Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2017 | Oct. 30, 2017 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | HERITAGE COMMERCE CORP | |
Entity Central Index Key | 1,053,352 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 38,200,006 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q3 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Assets | ||
Cash and due from banks | $ 37,133 | $ 27,993 |
Other investments and interest-bearing deposits in other financial institutions | 308,987 | 238,110 |
Total cash and cash equivalents | 346,120 | 266,103 |
Securities available-for-sale, at fair value | 390,107 | 306,589 |
Securities held-to-maturity, at amortized cost (fair value of $377,845 at September 30, 2017 and $318,748 at December 31, 2016) | 379,550 | 324,010 |
Loans held-for-sale - SBA, at lower of cost or fair value, including deferred costs | 4,602 | 5,705 |
Loans, net of deferred fees | 1,565,950 | 1,502,607 |
Allowance for loan losses | (19,748) | (19,089) |
Loans, net | 1,546,202 | 1,483,518 |
Federal Home Loan Bank and Federal Reserve Bank stock and other investments, at cost | 17,905 | 15,196 |
Company-owned life insurance | 60,407 | 59,148 |
Premises and equipment, net | 7,539 | 7,490 |
Goodwill | 45,664 | 45,664 |
Other intangible assets | 5,867 | 6,950 |
Accrued interest receivable and other assets | 39,985 | 50,507 |
Total assets | 2,843,948 | 2,570,880 |
Deposits: | ||
Demand, noninterest-bearing | 943,723 | 917,187 |
Demand, interest-bearing | 605,301 | 541,282 |
Savings and money market | 713,693 | 572,743 |
Time deposits-under $250 | 53,479 | 57,857 |
Time deposits-$250 and over | 147,422 | 163,670 |
CDARS - interest-bearing demand, money market and time deposits | 16,986 | 9,401 |
Total deposits | 2,480,604 | 2,262,140 |
Subordinated debt, net of issuance costs | 39,137 | |
Accrued interest payable and other liabilities | 48,762 | 48,890 |
Total liabilities | 2,568,503 | 2,311,030 |
Shareholders' equity: | ||
Preferred stock, no par value; 10,000,000 shares authorized; none issued and outstanding | ||
Common stock, no par value; 60,000,000 shares authorized; 39,199,006 shares issued and outstanding at September 30, 2017 and 37,941,007 shares issued and outstanding at December 31, 2016 | 217,906 | 215,237 |
Retained earnings | 63,679 | 52,527 |
Accumulated other comprehensive loss | (6,140) | (7,914) |
Total shareholders' equity | 275,445 | 259,850 |
Total liabilities and shareholders' equity | $ 2,843,948 | $ 2,570,880 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Securities held-to-maturity | ||
Securities held-to-maturity, fair value (in dollars) | $ 377,845 | $ 318,748 |
Preferred stock | ||
Preferred stock, par value (in dollars per share) | $ 0 | $ 0 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, outstanding (in shares) | 0 | 0 |
Common stock | ||
Common stock, par value (in dollars per share) | $ 0 | $ 0 |
Common stock, shares authorized | 60,000,000 | 60,000,000 |
Common stock, shares issued | 39,199,006 | 37,941,007 |
Common stock, shares outstanding | 39,199,006 | 37,941,007 |
CONSOLIDATED STATEMENTS OF INCO
CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Interest income: | ||||
Loans, including fees | $ 22,507 | $ 20,312 | $ 64,112 | $ 59,235 |
Securities, taxable | 3,596 | 2,401 | 9,916 | 8,004 |
Securities, exempt from Federal tax | 563 | 569 | 1,694 | 1,723 |
Other investments and interest-bearing deposits in other financial institutions | 1,289 | 592 | 3,037 | 1,478 |
Total interest income | 27,955 | 23,874 | 78,759 | 70,440 |
Interest expense: | ||||
Deposits | 1,051 | 826 | 2,867 | 2,332 |
Subordinated debt | 583 | 811 | ||
Short-term borrowings | 1 | 12 | ||
Total interest expense | 1,634 | 826 | 3,679 | 2,344 |
Net interest income before provision for loan losses | 26,321 | 23,048 | 75,080 | 68,096 |
Provision for loan losses | 115 | 245 | 390 | 997 |
Net interest income after provision for loan losses | 26,206 | 22,803 | 74,690 | 67,099 |
Noninterest income: | ||||
Service charges and fees on deposit accounts | 869 | 798 | 2,410 | 2,348 |
Increase in cash surrender value of life insurance | 417 | 428 | 1,259 | 1,317 |
Servicing income | 246 | 364 | 736 | 1,106 |
Gain on sales of SBA loans | 147 | 69 | 635 | 653 |
Gain on proceeds from company-owned life insurance | 1,019 | |||
Gain (loss) on sales of securities | (6) | 527 | ||
Other | 781 | 653 | 2,014 | 1,616 |
Total noninterest income | 2,460 | 2,312 | 7,048 | 8,586 |
Noninterest expense: | ||||
Salaries and employee benefits | 9,071 | 8,363 | 27,766 | 26,052 |
Occupancy and equipment | 1,142 | 1,120 | 3,426 | 3,277 |
Professional fees | 695 | 1,086 | 2,439 | 2,619 |
Other | 3,926 | 3,727 | 11,785 | 11,414 |
Total noninterest expense | 14,834 | 14,296 | 45,416 | 43,362 |
Income before income taxes | 13,832 | 10,819 | 36,322 | 32,323 |
Income tax expense | 5,249 | 4,054 | 13,752 | 12,157 |
Net income | 8,583 | 6,765 | 22,570 | 20,166 |
Dividends on preferred stock | (504) | (1,512) | ||
Net income available to common shareholders | 8,583 | 6,261 | 22,570 | 18,654 |
Undistributed earnings allocated to Series C preferred stock | (300) | (1,278) | ||
Distributed and undistributed earnings allocated to common shareholders | $ 8,583 | $ 5,961 | $ 22,570 | $ 17,376 |
Earnings per common share: | ||||
Basic (in dollars per share) | $ 0.22 | $ 0.18 | $ 0.59 | $ 0.53 |
Diluted (in dollars per share) | $ 0.22 | $ 0.18 | $ 0.59 | $ 0.53 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||
Net income | $ 8,583 | $ 6,765 | $ 22,570 | $ 20,166 |
Other comprehensive income: | ||||
Change in net unrealized holding gains on available-for-sale securities and I/O strips | 539 | 208 | 2,975 | 7,770 |
Deferred income taxes | (227) | (87) | (1,250) | (3,263) |
Change in net unamortized unrealized gain on securities available-for-sale that were reclassified to securities held-to-maturity | (12) | (13) | (38) | (103) |
Deferred income taxes | 5 | 5 | 16 | 43 |
Reclassification adjustment for losses (gains) realized in income | 6 | (527) | ||
Deferred income taxes | (2) | 221 | ||
Change in unrealized gains on securities and I/O strips, net of deferred income taxes | 305 | 113 | 1,707 | 4,141 |
Change in net pension and other benefit plan liability adjustment | 39 | 37 | 116 | 123 |
Deferred income taxes | (17) | (16) | (49) | (52) |
Change in pension and other benefit plan liability, net of deferred income taxes | 22 | 21 | 67 | 71 |
Other comprehensive income | 327 | 134 | 1,774 | 4,212 |
Total comprehensive income | $ 8,910 | $ 6,899 | $ 24,344 | $ 24,378 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($) $ in Thousands | Preferred Stock | Common Stock | Retained Earnings | Accumulated Other Comprehensive Income / (Loss) | Total |
Balance at Dec. 31, 2015 | $ 19,519 | $ 193,364 | $ 38,773 | $ (6,220) | $ 245,436 |
Balance (in shares) at Dec. 31, 2015 | 21,004 | 32,113,479 | |||
Increase (Decrease) in Shareholders' Equity | |||||
Net income | 20,166 | 20,166 | |||
Other comprehensive income | 4,212 | 4,212 | |||
Preferred stock exchanged for common stock | $ (19,519) | ||||
Preferred stock exchanged for common stock (in shares) | (21,004) | ||||
Preferred stock exchanged for common stock | $ 19,519 | ||||
Preferred stock exchanged for common stock (in shares) | 5,601,000 | ||||
Issuance of restricted stock awards, net (in shares) | 82,372 | ||||
Amortization of restricted stock awards, net of forfeitures and taxes | $ 291 | 291 | |||
Cash dividend declared | (10,213) | (10,213) | |||
Stock option expense, net of forfeitures and taxes | 712 | 712 | |||
Stock options exercised | $ 715 | 715 | |||
Stock options exercised (in shares) | 118,885 | ||||
Balance at Sep. 30, 2016 | $ 214,601 | 48,726 | (2,008) | 261,319 | |
Balance (in shares) at Sep. 30, 2016 | 37,915,736 | ||||
Balance at Dec. 31, 2016 | $ 215,237 | 52,527 | (7,914) | 259,850 | |
Balance (in shares) at Dec. 31, 2016 | 37,941,007 | ||||
Increase (Decrease) in Shareholders' Equity | |||||
Net income | 22,570 | 22,570 | |||
Other comprehensive income | 1,774 | 1,774 | |||
Issuance of restricted stock awards, net (in shares) | 64,136 | ||||
Amortization of restricted stock awards, net of forfeitures and taxes | $ 678 | 678 | |||
Cash dividend declared | (11,418) | (11,418) | |||
Stock option expense, net of forfeitures and taxes | 639 | 639 | |||
Stock options exercised | $ 1,352 | 1,352 | |||
Stock options exercised (in shares) | 193,863 | ||||
Balance at Sep. 30, 2017 | $ 217,906 | $ 63,679 | $ (6,140) | $ 275,445 | |
Balance (in shares) at Sep. 30, 2017 | 38,199,006 |
CONSOLIDATED STATEMENTS OF CHA7
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Parenthetical) - $ / shares | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY | ||
Cash dividend declared per share (in dollars per share) | $ 0.30 | $ 0.27 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income | $ 22,570 | $ 20,166 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Amortization of discounts and premiums on securities | 3,218 | 3,013 |
(Gain) loss on sale of securities available-for-sale | 6 | (527) |
(Gain) loss on sale of SBA loans | (635) | (653) |
Proceeds from sale of SBA loans originated for sale | 8,304 | 9,447 |
Net change in SBA loans originated for sale | (8,957) | (11,029) |
Provision for loan losses | 390 | 997 |
Increase in cash surrender value of life insurance | (1,259) | (1,317) |
Depreciation and amortization | 586 | 565 |
Amortization of other intangible assets | 1,083 | 1,176 |
Stock option expense, net | 639 | 712 |
Amortization of restricted stock awards, net | 678 | 291 |
Amortization of subordinated debt issuance costs | 64 | |
Gain on proceeds from company owned life insurance | (1,019) | |
Effect of changes in: | ||
Accrued interest receivable and other assets | 2,428 | (1,340) |
Accrued interest payable and other liabilities | (12) | (2,311) |
Net cash provided by operating activities | 29,103 | 18,171 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchase of securities available-for-sale | (123,561) | (75,803) |
Purchase of securities held-to-maturity | (89,470) | (109,934) |
Maturities/paydowns/calls of securities available-for-sale | 41,463 | 47,635 |
Maturities/paydowns/calls of securities held-to-maturity | 32,502 | 15,941 |
Proceeds from sales of securities available-for-sale | 6,536 | 49,171 |
Net change in loans | (60,683) | (88,609) |
Changes in Federal Home Loan Bank stock and other investments | (2,709) | (2,502) |
Purchase of premises and equipment | (635) | (344) |
Proceeds from sale of foreclosed assets | 49 | |
Proceeds from company owned life insurance | 3,164 | |
Net cash used in investing activities | (196,557) | (161,232) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Net change in deposits | 218,464 | 155,859 |
Issuance of subordinated debt, net of issuance costs | 39,073 | |
Exercise of stock options | 1,352 | 715 |
Repayment of short-term borrowings | (3,000) | |
Payment of cash dividends | (11,418) | (10,213) |
Net cash provided by financing activities | 247,471 | 143,361 |
Net decrease in cash and cash equivalents | 80,017 | 300 |
Cash and cash equivalents, beginning of year | 266,103 | 344,092 |
Cash and cash equivalents, end of year | 346,120 | 344,392 |
Supplemental disclosures of cash flow information: | ||
Interest paid | 2,912 | 2,327 |
Income taxes paid | 11,731 | 12,135 |
Supplemental schedule of non-cash investing activity: | ||
Transfer of loans held-for-sale to loan portfolio | $ 2,391 | 2,791 |
Loans transferred to foreclosed assets | $ 49 |
Basis of Presentation
Basis of Presentation | 9 Months Ended |
Sep. 30, 2017 | |
Basis of Presentation | |
Basis of Presentation | 1) Basis of Presentation The unaudited consolidated financial statements of Heritage Commerce Corp (the “Company” or “HCC”) and its wholly owned subsidiary, Heritage Bank of Commerce (“HBC”), have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and notes required by accounting principles generally accepted in the United States of America (“GAAP”) for annual financial statements are not included herein. The interim statements should be read in conjunction with the consolidated financial statements and notes that were included in the Company’s Form 10-K for the year ended December 31, 2016. The Company acquired Focus Business Bank (“Focus”) on August 20, 2015. Focus was merged with HBC, with HBC as the surviving bank. HBC is a commercial bank serving customers primarily located in Santa Clara, Alameda, Contra Costa, and San Benito counties of California. BVF/CSNK Acquisition Corp., a Delaware corporation (“BVF/CSNK”), the parent company of CSNK Working Capital Finance Corp. dba Bay View Funding (“Bay View Funding”) is a wholly owned subsidiary of HBC, and provides business-essential working capital factoring financing to various industries throughout the United States. No customer accounts for more than 10% of revenue for HBC or the Company. The Company reports its results for two segments: banking and factoring. The Company’s management uses segment results in its operating and strategic planning. In management’s opinion, all adjustments necessary for a fair presentation of these consolidated financial statements have been included and are of a normal and recurring nature. All intercompany transactions and balances have been eliminated. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ significantly from these estimates. The results for the three and nine months ended September 30, 2017 are not necessarily indicative of the results expected for any subsequent period or for the entire year ending December 31, 2017. Reclassifications Certain reclassifications of prior year balances have been made to conform to the current year presentation. These reclassifications had no impact on the Company’s consolidated financial position, results of operations or net change in cash and cash equivalents. Adoption of New Accounting Standards In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09, Compensation—Stock Compensation: Improvements to Employee Share Based Payment Accounting. The standard is intended to simplify several areas of accounting for share based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. All excess tax benefits and tax deficiencies (including tax benefits of dividends on share based payment awards) should be recognized as income tax expense or benefit in the income statement. The tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur. An entity also should recognize excess tax benefits regardless of whether the benefit reduces taxes payable in the current period. Excess tax benefits should be classified along with other income tax cash flows as an operating activity. An entity can make an entity wide accounting policy election to either estimate the number of awards that are expected to vest (current GAAP) or account for forfeitures when they occur. The threshold to qualify for equity classification permits withholding up to the maximum statutory tax rates in the applicable jurisdictions. The Company adopted the new guidance on January 1, 2017. The amount of the impact on the effective tax rate will be determined by the number of stock options exercised and the stock price of the Company when the stock options are exercised, and the amount of restricted stock awards vesting. The adoption of this guidance resulted in a reduction to net income tax expense of ($106,000) for the third quarter of 2017, and a reduction to income tax expense of ($158,000) for the first nine months of 2017. In connection with the adoption, the Company has elected to estimate forfeitures each reporting period. Newly Issued, but not yet Effective Accounting Standards In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which was an update to the guidance for accounting for revenue from contracts with customers. The guidance in this update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides steps to follow to achieve the core principle. An entity should disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Qualitative and quantitative information is required about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. The amendments in this update become effective for annual periods and interim periods within those annual periods beginning after December 15, 2017. The Company’s revenue is primarily comprised of net interest income on financial assets and liabilities, which is excluded from the scope of ASU No. 2014-09. The Company has determined the result of applying this ASU to the individual revenue streams affected, as well as on an aggregate basis, will not be material to the Company’s consolidated financial statements. The Company continues to evaluate the impact of the disclosure requirements associated with ASU No. 2014-09. In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Recognition and Measurement of Financial Assets and Liabilities. The new guidance is intended to improve the recognition and measurement of financial instruments by requiring: equity investments (other than equity method or consolidation) to be measured at fair value with changes in fair value recognized in net income; public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; separate presentation of financial assets and financial liabilities by measurement category and form of financial assets (i.e. securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; eliminating the requirement to disclose the fair value of financial instruments measured at amortized cost for organizations that are not public business entities; eliminating the requirement for non-public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is to be required to be disclosed for financial instruments measured at amortized cost on the balance sheet; and requiring a reporting organization to present separately in other comprehensive income the portion of the total change in fair value of a liability resulting from the change in the instrument-specific credit risk (also referred to as “own credit”) when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. The new guidance is effective for public business entities for fiscal years beginning after December 15, 2017. We are currently evaluating the impact of adopting the new guidance on the consolidated financial statements. Our preliminary finding is that the new pronouncement will not have a significant impact on our Statement of Operations as the majority of the Company's investment securities are classified as available-for-sale and held-to-maturity debt securities. The pronouncement will require some revision to our disclosures within the consolidated financial statements and we are currently evaluating the impact. In February 2016, the FASB issued ASU No. 2016-02, Leases. The standard requires a lessee to recognize assets and liabilities on the balance sheet for leases with lease terms greater than 12 months. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right of use asset representing its right to use the underlying asset for the lease term. When measuring assets and liabilities arising from a lease, a lessee (and a lessor) should include payments to be made in optional periods only if the lessee is reasonably certain to exercise an option to extend the lease or not to exercise an option to terminate the lease. Similarly, optional payments to purchase the underlying asset should be included in the measurement of lease assets and lease liabilities only if the lessee is reasonably certain to exercise that purchase option. Reasonably certain is a high threshold that is consistent with and intended to be applied in the same way as the reasonably assured threshold in the previous leases guidance. In addition, also consistent with the previous leases guidance, a lessee (and a lessor) should exclude most variable lease payments in measuring lease assets and lease liabilities, other than those that depend on an index or a rate or are in substance fixed payments. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight line basis over the lease term. The new guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, and early adoption is permitted. We are currently evaluating the provisions of this ASU and have determined that the provisions of ASU No. 2016-02 will result in an increase in assets to recognize the present value of the lease obligations with a corresponding increase in liabilities; however, we do not expect this to have a material impact to the Company’s results of operations or cash flows. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments. The standard is the final guidance on the new current expected credit loss (“CECL”) model. The amendments in this update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to estimate future credit loss estimates. As CECL encompasses all financial assets carried at amortized cost, the requirement that reserves be established based on an organization’s reasonable and supportable estimate of expected credit losses extends to held-to-maturity debt securities. The update amends the accounting for credit losses on available for sale securities, whereby credit losses will be presented as an allowance as opposed to a write down. In addition, CECL will modify the accounting for purchased loans with credit deterioration since origination, so that reserves are established at the date of acquisition for purchased loans. Lastly, the amendment requires enhanced disclosures on the significant estimates and judgments used to estimate credit losses, as well as on the credit quality and underwriting standards of an organization’s portfolio. These disclosures require organizations to present the currently required credit quality disclosures disaggregated by the year of origination or vintage. The guidance allows for a modified retrospective approach with a cumulative effect adjustment to the balance sheet upon adoption (charge to retained earnings instead of the income statement). The new guidance is effective for public business entities for fiscal years, and interim periods within those years, beginning after December 15, 2019, and early adoption is permitted. We have formed a committee that is assessing our data and system needs and are evaluating the impact of adopting the new guidance. We expect to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective, but cannot yet determine the magnitude of any such one-time adjustment or the overall impact of the new guidance on the consolidated financial statements. In January 2017, the FASB issued accounting standards ASU No. 2017-04, Simplifying the Test for Goodwill Impairment. The provisions of the update eliminate the existing second step of the goodwill impairment test which provides for the allocation of reporting unit fair value among existing assets and liabilities, with the net remaining amount representing the implied fair value of goodwill. In replacement of the existing goodwill impairment rule, the update will provide that impairment should be recognized as the excess of any of the reporting unit’s goodwill over the fair value of the reporting unit. Under the provisions of this update, the amount of the impairment is limited to the carrying value of the reporting unit’s goodwill. For public business entities that are SEC filers, the amendments of the update will become effective in fiscal years beginning after December 15, 2019. Management does not expect the requirements of this update to have a material impact on the Company’s financial position, results of operations or cash flows. |
Shareholders_ Equity and Earnin
Shareholders’ Equity and Earnings Per Share | 9 Months Ended |
Sep. 30, 2017 | |
Shareholders’ Equity and Earnings Per Share. | |
Shareholders' Equity and Earnings Per Share | 2) Shareholders’ Equity and Earnings Per Share On September 12, 2016, the Company, entered into Exchange Agreements with Castle Creek Capital Partners IV, LP, Patriot Financial Partners, L.P. and Patriot Financial Partners Parallel, L.P. (collectively “Preferred Stockholders”) providing for the exchange of 21,004 shares of the Company’s Series C convertible perpetual preferred stock, no par value (“ Series C Preferred Stock”), for 5,601,000 shares of the Company’s common stock, no par value. The exchange ratio was equal to the equivalent number of shares the Preferred Stockholders would have received upon conversion of the Series C Preferred Stock into the Company’s common stock. Earnings Per Share -- Basic earnings per common share is computed by dividing net income, less dividends and discount accretion on preferred stock, by the weighted average common shares outstanding. The Series C Preferred Stock participated in the earnings of the Company prior to the exchange for common stock and, therefore, the shares issued on the conversion of the Series C Preferred Stock were considered outstanding under the two class method of computing basic earnings per common share during periods of earnings. Diluted earnings per share reflect potential dilution from outstanding stock options using the treasury stock method. A reconciliation of these factors used in computing basic and diluted earnings per common share is as follows: Three Months Ended Nine Months Ended September 30, September 30, 2017 2016 2017 2016 (Dollars in thousands, except per share amounts) Net income available to common shareholders $ 8,583 $ 6,261 $ 22,570 $ 18,654 Less: undistributed earnings allocated to Series C Preferred Stock — (300) — (1,278) Distributed and undistributed earnings allocated to common shareholders $ 8,583 $ 5,961 $ 22,570 $ 17,376 Weighted average common shares outstanding for basic earnings per common share 38,152,633 33,397,704 38,060,224 32,591,784 Dilutive effect of stock options outstanding, using the treasury stock method 428,665 295,624 504,910 272,071 Shares used in computing diluted earnings per common share 38,581,298 33,693,328 38,565,134 32,863,855 Basic earnings per share $ 0.22 $ 0.18 $ 0.59 $ 0.53 Diluted earnings per share $ 0.22 $ 0.18 $ 0.59 $ 0.53 |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Income (Loss) (''AOCI'') | 9 Months Ended |
