Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
2019
☐ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Arkansas 71-0682831
719 Harkrider, Suite 100 ,Conway, Arkansas | 72032 | |
(Address of principal executive offices) | (Zip Code) |
15 (d)15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑ (§ ☑the definitionsdefinition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule (Check one): ☑ Non-accelerated filer ☐
September
Page No. | |||||||
Part I: | |||||||
Item 1: | |||||||
4 | |||||||
5 | |||||||
6 | |||||||
Item 2: | |||||||
Item 3: | |||||||
Item | |||||||
Part II: | |||||||
Item 1: | 88 | ||||||
Item 1A: | 88 | ||||||
Item 2: | |||||||
Item 3: | |||||||
Item | |||||||
Item 5: | 88 | ||||||
Item 6: | 89-90 | ||||||
Item 1: | Financial Statements |
(In thousands, except share data) | September 30, 2018 | December 31, 2017 | ||||||
(Unaudited) | ||||||||
Assets | �� | |||||||
Cash and due from banks | $ | 208,681 | $ | 166,915 | ||||
Interest-bearing deposits with other banks | 323,376 | 469,018 | ||||||
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Cash and cash equivalents | 532,057 | 635,933 | ||||||
Federal funds sold | 500 | 24,109 | ||||||
Investment securities –available-for-sale | 1,744,430 | 1,663,517 | ||||||
Investment securities –held-to-maturity | 199,266 | 224,756 | ||||||
Loans receivable | 10,832,815 | 10,331,188 | ||||||
Allowance for loan losses | (110,191 | ) | (110,266 | ) | ||||
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Loans receivable, net | 10,722,624 | 10,220,922 | ||||||
Bank premises and equipment, net | 233,652 | 237,439 | ||||||
Foreclosed assets held for sale | 13,507 | 18,867 | ||||||
Cash value of life insurance | 148,014 | 146,866 | ||||||
Accrued interest receivable | 48,909 | 45,708 | ||||||
Deferred tax asset, net | 79,548 | 76,564 | ||||||
Goodwill | 958,408 | 927,949 | ||||||
Core deposit and other intangibles | 44,484 | 49,351 | ||||||
Other assets | 187,339 | 177,779 | ||||||
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Total assets | $ | 14,912,738 | $ | 14,449,760 | ||||
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Liabilities and Stockholders’ Equity | ||||||||
Deposits: | ||||||||
Demand andnon-interest-bearing | $ | 2,482,857 | $ | 2,385,252 | ||||
Savings and interest-bearing transaction accounts | 6,420,951 | 6,476,819 | ||||||
Time deposits | 1,720,930 | 1,526,431 | ||||||
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Total deposits | 10,624,738 | 10,388,502 | ||||||
Securities sold under agreements to repurchase | 142,146 | 147,789 | ||||||
FHLB and other borrowed funds | 1,363,851 | 1,299,188 | ||||||
Accrued interest payable and other liabilities | 72,381 | 41,959 | ||||||
Subordinated debentures | 368,596 | 368,031 | ||||||
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Total liabilities | 12,571,712 | 12,245,469 | ||||||
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Stockholders’ equity: | ||||||||
Common stock, par value $0.01; shares authorized 200,000,000 in 2018 and 2017; shares issued and outstanding 174,134,811 in 2018 and 173,632,983 in 2017 | 1,741 | 1,736 | ||||||
Capital surplus | 1,668,106 | 1,675,318 | ||||||
Retained earnings | 701,900 | 530,658 | ||||||
Accumulated other comprehensive loss | (30,721 | ) | (3,421 | ) | ||||
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Total stockholders’ equity | 2,341,026 | 2,204,291 | ||||||
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Total liabilities and stockholders’ equity | $ | 14,912,738 | $ | 14,449,760 | ||||
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(In thousands, except share data) | June 30, 2019 | December 31, 2018 | ||||||
(Unaudited) | ||||||||
Assets | ||||||||
Cash and due from banks | $ | 183,745 | $ | 175,024 | ||||
Interest-bearing deposits with other banks | 373,557 | 482,915 | ||||||
Cash and cash equivalents | 557,302 | 657,939 | ||||||
Federal funds sold | 1,075 | 325 | ||||||
Investment securities – available-for-sale | 2,053,939 | 1,785,862 | ||||||
Investment securities – held-to-maturity | — | 192,776 | ||||||
Loans receivable | 11,053,129 | 11,071,879 | ||||||
Allowance for loan losses | (106,066 | ) | (108,791 | ) | ||||
Loans receivable, net | 10,947,063 | 10,963,088 | ||||||
Bank premises and equipment, net | 278,821 | 233,261 | ||||||
Foreclosed assets held for sale | 13,734 | 13,236 | ||||||
Cash value of life insurance | 149,708 | 148,621 | ||||||
Accrued interest receivable | 48,992 | 48,945 | ||||||
Deferred tax asset, net | 58,517 | 73,275 | ||||||
Goodwill | 958,408 | 958,408 | ||||||
Core deposit and other intangibles | 39,723 | 42,896 | ||||||
Other assets | 180,293 | 183,806 | ||||||
Total assets | $ | 15,287,575 | $ | 15,302,438 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Deposits: | ||||||||
Demand and non-interest-bearing | $ | 2,575,696 | $ | 2,401,232 | ||||
Savings and interest-bearing transaction accounts | 6,774,162 | 6,624,407 | ||||||
Time deposits | 1,997,458 | 1,874,139 | ||||||
Total deposits | 11,347,316 | 10,899,778 | ||||||
Securities sold under agreements to repurchase | 142,541 | 143,679 | ||||||
FHLB and other borrowed funds | 899,447 | 1,472,393 | ||||||
Accrued interest payable and other liabilities | 107,695 | 67,912 | ||||||
Subordinated debentures | 369,170 | 368,790 | ||||||
Total liabilities | 12,866,169 | 12,952,552 | ||||||
Stockholders’ equity: | ||||||||
Common stock, par value $0.01; shares authorized 300,000,000 in 2019 and 200,000,000 in 2018; shares issued and outstanding 167,465,975 in 2019 and 170,720,072 in 2018 | 1,675 | 1,707 | ||||||
Capital surplus | 1,550,999 | 1,609,810 | ||||||
Retained earnings | 853,964 | 752,184 | ||||||
Accumulated other comprehensive income (loss) | 14,768 | (13,815 | ) | |||||
Total stockholders’ equity | 2,421,406 | 2,349,886 | ||||||
Total liabilities and stockholders’ equity | $ | 15,287,575 | $ | 15,302,438 | ||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(In thousands, except per share data) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
(Unaudited) | ||||||||||||||||
Interest income: | ||||||||||||||||
Loans | $ | 166,334 | $ | 113,269 | $ | 467,395 | $ | 331,763 | ||||||||
Investment securities | ||||||||||||||||
Taxable | 9,011 | 7,071 | 26,960 | 18,983 | ||||||||||||
Tax-exempt | 3,427 | 3,032 | 9,801 | 8,942 | ||||||||||||
Deposits – other banks | 1,273 | 538 | 3,408 | 1,573 | ||||||||||||
Federal funds sold | 6 | 3 | 24 | 9 | ||||||||||||
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Total interest income | 180,051 | 123,913 | 507,588 | 361,270 | ||||||||||||
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Interest expense: | ||||||||||||||||
Interest on deposits | 21,412 | 8,535 | 54,382 | 20,831 | ||||||||||||
Federal funds purchased | — | — | 1 | — | ||||||||||||
FHLB and other borrowed funds | 7,055 | 3,408 | 15,880 | 10,707 | ||||||||||||
Securities sold under agreements to repurchase | 472 | 232 | 1,220 | 593 | ||||||||||||
Subordinated debentures | 5,202 | 4,969 | 15,374 | 10,203 | ||||||||||||
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Total interest expense | 34,141 | 17,144 | 86,857 | 42,334 | ||||||||||||
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Net interest income | 145,910 | 106,769 | 420,731 | 318,936 | ||||||||||||
Provision for loan losses | — | 35,023 | 4,322 | 39,324 | ||||||||||||
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Net interest income after provision for loan losses | 145,910 | 71,746 | 416,409 | 279,612 | ||||||||||||
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Non-interest income: | ||||||||||||||||
Service charges on deposit accounts | 6,992 | 6,408 | 19,847 | 18,356 | ||||||||||||
Other service charges and fees | 9,041 | 8,490 | 28,993 | 25,983 | ||||||||||||
Trust fees | 437 | 365 | 1,262 | 1,130 | ||||||||||||
Mortgage lending income | 3,691 | 3,172 | 9,825 | 9,713 | ||||||||||||
Insurance commissions | 463 | 472 | 1,668 | 1,482 | ||||||||||||
Increase in cash value of life insurance | 735 | 478 | 2,119 | 1,251 | ||||||||||||
Dividends from FHLB, FRB, FNBB & other | 1,288 | 834 | 3,765 | 2,455 | ||||||||||||
Gain on acquisitions | — | — | — | 3,807 | ||||||||||||
Gain on sale of SBA loans | 47 | 163 | 491 | 738 | ||||||||||||
Gain (loss) on sale of branches, equipment and other assets, net | (102 | ) | (1,337 | ) | (95 | ) | (962 | ) | ||||||||
Gain (loss) on OREO, net | 836 | 335 | 2,287 | 849 | ||||||||||||
Gain (loss) on securities, net | — | 136 | — | 939 | ||||||||||||
Other income | 2,419 | 1,941 | 9,163 | 6,603 | ||||||||||||
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Totalnon-interest income | 25,847 | 21,457 | 79,325 | 72,344 | ||||||||||||
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Non-interest expense: | ||||||||||||||||
Salaries and employee benefits | 37,825 | 28,510 | 107,315 | 83,965 | ||||||||||||
Occupancy and equipment | 8,148 | 7,887 | 25,650 | 21,602 | ||||||||||||
Data processing expense | 3,461 | 2,853 | 10,786 | 8,439 | ||||||||||||
Other operating expenses | 16,689 | 31,596 | 48,980 | 62,984 | ||||||||||||
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Totalnon-interest expense | 66,123 | 70,846 | 192,731 | 176,990 | ||||||||||||
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Income before income taxes | 105,634 | 22,357 | 303,003 | 174,966 | ||||||||||||
Income tax expense | 25,350 | 7,536 | 73,630 | 63,192 | ||||||||||||
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Net income | $ | 80,284 | $ | 14,821 | $ | 229,373 | $ | 111,774 | ||||||||
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Basic earnings per share | $ | 0.46 | $ | 0.10 | $ | 1.32 | $ | 0.78 | ||||||||
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Diluted earnings per share | $ | 0.46 | $ | 0.10 | $ | 1.32 | $ | 0.78 | ||||||||
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Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(In thousands, except per share data) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
(Unaudited) | ||||||||||||||||
Interest income: | ||||||||||||||||
Loans | $ | 165,816 | $ | 152,996 | $ | 329,664 | $ | 301,061 | ||||||||
Investment securities | ||||||||||||||||
Taxable | 10,650 | 8,979 | 21,356 | 17,949 | ||||||||||||
Tax-exempt | 3,183 | 3,368 | 6,562 | 6,374 | ||||||||||||
Deposits – other banks | 1,628 | 1,206 | 3,171 | 2,135 | ||||||||||||
Federal funds sold | 10 | 12 | 21 | 18 | ||||||||||||
Total interest income | 181,287 | 166,561 | 360,774 | 327,537 | ||||||||||||
Interest expense: | ||||||||||||||||
Interest on deposits | 29,709 | 18,164 | 57,715 | 32,970 | ||||||||||||
Federal funds purchased | — | — | — | 1 | ||||||||||||
FHLB and other borrowed funds | 4,722 | 4,245 | 10,840 | 8,825 | ||||||||||||
Securities sold under agreements to repurchase | 630 | 372 | 1,264 | 748 | ||||||||||||
Subordinated debentures | 5,239 | 5,168 | 10,498 | 10,172 | ||||||||||||
Total interest expense | 40,300 | 27,949 | 80,317 | 52,716 | ||||||||||||
Net interest income | 140,987 | 138,612 | 280,457 | 274,821 | ||||||||||||
Provision for loan losses | 1,325 | 2,722 | 1,325 | 4,322 | ||||||||||||
Net interest income after provision for loan losses | 139,662 | 135,890 | 279,132 | 270,499 | ||||||||||||
Non-interest income: | ||||||||||||||||
Service charges on deposit accounts | 6,259 | 6,780 | 12,660 | 12,855 | ||||||||||||
Other service charges and fees | 8,177 | 9,797 | 14,740 | 19,952 | ||||||||||||
Trust fees | 391 | 379 | 794 | 825 | ||||||||||||
Mortgage lending income | 3,457 | 3,477 | 5,892 | 6,134 | ||||||||||||
Insurance commissions | 515 | 526 | 1,124 | 1,205 | ||||||||||||
Increase in cash value of life insurance | 740 | 730 | 1,476 | 1,384 | ||||||||||||
Dividends from FHLB, FRB, FNBB & other | 1,149 | 1,600 | 4,654 | 2,477 | ||||||||||||
Gain on sale of SBA loans | 355 | 262 | 596 | 444 | ||||||||||||
(Loss) gain on sale of branches, equipment and other assets, net | (129 | ) | — | (50 | ) | 7 | ||||||||||
Gain on OREO, net | 58 | 1,046 | 264 | 1,451 | ||||||||||||
Other income | 2,094 | 3,076 | 4,588 | 6,744 | ||||||||||||
Total non-interest income | 23,066 | 27,673 | 46,738 | 53,478 | ||||||||||||
Non-interest expense: | ||||||||||||||||
Salaries and employee benefits | 37,976 | 34,476 | 75,812 | 69,490 | ||||||||||||
Occupancy and equipment | 8,853 | 8,519 | 17,676 | 17,502 | ||||||||||||
Data processing expense | 3,838 | 3,339 | 7,808 | 7,325 | ||||||||||||
Other operating expenses | 16,957 | 16,894 | 35,385 | 32,291 | ||||||||||||
Total non-interest expense | 67,624 | 63,228 | 136,681 | 126,608 | ||||||||||||
Income before income taxes | 95,104 | 100,335 | 189,189 | 197,369 | ||||||||||||
Income tax expense | 22,940 | 24,310 | 45,675 | 48,280 | ||||||||||||
Net income | $ | 72,164 | $ | 76,025 | $ | 143,514 | $ | 149,089 | ||||||||
Basic earnings per share | $ | 0.43 | $ | 0.44 | $ | 0.85 | $ | 0.86 | ||||||||
Diluted earnings per share | $ | 0.43 | $ | 0.44 | $ | 0.85 | $ | 0.86 | ||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(In thousands) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
(Unaudited) | ||||||||||||||||
Net income | $ | 80,284 | $ | 14,821 | $ | 229,373 | $ | 111,774 | ||||||||
Net unrealized gain (loss) onavailable-for-sale securities | (6,979 | ) | (4,065 | ) | (35,957 | ) | 6,681 | |||||||||
Less: reclassification adjustment for realized (gains) losses included in income | — | (136 | ) | — | (939 | ) | ||||||||||
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Other comprehensive (loss) income, before tax effect | (6,979 | ) | (4,201 | ) | (35,957 | ) | 5,742 | |||||||||
Tax effect on other comprehensive income | 2,867 | 1,648 | 9,647 | (2,253 | ) | |||||||||||
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Other comprehensive income (loss) | (4,112 | ) | (2,553 | ) | (26,310 | ) | 3,489 | |||||||||
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Comprehensive income | $ | 76,172 | $ | 12,268 | $ | 203,063 | $ | 115,263 | ||||||||
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Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(In thousands) | 2019 | 2018 | 2019 | 2018 | ||||||||||||
(Unaudited) | ||||||||||||||||
Net income | $ | 72,164 | $ | 76,025 | $ | 143,514 | $ | 149,089 | ||||||||
Net unrealized gain (loss) on available-for-sale securities | 26,520 | (4,345 | ) | 39,317 | (25,978 | ) | ||||||||||
Other comprehensive income (loss), before tax effect | 26,520 | (4,345 | ) | 39,317 | (25,978 | ) | ||||||||||
Tax effect on other comprehensive (loss)income | (6,931 | ) | 1,018 | (10,275 | ) | 6,780 | ||||||||||
Other comprehensive income (loss) | 19,589 | (3,327 | ) | 29,042 | (19,198 | ) | ||||||||||
Comprehensive income | $ | 91,753 | $ | 72,698 | $ | 172,556 | $ | 129,891 | ||||||||
Nine
(In thousands, except share data) | Common Stock | Capital Surplus | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total | |||||||||||||||
Balances at January 1, 2017 | 1,405 | 869,737 | 455,948 | 400 | 1,327,490 | |||||||||||||||
Comprehensive income: | ||||||||||||||||||||
Net income | — | — | 111,774 | — | 111,774 | |||||||||||||||
Other comprehensive income (loss) | — | — | — | 3,489 | 3,489 | |||||||||||||||
Net issuance of 160,237 shares of common stock from exercise of stock options | 2 | 847 | — | — | 849 | |||||||||||||||
Issuance of 2,738,038 shares of common stock from acquisition of GHI, net of issuance costs of approximately $195 | 27 | 77,290 | — | — | 77,317 | |||||||||||||||
Issuance of 30,863,658 shares of common stock from acquisition of Stonegate, net of issuance costs of approximately $630 | 309 | 741,324 | 741,633 | |||||||||||||||||
Repurchase of 800,000 shares of common stock | (8 | ) | (19,530 | ) | (19,538 | ) | ||||||||||||||
Share-based compensation net issuance of 231,766 shares of restricted common stock | 2 | 4,974 | — | — | 4,976 | |||||||||||||||
Cash dividends – Common Stock, $0.29 per share | — | — | (41,274 | ) | — | (41,274 | ) | |||||||||||||
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Balances at September 30, 2017 (unaudited) | $ | 1,737 | $ | 1,674,642 | $ | 526,448 | $ | 3,889 | $ | 2,206,716 | ||||||||||
Comprehensive income: | ||||||||||||||||||||
Net income | — | — | 23,309 | — | 23,309 | |||||||||||||||
Other comprehensive income (loss) | — | — | — | (7,310 | ) | (7,310 | ) | |||||||||||||
Net issuance of 24,879 shares of common stock from exercise of stock options | — | 233 | — | — | 233 | |||||||||||||||
Repurchase of 57,800 shares of common stock | (1 | ) | (1,286 | ) | — | — | (1,287 | ) | ||||||||||||
Share-based compensation | — | 1,729 | — | — | 1,729 | |||||||||||||||
Cash dividends – Common Stock, $0.11 per share | — | — | (19,099 | ) | — | (19,099 | ) | |||||||||||||
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Balances at December 31, 2017 | $ | 1,736 | $ | 1,675,318 | $ | 530,658 | $ | (3,421 | ) | $ | 2,204,291 | |||||||||
Comprehensive income: | ||||||||||||||||||||
Net Income | — | — | 229,373 | — | 229,373 | |||||||||||||||
Other comprehensive income (loss) | — | — | — | (26,310 | ) | (26,310 | ) | |||||||||||||
Net issuance of 176,821 shares of common stock from exercise of stock options | 2 | 1,255 | — | — | 1,257 | |||||||||||||||
Issuance of 1,250,000 shares of common stock from acquisition of Shore Premier Finance | 13 | 28,188 | — | — | 28,201 | |||||||||||||||
Impact of adoption of new accounting standards(1) | — | — | 990 | (990 | ) | — | ||||||||||||||
Repurchase of 1,863,400 shares of common stock | (19 | ) | (43,151 | ) | — | — | (43,170 | ) | ||||||||||||
Share-based compensation net issuance of 956,125 shares of restricted common stock | 9 | 6,496 | — | — | 6,505 | |||||||||||||||
Cash dividends – Common Stock, $0.34 per share | — | — | (59,121 | ) | — | (59,121 | ) | |||||||||||||
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Balances at September 30, 2018 (unaudited) | $ | 1,741 | $ | 1,668,106 | $ | 701,900 | $ | (30,721 | ) | $ | 2,341,026 | |||||||||
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For the three and six months ended June 30, 2019 |
(In thousands, except share data) | Common Stock | Capital Surplus | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total | |||||||||||||||
Balances at January 1, 2019 | $ | 1,707 | $ | 1,609,810 | $ | 752,184 | $ | (13,815 | ) | $ | 2,349,886 | |||||||||
Comprehensive income: | ||||||||||||||||||||
Net income | — | — | 71,350 | — | 71,350 | |||||||||||||||
Other comprehensive income | — | — | — | 9,453 | 9,453 | |||||||||||||||
Impact of adoption of new accounting standards (1) | — | — | 459 | (459 | ) | — | ||||||||||||||
Repurchase of 2,716,359 shares of common stock | (27 | ) | (51,658 | ) | — | — | (51,685 | ) | ||||||||||||
Share-based compensation net issuance of 169,125 shares of restricted common stock | 2 | 2,842 | — | — | 2,844 | |||||||||||||||
Cash dividends – Common Stock, $0.12 per share | — | — | (20,364 | ) | — | (20,364 | ) | |||||||||||||
�� | ||||||||||||||||||||
Balances at March 31, 2019 (unaudited) | $ | 1,682 | $ | 1,560,994 | $ | 803,629 | $ | (4,821 | ) | $ | 2,361,484 | |||||||||
Comprehensive income: | ||||||||||||||||||||
Net Income | — | — | 72,164 | — | 72,164 | |||||||||||||||
Other comprehensive income | — | — | — | 19,589 | 19,589 | |||||||||||||||
Repurchase of 700,363 shares of common stock | (7 | ) | (12,680 | ) | — | — | (12,687 | ) | ||||||||||||
Share-based compensation net forfeiture of 6,500 shares of restricted stock | — | 2,685 | — | — | 2,685 | |||||||||||||||
Cash dividends – Common Stock, $0.13 per share | — | — | (21,829 | ) | — | (21,829 | ) | |||||||||||||
Balances at June 30, 2019 (unaudited) | $ | 1,675 | $ | 1,550,999 | $ | 853,964 | $ | 14,768 | $ | 2,421,406 | ||||||||||
(1) | Represents the impact of adopting Accounting Standard Update (“ASU”) 2018-02. See Note 1 to the consolidated financial statements for more information. |
Nine Months Ended September 30, | ||||||||
(In thousands) | 2018 | 2017 | ||||||
(Unaudited) | ||||||||
Operating Activities | ||||||||
Net income | $ | 229,373 | $ | 111,774 | ||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
Depreciation | 9,156 | 8,634 | ||||||
Investment amortization | 16,033 | 12,087 | ||||||
Accretion of purchased loans | (32,021 | ) | (23,319 | ) | ||||
Share-based compensation | 6,505 | 4,976 | ||||||
Gain on assets | (3,436 | ) | (1,720 | ) | ||||
Gain on acquisitions | — | (3,807 | ) | |||||
Provision for loan losses | 4,322 | 39,324 | ||||||
Deferred income tax effect | 14,593 | (15,867 | ) | |||||
Increase in cash value of life insurance | (2,119 | ) | (1,251 | ) | ||||
Originations of mortgage loans held for sale | (258,520 | ) | (243,948 | ) | ||||
Proceeds from sales of mortgage loans held for sale | 262,900 | 250,784 | ||||||
Changes in assets and liabilities: | ||||||||
Accrued interest receivable | (2,377 | ) | (1,814 | ) | ||||
Other assets | (17,485 | ) | (22,642 | ) | ||||
Accrued interest payable and other liabilities | 28,547 | (35,436 | ) | |||||
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| |||||
Net cash provided by operating activities | 255,471 | 77,775 | ||||||
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| |||||
Investing Activities | ||||||||
Net decrease (increase) in federal funds sold | 23,609 | (1,480 | ) | |||||
Net increase in loans, excluding purchased loans | (119,723 | ) | (92,015 | ) | ||||
Purchases of investment securities –available-for-sale | (380,847 | ) | (522,329 | ) | ||||
Proceeds from maturities of investment securities –available-for-sale | 252,795 | 120,785 | ||||||
Proceeds from sale of investment securities –available-for-sale | 1,064 | 28,368 | ||||||
Purchases of investment securities –held-to-maturity | — | (219 | ) | |||||
Proceeds from maturities of investment securities –held-to-maturity | 25,007 | 48,144 | ||||||
Proceeds from sale of investment securities –held-to-maturity | — | 491 | ||||||
Proceeds from foreclosed assets held for sale | 17,744 | 13,315 | ||||||
Proceeds from sale of SBA Loans | 7,938 | 13,630 | ||||||
Purchases of premises and equipment, net | (5,070 | ) | (4,383 | ) | ||||
Return of investment on cash value of life insurance | 1,325 | 592 | ||||||
Net cash (paid) proceeds received – market acquisitions | (377,411 | ) | 227,845 | |||||
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| |||||
Net cash used in investing activities | (553,569 | ) | (167,256 | ) | ||||
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| |||||
Financing Activities | ||||||||
Net increase in deposits, excluding deposits acquired | 236,236 | 536,891 | ||||||
Net (decrease) increase in securities sold under agreements to repurchase | (5,643 | ) | 2,078 | |||||
Net increase (decrease) in FHLB and other borrowed funds | 64,663 | (350,230 | ) | |||||
Proceeds from exercise of stock options | 1,257 | 849 | ||||||
Proceeds from issuance of subordinated notes | — | 297,201 | ||||||
Repurchase of common stock | (43,170 | ) | (19,538 | ) | ||||
Common stock issuance costs – market acquisitions | — | (825 | ) | |||||
Dividends paid on common stock | (59,121 | ) | (41,274 | ) | ||||
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Net cash provided by used in financing activities | 194,222 | 425,152 | ||||||
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Net change in cash and cash equivalents | (103,876 | ) | 335,671 | |||||
Cash and cash equivalents – beginning of year | 635,933 | 216,649 | ||||||
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Cash and cash equivalents – end of period | $ | 532,057 | $ | 552,320 | ||||
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Stockholders’ Equity
For the three and six months ended June 30, 2018 |
(In thousands, except share data) | Common Stock | Capital Surplus | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total | |||||||||||||||
Balances at January 1, 2018 | $ | 1,736 | $ | 1,675,318 | $ | 530,658 | $ | (3,421 | ) | $ | 2,204,291 | |||||||||
Comprehensive income: | ||||||||||||||||||||
Net income | — | — | 73,064 | — | 73,064 | |||||||||||||||
Other comprehensive loss | — | — | — | (15,871 | ) | (15,871 | ) | |||||||||||||
Net issuance of 142,116 shares of common stock from exercise of stock options | 1 | 899 | — | — | 900 | |||||||||||||||
Impact of adoption of new accounting standards (2) | — | — | 990 | (990 | ) | — | ||||||||||||||
Repurchase of 303,637 shares of common stock | (3 | ) | (7,111 | ) | — | — | (7,114 | ) | ||||||||||||
Share-based compensation net issuance of 147,000 shares of restricted common stock | 2 | 2,035 | — | — | 2,037 | |||||||||||||||
Cash dividends – Common Stock, $0.11 per share | — | — | (19,126 | ) | — | (19,126 | ) | |||||||||||||
Balances at March 31, 2018 (unaudited) | $ | 1,736 | $ | 1,671,141 | $ | 585,586 | $ | (20,282 | ) | $ | 2,238,181 | |||||||||
Comprehensive income: | ||||||||||||||||||||
Net income | — | — | 76,025 | — | 76,025 | |||||||||||||||
Other comprehensive loss | — | — | — | (3,327 | ) | (3,327 | ) | |||||||||||||
Issuance of common stock - 3,424 stock options | — | 38 | — | — | 38 | |||||||||||||||
Issuance 1,250,000 shares of common stock from acquisition of Shore Premier Finance | 13 | 28,188 | — | — | 28,201 | |||||||||||||||
Repurchase of 345,683 shares of common stock | (3 | ) | (7,878 | ) | — | — | (7,881 | ) | ||||||||||||
Share-based compensation | (1 | ) | 1,848 | 1,847 | ||||||||||||||||
Cash dividends – Common Stock, $0.11 per share | — | — | (19,071 | ) | — | (19,071 | ) | |||||||||||||
Balances at June 30, 2018 (unaudited) | $ | 1,745 | $ | 1,693,337 | $ | 642,540 | $ | (23,609 | ) | $ | 2,314,013 | |||||||||
(2) | Represents the impact of adopting Accounting Standard Update (“ASU”) 2016-01. |
Six Months Ended June 30, | ||||||||
(In thousands) | 2019 | 2018 | ||||||
(Unaudited) | ||||||||
Operating Activities | ||||||||
Net income | $ | 143,514 | $ | 149,089 | ||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
Depreciation & amortization | 9,847 | 9,863 | ||||||
Amortization of securities, net | 7,165 | 6,781 | ||||||
Accretion of purchased loans | (18,295 | ) | (21,276 | ) | ||||
Share-based compensation | 5,529 | 3,884 | ||||||
Gain on assets | (423 | ) | (2,268 | ) | ||||
Provision for loan losses | 1,325 | 4,322 | ||||||
Deferred income tax effect | 14,760 | 13,200 | ||||||
Increase in cash value of life insurance | (1,476 | ) | (1,384 | ) | ||||
Originations of mortgage loans held for sale | (194,982 | ) | (171,616 | ) | ||||
Proceeds from sales of mortgage loans held for sale | 175,418 | 176,029 | ||||||
Changes in assets and liabilities: | ||||||||
Accrued interest receivable | (47 | ) | 850 | |||||
Other assets | (15,931 | ) | (21,692 | ) | ||||
Accrued interest payable and other liabilities | (6,839 | ) | 14,012 | |||||
Net cash provided by operating activities | 119,565 | 159,794 | ||||||
Investing Activities | ||||||||
Net (increase) decrease in federal funds sold | (750 | ) | 23,609 | |||||
Net decrease (increase) in loans, excluding purchased loans | 38,130 | (183,630 | ) | |||||
Purchases of investment securities – available-for-sale | (258,735 | ) | (254,851 | ) | ||||
Proceeds from maturities of investment securities – available-for-sale | 215,586 | 166,403 | ||||||
Proceeds from sale of investment securities – available-for-sale | — | 809 | ||||||
Proceeds from maturities of investment securities – held-to-maturity | — | 20,048 | ||||||
Redemptions (purchases) of other investments | 9,174 | (731 | ) | |||||
Proceeds from foreclosed assets held for sale | 5,530 | 10,384 | ||||||
Proceeds from sale of SBA loans | 9,261 | 7,055 | ||||||
Purchases of premises and equipment, net | (5,287 | ) | (3,422 | ) | ||||
Return of investment on cash value of life insurance | — | 1,325 | ||||||
Net cash paid – market acquisitions | — | (384,983 | ) | |||||
Net cash provided by (used in) investing activities | 12,909 | (597,984 | ) | |||||
Financing Activities | ||||||||
Net increase in deposits | 447,538 | 347,531 | ||||||
Net decrease in securities sold under agreements to repurchase | (1,138 | ) | (8,039 | ) | ||||
Net (decrease) increase in FHLB and other borrowed funds | (572,946 | ) | 10,762 | |||||
Proceeds from exercise of stock options | — | 938 | ||||||
Repurchase of common stock | (64,372 | ) | (14,995 | ) | ||||
Dividends paid on common stock | (42,193 | ) | (38,197 | ) | ||||
Net cash (used in) provided by financing activities | (233,111 | ) | 298,000 | |||||
Net change in cash and cash equivalents | (100,637 | ) | (140,190 | ) | ||||
Cash and cash equivalents – beginning of year | 657,939 | 635,933 | ||||||
Cash and cash equivalents – end of period | $ | 557,302 | $ | 495,743 | ||||
Revenue Recognition.
Service charges on deposit accounts – These represent general service fees for monthly account maintenance and activity or transaction-based fees and consist of transaction-based revenue, time-based revenue (service period), item-based revenue or some other individual attribute-based revenue. Revenue is recognized when our performance obligation is completed which is generally monthly for account maintenance services or when a transaction has been completed (such as a wire transfer). Payment for such performance obligations are generally received at the time the performance obligations are satisfied.
Other service charges and fees – These represent credit card interchange fees and Centennial CFG loan fees. The interchange fees are recorded in the period the performance obligation is satisfied which is generally the cash basis based on agreed upon contracts. The Centennial CFG loan fees are based on loan or other negotiated agreements with customers and are accounted for under ASC Topic 310.
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Earnings per Share
Basic earnings per share is computed based on the weighted-average number of shares outstanding during each year. Diluted earnings per share is computed using the weighted-average shares and all potential dilutive shares outstanding during the period. The following table sets forth the computation of basic and diluted earnings per share (“EPS”) for the following periods:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(In thousands) | ||||||||||||||||
Net income | $ | 80,284 | $ | 14,821 | $ | 229,373 | $ | 111,774 | ||||||||
Average shares outstanding | 174,440 | 144,238 | 173,870 | 143,111 | ||||||||||||
Effect of common stock options | 427 | 749 | 524 | 728 | ||||||||||||
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Average diluted shares outstanding | 174,867 | 144,987 | 174,394 | 143,839 | ||||||||||||
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Basic earnings per share | $ | 0.46 | $ | 0.10 | $ | 1.32 | $ | 0.78 | ||||||||
Diluted earnings per share | $ | 0.46 | $ | 0.10 | $ | 1.32 | $ | 0.78 |
2. Business Combinations
Acquisition of Shore Premier Finance
On June 30, 2018, the Company, completed the acquisition of Shore Premier Finance (“SPF”), a division of Union Bank & Trust of Richmond, Virginia, the bank subsidiary of Union Bankshares Corporation. The Company paid a purchase price of approximately $377.4 million in cash, subject to certain post-closing adjustments, adopted ASU
Including the effects of known purchase accounting adjustments, as of acquisition date, SPF had approximately $377.0 million in total assets, including $376.2 million in total loans and $1.9 million in assumed liabilities, which resulted in tentative goodwill of $30.5 million being recorded. The purchase price allocation and certain fair value measurements remain preliminary due to the timing of the acquisition. The Company will continue to review the estimated fair values of loans and intangible assets and to evaluate the assumed tax positions and contingencies.
This portfolio of loans is now housed in a division of Centennial known as Shore Premier Finance. The SPF division of Centennial is responsible for servicing the acquired loan portfolio and originating new loan production.Lessors
The Company has determined that the acquisition of the net assets of SPF constitutes a business combination as defined by the ASC Topic 805. Accordingly, the assets acquired are presented at their fair values as required. Fair values were determined based on the requirements of ASC Topic 820. In many cases, the determination of these fair values required management to make estimates about discount rates, future expected cash flows, market conditions and other future events that are highly subjective in nature and subject to change.
Acquisition of Stonegate Bank
On September 26, 2017, the Company, completed the acquisition of all of the issued and outstanding shares of common stock of Stonegate Bank (“Stonegate”), and merged Stonegate into Centennial. The Company paid a purchase price to the Stonegate shareholders of approximately $792.4 million for the Stonegate acquisition. Under the terms of the merger agreement, shareholders of Stonegate received 30,863,658 shares of HBI common stock valued at approximately $742.3 million plus approximately $50.1 million in cash in exchange for all outstanding shares of Stonegate common stock. In addition, the holders of outstanding stock options of Stonegate received approximately $27.6 million in cash in connection with the cancellation of their options immediately before the acquisition closed, for a total transaction value of approximately $820.0 million.
Including the effects of the purchase accounting adjustments, as of acquisition date, Stonegate had approximately $2.89 billion in total assets, $2.37 billion in loans and $2.53 billion in customer deposits. Stonegate formerly operated its banking business from 24 locations in key Florida markets with significant presence in Broward and Sarasota counties.
The Company has determined that the acquisition of the net assets of Stonegate constitutes a business combination as defined by the ASC Topic 805. Accordingly, the assets acquired and liabilities assumed are presented at their fair values as required. Fair values were determined based on the requirements of ASC Topic 820. In many cases, the determination of these fair values required
management to make estimates about discount rates, future expected cash flows, market conditions and other future events that are highly subjective in nature and subject to change. The following schedule is a breakdown of the assets acquired and liabilities assumed as of the acquisition date:
Stonegate Bank | ||||||||||||
Acquired from Stonegate | Fair Value Adjustments | As Recorded by HBI | ||||||||||
(Dollars in thousands) | ||||||||||||
Assets | ||||||||||||
Cash and due from banks | $ | 100,958 | $ | — | $ | 100,958 | ||||||
Interest-bearing deposits with other banks | 135,631 | — | 135,631 | |||||||||
Federal funds sold | 1,515 | — | 1,515 | |||||||||
Investment securities | 103,041 | 474 | 103,515 | |||||||||
Loans receivable | 2,446,149 | (74,067 | ) | 2,372,082 | ||||||||
Allowance for loan losses | (21,507 | ) | 21,507 | — | ||||||||
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Loans receivable, net | 2,424,642 | (52,560 | ) | 2,372,082 | ||||||||
Bank premises and equipment, net | 38,868 | (3,572 | ) | 35,296 | ||||||||
Foreclosed assets held for sale | 4,187 | (801 | ) | 3,386 | ||||||||
Cash value of life insurance | 48,000 | — | 48,000 | |||||||||
Accrued interest receivable | 7,088 | — | 7,088 | |||||||||
Deferred tax asset, net | 27,340 | 11,990 | 39,330 | |||||||||
Goodwill | 81,452 | (81,452 | ) | — | ||||||||
Core deposit and other intangibles | 10,505 | 20,364 | 30,869 | |||||||||
Other assets | 9,598 | 255 | 9,853 | |||||||||
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Total assets acquired | $ | 2,992,825 | $ | (105,302 | ) | $ | 2,887,523 | |||||
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Liabilities | ||||||||||||
Deposits | ||||||||||||
Demand andnon-interest-bearing | $ | 585,959 | $ | — | $ | 585,959 | ||||||
Savings and interest-bearing transaction accounts | 1,776,256 | — | 1,776,256 | |||||||||
Time deposits | 163,567 | (85 | ) | 163,482 | ||||||||
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Total deposits | 2,525,782 | (85 | ) | 2,525,697 | ||||||||
FHLB borrowed funds | 32,667 | 184 | 32,851 | |||||||||
Securities sold under agreements to repurchase | 26,163 | — | 26,163 | |||||||||
Accrued interest payable and other liabilities | 8,100 | (484 | ) | 7,616 | ||||||||
Subordinated debentures | 8,345 | 1,489 | 9,834 | |||||||||
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Total liabilities assumed | 2,601,057 | 1,104 | 2,602,161 | |||||||||
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Equity | ||||||||||||
Total equity assumed | 391,768 | (391,768 | ) | — | ||||||||
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Total liabilities and equity assumed | $ | 2,992,825 | $ | (390,664 | ) | 2,602,161 | ||||||
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Net assets acquired | 285,362 | |||||||||||
Purchase price | 792,370 | |||||||||||
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Goodwill | $ | 507,008 | ||||||||||
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The following is a description of the methods used to determine the fair values of significant assets and liabilities presented above:
Cash and due from banks, interest-bearing deposits with other banks and federal funds sold – The carrying amount of these assets is a reasonable estimate of fair value based on the short-term nature of these assets.
Investment securities – Investment securities were acquired from Stonegate with an approximately $474,000 adjustment to market value based upon quoted market prices.
Loans – Fair values for loans were based on a discounted cash flow methodology that considered factors including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan and whether or not the loan was amortizing, and current discount rates. The discount rates used for loans are based on current market rates for new originations of comparable loans and include adjustments for liquidity concerns.
The Company evaluated $2.37 billion of the loans purchased in conjunction with the acquisition in accordance with the provisions of FASB ASC Topic310-20,Nonrefundable Feeslease standards, the Company determines if an arrangement is a lease at inception. Operating leases are included in theOther Costs,which were recorded with a $73.3 million discount. As a result, the fair value discount on these loans is being accreted into interest income over the weighted average life of the loans using a constant yield method. The remaining $74.3 million of loans evaluated were considered purchased credit impaired loanslease liability within the provisions of FASB ASC Topic310-30,Loans and Debt Securities Acquired with Deteriorated Credit Quality, and were recorded with a $23.3 million discount. These purchase credit impaired loans will recognize interest income through accretion of the difference between the carrying amount of the loans and the expected cash flows. The acquired Stonegate loan balance and the fair value adjustment on loans receivable includes $22.6 million of discount on purchased loans, respectively.
Bankbank premises and equipment, – Bank premises and equipment were acquired from Stonegate with a $3.6 million adjustment to market value. This represents the difference between current appraisals completed in connection with the acquisition and book value acquired.
Foreclosed assets held for sale – These assets are presented at the estimated fair values that management expects to receive when the properties are sold, net of related costs of disposal.
Cash value of life insurance– Cash value of life insurance was acquired from Stonegate at market value.
Accrued interest receivable – Accrued interest receivable was acquired from Stonegate at market value.
Deferred tax asset – The current and deferred income tax assets and liabilities are recorded to reflect the differences in the carrying values of the acquired assets and assumed liabilities for financial reporting purposes and the cost basis for federal income tax purposes, at the Company’s statutory federal and state income tax rate which was 39.225% at the time of acquisition.
Core deposit intangible – This intangible asset represents the value of the relationships that Stonegate had with its deposit customers. The fair value of this intangible asset was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, cost of the deposit base, and the net maintenance cost attributable to customer deposits. The Company recorded $30.9 million of core deposit intangible.
Deposits – The fair values used for the demand and savings deposits that comprise the transaction accounts acquired, by definition equal the amount payable on demand at the acquisition date. The $85,000 fair value adjustment applied for time deposits was because the weighted average interest rate of Stonegate’s certificates of deposits were estimated to be below the current market rates.
