencies and weaknesses in revenue requirements; (2) provide a more robust framework for addressing revenue issues; (3) improve comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets; (4) provide more useful information to users of financial statements through improved disclosures; and (5) simplify the preparation of financial statements by reducing the number of requirements to which an entity must refer. The guidance affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets. The core principle is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides steps to follow to achieve the core principle. An entity should disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Qualitative and quantitative information is required with regard to contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. ASU2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods therein, with early adoption permitted for reporting periods beginning after December 15, 2016. The Company plans to adopt ASU2014-09 on January 1, 2018 utilizing the modified retrospective approach. Since the guidance does not apply to revenue associated with financial instruments such as loans and investments, which are accounted for under other provisions of GAAP, we do not expect it to impact interest income, our largest component of income. The Company is currently performing an overall assessment of revenue streams potentially affected by the ASU, including certain deposit related fees and interchange fees, to determine the potential impact of this guidance on our consolidated financial statements.
FASB issued Accounting Standard Update (ASU)No. 2016-02,Leases (Topic 842).ASU 2016-2, among other things, requires lessees to recognize most leaseson-balance sheet, increasing reported assets and liabilities. Lessor accounting remains substantially similar to current U.S. GAAP.ASU 2016-02 will be effective for the Company on January 1, 2019, utilizing the modified retrospective transition approach. The Company is currently evaluating the impact of adopting ASU2016-02 on the Company’s consolidated financial statements.
FASB issued Accounting Standard Update (ASU)No. 2016-09, Compensation – Stock Compensation (Topic 718).ASU 2016-09, among other things, requires: (i) that all excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) should be recognized as income tax expense or benefit in the income statement, (ii) the tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur, (iii) an entity also should recognize excess tax benefits regardless of whether the benefit reduces taxes payable in the current period, (iv) excess tax benefits should be classified along with other income tax cash flows as an operating activity, (v) an entity can make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest (current GAAP) or account for forfeitures when they occur, (vi) the threshold to qualify for equity classification permits withholding up to the maximum statutory tax rates in the applicable jurisdictions, and (vii) cash paid by an employer when directly withholding shares for tax withholding purposes should be classified as a financing activity.ASU 2016-09 was effective for the Company on January 1, 2017 and due to options exercised and restricted stock units released during the three and nine months ended September 30, 2017, resulted in the recognition of excess tax benefits totaling $150,000, and $847,000 respectively.
FASB issued ASUNo. 2016-13,Financial Instruments – — Credit Losses (Topic 326).ASU2016-13: Measurement of Credit Losses on Financial Instruments
FASB issued ASU No.2016-18, Statement of Cash Flows - Restricted Cash (Topic 230).ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling thebeginning-of-period andend-of-period total amounts shown on the statement of cash flows.ASU 2016-18 will be effective for the Company on January 1, 2018 and is not expected to have a significant impact on the Company’s consolidated financial statements.
FASB issued ASUNo. 2017-01,Business Combinations - Clarifying the Definition of a Business (Topic 805).ASU 2017-01 clarifies the definition and provides a more robust framework to use in determining when a set of assets and activities constitutes a business.ASU 2017-01 is intended to provide guidance when evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses.ASU 2017-01 will be effective for us on January 1, 2018 and is not expected to have a significant impact on our financial statements.
FASB issued ASUNo. 2017-04, Intangibles -
FASB issued ASU2017-08,Receivables - Nonrefundable Fees and Other Costs (Topic 310).ASU 2017-08 shortens the amortization period for certain callable debt securities held at a premium to require such premiums to be amortized to the earliest call date unless applicable guidance related to certain poolsas of securities is applied to consider estimated prepayments. Under prior guidance, entities were generally required to amortize premiums on individual,non-pooled callable debt securities as a yield adjustment over the contractual life of the security.ASU 2017-08 does not change the accounting for callable debt securities held at a discount.ASU 2017-08 will be effective for the Company on January 1, 2019, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU2016-08 on the Company’s consolidated financial statements.
FASB issued ASU2017-09, Compensation - Stock Compensation (Topic 718).ASU 2017-09 clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. UnderASU 2017-09, an entity will not apply modification accounting to a share-based payment award if all of the following are the same immediately before and after the change: (i) the award’s fair value, (ii) the award’s vesting conditions and (iii) the award’s classification as an equity or liability instrument.ASU 2017-09 will be effective for the Company on January 1, 2018 and is not expected to have a significant impact on the Company’s consolidated financial statements.
March 12, 2020 through December 31, 2022.
On March 18, 2016, the Bank completed its acquisition of three branch banking offices from Bank of America originally announced October 28, 2015. Investment Securities
The assets acquired and liabilities assumed in the acquisition of these branches were accounted for in accordance with ASC 805 “Business Combinations,” using the acquisition method of accounting and were recorded at theiramortized cost, estimated fair values on the March 18, 2016 acquisition date, and the results of operations of the acquired branches are included in the Company’s consolidated statements of income since that date. The excess of the fair value of consideration transferred over total identifiable net assets was recorded as goodwill. The goodwill arising from the acquisition consists largely of the synergies and economies of scale expected from combining the operations of the Company and the acquired branches. $849,000 of the goodwill is deductibleallowance for income tax purposes because the acquisition was accounted for as a purchase of assets and assumption of liabilities for tax purposes.
The following table discloses the calculation of the fair value of consideration transferred, the total identifiable net assets acquired and the resulting goodwill relating to the acquisition of three branch banking offices and certain deposits from Bank of America on March 18, 2016:
(in thousands) | March 18, 2016 | |||
Fair value of consideration transferred: | ||||
Cash consideration | $ | 3,204 | ||
|
| |||
Total fair value of consideration transferred | 3,204 | |||
|
| |||
Asset acquired: | ||||
Cash and cash equivalents | 159,520 | |||
Loans | 289 | |||
Premises and equipment | 1,590 | |||
Core deposit intangible | 2,046 | |||
Other assets | 141 | |||
|
| |||
Total assets acquired | 163,586 | |||
|
| |||
Liabilities assumed: | ||||
Deposits | 161,231 | |||
|
| |||
Total liabilities assumed | 161,231 | |||
|
| |||
Total net assets acquired | 2,355 | |||
|
| |||
Goodwill recognized | $ | 849 | ||
|
|
A summary of the cash paid and estimated fair value adjustments resulting in the goodwill recorded in the acquisition of three branch banking offices and certain deposits from Bank of America on March 18, 2016 are presented below:
March 18, 2016 | ||||
(in thousands) | ||||
Cash paid | $ | 3,204 | ||
Cost basis net assets acquired | — | |||
Fair value adjustments: | ||||
Loans | — | |||
Premises and Equipment | (309 | ) | ||
Core deposit intangible | (2,046 | ) | ||
|
| |||
Goodwill | $ | 849 | ||
|
|
As part of the acquisition of three branch banking offices from Bank of America, the Company performed a valuation of premises and equipment acquired. This valuation resulted in a $309,000 increase in the net book value of the land and buildings acquired, and was based on current appraisals of such land and buildings.
The Company recognized a core deposit intangible of $2,046,000 related to the acquisition of the core deposits. The recorded core deposit intangibles represented approximately 1.50% of the core deposits acquired and will be amortized over their estimated useful lives of 7 years.
A valuation of the time deposits acquired was also performed as of the acquisition date. Time deposits were split into similar pools based on size, type of time deposits, and maturity. A discounted cash flow analysis was performed on the pools based on current market rates currently paid on similar time deposits. The valuation resulted in no material fair value discount or premium, and none was recorded.
Note 3 - Investment Securities
The amortized cost and estimated fair valuescredit losses of investments in debt and equity securities are summarized in the following tables:
September 30, 2017 | ||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||
(in thousands) | ||||||||||||||||
Securities Available for Sale | ||||||||||||||||
Obligations of U.S. government corporations and agencies | $ | 557,060 | $ | 1,321 | $ | (4,319 | ) | $ | 554,062 | |||||||
Obligations of states and political subdivisions | 121,635 | 1,182 | (1,600 | ) | 121,217 | |||||||||||
Marketable equity securities | 3,000 | — | (43 | ) | 2,957 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total securities available for sale | $ | 681,695 | $ | 2,503 | $ | (5,962 | ) | $ | 678,236 | |||||||
|
|
|
|
|
|
|
| |||||||||
Securities Held to Maturity | ||||||||||||||||
Obligations of U.S. government corporations and agencies | $ | 521,999 | $ | 6,837 | $ | (1,442 | ) | $ | 527,394 | |||||||
Obligations of states and political subdivisions | 14,568 | 211 | (50 | ) | 14,729 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total securities held to maturity | $ | 536,567 | $ | 7,048 | $ | (1,492 | ) | $ | 542,123 | |||||||
|
|
|
|
|
|
|
| |||||||||
December 31, 2016 | ||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||
(in thousands) | ||||||||||||||||
Securities Available for Sale | ||||||||||||||||
Obligations of U.S. government corporations and agencies | $ | 434,357 | $ | 1,949 | $ | (6,628 | ) | $ | 429,678 | |||||||
Obligations of states and political subdivisions | 121,746 | 267 | (4,396 | ) | 117,617 | |||||||||||
Marketable equity securities | 3,000 | — | (62 | ) | 2,938 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total securities available for sale | $ | 559,103 | $ | 2,216 | $ | (11,086 | ) | $ | 550,233 | |||||||
|
|
|
|
|
|
|
| |||||||||
Securities Held to Maturity | ||||||||||||||||
Obligations of U.S. government corporations and agencies | $ | 587,982 | $ | 5,001 | $ | (4,199 | ) | $ | 588,784 | |||||||
Obligations of states and political subdivisions | 14,554 | 56 | (191 | ) | 14,419 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total securities held to maturity | $ | 602,536 | $ | 5,057 | $ | (4,390 | ) | $ | 603,203 | |||||||
|
|
|
|
|
|
|
|
During
March 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Allowance for Credit Losses | Estimated Fair Value | |||||||||||||||||||||||||||||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Securities Available for Sale | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Obligations of U.S. government agencies | $ | 447,736 | $ | 21,482 | $ | — | $ | — | $ | 469,218 | |||||||||||||||||||||||||||||||||||||||||||
Obligations of states and political subdivisions | 110,564 | 3,561 | — | — | 114,125 | ||||||||||||||||||||||||||||||||||||||||||||||||
Corporate bonds | 2,437 | 138 | — | — | 2,575 | ||||||||||||||||||||||||||||||||||||||||||||||||
Asset backed securities | 467,436 | 8 | (51,363) | — | 416,081 | ||||||||||||||||||||||||||||||||||||||||||||||||
Total debt securities available for sale | $ | 1,028,173 | $ | 25,189 | $ | (51,363) | $ | — | $ | 1,001,999 |
March 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | Allowance for Credit Losses | |||||||||||||||||||||||||||||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Securities Held to Maturity | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Obligations of U.S. government agencies | $ | 345,944 | $ | 17,352 | $ | (4) | $ | 363,292 | $ | — | |||||||||||||||||||||||||||||||||||||||||||
Obligations of states and political subdivisions | 13,826 | 324 | — | 14,150 | — | ||||||||||||||||||||||||||||||||||||||||||||||||
Total debt securities held to maturity | $ | 359,770 | $ | 17,676 | $ | (4) | $ | 377,442 | $ | — |
December 31, 2019 | |||||||||||||||||||||||||||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | ||||||||||||||||||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||||||||||||||||||||
Debt Securities Available for Sale | |||||||||||||||||||||||||||||||||||||||||
Obligations of U.S. government agencies | $ | 466,139 | $ | 7,261 | $ | (420) | $ | 472,980 | |||||||||||||||||||||||||||||||||
Obligations of states and political subdivisions | 106,373 | 3,229 | (1) | 109,601 | |||||||||||||||||||||||||||||||||||||
Corporate bonds | 2,430 | 102 | — | 2,532 | |||||||||||||||||||||||||||||||||||||
Asset backed securities | 371,809 | 129 | (6,913) | 365,025 | |||||||||||||||||||||||||||||||||||||
Total debt securities available for sale | $ | 946,751 | $ | 10,721 | $ | (7,334) | $ | 950,138 | |||||||||||||||||||||||||||||||||
Debt Securities Held to Maturity | |||||||||||||||||||||||||||||||||||||||||
Obligations of U.S. government agencies | 361,785 | 6,072 | (480) | 367,377 | |||||||||||||||||||||||||||||||||||||
Obligations of states and political subdivisions | 13,821 | 327 | — | 14,148 | |||||||||||||||||||||||||||||||||||||
Total debt securities held to maturity | $ | 375,606 | $ | 6,399 | $ | (480) | $ | 381,525 |
Investment Securities | Available for Sale | Held to Maturity | ||||||||||||||
(In thousands) | Amortized | Estimated | Amortized | Estimated | ||||||||||||
Cost | Fair Value | Cost | Fair Value | |||||||||||||
Due in one year | $ | 2 | $ | 2 | — | — | ||||||||||
Due after one year through five years | 206 | 206 | $ | 1,199 | $ | 1,233 | ||||||||||
Due after five years through ten years | 2,223 | 2,279 | 4,098 | 4,165 | ||||||||||||
Due after ten years | 679,264 | 675,749 | 531,270 | 536,725 | ||||||||||||
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|
|
|
|
|
|
| |||||||||
Totals | $ | 681,695 | $ | 678,236 | $ | 536,567 | $ | 542,123 | ||||||||
|
|
|
|
|
|
|
|
Debt Securities | Available for Sale | Held to Maturity | |||||||||||||||||||||||||||||||||
(in thousands) | Amortized Cost | Estimated Fair Value | Amortized Cost | Estimated Fair Value | |||||||||||||||||||||||||||||||
Due in one year | $ | 604 | $ | 607 | $ | 1,279 | $ | 1,285 | |||||||||||||||||||||||||||
Due after one year through five years | 18,264 | 18,958 | — | — | |||||||||||||||||||||||||||||||
Due after five years through ten years | 114,545 | 103,673 | 22,271 | 23,136 | |||||||||||||||||||||||||||||||
Due after ten years | 894,760 | 878,761 | 336,220 | 353,021 | |||||||||||||||||||||||||||||||
Totals | $ | 1,028,173 | $ | 1,001,999 | $ | 359,770 | $ | 377,442 |
Less than 12 months | 12 months or more | Total | ||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
September 30, 2017 | Value | Loss | Value | Loss | Value | Loss | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Securities Available for Sale: | ||||||||||||||||||||||||
Obligations of U.S. government corporations and agencies | $ | 365,252 | $ | (4,319 | ) | — | — | $ | 365,252 | $ | (4,319 | ) | ||||||||||||
Obligations of states and political subdivisions | 31,937 | (903 | ) | $ | 8,905 | $ | (697 | ) | 40,842 | (1,600 | ) | |||||||||||||
Marketable equity securities | 2,957 | (43 | ) | — | — | 2,957 | (43 | ) | ||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total securitiesavailable-for-sale | $ | 400,146 | $ | (5,265 | ) | $ | 8,905 | $ | (697 | ) | $ | 409,051 | $ | (5,962 | ) | |||||||||
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|
|
|
|
|
|
|
|
| |||||||||||||
Securities Held to Maturity: | ||||||||||||||||||||||||
Obligations of U.S. government corporations and agencies | $ | 133,453 | $ | (1,442 | ) | — | — | $ | 133,453 | $ | (1,442 | ) | ||||||||||||
Obligations of states and political subdivisions | 3,197 | (50 | ) | — | — | 3,179 | (50 | ) | ||||||||||||||||
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|
|
|
|
|
|
|
|
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|
| |||||||||||||
Total securitiesheld-to-maturity | $ | 136,650 | $ | (1,492 | ) | — | — | $ | 136,650 | $ | (1,492 | ) | ||||||||||||
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|
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| |||||||||||||
Less than 12 months | 12 months or more | Total | ||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
December 31, 2016 | Value | Loss | Value | Loss | Value | Loss | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Securities Available for Sale: | ||||||||||||||||||||||||
Obligations of U.S. government corporations and agencies | $ | 370,389 | $ | (6,628 | ) | — | — | $ | 370,389 | $ | (6,628 | ) | ||||||||||||
Obligations of states and political subdivisions | 90,825 | (4,396 | ) | — | — | 90,825 | (4,396 | ) | ||||||||||||||||
Marketable equity securities | 2,938 | (62 | ) | — | — | 2,938 | (62 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total securitiesavailable-for-sale | $ | 464,152 | $ | (11,086 | ) | — | — | $ | 464,152 | $ | (11,086 | ) | ||||||||||||
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| |||||||||||||
Securities Held to Maturity: | ||||||||||||||||||||||||
Obligations of U.S. government corporations and agencies | $ | 280,497 | $ | (4,199 | ) | — | — | $ | 280,497 | $ | (4,199 | ) | ||||||||||||
Obligations of states and political subdivisions | 9,984 | (191 | ) | — | — | 9,984 | (191 | ) | ||||||||||||||||
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|
|
|
|
|
|
|
|
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|
| |||||||||||||
Total securitiesheld-to-maturity | $ | 290,481 | $ | (4,390 | ) | — | — | $ | 290,481 | $ | (4,390 | ) | ||||||||||||
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|
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|
|
|
Less than 12 months | 12 months or more | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||
March 31, 2020: | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | |||||||||||||||||||||||||||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Securities Available for Sale | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Asset backed securities | $ | 166,612 | $ | (13,000) | $ | 248,222 | $ | (38,363) | $ | 414,834 | $ | (51,363) | |||||||||||||||||||||||||||||||||||||||||
Debt Securities Held to Maturity | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Obligations of U.S. government agencies | $ | 707 | $ | (4) | $ | — | $ | — | $ | 707 | $ | (4) | |||||||||||||||||||||||||||||||||||||||||
Less than 12 months | 12 months or more | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||
December 31, 2019: | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | |||||||||||||||||||||||||||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Securities Available for Sale | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Obligations of U.S. government agencies | $ | 36,709 | $ | (309) | $ | 23,852 | $ | (111) | $ | 60,561 | $ | (420) | |||||||||||||||||||||||||||||||||||||||||
Obligations of states and political subdivisions | 778 | (1) | — | — | 778 | (1) | |||||||||||||||||||||||||||||||||||||||||||||||
Asset backed securities | 237,463 | (4,535) | 99,981 | (2,378) | 337,444 | (6,913) | |||||||||||||||||||||||||||||||||||||||||||||||
Total debt securities available for sale | $ | 274,950 | $ | (4,845) | $ | 123,833 | $ | (2,489) | $ | 398,783 | $ | (7,334) | |||||||||||||||||||||||||||||||||||||||||
Debt Securities Held to Maturity | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Obligations of U.S. government agencies | 18,813 | (142) | 62,952 | (338) | 81,765 | (480) | |||||||||||||||||||||||||||||||||||||||||||||||
Total debt securities held to maturity | $ | 18,813 | $ | (142) | $ | 62,952 | $ | (338) | $ | 81,765 | $ | (480) |
Obligations The Company evaluates if a credit loss exists by monitoring to ensure it has adequate credit support and as of states and political subdivisions:March 31, 2020, the Company believes there is no expected allowance for credit losses.
Marketable equity securities: At September 30, 2017, 2 marketable equityof debt securities had unrealized losses with aggregate depreciation of (1.43%) fromheld-to-maturity at the Company’s amortized cost basis. The Company has the intent and ability to hold these securities for the foreseeable future and nodates indicated, aggregated by credit quality deterioration associated with these securities has been identified, therefore, management does not believe that they are other than temporarily impaired.
indicator:
March 31, 2020 | December 31, 2019 | ||||||||||||||||||||||||||||||||||
AAA/AA/A | BBB/BB/B | AAA/AA/A | BBB/BB/B | ||||||||||||||||||||||||||||||||
(In thousands) | (In thousands) | ||||||||||||||||||||||||||||||||||
Debt Securities Held to Maturity | |||||||||||||||||||||||||||||||||||
Obligations of U.S. government agencies | $ | 345,944 | $ | — | $ | 361,785 | $ | — | |||||||||||||||||||||||||||
Obligations of states and political subdivisions | 13,137 | 689 | 13,136 | 685 | |||||||||||||||||||||||||||||||
Total debt securities held to maturity | $ | 359,081 | $ | 689 | $ | 374,921 | $ | 685 |
September 30, 2017 | ||||||||||||||||||||
PCI - | PCI - | |||||||||||||||||||
Originated | PNCI | Cash basis | Other | Total | ||||||||||||||||
Mortgage loans on real estate: | ||||||||||||||||||||
Residential1-4 family | $ | 321,852 | $ | 67,815 | — | $ | 1,405 | $ | 391,072 | |||||||||||
Commercial | 1,588,790 | 206,841 | — | 8,171 | 1,803,802 | |||||||||||||||
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|
|
|
|
|
|
| |||||||||||
Total mortgage loan on real estate | 1,910,642 | 274,656 | — | 9,576 | 2,194,874 | |||||||||||||||
Consumer: | ||||||||||||||||||||
Home equity lines of credit | 269,470 | 17,084 | $ | 2,209 | 743 | 289,506 | ||||||||||||||
Home equity loans | 41,486 | 2,810 | — | 737 | 45,033 | |||||||||||||||
Other | 24,435 | 2,302 | — | 44 | 26,781 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total consumer loans | 335,391 | 22,196 | 2,209 | 1,524 | 361,320 | |||||||||||||||
Commercial | 215,946 | 8,838 | — | 2,695 | 227,479 | |||||||||||||||
Construction: | ||||||||||||||||||||
Residential | 75,108 | 12 | — | — | 75,120 | |||||||||||||||
Commercial | 69,452 | 3,368 | — | — | 72,820 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total construction | 144,560 | 3,380 | — | — | 147,940 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total loans, net of deferred loan fees and discounts | $ | 2,606,539 | $ | 309,070 | $ | 2,209 | $ | 13,795 | $ | 2,931,613 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total principal balance of loans owed, net of charge-offs | $ | 2,614,521 | $ | 316,657 | $ | 6,519 | $ | 17,626 | $ | 2,955,323 | ||||||||||
Unamortized net deferred loan fees | (7,982 | ) | — | — | — | (7,982 | ) | |||||||||||||
Discounts to principal balance of loans owed, net of charge-offs | — | (7,587 | ) | (4,310 | ) | (3,831 | ) | (15,728 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total loans, net of deferred loan fees and discounts | $ | 2,606,539 | $ | 309,070 | $ | 2,209 | $ | 13,795 | $ | 2,931,613 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Noncovered loans | $ | 2,606,539 | $ | 309,070 | $ | 2,209 | $ | 13,795 | $ | 2,931,613 | ||||||||||
Covered loans | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total loans, net of deferred loan fees and discounts | $ | 2,606,539 | $ | 309,070 | $ | 2,209 | $ | 13,795 | $ | 2,931,613 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Allowance for loan losses | $ | (27,417 | ) | $ | (1,043 | ) | $ | (12 | ) | $ | (275 | ) | $ | (28,747 | ) | |||||
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|
|
|
|
|
|
|
|
follows:
(in thousands) | March 31, 2020 | December 31, 2019 | |||||||||
Mortgage loans on real estate: | |||||||||||
Residential 1-4 family | $ | 506,833 | $ | 509,508 | |||||||
Commercial | 2,889,183 | 2,818,782 | |||||||||
Total mortgage loans on real estate | 3,396,016 | 3,328,290 | |||||||||
Consumer: | |||||||||||
Home equity lines of credit | 341,461 | 334,300 | |||||||||
Home equity loans | 27,110 | 28,586 | |||||||||
Other | 82,427 | 82,656 | |||||||||
Total consumer loans | 450,998 | 445,542 | |||||||||
Commercial | 290,334 | 283,707 | |||||||||
Construction: | |||||||||||
Residential | 42,333 | 46,146 | |||||||||
Commercial | 199,381 | 203,681 | |||||||||
Total construction loans | 241,714 | 249,827 | |||||||||
Total loans, net of deferred loan fees and discounts | $ | 4,379,062 | $ | 4,307,366 | |||||||
Total principal balance of loans owed, net of charge-offs | $ | 4,420,889 | $ | 4,351,725 | |||||||
Unamortized net deferred loan fees | (8,794) | (8,927) | |||||||||
Discounts to principal balance of loans owed, net of charge-offs | (33,033) | (35,432) | |||||||||
Total loans, net of unamortized deferred loan fees and discounts | $ | 4,379,062 | $ | 4,307,366 | |||||||
Allowance for loan losses | $ | (57,911) | $ | (30,616) |
A summary of loan balances follows (in thousands):
December 31, 2016 | ||||||||||||||||||||
PCI - | PCI - | |||||||||||||||||||
Originated | PNCI | Cash basis | Other | Total | ||||||||||||||||
Mortgage loans on real estate: | ||||||||||||||||||||
Residential1-4 family | $ | 284,539 | $ | 82,335 | — | $ | 1,469 | $ | 368,343 | |||||||||||
Commercial | 1,425,828 | 246,491 | — | 12,802 | 1,685,121 | |||||||||||||||
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|
|
|
|
|
|
|
|
| |||||||||||
Total mortgage loan on real estate | 1,710,367 | 328,826 | — | 14,271 | 2,053,464 | |||||||||||||||
Consumer: | ||||||||||||||||||||
Home equity lines of credit | 263,590 | 21,765 | $ | 2,983 | 1,377 | 289,715 | ||||||||||||||
Home equity loans | 40,736 | 3,764 | — | 1,682 | 46,182 | |||||||||||||||
Other | 28,167 | 2,534 | — | 65 | 30,766 | |||||||||||||||
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|
|
|
|
|
|
|
| |||||||||||
Total consumer loans | 332,493 | 28,063 | 2,983 | 3,124 | 366,663 | |||||||||||||||
Commercial | 200,735 | 12,321 | — | 3,991 | 217,047 | |||||||||||||||
Construction: | ||||||||||||||||||||
Residential | 54,613 | 141 | — | 675 | 55,429 | |||||||||||||||
Commercial | 58,119 | 8,871 | — | — | 66,990 | |||||||||||||||
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|
|
|
|
|
|
|
| |||||||||||
Total construction | 112,732 | 9,012 | — | 675 | 122,419 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total loans, net of deferred loan fees and discounts | $ | 2,356,327 | $ | 378,222 | $ | 2,983 | $ | 22,061 | $ | 2,759,593 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total principal balance of loans owed, net of charge-offs | $ | 2,363,243 | $ | 388,139 | $ | 8,280 | $ | 25,650 | $ | 2,785,312 | ||||||||||
Unamortized net deferred loan fees | (6,916 | ) | — | — | — | (6,916 | ) | |||||||||||||
Discounts to principal balance of loans owed, net of charge-offs | — | (9,917 | ) | (5,297 | ) | (3,589 | ) | (18,803 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total loans, net of unamortized deferred loan fees and discounts | $ | 2,356,327 | $ | 378,222 | $ | 2,983 | $ | 22,061 | $ | 2,759,593 | ||||||||||
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|
|
|
|
|
|
|
| |||||||||||
Noncovered loans | $ | 2,356,327 | $ | 378,222 | $ | 2,983 | $ | 18,885 | $ | 2,756,417 | ||||||||||
Covered loans | — | — | — | 3,176 | 3,176 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total loans, net of unamortized deferred loan fees and discounts | $ | 2,356,327 | $ | 378,222 | $ | 2,983 | $ | 22,061 | $ | 2,759,593 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Allowance for loan losses | $ | (28,141 | ) | $ | (1,665 | ) | $ | (17 | ) | $ | (2,680 | ) | $ | (32,503 | ) | |||||
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|
|
|
|
|
|
|
|
The following is a summary of the change in accretable yield for PCI – other loans during the periods indicated (in thousands):
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Change in accretable yield: | ||||||||||||||||
Balance at beginning of period | $ | 7,956 | $ | 11,775 | $ | 10,348 | $ | 13,255 | ||||||||
Accretion to interest income | (594 | ) | (961 | ) | (2,554 | ) | (3,068 | ) | ||||||||
Reclassification (to) from nonaccretable difference | (2,893 | ) | (160 | ) | (3,325 | ) | 467 | |||||||||
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|
|
|
|
|
|
| |||||||||
Balance at end of period | $ | 4,469 | $ | 10,654 | $ | 4,469 | $ | 10,654 | ||||||||
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|
|
|
|
Note 5 – Allowance for LoanCredit Losses
Allowance for Loan Losses – Three Months Ended September 30, 2017 | ||||||||||||||||||||||||||||||||||||
RE Mortgage | Home Equity | Other | Construction | |||||||||||||||||||||||||||||||||
(in thousands) | Resid. | Comm. | Lines | Loans | Consum. | C&I | Resid. | Comm. | Total | |||||||||||||||||||||||||||
Beginning balance | $ | 2,495 | $ | 10,119 | $ | 6,156 | $ | 2,354 | $ | 645 | $ | 4,729 | $ | 1,179 | $ | 466 | $ | 28,143 | ||||||||||||||||||
Charge-offs | (60 | ) | (20 | ) | (14 | ) | (94 | ) | (349 | ) | (291 | ) | (33 | ) | — | (861 | ) | |||||||||||||||||||
Recoveries | — | 238 | 189 | 121 | 91 | 61 | — | — | 700 | |||||||||||||||||||||||||||
(Benefit) provision | (217 | ) | 1,033 | (610 | ) | (390 | ) | 203 | 303 | 284 | 159 | 765 | ||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
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|
|
|
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| |||||||||||||||||||
Ending balance | $ | 2,218 | $ | 11,370 | $ | 5,721 | $ | 1,991 | $ | 590 | $ | 4,802 | $ | 1,430 | $ | 625 | $ | 28,747 | ||||||||||||||||||
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|
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| |||||||||||||||||||
Allowance for Loan Losses – Nine Months Ended September 30, 2017 | ||||||||||||||||||||||||||||||||||||
RE Mortgage | Home Equity | Other | Construction | |||||||||||||||||||||||||||||||||
(in thousands) | Resid. | Comm. | Lines | Loans | Consum. | C&I | Resid. | Comm. | Total | |||||||||||||||||||||||||||
Beginning balance | $ | 2,748 | $ | 11,517 | $ | 7,044 | $ | 2,644 | $ | 622 | $ | 5,831 | $ | 1,417 | $ | 680 | $ | 32,503 | ||||||||||||||||||
Charge-offs | (60 | ) | (170 | ) | (98 | ) | (331 | ) | (831 | ) | (1,188 | ) | (1,104 | ) | — | (3,782 | ) | |||||||||||||||||||
Recoveries | — | 365 | 487 | 146 | 300 | 315 | — | 1 | 1,614 | |||||||||||||||||||||||||||
(Benefit) provision | (470 | ) | (342 | ) | (1,712 | ) | (468 | ) | 499 | (156 | ) | 1,117 | (56 | ) | (1,588 | ) | ||||||||||||||||||||
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|
|
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|
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|
|
|
|
|
|
| |||||||||||||||||||
Ending balance | $ | 2,218 | $ | 11,370 | $ | 5,721 | $ | 1,991 | $ | 590 | $ | 4,802 | $ | 1,430 | $ | 625 | $ | 28,747 | ||||||||||||||||||
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|
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|
|
|
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| |||||||||||||||||||
Ending balance: | ||||||||||||||||||||||||||||||||||||
Individ. evaluated for impairment | $ | 240 | $ | 73 | $ | 363 | $ | 111 | $ | 77 | $ | 1,276 | — | — | $ | 2,140 | ||||||||||||||||||||
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|
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|
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| |||||||||||||||||||
Loans pooled for evaluation | $ | 1,978 | $ | 11,022 | $ | 5,347 | $ | 1,879 | $ | 513 | $ | 3,526 | $ | 1,430 | $ | 625 | $ | 26,320 | ||||||||||||||||||
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|
|
|
|
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| |||||||||||||||||||
Loans acquired with deteriorated credit quality | — | $ | 275 | $ | 12 | — | — | — | — | — | $ | 287 | ||||||||||||||||||||||||
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| |||||||||||||||||||
Loans, net of unearned fees – As of September 30, 2017 | ||||||||||||||||||||||||||||||||||||
RE Mortgage | Home Equity | Other | Construction | |||||||||||||||||||||||||||||||||
(in thousands) | Resid. | Comm. | Lines | Loans | Consum. | C&I | Resid. | Comm. | Total | |||||||||||||||||||||||||||
Ending balance: | ||||||||||||||||||||||||||||||||||||
Total loans | $ | 391,072 | $ | 1,803,802 | $ | 289,506 | $ | 45,033 | $ | 26,781 | $ | 227,479 | $ | 75,120 | $ | 72,820 | $ | 2,931,613 | ||||||||||||||||||
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| |||||||||||||||||||
Individ. evaluated for impairment | $ | 5,027 | $ | 19,788 | $ | 2,219 | $ | 1,842 | $ | 267 | $ | 2,938 | $ | 144 | — | $ | 32,225 | |||||||||||||||||||
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|
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|
|
|
|
|
|
| |||||||||||||||||||
Loans pooled for evaluation | $ | 384,640 | $ | 1,775,843 | $ | 284,335 | $ | 42,454 | $ | 26,470 | $ | 221,846 | $ | 74,976 | $ | 72,820 | $ | 2,883,384 | ||||||||||||||||||
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|
|
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|
|
|
|
|
|
| |||||||||||||||||||
Loans acquired with deteriorated credit quality | $ | 1,405 | $ | 8,171 | $ | 2,952 | $ | 737 | $ | 44 | $ | 2,695 | — | — | $ | 16,004 | ||||||||||||||||||||
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|
|
|
|
| |||||||||||||||||||
Allowance for Loan Losses – Year Ended December 31, 2016 | ||||||||||||||||||||||||||||||||||||
RE Mortgage | Home Equity | Other | Construction | |||||||||||||||||||||||||||||||||
(in thousands) | Resid. | Comm. | Lines | Loans | Consum. | C&I | Resid. | Comm. | Total | |||||||||||||||||||||||||||
Beginning balance | $ | 2,896 | $ | 11,015 | $ | 11,253 | $ | 3,177 | $ | 688 | $ | 5,271 | $ | 899 | $ | 812 | $ | 36,011 | ||||||||||||||||||
Charge-offs | (321 | ) | (827 | ) | (585 | ) | (219 | ) | (823 | ) | (455 | ) | — | — | (3,230 | ) | ||||||||||||||||||||
Recoveries | 880 | 920 | 2,317 | 590 | 449 | 404 | 54 | 78 | 5,692 | |||||||||||||||||||||||||||
(Benefit) provision | (694 | ) | 395 | (5,940 | ) | (903 | ) | 308 | 611 | 463 | (210 | ) | (5,970 | ) | ||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Ending balance | $ | 2,761 | $ | 11,503 | $ | 7,045 | $ | 2,645 | $ | 622 | $ | 5,831 | $ | 1,416 | $ | 680 | $ | 32,503 | ||||||||||||||||||
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|
|
|
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|
|
| |||||||||||||||||||
Ending balance: | ||||||||||||||||||||||||||||||||||||
Individ. evaluated for impairment | $ | 258 | $ | 4 | $ | 411 | $ | 215 | $ | 28 | $ | 1,130 | — | — | $ | 2,046 | ||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Loans pooled for evaluation | $ | 2,317 | $ | 10,050 | $ | 6,617 | $ | 2,366 | $ | 594 | $ | 3,765 | $ | 1,371 | $ | 680 | $ | 27,760 | ||||||||||||||||||
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|
|
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| |||||||||||||||||||
Loans acquired with deteriorated credit quality | $ | 186 | $ | 1,449 | $ | 17 | $ | 64 | — | $ | 936 | $ | 45 | — | $ | 2,697 | ||||||||||||||||||||
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|
Note 5 – Allowanceindicated:
Allowance for Loan Losses – Three Months Ended March 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in thousands) | Beginning Balance | Impact of CECL Adoption | Charge-offs | Recoveries | Provision (benefit) | Ending Balance | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage loans on real estate: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Residential 1-4 family | $ | 2,306 | $ | 2,675 | $ | — | $ | 410 | $ | 259 | $ | 5,650 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial | 11,995 | 11,848 | — | 194 | 5,216 | 29,253 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total mortgage loans on real estate | 14,301 | 14,523 | — | 604 | 5,475 | 34,903 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consumer: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Home equity lines of credit | 5,572 | 4,549 | — | 33 | 369 | 10,523 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Home equity loans | 611 | 89 | — | 15 | (42) | 673 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other | 1,595 | 971 | (130) | 94 | 216 | 2,746 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total consumer loans | 7,778 | 5,609 | (130) | 142 | 543 | 13,942 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial | 5,149 | (2,152) | (380) | 146 | 1,708 | 4,471 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Construction: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Residential | 630 | 189 | — | — | 5 | 824 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial | 2,758 | 744 | — | — | 269 | 3,771 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total construction loans | 3,388 | 933 | — | — | 274 | 4,595 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | $ | 30,616 | $ | 18,913 | $ | (510) | $ | 892 | $ | 8,000 | $ | 57,911 |
Loans, net of unearned fees – As of December 31, 2016 | ||||||||||||||||||||||||||||||||||||
RE Mortgage | Home Equity | Other | Construction | |||||||||||||||||||||||||||||||||
(in thousands) | Resid. | Comm. | Lines | Loans | Consum. | C&I | Resid. | Comm. | Total | |||||||||||||||||||||||||||
Ending balance: | ||||||||||||||||||||||||||||||||||||
Total loans | $ | 368,343 | $ | 1,685,121 | $ | 289,715 | $ | 46,182 | $ | 30,766 | $ | 217,047 | $ | 55,429 | $ | 66,990 | $ | 2,759,593 | ||||||||||||||||||
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|
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|
|
|
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|
|
|
|
|
|
| |||||||||||||||||||
Individ. evaluated for impairment | $ | 4,094 | $ | 15,081 | $ | 3,196 | $ | 1,508 | $ | 154 | $ | 4,096 | $ | 11 | — | $ | 28,140 | |||||||||||||||||||
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|
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|
|
|
|
|
|
|
| |||||||||||||||||||
Loans pooled for evaluation | $ | 362,780 | $ | 1,657,238 | $ | 282,159 | $ | 42,992 | $ | 30,547 | $ | 208,960 | $ | 54,743 | $ | 66,990 | $ | 2,706,409 | ||||||||||||||||||
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|
|
|
|
|
| |||||||||||||||||||
Loans acquired with deteriorated credit quality | $ | 1,469 | $ | 12,802 | $ | 4,360 | $ | 1,682 | $ | 65 | $ | 3,991 | $ | 675 | — | $ | 25,044 | |||||||||||||||||||
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|
Allowance for Loan Losses – Three Months Ended September 30, 2016 | ||||||||||||||||||||||||||||||||||||||||
RE Mortgage | Home Equity | Auto | Other | Construction | ||||||||||||||||||||||||||||||||||||
(in thousands) | Resid. | Comm. | Lines | Loans | Indirect | Consum. | C&I | Resid. | Comm. | Total | ||||||||||||||||||||||||||||||
Beginning balance | $ | 3,081 | $ | 11,934 | $ | 9,203 | $ | 3,057 | — | $ | 696 | $ | 5,265 | $ | 1,321 | $ | 952 | $ | 35,509 | |||||||||||||||||||||
Charge-offs | (50 | ) | — | (122 | ) | (25 | ) | — | (160 | ) | (307 | ) | — | — | (664 | ) | ||||||||||||||||||||||||
Recoveries | 391 | 20 | 1,580 | 429 | — | 107 | 85 | — | — | 2,612 | ||||||||||||||||||||||||||||||
(Benefit) provision | (653 | ) | (378 | ) | (2,261 | ) | (360 | ) | — | 24 | 199 | (16 | ) | (528 | ) | (3,973 | ) | |||||||||||||||||||||||
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Ending balance | $ | 2,769 | $ | 11,576 | $ | 8,400 | $ | 3,101 | — | $ | 667 | $ | 5,242 | $ | 1,305 | $ | 424 | $ | 33,484 | |||||||||||||||||||||
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Allowance for Loan Losses – Nine Months Ended September 30, 2016 | ||||||||||||||||||||||||||||||||||||||||
RE Mortgage | Home Equity | Auto | Other | Construction | ||||||||||||||||||||||||||||||||||||
(in thousands) | Resid. | Comm. | Lines | Loans | Indirect | Consum. | C&I | Resid. | Comm. | Total | ||||||||||||||||||||||||||||||
Beginning balance | $ | 2,896 | $ | 11,015 | $ | 11,253 | $ | 3,177 | — | $ | 688 | $ | 5,271 | $ | 899 | $ | 812 | $ | 36,011 | |||||||||||||||||||||
Charge-offs | (212 | ) | (793 | ) | (450 | ) | (118 | ) | — | (600 | ) | (421 | ) | — | — | (2,594 | ) | |||||||||||||||||||||||
Recoveries | 618 | 902 | 1,921 | 501 | — | 338 | 323 | — | 1 | 4,604 | ||||||||||||||||||||||||||||||
(Benefit) provision | (533 | ) | 452 | (4,324 | ) | (459 | ) | — | 241 | 69 | 406 | (389 | ) | (4,537 | ) | |||||||||||||||||||||||||
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Ending balance | $ | 2,769 | $ | 11,576 | $ | 8,400 | $ | 3,101 | — | $ | 667 | $ | 5,242 | $ | 1,305 | $ | 424 | $ | 33,484 | |||||||||||||||||||||
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Ending balance: | ||||||||||||||||||||||||||||||||||||||||
Individ. evaluated for impairment | $ | 418 | $ | 644 | $ | 511 | $ | 311 | — | $ | 72 | $ | 822 | — | — | $ | 2,778 | |||||||||||||||||||||||
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Loans pooled for evaluation | $ | 2,157 | $ | 9,493 | $ | 7,864 | $ | 2,730 | — | $ | 595 | $ | 3,426 | $ | 1,257 | $ | 424 | $ | 27,946 | |||||||||||||||||||||
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Loans acquired with deteriorated credit quality | $ | 181 | $ | 1,453 | $ | 25 | $ | 59 | — | — | $ | 994 | $ | 48 | — | $ | 2,760 | |||||||||||||||||||||||
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Loans, net of unearned fees – As of September 30, 2016 | ||||||||||||||||||||||||||||||||||||||||
RE Mortgage | Home Equity | Auto | Other | Construction | ||||||||||||||||||||||||||||||||||||
(in thousands) | Resid. | Comm. | Lines | Loans | Indirect | Consum. | C&I | Resid. | Comm. | Total | ||||||||||||||||||||||||||||||
Ending balance: | ||||||||||||||||||||||||||||||||||||||||
Total loans | $ | 368,223 | $ | 1,625,897 | $ | 301,884 | $ | 48,314 | — | $ | 31,611 | $ | 217,110 | $ | 57,892 | $ | 61,295 | $ | 2,712,226 | |||||||||||||||||||||
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Individ. evaluated for impairment | $ | 5,414 | $ | 14,706 | $ | 3,820 | $ | 2,650 | — | $ | 278 | $ | 2,397 | $ | 11 | — | $ | 29,276 | ||||||||||||||||||||||
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Loans pooled for evaluation | $ | 361,336 | $ | 1,597,876 | $ | 292,833 | $ | 43,552 | | — | | $ | 31,272 | $ | 210,565 | $ | 57,338 | $ | 61,295 | $ | 2,656,067 | |||||||||||||||||||
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Loans acquired with deteriorated credit quality | $ | 1,473 | $ | 13,315 | $ | 5,231 | $ | 2,112 | — | $ | 61 | $ | 4,148 | $ | 543 | — | $ | 26,883 | ||||||||||||||||||||||
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credit losses, accruing loans with similar risk characteristics are generally evaluated collectively. To estimate expected losses the Company generally utilizes historical loss trends and the remaining contractual lives of the loan portfolios to determine estimated credit losses through a reasonable and supportable forecast period. Individual loan credit quality indicators including loan grade and borrower repayment performance have been statistically correlated with historical credit losses and various econometrics, including California unemployment, gross domestic product, and corporate bond yields. Model forecasts may be adjusted for inherent limitations or biases that have been identified through independent validation and back-testing of model performance to actual realized results. At both January 1, 2020, the adoption and implementation date of ASC Topic 326, and March 31, 2020, the Company utilized a reasonable and supportable forecast period of approximately eight quarters and obtained the forecast data from publicly available sources. The Company also considered the impact of portfolio concentrations, changes in underwriting practices, imprecision in its economic forecasts, and other risk factors that might influence its loss estimation process. During the quarter ended March 31, 2020 the levels of actual and forecasted California unemployment and gross domestic product continued to deteriorate and as a result, were the primary cause for the increase in allowance for credit losses. Management believes that the allowance for credit losses at March 31, 2020 appropriately reflected expected credit losses inherent in the loan portfolio at that date.
