UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
For the quarterly period ended September 30, 2021March 31, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
For the transition period from to
Commission file number: 001-36872
HANCOCK WHITNEY CORPORATION
(Exact name of registrant as specified in its charter)
Mississippi | 64-0693170 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
| ||
Hancock Whitney Plaza, 2510 14th Street, Gulfport, Mississippi | 39501 | |
(Address of principal executive offices) | (Zip Code) |
(228)868-4000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading symbol(s) | Name of each exchange on which registered |
Common stock, par value $3.33 per share | HWC | Nasdaq |
6.25% Subordinated Notes | HWCPZ | Nasdaq |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ ☒Yes Yes ☐ No No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ ☒Yes Yes ☐ No No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer | ☒ | Accelerated filer | ☐ | |
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
86,826,48386,369,000 common shares were outstanding at October 31, 2021.April 30, 2022.
Hancock Whitney Corporation
Index
Part I. Financial Information | Page Number | |
ITEM 1. | 5 | |
Consolidated Balance Sheets (unaudited) – | 5 | |
6 | ||
7 | ||
8 | ||
9 | ||
10 | ||
ITEM 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations |
|
ITEM 3. |
| |
ITEM 4. |
| |
Part II. Other Information | ||
ITEM 1. |
| |
ITEM 1A. |
| |
ITEM 2. |
| |
ITEM 3. | Default on Senior Securities | N/A |
ITEM 4. | Mine Safety Disclosures | N/A |
ITEM 5. | Other Information | N/A |
ITEM 6. |
| |
|
2
Hancock Whitney Corporation
Glossary of Defined Terms
Entities:
Hancock Whitney Corporation – a financial holding company registered with the Securities and Exchange Commission
Hancock Whitney Bank – a wholly-owned subsidiary of Hancock Whitney Corporation through which Hancock Whitney Corporation conducts its banking operations
Company – Hancock Whitney Corporation and its consolidated subsidiaries
Parent – Hancock Whitney Corporation, exclusive of its subsidiaries
Bank – Hancock Whitney Bank
Other Terms:
ACL – allowance for credit losses
AFS – available for sale securities
AMERIBOR - Index created by the American Financial Exchange as a potential replacement for LIBOR; calculated daily as the volume-weighted average interest rate of the overnight unsecured loans on American Financial Exchange
AOCI – accumulated other comprehensive income or loss
ALCO – Asset Liability Management Committee
ALLL – allowance for loan and lease losses
ARRC – Alternative Reference Rates Committee
ASC – Accounting Standards Codification
ASR – accelerated share repurchaseASU
ASU – Accounting Standards Update
ATM – automated teller machine
Basel III – Basel Committee's 2010 Regulatory Capital Framework (Third Accord)
Beta – amount by which deposit or loan costs change in response to movement in short-term interest rates
BOLI – bank-owned life insurance
bp(s) – basis point(s)
C&I – commercial and industrial loans
CARES Act – Coronavirus Aid, Relief, and Economic Security Act
CD – certificate of deposit
CDE – Community Development Entity
CECL – Current Expected Credit Losses, the term commonly used to refer to the methodology of estimating credit losses required by ASC 326, “Financial Instruments – Credit Losses.” ASC 326 was adopted by the Company on January 1, 2020, superseding the methodology prescribed by ASC 310.
CEO – Chief Executive Officer
CFPB– Consumer Financial Protection Bureau
CFO – Chief Financial Officer
CME– Chicago Mercantile Exchange
CMO – collateralized mortgage obligation
Core Loans – loans excluding Paycheck Protection Program (PPP) loans
Coronavirus – the novel coronavirus declared a pandemic during the first quarter of 2020, resulting in prolonged market disruptions
COSO – Committee of Sponsoring Organizations of the Treadway Commission
COVID-19 – disease caused by the novel coronavirus
CRE – commercial real estate
DEI – Diversity, equity and inclusion
DIF – Deposit Insurance Fund
Excess Liquidity – deposits held at the Federal Reserve above $200 million, plus excess investments in the securities portfolio above normal cash flows
FASB – Financial Accounting Standards Board
FDIC – Federal Deposit Insurance Corporation
FDICIA – Federal Deposit Insurance Corporation Improvement Act of 1991
Federal Reserve Board – The 7-member Board of Governors that oversees the Federal Reserve System, establishes
monetary policy (interest rates, credit, etc.), and monitors the economic health of the country. Its members are appointed
by the President subject to Senate confirmation, and serve 14-year terms.
Federal Reserve System – The 12 Federal Reserve Banks, with each one serving member banks in its own district. This system, supervised by the Federal Reserve Board, has broad regulatory powers over the money supply and the
credit structure. They implement the policies of the Federal Reserve Board and also conduct economic research.
FFIEC – Federal Financial Institutions Examination Council
FHA – Federal Housing Administration
FHLB – Federal Home Loan Bank
GAAP – Generally Accepted Accounting Principles in the United States of America
3
HTM – held to maturity securities
IRS – Internal Revenue Service
LIBOR – London Interbank Offered Rate
LIHTC – Low Income Housing Tax Credit
LTIP – long-term incentive plan
MBS – mortgage-backed securities
MD&A – management’s discussion and analysis of financial condition and results of operations
MDBCF – Mississippi Department of Banking and Consumer Finance
NAICS – North American Industry Classification System
NII – net interest income
n/m – not meaningful
NSF – Non-sufficient funds
OCI – other comprehensive income or loss
ORE – other real estate defined as foreclosed and surplus real estate
PCD – purchased credit deteriorated loans, as defined by ASC 326
PCIPPNR – purchased credit impaired loans, as defined by ASC 310-30Pre-provision net revenue
3
PPP – Paycheck Protection Program, a loan program administered by the Small Business Administration designed to provide a direct incentive for small businesses to keep workers on payroll during interruptions caused by the COVID-19 pandemic
Reference rate reform – refers to the global transition away from LIBOR and other interbank offered rates toward new reference rates that are more reliable and robust
Repos – securities sold under agreements to repurchase
SBA – Small Business Administration
SBIC – Small Business Investment Company
SEC – U.S. Securities and Exchange Commission
Securities Act – Securities Act of 1933, as amended
SOFR – secured overnight financing rate
Structured Solutions – longer-term contractual payment modifications of original loan agreementte
te – taxable equivalent adjustment, or the term used to indicate that a financial measure is presented on a fully taxable equivalent basis
TDR – troubled debt restructuring
TSR – total shareholder return
U.S. Treasury – The United States Department of the Treasury
VERIP – Voluntary Early Retirement Incentive Program
Volcker Rule – Section 619 of the Dodd-Frank Act and regulations promulgated thereunder, as applicable
4
Part I. Financial Information
Item 1. Financial Statements
Hancock Whitney Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
|
| September 30, |
|
| December 31, |
|
| March 31, |
|
| December 31, |
| ||||
(in thousands, except per share data) |
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Cash and due from banks |
| $ | 527,880 |
|
| $ | 526,306 |
|
| $ | 703,421 |
|
| $ | 401,201 |
|
Interest-bearing bank deposits |
|
| 3,062,325 |
|
|
| 1,333,352 |
| �� |
| 3,132,551 |
|
|
| 3,830,177 |
|
Federal funds sold |
|
| 456 |
|
|
| 434 |
|
|
| 459 |
|
|
| 458 |
|
Securities available for sale, at fair value (amortized cost of $6,943,511 and $5,766,234) |
|
| 7,000,921 |
|
|
| 5,999,327 |
| ||||||||
Securities held to maturity (fair value of $1,385,967 and $1,467,581) |
|
| 1,307,701 |
|
|
| 1,357,170 |
| ||||||||
Loans held for sale |
|
| 90,618 |
|
|
| 136,063 |
| ||||||||
Securities available for sale, at fair value (amortized cost of $6,380,002 and $6,984,530) |
|
| 5,993,007 |
|
|
| 6,986,698 |
| ||||||||
Securities held to maturity (fair value of $2,429,049 and $1,631,482) |
|
| 2,488,088 |
|
|
| 1,565,751 |
| ||||||||
Loans held for sale (includes $25,046 and $41,022 measured at fair value) |
|
| 59,877 |
|
|
| 93,069 |
| ||||||||
Loans |
|
| 20,886,015 |
|
|
| 21,789,931 |
|
|
| 21,323,341 |
|
|
| 21,134,282 |
|
Less: allowance for loan losses |
|
| (371,521 | ) |
|
| (450,177 | ) |
|
| (317,843 | ) |
|
| (342,065 | ) |
Loans, net |
|
| 20,514,494 |
|
|
| 21,339,754 |
|
|
| 21,005,498 |
|
|
| 20,792,217 |
|
Property and equipment, net of accumulated depreciation of $272,213 and $271,801 |
|
| 350,554 |
|
|
| 380,516 |
| ||||||||
Right of use assets, net of accumulated amortization of $31,365 and $23,330 |
|
| 98,419 |
|
|
| 110,691 |
| ||||||||
Property and equipment, net of accumulated depreciation of $286,052 and $280,065 |
|
| 353,441 |
|
|
| 350,309 |
| ||||||||
Right of use assets, net of accumulated amortization of $37,511 and $34,425 |
|
| 100,889 |
|
|
| 102,239 |
| ||||||||
Prepaid expenses |
|
| 40,329 |
|
|
| 41,443 |
|
|
| 43,572 |
|
|
| 38,793 |
|
Other real estate and foreclosed assets, net |
|
| 8,423 |
|
|
| 11,648 |
|
|
| 6,345 |
|
|
| 7,533 |
|
Accrued interest receivable |
|
| 99,314 |
|
|
| 104,268 |
|
|
| 98,873 |
|
|
| 96,938 |
|
Goodwill |
|
| 855,453 |
|
|
| 855,453 |
|
|
| 855,453 |
|
|
| 855,453 |
|
Other intangible assets, net |
|
| 74,146 |
|
|
| 86,892 |
|
|
| 66,479 |
|
|
| 70,226 |
|
Life insurance contracts |
|
| 661,770 |
|
|
| 615,780 |
|
|
| 726,308 |
|
|
| 664,535 |
|
Funded pension assets, net |
|
| 220,121 |
|
|
| 171,175 |
|
|
| 233,195 |
|
|
| 227,870 |
|
Deferred tax asset, net |
|
| 59,606 |
|
|
| — |
| ||||||||
Other assets |
|
| 405,384 |
|
|
| 568,330 |
|
|
| 390,229 |
|
|
| 447,738 |
|
Total assets |
| $ | 35,318,308 |
|
| $ | 33,638,602 |
|
| $ | 36,317,291 |
|
| $ | 36,531,205 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Noninterest-bearing |
| $ | 13,653,376 |
|
| $ | 12,199,750 |
|
| $ | 14,976,670 |
|
| $ | 14,392,808 |
|
Interest-bearing |
|
| 15,554,781 |
|
|
| 15,498,127 |
|
|
| 15,523,039 |
|
|
| 16,073,089 |
|
Total deposits |
|
| 29,208,157 |
|
|
| 27,697,877 |
|
|
| 30,499,709 |
|
|
| 30,465,897 |
|
Short-term borrowings |
|
| 1,745,228 |
|
|
| 1,667,513 |
|
|
| 1,620,302 |
|
|
| 1,665,061 |
|
Long-term debt |
|
| 248,011 |
|
|
| 378,322 |
|
|
| 240,454 |
|
|
| 244,220 |
|
Accrued interest payable |
|
| 3,060 |
|
|
| 4,315 |
|
|
| 2,999 |
|
|
| 3,103 |
|
Lease liabilities |
|
| 119,250 |
|
|
| 130,627 |
|
|
| 120,788 |
|
|
| 122,079 |
|
Deferred tax liability, net |
|
| 31,250 |
|
|
| 49,406 |
|
|
| — |
|
|
| 19,434 |
|
Other liabilities |
|
| 333,586 |
|
|
| 271,517 |
|
|
| 382,088 |
|
|
| 341,059 |
|
Total liabilities |
|
| 31,688,542 |
|
|
| 30,199,577 |
|
|
| 32,866,340 |
|
|
| 32,860,853 |
|
Stockholders' equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Common stock |
|
| 309,513 |
|
|
| 309,513 |
|
|
| 309,513 |
|
|
| 309,513 |
|
Capital surplus |
|
| 1,774,874 |
|
|
| 1,757,937 |
|
|
| 1,742,021 |
|
|
| 1,755,701 |
|
Retained earnings |
|
| 1,545,181 |
|
|
| 1,291,506 |
|
|
| 1,758,693 |
|
|
| 1,659,073 |
|
Accumulated other comprehensive income, net |
|
| 198 |
|
|
| 80,069 |
| ||||||||
Accumulated other comprehensive loss, net |
|
| (359,276 | ) |
|
| (53,935 | ) | ||||||||
Total stockholders' equity |
|
| 3,629,766 |
|
|
| 3,439,025 |
|
|
| 3,450,951 |
|
|
| 3,670,352 |
|
Total liabilities and stockholders' equity |
| $ | 35,318,308 |
|
| $ | 33,638,602 |
|
| $ | 36,317,291 |
|
| $ | 36,531,205 |
|
Preferred shares authorized (par value of $20.00 per share) |
|
| 50,000 |
|
|
| 50,000 |
| ||||||||
Preferred shares authorized (par value of $20.00 per share) |
|
| 50,000 |
|
|
| 50,000 |
| ||||||||
Preferred shares issued and outstanding |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Common shares authorized (par value of $3.33 per share) |
|
| 350,000 |
|
|
| 350,000 |
| ||||||||
Common shares authorized (par value of $3.33 per share) |
|
| 350,000 |
|
|
| 350,000 |
| ||||||||
Common shares issued |
|
| 92,947 |
|
|
| 92,947 |
|
|
| 92,947 |
|
|
| 92,947 |
|
Common shares outstanding |
|
| 86,823 |
|
|
| 86,728 |
|
|
| 86,460 |
|
|
| 86,749 |
|
See notes to unaudited consolidated financial statements.
5
Hancock Whitney Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
| |||||||||||||||
|
| September 30, |
|
| September 30, |
|
| March 31, |
| |||||||||||||||
(in thousands, except per share data) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||||
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Loans, including fees |
| $ | 204,102 |
|
| $ | 220,392 |
|
| $ | 626,881 |
|
| $ | 688,032 |
|
| $ | 192,750 |
| $ | 213,713 |
| |
Loans held for sale |
|
| 635 |
|
|
| 833 |
|
|
| 1,954 |
|
|
| 2,104 |
|
| 691 |
| 671 |
| |||
Securities-taxable |
|
| 33,936 |
|
|
| 30,863 |
|
|
| 98,287 |
|
|
| 95,172 |
|
| 37,164 |
| 31,203 |
| |||
Securities-tax exempt |
|
| 4,724 |
|
|
| 4,831 |
|
|
| 14,269 |
|
|
| 14,629 |
|
| 4,655 |
| 4,783 |
| |||
Short-term investments |
|
| 1,020 |
|
|
| 124 |
|
|
| 2,111 |
|
|
| 791 |
|
|
| 1,526 |
|
|
| 415 |
|
Total interest income |
|
| 244,417 |
|
|
| 257,043 |
|
|
| 743,502 |
|
|
| 800,728 |
|
|
| 236,786 |
|
|
| 250,785 |
|
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Deposits |
|
| 5,090 |
|
|
| 14,783 |
|
|
| 21,381 |
|
|
| 76,349 |
|
| 3,778 |
| 9,227 |
| |||
Short-term borrowings |
|
| 1,470 |
|
|
| 1,673 |
|
|
| 4,558 |
|
|
| 8,388 |
|
| 1,419 |
| 1,533 |
| |||
Long-term debt |
|
| 3,148 |
|
|
| 5,404 |
|
|
| 13,624 |
|
|
| 11,754 |
|
|
| 3,126 |
|
|
| 5,438 |
|
Total interest expense |
|
| 9,708 |
|
|
| 21,860 |
|
|
| 39,563 |
|
|
| 96,491 |
|
|
| 8,323 |
|
|
| 16,198 |
|
Net interest income |
|
| 234,709 |
|
|
| 235,183 |
|
|
| 703,939 |
|
|
| 704,237 |
|
| 228,463 |
| 234,587 |
| |||
Provision for credit losses |
|
| (26,955 | ) |
|
| 24,999 |
|
|
| (49,095 | ) |
|
| 578,690 |
|
|
| (22,527 | ) |
|
| (4,911 | ) |
Net interest income after provision for credit losses |
|
| 261,664 |
|
|
| 210,184 |
|
|
| 753,034 |
|
|
| 125,547 |
|
|
| 250,990 |
|
|
| 239,498 |
|
Noninterest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Service charges on deposit accounts |
|
| 21,159 |
|
|
| 18,440 |
|
|
| 59,686 |
|
|
| 56,795 |
|
| 21,674 |
| 19,146 |
| |||
Trust fees |
|
| 16,041 |
|
|
| 14,424 |
|
|
| 47,351 |
|
|
| 43,390 |
|
| 15,279 |
| 15,003 |
| |||
Bank card and ATM fees |
|
| 19,833 |
|
|
| 17,222 |
|
|
| 58,436 |
|
|
| 50,541 |
|
| 20,396 |
| 18,120 |
| |||
Investment and annuity fees and insurance commissions |
|
| 7,167 |
|
|
| 5,988 |
|
|
| 21,956 |
|
|
| 18,504 |
|
| 7,427 |
| 7,458 |
| |||
Secondary mortgage market operations |
|
| 6,972 |
|
|
| 12,875 |
|
|
| 31,238 |
|
|
| 28,736 |
|
| 3,746 |
| 11,710 |
| |||
Securities transactions, net |
|
| — |
|
|
| 376 |
|
|
| 333 |
|
|
| 488 |
|
| (87 | ) |
| — |
| ||
Other income |
|
| 22,189 |
|
|
| 14,423 |
|
|
| 55,722 |
|
|
| 43,624 |
|
|
| 14,997 |
|
|
| 15,652 |
|
Total noninterest income |
|
| 93,361 |
|
|
| 83,748 |
|
|
| 274,722 |
|
|
| 242,078 |
|
|
| 83,432 |
|
|
| 87,089 |
|
Noninterest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Compensation expense |
|
| 92,601 |
|
|
| 97,095 |
|
|
| 289,034 |
|
|
| 286,922 |
|
| 85,993 |
| 95,846 |
| |||
Employee benefits |
|
| 19,377 |
|
|
| 20,761 |
|
|
| 85,213 |
|
|
| 64,892 |
|
|
| 21,403 |
|
|
| 23,769 |
|
Personnel expense |
|
| 111,978 |
|
|
| 117,856 |
|
|
| 374,247 |
|
|
| 351,814 |
|
|
| 107,396 |
|
|
| 119,615 |
|
Net occupancy expense |
|
| 11,974 |
|
|
| 13,191 |
|
|
| 37,839 |
|
|
| 39,272 |
|
| 11,680 |
| 12,910 |
| |||
Equipment expense |
|
| 4,894 |
|
|
| 5,355 |
|
|
| 14,067 |
|
|
| 14,724 |
|
| 4,867 |
| 4,781 |
| |||
Data processing expense |
|
| 24,766 |
|
|
| 21,888 |
|
|
| 71,598 |
|
|
| 65,185 |
|
| 24,239 |
| 22,947 |
| |||
Professional services expense |
|
| 12,748 |
|
|
| 14,372 |
|
|
| 37,472 |
|
|
| 35,098 |
|
| 7,793 |
| 11,251 |
| |||
Amortization of intangible assets |
|
| 4,082 |
|
|
| 4,788 |
|
|
| 12,746 |
|
|
| 15,302 |
|
| 3,748 |
| 4,419 |
| |||
Deposit insurance and regulatory fees |
|
| 3,680 |
|
|
| 4,108 |
|
|
| 10,042 |
|
|
| 15,039 |
|
| 3,740 |
| 3,395 |
| |||
Other real estate and foreclosed assets expense (income) |
|
| (376 | ) |
|
| (482 | ) |
|
| (456 | ) |
|
| 9,188 |
|
| (1,764 | ) |
| 6 |
| ||
Other expense |
|
| 20,957 |
|
|
| 14,698 |
|
|
| 66,990 |
|
|
| 50,026 |
|
|
| 18,240 |
|
|
| 13,748 |
|
Total noninterest expense |
|
| 194,703 |
|
|
| 195,774 |
|
|
| 624,545 |
|
|
| 595,648 |
|
|
| 179,939 |
|
|
| 193,072 |
|
Income (loss) before income taxes |
|
| 160,322 |
|
|
| 98,158 |
|
|
| 403,211 |
|
|
| (228,023 | ) | ||||||||
Income taxes expense (benefit) |
|
| 30,740 |
|
|
| 18,802 |
|
|
| 77,739 |
|
|
| (79,274 | ) | ||||||||
Net income (loss) |
| $ | 129,582 |
|
| $ | 79,356 |
|
| $ | 325,472 |
|
| $ | (148,749 | ) | ||||||||
Earnings (loss) per common share-basic |
| $ | 1.46 |
|
| $ | 0.90 |
|
| $ | 3.67 |
|
| $ | (1.73 | ) | ||||||||
Earnings (loss) per common share-diluted |
| $ | 1.46 |
|
| $ | 0.90 |
|
| $ | 3.67 |
|
| $ | (1.73 | ) | ||||||||
Income before income taxes |
| 154,483 |
| 133,515 |
| |||||||||||||||||||
Income taxes expense |
|
| 31,005 |
|
|
| 26,343 |
| ||||||||||||||||
Net income |
| $ | 123,478 |
|
| $ | 107,172 |
| ||||||||||||||||
Earnings per common share-basic |
| $ | 1.40 |
| $ | 1.21 |
| |||||||||||||||||
Earnings per common share-diluted |
| $ | 1.40 |
| $ | 1.21 |
| |||||||||||||||||
Dividends paid per share |
| $ | 0.27 |
|
| $ | 0.27 |
|
| $ | 0.81 |
|
| $ | 0.81 |
|
| $ | 0.27 |
| $ | 0.27 |
| |
Weighted average shares outstanding-basic |
|
| 86,834 |
|
|
| 86,358 |
|
|
| 86,800 |
|
|
| 86,614 |
|
| 86,660 |
| 86,752 |
| |||
Weighted average shares outstanding-diluted |
|
| 87,006 |
|
|
| 86,400 |
|
|
| 86,951 |
|
|
| 86,614 |
|
| 86,936 |
| 86,805 |
|
See notes to unaudited consolidated financial statements.
6
Hancock Whitney Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income
(Unaudited)
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
(in thousands) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Net income (loss) |
| $ | 129,582 |
|
| $ | 79,356 |
|
| $ | 325,472 |
|
| $ | (148,749 | ) |
Other comprehensive income (loss) before income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in unrealized gain or loss on securities available for sale and cash flow hedges |
|
| (48,569 | ) |
|
| 425 |
|
|
| (143,924 | ) |
|
| 217,254 |
|
Reclassification of net income realized and included in earnings |
|
| (6,425 | ) |
|
| (4,076 | ) |
|
| (9,337 | ) |
|
| (6,593 | ) |
Valuation adjustments to pension plan attributable to the Voluntary Early Retirement Incentive Program (VERIP) and curtailment |
|
| — |
|
|
| — |
|
|
| 59,606 |
|
|
| — |
|
Other valuation adjustments to employee benefit plans |
|
| — |
|
|
| — |
|
|
| (10,651 | ) |
|
| (10,251 | ) |
Amortization of unrealized net gain on securities transferred to held to maturity |
|
| (33 | ) |
|
| (89 | ) |
|
| (134 | ) |
|
| (378 | ) |
Other comprehensive income (loss) before income taxes |
|
| (55,027 | ) |
|
| (3,740 | ) |
|
| (104,440 | ) |
|
| 200,032 |
|
Income tax expense (benefit) |
|
| (12,363 | ) |
|
| 48 |
|
|
| (24,569 | ) |
|
| 46,370 |
|
Other comprehensive income (loss) net of income taxes |
|
| (42,664 | ) |
|
| (3,788 | ) |
|
| (79,871 | ) |
|
| 153,662 |
|
Comprehensive income |
| $ | 86,918 |
|
| $ | 75,568 |
|
| $ | 245,601 |
|
| $ | 4,913 |
|
| Three Months Ended |
| |||||
| March 31, |
| |||||
(in thousands) | 2022 |
|
| 2021 |
| ||
Net income | $ | 123,478 |
|
| $ | 107,172 |
|
Other comprehensive income (loss) before income taxes: |
|
|
|
|
| ||
Net change in unrealized gain or loss on securities available for sale and cash flow hedges |
| (390,904 | ) |
|
| (145,490 | ) |
Reclassification of net (income) loss realized and included in earnings |
| (3,838 | ) |
|
| 286 |
|
Amortization of unrealized net gain (loss) on securities transferred to held to maturity |
| 261 |
|
|
| (56 | ) |
Other comprehensive loss before income taxes |
| (394,481 | ) |
|
| (145,260 | ) |
Income tax benefit |
| (89,140 | ) |
|
| (33,748 | ) |
Other comprehensive loss net of income taxes |
| (305,341 | ) |
|
| (111,512 | ) |
Comprehensive loss | $ | (181,863 | ) |
| $ | (4,340 | ) |
See notes to unaudited consolidated financial statements.
7
Hancock Whitney Corporation and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
Three Months Ended September 30, 2021 and 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
| ||||
|
| Common Stock |
|
|
|
|
|
|
|
|
|
| Other |
|
|
|
|
| ||||||
(in thousands, except parenthetical share data) |
| Shares Issued |
|
| Amount |
|
| Capital Surplus |
|
| Retained Earnings |
|
| Comprehensive Income (Loss) |
|
| Total |
| ||||||
Balance, June 30, 2021 |
|
| 92,947 |
|
| $ | 309,513 |
|
| $ | 1,770,973 |
|
| $ | 1,439,553 |
|
| $ | 42,862 |
|
| $ | 3,562,901 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 129,582 |
|
|
| — |
|
|
| 129,582 |
|
Other comprehensive loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (42,664 | ) |
|
| (42,664 | ) |
Comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 129,582 |
|
|
| (42,664 | ) |
|
| 86,918 |
|
Cash dividends declared ($0.27 per common share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (24,002 | ) |
|
| — |
|
|
| (24,002 | ) |
Common stock activity, long-term incentive plans |
|
| — |
|
|
| — |
|
|
| 5,432 |
|
|
| 48 |
|
|
| — |
|
|
| 5,480 |
|
Repurchase of common stock (56,349 shares) |
|
| — |
|
|
| — |
|
|
| (2,509 | ) |
|
| - |
|
|
| — |
|
|
| (2,509 | ) |
Issuance of stock from dividend reinvestment and stock purchase plans |
|
| — |
|
|
| — |
|
|
| 978 |
|
|
| — |
|
|
| — |
|
|
| 978 |
|
Balance, September 30, 2021 |
|
| 92,947 |
|
| $ | 309,513 |
|
| $ | 1,774,874 |
|
| $ | 1,545,181 |
|
| $ | 198 |
|
| $ | 3,629,766 |
|
Balance, June 30, 2020 |
|
| 92,947 |
|
| $ | 309,513 |
|
| $ | 1,747,640 |
|
| $ | 1,156,278 |
|
| $ | 102,726 |
|
| $ | 3,316,157 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 79,356 |
|
|
| — |
|
|
| 79,356 |
|
Other comprehensive loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3,788 | ) |
|
| (3,788 | ) |
Comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 79,356 |
|
|
| (3,788 | ) |
|
| 75,568 |
|
Cash dividends declared ($0.27 per common share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (23,803 | ) |
|
| — |
|
|
| (23,803 | ) |
Common stock activity, long-term incentive plans |
|
| — |
|
|
| — |
|
|
| 6,595 |
|
|
| 47 |
|
|
| — |
|
|
| 6,642 |
|
Issuance of stock from dividend reinvestment and stock purchase plans |
|
| — |
|
|
| — |
|
|
| 1,080 |
|
|
| — |
|
|
| — |
|
|
| 1,080 |
|
Balance, September 30, 2020 |
|
| 92,947 |
|
| $ | 309,513 |
|
| $ | 1,755,315 |
|
| $ | 1,211,878 |
|
| $ | 98,938 |
|
| $ | 3,375,644 |
|
Nine Months Ended September 30, 2021 and 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
| Common Stock |
|
|
|
|
|
|
|
|
|
| Accumulated Other |
|
|
|
|
| ||||||
(in thousands, except parenthetical share data) |
| Shares Issued |
|
| Amount |
|
| Capital Surplus |
|
| Retained Earnings |
|
| Comprehensive Income (Loss) |
|
| Total |
| ||||||
Balance, December 31, 2020 |
|
| 92,947 |
|
| $ | 309,513 |
|
| $ | 1,757,937 |
|
| $ | 1,291,506 |
|
| $ | 80,069 |
|
| $ | 3,439,025 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 325,472 |
|
|
| — |
|
|
| 325,472 |
|
Other comprehensive loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (79,871 | ) |
|
| (79,871 | ) |
Comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 325,472 |
|
|
| (79,871 | ) |
|
| 245,601 |
|
Cash dividends declared ($0.81 per common share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (72,046 | ) |
|
| — |
|
|
| (72,046 | ) |
Common stock activity, long-term incentive plans |
|
| — |
|
|
| — |
|
|
| 16,506 |
|
|
| 249 |
|
|
| — |
|
|
| 16,755 |
|
Repurchase of common stock (56,349 shares) |
|
| — |
|
|
| — |
|
|
| (2,509 | ) |
|
| — |
|
|
| — |
|
|
| (2,509 | ) |
Issuance of stock from dividend reinvestment and stock purchase plans |
|
| — |
|
|
| — |
|
|
| 2,940 |
|
|
| — |
|
|
| — |
|
|
| 2,940 |
|
Balance, September 30, 2021 |
|
| 92,947 |
|
| $ | 309,513 |
|
| $ | 1,774,874 |
|
| $ | 1,545,181 |
|
| $ | 198 |
|
| $ | 3,629,766 |
|
Balance, December 31, 2019 |
|
| 92,947 |
|
| $ | 309,513 |
|
| $ | 1,736,664 |
|
| $ | 1,476,232 |
|
| $ | (54,724 | ) |
| $ | 3,467,685 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (148,749 | ) |
|
| — |
|
|
| (148,749 | ) |
Other comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 153,662 |
|
|
| 153,662 |
|
Comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (148,749 | ) |
|
| 153,662 |
|
|
| 4,913 |
|
Cumulative effect of change in accounting principle |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (44,087 | ) |
|
| — |
|
|
| (44,087 | ) |
Cash dividends declared ($0.81 per common share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (71,620 | ) |
|
| — |
|
|
| (71,620 | ) |
Common stock activity, long-term incentive plans |
|
| — |
|
|
| — |
|
|
| 16,159 |
|
|
| 102 |
|
|
| — |
|
|
| 16,261 |
|
Net settlement of accelerated share repurchase agreement (1,001,472 shares) |
|
| — |
|
|
| — |
|
|
| 12,110 |
|
|
| — |
|
|
| — |
|
|
| 12,110 |
|
Repurchase of common stock (315,851 shares) |
|
| — |
|
|
| — |
|
|
| (12,716 | ) |
|
| — |
|
|
| — |
|
|
| (12,716 | ) |
Issuance of stock from dividend reinvestment and stock purchase plans |
|
| — |
|
|
| — |
|
|
| 3,098 |
|
|
| — |
|
|
| — |
|
|
| 3,098 |
|
Balance, September 30, 2020 |
|
| 92,947 |
|
| $ | 309,513 |
|
| $ | 1,755,315 |
|
| $ | 1,211,878 |
|
| $ | 98,938 |
|
| $ | 3,375,644 |
|
Three Months Ended March 31, 2022 and 2021 |
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
| ||||||||
|
| Common Stock |
|
|
|
|
|
|
|
| Other |
|
|
|
| |||||||||
(in thousands, except parenthetical share data) |
| Shares |
|
| Amount |
|
| Capital |
|
| Retained |
|
| Comprehensive Income (Loss) |
|
| Total |
| ||||||
Balance, December 31, 2021 |
|
| 92,947 |
|
| $ | 309,513 |
|
| $ | 1,755,701 |
|
| $ | 1,659,073 |
|
| $ | (53,935 | ) |
| $ | 3,670,352 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 123,478 |
|
|
| — |
|
|
| 123,478 |
|
Other comprehensive loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (305,341 | ) |
|
| (305,341 | ) |
Comprehensive loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 123,478 |
|
|
| (305,341 | ) |
|
| (181,863 | ) |
Dividends declared ($0.27 per common share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (23,909 | ) |
|
| — |
|
|
| (23,909 | ) |
Common stock activity, long-term incentive plans |
|
| — |
|
|
| — |
|
|
| 3,929 |
|
|
| 51 |
|
|
| — |
|
|
| 3,980 |
|
Repurchase of common stock (350,000 shares) |
|
| — |
|
|
| — |
|
|
| (18,490 | ) |
|
| — |
|
|
| — |
|
|
| (18,490 | ) |
Issuance of stock from dividend reinvestment and stock purchase plans |
|
| — |
|
|
| — |
|
|
| 881 |
|
|
| — |
|
|
| — |
|
|
| 881 |
|
Balance, March 31, 2022 |
|
| 92,947 |
|
| $ | 309,513 |
|
| $ | 1,742,021 |
|
| $ | 1,758,693 |
|
| $ | (359,276 | ) |
| $ | 3,450,951 |
|
Balance, December 31, 2020 |
|
| 92,947 |
|
| $ | 309,513 |
|
| $ | 1,757,937 |
|
| $ | 1,291,506 |
|
| $ | 80,069 |
|
| $ | 3,439,025 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 107,172 |
|
|
| — |
|
|
| 107,172 |
|
Other comprehensive loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (111,512 | ) |
|
| (111,512 | ) |
Comprehensive loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 107,172 |
|
|
| (111,512 | ) |
|
| (4,340 | ) |
Dividends declared ($0.27 per common share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (24,021 | ) |
|
| — |
|
|
| (24,021 | ) |
Common stock activity, long-term incentive plans |
|
| — |
|
|
| — |
|
|
| 5,204 |
|
|
| 31 |
|
|
| — |
|
|
| 5,235 |
|
Issuance of stock from dividend reinvestment and stock purchase plans |
|
| — |
|
|
| — |
|
|
| 1,004 |
|
|
| — |
|
|
| — |
|
|
| 1,004 |
|
Balance, March 31, 2021 |
|
| 92,947 |
|
| $ | 309,513 |
|
| $ | 1,764,145 |
|
| $ | 1,374,688 |
|
| $ | (31,443 | ) |
| $ | 3,416,903 |
|
See notes to unaudited consolidated financial statements.
8
Hancock Whitney Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
|
| Nine Months Ended |
|
| Three Months Ended |
| ||||||||||
|
| September 30, |
|
| March 31, |
| ||||||||||
(in thousands) |
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Net income (loss) |
| $ | 325,472 |
|
| $ | (148,749 | ) | ||||||||
Net income |
| $ | 123,478 |
| $ | 107,172 |
| |||||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Depreciation and amortization |
|
| 21,743 |
|
|
| 22,869 |
|
| 7,177 |
| 7,083 |
| |||
Provision for credit losses |
|
| (49,095 | ) |
|
| 578,690 |
|
| (22,527 | ) |
| (4,911 | ) | ||
(Gain) loss on other real estate and foreclosed assets |
|
| (1,124 | ) |
|
| 9,252 |
| ||||||||
Gain on sale of securities |
|
| (333 | ) |
|
| (488 | ) | ||||||||
Deferred tax expense (benefit) |
|
| 1,378 |
|
|
| (28,949 | ) | ||||||||
Gain on other real estate and foreclosed assets |
| (3,014 | ) |
| (253 | ) | ||||||||||
Loss on sale of securities |
| 87 |
| — |
| |||||||||||
Deferred tax expense |
| 10,099 |
| 2,300 |
| |||||||||||
Increase in cash surrender value of life insurance contracts |
|
| (21,122 | ) |
|
| (14,443 | ) |
| (634 | ) |
| (9,400 | ) | ||
Impairment (gain) on disposal of assets |
|
| 15,165 |
|
|
| (556 | ) | ||||||||
Loss on extinguishment of debt |
|
| 4,165 |
|
|
| — |
| ||||||||
Net (increase) decrease in loans held for sale |
|
| 43,867 |
|
|
| (46,691 | ) | ||||||||
Net decrease in loans held for sale |
| 27,250 |
| 8,031 |
| |||||||||||
Net amortization of securities premium/discount |
|
| 38,318 |
|
|
| 30,576 |
|
| 11,356 |
| 13,211 |
| |||
Amortization of intangible assets |
|
| 12,746 |
|
|
| 15,302 |
|
| 3,748 |
| 4,419 |
| |||
Stock-based compensation expense |
|
| 17,270 |
|
|
| 16,661 |
|
| 5,292 |
| 5,517 |
| |||
Net change in liability from variation margin collateral |
|
| 53,387 |
|
|
| (102,501 | ) |
| 15,828 |
| 56,744 |
| |||
Decrease in interest payable and other liabilities |
|
| 22,037 |
|
|
| 11,369 |
| ||||||||
(Increase) decrease in other assets |
|
| 60,971 |
|
|
| (97,265 | ) | ||||||||
Increase (decrease) in interest payable and other liabilities |
| 18,512 |
| (23,472 | ) | |||||||||||
Decrease in other assets |
| 91,643 |
| 98,052 |
| |||||||||||
Other, net |
|
| (13,970 | ) |
|
| (17,607 | ) |
|
| (7,761 | ) |
|
| (9,453 | ) |
Net cash provided by operating activities |
|
| 530,875 |
|
|
| 227,470 |
|
|
| 280,534 |
|
|
| 255,040 |
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Proceeds from the sale of available for sale securities |
|
| 198,681 |
|
|
| 211,919 |
|
| 73,219 |
|
|
| — |
| |
Proceeds from maturities of securities available for sale |
|
| 831,433 |
|
|
| 662,269 |
|
| 167,949 |
| 311,232 |
| |||
Purchases of securities available for sale |
|
| (2,235,723 | ) |
|
| (1,667,476 | ) |
| (228,454 | ) |
| (1,164,798 | ) | ||
Proceeds from maturities of securities held to maturity |
|
| 99,044 |
|
|
| 169,863 |
|
| 28,125 |
| 37,830 |
| |||
Purchases of securities held to maturity |
|
| (59,362 | ) |
|
| (20,884 | ) |
| (391,761 | ) |
| (59,362 | ) | ||
Net redemptions (purchases) of Federal Home Loan Bank stock |
|
| 52,535 |
|
|
| (12,868 | ) | ||||||||
Net increase in short-term investments |
|
| (1,728,995 | ) |
|
| (668,828 | ) | ||||||||
Net (increase) decrease in short-term investments |
| 697,625 |
| (1,005,325 | ) | |||||||||||
Proceeds from sales of loans and leases |
|
| 12,540 |
|
|
| 301,609 |
|
| 18,890 |
| 7,373 |
| |||
Net (increase) decrease in loans |
|
| 915,652 |
|
|
| (1,657,939 | ) |
| (227,948 | ) |
| 101,924 |
| ||
Purchase of life insurance contracts |
|
| (75,000 | ) |
|
| — |
|
| (60,000 | ) |
| (45,000 | ) | ||
Proceeds from the surrender of life insurance contracts |
|
| 44,045 |
|
|
| — |
|
| — |
| 44,045 |
| |||
Purchases of property and equipment |
|
| (12,402 | ) |
|
| (31,214 | ) |
| (11,353 | ) |
| (4,269 | ) | ||
Proceeds from sales of other real estate |
|
| 7,804 |
|
|
| 15,299 |
|
| 6,227 |
| 4,191 |
| |||
Other, net |
|
| 35,903 |
|
|
| 8,456 |
|
|
| 3,002 |
|
|
| 5,809 |
|
Net cash used in investing activities |
|
| (1,913,845 | ) |
|
| (2,689,794 | ) | ||||||||
Net cash provided by (used in) investing activities |
|
| 75,521 |
|
|
| (1,766,350 | ) | ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Net increase in deposits |
|
| 1,510,280 |
|
|
| 3,227,084 |
|
| 33,812 |
| 1,512,643 |
| |||
Net increase (decrease) in short-term borrowings |
|
| 77,715 |
|
|
| (807,977 | ) | ||||||||
Net decrease in short-term borrowings |
| (44,759 | ) |
| (14,766 | ) | ||||||||||
Proceeds from the issuance of long-term debt |
|
| 22,388 |
|
|
| 166,425 |
|
| — |
| 22,388 |
| |||
Repayments of long-term debt |
|
| (153,365 | ) |
|
| (230 | ) |
| (79 | ) |
| (3,209 | ) | ||
Dividends paid |
|
| (72,046 | ) |
|
| (71,620 | ) |
| (23,804 | ) |
| (24,021 | ) | ||
Payroll tax remitted on net share settlement of equity awards |
|
| (1,298 | ) |
|
| (1,639 | ) |
| (1,396 | ) |
| (494 | ) | ||
Proceeds from exercise of stock options |
|
| 439 |
|
|
| — |
|
| — |
| 132 |
| |||
Proceeds from dividend reinvestment and stock purchase plans |
|
| 2,940 |
|
|
| 3,098 |
|
| 881 |
| 1,004 |
| |||
Settlement of forward contract portion of accelerated share repurchase |
|
| — |
|
|
| 12,110 |
| ||||||||
Repurchase of shares |
|
| (2,509 | ) |
|
| (12,716 | ) |
|
| (18,490 | ) |
|
| — |
|
Net cash provided by financing activities |
|
| 1,384,544 |
|
|
| 2,514,535 |
| ||||||||
NET INCREASE IN CASH AND DUE FROM BANKS |
|
| 1,574 |
|
|
| 52,211 |
| ||||||||
Net cash provided by (used in) financing activities |
|
| (53,835 | ) |
|
| 1,493,677 |
| ||||||||
NET INCREASE (DECREASE) IN CASH AND DUE FROM BANKS |
| 302,220 |
| (17,633 | ) | |||||||||||
CASH AND DUE FROM BANKS, BEGINNING |
|
| 526,306 |
|
|
| 432,104 |
|
|
| 401,201 |
|
|
| 526,306 |
|
CASH AND DUE FROM BANKS, ENDING |
| $ | 527,880 |
|
| $ | 484,315 |
|
| $ | 703,421 |
|
| $ | 508,673 |
|
SUPPLEMENTAL INFORMATION FOR NON-CASH |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
INVESTING AND FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Assets acquired in settlement of loans |
| $ | 2,623 |
|
| $ | 5,459 |
|
| $ | 118 |
|
| $ | 1,799 |
|
See notes to unaudited consolidated financial statements.
9
HANCOCK WHITNEY CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The consolidated financial statements include the accounts of Hancock Whitney Corporation and all other entities in which it has a controlling interest (the “Company”). The financial statements include all adjustments that are, in the opinion of management, necessary to fairly state the Company’s financial condition, results of operations, changes in stockholders’ equity and cash flows for the interim periods presented. The Company has also evaluated all subsequent events for potential recognition and disclosure through the date of the filing of this Quarterly Report on Form 10-Q. Some financial information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) have been condensed or omitted in this Quarterly Report on Form 10-Q pursuant to Securities and Exchange Commission rules and regulations. These financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.2021. Financial information reported in these financial statements is not necessarily indicative of the Company’s financial condition, results of operations, or cash flows for any other interim or annual period.
Certain prior period amounts have been reclassified to conform to the current period presentation. These changes in presentation did not have a material impact on the Company’s financial condition or operating results.
Use of Estimates
The accounting principles the Company follows and the methods for applying these principles conform to GAAP and general practices followed by the banking industry. These accounting principles require management to make estimates and assumptions about future events that affect the amounts reported in the consolidated financial statements and the accompanying notes. Actual results could differ from those estimates.
Accounting Policies
There were no material changes or developments during the reporting period with respect to methodologies that the Company uses when applying what management believes are critical accounting policies and developing critical accounting estimates as disclosed in its Annual Report on Form 10-K for the year ended December 31, 2020.2021.
Beginning in the second quarter of 2021, the Company enters into mandatory delivery forward sales contracts concurrently with interest rate lock commitments for select residential mortgage banking product offerings that are expected to be sold when funded. Previously, the Company only entered into forward sales agreements on a best-efforts basis and will now utilize both types of delivery methods. With mandatory delivery contracts, the Company commits to deliver a certain principal amount of mortgage loans to an investor at a specified price on or before a specified date. Forward loan sale commitments for the mandatory delivery contracts include the use of To Be Announced (“TBA”) securities to mitigate the risk of changes in value of the rate lock commitment. With the change in delivery method, the Company has elected the fair value option on funded residential mortgage loans originated for sale that are associated with forward sales contracts. For mortgage loans for which the Company has elected the fair value option, gains and losses are included in noninterest income within secondary mortgage market operations. For further discussion, see Note 6 – Derivatives and Note 14 – Fair Value Measurements.
Refer to Note 1514 – Recent Accounting Pronouncements for a discussion of accounting standards issued but not yet adopted during the nine months ended September 30, 2021at March 31, 2022 and the anticipated impact to the Company’s financial statements.
10
2. Securities
The following tables set forth the amortized cost, gross unrealized gains and losses, and estimated fair value of debt securities classified as available for sale and held to maturity at September 30, 2021March 31, 2022 and December 31, 2020.2021. Amortized cost of securities does not include accrued interest which is reflected in the accrued interest line item on the consolidated balance sheets totaling $25.0 $25.9million at September 30, 2021March 31, 2022 and $24.4$25.5 million at December 31, 2020.2021. During the three months ended March 31, 2022, the Company transferred securities with an aggregate fair value of $561.8 million, inclusive of an unrealized loss of $15.4 million, from the available for sale portfolio to the held to maturity portfolio; as such, the securities were recorded with an amortized cost of $561.8 million within the
10
held to maturity portfolio. The unrealized loss is reflected in accumulated other comprehensive income and will be amortized to interest income over the remaining lives of the securities.
|
| September 30, 2021 |
|
| December 31, 2020 |
|
| March 31, 2022 |
|
| December 31, 2021 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
| Gross |
|
| Gross |
|
|
|
|
|
|
|
|
|
| Gross |
|
| Gross |
|
|
|
|
|
|
|
| Gross |
| Gross |
|
|
|
|
| Gross |
| Gross |
|
|
| |||||||||||||||||||
Securities Available for Sale |
| Amortized |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
|
| Amortized |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
|
| Amortized |
| Unrealized |
| Unrealized |
| Fair |
| Amortized |
| Unrealized |
| Unrealized |
| Fair |
| |||||||||||||||||||||||
(in thousands) |
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
|
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
|
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
|
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
| ||||||||||||||||
U.S. Treasury and government agency securities |
| $ | 394,069 |
|
| $ | 4,822 |
|
| $ | 4,169 |
|
| $ | 394,722 |
|
| $ | 207,365 |
|
| $ | 6,289 |
|
| $ | 284 |
|
| $ | 213,370 |
|
| $ | 10,037 |
| $ | — |
| $ | 406 |
| $ | 9,631 |
| $ | 420,857 |
| $ | 3,781 |
| $ | 5,340 |
| $ | 419,298 |
| |||||||
Municipal obligations |
|
| 305,701 |
|
|
| 13,504 |
|
|
| 3,178 |
|
|
| 316,027 |
|
|
| 309,342 |
|
|
| 17,536 |
|
|
| 153 |
|
|
| 326,725 |
|
| 214,611 |
| 1,542 |
| 519 |
| 215,634 |
| 304,536 |
| 13,184 |
| 3,562 |
| 314,158 |
| |||||||||||||||
Residential mortgage-backed securities |
|
| 3,256,700 |
|
|
| 39,681 |
|
|
| 42,988 |
|
|
| 3,253,393 |
|
|
| 2,560,249 |
|
|
| 69,570 |
|
|
| 8 |
|
|
| 2,629,811 |
|
| 2,949,998 |
| 4,535 |
| 193,111 |
| 2,761,422 |
| 3,056,763 |
| 29,158 |
| 50,123 |
| 3,035,798 |
| |||||||||||||||
Commercial mortgage-backed securities |
|
| 2,838,584 |
|
|
| 81,615 |
|
|
| 35,766 |
|
|
| 2,884,433 |
|
|
| 2,323,306 |
|
|
| 135,516 |
|
|
| 3,288 |
|
|
| 2,455,534 |
|
| 3,089,562 |
| 2,587 |
| 197,976 |
| 2,894,173 |
| 3,064,828 |
| 61,645 |
| 48,614 |
| 3,077,859 |
| |||||||||||||||
Collateralized mortgage obligations |
|
| 133,957 |
|
|
| 3,628 |
|
|
| — |
|
|
| 137,585 |
|
|
| 354,472 |
|
|
| 7,651 |
|
|
| — |
|
|
| 362,123 |
|
| 94,294 |
| — |
| 3,074 |
| 91,220 |
| 119,046 |
| 1,837 |
| — |
| 120,883 |
| |||||||||||||||
Corporate debt securities |
|
| 14,500 |
|
|
| 263 |
|
|
| 2 |
|
|
| 14,761 |
|
|
| 11,500 |
|
|
| 264 |
|
|
| — |
|
|
| 11,764 |
|
|
| 21,500 |
|
|
| 32 |
|
|
| 605 |
|
|
| 20,927 |
|
|
| 18,500 |
|
|
| 210 |
|
|
| 8 |
|
|
| 18,702 |
|
|
| $ | 6,943,511 |
|
| $ | 143,513 |
|
| $ | 86,103 |
|
| $ | 7,000,921 |
|
| $ | 5,766,234 |
|
| $ | 236,826 |
|
| $ | 3,733 |
|
| $ | 5,999,327 |
|
| $ | 6,380,002 |
|
| $ | 8,696 |
|
| $ | 395,691 |
|
| $ | 5,993,007 |
|
| $ | 6,984,530 |
|
| $ | 109,815 |
|
| $ | 107,647 |
|
| $ | 6,986,698 |
|
|
| September 30, 2021 |
|
| December 31, 2020 |
|
| March 31, 2022 |
|
| December 31, 2021 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
| Gross |
|
| Gross |
|
|
|
|
|
|
|
|
|
| Gross |
|
| Gross |
|
|
|
|
|
|
|
|
| Gross |
|
| Gross |
|
|
|
|
|
|
|
| Gross |
|
| Gross |
|
|
|
| ||||||||||||
Securities Held to Maturity |
| Amortized |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
|
| Amortized |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
|
| Amortized |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
|
| Amortized |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
| ||||||||||||||||
(in thousands) |
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
|
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
|
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
|
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
| ||||||||||||||||
U.S. Treasury and government agency securities |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 368,334 |
| $ | — |
| $ | 14,745 |
| $ | 353,589 |
| $ | 14,857 |
| $ | — |
| $ | 20 |
| $ | 14,837 |
| |||||||
Municipal obligations |
|
| 617,289 |
|
|
| 39,989 |
|
|
| 211 |
|
|
| 657,067 |
|
|
| 627,019 |
|
|
| 51,408 |
|
|
| 2 |
|
|
| 678,425 |
|
| 696,275 |
| 5,986 |
| 7,492 |
| 694,769 |
| 621,405 |
| 37,941 |
| 205 |
| 659,141 |
| |||||||||||||||
Residential mortgage-backed securities |
|
| 47,330 |
|
|
| 985 |
|
|
| 243 |
|
|
| 48,072 |
|
|
| 21,951 |
|
|
| 1,469 |
|
|
| — |
|
|
| 23,420 |
|
| 525,039 |
| 211 |
| 23,814 |
| 501,436 |
| 268,907 |
| 682 |
| 1,499 |
| 268,090 |
| |||||||||||||||
Commercial mortgage-backed securities |
|
| 573,854 |
|
|
| 36,614 |
|
|
| 350 |
|
|
| 610,118 |
|
|
| 549,686 |
|
|
| 54,587 |
|
|
| — |
|
|
| 604,273 |
|
| 836,060 |
| 1,775 |
| 19,998 |
| 817,837 |
| 603,156 |
| 28,679 |
| 669 |
| 631,166 |
| |||||||||||||||
Collateralized mortgage obligations |
|
| 69,228 |
|
|
| 1,482 |
|
|
| — |
|
|
| 70,710 |
|
|
| 158,514 |
|
|
| 2,949 |
|
|
| — |
|
|
| 161,463 |
|
|
| 62,380 |
|
|
| 47 |
|
|
| 1,009 |
|
|
| 61,418 |
|
|
| 57,426 |
|
|
| 822 |
|
|
| — |
|
|
| 58,248 |
|
|
| $ | 1,307,701 |
|
| $ | 79,070 |
|
| $ | 804 |
|
| $ | 1,385,967 |
|
| $ | 1,357,170 |
|
| $ | 110,413 |
|
| $ | 2 |
|
| $ | 1,467,581 |
|
| $ | 2,488,088 |
|
| $ | 8,019 |
|
| $ | 67,058 |
|
| $ | 2,429,049 |
|
| $ | 1,565,751 |
|
| $ | 68,124 |
|
| $ | 2,393 |
|
| $ | 1,631,482 |
|
The following tables present the amortized cost and estimated fair value of debt securities available for sale and held to maturity at September 30, 2021March 31, 2022 by contractual maturity. Actual maturities will differ from contractual maturities because of rights to call or repay obligations with or without penalties and scheduled and unscheduled principal payments on mortgage-backed securities and collateralized mortgage obligations.
Debt Securities Available for Sale |
| Amortized |
|
| Fair |
|
| Amortized |
|
| Fair |
| ||||
(in thousands) |
| Cost |
|
| Value |
|
| Cost |
|
| Value |
| ||||
Due in one year or less |
| $ | 2,290 |
|
| $ | 2,294 |
|
| $ | 691 |
| $ | 694 |
| |
Due after one year through five years |
|
| 636,212 |
|
|
| 670,865 |
|
| 687,364 |
| 681,925 |
| |||
Due after five years through ten years |
|
| 2,805,443 |
|
|
| 2,839,375 |
|
| 2,902,497 |
| 2,715,517 |
| |||
Due after ten years |
|
| 3,499,566 |
|
|
| 3,488,387 |
|
|
| 2,789,450 |
|
|
| 2,594,871 |
|
Total available for sale debt securities |
| $ | 6,943,511 |
|
| $ | 7,000,921 |
|
| $ | 6,380,002 |
|
| $ | 5,993,007 |
|
Debt Securities Held to Maturity |
| Amortized |
|
| Fair |
|
| Amortized |
|
| Fair |
| ||||
(in thousands) |
| Cost |
|
| Value |
|
| Cost |
|
| Value |
| ||||
Due in one year or less |
| $ | 11,226 |
|
| $ | 11,371 |
|
| $ | 11,225 |
| $ | 11,248 |
| |
Due after one year through five years |
|
| 336,328 |
|
|
| 354,897 |
|
| 379,981 |
| 379,671 |
| |||
Due after five years through ten years |
|
| 548,812 |
|
|
| 587,548 |
|
| 891,327 |
| 873,478 |
| |||
Due after ten years |
|
| 411,335 |
|
|
| 432,151 |
|
|
| 1,205,555 |
|
|
| 1,164,652 |
|
Total held to maturity securities |
| $ | 1,307,701 |
|
| $ | 1,385,967 |
|
| $ | 2,488,088 |
|
| $ | 2,429,049 |
|
The Company held 0 securities classified as trading at September 30, 2021March 31, 2022 and December 31, 2020. 2021.
11
The following table presents the proceeds from, gross gaingains on, and gross losses on sales of securities during the ninethree months ended September 30, 2021March 31, 2022 and 2020.2021. Net gains or losses are reflected in the Securities Transactions, Net line items on the Consolidated Statements of Income.
|
| Nine Months Ended September 30, |
|
| Three Months Ended March 31, |
| ||||||||||
(in thousands) |
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
Proceeds |
| $ | 198,681 |
|
| $ | 211,919 |
|
| $ | 73,219 |
| $ | — |
| |
Gross gains |
|
| 1,649 |
|
|
| 1,984 |
|
| — |
| — |
| |||
Gross losses |
|
| 1,316 |
|
|
| 1,496 |
|
|
| 87 |
|
|
| — |
|
Net gain |
| $ | 333 |
|
| $ | 488 |
| ||||||||
Net loss |
| $ | (87 | ) |
| $ | — |
|
Securities with carrying values totaling $3.6 $4.2billion and $3.4$4.0 billion were pledged as collateral at September 30, 2021March 31, 2022 and December 31, 2020,2021, respectively, primarily to secure public deposits or securities sold under agreements to repurchase.
Credit Quality
The Company’s policy is to invest only in securities of investment grade quality. These investments are largely limited to U.S. agency securities and municipal securities. Management has concluded, based on the long history of no credit losses, that the expectation of nonpayment of the held to maturity securities carried at amortized cost is zero for securities that are backed by the full faith and credit of and/or guaranteed by the U.S. government. As such,0such, 0 allowance for credit losses has been recorded for these securities. The municipal portfolio is analyzed separately for allowance for credit loss in accordance with the applicable guidance for each portfolio as noted below.
At each reporting period, theThe Company evaluates credit impairment for individual securities available for sale whose fair value was below amortized cost with a more than inconsequential risk of default and where the Company had assessed whether the decline in fair value was significant enough to suggest a credit event occurred. There were 0 securities that met the criteria of a credit loss event and, therefore, 0 allowance for credit loss was recorded for eitherin any period presented.
The fair value and gross unrealized losses for securities classified as available for sale with unrealized losses for the periods indicated follow.