FHLB borrowed funds – The fair value of FHLB borrowed funds is estimated based on borrowing rates currently available to the Company for borrowings with similar terms and maturities.
Securities sold under agreements to repurchase – Securities sold under agreements to repurchase were acquired from Stonegate at market value.
Accrued interest payable and other liabilities – Accrued interest payable and other liabilities, were acquired from Stonegate at market value.
Subordinated debentures – The fair value of subordinated debentures is estimated based on borrowing rates currently available to the Company for borrowings with similar terms and maturities.
The unauditedpro-forma combined consolidated financial information presents how the combined financial information of HBI and Stonegate might have appeared had the businesses actually been combined. The following schedule represents the unaudited pro forma combined financial information as of the years ended December 31, 2017 and 2016, assuming the acquisition was completed as of January 1, 2017 and 2016, respectively:
Years Ended December 31, | ||||||||
2017 | 2016 | |||||||
(In thousands, except per share data) | ||||||||
Total interest income | $ | 610,697 | $ | 538,258 | ||||
Totalnon-interest income | 107,179 | 95,555 | ||||||
Net income available to all shareholders | 143,979 | 206,081 | ||||||
Basic earnings per common share | $ | 0.79 | $ | 1.20 | ||||
Diluted earnings per common share | 0.79 | 1.20 |
The unauditedpro-forma consolidated financial information is presented for illustrative purposes only and does not indicate the financial results of the combined company had the companies actually been combined at the beginning of the period presented and had the impact of possible significant revenue enhancements and expense efficiencies fromin-market cost savings, among other factors, been considered and, accordingly, does not attempt to predict or suggest future results. It also does not necessarily reflect what the historical results of the combined company would have been had the companies been combined during this period.
Acquisition of The Bank of Commerce
On February 28, 2017, the Company completed its acquisition of all of the issued and outstanding shares of common stock of The Bank of Commerce (“BOC”), a Florida state-chartered bank that operated in the Sarasota, Florida area, pursuant to an acquisition agreement, dated December 1, 2016, by and between HBI and Bank of Commerce Holdings, Inc. (“BCHI”), parent company of BOC. The Company merged BOC with and into Centennial effective as of the close of business on February 28, 2017.
The acquisition of BOC was conducted in accordance with the provisions of Section 363 of the United States Bankruptcy Code (the “Bankruptcy Code”) pursuant to a voluntary petition for relief under Chapter 11 of the Bankruptcy Code filed by BCHI with the United States Bankruptcy Court for the Middle District of Florida (the “Bankruptcy Court”). The sale of BOC by BCHI was subject to certain bidding procedures approved by the Bankruptcy Court, under which the Company submitted an initial bid to purchase the outstanding shares of BOC and was deemed to be the successful bidder after a subsequent auction was held. The Bankruptcy Court entered a final order on December 9, 2016 approving the sale of BOC to the Company pursuant to and in accordance with the acquisition agreement.
Under the terms of the acquisition agreement, the Company paid an aggregate of approximately $4.2 million in cash for the acquisition, which included the purchase of all outstanding shares of BOC common stock, the discounted purchase of certain subordinated debentures issued by BOC from the existing holders of the subordinated debentures, and an expense reimbursement to BCHI for approved administrative claims in connection with the bankruptcy proceeding.
BOC formerly operated three branch locations in the Sarasota, Florida area. Including the effects of the purchase accounting adjustments, as of acquisition date, BOC had approximately $178.1 million in total assets, $118.5 million in loans after $5.8 million of loan discounts, and $139.8 million in deposits.
The Company has determined that the acquisition of the net assets of BOC constitutes a business combination as defined by the ASC Topic 805. Accordingly, the assets acquired and liabilities assumed are presented at their fair values as required. Fair values were determined based on the requirements of ASC Topic 820. In many cases, the determination of these fair values required management to make estimates about discount rates, future expected cash flows, market conditions and other future events that are highly subjective in nature and subject to change. The following schedule is a breakdown of the assets acquired and liabilities assumed as of the acquisition date:
The Bank of Commerce | ||||||||||||
Acquired from BOC | Fair Value Adjustments | As Recorded by HBI | ||||||||||
(Dollars in thousands) | ||||||||||||
Assets | ||||||||||||
Cash and due from banks | $ | 4,610 | $ | — | $ | 4,610 | ||||||
Interest-bearing deposits with other banks | 14,360 | — | 14,360 | |||||||||
Investment securities | 25,926 | (113 | ) | 25,813 | ||||||||
Loans receivable | 124,289 | (5,751 | ) | 118,538 | ||||||||
Allowance for loan losses | (2,037 | ) | 2,037 | — | ||||||||
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Loans receivable, net | 122,252 | (3,714 | ) | 118,538 | ||||||||
Bank premises and equipment, net | 1,887 | — | 1,887 | |||||||||
Foreclosed assets held for sale | 8,523 | (3,165 | ) | 5,358 | ||||||||
Accrued interest receivable | 481 | — | 481 | |||||||||
Deferred tax asset, net | — | 4,198 | 4,198 | |||||||||
Core deposit intangible | �� | 968 | 968 | |||||||||
Other assets | 1,880 | — | 1,880 | |||||||||
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Total assets acquired | $ | 179,919 | $ | (1,826 | ) | $ | 178,093 | |||||
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Liabilities | ||||||||||||
Deposits | ||||||||||||
Demand andnon-interest-bearing | $ | 27,245 | $ | — | $ | 27,245 | ||||||
Savings and interest-bearing transaction accounts | 32,300 | — | 32,300 | |||||||||
Time deposits | 79,945 | 270 | 80,215 | |||||||||
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Total deposits | 139,490 | 270 | 139,760 | |||||||||
FHLB borrowed funds | 30,000 | 42 | 30,042 | |||||||||
Accrued interest payable and other liabilities | 564 | (255 | ) | 309 | ||||||||
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Total liabilities assumed | $ | 170,054 | $ | 57 | 170,111 | |||||||
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Net assets acquired | 7,982 | |||||||||||
Purchase price | 4,175 | |||||||||||
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Pre-tax gain on acquisition | $ | 3,807 | ||||||||||
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The following is a description of the methods used to determine the fair values of significant assets and liabilities presented above:
Cash and due from banks and interest-bearing deposits with other banks – The carrying amount of these assets is a reasonable estimate of fair value based on the short-term nature of these assets.
Investment securities – Investment securities were acquired from BOC with an $113,000 adjustment to market value based upon quoted market prices.
Loans – Fair values for loans were based on a discounted cash flow methodology that considered factors including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan and whether or not the loan was amortizing, and current discount rates. The discount rates used for loans are based on current market rates for new originations of comparable loans and include adjustments for liquidity concerns.
The Company evaluated $106.8 million of the loans purchased in conjunction with the acquisition in accordance with the provisions of FASB ASC Topic310-20,Nonrefundable Fees and Other Costs,which were recorded with a $3.0 million discount. As a result, the fair value discount on these loans is being accreted into interest income over the weighted-average life of the loans using a constant yield method. The remaining $17.5 million of loans evaluated were considered purchased credit impaired loans within the provisions of FASB ASC Topic310-30,Loans and Debt Securities Acquired with Deteriorated Credit Quality, and were recorded with a $2.8 million discount. These purchase credit impaired loans will recognize interest income through accretion of the difference between the carrying amount of the loans and the expected cash flows.
Bank premises and equipment – Bank premises and equipment were acquired from BOC at market value.
Foreclosed assets held for sale – These assets are presented at the estimated fair values that management expects to receive when the properties are sold, net of related costs to sell.
Accrued interest receivable – Accrued interest receivable was acquired from BOC at market value.
Deferred tax asset – The current and deferred income tax assets and liabilities are recorded to reflect the differences in the carrying values of the acquired assets and assumed liabilities for financial reporting purposes and the cost basis for federal income tax purposes, at the Company’s statutory federal and state income tax rate which was 39.225% at the time of acquisition.
Core deposit intangible – This intangible asset represents the value of the relationships that BOC had with its deposit customers. The fair value of this intangible asset was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, cost of the deposit base, and the net maintenance cost attributable to customer deposits. The Company recorded $968,000 of core deposit intangible.
Deposits – The fair values used for the demand and savings deposits that comprise the transaction accounts acquired, by definition equal the amount payable on demand at the acquisition date. The $270,000 fair value adjustment applied for time deposits was because the weighted-average interest rate of BOC’s certificates of deposits was estimated to be above the current market rates.
FHLB borrowed funds – The fair value of FHLB borrowed funds is estimated based on borrowing rates currently available to the Company for borrowings with similar terms and maturities.
Accrued interest payable and other liabilities – The fair value used represents the adjustment of certain estimated liabilities from BOC.
The Company’s operating results for the period ended December 31, 2017, include the operating results of the acquired assets and assumed liabilities subsequent to the acquisition date. Due to the fair value adjustments recorded and the fact BOC total assets acquired are less than 5% of total assets as of December 31, 2017 excluding BOC as recorded by HBI as of acquisition date, historical results are not believed to be material to the Company’s results, and thus nopro-forma information is presented.
Acquisition of Giant Holdings, Inc.
On February 23, 2017, the Company completed its acquisition of Giant Holdings, Inc. (“GHI”), parent company of Landmark Bank, N.A. (“Landmark”), pursuant to a definitive agreement and plan of merger whereby GHI merged with and into HBI and, immediately thereafter, Landmark merged with and into Centennial. The Company paid a purchase price to the GHI shareholders of approximately $96.0 million for the GHI acquisition. Under the terms of the agreement, shareholders of GHI received 2,738,038 shares of the Company’s common stock valued at approximately $77.5 million as of February 23, 2017, plus approximately $18.5 million in cash in exchange for all outstanding shares of GHI common stock.
GHI formerly operated six branch locations in the Ft. Lauderdale, Florida area. Including the effects of the purchase accounting adjustments, as of acquisition date, GHI had approximately $398.1 million in total assets, $327.8 million in loans after $8.1 million of loan discounts, and $304.0 million in deposits.
The Company has determined that the acquisition of the net assets of GHI constitutes a business combination as defined by the ASC Topic 805. Accordingly, the assets acquired and liabilities assumed are presented at their fair values as required. Fair values were determined based on the requirements of ASC Topic 820. In many cases, the determination of these fair values required management to make estimates about discount rates, future expected cash flows, market conditions and other future events that are highly subjective in nature and subject to change. The following schedule is a breakdown of the assets acquired and liabilities assumed as of the acquisition date:
Giant Holdings, Inc. | ||||||||||||
Acquired from GHI | Fair Value Adjustments | As Recorded by HBI | ||||||||||
(Dollars in thousands) | ||||||||||||
Assets | ||||||||||||
Cash and due from banks | $ | 41,019 | $ | — | $ | 41,019 | ||||||
Interest-bearing deposits with other banks | 4,057 | 1 | 4,058 | |||||||||
Investment securities | 1,961 | (5 | ) | 1,956 | ||||||||
Loans receivable | 335,886 | (6,517 | ) | 329,369 | ||||||||
Allowance for loan losses | (4,568 | ) | 4,568 | — | ||||||||
|
|
|
|
|
| |||||||
Loans receivable, net | 331,318 | (1,949 | ) | 329,369 | ||||||||
Bank premises and equipment, net | 2,111 | 608 | 2,719 | |||||||||
Cash value of life insurance | 10,861 | — | 10,861 | |||||||||
Accrued interest receivable | 850 | — | 850 | |||||||||
Deferred tax asset, net | 2,286 | 1,807 | 4,093 | |||||||||
Core deposit and other intangibles | 172 | 3,238 | 3,410 | |||||||||
Other assets | 254 | (489 | ) | (235 | ) | |||||||
|
|
|
|
|
| |||||||
Total assets acquired | $ | 394,889 | $ | 3,211 | $ | 398,100 | ||||||
|
|
|
|
|
| |||||||
Liabilities | ||||||||||||
Deposits | ||||||||||||
Demand andnon-interest-bearing | $ | 75,993 | $ | — | $ | 75,993 | ||||||
Savings and interest-bearing transaction accounts | 139,459 | — | 139,459 | |||||||||
Time deposits | 88,219 | 324 | 88,543 | |||||||||
|
|
|
|
|
| |||||||
Total deposits | 303,671 | 324 | 303,995 | |||||||||
FHLB borrowed funds | 26,047 | 431 | 26,478 | |||||||||
Accrued interest payable and other liabilities | 14,552 | 18 | 14,570 | |||||||||
|
|
|
|
|
| |||||||
Total liabilities assumed | 344,270 | 773 | 345,043 | |||||||||
|
|
|
|
|
| |||||||
Equity | ||||||||||||
Total equity assumed | 50,619 | (50,619 | ) | — | ||||||||
|
|
|
|
|
| |||||||
Total liabilities and equity assumed | $ | 394,889 | $ | (49,846 | ) | 345,043 | ||||||
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|
|
|
|
| |||||||
Net assets acquired | 53,057 | |||||||||||
Purchase price | 96,015 | |||||||||||
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| |||||||||||
Goodwill | $ | 42,958 | ||||||||||
|
|
The following is a description of the methods used to determine the fair values of significant assets and liabilities presented above:
Cash and due from banks and interest-bearing deposits with other banks – The carrying amount of these assets is a reasonable estimate of fair value based on the short-term nature of these assets.
Investment securities – Investment securities were acquired from GHI with an approximately $5,000 adjustment to market value based upon quoted market prices.
Loans – Fair values for loans were based on a discounted cash flow methodology that considered factors including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan and whether or not the loan was amortizing, and current discount rates. The discount rates used for loans are based on current market rates for new originations of comparable loans and include adjustments for liquidity concerns.
The Company evaluated $315.6 million of the loans purchased in conjunction with the acquisition in accordance with the provisions of FASB ASC Topic310-20,Nonrefundable Fees and Other Costs,which were recorded with a $3.6 million discount. As a result, the fair value discount on these loans is being accreted into interest income over the weighted-average life of the loans using a constant yield method. The remaining $20.3 million of loans evaluated were considered purchased credit impaired loans within the provisions of FASB ASC Topic310-30,Loans and Debt Securities Acquired with Deteriorated Credit Quality, and were recorded with a $4.5 million discount. These purchase credit impaired loans will recognize interest income through accretion of the difference between the carrying amount of the loans and the expected cash flows. The acquired GHI loan balance includes $1.6 million of discount on purchased loans.
Bank premises and equipment – Bank premises and equipment were acquired from GHI with a $608,000 adjustment to market value. This represents the difference between current appraisals completed in connection with the acquisition and book value acquired.
Cash value of life insurance– Cash value of life insurance was acquired from GHI at market value.
Accrued interest receivable – Accrued interest receivable was acquired from GHI at market value.
Deferred tax asset – The current and deferred income tax assets and liabilities are recorded to reflect the differences in the carrying values of the acquired assets and assumed liabilities for financial reporting purposes and the cost basis for federal income tax purposes, at the Company’s statutory federal and state income tax rate which was 39.225% at the time of acquisition.
Core deposit intangible – This intangible asset represents the value of the relationships that GHI had with its deposit customers. The fair value of this intangible asset was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, cost of the deposit base, and the net maintenance cost attributable to customer deposits. The Company recorded $3.4 million of core deposit intangible.
Deposits – The fair values used for the demand and savings deposits that comprise the transaction accounts acquired, by definition equal the amount payable on demand at the acquisition date. The $324,000 fair value adjustment applied for time deposits was because the weighted-average interest rate of GHI’s certificates of deposits was estimated to be above the current market rates.
FHLB borrowed funds – The fair value of FHLB borrowed funds is estimated based on borrowing rates currently available to the Company for borrowings with similar terms and maturities.
Accrued interest payable and other liabilities – The fair value used represents the adjustments of certain estimated liabilities from GHI.
3. Investment Securities
The amortized cost and estimated fair value of investment securities that are classified asavailable-for-sale andheld-to-maturity are as follows:
September 30, 2018 | ||||||||||||||||
Available-for-Sale | ||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized (Losses) | Estimated Fair Value | |||||||||||||
(In thousands) | ||||||||||||||||
U.S. government-sponsored enterprises | $ | 427,722 | $ | 138 | $ | (7,985 | ) | $ | 419,875 | |||||||
Residential mortgage-backed securities | 533,106 | 294 | (15,386 | ) | 518,014 | |||||||||||
Commercial mortgage-backed securities | 478,409 | 87 | (14,636 | ) | 463,860 | |||||||||||
State and political subdivisions | 311,117 | 1,235 | (6,202 | ) | 306,150 | |||||||||||
Other securities | 35,554 | 1,160 | (183 | ) | 36,531 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 1,785,908 | $ | 2,914 | $ | (44,392 | ) | $ | 1,744,430 | |||||||
|
|
|
|
|
|
|
|
Held-to-Maturity | ||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized (Losses) | Estimated Fair Value | |||||||||||||
(In thousands) | ||||||||||||||||
U.S. government-sponsored enterprises | $ | 3,587 | $ | — | $ | (87 | ) | $ | 3,500 | |||||||
Residential mortgage-backed securities | 47,670 | 23 | (1,395 | ) | 46,298 | |||||||||||
Commercial mortgage-backed securities | 12,705 | — | (370 | ) | 12,335 | |||||||||||
State and political subdivisions | 135,304 | 1,368 | (253 | ) | 136,419 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 199,266 | $ | 1,391 | $ | (2,105 | ) | $ | 198,552 | |||||||
|
|
|
|
|
|
|
|
December 31, 2017 | ||||||||||||||||
Available-for-Sale | ||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized (Losses) | Estimated Fair Value | |||||||||||||
(In thousands) | ||||||||||||||||
U.S. government-sponsored enterprises | $ | 407,387 | $ | 899 | $ | (1,982 | ) | $ | 406,304 | |||||||
Residential mortgage-backed securities | 481,981 | 538 | (4,919 | ) | 477,600 | |||||||||||
Commercial mortgage-backed securities | 497,870 | 332 | (4,430 | ) | 493,772 | |||||||||||
State and political subdivisions | 247,292 | 3,783 | (774 | ) | 250,301 | |||||||||||
Other securities | 34,617 | 1,225 | (302 | ) | 35,540 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 1,669,147 | $ | 6,777 | $ | (12,407 | ) | $ | 1,663,517 | |||||||
|
|
|
|
|
|
|
|
Held-to-Maturity | ||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized (Losses) | Estimated Fair Value | |||||||||||||
(In thousands) | ||||||||||||||||
U.S. government-sponsored enterprises | $ | 5,791 | $ | 15 | $ | (15 | ) | $ | 5,791 | |||||||
Residential mortgage-backed securities | 56,982 | 107 | (402 | ) | 56,687 | |||||||||||
Commercial mortgage-backed securities | 16,625 | 114 | (40 | ) | 16,699 | |||||||||||
State and political subdivisions | 145,358 | 3,031 | (27 | ) | 148,362 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 224,756 | $ | 3,267 | $ | (484 | ) | $ | 227,539 | |||||||
|
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|
|
|
|
|
|
Assets, principally investment securities, having a carrying value of approximately $1.17 billion and $1.18 billion at September 30, 2018 and December 31, 2017, respectively, were pledged to secure public deposits and for other purposes required or permitted by law. Also, investment securities pledged as collateral for repurchase agreements totaled approximately $142.1 million and $147.8 million at September 30, 2018 and December 31, 2017, respectively.
The amortized cost and estimated fair value of securities classified asavailable-for-sale andheld-to-maturity at September 30, 2018, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.
Available-for-Sale | Held-to-Maturity | |||||||||||||||
Amortized Cost | Estimated Fair Value | Amortized Cost | Estimated Fair Value | |||||||||||||
(In thousands) | ||||||||||||||||
Due in one year or less | $ | 188,664 | $ | 185,303 | $ | 64,821 | $ | 65,527 | ||||||||
Due after one year through five years | 997,039 | 975,767 | 89,950 | 89,016 | ||||||||||||
Due after five years through ten years | 468,969 | 455,579 | 11,773 | 11,472 | ||||||||||||
Due after ten years | 131,236 | 127,781 | 32,722 | 32,537 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 1,785,908 | $ | 1,744,430 | $ | 199,266 | $ | 198,552 | ||||||||
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|
|
|
|
|
|
|
For purposes of the maturity tables, mortgage-backed securities, which are not due at a single maturity date, have been allocated over maturity groupings based on anticipated maturities. The mortgage-backed securities may mature earlier than their weighted-average contractual maturities because of principal prepayments.
During the three-month period ended September 30, 2018, approximately $1.4 million inavailable-for-sale securities were sold. During nine-month period ended September 30, 2018, approximately $2.1 million inavailable-for-sale securities were sold. There were no realized gains or losses recorded on the sales for the three and nine-month periods ended September 30, 2018. The income tax expense/benefit to net security gains and losses was 26.135% of the gross amounts.
During the three and nine-month periods ended September 30, 2017, approximately $234,000 and $27.4 million, respectively, inavailable-for-sale securities were sold. The gross realized gains on the sale for the three-month period ended September 30, 2017 totaled approximately $136,000. The gross realized gains and losses on the sales for the nine-month period ended September 30, 2017 totaled approximately $1.1 million and $127,000, respectively. The income tax expense/benefit to net security gains and losses was 39.225% of the gross amounts.
During the three-month and nine-month periods ended September 30, 2018, noheld-to-maturity securities were sold. During the nine-month period ended September 30, 2017, oneheld-to-maturity security experienced its second downgrade in its credit rating. The Company made a strategic decision to sell thisheld-to-maturity security for approximately $483,000, which resulted in a gross realized loss on the sale for the nine-month period ended September 30, 2017 of approximately $7,000.
The Company evaluates all securities quarterly to determine if any unrealized losses are deemed to be other than temporary. In completing these evaluations, the Company follows the requirements of FASB ASC 320,Investments—Debt and Equity Securities. Certain investment securities are valued less than their historical cost. These declines are primarily the result of the rate for these investments yielding less than current market rates. Based on evaluation of available evidence, management believes the declines in fair value for these securities are temporary. The Company does not intend to sell or believe it will be required to sell these investments before recovery of their amortized cost basis, which may be maturity. Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced, and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified.
During the three and nine-month periods ended September 30, 2018, no securities were deemed to have other-than-temporary impairment.
At September 30, 2018, the Company had investment securities with approximately $26.9 million in unrealized losses, which have been in continuous loss positions for more than twelve months. Excluding impairment write downs taken in prior periods, the Company’s assessments indicated that the cause of the market depreciation was primarily the change in interest rates and not the issuer’s financial condition, or downgrades by rating agencies. In addition, approximately 67.7% of the Company’s investment portfolio matures in five years or less. As a result, the Company has the ability and intent to hold such securities until maturity.
The following shows gross unrealized losses and estimated fair value of investment securities classified asavailable-for-sale andheld-to-maturity with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual investment securities have been in a continuous loss position as of September 30, 2018 and December 31, 2017:
September 30, 2018 | ||||||||||||||||||||||||
Less Than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||
Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
U.S. government-sponsored enterprises | $ | 253,980 | $ | (3,686 | ) | $ | 135,156 | $ | (4,386 | ) | $ | 389,136 | $ | (8,072 | ) | |||||||||
Residential mortgage-backed securities | 212,531 | (4,745 | ) | 315,803 | (12,036 | ) | 528,334 | (16,781 | ) | |||||||||||||||
Commercial mortgage-backed securities | 233,726 | (6,738 | ) | 226,854 | (8,268 | ) | 460,580 | (15,006 | ) | |||||||||||||||
State and political subdivisions | 174,397 | (4,385 | ) | 42,238 | (2,070 | ) | 216,635 | (6,455 | ) | |||||||||||||||
Other securities | — | — | 9,792 | (183 | ) | 9,792 | (183 | ) | ||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | $ | 874,634 | $ | (19,554 | ) | $ | 729,843 | $ | (26,943 | ) | $ | 1,604,477 | $ | (46,497 | ) | |||||||||
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|
|
|
|
|
|
|
|
|
|
|
December 31, 2017 | ||||||||||||||||||||||||
Less Than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||
Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
U.S. government-sponsored enterprises | $ | 234,213 | $ | (1,288 | ) | $ | 40,122 | $ | (709 | ) | $ | 274,335 | $ | (1,997 | ) | |||||||||
Residential mortgage-backed securities | 389,541 | (3,656 | ) | 99,989 | (1,665 | ) | 489,530 | (5,321 | ) | |||||||||||||||
Commercial mortgage-backed securities | 314,301 | (2,343 | ) | 120,365 | (2,127 | ) | 434,666 | (4,470 | ) | |||||||||||||||
State and political subdivisions | 41,299 | (331 | ) | 20,980 | (470 | ) | 62,279 | (801 | ) | |||||||||||||||
Other securities | — | — | 9,852 | (302 | ) | 9,852 | (302 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | $ | 979,354 | $ | (7,618 | ) | $ | 291,308 | $ | (5,273 | ) | $ | 1,270,662 | $ | (12,891 | ) | |||||||||
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|
|
|
|
|
|
|
|
|
|
|
Income earned on securities for the three and nine months ended September 30, 2018 and 2017, is as follows:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Taxable: | (In thousands) | |||||||||||||||
Available-for-sale | $ | 8,578 | $ | 6,527 | $ | 25,571 | $ | 17,001 | ||||||||
Held-to-maturity | 433 | 544 | 1,389 | 1,982 | ||||||||||||
Non-taxable: | ||||||||||||||||
Available-for-sale | 2,205 | 1,627 | 6,006 | 4,757 | ||||||||||||
Held-to-maturity | 1,222 | 1,405 | 3,795 | 4,185 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 12,438 | $ | 10,103 | $ | 36,761 | $ | 27,925 | ||||||||
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|
|
|
|
|
|
|
4. Loans Receivable
The various categories of loans receivable are summarized as follows:
September 30, 2018 | December 31, 2017 | |||||||
(In thousands) | ||||||||
Real estate: | ||||||||
Commercial real estate loans | ||||||||
Non-farm/non-residential | $ | 4,685,827 | $ | 4,600,117 | ||||
Construction/land development | 1,550,910 | 1,700,491 | ||||||
Agricultural | 72,930 | 82,229 | ||||||
Residential real estate loans | ||||||||
Residential1-4 family | 1,982,666 | 1,970,311 | ||||||
Multifamily residential | 608,608 | 441,303 | ||||||
|
|
|
| |||||
Total real estate | 8,900,941 | 8,794,451 | ||||||
Consumer | 428,192 | 46,148 | ||||||
Commercial and industrial | 1,303,841 | 1,297,397 | ||||||
Agricultural | 58,644 | 49,815 | ||||||
Other | 141,197 | 143,377 | ||||||
|
|
|
| |||||
Total loans receivable | $ | 10,832,815 | $ | 10,331,188 | ||||
|
|
|
|
During the three and nine-month periods ended September 30, 2018, the Company sold $836,000 and $7.4 million, respectively, of the guaranteed portion of certain SBA loans, which resulted in a gain of approximately $47,000 and $491,000, respectively. During the three and nine-month periods ended September 30, 2017, the Company sold $3.1 million and $12.9 million, respectively, of the guaranteed portion of certain SBA loans, which resulted in a gain of approximately $163,000 and $738,000, respectively.
Mortgage loans held for sale of approximately $39.9 million and $44.3 million at September 30, 2018 and December 31, 2017, respectively, are included in residential1-4 family loans. Mortgage loans held for sale are carried at the lower of cost or fair value, determined using an aggregate basis. Gains and losses resulting from sales of mortgage loans are recognized when the respective loans are sold to investors. Gains and losses are determined by the difference between the selling price and the carrying amount of the loans sold, net of discounts collected or paid. The Company obtains forward commitments to sell mortgage loans to reduce market risk on mortgage loans in the process of origination and mortgage loans held for sale. The forward commitments acquired by the Company for mortgage loans in process of origination are considered mandatory forward commitments. Because these commitments are structured on a mandatory basis, the Company is required to substitute another loan or to buy back the commitment if the original loan does not fund. These commitments are derivative instruments and their fair values at September 30, 2018 and December 31, 2017 were not material.
The Company had $3.08 billion of purchased loans, which includes $120.8 million of discount for credit losses on purchased loans, at September 30, 2018. The Company had $40.5 million and $80.3 million remaining ofnon-accretable discount for credit losses on purchased loans and accretable discount for credit losses on purchased loans, respectively, as of September 30, 2018. The Company had $3.46 billion of purchased loans, which includes $146.6 million of discount for credit losses on purchased loans, at December 31, 2017. The Company had $51.9 million and $94.7 million remaining ofnon-accretable discount for credit losses on purchased loans and accretable discount for credit losses on purchased loans, respectively, as of December 31, 2017.
A description of our accounting policies for loans, impaired loans,non-accrual loans and allowance for loan losses are set forth in our 2017 Form10-K filed with the SEC on February 27, 2018. There have been no significant changes to these policies since December 31, 2017.
5. Allowance for Loan Losses, Credit Quality and Other
The Company’s allowance for loan loss as of September 30, 2018 and December 31, 2017 was significantly impacted by Hurricane Irma which made initial landfall in the Florida Keys and a second landfall just south of Naples, Florida, as a Category 4 hurricane on September 10, 2017. Based on initial assessments of the potential credit impact and damage to the approximately $2.41 billion in legacy loans receivable we have in the disaster area, the Company established a $32.9 million storm-related provision for loan losses as of December 31, 2017. As of September 30, 2018, charge-offs of $2.5 million have been taken against the storm-related provision for loan losses.
The following table presents a summary of changes in the allowance for loan losses:
Nine Months Ended September 30, 2018 | ||||
Allowance for loan losses: | (In thousands) | |||
Beginning balance | $ | 110,266 | ||
Loans charged off | (7,173 | ) | ||
Recoveries of loans previously charged off | 2,776 | |||
|
| |||
Net loans recovered (charged off) | (4,397 | ) | ||
|
| |||
Provision for loan losses | 4,322 | |||
|
| |||
Balance, September 30, 2018 | $ | 110,191 | ||
|
|
The following tables present the balance in the allowance for loan losses for the three and nine-month period ended September 30, 2018, and the allowance for loan losses and recorded investment in loans based on portfolio segment by impairment method as of September 30, 2018. Allocation of a portion of the allowance to one type of loans does not preclude its availability to absorb losses in other categories.
Three Months Ended September 30, 2018 | ||||||||||||||||||||||||||||
Construction/ Land Development | Other Commercial Real Estate | Residential Real Estate | Commercial & Industrial | Consumer & Other | Unallocated | Total | ||||||||||||||||||||||
Allowance for loan losses: | (In thousands) | |||||||||||||||||||||||||||
Beginning balance | $ | 20,243 | $ | 45,985 | $ | 24,205 | $ | 16,193 | $ | 3,518 | $ | 1,372 | $ | 111,516 | ||||||||||||||
Loans charged off | (337 | ) | (144 | ) | (608 | ) | (744 | ) | (668 | ) | — | (2,501 | ) | |||||||||||||||
Recoveries of loans previously charged off | 90 | 195 | 309 | 251 | 331 | — | 1,176 | |||||||||||||||||||||
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| |||||||||||||||
Net loans recovered (charged off) | (247 | ) | 51 | (299 | ) | (493 | ) | (337 | ) | — | (1,325 | ) | ||||||||||||||||
Provision for loan losses | (982 | ) | (683 | ) | 193 | (1,923 | ) | 479 | 2,916 | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Balance, September 30 | $ | 19,014 | $ | 45,353 | $ | 24,099 | $ | 13,777 | $ | 3,660 | $ | 4,288 | $ | 110,191 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2018 | ||||||||||||||||||||||||||||
Construction/ Land Development | Other Commercial Real Estate | Residential Real Estate | Commercial & Industrial | Consumer & Other | Unallocated | Total | ||||||||||||||||||||||
Allowance for loan losses: | (In thousands) | |||||||||||||||||||||||||||
Beginning balance | $ | 20,343 | $ | 43,939 | $ | 24,506 | $ | 15,292 | $ | 3,334 | $ | 2,852 | $ | 110,266 | ||||||||||||||
Loans charged off | (399 | ) | (981 | ) | (2,339 | ) | (1,816 | ) | (1,638 | ) | — | (7,173 | ) | |||||||||||||||
Recoveries of loans previously charged off | 209 | 383 | 844 | 568 | 772 | — | 2,776 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net loans recovered (charged off) | (190 | ) | (598 | ) | (1,495 | ) | (1,248 | ) | (866 | ) | — | (4,397 | ) | |||||||||||||||
Provision for loan losses | (1,139 | ) | 2,012 | 1,088 | (267 | ) | 1,192 | 1,436 | 4,322 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Balance, September 30 | $ | 19,014 | $ | 45,353 | $ | 24,099 | $ | 13,777 | $ | 3,660 | $ | 4,288 | $ | 110,191 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2018 | ||||||||||||||||||||||||||||
Construction/ Land Development | Other Commercial Real Estate | Residential Real Estate | Commercial & Industrial | Consumer & Other | Unallocated | Total | ||||||||||||||||||||||
Allowance for loan losses: | (In thousands) | |||||||||||||||||||||||||||
Period end amount allocated to: | ||||||||||||||||||||||||||||
Loans individually evaluated for impairment | $ | 854 | $ | 533 | $ | 115 | $ | 9 | $ | — | $ | — | $ | 1,511 | ||||||||||||||
Loans collectively evaluated for impairment | 18,150 | 44,590 | 23,355 | 13,672 | 3,660 | 4,288 | 107,715 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Loans evaluated for impairment balance, September 30 | 19,004 | 45,123 | 23,470 | 13,681 | 3,660 | 4,288 | 109,226 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Purchased credit impaired loans | 10 | 230 | 629 | 96 | — | — | 965 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Balance, September 30 | $ | 19,014 | $ | 45,353 | $ | 24,099 | $ | 13,777 | $ | 3,660 | $ | 4,288 | $ | 110,191 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Loans receivable: | ||||||||||||||||||||||||||||
Period end amount allocated to: | ||||||||||||||||||||||||||||
Loans individually evaluated for impairment | $ | 14,876 | $ | 60,572 | $ | 19,933 | $ | 30,716 | $ | 2,064 | $ | — | $ | 128,161 | ||||||||||||||
Loans collectively evaluated for impairment | 1,526,689 | 4,613,352 | 2,534,630 | 1,256,796 | 623,747 | — | 10,555,214 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Loans evaluated for impairment balance, September 30 | 1,541,565 | 4,673,924 | 2,554,563 | 1,287,512 | 625,811 | — | 10,683,375 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Purchased credit impaired loans | 9,345 | 84,833 | 36,711 | 16,329 | 2,222 | — | 149,440 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Balance, September 30 | $ | 1,550,910 | $ | 4,758,757 | $ | 2,591,274 | $ | 1,303,841 | $ | 628,033 | $ | — | $ | 10,832,815 | ||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
The following tables present the balances in the allowance for loan losses for the nine-month period ended September 30, 2017 and the year ended December 31, 2017, and the allowance for loan losses and recorded investment in loans receivable based on portfolio segment by impairment method as of December 31, 2017. Allocation of a portion of the allowance to one type of loans does not preclude its availability to absorb losses in other categories.
Year Ended December 31, 2017 | ||||||||||||||||||||||||||||
Construction/ Land Development | Other Commercial Real Estate | Residential Real Estate | Commercial & Industrial | Consumer & Other | Unallocated | Total | ||||||||||||||||||||||
Allowance for loan losses: | (In thousands) | |||||||||||||||||||||||||||
Beginning balance | $ | 11,522 | $ | 28,188 | $ | 16,517 | $ | 12,756 | $ | 4,188 | $ | 6,831 | $ | 80,002 | ||||||||||||||
Loans charged off | (326 | ) | (1,655 | ) | (2,288 | ) | (779 | ) | (1,063 | ) | — | (6,111 | ) | |||||||||||||||
Recoveries of loans previously charged off | 227 | 710 | 254 | 252 | 503 | — | 1,946 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net loans recovered (charged off) | (99 | ) | (945 | ) | (2,034 | ) | (527 | ) | (560 | ) | — | (4,165 | ) | |||||||||||||||
Provision for loan losses | 1,419 | 600 | 3,232 | 599 | (565 | ) | (984 | ) | 4,301 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Balance, September 30 | 12,842 | 27,843 | 17,715 | 12,828 | 3,063 | 5,847 | 80,138 | |||||||||||||||||||||
Loans charged off | (1,306 | ) | (2,094 | ) | (1,692 | ) | (4,799 | ) | (1,469 | ) | — | (11,360 | ) | |||||||||||||||
Recoveries of loans previously charged off | 235 | 332 | 422 | 212 | 338 | — | 1,539 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net loans recovered (charged off) | (1,071 | ) | (1,762 | ) | (1,270 | ) | (4,587 | ) | (1,131 | ) | — | (9,821 | ) | |||||||||||||||
Provision for loan losses | 8,572 | 17,858 | 8,061 | 7,051 | 1,402 | (2,995 | ) | 39,949 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Balance, December 31 | $ | 20,343 | $ | 43,939 | $ | 24,506 | $ | 15,292 | $ | 3,334 | $ | 2,852 | $ | 110,266 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2017 | ||||||||||||||||||||||||||||
Construction/ Land Development | Other Commercial Real Estate | Residential Real Estate | Commercial & Industrial | Consumer & Other | Unallocated | Total | ||||||||||||||||||||||
Allowance for loan losses: | (In thousands) | |||||||||||||||||||||||||||
Period end amount allocated to: | ||||||||||||||||||||||||||||
Loans individually evaluated for impairment | $ | 1,378 | $ | 768 | $ | 188 | $ | 843 | $ | 7 | $ | — | $ | 3,184 | ||||||||||||||
Loans collectively evaluated for impairment | 18,954 | 42,824 | 23,341 | 14,290 | 3,310 | 2,852 | 105,571 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Loans evaluated for impairment balance, December 31 | 20,332 | 43,592 | 23,529 | 15,133 | 3,317 | 2,852 | 108,755 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Purchased credit impaired loans | 11 | 347 | 977 | 159 | 17 | — | 1,511 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Balance, December 31 | $ | 20,343 | $ | 43,939 | $ | 24,506 | $ | 15,292 | $ | 3,334 | $ | 2,852 | $ | 110,266 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Loans receivable: | ||||||||||||||||||||||||||||
Period end amount allocated to: | ||||||||||||||||||||||||||||
Loans individually evaluated for impairment | $ | 26,860 | $ | 124,124 | $ | 20,431 | $ | 21,867 | $ | 500 | $ | — | $ | 193,782 | ||||||||||||||
Loans collectively evaluated for impairment | 1,658,519 | 4,442,201 | 2,341,081 | 1,261,161 | 236,392 | — | 9,939,354 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Loans evaluated for impairment balance, December 31 | 1,685,379 | 4,566,325 | 2,361,512 | 1,283,028 | 236,892 | — | 10,133,136 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Purchased credit impaired loans | 15,112 | 116,021 | 50,102 | 14,369 | 2,448 | — | 198,052 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Balance, December 31 | $ | 1,700,491 | $ | 4,682,346 | $ | 2,411,614 | $ | 1,297,397 | $ | 239,340 | $ | — | $ | 10,331,188 | ||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
The following is an aging analysis for loans receivable as of September 30, 2018 and December 31, 2017:
September 30, 2018 | ||||||||||||||||||||||||||||
Loans Past Due 30-59 Days | Loans Past Due 60-89 Days | Loans Past Due 90 Days or More | Total Past Due | Current Loans | Total Loans Receivable | Accruing Loans Past Due 90 Days or More | ||||||||||||||||||||||
Real estate: | (In thousands) | |||||||||||||||||||||||||||
Commercial real estate loans | ||||||||||||||||||||||||||||
Non-farm/non-residential | $ | 6,496 | $ | 4,411 | $ | 22,628 | $ | 33,535 | $ | 4,652,292 | $ | 4,685,827 | $ | 11,405 | ||||||||||||||
Construction/land development | 803 | 584 | 8,517 | 9,904 | 1,541,006 | 1,550,910 | 3,551 | |||||||||||||||||||||
Agricultural | — | — | 30 | 30 | 72,900 | 72,930 | — | |||||||||||||||||||||
Residential real estate loans | ||||||||||||||||||||||||||||
Residential1-4 family | 9,141 | 2,441 | 15,821 | 27,403 | 1,955,263 | 1,982,666 | 1,509 | |||||||||||||||||||||
Multifamily residential | 482 | — | 983 | 1,465 | 607,143 | 608,608 | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total real estate | 16,922 | 7,436 | 47,979 | 72,337 | 8,828,604 | 8,900,941 | 16,465 | |||||||||||||||||||||
Consumer | 784 | 73 | 2,004 | 2,861 | 425,331 | 428,192 | 1,796 | |||||||||||||||||||||
Commercial and industrial | 4,868 | 384 | 6,449 | 11,701 | 1,292,140 | 1,303,841 | 2,006 | |||||||||||||||||||||
Agricultural and other | 1,260 | 23 | 33 | 1,316 | 198,525 | 199,841 | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | $ | 23,834 | $ | 7,916 | $ | 56,465 | $ | 88,215 | $ | 10,744,600 | $ | 10,832,815 | $ | 20,267 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017 | ||||||||||||||||||||||||||||
Loans Past Due 30-59 Days | Loans Past Due 60-89 Days | Loans Past Due 90 Days or More | Total Past Due | Current Loans | Total Loans Receivable | Accruing Loans Past Due 90 Days or More | ||||||||||||||||||||||
Real estate: | (In thousands) | |||||||||||||||||||||||||||
Commercial real estate loans | ||||||||||||||||||||||||||||
Non-farm/non-residential | $ | 6,331 | $ | 1,480 | $ | 12,719 | $ | 20,530 | $ | 4,579,587 | $ | 4,600,117 | $ | 3,119 | ||||||||||||||
Construction/land development | 834 | 13 | 8,258 | 9,105 | 1,691,386 | 1,700,491 | 3,247 | |||||||||||||||||||||
Agricultural | — | 221 | 19 | 240 | 81,989 | 82,229 | — | |||||||||||||||||||||
Residential real estate loans | ||||||||||||||||||||||||||||
Residential1-4 family | 9,066 | 2,013 | 16,612 | 27,691 | 1,942,620 | 1,970,311 | 2,175 | |||||||||||||||||||||
Multifamily residential | — | — | 253 | 253 | 441,050 | 441,303 | 100 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total real estate | 16,231 | 3,727 | 37,861 | 57,819 | 8,736,632 | 8,794,451 | 8,641 | |||||||||||||||||||||
Consumer | 252 | 51 | 171 | 474 | 45,674 | 46,148 | 26 | |||||||||||||||||||||
Commercial and industrial | 2,073 | 1,030 | 6,528 | 9,631 | 1,287,766 | 1,297,397 | 1,944 | |||||||||||||||||||||
Agricultural and other | 288 | 113 | 137 | 538 | 192,654 | 193,192 | 54 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | $ | 18,844 | $ | 4,921 | $ | 44,697 | $ | 68,462 | $ | 10,262,726 | $ | 10,331,188 | $ | 10,665 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-accruing loans at September 30, 2018 and December 31, 2017 were $36.2 million and $34.0 million, respectively.