Allowance for Loan Losses – Year Ended December 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(in thousands) | Beginning Balance | Charge-offs | Recoveries | Provision (benefit) | Ending Balance | ||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage loans on real estate: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Residential 1-4 family | $ | 2,676 | $ | (2) | $ | 54 | $ | (422) | $ | 2,306 | |||||||||||||||||||||||||||||||||||||||||||
Commercial | 12,944 | (746) | 1,528 | (1,731) | 11,995 | ||||||||||||||||||||||||||||||||||||||||||||||||
Total mortgage loans on real estate | 15,620 | (748) | 1,582 | (2,153) | 14,301 | ||||||||||||||||||||||||||||||||||||||||||||||||
Consumer: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Home equity lines of credit | 6,042 | — | 504 | (974) | 5,572 | ||||||||||||||||||||||||||||||||||||||||||||||||
Home equity loans | 1,540 | (3) | 431 | (1,357) | 611 | ||||||||||||||||||||||||||||||||||||||||||||||||
Other | 793 | (765) | 321 | 1,246 | 1,595 | ||||||||||||||||||||||||||||||||||||||||||||||||
Total consumer loans | 8,375 | (768) | 1,256 | (1,085) | 7,778 | ||||||||||||||||||||||||||||||||||||||||||||||||
Commercial | 6,090 | (2,123) | 525 | 657 | 5,149 | ||||||||||||||||||||||||||||||||||||||||||||||||
Construction: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Residential | 464 | — | — | 166 | 630 | ||||||||||||||||||||||||||||||||||||||||||||||||
Commercial | 2,033 | — | — | 725 | 2,758 | ||||||||||||||||||||||||||||||||||||||||||||||||
Total construction loans | 2,497 | — | — | 891 | 3,388 | ||||||||||||||||||||||||||||||||||||||||||||||||
Total | $ | 32,582 | $ | (3,639) | $ | 3,363 | $ | (1,690) | $ | 30,616 |
Allowance for Loan Losses – Three Months Ended March 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(in thousands) | Beginning Balance | Charge-offs | Recoveries | Provision (benefit) | Ending Balance | ||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage loans on real estate: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Residential 1-4 family | $ | 2,676 | $ | — | $ | 2 | $ | (178) | $ | 2,500 | |||||||||||||||||||||||||||||||||||||||||||
Commercial | 12,944 | — | 1,381 | (1,995) | 12,330 | ||||||||||||||||||||||||||||||||||||||||||||||||
Total mortgage loans on real estate | 15,620 | — | 1,383 | (2,173) | 14,830 | ||||||||||||||||||||||||||||||||||||||||||||||||
Consumer: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Home equity lines of credit | 6,042 | — | 95 | (122) | 6,015 | ||||||||||||||||||||||||||||||||||||||||||||||||
Home equity loans | 1,540 | — | 87 | (341) | 1,286 | ||||||||||||||||||||||||||||||||||||||||||||||||
Other | 793 | (207) | 75 | 379 | 1,040 | ||||||||||||||||||||||||||||||||||||||||||||||||
Total consumer loans | 8,375 | (207) | 257 | (84) | 8,341 | ||||||||||||||||||||||||||||||||||||||||||||||||
Commercial | 6,090 | (519) | 168 | 339 | 6,078 | ||||||||||||||||||||||||||||||||||||||||||||||||
Construction: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Residential | 464 | — | — | 84 | 548 | ||||||||||||||||||||||||||||||||||||||||||||||||
Commercial | 2,033 | — | — | 234 | 2,267 | ||||||||||||||||||||||||||||||||||||||||||||||||
Total construction loans | 2,497 | — | — | 318 | 2,815 | ||||||||||||||||||||||||||||||||||||||||||||||||
Total | $ | 32,582 | $ | (726) | $ | 1,808 | $ | (1,600) | $ | 32,064 |
Note 5 – Allowance The Company analyzes loans individually to classify the loans as to credit risk and grading. This analysis is performed annually for Loan Losses (continued)
all outstanding balances greater than $1,000,000 and non-homogeneous loans, such as commercial real estate loans, unless other indicators, such as delinquency, trigger more frequent evaluation. Loans below the $1,000,000 threshold and homogenous in nature are evaluated as needed based on delinquency and borrower credit scores.
15 Table of Contents •Pass– This grade represents loans ranging from acceptable to very little or no credit risk. These loans typically meet most if not all policy standards in regard to: loan amount as a percentage of collateral value, debt service coverage, profitability, leverage, and working capital. •Special Mention– This grade represents “Other Assets Especially Mentioned” in accordance with regulatory guidelines and includes loans that display some potential weaknesses which, if left unaddressed, may result in deterioration of the repayment prospects for the asset or may inadequately protect the Company’s position in the future. These loans warrant more than normal supervision and attention. •Substandard– This grade represents “Substandard” loans in accordance with regulatory guidelines. Loans within this rating typically exhibit weaknesses that are well defined to the point that repayment is jeopardized. Loss potential is, however, not necessarily evident. The underlying collateral supporting the credit appears to have sufficient value to protect the Company from loss of principal and accrued interest, or |
The following tables present ending loan balances by loan category and risk grade for the periods indicated:
Credit Quality Indicators – As of September 30, 2017 | ||||||||||||||||||||||||||||||||||||
RE Mortgage | Home Equity | Other | Construction | |||||||||||||||||||||||||||||||||
(in thousands) | Resid. | Comm. | Lines | Loans | Consum. | C&I | Resid. | Comm. | Total | |||||||||||||||||||||||||||
Originated loans: | ||||||||||||||||||||||||||||||||||||
Pass | $ | 317,577 | $ | 1,553,178 | $ | 266,066 | $ | 38,885 | $ | 23,978 | $ | 209,215 | $ | 75,000 | $ | 60,921 | $ | 2,544,820 | ||||||||||||||||||
Special mention | 1,831 | 13,484 | 2,196 | 815 | 368 | 3,390 | — | 8,531 | 30,615 | |||||||||||||||||||||||||||
Substandard | 2,444 | 22,128 | 1,208 | 1,786 | 89 | 3,341 | 108 | — | 31,104 | |||||||||||||||||||||||||||
Loss | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
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Total originated | $ | 321,852 | $ | 1,588,790 | $ | 269,470 | $ | 41,486 | $ | 24,435 | $ | 215,946 | $ | 75,108 | $ | 69,452 | $ | 2,606,539 | ||||||||||||||||||
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PNCI loans: | ||||||||||||||||||||||||||||||||||||
Pass | $ | 65,700 | $ | 191,518 | $ | 15,832 | $ | 2,534 | $ | 2,257 | $ | 8,832 | $ | 12 | $ | 3,368 | $ | 290,053 | ||||||||||||||||||
Special mention | 223 | 13,155 | 452 | 209 | 39 | — | — | — | 14,078 | |||||||||||||||||||||||||||
Substandard | 1,892 | 2,168 | 800 | 67 | 6 | 6 | — | — | 4,939 | |||||||||||||||||||||||||||
Loss | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
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Total PNCI | $ | 67,815 | $ | 206,841 | $ | 17,084 | $ | 2,810 | $ | 2,302 | $ | 8,838 | $ | 12 | $ | 3,368 | $ | 309,070 | ||||||||||||||||||
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PCI loans | $ | 1,405 | $ | 8,171 | $ | 2,952 | $ | 737 | $ | 44 | $ | 2,695 | — | — | $ | 16,004 | ||||||||||||||||||||
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Total loans | $ | 391,072 | $ | 1,803,802 | $ | 289,506 | $ | 45,033 | $ | 26,781 | $ | 227,479 | $ | 75,120 | $ | 72,820 | $ | 2,931,613 | ||||||||||||||||||
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Credit Quality Indicators – As of December 31, 2016 | ||||||||||||||||||||||||||||||||||||
RE Mortgage | Home Equity | Other | Construction | |||||||||||||||||||||||||||||||||
(in thousands) | Resid. | Comm. | Lines | Loans | Consum. | C&I | Resid. | Comm. | Total | |||||||||||||||||||||||||||
Originated loans: | ||||||||||||||||||||||||||||||||||||
Pass | $ | 278,635 | $ | 1,399,936 | $ | 258,024 | $ | 37,844 | $ | 27,542 | $ | 190,902 | $ | 54,602 | $ | 57,808 | $ | 2,305,293 | ||||||||||||||||||
Special mention | 2,992 | 14,341 | 2,518 | 891 | 385 | 6,133 | — | 311 | 27,571 | |||||||||||||||||||||||||||
Substandard | 2,912 | 11,551 | 3,048 | 2,001 | 240 | 3,700 | 11 | — | 23,463 | |||||||||||||||||||||||||||
Loss | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
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Total originated | $ | 284,539 | $ | 1,425,828 | $ | 263,590 | $ | 40,736 | $ | 28,167 | $ | 200,735 | $ | 54,613 | $ | 58,119 | $ | 2,356,327 | ||||||||||||||||||
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PNCI loans: | ||||||||||||||||||||||||||||||||||||
Pass | $ | 79,000 | $ | 233,326 | $ | 20,442 | $ | 3,506 | $ | 2,437 | $ | 12,320 | $ | 141 | $ | 8,871 | $ | 360,043 | ||||||||||||||||||
Special mention | 1,849 | 5,925 | 509 | 173 | 92 | 1 | — | — | 8,549 | |||||||||||||||||||||||||||
Substandard | 1,486 | 7,240 | 814 | 85 | 5 | — | — | — | 9,630 | |||||||||||||||||||||||||||
Loss | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
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Total PNCI | $ | 82,335 | $ | 246,491 | $ | 21,765 | $ | 3,764 | $ | 2,534 | $ | 12,321 | $ | 141 | $ | 8,871 | $ | 378,222 | ||||||||||||||||||
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PCI loans | $ | 1,469 | $ | 12,802 | $ | 4,360 | $ | 1,682 | $ | 65 | $ | 3,991 | $ | 675 | — | $ | 25,044 | |||||||||||||||||||
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Total loans | $ | 368,343 | $ | 1,685,121 | $ | 289,715 | $ | 46,182 | $ | 30,766 | $ | 217,047 | $ | 55,429 | $ | 66,990 | $ | 2,759,593 | ||||||||||||||||||
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Note 5 – Allowance for Loan Losses (continued)
Consumer loans, whether unsecured or secured by real estate, automobiles, or other personal property, are susceptible to three primary risks;non-payment due to income loss, over-extension of credit and, when the borrower is unable to pay, shortfall in collateral value. Typicallynon-payment is due to loss of job and will follow general economic trends in the marketplace driven primarily by rises in the unemployment rate. Loss of collateral value can be due to market demand shifts, damage to collateral itself or a combination of the two.
Problem consumer loans are generally identified by payment history of the borrower (delinquency). The Bank manages its consumer loan portfolios by monitoring delinquency and contacting borrowers to encourage repayment, suggest modifications if appropriate, and, when continued scheduled payments become unrealistic, initiate repossession or foreclosure through appropriate channels. Collateral values may be determined by appraisals obtained through Bank approved, licensed appraisers, qualified independent third parties, public value information (blue book values for autos), sales invoices, or other appropriate means. Appropriate valuations are obtained at initiation of the credit and periodically (every3-12 months depending on collateral type) once repayment is questionable and the loan has been classified.
Commercial real estatewritten down to the point where this is true. There is a definite need for a well-defined workout/rehabilitation program.
Construction loans, whether owner occupied ornon-owner occupied commercial real estate loans or residential development loans, are not only susceptible to the related risks described above but the added risks of construction itself including cost over-runs, mismanagement of the project, or lack of demand or market changes experienced at time of completion. Again, losses are primarily related to underlying collateral value and changes therein as described above.
Problem C&I loans are generally identified by periodic review of financial information which may include financial statements, tax returns, rent rolls and payment history of the borrower (delinquency). Based on this information the Bank may decide to take any of several courses of action including demand for repayment, additional collateral, or guarantors, and when repayment becomes unlikely through borrower’s incomefinancing plans.
Collateral values may be determined by appraisals obtained through Bank approved, licensed appraisers, qualified independent third parties, publicsuch little value information (blue book values for autos), sales invoices, or other appropriate means. Appropriate valuations are obtained at initiation of the credit and periodically (every3-12 months depending on collateral type) once repaymentthat its continuance as a bankable asset is questionable andnot warranted. This classification does not mean that the loan has been classified.
Once a loan becomes delinquent and repayment becomes questionable, a Bank collection officer will address collateral shortfalls with the borrower and attempt to obtain additional collateral. If thisabsolutely no recovery or salvage value, but rather that it is not forthcoming and payment in full is unlikely, the Bank will estimate its probable loss, using a recent valuation as appropriatepractical or desirable to the underlying collateral less estimated costs of sale, and chargedefer writing off the loan, down toeven though some recovery may be affected in the estimated net realizable amount. Dependingfuture. The portion of the loan that is graded loss should be charged off no later than the end of the quarter in which the loss is identified.
(in thousands) | Term Loans Amortized Cost Basis by Origination Year – As of March 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | Prior | Revolving Loans Amortized Cost Basis | Revolving Loans Converted to Term | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage loans on real estate: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Residential 1-4 family risk ratings | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pass | $25,698 | $102,369 | $59,278 | $69,504 | $60,063 | $179,461 | — | $117 | $496,490 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Special Mention | — | — | — | 868 | 18 | 2,953 | — | 105 | 3,944 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Substandard | — | — | 574 | 996 | 51 | 4,778 | — | — | 6,399 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Doubtful/Loss | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total residential 1-4 family - mortgage loans | $25,698 | $102,369 | $59,852 | $71,368 | $60,132 | $187,192 | $— | $222 | $506,833 |
Mortgage loans on real estate: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial risk ratings | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Pass | $82,428 | $457,462 | $364,082 | $443,054 | $407,011 | $967,584 | $102,830 | $1,501 | $2,825,952 | ||||||||||||||||||||||||||||||||||||||||||||
Special Mention | 70 | 2,288 | — | 7,618 | 11,562 | 10,722 | 12,588 | — | 44,848 | ||||||||||||||||||||||||||||||||||||||||||||
Substandard | 200 | 1,394 | 1,445 | 1,580 | 3,191 | 9,801 | 772 | — | 18,383 | ||||||||||||||||||||||||||||||||||||||||||||
Doubtful/Loss | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Total commercial - mortgage loans | $82,698 | $461,144 | $365,527 | $452,252 | $421,764 | $988,107 | $116,190 | $1,501 | $2,889,183 |
Consumer loans: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Home equity line of credit risk ratings | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Pass | $2,859 | $8,591 | $2,967 | $714 | $1,561 | $10,815 | $304,911 | $627 | $333,045 | ||||||||||||||||||||||||||||||||||||||||||||
Special Mention | 80 | — | 36 | 46 | 70 | 644 | 3,524 | — | 4,400 | ||||||||||||||||||||||||||||||||||||||||||||
Substandard | — | — | 57 | 529 | 80 | 1,078 | 2,266 | 6 | 4,016 | ||||||||||||||||||||||||||||||||||||||||||||
Doubtful/Loss | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Total home equity lines of credit - consumer loans | $2,939 | $8,591 | $3,060 | $1,289 | $1,711 | $12,537 | $310,701 | $633 | $341,461 |
(in thousands) | Term Loans Amortized Cost Basis by Origination Year – As of March 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | Prior | Revolving Loans Amortized Cost Basis | Revolving Loans Converted to Term | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consumer loans: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Home equity loans risk ratings | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pass | $2 | $580 | $290 | $378 | $673 | $21,191 | $500 | $16 | $23,630 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Special Mention | — | — | 19 | — | — | 906 | — | — | 925 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Substandard | 153 | — | — | — | 145 | 2,257 | — | — | 2,555 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Doubtful/Loss | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total home equity loans - consumer loans | $155 | $580 | $309 | $378 | $818 | $24,354 | $500 | $16 | $27,110 |
Consumer loans: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Other risk ratings | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Pass | $7,679 | $40,454 | $20,465 | $6,221 | $1,883 | $1,787 | $1,747 | $1,407 | $81,643 | ||||||||||||||||||||||||||||||||||||||||||||
Special Mention | — | 53 | 170 | 141 | 44 | 158 | 83 | 2 | 651 | ||||||||||||||||||||||||||||||||||||||||||||
Substandard | — | 59 | — | 12 | 11 | 35 | 16 | — | 133 | ||||||||||||||||||||||||||||||||||||||||||||
Doubtful/Loss | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Total other - consumer loans | $7,679 | $40,566 | $20,635 | $6,374 | $1,938 | $1,980 | $1,846 | $1,409 | $82,427 |
Commercial loans: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial risk ratings | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Pass | $15,616 | $66,145 | $32,209 | $25,226 | $10,041 | $17,434 | $112,189 | $5,164 | $284,024 | ||||||||||||||||||||||||||||||||||||||||||||
Special Mention | — | — | 75 | 539 | 149 | 110 | 604 | 700 | 2,177 | ||||||||||||||||||||||||||||||||||||||||||||
Substandard | — | 153 | 382 | 1,236 | 1,262 | 201 | 725 | 174 | 4,133 | ||||||||||||||||||||||||||||||||||||||||||||
Doubtful/Loss | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Total commercial loans | $15,616 | $66,298 | $32,666 | $27,001 | $11,452 | $17,745 | $113,518 | $6,038 | $290,334 |
Contents
(in thousands) | Term Loans Amortized Cost Basis by Origination Year – As of March 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | Prior | Revolving Loans Amortized Cost Basis | Revolving Loans Converted to Term | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Construction loans: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Residential risk ratings | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pass | $1,725 | $15,703 | $17,067 | $0 | $3,459 | $0 | $0 | $0 | $37,954 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Special Mention | — | — | — | — | 4,379 | — | — | — | 4,379 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Substandard | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Doubtful/Loss | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total residential - construction loans | $1,725 | $15,703 | $17,067 | $0 | $7,838 | $0 | $0 | $0 | $42,333 |
Construction loans: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial risk ratings | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Pass | $14,081 | $35,515 | $82,740 | $43,455 | $15,793 | $5,709 | $0 | $0 | $197,293 | ||||||||||||||||||||||||||||||||||||||||||||
Special Mention | — | — | — | — | — | 1,845 | — | — | 1,845 | ||||||||||||||||||||||||||||||||||||||||||||
Substandard | — | — | — | — | — | 243 | — | — | 243 | ||||||||||||||||||||||||||||||||||||||||||||
Doubtful/Loss | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Total commercial - construction loans | $14,081 | $35,515 | $82,740 | $43,455 | $15,793 | $7,797 | $0 | $0 | $199,381 |
Total loans: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Risk ratings | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Pass | $150,088 | $726,819 | $579,098 | $588,552 | $500,484 | $1,203,981 | $522,177 | $8,832 | $4,280,031 | ||||||||||||||||||||||||||||||||||||||||||||
Special Mention | 150 | 2,341 | 300 | 9,212 | 16,222 | 17,338 | 16,799 | 807 | 63,169 | ||||||||||||||||||||||||||||||||||||||||||||
Substandard | 353 | 1,606 | 2,458 | 4,353 | 4,740 | 18,393 | 3,779 | 180 | 35,862 | ||||||||||||||||||||||||||||||||||||||||||||
Doubtful/Loss | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Total loans | $150,591 | $730,766 | $581,856 | $602,117 | $521,446 | $1,239,712 | $542,755 | $9,819 | $4,379,062 |
(in thousands) | Term Loans Amortized Cost Basis by Origination Year – As of December 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2019 | 2018 | 2017 | 2016 | Prior | Revolving Loans Amortized Cost Basis | Revolving Loans Converted to Term | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage loans on real estate: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Residential 1-4 family risk ratings | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pass | $102,613 | $63,542 | $73,195 | $65,050 | $194,214 | — | — | $498,614 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Special Mention | — | — | 1,408 | 19 | 3,287 | — | — | 4,714 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Substandard | — | 813 | 711 | 52 | 4,604 | — | — | 6,180 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Doubtful/Loss | — | — | — | — | — | — | — | $0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total residential 1-4 family - mortgage loans | $102,613 | $64,355 | $75,314 | $65,121 | $202,105 | $— | $— | $509,508 |
Mortgage loans on real estate: | ||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial risk ratings | ||||||||||||||||||||||||||||||||||||||||||||||||||
Pass | $446,597 | $373,065 | $421,901 | $415,568 | $1,010,057 | $107,965 | $748 | $2,775,901 | ||||||||||||||||||||||||||||||||||||||||||
Special Mention | — | — | 4,965 | 9,373 | 8,467 | 2,253 | — | 25,058 | ||||||||||||||||||||||||||||||||||||||||||
Substandard | 830 | 1,454 | 1,591 | 3,216 | 9,937 | 795 | — | 17,823 | ||||||||||||||||||||||||||||||||||||||||||
Doubtful/Loss | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Total commercial - mortgage loans | $447,427 | $374,519 | $428,457 | $428,157 | $1,028,461 | $111,013 | $748 | $2,818,782 |
Consumer loans: | ||||||||||||||||||||||||||||||||||||||||||||||||||
Home equity line of credit risk ratings | ||||||||||||||||||||||||||||||||||||||||||||||||||
Pass | $10,195 | $3,436 | $1,015 | $1,729 | $11,821 | $297,458 | $663 | $326,317 | ||||||||||||||||||||||||||||||||||||||||||
Special Mention | — | 11 | 47 | 31 | 665 | 3,398 | 37 | 4,189 | ||||||||||||||||||||||||||||||||||||||||||
Substandard | — | 59 | 253 | 77 | 1,223 | 2,146 | 36 | 3,794 | ||||||||||||||||||||||||||||||||||||||||||
Doubtful/Loss | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Total home equity lines of credit - consumer loans | $10,195 | $3,506 | $1,315 | $1,837 | $13,709 | $303,002 | $736 | $334,300 |
(in thousands) | Term Loans Amortized Cost Basis by Origination Year – As of December 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2019 | 2018 | 2017 | 2016 | Prior | Revolving Loans Amortized Cost Basis | Revolving Loans Converted to Term | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consumer loans: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Home equity loans risk ratings | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pass | $607 | $300 | $382 | $712 | $22,655 | $399 | $37 | $25,092 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Special Mention | — | 20 | — | — | 1,172 | — | — | 1,192 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Substandard | — | — | — | 156 | 2,146 | — | — | 2,302 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Doubtful/Loss | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total home equity loans - consumer loans | $607 | $320 | $382 | $868 | $25,973 | $399 | $37 | $28,586 |
Consumer loans: | ||||||||||||||||||||||||||||||||||||||||||||||||||
Other risk ratings | ||||||||||||||||||||||||||||||||||||||||||||||||||
Pass | $45,675 | $23,014 | $7,176 | $2,245 | $2,099 | $1,602 | $3 | $81,814 | ||||||||||||||||||||||||||||||||||||||||||
Special Mention | 56 | 182 | 176 | 52 | 172 | 81 | — | 719 | ||||||||||||||||||||||||||||||||||||||||||
Substandard | 60 | — | 13 | 1 | 45 | 1 | 3 | 123 | ||||||||||||||||||||||||||||||||||||||||||
Doubtful/Loss | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Total other - consumer loans | $45,791 | $23,196 | $7,365 | $2,298 | $2,316 | $1,684 | $6 | $82,656 |
Commercial loans: | ||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial risk ratings | ||||||||||||||||||||||||||||||||||||||||||||||||||
Pass | $77,614 | $37,411 | $27,195 | $11,906 | $17,806 | $100,098 | $3,623 | $275,653 | ||||||||||||||||||||||||||||||||||||||||||
Special Mention | — | 339 | 1,236 | 167 | 164 | 1,921 | — | 3,827 | ||||||||||||||||||||||||||||||||||||||||||
Substandard | — | 48 | 1,481 | 1,646 | 393 | 611 | 48 | 4,227 | ||||||||||||||||||||||||||||||||||||||||||
Doubtful/Loss | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Total commercial loans | $77,614 | $37,798 | $29,912 | $13,719 | $18,363 | $102,630 | $3,671 | $283,707 |
(in thousands) | Term Loans Amortized Cost Basis by Origination Year – As of December 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2019 | 2018 | 2017 | 2016 | Prior | Revolving Loans Amortized Cost Basis | Revolving Loans Converted to Term | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Construction loans: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Residential risk ratings | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pass | $18,516 | $12,990 | $0 | $3,319 | $0 | $6,230 | $889 | $41,944 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Special Mention | — | — | — | 4,202 | — | — | — | 4,202 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Substandard | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Doubtful/Loss | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total residential - construction loans | $18,516 | $12,990 | $0 | $7,521 | $0 | $6,230 | $889 | $46,146 |
Construction loans: | ||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial risk ratings | ||||||||||||||||||||||||||||||||||||||||||||||||||
Pass | $31,031 | $72,339 | $76,043 | $15,654 | $7,322 | $975 | $0 | $203,364 | ||||||||||||||||||||||||||||||||||||||||||
Special Mention | — | — | — | — | 317 | — | — | 317 | ||||||||||||||||||||||||||||||||||||||||||
Substandard | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Doubtful/Loss | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Total commercial - construction loans | $31,031 | $72,339 | $76,043 | $15,654 | $7,639 | $975 | $0 | $203,681 |
Total loans: | |||||||||||||||||||||||||||||||||||||||||||||||
Risk ratings | |||||||||||||||||||||||||||||||||||||||||||||||
Pass | $732,848 | $586,097 | $606,907 | $516,183 | $1,265,974 | $514,727 | $5,963 | $4,228,699 | |||||||||||||||||||||||||||||||||||||||
Special Mention | 56 | 552 | 7,832 | 13,844 | 14,244 | 7,653 | 37 | 44,218 | |||||||||||||||||||||||||||||||||||||||
Substandard | 890 | 2,374 | 4,049 | 5,148 | 18,348 | 3,553 | 87 | 34,449 | |||||||||||||||||||||||||||||||||||||||
Doubtful/Loss | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
Total loans | $733,794 | $589,023 | $618,788 | $535,175 | $1,298,566 | $525,933 | $6,087 | $4,307,366 |
Analysis of Past Due and Nonaccrual Originated Loans – As of September 30, 2017 | ||||||||||||||||||||||||||||||||||||
RE Mortgage | Home Equity | Other | Construction | |||||||||||||||||||||||||||||||||
(in thousands) | Resid. | Comm. | Lines | Loans | Consum. | C&I | Resid. | Comm. | Total | |||||||||||||||||||||||||||
Originated loan balance: |
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Past due: | ||||||||||||||||||||||||||||||||||||
30-59 Days | $ | 721 | $ | 2,241 | $ | 695 | $ | 662 | $ | 150 | $ | 362 | — | — | $ | 4,831 | ||||||||||||||||||||
60-89 Days | 403 | 793 | 299 | — | 83 | 1 | — | — | 1,579 | |||||||||||||||||||||||||||
> 90 Days | 343 | 744 | 82 | 468 | 1 | 407 | — | — | 2,045 | |||||||||||||||||||||||||||
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Total past due | 1,467 | 3,778 | 1,076 | 1,130 | 234 | 770 | — | — | 8,455 | |||||||||||||||||||||||||||
Current | 320,385 | 1,585,012 | 268,394 | 40,356 | 24,201 | 215,176 | 75,108 | 69,452 | 2,598,084 | |||||||||||||||||||||||||||
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Total orig. loans | $ | 321,852 | $ | 1,588,790 | $ | 269,470 | $ | 41,486 | $ | 24,435 | $ | 215,946 | $ | 75,108 | $ | 69,452 | $ | 2,606,539 | ||||||||||||||||||
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> 90 Days and still accruing | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
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Nonaccrual loans | $ | 1,037 | $ | 6,954 | $ | 534 | $ | 1,199 | $ | 13 | $ | 1,951 | — | — | $ | 11,688 | ||||||||||||||||||||
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Note 5 – Allowance for Loan Losses (continued)
Analysis of Past Due Loans - As of March 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in thousands) | 30-59 days | 60-89 days | > 90 days | Total Past Due Loans | Current | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage loans on real estate: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Residential 1-4 family | $ | 699 | $ | — | $ | 1,763 | $ | 2,462 | $ | 504,371 | $ | 506,833 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial | 18,445 | 1,283 | 2,675 | 22,403 | 2,866,780 | 2,889,183 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total mortgage loans on real estate | 19,144 | 1,283 | 4,438 | 24,865 | 3,371,151 | 3,396,016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consumer: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Home equity lines of credit | 572 | 85 | 1,118 | 1,775 | 339,686 | 341,461 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Home equity loans | 200 | 64 | 193 | 457 | 26,653 | 27,110 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other | 100 | 12 | 114 | 226 | 82,201 | 82,427 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total consumer loans | 872 | 161 | 1,425 | 2,458 | 448,540 | 450,998 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial | 1,014 | 932 | 70 | 2,016 | 288,318 | 290,334 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Construction: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Residential | — | — | — | — | 42,333 | 42,333 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial | — | — | — | — | 199,381 | 199,381 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total construction loans | — | — | — | — | 241,714 | 241,714 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total originated loans | $ | 21,030 | $ | 2,376 | $ | 5,933 | $ | 29,339 | $ | 4,349,723 | $ | 4,379,062 |
Analysis of Past Due and Nonaccrual PNCI Loans – As of September 30, 2017 | ||||||||||||||||||||||||||||||||||||
RE Mortgage | Home Equity | Other | Construction | |||||||||||||||||||||||||||||||||
(in thousands) | Resid. | Comm. | Lines | Loans | Consum. | C&I | Resid. | Comm. | Total | |||||||||||||||||||||||||||
PNCI loan balance: | ||||||||||||||||||||||||||||||||||||
Past due: | ||||||||||||||||||||||||||||||||||||
30-59 Days | $ | 39 | — | $ | 100 | $ | 27 | $ | 12 | — | — | — | $ | 178 | ||||||||||||||||||||||
60-89 Days | 159 | 1,599 | 129 | 18 | 5 | 1 | — | — | 1,911 | |||||||||||||||||||||||||||
> 90 Days | 1,021 | — | — | — | — | 6 | — | — | $ | 1,027 | ||||||||||||||||||||||||||
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Total past due | 1,219 | 1,599 | 229 | 45 | 17 | 7 | — | — | 3,116 | |||||||||||||||||||||||||||
Current | 66,596 | 205,242 | 16,855 | 2,765 | 2,285 | 8,831 | 12 | 3,368 | 305,954 | |||||||||||||||||||||||||||
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Total PNCI loans | $ | 67,815 | $ | 206,841 | $ | 17,084 | $ | 2,810 | $ | 2,302 | $ | 8,838 | $ | 12 | $ | 3,368 | $ | 309,070 | ||||||||||||||||||
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> 90 Days and still accruing | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
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Nonaccrual loans | $ | 1,089 | $ | 1,599 | $ | 276 | $ | 50 | $ | 6 | $ | 6 | — | — | $ | 3,026 | ||||||||||||||||||||
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The following table shows the ending balance of current, past due, and nonaccrual originated loans by loan category as of the date indicated: |
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Analysis of Past Due and Nonaccrual Originated Loans – As of December 31, 2016 | ||||||||||||||||||||||||||||||||||||
RE Mortgage | Home Equity | Other | Construction | |||||||||||||||||||||||||||||||||
(in thousands) | Resid. | Comm. | Lines | Loans | Consum. | C&I | Resid. | Comm. | Total | |||||||||||||||||||||||||||
Originated loan balance: |
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Past due: | ||||||||||||||||||||||||||||||||||||
30-59 Days | $ | 552 | $ | 317 | $ | 754 | $ | 646 | $ | 16 | $ | 1,148 | $ | 921 | — | $ | 4,354 | |||||||||||||||||||
60-89 Days | 269 | 1,387 | — | 395 | 30 | 84 | — | $ | 421 | 2,586 | ||||||||||||||||||||||||||
> 90 Days | — | 216 | 687 | 184 | 15 | 634 | 11 | — | 1,747 | |||||||||||||||||||||||||||
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Total past due | 821 | 1,920 | 1,441 | 1,225 | 61 | 1,866 | 932 | 421 | 8,687 | |||||||||||||||||||||||||||
Current | 283,718 | 1,423,908 | 262,149 | 39,511 | 28,106 | 198,869 | 53,681 | 57,698 | 2,347,640 | |||||||||||||||||||||||||||
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Total orig. loans | $ | 284,539 | $ | 1,425,828 | $ | 263,590 | $ | 40,736 | $ | 28,167 | $ | 200,735 | $ | 54,613 | $ | 58,119 | $ | 2,356,327 | ||||||||||||||||||
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> 90 Days and still accruing | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
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Nonaccrual loans | $ | 255 | $ | 7,651 | $ | 1,211 | $ | 803 | $ | 33 | $ | 2,930 | $ | 11 | — | $ | 12,894 | |||||||||||||||||||
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The following table shows the ending balance of current, past due, and nonaccrual PNCI loans by loan category as of the date indicated:
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Analysis of Past Due and Nonaccrual PNCI Loans – As of December 31, 2016 | ||||||||||||||||||||||||||||||||||||
RE Mortgage | Home Equity | Other | Construction | |||||||||||||||||||||||||||||||||
(in thousands) | Resid. | Comm. | Lines | Loans | Consum. | C&I | Resid. | Comm. | Total | |||||||||||||||||||||||||||
PNCI loan balance: | ||||||||||||||||||||||||||||||||||||
Past due: | ||||||||||||||||||||||||||||||||||||
30-59 Days | $ | 1,510 | $ | 73 | $ | 274 | $ | 39 | — | — | — | — | $ | 1,896 | ||||||||||||||||||||||
60-89 Days | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
> 90 Days | 21 | 81 | 589 | 13 | — | — | — | — | 704 | |||||||||||||||||||||||||||
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Total past due | 1,531 | 154 | 863 | 52 | — | — | — | — | 2,600 | |||||||||||||||||||||||||||
Current | 80,804 | 246,337 | 20,902 | 3,712 | $ | 2,534 | $ | 12,321 | $ | 141 | $ | 8,871 | 375,622 | |||||||||||||||||||||||
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Total PNCI loans | $ | 82,335 | $ | 246,491 | $ | 21,765 | $ | 3,764 | $ | 2,534 | $ | 12,321 | $ | 141 | $ | 8,871 | $ | 378,222 | ||||||||||||||||||
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> 90 Days and still accruing | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
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Nonaccrual loans | $ | 194 | $ | 1,826 | $ | 742 | $ | 67 | $ | 5 | — | — | — | $ | 2,834 | |||||||||||||||||||||
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Note 5 – Allowance for Loan Losses (continued)
Impaired
Analysis of Past Due Loans - As of December 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in thousands) | 30-59 days | 60-89 days | > 90 days | Total Past Due Loans | Current | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage loans on real estate: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Residential 1-4 family | $ | 1,149 | $ | 371 | $ | 1,957 | $ | 3,477 | $ | 506,031 | $ | 509,508 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial | 581 | 136 | 2,431 | 3,148 | 2,815,634 | 2,818,782 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total mortgage loans on real estate | 1,730 | 507 | 4,388 | 6,625 | 3,321,665 | 3,328,290 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consumer: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Home equity lines of credit | 1,083 | 363 | 956 | 2,402 | 331,898 | 334,300 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Home equity loans | 175 | 216 | 132 | 523 | 28,063 | 28,586 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other | 172 | 1 | 23 | 196 | 82,460 | 82,656 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total consumer loans | 1,430 | 580 | 1,111 | 3,121 | 442,421 | 445,542 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial | 652 | 298 | 24 | 974 | 282,733 | 283,707 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Construction: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Residential | — | — | — | — | 46,146 | 46,146 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial | — | — | — | — | 203,681 | 203,681 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total construction loans | — | — | — | — | 249,827 | 249,827 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total loans | $ | 3,812 | $ | 1,385 | $ | 5,523 | $ | 10,720 | $ | 4,296,646 | $ | 4,307,366 |
Non Accrual Loans | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
As of March 31, 2020 | As of December 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in thousands) | Non accrual with no allowance for credit losses | Total non accrual | Past due 90 days or more and still accruing | Non accrual with no allowance for credit losses | Total non accrual | Past due 90 days or more and still accruing | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage loans on real estate: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Residential 1-4 family | $ | 5,169 | $ | 5,784 | $ | — | $ | 5,023 | $ | 5,192 | $ | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial | 5,451 | 5,514 | — | 5,316 | 5,316 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total mortgage loans on real estate | 10,620 | 11,298 | — | 10,339 | 10,508 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consumer: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Home equity lines of credit | 2,760 | 3,210 | — | 2,419 | 2,590 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Home equity loans | 1,523 | 1,654 | — | 1,574 | 1,626 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other | — | 140 | — | 4 | 51 | 11 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total consumer loans | 4,283 | 5,004 | 3,997 | 4,267 | 11 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial | 298 | 1,653 | — | 489 | 2,089 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Construction: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Residential | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total construction | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total non accrual loans | $ | 15,201 | $ | 17,955 | $ | — | $ | 14,825 | $ | 16,864 | $ | 11 |
As of March 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in thousands) | Retail | Office | Warehouse | Other | Multifamily | Farmland | SFR -1st Deed | SFR -2nd Deed | Automobile/Truck | A/R and Inventory | Equipment | Unsecured | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage loans on real estate: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Residential 1-4 family | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 5,815 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 5,815 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial | 2,483 | 161 | 1,866 | 506 | 2,060 | 1,203 | — | — | — | — | — | — | 8,279 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total mortgage loans on real estate | 2,483 | 161 | 1,866 | 506 | 2,060 | 1,203 | 5,815 | — | — | — | — | — | 14,094 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consumer: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Home equity lines of credit | — | — | — | — | — | — | — | 1,936 | — | — | — | — | 1,936 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Home equity loans | — | — | — | — | — | — | — | 2,106 | — | — | — | — | 2,106 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other | — | — | — | — | — | 156 | 47 | — | 127 | — | — | 4 | 334 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total consumer loans | — | — | — | — | — | 156 | 47 | 4,042 | 127 | — | — | 4 | 4,376 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial | — | — | — | — | — | — | — | — | — | 1,824 | 1,012 | 116 | 2,952 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total collateral dependent loans | $ | 2,483 | $ | 161 | $ | 1,866 | $ | 506 | $ | 2,060 | $ | 1,359 | $ | 5,862 | $ | 4,042 | $ | 127 | $ | 1,824 | $ | 1,012 | $ | 120 | $ | 21,422 |
