Document and Entity Information
Document and Entity Information - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2019 | Feb. 14, 2020 | Jun. 28, 2019 | |
Cover [Abstract] | |||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2019 | ||
Entity Registrant Name | HERITAGE COMMERCE CORP | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Accelerated Filer | ||
Entity Small Business | false | ||
Entity Emerging Growth Company | false | ||
Entity Shell Company | false | ||
Entity Common Stock, Shares Outstanding | 59,548,859 | ||
Entity Central Index Key | 0001053352 | ||
Current Fiscal Year End Date | --12-31 | ||
Document Fiscal Year Focus | 2019 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Public Float | $ 372 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Assets | ||
Cash and due from banks | $ 49,447 | $ 30,273 |
Other investments and interest-bearing deposits in other financial institutions | 407,923 | 134,295 |
Total cash and cash equivalents | 457,370 | 164,568 |
Securities available-for-sale, at fair value | 404,825 | 459,043 |
Securities held-to-maturity, at amortized cost (fair value of $368,107 at December 31, 2019 and $366,175 at December 31, 2018) | 366,560 | 377,198 |
Loans held-for-sale - SBA, at lower of cost or fair value, including deferred costs | 1,052 | 2,649 |
Loans, net of deferred fees | 2,533,844 | 1,886,405 |
Allowance for loan losses | (23,285) | (27,848) |
Loans, net | 2,510,559 | 1,858,557 |
Federal Home Loan Bank, Federal Reserve Bank stock and other investments, at cost | 29,842 | 25,216 |
Company-owned life insurance | 76,027 | 61,859 |
Premises and equipment, net | 8,250 | 7,137 |
Goodwill | 167,420 | 83,753 |
Other intangible assets | 20,415 | 12,007 |
Accrued interest receivable and other assets | 67,143 | 44,575 |
Total assets | 4,109,463 | 3,096,562 |
Deposits: | ||
Demand, noninterest-bearing | 1,450,873 | 1,021,582 |
Demand, interest-bearing | 798,375 | 702,000 |
Savings and money market | 982,430 | 754,277 |
Time deposits - under $250 | 54,361 | 58,661 |
Time deposits - $250 and over | 99,882 | 86,114 |
CDARS - interest-bearing demand, money market and time deposits | 28,847 | 14,898 |
Total deposits | 3,414,768 | 2,637,532 |
Subordinated debt, net of issuance costs | 39,554 | 39,369 |
Other short-term borrowings | 328 | |
Accrued interest payable and other liabilities | 78,105 | 52,195 |
Total liabilities | 3,532,755 | 2,729,096 |
Shareholders' equity: | ||
Preferred stock, no par value; 10,000,000 shares authorized; none issued and outstanding at December 31, 2019 and December 31, 2018 | ||
Common stock, no par value; 100,000,000 shares authorized at December 31, 2019 and 60,000,000 shares authorized at December 31, 2018; 59,368,156 shares issued and outstanding at December 31, 2019 and 43,288,750 shares issued and outstanding at December 31, 2018 | 489,745 | 300,844 |
Retained earnings | 96,741 | 79,003 |
Accumulated other comprehensive loss | (9,778) | (12,381) |
Total shareholders' equity | 576,708 | 367,466 |
Total liabilities and shareholders' equity | $ 4,109,463 | $ 3,096,562 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Securities held-to-maturity | ||
Securities held-to-maturity, fair value (in dollars) | $ 368,107 | $ 366,175 |
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 | 100,000,000 | 60,000,000 |
Common stock, shares issued | 59,368,156 | 43,288,750 |
Common stock, shares outstanding | 59,368,156 | 43,288,750 |
CONSOLIDATED STATEMENTS OF INCO
CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Interest income: | |||
Loans, including fees | $ 116,808 | $ 105,635 | $ 86,346 |
Securities, taxable | 15,836 | 15,211 | 13,724 |
Securities, exempt from Federal tax | 2,148 | 2,225 | 2,256 |
Other investments, interest-bearing deposits in other financial institutions and Federal funds sold | 7,867 | 6,774 | 4,585 |
Total interest income | 142,659 | 129,845 | 106,911 |
Interest expense: | |||
Deposits | 8,159 | 5,506 | 3,991 |
Subordinated debt | 2,686 | 2,314 | 1,394 |
Short-term borrowings | 2 | 2 | 2 |
Total interest expense | 10,847 | 7,822 | 5,387 |
Net interest income before provision for loan losses | 131,812 | 122,023 | 101,524 |
Provision for loan losses | 846 | 7,421 | 99 |
Net interest income after provision for loan losses | 130,966 | 114,602 | 101,425 |
Noninterest income: | |||
Service charges and fees on deposit accounts | 4,510 | 4,113 | 3,231 |
Increase in cash surrender value of life insurance | 1,404 | 1,045 | 1,666 |
Gain (loss) on sales of securities | 661 | 266 | (6) |
Gain on sales of SBA loans | 689 | 698 | 1,108 |
Servicing income | 636 | 709 | 973 |
Other | 2,344 | 2,743 | 2,640 |
Total noninterest income | 10,244 | 9,574 | 9,612 |
Noninterest expense: | |||
Salaries and employee benefits | 50,754 | 43,762 | 35,719 |
Occupancy and equipment | 6,647 | 5,411 | 4,578 |
Professional fees | 3,259 | 1,969 | 2,982 |
Other | 24,238 | 24,379 | 17,459 |
Total noninterest expense | 84,898 | 75,521 | 60,738 |
Income before income taxes | 56,312 | 48,655 | 50,299 |
Income tax expense | 15,851 | 13,324 | 26,471 |
Net income | $ 40,461 | $ 35,331 | $ 23,828 |
Earnings per common share: | |||
Basic (in dollars per share) | $ 0.87 | $ 0.85 | $ 0.63 |
Diluted (in dollars per share) | $ 0.84 | $ 0.84 | $ 0.62 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||
Net income | $ 40,461 | $ 35,331 | $ 23,828 |
Other comprehensive income (loss): | |||
Change in net unrealized holding (losses) gains on available-for-sale securities and I/O strips | 10,620 | (6,383) | 417 |
Deferred income taxes | (3,545) | 1,925 | (175) |
Change in net unamortized unrealized gain on securities available-for-sale that were reclassified to securities held-to-maturity | (65) | (44) | (51) |
Deferred income taxes | 19 | 13 | 22 |
Reclassification adjustment for (gains) losses realized in income | (661) | (266) | 6 |
Deferred income taxes | 195 | 79 | (3) |
Change in unrealized gains (losses) on securities and I/O strips, net of deferred income taxes | 6,563 | (4,676) | 216 |
Change in net pension and other benefit plan liability adjustment | (5,622) | 2,196 | (923) |
Deferred income taxes | 1,662 | (649) | 388 |
Change in pension and other benefit plan liability, net of deferred income taxes | (3,960) | 1,547 | (535) |
Other comprehensive income (loss) | 2,603 | (3,129) | (319) |
Total comprehensive income | $ 43,064 | $ 32,202 | $ 23,509 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($) $ in Thousands | Common StockTri Valley Bank | Common StockUnited American Bank | Common StockPresidio bank | Common Stock | Retained Earnings | Accumulated Other Comprehensive Income / (Loss) | Tri Valley Bank | United American Bank | Presidio bank | Total |
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 | 23,828 | 23,828 | ||||||||
Other comprehensive income (loss) | (319) | (319) | ||||||||
Issuance of restricted stock awards, net (in shares) | 64,136 | |||||||||
Amortization of restricted stock awards, net of forfeitures and taxes | $ 912 | 912 | ||||||||
Cash dividend declared | (15,238) | (15,238) | ||||||||
Reclassification associated with the Adoption of ASU 2018-02 | 1,019 | (1,019) | ||||||||
Stock option expense, net of forfeitures | 838 | 838 | ||||||||
Stock options exercised | $ 1,368 | 1,368 | ||||||||
Stock options exercised (in shares) | 195,740 | |||||||||
Balance at Dec. 31, 2017 | $ 218,355 | 62,136 | (9,252) | 271,239 | ||||||
Balance (in shares) at Dec. 31, 2017 | 38,200,883 | |||||||||
Increase (Decrease) in Shareholders' Equity | ||||||||||
Net income | 35,331 | 35,331 | ||||||||
Other comprehensive income (loss) | (3,129) | (3,129) | ||||||||
Issuance of common shares to acquire Business | $ 30,725 | $ 47,280 | $ 30,725 | $ 47,280 | ||||||
Issuance of common shares to acquire Business (in shares) | 1,889,613 | 2,826,032 | ||||||||
Issuance of restricted stock awards, net (in shares) | 95,378 | |||||||||
Amortization of restricted stock awards, net of forfeitures and taxes | $ 1,109 | 1,109 | ||||||||
Cash dividend declared | (18,464) | (18,464) | ||||||||
Stock option expense, net of forfeitures | 708 | 708 | ||||||||
Stock options exercised | $ 2,667 | 2,667 | ||||||||
Stock options exercised (in shares) | 276,844 | |||||||||
Balance at Dec. 31, 2018 | $ 300,844 | 79,003 | (12,381) | 367,466 | ||||||
Balance (in shares) at Dec. 31, 2018 | 43,288,750 | |||||||||
Increase (Decrease) in Shareholders' Equity | ||||||||||
Net income | 40,461 | 40,461 | ||||||||
Other comprehensive income (loss) | 2,603 | 2,603 | ||||||||
Issuance of common shares to acquire Business | $ 177,926 | $ 177,926 | ||||||||
Issuance of common shares to acquire Business (in shares) | 15,684,064 | |||||||||
Consideration for Presidio stock options exchanged for Heritage Commerce Corp stock options | $ 7,426 | $ 7,426 | ||||||||
Issuance of restricted stock awards, net (in shares) | 128,653 | |||||||||
Amortization of restricted stock awards, net of forfeitures and taxes | $ 1,283 | 1,283 | ||||||||
Cash dividend declared | (22,723) | (22,723) | ||||||||
Stock option expense, net of forfeitures and taxes | 640 | 640 | ||||||||
Stock options exercised | $ 1,626 | 1,626 | ||||||||
Stock options exercised (in shares) | 266,689 | |||||||||
Balance at Dec. 31, 2019 | $ 489,745 | $ 96,741 | $ (9,778) | $ 576,708 | ||||||
Balance (in shares) at Dec. 31, 2019 | 59,368,156 |
CONSOLIDATED STATEMENTS OF CH_2
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Parenthetical) $ in Thousands | 12 Months Ended |
Dec. 31, 2019USD ($)$ / shares | |
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY | |
Cash dividend declared per share (in dollars per share) | $ / shares | $ 0.48 |
Presidio bank | |
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY | |
Issuance of common shares to acquire Presidio Bank, offering costs | $ | $ 246 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | |||
Net income | $ 40,461 | $ 35,331 | $ 23,828 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Amortization of discounts and premiums on securities | 2,590 | 3,788 | 4,344 |
(Gain) loss on sale of securities available-for-sale | (661) | (266) | 6 |
(Gain) on sale of SBA loans | (689) | (698) | (1,108) |
Proceeds from sale of SBA loans originated for sale | 10,096 | 11,765 | 14,733 |
SBA loans originated for sale | (8,504) | (15,214) | (13,730) |
Provision for loan losses | 846 | 7,421 | 99 |
Increase in cash surrender value of life insurance | (1,404) | (1,045) | (1,666) |
Depreciation and amortization | 846 | 753 | 786 |
Amortization of other intangible assets | 2,739 | 1,943 | 1,361 |
Stock option expense, net | 640 | 708 | 838 |
Amortization of restricted stock awards, net | 1,283 | 1,109 | 912 |
Amortization of subordinated debt issuance costs | 185 | 186 | 110 |
Effect of changes in: | |||
Accrued interest receivable and other assets | 8,407 | 1,572 | 10,497 |
Accrued interest payable and other liabilities | (6,492) | 1,219 | 348 |
Net cash provided by operating activities | 50,343 | 48,572 | 41,358 |
CASH FLOWS FROM INVESTING ACTIVITIES: | |||
Purchase of securities available-for-sale | (111,954) | (162,806) | (144,898) |
Purchase of securities held-to-maturity | (50,041) | (31,496) | (120,505) |
Maturities/paydowns/calls of securities available-for-sale | 53,566 | 57,142 | 57,862 |
Maturities/paydowns/calls of securities held-to-maturity | 59,361 | 50,773 | 44,277 |
Proceeds from sales of securities available-for-sale | 167,551 | 94,291 | 6,536 |
Net change in loans | 33,810 | 38,394 | (77,199) |
Changes in Federal Home Loan Bank stock and other investments | 1,161 | (4,483) | (2,715) |
Purchase of premises and equipment | (203) | (187) | (649) |
Cash received in bank acquisition, net of cash paid | 117,988 | 36,028 | |
Net cash provided by (used in) investing activities | 271,239 | 77,656 | (237,291) |
CASH FLOWS FROM FINANCING ACTIVITIES: | |||
Net change in deposits | 2,977 | (262,085) | 220,849 |
Issuance of subordinated debt, net of issuance costs | 39,073 | ||
Redemption of subordinated debt | (10,000) | ||
Payment for early debt extinguishment penalty | (300) | ||
Net change in short-term borrowings | (114) | ||
Exercise of stock options | 1,626 | 2,667 | 1,368 |
Common stock offering costs | (246) | ||
Payment of cash dividends | (22,723) | (18,464) | (15,238) |
Net cash provided by (used in) financing activities | (28,780) | (277,882) | 246,052 |
Net increase (decrease) in cash and cash equivalents | 292,802 | (151,654) | 50,119 |
Cash and cash equivalents, beginning of period | 164,568 | 316,222 | 266,103 |
Cash and cash equivalents, end of period | 457,370 | 164,568 | 316,222 |
Supplemental disclosures of cash flow information: | |||
Interest paid | 9,935 | 7,528 | 5,166 |
Income taxes paid | 17,730 | 12,838 | 17,256 |
Supplemental schedule of non-cash activity: | |||
Recording of right to use assets in exchange for lease obligations | 9,566 | ||
Transfer of loans held-for-sale to loan portfolio | $ 694 | $ 4,917 | $ 2,391 |
CONSOLIDATED STATEMENTS OF CA_2
CONSOLIDATED STATEMENTS OF CASH FLOWS - Summary of Assets Acquired and Liabilities Assumed Through Acquisition (Parenthetical) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Summary of assets acquired and liabilities assumed through acquisitions: | ||
Cash and cash equivalents, net of cash paid | $ 117,988 | $ 36,028 |
Securities available-for-sale | 45,069 | 63,723 |
Securities held-to-maturity | 463 | |
Net loans | 685,964 | 336,446 |
Premises and equipment | 1,756 | 350 |
Goodwill | 83,667 | 38,089 |
Other intangible assets | 11,147 | 8,361 |
Company owned life insurance | 12,764 | |
Other assets, net | 29,397 | 14,736 |
Deposits | (774,259) | (416,628) |
Subordinated debt | (10,000) | |
Other borrowings | (442) | (62) |
Other liabilities | (17,916) | (3,038) |
Presidio bank | ||
Summary of assets acquired and liabilities assumed through acquisitions: | ||
Securities available-for-sale | 45,069 | |
Securities held-to-maturity | 463 | |
Net loans | 685,964 | |
Premises and equipment | 1,756 | |
Other assets, net | 42,161 | |
Deposits | (774,259) | |
Other borrowings | (442) | |
Other liabilities | (17,916) | |
Common stock issued in acquisitions | $ 185,598 | |
Tri Valley Bank and United American Bank | ||
Summary of assets acquired and liabilities assumed through acquisitions: | ||
Common stock issued in acquisitions | $ 78,005 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2019 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 1) Summary of Significant Accounting Policies Description of Business and Basis of Presentation Heritage Commerce Corp (“HCC”) operates as a registered bank holding company for its wholly-owned subsidiary Heritage Bank of Commerce (“HBC” or the “Bank”), collectively referred to as the “Company”. HBC was incorporated on November 23, 1993 and commenced operations on June 8, 1994. HBC is a California state chartered bank which offers a full range of commercial and personal banking services to residents and the business/professional community in Santa Clara, Alameda, and Contra Costa counties of California. CSNK Working Capital Finance Corp. a California corporation, dba Bay View Funding (“Bay View Funding”) is a wholly owned subsidiary of HBC. Bay View Funding’s primary business operation is purchasing and collecting factored receivables. Factored receivables are receivables that have been transferred by the originating organization and typically have not been subject to previous collection efforts. In a factoring transaction Bay View Funding directly purchases the receivables generated by its clients at a discount to their face value. The transactions are structured to provide the clients with immediate working capital when there is a mismatch between payments to the client for a good and service and the payment of operating costs incurred to provide such good or service. The Company acquired Tri-Valley Bank (“Tri-Valley”) on April 6, 2018. Tri-Valley was merged with HBC, with HBC as the surviving bank. Tri-Valley’s results of operations have been included in the Company’s results of operations beginning April 7, 2018. The Company acquired United American Bank (“United American”) on May 4, 2018. United American was merged with HBC, with HBC as the surviving bank. United American’s results of operations have been included in the Company’s results of operations beginning May 5, 2018. The Company acquired Presidio Bank (“Presidio”) on October 11, 2019. Presidio was merged with HBC, with HBC as the surviving bank. Presidio’s results of operations have been included in the Company’s results of operations beginning October 12, 2019. The consolidated financial statements are prepared in accordance with accounting policies generally accepted in the United States of America and general practices in the banking industry. The financial statements include the accounts of the Company. All inter-company accounts and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents Cash and cash equivalents include cash on hand, amounts due from banks, amounts held at the Federal Reserve Bank, and Federal funds sold. The Company is required to maintain reserves against certain of the deposit accounts with the Federal Reserve Bank. Federal funds are generally sold and purchased for one‑day periods. Cash Flows Net cash flows are reported for customer loan and deposit transactions, notes payable, repurchase agreements and other short‑term borrowings. Securities The Company classifies its securities as either available-for-sale or held-to-maturity at the time of purchase. Debt securities are classified as held-to-maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity. Debt securities not classified as held-to-maturity are classified as available-for-sale. Securities available-for-sale are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income, net of taxes. A decline in the fair value of any available-for-sale or held-to-maturity security below amortized cost that is deemed other than temporary results in a charge to earnings and the corresponding establishment of a new cost basis for the security. In estimating other-than-temporary losses, management considers (1) the length of time and extent that fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the fair value decline was affected by macroeconomic conditions, and (4) whether the Company has the intention to sell the security or more likely than not will be required to sell the security before any anticipated recovery in fair value. Interest income includes amortization of purchase premiums or discounts. Premiums and discounts are amortized, or accreted, over the life of the related security as an adjustment to income using a method that approximates the interest method. Realized gains and losses are recorded on the trade date and determined using the specific identification method for the cost of securities sold. Loan Sales and Servicing The Company holds for sale the conditionally guaranteed portion of certain loans guaranteed by the Small Business Administration or the U.S. Department of Agriculture (collectively referred to as “SBA loans”). These loans are carried at the lower of aggregate cost or fair value. Net unrealized losses, if any, are recorded as a valuation allowance and charged to earnings. Gains or losses on SBA loans held-for-sale are recognized upon completion of the sale, based on the difference between the selling price and the carrying value of the related loan sold. SBA loans are sold with servicing retained. Servicing assets recognized separately upon the sale of SBA loans consist of servicing rights and, for loans sold prior to 2009, interest‑only strip receivables (“I/O strips”). The Company accounts for the sale and servicing of SBA loans based on the financial and servicing assets it controls and liabilities it has incurred, reversing recognition of financial assets when control has been surrendered, and reversing recognition of liabilities when extinguished. Servicing rights are initially recorded at fair value with the income statement effect recorded in gains on sale of loans. Servicing rights are amortized in proportion to and over the period of net servicing income and are assessed for impairment on an ongoing basis. Impairment is determined by stratifying the servicing rights based on interest rates and terms. Any servicing assets in excess of the contractually specified servicing fees are reclassified at fair value as an I/O strip receivable and treated like an available for sale security. Fair value is determined using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using market‑based assumptions. Impairment is recognized through a valuation allowance. The servicing rights, net of any required valuation allowance, and I/O strip receivable are included in other assets on the consolidated balance sheets. Servicing income, net of amortization of servicing rights, is recognized as noninterest income. The initial fair value of I/O strip receivables is amortized against interest income on loans. Loans Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at the principal amount outstanding, net of deferred loan origination fees and costs on originated loans, or unamortized premiums or discounts on purchased or acquired loans, and an allowance for loan losses. Interest on loans is accrued on the unpaid principal balance and is credited to income using the effective yield interest method. Interest on purchased or acquired loans and the accretion (amortization) of the related purchase discount (premium) is also credited to income using the effective yield interest method. A loan portfolio segment is defined as the level at which the Company uses a systematic methodology to determine the allowance for loan losses. A loan portfolio class is defined as a group of loans having similar risk characteristics and methods for monitoring and assessing risk. For all loan classes, when a loan is classified as nonaccrual, the accrual of interest is discontinued, any accrued and unpaid interest is reversed, and the amortization of deferred loan fees and costs is discontinued. For all loan classes, loans are classified as nonaccrual when the payment of principal or interest is 90 days past due, unless the loan is well secured and in the process of collection. Nonaccrual loans and loans past due 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans. In certain circumstances, loans that are under 90 days past due may also be classified as nonaccrual. Any interest or principal payments received on nonaccrual loans are applied toward reduction of principal. Nonaccrual loans generally are not returned to performing status until the obligation is brought current, the loan has performed in accordance with the contract terms for a reasonable period of time, and the ultimate collectability of the contractual principal and interest is no longer in doubt. Non‑refundable loan fees and direct origination costs are deferred and recognized over the expected lives of the related loans using the effective yield interest method. Acquired Loans Loans acquired through purchase or through a business combination are recorded at their fair value at the acquisition date. Credit discounts or premiums are included in the determination of fair value; therefore, an allowance for loan losses is not recorded at the acquisition date. Should the Company's allowance for loan losses methodology indicate that the credit discount associated with acquired, non-purchased credit impaired loans, is no longer sufficient to cover probable losses inherent in those loans, the Company will establish an allowance for those loans through a charge to provision for loan losses. Acquired loans are evaluated upon acquisition for evidence of deterioration in credit quality since origination such that it is probable at acquisition that the Company will be unable to collect all contractually required payments. Such loans are classified as purchased credit impaired loans ("PCI loans"), while all other acquired loans are classified as non-PCI loans. The Company has elected to account for PCI loans on an individual loan level. The Company estimates the amount and timing of expected cash flows for each loan. The expected cash flow in excess of the loan's carrying value, which is fair value on the date of acquisition, is referred to as the accretable yield, and is recorded as interest income over the remaining expected life of the loan. The excess of the loan's contractual principal and interest over expected cash flows is referred to as the non-accretable difference, and is not recorded in the Company's Consolidated Financial Statements. Quarterly, management performs an evaluation of expected future cash flows for PCI loans. If current expectations of future cash flows are less than management's previous expectations, other than due to decreases in interest rates and prepayment assumptions, an allowance for loan losses is recorded with a charge to current period earnings through provision for loan losses. If there has been a probable and significant increase in expected future cash flows over that which was previously expected, the Company would first reduce any previously established allowance for loan and lease losses, and then record an adjustment to interest income through a prospective increase in the accretable yield. There were no PCI loans at December 31, 2019 and December 31, 2018. Allowance for Loan Losses The allowance for loan losses is an estimate of probable incurred losses in the loan portfolio. Loans are charged‑off against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance for loan losses. Management’s methodology for estimating the allowance balance consists of several key elements, which include specific allowances on individual impaired loans and the formula driven allowances on pools of loans with similar risk characteristics. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off. Specific allowances are established for impaired loans. Management considers a loan to be impaired when it is probable that the Company will be unable to collect all amounts due according to the original contractual terms of the loan agreement, including scheduled interest payments. Loans for which the terms have been modified with a concession granted, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings and classified as impaired. When a loan is considered to be impaired, the amount of impairment is measured based on the fair value of the collateral, less costs to sell, if the loan is collateral dependent, or on the present value of expected future cash flows or values that are observable in the secondary market if the loan is not collateral dependent. The amount of any impairment will be charged off against the allowance for loan losses if the amount is a confirmed loss or, alternatively, a specific allocation within the allowance will be established. Loans that are considered impaired are specifically excluded from the formula portion of the allowance for loan losses analysis. The formula driven allowance on pools of loans covers all loans that are not impaired and is based on historical losses of each loan segment adjusted for current factors. In calculating the historical component of our allowance, we aggregate our loans into one of three loan segments: Commercial, Real Estate and Consumer. Each segment of loans in the portfolio possess varying degrees of risk, based on, among other things, the type of loan being made, the purpose of the loan, the type of collateral securing the loan, and the sensitivity the borrower has to changes in certain external factors such as economic conditions. The following provides a summary of the risks associated with various segments of the Company’s loan portfolio, which are factors management regularly considers when evaluating the adequacy of the allowance: Commercial loans consist primarily of commercial and industrial (“C&I”) loans (business lines of credit), and other commercial purpose loans. Repayment of commercial and industrial loans is generally provided from the cash flows of the related business to which the loan was made. Adverse changes in economic conditions may result in a decline in business activity, which may impact a borrower’s ability to continue to make scheduled payments. The factored receivables at Bay View Funding are included in the Company’s commercial loan portfolio; however, they are evaluated for risk primarily based on the agings of the receivables. Faster turning receivables imply less risk and therefore warrant a lower associated allowance. Should the overall aging for the portfolio increase, this structure will by formula increase the allowance to reflect the increasing risk. Should the portfolio turn more quickly, it would reduce the associated allowance to reflect the reducing risk. Real estate loans consist primarily of loans secured by commercial real estate (“CRE”) and residential real estate. Also included in this segment are land and construction loans and home equity lines of credit secured by real estate. As the majority of this segment is comprised of commercial real estate loans, risks associated with this segment lay primarily within these loan types. Adverse economic conditions may result in a decline in business activity and increased vacancy rates for commercial properties. These factors, in conjunction with a decline in real estate prices, may expose the Company to the potential for losses if a borrower cannot continue to service the loan with operating revenues, and the value of the property has declined to a level such that it no longer fully covers the Company’s recorded investment in the loan. Consumer loans consist primarily of a large number of small loans and lines of credit. The majority of installment loans are made for consumer and business purchases. Weakened economic conditions may result in an increased level of delinquencies within this segment, as economic pressures may impact the capacity of such borrowers to repay their obligations. As a result of the matters mentioned above, changes in the financial condition of individual borrowers, economic conditions, historical loss experience and the condition of the various markets in which collateral may be sold may all affect the required level of the allowance for loan losses and the associated provision for loan losses. The estimated loss factors for pools of loans that are not impaired are based on determining the probability of default and loss given default for loans within each segment of the portfolio, adjusted for significant factors that, in management’s judgment, affect collectibility as of the evaluation date. The Company’s historical delinquency experience and loss experience are utilized to determine the probability of default and loss given default for segments of the portfolio where the Company has experienced losses since the first quarter of 2009. For segments of the portfolio where the Company has no significant prior loss experience, the Company uses quantifiable observable industry data to determine the probability of default and loss given default. Risk factors impacting loans in each of the portfolio segments include broad deterioration of property values, reduced consumer and business spending as a result of continued high unemployment and reduced credit availability and lack of confidence in a sustainable recovery. The historical loss experience is adjusted for management’s estimate of the impact of other factors based on the risks present for each portfolio segment. These other factors include consideration of the following: the overall level of concentrations and trends of classified loans; loan concentrations within a portfolio segment or division of a portfolio segment; identification of certain loan types with higher risk than other loans; existing internal risk factors; and management’s evaluation of the impact of local and national economic conditions on each of our loan types. Loan Commitments and Related Financial Instruments Financial instruments include off‑balance sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded. Federal Home Loan Bank and Federal Reserve Bank Stock As a member of the Federal Home Loan Bank (“FHLB”) system, the Bank is required to own common stock in the FHLB based on the Bank’s level of borrowings and outstanding FHLB advances. FHLB stock is carried at cost and classified as a restricted security. Both cash and stock dividends