The following is a summary of the impaired loans as of September 30, 2018 and December 31, 2017:
September 30, 2018 | ||||||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||
Unpaid Contractual Principal Balance | Total Recorded Investment | Allocation of Allowance for Loan Losses | Average Recorded Investment | Interest Recognized | Average Recorded Investment | Interest Recognized | ||||||||||||||||||||||
Loans without a specific valuation allowance | (In thousands) | |||||||||||||||||||||||||||
Real estate: | ||||||||||||||||||||||||||||
Commercial real estate loans | ||||||||||||||||||||||||||||
Non-farm/non-residential | $ | 44 | $ | 44 | $ | — | $ | 36 | $ | 1 | $ | 33 | $ | 2 | ||||||||||||||
Construction/land development | 18 | 18 | — | 18 | — | 30 | 1 | |||||||||||||||||||||
Agricultural | 13 | 13 | — | 14 | — | 16 | 1 | |||||||||||||||||||||
Residential real estate loans | ||||||||||||||||||||||||||||
Residential1-4 family | 286 | 286 | — | 237 | 5 | 186 | 14 | |||||||||||||||||||||
Multifamily residential | — | — | — | — | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total real estate | 361 | 361 | — | 305 | 6 | 265 | 18 | |||||||||||||||||||||
Consumer | 27 | 28 | — | 29 | 1 | 23 | 2 | |||||||||||||||||||||
Commercial and industrial | 202 | 202 | — | 225 | 3 | 189 | 8 | |||||||||||||||||||||
Agricultural and other | — | — | — | — | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total loans without a specific valuation allowance | 590 | 591 | — | 559 | 10 | 477 | 28 | |||||||||||||||||||||
Loans with a specific valuation allowance | ||||||||||||||||||||||||||||
Real estate: | ||||||||||||||||||||||||||||
Commercial real estate loans | ||||||||||||||||||||||||||||
Non-farm/non-residential | 41,299 | 37,365 | 524 | 37,770 | 375 | 33,965 | 1,107 | |||||||||||||||||||||
Construction/land development | 13,509 | 12,446 | 854 | 12,614 | 75 | 12,398 | 234 | |||||||||||||||||||||
Agricultural | 299 | 303 | 9 | 410 | 4 | 412 | 14 | |||||||||||||||||||||
Residential real estate loans | ||||||||||||||||||||||||||||
Residential1-4 family | 19,248 | 17,241 | 67 | 17,678 | 51 | 18,639 | 429 | |||||||||||||||||||||
Multifamily residential | 2,405 | 2,405 | 48 | 2,561 | 16 | 2,116 | 66 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total real estate | 76,760 | 69,760 | 1,502 | 71,033 | 521 | 67,530 | 1,850 | |||||||||||||||||||||
Consumer | 2,245 | 2,003 | — | 1,092 | 24 | 638 | 42 | |||||||||||||||||||||
Commercial and industrial | 10,269 | 6,619 | 9 | 8,276 | 35 | 11,361 | 223 | |||||||||||||||||||||
Agricultural and other | 33 | 33 | — | 103 | — | 174 | 3 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total loans with a specific valuation allowance | 89,307 | 78,415 | 1,511 | 80,504 | 580 | 79,703 | 2,118 | |||||||||||||||||||||
Total impaired loans | ||||||||||||||||||||||||||||
Real estate: | ||||||||||||||||||||||||||||
Commercial real estate loans | ||||||||||||||||||||||||||||
Non-farm/non-residential | 41,343 | 37,409 | 524 | 37,806 | 376 | 33,998 | 1,109 | |||||||||||||||||||||
Construction/land development | 13,527 | 12,464 | 854 | 12,632 | 75 | 12,428 | 235 | |||||||||||||||||||||
Agricultural | 312 | 316 | 9 | 424 | 4 | 428 | 15 | |||||||||||||||||||||
Residential real estate loans | ||||||||||||||||||||||||||||
Residential1-4 family | 19,534 | 17,527 | 67 | 17,915 | 56 | 18,825 | 443 | |||||||||||||||||||||
Multifamily residential | 2,405 | 2,405 | 48 | 2,561 | 16 | 2,116 | 66 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total real estate | 77,121 | 70,121 | 1,502 | 71,338 | 527 | 67,795 | 1,868 | |||||||||||||||||||||
Consumer | 2,272 | 2,031 | — | 1,121 | 25 | 661 | 44 | |||||||||||||||||||||
Commercial and industrial | 10,471 | 6,821 | 9 | 8,501 | 38 | 11,550 | 231 | |||||||||||||||||||||
Agricultural and other | 33 | 33 | — | 103 | — | 174 | 3 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total impaired loans | $ | 89,897 | $ | 79,006 | $ | 1,511 | $ | 81,063 | $ | 590 | $ | 80,180 | $ | 2,146 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: Purchased credit impaired loans are accounted for on a pooled basis under ASC310-30. All of these pools are currently considered to be performing, resulting in none of the purchased credit impaired loans being classified as impaired loans as of September 30, 2018.
December 31, 2017 | ||||||||||||||||||||
Year Ended | ||||||||||||||||||||
Unpaid Contractual Principal Balance | Total Recorded Investment | Allocation of Allowance for Loan Losses | Average Recorded Investment | Interest Recognized | ||||||||||||||||
Loans without a specific valuation allowance | (In thousands) | |||||||||||||||||||
Real estate: | ||||||||||||||||||||
Commercial real estate loans | ||||||||||||||||||||
Non-farm/non-residential | $ | 29 | $ | 29 | $ | — | $ | 23 | $ | 2 | ||||||||||
Construction/land development | 64 | 64 | — | 31 | 3 | |||||||||||||||
Agricultural | 19 | — | — | — | 1 | |||||||||||||||
Residential real estate loans | ||||||||||||||||||||
Residential1-4 family | 115 | 115 | — | 135 | 7 | |||||||||||||||
Multifamily residential | — | — | — | — | — | |||||||||||||||
|
|
| �� |
|
|
|
|
|
| |||||||||||
Total real estate | 227 | 208 | — | 189 | 13 | |||||||||||||||
Consumer | 18 | — | — | — | 1 | |||||||||||||||
Commercial and industrial | 105 | 105 | — | 85 | 7 | |||||||||||||||
Agricultural and other | — | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total loans without a specific valuation allowance | 350 | 313 | — | 274 | 21 | |||||||||||||||
Loans with a specific valuation allowance | ||||||||||||||||||||
Real estate: | ||||||||||||||||||||
Commercial real estate loans | ||||||||||||||||||||
Non-farm/non-residential | 29,666 | 29,040 | 757 | 41,772 | 1,498 | |||||||||||||||
Construction/land development | 12,976 | 12,157 | 1,378 | 10,556 | 262 | |||||||||||||||
Agricultural | 281 | 303 | 11 | 268 | 11 | |||||||||||||||
Residential real estate loans | ||||||||||||||||||||
Residential1-4 family | 19,770 | 18,689 | 124 | 22,347 | 363 | |||||||||||||||
Multifamily residential | 1,627 | 1,627 | 64 | 1,412 | 81 | |||||||||||||||
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|
| |||||||||||
Total real estate | 64,320 | 61,816 | 2,334 | 76,355 | 2,215 | |||||||||||||||
Consumer | 179 | 191 | — | 163 | — | |||||||||||||||
Commercial and industrial | 16,777 | 13,007 | 843 | 9,726 | 121 | |||||||||||||||
Agricultural and other | 297 | 309 | 7 | 644 | 8 | |||||||||||||||
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|
| |||||||||||
Total loans with a specific valuation allowance | 81,573 | 75,323 | 3,184 | 86,888 | 2,344 | |||||||||||||||
Total impaired loans | ||||||||||||||||||||
Real estate: | ||||||||||||||||||||
Commercial real estate loans | ||||||||||||||||||||
Non-farm/non-residential | 29,695 | 29,069 | 757 | 41,795 | 1,500 | |||||||||||||||
Construction/land development | 13,040 | 12,221 | 1,378 | 10,587 | 265 | |||||||||||||||
Agricultural | 300 | 303 | 11 | 268 | 12 | |||||||||||||||
Residential real estate loans | ||||||||||||||||||||
Residential1-4 family | 19,885 | 18,804 | 124 | 22,482 | 370 | |||||||||||||||
Multifamily residential | 1,627 | 1,627 | 64 | 1,412 | 81 | |||||||||||||||
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|
|
|
|
|
| |||||||||||
Total real estate | 64,547 | 62,024 | 2,334 | 76,544 | 2,228 | |||||||||||||||
Consumer | 197 | 191 | — | 163 | 1 | |||||||||||||||
Commercial and industrial | 16,882 | 13,112 | 843 | 9,811 | 128 | |||||||||||||||
Agricultural and other | 297 | 309 | 7 | 644 | 8 | |||||||||||||||
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|
| |||||||||||
Total impaired loans | $ | 81,923 | $ | 75,636 | $ | 3,184 | $ | 87,162 | $ | 2,365 | ||||||||||
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Note: Purchased credit impaired loans are accounted for on a pooled basis under ASC310-30. All of these pools are currently considered to be performing resulting in none of the purchased credit impaired loans being classified as impaired loans as of December 31, 2017.
Interest recognized on impaired loans during the three months ended September 30, 2018 and 2017 was approximately $590,000 and $957,000, respectively. Interest recognized on impaired loans during the nine months ended September 30, 2018 and 2017 was approximately $2.1 million and $2.0 million, respectively. The amount of interest recognized on impaired loans on the cash basis is not materially different than the accrual basis.
Credit Quality Indicators. As part of theon-going monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including trends related to (i) the risk rating of loans, (ii) the level of classified loans, (iii) net charge-offs,(iv) non-performing loans and (v) the general economic conditions in Arkansas, Florida, Alabama and New York.
The Company utilizes a risk rating matrix to assign a risk rating to each of its loans. Loans are rated on a scale from 1 to 8. Descriptions of the general characteristics of the 8 risk ratings are as follows:
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The Company’s classified loans include loans in risk ratings 6, 7 and 8. The following is a presentation of classified loans (excluding loans accounted for under ASC Topic310-30) by class as of September 30, 2018 and December 31, 2017:
September 30, 2018 | ||||||||||||||||
Risk Rated 6 | Risk Rated 7 | Risk Rated 8 | Classified Total | |||||||||||||
Real estate: | (In thousands) | |||||||||||||||
Commercial real estate loans | ||||||||||||||||
Non-farm/non-residential | $ | 41,424 | $ | 484 | $ | — | $ | 41,908 | ||||||||
Construction/land development | 14,502 | 860 | — | 15,362 | ||||||||||||
Agricultural | 315 | 3 | — | 318 | ||||||||||||
Residential real estate loans | ||||||||||||||||
Residential1-4 family | 23,782 | 253 | — | 24,035 | ||||||||||||
Multifamily residential | 983 | — | — | 983 | ||||||||||||
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| |||||||||
Total real estate | 81,006 | 1,600 | — | 82,606 | ||||||||||||
Consumer | 1,117 | 1 | — | 1,118 | ||||||||||||
Commercial and industrial | 11,237 | 881 | — | 12,118 | ||||||||||||
Agricultural and other | 50 | — | — | 50 | ||||||||||||
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| |||||||||
Total risk rated loans | $ | 93,410 | $ | 2,482 | $ | — | $ | 95,892 | ||||||||
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December 31, 2017 | ||||||||||||||||
Risk Rated 6 | Risk Rated 7 | Risk Rated 8 | Classified Total | |||||||||||||
Real estate: | (In thousands) | |||||||||||||||
Commercial real estate loans | ||||||||||||||||
Non-farm/non-residential | $ | 20,933 | $ | 518 | $ | — | $ | 21,451 | ||||||||
Construction/land development | 24,013 | 204 | — | 24,217 | ||||||||||||
Agricultural | 321 | — | — | 321 | ||||||||||||
Residential real estate loans | ||||||||||||||||
Residential1-4 family | 23,420 | 564 | — | 23,984 | ||||||||||||
Multifamily residential | 939 | — | — | 939 | ||||||||||||
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| |||||||||
Total real estate | 69,626 | 1,286 | — | 70,912 | ||||||||||||
Consumer | 159 | 9 | — | 168 | ||||||||||||
Commercial and industrial | 12,818 | 80 | — | 12,898 | ||||||||||||
Agricultural and other | 136 | — | — | 136 | ||||||||||||
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| |||||||||
Total risk rated loans | $ | 82,739 | $ | 1,375 | $ | — | $ | 84,114 | ||||||||
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Loans may be classified, but not considered impaired, due to one of the following reasons: (1) The Company has established minimum dollar amount thresholds for loan impairment testing. All loans over $2.0 million that are rated 5 – 8 are individually assessed for impairment on a quarterly basis. Loans rated 5 – 8 that fall under the threshold amount are not individually tested for impairment and therefore are not included in impaired loans; (2) of the loans that are above the threshold amount and tested for impairment, after testing, some are considered to not be impaired and are not included in impaired loans.
The following is a presentation of loans receivable by class and risk rating as of September 30, 2018 and December 31, 2017:
September 30, 2018 | ||||||||||||||||||||||||||||
Risk Rated 1 | Risk Rated 2 | Risk Rated 3 | Risk Rated 4 | Risk Rated 5 | Classified Total | Total | ||||||||||||||||||||||
Real estate: | (In thousands) | |||||||||||||||||||||||||||
Commercial real estate loans | ||||||||||||||||||||||||||||
Non-farm/non-residential | $ | 993 | $ | 299 | $ | 2,660,482 | $ | 1,863,651 | $ | 33,857 | $ | 41,908 | $ | 4,601,190 | ||||||||||||||
Construction/land development | 20 | 736 | 261,009 | 1,263,515 | 923 | 15,362 | 1,541,565 | |||||||||||||||||||||
Agricultural | — | — | 35,336 | 36,099 | 981 | 318 | 72,734 | |||||||||||||||||||||
Residential real estate loans | ||||||||||||||||||||||||||||
Residential1-4 family | 770 | 750 | 1,454,690 | 461,225 | 7,536 | 24,035 | 1,949,006 | |||||||||||||||||||||
Multifamily residential | — | — | 398,294 | 206,280 | — | 983 | 605,557 | |||||||||||||||||||||
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| |||||||||||||||
Total real estate | 1,783 | 1,785 | 4,809,811 | 3,830,770 | 43,297 | 82,606 | 8,770,052 | |||||||||||||||||||||
Consumer | 13,051 | 995 | 397,060 | 13,617 | 129 | 1,118 | 425,970 | |||||||||||||||||||||
Commercial and industrial | 21,669 | 8,805 | 589,856 | 624,100 | 30,964 | 12,118 | 1,287,512 | |||||||||||||||||||||
Agricultural and other | 1,045 | 3,388 | 134,301 | 60,520 | 537 | 50 | 199,841 | |||||||||||||||||||||
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| |||||||||||||||
Total risk rated loans | $ | 37,548 | $ | 14,973 | $ | 5,931,028 | $ | 4,529,007 | $ | 74,927 | $ | 95,892 | 10,683,375 | |||||||||||||||
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| |||||||||||||||
Purchased credit impaired loans | 149,440 | |||||||||||||||||||||||||||
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Total loans receivable | $ | 10,832,815 | ||||||||||||||||||||||||||
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December 31, 2017 | ||||||||||||||||||||||||||||
Risk Rated 1 | Risk Rated 2 | Risk Rated 3 | Risk Rated 4 | Risk Rated 5 | Classified Total | Total | ||||||||||||||||||||||
Real estate: | (In thousands) | |||||||||||||||||||||||||||
Commercial real estate loans | ||||||||||||||||||||||||||||
Non-farm/non-residential | $ | 1,015 | $ | 558 | $ | 2,595,844 | $ | 1,745,778 | $ | 119,656 | $ | 21,451 | $ | 4,484,302 | ||||||||||||||
Construction/land development | 28 | 583 | 280,980 | 1,373,133 | 6,438 | 24,217 | 1,685,379 | |||||||||||||||||||||
Agricultural | — | 19 | 53,018 | 27,515 | 1,150 | 321 | 82,023 | |||||||||||||||||||||
Residential real estate loans | ||||||||||||||||||||||||||||
Residential1-4 family | 1,140 | 969 | 1,414,849 | 475,619 | 11,658 | 23,984 | 1,928,219 | |||||||||||||||||||||
Multifamily residential | — | — | 329,070 | 103,071 | 213 | 939 | 433,293 | |||||||||||||||||||||
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| |||||||||||||||
Total real estate | 2,183 | 2,129 | 4,673,761 | 3,725,116 | 139,115 | 70,912 | 8,613,216 | |||||||||||||||||||||
Consumer | 13,106 | 808 | 22,479 | 8,532 | 70 | 168 | 45,163 | |||||||||||||||||||||
Commercial and industrial | 20,870 | 7,543 | 627,316 | 592,088 | 22,313 | 12,898 | 1,283,028 | |||||||||||||||||||||
Agricultural and other | 1,986 | 3,914 | 147,323 | 38,370 | — | 136 | 191,729 | |||||||||||||||||||||
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| |||||||||||||||
Total risk rated loans | $ | 38,145 | $ | 14,394 | $ | 5,470,879 | $ | 4,364,106 | $ | 161,498 | $ | 84,114 | 10,133,136 | |||||||||||||||
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| |||||||||||||||
Purchased credit impaired loans | 198,052 | |||||||||||||||||||||||||||
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Total loans receivable | $ | 10,331,188 | ||||||||||||||||||||||||||
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The following is a presentation of troubled debt restructurings (“TDRs”) by class as of September 30, 2018 and December 31, 2017:
September 30, 2018 | ||||||||||||||||||||||||
Number of Loans | Pre- Modification Outstanding Balance | Rate Modification | Term Modification | Rate & Term Modification | Post- Modification Outstanding Balance | |||||||||||||||||||
Real estate: | (Dollars in thousands) | |||||||||||||||||||||||
Commercial real estate loans | ||||||||||||||||||||||||
Non-farm/non-residential | 16 | $ | 16,018 | $ | 8,177 | $ | 742 | $ | 4,494 | $ | 13,413 | |||||||||||||
Construction/land development | 3 | 641 | 546 | 69 | — | 615 | ||||||||||||||||||
Agricultural | 2 | 345 | 283 | 16 | — | 299 | ||||||||||||||||||
Residential real estate loans | ||||||||||||||||||||||||
Residential1-4 family | 24 | 4,494 | 1,105 | 353 | 1,035 | 2,493 | ||||||||||||||||||
Multifamily residential | 3 | 1,701 | 1,281 | — | 287 | 1,568 | ||||||||||||||||||
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Total real estate | 48 | 23,199 | 11,392 | 1,180 | 5,816 | 18,388 | ||||||||||||||||||
Consumer | 4 | 36 | 17 | 11 | — | 28 | ||||||||||||||||||
Commercial and industrial | 13 | 1,062 | 396 | 105 | — | 501 | ||||||||||||||||||
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Total | 65 | $ | 24,297 | $ | 11,805 | $ | 1,296 | $ | 5,816 | $ | 18,917 | |||||||||||||
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December 31, 2017 | ||||||||||||||||||||||||
Number of Loans | Pre- Modification Outstanding Balance | Rate Modification | Term Modification | Rate & Term Modification | Post- Modification Outstanding Balance | |||||||||||||||||||
Real estate: | (Dollars in thousands) | |||||||||||||||||||||||
Commercial real estate loans | ||||||||||||||||||||||||
Non-farm/non-residential | 16 | $ | 16,853 | $ | 8,815 | $ | 250 | $ | 5,513 | $ | 14,578 | |||||||||||||
Construction/land development | 5 | 782 | 689 | 75 | — | 764 | ||||||||||||||||||
Agricultural | 2 | 345 | 282 | 22 | — | 304 | ||||||||||||||||||
Residential real estate loans | ||||||||||||||||||||||||
Residential1-4 family | 21 | 5,607 | 1,926 | 81 | 1,238 | 3,245 | ||||||||||||||||||
Multifamily residential | 3 | 1,701 | 1,340 | — | 287 | 1,627 | ||||||||||||||||||
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| |||||||||||||
Total real estate | 47 | 25,288 | 13,052 | 428 | 7,038 | 20,518 | ||||||||||||||||||
Consumer | 3 | 19 | — | 18 | — | 18 | ||||||||||||||||||
Commercial and industrial | 11 | 951 | 445 | 50 | 1 | 496 | ||||||||||||||||||
Agricultural and other | 1 | 166 | 166 | — | — | 166 | ||||||||||||||||||
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Total | 62 | $ | 26,424 | $ | 13,663 | $ | 496 | $ | 7,039 | $ | 21,198 | |||||||||||||
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The following is a presentation of TDRs onnon-accrual status as of September 30, 2018 and December 31, 2017 because they are not in compliance with the modified terms:
September 30, 2018 | December 31, 2017 | |||||||||||||||
Number of Loans | Recorded Balance | Number of Loans | Recorded Balance | |||||||||||||
Real estate: | (Dollars in thousands) | |||||||||||||||
Commercial real estate loans | ||||||||||||||||
Non-farm/non-residential | 3 | $ | 758 | 2 | $ | 1,161 | ||||||||||
Agricultural | 1 | 16 | 1 | 22 | ||||||||||||
Residential real estate loans | ||||||||||||||||
Residential1-4 family | 9 | 787 | 8 | 850 | ||||||||||||
Multifamily residential | 1 | 146 | 1 | 153 | ||||||||||||
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| |||||||||
Total real estate | 14 | 1,707 | 12 | 2,186 | ||||||||||||
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| |||||||||
Commercial and industrial | 6 | 128 | 1 | — | ||||||||||||
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| |||||||||
Total | 20 | $ | 1,835 | 13 | $ | 2,186 | ||||||||||
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The following is a presentation of total foreclosed assets as of September 30, 2018 and December 31, 2017:
September 30, 2018 | December 31, 2017 | |||||||
(In thousands) | ||||||||
Commercial real estate loans | ||||||||
Non-farm/non-residential | $ | 5,858 | $ | 9,766 | ||||
Construction/land development | 3,539 | 5,920 | ||||||
Agriculture | 155 | |||||||
Residential real estate loans | ||||||||
Residential1-4 family | 3,885 | 2,654 | ||||||
Multifamily residential | 70 | 527 | ||||||
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| |||||
Total foreclosed assets held for sale | $ | 13,507 | $ | 18,867 | ||||
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The following is a summary of the purchased credit impaired loans acquired in the SPF, GHI, BOC and Stonegate acquisitions as of the dates of acquisition:
SPF | GHI | BOC | Stonegate | |||||||||||||
(In thousands) | ||||||||||||||||
Contractually required principal and interest at acquisition | $ | 3,496 | $ | 22,379 | $ | 18,586 | $ | 98,444 | ||||||||
Non-accretable difference (expected losses and foregone interest) | 285 | 4,462 | 2,811 | 23,297 | ||||||||||||
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| |||||||||
Cash flows expected to be collected at acquisition | 3,211 | 17,917 | 15,775 | 75,147 | ||||||||||||
Accretable yield | 808 | 2,071 | 1,043 | 11,761 | ||||||||||||
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| |||||||||
Basis in purchased credit impaired loans at acquisition | $ | 2,403 | $ | 15,846 | $ | 14,732 | $ | 63,386 | ||||||||
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Changes in the carrying amount of the accretable yield for purchased credit impaired loans were as follows for the nine-month period ended September 30, 2018 for the Company’s acquisitions:
Accretable Yield | Carrying Amount of Loans | |||||||
(In thousands) | ||||||||
Balance at beginning of period | $ | 41,803 | $ | 198,052 | ||||
Reforecasted future interest payments for loan pools | (459 | ) | — | |||||
Contractual accretion recorded to interest income | (13,206 | ) | 13,206 | |||||
Acquisitions | 808 | 2,403 | ||||||
Adjustment to yield | 8,519 | — | ||||||
Transfers to foreclosed assets held for sale | — | (2,156 | ) | |||||
Payments received, net | — | (62,065 | ) | |||||
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Balance at end of period | $ | 37,465 | $ | 149,440 | ||||
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The loan pools were evaluated by the Company and are currently forecasted to have a slowerrun-off than originally expected. As a result, the Company has reforecast the total accretable yield expectations for those loan pools by $459,000. This updated forecast does not change the expected weighted average yields on the loan pools.
During the 2018 impairment tests on the estimated cash flows of loans, the Company established that several loan pools were determined to have a materially projected credit improvement. As a result of this improvement, the Company will recognize approximately $8.5 million as an additional adjustment to yield over the weighted average life of the loans.
6. Goodwill and Core Deposits and Other Intangibles
Changes in the carrying amount and accumulated amortization of the Company’s goodwill and core deposits and other intangibles at September 30, 2018 and December 31, 2017, were as follows:
September 30, 2018 | December 31, 2017 | |||||||
Goodwill | (In thousands) | |||||||
Balance, beginning of period | $ | 927,949 | $ | 377,983 | ||||
Acquisitions | 30,459 | 549,966 | ||||||
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| |||||
Balance, end of period | $ | 958,408 | $ | 927,949 | ||||
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September 30, 2018 | December 31, 2017 | |||||||
Core Deposit and Other Intangibles | (In thousands) | |||||||
Balance, beginning of period | $ | 49,351 | $ | 18,311 | ||||
Acquisition | — | 35,247 | ||||||
Amortization expense | (4,867 | ) | (2,576 | ) | ||||
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| |||||
Balance, September 30 | $ | 44,484 | 50,982 | |||||
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Acquisitions | — | |||||||
Amortization expense | (1,631 | ) | ||||||
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Balance, end of year | $ | 49,351 | ||||||
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The carrying basis and accumulated amortization of core deposits and other intangibles at September 30, 2018 and December 31, 2017 were:
September 30, 2018 | December 31, 2017 | |||||||
(In thousands) | ||||||||
Gross carrying basis | $ | 86,625 | $ | 86,625 | ||||
Accumulated amortization | (42,141 | ) | (37,274 | ) | ||||
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Net carrying amount | $ | 44,484 | $ | 49,351 | ||||
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Core deposit and other intangible amortization expense was approximately $1.6 million and $906,000 for the three months ended September 30, 2018 and 2017, respectively. Core deposit and other intangible amortization expense was approximately $4.9 million and $2.6 million for the nine months ended September 30, 2018 and 2017, respectively. Including all of the mergers completed as of December 31, 2017, HBI’s estimated amortization expense of core deposits and other intangibles for each of the years 2018 through 2023 is approximately: 2018 – $6.6 million; 2019 – $6.5 million; 2020 – $5.9 million; 2021 – $5.7 million; 2022 – $5.7 million; 2023 – $5.5 million.
The carrying amount of the Company’s goodwill was $958.4 million and $927.9 million at September 30, 2018 and December 31, 2017, respectively. Goodwill is tested annually for impairment during the fourth quarter. If the implied fair value of goodwill is lower than its carrying amount, goodwill impairment is indicated, and goodwill is written down to its implied fair value. Subsequent increases in goodwill value are not recognized in the consolidated financial statements.
7. Other Assets
Other assets consist primarily of equity securities without a readily determinable fair value and other miscellaneous assets. As of September 30, 2018 and December 31, 2017, other assets were $187.3 million and $177.8 million, respectively.
The Company has equity securities without readily determinable fair values such as stock holdings in the Federal Home Loan Bank (“FHLB”) and the Federal Reserve Bank (“Federal Reserve”) which are outside the scope of ASC Topic 321,Investments – Equity Securities(“ASC Topic 321”). These equity securities without a readily determinable fair value were $134.1 million and $132.1 million at September 30, 2018 and December 31, 2017, respectively, and are accounted for at cost.
The Company has equity securities such as stock holdings in First National Bankers’ Bank and other miscellaneous holdings which are accounted for under ASC Topic 321. These equity securities without a readily determinable fair value were $24.5 million and $23.9 million at September 30, 2018 and December 31, 2017, respectively. There were no transactions during the period that would indicate a material change in fair value. Therefore, these investments were accounted for at cost.
8. Deposits
The aggregate amount of time deposits with a minimum denomination of $250,000 was $784.8 million and $636.9 million at September 30, 2018 and December 31, 2017, respectively. The aggregate amount of time deposits with a minimum denomination of $100,000 was $1.25 billion and $998.3 million at September 30, 2018 and December 31, 2017, respectively. Interest expense applicable to certificates in excess of $100,000 totaled $4.9 million and $2.2 million for the three months ended September 30, 2018 and 2017, respectively. Interest expense applicable to certificates in excess of $100,000 totaled $11.5 million and $5.8 million for the nine months ended September 30, 2018 and 2017, respectively. As of September 30, 2018 and December 31, 2017, brokered deposits were $591.6 million and $1.03 billion, respectively.
Deposits totaling approximately $1.84 billion and $1.51 billion at September 30, 2018 and December 31, 2017, respectively, were public funds obtained primarily from state and political subdivisions in the United States.
9. Securities Sold Under Agreements to Repurchase
At September 30, 2018 and December 31, 2017, securities sold under agreements to repurchase totaled $142.1 million and $147.8 million, respectively. For the three-month periods ended September 30, 2018 and 2017, securities sold under agreements to repurchase daily weighted-average totaled $148.8 million and $135.9 million, respectively. For the nine-month periods ended September 30, 2018 and 2017, securities sold under agreements to repurchase daily weighted-average totaled $148.5 million and $129.6 million, respectively.
The remaining contractual maturity of securities sold under agreements to repurchase in the consolidated balance sheets as of September 30, 2018 and December 31, 2017 is presented in the following tables:
September 30, 2018 | ||||||||||||||||||||
Overnight and Continuous | Up to 30 Days | 30-90 Days | Greater than 90 Days | Total | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Securities sold under agreements to repurchase: | ||||||||||||||||||||
U.S. government-sponsored enterprises | $ | 26,134 | $ | — | $ | — | $ | — | $ | 26,134 | ||||||||||
Mortgage-backed securities | 9,694 | — | — | — | 9,694 | |||||||||||||||
State and political subdivisions | 90,715 | — | — | — | 90,715 | |||||||||||||||
Other securities | 15,603 | — | — | — | 15,603 | |||||||||||||||
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| |||||||||||
Total borrowings | $ | 142,146 | $ | — | $ | — | $ | — | $ | 142,146 | ||||||||||
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|
|
December 31, 2017 | ||||||||||||||||||||
Overnight and Continuous | Up to 30 Days | 30-90 Days | Greater than 90 Days | Total | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Securities sold under agreements to repurchase: | ||||||||||||||||||||
U.S. government-sponsored enterprises | $ | 11,525 | $ | — | $ | — | $ | 10,000 | $ | 21,525 | ||||||||||
Mortgage-backed securities | 21,255 | — | — | — | 21,255 | |||||||||||||||
State and political subdivisions | 85,428 | — | — | — | 85,428 | |||||||||||||||
Other securities | 19,581 | — | — | — | 19,581 | |||||||||||||||
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| |||||||||||
Total borrowings | $ | 137,789 | $ | — | $ | — | $ | 10,000 | $ | 147,789 | ||||||||||
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10. FHLB Borrowed Funds
The Company’s FHLB borrowed funds, which are secured by our loan portfolio, were $ 1.36 billion and $1.30 billion at September 30, 2018 and December 31, 2017, respectively. At September 30, 2018, $750.0 million and $609.9 million of the outstanding balance were issued as short-term and long-term advances, respectively. At December 31, 2017, $525.0 million and $774.2 million of the outstanding balance were issued as short-term and long-term advances, respectively. The FHLB advances mature from the current year to 2033 with fixed interest rates ranging from 1.00% to 4.80% and are secured by loans and investments securities. Maturities of borrowings as of September 30, 2018 include: 2018 – $770.0 million; 2019 – $143.0 million; 2020 – $146.4 million; 2021 – zero; 2022 – zero; 2023 – zero; after 2023 – $300.4 million. Expected maturities will differ from contractual maturities because FHLB may have the right to call or HBI the right to prepay certain obligations. $300 million of the borrowings maturing after 2023 are callable by the FHLB within one year.
Additionally, the Company had $941.3 million and $695.3 million at September 30, 2018 and December 31, 2017, respectively, in letters of credit under a FHLB blanket borrowing line of credit, which are used to collateralize public deposits at September 30, 2018 and December 31, 2017, respectively.
11. Other Borrowings
The Company had zero other borrowings at September 30, 2018. The Parent Company took out a $20.0 million unsecured line of credit for general corporate purposes during 2015. The balance on this line of credit at September 30, 2018 and December 31, 2017 was zero.
12. Subordinated Debentures
Subordinated debentures at September 30, 2018 and December 31, 2017 consisted of guaranteed payments on trust preferred securities with the following components:
As of September 30, 2018 | As of December 31, 2017 | |||||||
(In thousands) | ||||||||
Trust preferred securities | ||||||||
Subordinated debentures, issued in 2006, due 2036, fixed rate of 6.75% during the first five years and at a floating rate of 1.85% above the three-month LIBOR rate, reset quarterly, thereafter, currently callable without penalty | $ | 3,093 | $ | 3,093 | ||||
Subordinated debentures, issued in 2004, due 2034, fixed rate of 6.00% during the first five years and at a floating rate of 2.00% above the three-month LIBOR rate, reset quarterly, thereafter, currently callable without penalty | 15,464 | 15,464 | ||||||
Subordinated debentures, issued in 2005, due 2035, fixed rate of 5.84% during the first five years and at a floating rate of 1.45% above the three-month LIBOR rate, reset quarterly, thereafter, currently callable without penalty | 25,774 | 25,774 | ||||||
Subordinated debentures, issued in 2004, due 2034, fixed rate of 4.29% during the first five years and at a floating rate of 2.50% above the three-month LIBOR rate, reset quarterly, thereafter, currently callable without penalty | 16,495 | 16,495 | ||||||
Subordinated debentures, issued in 2005, due 2035, floating rate of 2.15% above the three-month LIBOR rate, reset quarterly, currently callable without penalty | 4,341 | 4,304 | ||||||
Subordinated debentures, issued in 2006, due 2036, fixed rate of 7.38% during the first five years and at a floating rate of 1.62% above the three-month LIBOR rate, reset quarterly, thereafter, currently callable without penalty | 5,638 | 5,569 | ||||||
Subordinated debt securities | ||||||||
Subordinated notes, net of issuance costs, issued in 2017, due 2027, fixed rate of 5.625% during the first five years and at a floating rate of 3.575% above the then three-month LIBOR rate, reset quarterly, thereafter, callable in 2022 without penalty | 297,791 | 297,332 | ||||||
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| |||||
Total | $ | 368,596 | $ | 368,031 | ||||
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|
The Company holds trust preferred securities with a face amount of $73.3 million which are currently callable without penalty based on the terms of the specific agreements. The trust preferred securities aretax-advantaged issues that qualify for Tier 1 capital treatment subject to certain limitations. Distributions on these securities are included in interest expense. Each of the trusts is a statutory business trust organized for the sole purpose of issuing trust securities and investing the proceeds in the Company’s subordinated debentures, the sole asset of each trust. The trust preferred securities of each trust represent preferred beneficial interests in the assets of the respective trusts and are subject to mandatory redemption upon payment of the subordinated debentures held by the trust. The Company wholly owns the common securities of each trust. Each trust’s ability to pay amounts due on the trust preferred securities is solely dependent upon the Company making payment on the related subordinated debentures. The Company’s obligations under the subordinated securities and other relevant trust agreements, in aggregate, constitute a full and unconditional guarantee by the Company of each respective trust’s obligations under the trust securities issued by each respective trust.
The Bank acquired $12.5 million in trust preferred securities with a carrying value of $9.9 million and $9.8 million at September 30, 2018 and December 31, 2017, respectively, from the Stonegate acquisition. The difference between the fair value purchased of $9.9 million and the $12.5 million face amount, will be amortized into interest expense over the remaining life of the debentures. The associated subordinated debentures are redeemable, in whole or in part, prior to maturity at our option on a quarterly basis when interest is due and payable and in whole at any time within 90 days following the occurrence and continuation of certain changes in the tax treatment or capital treatment of the debentures.
13. Income Taxes
On December 22, 2017, the Tax Cuts and Jobs Act (“TCJA”) was signed into law. The TCJA makes broad and complex changes to the U.S. tax code that affected our income tax rate in 2017. The TCJA reduced the U.S. federal corporate income tax rate from 35% to 21%. The TCJA also established new tax laws that will affect 2018.
On December 22, 2017, the SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for the tax effects of the 2017 Act. SAB 118 provides a measurement period that should not extend beyond one year from the 2017 Act enactment date for companies to complete the accounting under ASC 740, Income Taxes. As such, the company’s 2017 financial results reflect the income tax effects for the 2017 Act for which the accounting under ASC 740 is complete and provisional amounts for those specific income tax effects of the 2017 Act for which the accounting under ASC 740 is incomplete, but a reasonable estimate could be determined. The company did not identify items for which the income tax effects of the 2017 Act have not been completed and a reasonable estimate could not be determined as of December 31, 2017. The tax expense recorded in 2017 is a reasonable estimate based on published guidance available at this time and is considered provisional. The ultimate impact of the 2017 Act may differ from these estimates due to changes in interpretations and assumptions made by the Company, as well as additional regulatory guidance. Any adjustments will be reflected in the Company’s financial statements in future periods.
The following is a summary of the components of the provision (benefit) for income taxes for the three and nine-month periods ended September 30, 2018 and 2017:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(In thousands) | ||||||||||||||||
Current: | ||||||||||||||||
Federal | $ | 17,999 | $ | 17,289 | $ | 44,354 | $ | 65,958 | ||||||||
State | 5,958 | 3,434 | 14,683 | 13,101 | ||||||||||||
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| |||||||||
Total current | 23,957 | 20,723 | 59,037 | 79,059 | ||||||||||||
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| |||||||||
Deferred: | ||||||||||||||||
Federal | 1,047 | (11,002 | ) | 10,964 | (13,238 | ) | ||||||||||
State | 346 | (2,185 | ) | 3,629 | (2,629 | ) | ||||||||||
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| |||||||||
Total deferred | 1,393 | (13,187 | ) | 14,593 | (15,867 | ) | ||||||||||
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| |||||||||
Income tax expense | $ | 25,350 | $ | 7,536 | $ | 73,630 | $ | 63,192 | ||||||||
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The reconciliation between the statutory federal income tax rate and effective income tax rate is as follows for the three and nine-month periods ended September 30, 2018 and 2017:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Statutory federal income tax rate | 21.00 | % | 35.00 | % | 21.00 | % | 35.00 | % | ||||||||
Effect ofnon-taxable interest income | (0.84 | ) | (4.48 | ) | (0.80 | ) | (1.82 | ) | ||||||||
Effect of gain on acquisitions | — | — | — | (0.76 | ) | |||||||||||
Stock compensation | (0.12 | ) | (0.09 | ) | (0.18 | ) | (0.49 | ) | ||||||||
State income taxes, net of federal benefit | 3.30 | 3.91 | 3.60 | 4.01 | ||||||||||||
Other | 0.66 | (0.63 | ) | 0.68 | 0.18 | |||||||||||
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| |||||||||
Effective income tax rate | 24.00 | % | 33.71 | % | 24.30 | % | 36.12 | % | ||||||||
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|
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The types of temporary differences between the tax basis of assets and liabilities and their financial reporting amounts that give rise to deferred income tax assets and liabilities, and their approximate tax effects, are as follows:
September 30, 2018 | December 31, 2017 | |||||||
(In thousands) | ||||||||
Deferred tax assets: | ||||||||
Allowance for loan losses | $ | 30,023 | $ | 29,515 | ||||
Deferred compensation | 2,868 | 1,142 | ||||||
Stock compensation | 3,674 | 2,731 | ||||||
Real estate owned | 1,419 | 1,731 | ||||||
Unrealized loss on securitiesavailable-for-sale | 11,118 | 1,471 | ||||||
Loan discounts | 25,144 | 32,784 | ||||||
Tax basis premium/discount on acquisitions | 8,387 | 8,802 | ||||||
Investments | 1,008 | 1,155 | ||||||
Other | 10,552 | 11,663 | ||||||
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|
|
| |||||
Gross deferred tax assets | 94,193 | 90,994 | ||||||
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| |||||
Deferred tax liabilities: | ||||||||
Accelerated depreciation on premises and equipment | 1,157 | 291 | ||||||
Core deposit intangibles | 10,163 | 11,258 | ||||||
FHLB dividends | 1,712 | 1,625 | ||||||
Other | 1,613 | 1,256 | ||||||
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| |||||
Gross deferred tax liabilities | 14,645 | 14,430 | ||||||
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|
|
| |||||
Net deferred tax assets | $ | 79,548 | $ | 76,564 | ||||
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|
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and the states of Arkansas, Alabama, Florida and New York. The Company is no longer subject to U.S. federal and state tax examinations by tax authorities for years before 2013.