As of December 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in thousands) | Retail | Office | Warehouse | Other | Multifamily | Farmland | SFR -1st Deed | SFR -2nd Deed | Automobile/Truck | A/R and Inventory | Equipment | Unsecured | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage loans on real estate: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Residential 1-4 family | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 5,293 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 5,293 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial | 2,506 | 163 | 1,640 | 509 | 2,060 | 1,242 | — | — | — | — | — | — | 8,120 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total mortgage loans on real estate | 2,506 | 163 | 1,640 | 509 | 2,060 | 1,242 | 5,293 | — | — | — | — | — | 13,413 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consumer: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Home equity lines of credit | — | — | — | — | — | — | — | 1,808 | — | — | — | — | 1,808 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Home equity loans | — | — | — | — | — | — | — | 2,040 | — | — | — | — | 2,040 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other | — | — | — | — | — | — | 48 | — | 27 | — | — | 4 | 79 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total consumer loans | — | — | — | — | — | — | 48 | 3,848 | 27 | — | — | 4 | 3,927 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial | — | — | — | — | — | — | — | — | — | 1,952 | 1,026 | 107 | 3,085 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total collateral dependent loans | $ | 2,506 | $ | 163 | $ | 1,640 | $ | 509 | $ | 2,060 | $ | 1,242 | $ | 5,341 | $ | 3,848 | $ | 27 | $ | 1,952 | $ | 1,026 | $ | 111 | $ | 20,425 |
Impaired Originated Loans – As of, or for the Nine Months Ended, September 30, 2017 | ||||||||||||||||||||||||||||||||||||
RE Mortgage | Home Equity | Other | Construction | |||||||||||||||||||||||||||||||||
(in thousands) | Resid. | Comm. | Lines | Loans | Consum. | C&I | Resid. | Comm. | Total | |||||||||||||||||||||||||||
With no related allowance recorded: | ||||||||||||||||||||||||||||||||||||
Recorded investment | $ | 1,777 | $ | 17,039 | $ | 1,108 | $ | 1,470 | $ | 3 | $ | 884 | $ | 144 | — | $ | 22,425 | |||||||||||||||||||
Unpaid principal | $ | 1,819 | $ | 17,493 | $ | 1,209 | $ | 1,892 | $ | 47 | $ | 1,139 | $ | 144 | — | $ | 23,743 | |||||||||||||||||||
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Average recorded Investment | $ | 1,734 | $ | 15,092 | $ | 1,294 | $ | 1,034 | $ | 9 | $ | 823 | $ | 78 | — | $ | 20,064 | |||||||||||||||||||
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Interest income Recognized | $ | 51 | $ | 474 | $ | 25 | $ | 25 | ($ | 25 | ) | $ | 16 | $ | 7 | — | $ | 573 | ||||||||||||||||||
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With an allowance recorded: | ||||||||||||||||||||||||||||||||||||
Recorded investment | $ | 1,644 | $ | 1,150 | $ | 110 | $ | 199 | $ | 11 | $ | 2,048 | — | — | $ | 5,162 | ||||||||||||||||||||
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Unpaid principal | $ | 1,670 | $ | 1,150 | $ | 115 | $ | 199 | $ | 12 | $ | 2,123 | — | — | $ | 5,269 | ||||||||||||||||||||
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| |||||||||||||||||||
Related allowance | $ | 167 | $ | 73 | $ | 33 | $ | 13 | $ | 7 | $ | 1,270 | — | — | $ | 1,563 | ||||||||||||||||||||
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| |||||||||||||||||||
Average recorded Investment | $ | 1,508 | $ | 898 | $ | 270 | $ | 342 | $ | 14 | $ | 2,691 | — | — | $ | 5,723 | ||||||||||||||||||||
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|
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|
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| |||||||||||||||||||
Interest income Recognized | $ | 39 | $ | 40 | — | $ | 7 | — | $ | 53 | — | — | $ | 139 | ||||||||||||||||||||||
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| |||||||||||||||||||
Impaired PNCI Loans – As of, or for the Nine Months Ended, September 30, 2017 | ||||||||||||||||||||||||||||||||||||
RE Mortgage | Home Equity | Other | Construction | |||||||||||||||||||||||||||||||||
(in thousands) | Resid. | Comm. | Lines | Loans | Consum. | C&I | Resid. | Comm. | Total | |||||||||||||||||||||||||||
With no related allowance recorded: | ||||||||||||||||||||||||||||||||||||
Recorded investment | $ | 1,356 | $ | 1,599 | $ | 394 | $ | 50 | — | — | — | — | $ | 3,399 | ||||||||||||||||||||||
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| |||||||||||||||||||
Unpaid principal | $ | 1,384 | $ | 1,869 | $ | 413 | $ | 62 | — | — | — | — | $ | 3,728 | ||||||||||||||||||||||
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| |||||||||||||||||||
Average recorded Investment | $ | 910 | $ | 1,712 | $ | 564 | $ | 59 | $ | 2 | — | — | — | $ | 3,247 | |||||||||||||||||||||
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| |||||||||||||||||||
Interest income Recognized | $ | 17 | — | $ | 8 | — | — | — | — | — | $ | 25 | ||||||||||||||||||||||||
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With an allowance recorded: | ||||||||||||||||||||||||||||||||||||
Recorded investment | $ | 250 | — | $ | 607 | $ | 123 | $ | 253 | $ | 6 | — | — | $ | 1,239 | |||||||||||||||||||||
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| |||||||||||||||||||
Unpaid principal | $ | 250 | — | $ | 607 | $ | 123 | $ | 253 | $ | 6 | — | — | $ | 1,239 | |||||||||||||||||||||
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| |||||||||||||||||||
Related allowance | $ | 73 | — | $ | 328 | $ | 99 | $ | 71 | $ | 6 | — | — | $ | 577 | |||||||||||||||||||||
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|
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| |||||||||||||||||||
Average recorded Investment | $ | 255 | $ | 66 | $ | 579 | $ | 62 | $ | 185 | $ | 3 | — | — | $ | 1,150 | ||||||||||||||||||||
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|
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|
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|
|
|
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| |||||||||||||||||||
Interest income Recognized | $ | 7 | — | $ | 20 | $ | 5 | $ | 8 | — | — | — | $ | 40 | ||||||||||||||||||||||
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|
Note 5 – Allowance for Loan Losses (continued)
Impaired Originated Loans – As of December 31, 2016 | ||||||||||||||||||||||||||||||||||||
RE Mortgage | Home Equity | Other | Construction | |||||||||||||||||||||||||||||||||
(in thousands) | Resid. | Comm. | Lines | Loans | Consum. | C&I | Resid. | Comm. | Total | |||||||||||||||||||||||||||
With no related allowance recorded: | ||||||||||||||||||||||||||||||||||||
Recorded investment | $ | 1,821 | $ | 12,897 | $ | 1,480 | $ | 715 | $ | 15 | $ | 762 | $ | 11 | — | $ | 17,701 | |||||||||||||||||||
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|
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| |||||||||||||||||||
Unpaid principal | $ | 1,829 | $ | 13,145 | $ | 1,561 | $ | 1,135 | $ | 29 | $ | 926 | $ | 16 | — | $ | 18,641 | |||||||||||||||||||
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| |||||||||||||||||||
Average recorded Investment | $ | 2,853 | $ | 20,003 | $ | 2,221 | $ | 831 | $ | 17 | $ | 669 | $ | 7 | — | $ | 26,601 | |||||||||||||||||||
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|
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| |||||||||||||||||||
Interest income Recognized | $ | 92 | $ | 570 | $ | 40 | $ | 6 | $ | 1 | $ | 48 | — | — | $ | 757 | ||||||||||||||||||||
With an allowance recorded: | ||||||||||||||||||||||||||||||||||||
Recorded investment | $ | 1,551 | $ | 357 | $ | 430 | $ | 594 | $ | 19 | $ | 3,334 | — | — | $ | 6,285 | ||||||||||||||||||||
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| |||||||||||||||||||
Unpaid principal | $ | 1,552 | $ | 357 | $ | 440 | $ | 596 | $ | 19 | $ | 3,385 | — | — | $ | 6,349 | ||||||||||||||||||||
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| |||||||||||||||||||
Related allowance | $ | 180 | $ | 4 | $ | 110 | $ | 107 | $ | 13 | $ | 1,130 | — | — | $ | 1,544 | ||||||||||||||||||||
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| |||||||||||||||||||
Average recorded Investment | $ | 1,779 | $ | 888 | $ | 1,076 | $ | 634 | $ | 9 | $ | 2,714 | — | — | $ | 7,100 | ||||||||||||||||||||
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| |||||||||||||||||||
Interest income Recognized | $ | 65 | $ | 22 | $ | 9 | $ | 31 | $ | 2 | $ | 77 | — | — | $ | 206 | ||||||||||||||||||||
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| |||||||||||||||||||
Impaired PNCI Loans – As of December 31, 2016 | ||||||||||||||||||||||||||||||||||||
RE Mortgage | Home Equity | Other | Construction | |||||||||||||||||||||||||||||||||
(in thousands) | Resid. | Comm. | Lines | Loans | Consum. | C&I | Resid. | Comm. | Total | |||||||||||||||||||||||||||
With no related allowance recorded: | ||||||||||||||||||||||||||||||||||||
Recorded investment | $ | 463 | $ | 1,826 | $ | 735 | $ | 67 | $ | 3 | — | — | — | $ | 3,094 | |||||||||||||||||||||
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|
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| |||||||||||||||||||
Unpaid principal | $ | 486 | $ | 2,031 | $ | 746 | $ | 74 | $ | 4 | — | — | — | $ | 3,341 | |||||||||||||||||||||
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|
|
|
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|
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| |||||||||||||||||||
Average recorded Investment | $ | 669 | $ | 1,479 | $ | 594 | $ | 69 | $ | 18 | $ | 1 | — | $ | 245 | $ | 3,075 | |||||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Interest income Recognized | $ | 7 | — | $ | 9 | $ | 1 | — | — | — | — | $ | 17 | |||||||||||||||||||||||
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| |||||||||||||||||||
With an allowance recorded: | ||||||||||||||||||||||||||||||||||||
Recorded investment | $ | 259 | — | $ | 551 | $ | 132 | $ | 118 | — | — | — | $ | 1,060 | ||||||||||||||||||||||
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|
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| |||||||||||||||||||
Unpaid principal | $ | 259 | — | $ | 551 | $ | 132 | $ | 118 | — | — | — | $ | 1,060 | ||||||||||||||||||||||
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|
|
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| |||||||||||||||||||
Related allowance | $ | 79 | — | $ | 300 | $ | 108 | $ | 15 | — | — | — | $ | 502 | ||||||||||||||||||||||
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|
|
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|
|
| |||||||||||||||||||
Average recorded Investment | $ | 130 | $ | 1,374 | $ | 579 | $ | 85 | $ | 176 | — | — | — | $ | 2,344 | |||||||||||||||||||||
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|
|
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|
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| |||||||||||||||||||
Interest income Recognized | $ | 10 | — | $ | 27 | $ | 7 | $ | 5 | — | — | — | $ | 49 | ||||||||||||||||||||||
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|
|
Note 5 – Allowance for Loan Losses (continued)
Impaired Originated Loans – As of, or for the Nine Months Ended, September 30, 2016 | ||||||||||||||||||||||||||||||||||||||||
RE Mortgage | Home Equity | Auto | Other | Construction | ||||||||||||||||||||||||||||||||||||
(in thousands) | Resid. | Comm. | Lines | Loans | Indirect | Consum. | C&I | Resid. | Comm. | Total | ||||||||||||||||||||||||||||||
With no related allowance recorded: | ||||||||||||||||||||||||||||||||||||||||
Recorded investment | $ | 2,392 | $ | 7,011 | $ | 1,888 | $ | 1,360 | — | $ | 7 | $ | 574 | $ | 11 | — | $ | 13,243 | ||||||||||||||||||||||
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|
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| |||||||||||||||||||||
Unpaid principal | $ | 3,083 | $ | 7,286 | $ | 2,318 | $ | 1,979 | — | $ | 11 | $ | 749 | $ | 16 | — | $ | 15,442 | ||||||||||||||||||||||
|
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|
|
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|
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|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Average recorded Investment | $ | 3,139 | $ | 17,059 | $ | 2,425 | $ | 1154 | $ | 1 | $ | 12 | $ | 575 | $ | 7 | — | $ | 24,372 | |||||||||||||||||||||
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Interest income Recognized | $ | 63 | $ | 232 | $ | 26 | $ | 9 | — | — | $ | 26 | — | — | $ | 356 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
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|
|
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|
| |||||||||||||||||||||
With an allowance recorded: | ||||||||||||||||||||||||||||||||||||||||
Recorded investment | $ | 2,613 | $ | 5,820 | $ | 923 | $ | 1,059 | — | $ | 8 | $ | 1,823 | — | — | $ | 12,246 | |||||||||||||||||||||||
Unpaid principal | $ | 2,701 | $ | 5,843 | $ | 931 | $ | 1,115 | — | $ | 8 | $ | 1,869 | — | — | $ | 12,467 | |||||||||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Related allowance | $ | 381 | $ | 644 | $ | 263 | $ | 201 | — | $ | 3 | $ | 822 | — | — | $ | 2,314 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Average recorded Investment | $ | 2,309 | $ | 3,620 | $ | 1,324 | $ | 866 | — | $ | 4 | $ | 1,959 | — | — | $ | 10,082 | |||||||||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Interest income Recognized | $ | 68 | $ | 216 | $ | 16 | $ | 36 | — | — | $ | 55 | — | — | $ | 391 | ||||||||||||||||||||||||
|
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|
| |||||||||||||||||||||
Impaired PNCI Loans – As of, or for the Nine Months Ended, September 30, 2016 | ||||||||||||||||||||||||||||||||||||||||
RE Mortgage | Home Equity | Auto | Other | Construction | ||||||||||||||||||||||||||||||||||||
(in thousands) | Resid. | Comm. | Lines | Loans | Indirect | Consum. | C&I | Resid. | Comm. | Total | ||||||||||||||||||||||||||||||
With no related allowance recorded: | ||||||||||||||||||||||||||||||||||||||||
Recorded investment | $ | 474 | $ | 1,874 | $ | 502 | $ | 97 | — | $ | 6 | — | — | — | $ | 2,953 | ||||||||||||||||||||||||
Unpaid principal | $ | 492 | $ | 2,048 | $ | 573 | $ | 103 | — | $ | 7 | — | — | — | $ | 3,223 | ||||||||||||||||||||||||
Average recorded Investment | $ | 674 | $ | 1,503 | $ | 478 | $ | 84 | — | $ | 19 | $ | 1 | — | $ | 245 | $ | 3,004 | ||||||||||||||||||||||
Interest income Recognized | $ | 7 | — | $ | 2 | $ | 1 | — | — | — | — | — | $ | 10 | ||||||||||||||||||||||||||
With an allowance recorded: | ||||||||||||||||||||||||||||||||||||||||
Recorded investment | $ | 263 | — | $ | 507 | $ | 134 | — | $ | 257 | — | — | — | $ | 1,161 | |||||||||||||||||||||||||
Unpaid principal | $ | 263 | — | $ | 507 | $ | 134 | — | $ | 257 | — | — | — | $ | 1,161 | |||||||||||||||||||||||||
Related allowance | $ | 81 | — | $ | 248 | $ | 109 | — | $ | 69 | — | — | — | $ | 507 | |||||||||||||||||||||||||
Average recorded Investment | $ | 131 | $ | 1,374 | $ | 557 | $ | 86 | — | $ | 246 | — | — | — | $ | 2,394 | ||||||||||||||||||||||||
Interest income Recognized | $ | 7 | — | $ | 16 | $ | 5 | — | $ | 8 | — | — | — | $ | 36 |
At September 30, 2017, $13,352,000 of originated loans were TDR andextent that such modifications meet the criteria previously described, such modifications are not expected to be classified as impaired. The Company had obligations to lend additional $209,000 on these TDR as of September 30, 2017. At September 30, 2017, $1,611,000 of PNCI loans were TDR and classified as impaired. The Company had obligations to lend $3,000 of additional funds on these TDR as of September 30, 2017.
At December 31, 2016, $12,371,000 of Originated loans were TDRs and classified as impaired. The Company had obligations to lend $25,000 of additional funds on these TDRs as of December 31, 2016. At December 31, 2016, $1,324,000 of PNCI loans were TDRs and classified as impaired. The Company had no obligations to lend additional funds on these TDRs as of December 31, 2016.
At September 30, 2016, $14,882,000 of originated loans were TDR and classified as impaired. The Company had obligations to lend $65,000 of additional funds on these TDR as of September 30, 2016. At September 30, 2016, $1,476,000 of PNCI loans were TDR and classified as impaired. The Company had no obligations to lend additional funds on these TDR as of September 30, 2016.
.
Note 5 – Allowance for Loan Losses (continued)
The following tables show certain information regarding Troubled Debt Restructurings (TDRs) that occurred during the periods indicated:
TDR Information for the Three Months Ended September 30, 2017 | ||||||||||||||||||||||||||||||||||
RE Mortgage | Home Equity | Other | Construction | |||||||||||||||||||||||||||||||
($ in thousands) | Resid. | Comm. | Lines | Loans | Consum. | C&I | Resid. | Comm. | Total | |||||||||||||||||||||||||
Number | 1 | 4 | — | 1 | — | 8 | 1 | — | 15 | |||||||||||||||||||||||||
Pre-mod outstanding principal balance | $ | 939 | $ | 2,886 | — | $ | 252 | — | $ | 1,109 | $ | 144 | — | $ | 5,330 | |||||||||||||||||||
Post-mod outstanding principal balance | $ | 939 | $ | 2,886 | — | $ | 252 | — | $ | 1,109 | $ | 144 | — | $ | 5,330 | |||||||||||||||||||
Financial impact due to TDR taken as additional provision | $ | 169 | $ | 14 | — | — | — | $ | 28 | — | — | $ | 211 | |||||||||||||||||||||
Number that defaulted during the period | 1 | 1 | — | — | — | — | — | — | 2 | |||||||||||||||||||||||||
Recorded investment of TDRs that defaulted during the period | $ | 99 | $ | 219 | — | — | — | — | — | — | $ | 318 | ||||||||||||||||||||||
Financial impact due to the default of previous TDR taken as charge-offs or additional provisions | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
TDR Information for the Nine Months Ended September 30, 2017 | ||||||||||||||||||||||||||||||||||
RE Mortgage | Home Equity | Other | Construction | |||||||||||||||||||||||||||||||
($ in thousands) | Resid. | Comm. | Lines | Loans | Consum. | C&I | Resid. | Comm. | Total | |||||||||||||||||||||||||
Number | 1 | 7 | 3 | 1 | 1 | 11 | 1 | — | 25 | |||||||||||||||||||||||||
Pre-mod outstanding principal balance | $ | 939 | $ | 3,509 | $ | 187 | $ | 252 | $ | 14 | $ | 1,854 | $ | 144 | — | $ | 6,898 | |||||||||||||||||
Post-mod outstanding principal balance | $ | 939 | $ | 3,482 | $ | 187 | $ | 252 | $ | 14 | $ | 1,748 | $ | 144 | — | $ | 6,765 | |||||||||||||||||
Financial impact due to TDR taken as additional provision | $ | 169 | $ | (111 | ) | $ | 27 | — | $ | 11 | $ | 37 | — | — | $ | 133 | ||||||||||||||||||
Number that defaulted during the period | 2 | 1 | — | — | — | — | — | — | 3 | |||||||||||||||||||||||||
Recorded investment of TDRs that defaulted during the period | $ | 223 | $ | 219 | — | — | — | — | — | — | $ | 442 | ||||||||||||||||||||||
Financial impact due to the default of previous TDR taken as charge-offs or additional provisions | — | — | — | — | — | — | — | — | — |
TDR Information for the Three Months Ended September 30, 2016 | ||||||||||||||||||||||||||||||||||||||
RE Mortgage | Home Equity | Auto | Other | Construction | ||||||||||||||||||||||||||||||||||
($ in thousands) | Resid. | Comm. | Lines | Loans | Indirect | Consum. | C&I | Resid. | Comm. | Total | ||||||||||||||||||||||||||||
Number | 2 | 2 | 2 | — | — | 1 | 3 | — | — | 10 | ||||||||||||||||||||||||||||
Pre-mod outstanding principal balance | $ | 318 | $ | 170 | $ | 113 | — | — | $ | 8 | $ | 65 | — | — | $ | 674 | ||||||||||||||||||||||
Post-mod outstanding principal balance | $ | 324 | $ | 170 | $ | 114 | — | — | $ | 8 | $ | 66 | — | — | $ | 682 | ||||||||||||||||||||||
Financial impact due to TDR taken as additional provision | $ | 6 | — | — | — | — | — | $ | 15 | — | — | $ | 21 | |||||||||||||||||||||||||
Number that defaulted during the period | 1 | — | 1 | — | — | — | — | — | — | 2 | ||||||||||||||||||||||||||||
Recorded investment of TDRs that defaulted during the period | $ | 14 | — | $ | 229 | — | — | — | — | — | — | $ | 243 | |||||||||||||||||||||||||
Financial impact due to the default of previous TDR taken as charge-offs or additional provisions | — | — | — | — | — | — | — | — | — | — |
Note 5 – Allowance for Loan Losses (continued)
troubled debt restructurings. The following tables show certain information regarding TDRs that occurred during the periods indicated:
TDR Information for the Nine Months Ended September 30, 2016 | ||||||||||||||||||||||||||||||||||||||||
RE Mortgage | Home Equity | Auto | Other | Construction | ||||||||||||||||||||||||||||||||||||
($ in thousands) | Resid. | Comm. | Lines | Loans | Indirect | Consum. | C&I | Resid. | Comm. | Total | ||||||||||||||||||||||||||||||
Number | 3 | 3 | 9 | 3 | — | 2 | 4 | — | — | 24 | ||||||||||||||||||||||||||||||
Pre-mod outstanding principal balance | $ | 650 | $ | 248 | $ | 707 | $ | 280 | — | $ | 27 | $ | 77 | — | — | $ | 1,989 | |||||||||||||||||||||||
Post-mod outstanding principal balance | $ | 656 | $ | 249 | $ | 709 | $ | 317 | — | $ | 27 | $ | 77 | — | — | $ | 2,035 | |||||||||||||||||||||||
Financial impact due to TDR taken as additional provision | $ | 50 | — | $ | 205 | $ | 46 | — | $ | 2 | $ | 23 | — | — | $ | 326 | ||||||||||||||||||||||||
Number that defaulted during the period | 2 | — | 1 | — | — | — | — | — | — | 3 | ||||||||||||||||||||||||||||||
Recorded investment of TDRs that defaulted during the period | $ | 101 | — | $ | 229 | — | — | — | — | — | — | $ | 330 | |||||||||||||||||||||||||||
Financial impact due to the default of previous TDR taken as charge-offs or additional provisions | — | — | — | — | — | — | — | — | — | — |
TDR Information for the three months ended March 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(dollars in thousands) | Number | Pre-mod outstanding principal balance | Post-mod outstanding principal balance | Financial impact due to TDR taken as additional provision | Number that defaulted during the period | Recorded investment of TDRs that defaulted during the period | Financial impact due to the default of previous TDR taken as charge- offs or additional provisions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage loans on real estate: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Residential 1-4 family | — | $ | — | $ | — | $ | — | 1 | $ | 302 | $ | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial | 3 | 487 | 549 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total mortgage loans on real estate | 3 | 487 | 549 | — | 1 | 302 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consumer: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Home equity lines of credit | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Home equity loans | 2 | 172 | 169 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total consumer loans | 2 | 172 | 169 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial | 1 | 21 | 20 | 21 | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Construction: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Residential | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total construction loans | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | 6 | $ | 680 | $ | 738 | $ | 21 | 1 | $ | 302 | $ | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
TDR Information for the three months ended March 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(dollars in thousands) | Number | Pre-mod outstanding principal balance | Post-mod outstanding principal balance | Financial impact due to TDR taken as additional provision | Number that defaulted during the period | Recorded investment of TDRs that defaulted during the period | Financial impact due to the default of previous TDR taken as charge- offs or additional provisions | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage loans on real estate: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Residential 1-4 family | — | $ | 163 | $ | 162 | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total mortgage loans on real estate | 1 | 163 | 162 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consumer: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Home equity lines of credit | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Home equity loans | 1 | 121 | 120 | 1 | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total consumer loans | 1 | 121 | 120 | 1 | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial | 2 | 15 | 15 | — | 1 | 7 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Construction: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Residential | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total construction loans | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | 4 | $ | 299 | $ | 297 | $ | 1 | 1 | $ | 7 | $ | — |
The objective of the modifications was to increase loan repayments by customers and thereby reduce net charge-offs. The modified loans are included in impaired loans for purposes of determining the level of the allowance for credit losses.
Loans that defaulted within the twelve month period subsequent to modification were not considered significant for financial reporting purposes.
A summary5 - Leases
Nine months ended September 30, 2017 | Nine months ended September 30, 2016 | |||||||||||||||||||||||
Noncovered | Covered | Total | Noncovered | Covered | Total | |||||||||||||||||||
Beginning balance, net | $ | 3,763 | $ | 223 | $ | 3,986 | $ | 5,369 | — | $ | 5,369 | |||||||||||||
Additions/transfers from loans | 726 | — | 726 | 1,730 | $ | 223 | 1,953 | |||||||||||||||||
Dispositions/sales | (1,256 | ) | (223 | ) | (1,479 | ) | (3,157 | ) | — | (3,157 | ) | |||||||||||||
Valuation adjustments | (162 | ) | — | (162 | ) | (41 | ) | — | (41 | ) | ||||||||||||||
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Ending balance, net | $ | 3,701 | — | $ | 3,071 | $ | 3,901 | $ | 223 | $ | 4,124 | |||||||||||||
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Ending valuation allowance | $ | (248 | ) | — | $ | (248 | ) | $ | (241 | ) | — | $ | (241 | ) | ||||||||||
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Ending number of foreclosed assets | 11 | — | 11 | 14 | 1 | 15 | ||||||||||||||||||
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Proceeds from sale of foreclosed assets | $ | 1,571 | $ | 216 | $ | 1,787 | $ | 3,375 | — | $ | 3,375 | |||||||||||||
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Gain (loss) on sale of foreclosed assets | $ | 315 | (7 | ) | $ | 308 | $ | 218 | — | $ | 218 | |||||||||||||
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As of September 30, 2017, $1,386,000 of foreclosed residential real estate properties, all of which the Company has obtained physical possessionis lessee of real estate property for branches, ATM locations, and general administration and operations. The Company elected not to include short-term leases (i.e. leases with initial terms of twelve months or less) within the ROUA and lease liability. Known or determinable adjustments to the required minimum future lease payments were included in the calculation of the Company’s ROUA and lease liability. Adjustments to the required minimum future lease payments that are variable and will not be determinable until a future period, such as changes in the consumer price index, are included as variable lease costs. Additionally, expected variable payments for common area maintenance, taxes and insurance were unknown and not determinable at lease commencement and therefore, were not included in foreclosed assets. At September 30, 2017, the recorded investmentdetermination of consumer mortgage loans securedthe Company’s ROUA or lease liability.
Note 7 - Premisesreduced based on the discounted present value of remaining payments as of each reporting period. The ROUA value is measured using the amount of lease liability and Equipment
Premisesadjusted for prepaid or accrued lease payments, remaining lease incentives, unamortized direct costs (if any), and equipment were comprised of:
September 30, | December 31, | |||||||
2017 | 2016 | |||||||
(In thousands) | ||||||||
Land & land improvements | $ | 10,021 | $ | 9,522 | ||||
Buildings | 43,860 | 42,345 | ||||||
Furniture and equipment | 34,530 | 31,428 | ||||||
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88,411 | 83,295 | |||||||
Less: Accumulated depreciation | (39,892 | ) | (37,412 | ) | ||||
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48,519 | 45,883 | |||||||
Construction in progress | 6,476 | 2,523 | ||||||
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Total premises and equipment | $ | 54,995 | $ | 48,406 | ||||
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Depreciationimpairment (if any).
(in thousands) | March 31, 2020 | March 31, 2019 | |||||||||||||||
Operating lease cost | $ | 1,294 | $ | 1,311 | |||||||||||||
Short-term lease cost | 63 | 71 | |||||||||||||||
Variable lease cost | 6 | (5) | |||||||||||||||
Sublease income | (34) | (34) | |||||||||||||||
Total lease cost | $ | 1,329 | $ | 1,343 |
Note 8 – Cash Value of Life Insurance
A summary of the activity in the balance of cash value of life insurance follows (in thousands):
Nine months ended September 30, | ||||||||
2017 | 2016 | |||||||
Beginning balance | $ | 95,912 | $ | 94,560 | ||||
Increase in cash value of life insurance | 2,043 | 2,086 | ||||||
Death benefit receivable in excess of cash value | 108 | 238 | ||||||
Death benefit receivable | (921 | ) | (1,603 | ) | ||||
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Ending balance | $ | 97,142 | $ | 95,281 | ||||
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End of period death benefit | $ | 165,006 | $ | 166,623 | ||||
Number of policies owned | 183 | 187 | ||||||
Insurance companies used | 14 | 14 | ||||||
Current and former employees and directors covered | 57 | 58 |
As of September 30, 2017, the Bank was the owner and beneficiary of 183 life insurance policies, issued by 14 life insurance companies, covering 57 current and former employees and directors. These life insurance policies are recorded on the Company’s financial statements at their reported cash (surrender) values. As a result of current tax law and the nature of these policies, the Bank records any increase in cash value of these policies as nontaxable noninterest income. If the Bank decided to surrender any of the policies prior to the death of the insured, such surrender may result in a tax expense related to thelife-to-date cumulative increase in cash value of the policy. If the Bank retains such policies until the death of the insured, the Bank would receive nontaxable proceeds from the insurance company equal to the death benefit of the policies. The Bank has entered into Joint Beneficiary Agreements (JBAs) with certain of the insured that for certain of the policies provide some level of sharing of the death benefit, less the cash surrender value, among the Bank and the beneficiaries of the insured upon the receipt of death benefits. See Note 15 of these condensed consolidated financial statements for additional information on JBAs.
Note 9 - Goodwill and Other Intangible Assets
ended:
(in thousands) | March 31, 2020 | March 31, 2019 | |||||||||||||||
Cash paid for amounts included in the measurement of lease liabilities: | |||||||||||||||||
Operating cash flows for operating leases | $ | 1,237 | $ | 1,218 | |||||||||||||
ROUA obtained in exchange for operating lease liabilities | $ | 3,393 | $ | 32,006 |
September 30, | December 31, | |||||||||||||||
(dollar in thousands) | 2017 | Additions | Reductions | 2016 | ||||||||||||
Goodwill | $ | 64,311 | — | — | $ | 64,311 | ||||||||||
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The following table summarizes the Company’s core deposit intangiblesperiods ended:
As of March 31, 2020 | As of March 31, 2019 | ||||||||||
Weighted-average remaining lease term | 10.3 | 9.5 | |||||||||
Weighted-average discount rate | 3.17 | % | 3.17 | % |
September 30, | Reductions/ | Fully | December 31, | |||||||||||||||||
(dollar in thousands) | 2017 | Additions | Amortization | Depreciated | 2016 | |||||||||||||||
Core deposit intangibles | $ | 9,558 | — | — | $ | (562 | ) | $ | 10,120 | |||||||||||
Accumulated amortization | (4,045 | ) | — | $ | (1,050 | ) | $ | 562 | (3,557 | ) | ||||||||||
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Core deposit intangibles, net | $ | 5,513 | — | $ | (1,050 | ) | — | $ | 6,563 | |||||||||||
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The Company recorded additions to its CDI of $2,046,000 in conjunction with the acquisition of three branch offices from Bank of America on March 18, 2016, $6,614,000 in conjunction with the North Valley Bancorp acquisition on October 3, 2014, $898,000 in conjunction with the Citizens acquisition on September 23, 2011, and $562,000 in conjunction with the Granite acquisition on May 28, 2010.
The following table summarizes the Company’s remaining estimated core deposit intangible amortization (dollars in thousands):
Estimated Core Deposit | ||||
Periods Ended | Intangible Amortization | |||
2017 | $ | 339 | ||
2018 | 1,324 | |||
2019 | 1,228 | |||
2020 | 1,228 | |||
2021 | 969 | |||
Thereafter | 425 |
follows:
(in thousands) | |||||
Periods ending December 31, | |||||
2020 | $ | 3,412 | |||
2021 | 4,428 | ||||
2022 | 4,089 | ||||
2023 | 3,410 | ||||
2024 | 3,130 | ||||
Thereafter | 17,337 | ||||
35,806 | |||||
Discount for present value of expected cash flows | (5,799) | ||||
Lease liability at March 31, 2020 | $ | 30,007 |
The following tables summarize the activity in, and the main assumptions used to determine the fair value of mortgage servicing rights (“MSRs”) for the periods indicated (dollars in thousands):
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Mortgage servicing rights: | ||||||||||||||||
Balance at beginning of period | $ | 6,596 | $ | 6,720 | $ | 6,595 | $ | 7,618 | ||||||||
Additions | 147 | 287 | 619 | 788 | ||||||||||||
Change in fair value | (324 | ) | (799 | ) | (795 | ) | (2,198 | ) | ||||||||
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Balance at end of period | $ | 6,419 | $ | 6,208 | $ | 6,419 | $ | 6,208 | ||||||||
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Servicing, late and ancillary fees received | $ | 513 | $ | 480 | $ | 1,560 | $ | 1,513 | ||||||||
Balance of loans serviced at: | ||||||||||||||||
Beginning of period | $ | 822,549 | $ | 814,702 | $ | 816,623 | $ | 817,917 | ||||||||
End of period | $ | 812,005 | $ | 811,128 | $ | 812,005 | $ | 811,128 | ||||||||
Period end: | ||||||||||||||||
Weighted-average prepayment speed (CPR) | 9.2 | % | 12.8 | % | ||||||||||||
Discount rate | 14.0 | % | 12.0 | % |
The changes in fair value of MSRs that occurred during the three and nine months ended September 30, 2017 and 2016 were mainly due to changes in principal balances, changes in mortgage prepayment speeds, and changes in investor required rate of return, or discount rate, of the MSRs
Note 11 - Indemnification Asset
A summary of the activity in the balance of indemnification asset (liability) follows (in thousands):
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Beginning (payable) receivable balance | — | $ | (662 | ) | $ | (744 | ) | $ | (521 | ) | ||||||
Effect of actual covered losses and change in estimated future covered losses | — | 17 | (224 | ) | (245 | ) | ||||||||||
Reimbursable expenses (revenue), net | — | — | 256 | (4 | ) | |||||||||||
Payments made (received) | — | 107 | — | 232 | ||||||||||||
Gain on termination of loss share agreement | — | — | 712 | — | ||||||||||||
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Ending (payable) receivable balance | — | $ | (538 | ) | — | $ | (538 | ) | ||||||||
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Amount of indemnification asset recorded in other assets | — | $ | 95 | |||||||||||||
Amount of indemnification liability recorded in other liabilities | — | (633 | ) | |||||||||||||
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Ending balance | — | $ | (538 | ) | ||||||||||||
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During May 2015, the indemnification portion of the Company’s agreement with the FDIC related to the Company’s acquisition of certain nonresidential real estate loans of Granite in May 2010 expired. The indemnification portion of the Company’s agreement with the FDIC related to the Company’s acquisition of certain residential real estate loans of Granite in May 2010 was set to expire in May 2018. The agreement specified that recoveries of losses that are claimed by the Company and indemnified by the FDIC under the agreement that are recovered by the Company through May 2020 are to be shared with the FDIC in the same proportion as they were indemnified by the FDIC. In addition, the agreement specified that at the end of the agreement in May 2020, to the extent that total claimed losses plus servicing expenses, net of recoveries, claimed under the agreement over the entire ten year period of the agreement did not meet a certain threshold, the Company would have been required to pay to the FDIC a “true up” amount equal to fifty percent of the difference of the threshold and actual claimed losses plus servicing expenses, net of recoveries. On May 9, 2017, the Company and the FDIC terminated their loss sharing agreements. As part of the termination agreement, the Company paid the FDIC $184,000, and recorded a $712,000 gain representing the difference between the Company’s payment to the FDIC and the recorded payable balance on May 9, 2017.
Note 12 – Other Assets
Other assets were comprised of (in thousands):
September 30, | December 31, | |||||||
2017 | 2016 | |||||||
Deferred tax asset, net | $ | 33,091 | $ | 36,199 | ||||
Prepaid expense | 3,912 | 3,045 | ||||||
Software | 1,563 | 2,039 | ||||||
Advanced compensation | — | 249 | ||||||
Capital Trusts | 1,706 | 1,702 | ||||||
Investment in Low Housing Tax Credit Funds | 17,453 | 18,465 | ||||||
Life insurance proceeds receivable | 2,242 | 2,120 | ||||||
Tax refund receivable | — | 6,460 | ||||||
Premises held for sale | — | 2,896 | ||||||
Due from broker | 25,757 | — | ||||||
Miscellaneous other assets | 1,212 | 1,568 | ||||||
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Total other assets | $ | 86,936 | $ | 74,743 | ||||
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Note 136 - Deposits
September 30 | December 31, | |||||||
2017 | 2016 | |||||||
Noninterest-bearing demand | $ | 1,283,949 | $ | 1,275,745 | ||||
Interest-bearing demand | 965,480 | 887,625 | ||||||
Savings | 1,367,597 | 1,397,036 | ||||||
Time certificates, over $250,000 | 74,944 | 75,184 | ||||||
Other time certificates | 235,486 | 259,970 | ||||||
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Total deposits | $ | 3,927,456 | $ | 3,895,560 | ||||
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March 31, 2020 | December 31, 2019 | ||||||||||
Noninterest-bearing demand | $ | 1,883,143 | $ | 1,832,665 | |||||||
Interest-bearing demand | 1,243,192 | 1,242,274 | |||||||||
Savings | 1,857,684 | 1,851,549 | |||||||||
Time certificates, $250,000 or more | 111,262 | 129,061 | |||||||||
Other time certificates | 307,417 | 311,445 | |||||||||
Total deposits | $ | 5,402,698 | $ | 5,366,994 |
The following tables summarize the activity in reserve for unfunded commitments for the periods indicated (dollars in thousands):
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Balance at beginning of period | $ | 2,599 | $ | 2,883 | $ | 2,719 | $ | 2,475 | ||||||||
Provision for losses – unfunded commitments | 390 | 25 | 270 | 433 | ||||||||||||
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Balance at end of period | $ | 2,989 | $ | 2,908 | $ | 2,989 | $ | 2,908 | ||||||||
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Note 15 – Other Liabilities
Other liabilities were comprised of (in thousands):
September 30, | December 31, | |||||||
2017 | 2016 | |||||||
Deferred compensation | $ | 6,431 | $ | 6,525 | ||||
Pension liability | 27,238 | 26,645 | ||||||
Joint beneficiary agreements | 3,192 | 3,007 | ||||||
Low income housing tax credit fund commitments | 11,439 | 15,176 | ||||||
Accrued salaries and benefits expense | 6,176 | 5,704 | ||||||
Loan escrow and servicing payable | 2,264 | 2,146 | ||||||
Deferred Revenue | 1,759 | 726 | ||||||
Litigation contingency | 1,450 | 1,450 | ||||||
Miscellaneous other liabilities | 2,901 | 5,985 | ||||||
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Total other liabilities | $ | 62,850 | $ | 67,364 | ||||
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Note 16 - Other Borrowings
A summary of the balances of other borrowings follows:
September 30, | December 31, | |||||||
2017 | 2016 | |||||||
(in thousands) | ||||||||
FHLB collateralized borrowing, fixed rate, as of September 30, 2017 of 1.11%, payable on October 2, 2017 | $ | 85,737 | — | |||||
Other collateralized borrowings, fixed rate, as of September 30, 2017 of 0.05%, payable on October 2, 2017 | 12,993 | $ | 17,493 | |||||
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Total other borrowings | $ | 98,730 | $ | 17,493 | ||||
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The Company did not enter into any repurchase agreements during the nine months ended September 30, 2017 or the year ended December 31, 2016.