Sep. 30, 2017 | |
Accumulated Other Comprehensive Income (Loss) ("AOCI") | |
Accumulated Other Comprehensive Income (Loss) ("AOCI") | 3) Accumulated Other Comprehensive Income (Loss) (“AOCI”) The following table reflects the changes in AOCI by component for the periods indicated: Three Months Ended September 30, 2017 and 2016 Unamortized Unrealized Unrealized Gain on Gains (Losses) on Available- Available- for-Sale Defined for-Sale Securities Benefit Securities Reclassified Pension and I/O to Held-to- Plan Strips(1) Maturity Items Total (Dollars in thousands) Beginning balance July 1, 2017, net of taxes $ 877 $ 321 $ (7,665) $ (6,467) Other comprehensive income (loss) before reclassification, net of taxes 312 — (7) 305 Amounts reclassified from other comprehensive income (loss), net of taxes — (7) 29 22 Net current period other comprehensive income (loss), net of taxes 312 (7) 22 327 Ending balance September 30, 2017, net of taxes $ 1,189 $ 314 $ (7,643) $ (6,140) Beginning balance July 1, 2016, net of taxes $ 5,170 $ 351 $ (7,663) $ (2,142) Other comprehensive income (loss) before reclassification, net of taxes 121 — (6) 115 Amounts reclassified from other comprehensive income (loss), net of taxes — (8) 27 19 Net current period other comprehensive income (loss), net of taxes 121 (8) 21 134 Ending balance September 30, 2016, net of taxes $ 5,291 $ 343 $ (7,642) $ (2,008) Nine Months Ended September 30, 2017 and 2016 Unamortized Unrealized Unrealized Gain on Gains (Losses) on Available- Available- for-Sale Defined for-Sale Securities Benefit Securities Reclassified Pension and I/O to Held-to- Plan Strips Maturity Items Total (Dollars in thousands) Beginning balance January 1, 2017, net of taxes $ (540) $ 336 $ (7,710) $ (7,914) Other comprehensive (loss) before reclassification, net of taxes 1,725 — (22) 1,703 Amounts reclassified from other comprehensive income (loss), net of taxes 4 (22) 89 71 Net current period other comprehensive income (loss), net of taxes 1,729 (22) 67 1,774 Ending balance September 30, 2017, net of taxes $ 1,189 $ 314 $ (7,643) $ (6,140) Beginning balance January 1, 2016, net of taxes $ 1,090 $ 403 $ (7,713) $ (6,220) Other comprehensive (loss) before reclassification, net of taxes 4,507 — (11) 4,496 Amounts reclassified from other comprehensive income (loss), net of taxes (306) (60) 82 (284) Net current period other comprehensive income (loss), net of taxes 4,201 (60) 71 4,212 Ending balance September 30, 2016, net of taxes $ 5,291 $ 343 $ (7,642) $ (2,008) Amounts Reclassified from AOCI(1) Three Months Ended September 30, Affected Line Item Where Details About AOCI Components 2017 2016 Net Income is Presented (Dollars in thousands) Unrealized (loss) gains on available-for-sale securities and I/O strips $ — $ — Gain on sales of securities — — Income tax expense — — Net of tax Amortization of unrealized gain on securities available-for-sale that were reclassified to securities held-to-maturity 12 13 Interest income on taxable securities (5) (5) Income tax expense 7 8 Net of tax Amortization of defined benefit pension plan items (1) Prior transition obligation 18 13 Actuarial losses (69) (60) (51) (47) Income before income tax 22 20 Income tax benefit (29) (27) Net of tax Total reclassification for the year $ (22) $ (19) (1) This AOCI component is included in the computation of net periodic benefit cost (see Note 8—Benefit Plans) and includes split-dollar life insurance benefit plan. Amounts Reclassified from AOCI(1) Nine Months Ended September 30, Details About AOCI Components 2017 2016 Net Income is Presented (Dollars in thousands) Unrealized gains on available-for-sale securities and I/O strips $ (6) $ 527 Gain (loss) on sales of securities 2 (221) Income tax expense (4) 306 Net of tax Amortization of unrealized gain on securities available-for-sale that were reclassified to securities held-to-maturity 38 103 Interest income on taxable securities (16) (43) Income tax expense 22 60 Net of tax Amortization of defined benefit pension plan items (1) Prior transition obligation 53 39 Actuarial losses (207) (180) (154) (141) Income before income tax 65 59 Income tax benefit (89) (82) Net of tax Total reclassification from AOCI for the year $ (71) $ 284 (1) This AOCI component is included in the computation of net periodic benefit cost (see Note 8—Benefit Plans) and includes split-dollar life insurance benefit plan. |
Securities
Securities | 9 Months Ended |
Sep. 30, 2017 | |
Securities | |
Securities | 4) Securities The amortized cost and estimated fair value of securities at September 30, 2017 and December 31, 2016 were as follows: Gross Gross Estimated Amortized Unrealized Unrealized Fair September 30, 2017 Cost Gains (Losses) Value (Dollars in thousands) Securities available-for-sale: Agency mortgage-backed securities $ 374,057 1,275 (2,165) $ 373,167 Trust preferred securities 15,000 1,940 — 16,940 Total $ 389,057 $ 3,215 $ (2,165) $ 390,107 Securities held-to-maturity: Agency mortgage-backed securities $ 290,418 $ 259 $ (2,341) $ 288,336 Municipals - exempt from Federal tax 89,132 1,054 (677) 89,509 Total $ 379,550 $ 1,313 $ (3,018) $ 377,845 Gross Gross Estimated Amortized Unrealized Unrealized Fair December 31, 2016 Cost Gains (Losses) Value (Dollars in thousands) Securities available-for-sale: Agency mortgage-backed securities $ 293,598 $ 928 $ (3,537) $ 290,989 Trust preferred securities 15,000 600 — 15,600 Total $ 308,598 $ 1,528 $ (3,537) $ 306,589 Securities held-to-maturity: Agency mortgage-backed securities $ 233,409 $ 15 $ (3,554) $ 229,870 Municipals - exempt from Federal tax 90,601 521 (2,244) 88,878 Total $ 324,010 $ 536 $ (5,798) $ 318,748 Securities with unrealized losses at September 30, 2017 and December 31, 2016, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position are as follows: Less Than 12 Months 12 Months or More Total Fair Unrealized Fair Unrealized Fair Unrealized September 30, 2017 Value (Losses) Value (Losses) Value (Losses) (Dollars in thousands) Securities available-for-sale: Agency mortgage-backed securities $ 237,933 $ (2,049) $ 9,346 $ (116) $ 247,279 $ (2,165) Total $ 237,933 $ (2,049) $ 9,346 $ (116) $ 247,279 $ (2,165) Securities held-to-maturity: Agency mortgage-backed securities $ 191,603 $ (1,980) $ 26,547 $ (361) $ 218,150 $ (2,341) Municipals - exempt from Federal tax 15,922 (116) 20,443 (561) 36,365 (677) Total $ 207,525 $ (2,096) $ 46,990 $ (922) $ 254,515 $ (3,018) Less Than 12 Months 12 Months or More Total Fair Unrealized Fair Unrealized Fair Unrealized December 31, 2016 Value (Losses) Value (Losses) Value (Losses) (Dollars in thousands) Securities available-for-sale: Agency mortgage-backed securities $ 245,045 $ (3,537) $ — $ — $ 245,045 $ (3,537) Total $ 245,045 $ (3,537) $ — $ — $ 245,045 $ (3,537) Securities held-to-maturity: Agency mortgage-backed securities $ 222,132 $ (3,528) $ 612 $ (26) $ 222,744 $ (3,554) Municipals - exempt from Federal tax 57,304 (2,026) 2,046 (218) 59,350 (2,244) Total $ 279,436 $ (5,554) $ 2,658 $ (244) $ 282,094 $ (5,798) There were no holdings of securities of any one issuer, other than the U.S. Government and its sponsored entities, in an amount greater than 10% of shareholders’ equity. At September 30, 2017, the Company held 494 securities (174 available-for-sale and 320 held‑to‑maturity), of which 250 had fair values below amortized cost. At September 30, 2017, there were $9,346,000 of agency mortgage-back securities available-for-sale, $26,547,000 of agency mortgage-backed securities held-to-maturity and $20,443,000 of municipal bonds held-to-maturity, carried with an unrealized loss for 12 months or more. The total unrealized loss for securities 12 months or more was $1,038,000 at September 30, 2017. The issuers are of high credit quality and all principal amounts are expected to be paid when securities mature. The fair value is expected to recover as the securities approach their maturity date and/or market rates decline. The Company does not believe that it is more likely than not that the Company will be required to sell a security in an unrealized loss position prior to recovery in value. The Company does not consider these securities to be other than temporarily impaired at September 30, 2017. The proceeds from sales of securities and the resulting gains and losses were as follows for the periods indicated: Three Months Ended Nine Months Ended September 30, September 30, 2017 2016 2017 2016 (Dollars in thousands) (Dollars in thousands) Proceeds $ — $ — $ 6,536 $ 49,171 Gross gains — — — 544 Gross losses — — (6) (17) The amortized cost and estimated fair values of securities as of September 30, 2017 are shown by contractual maturity below. The expected maturities will differ from contractual maturities if borrowers have the right to call or pre‑pay obligations with or without call or pre‑payment penalties. Securities not due at a single maturity date are shown separately. Available-for-sale Amortized Estimated Cost Fair Value (Dollars in thousands) Due after ten years $ 15,000 $ 16,940 Agency mortgage-backed securities 374,057 373,167 Total $ 389,057 $ 390,107 Held-to-maturity Amortized Estimated Cost Fair Value (Dollars in thousands) Due 3 months or less $ 370 $ 371 Due after 3 months through one year 505 506 Due after one through five years 3,680 3,756 Due after five through ten years 20,125 20,668 Due after ten years 64,452 64,208 Agency mortgage-backed securities 290,418 288,336 Total $ 379,550 $ 377,845 |
Loans
Loans | 9 Months Ended |
Sep. 30, 2017 | |
Loans | |
Loans | 5) Loans Loans were as follows for the periods indicated: September 30, December 31, 2017 2016 (Dollars in thousands) Loans held-for-investment: Commercial $ 587,276 $ 604,331 Real estate: CRE 754,856 662,228 Land and construction 92,310 81,002 Home equity 74,171 82,459 Residential mortgages 46,489 52,887 Consumer 11,749 20,460 Loans 1,566,851 1,503,367 Deferred loan fees, net (901) (760) Loans, net of deferred fees 1,565,950 1,502,607 Allowance for loan losses (19,748) (19,089) Loans, net $ 1,546,202 $ 1,483,518 At September 30, 2017 and December 31, 2016, total net loans included in the table above include $64,765,000 and $88,453,000, respectively, of the loans acquired in the Focus transaction that were not purchased credit impaired loans. Changes in the allowance for loan losses were as follows for the periods indicated: Three Months Ended September 30, 2017 Commercial Real Estate Consumer Total (Dollars in thousands) Beginning of period balance $ 11,259 $ 7,982 $ 156 $ 19,397 Charge-offs (111) — — (111) Recoveries 281 66 — 347 Net recoveries 170 66 — 236 Provision (credit) for loan losses (441) 592 (36) 115 End of period balance $ 10,988 $ 8,640 $ 120 $ 19,748 Three Months Ended September 30, 2016 Commercial Real Estate Consumer Total (Dollars in thousands) Beginning of period balance $ 11,528 $ 8,277 $ 116 $ 19,921 Charge-offs (160) — — (160) Recoveries 21 5 — 26 Net (charge-offs) recoveries (139) 5 — (134) Provision (credit) for loan losses 792 (519) (28) 245 End of period balance $ 12,181 $ 7,763 $ 88 $ 20,032 Nine Months Ended September 30, 2017 Commercial Real Estate Consumer Total (Dollars in thousands) Beginning of period balance $ 10,656 $ 8,327 $ 106 $ 19,089 Charge-offs (2,179) — — (2,179) Recoveries 1,453 995 — 2,448 Net (charge-offs) recoveries (726) 995 — 269 Provision (credit) for loan losses 1,058 (682) 14 390 End of period balance $ 10,988 $ 8,640 $ 120 $ 19,748 Nine Months Ended September 30, 2016 Commercial Real Estate Consumer Total (Dollars in thousands) Beginning of period balance $ 10,748 $ 8,076 $ 102 $ 18,926 Charge-offs (300) — — (300) Recoveries 182 227 — 409 Net (charge-offs) recoveries (118) 227 — 109 Provision (credit) for loan losses 1,551 (540) (14) 997 End of period balance $ 12,181 $ 7,763 $ 88 $ 20,032 The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment, based on the impairment method at the following period‑ends: September 30, 2017 Commercial Real Estate Consumer Total (Dollars in thousands) Allowance for loan losses: Ending allowance balance attributable to loans: Individually evaluated for impairment $ 217 $ 25 $ — $ 242 Collectively evaluated for impairment 10,771 8,615 120 19,506 Acquired with deteriorated credit quality — — — — Total allowance balance $ 10,988 $ 8,640 $ 120 $ 19,748 Loans: Individually evaluated for impairment $ 1,833 $ 1,982 $ 1 $ 3,816 Collectively evaluated for impairment 585,443 965,844 11,748 1,563,035 Acquired with deteriorated credit quality — — — — Total loan balance $ 587,276 $ 967,826 $ 11,749 $ 1,566,851 December 31, 2016 Commercial Real Estate Consumer Total (Dollars in thousands) Allowance for loan losses: Ending allowance balance attributable to loans: Individually evaluated for impairment $ 329 $ — $ — $ 329 Collectively evaluated for impairment 10,327 8,327 106 18,760 Acquired with deteriorated credit quality — — — — Total allowance balance $ 10,656 $ 8,327 $ 106 $ 19,089 Loans: Individually evaluated for impairment $ 2,057 $ 885 $ 3 $ 2,945 Collectively evaluated for impairment 602,029 877,691 20,457 1,500,177 Acquired with deteriorated credit quality 245 — — 245 Total loan balance $ 604,331 $ 878,576 $ 20,460 $ 1,503,367 The following table presents loans held-for-investment individually evaluated for impairment by class of loans as of September 30, 2017 and December 31, 2016. The recorded investment included in the following table represents loan principal net of any partial charge-offs recognized on the loans. The unpaid principal balance represents the recorded balance prior to any partial charge-offs. The recorded investment in consumer loans collateralized by residential real estate property that are in process of foreclosure according to local requirements of the applicable jurisdiction are not material as of the periods indicated: September 30, 2017 December 31, 2016 Allowance Allowance Unpaid for Loan Unpaid for Loan Principal Recorded Losses Principal Recorded Losses Balance Investment Allocated Balance Investment Allocated (Dollars in thousands) With no related allowance recorded: Commercial $ 1,370 $ 1,370 $ — $ 1,808 $ 1,808 $ — Real estate: CRE 501 501 — 1,278 419 — Land and construction 202 183 — 218 199 — Home Equity 388 388 — 267 267 — Consumer 1 1 — 3 3 — Total with no related allowance recorded 2,462 2,443 — 3,574 2,696 — With an allowance recorded: Commercial 463 463 217 494 494 329 Real estate: Land and construction 910 910 25 — — — Total with an allowance recorded 1,373 1,373 242 494 494 329 Total $ 3,835 $ 3,816 $ 242 $ 4,068 $ 3,190 $ 329 The following tables present interest recognized and cash‑basis interest earned on impaired loans for the periods indicated: Three Months Ended September 30, 2017 Real Estate Land and Home Commercial CRE Construction Equity Consumer Total (Dollars in thousands) Average of impaired loans during the period $ 2,010 $ 501 $ 641 $ 394 $ 1 $ 3,547 Interest income during impairment $ — $ — $ 3 $ — $ — $ 3 Cash-basis interest earned $ — $ — $ — $ — $ — $ — Three Months Ended September 30, 2016 Real Estate Land and Home Commercial CRE Construction Equity Consumer Total (Dollars in thousands) Average of impaired loans during the period $ 2,200 $ 1,644 $ 204 $ 516 $ 3 $ 4,567 Interest income during impairment $ — $ — $ — $ — $ — $ — Cash-basis interest earned $ — $ — $ — $ — $ — $ — Nine Months Ended September 30, 2017 Real Estate Land and Home Commercial CRE Construction Equity Consumer Total (Dollars in thousands) Average of impaired loans during the period $ 2,625 $ 583 $ 419 $ 326 $ 2 $ 3,955 Interest income during impairment $ — $ — $ 3 $ — $ — $ 3 Cash-basis interest earned $ — $ — $ — $ — $ — $ — Nine Months Ended September 30, 2016 Real Estate Land and Home Commercial CRE Construction Equity Consumer Total (Dollars in thousands) Average of impaired loans during the period $ 1,771 $ 2,298 $ 210 $ 715 $ 3 $ 4,997 Interest income during impairment $ — $ — $ — $ — $ — $ — Cash-basis interest earned $ — $ — $ — $ — $ — $ — Nonperforming loans include both smaller dollar balance homogenous loans that are collectively evaluated for impairment and individually classified loans. Nonperforming loans were as follows at period‑end: September 30, December 31, 2017 2016 2016 (Dollars in thousands) Nonaccrual loans - held-for-investment $ 2,560 $ 4,496 $ 3,059 Restructured and loans over 90 days past due and still accruing 931 — — Total nonperforming loans 3,491 4,496 3,059 Other restructured loans 325 137 131 Total impaired loans $ 3,816 $ 4,633 $ 3,190 The following table presents the nonperforming loans by class for the periods indicated: September 30, 2017 December 31, 2016 Restructured Restructured and Loans and Loans over 90 Days over 90 Days Past Due Past Due and Still and Still Nonaccrual Accruing Total Nonaccrual Accruing Total (Dollars in thousands) Commercial $ 1,487 $ $ 1,508 $ 2,171 $ — $ 2,171 Real estate: CRE 501 — 501 419 — 419 Land and construction 183 910 1,093 199 — 199 Home equity 388 — 388 267 — 267 Consumer 1 — 1 3 — 3 Total $ 2,560 $ 931 $ 3,491 $ 3,059 $ — $ 3,059 The following tables present the aging of past due loans by class for the periods indicated: September 30, 2017 30 - 59 60 - 89 90 Days or Days Days Greater Total Loans Not Past Due Past Due Past Due Past Due Past Due Total (Dollars in thousands) Commercial $ 3,798 $ 601 $ 575 $ 4,974 $ 582,302 $ 587,276 Real estate: CRE — 831 — 831 754,025 754,856 Land and construction — — 1,093 1,093 91,217 92,310 Home equity — — — — 74,171 74,171 Residential mortgages — — — — 46,489 46,489 Consumer — — — — 11,749 11,749 Total $ 3,798 $ 1,432 $ 1,668 $ 6,898 $ 1,559,953 $ 1,566,851 December 31, 2016 30 - 59 60 - 89 90 Days or Days Days Greater Total Loans Not Past Due Past Due Past Due Past Due Past Due Total (Dollars in thousands) Commercial $ 3,998 $ 857 $ 2,036 $ 6,891 $ 597,440 $ 604,331 Real estate: CRE 632 — — 632 661,596 662,228 Land and construction — — 199 199 80,803 81,002 Home equity — 267 — 267 82,192 82,459 Residential mortgages — — — — 52,887 52,887 Consumer — — — — 20,460 20,460 Total $ 4,630 $ 1,124 $ 2,235 $ 7,989 $ 1,495,378 $ 1,503,367 Past due loans 30 days or greater totaled $6,898,000 and $7,989,000 at September 30, 2017 and December 31, 2016, respectively, of which $1,256,000 and $2,057,000 were on nonaccrual, respectively. At September 30, 2017, there were also $1,304,000 of loans less than 30 days past due included in nonaccrual loans held-for-investment. At December 31, 2016, there were also $1,002,000 of loans less than 30 days past due included in nonaccrual loans held-for-investment. Management’s classification of a loan as “nonaccrual” is an indication that there is reasonable doubt as to the full recovery of principal or interest on the loan. At that point, the Company stops accruing interest income, and reverses any uncollected interest that had been accrued as income. The Company begins recognizing interest income only as cash interest payments are received and it has been determined the collection of all outstanding principal is not in doubt. The loans may or may not be collateralized, and collection efforts are pursued. Credit Quality Indicators Concentrations of credit risk arise when a number of customers are engaged in similar business activities, or activities in the same geographic region, or have similar features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic conditions. The Company’s loan portfolio is concentrated in commercial (primarily manufacturing, wholesale, and service) and real estate lending, with the remaining balance in consumer loans. While no specific industry concentration is considered significant, the Company’s lending operations are located in the Company’s market areas that are dependent on the technology and real estate industries and their supporting companies. Thus, the Company’s borrowers could be adversely impacted by a downturn in these sectors of the economy which could reduce the demand for loans and adversely impact the borrowers’ ability to repay their loans. The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on a quarterly basis. Nonclassified loans generally include those loans that are expected to be repaid in accordance with contractual loans terms. Classified loans are those loans that are assigned a substandard, substandard-nonaccrual, or doubtful risk rating using the following Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well‑defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Substandard‑Nonaccrual. Loans classified as substandard‑nonaccrual are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any, and it is probable that the Company will not receive payment of the full contractual principal and interest. Loans so classified have a well‑defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. In addition, the Company no longer accrues interest on the loan because of the underlying weaknesses. Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as 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. Loans classified as loss are considered uncollectable or of so little value that their continuance as assets is not warranted. This classification does not necessarily mean that a loan has no recovery or salvage value; but rather, there is much doubt about whether, how much, or when the recovery would occur. Loans classified as loss are immediately charged off against the allowance for loan losses. Therefore, there is no balance to report at September 30, 2017 and December 31, 2016. The following table provides a summary of the loan portfolio by loan type and credit quality classification at period end: September 30, 2017 December 31, 2016 Nonclassified Classified Total Nonclassified Classified Total Commercial $ 578,867 $ 8,409 $ 587,276 $ 594,255 $ 10,076 $ 604,331 Real estate: CRE 754,152 704 754,856 659,777 2,451 662,228 Land and construction 91,217 1,093 92,310 80,803 199 81,002 Home equity 73,469 702 74,171 81,866 593 82,459 Residential mortgages 46,489 — 46,489 52,887 — 52,887 Consumer 11,748 1 11,749 20,455 5 20,460 Total $ 1,555,942 $ 10,909 $ 1,566,851 $ 1,490,043 $ 13,324 $ 1,503,367 In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed in accordance with the Company’s underwriting policy. During the three months and nine months ended September 30, 2017, the terms of certain loans were modified as troubled debt restructurings. The modification of the terms of such loans included either one or both of the following: a reduction of the stated interest rate of the loan; or an extension of maturity date and/or at a stated rate of interest lower than the current market rate for new debt with similar risk. The balance of troubled debt restructurings at September 30, 2017 was $434,000, which included $91,000 of nonaccrual loans and $343,000 of accruing loans. The balance of troubled debt restructurings at December 31, 2016 was $133,000, which included $2,000 of nonaccrual loans and $131,000 of accruing loans. Approximately $36,000 and $2,000 of specific reserves were established with respect to these loans as of September 30, 2017 and December 31, 2016, respectively. The following table presents loans by class modified as troubled debt restructurings: During the Nine Months Ended September 30, 2017 Pre-modification Post-modification Number Outstanding Outstanding of Recorded Recorded Troubled Debt Restructurings: Contracts Investment Investment (Dollars in thousands) Commercial 3 $ 318 $ 318 Total 3 $ 318 $ 318 During the nine months ended September 30, 2017, there were no troubled debt restructurings in which the amount of principal or accrued interest owed from the borrower was forgiven or which resulted in a charge-off or change to the allowance for loan losses. The Company has committed to lend no additional amounts as of September 30, 2017 to custoners with outstanding loans that are classified as troubled debt restructurings. There were no new loans modified as troubled debt restructurings during the nine months ended September 30, 2016. A loan is considered to be in payment default when it is 30 days contractually past due under the modified terms. There were no defaults on troubled debt restructurings, within twelve months following the modification, during the three and nine month periods ended September 30, 2017 and 2016. A loan that is a troubled debt restructuring on nonaccrual status may return to accruing status after a period of at least six months of consecutive payments in accordance with the modified terms. |