14. Common Stock, Compensation Plans and Other
Common Stock
The Company’s Restated Articles of Incorporation, as amended, authorize the issuance of up to 200,000,000 shares of common stock, par value $0.01 per share.
The Company also has the authority to issue up to 5,500,000 shares of preferred stock, par value $0.01 per share under the Company’s Restated Articles of Incorporation.
Stock Repurchases
On February 21, 2018, the Company’s Board of Directors authorized the repurchase of up to an additional 5,000,000 shares of its common stock under the previously approved stock repurchase program, which brought the total amount of authorized shares to repurchase to 14,752,000 shares. During 2018, the Company utilized a portion of this stock repurchase program.
During the first nine months of 2018, the Company repurchased a total of 1,863,400 shares with a weighted-average stock price of $23.14 per share. The 2018 earnings were used to fund the repurchases during the year. Shares repurchased under the program as of September 30, 2018 total 6,388,264 shares. The remaining balance available for repurchase is8,363,736 shares at September 30, 2018.
Stock Compensation Plans
The Company has a stock option and performance incentive plan known as the Amended and Restated 2006 Stock Option and Performance Incentive Plan (the “Plan”). The purpose of the Plan is to attract and retain highly qualified officers, directors, key employees, and other persons, and to motivate those persons to improve the Company’s business results. On April 19, 2018 at the Annual Meeting of Shareholders of the Company, the shareholders approved, as proposed in the Proxy Statement, an amendment to the Plan to increase the number of shares of the Company’s common stock available for issuance under the Plan by 2,000,000 shares to 13,288,000 shares. The Plan provides for the granting of incentive andnon-qualified stock options and other equity awards, including the issuance of restricted shares. As of September 30, 2018, the maximum total number of shares of the Company’s common stock available for issuance under the Plan was 13,288,000. At September 30, 2018, the Company had approximately 1,841,443 shares of common stock remaining available for future grants and approximately 5,477,700 shares of common stock reserved for issuance pursuant to outstanding awards under the Plan.
During the third quarter of 2018, the Company granted 1,452,000 stock options and 843,500 shares of restricted stock to certain employees under the HOMB $2.00 program (“HOMB $2.00”). The purpose of the performance-based incentive plan is to motivate employees to help the Company achieve $2.00 of diluted earnings per share over a consecutive four-quarter period.
The intrinsic value of the stock options outstanding and stock options vested at September 30, 2018 was $11.0 million and $8.0 million, respectively. Total unrecognized compensation cost, net of income tax benefit, related tonon-vested stock option awards, which are expected to be recognized over the vesting periods, was approximately $13.3 million as of September 30, 2018. For the first nine months of 2018, the Company has expensed approximately $1.4 million for thenon-vested awards.
The table below summarizes the stock option transactions under the Plan at September 30, 2018 and December 31, 2017 and changes during the nine-month period and year then ended:
For the Nine Months Ended September 30, 2018 | For the Year Ended December 31, 2017 | |||||||||||||||
Shares (000) | Weighted- Average Exercisable Price | Shares (000) | Weighted- Average Exercisable Price | |||||||||||||
Outstanding, beginning of year | 2,274 | $ | 16.23 | 2,397 | $ | 15.19 | ||||||||||
Granted | 1,576 | 23.24 | 80 | 25.96 | ||||||||||||
Forfeited/Expired | (37 | ) | 22.30 | — | — | |||||||||||
Exercised | (177 | ) | 9.42 | (203 | ) | 7.82 | ||||||||||
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| |||||||||
Outstanding, end of period | 3,636 | 19.54 | 2,274 | 16.23 | ||||||||||||
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| |||||||||
Exercisable, end of period | 1,171 | 15.10 | 1,016 | $ | 13.55 | |||||||||||
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Stock-based compensation expense for stock-based compensation awards granted is based on the grant-date fair value. For stock option awards, the fair value is estimated at the date of grant using the Black-Scholes option-pricing model. This model requires the input of highly subjective assumptions, changes to which can materially affect the fair value estimate. Additionally, there may be other factors that would otherwise have a significant effect on the value of employee stock options granted but are not considered by the model. Accordingly, while management believes that the Black-Scholes option-pricing model provides a reasonable estimate of fair value, the model does not necessarily provide the best single measure of fair value for the Company’s employee stock options. The weighted-average fair value of options granted during the nine months ended September 30, 2018 was $5.58 per share. The weighted-average fair value of options granted during the year ended December 31, 2017 was $7.10 per share. The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model based on the weighted-average assumptions for expected dividend yield, expected stock price volatility, risk-free interest rate, and expected life of options granted.
For the Nine Months Ended September 30, 2018 | For the Year Ended December 31, 2017 | |||||||
Expected dividend yield | 2.05 | % | 1.39 | % | ||||
Expected stock price volatility | 25.59 | % | 28.47 | % | ||||
Risk-free interest rate | 2.82 | % | 2.06 | % | ||||
Expected life of options | 6.5 years | 6.5 years |
The following is a summary of currently outstanding and exercisable options at September 30, 2018:
Options Outstanding | Options Exercisable | |||||||||
Exercise Prices | Options Outstanding Shares (000) | Weighted- Average Remaining Contractual Life (in years) | Weighted- Average Exercise Price | Options Exercisable Shares (000) | Weighted- Average Exercise Price | |||||
$2.10 to $2.66 | 12 | 0.73 | 2.60 | 12 | 2.60 | |||||
$5.68 to $6.56 | 89 | 3.22 | 6.54 | 89 | 6.54 | |||||
$8.62 to $9.54 | 259 | 4.41 | 9.04 | 259 | 9.04 | |||||
$14.71 to $16.86 | 252 | 6.02 | 15.97 | 168 | 16.05 | |||||
$17.12 to $17.40 | 195 | 6.15 | 17.20 | 118 | 17.22 | |||||
$18.46 | 1,010 | 6.90 | 18.46 | 433 | 18.46 | |||||
$20.16 to $20.58 | 68 | 7.02 | 20.41 | 28 | 20.34 | |||||
$21.25 to $22.22 | 230 | 8.51 | 21.71 | 48 | 21.25 | |||||
$22.70 to $23.51 | 1,441 | 9.81 | 23.32 | — | — | |||||
$25.96 | 80 | 8.56 | 25.96 | 16 | 25.96 | |||||
|
| |||||||||
3,636 | 1,171 | |||||||||
|
|
The table below summarized the activity for the Company’s restricted stock issued and outstanding at September 30, 2018 and December 31, 2017 and changes during the period and year then ended:
As of September 30, 2018 | As of December 31, 2017 | |||||||
(In thousands) | ||||||||
Beginning of year | 1,145 | 958 | ||||||
Issued | 1,005 | 232 | ||||||
Vested | (229 | ) | (45 | ) | ||||
Forfeited | (49 | ) | — | |||||
|
|
|
| |||||
End of period | 1,872 | 1,145 | ||||||
|
|
|
| |||||
Amount of expense for nine months and twelve months ended, respectively | $ | 5,153 | $ | 5,237 | ||||
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|
|
|
Total unrecognized compensation cost, net of income tax benefit, related tonon-vested restricted stock awards, which are expected to be recognized over the 7.8 weighted average remaining contractual life, was approximately $30.2 million as of September 30, 2018.
15.Non-Interest Expense
The table below shows the components ofnon-interest expense for the three and nine months ended September 30, 2018 and 2017:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(In thousands) | ||||||||||||||||
Salaries and employee benefits | $ | 37,825 | $ | 28,510 | $ | 107,315 | $ | 83,965 | ||||||||
Occupancy and equipment | 8,148 | 7,887 | 25,650 | 21,602 | ||||||||||||
Data processing expense | 3,461 | 2,853 | 10,786 | 8,439 | ||||||||||||
Other operating expenses: | ||||||||||||||||
Advertising | 1,154 | 795 | 3,258 | 2,305 | ||||||||||||
Merger and acquisition expenses | — | 18,227 | — | 25,743 | ||||||||||||
Amortization of intangibles | 1,617 | 906 | 4,867 | 2,576 | ||||||||||||
Electronic banking expense | 1,947 | 1,712 | 5,653 | 4,885 | ||||||||||||
Directors’ fees | 314 | 309 | 962 | 946 | ||||||||||||
Due from bank service charges | 253 | 472 | 714 | 1,348 | ||||||||||||
FDIC and state assessment | 2,293 | 1,293 | 6,689 | 3,763 | ||||||||||||
Insurance | 762 | 577 | 2,363 | 1,698 | ||||||||||||
Legal and accounting | 761 | 698 | 2,397 | 1,799 | ||||||||||||
Other professional fees | 1,748 | 1,436 | 4,988 | 3,822 | ||||||||||||
Operating supplies | 510 | 432 | 1,712 | 1,376 | ||||||||||||
Postage | 311 | 280 | 978 | 861 | ||||||||||||
Telephone | 337 | 305 | 1,081 | 1,027 | ||||||||||||
Other expense | 4,682 | 4,154 | 13,318 | 10,835 | ||||||||||||
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|
|
|
|
|
|
| |||||||||
Total other operating expenses | 16,689 | 31,596 | 48,980 | 62,984 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Totalnon-interest expense | $ | 66,123 | $ | 70,846 | $ | 192,731 | $ | 176,990 | ||||||||
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16. Significant Estimates and Concentrations of Credit Risks
Accounting principles generally accepted in the United States of America require disclosure of certain significant estimates and current vulnerabilities due to certain concentrations. Estimates related to the allowance for loan losses and certain concentrations of credit risk are reflected in Note 5, while deposit concentrations are reflected in Note 8.
The Company’s primary market areas are in Arkansas, Florida, South Alabama and New York. The Company primarily grants loans to customers located within these markets unless the borrower has an established relationship with the Company.
The diversity of the Company’s economic base tends to provide a stable lending environment. Although the Company has a loan portfolio that is diversified in both industry and geographic area, a substantial portion of its debtors’ ability to honor their contracts is dependent upon real estate values, tourism demand and the economic conditions prevailing in its market areas.
Although the Company has a diversified loan portfolio, commercial real estate loans represented 58.3% and 61.8% of total loans receivable at September 30, 2018 and December 31, 2017, respectively, and 269.5% and 289.6% of total stockholders’ equity at September 30, 2018 and December 31, 2017, respectively. Residential real estate loans represented23.9% and 23.3% of total loans receivable and 110.7% and 109.4% of total stockholders’ equity at September 30, 2018 and December 31, 2017, respectively.
Approximately 89.1% of the Company’s total loans and 91.1% of the Company’s real estate loans as of September 30, 2018, are to borrowers whose collateral is located in Alabama, Arkansas, Florida and New York, the states in which the Company has its branch locations.
Although general economic conditions in our market areas have improved, both nationally and locally, in recent years and have shown signs of continued improvement, financial institutions still face circumstances and challenges which, in some cases, have resulted and could potentially result, in large declines in the fair values of investments and other assets, constraints on liquidity and significant credit quality problems, including severe volatility in the valuation of real estate and other collateral supporting loans. The financial statements have been prepared using values and information currently available to the Company.
Any future volatility in the economy could cause the values of assets and liabilities recorded in the financial statements to change rapidly, resulting in material future adjustments in asset values, the allowance for loan losses and capital that could negatively impact the Company’s ability to meet regulatory capital requirements and maintain sufficient liquidity.
17. Commitments and Contingencies
In the ordinary course of business, the Company makes various commitments and incurs certain contingent liabilities to fulfill the financing needs of their customers. These commitments and contingent liabilities include lines of credit and commitments to extend credit and issue standby letters of credit. The Company applies the same credit policies and standards as they do in the lending process when making these commitments. The collateral obtained is based on the assessed creditworthiness of the borrower.
At September 30, 2018 and December 31, 2017, commitments to extend credit of $2.25 billion and $2.38 billion, respectively, were outstanding. A percentage of these balances are participated out to other banks; therefore, the Company can call on the participating banks to fund future draws. Since some of these commitments are expected to expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements.
Outstanding standby letters of credit are contingent commitments issued by the Company, generally to guarantee the performance of a customer in third-party borrowing arrangements. The term of the guarantee is dependent upon the creditworthiness of the borrower, some of which are long-term. The amount of collateral obtained, if deemed necessary, is based on management’s credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, commercial real estate and residential real estate. Management uses the same credit policies in granting lines of credit as it does foron-balance-sheet instruments. The maximum amount of future payments the Company could be required to make under these guarantees at September 30, 2018 and December 31, 2017, is $55.0 million and $70.5 million, respectively.
The Company and/or its bank subsidiary have various unrelated legal proceedings, most of which involve loan foreclosure activity pending, which, in the aggregate, are not expected to have a material adverse effect on the financial position or results of operations or cash flows of the Company and its subsidiary.
18. Regulatory Matters
The Bank is subject to a legal limitation on dividends that can be paid to the parent company without prior approval of the applicable regulatory agencies. Arkansas bank regulators have specified that the maximum dividend limit state banks may pay to the parent company without prior approval is 75% of the current year earnings plus 75% of the retained net earnings of the preceding year. Since the Bank is also under supervision of the Federal Reserve, it is further limited if the total of all dividends declared in any calendar year by the Bank exceeds the Bank’s net profits to date for that year combined with its retained net profits for the preceding two years. During the first nine months of 2018, the Company requested approximately $155.5 million in regular dividends from its banking subsidiary. This dividend is equal to approximately63.0% of the Company’s banking subsidiary’syear-to-date 2018 earnings.
The Company’s banking subsidiary is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of the Company’s assets, liabilities and certainoff-balance-sheet items as calculated under regulatory accounting practices.balance sheets. The Company’s capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Furthermore, the Company’s regulators could require adjustments to regulatory capital not reflected in the consolidated financial statements.
Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios of total, common Tier 1 equity and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier 1 capital (as defined) to average assets (as defined). Management believes that, as of September 30, 2018, the Company meets all capital adequacy requirements to which it is subject.
In July 2013, the Federal Reserve Board and the other federal bank regulatory agencies issued a final rule to revise their risk-based and leverage capital requirements and their method for calculating risk-weighted assets to make them consistent with the agreements that were reached by the Basel Committee on Banking Supervision in “Basel III: A Global Regulatory Framework for More Resilient Banks and Banking Systems” and certain provisions of the Dodd-Frank Act (“Basel III”). Basel III applies to all depository institutions, bank holding companies with total consolidated assets of $500 million or more, and savings and loan holding companies. Basel III became effective for the Company and its bank subsidiary on January 1, 2015. The capital conservation buffer requirement began being phased in beginning January 1, 2016 at the 0.625% level and will increase by 0.625% on each subsequent January 1, until it reaches 2.5% on January 1, 2019 when thephase-in period ends and the full capital conservation buffer requirement becomes effective.
Basel III amended the prompt corrective action rules to incorporate a “common equity Tier 1 capital” requirement and to raise the capital requirements for certain capital categories. In order to be adequately capitalized for purposes of the prompt corrective action rules, a banking organization will be required to have at least a 4.5% “common equity Tier 1 risk-based capital” ratio, a 4% “Tier 1 leverage capital” ratio, a 6% “Tier 1 risk-based capital” ratio and an 8% “total risk-based capital” ratio.
The Federal Reserve Board’s risk-based capital guidelines include the definitions for (1) a well-capitalized institution, (2) an adequately-capitalized institution, and (3) an undercapitalized institution. Under Basel III, the criteria for a well-capitalized institution are now: a 6.5% “common equity Tier 1 risk-based capital” ratio, a 5% “Tier 1 leverage capital” ratio, an 8% “Tier 1 risk-based capital” ratio, and a 10% “total risk-based capital” ratio. As of September 30, 2018, the Bank met the capital standards for a well-capitalized institution. The Company’s “common equity Tier 1 risk-based capital” ratio, “Tier 1 leverage capital” ratio, “Tier 1 risk-based capital” ratio, and “total risk-based capital” ratio were 11.65%, 10.38%, 12.25%, and 15.73%, respectively, as of September 30, 2018.
19. Additional Cash Flow Information
In connection with the GHI acquisition, accounted for using the purchase method, the Company acquired approximately $398.1 million in assets, including $41.0 million in cash and cash equivalents, assumed $345.0 million in liabilities, issued 2,738,038 shares of its common stock valued at approximately $77.5 million as of February 23, 2017, and paid approximately $18.5 million in cash in exchange for all outstanding shares of GHI common stock.
In connection with the BOC acquisition, accounted for using the purchase method, the Company acquired approximately $178.1 million in assets, including $4.6 million in cash and cash equivalents, assumed $170.1 million in liabilities, issued no equity and paid approximately $4.2 million in cash. As a result, the Company recorded a bargain purchase gain of $3.8 million.
In connection with the Stonegate acquisition, accounted for using the purchase method, the Company acquired approximately $2.89 billion in assets, including $101.0 million in cash and cash equivalents, assumed $2.60 billion in liabilities, issued 30,863,658 shares of its common stock valued at approximately $742.3 million as of September 26, 2017, and paid $50.1 million in cash in exchange for all outstanding shares of Stonegate common stock.
In connection with the SPF acquisition, accounted for using the purchase method, the Company acquired approximately $377.0 million in assets, including $376.2 million in loans, issued 1,250,000 shares of its common stock valued at approximately $28.2 million as of June 30, 2018, and paid $377.4 million in cash.
The following is a summary of the Company’s additional cash flow information during the nine-month periods ended:
September 30, | ||||||||
2018 | 2017 | |||||||
(In thousands) | ||||||||
Interest paid | $ | 80,057 | $ | 34,573 | ||||
Income taxes paid | 47,682 | 117,025 | ||||||
Assets acquired by foreclosure | 10,098 | 9,255 |
20. Financial Instruments
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There is a hierarchy of three levels of inputs that may be used to measure fair values:
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A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Transfers of financial instruments between levels within the fair value hierarchy are recognized on the date management determines that the underlying circumstances or assumptions have changed.
Financial Assets and Liabilities Measured on a Recurring Basis
Available-for-sale securities are the only material financial instruments valued on a recurring basis which are held by the Company at fair value. The Company does not have any Level 1 securities. Primarily all of the Company’s securities are considered to be Level 2 securities. These Level 2 securities consist primarily of U.S. government-sponsored enterprises, mortgage-backed securities plus state and political subdivisions. For these securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and conditions, among other things. As of September 30, 2018 and December 31, 2017, Level 3 securities were immaterial. In addition, there were no material transfers between hierarchy levels during 2018 and 2017. See Note 3 for additional detail related to investment securities.
The Company reviews the prices supplied by the independent pricing service, as well as their underlying pricing methodologies, for reasonableness and to ensure such prices are aligned with traditional pricing matrices. In general, the Company does not purchase investment portfolio securities with complicated structures. Pricing for the Company’s investment securities is fairly generic and is easily obtained.
Financial Assets and Liabilities Measured on a Nonrecurring Basis
Impaired loans that are collateral dependent are the only material financial assets valued on anon-recurring basis which are held by the Company at fair value. Loan impairment is reported when full payment under the loan terms is not expected. Impaired loans are carried at the net realizable value of the collateral if the loan is collateral dependent. A portion of the allowance for loan losses is allocated to impaired loans if the value of such loans is deemed to be less than the unpaid balance. If these allocations cause the allowance for loan losses to require an increase, such increase is reported as a component of the provision for loan losses. The fair value of loans with specific allocated losses was $77.5 million and $72.5 million as of September 30, 2018 and December 31, 2017, respectively. This valuation is considered Level 3, consisting of appraisals of underlying collateral. The Company reversed approximately $164,000 and $314,000 of accrued interest receivable whennon-covered impaired loans were put onnon-accrual status during the three months ended September 30, 2018 and 2017, respectively. The Company reversed approximately $728,000 and $523,000 of accrued interest receivable whennon-covered impaired loans were put onnon-accrual status during the nine months ended September 30, 2018 and 2017, respectively.
Nonfinancial Assets and Liabilities Measured on a Nonrecurring Basis
Foreclosed assets held for sale are the only materialnon-financial assets valued on anon-recurring basis which are held by the Company at fair value, less estimated costs to sell. At foreclosure, if the fair value, less estimated costs to sell, of the real estate acquired is less than the Company’s recorded investment in the related loan, a write-down is recognized through a charge to the allowance for loan losses. Additionally, valuations are periodically performed by management and any subsequent reduction in value is recognized by a charge to income. The fair value of foreclosed assets held for sale is estimated using Level 3 inputs based on appraisals of underlying collateral. As of September 30, 2018 and December 31, 2017, the fair value of foreclosed assets held for sale, less estimated costs to sell, was $13.5 million and $18.9 million, respectively.
No foreclosed assets held for sale were remeasured during the nine months ended September 30, 2018. Regulatory guidelines require the Company to reevaluate the fair value of foreclosed assets held for sale on at least an annual basis. The Company’s policy is to comply with the regulatory guidelines.
The significant unobservable (Level 3) inputs used in the fair value measurement of collateral for collateral-dependent impaired loans and foreclosed assets primarily relate to customized discounting criteria applied to the customer’s reported amount of collateral. The amount of the collateral discount depends upon the condition and marketability of the underlying collateral. As the Company’s primary objective in the event of default would be to monetize the collateral to settle the outstanding balance of the loan, less marketable collateral would receive a larger discount. During the reported periods, collateral discounts ranged from 20% to 30% for commercial and residential real estate collateral.
Fair Values of Financial Instruments
The following table presents the estimated fair values of the Company’s financial instruments. Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
September 30, 2018 | ||||||||||||
Carrying Amount | Fair Value | Level | ||||||||||
(In thousands) | ||||||||||||
Financial assets: | ||||||||||||
Cash and cash equivalents | $ | 532,057 | $ | 532,057 | 1 | |||||||
Federal funds sold | 500 | 500 | 1 | |||||||||
Investment securities –held-to-maturity | 199,266 | 198,552 | 2 | |||||||||
Loans receivable, net of impaired loans and allowance | 10,645,129 | 10,429,379 | 3 | |||||||||
Accrued interest receivable | 48,909 | 48,909 | 1 | |||||||||
Financial liabilities: | ||||||||||||
Deposits: | ||||||||||||
Demand andnon-interest-bearing | $ | 2,482,857 | $ | 2,482,857 | 1 | |||||||
Savings and interest-bearing transaction accounts | 6,420,951 | 6,420,951 | 1 | |||||||||
Time deposits | 1,720,930 | 1,696,005 | 3 | |||||||||
Securities sold under agreements to repurchase | 142,146 | 142,146 | 1 | |||||||||
FHLB and other borrowed funds | 1,363,851 | 1,291,287 | 2 | |||||||||
Accrued interest payable | 12,383 | 12,383 | 1 | |||||||||
Subordinated debentures | 368,596 | 374,338 | 3 | |||||||||
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December 31, 2017 | ||||||||||||
Carrying Amount | Fair Value | Level | ||||||||||
(In thousands) | ||||||||||||
Financial assets: | ||||||||||||
Cash and cash equivalents | $ | 635,933 | $ | 635,933 | 1 | |||||||
Federal funds sold | 24,109 | 24,109 | 1 | |||||||||
Investment securities –held-to-maturity | 224,756 | 227,539 | 2 | |||||||||
Loans receivable, net of impaired loans and allowance | 10,148,470 | 10,055,901 | 3 | |||||||||
Accrued interest receivable | 45,708 | 45,708 | 1 | |||||||||
Financial liabilities: | ||||||||||||
Deposits: | ||||||||||||
Demand andnon-interest-bearing | $ | 2,385,252 | $ | 2,385,252 | 1 | |||||||
Savings and interest-bearing transaction accounts | 6,476,819 | 6,476,819 | 1 | |||||||||
Time deposits | 1,526,431 | 1,514,670 | 3 | |||||||||
Securities sold under agreements to repurchase | 147,789 | 147,789 | 1 | |||||||||
FHLB and other borrowed funds | 1,299,188 | 1,299,961 | 2 | |||||||||
Accrued interest payable | 5,583 | 5,583 | 1 | |||||||||
Subordinated debentures | 368,031 | 379,146 | 3 |
21. Recent Accounting Pronouncements
In May 2014, the FASB issued ASU2014-09,Revenue from Contracts with Customers (Topic 606). ASU2014-09 provides guidance that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. In August 2015, the FASB issued ASUNo. 2015-14,Revenue from Contracts with Customers (Topic 606), which defers the effective date of this standard to annual and interim periods beginning after December 15, 2017; however, early adoption was permitted for annual and interim reporting periods beginning after December 15, 2016. In April 2016, the FASB issued ASU2016-10,Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which amends certain aspects of the guidance in ASU2014-09 (FASB’s new revenue standard) on (1) identifying performance obligations and (2) licensing. ASU2014-10’s effective date and transition provisions are aligned with the requirements in ASU2014-09. In May 2016, the FASB issued ASU2016-12,Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which amends certain aspects of the FASB’s new revenue standard, ASU2014-09. ASU2016-12’s effective date and transition provisions are aligned with the requirements in ASU2014-09.
The guidance issued in ASU2014-09, ASU2015-14, ASU2016-10 and ASU2016-12 permit two implementation approaches, one requiring retrospective application of the new standard with restatement of prior years and one requiring prospective application of the new standard with disclosure of results under old standards. The Company adopted the guidance effective January 1, 2018, and its adoption did not have a significant impact on our financial position or financial statement disclosures.
In January 2016, the FASB issued ASU2016-01,Financial Instruments – Overall(Subtopic825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. Changes to the current GAAP model primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. ASU2016-01 requires equity investments, other than equity method investments, to be measured at fair value with changes in fair value recognized in net income. The ASU requires a cumulative-effect adjustment to retained earnings as of the beginning of the reporting period of adoption to reclassify the cumulative change in fair value of equity securities previously recognized in accumulated other comprehensive income (“AOCI”). In addition, ASU2016-01 clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses onavailable-for-sale securities. The new guidance is effective for annual reporting period and interim reporting periods within those annual periods, beginning after December 15, 2017. The Company adopted the guidance effective January 1, 2018 and recorded a cumulative-effect adjustment to retained earnings of $990,000 to reclassify the cumulative change in fair value of equity securities previously recognized in AOCI. For additional information on fair value of assets and liabilities, see Note 20.
In February 2016, the FASB issued ASU2016-02,Leases (Topic 842). The amendments in ASU2016-02 address several aspects of lease accounting with the significant change being the recognition ofROU lease assets and lease liabilities for leases previously classified as operating leases. ASU2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application ofrepresent the amendments in ASU2016-02 is permitted for all entities. The Company has several lease agreements for which the amendments will require the Company to recognize a lease liability to make lease payments and aright-of-use asset which will represent itsCompany’s right to use thean underlying asset for the lease term.term, and the lease liability represents the Company’s obligation to make lease payments arising from the lease. The Company is currently reviewingoperating ROU lease asset and lease liability are recognized at the amendments to ensure it is fully compliant by the adoptioncommencement date and does not expect to early adopt. The impact is not expected to have a material effectare based on the Company’s financial position or results of operations as the Company does not have a material amountpresent value of lease agreements. In addition,payments over the Company will change its current accounting policies to comply with the amendments with such changes as mentioned above. For additional information onlease term. As most of the Company’s leases see Note 18 “Leases” in the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form10-K for the year ended December 31, 2017.
In May 2016, the FASB issued ASU2016-11,Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates2014-09 and2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting (SEC Update), which rescinds certain SEC guidance from the FASB Accounting Standards Codification in response to announcements made by the SEC staff at the Emerging Issues Task Force’s (“EITF”) March 3, 2016, meeting. ASU2016-11 is effective at the same time as ASU2014-09 and ASU2014-16. The Company adopted the guidance effective January 1, 2018, and its adoption diddo not have a significant impact on the Company’s financial position or financial statement disclosures.
In June 2016, the FASB issued ASU2016-13,Measurement of Credit Losses on Financial Instruments, which amends the FASB’s guidance on the impairment of financial instruments. The amendments in ASU2016-13 replace the incurred loss model with a methodology that reflects expected credit losses over the life of the loan and requires consideration of a broader range of reasonable and supportable information to calculate credit loss estimates, known as the current expected credit loss (“CECL”) model. Under the new guidance,provide an entity recognizes as an allowance its estimate of expected credit losses, which the FASB believes will result in more timely recognition of such losses. ASU2016-13 is also intended to reduce the complexity of U.S. GAAP by decreasing the number of credit impairment models that entities use to account for debt instruments. ASU2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The allowance for loan losses is a material estimate ofimplicit rate, the Company and given the change from an incurred loss model to a methodology that considers the credit loss over the life of the loan, there is the potential for an increase in the allowance for loan losses at adoption date. The Company is anticipating a significant change in the processes and procedures to calculate the allowance for loan losses, including changes in assumptions and estimates to consider expected credit losses over the life of the loan versus the current accounting practice that utilizes the incurred loss model. The Company will also develop new procedures for determining an allowance for credit losses relating toheld-to-maturity investment securities. In addition, the current accounting policy and procedures for other-than-temporary impairment onavailable-for-sale investment securities will be replaced with an allowance approach. The Company is currently evaluating the impact, if any, ASU2016-13 will have onuses its financial position and results of operations and currently does not know or cannot reasonably quantify the impact of the adoption of the amendments as a result of the complexity and extensive changes from the amendments. It is too early to assess the impact that the implementation of this guidance will have on the Company’s consolidated financial statements; however, the Company has begun developing processes and procedures to ensure it is fully compliant with the amendments at the required adoption date. Among other things, the Company has initiated data gathering and assessment to support forecasting of asset quality, loan balances, and portfolio net charge-offs and has developed anin-house data warehouse, developed asset quality forecast models and evaluated potential software vendors in preparation for the implementation of this standard. For additional information on the allowance for loan losses, see Note 5.
In August 2016, the FASB issued ASU2016-15,Classification of Certain Cash Receipts and Cash Payments,which amends the guidance in ASC 230 on the classification of certain cash receipts and payments in the statement of cash flows. The primary purpose of ASU2016-15 is to reduce the diversity in practice that has resulted from the lack of consistent principles on this topic. ASU2016-15’s amendments add or clarify guidance on eight cash flow issues including debt prepayment or debt extinguishment costs; settlement ofzero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interestincremental borrowing rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies; including bank-owned life insurance policies; distributions received from equity method investees; beneficial interests in securitization transactions and separately identifiable cash flows and application of the predominance principle. ASU2016-15 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted and the guidance must be applied retrospectively to all periods presented but may be applied prospectively from the earliest date practicable if retrospective application would be impracticable. The Company adopted the guidance effective January 1, 2018, and its adoption did not have a significant impact on the Company’s statement of cash flows or financial statement disclosures.
In October 2016, the FASB issued ASU2016-16,Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, which requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, and should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings at the beginning period of adoption. Early adoption is permitted in the first interim period of an annual reporting period for which financial statements have not been issued. The Company adopted the guidance effective January 1, 2018, and its adoption did not have a significant impact on the Company’s financial position or financial statement disclosures.
In November 2016, the FASB issued ASU2016-18,Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force), which clarifies how entities should present restricted cash and restricted cash equivalents in the statement of cash flows, and, as a result, entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. An entity with a material balance of restricted cash and restricted cash equivalents must disclose information about the nature of the restrictions. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted, and the new guidance must be applied retrospectively to all periods presented. The Company adopted the guidance effective January 1, 2018 and its adoption did not have a significant impact on the Company’s financial position or financial statement disclosures.
In January 2017, the FASB issued ASU2017-01,Business Combinations (Topic 805): Clarifying the Definition of a Business, which provides guidance to entities to assist with evaluating when a set of transferred assets and activities (collectively, the “set”) is a business and provides a screen to determine when a set is not a business. Under the new guidance, when substantially all of the fair value of gross assets acquired (or disposed of) is concentrated in a single identifiable asset, or group of similar assets, the assets acquired would not represent a business. Also, to be considered a business, an acquisition would have to include an input and a substantive process that together significantly contribute to the ability to produce outputs. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, and should be applied on a prospective basis to any transactions occurring within the period of adoption. Early adoption is permitted for interim or annual periods in which the financial statements have not been issued. The Company adopted the guidance effective January 1, 2018, and its adoption did not have a significant impact on the Company’s financial position or financial statement disclosures.
In January 2017, the FASB issued ASU2017-03,Accounting Changes and Error Corrections (Topic 250) and Investments – Equity Method and Joint Ventures (Topic 323). The amendments in the update relate to SEC paragraphs pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF meetings related to disclosure of the impact of recently issued accounting standards. The SEC staff’s view that a registrant should evaluate ASC updates that have not yet been adopted to determine the appropriate financial disclosures about the potential material effects of the updates on the financial statements when adopted. If a registrant does not know or cannot reasonably estimate the impact of an update, then in addition to making a statement to that effect, the registrant should consider additional qualitative financial statement disclosures to assist the reader in assessing the significance of the impact. The staff expects the additional qualitative disclosures to include a description of the effect of the accounting policies expected to be applied compared to current accounting policies. Also, the registrant should describe the status of its process to implement the new standards and the significant implementation matters yet to be addressed. The amendments specifically addressed recent ASC amendments to ASU2016-02,Leases, and ASU2014-09,Revenue from Contracts with Customers, although, the amendments apply to any subsequent amendments to guidance in the ASC. The Company adopted the amendments in this update during the fourth quarter of 2016, and appropriate disclosures have been included in this Note for each recently issued accounting standard.
In January 2017, the FASB issued ASU2017-04,Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which eliminates the requirement to determine the fair value of individual assets and liabilities of a reporting unit to measure goodwill impairment. Under the amendments in the new ASU, goodwill impairment testing will be performed by comparing the fair value of the reporting unit with its carrying amount and recognizing an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss should not exceed the total amount of goodwill allocated to that reporting unit. The new standard is effective for annual and interim goodwill impairment tests in fiscal years beginning after December 15, 2019 and should be applied on a prospective basis. Early adoption is permitted for annual or interim goodwill impairment testing performed after January 1, 2017. The Company has goodwill from prior business combinations and performs an annual impairment test or more frequently if changes or circumstances occur that wouldmore-likely-than-not reduce the fair value of the reporting unit below its carrying value. During 2017, the Company performed its impairment assessment and determined the fair value of the aggregated reporting units exceed the carrying value, such that the Company’s goodwill was not considered impaired. Although the Company cannot anticipate future goodwill impairment assessments, based on the most recent assessment it is unlikely that an impairment amount would need to be calculated, and, therefore,information available at the Company does not anticipate a material impact from these amendments tocommencement date in determining the Company’s financial position and resultspresent value of operations. The current accounting policies and processes are not anticipated to change, exceptlease payments. See Note 15 for the elimination of the Step 2 analysis.
In February 2017, the FASB issued ASU2017-05,Other Income: Gains and Losses from the Derecognition of Nonfinancial Assets, which clarifies the scope of the FASB’s guidance on nonfinancial asset derecognition (ASC610-20) as well as the accounting for partial sales of nonfinancial assets. The ASU conforms the derecognition guidance on nonfinancial assets with the model for transactions in the new revenue standard (ASC 606, as amended). The ASU requires an entity to derecognize the nonfinancial asset orin-substance nonfinancial asset in a partial sale transaction when (1) the entity ceases to have a controlling financial interest in a subsidiary under ASC 810 and (2) control of the asset is transferred in accordance with ASC 606. The entity therefore has to consider repurchase agreements (e.g., a call option to repurchase the ownership interest in a subsidiary) in its assessment and may not be able to derecognize the nonfinancial assets, even though it no longer has a controlling financial interest in a subsidiary in accordance with ASC 810. The ASU illustrates the application of this guidance in ASC610-20-55-15 and55-16. The effective date of the new guidance is aligned with the requirements in the new revenue standard, which is effective for public entities for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2017, and for nonpublic entities for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. The Company adopted the guidance effective January 1, 2018, and its adoption did not have a significant impact on the Company’s financial position or financial statement disclosures.
In March 2017, the FASB issued ASU2017-08,Receivables – Nonrefundable Fees and Other Costs (Topic 310): Premium Amortization on Purchased Callable Debt Securities, which amends the amortization period for certain purchased callable debt securities held at a premium. This ASU will shorten the amortization period for the premium to be amortized to the earliest call date. This ASU does not apply to securities held at a discount, which will continue to be amortized to maturity. This ASU is effective for interim and annual reporting periods beginning after December 15, 2018. The guidance should be applied using a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Early adoption is permitted, including adoption in an interim period. The Company early adopted the guidance effective January 1, 2018, and its adoption did not have a significant impact on the Company’s financial position or financial statement disclosures.
In May 2017, the FASB issued ASU2017-09,Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting, which amends the scope of modification accounting for share-based payment arrangements. Specifically, an entity would not apply modification accounting if the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification. The amendments in ASU2017-09 should be applied prospectively to an award modified on or after the adoption date. This ASU is effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. The Company adopted the guidance effective January 1, 2018. The Company does not anticipate any modifications to its existing awards, and therefore, the adoption of ASU2017-09 is not expected to have a significant impact on the Company’s financial position, results of operations, or its financial statement disclosures.
In July 2017, the FASB issued ASU2017-11,Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily RedeemableNon-Controlling Interests with a Scope Exception. Part I of this update addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. Part II of this update addresses the difficulty of navigatingTopic 480, Distinguishing Liabilities from Equity, because of the existence of extensive pending content in the FASB Accounting Standards Codification. This pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemablenon-controlling interests. The amendments in Part II of this update do not have an accounting effect. This ASU is effective for interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact, if any, ASU2017-11 will have on its financial position, results of operations, and its financial statement disclosures. The Company’s evaluation process includes, but is not limited to, identifying transactions and accounts within the scope of the guidance, reviewing its accounting and disclosures for these transactions and accounts, and identifying and implementing any necessary changes to its accounting and disclosures as a result of the guidance. The Company is also identifying and implementing changes to its business processes, systems and controls to support adoption of the new standard in 2019.
In August 2017, the FASB issued ASU–- Targeted Improvements to Accounting for Hedging Activitiesis currently evaluating the impact, if any, ASU2017-12 will have on its financial position, results of operations, and its financial statement disclosures. The Company’s evaluation process includes, but is not limited to, identifying transactions and accounts within the scope ofadopted the guidance reviewing its accountingeffective January 1, 2019, and disclosures for these transactionsas permitted by the ASU, the Company reclassified the prepayableaccounts, and identifying and implementing any necessary changes$834,000 in net unrealized gains as of December 31, 2018, to its accounting and disclosures as a result of the guidance.