The Company maintains a collateralized line of credit with the Federal Home Loan Bank of San Francisco. Based on the FHLB stock requirements at September 30, 2017, this line provided for maximum borrowings of $1,303,462,000 of which $85,737,000 was outstanding as of September 30, 2017, leaving $1,217,725,000 available. As of September 30, 2017, the Company has designated investment securities with fair value of $70,534,000 and loans totaling $1,919,515,000 as potential collateral under this collateralized line of credit with the FHLB.
The Company had $12,993,000 and $17,493,000 of other collateralized borrowings at September 30, 2017 and December 31, 2016, respectively. Other collateralized borrowings are generally overnight maturity borrowings fromnon-financial institutions that are collateralized by securities owned by the Company. As of September 30, 2017, the Company has pledged as collateral and sold under agreements to repurchase investment securities with fair value of $27,150,000 under these other collateralized borrowings.
The Company maintains a collateralized line of credit with the San Francisco Federal Reserve Bank. As of September 30, 2017, this line provided for maximum borrowings of $130,985,000 of which none was outstanding, leaving $130,985,000 available. As of September 30, 2017, the Company has designated investment securities with fair value of $18,000 and loans totaling $232,290,000 as potential collateral under this collateralized line of credit with the San Francisco Federal Reserve Bank.
The Company had available unused correspondent banking lines of credit from commercial banks totaling $20,000,000 for federal funds transactions at September 30, 2017.
Note 17 – Junior Subordinated Debt
At September 30, 2017, the Company had five wholly-owned subsidiary business trusts that had issued $62.9 million of trust preferred securities (the “Capital Trusts”). Trust preferred securities accrue and pay distributions periodically at specified annual rates as provided in the indentures. The trusts used the net proceeds from the offering to purchase a like amount of subordinated debentures (the “Debentures”) of the Company. The Debentures are the sole assets of the trusts. The Company’s obligations under the subordinated debentures and related documents, taken together, constitute a full and unconditional guarantee by the Company of the obligations of the trusts. The trust preferred securities are mandatorily redeemable upon the maturity of the Debentures, or upon earlier redemption as provided in the indentures. The Company has the right to redeem the Debentures in whole (but not in part) on or after specific dates, at a redemption price specified in the indentures plus any accrued but unpaid interest to the redemption date. The Company also has a right to defer consecutive payments of interest on the debentures for up to five years.
The Company organized two of the Capital Trusts. The Company acquired its three other Capital Trusts and assumed their related Debentures as a result of its acquisition of North Valley Bancorp. At the acquisition date of October 3, 2014, the Debentures associated with North Valley Bancorp’s three Capital Trusts were recorded on the Company’s books at their fair values of $5,006,000, $3,918,000, and $6,063,000, respectively. The related fair value discounts to face value of these Debentures will be amortized over the remaining time to maturity for each of these Debentures using the effective interest method. Similar, and proportional, discounts were applied to the acquired common stock interests in each of the acquired Capital Trusts and these discounts will be proportionally amortized over the remaining time to maturity for each related debenture.
The recorded book values of the Debentures issued by the Capital Trusts are reflected as junior subordinated debt in the Company’s consolidated balance sheets. The common stock issued by the Capital Trusts and owned by the Company is recorded in other assets in the Company’s consolidated balance sheets. The recorded book value of the debentures issued by the Capital Trusts, less the recorded book value of the common stock of the Capital Trusts owned by the Company, continues to qualify as Tier 1 or Tier 2 capital under interim guidance issued by the Board of Governors of the Federal Reserve System.
The following table summarizes the terms and recorded balance of each subordinated debenture as of the date indicated (dollars in thousands):
Coupon Rate | As of September 30, 2017 | December 31, 2016 | ||||||||||||||||||||||
Subordinated | Maturity | Face | (Variable) | Current | Recorded | Recorded | ||||||||||||||||||
Debt Series | Date | Value | 3 mo. LIBOR + | Coupon Rate | Book Value | Book Value | ||||||||||||||||||
TriCo Cap Trust I | 10/7/2033 | $ | 20,619 | 3.05 | % | 4.35 | % | $ | 20,619 | $ | 20,619 | |||||||||||||
TriCo Cap Trust II | 7/23/2034 | 20,619 | 2.55 | % | 3.86 | % | 20,619 | 20,619 | ||||||||||||||||
North Valley Trust II | 4/24/2033 | 6,186 | 3.25 | % | 4.56 | % | 5,125 | 5,095 | ||||||||||||||||
North Valley Trust III | 4/24/2034 | 5,155 | 2.80 | % | 4.11 | % | 4,032 | 4,005 | ||||||||||||||||
North Valley Trust IV | 3/15/2036 | 10,310 | 1.33 | % | 2.65 | % | 6,415 | 6,329 | ||||||||||||||||
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$ | 62,889 | $ | 56,810 | $ | 56,667 | |||||||||||||||||||
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During the nine months ended September 30, 2017, the balance of Junior Subordinated Debt increased $143,000 to $56,810,000 due to purchase fair value discount amortization.
Note 187 - Commitments and Contingencies
Restricted Cash Balances— Reserves (in the form of deposits with the San Francisco Federal Reserve Bank) of $79,226,000 and $78,183,000 were maintained to satisfy Federal regulatory requirements at September 30, 2017 and December 31, 2016. These reserves are included in cash and due from banks in the accompanying consolidated balance sheets.
Lease Commitments— The Company leases 42 sites undernon-cancelable operating leases. The leases contain various provisions for increases in rental rates, based either on changes in the published Consumer Price Index or a predetermined escalation schedule. Substantially all of the leases provide the Company with the option to extend the lease term one or more times following expiration of the initial term. The Company currently does not have any capital leases.
At December 31, 2016, future minimum commitments undernon-cancelable operating leases with initial or remaining terms of one year or more are as follows:
Operating Leases | ||||
(in thousands) | ||||
2017 | $ | 3,320 | ||
2018 | 2,523 | |||
2019 | 1,924 | |||
2020 | 1,325 | |||
2021 | 963 | |||
Thereafter | 1,696 | |||
|
| |||
Future minimum lease payments | $ | 11,751 | ||
|
|
Rent expense under operating leases was $1,038,000 and $1,034,000 during the three months ended September 30, 2017 and 2016, respectively. Rent expense was offset by rent income of $10,000 and $58,000 during the three months ended September 30, 2017 and 2016, respectively. Rent expense under operating leases was $3,134,000 and $3,024,000 during the nine months ended September 30, 2017 and 2016, respectively. Rent expense was offset by rent income of $34,000 and $177,000 during the nine months ended September 30, 2017 and 2016, respectively.
Financial Instruments withOff-Balance-Sheet Risk— The Company is a party to financial instruments withoff-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby letters of credit, and deposit account overdraft privilege. Those instruments involve, to varying degrees, elements of risk in excess of the amount recognized in the balance sheet. The contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.
The Company’s exposure to loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit written is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does foron-balance sheet instruments. The Company’s exposure to loss in the event of nonperformance by the other party to the financial instrument for deposit account overdraft privilege is represented by the overdraft privilege amount disclosed to the deposit account holder.
(in thousands) | September 30, | December 31, | ||||||
2017 | 2016 | |||||||
Financial instruments whose amounts represent risk: | ||||||||
Commitments to extend credit: | ||||||||
Commercial loans | $ | 253,673 | $ | 220,836 | ||||
Consumer loans | 422,521 | 406,855 | ||||||
Real estate mortgage loans | 63,290 | 42,184 | ||||||
Real estate construction loans | 170,416 | 97,399 | ||||||
Standby letters of credit | 12,700 | 12,763 | ||||||
Deposit account overdraft privilege | 96,650 | 98,583 |
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates of one year or less or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s credit worthiness on acase-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on Management’s credit evaluation of the customer. Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, residential properties, and income-producing commercial properties.
Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support private borrowing arrangements. Most standby letters of credit are issued for one year or less. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Collateral requirements vary, but in general follow the requirements for other loan facilities.
Deposit account overdraft privilege amount represents the unused overdraft privilege balance available to the Company’s deposit account holders who have deposit accounts covered by an overdraft privilege. The Company has established an overdraft privilege for certain of its deposit account products whereby all holders of such accounts who bring their accounts to a positive balance at least once every thirty days receive the overdraft privilege. The overdraft privilege allows depositors to overdraft their deposit account up to a predetermined level. The predetermined overdraft limit is set by the Company based on account type.
Legal Proceedings— On September 15, 2014, a former Personal Banker at one of the Bank’sin-store branches filed a Class Action Complaint against the Bank in Butte County Superior Court, alleging causes of action related to the observance of meal and rest periods and seeking to represent a class of current and former branch employees with the same or similar job duties, employed by the Bank within the State of California during the preceding four years. On or about June 25, 2015, Plaintiff filed an Amended Complaint expanding the class definition to include all current and formernon-exempt branch employees employed by the Bank within the State of California at any time during the period of September 15, 2010 to the entry of judgment. The Bank responded to the First Amended Complaint by denying the charges and the parties engaged in written discovery. The parties then engaged innon-binding mediation during the third quarter of 2016.
In addition to this, on January 20, 2015, a then-current Personal Banker at one of the Bank’sin-store branches filed a First Amended Complaint against the Bank and the Company in Sacramento County Superior Court, alleging causes of action related to wage statement violations. As part of the Complaint Plaintiff is seeking to represent a class of current and former exempt andnon-exempt employees who worked for the Company and/or the Bank during the time period of December 12, 2013 to the date of filing the action. The Company and the Bank responded to the First Amended Complaint by denying the charges and engaging in written discovery with Plaintiff. The parties then engaged innon-binding mediation of the action during the third quarter of 2016 as well. This matter was transferred to the Butte County Superior Court and consolidated with the case above, effective August 25, 2017.
As part of the mediations, which took place concurrently, the Bank agreed in principal to settle the two matters in a consolidated settlement proceeding. In connection with the settlement and in consideration of a full release of all claims raised in both the actions, the Bank has agreed to pay up to $1.9 million though the actual cost of the settlement will depend on the number of claims submitted by the members of the purported classes. As a result, the Bank estimates the actual cost of the settlement may be approximately $1,450,000, and recorded such estimate. The settlement agreement was preliminarily approved and has been executed, although final settlement is subject to customary conditions, including court approval following notice to the members of the purported classes. It should be noted there are no assurances the court will approve the final settlement.
Neither the Company nor its subsidiaries are a party to any other pending legal proceedings that are material, nor is their property the subject of any other material pending legal proceeding at this time. All other legal proceedings are routine and arise out of the ordinary course of the Bank’s business. None of those proceedings are currently expected to have a material adverse impact upon the Company’s and the Bank’s business, their consolidated financial position nor their operations in any material amount not already accrued, after taking into consideration any applicable insurance.
Other Commitments and Contingencies—The Company has entered into employment agreements or change of control agreements with certain officers of the Company providing severance payments and accelerated vesting of benefits under supplemental retirement agreements to the officers in the event of a change in control of the Company and termination for other than cause or after a substantial and material change in the officer’s title, compensation or responsibilities.
The Bank owns 13,396 shares of Class B common stock of Visa Inc. which are convertible into Class A common stock at a conversion ratio of 1.648265 per Class B share. As of September 30, 2017, the value of the Class A shares was $105.24 per share. Utilizing the conversion ratio, the value of unredeemed Class A equivalent shares owned by the Bank was $2,324,000 as of September 30, 2017, and has not been reflected in the accompanying financial statements. The shares of Visa Class B common stock are restricted and may not be transferred. Visa Member Banks are required to fund an escrow account to cover settlements, resolution of pending litigation and related claims. If the funds in the escrow account are insufficient to settle all the covered litigation, Visa may sell additional Class A shares, use the proceeds to settle litigation, and further reduce the conversion ratio. If funds remain in the escrow account after all litigation is settled, the Class B conversion ratio will be increased to reflect that surplus.
Mortgage loans sold to investors may be sold with servicing rights retained, with only the standard legal representations and warranties regarding recourse to the Bank. Management believes that any liabilities that may result from such recourse provisions are not significant.
(in thousands) | March 31, 2020 | December 31, 2019 | |||||||||
Financial instruments whose amounts represent risk: | |||||||||||
Commitments to extend credit: | |||||||||||
Commercial loans | $ | 360,793 | $ | 363,793 | |||||||
Consumer loans | 541,848 | 533,576 | |||||||||
Real estate mortgage loans | 189,921 | 188,959 | |||||||||
Real estate construction loans | 204,170 | 222,998 | |||||||||
Standby letters of credit | 12,084 | 12,014 | |||||||||
Deposit account overdraft privilege | 109,752 | 110,402 |
the 2007 Repurchase Plan during 2019.
During the nine months ended September 30, 2017 and 2016 employees tendered 107,390 and 101,125 shares, respectively, of the Company’sCompany's common stock withtendered had market valuevalues of $3,854,000$153,000 and $2,774,000, respectively, in lieu of cash to exercise options to purchase shares of$1,036,000 during the Company’s stockquarter ended March 31, 2020 and to satisfy tax withholding requirements related to such exercises and the release of RSUs as permitted by the Company’s shareholder-approved equity compensation plans.
2019, respectively. The tendered shares were retired. The market value of tendered shares is the last market trade price at closing on the day an equity compensation plan instrumentoption is exercised or released.the other share based award vests. Stock repurchased under equity incentive plans are not included in the total of stock repurchased under the stock repurchase plan announced on August 21, 2007.
2019 or 2007 Stock Repurchase Plans.
In March 2009, the
In May 2001, the CompanyDirectors adopted the TriCo Bancshares 2001 Stock Option2019 Equity Incentive Plan (2001(2019 Plan) covering officers, employees, directorswhich was approved by shareholders on May 21, 2019. The 2019 Plan allows for up to 1,500,000 shares to be issued in connection with equity-based incentives. All grants of and consultants to,equity awards made during the Company. Underthree months ended March 31, 2020, if any, were made from the 2001 Plan, the option exercise price cannot be less than the fair market value2019 Plan.
Contents
Number of Shares | Option Price per Share | Weighted Average Exercise Price | Weighted Average Fair Value on Date of Grant | |||||||||||||||||||
Outstanding at December 31, 2016 | 592,250 | $ | 12.63 | to | $ | 23.21 | $ | 17.12 | ||||||||||||||
Options granted | — | — | to | — | — | — | ||||||||||||||||
Options exercised | (133,850 | ) | $ | 14.54 | to | $ | 22.54 | $ | 18.07 | |||||||||||||
Options forfeited | — | — | to | — | — | |||||||||||||||||
Outstanding at September 30, 2017 | 458,400 | $ | 12.63 | to | $ | 23.21 | $ | 16.85 |
Number of Shares | Option Price per Share | Weighted Average Exercise Price | |||||||||||||||
Outstanding at December 31, 2019 | 160,500 | $14.54 to $23.21 | $ | 17.60 | |||||||||||||
Options granted | — | — | — | ||||||||||||||
Options exercised | (8,000) | $17.54 to $19.46 | 18.50 | ||||||||||||||
Options forfeited | — | — | — | ||||||||||||||
Outstanding at March 31, 2020 | 152,500 | $14.54 to $23.21 | $ | 17.55 |
Currently Exercisable | Currently Not Exercisable | Total Outstanding | ||||||||||
Number of options | 431,100 | 27,300 | 458,400 | |||||||||
Weighted average exercise price | $ | 16.61 | $ | 20.54 | $ | 16.85 | ||||||
Intrinsic value (in thousands) | $ | 10,406 | $ | 552 | $ | 10,958 | ||||||
Weighted average remaining contractual term (yrs.) | 4.0 | 6.1 | 4.1 |
The 27,300March 31, 2020:
Currently Exercisable | Currently Not Exercisable | Total Outstanding | |||||||||||||||
Number of options | 152,500 | — | 152,500 | ||||||||||||||
Weighted average exercise price | $ | 17.55 | $ | — | $ | 17.55 | |||||||||||
Intrinsic value (in thousands) | $ | 1,871 | $ | — | $ | 1,871 | |||||||||||
Weighted average remaining contractual term (yrs.) | 2.6 | 0 | 2.6 |
RestrictedMarch 31, 2020.
Service Condition Vesting RSUs | Market Plus Service Condition Vesting RSUs | |||||||||||||||
Number of RSUs | Weighted Average Fair Value on Date of Grant | Number of RSUs | Weighted Average Fair Value on Date of Grant | |||||||||||||
Outstanding at December 31, 2016 | 68,450 | 47,426 | ||||||||||||||
RSUs granted | 29,669 | $ | 35.36 | 17,939 | $ | 32.95 | ||||||||||
Additional market plus service condition RSUs vested | 6,269 | |||||||||||||||
RSUs added through dividend credits | 939 | — | ||||||||||||||
RSUs released | (28,397 | ) | (18,805 | ) | ||||||||||||
RSUs forfeited/expired | (11 | ) | — | |||||||||||||
Outstanding at September 30, 2017 | 70,650 | 52,829 |
table:
Service Condition Vesting RSUs | Market Plus Service Condition Vesting RSUs | ||||||||||
Outstanding at December 31, 2019 | 68,597 | 51,312 | |||||||||
RSUs granted | — | — | |||||||||
RSUs added through dividend and performance credits | 521 | — | |||||||||
RSUs released | (362) | — | |||||||||
RSUs forfeited/expired | (80) | (78) | |||||||||
Outstanding at March 31, 2020 | 68,676 | 51,234 |
March 31, 2020.
Three months ended March 31, | |||||||||||||||||||||||||||||
(dollars in thousands) | 2020 | 2019 | |||||||||||||||||||||||||||
ATM and interchange fees | $ | 5,111 | $ | 4,581 | |||||||||||||||||||||||||
Service charges on deposit accounts | 4,046 | 3,880 | |||||||||||||||||||||||||||
Other service fees | 758 | 771 | |||||||||||||||||||||||||||
Mortgage banking service fees | 469 | 483 | |||||||||||||||||||||||||||
Change in value of mortgage servicing rights | (1,258) | (645) | |||||||||||||||||||||||||||
Total service charges and fees | 9,126 | 9,070 | |||||||||||||||||||||||||||
Increase in cash value of life insurance | 720 | 775 | |||||||||||||||||||||||||||
Asset management and commission income | 916 | 642 | |||||||||||||||||||||||||||
Gain on sale of loans | 891 | 412 | |||||||||||||||||||||||||||
Lease brokerage income | 193 | 220 | |||||||||||||||||||||||||||
Sale of customer checks | 124 | 140 | |||||||||||||||||||||||||||
Gain on sale of investment securities | — | — | |||||||||||||||||||||||||||
Gain on marketable equity securities | 47 | 36 | |||||||||||||||||||||||||||
Other | (197) | 508 | |||||||||||||||||||||||||||
Total other non-interest income | 2,694 | 2,733 | |||||||||||||||||||||||||||
Total non-interest income | $ | 11,820 | $ | 11,803 |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Service charges on deposit accounts | $ | 4,160 | $ | 3,641 | $ | 12,102 | $ | 10,549 | ||||||||
ATM and interchange fees | 4,209 | 3,851 | 12,472 | 11,136 | ||||||||||||
Other service fees | 917 | 792 | 2,521 | 2,369 | ||||||||||||
Mortgage banking service fees | 514 | 537 | 1,561 | 1,570 | ||||||||||||
Change in value of mortgage servicing rights | (325 | ) | (799 | ) | (795 | ) | (2,198 | ) | ||||||||
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Total service charges and fees | 9,475 | 8,022 | 27,861 | 23,426 | ||||||||||||
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Gain on sale of loans | 606 | 953 | 2,293 | 2,645 | ||||||||||||
Commissions on sale ofnon-deposit investment products | 672 | 747 | 1,984 | 1,890 | ||||||||||||
Increase in cash value of life insurance | 732 | 709 | 2,043 | 2,086 | ||||||||||||
Gain on sale of investment securities | 961 | — | 961 | — | ||||||||||||
Change in indemnification asset | — | (10 | ) | 490 | (274 | ) | ||||||||||
Gain on sale of foreclosed assets | 37 | 69 | 308 | 218 | ||||||||||||
Sale of customer checks | 89 | 110 | 287 | 299 | ||||||||||||
Lease brokerage income | 234 | 172 | 601 | 602 | ||||||||||||
Loss on disposal of fixed assets | (33 | ) | (13 | ) | (61 | ) | (52 | ) | ||||||||
Life Insurance death benefit in excess of cash value | — | — | 108 | 238 | ||||||||||||
Other | 157 | 307 | 668 | 1,023 | ||||||||||||
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Total other noninterest income | 3,455 | 3,044 | 9,682 | 8,675 | ||||||||||||
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Total noninterest income | $ | 12,930 | $ | 11,066 | $ | 37,543 | $ | 32,101 | ||||||||
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Mortgage loan servicing fees, net of change in fair value of mortgage loan servicing rights | $ | 189 | $ | (262 | ) | $ | 766 | $ | (628 | ) | ||||||
Mortgage banking revenue | $ | 795 | $ | 691 | $ | 3,059 | $ | 2,017 |
The components of noninterestnon-interest expense were as follows (in thousands):
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Base salaries, net of deferred loan origination costs | $ | 13,600 | $ | 13,419 | $ | 40,647 | $ | 39,095 | ||||||||
Incentive compensation | 2,609 | 2,798 | 6,980 | 7,008 | ||||||||||||
Benefits and other compensation costs | 4,724 | 4,643 | 14,693 | 14,067 | ||||||||||||
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Total salaries and benefits expense | 20,933 | 20,860 | 62,320 | 60,170 | ||||||||||||
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Occupancy | 2,799 | 2,667 | 8,196 | 7,504 | ||||||||||||
Equipment | 1,816 | 1,607 | 5,344 | 4,837 | ||||||||||||
Data processing and software | 2,495 | 2,068 | 7,332 | 6,266 | ||||||||||||
ATM & POS network charges | 1,425 | 1,915 | 3,353 | 3,923 | ||||||||||||
Telecommunications | 716 | 702 | 2,027 | 2,085 | ||||||||||||
Postage | 325 | 381 | 1,058 | 1,186 | ||||||||||||
Courier service | 235 | 280 | 752 | 816 | ||||||||||||
Advertising | 1,039 | 1,049 | 3,173 | 3,021 | ||||||||||||
Assessments | 427 | 654 | 1,252 | 1,864 | ||||||||||||
Operational losses | 301 | 497 | 1,166 | 1,006 | ||||||||||||
Professional fees | 901 | 1,018 | 2,357 | 3,183 | ||||||||||||
Foreclosed assets expense | 41 | 37 | 117 | 197 | ||||||||||||
Provision for foreclosed asset losses | 134 | 8 | 162 | 40 | ||||||||||||
Change in reserve for unfunded commitments | 390 | 25 | 270 | 433 | ||||||||||||
Intangible amortization | 339 | 359 | 1,050 | 1,017 | ||||||||||||
Merger expense | — | — | — | 784 | ||||||||||||
Litigation contingent liability | — | — | — | 1,450 | ||||||||||||
Other | 2,906 | 3,289 | 9,019 | 9,652 | ||||||||||||
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Total other noninterest expense | 16,289 | 16,556 | 46,628 | 49,264 | ||||||||||||
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Total noninterest expense | $ | 37,222 | $ | 37,416 | $ | 108,948 | $ | 109,434 | ||||||||
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Merger expense: | ||||||||||||||||
Base salaries (outside temporary help) | — | — | — | $ | 187 | |||||||||||
Equipment | — | — | — | 35 | ||||||||||||
Professional fees | — | — | — | 342 | ||||||||||||
Advertising and marketing | — | — | — | 114 | ||||||||||||
Other | — | — | — | 106 | ||||||||||||
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Total merger expense | — | — | — | $ | 784 | |||||||||||
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Average full time equivalent staff | 993 | 1,022 | 1,005 | 996 | ||||||||||||
Noninterest expense to revenue (FTE) | 64.6 | % | 69.4 | % | 64.5 | % | 69.0 | % |
Three months ended March 31, | |||||||||||||||||||||||||||||
2020 | 2019 | ||||||||||||||||||||||||||||
Base salaries, net of deferred loan origination costs | $ | 17,623 | $ | 16,757 | |||||||||||||||||||||||||
Incentive compensation | 3,101 | 2,567 | |||||||||||||||||||||||||||
Benefits and other compensation costs | 6,548 | 5,804 | |||||||||||||||||||||||||||
Total salaries and benefits expense | 27,272 | 25,128 | |||||||||||||||||||||||||||
Occupancy | 3,875 | 3,774 | |||||||||||||||||||||||||||
Data processing and software | 3,367 | 3,349 | |||||||||||||||||||||||||||
Equipment | 1,512 | 1,867 | |||||||||||||||||||||||||||
Intangible amortization | 1,431 | 1,431 | |||||||||||||||||||||||||||
Advertising | 665 | 1,331 | |||||||||||||||||||||||||||
ATM and POS network charges | 1,373 | 1,323 | |||||||||||||||||||||||||||
Professional fees | 703 | 839 | |||||||||||||||||||||||||||
Telecommunications | 725 | 797 | |||||||||||||||||||||||||||
Regulatory assessments and insurance | 95 | 511 | |||||||||||||||||||||||||||
Postage | 290 | 310 | |||||||||||||||||||||||||||
Operational losses | 221 | 225 | |||||||||||||||||||||||||||
Courier service | 331 | 270 | |||||||||||||||||||||||||||
Gain on sale of foreclosed assets | (41) | (99) | |||||||||||||||||||||||||||
Loss on disposal of fixed assets | — | 24 | |||||||||||||||||||||||||||
Other miscellaneous expense | 3,000 | 4,372 | |||||||||||||||||||||||||||
Total other non-interest expense | 17,547 | 20,324 | |||||||||||||||||||||||||||
Total non-interest expense | $ | 44,819 | $ | 45,452 |
The provisions for income taxes applicable to income before taxes differ from amounts computed by applying the statutory Federal income tax rates to income before taxes. The effective tax rate and the statutory federal income tax rate are reconciled for the periods indicated as follows:
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Federal statutory income tax rate | 35.0 | % | 35.0 | % | 35.0 | % | 35.0 | % | ||||||||
State income taxes, net of federal tax benefit | 6.9 | 6.9 | 6.8 | 6.7 | ||||||||||||
Tax-exempt interest on municipal obligations | (1.9 | ) | (1.7 | ) | (1.8 | ) | (1.9 | ) | ||||||||
Increase in cash value of insurance policies | (1.3 | ) | (1.2 | ) | (1.3 | ) | (1.6 | ) | ||||||||
Low income housing tax credits | (0.5 | ) | (0.3 | ) | (0.4 | ) | (0.3 | ) | ||||||||
Equity compensation | (0.8 | ) | — | (1.4 | ) | — | ||||||||||
Other | 0.1 | — | 0.2 | 0.1 | ||||||||||||
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| |||||||||
Effective Tax Rate | 37.5 | % | 38.7 | % | 37.1 | % | 38.0 | % | ||||||||
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Note 2311 - Earnings Per Share
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
(in thousands) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income | $ | 11,897 | $ | 12,199 | $ | 37,565 | $ | 32,278 | ||||||||
Average number of common shares outstanding | 22,932 | 22,825 | 22,901 | 22,804 | ||||||||||||
Effect of dilutive stock options and restricted stock units | 312 | 274 | 338 | 273 | ||||||||||||
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| |||||||||
Average number of common shares outstanding used to calculate diluted earnings per share | 23,244 | 23,099 | 23,239 | 23,077 | ||||||||||||
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| |||||||||
Options excluded from diluted earnings per share because the effect of these options was antidilutive | — | 12 | — | 18 |
Three months ended March 31, | |||||||||||||||||
(in thousands) | 2020 | 2019 | |||||||||||||||
Net income | $ | 16,121 | $ | 22,726 | |||||||||||||
Average number of common shares outstanding | 30,395 | 30,424 | |||||||||||||||
Effect of dilutive stock options and restricted stock | 128 | 234 | |||||||||||||||
Average number of common shares outstanding used to calculate diluted earnings per share | 30,523 | 30,658 | |||||||||||||||
Options excluded from diluted earnings per share because the effect of these options was antidilutive | — | — |
Three months ended March 31, | |||||||||||||||||||||||||||||
(in thousands) | 2020 | 2019 | |||||||||||||||||||||||||||
Unrealized holding gains (losses) on available for sale securities before reclassifications | $ | (29,561) | $ | 12,710 | |||||||||||||||||||||||||
Tax effect | 8,739 | (3,758) | |||||||||||||||||||||||||||
Unrealized holding gains (losses) on available for sale securities, net of tax | (20,822) | 8,952 | |||||||||||||||||||||||||||
Change in unfunded status of the supplemental retirement plans before reclassifications | 448 | (89) | |||||||||||||||||||||||||||
Amounts reclassified out of accumulated other comprehensive income (loss): | |||||||||||||||||||||||||||||
Amortization of prior service cost | (14) | (13) | |||||||||||||||||||||||||||
Amortization of actuarial losses | 478 | 102 | |||||||||||||||||||||||||||
Total amounts reclassified out of accumulated other comprehensive income (loss) | 464 | 89 | |||||||||||||||||||||||||||
Change in unfunded status of the supplemental retirement plans after reclassifications | 912 | — | |||||||||||||||||||||||||||
Tax effect | — | — | |||||||||||||||||||||||||||
Change in unfunded status of the supplemental retirement plans, net of tax | 912 | — | |||||||||||||||||||||||||||
Total other comprehensive income (loss) | $ | (19,910) | $ | 8,952 |
September 30, 2017 | December 31, 2016 | |||||||
(in thousands) | ||||||||
Net unrealized loss on available for sale securities | $ | (3,459 | ) | $ | (8,870 | ) | ||
Tax effect | 1,455 | 3,729 | ||||||
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| |||||
Unrealized holding loss on available for sale securities, net of tax | (2,004 | ) | (5,141 | ) | ||||
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| |||||
Unfunded status of the supplemental retirement plans | (4,431 | ) | (4,714 | ) | ||||
Tax effect | 1,863 | 1,982 | ||||||
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| |||||
Unfunded status of the supplemental retirement plans, net of tax | (2,568 | ) | (2,732 | ) | ||||
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| |||||
Joint beneficiary agreement liability | (40 | ) | (40 | ) | ||||
Tax effect | — | — | ||||||
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| |||||
Joint beneficiary agreement liability, net of tax | (40 | ) | (40 | ) | ||||
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|
| |||||
Accumulated other comprehensive loss | $ | (4,612 | ) | $ | (7,913 | ) | ||
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|
The components of other comprehensive income and related tax effects are as follows:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(in thousands) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Unrealized holding gains (losses) on available for sale securities before reclassifications | $ | 674 | $ | (2,058 | ) | $ | 6,372 | $ | 11,240 | |||||||
Amounts reclassified out of accumulated other comprehensive income | (961 | ) | — | (961 | ) | — | ||||||||||
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|
|
|
|
|
| |||||||||
Unrealized holding (losses) gains on available for sale securities after reclassifications | (287 | ) | (2,058 | ) | 5,411 | 11,240 | ||||||||||
Tax effect | 121 | 865 | (2,274 | ) | (4,726 | ) | ||||||||||
|
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|
|
|
|
|
| |||||||||
Unrealized holding (losses) gains on available for sale securities, net of tax | (166 | ) | (1,193 | ) | 3,137 | $ | 6,514 | |||||||||
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|
|
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| |||||||||
Change in unfunded status of the supplemental retirement plans before reclassifications | — | — | — | — | ||||||||||||
Amounts reclassified out of accumulated other comprehensive income: | ||||||||||||||||
Amortization of prior service cost | (1 | ) | (10 | ) | (5 | ) | (30 | ) | ||||||||
Amortization of actuarial losses | 96 | 138 | 288 | 413 | ||||||||||||
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| |||||||||
Total amounts reclassified out of accumulated other comprehensive income | 95 | 128 | 283 | 383 | ||||||||||||
|
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|
|
|
|
| |||||||||
Change in unfunded status of the supplemental retirement plans after reclassifications | 95 | 128 | 283 | 383 | ||||||||||||
Tax effect | (40 | ) | (54 | ) | (119 | ) | (161 | ) | ||||||||
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| |||||||||
Change in unfunded status of the supplemental retirement plans, net of tax | 55 | 74 | 164 | 222 | ||||||||||||
|
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|
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| |||||||||
Change in joint beneficiary agreement liability before reclassifications | — | (1 | ) | — | (5 | ) | ||||||||||
Amounts reclassified out of accumulated other comprehensive income | — | — | — | — | ||||||||||||
|
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| |||||||||
Change in joint beneficiary agreement liability after reclassifications | — | (1 | ) | — | (5 | ) | ||||||||||
Tax effect | — | — | — | — | ||||||||||||
|
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| |||||||||
Change in joint beneficiary agreement liability, net of tax | — | (1 | ) | — | (5 | ) | ||||||||||
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| |||||||||
Total other comprehensive (loss) income | $ | (111 | ) | $ | (1,120 | ) | $ | 3,301 | $ | 6,731 | ||||||
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|
|
|
(in thousands) | March 31, 2020 | December 31, 2019 | |||||||||
Net unrealized gain (loss) on available for sale securities | $ | (26,174) | $ | 3,387 | |||||||
Tax effect | 7,738 | (1,001) | |||||||||
Unrealized holding gain (loss) on available for sale securities, net of tax | (18,436) | 2,386 | |||||||||
Unfunded status of the supplemental retirement plans | (11,193) | (11,193) | |||||||||
Tax effect | 3,309 | 3,309 | |||||||||
Unfunded status of the supplemental retirement plans, net of tax | (7,884) | (7,884) | |||||||||
Joint beneficiary agreement liability | 1,188 | 276 | |||||||||
Tax effect | — | — | |||||||||
Joint beneficiary agreement liability, net of tax | 1,188 | 276 | |||||||||
Accumulated other comprehensive income (loss) | $ | (25,132) | $ | (5,222) |
401(k) Plan
The Company sponsors a 401(k) Plan whereby substantially all employees age 21 and over with 90 days of service may participate. Participants may contribute a portion of their compensation subject to certain limits based on federal tax laws. Prior to July 1, 2015, the Company did not contribute to the 401(k) Plan. Effective July 1, 2015, the Company initiated a discretionary matching contribution equal to 50% of participant’s elective deferrals each quarter, up to 4% of eligible compensation. The following table sets forth the benefit expense attributable to the 401(k) Plan matching contributions, and the contributions made by the Company to the 401(k) Plan during the periods indicated:
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
(in thousands) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
401(k) Plan benefits expense | $ | 164 | $ | 187 | $ | 603 | $ | 515 | ||||||||
401(k) Plan contributions made by the Company | $ | 224 | $ | 187 | $ | 595 | $ | 648 |
Employee Stock Ownership Plan
Substantially all employees with at least one year of service are covered by a discretionary employee stock ownership plan (ESOP). Contributions are made to the plan at the discretion of the Board of Directors. Company shares owned by the ESOP are paid dividends and included in the calculation of earnings per share exactly as other common shares outstanding. The following table sets forth the benefit expense attributable to the ESOP, and the contributions made by the Company to the ESOP during the periods indicated:
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
(in thousands) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
ESOP benefits expense | $ | 537 | $ | 463 | $ | 1,610 | $ | 1,368 | ||||||||
ESOP contributions made by the Company | $ | 537 | — | $ | 2,073 | $ | 905 |
Deferred Compensation Plans
The Company has deferred compensation plans for certain directors and key executives, which allow certain directors and key executives designated by the Board of Directors of the Company to defer a portion of their compensation. The Company has purchased insurance on the lives of the participants and intends to hold these policies until death as a cost recovery of the Company’s deferred compensation obligations of $6,431,000 and $6,525,000 at September 30, 2017 and December 31, 2016, respectively. The following table sets forth the earnings credits on deferred balances included in noninterest expense during the periods indicated:
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
(in thousands) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Deferred compensation earnings credits included in noninterest expense | $ | 111 | $ | 111 | $ | 365 | $ | 366 |
Supplemental Retirement Plans
The Company has supplemental retirement plans for current and former directors and key executives. These plans arenon-qualified defined benefit plans and are unsecured and unfunded. The Company has purchased insurance on the lives of the participants and intends (but is not required) to use the cash values of these policies to pay the retirement obligations. The following table sets forth the net periodic benefit cost recognized for the plans:
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
(in thousands) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Net pension cost included the following components: | ||||||||||||||||
Service cost-benefits earned during the period | $ | 235 | $ | 260 | $ | 706 | $ | 781 | ||||||||
Interest cost on projected benefit obligation | 248 | 256 | 743 | 769 | ||||||||||||
Amortization of net obligation at transition | — | 1 | 1 | 1 | ||||||||||||
Amortization of prior service cost | (3 | ) | (10 | ) | (8 | ) | (30 | ) | ||||||||
Recognized net actuarial loss | 98 | 137 | 292 | 412 | ||||||||||||
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| |||||||||
Net periodic pension cost | $ | 578 | $ | 644 | $ | 1,734 | $ | 1,933 | ||||||||
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| |||||||||
Company contributions to pension plans | $ | 267 | $ | 260 | $ | 856 | $ | 834 | ||||||||
Pension plan payouts to participants | $ | 267 | $ | 260 | $ | 856 | $ | 834 |
For the year ending December 31, 2017, the Company expects to contribute and pay out as benefits $1,117,000 to participants under the plans.
Note 26 - Related Party Transactions
Certain directors, officers, and companies with which they are associated were customers of, and had banking transactions with, the Company or the Bank in the ordinary course of business.