Goodwill and Other Intangible A
Goodwill and Other Intangible Assets | 9 Months Ended |
Sep. 30, 2017 | |
Goodwill and Other Intangible Assets | |
Goodwill and Other Intangible Assets | 6) Goodwill and Other Intangible Assets Goodwill At September 30, 2017, the carrying value of goodwill was $45,664,000, which included $13,044,000 of goodwill related to its acquisition of Bay View Funding and $32,620,000 from its acquisition of Focus. Goodwill impairment exists when a reporting unit’s carrying value exceeds its fair value, which is determined through a qualitative assessment whether it is more likely than not that the fair value of equity of the reporting unit exceeds the carrying value (“Step Zero”). If the qualitative assessment indicates it is more likely than not that the fair value of equity of a reporting unit is less than book value, then a quantitative two-step impairment test is required. Step 1 includes the determination of the carrying value of the Company’s single reporting unit, including the existing goodwill and intangible assets, and estimating the fair value of the reporting unit. If the carrying amount of a reporting unit exceeds its fair value, the Company is required to perform a second step to the impairment test. Step 2 requires that the implied fair value of the reporting unit goodwill be compared to the carrying amount of that goodwill. If the carrying amount of the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss shall be recognized in an amount equal to that excess. The Company completed its annual impairment analysis on the goodwill from the Bay View Funding and Focus acquisitions as of November 30, 2016 with the assistance of an independent valuation firm. Based on the Step Zero qualitative analysis performed, the Company determined that it is more likely than not that the fair value of the reporting unit exceeded its reported book value of equity at November 30, 2016. As such, no impairment was indicated and no further testing was required. Other Intangible Assets The core deposit intangible asset originally acquired in the June 2007 acquisition of Diablo Valley Bank was $5,049,000. The core deposit intangible asset was amortized over its estimated useful life of 10 years, and was fully amortized at September 30, 2017. Accumulated amortization of the core deposit intangible asset was $4,854,000 at December 31, 2016. The core deposit intangible asset acquired in the acquisition of Focus in August 2015 was $6,285,000. This asset is amortized over its estimated useful life of 10 years. Accumulated amortization of this intangible asset was $1,776,000 and $1,120,000 at September 30, 2017 and December 31, 2016, respectively. Other intangible assets acquired in the acquisition of Bay View Funding in November 2014 included: a below market value lease intangible asset of $109,000 (amortized over 3 years), customer relationship and brokered relationship intangible assets of $1,900,000, (amortized over the 10 year estimated useful life), and a non-compete agreement intangible asset of $250,000 (amortized over 3 years). Accumulated amortization of these intangible assets was $901,000 and $669,000 at September 30, 2017 and December 31, 2016, respectively. Estimated amortization expense for 2017 and each of the next five years and thereafter as follows: Bay View Funding Diablo Valley Customer & Bank Core Focus Core Below Market Brokered Non-Compete Total Deposit Deposit Value Lease Relationship Agreement Amortization Year Intangible Intangible Intangible Intangible Intangible Expense (Dollars in thousands) 2017 $ 195 $ 875 $ 31 $ 190 $ 70 $ 1,361 2018 — 775 — 190 — 965 2019 — 734 — 190 — 924 2020 — 716 — 190 — 906 2021 — 596 — 190 — 786 2022 — 502 — 190 — 692 Thereafter — 967 — 349 — 1,316 $ 195 $ 5,165 $ 31 $ 1,489 $ 70 $ 6,950 Impairment testing of the intangible assets is performed at the individual asset level. Impairment exists if the carrying amount of the asset is not recoverable and exceeds its fair value at the date of the impairment test. For intangible assets, estimates of expected future cash flows (cash inflows less cash outflows) that are directly associated with an intangible asset are used to determine the fair value of that asset. Management makes certain estimates and assumptions in determining the expected future cash flows from core deposit and customer relationship intangibles including account attrition, expected lives, discount rates, interest rates, servicing costs and other factors. Significant changes in these estimates and assumptions could adversely impact the valuation of these intangible assets. If an impairment loss exists, the carrying amount of the intangible asset is adjusted to a new cost basis. The new cost basis is then amortized over the remaining useful life of the asset. Based on its assessment, management concluded that there was no impairment of intangible assets at September 30, 2017 and December 31, 2016. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2017 | |
Income Taxes | |
Income Taxes | 7) Income Taxes Some items of income and expense are recognized in different years for tax purposes than when applying generally accepted accounting principles, leading to timing differences between the Company’s actual current tax liability and the amount accrued for this liability based on book income. These temporary differences comprise the “deferred” portion of the Company’s tax expense or benefit, which is accumulated on the Company’s books as a deferred tax asset or deferred tax liability until such time as they reverse. Under generally accepted accounting principles, a valuation allowance is required if it is “more likely than not” that a deferred tax asset will not be realized. The determination of the realizability of the deferred tax assets is highly subjective and dependent upon judgment concerning management’s evaluation of both positive and negative evidence, including forecasts of future income, cumulative losses, applicable tax planning strategies, and assessments of current and future economic and business conditions. The Company had net deferred tax assets of $22,400,000, and $25,058,000, at September 30, 2017, and December 31, 2016, respectively. After consideration of the matters in the preceding paragraph, the Company determined that it is more likely than not that the net deferred tax asset at September 30, 2017 and December 31, 2016 will be fully realized in future years. The following table reflects the carry amounts of the low income housing investments included in accrued interest receivable and other assets, and the future commitments included in accrued interest payable and other liabilities for the periods indicated: September 30, December 31, 2017 2016 (Dollars in thousands) Low income housing investments $ 3,526 $ Future commitments $ 365 $ The Company expects future commitments of $79,000 to be paid in 2017, $14,000 in 2018, and $272,000 in 2019 through 2023. For tax purposes, the Company had low income housing tax credits of $110,000 and $111,000 for the three months ended September 30, 2017 and September 30, 2016, respectively, and low income housing investment losses of $115,000 and $118,000, respectively. For tax purposes, the Company had low income housing tax credits of $329,000 and $333,000 for the nine months ended September 30, 2017 and September 30, 2016, respectively, and low income housing investment losses of $345,000 and $353,000, respectively. The Company recognized low income housing investment expense as a component of income tax expense. |
Benefit Plans
Benefit Plans | 9 Months Ended |
Sep. 30, 2017 | |
Benefit Plans | |
Benefit Plans | 8) Benefit Plans Supplemental Retirement Plan The Company has a supplemental retirement plan (the “Plan”) covering some current and some former key employees and directors. The Plan is a nonqualified defined benefit plan. Benefits are unsecured as there are no Plan assets. The following table presents the amount of periodic cost recognized for the periods indicated: Three Months Ended Nine Months Ended September 30, September 30, 2017 2016 2017 2016 (Dollars in thousands) Components of net periodic benefit cost: Service cost $ 81 $ 134 $ 243 $ 400 Interest cost 259 259 777 777 Amortization of net actuarial loss 69 60 207 180 Net periodic benefit cost $ 409 $ 453 $ 1,227 $ 1,357 Split‑Dollar Life Insurance Benefit Plan The Company maintains life insurance policies for some current and some former directors and officers that are subject to split‑dollar life insurance agreements. The following table sets forth the funded status of the split‑dollar life insurance benefits for the periods indicated: September 30, December 31, 2017 2016 (Dollars in thousands) Change in projected benefit obligation: Projected benefit obligation at beginning of year $ 6,301 $ 6,215 Interest cost 182 248 Actuarial gain — (162) Projected benefit obligation at end of period $ 6,483 $ 6,301 September 30, December 31, 2017 2016 (Dollars in thousands) Net actuarial loss $ 2,246 $ 2,126 Prior transition obligation 1,261 1,328 Accumulated other comprehensive loss $ 3,507 $ 3,454 Three Months Ended Nine Months Ended September 30, September 30, 2017 2016 2017 2016 (Dollars in thousands) Amortization of prior transition obligation $ (18) $ (13) $ (53) $ (39) Interest cost 61 62 182 186 Net periodic benefit cost $ 43 $ 49 $ 129 $ 147 |
Fair Value
Fair Value | 9 Months Ended |
Sep. 30, 2017 | |
Fair Value | |
Fair Value | 9) Fair Value Accounting guidance establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value: Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data (for example, interest rates and yield curves observable at commonly quoted intervals, prepayment speeds, credit risks, and default rates). Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. Financial Assets and Liabilities Measured on a Recurring Basis The fair values of securities available-for sale-are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). The fair value of interest‑only (“I/O”) strip receivable assets is based on a valuation model used by a third party. The Company is able to compare the valuation model inputs and results to widely available published industry data for reasonableness (Level 2 inputs). Fair Value Measurements Using Significant Quoted Prices in Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs Balance (Level 1) (Level 2) (Level 3) (Dollars in thousands) Assets at September 30, 2017 Available-for-sale securities: Agency mortgage-backed securities $ 373,167 — $ 373,167 — Trust preferred securities 16,940 — 16,940 — I/O strip receivables 989 — 989 — Assets at December 31, 2016 Available-for-sale securities: Agency mortgage-backed securities $ 290,989 — $ 290,989 — Trust preferred securities 15,600 — 15,600 — I/O strip receivables 1,067 — 1,067 — There were no transfers between Level 1 and Level 2 during the period for assets measured at fair value on a recurring basis. Assets and Liabilities Measured on a Non‑Recurring Basis The fair value of impaired loans with specific allocations of the allowance for loan losses is generally based on recent real estate appraisals. The appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Foreclosed assets are valued at the time the loan is foreclosed upon and the asset is transferred to foreclosed assets. The fair value is based primarily on third party appraisals, less costs to sell. The appraisals may utilize a single valuation approach or a combination of approaches including the comparable sales and income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value. Fair Value Measurements Using Significant Quoted Prices in Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs Balance (Level 1) (Level 2) (Level 3) (Dollars in thousands) Assets at September 30, 2017 Impaired loans - held-for-investment: Commercial $ 246 — — $ 246 Real estate: Land and construction 1,068 — — 1,068 $ 1,314 — — $ 1,314 Assets at December 31, 2016 Impaired loans - held-for-investment: Commercial $ 165 — — $ 165 Real estate: CRE 419 — — 419 Land and construction 199 — — 199 $ 783 — — $ 783 Foreclosed assets: Land and construction $ — — $ $ $ The following table shows the detail of the impaired loans held-for-investment and the impaired loans held‑for‑investment carried at fair value for the periods indicated: September 30, 2017 December 31, 2016 (Dollars in thousands) Impaired loans held-for-investment: Book value of impaired loans held-for-investment carried at fair value $ 1,556 $ 1,112 Book value of impaired loans held-for-investment carried at cost 2,260 2,078 Total impaired loans held-for-investment $ 3,816 $ 3,190 Impaired loans held-for-investment carried at fair value: Book value of impaired loans held-for-investment carried at fair value $ 1,556 $ 1,112 Specific valuation allowance (242) (329) Impaired loans held-for-investment carried at fair value, net $ 1,314 $ 783 Impaired loans held‑for‑investment which are measured primarily for impairment using the fair value of the collateral were $3,816,000 at September 30, 2017. In addition, these loans had a specific valuation allowance of $242,000 at September 30, 2017. Impaired loans held‑for‑investment totaling $1,556,000 at September 30, 2017, were carried at fair value as a result of the aforementioned partial charge‑offs and specific valuation allowances at period‑end. The remaining $2,260,000 of impaired loans were carried at cost at September 30, 2017, as the fair value of the collateral exceeded the cost basis of each respective loan. Partial charge‑offs and changes in specific valuation allowances during the first nine months of 2017 on impaired loans held‑for‑investment carried at fair value at September 30, 2017 resulted in an additional provision for loan losses of $228,000. At September 30, 2017, there were no foreclosed assets. Impaired loans held-for-investment were $3,190,000 at December 31, 2016. There were no partial charge-offs at December 31, 2016. In addition, these loans had a specific valuation allowance of $329,000 at December 31, 2016. Impaired loans held-for-investment totaling $1,112,000 at December 31, 2016 were carried at fair value as a result of the aforementioned partial charge-offs and specific valuation allowances at year-end. The remaining $2,078,000 of impaired loans were carried at cost at December 31, 2016, as the fair value collateral exceeded the cost basis of each respective loan. Partial charge-offs and changes in specific valuation allowances during 2016 on impaired loans held-for-investment carried at fair value at December 31, 2016 resulted in an additional provision for loan losses of $320,000. At December 31, 2016, foreclosed assets had a carrying amount of $229,000, with no valuation allowance. The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a non‑recurring basis at the periods indicated: September 30, 2017 Valuation Unobservable Range Fair Value Techniques Inputs (Weighted Average) (Dollars in thousands) Impaired loans - held-for-investment: Commercial $ 246 Market Approach Discount adjustment for differences between comparable sales Less than 1 % Real estate: Land and construction 1,068 Market Approach Discount adjustment for differences between comparable sales Less than 1% December 31, 2016 Valuation Unobservable Range Fair Value Techniques Inputs (Weighted Average) (Dollars in thousands) Impaired loans - held-for-investment: Commercial $ 165 Market Approach Discount adjustment for differences between comparable sales Less than 1% Real estate: CRE 419 Market Approach Discount adjustment for differences between comparable sales 0% to 3% (3)% Land and construction 199 Market Approach Discount adjustment for differences between comparable sales Less than 1% Foreclosed assets: Land and construction 229 Market Approach Discount adjustment for differences between comparable sales 0% to 2% (2)% The Company obtains third party appraisals on its impaired loans held-for-investment and foreclosed assets to determine fair value. Generally, the third party appraisals apply the “market approach,” which is a valuation technique that uses prices and other relevant information generated by market transactions involving identical or comparable (that is, similar) assets, liabilities, or a group of assets and liabilities, such as a business. Adjustments are then made based on the type of property, age of appraisal, current status of property and other related factors to estimate the current value of collateral. The carrying amounts and estimated fair values of financial instruments at September 30, 2017 are as follows: Estimated Fair Value Significant Quoted Prices in Other Significant Active Markets for Observable Unobservable Carrying Identical Assets Inputs Inputs Amounts (Level 1) (Level 2) (Level 3) Total (Dollars in thousands) Assets: Cash and cash equivalents $ 346,120 $ 346,120 $ — $ — $ 346,120 Securities available-for-sale 390,107 — 390,107 — 390,107 Securities held-to-maturity 379,550 — 377,845 — 377,845 Loans (including loans held-for-sale), net 1,550,804 — 4,602 1,497,010 1,501,612 FHLB stock, FRB stock, and other investments 17,905 — — — N/A Accrued interest receivable 7,818 — 2,522 5,296 7,818 I/O strips receivables 989 — 989 — 989 Liabilities: Time deposits $ 204,291 $ — $ 204,555 $ — $ 204,555 Other deposits 2,276,313 — 2,276,313 — 2,276,313 Subordinated debt 39,137 — 39,937 39,937 Accrued interest payable 934 — 934 — 934 The carrying amounts and estimated fair values of the Company’s financial instruments at December 31, 2016: Estimated Fair Value Significant Quoted Prices in Other Significant Active Markets for Observable Unobservable Carrying Identical Assets Inputs Inputs Amounts (Level 1) (Level 2) (Level 3) Total (Dollars in thousands) Assets: Cash and cash equivalents $ 266,103 $ 266,103 $ — $ — $ 266,103 Securities available-for-sale 306,589 — 306,589 — 306,589 Securities held-to-maturity 324,010 — 318,748 — 318,748 Loans (including loans held-for-sale), net 1,489,223 — 5,705 1,444,076 1,449,781 FHLB stock, FRB stock, and other investments 15,196 — — — N/A Accrued interest receivable 6,859 — 1,961 4,898 6,859 I/O strips receivables 1,067 — 1,067 — 1,067 Liabilities: Time deposits $ 224,717 $ — $ 225,047 $ — $ 225,047 Other deposits 2,037,423 — 2,037,423 — 2,037,423 Accrued interest payable 168 — 168 — 168 The methods and assumptions, not previously discussed, used to estimate the fair value are described as follows: Cash and Cash Equivalents The carrying amounts of cash on hand, noninterest and interest-bearing due from bank accounts, and Fed funds sold approximate fair values and are classified as Level 1. Loans The fair value of loans held‑for‑sale is estimated based upon binding contracts and quotes from third parties resulting in a Level 2 classification. Fair values of loans, excluding loans held-for-sale, are estimated as follows: For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying values resulting in a Level 3 classification. Fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification. Impaired loans are valued at the lower of cost or fair value as described previously. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price. FHLB and FRB Stock It was not practical to determine the fair value of FHLB and FRB stock due to restrictions placed on their transferability. Accrued Interest Receivable/Payable The carrying amounts of accrued interest approximate fair value resulting in a Level 2 or Level 3 classification. Deposits The fair values disclosed for demand deposits (e.g., interest and noninterest checking, passbook savings, and certain types of money market accounts) are, by definition, equal to the amount payable on demand at the reporting date (i.e., their carrying amount) resulting in a Level 2 classification. The carrying amounts of variable rate, fixed‑term money market accounts approximate their fair values at the reporting date resulting in a Level 2 classification. The carrying amounts of variable rate, certificates of deposit approximate their fair values at the reporting date resulting in a Level 2 classification. Fair values for fixed rate certificates of deposit are estimated using a discounted cash flows calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities on time deposits resulting in a Level 2 classification. Subordinated Debt The fair values of the subordinated debentures are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 3 classification. Off‑balance Sheet Instruments Fair values for off‑balance sheet, credit‑related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The fair value of commitments is not material. Limitations Fair value estimates are made at a specific point in time, based on relevant market information about the financial instruments. These estimates do not reflect any premium or discount that could result from offering for sale at one time the entire holdings of a particular financial instrument. Fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. |
Equity Plan
Equity Plan | 9 Months Ended |
Sep. 30, 2017 | |
Equity Plan | |
Equity Plan | 10) Equity Plan The Company maintained an Amended and Restated 2004 Equity Plan (the “2004 Plan”) for directors, officers, and key employees. The 2004 Plan was terminated on May 23, 2013. On May 23, 2013, the Company’s shareholders approved the 2013 Equity Incentive Plan (the “2013 Plan”). On May 25, 2017, the shareholders approved an amendment to the Heritage Commerce Corp 2013 Equity Incentive Plan to increase the number of shares available from 1,750,000 to 3,000,000 shares. The equity plans provide for the grant of incentive and nonqualified stock options and restricted stock. The equity plans provide that the option price for both incentive and nonqualified stock options will be determined by the Board of Directors at no less than the fair value at the date of grant. Options granted vest on a schedule determined by the Board of Directors at the time of grant. Generally options vest over four years. All options expire no later than ten years from the date of grant. Restricted stock is subject to time vesting. For the nine months ended September 30, 2017, the Company granted 270,000 shares of nonqualified stock options and 82,770 shares of restricted stock. There were 1,528,099 shares available for the issuance of equity awards under the 2013 Plan as of September 30, 2017. Stock option activity under the equity plans is as follows: Weighted Weighted Average Average Remaining Aggregate Number Exercise Contractual Intrinsic Total Stock Options of Shares Price Life (Years) Value Outstanding at January 1, 2017 1,719,091 $ 9.79 Granted 270,000 $ 14.41 Exercised (193,863) $ 6.98 Forfeited or expired (151,119) $ 22.85 Outstanding at September 30, 2017 1,644,109 $ 9.69 6.41 $ 6,972,963 Vested or expected to vest 1,545,462 6.41 $ 6,554,585 Exercisable at September 30, 2017 1,085,246 5.21 $ 5,799,239 Information related to the equity plans for the periods indicated: Nine Months Ended September 30, 2017 2016 Intrinsic value of options exercised $ 1,331,528 $ 437,357 Cash received from option exercise $ 1,352,236 $ 771,386 Tax benefit realized from option exercises $ 543,654 $ 174,194 Weighted average fair value of options granted $ 2.66 $ 2.12 As of September 30, 2017, there was $1,446,000 of total unrecognized compensation cost related to nonvested stock options granted under the equity plans. That cost is expected to be recognized over a weighted‑average period of approximately 2.75 years. The fair value of each option grant is estimated on the date of grant using the Black Scholes option pricing model that uses the assumptions noted in the following table, including the weighted average assumptions for the option grants for the periods indicated: Nine Months Ended September 30, 2017 2016 Expected life in months(1) 72 72 Volatility(1) 24 % 31 % Weighted average risk-free interest rate(2) 1.94 % 1.41 % Expected dividends(3) 2.78 % 3.48 % (1) The expected life of employee stock options represents the weighted average period the stock options are expected to remain outstanding based on historical experience. Volatility is based on the historical volatility of the stock price over the same period of the expected life of the option. (2) Based on the U.S. Treasury constant maturity interest rate with a term consistent with the expected life of the option granted. (3) Each grant’s dividend yield is calculated by annualizing the most recent quarterly cash dividend and dividing that amount by the market price of the Company’s common stock as of the grant date Restricted stock activity under the equity plans is as follows: Weighted Average Grant Number Date Fair Total Restricted Stock Award of Shares Value Nonvested shares at January 1, 2017 199,503 $ 9.74 Granted 82,770 $ 14.36 Vested (64,954) $ 10.02 Forfeited or expired (18,634) $ 11.87 Nonvested shares at September 30, 2017 198,685 $ 11.38 As of September 30, 2017, there was $1,817,000 of total unrecognized compensation cost related to nonvested restricted stock awards granted under the equity plans. The cost is expected to be recognized over a weighted‑average period of approximately 2.43 years. |