In February 2018, the FASB issuedadopted ASU
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(In thousands) | ||||||||||||||||
Net income | $ | 72,164 | $ | 76,025 | $ | 143,514 | $ | 149,089 | ||||||||
Average shares outstanding | 167,791 | 173,403 | 168,686 | 173,581 | ||||||||||||
Effect of common stock options | — | 533 | — | 587 | ||||||||||||
Average diluted shares outstanding | 167,791 | 173,936 | 168,686 | 174,168 | ||||||||||||
Basic earnings per share | $ | 0.43 | $ | 0.44 | $ | 0.85 | $ | 0.86 | ||||||||
Diluted earnings per share | $ | 0.43 | $ | 0.44 | $ | 0.85 | $ | 0.86 |
June 30, 2019 | ||||||||||||||||
Available-for-Sale | ||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized (Losses) | Estimated Fair Value | |||||||||||||
(In thousands) | ||||||||||||||||
U.S. government-sponsored enterprises | $ | 415,153 | $ | 1,218 | $ | (1,899 | ) | $ | 414,472 | |||||||
Residential mortgage-backed securities | 665,630 | 3,848 | (2,249 | ) | 667,229 | |||||||||||
Commercial mortgage-backed securities | 494,115 | 7,388 | (682 | ) | 500,821 | |||||||||||
State and political subdivisions | 425,505 | 12,345 | (103 | ) | 437,747 | |||||||||||
Other securities | 33,544 | 450 | (324 | ) | 33,670 | |||||||||||
Total | $ | 2,033,947 | $ | 25,249 | $ | (5,257 | ) | $ | 2,053,939 | |||||||
December 31, 2018 | ||||||||||||||||
Available-for-Sale | ||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized (Losses) | Estimated Fair Value | |||||||||||||
(In thousands) | ||||||||||||||||
U.S. government-sponsored enterprises | $ | 418,605 | $ | 504 | $ | (4,976 | ) | $ | 414,133 | |||||||
Residential mortgage-backed securities | 580,183 | 1,230 | (8,512 | ) | 572,901 | |||||||||||
Commercial mortgage-backed securities | 463,084 | 539 | (7,745 | ) | 455,878 | |||||||||||
State and political subdivisions | 308,835 | 2,311 | (2,589 | ) | 308,557 | |||||||||||
Other securities | 34,336 | 304 | (247 | ) | 34,393 | |||||||||||
Total | $ | 1,805,043 | $ | 4,888 | $ | (24,069 | ) | $ | 1,785,862 | |||||||
Held-to-Maturity | ||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized (Losses) | Estimated Fair Value | |||||||||||||
(In thousands) | ||||||||||||||||
U.S. government-sponsored enterprises | $ | 3,261 | $ | 14 | $ | (71 | ) | $ | 3,204 | |||||||
Residential mortgage-backed securities | 39,707 | 20 | (689 | ) | 39,038 | |||||||||||
Commercial mortgage-backed securities | 17,587 | 58 | (267 | ) | 17,378 | |||||||||||
State and political subdivisions | 132,221 | 1,815 | (46 | ) | 133,990 | |||||||||||
Total | $ | 192,776 | $ | 1,907 | $ | (1,073 | ) | $ | 193,610 | |||||||
Available-for-Sale | ||||||||
Amortized Cost | Estimated Fair Value | |||||||
(In thousands) | ||||||||
Due in one year or less | $ | 363,329 | $ | 364,679 | ||||
Due after one year through five years | 1,134,765 | 1,141,408 | ||||||
Due after five years through ten years | 374,841 | 384,786 | ||||||
Due after ten years | 161,012 | 163,066 | ||||||
Total | $ | 2,033,947 | $ | 2,053,939 | ||||
June 30, 2019 | ||||||||||||||||||||||||
Less Than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||
Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
U.S. government-sponsored enterprises | $ | 18,720 | $ | (72 | ) | $ | 190,667 | $ | (1,827 | ) | $ | 209,387 | $ | (1,899 | ) | |||||||||
Residential mortgage-backed securities | 58,361 | (437 | ) | 268,583 | (1,812 | ) | 326,944 | (2,249 | ) | |||||||||||||||
Commercial mortgage-backed securities | 5,883 | (42 | ) | 91,770 | (640 | ) | 97,653 | (682 | ) | |||||||||||||||
State and political subdivisions | 4,977 | (23 | ) | 18,835 | (80 | ) | 23,812 | (103 | ) | |||||||||||||||
Other securities | 7,283 | (239 | ) | 8,209 | (85 | ) | 15,492 | (324 | ) | |||||||||||||||
Total | $ | 95,224 | $ | (813 | ) | $ | 578,064 | $ | (4,444 | ) | $ | 673,288 | $ | (5,257 | ) | |||||||||
December 31, 2018 | ||||||||||||||||||||||||
Less Than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||
Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
U.S. government-sponsored enterprises | $ | 148,392 | $ | (1,398 | ) | $ | 192,456 | $ | (3,649 | ) | $ | 340,848 | $ | (5,047 | ) | |||||||||
Residential mortgage-backed securities | 95,001 | (713 | ) | 386,279 | (8,488 | ) | 481,280 | (9,201 | ) | |||||||||||||||
Commercial mortgage-backed securities | 33,917 | (337 | ) | 368,705 | (7,675 | ) | 402,622 | (8,012 | ) | |||||||||||||||
State and political subdivisions | 64,376 | (763 | ) | 77,602 | (1,872 | ) | 141,978 | (2,635 | ) | |||||||||||||||
Other securities | 3,364 | (154 | ) | 8,307 | (93 | ) | 11,671 | (247 | ) | |||||||||||||||
Total | $ | 345,050 | $ | (3,365 | ) | $ | 1,033,349 | $ | (21,777 | ) | $ | 1,378,399 | $ | (25,142 | ) | |||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(In thousands) | ||||||||||||||||
Taxable: | ||||||||||||||||
Available-for-sale | $ | 10,650 | $ | 8,528 | $ | 21,356 | $ | 16,993 | ||||||||
Held-to-maturity | — | 451 | — | 956 | ||||||||||||
Non-taxable: | ||||||||||||||||
Available-for-sale | 3,183 | 2,452 | 6,562 | 3,801 | ||||||||||||
Held-to-maturity | — | 916 | — | 2,573 | ||||||||||||
Total | $ | 13,833 | $ | 12,347 | $ | 27,918 | $ | 24,323 | ||||||||
June 30, 2019 | December 31, 2018 | |||||||
(In thousands) | ||||||||
Real estate: | ||||||||
Commercial real estate loans | ||||||||
Non-farm/non-residential | $ | 4,495,558 | $ | 4,806,684 | ||||
Construction/land development | 1,930,838 | 1,546,035 | ||||||
Agricultural | 85,045 | 76,433 | ||||||
Residential real estate loans | ||||||||
Residential 1-4 family | 1,852,784 | 1,975,586 | ||||||
Multifamily residential | 523,789 | 560,475 | ||||||
Total real estate | 8,888,014 | 8,965,213 | ||||||
Consumer | 455,554 | 443,105 | ||||||
Commercial and industrial | 1,515,357 | 1,476,331 | ||||||
Agricultural | 80,621 | 48,562 | ||||||
Other | 113,583 | 138,668 | ||||||
Total loans receivable | $ | 11,053,129 | $ | 11,071,879 | ||||
Six Months Ended June 30, 2019 | ||||
(In thousands) | ||||
Allowance for loan losses: | ||||
Beginning balance | $ | 108,791 | ||
Loans charged off | (5,670 | ) | ||
Recoveries of loans previously charged off | 1,620 | |||
Net loans recovered (charged off) | (4,050 | ) | ||
Provision for loan losses | 1,325 | |||
Balance, June 30, 2019 | $ | 106,066 | ||
Three Months Ended June 30, 2019 | ||||||||||||||||||||||||||||
Construction/ Land Development | Other Commercial Real Estate | Residential Real Estate | Commercial & Industrial | Consumer & Other | Unallocated | Total | ||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||||||
Beginning balance | $ | 21,887 | $ | 40,665 | $ | 25,445 | $ | 14,690 | $ | 3,670 | $ | — | $ | 106,357 | ||||||||||||||
Loans charged off | (26 | ) | (1,163 | ) | (125 | ) | (305 | ) | (660 | ) | — | (2,279 | ) | |||||||||||||||
Recoveries of loans previously charged off | 95 | 13 | 152 | 222 | 181 | — | 663 | |||||||||||||||||||||
Net loans recovered (charged off) | 69 | (1,150 | ) | 27 | (83 | ) | (479 | ) | — | (1,616 | ) | |||||||||||||||||
Provision for loan losses | 2,302 | (848 | ) | (1,201 | ) | 246 | 826 | — | 1,325 | |||||||||||||||||||
Balance, June 30 | $ | 24,258 | $ | 38,667 | $ | 24,271 | $ | 14,853 | $ | 4,017 | $ | — | $ | 106,066 | ||||||||||||||
Six Months Ended June 30, 2019 | ||||||||||||||||||||||||||||
Construction/ Land Development | Other Commercial Real Estate | Residential Real Estate | Commercial & Industrial | Consumer & Other | Unallocated | Total | ||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||||||
Beginning balance | $ | 21,302 | $ | 42,336 | $ | 26,734 | $ | 14,981 | $ | 3,438 | $ | — | $ | 108,791 | ||||||||||||||
Loans charged off | (1,312 | ) | (1,502 | ) | (661 | ) | (1,009 | ) | (1,186 | ) | — | (5,670 | ) | |||||||||||||||
Recoveries of loans previously charged off | 118 | 204 | 504 | 404 | 390 | — | 1,620 | |||||||||||||||||||||
Net loans recovered (charged off) | (1,194 | ) | (1,298 | ) | (157 | ) | (605 | ) | (796 | ) | — | (4,050 | ) | |||||||||||||||
Provision for loan losses | 4,150 | (2,371 | ) | (2,306 | ) | 477 | 1,375 | — | 1,325 | |||||||||||||||||||
Balance, June 30 | $ | 24,258 | $ | 38,667 | $ | 24,271 | $ | 14,853 | $ | 4,017 | $ | — | $ | 106,066 | ||||||||||||||
As of June 30, 2019 | ||||||||||||||||||||||||||||
Construction/ Land Development | Other Commercial Real Estate | Residential Real Estate | Commercial & Industrial | Consumer & Other | Unallocated | Total | ||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||||||
Period end amount allocated to: | ||||||||||||||||||||||||||||
Loans individually evaluated for impairment | $ | 101 | $ | 287 | $ | 74 | $ | 16 | $ | — | $ | — | $ | 478 | ||||||||||||||
Loans collectively evaluated for impairment | 23,934 | 38,287 | 23,557 | 14,766 | 4,017 | — | 104,561 | |||||||||||||||||||||
Loans evaluated for impairment balance, June 30 | 24,035 | 38,574 | 23,631 | 14,782 | 4,017 | — | 105,039 | |||||||||||||||||||||
Purchased credit impaired loans | 223 | 93 | 640 | 71 | — | — | 1,027 | |||||||||||||||||||||
Balance, June 30 | $ | 24,258 | $ | 38,667 | $ | 24,271 | $ | 14,853 | $ | 4,017 | $ | — | $ | 106,066 | ||||||||||||||
Loans receivable: | ||||||||||||||||||||||||||||
Period end amount allocated to: | ||||||||||||||||||||||||||||
Loans individually evaluated for impairment | $ | 11,635 | $ | 56,146 | $ | 102,416 | $ | 33,205 | $ | 3,667 | $ | — | $ | 207,069 | ||||||||||||||
Loans collectively evaluated for impairment | 1,913,123 | 4,455,278 | 2,246,999 | 1,469,477 | 644,123 | — | 10,729,000 | |||||||||||||||||||||
Loans evaluated for impairment balance, June 30 | 1,924,758 | 4,511,424 | 2,349,415 | 1,502,682 | 647,790 | — | 10,936,069 | |||||||||||||||||||||
Purchased credit impaired loans | 6,080 | 69,179 | 27,158 | 12,675 | 1,968 | — | 117,060 | |||||||||||||||||||||
Balance, June 30 | $ | 1,930,838 | $ | 4,580,603 | $ | 2,376,573 | $ | 1,515,357 | $ | 649,758 | $ | — | $ | 11,053,129 | ||||||||||||||
Year Ended December 31, 2018 | ||||||||||||||||||||||||||||
Construction/ Land Development | Other Commercial Real Estate | Residential Real Estate | Commercial & Industrial | Consumer & Other | Unallocated | Total | ||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||||||
Beginning balance | $ | 20,343 | $ | 43,939 | $ | 24,506 | $ | 15,292 | $ | 3,334 | $ | 2,852 | $ | 110,266 | ||||||||||||||
Loans charged off | (62 | ) | (837 | ) | (1,731 | ) | (1,072 | ) | (970 | ) | — | (4,672 | ) | |||||||||||||||
Recoveries of loans previously charged off | 119 | 188 | 535 | 317 | 441 | — | 1,600 | |||||||||||||||||||||
Net loans recovered (charged off) | 57 | (649 | ) | (1,196 | ) | (755 | ) | (529 | ) | —�� | (3,072 | ) | ||||||||||||||||
Provision for loan losses | (157 | ) | 2,695 | 895 | 1,656 | 713 | (1,480 | ) | 4,322 | |||||||||||||||||||
Balance, June 30 | 20,243 | 45,985 | 24,205 | 16,193 | 3,518 | 1,372 | 111,516 | |||||||||||||||||||||
Loans charged off | (337 | ) | (374 | ) | (1,013 | ) | (1,149 | ) | (1,443 | ) | — | (4,316 | ) | |||||||||||||||
Recoveries of loans previously charged off | 61 | 339 | 389 | 307 | 495 | — | 1,591 | |||||||||||||||||||||
Net loans recovered (charged off) | (276 | ) | (35 | ) | (624 | ) | (842 | ) | (948 | ) | — | (2,725 | ) | |||||||||||||||
Provision for loan losses | 1,335 | (3,614 | ) | 3,153 | (370 | ) | 868 | (1,372 | ) | — | ||||||||||||||||||
Balance, December 31 | $ | 21,302 | $ | 42,336 | $ | 26,734 | $ | 14,981 | $ | 3,438 | $ | — | $ | 108,791 | ||||||||||||||
As of December 31, 2018 | ||||||||||||||||||||||||||||
Construction/ Land Development | Other Commercial Real Estate | Residential Real Estate | Commercial & Industrial | Consumer & Other | Unallocated | Total | ||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||||||
Period end amount allocated to: | ||||||||||||||||||||||||||||
Loans individually evaluated for impairment | $ | 732 | $ | 468 | $ | 100 | $ | 21 | $ | — | $ | — | $ | 1,321 | ||||||||||||||
Loans collectively evaluated for impairment | 20,336 | 41,512 | 25,970 | 14,789 | 3,438 | — | 106,045 | |||||||||||||||||||||
Loans evaluated for impairment balance, December 31 | 21,068 | 41,980 | 26,070 | 14,810 | 3,438 | — | 107,366 | |||||||||||||||||||||
Purchased credit impaired loans | 234 | 356 | 664 | 171 | — | — | 1,425 | |||||||||||||||||||||
Balance, December 31 | $ | 21,302 | $ | 42,336 | $ | 26,734 | $ | 14,981 | $ | 3,438 | $ | — | $ | 108,791 | ||||||||||||||
Loans receivable: | ||||||||||||||||||||||||||||
Period end amount allocated to: | ||||||||||||||||||||||||||||
Loans individually evaluated for impairment | $ | 14,519 | $ | 58,706 | $ | 29,535 | $ | 30,251 | $ | 3,688 | $ | — | $ | 136,699 | ||||||||||||||
Loans collectively evaluated for impairment | 1,522,520 | 4,741,484 | 2,473,467 | 1,431,608 | 624,561 | — | 10,793,640 | |||||||||||||||||||||
Loans evaluated for impairment balance, December 31 | 1,537,039 | 4,800,190 | 2,503,002 | 1,461,859 | 628,249 | — | 10,930,339 | |||||||||||||||||||||
Purchased credit impaired loans | 8,996 | 82,927 | 33,059 | 14,472 | 2,086 | — | 141,540 | |||||||||||||||||||||
Balance, December 31 | $ | 1,546,035 | $ | 4,883,117 | $ | 2,536,061 | $ | 1,476,331 | $ | 630,335 | $ | — | $ | 11,071,879 | ||||||||||||||
June 30, 2019 | ||||||||||||||||||||||||||||
Loans Past Due 30-59 Days | Loans Past Due 60-89 Days | Loans Past Due 90 Days or More | Total Past Due | Current Loans | Total Loans Receivable | Accruing Loans Past Due 90 Days or More | ||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||
Real estate: | ||||||||||||||||||||||||||||
Commercial real estate loans | ||||||||||||||||||||||||||||
Non-farm/non-residential | $ | 3,918 | $ | 2,147 | $ | 25,580 | $ | 31,645 | $ | 4,463,913 | $ | 4,495,558 | $ | 6,633 | ||||||||||||||
Construction/land development | 539 | — | 3,812 | 4,351 | 1,926,487 | 1,930,838 | 1,546 | |||||||||||||||||||||
Agricultural | 1,027 | — | 381 | 1,408 | 83,637 | 85,045 | — | |||||||||||||||||||||
Residential real estate loans | ||||||||||||||||||||||||||||
Residential 1-4 family | 6,318 | 1,377 | 23,048 | 30,743 | 1,822,041 | 1,852,784 | 821 | |||||||||||||||||||||
Multifamily residential | 133 | 18 | 1,155 | 1,306 | 522,483 | 523,789 | — | |||||||||||||||||||||
Total real estate | 11,935 | 3,542 | 53,976 | 69,453 | 8,818,561 | 8,888,014 | 9,000 | |||||||||||||||||||||
Consumer | 850 | 363 | 2,481 | 3,694 | 451,860 | 455,554 | 574 | |||||||||||||||||||||
Commercial and industrial | 2,628 | 831 | 6,313 | 9,772 | 1,505,585 | 1,515,357 | 387 | |||||||||||||||||||||
Agricultural and other | 951 | 243 | 32 | 1,226 | 192,978 | 194,204 | — | |||||||||||||||||||||
Total | $ | 16,364 | $ | 4,979 | $ | 62,802 | $ | 84,145 | $ | 10,968,984 | $ | 11,053,129 | $ | 9,961 | ||||||||||||||
December 31, 2018 | ||||||||||||||||||||||||||||
Loans Past Due 30-59 Days | Loans Past Due 60-89 Days | Loans Past Due 90 Days or More | Total Past Due | Current Loans | Total Loans Receivable | Accruing Loans Past Due 90 Days or More | ||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||
Real estate: | ||||||||||||||||||||||||||||
Commercial real estate loans | ||||||||||||||||||||||||||||
Non-farm/non-residential | $ | 3,598 | $ | 927 | $ | 24,710 | $ | 29,235 | $ | 4,777,449 | $ | 4,806,684 | $ | 9,679 | ||||||||||||||
Construction/land development | 2,057 | 261 | 8,761 | 11,079 | 1,534,956 | 1,546,035 | 3,481 | |||||||||||||||||||||
Agricultural | 98 | — | 20 | 118 | 76,315 | 76,433 | — | |||||||||||||||||||||
Residential real estate loans | ||||||||||||||||||||||||||||
Residential 1-4 family | 5,890 | 3,745 | 19,137 | 28,772 | 1,946,814 | 1,975,586 | 1,753 | |||||||||||||||||||||
Multifamily residential | — | 200 | 972 | 1,172 | 559,303 | 560,475 | — | |||||||||||||||||||||
Total real estate | 11,643 | 5,133 | 53,600 | 70,376 | 8,894,837 | 8,965,213 | 14,913 | |||||||||||||||||||||
Consumer | 5,712 | 168 | 3,632 | 9,512 | 433,593 | 443,105 | 720 | |||||||||||||||||||||
Commercial and industrial | 1,237 | 87 | 6,977 | 8,301 | 1,468,030 | 1,476,331 | 1,526 | |||||||||||||||||||||
Agricultural and other | 1,121 | — | 33 | 1,154 | 186,076 | 187,230 | — | |||||||||||||||||||||
Total | $ | 19,713 | $ | 5,388 | $ | 64,242 | $ | 89,343 | $ | 10,982,536 | $ | 11,071,879 | $ | 17,159 | ||||||||||||||
June 30, 2019 | ||||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||
Unpaid Contractual Principal Balance | Total Recorded Investment | Allocation of Allowance for Loan Losses | ||||||||||||||||||||||||||
Average Recorded Investment | Interest Recognized | Average Recorded Investment | Interest Recognized | |||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||
Loans without a specific valuation allowance | ||||||||||||||||||||||||||||
Real estate: | ||||||||||||||||||||||||||||
Commercial real estate loans | ||||||||||||||||||||||||||||
Non-farm/non-residential | $ | 41 | $ | 41 | $ | — | $ | 41 | $ | 1 | $ | 41 | $ | 1 | ||||||||||||||
Construction/land development | 14 | 14 | — | 15 | — | 15 | — | |||||||||||||||||||||
Agricultural | 8 | 8 | — | 9 | — | 10 | — | |||||||||||||||||||||
Residential real estate loans | ||||||||||||||||||||||||||||
Residential 1-4 family | 258 | 258 | — | 281 | 5 | 225 | 5 | |||||||||||||||||||||
Multifamily residential | — | — | — | — | — | — | — | |||||||||||||||||||||
Total real estate | 321 | 321 | — | 346 | 6 | 291 | 6 | |||||||||||||||||||||
Consumer | 22 | 22 | — | 23 | — | 21 | — | |||||||||||||||||||||
Commercial and industrial | 131 | 131 | — | 169 | 2 | 148 | 2 | |||||||||||||||||||||
Agricultural and other | — | — | — | — | — | — | — | |||||||||||||||||||||
Total loans without a specific valuation allowance | 474 | 474 | — | 538 | 8 | 460 | 8 | |||||||||||||||||||||
Loans with a specific valuation allowance | ||||||||||||||||||||||||||||
Real estate: | ||||||||||||||||||||||||||||
Commercial real estate loans | ||||||||||||||||||||||||||||
Non-farm/non-residential | 42,934 | 39,173 | 279 | 39,548 | 478 | 39,230 | 963 | |||||||||||||||||||||
Construction/land development | 7,998 | 7,142 | 101 | 8,174 | 52 | 9,480 | 139 | |||||||||||||||||||||
Agricultural | 655 | 659 | 8 | 592 | 5 | 493 | 10 | |||||||||||||||||||||
Residential real estate loans | ||||||||||||||||||||||||||||
Residential 1-4 family | 26,396 | 24,420 | 43 | 23,941 | 39 | 22,839 | 114 | |||||||||||||||||||||
Multifamily residential | 2,511 | 2,511 | 31 | 2,530 | 16 | 2,476 | 32 | |||||||||||||||||||||
Total real estate | 80,494 | 73,905 | 462 | 74,785 | 590 | 74,518 | 1,258 | |||||||||||||||||||||
Consumer | 2,651 | 2,480 | — | 3,045 | 8 | 3,243 | 16 | |||||||||||||||||||||
Commercial and industrial | 10,188 | 6,941 | 16 | 6,291 | 18 | 6,754 | 42 | |||||||||||||||||||||
Agricultural and other | 31 | 31 | — | 32 | — | 32 | — | |||||||||||||||||||||
Total loans with a specific valuation allowance | 93,364 | 83,357 | 478 | 84,153 | 616 | 84,547 | 1,316 | |||||||||||||||||||||
Total impaired loans | ||||||||||||||||||||||||||||
Real estate: | ||||||||||||||||||||||||||||
Commercial real estate loans | ||||||||||||||||||||||||||||
Non-farm/non-residential | 42,975 | 39,214 | 279 | 39,589 | 479 | 39,271 | 964 | |||||||||||||||||||||
Construction/land development | 8,012 | 7,156 | 101 | 8,189 | 52 | 9,495 | 139 | |||||||||||||||||||||
Agricultural | 663 | 667 | 8 | 601 | 5 | 503 | 10 | |||||||||||||||||||||
Residential real estate loans | ||||||||||||||||||||||||||||
Residential 1-4 family | 26,654 | 24,678 | 43 | 24,222 | 44 | 23,064 | 119 | |||||||||||||||||||||
Multifamily residential | 2,511 | 2,511 | 31 | 2,530 | 16 | 2,476 | 32 | |||||||||||||||||||||
Total real estate | 80,815 | 74,226 | 462 | 75,131 | 596 | 74,809 | 1,264 | |||||||||||||||||||||
Consumer | 2,673 | 2,502 | — | 3,068 | 8 | 3,264 | 16 | |||||||||||||||||||||
Commercial and industrial | 10,319 | 7,072 | 16 | 6,460 | 20 | 6,902 | 44 | |||||||||||||||||||||
Agricultural and other | 31 | 31 | — | 32 | — | 32 | — | |||||||||||||||||||||
Total impaired loans | $ | 93,838 | $ | 83,831 | $ | 478 | $ | 84,691 | $ | 624 | $ | 85,007 | $ | 1,324 | ||||||||||||||
December 31, 2018 | ||||||||||||||||||||
Unpaid Contractual Principal Balance | Total Recorded Investment | Allocation of Allowance for Loan Losses | Year Ended | |||||||||||||||||
Average Recorded Investment | Interest Recognized | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||
Loans without a specific valuation allowance | ||||||||||||||||||||
Real estate: | ||||||||||||||||||||
Commercial real estate loans | ||||||||||||||||||||
Non-farm/non-residential | $ | 42 | $ | 42 | $ | — | $ | 34 | $ | 3 | ||||||||||
Construction/land development | 16 | 16 | — | 27 | 1 | |||||||||||||||
Agricultural | 11 | 11 | — | 15 | 1 | |||||||||||||||
Residential real estate loans | ||||||||||||||||||||
Residential 1-4 family | 223 | 223 | — | 193 | 16 | |||||||||||||||
Multifamily residential | — | — | — | — | — | |||||||||||||||
Total real estate | 292 | 292 | — | 269 | 21 | |||||||||||||||
Consumer | 27 | 27 | — | 24 | 2 | |||||||||||||||
Commercial and industrial | 236 | 236 | — | 199 | 13 | |||||||||||||||
Agricultural and other | — | — | — | — | — | |||||||||||||||
Total loans without a specific valuation allowance | 555 | 555 | — | 492 | 36 | |||||||||||||||
Loans with a specific valuation allowance | ||||||||||||||||||||
Real estate: | ||||||||||||||||||||
Commercial real estate loans | ||||||||||||||||||||
Non-farm/non-residential | 42,474 | 38,594 | 460 | 34,891 | 1,632 | |||||||||||||||
Construction/land development | 13,178 | 12,091 | 732 | 12,337 | 307 | |||||||||||||||
Agricultural | 291 | 294 | 8 | 388 | 18 | |||||||||||||||
Residential real estate loans | ||||||||||||||||||||
Residential 1-4 family | 22,570 | 20,526 | 58 | 19,017 | 485 | |||||||||||||||
Multifamily residential | 2,369 | 2,369 | 42 | 2,166 | 83 | |||||||||||||||
Total real estate | 80,882 | 73,874 | 1,300 | 68,799 | 2,525 | |||||||||||||||
Consumer | 3,830 | 3,629 | — | 1,236 | 52 | |||||||||||||||
Commercial and industrial | 11,176 | 7,550 | 21 | 10,599 | 257 | |||||||||||||||
Agricultural and other | 33 | 32 | — | 146 | 3 | |||||||||||||||
Total loans with a specific valuation allowance | 95,921 | 85,085 | 1,321 | 80,780 | 2,837 | |||||||||||||||
Total impaired loans | ||||||||||||||||||||
Real estate: | ||||||||||||||||||||
Commercial real estate loans | ||||||||||||||||||||
Non-farm/non-residential | 42,516 | 38,636 | 460 | 34,925 | 1,635 | |||||||||||||||
Construction/land development | 13,194 | 12,107 | 732 | 12,364 | 308 | |||||||||||||||
Agricultural | 302 | 305 | 8 | 403 | 19 | |||||||||||||||
Residential real estate loans | ||||||||||||||||||||
Residential 1-4 family | 22,793 | 20,749 | 58 | 19,210 | 501 | |||||||||||||||
Multifamily residential | 2,369 | 2,369 | 42 | 2,166 | 83 | |||||||||||||||
Total real estate | 81,174 | 74,166 | 1,300 | 69,068 | 2,546 | |||||||||||||||
Consumer | 3,857 | 3,656 | — | 1,260 | 54 | |||||||||||||||
Commercial and industrial | 11,412 | 7,786 | 21 | 10,798 | 270 | |||||||||||||||
Agricultural and other | 33 | 32 | — | 146 | 3 | |||||||||||||||
Total impaired loans | $ | 96,476 | $ | 85,640 | $ | 1,321 | $ | 81,272 | $ | 2,873 | ||||||||||
June 30, 2019 | ||||||||||||||||
Risk Rated 6 | Risk Rated 7 | Risk Rated 8 | Classified Total | |||||||||||||
(In thousands) | ||||||||||||||||
Real estate: | ||||||||||||||||
Commercial real estate loans | ||||||||||||||||
Non-farm/non-residential | $ | 46,185 | $ | 1,834 | $ | — | $ | 48,019 | ||||||||
Construction/land development | 12,656 | 546 | — | 13,202 | ||||||||||||
Agricultural | 898 | — | — | 898 | ||||||||||||
Residential real estate loans | ||||||||||||||||
Residential 1-4 family | 31,671 | 355 | — | 32,026 | ||||||||||||
Multifamily residential | 1,173 | — | — | 1,173 | ||||||||||||
Total real estate | 92,583 | 2,735 | — | 95,318 | ||||||||||||
Consumer | 2,236 | — | — | 2,236 | ||||||||||||
Commercial and industrial | 19,848 | 598 | — | 20,446 | ||||||||||||
Agricultural and other | 275 | — | — | 275 | ||||||||||||
Total risk rated loans | $ | 114,942 | $ | 3,333 | $ | — | $ | 118,275 | ||||||||
December 31, 2018 | ||||||||||||||||
Risk Rated 6 | Risk Rated 7 | Risk Rated 8 | Classified Total | |||||||||||||
(In thousands) | ||||||||||||||||
Real estate: | ||||||||||||||||
Commercial real estate loans | ||||||||||||||||
Non-farm/non-residential | $ | 44,089 | $ | 484 | $ | — | $ | 44,573 | ||||||||
Construction/land development | 15,236 | — | — | 15,236 | ||||||||||||
Agricultural | 301 | 3 | — | 304 | ||||||||||||
Residential real estate loans | ||||||||||||||||
Residential 1-4 family | 34,731 | 253 | — | 34,984 | ||||||||||||
Multifamily residential | 972 | — | — | 972 | ||||||||||||
Total real estate | 95,329 | 740 | — | 96,069 | ||||||||||||
Consumer | 3,226 | 3 | — | 3,229 | ||||||||||||
Commercial and industrial | 16,362 | 585 | — | 16,947 | ||||||||||||
Agricultural and other | 48 | — | — | 48 | ||||||||||||
Total risk rated loans | $ | 114,965 | $ | 1,328 | $ | — | $ | 116,293 | ||||||||
June 30, 2019 | |||||||||||||||||||||||||||||
Risk Rated 1 | Risk Rated 2 | Risk Rated 3 | Risk Rated 4 | Risk Rated 5 | Classified Total | Total | |||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||
Real estate: | |||||||||||||||||||||||||||||
Commercial real estate loans | |||||||||||||||||||||||||||||
Non-farm/non-residential | $ | — | $ | 289 | $ | 3,455,486 | $ | 887,951 | $ | 34,820 | $ | 48,019 | $ | 4,426,565 | |||||||||||||||
Construction/land development | 9 | 748 | 707,143 | 1,203,472 | 184 | 13,202 | 1,924,758 | ||||||||||||||||||||||
Agricultural | — | — | 64,908 | 18,156 | 897 | 898 | 84,859 | ||||||||||||||||||||||
Residential real estate loans | |||||||||||||||||||||||||||||
Residential 1-4 family | 685 | 710 | 1,513,589 | 268,449 | 11,235 | 32,026 | 1,826,694 | ||||||||||||||||||||||
Multifamily residential | — | — | 363,237 | 85,848 | 72,463 | 1,173 | 522,721 | ||||||||||||||||||||||
Total real estate | 694 | 1,747 | 6,104,363 | 2,463,876 | 119,599 | 95,318 | 8,785,597 | ||||||||||||||||||||||
Consumer | 14,059 | 1,822 | 424,573 | 10,472 | 424 | 2,236 | 453,586 | ||||||||||||||||||||||
Commercial and industrial | 23,438 | 10,508 | 817,585 | 607,778 | 22,927 | 20,446 | 1,502,682 | ||||||||||||||||||||||
Agricultural and other | 384 | 3,185 | 138,684 | 50,891 | 785 | 275 | 194,204 | ||||||||||||||||||||||
Total risk rated loans | $ | 38,575 | $ | 17,262 | $ | 7,485,205 | $ | 3,133,017 | $ | 143,735 | $ | 118,275 | 10,936,069 | ||||||||||||||||
Purchased credit impaired loans | 117,060 | ||||||||||||||||||||||||||||
Total loans receivable | $ | 11,053,129 | |||||||||||||||||||||||||||
December 31, 2018 | |||||||||||||||||||||||||||||
Risk Rated 1 | Risk Rated 2 | Risk Rated 3 | Risk Rated 4 | Risk Rated 5 | Classified Total | Total | |||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||
Real estate: | |||||||||||||||||||||||||||||
Commercial real estate loans | |||||||||||||||||||||||||||||
Non-farm/non-residential | $ | 443 | $ | 296 | $ | 2,740,068 | $ | 1,912,191 | $ | 26,361 | $ | 44,573 | $ | 4,723,932 | |||||||||||||||
Construction/land development | 17 | 645 | 264,507 | 1,255,258 | 1,377 | 15,236 | 1,537,040 | ||||||||||||||||||||||
Agricultural | — | — | 37,377 | 38,295 | 282 | 304 | 76,258 | ||||||||||||||||||||||
Residential real estate loans | |||||||||||||||||||||||||||||
Residential 1-4 family | 715 | 738 | 1,453,859 | 446,557 | 7,078 | 34,984 | 1,943,931 | ||||||||||||||||||||||
Multifamily residential | — | — | 388,572 | 169,526 | — | 972 | 559,070 | ||||||||||||||||||||||
Total real estate | 1,175 | 1,679 | 4,884,383 | 3,821,827 | 35,098 | 96,069 | 8,840,231 | ||||||||||||||||||||||
Consumer | 13,432 | 4,298 | 401,209 | 18,409 | 442 | 3,229 | 441,019 | ||||||||||||||||||||||
Commercial and industrial | 21,673 | 13,310 | 737,218 | 649,390 | 23,321 | 16,947 | 1,461,859 | ||||||||||||||||||||||
Agricultural and other | 737 | 3,423 | 133,901 | 48,567 | 554 | 48 | 187,230 | ||||||||||||||||||||||
Total risk rated loans | $ | 37,017 | $ | 22,710 | $ | 6,156,711 | $ | 4,538,193 | $ | 59,415 | $ | 116,293 | 10,930,339 | ||||||||||||||||
Purchased credit impaired loans | 141,540 | ||||||||||||||||||||||||||||
Total loans receivable | $ | 11,071,879 | |||||||||||||||||||||||||||
June 30, 2019 | ||||||||||||||||||||||||
Number of Loans | Pre- Modification Outstanding Balance | Rate Modification | Term Modification | Rate & Term Modification | Post- Modification Outstanding Balance | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Real estate: | ||||||||||||||||||||||||
Commercial real estate loans | ||||||||||||||||||||||||
Non-farm/non-residential | 17 | $ | 15,227 | $ | 8,310 | $ | 376 | $ | 4,438 | $ | 13,124 | |||||||||||||
Construction/land development | 2 | 584 | 546 | 14 | — | 560 | ||||||||||||||||||
Agricultural | 3 | 451 | 388 | 11 | — | 399 | ||||||||||||||||||
Residential real estate loans | ||||||||||||||||||||||||
Residential 1-4 family | 20 | 3,165 | 1,089 | 235 | 975 | 2,299 | ||||||||||||||||||
Multifamily residential | 3 | 1,701 | 1,200 | — | 290 | 1,490 | ||||||||||||||||||
Total real estate | 45 | 21,128 | 11,533 | 636 | 5,703 | 17,872 | ||||||||||||||||||
Consumer | 3 | 30 | 16 | 5 | — | 21 | ||||||||||||||||||
Commercial and industrial | 9 | 1,554 | 840 | 50 | — | 890 | ||||||||||||||||||
Total | 57 | $ $ | 22,712 | $ $ | 12,389 | $ | 691 | $ $ | 5,703 | $ $ | 18,783 | |||||||||||||
December 31, 2018 | ||||||||||||||||||||||||
Number of Loans | Pre- Modification Outstanding Balance | Rate Modification | Term Modification | Rate & Term Modification | Post- Modification Outstanding Balance | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Real estate: | ||||||||||||||||||||||||
Commercial real estate loans | ||||||||||||||||||||||||
Non-farm/non-residential | 17 | $ | 15,227 | $ | 8,482 | $ | 982 | $ | 4,475 | $ | 13,939 | |||||||||||||
Construction/land development | 2 | 584 | 546 | 17 | — | 563 | ||||||||||||||||||
Agricultural | 2 | 345 | 283 | 14 | — | 297 | ||||||||||||||||||
Residential real estate loans | ||||||||||||||||||||||||
Residential 1-4 family | 22 | 3,204 | 1,059 | 281 | 1,022 | 2,362 | ||||||||||||||||||
Multifamily residential | 3 | 1,701 | 1,253 | — | 286 | 1,539 | ||||||||||||||||||
Total real estate | 46 | 21,061 | 11,623 | 1,294 | 5,783 | 18,700 | ||||||||||||||||||
Consumer | 5 | 38 | 18 | 9 | — | 27 | ||||||||||||||||||
Commercial and industrial | 14 | 1,679 | 897 | 105 | — | 1,002 | ||||||||||||||||||
Total | 65 | $ | 22,778 | $ | 12,538 | $ | 1,408 | $ | 5,783 | $ | 19,729 | |||||||||||||
June 30, 2019 | December 31, 2018 | |||||||||||||||
Number of Loans | Recorded Balance | Number of Loans | Recorded Balance | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Real estate: | ||||||||||||||||
Commercial real estate loans | ||||||||||||||||
Non-farm/non-residential | 4 | $ | 2,350 | 4 | $ | 2,950 | ||||||||||
Construction/land development | 1 | 546 | 1 | 546 | ||||||||||||
Agricultural | 2 | 117 | 1 | 14 | ||||||||||||
Residential real estate loans | ||||||||||||||||
Residential 1-4 family | 6 | 688 | 8 | 778 | ||||||||||||
Multifamily residential | 1 | 135 | 1 | 142 | ||||||||||||
Total real estate | 14 | 3,836 | 15 | 4,430 | ||||||||||||
Consumer | 1 | 1 | 1 | 2 | ||||||||||||
Commercial and industrial | 3 | 131 | 6 | 194 | ||||||||||||
Total | 18 | $ | 3,968 | 22 | $ | 4,626 | ||||||||||
June 30, 2019 | December 31, 2018 | |||||||
(In thousands) | ||||||||
Commercial real estate loans | ||||||||
Non-farm/non-residential | $ | 3,929 | $ | 5,555 | ||||
Construction/land development | 5,673 | 3,534 | ||||||
Residential real estate loans | ||||||||
Residential 1-4 family | 4,132 | 4,142 | ||||||
Multifamily residential | — | 5 | ||||||
Total foreclosed assets held for sale | $ | 13,734 | $ | 13,236 | ||||
Accretable Yield | Carrying Amount of Loans | |||||||
(In thousands) | ||||||||
Balance at beginning of period | $ | 33,759 | $ | 141,540 | ||||
Reforecasted future interest payments for loan pools | 3,765 | — | ||||||
Accretion recorded to interest income | (8,558 | ) | 8,558 | |||||
Adjustment to yield | 4,917 | — | ||||||
Transfers to foreclosed assets held for sale | — | 223 | ||||||
Payments received, net | — | (33,261 | ) | |||||
Balance at end of period | $ | 33,883 | $ | 117,060 | ||||
June 30, 2019 | December 31, 2018 | |||||||
(In thousands) | ||||||||
Goodwill | ||||||||
Balance, beginning of period | $ | 958,408 | $ | 927,949 | ||||
Acquisitions | — | 30,459 | ||||||
Balance, end of period | $ | 958,408 | $ | 958,408 | ||||
June 30, 2019 | December 31, 2018 | |||||||
(In thousands) | ||||||||
Core Deposit and Other Intangibles | ||||||||
Balance, beginning of period | $ | 42,896 | $ | 49,351 | ||||
Amortization expense | (3,173 | ) | (3,250 | ) | ||||
Balance, June 30 | 39,723 | 46,101 | ||||||
Amortization expense | (3,205 | ) | ||||||
Balance, end of year | $ | 42,896 | ||||||
June 30, 2019 | December 31, 2018 | |||||||
(In thousands) | ||||||||
Gross carrying basis | $ | 86,625 | $ | 86,625 | ||||
Accumulated amortization | (46,902 | ) | (43,729 | ) | ||||
Net carrying amount | $ | 39,723 | $ | 42,896 | ||||
June 30, 2019 | ||||||||||||||||||||
Overnight and Continuous | Up to 30 Days | 30-90 Days | Greater than 90 Days | Total | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Securities sold under agreements to repurchase: | ||||||||||||||||||||
U.S. government-sponsored enterprises | $ | 5,396 | $ | — | $ | — | $ | — | $ | 5,396 | ||||||||||
Mortgage-backed securities | 30,816 | — | — | — | 30,816 | |||||||||||||||
State and political subdivisions | 102,977 | — | — | — | 102,977 | |||||||||||||||
Other securities | 3,352 | — | — | — | 3,352 | |||||||||||||||
Total borrowings | $ | 142,541 | $ | — | $ | — | $ | — | $ | 142,541 | ||||||||||
December 31, 2018 | ||||||||||||||||||||
Overnight and Continuous | Up to 30 Days | 30-90 Days | Greater than 90 Days | Total | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Securities sold under agreements to repurchase: | ||||||||||||||||||||
U.S. government-sponsored enterprises | $ | 19,124 | $ | — | $ | — | $ | — | $ | 19,124 | ||||||||||
Mortgage-backed securities | 9,184 | — | — | — | 9,184 | |||||||||||||||
State and political subdivisions | 98,841 | — | — | — | 98,841 | |||||||||||||||
Other securities | 16,530 | — | — | — | 16,530 | |||||||||||||||
Total borrowings | $ | 143,679 | $ | — | $ | — | $ | — | $ | 143,679 | ||||||||||
As of June 30, 2019 | As of December 31, 2018 | |||||||
(In thousands) | ||||||||
Trust preferred securities | ||||||||
Subordinated debentures, issued in 2006, due 2036, fixed rate of 6.75 % during the first five years and at a floating rate of1.85 % above the three-month LIBOR rate, reset quarterly, thereafter, currently callable without penalty | $ | 3,093 | $ | 3,093 | ||||
Subordinated debentures, issued in 2004, due 2034, fixed rate of 6.00 % during the first five years and at a floating rate of2.00 % above the three-month LIBOR rate, reset quarterly, thereafter, currently callable without penalty | 15,464 | 15,464 | ||||||
Subordinated debentures, issued in 2005, due 2035, fixed rate of 5.84 % during the first five years and at a floating rate of1.45 % above the three-month LIBOR rate, reset quarterly, thereafter, currently callable without penalty | 25,774 | 25,774 | ||||||
Subordinated debentures, issued in 2004, due 2034, fixed rate of 4.29 % during the first five years and at a floating rate of2.50 % above the three-month LIBOR rate, reset quarterly, thereafter, currently callable without penalty | 16,495 | 16,495 | ||||||
Subordinated debentures, issued in 2005, due 2035, floating rate of 2.15 % above the three-month LIBOR rate, reset quarterly, currently callable without penalty | 4,378 | 4,353 | ||||||
Subordinated debentures, issued in 2006, due 2036, fixed rate of 7.38 % during the first five years and at a floating rate of1.62 % above the three-month LIBOR rate, reset quarterly, thereafter, currently callable without penalty | 5,708 | 5,662 | ||||||
Subordinated debt securities | ||||||||
Subordinated notes, net of issuance costs, issued in 2017, due 2027, fixed rate of 5.625 % during the first five years and at a floating rate of3.575 % above the then three-month LIBOR rate, reset quarterly, thereafter, callable in2022 without penalty | 298,258 | 297,949 | ||||||
Total | $ | 369,170 | $ | 368,790 | ||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(In thousands) | ||||||||||||||||
Current: | ||||||||||||||||
Federal | $ | 13,068 | $ | 11,351 | $ | 23,226 | $ | 26,355 | ||||||||
State | 4,326 | 3,757 | 7,689 | 8,725 | ||||||||||||
Total current | 17,394 | 15,108 | 30,915 | 35,080 | ||||||||||||
Deferred: | ||||||||||||||||
Federal | 4,167 | 6,913 | 11,089 | 9,917 | ||||||||||||
State | 1,379 | 2,289 | 3,671 | 3,283 | ||||||||||||
Total deferred | 5,546 | 9,202 | 14,760 | 13,200 | ||||||||||||
Income tax expense | $ | 22,940 | $ | 24,310 | $ | 45,675 | $ | 48,280 | ||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Statutory federal income tax rate | 21.00 | % | 21 .00 | % | 21.00 | % | 21.00 | % | ||||||||
Effect of non-taxable interest income | (0.82 | ) | (0.83 | ) | (0.84 | ) | (0.79 | ) | ||||||||
Stock compensation | 0.30 | 0.01 | 0.10 | (0.21 | ) | |||||||||||
State income taxes, net of federal benefit | 4.03 | 4.16 | 4.01 | 4.57 | ||||||||||||
Other | (0.39 | ) | (0.11 | ) | (0.13 | ) | (0.11 | ) | ||||||||
Effective income tax rate | 24.12 | % | 24.23 | % | 24.14 | % | 24.46 | % | ||||||||
June 30, 2019 | December 31, 2018 | |||||||
(In thousands) | ||||||||
Deferred tax assets: | ||||||||
Allowance for loan losses | $ | 29,281 | $ | 30,033 | ||||
Deferred compensation | 2,848 | 4,037 | ||||||
Stock compensation | 5,311 | 4,259 | ||||||
Non-accrual interest income | 250 | — | ||||||
Real estate owned | 1,266 | 1,382 | ||||||
Unrealized loss on securities available-for-sale | — | 5,050 | ||||||
Loan discounts | 21,107 | 23,755 | ||||||
Tax basis premium/discount on acquisitions | 6,392 | 7,378 | ||||||
Investments | 932 | 866 | ||||||
Other | 10,034 | 10,243 | ||||||
Gross deferred tax assets | 77,421 | 87,003 | ||||||
Deferred tax liabilities: | ||||||||
Accelerated depreciation on premises and equipment | 557 | 87 | ||||||
Unrealized gain on securities available-for-sale | 5,225 | — | ||||||
Core deposit intangibles | 9,276 | 9,804 | ||||||
FHLB dividends | 1,712 | 1,712 | ||||||
Other | 2,134 | 2,125 | ||||||
Gross deferred tax liabilities | 18,904 | 13,728 | ||||||
Net deferred tax assets | $ | 58,517 | $ | 73,275 | ||||
For the Six Months Ended June 30, 2019 | For the Year Ended December 31, 2018 | |||||||||||||||
Shares (000) | Weighted- Average Exercisable Price | Shares (000) | Weighted- Average Exercisable Price | |||||||||||||
Outstanding, beginning of year | 3,617 | $ | 19.62 | 2,274 | $ | 16.23 | ||||||||||
Granted | 55 | 19.15 | 1,581 | 23.24 | ||||||||||||
Forfeited/Expired | (52 | ) | 22.41 | (37 | ) | 22.30 | ||||||||||
Exercised | — | (201 | ) | 9.25 | ||||||||||||
Outstanding, end of period | 3,620 | 19.57 | 3,617 | 19.62 | ||||||||||||
Exercisable, end of period | 1,305 | $ | 15.70 | 1,167 | $ | 15.31 | ||||||||||
For the Six Months Ended June 30, 2019 | For the Year Ended December 31, 2018 | |||||||
Expected dividend yield | 2.70 | % | 2.05 | % | ||||
Expected stock price volatility | 26.13 | % | 25.59 | % | ||||
Risk-free interest rate | 2.48 | % | 2.82 | % | ||||
Expected life of options | 6.5 | 6.5 years |
Options Outstanding | Options Exercisable | |||||||||
Exercise Prices | Options Outstanding Shares (000) | Weighted- Average Remaining Contractual Life (in years) | Weighted- Average Exercise Price | Options Exercisable Shares (000) | Weighted- Average Exercise Price | |||||
$ 2.66 to $2.77 | 6 | 0.50 | 2.66 | 6 | 2.66 | |||||
$ 4.30 to $6.56 | 87 | 2.56 | 6.56 | 87 | 6.56 | |||||
$ 8.62 to $9.54 | 245 | 3.66 | 9.01 | 245 | 9.01 | |||||
$ 14.71 to $16.86 | 252 | 5.28 | 15.97 | 222 | 16.04 | |||||
$ 17.12 to $17.40 | 193 | 5.39 | 17.20 | 160 | 17.21 | |||||
$ 18.46 to $19.12 | 1,064 | 6.34 | 18.49 | 433 | 18.46 | |||||
$ 20.16 to $20.58 | 48 | 6.28 | 20.51 | 25 | 20.45 | |||||
$ 21.25 to $22.22 | 235 | 7.79 | 21.71 | 94 | 21.48 | |||||
$ 22.70 to $23.51 | 1,416 | 9.06 | 23.32 | 1 | 23.51 | |||||
$ 25.96 | 74 | 7.81 | 25.96 | 32 | 25.96 | |||||
3,620 | 1,305 | |||||||||
As of June 30, 2019 | As of December 31, 2018 | |||||||
(In thousands) | ||||||||
Beginning of year | 1,873 | 1,145 | ||||||
Issued | 179 | 1,010 | ||||||
Vested | (175 | ) | (233 | ) | ||||
Forfeited | (16 | ) | (49 | ) | ||||
End of period | 1,861 | 1,873 | ||||||
Amount of expense for six months and twelve months ended, respectively | $ | 4,216 | $ | 7,232 | ||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(In thousands) | ||||||||||||||||
Salaries and employee benefits | $ | 37,976 | $ | 34,476 | $ | 75,812 | $ | 69,490 | ||||||||
Occupancy and equipment | 8,853 | 8,519 | 17,676 | 17,502 | ||||||||||||
Data processing expense | 3,838 | 3,339 | 7,808 | 7,325 | ||||||||||||
Other operating expenses: | ||||||||||||||||
Advertising | 1,095 | 1,142 | 2,146 | 2,104 | ||||||||||||
Amortization of intangibles | 1,587 | 1,624 | 3,173 | 3,250 | ||||||||||||
Electronic banking expense | 1,851 | 1,828 | 3,754 | 3,706 | ||||||||||||
Directors’ fees | 392 | 318 | 826 | 648 | ||||||||||||
Due from bank service charges | 282 | 242 | 520 | 461 | ||||||||||||
FDIC and state assessment | 1,655 | 2,788 | 3,365 | 4,396 | ||||||||||||
Hurricane expense | — | — | 897 | — | ||||||||||||
Insurance | 661 | 714 | 1,358 | 1,601 | ||||||||||||
Legal and accounting | 989 | 858 | 1,970 | 1,636 | ||||||||||||
Other professional fees | 2,306 | 1,601 | 5,118 | 3,240 | ||||||||||||