Available for Sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
September 30, 2021 |
| Losses < 12 months |
|
| Losses 12 months or > |
|
| Total |
| |||||||||||||||||||||||||||||||||||||||
March 31, 2022 |
| Losses < 12 months |
|
| Losses 12 months or > |
|
| Total |
| |||||||||||||||||||||||||||||||||||||||
(in thousands) |
| Fair Value |
|
| Gross Unrealized Losses |
|
| Fair Value |
|
| Gross Unrealized Losses |
|
| Fair Value |
|
| Gross Unrealized Losses |
|
| Fair |
|
| Gross |
|
| Fair |
|
| Gross |
|
| Fair |
|
| Gross |
| ||||||||||||
U.S. Treasury and government agency securities |
| $ | 199,451 |
|
| $ | 2,712 |
|
| $ | 32,489 |
|
| $ | 1,457 |
|
| $ | 231,940 |
|
| $ | 4,169 |
|
| $ | 9,631 |
| $ | 406 |
|
| $ | — |
|
| $ | — |
|
| $ | 9,631 |
|
| $ | 406 |
| |
Municipal obligations |
|
| 43,297 |
|
|
| 2,098 |
|
|
| 25,243 |
|
|
| 1,080 |
|
|
| 68,540 |
|
|
| 3,178 |
|
| 63,349 |
| 519 |
|
|
| — |
|
|
| — |
|
|
| 63,349 |
|
|
| 519 |
| |||
Residential mortgage-backed securities |
|
| 2,097,625 |
|
|
| 42,984 |
|
|
| 704 |
|
|
| 4 |
|
|
| 2,098,329 |
|
|
| 42,988 |
|
| 1,359,065 |
| 65,035 |
| 1,195,222 |
| 128,076 |
| 2,554,287 |
| 193,111 |
| |||||||||||
Commercial mortgage-backed securities |
|
| 856,462 |
|
|
| 22,196 |
|
|
| 294,972 |
|
|
| 13,570 |
|
|
| 1,151,434 |
|
|
| 35,766 |
|
| 1,762,250 |
|
|
| 91,931 |
| 802,289 |
|
|
| 106,045 |
| 2,564,539 |
|
|
| 197,976 |
| |||||
Collateralized mortgage obligations |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
| 91,220 |
| 3,074 |
|
|
| — |
|
|
| — |
|
|
| 91,220 |
|
|
| 3,074 |
| |||
Corporate debt securities |
|
| 2,998 |
|
|
| 2 |
|
|
| — |
|
|
| — |
|
|
| 2,998 |
|
|
| 2 |
|
|
| 15,895 |
|
|
| 605 |
|
|
| — |
|
|
| — |
|
|
| 15,895 |
|
|
| 605 |
|
|
| $ | 3,199,833 |
|
| $ | 69,992 |
|
| $ | 353,408 |
|
| $ | 16,111 |
|
| $ | 3,553,241 |
|
| $ | 86,103 |
|
| $ | 3,301,410 |
|
| $ | 161,570 |
|
| $ | 1,997,511 |
|
| $ | 234,121 |
|
| $ | 5,298,921 |
|
| $ | 395,691 |
|
Available for Sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020 |
| Losses < 12 months |
|
| Losses 12 months or > |
|
| Total |
| |||||||||||||||
|
|
|
|
|
| Gross |
|
|
|
|
|
| Gross |
|
|
|
|
|
| Gross |
| |||
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
| ||||||
(in thousands) |
| Value |
|
| Losses |
|
| Value |
|
| Losses |
|
| Value |
|
| Losses |
| ||||||
U.S. Treasury and government agency securities |
| $ | 35,845 |
|
|
| 284 |
|
| $ | — |
|
| $ | — |
|
| $ | 35,845 |
|
| $ | 284 |
|
Municipal obligations |
|
| 30,170 |
|
|
| 153 |
|
|
| — |
|
|
| — |
|
|
| 30,170 |
|
|
| 153 |
|
Residential mortgage-backed securities |
|
| 530 |
|
|
| 2 |
|
|
| 760 |
|
|
| 6 |
|
|
| 1,290 |
|
|
| 8 |
|
Commercial mortgage-backed securities |
|
| 446,190 |
|
|
| 3,288 |
|
|
| — |
|
|
| — |
|
|
| 446,190 |
|
|
| 3,288 |
|
Collateralized mortgage obligations |
|
| 70 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 70 |
|
|
| — |
|
Corporate debt securities |
|
| 2,000 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,000 |
|
|
| — |
|
|
| $ | 514,805 |
|
| $ | 3,727 |
|
| $ | 760 |
|
| $ | 6 |
|
| $ | 515,565 |
|
| $ | 3,733 |
|
12
12
Available for Sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
December 31, 2021 |
| Losses < 12 months |
|
| Losses 12 months or > |
|
| Total |
| |||||||||||||||
|
|
|
|
| Gross |
|
|
|
|
| Gross |
|
|
|
|
| Gross |
| ||||||
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
| ||||||
(in thousands) |
| Value |
|
| Losses |
|
| Value |
|
| Losses |
|
| Value |
|
| Losses |
| ||||||
U.S. Treasury and government agency securities |
| $ | 198,318 |
|
|
| 2,305 |
|
| $ | 63,534 |
|
| $ | 3,035 |
|
| $ | 261,852 |
|
| $ | 5,340 |
|
Municipal obligations |
|
| 43,021 |
|
|
| 2,372 |
|
|
| 25,126 |
|
|
| 1,190 |
|
|
| 68,147 |
|
|
| 3,562 |
|
Residential mortgage-backed securities |
|
| 1,293,179 |
|
|
| 20,581 |
|
|
| 819,596 |
|
|
| 29,541 |
|
|
| 2,112,775 |
|
|
| 50,122 |
|
Commercial mortgage-backed securities |
|
| 786,206 |
|
|
| 14,819 |
|
|
| 665,687 |
|
|
| 33,796 |
|
|
| 1,451,893 |
|
|
| 48,615 |
|
Collateralized mortgage obligations |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Corporate debt securities |
|
| 6,992 |
|
|
| 8 |
|
|
| — |
|
|
| — |
|
|
| 6,992 |
|
|
| 8 |
|
|
| $ | 2,327,716 |
|
| $ | 40,085 |
|
| $ | 1,573,943 |
|
| $ | 67,562 |
|
| $ | 3,901,659 |
|
| $ | 107,647 |
|
At eacheach reporting period, the Company evaluates its held to maturity municipal obligation portfolio for credit loss using probability of default and loss given default models. The models arewere run using a long-term average probability of default migration and with a probability weighting of Moody’s economic forecasts. The economic forecasts are largely weighted to a baseline scenario with some weight given to one or more upside and/or downside scenarios. The resulting credit loss, wasif any, were negligible for both periods presented and no allowance for credit loss was recorded.
The fair value and gross unrealized losses for securities classified as held to maturity with unrealized losses for the periods indicated follow.
Held to maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
September 30, 2021 |
| Losses < 12 months |
|
| Losses 12 months or > |
|
| Total |
| |||||||||||||||||||||||||||||||||||||||
March 31, 2022 |
| Losses < 12 months |
|
| Losses 12 months or > |
|
| Total |
| |||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
| Gross |
|
|
|
|
|
| Gross |
|
|
|
|
|
| Gross |
|
|
|
| Gross |
|
|
| Gross |
|
|
| Gross |
| ||||||||||||||
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
|
| Fair |
| Unrealized |
| Fair |
| Unrealized |
| Fair |
| Unrealized |
| |||||||||||||||||
(in thousands) |
| Value |
|
| Losses |
|
| Value |
|
| Losses |
|
| Value |
|
| Losses |
|
| Value |
|
| Losses |
|
| Value |
|
| Losses |
|
| Value |
|
| Losses |
| ||||||||||||
U.S. Treasury and government agency securities |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 282,780 |
| $ | 11,386 |
|
| $ | 70,808 |
|
| $ | 3,360 |
|
| $ | 353,588 |
|
| $ | 14,746 |
| |
Municipal obligations |
|
| 7,789 |
|
|
| 211 |
|
|
| 190 |
|
|
| — |
|
|
| 7,979 |
|
|
| 211 |
|
| 124,523 |
|
|
| 3,410 |
| 42,807 |
| 4,082 |
| 167,330 |
| 7,492 |
| |||||||||
Residential mortgage-backed securities |
|
| 7,821 |
|
|
| 243 |
|
|
| — |
|
|
| — |
|
|
| 7,821 |
|
|
| 243 |
|
| 482,145 |
| 22,993 |
| 6,727 |
|
|
| 820 |
|
|
| 488,872 |
|
|
| 23,813 |
| |||||
Commercial mortgage-backed securities |
|
| 11,960 |
|
|
| 350 |
|
|
| — |
|
|
| — |
|
|
| 11,960 |
|
|
| 350 |
|
| 551,422 |
| 18,637 |
| 10,931 |
|
|
| 1,361 |
|
|
| 562,353 |
|
|
| 19,998 |
| |||||
Collateralized mortgage obligations |
|
| 291 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 291 |
|
|
| — |
|
|
| 50,719 |
|
|
| 1,009 |
|
|
| — |
|
|
| — |
|
|
| 50,719 |
|
|
| 1,009 |
|
|
| $ | 27,861 |
|
| $ | 804 |
|
| $ | 190 |
|
| $ | — |
|
| $ | 28,051 |
|
| $ | 804 |
|
| $ | 1,491,589 |
|
| $ | 57,435 |
|
| $ | 131,273 |
|
| $ | 9,623 |
|
| $ | 1,622,862 |
|
| $ | 67,058 |
|
Held to maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
December 31, 2021 |
| Losses < 12 months |
|
| Losses 12 months or > |
|
| Total |
| |||||||||||||||
|
|
|
|
| Gross |
|
|
|
|
| Gross |
|
|
|
|
| Gross |
| ||||||
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
| ||||||
(in thousands) |
| Value |
|
| Losses |
|
| Value |
|
| Losses |
|
| Value |
|
| Losses |
| ||||||
U.S. Treasury and government agency securities |
| $ | 14,837 |
|
| $ | 20 |
|
| $ | — |
|
| $ | — |
|
| $ | 14,837 |
|
| $ | 20 |
|
Municipal obligations |
|
| 7,795 |
|
|
| 205 |
|
|
| — |
|
|
| — |
|
|
| 7,795 |
|
|
| 205 |
|
Residential mortgage-backed securities |
|
| 253,661 |
|
|
| 1,499 |
|
|
| — |
|
|
| — |
|
|
| 253,661 |
|
|
| 1,499 |
|
Commercial mortgage-backed securities |
|
| 56,366 |
|
|
| 205 |
|
|
| 11,837 |
|
|
| 464 |
|
|
| 68,203 |
|
|
| 669 |
|
Collateralized mortgage obligations |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| $ | 332,659 |
|
| $ | 1,929 |
|
| $ | 11,837 |
|
| $ | 464 |
|
| $ | 344,496 |
|
| $ | 2,393 |
|
Held to maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020 |
| Losses < 12 months |
|
| Losses 12 months or > |
|
| Total |
| |||||||||||||||
|
|
|
|
|
| Gross |
|
|
|
|
|
| Gross |
|
|
|
|
|
| Gross |
| |||
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
| ||||||
(in thousands) |
| Value |
|
| Losses |
|
| Value |
|
| Losses |
|
| Value |
|
| Losses |
| ||||||
U.S. Treasury and government agency securities |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Municipal obligations |
|
| — |
|
|
| — |
|
|
| 2,381 |
|
|
| 2 |
|
|
| 2,381 |
|
|
| 2 |
|
Residential mortgage-backed securities |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Commercial mortgage-backed securities |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Collateralized mortgage obligations |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| $ | — |
|
| $ | — |
|
| $ | 2,381 |
|
| $ | 2 |
|
| $ | 2,381 |
|
| $ | 2 |
|
As of September 30, 2021March 31, 2022 and December 31, 2020,2021, the Company had 115 462and 28142 securities, respectively, with market values below their cost basis. None of the unrealized losses relate primarily to the marketability of the securities or the issuer’s ability to meet contractual obligations. In all cases, the indicated impairment on these debt securities would be recovered no later than the security’s maturity date or possibly earlier if the market price for the security increases with a reduction in the yield required by the market. The unrealized losses were deemed to be non-credit related at September 30, 2021March 31, 2022 and December 31, 2020.2021. The Company has adequate liquidity and, therefore does not plan to, and more likely than not, will not be required to liquidate these securities before recovery of the indicated impairment.
13
3. Loans and Allowance for Credit Losses
The Company generally makes loans in its market areas of south and central Mississippi; southern and central Alabama; northwest, central and south Louisiana; the northern, central and panhandle regions of Florida; certain areas of east and northeast Texas, including Houston, Beaumont, Dallas, and Dallas;San Antonio; and Nashville, Tennessee.
Loans, net of unearned income, by portfolio are presented at amortized cost basis in the table below. Amortized cost does not include accrued interest, which is reflected in the accrued interest line item in the Consolidated Balance Sheets, totaling $70.5$69.3 million and $76.2$67.8 million at September 30, 2021March 31, 2022 and December 31, 2020,2021, respectively. Included in commercial non-real estate loans at September 30, 2021March 31, 2022 and December 31, 2020 2021 was $935.3$334.8 million and $2.0 billion,and $531.1 million, respectively, of Paycheck Protection Program loans, described in more detail below. The following table presents loans, net of unearned income, by portfolio class at September 30, 2021March 31, 2022 and December 31, 2020.2021.
|
| March 31, |
|
| December 31, |
| ||
(in thousands) |
| 2022 |
|
| 2021 |
| ||
Commercial non-real estate |
| $ | 9,584,480 |
|
| $ | 9,612,460 |
|
Commercial real estate - owner occupied |
|
| 2,868,233 |
|
|
| 2,821,246 |
|
Total commercial and industrial |
|
| 12,452,713 |
|
|
| 12,433,706 |
|
Commercial real estate - income producing |
|
| 3,563,299 |
|
|
| 3,464,626 |
|
Construction and land development |
|
| 1,286,655 |
|
|
| 1,228,670 |
|
Residential mortgages |
|
| 2,462,900 |
|
|
| 2,423,890 |
|
Consumer |
|
| 1,557,774 |
|
|
| 1,583,390 |
|
Total loans |
| $ | 21,323,341 |
|
| $ | 21,134,282 |
|
|
| September 30, |
|
| December 31, |
| ||
(in thousands) |
| 2021 |
|
| 2020 |
| ||
Commercial non-real estate |
| $ | 9,416,990 |
|
| $ | 9,986,983 |
|
Commercial real estate - owner occupied |
|
| 2,812,926 |
|
|
| 2,857,445 |
|
Total commercial and industrial |
|
| 12,229,916 |
|
|
| 12,844,428 |
|
Commercial real estate - income producing |
|
| 3,467,939 |
|
|
| 3,357,939 |
|
Construction and land development |
|
| 1,213,991 |
|
|
| 1,065,057 |
|
Residential mortgages |
|
| 2,351,053 |
|
|
| 2,665,212 |
|
Consumer |
|
| 1,623,116 |
|
|
| 1,857,295 |
|
Total loans |
| $ | 20,886,015 |
|
| $ | 21,789,931 |
|
The following briefly describes the composition of each loan category and portfolio class.
Commercial and industrial
Commercial and industrial loans are made available to businesses for working capital (including financing of inventory and receivables), business expansion, to facilitate the acquisition of a business, and the purchase of equipment and machinery, including equipment leasing. These loans are primarily made based on the identified cash flows of the borrower and, when secured, have the added strength of the underlying collateral.
Commercial non-real estate loans may be secured by the assets being financed or other tangible or intangible business assets such as accounts receivable, inventory, ownership, enterprise value or commodity interests, and may incorporate a personal or corporate guarantee; however, some short-term loans may be made on an unsecured basis, including a small portfolio of corporate credit cards, generally issued as a part of overall customer relationships.
Commercial non-real estate loans also include loans made under the Small Business Administration’s (SBA) Paycheck Protection Program (PPP). PPP loans are guaranteed by the SBA and are forgivable to the debtor upon satisfaction of certain criteria. The loans bear interest at 1%1% per annum and have two or five year terms, depending on the date of origination. These loans also earn an origination fee of 1%1%, 3%, or 5%5%, depending on the loan size; this origination feesize, which is deferred and amortized over the estimated life of the loan using the effective yield method.
Commercial real estate – owner occupied loans consist of commercial mortgages on properties where repayment is generally dependent on the cash flow from the ongoing operations and activities of the borrower. Like commercial non-real estate, these loans are primarily made based on the identified cash flows of the borrower, but also have the added strength of the value of underlying real estate collateral.
Commercial real estate – income producing
Commercial real estate – income producing loans consist of loans secured by commercial mortgages on properties where the loan is made to real estate developers or investors and repayment is dependent on the sale, refinance, or income generated from the operation of the property. Properties financed include retail, office, multifamily, senior housing, hotel/motel, skilled nursing facilities and other commercial properties.
14
Construction and land development
Construction and land development loans are made to facilitate the acquisition, development, improvement and construction of both commercial and residential-purpose properties. Such loans are made to builders and investors where repayment is expected to be made from the sale, refinance or operation of the property or to businesses to be used in their business operations. This portfolio also includes residential construction loans and loans secured by raw land not yet under development.
Residential mortgages
Residential mortgages consist of closed-end loans secured by first liens on 1- 4 family residential properties. The portfolio includes both fixed and adjustable rate loans, although most longer term, fixed rate loans originated are sold in the secondary mortgage market.
Consumer
Consumer loans include second lien mortgage home loans, home equity lines of credit and nonresidential consumer purpose loans. Nonresidential consumer loans include both direct and indirect loans. Direct nonresidential consumer loans are made to finance the purchase of personal property, including automobiles, recreational vehicles and boats, and for other personal purposes (secured and unsecured), and deposit account secured loans. Indirect nonresidential consumer loans include automobile financing provided to the consumer through an agreement with automobile dealerships, though the Company is no longer engaged in this type of lending and the remaining portfolio is in runoff. Consumer loans also include a small portfolio of credit card receivables issued on the basis of applications received through referrals from the Bank’s branches, online and other marketing efforts.
Allowance for Credit Losses
The following tables present activity in the allowance for credit losses (ACL) by portfolio class for the nine months ended September 30, 2021 and 2020, as well as the corresponding recorded investment in loans at the end of each period. Effective January 1, 2020, the Company adopted the provisions of Accounting Standards Codification (ASC) 326, “Financial Instruments – Credit Losses,” using a modified retrospective basis. ASC 326, commonly referred to as CECL, prescribed a change in computing allowance for credit losses from an incurred methodology to a life of loan methodology. The difference between the December 31, 2019 incurred allowance and the CECL allowance is reflected as a cumulative effect of change in accounting principle in the ACL activity for the nine months ended September 30, 2020.
|
|
|
|
|
| Commercial |
|
| Total |
|
| Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
| Commercial |
|
| real estate- |
|
| commercial |
|
| real estate- |
|
| Construction |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
| non-real |
|
| owner |
|
| and |
|
| income |
|
| and land |
|
| Residential |
|
|
|
|
|
|
|
|
| ||||||
(in thousands) |
| estate |
|
| occupied |
|
| industrial |
|
| producing |
|
| development |
|
| mortgages |
|
| Consumer |
|
| Total |
| ||||||||
|
| Nine Months Ended September 30, 2021 |
| |||||||||||||||||||||||||||||
Allowance for credit losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
| $ | 149,693 |
|
| $ | 69,134 |
|
| $ | 218,827 |
|
| $ | 109,474 |
|
| $ | 26,462 |
|
| $ | 48,842 |
|
| $ | 46,572 |
|
| $ | 450,177 |
|
Charge-offs |
|
| (32,369 | ) |
|
| (1,722 | ) |
|
| (34,091 | ) |
|
| (231 | ) |
|
| (267 | ) |
|
| (218 | ) |
|
| (9,874 | ) |
|
| (44,681 | ) |
Recoveries |
|
| 6,579 |
|
|
| 363 |
|
|
| 6,942 |
|
|
| 100 |
|
|
| 1,548 |
|
|
| 933 |
|
|
| 4,636 |
|
|
| 14,159 |
|
Net provision for loan losses |
|
| (17,594 | ) |
|
| (10,642 | ) |
|
| (28,236 | ) |
|
| 11,752 |
|
|
| (5,167 | ) |
|
| (18,484 | ) |
|
| (7,999 | ) |
|
| (48,134 | ) |
Ending balance - allowance for loan losses |
| $ | 106,309 |
|
| $ | 57,133 |
|
| $ | 163,442 |
|
| $ | 121,095 |
|
| $ | 22,576 |
|
| $ | 31,073 |
|
| $ | 33,335 |
|
| $ | 371,521 |
|
Reserve for unfunded lending commitments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
| $ | 4,529 |
|
| $ | 381 |
|
| $ | 4,910 |
|
| $ | 1,099 |
|
| $ | 22,694 |
|
| $ | 19 |
|
| $ | 1,185 |
|
| $ | 29,907 |
|
Provision for losses on unfunded commitments |
|
| (176 | ) |
|
| (131 | ) |
|
| (307 | ) |
|
| 124 |
|
|
| (383 | ) |
|
| (8 | ) |
|
| (387 | ) |
|
| (961 | ) |
Ending balance - reserve for unfunded lending commitments |
|
| 4,353 |
|
|
| 250 |
|
|
| 4,603 |
|
|
| 1,223 |
|
|
| 22,311 |
|
|
| 11 |
|
|
| 798 |
|
|
| 28,946 |
|
Total allowance for credit losses |
| $ | 110,662 |
|
| $ | 57,383 |
|
| $ | 168,045 |
|
| $ | 122,318 |
|
| $ | 44,887 |
|
| $ | 31,084 |
|
| $ | 34,133 |
|
| $ | 400,467 |
|
Allowance for loan losses: |
|
|
| |||||||||||||||||||||||||||||
Individually evaluated |
| $ | 113 |
|
| $ | 33 |
|
| $ | 146 |
|
| $ | 20 |
|
| $ | 20 |
|
| $ | 447 |
|
| $ | 202 |
|
| $ | 835 |
|
Collectively evaluated |
|
| 106,196 |
|
|
| 57,100 |
|
|
| 163,296 |
|
|
| 121,075 |
|
|
| 22,556 |
|
|
| 30,626 |
|
|
| 33,133 |
|
|
| 370,686 |
|
Allowance for loan losses |
| $ | 106,309 |
|
| $ | 57,133 |
|
| $ | 163,442 |
|
| $ | 121,095 |
|
| $ | 22,576 |
|
| $ | 31,073 |
|
| $ | 33,335 |
|
| $ | 371,521 |
|
Reserve for unfunded lending commitments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Collectively evaluated |
|
| 4,353 |
|
|
| 250 |
|
|
| 4,603 |
|
|
| 1,223 |
|
|
| 22,311 |
|
|
| 11 |
|
|
| 798 |
|
|
| 28,946 |
|
Reserve for unfunded lending commitments: |
| $ | 4,353 |
|
| $ | 250 |
|
| $ | 4,603 |
|
| $ | 1,223 |
|
| $ | 22,311 |
|
| $ | 11 |
|
| $ | 798 |
|
| $ | 28,946 |
|
Total allowance for credit losses |
| $ | 110,662 |
|
| $ | 57,383 |
|
| $ | 168,045 |
|
| $ | 122,318 |
|
| $ | 44,887 |
|
| $ | 31,084 |
|
| $ | 34,133 |
|
| $ | 400,467 |
|
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated |
| $ | 5,929 |
|
| $ | 5,618 |
|
| $ | 11,547 |
|
| $ | 4,004 |
|
| $ | 127 |
|
| $ | 5,083 |
|
| $ | 1,315 |
|
| $ | 22,076 |
|
Collectively evaluated |
|
| 9,411,061 |
|
|
| 2,807,308 |
|
|
| 12,218,369 |
|
|
| 3,463,935 |
|
|
| 1,213,864 |
|
|
| 2,345,970 |
|
|
| 1,621,801 |
|
|
| 20,863,939 |
|
Total loans |
| $ | 9,416,990 |
|
| $ | 2,812,926 |
|
| $ | 12,229,916 |
|
| $ | 3,467,939 |
|
| $ | 1,213,991 |
|
| $ | 2,351,053 |
|
| $ | 1,623,116 |
|
| $ | 20,886,015 |
|
15
|
|
|
|
|
| Commercial |
|
| Total |
|
| Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
| Commercial |
|
| real estate- |
|
| commercial |
|
| real estate- |
|
| Construction |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
| non-real |
|
| owner |
|
| and |
|
| income |
|
| and land |
|
| Residential |
|
|
|
|
|
|
|
|
| ||||||
(in thousands) |
| estate |
|
| occupied |
|
| industrial |
|
| producing |
|
| development |
|
| mortgages |
|
| Consumer |
|
| Total |
| ||||||||
|
| Nine Months Ended September 30, 2020 |
| |||||||||||||||||||||||||||||
Allowance for credit losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
| $ | 106,432 |
|
| $ | 10,977 |
|
| $ | 117,409 |
|
| $ | 20,869 |
|
| $ | 9,350 |
|
| $ | 20,331 |
|
| $ | 23,292 |
|
| $ | 191,251 |
|
Cumulative effect of change in accounting principle |
|
| (244 | ) |
|
| 14,877 |
|
|
| 14,633 |
|
|
| 7,287 |
|
|
| 7,478 |
|
|
| 12,921 |
|
|
| 7,092 |
|
|
| 49,411 |
|
Charge-offs |
|
| (364,123 | ) |
|
| (1,828 | ) |
|
| (365,951 | ) |
|
| (2,211 | ) |
|
| (7 | ) |
|
| (170 | ) |
|
| (13,640 | ) |
|
| (381,979 | ) |
Recoveries |
|
| 4,831 |
|
|
| 659 |
|
|
| 5,490 |
|
|
| 46 |
|
|
| 549 |
|
|
| 1,078 |
|
|
| 4,360 |
|
|
| 11,523 |
|
Net provision for loan losses |
|
| 401,155 |
|
|
| 41,336 |
|
|
| 442,491 |
|
|
| 78,661 |
|
|
| 12,325 |
|
|
| 17,613 |
|
|
| 27,378 |
|
|
| 578,468 |
|
Ending balance - allowance for loan losses |
| $ | 148,051 |
|
| $ | 66,021 |
|
| $ | 214,072 |
|
| $ | 104,652 |
|
| $ | 29,695 |
|
| $ | 51,773 |
|
| $ | 48,482 |
|
| $ | 448,674 |
|
Reserve for unfunded lending commitments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
| $ | 3,974 |
|
| $ | — |
|
| $ | 3,974 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 3,974 |
|
Cumulative effect of change in accounting principle |
|
| 5,772 |
|
|
| 288 |
|
|
| 6,060 |
|
|
| 449 |
|
|
| 15,658 |
|
|
| 17 |
|
|
| 5,146 |
|
|
| 27,330 |
|
Provision for losses on unfunded commitments |
|
| (3,786 | ) |
|
| 187 |
|
|
| (3,599 | ) |
|
| 1,599 |
|
|
| 6,046 |
|
|
| (11 | ) |
|
| (3,813 | ) |
|
| 222 |
|
Ending balance - reserve for unfunded lending commitments |
|
| 5,960 |
|
|
| 475 |
|
|
| 6,435 |
|
|
| 2,048 |
|
|
| 21,704 |
|
|
| 6 |
|
|
| 1,333 |
|
|
| 31,526 |
|
Total allowance for credit losses |
| $ | 154,011 |
|
| $ | 66,496 |
|
| $ | 220,507 |
|
| $ | 106,700 |
|
| $ | 51,399 |
|
| $ | 51,779 |
|
| $ | 49,815 |
|
| $ | 480,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment |
| $ | 27,304 |
|
| $ | 1,344 |
|
| $ | 28,648 |
|
| $ | 24 |
|
| $ | 169 |
|
| $ | 416 |
|
| $ | 456 |
|
| $ | 29,713 |
|
Collectively evaluated for impairment |
|
| 120,747 |
|
|
| 64,677 |
|
|
| 185,424 |
|
|
| 104,628 |
|
|
| 29,526 |
|
|
| 51,357 |
|
|
| 48,026 |
|
|
| 418,961 |
|
Allowance for loan losses |
| $ | 148,051 |
|
| $ | 66,021 |
|
| $ | 214,072 |
|
| $ | 104,652 |
|
| $ | 29,695 |
|
| $ | 51,773 |
|
| $ | 48,482 |
|
| $ | 448,674 |
|
Reserve for unfunded lending commitments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated |
| $ | 992 |
|
| $ | — |
|
| $ | 992 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 5 |
|
| $ | 997 |
|
Collectively evaluated |
|
| 4,968 |
|
|
| 475 |
|
|
| 5,443 |
|
|
| 2,048 |
|
|
| 21,704 |
|
|
| 6 |
|
|
| 1,328 |
|
|
| 30,529 |
|
Reserve for unfunded lending commitments: |
|
| 5,960 |
|
|
| 475 |
|
|
| 6,435 |
|
|
| 2,048 |
|
|
| 21,704 |
|
|
| 6 |
|
|
| 1,333 |
|
|
| 31,526 |
|
Total allowance for credit losses |
| $ | 154,011 |
|
| $ | 66,496 |
|
| $ | 220,507 |
|
| $ | 106,700 |
|
| $ | 51,399 |
|
| $ | 51,779 |
|
| $ | 49,815 |
|
| $ | 480,200 |
|
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment |
| $ | 73,139 |
|
| $ | 11,124 |
|
| $ | 84,263 |
|
| $ | 5,549 |
|
| $ | 1,837 |
|
| $ | 6,064 |
|
| $ | 3,924 |
|
| $ | 101,637 |
|
Collectively evaluated for impairment |
|
| 10,184,649 |
|
|
| 2,768,283 |
|
|
| 12,952,932 |
|
|
| 3,401,005 |
|
|
| 1,094,312 |
|
|
| 2,748,324 |
|
|
| 1,941,994 |
|
|
| 22,138,567 |
|
Total loans |
| $ | 10,257,788 |
|
| $ | 2,779,407 |
|
| $ | 13,037,195 |
|
| $ | 3,406,554 |
|
| $ | 1,096,149 |
|
| $ | 2,754,388 |
|
| $ | 1,945,918 |
|
| $ | 22,240,204 |
|
The calculation of the allowance for credit losses is performed using two primary approaches: a collective approach for pools of loans that have similar risk characteristics using a loss rate analysis, and a specific reserve analysis for credits individually evaluated. The allowance for credit losses was developed using multiple Moody’s Analytics (“Moody’s)Moody’s") macroeconomic forecasts applied to internally developed credit models for a two year reasonable and supportable period. The following tables present activity in the allowance for credit losses (ACL) by portfolio class for the three months ended March 31, 2022 and 2021, as well as the corresponding recorded investment in loans at the end of each period.
15
|
|
|
|
| Commercial |
|
| Total |
|
| Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
| Commercial |
|
| real estate- |
|
| commercial |
|
| real estate- |
|
| Construction |
|
|
|
|
|
|
|
|
|
| ||||||||
|
| non-real |
|
| owner |
|
| and |
|
| income |
|
| and land |
|
| Residential |
|
|
|
|
|
|
| ||||||||
(in thousands) |
| estate |
|
| occupied |
|
| industrial |
|
| producing |
|
| development |
|
| mortgages |
|
| Consumer |
|
| Total |
| ||||||||
|
| Three Months Ended March 31, 2022 |
| |||||||||||||||||||||||||||||
Allowance for credit losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Beginning balance |
| $ | 95,888 |
|
| $ | 53,433 |
|
| $ | 149,321 |
|
| $ | 108,058 |
|
| $ | 22,102 |
|
| $ | 30,623 |
|
| $ | 31,961 |
|
| $ | 342,065 |
|
Charge-offs |
|
| (2,659 | ) |
|
| — |
|
|
| (2,659 | ) |
|
| (4 | ) |
|
| — |
|
|
| (42 | ) |
|
| (2,680 | ) |
|
| (5,385 | ) |
Recoveries |
|
| 2,142 |
|
|
| 389 |
|
|
| 2,531 |
|
|
| 878 |
|
|
| 68 |
|
|
| 61 |
|
|
| 1,528 |
|
|
| 5,066 |
|
Net provision for loan losses |
|
| (8,072 | ) |
|
| (5,361 | ) |
|
| (13,433 | ) |
|
| (3,565 | ) |
|
| (1,082 | ) |
|
| (4,307 | ) |
|
| (1,516 | ) |
|
| (23,903 | ) |
Ending balance - allowance for loan losses |
| $ | 87,299 |
|
| $ | 48,461 |
|
| $ | 135,760 |
|
| $ | 105,367 |
|
| $ | 21,088 |
|
| $ | 26,335 |
|
| $ | 29,293 |
|
| $ | 317,843 |
|
Reserve for unfunded lending commitments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Beginning balance |
| $ | 4,522 |
|
| $ | 323 |
|
| $ | 4,845 |
|
| $ | 1,694 |
|
| $ | 21,907 |
|
| $ | 22 |
|
| $ | 866 |
|
| $ | 29,334 |
|
Provision for losses on unfunded commitments |
|
| (246 | ) |
|
| 108 |
|
|
| (138 | ) |
|
| 453 |
|
|
| 474 |
|
|
| (3 | ) |
|
| 590 |
|
|
| 1,376 |
|
Ending balance - reserve for unfunded lending commitments |
|
| 4,276 |
|
|
| 431 |
|
|
| 4,707 |
|
|
| 2,147 |
|
|
| 22,381 |
|
|
| 19 |
|
|
| 1,456 |
|
|
| 30,710 |
|
Total allowance for credit losses |
| $ | 91,575 |
|
| $ | 48,892 |
|
| $ | 140,467 |
|
| $ | 107,514 |
|
| $ | 43,469 |
|
| $ | 26,354 |
|
| $ | 30,749 |
|
| $ | 348,553 |
|
Allowance for loan losses: |
|
|
| |||||||||||||||||||||||||||||
Individually evaluated |
| $ | 112 |
|
| $ | 32 |
|
| $ | 144 |
|
| $ | 20 |
|
| $ | 20 |
|
| $ | 408 |
|
| $ | 174 |
|
| $ | 766 |
|
Collectively evaluated |
|
| 87,187 |
|
|
| 48,429 |
|
|
| 135,616 |
|
|
| 105,347 |
|
|
| 21,068 |
|
|
| 25,927 |
|
|
| 29,119 |
|
|
| 317,077 |
|
Allowance for loan losses |
| $ | 87,299 |
|
| $ | 48,461 |
|
| $ | 135,760 |
|
| $ | 105,367 |
|
| $ | 21,088 |
|
| $ | 26,335 |
|
| $ | 29,293 |
|
| $ | 317,843 |
|
Reserve for unfunded lending commitments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Individually evaluated |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Collectively evaluated |
|
| 4,276 |
|
|
| 431 |
|
|
| 4,707 |
|
|
| 2,147 |
|
|
| 22,381 |
|
|
| 19 |
|
|
| 1,456 |
|
|
| 30,710 |
|
Reserve for unfunded lending commitments: |
| $ | 4,276 |
|
| $ | 431 |
|
| $ | 4,707 |
|
| $ | 2,147 |
|
| $ | 22,381 |
|
| $ | 19 |
|
| $ | 1,456 |
|
| $ | 30,710 |
|
Total allowance for credit losses |
| $ | 91,575 |
|
| $ | 48,892 |
|
| $ | 140,467 |
|
| $ | 107,514 |
|
| $ | 43,469 |
|
| $ | 26,354 |
|
| $ | 30,749 |
|
| $ | 348,553 |
|
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Individually evaluated |
| $ | 1,742 |
|
| $ | 951 |
|
| $ | 2,693 |
|
| $ | 1,309 |
|
| $ | 122 |
|
| $ | 4,534 |
|
| $ | 929 |
|
| $ | 9,587 |
|
Collectively evaluated |
|
| 9,582,738 |
|
|
| 2,867,282 |
|
|
| 12,450,020 |
|
|
| 3,561,990 |
|
|
| 1,286,533 |
|
|
| 2,458,366 |
|
|
| 1,556,845 |
|
|
| 21,313,754 |
|
Total loans |
| $ | 9,584,480 |
|
| $ | 2,868,233 |
|
| $ | 12,452,713 |
|
| $ | 3,563,299 |
|
| $ | 1,286,655 |
|
| $ | 2,462,900 |
|
| $ | 1,557,774 |
|
| $ | 21,323,341 |
|
In arriving at the calculation of the September 30, 2021March 31, 2022 allowance, the Company weighted the September 2021March 2022 baseline economic forecast, which Moody’s defines as the “most likely outcome” based on current conditions and its view of where the economy is headed, at 50%.with a 40% probability. The September 2021March 31, 2022 baseline scenario assumes: (1) coronavirus herd resiliency wasassumesCOVID-19 infections have already abated; the disruption to the U.S. economy from the Russian invasion of Ukraine will be limited and temporary; the legislature passes a $600 billion social and climate package; full-employment economy being achieved in late August 2021, with infection abatement in November 2021; (2) no new widespread economic shutdowns will occur in response to virus outbreaks; (3) the unemployment rate2022 or early 2023; GDP continues to decline, with fourth quarter 2021 averaging 4.5%, and full year 2021, 2022 and 2023 rates averaging 5.5%, 3.6% and 3.5%, respectively; (4) gross domestic product will increase an average of 6.0% in 2021, 4.3%grow between 3%-3.5% in 2022 and 2.3% in 2023; (5) the Build Back Better infrastructure and social legislation package, forecasted to be passed in late 2021 at $2.5 trillion, will provide an additional boost to the economy; and (6) the Federal Reserve will continue to respondhas four 25-basis point interest rate increases in 2022. Alternative Moody’s forecast scenarios have varying depictions of economic performance as compared to the baseline. Consistent with our December 31, 2021 calculation, management determined that assumptions provided for in the downside slower near-term growth (S-2) to be somewhat more likely than the baseline scenario; as such, the S-2 scenario was given a 60% probability weighting in the allowance for credit losses calculation at March 31, 2022. The S-2 scenario assumes that, when compared to baseline, the conflict between Russian and Ukraine spans longer than anticipated and that global supply chain issues worsen, prompting a higher rate of inflation, and as a result, the Federal Reserve raises interest rates more often, generating corrections in equity markets and declines in spending. Further, the S-2 scenario assumes the economic impactlegislation package will be less effective; unemployment begins to rise in the second quarter of 2022, with the return to full employment not occurring until the fourth quarter of 2023; and the number of COVID-19 by maintaining ratescases slows consumer spending on retail goods and travel and leisure activities. Despite the lingering economic effects of the COVID-19 pandemic and the emergence of new risks stemming from geopolitical conflict, overall credit loss outlook on our portfolio has not changed materially since year-end. Positive economic indicators of growth in our markets, continued improvements in our asset quality metrics and minimal credit losses in recent periods allowed for a release of credit loss reserves across all portfolios at or near 0 untilMarch 31, 2022.
16
|
|
|
|
| Commercial |
|
| Total |
|
| Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
| Commercial |
|
| real estate- |
|
| commercial |
|
| real estate- |
|
| Construction |
|
|
|
|
|
|
|
|
|
| ||||||||
|
| non-real |
|
| owner |
|
| and |
|
| income |
|
| and land |
|
| Residential |
|
|
|
|
|
|
| ||||||||
(in thousands) |
| estate |
|
| occupied |
|
| industrial |
|
| producing |
|
| development |
|
| mortgages |
|
| Consumer |
|
| Total |
| ||||||||
|
| Three Months Ended March 31, 2021 |
| |||||||||||||||||||||||||||||
Allowance for credit losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Beginning balance |
| $ | 149,693 |
|
| $ | 69,134 |
|
| $ | 218,827 |
|
| $ | 109,474 |
|
| $ | 26,462 |
|
| $ | 48,842 |
|
| $ | 46,572 |
|
| $ | 450,177 |
|
Charge-offs |
|
| (17,512 | ) |
|
| (347 | ) |
|
| (17,859 | ) |
|
| (194 | ) |
|
| (248 | ) |
|
| (109 | ) |
|
| (3,694 | ) |
|
| (22,104 | ) |
Recoveries |
|
| 1,899 |
|
|
| 37 |
|
|
| 1,936 |
|
|
| — |
|
|
| 159 |
|
|
| 206 |
|
|
| 1,549 |
|
|
| 3,850 |
|
Net provision for loan losses |
|
| (5,144 | ) |
|
| (2,301 | ) |
|
| (7,445 | ) |
|
| 6,899 |
|
|
| (1,200 | ) |
|
| (6,420 | ) |
|
| 603 |
|
|
| (7,563 | ) |
Ending balance - allowance for loan losses |
| $ | 128,936 |
|
| $ | 66,523 |
|
| $ | 195,459 |
|
| $ | 116,179 |
|
| $ | 25,173 |
|
| $ | 42,519 |
|
| $ | 45,030 |
|
| $ | 424,360 |
|
Reserve for unfunded lending commitments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Beginning balance |
| $ | 4,529 |
|
| $ | 381 |
|
| $ | 4,910 |
|
| $ | 1,099 |
|
| $ | 22,694 |
|
| $ | 19 |
|
| $ | 1,185 |
|
| $ | 29,907 |
|
Provision for losses on unfunded commitments |
|
| 2,642 |
|
|
| 131 |
|
|
| 2,773 |
|
|
| 439 |
|
|
| (617 | ) |
|
| 3 |
|
|
| 54 |
|
|
| 2,652 |
|
Ending balance - reserve for unfunded lending commitments |
|
| 7,171 |
|
|
| 512 |
|
|
| 7,683 |
|
|
| 1,538 |
|
|
| 22,077 |
|
|
| 22 |
|
|
| 1,239 |
|
|
| 32,559 |
|
Total allowance for credit losses |
| $ | 136,107 |
|
| $ | 67,035 |
|
| $ | 203,142 |
|
| $ | 117,717 |
|
| $ | 47,250 |
|
| $ | 42,541 |
|
| $ | 46,269 |
|
| $ | 456,919 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Individually evaluated for impairment |
| $ | 4,564 |
|
| $ | 1,242 |
|
| $ | 5,806 |
|
| $ | 22 |
|
| $ | 21 |
|
| $ | 486 |
|
| $ | 739 |
|
| $ | 7,074 |
|
Collectively evaluated for impairment |
|
| 124,372 |
|
|
| 65,281 |
|
|
| 189,653 |
|
|
| 116,157 |
|
|
| 25,152 |
|
|
| 42,033 |
|
|
| 44,291 |
|
|
| 417,286 |
|
Allowance for loan losses |
| $ | 128,936 |
|
| $ | 66,523 |
|
| $ | 195,459 |
|
| $ | 116,179 |
|
| $ | 25,173 |
|
| $ | 42,519 |
|
| $ | 45,030 |
|
| $ | 424,360 |
|
Reserve for unfunded lending commitments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Individually evaluated |
| $ | 190 |
|
| $ | 51 |
|
| $ | 241 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 241 |
|
Collectively evaluated |
|
| 6,981 |
|
|
| 461 |
|
|
| 7,442 |
|
|
| 1,538 |
|
|
| 22,077 |
|
|
| 22 |
|
|
| 1,239 |
|
|
| 32,318 |
|
Reserve for unfunded lending commitments: |
| $ | 7,171 |
|
| $ | 512 |
|
| $ | 7,683 |
|
| $ | 1,538 |
|
| $ | 22,077 |
|
| $ | 22 |
|
| $ | 1,239 |
|
| $ | 32,559 |
|
Total allowance for credit losses |
| $ | 136,107 |
|
| $ | 67,035 |
|
| $ | 203,142 |
|
| $ | 117,717 |
|
| $ | 47,250 |
|
| $ | 42,541 |
|
| $ | 46,269 |
|
| $ | 456,919 |
|
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Individually evaluated for impairment |
| $ | 20,132 |
|
| $ | 10,047 |
|
| $ | 30,179 |
|
| $ | 4,363 |
|
| $ | 131 |
|
| $ | 5,241 |
|
| $ | 2,779 |
|
| $ | 42,693 |
|
Collectively evaluated for impairment |
|
| 10,071,210 |
|
|
| 2,785,057 |
|
|
| 12,856,267 |
|
|
| 3,406,665 |
|
|
| 1,122,010 |
|
|
| 2,483,551 |
|
|
| 1,753,673 |
|
|
| 21,622,166 |
|
Total loans |
| $ | 10,091,342 |
|
| $ | 2,795,104 |
|
| $ | 12,886,446 |
|
| $ | 3,411,028 |
|
| $ | 1,122,141 |
|
| $ | 2,488,792 |
|
| $ | 1,756,452 |
|
| $ | 21,664,859 |
|
The modest release across most portfolios during the first quarter of 2023. The downside scenario S-2 was weighted at 50% to incorporate a reasonably possible alternative economic outcome. The S-2 scenario2021 reflects a slower economic recovery as compared to the baseline, with key assumptions that include a delay in infection abatement, continued supply chain disruptions, a scaled back stimulus package resulting in less of a rise in real consumer spending and a near-term rise in unemployment that impedes growth in late 2021 and in 2022. The modest release during the third quarter of 2021 reflects improvements in the economic forecast. The continued elevated allowance level iswas a result of uncertainty surrounding paymentfuture performance of borrowers in certain regions and/or industries that have not returned to pre-pandemic circumstances and as the impact of federal stimulus diminishes and modifications expire. In arriving at the allowance for credit losses at March 31, 2021, the Company weighted the baseline economic forecast at 65% and the downside slower near-term growth scenario S-2 at 35%.
16
17
Nonaccrual loans and loans modified in troubled debt restructurings
The following table shows the composition of nonaccrual loans and those without an allowance for loan loss, by portfolio class.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
| March 31, |
|
|
| December 31, |
| ||||||||||||
|
| 2022 |
|
|
| 2021 |
| |||||||||||||
(in thousands) |
|
| Total nonaccrual |
|
|
| Nonaccrual without allowance for loan loss |
|
|
| Total nonaccrual |
|
|
| Nonaccrual without allowance for loan loss |
| ||||
Commercial non-real estate |
| $ |
| 5,312 |
|
| $ |
| 1,247 |
|
| $ |
| 6,974 |
|
| $ |
| 1,264 |
|
Commercial real estate - owner occupied |
|
|
| 2,749 |
|
|
|
| 716 |
|
|
|
| 4,921 |
|
|
|
| 729 |
|
Total commercial and industrial |
|
|
| 8,061 |
|
|
|
| 1,963 |
|
|
|
| 11,895 |
|
|
|
| 1,993 |
|
Commercial real estate - income producing |
|
|
| 1,956 |
|
|
|
| 1,233 |
|
|
|
| 5,458 |
|
|
|
| 5,207 |
|
Construction and land development |
|
|
| 584 |
|
|
|
| — |
|
|
|
| 844 |
|
|
|
| — |
|
Residential mortgages |
|
|
| 22,744 |
|
|
|
| 1,287 |
|
|
|
| 25,439 |
|
|
|
| 1,997 |
|
Consumer |
|
|
| 9,094 |
|
|
|
| 5 |
|
|
|
| 11,887 |
|
|
|
| 48 |
|
Total loans |
| $ |
| 42,439 |
|
| $ |
| 4,488 |
|
| $ |
| 55,523 |
|
| $ |
| 9,245 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
| September 30, |
|
|
| December 31, |
| ||||||||||||
|
| 2021 |
|
|
| 2020 |
| |||||||||||||
(in thousands) |
|
| Total nonaccrual |
|
|
| Nonaccrual without allowance for loan loss |
|
|
| Total nonaccrual |
|
|
| Nonaccrual without allowance for loan loss |
| ||||
Commercial non-real estate |
| $ |
| 9,948 |
|
| $ |
| 5,449 |
|
| $ |
| 52,836 |
|
| $ |
| 15,268 |
|
Commercial real estate - owner occupied |
|
|
| 6,720 |
|
|
|
| 5,379 |
|
|
|
| 13,856 |
|
|
|
| 7,038 |
|
Total commercial and industrial |
|
|
| 16,668 |
|
|
|
| 10,828 |
|
|
|
| 66,692 |
|
|
|
| 22,306 |
|
Commercial real estate - income producing |
|
|
| 4,249 |
|
|
|
| 3,922 |
|
|
|
| 6,743 |
|
|
|
| — |
|
Construction and land development |
|
|
| 1,238 |
|
|
|
| — |
|
|
|
| 2,486 |
|
|
|
| 1,116 |
|
Residential mortgages |
|
|
| 25,964 |
|
|
|
| 1,598 |
|
|
|
| 40,573 |
|
|
|
| 1,705 |
|
Consumer |
|
|
| 12,238 |
|
|
|
| 250 |
|
|
|
| 23,385 |
|
|
|
| — |
|
Total loans |
| $ |
| 60,357 |
|
| $ |
| 16,598 |
|
| $ |
| 139,879 |
|
| $ |
| 25,127 |
|
Nonaccrual loans include nonaccruing loans modified in troubled debt restructurings (“TDRs”) of $7.2$3.6 million and $21.6$6.8 million at September 30, 2021March 31, 2022 and December 31, 2020,2021, respectively. Total TDRs, both accruing and nonaccruing, were $10.3$6.5 million at September 30, 2021March 31, 2022 and $25.8$10.6 million at December 31, 2020.2021. All TDRs are individually evaluated for credit loss. At September 30,March 31, 2022 and December 31, 2021, the Company had 0 unfunded commitments to borrowers whose loan terms have been modified in a TDR and $4.6 million at December 31, 2020.TDR.
The tablestable below provides detail by portfolio class TDRs that were modified during the three and nine months ended September 30, 2021March 31, 2022 and 2020.2021. All such loans are individually evaluated for credit loss.
|
| Three Months Ended |
|
| Three Months Ended |
| ||||||||||||||||||||||||||||||||||||||||||
($ in thousands) |
| September 30, 2021 |
|
| September 30, 2020 |
|
| March 31, 2022 |
|
| March 31, 2021 |
| ||||||||||||||||||||||||||||||||||||
Troubled Debt Restructurings: |
| Number of Contracts |
|
| Pre- Modification Outstanding Recorded Investment |
|
| Post- Modification Outstanding Recorded Investment |
|
| Number of Contracts |
|
| Pre- Modification Outstanding Recorded Investment |
|
| Post- Modification Outstanding Recorded Investment |
|
| Number |
|
| Pre- |
|
| Post- |
|
| Number |
|
| Pre- |
|
| Post- |
| ||||||||||||
Commercial non-real estate |
|
| — |
|
| $ | — |
|
| $ | — |
|
|
| — |
|
| $ | — |
|
| $ | — |
|
| — |
| $ | — |
| $ | — |
| 3 |
| $ | 6,935 |
| $ | 6,935 |
| |||||||
Commercial real estate - owner occupied |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
| — |
| |
Total commercial and industrial |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3 |
|
|
| 6,935 |
|
|
| 6,935 |
|
Commercial real estate - income producing |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
| — |
|
|
| — |
|
|
| — |
| — |
|
|
| — |
|
|
| — |
| |||
Construction and land development |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
| — |
| — |
| — |
| — |
| — |
| — |
| |||||||||||
Residential mortgages |
|
| 1 |
|
|
| 196 |
|
|
| 196 |
|
|
| 5 |
|
|
| 1,358 |
|
|
| 1,358 |
|
| 2 |
| 110 |
| 115 |
| 1 |
| 210 |
| 210 |
| |||||||||||
Consumer |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2 |
|
|
| 25 |
|
|
| 25 |
|
|
| 2 |
|
|
| 73 |
|
|
| 73 |
|
|
| 1 |
|
|
| 54 |
|
|
| 54 |
|
Total loans |
|
| 1 |
|
| $ | 196 |
|
| $ | 196 |
|
|
| 7 |
|
| $ | 1,383 |
|
| $ | 1,383 |
|
|
| 4 |
|
| $ | 183 |
|
| $ | 188 |
|
|
| 5 |
|
| $ | 7,199 |
|
| $ | 7,199 |
|
|
| Nine Months Ended |
| |||||||||||||||||||||
($ in thousands) |
| September 30, 2021 |
|
| September 30, 2020 |
| ||||||||||||||||||
|
|
|
|
|
| Pre- Modification |
|
| Post- Modification |
|
|
|
|
|
| Pre- Modification |
|
| Post- Modification |
| ||||
|
| Number |
|
| Outstanding |
|
| Outstanding |
|
| Number |
|
| Outstanding |
|
| Outstanding |
| ||||||
|
| of |
|
| Recorded |
|
| Recorded |
|
| of |
|
| Recorded |
|
| Recorded |
| ||||||
Troubled Debt Restructurings: |
| Contracts |
|
| Investment |
|
| Investment |
|
| Contracts |
|
| Investment |
|
| Investment |
| ||||||
Commercial non-real estate |
|
| 3 |
|
| $ | 6,935 |
|
| $ | 6,935 |
|
|
| 3 |
|
| $ | 745 |
|
| $ | 745 |
|
Commercial real estate - owner occupied |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total commercial and industrial |
|
| 3 |
|
|
| 6,935 |
|
|
| 6,935 |
|
|
| 3 |
|
|
| 745 |
|
|
| 745 |
|
Commercial real estate - income producing |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Construction and land development |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1 |
|
|
| 15 |
|
|
| 15 |
|
Residential mortgages |
|
| 3 |
|
|
| 515 |
|
|
| 538 |
|
|
| 14 |
|
|
| 3,424 |
|
|
| 3,424 |
|
Consumer |
|
| 4 |
|
|
| 86 |
|
|
| 86 |
|
|
| 7 |
|
|
| 89 |
|
|
| 89 |
|
Total loans |
|
| 10 |
|
| $ | 7,536 |
|
| $ | 7,559 |
|
|
| 25 |
|
| $ | 4,273 |
|
| $ | 4,273 |
|
17
The TDRs modified during the ninethree months ended September 30, 2021March 31, 2022 reflected in the table above include $7.1$0.1 million of loans with interest rate reduction and $0.1 million with other modifications. The TDRs modified during the three months ended March 31, 2021 include $1.9 million of loans with extended amortization terms or other payment concessions, and $0.5 million of loans with other modifications. The TDRs modified during the nine months ended September 30, 2020 include $0.7 million of loans with extended amortization terms or other payment concessions, $1.1 million with reduced interest rates, $0.4 million with significant covenant waivers, and $2.1$5.3 million with other modifications.
NaN residential mortgage loan commercial non-real estate loans totaling $0.6$3.1 million that defaulted during the ninethree months period ended March 31, 2022 had been modified in a TDR during the twelve months prior to default.NaN residential loan totaling $0.6 million that defaulted during the three months ended September 30,March 31, 2021 had been modified in a TDR during the twelve months prior to default.
18
NaNcommercial non-real estate loan totaling $0.4 million, 1 residential mortgage loan totaling $0.6 million and 2 consumer loans totaling $0.2 million that defaulted during
The TDR disclosures for the ninethree months ended September 30, 2020 had been modified in a TDR during the twelve months prior to default.
The TDR disclosures aboveMarch 31, 2021 do not include loans eligible for exclusion from TDR assessment under Section 4013 of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). Loans modified under the CARES Act are, which expired on December 31, 2021. Any such loan having an eligible modification was reported in the aging analysis that follows based on the modified terms.
Aging Analysis
The tables below present the aging analysis of past due loans by portfolio class at September 30, 2021March 31, 2022 and December 31, 2020.2021.