from the FHLB are reported as income. As a member of the Federal Reserve Bank (“FRB”) of San Francisco, the Bank is required to own stock in the FRB of San Francisco based on a specified ratio relative to our capital. FRB stock is carried at cost and may be sold back to the FRB at its carrying value. Cash dividends received from the FRB are reported as income. Company-Owned Life Insurance and Split‑Dollar Life Insurance Benefit Plan The Company has purchased life insurance policies on certain directors and officers. Company-owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for charges or other amounts due that are probable at settlement. The purchased insurance is subject to split‑dollar insurance agreements with the insured participants, which continues after the participant’s employment and retirement. Accounting guidance requires that a liability be recorded primarily over the participant’s service period when a split-dollar life insurance agreement continues after a participant’s employment or retirement. The required accrued liability is based on either the post-employment benefit cost for the continuing life insurance or the future death benefit depending on the contractual terms of the underlying agreement. Premises and Equipment Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation. Depreciation and amortization are computed on the straight‑line basis over the lesser of the respective lease terms or estimated useful lives. The Company owns one building which is being depreciated over 40 years. Furniture, equipment, and leasehold improvements are depreciated over estimated useful lives generally ranging from five to fifteen years. The Company evaluates the recoverability of long‑lived assets on an ongoing basis. Business Combinations The Company accounts for acquisitions of businesses using the acquisition method of accounting. Under the acquisition method, assets acquired and liabilities assumed are recorded at their estimated fair values at the date of acquisition. Management utilizes various valuation techniques including discounted cash flow analyses to determine these fair values. Any excess of the purchase price over amounts allocated to the acquired assets, including identifiable intangible assets, and liabilities assumed is recorded as goodwill. Goodwill and Other Intangible Assets Goodwill resulted from the acquisition of Presidio on October 11, 2019, Tri-Valley on April 6, 2018 and United American on May 4, 2018, and from acquisitions in prior years. Goodwill represents the excess of the purchase price over the fair value of acquired tangible assets and liabilities and identifiable intangible assets. Goodwill is assessed at least annually for impairment and any such impairment is recognized in the period identified. Other intangible assets consist of a core deposit intangible assets from the Focus Business Bank (“Focus”) acquisition in August 2015, the Tri-Valley acquisition in April 2018, the United American acquisition in May 2018, and the Presidio merger in October 2019, and below market value lease intangible assets from the Tri-Valley and United American acquisitions, and an above market lease liability from the Presidio merger. In addition, a customer relationship and brokered relationship intangible assets arising from the Bay View Funding acquisition in November 2014 are included in other intangible assets. They are initially measured at fair value and then are amortized over their estimated useful lives. The core deposits intangible assets from the acquisitions are being amortized on an accelerated method over ten years. The below market value lease intangible assets are being amortized on the straight line method over three years for United American and eleven years for Tri-Valley. The above market lease adjustment is being amortized on the straight line method over 60 months for Presidio. The customer relationship and brokered relationship intangible assets from the Bay View Funding acquisition are being amortized over ten years. Foreclosed Assets Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through operations. Operating costs after acquisition are expensed. Gains and losses on disposition are included in noninterest expense. There were no foreclosed assets at December 31, 2019 and 2018. Retirement Plans Expenses for the Company’s non‑qualified, unfunded defined benefits plan consists of service and interest cost and amortization of gains and losses not immediately recognized. Employee 401(k) and profit sharing plan expense is the amount of matching contributions. Deferred compensation and supplemental retirement plan expense allocates the benefits over years of service. Loss Contingencies Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. The Company’s accounting policy for legal costs related to loss contingencies is to accrue for the probable fees that can be reasonably estimated. The Company’s accounting policy for uncertain recoveries is to recognize the anticipated recovery when realization is deemed probable. Income Taxes The Company files consolidated Federal and combined and separate state income tax returns. Income tax expense is the total of the current year income tax payable or refunded, the change in deferred tax assets and liabilities, and low income housing investment losses, net of tax benefits received. Some items of income and expense are recognized in different years for tax purposes when applying generally accepted accounting principles, leading to timing differences between the Company’s actual 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. Realization of the Company’s deferred tax assets is primarily dependent upon the Company generating sufficient taxable income to obtain benefit from the reversal of net deductible temporary differences and utilization of tax credit carryforwards for Federal and California state income tax purposes. The amount of deferred tax assets considered realizable is subject to adjustment in future periods based on estimates of future taxable income. Under generally accepted accounting principles, a valuation allowance is required to be recognized 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. In March 2016, the FASB issued new guidance intended to simplify several areas of accounting for share-based compensation programs, including the income tax impact, classification on the statement of cash flows, and forfeitures. The Company adopted the new guidance on share-based compensation during the first quarter of 2017. All excess tax benefits and tax deficiencies (including tax benefits of dividends on share‑based payment awards) are recognized as income tax expense or benefit on the income statement. The tax effects of exercised or vested awards are treated as discrete items in the reporting period in which they occur. The adoption of this guidance resulted in a reduction to tax expense of $146,000 and $424,000 and $146,000 for the years ended December 31, 2019, 2018, and 2017 respectively. On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”), was signed into law, which among other things reduces the federal corporate tax rate to 21% from 35%, effective January 1, 2018. When tax rates change, U.S. generally accepted accounting principles requires companies to remeasure certain tax-related assets and liabilities as of the date of enactment of the new legislation with the resulting tax effects accounted for as a discrete item recorded as a component of tax expense or benefit in the reporting period. A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The Company recognizes interest and penalties related to uncertain tax positions as income tax expense. Stock‑Based Compensation Compensation cost is recognized for stock options and restricted stock awards issued to employees and directors, based on the fair value of these awards at the date of grant. A Black‑Scholes model is utilized to estimate the fair value of stock options, while the market price of the Company’s common stock at the date of grant is used for restricted stock awards. Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight‑line basis over the requisite service period for the entire award. Compensation cost recognized reflects estimated forfeitures, adjusted as necessary for actual forfeitures. Comprehensive Income (Loss) Total comprehensive income (loss) consists of net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) refers to gains and losses that are included in comprehensive income (loss) but are excluded from net income (loss) because they have been recorded directly in equity, net of tax, under the provisions of certain accounting guidance. The Company’s sources of other comprehensive income (loss) are unrealized gains and losses on securities available‑for‑sale, and I/O strips, which are treated like available‑for‑sale securities, and the liabilities related to the Company’s defined benefit pension plan and the split‑dollar life insurance benefit plan. Reclassification adjustments result from gains or losses that were realized and included in net income (loss) of the current period that also had been included in other comprehensive income as unrealized holding gains and losses. Segment Reporting HBC is a commercial bank serving customers located in Alameda, Contra Costa, Marin, San Benito, San Francisco, San Mateo, and Santa Clara counties of California. Bay View Funding provides business essential working capital factoring financing to various industries throughout the United States. No customer accounts for more than 10 percent of revenue for HBC or the Company. With the previous acquisition of Bay View Funding, the Company has two reportable segments consisting of Banking and Factoring. Reclassifications Certain items in the consolidated financial statements for the years ended December 31, 2018 and 2017 were reclassified to conform to the 2019 presentation. These reclassifications did not affect previously reported net income or shareholders’ equity. Adoption of New Accounting Standards In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842)”. The pronouncement affects all entities that are party to leasing agreements. The ASU requires a lessee to recognize assets and liabilities on the balance sheet for leases. The ASU permits a lessee to elect to opt out of recognizing lease assets and lease liabilities for short-term leases with a term of twelve months or less. The Company has made this short-term lease election. Lessee’s recognition, measurement, and presentation of income, expenses and cash flows arising from a lease remain similar to current GAAP. Lessee and lessors have additional quantitative and qualitative disclosures to help users better understand the amount, timing, and uncertainty of cash flows arising from leases. ASU No. 2016-02 is effective for fiscal years beginning after December 31, 2018, and interim periods within those fiscal years. Lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. In July 2018, the FASB issued ASU No. 2018-11, “Leases (Topic 842) - Targeted Improvements” to provide entities with relief from the costs of implementing certain aspects of the new leasing standard. Specifically, under the amendments in ASU No. 2018-11 entities may elect not to recast the comparative periods presented when transitioning to the new leasing standard, and lessors may |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Income (“AOCI”) | 12 Months Ended |
Dec. 31, 2019 | |
Accumulated Other Comprehensive Income (“AOCI”) | |
Accumulated Other Comprehensive Income (“AOCI”) | 2) Accumulated Other Comprehensive Income (“AOCI”) The following table reflects the changes in AOCI by component for the periods indicated: Year Ended December 31, 2019 and 2018 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, 2019, net of taxes $ (5,007) $ 344 $ (7,718) $ (12,381) Other comprehensive income (loss) before reclassification, net of taxes 7,075 — (4,022) 3,053 Amounts reclassified from other comprehensive income (loss), net of taxes (466) (46) 62 (450) Net current period other comprehensive income (loss), net of taxes 6,609 (46) (3,960) 2,603 Ending balance December 31, 2019, net of taxes $ 1,602 $ 298 $ (11,678) $ (9,778) Beginning balance January 1, 2018, net of taxes $ (362) $ 375 $ (9,265) $ (9,252) Other comprehensive (loss) before reclassification, net of taxes (4,458) — 1,387 (3,071) Amounts reclassified from other comprehensive income (loss), net of taxes (187) (31) 160 (58) Net current period other comprehensive income (loss), net of taxes (4,645) (31) 1,547 (3,129) Ending balance December 31, 2018, net of taxes $ (5,007) $ 344 $ (7,718) $ (12,381) Amounts Reclassified from AOCI(1) Year Ended December 31, Affected Line Item Where Details About AOCI Components 2019 2018 2017 Net Income is Presented (Dollars in thousands) Unrealized gains on available-for-sale securities and I/O strips $ 661 $ 266 $ (6) Gain (loss) on sales of securities (195) (79) 3 Income tax expense 466 187 (3) Net of tax Amortization of unrealized gain on securities available-for-sale that were reclassified to securities held-to-maturity 65 44 51 Interest income on taxable securities (19) (13) (22) Income tax expense 46 31 29 Net of tax Amortization of defined benefit pension plan items (1) Prior transition obligation 96 65 71 Actuarial losses (184) (292) (276) (88) (227) (205) Other noninterest expense 26 67 86 Income tax benefit (62) (160) (119) Net of tax Total reclassification from AOCI for the period $ 450 $ 58 $ (93) (1) Benefit Plans ). |
Securities
Securities | 12 Months Ended |
Dec. 31, 2019 | |
Securities | |
Securities | 3) Securities The amortized cost and estimated fair value of securities at year‑end were as follows: Gross Gross Estimated Amortized Unrealized Unrealized Fair December 31, 2019 Cost Gains (Losses) Value (Dollars in thousands) Securities available-for-sale: Agency mortgage-backed securities $ 283,598 $ 934 $ (171) $ 284,361 U.S. Treasury 118,939 1,525 — 120,464 Total $ 402,537 $ 2,459 $ (171) $ 404,825 Securities held-to-maturity: Agency mortgage-backed securities $ 285,344 $ 1,206 $ (968) $ 285,582 Municipals - exempt from Federal tax 81,216 1,313 (4) 82,525 Total $ 366,560 $ 2,519 $ (972) $ 368,107 Gross Gross Estimated Amortized Unrealized Unrealized Fair December 31, 2018 Cost Gains (Losses) Value (Dollars in thousands) Securities available-for-sale: Agency mortgage-backed securities $ 311,523 $ 98 $ (8,767) $ 302,854 U.S. Treasury 147,823 930 — 148,753 U.S. Government sponsored entities 7,433 4 (1) 7,436 Total $ 466,779 $ 1,032 $ (8,768) $ 459,043 Securities held-to-maturity: Agency mortgage-backed securities $ 291,241 $ 59 $ (9,153) $ 282,147 Municipals - exempt from Federal tax 85,957 312 (2,241) 84,028 Total $ 377,198 $ 371 $ (11,394) $ 366,175 Securities with unrealized losses at year end, aggregated by investment category and length of time that individual securities have been in an unrealized loss position are as follows: Less Than 12 Months 12 Months or More Total Fair Unrealized Fair Unrealized Fair Unrealized December 31, 2019 Value (Losses) Value (Losses) Value (Losses) (Dollars in thousands) Securities available-for-sale: Agency mortgage-backed securities $ 100,816 $ (105) $ 27,534 $ (66) $ 128,350 $ (171) Total $ 100,816 $ (105) $ 27,534 $ (66) $ 128,350 $ (171) Securities held-to-maturity: Agency mortgage-backed securities $ 50,060 $ (178) $ 88,128 $ (790) $ 138,188 $ (968) Municipals - exempt from Federal tax 1,556 (4) — — 1,556 (4) Total $ 51,616 $ (182) $ 88,128 $ (790) $ 139,744 $ (972) Less Than 12 Months 12 Months or More Total Fair Unrealized Fair Unrealized Fair Unrealized December 31, 2018 Value (Losses) Value (Losses) Value (Losses) (Dollars in thousands) Securities available-for-sale: Agency mortgage-backed securities $ 3,868 $ (21) $ 281,082 $ (8,746) $ 284,950 $ (8,767) U.S. Government sponsored entities 3,974 (1) — — 3,974 (1) Total $ 7,842 $ (22) $ 281,082 $ (8,746) $ 288,924 $ (8,768) Securities held-to-maturity: Agency mortgage-backed securities $ 16,088 $ (103) $ 255,917 $ (9,050) $ 272,005 $ (9,153) Municipals - exempt from Federal tax 5,019 (27) 57,301 (2,214) 62,320 (2,241) Total $ 21,107 $ (130) $ 313,218 $ (11,264) $ 334,325 $ (11,394) 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 December 31, 2019, the Company held 463 securities (141 available-for-sale and 322 held-to-maturity), of which 86 had fair values below amortized cost. At December 31, 2019, there were $27,534,000 of agency mortgage-backed securities available-for-sale, and $88,128,000 of agency mortgage-backed securities held-to-maturity, carried with an unrealized loss for 12 months or greater. The total unrealized loss for securities 12 months or greater was $856,000 at December 31, 2019. The unrealized losses were due to higher interest rates. 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 December 31, 2019. The proceeds from sales of securities and the resulting gains and losses are listed below: 2019 2018 2017 (Dollars in thousands) Proceeds $ 167,551 $ 94,291 $ 6,536 Gross gains 1,094 1,243 — Gross losses (433) (977) (6) The amortized cost and fair value of debt securities as of December 31, 2019, by contractual maturity, are shown below. The expected maturities will differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment 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 3 months through one year $ 54,649 55,085 Due after one through five years 64,290 65,379 Agency mortgage-backed securities 283,598 284,361 Total $ 402,537 $ 404,825 Held-to-maturity Amortized Estimated Cost Fair Value (Dollars in thousands) Due 3 months or less $ 125 125 Due after 3 months through one year 1,449 1,457 Due after one through five years 5,206 5,358 Due after five through ten years 31,698 32,279 Due after ten years 42,738 43,306 Agency mortgage-backed securities 285,344 285,582 Total $ 366,560 $ 368,107 Securities with amortized cost of $32,773,000 and $36,229,000 as of December 31, 2019 and 2018 were pledged to secure public deposits and for other purposes as required or permitted by law or contract. |
Loans
Loans | 12 Months Ended |
Dec. 31, 2019 | |
Loans | |
Loans | 4) Loans Loans at year‑end were as follows: December 31, December 31, 2019 2018 (Dollars in thousands) Loans held-for-investment: Commercial $ 631,547 $ 597,763 Real estate: CRE 1,510,592 994,067 Land and construction 150,634 122,358 Home equity 175,252 109,112 Residential mortgages 46,256 50,979 Consumer 19,882 12,453 Loans 2,534,163 1,886,732 Deferred loan fees, net (319) (327) Loans, net of deferred fees 2,533,844 1,886,405 Allowance for loan losses (23,285) (27,848) Loans, net $ 2,510,559 $ 1,858,557 Changes in the allowance for loan losses were as follows: ` Year Ended December 31, 2019 Commercial Real Estate Consumer Total (Dollars in thousands) Beginning of period balance $ 17,061 $ 10,671 $ 116 $ 27,848 Charge-offs (6,609) — (14) (6,623) Recoveries 1,045 169 — 1,214 Net (charge-offs) recoveries (5,564) 169 (14) (5,409) Provision (credit) for loan losses (1,044) 1,910 (20) 846 End of period balance $ 10,453 $ 12,750 $ 82 $ 23,285 Year Ended December 31, 2018 Commercial Real Estate Consumer Total (Dollars in thousands) Beginning of period balance $ 10,608 $ 8,950 $ 100 $ 19,658 Charge-offs (2,002) — (24) (2,026) Recoveries 2,645 150 — 2,795 Net (charge-offs) recoveries 643 150 (24) 769 Provision for loan losses 5,810 1,571 40 7,421 End of period balance $ 17,061 $ 10,671 $ 116 $ 27,848 Year Ended December 31, 2017 Commercial Real Estate Consumer Total (Dollars in thousands) Beginning of period balance $ 10,656 $ 8,327 $ 106 $ 19,089 Charge-offs (2,239) — — (2,239) Recoveries 1,585 1,124 — 2,709 Net (charge-offs) recoveries (654) 1,124 — 470 Provision (credit) for loan losses 606 (501) (6) 99 End of period balance $ 10,608 $ 8,950 $ 100 $ 19,658 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 as follows at year‑end: December 31, 2019 Commercial Real Estate Consumer Total (Dollars in thousands) Allowance for loan losses: Ending allowance balance attributable to loans: Individually evaluated for impairment $ 1,835 $ — $ — $ 1,835 Collectively evaluated for impairment 8,618 12,750 82 21,450 Total allowance balance $ 10,453 $ 12,750 $ 82 $ 23,285 Loans: Individually evaluated for impairment $ 4,810 $ 5,454 $ — $ 10,264 Collectively evaluated for impairment 626,737 1,877,280 19,882 2,523,899 Total loan balance $ 631,547 $ 1,882,734 $ 19,882 $ 2,534,163 December 31, 2018 Commercial Real Estate Consumer Total (Dollars in thousands) Allowance for loan losses: Ending allowance balance attributable to loans: Individually evaluated for impairment $ 6,944 $ — $ — $ 6,944 Collectively evaluated for impairment 10,117 10,671 116 20,904 Total allowance balance $ 17,061 $ 10,671 $ 116 $ 27,848 Loans: Individually evaluated for impairment $ 9,495 $ 5,645 $ — $ 15,140 Collectively evaluated for impairment 588,268 1,270,871 12,453 1,871,592 Total loan balance $ 597,763 $ 1,276,516 $ 12,453 $ 1,886,732 The following table presents loans held‑for‑investment individually evaluated for impairment by class of loans as of December 31, 2019 and December 31, 2018. 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. December 31, 2019 December 31, 2018 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 $ 2,113 $ 2,113 $ — $ 1,849 $ 1,849 $ — Real estate: CRE 5,094 5,094 — 5,094 5,094 — Home Equity 360 360 — 551 551 — Total with no related allowance recorded 7,567 7,567 — 7,494 7,494 — With an allowance recorded: Commercial 2,697 2,697 1,835 7,646 7,646 6,944 Total with an allowance recorded 2,697 2,697 1,835 7,646 7,646 6,944 Total $ 10,264 $ 10,264 $ 1,835 $ 15,140 $ 15,140 $ 6,944 The following table presents interest recognized and cash‑basis interest earned on impaired loans for the periods indicated: Year Ended December 31, 2019 Real Estate Land and Home Commercial CRE Construction Equity Consumer Total (Dollars in thousands) Average of impaired loans during the period $ 8,048 $ 6,433 $ — $ 440 $ — $ 14,921 Interest income during impairment $ — $ — $ — $ — $ — $ — Cash-basis interest recognized $ — $ — $ — $ — $ — $ — Year Ended December 31, 2018 Real Estate Land and Home Commercial CRE Construction Equity Consumer Total (Dollars in thousands) Average of impaired loans during the period $ 10,744 $ 3,507 $ 24 $ 487 $ — $ 14,762 Interest income during impairment $ — $ — $ — $ — $ — $ — Cash-basis interest recognized $ — $ — $ — $ — $ — $ — 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 year‑end: 2019 2018 (Dollars in thousands) Nonaccrual loans - held-for-investment $ 8,675 $ 13,699 Restructured and loans over 90 days past due and still accruing 1,153 1,188 Total nonperforming loans 9,828 14,887 Other restructured loans 436 253 Total impaired loans $ 10,264 $ 15,140 The following table presents the nonperforming loans by class at year‑end: December 31, 2019 December 31, 2018 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 $ 3,444 $ 1,153 $ 4,597 $ 8,279 $ 963 $ 9,242 Real estate: CRE 5,094 — 5,094 5,094 — 5,094 Home equity 137 — 137 326 225 551 Total $ 8,675 $ 1,153 $ 9,828 $ 13,699 $ 1,188 $ 14,887 The following table presents the aging of past due loans at year-end by class of loans: December 31, 2019 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 $ 4,770 $ 2,097 $ 3,217 $ 10,084 $ 621,463 $ 631,547 Real estate: CRE — — 5,094 5,094 1,505,498 1,510,592 Land and construction — — — — 150,634 150,634 Home equity — 137 — 137 175,115 175,252 Residential mortgages — — — — 46,256 46,256 Consumer — — — — 19,882 19,882 Total $ 4,770 $ 2,234 $ 8,311 $ 15,315 $ 2,518,848 $ 2,534,163 December 31, 2018 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 $ 5,698 $ 1,916 $ 1,258 $ 8,872 $ 588,891 $ 597,763 Real estate: CRE — — — — 994,067 994,067 Land and construction — — — — 122,358 122,358 Home equity — — — — 109,112 109,112 Residential mortgages — — — — 50,979 50,979 Consumer 1 — — 1 12,452 12,453 Total $ 5,699 $ 1,916 $ 1,258 $ 8,873 $ 1,877,859 $ 1,886,732 Past due loans 30 days or greater totaled $ 15,315,000 and $8,873,000 at December 31, 2019 and December 31, 2018, respectively, of which $7,413,000 and $430,000 were on nonaccrual. At December 31, 2019, there were also $1,262,000 loans less than 30 days past due included in nonaccrual loans held-for-investment. At December 31, 2018, there were also $13,269,000 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 clients 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 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 continued 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 definitions: 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. In addition, loans of so little value that their continuance as assets is not warranted are classified as loss. 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 will occur. Loans classified as loss are immediately charged off against the allowance for loan losses. Therefore, there is no balance to report at December 31, 2019 or 2018. The following table provides a summary of the loan portfolio by loan type and credit quality classification for the periods indicated: December 31, 2019 December 31, 2018 Nonclassified Classified Total Nonclassified Classified Total (Dollars in thousands) Commercial $ 623,768 7,779 $ 631,547 $ 584,845 $ 12,918 $ 597,763 Real estate: CRE 1,492,126 18,466 1,510,592 985,193 8,874 994,067 Land and construction 147,553 3,081 150,634 122,358 — 122,358 Home equity 171,999 3,253 175,252 107,495 1,617 109,112 Residential mortgages 46,256 — 46,256 50,979 — 50,979 Consumer 19,882 — 19,882 12,453 — 12,453 Total $ 2,501,584 $ 32,579 $ 2,534,163 $ 1,863,323 $ 23,409 $ 1,886,732 The increase in classified assets at December 31, 2019 was primarily due to classified assets acquired from Presidio. 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 compliance with the Company’s underwriting policy. The book balance of troubled debt restructurings at December 31, 2019 was $1,039,000, which included $590,000 of nonaccrual loans and $449,000 of accruing loans. The book balance of troubled debt restructurings at December 31, 2018 was $649,000, which included $36,000 of nonaccrual loans and $613,000 of accruing loans. Approximately $20,000 and $38,000 in specific reserves were established with respect to these loans as of December 31, 2019 and December 31, 2018. As of December 31, 2019 and December 31, 2018, the Company had no additional amounts committed on any loan classified as a troubled debt restructuring. The following table presents loans by class modified as troubled debt restructurings: During the Year Ended December 31, 2019 Pre-modification Post-modification Number Outstanding Outstanding of Recorded Recorded Troubled Debt Restructurings: Contracts Investment Investment (Dollars in thousands) Commercial 3 $ 591 $ 591 Total 3 $ 591 $ 591 During the Year Ended December 31, 2018 Pre-modification Post-modification Number Outstanding Outstanding of Recorded Recorded Troubled Debt Restructurings: Contracts Investment Investment (Dollars in thousands) Commercial 2 $ 112 $ 112 Equity 1 224 224 Total 3 $ 336 $ 336 During the twelve months ended December 31, 2019, 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. 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 years ended December 31, 2019 and 2018. 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. HBC makes loans to executive officers, directors, and their affiliates. The following table presents the loans outstanding to these related parties for the periods indicated: 2019 2018 (Dollars in thousands) Beginning of year balance $ — $ 531 Repayment on loans during the year — (531) End of year balance $ — $ — |
Loan Servicing
Loan Servicing | 12 Months Ended |
Dec. 31, 2019 | |
Loan Servicing | |
Loan Servicing | 5) Loan Servicing At December 31, 2019, 2018, and 2017, the Company serviced SBA loans sold to the secondary market of approximately $87,835,000, $104,016,000, and $139,086,000, respectively. Servicing assets represent the servicing spread generated from the sold guaranteed portions of SBA loans. The weighted average servicing rate for all loans serviced was 1.16%, 1.12%, and 1.13% at December 31, 2019, 2018, and 2017, respectively. Servicing rights are included in “accrued interest receivable and other assets” on the consolidated balance sheets. Activity for loan servicing rights follows: 2019 2018 2017 (Dollars in thousands) Beginning of year balance $ 871 $ 1,373 $ 1,854 Additions 157 200 278 Amortization (445) (702) (759) End of year balance $ 583 $ 871 $ 1,373 There was no valuation allowance for servicing rights at December 31, 2019, 2018, and 2017, because the estimated fair value of the servicing rights was greater than the carrying value. The estimated fair value of loan servicing rights was $1,295,000, $1,651,000, and $2,594,000, at December 31, 2019, 2018, and 2017, respectively. The fair value of servicing rights at December 31, 2019, was estimated using a weighted average constant prepayment rate (“CPR”) assumption of 13.50%, and a weighted average discount rate assumption of 15.90%. The fair value of servicing rights at December 31, 2018, was estimated using a weighted average CPR assumption of 10.89%, and a weighted average discount rate assumption of 16.40%. The fair value of servicing rights at December 31, 2017, was estimated using a weighted average CPR assumption of 8.13%, and a weighted average discount rate assumption of 13.86%. The weighted average discount rate and CPR assumptions used to estimate the fair value of the I/O strip receivables are the same as for the servicing rights. Management reviews the key economic assumptions used to estimate the fair value of I/O strip receivables on a quarterly basis. The fair value of the I/O strip can be adversely impacted by a significant increase in either the prepayment speed of the portfolio or the discount rate. I/O strip receivables are included in “accrued interest receivable and other assets” on the consolidated balance sheets. Activity for I/O strip receivables follows: 2019 2018 2017 (Dollars in thousands) Beginning of year balance $ 568 $ 968 $ 1,067 Unrealized loss (65) (400) (99) End of year balance $ 503 $ 568 $ 968 |
Premises and Equipment
Premises and Equipment | 12 Months Ended |
Dec. 31, 2019 | |
Premises and Equipment | |
Premises and Equipment | 6) Premises and Equipment Premises and equipment at year‑end were as follows: 2019 2018 (Dollars in thousands) Building $ 3,508 $ 3,508 Land 2,900 2,900 Furniture and equipment 10,067 9,584 Leasehold improvements 7,372 5,645 23,847 21,637 Accumulated depreciation and amortization (15,597) (14,500) Premises and equipment, net $ 8,250 $ 7,137 Depreciation and amortization expense was $846,000, $753,000, and $786,000 in 2019, 2018, and 2017, respectively. |
Leases
Leases | 12 Months Ended |
Dec. 31, 2019 | |
Leases | |
Leases | 7) Leases On January 1, 2019, the Company adopted ASU No. 2016-02, Leases (Topic 842). Under the new guidance, the Company recognizes the following for all leases, at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use (“ROU”) asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The Company is impacted as a lessee of the offices and real estate used for operations. The Company's lease agreements include options to renew at the Company's option. No lease extensions are reasonably certain to be exercised, therefore it was not considered in the calculation of the ROU asset and lease liability. As of December 31, 2019, operating lease ROU assets, included in other assets totaled $12,173,000, and lease liabilities, included in other liabilities, totaled $13,032,000. The following table presents the quantitative information for the Company’s leases: December 31, 2019 (Dollars in thousands) Operating Lease Cost (Cost resulting from lease payments) $ 1,490 Operating Lease - Operating Cash Flows (Fixed Payments) $ 1,519 Operating Lease - ROU assets $ 12,173 Operating Lease - Liabilities $ 13,032 Weighted Average Lease Term - Operating Leases 4.79 years Weighted Average Discount Rate - Operating Leases The following maturity analysis shows the undiscounted cash flows due on the Company’s operating lease liabilities: (Dollars in thousands) 2020 $ 3,812 2021 2,852 2022 2,578 2023 1,855 2024 1,474 Thereafter 1,618 Total undiscounted cash flows 14,189 Discount on cash flows (1,157) Total lease liability $ 13,032 The merger with Presidio resulted in the Company operating overlapping branch locations in the cities of Walnut Creek and San Mateo, California. Management has approved the consolidation of these branches in 2020 by vacating the HBC leased locations prior to the lease termination date, and moving the operations to the Presidio branch locations. The consolidation of these two branches into the Presidio locations resulted in the impairment of both leases at December 31, 2019. The lease impairment and write-off of fixed assets and tenant improvements totaled $434,000 for the Walnut Creek location, and $625,000 for the San Mateo location during the fourth quarter of 2019. In June of 2019, the Company entered in to a lease agreement for 54,910 square feet of office space in San Jose, California, commencing on February 1, 2020. The Company intends to move its Bay View Funding office during the first quarter of 2020, and move the main office of HBC during the second quarter of 2020, to this new location. |