Subordinated Debt
Subordinated Debt | 9 Months Ended |
Sep. 30, 2017 | |
Subordinated Debt | |
Subordinated Debt | 11) Subordinated Debt On May 26, 2017, the Company completed an underwritten public offering of $40,000,000 aggregate principal amount of its fixed-to-floating rate subordinated notes (“Subordinated Debt”) due June 1, 2027. The Subordinated Debt initially bears a fixed interest rate of 5.25% per year, payable semi-annually. Commencing on June 1, 2022, the interest rate on the Subordinated Debt resets quarterly to the three-month LIBOR rate plus a spread of 336.5 basis points, payable quarterly in arrears. Interest on the Subordinated Debt is payable semi-annually on June 1 and December 1 of each year through June 1, 2022 and quarterly thereafter on March 1, June 1, September 1 and December 1 of each year through the maturity date or early redemption date. The first interest payment will be made on December 1, 2017. The Company at its option may redeem the Subordinated Debt, in whole or in part, on any interest payment date on or after June 1, 2022 without a premium. The issuance costs of the Subordinated Debt totaled $927,000, which is being amortized through the Subordinated Debt maturity date. The Subordinated Debt, net of the unamortized issuance costs, totaled $39,137,000 at September 30, 2017, and qualifies as Tier 2 capital for the Company under the guidelines established by the Federal Reserve Bank. |
Capital Requirements
Capital Requirements | 9 Months Ended |
Sep. 30, 2017 | |
Capital Requirements | |
Capital Requirements | 12) Capital Requirements The Company and its subsidiary bank are subject to various regulatory capital requirements administered by the banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory—and possibly additional discretionary—actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements and operations. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and HBC must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off balance sheet items as calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. There are no conditions or events since September 30, 2017, that management believes have changed the categorization of the Company or HBC as “well-capitalized.” As of January 1, 2015, HCC and HBC along with other community banking organizations became subject to new capital requirements and certain provisions of the new rules will be phased in from 2015 through 2019. The Federal Banking regulators approved the new rules to implement the revised capital adequacy standards of the Basel Committee on Banking Supervision, commonly called Basel III, and address relevant provisions of The Dodd Frank Wall Street Reform and Consumer Protection Act of 2010, as amended. The Company’s consolidated capital ratios and the Bank’s capital ratios exceeded the regulatory guidelines for a well-capitalized financial institution under the Basel III regulatory requirements at September 30, 2017. Quantitative measures established by regulation to help ensure capital adequacy require the Company and HBC to maintain minimum amounts and ratios (set forth in the tables below) of total, Tier 1 capital, and common equity Tier 1 capital (as defined in the regulations) to risk weighted assets (as defined), and of Tier 1 capital to average assets (as defined). Management believes that, as of September 30, 2017 and December 31, 2016, the Company and HBC met all capital adequacy guidelines to which they were subject. The Company’s consolidated capital amounts and ratios are presented in the following table, together with capital adequacy requirements, under the Basel III regulatory requirements as of September 30, 2017, and December 31, 2016. Required For Capital Adequacy Purposes Actual Under Basel III Amount Ratio Amount Ratio (1) (Dollars in thousands) As of September 30, 2017 Total Capital $ 289,231 14.6 % $ 183,750 9.25 % (to risk-weighted assets) Tier 1 Capital $ 229,656 11.6 % $ 144,020 7.25 % (to risk-weighted assets) Common Equity Tier 1 Capital $ 229,656 11.6 % $ 114,223 5.75 % (to risk-weighted assets) Tier 1 Capital $ 229,656 8.3 % $ 111,329 4.00 % (to average assets) (1) Includes 1.25% capital conservation buffer, effective January 1, 2017, except the Tier 1 Capital to average assets ratio. Required For Capital Adequacy Purposes Actual Under Basel III Amount Ratio Amount Ratio (1) (Dollars in thousands) As of December 31, 2016 Total Capital $ 234,629 12.5 % $ 161,868 8.625 % (to risk-weighted assets) Tier 1 Capital $ 214,924 11.5 % $ 124,333 6.625 % (to risk-weighted assets) Common Equity Tier 1 Capital $ 214,924 11.5 % $ 96,183 5.125 % (to risk-weighted assets) Tier 1 Capital $ 214,924 8.5 % $ 100,625 4.000 % (to average assets) (1) Includes 0.625% capital conservation buffer, effective January 1, 2016, except the Tier 1 Capital to average assets ratio. HBC’s actual capital amounts and ratios are presented in the following table, together with capital adequacy requirements, under the Basel III regulatory requirements as of September 30, 2017, and December 31, 2016. Required For Capital To Be Well-Capitalized Adequacy Under Basel III Regulatory Purposes Actual Requirements Under Basel III Amount Ratio Amount Ratio Amount Ratio (1) (Dollars in thousands) As of September 30, 2017 Total Capital $ 265,269 13.4 % $ 198,513 10.0 % $ 183,625 9.25 % (to risk-weighted assets) Tier 1 Capital $ 244,831 12.3 % $ 158,811 8.0 % $ 143,922 7.25 % (to risk-weighted assets) Common Equity Tier 1 Capital $ 244,831 12.3 % $ 129,034 6.5 % $ 114,145 5.75 % (to risk-weighted assets) Tier 1 Capital $ 244,831 8.8 % $ 139,101 5.0 % $ 111,281 4.00 % (to average assets) (1) Includes 1.25% capital conservation buffer, effective January 1, 2017, except the Tier 1 Capital to average assets ratio. Required For Capital To Be Well-Capitalized Adequacy Under Basel III Regulatory Purposes Actual Requirements Under Basel III Amount Ratio Amount Ratio Amount Ratio (1) (Dollars in thousands) As of December 31, 2016 Total Capital $ 231,069 12.3 % $ 187,602 10.0 % $ 161,807 8.625 % (to risk-weighted assets) Tier 1 Capital $ 211,364 11.3 % $ 150,082 8.0 % $ 124,287 6.625 % (to risk-weighted assets) Common Equity Tier 1 Capital $ 211,364 11.3 % $ 121,942 6.5 % $ 96,146 5.125 % (to risk-weighted assets) Tier 1 Capital $ 211,364 8.4 % $ 125,746 5.0 % $ 100,597 4.000 % (to average assets) (1) Includes 0.625% capital conservation buffer, effective January 1, 2016, except the Tier 1 Capital to average assets ratio. The Subordinated Debt, net of unamortized issuance costs, totaled $39,137,000 at September 30, 2017, and qualifies as Tier 2 capital for the Company under the guidelines established by the Federal Reserve Bank. The issuance of Subordinated Debt resulted in an increase in the Company’s total risk‑based capital ratio at September 30, 2017, compared to December 31, 2016, but had no effect on the other regulatory capital ratios of the Company. All of HBC’s regulatory capital ratios increased at September 30, 2017, compared to December 31, 2016, primarily due to the downstream of $20,000,000 of the proceeds of the Subordinated Debt from the Company to HBC, and from the retention of $24,051,000 in earnings, net of distributed dividends totaling $12,000,000 from HBC to the Company during the first nine months of 2017. HCC is dependent upon dividends from HBC. Under California General Corporation Law, the holders of common stock are entitled to receive dividends when and as declared by the Board of Directors, out of funds legally available. The California Financial Code provides that a state licensed bank may not make a cash distribution to its shareholders in excess of the lesser of the following: (i) the bank’s retained earnings; or (ii) the bank’s net income for its last three fiscal years, less the amount of any distributions made by the bank to its shareholders during such period. However, a bank, with the prior approval of the Commissioner of the California Department of Business Oversight—Division of Financial Institutions (“DBO”) may make a distribution to its shareholders of an amount not to exceed the greater of: (i) a bank’s retained earnings; (ii) its net income for its last fiscal year; or (iii) its net income for the current fiscal year. Also with the prior approval of the Commissioner of the DBO and the shareholders of the bank, the bank may make a distribution to its shareholders, as a reduction in capital of the bank. In the event that the Commissioner determines that the shareholders’ equity of a bank is inadequate or that the making of a distribution by a bank would be unsafe or unsound, the Commissioner may order a bank to refrain from making such a proposed distribution. As of September 30, 2017, HBC would not be required to obtain regulatory approval, and the amount available for cash dividends is $21,260,000. Similar restrictions applied to the amount and sum of loan advances and other transfers of funds from HBC to the parent company. During each of the third, second, and first quarters of 2017, HBC distributed dividends of $4,000,000, for a total of $12,000,000 for the first nine months of 2017. |
Loss Contingencies
Loss Contingencies | 9 Months Ended |
Sep. 30, 2017 | |
Loss Contingencies | |
Loss Contingencies | 13) Loss Contingencies The Company’s policy is to accrue for legal costs associated with both asserted and unasserted claims when it is probable that such costs will be incurred and such costs can be reasonably estimated. A number of parties filed complaints in the Superior Court of California for the County of Santa Clara asserting certain claims against the Company arising from the transfer of funds. During the fourth quarter of 2016, the Company reached settlements with each of the parties in amounts not material to the Company. |
Noninterest Expense
Noninterest Expense | 9 Months Ended |
Sep. 30, 2017 | |
Noninterest Expense | |
Noninterest Expense | 14) Noninterest Expense The following table sets forth the various components of the Company’s noninterest expense for the periods indicated: Three Months Ended Nine Months Ended September 30, September 30, 2017 2016 2017 2016 (Dollars in thousands) Salaries and employee benefits $ 9,071 $ 8,363 $ 27,766 $ 26,052 Occupancy and equipment 1,142 1,120 3,426 3,277 Professional fees 695 1,086 2,439 2,619 Software subscriptions 475 401 1,333 1,118 Data processing 411 372 1,080 1,143 Insurance expense 401 319 1,123 924 FDIC deposit insurance premiums 304 308 860 966 Amortization of intangible assets 296 392 1,083 1,176 Foreclosed assets 2 10 6 14 Other 2,037 1,925 6,300 6,073 Total $ 14,834 $ 14,296 $ 45,416 $ 43,362 |
Business Segment Information
Business Segment Information | 9 Months Ended |
Sep. 30, 2017 | |
Business Segment Information | |
Business Segment Information | 15) Business Segment Information The following presents the Company’s operating segments. The Company operates through two business segments: Banking segment and Factoring segment. Transactions between segments consist primarily of borrowed funds. Intersegment interest expense is allocated to the Factoring segment based on the Company’s prime rate and funding costs. The provision for loan loss is allocated based on the segment’s allowance for loan loss determination which considers the effects of charge-offs. Noninterest income and expense directly attributable to a segment are assigned to it. Taxes are paid on a consolidated basis and allocated for segment purposes. The Factoring segment includes only factoring originated by Bay View Funding. Three Months Ended September 30, 2017 Banking(1) Factoring Consolidated (Dollars in thousands) Interest income $ 24,805 $ 3,150 $ 27,955 Intersegment interest allocations 284 (284) — Total interest expense 1,634 — 1,634 Net interest income 23,455 2,866 26,321 Provision for loan losses 107 8 115 Net interest income after provision 23,348 2,858 26,206 Noninterest income 2,101 359 2,460 Noninterest expense 13,149 1,685 14,834 Intersegment expense allocations 130 (130) — Income before income taxes 12,430 1,402 13,832 Income tax expense 4,660 589 5,249 Net income $ 7,770 $ 813 $ 8,583 Total assets $ 2,776,262 $ 67,686 $ 2,843,948 Loans, net of deferred fees $ 1,517,186 $ 48,764 $ 1,565,950 Goodwill $ 32,620 $ 13,044 $ 45,664 Three Months Ended September 30, 2016 Banking(1) Factoring Consolidated (Dollars in thousands) Interest income $ 20,743 $ 3,131 $ 23,874 Intersegment interest allocations 314 (314) — Total interest expense 826 — 826 Net interest income 20,231 2,817 23,048 Provision for loan losses 237 8 245 Net interest income after provision 19,994 2,809 22,803 Noninterest income 2,160 152 2,312 Noninterest expense 12,382 1,914 14,296 Intersegment expense allocations 234 (234) — Income before income taxes 10,006 813 10,819 Income tax expense 3,712 342 4,054 Net income $ 6,294 $ 471 $ 6,765 Total assets $ 2,464,438 $ 63,524 $ 2,527,962 Loans, net of deferred fees $ 1,402,330 $ 47,846 $ 1,450,176 Goodwill $ 32,620 $ 13,044 $ 45,664 (1) Includes the holding company’s results of operations Nine Months Ended September 30, 2017 Banking(1) Factoring Consolidated (Dollars in thousands) Interest income $ 70,146 $ 8,613 $ 78,759 Intersegment interest allocations 786 (786) — Total interest expense 3,679 — 3,679 Net interest income 67,253 7,827 75,080 Provision for loan losses 372 18 390 Net interest income after provision 66,881 7,809 — 74,690 Noninterest income 6,153 895 7,048 Noninterest expense 40,152 5,264 45,416 Intersegment expense allocations 392 (392) — Income before income taxes 33,274 3,048 36,322 Income tax expense 12,472 1,280 13,752 Net income $ 20,802 $ 1,768 $ 22,570 Total assets $ 2,776,262 $ 67,686 $ 2,843,948 Loans, net of deferred fees $ 1,517,186 $ 48,764 $ 1,565,950 Goodwill $ 32,620 $ 13,044 $ 45,664 Nine Months Ended September 30, 2016 Banking(1) Factoring Consolidated (Dollars in thousands) Interest income $ 61,252 $ 9,188 $ 70,440 Intersegment interest allocations 863 (863) — Total interest expense 2,344 — 2,344 Net interest income 59,771 8,325 68,096 Provision for loan losses 949 48 997 Net interest income after provision 58,822 8,277 67,099 Noninterest income 8,069 517 8,586 Noninterest expense 38,036 5,326 43,362 Intersegment expense allocations 623 (623) — Income before income taxes 29,478 2,845 32,323 Income tax expense 10,962 1,195 12,157 Net income $ 18,516 $ 1,650 $ 20,166 Total assets $ 2,464,438 $ 63,524 $ 2,527,962 Loans, net of deferred fees $ 1,402,330 $ 47,846 $ 1,450,176 Goodwill $ 32,620 $ 13,044 $ 45,664 (1) Includes the holding company’s results of operations |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2017 | |
Subsequent Events | |
Subsequent Events | 16) Subsequent Events On October 26, 2017, the Company announced that its Board of Directors declared a $0.10 per share quarterly cash dividend to holders of common stock. The dividend will be paid on November 21, 2017 to shareholders of record on November 7, 2017. |
Basis of Presentation (Policies
Basis of Presentation (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
Basis of Presentation | |
Basis of Presentation | Basis of Presentation The unaudited consolidated financial statements of Heritage Commerce Corp (the “Company” or “HCC”) and its wholly owned subsidiary, Heritage Bank of Commerce (“HBC”), have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and notes required by accounting principles generally accepted in the United States of America (“GAAP”) for annual financial statements are not included herein. The interim statements should be read in conjunction with the consolidated financial statements and notes that were included in the Company’s Form 10-K for the year ended December 31, 2016. The Company acquired Focus Business Bank (“Focus”) on August 20, 2015. Focus was merged with HBC, with HBC as the surviving bank. HBC is a commercial bank serving customers primarily located in Santa Clara, Alameda, Contra Costa, and San Benito counties of California. BVF/CSNK Acquisition Corp., a Delaware corporation (“BVF/CSNK”), the parent company of CSNK Working Capital Finance Corp. dba Bay View Funding (“Bay View Funding”) is a wholly owned subsidiary of HBC, and provides business-essential working capital factoring financing to various industries throughout the United States. No customer accounts for more than 10% of revenue for HBC or the Company. The Company reports its results for two segments: banking and factoring. The Company’s management uses segment results in its operating and strategic planning. In management’s opinion, all adjustments necessary for a fair presentation of these consolidated financial statements have been included and are of a normal and recurring nature. All intercompany transactions and balances have been eliminated. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ significantly from these estimates. The results for the three and nine months ended September 30, 2017 are not necessarily indicative of the results expected for any subsequent period or for the entire year ending December 31, 2017. |
Reclassifications | Reclassifications Certain reclassifications of prior year balances have been made to conform to the current year presentation. These reclassifications had no impact on the Company’s consolidated financial position, results of operations or net change in cash and cash equivalents. |
Adoption of New Accounting Standards | Adoption of New Accounting Standards In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09, Compensation—Stock Compensation: Improvements to Employee Share Based Payment Accounting. The standard is intended to simplify several areas of accounting for share based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. All excess tax benefits and tax deficiencies (including tax benefits of dividends on share based payment awards) should be recognized as income tax expense or benefit in the income statement. The tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur. An entity also should recognize excess tax benefits regardless of whether the benefit reduces taxes payable in the current period. Excess tax benefits should be classified along with other income tax cash flows as an operating activity. An entity can make an entity wide accounting policy election to either estimate the number of awards that are expected to vest (current GAAP) or account for forfeitures when they occur. The threshold to qualify for equity classification permits withholding up to the maximum statutory tax rates in the applicable jurisdictions. The Company adopted the new guidance on January 1, 2017. The amount of the impact on the effective tax rate will be determined by the number of stock options exercised and the stock price of the Company when the stock options are exercised, and the amount of restricted stock awards vesting. The adoption of this guidance resulted in a reduction to net income tax expense of ($106,000) for the third quarter of 2017, and a reduction to income tax expense of ($158,000) for the first nine months of 2017. In connection with the adoption, the Company has elected to estimate forfeitures each reporting period. Newly Issued, but not yet Effective Accounting Standards In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which was an update to the guidance for accounting for revenue from contracts with customers. The guidance in this update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides steps to follow to achieve the core principle. An entity should disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Qualitative and quantitative information is required about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. The amendments in this update become effective for annual periods and interim periods within those annual periods beginning after December 15, 2017. The Company’s revenue is primarily comprised of net interest income on financial assets and liabilities, which is excluded from the scope of ASU No. 2014-09. The Company has determined the result of applying this ASU to the individual revenue streams affected, as well as on an aggregate basis, will not be material to the Company’s consolidated financial statements. The Company continues to evaluate the impact of the disclosure requirements associated with ASU No. 2014-09. In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Recognition and Measurement of Financial Assets and Liabilities. The new guidance is intended to improve the recognition and measurement of financial instruments by requiring: equity investments (other than equity method or consolidation) to be measured at fair value with changes in fair value recognized in net income; public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; separate presentation of financial assets and financial liabilities by measurement category and form of financial assets (i.e. securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; eliminating the requirement to disclose the fair value of financial instruments measured at amortized cost for organizations that are not public business entities; eliminating the requirement for non-public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is to be required to be disclosed for financial instruments measured at amortized cost on the balance sheet; and requiring a reporting organization to present separately in other comprehensive income the portion of the total change in fair value of a liability resulting from the change in the instrument-specific credit risk (also referred to as “own credit”) when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. The new guidance is effective for public business entities for fiscal years beginning after December 15, 2017. We are currently evaluating the impact of adopting the new guidance on the consolidated financial statements. Our preliminary finding is that the new pronouncement will not have a significant impact on our Statement of Operations as the majority of the Company's investment securities are classified as available-for-sale and held-to-maturity debt securities. The pronouncement will require some revision to our disclosures within the consolidated financial statements and we are currently evaluating the impact. In February 2016, the FASB issued ASU No. 2016-02, Leases. The standard requires a lessee to recognize assets and liabilities on the balance sheet for leases with lease terms greater than 12 months. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right of use asset representing its right to use the underlying asset for the lease term. When measuring assets and liabilities arising from a lease, a lessee (and a lessor) should include payments to be made in optional periods only if the lessee is reasonably certain to exercise an option to extend the lease or not to exercise an option to terminate the lease. Similarly, optional payments to purchase the underlying asset should be included in the measurement of lease assets and lease liabilities only if the lessee is reasonably certain to exercise that purchase option. Reasonably certain is a high threshold that is consistent with and intended to be applied in the same way as the reasonably assured threshold in the previous leases guidance. In addition, also consistent with the previous leases guidance, a lessee (and a lessor) should exclude most variable lease payments in measuring lease assets and lease liabilities, other than those that depend on an index or a rate or are in substance fixed payments. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight line basis over the lease term. The new guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, and early adoption is permitted. We are currently evaluating the provisions of this ASU and have determined that the provisions of ASU No. 2016-02 will result in an increase in assets to recognize the present value of the lease obligations with a corresponding increase in liabilities; however, we do not expect this to have a material impact to the Company’s results of operations or cash flows. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments. The standard is the final guidance on the new current expected credit loss (“CECL”) model. The amendments in this update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to estimate future credit loss estimates. As CECL encompasses all financial assets carried at amortized cost, the requirement that reserves be established based on an organization’s reasonable and supportable estimate of expected credit losses extends to held-to-maturity debt securities. The update amends the accounting for credit losses on available for sale securities, whereby credit losses will be presented as an allowance as opposed to a write down. In addition, CECL will modify the accounting for purchased loans with credit deterioration since origination, so that reserves are established at the date of acquisition for purchased loans. Lastly, the amendment requires enhanced disclosures on the significant estimates and judgments used to estimate credit losses, as well as on the credit quality and underwriting standards of an organization’s portfolio. These disclosures require organizations to present the currently required credit quality disclosures disaggregated by the year of origination or vintage. The guidance allows for a modified retrospective approach with a cumulative effect adjustment to the balance sheet upon adoption (charge to retained earnings instead of the income statement). The new guidance is effective for public business entities for fiscal years, and interim periods within those years, beginning after December 15, 2019, and early adoption is permitted. We have formed a committee that is assessing our data and system needs and are evaluating the impact of adopting the new guidance. We expect to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective, but cannot yet determine the magnitude of any such one-time adjustment or the overall impact of the new guidance on the consolidated financial statements. In January 2017, the FASB issued accounting standards ASU No. 2017-04, Simplifying the Test for Goodwill Impairment. The provisions of the update eliminate the existing second step of the goodwill impairment test which provides for the allocation of reporting unit fair value among existing assets and liabilities, with the net remaining amount representing the implied fair value of goodwill. In replacement of the existing goodwill impairment rule, the update will provide that impairment should be recognized as the excess of any of the reporting unit’s goodwill over the fair value of the reporting unit. Under the provisions of this update, the amount of the impairment is limited to the carrying value of the reporting unit’s goodwill. For public business entities that are SEC filers, the amendments of the update will become effective in fiscal years beginning after December 15, 2019. Management does not expect the requirements of this update to have a material impact on the Company’s financial position, results of operations or cash flows. |