The following table summarizes the activity in these loans for periods indicated (in thousands):
Balance December 31, 2015 | $ | 4,201 | ||
Advances/new loans | 730 | |||
Removed/payments | (2,499 | ) | ||
|
| |||
Balance December 31, 2016 | 2,432 | |||
Advances/new loans | 160 | |||
Removed/payments | (666 | ) | ||
|
| |||
Balance September 30, 2017 | $ | 1,926 | ||
|
|
Note 2713 - Fair Value Measurement
Securities
Impaired originated and PNCI
Fair value at September 30, 2017 | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Securities available for sale: | ||||||||||||||||
Obligations of U.S. government corporations and agencies | $ | 554,062 | — | $ | 554,062 | — | ||||||||||
Obligations of states and political subdivisions | 121,217 | — | 121,217 | — | ||||||||||||
Marketable equity services | 2,957 | $ | 2,957 | — | — | |||||||||||
Mortgage servicing rights | 6,419 | — | — | $ | 6,419 | |||||||||||
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|
|
|
|
|
|
| |||||||||
Total assets measured at fair value | $ | 684,655 | $ | 2,957 | $ | 675,279 | $ | 6,419 | ||||||||
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|
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| |||||||||
Fair value at December 31, 2016 | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Securitiesavailable-for-sale: | ||||||||||||||||
Obligations of U.S. government corporations and agencies | $ | 429,678 | — | $ | 429,678 | — | ||||||||||
Obligations of states and political subdivisions | 117,617 | — | 117,617 | — | ||||||||||||
Marketable equity securities | 2,938 | $ | 2,938 | — | — | |||||||||||
Mortgage servicing rights | 6,595 | — | — | $ | 6,595 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total assets measured at fair value | $ | 556,828 | $ | 2,938 | $ | 547,295 | $ | 6,595 | ||||||||
|
|
|
|
|
|
|
|
Fair value at March 31, 2020 | Total | Level 1 | Level 2 | Level 3 | |||||||||||||||||||
Marketable equity securities | $ | 3,007 | $ | 3,007 | $ | — | $ | — | |||||||||||||||
Debt securities available for sale: | |||||||||||||||||||||||
Obligations of U.S. government corporations and agencies | 469,218 | — | 469,218 | — | |||||||||||||||||||
Obligations of states and political subdivisions | 114,125 | — | 114,125 | — | |||||||||||||||||||
Corporate bonds | 2,575 | — | 2,575 | — | |||||||||||||||||||
Asset backed securities | 416,081 | — | 416,081 | — | |||||||||||||||||||
Loans held for sale | 2,695 | — | 2,695 | — | |||||||||||||||||||
Mortgage servicing rights | 5,168 | — | — | 5,168 | |||||||||||||||||||
Total assets measured at fair value | $ | 1,012,869 | $ | 3,007 | $ | 1,004,694 | $ | 5,168 |
Fair value at December 31, 2019 | Total | Level 1 | Level 2 | Level 3 | |||||||||||||||||||
Marketable equity securities | $ | 2,960 | $ | 2,960 | $ | — | $ | — | |||||||||||||||
Debt securities available for sale: | |||||||||||||||||||||||
Obligations of U.S. government corporations and agencies | 472,980 | — | 472,980 | — | |||||||||||||||||||
Obligations of states and political subdivisions | 109,601 | — | 109,601 | — | |||||||||||||||||||
Corporate bonds | 2,532 | — | 2,532 | — | |||||||||||||||||||
Asset backed securities | 365,025 | — | 365,025 | — | |||||||||||||||||||
Loans held for sale | 5,265 | — | 5,265 | — | |||||||||||||||||||
Mortgage servicing rights | 6,200 | — | — | 6,200 | |||||||||||||||||||
Total assets measured at fair value | $ | 964,563 | $ | 2,960 | $ | 955,403 | $ | 6,200 |
2019.
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Mortgage servicing rights: | ||||||||||||||||
Balance at beginning of period | $ | 6,596 | $ | 6,720 | $ | 6,595 | $ | 7,618 | ||||||||
Additions | 147 | 287 | 619 | 788 | ||||||||||||
Change in fair value | (324 | ) | (799 | ) | (795 | ) | (2,198 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Balance at end of period | $ | 6,419 | $ | 6,208 | $ | 6,419 | $ | 6,208 | ||||||||
|
|
|
|
|
|
|
|
The Company’s method for determining the fair value of mortgage servicing rights is described in Note 1.
Three months ended March 31, | Beginning Balance | Transfers into (out of) Level 3 | Change Included in Earnings | Issuances | Ending Balance | ||||||||||||||||||||||||
2020: Mortgage servicing rights | $ | 6,200 | — | $ | (1,258) | $ | 226 | $ | 5,168 | ||||||||||||||||||||
2019: Mortgage servicing rights | $ | 7,098 | — | $ | (645) | $ | 119 | $ | 6,572 |
Three months ended March 31, | |||||||||||||||||||||||||||||
Fair Value (in thousands) | Valuation Technique | Unobservable Inputs | Range, Weighted Average | |||||||||
Mortgage Servicing Rights | $ | 6,419 | Discounted cash flow | Constant prepayment rate | 6.5%-21.4%, 9.2% | |||||||
Discount rate | 14.0%-16.0%, 14.0% |
The following table presents quantitative information about recurring Level 3 fair value measurements atMarch 31, 2020 and December 31, 2016:
Fair Value (in thousands) | Valuation Technique | Unobservable Inputs | Range, Weighted Average | |||||||||
Mortgage Servicing Rights | $ | 6,595 | Discounted cash flow | Constant prepayment rate | 6.9%-16.6%, 8.8% | |||||||
Discount rate | 14.0%-16.0%, 14.0% |
2019:
As of March 31, 2020: | Fair Value (in thousands) | Valuation Technique | Unobservable Inputs | Range, Weighted Average | |||||||||||||||||||
Mortgage Servicing Rights | $ | 5,168 | Discounted cash flow | Constant prepayment rate | 7% - 42%; 11% | ||||||||||||||||||
Discount rate | 10% - 14%; 12% | ||||||||||||||||||||||
As of December 31, 2019: | |||||||||||||||||||||||
Mortgage Servicing Rights | $ | 6,200 | Discounted cash flow | Constant prepayment rate | 6% - 42.0%; 11.0% | ||||||||||||||||||
Discount rate | 10% - 14%; 12% |
Nine months ended September 30, 2017 | Total | Level 1 | Level 2 | Level 3 | Total Gains (Losses) | |||||||||||||||
Fair value: | ||||||||||||||||||||
Impaired Originated & PNCI loans | $ | 1,026 | — | — | $ | 1,026 | $ | (892 | ) | |||||||||||
Foreclosed assets | 2,062 | — | — | 2,062 | (157 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total assets measured at fair value | $ | 3,088 | — | — | $ | 3,088 | $ | (1,049 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Year ended December 31, 2016 | Total | Level 1 | Level 2 | Level 3 | Total Gains (Losses) | |||||||||||||||
Fair value: | ||||||||||||||||||||
Impaired Originated & PNCI loans | $ | 1,107 | — | — | $ | 1,107 | $ | (409 | ) | |||||||||||
Foreclosed assets | 2,253 | 2,253 | (86 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total assets measured at fair value | $ | 3,360 | — | — | $ | 3,360 | $ | (495 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Nine months ended September 30, 2016 | Total | Level 1 | Level 2 | Level 3 | Total Gains/(Losses) | |||||||||||||||
Fair value: | ||||||||||||||||||||
Impaired Originated & PNCI loans | $ | 5,941 | — | — | $ | 5,941 | $ | (570 | ) | |||||||||||
Foreclosed assets | 1,801 | — | — | 1,801 | 14 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total assets measured at fair value | $ | 7,742 | — | — | $ | 7,742 | $ | (556 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
March 31, 2020 | Total | Level 1 | Level 2 | Level 3 | Total Losses | ||||||||||||||||||||||||
Fair value: | |||||||||||||||||||||||||||||
Individually evaluated loans | $ | 105 | — | — | $ | 105 | $ | (107) | |||||||||||||||||||||
December 31, 2019 | Total | Level 1 | Level 2 | Level 3 | Total Losses | ||||||||||||||||||||||||
Fair value: | |||||||||||||||||||||||||||||
Individually evaluated loans | $ | 1,055 | — | — | $ | 1,055 | $ | (652) | |||||||||||||||||||||
Foreclosed assets | 417 | — | — | 417 | (27) | ||||||||||||||||||||||||
Total assets measured at fair value | $ | 1,472 | — | — | $ | 1,472 | $ | (679) |
March 31, 2019 | Total | Level 1 | Level 2 | Level 3 | Total Losses | ||||||||||||||||||||||||
Fair value: | |||||||||||||||||||||||||||||
Individually evaluated loans | $ | 212 | — | — | $ | 212 | $ | (197) | |||||||||||||||||||||
Foreclosed assets | 214 | — | — | 214 | — | ||||||||||||||||||||||||
Total assets measured at fair value | $ | 426 | — | — | $ | 426 | $ | (197) |
0.
Fair Value (in thousands) | Valuation Technique | Unobservable Inputs | Range, Weighted | |||||||
Impaired Originated & PNCI loans | $ | 1,026 | Sales comparison approach Income approach | Adjustment for differences between comparable sales Capitalization rate | (74)%-21%, (32%) N/A | |||||
Foreclosed assets (Land & construction) | $ | 960 | Sales comparison approach | Adjustment for differences between comparable sales | (53)%-283%, 230% | |||||
Foreclosed assets (residential | $ | 822 | Sales comparison approach | Adjustment for differences between comparable sales | (47%)-39%, 3.3% | |||||
Foreclosed assets | $ | 280 | Sales comparison approach | Adjustment for differences between comparable sales | (46%)-63%, 26% |
March 31, 2020:
March 31, 2020 | Fair Value (in thousands) | Valuation Technique | Unobservable Inputs | Range, Weighted Average | |||||||||||||||||||
Individually evaluated loans | $ | 105 | Sales comparison approach Income approach | Adjustment for differences between comparable sales Capitalization rate | Not meaningful N/A | ||||||||||||||||||
Fair Value (in thousands) | Valuation Technique | Unobservable Inputs | Range, | |||||||
Impaired Originated & PNCI loans | $ | 1,107 | Sales comparison approach Income approach | Adjustment for differences between comparable sales Capitalization rate | Not meaningful N/A | |||||
Foreclosed assets | $ | 15 | Sales comparison approach | Adjustment for differences between comparable sales | Not meaningful | |||||
Foreclosed assets | $ | 1,564 | Sales comparison approach | Adjustment for differences between comparable sales | Not meaningful | |||||
Foreclosed assets | $ | 674 | Sales comparison approach | Adjustment for differences between comparable sales | Not meaningful |
In addition to the methods and assumptions used to estimate the fair value of each class of financial instrument noted above, the following methods and assumptions were used to estimate the fair value of other classes of financial instruments for which it is practical to estimate the fair value.
Short-term Instruments - Cash and due from banks, fed funds purchased and sold, interest receivable and payable, and short-term borrowings are considered short-term instruments. For these short-term instruments their carrying amount approximates their fair value.
Securities held to maturity – The fair value of securities held to maturity is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in activeover-the-counter markets and money market funds. Level 2 securities include mortgage-backed securities issued by government sponsored entities, municipal bonds and corporate debt securities. The Company had no securities held to maturity classified as Level 3 during any of the periods covered in these financial statements.
Restricted Equity Securities - It is not practical to determine the fair value of restricted equity securities due to restrictions placed on their transferability.
Originated and PNCI loans- The fair value of variable rate originated and PNCI loans is the current carrying value. The interest rates on these originated and PNCI loans are regularly adjusted to market rates. The fair value of other types of fixed rate originated and PNCI loans is estimated by discounting the future cash flows using current rates at which similar loans would be made to borrowers with similar credit ratings for the same remaining maturities. The allowance for loan losses is a reasonable estimate of the valuation allowance needed to adjust computed fair values for credit quality of certain originated and PNCI loans in the portfolio.
PCI Loans -PCI loans are measured at estimated fair value on the date of acquisition. Carrying value is calculated as the present value of expected cash flows and approximates fair value.
Deposit Liabilities- The fair value of demand deposits, savings accounts, and certain money market deposits is the amount payable on demand at the reporting date. These values do not consider the estimated fair value of the Company’s core deposit intangible, which is a significant unrecognized asset of the Company. The fair value of time deposits and other borrowings is based on the discounted value of contractual cash flows.
Other Borrowings- The fair value of other borrowings is calculated based on the discounted value of the contractual cash flows using current rates at which such borrowings can currently be obtained.
Junior Subordinated Debentures - The fair value of junior subordinated debentures is estimated using a discounted cash flow model. The future cash flows of these instruments are extended to the next available redemption date or maturity date as appropriate based upon the spreads of recent issuances or quotes from brokers for comparable bank holding companies compared to the contractual spread of each junior subordinated debenture measured at fair value.
Commitments to Extend Credit and Standby Letters of Credit - The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present credit worthiness of the counter parties. For fixed rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligation with the counter parties at the reporting date.
2019:
December 31, 2019 | Fair Value (in thousands) | Valuation Technique | Unobservable Inputs | Range, Weighted Average | |||||||||||||||||||
Individually evaluated loans | $ | 1,055 | Sales comparison approach Income approach | Adjustment for differences between comparable sales Capitalization rate | Not meaningfulN/A | ||||||||||||||||||
Foreclosed assets (Residential real estate) | $ | 417 | Sales comparison approach | Adjustment for differences between comparable sales | Not meaningfulN/A | ||||||||||||||||||
The estimated fair values
September 30, 2017 | December 31, 2016 | |||||||||||||||
Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||||
Financial assets: | ||||||||||||||||
Level 1 inputs: | ||||||||||||||||
Cash and due from banks | $ | 86,815 | $ | 86,815 | $ | 92,197 | $ | 92,197 | ||||||||
Cash at Federal Reserve and other banks | 101,219 | 101,219 | 213,415 | 213,415 | ||||||||||||
Level 2 inputs: | �� | |||||||||||||||
Securities held to maturity | 536,567 | 542,123 | 602,536 | 603,203 | ||||||||||||
Restricted equity securities | 16,956 | N/A | 16,956 | N/A | ||||||||||||
Loans held for sale | 2,733 | 2,733 | 2,998 | 2,998 | ||||||||||||
Level 3 inputs: | ||||||||||||||||
Loans, net | 2,902,866 | 2,928,059 | 2,727,090 | 2,763,473 | ||||||||||||
Financial liabilities: | ||||||||||||||||
Level 2 inputs: | ||||||||||||||||
Deposits | 3,927,456 | 3,925,527 | 3,895,560 | 3,893,941 | ||||||||||||
Other borrowings | 98,730 | 98,730 | 17,493 | 17,493 | ||||||||||||
Level 3 inputs: | ||||||||||||||||
Junior subordinated debt | $ | 56,810 | $ | 55,259 | $ | 56,667 | $ | 49,033 | ||||||||
Contract Amount | Fair Value | Contract Amount | Fair Value | |||||||||||||
Off-balance sheet: | ||||||||||||||||
Level 3 inputs: | ||||||||||||||||
Commitments | $ | 909,900 | $ | 9,099 | $ | 767,274 | $ | 7,673 | ||||||||
Standby letters of credit | $ | 12,700 | $ | 128 | $ | 12,763 | $ | 128 | ||||||||
Overdraft privilege commitments | $ | 96,650 | $ | 967 | $ | 98,583 | $ | 986 |
Contents
March 31, 2020 | December 31, 2019 | ||||||||||||||||||||||||||||||||||
(in thousands) | Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||||||||||||||||||||||
Financial assets: | |||||||||||||||||||||||||||||||||||
Level 1 inputs: | |||||||||||||||||||||||||||||||||||
Cash and due from banks | $ | 95,364 | $ | 95,364 | $ | 92,816 | $ | 92,816 | |||||||||||||||||||||||||||
Cash at Federal Reserve and other banks | 90,102 | 90,102 | 183,691 | 183,691 | |||||||||||||||||||||||||||||||
Level 2 inputs: | |||||||||||||||||||||||||||||||||||
Securities held to maturity | 359,770 | 377,442 | 375,606 | 381,525 | |||||||||||||||||||||||||||||||
Restricted equity securities | 17,250 | N/A | 17,250 | N/A | |||||||||||||||||||||||||||||||
Level 3 inputs: | |||||||||||||||||||||||||||||||||||
Loans, net | 4,321,151 | 4,307,323 | 4,276,750 | 4,263,064 | |||||||||||||||||||||||||||||||
Financial liabilities: | |||||||||||||||||||||||||||||||||||
Level 2 inputs: | |||||||||||||||||||||||||||||||||||
Deposits | 5,402,698 | 5,401,617 | 5,366,994 | 5,365,921 | |||||||||||||||||||||||||||||||
Other borrowings | 19,309 | 19,309 | 18,454 | 18,454 | |||||||||||||||||||||||||||||||
Level 3 inputs: | |||||||||||||||||||||||||||||||||||
Junior subordinated debt | 57,323 | 56,254 | 57,232 | 56,297 |
(in thousands) | Contract Amount | Fair Value | Contract Amount | Fair Value | |||||||||||||||||||
Off-balance sheet: | |||||||||||||||||||||||
Level 3 inputs: | |||||||||||||||||||||||
Commitments | $ | 1,296,732 | $ | 12,967 | $ | 1,309,326 | $ | 13,093 | |||||||||||||||
Standby letters of credit | 12,084 | 121 | 12,014 | 120 | |||||||||||||||||||
Overdraft privilege commitments | 109,752 | 1,098 | 110,402 | 1,104 |
Condensed Balance Sheets | September 30, 2017 | December 31, 2016 | ||||||
(In thousands) | ||||||||
Assets | ||||||||
Cash and Cash equivalents | $ | 3,278 | $ | 2,802 | ||||
Investment in Tri Counties Bank | 558,986 | 529,907 | ||||||
Other assets | 1,729 | 1,711 | ||||||
|
|
|
| |||||
Total assets | $ | 563,993 | $ | 534,420 | ||||
|
|
|
| |||||
Liabilities and shareholders’ equity | ||||||||
Other liabilities | $ | 450 | $ | 406 | ||||
Junior subordinated debt | 56,810 | 56,667 | ||||||
|
|
|
| |||||
Total liabilities | 57,260 | 57,073 | ||||||
|
|
|
| |||||
Shareholders’ equity: | ||||||||
Common stock, no par value: authorized 50,000,000 shares; issued and outstanding 22,941,464 and 22,867,802 shares, respectively | 255,231 | 252,820 | ||||||
Retained earnings | 256,114 | 232,440 | ||||||
Accumulated other comprehensive loss, net | (4,612 | ) | (7,913 | ) | ||||
|
|
|
| |||||
Total shareholders’ equity | 506,733 | 477,347 | ||||||
|
|
|
| |||||
Total liabilities and shareholders’ equity | $ | 563,993 | $ | 534,420 | ||||
|
|
|
|
Statements of Income | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
(In thousands) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Interest expense | $ | 652 | $ | 562 | $ | 1,870 | $ | 1,643 | ||||||||
Administration expense | 209 | 158 | 586 | 548 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Loss before equity in net income of Tri Counties Bank | (861 | ) | (720 | ) | (2,456 | ) | (2,191 | ) | ||||||||
Equity in net income of Tri Counties Bank: | ||||||||||||||||
Distributed | 5,185 | 4,096 | 14,394 | 11,434 | ||||||||||||
(Over) under distributed | 7,211 | 8,522 | 24,594 | 22,116 | ||||||||||||
Income tax benefit | 362 | 301 | 1,033 | 919 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net income | $ | 11,897 | $ | 12,199 | $ | 37,565 | $ | 32,278 | ||||||||
|
|
|
|
|
|
|
|
Note 28 - TriCo Bancshares Condensed Financial Statements (Parent Only, continued)
Statements of Comprehensive Income | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
(In thousands) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income | $ | 11,897 | $ | 12,199 | $ | 37,565 | $ | 32,278 | ||||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||
Unrealized holding (losses) gains on available for sale securities arising during the period | (166 | ) | (1,193 | ) | 3,137 | 6,514 | ||||||||||
Change in minimum pension liability | 55 | 74 | 164 | 222 | ||||||||||||
Change in joint beneficiary liability | — | (1 | ) | — | (5 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Other comprehensive (loss) income | (111 | ) | (1,120 | ) | 3,301 | 6,731 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Comprehensive income | $ | 11,786 | $ | 11,079 | $ | 40,866 | $ | 39,009 | ||||||||
|
|
|
|
|
|
|
|
Statements of Cash Flows | Nine months ended September 30, | |||||||
(In thousands) | 2017 | 2016 | ||||||
Operating activities: | ||||||||
Net income | $ | 37,565 | $ | 32,278 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Over (under) distributed equity in earnings of Tri Counties Bank | (24,594 | ) | (22,116 | ) | ||||
Equity compensation vesting expense | 1,184 | 1,078 | ||||||
Equity compensation net (excess tax benefit) tax expense | — | 182 | ||||||
Net change in other assets and liabilities | (1,015 | ) | (906 | ) | ||||
|
|
|
| |||||
Net cash provided by operating activities | 13,140 | 10,516 | ||||||
Investing activities: None | ||||||||
Financing activities: | ||||||||
Issuance of common stock through option exercise | 193 | 518 | ||||||
Equity compensation net (excess tax benefit) tax expense | — | (182 | ) | |||||
Repurchase of common stock | (1,629 | ) | (384 | ) | ||||
Cash dividends paid — common | (11,228 | ) | (10,265 | ) | ||||
|
|
|
| |||||
Net cash used for financing activities | (12,664 | ) | (10,313 | ) | ||||
|
|
|
| |||||
Increase in cash and cash equivalents | 476 | 203 | ||||||
|
|
|
| |||||
Cash and cash equivalents at beginning of year | 2,802 | 2,565 | ||||||
|
|
|
| |||||
Cash and cash equivalents at end of year | $ | 3,278 | $ | 2,768 | ||||
|
|
|
|
Note 2914 - Regulatory Matters
The following tables present actual and required capital ratios as of September 30, 2017March 31, 2020 and December 31, 20162019 for the Company and the Bank under applicable Basel III Capital Rules. The minimum capital amounts presented include the minimum required capital levels as of September 30, 2017 (1.25%)March 31, 2020 and December 31, 2016 (0.625%)2019 based on the thenphased-in provisions of the Basel III Capital Rules andRules. As of January 1, 2019, the minimum required capital levels as of January 1, 2019 when the Basel III Capital Rules have been fullyphased-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 Capital Rules.
Minimum Capital | Minimum Capital | Required to be | ||||||||||||||||||||||||||||||
Required – Basel III | Required – Basel III | Considered Well | ||||||||||||||||||||||||||||||
Actual | Phase-in Schedule | Fully Phased In | Capitalized | |||||||||||||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||||||||||
As of September 30, 2017: | ||||||||||||||||||||||||||||||||
Total Capital | ||||||||||||||||||||||||||||||||
(to Risk Weighted Assets): | ||||||||||||||||||||||||||||||||
Consolidated | $ | 525,569 | 14.42 | % | $ | 337,117 | 9.250 | % | $ | 382,673 | 10.50 | % | N/A | N/A | ||||||||||||||||||
Tri Counties Bank | $ | 522,718 | 14.35 | % | $ | 336,957 | 9.250 | % | $ | 382,492 | 10.50 | % | $ | 364,278 | 10.00 | % | ||||||||||||||||
Tier 1 Capital | ||||||||||||||||||||||||||||||||
(to Risk Weighted Assets): | ||||||||||||||||||||||||||||||||
Consolidated | $ | 493,833 | 13.55 | % | $ | 264,227 | 7.250 | % | $ | 309,783 | 8.50 | % | N/A | N/A | ||||||||||||||||||
Tri Counties Bank | $ | 490,982 | 13.48 | % | $ | 264,102 | 7.250 | % | $ | 309,636 | 8.50 | % | $ | 291,422 | 8.00 | % | ||||||||||||||||
Common equity Tier 1 Capital | ||||||||||||||||||||||||||||||||
(to Risk Weighted Assets): | ||||||||||||||||||||||||||||||||
Consolidated | $ | 439,498 | 12.06 | % | $ | 209,559 | 5.750 | % | $ | 255,116 | 7.00 | % | N/A | N/A | ||||||||||||||||||
Tri Counties Bank | $ | 490,982 | 13.48 | % | $ | 209,460 | 5.750 | % | $ | 254,995 | 7.00 | % | $ | 236,781 | 6.50 | % | ||||||||||||||||
Tier 1 Capital (to Average Assets): | ||||||||||||||||||||||||||||||||
Consolidated | $ | 493,833 | 10.98 | % | $ | 179,925 | 4.000 | % | $ | 179,925 | 4.00 | % | N/A | N/A | ||||||||||||||||||
Tri Counties Bank | $ | 490,982 | 10.92 | % | $ | 179,920 | 4.000 | % | $ | 179,920 | 4.00 | % | $ | 224,900 | 5.00 | % | ||||||||||||||||
Minimum Capital | Minimum Capital | Required to be | ||||||||||||||||||||||||||||||
Required – Basel III | Required – Basel III | Considered Well | ||||||||||||||||||||||||||||||
Actual | Phase-in Schedule | Fully Phased In | Capitalized | |||||||||||||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||||||||||
As of December 31, 2016: | ||||||||||||||||||||||||||||||||
Total Capital | ||||||||||||||||||||||||||||||||
(to Risk Weighted Assets): | ||||||||||||||||||||||||||||||||
Consolidated | $ | 503,283 | 14.77 | % | $ | 293,854 | 8.625 | % | $ | 357,735 | 10.50 | % | N/A | N/A | ||||||||||||||||||
Tri Counties Bank | $ | 500,876 | 14.71 | % | $ | 293,706 | 8.625 | % | $ | 357,556 | 10.50 | % | $ | 340,529 | 10.00 | % | ||||||||||||||||
Tier 1 Capital | ||||||||||||||||||||||||||||||||
(to Risk Weighted Assets): | ||||||||||||||||||||||||||||||||
Consolidated | $ | 468,061 | 13.74 | % | $ | 225,714 | 6.625 | % | $ | 289,595 | 8.50 | % | N/A | N/A | ||||||||||||||||||
Tri Counties Bank | $ | 465,654 | 13.67 | % | $ | 225,601 | 6.625 | % | $ | 289,450 | 8.50 | % | $ | 274,725 | 8.00 | % | ||||||||||||||||
Common equity Tier 1 Capital | ||||||||||||||||||||||||||||||||
(to Risk Weighted Assets): | ||||||||||||||||||||||||||||||||
Consolidated | $ | 414,632 | 12.17 | % | $ | 174,609 | 5.125 | % | $ | 238,490 | 7.00 | % | N/A | N/A | ||||||||||||||||||
Tri Counties Bank | $ | 465,654 | 13.66 | % | $ | 174,521 | 5.125 | % | $ | 238,370 | 7.00 | % | $ | 221,344 | 6.50 | % | ||||||||||||||||
Tier 1 Capital (to Average Assets): | ||||||||||||||||||||||||||||||||
Consolidated | $ | 468,061 | 10.62 | % | $ | 176,346 | 4.000 | % | $ | 176,346 | 4.00 | % | N/A | N/A | ||||||||||||||||||
Tri Counties Bank | $ | 465,654 | 10.56 | % | $ | 176,341 | 4.000 | % | $ | 176,341 | 4.00 | % | $ | 220,426 | 5.00 | % |
Actual | Required for Capital Adequacy Purposes | Required to be Considered Well Capitalized | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
As of March 31, 2020: | Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total Capital (to Risk Weighted Assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consolidated | $ | 762,763 | 15.12 | % | $ | 529,576 | 10.50 | % | N/A | N/A | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tri Counties Bank | $ | 755,893 | 14.99 | % | $ | 529,388 | 10.50 | % | $ | 504,179 | 10.00 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Tier 1 Capital (to Risk Weighted Assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consolidated | $ | 702,007 | 13.92 | % | $ | 428,705 | 8.50 | % | N/A | N/A | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tri Counties Bank | $ | 695,137 | 13.79 | % | $ | 428,552 | 8.50 | % | $ | 403,343 | 8.00 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Common equity Tier 1 Capital (to Risk Weighted Assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consolidated | $ | 646,407 | 12.82 | % | $ | 353,051 | 7.00 | % | N/A | N/A | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tri Counties Bank | $ | 695,137 | 13.79 | % | $ | 352,925 | 7.00 | % | $ | 327,716 | 6.50 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Tier 1 Capital (to Average Assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consolidated | $ | 702,007 | 11.22 | % | $ | 250,216 | 4.00 | % | N/A | N/A | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tri Counties Bank | $ | 695,137 | 11.11 | % | $ | 250,209 | 4.00 | % | $ | 312,762 | 5.00 | % |
Actual | Required for Capital Adequacy Purposes | Required to be Considered Well Capitalized | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
As of December 31, 2019: | Amount | As of : | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total Capital (to Risk Weighted Assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consolidated | $ | 753,200 | 15.07 | % | $ | 524,944 | 10.50 | % | N/A | N/A | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tri Counties Bank | $ | 748,660 | 14.98 | % | $ | 524,759 | 10.50 | % | $ | 499,770 | 10.00 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tier 1 Capital (to Risk Weighted Assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consolidated | $ | 719,809 | 14.40 | % | $ | 424,955 | 8.50 | % | N/A | N/A | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tri Counties Bank | $ | 715,269 | 14.31 | % | $ | 424,805 | 8.50 | % | $ | 399,816 | 8.00 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common equity Tier 1 Capital (to Risk Weighted Assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consolidated | $ | 664,296 | 13.29 | % | $ | 349,963 | 7.00 | % | N/A | N/A | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tri Counties Bank | $ | 715,269 | 14.31 | % | $ | 349,839 | 7.00 | % | $ | 324,851 | 6.50 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tier 1 Capital (to Average Assets): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consolidated | $ | 719,809 | 11.55 | % | $ | 249,343 | 4.00 | % | N/A | N/A | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tri Counties Bank | $ | 715,269 | 11.47 | % | $ | 249,337 | 4.00 | % | $ | 311,672 | 5.00 | % |
Beginning January 1, 2016, the
Note 30 - Summary
The following table sets forth the results of operations for the periods indicated, and is unaudited; however, in the opinion of Management, it reflects all adjustments (which include only normal recurring adjustments) necessary to present fairly the summarized results for such periods.
2017 Quarters Ended | ||||||||||||||||
September 30, | June 30, | March 31, | ||||||||||||||
(dollars in thousands, except per share data) | ||||||||||||||||
Interest and dividend income: | ||||||||||||||||
Loans: | ||||||||||||||||
Discount accretion PCI – cash basis | 398 | $ | 386 | $ | 112 | |||||||||||
Discount accretion PCI – other | 407 | 797 | 631 | |||||||||||||
Discount accretion PNCI | 559 | 987 | 798 | |||||||||||||
All other loan interest income | 35,904 | 34,248 | 33,373 | |||||||||||||
|
|
|
|
|
| |||||||||||
Total loan interest income | 37,268 | 36,418 | 34,914 | |||||||||||||
Debt securities, dividends and interest bearing cash at Banks (not FTE) | 8,645 | 8,626 | 8,570 | |||||||||||||
|
|
|
|
|
| |||||||||||
Total interest income | 45,913 | 45,044 | 43,484 | |||||||||||||
Interest expense | 1,829 | 1,610 | 1,491 | |||||||||||||
|
|
|
|
|
| |||||||||||
Net interest income | 44,084 | 43,434 | 41,993 | |||||||||||||
Provision for (benefit from reversal of provision for) loan losses | 765 | (796 | ) | (1,557 | ) | |||||||||||
|
|
|
|
|
| |||||||||||
Net interest income after provision for loan losses | 43,319 | 44,230 | 43,550 | |||||||||||||
Noninterest income | 12,930 | 12,910 | 11,703 | |||||||||||||
Noninterest expense | 37,222 | 35,904 | 35,822 | |||||||||||||
|
|
|
|
|
| |||||||||||
Income before income taxes | 19,027 | 21,236 | 19,431 | |||||||||||||
Income tax expense | 7,130 | 7,647 | 7,352 | |||||||||||||
|
|
|
|
|
| |||||||||||
Net income | $ | 11,897 | $ | 13,589 | $ | 12,079 | ||||||||||
|
|
|
|
|
| |||||||||||
Per common share: | ||||||||||||||||
Net income (diluted) | $ | 0.51 | $ | 0.58 | $ | 0.52 | ||||||||||
|
|
|
|
|
| |||||||||||
Dividends | $ | 0.17 | $ | 0.17 | $ | 0.15 | ||||||||||
|
|
|
|
|
|
2016 Quarters Ended | ||||||||||||||||
December 31, | September 30, | June 30, | March 31, | |||||||||||||
(dollars in thousands, except per share data) | ||||||||||||||||
Interest and dividend income: | ||||||||||||||||
Loans: | ||||||||||||||||
Discount accretion PCI – cash basis | $ | 483 | $ | 777 | $ | 426 | $ | 269 | ||||||||
Discount accretion PCI – other | 658 | 569 | 415 | (45 | ) | |||||||||||
Discount accretion PNCI | 637 | 883 | 1,459 | 868 | ||||||||||||
All other loan interest income | 34,463 | 33,540 | 32,038 | 33,646 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total loan interest income | 36,241 | 35,769 | 34,338 | 34,738 | ||||||||||||
Debt securities, dividends and interest bearing cash at Banks (not FTE) | 8,374 | 7,940 | 8,252 | 8,056 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total interest income | 44,615 | 43,709 | 42,590 | 42,794 | ||||||||||||
Interest expense | 1,460 | 1,439 | 1,430 | 1,392 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net interest income | 43,155 | 42,270 | 41,160 | 41,402 | ||||||||||||
(Benefit from reversal of) provision for loan losses | (1,433 | ) | (3,973 | ) | (773 | ) | 209 | |||||||||
|
|
|
|
|
|
|
| |||||||||
Net interest income after provision for loan losses | 44,588 | 46,243 | 41,933 | 41,193 | ||||||||||||
Noninterest income | 12,462 | 11,066 | 11,245 | 9,790 | ||||||||||||
Noninterest expense | 36,563 | 37,416 | 38,267 | 33,751 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Income before income taxes | 20,487 | 19,893 | 14,911 | 17,232 | ||||||||||||
Income tax expense | 7,954 | 7,694 | 5,506 | 6,558 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net income | $ | 12,533 | $ | 12,199 | $ | 9,405 | $ | 10,674 | ||||||||
|
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|
|
|
|
|
| |||||||||
Per common share: | ||||||||||||||||
Net income (diluted) | $ | 0.54 | $ | 0.53 | $ | 0.41 | $ | 0.46 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Dividends | $ | 0.15 | $ | 0.15 | $ | 0.15 | $ | 0.15 | ||||||||
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|
Note 31 – Subsequent Event
On October 8, 2017, a series of wildfires broke out in several Northern California counties in which the Company conducts business. The hardest hit counties appear to be Sonoma and Napa counties with the City of Santa Rosa, and the surrounding Sonoma County area, being especially hard hit. It has been reported that several thousand homes and businesses have been destroyed as a result of these fires. As of October 24, 2017, the Company has identified 39 of its loans with total recorded balances of $15,808,000 that are collateralized by properties within the evacuation zones established for these fires. Of these 39 loans, 32 loans with recorded balances of $9,192,000 are collateralized by residential real estate, and seven loans with recorded balances of $6,616,000 are collateralized by commercial real estate. Properties serving as collateral for nine of the 32 residential real estate loans, and representing $2,636,000 of the recorded balance of loans, and properties serving as collateral for one of the seven commercial real estate loans, and representing $4,062,000 of the recorded balance of loans, have been identified as being partially or totally destroyed. It is the policy of the Company to require borrowers to maintain property & casualty insurance on properties that serve as collateral for the Company’s loans. Management is in the process of determining what the financial effects of these fires may have on the Company, but at this time, Management does not believe any such effects will be material to the Company’s financial condition or results of operations.
There have been no changes to the Company’s critical accounting policies during the nine months ended September 30, 2017.
On March 18, 2016, Tri Counties Bank acquired three branches from Bank of America. The branches are locatedthe consolidated financial statements included in the citiesCompany’s annual report of Arcata, Eureka, and Fortuna in Humboldt County, California. The Bank paid $3,204,000Form 10-K for deposit relationships with balances totaling $161,231,000 and loans with balances totaling $289,000. See “Results of Operations” and “Financial Condition” below and Note 2 in Item 1 of Part I of this report, for additional discussion about this transaction.
On October 3, 2014, TriCo acquired North Valley Bancorp. As part of the acquisition, North Valley Bank, a wholly-owned subsidiary of North Valley Bancorp, merged with and into Tri Counties Bank. TriCo issued an aggregate of approximately 6.58 million shares of TriCo common stock to North Valley Bancorp shareholders, which was valued at a total of approximately $151 million based on the closing trading price of TriCo common stock on October 3, 2014 of $21.73 per share. TriCo also assumed North Valley Bancorp’s obligations with respect to its outstanding trust preferred securities. North Valley Bank was a full-service commercial bank headquartered in Redding, California. North Valley Bank conducted a commercial and retail banking services which included accepting demand, savings, and money market rate deposit accounts and time deposits, and making commercial, real estate and consumer loans. North Valley Bank had $935 million in assets and 22 commercial banking offices in Shasta, Humboldt, Del Norte, Mendocino, Yolo, Sonoma, Placer and Trinity Counties in Northern California at June 30, 2014. Between January 7, 2015 and January 21, 2015, four Tri Counties Bank branches and four former North Valley Bank branches were consolidated into other Tri Counties Bank or other former North Valley Bank branches.
On September 23, 2011, the California Department of Financial Institutions closed Citizens Bank of Northern California (“Citizens”), Nevada City, California and appointed the FDIC as receiver. That same date, the Bank assumed the banking operations of Citizens from the FDIC under a whole bank purchase and assumption agreement without loss sharing.
On May 28, 2010, the Office of the Comptroller of the Currency closed Granite Community Bank, N.A. (“Granite”), Granite Bay, California and appointed the FDIC as receiver. That same date, the Bank assumed the banking operations of Granite from the FDIC under a whole bank purchase and assumption agreement with loss sharing. Under the terms of the loss sharing agreement, the FDIC covered a substantial portion of any future losses on loans, related unfunded loan commitments, other real estate owned (OREO)/foreclosed assets and accrued interest on loans for up to 90 days. The FDIC absorbed 80% of losses and share in 80% of loss recoveries on the covered assets acquired from Granite.
The loss sharing arrangements fornon-single family residential and single family residential loans had original terms of 5 years and 10 years, respectively, and the loss recovery provisions had original terms of 8 years and 10 years, respectively, from the acquisition date. On May 9, 2017, the Company and the FDIC agreed to terminate the whole bank purchase and assumption agreement with loss sharing. For further information regarding the whole bank purchase and assumption agreement with loss sharing, and its termination, see Note 11 in Item 1 of Part I of this report.
The Company refers to loans and foreclosed assets that are covered by loss sharing agreements as “covered loans” and “covered foreclosed assets”, respectively. In addition, the Company refers to loans purchased or obtained in a business combination as “purchased credit impaired” (PCI) loans, or “purchasednon-credit impaired” (PNCI) loans. The Company refers to loans that it originates as “originated” loans. Additional information regarding the Citizens and Granite Bank acquisitions can be found in Note 2 in Item 1 of Part I of this report. Additional information regarding the definitions and accounting for originated, PNCI and PCI loans can be found in Notes 1, 2, 4 and 5 in Item 1 of Part I of this report, and under the headingAsset Quality andNon-Performing Assetsbelow.
year ended December 31, 2019.
Bakersfield and San Luis Obispo.