Business Combinations
Business Combinations | 12 Months Ended |
Dec. 31, 2019 | |
Business Combinations | |
Business Combinations | 8) Business Combinations On April 6, 2018, the Company completed its acquisition of Tri-Valley for a transaction value of $32,320,000. At closing the Company issued 1,889,613 shares of the Company’s common stock with an aggregate market value of $30,725,000 on the date of closing. The number of shares issued was based on a fixed exchange ratio of 0.0489 of a share of the Company’s common stock for each outstanding share of Tri-Valley common stock. In addition, at closing the Company paid cash to the holder of a stock warrant and holders of outstanding stock options and related fees and fractional shares totaling $1,595,000. Tri-Valley’s results of operations have been included in the Company’s results of operations beginning April 7, 2018. On May 4, 2018, the Company completed its acquisition of United American for a transaction value of $56,417,000. At closing the Company issued 2,826,032 shares of the Company’s common stock with an aggregate market value of $47,280,000 on the date of closing. The number of shares issued was based on a fixed exchange ratio of 2.1644 of a share of the Company’s common stock for each outstanding share of United American common stock and each common stock equivalent underlying the United American Series D Preferred Stock and Series E Preferred Stock. The shareholders of the United American Series A Preferred Stock and Series B Preferred Stock received $1,000 cash for each share totaling $8,700,000 and $435,000, respectively. In addition, the Company paid $2,000 in cash for fractional shares, for total cash consideration of $9,137,000. United American’s results of operations have been included in the Company’s results of operations beginning May 5, 2018. On October 11, 2019, the Company completed its merger with Presidio for an aggregate transaction value of $185,598,000. Shareholders of Presidio received a fixed exchange ratio at closing of 2.47 shares of the Company’s common stock for each share of Presidio common stock. Upon closing of the transaction, the Company issued 15,684,064 shares of the Company’s common stock to Presidio shareholders and holders of restricted stock units for a total value of $178,171,000 based on the Company’s closing stock price of $11.36 on the closing date of October 11, 2019. In addition, the consideration for Presidio stock options exchanged for the Company’s stock options totaled $7,426,000 and cash-in-lieu of fractional shares totaled $1,000 on October 11, 2019. The following table summarizes the consideration paid for Presidio: (Dollars in thousands) Issuance of 15,684,064 shares of common stock to Presidio shareholders and holders of restricted stock (stock price = $11.36 on October 11, 2019) $ 178,171 Consideration for Presidio stock options exchanged for Heritage Commerce Corp stock options 7,426 Cash paid for fractional shares 1 Total consideration $ 185,598 The following table summarizes the estimated fair values of the Presidio assets acquired and liabilities assumed at the date of the merger. As As Recorded Fair Recorded by Value at Presidio Adjustments Acquisition (Dollars in thousands) Assets acquired: Cash and cash equivalents $ 117,989 $ (1) (a) $ 117,988 Securities available-for-sale 44,647 422 (b) 45,069 Securities held-to-maturity 463 — 463 Loans 698,493 (12,529) (c) 685,964 Allowance for loan losses (7,463) 7,463 (d) — Premises and equipment, net 1,756 — 1,756 Other intangible assets — 11,147 (e) 11,147 Other assets, net 43,539 (1,378) (f) 42,161 Total assets acquired $ 899,424 $ 5,124 904,548 Liabilities assumed: Deposits $ 774,260 $ (1) (g) 774,259 Subordinated Debt 10,000 — (h) 10,000 Other borrowings 442 — 442 Other liabilities 17,916 — 17,916 Total liabilities assumed $ 802,618 $ (1) 802,617 Net assets acquired 101,931 Purchase price 185,598 Goodwill recorded in the merger $ 83,667 Explanation of certain fair value related adjustments for the Presidio merger: (a) Represents cash paid for fractional shares in the transaction. (b) Represents the fair value adjustment on investment securities available-for-sale. (c) Represents the fair value adjustment to the net book value of loans includes an interest rate mark and credit mark adjustment. (d) Represents the elimination of Presidio’s allowance for loan losses. (e) Represents intangible assets recorded to reflect the fair value of core deposits and an above market lease. The core deposit asset was recorded as an identifiable intangible asset and is amortized on an accelerated basis over the estimated average life of the deposit base. The above market lease liability will be accreted on the straight line method over 60 months. (f) Represents an adjustment to net deferred tax assets resulting from the fair value adjustments related to the acquired assets, liabilities assumed and identifiable intangible assets recorded. (g) Represents the fair value adjustment on time deposits, which was amortized as interest expense. (h) The Company acquired $10,000,000 of subordinated debt from the Presidio transaction. The Presidio subordinated debt was redeemed on December 19, 2019. Presidio’s results of operations have been included in the Company’s results of operations beginning October 12, 2019. The following table presents pro forma financial information as if the merger had occurred on January 1, 2018, which includes the pre‑acquisition period for Presidio. The historical unaudited pro forma financial information has been adjusted to reflect supportable items that are directly attributable to the acquisition and expected to have a continuing impact on consolidated results of operations, as such, one‑time acquisition costs are not included. The unaudited pro forma financial information is provided for informational purposes only. The unaudited pro forma financial information is not necessarily, and should not be assumed to be, an indication of the results that would have been achieved had the acquisition been completed as of the dates indicated or that may be achieved in the future. The preparation of the unaudited pro forma combined consolidated financial statements and related adjustments required management to make certain assumptions and estimates. For the Year Ended UNAUDITED December 31, 2019 December 31, 2018 (Dollars in thousands, except per share amounts) Net interest income $ 163,555 $ 160,044 Provision (credit) for loan losses 870 7,694 Noninterest income 11,291 10,795 Noninterest expense 92,709 97,563 Income before income taxes 81,268 65,582 Income tax expense 23,730 17,549 Net income $ 57,538 $ 48,033 Net income per share - basic $ 0.98 $ 0.84 Net income per share - diluted $ 0.96 $ 0.83 The Company believes the mergers provide the opportunity to combine independent business banking franchises with similar philosophies and cultures into a combined $4.1 billion business bank based in San Jose, California. The pooling of the three banks’ resources and knowledge enhance the Company’s capabilities, operational efficiencies, and community outreach. The Company also believes the combined bank will be much better positioned to meet the needs of the Company’s customers, shareholders and the community. The following table summarizes the pre-tax merger-related costs for the year ended December 31, 2019 for the Presidio merger, and the pre-tax merger-related costs for the years ended December 31, 2018 and 2017 for the Tri-Valley and United American acquisitions: For the Year Ended December 31, December 31, December 31, 2019 2018 2017 (Dollars in thousands) Salaries and employee benefits $ 6,580 $ 3,569 $ — Other 4,500 5,598 671 Total merger-related costs $ 11,080 $ 9,167 $ 671 The fair value of net assets acquired includes fair value adjustments to certain receivables of which some were considered impaired and some were not considered impaired as of the acquisition date. The fair value adjustments were determined using discounted contractual cash flows, adjusted for expected losses and prepayments, where appropriate. The receivables that were not considered impaired at the acquisition date were not subject to the guidance relating to purchased credit impaired loans, which have shown evidence of credit deterioration since origination. There were no PCI loans at December 31, 2019 and December 31, 2018. Goodwill of $13,819,000 arising from the Tri-Valley acquisition, $24,270,000 from the United American acquisition and $83,667,000 from the Presidio merger is largely attributable to synergies and cost savings resulting from combining the operations of the companies. As these transactions were structured as tax-free exchanges, the goodwill will not be deductible for tax purposes. As of April 6, 2019 and May 4, 2019 the Company finalized its valuation of all assets acquired and liabilities assumed in its acquisition of Tri-Valley and United American, respectively, resulting in no material changes to acquisition accounting adjustments. Management’s preliminary valuation of the tangible and intangible assets acquired and liabilities assumed from the Presidio merger, which are based on assumptions that are subject to change, and the resulting allocation of the consideration paid for the allocation is reflected in the tables above. Prior to the end of the one-year measurement period for finalizing the consideration paid allocation, if information becomes available which would indicate adjustments are required to the allocation, such adjustments will be included in the allocation in the reporting period in which the adjustment amounts are determined. Loan valuations may be adjusted based on new information obtained by the Company in future periods that may reflect conditions or events that existed on the acquisition date. Deferred tax assets may be adjusted for purchase accounting adjustments on open areas such as loans or upon filing final “stub” period tax returns for October 11, 2019 for Presidio. |
Goodwill and Other Intangible A
Goodwill and Other Intangible Assets | 12 Months Ended |
Dec. 31, 2019 | |
Goodwill and Other Intangible Assets | |
Goodwill and Other Intangible Assets | 9) Goodwill and Other Intangible Assets Goodwill 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 goodwill impairment analysis as of November 30, 2019 with the assistance of an independent valuation firm. The goodwill related to the acquisition of Bay View Funding was tested separately for impairment under this analysis. No events or circumstances since the November 30, 2019 annual impairment test were noted that would indicate it was more likely than not a goodwill impairment exists, for either the Company’s banking segment or the factoring segment. The following table summarizes the carrying amount of goodwill by segment at December 31, 2019 and 2018: December 31, 2019 2018 (Dollars in thousands) Banking $ 154,376 $ 70,709 Factoring 13,044 13,044 Total Goodwill $ 167,420 $ 83,753 Other Intangible Assets Other intangible assets acquired in the merger with Presidio in October 2019 included a core deposit intangible asset of $11,247,000, amortized on an accelerated method over its estimated useful life of 10 years, and an above market value lease liability of ($100,000), amortized over its estimated useful life of 60 months. Accumulated amortization of the core deposit intangible and above market lease was $524,000 at December 31, 2019. Other intangible assets acquired in the acquisition of United American in May 2018 included a core deposit intangible asset of $5,723,000, amortized on an accelerated method over its estimated useful life of 10 years, and a below market value lease intangible asset of $660,000, amortized over its estimated useful life of 3 years. Accumulated amortization of the core deposit intangible and below market lease was $1,788,000, and $756,000 at December 31, 2019 and December 31, 2018, respectively. Other intangible assets acquired in the acquisition of Tri-Valley in April 2018 include a core deposit intangible asset of $1,768,000, amortized on an accelerated method over its estimated useful life of 10 years, and a below market value lease intangible asset of $210,000, amortized over its estimated useful life of 11 years. Accumulated amortization of the core deposit intangible and below market lease was $480,000 and $222,000 at December 31, 2019 and December 31, 2018, respectively. The core deposit intangible asset acquired in the acquisition of Focus in August 2015 was $6,285,000. This asset is amortized on an accelerated method over its estimated useful life of 10 years. Accumulated amortization of this intangible asset was $ 3,504,000 and $2,770,000 at December 31, 2019 and December 31, 2018, respectively. Other intangible assets acquired in the acquisition of Bay View Funding in November 2014 included a below market value lease intangible assets of $109,000, a non-compete agreement intangible asset of $250,000, and a customer relationship and brokered relationship intangible assets of $1,900,000, amortized over the 10 year estimated useful lives. Accumulated amortization of these intangible assets was $981,000 and $791,000 at December 31, 2019 and December 31, 2018, respectively. The below market lease and non-compete agreement intangible assets were fully amortized at December 31, 2017. Estimated amortization expense for each of the next five years and thereafter is as follows: United United Bay View Funding Presidio Presidio American American Tri-Valley Tri-Valley Focus Customer & Core Above Core Below Core Below Core Brokered Total Deposit Market Deposit Market Deposit Market Deposit Relationship Amortization Year Intangible Lease Intangible Lease Intangible Lease Intangible Intangible Expense (Dollars in thousands) 2020 $ 1,719 (20) $ 665 $ 235 $ 208 $ 18 $ 716 $ 190 $ 3,731 2021 1,447 (20) 602 — 184 18 596 190 3,017 2022 1,225 (20) 553 — 167 18 502 190 2,635 2023 1,118 (20) 521 — 158 18 420 190 2,405 2024 1,026 (14) 499 — 152 18 347 159 2,187 Thereafter 4,181 — 1,520 — 451 88 200 — 6,440 $ 10,716 $ (94) $ 4,360 $ 235 $ 1,320 $ 178 $ 2,781 $ 919 $ 20,415 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 December 31, 2019 and December 31, 2018. |
Deposits
Deposits | 12 Months Ended |
Dec. 31, 2019 | |
Deposits. | |
Deposits | 10) Deposits The following table presents the scheduled maturities of all time deposits for the next five years: (Dollars in thousands) 2020 $ 156,141 2021 9,658 2022 2,115 2023 54 2024 66 Total $ 168,034 Time deposits of $250,000 and over were $99,882,000 and $86,114,000 at December 31, 2019 and 2018, respectively. At December 31, 2019, time deposits within Certificate of Deposit Account Registry Service (“CDARS”) deposits totaled $28,847,000, which were comprised of money market deposits of $2,171,000, and interest-bearing demand deposits of $12,885,000, (which have no scheduled maturity date, and therefore, are excluded from the table above), and time deposits of $13,791,000, (which are included in the table above). At December 31, 2018, CDARS deposits totaled $14,898,000, which comprised money market deposits of $3,366,000, and interest-bearing demand deposits of $8,747,000, (which have no scheduled maturity date, and therefore, are excluded from the table above), and time deposits of $2,785,000. The CDARS program allows customers with deposits in excess of FDIC-insured limits to obtain full coverage on time deposits through a network of banks within the CDARS program. Deposits gathered through these programs are not considered brokered deposits under current regulatory reporting guidelines. Deposits from executive officers, directors, and their affiliates were $12,636,000 and $21,752,000 at December 31, 2019 and 2018, respectively. |
Borrowing Arrangements
Borrowing Arrangements | 12 Months Ended |
Dec. 31, 2019 | |
Borrowing Arrangements | |
Borrowing Arrangements | 11) Borrowing Arrangements Federal Home Loan Bank Borrowings, Federal Reserve Bank Borrowings, and Available Lines of Credit HBC maintains a collateralized line of credit with the FHLB of San Francisco. Under this line, the Company can borrow from the FHLB on a short-term (typically overnight) or long-term (over one year) basis. As of December 31, 2019, and December 31, 2018, HBC had no overnight borrowings from the FHLB. HBC had $272,879,000 of loans and no securities pledged to the FHLB as collateral on a line of credit of $228,103,000 at December 31, 2019. HBC had $228,152,000 of loans and no securities pledged to the FHLB as collateral on a line of credit of $178,560,000 at December 31, 2018. HBC can also borrow from the FRB’s discount window. HBC had approximately $726,709,000 of loans pledged to the FRB as collateral on an available line of credit of approximately $408,401,000 at December 31, 2019, none of which was outstanding. HBC had approximately $739,830,000 of loans pledged to the FRB as collateral on an available line of credit of approximately $418,399,000 at December 31, 2018, none of which was outstanding. At December 31, 2019, HBC had Federal funds purchase arrangements available of $80,000,000. There were no Federal funds purchased outstanding at December 31, 2019 and 2018. HCC has a $5,000,000 line of credit with a correspondent bank, of which none was outstanding at December 31, 2019 and 2018. HBC may also utilize securities sold under repurchase agreements to manage our liquidity position. There were no securities sold under agreements to repurchase at December 31, 2019, and 2018. 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. 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 1st and December 1st of each year through June 1, 2022 and quarterly thereafter on March 1st, June 1st, September 1st and December 1st of each year through the maturity date or early redemption date. 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. Unamortized debt issuance cost totaled $446,000 at December 31, 2019. It is understood that after December 31, 2021, the administrator in the United Kingdom with authority over the agency that currently publishes LIBOR (commonly known as the Intercontinental Exchange “ICE”), will no longer support that published index as a generally representative rate. Due to this, standardized contract language addressing the replacement of LIBOR has been published by the Alternative Rate Reference Committee (commonly known as “ARRC”) convened by, among others, the Federal Reserve Board. It is also understood that ARRC generally supports using the Secured Overnight Financing Rate (“SOFR”) as a replacement index (with an adjustment mechanism), although one version of the ARRC’s proposed language does not require implementation of SOFR immediately. With respect to new financings tied to LIBOR going forward, it is expected to consider the implementation of the ARRC’s proposed language (with variations as appropriate) into the documentation thereof. With respect to existing financings tied to LIBOR, the existing terms of the documentation thereof will be the primary driver of how all issues related to LIBOR are dealt with, which necessarily means each will be evaluated and responded to on a case-by-case basis as necessary. Efforts are underway to coordinate with the counter-parties under such financings to address the issues, subject to the terms of the existing documentation and any mutually agreeable amendments thereto. The Company acquired $10,000,000 of subordinated debt from the Presidio transaction with an interest rate of 8%, which was redeemed on December 19, 2019. As a result of the redemption of the Presidio subordinated debt, the Company paid a pre-payment penalty of $300,000 during the fourth quarter of 2019. |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2019 | |
Income Taxes | |
Income Taxes | 12) Income Taxes On December 22, 2017, the Tax Act was signed into law, which among other things reduces the federal corporate tax rate to 21% from 35%, effective January 1, 2018. The enactment of the Tax Act caused our net deferred tax assets to be revalued at the new lower tax rate with resulting tax effects accounted for in the fourth quarter of 2017. The Company performed an analysis and determined the value of the net DTA was reduced by $7,103,000, which was recognized as a one-time, non-cash, incremental income tax expense for the fourth quarter of 2017. Also on December 22, 2017, the SEC issued Staff Accounting Bulletin (“SAB”) 118, which addresses the situations where the accounting for changes in tax laws is complete, incomplete but can be reasonably estimated, and incomplete and cannot be reasonably estimated. SAB 118 also permits a measurement period up to one year from the date of enactment to refine the provisional accounting. There were no items for which the Company was unable to make a reasonable estimate for the effects of the tax law change. The Company has completed its accounting for the effects of the Tax Act on its deferred tax assets and liabilities. Income tax expense (benefit) consisted of the following for the year ended December 31, as follows: 2019 2018 2017 (Dollars in thousands) Currently payable tax: Federal $ 7,631 $ 9,187 $ 12,948 State 4,689 5,416 4,653 Total currently payable 12,320 14,603 17,601 Deferred tax expense (benefit): Federal 2,200 (1,133) 1,193 Due to enactment of Tax Reform — — 7,103 State 1,331 (146) 574 Total deferred tax 3,531 (1,279) 8,870 Income tax expense $ 15,851 $ 13,324 $ 26,471 The effective tax rate differs from the Federal statutory rate for the years ended December 31, as follows: 2019 2018 2017 Statutory Federal income tax rate % 21.0 % 35.0 % State income taxes, net of federal tax benefit % 8.5 % 6.8 % Low income housing credits, net of investment losses % (0.8) % (0.5) % Increase in cash surrender value of life insurance % (0.5) % (1.2) % Stock option/restricted stock windfall tax benefit % (0.9) % (0.3) % Non-taxable interest income % (0.9) % (1.5) % Split-dollar term insurance % 0.1 % 0.1 % Merger cost % 0.5 % — % Due to enactment of Tax Reform — % — % 14.1 % Other, net % 0.4 % 0.1 % Effective tax rate % % % Deferred tax assets and liabilities that result from the tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes at December 31, are as follows: 2019 2018 (Dollars in thousands) Deferred tax assets: Defined postretirement benefit obligation $ 9,901 $ 7,877 Allowance for loan losses 7,231 7,697 Federal net operating loss carryforwards 3,662 5,093 Accrued expenses 2,562 1,939 Lease accounting 1,647 — Stock compensation 1,636 1,244 California net operating loss carryforwards 1,489 2,128 State income taxes 954 1,117 Premises and equipment 695 642 Split-dollar life insurance benefit plan 75 80 Nonaccrual interest 61 55 Tax credit carryforwards 57 71 Securities available-for-sale — 2,184 Other 654 716 Total deferred tax assets 30,624 30,843 Deferred tax liabilities: Intangible liabilities (1,321) (1,671) Loan fees (1,842) (1,089) Prepaid expenses (289) (554) Securities available-for-sale (772) — Lease accounting (1,647) — I/O strips (144) (163) FHLB stock (177) (174) Other (130) (103) Total deferred tax liabilities (6,322) (3,754) Net deferred tax assets $ 24,302 $ 27,089 At December 31, 2019, the Company's federal net operating loss (“NOL”) carryforwards were $17,438,000 and the Company's California net operating loss carryforwards were $17,372,000. These amounts are attributable to the Focus, Tri-Valley and United American transactions. The realization of these NOL carryforwards for Federal and State tax purposes are limited on the amount of net operating losses that can be utilized annually under the current tax law. The Company does not believe that its annual limitation on each acquisition will impact the ultimate deductibility of the NOL carry-forwards. The State tax credit carryforwards, net of Federal tax effects, were $57,328 as of December 31, 2019, which will begin to expire in 2022. Since the Company will be able to fully utilize the net operating loss carryforwards before they begin to expire in 2029, no valuation allowance is required against the deferred tax assets. 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. As of December 31, 2019 and 2018 the Company’s recorded amount of uncertain tax positions was not considered significant for financial reporting and the Company does not expect this amount to significantly increase or decrease in the next twelve months. At December 31, 2019, and December 31, 2018, the Company had net deferred tax assets of $24,302,000 and $27,089,000, respectively. At December 31, 2019, the Company determined that a valuation allowance for deferred tax assets was not necessary. The Company and its subsidiaries are subject to U.S. Federal income tax as well as income tax of the State of California. The Company is no longer subject to examination by Federal and state taxing authorities for years before 2016, and by the State of California taxing authority for years before 2015. The following table reflects the carrying 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: December 31, December 31, 2019 2018 (Dollars in thousands) Low income housing investments $ 6,126 $ 3,172 Future commitments $ 625 $ 273 The Company expects $28,000 of the future commitments to be paid in 2020, and $597,000 in 2021 through 2025. For tax purposes, the Company recognized low income housing tax credits of $511,000 and $425,000 for the years ended December 31, 2019 and December 2018, respectively, and low income housing investment expense of $520,000 and $437,000, respectively. The Company recognizes low income housing investment expenses as a component of income tax expense. |
Equity Plan
Equity Plan | 12 Months Ended |
Dec. 31, 2019 | |
Equity Plan | |
Equity Plan | 13) 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. The Company’s shareholders approved the 2013 Equity Incentive Plan (the “2013 Plan”). 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. In 2019, the Company granted 299,500 shares of nonqualified stock options and 134,653 shares of restricted stock subject to time vesting requirements. There were 796,957 shares available for the issuance of equity awards under the 2013 Plan as of December 31, 2019. The Presidio equity plans were assumed by the Company and the outstanding options issued under the Presidio equity plans were converted into the right to receive the Company’s shares at the exercise price pursuant to the formula defined in the merger agreement. Consideration for the assumed Presidio stock options exchanged for 1,176,757 shares of the Company’s stock options totaled $7,426,000. 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, 2019 1,570,603 $ 10.76 Granted 299,500 $ 12.16 Assumed Presidio Bank stock options exchanged for Heritage Commerce Corp stock options 1,176,757 $ 5.05 Exercised (266,689) $ 6.10 Forfeited or expired (67,325) $ 14.31 Outstanding at December 31, 2019 2,712,846 $ 8.80 5.62 $ 12,369,413 Vested or expected to vest 2,550,075 5.62 $ 11,627,248 Exercisable at December 31, 2019 2,206,775 4.93 $ 12,151,054 Information related to the equity plans for each of the last three years: December 31, 2019 2018 2017 Intrinsic value of options exercised $ 1,618,615 $ 1,844,909 $ 1,342,794 Cash received from option exercise $ 1,626,113 $ 2,667,305 $ 1,368,673 Tax benefit realized from option exercises $ 258,037 $ 534,638 $ 547,817 Weighted average fair value of options granted $ 1.91 $ 3.03 $ 2.66 As of December 31, 2019, there was $ 1,156,000 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 2.64 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 in each year. December 31, 2019 2018 2017 Expected life in months(1) 72 72 Volatility(1) 24 % 21 % 24 % Weighted average risk-free interest rate(2) 2.23 % 2.88 % 1.94 % Expected dividends(3) 3.95 % 2.64 % 2.78 % (1) (2) (3) The Company estimates the impact of forfeitures based on historical experience. Should the Company’s current estimate change, additional expense could be recognized or reversed in future periods. The Company issues authorized shares of common stock to satisfy stock option exercises. 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, 2019 193,298 $ 11.04 Granted 134,653 $ 12.16 Vested (82,498) $ 12.37 Forfeited or expired (6,000) $ 17.11 Nonvested shares at December 31, 2019 239,453 $ 11.23 As of December 31, 2019, there was $2,340,000 of total unrecognized compensation cost related to nonvested restricted stock awards granted under the 2013 Plan. The cost is expected to be recognized over a weighted-average period of approximately 2.11 years. The Company has two share based compensation plans. Total compensation cost has been charged against income for those plans was $1,924,000, $1,817,000, $1,750,000, for 2019, 2018, and 2017, respectively. The total income tax benefit was $239,000, $424,000, and $146,000 for 2019, 2018, and 2017, respectively. |
Benefit Plans
Benefit Plans | 12 Months Ended |
Dec. 31, 2019 | |
Benefit Plans | |