Shareholders_ Equity and Earn26
Shareholders’ Equity and Earnings Per Share (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Shareholders’ Equity and Earnings Per Share. | |
Schedule of reconciliation of factors used in computing basic and diluted earnings per common share | Three Months Ended Nine Months Ended September 30, September 30, 2017 2016 2017 2016 (Dollars in thousands, except per share amounts) Net income available to common shareholders $ 8,583 $ 6,261 $ 22,570 $ 18,654 Less: undistributed earnings allocated to Series C Preferred Stock — (300) — (1,278) Distributed and undistributed earnings allocated to common shareholders $ 8,583 $ 5,961 $ 22,570 $ 17,376 Weighted average common shares outstanding for basic earnings per common share 38,152,633 33,397,704 38,060,224 32,591,784 Dilutive effect of stock options outstanding, using the treasury stock method 428,665 295,624 504,910 272,071 Shares used in computing diluted earnings per common share 38,581,298 33,693,328 38,565,134 32,863,855 Basic earnings per share $ 0.22 $ 0.18 $ 0.59 $ 0.53 Diluted earnings per share $ 0.22 $ 0.18 $ 0.59 $ 0.53 |
Accumulated Other Comprehensi27
Accumulated Other Comprehensive Income (Loss) (''AOCI'') (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Accumulated Other Comprehensive Income (Loss) ("AOCI") | |
Schedule of changes in AOCI by component | Three Months Ended September 30, 2017 and 2016 Unamortized Unrealized Unrealized Gain on Gains (Losses) on Available- Available- for-Sale Defined for-Sale Securities Benefit Securities Reclassified Pension and I/O to Held-to- Plan Strips(1) Maturity Items Total (Dollars in thousands) Beginning balance July 1, 2017, net of taxes $ 877 $ 321 $ (7,665) $ (6,467) Other comprehensive income (loss) before reclassification, net of taxes 312 — (7) 305 Amounts reclassified from other comprehensive income (loss), net of taxes — (7) 29 22 Net current period other comprehensive income (loss), net of taxes 312 (7) 22 327 Ending balance September 30, 2017, net of taxes $ 1,189 $ 314 $ (7,643) $ (6,140) Beginning balance July 1, 2016, net of taxes $ 5,170 $ 351 $ (7,663) $ (2,142) Other comprehensive income (loss) before reclassification, net of taxes 121 — (6) 115 Amounts reclassified from other comprehensive income (loss), net of taxes — (8) 27 19 Net current period other comprehensive income (loss), net of taxes 121 (8) 21 134 Ending balance September 30, 2016, net of taxes $ 5,291 $ 343 $ (7,642) $ (2,008) Nine Months Ended September 30, 2017 and 2016 Unamortized Unrealized Unrealized Gain on Gains (Losses) on Available- Available- for-Sale Defined for-Sale Securities Benefit Securities Reclassified Pension and I/O to Held-to- Plan Strips Maturity Items Total (Dollars in thousands) Beginning balance January 1, 2017, net of taxes $ (540) $ 336 $ (7,710) $ (7,914) Other comprehensive (loss) before reclassification, net of taxes 1,725 — (22) 1,703 Amounts reclassified from other comprehensive income (loss), net of taxes 4 (22) 89 71 Net current period other comprehensive income (loss), net of taxes 1,729 (22) 67 1,774 Ending balance September 30, 2017, net of taxes $ 1,189 $ 314 $ (7,643) $ (6,140) Beginning balance January 1, 2016, net of taxes $ 1,090 $ 403 $ (7,713) $ (6,220) Other comprehensive (loss) before reclassification, net of taxes 4,507 — (11) 4,496 Amounts reclassified from other comprehensive income (loss), net of taxes (306) (60) 82 (284) Net current period other comprehensive income (loss), net of taxes 4,201 (60) 71 4,212 Ending balance September 30, 2016, net of taxes $ 5,291 $ 343 $ (7,642) $ (2,008) |
Schedule of reclassifications out of AOCI into net income | Amounts Reclassified from AOCI(1) Three Months Ended September 30, Affected Line Item Where Details About AOCI Components 2017 2016 Net Income is Presented (Dollars in thousands) Unrealized (loss) gains on available-for-sale securities and I/O strips $ — $ — Gain on sales of securities — — Income tax expense — — Net of tax Amortization of unrealized gain on securities available-for-sale that were reclassified to securities held-to-maturity 12 13 Interest income on taxable securities (5) (5) Income tax expense 7 8 Net of tax Amortization of defined benefit pension plan items (1) Prior transition obligation 18 13 Actuarial losses (69) (60) (51) (47) Income before income tax 22 20 Income tax benefit (29) (27) Net of tax Total reclassification for the year $ (22) $ (19) (1) This AOCI component is included in the computation of net periodic benefit cost (see Note 8—Benefit Plans) and includes split-dollar life insurance benefit plan. Amounts Reclassified from AOCI(1) Nine Months Ended September 30, Details About AOCI Components 2017 2016 Net Income is Presented (Dollars in thousands) Unrealized gains on available-for-sale securities and I/O strips $ (6) $ 527 Gain (loss) on sales of securities 2 (221) Income tax expense (4) 306 Net of tax Amortization of unrealized gain on securities available-for-sale that were reclassified to securities held-to-maturity 38 103 Interest income on taxable securities (16) (43) Income tax expense 22 60 Net of tax Amortization of defined benefit pension plan items (1) Prior transition obligation 53 39 Actuarial losses (207) (180) (154) (141) Income before income tax 65 59 Income tax benefit (89) (82) Net of tax Total reclassification from AOCI for the year $ (71) $ 284 (1) This AOCI component is included in the computation of net periodic benefit cost (see Note 8—Benefit Plans) and includes split-dollar life insurance benefit plan. |
Securities (Tables)
Securities (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Securities | |
Schedule of amortized cost and estimated fair value of securities | Gross Gross Estimated Amortized Unrealized Unrealized Fair September 30, 2017 Cost Gains (Losses) Value (Dollars in thousands) Securities available-for-sale: Agency mortgage-backed securities $ 374,057 1,275 (2,165) $ 373,167 Trust preferred securities 15,000 1,940 — 16,940 Total $ 389,057 $ 3,215 $ (2,165) $ 390,107 Securities held-to-maturity: Agency mortgage-backed securities $ 290,418 $ 259 $ (2,341) $ 288,336 Municipals - exempt from Federal tax 89,132 1,054 (677) 89,509 Total $ 379,550 $ 1,313 $ (3,018) $ 377,845 Gross Gross Estimated Amortized Unrealized Unrealized Fair December 31, 2016 Cost Gains (Losses) Value (Dollars in thousands) Securities available-for-sale: Agency mortgage-backed securities $ 293,598 $ 928 $ (3,537) $ 290,989 Trust preferred securities 15,000 600 — 15,600 Total $ 308,598 $ 1,528 $ (3,537) $ 306,589 Securities held-to-maturity: Agency mortgage-backed securities $ 233,409 $ 15 $ (3,554) $ 229,870 Municipals - exempt from Federal tax 90,601 521 (2,244) 88,878 Total $ 324,010 $ 536 $ (5,798) $ 318,748 |
Schedule of securities with unrealized losses | Less Than 12 Months 12 Months or More Total Fair Unrealized Fair Unrealized Fair Unrealized September 30, 2017 Value (Losses) Value (Losses) Value (Losses) (Dollars in thousands) Securities available-for-sale: Agency mortgage-backed securities $ 237,933 $ (2,049) $ 9,346 $ (116) $ 247,279 $ (2,165) Total $ 237,933 $ (2,049) $ 9,346 $ (116) $ 247,279 $ (2,165) Securities held-to-maturity: Agency mortgage-backed securities $ 191,603 $ (1,980) $ 26,547 $ (361) $ 218,150 $ (2,341) Municipals - exempt from Federal tax 15,922 (116) 20,443 (561) 36,365 (677) Total $ 207,525 $ (2,096) $ 46,990 $ (922) $ 254,515 $ (3,018) Less Than 12 Months 12 Months or More Total Fair Unrealized Fair Unrealized Fair Unrealized December 31, 2016 Value (Losses) Value (Losses) Value (Losses) (Dollars in thousands) Securities available-for-sale: Agency mortgage-backed securities $ 245,045 $ (3,537) $ — $ — $ 245,045 $ (3,537) Total $ 245,045 $ (3,537) $ — $ — $ 245,045 $ (3,537) Securities held-to-maturity: Agency mortgage-backed securities $ 222,132 $ (3,528) $ 612 $ (26) $ 222,744 $ (3,554) Municipals - exempt from Federal tax 57,304 (2,026) 2,046 (218) 59,350 (2,244) Total $ 279,436 $ (5,554) $ 2,658 $ (244) $ 282,094 $ (5,798) |
Schedule of proceeds from sales of securities and the resulting gains and losses | Three Months Ended Nine Months Ended September 30, September 30, 2017 2016 2017 2016 (Dollars in thousands) (Dollars in thousands) Proceeds $ — $ — $ 6,536 $ 49,171 Gross gains — — — 544 Gross losses — — (6) (17) |
Schedule of amortized cost and estimated fair values of securities, by contractual maturity | Available-for-sale Amortized Estimated Cost Fair Value (Dollars in thousands) Due after ten years $ 15,000 $ 16,940 Agency mortgage-backed securities 374,057 373,167 Total $ 389,057 $ 390,107 Held-to-maturity Amortized Estimated Cost Fair Value (Dollars in thousands) Due 3 months or less $ 370 $ 371 Due after 3 months through one year 505 506 Due after one through five years 3,680 3,756 Due after five through ten years 20,125 20,668 Due after ten years 64,452 64,208 Agency mortgage-backed securities 290,418 288,336 Total $ 379,550 $ 377,845 |
Loans (Tables)
Loans (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Loans | |
Schedule of loans | September 30, December 31, 2017 2016 (Dollars in thousands) Loans held-for-investment: Commercial $ 587,276 $ 604,331 Real estate: CRE 754,856 662,228 Land and construction 92,310 81,002 Home equity 74,171 82,459 Residential mortgages 46,489 52,887 Consumer 11,749 20,460 Loans 1,566,851 1,503,367 Deferred loan fees, net (901) (760) Loans, net of deferred fees 1,565,950 1,502,607 Allowance for loan losses (19,748) (19,089) Loans, net $ 1,546,202 $ 1,483,518 |
Schedule of changes in allowance for loan losses | Three Months Ended September 30, 2017 Commercial Real Estate Consumer Total (Dollars in thousands) Beginning of period balance $ 11,259 $ 7,982 $ 156 $ 19,397 Charge-offs (111) — — (111) Recoveries 281 66 — 347 Net recoveries 170 66 — 236 Provision (credit) for loan losses (441) 592 (36) 115 End of period balance $ 10,988 $ 8,640 $ 120 $ 19,748 Three Months Ended September 30, 2016 Commercial Real Estate Consumer Total (Dollars in thousands) Beginning of period balance $ 11,528 $ 8,277 $ 116 $ 19,921 Charge-offs (160) — — (160) Recoveries 21 5 — 26 Net (charge-offs) recoveries (139) 5 — (134) Provision (credit) for loan losses 792 (519) (28) 245 End of period balance $ 12,181 $ 7,763 $ 88 $ 20,032 Nine Months Ended September 30, 2017 Commercial Real Estate Consumer Total (Dollars in thousands) Beginning of period balance $ 10,656 $ 8,327 $ 106 $ 19,089 Charge-offs (2,179) — — (2,179) Recoveries 1,453 995 — 2,448 Net (charge-offs) recoveries (726) 995 — 269 Provision (credit) for loan losses 1,058 (682) 14 390 End of period balance $ 10,988 $ 8,640 $ 120 $ 19,748 Nine Months Ended September 30, 2016 Commercial Real Estate Consumer Total (Dollars in thousands) Beginning of period balance $ 10,748 $ 8,076 $ 102 $ 18,926 Charge-offs (300) — — (300) Recoveries 182 227 — 409 Net (charge-offs) recoveries (118) 227 — 109 Provision (credit) for loan losses 1,551 (540) (14) 997 End of period balance $ 12,181 $ 7,763 $ 88 $ 20,032 |
Schedule of balance in allowance for loan losses and recorded investment in loans by portfolio segment, based on impairment method | September 30, 2017 Commercial Real Estate Consumer Total (Dollars in thousands) Allowance for loan losses: Ending allowance balance attributable to loans: Individually evaluated for impairment $ 217 $ 25 $ — $ 242 Collectively evaluated for impairment 10,771 8,615 120 19,506 Acquired with deteriorated credit quality — — — — Total allowance balance $ 10,988 $ 8,640 $ 120 $ 19,748 Loans: Individually evaluated for impairment $ 1,833 $ 1,982 $ 1 $ 3,816 Collectively evaluated for impairment 585,443 965,844 11,748 1,563,035 Acquired with deteriorated credit quality — — — — Total loan balance $ 587,276 $ 967,826 $ 11,749 $ 1,566,851 December 31, 2016 Commercial Real Estate Consumer Total (Dollars in thousands) Allowance for loan losses: Ending allowance balance attributable to loans: Individually evaluated for impairment $ 329 $ — $ — $ 329 Collectively evaluated for impairment 10,327 8,327 106 18,760 Acquired with deteriorated credit quality — — — — Total allowance balance $ 10,656 $ 8,327 $ 106 $ 19,089 Loans: Individually evaluated for impairment $ 2,057 $ 885 $ 3 $ 2,945 Collectively evaluated for impairment 602,029 877,691 20,457 1,500,177 Acquired with deteriorated credit quality 245 — — 245 Total loan balance $ 604,331 $ 878,576 $ 20,460 $ 1,503,367 |
Schedule of loans held-for-investment individually evaluated for impairment by class of loans | September 30, 2017 December 31, 2016 Allowance Allowance Unpaid for Loan Unpaid for Loan Principal Recorded Losses Principal Recorded Losses Balance Investment Allocated Balance Investment Allocated (Dollars in thousands) With no related allowance recorded: Commercial $ 1,370 $ 1,370 $ — $ 1,808 $ 1,808 $ — Real estate: CRE 501 501 — 1,278 419 — Land and construction 202 183 — 218 199 — Home Equity 388 388 — 267 267 — Consumer 1 1 — 3 3 — Total with no related allowance recorded 2,462 2,443 — 3,574 2,696 — With an allowance recorded: Commercial 463 463 217 494 494 329 Real estate: Land and construction 910 910 25 — — — Total with an allowance recorded 1,373 1,373 242 494 494 329 Total $ 3,835 $ 3,816 $ 242 $ 4,068 $ 3,190 $ 329 |
Schedule of average impaired loans with interest recognized and cash-basis interest earned on impaired loans | Three Months Ended September 30, 2017 Real Estate Land and Home Commercial CRE Construction Equity Consumer Total (Dollars in thousands) Average of impaired loans during the period $ 2,010 $ 501 $ 641 $ 394 $ 1 $ 3,547 Interest income during impairment $ — $ — $ 3 $ — $ — $ 3 Cash-basis interest earned $ — $ — $ — $ — $ — $ — Three Months Ended September 30, 2016 Real Estate Land and Home Commercial CRE Construction Equity Consumer Total (Dollars in thousands) Average of impaired loans during the period $ 2,200 $ 1,644 $ 204 $ 516 $ 3 $ 4,567 Interest income during impairment $ — $ — $ — $ — $ — $ — Cash-basis interest earned $ — $ — $ — $ — $ — $ — Nine Months Ended September 30, 2017 Real Estate Land and Home Commercial CRE Construction Equity Consumer Total (Dollars in thousands) Average of impaired loans during the period $ 2,625 $ 583 $ 419 $ 326 $ 2 $ 3,955 Interest income during impairment $ — $ — $ 3 $ — $ — $ 3 Cash-basis interest earned $ — $ — $ — $ — $ — $ — Nine Months Ended September 30, 2016 Real Estate Land and Home Commercial CRE Construction Equity Consumer Total (Dollars in thousands) Average of impaired loans during the period $ 1,771 $ 2,298 $ 210 $ 715 $ 3 $ 4,997 Interest income during impairment $ — $ — $ — $ — $ — $ — Cash-basis interest earned $ — $ — $ — $ — $ — $ — |
Schedule of nonperforming loans | September 30, December 31, 2017 2016 2016 (Dollars in thousands) Nonaccrual loans - held-for-investment $ 2,560 $ 4,496 $ 3,059 Restructured and loans over 90 days past due and still accruing 931 — — Total nonperforming loans 3,491 4,496 3,059 Other restructured loans 325 137 131 Total impaired loans $ 3,816 $ 4,633 $ 3,190 |
Schedule of nonperforming loans by class | September 30, 2017 December 31, 2016 Restructured Restructured and Loans and Loans over 90 Days over 90 Days Past Due Past Due and Still and Still Nonaccrual Accruing Total Nonaccrual Accruing Total (Dollars in thousands) Commercial $ 1,487 $ $ 1,508 $ 2,171 $ — $ 2,171 Real estate: CRE 501 — 501 419 — 419 Land and construction 183 910 1,093 199 — 199 Home equity 388 — 388 267 — 267 Consumer 1 — 1 3 — 3 Total $ 2,560 $ 931 $ 3,491 $ 3,059 $ — $ 3,059 |
Schedule of aging of past due loans by class of loans | September 30, 2017 30 - 59 60 - 89 90 Days or Days Days Greater Total Loans Not Past Due Past Due Past Due Past Due Past Due Total (Dollars in thousands) Commercial $ 3,798 $ 601 $ 575 $ 4,974 $ 582,302 $ 587,276 Real estate: CRE — 831 — 831 754,025 754,856 Land and construction — — 1,093 1,093 91,217 92,310 Home equity — — — — 74,171 74,171 Residential mortgages — — — — 46,489 46,489 Consumer — — — — 11,749 11,749 Total $ 3,798 $ 1,432 $ 1,668 $ 6,898 $ 1,559,953 $ 1,566,851 December 31, 2016 30 - 59 60 - 89 90 Days or Days Days Greater Total Loans Not Past Due Past Due Past Due Past Due Past Due Total (Dollars in thousands) Commercial $ 3,998 $ 857 $ 2,036 $ 6,891 $ 597,440 $ 604,331 Real estate: CRE 632 — — 632 661,596 662,228 Land and construction — — 199 199 80,803 81,002 Home equity — 267 — 267 82,192 82,459 Residential mortgages — — — — 52,887 52,887 Consumer — — — — 20,460 20,460 Total $ 4,630 $ 1,124 $ 2,235 $ 7,989 $ 1,495,378 $ 1,503,367 |
Summary of loan portfolio by loan type and credit quality classification | September 30, 2017 December 31, 2016 Nonclassified Classified Total Nonclassified Classified Total Commercial $ 578,867 $ 8,409 $ 587,276 $ 594,255 $ 10,076 $ 604,331 Real estate: CRE 754,152 704 754,856 659,777 2,451 662,228 Land and construction 91,217 1,093 92,310 80,803 199 81,002 Home equity 73,469 702 74,171 81,866 593 82,459 Residential mortgages 46,489 — 46,489 52,887 — 52,887 Consumer 11,748 1 11,749 20,455 5 20,460 Total $ 1,555,942 $ 10,909 $ 1,566,851 $ 1,490,043 $ 13,324 $ 1,503,367 |
Schedule of loans by class modified as troubled debt restructurings | During the Nine Months Ended September 30, 2017 Pre-modification Post-modification Number Outstanding Outstanding of Recorded Recorded Troubled Debt Restructurings: Contracts Investment Investment (Dollars in thousands) Commercial 3 $ 318 $ 318 Total 3 $ 318 $ 318 |
Goodwill and Other Intangible30
Goodwill and Other Intangible Assets (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Goodwill and Other Intangible Assets | |
Schedule of estimated amortization expense | Estimated amortization expense for 2017 and each of the next five years and thereafter as follows: Bay View Funding Diablo Valley Customer & Bank Core Focus Core Below Market Brokered Non-Compete Total Deposit Deposit Value Lease Relationship Agreement Amortization Year Intangible Intangible Intangible Intangible Intangible Expense (Dollars in thousands) 2017 $ 195 $ 875 $ 31 $ 190 $ 70 $ 1,361 2018 — 775 — 190 — 965 2019 — 734 — 190 — 924 2020 — 716 — 190 — 906 2021 — 596 — 190 — 786 2022 — 502 — 190 — 692 Thereafter — 967 — 349 — 1,316 $ 195 $ 5,165 $ 31 $ 1,489 $ 70 $ 6,950 |
Income Taxes (Tables)
Income Taxes (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Income Taxes | |
Summary of carrying amount of income tax housing investment | September 30, December 31, 2017 2016 (Dollars in thousands) Low income housing investments $ 3,526 $ Future commitments $ 365 $ |
Benefit Plans (Tables)
Benefit Plans (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Supplemental Retirement Plan | |
Benefit plans | |
Schedule of components of net periodic benefit cost | Three Months Ended Nine Months Ended September 30, September 30, 2017 2016 2017 2016 (Dollars in thousands) Components of net periodic benefit cost: Service cost $ 81 $ 134 $ 243 $ 400 Interest cost 259 259 777 777 Amortization of net actuarial loss 69 60 207 180 Net periodic benefit cost $ 409 $ 453 $ 1,227 $ 1,357 |
Split-Dollar Life Insurance Benefit Plan | |
Benefit plans | |
Schedule of change in projected benefit obligation | September 30, December 31, 2017 2016 (Dollars in thousands) Change in projected benefit obligation: Projected benefit obligation at beginning of year $ 6,301 $ 6,215 Interest cost 182 248 Actuarial gain — (162) Projected benefit obligation at end of period $ 6,483 $ 6,301 |
Schedule of amounts recognized in accumulated other comprehensive loss | September 30, December 31, 2017 2016 (Dollars in thousands) Net actuarial loss $ 2,246 $ 2,126 Prior transition obligation 1,261 1,328 Accumulated other comprehensive loss $ 3,507 $ 3,454 |
Schedule of components of net periodic benefit cost | Three Months Ended Nine Months Ended September 30, September 30, 2017 2016 2017 2016 (Dollars in thousands) Amortization of prior transition obligation $ (18) $ (13) $ (53) $ (39) Interest cost 61 62 182 186 Net periodic benefit cost $ 43 $ 49 $ 129 $ 147 |
Fair Value (Tables)
Fair Value (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Fair Value | |
Schedule of financial assets and liabilities measured on a recurring basis | Fair Value Measurements Using Significant Quoted Prices in Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs Balance (Level 1) (Level 2) (Level 3) (Dollars in thousands) Assets at September 30, 2017 Available-for-sale securities: Agency mortgage-backed securities $ 373,167 — $ 373,167 — Trust preferred securities 16,940 — 16,940 — I/O strip receivables 989 — 989 — Assets at December 31, 2016 Available-for-sale securities: Agency mortgage-backed securities $ 290,989 — $ 290,989 — Trust preferred securities 15,600 — 15,600 — I/O strip receivables 1,067 — 1,067 — |
Schedule of assets and liabilities measured on a non-recurring basis | Fair Value Measurements Using Significant Quoted Prices in Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs Balance (Level 1) (Level 2) (Level 3) (Dollars in thousands) Assets at September 30, 2017 Impaired loans - held-for-investment: Commercial $ 246 — — $ 246 Real estate: Land and construction 1,068 — — 1,068 $ 1,314 — — $ 1,314 Assets at December 31, 2016 Impaired loans - held-for-investment: Commercial $ 165 — — $ 165 Real estate: CRE 419 — — 419 Land and construction 199 — — 199 $ 783 — — $ 783 Foreclosed assets: Land and construction $ — — $ $ $ |
Schedule of impaired loans held-for-investment and impaired loans held-for-investment carried at fair value | September 30, 2017 December 31, 2016 (Dollars in thousands) Impaired loans held-for-investment: Book value of impaired loans held-for-investment carried at fair value $ 1,556 $ 1,112 Book value of impaired loans held-for-investment carried at cost 2,260 2,078 Total impaired loans held-for-investment $ 3,816 $ 3,190 Impaired loans held-for-investment carried at fair value: Book value of impaired loans held-for-investment carried at fair value $ 1,556 $ 1,112 Specific valuation allowance (242) (329) Impaired loans held-for-investment carried at fair value, net $ 1,314 $ 783 |
Schedule of quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis | September 30, 2017 Valuation Unobservable Range Fair Value Techniques Inputs (Weighted Average) (Dollars in thousands) Impaired loans - held-for-investment: Commercial $ 246 Market Approach Discount adjustment for differences between comparable sales Less than 1 % Real estate: Land and construction 1,068 Market Approach Discount adjustment for differences between comparable sales Less than 1% December 31, 2016 Valuation Unobservable Range Fair Value Techniques Inputs (Weighted Average) (Dollars in thousands) Impaired loans - held-for-investment: Commercial $ 165 Market Approach Discount adjustment for differences between comparable sales Less than 1% Real estate: CRE 419 Market Approach Discount adjustment for differences between comparable sales 0% to 3% (3)% Land and construction 199 Market Approach Discount adjustment for differences between comparable sales Less than 1% Foreclosed assets: Land and construction 229 Market Approach Discount adjustment for differences between comparable sales 0% to 2% (2)% |