Operating supplies | 505 | 602 | 1,041 | 1,202 | ||||||||||||
Postage | 293 | 323 | 619 | 667 | ||||||||||||
Telephone | 306 | 371 | 609 | 744 | ||||||||||||
Other expense | 5,035 | 4,483 | 9,989 | 8,636 | ||||||||||||
Total other operating expenses | 16,957 | 16,894 | 35,385 | 32,291 | ||||||||||||
Total non-interest expense | $ | 67,624 | $ | 63,228 | $ | 136,681 | $ | 126,608 | ||||||||
2019 | $ | 3,027 | ||
2020-2021 | 10,682 | |||
2022-2023 | 7,836 | |||
Thereafter | 27,691 | |||
$ | 49,236 | |||
2019 | $ | 3,880 | ||
2020 | 7,447 | |||
2021 | 6,478 | |||
2022 | 5,310 | |||
2023 | 4,613 | |||
Thereafter | 32,476 | |||
$ | 60,204 | |||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||
2019 | 2019 | |||||||
Lease expense: | ||||||||
Operating lease expense | $ | 2,054 | $ | 4,119 | ||||
Short-term lease expense | 29 | 53 | ||||||
Variable lease expense | 240 | 479 | ||||||
Total lease expense | $ | 2,323 | $ | 4,651 | ||||
Other information: | ||||||||
Cash paid for amounts included in the measurement of lease liabilities | $ | 1,998 | $ | 3,938 | ||||
Weighted-average remaining lease term | 10.85 | 10.83 | ||||||
Weighted-average discount rate | 3.61 | % | 3.63 | % |
June 30, | ||||||||
2019 | 2018 | |||||||
(In thousands) | ||||||||
Interest paid | $ | 80,473 | $ | 51,069 | ||||
Income taxes paid | 55,382 | 23,375 | ||||||
Assets acquired by foreclosure | 5,764 | 7,919 |
Level 1 | Quoted prices in active markets for identical assets or liabilities | |
Level 2 | Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities | |
Level 3 | Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities |
June 30, 2019 | |||||||||||||
Carrying Amount | Fair Value | Level | |||||||||||
(In thousands) | |||||||||||||
Financial assets: | |||||||||||||
Cash and cash equivalents | $ | 557,302 | $ | 557,302 | 1 | ||||||||
Federal funds sold | 1,075 | 1,075 | 1 | ||||||||||
Investment securities – held-to-maturity | — | — | 2 | ||||||||||
Loans receivable, net of impaired loans and allowance | 10,863,710 | 10,624,280 | 3 | ||||||||||
Accrued interest receivable | 48,992 | 48,992 | 1 | ||||||||||
FHLB, Federal Reserve & First National Banker’s Bank stock; other equity investments | 152,236 | 152,236 | 3 | ||||||||||
Financial liabilities: | |||||||||||||
Deposits: | |||||||||||||
Demand and non-interest bearing | $ | 2,575,696 | $ | 2,575,696 | 1 | ||||||||
Savings and interest-bearing transaction accounts | 6,774,162 | 6,774,162 | 1 | ||||||||||
Time deposits | 1,997,458 | 1,986,178 | 3 | ||||||||||
Securities sold under agreements to repurchase | 142,541 | 142,541 | 1 | ||||||||||
FHLB and other borrowed funds | 899,447 | 868,054 | 2 | ||||||||||
Accrued interest payable | 8,735 | 8,735 | 1 | ||||||||||
Subordinated debentures | 369,170 | 378,605 | 3 |
December 31, 2018 | |||||||||||||
Carrying Amount | Fair Value | Level | |||||||||||
(In thousands) | |||||||||||||
Financial assets: | |||||||||||||
Cash and cash equivalents | $ | 657,939 | $ | 657,939 | 1 | ||||||||
Federal funds sold | 325 | 325 | 1 | ||||||||||
Investment securities – held-to-maturity | 192,776 | 193,610 | 2 | ||||||||||
Loans receivable, net of impaired loans and allowance | 10,878,769 | 10,659,428 | 3 | ||||||||||
Accrued interest receivable | 48,945 | 48,945 | 1 | ||||||||||
FHLB, Federal Reserve & First National Banker’s Bank stock; other equity investments | 159,775 | 159,775 | 3 | ||||||||||
Financial liabilities: | |||||||||||||
Deposits: | |||||||||||||
Demand and non-interest bearing | $ | 2,401,232 | $ | 2,401,232 | 1 | ||||||||
Savings and interest-bearing transaction accounts | 6,624,407 | 6,624,407 | 1 | ||||||||||
Time deposits | 1,874,139 | 1,852,816 | 3 | ||||||||||
Securities sold under agreements to repurchase | 143,679 | 143,679 | 1 | ||||||||||
FHLB and other borrowed funds | 1,472,393 | 1,464,073 | 2 | ||||||||||
Accrued interest payable | 8,891 | 8,891 | 1 | ||||||||||
Subordinated debentures | 368,790 | 366,159 | 3 |
In February 2018, the FASB issued ASU2018-03,Technical Corrections and Improvements to Financial Instruments – Overall (Subtopic825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in ASU2018-03 make technical corrections to certain aspects of ASU2016-01 (on recognition of financial assets and financial liabilities), including the following:
Equity securities without a readily determinable fair value – discontinuation.
Equity securities without a readily determinable fair value – adjustments.
Forward contracts and purchased options.
Presentation requirements for certain fair value option liabilities.
Fair value option liabilities denominated in a foreign currency.
Transition guidance for equity securities without a readily determinable fair value.
The amendments in ASU2018-03 are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years beginning after June 15, 2018. Early adoption of ASU2018-03 is permitted for all entities for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, if they have adopted ASU2016-01. The Company adopted the guidance effective January 1, 2018,2019, and its adoption did not haveresulted in a significant impact on our financial position or financial statement disclosures.
$
position or financial statement disclosures.
Hurricane Michael made landfall
November 5, 2018
Item 2: | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
As of or for the Three Months Ended September 30, | As of or for the Nine Months Ended September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(Dollars in thousands, except per share data) | ||||||||||||||||
Total assets | $ | 14,912,738 | $ | 14,255,967 | $ | 14,912,738 | $ | 14,255,967 | ||||||||
Loans receivable | 10,832,815 | 10,286,193 | 10,832,815 | 10,286,193 | ||||||||||||
Allowance for loan losses | 110,191 | 111,620 | 110,191 | 111,620 | ||||||||||||
Total deposits | 10,624,738 | 10,448,770 | 10,624,738 | 10,448,770 | ||||||||||||
Total stockholders’ equity | 2,341,026 | 2,206,716 | 2,341,026 | 2,206,716 | ||||||||||||
Net income | 80,284 | 14,821 | 229,373 | 111,774 | ||||||||||||
Basic earnings per share | 0.46 | 0.10 | 1.32 | 0.78 | ||||||||||||
Diluted earnings per share | 0.46 | 0.10 | 1.32 | 0.78 | ||||||||||||
Book value per share | 13.44 | 12.71 | 13.44 | 12.71 | ||||||||||||
Tangible book value per share(non-GAAP) | 7.68 | 7.06 | 7.68 | 7.06 | ||||||||||||
Annualized net interest margin – FTE | 4.46 | % | 4.40 | % | 4.46 | % | 4.53 | % | ||||||||
Efficiency ratio | 37.23 | 53.77 | 37.26 | 43.92 | ||||||||||||
Efficiency ratio, as adjusted(non-GAAP) | 37.40 | 39.12 | 37.46 | 37.79 | ||||||||||||
Annualized return on average assets | 2.14 | 0.54 | 2.12 | 1.41 | ||||||||||||
Annualized return on average common equity | 13.74 | 3.88 | 13.56 | 10.33 |
As of or for the Three Months Ended June 30, | As of or for the Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(Dollars in thousands, except per share data) | ||||||||||||||||
Total assets | $ | 15,287,575 | $ | 14,924,120 | $ | 15,287,575 | $ | 14,924,120 | ||||||||
Loans receivable | 11,053,129 | 10,897,970 | 11,053,129 | 10,897,970 | ||||||||||||
Allowance for loan losses | 106,066 | 111,516 | 106,066 | 111,516 | ||||||||||||
Total deposits | 11,347,316 | 10,736,033 | 11,347,316 | 10,736,033 | ||||||||||||
Total stockholders’ equity | 2,421,406 | 2,314,013 | 2,421,406 | 2,314,013 | ||||||||||||
Net income | 72,164 | 76,025 | 143,514 | 149,089 | ||||||||||||
Basic earnings per share | 0.43 | 0.44 | 0.85 | 0.86 | ||||||||||||
Diluted earnings per share | 0.43 | 0.44 | 0.85 | 0.86 | ||||||||||||
Book value per share | 14.46 | 13.26 | 14.46 | 13.26 | ||||||||||||
Tangible book value per share (non-GAAP) (1) | 8.50 | 7.52 | 8.50 | 7.52 | ||||||||||||
Annualized net interest margin – FTE | 4.28 | % | 4.47 | % | 4.29 | % | 4.47 | % | ||||||||
Efficiency ratio | 39.93 | 36.74 | 40.47 | 37.28 | ||||||||||||
Efficiency ratio, as adjusted (non-GAAP) (2) | 39.92 | 37.03 | 40.21 | 37.49 | ||||||||||||
Annualized return on average assets | 1.92 | 2.13 | 1.92 | 2.11 | ||||||||||||
Annualized return on average common equity | 12.18 | 13.54 | 12.26 | 13.46 |
(1) | See Table 19 for the non-GAAP tabular reconciliation. |
(2) | See Table 23 for the non-GAAP tabular reconciliation. |
2018
Our net interest margin increased from 4.40% for the three-month period ended September 30, 2017 to 4.46% for the three-month period ended September 30, 2018. The yield on loans was 6.06% and 5.66% for the three months ended September 30, 2018 and 2017, respectively, as average loans increased from $7.94 billion to $10.91 billion. The increase in loan balances is primarily due to the acquisition of Stonegate. For the three months ended September 30, 2018 and 2017, we recognized $10.7interest expense was a $11.5 million, and $7.2 millionor 63.6%, increase in total net accretion for acquired loans andinterest expense on deposits. The rate on interest-bearing deposits increased from 0.57% for the three months ended September 30, 2017 to 1.05% for the three months ended September 30, 2018 with average balances of $5.96 billion and $8.07 billion, respectively.
Our efficiency ratio was 37.23% for the three months ended September 30, 2018, compared to 53.77% for the same period in 2017. For the third quarter of 2018, our efficiency ratio, as adjusted(non-GAAP), was 37.40%, an improvement of 172 basis points from the 39.12% reported for third quarter of 2017 (See Table 23 for thenon-GAAP tabular reconciliation). Even though acquisitions tend to increase our efficiency ratio in the short term, we had a slight improvement in the efficiency ratio, as adjusted, as a result of cost savings from our Stonegate acquisition being realized soon after conversion, which was completed on February 9, 2018.
Our annualized return on average assets was 2.14% for the three months ended September 30, 2018, compared to 0.54% for the same period in 2017. Excluding merger expenses and hurricane expenses, our annualized return on average assets was 2.14% for the three months ended September 30, 2018 compared to 1.70% for the same period in 2017 (See Table 20 for thenon-GAAP tabular reconciliation). Our annualized return on average common equity was 13.74% for the three months ended September 30, 2018, compared to 3.88% for the same period in 2017. Excluding merger expenses and hurricane expenses, our annualized return on average common equity was 13.74% for the three months ended September 30, 2018 compared to 12.17% for the same period in 2017 (See Table 21 for thenon-GAAP tabular reconciliation). Excluding the $13.4 million tax effectprimary driver of the TCJA, our annualized return on average assetsincrease in non-interest expense was 1.78% for the three months ended September 30, 2018 (See Table 20 for thenon-GAAP tabular reconciliation) and our annualized return on average common equity was 11.45% (See Table 21 for thenon-GAAP tabular reconciliation).
Results of Operations for Nine Months Ended September 30, 2018 and 2017
Our net income increased $117.6 million, or 105.2%, to $229.4 million for the nine-month period ended September 30, 2018, from $111.8 million for the same period in 2017. On a diluted earnings per share basis, our earnings were $1.32 per share and $0.78 per share for the nine-month periods ended September 30, 2018 and 2017, respectively. Excluding the $3.8 million ofnon-taxable gain on acquisition, $25.7 million of merger expenses associated with the 2017 acquisitions and $33.4 million of hurricane expenses, our net income increased $84.8 million, or 58.7%, to $229.4 million for the nine-month period ended September 30, 2018, from $144.5 million for the same period in 2017 (See Table 18 for thenon-GAAP tabular reconciliation). The $84.8$3.5 million increase in net income includes $38.0 million from tax savings of the TCJA. The remaining $46.8 million increase in net income from the 2017 acquisitions, increased profitability of Centennial CFGsalaries and the acquisition of Shore Premier Finance.
Our net interest margin decreased from 4.53%4.47% for the nine-monththree-month period ended SeptemberJune 30, 20172018 to 4.46%4.28% for the nine-monththree-month period ended SeptemberJune 30, 2018.2019. The yield on loansinterest earning assets was 5.95%5.50% and 5.70%5.36% for the ninethree months ended SeptemberJune 30, 20182019 and 2017,2018, respectively, as average loansinterest earning assets increased from $7.79$12.56 billion to $10.53$13.32 billion. The increase in loan balancesearning assets is primarily due to the acquisitions we completed during 2017.result of our acquisition in 2018 and organic loan growth. For the ninethree months ended SeptemberJune 30, 20182019 and 2017,2018, we recognized $32.0$9.2 million and $23.3$10.7 million, respectively, in total net accretion for acquired loans and deposits. The rate on interest bearing liabilities was 1.61% and 1.18% for the three months ended June 30, 2019 and 2018, respectively, as average interest-bearing depositsliabilities increased from 0.49%$9.50 billion to $10.07 billion. The growth in the rate on interest bearing liabilities was only partially offset by the increase in yield, which led to a decrease in net interest margin for the nine monthsquarter ended SeptemberJune 30, 2017, to 0.91% for the nine months ended September 30, 2018, with average balances of $5.73 billion and $8.02 billion, respectively.
2019.
partially offset by a $892,000 increase in property finance loan fees and a $223,000 increase in wire service income.
Contents
2018
As of September 30, 2018, ourin 2019.
franchise.
|
–- Overall (Subtopic825-10): Recognition of Financial Assets and Financial Liabilities,accumulated other comprehensive income (“AOCI”).AOCI. ASU2016-01 became effective for us on January 1, 2018. The adoption of the guidance resulted in a $990,000 cumulative-effect adjustment that increased retained earnings, with offsetting related adjustments to deferred taxes and AOCI. ASU2016-01 also emphasizes the existing requirement to use exit prices to measure fair value for disclosure purposes and clarifies that entities should not make use of a practicability exception in determining the fair value of loans. Accordingly, we refined the calculation used to determine the disclosed fair value of our loans held for investment portfolio as part of adopting this standard. The refined calculation did not have a significant impact on our fair value disclosures.
Effective January 1, 2019, as permitted by ASU 2017-12,
Acquisition of
Acquisition of Stonegate Bank
On September 26, 2017, the Company completed the acquisition of all of the issued and outstanding shares of common stock of Stonegate Bank (“Stonegate”), and merged Stonegate into Centennial. The Company paid a purchase price to the Stonegate shareholders of approximately $792.4 million for the Stonegate acquisition. Under the terms of the merger agreement, shareholders of Stonegate received 30,863,658 shares of HBI common stock valued at approximately $742.3 million plus approximately $50.1 million in cash in exchange for all outstanding shares of Stonegate common stock. In addition, the holders of outstanding stock options of Stonegate received approximately $27.6 million in cash in connection with the cancellation of their options immediately before the acquisition closed, for a total transaction value of approximately $820.0 million.
Including the effects of the purchase accounting adjustments, as of acquisition date, Stonegate had approximately $2.89 billion in total assets, $2.37 billion in loans and $2.53 billion in customer deposits. Stonegate formerly operated its banking business from 24 locations in key Florida markets with significant presence in Broward and Sarasota counties.
Through our acquisition and merger of Stonegate into Centennial, we maintain a customer relationship to handle the accounts for Cuba’s diplomatic missions at the United Nations and for the Cuban Interests Section (now the Cuban Embassy) in Washington, D.C. This relationship was established in May 2015 pursuant to a special license granted to Stonegate by the U.S. Treasury Department’s Office of Foreign Assets Control in connection with the reestablishment of diplomatic relations between the U.S. and Cuba. In July 2015, Stonegate established a correspondent banking relationship with Banco Internacional de Comercio, S.A. in Havana, Cuba.
See Note 2 “Business Combinations” in the Notes to Consolidated Financial Statements in our Annual Report on Form10-K for the year ended December 31, 2017, for additional information regarding the acquisition of Stonegate.
Acquisition of The Bank of Commerce
On February 28, 2017, the Company completed its acquisition of all of the issued and outstanding shares of common stock of The Bank of Commerce, a Florida state-chartered bank that operated in the Sarasota, Florida area (“BOC”), pursuant to an acquisition agreement, dated December 1, 2016, by and between the Company and Bank of Commerce Holdings, Inc. (“BCHI”), parent company of BOC. The Company merged BOC with and into Centennial effective as of the close of business on February 28, 2017.
The acquisition of BOC was conducted in accordance with the provisions of Section 363 of the United States Bankruptcy Code (the “Bankruptcy Code”) pursuant to a voluntary petition for relief under Chapter 11 of the Bankruptcy Code filed by BCHI with the United States Bankruptcy Court for the Middle District of Florida (the “Bankruptcy Court”). The sale of BOC by BCHI was subject to certain bidding procedures approved by the Bankruptcy Court, under which the Company submitted an initial bid to purchase the outstanding shares of BOC and was deemed to be the successful bidder after a subsequent auction was held. The Bankruptcy Court entered a final order on December 9, 2016 approving the sale of BOC to the Company pursuant to and in accordance with the acquisition agreement.
Under the terms of the acquisition agreement, the Company paid an aggregate of approximately $4.2 million in cash for the acquisition, which included the purchase of all outstanding shares of BOC common stock, the discounted purchase of certain subordinated debentures issued by BOC from the existing holders of the subordinated debentures, and an expense reimbursement to BCHI for approved administrative claims in connection with the bankruptcy proceeding.
BOC formerly operated three branch locations in the Sarasota, Florida area. Including the effects of the purchase accounting adjustments, as of acquisition date, BOC had approximately $178.1 million in total assets, $118.5 million in loans after $5.8 million of loan discounts, and $139.8 million in deposits.
See Note 2 “Business Combinations” in the Notes to Consolidated Financial Statements in our Annual Report on Form10-K for the year ended December 31, 2017, for additional information regarding the acquisition of BOC.
Acquisition of Giant Holdings, Inc.
On February 23, 2017, the Company completed its acquisition of Giant Holdings, Inc. (“GHI”), parent company of Landmark Bank, N.A. (“Landmark”), pursuant to a definitive agreement and plan of merger whereby GHI merged with and into HBI and, immediately thereafter, Landmark merged with and into Centennial. The Company paid a purchase price to the GHI shareholders of approximately $96.0 million for the GHI acquisition. Under the terms of the agreement, shareholders of GHI received 2,738,038 shares of its common stock valued at approximately $77.5 million as of February 23, 2017, plus approximately $18.5 million in cash in exchange for all outstanding shares of GHI common stock.
GHI formerly operated six branch locations in the Ft. Lauderdale, Florida area. Including the effects of the purchase accounting adjustments, as of acquisition date, GHI had approximately $398.1 million in total assets, $327.8 million in loans after $8.1 million of loan discounts, and $304.0 million in deposits.
See Note 2 “Business Combinations” in the Notes to Consolidated Financial Statements in our Annual Report on Form10-K for the year ended December 31, 2017, for additional information regarding the acquisition of GHI.
During the third quarter of 2018, we opened a loan production office in Dallas, Texas.
2018
Our net income increased $117.6 million, or 105.2%, to $229.4 million for the nine-month period ended September 30, 2018, from $111.8 million for the same period in 2017.2018. On a diluted earnings per share basis, our earnings were $1.32$0.85 per share and $0.78$0.86 per share for the nine-month
primarily the result of our acquisition in 2018 and organic loan growth. For the three months ended SeptemberJune 30, 20182019 and 2017,2018, we recognized $9.2 million and $10.7 million, and $7.2 millionrespectively, in total net accretion for acquired loans and deposits. Purchase accountingThe rate on interest bearing liabilities was 1.61% and 1.18% for the three months ended June 30, 2019 and 2018, respectively, as average interest-bearing liabilities increased from $9.50 billion to $10.07 billion. The growth in the rate on interest bearing liabilities was only partially offset by the increase in yield, which led to a decrease in net interest margin for the quarter ended June 30, 2019.
For the nine months ended September 30, 2018 and 2017, we recognized $32.0 million and $23.3$10.7 million, respectively, in total net accretion for acquired loans and deposits. Purchase accounting accretion on acquired loans was $31.7$9.2 million and $23.0$10.6 million and average purchase accounting loan discounts were $156.9$122.2 million and $97.2$153.6 million for the nine-monththree-month periods ended SeptemberJune 30, 2019 and June 30, 2018, and September 30, 2017, respectively. Net accretionamortization of time deposit premiums was $270,000$30,000 and $300,000$102,000 and net average unamortized CD premiums were $542,000$327,000 and $721,000 for the nine-month periods ended September 30, 2018 and September 30, 2017, respectively.
Our net interest margin increased from 4.40%$538,000 for the three-month periodperiods ended SeptemberJune 30, 2017 to 4.46% for2019 and June 30, 2018, respectively.
Our net interest margin decreased from 4.53% for the nine-month period ended September 30, 2017 to 4.46% for the nine-month period ended September 30, 2018. The yield on loans was 5.95% and 5.70% for the nine months ended September 30, 2018 and 2017, respectively as average loans increased from $7.79 billion to $10.53 billion. The increase in loan balances is primarily due to the acquisitions we completed during 2017. For the nine months ended September 30, 2018 and 2017, we recognized $32.0 million and $23.3$21.3 million, respectively, in total net accretion for acquired loans and deposits. The ratePurchase accounting accretion on interest-bearing deposits increased from 0.49%acquired loans was $18.2 million and $21.1 million and average purchase accounting loan discounts were $126.9 million and $159.4 million for the nine months
Tables 2 and 3 reflect an analysis of net interest income on a fully taxable equivalent basis for the three and nine-monthsix-month periods ended SeptemberJune 30, 20182019 and 2017,2018, as well as changes in fully taxable equivalent net interest margin for the three and nine-monthsix-month periods ended SeptemberJune 30, 20182019 compared to the same period in 2017.
2018.
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Interest income | $ | 180,051 | $ | 123,913 | $ | 507,588 | $ | 361,270 | ||||||||
Fully taxable equivalent adjustment | 1,489 | 1,846 | 4,101 | 5,873 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Interest income – fully taxable equivalent | 181,540 | 125,759 | 511,689 | 367,143 | ||||||||||||
Interest expense | 34,141 | 17,144 | 86,857 | 42,334 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net interest income – fully taxable equivalent | 147,399 | $ | 108,615 | 424,832 | $ | 324,809 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Yield on earning assets – fully taxable equivalent | 5.49 | % | 5.09 | % | 5.38 | % | 5.12 | % | ||||||||
Cost of interest-bearing liabilities | 1.36 | 0.92 | 1.20 | 0.78 | ||||||||||||
Net interest spread – fully taxable equivalent | 4.13 | 4.17 | 4.18 | 4.34 | ||||||||||||
Net interest margin – fully taxable equivalent | 4.46 | 4.40 | 4.46 | 4.53 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Interest income | $ | 181,287 | $ | 166,561 | $ | 360,774 | $ | 327,537 | ||||||||
Fully taxable equivalent adjustment | 1,319 | 1,403 | 2,686 | 2,612 | ||||||||||||
Interest income – fully taxable equivalent | 182,606 | 167,964 | 363,460 | 330,149 | ||||||||||||
Interest expense | 40,300 | 27,949 | 80,317 | 52,716 | ||||||||||||
Net interest income – fully taxable equivalent | $ | 142,306 | $ | 140,015 | $ | 283,143 | $ | 277,433 | ||||||||
Yield on earning assets – fully taxable equivalent | 5.50 | % | 5.36 | % | 5.51 | % | 5.32 | % | ||||||||
Cost of interest-bearing liabilities | 1.61 | 1.18 | 1.60 | 1.11 | ||||||||||||
Net interest spread – fully taxable equivalent | 3.89 | 4.18 | 3.91 | 4.21 | ||||||||||||
Net interest margin – fully taxable equivalent | 4.28 | 4.47 | 4.29 | 4.47 |
Three Months Ended September 30, 2018 vs. 2017 | Nine Months Ended September 30, 2018 vs. 2017 | |||||||
(In thousands) | ||||||||
Increase (decrease) in interest income due to change in earning assets | $ | 47,124 | $ | 128,435 | ||||
Increase (decrease) in interest income due to change in earning asset yields | 8,657 | 16,111 | ||||||
(Increase) decrease in interest expense due to change in interest-bearing liabilities | (5,890 | ) | (14,483 | ) | ||||
(Increase) decrease in interest expense due to change in interest rates paid on interest-bearing liabilities | (11,107 | ) | (30,040 | ) | ||||
|
|
|
| |||||
Increase (decrease) in net interest income | $ | 38,784 | $ | 100,023 | ||||
|
|
|
|
Three Months Ended June 30, | Six Months Ended June 30, | |||||||
2019 vs. 2018 | 2019 vs. 2018 | |||||||
(In thousands) | ||||||||
Increase (decrease) in interest income due to change in earning assets | $ | 10,383 | $ | 21,635 | ||||
Increase (decrease) in interest income due to change in earning asset yields | 4,259 | 11,676 | ||||||
(Increase) decrease in interest expense due to change in interest-bearing liabilities | (1,630 | ) | (3,128 | ) | ||||
(Increase) decrease in interest expense due to change in interest rates paid on interest-bearing liabilities | (10,721 | ) | (24,473 | ) | ||||
Increase (decrease) in net interest income | $ | 2,291 | $ | 5,710 | ||||
Three Months Ended September 30, | ||||||||||||||||||||||||
2018 | 2017 | |||||||||||||||||||||||
Average Balance | Income / Expense | Yield / Rate | Average Balance | Income / Expense | Yield / Rate | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||
Earnings assets | ||||||||||||||||||||||||
Interest-bearing balances due from banks | $ | 281,115 | $ | 1,273 | 1.80 | % | $ | 180,368 | $ | 538 | 1.18 | % | ||||||||||||
Federal funds sold | 524 | 6 | 4.54 | 878 | 3 | 1.36 | ||||||||||||||||||
Investment securities – taxable | 1,526,455 | 9,011 | 2.34 | 1,326,117 | 7,071 | 2.12 | ||||||||||||||||||
Investment securities –non-taxable | 402,355 | 4,507 | 4.44 | 348,920 | 4,908 | 5.58 | ||||||||||||||||||
Loans receivable | 10,909,646 | 166,743 | 6.06 | 7,938,716 | 113,239 | 5.66 | ||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Total interest-earning assets | 13,120,095 | $ | 181,540 | 5.49 | 9,794,999 | $ | 125,759 | 5.09 | ||||||||||||||||
|
|
|
| |||||||||||||||||||||
Non-earning assets | 1,760,836 | 1,058,560 | ||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Total assets | $ | 14,880,931 | $ | 10,853,559 | ||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
| |||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||
Interest-bearing liabilities | ||||||||||||||||||||||||
Savings and interest-bearing transaction accounts | $ | 6,406,711 | $ | 15,596 | 0.97 | % | $ | 4,512,785 | $ | 5,755 | 0.51 | % | ||||||||||||
Time deposits | 1,661,129 | 5,816 | 1.39 | 1,444,662 | 2,780 | 0.76 | ||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Total interest-bearing deposits | 8,067,840 | 21,412 | 1.05 | 5,957,447 | 8,535 | 0.57 | ||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Federal funds purchased | — | — | — | — | — | — | ||||||||||||||||||
Securities sold under agreement to repurchase | 148,791 | 472 | 1.26 | 135,855 | 232 | 0.68 | ||||||||||||||||||
FHLB and other borrowed funds | 1,398,738 | 7,055 | 2.00 | 920,754 | 3,408 | 1.47 | ||||||||||||||||||
Subordinated debentures | 368,501 | 5,202 | 5.60 | 358,347 | 4,969 | 5.50 | ||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Total interest-bearing liabilities | 9,983,870 | 34,141 | 1.36 | 7,372,403 | 17,144 | 0.92 | ||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Non-interest-bearing liabilities | ||||||||||||||||||||||||
Non-interest-bearing deposits | 2,512,690 | 1,924,933 | ||||||||||||||||||||||
Other liabilities | 66,441 | 42,394 | ||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Total liabilities | 12,563,001 | 9,339,730 | ||||||||||||||||||||||
Stockholders’ equity | 2,317,930 | 1,513,829 | ||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 14,880,931 | $ | 10,853,559 | ||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Net interest spread | 4.13 | % | 4.17 | % | ||||||||||||||||||||
Net interest income and margin | $ | 147,399 | 4.46 | % | $ | 108,615 | 4.40 | % | ||||||||||||||||
|
|
|
|
Three Months Ended June 30, | ||||||||||||||||||||||||
2019 | 2018 | |||||||||||||||||||||||
Average Balance | Income / Expense | Yield / Rate | Average Balance | Income / Expense | Yield / Rate | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||
Earnings assets | ||||||||||||||||||||||||
Interest-bearing balances due from banks | $ | 298,821 | $ | 1,628 | 2.19 | % | $ | 288,643 | $ | 1,206 | 1.68 | % | ||||||||||||
Federal funds sold | 1,596 | 10 | 2.51 | 679 | 12 | 7.09 | ||||||||||||||||||
Investment securities – taxable | 1,640,883 | 10,650 | 2.60 | 1,528,613 | 8,979 | 2.36 | ||||||||||||||||||
Investment securities – non-taxable | 379,437 | 4,177 | 4.42 | 398,067 | 4,476 | 4.51 | ||||||||||||||||||
Loans receivable | 11,000,926 | 166,141 | 6.06 | 10,345,846 | 153,291 | 5.94 | ||||||||||||||||||
Total interest-earning assets | 13,321,663 | 182,606 | 5.50 | 12,561,848 | 167,964 | 5.36 | ||||||||||||||||||
Non-earning assets | 1,776,937 | 1,742,635 | ||||||||||||||||||||||
Total assets | $ | 15,098,600 | $ | 14,304,483 | ||||||||||||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||
Interest-bearing liabilities | ||||||||||||||||||||||||
Savings and interest-bearing transaction accounts | $ | 6,677,683 | $ | 20,637 | 1.24 | % | $ | 6,451,204 | $ | 13,489 | 0.84 | % | ||||||||||||
Time deposits | 1,943,320 | 9,072 | 1.87 | 1,611,353 | 4,675 | 1.16 | ||||||||||||||||||
Total interest-bearing deposits | 8,621,003 | 29,709 | 1.38 | 8,062,557 | 18,164 | 0.90 | ||||||||||||||||||
Federal funds purchased | — | — | — | 46 | — | — | ||||||||||||||||||
Securities sold under agreement to repurchase | 144,478 | 630 | 1.75 | 143,952 | 372 | 1.04 | ||||||||||||||||||
FHLB and other borrowed funds | 932,365 | 4,722 | 2.03 | 928,357 | 4,245 | 1.83 | ||||||||||||||||||
Subordinated debentures | 369,076 | 5,239 | 5.69 | 368,309 | 5,168 | 5.63 | ||||||||||||||||||
Total interest-bearing liabilities | 10,066,922 | 40,300 | 1.61 | 9,503,221 | 27,949 | 1.18 | ||||||||||||||||||
Non-interest-bearing liabilities | ||||||||||||||||||||||||
Non-interest-bearing deposits | 2,553,060 | 2,496,701 | ||||||||||||||||||||||
Other liabilities | 101,900 | 53,149 | ||||||||||||||||||||||
Total liabilities | 12,721,882 | 12,053,071 | ||||||||||||||||||||||
Stockholders’ equity | 2,376,718 | 2,251,412 | ||||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 15,098,600 | $ | 14,304,483 | ||||||||||||||||||||
Net interest spread | 3.89 | % | 4.18 | % | ||||||||||||||||||||
Net interest income and margin | $ | 142,306 | 4.28 | % | $ | 140,015 | 4.47 | % | ||||||||||||||||
Nine Months Ended September 30, | ||||||||||||||||||||||||
2018 | 2017 | |||||||||||||||||||||||
Average Balance | Income / Expense | Yield / Rate | Average Balance | Income / Expense | Yield / Rate | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||
Earnings assets | ||||||||||||||||||||||||
Interest-bearing balances due from banks | $ | 271,987 | $ | 3,408 | 1.68 | % | $ | 218,324 | $ | 1,573 | 0.96 | % | ||||||||||||
Federal funds sold | 3,595 | 24 | 0.89 | 1,161 | 9 | 1.04 | ||||||||||||||||||
Investment securities – taxable | 1,538,387 | 26,960 | 2.34 | 1,231,619 | 18,983 | 2.06 | ||||||||||||||||||
Investment securities –non-taxable | 382,088 | 12,981 | 4.54 | 347,578 | 14,506 | 5.58 | ||||||||||||||||||
Loans receivable | 10,529,117 | 468,316 | 5.95 | 7,785,925 | 332,072 | 5.70 | ||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Total interest-earning assets | 12,725,174 | $ | 511,689 | 5.38 | 9,584,607 | $ | 367,143 | 5.12 | ||||||||||||||||
|
|
|
| |||||||||||||||||||||
Non-earning assets | 1,750,456 | 1,033,310 | ||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Total assets | $ | 14,475,630 | $ | 10,617,917 | ||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
| |||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||
Interest-bearing liabilities | ||||||||||||||||||||||||
Savings and interest-bearing transaction accounts | $ | 6,422,489 | $ | 40,327 | 0.84 | % | $ | 4,316,032 | $ | 13,445 | 0.42 | % | ||||||||||||
Time deposits | 1,595,985 | 14,055 | 1.18 | 1,415,383 | 7,386 | 0.70 | ||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Total interest-bearing deposits | 8,018,474 | 54,382 | 0.91 | 5,731,415 | 20,831 | 0.49 | ||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Federal funds purchased | 41 | 1 | 3.26 | — | — | — | ||||||||||||||||||
Securities sold under agreement to repurchase | 148,472 | 1,220 | 1.10 | 129,580 | 593 | 0.61 | ||||||||||||||||||
FHLB and other borrowed funds | 1,159,973 | 15,880 | 1.83 | 1,155,503 | 10,707 | 1.24 | ||||||||||||||||||
Subordinated debentures | 368,313 | 15,374 | 5.58 | 258,032 | 10,203 | 5.29 | ||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Total interest-bearing liabilities | 9,695,273 | 86,857 | 1.20 | 7,274,530 | 42,334 | 0.78 | ||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Non-interest-bearing liabilities | ||||||||||||||||||||||||
Non-interest-bearing deposits | 2,464,032 | 1,847,843 | ||||||||||||||||||||||
Other liabilities | 54,731 | 48,804 | ||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Total liabilities | 12,214,036 | 9,171,177 | ||||||||||||||||||||||
Stockholders’ equity | 2,261,594 | 1,446,740 | ||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 14,475,630 | $ | 10,617,917 | ||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
Net interest spread | 4.18 | % | 4.34 | % | ||||||||||||||||||||
Net interest income and margin | $ | 424,832 | 4.46 | % | $ | 324,809 | 4.53 | % | ||||||||||||||||
|
|
|
|
Six Months Ended June 30, | ||||||||||||||||||||||||
2019 | 2018 | |||||||||||||||||||||||
Average Balance | Income / Expense | Yield / Rate | Average Balance | Income / Expense | Yield / Rate | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||
Earnings assets | ||||||||||||||||||||||||
Interest-bearing balances due from banks | $ | 285,688 | $ | 3,171 | 2.24 | % | $ | 267,347 | $ | 2,135 | 1.61 | % | ||||||||||||
Federal funds sold | 1,544 | 21 | 2.74 | 5,156 | 18 | 0.70 | ||||||||||||||||||
Investment securities – taxable | 1,618,369 | 21,356 | 2.66 | 1,544,451 | 17,949 | 2.34 | ||||||||||||||||||
Investment securities – non-taxable | 385,064 | 8,602 | 4.50 | 371,788 | 8,473 | 4.60 | ||||||||||||||||||
Loans receivable | 11,018,616 | 330,310 | 6.05 | 10,335,699 | 301,574 | 5.88 | ||||||||||||||||||
Total interest-earning assets | 13,309,281 | 363,460 | 5.51 | 12,524,441 | 330,149 | 5.32 | ||||||||||||||||||
Non-earning assets | 1,779,908 | 1,745,179 | ||||||||||||||||||||||
Total assets | $ | 15,089,189 | $ | 14,269,620 | ||||||||||||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||
Interest-bearing liabilities | ||||||||||||||||||||||||
Savings and interest-bearing transaction accounts | $ | 6,637,512 | $ | 40,174 | 1.22 | % | $ | 6,430,509 | $ | 24,731 | 0.78 | % | ||||||||||||
Time deposits | 1,923,457 | 17,541 | 1.84 | 1,562,873 | 8,239 | 1.06 | ||||||||||||||||||
Total interest-bearing deposits | 8,560,969 | 57,715 | 1.36 | 7,993,382 | 32,970 | 0.83 | ||||||||||||||||||
Federal funds purchased | — | — | 0.00 | 62 | 1 | 3.25 | ||||||||||||||||||
Securities sold under agreement to repurchase | 147,623 | 1,264 | 1.73 | 148,310 | 748 | 1.02 | ||||||||||||||||||
FHLB and other borrowed funds | 1,045,370 | 10,840 | 2.09 | 1,038,612 | 8,825 | 1.71 | ||||||||||||||||||
Subordinated debentures | 368,981 | 10,498 | 5.74 | 368,217 | 10,172 | 5.57 | ||||||||||||||||||
Total interest-bearing liabilities | 10,122,943 | 80,317 | 1.60 | 9,548,583 | 52,716 | 1.11 | ||||||||||||||||||
Non-interest-bearing liabilities | ||||||||||||||||||||||||
Non-interest-bearing deposits | 2,496,604 | 2,439,299 | ||||||||||||||||||||||
Other liabilities | 108,866 | 48,779 | ||||||||||||||||||||||
Total liabilities | 12,728,413 | 12,036,661 | ||||||||||||||||||||||
Stockholders’ equity | 2,360,776 | 2,232,959 | ||||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 15,089,189 | $ | 14,269,620 | ||||||||||||||||||||
Net interest spread | 3.91 | % | 4.21 | % | ||||||||||||||||||||
Net interest income and margin | $ | 283,143 | 4.29 | % | $ | 277,433 | 4.47 | % | ||||||||||||||||
Three Months Ended September 30, 2018 over 2017 | Nine Months Ended September 30, 2018 over 2017 | |||||||||||||||||||||||
Volume | Yield/Rate | Total | Volume | Yield/Rate | Total | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Increase (decrease) in: | ||||||||||||||||||||||||
Interest income: | ||||||||||||||||||||||||
Interest-bearing balances due from banks | $ | 382 | $ | 353 | $ | 735 | $ | 458 | $ | 1,377 | $ | 1,835 | ||||||||||||
Federal funds sold | (1 | ) | 4 | 3 | 16 | (1 | ) | 15 | ||||||||||||||||
Investment securities – taxable | 1,135 | 805 | 1,940 | 5,146 | 2,831 | 7,977 | ||||||||||||||||||
Investment securities –non-taxable | 686 | (1,087 | ) | (401 | ) | 1,347 | (2,872 | ) | (1,525 | ) | ||||||||||||||
Loans receivable | 44,922 | 8,582 | 53,504 | 121,468 | 14,776 | 136,244 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total interest income | 47,124 | 8,657 | 55,781 | 128,435 | 16,111 | 144,546 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Interest expense: | ||||||||||||||||||||||||
Interest-bearing transaction and savings deposits | 3,108 | 6,733 | 9,841 | 8,725 | 18,157 | 26,882 | ||||||||||||||||||
Time deposits | 470 | 2,566 | 3,036 | 1,044 | 5,625 | 6,669 | ||||||||||||||||||
Federal funds purchased | — | — | — | 1 | — | 1 | ||||||||||||||||||
Securities sold under agreement to repurchase | 23 | 217 | 240 | 97 | 530 | 627 | ||||||||||||||||||
FHLB borrowed funds | 2,147 | 1,500 | 3,647 | 41 | 5,132 | 5,173 | ||||||||||||||||||
Subordinated debentures | 142 | 91 | 233 | 4,575 | 596 | 5,171 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total interest expense | 5,890 | 11,107 | 16,997 | 14,483 | 30,040 | 44,523 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Increase (decrease) in net interest income | $ | 41,234 | $ | (2,450 | ) | $ | 38,784 | $ | 113,952 | $ | (13,929 | ) | $ | 100,023 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||
2019 over 2018 | 2019 over 2018 | |||||||||||||||||||||||
Volume | Yield/Rate | Total | Volume | Yield/Rate | Total | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
Increase (decrease) in: | ||||||||||||||||||||||||
Interest income: | ||||||||||||||||||||||||
Interest-bearing balances due from banks | $ | 44 | $ | 378 | $ | 422 | $ | 155 | 881 | $ | 1,036 | |||||||||||||
Federal funds sold | 9 | (11 | ) | (2 | ) | (20 | ) | 23 | 3 | |||||||||||||||
Investment securities – taxable | 687 | 984 | 1,671 | 889 | 2,518 | 3,407 | ||||||||||||||||||
Investment securities – non-taxable | (206 | ) | (93 | ) | (299 | ) | 299 | (170 | ) | 129 | ||||||||||||||
Loans receivable | 9,849 | 3,001 | 12,850 | 20,312 | 8,424 | 28,736 | ||||||||||||||||||
Total interest income | 10,383 | 4,259 | 14,642 | 21,635 | 11,676 | 33,311 | ||||||||||||||||||
Interest expense: | ||||||||||||||||||||||||
Interest-bearing transaction and savings deposits | 489 | 6,659 | 7,148 | 820 | 14,623 | 15,443 | ||||||||||||||||||
Time deposits | 1,111 | 3,286 | 4,397 | 2,234 | 7,068 | 9,302 | ||||||||||||||||||
Federal funds purchased | — | — | — | (1 | ) | — | (1 | ) | ||||||||||||||||
Securities sold under agreement to repurchase | 1 | 257 | 258 | (3 | ) | 519 | 516 | |||||||||||||||||
FHLB borrowed funds | 18 | 459 | 477 | 57 | 1,958 | 2,015 | ||||||||||||||||||
Subordinated debentures | 11 | 60 | 71 | 21 | 305 | 326 | ||||||||||||||||||
Total interest expense | 1,630 | 10,721 | 12,351 | 3,128 | 24,473 | 27,601 | ||||||||||||||||||
Increase (decrease) in net interest income | $ | 8,753 | $ | (6,462 | ) | $ | 2,291 | $ | 18,507 | $ | (12,797 | ) | $ | 5,710 | ||||||||||
Our Company is
We had $4.3 million and $39.3 million of provision for loan losses for the nine months ended September 30, 2018 and 2017, respectively, reflecting a $35.0$1.4 million decrease in the provision for loan losses for the ninesecond quarter of 2019 versus the second quarter of 2018. We had $1.3 million and $4.3 million of provision for loan losses for the six months ended SeptemberJune 30, 2019 and 2018, respectively. The decrease in the provision for loan losses during the three and
0.07% for the three and
2018.