Rank | County | % of Total PPP Loans | Rank | County | % of Total PPP Loans | Rank | County | % of Total PPP Loans | ||||||||||||||||||||||||
1 | Placer | 10.5 | % | 5 | Shasta | 9.4 | % | 9 | Marin | 3.8 | % | |||||||||||||||||||||
2 | Butte | 10.2 | % | 6 | San Francisco | 7.9 | % | 10 | Sutter | 3.0 | % | |||||||||||||||||||||
3 | San Mateo | 9.8 | % | 7 | Nevada | 6.7 | % | 11 | Kern | 2.8 | % | |||||||||||||||||||||
4 | Sacramento | 9.6 | % | 8 | Stanislaus | 4.3 | % | 12 | Glenn | 2.2 | % |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net Interest Income (FTE) | $ | 44,708 | $ | 42,857 | $ | 131,385 | $ | 126,542 | ||||||||
Provision for (benefit from reversal of provision for) loan losses | (765 | ) | 3,973 | 1,588 | 4,537 | |||||||||||
Noninterest income | 12,930 | 11,066 | 37,543 | 32,101 | ||||||||||||
Noninterest expense | (37,222 | ) | (37,416 | ) | (108,948 | ) | (109,434 | ) | ||||||||
Provision for income taxes (FTE) | (7,754 | ) | (8,281 | ) | (24,003 | ) | (21,468 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net income | $ | 11,897 | $ | 12,199 | $ | 37,565 | $ | 32,278 | ||||||||
|
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|
|
|
|
|
| |||||||||
Earnings per share: | ||||||||||||||||
Basic | $ | 0.52 | $ | 0.53 | $ | 1.64 | $ | 1.42 | ||||||||
Diluted | $ | 0.51 | $ | 0.53 | $ | 1.62 | $ | 1.40 | ||||||||
Per share: | ||||||||||||||||
Dividends paid | $ | 0.17 | $ | 0.15 | $ | 0.49 | $ | 0.45 | ||||||||
Book value at period end | $ | 22.09 | $ | 21.11 | ||||||||||||
Average common shares outstanding | 22,932 | 22,825 | 22,901 | 22,804 | ||||||||||||
Average diluted common shares outstanding | 23,244 | 23,099 | 23,239 | 23,077 | ||||||||||||
Shares outstanding at period end | 22,941 | 22,827 | ||||||||||||||
At period end: | ||||||||||||||||
Loans, net | $ | 2,902,866 | $ | 2,678,742 | ||||||||||||
Total assets | 4,656,435 | 4,467,131 | ||||||||||||||
Total deposits | 3,927,456 | 3,836,012 | ||||||||||||||
Other borrowings | 98,730 | 19,235 | ||||||||||||||
Junior subordinated debt | 56,810 | 56,617 | ||||||||||||||
Shareholders’ equity | $ | 506,733 | $ | 481,890 | ||||||||||||
Financial Ratios: | ||||||||||||||||
During the period (annualized): | ||||||||||||||||
Return on assets | 1.04 | % | 1.11 | % | 1.11 | % | 0.99 | % | ||||||||
Return on equity | 9.38 | % | 10.15 | % | 10.09 | % | 9.13 | % | ||||||||
Net interest margin1 | 4.24 | % | 4.23 | % | 4.21 | % | 4.23 | % | ||||||||
Efficiency ratio2 | 64.6 | % | 69.4 | % | 64.5 | % | 69.0 | % | ||||||||
Average equity to average assets | 11.10 | % | 10.90 | % | 10.99 | % | 10.87 | % | ||||||||
At period end: | ||||||||||||||||
Equity to assets | 10.88 | % | 10.79 | % | ||||||||||||
Total capital to risk-adjusted assets | 14.42 | % | 14.79 | % |
Three months ended March 31, | |||||||||||||||||||||||||||||
2020 | 2019 | ||||||||||||||||||||||||||||
Net interest income | 63,192 | 63,870 | |||||||||||||||||||||||||||
(Provision for) reversal of credit losses | (8,000) | 1,600 | |||||||||||||||||||||||||||
Non-interest income | 11,820 | 11,803 | |||||||||||||||||||||||||||
Non-interest expense | (44,819) | (45,452) | |||||||||||||||||||||||||||
Provision for income taxes | (6,072) | (9,095) | |||||||||||||||||||||||||||
Net income | $ | 16,121 | $ | 22,726 | |||||||||||||||||||||||||
Per Share Data: | |||||||||||||||||||||||||||||
Basic earnings per share | $ | 0.53 | $ | 0.75 | |||||||||||||||||||||||||
Diluted earnings per share | $ | 0.53 | $ | 0.74 | |||||||||||||||||||||||||
Dividends paid | $ | 0.22 | $ | 0.19 | |||||||||||||||||||||||||
Book value at period end | $ | 28.91 | $ | 28.04 | |||||||||||||||||||||||||
Average common shares outstanding | 30,394,904 | 30,424,184 | |||||||||||||||||||||||||||
Average diluted common shares outstanding | 30,522,842 | 30,657,833 | |||||||||||||||||||||||||||
Shares outstanding at period end | 29,973,516 | 30,432,419 | |||||||||||||||||||||||||||
At period end: | |||||||||||||||||||||||||||||
Loans, net | $ | 4,321,151 | 4,002,267 | ||||||||||||||||||||||||||
Total investment securities | $ | 1,382,026 | 1,564,692 | ||||||||||||||||||||||||||
Total assets | $ | 6,474,309 | 6,471,852 | ||||||||||||||||||||||||||
Total deposits | $ | 5,402,698 | 5,430,262 | ||||||||||||||||||||||||||
Other borrowings | $ | 19,309 | 12,466 | ||||||||||||||||||||||||||
Shareholders’ equity | $ | 866,426 | 853,278 | ||||||||||||||||||||||||||
Financial Ratios: | |||||||||||||||||||||||||||||
During the period: | |||||||||||||||||||||||||||||
Return on average assets (annualized) | 1.00 | % | 1.43 | % | |||||||||||||||||||||||||
Return on average equity (annualized) | 7.14 | % | 10.93 | % | |||||||||||||||||||||||||
Net interest margin(1) (annualized) | 4.34 | % | 4.52 | % | |||||||||||||||||||||||||
Efficiency ratio | 59.75 | % | 60.06 | % | |||||||||||||||||||||||||
Average equity to average assets | 13.96 | % | 13.12 | % | |||||||||||||||||||||||||
At end of period: | |||||||||||||||||||||||||||||
Equity to assets | 13.38 | % | 13.18 | % | |||||||||||||||||||||||||
Total capital to risk-adjusted assets | 15.12 | % | 14.73 | % |
Following is a summary of the components of FTE
Three months ended | |||||||||||||||||||||||||||||||||||||||||
March 31, 2020 | December 31, 2019 | March 31, 2019 | |||||||||||||||||||||||||||||||||||||||
Net interest income | $ | 63,192 | $ | 64,196 | $ | 63,870 | |||||||||||||||||||||||||||||||||||
(Provision for) reversal of credit losses | (8,000) | 298 | 1,600 | ||||||||||||||||||||||||||||||||||||||
Non-interest income | 11,820 | 14,186 | 11,803 | ||||||||||||||||||||||||||||||||||||||
Non-interest expense | (44,819) | (46,964) | (45,452) | ||||||||||||||||||||||||||||||||||||||
Provision for income taxes | (6,072) | (8,826) | (9,095) | ||||||||||||||||||||||||||||||||||||||
Net income | $ | 16,121 | $ | 22,890 | $ | 22,726 |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net Interest Income (FTE) | $ | 44,708 | $ | 42,857 | $ | 131,385 | $ | 126,542 | ||||||||
(Provision for) benefit from reversal of provision for loan losses | (765 | ) | 3,973 | 1,588 | 4,537 | |||||||||||
Noninterest income | 12,930 | 11,066 | 37,543 | 32,101 | ||||||||||||
Noninterest expense | (37,222 | ) | (37,416 | ) | (108,948 | ) | (109,434 | ) | ||||||||
Provision for income taxes (FTE) | (7,754 | ) | (8,281 | ) | (24,003 | ) | (21,468 | ) | ||||||||
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|
|
|
|
| |||||||||
Net income | $ | 11,897 | $ | 12,199 | $ | 37,565 | $ | 32,278 | ||||||||
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|
Included in the Company’s results of operations for the three and nine months ended September 30, 2017 is a gain of $961,000 recorded in noninterest income from the sale of available for sale mortgage backed securities on September 28, 2017 with a book value of $24,796,000 at the time of sale.
Also, included in the Company’s results of operations for the nine months ended September 30, 2017 is noninterest income of $712,000 related to the termination on May 9, 2017 of the loss sharing agreements between the Company and the FDIC that were originally agreed to in conjunction with the Company’s acquisition of certain assets and liabilities of Granite Community Bank from the FDIC in May 2010. As part of the termination agreement, the Company paid the FDIC $184,000, and recorded $712,000 of noninterest income representing the difference between the Company’s recorded loss share liability on May 9, 2017 and the payment to the FDIC.
Also, included in the Company’s results of operations for the three and nine months ended September 30, 2017 are $150,000 and $847,000 of excess tax benefits (a reduction of tax expense) related to the exercise or release of equity compensation instruments during these time periods, respectively. Prior to January 1, 2017, generally accepted accounting principles required these types of excess tax benefits, and tax deficiencies, to be recorded directly to shareholders’ equity, and not affect tax expense. During the three and nine month periods ended September 30, 2016, the Company recorded equity compensation related tax deficiencies of $0 and $182,000, respectively, to shareholders’ equity.
Included in the Company’s results of operations for the three and nine months ended September 30, 2016 is the impact of the sale on August 22, 2016, of two performing loans with recorded book value of $166,000, and 48 nonperforming loans with recorded book value, includingpre-sale write downs and purchase discounts, of approximately $2,757,000. The loans sold on August 22, 2016 had contractual amounts outstanding of $6,558,000. Net sale proceeds of $4,980,000 resulted in the recovery of loan balances previously charged off of $1,727,000, additional loan charge offs of $159,000, and interest income of $488,000 from the recovery of interest payments previously applied to principal balances.
Also, included in the Company’s results of operations for the three and nine months ended September 30, 2016 was a $716,000 valuation allowance expense related to a closed branch building held for sale, the value of which was written down to current market value, and subsequently sold during the three months ended September 30, 2016. Net proceeds from the sale of this building were $1,218,000, and resulted in no gain or additional loss being recorded upon the sale of this building.
Included in the Company’s results of operations for the nine month period ended September 30, 2016 is a $1,450,000 litigation contingent liability expense accrual recorded during the three months ended June 30, 2016, and representing the Company’s estimate of probable incurred losses associated with the legal proceedings originally brought against the Company on September 15, 2014 and January 20, 2015, and described further under the heading“Legal Proceedings” at Note 18 in Item 1 of Part I of this report.
Also, included in the Company’s results of operations for the nine months ended September 30, 2016 is the impact of the sale, on March 31, 2016, of twenty-seven nonperforming loans, nine substandard performing loans, and three purchased credit impaired loans with total contractual principal balances outstanding of $31,487,000, and recorded book value, includingpre-sale write downs and purchase discounts, of approximately $24,810,000. Net proceeds from the sale of these loans were $27,049,000, and resulted in additional net loan write downs of $21,000, the recovery of $1,237,000 of interest income that was previously applied to the principal balance of loans in nonaccrual status, and a gain on sale of loans of $103,000.
Also, included in the Company’s results of operations for the nine months ended September 30, 2016 was $784,000 of nonrecurring noninterest expense related to the Company’s acquisition of three bank branches from Bank of America on March 18, 2016. The branches are located in the cities of Arcata, Eureka, and Fortuna in Humboldt County, California. The Bank paid $3,204,000 for deposit relationships with balances of $161,231,000 and loans with balances of $289,000, and received $159,520,000 in cash from Bank of America. The acquisition of the deposits and cash in this acquisition, on March 18, 2016, had a muted effect on average assets and average deposit balances$16,121,000 for the quarter ended March 31, 2016, but had full effect in2020, compared to $22,890,000 and$22,726,000 for the quarters thereafter.
ended December 31, 2019 and March 31, 2019, respectively. Diluted earnings per share were $0.53, $0.75 and $0.74 for the quarters ended March 31, 2020, December 31, 2019 and March 31, 2019, respectively.
Three months ended September 30, | Nine month ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Interest income | $ | 45,913 | $ | 43,709 | $ | 134,441 | $ | 129,093 | ||||||||
Interest expense | (1,829 | ) | (1,439 | ) | (4,930 | ) | (4,261 | ) | ||||||||
FTE adjustment | 624 | 587 | 1,874 | 1,710 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net interest income (FTE) | $ | 44,708 | $ | 42,857 | $ | 131,385 | $ | 126,542 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net interest margin (FTE) | 4.24 | % | 4.23 | % | 4.21 | % | 4.23 | % | ||||||||
|
|
|
|
|
|
|
| |||||||||
Purchased loan discount accretion | $ | 1,364 | $ | 2,229 | $ | 5,075 | $ | 5,621 | ||||||||
Interest income recovered from sale of loans | — | $ | 488 | — | $ | 1,725 | ||||||||||
Effect of purchased loan discount accretion on net interest margin (FTE) | 0.13 | % | 0.22 | % | 0.16 | % | 0.19 | % | ||||||||
Effect of interest income recovered from sale of loans on net interest margin (FTE) | — | 0.05 | % | — | 0.06 | % |
Three months ended | |||||||||||||||||||||||||||||||||||||||||
March 31, 2020 | December 31, 2019 | March 31, 2019 | |||||||||||||||||||||||||||||||||||||||
Interest income | $ | 66,517 | $ | 67,918 | $ | 67,457 | |||||||||||||||||||||||||||||||||||
Interest expense | (3,325) | $ | (3,722) | (3,587) | |||||||||||||||||||||||||||||||||||||
FTE adjustment | 271 | $ | 272 | 322 | |||||||||||||||||||||||||||||||||||||
Net interest income (FTE) | $ | 63,463 | $ | 64,468 | $ | 64,192 | |||||||||||||||||||||||||||||||||||
Net interest margin (FTE) | 4.34 | % | 4.39 | % | 4.52 | % | |||||||||||||||||||||||||||||||||||
Acquired loans discount accretion, net: | |||||||||||||||||||||||||||||||||||||||||
Amount (included in interest income) | $ | 1,748 | $ | 2,218 | $ | 1,655 | |||||||||||||||||||||||||||||||||||
Effect on average loan yield | 0.17 | % | 0.21 | % | 0.16 | % | |||||||||||||||||||||||||||||||||||
Effect on net interest margin (FTE) | 0.12 | % | 0.16 | % | 0.17 | % | |||||||||||||||||||||||||||||||||||
Net interest margin less effect of acquired loan discount | 4.22 | % | 4.23 | % | 4.35 | % |
For the three months ended | ||||||||||||||||||||||||
September 30, 2017 | September 30, 2016 | |||||||||||||||||||||||
Interest | Rates | Interest | Rates | |||||||||||||||||||||
Average | Income/ | Earned | Average | Income/ | Earned | |||||||||||||||||||
Balance | Expense | /Paid | Balance | Expense | /Paid | |||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Loans | $ | 2,878,944 | $ | 37,268 | 5.18 | % | $ | 2,669,954 | $ | 35,769 | 5.36 | % | ||||||||||||
Investment securities - taxable | 1,114,112 | 7,312 | 2.63 | % | 1,073,030 | 6,687 | 2.49 | % | ||||||||||||||||
Investment securities - nontaxable | 136,095 | 1,665 | 4.89 | % | 126,910 | 1,565 | 4.93 | % | ||||||||||||||||
Cash at Federal Reserve and other banks | 85,337 | 292 | 1.37 | % | 185,552 | 275 | 0.59 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total interest-earning assets | 4,214,488 | 46,537 | 4.42 | % | 4,055,446 | 44,296 | 4.37 | % | ||||||||||||||||
Other assets | 357,937 | 351,876 | ||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Total assets | $ | 4,572,424 | $ | 4,407,322 | ||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Liabilities and shareholders’ equity: | ||||||||||||||||||||||||
Interest-bearing demand deposits | $ | 949,348 | 206 | 0.09 | % | $ | 888,377 | 111 | 0.05 | % | ||||||||||||||
Savings deposits | 1,365,249 | 419 | 0.12 | % | 1,357,359 | 426 | 0.13 | % | ||||||||||||||||
Time deposits | 310,325 | 403 | 0.52 | % | 340,709 | 338 | 0.40 | % | ||||||||||||||||
Other borrowings | 65,234 | 149 | 0.91 | % | 18,952 | 2 | 0.05 | % | ||||||||||||||||
Junior subordinated debt | 56,784 | 652 | 4.59 | % | 56,584 | 562 | 3.97 | % | ||||||||||||||||
|
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|
|
|
|
|
|
|
|
| |||||||||||||
Total interest-bearing liabilities | 2,746,941 | 1,829 | 0.27 | % | 2,661,981 | 1,439 | 0.22 | % | ||||||||||||||||
Noninterest-bearing deposits | 1,253,261 | 1,198,302 | ||||||||||||||||||||||
Other liabilities | 64,834 | 66,464 | ||||||||||||||||||||||
Shareholders’ equity | 507,389 | 480,575 | ||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 4,572,424 | $ | 4,407,322 | ||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Net interest spread(1) | 4.15 | % | 4.15 | % | ||||||||||||||||||||
Net interest income and interest margin(2) | $ | 44,708 | 4.24 | % | $ | 42,857 | 4.23 | % | ||||||||||||||||
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(1)Fully taxable equivalent (FTE) (2)Net interest spread represents the average yield earned on interest-earning assets minus the average rate paid on interest-bearing liabilities. (3)Net interest margin is computed by calculating the difference between interest income and interest expense, divided by the average balance |
Summary of Average Balances, Yields/Ratesinterest-earning assets, then annualized based on the number of days in the given period.
For the nine months ended | ||||||||||||||||||||||||
September 30, 2017 | September 30, 2016 | |||||||||||||||||||||||
Interest | Rates | Interest | Rates | |||||||||||||||||||||
Average | Income/ | Earned | Average | Income/ | Earned | |||||||||||||||||||
Balance | Expense | /Paid | Balance | Expense | /Paid | |||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Loans | $ | 2,807,453 | $ | 108,600 | 5.16 | % | $ | 2,596,175 | 104,845 | 5.38 | % | |||||||||||||
Investment securities - taxable | 1,076,887 | 21,637 | 2.68 | % | 1,075,413 | 20,552 | 2.55 | % | ||||||||||||||||
Investment securities - nontaxable | 136,213 | 4,998 | 4.89 | % | 123,129 | 4,560 | 4.94 | % | ||||||||||||||||
Cash at Federal Reserve and other banks | 139,739 | 1,080 | 1.03 | % | 195,961 | 846 | 0.58 | % | ||||||||||||||||
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Total interest-earning assets | 4,160,292 | 136,315 | 4.37 | % | 3,990,678 | 130,803 | 4.37 | % | ||||||||||||||||
Other assets | 359,489 | 345,601 | ||||||||||||||||||||||
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Total assets | $ | 4,519,781 | $ | 4,336,279 | ||||||||||||||||||||
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Liabilities and shareholders’ equity: | ||||||||||||||||||||||||
Interest-bearing demand deposits | $ | 931,079 | 534 | 0.08 | % | $ | 873,742 | 347 | 0.05 | % | ||||||||||||||
Savings deposits | 1,364,812 | 1,253 | 0.12 | % | 1,329,180 | 1,246 | 0.12 | % | ||||||||||||||||
Time deposits | 321,150 | 1,109 | 0.46 | % | 343,906 | 1,018 | 0.39 | % | ||||||||||||||||
Other borrowings | 34,413 | 164 | 0.64 | % | 18,790 | 7 | 0.05 | % | ||||||||||||||||
Junior subordinated debt | 56,737 | 1,870 | 4.39 | % | 56,541 | 1,643 | 3.87 | % | ||||||||||||||||
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Total interest-bearing liabilities | 2,708,191 | 4,930 | 0.24 | % | 2,622,159 | 4,261 | 0.22 | % | ||||||||||||||||
Noninterest-bearing deposits | 1,247,201 | 1,180,092 | ||||||||||||||||||||||
Other liabilities | 67,854 | 62,824 | ||||||||||||||||||||||
Shareholders’ equity | 496,535 | 471,204 | ||||||||||||||||||||||
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Total liabilities and shareholders’ equity | $ | 4,519,781 | $ | 4,336,279 | ||||||||||||||||||||
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Net interest spread(1) | 4.13 | % | 4.15 | % | ||||||||||||||||||||
Net interest income and interest margin(2) | $ | 131,385 | 4.21 | % | 126,542 | 4.23 | % | |||||||||||||||||
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net interest margin were negatively impacted by the decline in interest rates.
The index utilized in a significant portion of the Company’s variable rate loans, Wall Street Journal Prime, decreased by 150 basis points during the current quarter to 3.25% at March 31, 2020, as compared to 4.75% at March 31, 2020 and 5.50% at March 31, 2019. As compared to the same quarter in the prior year, average loan yields decreased 25 basis points from 5.48% during the three months ended March 31, 2019 to 5.23% during the three months ended March 31, 2020. Of the 25 basis point decrease in yields on loans during the comparable three month periods ended March 31, 2020 and 2019, 26 basis points was attributable to decreases in market rates while 1 basis point was gained from the accretion of purchased loan discounts. See the Summary of Changes in Interest Income and Expense due to Changes in Average Asset and Liability Balances and Yields Earned and Rates Paid, below for additional information.Three months ended September 30, 2017 | ||||||||||||
compared with three months | ||||||||||||
ended September 30, 2016 | ||||||||||||
Volume | Rate | Total | ||||||||||
Increase (decrease) in interest income: | ||||||||||||
Loans | $ | 2,800 | $ | (1,301 | ) | $ | 1,499 | |||||
Investment securities | 369 | 356 | 725 | |||||||||
Cash at Federal Reserve and other banks | (148 | ) | 165 | 17 | ||||||||
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Total interest-earning assets | 3,021 | (780 | ) | 2,241 | ||||||||
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Increase (decrease) in interest expense: | ||||||||||||
Interest-bearing demand deposits | 8 | 87 | 95 | |||||||||
Savings deposits | 3 | (10 | ) | (7 | ) | |||||||
Time deposits | (30 | ) | 95 | 65 | ||||||||
Other borrowings | 4 | 143 | 147 | |||||||||
Junior subordinated debt | 2 | 88 | 90 | |||||||||
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Total interest-bearing liabilities | (13 | ) | 403 | 390 | ||||||||
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Increase (decrease) in Net Interest Income | $ | 3,034 | $ | (1,183 | ) | $ | 1,851 | |||||
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components.
(in thousands) | Three months ended March 31, 2020 compared with three months ended March 31, 2019 | ||||||||||||||||||||||||||||
Volume | Rate | Total | |||||||||||||||||||||||||||
Increase in interest income: | |||||||||||||||||||||||||||||
Loans | $ | 4,840 | $ | (2,980) | $ | 1,860 | |||||||||||||||||||||||
Investment securities(1) | (1,532) | (1,031) | (2,563) | ||||||||||||||||||||||||||
Cash at Federal Reserve and other banks | 262 | (550) | (288) | ||||||||||||||||||||||||||
Total interest-earning assets | 3,570 | (4,561) | (991) | ||||||||||||||||||||||||||
Increase (decrease) in interest expense: | |||||||||||||||||||||||||||||
Interest-bearing demand deposits | (6) | (112) | (118) | ||||||||||||||||||||||||||
Savings deposits | (32) | (39) | (71) | ||||||||||||||||||||||||||
Time deposits | (70) | 90 | 20 | ||||||||||||||||||||||||||
Other borrowings | 12 | (20) | (8) | ||||||||||||||||||||||||||
Junior subordinated debt | 5 | (91) | (86) | ||||||||||||||||||||||||||
Total interest-bearing liabilities | (91) | (172) | (263) | ||||||||||||||||||||||||||
Increase in net interest income | $ | 3,661 | $ | (4,389) | $ | (728) |
(in thousands) | |||||||||||||||||
Nine months ended September 30, 2017 | ||||||||||||
compared with nine months | ||||||||||||
ended September 30, 2016 | ||||||||||||
Volume | Rate | Total | ||||||||||
Increase (decrease) in interest income: | ||||||||||||
Loans | $ | 8,525 | $ | (4,770 | ) | $ | 3,755 | |||||
Investment securities | 513 | 1,010 | 1,523 | |||||||||
Cash at Federal Reserve and other banks | (245 | ) | 479 | 234 | ||||||||
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Total interest-earning assets | 8,793 | (3,281 | ) | 5,512 | ||||||||
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Increase (decrease) in interest expense: | ||||||||||||
Interest-bearing demand deposits | 22 | 165 | 187 | |||||||||
Savings deposits | 32 | (25 | ) | 7 | ||||||||
Time deposits | (67 | ) | 158 | 91 | ||||||||
Other borrowings | 6 | 151 | 157 | |||||||||
Junior subordinated debt | 6 | 221 | 227 | |||||||||
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Total interest-bearing liabilities | (1 | ) | 670 | 669 | ||||||||
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Increase (decrease) in Net Interest Income | $ | 6,794 | $ | (3,951 | ) | $ | 4,843 | |||||
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The following commentary regarding net interest income, interest income and interest expense may be best understood while referencing theSummary of Average Balances, Yields/Rates and Interest Differentialand the Summary of Changes in Interest Income and Expense due to Changes in Average Asset and Liability Balances and Yields Earned and Rates Paid
above.
Net interest income (FTE) during the nine months ended September 30, 2017 increased $4,843,000 (3.8%) from the same period in 2016 to $131,385,000. The increase in net interest income (FTE) was due primarily to increases in the average balance of loans and investments, and an increase in yield on investments – taxable, that were partially offset by a decrease in the average yield on loans and an increase in other borrowings compared to the nine months ended September 30, 2016.
During the three months ended September 30, 2017, loan interest income increased $1,499,000 (4.2%) to $37,268,000. The increase in loan interest income was due to a $208,990,000 (7.8%) increase in the average balance of loans, that wasadding $4,840,000 to net interest income, partially offset by an 18 basis point decreasea reduction of net interest income totaling $2,980,000 from lower market rates and purchase discount accretion. The reduction in the average yieldmarket rates also led to a decline in interest expense paid on loans to 5.18% compared to 5.36%deposits and borrowings of $172,000 during the three months ended September 30, 2016. Included in loan interest income for the quarter ended September 30, 2017 was $1,364,000 of purchased loan discount accretion. Included in loan interest income for the quarter ended September 30, 2016 was $2,229,000 of purchased loan discount accretion, and $488,000 of interest income recovered upon the sale of certain nonperforming loans. During the three months ended September 30, 2017, investment interest income (FTE) increased $725,000 (8.8%) from theyear-ago quarter to $8,977,000. The increase in investment interest income was due to a $50,267,000 (4.2%) increase in the average balance of investments and a 12 basis point increase in the average investment yield to 2.87% compared to 2.75% in theyear-ago quarter. The increase in loan and investment balances noted above was funded primarily by a $93,436,000 (2.5%) increase in the average balance of total deposits, a $100,215,000 (54.0%) decrease in the average balance of interest earning cash at banks, and a $46,282,000 (244%) increase in other borrowings during the three months ended September 30, 2017March 31, 2020, compared to the three months ended September 30, 2016. Despite the 54.0% decreasesame period in the average balance of interest earning cash at banks, interest income from cash at banks increased $17,000 (6.2%) to $292,000 due to a 78 basis point increase in the average yield on cash at banks to 1.37% during the three months ended September 30, 2017 compared to 0.59% during the three months ended September 30, 2016. While the average balance of total deposits grew $93,436,000 (2.5%) from the three months ended September 30, 2016 to the three months ended September 30, 2017, the average balance of interest bearing deposits grew $38,477,000 (1.5%)2019.
The Federal Reserve has increased the Federal Funds target rate 25 basis points in each of December 2015, December 2016, March 2017, and June 2017; and the widely used prime rate of lending index has mirrored these increases in the Federal Funds rate, increasing from 3.25% in December 2015 to 4.25% in June 2017. While a significant portion of the Bank’s loans are indexed to the prime lending rate, and have rates that reset on or near the date of any prime lending rate change, the positive effect of such prime lending rate changes have been substantially offset by loan renewals and originations at market rates that are lower than the average rate of the Bank’s loan portfolio.
As of September 30, 2017, the Bank’s $2,955,323,000 principal balance of loans, net of charge-offs, and not including deferred loan fees and purchase discounts, was made up of loans with principal balances totaling $1,051,513,000 that have fixed interest rates, and $1,903,810,000 of loans with interest rates that are variable. Included in the balance of variable rate loansformerly known as of September 30, 2017 were loans with principal balances of approximately $526,070,000 that had adjustable interest rates tied to the prime lending rate that adjust on or near the date of any prime rate change, and of which approximately $59,100,000 had minimum contractual interest rates that are higher than their prime-indexed rate and will not experience an interest rate increase until their prime-indexed rate exceeds their minimum contractual interest rate. Also included in the balance of variable rate loans as of September 30, 2017 were loans with principal balances of approximately $945,801,000 that had adjustable interest rates tied to the5-year U.S. Treasury Bond Rate index(5-year CMT index), and of which approximately $300,117,000 had minimum contractual interest rates that are higher than their5-yearCMT-indexed rate and will not experience an interest rate increase until their5-yearCMT-indexed rate exceeds their minimum contractual interest rate on their reset date. These5-year CMT indexed loans have interest rates that adjust once every five years. Of course, any of these prime-indexed,5-yearCMT-indexed, or any other variable rate loan, may payoff, or may be refinanced, at any time.
During the nine months ended September 30, 2017, interest income (FTE) increased $4,843,000 (3.9%) to $131,385,000 compared to $126,542,000 during the nine months ended September 30, 2016. This increase in interest income was due primarily to a $3,755,000 (3.6%) increase in loan interest income to $108,600,000. This increase in loan interest income was due to a $211,278,000 (8.1%) increase in the average balance of loans that was partially offset by a 22 basis point decrease in the average loan yield to 5.16% compared to 5.38% during the nine months ended September 30, 2016. Included in loan interest income for the nine months ended September 30, 2017 was $5,075,000 of purchased loan discount accretion. Included in loan interest income for the nine months ended September 30, 2016 was $5,621,000 of purchased loan discount accretion, and $1,725,000 of interest income recovered as the result of the loan sales during the nine months ended September 30, 2016. During the nine months ended September 30, 2017, investment interest income (FTE) increased $1,523,000 (6.1%) to $26,635,000 compared to the nine months ended September 30, 2016. This increase in investment interest income was due primarily to a 13 basis point increase in the average yield on investments to 2.93% compared to 2.79%. The increase in loan balances noted above was funded primarily by a $137,322,000 (3.7%) increase in the average balance of total deposits, a $56,222,000 (28.7%) decrease in the average balance of interest earning cash at banks, and a $15,623,000 (83.1%) increase in other borrowings during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. Despite the 28.7% decrease in the average balance of interest earning cash at banks, interest income from cash at banks increased $234,000 (27.7%) to $1,080,000 due to a 45 basis point increase in the average yield on cash at banks during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. While the average balance of total deposits grew $137,322,000 (3.7%) from the nine months ended September 30, 2016 to the nine months ended September 30, 2017, the average balance of interest earning deposits grew $70,213,000 (2.7%), and the average rate paid on those interest earning deposits increased 1 basis point to 0.22%. The $15,623,000 increase in the average balance of other borrowings was due to the addition of borrowings from the FHLB, and resulted in a 59 basis point increase in the average rate paid on other borrowings during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. The average rate paid on junior subordinated debt increased 52 basis points to 4.39% during the nine months ended September 30, 2017 compared to 3.87% during the nine months ended September 30, 2016. The changes in the average balances of interest bearing assets and liabilities, and their respective yields and rates, from the nine months ended September 30, 2016 to the nine months ended September 30, 2017 is indicative of moderate to strong loan demand from September 30, 2016 to September 30, 2017, and the increases in short-term interest rates during this time frame that did not result in significant increases in deposit rates or long-term fixed-rate loan rates.
Provision for Loan Losses
The provision for loan losses during any period is the sum of the allowance for loan losses required atwas $30,616,000 as of December 31, 2019. Upon adoption of CECL on January 1, 2020, the endCompany recognized an increase in the ACL for loans totaling $18,913,000, including a reclassification of the period and any loan charge offs during the period, less$481,000 from discounts on acquired loans to the allowance for loancredit losses, requiredas a cumulative effect adjustment from change in accounting policies, with a corresponding decrease in retained earnings, net of $5,449,000 in taxes of $12,983,000. Management has separately evaluated its held-to-maturity investment securities from obligations of state and political subdivisions utilizing the historical loss data represented by similar securities over a period of time spanning nearly 50 years. Based on this evaluation, management has determined that the expected credit losses associated with these securities is less than significant for financial reporting purposes and therefore, no loss reserves were recorded for these securities at the beginningtime of adoption and implementation of the period, and less any loan recoveries during the period. See the Tables labeled“Allowance for loan losses – three and nine months ended September 30, 2017 and 2016” at Note 5 in Item 1 of Part I of this report for the components that make up the provision for loan losses for the three and nine months ended September 30, 2017 and 2016.
Increases and decreases in estimated cash flows and collateral values, changes in historical loss factors, changes in concentration levels, and changes in economic environmental factors, in part, determine the required loan loss allowance, and provision for loan losses, for nonperforming and performing loans in accordance with the Company’s allowance for loan losses methodology as described under the heading“Loans and Allowance for Loan Losses” at Note 1 in Item 1 of Part I of this report. For details of the change in nonperforming loans during the three months ended September 30, 2017 see the Tables, and associated narratives, labeled“Changes in nonperforming assets during the three months ended September 30, 2017”under the heading“Asset Quality andNon-Performing Assets” below. For details of the change in nonperforming loans during the nine months ended September 30, 2017 see the Tables, and associated narratives, labeled“Changes in nonperforming assets during the nine months ended September 30, 2017”under the heading“Asset Quality andNon-Performing Assets” below.
CECL standard.
As shown in the Table labeled“Allowance for Loan Losses – Three Months Ended September 30, 2017” at Note 5 in Item 1 of Part I of this report, home equity lines of credit and home equity loans experienced a benefit from reversal of provision for loan losses while, residential and commercial real estate mortgage loans, other consumer loans, C&I loans, residential construction loans, and commercial construction
loans experienced a provision for loan losses during the three months ended September 30, 2017. The level of provision, or reversal of provision, for loan losses of each loan category during the three months ended September 30, 2017 was due primarily to the increase or decrease in the required allowance for loan losses as of September 30, 2017 when compared to the required allowance for loan losses as of June 30, 2017 plus or minus net charge-offs or net recoveries during the three months ended September 30, 2017. All categories of loans except home equity lines, home equity loans,$16,864,000 and other consumer loans experienced an increase in the required allowance for loan losses during the three months ended September 30, 2017. The decreases in the required allowance for loan losses for home equity lines, home equity loans, and other consumer loans were due primarily to stable or improving estimated cash flows and collateral values for certain impaired originated and purchased loans, continued low net charge off rates in many loan categories, and stable to improving economic environmental factors. The increase in the required allowance for loan losses for commercial real estate mortgage loans was due primarily to the increases in the outstanding balances and the level of nonperforming balances of these types of loans. The increase in the required allowance for loan losses for residential real estate mortgage, and commercial & industrial loans were due primarily to the increases in the outstanding balances and the level of nonperforming balances of these types of loans. The increase in the required allowance for loan losses for residential and commercial construction loans were due primarily to the increases in the outstanding balances of these types of loans.
The Company recorded a reversal of provision for loan losses of $1,588,000 during the nine months ended September 30, 2017 compared to a reversal of provision for loan losses of $4,537,000 during the nine months ended September 30, 2016. The $1,588,000 reversal of provision for loan losses during the nine months ended September 30, 2017 was primarily due to a continued low historical loan loss experience, and stable to improving economic environmental factors that were partially offset by a $1,826,000 increase in nonperforming loans, and an increase in the concentration of nonowner-occupied commercial real estate secured loans. Net loan charge-offs during the nine months ended September 30, 2017 were $2,168,000, and included $1,832,000 of charge-offs related to purchased credit impaired(PCI-other) loans for which an allowance was previously established. Excluding these PCI loan charge-offs, charge-offs for the nine months ended September 30, 2017 would have been $1,951,000, and charge-offs, net of recoveries, would have been $336,000.
As shown in the Table labeled“Allowance for Loan Losses – Nine Months Ended September 30, 2017” at Note 5 in Item 1 of Part I of this report, residential and commercial real estate mortgage loans, home equity lines of credit, home equity loans, C&I loans and commercial construction loans experienced a benefit from reversal of provision for loan losses while, other consumer loans, and residential construction loans experienced a provision for loan losses during the nine months ended September 30, 2017. The level of provision, or reversal of provision, for loan losses of each loan category during the nine months ended September 30, 2017 was due primarily to the increase or decrease in the required allowance for loan losses as of September 30, 2017 when compared to the required allowance for loan losses$19,565,000 as of December 31, 2016 plus or minus net charge-offs or net recoveries2019 and March 31, 2019, respectively. There were no additions and one sale of other real estate owned during the nine monthsthree month period ended September 30, 2017. All categoriesMarch 31, 2020. The sold property generated $353,000 in proceeds and had a carrying value of loans except$312,000. As of March 31, 2020, other residential construction loans experiencedreal estate owned consisted of five properties with a decrease in the required allowance for loan losses during the nine months ended September 30, 2017. The increase in the required allowance for loan losses for residential construction loans was due primarily to increased balances in this loan category. The decrease in the required allowance for loan losses for all loan categories except residential construction was due primarily to stable or improving estimated cash flows and collateral values for certain impaired originated and purchased loans, continued low net charge off rates in many loan categories, and stable to improving economic environmental factors.
The provision for loan losses related to originated and PNCI loans is based on management’s evaluationcarrying value of inherent risks in these loan portfolios and a corresponding analysis of the allowance for loan losses. The provision for loan losses related to PCI loan portfolio is based on changes in estimated cash flows expected to be collected on PCI loans. Additional discussion on loan quality, our procedures to measure loan impairment, and the allowance for loan losses is provided under the heading“Asset Quality andNon-Performing Assets” below.
Managementre-evaluates the loss ratios and other assumptions used in its calculation of the allowance for loan losses for its originated and PNCI loan portfolios on a quarterly basis and makes changes as appropriate based upon, among other things, changes in loss rates experienced, collateral support for underlying loans, changes and trends in the economy, and changes in the loan mix.Management alsore-evaluates expected cash flows used in its accounting for its PCI loan portfolio, including any required allowance for loan losses, on a quarterly basis and makes changes as appropriate based upon, among other things, changes in loan repayment experience, changes in loss rates experienced, and collateral support for underlying loans.
Noninterest$2,229,000.
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Service charges on deposit accounts | $ | 4,160 | $ | 3,641 | $ | 12,102 | $ | 10,549 | ||||||||
ATM and interchange fees | 4,209 | 3,851 | 12,472 | 11,136 | ||||||||||||
Other service fees | 917 | 792 | 2,521 | 2,369 | ||||||||||||
Mortgage banking service fees | 514 | 537 | 1,561 | 1,570 | ||||||||||||
Change in value of mortgage servicing rights | (325 | ) | (799 | ) | (795 | ) | (2,198 | ) | ||||||||
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Total service charges and fees | 9,475 | 8,022 | 27,861 | 23,426 | ||||||||||||
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Gain on sale of loans | 606 | 953 | 2,293 | 2,645 | ||||||||||||
Commissions on sale ofnon-deposit investment products | 672 | 747 | 1,984 | 1,890 | ||||||||||||
Increase in cash value of life insurance | 732 | 709 | 2,043 | 2,086 | ||||||||||||
Gain on sale of investment securities | 961 | — | 961 | — | ||||||||||||
Change in indemnification asset | — | (10 | ) | 490 | (274 | ) | ||||||||||
Gain on sale of foreclosed assets | 37 | 69 | 308 | 218 | ||||||||||||
Sale of customer checks | 89 | 110 | 287 | 299 | ||||||||||||
Lease brokerage income | 234 | 172 | 601 | 602 | ||||||||||||
Loss on disposal of fixed assets | (33 | ) | (13 | ) | (61 | ) | (52 | ) | ||||||||
Life Insurance death benefit in excess of cash value | — | — | 108 | 238 | ||||||||||||
Other | 157 | 307 | 668 | 1,023 | ||||||||||||
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Total other noninterest income | 3,455 | 3,044 | 9,682 | 8,675 | ||||||||||||
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Total noninterest income | $ | 12,930 | $ | 11,066 | $ | 37,543 | $ | 32,101 | ||||||||
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Mortgage loan servicing fees, net of change in fair value of mortgage loan servicing rights | $ | 189 | $ | (262 | ) | $ | 766 | $ | (628 | ) |
Noninterest
Three months ended March 31, | |||||||||||||||||||||||||||||
(dollars in thousands) | 2020 | 2019 | $ Change | % Change | |||||||||||||||||||||||||
ATM and interchange fees | $ | 5,111 | $ | 4,581 | $ | 530 | 11.6 | % | |||||||||||||||||||||
Service charges on deposit accounts | 4,046 | 3,880 | $ | 166 | 4.3 | % | |||||||||||||||||||||||
Other service fees | 758 | 771 | $ | (13) | (1.7) | % | |||||||||||||||||||||||
Mortgage banking service fees | 469 | 483 | $ | (14) | (2.9) | % | |||||||||||||||||||||||
Change in value of mortgage servicing rights | (1,258) | (645) | $ | (613) | 95.0 | % | |||||||||||||||||||||||
Total service charges and fees | 9,126 | 9,070 | 56 | 0.6 | % | ||||||||||||||||||||||||
Increase in cash value of life insurance | 720 | 775 | $ | (55) | (7.1) | % | |||||||||||||||||||||||
Asset management and commission income | 916 | 642 | $ | 274 | 42.7 | % | |||||||||||||||||||||||
Gain on sale of loans | 891 | 412 | $ | 479 | 116.3 | % | |||||||||||||||||||||||
Lease brokerage income | 193 | 220 | $ | (27) | (12.3) | % | |||||||||||||||||||||||
Sale of customer checks | 124 | 140 | $ | (16) | (11.4) | % | |||||||||||||||||||||||
Gain on marketable equity securities | 47 | 36 | $ | 11 | 30.6 | % | |||||||||||||||||||||||
Other | (197) | 508 | $ | (705) | (138.8) | % | |||||||||||||||||||||||
Total other non-interest income | 2,694 | 2,733 | $ | (39) | (1.4) | % | |||||||||||||||||||||||
Total non-interest income | $ | 11,820 | $ | 11,803 | $ | 17 | 0.1 | % |
Noninterest income increased $5,442,000 (17.0%) to $37,543,000 during$4,581,000 for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. The increasecomparative period in noninterest income was due primarily to a $1,553,000 (14.7%) increase in service charges on deposit accounts, a $1,336,000 (12.0%) increase in ATM fees and interchange income, a $1,403,000 improvement in change in value of mortgage servicing rights, a $961,000 gain on sale of investment securities, and a $764,000 improvement in change in indemnification asset that were partially offset by a $355,000 decrease in other noninterest income, and a $352,000 decrease in gain on sale of loans. The $1,553,000 increase in service charges on deposit accounts was due primarily to increased fee generation from both consumer and business checking customers. The $1,336,000 increase in ATM fees and interchange revenue was due primarily to the Company’s continued focus in this area, new services, fees, and operational changes introduced throughout 2016, and growth in electronic payments volume. The $1,403,000 improvement in change in value of mortgage servicing rights (MSRs) was due to a smaller increase in the estimated weighted-average prepayment speed of the loans being service during the nine months ended September 30, 2017 compared to the nine months ended September 30,2016, and2019, for an increase in the discount rate used by investors to calculate the present value of future servicing fee income during the nine months ended September 30, 2016 while no such increase occurred during the nine months ended September 30, 2017. The $961,000 gain on sale$530,000.