September 30, 2021 |
| 30-59 days past due |
|
| 60-89 days past due |
|
| Greater than 90 days past due |
|
| Total past due |
|
| Current |
|
| Total Loans |
|
| Recorded investment > 90 days and still accruing |
| |||||||||||||||||||||||||||||||||||
March 31, 2022 |
| 30-59 |
|
| 60-89 |
|
| Greater |
|
| Total |
|
| Current |
|
| Total |
|
| Recorded |
| |||||||||||||||||||||||||||||||||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Commercial non-real estate |
| $ | 5,623 |
|
| $ | 2,100 |
|
| $ | 14,568 |
|
| $ | 22,291 |
|
| $ | 9,394,699 |
|
| $ | 9,416,990 |
|
| $ | 7,228 |
|
| $ | 7,206 |
| $ | 2,033 |
| $ | 5,247 |
| $ | 14,486 |
| $ | 9,569,994 |
| $ | 9,584,480 |
| $ | 701 |
| ||||||
Commercial real estate - owner occupied |
|
| 5,761 |
|
|
| 762 |
|
|
| 1,548 |
|
|
| 8,071 |
|
|
| 2,804,855 |
|
|
| 2,812,926 |
|
|
| 142 |
|
|
| 2,443 |
|
|
| 1,245 |
|
|
| 3,153 |
|
|
| 6,841 |
|
|
| 2,861,392 |
|
|
| 2,868,233 |
|
|
| 1,721 |
|
Total commercial and industrial |
|
| 11,384 |
|
|
| 2,862 |
|
|
| 16,116 |
|
|
| 30,362 |
|
|
| 12,199,554 |
|
|
| 12,229,916 |
|
|
| 7,370 |
|
|
| 9,649 |
|
|
| 3,278 |
|
|
| 8,400 |
|
|
| 21,327 |
|
|
| 12,431,386 |
|
|
| 12,452,713 |
|
|
| 2,422 |
|
Commercial real estate - income producing |
|
| 1,175 |
|
|
| 1,474 |
|
|
| 5,441 |
|
|
| 8,090 |
|
|
| 3,459,849 |
|
|
| 3,467,939 |
|
|
| 1,346 |
|
| 1,769 |
| 9 |
| 1,870 |
| 3,648 |
| 3,559,651 |
| 3,563,299 |
| — |
| |||||||||||||
Construction and land development |
|
| 369 |
|
|
| 733 |
|
|
| 1,035 |
|
|
| 2,137 |
|
|
| 1,211,854 |
|
|
| 1,213,991 |
|
|
| 57 |
|
| 8,470 |
| 99 |
| 333 |
| 8,902 |
| 1,277,753 |
| 1,286,655 |
| 3 |
| |||||||||||||
Residential mortgages |
|
| 3,799 |
|
|
| 5,579 |
|
|
| 17,567 |
|
|
| 26,945 |
|
|
| 2,324,108 |
|
|
| 2,351,053 |
|
|
| 254 |
|
| 29,874 |
| 2,766 |
| 9,723 |
| 42,363 |
| 2,420,537 |
| 2,462,900 |
| 209 |
| |||||||||||||
Consumer |
|
| 13,750 |
|
|
| 3,108 |
|
|
| 7,331 |
|
|
| 24,189 |
|
|
| 1,598,927 |
|
|
| 1,623,116 |
|
|
| 943 |
|
|
| 7,093 |
|
|
| 2,743 |
|
|
| 4,666 |
|
|
| 14,502 |
|
|
| 1,543,272 |
|
|
| 1,557,774 |
|
|
| 1,634 |
|
Total |
| $ | 30,477 |
|
| $ | 13,756 |
|
| $ | 47,490 |
|
| $ | 91,723 |
|
| $ | 20,794,292 |
|
| $ | 20,886,015 |
|
| $ | 9,970 |
|
| $ | 56,855 |
|
| $ | 8,895 |
|
| $ | 24,992 |
|
| $ | 90,742 |
|
| $ | 21,232,599 |
|
| $ | 21,323,341 |
|
| $ | 4,268 |
|
December 31, 2021 |
| 30-59 |
|
| 60-89 |
|
| Greater |
|
| Total |
|
| Current |
|
| Total |
|
| Recorded |
| |||||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Commercial non-real estate |
| $ | 8,381 |
|
| $ | 3,123 |
|
| $ | 7,041 |
|
| $ | 18,545 |
|
| $ | 9,593,915 |
|
| $ | 9,612,460 |
|
| $ | 2,818 |
|
Commercial real estate - owner occupied |
|
| 704 |
|
|
| 653 |
|
|
| 1,563 |
|
|
| 2,920 |
|
|
| 2,818,326 |
|
|
| 2,821,246 |
|
|
| 142 |
|
Total commercial and industrial |
|
| 9,085 |
|
|
| 3,776 |
|
|
| 8,604 |
|
|
| 21,465 |
|
|
| 12,412,241 |
|
|
| 12,433,706 |
|
|
| 2,960 |
|
Commercial real estate - income producing |
|
| 281 |
|
|
| 107 |
|
|
| 5,307 |
|
|
| 5,695 |
|
|
| 3,458,931 |
|
|
| 3,464,626 |
|
|
| — |
|
Construction and land development |
|
| 2,624 |
|
|
| 1,022 |
|
|
| 587 |
|
|
| 4,233 |
|
|
| 1,224,437 |
|
|
| 1,228,670 |
|
|
| 83 |
|
Residential mortgages |
|
| 23,306 |
|
|
| 4,638 |
|
|
| 15,339 |
|
|
| 43,283 |
|
|
| 2,380,607 |
|
|
| 2,423,890 |
|
|
| 310 |
|
Consumer |
|
| 6,806 |
|
|
| 2,805 |
|
|
| 7,447 |
|
|
| 17,058 |
|
|
| 1,566,332 |
|
|
| 1,583,390 |
|
|
| 2,171 |
|
Total |
| $ | 42,102 |
|
| $ | 12,348 |
|
| $ | 37,284 |
|
| $ | 91,734 |
|
| $ | 21,042,548 |
|
| $ | 21,134,282 |
|
| $ | 5,524 |
|
December 31, 2020 |
| 30-59 days past due |
|
| 60-89 days past due |
|
| Greater than 90 days past due |
|
| Total past due |
|
| Current |
|
| Total Loans |
|
| Recorded investment > 90 days and still accruing |
| |||||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial non-real estate |
| $ | 7,963 |
|
| $ | 2,564 |
|
| $ | 39,530 |
|
| $ | 50,057 |
|
| $ | 9,936,926 |
|
| $ | 9,986,983 |
|
| $ | 583 |
|
Commercial real estate - owner occupied |
|
| 1,525 |
|
|
| 753 |
|
|
| 13,663 |
|
|
| 15,941 |
|
|
| 2,841,504 |
|
|
| 2,857,445 |
|
|
| 955 |
|
Total commercial and industrial |
|
| 9,488 |
|
|
| 3,317 |
|
|
| 53,193 |
|
|
| 65,998 |
|
|
| 12,778,430 |
|
|
| 12,844,428 |
|
|
| 1,538 |
|
Commercial real estate - income producing |
|
| 1,494 |
|
|
| 798 |
|
|
| 5,744 |
|
|
| 8,036 |
|
|
| 3,349,903 |
|
|
| 3,357,939 |
|
|
| 182 |
|
Construction and land development |
|
| 4,168 |
|
|
| 284 |
|
|
| 2,001 |
|
|
| 6,453 |
|
|
| 1,058,604 |
|
|
| 1,065,057 |
|
|
| — |
|
Residential mortgages |
|
| 29,319 |
|
|
| 9,858 |
|
|
| 27,886 |
|
|
| 67,063 |
|
|
| 2,598,149 |
|
|
| 2,665,212 |
|
|
| 912 |
|
Consumer |
|
| 12,215 |
|
|
| 5,012 |
|
|
| 11,714 |
|
|
| 28,941 |
|
|
| 1,828,354 |
|
|
| 1,857,295 |
|
|
| 729 |
|
Total |
| $ | 56,684 |
|
| $ | 19,269 |
|
| $ | 100,538 |
|
| $ | 176,491 |
|
| $ | 21,613,440 |
|
| $ | 21,789,931 |
|
| $ | 3,361 |
|
18
19
Credit Quality Indicators
The following tables present the credit quality indicators by segment and portfolio class of loans held for investment at September 30, 2021March 31, 2022 and December 31, 2020.2021. The Company routinely assesses the ratings of loans in its portfolio through an established and comprehensive portfolio management process. In addition, the Company often examines portfolios of loans to determine if there are areas of risk not specifically identified in its loan by loan approach.
|
| September 30, 2021 |
|
| March 31, 2022 |
| ||||||||||||||||||||||||||||||||||||||||||
(in thousands) |
| Commercial non-real estate |
|
| Commercial real estate - owner- occupied |
|
| Total commercial and industrial |
|
| Commercial real estate - income producing |
|
| Construction and land development |
|
| Total commercial |
|
| Commercial |
|
| Commercial |
|
| Total |
|
| Commercial |
|
| Construction |
|
| Total |
| ||||||||||||
Grade: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Pass |
| $ | 9,032,981 |
|
| $ | 2,659,738 |
|
| $ | 11,692,719 |
|
| $ | 3,363,503 |
|
| $ | 1,190,718 |
|
| $ | 16,246,940 |
|
| $ | 9,223,834 |
| $ | 2,707,795 |
| $ | 11,931,629 |
| $ | 3,494,699 |
| $ | 1,260,421 |
| $ | 16,686,749 |
| |||||
Pass-Watch |
|
| 204,260 |
|
|
| 68,660 |
|
|
| 272,920 |
|
|
| 79,328 |
|
|
| 19,048 |
|
|
| 371,296 |
|
| 186,008 |
| 72,436 |
| 258,444 |
| 50,088 |
| 24,916 |
| 333,448 |
| |||||||||||
Special Mention |
|
| 46,263 |
|
|
| 24,878 |
|
|
| 71,141 |
|
|
| 4,739 |
|
|
| 1,887 |
|
|
| 77,767 |
|
| 52,307 |
| 19,770 |
| 72,077 |
| 3,615 |
| 566 |
| 76,258 |
| |||||||||||
Substandard |
|
| 133,486 |
|
|
| 59,650 |
|
|
| 193,136 |
|
|
| 20,369 |
|
|
| 2,338 |
|
|
| 215,843 |
|
| 122,331 |
| 68,232 |
| 190,563 |
| 14,897 |
| 752 |
| 206,212 |
| |||||||||||
Doubtful |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total |
| $ | 9,416,990 |
|
| $ | 2,812,926 |
|
| $ | 12,229,916 |
|
| $ | 3,467,939 |
|
| $ | 1,213,991 |
|
| $ | 16,911,846 |
|
| $ | 9,584,480 |
|
| $ | 2,868,233 |
|
| $ | 12,452,713 |
|
| $ | 3,563,299 |
|
| $ | 1,286,655 |
|
| $ | 17,302,667 |
|
|
| December 31, 2021 |
| |||||||||||||||||||||
(in thousands) |
| Commercial |
|
| Commercial |
|
| Total |
|
| Commercial |
|
| Construction |
|
| Total |
| ||||||
Grade: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Pass |
| $ | 9,279,719 |
|
| $ | 2,650,399 |
|
| $ | 11,930,118 |
|
| $ | 3,373,099 |
|
| $ | 1,216,177 |
|
| $ | 16,519,394 |
|
Pass-Watch |
|
| 157,815 |
|
|
| 86,133 |
|
|
| 243,948 |
|
|
| 67,157 |
|
|
| 9,289 |
|
|
| 320,394 |
|
Special Mention |
|
| 43,344 |
|
|
| 23,377 |
|
|
| 66,721 |
|
|
| 4,466 |
|
|
| 1,909 |
|
|
| 73,096 |
|
Substandard |
|
| 131,582 |
|
|
| 61,337 |
|
|
| 192,919 |
|
|
| 19,904 |
|
|
| 1,295 |
|
|
| 214,118 |
|
Doubtful |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total |
| $ | 9,612,460 |
|
| $ | 2,821,246 |
|
| $ | 12,433,706 |
|
| $ | 3,464,626 |
|
| $ | 1,228,670 |
|
| $ | 17,127,002 |
|
| December 31, 2020 |
| ||||||||||||||||||||||
(in thousands) |
| Commercial non-real estate |
|
| Commercial real estate - owner- occupied |
|
| Total commercial and industrial |
|
| Commercial real estate - income producing |
|
| Construction and land development |
|
| Total commercial |
| ||||||
Grade: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
| $ | 9,439,264 |
|
| $ | 2,641,423 |
|
| $ | 12,080,687 |
|
| $ | 3,219,155 |
|
| $ | 1,033,060 |
|
| $ | 16,332,902 |
|
Pass-Watch |
|
| 314,739 |
|
|
| 114,358 |
|
|
| 429,097 |
|
|
| 89,968 |
|
|
| 22,820 |
|
|
| 541,885 |
|
Special Mention |
|
| 79,613 |
|
|
| 46,239 |
|
|
| 125,852 |
|
|
| 5,989 |
|
|
| 5,751 |
|
|
| 137,592 |
|
Substandard |
|
| 153,367 |
|
|
| 55,425 |
|
|
| 208,792 |
|
|
| 42,827 |
|
|
| 3,426 |
|
|
| 255,045 |
|
Doubtful |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total |
| $ | 9,986,983 |
|
| $ | 2,857,445 |
|
| $ | 12,844,428 |
|
| $ | 3,357,939 |
|
| $ | 1,065,057 |
|
| $ | 17,267,424 |
|
|
| March 31, 2022 |
|
| December 31, 2021 |
| ||||||||||||||||||
(in thousands) |
| Residential |
|
| Consumer |
|
| Total |
|
| Residential |
|
| Consumer |
|
| Total |
| ||||||
Performing |
| $ | 2,438,792 |
|
| $ | 1,547,751 |
|
| $ | 3,986,543 |
|
| $ | 2,396,282 |
|
| $ | 1,570,516 |
|
| $ | 3,966,798 |
|
Nonperforming |
|
| 24,108 |
|
|
| 10,023 |
|
|
| 34,131 |
|
|
| 27,608 |
|
|
| 12,874 |
|
|
| 40,482 |
|
Total |
| $ | 2,462,900 |
|
| $ | 1,557,774 |
|
| $ | 4,020,674 |
|
| $ | 2,423,890 |
|
| $ | 1,583,390 |
|
| $ | 4,007,280 |
|
|
| September 30, 2021 |
|
| December 31, 2020 |
| ||||||||||||||||||
(in thousands) |
| Residential mortgage |
|
| Consumer |
|
| Total |
|
| Residential mortgage |
|
| Consumer |
|
| Total |
| ||||||
Performing |
| $ | 2,323,682 |
|
| $ | 1,609,813 |
|
| $ | 3,933,495 |
|
| $ | 2,622,422 |
|
| $ | 1,832,885 |
|
| $ | 4,455,307 |
|
Nonperforming |
|
| 27,371 |
|
|
| 13,303 |
|
|
| 40,674 |
|
|
| 42,790 |
|
|
| 24,410 |
|
|
| 67,200 |
|
Total |
| $ | 2,351,053 |
|
| $ | 1,623,116 |
|
| $ | 3,974,169 |
|
| $ | 2,665,212 |
|
| $ | 1,857,295 |
|
| $ | 4,522,507 |
|
Below are the definitions of the Company’s internally assigned grades:
Commercial:
|
|
|
|
|
|
|
|
19
20
• Doubtful – an asset that has all the weaknesses inherent in one classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. • Loss – credits classified as Loss are considered uncollectable and are charged off promptly once so classified.
|
|
|
|
Residential and Consumer:
|
|
|
|
Vintage Analysis
The following tabletables presents credit quality disclosures of amortized cost by segment and vintage for term loans and by revolving and revolving converted to amortizing at September 30,March 31, 2022 and December 31, 2021. The Company defines vintage as the later of origination, renewal or restructure date.
Term Loans |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amortized Cost Basis by Origination Year |
|
|
|
|
|
|
|
|
|
|
| Term Loans |
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2017 |
|
| Prior |
|
| Revolving Loans |
|
| Revolving Loans Converted to Term Loans |
|
| Total |
| Amortized Cost Basis by Origination Year |
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||
March 31, 2022 |
| 2022 |
|
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| Prior |
|
| Revolving Loans |
|
| Revolving Loans Converted to Term Loans |
|
| Total |
| |||||||||||||||||||||||||||||||||||||||||||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||||||
Commercial Loans: | Commercial Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commercial Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Pass |
| $ | 3,916,476 |
|
| $ | 3,333,009 |
|
| $ | 2,308,701 |
|
| $ | 1,374,599 |
|
| $ | 1,105,917 |
|
| $ | 1,520,061 |
|
| $ | 2,582,321 |
|
| $ | 105,856 |
|
| $ | 16,246,940 |
|
| $ | 1,326,731 |
|
| $ | 4,549,370 |
|
| $ | 2,750,447 |
|
| $ | 1,801,058 |
|
| $ | 1,068,711 |
|
| $ | 2,043,133 |
|
| $ | 3,072,931 |
|
| $ | 74,369 |
|
| $ | 16,686,749 |
|
Pass-Watch |
|
| 40,835 |
|
|
| 59,789 |
|
|
| 71,484 |
|
|
| 31,238 |
|
|
| 22,528 |
|
|
| 82,569 |
|
|
| 47,600 |
|
|
| 15,253 |
|
|
| 371,296 |
|
|
| 21,757 |
|
|
| 57,011 |
|
|
| 24,746 |
|
|
| 42,969 |
|
|
| 43,367 |
|
|
| 79,352 |
|
|
| 59,453 |
|
|
| 4,792 |
|
|
| 333,448 |
|
Special Mention |
|
| 15,346 |
|
|
| 3,105 |
|
|
| 6,857 |
|
|
| 11,061 |
|
|
| 19,648 |
|
|
| 8,613 |
|
|
| 11,841 |
|
|
| 1,296 |
|
|
| 77,767 |
|
|
| 4,110 |
|
|
| 13,566 |
|
|
| 5,128 |
|
|
| 8,612 |
|
|
| 12,472 |
|
|
| 12,378 |
|
|
| 19,536 |
|
|
| 456 |
|
|
| 76,258 |
|
Substandard |
|
| 26,982 |
|
|
| 51,212 |
|
|
| 38,745 |
|
|
| 17,302 |
|
|
| 27,220 |
|
|
| 22,332 |
|
|
| 25,384 |
|
|
| 6,666 |
|
|
| 215,843 |
|
|
| 31,450 |
|
|
| 24,783 |
|
|
| 36,877 |
|
|
| 37,591 |
|
|
| 15,382 |
|
|
| 36,110 |
|
|
| 23,046 |
|
|
| 973 |
|
|
| 206,212 |
|
Doubtful |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total Commercial Loans |
| $ | 3,999,639 |
|
| $ | 3,447,115 |
|
| $ | 2,425,787 |
|
| $ | 1,434,200 |
|
| $ | 1,175,313 |
|
| $ | 1,633,575 |
|
| $ | 2,667,146 |
|
| $ | 129,071 |
|
| $ | 16,911,846 |
|
| $ | 1,384,048 |
|
| $ | 4,644,730 |
|
| $ | 2,817,198 |
|
| $ | 1,890,230 |
|
| $ | 1,139,932 |
|
| $ | 2,170,973 |
|
| $ | 3,174,966 |
|
| $ | 80,590 |
|
| $ | 17,302,667 |
|
Residential Mortgage and Consumer Loans: | Residential Mortgage and Consumer Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Residential Mortgage and Consumer Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Performing |
| $ | 330,316 |
|
| $ | 461,269 |
|
| $ | 401,774 |
|
| $ | 265,787 |
|
| $ | 367,106 |
|
| $ | 973,576 |
|
| $ | 1,128,048 |
|
| $ | 5,619 |
|
| $ | 3,933,495 |
|
| $ | 170,543 |
|
| $ | 557,335 |
|
| $ | 486,997 |
|
| $ | 314,321 |
|
| $ | 197,414 |
|
| $ | 1,131,990 |
|
| $ | 1,123,451 |
|
| $ | 4,492 |
|
| $ | 3,986,543 |
|
Nonperforming |
|
| 433 |
|
|
| 1,101 |
|
|
| 1,902 |
|
|
| 3,599 |
|
|
| 5,614 |
|
|
| 25,114 |
|
|
| 1,424 |
|
|
| 1,487 |
|
|
| 40,674 |
|
|
| 30 |
|
|
| 1,250 |
|
|
| 1,027 |
|
|
| 2,299 |
|
|
| 3,360 |
|
|
| 25,096 |
|
|
| 746 |
|
|
| 323 |
|
|
| 34,131 |
|
Total Consumer Loans |
| $ | 330,749 |
|
| $ | 462,370 |
|
| $ | 403,676 |
|
| $ | 269,386 |
|
| $ | 372,720 |
|
| $ | 998,690 |
|
| $ | 1,129,472 |
|
| $ | 7,106 |
|
| $ | 3,974,169 |
|
| $ | 170,573 |
|
| $ | 558,585 |
|
| $ | 488,024 |
|
| $ | 316,620 |
|
| $ | 200,774 |
|
| $ | 1,157,086 |
|
| $ | 1,124,197 |
|
| $ | 4,815 |
|
| $ | 4,020,674 |
|
21
| Term Loans |
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
| Amortized Cost Basis by Origination Year |
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
December 31, 2021 |
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2018 |
|
| 2017 |
|
| Prior |
|
| Revolving |
|
| Revolving |
|
| Total |
| |||||||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Commercial Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Pass |
| $ | 4,946,459 |
|
| $ | 3,008,160 |
|
| $ | 2,035,849 |
| �� | $ | 1,212,306 |
|
| $ | 937,639 |
|
| $ | 1,296,382 |
|
| $ | 3,002,064 |
|
| $ | 80,535 |
|
| $ | 16,519,394 |
|
Pass-Watch |
|
| 68,421 |
|
|
| 19,467 |
|
|
| 31,598 |
|
|
| 45,846 |
|
|
| 27,188 |
|
|
| 69,310 |
|
|
| 52,850 |
|
|
| 5,714 |
|
|
| 320,394 |
|
Special |
|
| 17,536 |
|
|
| 2,683 |
|
|
| 10,296 |
|
|
| 12,410 |
|
|
| 10,669 |
|
|
| 3,656 |
|
|
| 9,603 |
|
|
| 6,243 |
|
|
| 73,096 |
|
Substandard |
|
| 43,895 |
|
|
| 43,494 |
|
|
| 36,763 |
|
|
| 14,664 |
|
|
| 28,337 |
|
|
| 16,125 |
|
|
| 20,358 |
|
|
| 10,482 |
|
|
| 214,118 |
|
Doubtful |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total Commercial |
| $ | 5,076,311 |
|
| $ | 3,073,804 |
|
| $ | 2,114,506 |
|
| $ | 1,285,226 |
|
| $ | 1,003,833 |
|
| $ | 1,385,473 |
|
| $ | 3,084,875 |
|
| $ | 102,974 |
|
| $ | 17,127,002 |
|
Residential Mortgage and Consumer Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Performing |
| $ | 580,813 |
|
| $ | 467,497 |
|
| $ | 355,833 |
|
| $ | 223,494 |
|
| $ | 320,344 |
|
| $ | 892,361 |
|
| $ | 1,120,461 |
|
| $ | 5,995 |
|
| $ | 3,966,798 |
|
Nonperforming |
|
| 565 |
|
|
| 951 |
|
|
| 2,018 |
|
|
| 4,465 |
|
|
| 4,719 |
|
|
| 24,365 |
|
|
| 1,432 |
|
|
| 1,967 |
|
|
| 40,482 |
|
Total Consumer |
| $ | 581,378 |
|
| $ | 468,448 |
|
| $ | 357,851 |
|
| $ | 227,959 |
|
| $ | 325,063 |
|
| $ | 916,726 |
|
| $ | 1,121,893 |
|
| $ | 7,962 |
|
| $ | 4,007,280 |
|
Residential Mortgage Loans in Process of Foreclosure
Loans in process of foreclosure include those for which formal foreclosure proceedings are in process according to local requirements of the applicable jurisdiction. Included in loans at September 30, 2021March 31, 2022 and December 31, 2020 was $6.12021 were $5.6 million and $17.2$4.4 million, respectively, of consumer loans secured by single family residential real estate that were in process of foreclosure. In addition to the single family residential real estate loans in process of foreclosure, the Company also held $4.0 million and $3.4$2.4 million of foreclosed single family residential properties in other real estate owned at September 30, 2021March 31, 2022 and December 31, 2020, respectively.2021.
Loans Held for Sale
Loans held for sale totaled $59.9 million and $93.1 million at March 31, 2022 and December 31, 2021, respectively. Loans held for sale is composed primarily of mortgage loans originated for sale in the secondary market. At March 31, 2022, residential mortgage loans carried at the fair value option totaled $25.0 million with an unpaid principal balance of $25.1 million. At December 31, 2021, residential mortgage loans carried at the fair value option totaled $41.0 million with an unpaid principal balance of $40.1 million. All other loans held for sale are carried at lower of cost or market.
4. Securities Sold under Agreements to Repurchase
Included in short-term borrowings are securities sold under agreements to repurchase that mature daily and are secured by U.S. agency securities totaling $643.4$518.0 million and $567.2$563.2 million at September 30, 2021March 31, 2022 and December 31, 2020,2021, respectively. The Company borrows funds on a secured basis by selling securities under agreements to repurchase, mainly in connection with treasury management services offered to its deposit customers. As the Company maintains effective control over assets sold under agreements to repurchase, the securities continue to be carried on the consolidated statements of financial condition. Because the Company acts as borrower transferring assets to the counterparty, and the agreements mature daily, the Company’s risk is limited.
20
5. Long Term Debt
At September 30, 2021 and December 31, 2020, long-term debt was comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, |
|
| December 31, |
| ||||
(in thousands) |
| 2021 |
|
| 2020 |
| ||||
Subordinated notes payable, maturing June 2045 |
| $ |
| — |
|
| $ |
| 150,000 |
|
Subordinated notes payable, maturing June 2060 |
|
|
| 172,500 |
|
|
|
| 172,500 |
|
Other long-term debt |
|
|
| 81,385 |
|
|
|
| 66,062 |
|
Less: unamortized debt issuance costs |
|
|
| (5,874 | ) |
|
|
| (10,240 | ) |
Total long-term debt |
| $ |
| 248,011 |
|
| $ |
| 378,322 |
|
5. Derivatives
The following table sets forth unamortized debt issuance costs associated with the respective debt instruments at September 30, 2021:
|
|
|
|
|
|
|
| Unamortized |
| |
|
|
|
|
|
|
|
| Debt |
| |
|
|
|
|
|
|
|
| Issuance |
| |
(in thousands) |
|
| Principal |
|
|
| Costs |
| ||
Subordinated notes payable, maturing June 2060 |
| $ |
| 172,500 |
|
| $ |
| 5,874 |
|
Other long-term debt |
|
|
| 81,385 |
|
|
|
| — |
|
Total |
| $ |
| 253,885 |
|
| $ |
| 5,874 |
|
On June 15, 2021, the Company redeemed in full its 5.95% $150 million subordinated notes due 2045. The notes were redeemed at 100% of principal plus accrued and unpaid interest therein. Loss on extinguishment of debt included in other noninterest expense totaling $4.2 million represents the disposal of unamortized loan costs associated with the original issuance of the notes.
On June 9, 2020, the Company completed the issuance of subordinated notes payable with an aggregate principal amount of $172.5 million with a stated maturity of June 15, 2060. The notes accrue interest at a fixed rate of 6.25% per annum, with quarterly interest payments that began September 15, 2020. Subject to prior approval by the Federal Reserve, the Company may redeem the notes in whole or in part on any interest payment date on or after June 15, 2025. This debt qualifies as tier 2 capital in the calculation of certain regulatory capital ratios.
Substantially all of the Company’s other long-term debt consists of borrowings associated with tax credit fund activities. Although these borrowings have indicated maturities through 2050, each is expected to be satisfied at the end of the seven-year compliance period for the related tax credit investments.
6. Derivatives
Risk Management Objective of Using Derivatives
The Company enters into derivative financial instruments to manage risks related to differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments. The Bank also enteredenters into interest rate derivative agreements as a service to certain qualifying customers. The Bank manages a matched book with respect to these customer derivatives in order to minimize its net interest rate risk exposure resulting from such agreements. In addition, the Bank also enters into risk participation agreements under which it may either sell or buy credit risk associated with a customer’s performance under certain interest rate derivative contracts related to loans in which participation interests have been sold to or purchased from other banks.
21
22
Fair Values of Derivative Instruments on the Balance Sheet
The table below presents the notional or contractual amounts and fair values of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets at September 30, 2021March 31, 2022 and December 31, 2020. 2021.
|
|
|
| March 31, 2022 |
|
| December 31, 2021 |
| ||||||||||||||||||
|
|
|
|
|
|
| Derivative (1) |
|
|
|
|
| Derivative (1) |
| ||||||||||||
(in thousands) |
| Type of |
| Notional or |
|
| Assets |
|
| Liabilities |
|
| Notional or |
|
| Assets |
|
| Liabilities |
| ||||||
Derivatives designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Interest rate swaps - variable rate loans |
| Cash Flow |
| $ | 1,325,000 |
|
| $ | 1,336 |
|
| $ | 36,930 |
|
| $ | 1,125,000 |
|
| $ | 5,884 |
|
| $ | 4,421 |
|
Interest rate swaps - securities |
| Fair Value |
|
| 1,694,650 |
|
|
| 60,693 |
|
|
| — |
|
|
| 1,837,650 |
|
|
| 22,138 |
|
|
| 10,690 |
|
|
|
|
|
| 3,019,650 |
|
|
| 62,029 |
|
|
| 36,930 |
|
|
| 2,962,650 |
|
|
| 28,022 |
|
|
| 15,111 |
|
Derivatives not designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Interest rate swaps |
| N/A |
|
| 5,188,151 |
|
|
| 84,071 |
|
|
| 82,835 |
|
|
| 5,193,991 |
|
|
| 75,819 |
|
|
| 75,861 |
|
Risk participation agreements |
| N/A |
|
| 235,301 |
|
|
| 5 |
|
|
| 16 |
|
|
| 217,437 |
|
|
| 11 |
|
|
| 35 |
|
Interest rate-lock commitments on residential mortgage loans |
| N/A |
|
| 66,675 |
|
|
| 585 |
|
|
| 132 |
|
|
| 82,037 |
|
|
| 1,525 |
|
|
| 1 |
|
Forward commitments to sell residential mortgage loans |
| N/A |
|
| 31,306 |
|
|
| 55 |
|
|
| 168 |
|
|
| 46,739 |
|
|
| 1 |
|
|
| 645 |
|
To Be Announced (TBA) securities |
| N/A |
|
| 42,750 |
|
|
| 736 |
|
|
| 7 |
|
|
| 55,000 |
|
|
| 15 |
|
|
| 53 |
|
Foreign exchange forward contracts |
| N/A |
|
| 57,213 |
|
|
| 452 |
|
|
| 358 |
|
|
| 48,364 |
|
|
| 778 |
|
|
| 758 |
|
Visa Class B derivative contract |
| N/A |
|
| 43,439 |
|
|
| — |
|
|
| 3,516 |
|
|
| 43,439 |
|
|
| — |
|
|
| 4,116 |
|
|
|
|
|
| 5,664,835 |
|
|
| 85,904 |
|
|
| 87,032 |
|
|
| 5,687,007 |
|
|
| 78,149 |
|
|
| 81,469 |
|
Total derivatives |
|
|
| $ | 8,684,485 |
|
| $ | 147,933 |
|
| $ | 123,962 |
|
| $ | 8,649,657 |
|
| $ | 106,171 |
|
| $ | 96,580 |
|
Less: netting adjustment (2) |
|
|
|
|
|
|
| (88,275 | ) |
|
| (45,705 | ) |
|
|
|
|
| (30,304 | ) |
|
| (61,534 | ) | ||
Total derivative assets/liabilities |
|
|
|
|
|
| $ | 59,658 |
|
| $ | 78,257 |
|
|
|
|
| $ | 75,867 |
|
| $ | 35,046 |
|
|
|
| September 30, 2021 |
|
| December 31, 2020 |
| |||||||||||||||||||
|
|
|
|
|
|
|
| Derivative (1) |
|
|
|
|
|
| Derivative (1) |
| ||||||||||
(in thousands) |
| Type of Hedge |
| Notional or Contractual Amount |
|
| Assets |
|
| Liabilities |
|
| Notional or Contractual Amount |
|
| Assets |
|
| Liabilities |
| ||||||
Derivatives designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps - variable rate loans |
| Cash Flow |
| $ | 1,025,000 |
|
| $ | 9,731 |
|
| $ | 867 |
|
| $ | 1,175,000 |
|
| $ | 50,962 |
|
| $ | — |
|
Interest rate swaps - securities |
| Fair Value |
|
| 1,608,150 |
|
|
| 28,629 |
|
|
| 7,742 |
|
|
| 1,158,150 |
|
|
| 6,686 |
|
|
| 18,920 |
|
|
|
|
|
| 2,633,150 |
|
|
| 38,360 |
|
|
| 8,609 |
|
|
| 2,333,150 |
|
|
| 57,648 |
|
|
| 18,920 |
|
Derivatives not designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
| N/A |
|
| 5,174,836 |
|
|
| 96,176 |
|
|
| 95,297 |
|
|
| 4,806,258 |
|
|
| 145,517 |
|
|
| 148,778 |
|
Risk participation agreements |
| N/A |
|
| 218,947 |
|
|
| 2 |
|
|
| 5 |
|
|
| 216,511 |
|
|
| 35 |
|
|
| 108 |
|
Interest rate-lock commitments on residential mortgage loans |
| N/A |
|
| 108,155 |
|
|
| 2,038 |
|
|
| — |
|
|
| 206,258 |
|
|
| 1,793 |
|
|
| 14 |
|
Forward commitments to sell residential mortgage loans |
| N/A |
|
| 67,476 |
|
|
| — |
|
|
| 1,010 |
|
|
| 310,458 |
|
|
| 19 |
|
|
| 3,211 |
|
To Be Announced (TBA) securities |
| N/A |
|
| 74,000 |
|
|
| 318 |
|
|
| 18 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Foreign exchange forward contracts |
| N/A |
|
| 62,806 |
|
|
| 1,250 |
|
|
| 1,114 |
|
|
| 58,822 |
|
|
| 2,816 |
|
|
| 2,785 |
|
Visa Class B derivative contract |
| N/A |
|
| 43,565 |
|
|
| — |
|
|
| 4,472 |
|
|
| 43,565 |
|
|
| — |
|
|
| 5,645 |
|
|
|
|
|
| 5,749,785 |
|
|
| 99,784 |
|
|
| 101,916 |
|
|
| 5,641,872 |
|
|
| 150,180 |
|
|
| 160,541 |
|
Total derivatives |
|
|
| $ | 8,382,935 |
|
| $ | 138,144 |
|
| $ | 110,525 |
|
| $ | 7,975,022 |
|
| $ | 207,828 |
|
| $ | 179,461 |
|
Less: netting adjustment (2) |
|
|
|
|
|
|
|
| (39,988 | ) |
|
| (70,817 | ) |
|
|
|
|
|
| (57,648 | ) |
|
| (124,204 | ) |
Total derivative assets/liabilities |
|
|
|
|
|
|
| $ | 98,156 |
|
| $ | 39,708 |
|
|
|
|
|
| $ | 150,180 |
|
| $ | 55,257 |
|
|
|
|
|
Cash Flow Hedges of Interest Rate Risk
The Company is party to various interest rate swap agreements designated and qualifying as cash flow hedges of the Company’s forecasted variable cash flows for pools of variable rate loans. For each agreement, the Company receives interest at a fixed rate and pays at a variable rate. T During the nine months ended September 30, 2021, thehe Company terminated sixswap agreements in 2021 and received cash of approximately $23.7$23.7 million, which was recorded as accumulated other comprehensive income and will beis being accreted into earnings through the original maturity dates of the respective contracts. The notional amounts of the swap agreements in place at September 30, 2021March 31, 2022 expire as follows: $50$425 million in 2021; $4752022; $150 million in 2022; $1502023; $250 million in 2023; $1002026; $400 million in 20262027 and $250$100 million thereafter.
Fair
FairValue Hedges of Interest Rate Risk
Interest rate swaps on securities available for sale
The Company is party to forward-starting fixed payer swaps that convert the latter portion of the term of certain available for sale securities to a floating rate. These derivative instruments are designated as fair value hedges of interest rate risk. This strategy provides the Company with a fixed rate coupon during the front-end unhedged tenor of the bonds and results in a floating rate security during the back-end hedged tenor with hedged start dates between AugustOctober 2023 through August 2025,July 2026, and maturity dates from December 2027 through March 2032. The fair value of the hedged item attributable to interest rate risk will be presented in interest income along with the change in the fair value of the hedging instrument.
22
23
The majority of the hedged available for sale securities is a closed portfolio of pre-payable commercial mortgage backed securities. In accordance with ASC 815, prepayment risk may be excluded when measuring the change in fair value of such hedged items attributable to interest rate risk under the last-of-layer approach. At September 30, 2021,March 31, 2022, the amortized cost basis of the closed portfolio of pre-payable commercial mortgage backed securities totaled $1.7$1.9 billion. The amount that represents the hedged items was $1.51.6 billion and the basis adjustment associated with the hedged items totaled $21.0$60.2 million.
The Company terminatedfour fair value swap agreements during the three months ended March 31, 2022 and received cash of approximately $6.5 million. At the time of termination, the value of the swap was recorded as an adjustment to the book value of the underlying security thereby changing its current book yield and extending its duration.
Derivatives Not Designated as Hedges
Customer interest rate derivative program
The Bank enters into interest rate derivative agreements, primarily rate swaps, with commercial banking customers to facilitate their risk management strategies. The Bank enters into offsetting agreements with unrelated financial institutions, thereby mitigating its net risk exposure resulting from such transactions. Because the interest rate derivatives associated with this program do not meet hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings.
Risk participation agreements
The Bank also enters into risk participation agreements under which it may either assume or sell credit risk associated with a borrower’s performance under certain interest rate derivative contracts. In those instances where the Bank has assumed credit risk, it is not a direct counterparty to the derivative contract with the borrower and has entered into the risk participation agreement because it is a party to the related loan agreement with the borrower. In those instances in which the Bank has sold credit risk, it is the sole counterparty to the derivative contract with the borrower and has entered into the risk participation agreement because other banks participate in the related loan agreement. The Bank manages its credit risk under risk participation agreements by monitoring the creditworthiness of the borrower, based on the Bank’s normal credit review process.
Mortgage banking derivatives
The Bank also enters into certain derivative agreements as part of its mortgage banking activities. These agreements include interest rate lock commitments on prospective residential mortgage loans and forward commitments to sell loans to investors on either a best efforts or a mandatory delivery basis. The Company uses these forward sales commitments, which may include To Be Announced (“TBA”) security contracts, on the open market to protect the value of its rate locks and mortgage loans held for sale from changes in interest rates and pricing between the origination of the rate lock and the final sale of these loans. These instruments meet the definition of derivative financial instruments and are reflected in other assets and other liabilities in the Consolidated Balance Sheets, with changes to the fair value recorded in noninterest income within the secondary mortgage market operations line item in the Consolidated Statements of Income.
The loans sold on a mandatory basis commit the Company to deliver a specific principal amount of mortgage loans to an investor at a specified price, by a specified date. If the Company fails to deliver the amount of mortgages necessary to fulfill the commitment by the specified date, we may be obligated to pay a pair-off fee, based on then-current market prices, to the investor/counterparty to compensate the investor for the shortfall. Mandatory delivery forward commitments include TBA security contracts on the open market to provide protection against changes in interest rates on the locked mortgage pipeline. The Company expects that mandatory delivery contracts, including TBA security contracts, will experience changes in fair value opposite to the changes in the fair value of derivative loan commitments. Certain assumptions, including pull through rates and rate lock periods, are used in managing the existing and future hedges. The accuracy of underlying assumptions could impact the ultimate effectiveness of any hedging strategies.
Forward commitments under best effort contracts commit the Company to deliver a specific individual mortgage loan to an investor if the loan to the underlying borrower closes. Generally, best efforts cash contracts have no pair-off risk regardless of market movement. The price the investor will pay the seller for an individual loan is specified prior to the loan being funded, generally the same day the Company enters into the interest rate lock commitment with the potential borrower. The Company expects that these best efforts forward loan sale commitments will experience a net neutral shift in fair value with related derivative loan commitments.
24
At the closing of the loan, the rate lock commitment derivative expires and the Company records a loan held for sale at fair value under the election of fair value option.
23
Customer foreign exchange forward contract derivatives
The Company enters into foreign exchange forward derivative agreements, primarily forward foreign currency contracts, with commercial banking customers to facilitate their risk management strategies. The Bank manages its risk exposure from such transactions by entering into offsetting agreements with unrelated financial institutions. The Bank has not elected to designate these foreign exchange forward contract derivatives as hedges; as such, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings.
Visa Class B derivative contract
The Company is a member of Visa USA. During the fourth quarter of 2018, the Company sold the majority of its Visa Class B holdings, at which time it entered into a derivative agreement with the purchaser whereby the Company will make or receive cash payments whenever the conversion ratio of the Visa Class B shares into Visa Class A shares is adjusted. The conversion ratio changes when Visa deposits funds to a litigation escrow account established by Visa to pay settlements for certain litigation, for which Visa is indemnified by Visa USA members. The Company is also required to make periodic financing payments to the purchaser until all of Visa’s covered litigation matters are resolved. Thus, the derivative contract extends until the end of Visa’s covered litigation matters, the timing of which is uncertain.
The contract includes a contingent accelerated termination clause based on the credit ratings of the Company. At September 30, 2021March 31, 2022 and December 31, 2020,2021, the fair value of the liability associated with this contract was $4.5$3.5 million and $5.6$4.1 million, respectively. Refer to Note 1413 – Fair Value of Financial Instruments for discussion of the valuation inputs and process for this derivative liability.
Effect of Derivative Instruments on the Statements of Income
The effects of derivative instruments on the consolidated statements of income for the three ended March 31, 2022 and nine months ended September 30, 2021 and 2020 are presented in the table below. Interest income attributable to cash flow hedges includes amortization of accumulated other comprehensive income or loss that resulted from termination of certain interest rate swap contracts.
|
|
|
| Three Months Ended |
| |||||
|
|
|
| March 31, |
| |||||
Derivative Instruments: |
| Location of Gain (Loss) |
| 2022 |
|
| 2021 |
| ||
Cash flow hedges: |
|
|
|
|
|
|
|
| ||
Variable rate loans |
| Interest income - loans |
| $ | 6,754 |
|
| $ | 6,136 |
|
Fair value hedges: |
|
|
|
|
|
|
|
| ||
Securities |
| Interest income - securities - taxable |
|
| 1,158 |
|
|
| 83 |
|
Securities - termination |
| Noninterest income - securities transactions, net |
|
| 1,620 |
|
|
| — |
|
Derivatives not designated as hedging: |
|
|
|
|
|
|
|
| ||
Residential mortgage banking |
| Noninterest income - secondary mortgage market operations |
|
| 1,192 |
|
|
| — |
|
Customer and all other instruments |
| Noninterest income - other noninterest income |
|
| 2,349 |
|
|
| 5,035 |
|
Total gain |
|
|
| $ | 13,073 |
|
| $ | 11,254 |
|
|
|
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
|
|
| September 30, |
|
| September 30, |
| ||||||||||
Derivative Instruments: |
| Location of Gain (Loss) Recognized in the Statements of Income: |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable rate loans |
| Interest income - loans |
| $ | 6,950 |
|
| $ | 5,788 |
|
| $ | 19,941 |
|
| $ | 11,249 |
|
Fair value hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities |
| Interest income - securities - taxable |
|
| 21 |
|
|
| (7 | ) |
|
| (6 | ) |
|
| 33 |
|
Securities - termination |
| Noninterest income - securities transactions, net |
|
| — |
|
|
| — |
|
|
| 2,499 |
|
|
| — |
|
Brokered deposits |
| Interest expense - deposits |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 46 |
|
Derivatives not designated as hedging: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage banking |
| Noninterest income - secondary mortgage market operations |
|
| (1,249 | ) |
|
| — |
|
|
| 2,223 |
|
|
| — |
|
Customer and all other instruments |
| Noninterest income - other noninterest income |
|
| 2,970 |
|
|
| 1,739 |
|
|
| 11,755 |
|
|
| 9,718 |
|
Total gain |
|
|
| $ | 8,692 |
|
| $ | 7,520 |
|
| $ | 36,412 |
|
| $ | 21,046 |
|
Credit Risk-Related Contingent Features
Certain of the Bank’s derivative instruments contain provisions allowing the financial institution counterparty to terminate the contracts in certain circumstances, such as a downgrade of the Bank’s credit ratings below specified levels, a default by the Bank on its indebtedness, or the failure of the Bank to maintain specified minimum regulatory capital ratios or its regulatory status as a well-capitalized institution. These derivative agreements also contain provisions regarding the posting of collateral by each party. At September 30, 2021,March 31, 2022, the Company wasis not in violation of any such provisions. The aggregate fair value of derivative instruments with credit
25
risk-related contingent features that were in a net liability position at September 30, 2021March 31, 2022 and December 31, 20202021 was $56.9$0.6 million and $49.4$109.7 million, respectively, for which the Company had posted collateral of $24.3$0.7 million and $44.7$15.0 million, respectively.
24
Offsetting Assets and Liabilities
The Bank’s derivative instruments with certain counterparties contain legally enforceable netting provisions that allow for net settlement of multiple transactions to a single amount, which may be positive, negative, or zero. Agreements with certain bilateral counterparties require both parties to maintain collateral in the event that the fair values of derivative instruments exceed established exposure thresholds. For centrally cleared derivatives, the Company is subject to initial margin posting and daily variation margin exchange with the central clearinghouses. Offsetting information in regards to all derivative assets and liabilities, including accrued interest, subject to these master netting agreements at September 30, 2021March 31, 2022 and December 31, 20202021 is presented in the following tables.
(in thousands) |
|
|
|
| Gross |
|
| Net Amounts |
|
| Gross Amounts Not Offset in the |
| ||||||||||||
Description |
| Gross |
|
| Offset in |
|
| Presented in |
|
| Financial |
|
| Cash |
|
| Net |
| ||||||
As of March 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Derivative Assets |
| $ | 133,175 |
|
| $ | (87,894 | ) |
| $ | 45,281 |
|
| $ | 3,796 |
|
| $ | 48,163 |
|
| $ | 89,648 |
|
Derivative Liabilities |
| $ | 49,810 |
|
| $ | (46,014 | ) |
| $ | 3,796 |
|
| $ | 3,796 |
|
| $ | 0 |
|
| $ | 0 |
|
(in thousands) |
|
|
|
| Gross |
|
| Net Amounts |
|
| Gross Amounts Not Offset in the |
| ||||||||||||
Description |
| Gross |
|
| Offset in |
|
| Presented in |
|
| Financial |
|
| Cash |
|
| Net |
| ||||||
As of December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Derivative Assets | $ |
| 36,790 |
|
| $ | (29,882 | ) |
| $ | 6,908 |
|
| $ | 6,908 |
|
| $ | 0 |
|
| $ | 0 |
|
Derivative Liabilities | $ |
| 85,448 |
|
| $ | (63,204 | ) |
| $ | 22,244 |
|
| $ | 6,908 |
|
| $ | 66,207 |
|
| $ | (50,871 | ) |
(in thousands) |
|
|
|
|
| Gross Amounts |
|
| Net Amounts |
|
| Gross Amounts Not Offset in the Statement of Financial Condition |
| |||||||||||
|
| Gross Amounts Recognized |
|
| Offset in the Statement of Financial Condition |
|
| Presented in the Statement of Financial Condition |
|
| Financial Instruments |
|
| Cash Collateral |
|
| Net Amount |
| ||||||
September 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Assets |
| $ | 46,013 |
|
| $ | (41,102 | ) |
| $ | 4,911 |
|
| $ | 4,911 |
|
| $ | 0 |
|
| $ | 0 |
|
Derivative Liabilities |
| $ | 101,940 |
|
| $ | (72,835 | ) |
| $ | 29,105 |
|
| $ | 4,911 |
|
| $ | 69,668 |
|
| $ | (45,474 | ) |
(in thousands) |
|
|
|
|
| Gross Amounts |
|
| Net Amounts |
|
| Gross Amounts Not Offset in the Statement of Financial Condition |
| |||||||||||
|
| Gross Amounts Recognized |
|
| Offset in the Statement of Financial Condition |
|
| Presented in the Statement of Financial Condition |
|
| Financial Instruments |
|
| Cash Collateral |
|
| Net Amount |
| ||||||
December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Assets |
|
| 61,529 |
|
| $ | (58,660 | ) |
| $ | 2,869 |
|
| $ | 2,869 |
|
| $ | 0 |
|
| $ | 0 |
|
Derivative Liabilities |
|
| 171,275 |
|
| $ | (126,434 | ) |
| $ | 44,841 |
|
| $ | 2,869 |
|
| $ | 90,312 |
|
| $ | (48,340 | ) |
The Company has excess posted collateral compared to total exposure due to initial margin requirements for day-to-day rate volatility.
7.6. Stockholders’ Equity
Common Shares Outstanding
Common shares outstanding excludes treasury shares totaling 4.65.4 million at September 30, 2021March 31, 2022 and 4.55.1 million at December 31, 2020,2021, with a first-in-first-out cost basis of $151.3$193.8 million and $150.7$175.8 million at September 30, 2021March 31, 2022 and December 31, 2020,2021, respectively. Shares outstanding also excludes unvested restricted share awards totaling 1.6 million and1.11.7 million at September 30, 2021March 31, 2022 and December 31, 2020, respectively.2021.
Stock Buyback Program
On April 22, 2021, the Company’s board of directors approved a stock buyback program whereby the Company is authorized to repurchase up to 4.3 million shares of its common stock through the program’s expiration date of December 31, 2022.2022. The program allows the Company to repurchase its common shares in the open market, by block purchase, through accelerated share repurchase programs, in privately negotiated transactions, or otherwise, in one or more transactions. The Company is not obligated to purchase any shares under this program, and the board of directors has the ability to terminate or amend the program at any time prior to the expiration date. During the thirdfirst quarter of 2021,2022, the Company repurchased 56,349350,000 shares of its common stock at an average cost of $44.52$52.82 per share, inclusive of commissions.
Prior to its expiration To date, of December 31, 2020, the Company had in place a stock buyback program that authorized the repurchase of up to 5.5 millionhas repurchased 799,876 shares of its common stock. The program, as amended, allowed the Company to repurchase its common shares on the open market, by block purchase, through accelerated share repurchase programs, in privately negotiated transactions, or as otherwise determined by the Company, in one or more transactions. The Company was not obligated to purchase any shares under this program, and the board of directors had the ability to terminate or amend the program at any time prior to the expiration date. In total, the Company repurchased 4.9 million of the 5.5 million authorized shares under this buyback program at an average cost of $37.65 per share, inclusive$50.36 under this program.
Accumulated Other Comprehensive Income (Loss)
A roll forward of commissions.the components of AOCI is included as follows:
The Company was party to an accelerated share repurchase (“ASR”) agreement with Morgan Stanley & Co. LLC whereby the Company made a $185 million payment to Morgan Stanley and received from Morgan Stanley an initial delivery of 3,611,870 shares
25
26
|
| Available |
|
| HTM Securities |
|
| Employee |
|
| Cash |
|
| Equity Method Investment |
|
| Total |
| ||||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balance, December 31, 2020 |
| $ | 171,224 |
|
| $ | 276 |
|
| $ | (125,573 | ) |
| $ | 39,511 |
|
| $ | (5,369 | ) |
| $ | 80,069 |
|
Net change in unrealized gain or loss |
|
| (141,800 | ) |
| — |
|
| — |
|
|
| (4,152 | ) |
|
| 462 |
|
|
| (145,490 | ) | ||
Reclassification of net income or loss realized and included in earnings |
| — |
|
| — |
|
|
| 1,954 |
|
|
| (6,136 | ) |
|
| 4,468 |
|
|
| 286 |
| ||
Amortization of unrealized net gain on securities transferred to HTM |
| — |
|
|
| (56 | ) |
| — |
|
| — |
|
|
| — |
|
|
| (56 | ) | |||
Income tax expense (benefit) |
|
| (31,862 | ) |
|
| (13 | ) |
|
| 439 |
|
|
| (2,312 | ) |
|
| — |
|
|
| (33,748 | ) |
Balance, March 31, 2021 |
| $ | 61,286 |
|
| $ | 233 |
|
| $ | (124,058 | ) |
| $ | 31,535 |
|
| $ | (439 | ) |
| $ | (31,443 | ) |
Balance, December 31, 2021 |
| $ | 11,037 |
|
| $ | 153 |
|
| $ | (80,946 | ) |
| $ | 16,284 |
|
| $ | (463 | ) |
| $ | (53,935 | ) |
Net change in unrealized gain or loss |
|
| (358,190 | ) |
|
| — |
|
|
| — |
|
|
| (33,182 | ) |
|
| 468 |
|
|
| (390,904 | ) |
Reclassification of net income or loss realized and included in earnings |
|
| 1,707 |
|
|
| — |
|
|
| 1,209 |
|
|
| (6,754 | ) |
|
| — |
|
|
| (3,838 | ) |
Transfer of net unrealized loss from AFS to HTM securities portfolio |
|
| 15,405 |
|
|
| (15,405 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Amortization of unrealized net gain or loss on securities transferred to HTM |
|
| — |
|
|
| 261 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 261 |
|
Income tax expense (benefit) |
|
| (76,981 | ) |
|
| (3,418 | ) |
|
| 273 |
|
|
| (9,014 | ) |
|
| — |
|
|
| (89,140 | ) |
Balance, March 31, 2022 |
| $ | (253,060 | ) |
| $ | (11,573 | ) |
| $ | (80,010 | ) |
| $ | (14,638 | ) |
| $ | 5 |
|
| $ | (359,276 | ) |
of the Company’s common stock, which represented 75% of the estimated total number of shares to be repurchased, based on the closing price of the Company’s common stock on October 18, 2019. Final settlement of the ASR agreement occurred on March 18, 2020. Pursuant to the terms of the settlement, the Company received cash of approximately $12.1 million and a final delivery of 1,001,472 shares of its common stock.
In January 2020, the Company repurchased 315,851 shares of its common stock at a cost of $40.26 in a privately negotiated transaction.
Accumulated Other Comprehensive Income (Loss)
The components of Accumulated Other Comprehensive Income (Loss) and changes in those components are presented in the following table.
|
| Available for Sale Securities |
|
| HTM Securities Transferred from AFS |
|
| Employee Benefit Plans |
|
| Cash Flow Hedges |
|
| Equity Method Investment |
|
| Total |
| ||||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2019 |
| $ | 28,950 |
|
| $ | 639 |
|
| $ | (101,278 | ) |
| $ | 17,399 |
|
| $ | (434 | ) |
| $ | (54,724 | ) |
Net change in unrealized gain or loss |
|
| 176,009 |
|
|
| — |
|
|
| — |
|
|
| 46,180 |
|
|
| (4,935 | ) |
|
| 217,254 |
|
Reclassification of net income or loss realized and included in earnings |
|
| — |
|
|
| — |
|
|
| 4,656 |
|
|
| (11,249 | ) |
|
| — |
|
|
| (6,593 | ) |
Valuation adjustment to employee benefit plans |
|
| — |
|
|
| — |
|
|
| (10,251 | ) |
|
| — |
|
|
| — |
|
|
| (10,251 | ) |
Amortization of unrealized net gain or loss on securities transferred to HTM |
|
| — |
|
|
| (378 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (378 | ) |
Income tax expense (benefit) |
|
| 39,817 |
|
|
| (85 | ) |
|
| (1,265 | ) |
|
| 7,903 |
|
|
| — |
|
|
| 46,370 |
|
Balance, September 30, 2020 |
| $ | 165,142 |
|
| $ | 346 |
|
| $ | (105,608 | ) |
| $ | 44,427 |
|
| $ | (5,369 | ) |
| $ | 98,938 |
|
Balance, December 31, 2020 |
| $ | 171,224 |
|
| $ | 276 |
|
| $ | (125,573 | ) |
| $ | 39,511 |
|
| $ | (5,369 | ) |
| $ | 80,069 |
|
Net change in unrealized gain or loss |
|
| (144,715 | ) |
|
| — |
|
|
| — |
|
|
| 353 |
|
|
| 438 |
|
|
| (143,924 | ) |
Reclassification of net income or loss realized and included in earnings |
|
| 2,166 |
|
|
| — |
|
|
| 3,970 |
|
|
| (19,941 | ) |
|
| 4,468 |
|
|
| (9,337 | ) |
Valuation adjustments to pension plan attributable to VERIP and curtailment |
|
| — |
|
|
| — |
|
|
| 59,606 |
|
|
| — |
|
|
| — |
|
|
| 59,606 |
|
Other valuation adjustments to employee benefit plans |
|
| — |
|
|
| — |
|
|
| (10,651 | ) |
|
| — |
|
|
| — |
|
|
| (10,651 | ) |
Amortization of unrealized net gain or loss on securities transferred to HTM |
|
| — |
|
|
| (134 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (134 | ) |
Income tax expense (benefit) |
|
| (31,952 | ) |
|
| (30 | ) |
|
| 11,783 |
|
|
| (4,370 | ) |
|
| — |
|
|
| (24,569 | ) |
Balance, September 30, 2021 |
| $ | 60,627 |
|
| $ | 172 |
|
| $ | (84,431 | ) |
| $ | 24,293 |
|
| $ | (463 | ) |
| $ | 198 |
|
Accumulated Other Comprehensive Income or Loss (“AOCI”) is reported as a component of stockholders’ equity. AOCI can include, among other items, unrealized holding gains and losses on securities available for sale (“AFS”), including the Company’s share of unrealized gains and losses reported by a partnership accounted for under the equity method, gains and losses associated with pension or other post-retirement benefits that are not recognized immediately as a component of net periodic benefit cost, and gains and losses on derivative instruments that are designated as, and qualify as, cash flow hedges. Net unrealized gains and losses on AFS securities reclassified as securities held to maturity (“HTM”) also continue to be reported as a component of AOCI and will be amortized over the estimated remaining life of the securities as an adjustment to interest income. Subject to certain thresholds, unrealized losses on employee benefit plans will be reclassified into income as pension and post-retirement costs are recognized over the remaining service period of plan participants. Accumulated gains or losses on cash flow hedges of variable rate loans described in Note 65 will be reclassified into income over the life of the hedge. Accumulated other comprehensive loss resulting from the terminated interest rate swaps will be amortized over the remaining maturities of the designated instruments. Gains and losses within AOCI are net of deferred income taxes, where applicable.