Three Months Ended September 30, | 2018 Change from 2017 | Nine Months Ended September 30, | 2018 Change from 2017 | |||||||||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||
Service charges on deposit accounts | $ | 6,992 | $ | 6,408 | $ | 584 | 9.1 | % | $ | 19,847 | $ | 18,356 | $ | 1,491 | 8.1 | % | ||||||||||||||||
Other service charges and fees | 9,041 | 8,490 | 551 | 6.5 | 28,993 | 25,983 | 3,010 | 11.6 | ||||||||||||||||||||||||
Trust fees | 437 | 365 | 72 | 19.7 | 1,262 | 1,130 | 132 | 11.7 | ||||||||||||||||||||||||
Mortgage lending income | 3,691 | 3,172 | 519 | 16.4 | 9,825 | 9,713 | 112 | 1.2 | ||||||||||||||||||||||||
Insurance commissions | 463 | 472 | (9 | ) | (1.9 | ) | 1,668 | 1,482 | 186 | 12.6 | ||||||||||||||||||||||
Increase in cash value of life insurance | 735 | 478 | 257 | 53.8 | 2,119 | 1,251 | 868 | 69.4 | ||||||||||||||||||||||||
Dividends from FHLB, FRB, FNBB & other | 1,288 | 834 | 454 | 54.4 | 3,765 | 2,455 | 1,310 | 53.4 | ||||||||||||||||||||||||
Gain on acquisitions | — | — | — | — | — | 3,807 | (3,807 | ) | (100.0 | ) | ||||||||||||||||||||||
Gain on sale of SBA loans | 47 | 163 | (116 | ) | (71.2 | ) | 491 | 738 | (247 | ) | (33.5 | ) | ||||||||||||||||||||
Gain (loss) on sale of branches, equipment and other assets, net | (102 | ) | (1,337 | ) | 1,235 | 92.4 | (95 | ) | (962 | ) | 867 | 90.1 | ||||||||||||||||||||
Gain (loss) on OREO, net | 836 | 335 | 501 | 149.6 | 2,287 | 849 | 1,438 | 169.4 | ||||||||||||||||||||||||
Gain (loss) on securities, net | — | 136 | (136 | ) | (100.0 | ) | — | 939 | (939 | ) | (100.0 | ) | ||||||||||||||||||||
Other income | 2,419 | 1,941 | 478 | 24.6 | 9,163 | 6,603 | 2,560 | 38.8 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Totalnon-interest income | $ | 25,847 | $ | 21,457 | $ | 4,390 | 20.5 | % | $ | 79,325 | $ | 72,344 | $ | 6,981 | 9.6 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
June 30, | 2019 Change | June 30, | 2019 Change | |||||||||||||||||||||||||||||
2019 | 2018 | from 2018 | 2019 | 2018 | from 2018 | |||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||
Service charges on deposit accounts | $ | 6,259 | $ | 6,780 | $ | (521 | ) | (7.7 | )% | $ | 12,660 | $ | 12,855 | (195 | ) | (1.5 | )% | |||||||||||||||
Other service charges and fees | 8,177 | 9,797 | (1,620 | ) | (16.5 | ) | 14,740 | 19,952 | (5,212 | ) | (26.1 | ) | ||||||||||||||||||||
Trust fees | 391 | 379 | 12 | 3.2 | 794 | 825 | (31 | ) | (3.8 | ) | ||||||||||||||||||||||
Mortgage lending income | 3,457 | 3,477 | (20 | ) | (0.6 | ) | 5,892 | 6,134 | (242 | ) | (3.9 | ) | ||||||||||||||||||||
Insurance commissions | 515 | 526 | (11 | ) | (2.1 | ) | 1,124 | 1,205 | (81 | ) | (6.7 | ) | ||||||||||||||||||||
Increase in cash value of life insurance | 740 | 730 | 10 | 1.4 | 1,476 | 1,384 | 92 | 6.6 | ||||||||||||||||||||||||
Dividends from FHLB, FRB, FNBB & other | 1,149 | 1,600 | (451 | ) | (28.2 | ) | 4,654 | 2,477 | 2,177 | 87.9 | ||||||||||||||||||||||
Gain on sale of SBA loans | 355 | 262 | 93 | 35.5 | 596 | 444 | 152 | 34.2 | ||||||||||||||||||||||||
Gain (loss) on sale of branches, equipment and other assets, net | (129 | ) | — | (129 | ) | (100.0 | ) | (50 | ) | 7 | (57 | ) | (814.3 | ) | ||||||||||||||||||
Gain (loss) on OREO, net | 58 | 1,046 | (988 | ) | (94.5 | ) | 264 | 1,451 | (1,187 | ) | (81.8 | ) | ||||||||||||||||||||
Other income | 2,094 | 3,076 | (982 | ) | (31.9 | ) | 4,588 | 6,744 | (2,156 | ) | (32.0 | ) | ||||||||||||||||||||
Total non-interest income | $ | 23,066 | $ | 27,673 | $ | (4,607 | ) | (16.6 | )% | $ | 46,738 | $ | 53,478 | (6,740 | ) | (12.6 | )% | |||||||||||||||
Excluding gain on acquisitions, the2018. The primary factorsfactor that resulted in this increasedecrease was the impact of the Durbin Amendment which reduced interchange fees by approximately $3.0 million for the quarter. Other factors were changes related to service charges on deposit accounts, other service charges and fees, increase in cash valuedividends from FHLB, FRB, First National Bankers’ Bank & other, gain (loss) on sale of life insurance, dividends,branches, equipment and other assets, net, gain on securities, net gain(loss) on OREO and other income.
The $519,000 increase in mortgage lending income is primarily related to the acquisition of Stonegate during the third quarter of 2017 which resulted in an increase in secondary market lending fees and fair market value adjustments for loan hedging which was partially offset by a decrease in the gain on sale of mortgage loans and fair market value adjustments for mortgage loans held for sale.
The $454,000 increase in dividends from FHLB, FRB, First National Bankers’ Bank & other is primarily associated with higher dividend income from Federal Reserve and FHLB stock, which is related to an increased investment balance and improved dividend rate.
The $1.2 million increase in gain (loss) on branches, equipment and other assets, net is primarily due to lower levels of sales during the third quarter of 2018. The $1.3 million loss from the third quarter of 2017 was due to losses on three vacant properties sold during the third quarter of 2017.
The $501,000 increase in gain on OREO is primarily related to realizing additional gains on sale from OREO properties during the third quarter of 2018 compared to the third quarter of 2017.
Other income includes $1.0 million of additional income for items previously charged off, $877,000 of brokerage fee income, $435,000 of rental income and $110,000 of miscellaneous income.
Amendment. We exceeded $10 billion in assets during the first quarter of 2017 and became subject to the Durbin Amendment to the Dodd-Frank Act interchange fee restrictions beginning in the third quarter of 2018. The Durbin Amendment negatively impactsimpacted debit card and ATM fees beginning in the second half of 2018. During the third quarter of 2018, we collected $3.7 million in debit cardfees. We estimate that quarterly interchange fees which wasare approximately $2.8$3.0 million lower as a result of the Durbin Amendment. This was partially offset by a $892,000 increase in property finance loan fees and a $223,000 increase in wire service income.
The $3.8 million decrease in gain on acquisitions is athe result of no bargain purchase gain being recorded for the first nine months of 2018. Duringa $2.1 million special dividend from an equity investment in the first quarter of 2017, we acquired BOC and recorded a $3.82019.
The $867,000 increase in gain (loss) on branches, equipment and other assets, net is primarily due to lower levels of sales during the first nine months of 2018. The $962,000 loss from the first nine months of 2017 was primarily related to net losses on eleven vacant properties from closed branches.
The $1.4 million increasedecrease in gain (loss) on OREO is primarily related to realizing additionalfewer gains on sale from OREO properties during the first ninesix months ended June 30, 2019 compared to the six months ended June 30, 2018.
Other income includes $3.4 million ofa $564,000 decrease in additional income for items previously charged off $2.2 million ofand a $490,000 decrease in investment brokerage fee income, $1.2 million of rental income, $535,000 of income related to the fair value adjustment of equity securities and $1.0 million of miscellaneous income.
2018.
Three Months Ended September 30, | 2018 Change from 2017 | Nine Months Ended September 30, | 2018 Change from 2017 | |||||||||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||
Salaries and employee benefits | $ | 37,825 | $ | 28,510 | $ | 9,315 | 32.7 | % | $ | 107,315 | $ | 83,965 | $ | 23,350 | 27.8 | % | ||||||||||||||||
Occupancy and equipment | 8,148 | 7,887 | 261 | 3.3 | 25,650 | 21,602 | 4,048 | 18.7 | ||||||||||||||||||||||||
Data processing expense | 3,461 | 2,853 | 608 | 21.3 | 10,786 | 8,439 | 2,347 | 27.8 | ||||||||||||||||||||||||
Other operating expenses: | ||||||||||||||||||||||||||||||||
Advertising | 1,154 | 795 | 359 | 45.2 | 3,258 | 2,305 | 953 | 41.3 | ||||||||||||||||||||||||
Merger and acquisition expenses | — | 18,227 | (18,227 | ) | (100.0 | ) | — | 25,743 | (25,743 | ) | (100.0 | ) | ||||||||||||||||||||
Amortization of intangibles | 1,617 | 906 | 711 | 78.5 | 4,867 | 2,576 | 2,291 | 88.9 | ||||||||||||||||||||||||
Electronic banking expense | 1,947 | 1,712 | 235 | 13.7 | 5,653 | 4,885 | 768 | 15.7 | ||||||||||||||||||||||||
Directors’ fees | 314 | 309 | 5 | 1.6 | 962 | 946 | 16 | 1.7 | ||||||||||||||||||||||||
Due from bank service charges | 253 | 472 | (219 | ) | (46.4 | ) | 714 | 1,348 | (634 | ) | (47.0 | ) | ||||||||||||||||||||
FDIC and state assessment | 2,293 | 1,293 | 1,000 | 77.3 | 6,689 | 3,763 | 2,926 | 77.8 | ||||||||||||||||||||||||
Insurance | 762 | 577 | 185 | 32.1 | 2,363 | 1,698 | 665 | 39.2 | ||||||||||||||||||||||||
Legal and accounting | 761 | 698 | 63 | 9.0 | 2,397 | 1,799 | 598 | 33.2 | ||||||||||||||||||||||||
Other professional fees | 1,748 | 1,436 | 312 | 21.7 | 4,988 | 3,822 | 1,166 | 30.5 | ||||||||||||||||||||||||
Operating supplies | 510 | 432 | 78 | 18.1 | 1,712 | 1,376 | 336 | 24.4 | ||||||||||||||||||||||||
Postage | 311 | 280 | 31 | 11.1 | 978 | 861 | 117 | 13.6 | ||||||||||||||||||||||||
Telephone | 337 | 305 | 32 | 10.5 | 1,081 | 1,027 | 54 | 5.3 | ||||||||||||||||||||||||
Other expense | 4,682 | 4,154 | 528 | 12.7 | 13,318 | 10,835 | 2,483 | 22.9 | ||||||||||||||||||||||||
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Totalnon-interest expense | $ | 66,123 | $ | 70,846 | $ | (4,723 | ) | (6.7 | )% | $ | 192,731 | $ | 176,990 | $ | 15,741 | 8.9 | % | |||||||||||||||
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Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||
June 30, | 2019 Change | June 30, | 2019 Change | |||||||||||||||||||||||||||||
2019 | 2018 | from 2018 | 2019 | 2018 | from 2018 | |||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||
Salaries and employee benefits | $ | 37,976 | $ | 34,476 | $ | 3,500 | 10.2 | % | $ | 75,812 | $ | 69,490 | $ | 6,322 | 9.1 | % | ||||||||||||||||
Occupancy and equipment | 8,853 | 8,519 | 334 | 3.9 | 17,676 | 17,502 | 174 | 1.0 | ||||||||||||||||||||||||
Data processing expense | 3,838 | 3,339 | 499 | 14.9 | 7,808 | 7,325 | 483 | 6.6 | ||||||||||||||||||||||||
Other operating expenses: | ||||||||||||||||||||||||||||||||
Advertising | 1,095 | 1,142 | (47 | ) | (4.1 | ) | 2,146 | 2,104 | 42 | 2.0 | ||||||||||||||||||||||
Merger and acquisition expenses | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Amortization of intangibles | 1,587 | 1,624 | (37 | ) | (2.3 | ) | 3,173 | 3,250 | (77 | ) | (2.4 | ) | ||||||||||||||||||||
Electronic banking expense | 1,851 | 1,828 | 23 | 1.3 | 3,754 | 3,706 | 48 | 1.3 | ||||||||||||||||||||||||
Directors’ fees | 392 | 318 | 74 | 23.3 | 826 | 648 | 178 | 27.5 | ||||||||||||||||||||||||
Due from bank service charges | 282 | 242 | 40 | 16.5 | 520 | 461 | 59 | 12.8 | ||||||||||||||||||||||||
FDIC and state assessment | 1,655 | 2,788 | (1,133 | ) | (40.6 | ) | 3,365 | 4,396 | (1,031 | ) | (23.5 | ) | ||||||||||||||||||||
Hurricane expense | — | — | — | — | 897 | — | 897 | 100.0 | ||||||||||||||||||||||||
Insurance | 661 | 714 | (53 | ) | (7.4 | ) | 1,358 | 1,601 | (243 | ) | (15.2 | ) | ||||||||||||||||||||
Legal and accounting | 989 | 858 | 131 | 15.3 | 1,970 | 1,636 | 334 | 20.4 | ||||||||||||||||||||||||
Other professional fees | 2,306 | 1,601 | 705 | 44.0 | 5,118 | 3,240 | 1,878 | 58.0 | ||||||||||||||||||||||||
Operating supplies | 505 | 602 | (97 | ) | (16.1 | ) | 1,041 | 1,202 | (161 | ) | (13.4 | ) | ||||||||||||||||||||
Postage | 293 | 323 | (30 | ) | (9.3 | ) | 619 | 667 | (48 | ) | (7.2 | ) | ||||||||||||||||||||
Telephone | 306 | 371 | (65 | ) | (17.5 | ) | 609 | 744 | (135 | ) | (18.1 | ) | ||||||||||||||||||||
Other expense | 5,035 | 4,483 | 552 | 12.3 | 9,989 | 8,636 | 1,353 | 15.7 | ||||||||||||||||||||||||
Total non-interest expense | $ | 67,624 | $ | 63,228 | $ | 4,396 | 7.0 | % | $ | 136,681 | $ | 126,608 | $ | 10,073 | 8.0 | % | ||||||||||||||||
Included within salarysalaries and employee benefits expense is approximately $781,000primarily due to increased salary expense related to the normal increased cost of doing business, additional employees hired as a result of the increased regulatory environment, $326,000 increase in salary expense for Centennial CFG, $831,000 of additional expense related to performance based restricted stock and stock options granted during the third quarter of 2018 under the HOMB $2.00 program. During the third quarter of 2018, the Company granted 1,452,000 stock options“HOMB $2.00” and 843,500 shares of restricted stock to certain employees under HOMB $2.00. In addition, Centennial CFG incurred $1.8 million in incentive compensation paid as a result of fees collected from several large payoffs during the 3rd quarter of 2018.
The change innon-interest expense for 2018 when compared to 2017 is primarily related to the completion of the acquisition of Stonegate inSPF during the thirdsecond quarter of 2017,2018, which accounted for $236,000 of the increase.
Centennial CFG’s branch and loan production offices incurred $7.9 million and $19.0CFG, $1.7 million ofnon-interest additional expense related to performance based restricted stock and stock options granted during the threethird quarter of 2018 under “HOMB $2.00” and nine months ended September 30, 2018, compared to $4.8 million and $13.8 millionthe completion ofnon-interest expense the acquisition of SPF during the threesecond quarter of 2018, which accounted for $489,000 of the increase.
In December 2017, President Trump signed into law the TCJA which lowered the Company’s corporate tax rate of 35.0% to 21.0%.
2018.
2018
2019.
During the second quarter of 2018, the Company acquired $376.2 million of loans, net of known purchase accounting discounts.
2019.
2018.
As of September 30, 2018 | As of December 31, 2017 | |||||||
(In thousands) | ||||||||
Real estate: | ||||||||
Commercial real estate loans: | ||||||||
Non-farm/non-residential | $ | 4,685,827 | $ | 4,600,117 | ||||
Construction/land development | 1,550,910 | 1,700,491 | ||||||
Agricultural | 72,930 | 82,229 | ||||||
Residential real estate loans: | ||||||||
Residential1-4 family | 1,982,666 | 1,970,311 | ||||||
Multifamily residential | 608,608 | 441,303 | ||||||
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| |||||
Total real estate | 8,900,941 | 8,794,451 | ||||||
Consumer | 428,192 | 46,148 | ||||||
Commercial and industrial | 1,303,841 | 1,297,397 | ||||||
Agricultural | 58,644 | 49,815 | ||||||
Other | 141,197 | 143,377 | ||||||
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| |||||
Total loans receivable | $ | 10,832,815 | $ | 10,331,188 | ||||
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|
|
As of | As of | |||||||
June 30, 2019 | December 31, 2018 | |||||||
(In thousands) | ||||||||
Real estate: | ||||||||
Commercial real estate loans: | ||||||||
Non-farm/non-residential | $ | 4,495,558 | $ | 4,806,684 | ||||
Construction/land development | 1,930,838 | 1,546,035 | ||||||
Agricultural | 85,045 | 76,433 | ||||||
Residential real estate loans: | ||||||||
Residential 1-4 family | 1,852,784 | 1,975,586 | ||||||
Multifamily residential | 523,789 | 560,475 | ||||||
Total real estate | 8,888,014 | 8,965,213 | ||||||
Consumer | 455,554 | 443,105 | ||||||
Commercial and industrial | 1,515,357 | 1,476,331 | ||||||
Agricultural | 80,621 | 48,562 | ||||||
Other | 113,583 | 138,668 | ||||||
Total loans receivable | $ | 11,053,129 | $ | 11,071,879 | ||||
As of September 30, 2018 | As of December 31, 2017 | |||||||
(Dollars in thousands) | ||||||||
Non-accrual loans | $ | 36,198 | $ | 34,032 | ||||
Loans past due 90 days or more (principal or interest payments) | 20,267 | 10,665 | ||||||
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Totalnon-performing loans | 56,465 | 44,697 | ||||||
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| |||||
Othernon-performing assets | ||||||||
Foreclosed assets held for sale, net | 13,507 | 18,867 | ||||||
Othernon-performing assets | 405 | 3 | ||||||
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| |||||
Total othernon-performing assets | 13,912 | 18,870 | ||||||
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| |||||
Totalnon-performing assets | 70,377 | $ | 63,567 | |||||
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| |||||
Allowance for loan losses tonon-performing loans | 195.15 | % | 246.70 | % | ||||
Non-performing loans to total loans | 0.52 | 0.43 | ||||||
Non-performing assets to total assets | 0.47 | 0.44 |
As of June 30, 2019 | As of December 31, 2018 | |||||||
(Dollars in thousands) | ||||||||
Non-accrual loans | $ | 52,841 | $ | 47,083 | ||||
Loans past due 90 days or more (principal or interest payments) | 9,961 | 17,159 | ||||||
Total non-performing loans | 62,802 | 64,242 | ||||||
Other non-performing assets | ||||||||
Foreclosed assets held for sale, net | 13,734 | 13,236 | ||||||
Other non-performing assets | 947 | 497 | ||||||
Total other non-performing assets | 14,681 | 13,733 | ||||||
Total non-performing assets | 77,483 | $ | 77,975 | |||||
Allowance for loan losses to non-performing loans | 168.89 | % | 169.35 | % | ||||
Non-performing loans to total loans | 0.57 | 0.58 | ||||||
Non-performing assets to total assets | 0.51 | 0.51 |
A loan modification that might not otherwise be considered may be granted resulting in classification as a TDR. These loans can involve loans remaining on
2018.
As of September 30, 2018 | As of December 31, 2017 | |||||||
Real estate: | (In thousands) | |||||||
Commercial real estate loans | ||||||||
Non-farm/non-residential | $ | 5,858 | $ | 9,766 | ||||
Construction/land development | 3,539 | 5,920 | ||||||
Agricultural | 155 | — | ||||||
Residential real estate loans | ||||||||
Residential1-4 family | 3,885 | 2,654 | ||||||
Multifamily residential | 70 | 527 | ||||||
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Total foreclosed assets held for sale | $ | 13,507 | $ | 18,867 | ||||
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|
As of June 30, 2019 | As of December 31, 2018 | |||||||
(In thousands) | ||||||||
Real estate: | ||||||||
Commercial real estate loans | ||||||||
Non-farm/non-residential | $ | 3,929 | $ | 5,555 | ||||
Construction/land development | 5,673 | 3,534 | ||||||
Agricultural | — | — | ||||||
Residential real estate loans | ||||||||
Residential 1-4 family | 4,132 | 4,142 | ||||||
Multifamily residential | — | 5 | ||||||
Total foreclosed assets held for sale | $ | 13,734 | $ | 13,236 | ||||
We evaluated loans purchased in conjunction with our historical acquisitions for impairment in accordance with the provisions of FASB ASC Topic
2018:
As of September 30, 2018 | As of December 31, 2017 | |||||||
Real estate: | (In thousands) | |||||||
Commercial real estate loans | ||||||||
Non-farm/non-residential | $ | 11,223 | $ | 9,600 | ||||
Construction/land development | 4,966 | 5,011 | ||||||
Agricultural | 30 | 19 | ||||||
Residential real estate loans | ||||||||
Residential1-4 family | 14,312 | 14,437 | ||||||
Multifamily residential | 983 | 153 | ||||||
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| |||||
Total real estate | 31,514 | 29,220 | ||||||
Consumer | 208 | 145 | ||||||
Commercial and industrial | 4,443 | 4,584 | ||||||
Agricultural | 32 | 54 | ||||||
Other | 1 | 29 | ||||||
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Totalnon-accrual loans | $ | 36,198 | $ | 34,032 | ||||
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|
As of June 30, 2019 | As of December 31, 2018 | |||||||
(In thousands) | ||||||||
Real estate: | ||||||||
Commercial real estate loans | ||||||||
Non-farm/non-residential | $ | 18,947 | $ | 15,031 | ||||
Construction/land development | 2,266 | 5,280 | ||||||
Agricultural | 381 | 20 | ||||||
Residential real estate loans | ||||||||
Residential 1-4 family | 22,227 | 17,384 | ||||||
Multifamily residential | 1,155 | 972 | ||||||
Total real estate | 44,976 | 38,687 | ||||||
Consumer | 1,907 | 2,912 | ||||||
Commercial and industrial | 5,926 | 5,451 | ||||||
Agricultural | 31 | 32 | ||||||
Other | 1 | 1 | ||||||
Total non-accrual loans | $ | 52,841 | $ | 47,083 | ||||
2018:
As of September 30, 2018 | As of December 31, 2017 | |||||||
Real estate: | (In thousands) | |||||||
Commercial real estate loans | ||||||||
Non-farm/non-residential | $ | 11,405 | $ | 3,119 | ||||
Construction/land development | 3,551 | 3,247 | ||||||
Agricultural | — | — | ||||||
Residential real estate loans | ||||||||
Residential1-4 family | 1,509 | 2,175 | ||||||
Multifamily residential | — | 100 | ||||||
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| |||||
Total real estate | 16,465 | 8,641 | ||||||
Consumer | 1,796 | 26 | ||||||
Commercial and industrial | 2,006 | 1,944 | ||||||
Agricultural and other | — | 54 | ||||||
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| |||||
Total loans accruing past due 90 days or more | $ | 20,267 | $ | 10,665 | ||||
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|
As of June 30, 2019 | As of December 31, 2018 | |||||||
(In thousands) | ||||||||
Real estate: | ||||||||
Commercial real estate loans | ||||||||
Non-farm/non-residential | $ | 6,633 | $ | 9,679 | ||||
Construction/land development | 1,546 | 3,481 | ||||||
Agricultural | — | — | ||||||
Residential real estate loans | ||||||||
Residential 1-4 family | 821 | 1,753 | ||||||
Multifamily residential | — | — | ||||||
Total real estate | 9,000 | 14,913 | ||||||
Consumer | 574 | 720 | ||||||
Commercial and industrial | 387 | 1,526 | ||||||
Agricultural and other | — | — | ||||||
Total loans accruing past due 90 days or more | $ | 9,961 | $ | 17,159 | ||||
annually on these loans.
Hurricanelossesloss as of SeptemberJune 30, 20182019 and December 31, 20172018 was significantly impacted by Hurricane Michael, which made landfall in the Florida Panhandle as a Category 4 hurricane during the fourth quarter of 2018, and somewhat impacted by Hurricane Irma, which made initial landfall in the Florida Keys and a second landfall just south of Naples, Florida, as a Category 4 hurricane on September 10,during the third quarter of 2017. As of December 31, 2018, management reevaluated the storm-related allowance for Hurricane Irma. Based on initial assessments ofthis analysis, management determined a $2.9 million storm-related allowance was still necessary. The Company’s management also performed an analysis on the potential credit impact and damage to the approximately $2.41 billionloans with collateral in legacy loans receivable we havecounties in the disaster area, the Company establishedFlorida Panhandle which were impacted by Hurricane Michael. Based on this analysis, management determined a $32.9$20.4 million storm-related provision was necessary. This amount was calculated by taking a 1.0% to 6.0% allocation on the loans in the impacted counties. The counties that experienced the most damage were assigned a 6.0% allocation. After establishing the storm-related provision for loan losses as ofHurricane Michael and adjusting the allowance for Hurricane Irma, the storm-related allowance was $23.2 million and $23.3 million at June 30, 2019 and December 31, 2017.2018, respectively. As of SeptemberJune 30, 2018,2019, charge-offs of $2.5$2.6 million have been taken against the storm-related provisionallowance for loan losses. Due to the uncertainty that still exists as to the timing of the full recovery of the disaster area, we believe that the storm-related provision recorded as of September 30, 2018 is appropriate.decreasedincreased to $2.5$2.3 million for the three months ended SeptemberJune 30, 2018,2019, compared to $4.4$2.1 million for the same period in 2017.2018. Total charge-offs decreasedincreased to $7.2$5.7 million for the ninesix months ended SeptemberJune 30, 2018,2019, compared to $10.5$4.7 million for the same period in 2017.2018. Total recoveries increaseddecreased to $1.2 million$663,000 for the three months ended SeptemberJune 30, 2018,2019, compared to $883,000$714,000 for the same period in 2017.2018. Total recoveries remained flat at $2.8$1.6 million for the ninesix months ended SeptemberJune 30, 20182019 and 2017.2018. For the three months ended SeptemberJune 30, 2018,2019, net charge-offs were $849,000$983,000 for Arkansas, $470,000$597,000 for Florida, $6,000$43,000 for AlabamaSPF and zero for SPF and Centennial CFG, equalingwhile Alabama had $7,000 in net recoveries. These equal a net$1.3$1.6 million. For the ninesix months ended SeptemberJune 30, 2018,2019, net charge-offs were $2.8$1.9 million for Arkansas, $1.5$2.1 million for Florida, $123,000$43,000 for AlabamaSPF and zero for SPF and Centennial CFG, equalingwhile Alabama had $15,000 in net recoveries. These equal a net$4.4$4.1 million. While the 20182019 charge-offs and recoveries consisted of many relationships, there were no individual relationships consisting of charge-offs greater than $1.0 million.
2018.
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Balance, beginning of period | $ | 111,516 | $ | 80,138 | $ | 110,266 | $ | 80,002 | ||||||||
Loans charged off | ||||||||||||||||
Real estate: | ||||||||||||||||
Commercial real estate loans: | ||||||||||||||||
Non-farm/non-residential | 144 | 796 | 981 | 2,324 | ||||||||||||
Construction/land development | 337 | 182 | 399 | 508 | ||||||||||||
Agricultural | — | — | — | 127 | ||||||||||||
Residential real estate loans: | ||||||||||||||||
Residential1-4 family | 608 | 309 | 2,339 | 2,512 | ||||||||||||
Multifamily residential | — | — | — | 85 | ||||||||||||
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| |||||||||
Total real estate | 1,089 | 1,287 | 3,719 | 5,556 | ||||||||||||
Consumer | 15 | 14 | 73 | 158 | ||||||||||||
Commercial and industrial | 744 | 2,280 | 1,816 | 3,059 | ||||||||||||
Agricultural | — | — | — | — | ||||||||||||
Other | 653 | 843 | 1,565 | 1,762 | ||||||||||||
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|
|
|
| |||||||||
Total loans charged off | 2,501 | 4,424 | 7,173 | 10,535 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Recoveries of loans previously charged off | ||||||||||||||||
Real estate: | ||||||||||||||||
Commercial real estate loans: | ||||||||||||||||
Non-farm/non-residential | 195 | 278 | 383 | 988 | ||||||||||||
Construction/land development | 90 | 85 | 209 | 312 | ||||||||||||
Agricultural | — | — | — | — | ||||||||||||
Residential real estate loans: | ||||||||||||||||
Residential1-4 family | 307 | 188 | 801 | 430 | ||||||||||||
Multifamily residential | 2 | 38 | 43 | 50 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total real estate | 594 | 589 | 1,436 | 1,780 | ||||||||||||
Consumer | 108 | 25 | 168 | 91 | ||||||||||||
Commercial and industrial | 251 | 140 | 568 | 392 | ||||||||||||
Agricultural | — | — | — | — | ||||||||||||
Other | 223 | 129 | 604 | 566 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total recoveries | 1,176 | 883 | 2,776 | 2,829 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net loans charged off (recovered) | 1,325 | 3,541 | 4,397 | 7,706 | ||||||||||||
Provision for loan losses | — | 35,023 | 4,322 | 39,324 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Balance, September 30 | $ | 110,191 | $ | 111,620 | $ | 110,191 | $ | 111,620 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net charge-offs (recoveries) to average loans receivable | 0.05 | % | 0.18 | % | 0.06 | % | 0.13 | % | ||||||||
Allowance for loan losses to total loans | 1.02 | 1.09 | 1.02 | 1.09 | ||||||||||||
Allowance for loan losses to net charge-offs (recoveries) | 2,096 | 795 | 1,874 | 1,083 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Balance, beginning of period | $ | 106,357 | $ | 110,212 | $ | 108,791 | $ | 110,266 | ||||||||
Loans charged off | ||||||||||||||||
Real estate: | ||||||||||||||||
Commercial real estate loans: | ||||||||||||||||
Non-farm/non-residential | 1,163 | 390 | 1,502 | 837 | ||||||||||||
Construction/land development | 26 | 54 | 1,312 | 62 | ||||||||||||
Agricultural | — | — | — | — | ||||||||||||
Residential real estate loans: | — | |||||||||||||||
Residential 1-4 family | 125 | 952 | 661 | 1,731 | ||||||||||||
Multifamily residential | — | — | — | — | ||||||||||||
Total real estate | 1,314 | 1,396 | 3,475 | 2,630 | ||||||||||||
Consumer | 163 | 43 | 202 | 58 | ||||||||||||
Commercial and industrial | 305 | 258 | 1,009 | 1,072 | ||||||||||||
Agricultural | — | — | — | — | ||||||||||||
Other | 497 | 435 | 984 | 912 | ||||||||||||
Total loans charged off | 2,279 | 2,132 | 5,670 | 4,672 | ||||||||||||
Recoveries of loans previously charged off | ||||||||||||||||
Real estate: | ||||||||||||||||
Commercial real estate loans: | ||||||||||||||||
Non-farm/non-residential | 13 | 87 | 204 | 188 | ||||||||||||
Construction/land development | 95 | 89 | 118 | 119 | ||||||||||||
Agricultural | — | — | — | — | ||||||||||||
Residential real estate loans: | ||||||||||||||||
Residential 1-4 family | 149 | 167 | 496 | 494 | ||||||||||||
Multifamily residential | 3 | 7 | 8 | 41 | ||||||||||||
Total real estate | 260 | 350 | 826 | 842 | ||||||||||||
Consumer | 17 | 33 | 37 | 60 | ||||||||||||
Commercial and industrial | 222 | 219 | 404 | 317 | ||||||||||||
Agricultural | — | — | — | — | ||||||||||||
Other | 164 | 112 | 353 | 381 | ||||||||||||
Total recoveries | 663 | 714 | 1,620 | 1,600 | ||||||||||||
Net loans charged off (recovered) | 1,616 | 1,418 | 4,050 | 3,072 | ||||||||||||
Provision for loan losses | 1,325 | 2,722 | 1,325 | 4,322 | ||||||||||||
Balance, June 30 | $ | 106,066 | $ | 111,516 | $ | 106,066 | $ | 111,516 | ||||||||
Net charge-offs (recoveries) to average loans receivable | 0.06 | % | 0.05 | % | 0.07 | % | 0.06 | % | ||||||||
Allowance for loan losses to total loans | 0.96 | 1.02 | 0.96 | 1.02 | ||||||||||||
Allowance for loan losses to net charge-offs (recoveries) | 1,636 | 1,961 | 1,299 | 1,800 |
2018.