Schedule of carrying amounts and estimated fair values of financial instruments | The carrying amounts and estimated fair values of financial instruments at September 30, 2017 are as follows: Estimated Fair Value Significant Quoted Prices in Other Significant Active Markets for Observable Unobservable Carrying Identical Assets Inputs Inputs Amounts (Level 1) (Level 2) (Level 3) Total (Dollars in thousands) Assets: Cash and cash equivalents $ 346,120 $ 346,120 $ — $ — $ 346,120 Securities available-for-sale 390,107 — 390,107 — 390,107 Securities held-to-maturity 379,550 — 377,845 — 377,845 Loans (including loans held-for-sale), net 1,550,804 — 4,602 1,497,010 1,501,612 FHLB stock, FRB stock, and other investments 17,905 — — — N/A Accrued interest receivable 7,818 — 2,522 5,296 7,818 I/O strips receivables 989 — 989 — 989 Liabilities: Time deposits $ 204,291 $ — $ 204,555 $ — $ 204,555 Other deposits 2,276,313 — 2,276,313 — 2,276,313 Subordinated debt 39,137 — 39,937 39,937 Accrued interest payable 934 — 934 — 934 The carrying amounts and estimated fair values of the Company’s financial instruments at December 31, 2016: Estimated Fair Value Significant Quoted Prices in Other Significant Active Markets for Observable Unobservable Carrying Identical Assets Inputs Inputs Amounts (Level 1) (Level 2) (Level 3) Total (Dollars in thousands) Assets: Cash and cash equivalents $ 266,103 $ 266,103 $ — $ — $ 266,103 Securities available-for-sale 306,589 — 306,589 — 306,589 Securities held-to-maturity 324,010 — 318,748 — 318,748 Loans (including loans held-for-sale), net 1,489,223 — 5,705 1,444,076 1,449,781 FHLB stock, FRB stock, and other investments 15,196 — — — N/A Accrued interest receivable 6,859 — 1,961 4,898 6,859 I/O strips receivables 1,067 — 1,067 — 1,067 Liabilities: Time deposits $ 224,717 $ — $ 225,047 $ — $ 225,047 Other deposits 2,037,423 — 2,037,423 — 2,037,423 Accrued interest payable 168 — 168 — 168 |
Equity Plan (Tables)
Equity Plan (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Equity Plan | |
Schedule of stock option activity under the equity plans | Weighted Weighted Average Average Remaining Aggregate Number Exercise Contractual Intrinsic Total Stock Options of Shares Price Life (Years) Value Outstanding at January 1, 2017 1,719,091 $ 9.79 Granted 270,000 $ 14.41 Exercised (193,863) $ 6.98 Forfeited or expired (151,119) $ 22.85 Outstanding at September 30, 2017 1,644,109 $ 9.69 6.41 $ 6,972,963 Vested or expected to vest 1,545,462 6.41 $ 6,554,585 Exercisable at September 30, 2017 1,085,246 5.21 $ 5,799,239 |
Schedule of information related to the equity Plan | Nine Months Ended September 30, 2017 2016 Intrinsic value of options exercised $ 1,331,528 $ 437,357 Cash received from option exercise $ 1,352,236 $ 771,386 Tax benefit realized from option exercises $ 543,654 $ 174,194 Weighted average fair value of options granted $ 2.66 $ 2.12 |
Schedule of assumptions used to estimate the fair value of each option grant on the date of grant | Nine Months Ended September 30, 2017 2016 Expected life in months(1) 72 72 Volatility(1) 24 % 31 % Weighted average risk-free interest rate(2) 1.94 % 1.41 % Expected dividends(3) 2.78 % 3.48 % (1) The expected life of employee stock options represents the weighted average period the stock options are expected to remain outstanding based on historical experience. Volatility is based on the historical volatility of the stock price over the same period of the expected life of the option. (2) Based on the U.S. Treasury constant maturity interest rate with a term consistent with the expected life of the option granted. (3) Each grant’s dividend yield is calculated by annualizing the most recent quarterly cash dividend and dividing that amount by the market price of the Company’s common stock as of the grant date |
Schedule of restricted stock activity under the equity plans | Weighted Average Grant Number Date Fair Total Restricted Stock Award of Shares Value Nonvested shares at January 1, 2017 199,503 $ 9.74 Granted 82,770 $ 14.36 Vested (64,954) $ 10.02 Forfeited or expired (18,634) $ 11.87 Nonvested shares at September 30, 2017 198,685 $ 11.38 |
Capital Requirements (Tables)
Capital Requirements (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Capital Requirements | |
Schedule of actual capital and required amounts and ratios | Required For Capital Adequacy Purposes Actual Under Basel III Amount Ratio Amount Ratio (1) (Dollars in thousands) As of September 30, 2017 Total Capital $ 289,231 14.6 % $ 183,750 9.25 % (to risk-weighted assets) Tier 1 Capital $ 229,656 11.6 % $ 144,020 7.25 % (to risk-weighted assets) Common Equity Tier 1 Capital $ 229,656 11.6 % $ 114,223 5.75 % (to risk-weighted assets) Tier 1 Capital $ 229,656 8.3 % $ 111,329 4.00 % (to average assets) (1) Includes 1.25% capital conservation buffer, effective January 1, 2017, except the Tier 1 Capital to average assets ratio. Required For Capital Adequacy Purposes Actual Under Basel III Amount Ratio Amount Ratio (1) (Dollars in thousands) As of December 31, 2016 Total Capital $ 234,629 12.5 % $ 161,868 8.625 % (to risk-weighted assets) Tier 1 Capital $ 214,924 11.5 % $ 124,333 6.625 % (to risk-weighted assets) Common Equity Tier 1 Capital $ 214,924 11.5 % $ 96,183 5.125 % (to risk-weighted assets) Tier 1 Capital $ 214,924 8.5 % $ 100,625 4.000 % (to average assets) (1) Includes 0.625% capital conservation buffer, effective January 1, 2016, except the Tier 1 Capital to average assets ratio. |
HBC (Wholly-owned Subsidiary) | |
Capital Requirements | |
Schedule of actual capital and required amounts and ratios | Required For Capital To Be Well-Capitalized Adequacy Under Basel III Regulatory Purposes Actual Requirements Under Basel III Amount Ratio Amount Ratio Amount Ratio (1) (Dollars in thousands) As of September 30, 2017 Total Capital $ 265,269 13.4 % $ 198,513 10.0 % $ 183,625 9.25 % (to risk-weighted assets) Tier 1 Capital $ 244,831 12.3 % $ 158,811 8.0 % $ 143,922 7.25 % (to risk-weighted assets) Common Equity Tier 1 Capital $ 244,831 12.3 % $ 129,034 6.5 % $ 114,145 5.75 % (to risk-weighted assets) Tier 1 Capital $ 244,831 8.8 % $ 139,101 5.0 % $ 111,281 4.00 % (to average assets) (1) Includes 1.25% capital conservation buffer, effective January 1, 2017, except the Tier 1 Capital to average assets ratio. Required For Capital To Be Well-Capitalized Adequacy Under Basel III Regulatory Purposes Actual Requirements Under Basel III Amount Ratio Amount Ratio Amount Ratio (1) (Dollars in thousands) As of December 31, 2016 Total Capital $ 231,069 12.3 % $ 187,602 10.0 % $ 161,807 8.625 % (to risk-weighted assets) Tier 1 Capital $ 211,364 11.3 % $ 150,082 8.0 % $ 124,287 6.625 % (to risk-weighted assets) Common Equity Tier 1 Capital $ 211,364 11.3 % $ 121,942 6.5 % $ 96,146 5.125 % (to risk-weighted assets) Tier 1 Capital $ 211,364 8.4 % $ 125,746 5.0 % $ 100,597 4.000 % (to average assets) (1) Includes 0.625% capital conservation buffer, effective January 1, 2016, except the Tier 1 Capital to average assets ratio. |
Noninterest Expense (Tables)
Noninterest Expense (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Noninterest Expense | |
Schedule of noninterest expense | Three Months Ended Nine Months Ended September 30, September 30, 2017 2016 2017 2016 (Dollars in thousands) Salaries and employee benefits $ 9,071 $ 8,363 $ 27,766 $ 26,052 Occupancy and equipment 1,142 1,120 3,426 3,277 Professional fees 695 1,086 2,439 2,619 Software subscriptions 475 401 1,333 1,118 Data processing 411 372 1,080 1,143 Insurance expense 401 319 1,123 924 FDIC deposit insurance premiums 304 308 860 966 Amortization of intangible assets 296 392 1,083 1,176 Foreclosed assets 2 10 6 14 Other 2,037 1,925 6,300 6,073 Total $ 14,834 $ 14,296 $ 45,416 $ 43,362 |
Business Segment Information (T
Business Segment Information (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Business Segment Information | |
Schedule of information by operating segment | Three Months Ended September 30, 2017 Banking(1) Factoring Consolidated (Dollars in thousands) Interest income $ 24,805 $ 3,150 $ 27,955 Intersegment interest allocations 284 (284) — Total interest expense 1,634 — 1,634 Net interest income 23,455 2,866 26,321 Provision for loan losses 107 8 115 Net interest income after provision 23,348 2,858 26,206 Noninterest income 2,101 359 2,460 Noninterest expense 13,149 1,685 14,834 Intersegment expense allocations 130 (130) — Income before income taxes 12,430 1,402 13,832 Income tax expense 4,660 589 5,249 Net income $ 7,770 $ 813 $ 8,583 Total assets $ 2,776,262 $ 67,686 $ 2,843,948 Loans, net of deferred fees $ 1,517,186 $ 48,764 $ 1,565,950 Goodwill $ 32,620 $ 13,044 $ 45,664 Three Months Ended September 30, 2016 Banking(1) Factoring Consolidated (Dollars in thousands) Interest income $ 20,743 $ 3,131 $ 23,874 Intersegment interest allocations 314 (314) — Total interest expense 826 — 826 Net interest income 20,231 2,817 23,048 Provision for loan losses 237 8 245 Net interest income after provision 19,994 2,809 22,803 Noninterest income 2,160 152 2,312 Noninterest expense 12,382 1,914 14,296 Intersegment expense allocations 234 (234) — Income before income taxes 10,006 813 10,819 Income tax expense 3,712 342 4,054 Net income $ 6,294 $ 471 $ 6,765 Total assets $ 2,464,438 $ 63,524 $ 2,527,962 Loans, net of deferred fees $ 1,402,330 $ 47,846 $ 1,450,176 Goodwill $ 32,620 $ 13,044 $ 45,664 (1) Includes the holding company’s results of operations Nine Months Ended September 30, 2017 Banking(1) Factoring Consolidated (Dollars in thousands) Interest income $ 70,146 $ 8,613 $ 78,759 Intersegment interest allocations 786 (786) — Total interest expense 3,679 — 3,679 Net interest income 67,253 7,827 75,080 Provision for loan losses 372 18 390 Net interest income after provision 66,881 7,809 — 74,690 Noninterest income 6,153 895 7,048 Noninterest expense 40,152 5,264 45,416 Intersegment expense allocations 392 (392) — Income before income taxes 33,274 3,048 36,322 Income tax expense 12,472 1,280 13,752 Net income $ 20,802 $ 1,768 $ 22,570 Total assets $ 2,776,262 $ 67,686 $ 2,843,948 Loans, net of deferred fees $ 1,517,186 $ 48,764 $ 1,565,950 Goodwill $ 32,620 $ 13,044 $ 45,664 Nine Months Ended September 30, 2016 Banking(1) Factoring Consolidated (Dollars in thousands) Interest income $ 61,252 $ 9,188 $ 70,440 Intersegment interest allocations 863 (863) — Total interest expense 2,344 — 2,344 Net interest income 59,771 8,325 68,096 Provision for loan losses 949 48 997 Net interest income after provision 58,822 8,277 67,099 Noninterest income 8,069 517 8,586 Noninterest expense 38,036 5,326 43,362 Intersegment expense allocations 623 (623) — Income before income taxes 29,478 2,845 32,323 Income tax expense 10,962 1,195 12,157 Net income $ 18,516 $ 1,650 $ 20,166 Total assets $ 2,464,438 $ 63,524 $ 2,527,962 Loans, net of deferred fees $ 1,402,330 $ 47,846 $ 1,450,176 Goodwill $ 32,620 $ 13,044 $ 45,664 (1) Includes the holding company’s results of operations |
Basis of Presentation (Details)
Basis of Presentation (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017USD ($) | Sep. 30, 2016USD ($) | Sep. 30, 2017USD ($)segmentcustomer | Sep. 30, 2016USD ($) | |
Segment Reporting | ||||
Number of customers accounting for more than 10 percent of revenue for HBC or the Company | customer | 0 | |||
Number of operating segments | segment | 2 | |||
Income tax expense | $ 5,249 | $ 4,054 | $ 13,752 | $ 12,157 |
Adjustments for New Accounting Pronouncement | ||||
Segment Reporting | ||||
Income tax expense | $ (106) | $ (158) |
Shareholders_ Equity and Earn39
Shareholders’ Equity and Earnings Per Share - Series C Preferred Stock (Details) - $ / shares | Sep. 12, 2016 | Sep. 30, 2017 | Dec. 31, 2016 |
Series C Preferred Stock | |||
Preferred stock, par value (in dollars per share) | $ 0 | $ 0 | |
Par value of common stock (in dollars per share) | $ 0 | $ 0 | |
Preferred Stockholders | |||
Series C Preferred Stock | |||
Common shares issued in exchange of convertible perpetual preferred stock (in shares) | 5,601,000 | ||
Par value of common stock (in dollars per share) | $ 0 | ||
Preferred Stockholders | Series C Preferred Stock | |||
Series C Preferred Stock | |||
Number of convertible preferred shares converted (in shares) | 21,004 | ||
Preferred stock, par value (in dollars per share) | $ 0 |
Shareholders_ Equity and Earn40
Shareholders’ Equity and Earnings Per Share - Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Reconciliation of factors used in computing basic and diluted earnings per common share | ||||
Net income available to common shareholders | $ 8,583 | $ 6,261 | $ 22,570 | $ 18,654 |
Less: undistributed earnings allocated to Series C Preferred Stock | (300) | (1,278) | ||
Distributed and undistributed earnings allocated to common shareholders | $ 8,583 | $ 5,961 | $ 22,570 | $ 17,376 |
Weighted average common shares outstanding for basic earnings per common share (in shares) | 38,152,633 | 33,397,704 | 38,060,224 | 32,591,784 |
Dilutive effect of stock options outstanding, using the treasury stock method (in shares) | 428,665 | 295,624 | 504,910 | 272,071 |
Shares used in computing diluted earnings per common share (in shares) | 38,581,298 | 33,693,328 | 38,565,134 | 32,863,855 |
Basic earnings per share (in dollars per share) | $ 0.22 | $ 0.18 | $ 0.59 | $ 0.53 |
Diluted earnings per share (in dollars per share) | $ 0.22 | $ 0.18 | $ 0.59 | $ 0.53 |
Accumulated Other Comprehensi41
Accumulated Other Comprehensive Income (Loss) (''AOCI'') - Changes in AOCI by Component (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Changes in AOCI by Component | ||||
Balance at the beginning of the period, net of taxes | $ (7,914) | |||
Net current period other comprehensive income (loss), net of taxes | $ 327 | $ 134 | 1,774 | $ 4,212 |
Balance at the end of the period, net of taxes | (6,140) | (6,140) | ||
Accumulated Other Comprehensive Income / (Loss) | ||||
Changes in AOCI by Component | ||||
Balance at the beginning of the period, net of taxes | (6,467) | (2,142) | (7,914) | (6,220) |
Other comprehensive income (loss) before reclassification, net of taxes | 305 | 115 | 1,703 | 4,496 |
Amounts reclassified from other comprehensive income (loss), net of taxes | 22 | 19 | 71 | (284) |
Net current period other comprehensive income (loss), net of taxes | 327 | 134 | 1,774 | 4,212 |
Balance at the end of the period, net of taxes | (6,140) | (2,008) | (6,140) | (2,008) |
Unrealized Gains on Available-for-Sale Securities and I/O Strips | ||||
Changes in AOCI by Component | ||||
Balance at the beginning of the period, net of taxes | 877 | 5,170 | (540) | 1,090 |
Other comprehensive income (loss) before reclassification, net of taxes | 312 | 121 | 1,725 | 4,507 |
Amounts reclassified from other comprehensive income (loss), net of taxes | 4 | (306) | ||
Net current period other comprehensive income (loss), net of taxes | 312 | 121 | 1,729 | 4,201 |
Balance at the end of the period, net of taxes | 1,189 | 5,291 | 1,189 | 5,291 |
Unamortized Unrealized Gain on Available-for-Sale Securities Reclassified to Held-to-Maturity | ||||
Changes in AOCI by Component | ||||
Balance at the beginning of the period, net of taxes | 321 | 351 | 336 | 403 |
Amounts reclassified from other comprehensive income (loss), net of taxes | (7) | (8) | (22) | (60) |
Net current period other comprehensive income (loss), net of taxes | (7) | (8) | (22) | (60) |
Balance at the end of the period, net of taxes | 314 | 343 | 314 | 343 |
Defined Benefit Pension Plan Items | ||||
Changes in AOCI by Component | ||||
Balance at the beginning of the period, net of taxes | (7,665) | (7,663) | (7,710) | (7,713) |
Other comprehensive income (loss) before reclassification, net of taxes | (7) | (6) | (22) | (11) |
Amounts reclassified from other comprehensive income (loss), net of taxes | 29 | 27 | 89 | 82 |
Net current period other comprehensive income (loss), net of taxes | 22 | 21 | 67 | 71 |
Balance at the end of the period, net of taxes | $ (7,643) | $ (7,642) | $ (7,643) | $ (7,642) |
Accumulated Other Comprehensi42
Accumulated Other Comprehensive Income (Loss) (''AOCI'') - Amount Reclassified from AOCI (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Amount Reclassified from AOCI | ||||
Gain (loss) on sales of securities | $ (6) | $ 527 | ||
Interest income on taxable securities | $ 3,596 | $ 2,401 | 9,916 | 8,004 |
Income tax expense | (5,249) | (4,054) | (13,752) | (12,157) |
Net income | 8,583 | 6,765 | 22,570 | 20,166 |
Unrealized Gains on Available-for-Sale Securities and I/O Strips | ||||
Amount Reclassified from AOCI | ||||
Net of tax | (4) | 306 | ||
Unrealized Gains on Available-for-Sale Securities and I/O Strips | Amount Reclassified from AOCI | ||||
Amount Reclassified from AOCI | ||||
Gain (loss) on sales of securities | (6) | 527 | ||
Income tax expense | 2 | (221) | ||
Net of tax | (4) | 306 | ||
Unamortized Unrealized Gain on Available-for-Sale Securities Reclassified to Held-to-Maturity | ||||
Amount Reclassified from AOCI | ||||
Net of tax | 7 | 8 | 22 | 60 |
Unamortized Unrealized Gain on Available-for-Sale Securities Reclassified to Held-to-Maturity | Amount Reclassified from AOCI | ||||
Amount Reclassified from AOCI | ||||
Interest income on taxable securities | 12 | 13 | 38 | 103 |
Income tax expense | (5) | (5) | (16) | (43) |
Net income | 7 | 8 | ||
Net of tax | 22 | 60 | ||
Defined Benefit Pension Plan Items | ||||
Amount Reclassified from AOCI | ||||
Net of tax | (29) | (27) | (89) | (82) |
Defined Benefit Pension Plan Items | Amount Reclassified from AOCI | ||||
Amount Reclassified from AOCI | ||||
Income before income tax | (51) | (47) | (154) | (141) |
Income tax benefit | 22 | 20 | 65 | 59 |
Net of tax | (29) | (27) | (89) | (82) |
Prior transition obligation | Amount Reclassified from AOCI | ||||
Amount Reclassified from AOCI | ||||
Income before income tax | 18 | 13 | 53 | 39 |
Actuarial losses | Amount Reclassified from AOCI | ||||
Amount Reclassified from AOCI | ||||
Income before income tax | (69) | (60) | (207) | (180) |
Accumulated Other Comprehensive Income / (Loss) | ||||
Amount Reclassified from AOCI | ||||
Net of tax | (22) | (19) | (71) | 284 |
Accumulated Other Comprehensive Income / (Loss) | Amount Reclassified from AOCI | ||||
Amount Reclassified from AOCI | ||||
Net of tax | $ (22) | $ (19) | $ (71) | $ 284 |
Securities - Amortized Cost and
Securities - Amortized Cost and Estimated Fair Value of Securities - Securities Available-for-sale (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Securities available-for-sale: | ||
Amortized Cost | $ 389,057 | $ 308,598 |
Gross Unrealized Gains | 3,215 | 1,528 |
Gross Unrealized Losses | (2,165) | (3,537) |
Estimated Fair Value | 390,107 | 306,589 |
Agency mortgage-backed securities | ||
Securities available-for-sale: | ||
Amortized Cost | 374,057 | 293,598 |
Gross Unrealized Gains | 1,275 | 928 |
Gross Unrealized Losses | (2,165) | (3,537) |
Estimated Fair Value | 373,167 | 290,989 |
Trust preferred securities | ||
Securities available-for-sale: | ||
Amortized Cost | 15,000 | 15,000 |
Gross Unrealized Gains | 1,940 | 600 |
Estimated Fair Value | $ 16,940 | $ 15,600 |
Securities - Amortized Cost a44
Securities - Amortized Cost and Estimated Fair Value of Securities - Securities Held-to-maturity (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Securities held-to-maturity: | ||
Amortized Cost | $ 379,550 | $ 324,010 |
Gross Unrealized Gains | 1,313 | 536 |
Gross Unrealized Losses | (3,018) | (5,798) |
Estimated Fair Value | 377,845 | 318,748 |
Agency mortgage-backed securities | ||
Securities held-to-maturity: | ||
Amortized Cost | 290,418 | 233,409 |
Gross Unrealized Gains | 259 | 15 |
Gross Unrealized Losses | (2,341) | (3,554) |
Estimated Fair Value | 288,336 | 229,870 |
Municipals - exempt from Federal tax | ||
Securities held-to-maturity: | ||
Amortized Cost | 89,132 | 90,601 |
Gross Unrealized Gains | 1,054 | 521 |
Gross Unrealized Losses | (677) | (2,244) |
Estimated Fair Value | $ 89,509 | $ 88,878 |
Securities - Securities with Un
Securities - Securities with Unrealized Losses - Securities Available-for-sale (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Available-for-sale, Fair Value | ||
Less Than 12 Months | $ 237,933 | $ 245,045 |
12 Months or More | 9,346 | |
Total | 247,279 | 245,045 |
Available-for-sale, Unrealized Losses | ||
Less Than 12 Months | (2,049) | (3,537) |
12 Months or More | (116) | |
Total | (2,165) | (3,537) |
Agency mortgage-backed securities | ||
Available-for-sale, Fair Value | ||
Less Than 12 Months | 237,933 | 245,045 |
12 Months or More | 9,346 | |
Total | 247,279 | 245,045 |
Available-for-sale, Unrealized Losses | ||
Less Than 12 Months | (2,049) | (3,537) |
12 Months or More | (116) | |
Total | $ (2,165) | $ (3,537) |
Securities - Securities with 46
Securities - Securities with Unrealized Losses - Securities Held-to-maturity (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Held-to-maturity, Fair Value | ||
Less Than 12 Months | $ 207,525 | $ 279,436 |
12 Months or More | 46,990 | 2,658 |
Total | 254,515 | 282,094 |
Held-to-maturity, Unrealized Losses | ||
Less Than 12 Months | (2,096) | (5,554) |
12 Months or More | (922) | (244) |
Total | (3,018) | (5,798) |
Agency mortgage-backed securities | ||
Held-to-maturity, Fair Value | ||
Less Than 12 Months | 191,603 | 222,132 |
12 Months or More | 26,547 | 612 |
Total | 218,150 | 222,744 |
Held-to-maturity, Unrealized Losses | ||
Less Than 12 Months | (1,980) | (3,528) |
12 Months or More | (361) | (26) |
Total | (2,341) | (3,554) |
Municipals - exempt from Federal tax | ||
Held-to-maturity, Fair Value | ||
Less Than 12 Months | 15,922 | 57,304 |
12 Months or More | 20,443 | 2,046 |
Total | 36,365 | 59,350 |
Held-to-maturity, Unrealized Losses | ||
Less Than 12 Months | (116) | (2,026) |
12 Months or More | (561) | (218) |
Total | $ (677) | $ (2,244) |
Securities - Additional Informa
Securities - Additional Information (Details) $ in Thousands | 9 Months Ended | |
Sep. 30, 2017USD ($)security | Dec. 31, 2016USD ($) | |
Additional Information | ||
The number of holdings of securities of any one issuer other than the U.S. Government and its sponsored entities | 0 | |
Holdings of securities as percentage of shareholders' equity, considered as threshold for disclosure purpose | 10.00% | |
Number of securities held | 494 | |
Number of available for sale securities held | 174 | |
Number of held to maturity securities held | 320 | |
Number of securities with fair values below amortized cost | 250 | |
12 Months or More | $ | $ 46,990 | $ 2,658 |
Municipals - exempt from Federal tax | ||
Additional Information | ||
12 Months or More | $ | $ 20,443 | $ 2,046 |
Securities - Proceeds from Sale
Securities - Proceeds from Sales of Securities and the Resulting Gains and Losses (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Proceeds from Sales of Securities and the Resulting Gains and Losses | ||
Proceeds | $ 6,536 | $ 49,171 |
Gross gains | 544 | |
Gross losses | $ (6) | $ (17) |
Securities - Amortized Cost a49
Securities - Amortized Cost and Fair Value of Debt Securities by Contractual Maturity – Securities Available-for-sale (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Available-for-sale, Amortized Cost | ||
Due after ten years | $ 15,000 | |
Agency mortgage-backed securities | 374,057 | |
Total | 389,057 | |
Available-for-sale, Estimated Fair Value | ||
Due after ten years | 16,940 | |
Agency mortgage-backed securities | 373,167 | |
Estimated Fair Value | $ 390,107 | $ 306,589 |
Securities - Amortized Cost a50
Securities - Amortized Cost and Fair Value of Debt Securities by Contractual Maturity – Securities Held-to-maturity (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Held-to-maturity, Amortized Cost | ||
Due after 3 months or less | $ 370 | |
Due after 3 months through one year | 505 | |
Due after one year through five years | 3,680 | |
Due after five years through ten years | 20,125 | |
Due after ten years | 64,452 | |
Agency mortgage-backed securities | 290,418 | |
Total | 379,550 | $ 324,010 |
Held-to-maturity, Estimated Fair Value | ||
Due 3 months or less | 371 | |
Due after 3 months through one year | 506 | |
Due after one year through five years | 3,756 | |
Due after five years through ten years | 20,668 | |
Due after ten years | 64,208 | |
Agency mortgage-backed securities | 288,336 | |
Estimated Fair Value | $ 377,845 | $ 318,748 |
Loans -Loans Balance (Details)
Loans -Loans Balance (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Dec. 31, 2015 |
Loans held-for-investment: | |||||||
Total loan balance | $ 1,566,851 | $ 1,503,367 | |||||
Deferred loan fees, net | (901) | (760) | |||||
Loans, net of deferred fees | 1,565,950 | 1,502,607 | $ 1,450,176 | ||||
Allowance for loan losses | (19,748) | $ (19,397) | (19,089) | (20,032) | $ (19,921) | $ (18,926) | |
Loans, net | 1,546,202 | 1,483,518 | |||||
Non-PCI loans acquired | 64,765 | ||||||
Commercial | |||||||
Loans held-for-investment: | |||||||