26
27
The following table shows the line items ofin the consolidated statements of income affected by amounts reclassified from AOCI.
|
| Nine Months Ended |
|
|
| |||||
Amount reclassified from AOCI (a) |
| September 30, |
|
| Affected line item on | |||||
(in thousands) |
| 2021 |
|
| 2020 |
|
| the statement of income | ||
Loss on sale of AFS securities |
| $ | (2,166 | ) |
| $ | — |
|
| Noninterest income |
Tax effect |
|
| 487 |
|
|
| — |
|
| Income taxes |
Net of tax |
|
| (1,679 | ) |
|
| — |
|
| Net income |
Amortization of unrealized net gain on securities transferred to HTM |
|
| 134 |
|
|
| 378 |
|
| Interest income |
Tax effect |
|
| (30 | ) |
|
| (85 | ) |
| Income taxes |
Net of tax |
|
| 104 |
|
|
| 293 |
|
| Net income |
Amortization of defined benefit pension and post-retirement items |
|
| (3,970 | ) |
|
| (4,656 | ) |
| Other noninterest expense (b) |
Tax effect |
|
| 884 |
|
|
| 1,053 |
|
| Income taxes |
Net of tax |
|
| (3,086 | ) |
|
| (3,603 | ) |
| Net income |
Reclassification of unrealized gain on cash flow hedges |
|
| 18,771 |
|
|
| 12,602 |
|
| Interest income |
Tax effect |
|
| (4,188 | ) |
|
| (2,851 | ) |
| Income taxes |
Net of tax |
|
| 14,583 |
|
|
| 9,751 |
|
| Net income |
Amortization of gain (loss) on terminated cash flow hedges |
|
| 1,170 |
|
|
| (1,353 | ) |
| Interest income |
Tax effect |
|
| (261 | ) |
|
| 306 |
|
| Income taxes |
Net of tax |
|
| 909 |
|
|
| (1,047 | ) |
| Net income |
Reclassification of unrealized loss on equity method investment |
|
| (4,468 | ) |
|
| — |
|
| Noninterest income |
Tax effect |
|
| — |
|
|
| — |
|
| Income taxes |
Net of tax |
|
| (4,468 | ) |
|
| — |
|
| Net income |
Total reclassifications, net of tax |
| $ | 6,363 |
|
| $ | 5,394 |
|
| Net income |
|
|
|
|
On March 27, 2020, the Office of the Comptroller of the Currency (“OCC”), the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation issued an interim final rule that provides an option to delay the estimated impact on regulatory capital stemming from the implementation of CECL for a transition period of five years. The five-year rule provides a full delay of the estimated impact of CECL on regulatory capital transition (0%) for the first two years, followed by a three-year transition (25% of the impact included
|
| Three Months Ended |
|
|
| |||||
Amount reclassified from AOCI (a) |
| March 31, |
|
| Affected line item on | |||||
(in thousands) |
| 2022 |
|
| 2021 |
|
| the statement of income | ||
Loss on sale of AFS securities |
| $ | (1,707 | ) |
| $ | — |
|
| Noninterest income |
Tax effect |
|
| 385 |
|
|
| — |
|
| Income taxes |
Net of tax |
|
| (1,322 | ) |
|
| — |
|
| Net income |
Amortization of unrealized net gain (loss) on securities transferred to HTM |
|
| (261 | ) |
|
| 56 |
|
| Interest income |
Tax effect |
|
| 59 |
|
|
| (13 | ) |
| Income taxes |
Net of tax |
|
| (202 | ) |
|
| 43 |
|
| Net income |
Amortization of defined benefit pension and post-retirement items |
|
| (1,209 | ) |
|
| (1,954 | ) |
| Other noninterest expense (b) |
Tax effect |
|
| 273 |
|
|
| 439 |
|
| Income taxes |
Net of tax |
|
| (936 | ) |
|
| (1,515 | ) |
| Net income |
Reclassification of unrealized gain on cash flow hedges |
|
| 3,875 |
|
|
| 6,136 |
|
| Interest income |
Tax effect |
|
| (875 | ) |
|
| (1,379 | ) |
| Income taxes |
Net of tax |
|
| 3,000 |
|
|
| 4,757 |
|
| Net income |
Amortization of gain (loss) on terminated cash flow hedges |
|
| 2,879 |
|
|
| — |
|
| Interest income |
Tax effect |
|
| (650 | ) |
|
| — |
|
| Income taxes |
Net of tax |
|
| 2,229 |
|
|
| — |
|
| Net income |
Reclassification of unrealized loss on equity method investment |
|
| (468 | ) |
|
| (4,468 | ) |
| Noninterest income |
Tax effect |
|
| — |
|
|
| — |
|
| Income taxes |
Net of tax |
|
| (468 | ) |
|
| (4,468 | ) |
| Net income |
Total reclassifications, net of tax |
| $ | 2,301 |
|
| $ | (1,183 | ) |
| Net income |
8.7. Other Noninterest Income
Components of other noninterest income are as follows:
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
| |||||||||||||||
|
| September 30, |
|
| September 30, |
|
| March 31, |
| |||||||||||||||
(in thousands) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||||
Income from bank-owned life insurance |
| $ | 3,907 |
|
| $ | 6,628 |
|
| $ | 14,535 |
|
| $ | 14,211 |
|
| $ | 3,545 |
| $ | 7,281 |
| |
Credit related fees |
|
| 2,568 |
|
|
| 2,911 |
|
|
| 8,383 |
|
|
| 8,585 |
|
| 2,669 |
| 2,844 |
| |||
Income from derivatives |
|
| 2,970 |
|
|
| 1,739 |
|
|
| 11,755 |
|
|
| 9,718 |
|
| 2,349 |
| 5,035 |
| |||
Gain on sale of Mastercard Class B common stock |
|
| — |
|
|
| — |
|
|
| 2,800 |
|
|
| — |
| ||||||||
Gain on sale of Hancock Horizon Funds |
|
| 4,576 |
|
|
| — |
|
|
| 4,576 |
|
|
| — |
| ||||||||
Other miscellaneous |
|
| 8,168 |
|
|
| 3,145 |
|
|
| 13,673 |
|
|
| 11,110 |
|
|
| 6,434 |
|
|
| 492 |
|
Total other noninterest income |
| $ | 22,189 |
|
| $ | 14,423 |
|
| $ | 55,722 |
|
| $ | 43,624 |
|
| $ | 14,997 |
|
| $ | 15,652 |
|
27
28
9.8. Other Noninterest Expense
Components of other noninterest expense are as follows:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
(in thousands) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Corporate value and franchise taxes |
| $ | 3,414 |
|
| $ | 4,872 |
|
| $ | 11,300 |
|
| $ | 13,649 |
|
Telecommunications and postage |
|
| 3,087 |
|
|
| 4,043 |
|
|
| 9,568 |
|
|
| 11,483 |
|
Advertising |
|
| 3,638 |
|
|
| 3,159 |
|
|
| 8,400 |
|
|
| 10,089 |
|
Entertainment and contributions |
|
| 2,280 |
|
|
| 1,315 |
|
|
| 5,214 |
|
|
| 7,146 |
|
Tax credit investment amortization |
|
| 1,112 |
|
|
| 961 |
|
|
| 3,337 |
|
|
| 2,882 |
|
Printing and supplies |
|
| 914 |
|
|
| 1,271 |
|
|
| 2,833 |
|
|
| 4,006 |
|
Travel expense |
|
| 765 |
|
|
| 309 |
|
|
| 1,789 |
|
|
| 1,816 |
|
Net other retirement expense |
|
| (7,294 | ) |
|
| (6,337 | ) |
|
| (20,645 | ) |
|
| (18,796 | ) |
Loss on facilities and equipment from consolidation |
|
| — |
|
|
| — |
|
|
| 15,462 |
|
|
| 929 |
|
Loss on extinguishment of debt |
|
| — |
|
|
| — |
|
|
| 4,165 |
|
|
| — |
|
Other miscellaneous |
|
| 13,041 |
|
|
| 5,105 |
|
|
| 25,567 |
|
|
| 16,822 |
|
Total other noninterest expense |
| $ | 20,957 |
|
| $ | 14,698 |
|
| $ | 66,990 |
|
| $ | 50,026 |
|
For the three and nine months ended September 30, 2021, other miscellaneous expense includes certain expenses incurred as a result of Hurricane Ida.
10. Earnings (Loss) Per Common
|
| Three Months Ended |
| |||||
|
| March 31, |
| |||||
(in thousands) |
| 2022 |
|
| 2021 |
| ||
Corporate value and franchise taxes |
| $ | 4,248 |
|
| $ | 4,464 |
|
Telecommunications and postage |
|
| 2,925 |
|
|
| 3,318 |
|
Advertising |
|
| 3,166 |
|
|
| 2,486 |
|
Entertainment and contributions |
|
| 2,961 |
|
|
| 1,448 |
|
Tax credit investment amortization |
|
| 1,004 |
|
|
| 1,112 |
|
Printing and supplies |
|
| 1,003 |
|
|
| 978 |
|
Travel expense |
|
| 660 |
|
|
| 357 |
|
Net other retirement expense |
|
| (6,772 | ) |
|
| (6,545 | ) |
Other miscellaneous |
|
| 9,045 |
|
|
| 6,130 |
|
Total other noninterest expense |
| $ | 18,240 |
|
| $ | 13,748 |
|
9. Earnings PerCommonShare
The Company calculates earnings (loss) per share using the two-class method. The two-class method allocates net income or loss to each class of common stock and participating security according to common dividends declared and participation rights in undistributed earnings. For reporting periods in which a net loss is recorded, net loss is not allocated to participating securities because the holders of such securities bear no contractual obligation to fund or otherwise share in the losses. Participating securities consist of nonvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents.
A summary of the information used in the computation of earnings (loss) per common share follows.
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
|
| |||||||||||||||
|
| September 30, |
|
| September 30, |
|
| March 31, |
|
| |||||||||||||||
(in thousands, except per share data) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
|
| ||||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Net income (loss) to common shareholders |
| $ | 129,582 |
|
| $ | 79,356 |
|
| $ | 325,472 |
|
| $ | (148,749 | ) | |||||||||
Net dividends or income allocated to participating securities - basic and diluted |
|
| 2,419 |
|
|
| 1,435 |
|
|
| 6,650 |
|
|
| 1,278 |
| |||||||||
Net income (loss) allocated to common shareholders - basic and diluted |
| $ | 127,163 |
|
| $ | 77,921 |
|
| $ | 318,822 |
|
| $ | (150,027 | ) | |||||||||
Net income to common shareholders |
| $ | 123,478 |
| $ | 107,172 |
| ||||||||||||||||||
Net income allocated to participating securities - basic and diluted |
|
| 1,918 |
|
|
| 2,337 |
|
| ||||||||||||||||
Net income allocated to common shareholders - basic and diluted |
| $ | 121,560 |
|
| $ | 104,835 |
|
| ||||||||||||||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Weighted-average common shares - basic |
|
| 86,834 |
|
|
| 86,358 |
|
| $ | 86,800 |
|
| $ | 86,614 |
|
| 86,660 |
| 86,752 |
| ||||
Dilutive potential common shares |
|
| 172 |
|
|
| 42 |
|
|
| 151 |
|
|
| — |
|
|
| 276 |
|
|
| 53 |
|
|
Weighted-average common shares - diluted |
|
| 87,006 |
|
|
| 86,400 |
|
| $ | 86,951 |
|
| $ | 86,614 |
|
|
| 86,936 |
|
|
| 86,805 |
|
|
Earnings (loss) per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Earnings per common share: |
|
|
|
|
|
|
| ||||||||||||||||||
Basic |
| $ | 1.46 |
|
| $ | 0.90 |
|
| $ | 3.67 |
|
| $ | (1.73 | ) |
| $ | 1.40 |
| $ | 1.21 |
| ||
Diluted |
| $ | 1.46 |
|
| $ | 0.90 |
|
| $ | 3.67 |
|
| $ | (1.73 | ) |
| $ | 1.40 |
|
| $ | 1.21 |
|
|
Potential common shares consist of stock options, nonvested performance-based awards, nonvested restricted stock units, and nonvested restricted share awards deferred under the Company’s nonqualified deferred compensation plan. These potential common shares do not enter into the calculation of diluted earnings per share if the impact would be antidilutive, i.e., increase earnings per share or reduce a loss per share. NaN potential common shares would have had an antidilutive effect in the calculation of earnings per common share forFor the three months ended September 30, 2021. For the nine months ended September 30,March 31, 2022 and 2021, antidilutive potential common shares with a weighted averageaverages of 796 231 and 7,191, respectively,were excluded from the computation of earnings per common share. For the three months ended September 30, 2020, antidilutive potential common shares with a weighted average of 78,867 were excluded from the computation of earnings per common share. For reporting periods in which a net loss is reported, no effect is given to potentially dilutive common shares in the computation of loss per common share as any impact from such shares would be antidilutive; as such, no effect was given to antidilutive potential common shares for the computation of earnings per common share for the nine months ended September 30, 2020.
28
29
11.10. Retirement Plans
The Company offers a qualified defined benefit pension plan, the Hancock Whitney Corporation Pension Plan and Trust Agreement (“Pension Plan”), covering certain eligible associates. Eligibility is based on minimum age and service-related requirements. The Pension Plan excludes any individual hired or rehired by the Company after June 30, 2017 from eligibility to participate, and the accrued benefits of any participant in the Pension Plan whose combined age plus years of service as of January 1, 2018 totaled less than 55 were frozen as of January 1, 2018 and will not thereafter increase. The Company makes contributions to the Pension Plan in amounts sufficient to meet funding requirements set forth in federal employee benefit and tax laws, plus such additional amounts as the Company may determine to be appropriate.
The Company also offers a defined contribution retirement benefit plan (401(k) plan), the Hancock Whitney Corporation 401(k) Savings Plan and Trust Agreement (“401(k) Plan”), that covers substantially all associates who have been employed 60 days and meet a minimum age requirement and employment classification criteria. The Company matches 100%100% of the first 1%1% of compensation saved by a participant, and 50%50% of the next 5%5% of compensation saved. Newly eligible associates are automatically enrolled at an initial 3%3% savings rate unless the associate actively opts out of participation in the plan. Beginning January 1, 2018, the Company makes an additional basic contribution to associates hired or rehired after June 30, 2017 in an amount equal to 2%2% of the associate’s eligible compensation. For Pension Plan participants whose benefits were frozen as of January 1, 2018, the 401(k) Plan provides an enhanced Company contribution in the amount of 2%2%, 4%4% or 6%6% of such participant’s eligible compensation, based on the participant’s current age and years of service with the Company. Participants vest in basic and enhanced Company contributions upon completion of three years of service.
The Company sponsors a nonqualified defined benefit plan covering certain legacy Whitney employees, under which accrued benefits were frozen as of December 31, 2012 and, as such, no future benefits are accrued under this plan.
The Company sponsors defined benefit post-retirement plans for both legacy Hancock and legacy Whitney employees that provide health care and life insurance benefits. Benefits under the Hancock plan are not available to employees hired on or after January 1, 2000. Benefits under the Whitney plan are restricted to retirees who were already receiving benefits at the time of plan amendments in 2007 or active participants who were eligible to receive benefits as of December 31, 2007.
The following tables show the components of net periodic benefit cost included in expense for the periods indicated.
|
|
|
|
|
|
|
|
|
| Other Post- |
|
|
|
|
|
| Other Post- |
| ||||||||||||||
(in thousands) |
| Pension Benefits |
|
| Retirement Benefits |
|
| Pension Benefits |
|
| Retirement Benefits |
| ||||||||||||||||||||
For The Three Months Ended September 30, |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||||||||||||||||||
For the Three Months Ended March 31, |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||||||||||||||
Service cost |
| $ | 2,620 |
|
| $ | 3,207 |
|
| $ | 23 |
|
| $ | 28 |
|
| $ | 2,800 |
| $ | 3,450 |
| $ | 25 |
| $ | 27 |
| |||
Interest cost |
|
| 3,552 |
|
|
| 3,892 |
|
|
| 91 |
|
|
| 106 |
|
| 3,417 |
| 3,460 |
| 77 |
| 99 |
| |||||||
Expected return on plan assets |
|
| (11,463 | ) |
|
| (12,047 | ) |
|
| — |
|
|
| — |
|
| (11,475 | ) |
| (12,058 | ) |
| — |
| — |
| |||||
Amortization of net (gain) or loss and prior service costs |
|
| 717 |
|
|
| 1,854 |
|
|
| (192 | ) |
|
| (142 | ) |
|
| 1,348 |
|
|
| 2,100 |
|
|
| (139 | ) |
|
| (146 | ) |
Net periodic benefit cost |
| $ | (4,574 | ) |
| $ | (3,094 | ) |
| $ | (78 | ) |
| $ | (8 | ) | ||||||||||||||||
Net reduction of periodic benefit cost |
| $ | (3,910 | ) |
| $ | (3,048 | ) |
| $ | (37 | ) |
| $ | (20 | ) |
|
|
|
|
|
|
|
|
|
| Other Post- |
| |||||
(in thousands) |
| Pension Benefits |
|
| Retirement Benefits |
| ||||||||||
For the Nine Months Ended September 30, |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Service cost |
| $ | 8,996 |
|
| $ | 9,690 |
|
| $ | 71 |
|
| $ | 78 |
|
Interest cost |
|
| 9,982 |
|
|
| 12,315 |
|
|
| 257 |
|
|
| 377 |
|
Expected return on plan assets |
|
| (34,854 | ) |
|
| (36,144 | ) |
|
| — |
|
|
| — |
|
Amortization of net (gain) or loss and prior service costs |
|
| 4,471 |
|
|
| 5,168 |
|
|
| (501 | ) |
|
| (512 | ) |
Special termination benefits |
|
| 16,052 |
|
|
| — |
|
|
| 4,137 |
|
|
| — |
|
Net periodic benefit cost |
| $ | 4,647 |
|
| $ | (8,971 | ) |
| $ | 3,964 |
|
| $ | (57 | ) |
During the nine months ended September 30, 2021, the Company completed a Voluntary Early Retirement Incentive Program (VERIP), which was accepted by approximately 260 eligible Pension Plan participants. The event constituted a curtailment of the Pension Plan and resulted in a re-measurement of the projected benefit obligation.obligation at April 30, 2021. The program had two components: a supplemental cash incentive, substantially all of which was paid through the Pension Plan with existing plan assets, and coverage in a post-retirement medical plan, with each component having specific age and years of service requirements. The impact of offering these incentives is classified as special termination benefits in the table above. As of the re-measurement date of April 30, 2021, Pension Plan assets totaled $808 million and the benefit obligation totaled $597 million.
��
29
12.11. Share-Based Payment Arrangements
The Company maintains incentive compensation plans that provide for awards of share-based compensation to employees and directors. These plans have been approved by the Company’s shareholders. Detailed descriptions of these plans were included in Note 19 18to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.2021.
At September 30, 2021,March 31, 2022, the Company had 10,8919,106 outstanding and exercisable stock options, with a weighted average exercise price of $32.98,$33.62, weighted average remaining contractual term of less than 1one year and an aggregate intrinsic value of $0.2$0.2 million.
During the ninethree months ended September 30, 2021,March 31, 2022, there were 0exercises of 12,183 stock options with a total intrinsic valueoptions.
30
Table of $0.1 million.Contents
The Company’s restricted and performance-based share awards to certain employees and directors are subject to service requirements. A summary of the status of the Company’s nonvested restricted stock units and restricted and performance-based share awards at September 30, 2021March 31, 2022 are presented in the following table.
|
|
|
|
| Weighted |
| ||
|
|
|
|
| Average |
| ||
|
| Number of |
|
| Grant Date |
| ||
|
| Shares |
|
| Fair Value |
| ||
Nonvested at January 1, 2022 |
|
| 1,453,085 |
|
| $ | 34.58 |
|
Granted |
|
| 505,735 |
|
|
| 52.77 |
|
Vested |
|
| (81,592 | ) |
|
| 34.74 |
|
Forfeited |
|
| (64,180 | ) |
|
| 33.14 |
|
Nonvested at March 31, 2022 |
|
| 1,813,048 |
|
| $ | 39.70 |
|
|
|
|
|
|
| Weighted |
| |
|
|
|
|
|
| Average |
| |
|
| Number of |
|
| Grant Date |
| ||
|
| Shares |
|
| Fair Value |
| ||
Nonvested at January 1, 2021 |
|
| 1,886,853 |
|
| $ | 34.77 |
|
Granted |
|
| 236,874 |
|
|
| 36.50 |
|
Vested |
|
| (62,299 | ) |
|
| 33.74 |
|
Forfeited |
|
| (167,411 | ) |
|
| 35.32 |
|
Nonvested at September 30, 2021 |
|
| 1,894,017 |
|
| $ | 34.97 |
|
At September 30, 2021,March 31, 2022, there was $46.8$61.5 million of total unrecognized compensation expense related to nonvested restricted and performance sharesshare awards and units expected to vest in the future. This compensation is expected to be recognized in expense over a weighted average period of 3.03.3 years. The total fair value of shares that vested during the ninethree months ended September 30, 2021March 31, 2022 was $2.6$2.2 million.
During the ninethree months ended September 30, 2021,March 31, 2022, the Company granted 60,996411,711 restricted stock units (RSUs) to certain eligible employees. Unlike restricted share awards (RSAs), which comprise the majority of the unvested share-based compensation awards, the holders of unvested restricted stock units have no rights as a shareholder of the Company, including voting or dividend rights. The Company has elected to award dividend equivalents on each restricted stock unit. Such dividend equivalents are forfeited should the employee terminate employment prior to the vesting of the RSU.
During the three months ended March 31, 2022, the Company granted36,475 performance share awards subject to a total shareholder return (“TSR”) performance metric with a grant date fair value of $38.49$61.47 per share and 60,99636,475 performance shares subject to an operating earnings per share performance metric with a grant date fair value of $32.17$47.36 per share to key members of executive management. The number of performance shares subject to TSR that ultimately vest at the end of the three-year performance period, if any, will be based on the relative rank of the Company’s three-year TSR among the TSRs of a peer group of 4850 regional banks. The fair value of the performance shares subject to TSR at the grant date was determined using a Monte Carlo simulation method. The number of performance shares subject to operating earnings per share that ultimately vest will be based on the Company’s attainment of certain operating earnings per share goals over the two-year performance period. The maximum number of performance shares that could vest is 200%200% of the target award. Compensation expense for these performance shares is recognized on a straight line basis over the three-year service period.
13.12. Commitments and Contingencies
In the normal course of business, the Bank enters into financial instruments, such as commitments to extend credit and letters of credit, to meet the financing needs of its customers. Such instruments are not reflected in the accompanying consolidated financial statements until they are funded, although they expose the Bank to varying degrees of credit risk and interest rate risk in much the same way as funded loans. Under regulatory capital guidelines, the Company and Bank must include unfunded commitments meeting certain criteria in risk-weighted capital calculations.
Commitments to extend credit include revolving commercial credit lines, nonrevolving loan commitments issued mainly to finance the acquisition and development or construction of real property or equipment, and credit card and personal credit lines. The availability of funds under commercial credit lines and loan commitments generally depends on whether the borrower continues to meet credit standards established in the underlying contract and has not violated other contractual conditions. Loan commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee by the borrower. Credit card and personal credit lines are generally subject to cancellation if the borrower’s credit quality deteriorates. A number of commercial and personal credit lines are used only partially or, in some cases, not at all before they expire, and the total commitment amounts do not necessarily represent future cash requirements of the Company.
A substantial majority of the letters of credit are standby agreements that obligate the Bank to fulfill a customer’s financial commitments to a third party if the customer is unable to perform. The Bank issues standby letters of credit primarily to provide credit enhancement to its customers’ other commercial or public financing arrangements and to help them demonstrate financial capacity to vendors of essential goods and services.
30
The contract amounts of these instruments reflect the Company’s exposure to credit risk. The Company undertakes the same credit evaluation in making loan commitments and assuming conditional obligations as it does for on-balance sheet instruments and may
31
require collateral or other credit support. The Company had a reserve for unfunded lending commitments of $28.9$30.7 millionand $29.9$29.3 million at September 30, 2021March 31, 2022 and December 31, 2020,2021, respectively.
The following table presents a summary of the Company’s off-balance sheet financial instruments as of September 30, 2021March 31, 2022 and December 31, 2020:2021:
|
| September 30, |
|
| December 31, |
|
| March 31, |
|
| December 31, |
| ||||
(in thousands) |
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
Commitments to extend credit |
| $ | 8,983,039 |
|
| $ | 8,106,223 |
|
| $ | 9,612,025 |
| $ | 9,444,803 |
| |
Letters of credit |
|
| 370,905 |
|
|
| 365,510 |
|
| 382,067 |
| 396,956 |
|
Legal Proceedings
The Company is party to various legal proceedings arising in the ordinary course of business. Management does not believe that loss contingencies, if any, arising from pending litigation and regulatory matters will have a material adverse effect on the consolidated financial position or liquidity of the Company.
14.13. Fair Value Measurements
The FASB defines fair value as the exchange price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The FASB’s guidance also establishes a fair value hierarchy that prioritizes the inputs to these valuation techniques used to measure fair value, giving preference to quoted prices in active markets for identical assets or liabilities (“level 1”) and the lowest priority to unobservable inputs such as a reporting entity’s own data (“level 3”). Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical assets or liabilities in markets that are not active, observable inputs other than quoted prices, such as interest rates and yield curves, and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
31
32
Fair Value of Assets and Liabilities Measured on a Recurring Basis
The following tables present for each of the fair value hierarchy levels the Company’s financial assets and liabilities that are measured at fair value on a recurring basis in the consolidated balance sheets at September 30, 2021March 31, 2022 and December 31, 2020:2021:
|
| March 31, 2022 |
| |||||||||||||
(in thousands) |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Available for sale debt securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
U.S. Treasury and government agency securities |
| $ | — |
|
| $ | 9,631 |
|
| $ | — |
|
| $ | 9,631 |
|
Municipal obligations |
|
| — |
|
|
| 215,634 |
|
|
| — |
|
|
| 215,634 |
|
Corporate debt securities |
|
| — |
|
|
| 20,927 |
|
|
| — |
|
|
| 20,927 |
|
Residential mortgage-backed securities |
|
| — |
|
|
| 2,761,422 |
|
|
| — |
|
|
| 2,761,422 |
|
Commercial mortgage-backed securities |
|
| — |
|
|
| 2,894,173 |
|
|
| — |
|
|
| 2,894,173 |
|
Collateralized mortgage obligations |
|
| — |
|
|
| 91,220 |
|
|
| — |
|
|
| 91,220 |
|
Total available for sale securities |
|
| — |
|
|
| 5,993,007 |
|
|
| — |
|
|
| 5,993,007 |
|
Mortgage loans held for sale |
|
| — |
|
|
| 25,046 |
|
|
| — |
|
|
| 25,046 |
|
Derivative assets (1) |
|
| — |
|
|
| 59,658 |
|
|
| — |
|
|
| 59,658 |
|
Total recurring fair value measurements - assets |
| $ | — |
|
| $ | 6,077,711 |
|
| $ | — |
|
| $ | 6,077,711 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Derivative liabilities (1) |
| $ | — |
|
| $ | 74,741 |
|
| $ | 3,516 |
|
| $ | 78,257 |
|
Total recurring fair value measurements - liabilities |
| $ | — |
|
| $ | 74,741 |
|
| $ | 3,516 |
|
| $ | 78,257 |
|
|
| December 31, 2021 |
| |||||||||||||
(in thousands) |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Available for sale debt securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
U.S. Treasury and government agency securities |
| $ | — |
|
| $ | 419,298 |
|
| $ | — |
|
| $ | 419,298 |
|
Municipal obligations |
|
| — |
|
|
| 314,158 |
|
|
| — |
|
|
| 314,158 |
|
Corporate debt securities |
|
| — |
|
|
| 18,702 |
|
|
| — |
|
|
| 18,702 |
|
Residential mortgage-backed securities |
|
| — |
|
|
| 3,035,798 |
|
|
| — |
|
|
| 3,035,798 |
|
Commercial mortgage-backed securities |
|
| — |
|
|
| 3,077,859 |
|
|
| — |
|
|
| 3,077,859 |
|
Collateralized mortgage obligations |
|
| — |
|
|
| 120,883 |
|
|
| — |
|
|
| 120,883 |
|
Total available for sale securities |
|
| — |
|
|
| 6,986,698 |
|
|
| — |
|
|
| 6,986,698 |
|
Mortgage loans held for sale |
|
|
|
|
| 41,022 |
|
|
|
|
|
| 41,022 |
| ||
Derivative assets (1) |
|
| — |
|
|
| 75,867 |
|
|
| — |
|
|
| 75,867 |
|
Total recurring fair value measurements - assets |
| $ | — |
|
| $ | 7,103,587 |
|
| $ | — |
|
| $ | 7,103,587 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Derivative liabilities (1) |
| $ | — |
|
| $ | 30,930 |
|
| $ | 4,116 |
|
| $ | 35,046 |
|
Total recurring fair value measurements - liabilities |
| $ | — |
|
| $ | 30,930 |
|
| $ | 4,116 |
|
| $ | 35,046 |
|
|
| September 30, 2021 |
| |||||||||||||
(in thousands) |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and government agency securities |
| $ | — |
|
| $ | 394,722 |
|
| $ | — |
|
| $ | 394,722 |
|
Municipal obligations |
|
| — |
|
|
| 316,027 |
|
|
| — |
|
|
| 316,027 |
|
Corporate debt securities |
|
| — |
|
|
| 14,761 |
|
|
| — |
|
|
| 14,761 |
|
Residential mortgage-backed securities |
|
| — |
|
|
| 3,253,393 |
|
|
| — |
|
|
| 3,253,393 |
|
Commercial mortgage-backed securities |
|
| — |
|
|
| 2,884,433 |
|
|
| — |
|
|
| 2,884,433 |
|
Collateralized mortgage obligations |
|
| — |
|
|
| 137,585 |
|
|
| — |
|
|
| 137,585 |
|
Total available for sale securities |
|
| — |
|
|
| 7,000,921 |
|
|
| — |
|
|
| 7,000,921 |
|
Mortgage loans held for sale |
|
| — |
|
|
| 72,456 |
|
|
| — |
|
|
| 72,456 |
|
Derivative assets (1) |
|
| — |
|
|
| 98,156 |
|
|
| — |
|
|
| 98,156 |
|
Total recurring fair value measurements - assets |
| $ | — |
|
| $ | 7,171,533 |
|
| $ | — |
|
| $ | 7,171,533 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities (1) |
| $ | — |
|
| $ | 35,236 |
|
| $ | 4,472 |
|
| $ | 39,708 |
|
Total recurring fair value measurements - liabilities |
| $ | — |
|
| $ | 35,236 |
|
| $ | 4,472 |
|
| $ | 39,708 |
|
|
| December 31, 2020 |
| |||||||||||||
(in thousands) |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and government agency securities |
| $ | — |
|
| $ | 213,370 |
|
| $ | — |
|
| $ | 213,370 |
|
Municipal obligations |
|
| — |
|
|
| 326,725 |
|
|
| — |
|
|
| 326,725 |
|
Corporate debt securities |
|
| — |
|
|
| 11,764 |
|
|
| — |
|
|
| 11,764 |
|
Residential mortgage-backed securities |
|
| — |
|
|
| 2,629,811 |
|
|
| — |
|
|
| 2,629,811 |
|
Commercial mortgage-backed securities |
|
| — |
|
|
| 2,455,534 |
|
|
| — |
|
|
| 2,455,534 |
|
Collateralized mortgage obligations |
|
| — |
|
|
| 362,123 |
|
|
| — |
|
|
| 362,123 |
|
Total available for sale securities |
|
| — |
|
|
| 5,999,327 |
|
|
| — |
|
|
| 5,999,327 |
|
Derivative assets (1) |
|
| — |
|
|
| 150,180 |
|
|
| — |
|
|
| 150,180 |
|
Total recurring fair value measurements - assets |
| $ | — |
|
| $ | 6,149,507 |
|
| $ | — |
|
| $ | 6,149,507 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities (1) |
| $ | — |
|
| $ | 49,612 |
|
| $ | 5,645 |
|
| $ | 55,257 |
|
Total recurring fair value measurements - liabilities |
| $ | — |
|
| $ | 49,612 |
|
| $ | 5,645 |
|
| $ | 55,257 |
|
|
|
Securities classified as level 2 include obligations of U.S. Government agencies and U.S. Government-sponsored agencies, including “off-the-run” U.S. Treasury securities, residential and commercial mortgage-backed securities and collateralized mortgage obligations that are issued or guaranteed by U.S. government agencies, and state and municipal bonds. The level 2 fair value measurements for investment securities are obtained quarterly from a third-party pricing service that uses industry-standard pricing models. Substantially all of the model inputs are observable in the marketplace or can be supported by observable data.
The Company invests only in securities of investment grade quality with a targeted duration, for the overall portfolio, generally between two and five and a half years.years. Company policies generally limit investments to U.S. agency securities and municipal securities determined to be investment grade according to an internally generated score which generally includes a rating of not less than “Baa” or its equivalent by a nationally recognized statistical rating agency.
Loans held for sale consist of residential mortgage loans carried under the fair value option. The fair value for these instruments is classified as level 2 based on market prices obtained from potential buyers.
32
33
For the Company’s derivative financial instruments designated as hedges and those under the customer interest rate program, the fair value is obtained from a third-party pricing service that uses an industry-standard discounted cash flow model that relies on inputs, LIBOR swap curves and Overnight Index swap rate curves, all observable in the marketplace. To comply with the accounting guidance, credit valuation adjustments are incorporated in the fair values to appropriately reflect nonperformance risk for both the Company and the counterparties. Although the Company has determined that the majority of the inputs used to value these derivative instruments fall within level 2 of the fair value hierarchy, the credit value adjustments utilize level 3 inputs, such as estimates of current credit spreads. The Company has determined that the impact of the credit valuation adjustments is not significant to the overall valuation of these derivatives. As a result, the Company has classified its derivative valuations for these instruments in level 2 of the fair value hierarchy. The Company’s policy is to measure counterparty credit risk quarterly for all derivative instruments subject to master netting arrangements consistent with how market participants would price the net risk exposure at the measurement date.
The Company also has certain derivative instruments associated with the Bank’s mortgage-banking activities. These derivative instruments include interest rate lock commitments on prospective residential mortgage loans and forward commitments to sell these loans to investors on a best efforts delivery basis and To Be Announced securities for mandatory delivery contracts. The fair value of these derivative instruments is measured using observable market prices for similar instruments and is classified as a level 2 measurement.
The Company’s Level 3 liability consists of a derivative contract with the purchaser of 192,163 shares of Visa Class B common stock. Pursuant to the agreement, the Company retains the risks associated with the ultimate conversion of the Visa Class B common shares into shares of Visa Class A common stock, such that the counterparty will be compensated for any dilutive adjustments to the conversion ratio and the Company will be compensated for any anti-dilutive adjustments to the ratio. The agreement also requires periodic payments by the Company to the counterparty calculated by reference to the market price of Visa Class A common shares at the time of sale and a fixed rate of interest that steps up once after the eighth scheduled quarterly payment. The fair value of the liability is determined using a discounted cash flow methodology. The significant unobservable inputs used in the fair value measurement are the Company’s own assumptions about estimated changes in the conversion rate of the Visa Class B common shares into Visa Class A common shares, the date on which such conversion is expected to occur and the estimated growth rate of the Visa Class A common share price. Refer to Note 65 – Derivatives for information about the derivative contract with the counterparty.
The Company believes its valuation methods for its assets and liabilities carried at fair value are appropriate; however, the use of different methodologies or assumptions, particularly as applied to Level 3 assets and liabilities, could have a material effect on the computation of their estimated fair values.
Changes in Level 3 Fair Value Measurements and Quantitative Information about Level 3 Fair Value Measurements
The table below presents a rollforward of the amounts on the consolidated balance sheets for the ninethree months ended September 30, 2021March 31, 2022 and the year ended December 31, 20202021 for financial instruments of a material nature that are classified within Level 3 of the fair value hierarchy and are measured at fair value on a recurring basis:
(in thousands) |
|
|
| |
Balance at December 31, 2020 |
| $ | 5,645 |
|
Cash settlement |
|
| (1,767 | ) |
Losses included in earnings |
|
| 238 |
|
Balance at December 31, 2021 |
|
| 4,116 |
|
Cash settlement |
|
| (634 | ) |
Losses included in earnings |
|
| 34 |
|
Balance at March 31, 2022 |
| $ | 3,516 |
|
(in thousands) |
|
|
|
|
Balance at December 31, 2019 |
| $ | 5,704 |
|
Cash settlement |
|
| (1,656 | ) |
Losses included in earnings |
|
| 1,597 |
|
Balance at December 31, 2020 |
|
| 5,645 |
|
Cash settlement |
|
| (1,327 | ) |
Losses included in earnings |
|
| 154 |
|
Balance at September 30, 2021 |
| $ | 4,472 |
|
The table below provides an overview of the valuation techniques and significant unobservable inputs used in those techniques to measure the financial instrument measured on a recurring basis and classified within Level 3 of the valuation. The range of sensitivities that management utilized in its fair value calculations is deemed acceptable in the industry with respect to the identified financial instrument.
33
34
($ in thousands) |
|
|
|
|
|
| ||
|
| Fair Value |
| |||||
Level 3 Class |
| March 31, 2022 |
|
| December 31, 2021 |
| ||
Derivative liability |
| $ | 3,516 |
|
| $ | 4,116 |
|
Valuation technique |
| Discounted cash flow |
|
| Discounted cash flow |
| ||
Unobservable inputs: |
|
|
|
|
|
| ||
Visa Class A appreciation - range |
| 6%-12% |
|
| 6%-12% |
| ||
Visa Class A appreciation - weighted average |
| 9% |
|
| 9% |
| ||
Conversion rate - range |
| 1.62x-1.60x |
|
| 1.62x-1.60x |
| ||
Conversion rate -weighted average |
| 1.6091x |
|
| 1.6091x |
| ||
Time until resolution |
| 3-21 months |
|
| 3-24 months |
|
($ in thousands) |
|
|
|
|
|
|
|
|
|
| Fair Value |
| |||||
Level 3 Class |
| September 30, 2021 |
|
| December 31, 2020 |
| ||
Derivative liability |
| $ | 4,472 |
|
| $ | 5,645 |
|
Valuation technique |
| Discounted cash flow |
|
| Discounted cash flow |
| ||
Unobservable inputs: |
|
|
|
|
|
|
|
|
Visa Class A appreciation - range |
| 6%-12% |
|
| 6%-12% |
| ||
Visa Class A appreciation - weighted average |
| 9% |
|
| 9% |
| ||
Conversion rate - range |
| 1.62x-1.60x |
|
| 1.62x-1.60x |
| ||
Conversion rate -weighted average |
| 1.6114x |
|
| 1.6114x |
| ||
Time until resolution |
| 3-27 months |
|
| 3-36 months |
|
The Company’s policy is to recognize transfers between valuation hierarchy levels as of the end of a reporting period.
Fair Value of Assets Measured on a Nonrecurring Basis
Certain assets and liabilities are measured at fair value on a nonrecurring basis. Collateral-dependent loans individually evaluated for credit loss loans are level 2 assets measured at the fair value of the underlying collateral based on independent third-party appraisals that take into consideration market-based information such as recent sales activity for similar assets in the property’s market.
Other real estate owned and foreclosed assets, including both foreclosed property and surplus banking property, are level 3 assets that are adjusted to fair value, less estimated selling costs, upon transfer from loans or property and equipment. Subsequently, other real estate owned and foreclosed assets is carried at the lower of carrying value or fair value less estimated selling costs. Fair values are determined by sales agreement or third-party appraisals as discounted for estimated selling costs, information from comparable sales, and marketability of the assets.
The fair value information presented below is not as of the period end, rather it was as of the date the fair value adjustment was recorded during the twelve months for each of the dates presented below, and excludes nonrecurring fair value measurements of assets no longer on the balance sheet.
The following tables present the Company’s financial assets that are measured at fair value on a nonrecurring basis for each of the fair value hierarchy levels.
|
| September 30, 2021 |
|
| March 31, 2022 |
| ||||||||||||||||||||||||||
(in thousands) |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||||||
Collateral-dependent loans individually evaluated for credit loss |
| $ | — |
|
| $ | 17,381 |
|
| $ | — |
|
| $ | 17,381 |
|
| $ | — |
| $ | 4,861 |
| $ | — |
| $ | 4,861 |
| |||
Other real estate owned and foreclosed assets, net |
|
| — |
|
|
| — |
|
|
| 8,423 |
|
|
| 8,423 |
|
|
| — |
|
|
| — |
|
|
| 6,345 |
|
|
| 6,345 |
|
Total nonrecurring fair value measurements |
| $ | — |
|
| $ | 17,381 |
|
| $ | 8,423 |
|
| $ | 25,804 |
|
| $ | — |
|
| $ | 4,861 |
|
| $ | 6,345 |
|
| $ | 11,206 |
|
|
| December 31, 2021 |
| |||||||||||||
(in thousands) |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
Collateral-dependent loans individually evaluated for credit loss |
| $ | — |
|
| $ | 13,253 |
|
| $ | — |
|
| $ | 13,253 |
|
Other real estate owned and foreclosed assets, net |
|
| — |
|
|
| — |
|
|
| 7,533 |
|
|
| 7,533 |
|
Total nonrecurring fair value measurements |
| $ | — |
|
| $ | 13,253 |
|
| $ | 7,533 |
|
| $ | 20,786 |
|
|
| December 31, 2020 |
| |||||||||||||
(in thousands) |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
Collateral-dependent loans individually evaluated for credit loss |
| $ | — |
|
| $ | 60,451 |
|
| $ | — |
|
| $ | 60,451 |
|
Other real estate owned and foreclosed assets, net |
|
| — |
|
|
| — |
|
|
| 11,648 |
|
|
| 11,648 |
|
Total nonrecurring fair value measurements |
| $ | — |
|
| $ | 60,451 |
|
| $ | 11,648 |
|
| $ | 72,099 |
|
Accounting guidance from the FASB requires the disclosure of estimated fair value information about certain on- and off-balance sheet financial instruments, including those financial instruments that are not measured and reported at fair value on a recurring basis. The significant methods and assumptions used by the Company to estimate the fair value of financial instruments are discussed below.
Cash, Short-Term Investments and Federal Funds Sold –For these short-term instruments, the carrying amount is a reasonable estimate of fair value.
Securities – The fair value measurement for securities available for sale was discussed earlier in the note. The same measurement techniques were applied to the valuation of securities held to maturity.
35
Loans, Net – The fair value measurement for certain impaired loans was described earlier in this note. For the remaining portfolio, fair values were generally determined by discounting scheduled cash flows using discount rates determined with reference to current market rates at which loans with similar terms would be made to borrowers of similar credit quality.
34
Loans Held for Sale – These loans are either carried under the fair value option or at the lower of cost or market, whichmarket. Given the short duration of these instruments, the carrying amount is considered a reasonable estimate of fair value.
Deposits – The accounting guidance requires that the fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits, interest-bearing checking and savings accounts, be assigned fair values equal to amounts payable upon demand (“carrying amounts”). The fair value of fixed maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities.
Federal Funds Purchased and Securities Sold under Agreements to Repurchase – For these short-term liabilities, the carrying amount is a reasonable estimate of fair value.
Short-Term FHLB Borrowings – The fair value is estimated by discounting the future contractual cash flows using current market rates at which borrowings with similar terms and options could be obtained.
Long-Term Debt – The fair value is estimated by discounting the future contractual cash flows using current market rates at which debt with similar terms could be obtained.
Derivative Financial Instruments – The fair value measurement for derivative financial instruments was described earlier in this note.
35
36
The following tables present the estimated fair values of the Company’s financial instruments by fair value hierarchy levels and the corresponding carrying amounts:
|
| March 31, 2022 |
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| Total Fair |
|
| Carrying |
| |||||
(in thousands) |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Value |
|
| Amount |
| |||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cash, interest-bearing bank deposits, and federal funds sold |
| $ | 3,836,431 |
|
| $ | — |
|
| $ | — |
|
| $ | 3,836,431 |
|
| $ | 3,836,431 |
|
Available for sale securities |
|
| — |
|
|
| 5,993,007 |
|
|
| — |
|
|
| 5,993,007 |
|
|
| 5,993,007 |
|
Held to maturity securities |
|
| — |
|
|
| 2,429,049 |
|
|
| — |
|
|
| 2,429,049 |
|
|
| 2,488,088 |
|
Loans, net |
|
| — |
|
|
| 4,861 |
|
|
| 20,501,931 |
|
|
| 20,506,792 |
|
|
| 21,005,498 |
|
Loans held for sale |
|
| — |
|
|
| 59,877 |
|
|
| — |
|
|
| 59,877 |
|
|
| 59,877 |
|
Derivative financial instruments |
|
| — |
|
|
| 59,658 |
|
|
| — |
|
|
| 59,658 |
|
|
| 59,658 |
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Deposits |
| $ | — |
|
| $ | — |
|
| $ | 30,454,443 |
|
| $ | 30,454,443 |
|
| $ | 30,499,709 |
|
Federal funds purchased |
|
| 2,350 |
|
|
| — |
|
|
| — |
|
|
| 2,350 |
|
|
| 2,350 |
|
Securities sold under agreements to repurchase |
|
| 517,952 |
|
|
| — |
|
|
| — |
|
|
| 517,952 |
|
|
| 517,952 |
|
FHLB short-term borrowings |
|
| — |
|
|
| 1,105,633 |
|
|
| — |
|
|
| 1,105,633 |
|
|
| 1,100,000 |
|
Long-term debt |
|
| — |
|
|
| 231,781 |
|
|
| — |
|
|
| 231,781 |
|
|
| 240,454 |
|
Derivative financial instruments |
|
| — |
|
|
| 74,741 |
|
|
| 3,516 |
|
|
| 78,257 |
|
|
| 78,257 |
|
|
| December 31, 2021 |
| |||||||||||||||||
(in thousands) |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total Fair |
|
| Carrying |
| |||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cash, interest-bearing bank deposits, and federal funds sold |
| $ | 4,231,836 |
|
| $ | — |
|
| $ | — |
|
| $ | 4,231,836 |
|
| $ | 4,231,836 |
|
Available for sale securities |
|
| — |
|
|
| 6,986,698 |
|
|
| — |
|
|
| 6,986,698 |
|
|
| 6,986,698 |
|
Held to maturity securities |
|
| — |
|
|
| 1,631,482 |
|
|
| — |
|
|
| 1,631,482 |
|
|
| 1,565,751 |
|
Loans, net |
|
| — |
|
|
| 13,253 |
|
|
| 20,720,568 |
|
|
| 20,733,821 |
|
|
| 20,792,217 |
|
Loans held for sale |
|
| — |
|
|
| 93,069 |
|
|
| — |
|
|
| 93,069 |
|
|
| 93,069 |
|
Derivative financial instruments |
|
| — |
|
|
| 75,867 |
|
|
| — |
|
|
| 75,867 |
|
|
| 75,867 |
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Deposits |
| $ | — |
|
| $ | — |
|
| $ | 30,432,646 |
|
| $ | 30,432,646 |
|
| $ | 30,465,897 |
|
Federal funds purchased |
|
| 1,850 |
|
|
| — |
|
|
| — |
|
|
| 1,850 |
|
|
| 1,850 |
|
Securities sold under agreements to repurchase |
|
| 563,211 |
|
|
| — |
|
|
| — |
|
|
| 563,211 |
|
|
| 563,211 |
|
FHLB short-term borrowings |
|
| — |
|
|
| 1,119,026 |
|
|
| — |
|
|
| 1,119,026 |
|
|
| 1,100,000 |
|
Long-term debt |
|
| — |
|
|
| 253,677 |
|
|
| — |
|
|
| 253,677 |
|
|
| 244,220 |
|
Derivative financial instruments |
|
| — |
|
|
| 30,930 |
|
|
| 4,116 |
|
|
| 35,046 |
|
|
| 35,046 |
|
|
| September 30, 2021 |
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total Fair |
|
| Carrying |
| ||
(in thousands) |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Value |
|
| Amount |
| |||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, interest-bearing bank deposits, and federal funds sold |
| $ | 3,590,661 |
|
| $ | — |
|
| $ | — |
|
| $ | 3,590,661 |
|
| $ | 3,590,661 |
|
Available for sale securities |
|
| — |
|
|
| 7,000,921 |
|
|
| — |
|
|
| 7,000,921 |
|
|
| 7,000,921 |
|
Held to maturity securities |
|
| — |
|
|
| 1,385,967 |
|
|
| — |
|
|
| 1,385,967 |
|
|
| 1,307,701 |
|
Loans, net |
|
| — |
|
|
| 17,381 |
|
|
| 20,526,735 |
|
|
| 20,544,116 |
|
|
| 20,514,494 |
|
Loans held for sale |
|
| — |
|
|
| 90,618 |
|
|
| — |
|
|
| 90,618 |
|
|
| 90,618 |
|
Derivative financial instruments |
|
| — |
|
|
| 98,156 |
|
|
| — |
|
|
| 98,156 |
|
|
| 98,156 |
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
| $ | — |
|
| $ | — |
|
| $ | 29,177,424 |
|
| $ | 29,177,424 |
|
| $ | 29,208,157 |
|
Federal funds purchased |
|
| 1,825 |
|
|
| — |
|
|
| — |
|
|
| 1,825 |
|
|
| 1,825 |
|
Securities sold under agreements to repurchase |
|
| 643,403 |
|
|
| — |
|
|
| — |
|
|
| 643,403 |
|
|
| 643,403 |
|
FHLB short-term borrowings |
|
| — |
|
|
| 1,126,938 |
|
|
| — |
|
|
| 1,126,938 |
|
|
| 1,100,000 |
|
Long-term debt |
|
| — |
|
|
| 260,964 |
|
|
| — |
|
|
| 260,964 |
|
|
| 248,011 |
|
Derivative financial instruments |
|
| — |
|
|
| 35,236 |
|
|
| 4,472 |
|
|
| 39,708 |
|
|
| 39,708 |
|
|
| December 31, 2020 |
| |||||||||||||||||
(in thousands) |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total Fair Value |
|
| Carrying Amount |
| |||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, interest-bearing bank deposits, and federal funds sold |
| $ | 1,860,092 |
|
| $ | — |
|
| $ | — |
|
| $ | 1,860,092 |
|
| $ | 1,860,092 |
|
Available for sale securities |
|
| — |
|
|
| 5,999,327 |
|
|
| — |
|
|
| 5,999,327 |
|
|
| 5,999,327 |
|
Held to maturity securities |
|
| — |
|
|
| 1,467,581 |
|
|
| — |
|
|
| 1,467,581 |
|
|
| 1,357,170 |
|
Loans, net |
|
| — |
|
|
| 60,451 |
|
|
| 21,472,933 |
|
|
| 21,533,384 |
|
|
| 21,339,754 |
|
Loans held for sale |
|
| — |
|
|
| 136,063 |
|
|
| — |
|
|
| 136,063 |
|
|
| 136,063 |
|
Derivative financial instruments |
|
| — |
|
|
| 150,180 |
|
|
| — |
|
|
| 150,180 |
|
|
| 150,180 |
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
| $ | — |
|
| $ | — |
|
| $ | 27,679,321 |
|
| $ | 27,679,321 |
|
| $ | 27,697,877 |
|
Federal funds purchased |
|
| 300 |
|
|
| — |
|
|
| — |
|
|
| 300 |
|
|
| 300 |
|
Securities sold under agreements to repurchase |
|
| 567,213 |
|
|
| — |
|
|
| — |
|
|
| 567,213 |
|
|
| 567,213 |
|
FHLB short-term borrowings |
|
| — |
|
|
| 1,147,335 |
|
|
| — |
|
|
| 1,147,335 |
|
|
| 1,100,000 |
|
Long-term debt |
|
| — |
|
|
| 404,880 |
|
|
| — |
|
|
| 404,880 |
|
|
| 378,322 |
|
Derivative financial instruments |
|
| — |
|
|
| 49,612 |
|
|
| 5,645 |
|
|
| 55,257 |
|
|
| 55,257 |
|
15.14. Recent Accounting Pronouncements
Accounting Standards Issued But Not Yet Adopted in 2021
In August 2021,March 2022, the FASBFinancial Accounting Standards Board ("FASB") issued ASU 2021-06, “PresentationAccounting Standards Update ("ASU") 2022-01, "Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method," to provide clarification of Financial Statements (Topic 205), Financial Services – Depository and Lending (Topic 942) and Financial Services – Investment Companies (Topic 946),” to reflectexpand upon certain provisions of Topic 815 that became effective with the issuance of SEC Release No. 33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses, and No. 33-10835, Update of Statistical Disclosures for Bank and Savings and Loan Registrants. The Company is required to comply with the rules set forth in SEC Release No. 33-10835 for fiscal years ending on or after December 31, 2021, with voluntary early compliance permitted. The Company adopted the rules set forth in this release in its December 31, 2020 Form 10-K and, therefore, was in compliance with this standard upon its issuance.
In January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform (Topic 848),” to clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the transition to new reference rates.2017-12. The amendments in this update include the following provisions: (1) expand the current last-of-layer method to allow multiple hedged layers of a single closed portfolio and, accordingly, renaming the last-of-layer method to the portfolio layer method; (2) expand the scope of the portfolio layer method to include nonprepayable financial assets; (3) specify that eligible hedging instruments in a single-layer hedge may include spot-starting or forward-starting constant-notional swaps, or spot or forward-starting amortizing-notional swaps and that the number of hedged layers corresponds with the number of hedges designated; (4) provide additional guidance on the accounting for and disclosure of hedge basis adjustments that are applicable to the portfolio layer method whether a single hedged layer or multiple hedged layers are designated, and; (5) specify how hedge basis adjustments should be considered when determining credit losses for the assets included in the closed portfolio. The amendments in this update do not apply to contract modifications made after December 31, 2022, new hedging relationships entered into after December 31, 2022, and existing hedging relationships evaluated for effectiveness in periods after December 31, 2022, except for hedging relationships existing as of December 31, 2022,all entities that apply certain optional expedients in which the accounting effects are recorded through the end of the hedging relationship (including periods after December 31, 2022). The provisions of this guidance were effective upon issuance for all entities. An entity may elect to apply the amendmentsportfolio layer method of hedge accounting in accordance with Topic 815.
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this update on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or on a prospective basis to new modifications from any date within an interim period that includes or is subsequent to the date of the issuance of a final update, up to the date that financial statements are available to be issued. The Company adopted this guidance on a full retrospective basis upon issuance. Adoption of this guidance did not have a material impact upon the Company’s financial position and results of operations.
In October 2020, the FASB issued ASU 2020-08, “Codification Improvements to Subtopic 310-20, Receivables- Nonrefundable Fees and Other Costs,” to clarify that an entity should reevaluate whether a callable debt security is within the scope of paragraph 310-20-35-33 for each reporting period. Securities within the scope of this paragraph are those that have explicit, noncontingent call options that are callable at fixed prices and on preset dates at prices less than the amortized cost basis of the security. Whether a security is subject to this paragraph may change depending on the amortized cost basis of the security and the terms of the next call option. For instruments that fall within the scope, the premium should be amortized to the next call date, which is defined as the first date at which a call option at a specified price becomes exercisable. Once the next call date has passed, the next call date after that (if applicable) is the date at which the next call option at a specified price becomes exercisable, and, if there is no remaining premium or if there are no further call dates, the effective yield should be reset using the payment terms of the debt security. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years,years. Early adoption is permitted on any date on or after the issuance of this update, with the effect of adopting the amendments related to basis adjustments reflected as of the beginning after December 15, 2020, andof the fiscal year of adoption (that is, the initial application date). Upon adoption, any entity may designate multiple hedged layers of a single closed portfolio solely on a prospective basis. All entities shouldare required to apply the amendments inrelated to hedge basis adjustments under the updateportfolio layer method, except for those related to disclosures, on a modified retrospective basis by means of a cumulative-effect adjustment to the opening balance of retained earnings on the initial application date. Entities have the option to apply the amendments related to disclosures on a prospective basis for existing and newly purchased callablefrom the initial application date or on a retrospective basis to each prior period presented after the date of adoption of the amendments in Update 2017-12. Within 30 days after the adoption, an entity may reclassify debt securities classified in the held-to-maturity category at the date of adoption to the available-for-sale category only if the entity applies portfolio layer method hedging to one or more closed portfolios that include those debt securities. The Company assessed its bond portfolio uponis currently evaluating this standard, including consideration of early adoption, however, the impact of adoption is not expected to be material to the consolidated results of operation.
In March 2002, the FASB issued ASU 2022-02, "Financial Instruments: Credit Losses (Topic 326) - Troubled Debt Restructurings and determinedVintage Disclosures." The amendments in this update cover two issues: (1) the elimination of TDR recognition and measurement guidance as prescribed by ASC 310-40 and, instead, require that there were no bondsan entity evaluate (consistent with premium calls at such dates.the accounting for other loan modifications) whether the modification represents a new loan or a continuation of an existing loan. The Company will evaluate its bond portfolio at each interimamendments enhance existing disclosure requirements and annual reporting dateintroduce new requirements related to determine if any instruments fallcertain modifications of receivables made to borrowers experiencing financial difficulty; and, (2) for public business entities, the requirement that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investment in leases within the scope of Subtopic 326-20. Gross write-off information must be included in the vintage disclosures required for public business entities in accordance with paragraph 310-20-35-33.326-20-50-6, which requires that an entity disclose the amortized cost basis of financing receivables by credit quality indicator and class of financing receivable by year of origination.
In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes (Topic 740).” The amendments in this update are meant to simplify the accounting for income taxes by removing certain exceptions to GAAP. The amendments also improve consistent application of and simplify GAAP by modifying and/or revising the accounting for certain income tax transactions and by clarifying certain existing codification. The amendments in the update are effective for public business entities for fiscal years and interim periods within those fiscal years beginning after December 15, 2020.2022, including interim periods within those fiscal years. For the elimination of recognition and measurement guidance on troubled debt restructurings by creditors in Subtopic 310-40, an entity may elect to apply a modified retrospective transition by means of a cumulative-effect adjustment to the opening retained earnings as of the beginning of the fiscal year of adoption, or a prospective approach applied to modifications occurring after the date of adoption. The remainder of amendments should be applied prospectively. Early adoption of the amendments in this update is permitted, including adoption in an interim period. An entity may elect to early adopt the amendments about TDRs and related disclosure enhancements separately from the amendments related to vintage disclosures. The Company adoptedis currently evaluating this guidance on January 1, 2021. Adoptionstandard, however, the impact of this guidance didadoption is not have aexpected to be material impact uponto the Company’s financial position andconsolidated results of operations.operation.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
FORWARD-LOOKING STATEMENTS
The objective of this discussion and analysis is to provide material information relevant to the assessment of the financial condition and results of operations of Hancock Whitney Corporation and subsidiaries during the three months ended March 31, 2022 and selected comparable prior periods, including an evaluation of the amounts and certainty of cash flows from operations and outside sources. This discussion and analysis is intended to highlight and supplement financial and operating data and information presented elsewhere in this report, including the consolidated financial statements and related notes. The discussion contains forward-looking statements within the meaning and protections of section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are subject to risks and uncertainties. Should one or more of these risks or uncertainties materialize, our actual results may differ from those expressed or implied by the forward-looking statements.Important factors that could cause actual results to differ materially from the forward-looking statements we make in this Quarterly Report on Form 10-Q and in other reports or documents that we file from time to time with the SEC include, but are not limited to, the following:
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• the impact on our financial results, reputation, and business if we are unable to comply with all applicable federal and state regulations or other supervisory actions or directives and any necessary capital initiatives; • our ability to effectively compete with other traditional and non-traditional financial services companies, some of whom possess greater financial resources than we do or are subject to different regulatory standards than we are; • our ability to maintain adequate internal controls over financial reporting; • potential claims, damages, penalties, fines and reputational damage resulting from pending or future litigation, regulatory proceedings and enforcement actions, including costs and effects of litigation related to our participation in stimulus programs associated with the government’s response to the COVID-19 pandemic; • the financial impact of future tax legislation; • the effects of war or other conflicts, including Russia's military action in Ukraine, acts of terrorism, natural disasters such as hurricanes, freezes, flooding and other man-made disasters, such as oil spills in the Gulf of Mexico, health emergencies, epidemics or pandemics, or other catastrophic events that may affect general economic conditions; and • changes in laws and regulations affecting our businesses, including governmental monetary and fiscal policies, legislation and regulations relating to bank products and services, as well as changes in the enforcement and interpretation of such laws and regulations by applicable governmental and self-regulatory agencies, which could require us to change certain business practices, increase compliance risk, reduce our revenue, impose additional costs on us, or otherwise negatively affect our businesses.