NoninterestContents
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Base salaries, net of deferred loan origination costs | $ | 13,600 | $ | 13,419 | $ | 40,647 | $ | 39,095 | ||||||||
Incentive compensation | 2,609 | 2,798 | 6,980 | 7,008 | ||||||||||||
Benefits and other compensation costs | 4,724 | 4,643 | 14,693 | 14,067 | ||||||||||||
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Total salaries and benefits expense | 20,933 | 20,860 | 62,320 | 60,170 | ||||||||||||
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Occupancy | 2,799 | 2,667 | 8,196 | 7,504 | ||||||||||||
Equipment | 1,816 | 1,607 | 5,344 | 4,837 | ||||||||||||
Data processing and software | 2,495 | 2,068 | 7,332 | 6,266 | ||||||||||||
ATM & POS network charges | 1,425 | 1,915 | 3,353 | 3,923 | ||||||||||||
Telecommunications | 716 | 702 | 2,027 | 2,085 | ||||||||||||
Postage | 325 | 381 | 1,058 | 1,186 | ||||||||||||
Courier service | 235 | 280 | 752 | 816 | ||||||||||||
Advertising | 1,039 | 1,049 | 3,173 | 3,021 | ||||||||||||
Assessments | 427 | 654 | 1,252 | 1,864 | ||||||||||||
Operational losses | 301 | 497 | 1,166 | 1,006 | ||||||||||||
Professional fees | 901 | 1,018 | 2,357 | 3,183 | ||||||||||||
Foreclosed assets expense | 41 | 37 | 117 | 197 | ||||||||||||
Provision for foreclosed asset losses | 134 | 8 | 162 | 40 | ||||||||||||
Change in reserve for unfunded commitments | 390 | 25 | 270 | 433 | ||||||||||||
Intangible amortization | 339 | 359 | 1,050 | 1,017 | ||||||||||||
Merger expense | — | — | — | 784 | ||||||||||||
Litigation contingent liability | — | — | — | 1,450 | ||||||||||||
Other | 2,906 | 3,289 | 9,019 | 9,652 | ||||||||||||
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Total other noninterest expense | 16,289 | 16,556 | 46,628 | 49,264 | ||||||||||||
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Total noninterest expense | $ | 37,222 | $ | 37,416 | $ | 108,948 | $ | 109,434 | ||||||||
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Merger expense: | ||||||||||||||||
Base salaries (outside temporary help) | — | — | — | $ | 187 | |||||||||||
Equipment | — | — | — | 35 | ||||||||||||
Data processing and software | — | — | — | — | ||||||||||||
Professional fees | — | — | — | 342 | ||||||||||||
Advertising and marketing | — | — | — | 114 | ||||||||||||
Other | — | — | — | 106 | ||||||||||||
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Total merger expense | — | — | — | $ | 784 | |||||||||||
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Average full time equivalent staff | 993 | 1,022 | 1,005 | 996 | ||||||||||||
Noninterest expense to revenue (FTE) | 64.6 | % | 69.4 | % | 64.5 | % | 69.0 | % |
Salary and benefit expenses increased $73,000 (0.3%)
Three months ended March 31, | |||||||||||||||||||||||||||||
2020 | 2019 | $ Change | % Change | ||||||||||||||||||||||||||
Base salaries, net of deferred loan origination costs | $ | 17,623 | $ | 16,757 | $ | 866 | 5.2 | % | |||||||||||||||||||||
Incentive compensation | 3,101 | 2,567 | 534 | 20.8 | % | ||||||||||||||||||||||||
Benefits and other compensation costs | 6,548 | 5,804 | 744 | 12.8 | % | ||||||||||||||||||||||||
Total salaries and benefits expense | 27,272 | 25,128 | 2,144 | 8.5 | % | ||||||||||||||||||||||||
Occupancy | 3,875 | 3,774 | 101 | 2.7 | % | ||||||||||||||||||||||||
Data processing and software | 3,367 | 3,349 | 18 | 0.5 | % | ||||||||||||||||||||||||
Equipment | 1,512 | 1,867 | (355) | (19.0) | % | ||||||||||||||||||||||||
Intangible amortization | 1,431 | 1,431 | — | — | % | ||||||||||||||||||||||||
Advertising | 665 | 1,331 | (666) | (50.0) | % | ||||||||||||||||||||||||
ATM and POS network charges | 1,373 | 1,323 | 50 | 3.8 | % | ||||||||||||||||||||||||
Professional fees | 703 | 839 | (136) | (16.2) | % | ||||||||||||||||||||||||
Telecommunications | 725 | 797 | (72) | (9.0) | % | ||||||||||||||||||||||||
Regulatory assessments and insurance | 95 | 511 | (416) | (81.4) | % | ||||||||||||||||||||||||
Postage | 290 | 310 | (20) | (6.5) | % | ||||||||||||||||||||||||
Operational losses | 221 | 225 | (4) | (1.8) | % | ||||||||||||||||||||||||
Courier service | 331 | 270 | 61 | 22.6 | % | ||||||||||||||||||||||||
Gain on sale of foreclosed assets | (41) | (99) | 58 | (58.6) | % | ||||||||||||||||||||||||
Loss on disposal of fixed assets | — | 24 | (24) | (100.0) | % | ||||||||||||||||||||||||
Other miscellaneous expense | 3,000 | 4,372 | (1,372) | (31.4) | % | ||||||||||||||||||||||||
Total other non-interest expense | 17,547 | 20,324 | (2,777) | (13.7) | % | ||||||||||||||||||||||||
Total non-interest expense | $ | 44,819 | $ | 45,452 | $ | (633) | (1.4) | % | |||||||||||||||||||||
Average full time equivalent staff | 1,165 | 1,160 | 5 | 0.4 | % |
Salary and benefit expenses increased $2,150,000 (3.6%) to $62,320,000$3,000,000 during the nine months ended September 30, 2017current quarter, as compared to $60,170,000 during the nine months ended September 30, 2016. Base salaries, net of deferred loan origination costs increased $1,552,000 (4.0%) to $40,647,000. The increase in base salaries was due primarily to annual merit increases and a 0.9% increase in average full time equivalent employees to 1,005 from 996 during the nine months ended September 30, 2016. Commissions and incentive compensation decreased $28,000 (0.4%) to $6,980,000 due primarily to a decreases in commissions on loans. Benefits & other compensation expense increased $626,000 (4.5%) to $14,693,000 during the nine months ended September 30, 2017 due primarily to primarily to increases in group medical and workers compensation insurance, and employee stock ownership plan (ESOP) expense.
Other noninterest expense decreased $267,000 (1.6%) to $16,289,000 during the three months ended September 30, 2017 compared to the three months ended September 30, 2016. The decrease in other noninterest expense was due primarily to a $490,000 decrease in ATM & POS network charges, a $227,000 decrease in deposit insurance and other assessments, and a $383,000 decrease in other noninterest expense that were partially offset by increases of $427,000 in data processing and software expense, $365,000 in change in reserve for unfunded commitments, and $341,000 in occupancy and equipment expense. The $490,000 decrease in ATM & POS network charges was due to nonrecurring ATM & POS network charges that occurred during the third quarter of 2016 related to system enhancements. The $227,000 decrease in assessments was due the lowering of FDIC deposit insurance rates during the third quarter of 2016. The $383,000 decrease in other noninterest expense was due to a $716,000 valuation allowance expense taken during the third quarter of 2016 on a closed branch
building that was also sold during the third quarter of 2016 without further loss or gain. The $365,000 increase in change in reserve for unfunded commitments was due primarily to a larger increase in unfunded loan commitments during the three months ended September 30, 2017, compared to the three months ended September 30, 2016. The $341,000 increase in occupancy and equipment expense was due primarily to increased depreciation expense on equipment and maintenance and repair expense on facilities and equipment.
Other noninterest expense decreased $2,636,000 (5.4%) to $46,628,000 during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016. The decrease in other noninterest expense was due primarily to the absence of any litigation settlement expense, merger expenses, or fixed asset valuation expenses during the nine months ended September 30, 2017 compared to a litigation settlement expense of $1,450,000, merger expenses of $784,000, and $716,000 fixed asset valuation expense during the nine months ended September 30, 2016. Also contributing to the decrease in other noninterest expense during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 were a $826,000 decrease in professional fees, a $612,000 decrease in assessments, and a $570,000 decrease in ATM & POS network charges that were partially offset by a $1,199,000 increase in occupancy and equipment expenses, and a $1,066,000 increase in data processing and software expense. The $826,000 decrease in professional fees was due to system conversion related consulting fees incurred during the nine months ended September 30, 2016. The $612,000 decrease in assessments was due the lowering of FDIC deposit insurance rates during the third quarter of 2016. The $570,000 decrease in ATM & POS network charges was due to nonrecurring ATM & POS network charges that occurred during the third quarter of 2016 related to system enhancements. The $1,199,000 increase in occupancy and equipment expenses was due primarily to increased building and equipment maintenance expense. The increased data processing and software expense is due primarily to the outsourcing of the Company’s core processing system, and other ancillary systems in 2016.
Income Taxes
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Federal statutory income tax rate | 35.0 | % | 35.0 | % | 35.0 | % | 35.0 | % | ||||||||
State income taxes, net of federal tax benefit | 6.9 | 6.9 | 6.8 | 6.7 | ||||||||||||
Tax-exempt interest on municipal obligations | (1.9 | ) | (1.7 | ) | (1.8 | ) | (1.9 | ) | ||||||||
Increase in cash value of insurance policies | (1.3 | ) | (1.2 | ) | (1.3 | ) | (1.6 | ) | ||||||||
Low income housing tax credits | (0.5 | ) | (0.3 | ) | (0.4 | ) | (0.3 | ) | ||||||||
Equity compensation | (0.8 | ) | — | (1.4 | ) | — | ||||||||||
Other | 0.1 | — | 0.2 | 0.1 | ||||||||||||
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Effective Tax Rate | 37.5 | % | 38.7 | % | 37.1 | % | 38.0 | % | ||||||||
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The effective combined Federal and State income tax rate on income was 37.5% and 38.7%$4,372,000 for the three months ended September 30, 2017 and 2016, respectively. same period in 2019.
($‘s in thousands) | As of March 31, 2020 | As of December 31, 2019 | $ Change | Annualized % Change | |||||||||||||||||||
Ending balances | |||||||||||||||||||||||
Total assets | $ | 6,474,309 | $ | 6,471,181 | $ | 3,128 | 0.2 | % | |||||||||||||||
Total loans | 4,379,062 | 4,307,366 | 71,696 | 6.7 | % | ||||||||||||||||||
Total investments | 1,382,026 | 1,345,954 | 36,072 | 10.7 | % | ||||||||||||||||||
Total deposits | 5,402,698 | 5,366,994 | 35,704 | 2.7 | % | ||||||||||||||||||
Total noninterest-bearing deposits | 1,883,143 | 1,832,665 | 50,478 | 11.0 | % | ||||||||||||||||||
Total other borrowings | 19,309 | 18,454 | 855 | 18.5 | % |
The effective combined Federal and State income tax rate on income was 37.1% and 38.0% for the nine months ended September 30, 2017 and 2016, respectively. The effective combined Federal and State income tax rate was greater than the Federal statutory tax rate of 35.0% due to State income tax expense of $6,205,000 and $5,381,000, respectively, in these periods that were partially offset by the effects oftax-exempt income of $3,124,000 and $2,850,000, respectively, from investment securities, $2,151,000 and $2,324,000, respectively, from increase in cash value of life insurance,low-income housing tax credits of $265,000 and $135,000, respectively, and $847,000 and $0, respectively, of equity compensation related excess tax benefits. These offsetting items helped to reduce the effective combined Federal and State income tax rate from the combined Federal and State statutory income tax rate of approximately 42.0%.
On January 1, 2017, ASUNo. 2016-9, Compensation – Stock Compensation (Topic 718)became effective for the Company.ASU 2016-9, among other things, requires that all excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) should be recognized as income tax expense or benefit in the income statement. As noted above, the Company recognized $150,000 and $847,000 of excess tax benefits (in the income statement) during the three and nine month periods ended September 30, 2017, respectively. Prior to January 1, 2017, such excess tax benefits and deficiencies were recorded directly to shareholders’ equity (and not in the income statement). During the three and nine month periods ended September 30, 2016, the Company recorded equity compensation related tax deficiencies of $0 and $182,000, respectively, to shareholders’ equity.
Financial Condition
liabilities:
As of March 31, | $ Change | % Change | |||||||||||||||||||||||||||
($‘s in thousands) | 2020 | 2019 | |||||||||||||||||||||||||||
Ending balances | |||||||||||||||||||||||||||||
Total assets | $ | 6,474,309 | $ | 6,471,852 | $ | 2,457 | 0.04 | % | |||||||||||||||||||||
Total loans | 4,379,062 | 4,034,331 | 344,731 | 8.5 | % | ||||||||||||||||||||||||
Total investments | 1,382,026 | 1,564,692 | (182,666) | (11.7) | % | ||||||||||||||||||||||||
Total deposits | 5,402,698 | 5,430,262 | (27,564) | (0.5) | % | ||||||||||||||||||||||||
Total noninterest-bearing deposits | 1,883,143 | 1,761,559 | 121,584 | 6.9 | % | ||||||||||||||||||||||||
Total other borrowings | 19,309 | 12,466 | 6,843 | 54.9 | % |
2019, respectively.
September 30, 2017 | December 31, 2016 | |||||||||||||||
(In thousands) | Fair Value | % | Fair Value | % | ||||||||||||
Securities available for sale: | ||||||||||||||||
Obligations of U.S. government corporations and agencies | $ | 554,062 | 81.7 | % | $ | 429,678 | 78.1 | % | ||||||||
Obligations of states and political subdivisions | 121,217 | 17.9 | % | 117,617 | 21.4 | % | ||||||||||
Marketable equity securities | 2,957 | 0.4 | % | 2,938 | 0.5 | % | ||||||||||
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Total securities available for sale | $ | 678,236 | 100.0 | % | $ | 550,233 | 100.0 | % | ||||||||
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2019:
(dollars in thousands) | March 31, 2020 | December 31, 2019 | |||||||||||||||||||||||||||||||||
Fair Value | % | Fair Value | % | ||||||||||||||||||||||||||||||||
Debt securities available for sale: | |||||||||||||||||||||||||||||||||||
Obligations of U.S. government agencies | $ | 469,218 | 46.8 | % | $ | 472,980 | 49.8 | % | |||||||||||||||||||||||||||
Obligations of states and political subdivisions | 114,125 | 11.4 | % | 109,601 | 11.5 | % | |||||||||||||||||||||||||||||
Corporate bonds | 2,575 | 0.3 | % | 2,532 | 0.3 | % | |||||||||||||||||||||||||||||
Asset backed securities | 416,081 | 41.5 | % | 365,025 | 38.4 | % | |||||||||||||||||||||||||||||
Total debt securities available for sale | $ | 1,001,999 | 100.0 | % | $ | 950,138 | 100.0 | % |
$244,000.
September 30, 2017 | December 31, 2016 | |||||||||||||||
(In thousands) | Cost Basis | % | Cost Basis | % | ||||||||||||
Securities held to maturity: | ||||||||||||||||
Obligations of U.S. government corporations and agencies | $ | 521,999 | 97.3 | % | $ | 587,982 | 97.6 | % | ||||||||
Obligations of states and political subdivisions | 14,568 | 2.7 | % | 14,554 | 2.4 | % | ||||||||||
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Total securities held to maturity | $ | 536,567 | 100.0 | % | $ | 602,536 | 100.0 | % | ||||||||
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Additional information about2019:
(dollars in thousands) | March 31, 2020 | December 31, 2019 | |||||||||||||||||||||||||||||||||
Amortized Cost | % | Amortized Cost | % | ||||||||||||||||||||||||||||||||
Debt securities held to maturity: | |||||||||||||||||||||||||||||||||||
Obligations of U.S. government and agencies | $ | 345,944 | 96.2 | % | $ | 361,785 | 96.3 | % | |||||||||||||||||||||||||||
Obligations of states and political subdivisions | 13,826 | 3.8 | % | 13,821 | 3.7 | % | |||||||||||||||||||||||||||||
Total debt securities held to maturity | $ | 359,770 | 100.0 | % | $ | 375,606 | 100.0 | % |
Restricted Equity Securities
Restricted equity securities were $16,956,000 at September 30, 2017 and December 31, 2016. be received timely, therefore, no allowance for credit losses has been recorded.
Additional information about the restricted equity securities is provided in Note 1 of the Notes to Unaudited Condensed Consolidated Financial Statements at Item 1 of Part I of this report.
Loans
The BankCompany concentrates its lending activities in four principal areas: real estate mortgage loans (residential and commercial loans), consumer loans, commercial loans (including agricultural loans), and real estate construction loans. The interest rates charged for the loans made by the BankCompany vary with the degree of risk, the size and maturity of the loans, the borrower’s relationship with the BankCompany and prevailing money market rates indicative of the Bank’sCompany’s cost of funds.
September 30, | December 31, | |||||||
(In thousands) | 2017 | 2016 | ||||||
Real estate mortgage | $ | 2,194,874 | $ | 2,053,464 | ||||
Consumer | 361,320 | 366,663 | ||||||
Commercial | 227,479 | 217,047 | ||||||
Real estate construction | 147,940 | 122,419 | ||||||
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Total loans | $ | 2,931,613 | $ | 2,759,593 | ||||
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(dollars in thousands) | March 31, 2020 | December 31, 2019 | |||||||||||||||||||||||||||||||||
Real estate mortgage | $ | 3,396,016 | 77.6 | % | $ | 3,328,290 | 77.3 | % | |||||||||||||||||||||||||||
Consumer | 450,998 | 10.3 | % | 445,542 | 10.3 | % | |||||||||||||||||||||||||||||
Commercial | 290,334 | 6.6 | % | 283,707 | 6.6 | % | |||||||||||||||||||||||||||||
Real estate construction | 241,714 | 5.5 | % | 249,827 | 5.8 | % | |||||||||||||||||||||||||||||
Total loans | $ | 4,379,062 | 100.0 | % | $ | 4,307,366 | 100.0 | % |
The following table shows the Company’s loan balances, including net deferred loan costs, as a percentage of total loans for the periods indicated:
September 30, | December 31, | |||||||
2017 | 2016 | |||||||
Real estate mortgage | 74.9 | % | 74.4 | % | ||||
Consumer | 12.3 | % | 13.3 | % | ||||
Commercial | 7.8 | % | 7.9 | % | ||||
Real estate construction | 5.0 | % | 4.4 | % | ||||
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Total loans | 100.0 | % | 100.0 | % | ||||
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AssetsContents
Loans originated by the Company, i.e., not purchased or acquired in a business combination, are referred to as originated loans. Originated loans are reported at the principal amount outstanding, net of deferred loan fees and costs. Loan origination and commitment fees and certain direct loan origination costs are deferred, and the net amount is amortized as an adjustment of the related loan’s yield over the actual life of the loan. Originated loans on which the accrual of interest has been discontinued are designated as nonaccrual loans.
Originated loans are placed in nonaccrual status when reasonable doubt exists as to the full, timely collection of interest or principal, or a loan becomes contractually past due by 90 days or more with respect to interest or principal and is not well secured and in the process of collection. When an originated loan is placed on nonaccrual status, all interest previously accrued but not collected is reversed. Income on such loans is then recognized only to the extent that cash is received and where the future collection of principal is probable. Interest accruals are resumed on such loans only when they are brought fully current with respect to interest and principal and when, in the judgment of management, the loan is estimated to be fully collectible as to both principal and interest.
An allowance for loan losses for originated loans is established through a provision for loan losses charged to expense. Originated loans and deposit related overdrafts are charged against the allowance for loan losses when management believes that the collectability of the principal is unlikely or, with respect to consumer installment loans, according to an established delinquency schedule. The allowance is an amount that management believes will be adequate to absorb probable losses inherent in existing loans and leases, based on evaluations of the collectability, impairment and prior loss experience of loans and leases. The evaluations take into consideration such factors as changes in the nature and size of the portfolio, overall portfolio quality, loan concentrations, specific problem loans, and current economic conditions that may affect the borrower’s ability to pay. The Company defines an originated loan as impaired when it is probable the Company will be unable to collect all amounts due according to the original contractual terms of the loan agreement. Impaired originated loans are measured based on the present value of expected future cash flows discounted at the loan’s original effective interest rate. As a practical expedient, impairment may be measured based on the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent. When the measure of the impaired loan is less than the recorded investment in the loan, the impairment is recorded through a valuation allowance.
In situations related to originated loans where, for economic or legal reasons related to a borrower’s financial difficulties, the Company grants a concession for other than an insignificant period of time to the borrower that the Company would not otherwise consider, the related loan is classified as a troubled debt restructuring (TDR). The Company strives to identify borrowers in financial difficulty early and work with them to modify to more affordable terms before their loan reaches nonaccrual status. These modified terms may include rate reductions, principal forgiveness, payment forbearance and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. In cases where the Company grants the borrower new terms that result in the loan being classified as a TDR, the Company measures any impairment on the restructuring as noted above for impaired loans. TDR loans are classified as impaired until they are fully paid off or charged off. Loans that are in nonaccrual status at the time they become TDR loans, remain in nonaccrual status until the borrower demonstrates a sustained period of performance which the Company generally believes to be six consecutive months of payments, or equivalent. Otherwise, TDR loans are subject to the same nonaccrual andcharge-off policies as noted above with respect to their restructured principal balance.
Credit risk is inherent in the business of lending. As a result, the Company maintains an allowance for loan losses to absorb losses inherent in the Company’s originated loan portfolio. This is maintained through periodic charges to earnings. These charges are included in the Consolidated Statements of Income as provision for loan losses. All specifically identifiable and quantifiable losses are immediately charged off against the allowance. However, for a variety of reasons, not all losses are immediately known to the Company and, of those that are known, the full extent of the loss may not be quantifiable at that point in time. The balance of the Company’s allowance for originated loan losses is meant to be an estimate of these unknown but probable losses inherent in the portfolio.
The Company formally assesses the adequacy of the allowance for originated loan losses on a quarterly basis. Determination of the adequacy is based on ongoing assessments of the probable risk in the outstanding originated loan portfolio, and to a lesser extent the Company’s originated loan commitments. These assessments include the periodicre-grading of credits based on changes in their individual credit characteristics including delinquency, seasoning, recent financial performance of the borrower, economic factors, changes in the interest rate environment, growth of the portfolio as a whole or by segment, and other factors as warranted. Loans are initially graded when originated. They arere-graded as they are renewed, when there is a new loan to the same borrower, when identified facts demonstrate heightened risk of nonpayment, or if they become delinquent.Re-grading of larger problem loans occurs at least quarterly. Confirmation of the quality of the grading process is obtained by independent credit reviews conducted by consultants specifically hired for this purpose and by various bank regulatory agencies.
The Company’s method for assessing the appropriateness of the allowance for originated loan losses includes specific allowances for impaired originated loans and leases, formula allowance factors for pools of credits, and allowances for changing environmental factors (e.g., interest rates, growth, economic conditions, etc.). Allowance factors for loan pools were based on historical loss experience by product type and prior risk rating.
Loans purchased or acquired in a business combination are referred to as acquired loans. Acquired loans are valued as of acquisition date in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Topic 805,Business Combinations. Loans acquired with evidence of credit deterioration since origination for which it is probable that all contractually required payments will not be collected are referred to as purchased credit impaired (PCI) loans. PCI loans are accounted for under FASB ASC Topic310-30,Loans and Debt Securities Acquired with Deteriorated Credit Quality. Under FASB ASC Topic 805 and FASB ASC Topic310-30, PCI loans are recorded at fair value at acquisition date, factoring in credit losses expected to be incurred over the life of the loan. Accordingly, an allowance for loan losses is not carried over or recorded as of the acquisition date. Fair value is defined as the present value of the future estimated principal and interest payments of the loan, with the discount rate used in the present value calculation representing the estimated effective yield of the loan. Default rates, loss severity, and prepayment speed assumptions are periodically reassessed and our estimate of future payments is adjusted accordingly. The difference between contractual future payments and estimated future payments is referred to as the nonaccretable difference. The difference between estimated future payments and the present value of the estimated future payments is referred to as the accretable yield. The accretable yield represents the amount that is expected to be recorded as interest income over the remaining life of the loan. If after acquisition, the Company determines that the estimated future cash flows of a PCI loan are expected to be more than the originally estimated, an increase in the discount rate (effective yield) would be made such that the newly increased accretable yield would be recognized, on a level yield basis, over the remaining estimated life of the loan. If, after acquisition, the Company determines that the estimated future cash flows of a PCI loan are expected to be less than the previously estimated, the discount rate would first be reduced until the present value of the reduced cash flow estimate equals the previous present value however, the discount rate may not be lowered below its original level at acquisition. If the discount rate has been lowered to its original level and the present value has not been sufficiently lowered, an allowance for loan loss would be established through a provision for loan losses charged to expense to decrease the present value to the required level. If the estimated cash flows improve after an allowance has been established for a loan, the allowance may be partially or fully reversed depending on the improvement in the estimated cash flows. Only after the allowance has been fully reversed may the discount rate be increased. PCI loans are put on nonaccrual status when cash flows cannot be reasonably estimated. PCI loans on nonaccrual status are accounted for using the cost recovery method or cash basis method of income recognition. PCI loans are charged off when evidence suggests cash flows are not recoverable. Foreclosed assets from PCI loans are recorded in foreclosed assets at fair value with the fair value at time of foreclosure representing cash flow from the loan. ASC310-30 allows PCI loans with similar risk characteristics and acquisition time frame to be “pooled” and have their cash flows aggregated as if they were one loan. The Company elected to use the “pooled” method of ASC310-30 for PCI – other loans in the acquisition of certain assets and liabilities of Granite and Citizens.
Acquired loans that are not PCI loans are referred to as purchased not credit impaired (PNCI) loans. PNCI loans are accounted for under FASB ASC Topic310-20,Receivables – Nonrefundable Fees and Other Costs,in which interest income is accrued on a level-yield basis for performing loans. For income recognition purposes, this method assumes that all contractual cash flows will be collected, and no allowance for loan losses is established at the time of acquisition. Post-acquisition date, an allowance for loan losses may need to be established for acquired loans through a provision charged to earnings for credit losses incurred subsequent to acquisition. Under ASC310-20, the loss would be measured based on the probable shortfall in relation to the contractual note requirements, consistent with our allowance for loan loss policy for similar loans.
When referring to PNCI and PCI loans we use the terms “nonaccretable difference”, “accretable yield”, or “purchase discount”. Nonaccretable difference is the difference between undiscounted contractual cash flows due and undiscounted cash flows we expect to collect, or put another way, it is the undiscounted contractual cash flows we do not expect to collect. Accretable yield is the difference between undiscounted cash flows we expect to collect and the value at which we have recorded the loan on our financial statements. On the date of acquisition, all purchased loans are recorded on our consolidated financial statements at estimated fair value. Purchase discount is the difference between the estimated fair value of loans on the date of acquisition and the principal amount owed by the borrower, net of charge offs, on the date of acquisition. We may also refer to “discounts to principal balance of loans owed, net of charge-offs”. Discounts to principal balance of loans owed, net of charge-offs is the difference between principal balance of loans owed, net of charge-offs, and loans as recorded on our financial statements. Discounts to principal balance of loans owed, net of charge-offs arise from purchase discounts, and equal the purchase discount on the acquisition date.
Loans are also categorized as “covered” or “noncovered”. Covered loans refer to loans covered by a FDIC loss sharing agreement. Noncovered loans refer to loans not covered by a FDIC loss sharing agreement.
Originated loans and PNCI loans are reviewed on an individual basis for reclassification to nonaccrual status when any one of the following occurs: the loan becomes 90 days past due as to interest or principal, the full and timely collection of additional interest or principal becomes uncertain, the loan is classified as doubtful by internal credit review or bank regulatory agencies, a portion of the principal balance has been charged off, or the Company takes possession of the collateral. Loans that are placed on nonaccrual even though the borrowers continue to repay the loans as scheduled are classified as “performing nonaccrual” and are included in total nonperforming loans. The reclassification of loans as nonaccrual does not necessarily reflect management’s judgment as to whether they are collectible.
Interest income on originated nonaccrual loans that would have been recognized during the three months ended September 30, 2017 and 2016, if all such loans had been current in accordance with their original terms, totaled $244,000 and $222,000, respectively. Interest income actually recognized on these originated loans during the three months ended September 30, 2017 and 2016 was $33,000 and $227,000, respectively. Interest income on PNCI nonaccrual loans that would have been recognized during the three months ended September 30, 2017 and 2016, if all such loans had been current in accordance with their original terms, totaled $90,000 and $(42,000), respectively. Interest income actually recognized on these PNCI loans during the three months ended September 30, 2017 and 2016 was $2,000 and $1,000.
Interest income on originated nonaccrual loans that would have been recognized during the nine months ended September 30, 2017 and 2016, if all such loans had been current in accordance with their original terms, totaled $617,000 and $689,000, respectively. Interest income actually recognized on these originated loans during the nine months ended September 30, 2017 and 2016 was $49,000 and $256,000, respectively. Interest income on PNCI nonaccrual loans that would have been recognized during the nine months ended September 30, 2017 and 2016, if all such loans had been current in accordance with their original terms, totaled $188,000 and $137,000. Interest income actually recognized on these PNCI loans during the nine months ended September 30, 2017 and 2016 was $14,000 and $1,000.
The Company’s policy is to place originated loans and PNCI loans 90 days or more past due on nonaccrual status. In some instances when an originated loan is 90 days past due Management does not place it on nonaccrual status because the loan is well secured and in the process of collection. A loan is considered to be in the process of collection if, based on a probable specific event, it is expected that the loan will be repaid or brought current. Generally, this collection period would not exceed 30 days. Loans where the collateral has been repossessed are classified as foreclosed assets. Management considers both the adequacy of the collateral and the other resources of the borrower in determining the steps to be taken to collect nonaccrual loans. Alternatives that are considered are foreclosure, collecting on guarantees, restructuring the loan or collection lawsuits.
September 30, 2017 | ||||||||||||||||||||
(dollars in thousands) | Originated | PNCI | PCI – cash basis | PCI – other | Total | |||||||||||||||
Performing nonaccrual loans | $ | 9,642 | $ | 1,999 | $ | 2,160 | $ | 5,031 | $ | 18,832 | ||||||||||
Nonperforming nonaccrual loans | 2,046 | 1,027 | 49 | — | 3,122 | |||||||||||||||
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Total nonaccrual loans | 11,688 | 3,026 | 2,209 | 5,031 | 21,954 | |||||||||||||||
Originated and PNCI loans 90 days past due and still accruing | — | — | — | — | — | |||||||||||||||
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Total nonperforming loans | 11,688 | 3,026 | 2,209 | 5,031 | 21,954 | |||||||||||||||
Noncovered foreclosed assets | 1,957 | — | — | 1,114 | 3,071 | |||||||||||||||
Covered foreclosed assets | — | — | — | — | — | |||||||||||||||
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Total nonperforming assets | $ | 13,645 | $ | 3,026 | $ | 2,209 | $ | 6,145 | $ | 25,025 | ||||||||||
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U.S. government, including its agencies and its government-sponsored agencies, guaranteed portion of nonperforming loans | $ | 425 | — | — | — | $ | 425 | |||||||||||||
Nonperforming assets to total assets | 0.29 | % | 0.06 | % | 0.05 | % | 0.13 | % | 0.54 | % | ||||||||||
Nonperforming loans to total loans | 0.45 | % | 0.98 | % | 100.0 | % | 36.47 | % | 0.75 | % | ||||||||||
Allowance for loan losses to nonperforming loans | 235 | % | 34 | % | 1 | % | 5 | % | 131 | % | ||||||||||
Allowance for loan losses, unamortized loan fees, and discounts to loan principal balances owed | 1.35 | % | 2.73 | % | 66.3 | % | 23.29 | % | 1.78 | % |
The following table set forth the amount of the Bank’s nonperforming assets as of the dates indicated. For purposes of the following table, “PCI – other” loans that are 90 days past due and still accruing are not considered nonperforming loans. “Performing nonaccrual loans” are loans that may be current for both principal and interest payments, or are less than 90 days past due, but for which payment in full of both principal and interest is not expected, and are not well secured and in the process of collection:
December 31, 2016 | ||||||||||||||||||||
(dollars in thousands) | Originated | PNCI | PCI – cash basis | PCI – other | Total | |||||||||||||||
Performing nonaccrual loans | $ | 11,146 | $ | 2,131 | $ | 2,983 | $ | 1,417 | $ | 17,677 | ||||||||||
Nonperforming nonaccrual loans | 1,748 | 703 | — | — | 2,451 | |||||||||||||||
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Total nonaccrual loans | 12,894 | 2,834 | $ | 2,983 | $ | 1,417 | 20,128 | |||||||||||||
Originated loans 90 days past due and still accruing | — | — | — | — | — | |||||||||||||||
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Total nonperforming loans | 12,894 | 2,834 | $ | 2,983 | $ | 1,417 | 20,128 | |||||||||||||
Noncovered foreclosed assets | 2,277 | — | — | 1,486 | 3,763 | |||||||||||||||
Covered foreclosed assets | — | — | — | 223 | 223 | |||||||||||||||
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Total nonperforming assets | $ | 15,171 | $ | 2,834 | $ | 2,983 | $ | 3,126 | $ | 24,114 | ||||||||||
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U.S. government, including its agencies and its government-sponsored agencies, guaranteed portion of nonperforming loans | $ | 911 | — | — | — | $ | 911 | |||||||||||||
Indemnified portion of covered foreclosed assets | — | — | — | $ | 218 | $ | 218 | |||||||||||||
Nonperforming assets to total assets | 0.34 | % | 0.06 | % | 0.07 | % | 0.07 | % | 0.53 | % | ||||||||||
Nonperforming loans to total loans | 0.55 | % | 0.75 | % | 100.00 | % | 6.42 | % | 0.73 | % | ||||||||||
Allowance for loan losses to nonperforming loans | 218 | % | 59 | % | 1 | % | 189 | % | 161 | % | ||||||||||
Allowance for loan losses, unamortized loan fees, and discounts to loan principal balances owed | 1.48 | % | 2.98 | % | 64.18 | % | 24.44 | % | 2.09 | % |
(dollars in thousands) | March 31, 2020 | December 31, 2019 | |||||||||
Performing nonaccrual loans | $ | 11,900 | $ | 11,266 | |||||||
Nonperforming nonaccrual loans | 6,055 | 5,579 | |||||||||
Total nonaccrual loans | 17,955 | 16,845 | |||||||||
Loans 90 days past due and still accruing | — | 11 | |||||||||
Total nonperforming loans | 17,955 | 16,856 | |||||||||
Foreclosed assets | 2,229 | 2,541 | |||||||||
Total nonperforming assets | $ | 20,184 | $ | 19,397 | |||||||
Nonperforming assets to total assets | 0.31 | % | 0.30 | % | |||||||
Nonperforming loans to total loans | 0.41 | % | 0.39 | % | |||||||
Allowance for credit losses to nonperforming loans | 323 | % | 182 | % |
(dollars in thousands): | Balance at September 30, 2017 | New NPA | Advances/ Capitalized | Pay-downs /Sales Upgrades | Charge-offs/ Write-downs | Transfers to Foreclosed Assets | Category Changes | Balance at June 30, 2017 | ||||||||||||||||||||||||
Real estate mortgage: | ||||||||||||||||||||||||||||||||
Residential | $ | 3,066 | $ | 1,144 | — | $ | (43 | ) | $ | (60 | ) | — | 183 | $ | 1,842 | |||||||||||||||||
Commercial | 12,349 | 3,323 | $ | 7 | (486 | ) | (20 | ) | — | 123 | 9,402 | |||||||||||||||||||||
Consumer | ||||||||||||||||||||||||||||||||
Home equity lines | 3,019 | 137 | — | (448 | ) | (13 | ) | — | (210 | ) | 3,553 | |||||||||||||||||||||
Home equity loans | 1,500 | 709 | — | (103 | ) | (94 | ) | $ | (42 | ) | 27 | 1,003 | ||||||||||||||||||||
Other consumer | 19 | 143 | — | (24 | ) | (174 | ) | — | — | 74 | ||||||||||||||||||||||
Commercial (C&I) | 2,001 | 1,189 | 3 | (332 | ) | (291 | ) | — | (123 | ) | 1,555 | |||||||||||||||||||||
Construction: | ||||||||||||||||||||||||||||||||
Residential | — | 33 | — | (33 | ) | — | — | — | ||||||||||||||||||||||||
Commercial | — | — | — | — | — | — | ||||||||||||||||||||||||||
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Total nonperforming loans | 21,954 | 6,678 | 10 | (1,436 | ) | (685 | ) | (42 | ) | — | 17,429 | |||||||||||||||||||||
Noncovered foreclosed assets | 3,071 | — | — | (325 | ) | (135 | ) | 42 | — | 3,489 | ||||||||||||||||||||||
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Total nonperforming assets | $ | 25,025 | $ | 6,678 | $ | 10 | $ | (1,761 | ) | $ | (820 | ) | — | — | $ | 20,918 | ||||||||||||||||
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March 31, 2020
(in thousands) | Balance at December 31, 2019 | New NPA / Valuation Adjustments | Pay-downs /Sales /Upgrades | Charge-offs/ (1) Write-downs | Transfers to Foreclosed Assets | Balance at March 31, 2020 | |||||||||||||||||||||||||||||
Real estate mortgage: | |||||||||||||||||||||||||||||||||||
Residential | $ | 5,068 | $ | 985 | $ | (388) | $ | — | $ | — | $ | 5,665 | |||||||||||||||||||||||
Commercial | 5,203 | 311 | (113) | — | — | 5,401 | |||||||||||||||||||||||||||||
Consumer | |||||||||||||||||||||||||||||||||||
Home equity lines | 2,740 | 852 | (236) | — | — | 3,356 | |||||||||||||||||||||||||||||
Home equity loans | 1,600 | 163 | (136) | — | — | 1,627 | |||||||||||||||||||||||||||||
Other consumer | 51 | 113 | (2) | (23) | — | 139 | |||||||||||||||||||||||||||||
Commercial | 2,194 | 463 | (510) | (380) | — | 1,767 | |||||||||||||||||||||||||||||
Construction | — | — | — | — | — | — | |||||||||||||||||||||||||||||
Total nonperforming loans | 16,856 | 2,887 | (1,385) | (403) | — | 17,955 | |||||||||||||||||||||||||||||
Foreclosed assets | 2,541 | (312) | — | — | 2,229 | ||||||||||||||||||||||||||||||
Total nonperforming assets | $ | 19,397 | $ | 2,887 | $ | (1,697) | $ | (403) | $ | — | $ | 20,184 |
The $6,678,000 in new nonperforming$403,000.
The $1,144,000 in new nonperforming residential real estate loans was primarily made up of oneborrower, with the largest individual loan totaling $320,000.