Total loan balance | 587,276 | 604,331 | |||||
Allowance for loan losses | (10,988) | (11,259) | (10,656) | (12,181) | (11,528) | (10,748) | |
Real estate | |||||||
Loans held-for-investment: | |||||||
Total loan balance | 967,826 | 878,576 | |||||
Allowance for loan losses | (8,640) | (7,982) | (8,327) | (7,763) | (8,277) | (8,076) | |
Real estate | Commercial | |||||||
Loans held-for-investment: | |||||||
Total loan balance | 754,856 | 662,228 | |||||
Real estate | Land and construction | |||||||
Loans held-for-investment: | |||||||
Total loan balance | 92,310 | 81,002 | |||||
Real estate | Home equity | |||||||
Loans held-for-investment: | |||||||
Total loan balance | 74,171 | 82,459 | |||||
Real estate | Residential mortgages | |||||||
Loans held-for-investment: | |||||||
Total loan balance | 46,489 | 52,887 | |||||
Consumer | |||||||
Loans held-for-investment: | |||||||
Total loan balance | 11,749 | 20,460 | |||||
Allowance for loan losses | $ (120) | $ (156) | (106) | $ (88) | $ (116) | $ (102) | |
Focus Business Bank | |||||||
Loans held-for-investment: | |||||||
Non-PCI loans acquired | $ 64,765 | $ 88,453 |
Loans - Changes in the Allowanc
Loans - Changes in the Allowance for Loan Losses (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Changes in the Allowance for Loan Losses | ||||
Balance, beginning of period | $ 19,397 | $ 19,921 | $ 19,089 | $ 18,926 |
Charge-offs | (111) | (160) | (2,179) | (300) |
Recoveries | 347 | 26 | 2,448 | 409 |
Net (charge-offs) recoveries | 236 | (134) | 269 | 109 |
Provision for loan losses | 115 | 245 | 390 | 997 |
Balance, end of period | 19,748 | 20,032 | 19,748 | 20,032 |
Commercial | ||||
Changes in the Allowance for Loan Losses | ||||
Balance, beginning of period | 11,259 | 11,528 | 10,656 | 10,748 |
Charge-offs | (111) | (160) | (2,179) | (300) |
Recoveries | 281 | 21 | 1,453 | 182 |
Net (charge-offs) recoveries | 170 | (139) | (726) | (118) |
Provision for loan losses | (441) | 792 | 1,058 | 1,551 |
Balance, end of period | 10,988 | 12,181 | 10,988 | 12,181 |
Real estate | ||||
Changes in the Allowance for Loan Losses | ||||
Balance, beginning of period | 7,982 | 8,277 | 8,327 | 8,076 |
Recoveries | 66 | 5 | 995 | 227 |
Net (charge-offs) recoveries | 66 | 5 | 995 | 227 |
Provision for loan losses | 592 | (519) | (682) | (540) |
Balance, end of period | 8,640 | 7,763 | 8,640 | 7,763 |
Consumer | ||||
Changes in the Allowance for Loan Losses | ||||
Balance, beginning of period | 156 | 116 | 106 | 102 |
Provision for loan losses | (36) | (28) | 14 | (14) |
Balance, end of period | $ 120 | $ 88 | $ 120 | $ 88 |
Loans - Balance in the Allowanc
Loans - Balance in the Allowance for Loan Losses and the Recorded Investment in Loans by Portfolio Segment, Based on the Impairment Method (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Jun. 30, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Dec. 31, 2015 |
Balance in the Allowance for Loan Losses and the Recorded Investment in Loans by Portfolio Segment, Based on the Impairment Method | ||||||
Allowance for loan losses, Individually evaluated for impairment | $ 242 | $ 329 | ||||
Allowance for loan losses, Collectively evaluated for impairment | 19,506 | 18,760 | ||||
Total allowance balance | 19,748 | $ 19,397 | 19,089 | $ 20,032 | $ 19,921 | $ 18,926 |
Loans, Individually evaluated for impairment | 3,816 | 2,945 | ||||
Loans, Collectively evaluated for impairment | 1,563,035 | 1,500,177 | ||||
Loans, Acquired with deteriorated credit quality | 245 | |||||
Loans and Leases Receivable, Gross | 1,566,851 | 1,503,367 | ||||
Commercial | ||||||
Balance in the Allowance for Loan Losses and the Recorded Investment in Loans by Portfolio Segment, Based on the Impairment Method | ||||||
Allowance for loan losses, Individually evaluated for impairment | 217 | 329 | ||||
Allowance for loan losses, Collectively evaluated for impairment | 10,771 | 10,327 | ||||
Total allowance balance | 10,988 | 11,259 | 10,656 | 12,181 | 11,528 | 10,748 |
Loans, Individually evaluated for impairment | 1,833 | 2,057 | ||||
Loans, Collectively evaluated for impairment | 585,443 | 602,029 | ||||
Loans, Acquired with deteriorated credit quality | 245 | |||||
Loans and Leases Receivable, Gross | 587,276 | 604,331 | ||||
Real estate | ||||||
Balance in the Allowance for Loan Losses and the Recorded Investment in Loans by Portfolio Segment, Based on the Impairment Method | ||||||
Allowance for loan losses, Individually evaluated for impairment | 25 | |||||
Allowance for loan losses, Collectively evaluated for impairment | 8,615 | 8,327 | ||||
Total allowance balance | 8,640 | 7,982 | 8,327 | 7,763 | 8,277 | 8,076 |
Loans, Individually evaluated for impairment | 1,982 | 885 | ||||
Loans, Collectively evaluated for impairment | 965,844 | 877,691 | ||||
Loans and Leases Receivable, Gross | 967,826 | 878,576 | ||||
Consumer | ||||||
Balance in the Allowance for Loan Losses and the Recorded Investment in Loans by Portfolio Segment, Based on the Impairment Method | ||||||
Allowance for loan losses, Collectively evaluated for impairment | 120 | 106 | ||||
Total allowance balance | 120 | $ 156 | 106 | $ 88 | $ 116 | $ 102 |
Loans, Individually evaluated for impairment | 1 | 3 | ||||
Loans, Collectively evaluated for impairment | 11,748 | 20,457 | ||||
Loans and Leases Receivable, Gross | $ 11,749 | $ 20,460 |
Loans - Loans Held for Investme
Loans - Loans Held for Investment Individually Evaluated for Impairment by Class of Loans (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 | Sep. 30, 2016 |
Unpaid Principal Balance | |||
Total with no related allowance recorded | $ 2,462 | $ 3,574 | |
Total with an allowance recorded | 1,373 | 494 | |
Total | 3,835 | 4,068 | |
Recorded Investment | |||
Total with no related allowance recorded | 2,443 | 2,696 | |
Total with an allowance recorded | 1,373 | 494 | |
Total | 3,816 | 3,190 | $ 4,633 |
Total with an allowance recorded, Allowance for Loan Losses Allocated | 242 | 329 | |
Commercial | |||
Unpaid Principal Balance | |||
Total with no related allowance recorded | 1,370 | 1,808 | |
Total with an allowance recorded | 463 | ||
Recorded Investment | |||
Total with no related allowance recorded | 1,370 | 1,808 | |
Total with an allowance recorded | 463 | 494 | |
Total with an allowance recorded, Allowance for Loan Losses Allocated | 217 | 329 | |
Consumer | |||
Unpaid Principal Balance | |||
Total with no related allowance recorded | 1 | 3 | |
Recorded Investment | |||
Total with no related allowance recorded | 1 | 3 | |
Commercial | Real estate | |||
Unpaid Principal Balance | |||
Total with no related allowance recorded | 501 | 1,278 | |
Recorded Investment | |||
Total with no related allowance recorded | 501 | 419 | |
Land and construction | Real estate | |||
Unpaid Principal Balance | |||
Total with no related allowance recorded | 202 | 218 | |
Total with an allowance recorded | 910 | ||
Recorded Investment | |||
Total with no related allowance recorded | 183 | 199 | |
Total with an allowance recorded | 910 | ||
Total with an allowance recorded, Allowance for Loan Losses Allocated | 25 | ||
Home equity | Real estate | |||
Unpaid Principal Balance | |||
Total with no related allowance recorded | 388 | 267 | |
Recorded Investment | |||
Total with no related allowance recorded | $ 388 | $ 267 |
Loans - Interest Recognized and
Loans - Interest Recognized and Cash Basis Interest Earned on Impaired Loans (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Interest Recognized and Cash Basis Interest Earned on Impaired Loans | ||||
Average of impaired loans during the period | $ 3,547 | $ 4,567 | $ 3,955 | $ 4,997 |
Interest income during impairment | 3 | 3 | ||
Commercial | ||||
Interest Recognized and Cash Basis Interest Earned on Impaired Loans | ||||
Average of impaired loans during the period | 2,010 | 2,200 | ||
Real estate | ||||
Interest Recognized and Cash Basis Interest Earned on Impaired Loans | ||||
Average of impaired loans during the period | 3 | |||
Consumer | ||||
Interest Recognized and Cash Basis Interest Earned on Impaired Loans | ||||
Average of impaired loans during the period | 1 | 3 | 2 | |
Commercial | Real estate | ||||
Interest Recognized and Cash Basis Interest Earned on Impaired Loans | ||||
Average of impaired loans during the period | 2,625 | 1,771 | ||
CRE | Real estate | ||||
Interest Recognized and Cash Basis Interest Earned on Impaired Loans | ||||
Average of impaired loans during the period | 501 | 1,644 | 583 | 2,298 |
Land and construction | Real estate | ||||
Interest Recognized and Cash Basis Interest Earned on Impaired Loans | ||||
Average of impaired loans during the period | 641 | 204 | 419 | 210 |
Interest income during impairment | 3 | 3 | ||
Home equity | Real estate | ||||
Interest Recognized and Cash Basis Interest Earned on Impaired Loans | ||||
Average of impaired loans during the period | $ 394 | $ 516 | $ 326 | $ 715 |
Loans - Nonperforming Loans (De
Loans - Nonperforming Loans (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 | Sep. 30, 2016 |
Nonaccrual loans | $ 2,560 | $ 3,059 | $ 4,496 |
Restructured and loans over 90 days past due and still accruing | 931 | ||
Total nonperforming loans | 3,491 | 3,059 | 4,496 |
Other restructured loans | 325 | 131 | 137 |
Total | $ 3,816 | $ 3,190 | $ 4,633 |
Loans - Nonperforming Loans by
Loans - Nonperforming Loans by Class (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 | Sep. 30, 2016 |
Nonperforming Loans by Class | |||
Nonaccrual loans | $ 2,560 | $ 3,059 | $ 4,496 |
Restructured and Loans Over 90 Days Past Due and Still Accruing | 931 | ||
Total | 3,491 | 3,059 | $ 4,496 |
Commercial | |||
Nonperforming Loans by Class | |||
Nonaccrual loans | 1,487 | 2,171 | |
Restructured and Loans Over 90 Days Past Due and Still Accruing | 21 | ||
Total | 1,508 | 2,171 | |
Consumer | |||
Nonperforming Loans by Class | |||
Nonaccrual loans | 1 | 3 | |
Total | 1 | 3 | |
CRE | Real estate | |||
Nonperforming Loans by Class | |||
Nonaccrual loans | 501 | 419 | |
Total | 501 | 419 | |
Land and construction | Real estate | |||
Nonperforming Loans by Class | |||
Nonaccrual loans | 183 | 199 | |
Restructured and Loans Over 90 Days Past Due and Still Accruing | 910 | ||
Total | 1,093 | 199 | |
Home equity | Real estate | |||
Nonperforming Loans by Class | |||
Nonaccrual loans | 388 | 267 | |
Total | $ 388 | $ 267 |
Loans - Aging of Past Due Loans
Loans - Aging of Past Due Loans by Class of Loans - Tabular Disclosure (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Aging of Past Due Loans by Class of Loans | ||
Total Past Due | $ 6,898 | $ 7,989 |
Loans Not Past Due | 1,559,953 | 1,495,378 |
Total loan balance | 1,566,851 | 1,503,367 |
30-59 Days Past Due | ||
Aging of Past Due Loans by Class of Loans | ||
Total Past Due | 3,798 | 4,630 |
60-89 Days Past Due | ||
Aging of Past Due Loans by Class of Loans | ||
Total Past Due | 1,432 | 1,124 |
90 Days or Greater Past Due | ||
Aging of Past Due Loans by Class of Loans | ||
Total Past Due | 1,668 | 2,235 |
Commercial | ||
Aging of Past Due Loans by Class of Loans | ||
Total Past Due | 4,974 | 6,891 |
Loans Not Past Due | 582,302 | 597,440 |
Total loan balance | 587,276 | 604,331 |
Commercial | 30-59 Days Past Due | ||
Aging of Past Due Loans by Class of Loans | ||
Total Past Due | 3,798 | 3,998 |
Commercial | 60-89 Days Past Due | ||
Aging of Past Due Loans by Class of Loans | ||
Total Past Due | 601 | 857 |
Commercial | 90 Days or Greater Past Due | ||
Aging of Past Due Loans by Class of Loans | ||
Total Past Due | 575 | 2,036 |
Real estate | ||
Aging of Past Due Loans by Class of Loans | ||
Total loan balance | 967,826 | 878,576 |
Consumer | ||
Aging of Past Due Loans by Class of Loans | ||
Loans Not Past Due | 11,749 | 20,460 |
Total loan balance | 11,749 | 20,460 |
Commercial | Real estate | ||
Aging of Past Due Loans by Class of Loans | ||
Total Past Due | 632 | |
Loans Not Past Due | 661,596 | |
Total loan balance | 754,856 | 662,228 |
Commercial | Real estate | 30-59 Days Past Due | ||
Aging of Past Due Loans by Class of Loans | ||
Total Past Due | 632 | |
CRE | Real estate | ||
Aging of Past Due Loans by Class of Loans | ||
Total Past Due | 831 | |
Loans Not Past Due | 754,025 | |
Total loan balance | 754,856 | 662,228 |
CRE | Real estate | 60-89 Days Past Due | ||
Aging of Past Due Loans by Class of Loans | ||
Total Past Due | 831 | |
Land and construction | Real estate | ||
Aging of Past Due Loans by Class of Loans | ||
Total Past Due | 1,093 | 199 |
Loans Not Past Due | 91,217 | 80,803 |
Total loan balance | 92,310 | 81,002 |
Land and construction | Real estate | 90 Days or Greater Past Due | ||
Aging of Past Due Loans by Class of Loans | ||
Total Past Due | 1,093 | 199 |
Home equity | Real estate | ||
Aging of Past Due Loans by Class of Loans | ||
Total Past Due | 267 | |
Loans Not Past Due | 74,171 | 82,192 |
Total loan balance | 74,171 | 82,459 |
Home equity | Real estate | 60-89 Days Past Due | ||
Aging of Past Due Loans by Class of Loans | ||
Total Past Due | 267 | |
Residential mortgages | Real estate | ||
Aging of Past Due Loans by Class of Loans | ||
Loans Not Past Due | 46,489 | 52,887 |
Total loan balance | $ 46,489 | $ 52,887 |
Loans - Aging of Past Due Loa59
Loans - Aging of Past Due Loans by Class of Loans - Additional Information (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 | Sep. 30, 2016 |
Aging of Past Due Loans by Class of Loans | |||
Past due loans 30 day or greater | $ 6,898 | $ 7,989 | |
Nonaccrual loans | 2,560 | 3,059 | $ 4,496 |
30 days or greater past due | |||
Aging of Past Due Loans by Class of Loans | |||
Nonaccrual loans | 1,256 | 2,057 | |
Less than 30 days past due | |||
Aging of Past Due Loans by Class of Loans | |||
Nonaccrual loans | $ 1,304 | $ 1,002 |
Loans - Credit Quality Indicato
Loans - Credit Quality Indicators (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Loans | ||
Balance to report | $ 1,546,202 | $ 1,483,518 |
Loan classified as loss | ||
Loans | ||
Balance to report | $ 0 | $ 0 |
Loans - Summary of the Loan Por
Loans - Summary of the Loan Portfolio by Loan Type and Credit Quality Classification (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Loans | ||
Total | $ 1,566,851 | $ 1,503,367 |
Nonclassified | ||
Loans | ||
Total | 1,555,942 | 1,490,043 |
Classified | ||
Loans | ||
Total | 10,909 | 13,324 |
Commercial | ||
Loans | ||
Total | 587,276 | 604,331 |
Commercial | Nonclassified | ||
Loans | ||
Total | 578,867 | 594,255 |
Commercial | Classified | ||
Loans | ||
Total | 8,409 | 10,076 |
Real estate | ||
Loans | ||
Total | 967,826 | 878,576 |
Consumer | ||
Loans | ||
Total | 11,749 | 20,460 |
Consumer | Nonclassified | ||
Loans | ||
Total | 11,748 | 20,455 |
Consumer | Classified | ||
Loans | ||
Total | 1 | 5 |
Commercial | Real estate | ||
Loans | ||
Total | 754,856 | 662,228 |
CRE | Real estate | ||
Loans | ||
Total | 754,856 | 662,228 |
CRE | Real estate | Nonclassified | ||
Loans | ||
Total | 754,152 | 659,777 |
CRE | Real estate | Classified | ||
Loans | ||
Total | 704 | 2,451 |
Land and construction | Real estate | ||
Loans | ||
Total | 92,310 | 81,002 |
Land and construction | Real estate | Nonclassified | ||
Loans | ||
Total | 91,217 | 80,803 |
Land and construction | Real estate | Classified | ||
Loans | ||
Total | 1,093 | 199 |
Home equity | Real estate | ||
Loans | ||
Total | 74,171 | 82,459 |
Home equity | Real estate | Nonclassified | ||
Loans | ||
Total | 73,469 | 81,866 |
Home equity | Real estate | Classified | ||
Loans | ||
Total | 702 | 593 |
Residential mortgages | Real estate | ||
Loans | ||
Total | 46,489 | 52,887 |
Residential mortgages | Real estate | Nonclassified | ||
Loans | ||
Total | $ 46,489 | $ 52,887 |
Loans - Troubled Debt Restructu
Loans - Troubled Debt Restructurings (Details) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Loans | ||
Recorded investment of troubled debt restructurings | $ 434,000 | $ 133,000 |
Troubled debt restructurings, nonaccrual loans | 91,000 | 2,000 |
Troubled debt restructurings, accruing loans | 343,000 | 131,000 |
Specific reserves | $ 36,000 | $ 2,000 |
Loans - Troubled Debt Restruc63
Loans - Troubled Debt Restructurings by Class (Details) $ in Thousands | 9 Months Ended | |
Sep. 30, 2017USD ($)contract | Sep. 30, 2016loan | |
Troubled Debt Restructurings by Class | ||
Number of loans modified as troubled debt restructurings during the period | 3 | 0 |
Pre-modification Outstanding Recorded Investment | $ 318 | |
Commercial | ||
Troubled Debt Restructurings by Class | ||
Number of loans modified as troubled debt restructurings during the period | contract | 3 | |
Pre-modification Outstanding Recorded Investment | $ 318 |
Loans - Defaults on Troubled De
Loans - Defaults on Troubled Debt Restructurings (Details) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017item | Sep. 30, 2016item | Sep. 30, 2017USD ($)itemcontractloan | Sep. 30, 2016itemloan | |
Loans | ||||
Number of troubled debt restructurings in which the amount of principal or accrued interest owed from the borrower was forgiven | loan | 0 | |||
Amounts that the company commits to lend customers with outstanding loans that are classified as troubled debt restructurings | $ | $ 0 | |||
Number of loans modified as troubled debt restructurings during the period | 3 | 0 | ||
Default period contractually past due under modified terms (in days) | 30 days | |||
Number of defaults on troubled debt restructurings | item | 0 | 0 | 0 | 0 |
Period of consecutive payments (in months) | 6 months |
Goodwill and Other Intangible65
Goodwill and Other Intangible Assets - Goodwill (Details) - USD ($) $ in Thousands | 9 Months Ended | ||
Sep. 30, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | |
Goodwill | |||
Goodwill | $ 45,664 | $ 45,664 | $ 45,664 |
BVF/CSNK | |||
Goodwill | |||
Goodwill acquired | 13,044 | ||
Focus Business Bank | |||
Goodwill | |||
Goodwill acquired | $ 32,620 |
Goodwill and Other Intangible66
Goodwill and Other Intangible Assets - Other Intangible Assets (Details) - USD ($) $ in Thousands | Aug. 20, 2015 | Nov. 01, 2014 | Sep. 30, 2017 | Dec. 31, 2016 | Jun. 30, 2007 |
Diablo Valley Bank | |||||
Other Intangible Assets | |||||
Accumulated amortization | $ 4,854 | ||||
Diablo Valley Bank | Core deposit | |||||
Other Intangible Assets | |||||
Intangible assets acquired | $ 5,049 | ||||
Useful life, amortization period | 10 years | ||||
Focus Business Bank | Core deposit | |||||
Other Intangible Assets | |||||
Intangible assets acquired | $ 6,285 | ||||
Accumulated amortization | $ 1,776 | 1,120 | |||
Useful life, amortization period | 10 years | ||||
BVF/CSNK | |||||
Other Intangible Assets | |||||
Accumulated amortization | $ 901 | $ 669 | |||
BVF/CSNK | Below market-value lease | |||||
Other Intangible Assets | |||||
Intangible assets acquired | $ 109 | ||||
Useful life, amortization period | 3 years | ||||
BVF/CSNK | Customer relationship and brokered relationship | |||||
Other Intangible Assets | |||||
Intangible assets acquired | $ 1,900 | ||||
Useful life, amortization period | 10 years | ||||
BVF/CSNK | Non-compete agreement | |||||
Other Intangible Assets | |||||
Intangible assets acquired | $ 250 | ||||
Useful life, amortization period | 3 years |
Goodwill and Other Intangible67
Goodwill and Other Intangible Assets - Estimated Amortization Expense (Details) $ in Thousands | Sep. 30, 2017USD ($) |
Estimated Amortization Expense | |
2,017 | $ 1,361 |
2,018 | 965 |
2,019 | 924 |
2,020 | 906 |
2,021 | 786 |
2,022 | 692 |
Thereafter | 1,316 |
Total | 6,950 |
Diablo Valley Bank | Core deposit | |
Estimated Amortization Expense | |
2,017 | 195 |
Total | 195 |
Focus Business Bank | Core deposit | |
Estimated Amortization Expense | |
2,017 | 875 |
2,018 | 775 |
2,019 | 734 |
2,020 | 716 |
2,021 | 596 |
2,022 | 502 |
Thereafter | 967 |
Total | 5,165 |
BVF/CSNK | Below market-value lease | |
Estimated Amortization Expense | |
2,017 | 31 |
Total | 31 |
BVF/CSNK | Customer relationship and brokered relationship | |
Estimated Amortization Expense | |
2,017 | 190 |
2,018 | 190 |
2,019 | 190 |
2,020 | 190 |
2,021 | 190 |
2,022 | 190 |
Thereafter | 349 |
Total | 1,489 |
BVF/CSNK | Non-compete agreement | |
Estimated Amortization Expense | |
2,017 | 70 |
Total | $ 70 |
Goodwill and Other Intangible68
Goodwill and Other Intangible Assets - Impairment of Intangible Assets (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Impairment of Intangible Assets | ||
Impairment of intangible assets | $ 0 | $ 0 |
Income Taxes - Net Deferred Tax
Income Taxes - Net Deferred Tax Assets (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Net deferred tax assets | ||
Net deferred tax assets | $ 22,400 | $ 25,058 |
Income Taxes - Carry Amounts of
Income Taxes - Carry Amounts of the Low Income Housing Investments (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Income Taxes | ||
Low income housing investments | $ 3,526 | $ 3,880 |
Future commitments | $ 365 | $ 365 |
Income Taxes - Future Commitmen
Income Taxes - Future Commitments of the Low Income Housing Investments (Details) - Low income housing investments $ in Thousands | Sep. 30, 2017USD ($) |
Future Commitments | |
2,017 | $ 79 |
2,018 | 14 |
2019 through 2023 | $ 272 |
Income Taxes - Components of Lo
Income Taxes - Components of Low Income Housing Investment (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Income Taxes | ||||
Low income housing tax credits | $ 110 | $ 111 | $ 329 | $ 333 |
Low income housing investment losses | $ 115 | $ 118 | $ 345 | $ 353 |
Benefit Plans - Defined Benefit
Benefit Plans - Defined Benefit Plans - Nonqualified Defined Benefit Pension Plan (Details) $ in Thousands | Sep. 30, 2017USD ($) |
Supplemental Retirement Plan | |
Supplemental Retirement Plan | |
Plan assets associated with the plan | $ 0 |
Benefit Plans - Defined Benef74
Benefit Plans - Defined Benefit Plans - Components of Pension Cost (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Supplemental Retirement Plan | |||||
Components of net periodic benefit cost: | |||||
Service cost | $ 81 | $ 134 | $ 243 | $ 400 | |
Interest cost | 259 | 259 | 777 | 777 | |
Amortization of net actuarial loss | 69 | 60 | 207 | 180 | |
Net periodic benefit cost | 409 | 453 | 1,227 | 1,357 | |
Split-Dollar Life Insurance Benefit Plan | |||||
Components of net periodic benefit cost: | |||||
Amortization of prior transition obligation | (18) | (13) | (53) | (39) | |
Interest cost | 61 | 62 | 182 | 186 | $ 248 |
Net periodic benefit cost | $ 43 | $ 49 | $ 129 | $ 147 |
Benefit Plans - Defined Benef75
Benefit Plans - Defined Benefit Plans - Change in Projected Benefit Obligation (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Split-Dollar Life Insurance Benefit Plan | |||||
Change in projected benefit obligation: | |||||
Projected benefit obligation at beginning of year | $ 6,301 | $ 6,215 | $ 6,215 | ||
Actuarial gain | (162) | ||||
Interest cost | $ 61 | $ 62 | 182 | 186 | 248 |
Projected benefit obligation at end of period | 6,483 | 6,483 | $ 6,301 | ||
Supplemental Retirement Plan | |||||
Change in projected benefit obligation: | |||||
Service cost | 81 | 134 | 243 | 400 | |
Interest cost | $ 259 | $ 259 | $ 777 | $ 777 |
Benefit Plans - Defined Benef76
Benefit Plans - Defined Benefit Plans - Amounts Recognized in Accumulated Other Comprehensive Loss (Details) - Split-Dollar Life Insurance Benefit Plan - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Amounts Recognized in Accumulated Other Comprehensive Loss | ||
Net actuarial loss | $ 2,246 | $ 2,126 |
Prior transition obligation | 1,261 | 1,328 |
Accumulated other comprehensive loss | $ 3,507 | $ 3,454 |
Fair Value - Financial Assets a
Fair Value - Financial Assets and Liabilities Measured on a Recurring Basis (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Financial Assets and Liabilities Measured on a Recurring Basis | ||
Securities available-for-sale | $ 390,107 | $ 306,589 |
I/O strip receivables | 989 | 1,067 |
Agency mortgage-backed securities | ||
Financial Assets and Liabilities Measured on a Recurring Basis | ||
Securities available-for-sale | 373,167 | 290,989 |
Trust preferred securities | ||
Financial Assets and Liabilities Measured on a Recurring Basis | ||
Securities available-for-sale | 16,940 | 15,600 |
Significant Other Observable Inputs (Level 2) | ||
Financial Assets and Liabilities Measured on a Recurring Basis | ||
I/O strip receivables | 989 | 1,067 |
Significant Other Observable Inputs (Level 2) | Agency mortgage-backed securities | ||
Financial Assets and Liabilities Measured on a Recurring Basis | ||
Securities available-for-sale | 373,167 | 290,989 |
Significant Other Observable Inputs (Level 2) | Trust preferred securities | ||
Financial Assets and Liabilities Measured on a Recurring Basis | ||
Securities available-for-sale | 16,940 | 15,600 |
Recurring basis | ||
Transfers between Level 1 and Level 2 | ||
Transfers between Level 1 and Level 2 | 0 | 0 |
Transfers between Level 2 and Level 1 | $ 0 | $ 0 |
Fair Value - Financial Assets78
Fair Value - Financial Assets and Liabilities Measured on a Non-Recurring Basis (Details) - Non-recurring basis - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Financial Assets and Liabilities Measured on a Non-Recurring Basis | ||