Benefit Plans | 14) Benefit Plans 401(k) Savings Plan The Company offers a 401(k) savings plan that allows employees to contribute up to a maximum percentage of their compensation, as established by the Internal Revenue Code. The Company made a discretionary matching contribution of up to $3,000 and $2,500 for each employee’s contributions in 2019 and 2018, respectively. Contribution expense was $934,000, $749,000, and $535,000 in 2019, 2018 and 2017, respectively. Employee Stock Ownership Plan The Company sponsors a non‑contributory employee stock ownership plan. To participate in this plan, an employee must have worked at least 1,000 hours during the year and must be employed by the Company at year‑end. Employer contributions to the ESOP are discretionary. The Company has suspended contributions to the ESOP since 2010. The Plan was “frozen” as of January 1, 2019. At December 31, 2019, the ESOP owned 102,834 shares of the Company’s common stock. Deferred Compensation Plan The Company has a nonqualified deferred compensation plan for some of its employees. Under the deferred compensation plan, an employee may defer up to 100% of his or her bonus and 50% of their regular salary into a deferred account. Amounts deferred are invested in a portfolio of approved investment choices as directed by the employee. Amounts deferred by employees to the deferred compensation plan will be distributed at a future date they have selected or upon termination of employment. There were five and seven employees who elected to participate in the deferred compensation plan during 2019 and 2018, respectively. Nonqualified Defined Benefit Pension Plan The Company has a supplemental retirement plan (“SERP”) covering some current and some former key executives and directors. The SERP is an unfunded, nonqualified defined benefit plan. The combined number of active and retired/terminated participants in the SERP was 60 at December 31, 2019. The defined benefit represents a stated amount for key executives and directors that generally vests over nine years and is reduced for early retirement. The projected benefit obligation is included in “Accrued interest payable and other liabilities” on the consolidated balance sheets. The SERP has no assets and the projected benefit obligation is unfunded. The measurement date of the SERP is December 31. The following table sets forth the SERP’s status at December 31: 2019 2018 (Dollars in thousands) Change in projected benefit obligation: Projected benefit obligation at beginning of year $ 26,781 $ 28,510 Projected benefit obligation of SERP agreements acquired from Presidio 2,541 — Service cost 263 249 Actuarial loss (gain) 4,182 (1,885) Interest cost 1,059 947 Benefits paid (1,137) (1,040) Projected benefit obligation at end of year $ 33,689 $ 26,781 Amounts recognized in accumulated other comprehensive loss: Net actuarial loss $ 9,670 $ 5,672 Weighted‑average assumptions used to determine the benefit obligation at year‑end: 2019 2018 Discount rate 3.01 % 4.03 % Rate of compensation increase N/A N/A Estimated benefit payments over the next ten years, which reflect anticipated future events, service and other assumptions, are as follows: Estimated Benefit Year Payments (Dollars in thousands) 2020 $ 1,509 2021 1,717 2022 1,863 2023 1,974 2024 2,011 2025 to 2029 11,366 $ 20,440 The components of pension cost for the SERP follow: 2019 2018 (Dollars in thousands) Components of net periodic benefit cost: Service cost $ 263 $ 249 Interest cost 1,059 947 Amortization of net actuarial loss 184 292 Accelerated benefits for Presidio SERP agreements due to change in control 1,465 — Net periodic benefit cost $ 2,971 $ 1,488 Amount recognized in other comprehensive income $ 2,847 $ 1,577 The components of net periodic benefit cost other than the service cost component are included in the line item “other noninterest expense” in the Consolidated Statements of Income. The estimated net actuarial loss and prior service cost for the SERP that will be amortized from Accumulated Other Comprehensive Loss into net periodic benefit cost over the next fiscal year are $387,000 and $183,000 as of December 31, 2019 and 2018, respectively. Net periodic benefit cost for the years ended December 31, 2019 and 2018 were determined using the following assumption: 2019 2018 Discount rate 4.03 % 3.38 % Rate of compensation increase N/A N/A 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, some of which continues after the participant’s employment and retirement. The policies acquired from Focus and Presidio do not include a post retirement benefit. All participants are fully vested in their split‑dollar life insurance benefits. The accrued benefit liability for the split‑dollar insurance agreements represents either the present value of the future death benefits payable to the participants’ beneficiaries or the present value of the estimated cost to maintain life insurance, depending on the contractual terms of the participant’s underlying agreement. The split‑dollar life insurance projected benefit obligation is included in “Accrued interest payable and other liabilities” on the consolidated balance sheets. The measurement date of the split‑dollar life insurance benefit plan is December 31. The following sets forth the funded status of the split dollar life insurance benefits: December 31, December 31, 2019 2018 (Dollars in thousands) Change in projected benefit obligation: Projected benefit obligation at beginning of year $ 6,903 $ 6,711 Interest cost 278 227 Actuarial loss (gain) 1,017 (35) Projected benefit obligation at end of period $ 8,198 $ 6,903 Amounts recognized in accumulated other comprehensive loss at December 31 consist of: December 31, December 31, 2019 2018 (Dollars in thousands) Net actuarial loss $ 3,776 $ 2,573 Prior transition obligation 1,059 1,149 Accumulated other comprehensive loss $ 4,835 $ 3,722 Weighted‑average assumption used to determine the benefit obligation at year‑end follow: 2019 2018 Discount rate 3.01 % 4.03 % Components of net periodic benefit cost during the year are: 2019 2018 (Dollars in thousands) Amortization of prior transition obligation $ (96) $ (65) Interest cost 278 227 Net periodic benefit cost $ 182 $ 162 Amount recognized in other comprehensive income $ 1,113 $ (30) The estimated net actuarial loss and prior transition obligation for the split‑dollar life insurance benefit plan that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next fiscal year are $90,000 as of December 31, 2019 and 2018. Weighted‑average assumption used to determine the net periodic benefit cost: 2019 2018 Discount rate 4.03 % 3.38 % |
Fair Value
Fair Value | 12 Months Ended |
Dec. 31, 2019 | |
Fair Value | |
Fair Value | 15) 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 Company uses matrix pricing (Level 2 inputs) to establish the fair value of its securities available-for-sale. 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 December 31, 2019 Available-for-sale securities: Agency mortgage-backed securities $ 284,361 — $ 284,361 — U.S. Treasury 120,464 120,464 — — I/O strip receivables 503 — 503 — Assets at December 31, 2018 Available-for-sale securities: Agency mortgage-backed securities $ 302,854 — $ 302,854 — U.S. Treasury 148,753 148,753 — — U.S. Government sponsored entities 7,436 — 7,436 — I/O strip receivables 568 — 568 — There were no transfers between Level 1 and Level 2 during the year for assets measured at fair value on a recurring basis. Financial 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. 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 December 31, 2019 Impaired loans - held-for-investment: Commercial $ 862 — — $ 862 $ 862 — — $ 862 Assets at December 31, 2018 Impaired loans - held-for-investment: Commercial $ 702 — — $ 702 $ 702 — — $ 702 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: December 31, 2019 December 31, 2018 (Dollars in thousands) Impaired loans held-for-investment: Book value of impaired loans held-for-investment carried at fair value $ 2,697 $ 7,646 Book value of impaired loans held-for-investment carried at cost 7,567 7,494 Total impaired loans held-for-investment $ 10,264 $ 15,140 Impaired loans held-for-investment carried at fair value: Book value of impaired loans held-for-investment carried at fair value $ 2,697 $ 7,646 Specific valuation allowance (1,835) (6,944) Impaired loans held-for-investment carried at fair value, net $ 862 $ 702 Impaired loans held‑for‑investment were $10,264,000 at December 31, 2019. In addition, these loans had a specific valuation allowance of $1,835,000 at December 31, 2019. Impaired loans held‑for‑investment totaling $2,697,000 at December 31, 2019 were carried at fair value as a result of partial charge‑offs and specific valuation allowances at year‑end. The remaining $7,567,000 of impaired loans were carried at cost at December 31, 2019, 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 2019 on impaired loans held‑for‑investment carried at fair value at December 31, 2019 resulted in an additional credit to provision for loan losses of $2,128,000. At December 31, 2019, there were no foreclosed assets. Impaired loans held‑for‑investment were $15,140,000 at December 31, 2018. In addition, these loans had a specific valuation allowance of $6,944,000 at December 31, 2018. Impaired loans held‑for‑investment totaling $7,646,000 at December 31, 2018 were carried at fair value as a result of partial charge‑offs and specific valuation allowances at year‑end. The remaining $7,494,000 of impaired loans were carried at cost at December 31, 2018, 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 2018 on impaired loans held‑for‑investment carried at fair value at December 31, 2018 resulted in an additional provision for loan losses of $7,042,000. At December 31, 2018, there were no foreclosed assets. 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 December 31, 2019 and 2018: December 31, 2019 Valuation Unobservable Range Fair Value Techniques Inputs (Weighted Average) (Dollars in thousands) Impaired loans - held-for-investment: Commercial $ 862 Market Approach Discount adjustment for differences between comparable sales Less than 1% December 31, 2018 Valuation Unobservable Range Fair Value Techniques Inputs (Weighted Average) (Dollars in thousands) Impaired loans - held-for-investment: Commercial $ 702 Market Approach Discount adjustment for differences between comparable sales 0% to 1% The Company obtains third party appraisals on collateral for 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 December 31, 2019 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 $ 457,370 $ 457,370 $ — $ — $ 457,370 Securities available-for-sale 404,825 120,464 284,361 — 404,825 Securities held-to-maturity 366,560 — 368,107 — 368,107 Loans (including loans held-for-sale), net 2,511,611 — 1,052 2,512,277 2,513,329 FHLB stock, FRB stock, and other investments 29,842 — — — N/A Accrued interest receivable 10,915 446 2,218 8,251 10,915 I/O strips receivables 503 — 503 — 503 Liabilities: Time deposits $ 168,034 $ — $ 158,704 $ — $ 158,704 Other deposits 3,246,734 — 3,246,734 — 3,246,734 Subordinated debt 39,554 — 40,404 — 40,404 Accrued interest payable 707 — 707 — 707 The carrying amounts and estimated fair values of financial instruments at December 31, 2018 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 $ 164,568 $ 164,568 $ — $ — $ 164,568 Securities available-for-sale 459,043 148,753 310,290 — 459,043 Securities held-to-maturity 377,198 — 366,175 — 366,175 Loans (including loans held-for-sale), net 1,861,206 — 2,649 1,826,654 1,829,303 FHLB stock, FRB stock, and other investments 25,216 — — — N/A Accrued interest receivable 9,577 597 2,274 6,706 9,577 I/O strips receivables 568 — 568 — 568 Liabilities: Time deposits $ 147,560 $ — $ 147,916 $ — $ 147,916 Other deposits 2,489,972 — 2,489,972 — 2,489,972 Subordinated debt 39,369 — 38,969 — 38,969 Accrued interest payable 497 — 497 — 497 In accordance with our adoption of ASU 2016-01 in 2018, the methods utilized to measure the fair value of financial instruments at December 31, 2018 represent an approximation of exit price, however, an actual exit price may differ. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies | |
Commitments and Contingencies | 16) Commitments and Contingencies Financial Instruments with Off‑Balance Sheet Risk HBC is a party to financial instruments with off‑balance sheet risk in the normal course of business to meet the financing needs of its clients. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the balance sheets. HBC’s exposure to credit loss in the event of non‑performance of the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. HBC uses the same credit policies in making commitments and conditional obligations as it does for on‑balance sheet instruments. Credit risk is the possibility that a loss may occur because a party to a transaction failed to perform according to the terms of the contract. HBC controls the credit risk of these transactions through credit approvals, limits, and monitoring procedures. Management does not anticipate any significant losses as a result of these transactions. Commitments to extend credit were as follows: December 31, 2019 2018 Fixed Variable Fixed Variable Rate Rate Total Rate Rate Total (Dollars in thousands) Unused lines of credit and commitments to make loans $ 147,372 $ 951,206 $ 1,098,578 $ 130,871 $ 593,839 $ 724,710 Standby letters of credit 11,445 10,615 22,060 2,770 12,899 15,669 $ 158,817 $ 961,821 $ 1,120,638 $ 133,641 $ 606,738 $ 740,379 Commitments generally expire within one year. Standby letters of credit are written with conditional commitments issued by HBC to guarantee the performance of a client to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to clients. The Company is required to maintain interest‑bearing reserves. Reserve requirements are based on a percentage of certain deposits. As of December 31, 2019, the Company maintained reserves of $48,717,000 in the form of vault cash and balances at the Federal Reserve Bank of San Francisco, which satisfied the regulatory requirements. Loss Contingencies The Company is involved in certain legal actions arising from normal business activities. Management, based upon the advice of legal counsel, believes the ultimate resolution of all pending legal actions will not have a material effect on the financial statements of the Company. |
Shareholders' Equity and Earnin
Shareholders' Equity and Earnings Per Share | 12 Months Ended |
Dec. 31, 2019 | |
Equity | |
Shareholders' Equity and Earnings Per Share | 17) Shareholders’ Equity and Earnings Per Share Authorized Shares of Common Stock — At a Special Meeting of Shareholders on August 27, 2019, the Company’s shareholders approved an amendment to the Company’s articles of incorporation to increase the number of authorized shares of common stock from 60,000,000 to 100,000,000 shares of 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. Diluted earnings per share reflect potential dilution from outstanding stock options using the treasury stock method. There were 789,065, 534,106, and 346,500 stock options for the years ended December 31, 2019, 2018 and 2017, respectively, considered to be antidilutive and excluded from the computation of diluted earnings per share. A reconciliation of these factors used in computing basic and diluted earnings per common share is as follows: Year Ended December 31, 2019 2018 2017 (Dollars in thousands, except per share amounts) Net income $ 40,461 $ 35,331 $ $ 23,828 Weighted average common shares outstanding for basic earnings per common share 46,684,384 41,469,211 38,095,250 Dilutive potential common shares 1,221,845 713,728 515,565 Shares used in computing diluted earnings per common share 47,906,229 42,182,939 38,610,815 Basic earnings per share $ $ $ 0.63 Diluted earnings per share $ $ $ 0.62 |
Capital Requirements
Capital Requirements | 12 Months Ended |
Dec. 31, 2019 | |
Capital Requirements | |
Capital Requirements | 18) 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 December 31, 2019, 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 were 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 addressed relevant provisions of The Dodd Frank Wall Street Reform and Consumer Protection Act of 2010, as amended. The new capital rules established a “capital conservation buffer,” which must consist entirely of common equity Tier 1 capital. The capital conservation buffer is 2.5% of risk-weighted assets for 2019 and 1.875% for 2018. The Company and HBC must maintain a capital conservation buffer above the minimum risk-based capital requirements in order to avoid certain limitations on capital distributions, stock repurchases and discretionary bonus payments to executive officers. 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 December 31, 2019. 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 December 31, 2019 and December 31, 2018, 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 December 31, 2019, and December 31, 2018. Required For Capital Adequacy Purposes Actual Under Basel III Amount Ratio Amount Ratio (1) (Dollars in thousands) As of December 31, 2019 Total Capital $ 457,158 14.6 % $ 329,306 10.5 % (to risk-weighted assets) Tier 1 Capital $ 393,432 12.5 % $ 266,581 8.5 % (to risk-weighted assets) Common Equity Tier 1 Capital $ 393,432 12.5 % $ 219,538 7.0 % (to risk-weighted assets) Tier 1 Capital $ 393,432 9.7 % $ 161,677 4.0 % (to average assets) (1) Required For Capital Adequacy Purposes Actual Under Basel III Amount Ratio Amount Ratio (1) (Dollars in thousands) As of December 31, 2018 Total Capital $ 344,597 15.0 % $ 227,514 9.875 % (to risk-weighted assets) Tier 1 Capital $ 276,675 12.0 % $ 181,435 7.875 % (to risk-weighted assets) Common Equity Tier 1 Capital $ 276,675 12.0 % $ 146,876 6.375 % (to risk-weighted assets) Tier 1 Capital $ 276,675 8.9 % $ 124,726 4.000 % (to average assets) (1) 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 December 31, 2019, and December 31, 2018. Required For Capital To Be Well-Capitalized Adequacy Under Basel III PCA Regulatory Purposes Actual Requirements Under Basel III Amount Ratio Amount Ratio Amount Ratio (1) (Dollars in thousands) As of December 31, 2019 Total Capital $ 435,757 13.9 % $ 313,485 10.0 % $ 329,159 10.5 % (to risk-weighted assets) Tier 1 Capital $ 411,585 13.1 % $ 250,788 8.0 % $ 266,462 8.5 % (to risk-weighted assets) Common Equity Tier 1 Capital $ 411,585 13.1 % $ 203,765 6.5 % $ 219,439 7.0 % (to risk-weighted assets) Tier 1 Capital $ 411,585 10.2 % $ 202,013 5.0 % $ 161,611 4.0 % (to average assets) (1) Required For Capital To Be Well-Capitalized Adequacy Under Basel III PCA Regulatory Purposes Actual Requirements Under Basel III Amount Ratio Amount Ratio Amount Ratio (1) (Dollars in thousands) As of December 31, 2018 Total Capital $ 322,283 14.0 % $ 230,275 10.0 % $ 227,397 9.875 % (to risk-weighted assets) Tier 1 Capital $ 293,730 12.8 % $ 184,220 8.0 % $ 181,342 7.875 % (to risk-weighted assets) Common Equity Tier 1 Capital $ 293,730 12.8 % $ 149,679 6.5 % $ 146,800 6.375 % (to risk-weighted assets) Tier 1 Capital $ 293,730 9.4 % $ 155,832 5.0 % $ 124,666 4.000 % (to average assets) (1) The Subordinated Debt, net of unamortized issuance costs, totaled $39,554,000 at December 31, 2019, and qualifies as Tier 2 capital for the Company under the guidelines established by the Federal Reserve Bank. 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 December 31, 2019, HBC would not be required to obtain regulatory approval, and the amount available for cash dividends is $20,636,000. Similar restrictions applied to the amount and sum of loan advances and other transfers of funds from HBC to the parent company. HBC distributed dividends totaling $22,500,000 and $17,000,000 for the years ended December 31, 2019 and 2018, respectively. |
Revenue Recognition
Revenue Recognition | 12 Months Ended |
Dec. 31, 2019 | |
Revenue Recognition | |
Revenue Recognition | 19) Revenue Recognition On January 1, 2018, the Company adopted ASU No. 2014-09 (Topic 606) and all subsequent ASUs that modified Topic 606. Topic 606 does not apply to revenue associated with financial instruments, including revenue from loans and securities. In addition, certain noninterest income streams such as fees associated with mortgage servicing rights, financial guarantees, gain on sale of securities, bank-owned life insurance, gain on sales of SBA loans, and certain credit card fees are also not in scope of the new guidance. Topic 606 is applicable to noninterest revenue streams such as deposit related fees, interchange fees, and merchant income. However, the recognition of these revenue streams did not change significantly upon adoption of Topic 606. Substantially all of the Company’s revenue is generated from contracts with customers. The following noninterest income revenue streams are in-scope of Topic 606: Service charges and fees on deposit accounts consist of account analysis fees (i.e., net fees earned on analyzed business and public checking accounts), monthly service fees, check orders, and other deposit account related fees. We sometimes charge customers fees that are not specifically related to the customer accessing its funds, such as account maintenance or dormancy fees. The amount of deposit fees assessed varies based on a number of factors, such as the type of customer and account, the quantity of transactions, and the size of the deposit balance. We charge, and in some circumstances do not charge, fees to earn additional revenue and influence certain customer behavior. An example would be where we do not charge a monthly service fee, or do not charge for certain transactions, for customers that have a high deposit balance. Deposit fees are considered either transactional in nature (such as wire transfers, nonsufficient fund fees, and stop payment orders) or non-transactional (such as account maintenance and dormancy fees). These fees are recognized as earned or as transactions occur and services are provided. Check orders and other deposit account related fees are largely transactional based and, therefore, the Company’s performance obligation is satisfied, and related revenue recognized, at a point in time. Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers’ accounts. The following presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the periods indicated: Year Ended December 31, 2019 2018 (Dollars in thousands) Noninterest Income In-scope of Topic 606: Service charges and fees on deposit accounts $ 4,510 $ 4,113 Noninterest Income Out-of-scope of Topic 606 5,734 5,461 Total noninterest income $ 10,244 $ 9,574 |
Noninterest Expense
Noninterest Expense | 12 Months Ended |
Dec. 31, 2019 | |
Noninterest Expense | |
Noninterest Expense | 20) Noninterest Expense The following table indicates the various components of the Company’s noninterest expense in each category for the periods indicated: Year Ended December 31, 2019 2018 2017 (Dollars in thousands) Salaries and employee benefits $ 50,754 $ 43,762 $ 35,719 Occupancy and equipment 6,647 5,411 4,578 Professional fees 3,259 1,969 2,982 Data processing 2,890 1,978 1,483 Amortization of intangible assets 2,739 1,943 1,361 Software subscriptions 2,397 2,343 1,831 Insurance expense 1,864 1,685 1,529 Other 14,348 16,430 11,255 Total noninterest expense $ 84,898 $ 75,521 $ 60,738 The following table presents the merger-related costs by category for the periods indicated: For the Year Ended December 31, December 31, December 31, 2019 2018 2017 (Dollars in thousands) Salaries and employee benefits $ 6,580 $ 3,569 $ — Other 4,500 5,598 671 Total merger-related costs $ 11,080 $ 9,167 $ 671 |
Business Segment Information
Business Segment Information | 12 Months Ended |
Dec. 31, 2019 | |
Business Segment Information | |
Business Segment Information | 21) 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. Year Ended December 31, 2019 Banking (1) Factoring Consolidated (Dollars in thousands) Interest income $ 130,971 $ 11,688 $ 142,659 Intersegment interest allocations 1,182 (1,182) — Total interest expense 10,847 — 10,847 Net interest income 121,306 10,506 131,812 Provision for loan losses 517 329 846 Net interest income after provision 120,789 10,177 130,966 Noninterest income 9,643 601 10,244 Noninterest expense (2) 78,159 6,739 84,898 Intersegment expense allocations 547 (547) — Income before income taxes 52,820 3,492 56,312 Income tax expense 14,819 1,032 15,851 Net income $ 38,001 $ 2,460 $ 40,461 Total assets $ 4,045,801 $ 63,662 $ 4,109,463 Loans, net of deferred fees $ 2,487,864 $ 45,980 $ 2,533,844 Goodwill $ 154,376 $ 13,044 $ 167,420 (1) (2) Year Ended December 31, 2018 Banking (1) Factoring Consolidated (Dollars in thousands) Interest income $ 115,147 $ 14,698 $ 129,845 Intersegment interest allocations 1,856 (1,856) — Total interest expense 7,822 — 7,822 Net interest income 109,181 12,842 122,023 Provision for loan losses 7,224 197 7,421 Net interest income after provision 101,957 12,645 114,602 Noninterest income 8,662 912 9,574 Noninterest expense (2) 69,164 6,357 75,521 Intersegment expense allocations 753 (753) — Income before income taxes 42,208 6,447 48,655 Income tax expense 11,418 1,906 13,324 Net income $ 30,790 $ 4,541 $ 35,331 Total assets $ 3,028,721 $ 67,841 $ 3,096,562 Loans, net of deferred fees $ 1,832,815 $ 53,590 $ 1,886,405 Goodwill $ 70,709 $ 13,044 $ 83,753 (1) Includes the holding company’s results of operations. (2) The banking segment’s noninterest expense includes acquisition costs of $9,167,000. Year Ended December 31, 2017 Banking (1) Factoring Consolidated (Dollars in thousands) Interest income $ 95,027 $ 11,884 $ 106,911 Intersegment interest allocations 1,126 (1,126) — Total interest expense 5,387 — 5,387 Net interest income 90,766 10,758 101,524 Provision (credit) for loan losses 102 (3) 99 Net interest income after provision 90,664 10,761 101,425 Noninterest income 8,559 1,053 9,612 Noninterest expense (2) 53,860 6,878 60,738 Intersegment expense allocations 528 (528) — Income before income taxes 45,891 4,408 50,299 Income tax expense (3) 24,266 2,205 26,471 Net income $ 21,625 $ 2,203 $ 23,828 Total assets $ 2,780,286 $ 63,166 $ 2,843,452 Loans, net of deferred fees $ 1,533,841 $ 48,826 $ 1,582,667 Goodwill $ 32,620 $ 13,044 $ 45,664 (1) Includes the holding company’s results of operations. (2) (3) |
Parent Company only Condensed F
Parent Company only Condensed Financial Information | 12 Months Ended |
Dec. 31, 2019 | |
Parent Company only Condensed Financial Information | |
Parent Company only Condensed Financial Information | 22) Parent Company only Condensed Financial Information The condensed financial statements of Heritage Commerce Corp (parent company only) are as follows: Condensed Balance Sheets December 31, 2019 2018 (Dollars in thousands) Assets Cash and cash equivalents $ 20,260 $ 21,358 Investment in subsidiary bank 594,868 384,516 Other assets 1,761 1,194 Total assets $ 616,889 $ 407,068 Liabilities and Shareholders' Equity Subordinated debt, net of issuance costs 39,554 39,369 Other liabilities 627 233 Shareholders' equity 576,708 367,466 Total liabilities and shareholders' equity $ 616,889 $ 407,068 Condensed Statements of Operations Year Ended December 31, 2019 2018 2017 (Dollars in thousands) Dividend from subsidiary bank $ 22,500 $ 17,000 $ 16,000 Other income 121 — 114 Interest expense (2,314) (2,315) (1,394) Other expenses (3,084) (3,030) (2,270) Income before income taxes and equity in net income of subsidiary bank 17,223 11,655 12,450 Equity in undistributed net income of subsidiary bank 21,757 22,161 10,078 Income tax benefit 1,481 1,515 1,300 Net income $ 40,461 $ 35,331 $ 23,828 Condensed Statements of Cash Flows Year Ended December 31, 2019 2018 2017 (Dollars in thousands) Cash flows from operating activities: Net Income $ 40,461 $ 35,331 $ 23,828 Adjustments to reconcile net income to net cash provided by operations: Amortization of restricted stock awards, net 1,283 1,109 912 Equity in undistributed net income of subsidiary bank (21,757) (22,161) (10,078) Net change in other assets and liabilities 12 (64) 224 Net cash provided by operating activities 19,999 14,215 14,886 Cash flows from financing activities: Equity investment in subsidiary bank — — (20,000) Payment of cash dividends (22,723) (18,464) (15,238) Proceeds from issuance of subordinated debt, net of issuance costs — — 39,073 Proceeds from exercise of stock options 1,626 2,667 1,368 Net cash provided by (used in) financing activities (21,097) (15,797) 5,203 Net increase (decrease) in cash and cash equivalents (1,098) (1,582) 20,089 Cash and cash equivalents, beginning of year 21,358 22,940 2,851 Cash and cash equivalents, end of year $ 20,260 $ 21,358 $ 22,940 |
Quarterly Financial Data (Unaud
Quarterly Financial Data (Unaudited) | 12 Months Ended |
Dec. 31, 2019 | |
Quarterly Financial Data (Unaudited) | |
Quarterly Financial Data (Unaudited) | 23) Quarterly Financial Data (Unaudited) The following table discloses the Company’s selected unaudited quarterly financial data: Quarter Ended 12/31/2019 9/30/2019 6/30/2019 3/31/2019 (Dollars in thousands, except per share amounts) Interest income $ 42,471 $ 33,250 $ 33,489 $ 33,449 Interest expense 3,242 2,625 2,573 2,407 Net interest income 39,229 30,625 30,916 31,042 Provision (credit) for loan losses 3,223 (576) (740) (1,061) Net interest income after provision for loan losses 36,006 31,201 31,656 32,103 Noninterest income 2,393 2,618 2,765 2,468 Noninterest expense (1) 30,626 17,909 18,445 17,918 Income before income taxes 7,773 15,910 15,976 16,653 Income tax expense 2,088 4,633 4,623 4,507 Net income $ 5,685 $ 11,277 $ 11,353 $ 12,146 Earnings per common share Basic $ 0.10 $ 0.26 $ 0.26 $ 0.28 Diluted $ 0.10 $ 0.26 $ 0.26 $ 0.28 (1) Includes $9,879,000, $661,000, and $540,000 pre-tax acquisition costs in the fourth, third, and second quarters of 2019, respectively, related to the Presidio merger. Quarter Ended 12/31/2018 9/30/2018 6/30/2018 3/31/2018 (Dollars in thousands, except per share amounts) Interest income $ 35,378 $ 34,610 $ 31,980 $ 27,877 Interest expense 2,318 2,159 1,816 1,529 Net interest income 33,060 32,451 30,164 26,348 Provision for loan losses 142 (425) 7,198 506 Net interest income after provision for loan losses 32,918 32,876 22,966 25,842 Noninterest income 2,393 2,206 2,780 2,195 Noninterest expense (1) 16,941 17,728 24,862 15,990 Income before income taxes 18,370 17,354 884 12,047 Income tax expense 5,138 4,979 (31) 3,238 Net income $ 13,232 $ 12,375 $ 915 $ 8,809 Earnings per common share Basic $ 0.31 $ 0.29 $ 0.02 $ 0.23 Diluted $ 0.30 $ 0.28 $ 0.02 $ 0.23 (1) Includes $139,000, $199,000, $8,214,000, and $615,000 pre-tax acquisition costs in the fourth, third, second and first quarters of 2018, respectively, related to the Tri-Valley and United American mergers. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2019 | |
Subsequent Events | |
Subsequent Events | 24) Subsequent Events On January 23, 2020, the Company announced that its Board of Directors declared a $0.13 per share quarterly cash dividend to holders of common stock. The dividend will be paid on February 19, 2020 to shareholders of record on February 5, 2020. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2019 | |
Summary of Significant Accounting Policies | |
Description of Business and Basis of Presentation | Description of Business and Basis of Presentation Heritage Commerce Corp (“HCC”) operates as a registered bank holding company for its wholly-owned subsidiary Heritage Bank of Commerce (“HBC” or the “Bank”), collectively referred to as the “Company”. HBC was incorporated on November 23, 1993 and commenced operations on June 8, 1994. HBC is a California state chartered bank which offers a full range of commercial and personal banking services to residents and the business/professional community in Santa Clara, Alameda, and Contra Costa counties of California. CSNK Working Capital Finance Corp. a California corporation, dba Bay View Funding (“Bay View Funding”) is a wholly owned subsidiary of HBC. Bay View Funding’s primary business operation is purchasing and collecting factored receivables. Factored receivables are receivables that have been transferred by the originating organization and typically have not been subject to previous collection efforts. In a factoring transaction Bay View Funding directly purchases the receivables generated by its clients at a discount to their face value. The transactions are structured to provide the clients with immediate working capital when there is a mismatch between payments to the client for a good and service and the payment of operating costs incurred to provide such good or service. The Company acquired Tri-Valley Bank (“Tri-Valley”) on April 6, 2018. Tri-Valley was merged with HBC, with HBC as the surviving bank. Tri-Valley’s results of operations have been included in the Company’s results of operations beginning April 7, 2018. The Company acquired United American Bank (“United American”) on May 4, 2018. United American was merged with HBC, with HBC as the surviving bank. United American’s results of operations have been included in the Company’s results of operations beginning May 5, 2018. The Company acquired Presidio Bank (“Presidio”) on October 11, 2019. Presidio was merged with HBC, with HBC as the surviving bank. Presidio’s results of operations have been included in the Company’s results of operations beginning October 12, 2019. The consolidated financial statements are prepared in accordance with accounting policies generally accepted in the United States of America and general practices in the banking industry. The financial statements include the accounts of the Company. All inter-company accounts and transactions have been eliminated in consolidation. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash and cash equivalents include cash on hand, amounts due from banks, amounts held at the Federal Reserve Bank, and Federal funds sold. The Company is required to maintain reserves against certain of the deposit accounts with the Federal Reserve Bank. Federal funds are generally sold and purchased for one‑day periods. |
Cash Flows | Cash Flows Net cash flows are reported for customer loan and deposit transactions, notes payable, repurchase agreements and other short‑term borrowings. |