Contents
March 31, 2020 and March 31, 2019
Total
Changes in nonperforming assets during the three months ended June 30, 2017
(dollars in thousands): | Balance at June 30, 2017 | New NPA | Advances/ Capitalized Costs | Pay-downs /Sales /Upgrades | Charge-offs/ Write-downs | Transfers to Foreclosed Assets | Category Changes | Balance at March 31, 2017 | ||||||||||||||||||||||||
Real estate mortgage: | ||||||||||||||||||||||||||||||||
Residential | $ | 1,842 | $ | 1,097 | — | $ | (16 | ) | — | — | — | $ | 761 | |||||||||||||||||||
Commercial | 9,402 | 362 | — | (3,085 | ) | $ | (150 | ) | — | $ | 135 | 12,140 | ||||||||||||||||||||
Consumer | ||||||||||||||||||||||||||||||||
Home equity lines | 3,553 | 396 | $ | 360 | (428 | ) | (13 | ) | $ | (462 | ) | — | 3,700 | |||||||||||||||||||
Home equity loans | 1,003 | 283 | — | (35 | ) | (206 | ) | — | — | 961 | ||||||||||||||||||||||
Other consumer | 74 | 255 | — | (6 | ) | (190 | ) | — | — | 15 | ||||||||||||||||||||||
Commercial (C&I) | 1,555 | 1,684 | — | (1,139 | ) | (764 | ) | — | $ | (135 | ) | 1,909 | ||||||||||||||||||||
Construction: | ||||||||||||||||||||||||||||||||
Residential | — | 1,071 | — | (25 | ) | (1,071 | ) | — | — | 25 | ||||||||||||||||||||||
Commercial | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
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Total nonperforming loans | 17,429 | 5,148 | 360 | (4,734 | ) | (2,394 | ) | (462 | ) | — | 19,511 | �� | ||||||||||||||||||||
Noncovered foreclosed assets | 3,489 | — | — | (545 | ) | 43 | $ | 462 | — | 3,529 | ||||||||||||||||||||||
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Total nonperforming assets | $ | 20,918 | $ | 5,148 | $ | 360 | $ | (5,279 | ) | $ | (2,351 | ) | — | — | $ | 23,040 | ||||||||||||||||
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The table above does not include deposit overdraft charge-offs.
Nonperforming assets decreased during the second quarter of 2017 by $2,122,000 (9.2%) to $20,918,000 at June 30, 2017 compared to $23,040,000 at March 31, 2017. The decrease in nonperforming assets during the second quarter of 2017 was primarily the result of sales or upgrades of nonperforming loans to performing status totaling $4,734,000, dispositions of foreclosed assets totaling $545,000, and loan charge-offs of $2,394,000, that were partially offset by new nonperforming loans of $5,148,000, advances on nonperforming loans of $360,000, and an increase in foreclosed asset valuation of $43,000, the net result of $6,000 of write-downs and $49,000 of positive adjustments to foreclosed asset valuations.
The $5,148,000 in new nonperforming loans during the second quarter of 2017 was comprised of increases of $1,097,000 on two residential real estate loans, $362,000 on two commercial real estate loans, $679,000 on 11 home equity lines and loans, $255,000 on 27 consumer loans, $1,684,000 on 12 C&I loans, and $1,071,000 residential construction loans.
The $1,097,000 in new nonperforming residential real estate loans was primarily made up of one loan in the amount of $959,000 secured by a single family property in southern California. The $1,684,000 in new nonperforming C&I loans was primarily comprised of one loan in the amount of $361,000 secured by crop proceeds in northern California, and one loan in the amount of $363,000 secured by general business assets in northern California. Also, included in these new nonperforming assets during the three months ended June 30, 2017 were residential construction loans of $1,071,000, commercial loans of $424,000, and commercial real estate loans of $150,000; all of which were classified as PCI – other loans and accounted for using the pool method of accounting under ASC Topic310-30; and for which the related pools were resolved during the three months ended June 30, 2017 resulting in these fully reserved loan balances to be deemed uncollectable and simultaneously charged off. Related charge-offs are discussed below.
Loan charge-offs during the three months ended June 30, 2017
In the second quarter of 2017, the Company recorded $2,394,000 in loan charge-offs and $118,000 in deposit overdraft charge-offs less $377,000 in loan recoveries and $56,000 in deposit overdraft recoveries resulting in $2,079,000 of net charge-offs. Primary causes of the loan charges taken in the first quarter of 2017 were gross charge-offs of $150,000 on a single pool of PCI—other commercial real estate loans, $219,000 on five home equity lines and loans, $190,000 on 24 other consumer loans, $764,000 on five C&I loans and $1,071,000 on a single pool of Purchased Credit Impaired residential construction loans.
Total charge-offs were generally comprised of individual charges of less than $250,000 each with the exception of two during the quarter. Each of these charges was related to the resolution of a pool of Purchased Credit Impaired loans. One charge in the amount of $424,000 was related to C&I loans secured by general business assets in northern California, and the second in the amount of $1,071,000 was related to a pool of residential construction loans in northern California. Generally losses are triggered bynon-performance by the borrower and calculated based on any difference between the current loan amount and the current value of the underlying collateral less any estimated costs associated with the disposition of the collateral.
Changes in nonperforming assets during the three months ended March 31, 2017
(dollars in thousands): | Balance at March 31, 2017 | New NPA | Advances/ Capitalized Costs | Pay-downs /Upgrades | Charge-offs/ Write-downs | Transfers to Foreclosed Assets | Category Changes | Balance at December 31, 2016 | ||||||||||||||||||||||||
Real estate mortgage: | ||||||||||||||||||||||||||||||||
Residential | $ | 761 | $ | 345 | — | $ | (33 | ) | — | — | $ | 449 | ||||||||||||||||||||
Commercial | 12,140 | 1,712 | — | (380 | ) | — | $ | (85 | ) | — | 10,893 | |||||||||||||||||||||
Consumer | ||||||||||||||||||||||||||||||||
Home equity lines | 3,700 | — | — | (1,107 | ) | $ | (71 | ) | — | $ | (59 | ) | 4,937 | |||||||||||||||||||
Home equity loans | 961 | 199 | — | (136 | ) | (31 | ) | — | 59 | 870 | ||||||||||||||||||||||
Other consumer | 15 | 57 | — | (9 | ) | (71 | ) | — | — | 38 | ||||||||||||||||||||||
Commercial (C&I) | 1,909 | 129 | — | (1,017 | ) | (133 | ) | — | — | 2,930 | ||||||||||||||||||||||
Construction: | ||||||||||||||||||||||||||||||||
Residential | 25 | 14 | — | — | — | — | — | 11 | ||||||||||||||||||||||||
Commercial | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
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Total nonperforming loans | 19,511 | 2,456 | — | (2,682 | ) | (306 | ) | (85 | ) | — | 20,128 | |||||||||||||||||||||
Noncovered foreclosed assets | 3,529 | — | — | (385 | ) | 66 | 85 | — | 3,763 | |||||||||||||||||||||||
Covered foreclosed assets | — | — | — | (223 | ) | — | — | — | 223 | |||||||||||||||||||||||
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Total nonperforming assets | $ | 23,040 | $ | 2,456 | — | $ | (3,290 | ) | $ | 240 | — | — | $ | 24,114 | ||||||||||||||||||
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The table above does not include deposit overdraft charge-offs.
Nonperforming assets decreased during the first quarter of 2017 by $1,074,000 (4.5%) to $23,040,000 at March 31, 2017 compared to $24,114,000 at December 31, 2016. The decrease in nonperforming assets during the first quarter of 2017 was primarily the result of sales or upgrades of nonperforming loans to performing status totaling $2,682,000, dispositions of foreclosed assets totaling $608,000, loan charge-offs of $306,000, and write-downs on foreclosed assets totaling $22,000, that were partially offset by new nonperforming loans of $2,456,000, and an increase in foreclosed asset valuation of $66,000, the net result of $22,000 of write-downs and $88,000 of positive adjustments to foreclosed asset valuations.
The $2,456,000 in new nonperforming loans during the first quarter of 2017 was comprised of increases of $345,000 on three residential real estate loans, $1,712,000 on one commercial real estate loan, $199,000 on three home equity lines and loans, $57,000 on 10 consumer loans, $129,000 on two C&I loans, and $14,000 on a single residential construction loan.
The $1,712,000 in new nonperforming commercial real estate loans was entirely comprised of one loan secured by a commercial mini storage facility in central California. Related charge-offs are discussed below.
Loan charge-offs during the three months ended March 31, 2017
In the first quarter of 2017, the Company recorded $306,000 in loan charge-offs and $103,000 in deposit overdraft charge-offs less $406,000 in loan recoveries and $74,000 in deposit overdraft recoveries resulting in $71,000 of net recoveries. Primary causes of the loan charges taken in the first quarter of 2017 were gross charge-offs of $102,000 on five home equity lines and loans, $71,000 on 12 other consumer loans, and $133,000 on five C&I loans.
Total charge-offs were generally comprised of individual charges of less than $250,000 each. Generally losses are triggered bynon-performance by the borrower and calculated based on any difference between the current loan amount and the current value of the underlying collateral less any estimated costs associated with the disposition of the collateral.
Allowance for Loan Losses
The Company’s allowance for loan losses is comprised of allowances for originated, PNCI and PCI loans. All such allowances are established through a provision for loan losses charged to expense.
Originated and PNCI loans, and deposit related overdrafts are charged against the allowance for originated loan losses when Management believes that the collectability of the principal is unlikely or, with respect to consumer installment loans, according to an established delinquency schedule. The allowances for originated and PNCI loan losses are amounts that Management believes will be adequate to absorb probable losses inherent in existing originated loans, based on evaluations of the collectability, impairment and prior loss experience of those loans and leases. The evaluations take into consideration such factors as changes in the nature and size of the portfolio, overall portfolio quality, loan concentrations, specific problem loans, and current economic conditions that may affect the borrower’s ability to pay. The Company defines an originated or PNCI loan as impaired when it is probable the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired originated and PNCI loans are measured based on the present value of expected future cash flows discounted at the loan’s original effective interest rate. As a practical expedient, impairment may be measured based on the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent. When the measure of the impaired loan is less than the recorded investment in the loan, the impairment is recorded through a valuation allowance.
In situations related to originated and PNCI loans where, for economic or legal reasons related to a borrower’s financial difficulties, the Company grants a concession for other than an insignificant period of time to the borrower that the Company would not otherwise consider, the related loan is classified as a troubled debt restructuring (TDR). The Company strives to identify borrowers in financial difficulty early and work with them to modify to more affordable terms before their loan reaches nonaccrual status. These modified terms may include rate reductions, principal forgiveness, payment forbearance and other actions intended to minimize the economic loss and to avoid foreclosure or
repossession of the collateral. In cases where the Company grants the borrower new terms that provide for a reduction of either interest or principal, the Company measures any impairment on the restructuring as noted above for impaired loans. TDR loans are classified as impaired until they are fully paid off or charged off. Loans that are in nonaccrual status at the time they become TDR loans, remain in nonaccrual status until the borrower demonstrates a sustained period of performance which the Company generally believes to be six consecutive months of payments, or equivalent. Otherwise, TDR loans are subject to the same nonaccrual andcharge-off policies as noted above with respect to their restructured principal balance.
Credit risk is inherent in the business of lending. As a result, the Company maintains an allowance for loan losses to absorb losses inherent in the Company’s originated and PNCI loan portfolios. These are maintained through periodic charges to earnings. These charges are included in the Consolidated Income Statements as provision for loan losses. All specifically identifiable and quantifiable losses are immediately charged off against the allowance. However, for a variety of reasons, not all losses are immediately known to the Company and, of those that are known, the full extent of the loss may not be quantifiable at that point in time. The balance of the Company’s allowances for originated and PNCI loan losses are meant to be an estimate of these unknown but probable losses inherent in these portfolios.
The Company formally assesses the adequacy of the allowance for originated and PNCI loan losses on a quarterly basis. Determination of the adequacy is based on ongoing assessments of the probable risk in the outstanding originated and PNCI loan portfolios, and to a lesser extent the Company’s originated and PNCI loan commitments. These assessments include the periodicre-grading of credits based on changes in their individual credit characteristics including delinquency, seasoning, recent financial performance of the borrower, economic factors, changes in the interest rate environment, growth of the portfolio as a whole or by segment, and other factors as warranted. Loans are initially graded when originated or acquired. They arere-graded as they are renewed, when there is a new loan to the same borrower, when identified facts demonstrate heightened risk of nonpayment, or if they become delinquent.Re-grading of larger problem loans occurs at least quarterly. Confirmation of the quality of the grading process is obtained by independent credit reviews conducted by consultants specifically hired for this purpose and by various bank regulatory agencies.
The Company’s method for assessing the appropriateness of the allowance for originated and PNCI loan losses includes specific allowances for impaired loans and leases, formula allowance factors for pools of credits, and allowances for changing environmental factors (e.g., interest rates, growth, economic conditions, etc.). Allowance factors for loan pools are based on historical loss experience by product type and prior risk rating. Allowances for impaired loans are based on analysis of individual credits. Allowances for changing environmental factors are Management’s best estimate of the probable impact these changes have had on the originated or PNCI loan portfolio as a whole. The allowances for originated and PNCI loans are included in the allowance for loan losses.
As noted above, the allowances for originated and PNCI loan losses consists of a specific allowance, a formula allowance, and an allowance for environmental factors. The first component, the specific allowance, results from the analysis of identified credits that meet management’s criteria for specific evaluation. These loans are reviewed individually to determine if such loans are considered impaired. Impaired loans are those where management has concluded that it is probable that the borrower will be unable to pay all amounts due under the original contractual terms. Impaired loans are specifically reviewed and evaluated individually by management for loss potential by evaluating sources of repayment, including collateral as applicable, and a specified allowance for loan losses is established where necessary.
The second component of the allowance for originated and PNCI loan losses, the formula allowance, is an estimate of the probable losses that have occurred across the major loan categories in the Company’s originated and PNCI loan portfolios. This analysis is based on loan grades by pool and the loss history of these pools. This analysis covers the Company’s entire originated and PNCI loan portfolios including unused commitments but excludes any loans that were analyzed individually and assigned a specific allowance as discussed above. The total amount allocated for this component is determined by applying loss estimation factors to outstanding loans and loan commitments. The loss factors were previously based primarily on the Company’s historical loss experience tracked over a five-year period and adjusted as appropriate for the input of current trends and events. Because historical loss experience varies for the different categories of originated loans, the loss factors applied to each category also differed. In addition, there is a greater chance that the Company would suffer a loss from a loan that was risk rated less than satisfactory than if the loan was last graded satisfactory. Therefore, for any given category, a larger loss estimation factor was applied to less than satisfactory loans than to those that the Company last graded as satisfactory. The resulting formula allowance was the sum of the allocations determined in this manner.
The third component of the allowances for originated and PNCI loan losses, the environmental factor allowance, is a component that is not allocated to specific loans or groups of loans, but rather is intended to absorb losses that may not be provided for by the other components.
There are several primary reasons that the other components discussed above might not be sufficient to absorb the losses present in the originated and PNCI loan portfolios, and the environmental factor allowance is used to provide for the losses that have occurred because of them.
The first reason is that there are limitations to any credit risk grading process. The volume of originated and PNCI loans makes it impractical tore-grade every loan every quarter. Therefore, it is possible that some currently performing originated or PNCI loans not recently graded will not be as strong as their last grading and an insufficient portion of the allowance will have been allocated to them. Grading and loan review often must be done without knowing whether all relevant facts are at hand. Troubled borrowers may deliberately or inadvertently omit important information from reports or conversations with lending officers regarding their financial condition and the diminished strength of repayment sources.
The second reason is that the loss estimation factors are based primarily on historical loss totals. As such, the factors may not give sufficient weight to such considerations as the current general economic and business conditions that affect the Company’s borrowers and specific industry conditions that affect borrowers in that industry. The factors might also not give sufficient weight to other environmental factors such as changing economic conditions and interest rates, portfolio growth, entrance into new markets or products, and other characteristics as may be determined by Management.
Specifically, in assessing how much environmental factor allowance needed to be provided, management considered the following:
Each of these considerations was assigned a factor and applied to a portion or the entire originated and PNCI loan portfolios. Since these factors are not derived from experience and are applied to largenon-homogeneous groups of loans, they are available for use across the portfolio as a whole.
Acquired loans are valued as of their acquisition date in accordance with FASB ASC Topic 805,Business Combinations. Loans purchased with evidence of credit deterioration since origination for which it is probable that all contractually required payments will not be collected are referred to as purchased credit impaired (PCI) loans. PCI loans are accounted for under FASB ASC Topic310-30,Loans and Debt Securities Acquired with Deteriorated Credit Quality. In addition, because of the significant credit discounts associated with the loans acquired in the Granite acquisition, the Company elected to account for all loans acquired in the Granite acquisition under FASB ASC Topic310-30, and classify them all as PCI loans. Under FASB ASC Topic 805 and FASB ASC Topic310-30, PCI loans are recorded at fair value at acquisition date, factoring in credit losses expected to be incurred over the life of the loan. Accordingly, an allowance for loan losses is not carried over or recorded as of the acquisition date. Fair value is defined as the present value of the future estimated principal and interest payments of the loan, with the discount rate used in the present value calculation representing the estimated effective yield of the loan. The difference between contractual future payments and estimated future payments is referred to as the nonaccretable difference. The difference between estimated future payments and the present value of the estimated future payments is referred to as the accretable yield. The accretable yield represents the amount that is expected to be recorded as interest income over the remaining life of the loan. If after acquisition, the Company determines that the future cash flows of a PCI loan are expected to be more than the originally estimated, an increase in the discount rate (effective yield) would be made such that the newly increased accretable yield would be recognized, on a level yield basis, over the remaining estimated life of the loan. If after acquisition, the Company determines that the future cash flows of a PCI loan are expected to be less than the previously estimated, the discount rate would first be reduced until the present value of the reduced cash flow estimate equals the previous present value however, the discount rate may not be lowered below its original level. If the discount rate has been lowered to its original level and the present value has not been sufficiently lowered, an allowance for loan loss would be established through a provision for loan losses charged to expense to decrease the present value to the required level. If the estimated cash flows improve after an allowance has been established for a loan, the allowance may be partially or fully reversed depending on the improvement in the estimated cash flows. Only after the allowance has been fully reversed may the discount rate be increased. PCI loans are put on nonaccrual status when cash flows cannot be reasonably estimated. PCI loans are charged off when evidence suggests cash flows are not recoverable. Foreclosed assets from PCI loans are recorded in foreclosed assets at fair value with the fair value at time of foreclosure representing cash flow from the loan. ASC310-30 allows PCI loans with similar risk characteristics and acquisition time frame to be “pooled” and have their cash flows aggregated as if they were one loan.
The Components of the Allowance for LoanCredit Losses
for Loans
September 30, | December 31, | |||||||
(dollars in thousands) | 2017 | 2016 | ||||||
Allowance for originated and PNCI loan losses: | ||||||||
Specific allowance | $ | 2,140 | $ | 2,046 | ||||
Formula allowance | 16,469 | 17,485 | ||||||
Environmental factors allowance | 9,851 | 10,275 | ||||||
|
|
|
| |||||
Allowance for originated and PNCI loan losses | 28,460 | 29,806 | ||||||
Allowance for PCI loan losses | 287 | 2,697 | ||||||
|
|
|
| |||||
Allowance for loan losses | $ | 28,747 | $ | 32,503 | ||||
|
|
|
| |||||
Allowance for loan losses to loans | 0.98 | % | 1.18 | % |
(dollars in thousands) | March 31, 2020 | December 31, 2019 | |||||||||
Allowance for credit losses: | |||||||||||
Qualitative and forecast factor allowance | $ | 30,255 | $ | 12,146 | |||||||
Cohort model allowance reserves | 26,694 | 17,529 | |||||||||
Total allowance for credit losses | 56,949 | 29,675 | |||||||||
Allowance for individually evaluated loans | 962 | 935 | |||||||||
Allowance for PCD loan losses | — | n/a | |||||||||
Allowance for PCI loan losses | n/a | 6 | |||||||||
Total allowance for credit losses | $ | 57,911 | $ | 30,616 | |||||||
Allowance for credit losses for loans | 1.32 | % | 0.71 | % |
(in thousands) | September 30, 2017 | December 31, 2016 | ||||||
Real estate mortgage | $ | 13,588 | $ | 14,264 | ||||
Consumer | 8,302 | 10,312 | ||||||
Commercial | 4,802 | 5,831 | ||||||
Real estate construction | 2,055 | 2,096 | ||||||
|
|
|
| |||||
Total allowance for loan losses | $ | 28,747 | $ | 32,503 | ||||
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|
|
|
The following table summarizes the allocation of the allowance for loan losses between loan types as aand by percentage of the total allowance for loan losses as of the dates indicated:
September 30, 2017 | December 31, 2016 | |||||||
Real estate mortgage | 47.3 | % | 43.9 | % | ||||
Consumer | 28.9 | % | 31.7 | % | ||||
Commercial | 16.7 | % | 17.9 | % | ||||
Real estate construction | 7.1 | % | 6.5 | % | ||||
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|
|
| |||||
Total allowance for loan losses | 100.0 | % | 100.0 | % | ||||
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|
|
March 31, 2020 | December 31, 2019 | ||||||||||||||||||||||||||||||||||
Real estate mortgage | $ | 34,902 | 60.3 | % | $ | 14,301 | 46.8 | % | |||||||||||||||||||||||||||
Consumer | 13,942 | 24.1 | % | 7,778 | 25.4 | % | |||||||||||||||||||||||||||||
Commercial | 4,472 | 7.7 | % | 5,149 | 16.8 | % | |||||||||||||||||||||||||||||
Real estate construction | 4,595 | 7.9 | % | 3,388 | 11.0 | % | |||||||||||||||||||||||||||||
Total allowance for credit losses | $ | 57,911 | 100.0 | % | $ | 30,616 | 100.0 | % |
September 30, 2017 | December 31, 2016 | |||||||
Real estate mortgage | 0.62 | % | 0.68 | % | ||||
Consumer | 2.30 | % | 2.80 | % | ||||
Commercial | 2.11 | % | 2.69 | % | ||||
Real estate construction | 1.39 | % | 1.71 | % | ||||
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|
|
| |||||
Total allowance for loan losses | 0.98 | % | 1.18 | % | ||||
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|
|
March 31, 2020 | December 31, 2019 | ||||||||||||||||||||||||||||||||||
Real estate mortgage | $ | 3,422,440 | 1.02 | % | $ | 3,328,290 | 0.43 | % | |||||||||||||||||||||||||||
Consumer | 428,313 | 3.26 | % | 445,542 | 1.75 | % | |||||||||||||||||||||||||||||
Commercial | 285,830 | 1.56 | % | 283,707 | 1.81 | % | |||||||||||||||||||||||||||||
Real estate construction | 242,479 | 1.90 | % | 249,827 | 1.36 | % | |||||||||||||||||||||||||||||
Total allowance for credit losses | $ | 4,379,062 | 1.32 | % | $ | 4,307,366 | 0.71 | % |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Allowance for loan losses: | ||||||||||||||||
Balance at beginning of period | $ | 28,143 | $ | 35,509 | $ | 32,503 | $ | 36,011 | ||||||||
Benefit from reversal of provision for loan losses | 765 | (3,973 | ) | (1,588 | ) | (4,537 | ) | |||||||||
Loans charged off: | ||||||||||||||||
Real estate mortgage: | ||||||||||||||||
Residential | (60 | ) | (50 | ) | (60 | ) | (212 | ) | ||||||||
Commercial | (20 | ) | — | (170 | ) | (793 | ) | |||||||||
Consumer: | ||||||||||||||||
Home equity lines | (14 | ) | (122 | ) | (98 | ) | (450 | ) | ||||||||
Home equity loans | (94 | ) | (25 | ) | (331 | ) | (118 | ) | ||||||||
Other consumer | (349 | ) | (160 | ) | (831 | ) | (600 | ) | ||||||||
Commercial | (291 | ) | (307 | ) | (1,188 | ) | (421 | ) | ||||||||
Construction: | ||||||||||||||||
Residential | (33 | ) | — | (1,104 | ) | — | ||||||||||
Commercial | — | — | — | |||||||||||||
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| |||||||||
Total loans charged off | (861 | ) | (664 | ) | (3,782 | ) | (2,594 | ) | ||||||||
Recoveries of previouslycharged-off loans: | ||||||||||||||||
Real estate mortgage: | ||||||||||||||||
Residential | — | 391 | — | 618 | ||||||||||||
Commercial | 238 | 20 | 365 | 902 | ||||||||||||
Consumer: | ||||||||||||||||
Home equity lines | 189 | 1,580 | 487 | 1,921 | ||||||||||||
Home equity loans | 121 | 429 | 146 | 501 | ||||||||||||
Other consumer | 91 | 107 | 300 | 338 | ||||||||||||
Commercial | 61 | 85 | 315 | 323 | ||||||||||||
Construction: | ||||||||||||||||
Residential | — | — | — | |||||||||||||
Commercial | — | — | 1 | 1 | ||||||||||||
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| |||||||||
Total recoveries of previously charged off loans | 700 | 2,612 | 1,614 | 4,604 | ||||||||||||
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| |||||||||
Net (charge-offs) recoveries | (161 | ) | 1,948 | (2,168 | ) | 2,010 | ||||||||||
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| |||||||||
Balance at end of period | $ | 28,747 | $ | 33,484 | $ | 28,747 | $ | 33,484 | ||||||||
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Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Reserve for unfunded commitments: | ||||||||||||||||
Balance at beginning of period | $ | 2,599 | $ | 2,635 | $ | 2,719 | $ | 2,475 | ||||||||
Provision for losses – unfunded commitments | 390 | 273 | 270 | 433 | ||||||||||||
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| |||||||||
Balance at end of period | $ | 2,989 | $ | 2,908 | $ | 2,989 | $ | 2,908 | ||||||||
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| |||||||||
Balance at end of period: | ||||||||||||||||
Allowance for loan losses | $ | 28,747 | $ | 33,484 | ||||||||||||
Reserve for unfunded commitments | 2,989 | 2,908 | ||||||||||||||
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| |||||||||||||
Allowance for loan losses and Reserve for unfunded commitments | $ | 31,736 | $ | 36,392 | ||||||||||||
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As a percentage of total loans at end of period: | ||||||||||||||||
Allowance for loan losses | 0.98 | % | 1.23 | % | ||||||||||||
Reserve for unfunded commitments | 0.10 | % | 0.11 | % | ||||||||||||
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| |||||||||||||
Allowance for loan losses and Reserve for unfunded commitments | 1.08 | % | 1.34 | % | ||||||||||||
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| |||||||||||||
Average total loans | $ | 2,878,944 | $ | 2,669,954 | $ | 2,807,453 | $ | 2,596,175 | ||||||||
Ratios (annualized): | ||||||||||||||||
Net charge-offs during period to average loans outstanding during period | 0.02 | % | (0.29 | )% | 0.10 | % | (0.10 | )% | ||||||||
Provision (benefit from reversal of provision) for loan losses to average loans outstanding | 0.11 | % | (0.60 | )% | (0.08 | )% | (0.23 | )% |
Three months ended March 31, | |||||||||||||||||||||||||||||
(in thousands) | 2020 | 2019 | |||||||||||||||||||||||||||
Allowance for credit losses: | |||||||||||||||||||||||||||||
Balance at beginning of period | $ | 30,616 | $ | 32,582 | |||||||||||||||||||||||||
Impact of adoption from ASU 2016-13 | 18,913 | — | |||||||||||||||||||||||||||
Provision for (reversal of) loan losses | 8,000 | (1,600) | |||||||||||||||||||||||||||
Loans charged-off: | |||||||||||||||||||||||||||||
Real estate mortgage: | |||||||||||||||||||||||||||||
Residential | — | — | |||||||||||||||||||||||||||
Commercial | — | — | |||||||||||||||||||||||||||
Consumer: | |||||||||||||||||||||||||||||
Home equity lines | — | — | |||||||||||||||||||||||||||
Home equity loans | — | — | |||||||||||||||||||||||||||
Other consumer | (130) | (207) | |||||||||||||||||||||||||||
Commercial | (380) | (519) | |||||||||||||||||||||||||||
Construction: | |||||||||||||||||||||||||||||
Residential | — | — | |||||||||||||||||||||||||||
Commercial | — | — | |||||||||||||||||||||||||||
Total loans charged-off | (510) | (726) | |||||||||||||||||||||||||||
Recoveries of previously charged-off loans: | |||||||||||||||||||||||||||||
Real estate mortgage: | |||||||||||||||||||||||||||||
Residential | 410 | 2 | |||||||||||||||||||||||||||
Commercial | 194 | 1,381 | |||||||||||||||||||||||||||
Consumer: | |||||||||||||||||||||||||||||
Home equity lines | 33 | 95 | |||||||||||||||||||||||||||
Home equity loans | 15 | 87 | |||||||||||||||||||||||||||
Other consumer | 94 | 75 | |||||||||||||||||||||||||||
Commercial | 146 | 168 | |||||||||||||||||||||||||||
Construction: | |||||||||||||||||||||||||||||
Residential | — | — | |||||||||||||||||||||||||||
Commercial | — | — | |||||||||||||||||||||||||||
Total recoveries of previously charged-off loans | 892 | 1,808 | |||||||||||||||||||||||||||
Net recoveries | 382 | 1,082 | |||||||||||||||||||||||||||
Balance at end of period | $ | 57,911 | $ | 32,064 | |||||||||||||||||||||||||
Average total loans | $ | 4,329,357 | $ | 4,023,864 | |||||||||||||||||||||||||
Ratios (annualized): | |||||||||||||||||||||||||||||
Net recoveries during period to average loans outstanding during period | 0.04 | % | (0.11) | % | |||||||||||||||||||||||||
(Benefit from reversal of) provision for loan losses to average loans outstanding during period | 0.74 | % | (0.16) | % |
(dollars in thousands): | Balance at September 30, 2017 | New NPA | Advances/ Capitalized Costs/Other | Sales | Valuation Adjustments | Transfers from Loans | Category Changes | Balance at June 30, 2017 | ||||||||||||||||||||||||
Noncovered: | ||||||||||||||||||||||||||||||||
Land & Construction | $ | 1,405 | — | — | — | $ | (92 | ) | — | — | $ | 1,497 | ||||||||||||||||||||
Residential real estate | 1,386 | — | — | $ | (326 | ) | (42 | ) | 42 | — | 1,712 | |||||||||||||||||||||
Commercial real estate | 280 | — | — | — | — | — | — | 280 | ||||||||||||||||||||||||
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| |||||||||||||||||
Total noncovered | 3,071 | — | — | (326 | ) | (134 | ) | 42 | — | 3,489 | ||||||||||||||||||||||
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| |||||||||||||||||
Total foreclosed assets | $ | 3,071 | — | — | $ | (326 | ) | $ | (134 | ) | $ | 42 | — | $ | 3,489 | |||||||||||||||||
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|
|
|
|
| |||||||||||||||||
(dollars in thousands): | Balance at June 30, 2017 | New NPA | Advances/ Capitalized Costs/Other | Sales | Valuation Adjustments | Transfers from Loans | Category Changes | Balance at March 31, 2017 | ||||||||||||||||||||||||
Noncovered: | ||||||||||||||||||||||||||||||||
Land & Construction | $ | 1,497 | — | — | — | — | — | — | $ | 1,497 | ||||||||||||||||||||||
Residential real estate | 1,712 | — | — | — | $ | (6 | ) | $ | 511 | — | 1,207 | |||||||||||||||||||||
Commercial real estate | 280 | — | — | $ | (545 | ) | (88 | ) | 88 | — | 825 | |||||||||||||||||||||
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|
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|
|
|
|
|
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|
| |||||||||||||||||
Total noncovered | 3,489 | — | — | (545 | ) | (94 | ) | 599 | — | 3,529 | ||||||||||||||||||||||
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|
|
|
|
|
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| |||||||||||||||||
Total foreclosed assets | $ | 3,489 | — | — | $ | (545 | ) | $ | (94 | ) | $ | 599 | — | $ | 3,529 | |||||||||||||||||
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|
| |||||||||||||||||
(dollars in thousands): | Balance at March 31, 2017 | New NPA | Advances/ Capitalized Costs/Other | Sales | Valuation Adjustments | Transfers from Loans | Category Changes | Balance at December 31, 2016 | ||||||||||||||||||||||||
Noncovered: | ||||||||||||||||||||||||||||||||
Land & Construction | $ | 1,497 | — | — | $ | (15 | ) | — | — | — | $ | 1,512 | ||||||||||||||||||||
Residential real estate | 1,207 | — | — | (234 | ) | — | — | — | 1,441 | |||||||||||||||||||||||
Commercial real estate | 825 | — | — | (136 | ) | $ | 66 | $ | 85 | — | 810 | |||||||||||||||||||||
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Total noncovered | 3,529 | — | — | (385 | ) | 66 | 85 | — | 3,763 | |||||||||||||||||||||||
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Covered: | ||||||||||||||||||||||||||||||||
Land & Construction | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Residential real estate | — | — | — | (223 | ) | — | — | — | 223 | |||||||||||||||||||||||
Commercial real estate | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
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Total covered | — | — | — | (223 | ) | — | — | — | 223 | |||||||||||||||||||||||
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Total foreclosed assets | $ | 3,529 | — | — | $ | (608 | ) | $ | 66 | $ | 85 | — | $ | 3,986 | ||||||||||||||||||
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Premises and Equipment
Premises and equipment were comprised of:
September 30, 2017 | December 31, 2016 | |||||||
(In thousands) | ||||||||
Land & land improvements | $ | 10,021 | $ | 9,522 | ||||
Buildings | 43,860 | 42,345 | ||||||
Furniture and equipment | 34,530 | 31,428 | ||||||
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88,411 | 83,295 | |||||||
Less: Accumulated depreciation | (39,892 | ) | (37,412 | ) | ||||
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48,519 | 45,883 | |||||||
Construction in progress | 6,476 | 2,523 | ||||||
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Total premises and equipment | $ | 54,995 | $ | 48,406 | ||||
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indicated:
(in thousands) | Balance at December 31, 2019 | Sales | Valuation Adjustments | Transfers from Loans | Balance at March 31, 2020 | ||||||||||||||||||||||||
Land & Construction | $ | 312 | $ | (312) | $ | — | $ | — | $ | — | |||||||||||||||||||
Residential real estate | 1,048 | — | — | — | 1,048 | ||||||||||||||||||||||||
Commercial real estate | 1,181 | — | — | — | 1,181 | ||||||||||||||||||||||||
Total foreclosed assets | $ | 2,541 | $ | (312) | $ | — | $ | — | $ | 2,229 |
Intangible Assets
Intangible assets at were comprised of the following as of the dates indicated:
(In thousands) | September 30, 2017 | December 31, 2016 | ||||||
Core-deposit intangible | $ | 5,513 | $ | 6,563 | ||||
Goodwill | 64,311 | 64,311 | ||||||
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Total intangible assets | $ | 69,824 | $ | 70,874 | ||||
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The core-deposit intangible assets resulted from the Bank’s acquisition of three bank branches from Bank of America on March 18, 2016, North Valley Bancorp in 2014, Citizens in 2011, and Granite in 2010. The goodwill intangible asset includes $849,000 from the acquisition of three bank branches from Bank of America on March 18, 2016, $47,943,000 from the North Valley Bancorp acquisition in 2014, and $15,519,000 from the North State National Bank acquisition in 2003. Amortization of core deposit intangible assets amounting to $339,000
and $359,000 was recorded during the three months ended September 30, 2017 and 2016, respectively. Amortization of core deposit intangible assets amounting to $1,050,000 and $1,017,000 was recorded during the nine months ended September 30, 2017 and 2016, respectively.
Investment in Low Income Housing Tax Credit Funds
During the three and nine month periods ended September 30, 2017, the Company’s investment in low income housing tax credit funds, recorded in other assets, decreased $366,000 and $1,012,000, respectively, to $17,453,000 due amortization of such investments. The Company’s investment in low income housing tax credit funds is recorded in other assets. During the three and nine month periods ended September 30, 2017, the Company made capital contributions of $903,000 and $3,737,000, respectively, to several of its five existing low income housing tax credit fund investments reducing its commitment for future capital contributions to $11,439,000 at September 30, 2017. This commitment for low income housing tax credit funds is recorded in other liabilities.
Deposits
During the nine months ended September 30, 2017,March 31, 2020, the Company’s deposits increased $31,896,000 (0.8%)$35,704,000 to $3,927,456,000.$5,402,698,000. Included in the September 30, 2017March 31, 2020 and December 31, 20162019 certificate of deposit balances are $50,000,000$30,000,000, respectively, from the State of California. The BankCompany participates in a deposit program offered by the State of California whereby the State may make deposits at the Bank’sCompany’s request subject to collateral and creditworthiness constraints. The negotiated rates on these State deposits are generally more favorable than other wholesale funding sources available to the Bank. Company.
Long-Term Debt
See Note 16 to the condensed consolidated financial statements at Item 1 of Part I of this report for information about the Company’s other borrowings, including long-term debt.
Junior Subordinated Debt
See Note 17 to the condensed consolidated financial statements at Item 1 of Part I of this report for information about the Company’s junior subordinated debt.
Off-Balance Sheet Arrangements
See Note 187 to the condensed consolidated financial statements at Item 1 of Part I of this report for information about the Company’s commitments and contingenciesincludingcontingencies including off-balance-sheet arrangements.
The Company adopted and announced a stock
$17,139,000.
September 30, 2017 | December 31, 2016 | |||||||||||||||
Minimum | Minimum | |||||||||||||||
Regulatory | Regulatory | |||||||||||||||
Ratio | Requirement | Ratio | Requirement | |||||||||||||
Total capital | 14.42 | % | 9.250 | % | 14.77 | % | 8.625 | % | ||||||||
Tier I capital | 13.55 | % | 7.250 | % | 13.74 | % | 6.625 | % | ||||||||
Common equity Tier 1 capital | 12.06 | % | 5.750 | % | 12.17 | % | 5.125 | % | ||||||||
Leverage | 10.98 | % | 4.000 | % | 10.62 | % | 4.000 | % |
March 31, 2020 | December 31, 2019 | ||||||||||||||||||||||||||||||||||
Ratio | Minimum Regulatory Requirement | Ratio | Minimum Regulatory Requirement | ||||||||||||||||||||||||||||||||
Total capital | 15.12 | % | 10.50 | % | 15.07 | % | 9.25 | % | |||||||||||||||||||||||||||
Tier I capital | 13.92 | % | 8.50 | % | 14.40 | % | 7.25 | % | |||||||||||||||||||||||||||
Common equity Tier 1 capital | 12.82 | % | 7.00 | % | 13.29 | % | 5.75 | % | |||||||||||||||||||||||||||
Leverage | 11.22 | % | 4.00 | % | 11.55 | % | 4.00 | % |
The
Change in Interest Rates (Basis Points) | Estimated Change in Net Interest Income (NII) (as % of NII) | Estimated Change in Market Value of Equity (MVE) (as % of MVE) | |||||||||
+200 (shock) | 0.2 | % | 13.9 | % | |||||||
+100 (shock) | — | % | 9.6 | % | |||||||
+ 0 (flat) | — | — | |||||||||
-100 (shock) | (1.7) | % | (29.9) | % | |||||||
-200 (shock) | nm | nm |
March 31, 2020.
Period | (a) Total number of shares purchased (1) | (b) Average price paid per share | (c) Total number of shares purchased as of part of publicly announced plans or programs | (d) Maximum number of shares that may yet be purchased under the plans or programs (2) | |||||||||||||||||||
January 1-31, 2020 | 71 | $ | 40.16 | — | 1,525,000 | ||||||||||||||||||
February 1-29, 2020 | 139,058 | $ | 36.59 | 138,996 | 1,386,004 | ||||||||||||||||||
March 1-31, 2020 | 419,541 | $ | 29.08 | 414,873 | 971,131 | ||||||||||||||||||
Total | 558,670 | $ | 36.48 | 553,869 |
In additionstock repurchased under equity compensation plans.
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds
The following table shows the repurchases made by the Company or any affiliated purchaser (as defined in Rule10b-18(a)(3) under the Exchange Act) during the three months ended September 30, 2017:
Period | (a) Total number of shares purchased(1) | (b) Average price paid per share | (c) Total number of shares purchased as of part of publicly announced plans or programs | (d) Maximum number shares that may yet be purchased under the plans or programs(2) | ||||||||||||
July1-31, 2017 | — | — | — | 333,400 | ||||||||||||
Aug. 1-31, 2017 | 9,672 | $ | 36.34 | — | 333,400 | |||||||||||
Sep.1-30, 2017 | 12,066 | $ | 34.50 | — | 333,400 | |||||||||||
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Total | 21,738 | $ | 35.32 | — | 333,400 |
`
Item 6 – Exhibits (continued)
101.INS | XBRL Instance Document | |||||||
101.SCH | XBRL Taxonomy Extension Schema Document | |||||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |||||||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |||||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
TRICO BANCSHARES
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(Registrant) | ||||||
Date: May 11, 2020 | /s/ Peter G. Wiese | |||||
Peter G. Wiese | ||||||
Executive Vice President and Chief Financial Officer | ||||||
(Duly authorized officer and principal financial and chief accounting |
76