Impaired loans - held-for-investment: | $ 1,314 | $ 783 |
Foreclosed Assets Fair Value Disclosure | 229 | |
Significant Unobservable Inputs (Level 3) | ||
Financial Assets and Liabilities Measured on a Non-Recurring Basis | ||
Impaired loans - held-for-investment: | 1,314 | 783 |
Foreclosed Assets Fair Value Disclosure | 229 | |
Commercial | Commercial | ||
Financial Assets and Liabilities Measured on a Non-Recurring Basis | ||
Impaired loans - held-for-investment: | 246 | 165 |
Commercial | Commercial | Significant Unobservable Inputs (Level 3) | ||
Financial Assets and Liabilities Measured on a Non-Recurring Basis | ||
Impaired loans - held-for-investment: | 246 | 165 |
Land and construction | ||
Financial Assets and Liabilities Measured on a Non-Recurring Basis | ||
Foreclosed Assets Fair Value Disclosure | 229 | |
Land and construction | Significant Unobservable Inputs (Level 3) | ||
Financial Assets and Liabilities Measured on a Non-Recurring Basis | ||
Foreclosed Assets Fair Value Disclosure | 229 | |
Land and construction | Real estate | ||
Financial Assets and Liabilities Measured on a Non-Recurring Basis | ||
Impaired loans - held-for-investment: | 1,068 | 199 |
Land and construction | Real estate | Significant Unobservable Inputs (Level 3) | ||
Financial Assets and Liabilities Measured on a Non-Recurring Basis | ||
Impaired loans - held-for-investment: | $ 1,068 | 199 |
CRE | Real estate | ||
Financial Assets and Liabilities Measured on a Non-Recurring Basis | ||
Impaired loans - held-for-investment: | 419 | |
CRE | Real estate | Significant Unobservable Inputs (Level 3) | ||
Financial Assets and Liabilities Measured on a Non-Recurring Basis | ||
Impaired loans - held-for-investment: | $ 419 |
Fair Value - Impaired Loans Hel
Fair Value - Impaired Loans Held-for-investment - Tabular Disclosure (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Impaired Loans Held-for-investment | ||
Impaired loans held-for-investment | $ 3,816 | $ 3,190 |
Carried at fair value | ||
Impaired Loans Held-for-investment | ||
Impaired loans held-for-investment | 1,556 | 1,112 |
Specific valuation allowance | (242) | (329) |
Impaired loans held-for-investment carried at fair value, net | 1,314 | 783 |
Portion carried at cost | ||
Impaired Loans Held-for-investment | ||
Impaired loans held-for-investment | $ 2,260 | $ 2,078 |
Fair Value - Impaired Loans H80
Fair Value - Impaired Loans Held-for-investment - Additional Disclosures (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Impaired Loans Held-for-investment | ||
Impaired loans held-for-investment | $ 3,816 | $ 3,190 |
Additional provision (credit) for loan losses | 228 | 320 |
Valuation allowance on foreclosed assets | 0 | |
Partial charge-offs | 0 | |
Carrying amount | ||
Impaired Loans Held-for-investment | ||
Foreclosed assets | 0 | 229 |
Carried at fair value | ||
Impaired Loans Held-for-investment | ||
Impaired loans held-for-investment | 1,556 | 1,112 |
Specific valuation allowance | 242 | 329 |
Portion carried at cost | ||
Impaired Loans Held-for-investment | ||
Impaired loans held-for-investment | $ 2,260 | $ 2,078 |
Fair Value - Quantitative Infor
Fair Value - Quantitative Information about Level 3 Fair Value Measurements (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Non-recurring basis | ||
Quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis | ||
Impaired loans - held-for-investment, Fair Value | $ 1,314 | $ 783 |
Non-recurring basis | Significant Unobservable Inputs (Level 3) | ||
Quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis | ||
Impaired loans - held-for-investment, Fair Value | $ 1,314 | 783 |
Commercial | Non-recurring basis | Significant Unobservable Inputs (Level 3) | Market Approach | ||
Quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis | ||
Impaired loans - held-for-investment, Fair Value | $ 165 | |
Commercial | Non-recurring basis | Significant Unobservable Inputs (Level 3) | Market Approach | Maximum | ||
Quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis | ||
Discount adjustment for differences between comparable sales (as a percent) | 1.00% | 1.00% |
Foreclosed Assets | Non-recurring basis | Significant Unobservable Inputs (Level 3) | Foreclosed assets - commercial | Market Approach | Minimum | ||
Quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis | ||
Discount adjustment for differences between comparable sales (as a percent) | 0.00% | |
Foreclosed Assets | Non-recurring basis | Significant Unobservable Inputs (Level 3) | Foreclosed assets - commercial | Market Approach | Maximum | ||
Quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis | ||
Discount adjustment for differences between comparable sales (as a percent) | 2.00% | |
Foreclosed Assets | Non-recurring basis | Significant Unobservable Inputs (Level 3) | Foreclosed assets - land and construction | Market Approach | ||
Quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis | ||
Impaired loans - held-for-investment, Fair Value | $ 229 | |
Commercial | Commercial | Significant Unobservable Inputs (Level 3) | Market Approach | ||
Quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis | ||
Impaired loans - held-for-investment, Fair Value | $ 246 | |
Commercial | Commercial | Non-recurring basis | ||
Quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis | ||
Impaired loans - held-for-investment, Fair Value | 246 | 165 |
Commercial | Commercial | Non-recurring basis | Significant Unobservable Inputs (Level 3) | ||
Quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis | ||
Impaired loans - held-for-investment, Fair Value | $ 246 | 165 |
Commercial | Real estate | Non-recurring basis | Significant Unobservable Inputs (Level 3) | Market Approach | ||
Quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis | ||
Impaired loans - held-for-investment, Fair Value | $ 419 | |
Commercial | Real estate | Non-recurring basis | Significant Unobservable Inputs (Level 3) | Market Approach | Minimum | ||
Quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis | ||
Discount adjustment for differences between comparable sales (as a percent) | 0.00% | |
Commercial | Real estate | Non-recurring basis | Significant Unobservable Inputs (Level 3) | Market Approach | Maximum | ||
Quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis | ||
Discount adjustment for differences between comparable sales (as a percent) | 3.00% | |
Commercial | Real estate | Non-recurring basis | Significant Unobservable Inputs (Level 3) | Market Approach | Weighted average | ||
Quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis | ||
Discount adjustment for differences between comparable sales (as a percent) | 3.00% | |
Commercial | Foreclosed Assets | Non-recurring basis | Significant Unobservable Inputs (Level 3) | Foreclosed assets - commercial | Market Approach | Weighted average | ||
Quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis | ||
Discount adjustment for differences between comparable sales (as a percent) | 2.00% | |
Land and construction | Non-recurring basis | Significant Unobservable Inputs (Level 3) | Market Approach | Maximum | ||
Quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis | ||
Discount adjustment for differences between comparable sales (as a percent) | 1.00% | |
Land and construction | Real estate | Significant Unobservable Inputs (Level 3) | Market Approach | ||
Quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis | ||
Impaired loans - held-for-investment, Fair Value | $ 1,068 | |
Land and construction | Real estate | Non-recurring basis | ||
Quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis | ||
Impaired loans - held-for-investment, Fair Value | 1,068 | $ 199 |
Land and construction | Real estate | Non-recurring basis | Significant Unobservable Inputs (Level 3) | ||
Quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis | ||
Impaired loans - held-for-investment, Fair Value | $ 1,068 | 199 |
Land and construction | Real estate | Non-recurring basis | Significant Unobservable Inputs (Level 3) | Market Approach | ||
Quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis | ||
Impaired loans - held-for-investment, Fair Value | $ 199 | |
Land and construction | Real estate | Non-recurring basis | Significant Unobservable Inputs (Level 3) | Market Approach | Maximum | ||
Quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis | ||
Discount adjustment for differences between comparable sales (as a percent) | 1.00% | |
CRE | Real estate | Non-recurring basis | ||
Quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis | ||
Impaired loans - held-for-investment, Fair Value | $ 419 | |
CRE | Real estate | Non-recurring basis | Significant Unobservable Inputs (Level 3) | ||
Quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis | ||
Impaired loans - held-for-investment, Fair Value | $ 419 |
Fair Value - Carrying Amounts a
Fair Value - Carrying Amounts and Estimated Fair Values of Financial Instruments (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Assets | ||
Securities available-for-sale | $ 390,107 | $ 306,589 |
Securities held-to-maturity | 377,845 | 318,748 |
I/O strips receivables | 989 | 1,067 |
Liabilities | ||
Subordinated Debt. | 39,137 | |
Significant Other Observable Inputs (Level 2) | ||
Assets | ||
I/O strips receivables | 989 | 1,067 |
Carrying amount | ||
Assets | ||
Cash and cash equivalents | 346,120 | 266,103 |
Securities available-for-sale | 390,107 | 306,589 |
Securities held-to-maturity | 379,550 | 324,010 |
Loans (including loans held-for-sale), net | 1,550,804 | 1,489,223 |
FHLB and FRB stock and other investments | 17,905 | 15,196 |
Accrued interest receivable | 7,818 | 6,859 |
I/O strips receivables | 989 | 1,067 |
Liabilities | ||
Time deposits | 204,291 | 224,717 |
Other deposits | 2,276,313 | 2,037,423 |
Subordinated Debt. | 39,137 | |
Accrued interest payable | 934 | 168 |
Carried at fair value | ||
Assets | ||
Cash and cash equivalents | 346,120 | 266,103 |
Securities available-for-sale | 390,107 | 306,589 |
Securities held-to-maturity | 377,845 | 318,748 |
Loans (including loans held-for-sale), net | 1,501,612 | 1,449,781 |
Accrued interest receivable | 7,818 | 6,859 |
I/O strips receivables | 989 | 1,067 |
Liabilities | ||
Time deposits | 204,555 | 225,047 |
Other deposits | 2,276,313 | 2,037,423 |
Subordinated Debt. | 39,937 | |
Accrued interest payable | 934 | 168 |
Carried at fair value | Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Assets | ||
Cash and cash equivalents | 346,120 | 266,103 |
Carried at fair value | Significant Other Observable Inputs (Level 2) | ||
Assets | ||
Securities available-for-sale | 390,107 | 306,589 |
Securities held-to-maturity | 377,845 | 318,748 |
Loans (including loans held-for-sale), net | 4,602 | 5,705 |
Accrued interest receivable | 2,522 | 1,961 |
I/O strips receivables | 989 | 1,067 |
Liabilities | ||
Time deposits | 204,555 | 225,047 |
Other deposits | 2,276,313 | 2,037,423 |
Subordinated Debt. | 39,937 | |
Accrued interest payable | 934 | 168 |
Carried at fair value | Significant Unobservable Inputs (Level 3) | ||
Assets | ||
Loans (including loans held-for-sale), net | 1,497,010 | 1,444,076 |
Accrued interest receivable | $ 5,296 | $ 4,898 |
Equity Plan - General Disclosur
Equity Plan - General Disclosures (Details) - shares | 9 Months Ended | ||
Sep. 30, 2017 | May 25, 2017 | May 24, 2017 | |
2013 Plan | |||
Equity Plan | |||
Number of shares authorized for equity plan | 3,000,000 | 1,750,000 | |
Number of shares available for future grants | 1,528,099 | ||
Options | |||
Equity Plan | |||
Vesting period | 4 years | ||
Options | Maximum | |||
Equity Plan | |||
Expiration term | 10 years | ||
Restricted stock | |||
Equity Plan | |||
Number of equity awards issued (in shares) | 82,770 | ||
Nonqualified stock options | |||
Equity Plan | |||
Number of equity awards issued (in shares) | 270,000 |
Equity Plan - Stock Option Acti
Equity Plan - Stock Option Activity (Details) - Options | 9 Months Ended |
Sep. 30, 2017USD ($)$ / sharesshares | |
Number of Shares | |
Outstanding at the beginning of the period (in shares) | 1,719,091 |
Granted (in shares) | 270,000 |
Exercised (in shares) | (193,863) |
Forfeited or expired (in shares) | (151,119) |
Outstanding at the end of the period (in shares) | 1,644,109 |
Vested or expected to vest (in shares) | 1,545,462 |
Exercisable at the end of the period (in shares) | 1,085,246 |
Weighted Average Exercise Price | |
Outstanding at the beginning of the period (in dollars per share) | $ / shares | $ 9.79 |
Granted (in dollars per share) | $ / shares | 14.41 |
Exercised (in dollars per share) | $ / shares | 6.98 |
Forfeited or expired (in dollars per share) | $ / shares | 22.85 |
Outstanding at the end of the period (in dollars per share) | $ / shares | $ 9.69 |
Additional Information | |
Weighted Average Remaining Contractual Life - Outstanding at the end of the period (in years) | 6 years 4 months 28 days |
Weighted Average Remaining Contractual Life - Vested or expected to vest (in years) | 6 years 4 months 28 days |
Weighted Average Remaining Contractual Life - Exercisable at the end of the period (in years) | 5 years 2 months 16 days |
Aggregate Intrinsic Value - Outstanding at the end of the period (in dollars) | $ | $ 6,972,963 |
Aggregate Intrinsic Value - Vested or expected to vest (in dollars) | $ | 6,554,585 |
Aggregate Intrinsic Value - Exercisable at the end of the period (in dollars) | $ | $ 5,799,239 |
Equity Plan - Information Relat
Equity Plan - Information Related to the Equity Plans for each of the Last Three Years (Details) - Options - USD ($) $ / shares in Units, $ in Thousands | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Information Related to the Equity Plans | ||
Intrinsic value of options exercised | $ 1,331,528 | $ 437,357 |
Cash received from option exercise | 1,352,236 | 771,386 |
Tax benefit realized from option exercises | $ 543,654 | $ 174,194 |
Weighted average fair value of options granted (in dollars per share) | $ 2.66 | $ 2.12 |
Equity Plan - Unrecognized Comp
Equity Plan - Unrecognized Compensation Cost - Nonvested Stock Options (Details) - Options $ in Thousands | 9 Months Ended |
Sep. 30, 2017USD ($) | |
Unrecognized Compensation Cost | |
Total unrecognized compensation cost related to nonvested stock options granted | $ 1,446 |
Expected weighted-average period for recognition of compensation costs related to nonvested stock options | 2 years 9 months |
Equity Plan - Assumptions Used
Equity Plan - Assumptions Used to Estimate Fair Value (Details) - Options | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Assumptions Used to Estimate Fair Value | ||
Expected life in months | 72 months | 72 months |
Volatility (as a percent) | 24.00% | 31.00% |
Weighted average risk-free interest rate (as a percent) | 1.94% | 1.41% |
Expected dividends (as a percent) | 2.78% | 3.48% |
Equity Plan - Restricted Stock
Equity Plan - Restricted Stock Activity (Details) - Restricted stock | 9 Months Ended |
Sep. 30, 2017$ / sharesshares | |
Number of Shares | |
Nonvested shares at the beginning of the period (in shares) | shares | 199,503 |
Granted (in shares) | shares | 82,770 |
Vested (in shares) | shares | (64,954) |
Forfeited or expired (in shares) | shares | (18,634) |
Nonvested shares at the end of the period (in shares) | shares | 198,685 |
Weighted Average Grant Date Fair Value | |
Nonvested shares at the beginning of the period (in dollars per share) | $ / shares | $ 9.74 |
Granted (in dollars per share) | $ / shares | 14.36 |
Vested (in dollars per share) | $ / shares | 10.02 |
Forfeited or expired (in dollars per share) | $ / shares | 11.87 |
Nonvested shares at the end of the period (in dollars per share) | $ / shares | $ 11.38 |
Equity Plan - Unrecognized Co89
Equity Plan - Unrecognized Compensation Cost - Nonvested Restricted Stock Awards (Details) - Restricted stock $ in Thousands | 9 Months Ended |
Sep. 30, 2017USD ($) | |
Unrecognized Compensation Cost | |
Total unrecognized compensation cost related to nonvested restricted stock awards | $ 1,817 |
Expected weighted-average period for recognition of compensation costs related to nonvested restricted stock awards | 2 years 5 months 5 days |
Subordinate Debt (Details)
Subordinate Debt (Details) - USD ($) | Jun. 01, 2022 | Sep. 30, 2017 | May 17, 2017 |
Debt Instrument [Line Items] | |||
Principal amount | $ 40,000,000 | ||
Fixed interest rate (as a percent) | 5.25% | ||
Debt Issuance Costs | $ 927,000 | ||
Subordinated debt, net of issuance costs | $ 39,137,000 | ||
LIBOR | |||
Debt Instrument [Line Items] | |||
Base rate | three-month LIBOR | ||
Rate of interest added to base rate | 3.365% |
Capital Requirements - General
Capital Requirements - General Information (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended |
Jun. 30, 2017 | Sep. 30, 2017 | Dec. 31, 2016 | |
Capital Requirements | |||
Capital conservation buffer (as a percent) | 1.25% | 0.625% | |
Subordinated debt, net of issuance costs | $ 39,137,000 | ||
Downstream of proceeds from subordinated debt to HBC | 20,000,000 | ||
HCC (Parent) | |||
Capital Requirements | |||
Dividends paid to parent company | $ 4,000,000 | $ 12,000,000 | |
HBC (Wholly-owned Subsidiary) | |||
Capital Requirements | |||
Capital conservation buffer (as a percent) | 1.25% | 0.625% |
Capital Requirements - Tabular
Capital Requirements - Tabular Disclosure (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Total Capital (to risk-weighted assets) | ||
Actual, Amount | $ 289,231 | $ 234,629 |
Required For Capital Adequacy Purposes, Amount | $ 183,750 | $ 161,868 |
Actual, Ratio (as a percent) | 14.60% | 12.50% |
Required For Capital Adequacy Purposes, Ratio (as a percent) | 9.25% | 8.625% |
Capital conservation buffer (as a percent) | 1.25% | 0.625% |
Tier 1 Capital (to risk-weighted assets) | ||
Actual, Amount | $ 229,656 | $ 214,924 |
Required For Capital Adequacy Purposes, Amount | $ 144,020 | $ 124,333 |
Actual, Ratio (as a percent) | 11.60% | 11.50% |
Required For Capital Adequacy Purposes, Ratio (as a percent) | 7.25% | 6.625% |
Common Equity Tier 1 Capital (to risk-weighted assets) | ||
Actual, Amount | $ 229,656 | $ 214,924 |
Required For Capital Adequacy Purposes, Amount | $ 114,223 | $ 96,183 |
Actual, Ratio (as a percent) | 11.60% | 11.50% |
Required For Capital Adequacy Purposes, Ratio (as a percent) | 5.75% | 5.125% |
Tier 1 Capital (to average assets) | ||
Actual, Amount | $ 229,656 | $ 214,924 |
Required For Capital Adequacy Purposes, Amount | $ 111,329 | $ 100,625 |
Actual, Ratio (as a percent) | 8.30% | 8.50% |
Required For Capital Adequacy Purposes, Ratio (as a percent) | 4.00% | 4.00% |
HBC (Wholly-owned Subsidiary) | ||
Total Capital (to risk-weighted assets) | ||
Actual, Amount | $ 265,269 | $ 231,069 |
To Be Well Capitalized Under Regulatory Requirements, Amount | 198,513 | 187,602 |
Required For Capital Adequacy Purposes, Amount | $ 183,625 | $ 161,807 |
Actual, Ratio (as a percent) | 13.40% | 12.30% |
To Be Well Capitalized Under Regulatory Requirements, Ratio (as a percent) | 10.00% | 10.00% |
Required For Capital Adequacy Purposes, Ratio (as a percent) | 9.25% | 8.625% |
Capital conservation buffer (as a percent) | 1.25% | 0.625% |
Tier 1 Capital (to risk-weighted assets) | ||
Actual, Amount | $ 244,831 | $ 211,364 |
To Be Well Capitalized Under Regulatory Requirements, Amount | 158,811 | 150,082 |
Required For Capital Adequacy Purposes, Amount | $ 143,922 | $ 124,287 |
Actual, Ratio (as a percent) | 12.30% | 11.30% |
To Be Well Capitalized Under Regulatory Requirements, Ratio (as a percent) | 8.00% | 8.00% |
Required For Capital Adequacy Purposes, Ratio (as a percent) | 7.25% | 6.625% |
Common Equity Tier 1 Capital (to risk-weighted assets) | ||
Actual, Amount | $ 244,831 | $ 211,364 |
To Be Well Capitalized Under Regulatory Requirements, Amount | 129,034 | 121,942 |
Required For Capital Adequacy Purposes, Amount | $ 114,145 | $ 96,146 |
Actual, Ratio (as a percent) | 12.30% | 11.30% |
To Be Well Capitalized Under Regulatory Requirements, Ratio (as a percent) | 6.50% | 6.50% |
Required For Capital Adequacy Purposes, Ratio (as a percent) | 5.75% | 5.125% |
Tier 1 Capital (to average assets) | ||
Actual, Amount | $ 244,831 | $ 211,364 |
To Be Well Capitalized Under Regulatory Requirements, Amount | 139,101 | 125,746 |
Required For Capital Adequacy Purposes, Amount | $ 111,281 | $ 100,597 |
Actual, Ratio (as a percent) | 8.80% | 8.40% |
To Be Well Capitalized Under Regulatory Requirements, Ratio (as a percent) | 5.00% | 5.00% |
Required For Capital Adequacy Purposes, Ratio (as a percent) | 4.00% | 4.00% |
Capital Requirements - Dividend
Capital Requirements - Dividends to Parent (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |
Jun. 30, 2017 | Sep. 30, 2017 | Dec. 31, 2016 | |
Cash dividend | |||
Retained earnings | $ 63,679,000 | $ 52,527,000 | |
HCC (Parent) | |||
Cash dividend | |||
Cash dividend available | 21,260,000 | ||
Dividends paid to parent company | $ 4,000,000 | 12,000,000 | |
Retained earnings | $ 24,051,000 |
Noninterest Expense (Details)
Noninterest Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Noninterest Expense | ||||
Salaries and employee benefits | $ 9,071 | $ 8,363 | $ 27,766 | $ 26,052 |
Occupancy and equipment | 1,142 | 1,120 | 3,426 | 3,277 |
Professional fees | 695 | 1,086 | 2,439 | 2,619 |
Software subscriptions | 475 | 401 | 1,333 | 1,118 |
Data processing | 411 | 372 | 1,080 | 1,143 |
Insurance expense | 401 | 319 | 1,123 | 924 |
FDIC deposit insurance premiums | 304 | 308 | 860 | 966 |
Amortization of intangible assets | 296 | 392 | 1,083 | 1,176 |
Foreclosed assets | 2 | 10 | 6 | 14 |
Other | 2,037 | 1,925 | 6,300 | 6,073 |
Total noninterest expense | $ 14,834 | $ 14,296 | $ 45,416 | $ 43,362 |
Business Segment Information -
Business Segment Information - Business Segments (Details) | 9 Months Ended |
Sep. 30, 2017segmentitem | |
Business Segment Information | |
Number of business segments | segment | 2 |
Focus Business Bank | |
Business Segment Information | |
Number of business segments | item | 2 |
Business Segment Information 96
Business Segment Information - Operating Statements (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Operating Income | |||||
Interest income | $ 27,955 | $ 23,874 | $ 78,759 | $ 70,440 | |
Total interest expense | 1,634 | 826 | 3,679 | 2,344 | |
Net interest income | 26,321 | 23,048 | 75,080 | 68,096 | |
Provision for loan losses | 115 | 245 | 390 | 997 | |
Net interest income after provision | 26,206 | 22,803 | 74,690 | 67,099 | |
Noninterest income | 2,460 | 2,312 | 7,048 | 8,586 | |
Noninterest expense | 14,834 | 14,296 | 45,416 | 43,362 | |
Income before income taxes | 13,832 | 10,819 | 36,322 | 32,323 | |
Income tax expense | 5,249 | 4,054 | 13,752 | 12,157 | |
Net income | 8,583 | 6,765 | 22,570 | 20,166 | |
Total assets | 2,843,948 | 2,527,962 | 2,843,948 | 2,527,962 | $ 2,570,880 |
Loans, net of deferred fees | 1,565,950 | 1,450,176 | 1,565,950 | 1,450,176 | 1,502,607 |
Goodwill | 45,664 | 45,664 | 45,664 | 45,664 | $ 45,664 |
Banking | |||||
Operating Income | |||||
Interest income | 24,805 | 20,743 | 70,146 | 61,252 | |
Intersegment interest allocations | 284 | 314 | 786 | 863 | |
Total interest expense | 1,634 | 826 | 3,679 | 2,344 | |
Net interest income | 23,455 | 20,231 | 67,253 | 59,771 | |
Provision for loan losses | 107 | 237 | 372 | 949 | |
Net interest income after provision | 23,348 | 19,994 | 66,881 | 58,822 | |
Noninterest income | 2,101 | 2,160 | 6,153 | 8,069 | |
Noninterest expense | 13,149 | 12,382 | 40,152 | 38,036 | |
Intersegment expense allocations | 130 | 234 | 392 | 623 | |
Income before income taxes | 12,430 | 10,006 | 33,274 | 29,478 | |
Income tax expense | 4,660 | 3,712 | 12,472 | 10,962 | |
Net income | 7,770 | 6,294 | 20,802 | 18,516 | |
Total assets | 2,776,262 | 2,464,438 | 2,776,262 | 2,464,438 | |
Loans, net of deferred fees | 1,517,186 | 1,402,330 | 1,517,186 | 1,402,330 | |
Goodwill | 32,620 | 32,620 | 32,620 | 32,620 | |
Factoring | |||||
Operating Income | |||||
Interest income | 3,150 | 3,131 | 8,613 | 9,188 | |
Intersegment interest allocations | (284) | (314) | (786) | (863) | |
Net interest income | 2,866 | 2,817 | 7,827 | 8,325 | |
Provision for loan losses | 8 | 8 | 18 | 48 | |
Net interest income after provision | 2,858 | 2,809 | 7,809 | 8,277 | |
Noninterest income | 359 | 152 | 895 | 517 | |
Noninterest expense | 1,685 | 1,914 | 5,264 | 5,326 | |
Intersegment expense allocations | (130) | (234) | (392) | (623) | |
Income before income taxes | 1,402 | 813 | 3,048 | 2,845 | |
Income tax expense | 589 | 342 | 1,280 | 1,195 | |
Net income | 813 | 471 | 1,768 | 1,650 | |
Total assets | 67,686 | 63,524 | 67,686 | 63,524 | |
Loans, net of deferred fees | 48,764 | 47,846 | 48,764 | 47,846 | |
Goodwill | $ 13,044 | $ 13,044 | $ 13,044 | $ 13,044 |
Subsequent Events (Details)
Subsequent Events (Details) - $ / shares | Oct. 26, 2017 | Sep. 30, 2017 | Sep. 30, 2016 |
Common stock | |||
Quarterly cash dividends declared to holders of common stock | $ 0.30 | $ 0.27 | |
Subsequent Event | |||
Common stock | |||
Quarterly cash dividends declared to holders of common stock | $ 0.10 |