As of September 30, 2018 | As of December 31, 2017 | |||||||||||||||
Allowance Amount | % of loans (1) | Allowance Amount | % of loans (1) | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Real estate: | ||||||||||||||||
Commercial real estate loans: | ||||||||||||||||
Non-farm/non-residential | $ | 44,350 | 43.3 | % | $ | 42,893 | 44.5 | % | ||||||||
Construction/land development | 19,014 | 14.3 | 20,343 | 16.4 | ||||||||||||
Agricultural | 1,003 | 0.7 | 1,046 | 0.8 | ||||||||||||
Residential real estate loans: | ||||||||||||||||
Residential1-4 family | 19,606 | 18.3 | 21,370 | 19.1 | ||||||||||||
Multifamily residential | 4,493 | 5.6 | 3,136 | 4.3 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total real estate | 88,466 | 82.2 | 88,788 | 85.1 | ||||||||||||
Consumer | 632 | 4.0 | 462 | 0.4 | ||||||||||||
Commercial and industrial | 13,777 | 12.0 | 15,292 | 12.6 | ||||||||||||
Agricultural | 2,854 | 0.5 | 2,692 | 0.5 | ||||||||||||
Other | 174 | 1.3 | 180 | 1.4 | ||||||||||||
Unallocated | 4,288 | — | 2,852 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total allowance for loan losses | $ | 110,191 | 100.0 | % | $ | 110,266 | 100.0 | % | ||||||||
|
|
|
|
|
|
|
|
As of June 30, 2019 | As of December 31, 2018 | |||||||||||||||
Allowance Amount | % of loans (1) | Allowance Amount | % of loans (1) | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Real estate: | ||||||||||||||||
Commercial real estate loans: | ||||||||||||||||
Non-farm/non-residential | $ | 38,010 | 40.7 | % | $ | 41,721 | 43.4 | % | ||||||||
Construction/land development | 24,258 | 17.5 | 21,302 | 14.0 | ||||||||||||
Agricultural | 657 | 0.8 | 615 | 0.7 | ||||||||||||
Residential real estate loans: | ||||||||||||||||
Residential 1-4 family | 21,001 | 16.8 | 22,547 | 17.8 | ||||||||||||
Multifamily residential | 3,270 | 4.7 | 4,187 | 5.1 | ||||||||||||
Total real estate | 87,196 | 80.5 | 90,372 | 81.0 | ||||||||||||
Consumer | 1,429 | 4.1 | 1,153 | 4.0 | ||||||||||||
Commercial and industrial | 14,853 | 13.7 | 14,981 | 13.3 | ||||||||||||
Agricultural | 2,477 | 0.7 | 2,175 | 0.4 | ||||||||||||
Other | 111 | 1.0 | 110 | 1.3 | ||||||||||||
Unallocated | — | — | — | — | ||||||||||||
Total allowance for loan losses | $ | 106,066 | 100.0 | % | $ | 108,791 | 100.0 | % | ||||||||
(1) | Percentage of loans in each category to total loans receivable. |
2019.3.32.4 years as of SeptemberJune 30, 2018.September 30, 2018 and December 31, 2017,2018, we had $199.3$192.8 million and $224.8 million of securities, respectively.$199.3$192.8 million ofSeptember 30,December 31, 2018, $3.6$3.3 million were invested in U.S. Government-sponsored enterprises, $60.4$57.3 million were invested in mortgage-backed securities and $135.3$132.2 million were invested in state and political subdivisions. Of the $224.8 million
Securities$1.74$2.05 billion and $1.66$1.79 billion as of SeptemberJune 30, 20182019 and December 31, 2017,2018, respectively.
2018. Also, we had approximately $33.7 million, or 1.6%, invested in other securities as of June 30, 2019, compared to $34.3 million, or 1.9% of our
2018.
September 30, 2018 | December 31, 2017 | |||||||
(In thousands) | ||||||||
Time Deposits | $ | 84,943 | $ | 60,022 | ||||
CDARS | 109 | 53,588 | ||||||
Insured Cash Sweep and Other Transaction Accounts | 506,540 | 915,060 | ||||||
|
|
|
| |||||
Total Brokered Deposits | $ | 591,592 | $ | 1,028,670 | ||||
|
|
|
|
The Economic Growth, Regulatory Relief and Consumer Protection Act enacted in May 2018, provides that most reciprocal deposits are no longer treated as brokered deposits. As a result of this new law, our brokered deposits as of September 30, 2018 were approximately $421.3 million lower than they would otherwise have been.
June 30, 2019 | December 31, 2018 | |||||||
(In thousands) | ||||||||
Time Deposits | $ | 122,165 | $ | 125,610 | ||||
CDARS | 109 | 109 | ||||||
Insured Cash Sweep and Other Transaction Accounts | 519,593 | 534,508 | ||||||
Total Brokered Deposits | $ | 641,867 | $ | 660,228 | ||||
2018.
Three Months Ended September 30, | ||||||||||||||||
2018 | 2017 | |||||||||||||||
Average Amount | Average Rate Paid | Average Amount | Average Rate Paid | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Non-interest-bearing transaction accounts | $ | 2,512,690 | — | % | $ | 1,924,933 | — | % | ||||||||
Interest-bearing transaction accounts | 5,758,161 | 1.05 | 3,973,270 | 0.56 | ||||||||||||
Savings deposits | 648,550 | 0.19 | 539,515 | 0.10 | ||||||||||||
Time deposits: | ||||||||||||||||
$100,000 or more | 1,183,503 | 1.63 | 989,697 | 0.89 | ||||||||||||
Other time deposits | 477,626 | 0.80 | 454,965 | 0.48 | ||||||||||||
|
|
|
| |||||||||||||
Total | $ | 10,580,530 | 0.80 | % | $ | 7,882,380 | 0.43 | % | ||||||||
|
|
|
|
Nine Months Ended September 30, | ||||||||||||||||
2018 | 2017 | |||||||||||||||
Average Amount | Average Rate Paid | Average Amount | Average Rate Paid | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Non-interest-bearing transaction accounts | $ | 2,464,032 | — | % | $ | 1,847,843 | — | % | ||||||||
Interest-bearing transaction accounts | 5,767,190 | 0.91 | 3,792,388 | 0.46 | ||||||||||||
Savings deposits | 655,299 | 0.19 | 523,644 | 0.09 | ||||||||||||
Time deposits: | ||||||||||||||||
$100,000 or more | 1,101,628 | 1.40 | 949,493 | 0.82 | ||||||||||||
Other time deposits | 494,357 | 0.69 | 465,890 | 0.44 | ||||||||||||
|
|
|
| |||||||||||||
Total | $ | 10,482,506 | 0.69 | % | $ | 7,579,258 | 0.37 | % | ||||||||
|
|
|
|
Three Months Ended June 30, | ||||||||||||||||
2019 | 2018 | |||||||||||||||
Average Amount | Average Rate Paid | Average Amount | Average Rate Paid | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Non-interest-bearing transaction accounts | $ | 2,553 060 | — | % | $ | 2,496,701 | — | % | ||||||||
Interest-bearing transaction accounts | 6,045,890 | 1.34 | 5,793,026 | 0.91 | ||||||||||||
Savings deposits | 631,793 | 0.27 | 658,178 | 0.20 | ||||||||||||
Time deposits: | ||||||||||||||||
$100,000 or more | 1,473,372 | 2.08 | 1,116,669 | 1.38 | ||||||||||||
Other time deposits | 469,948 | 1.24 | 494,684 | 0.68 | ||||||||||||
Total | $ | 11,174,063 | 1.07 | % | $ | 10,559,258 | 0.69 | % | ||||||||
Six Months Ended June 30, | ||||||||||||||||
2019 | 2018 | |||||||||||||||
Average Amount | Average Rate Paid | Average Amount | Average Rate Paid | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Non-interest-bearing transaction accounts | $ | 2,496,604 | — | % | $ | 2,439,299 | — | % | ||||||||
Interest-bearing transaction accounts | 6,008,963 | 1.32 | 5,771,779 | 0.84 | ||||||||||||
Savings deposits | 628,549 | 0.26 | 658,730 | 0.19 | ||||||||||||
Time deposits: | ||||||||||||||||
$100,000 or more | 1,454,874 | 2.06 | 1,060,012 | 1.27 | ||||||||||||
Other time deposits | 468,583 | 1.16 | 502,861 | 0.63 | ||||||||||||
Total | $ | 11,057,573 | 1.05 | % | $ | 10,432,681 | 0.64 | % | ||||||||
2019.
respectively.
During 2017, we acquired $12.5 million in trust preferred securities with a fair value of $9.8 million from the Stonegate acquisition. The difference between the fair value purchased of $9.8 million and the $12.5 million face amount will be amortized into interest expense over the remaining life of the debentures. The associated subordinated debentures are redeemable, in whole or in part, prior to maturity at our option on a quarterly basis when interest is due and payable and in whole at any time within 90 days following the occurrence and continuation of certain changes in the tax treatment or capital treatment of the debentures.
On April 3, 2017, the Company completed an underwritten public offering of $300.0 million in aggregate principal amount of its 5.625%Fixed-to-Floating Rate Subordinated Notes due 2027 (the “Notes”). The Notes were issued at 99.997% of par, resulting in net proceeds, after underwriting discounts and issuance costs, of approximately $297.0 million. The Notes are unsecured, subordinated debt obligations of the Company and will mature on April 15, 2027. The Notes qualify as Tier 2 capital for regulatory purposes.
2019.
2019.
On April 3, 2017 the Company completed an underwritten public offering
2018.
As of September 30, 2018 | As of December 31, 2017 | |||||||
(Dollars in thousands) | ||||||||
Tier 1 capital | ||||||||
Stockholders’ equity | $ | 2,341,026 | $ | 2,204,291 | ||||
Goodwill and core deposit intangibles, net | (1,002,434 | ) | (966,890 | ) | ||||
Unrealized (gain) loss onavailable-for-sale securities | 30,721 | 3,421 | ||||||
Deferred tax assets | — | — | ||||||
|
|
|
| |||||
Total common equity Tier 1 capital | 1,369,313 | 1,240,822 | ||||||
Qualifying trust preferred securities | 70,805 | 70,698 | ||||||
|
|
|
| |||||
Total Tier 1 capital | 1,440,118 | 1,311,520 | ||||||
|
|
|
| |||||
Tier 2 capital | ||||||||
Qualifying subordinated notes | 297,791 | 297,332 | ||||||
Qualifying allowance for loan losses | 110,191 | 110,266 | ||||||
|
|
|
| |||||
Total Tier 2 capital | 407,982 | 407,598 | ||||||
|
|
|
| |||||
Total risk-based capital | $ | 1,848,100 | $ | 1,719,118 | ||||
|
|
|
| |||||
Average total assets for leverage ratio | $ | 13,878,497 | $ | 13,147,046 | ||||
|
|
|
| |||||
Risk weighted assets | $ | 11,752,120 | $ | 11,424,963 | ||||
|
|
|
| |||||
Ratios at end of period | ||||||||
Common equity Tier 1 capital | 11.65 | % | 10.86 | % | ||||
Leverage ratio | 10.38 | 9.98 | ||||||
Tier 1 risk-based capital | 12.25 | 11.48 | ||||||
Total risk-based capital | 15.73 | 15.05 | ||||||
Minimum guidelines – Basel IIIphase-in schedule | ||||||||
Common equity Tier 1 capital | 6.38 | % | 5.75 | % | ||||
Leverage ratio | 4.00 | 4.00 | ||||||
Tier 1 risk-based capital | 7.88 | 7.25 | ||||||
Total risk-based capital | 9.88 | 9.25 | ||||||
Minimum guidelines – Basel III fullyphased-in | ||||||||
Common equity Tier 1 capital | 7.00 | % | 7.00 | % | ||||
Leverage ratio | 4.00 | 4.00 | ||||||
Tier 1 risk-based capital | 8.50 | 8.50 | ||||||
Total risk-based capital | 10.50 | 10.50 | ||||||
Well-capitalized guidelines | ||||||||
Common equity Tier 1 capital | 6.50 | % | 6.50 | % | ||||
Leverage ratio | 5.00 | 5.00 | ||||||
Tier 1 risk-based capital | 8.00 | 8.00 | ||||||
Total risk-based capital | 10.00 | 10.00 |
As of June 30, 2019 | As of December 31, 2018 | |||||||
(Dollars in thousands) | ||||||||
Tier 1 capital | ||||||||
Stockholders’ equity | $ | 2,421,406 | $ | 2,349,886 | ||||
Goodwill and core deposit intangibles, net | (997,706 | ) | (1,000,842 | ) | ||||
Unrealized (gain) loss on available-for-sale securities | (14,768 | ) | 13,815 | |||||
Deferred tax assets | — | — | ||||||
Total common equity Tier 1 capital | 1,408,932 | 1,362,859 | ||||||
Qualifying trust preferred securities | 70,912 | 70,841 | ||||||
Total Tier 1 capital | 1,479,844 | 1,433,700 | ||||||
Tier 2 capital | ||||||||
Qualifying subordinated notes | 298,258 | 297,949 | ||||||
Qualifying allowance for loan losses | 106,066 | 108,791 | ||||||
Total Tier 2 capital | 404,324 | 406,740 | ||||||
Total risk-based capital | $ | 1,884,168 | $ | 1,840,440 | ||||
Average total assets for leverage ratio | $ | 14,100,894 | $ | 13,838,137 | ||||
Risk weighted assets | $ | 12,177,760 | $ | 12,022,576 | ||||
Ratios at end of period | ||||||||
Common equity Tier 1 capital | 11.57 | % | 11.34 | % | ||||
Leverage ratio | 10.49 | 10.36 | ||||||
Tier 1 risk-based capital | 12.15 | 11.93 | ||||||
Total risk-based capital | 15.47 | 15.31 | ||||||
Minimum guidelines – Basel III phase-in schedule | ||||||||
Common equity Tier 1 capital | 7.00 | % | 6.375 | % | ||||
Leverage ratio | 4.00 | 4.00 | ||||||
Tier 1 risk-based capital | 8.50 | 7.875 | ||||||
Total risk-based capital | 10.50 | 9.875 | ||||||
Minimum guidelines – Basel III fully phased-in | ||||||||
Common equity Tier 1 capital | 7.00 | % | 7.00 | % | ||||
Leverage ratio | 4.00 | 4.00 | ||||||
Tier 1 risk-based capital | 8.50 | 8.50 | ||||||
Total risk-based capital | 10.50 | 10.50 | ||||||
Well-capitalized guidelines | ||||||||
Common equity Tier 1 capital | 6.50 | % | 6.50 | % | ||||
Leverage ratio | 5.00 | 5.00 | ||||||
Tier 1 risk-based capital | 8.00 | 8.00 | ||||||
Total risk-based capital | 10.00 | 10.00 |
GAAP.
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
GAAP net income available to common shareholders (A) | $ | 80,284 | $ | 14,821 | $ | 229,373 | $ | 111,774 | ||||||||
Adjustments: | ||||||||||||||||
Gain on acquisitions | — | — | — | (3,807 | ) | |||||||||||
Merger expenses | — | 18,227 | — | 25,743 | ||||||||||||
Hurricane expenses(2) | — | 33,445 | — | 33,445 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total adjustments | — | 51,672 | — | 55,381 | ||||||||||||
Tax-effect of adjustments(1) | — | 20,045 | — | 22,626 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Adjustmentsafter-tax (B) | — | 31,627 | — | 32,755 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Earnings, as adjusted (C) | $ | 80,284 | $ | 46,448 | $ | 229,373 | $ | 144,529 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Average diluted shares outstanding (D) | 174,867 | 144,987 | 174,394 | 143,839 | ||||||||||||
GAAP diluted earnings per share: A/D | $ | 0.46 | $ | 0.10 | $ | 1.32 | $ | 0.78 | ||||||||
Adjustmentsafter-tax B/D | — | 0.22 | — | 0.22 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Diluted earnings per common share, as adjusted: C/D | $ | 0.46 | $ | 0.32 | $ | 1.32 | $ | 1.00 | ||||||||
|
|
|
|
|
|
|
|
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
GAAP net income available to common shareholders (A) | $ | 72,164 | $ | 76,025 | $ | 143,514 | $ | 149,089 | ||||||||
Adjustments: | ||||||||||||||||
Special dividend from equity investment | — | — | (2,134 | ) | — | |||||||||||
Hurricane expenses | — | — | 897 | — | ||||||||||||
Outsourced special project expense | — | — | 900 | — | ||||||||||||
Total adjustments | — | — | (337 | ) | — | |||||||||||
Tax-effect of adjustments(1) | — | ��� | (88 | ) | — | |||||||||||
Adjustments after-tax (B) | — | — | (249 | ) | — | |||||||||||
Earnings, as adjusted (C) | 72,164 | $ | 76,025 | $ | 143,265 | $ | 149,089 | |||||||||
Average diluted shares outstanding (D) | 167,791 | 173,936 | 168,686 | 174,168 | ||||||||||||
GAAP diluted earnings per share: A/D | $ | 0.43 | $ | 0.44 | $ | 0.85 | $ | 0.86 | ||||||||
Adjustments after-tax B/D | — | — | — | — | ||||||||||||
Diluted earnings per common share, as adjusted: C/D | $ | 0.43 | $ | 0.44 | $ | 0.85 | $ | 0.86 | ||||||||
(1) | Effective tax rate of six-month periods ended |
|
As of September 30, 2018 | As of December 31, 2017 | |||||||
(In thousands, except per share data) | ||||||||
Book value per share: A/B | $ | 13.44 | $ | 12.70 | ||||
Tangible book value per share:(A-C-D)/B | 7.68 | 7.07 | ||||||
(A) Total equity | $ | 2,341,026 | $ | 2,204,291 | ||||
(B) Shares outstanding | 174,135 | 173,633 | ||||||
(C) Goodwill | $ | 958,408 | $ | 927,949 | ||||
(D) Core deposit and other intangibles | 44,484 | 49,351 |
As of June 30, 2019 | As of December 31, 2018 | |||||||
(In thousands, except per share data) | ||||||||
Book value per share: A/B | $ | 14.46 | $ | 13.76 | ||||
Tangible book value per share: (A-C-D)/B | 8.50 | 7.90 | ||||||
(A) Total equity | $ | 2,421,406 | $ | 2,349,886 | ||||
(B) Shares outstanding | 167,466 | 170,720 | ||||||
(C) Goodwill | $ | 958,408 | $ | 958,408 | ||||
(D) Core deposit and other intangibles | 39,723 | 42,896 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Return on average assets: A/I | 2.14 | % | 0.54 | % | 2.12 | % | 1.41 | % | ||||||||
Return on average assets excluding tax effect of TCJA (A-H)/I | 1.78 | 0.54 | 1.77 | 1.41 | ||||||||||||
Return on average assets excluding intangible amortization: (A+C)/(I-J) | 2.33 | 0.59 | 2.31 | 1.49 | ||||||||||||
Return on average assets excluding gain on acquisitions, merger expenses and hurricane expenses: (A+F)/I | 2.14 | 1.70 | 2.12 | 1.82 | ||||||||||||
Return on average assets excluding intangible amortization, provision for loan losses, gain on acquisitions, merger expenses, hurricane expenses and income taxes (ROA, as adjusted): (A+B+D+E+G)/(I-J) | 3.07 | 2.94 | 3.09 | 3.14 | ||||||||||||
(A) Net income | $ | 80,284 | $ | 14,821 | $ | 229,373 | $ | 111,774 | ||||||||
(B) Intangible amortization | 1,617 | 906 | 4,867 | 2,576 | ||||||||||||
(C) Intangible amortization after-tax | 1,194 | 551 | 3,595 | 1,566 | ||||||||||||
(D) Provision for loan losses excluding hurricane provision | $ | — | $ | 2,134 | $ | 4,322 | $ | 6,435 | ||||||||
(E) Total adjustments | — | 51,672 | — | 55,381 | ||||||||||||
(F) Adjustments after-tax | — | 31,627 | — | 32,755 | ||||||||||||
(G) Income tax expense excluding effect of tax rate change | 25,350 | 7,536 | 73,630 | 63,192 | ||||||||||||
(H) Tax effect of TCJA | 13,395 | — | 37,952 | — | ||||||||||||
(I) Average assets | 14,880,931 | 10,853,559 | 14,475,630 | 10,617,917 | ||||||||||||
(J) Average goodwill, core deposits & other intangible assets | 1,001,843 | 462,799 | 984,639 | 440,465 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Return on average assets: A/D | 1.92 | % | 2.13 | % | 1.92 | % | 2.11 | % | ||||||||
Return on average assets excluding intangible amortization: B/(D-E) | 2.09 | 2.32 | 2.09 | 2.30 | ||||||||||||
Return on average assets excluding special dividend from equity investment, merger expenses, hurricane expenses & outsourced special project expense: (ROA, as adjusted): (A+C)/D | 1.92 | 2.13 | 1.91 | 2.11 | ||||||||||||
(A) Net income | $ | 72,164 | $ | 76,025 | $ | 143,514 | $ | 149,089 | ||||||||
Intangible amortization after-tax | 1,172 | 1,200 | 2,344 | 2,401 | ||||||||||||
(B) Earnings excluding intangible amortization | $ | 73,336 | $ | 77,225 | $ | 145,858 | $ | 151,490 | ||||||||
(C) Adjustments after-tax | $ | — | $ | — | $ | (249 | ) | $ | — | |||||||
(D) Average assets | 15,098,600 | 14,304,483 | 15,089,189 | 14,269,620 | ||||||||||||
(E) Average goodwill, core deposits and other intangible assets | 998,898 | 975,345 | 999,692 | 975,895 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Return on average equity: A/E | 13.74 | % | 3.88 | % | 13.56 | % | 10.33 | % | ||||||||
Return on average equity excluding tax effect ofTCJA (A-C)/E | 11.45 | — | 11.32 | — | ||||||||||||
Return on average tangible equity excluding intangible amortization:B/(E-F) | 24.56 | 5.80 | 24.39 | 15.06 | ||||||||||||
Return on average equity excluding gain on acquisitions, merger expenses and hurricane expenses: (A+D)/E | 13.74 | 12.17 | 13.56 | 13.36 | ||||||||||||
(A) Net income | $ | 80,284 | $ | 14,821 | $ | 229,373 | $ | 111,774 | ||||||||
(B) Earnings excluding intangible amortization | 81,478 | 15,372 | 232,968 | 113,340 | ||||||||||||
(C) Tax effect of TCJA | 13,395 | — | 37,952 | — | ||||||||||||
(D) Adjustments after tax | — | 31,627 | — | 32,755 | ||||||||||||
(E) Average equity | 2,317,930 | 1,513,829 | 2,261,594 | 1,446,740 | ||||||||||||
(F) Average goodwill, core deposits and other intangible assets | 1,001,843 | 462,799 | 984,639 | 440,465 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Return on average equity: A/D | 12.18 | % | 13.54 | % | 12.26 | % | 13.46 | % | ||||||||
Return on average common equity excluding special dividend from equity investment, merger expenses, hurricane expenses & outsourced special project expense: (ROE, as adjusted) ((A+C)/D) | 12.18 | 13.54 | 12.24 | 13.46 | ||||||||||||
Return on average tangible common equity: (A/(D-E)) | 21.01 | 23.90 | 21.26 | 23.92 | ||||||||||||
Return on average tangible equity excluding intangible amortization: B/(D-E) | 21.35 | 24.27 | 21.61 | 24.30 | ||||||||||||
Return on average tangible common equity excluding special dividend from equity investment, hurricane expenses & outsourced special project expense: (ROTCE, as adjusted) ((A+C)/(D-E)) | 21.01 | 23.90 | 21.23 | 23.92 | ||||||||||||
(A) Net income | $ | 72,164 | $ | 76,025 | $ | 143,514 | $ | 149,089 | ||||||||
(B) Earnings excluding intangible amortization | 73,336 | 77,225 | 145,858 | 151,490 | ||||||||||||
(C) Adjustments after-tax | — | — | (249 | ) | — | |||||||||||
(D) Average equity | 2,376,718 | 2,251,412 | 2,360,776 | 2,232,959 | ||||||||||||
(E) Average goodwill, core deposits and other intangible assets | 998,898 | 975,345 | 999,692 | 975,895 |
As of September 30, 2018 | As of December 31, 2017 | |||||||
(Dollars in thousands) | ||||||||
Equity to assets: B/A | 15.70 | % | 15.25 | % | ||||
Tangible equity to tangible assets:(B-C-D)/(A-C-D) | 9.62 | 9.11 | ||||||
(A) Total assets | $ | 14,912,738 | $ | 14,449,760 | ||||
(B) Total equity | 2,341,026 | 2,204,291 | ||||||
(C) Goodwill | 958,408 | 927,949 | ||||||
(D) Core deposit and other intangibles | 44,484 | 49,351 |
As of June 30, 2019 | As of December 31, 2018 | |||||||
(Dollars in thousands) | ||||||||
Equity to assets: B/A | 15.84 | % | 15.36 | % | ||||
Tangible equity to tangible assets: (B-C-D)/(A-C -D) | 9.96 | 9.43 | ||||||
(A) Total assets | $ | 15,287,575 | $ | 15,302,438 | ||||
(B) Total equity | 2,421,406 | 2,349,886 | ||||||
(C) Goodwill | 958,408 | 958,408 | ||||||
(D) Core deposit and other intangibles | 39,723 | 42,896 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Net interest income (A) | $ | 145,910 | $ | 106,769 | $ | 420,731 | $ | 318,936 | ||||||||
Non-interest income (B) | 25,847 | 21,457 | 79,325 | 72,344 | ||||||||||||
Non-interest expense (C) | 66,123 | 70,846 | 192,731 | 176,990 | ||||||||||||
FTE Adjustment (D) | 1,489 | 1,846 | 4,101 | 5,873 | ||||||||||||
Amortization of intangibles (E) | 1,617 | 906 | 4,867 | 2,576 | ||||||||||||
Non-fundamental items: | ||||||||||||||||
Non-interest income: | ||||||||||||||||
Gain on acquisitions | $ | — | $ | — | $ | — | $ | 3,807 | ||||||||
Gain (loss) on OREO, net | 836 | 335 | 2,287 | 849 | ||||||||||||
Gain on sale of SBA loans | 47 | 163 | 491 | 738 | ||||||||||||
Gain (loss) on sale of branches, equipment and other assets, net | (102 | ) | (1,337 | ) | (95 | ) | (962 | ) | ||||||||
Gain (loss) on securities, net | — | 136 | — | 939 | ||||||||||||
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Totalnon-fundamentalnon-interest income (F) | $ | 781 | $ | (703) | $ | 2,683 | $ | 5,371 | ||||||||
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Non-interest expense: | ||||||||||||||||
Merger expenses | $ | — | $ | 18,227 | $ | — | $ | 25,743 | ||||||||
Hurricane damage expense | — | 556 | — | 556 | ||||||||||||
Other expense (1) | — | — | — | 47 | ||||||||||||
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Totalnon-fundamentalnon-interest expense (G) | — | $ | 18,783 | — | $ | 26,346 | ||||||||||
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Efficiency ratio (reported):((C-E)/(A+B+D)) | 37.23 | % | 53.77 | % | 37.26 | % | 43.92 | % | ||||||||
Efficiency ratio, as adjusted(non-GAAP):((C-E-G)/(A+B+D-F)) | 37.40 | 39.12 | 37.46 | 37.79 |
|
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Net interest income (A) | $ | 140,987 | $ | 138,612 | $ | 280,457 | $ | 274,821 | ||||||||
Non-interest income (B) | 23,066 | 27,673 | 46,738 | 53,478 | ||||||||||||
Non-interest expense (C) | 67,624 | 63,228 | 136,681 | 126,608 | ||||||||||||
FTE Adjustment (D) | 1,319 | 1,403 | 2,686 | 2,612 | ||||||||||||
Amortization of intangibles (E) | 1,587 | 1,624 | 3,173 | 3,250 | ||||||||||||
Adjustments: | ||||||||||||||||
Non-interest income: | ||||||||||||||||
Special dividend from equity investments | $ | — | $ | — | $ | 2,134 | $ | — | ||||||||
Gain (loss) on OREO, net | 58 | 1,046 | 264 | 1,451 | ||||||||||||
Gain (loss) on sale of branches, equipment and other assets, net | (129 | ) | — | (50 | ) | 7 | ||||||||||
Total non-interest income adjustments (F) | $ | (71 | ) | $ | 1,046 | $ | 2,348 | $ | 1,458 | |||||||
Non-interest expense: | ||||||||||||||||
Hurricane expenses | $ | — | $ | — | $ | 897 | $ | — | ||||||||
Outsourced special project expense | — | — | 900 | — | ||||||||||||
Total non-interest expense adjustments (G) | $ | — | $ | — | $ | 1,797 | $ | — | ||||||||
Efficiency ratio (reported): ((C-E)/(A+B+D)) | 39.93 | % | 36.74 | % | 40.47 | % | 37.28 | % | ||||||||
Efficiency ratio, as adjusted (non-GAAP): ((C-E-G)/(A+B+D-F)) | 39.92 | 36.97 | 40.21 | 37.44 |
Item 3: | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Liquidity needs can be met from either assets or liabilities. On the asset side, our primary sources of liquidity include cash and due from banks, federal funds sold,SeptemberJune 30, 2018,2019, our cash and cash equivalents were $532.1$557.3 million, or 3.6% of total assets, compared to $635.9$657.9 million, or 4.4%4.3% of total assets, as of December 31, 2017.2018. Our$1.74$2.05 billion and $1.69$1.79 billion as of SeptemberJune 30, 20182019 and December 31, 2017,2018, respectively.
The decrease in investments pledged to secure public deposits is due to the Company increasing the usage of FHLB letters of credit in order to secure public deposits. The Company made this strategic decision to improve the
2019.
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Interest Rate Scenario | Percentage Change from Base | |||
Up | 6.63 | % | ||
Up 100 basis points | 3.69 | |||
Down | ( | ) | ||
Down 200 basis points | (11.65 | ) |
2019.
Interest Rate Sensitivity Period | ||||||||||||||||||||||||||||||||
0-30 Days | 31-90 Days | 91-180 Days | 181-365 Days | 1-2 Years | 2-5 Years | Over 5 Years | Total | |||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||
Earning assets | ||||||||||||||||||||||||||||||||
Interest-bearing deposits due from banks | $ | 323,376 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 323,376 | ||||||||||||||||
Federal funds sold | 500 | — | — | — | — | — | — | 500 | ||||||||||||||||||||||||
Investment securities | 298,914 | 78,759 | 69,288 | 112,483 | 176,612 | 482,712 | 724,928 | 1,943,696 | ||||||||||||||||||||||||
Loans receivable | 3,262,719 | 634,382 | 784,590 | 1,284,728 | 1,698,675 | 2,467,054 | 700,667 | 10,832,815 | ||||||||||||||||||||||||
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Total earning assets | 3,885,509 | 713,141 | 853,878 | 1,397,211 | 1,875,287 | 2,949,766 | 1,425,595 | 13,100,387 | ||||||||||||||||||||||||
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Interest-bearing liabilities | ||||||||||||||||||||||||||||||||
Interest-bearing transaction and savings deposits | 1,115,690 | 503,425 | 755,138 | 1,510,275 | 870,066 | 633,124 | 1,033,233 | 6,420,951 | ||||||||||||||||||||||||
Time deposits | 179,639 | 153,019 | 264,598 | 450,935 | 557,087 | 112,564 | 3,088 | 1,720,930 | ||||||||||||||||||||||||
Securities sold under repurchase agreements | 142,146 | — | — | — | — | — | — | 142,146 | ||||||||||||||||||||||||
FHLB and other borrowed funds | 401,178 | 371,099 | 24 | 444,329 | 143,752 | 3,469 | — | 1,363,851 | ||||||||||||||||||||||||
Subordinated debentures | 70,805 | — | — | — | — | 297,791 | — | 368,596 | ||||||||||||||||||||||||
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Total interest-bearing liabilities | 1,909,458 | 1,027,543 | 1,019,760 | 2,405,539 | 1,570,905 | 1,046,948 | 1,036,321 | 10,016,474 | ||||||||||||||||||||||||
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Interest rate sensitivity gap | $ | 1,976,051 | $ | (314,402 | ) | $ | (165,882 | ) | $ | (1,008,321 | ) | $ | 304,382 | $ | 1,902,818 | $ | 389,274 | $ | 3,083,913 | |||||||||||||
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Cumulative interest rate sensitivity gap | $ | 1,976,051 | $ | 1,661,649 | $ | 1,495,767 | $ | 487,439 | $ | 791,821 | $ | 2,694,639 | $ | 3,083,913 | ||||||||||||||||||
Cumulative rate sensitive assets to rate sensitive liabilities | 203.5 | % | 156.6 | % | 137.8 | % | 107.7 | % | 110.0 | % | 130.0 | % | 130.8 | % | ||||||||||||||||||
Cumulative gap as a % of total earning assets | 15.1 | % | 12.7 | % | 11.4 | % | 3.7 | % | 6.0 | % | 20.6 | % | 23.5 | % |
Item 4: CONTROLS AND PROCEDURES
Interest Rate Sensitivity Period | ||||||||||||||||||||||||||||||||
0-30 Days | 31-90 Days | 91-180 Days | 181-365 Days | 1-2 Years | 2-5 Years | Over 5 Years | Total | |||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||
Earning assets | ||||||||||||||||||||||||||||||||
Interest-bearing deposits due from banks | $ | 373,557 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 373,557 | ||||||||||||||||
Federal funds sold | 1,075 | — | — | — | — | — | — | 1,075 | ||||||||||||||||||||||||
Investment securities | 361,339 | 97,353 | 96,348 | 193,699 | 286,050 | 515,165 | 503,985 | 2,053,939 | ||||||||||||||||||||||||
Loans receivable | 3,519,779 | 649,026 | 859,919 | 1,358,874 | 1,714,032 | 2,307,751 | 643,748 | 11,053,129 | ||||||||||||||||||||||||
Total earning assets | 4,255,750 | 746,379 | 956,267 | 1,552,573 | 2,000,082 | 2,822,916 | 1,147,733 | 13,481,700 | ||||||||||||||||||||||||
Interest-bearing liabilities | ||||||||||||||||||||||||||||||||
Interest-bearing transaction and savings deposits | $ | 1,209,750 | $ | 530,940 | $ | 796,409 | $ | 1,592,819 | $ | 907,804 | $ | 659,732 | $ | 1,076,709 | $ | 6,774,163 | ||||||||||||||||
Time deposits | 193,293 | 178,324 | 669,639 | 580,031 | 256,987 | 119,185 | — | 1,997,459 | ||||||||||||||||||||||||
Securities sold under repurchase agreements | 142,541 | — | — | — | — | — | — | 142,541 | ||||||||||||||||||||||||
FHLB and other borrowed funds | 274,999 | 78,000 | — | 15,000 | 131,447 | — | 400,000 | 899,446 | ||||||||||||||||||||||||
Subordinated debentures | 70,876 | — | — | — | — | 298,294 | — | 369,170 | ||||||||||||||||||||||||
Total interest-bearing liabilities | 1,891,459 | 787,264 | 1,466,048 | 2,187,850 | 1,296,238 | 1,077,211 | 1,476,709 | 10,182,779 | ||||||||||||||||||||||||
Interest rate sensitivity gap | $ | 2,364,291 | $ | (40,885 | ) | $ | (509,781 | ) | $ | (635,277 | ) | $ | 703,844 | $ | 1,745,705 | $ | (328,976 | ) | $ | 3,298,921 | ||||||||||||
Cumulative interest rate sensitivity gap | $ | 2,364,291 | $ | 2,323,406 | $ | 1,813,625 | $ | 1,178,348 | $ | 1,882,192 | $ | 3,627,897 | $ | 3,298,921 | ||||||||||||||||||
Cumulative rate sensitive assets to rate sensitive liabilities | 225.0 | % | 186.7 | % | 143.8 | % | 118.6 | % | 124.7 | % | 141.7 | % | 132.4 | % | ||||||||||||||||||
Cumulative gap as a % of total earning assets | 17.5 | % | 17.2 | % | 13.5 | % | 8.7 | % | 14.0 | % | 26.9 | % | 24.5 | % |
Item 4: | CONTROLS AND PROCEDURES |
Item 1: | Legal Proceedings |
Item 1A: | Risk Factors |
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
In connection with
Item 2: | Unregistered Sales of Equity Securities and Use of Proceeds |
During the three months ended September 30, 2018, the Company utilized a portion of itspreviously approved stock repurchase program, which was last amended and approved by the Board of Directors on February 21, 2018. This programauthorization brought the total amount of authorized theshares to repurchase of 14,752,000 shares of the Company’s common stock.to 9,919,447 shares. The following table sets forth information with respect to purchases made by or on behalf of the Company of shares of the Company’s common stock during the periods indicated:
Period | Number of Shares Purchased | Average Price Paid Per Share Purchased | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs (1) | ||||||||||||
July 1 through July 31, 2018 | 541,700 | $ | 23.02 | 541,700 | 9,036,116 | |||||||||||
August 1 through August 31, 2018 | 565,544 | 23.39 | 565,544 | 8,470,572 | ||||||||||||
September 1 through September 30, 2018 | 106,836 | 22.82 | 106,836 | 8,363,736 | ||||||||||||
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Total | 1,214,080 | 23.18 | 1,214,080 | |||||||||||||
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Period | Number of Shares Purchased | Average Price Paid Per Share Purchased | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs (1) | ||||||||||||
April 1 through April 30, 2019 | 173,684 | $ | 17.74 | 173,684 | 7,029,404 | |||||||||||
May 1 through May 31, 2019 | 410,000 | 18.27 | 410,000 | 6,619,404 | ||||||||||||
June 1 through June 30, 2019 | 116,679 | 17.98 | 116,679 | 6,502,725 | ||||||||||||
Total | 700,363 | 700,373 | ||||||||||||||
(1) | The above described stock repurchase program has no expiration date. |
Item 3: Defaults Upon Senior Securities
Item 3: | Defaults Upon Senior Securities |
Item 4: | Mine Safety Disclosures |
Item 5: | Other Information |
Item 6: | Exhibits |
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Exhibit No. | Description of Exhibit | |||
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3.1 | ||||
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3.2 |
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3.3 | ||||
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3.4 | ||||
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3.5 | ||||
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3.6 | ||||
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3.7 | ||||
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3.8 | ||||
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3.9 | ||||
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3.10 | ||||
3.11 | ||||
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4.1 | ||||
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4.2 | Instruments defining the rights of security holders including indentures. Home BancShares hereby agrees to furnish to the SEC upon request copies of instruments defining the rights of holders of long-term debt of Home BancShares and its consolidated subsidiaries. No issuance of debt exceeds ten percent of the assets of Home BancShares and its subsidiaries on a consolidated basis. | |||
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10.1 | ||||
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10.2 | ||||
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10.3 | ||||
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10.4 |
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10.5 | ||||
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15 | ||||
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31.1 | ||||
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31.2 | ||||
32.1 | ||||
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32.2 | ||||
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101.INS | XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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* |
* | Filed herewith |
Date: | /s/ C. Randall Sims | |||||||
C. Randall Sims, Chief Executive Officer | ||||||||
Date: | /s/ Brian S. Davis | |||||||
Brian S. Davis, Chief Financial Officer | ||||||||
Date: | /s/ Jennifer C. Floyd | |||||||
Jennifer C. Floyd, Chief Accounting Officer |
98