Securities | Securities The Company classifies its securities as either available-for-sale or held-to-maturity at the time of purchase. Debt securities are classified as held-to-maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity. Debt securities not classified as held-to-maturity are classified as available-for-sale. Securities available-for-sale are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income, net of taxes. A decline in the fair value of any available-for-sale or held-to-maturity security below amortized cost that is deemed other than temporary results in a charge to earnings and the corresponding establishment of a new cost basis for the security. In estimating other-than-temporary losses, management considers (1) the length of time and extent that fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, (3) whether the fair value decline was affected by macroeconomic conditions, and (4) whether the Company has the intention to sell the security or more likely than not will be required to sell the security before any anticipated recovery in fair value. Interest income includes amortization of purchase premiums or discounts. Premiums and discounts are amortized, or accreted, over the life of the related security as an adjustment to income using a method that approximates the interest method. Realized gains and losses are recorded on the trade date and determined using the specific identification method for the cost of securities sold. |
Loan Sales and Servicing | Loan Sales and Servicing The Company holds for sale the conditionally guaranteed portion of certain loans guaranteed by the Small Business Administration or the U.S. Department of Agriculture (collectively referred to as “SBA loans”). These loans are carried at the lower of aggregate cost or fair value. Net unrealized losses, if any, are recorded as a valuation allowance and charged to earnings. Gains or losses on SBA loans held-for-sale are recognized upon completion of the sale, based on the difference between the selling price and the carrying value of the related loan sold. SBA loans are sold with servicing retained. Servicing assets recognized separately upon the sale of SBA loans consist of servicing rights and, for loans sold prior to 2009, interest‑only strip receivables (“I/O strips”). The Company accounts for the sale and servicing of SBA loans based on the financial and servicing assets it controls and liabilities it has incurred, reversing recognition of financial assets when control has been surrendered, and reversing recognition of liabilities when extinguished. Servicing rights are initially recorded at fair value with the income statement effect recorded in gains on sale of loans. Servicing rights are amortized in proportion to and over the period of net servicing income and are assessed for impairment on an ongoing basis. Impairment is determined by stratifying the servicing rights based on interest rates and terms. Any servicing assets in excess of the contractually specified servicing fees are reclassified at fair value as an I/O strip receivable and treated like an available for sale security. Fair value is determined using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using market‑based assumptions. Impairment is recognized through a valuation allowance. The servicing rights, net of any required valuation allowance, and I/O strip receivable are included in other assets on the consolidated balance sheets. Servicing income, net of amortization of servicing rights, is recognized as noninterest income. The initial fair value of I/O strip receivables is amortized against interest income on loans. |
Loans | Loans Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at the principal amount outstanding, net of deferred loan origination fees and costs on originated loans, or unamortized premiums or discounts on purchased or acquired loans, and an allowance for loan losses. Interest on loans is accrued on the unpaid principal balance and is credited to income using the effective yield interest method. Interest on purchased or acquired loans and the accretion (amortization) of the related purchase discount (premium) is also credited to income using the effective yield interest method. A loan portfolio segment is defined as the level at which the Company uses a systematic methodology to determine the allowance for loan losses. A loan portfolio class is defined as a group of loans having similar risk characteristics and methods for monitoring and assessing risk. For all loan classes, when a loan is classified as nonaccrual, the accrual of interest is discontinued, any accrued and unpaid interest is reversed, and the amortization of deferred loan fees and costs is discontinued. For all loan classes, loans are classified as nonaccrual when the payment of principal or interest is 90 days past due, unless the loan is well secured and in the process of collection. Nonaccrual loans and loans past due 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans. In certain circumstances, loans that are under 90 days past due may also be classified as nonaccrual. Any interest or principal payments received on nonaccrual loans are applied toward reduction of principal. Nonaccrual loans generally are not returned to performing status until the obligation is brought current, the loan has performed in accordance with the contract terms for a reasonable period of time, and the ultimate collectability of the contractual principal and interest is no longer in doubt. Non‑refundable loan fees and direct origination costs are deferred and recognized over the expected lives of the related loans using the effective yield interest method. |
Acquired Loans | Acquired Loans Loans acquired through purchase or through a business combination are recorded at their fair value at the acquisition date. Credit discounts or premiums are included in the determination of fair value; therefore, an allowance for loan losses is not recorded at the acquisition date. Should the Company's allowance for loan losses methodology indicate that the credit discount associated with acquired, non-purchased credit impaired loans, is no longer sufficient to cover probable losses inherent in those loans, the Company will establish an allowance for those loans through a charge to provision for loan losses. Acquired loans are evaluated upon acquisition for evidence of deterioration in credit quality since origination such that it is probable at acquisition that the Company will be unable to collect all contractually required payments. Such loans are classified as purchased credit impaired loans ("PCI loans"), while all other acquired loans are classified as non-PCI loans. The Company has elected to account for PCI loans on an individual loan level. The Company estimates the amount and timing of expected cash flows for each loan. The expected cash flow in excess of the loan's carrying value, which is fair value on the date of acquisition, is referred to as the accretable yield, and is recorded as interest income over the remaining expected life of the loan. The excess of the loan's contractual principal and interest over expected cash flows is referred to as the non-accretable difference, and is not recorded in the Company's Consolidated Financial Statements. Quarterly, management performs an evaluation of expected future cash flows for PCI loans. If current expectations of future cash flows are less than management's previous expectations, other than due to decreases in interest rates and prepayment assumptions, an allowance for loan losses is recorded with a charge to current period earnings through provision for loan losses. If there has been a probable and significant increase in expected future cash flows over that which was previously expected, the Company would first reduce any previously established allowance for loan and lease losses, and then record an adjustment to interest income through a prospective increase in the accretable yield. There were no PCI loans at December 31, 2019 and December 31, 2018. |
Allowance for Loan Losses | Allowance for Loan Losses The allowance for loan losses is an estimate of probable incurred losses in the loan portfolio. Loans are charged‑off against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance for loan losses. Management’s methodology for estimating the allowance balance consists of several key elements, which include specific allowances on individual impaired loans and the formula driven allowances on pools of loans with similar risk characteristics. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off. Specific allowances are established for impaired loans. Management considers a loan to be impaired when it is probable that the Company will be unable to collect all amounts due according to the original contractual terms of the loan agreement, including scheduled interest payments. Loans for which the terms have been modified with a concession granted, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings and classified as impaired. When a loan is considered to be impaired, the amount of impairment is measured based on the fair value of the collateral, less costs to sell, if the loan is collateral dependent, or on the present value of expected future cash flows or values that are observable in the secondary market if the loan is not collateral dependent. The amount of any impairment will be charged off against the allowance for loan losses if the amount is a confirmed loss or, alternatively, a specific allocation within the allowance will be established. Loans that are considered impaired are specifically excluded from the formula portion of the allowance for loan losses analysis. The formula driven allowance on pools of loans covers all loans that are not impaired and is based on historical losses of each loan segment adjusted for current factors. In calculating the historical component of our allowance, we aggregate our loans into one of three loan segments: Commercial, Real Estate and Consumer. Each segment of loans in the portfolio possess varying degrees of risk, based on, among other things, the type of loan being made, the purpose of the loan, the type of collateral securing the loan, and the sensitivity the borrower has to changes in certain external factors such as economic conditions. The following provides a summary of the risks associated with various segments of the Company’s loan portfolio, which are factors management regularly considers when evaluating the adequacy of the allowance: Commercial loans consist primarily of commercial and industrial (“C&I”) loans (business lines of credit), and other commercial purpose loans. Repayment of commercial and industrial loans is generally provided from the cash flows of the related business to which the loan was made. Adverse changes in economic conditions may result in a decline in business activity, which may impact a borrower’s ability to continue to make scheduled payments. The factored receivables at Bay View Funding are included in the Company’s commercial loan portfolio; however, they are evaluated for risk primarily based on the agings of the receivables. Faster turning receivables imply less risk and therefore warrant a lower associated allowance. Should the overall aging for the portfolio increase, this structure will by formula increase the allowance to reflect the increasing risk. Should the portfolio turn more quickly, it would reduce the associated allowance to reflect the reducing risk. Real estate loans consist primarily of loans secured by commercial real estate (“CRE”) and residential real estate. Also included in this segment are land and construction loans and home equity lines of credit secured by real estate. As the majority of this segment is comprised of commercial real estate loans, risks associated with this segment lay primarily within these loan types. Adverse economic conditions may result in a decline in business activity and increased vacancy rates for commercial properties. These factors, in conjunction with a decline in real estate prices, may expose the Company to the potential for losses if a borrower cannot continue to service the loan with operating revenues, and the value of the property has declined to a level such that it no longer fully covers the Company’s recorded investment in the loan. Consumer loans consist primarily of a large number of small loans and lines of credit. The majority of installment loans are made for consumer and business purchases. Weakened economic conditions may result in an increased level of delinquencies within this segment, as economic pressures may impact the capacity of such borrowers to repay their obligations. As a result of the matters mentioned above, changes in the financial condition of individual borrowers, economic conditions, historical loss experience and the condition of the various markets in which collateral may be sold may all affect the required level of the allowance for loan losses and the associated provision for loan losses. The estimated loss factors for pools of loans that are not impaired are based on determining the probability of default and loss given default for loans within each segment of the portfolio, adjusted for significant factors that, in management’s judgment, affect collectibility as of the evaluation date. The Company’s historical delinquency experience and loss experience are utilized to determine the probability of default and loss given default for segments of the portfolio where the Company has experienced losses since the first quarter of 2009. For segments of the portfolio where the Company has no significant prior loss experience, the Company uses quantifiable observable industry data to determine the probability of default and loss given default. Risk factors impacting loans in each of the portfolio segments include broad deterioration of property values, reduced consumer and business spending as a result of continued high unemployment and reduced credit availability and lack of confidence in a sustainable recovery. The historical loss experience is adjusted for management’s estimate of the impact of other factors based on the risks present for each portfolio segment. These other factors include consideration of the following: the overall level of concentrations and trends of classified loans; loan concentrations within a portfolio segment or division of a portfolio segment; identification of certain loan types with higher risk than other loans; existing internal risk factors; and management’s evaluation of the impact of local and national economic conditions on each of our loan types. |
Loan Commitments and Related Financial Instruments | Loan Commitments and Related Financial Instruments Financial instruments include off‑balance sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded. |
Federal Home Loan Bank and Federal Reserve Bank Stock | Federal Home Loan Bank and Federal Reserve Bank Stock As a member of the Federal Home Loan Bank (“FHLB”) system, the Bank is required to own common stock in the FHLB based on the Bank’s level of borrowings and outstanding FHLB advances. FHLB stock is carried at cost and classified as a restricted security. Both cash and stock dividends from the FHLB are reported as income. As a member of the Federal Reserve Bank (“FRB”) of San Francisco, the Bank is required to own stock in the FRB of San Francisco based on a specified ratio relative to our capital. FRB stock is carried at cost and may be sold back to the FRB at its carrying value. Cash dividends received from the FRB are reported as income. |
Company Owned Life Insurance and Split-Dollar Life Insurance Benefit Plan | Company-Owned Life Insurance and Split‑Dollar Life Insurance Benefit Plan The Company has purchased life insurance policies on certain directors and officers. Company-owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for charges or other amounts due that are probable at settlement. The purchased insurance is subject to split‑dollar insurance agreements with the insured participants, which continues after the participant’s employment and retirement. Accounting guidance requires that a liability be recorded primarily over the participant’s service period when a split-dollar life insurance agreement continues after a participant’s employment or retirement. The required accrued liability is based on either the post-employment benefit cost for the continuing life insurance or the future death benefit depending on the contractual terms of the underlying agreement. |
Premises and Equipment | Premises and Equipment Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation. Depreciation and amortization are computed on the straight‑line basis over the lesser of the respective lease terms or estimated useful lives. The Company owns one building which is being depreciated over 40 years. Furniture, equipment, and leasehold improvements are depreciated over estimated useful lives generally ranging from five to fifteen years. The Company evaluates the recoverability of long‑lived assets on an ongoing basis. |
Business Combinations | Business Combinations The Company accounts for acquisitions of businesses using the acquisition method of accounting. Under the acquisition method, assets acquired and liabilities assumed are recorded at their estimated fair values at the date of acquisition. Management utilizes various valuation techniques including discounted cash flow analyses to determine these fair values. Any excess of the purchase price over amounts allocated to the acquired assets, including identifiable intangible assets, and liabilities assumed is recorded as goodwill. |
Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets Goodwill resulted from the acquisition of Presidio on October 11, 2019, Tri-Valley on April 6, 2018 and United American on May 4, 2018, and from acquisitions in prior years. Goodwill represents the excess of the purchase price over the fair value of acquired tangible assets and liabilities and identifiable intangible assets. Goodwill is assessed at least annually for impairment and any such impairment is recognized in the period identified. Other intangible assets consist of a core deposit intangible assets from the Focus Business Bank (“Focus”) acquisition in August 2015, the Tri-Valley acquisition in April 2018, the United American acquisition in May 2018, and the Presidio merger in October 2019, and below market value lease intangible assets from the Tri-Valley and United American acquisitions, and an above market lease liability from the Presidio merger. In addition, a customer relationship and brokered relationship intangible assets arising from the Bay View Funding acquisition in November 2014 are included in other intangible assets. They are initially measured at fair value and then are amortized over their estimated useful lives. The core deposits intangible assets from the acquisitions are being amortized on an accelerated method over ten years. The below market value lease intangible assets are being amortized on the straight line method over three years for United American and eleven years for Tri-Valley. The above market lease adjustment is being amortized on the straight line method over 60 months for Presidio. The customer relationship and brokered relationship intangible assets from the Bay View Funding acquisition are being amortized over ten years. |
Foreclosed Assets | Foreclosed Assets Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through operations. Operating costs after acquisition are expensed. Gains and losses on disposition are included in noninterest expense. There were no foreclosed assets at December 31, 2019 and 2018. |
Retirement Plans | Retirement Plans Expenses for the Company’s non‑qualified, unfunded defined benefits plan consists of service and interest cost and amortization of gains and losses not immediately recognized. Employee 401(k) and profit sharing plan expense is the amount of matching contributions. Deferred compensation and supplemental retirement plan expense allocates the benefits over years of service. |
Loss Contingencies | Loss Contingencies Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. The Company’s accounting policy for legal costs related to loss contingencies is to accrue for the probable fees that can be reasonably estimated. The Company’s accounting policy for uncertain recoveries is to recognize the anticipated recovery when realization is deemed probable. |
Income Taxes | Income Taxes The Company files consolidated Federal and combined and separate state income tax returns. Income tax expense is the total of the current year income tax payable or refunded, the change in deferred tax assets and liabilities, and low income housing investment losses, net of tax benefits received. Some items of income and expense are recognized in different years for tax purposes when applying generally accepted accounting principles, leading to timing differences between the Company’s actual 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. Realization of the Company’s deferred tax assets is primarily dependent upon the Company generating sufficient taxable income to obtain benefit from the reversal of net deductible temporary differences and utilization of tax credit carryforwards for Federal and California state income tax purposes. The amount of deferred tax assets considered realizable is subject to adjustment in future periods based on estimates of future taxable income. Under generally accepted accounting principles, a valuation allowance is required to be recognized 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. In March 2016, the FASB issued new guidance intended to simplify several areas of accounting for share-based compensation programs, including the income tax impact, classification on the statement of cash flows, and forfeitures. The Company adopted the new guidance on share-based compensation during the first quarter of 2017. All excess tax benefits and tax deficiencies (including tax benefits of dividends on share‑based payment awards) are recognized as income tax expense or benefit on the income statement. The tax effects of exercised or vested awards are treated as discrete items in the reporting period in which they occur. The adoption of this guidance resulted in a reduction to tax expense of $146,000 and $424,000 and $146,000 for the years ended December 31, 2019, 2018, and 2017 respectively. On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”), was signed into law, which among other things reduces the federal corporate tax rate to 21% from 35%, effective January 1, 2018. When tax rates change, U.S. generally accepted accounting principles requires companies to remeasure certain tax-related assets and liabilities as of the date of enactment of the new legislation with the resulting tax effects accounted for as a discrete item recorded as a component of tax expense or benefit in the reporting period. A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The Company recognizes interest and penalties related to uncertain tax positions as income tax expense. |
Stock-Based Compensation | Stock‑Based Compensation Compensation cost is recognized for stock options and restricted stock awards issued to employees and directors, based on the fair value of these awards at the date of grant. A Black‑Scholes model is utilized to estimate the fair value of stock options, while the market price of the Company’s common stock at the date of grant is used for restricted stock awards. Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with graded vesting, compensation cost is recognized on a straight‑line basis over the requisite service period for the entire award. Compensation cost recognized reflects estimated forfeitures, adjusted as necessary for actual forfeitures. |
Comprehensive Income (Loss) | Comprehensive Income (Loss) Total comprehensive income (loss) consists of net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) refers to gains and losses that are included in comprehensive income (loss) but are excluded from net income (loss) because they have been recorded directly in equity, net of tax, under the provisions of certain accounting guidance. The Company’s sources of other comprehensive income (loss) are unrealized gains and losses on securities available‑for‑sale, and I/O strips, which are treated like available‑for‑sale securities, and the liabilities related to the Company’s defined benefit pension plan and the split‑dollar life insurance benefit plan. Reclassification adjustments result from gains or losses that were realized and included in net income (loss) of the current period that also had been included in other comprehensive income as unrealized holding gains and losses. |
Segment Reporting | Segment Reporting HBC is a commercial bank serving customers located in Alameda, Contra Costa, Marin, San Benito, San Francisco, San Mateo, and Santa Clara counties of California. Bay View Funding provides business essential working capital factoring financing to various industries throughout the United States. No customer accounts for more than 10 percent of revenue for HBC or the Company. With the previous acquisition of Bay View Funding, the Company has two reportable segments consisting of Banking and Factoring. |
Reclassifications | Reclassifications Certain items in the consolidated financial statements for the years ended December 31, 2018 and 2017 were reclassified to conform to the 2019 presentation. These reclassifications did not affect previously reported net income or shareholders’ equity. |
Adoption of New Accounting Standards | Adoption of New Accounting Standards In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842)”. The pronouncement affects all entities that are party to leasing agreements. The ASU requires a lessee to recognize assets and liabilities on the balance sheet for leases. The ASU permits a lessee to elect to opt out of recognizing lease assets and lease liabilities for short-term leases with a term of twelve months or less. The Company has made this short-term lease election. Lessee’s recognition, measurement, and presentation of income, expenses and cash flows arising from a lease remain similar to current GAAP. Lessee and lessors have additional quantitative and qualitative disclosures to help users better understand the amount, timing, and uncertainty of cash flows arising from leases. ASU No. 2016-02 is effective for fiscal years beginning after December 31, 2018, and interim periods within those fiscal years. Lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. In July 2018, the FASB issued ASU No. 2018-11, “Leases (Topic 842) - Targeted Improvements” to provide entities with relief from the costs of implementing certain aspects of the new leasing standard. Specifically, under the amendments in ASU No. 2018-11 entities may elect not to recast the comparative periods presented when transitioning to the new leasing standard, and lessors may elect not to separate lease and non-lease components when certain conditions are met. As the Company elected the transition option provided in ASU No. 2018-11, the modified retrospective approach was applied on January 1, 2019 (as opposed to January 1, 2017). The Company also elected certain practical expedients provided under ASU No. 2016-02 whereby we will not reassess (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases and (iii) initial direct costs for any existing leases. In December 2018, the FASB issued ASU No. 2018-20, “Leases (Topic 842): Narrow-Scope Improvements for Lessors,” which provides targeted improvements and clarification to guidance with FASB ASC Topic 842 specific to lessors. The amendments of ASU No. 2018-20 have the same effective date as ASU 2016-02 and may be applied either retrospectively or prospectively to all new and existing leases. The Company obtained a third-party software application which provides lease accounting under the guidelines of FASB ASC Topic 842. The amendments of ASU No. 2016-02 and subsequently issued ASUs, which provided additional guidance and clarifications to various aspects of FASB ASC Topic 842, became effective for the Company on January 1, 2019. At December 31, 2019, the Company reported increased assets of $12.2 million and increased liabilities of $13.0 million on its consolidated balance sheet as a result of recognizing right-of-use assets and lease liabilities related to non-cancellable operating lease agreements for office space. The adoption of this guidance did not have a material impact to its Consolidated Statements of Income or Cash Flows. See Note 7 – Leases for more information. In March 2017, the FASB issued ASU 2017-08, Premium Amortization on Purchased Callable Debt Securities. This update shortens the amortization period of certain callable debt securities held at a premium to the earliest call date. The amendments in this update were effective for the Company on January 1, 2019. The amendments are applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption and the Company is required to provide change in accounting principle disclosures. The Company adopted the new guidance on January 1, 2019, and there was no material impact to the financial statements and no cumulative adjustments were made. 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. This update became effective for the Company on January 1, 2020. The Company is finalizing the economic forecasts and certain other key assumptions used in our CECL model and methodologies, and the required financial reporting disclosures are being further refined and internally validated. Internal controls related to CECL have been designed and are being evaluated; however, all internal controls related to CECL implementation are not operational. As of the implementation date, Management expects to recognize an increase of up to $12,000,000 to its allowance for credit losses for loans. The majority of this increase is related to the acquired loan portfolios. Once finalized, the cumulative-effect adjustment as a result of the adoption of this guidance will be recorded, net of tax, as an adjustment to retained earnings effective January 1, 2020. This estimate is subject to change based on continued refinement and validation of the model and methodologies as well as changes in forecasted macroeconomic conditions. Ongoing impacts of the CECL methodology will be dependent upon changes in economic conditions and forecasts, originated and acquired loan portfolio composition, portfolio duration, and other factors. Management does not expect a material allowance for credit losses to be recorded on its available-for-sale debt securities under the newly codified available-for-sale debt security impairment model, as the majority of these securities are U.S. government agency-backed securities for which the risk of loss is minimal. 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. The amendments of the update became effective for the Company on January 1, 2020. The requirements of this update did not have a material impact on the Company’s financial position, results of operations or cash flows. |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Income (“AOCI”) (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Accumulated Other Comprehensive Income (“AOCI”) | |
Schedule of changes in AOCI by component | Year Ended December 31, 2019 and 2018 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, 2019, net of taxes $ (5,007) $ 344 $ (7,718) $ (12,381) Other comprehensive income (loss) before reclassification, net of taxes 7,075 — (4,022) 3,053 Amounts reclassified from other comprehensive income (loss), net of taxes (466) (46) 62 (450) Net current period other comprehensive income (loss), net of taxes 6,609 (46) (3,960) 2,603 Ending balance December 31, 2019, net of taxes $ 1,602 $ 298 $ (11,678) $ (9,778) Beginning balance January 1, 2018, net of taxes $ (362) $ 375 $ (9,265) $ (9,252) Other comprehensive (loss) before reclassification, net of taxes (4,458) — 1,387 (3,071) Amounts reclassified from other comprehensive income (loss), net of taxes (187) (31) 160 (58) Net current period other comprehensive income (loss), net of taxes (4,645) (31) 1,547 (3,129) Ending balance December 31, 2018, net of taxes $ (5,007) $ 344 $ (7,718) $ (12,381) |
Schedule of reclassifications out of AOCI into net income | Amounts Reclassified from AOCI(1) Year Ended December 31, Affected Line Item Where Details About AOCI Components 2019 2018 2017 Net Income is Presented (Dollars in thousands) Unrealized gains on available-for-sale securities and I/O strips $ 661 $ 266 $ (6) Gain (loss) on sales of securities (195) (79) 3 Income tax expense 466 187 (3) Net of tax Amortization of unrealized gain on securities available-for-sale that were reclassified to securities held-to-maturity 65 44 51 Interest income on taxable securities (19) (13) (22) Income tax expense 46 31 29 Net of tax Amortization of defined benefit pension plan items (1) Prior transition obligation 96 65 71 Actuarial losses (184) (292) (276) (88) (227) (205) Other noninterest expense 26 67 86 Income tax benefit (62) (160) (119) Net of tax Total reclassification from AOCI for the period $ 450 $ 58 $ (93) (1) Benefit Plans ). |