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Also, any statement that does not describe historical or current facts is a forward-looking statement. These statements often include the words “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “forecast,” “goals,” “targets,” “initiatives,” “focus,” “potentially,” “probably,” “projects,” “outlook,” or similar expressions or future conditional verbs such as “may,” “will,” “should,” “would,” and “could.” Forward-looking statements are based upon the current beliefs and expectations of management and on information currently available to management. Our statements speak as of the date hereof, and we do not assume any obligation to update these statements or to update the reasons why actual results could differ from those contained in such statements in light of new information or future events.
Forward-looking statements are subject to significant risks and uncertainties. Investors are cautioned against placing undue reliance on such statements. Actual results may differ materially from those set forth in the forward looking statements. Additional factors that could cause actual results to differ materially from those described in the forward-looking statements can be found in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 20202021 and in other periodic reports that we file with the SEC.
You are cautioned not to place undue reliance on these forward-looking statements. We do not intend, and undertake no obligation, to update or revise any forward-looking statements, whether as a result of differences in actual results, changes in assumptions or changes in other factors affecting such statements, except as required by law.
OVERVIEW
Non-GAAP Financial Measures
Management’s Discussion and Analysis of Financial Condition and Results of Operations include non-GAAP measures used to describe our performance. These non-GAAP financial measures have inherent limitations as analytical tools and should not be considered on a standalone basis or as a substitute for analyses of financial condition and results as reported under GAAP. Non-GAAP financial measures are not standardized and therefore, it may not be possible to compare these measures with other companies that present measures having the same or similar names. These disclosures should not be considered an alternative to GAAP.
A reconciliation of those measures to GAAP measures are provided withinin the SelectedConsolidated Financial Data section that appearsResults table later in this item. The following is a summary of these non-GAAP measures and an explanation as to why they are deemed useful.
Consistent with the provisions of subpart 229.1400 of the Securities and Exchange Commission’s Regulation S-K, “Disclosures by Bank and Savings and Loan Registrants,” we present net interest income, net interest margin and efficiency ratios on a fully taxable equivalent (“te”) basis. The te basis adjusts for the tax-favored status of net interest income from certain loans and investments using a statutory federal tax rate of 21% to increase tax-exempt interest income to a taxable equivalent basis. We believe this measure to be the preferred industry measurement of net interest income, and that it enhances comparability of net interest income arising from taxable and tax-exempt sources.
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We present certain additional non-GAAP financial measures to assist the reader with a better understanding of the Company’s performance period over period, as well as to provide investors with assistance in understanding the success management has experienced in executing its strategic initiatives. These non-GAAP measures may reference the concept “operating.” We use the term “operating” to describe a financial measure that excludes income or expense considered to be nonoperating in nature. Items identified as nonoperating are those that, when excluded from a reported financial measure, provide management or the reader with a measure that may be more indicative of forward-looking trends in our business.
We define Operating Pre-Provision Net Revenue as total revenue (te) less noninterest expense, excluding nonoperating items. Management believes that operating pre-provision net revenue is a useful financial measure because it enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle.
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Current Economic Environment
Economic recovery continued duringDuring the thirdfirst quarter of 2022, the U.S. economy contracted for the first time since the second quarter 2020, as Gross Domestic Product (GDP) declined 1.4% on an annualized basis. The decline in real GDP reflected a decline in Federal national defense spending, a decline in net exports, and a decline in private inventory investment. There were, however, bright spots, as consumer spending, a primary driver of economic activity, grew 2.7%, slightly above the fourth quarter 2021 albeitrate of 2.5%. Business spending, as measured by residential and nonresidential investment increased 7.3% at a slower pace in some respects when comparedan annualized rate, above the fourth quarter 2021 rate of 2.7%. According to the previous quarter. TheU.S. Bureau of Labor and Statistics, the rate of unemployment again declined, falling to 4.8%3.6% in September 2021March 2022 from 5.9%3.9% in JuneDecember 2021. Gross Domestic Product displayed 2% growth, slightly shortAt present, the epidemiological risks of consensusCOVID-19 have lessened and smaller thanmost of the growth experiencedsocial restrictions in response to those risks have been removed. However, lingering and pervasive economic effects of the preceding four fiscal quarters.Supplypandemic remain, including supply chain interruption,backlogs, labor shortages and wageincreased input costs, resulting in escalating inflationary conditions. Further, the recent military conflict between Russia and pricing pressures intensified duringUkraine has prompted concern over global commodity supply, intensifying inflationary pressures. In response to these conditions, in March 2022, the period, largelyFederal Reserve approved the resultfirst interest rate increase in over three years. The 25-basis point interest rate increase is expected to be the first of potentially several increases in the next year.
Our markets continued to show moderate signs of improvement in the quarter. Tourism has improved, driven by the return of several events for the first time since the onset of the surge in COVID-19 infections caused by the Delta variant of the virus. While there were no widespread or pervasive restrictions on movement or business instituted in response to the surge, the rapid increase in the rate of infection and serious illness created strain on healthcare delivery in many areas in the US and prompted certain localized mandated mitigation measures and other voluntary responses, such as leisure and business event cancellations. These cancellations, continued restrictions on international travel and lagging/limited large-scale convention and other events continue to impact our markets, particularly in the central region.
Parts of our footprint were further affected by Hurricane Ida, a major hurricane that made landfall in late August in Southeast Louisiana. Along with personal and commercial property damage in some hard-hit areas, extensive damage to the region’s energy grid resulted in extended power outages for a portion of our market. The effects of the storm prompted temporary evacuation for many residents and unplanned closures of businesses, schools, and other essential services. As a result, supply chain and labor constraints already present were exacerbated, and many events that foster leisure and business tourism were canceled or postponed. Certain of our fee income categories, such as ATM fees and secondary mortgage market operations, were temporarily impacted by Hurricane Ida’s disruption, but those conditions are not expected to persist.pandemic. Our hurricane impacted markets generally experience increased economic activity as the communities rebuild and recover from the damage.
Despite the disruption to portions of our market, wecredit quality metrics continued to experience growth in our core loan portfolio, which excludesimprove and remain at historically low levels. In the Small Business Administration’s (SBA) Paycheck Protection Program (PPP) loans that continue to be paid down through debt forgiveness. Although loan pricing pressure continues, particularly on shorter-duration facilities,first quarter of 2022, we experienced core loan growth continued across most regions and inof our equipment finance and healthcare specialty business lines. Similar to last quarter, improvement in economic activity across our footprint led toportfolio, with an increased loan pipeline with a higher pull-through rate and a slightan uptick in credit line utilization. These factors, coupled with fewer payoffs, resultedutilization that led to a 2% linked-quarter growth rate in 4% linked quarter annualized growth. Excesscore loans (excluding PPP). Core loan growth and an improving asset mix have contributed favorably to our net interest margin and income, while excess liquidity from PPP loan forgiveness and elevated deposit levels and the low interest rate environment continue to pressure net interest margin.remained a headwind.
Economic Outlook
We utilize economic forecasts produced by Moody’s Analytics (Moody’s) that provide various scenarios to assist in the development of our economic outlook. This outlook discussion utilizes the September 2021March 2022 Moody’s forecast, the most current available at September 30, 2021.March 31, 2022. The forecasts are anchored on a baseline forecast scenario, which Moody’s defines as the “most likely outcome” of where the economy is headed based on current conditions. Several upside and downside scenarios are produced that are derived from the baseline scenario. InSince the September 2021 baseline forecast, the near-term economic recovery was assumed to be somewhat slower in the short term compared to the assumptions included in the June forecast, largely due to the surge in casesonset of the COVID-19 Delta variantpandemic, conditions such as infection and scaled back expectations regarding proposed fiscal stimulus. Following a slowdown in late 2021, Moody’s expects growth will be strong in 2022. Keymorbidity rates and social, commercial and governmental response thereto have been the primary drivers of the assumptions underlying the forecasts. As geopolitical and economic conditions have evolved, the narratives used in forming March 2022 economic scenarios shifted to a focus on supply chain issues, rising oil prices and inflation.
While remaining overall positive, the assumptions underlying the March 2022 baseline forecast are thatslightly less optimistic in certain areas than the December 2021 baseline, and certain new risks have been incorporated. Key assumptions within the March 2022 baseline forecast include the following: (1) coronavirus herd resiliency wasRussian invasion will go no further than Ukraine and, as such, disruption to the U.S. economy will be limited and temporary; (2) the passage of a $600 billion Building a Better America legislation package; (3) unemployment forecasted at 3.6% in 2022 and 3.4% in 2023, with full-employment being achieved in late August 2021, with infection abatement pushed to November 2021 due to the Delta variant; (2) no new widespread economic shutdowns will occur in response to virus outbreaks; (3) the unemployment rate continues to decline, with fourth quarter 2021 averaging 4.5%, and full year 2021, 2022 and 2023 rates averaging 5.5%, 3.6% andor early 2023; (4) forecasted GDP growth of 3.5%, respectively, reaching full employment by the end of 2022; (4) gross domestic product will increase an average of 6.0% in 2021, 4.3% in 2022 and 2.3%3.1% in 2023; (5) the Build Back Better infrastructure and social legislation package, forecasted to be passedfour 25-basis point interest rate increases in late 2021 at $2.5 trillion, will spur additional economic activity;2022; and (6) the Federal Reserve will continue to respond to the economic impact of COVID-19 by maintaining rates at or near zero until the first quarter of 2023.infections abated in March 2022.
The alternative Moody’s forecast scenarios have varying degreesdepictions of positive and negative severity ofeconomic performance as compared to the outcome ofbaseline. Consistent with the economic downturn, as well as varying shapes and length of recovery. Managementprior quarter, management determined that assumptions provided for in the downside slower near-term growth (S-2) were as reasonably possible asto be somewhat more likely than the baseline scenario, particularly within our footprint;scenario; as such, the S-2 scenario was given equal consideration througha 60% probability weighting in our allowance for credit losses calculation at September 30, 2021.March 31, 2022. The S-2 slower near-term growth assumptions (compared to baseline) include a delay in infection abatement until January 2022, continuedscenario assumes that the conflict between Russian and Ukraine spans longer than anticipated and that global supply chain disruptions,issues worsen, prompting a smaller or less impactful stimulus package and a near-term risehigher rate of inflation than in unemployment, resulting in a smaller increase in real consumer spending that impedes growth in late 2021 and in 2022.
Uncertainty over some of the assumptions underlying the baseline forecast has increased since the second quarter due to the emergence of and resulting effects of the Delta variant of COVID-19 and the disruption caused by Hurricane Ida. These emerging risks lead toscenario. As a higher weighting of the S-2 slower growth scenario in the September 30, 2021 calculation of the allowance as compared to June 30, 2021. However, our credit loss outlook has not changed materially, and continued optimism inherent in the forecasted scenarios, coupled with improvements in our asset quality metrics allowed for a modest release of reserves during the period.
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Excess liquidity from Paycheck Protection Program (PPP) loan forgivenessresult, the Federal Reserve is expected to raise interest rates more than anticipated in the baseline scenario, generating corrections in equity markets and elevated customer deposit levels, coupleddeclines in spending. Further, the scenario assumes the economic legislation package will be less effective; unemployment begins to rise in the second quarter of 2022, with the lowreturn to full employment not occurring until the fourth quarter of 2023; and the number of COVID-19 cases, hospitalizations and deaths begin to rise in March 2022, slowing consumer spending on retail goods and travel and leisure activities.
Despite the lingering economic effects of the COVID-19 pandemic and the emergence of new risks stemming from geopolitical conflict, overall credit loss outlook on our portfolio has not changed significantly. Positive economic indicators of growth in our footprint, continued improvements in our asset quality metrics and minimal credit losses in recent periods allowed for a modest release of credit loss reserves during the period.
The effect of rising inflation and the Federal Reserve's actions to counter those effects are likely to reduce economic growth. While the operating environment remains challenging, we expect the planned interest rate environment are expectedincreases will contribute favorably to continue to pressureour net interest margin inand income, and we do not expect the near term.rate increases to significantly impact core loan growth guidance. We continue to focus on effectively managing our asset/liability mix to maximize those resources, and to gain efficiency within our organization. The timing of the return to pre-pandemic conditions in our footprint remains uncertain. resources.
Forward-looking information based on management’s expectation of near-term performance is provided in the sections that follow.
Given the economic volatility that has stemmed fromexperienced over the past two years, the remaining economic effects of the pandemic including supply chain constraints, labor shortages and the potential for future impacts that may result from mitigation measures intended to combat variants of the virus,risks and uncertainties surrounding geopolitical unrest, it is not possible to accurately predict the extent, severity or duration ofthat these conditions or when typical operating conditions will fully resume. The continued successmay have upon our results of government initiatives in stimulating economic activity, societal response to virus containment measures and the efficacy of vaccines and/or treatments that will control the rate of serious illness are critical to the resolution of the crisis.operation. We continuously seek to monitor and anticipate developments but cannot predict all of the various adverse effects COVID-19 will have onas they relate to our business, financial condition, liquidity and results of operations.business.
Highlights of the ThirdFirst Quarter 20212022
We reported net income for the thirdfirst quarter of 20212022 of $129.6$123.5 million, or $1.46$1.40 per diluted common share, (EPS), compared to $88.7$137.7 million, or $1.00 EPS$1.55 per diluted common share in the secondfourth quarter of 2021 and $79.4$107.2 million, or $.90 EPS,$1.21 per diluted common share, in the thirdfirst quarter of 2020. The third2021. There were no nonoperating items in the first quarters of 2022 or 2021. There was $4.9 million, or $0.04 per share after-tax, of net nonoperating income items in the fourth quarter of 2021, included net nonoperatingmostly attributable to hurricane-related insurance proceeds.
First quarter 2022 results compared to fourth quarter 2021:
We reported solid results for the first quarter of 2021 included net nonoperating expense of $42.2 million (pre-tax), or $0.37 EPS (after tax), including costs associated with2022 that are a good start to the planned closure of 18 financial centers, the Voluntary Early Retirement Incentive Program (VERIP), a reduction in force, and the redemption of subordinated notes, partially offset by a gain on the sale of Mastercard Class B common stock (Mastercard stock).
Third quarter 2021 results compared to second quarter 2021:
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year. We achieved solid third quarter performance despite the impact of Hurricane Ida and the COVID-19 Delta surge. Net income was up, with operating results driven largely by a $27 million negative provision, reflecting continued improved economic conditions and asset quality. Despite a 2 bp compression in the net interest margin, net interest income (te) was virtually unchanged linked-quarter. Fee income declined, partly as a result of Hurricane Ida disruptions; however, our operating expense was essentially flat as efficiency initiatives announced earlier in the year are maturing and reflected in our results. Our balance sheet remained strong with continuedhad core loan growth, stable deposits, and an increasewhat we believe to be the beginning of a widening net interest margin. Our asset quality metrics are at historically low levels, our capital levels are solid, and we continue strategic expense management while investing for revenue growth.
During the quarter, we added ten new bankers across our footprint, including additions in noninterest-bearing deposits. Capital remained solid,Dallas, San Antonio, Austin, Houston, Beaumont, Nashville, Tampa and Lafayette. This is in addition to fifteen bankers hired in the second half of 2021, with TCE improving 15 bps to 7.85%.
As an organization, we are proud to have aided in hurricane relief efforts and provided recovery assistance to our impacted communities by maintaining business continuity andadditional hires planned during the remainder of 2022. Revenue enhancements funded through continued expense focus, along with expected interest rate increases, sets the distribution of meals, ice and fuel to those in need. Reinforced with technological and structural enhancements we have implemented since Hurricane Katrina, our corporate headquarters in Gulfport, Mississippi, and technology and operations centers opened without storm damage. While we had damage to facilities, we do not expect a financial impact other than the $5.1 million reflected in our third quarter results, including no significant provision for credit loss.
We believe our third quarter results and near term guidance are the building blockspath for our path to antarget of a 55% efficiency ratio target of 55%(currently at 56.03%) by the fourth quarter of 2022. Our path to this target considers continued momentum in core loan growth, maintaining our target level of expenses with additional efficiency initiatives, including strategic procurement, and deployment of excess liquidity into loans and modest investment in the bond portfolio. Additional information related to our expectations is included in the discussions that follow. 2022 or possibly sooner.
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In March, we announced a strategic decision addressing recent trends in the banking industry to eliminate consumer (retail) non-sufficient funds fees and certain overdraft fees by the end of 2022. The annual impact upon fee income is estimated to be $10 million to $11 million. We believe these changes are in line with an evolving retail banking industry, as traditional banks adjust products to meet consumer needs and provide them with the tools needed to help manage their overall finances. We expect to see improving account acquisition rates in 2023 with this change and as we launch additional retail products and features.
Consolidated Financial Results
The following table contains the consolidated financial results for the periods indicated.
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| Three Months Ended |
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(in thousands, except per share data) |
| March 31, 2022 |
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| December 31, 2021 |
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| September 30, 2021 |
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| June 30, 2021 |
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| March 31, 2021 |
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Income Statement Data: |
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Interest income |
| $ |
| 236,786 |
|
| $ |
| 238,756 |
|
| $ |
| 244,417 |
|
| $ |
| 248,300 |
|
| $ |
| 250,785 |
|
Interest income (te) (a) |
|
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| 239,331 |
|
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| 241,391 |
|
|
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| 247,185 |
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| 251,154 |
|
|
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| 253,707 |
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Interest expense |
|
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| 8,323 |
|
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| 9,460 |
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| 9,708 |
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| 13,657 |
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| 16,198 |
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Net interest income (te) |
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| 231,008 |
|
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| 231,931 |
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| 237,477 |
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| 237,497 |
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| 237,509 |
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Provision for credit losses |
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| (22,527 | ) |
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| (28,399 | ) |
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| (26,955 | ) |
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| (17,229 | ) |
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| (4,911 | ) |
Noninterest income |
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| 83,432 |
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| 89,612 |
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| 93,361 |
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| 94,272 |
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| 87,089 |
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Noninterest expense |
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| 179,939 |
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| 182,462 |
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| 194,703 |
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| 236,770 |
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| 193,072 |
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Income before income taxes |
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| 154,483 |
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| 164,845 |
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| 160,322 |
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| 109,374 |
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| 133,515 |
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Income tax expense |
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| 31,005 |
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| 27,102 |
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| 30,740 |
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| 20,656 |
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| 26,343 |
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Net income |
| $ |
| 123,478 |
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| $ |
| 137,743 |
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| $ |
| 129,582 |
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| $ |
| 88,718 |
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| $ |
| 107,172 |
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For informational purposes - included above, pre-tax |
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|
|
|
|
|
|
|
|
| |||||
Nonoperating item included in noninterest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Gain on hurricane-related insurance settlement |
| $ |
| — |
|
| $ |
| 3,600 |
|
| $ |
| — |
|
| $ |
| — |
|
| $ |
| — |
|
Gain on sale of Hancock Horizon Funds |
|
|
| — |
|
|
|
| — |
|
|
|
| 4,576 |
|
|
|
| — |
|
|
|
| — |
|
Gain on sale of Mastercard Class B common stock |
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 2,800 |
|
|
|
| — |
|
Nonoperating items included in noninterest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Efficiency initiatives |
|
|
| — |
|
|
|
| (649 | ) |
|
|
| (1,867 | ) |
|
|
| 40,812 |
|
|
|
| — |
|
Hurricane related expenses |
|
|
| — |
|
|
|
| (680 | ) |
|
|
| 5,092 |
|
|
|
| — |
|
|
|
| — |
|
Loss on redemption of subordinated notes |
|
|
| — |
|
|
|
| — |
|
|
|
| — |
|
|
|
| 4,165 |
|
|
|
| — |
|
Balance Sheet Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Period end balance sheet data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Loans |
| $ |
| 21,323,341 |
|
| $ |
| 21,134,282 |
|
| $ |
| 20,886,015 |
|
| $ |
| 21,148,530 |
|
| $ |
| 21,664,859 |
|
Earning assets |
|
|
| 32,997,323 |
|
|
|
| 33,610,435 |
|
|
|
| 32,348,036 |
|
|
|
| 32,075,450 |
|
|
|
| 32,134,637 |
|
Total assets |
|
|
| 36,317,291 |
|
|
|
| 36,531,205 |
|
|
|
| 35,318,308 |
|
|
|
| 35,098,709 |
|
|
|
| 35,072,643 |
|
Noninterest-bearing deposits |
|
|
| 14,976,670 |
|
|
|
| 14,392,808 |
|
|
|
| 13,653,376 |
|
|
|
| 13,406,385 |
|
|
|
| 13,174,911 |
|
Total deposits |
|
|
| 30,499,709 |
|
|
|
| 30,465,897 |
|
|
|
| 29,208,157 |
|
|
|
| 29,273,107 |
|
|
|
| 29,210,520 |
|
Stockholders' equity |
|
|
| 3,450,951 |
|
|
|
| 3,670,352 |
|
|
|
| 3,629,766 |
|
|
|
| 3,562,901 |
|
|
|
| 3,416,903 |
|
Average balance sheet data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Loans |
| $ |
| 21,122,038 |
|
| $ |
| 20,770,130 |
|
| $ |
| 20,941,173 |
|
| $ |
| 21,388,814 |
|
| $ |
| 21,745,298 |
|
Earning assets |
|
|
| 33,201,926 |
|
|
|
| 32,913,659 |
|
|
|
| 32,097,381 |
|
|
|
| 32,195,515 |
|
|
|
| 31,015,637 |
|
Total assets |
|
|
| 36,003,803 |
|
|
|
| 35,829,027 |
|
|
|
| 35,207,960 |
|
|
|
| 35,165,684 |
|
|
|
| 34,078,200 |
|
Noninterest-bearing deposits |
|
|
| 14,363,324 |
|
|
|
| 14,126,335 |
|
|
|
| 13,535,961 |
|
|
|
| 13,237,796 |
|
|
|
| 12,374,235 |
|
Total deposits |
|
|
| 30,029,793 |
|
|
|
| 29,750,665 |
|
|
|
| 29,237,306 |
|
|
|
| 29,228,809 |
|
|
|
| 28,138,763 |
|
Stockholders' equity |
|
|
| 3,607,061 |
|
|
|
| 3,642,003 |
|
|
|
| 3,606,087 |
|
|
|
| 3,488,592 |
|
|
|
| 3,441,466 |
|
Common Shares Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Earnings per share - basic |
| $ |
| 1.40 |
|
| $ |
| 1.56 |
|
| $ |
| 1.46 |
|
| $ |
| 1.00 |
|
| $ |
| 1.21 |
|
Earnings per share - diluted |
|
|
| 1.40 |
|
|
|
| 1.55 |
|
|
|
| 1.46 |
|
|
|
| 1.00 |
|
|
|
| 1.21 |
|
Cash dividends per common share |
|
|
| 0.27 |
|
|
|
| 0.27 |
|
|
|
| 0.27 |
|
|
|
| 0.27 |
|
|
|
| 0.27 |
|
Book value per share (period end) |
|
|
| 39.91 |
|
|
|
| 42.31 |
|
|
|
| 41.81 |
|
|
|
| 41.03 |
|
|
|
| 39.38 |
|
Tangible book value per share (period end) |
|
|
| 29.25 |
|
|
|
| 31.64 |
|
|
|
| 31.10 |
|
|
|
| 30.27 |
|
|
|
| 28.57 |
|
Weighted average number of shares - diluted |
|
|
| 86,936 |
|
|
|
| 87,132 |
|
|
|
| 87,006 |
|
|
|
| 86,990 |
|
|
|
| 86,805 |
|
Period end number of shares |
|
|
| 86,460 |
|
|
|
| 86,749 |
|
|
|
| 86,823 |
|
|
|
| 86,847 |
|
|
|
| 86,777 |
|
43
|
| Three Months Ended |
| ||||||||||||||||||||||
($ in thousands) |
| March 31, 2022 |
|
| December 31, 2021 |
|
| September 30, 2021 |
|
| June 30, 2021 |
|
| March 31, 2021 |
| ||||||||||
Performance and other data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Return on average assets |
|
|
| 1.39 | % |
|
|
| 1.53 | % |
|
|
| 1.46 | % |
|
|
| 1.01 | % |
|
|
| 1.28 | % |
Return on average common equity |
|
|
| 13.88 | % |
|
|
| 15.00 | % |
|
|
| 14.26 | % |
|
|
| 10.20 | % |
|
|
| 12.63 | % |
Return on average tangible common equity |
|
|
| 18.66 | % |
|
|
| 20.13 | % |
|
|
| 19.22 | % |
|
|
| 13.94 | % |
|
|
| 17.38 | % |
Tangible common equity (b) |
|
|
| 7.15 | % |
|
|
| 7.71 | % |
|
|
| 7.85 | % |
|
|
| 7.70 | % |
|
|
| 7.26 | % |
Tangible common equity Tier 1 (CET1) ratio |
|
|
| 11.12 | % |
|
|
| 11.09 | % |
|
|
| 11.17 | % |
|
|
| 10.98 | % |
|
|
| 11.00 | % |
Net interest margin (te) |
|
|
| 2.81 | % |
|
|
| 2.80 | % |
|
|
| 2.94 | % |
|
|
| 2.96 | % |
|
|
| 3.09 | % |
Noninterest income as a percentage of total revenue (te) |
|
|
| 26.53 | % |
|
|
| 27.87 | % |
|
|
| 28.22 | % |
|
|
| 28.41 | % |
|
|
| 26.83 | % |
Efficiency ratio (c ) |
|
|
| 56.03 | % |
|
|
| 56.57 | % |
|
|
| 57.44 | % |
|
|
| 57.01 | % |
|
|
| 58.12 | % |
Allowance for credit loss as a percentage of total loans |
|
|
| 1.63 | % |
|
|
| 1.76 | % |
|
|
| 1.92 | % |
|
|
| 2.03 | % |
|
|
| 2.11 | % |
Annualized net charge-offs to average loans |
|
|
| 0.01 | % |
|
|
| 0.01 | % |
|
|
| 0.03 | % |
|
|
| 0.20 | % |
|
|
| 0.34 | % |
Nonperforming assets as a percentage of loans, ORE and foreclosed assets |
|
|
| 0.24 | % |
|
|
| 0.32 | % |
|
|
| 0.34 | % |
|
|
| 0.46 | % |
|
|
| 0.57 | % |
FTE headcount |
|
|
| 3,543 |
|
|
|
| 3,486 |
|
|
|
| 3,429 |
|
|
|
| 3,626 |
|
|
|
| 3,926 |
|
Reconciliation of operating revenue and operating pre-provision net revenue (non-GAAP measure) (te) (d) |
| ||||||||||||||||||||||||
Net interest income |
| $ |
| 228,463 |
|
| $ |
| 229,296 |
|
| $ |
| 234,709 |
|
| $ |
| 234,643 |
|
| $ |
| 234,587 |
|
Noninterest income |
|
|
| 83,432 |
|
|
|
| 89,612 |
|
|
|
| 93,361 |
|
|
|
| 94,272 |
|
|
|
| 87,089 |
|
Total revenue |
|
|
| 311,895 |
|
|
|
| 318,908 |
|
|
|
| 328,070 |
|
|
|
| 328,915 |
|
|
|
| 321,676 |
|
Taxable equivalent adjustment |
|
|
| 2,545 |
|
|
|
| 2,635 |
|
|
|
| 2,768 |
|
|
|
| 2,854 |
|
|
|
| 2,922 |
|
Nonoperating revenue |
|
|
| — |
|
|
|
| (3,600 | ) |
|
|
| (4,576 | ) |
|
|
| (2,800 | ) |
|
|
| — |
|
Total revenue (te) |
| $ |
| 314,440 |
|
| $ |
| 317,943 |
|
| $ |
| 326,262 |
|
| $ |
| 328,969 |
|
| $ |
| 324,598 |
|
Noninterest expense |
|
|
| (179,939 | ) |
|
|
| (182,462 | ) |
|
|
| (194,703 | ) |
|
|
| (236,770 | ) |
|
|
| (193,072 | ) |
Nonoperating expense |
|
|
| — |
|
|
|
| (1,329 | ) |
|
|
| 3,225 |
|
|
|
| 44,977 |
|
|
|
| — |
|
Operating pre-provision net revenue (te) |
| $ |
| 134,501 |
|
| $ |
| 134,152 |
|
| $ |
| 134,784 |
|
| $ |
| 137,176 |
|
| $ |
| 131,526 |
|
RESULTS OF OPERATIONS
Net Interest Income
Net interest income (te) for the thirdfirst quarter of 20212022 was $237.5$231.0 million, relatively flat compared to the second quarter of 2021 and down $0.9 million, or less than 1%, compared to the fourth quarter of 2021 and down $6.5 million, or 3%, from the thirdfirst quarter of 2020.2021.
The relatively flatdecrease in net interest income (te) compared to the secondfourth quarter of 2021 was dueis largely attributable to increases from an additionaltwo fewer accrual daydays and reductiona decline in the accretion of PPP loan fees, and to a lesser extent, a decline in purchase accounting discount accretion and nonaccrual interest recoveries, largely offset by a lower cost of funds offset byand a $1.3 million decrease in interest recoveries and an unfavorablefavorable change in the earning asset mix. The reduction in the cost of funds reflects a favorable change in the deposit mix that includes increasedincreases in noninterest-bearing and lower-cost interest-bearing transaction deposits whilealong with declines in higher-cost time deposits and a seasonal reduction of interest bearing public fund deposits were down, as well as lower borrowing costs from the redemption of $150 million in subordinated notes latedeposits. The favorable change in the second quarter. The unfavorable change inmix of average earning assets was athe result of a net decreaseincreases in loans largely due to the forgiveness of PPP loans offset by increasesand investment securities and a decrease in lower-yielding short-term investments and securities from investments made late in the prior quarter.investments.
The net interest margin for the thirdfirst quarter of 2022 was 2.81%, up 1 bp from 2.80% in the fourth quarter of 2021, was 2.94%, down 2 bpsfor the first quarterly increase since the onset of the pandemic. The slight widening of net interest margin from 2.96% in the second quarter of 2021. The compression compared to the prior quarter was driven by declines of 6 bps attributablelargely due to a change7 bp improvement from a favorable shift in the earning asset mix, and 1 bp from lower interest recoveries,along with a modest improvement in the cost of funds. This improvement was partially offset by an increase of 3 bps attributable to lower deposit costs, due in part to strategic pricing and an improving mix and 2 bpsa 6 bp decline due to the full quarter impact of almost $200 million of PPP loan forgiveness during the subordinated note redemption.current quarter.
The $0.9$6.5 million decrease in net interest income (te) compared to the thirdfirst quarter of 2020 was2021 is attributable to the impacta $14.4 million decline in interest income and fees as a result of the lowlower average loan balances and yields, a $4.2 million decrease in nonaccrual interest rate environment onrecoveries and $2.0 million of lower purchase accounting discount accretion. These decreases were partially offset by income associated with a $1.2 billion increase in average earning assets combined with an unfavorable change in earning asset mix,securities, a $0.8$1.6 million increase in short-term investments, $1.7 million in lower securities premium amortization, and a $1.6$7.9 million decreasedecline in purchase accounting accretion, partially offsetinterest expense. The decline in interest expense was driven by lower rates paid on interest-bearing deposit accounts and a decline in interest on long-term debt due to the impactredemption of $150 million of subordinated debt at
44
5.95% in the second quarter of 2021. The increase in securities and short-term investments average balances are the result of excess liquidity driven largely by a $2.7$1.9 billion increase in average earning assets, a $3.5 million increase in interest recoveries,deposits and an 18 bp decrease in funding costs as a result of a combination of the interest rate environment, strategic deposit pricing and a favorable change in deposit mix. Average earning asset growth compared to the same quarter last year of $2.7 billion, or 9%, was driven by excess liquidity from a $2.5 billion increase in average deposits. The increase in average earning assets reflects an unfavorable change in mix, with a $2.2 billion increase in short-term investments, a $2.0 billion increase in securities, and a $1.5 billion decrease in loans.PPP loan forgiveness.
The net interest margin was down 2928 bps compared to the thirdfirst quarter of 20202021 as a result of the continued low interest rate environment andresulting in a less favorable mix of average earning asset mix,assets as inflows from PPP loan forgiveness and repayments were reinvested into lower-yielding assets, partially offset by a favorable change in the funding mix.mix to lower cost products. Compared to the thirdfirst quarter of 2020,2021, the yield on earning assets was down 4739 bps, while the cost of funds decreased 1811 bps to 0.12% from 0.30%, as we strategically priced downward interest-bearing transaction and time deposits by reducing0.10%. The reduction in cost of funds reflects the previously mentioned shift in mix to lower cost products, the strategic reduction of promotional deposit rates and used excess liquidity to reduce the balance of higher costing brokered deposits. The cost of long-term debt was 5.08%, down 52 bps from 5.60% in the third quarter of 2020 due to the June 2021 redemption of $150 million of higher-cost subordinated notes.
Net interest income (te) for the nine months ended September 30, 2021 was $712.5 million, down $1.6 million, or less than 1%, from the same period in 2020, due in part to one fewer accrual day. The impacts of changes in volume/mix and rates within earning assets and interest-bearing liabilities largely offset, as illustrated in the table that follows this discussion. The net interest margin was 3.00% for the nine months ended September 30, 2021, down 29 bps from the same period in 2020.
We anticipate that the net interest margin could compress anwill continue to widen during the remainder of 2022 as additional 4 bps in the fourth quarter of 2021, primarily due to elevated levelsFederal Reserve interest rate increases are expected and through continued deployment of excess liquidity as a result of PPP loan forgiveness, absent opportunities to deploy liquidity. We currently expect the net interest margin to be down 30 bps for the full year of 2021 versus the 2020 net interest margin of 3.27%. Net interest income (te) is expected to be slightly down linked-quarterinto higher-yielding loans and to be down approximately 1% for the full year 2021 as compared to 2020.investment securities.
42
The following tables detail the components of our net interest income (te) and net interest margin.
|
| Three Months Ended |
| |||||||||||||||||||||||||||||||||
|
| March 31, 2022 |
|
| December 31, 2021 |
|
| March 31, 2021 |
| |||||||||||||||||||||||||||
(dollars in millions) |
| Volume |
|
| Interest (d) |
|
| Rate |
|
| Volume |
|
| Interest (d) |
|
| Rate |
|
| Volume |
|
| Interest (d) |
|
| Rate |
| |||||||||
Average earning assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Commercial & real estate loans (te) (a) |
| $ | 17,119.3 |
|
| $ | 150.3 |
|
|
| 3.56 | % |
| $ | 16,802.8 |
|
| $ | 150.7 |
|
|
| 3.56 | % |
| $ | 17,334.3 |
|
| $ | 155.9 |
|
|
| 3.65 | % |
Residential mortgage loans |
|
| 2,441.3 |
|
|
| 21.0 |
|
|
| 3.44 | % |
|
| 2,365.8 |
|
|
| 20.5 |
|
|
| 3.46 | % |
|
| 2,600.5 |
|
|
| 24.7 |
|
|
| 3.79 | % |
Consumer loans |
|
| 1,561.4 |
|
|
| 18.4 |
|
|
| 4.77 | % |
|
| 1,601.5 |
|
|
| 18.9 |
|
|
| 4.68 | % |
|
| 1,810.5 |
|
|
| 21.4 |
|
|
| 4.79 | % |
Loan fees & late charges |
|
| — |
|
|
| 4.4 |
|
|
| 0.00 | % |
|
| — |
|
|
| 10.3 |
|
|
| 0.00 | % |
|
| — |
|
|
| 13.4 |
|
|
| 0.00 | % |
Total loans (te) (b) |
|
| 21,122.0 |
|
|
| 194.1 |
|
|
| 3.72 | % |
|
| 20,770.1 |
|
|
| 200.4 |
|
|
| 3.83 | % |
|
| 21,745.3 |
|
|
| 215.4 |
|
|
| 4.01 | % |
Loans held for sale |
|
| 64.3 |
|
|
| 0.7 |
|
|
| 4.36 | % |
|
| 77.4 |
|
|
| 0.6 |
|
|
| 3.02 | % |
|
| 111.8 |
|
|
| 0.7 |
|
|
| 2.41 | % |
US Treasury and government agency securities |
|
| 397.8 |
|
|
| 1.6 |
|
|
| 1.64 | % |
|
| 418.4 |
|
|
| 1.6 |
|
|
| 1.60 | % |
|
| 214.5 |
|
|
| 0.9 |
|
|
| 1.77 | % |
Mortgage-backed securities and |
|
| 7,352.5 |
|
|
| 34.5 |
|
|
| 1.88 | % |
|
| 7,019.6 |
|
|
| 30.5 |
|
|
| 1.74 | % |
|
| 6,307.9 |
|
|
| 29.4 |
|
|
| 1.86 | % |
Municipals (te) |
|
| 916.5 |
|
|
| 6.7 |
|
|
| 2.93 | % |
|
| 924.1 |
|
|
| 6.8 |
|
|
| 2.93 | % |
|
| 934.5 |
|
|
| 6.8 |
|
|
| 2.93 | % |
Other securities |
|
| 21.0 |
|
|
| 0.2 |
|
|
| 3.31 | % |
|
| 16.2 |
|
|
| 0.1 |
|
|
| 3.50 | % |
|
| 11.6 |
|
|
| 0.1 |
|
|
| 4.07 | % |
Total securities (te) (c) |
|
| 8,687.8 |
|
|
| 43.0 |
|
|
| 1.98 | % |
|
| 8,378.3 |
|
|
| 39.0 |
|
|
| 1.86 | % |
|
| 7,468.5 |
|
|
| 37.2 |
|
|
| 2.00 | % |
Total short-term investments |
|
| 3,327.8 |
|
|
| 1.5 |
|
|
| 0.19 | % |
|
| 3,687.9 |
|
|
| 1.4 |
|
|
| 0.15 | % |
|
| 1,690.0 |
|
|
| 0.4 |
|
|
| 0.10 | % |
Total earning assets (te) |
| $ | 33,201.9 |
|
| $ | 239.3 |
|
|
| 2.91 | % |
| $ | 32,913.7 |
|
| $ | 241.4 |
|
|
| 2.92 | % |
| $ | 31,015.6 |
|
| $ | 253.7 |
|
|
| 3.30 | % |
Average interest-bearing liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Interest-bearing transaction and savings deposits |
| $ | 11,423.4 |
|
| $ | 1.1 |
|
|
| 0.04 | % |
| $ | 11,405.1 |
|
| $ | 1.3 |
|
|
| 0.04 | % |
| $ | 10,796.0 |
|
| $ | 3.4 |
|
|
| 0.13 | % |
Time deposits |
|
| 1,088.5 |
|
|
| 0.6 |
|
|
| 0.24 | % |
|
| 1,161.4 |
|
|
| 0.8 |
|
|
| 0.27 | % |
|
| 1,757.4 |
|
|
| 3.0 |
|
|
| 0.69 | % |
Public funds |
|
| 3,154.6 |
|
|
| 2.1 |
|
|
| 0.26 | % |
|
| 3,057.8 |
|
|
| 2.8 |
|
|
| 0.36 | % |
|
| 3,211.1 |
|
|
| 2.8 |
|
|
| 0.36 | % |
Total interest-bearing deposits |
|
| 15,666.5 |
|
|
| 3.8 |
|
|
| 0.10 | % |
|
| 15,624.3 |
|
|
| 4.9 |
|
|
| 0.12 | % |
|
| 15,764.5 |
|
|
| 9.2 |
|
|
| 0.24 | % |
Repurchase agreements |
|
| 587.5 |
|
|
| 0.1 |
|
|
| 0.06 | % |
|
| 589.4 |
|
|
| 0.1 |
|
|
| 0.06 | % |
|
| 583.7 |
|
|
| 0.1 |
|
|
| 0.13 | % |
Other short-term borrowings |
|
| 1,102.4 |
|
|
| 1.3 |
|
|
| 0.49 | % |
|
| 1,102.2 |
|
|
| 1.4 |
|
|
| 0.49 | % |
|
| 1,104.7 |
|
|
| 1.4 |
|
|
| 0.49 | % |
Long-term debt |
|
| 241.8 |
|
|
| 3.1 |
|
|
| 5.17 | % |
|
| 245.4 |
|
|
| 3.1 |
|
|
| 5.12 | % |
|
| 396.7 |
|
|
| 5.5 |
|
|
| 5.48 | % |
Total borrowings |
|
| 1,931.7 |
|
|
| 4.5 |
|
|
| 0.95 | % |
|
| 1,937.0 |
|
|
| 4.6 |
|
|
| 0.95 | % |
|
| 2,085.1 |
|
|
| 7.0 |
|
|
| 1.34 | % |
Total interest-bearing liabilities |
|
| 17,598.2 |
|
|
| 8.3 |
|
|
| 0.19 | % |
|
| 17,561.3 |
|
|
| 9.5 |
|
|
| 0.21 | % |
|
| 17,849.6 |
|
|
| 16.2 |
|
|
| 0.37 | % |
Net interest-free funding sources |
|
| 15,603.7 |
|
|
|
|
|
|
|
|
| 15,352.4 |
|
|
|
|
|
|
|
|
| 13,166.0 |
|
|
|
|
|
|
| ||||||
Total cost of funds |
| $ | 33,201.9 |
|
| $ | 8.3 |
|
|
| 0.10 | % |
| $ | 32,913.7 |
|
| $ | 9.5 |
|
|
| 0.11 | % |
| $ | 31,015.6 |
|
| $ | 16.2 |
|
|
| 0.21 | % |
Net interest spread (te) |
|
|
|
| $ | 231.0 |
|
|
| 2.72 | % |
|
|
|
| $ | 231.9 |
|
|
| 2.70 | % |
|
|
|
| $ | 237.5 |
|
|
| 2.94 | % | |||
Net interest margin |
| $ | 33,201.9 |
|
| $ | 231.0 |
|
|
| 2.81 | % |
| $ | 32,913.7 |
|
| $ | 231.9 |
|
|
| 2.80 | % |
| $ | 31,015.6 |
|
| $ | 237.5 |
|
|
| 3.09 | % |
|
| Three Months Ended |
| |||||||||||||||||||||||||||||||||
|
| September 30, 2021 |
|
| June 30, 2021 |
|
| September 30, 2020 |
| |||||||||||||||||||||||||||
(dollars in millions) |
| Volume |
|
| Interest (d) |
|
| Rate |
|
| Volume |
|
| Interest (d) |
|
| Rate |
|
| Volume |
|
| Interest (d) |
|
| Rate |
| |||||||||
Average earning assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial & real estate loans (te) (a) |
| $ | 16,918.4 |
|
| $ | 150.3 |
|
|
| 3.52 | % |
| $ | 17,233.1 |
|
| $ | 149.3 |
|
|
| 3.47 | % |
| $ | 17,607.2 |
|
| $ | 155.6 |
|
|
| 3.52 | % |
Residential mortgage loans |
|
| 2,376.5 |
|
|
| 21.5 |
|
|
| 3.63 | % |
|
| 2,443.0 |
|
|
| 23.9 |
|
|
| 3.92 | % |
|
| 2,807.5 |
|
|
| 27.5 |
|
|
| 3.92 | % |
Consumer loans |
|
| 1,646.3 |
|
|
| 20.4 |
|
|
| 4.90 | % |
|
| 1,712.7 |
|
|
| 21.0 |
|
|
| 4.92 | % |
|
| 1,993.1 |
|
|
| 24.0 |
|
|
| 4.79 | % |
Loan fees & late charges |
|
| — |
|
|
| 13.5 |
|
|
| 0.00 | % |
|
| — |
|
|
| 16.5 |
|
|
| 0.00 | % |
|
| — |
|
|
| 15.2 |
|
|
| 0.00 | % |
Total loans (te) (b) |
|
| 20,941.2 |
|
|
| 205.7 |
|
|
| 3.90 | % |
|
| 21,388.8 |
|
|
| 210.7 |
|
|
| 3.95 | % |
|
| 22,407.8 |
|
|
| 222.3 |
|
|
| 3.95 | % |
Loans held for sale |
|
| 82.6 |
|
|
| 0.6 |
|
|
| 3.06 | % |
|
| 89.6 |
|
|
| 0.6 |
|
|
| 2.90 | % |
|
| 112.2 |
|
|
| 0.8 |
|
|
| 2.96 | % |
US Treasury and government agency securities |
|
| 395.6 |
|
|
| 1.6 |
|
|
| 1.59 | % |
|
| 291.0 |
|
|
| 1.2 |
|
|
| 1.67 | % |
|
| 165.6 |
|
|
| 0.8 |
|
|
| 1.99 | % |
Mortgage-backed securities and collateralized mortgage obligations |
|
| 7,033.7 |
|
|
| 31.4 |
|
|
| 1.79 | % |
|
| 6,961.4 |
|
|
| 31.0 |
|
|
| 1.78 | % |
|
| 5,326.2 |
|
|
| 29.4 |
|
|
| 2.21 | % |
Municipals (te) |
|
| 925.0 |
|
|
| 6.8 |
|
|
| 2.93 | % |
|
| 930.1 |
|
|
| 6.8 |
|
|
| 2.94 | % |
|
| 889.5 |
|
|
| 6.7 |
|
|
| 3.01 | % |
Other securities |
|
| 14.5 |
|
|
| 0.1 |
|
|
| 3.56 | % |
|
| 12.3 |
|
|
| 0.1 |
|
|
| 3.64 | % |
|
| 8.0 |
|
|
| 0.1 |
|
|
| 4.33 | % |
Total securities (te) (c) |
|
| 8,368.8 |
|
|
| 39.9 |
|
|
| 1.91 | % |
|
| 8,194.8 |
|
|
| 39.1 |
|
|
| 1.91 | % |
|
| 6,389.3 |
|
|
| 37.0 |
|
|
| 2.31 | % |
Total short-term investments |
|
| 2,704.8 |
|
|
| 1.0 |
|
|
| 0.15 | % |
|
| 2,522.3 |
|
|
| 0.7 |
|
|
| 0.11 | % |
|
| 503.0 |
|
|
| 0.1 |
|
|
| 0.10 | % |
Total earning assets (te) |
| $ | 32,097.4 |
|
| $ | 247.2 |
|
|
| 3.06 | % |
| $ | 32,195.5 |
|
| $ | 251.1 |
|
|
| 3.13 | % |
| $ | 29,412.3 |
|
| $ | 260.2 |
|
|
| 3.53 | % |
Average interest-bearing liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing transaction and savings deposits |
| $ | 11,341.0 |
|
| $ | 1.7 |
|
|
| 0.06 | % |
| $ | 11,315.8 |
|
| $ | 2.7 |
|
|
| 0.10 | % |
| $ | 9,806.8 |
|
| $ | 4.2 |
|
|
| 0.17 | % |
Time deposits |
|
| 1,274.9 |
|
|
| 1.0 |
|
|
| 0.32 | % |
|
| 1,466.5 |
|
|
| 1.7 |
|
|
| 0.47 | % |
|
| 2,174.6 |
|
|
| 6.0 |
|
|
| 1.09 | % |
Public funds |
|
| 3,085.4 |
|
|
| 2.3 |
|
|
| 0.30 | % |
|
| 3,208.7 |
|
|
| 2.6 |
|
|
| 0.33 | % |
|
| 3,196.8 |
|
|
| 4.6 |
|
|
| 0.57 | % |
Total interest-bearing deposits |
|
| 15,701.3 |
|
|
| 5.0 |
|
|
| 0.13 | % |
|
| 15,991.0 |
|
|
| 7.0 |
|
|
| 0.18 | % |
|
| 15,178.2 |
|
|
| 14.8 |
|
|
| 0.39 | % |
Repurchase agreements |
|
| 509.0 |
|
|
| 0.1 |
|
|
| 0.08 | % |
|
| 556.1 |
|
|
| 0.2 |
|
|
| 0.15 | % |
|
| 627.9 |
|
|
| 0.3 |
|
|
| 0.19 | % |
Other short-term borrowings |
|
| 1,103.3 |
|
|
| 1.4 |
|
|
| 0.49 | % |
|
| 1,104.9 |
|
|
| 1.4 |
|
|
| 0.49 | % |
|
| 1,105.4 |
|
|
| 1.3 |
|
|
| 0.50 | % |
Long-term debt |
|
| 248.0 |
|
|
| 3.2 |
|
|
| 5.08 | % |
|
| 371.9 |
|
|
| 5.0 |
|
|
| 5.42 | % |
|
| 386.0 |
|
|
| 5.4 |
|
|
| 5.60 | % |
Total borrowings |
|
| 1,860.3 |
|
|
| 4.7 |
|
|
| 0.99 | % |
|
| 2,032.9 |
|
|
| 6.6 |
|
|
| 1.30 | % |
|
| 2,119.3 |
|
|
| 7.0 |
|
|
| 1.33 | % |
Total interest-bearing liabilities |
|
| 17,561.6 |
|
|
| 9.7 |
|
|
| 0.22 | % |
|
| 18,023.9 |
|
|
| 13.6 |
|
|
| 0.30 | % |
|
| 17,297.5 |
|
|
| 21.8 |
|
|
| 0.50 | % |
Net interest-free funding sources |
|
| 14,535.8 |
|
|
|
|
|
|
|
|
|
|
| 14,171.6 |
|
|
|
|
|
|
|
|
|
|
| 12,114.8 |
|
|
|
|
|
|
|
|
|
Total cost of funds |
| $ | 32,097.4 |
|
| $ | 9.7 |
|
|
| 0.12 | % |
| $ | 32,195.5 |
|
| $ | 13.6 |
|
|
| 0.17 | % |
| $ | 29,412.3 |
|
| $ | 21.8 |
|
|
| 0.30 | % |
Net interest spread (te) |
|
|
|
|
| $ | 237.5 |
|
|
| 2.84 | % |
|
|
|
|
| $ | 237.5 |
|
|
| 2.82 | % |
|
|
|
|
| $ | 238.4 |
|
|
| 3.02 | % |
Net interest margin |
| $ | 32,097.4 |
|
| $ | 237.5 |
|
|
| 2.94 | % |
| $ | 32,195.5 |
|
| $ | 237.5 |
|
|
| 2.96 | % |
| $ | 29,412.3 |
|
| $ | 238.4 |
|
|
| 3.23 | % |
|
|
|
|
|
|
|
|
43
45
|
| Nine Months Ended |
| |||||||||||||||||||||
|
| September 30, 2021 |
|
| September 30, 2020 |
| ||||||||||||||||||
(dollars in millions) |
| Volume |
|
| Interest (d) |
|
| Rate |
|
| Volume |
|
| Interest (d) |
|
| Rate |
| ||||||
Average earning assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial & real estate loans (te) (a) |
| $ | 17,160.4 |
|
| $ | 455.4 |
|
|
| 3.55 | % |
| $ | 17,217.5 |
|
| $ | 503.5 |
|
|
| 3.91 | % |
Residential mortgage loans |
|
| 2,472.5 |
|
|
| 70.1 |
|
|
| 3.78 | % |
|
| 2,899.6 |
|
|
| 85.4 |
|
|
| 3.93 | % |
Consumer loans |
|
| 1,722.6 |
|
|
| 62.7 |
|
|
| 4.87 | % |
|
| 2,083.3 |
|
|
| 78.7 |
|
|
| 5.05 | % |
Loan fees & late charges |
|
| — |
|
|
| 43.4 |
|
|
| 0.00 | % |
|
| — |
|
|
| 26.4 |
|
|
| 0.00 | % |
Total loans (te) (b) |
|
| 21,355.5 |
|
|
| 631.6 |
|
|
| 3.95 | % |
|
| 22,200.4 |
|
|
| 694.0 |
|
|
| 4.17 | % |
Loans held for sale |
|
| 94.6 |
|
|
| 2.0 |
|
|
| 2.76 | % |
|
| 80.9 |
|
|
| 2.1 |
|
|
| 3.47 | % |
US Treasury and government agency securities |
|
| 301.0 |
|
|
| 3.7 |
|
|
| 1.66 | % |
|
| 139.2 |
|
|
| 2.3 |
|
|
| 2.20 | % |
Mortgage-backed securities and collateralized mortgage obligations |
|
| 6,770.4 |
|
|
| 91.8 |
|
|
| 1.81 | % |
|
| 5,198.4 |
|
|
| 91.1 |
|
|
| 2.34 | % |
Municipals (te) |
|
| 929.8 |
|
|
| 20.4 |
|
|
| 2.93 | % |
|
| 877.7 |
|
|
| 20.0 |
|
|
| 3.05 | % |
Other securities |
|
| 12.8 |
|
|
| 0.4 |
|
|
| 3.73 | % |
|
| 8.0 |
|
|
| 0.3 |
|
|
| 4.31 | % |
Total securities (te) (c) |
|
| 8,014.0 |
|
|
| 116.3 |
|
|
| 1.94 | % |
|
| 6,223.3 |
|
|
| 113.7 |
|
|
| 2.44 | % |
Total short-term investments |
|
| 2,309.4 |
|
|
| 2.1 |
|
|
| 0.12 | % |
|
| 515.7 |
|
|
| 0.8 |
|
|
| 0.21 | % |
Total earning assets (te) |
| $ | 31,773.5 |
|
| $ | 752.0 |
|
|
| 3.16 | % |
| $ | 29,020.3 |
|
| $ | 810.6 |
|
|
| 3.73 | % |
Average interest-bearing liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing transaction and savings deposits |
| $ | 11,152.9 |
|
| $ | 7.8 |
|
|
| 0.09 | % |
| $ | 9,332.6 |
|
| $ | 21.4 |
|
|
| 0.31 | % |
Time deposits |
|
| 1,497.8 |
|
|
| 5.7 |
|
|
| 0.51 | % |
|
| 2,895.0 |
|
|
| 33.3 |
|
|
| 1.54 | % |
Public funds |
|
| 3,168.0 |
|
|
| 7.8 |
|
|
| 0.33 | % |
|
| 3,256.2 |
|
|
| 21.6 |
|
|
| 0.89 | % |
Total interest-bearing deposits |
|
| 15,818.7 |
|
|
| 21.3 |
|
|
| 0.18 | % |
|
| 15,483.8 |
|
|
| 76.3 |
|
|
| 0.66 | % |
Repurchase agreements |
|
| 549.3 |
|
|
| 0.5 |
|
|
| 0.12 | % |
|
| 574.6 |
|
|
| 1.2 |
|
|
| 0.27 | % |
Other short-term borrowings |
|
| 1,104.3 |
|
|
| 4.1 |
|
|
| 0.49 | % |
|
| 1,470.3 |
|
|
| 7.2 |
|
|
| 0.66 | % |
Long-term debt |
|
| 338.4 |
|
|
| 13.6 |
|
|
| 5.37 | % |
|
| 298.5 |
|
|
| 11.8 |
|
|
| 5.25 | % |
Total borrowings |
|
| 1,992.0 |
|
|
| 18.2 |
|
|
| 1.22 | % |
|
| 2,343.4 |
|
|
| 20.2 |
|
|
| 1.15 | % |
Total interest-bearing liabilities |
|
| 17,810.7 |
|
|
| 39.5 |
|
|
| 0.30 | % |
|
| 17,827.2 |
|
|
| 96.5 |
|
|
| 0.72 | % |
Net interest-free funding sources |
|
| 13,962.8 |
|
|
|
|
|
|
|
|
|
|
| 11,193.1 |
|
|
|
|
|
|
|
|
|
Total cost of funds |
| $ | 31,773.5 |
|
| $ | 39.5 |
|
|
| 0.17 | % |
| $ | 29,020.3 |
|
| $ | 96.5 |
|
|
| 0.44 | % |
Net interest spread (te) |
|
|
|
|
| $ | 712.5 |
|
|
| 2.87 | % |
|
|
|
|
| $ | 714.1 |
|
|
| 3.01 | % |
Net interest margin |
| $ | 31,773.5 |
|
| $ | 712.5 |
|
|
| 3.00 | % |
| $ | 29,020.3 |
|
| $ | 714.1 |
|
|
| 3.29 | % |
|
|
|
|
|
|
|
|
Provision for Credit Losses
During the thirdfirst quarter of 2021,2022, we recorded a negative provision for credit losses of $27.0$22.5 million, compared to a negative provisionprovisions for credit losses of $17.2$28.4 million in the secondfourth quarter of 2021, and a $25.0$4.9 million provision for credit losses expense in the thirdfirst quarter of 2020.2021. The thirdfirst quarter of 2022 negative provision included net charge-offs of $0.3 million and a reserve release of $22.8 million. The fourth quarter of 2021 negative provision included net charge-offs of $1.8$0.7 million and a reserve release of $28.8$29.1 million. The secondfirst quarter of 2021 negative provision for credit loss included net charge-offs of $10.5$18.3 million and a reserve release of $27.7$23.2 million. The negative provision for credit losses recorded in the thirdfirst quarter of 2022 and second quartersfourth quarter of 2021 reflect improvementswere largely the result of continued improvement in macroeconomic forecastsasset quality with minimal losses over the past few quarters and continued improvement in economic conditions in our asset quality metrics.footprint. The third quarter of 2020modest negative provision for credit loss expense included net charge-offsin the first quarter of $24.0 million and a reserve build2021 was the result of $1.0 million.