Securities (Tables)
Securities (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Securities | |
Schedule of amortized cost and estimated fair value of securities | Gross Gross Estimated Amortized Unrealized Unrealized Fair December 31, 2019 Cost Gains (Losses) Value (Dollars in thousands) Securities available-for-sale: Agency mortgage-backed securities $ 283,598 $ 934 $ (171) $ 284,361 U.S. Treasury 118,939 1,525 — 120,464 Total $ 402,537 $ 2,459 $ (171) $ 404,825 Securities held-to-maturity: Agency mortgage-backed securities $ 285,344 $ 1,206 $ (968) $ 285,582 Municipals - exempt from Federal tax 81,216 1,313 (4) 82,525 Total $ 366,560 $ 2,519 $ (972) $ 368,107 Gross Gross Estimated Amortized Unrealized Unrealized Fair December 31, 2018 Cost Gains (Losses) Value (Dollars in thousands) Securities available-for-sale: Agency mortgage-backed securities $ 311,523 $ 98 $ (8,767) $ 302,854 U.S. Treasury 147,823 930 — 148,753 U.S. Government sponsored entities 7,433 4 (1) 7,436 Total $ 466,779 $ 1,032 $ (8,768) $ 459,043 Securities held-to-maturity: Agency mortgage-backed securities $ 291,241 $ 59 $ (9,153) $ 282,147 Municipals - exempt from Federal tax 85,957 312 (2,241) 84,028 Total $ 377,198 $ 371 $ (11,394) $ 366,175 |
Schedule of securities with unrealized losses | Less Than 12 Months 12 Months or More Total Fair Unrealized Fair Unrealized Fair Unrealized December 31, 2019 Value (Losses) Value (Losses) Value (Losses) (Dollars in thousands) Securities available-for-sale: Agency mortgage-backed securities $ 100,816 $ (105) $ 27,534 $ (66) $ 128,350 $ (171) Total $ 100,816 $ (105) $ 27,534 $ (66) $ 128,350 $ (171) Securities held-to-maturity: Agency mortgage-backed securities $ 50,060 $ (178) $ 88,128 $ (790) $ 138,188 $ (968) Municipals - exempt from Federal tax 1,556 (4) — — 1,556 (4) Total $ 51,616 $ (182) $ 88,128 $ (790) $ 139,744 $ (972) Less Than 12 Months 12 Months or More Total Fair Unrealized Fair Unrealized Fair Unrealized December 31, 2018 Value (Losses) Value (Losses) Value (Losses) (Dollars in thousands) Securities available-for-sale: Agency mortgage-backed securities $ 3,868 $ (21) $ 281,082 $ (8,746) $ 284,950 $ (8,767) U.S. Government sponsored entities 3,974 (1) — — 3,974 (1) Total $ 7,842 $ (22) $ 281,082 $ (8,746) $ 288,924 $ (8,768) Securities held-to-maturity: Agency mortgage-backed securities $ 16,088 $ (103) $ 255,917 $ (9,050) $ 272,005 $ (9,153) Municipals - exempt from Federal tax 5,019 (27) 57,301 (2,214) 62,320 (2,241) Total $ 21,107 $ (130) $ 313,218 $ (11,264) $ 334,325 $ (11,394) |
Schedule of proceeds from sales of securities and the resulting gains and losses | 2019 2018 2017 (Dollars in thousands) Proceeds $ 167,551 $ 94,291 $ 6,536 Gross gains 1,094 1,243 — Gross losses (433) (977) (6) |
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 3 months through one year $ 54,649 55,085 Due after one through five years 64,290 65,379 Agency mortgage-backed securities 283,598 284,361 Total $ 402,537 $ 404,825 Held-to-maturity Amortized Estimated Cost Fair Value (Dollars in thousands) Due 3 months or less $ 125 125 Due after 3 months through one year 1,449 1,457 Due after one through five years 5,206 5,358 Due after five through ten years 31,698 32,279 Due after ten years 42,738 43,306 Agency mortgage-backed securities 285,344 285,582 Total $ 366,560 $ 368,107 |
Loans (Tables)
Loans (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Loans | |
Schedule of loans | December 31, December 31, 2019 2018 (Dollars in thousands) Loans held-for-investment: Commercial $ 631,547 $ 597,763 Real estate: CRE 1,510,592 994,067 Land and construction 150,634 122,358 Home equity 175,252 109,112 Residential mortgages 46,256 50,979 Consumer 19,882 12,453 Loans 2,534,163 1,886,732 Deferred loan fees, net (319) (327) Loans, net of deferred fees 2,533,844 1,886,405 Allowance for loan losses (23,285) (27,848) Loans, net $ 2,510,559 $ 1,858,557 |
Schedule of changes in allowance for loan losses | ` Year Ended December 31, 2019 Commercial Real Estate Consumer Total (Dollars in thousands) Beginning of period balance $ 17,061 $ 10,671 $ 116 $ 27,848 Charge-offs (6,609) — (14) (6,623) Recoveries 1,045 169 — 1,214 Net (charge-offs) recoveries (5,564) 169 (14) (5,409) Provision (credit) for loan losses (1,044) 1,910 (20) 846 End of period balance $ 10,453 $ 12,750 $ 82 $ 23,285 Year Ended December 31, 2018 Commercial Real Estate Consumer Total (Dollars in thousands) Beginning of period balance $ 10,608 $ 8,950 $ 100 $ 19,658 Charge-offs (2,002) — (24) (2,026) Recoveries 2,645 150 — 2,795 Net (charge-offs) recoveries 643 150 (24) 769 Provision for loan losses 5,810 1,571 40 7,421 End of period balance $ 17,061 $ 10,671 $ 116 $ 27,848 Year Ended December 31, 2017 Commercial Real Estate Consumer Total (Dollars in thousands) Beginning of period balance $ 10,656 $ 8,327 $ 106 $ 19,089 Charge-offs (2,239) — — (2,239) Recoveries 1,585 1,124 — 2,709 Net (charge-offs) recoveries (654) 1,124 — 470 Provision (credit) for loan losses 606 (501) (6) 99 End of period balance $ 10,608 $ 8,950 $ 100 $ 19,658 |
Schedule of balance in allowance for loan losses and recorded investment in loans by portfolio segment, based on impairment method | December 31, 2019 Commercial Real Estate Consumer Total (Dollars in thousands) Allowance for loan losses: Ending allowance balance attributable to loans: Individually evaluated for impairment $ 1,835 $ — $ — $ 1,835 Collectively evaluated for impairment 8,618 12,750 82 21,450 Total allowance balance $ 10,453 $ 12,750 $ 82 $ 23,285 Loans: Individually evaluated for impairment $ 4,810 $ 5,454 $ — $ 10,264 Collectively evaluated for impairment 626,737 1,877,280 19,882 2,523,899 Total loan balance $ 631,547 $ 1,882,734 $ 19,882 $ 2,534,163 December 31, 2018 Commercial Real Estate Consumer Total (Dollars in thousands) Allowance for loan losses: Ending allowance balance attributable to loans: Individually evaluated for impairment $ 6,944 $ — $ — $ 6,944 Collectively evaluated for impairment 10,117 10,671 116 20,904 Total allowance balance $ 17,061 $ 10,671 $ 116 $ 27,848 Loans: Individually evaluated for impairment $ 9,495 $ 5,645 $ — $ 15,140 Collectively evaluated for impairment 588,268 1,270,871 12,453 1,871,592 Total loan balance $ 597,763 $ 1,276,516 $ 12,453 $ 1,886,732 |
Schedule of loans held-for-investment individually evaluated for impairment by class of loans | December 31, 2019 December 31, 2018 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 $ 2,113 $ 2,113 $ — $ 1,849 $ 1,849 $ — Real estate: CRE 5,094 5,094 — 5,094 5,094 — Home Equity 360 360 — 551 551 — Total with no related allowance recorded 7,567 7,567 — 7,494 7,494 — With an allowance recorded: Commercial 2,697 2,697 1,835 7,646 7,646 6,944 Total with an allowance recorded 2,697 2,697 1,835 7,646 7,646 6,944 Total $ 10,264 $ 10,264 $ 1,835 $ 15,140 $ 15,140 $ 6,944 |
Schedule of average impaired loans with interest recognized and cash-basis interest earned on impaired loans | Year Ended December 31, 2019 Real Estate Land and Home Commercial CRE Construction Equity Consumer Total (Dollars in thousands) Average of impaired loans during the period $ 8,048 $ 6,433 $ — $ 440 $ — $ 14,921 Interest income during impairment $ — $ — $ — $ — $ — $ — Cash-basis interest recognized $ — $ — $ — $ — $ — $ — Year Ended December 31, 2018 Real Estate Land and Home Commercial CRE Construction Equity Consumer Total (Dollars in thousands) Average of impaired loans during the period $ 10,744 $ 3,507 $ 24 $ 487 $ — $ 14,762 Interest income during impairment $ — $ — $ — $ — $ — $ — Cash-basis interest recognized $ — $ — $ — $ — $ — $ — |
Schedule of nonperforming loans | 2019 2018 (Dollars in thousands) Nonaccrual loans - held-for-investment $ 8,675 $ 13,699 Restructured and loans over 90 days past due and still accruing 1,153 1,188 Total nonperforming loans 9,828 14,887 Other restructured loans 436 253 Total impaired loans $ 10,264 $ 15,140 |
Schedule of nonperforming loans by class | December 31, 2019 December 31, 2018 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 $ 3,444 $ 1,153 $ 4,597 $ 8,279 $ 963 $ 9,242 Real estate: CRE 5,094 — 5,094 5,094 — 5,094 Home equity 137 — 137 326 225 551 Total $ 8,675 $ 1,153 $ 9,828 $ 13,699 $ 1,188 $ 14,887 |
Schedule of aging of past due loans by class of loans | The following table presents the aging of past due loans at year-end by class of loans: December 31, 2019 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 $ 4,770 $ 2,097 $ 3,217 $ 10,084 $ 621,463 $ 631,547 Real estate: CRE — — 5,094 5,094 1,505,498 1,510,592 Land and construction — — — — 150,634 150,634 Home equity — 137 — 137 175,115 175,252 Residential mortgages — — — — 46,256 46,256 Consumer — — — — 19,882 19,882 Total $ 4,770 $ 2,234 $ 8,311 $ 15,315 $ 2,518,848 $ 2,534,163 December 31, 2018 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 $ 5,698 $ 1,916 $ 1,258 $ 8,872 $ 588,891 $ 597,763 Real estate: CRE — — — — 994,067 994,067 Land and construction — — — — 122,358 122,358 Home equity — — — — 109,112 109,112 Residential mortgages — — — — 50,979 50,979 Consumer 1 — — 1 12,452 12,453 Total $ 5,699 $ 1,916 $ 1,258 $ 8,873 $ 1,877,859 $ 1,886,732 |
Summary of loan portfolio by loan type and credit quality classification | December 31, 2019 December 31, 2018 Nonclassified Classified Total Nonclassified Classified Total (Dollars in thousands) Commercial $ 623,768 7,779 $ 631,547 $ 584,845 $ 12,918 $ 597,763 Real estate: CRE 1,492,126 18,466 1,510,592 985,193 8,874 994,067 Land and construction 147,553 3,081 150,634 122,358 — 122,358 Home equity 171,999 3,253 175,252 107,495 1,617 109,112 Residential mortgages 46,256 — 46,256 50,979 — 50,979 Consumer 19,882 — 19,882 12,453 — 12,453 Total $ 2,501,584 $ 32,579 $ 2,534,163 $ 1,863,323 $ 23,409 $ 1,886,732 |
Schedule of loans by class modified as troubled debt restructurings | During the Year Ended December 31, 2019 Pre-modification Post-modification Number Outstanding Outstanding of Recorded Recorded Troubled Debt Restructurings: Contracts Investment Investment (Dollars in thousands) Commercial 3 $ 591 $ 591 Total 3 $ 591 $ 591 During the Year Ended December 31, 2018 Pre-modification Post-modification Number Outstanding Outstanding of Recorded Recorded Troubled Debt Restructurings: Contracts Investment Investment (Dollars in thousands) Commercial 2 $ 112 $ 112 Equity 1 224 224 Total 3 $ 336 $ 336 |
Schedule of loans outstanding to related parties | 2019 2018 (Dollars in thousands) Beginning of year balance $ — $ 531 Repayment on loans during the year — (531) End of year balance $ — $ — |
Loan Servicing (Tables)
Loan Servicing (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Loan Servicing | |
Schedule of activity for loan servicing rights | 2019 2018 2017 (Dollars in thousands) Beginning of year balance $ 871 $ 1,373 $ 1,854 Additions 157 200 278 Amortization (445) (702) (759) End of year balance $ 583 $ 871 $ 1,373 |
Schedule of activity for IO strip receivables | 2019 2018 2017 (Dollars in thousands) Beginning of year balance $ 568 $ 968 $ 1,067 Unrealized loss (65) (400) (99) End of year balance $ 503 $ 568 $ 968 |
Premises and Equipment (Tables)
Premises and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Premises and Equipment | |
Schedule of premises and equipment | 2019 2018 (Dollars in thousands) Building $ 3,508 $ 3,508 Land 2,900 2,900 Furniture and equipment 10,067 9,584 Leasehold improvements 7,372 5,645 23,847 21,637 Accumulated depreciation and amortization (15,597) (14,500) Premises and equipment, net $ 8,250 $ 7,137 |
Leases (Tables)
Leases (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Leases | |
Schedule of leases | December 31, 2019 (Dollars in thousands) Operating Lease Cost (Cost resulting from lease payments) $ 1,490 Operating Lease - Operating Cash Flows (Fixed Payments) $ 1,519 Operating Lease - ROU assets $ 12,173 Operating Lease - Liabilities $ 13,032 Weighted Average Lease Term - Operating Leases 4.79 years Weighted Average Discount Rate - Operating Leases |
Schedule of maturity analysis shows the undiscounted cash flows due on the Company’s operating lease liabilities | (Dollars in thousands) 2020 $ 3,812 2021 2,852 2022 2,578 2023 1,855 2024 1,474 Thereafter 1,618 Total undiscounted cash flows 14,189 Discount on cash flows (1,157) Total lease liability $ 13,032 |
Business Combinations (Tables)
Business Combinations (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Business Acquisition [Line Items] | |
Summary of consideration paid | (Dollars in thousands) Issuance of 15,684,064 shares of common stock to Presidio shareholders and holders of restricted stock (stock price = $11.36 on October 11, 2019) $ 178,171 Consideration for Presidio stock options exchanged for Heritage Commerce Corp stock options 7,426 Cash paid for fractional shares 1 Total consideration $ 185,598 |
Schedule of unaudited pro forma combined consolidated financial statements and related adjustments | For the Year Ended UNAUDITED December 31, 2019 December 31, 2018 (Dollars in thousands, except per share amounts) Net interest income $ 163,555 $ 160,044 Provision (credit) for loan losses 870 7,694 Noninterest income 11,291 10,795 Noninterest expense 92,709 97,563 Income before income taxes 81,268 65,582 Income tax expense 23,730 17,549 Net income $ 57,538 $ 48,033 Net income per share - basic $ 0.98 $ 0.84 Net income per share - diluted $ 0.96 $ 0.83 |
Summary of pre-tax merger-related costs | For the Year Ended December 31, December 31, December 31, 2019 2018 2017 (Dollars in thousands) Salaries and employee benefits $ 6,580 $ 3,569 $ — Other 4,500 5,598 671 Total merger-related costs $ 11,080 $ 9,167 $ 671 |
Presidio bank | |
Business Acquisition [Line Items] | |
Schedule of recognized identified assets acquired and liabilities assumed | As As Recorded Fair Recorded by Value at Presidio Adjustments Acquisition (Dollars in thousands) Assets acquired: Cash and cash equivalents $ 117,989 $ (1) (a) $ 117,988 Securities available-for-sale 44,647 422 (b) 45,069 Securities held-to-maturity 463 — 463 Loans 698,493 (12,529) (c) 685,964 Allowance for loan losses (7,463) 7,463 (d) — Premises and equipment, net 1,756 — 1,756 Other intangible assets — 11,147 (e) 11,147 Other assets, net 43,539 (1,378) (f) 42,161 Total assets acquired $ 899,424 $ 5,124 904,548 Liabilities assumed: Deposits $ 774,260 $ (1) (g) 774,259 Subordinated Debt 10,000 — (h) 10,000 Other borrowings 442 — 442 Other liabilities 17,916 — 17,916 Total liabilities assumed $ 802,618 $ (1) 802,617 Net assets acquired 101,931 Purchase price 185,598 Goodwill recorded in the merger $ 83,667 Explanation of certain fair value related adjustments for the Presidio merger: (a) Represents cash paid for fractional shares in the transaction. (b) Represents the fair value adjustment on investment securities available-for-sale. (c) Represents the fair value adjustment to the net book value of loans includes an interest rate mark and credit mark adjustment. (d) Represents the elimination of Presidio’s allowance for loan losses. (e) Represents intangible assets recorded to reflect the fair value of core deposits and an above market lease. The core deposit asset was recorded as an identifiable intangible asset and is amortized on an accelerated basis over the estimated average life of the deposit base. The above market lease liability will be accreted on the straight line method over 60 months. (f) Represents an adjustment to net deferred tax assets resulting from the fair value adjustments related to the acquired assets, liabilities assumed and identifiable intangible assets recorded. (g) Represents the fair value adjustment on time deposits, which was amortized as interest expense. (h) The Company acquired $10,000,000 of subordinated debt from the Presidio transaction. The Presidio subordinated debt was redeemed on December 19, 2019. |
Goodwill and Other Intangible_2
Goodwill and Other Intangible Assets (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Goodwill and Other Intangible Assets | |
Schedule of carrying amount of goodwill by segment | December 31, 2019 2018 (Dollars in thousands) Banking $ 154,376 $ 70,709 Factoring 13,044 13,044 Total Goodwill $ 167,420 $ 83,753 |
Schedule of estimated amortization expense | United United Bay View Funding Presidio Presidio American American Tri-Valley Tri-Valley Focus Customer & Core Above Core Below Core Below Core Brokered Total Deposit Market Deposit Market Deposit Market Deposit Relationship Amortization Year Intangible Lease Intangible Lease Intangible Lease Intangible Intangible Expense (Dollars in thousands) 2020 $ 1,719 (20) $ 665 $ 235 $ 208 $ 18 $ 716 $ 190 $ 3,731 2021 1,447 (20) 602 — 184 18 596 190 3,017 2022 1,225 (20) 553 — 167 18 502 190 2,635 2023 1,118 (20) 521 — 158 18 420 190 2,405 2024 1,026 (14) 499 — 152 18 347 159 2,187 Thereafter 4,181 — 1,520 — 451 88 200 — 6,440 $ 10,716 $ (94) $ 4,360 $ 235 $ 1,320 $ 178 $ 2,781 $ 919 $ 20,415 |
Deposits (Tables)
Deposits (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Deposits. | |
Schedule of maturities of time deposits including brokered deposits | (Dollars in thousands) 2020 $ 156,141 2021 9,658 2022 2,115 2023 54 2024 66 Total $ 168,034 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Income Taxes | |
Schedule of income tax (benefit) | 2019 2018 2017 (Dollars in thousands) Currently payable tax: Federal $ 7,631 $ 9,187 $ 12,948 State 4,689 5,416 4,653 Total currently payable 12,320 14,603 17,601 Deferred tax expense (benefit): Federal 2,200 (1,133) 1,193 Due to enactment of Tax Reform — — 7,103 State 1,331 (146) 574 Total deferred tax 3,531 (1,279) 8,870 Income tax expense $ 15,851 $ 13,324 $ 26,471 |
Schedule of effective tax rate differs from the federal statutory rate | 2019 2018 2017 Statutory Federal income tax rate % 21.0 % 35.0 % State income taxes, net of federal tax benefit % 8.5 % 6.8 % Low income housing credits, net of investment losses % (0.8) % (0.5) % Increase in cash surrender value of life insurance % (0.5) % (1.2) % Stock option/restricted stock windfall tax benefit % (0.9) % (0.3) % Non-taxable interest income % (0.9) % (1.5) % Split-dollar term insurance % 0.1 % 0.1 % Merger cost % 0.5 % — % Due to enactment of Tax Reform — % — % 14.1 % Other, net % 0.4 % 0.1 % Effective tax rate % % % |
Schedule of deferred tax assets and liabilities | 2019 2018 (Dollars in thousands) Deferred tax assets: Defined postretirement benefit obligation $ 9,901 $ 7,877 Allowance for loan losses 7,231 7,697 Federal net operating loss carryforwards 3,662 5,093 Accrued expenses 2,562 1,939 Lease accounting 1,647 — Stock compensation 1,636 1,244 California net operating loss carryforwards 1,489 2,128 State income taxes 954 1,117 Premises and equipment 695 642 Split-dollar life insurance benefit plan 75 80 Nonaccrual interest 61 55 Tax credit carryforwards 57 71 Securities available-for-sale — 2,184 Other 654 716 Total deferred tax assets 30,624 30,843 Deferred tax liabilities: Intangible liabilities (1,321) (1,671) Loan fees (1,842) (1,089) Prepaid expenses (289) (554) Securities available-for-sale (772) — Lease accounting (1,647) — I/O strips (144) (163) FHLB stock (177) (174) Other (130) (103) Total deferred tax liabilities (6,322) (3,754) Net deferred tax assets $ 24,302 $ 27,089 |
Summary of carrying amount of low income tax housing investment | December 31, December 31, 2019 2018 (Dollars in thousands) Low income housing investments $ 6,126 $ 3,172 Future commitments $ 625 $ 273 |
Equity Plan (Tables)
Equity Plan (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
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, 2019 1,570,603 $ 10.76 Granted 299,500 $ 12.16 Assumed Presidio Bank stock options exchanged for Heritage Commerce Corp stock options 1,176,757 $ 5.05 Exercised (266,689) $ 6.10 Forfeited or expired (67,325) $ 14.31 Outstanding at December 31, 2019 2,712,846 $ 8.80 5.62 $ 12,369,413 Vested or expected to vest 2,550,075 5.62 $ 11,627,248 Exercisable at December 31, 2019 2,206,775 4.93 $ 12,151,054 |
Schedule of information related to the equity Plan | December 31, 2019 2018 2017 Intrinsic value of options exercised $ 1,618,615 $ 1,844,909 $ 1,342,794 Cash received from option exercise $ 1,626,113 $ 2,667,305 $ 1,368,673 Tax benefit realized from option exercises $ 258,037 $ 534,638 $ 547,817 Weighted average fair value of options granted $ 1.91 $ 3.03 $ 2.66 |
Schedule of assumptions used to estimate the fair value of each option grant on the date of grant | December 31, 2019 2018 2017 Expected life in months(1) 72 72 Volatility(1) 24 % 21 % 24 % Weighted average risk-free interest rate(2) 2.23 % 2.88 % 1.94 % Expected dividends(3) 3.95 % 2.64 % 2.78 % (1) (2) (3) |
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, 2019 193,298 $ 11.04 Granted 134,653 $ 12.16 Vested (82,498) $ 12.37 Forfeited or expired (6,000) $ 17.11 Nonvested shares at December 31, 2019 239,453 $ 11.23 |
Benefit Plans (Tables)
Benefit Plans (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Supplemental Retirement Plan | |
Benefit plans | |
Schedule of change in projected benefit obligation | 2019 2018 (Dollars in thousands) Change in projected benefit obligation: Projected benefit obligation at beginning of year $ 26,781 $ 28,510 Projected benefit obligation of SERP agreements acquired from Presidio 2,541 — Service cost 263 249 Actuarial loss (gain) 4,182 (1,885) Interest cost 1,059 947 Benefits paid (1,137) (1,040) Projected benefit obligation at end of year $ 33,689 $ 26,781 Amounts recognized in accumulated other comprehensive loss: Net actuarial loss $ 9,670 $ 5,672 |
Schedule of weighted-average assumptions used to determine the benefit obligation | 2019 2018 Discount rate 3.01 % 4.03 % Rate of compensation increase N/A N/A |
Schedule of estimated benefit payments over the next ten years, which reflect anticipated future events, service and other assumptions | Estimated Benefit Year Payments (Dollars in thousands) 2020 $ 1,509 2021 1,717 2022 1,863 2023 1,974 2024 2,011 2025 to 2029 11,366 $ 20,440 |
Schedule of components of net periodic benefit cost | 2019 2018 (Dollars in thousands) Components of net periodic benefit cost: Service cost $ 263 $ 249 Interest cost 1,059 947 Amortization of net actuarial loss 184 292 Accelerated benefits for Presidio SERP agreements due to change in control 1,465 — Net periodic benefit cost $ 2,971 $ 1,488 Amount recognized in other comprehensive income $ 2,847 $ 1,577 |
Schedule of assumption used to determine the net periodic benefit cost | 2019 2018 Discount rate 4.03 % 3.38 % Rate of compensation increase N/A N/A |
Split-Dollar Life Insurance Benefit Plan | |
Benefit plans | |
Schedule of change in projected benefit obligation | December 31, December 31, 2019 2018 (Dollars in thousands) Change in projected benefit obligation: Projected benefit obligation at beginning of year $ 6,903 $ 6,711 Interest cost 278 227 Actuarial loss (gain) 1,017 (35) Projected benefit obligation at end of period $ 8,198 $ 6,903 |
Schedule of amounts recognized in accumulated other comprehensive loss | December 31, December 31, 2019 2018 (Dollars in thousands) Net actuarial loss $ 3,776 $ 2,573 Prior transition obligation 1,059 1,149 Accumulated other comprehensive loss $ 4,835 $ 3,722 |
Schedule of weighted-average assumptions used to determine the benefit obligation | 2019 2018 Discount rate 3.01 % 4.03 % |
Schedule of components of net periodic benefit cost | 2019 2018 (Dollars in thousands) Amortization of prior transition obligation $ (96) $ (65) Interest cost 278 227 Net periodic benefit cost $ 182 $ 162 Amount recognized in other comprehensive income $ 1,113 $ (30) |
Schedule of assumption used to determine the net periodic benefit cost | 2019 2018 Discount rate 4.03 % 3.38 % |
Fair Value (Tables)
Fair Value (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
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 December 31, 2019 Available-for-sale securities: Agency mortgage-backed securities $ 284,361 — $ 284,361 — U.S. Treasury 120,464 120,464 — — I/O strip receivables 503 — 503 — Assets at December 31, 2018 Available-for-sale securities: Agency mortgage-backed securities $ 302,854 — $ 302,854 — U.S. Treasury 148,753 148,753 — — U.S. Government sponsored entities 7,436 — 7,436 — I/O strip receivables 568 — 568 — |
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 December 31, 2019 Impaired loans - held-for-investment: Commercial $ 862 — — $ 862 $ 862 — — $ 862 Assets at December 31, 2018 Impaired loans - held-for-investment: Commercial $ 702 — — $ 702 $ 702 — — $ 702 |
Schedule of impaired loans held-for-investment and impaired loans held-for-investment carried at fair value | December 31, 2019 December 31, 2018 (Dollars in thousands) Impaired loans held-for-investment: Book value of impaired loans held-for-investment carried at fair value $ 2,697 $ 7,646 Book value of impaired loans held-for-investment carried at cost 7,567 7,494 Total impaired loans held-for-investment $ 10,264 $ 15,140 Impaired loans held-for-investment carried at fair value: Book value of impaired loans held-for-investment carried at fair value $ 2,697 $ 7,646 Specific valuation allowance (1,835) (6,944) Impaired loans held-for-investment carried at fair value, net $ 862 $ 702 |
Schedule of quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis | December 31, 2019 Valuation Unobservable Range Fair Value Techniques Inputs (Weighted Average) (Dollars in thousands) Impaired loans - held-for-investment: Commercial $ 862 Market Approach Discount adjustment for differences between comparable sales Less than 1% December 31, 2018 Valuation Unobservable Range Fair Value Techniques Inputs (Weighted Average) (Dollars in thousands) Impaired loans - held-for-investment: Commercial $ 702 Market Approach Discount adjustment for differences between comparable sales 0% to 1% |
Schedule of carrying amounts and estimated fair values of financial instruments | The carrying amounts and estimated fair values of financial instruments at December 31, 2019 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 $ 457,370 $ 457,370 $ — $ — $ 457,370 Securities available-for-sale 404,825 120,464 284,361 — 404,825 Securities held-to-maturity 366,560 — 368,107 — 368,107 Loans (including loans held-for-sale), net 2,511,611 — 1,052 2,512,277 2,513,329 FHLB stock, FRB stock, and other investments 29,842 — — — N/A Accrued interest receivable 10,915 446 2,218 8,251 10,915 I/O strips receivables 503 — 503 — 503 Liabilities: Time deposits $ 168,034 $ — $ 158,704 $ — $ 158,704 Other deposits 3,246,734 — 3,246,734 — 3,246,734 Subordinated debt 39,554 — 40,404 — 40,404 Accrued interest payable 707 — 707 — 707 The carrying amounts and estimated fair values of financial instruments at December 31, 2018 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 $ 164,568 $ 164,568 $ — $ — $ 164,568 Securities available-for-sale 459,043 148,753 310,290 — 459,043 Securities held-to-maturity 377,198 — 366,175 — 366,175 Loans (including loans held-for-sale), net 1,861,206 — 2,649 1,826,654 1,829,303 FHLB stock, FRB stock, and other investments 25,216 — — — N/A Accrued interest receivable 9,577 597 2,274 6,706 9,577 I/O strips receivables 568 — 568 — 568 Liabilities: Time deposits $ 147,560 $ — $ 147,916 $ — $ 147,916 Other deposits 2,489,972 — 2,489,972 — 2,489,972 Subordinated debt 39,369 — 38,969 — 38,969 Accrued interest payable 497 — 497 — 497 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies | |
Schedule of commitments to extend credit | December 31, 2019 2018 Fixed Variable Fixed Variable Rate Rate Total Rate Rate Total (Dollars in thousands) Unused lines of credit and commitments to make loans $ 147,372 $ 951,206 $ 1,098,578 $ 130,871 $ 593,839 $ 724,710 Standby letters of credit 11,445 10,615 22,060 2,770 12,899 15,669 $ 158,817 $ 961,821 $ 1,120,638 $ 133,641 $ 606,738 $ 740,379 |
Shareholders' Equity and Earn_2
Shareholders' Equity and Earnings Per Share (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Shareholders' Equity and Earnings Per Share. | |
Schedule of reconciliation of factors used in computing basic and diluted earnings per common share | Year Ended December 31, 2019 2018 2017 (Dollars in thousands, except per share amounts) Net income $ 40,461 $ 35,331 $ $ 23,828 Weighted average common shares outstanding for basic earnings per common share 46,684,384 41,469,211 38,095,250 Dilutive potential common shares 1,221,845 713,728 515,565 Shares used in computing diluted earnings per common share 47,906,229 42,182,939 38,610,815 Basic earnings per share $ $ $ 0.63 Diluted earnings per share $ $ $ 0.62 |
Capital Requirements (Tables)
Capital Requirements (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
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 December 31, 2019 Total Capital $ 457,158 14.6 % $ 329,306 10.5 % (to risk-weighted assets) Tier 1 Capital $ 393,432 12.5 % $ 266,581 8.5 % (to risk-weighted assets) Common Equity Tier 1 Capital $ 393,432 12.5 % $ 219,538 7.0 % (to risk-weighted assets) Tier 1 Capital $ 393,432 9.7 % $ 161,677 4.0 % (to average assets) (1) Required For Capital Adequacy Purposes Actual Under Basel III Amount Ratio Amount Ratio (1) (Dollars in thousands) As of December 31, 2018 Total Capital $ 344,597 15.0 % $ 227,514 9.875 % (to risk-weighted assets) Tier 1 Capital $ 276,675 12.0 % $ 181,435 7.875 % (to risk-weighted assets) Common Equity Tier 1 Capital $ 276,675 12.0 % $ 146,876 6.375 % (to risk-weighted assets) Tier 1 Capital $ 276,675 8.9 % $ 124,726 4.000 % (to average assets) (1) |
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 PCA Regulatory Purposes Actual Requirements Under Basel III Amount Ratio Amount Ratio Amount Ratio (1) (Dollars in thousands) As of December 31, 2019 Total Capital $ 435,757 13.9 % $ 313,485 10.0 % $ 329,159 10.5 % (to risk-weighted assets) Tier 1 Capital $ 411,585 13.1 % $ 250,788 8.0 % $ 266,462 8.5 % (to risk-weighted assets) Common Equity Tier 1 Capital $ 411,585 13.1 % $ 203,765 6.5 % $ 219,439 7.0 % (to risk-weighted assets) Tier 1 Capital $ 411,585 10.2 % $ 202,013 5.0 % $ 161,611 4.0 % (to average assets) (1) Required For Capital To Be Well-Capitalized Adequacy Under Basel III PCA Regulatory Purposes Actual Requirements Under Basel III Amount Ratio Amount Ratio Amount Ratio (1) (Dollars in thousands) As of December 31, 2018 Total Capital $ 322,283 14.0 % $ 230,275 10.0 % $ 227,397 9.875 % (to risk-weighted assets) Tier 1 Capital $ 293,730 12.8 % $ 184,220 8.0 % $ 181,342 7.875 % (to risk-weighted assets) Common Equity Tier 1 Capital $ 293,730 12.8 % $ 149,679 6.5 % $ 146,800 6.375 % (to risk-weighted assets) Tier 1 Capital $ 293,730 9.4 % $ 155,832 5.0 % $ 124,666 4.000 % (to average assets) (1) |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Revenue Recognition | |
Schedule of noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606 | Year Ended December 31, 2019 2018 (Dollars in thousands) Noninterest Income In-scope of Topic 606: Service charges and fees on deposit accounts $ 4,510 $ 4,113 Noninterest Income Out-of-scope of Topic 606 5,734 5,461 Total noninterest income $ 10,244 $ 9,574 |
Noninterest Expense (Tables)
Noninterest Expense (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Noninterest Expense | |
Schedule of noninterest expense | Year Ended December 31, 2019 2018 2017 (Dollars in thousands) Salaries and employee benefits $ 50,754 $ 43,762 $ 35,719 Occupancy and equipment 6,647 5,411 4,578 Professional fees 3,259 1,969 2,982 Data processing 2,890 1,978 1,483 Amortization of intangible assets 2,739 1,943 1,361 Software subscriptions 2,397 2,343 1,831 Insurance expense 1,864 1,685 1,529 Other 14,348 16,430 11,255 Total noninterest expense $ 84,898 $ 75,521 $ 60,738 The following table presents the merger-related costs by category for the periods indicated: For the Year Ended December 31, December 31, December 31, 2019 2018 2017 (Dollars in thousands) Salaries and employee benefits $ 6,580 $ 3,569 $ — Other 4,500 5,598 671 Total merger-related costs $ 11,080 $ 9,167 $ 671 |
Business Segment Information (T
Business Segment Information (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Business Segment Information | |