For the nine months ended September 30, 2021, we recorded a negative provision for credit losses of $49.1 million, compared to a provision for credit loss expense of $578.7 million for same period in 2020. As noted above, reserve releases made in 2021 reflect continued improvement in macroeconomic forecasts and asset quality metrics. The provision for credit losses expense recordedthe contraction in the nine months ended September 30, 2020 was driven by economic deterioration brought on by the widespread economic shutdown in response to the COVID-19 pandemic and the loss on the sale of a portion of our energycore loan portfolio in July 2020.(excluding PPP).
Net charge-offs in the thirdfirst quarter of 20212022 were $1.8$0.3 million, or 0.03%0.01% of average total loans on an annualized basis, compared to $10.5$0.7 million, or 0.20%0.01% in the secondfourth quarter of 2021, and $24.0$18.3 million, or 0.43%0.34% in the thirdfirst quarter of 2020.2021. The thirdfirst quarter of 2022 included $1.2 million of consumer net charge-offs, largely offset by net recoveries of $0.8 million for commercial and less than $0.1 million for residential mortgage, virtually unchanged from fourth quarter of 2021 levels. Net charge-offs in the first quarter of 2021 included $0.5$16.2 million of commercial net charge-offs, $0.4largely energy-related, $0.1 million of residential mortgage net recoveries and $1.7$2.5 million of consumer net charge-offs. The second quarter
Future assumptions in economic forecasts and our own asset quality metrics will drive our outlook for the level of 2021 included $9.3 million of commercial net charge-offs, $0.1 million of residential
44
mortgage net recoveries and $1.3 million of consumer net charge-offs. Net charge-offs in the third quarter of 2020 included $17.3 million of net charge-offs of healthcare-dependent credits.
The discussion of Allowancelabeled "Allowance for Credit Losses and Asset QualityQuality" appears later in this Item and provides additional information on these changes and on general credit quality, including our near-term outlook.quality.
Noninterest Income
Noninterest income totaled $93.4$83.4 million for the thirdfirst quarter of 2021,2022, down $0.9$6.2 million, or 1%7%, from the secondfourth quarter of 2021, and up $9.6down $3.7 million, or 11%4%, from the thirdfirst quarter of 2020. Noninterest2021. There were no nonoperating items included in noninterest income includes nonoperating income of $4.6 million from the sale of the remaining Hancock Horizon Funds in the thirdfirst quarters of 2022 and 2021. There was $3.6 million of nonoperating noninterest income in the fourth quarter of 2021 and $2.8 million relatedattributable to the sale of Mastercard stock in the second quarter of 2021.a gain on a hurricane-related insurance settlement. Excluding these items,this item, operating noninterest income decreased $2.7$2.6 million, or 3%, linked quarter. The decrease in operating noninterest income from the prior quarter which was largely attributable to lower secondary mortgage market operations income, with limited impact from Hurricane Ida. The increase compared to the third quarter of 2020 was attributable to most fee categories as economic conditions have improved and consumer activity rebounded, and the previously mentioned nonoperating items, partially offset by thea decline in secondary mortgage market operations income. The decrease compared to the same quarter last year was attributable to declines in secondary mortgage market operations income, bank-owned life insurance (BOLI) income, and a lower level of bank owned life insurance gains.derivative fees, partially offset by an increase in other income largely due to Small Business Investment Company (SBIC) income and other revenue items described below.
The components of noninterest income are presented in the following table for the indicated periods.
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
| ||||||||||||||||||||||||
|
| September 30, |
|
| June 30, |
|
| September 30, |
|
| September 30, |
|
| September 30, |
|
| March 31, |
|
| December 31, |
|
| March 31, |
| ||||||||
(in thousands) |
| 2021 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
|
| 2021 |
| ||||||||
Service charges on deposit accounts |
| $ | 21,159 |
|
| $ | 19,381 |
|
| $ | 18,440 |
|
| $ | 59,686 |
|
| $ | 56,795 |
|
| $ | 21,674 |
| $ | 21,346 |
| $ | 19,146 |
| ||
Trust fees |
|
| 16,041 |
|
|
| 16,307 |
|
|
| 14,424 |
|
|
| 47,351 |
|
|
| 43,390 |
|
| 15,279 |
| 15,547 |
| 15,003 |
| |||||
Bank card and ATM fees |
|
| 19,833 |
|
|
| 20,483 |
|
|
| 17,222 |
|
|
| 58,436 |
|
|
| 50,541 |
|
| 20,396 |
| 20,638 |
| 18,120 |
| |||||
Investment and annuity fees and insurance commissions |
|
| 7,167 |
|
|
| 7,331 |
|
|
| 5,988 |
|
|
| 21,956 |
|
|
| 18,504 |
|
| 7,427 |
| 7,546 |
| 7,458 |
| |||||
Secondary mortgage market operations |
|
| 6,972 |
|
|
| 12,556 |
|
|
| 12,875 |
|
|
| 31,238 |
|
|
| 28,736 |
|
| 3,746 |
| 5,456 |
| 11,710 |
| |||||
Income from bank-owned life insurance |
|
| 3,907 |
|
|
| 3,347 |
|
|
| 6,628 |
|
|
| 14,535 |
|
|
| 14,211 |
|
| 3,545 |
| 3,795 |
| 7,281 |
| |||||
Credit related fees |
|
| 2,568 |
|
|
| 2,971 |
|
|
| 2,911 |
|
|
| 8,383 |
|
|
| 8,585 |
|
| 2,669 |
| 2,618 |
| 2,844 |
| |||||
Income from customer and other derivatives |
|
| 2,970 |
|
|
| 3,750 |
|
|
| 1,739 |
|
|
| 11,755 |
|
|
| 9,718 |
|
| 2,349 |
| 1,722 |
| 5,035 |
| |||||
Securities transactions, net |
|
| — |
|
|
| 333 |
|
|
| 376 |
|
|
| 333 |
|
|
| 488 |
|
| (87 | ) |
| — |
| — |
| ||||
Gain on sale of Mastercard Class B common stock |
|
| — |
|
|
| 2,800 |
|
|
| — |
|
|
| 2,800 |
|
|
| — |
| ||||||||||||
Gain on sale of Hancock Horizon Funds |
|
| 4,576 |
|
|
| — |
|
|
| — |
|
|
| 4,576 |
|
|
| — |
| ||||||||||||
Gain on hurricane-related insurance settlement |
| — |
| 3,600 |
| — |
| |||||||||||||||||||||||||
Other miscellaneous |
|
| 8,168 |
|
|
| 5,013 |
|
|
| 3,145 |
|
|
| 13,673 |
|
|
| 11,110 |
|
|
| 6,434 |
|
|
| 7,344 |
|
|
| 492 |
|
Total noninterest income |
| $ | 93,361 |
|
| $ | 94,272 |
|
| $ | 83,748 |
|
| $ | 274,722 |
|
| $ | 242,078 |
|
| $ | 83,432 |
|
| $ | 89,612 |
|
| $ | 87,089 |
|
Service charges are composed of overdraft and insufficientnonsufficient funds fees, business and corporate account analysis fees, overdraft protection fees and other customer transaction-related charges. Service charges on deposits totaled $21.2$21.7 million for the thirdfirst quarter of 2021,2022, up $1.8$0.3 million, or 9%2%, from the secondfourth quarter of 2021, and up $2.7$2.5 million, or 15%13%, from the thirdfirst quarter of 2020.2021. The
46
increase from the secondfourth quarter of 2021 is primarily attributable to an additional processing day, increasedincrease in business account activity andservice charges, partially offset by a lower earnings credit rate applied to excess deposit balances.decrease in consumer overdraft fees. The increase from the thirdfirst quarter of 20202021 was largely due to both increased activity relatedactivity-related fees and higher overdraft revenue,fees, which continues to reboundhave increased as consumer spending activity returns, althoughhas returned to a more typical level. As noted previously, the Company has announced plans to eliminate consumer (retail) non-sufficient funds fees remain lower than pre-pandemic levels dueand certain overdraft fees by the end of 2022, which are currently reflected in partthis revenue line item. We expect these fees to higher checking account balances.decrease, on average, by approximately $2 to $3 million per quarter for 2023.
Trust fee income represents revenue generated from a full range of trust services, including asset management and custody services provided to individuals, businesses and institutions. Trust fees decreased $0.3 million, or 2%, from the prior quarter and increased $1.6$0.3 million, or 11%2%, compared to the same quarter a year ago. The decrease compared to the prior quarter is primarily due to seasonal tax preparation fees recordeda decline in the second quarter.employee benefits trust income. The increase from the same quarter alast year ago was largely due to an increase in personal trust income with the continued rebound from the volatility in theof equity markets, in 2020 and a new fee structure introduced induring the second quarter of 2021. Trust assets under management totaled $9.5 billion at September 30, 2021, compared to $10.1 billion at June 30, 2021, and $9.0 billion at September 30, 2020.These increases were partially offset by a decline in Hancock Horizon mutual funds income as the funds were sold in late 2021.
Bank card and ATM fees include interchange and other income from credit and debit card transactions, fees earned from processing card transactions for merchants, and fees earned from ATM transactions. Bank card and ATM fees totaled $19.8$20.4 million for the thirdfirst quarter of 2021,2022, down $0.7$0.2 million, or 3%1%, from the secondfourth quarter of 2021 and up $2.6$2.3 million, or 15%13%, from the same quarter last year. The decrease from the prior quarter was largely due to branch and ATM closures and fee waivers related to Hurricane Ida.two fewer activity days. The increase fromcompared to the same quarter last year reflectswas largely due to higher levels of activity as economic conditions continuerelated to improve.
45
the pandemic have returned to a more typical level.Table of Contents
Investment and annuity fees and insurance commissions decreased $0.2$0.1 million, or 2%, compared to the secondfourth quarter of 2021 and were up $1.2 million, or 20%,virtually flat compared to the same quarter a year ago. The decline from the prior quarter was primarilylargely due to lower underwriting activity, annuity salesinsurance commissions, and insurance commissions,investment fees, partially offset by higher investment activityannuity fees. The increase fromCompared to the same quarter a year ago, lower levels of the prior year was attributable tounderwriting and insurance fees were offset by an increase in investment commissions and annuity sales activity as the lower interest rate environment slowed bond trading activity in 2020. fees.
Income from secondary mortgage market operations is comprised of income produced from the origination and sales of residential mortgage loans in the secondary market. We offer a full range of mortgage products to our customers and typically sell longer-term fixed rate loans while retaining the majority of adjustable rate loans, as well as loans generated through programs to support customer relationships. Income from secondary mortgage market operations was $7.0$3.7 million in the thirdfirst quarter of 2021,2022, down $5.6$1.7 million, or 44%31%, from the secondfourth quarter of 2021 and down $5.9$8.0 million, or 46%68%, from the thirdfirst quarter of 2020.2021. The decrease in income compared tofrom the prior quarter and the same quarter last year was due largely to the diversificationboth a lower level of delivery methodsrefinancing activity as interest rates have begun to rise, and a lower percentage of originated loans sold in the secondsecondary market. The level of mortgage applications during the first quarter of 2021, which resulted in a one-time acceleration of income recognition in the prior quarter, as well as slowed production in the third quarter due in part to disruption caused by Hurricane Ida in a portion of our market. Third quarter 2021 mortgage applications were2022 was down approximately 15% when compared to the secondfourth quarter of 2021 and down 37% when compared to the first quarter of 2021. The percentage of originated loans sold in the secondary market declined to 27% in the first quarter of 2022 from 35% in the fourth quarter of 2021 and 64% in the same quarter last year. Secondary mortgage market operations income will vary based on application volume and pull through rates. We expect income from secondary mortgage feesmarket operations to decline in timeremain low as the demand for mortgage loans and refinancing slows.slows in the rising interest rate environment.
Income from bank-owned life insurance (BOLI) is typically generated through insurance benefit proceeds as well as the growth of the cash surrender value of insurance contracts held. Income from bank-owned life insurance was $3.9$3.5 million for the thirdfirst quarter of 2021, up $0.62022, down $0.3 million, or 17%7%, from the secondfourth quarter of 2021, and down $2.7$3.7 million, or 41%51%, from the thirdfirst quarter of 2020.2021. The linked-quarter increasedecrease is attributable to a higher level of benefit proceeds recorded in thirdfourth quarter of 2021, and the decrease from the prior year is largely attributable to benefit proceedsincome received in connection with the purchase of $3.4 million recordedpolicies in the thirdfirst quarter of 2020.2021.
Credit-related fees include fees assessed on letters of credit and unused portions of loan commitments. Credit related fees were $2.6$2.7 million for the thirdfirst quarter of 2021, down $0.42022, up $0.1 million, or 14%2%, from the secondfourth quarter of 2021 and down $0.3$0.2 million, or 12%6%, from the thirdfirst quarter of 2020.2021. The linked quarter decreaseincrease is primarily attributable to an increase in letter of credit fees, partially offset by a decline in loan commitment fees, as credit line utilization increased during the period. The decrease from the thirdfirst quarter of 20202021 is primarily attributable to a decrease in both letters of credit fees and loan commitment fees.
Income from customer and other derivatives is largely from our customer interest rate derivative program and totaled $3.0$2.3 million for the thirdfirst quarter of 20212022 compared to $3.8$1.7 million in the secondfourth quarter of 2021 and $1.7$5.0 million for the thirdfirst quarter of 2020.2021. The decrease from the same quarter last year is largely attributable to the demand during the first quarter of 2021 for interest rate swap arrangements due to the long-term interest rate environment at the time. Derivative income can be volatile and is dependent upon the composition of the portfolio, volume and mix of sales activity and market value adjustments due to market interest rate movement.
Other miscellaneous income is comprised of various items, including income from small business investment companies (SBIC), FHLB stock dividends, and syndication fees. Other miscellaneous income (excluding nonoperating items) totaled $8.2$6.4 million, up $3.2down
47
$0.9 million compared to the second quarterfourth of 2021 and up $5.0$5.9 million compared to the thirdfirst quarter of 2020.2021. The increasedecrease compared to the prior period was largely driven by neta lower level of SBIC income and syndication fees, partially offset by an increase in gains on sales of other assets, partially offset by decreases in syndication fees and SBIC income.assets. The increase compared to the prior year reflects increased net gains on salesSBIC income as a result of other assetsan approximately $4.7 million pandemic related write-down in the first quarter of 2021, and higher teller fees,syndication fees.
Management expects our 2022 fee income, excluding nonoperating items, to decline 1% to 3%, from the 2021 level of $353.4 million, largely due to lower secondary mortgage fees.
Noninterest Expense
Noninterest expense for the first quarter of 2022 was $179.9 million, down $2.5 million, or 1%, from the fourth quarter of 2021, and down $13.1 million, or 7%, from the first quarter of 2021. There were no nonoperating noninterest expense items in the first quarters of 2022 and 2021. During the fourth quarter of 2021, there was a net negative $1.3 million of nonoperating noninterest expense largely resulting from accrual reversals related to both Hurricane Ida expenses and closed branch writedowns, partially offset by a gain on a lease buyout recorded in the third quarter of 2020.
Noninterest income for the first nine months of 2021 was $274.7 million, up $32.6 million, or 13% from the first nine months of 2020, and includes the $7.4 million of nonoperating income, as noted above.expense associated with efficiency initiatives. Excluding the nonoperating items, operating noninterest income was up $25.3 million, or 10%. The increase in fee income for the first nine months of 2021 compared to 2020 includes increases in almost all fee categories and is primarily attributable to the economic rebound from the recessionary market conditions present in much of the first nine months of 2020. Card fees were up $7.9 million, or 16%, related to increased activity. Trust fees were up $4.0 million, or 9%, primarily in personal trust with improved market conditions and a higher level of assets under management. Insurance, investment and annuity fees were up $3.5 million, or 19%, with increased annuity and investment fees. Secondary mortgage fees were up $2.5 million, or 9%, related to the low interest rate environment. Other miscellaneous income, excluding nonoperating items, was up $2.6 million, or 23%.
Management expects fee income, excluding nonoperating items, to remain relatively flat for the fourth quarter of 2021, and to grow approximately 9% on a full year basis with increases expected in most fee categories.
Noninterest Expense
Noninterest expense for the third quarter of 2021 was $194.7 million, down $42.1 million, or 18%, from the second quarter of 2021, and down $1.1 million, or 1%, from the third quarter of 2020. The third quarter of 2021 included $3.2 million in net nonoperating expenses which included a $1.9 million severance reversal for certain employees with positions eliminated in the prior quarter that were internally placed and $5.1 million in expenses related to Hurricane Ida, which includes damage to facilities, recovery cost, charitable contributions to organizations providing recovery assistance, temporary housing, distribution of meals, ice and fuel, among
46
other things. The second quarter of 2021 included $45.0 million of nonoperating expenses, with $40.8 million related to initiatives put in place to improve overall efficiency and operating performance and $4.2 million related to the redemption of $150 million of subordinated notes. There were no nonoperating expenses in the third quarter of 2020. Excluding these items, operating expense was down $0.3$3.9 million, or less than 1%, linked quarter, and down $4.3 million, or 2%, from the same quarter a year ago.prior quarter. The decrease in operating expense from the prior quarter was largely driven by lower salaries and benefits and lower occupancy as a result of initiatives put in place during the second quarter of 2021, and lower professional services expense partially offset by higher business development costs, regulatory expensewith lower consulting and legal fees, other real estate gains, lower data processing expense as card activity increased.with fewer processing days and lower personnel expense with one less workday. Compared to the same quarter last year, the decrease was largely attributable to personnel expense savings as a result of reduced headcount, lower occupancy expense resulting from branch closures, lower FDIC assessment and corporate value tax, and a decrease in professional services expense, partially offset by an increase in business development costs and data processing expense as a result of higher level of card activity. A more detailed discussion of the variances follows.
The components of noninterest expense for the periods indicated are presented in the following tables.
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
| |||||||||||||||||||||||
|
| September 30, |
|
| June 30, |
|
| September 30, |
|
| September 30, |
|
| September 30, |
|
| March 31, |
|
| December 31, |
|
| March 31, |
| ||||||||
(in thousands) |
| 2021 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
|
| 2021 |
| ||||||||
Compensation expense |
| $ | 92,601 |
|
| $ | 100,587 |
|
| $ | 97,095 |
|
| $ | 289,034 |
|
| $ | 286,922 |
|
| $ | 85,993 |
| $ | 89,555 |
| $ | 95,846 |
| ||
Employee benefits |
|
| 19,377 |
|
|
| 42,067 |
|
|
| 20,761 |
|
|
| 85,213 |
|
|
| 64,892 |
|
|
| 21,403 |
|
|
| 18,573 |
|
|
| 23,769 |
|
Personnel expense |
|
| 111,978 |
|
|
| 142,654 |
|
|
| 117,856 |
|
|
| 374,247 |
|
|
| 351,814 |
|
|
| 107,396 |
|
|
| 108,128 |
|
|
| 119,615 |
|
Net occupancy expense |
|
| 11,974 |
|
|
| 12,955 |
|
|
| 13,191 |
|
|
| 37,839 |
|
|
| 39,272 |
|
| 11,680 |
| 11,947 |
| 12,910 |
| |||||
Equipment expense |
|
| 4,894 |
|
|
| 4,392 |
|
|
| 5,355 |
|
|
| 14,067 |
|
|
| 14,724 |
|
| 4,867 |
| 4,100 |
| 4,781 |
| |||||
Data processing expense |
|
| 24,766 |
|
|
| 23,885 |
|
|
| 21,888 |
|
|
| 71,598 |
|
|
| 65,185 |
|
| 24,239 |
| 25,157 |
| 22,947 |
| |||||
Professional services expense |
|
| 12,748 |
|
|
| 13,473 |
|
|
| 14,372 |
|
|
| 37,472 |
|
|
| 35,098 |
|
| 7,793 |
| 11,206 |
| 11,251 |
| |||||
Amortization of intangible assets |
|
| 4,082 |
|
|
| 4,245 |
|
|
| 4,788 |
|
|
| 12,746 |
|
|
| 15,302 |
|
| 3,748 |
| 3,919 |
| 4,419 |
| |||||
Deposit insurance and regulatory fees |
|
| 3,680 |
|
|
| 2,967 |
|
|
| 4,108 |
|
|
| 10,042 |
|
|
| 15,039 |
|
| 3,740 |
| 3,540 |
| 3,395 |
| |||||
Other real estate and foreclosed asset expense |
|
| (376 | ) |
|
| (86 | ) |
|
| (482 | ) |
|
| (456 | ) |
|
| 9,188 |
|
| (1,764 | ) |
| 246 |
| 6 |
| ||||
Advertising |
|
| 3,638 |
|
|
| 2,276 |
|
|
| 3,159 |
|
|
| 8,400 |
|
|
| 10,089 |
|
| 3,166 |
| 4,041 |
| 2,486 |
| |||||
Corporate value, franchise and other non-income taxes |
|
| 3,414 |
|
|
| 3,422 |
|
|
| 4,872 |
|
|
| 11,300 |
|
|
| 13,649 |
|
| 4,248 |
| 3,178 |
| 4,464 |
| |||||
Telecommunications and postage |
|
| 3,087 |
|
|
| 3,163 |
|
|
| 4,043 |
|
|
| 9,568 |
|
|
| 11,483 |
|
| 2,925 |
| 3,078 |
| 3,318 |
| |||||
Entertainment and contributions |
|
| 2,280 |
|
|
| 1,486 |
|
|
| 1,315 |
|
|
| 5,214 |
|
|
| 7,146 |
|
| 2,961 |
| 2,653 |
| 1,448 |
| |||||
Travel expense |
|
| 765 |
|
|
| 667 |
|
|
| 309 |
|
|
| 1,789 |
|
|
| 1,816 |
|
| 660 |
| 908 |
| 357 |
| |||||
Printing and supplies |
|
| 914 |
|
|
| 941 |
|
|
| 1,271 |
|
|
| 2,833 |
|
|
| 4,006 |
|
| 1,003 |
| 895 |
| 978 |
| |||||
Tax credit investment amortization |
|
| 1,112 |
|
|
| 1,113 |
|
|
| 961 |
|
|
| 3,337 |
|
|
| 2,882 |
|
| 1,004 |
| 1,099 |
| 1,112 |
| |||||
Other retirement expense |
|
| (7,294 | ) |
|
| (6,806 | ) |
|
| (6,337 | ) |
|
| (20,645 | ) |
|
| (18,796 | ) |
| (6,772 | ) |
| (7,296 | ) |
| (6,545 | ) | |||
Loss on extinguishment of debt |
|
| — |
|
|
| 4,165 |
|
|
| — |
|
|
| 4,165 |
|
|
| — |
| ||||||||||||
Loss on facilities and equipment from consolidation |
|
| — |
|
|
| 15,462 |
|
|
| — |
|
|
| 15,462 |
|
|
| 929 |
|
| — |
| (1,599 | ) |
| — |
| ||||
Other miscellaneous |
|
| 13,041 |
|
|
| 6,396 |
|
|
| 5,105 |
|
|
| 25,567 |
|
|
| 16,822 |
|
|
| 9,045 |
|
|
| 7,262 |
|
|
| 6,130 |
|
Total noninterest expense |
| $ | 194,703 |
|
| $ | 236,770 |
|
| $ | 195,774 |
|
| $ | 624,545 |
|
| $ | 595,648 |
|
| $ | 179,939 |
|
| $ | 182,462 |
|
| $ | 193,072 |
|
Nonoperating Expenses (included above)
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||
|
| September 30, |
|
| June 30, |
|
| September 30, |
|
| September 30, |
| ||||||||
(in thousands) |
| 2021 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| |||||
Nonoperating expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation expense |
| $ | (1,862 | ) |
| $ | 5,161 |
|
| $ | — |
|
| $ | 3,299 |
|
| $ | — |
|
Employee benefits |
|
| 3 |
|
|
| 20,189 |
|
|
| — |
|
|
| 20,192 |
|
|
| — |
|
Personnel expense |
|
| (1,859 | ) |
|
| 25,350 |
|
|
| — |
|
|
| 23,491 |
|
|
| — |
|
Net occupancy expense |
|
| 2 |
|
|
| — |
|
|
| — |
|
|
| 2 |
|
|
| — |
|
Equipment expense |
|
| 2 |
|
|
| — |
|
|
| — |
|
|
| 2 |
|
|
| — |
|
Advertising |
|
| 2 |
|
|
| — |
|
|
| — |
|
|
| 2 |
|
|
| — |
|
Entertainment and contributions |
|
| 174 |
|
|
| — |
|
|
| — |
|
|
| 174 |
|
|
| — |
|
Travel expense |
|
| 5 |
|
|
| — |
|
|
| — |
|
|
| 5 |
|
|
| — |
|
Printing and supplies |
|
| 22 |
|
|
| — |
|
|
| — |
|
|
| 22 |
|
|
| — |
|
Loss on extinguishment of debt |
|
| — |
|
|
| 4,165 |
|
|
| — |
|
|
| 4,165 |
| �� |
| — |
|
Loss on facilities and equipment from consolidation |
|
| — |
|
|
| 15,462 |
|
|
| — |
|
|
| 15,462 |
|
|
| — |
|
Other miscellaneous |
|
| 4,877 |
|
|
| — |
|
|
| — |
|
|
| 4,877 |
|
|
| — |
|
Total nonoperating expenses |
| $ | 3,225 |
|
| $ | 44,977 |
|
| $ | — |
|
| $ | 48,202 |
|
| $ | — |
|
47
48
Nonoperating Expenses (included above)
|
| Three Months Ended |
| |||||||||
|
| March 31, |
|
| December 31, |
|
| March 31, |
| |||
(in thousands) |
| 2022 |
|
| 2021 |
|
| 2021 |
| |||
Nonoperating expense |
|
|
|
|
|
|
|
|
| |||
Personnel expense |
| $ | — |
|
| $ | 949 |
|
| $ | — |
|
Equipment expense |
|
| — |
|
|
| 3 |
|
|
| — |
|
Advertising |
|
| — |
|
|
| 14 |
|
|
| — |
|
Loss on facilities and equipment from consolidation |
|
| — |
|
|
| (1,599 | ) |
|
| — |
|
Other miscellaneous |
|
| — |
|
|
| (696 | ) |
|
| — |
|
Total nonoperating expenses |
| $ | — |
|
| $ | (1,329 | ) |
| $ | — |
|
Personnel expense consists of salaries, incentive compensation, long-term incentives, payroll taxes, and other employee benefits such as 401(k), pension, and medical, life and disability. Personnel expense totaled $112.0$107.4 million for the thirdfirst quarter of 2021,2022, down $30.7$0.7 million, or 22%1%, compared to the prior quarter and down $5.9$12.2 million, or 5%10%, compared to the same quarter last year. The third quarter of 2021 includes a $1.9 million credit of nonoperating expense, primarily related to the reversal of severance, as noted above. The second quarter of 2021 includes $25.4 million of nonoperating expenses related to efficiency initiatives, including the VERIP ($20.2 million) and reduction in force ($5.1 million). Excluding the nonoperating expenses, personnel expense was down $3.5 million, or 3%, from the prior quarter, and down $4.0 million, or 3%, from the same quarter last year. The decrease from the prior quarter was largely due to one less payroll day and lower bonus and incentives from a lower level of secondary mortgage production. The decrease from the same quarter last year is primarilylargely attributable to a decrease of 197383 full-time equivalent employees (FTEs), primarily the result of the reduction in force at the end of the second quarter. The decrease from the same quarter last year is attributable toefficiency measures implemented during 2021, including a decrease of 629 FTEs as a result of the VERIP,voluntary early retirement program and the closure of 20 financial centers, and the second quarter reduction in force, partially offset by annual merit raises and higher bonus and incentive accruals.raises.
Occupancy and equipment expenses are primarily composed of lease expenses, depreciation, maintenance and repairs, rent, taxes, and other equipment expenses. Occupancy and equipment expenses totaled $16.9$16.5 million in the thirdfirst quarter of 2021, down2022, up $0.5 million, or 3%, from the secondfourth quarter of 2021 and $1.7down $1.1 million, or 9%6%, from the thirdfirst quarter of 2020.2021. The linked-quarter decreaseincrease was largely related to higher equipment expense related to annual maintenance contract renewals, partially offset by a decrease in occupancy expense due in part to branch closures, partially offset by an increase in equipment expense related to equipment purchases.higher sublease rental income. The decrease from the same quarter last year is related to decreases in both occupancy expense and equipment expense, largelyprimarily attributable to the eightclosure of 26 financial centers that were closed in April 2021.during 2021 as a result of efficiency initiatives.
Data processing expense includes expenses related to third party technology processing and servicing costs, technology project costs and fees associated with bank card and ATM transactions. Data processing expense was $24.8$24.2 million for the thirdfirst quarter of 2021, up2022, down $0.9 million, or 4%, compared to the secondfourth quarter of 2021, and up $2.9$1.3 million, or 13%6%, compared to the thirdfirst quarter of 2020.2021. The increase overdecrease from the secondfourth quarter of 2021 is largely due to the increase ina lower level of card activity.activity with two fewer activity days. The increase from thirdfirst quarter of 20202021 is largely due to expense associated with investments in new technology, along withhigher processing expense related to the increase in bank card activity.
Professional services expense for the thirdfirst quarter of 20212022 totaled $12.7$7.8 million, down $0.7$3.4 million, or 5%30%, compared to the previous quarter and $1.6$3.5 million, or 11%31%, from the thirdfirst quarter of 2020.2021. The decrease from the secondfourth quarter of 2021 and the same quarter last year is primarily attributable to lower levels of expense related to PPP consulting support, andas well as a reduction in legal fees.
Deposit insurance and regulatory fees totaled $3.7 million, up $0.7$0.2 million, or 24%6%, from the secondfourth quarter of 2021 and down $0.4up $0.3 million, or 10%, from the thirdfirst quarter of 2020.2021. The increase from the prior periodquarter and the prior year is due in partlargely to the impact on our risk based assessment of declining levels of low-risk PPP loans and a changelower levels of excess liquidity to our FDIC insurance cost. We expect our FDIC insurance cost to continue to increase as we continue to redeploy our excess liquidity and as our PPP loans pay down.
Other real estate and foreclosed asset expense reflected net income of $1.8 million for the first quarter of 2022 resulting from gains on sales of properties, compared to minimal activity in both the treatment of certain CECL transition provisions on the risk based assessment. The decrease fromprior quarter and the same quarter last year is largely due to the favorable effect that excess liquidityyear. Other real estate gain or losses may occur periodically and continued asset quality improvement hasare dependent on the risk-based assessment. We expect our deposit assessment fee to return to a more typical level as our excess liquidity declines.volume of properties for sale and current market conditions.
Corporate value, franchise and other non-income tax expense for the thirdfirst quarter of 20212022 totaled $3.4$4.2 million, virtually unchanged fromup $1.1 million, or 34%, over the prior quarter and down $1.5$0.2 million, or 30%5%, compared to the same quarter last year. The decreaseincrease from the thirdfourth quarter of 20202021 reflects a decreasean increase in bank share tax as a result ofthe benefit from the net loss recorded in 2020 concluded in 2021. The decrease from the same quarter last year is primarily due to a $1.2 million termination penalty on a BOLI transaction incurred in the first quarter of 2021, partially offset by the bank share tax benefit realized during 2021 from the net loss recorded in 2020.
Business development-related expenses (including advertising, travel, entertainment and contributions) totaled $6.7$6.8 million for the thirdfirst quarter of 2021, up $2.32022, down $0.8 million, or 51%11%, from the secondfourth quarter of 2021, and $1.9up $2.5 million, or 40%58%, from the thirdfirst quarter of 2020.2021. The linked-quarter increasedecrease was largely due to an increasea decrease in advertising and charitable contributionstravel, and the increase over last year was largely due to entertainment and contributions, advertising and travel expense.
49
All other expenses, excluding amortization of intangibles and nonoperating items, totaled $5.6$7.2 million for the thirdfirst quarter of 2021,2022, an increase of $0.9$1.5 million from the secondfourth quarter of 2021, and an increase of $1.0$2.2 million from the thirdfirst quarter of 2020.2021. The variance compared toincrease for both periods is the resultdue in part to increases in noncredit losses of approximately $1.0$0.9 million in contract cancellation costs in the third quarter of 2021.
Noninterest expense totaled $624.5linked-quarter and $2.1 million for the first nine months of 2021, up $28.9 million, or 5%, from the first nine months of 2020. Excluding the nonoperating expenses described above,same quarter last year, and other miscellaneous smaller items.
We expect our 2022 operating expense was down $19.3 million, or 3%. Other real estate and foreclosed assets expense was down $9.6 million, as 2020 included a $9.8 million write-down of equity interests received in energy-related bankruptcy restructurings. Deposit insurance and regulatory expense was down $5.0 million, or 33%, due to the favorable impact of higher liquidity and improved asset quality upon the risk-based assessment. Operating business development expense was down $3.8 million, or 20%, attributable to expense control initiatives put in place in the current year. The nine months ended September 30, 2020 also includes $2.5 million of pandemic relief contributions in the Gulf Coast region. Operating personnel expense was down $1.1 million or less than 1%, with lower salary expense related to the efficiency initiatives referred to above, partially offset by higher bonus and incentives in connection with improved Company performance. Occupancy and equipment expense was down $2.1 million, or 4% related to expense control measures and branch closures. These decreases were partially offset by increases of $6.4 million, or 10% in data processing expense attributable to investments in new technology and increased card activity, and $2.4 million, or 7%, in professional services as a result of consulting and support related to PPP loan origination and forgiveness.
Management expects fourth quarter 2021 operating noninterest expense to total $187 million, and to be down approximately 2% to 3% forfrom the full year of 2021 compared to 2020. The forecasted fourth quarter 2021 expense level of approximately $187$760.1 million, isreflecting our continued focus on expense management. We expect our ongoing expense initiatives, including strategic procurement, combined with the expected quarterly run rate for 2022 operating expense.full-year impact of initiatives completed through 2021, will support the strategy of using cost control measures to fund revenue enhancements, such as additional investments in technology and additional bankers, and reduce the overall impact of wage inflation.
48
Income Taxes
The effective income tax rate for the thirdfirst quarter of 20212022 was approximately 19.2%20.1% compared to 18.9%16.4% in the secondfourth quarter of 2021 and 19.2%19.7% in the thirdfirst quarter of 2020.2021. The nominallinked-quarter increase in the third quarter 2021 effective income tax rate is due primarily to a slight decrease$4.9 million income tax benefit in expected tax credits due to revised estimates.the fourth quarter of 2021 from an increase in the 2020 net operating loss (“NOL”).
Many factors impact the effective income tax rate including, but not limited to, the level of pre-tax income and relative impact of net tax benefits related to tax credit investments, tax-exempt interest income, bank-owned life insurance, and nondeductible expenses. Based on the current forecast, management expects the effective income tax rate for 20212022 will be in the 19%-20%-21% range, absent any changes in tax law.
Our effective tax rate has historically varied from the federal statutory rate primarily because of tax-exempt income and tax credits. Interest income on bonds issued by or loans to state and municipal governments and authorities, and earnings from the bank-owned life insurance program are the major components of tax-exempt income. The main source of tax credits has been investments in tax-advantaged securities and tax credit projects. These investments are made primarily in the markets we serve and are directed at tax credits issued under the Federal and State New Market Tax Credit (“NMTC”) programs, Low-Income Housing Tax Credit (“LIHTC”) programs, as well as pre-2018 Qualified Zone Academy Bonds (“QZAB”) and Qualified School Construction Bonds (“QSCB”). These investments generate tax credits, which reduce current and future taxes and are recognized when earned as a benefit in the provision for income taxes.
We have invested in NMTC projects through investments in our own Community Development Entities (“CDE”), as well as other unrelated CDEs. Federal tax credits from NMTC investments are recognized over a seven-year period, while recognition of the benefits from state tax credits varies from three to five years. We have also invested in affordable housing projects that generate federal LIHTC tax credits that are recognized over a ten-year period, beginning in the year the rental activity begins. The amortization of the LIHTC investment cost is recognized as a component of income tax expense in proportion to the tax credits recognized over the ten-year credit period.
Based on tax credit investments that have been made to date in 2021,2022, we expect to realize benefits from federal and state tax credits over the next three years totaling $10.0 million, $10.1 million $10.0 million and $10.1$7.4 million in 2022, 2023, 2024, and 2024,2025, respectively. We intend to continue making investments in tax credit projects. However, our ability to access new credits will depend upon, among other factors, federal and state tax policies and the level of competition for such credits.
Selected Financial DataLIQUIDITY AND CAPITAL RESOURCES
The following tables contain selected financial data as of the dates and for the periods indicated.Liquidity
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||
|
| September 30, |
|
| June 30, |
|
| September 30, |
|
| September 30, |
| ||||||||
|
| 2021 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| |||||
Common Share Data |
|
|
|
|
|
|
|
|
|
|
|
|
| �� |
|
|
|
|
|
|
Earnings (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | 1.46 |
|
| $ | 1.00 |
|
| $ | 0.90 |
|
| $ | 3.67 |
|
| $ | (1.73 | ) |
Diluted |
| $ | 1.46 |
|
| $ | 1.00 |
|
| $ | 0.90 |
|
| $ | 3.67 |
|
| $ | (1.73 | ) |
Cash dividends paid |
| $ | 0.27 |
|
| $ | 0.27 |
|
| $ | 0.27 |
|
| $ | 0.81 |
|
| $ | 0.81 |
|
Book value per share (period-end) |
| $ | 41.81 |
|
| $ | 41.03 |
|
| $ | 39.07 |
|
| $ | 41.81 |
|
| $ | 39.07 |
|
Tangible book value per share (period-end) |
| $ | 31.10 |
|
| $ | 30.27 |
|
| $ | 28.11 |
|
| $ | 31.10 |
|
| $ | 28.11 |
|
Weighted average number of shares (000s): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
| 86,834 |
|
|
| 86,814 |
|
|
| 86,358 |
|
|
| 86,800 |
|
|
| 86,614 |
|
Diluted |
|
| 87,006 |
|
|
| 86,990 |
|
|
| 86,400 |
|
|
| 86,951 |
|
|
| 86,614 |
|
Period-end number of shares (000s) |
|
| 86,823 |
|
|
| 86,847 |
|
|
| 86,400 |
|
|
| 86,823 |
|
|
| 86,400 |
|
49
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||
|
| September 30, |
|
| June 30, |
|
| September 30, |
|
| September 30, |
| ||||||||
(in thousands) |
| 2021 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| |||||
Income Statement: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
| $ | 244,417 |
|
| $ | 248,300 |
|
| $ | 257,043 |
|
| $ | 743,502 |
|
| $ | 800,728 |
|
Interest income (te) (a) |
|
| 247,185 |
|
|
| 251,154 |
|
|
| 260,232 |
|
|
| 752,046 |
|
|
| 810,613 |
|
Interest expense |
|
| 9,708 |
|
|
| 13,657 |
|
|
| 21,860 |
|
|
| 39,563 |
|
|
| 96,491 |
|
Net interest income (te) |
|
| 237,477 |
|
|
| 237,497 |
|
|
| 238,372 |
|
|
| 712,483 |
|
|
| 714,122 |
|
Provision for credit losses |
|
| (26,955 | ) |
|
| (17,229 | ) |
|
| 24,999 |
|
|
| (49,095 | ) |
|
| 578,690 |
|
Noninterest income |
|
| 93,361 |
|
|
| 94,272 |
|
|
| 83,748 |
|
|
| 274,722 |
|
|
| 242,078 |
|
Noninterest expense (excluding amortization of intangibles) |
|
| 190,621 |
|
|
| 232,525 |
|
|
| 190,986 |
|
|
| 611,799 |
|
|
| 580,346 |
|
Amortization of intangibles |
|
| 4,082 |
|
|
| 4,245 |
|
|
| 4,788 |
|
|
| 12,746 |
|
|
| 15,302 |
|
Income (loss) before income taxes |
|
| 160,322 |
|
|
| 109,374 |
|
|
| 98,158 |
|
|
| 403,211 |
|
|
| (228,023 | ) |
Income tax expense (benefit) |
|
| 30,740 |
|
|
| 20,656 |
|
|
| 18,802 |
|
|
| 77,739 |
|
|
| (79,274 | ) |
Net income (loss) |
| $ | 129,582 |
|
| $ | 88,718 |
|
| $ | 79,356 |
|
| $ | 325,472 |
|
| $ | (148,749 | ) |
For informational purposes - included above, pre-tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonoperating item included in noninterest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of Hancock Horizon Funds |
| $ | 4,576 |
|
| $ | — |
|
| $ | — |
|
| $ | 4,576 |
|
| $ | — |
|
Gain on sale of Mastercard Class B common stock |
|
| — |
|
|
| 2,800 |
|
|
| — |
|
|
| 2,800 |
|
|
| — |
|
Nonoperating items included in noninterest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Efficiency initiatives |
|
| (1,867 | ) |
|
| 40,812 |
|
|
| — |
|
|
| 38,945 |
|
|
| — |
|
Hurricane related expenses |
|
| 5,092 |
|
|
| — |
|
|
| — |
|
|
| 5,092 |
|
|
| — |
|
Loss on redemption of subordinated notes |
|
| — |
|
|
| 4,165 |
|
|
| — |
|
|
| 4,165 |
|
|
| — |
|
Provision for credit loss associated with energy loan sale |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 160,101 |
|
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||
|
| September 30, |
|
| June 30, |
|
| September 30, |
|
| September 30, |
| ||||||||
|
| 2021 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| |||||
Performance Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets |
|
| 1.46 | % |
|
| 1.01 | % |
|
| 0.97 | % |
|
| 1.25 | % |
|
| (0.62 | )% |
Return on average common equity |
|
| 14.26 | % |
|
| 10.20 | % |
|
| 9.42 | % |
|
| 12.39 | % |
|
| (5.77 | )% |
Return on average tangible common equity |
|
| 19.22 | % |
|
| 13.94 | % |
|
| 13.14 | % |
|
| 16.89 | % |
|
| (7.99 | )% |
Earning asset yield (te) (a) |
|
| 3.06 | % |
|
| 3.13 | % |
|
| 3.53 | % |
|
| 3.16 | % |
|
| 3.73 | % |
Total cost of funds |
|
| 0.12 | % |
|
| 0.17 | % |
|
| 0.30 | % |
|
| 0.17 | % |
|
| 0.44 | % |
Net Interest Margin (te) |
|
| 2.94 | % |
|
| 2.96 | % |
|
| 3.23 | % |
|
| 3.00 | % |
|
| 3.29 | % |
Noninterest income to total revenue (te) |
|
| 28.22 | % |
|
| 28.41 | % |
|
| 26.00 | % |
|
| 27.83 | % |
|
| 25.32 | % |
Efficiency ratio (b) |
|
| 57.44 | % |
|
| 57.01 | % |
|
| 59.29 | % |
|
| 57.52 | % |
|
| 60.69 | % |
Average loan/deposit ratio |
|
| 71.62 | % |
|
| 73.18 | % |
|
| 83.72 | % |
|
| 73.97 | % |
|
| 85.61 | % |
FTE employees (period-end) |
|
| 3,429 |
|
|
| 3,626 |
|
|
| 4,058 |
|
|
| 3,429 |
|
|
| 4,058 |
|
Capital Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stockholders' equity to total assets |
|
| 10.28 | % |
|
| 10.15 | % |
|
| 10.17 | % |
|
| 10.28 | % |
|
| 10.17 | % |
Tangible common equity ratio (c) |
|
| 7.85 | % |
|
| 7.70 | % |
|
| 7.53 | % |
|
| 7.85 | % |
|
| 7.53 | % |
|
|
|
|
|
|
50
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||
|
| September 30, |
|
| June 30, |
|
| September 30, |
|
| September 30, |
| ||||||||
($ in thousands) |
| 2021 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| |||||
Asset Quality Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual loans (a) |
| $ | 60,357 |
|
| $ | 83,551 |
|
| $ | 171,462 |
|
| $ | 60,357 |
|
| $ | 171,462 |
|
Restructured loans - still accruing |
|
| 3,071 |
|
|
| 3,830 |
|
|
| 9,115 |
|
|
| 3,071 |
|
|
| 9,115 |
|
Total nonperforming loans |
|
| 63,428 |
|
|
| 87,381 |
|
|
| 180,577 |
|
|
| 63,428 |
|
|
| 180,577 |
|
ORE and foreclosed assets |
|
| 8,423 |
|
|
| 10,201 |
|
|
| 11,640 |
|
|
| 8,423 |
|
|
| 11,640 |
|
Total nonperforming assets |
| $ | 71,851 |
|
| $ | 97,582 |
|
| $ | 192,217 |
|
| $ | 71,851 |
|
| $ | 192,217 |
|
Accruing loans 90 days past due (b) |
| $ | 9,970 |
|
| $ | 8,925 |
|
| $ | 10,439 |
|
| $ | 9,970 |
|
| $ | 10,439 |
|
Net charge-offs |
|
| 1,770 |
|
|
| 10,498 |
|
|
| 24,008 |
|
|
| 30,522 |
|
|
| 370,456 |
|
Allowance for loan losses |
| $ | 371,521 |
|
| $ | 399,668 |
|
| $ | 448,674 |
|
| $ | 371,521 |
|
| $ | 448,674 |
|
Reserve for unfunded lending commitments |
|
| 28,946 |
|
|
| 29,524 |
|
|
| 31,526 |
|
|
| 28,946 |
|
|
| 31,526 |
|
Allowance for credit losses |
| $ | 400,467 |
|
| $ | 429,192 |
|
| $ | 480,200 |
|
| $ | 400,467 |
|
| $ | 480,200 |
|
Total provision for credit losses |
| $ | (26,955 | ) |
| $ | (17,229 | ) |
| $ | 24,999 |
|
| $ | (49,095 | ) |
| $ | 578,690 |
|
Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming assets to loans, ORE and foreclosed assets |
|
| 0.34 | % |
|
| 0.46 | % |
|
| 0.86 | % |
|
| 0.34 | % |
|
| 0.86 | % |
Accruing loans 90 days past due to loans |
|
| 0.05 | % |
|
| 0.04 | % |
|
| 0.05 | % |
|
| 0.05 | % |
|
| 0.05 | % |
Nonperforming assets + accruing loans 90 days past due to loans, ORE and foreclosed assets |
|
| 0.39 | % |
|
| 0.50 | % |
|
| 0.91 | % |
|
| 0.39 | % |
|
| 0.91 | % |
Net charge-offs to average loans |
|
| 0.03 | % |
|
| 0.20 | % |
|
| 0.43 | % |
|
| 0.19 | % |
|
| 2.23 | % |
Allowance for loan losses to period-end loans |
|
| 1.78 | % |
|
| 1.89 | % |
|
| 2.02 | % |
|
| 1.78 | % |
|
| 2.02 | % |
Allowance for credit losses to period-end loans |
|
| 1.92 | % |
|
| 2.03 | % |
|
| 2.16 | % |
|
| 1.92 | % |
|
| 2.16 | % |
Allowance for loan losses to nonperforming loans + accruing loans 90 days past due |
|
| 506.17 | % |
|
| 415.00 | % |
|
| 234.89 | % |
|
| 506.17 | % |
|
| 234.89 | % |
For informational purposes - included above |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for credit loss associated with energy loan sale |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 160,101 |
|
Charge-offs associated with energy loan sale |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 242,628 |
|
|
|
51
|
| September 30, |
|
| June 30, |
|
| March 31, |
|
| December 31, |
|
| September 30, |
| |||||
(in thousands) |
| 2021 |
|
| 2021 |
|
| 2021 |
|
| 2020 |
|
| 2020 |
| |||||
Period-End Balance Sheet |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans |
|
| 20,886,015 |
|
|
| 21,148,530 |
|
|
| 21,664,859 |
|
|
| 21,789,931 |
|
|
| 22,240,204 |
|
Loans held for sale |
|
| 90,618 |
|
|
| 90,002 |
|
|
| 124,677 |
|
|
| 136,063 |
|
|
| 103,566 |
|
Securities |
|
| 8,308,622 |
|
|
| 8,633,133 |
|
|
| 8,005,990 |
|
|
| 7,356,497 |
|
|
| 7,056,276 |
|
Short-term investments |
|
| 3,062,781 |
|
|
| 2,203,785 |
|
|
| 2,339,111 |
|
|
| 1,333,786 |
|
|
| 779,057 |
|
Earning assets |
|
| 32,348,036 |
|
|
| 32,075,450 |
|
|
| 32,134,637 |
|
|
| 30,616,277 |
|
|
| 30,179,103 |
|
Allowance for loan losses |
|
| (371,521 | ) |
|
| (399,668 | ) |
|
| (424,360 | ) |
|
| (450,177 | ) |
|
| (448,674 | ) |
Goodwill and other intangible assets |
|
| 929,599 |
|
|
| 933,681 |
|
|
| 937,926 |
|
|
| 942,345 |
|
|
| 946,958 |
|
Other assets |
|
| 2,412,194 |
|
|
| 2,489,246 |
|
|
| 2,424,440 |
|
|
| 2,530,157 |
|
|
| 2,515,937 |
|
Total assets |
| $ | 35,318,308 |
|
| $ | 35,098,709 |
|
| $ | 35,072,643 |
|
| $ | 33,638,602 |
|
| $ | 33,193,324 |
|
Noninterest-bearing deposits |
| $ | 13,653,376 |
|
| $ | 13,406,385 |
|
| $ | 13,174,911 |
|
| $ | 12,199,750 |
|
| $ | 11,881,548 |
|
Interest-bearing transaction and savings deposits |
|
| 11,291,878 |
|
|
| 11,308,744 |
|
|
| 11,200,412 |
|
|
| 10,413,870 |
|
|
| 9,971,869 |
|
Interest-bearing public fund deposits |
|
| 3,055,388 |
|
|
| 3,206,799 |
|
|
| 3,198,523 |
|
|
| 3,234,936 |
|
|
| 3,176,225 |
|
Time deposits |
|
| 1,207,515 |
|
|
| 1,351,179 |
|
|
| 1,636,674 |
|
|
| 1,849,321 |
|
|
| 2,001,017 |
|
Total interest-bearing deposits |
|
| 15,554,781 |
|
|
| 15,866,722 |
|
|
| 16,035,609 |
|
|
| 15,498,127 |
|
|
| 15,149,111 |
|
Total deposits |
|
| 29,208,157 |
|
|
| 29,273,107 |
|
|
| 29,210,520 |
|
|
| 27,697,877 |
|
|
| 27,030,659 |
|
Short-term borrowings |
|
| 1,745,228 |
|
|
| 1,516,508 |
|
|
| 1,652,747 |
|
|
| 1,667,513 |
|
|
| 1,906,895 |
|
Long-term debt |
|
| 248,011 |
|
|
| 248,052 |
|
|
| 397,583 |
|
|
| 378,322 |
|
|
| 385,887 |
|
Other liabilities |
|
| 487,146 |
|
|
| 498,141 |
|
|
| 394,890 |
|
|
| 455,865 |
|
|
| 494,239 |
|
Stockholders' equity |
|
| 3,629,766 |
|
|
| 3,562,901 |
|
|
| 3,416,903 |
|
|
| 3,439,025 |
|
|
| 3,375,644 |
|
Total liabilities & stockholders' equity |
| $ | 35,318,308 |
|
| $ | 35,098,709 |
|
| $ | 35,072,643 |
|
| $ | 33,638,602 |
|
| $ | 33,193,324 |
|
For informational purposes only - included above |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SBA Paycheck Protection Program (PPP) loans |
| $ | 935,330 |
|
| $ | 1,417,523 |
|
| $ | 2,345,605 |
|
| $ | 2,005,237 |
|
| $ | 2,323,691 |
|
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||
|
| September 30, |
|
| June 30, |
|
| September 30, |
|
| September 30, |
| ||||||||
(in thousands) |
| 2021 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| |||||
Average Balance Sheet |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans |
| $ | 20,941,173 |
|
| $ | 21,388,814 |
|
| $ | 22,407,825 |
|
| $ | 21,355,483 |
|
| $ | 22,200,385 |
|
Loans held for sale |
|
| 82,588 |
|
|
| 89,638 |
|
|
| 112,230 |
|
|
| 94,553 |
|
|
| 80,942 |
|
Securities (a) |
|
| 8,368,824 |
|
|
| 8,194,812 |
|
|
| 6,389,214 |
|
|
| 8,014,023 |
|
|
| 6,223,361 |
|
Short-term investments |
|
| 2,704,796 |
|
|
| 2,522,251 |
|
|
| 502,992 |
|
|
| 2,309,414 |
|
|
| 515,661 |
|
Earning assets |
|
| 32,097,381 |
|
|
| 32,195,515 |
|
|
| 29,412,261 |
|
|
| 31,773,473 |
|
|
| 29,020,349 |
|
Allowance for loan losses |
|
| (392,767 | ) |
|
| (418,753 | ) |
|
| (446,901 | ) |
|
| (420,900 | ) |
|
| (371,646 | ) |
Goodwill and other intangible assets |
|
| 931,584 |
|
|
| 935,737 |
|
|
| 949,287 |
|
|
| 935,767 |
|
|
| 954,328 |
|
Other assets |
|
| 2,571,762 |
|
|
| 2,453,185 |
|
|
| 2,770,783 |
|
|
| 2,533,080 |
|
|
| 2,560,792 |
|
Total assets |
| $ | 35,207,960 |
|
| $ | 35,165,684 |
|
| $ | 32,685,430 |
|
| $ | 34,821,420 |
|
| $ | 32,163,823 |
|
Noninterest-bearing deposits |
| $ | 13,535,961 |
|
| $ | 13,237,796 |
|
| $ | 11,585,617 |
|
| $ | 13,053,586 |
|
| $ | 10,450,457 |
|
Interest-bearing transaction and savings deposits |
|
| 11,341,034 |
|
|
| 11,315,790 |
|
|
| 9,806,826 |
|
|
| 11,152,935 |
|
|
| 9,332,604 |
|
Interest-bearing public fund deposits |
|
| 3,085,452 |
|
|
| 3,208,718 |
|
|
| 3,196,767 |
|
|
| 3,167,956 |
|
|
| 3,256,228 |
|
Time deposits |
|
| 1,274,859 |
|
|
| 1,466,505 |
|
|
| 2,174,585 |
|
|
| 1,497,840 |
|
|
| 2,894,969 |
|
Total interest-bearing deposits |
|
| 15,701,345 |
|
|
| 15,991,013 |
|
|
| 15,178,178 |
|
|
| 15,818,731 |
|
|
| 15,483,801 |
|
Total deposits |
|
| 29,237,306 |
|
|
| 29,228,809 |
|
|
| 26,763,795 |
|
|
| 28,872,317 |
|
|
| 25,934,258 |
|
Short-term borrowings |
|
| 1,612,253 |
|
|
| 1,661,015 |
|
|
| 1,733,298 |
|
|
| 1,653,600 |
|
|
| 2,044,923 |
|
Long-term debt |
|
| 248,019 |
|
|
| 371,892 |
|
|
| 386,015 |
|
|
| 338,336 |
|
|
| 298,436 |
|
Other liabilities |
|
| 504,295 |
|
|
| 415,376 |
|
|
| 450,729 |
|
|
| 444,516 |
|
|
| 444,225 |
|
Stockholders' equity |
|
| 3,606,087 |
|
|
| 3,488,592 |
|
|
| 3,351,593 |
|
|
| 3,512,651 |
|
|
| 3,441,981 |
|
Total liabilities & stockholders' equity |
| $ | 35,207,960 |
|
| $ | 35,165,684 |
|
| $ | 32,685,430 |
|
| $ | 34,821,420 |
|
| $ | 32,163,823 |
|
For informational purposes only - included above |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SBA Paycheck Protection Program (PPP) loans |
| $ | 1,172,276 |
|
| $ | 2,043,032 |
|
| $ | 2,308,021 |
|
| $ | 1,798,465 |
|
| $ | 1,348,786 |
|
|
|
52
Reconciliation of Non-GAAP Measures
Operating revenue (te) and operating pre-provision net revenue (te)
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||
|
| September 30, |
|
| June 30, |
|
| September 30, |
|
| September 30, |
| ||||||||
(in thousands) |
| 2021 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| |||||
Net interest income |
| $ | 234,709 |
|
| $ | 234,643 |
|
| $ | 235,183 |
|
| $ | 703,939 |
|
| $ | 704,237 |
|
Noninterest income |
|
| 93,361 |
|
|
| 94,272 |
|
|
| 83,748 |
|
|
| 274,722 |
|
|
| 242,078 |
|
Total revenue |
| $ | 328,070 |
|
| $ | 328,915 |
|
| $ | 318,931 |
|
| $ | 978,661 |
|
| $ | 946,315 |
|
Taxable equivalent adjustment (a) |
|
| 2,768 |
|
|
| 2,854 |
|
|
| 3,189 |
|
|
| 8,544 |
|
|
| 9,885 |
|
Nonoperating revenue |
|
| (4,576 | ) |
|
| (2,800 | ) |
|
| — |
|
|
| (7,376 | ) |
|
| — |
|
Operating revenue (te) |
| $ | 326,262 |
|
| $ | 328,969 |
|
| $ | 322,120 |
|
| $ | 979,829 |
|
| $ | 956,200 |
|
Noninterest expense |
|
| (194,703 | ) |
|
| (236,770 | ) |
|
| (195,774 | ) |
|
| (624,545 | ) |
|
| (595,648 | ) |
Nonoperating expense |
|
| 3,225 |
|
|
| 44,977 |
|
|
| — |
|
|
| 48,202 |
|
|
| — |
|
Operating pre-provision net revenue (te) |
| $ | 134,784 |
|
| $ | 137,176 |
|
| $ | 126,346 |
|
| $ | 403,486 |
|
| $ | 360,552 |
|
|
|
LIQUIDITY
Liquidity management ensures that funds are available to meet the cash flow requirements of our depositors and borrowers, while also meeting the operating, capital and strategic cash flow needs of the Company, the Bank and other subsidiaries. As part of the overall asset and liability management process, liquidity management strategies and measurements have been developed to manage and
50
monitor liquidity risk. At September 30, 2021, we had $20.9The Company has access to sufficient liquidity for cash requirements, both on balance sheet and with $21.4 billion in net available sources of funds at March 31, 2022, summarized as follows:
|
| September 30, 2021 |
| |||||||||||||||||||||
(in millions) |
| Total Available |
|
| Amount Used |
|
| Net Availability |
| |||||||||||||||
|
| March 31, 2022 |
| |||||||||||||||||||||
(in thousands) |
| Total |
|
| Amount |
|
| Net |
| |||||||||||||||
Internal Sources |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Free Securities, cash and other |
| $ | 7,829 |
|
| $ | — |
|
| $ | 7,829 |
|
| $ | 7,386,592 |
| $ | — |
| $ | 7,386,592 |
| ||
External Sources |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Federal Home Loan Bank |
|
| 5,834 |
|
|
| 2,134 |
|
|
| 3,700 |
|
| 5,739,451 |
| 1,200,814 |
| 4,538,637 |
| |||||
Federal Reserve Bank |
|
| 3,605 |
|
|
| — |
|
|
| 3,605 |
|
| 3,603,969 |
| — |
| 3,603,969 |
| |||||
Brokered deposits |
|
| 4,381 |
|
|
| 9 |
|
|
| 4,372 |
|
| 4,574,956 |
| 9,190 |
| 4,565,766 |
| |||||
Other |
|
| 1,369 |
|
|
| — |
|
|
| 1,369 |
|
|
| 1,294,000 |
|
|
| — |
|
|
| 1,294,000 |
|
Total Liquidity |
| $ | 23,018 |
|
| $ | 2,143 |
|
| $ | 20,875 |
|
| $ | 22,598,968 |
|
| $ | 1,210,004 |
|
| $ | 21,388,964 |
|
The asset portion of the balance sheet provides liquidity primarily through loan principal repayments, maturities and repayments of investment securities and occasional sales of various assets. Short-term investments such as federal funds sold, securities purchased under agreements to resell and interest-bearing deposits with the Federal Reserve Bank or with other commercial banks are additional sources of liquidity to meet cash flow requirements. Free securities represent unpledged securities that can be sold or used as collateral for borrowings, and include unpledged securities assigned to short-term dealer repurchase agreements or to the Federal Reserve Bank discount window. Management has established an internal target for the ratio of free securities to total securities of 20% or greater. As shown in the table below, our ratio of free securities to total securities was 56.73%50.63% at September 30, 2021,March 31, 2022, compared to 65.33%53.95% at June 30,December 31, 2021 and 54.68%62.98% at September 30, 2020.March 31, 2021. Securities and FHLB letters of credit are pledged as collateral related to public funds and repurchase agreements. Pledged securities at September 30, 2021March 31, 2022 totaled $3.6$4.2 billion, up $588$250 million from June 30,December 31, 2021. The increase in pledged securities, as well as the decrease in the ratio of free securities to total securities, was the result of utilizing securities to replace $400 million in maturing FHLB letters of credit as pledged collateral.
|
|
| September 30, |
|
| June 30, |
|
| September 30, |
|
| March 31, |
|
| December 31, |
|
| March 31, |
| |||||||
Liquidity Metrics |
|
| 2021 |
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
|
| 2021 |
| |||||||
Free securities / total securities |
|
|
| 56.73 | % |
|
| 65.33 | % |
|
| 54.68 | % |
| 50.63 | % |
| 53.95 | % |
| 62.98 | % | ||||
Core deposits / total deposits |
|
|
| 98.27 | % |
|
| 98.07 | % |
|
| 96.22 | % |
| 98.94 | % |
|
| 98.66 | % |
| 97.65 | % | |||
Wholesale funds / core deposits |
|
|
| 7.19 | % |
|
| 6.41 | % |
|
| 9.42 | % |
| 6.21 | % |
| 6.45 | % |
| 7.45 | % | ||||
Quarter-to-date average loans /quarter-to-date average deposits |
|
|
| 71.62 | % |
|
| 73.18 | % |
|
| 83.72 | % |
| 70.34 | % |
|
| 69.81 | % |
|
| 77.28 | % |
The liability portion of the balance sheet provides liquidity mainly through the ability to use cash sourced from various customers’ interest-bearing and noninterest-bearing deposit and sweep accounts. At September 30, 2021,March 31, 2022, deposits totaled $29.2$30.5 billion, a decreasean increase of $65$33.8 million, or less than 1%, from June 30,December 31, 2021 and an increase of $2.2$1.3 billion, or 8%4%, from September 30, 2020.March 31, 2021. The year over year increase is largely attributable to pandemic-related conditions, such as an overall slowdownhigher balances in consumer and business spending,
53
coupled with governmentaccounts, due in part to stimulus such as direct payments to individuals and PPP loans to qualifying businesses.hurricane-related insurance proceeds. Core deposits consist of total deposits excluding CDscertificates of deposit of $250,000 or more and brokered deposits. Core deposits totaled $28.7$30.2 billion at September 30, 2021, relatively flatMarch 31, 2022, up $120.2 million, or less than 1%, compared to June 30,December 31, 2021, and up $2.7$1.7 billion, or 6%, from September 30, 2020.March 31, 2021. The ratio of core deposits to total deposits was 98.27%98.94% at September 30, 2021,March 31, 2022, compared to 98.07%98.66% at June 30,December 31, 2021 and 96.22%97.65% at September 30, 2020.March 31, 2021. Brokered deposits totaled $69.3$14.2 million as of September 30, 2021,March 31, 2022, a decrease of $4.9$16.0 million compared to June 30,December 31, 2021 and a decrease of $87.7$61.3 million compared to September 30, 2020.March 31, 2021. The decline inCompany has had only limited brokered deposits from both comparativedeposit activity over the periods resulted from maturing brokered time deposits that were not reissued as part ofdisclosed due to our effort to utilize excess liquidity. The use of brokered deposits as a funding source is subject to certain policies regarding the amount, term and interest rate.