Schedule of information by operating segment | Year Ended December 31, 2019 Banking (1) Factoring Consolidated (Dollars in thousands) Interest income $ 130,971 $ 11,688 $ 142,659 Intersegment interest allocations 1,182 (1,182) — Total interest expense 10,847 — 10,847 Net interest income 121,306 10,506 131,812 Provision for loan losses 517 329 846 Net interest income after provision 120,789 10,177 130,966 Noninterest income 9,643 601 10,244 Noninterest expense (2) 78,159 6,739 84,898 Intersegment expense allocations 547 (547) — Income before income taxes 52,820 3,492 56,312 Income tax expense 14,819 1,032 15,851 Net income $ 38,001 $ 2,460 $ 40,461 Total assets $ 4,045,801 $ 63,662 $ 4,109,463 Loans, net of deferred fees $ 2,487,864 $ 45,980 $ 2,533,844 Goodwill $ 154,376 $ 13,044 $ 167,420 (1) (2) Year Ended December 31, 2018 Banking (1) Factoring Consolidated (Dollars in thousands) Interest income $ 115,147 $ 14,698 $ 129,845 Intersegment interest allocations 1,856 (1,856) — Total interest expense 7,822 — 7,822 Net interest income 109,181 12,842 122,023 Provision for loan losses 7,224 197 7,421 Net interest income after provision 101,957 12,645 114,602 Noninterest income 8,662 912 9,574 Noninterest expense (2) 69,164 6,357 75,521 Intersegment expense allocations 753 (753) — Income before income taxes 42,208 6,447 48,655 Income tax expense 11,418 1,906 13,324 Net income $ 30,790 $ 4,541 $ 35,331 Total assets $ 3,028,721 $ 67,841 $ 3,096,562 Loans, net of deferred fees $ 1,832,815 $ 53,590 $ 1,886,405 Goodwill $ 70,709 $ 13,044 $ 83,753 (1) Includes the holding company’s results of operations. (2) The banking segment’s noninterest expense includes acquisition costs of $9,167,000. Year Ended December 31, 2017 Banking (1) Factoring Consolidated (Dollars in thousands) Interest income $ 95,027 $ 11,884 $ 106,911 Intersegment interest allocations 1,126 (1,126) — Total interest expense 5,387 — 5,387 Net interest income 90,766 10,758 101,524 Provision (credit) for loan losses 102 (3) 99 Net interest income after provision 90,664 10,761 101,425 Noninterest income 8,559 1,053 9,612 Noninterest expense (2) 53,860 6,878 60,738 Intersegment expense allocations 528 (528) — Income before income taxes 45,891 4,408 50,299 Income tax expense (3) 24,266 2,205 26,471 Net income $ 21,625 $ 2,203 $ 23,828 Total assets $ 2,780,286 $ 63,166 $ 2,843,452 Loans, net of deferred fees $ 1,533,841 $ 48,826 $ 1,582,667 Goodwill $ 32,620 $ 13,044 $ 45,664 (1) Includes the holding company’s results of operations. (2) (3) |
Parent Company only Condensed_2
Parent Company only Condensed Financial Information (Tables) - HCC (Parent) | 12 Months Ended |
Dec. 31, 2019 | |
Condensed financial statements | |
Schedule of condensed balance sheets | Condensed Balance Sheets December 31, 2019 2018 (Dollars in thousands) Assets Cash and cash equivalents $ 20,260 $ 21,358 Investment in subsidiary bank 594,868 384,516 Other assets 1,761 1,194 Total assets $ 616,889 $ 407,068 Liabilities and Shareholders' Equity Subordinated debt, net of issuance costs 39,554 39,369 Other liabilities 627 233 Shareholders' equity 576,708 367,466 Total liabilities and shareholders' equity $ 616,889 $ 407,068 |
Schedule of condensed statements of income | Condensed Statements of Operations Year Ended December 31, 2019 2018 2017 (Dollars in thousands) Dividend from subsidiary bank $ 22,500 $ 17,000 $ 16,000 Other income 121 — 114 Interest expense (2,314) (2,315) (1,394) Other expenses (3,084) (3,030) (2,270) Income before income taxes and equity in net income of subsidiary bank 17,223 11,655 12,450 Equity in undistributed net income of subsidiary bank 21,757 22,161 10,078 Income tax benefit 1,481 1,515 1,300 Net income $ 40,461 $ 35,331 $ 23,828 |
Schedule of condensed statements of cash flows | Condensed Statements of Cash Flows Year Ended December 31, 2019 2018 2017 (Dollars in thousands) Cash flows from operating activities: Net Income $ 40,461 $ 35,331 $ 23,828 Adjustments to reconcile net income to net cash provided by operations: Amortization of restricted stock awards, net 1,283 1,109 912 Equity in undistributed net income of subsidiary bank (21,757) (22,161) (10,078) Net change in other assets and liabilities 12 (64) 224 Net cash provided by operating activities 19,999 14,215 14,886 Cash flows from financing activities: Equity investment in subsidiary bank — — (20,000) Payment of cash dividends (22,723) (18,464) (15,238) Proceeds from issuance of subordinated debt, net of issuance costs — — 39,073 Proceeds from exercise of stock options 1,626 2,667 1,368 Net cash provided by (used in) financing activities (21,097) (15,797) 5,203 Net increase (decrease) in cash and cash equivalents (1,098) (1,582) 20,089 Cash and cash equivalents, beginning of year 21,358 22,940 2,851 Cash and cash equivalents, end of year $ 20,260 $ 21,358 $ 22,940 |
Quarterly Financial Data (Una_2
Quarterly Financial Data (Unaudited) (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Quarterly Financial Data (Unaudited) | |
Schedule of the Company's selected unaudited quarterly financial data | Quarter Ended 12/31/2019 9/30/2019 6/30/2019 3/31/2019 (Dollars in thousands, except per share amounts) Interest income $ 42,471 $ 33,250 $ 33,489 $ 33,449 Interest expense 3,242 2,625 2,573 2,407 Net interest income 39,229 30,625 30,916 31,042 Provision (credit) for loan losses 3,223 (576) (740) (1,061) Net interest income after provision for loan losses 36,006 31,201 31,656 32,103 Noninterest income 2,393 2,618 2,765 2,468 Noninterest expense (1) 30,626 17,909 18,445 17,918 Income before income taxes 7,773 15,910 15,976 16,653 Income tax expense 2,088 4,633 4,623 4,507 Net income $ 5,685 $ 11,277 $ 11,353 $ 12,146 Earnings per common share Basic $ 0.10 $ 0.26 $ 0.26 $ 0.28 Diluted $ 0.10 $ 0.26 $ 0.26 $ 0.28 (1) Includes $9,879,000, $661,000, and $540,000 pre-tax acquisition costs in the fourth, third, and second quarters of 2019, respectively, related to the Presidio merger. Quarter Ended 12/31/2018 9/30/2018 6/30/2018 3/31/2018 (Dollars in thousands, except per share amounts) Interest income $ 35,378 $ 34,610 $ 31,980 $ 27,877 Interest expense 2,318 2,159 1,816 1,529 Net interest income 33,060 32,451 30,164 26,348 Provision for loan losses 142 (425) 7,198 506 Net interest income after provision for loan losses 32,918 32,876 22,966 25,842 Noninterest income 2,393 2,206 2,780 2,195 Noninterest expense (1) 16,941 17,728 24,862 15,990 Income before income taxes 18,370 17,354 884 12,047 Income tax expense 5,138 4,979 (31) 3,238 Net income $ 13,232 $ 12,375 $ 915 $ 8,809 Earnings per common share Basic $ 0.31 $ 0.29 $ 0.02 $ 0.23 Diluted $ 0.30 $ 0.28 $ 0.02 $ 0.23 (1) Includes $139,000, $199,000, $8,214,000, and $615,000 pre-tax acquisition costs in the fourth, third, second and first quarters of 2018, respectively, related to the Tri-Valley and United American mergers. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies - Cash and Cash Equivalents (Details) | 12 Months Ended |
Dec. 31, 2019 | |
Cash and Cash Equivalents | |
Period for which federal funds are sold and purchased | 1 day |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Acquired Loans (Details) $ in Thousands | Dec. 31, 2019USD ($)loan | Dec. 31, 2018USD ($)loan |
Summary of Significant Accounting Policies | ||
Number of loan classified as PCI loan | loan | 0 | 0 |
Total with an allowance recorded, Allowance for Loan Losses Allocated | $ | $ 1,835 | $ 6,944 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Premises and Equipment (Details) | 12 Months Ended |
Dec. 31, 2019building | |
Premises and Equipment | |
Number of buildings owned | 1 |
Building | |
Premises and Equipment | |
Estimated useful life | 40 years |
Furniture | Minimum | |
Premises and Equipment | |
Estimated useful life | 5 years |
Furniture | Maximum | |
Premises and Equipment | |
Estimated useful life | 15 years |
Equipment | Minimum | |
Premises and Equipment | |
Estimated useful life | 5 years |
Equipment | Maximum | |
Premises and Equipment | |
Estimated useful life | 15 years |
Leasehold improvements | Minimum | |
Premises and Equipment | |
Estimated useful life | 5 years |
Leasehold improvements | Maximum | |
Premises and Equipment | |
Estimated useful life | 15 years |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Goodwill and Other Intangible Assets (Details) | May 04, 2018 | Apr. 06, 2018 | Oct. 31, 2019 | May 31, 2018 | Apr. 30, 2018 | Aug. 31, 2015 | Nov. 30, 2014 |
United American Bank | |||||||
Goodwill and Other Intangible Assets | |||||||
Useful life, amortization period | 3 years | ||||||
Tri Valley Bank | |||||||
Goodwill and Other Intangible Assets | |||||||
Useful life, amortization period | 11 years | ||||||
Core deposit | Focus | |||||||
Goodwill and Other Intangible Assets | |||||||
Useful life, amortization period | 10 years | ||||||
Core deposit | United American Bank | |||||||
Goodwill and Other Intangible Assets | |||||||
Useful life, amortization period | 10 years | ||||||
Core deposit | Tri Valley Bank | |||||||
Goodwill and Other Intangible Assets | |||||||
Useful life, amortization period | 10 years | ||||||
Core deposit | Presidio bank | |||||||
Goodwill and Other Intangible Assets | |||||||
Useful life, amortization period | 10 years | ||||||
Below or Above market-value lease | United American Bank | |||||||
Goodwill and Other Intangible Assets | |||||||
Useful life, amortization period | 3 years | ||||||
Below or Above market-value lease | Tri Valley Bank | |||||||
Goodwill and Other Intangible Assets | |||||||
Useful life, amortization period | 11 years | ||||||
Below or Above market-value lease | Presidio bank | |||||||
Goodwill and Other Intangible Assets | |||||||
Useful life, amortization period | 60 months | ||||||
Customer relationship and brokered relationship | BVF/CSNK | |||||||
Goodwill and Other Intangible Assets | |||||||
Useful life, amortization period | 10 years |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies - Foreclosed Assets (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Foreclosed Assets | ||
Foreclosed assets | $ 0 | $ 0 |
Summary of Significant Accoun_8
Summary of Significant Accounting Policies - Income Taxes (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Income Taxes | |||
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate | 21.00% | 21.00% | 35.00% |
ASU 2016-09 | |||
Income Taxes | |||
Reduction to income tax expenses | $ 146,000 | $ 424,000 | $ 146,000 |
Summary of Significant Accoun_9
Summary of Significant Accounting Policies - Segment Reporting (Details) | 12 Months Ended |
Dec. 31, 2019segmentcustomer | |
Segment Reporting | |
Number of customers accounting for more than 10 percent of revenue for HBC or the Company | customer | 0 |
Number of Reportable Segments | segment | 2 |
Summary of Significant Accou_10
Summary of Significant Accounting Policies - Adoption of New Accounting Standards (Details) - USD ($) | Jan. 01, 2020 | Dec. 31, 2019 |
Operating Lease - Liabilities | $ 13,032,000 | |
Maximum | ||
Increase in allowance for credit losses for loans | $ 12,000,000 | |
ASU 2016-02 | ||
Operating Lease - ROU assets | 12,200,000 | |
Operating Lease - Liabilities | $ 13,000,000 |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Income (''AOCI'') - Changes in AOCI by Component (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Changes in AOCI by Component | |||
Balance at the beginning of the period, net of taxes | $ (12,381) | ||
Net current period other comprehensive income (loss), net of taxes | 2,603 | $ (3,129) | $ (319) |
Balance at the end of the period, net of taxes | (9,778) | (12,381) | |
Accumulated Other Comprehensive Income / (Loss) | |||
Changes in AOCI by Component | |||
Balance at the beginning of the period, net of taxes | (12,381) | (9,252) | |
Other comprehensive income (loss) before reclassification, net of taxes | 3,053 | (3,071) | |
Amounts reclassified from other comprehensive income (loss), net of taxes | (450) | (58) | |
Net current period other comprehensive income (loss), net of taxes | 2,603 | (3,129) | (319) |
Balance at the end of the period, net of taxes | (9,778) | (12,381) | (9,252) |
Unrealized Gains (Losses) on Available-for-Sale Securities and I/O Strips | |||
Changes in AOCI by Component | |||
Balance at the beginning of the period, net of taxes | (5,007) | (362) | |
Other comprehensive income (loss) before reclassification, net of taxes | 7,075 | (4,458) | |
Amounts reclassified from other comprehensive income (loss), net of taxes | (466) | (187) | |
Net current period other comprehensive income (loss), net of taxes | 6,609 | (4,645) | |
Balance at the end of the period, net of taxes | 1,602 | (5,007) | (362) |
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 | 344 | 375 | |
Amounts reclassified from other comprehensive income (loss), net of taxes | (46) | (31) | |
Net current period other comprehensive income (loss), net of taxes | (46) | (31) | |
Balance at the end of the period, net of taxes | 298 | 344 | 375 |
Defined Benefit Pension Plan Items | |||
Changes in AOCI by Component | |||
Balance at the beginning of the period, net of taxes | (7,718) | (9,265) | |
Other comprehensive income (loss) before reclassification, net of taxes | (4,022) | 1,387 | |
Amounts reclassified from other comprehensive income (loss), net of taxes | 62 | 160 | |
Net current period other comprehensive income (loss), net of taxes | (3,960) | 1,547 | |
Balance at the end of the period, net of taxes | $ (11,678) | $ (7,718) | $ (9,265) |
Accumulated Other Comprehensi_4
Accumulated Other Comprehensive Income (''AOCI'') - Amount Reclassified from AOCI (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Amount Reclassified from AOCI | |||||||||||
Gain (loss) on sales of securities | $ 661 | $ 266 | $ (6) | ||||||||
Interest income on taxable securities | 15,836 | 15,211 | 13,724 | ||||||||
Income tax expense | $ (2,088) | $ (4,633) | $ (4,623) | $ (4,507) | $ (5,138) | $ (4,979) | $ 31 | $ (3,238) | (15,851) | (13,324) | (26,471) |
Net income | 5,685 | 11,277 | 11,353 | 12,146 | 13,232 | 12,375 | 915 | 8,809 | 40,461 | 35,331 | 23,828 |
Income before income tax | $ 7,773 | $ 15,910 | $ 15,976 | $ 16,653 | $ 18,370 | $ 17,354 | $ 884 | $ 12,047 | 56,312 | 48,655 | 50,299 |
Unrealized Gains (Losses) on Available-for-Sale Securities and I/O Strips | |||||||||||
Amount Reclassified from AOCI | |||||||||||
Net of tax | 466 | 187 | |||||||||
Unrealized Gains (Losses) on Available-for-Sale Securities and I/O Strips | Amount Reclassified from AOCI | |||||||||||
Amount Reclassified from AOCI | |||||||||||
Gain (loss) on sales of securities | 661 | 266 | (6) | ||||||||
Income tax expense | (195) | (79) | 3 | ||||||||
Net income | 466 | 187 | (3) | ||||||||
Unamortized Unrealized Gain on Available-for-Sale Securities Reclassified to Held-to-Maturity | |||||||||||
Amount Reclassified from AOCI | |||||||||||
Net of tax | 46 | 31 | |||||||||
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 | 65 | 44 | 51 | ||||||||
Income tax expense | (19) | (13) | (22) | ||||||||
Net income | 46 | 31 | 29 | ||||||||
Defined Benefit Pension Plan Items | |||||||||||
Amount Reclassified from AOCI | |||||||||||
Net of tax | (62) | (160) | |||||||||
Defined Benefit Pension Plan Items | Amount Reclassified from AOCI | |||||||||||
Amount Reclassified from AOCI | |||||||||||
Other noninterest expense | (88) | (227) | (205) | ||||||||
Income tax benefit | 26 | 67 | 86 | ||||||||
Net of tax | (62) | (160) | (119) | ||||||||
Prior transition obligation | Amount Reclassified from AOCI | |||||||||||
Amount Reclassified from AOCI | |||||||||||
Other noninterest expense | 96 | 65 | 71 | ||||||||
Actuarial losses | Amount Reclassified from AOCI | |||||||||||
Amount Reclassified from AOCI | |||||||||||
Other noninterest expense | (184) | (292) | (276) | ||||||||
Accumulated Other Comprehensive Income / (Loss) | |||||||||||
Amount Reclassified from AOCI | |||||||||||
Net of tax | 450 | 58 | |||||||||
Accumulated Other Comprehensive Income / (Loss) | Amount Reclassified from AOCI | |||||||||||
Amount Reclassified from AOCI | |||||||||||
Net of tax | $ 450 | $ 58 | $ (93) |
Securities - Amortized Cost and
Securities - Amortized Cost and Estimated Fair Value of Securities - Securities Available-for-sale (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Securities available-for-sale: | ||
Amortized Cost | $ 402,537 | $ 466,779 |
Gross Unrealized Gains | 2,459 | 1,032 |
Gross Unrealized (Losses) | (171) | (8,768) |
Total | 404,825 | 459,043 |
Agency mortgage-backed securities | ||
Securities available-for-sale: | ||
Amortized Cost | 283,598 | 311,523 |
Gross Unrealized Gains | 934 | 98 |
Gross Unrealized (Losses) | (171) | (8,767) |
Total | 284,361 | 302,854 |
U.S. Treasury | ||
Securities available-for-sale: | ||
Amortized Cost | 118,939 | 147,823 |
Gross Unrealized Gains | 1,525 | 930 |
Total | $ 120,464 | 148,753 |
U.S. Government sponsored entities | ||
Securities available-for-sale: | ||
Amortized Cost | 7,433 | |
Gross Unrealized Gains | 4 | |
Gross Unrealized (Losses) | (1) | |
Total | $ 7,436 |
Securities - Amortized Cost a_2
Securities - Amortized Cost and Estimated Fair Value of Securities - Securities Held-to-maturity (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Securities held-to-maturity: | ||
Amortized Cost | $ 366,560 | $ 377,198 |
Gross Unrealized Gains | 2,519 | 371 |
Gross Unrealized (Losses) | (972) | (11,394) |
Estimated Fair Value | 368,107 | 366,175 |
Agency mortgage-backed securities | ||
Securities held-to-maturity: | ||
Amortized Cost | 285,344 | 291,241 |
Gross Unrealized Gains | 1,206 | 59 |
Gross Unrealized (Losses) | (968) | (9,153) |
Estimated Fair Value | 285,582 | 282,147 |
Municipals - exempt from Federal tax | ||
Securities held-to-maturity: | ||
Amortized Cost | 81,216 | 85,957 |
Gross Unrealized Gains | 1,313 | 312 |
Gross Unrealized (Losses) | (4) | (2,241) |
Estimated Fair Value | $ 82,525 | $ 84,028 |
Securities - Securities with Un
Securities - Securities with Unrealized Losses - Securities Available-for-sale (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Available-for-sale, Fair Value | ||
Less Than 12 Months | $ 100,816 | $ 7,842 |
12 Months or More | 27,534 | 281,082 |
Total | 128,350 | 288,924 |
Available-for-sale, Unrealized (Losses) | ||
Less Than 12 Months | (105) | (22) |
12 Months or More | (66) | (8,746) |
Total | (171) | (8,768) |
Agency mortgage-backed securities | ||
Available-for-sale, Fair Value | ||
Less Than 12 Months | 100,816 | 3,868 |
12 Months or More | 27,534 | 281,082 |
Total | 128,350 | 284,950 |
Available-for-sale, Unrealized (Losses) | ||
Less Than 12 Months | (105) | (21) |
12 Months or More | (66) | (8,746) |
Total | $ (171) | (8,767) |
U.S. Government sponsored entities | ||
Available-for-sale, Fair Value | ||
Less Than 12 Months | 3,974 | |
Total | 3,974 | |
Available-for-sale, Unrealized (Losses) | ||
Less Than 12 Months | (1) | |
Total | $ (1) |
Securities - Securities with _2
Securities - Securities with Unrealized Losses - Securities Held-to-maturity (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Held-to-maturity, Fair Value | ||
Less Than 12 Months | $ 51,616 | $ 21,107 |
12 Months or More | 88,128 | 313,218 |
Total | 139,744 | 334,325 |
Held-to-maturity, Unrealized (Losses) | ||
Less Than 12 Months | (182) | (130) |
12 Months or More | (790) | (11,264) |
Total | (972) | (11,394) |
Agency mortgage-backed securities | ||
Held-to-maturity, Fair Value | ||
Less Than 12 Months | 50,060 | 16,088 |
12 Months or More | 88,128 | 255,917 |
Total | 138,188 | 272,005 |
Held-to-maturity, Unrealized (Losses) | ||
Less Than 12 Months | (178) | (103) |
12 Months or More | (790) | (9,050) |
Total | (968) | (9,153) |
Municipals - exempt from Federal tax | ||
Held-to-maturity, Fair Value | ||
Less Than 12 Months | 1,556 | 5,019 |
12 Months or More | 57,301 | |
Total | 1,556 | 62,320 |
Held-to-maturity, Unrealized (Losses) | ||
Less Than 12 Months | (4) | (27) |
12 Months or More | (2,214) | |
Total | $ (4) | $ (2,241) |
Securities - Additional Informa
Securities - Additional Information (Details) | 12 Months Ended | |
Dec. 31, 2019USD ($)itemsecurity | Dec. 31, 2018USD ($) | |
Additional Information | ||
The number of holdings of securities of any one issuer other than the U.S. Government and its sponsored entities | security | 0 | |
Holdings of securities as percentage of shareholders' equity, considered as threshold for disclosure purpose | 10.00% | |
Number of securities held | security | 463 | |
Number of available for sale securities held | item | 141 | |
Number of held to maturity securities held | item | 322 | |
Number of securities with fair values below amortized cost | security | 86 | |
Total unrealized loss for securities 12 months or more | $ 856,000 | |
Available-for-sale securities carried with an unrealized loss for over 12 months | 27,534,000 | $ 281,082,000 |
Held-to-maturity securities carried with an unrealized loss for over 12 months | $ 88,128,000 | 313,218,000 |
Municipals - exempt from Federal tax | ||
Additional Information | ||
Held-to-maturity securities carried with an unrealized loss for over 12 months | $ 57,301,000 |
Securities - Proceeds from Sale
Securities - Proceeds from Sales of Securities and the Resulting Gains and Losses (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Proceeds from Sales of Securities and the Resulting Gains and Losses | |||
Proceeds | $ 167,551 | $ 94,291 | $ 6,536 |
Gross gains | 1,094 | 1,243 | |
Gross losses | $ (433) | $ (977) | $ (6) |
Securities - Amortized Cost a_3
Securities - Amortized Cost and Fair Value of Debt Securities by Contractual Maturity – Securities Available-for-sale (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Available-for-sale, Amortized Cost | ||
Due after 3 months through one year | $ 54,649 | |
Due after one year through five years | 64,290 | |
Agency mortgage-backed securities | 283,598 | |
Total | 402,537 | $ 466,779 |
Available-for-sale, Estimated Fair Value | ||
Due after 3 months through one year | 55,085 | |
Due after one year through five years | 65,379 | |
Agency mortgage-backed securities | 284,361 | |
Total | $ 404,825 | $ 459,043 |
Securities - Amortized Cost a_4
Securities - Amortized Cost and Fair Value of Debt Securities by Contractual Maturity – Securities Held-to-maturity (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Held-to-maturity, Amortized Cost | ||
Due 3 months or less | $ 125 | |
Due after 3 months through one year | 1,449 | |
Due after one year through five years | 5,206 | |
Due after five years through ten years | 31,698 | |
Due after ten years | 42,738 | |
Agency mortgage-backed securities | 285,344 | |
Total | 366,560 | $ 377,198 |
Held-to-maturity, Estimated Fair Value | ||
Due 3 months or less | 125 | |
Due after 3 months through one year | 1,457 | |
Due after one year through five years | 5,358 | |
Due after five years through ten years | 32,279 | |
Due after ten years | 43,306 | |
Agency mortgage-backed securities | 285,582 | |
Total | $ 368,107 | $ 366,175 |
Securities - Securities Pledged
Securities - Securities Pledged to Secure Public Deposits and for Other Purposes (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Securities Pledged to Secure Public Deposits and for Other Purposes | ||
Amortized cost of securities pledged to secure public deposits and for other purposes as required or permitted by law or contract | $ 32,773,000 | $ 36,229,000 |
Loans -Loans Balance (Details)
Loans -Loans Balance (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Loans held-for-investment: | ||||
Total loan balance | $ 2,534,163 | $ 1,886,732 | ||
Deferred loan fees, net | (319) | (327) | ||
Loans, net of deferred fees | 2,533,844 | 1,886,405 | $ 1,582,667 | |
Allowance for loan losses | (23,285) | (27,848) | (19,658) | $ (19,089) |
Loans, net | 2,510,559 | 1,858,557 | ||
Commercial | ||||
Loans held-for-investment: | ||||
Total loan balance | 597,763 | |||
Commercial | ||||
Loans held-for-investment: | ||||
Total loan balance | 631,547 | 597,763 | ||
Allowance for loan losses | (10,453) | (17,061) | (10,608) | (10,656) |
Real estate | ||||
Loans held-for-investment: | ||||
Total loan balance | 1,882,734 | 1,276,516 | ||
Allowance for loan losses | (12,750) | (10,671) | (8,950) | (8,327) |
Real estate | CRE | ||||
Loans held-for-investment: | ||||
Total loan balance | 1,510,592 | 994,067 | ||
Real estate | Land and construction | ||||
Loans held-for-investment: | ||||
Total loan balance | 150,634 | 122,358 | ||
Real estate | Home equity | ||||
Loans held-for-investment: | ||||
Total loan balance | 175,252 | 109,112 | ||
Real estate | Residential mortgages | ||||
Loans held-for-investment: | ||||
Total loan balance | 46,256 | 50,979 | ||
Consumer | ||||
Loans held-for-investment: | ||||
Total loan balance | 19,882 | 12,453 | ||
Allowance for loan losses | $ (82) | $ (116) | $ (100) | $ (106) |
Loans - Additional Information
Loans - Additional Information (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Loans | |||||||||||
30 days or greater past due nonaccrual loans | $ 15,315,000 | $ 8,873,000 | $ 15,315,000 | $ 8,873,000 | |||||||
Provision for loan losses | $ 3,223,000 | $ (576,000) | $ (740,000) | $ (1,061,000) | $ 142,000 | $ (425,000) | $ 7,198,000 | $ 506,000 | 846,000 | 7,421,000 | $ 99,000 |
Net (charge-offs) recoveries | $ (5,409,000) | $ 769,000 | $ 470,000 |
Loans - Changes in the Allowanc
Loans - Changes in the Allowance for Loan Losses (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Changes in the Allowance for Loan Losses | |||||||||||
Beginning of period balance | $ 27,848 | $ 19,658 | $ 27,848 | $ 19,658 | $ 19,089 | ||||||
Charge-offs | (6,623) | (2,026) | (2,239) | ||||||||
Recoveries | 1,214 | 2,795 | 2,709 | ||||||||
Net (charge-offs) recoveries | (5,409) | 769 | 470 | ||||||||
Provision for loan losses | $ 3,223 | $ (576) | $ (740) | (1,061) | $ 142 | $ (425) | $ 7,198 | 506 | 846 | 7,421 | 99 |
End of period balance | 23,285 | 27,848 | 23,285 | 27,848 | 19,658 | ||||||
Commercial | |||||||||||
Changes in the Allowance for Loan Losses | |||||||||||
Beginning of period balance | 17,061 | 10,608 | 17,061 | 10,608 | 10,656 | ||||||
Charge-offs | (6,609) | (2,002) | (2,239) | ||||||||
Recoveries | 1,045 | 2,645 | 1,585 | ||||||||
Net (charge-offs) recoveries | (5,564) | 643 | (654) | ||||||||
Provision for loan losses | (1,044) | 5,810 | 606 | ||||||||
End of period balance | 10,453 | 17,061 | 10,453 | 17,061 | 10,608 | ||||||
Real estate | |||||||||||
Changes in the Allowance for Loan Losses | |||||||||||
Beginning of period balance | 10,671 | 8,950 | 10,671 | 8,950 | 8,327 | ||||||
Recoveries | 169 | 150 | 1,124 | ||||||||
Net (charge-offs) recoveries | 169 | 150 | 1,124 | ||||||||
Provision for loan losses | 1,910 | 1,571 | (501) | ||||||||
End of period balance | 12,750 | 10,671 | 12,750 | 10,671 | 8,950 | ||||||
Consumer | |||||||||||
Changes in the Allowance for Loan Losses | |||||||||||
Beginning of period balance | $ 116 | $ 100 | 116 | 100 | 106 | ||||||
Charge-offs | (14) | (24) | |||||||||
Net (charge-offs) recoveries | (14) | (24) | |||||||||
Provision for loan losses | (20) | 40 | (6) | ||||||||
End of period balance | $ 82 | $ 116 | $ 82 | $ 116 | $ 100 |
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 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
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 | $ 1,835 | $ 6,944 | ||
Allowance for loan losses, Collectively evaluated for impairment | 21,450 | 20,904 | ||
Total allowance balance | 23,285 | 27,848 | $ 19,658 | $ 19,089 |
Loans, Individually evaluated for impairment | 10,264 | 15,140 | ||
Loans, Collectively evaluated for impairment | 2,523,899 | 1,871,592 | ||
Total loan balance | 2,534,163 | 1,886,732 | ||
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 | 1,835 | 6,944 | ||
Allowance for loan losses, Collectively evaluated for impairment | 8,618 | 10,117 | ||
Total allowance balance | 10,453 | 17,061 | 10,608 | 10,656 |
Loans, Individually evaluated for impairment | 4,810 | 9,495 | ||
Loans, Collectively evaluated for impairment | 626,737 | 588,268 | ||
Total loan balance | 631,547 | 597,763 | ||
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, Collectively evaluated for impairment | 12,750 | 10,671 | ||
Total allowance balance | 12,750 | 10,671 | 8,950 | 8,327 |
Loans, Individually evaluated for impairment | 5,454 | 5,645 | ||
Loans, Collectively evaluated for impairment | 1,877,280 | 1,270,871 | ||
Total loan balance | 1,882,734 | 1,276,516 | ||
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 | 82 | 116 | ||
Total allowance balance | 82 | 116 | $ 100 | $ 106 |
Loans, Collectively evaluated for impairment | 19,882 | 12,453 | ||
Total loan balance | $ 19,882 | $ 12,453 |
Loans - Loans Held for Investme
Loans - Loans Held for Investment Individually Evaluated for Impairment by Class of Loans (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Unpaid Principal Balance | ||
Total with no related allowance recorded | $ 7,567 | $ 7,494 |
Total with an allowance recorded | 2,697 | 7,646 |
Total | 10,264 | 15,140 |
Recorded Investment | ||
Total with no related allowance recorded | 7,567 | 7,494 |
Total with an allowance recorded | 2,697 | 7,646 |
Total | 10,264 | 15,140 |
Total with an allowance recorded, Allowance for Loan Losses Allocated | 1,835 | 6,944 |
Commercial | ||
Unpaid Principal Balance | ||
Total with no related allowance recorded | 2,113 | 1,849 |
Total with an allowance recorded | 2,697 | 7,646 |
Recorded Investment | ||
Total with no related allowance recorded | 2,113 | 1,849 |
Total with an allowance recorded | 2,697 | 7,646 |
Total with an allowance recorded, Allowance for Loan Losses Allocated | 1,835 | 6,944 |
Home equity | Real estate | ||
Unpaid Principal Balance | ||
Total with no related allowance recorded | 360 | 551 |
Recorded Investment | ||
Total with no related allowance recorded | 360 | 551 |
CRE | Real estate | ||
Unpaid Principal Balance | ||
Total with no related allowance recorded | 5,094 | 5,094 |
Recorded Investment | ||
Total with no related allowance recorded | $ 5,094 | $ 5,094 |
Loans - Interest Recognized and
Loans - Interest Recognized and Cash Basis Interest Earned on Impaired Loans (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Interest Recognized and Cash Basis Interest Earned on Impaired Loans | ||
Average of impaired loans during the period | $ 14,921 | $ 14,762 |
Commercial | ||
Interest Recognized and Cash Basis Interest Earned on Impaired Loans | ||
Average of impaired loans during the period | 8,048 | |
Commercial | ||
Interest Recognized and Cash Basis Interest Earned on Impaired Loans | ||
Average of impaired loans during the period | 10,744 | |
CRE | Real estate | ||
Interest Recognized and Cash Basis Interest Earned on Impaired Loans | ||
Average of impaired loans during the period | 6,433 | 3,507 |
Land and construction | Real estate | ||
Interest Recognized and Cash Basis Interest Earned on Impaired Loans | ||
Average of impaired loans during the period | 24 | |
Home equity | Real estate | ||
Interest Recognized and Cash Basis Interest Earned on Impaired Loans | ||
Average of impaired loans during the period | $ 440 | $ 487 |
Loans - Nonperforming Loans (De
Loans - Nonperforming Loans (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Nonaccrual loans - held-for-investment | $ 8,675 | $ 13,699 |
Restructured and loans over 90 days past due and still accruing | 1,153 | 1,188 |
Total nonperforming loans | 9,828 | 14,887 |
Other restructured loans | 436 | 253 |
Total | $ 10,264 | $ 15,140 |
Loans - Nonperforming Loans by
Loans - Nonperforming Loans by Class (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Nonperforming Loans by Class | ||
Nonaccrual loans - held-for-investment | $ 8,675 | $ 13,699 |
Restructured and Loans Over 90 Days Past Due and Still Accruing | 1,153 | 1,188 |
Total | 9,828 | 14,887 |
Commercial | ||
Nonperforming Loans by Class | ||
Nonaccrual loans - held-for-investment | 3,444 | 8,279 |
Restructured and Loans Over 90 Days Past Due and Still Accruing | 1,153 | 963 |
Total | 4,597 | 9,242 |
CRE | Commercial | ||
Nonperforming Loans by Class | ||
Nonaccrual loans - held-for-investment | 5,094 | |
CRE | Real estate | ||
Nonperforming Loans by Class | ||
Nonaccrual loans - held-for-investment | 5,094 | |
Total | 5,094 | 5,094 |
Home equity | Real estate | ||
Nonperforming Loans by Class | ||
Nonaccrual loans - held-for-investment | 137 | 326 |