Purchases of federal funds, securities sold under agreements to repurchase and other short-term borrowings from customers provide additional sources of liquidity to meet short-term funding requirements. Besides funding from customer sources, the Bank has a line of credit with the FHLB that is secured by blanket pledges of certain mortgage loans. At September 30, 2021,March 31, 2022, the Bank had borrowings of approximately $1.1 billion and had approximately $3.7$4.5 billion available under this line. The unused borrowing capacity at the Federal Reserve’s discount window is approximately $3.6 billion. There were no outstanding borrowings with the Federal Reserve at any date during any period covered by this report.
Wholesale funds, which are comprised of short-term borrowings, long-term debt and brokered deposits were 7.19%6.21% of core deposits at September 30, 2021,March 31, 2022, compared to 6.41%6.45% at June 30,December 31, 2021 and 9.42%7.45% at September 30, 2020.March 31, 2021. At September 30, 2021,March 31, 2022, wholesale funds totaled $2.1$1.9 billion, an increasea decrease of $223.8$64.5 million, or 12%3%, from June 30,December 31, 2021 and a decrease of $387.2$250.9 million, or 16%12%, from September 30, 2020.March 31, 2021. The quarter over quarter increasedecline was primarily due to increaseddecreased repurchase agreements.agreements and brokered deposits. The year over year decrease was largely attributable to decreases in short-term borrowings, brokered deposits and the redemption of $150 million of our 5.95% subordinated notes.notes during the second quarter of
51
2021, as well as decreased brokered deposits, repurchase agreements, and other short term borrowings. The Company has established an internal target for wholesale funds to be less than 25% of core deposits.
Another key measure used to monitor our liquidity position is the loan-to-deposit ratio (average loans outstanding for the reporting period divided by average deposits outstanding). The loan-to-deposit ratio measures the amount of funds the Company lends for each dollar of deposits on hand. Our average loan-to-deposit ratio for the thirdfirst quarter of 20212022 was 71.62%70.34%, compared to 73.18%69.81% for the secondfourth quarter of 2021 and 83.72%77.28% for the thirdfirst quarter of 2020.2021. Management has an established target range for the loan-to-deposit ratio of 87% to 89%, but will operate outside that range under certain circumstances. The average loan to deposit ratio began to decline duringcircumstances, such as those caused by the second quartercontinuing impact of 2020, as pandemic-related economic stimulus and funding of PPP loans began to increase deposits, coupled with core loan contraction.the pandemic. Average loans outstanding for the thirdfirst quarter of 2021,2022, the secondfourth quarter of 2021, and the thirdfirst quarter in 2020,2021, included approximately $1.2$0.4 billion, $2.0$0.7 billion, and $2.3$2.2 billion, respectively, of low-risk SBA guaranteed PPP loans that are expected to be largelyprimarily repaid through the forgiveness process, which is expected to be substantially complete by mid-yearend of the second quarter of 2022.
Cash generated from operations is another important source of funds to meet liquidity needs. The consolidated statements of cash flows included in Part I. Item 1 of this document present operating cash flows and summarize all significant sources and uses of funds during the ninethree months ended September 30, 2021March 31, 2022 and 2020. 2021.
Dividends received from the Bank have been the primary source of funds available to the Parent for the payment of dividends to our stockholders and for servicing its debt. The liquidity management process takes into account the various regulatory provisions that can limit the amount of dividends the Bank can distribute to the Parent. The Parent targets cash and other liquid assets to provide liquidity in an amount sufficient to fund approximately four quarters of ongoing cash or liquid asset needs, consisting primarily of common stockholder dividends, debt service requirements, and any expected share repurchase or early extinguishment of debt. The Parent may operate below the target level on a temporary basis if a return to the target can be achieved in the near-term, generally not to exceed four quarters. The Parent had cash and liquid assets of $89.0 million at March 31, 2022.
During the thirdfirst quarter of 2021,2022, we repurchased 56,349350,000 shares of our common stock at an average cost of $44.52$52.82 per share, inclusive of commissions, under a Board authorization to repurchase up to 4,338,000 shares of the company’s common stock, set to expire December 31, 2022. To-date, the Company has repurchased 799,876 shares under this plan at a total cost of $40.3 million.
On June 9, 2020, the Parent completed the issuance of subordinated notes payable with an aggregate principal amount of $172.5 million, providing additional liquidity that can be used by the Parent or to provide capital to the Bank, if deemed appropriate. On June 15, 2021, the Parent redeemedutilized excess liquidity to redeem all of its issued and outstanding 5.95% Subordinated Notessubordinated notes due 2045 with an aggregate principal amount of $150 million.
CAPITAL RESOURCES
Capital Resources
Stockholders’ equity totaled $3.6$3.5 billion at September 30, 2021, up $66.9March 31, 2022, down $219.4 million from June 30,December 31, 2021 and $254.1up $34.0 million from September 30, 2020.March 31, 2021. The increasedecrease from June 30,December 31, 2021 is primarily attributable to $129.6a $305.3 million decrease in accumulated other comprehensive income, largely due to fair value adjustments on securities available for sale and cash flow hedges, $23.9 million of dividends, and the repurchase of $18.5 million of common stock. These factors were partially offset by $123.5 million in net income and $6.5$4.9 million of long-term incentive plan and dividend reinvestment activity. The increase from March 31, 2021 is attributable to $479.5 million of net income and $18.4 million of long term incentive plan and dividend reinvestment activity, partially offset by a $42.7 million decrease in accumulated other comprehensive income, largely attributable to the fair value adjustments on the available for sale securities portfolio and cash flow hedges, $24.0 million of dividends and the repurchase of $2.5 million of common stock. The increase from September 30, 2020 is attributable to $429.0 million of net income and $17.1 million of long term incentive and dividend reinvestment activity, partially
54
offset by a decline of $98.7$327.8 million of accumulated other comprehensive income, largely attributable to fair value adjustments on the available for sale securities portfolio, and, to a lesser degree, cash flow hedges, the re-measurement of the pension liability, $96.0and $95.8 million of dividends and the repurchase of $2.5$40.3 million of common stock.
The tangible common equity (TCE) ratio was 7.85%7.15% at September 30, 2021,March 31, 2022, compared to 7.70%7.71% at June 30,December 31, 2021 and 7.53%7.26% at September 30, 2020. March 31, 2021. The linked-quarter increase is primarilydecreases from both comparative periods are largely attributable to tangible earnings,other comprehensive loss that resulted from fair value adjustments to the available for sale securities portfolio, as well as to dividends and common stock repurchases. These factors were partially offset by other comprehensive lossnet income and dividends.long-term incentive plan and dividend reinvestment activity. The year over year increase is largely attributableratio as compared to tangible earnings, partially offsetDecember 31, 2021 was influenced by tangible asset growth, dividends, and other comprehensive loss.contraction, primarily in short-term investments. The ratio as compared to March 31, 2021 was influenced by growth in tangible assets is principally attributable to low-riskthat resulted from deployment of excess liquidity carried ininto short-term investments and investment with the Federal Reserve and SBA guaranteed PPP loans. The impact of additional assets from PPP loans reduced the TCE ratio by 22 bps at September 30, 2021 and 33 bps at June 30, 2021.securities.
The regulatory capital ratios of the Company and the Bank at September 30, 2021March 31, 2022 remained well in excess of current regulatory minimum requirements, including capital conservation buffers, by at least $503$486 million. The Company and the Bank have been categorized as “well-capitalized” in the most recent notices received from our regulators. Refer to the Supervision and Regulation section in the Company’s Annual Report on Form 10-K for the year ended December 31, 20202021 for further discussion of our capital requirements.
52
The following table shows the regulatory capital ratios for the Company and the Bank as calculated under current rules for the indicated periods. The capital ratios reflect the election to use the CECL five-year transition rule that allowed for the option to delay for two years the estimated impact of CECL on regulatory capital (0% in 2020 and 2021), followed by a three-year transition (25% in 2022, 50% in 2023, 75% in 2024, and 100% thereafter). In addition, theThe two-year delay also includes the full impact of January 1, 2020 cumulative effect impact plus an estimated impact of CECL calculated quarterly as 25% of the current ACL over the January 1, 2020 balance (modified transition amount). The modified transition amount will bewas recalculated each quarter in 2020 and 2021, with the December 31, 2021 impact of $24.9 million plus day one impact of $44.1 million (net of tax) carrying through the remaining three-year transition.three years of the transition, as adjusted by the applicable transition percentage.
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| Well- |
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| September 30, |
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| June 30, |
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| March 31, |
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| December 31, |
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| 2021 |
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| 2021 |
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Total capital (to risk weighted assets) |
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Hancock Whitney Corporation |
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| 10.00 | % |
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| 13.06 | % |
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| 12.94 | % |
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| 13.60 | % |
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| 13.22 | % |
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| 12.92 | % |
| 10.00 | % |
| 12.82 | % |
| 12.84 | % |
| 13.06 | % |
| 12.94 | % |
| 13.60 | % | |||||||||||||||
Hancock Whitney Bank |
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| 10.00 | % |
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| 12.51 | % |
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| 12.45 | % |
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| 12.52 | % |
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| 12.19 | % |
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| 11.78 | % |
| 10.00 | % |
| 12.33 | % |
| 12.33 | % |
| 12.51 | % |
| 12.45 | % |
| 12.52 | % | |||||||||||||||
Tier 1 common equity capital (to risk weighted assets) |
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Hancock Whitney Corporation |
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| 6.50 | % |
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| 11.17 | % |
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| 10.98 | % |
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| 11.00 | % |
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| 10.61 | % |
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| 10.30 | % |
| 6.50 | % |
| 11.12 | % |
| 11.09 | % |
| 11.17 | % |
| 10.98 | % |
| 11.00 | % | |||||||||||||||
Hancock Whitney Bank |
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| 6.50 | % |
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| 11.30 | % |
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| 11.20 | % |
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| 11.26 | % |
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| 10.94 | % |
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| 10.53 | % |
| 6.50 | % |
| 11.27 | % |
| 11.24 | % |
| 11.30 | % |
| 11.20 | % |
| 11.26 | % | |||||||||||||||
Tier 1 capital (to risk weighted assets) |
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Hancock Whitney Corporation |
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| 8.00 | % |
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| 11.17 | % |
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| 10.98 | % |
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| 11.00 | % |
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| 10.61 | % |
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| 10.30 | % |
| 8.00 | % |
| 11.12 | % |
| 11.09 | % |
| 11.17 | % |
| 10.98 | % |
| 11.00 | % | |||||||||||||||
Hancock Whitney Bank |
|
| 8.00 | % |
|
| 11.30 | % |
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| 11.20 | % |
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| 11.26 | % |
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| 10.94 | % |
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| 10.53 | % |
| 8.00 | % |
| 11.27 | % |
| 11.24 | % |
| 11.30 | % |
| 11.20 | % |
| 11.26 | % | |||||||||||||||
Tier 1 leverage capital |
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Hancock Whitney Corporation |
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| 5.00 | % |
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| 8.15 | % |
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| 7.83 | % |
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| 7.89 | % |
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| 7.88 | % |
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| 7.70 | % |
| 5.00 | % |
| 8.38 | % |
| 8.25 | % |
| 8.15 | % |
| 7.83 | % |
| 7.89 | % | |||||||||||||||
Hancock Whitney Bank |
|
| 5.00 | % |
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| 8.25 | % |
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| 7.98 | % |
|
| 8.08 | % |
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| 8.11 | % |
|
| 7.86 | % |
| 5.00 | % |
| 8.49 | % |
| 8.36 | % |
| 8.25 | % |
| 7.98 | % |
| 8.08 | % |
Hancock Whitney Corporation total capital to risk weighted assets ratios at September 30, 2021 and June 30,after March 31, 2021 reflect the impact of the June 15, 2021 redemption of $150 million of subordinated notes of the Parent that qualified as tier 2 capital in the calculation of certain regulatory capital ratios, reducing total capital to risk weighted assets ratio by approximately 60 bps. Our regulatory ratios also reflect the impact of PPP loans, which are guaranteed by the SBA and, when meeting certain criteria, are subject to forgiveness to the debtor by the SBA. These loans carry a 0% risk-weighting in the tier 1 and total capital regulatory ratios due to the full guarantee by the SBA. However, these loans are reflected in average assets used to compute tier 1 leverage. PPP loans totaled $335 million, $531 million and $2.3 billion as of March 31, 2022, December 31, 2021 and March 31, 2021, respectively.
On April 22, 2021, our board of directors authorized the repurchase of up to 4,338,000 shares of the Company’s common stock (approximately 5% of the shares of common stock outstanding as of March 31, 2021). The authorization is currently set to expire on December 31, 2022. The shares may be repurchased in the open market, by block purchase, through accelerated share repurchase plans, in privately negotiated transactions or otherwise, in one or more transactions, from time to time, depending upon market conditions and other factors, and in accordance with applicable regulations of the Securities and Exchange Commission. The repurchase authorization may be terminated or amended by the Board at any time prior to the expiration date. During the thirdfirst quarter of 2021, 56,3492022, 350,000 shares were repurchased under this program at an average cost of $44.52$52.82 per share, inclusive of commissions. To date, 799,876 shares with an average cost of $50.36 have been repurchased under this program.
On July 30, 2021,January 27, 2022, our board of directors declared a regular thirdfirst quarter cash dividend of $0.27 per share, consistent with the prior quarter. The Company has paid uninterrupted dividends to its shareholders since 1967.
55
BALANCE SHEET ANALYSIS
Short-Term Investments
Short-term assets are held to ensure funds are available to meet the cash flow needs of both borrowers and depositors. Short-term investments, including interest-bearing bank deposits and federal funds sold, were $3.1 billion at September 30, 2021, up $0.9March 31, 2022, down $0.7 billion from June 30,December 31, 2021 and up $2.3$0.8 billion from September 30, 2020.March 31, 2021. Average short-term investments of $2.7$3.3 billion for the thirdfirst quarter of 20212022 were up $0.2down $0.4 billion compared to the secondfourth quarter of 2021, and up $2.2$1.6 billion compared to the thirdfirst quarter of 2020.2021. Typically, these balances will change on a daily basis depending upon movement in customer loan and deposit accounts. However,
53
excess liquidity that has stemmed from pandemic related conditions (refer to discussionsthe discussion of Liquidity above) continues to drive thean elevated balance of short-terms investments, largely held at the Federal Reserve.
Securities
Investment in securities totaled $8.3$8.5 billion at September 30, 2021,March 31, 2022, down $324.5$71.4 million, or 4%1%, from June 30,December 31, 2021, and up $1.3 billion,$475.1 million, or 18%6%, from September 30, 2020.March 31, 2021. The decrease from June 30,December 31, 2021 was the result of maturities and paydowns as there were no securities purchased during the quarter.a negative market valuation adjustment of $389.2 million, partially offset by net purchases of $317.8 million. The increase from September 30, 2020March 31, 2021 reflects net purchases of $882.9 million, partially offset by a negative valuation adjustment of $407.8 million. The net purchases from the prior quarter and the same quarter last year reflect investment of a portion of excess cash from federal funds into higher-yielding securities. Our securities portfolio includes securities categorized as available for sale and held to maturity. At September 30, 2021,March 31, 2022, securities available for sale totaled $7.0$6.0 billion and securities held to maturity totaled $1.3$2.5 billion. As a result of excess liquidity, and to provide some protection from the impact of future interest rate changes upon accumulated other comprehensive income, we reclassified securities available for sale with an aggregate fair value of $561.8 million to the securities held to maturity portfolio during the first quarter of 2022. The purpose of the securities portfolio is to increase profitability, mitigate interest rate risk, provide liquidity and comply with regulatory pledging requirements.requirements. Available for sale securities are carried at fair value and may be sold prior to maturity. Unrealized gains or losses on available for sale securities, net of deferred taxes, are recorded as accumulated other comprehensive income in stockholders’ equity.
Our securities portfolio consists mainly of residential and commercial mortgage-backed securities and collateralized mortgage obligations that are issued or guaranteed by U.S. government agencies. We invest only in high quality investment grade securities with a targeted portfolio effective duration generally between two and five and a half years. At September 30, 2021,March 31, 2022, the average expected maturity of the portfolio was 5.81 years 5.86 years with an effective duration of 4.414.47 years and a nominal weighted-average yield of 1.89% 1.93%. Under an immediate, parallel rate shock of 100 bps and 200 bps, the effective durationdurations would be 4.724.60 years and 4.80 years, respectively.in both scenarios. At June 30,December 31, 2021, the average expected maturity of the portfolio was 5.915.80 years with an effective duration of 4.584.25 years and a nominal weighted-average yield of 1.89%1.87%. The average maturity of the portfolio at September 30, 2020March 31, 2021 was 5.545.93 years, with an effective duration of 4.004.76 years and a nominal weighted-average yield of 2.20%1.95%. The changes in expected maturity, effective duration, and nominal weighted-average yield compared to June 30,both December 31, 2021 and March 31, 2021 was the result of reinvestment of maturities and paydowns;paydowns and compared to September 30, 2020, is primarily related to securities portfolio growth andfrom the reinvestmentinvestment of the securities portfolio maturities and paydowns.excess liquidity. At September 30, 2021,March 31, 2022, approximately $1.8$1.9 billion of our available for sale securities are hedged with $1.6$1.7 billion in fair value hedges in order to provide protection and flexibility to reposition and/or reprice the portfolio in a rising interest rate environment, effectively reducing the duration (market price risk) on the hedged securities. Our strategy in the near term will be to invest in the securities portfolio as rates rise and monitor our hedge positions to adjust interest rate sensitivity.
At the end of each reporting period, we evaluate the securities portfolio for credit loss. Based on our assessments, expected credit loss was negligible for all periods in 20212022 and 2020,2021, and therefore no allowance for credit loss was recorded.
Loans
Total loans at September 30, 2021March 31, 2022 were $20.9$21.3 billion, down $263up $189.1 million, or 1%, from June 30,December 31, 2021, and down $1.4$341.5 billion, or 6%2%, from September 30, 2020.March 31, 2021. The linked-quarter declineincrease was primarily attributable to a $482growth of $385.3 million decrease in PPP loans, partially offset by net growth in core loans, of $219.7 million, as demand for traditional loan products increased, across mostdriven by our east and west regions and equipment finance specialty line, partially offset by a decrease of $196.2 million in specialty lines.PPP loans. The decline compared to September 30, 2020March 31, 2021 is due to a net decrease in PPP loans of $1.4$2.0 billion, residential mortgage loans of $403 million, and consumer loans of $323 million, partially offset by moderate growth of $1.7 billion in most other portfolios.
56
The following table shows the composition of our loan portfolio at each date indicated:
|
| September 30, |
|
| June 30, |
|
| March 31, |
|
| December 31, |
|
| September 30, |
|
| March 31, |
|
| December 31, |
|
| September 30, |
|
| June 30, |
|
| March 31, |
| ||||||||||
(in thousands) |
| 2021 |
|
| 2021 |
|
| 2021 |
|
| 2020 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
|
| 2021 |
|
| 2021 |
|
| 2021 |
| ||||||||||
Total loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Commercial non-real estate |
| $ | 9,416,990 |
|
| $ | 9,532,710 |
|
| $ | 10,091,342 |
|
| $ | 9,986,983 |
|
| $ | 10,257,788 |
|
| $ | 9,584,480 |
| $ | 9,612,460 |
| $ | 9,416,990 |
| $ | 9,532,710 |
| $ | 10,091,342 |
| ||||
Commercial real estate - owner occupied |
|
| 2,812,926 |
|
|
| 2,809,868 |
|
|
| 2,795,104 |
|
|
| 2,857,445 |
|
|
| 2,779,407 |
|
|
| 2,868,233 |
|
|
| 2,821,246 |
|
|
| 2,812,926 |
|
|
| 2,809,868 |
|
|
| 2,795,104 |
|
Total commercial and industrial |
|
| 12,229,916 |
|
|
| 12,342,578 |
|
|
| 12,886,446 |
|
|
| 12,844,428 |
|
|
| 13,037,195 |
|
|
| 12,452,713 |
|
|
| 12,433,706 |
|
|
| 12,229,916 |
|
|
| 12,342,578 |
|
|
| 12,886,446 |
|
Commercial real estate - income producing |
|
| 3,467,939 |
|
|
| 3,419,028 |
|
|
| 3,411,028 |
|
|
| 3,357,939 |
|
|
| 3,406,554 |
|
| 3,563,299 |
| 3,464,626 |
| 3,467,939 |
| 3,419,028 |
| 3,411,028 |
| |||||||||
Construction and land development |
|
| 1,213,991 |
|
|
| 1,295,036 |
|
|
| 1,122,141 |
|
|
| 1,065,057 |
|
|
| 1,096,149 |
|
| 1,286,655 |
| 1,228,670 |
| 1,213,991 |
| 1,295,036 |
| 1,122,141 |
| |||||||||
Residential mortgages |
|
| 2,351,053 |
|
|
| 2,412,459 |
|
|
| 2,488,792 |
|
|
| 2,665,212 |
|
|
| 2,754,388 |
|
| 2,462,900 |
| 2,423,890 |
| 2,351,053 |
| 2,412,459 |
| 2,488,792 |
| |||||||||
Consumer |
|
| 1,623,116 |
|
|
| 1,679,429 |
|
|
| 1,756,452 |
|
|
| 1,857,295 |
|
|
| 1,945,918 |
|
|
| 1,557,774 |
|
|
| 1,583,390 |
|
|
| 1,623,116 |
|
|
| 1,679,429 |
|
|
| 1,756,452 |
|
Total loans |
| $ | 20,886,015 |
|
| $ | 21,148,530 |
|
| $ | 21,664,859 |
|
| $ | 21,789,931 |
|
| $ | 22,240,204 |
|
| $ | 21,323,341 |
|
| $ | 21,134,282 |
|
| $ | 20,886,015 |
|
| $ | 21,148,530 |
|
| $ | 21,664,859 |
|
54
Commercial and industrial (“C&I”) loans, including both non-real estate and owner occupied real estate secured loans, totaled approximately $12.2$12.5 billion, or 59%58% of the total loan portfolio, at September 30, 2021, a decreaseMarch 31, 2022, an increase of $113$19 million, or less than 1%, from June 30,December 31, 2021, and a decrease of $807$434 million, or 6%3%, from September 30, 2020.March 31, 2021. The linked-quarter decreaseincrease is primarily attributable to thegrowth of $215 million, or 2%, in core loans, partially offset by a $196 million reduction in PPP loans, of $482 million, due to repayment primarily through the SBA’s forgiveness program, partially offset by growth in the core portfolio.program. Core loan growth linked quarter reflects increased production in the western and central regionsour commercial portfolio and in our equipment finance and health care specialty portfolios,portfolio, as well as fewer than expected payoffs and an increase in the line utilization rate. The year over year decrease is attributable to a $1.4$2.0 billion net reduction in PPP loans.loans, partially offset by $1.6 billion of core loan growth. PPP loans included in C&I portfolio totaled $935$335 million at September 30, 2021, $1.4 billionMarch 31, 2022, $531 million at June 30,December 31, 2021, and $2.3 billion at September 30, 2020.March 31, 2021.
The Bank lends mainly to middle market and smaller commercial entities, although it participates in larger shared credit loan facilities. Shared national credits funded at September 30, 2021March 31, 2022 totaled approximately $1.8$2.2 billion, or 9%10% of total loans, an increase of $182$64 million from June 30,December 31, 2021 and $185$554 million from September 30, 2020.March 31, 2021. At September 30, 2021,March 31, 2022, approximately $383$375 million of our shared national credits were with healthcare-related customers, with the remaining portfolio in commercial real estate and other diverse industries.
57
Our loan portfolio is well diversified by product, client, and geography throughout our footprint. Nevertheless, we may be exposed to certain concentrations of credit risk which exist in relation to different borrowers or groups of borrowers, specific types of collateral, industries, loan products, or regions. The following table provides detail of the more significant industry concentrations for our commercial and industrial loan portfolio, which is based on NAICS codes for all industries, with the exceptions of energy, which is based on the borrower’s source of revenue (i.e. a manufacturer whose income is derived from energy-related business is reported as energy), and PPP loans, as those are expected to be 100% SBA guaranteed and therefore have limited credit risk.
|
| September 30, |
|
| June 30, |
|
| March 31, |
|
| December 31, |
|
| September 30, |
|
| March 31, |
|
| December 31, |
|
| September 30, |
|
| June 30, |
|
| March 31, |
| ||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 2021 |
|
| 2021 |
|
| 2021 |
|
| 2020 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
|
| 2021 |
|
| 2021 |
|
| 2021 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
| Pct of |
|
|
|
|
|
| Pct of |
|
|
|
|
|
| Pct of |
|
|
|
|
|
| Pct of |
|
|
|
|
|
| Pct of |
|
|
|
|
| Pct of |
|
|
|
|
| Pct of |
|
|
|
|
| Pct of |
|
|
|
|
| Pct of |
|
|
|
|
| Pct of |
| |||||||||||||||
( $ in thousands ) |
| Balance |
|
| Total |
|
| Balance |
|
| Total |
|
| Balance |
|
| Total |
|
| Balance |
|
| Total |
|
| Balance |
|
| Total |
|
| Balance |
|
| Total |
|
| Balance |
|
| Total |
|
| Balance |
|
| Total |
|
| Balance |
|
| Total |
|
| Balance |
|
| Total |
| ||||||||||||||||||||
Commercial & industrial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Real estate and rental and leasing |
| $ | 1,298,560 |
|
|
| 11 | % |
| $ | 1,250,737 |
|
|
| 10 | % |
| $ | 1,234,521 |
|
|
| 10 | % |
| $ | 1,260,084 |
|
|
| 10 | % |
| $ | 1,273,360 |
|
|
| 10 | % |
| $ | 1,363,548 |
|
|
| 11 | % |
| $ | 1,311,241 |
|
|
| 11 | % |
| $ | 1,298,560 |
|
|
| 11 | % |
| $ | 1,250,737 |
|
|
| 10 | % |
| $ | 1,234,521 |
|
|
| 10 | % |
Health care and social assistance |
|
| 1,219,769 |
|
|
| 10 | % |
|
| 1,086,845 |
|
|
| 9 | % |
|
| 1,140,616 |
|
|
| 9 | % |
|
| 1,152,713 |
|
|
| 9 | % |
|
| 1,135,986 |
|
|
| 9 | % |
|
| 1,182,345 |
|
|
| 10 | % |
|
| 1,284,578 |
|
|
| 10 | % |
|
| 1,219,769 |
|
|
| 10 | % |
|
| 1,086,845 |
|
|
| 9 | % |
|
| 1,140,616 |
|
|
| 9 | % |
Retail trade |
|
| 1,069,225 |
|
|
| 9 | % |
|
| 1,051,317 |
|
|
| 9 | % |
|
| 1,033,822 |
|
|
| 8 | % |
|
| 1,084,810 |
|
|
| 8 | % |
|
| 1,035,295 |
|
|
| 8 | % |
|
| 1,104,686 |
|
|
| 9 | % |
|
| 1,086,204 |
|
|
| 9 | % |
|
| 1,069,225 |
|
|
| 9 | % |
|
| 1,051,317 |
|
|
| 9 | % |
|
| 1,033,822 |
|
|
| 8 | % |
Construction |
|
| 1,027,469 |
|
|
| 8 | % |
|
| 923,040 |
|
|
| 7 | % |
|
| 861,075 |
|
|
| 7 | % |
|
| 753,049 |
|
|
| 6 | % |
|
| 648,379 |
|
|
| 5 | % | ||||||||||||||||||||||||||||||||||||||||
Manufacturing |
|
| 928,041 |
|
|
| 8 | % |
|
| 946,266 |
|
|
| 8 | % |
|
| 928,993 |
|
|
| 7 | % |
|
| 929,737 |
|
|
| 7 | % |
|
| 934,582 |
|
|
| 7 | % |
|
| 984,699 |
|
|
| 8 | % |
|
| 919,830 |
|
|
| 7 | % |
|
| 928,041 |
|
|
| 8 | % |
|
| 946,266 |
|
|
| 8 | % |
|
| 928,993 |
|
|
| 7 | % |
Construction |
|
| 861,075 |
|
|
| 7 | % |
|
| 753,049 |
|
|
| 6 | % |
|
| 648,379 |
|
|
| 5 | % |
|
| 688,676 |
|
|
| 5 | % |
|
| 631,239 |
|
|
| 5 | % | ||||||||||||||||||||||||||||||||||||||||
Finance and insurance |
|
| 911,910 |
|
|
| 7 | % |
|
| 896,105 |
|
|
| 7 | % |
|
| 796,980 |
|
|
| 7 | % |
|
| 772,464 |
|
|
| 6 | % |
|
| 680,368 |
|
|
| 5 | % | ||||||||||||||||||||||||||||||||||||||||
Wholesale trade |
|
| 808,252 |
|
|
| 7 | % |
|
| 751,689 |
|
|
| 6 | % |
|
| 707,541 |
|
|
| 5 | % |
|
| 708,640 |
|
|
| 6 | % |
|
| 664,648 |
|
|
| 5 | % |
|
| 856,534 |
|
|
| 7 | % |
|
| 823,295 |
|
|
| 7 | % |
|
| 808,252 |
|
|
| 7 | % |
|
| 751,689 |
|
|
| 6 | % |
|
| 707,541 |
|
|
| 5 | % |
Finance and insurance |
|
| 796,980 |
|
|
| 7 | % |
|
| 772,464 |
|
|
| 6 | % |
|
| 680,368 |
|
|
| 5 | % |
|
| 690,354 |
|
|
| 5 | % |
|
| 655,468 |
|
|
| 5 | % | ||||||||||||||||||||||||||||||||||||||||
Transportation and warehousing |
|
| 785,367 |
|
|
| 6 | % |
|
| 769,145 |
|
|
| 6 | % |
|
| 789,573 |
|
|
| 6 | % |
|
| 800,034 |
|
|
| 6 | % |
|
| 825,113 |
|
|
| 6 | % |
|
| 771,865 |
|
|
| 6 | % |
|
| 780,934 |
|
|
| 6 | % |
|
| 785,367 |
|
|
| 6 | % |
|
| 769,145 |
|
|
| 6 | % |
|
| 789,573 |
|
|
| 6 | % |
Professional, scientific, and technical services |
|
| 662,559 |
|
|
| 5 | % |
|
| 621,739 |
|
|
| 5 | % |
|
| 521,965 |
|
|
| 4 | % |
|
| 503,425 |
|
|
| 4 | % |
|
| 486,970 |
|
|
| 4 | % | ||||||||||||||||||||||||||||||||||||||||
Accommodation, food services and entertainment |
|
| 644,919 |
|
|
| 5 | % |
|
| 595,698 |
|
|
| 5 | % |
|
| 604,550 |
|
|
| 5 | % |
|
| 605,728 |
|
|
| 5 | % |
|
| 625,352 |
|
|
| 5 | % | ||||||||||||||||||||||||||||||||||||||||
Public administration |
|
| 625,979 |
|
|
| 5 | % |
|
| 638,921 |
|
|
| 5 | % |
|
| 629,571 |
|
|
| 5 | % |
|
| 650,595 |
|
|
| 5 | % |
|
| 696,160 |
|
|
| 5 | % |
|
| 588,755 |
|
|
| 5 | % |
|
| 596,301 |
|
|
| 5 | % |
|
| 625,979 |
|
|
| 5 | % |
|
| 638,921 |
|
|
| 5 | % |
|
| 629,571 |
|
|
| 5 | % |
Accommodation, food services and entertainment |
|
| 604,550 |
|
|
| 5 | % |
|
| 605,728 |
|
|
| 5 | % |
|
| 625,352 |
|
|
| 5 | % |
|
| 633,869 |
|
|
| 5 | % |
|
| 632,582 |
|
|
| 5 | % | ||||||||||||||||||||||||||||||||||||||||
Professional, scientific, and technical services |
|
| 521,965 |
|
|
| 4 | % |
|
| 503,425 |
|
|
| 4 | % |
|
| 486,970 |
|
|
| 4 | % |
|
| 500,219 |
|
|
| 4 | % |
|
| 481,296 |
|
|
| 4 | % | ||||||||||||||||||||||||||||||||||||||||
Other services (except public administration) |
|
| 421,884 |
|
|
| 3 | % |
|
| 420,321 |
|
|
| 4 | % |
|
| 433,848 |
|
|
| 3 | % |
|
| 436,665 |
|
|
| 3 | % |
|
| 433,718 |
|
|
| 3 | % |
|
| 401,243 |
|
|
| 3 | % |
|
| 424,090 |
|
|
| 4 | % |
|
| 421,884 |
|
|
| 3 | % |
|
| 420,321 |
|
|
| 4 | % |
|
| 433,848 |
|
|
| 3 | % |
Energy |
|
| 264,791 |
|
|
| 2 | % |
|
| 274,641 |
|
|
| 2 | % |
|
| 284,435 |
|
|
| 2 | % |
|
| 305,867 |
|
|
| 2 | % |
|
| 335,677 |
|
|
| 3 | % |
|
| 249,235 |
|
|
| 2 | % |
|
| 266,235 |
|
|
| 2 | % |
|
| 264,791 |
|
|
| 2 | % |
|
| 274,641 |
|
|
| 2 | % |
|
| 284,435 |
|
|
| 2 | % |
Educational services |
|
| 251,383 |
|
|
| 2 | % |
|
| 260,366 |
|
|
| 2 | % |
|
| 268,305 |
|
|
| 2 | % |
|
| 270,980 |
|
|
| 2 | % |
|
| 309,664 |
|
|
| 2 | % |
|
| 274,848 |
|
|
| 2 | % |
|
| 255,127 |
|
|
| 2 | % |
|
| 251,383 |
|
|
| 2 | % |
|
| 260,366 |
|
|
| 2 | % |
|
| 268,305 |
|
|
| 2 | % |
Other |
|
| 836,765 |
|
|
| 6 | % |
|
| 840,141 |
|
|
| 7 | % |
|
| 648,547 |
|
|
| 5 | % |
|
| 725,948 |
|
|
| 6 | % |
|
| 668,716 |
|
|
| 5 | % |
|
| 1,093,270 |
|
|
| 9 | % |
|
| 1,118,230 |
|
|
| 9 | % |
|
| 836,765 |
|
|
| 6 | % |
|
| 840,141 |
|
|
| 7 | % |
|
| 648,547 |
|
|
| 5 | % |
Total commercial & industrial loans |
|
| 11,294,586 |
|
|
| 92 | % |
|
| 10,925,055 |
|
|
| 89 | % |
|
| 10,540,841 |
|
|
| 82 | % |
|
| 10,839,191 |
|
|
| 84 | % |
|
| 10,713,504 |
|
|
| 82 | % |
|
| 12,117,885 |
|
|
| 97 | % |
|
| 11,902,647 |
|
|
| 96 | % |
|
| 11,294,586 |
|
|
| 92 | % |
|
| 10,925,055 |
|
|
| 89 | % |
|
| 10,540,841 |
|
|
| 82 | % |
PPP loans |
|
| 935,330 |
|
|
| 8 | % |
|
| 1,417,523 |
|
|
| 11 | % |
|
| 2,345,605 |
|
|
| 18 | % |
|
| 2,005,237 |
|
|
| 16 | % |
|
| 2,323,691 |
|
|
| 18 | % |
|
| 334,828 |
|
|
| 3 | % |
|
| 531,059 |
|
|
| 4 | % |
|
| 935,330 |
|
|
| 8 | % |
|
| 1,417,523 |
|
|
| 11 | % |
|
| 2,345,605 |
|
|
| 18 | % |
Total commercial & industrial loans |
| $ | 12,229,916 |
|
|
| 100 | % |
| $ | 12,342,578 |
|
|
| 100 | % |
| $ | 12,886,446 |
|
|
| 100 | % |
| $ | 12,844,428 |
|
|
| 100 | % |
| $ | 13,037,195 |
|
|
| 100 | % |
| $ | 12,452,713 |
|
|
| 100 | % |
| $ | 12,433,706 |
|
|
| 100 | % |
| $ | 12,229,916 |
|
|
| 100 | % |
| $ | 12,342,578 |
|
|
| 100 | % |
| $ | 12,886,446 |
|
|
| 100 | % |
Commercial real estate – income producing loans totaled approximately $3.5$3.6 billion at September 30, 2021,March 31, 2022, an increase of $49$99 million, or 1%3%, from June 30,December 31, 2021 and $61$152 million, or 2%4%, from September 30, 2020.March 31, 2021. Construction and land development loans, totaling approximately $1.2$1.3 billion at September 30, 2021, decreased $81March 31, 2022, increased $58 million, or 6%5%, from June 30,December 31, 2021 and increased $118$165 million, or 11%15%, from September 30, 2020.March 31, 2021. The following table details the end-of-period aggregated commercial real estate – income producing and
55
construction loan balances by property type. Loans reflected in 1-4 family residential construction include both loans to construction builders as well as single family borrowers.
|
| September 30, |
|
| June 30, |
|
| March 31, |
|
| December 31, |
|
| September 30, |
|
| March 31, |
| December 31, |
|
| September 30, |
| June 30, |
|
| March 31, |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| 2021 |
|
| 2021 |
|
| 2021 |
|
| 2020 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
|
| 2021 |
|
| 2021 |
|
| 2021 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
| Pct of |
|
|
|
|
|
| Pct of |
|
|
|
|
|
| Pct of |
|
|
|
|
|
| Pct of |
|
|
|
|
|
| Pct of |
|
|
|
|
| Pct of |
|
|
|
|
| Pct of |
|
|
|
|
| Pct of |
|
|
|
| Pct of |
|
|
|
|
| Pct of |
| ||||||||||||||||
( $ in thousands ) |
| Balance |
|
| Total |
|
| Balance |
|
| Total |
|
| Balance |
|
| Total |
|
| Balance |
|
| Total |
|
| Balance |
|
| Total |
|
| Balance |
|
| Total |
|
| Balance |
|
| Total |
|
| Balance |
|
| Total |
|
| Balance |
|
| Total |
|
| Balance |
|
| Total |
| ||||||||||||||||||||
Commercial real estate - income producing and construction loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Healthcare related properties |
| $ | 815,090 |
| 17 | % |
| $ | 766,338 |
| 16 | % |
| $ | 677,137 |
| 15 | % |
| $ | 676,587 |
| 14 | % |
|
| 614,510 |
|
| 14 | % | |||||||||||||||||||||||||||||||||||||||||||||||||
Retail |
| $ | 756,619 |
|
|
| 16 | % |
| $ | 781,143 |
|
|
| 16 | % |
| $ | 742,649 |
|
|
| 16 | % |
| $ | 746,520 |
|
|
| 17 | % |
| $ | 744,994 |
|
|
| 17 | % |
| 793,126 |
| 17 | % |
| 777,594 |
| 17 | % |
| 756,619 |
| 16 | % |
|
| 781,143 |
| 16 | % |
| 742,649 |
| 16 | % | ||||||||||||||
Multifamily |
|
| 696,924 |
|
|
| 15 | % |
|
| 688,900 |
|
|
| 15 | % |
|
| 648,097 |
|
|
| 14 | % |
|
| 630,392 |
|
|
| 14 | % |
|
| 625,992 |
|
|
| 14 | % |
|
| 695,090 |
|
| 14 | % |
|
| 647,300 |
|
| 14 | % |
|
| 696,924 |
|
| 15 | % |
|
| 688,900 |
|
| 15 | % |
|
| 648,097 |
|
| 14 | % | |||||
Healthcare related properties |
|
| 677,137 |
|
|
| 15 | % |
|
| 676,587 |
|
|
| 14 | % |
|
| 614,510 |
|
|
| 14 | % |
|
| 557,473 |
|
|
| 13 | % |
|
| 559,196 |
|
|
| 12 | % | ||||||||||||||||||||||||||||||||||||||||
Industrial |
|
| 577,988 |
|
|
| 12 | % |
|
| 569,123 |
|
|
| 12 | % |
|
| 544,755 |
|
|
| 12 | % |
|
| 540,198 |
|
|
| 12 | % |
|
| 530,450 |
|
|
| 12 | % |
| 568,886 |
| 12 | % |
| 561,022 |
| 12 | % |
| 577,988 |
| 12 | % |
|
| 569,123 |
| 12 | % |
| 544,755 |
| 12 | % | ||||||||||||||
Hotel/motel and restaurants |
|
| 504,536 |
|
|
| 11 | % |
|
| 501,434 |
|
|
| 11 | % |
|
| 519,736 |
|
|
| 12 | % |
|
| 527,393 |
|
|
| 12 | % |
|
| 524,275 |
|
|
| 12 | % | ||||||||||||||||||||||||||||||||||||||||
Office |
|
| 487,510 |
|
|
| 10 | % |
|
| 501,885 |
|
|
| 11 | % |
|
| 506,661 |
|
|
| 11 | % |
|
| 527,576 |
|
|
| 12 | % |
|
| 504,168 |
|
|
| 11 | % |
|
| 554,005 |
|
| 11 | % |
|
| 501,771 |
|
| 11 | % |
|
| 487,510 |
|
| 10 | % |
|
| 501,885 |
|
| 11 | % |
|
| 506,661 |
|
| 11 | % | |||||
1-4 family residential construction |
|
| 441,925 |
|
|
| 9 | % |
|
| 426,745 |
|
|
| 9 | % |
|
| 426,124 |
|
|
| 9 | % |
|
| 393,568 |
|
|
| 9 | % |
|
| 464,347 |
|
|
| 10 | % |
| 516,580 |
| 11 | % |
| 469,690 |
| 10 | % |
| 441,925 |
| 9 | % |
|
| 426,745 |
| 9 | % |
| 426,124 |
| 9 | % | ||||||||||||||
Hotel/motel and restaurants |
|
| 441,285 |
|
| 9 | % |
|
| 437,241 |
|
| 9 | % |
|
| 504,536 |
|
| 11 | % |
|
| 501,434 |
|
| 11 | % |
|
| 519,736 |
|
| 12 | % | |||||||||||||||||||||||||||||||||||||||||||||
Other land loans |
|
| 291,415 |
|
|
| 7 | % |
|
| 318,136 |
|
|
| 7 | % |
|
| 283,833 |
|
|
| 6 | % |
|
| 273,285 |
|
|
| 6 | % |
|
| 273,915 |
|
|
| 6 | % |
| 214,446 |
| 4 | % |
| 257,594 |
| 5 | % |
| 291,415 |
| 7 | % |
|
| 318,136 |
| 7 | % |
| 283,833 |
| 6 | % | ||||||||||||||
Other |
|
| 247,876 |
|
|
| 5 | % |
|
| 250,111 |
|
|
| 5 | % |
|
| 246,804 |
|
|
| 6 | % |
|
| 226,591 |
|
|
| 5 | % |
|
| 275,366 |
|
|
| 6 | % |
|
| 251,446 |
|
|
| 5 | % |
|
| 274,746 |
|
|
| 6 | % |
|
| 247,876 |
|
|
| 5 | % |
|
| 250,111 |
|
|
| 5 | % |
|
| 246,804 |
|
|
| 6 | % |
Total commercial real estate - income producing and construction loans |
| $ | 4,681,930 |
|
|
| 100 | % |
| $ | 4,714,064 |
|
|
| 100 | % |
| $ | 4,533,169 |
|
|
| 100 | % |
| $ | 4,422,996 |
|
|
| 100 | % |
| $ | 4,502,703 |
|
|
| 100 | % |
| $ | 4,849,954 |
|
|
| 100 | % |
| $ | 4,693,296 |
|
|
| 100 | % |
| $ | 4,681,930 |
|
|
| 100 | % |
| $ | 4,714,064 |
|
|
| 100 | % |
|
| 4,533,169 |
|
|
| 100 | % |
Our residential mortgages loan portfolio totaled $2.4$2.5 billion at September 30, 2021, down $61March 31, 2022, up $39 million, or 3%2%, from June 30,December 31, 2021 and down $403$26 million, or 15%1%, from September 30, 2020.March 31, 2021. The lowincrease in residential mortgage loans from the prior quarter was due to a lower level of originated loans sold in the secondary market, down to 27% from 35% in the quarter ending December 31, 2021, partially offset by a 2% decline in production. The decrease from the same quarter last year was due to continued refinance activity due to the interest rate environment haswhich led to increased demand for longer term, fixed rate mortgages, which we typically originate for sale in the secondary market, and, as such, we have experienced a decline in our residential mortgage portfolio. The consumer loan portfolio totaled $1.6 billion at September 30, 2021,March 31, 2022, down $56$26 million, or 3%2%, from June 30,December 31, 2021, and down $323$199 million, or 17%11%, from September 30, 2020.March 31, 2021. The decline in the consumer loan portfolio is due in part to the exit of indirect automobile lending, and decreased loan demand.
58
The markets that we serve have been negatively impacted by the economic and social conditions caused by the pandemic. We are continuing to monitor portions of three principle sectors that are of particular focus where we expect there may be a greater effect and a more challenging recovery. We are closely monitoring our concentrations in these industries and others with active and frequent borrower dialogue, payment deferral, and other accommodations and financial support, where warranted. While these industries and others have been significantly impacted by the pandemic, the long-term impacts remain unknown and are dependent on several factors, including the length of time until full recovery and the effectiveness of government stimulus plans to bridge our customers to the end.
The table below summarizes our funded commercial loan exposure to sectors currently identified as pandemic-related sectors under focus at September 30, 2021, and the relative concentration to the total loan portfolio, excluding low-risk SBA guaranteed PPP loans. Loans within our sectors under focus total approximately 17% of total loans outstanding, excluding PPP loans, and comprise 24% of our commercial criticized loans and 37% of our commercial pass-watch rated loans at September 30, 2021. Approximately $232 million of these loans have active structured solutions, defined as a longer-term contractual payment modification of the original loan agreement. Across all portfolios, our active structured solutions totaled $260 million at September 30, 2021.
|
|
|
| |||||
|
|
|
| |||||
( $ in thousands ) |
| Balance |
|
| Percentage of Total Loans * |
| ||
Pandemic-related sectors under focus * |
|
|
|
|
|
|
|
|
Healthcare and social assistance |
|
|
|
|
|
|
|
|
Assisted living (investor CRE) |
| $ | 408,547 |
|
|
| 2.0 | % |
Assisted living (non- investor CRE) |
|
| 193,936 |
|
|
| 1.0 | % |
Total healthcare and social assistance |
|
| 602,483 |
|
|
| 3.0 | % |
Hospitality |
|
|
|
|
|
|
|
|
Hotel |
|
| 505,379 |
|
|
| 2.5 | % |
Restaurants full service, casual dining and bars |
|
| 298,771 |
|
|
| 1.5 | % |
Entertainment |
|
| 135,987 |
|
|
| 0.7 | % |
Total hospitality |
|
| 940,137 |
|
|
| 4.7 | % |
Retail trade |
|
|
|
|
|
|
|
|
Retail CRE |
|
| 683,568 |
|
|
| 3.4 | % |
Retail goods and services |
|
| 1,130,891 |
|
|
| 5.7 | % |
Total retail trade |
|
| 1,814,459 |
|
|
| 9.1 | % |
Total pandemic-related sectors under focus |
| $ | 3,357,079 |
|
|
| 16.8 | % |
* Excludes PPP loans
Management expects core loan growth (excluding PPP loans) of $4006% to $500 million in8% for the fourth quarter of 2021, ending thefull year at approximately $20.4 billion.2022, with quarterly results reflecting normal seasonality. We expect mostthe majority of the remainingour PPP loans to be forgiven by mid-year 2022, with a forecasted December 31, 2021 balancethe end of approximately $400 to $500 million.the second quarter of 2022.
Allowance for Credit Losses and Asset Quality
The Company's allowance for credit losses was $400.5$348.6 million at September 30, 2021,March 31, 2022, compared to $429.2$371.4 million at June 30,December 31, 2021 and $480.2$456.9 million at September 30, 2020.March 31, 2021.
The $28.8$22.8 million decrease in the September 30, 2021March 31, 2022 allowance for credit losses is primarily attributable to lower collectively evaluated reserves driven by an improvedthe economic forecast and improving asset quality, and lower individually evaluated reserves (generally used for nonperforming and troubled debt restructured loans) due largely to customer payment activity. The Company probability-weighted two Moody’s macroeconomic scenarios inslower near-term growth S-2 scenario (anchored on the calculation of our collectively evaluated allowance for credit losses. The baseline scenariobaseline) was weighted most heavily at 60% and downside scenario S-2 (slower near-term growth) were each weighted 50%, compared to a weighting of 65% on the baseline scenario was weighted 40% to incorporate reasonably possible alternative economic outcomes. Both economic scenarios utilized reflect continued recovery from the economic downturn in the first half of 2020; however, each scenario has varying degrees of severity and 35% on the downside scenario S-2duration of inflationary pressures and volatility in prior quarter. Both scenarios reflect a continued economic recovery, with the downside scenario including a longer duration recovery, and both scenarios had improved economic conditions when compared to the prior quarter. commodities prices stemming from geopolitical unrest.
The baseline and S-2 scenarios are both reasonably likely outcomes, and, therefore were given equal probability weighting in our calculation. Uncertainty over some of the assumptions underlying the baseline forecast has increased since the second quarter due to the emergence of and resulting effects of the Delta variant and the disruption caused by Hurricane Ida, leading to a higher weighing of the slower growth scenario compared to June 30, 2021.
The September 2021March 2022 baseline forecast assumes that the Russian invasion of Ukraine will have a marginal impact on the U.S. economy and disruptions to commodity markets will be limited and temporary. The date for abatement of the pandemic, where total case growth is less than 0.05% per day, occurred in the first quarter of 2022 and the forecast assumes that COVID-19 cases peaked in January 2021will be endemic and new infections abate in November 2021. Any future surges in cases do not result in new widespread business closures. Additional legislation focusedseasonal. Congress will pass a $600 billion Building a Better America plan by the third quarter of 2022, which will focus on infrastructure, social benefits, and expandedclean-energy tax credits is expected to pass in late 2021, which will boost gross domestic product growth, but the total dollar amount of fiscal stimulus has been scaled back compared to prior quarter. Comparedand other climate change programs. Inflation moderates and returns to the June 2021 baseline scenario, the
59
TableFederal Reserve’s target of Contents
reduction in fiscal stimulus combined with the surge2% in the Delta variant resulted in slower economic recovery infirst half of next year and the near term inFederal Reserve raises the baseline forecast. However, September 2021 baseline reflects rapid growth in 2022 due totarget range for the passage of additional stimulus, resolution of the global supply chain constraints, and labor supply shortages. Additional information on the September baseline forecast is provided in the “Economic Outlook” section offederal funds rate four times this document.year, 25 basis points each time. The slower near-term growth S-2 forecast reflects a slower economic recovery than the baseline forecast, with concerns about resistant strains leading to lower consumer spendingthe conflict between Russia and slower reopening of businesses,Ukraine persisting longer than in the baseline, resulting in higher unemployment ratesfurther supply-chain disruption and volatility in commodities prices. Additionally, new cases, hospitalizations and deaths from COVID-19 begin to rise again, and as a result, a slower return to spending on air travel, retail and hotels than the Baseline scenario.baseline. The S-2 scenario also reflects infrastructureassumes less effective stimulus and social benefits legislation smaller than that withina slower return to full employment. Additional information on the baseline and more persistent global supply chain constraints and labor shortages, further impeding economic growthMoody’s forecast is provided in the fourth quarter“Economic Outlook” section of 2021 and 2022.this document
The allowance release of $28.8$22.8 million in the thirdfirst quarter 20212022 and the release of $79.7$108.4 million when compared to September 30, 2020March 31, 2021 are across most portfolios and reflect the continued improvement in the economic forecast.conditions in our market and overall asset quality. Our allowance for credit loss coverage to total loans remains strong at 1.92%1.63% at September 30, 2021,March 31, 2022, or 2.00%1.66% when excluding SBA
56
guaranteed PPP loans, compared to 2.03%1.76% at June 30,December 31, 2021, or 2.17%1.80% excluding PPP loans, and 2.16%2.11% at September 30, 2020,March 31, 2021, or 2.40%2.35% excluding PPP loans. While our reserve coverage to total loans continues to decline, it remains elevated compared to normalized levels, as our expectation of loss has not diminished substantially, with borrower performance for select regions/industries not yet at pre-pandemic levels and uncertainty related to future payment performance as the impact of the federal stimulus tapers and modifications expire. The impact of the Delta variant,COVID-19 variants, inflationary pressures, global supply chain issues, and labor supply shortages in our markets adds uncertainty to the overall outlook.
The allowance for credit losses on the commercial portfolio excluding PPP loans, decreased to $334.3$291.5 million, or 2.09%1.68% of that portfolio, at September 30, 2021March 31, 2022 compared to the June 30,December 31, 2021 allowance of $352.0$307.9 million, or 2.25%1.80%. The commercial portfolio includes concentrations of various pandemic-impacted industries including hospitality and tourism, which includes hotels, restaurants, and bars, certain healthcare services such as assisted living facilities, and certain types of retail outlets, as well as our remaining energy portfolio. The modest decrease in the commercial allowance is primarily due to improved economic conditions in our footprint and improved asset quality.quality metrics, with several quarters of little to no net charge-offs. Our residential mortgage allowance for credit loss decreased to $31.1$26.4 million, or 1.32%1.07% of that portfolio, at March 31, 2022, compared to $30.6 million, or 1.26%, at September 30, 2021, compared to $36.5 million, or 1.51%, at June 30,December 31, 2021, due primarily to a favorable movement in forecasted variables for home prices. Our allowance for credit losses on the consumer portfolio was $34.1$30.7 million, or 2.10%1.97%, at September 30, 2021,March 31, 2022, compared to $39.3$32.8 million, or 2.34%2.07%, at June 30,December 31, 2021.
Criticized commercial loans totaled $294$282.5 million at September 30, 2021,March 31, 2022, down 11%2% from $330$287.2 million at June 30,December 31, 2021 and down 29%19% from $412$347.8 million at September 30, 2020.March 31, 2021. The reduction in commercial criticized loans reflects payoffs, paydowns, upgrades, and charge-offs exceeding new downgrades. Criticized commercial loans at September 30, 2021 include $69 million of loans in our sectors under focus, or those that we deem to be disproportionately impacted by the pandemic and $72 million in our energy portfolio. Criticized loans are defined as those having potential weaknesses that deserve management’s close attention (risk-rated as special mention, substandard and doubtful), including both accruing and nonaccruing loans. The Company routinely assesses the ratings of loans in its portfolio through an established and comprehensive portfolio management process. In addition, the Company often looks at portfolios of loans to determine if there are areas of risk not specifically identified in its loan by loan approach. In alignment with regulatory guidance, we have been working with our customers by providing various types of loan deferrals or other modifications to manage the effects of economic stress. Most shorter-term deferrals have expired; however, loans totaling approximately $260 million at September 30, 2021 have active structured solutions, or longer-term contractual payment modifications of the original loan agreement, down from $385 million at June 30, 2021. Our ability to predict future cash flow beyond the modification period is limited due to economic uncertainty, and further risk rating adjustments could be required.
Net charge-offs were $1.8$0.3 million, or 0.03%0.01% of average total loans on an annualized basis in the thirdfirst quarter of 2021,2022, virtually unchanged compared to $10.5$0.7 million, or 0.20%0.01% of average total loans in the secondfourth quarter of 2021 and $24.0down from $18.3 million, or 0.43%0.34% in the thirdfirst quarter of 2020. Commercial2021. Our commercial portfolio had net charge-offs totaledrecoveries of $0.8 million and $0.5 million in the thirdfirst quarter of 2021. This is down compared to2022 and the secondfourth quarter of 2021, respectively. The first quarter of 2021 commercial charge-offs of $9.3 million. The third quarter of 2020 commercial net charge-offs totaled $23.2$16.2 million, consisting largely of charges related to healthcare-dependentenergy-dependent credits. Our residential mortgage portfolio reflected minimal net recoveries in the third and second quartersfirst quarter of 20212022 and the thirdfourth and first quarter of 2020,2021, and consumer net charge-offs were $1.7$1.2 million in the thirdfirst quarter of 2021, up from $1.4 million in2022, virtually flat to the prior quarter and $1.1down from $2.1 million in the thirdfirst quarter of 2020.2021.
60
57
The following table sets forth activity in the allowance for credit losses for the periods indicated:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||
|
| September 30, |
|
| June 30, |
|
| September 30, |
|
| September 30, |
| ||||||||
(in thousands) |
| 2021 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| |||||
Provision and Allowance for Credit Losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses at beginning of period |
| $ | 399,668 |
|
| $ | 424,360 |
|
| $ | 442,638 |
|
| $ | 450,177 |
|
| $ | 191,251 |
|
Loans charged-off: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial non real estate |
|
| 3,437 |
|
|
| 11,420 |
|
|
| 24,557 |
|
|
| 32,369 |
|
|
| 364,123 |
|
Commercial real estate - owner-occupied |
|
| 40 |
|
|
| 1,335 |
|
|
| 122 |
|
|
| 1,722 |
|
|
| 1,828 |
|
Total commercial & industrial |
|
| 3,477 |
|
|
| 12,755 |
|
|
| 24,679 |
|
|
| 34,091 |
|
|
| 365,951 |
|
Commercial real estate - income producing |
|
| - |
|
|
| 37 |
|
|
| 710 |
|
|
| 231 |
|
|
| 2,211 |
|
Construction and land development |
|
| 11 |
|
|
| 8 |
|
|
| 2 |
|
|
| 267 |
|
|
| 7 |
|
Total commercial |
|
| 3,488 |
|
|
| 12,800 |
|
|
| 25,391 |
|
|
| 34,589 |
|
|
| 368,169 |
|
Residential mortgages |
|
| 11 |
|
|
| 98 |
|
|
| 29 |
|
|
| 218 |
|
|
| 170 |
|
Consumer |
|
| 3,256 |
|
|
| 2,924 |
|
|
| 2,904 |
|
|
| 9,874 |
|
|
| 13,640 |
|
Total charge-offs |
|
| 6,755 |
|
|
| 15,822 |
|
|
| 28,324 |
|
|
| 44,681 |
|
|
| 381,979 |
|
Recoveries of loans previously charged-off: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial non real estate |
|
| 2,392 |
|
|
| 2,288 |
|
|
| 1,532 |
|
|
| 6,579 |
|
|
| 4,831 |
|
Commercial real estate - owner-occupied |
|
| 76 |
|
|
| 250 |
|
|
| 552 |
|
|
| 363 |
|
|
| 659 |
|
Total commercial & industrial |
|
| 2,468 |
|
|
| 2,538 |
|
|
| 2,084 |
|
|
| 6,942 |
|
|
| 5,490 |
|
Commercial real estate - income producing |
|
| 100 |
|
|
| — |
|
|
| — |
|
|
| 100 |
|
|
| 46 |
|
Construction and land development |
|
| 384 |
|
|
| 1,005 |
|
|
| 98 |
|
|
| 1,548 |
|
|
| 549 |
|
Total commercial |
|
| 2,952 |
|
|
| 3,543 |
|
|
| 2,182 |
|
|
| 8,590 |
|
|
| 6,085 |
|
Residential mortgages |
|
| 496 |
|
|
| 231 |
|
|
| 317 |
|
|
| 933 |
|
|
| 1,078 |
|
Consumer |
|
| 1,537 |
|
|
| 1,550 |
|
|
| 1,817 |
|
|
| 4,636 |
|
|
| 4,360 |
|
Total recoveries |
|
| 4,985 |
|
|
| 5,324 |
|
|
| 4,316 |
|
|
| 14,159 |
|
|
| 11,523 |
|
Total net charge-offs |
|
| 1,770 |
|
|
| 10,498 |
|
|
| 24,008 |
|
|
| 30,522 |
|
|
| 370,456 |
|
Provision for loan losses |
|
| (26,377 | ) |
|
| (14,194 | ) |
|
| 30,044 |
|
|
| (48,134 | ) |
|
| 578,468 |
|
Cumulative effect of change in accounting principle (a) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 49,411 |
|
Allowance for loan losses at end of period |
| $ | 371,521 |
|
| $ | 399,668 |
|
| $ | 448,674 |
|
| $ | 371,521 |
|
| $ | 448,674 |
|
Reserve for Unfunded Lending Commitments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve for Unfunded Lending Commitments at beginning of period |
| $ | 29,524 |
|
| $ | 32,559 |
|
| $ | 36,571 |
|
| $ | 29,907 |
|
| $ | 3,974 |
|
Cumulative effect of change in accounting principle (a) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 27,330 |
|
Provision for losses on unfunded lending commitments |
|
| (578 | ) |
|
| (3,035 | ) |
|
| (5,045 | ) |
|
| (961 | ) |
|
| 222 |
|
Reserve for unfunded lending commitments at end of period |
| $ | 28,946 |
|
| $ | 29,524 |
|
| $ | 31,526 |
|
| $ | 28,946 |
|
| $ | 31,526 |
|
Total Allowance for Credit Losses |
| $ | 400,467 |
|
| $ | 429,192 |
|
| $ | 480,200 |
|
| $ | 400,467 |
|
| $ | 480,200 |
|
Total Provision for Credit Losses |
| $ | (26,955 | ) |
| $ | (17,229 | ) |
| $ | 24,999 |
|
| $ | (49,095 | ) |
| $ | 578,690 |
|
Coverage Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses to period-end loans |
|
| 1.78 | % |
|
| 1.89 | % |
|
| 2.02 | % |
|
| 1.78 | % |
|
| 2.02 | % |
Allowance for credit losses to period-end loans |
|
| 1.92 | % |
|
| 2.03 | % |
|
| 2.16 | % |
|
| 1.92 | % |
|
| 2.16 | % |
Charge-offs ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross charge-offs to average loans |
|
| 0.13 | % |
|
| 0.30 | % |
|
| 0.50 | % |
|
| 0.28 | % |
|
| 2.30 | % |
Recoveries to average loans |
|
| 0.09 | % |
|
| 0.10 | % |
|
| 0.08 | % |
|
| 0.09 | % |
|
| 0.07 | % |
Net charge-offs to average loans |
|
| 0.03 | % |
|
| 0.20 | % |
|
| 0.43 | % |
|
| 0.19 | % |
|
| 2.23 | % |
Net Charge-offs to average loans by portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial non real estate |
|
| 0.04 | % |
|
| 0.37 | % |
|
| 0.88 | % |
|
| 0.35 | % |
|
| 4.75 | % |
Commercial real estate - owner-occupied |
|
| (0.01 | )% |
|
| 0.16 | % |
|
| (0.06 | )% |
|
| 0.06 | % |
|
| 0.06 | % |
Total commercial & industrial |
|
| 0.03 | % |
|
| 0.32 | % |
|
| 0.69 | % |
|
| 0.29 | % |
|
| 3.75 | % |
Commercial real estate - income producing |
|
| (0.01 | )% |
|
| 0.00 | % |
|
| 0.08 | % |
|
| 0.01 | % |
|
| 0.09 | % |
Construction and land development |
|
| (0.12 | )% |
|
| (0.35 | )% |
|
| (0.03 | )% |
|
| (0.15 | )% |
|
| (0.06 | )% |
Total commercial |
|
| 0.01 | % |
|
| 0.22 | % |
|
| 0.52 | % |
|
| 0.20 | % |
|
| 2.81 | % |
Residential mortgages |
|
| (0.08 | )% |
|
| (0.02 | )% |
|
| (0.04 | )% |
|
| (0.04 | )% |
|
| (0.04 | )% |
Consumer |
|
| 0.41 | % |
|
| 0.32 | % |
|
| 0.22 | % |
|
| 0.41 | % |
|
| 0.60 | % |
For informational purposes - included above |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for credit loss associated with energy loan sale |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 160,101 |
|
Charge-offs associated with energy loan sale |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 242,628 |
|
|
|
61
|
| Three Months Ended |
|
| |||||||||
|
| March 31, |
|
| December 31, |
|
| March 31, |
|
| |||
(in thousands) |
| 2022 |
|
| 2021 |
|
| 2021 |
|
| |||
Provision and Allowance for Credit Losses |
|
|
|
|
|
|
|
|
|
| |||
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
| |||
Allowance for loan losses at beginning of period |
| $ | 342,065 |
|
| $ | 371,521 |
|
| $ | 450,177 |
|
|
Loans charged-off: |
|
|
|
|
|
|
|
|
|
| |||
Commercial non real estate |
|
| 2,659 |
|
|
| 1,154 |
|
|
| 17,512 |
|
|
Commercial real estate - owner-occupied |
|
| — |
|
|
| 1,457 |
|
|
| 347 |
|
|
Total commercial & industrial |
|
| 2,659 |
|
|
| 2,611 |
|
|
| 17,859 |
|
|
Commercial real estate - income producing |
|
| 4 |
|
|
| 194 |
|
|
| 194 |
|
|
Construction and land development |
|
| — |
|
|
| 7 |
|
|
| 248 |
|
|
Total commercial |
|
| 2,663 |
|
|
| 2,812 |
|
|
| 18,301 |
|
|
Residential mortgages |
|
| 42 |
|
|
| 495 |
|
|
| 109 |
|
|
Consumer |
|
| 2,680 |
|
|
| 2,848 |
|
|
| 3,694 |
|
|
Total charge-offs |
|
| 5,385 |
|
|
| 6,155 |
|
|
| 22,104 |
|
|
Recoveries of loans previously charged-off: |
|
|
|
|
|
|
|
|
|
| |||
Commercial non real estate |
|
| 2,142 |
|
|
| 2,406 |
|
|
| 1,899 |
|
|
Commercial real estate - owner-occupied |
|
| 389 |
|
|
| 279 |
|
|
| 37 |
|
|
Total commercial & industrial |
|
| 2,531 |
|
|
| 2,685 |
|
|
| 1,936 |
|
|
Commercial real estate - income producing |
|
| 878 |
|
|
| 5 |
|
|
| — |
|
|
Construction and land development |
|
| 68 |
|
|
| 624 |
|
|
| 159 |
|
|
Total commercial |
|
| 3,477 |
|
|
| 3,314 |
|
|
| 2,095 |
|
|
Residential mortgages |
|
| 61 |
|
|
| 526 |
|
|
| 206 |
|
|
Consumer |
|
| 1,528 |
|
|
| 1,646 |
|
|
| 1,549 |
|
|
Total recoveries |
|
| 5,066 |
|
|
| 5,486 |
|
|
| 3,850 |
|
|
Total net charge-offs |
|
| 319 |
|
|
| 669 |
|
|
| 18,254 |
|
|
Provision for loan losses |
|
| (23,903 | ) |
|
| (28,787 | ) |
|
| (7,563 | ) |
|
Allowance for loan losses at end of period |
| $ | 317,843 |
|
| $ | 342,065 |
|
| $ | 424,360 |
|
|
Reserve for Unfunded Lending Commitments: |
|
|
|
|
|
|
|
|
|
| |||
Reserve for unfunded lending commitments at beginning of period |
| $ | 29,334 |
|
| $ | 28,946 |
|
| $ | 29,907 |
|
|
Provision for losses on unfunded lending commitments |
|
| 1,376 |
|
|
| 388 |
|
|
| 2,652 |
|
|
Reserve for unfunded lending commitments at end of period |
| $ | 30,710 |
|
| $ | 29,334 |
|
| $ | 32,559 |
|
|
Total Allowance for Credit Losses |
| $ | 348,553 |
|
| $ | 371,399 |
|
| $ | 456,919 |
|
|
Total Provision for Credit Losses |
| $ | (22,527 | ) |
| $ | (28,399 | ) |
| $ | (4,911 | ) |
|
Coverage Ratios: |
|
|
|
|
|
|
|
|
|
| |||
Allowance for loan losses to period-end loans |
|
| 1.49 | % |
|
| 1.62 | % |
|
| 1.96 | % |
|
Allowance for credit losses to period-end loans |
|
| 1.63 | % |
|
| 1.76 | % |
|
| 2.11 | % |
|
Charge-offs ratios: |
|
|
|
|
|
|
|
|
|
| |||
Gross charge-offs to average loans |
|
| 0.10 | % |
|
| 0.12 | % |
|
| 0.41 | % |
|
Recoveries to average loans |
|
| 0.10 | % |
|
| 0.10 | % |
|
| 0.07 | % |
|
Net charge-offs to average loans |
|
| 0.01 | % |
|
| 0.01 | % |
|
| 0.34 | % |
|
Net Charge-offs to average loans by portfolio |
|
|
|
|
|
|
|
|
|
| |||
Commercial non real estate |
|
| 0.02 | % |
|
| (0.05 | )% |
|
| 0.63 | % |
|
Commercial real estate - owner-occupied |
|
| (0.06 | )% |
|
| 0.17 | % |
|
| 0.04 | % |
|
Total commercial & industrial |
|
| 0.00 | % |
|
| 0.00 | % |
|
| 0.50 | % |
|
Commercial real estate - income producing |
|
| (0.10 | )% |
|
| 0.02 | % |
|
| 0.02 | % |
|
Construction and land development |
|
| (0.02 | )% |
|
| (0.20 | )% |
|
| 0.03 | % |
|
Total commercial |
|
| (0.02 | )% |
|
| (0.01 | )% |
|
| 0.38 | % |
|
Residential mortgages |
|
| (0.00 | )% |
|
| (0.01 | )% |
|
| (0.02 | )% |
|
Consumer |
|
| 0.30 | % |
|
| 0.30 | % |
|
| 0.48 | % |
|
58
The following table sets forth nonperforming assets by type for the periods indicated, consisting of nonaccrual loans, troubled debt restructurings and foreclosed and surplus ORE and other foreclosed assets. Loans past due 90 days or more and still accruing are also disclosed.
|
| March 31, |
|
| December 31, |
|
| September 30, |
|
| June 30, |
|
| March 31, |
| |||||
(in thousands) |
| 2022 |
|
| 2021 |
|
| 2021 |
|
| 2021 |
|
| 2021 |
| |||||
Loans accounted for on a nonaccrual basis: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Commercial non-real estate |
| $ | 4,065 |
|
| $ | 4,058 |
|
| $ | 7,167 |
|
| $ | 16,029 |
|
| $ | 24,108 |
|
Commercial non-real estate - restructured |
|
| 1,247 |
|
|
| 2,915 |
|
|
| 2,781 |
|
|
| 3,095 |
|
|
| 3,542 |
|
Total commercial non-real estate |
|
| 5,312 |
|
|
| 6,973 |
|
|
| 9,948 |
|
|
| 19,124 |
|
|
| 27,650 |
|
Commercial real estate - owner occupied |
|
| 2,514 |
|
|
| 3,104 |
|
|
| 4,922 |
|
|
| 6,276 |
|
|
| 9,922 |
|
Commercial real estate - owner-occupied - restructured |
|
| 235 |
|
|
| 1,817 |
|
|
| 1,798 |
|
|
| 1,839 |
|
|
| 1,882 |
|
Total commercial real estate - owner-occupied |
|
| 2,749 |
|
|
| 4,921 |
|
|
| 6,720 |
|
|
| 8,115 |
|
|
| 11,804 |
|
Commercial real estate - income producing |
|
| 1,880 |
|
|
| 5,377 |
|
|
| 4,167 |
|
|
| 4,975 |
|
|
| 4,729 |
|
Commercial real estate - income producing - restructured |
|
| 76 |
|
|
| 81 |
|
|
| 82 |
|
|
| 86 |
|
|
| 89 |
|
Total commercial real estate - income producing |
|
| 1,956 |
|
|
| 5,458 |
|
|
| 4,249 |
|
|
| 5,061 |
|
|
| 4,818 |
|
Construction and land development |
|
| 578 |
|
|
| 837 |
|
|
| 1,230 |
|
|
| 2,004 |
|
|
| 1,680 |
|
Construction and land development - restructured |
|
| 6 |
|
|
| 7 |
|
|
| 8 |
|
|
| 8 |
|
|
| 9 |
|
Total construction and land development |
|
| 584 |
|
|
| 844 |
|
|
| 1,238 |
|
|
| 2,012 |
|
|
| 1,689 |
|
Residential mortgage |
|
| 20,709 |
|
|
| 23,483 |
|
|
| 23,423 |
|
|
| 30,995 |
|
|
| 39,066 |
|
Residential mortgage - restructured |
|
| 2,036 |
|
|
| 1,956 |
|
|
| 2,541 |
|
|
| 1,780 |
|
|
| 1,649 |
|
Total residential mortgage |
|
| 22,745 |
|
|
| 25,439 |
|
|
| 25,964 |
|
|
| 32,775 |
|
|
| 40,715 |
|
Consumer |
|
| 9,093 |
|
|
| 11,888 |
|
|
| 12,238 |
|
|
| 16,464 |
|
|
| 21,758 |
|
Consumer - restructured |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total consumer |
|
| 9,093 |
|
|
| 11,888 |
|
|
| 12,238 |
|
|
| 16,464 |
|
|
| 21,758 |
|
Total nonaccrual loans |
| $ | 42,439 |
|
| $ | 55,523 |
|
| $ | 60,357 |
|
| $ | 83,551 |
|
| $ | 108,434 |
|
Restructured loans - still accruing: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Commercial non-real estate |
| $ | 494 |
|
| $ | 515 |
|
| $ | 480 |
|
| $ | 526 |
|
| $ | 2,337 |
|
Commercial real estate - owner occupied |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Commercial real estate - income producing |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 341 |
|
Construction and land development |
|
| 117 |
|
|
| 118 |
|
|
| 119 |
|
|
| 120 |
|
|
| 121 |
|
Residential mortgage |
|
| 1,363 |
|
|
| 2,169 |
|
|
| 1,407 |
|
|
| 2,103 |
|
|
| 2,457 |
|
Consumer |
|
| 929 |
|
|
| 986 |
|
|
| 1,065 |
|
|
| 1,081 |
|
|
| 1,064 |
|
Total restructured loans - still accruing |
|
| 2,903 |
|
|
| 3,788 |
|
|
| 3,071 |
|
|
| 3,830 |
|
|
| 6,320 |
|
Total nonperforming loans |
|
| 45,342 |
|
|
| 59,311 |
|
|
| 63,428 |
|
|
| 87,381 |
|
|
| 114,754 |
|
ORE and foreclosed assets |
|
| 6,345 |
|
|
| 7,533 |
|
|
| 8,423 |
|
|
| 10,201 |
|
|
| 9,467 |
|
Total nonperforming assets (a) |
| $ | 51,687 |
|
| $ | 66,844 |
|
| $ | 71,851 |
|
| $ | 97,582 |
|
| $ | 124,221 |
|
Loans 90 days past due still accruing (b) |
| $ | 4,258 |
|
| $ | 5,524 |
|
| $ | 9,970 |
|
| $ | 8,925 |
|
| $ | 5,090 |
|
Total restructured loans |
| $ | 6,503 |
|
| $ | 10,564 |
|
| $ | 10,281 |
|
| $ | 10,638 |
|
| $ | 13,491 |
|
Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Nonaccrual loans to total loans |
|
| 0.20 | % |
|
| 0.26 | % |
|
| 0.29 | % |
|
| 0.40 | % |
|
| 0.50 | % |
Nonperforming assets to loans plus ORE and foreclosed assets |
|
| 0.24 | % |
|
| 0.32 | % |
|
| 0.34 | % |
|
| 0.46 | % |
|
| 0.57 | % |
Allowance for loan losses to nonaccrual loans and accruing loans 90 days past due |
|
| 680.65 | % |
|
| 560.33 | % |
|
| 528.28 | % |
|
| 432.19 | % |
|
| 373.81 | % |
Allowance for loan losses to nonperforming loans and accruing loans 90 days past due |
|
| 640.81 | % |
|
| 527.59 | % |
|
| 506.17 | % |
|
| 415.00 | % |
|
| 354.09 | % |
Loans 90 days past due still accruing to loans |
|
| 0.02 | % |
|
| 0.03 | % |
|
| 0.05 | % |
|
| 0.04 | % |
|
| 0.02 | % |
|
| September 30, |
|
| June 30, |
|
| March 31, |
|
| December 31, |
|
| September 30, |
| |||||
(in thousands) |
| 2021 |
|
| 2021 |
|
| 2021 |
|
| 2020 |
|
| 2020 |
| |||||
Loans accounted for on a nonaccrual basis: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial non-real estate |
| $ | 7,167 |
|
| $ | 16,029 |
|
| $ | 24,108 |
|
| $ | 34,200 |
|
| $ | 41,401 |
|
Commercial non-real estate - restructured |
|
| 2,781 |
|
|
| 3,095 |
|
|
| 3,542 |
|
|
| 18,636 |
|
|
| 36,783 |
|
Total commercial non-real estate |
|
| 9,948 |
|
|
| 19,124 |
|
|
| 27,650 |
|
|
| 52,836 |
|
|
| 78,184 |
|
Commercial real estate - owner occupied |
|
| 4,922 |
|
|
| 6,276 |
|
|
| 9,922 |
|
|
| 13,514 |
|
|
| 14,394 |
|
Commercial real estate - owner-occupied - restructured |
|
| 1,798 |
|
|
| 1,839 |
|
|
| 1,882 |
|
|
| 342 |
|
|
| 289 |
|
Total commercial real estate - owner-occupied |
|
| 6,720 |
|
|
| 8,115 |
|
|
| 11,804 |
|
|
| 13,856 |
|
|
| 14,683 |
|
Commercial real estate - income producing |
|
| 4,167 |
|
|
| 4,975 |
|
|
| 4,729 |
|
|
| 6,650 |
|
|
| 6,932 |
|
Commercial real estate - income producing - restructured |
|
| 82 |
|
|
| 86 |
|
|
| 89 |
|
|
| 93 |
|
|
| 96 |
|
Total commercial real estate - income producing |
|
| 4,249 |
|
|
| 5,061 |
|
|
| 4,818 |
|
|
| 6,743 |
|
|
| 7,028 |
|
Construction and land development |
|
| 1,230 |
|
|
| 2,004 |
|
|
| 1,680 |
|
|
| 2,475 |
|
|
| 3,192 |
|
Construction and land development - restructured |
|
| 8 |
|
|
| 8 |
|
|
| 9 |
|
|
| 11 |
|
|
| 42 |
|
Total construction and land development |
|
| 1,238 |
|
|
| 2,012 |
|
|
| 1,689 |
|
|
| 2,486 |
|
|
| 3,234 |
|
Residential mortgage |
|
| 23,423 |
|
|
| 30,995 |
|
|
| 39,066 |
|
|
| 38,075 |
|
|
| 40,865 |
|
Residential mortgage - restructured |
|
| 2,541 |
|
|
| 1,780 |
|
|
| 1,649 |
|
|
| 2,498 |
|
|
| 2,731 |
|
Total residential mortgage |
|
| 25,964 |
|
|
| 32,775 |
|
|
| 40,715 |
|
|
| 40,573 |
|
|
| 43,596 |
|
Consumer |
|
| 12,238 |
|
|
| 16,464 |
|
|
| 21,758 |
|
|
| 23,385 |
|
|
| 24,737 |
|
Consumer - restructured |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total consumer |
|
| 12,238 |
|
|
| 16,464 |
|
|
| 21,758 |
|
|
| 23,385 |
|
|
| 24,737 |
|
Total nonaccrual loans |
| $ | 60,357 |
|
| $ | 83,551 |
|
| $ | 108,434 |
|
| $ | 139,879 |
|
| $ | 171,462 |
|
Restructured loans - still accruing: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial non-real estate |
| $ | 480 |
|
| $ | 526 |
|
| $ | 2,337 |
|
| $ | 549 |
|
| $ | 5,195 |
|
Commercial real estate - owner occupied |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Commercial real estate - income producing |
|
| — |
|
|
| — |
|
|
| 341 |
|
|
| 349 |
|
|
| 357 |
|
Construction and land development |
|
| 119 |
|
|
| 120 |
|
|
| 121 |
|
|
| 122 |
|
|
| 123 |
|
Residential mortgage |
|
| 1,407 |
|
|
| 2,103 |
|
|
| 2,457 |
|
|
| 2,217 |
|
|
| 2,308 |
|
Consumer |
|
| 1,065 |
|
|
| 1,081 |
|
|
| 1,064 |
|
|
| 1,025 |
|
|
| 1,132 |
|
Total restructured loans - still accruing |
|
| 3,071 |
|
|
| 3,830 |
|
|
| 6,320 |
|
|
| 4,262 |
|
|
| 9,115 |
|
Total nonperforming loans |
|
| 63,428 |
|
|
| 87,381 |
|
|
| 114,754 |
|
|
| 144,141 |
|
|
| 180,577 |
|
ORE and foreclosed assets |
|
| 8,423 |
|
|
| 10,201 |
|
|
| 9,467 |
|
|
| 11,648 |
|
|
| 11,640 |
|
Total nonperforming assets (a) |
| $ | 71,851 |
|
| $ | 97,582 |
|
| $ | 124,221 |
|
| $ | 155,789 |
|
| $ | 192,217 |
|
Loans 90 days past due still accruing (b) |
| $ | 9,970 |
|
| $ | 8,925 |
|
| $ | 5,090 |
|
| $ | 3,361 |
|
| $ | 10,439 |
|
Total restructured loans |
| $ | 10,281 |
|
| $ | 10,638 |
|
| $ | 13,491 |
|
| $ | 25,842 |
|
| $ | 49,056 |
|
Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual loans to total loans |
|
| 0.29 | % |
|
| 0.40 | % |
|
| 0.50 | % |
|
| 0.64 | % |
|
| 0.77 | % |
Nonperforming assets to loans plus ORE and foreclosed assets |
|
| 0.34 | % |
|
| 0.46 | % |
|
| 0.57 | % |
|
| 0.71 | % |
|
| 0.86 | % |
Allowance for loan losses to nonaccrual loans |
|
| 615.54 | % |
|
| 478.35 | % |
|
| 391.35 | % |
|
| 321.83 | % |
|
| 261.68 | % |
Allowance for loan losses to nonperforming loans and accruing loans 90 days past due |
|
| 506.17 | % |
|
| 415.00 | % |
|
| 354.09 | % |
|
| 305.20 | % |
|
| 234.89 | % |
Loans 90 days past due still accruing to loans |
|
| 0.05 | % |
|
| 0.04 | % |
|
| 0.02 | % |
|
| 0.02 | % |
|
| 0.05 | % |
(a)
Nonperforming assets totaled $71.9$51.7 million at September 30, 2021,March 31, 2022, down $25.7$15.2 million from June 30,December 31, 2021, and $120.4$72.5 million from September 30, 2020.March 31, 2021. Nonperforming loans decreased $24.0$14.0 million compared to June 30,December 31, 2021, and $117.1$69.4 million from September 30, 2020.March 31, 2021. The declinedeclines in nonperforming loans was largely attributable to charge-offspayoffs and payoffscharge-offs outpacing downgrades. ORE and foreclosed assets were $8.4$6.3 million at September 30, 2021,March 31, 2022, down from $10.2$7.5 million at June 30,December 31, 2021, and $11.6$9.5 million at September 30, 2020.March 31, 2021. Nonperforming assets as a percentage of total loans, ORE and other foreclosed assets was 0.34%0.24% at September 30, 2021,March 31, 2022, down 128 bps from June 30,December 31, 2021, and 5233 bps from September 30, 2020.March 31, 2021.
62Future assumptions in economic forecasts and our own asset quality metrics will drive our outlook for the level of forecasted reserves. We currently expect reserve releases will continue, however, expect to see them taper off over the next few quarters.
59
Changes in assumptions in our underlying economic forecasts, such as vaccination rates, size and timing of government infrastructure spending, timing of the resolution of the coronavirus pandemic and return to full economic activity will drive our future level of reserves. Assuming that we continue to see improving credit quality and favorable changes in economic assumptions, we expect a modest reserve release in the fourth quarter of 2021.Deposits
Deposits
Deposits provide the most significant source of funding for our interest earning assets. Generally, our ability to compete for market share depends on our deposit pricing and our wide range of products and services that are focused on customer needs. In order to meet our customers’ needs, we offer high-quality banking services with convenient delivery channels, including online and mobile banking. We provide specialized services to our commercial customers to promote commercial deposit growth. These services include treasury management, industry expertise and lockbox services. Since early 2020, deposit levels have also been influenced by pandemic driven factors, such as inflows from government stimulus payments, deposits related to funding PPP loans into business checking accounts and a general slowdown in customer spending.spending during the height of the pandemic.
Total deposits were $29.2$30.5 billion at September 30, 2021, down $65March 31, 2022, up $34 million, or less than 1%, from June 30,December 31, 2021, with a favorable change in ourthe deposit mix that included a $247$584 million increase in noninterest-bearing deposits and a $312$550 million decrease in interest-bearing accounts, including a $144an $81 million decrease in higher-cost time deposits. Total deposits increased $2.2$1.3 billion, or 8%4%, from September 30, 2020,March 31, 2021, with strong growth of $1.8 billion in both noninterest-bearing and a $513 million decrease in interest-bearing transaction deposits. Growth in noninterest-bearing deposits includes both commercial and consumer accounts. The decrease in interest-bearing deposits is largely a function of the low interest bearing transaction deposits, largely the result of pandemic-related activity.rate environment and deposit pricing. Average deposits for the thirdfirst quarter of 20212022 were $29.2$30.0 billion, flat toup $279 million, or 1%, from the secondfourth quarter of 2021 and up $2.5$1.9 billion, or 9%7%, from the thirdfirst quarter of 2020.2021.
The following table shows the composition of our deposits at each date indicated.
|
| Three Months Ended |
| |||||||||||||||||
|
| March 31, |
|
| December 31, |
|
| September 30, |
|
| June 30, |
|
| March 31, |
| |||||
(in thousands) |
| 2022 |
|
| 2021 |
|
| 2021 |
|
| 2021 |
|
| 2021 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Noninterest-bearing deposits |
| $ | 14,976,670 |
|
| $ | 14,392,808 |
|
| $ | 13,653,366 |
|
| $ | 13,406,385 |
|
| $ | 13,174,911 |
|
Interest-bearing retail transaction and savings deposits |
|
| 11,488,607 |
|
|
| 11,677,333 |
|
|
| 11,306,731 |
|
|
| 11,325,942 |
|
|
| 11,218,208 |
|
Interest-bearing public fund deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Public fund transaction and savings deposits |
|
| 2,962,811 |
|
|
| 3,216,651 |
|
|
| 2,938,943 |
|
|
| 3,090,247 |
|
|
| 3,067,819 |
|
Public fund time deposits |
|
| 51,496 |
|
|
| 77,956 |
|
|
| 116,445 |
|
|
| 116,552 |
|
|
| 130,704 |
|
Total interest-bearing public fund deposits |
|
| 3,014,307 |
|
|
| 3,294,607 |
|
|
| 3,055,388 |
|
|
| 3,206,799 |
|
|
| 3,198,523 |
|
Retail time deposits |
|
| 1,010,935 |
|
|
| 1,091,959 |
|
|
| 1,183,482 |
|
|
| 1,319,857 |
|
|
| 1,604,754 |
|
Brokered time deposits |
|
| 9,190 |
|
|
| 9,190 |
|
|
| 9,190 |
|
|
| 14,124 |
|
|
| 14,124 |
|
Total interest-bearing deposits |
|
| 15,523,039 |
|
|
| 16,073,089 |
|
|
| 15,554,791 |
|
|
| 15,866,722 |
|
|
| 16,035,609 |
|
Total deposits |
| $ | 30,499,709 |
|
| $ | 30,465,897 |
|
| $ | 29,208,157 |
|
| $ | 29,273,107 |
|
| $ | 29,210,520 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing demand deposits were $13.7$15.0 billion at September 30, 2021,March 31, 2022, up $247$584 million, or 2%4%, from June 30,December 31, 2021, and $1.8 billion, or 15%14%, from September 30, 2020.March 31, 2021. The continued elevated balances are primarilylinked quarter increase reflects growth in noninterest-bearing commercial and public funds deposits due in part to stimulustypical seasonality related to taxes, while the year-over-year changes is likely the result of pandemic and additional PPP funds deposited in business accounts.hurricane related cash inflows. Noninterest-bearing demand deposits comprised 47%49% of total deposits at September 30, 2021, 46%March 31, 2022, 47% at June 30,December 31, 2021 and 44%45% at September 30, 2020.March 31, 2021.
Interest-bearing transaction and savings accounts of $11.3$11.5 billion at September 30, 2021March 31, 2022 were virtually flat compared to June 30,down $189 million, or 2%, from December 31, 2021 and increased $1.3 billion,up $270 million, or 13%2%, from September 30, 2020. These increases were primarily driven by movement from maturing certificates of deposit in the low interest rate environment, as well as other stimulus-related funds that remain in customer accounts.
March 31, 2021. Interest-bearing public fund deposits totaled $3.1$3.0 billion at September 30, 2021,March 31, 2022, down $151.4$280.3 million, or 5%9%, from June 30,December 31, 2021, and down $120.8$184.2 million, or 4%6%, from September 30, 2020.March 31, 2021. Time deposits other than public funds totaled $1.2$1.0 billion at September 30, 2021,March 31, 2022, down $143.7$81.0 million, or 11%7%, from June 30,December 31, 2021, and $793.5$593.8 million, or 40%37%, from the third quarter of 2020.March 31, 2021. The decrease in time deposits from both periods was due in part to maturing retail and jumbo certificates of deposit which were not renewed, likely due to prevailing rates that reflect management’s strategic approach to lowering the cost of funds. The decrease from the prior year was also due to a $96.2 million decrease in brokered certificates of deposit which matured and were not replaced due to excess liquidity.
Management expects deposits to increase $100remain flat to $200 million indown slightly from the fourth quarter, ending the year at approximately $29.4 billion, or up 6% compared to year-end 2020.December 31, 2021 level of $30.5 billion.
60
Short-Term Borrowings
At September 30, 2021,March 31, 2022, short-term borrowings totaled $1.7$1.6 billion, up $229down $45 million, or 15%3%, from June 30,December 31, 2021 and down $162$32 million, or 8%2%, from September 30, 2020,March 31, 2021, driven mainly by changes in customer repurchase agreements. Average short-term borrowings of $1.6$1.7 billion in the thirdfirst quarter of 20212022 were down $49 million, or 3%,virtually flat when compared to both the secondprior quarter of 2021, and $121 million, or 7%, compared to the thirdsame quarter of 2020. The decrease in both periods was largely due to a lower level of customer repurchase agreements.last year.
Short-term borrowings are a core portion of the Company’s funding strategy and can fluctuate depending on our funding needs and the sources utilized. Customer repurchase agreements and FHLB borrowings are the major sources of short-term borrowings. Customer repurchase agreements are offered mainly to commercial customers to assist them with their cash management strategies or to provide a temporary investment vehicle for their excess liquidity pending redeployment for corporate or investment purposes. While customer repurchase agreements provide a recurring source of funds to the Bank, amounts available will vary. FHLB borrowings are funds from the Federal Home Loan Bank that are collateralized by certain residential mortgage and commercial real estate loans included in the Bank’s loan portfolio, subject to specific criteria.
63
that are classified as short-term as the FHLB has the option to put (terminate) the advance prior to maturity. The advances were entered into in late 2019 into early 2020 with average interest rates of 0.49%. The Company has access to sufficient liquidity should these advances be called.
Long-Term Debt
Long-term debt totaled $248.0$240.5 million at September 30, 2021 virtually flat compared to June 30,March 31, 2022, down $3.8 million, or 2%, from December 31, 2021, and down $157.1 million, or 40%, from $385.9 million at September 30, 2020.March 31, 2021. The decrease from September 30, 2020March 31, 2021 is largely attributable to the redemption of $150 million of subordinated notes on June 15, 2021 early redemption of the 5.95% subordinated notes due 2045 with an aggregate principal amount of $150 million.2021.
Long-term debt at September 30, 2021March 31, 2022 includes subordinated notes payable with an aggregate principal amount of $172.5 million with a stated maturity of June 15, 2060, a fixed rate of 6.25% per annum that qualify as Tier 2 capital of certain regulatory capital ratios. Subject to prior approval by the Federal Reserve, the Company may redeem these notes in whole or in part on any of its quarterly interest payment dates after June 15, 2025.
OFF-BALANCE SHEET ARRANGEMENTS
Loan Commitments and Letters of Credit
In the normal course of business, the Bank enters into financial instruments, such as commitments to extend credit and letters of credit, to meet the financing needs of its customers. Such instruments are not reflected in the accompanying consolidated financial statements until they are funded, although they expose the Bank to varying degrees of credit risk and interest rate risk in much the same way as funded loans. Under regulatory capital guidelines, the Company and Bank must include unfunded commitments meeting certain criteria in risk-weighted capital calculations.
Commitments to extend credit include revolving commercial credit lines, non-revolving loan commitments issued mainly to finance the acquisition and development or construction of real property or equipment, and credit card and personal credit lines. The availability of funds under commercial credit lines and loan commitments generally depends on whether the borrower continues to meet credit standards established in the underlying contract and has not violated other contractual conditions. Loan commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee by the borrower. Credit card and personal credit lines are generally subject to cancellation if the borrower’s credit quality deteriorates. A number of commercial and personal credit lines are used only partially or, in some cases, not at all before they expire, and the total commitment amounts do not necessarily represent our future cash requirements.
A substantial majority of the letters of credit are standby agreements that obligate the Bank to fulfill a customer’s financial commitments to a third party if the customer is unable to perform. The Bank issues standby letters of credit primarily to provide credit enhancement to its customers’ other commercial or public financing arrangements and to help them demonstrate financial capacity to vendors of essential goods and services.
61
The contract amounts of these instruments reflect our exposure to credit risk. The Bank undertakes the same credit evaluation in making loan commitments and assuming conditional obligations as it does for on-balance sheet instruments and may require collateral or other credit support. At September 30, 2021,March 31, 2022, the Company had a reserve for unfunded lending commitments totaling $28.9$30.7 million.
The following table shows the commitments to extend credit and letters of credit at September 30, 2021March 31, 2022 according to expiration date.
|
|
|
|
|
| Expiration Date |
|
|
|
|
| Expiration Date |
| |||||||||||||||||||||||||||
|
|
|
|
|
| Less than |
|
| 1-3 |
|
| 3-5 |
|
| More than |
|
|
|
|
| Less than |
|
| 1-3 |
|
| 3-5 |
|
| More than |
| |||||||||
(in thousands) |
| Total |
|
| 1 year |
|
| years |
|
| years |
|
| 5 years |
|
| Total |
|
| 1 year |
|
| years |
|
| years |
|
| 5 years |
| ||||||||||
Commitments to extend credit |
| $ | 8,983,039 |
|
| $ | 4,128,455 |
|
| $ | 2,240,564 |
|
| $ | 1,788,746 |
|
| $ | 825,274 |
|
| $ | 9,612,025 |
| $ | 4,086,523 |
| $ | 2,500,027 |
| $ | 2,219,598 |
| $ | 805,877 |
| ||||
Letters of credit |
|
| 370,905 |
|
|
| 300,619 |
|
|
| 58,387 |
|
|
| 11,899 |
|
|
| — |
|
|
| 382,067 |
|
|
| 287,586 |
|
|
| 82,761 |
|
|
| 11,720 |
|
|
| — |
|
Total |
| $ | 9,353,944 |
|
| $ | 4,429,074 |
|
| $ | 2,298,951 |
|
| $ | 1,800,645 |
|
| $ | 825,274 |
|
| $ | 9,994,092 |
|
| $ | 4,374,109 |
|
| $ | 2,582,788 |
|
| $ | 2,231,318 |
|
| $ | 805,877 |
|
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
There were no material changes or developments during the reporting period with respect to methodologies that the Company uses when applying what management believes are critical accounting policies and developing critical accounting estimates as disclosed in its Annual Report on Form 10-K for the year ended December 31, 2020.2021.
The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and with those generally practiced within the banking industry which require management to make estimates and assumptions about future events. Estimates are based on historical experience and on various other assumptions that are believed to be
64
reasonable under the circumstances, and the resulting estimates form the basis for making judgments about the carrying values of certain assets and liabilities not readily apparent from other sources. Actual results could differ significantly from those estimates.
NEW ACCOUNTING PRONOUNCEMENTS
Refer to Note 1514 to our consolidated financial statements included elsewhere in this report.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company’s net income is materially dependent upon net interest income. The Company’s primary market risk is interest rate risk which stems from uncertainty with respect to absolute and relative levels of future market interest rates that affect financial products and services. In order to manage the exposures to interest rate risk, management measures the sensitivity of net interest income and cash flows under various market interest rate scenarios, establishes interest rate risk management policies and implements asset/liability management strategies designed to produce a relatively stable net interest margin under varying interest rate environments.
The following table presents an analysis of our interest rate risk as measured by the estimated changes in net interest income resulting from an instantaneous and sustained parallel shift in rates at September 30, 2021.March 31, 2022. Shifts are measured in 100 basis point increments in a range from -500 to +500 basis points from base case, with +100 through +300 basis points presented in the table below. Our interest rate sensitivity modeling incorporates a number of assumptions including loan and deposit repricing characteristics, the rate of loan prepayments and other factors.factors such as loan floors the impact of off-balance sheet hedges. The base scenario assumes that the current interest rate environment is held constant over a 24-month forecast period and is the scenario to which all others are compared in order to measure the change in net interest income. Policy limits on the change in net interest income under a variety of interest rate scenarios are approved by the Board of Directors. All policy scenarios assume a static volume forecast where the balance sheet is held constant, although other scenarios are modeled.
|
| Estimated Increase |
|
| Estimated Increase |
| ||||||||||
|
| (Decrease) in NII |
|
| (Decrease) in NII |
| ||||||||||
Change in Interest Rates |
| Year 1 |
|
| Year 2 |
|
| Year 1 |
|
| Year 2 |
| ||||
(basis points) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
+100 |
|
| 6.64 | % |
|
| 10.66 | % |
| 6.84 | % |
| 10.32 | % | ||
+200 |
|
| 14.01 | % |
|
| 21.30 | % |
| 14.54 | % |
| 21.24 | % | ||
+300 |
|
| 21.48 | % |
|
| 32.22 | % |
| 22.21 | % |
| 32.12 | % |
62
The results indicate a generalan increased level of asset sensitivity across most scenarios driven primarily by a large short-term excess reserves position held at the Federal Reserve, repricing in variable rate loans, an increase in short-term excess reserves held at the Federal Reserve, and a funding mix which is composed of material volumeshas a higher composition of non-interest bearing and lower rate sensitive deposits. When deemed to be prudent, management has taken actions to mitigate exposure to interest rate risk with on- or off-balance sheet financial instruments and intends to do so in the future. Possible actions include, but are not limited to, changes in the pricing of loan and deposit products, modifying the composition of earning assets and interest-bearing liabilities, and adding to, modifying or terminating existing interest rate swap agreements or other financial instruments used for interest rate risk management purposes.
Even if interest rates change in the designated amounts, there can be no assurance that our assets and liabilities would perform as anticipated. Additionally, a change in the U.S. Treasury rates in the designated amounts accompanied by a change in the shape of the U.S. Treasury yield curve would cause significantly different changes to net interest income than indicated above. Strategic management of our balance sheet and earnings is fluid and would be adjusted to accommodate these movements. As with any method of measuring interest rate risk, certain shortcomings are inherent in the methods of analysis presented above. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Certain assets such as adjustable-rate loans have features which restrict changes in interest rates on a short-term basis and over the life of the asset. Also, the ability of many borrowers to service their debt may decrease in the event of an interest rate increase. We consider all of these factors in monitoring exposure to interest rate risk.
In 2017, the United Kingdom’s Financial Conduct Authority announced that after 2021 it would no longer compel banks to submit the rates required to calculate the London Interbank Offered Rate (“LIBOR”). In November 2020, the administrator of LIBOR announced it will consult on its intention to extend the retirement date of certain offered rates whereby the publication of the one week and two month LIBOR offered rates will cease after December 31, 2021, but the publication of the remaining LIBOR offered rates will continue until June 30, 2023. Given consumer protection, litigation, and reputation risks, the bank regulatory agencies have indicated
65
that entering into new contracts that use LIBOR as a reference rate after December 31, 2021, would create safety and soundness risks and that they will examine bank practices accordingly. Therefore, the agencies encouraged banks to cease entering into new contracts that use LIBOR as a reference rate as soon as practicable and in any event by December 31, 2021.
Uncertainty remains over what rate or rates may become widely accepted alternatives to LIBOR within the industry, and the effect of any such changes in views or alternatives may have on the markets for LIBOR-indexed financial instruments. In particular, regulators,Regulators, industry groups and certain committees (e.g., the Alternative Reference Rates Committee (ARRC)("ARRC") have, among other things, published recommended fallback language for LIBOR-linked financial instruments, identified recommended alternatives for certain LIBOR rates (e.g., AMERIBOR or the Secured Overnight Financing Rate (SOFR)("SOFR") as the recommended alternative to U.S. Dollar LIBOR), and proposed implementations of the recommended alternatives in floating rate instruments.
We have a significant number of loans, derivative contracts, borrowings and other financial instruments with attributes that are either directly or indirectly dependent on LIBOR. The transition from LIBOR has resulted in and could continue to result in added costs and employee efforts and could present additional risk. Since proposed alternative rates are calculated differently, payments under contracts referencing new rates will differ from those referencing LIBOR. The transition will change our market risk profiles, requiring changes to risk and pricing models, valuation tools, product design and hedging strategies.
Management has established a LIBOR Transition Working Group (the “Group”) whose purpose is to direct the overall transition process for the Company. The Group is an internal, cross-functional team with representatives from business lines, support and control functions and legal counsel. Beginning in the third quarter of 2019, key provisions in our loan documents were modified to ensure new and renewed loans include appropriate pre-cessation trigger language and LIBOR fallback language for transition from LIBOR to the new benchmark when such transition occurs. All direct exposures resulting from existing financial contracts that mature after 2021 have been inventoried and are monitored on an ongoing basis. Remediation of these exposures will be consistent with industry timing. The Group has also inventoried indirect LIBOR exposures within the Company's systems, models and processes. The results of this assessment will drive development and prioritization of remediation plans, and the Group is continuing to monitor developments and taking steps to ensure readiness when the LIBOR benchmark rate is discontinued. Although we are currently unable to assess what the ultimate impact of the transition from LIBOR will be, failure to adequately manage the transition could have a material adverse effect on our business, financial condition and results of operations.
The Bank has adopted several replacement benchmarks to use in place of LIBOR benchmark rates, with AMERIBOR along with Chicago Mercantile Exchange Inc. (“CME”) Term SOFR and FRB-NY SOFR as the primary rates. The replacement benchmarks rates adopted by the Bank have been affirmed to comply with the 19 principles set forth by the International Organization of Securities Commissions (IOSCO)("IOSCO") for Financial Benchmarks, and it further provides the Bank confidence these replacement benchmarks are
63
based on transparent, market-based transactions. The Bank began using these replacement benchmarks towards the end of the third quarter of 2021.
At September 30, 2021,March 31, 2022, approximately 36%31% of our loan portfolio, excluding PPP loans, consisted of variable rate loans tied to LIBOR, along with related derivatives and other financial instruments.
Item 4. Controls and Procedures
In connection with the preparation of this Quarterly Report on Form 10-Q, an evaluation was carried out by the Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2021,March 31, 2022, the Company’s disclosure controls and procedures were effective.
Our management, including the Chief Executive Officer and Chief Financial Officer, identified no change in our internal control over financial reporting that occurred during the three month period ended September 30, 2021,March 31, 2022, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
66
64
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company, including subsidiaries, is party to various legal proceedings arising in the ordinary course of business. We do not believe that loss contingencies, if any, arising from pending litigation and regulatory matters will have a material adverse effect on our consolidated financial position or liquidity.
Item 1A. Risk Factors
The Company disclosed risk factors in its Annual Report on Form 10-K for the year ended December 31, 2020.2021. The risks described may not be the only risks facing us. Additional risks and uncertainties not currently known to us or that are currently considered to not be material also may materially adversely affect our business, financial condition, and/or operating results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
|
| Total number of shares or units purchased |
|
| Average price paid per share |
|
| Total number of shares purchased as part of a publicly announced plan or program |
|
| Maximum number of shares that may yet be purchased under such plans or programs |
| ||||
July 1, 2021 - July 31, 2021 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,338,000 |
|
August 1, 2021 - August 31, 2021 |
|
| 56,349 |
|
| $ | 44.52 |
|
|
| 56,349 |
|
|
| 4,281,651 |
|
September 1, 2021 - September 30, 2021 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,281,651 |
|
|
|
| 56,349 |
|
| $ | 35.55 |
|
|
| 56,349 |
|
|
|
|
|
The Company has in place a Board approved stock buyback program whereby the Company is authorized to repurchase up to 4.3 million shares of its common stock through the program’s expiration date of December 31, 2022. The program allows the Company to repurchase its common shares in the open market, by block purchase, through accelerated share repurchase programs, in privately negotiated transactions, or otherwise, in one or more transactions. Following is a summary of repurchases during the three months ended March 31, 2022.
Item 6. Exhibits
|
| Total number of shares or units purchased |
|
| Average price paid per share |
|
| Total number of shares purchased as part of a publicly announced plan or program |
|
| Maximum number of shares that may yet be purchased under such plans or programs |
| ||||
January 1, 2022 - January 31, 2022 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,850,124 |
|
February 1, 2022 - February 28, 2022 |
|
| 165,767 |
|
| $ | 53.08 |
|
|
| 165,767 |
|
|
| 3,684,357 |
|
March 1, 2022 - March 31, 2022 |
|
| 184,233 |
|
| $ | 52.59 |
|
|
| 184,233 |
|
|
| 3,500,124 |
|
|
|
| 350,000 |
|
| $ | 52.82 |
|
|
| 350,000 |
|
|
|
|
(a) Exhibits:
Exhibit Number |
| Description |
| Filed Herewith |
| Form |
| Exhibit |
| Filing Date |
3.1 |
| Second Amended and Restated Articles of Hancock Whitney Corporation |
|
|
| 8-K |
| 3.1 |
| 5/1/2020 |
3.2 |
| Second Amended and Restated Bylaws of Hancock Whitney Corporation |
|
|
| 8-K |
| 3.2 |
| 5/1/2020 |
31.1 |
|
| X |
|
|
|
|
|
| |
31.2 |
|
| X |
|
|
|
|
|
| |
32.1 |
|
| X |
|
|
|
|
|
| |
32.2 |
|
| X |
|
|
|
|
|
| |
101.INS |
| Inline XBRL Instance Document |
| X |
|
|
|
|
|
|
101.SCH |
| Inline XBRL Taxonomy Extension Schema Document |
| X |
|
|
|
|
|
|
101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| X |
|
|
|
|
|
|
101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase Document |
| X |
|
|
|
|
|
|
101.LAB |
| Inline XBRL Taxonomy Extension Label Linkbase Document |
| X |
|
|
|
|
|
|
101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| X |
|
|
|
|
|
|
104 |
| Cover Page Interactive Data File |
| X |
|
|
|
|
|
|
67
65
Item 6. Exhibits
SIGNATURES(a) Exhibits:
Exhibit Number |
| Description |
| Filed Herewith |
| Form |
| Exhibit |
| Filing Date |
3.1 |
| Second Amended and Restated Articles of Hancock Whitney Corporation |
|
|
| 8-K |
| 3.1 |
| 5/1/2020 |
3.2 |
| Second Amended and Restated Bylaws of Hancock Whitney Corporation |
|
|
| 8-K |
| 3.2 |
| 5/1/2020 |
31.1 |
|
| X |
|
|
|
|
|
| |
31.2 |
|
| X |
|
|
|
|
|
| |
32.1 |
|
| X |
|
|
|
|
|
| |
32.2 |
|
| X |
|
|
|
|
|
| |
101.INS |
| Inline XBRL Instance Document |
| X |
|
|
|
|
|
|
101.SCH |
| Inline XBRL Taxonomy Extension Schema Document |
| X |
|
|
|
|
|
|
101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| X |
|
|
|
|
|
|
101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase Document |
| X |
|
|
|
|
|
|
101.LAB |
| Inline XBRL Taxonomy Extension Label Linkbase Document |
| X |
|
|
|
|
|
|
101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| X |
|
|
|
|
|
|
104 |
| Cover Page Interactive Data File |
| X |
|
|
|
|
|
|
66
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| ||||||
Hancock Whitney Corporation | ||||||
| ||||||
By: | /s/ John M. Hairston | |||||
John M. Hairston | ||||||
President & Chief Executive Officer | ||||||
(Principal Executive Officer) | ||||||
/s/ Michael M. Achary | ||||||
Michael M. Achary | ||||||
Senior Executive Vice President & Chief Financial Officer (Principal Financial Officer) | ||||||
| ||||||
| ||||||
| ||||||
|
6867