Restructured and Loans Over 90 Days Past Due and Still Accruing | 225 | |
Total | $ 137 | $ 551 |
Loans - Aging of Past Due Loans
Loans - Aging of Past Due Loans by Class of Loans - Tabular Disclosure (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Aging of Past Due Loans by Class of Loans | ||
Total Past Due | $ 15,315 | $ 8,873 |
Loans Not Past Due | 2,518,848 | 1,877,859 |
Total loan balance | 2,534,163 | 1,886,732 |
30-59 Days Past Due | ||
Aging of Past Due Loans by Class of Loans | ||
Total Past Due | 4,770 | 5,699 |
60-89 Days Past Due | ||
Aging of Past Due Loans by Class of Loans | ||
Total Past Due | 2,234 | 1,916 |
90 Days or Greater Past Due | ||
Aging of Past Due Loans by Class of Loans | ||
Total Past Due | 8,311 | 1,258 |
Commercial | ||
Aging of Past Due Loans by Class of Loans | ||
Total Past Due | 10,084 | |
Loans Not Past Due | 621,463 | |
Total loan balance | 631,547 | 597,763 |
Commercial | 30-59 Days Past Due | ||
Aging of Past Due Loans by Class of Loans | ||
Total Past Due | 4,770 | |
Commercial | 60-89 Days Past Due | ||
Aging of Past Due Loans by Class of Loans | ||
Total Past Due | 2,097 | |
Commercial | 90 Days or Greater Past Due | ||
Aging of Past Due Loans by Class of Loans | ||
Total Past Due | 3,217 | |
Real estate | ||
Aging of Past Due Loans by Class of Loans | ||
Total loan balance | 1,882,734 | 1,276,516 |
Consumer | ||
Aging of Past Due Loans by Class of Loans | ||
Total Past Due | 1 | |
Loans Not Past Due | 19,882 | 12,452 |
Total loan balance | 19,882 | 12,453 |
Consumer | 30-59 Days Past Due | ||
Aging of Past Due Loans by Class of Loans | ||
Total Past Due | 1 | |
Commercial | ||
Aging of Past Due Loans by Class of Loans | ||
Total Past Due | 8,872 | |
Loans Not Past Due | 588,891 | |
Total loan balance | 597,763 | |
Commercial | 30-59 Days Past Due | ||
Aging of Past Due Loans by Class of Loans | ||
Total Past Due | 5,698 | |
Commercial | 60-89 Days Past Due | ||
Aging of Past Due Loans by Class of Loans | ||
Total Past Due | 1,916 | |
Commercial | 90 Days or Greater Past Due | ||
Aging of Past Due Loans by Class of Loans | ||
Total Past Due | 1,258 | |
CRE | Real estate | ||
Aging of Past Due Loans by Class of Loans | ||
Total Past Due | 5,094 | |
Loans Not Past Due | 1,505,498 | 994,067 |
Total loan balance | 1,510,592 | 994,067 |
CRE | Real estate | 90 Days or Greater Past Due | ||
Aging of Past Due Loans by Class of Loans | ||
Total Past Due | 5,094 | |
Land and construction | Real estate | ||
Aging of Past Due Loans by Class of Loans | ||
Loans Not Past Due | 150,634 | 122,358 |
Total loan balance | 150,634 | 122,358 |
Home equity | Real estate | ||
Aging of Past Due Loans by Class of Loans | ||
Total Past Due | 137 | |
Loans Not Past Due | 175,115 | 109,112 |
Total loan balance | 175,252 | 109,112 |
Home equity | Real estate | 60-89 Days Past Due | ||
Aging of Past Due Loans by Class of Loans | ||
Total Past Due | 137 | |
Residential mortgages | Real estate | ||
Aging of Past Due Loans by Class of Loans | ||
Loans Not Past Due | 46,256 | 50,979 |
Total loan balance | $ 46,256 | $ 50,979 |
Loans - Aging of Past Due Loa_2
Loans - Aging of Past Due Loans by Class of Loans - Additional Information (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Aging of Past Due Loans by Class of Loans | ||
Past due loans 30 day or greater | $ 15,315,000 | $ 8,873,000 |
Nonaccrual loans - held-for-investment | 8,675,000 | 13,699,000 |
30 days or greater past due nonaccrual loans | 15,315,000 | 8,873,000 |
30 days or greater past due | ||
Aging of Past Due Loans by Class of Loans | ||
30 days or greater past due nonaccrual loans | 7,413,000 | 430,000 |
Less than 30 days past due | ||
Aging of Past Due Loans by Class of Loans | ||
Less than 30 days past due nonaccrual loans held-for-investment | $ 1,262,000 | $ 13,269,000 |
Loans - Credit Quality Indicato
Loans - Credit Quality Indicators (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Loans | ||
Balance to report | $ 2,510,559,000 | $ 1,858,557,000 |
Loan classified as loss | ||
Loans | ||
Balance to report | 0 | $ 0 |
Loan classified as loss | Minimum | ||
Loans | ||
Recovery value | $ 0 |
Loans - Summary of the Loan Por
Loans - Summary of the Loan Portfolio by Loan Type and Credit Quality Classification (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Loans | ||
Total | $ 2,534,163 | $ 1,886,732 |
Nonclassified | ||
Loans | ||
Total | 2,501,584 | 1,863,323 |
Classified | ||
Loans | ||
Total | 32,579 | 23,409 |
Commercial | ||
Loans | ||
Total | 597,763 | |
Commercial | ||
Loans | ||
Total | 631,547 | 597,763 |
Commercial | Nonclassified | ||
Loans | ||
Total | 623,768 | 584,845 |
Commercial | Classified | ||
Loans | ||
Total | 7,779 | 12,918 |
Real estate | ||
Loans | ||
Total | 1,882,734 | 1,276,516 |
Real estate | CRE | ||
Loans | ||
Total | 1,510,592 | 994,067 |
Real estate | CRE | Nonclassified | ||
Loans | ||
Total | 1,492,126 | 985,193 |
Real estate | CRE | Classified | ||
Loans | ||
Total | 18,466 | 8,874 |
Real estate | Land and construction | ||
Loans | ||
Total | 150,634 | 122,358 |
Real estate | Land and construction | Nonclassified | ||
Loans | ||
Total | 147,553 | 122,358 |
Real estate | Land and construction | Classified | ||
Loans | ||
Total | 3,081 | |
Real estate | Home equity | ||
Loans | ||
Total | 175,252 | 109,112 |
Real estate | Home equity | Nonclassified | ||
Loans | ||
Total | 171,999 | 107,495 |
Real estate | Home equity | Classified | ||
Loans | ||
Total | 3,253 | 1,617 |
Real estate | Residential mortgages | ||
Loans | ||
Total | 46,256 | 50,979 |
Real estate | Residential mortgages | Nonclassified | ||
Loans | ||
Total | 46,256 | 50,979 |
Consumer | ||
Loans | ||
Total | 19,882 | 12,453 |
Consumer | Nonclassified | ||
Loans | ||
Total | $ 19,882 | $ 12,453 |
Loans - Troubled Debt Restructu
Loans - Troubled Debt Restructurings (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Loans | ||
Recorded investment of troubled debt restructurings | $ 1,039,000 | $ 649,000 |
Troubled debt restructurings, nonaccrual loans | 590,000 | 36,000 |
Troubled debt restructurings, accruing loans | 449,000 | 613,000 |
Specific reserves | 20,000 | 38,000 |
Additional loan committed on any loans classified as troubled debt restructuring. | $ 0 | $ 0 |
Loans - Troubled Debt Restruc_2
Loans - Troubled Debt Restructurings by Class (Details) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019USD ($)contract | Dec. 31, 2018USD ($)contract | |
Troubled Debt Restructurings by Class | ||
Number of loans modified as troubled debt restructurings during the period | contract | 3 | 3 |
Pre-modification Outstanding Recorded Investment | $ 591 | $ 336 |
Post-modification Outstanding Recorded Investment | $ 591 | $ 336 |
Commercial | ||
Troubled Debt Restructurings by Class | ||
Number of loans modified as troubled debt restructurings during the period | contract | 3 | 2 |
Pre-modification Outstanding Recorded Investment | $ 591 | $ 112 |
Post-modification Outstanding Recorded Investment | $ 591 | $ 112 |
Home equity | ||
Troubled Debt Restructurings by Class | ||
Number of loans modified as troubled debt restructurings during the period | contract | 1 | |
Pre-modification Outstanding Recorded Investment | $ 224 | |
Post-modification Outstanding Recorded Investment | $ 224 |
Loans - Defaults on Troubled De
Loans - Defaults on Troubled Debt Restructurings (Details) | 12 Months Ended | |
Dec. 31, 2019contractloanitem | Dec. 31, 2018contractitem | |
Loans | ||
Number of troubled debt restructurings in which the amount of principal or accrued interest owed from the borrower was forgiven | loan | 0 | |
Number of loans modified as troubled debt restructurings during the period | contract | 3 | 3 |
Default period contractually past due under modified terms (in days) | 30 days | |
Number of defaults on troubled debt restructurings | item | 0 | 0 |
Period of consecutive payments (in months) | 6 months |
Loans - Loans Due From Related
Loans - Loans Due From Related Parties (Details) $ in Thousands | 12 Months Ended |
Dec. 31, 2018USD ($) | |
Loans due from related parties | |
Balance, beginning of year | $ 531 |
Repayment on loans during the year | $ (531) |
Loan Servicing - SBA Loans (Det
Loan Servicing - SBA Loans (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 |
Loans | |||
Serviced SBA loans sold to secondary market | $ 87,835,000 | $ 104,016,000 | $ 139,086,000 |
Weighted average servicing rate for loans serviced (as a percent) | 1.16% | 1.12% | 1.13% |
Loan Servicing - Activity for L
Loan Servicing - Activity for Loan Servicing Rights (Details) - Loan servicing rights - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Activity for Loan Servicing Rights | |||
Balance, beginning of year | $ 871 | $ 1,373 | $ 1,854 |
Additions | 157 | 200 | 278 |
Amortization | (445) | (702) | (759) |
Balance, end of year | $ 583 | $ 871 | $ 1,373 |
Loan Servicing - Loan Servicing
Loan Servicing - Loan Servicing Rights - Additional Information (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Loan Servicing | |||
Carrying amount/fair value | $ 1,295,000 | $ 1,651,000 | $ 2,594,000 |
Prepayment speed assumption (annual rate) (as a percent) | 13.50% | 10.89% | 8.13% |
Residual cash flow discount rate assumption (annual) (as a percent) | 15.90% | 16.40% | 13.86% |
Loan servicing rights | |||
Loan Servicing | |||
Valuation allowance | $ 0 | $ 0 | $ 0 |
Loan Servicing - Activity for I
Loan Servicing - Activity for I/O Strip Receivables (Details) - I/O strip receivables - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Activity for I/O Strip Receivables | |||
Balance, beginning of year | $ 568 | $ 968 | $ 1,067 |
Unrealized loss | (65) | (400) | (99) |
Balance, end of year | $ 503 | $ 568 | $ 968 |
Premises and Equipment - Premis
Premises and Equipment - Premises and Equipment, Net (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Premises and Equipment | ||
Premises and equipment, gross | $ 23,847 | $ 21,637 |
Accumulated depreciation and amortization | (15,597) | (14,500) |
Premises and equipment, net | 8,250 | 7,137 |
Building | ||
Premises and Equipment | ||
Premises and equipment, gross | 3,508 | 3,508 |
Land | ||
Premises and Equipment | ||
Premises and equipment, gross | 2,900 | 2,900 |
Furniture and equipment | ||
Premises and Equipment | ||
Premises and equipment, gross | 10,067 | 9,584 |
Leasehold improvements | ||
Premises and Equipment | ||
Premises and equipment, gross | $ 7,372 | $ 5,645 |
Premises and Equipment - Deprec
Premises and Equipment - Depreciation and Amortization Expense (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Premises and Equipment | |||
Depreciation and amortization | $ 846 | $ 753 | $ 786 |
Leases (Details)
Leases (Details) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Dec. 31, 2019USD ($) | Dec. 31, 2019USD ($) | Jun. 30, 2019ft² | |
Lessee, Lease, Description [Line Items] | |||
Lessee, Operating Lease, Option to renew | true | ||
Operating Lease Cost (Cost resulting from lease payments) | $ 1,490 | ||
Operating Lease - Operating Cash Flows (Fixed Payments) | 1,519 | ||
Operating Lease - Liabilities | $ 13,032 | $ 13,032 | |
Operating Lease, Liability, Statement of Financial Position [Extensible List] | Operating Lease - Liabilities | Operating Lease - Liabilities | |
Weighted Average Lease Term - Operating Leases | 4 years 9 months 15 days | 4 years 9 months 15 days | |
Weighted Average Discount Rate - Operating Leases | 3.86% | 3.86% | |
Area of office space | ft² | 54,910 | ||
Wallnut creek | |||
Lessee, Lease, Description [Line Items] | |||
Lease impairment and write-off of fixed assets and tenant improvements | $ 434 | ||
San Mateo | |||
Lessee, Lease, Description [Line Items] | |||
Lease impairment and write-off of fixed assets and tenant improvements | 625 | ||
ASU 2018-11 | |||
Lessee, Lease, Description [Line Items] | |||
Operating Lease - ROU assets | $ 12,173 | $ 12,173 |
Leases - Maturity Analysis (Det
Leases - Maturity Analysis (Details) $ in Thousands | Dec. 31, 2019USD ($) |
Operating Lease Payments Due | |
2020 | $ 3,812 |
2021 | 2,852 |
2022 | 2,578 |
2023 | 1,855 |
2024 | 1,474 |
Thereafter | 1,618 |
Total undiscounted cash flows | 14,189 |
Discount on cash flows | (1,157) |
Total lease liability | $ 13,032 |
Business Combinations - Tri-Val
Business Combinations - Tri-Valley (Details) - Tri Valley Bank | Apr. 06, 2018USD ($)shares |
Business Combinations | |
Aggregate transaction value | $ 32,320,000 |
Shares issued in acquisition | shares | 1,889,613 |
Issuance of 1,889,613 shares of common stock to Tri-Valley shareholders at $16.26 per share at Closing | $ 30,725,000 |
Fixed exchange ratio of company's common stock | 0.0489 |
Total cash paid | $ 1,595,000 |
Business Combinations - United
Business Combinations - United American (Details) - United American Bank | May 04, 2018USD ($)$ / sharesshares |
Business Combinations | |
Aggregate transaction value | $ 56,417,000 |
Fixed exchange ratio of company's common stock | 2.1644 |
Shares issued in acquisition | shares | 2,826,032 |
Total cash paid | $ 9,137,000 |
Issuance of shares of common stock to holders of restricted stock | 47,280,000 |
Series A Preferred Stock | |
Business Combinations | |
Total cash paid | 8,700,000 |
Series B Preferred Stock | |
Business Combinations | |
Total cash paid | $ 435,000 |
Series A and Series B Preferred Stock | |
Business Combinations | |
Cash issued per share | $ / shares | $ 1,000 |
Other | |
Business Combinations | |
Total cash paid | $ 2,000 |
Business combinations - Presidi
Business combinations - Presidio (Details) | Oct. 11, 2019USD ($)$ / sharesshares | Oct. 31, 2019 | Dec. 31, 2019USD ($) | Dec. 19, 2019USD ($) | Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) |
Assets acquired: | ||||||
Securities available-for-sale | $ 45,069,000 | $ 63,723,000 | ||||
Securities held-to-maturity | 463,000 | |||||
Loans | 685,964,000 | 336,446,000 | ||||
Premises and equipment | 1,756,000 | 350,000 | ||||
Other assets, net | 29,397,000 | 14,736,000 | ||||
Liabilities assumed: | ||||||
Deposits | 774,259,000 | 416,628,000 | ||||
Subordinate debt | 39,554,000 | 39,369,000 | ||||
Other borrowings | 442,000 | 62,000 | ||||
Other liabilities | 17,916,000 | 3,038,000 | ||||
Goodwill recorded in the merger | 167,420,000 | 83,753,000 | $ 45,664,000 | |||
Subordinate debt | 39,554,000 | $ 39,369,000 | ||||
Presidio bank | ||||||
Assets acquired: | ||||||
Cash and cash equivalents | 117,988,000 | |||||
Securities available-for-sale | 45,069,000 | |||||
Securities held-to-maturity | 463,000 | |||||
Loans | 685,964,000 | |||||
Premises and equipment | 1,756,000 | |||||
Other intangible assets | 11,147,000 | |||||
Other assets, net | 42,161,000 | |||||
Total assets acquired | 904,548,000 | |||||
Liabilities assumed: | ||||||
Deposits | 774,259,000 | |||||
Subordinate debt | 10,000,000 | $ 10,000,000 | ||||
Other borrowings | 442,000 | |||||
Other liabilities | 17,916,000 | |||||
Total liabilities assumed | 802,617,000 | |||||
Net assets acquired | 101,931,000 | |||||
Purchase price | 185,598,000 | |||||
Goodwill recorded in the merger | $ 83,667,000 | |||||
Aggregate transaction value | $ 185,598,000 | |||||
Fixed exchange ratio | 2.47 | |||||
Issuance of shares of common stock to Presidio shareholders | shares | 15,684,064 | |||||
Issuance of shares of common stock to holders of restricted stock | $ 178,171,000 | |||||
Stock price at Closing (in dollars per share) | $ / shares | $ 11.36 | |||||
Consideration for Presidio stock options exchanged for Heritage Commerce Corp stock options | $ 7,426,000 | $ 7,426,000 | ||||
Cash paid for fractional shares | $ 1,000 | |||||
Subordinate debt | 10,000,000 | $ 10,000,000 | ||||
Presidio bank | Below or Above market-value lease | ||||||
Liabilities assumed: | ||||||
Amortized intangible assets | 60 months | |||||
As Recorded | Presidio bank | ||||||
Assets acquired: | ||||||
Cash and cash equivalents | 117,989,000 | |||||
Securities available-for-sale | 44,647,000 | |||||
Securities held-to-maturity | 463,000 | |||||
Loans | 698,493,000 | |||||
Allowance for loan losses | (7,463,000) | |||||
Premises and equipment | 1,756,000 | |||||
Other assets, net | 43,539,000 | |||||
Total assets acquired | 899,424,000 | |||||
Liabilities assumed: | ||||||
Deposits | 774,260,000 | |||||
Subordinate debt | 10,000,000 | |||||
Other borrowings | 442,000 | |||||
Other liabilities | 17,916,000 | |||||
Total liabilities assumed | 802,618,000 | |||||
Subordinate debt | 10,000,000 | |||||
Fair Value Adjustments | Presidio bank | ||||||
Assets acquired: | ||||||
Cash and cash equivalents | (1,000) | |||||
Securities available-for-sale | 422,000 | |||||
Loans | (12,529,000) | |||||
Allowance for loan losses | 7,463,000 | |||||
Other intangible assets | 11,147,000 | |||||
Other assets, net | (1,378,000) | |||||
Total assets acquired | 5,124,000 | |||||
Liabilities assumed: | ||||||
Deposits | (1,000) | |||||
Total liabilities assumed | $ (1,000) |
Business Combinations - Pro For
Business Combinations - Pro Forma Information (Details) - Presidio bank - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Pro Forma Information | ||
Net interest income | $ 163,555 | $ 160,044 |
Provision (credit) for loan losses | 870 | 7,694 |
Noninterest income | 11,291 | 10,795 |
Noninterest expense | 92,709 | 97,563 |
Income before income taxes | 81,268 | 65,582 |
Income tax expense | 23,730 | 17,549 |
Net income | $ 57,538 | $ 48,033 |
Net income per share - basic (in dollars per share) | $ 0.98 | $ 0.84 |
Net income per share - diluted (in dollars per share) | $ 0.96 | $ 0.83 |
Business combinations - Pre-tax
Business combinations - Pre-tax merger-related costs (Details) - USD ($) | 3 Months Ended | 12 Months Ended | ||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Business Acquisition [Line Items] | ||||||||||
Salaries and employee benefits | $ 6,580,000 | $ 3,569,000 | ||||||||
Other | 4,500,000 | 5,598,000 | $ 671,000 | |||||||
Pre-tax acquisition costs | $ 9,879,000 | $ 661,000 | $ 540,000 | $ 139,000 | $ 199,000 | $ 8,214,000 | $ 615,000 | 11,080,000 | 9,167,000 | 671,000 |
Presidio bank | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Salaries and employee benefits | 6,580,000 | |||||||||
Other | 4,500,000 | |||||||||
Pre-tax acquisition costs | $ 11,080,000 | |||||||||
Tri Valley Bank | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Salaries and employee benefits | 3,569,000 | |||||||||
Other | 5,598,000 | |||||||||
Pre-tax acquisition costs | $ 9,167,000 | |||||||||
United American Bank | ||||||||||
Business Acquisition [Line Items] | ||||||||||
Other | 671,000 | |||||||||
Pre-tax acquisition costs | $ 671,000 |
Business Combinations (Details)
Business Combinations (Details) | 3 Months Ended | 12 Months Ended | ||||||||
Dec. 31, 2019USD ($)companyloan | Sep. 30, 2019USD ($) | Jun. 30, 2019USD ($) | Dec. 31, 2018USD ($)loan | Sep. 30, 2018USD ($) | Jun. 30, 2018USD ($) | Mar. 31, 2018USD ($) | Dec. 31, 2019USD ($)companyloan | Dec. 31, 2018USD ($)loan | Dec. 31, 2017USD ($) | |
Business Combinations | ||||||||||
Number of business banking franchises acquired | company | 3 | 3 | ||||||||
Combined business value after business combination | $ 4,100,000,000 | $ 4,100,000,000 | ||||||||
Other merger-related costs | 4,500,000 | $ 5,598,000 | $ 671,000 | |||||||
Salaries and employee benefits merger-related costs | 6,580,000 | 3,569,000 | ||||||||
Pre-tax acquisition costs | $ 9,879,000 | $ 661,000 | $ 540,000 | $ 139,000 | $ 199,000 | $ 8,214,000 | $ 615,000 | $ 11,080,000 | $ 9,167,000 | $ 671,000 |
Number of loan classified as PCI loan | loan | 0 | 0 | 0 | 0 | ||||||
Total with an allowance recorded, Allowance for Loan Losses Allocated | $ 1,835,000 | $ 6,944,000 | $ 1,835,000 | $ 6,944,000 |
Goodwill and Other Intangible_3
Goodwill and Other Intangible Assets - Goodwill (Details) - USD ($) | 12 Months Ended | |||
Dec. 31, 2019 | Dec. 31, 2018 | Apr. 06, 2018 | Dec. 31, 2017 | |
Goodwill | ||||
Goodwill | $ 167,420,000 | $ 83,753,000 | $ 45,664,000 | |
Goodwill acquired | 83,667,000 | 38,089,000 | ||
Tri Valley Bank | ||||
Goodwill | ||||
Goodwill | $ 13,819,000 | |||
United American Bank | ||||
Goodwill | ||||
Goodwill | 24,270,000 | |||
Presidio bank | ||||
Goodwill | ||||
Goodwill | 83,667,000 | |||
Banking | ||||
Goodwill | ||||
Goodwill | 154,376,000 | 70,709,000 | 32,620,000 | |
Factoring | ||||
Goodwill | ||||
Goodwill | $ 13,044,000 | $ 13,044,000 | $ 13,044,000 |
Goodwill and Other Intangible_4
Goodwill and Other Intangible Assets - Other Intangible Assets (Details) - USD ($) | May 04, 2018 | Apr. 06, 2018 | Oct. 31, 2019 | May 31, 2018 | Apr. 30, 2018 | Aug. 31, 2015 | Nov. 30, 2014 | Dec. 31, 2019 | Dec. 31, 2018 |
United American Bank | |||||||||
Other Intangible Assets | |||||||||
Accumulated amortization | $ 1,788,000 | $ 756,000 | |||||||
Useful life, amortization period | 3 years | ||||||||
United American Bank | Core deposit | |||||||||
Other Intangible Assets | |||||||||
Intangible assets acquired | $ 5,723,000 | ||||||||
Useful life, amortization period | 10 years | ||||||||
United American Bank | Below or Above market-value lease | |||||||||
Other Intangible Assets | |||||||||
Intangible assets acquired | $ 660,000 | ||||||||
Useful life, amortization period | 3 years | ||||||||
Tri Valley Bank | |||||||||
Other Intangible Assets | |||||||||
Accumulated amortization | 480,000 | 222,000 | |||||||
Useful life, amortization period | 11 years | ||||||||
Tri Valley Bank | Core deposit | |||||||||
Other Intangible Assets | |||||||||
Intangible assets acquired | $ 1,768,000 | ||||||||
Useful life, amortization period | 10 years | ||||||||
Tri Valley Bank | Below or Above market-value lease | |||||||||
Other Intangible Assets | |||||||||
Intangible assets acquired | $ 210,000 | ||||||||
Useful life, amortization period | 11 years | ||||||||
Presidio bank | |||||||||
Other Intangible Assets | |||||||||
Accumulated amortization | 524,000 | ||||||||
Presidio bank | Core deposit | |||||||||
Other Intangible Assets | |||||||||
Intangible assets acquired | $ 11,247,000 | ||||||||
Useful life, amortization period | 10 years | ||||||||
Presidio bank | Below or Above market-value lease | |||||||||
Other Intangible Assets | |||||||||
Accumulated amortization | $ (100,000) | ||||||||
Useful life, amortization period | 60 months | ||||||||
Focus | |||||||||
Other Intangible Assets | |||||||||
Accumulated amortization | 3,504,000 | 2,770,000 | |||||||
Focus | Core deposit | |||||||||
Other Intangible Assets | |||||||||
Intangible assets acquired | $ 6,285,000 | ||||||||
Useful life, amortization period | 10 years | ||||||||
BVF/CSNK | |||||||||
Other Intangible Assets | |||||||||
Accumulated amortization | $ 981,000 | $ 791,000 | |||||||
BVF/CSNK | Below or Above market-value lease | |||||||||
Other Intangible Assets | |||||||||
Intangible assets acquired | $ 109,000 | ||||||||
BVF/CSNK | Non-compete agreement | |||||||||
Other Intangible Assets | |||||||||
Intangible assets acquired | 250,000 | ||||||||
BVF/CSNK | Customer relationship and brokered relationship | |||||||||
Other Intangible Assets | |||||||||
Intangible assets acquired | $ 1,900,000 | ||||||||
Useful life, amortization period | 10 years |
Goodwill and Other Intangible_5
Goodwill and Other Intangible Assets - Estimated Amortization Expense (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Estimated Amortization Expense | ||
2020 | $ 3,731 | |
2021 | 3,017 | |
2022 | 2,635 | |
2023 | 2,405 | |
2024 | 2,187 | |
Thereafter | 6,440 | |
Total | 20,415 | $ 12,007 |
United American Bank | Core deposit | ||
Estimated Amortization Expense | ||
2020 | 665 | |
2021 | 602 | |
2022 | 553 | |
2023 | 521 | |
2024 | 499 | |
Thereafter | 1,520 | |
Total | 4,360 | |
United American Bank | Below or Above market-value lease | ||
Estimated Amortization Expense | ||
2020 | 235 | |
Total | 235 | |
Tri Valley Bank | Core deposit | ||
Estimated Amortization Expense | ||
2020 | 208 | |
2021 | 184 | |
2022 | 167 | |
2023 | 158 | |
2024 | 152 | |
Thereafter | 451 | |
Total | 1,320 | |
Tri Valley Bank | Below or Above market-value lease | ||
Estimated Amortization Expense | ||
2020 | 18 | |
2021 | 18 | |
2022 | 18 | |
2023 | 18 | |
2024 | 18 | |
Thereafter | 88 | |
Total | 178 | |
Presidio bank | Core deposit | ||
Estimated Amortization Expense | ||
2020 | 1,719 | |
2021 | 1,447 | |
2022 | 1,225 | |
2023 | 1,118 | |
2024 | 1,026 | |
Thereafter | 4,181 | |
Total | 10,716 | |
Presidio bank | Below or Above market-value lease | ||
Estimated Amortization Expense | ||
2020 | (20) | |
2021 | (20) | |
2022 | (20) | |
2023 | (20) | |
2024 | (14) | |
Total | (94) | |
Focus | Core deposit | ||
Estimated Amortization Expense | ||
2020 | 716 | |
2021 | 596 | |
2022 | 502 | |
2023 | 420 | |
2024 | 347 | |
Thereafter | 200 | |
Total | 2,781 | |
BVF/CSNK | Customer relationship and brokered relationship | ||
Estimated Amortization Expense | ||
2020 | 190 | |
2021 | 190 | |
2022 | 190 | |
2023 | 190 | |
2024 | 159 | |
Total | $ 919 |
Goodwill and Other Intangible_6
Goodwill and Other Intangible Assets - Impairment of Intangible Assets (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Impairment of Intangible Assets | ||
Impairment of intangible assets | $ 0 | $ 0 |
Deposits - Time Deposits (Detai
Deposits - Time Deposits (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Deposits. | ||
Time deposits, including deposits within the CDARS and brokered deposits, $250,000 or more | $ 99,882 | $ 86,114 |
Deposits - Scheduled Maturities
Deposits - Scheduled Maturities of all Time Deposits and Brokered Deposits for the Next Five Years (Details) $ in Thousands | Dec. 31, 2019USD ($) |
Scheduled Maturities of Time Deposits Including Brokered Deposits for the Next Five Years | |
2020 | $ 156,141 |
2021 | 9,658 |
2022 | 2,115 |
2023 | 54 |
2024 | 66 |
Total | $ 168,034 |
Deposits - Additional Informati
Deposits - Additional Information (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Additional Information | ||
CDARS - money market and time deposits | $ 28,847 | $ 14,898 |
Interest-bearing demand deposits | 12,885 | 8,747 |
Money market accounts under CDARS program | 2,171 | 3,366 |
Time deposits under CDARS program | 13,791 | 2,785 |
Deposits from executive officers, directors, and their affiliates | $ 12,636 | $ 21,752 |
Borrowing Arrangements - Federa
Borrowing Arrangements - Federal Home Loan Bank Borrowings, Federal Reserve Bank Borrowings, and Available Lines of Credit (Details) - Line of credit - FHLB of San Francisco - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
FHLB | ||
Borrowing Arrangements | ||
FHLB overnight borrowings | $ 0 | $ 0 |
FHLB | ||
Borrowing Arrangements | ||
Loans pledged as collateral | 272,879,000 | 228,152,000 |
Securities pledged as collateral | 0 | 0 |
Line of credit | $ 228,103,000 | $ 178,560,000 |
Borrowing Arrangements - Fede_2
Borrowing Arrangements - Federal Reserve Bank Borrowings (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Borrowing Arrangements | ||
Amount outstanding | $ 0 | $ 0 |
Line of credit | FRB | ||
Borrowing Arrangements | ||
Loans pledged as collateral | 726,709,000 | 739,830,000 |
Line of credit | 408,401,000 | 418,399,000 |
Amount outstanding | $ 0 | $ 0 |
Borrowing Arrangements - Availa
Borrowing Arrangements - Available Lines of Credit (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Borrowing Arrangements | ||
Federal funds purchased | $ 0 | $ 0 |
Federal funds purchase arrangement | ||
Borrowing Arrangements | ||
Federal funds purchase arrangements available | $ 80,000,000 |
Borrowing Arrangements - Line o
Borrowing Arrangements - Line of Credit with a Corresponding Bank (Details) | Dec. 31, 2019USD ($) |
Line of credit | HCC (Parent) | |
Borrowing Arrangements | |
Line of credit | $ 5,000,000 |
Borrowing Arrangements - Securi
Borrowing Arrangements - Securities Sold under Repurchase Agreements (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Borrowing Arrangements | ||
Amount of securities sold under agreements | $ 0 | $ 0 |
Borrowing Arrangements - Subord
Borrowing Arrangements - Subordinated Debt (Details) - USD ($) | May 26, 2017 | Dec. 31, 2019 | Dec. 19, 2019 | Dec. 31, 2018 |
Principal amount | $ 40,000,000 | |||
Fixed interest rate (as a percent) | 5.25% | |||
Subordinated Debt. | $ 39,554,000 | $ 39,369,000 | ||
Debt Issuance Costs | $ 446,000 | |||
Presidio bank | ||||
Fixed interest rate (as a percent) | 8.00% | |||
Subordinated Debt. | $ 10,000,000 | $ 10,000,000 | ||
Pre-payment penalty | $ 300,000 | |||
LIBOR | ||||
Rate of interest added to base rate | 336.50% |
Income Taxes - Net Deferred Tax
Income Taxes - Net Deferred Tax Assets (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Income Taxes | |||
Statutory Federal income tax rate (as a percent) | 21.00% | 21.00% | 35.00% |
Net deferred tax assets | |||
Valuation allowance for deferred tax assets | $ 0 |
Income Taxes - Income Tax (Bene
Income Taxes - Income Tax (Benefit) (Details) | 3 Months Ended | 12 Months Ended | ||||||||||
Dec. 31, 2019USD ($) | Sep. 30, 2019USD ($) | Jun. 30, 2019USD ($) | Mar. 31, 2019USD ($) | Dec. 31, 2018USD ($) | Sep. 30, 2018USD ($) | Jun. 30, 2018USD ($) | Mar. 31, 2018USD ($) | Dec. 31, 2017USD ($) | Dec. 31, 2019USD ($)item | Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) | |
Currently payable tax: | ||||||||||||
Federal | $ 7,631,000 | $ 9,187,000 | $ 12,948,000 | |||||||||
State | 4,689,000 | 5,416,000 | 4,653,000 | |||||||||
Total currently payable | $ 12,320,000 | 14,603,000 | 17,601,000 | |||||||||
Tax Cuts and Jobs Act of 2017 effect on re-measurement of net deferred tax assets | $ 7,103,000 | 7,103,000 | ||||||||||
Number of items for which the Company was unable to make a reasonable estimate for the effects of the tax law change | item | 0 | |||||||||||
Deferred tax (benefit): | ||||||||||||
Federal | $ 2,200,000 | (1,133,000) | 1,193,000 | |||||||||
Due to enactment of Tax Reform | $ 7,103,000 | 7,103,000 | ||||||||||
State | 1,331,000 | (146,000) | 574,000 | |||||||||
Total deferred tax | 3,531,000 | (1,279,000) | 8,870,000 | |||||||||
Income tax expense | $ 2,088,000 | $ 4,633,000 | $ 4,623,000 | $ 4,507,000 | $ 5,138,000 | $ 4,979,000 | $ (31,000) | $ 3,238,000 | $ 15,851,000 | $ 13,324,000 | $ 26,471,000 |
Income Taxes - Effective Tax Ra
Income Taxes - Effective Tax Rate (Details) | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Effective tax rate differs from the federal statutory rate | |||
Statutory Federal income tax rate (as a percent) | 21.00% | 21.00% | 35.00% |
State income taxes, net of federal tax benefit (as a percent) | 8.50% | 8.50% | 6.80% |
Low income housing credits, net of investment losses (as a percent) | (0.50%) | (0.80%) | (0.50%) |
Increase in cash surrender value of life insurance (as a percent) | (0.50%) | (0.50%) | (1.20%) |
Stock option/restricted stock windfall tax benefit | (0.30%) | (0.90%) | (0.30%) |
Non-taxable interest income (as a percent) | (0.80%) | (0.90%) | (1.50%) |
Split dollar term insurance (as a percent) | 0.10% | 0.10% | 0.10% |
Merger cost | 0.50% | 0.50% | |
Due to enactment of Tax Reform | 14.10% | ||
Other, net (as a percent) | 0.10% | 0.40% | 0.10% |
Effective tax rate (as a percent) | 28.10% | 27.40% | 52.60% |
Income Taxes - Deferred Tax Ass
Income Taxes - Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Deferred tax assets: | ||
Defined postretirement benefit obligation | $ 9,901 | $ 7,877 |
Allowance for loan losses | 7,231 | 7,697 |
Federal net operating loss carryforwards | 3,662 | 5,093 |
Accrued expenses | 2,562 | 1,939 |
Lease accounting | 1,647 | |
Stock compensation | 1,636 | 1,244 |
California net operating loss carryforwards | 1,489 | 2,128 |
State income taxes | 954 | 1,117 |
Premises and equipment | 695 | 642 |
Split-dollar life insurance benefit plan | 75 | 80 |
Nonaccrual interest | 61 | 55 |
Tax credit carryforwards | 57 | 71 |
Securities available-for-sale | 2,184 | |
Other | 654 | 716 |
Total deferred tax assets | 30,624 | 30,843 |
Deferred tax liabilities: | ||
Intangible liabilities | (1,321) | (1,671) |
Loan fees | (1,842) | (1,089) |
Prepaid expenses | (289) | (554) |
I/O strips | (144) | (163) |
Securities available-for-sale | (772) | |
Lease accounting | (1,647) | |
FHLB stock | (177) | (174) |
Other | (130) | (103) |
Total deferred tax liabilities | (6,322) | (3,754) |
Net deferred tax assets | $ 24,302 | $ 27,089 |
Income Taxes - Operating Loss C
Income Taxes - Operating Loss Carryforward (Details) | Dec. 31, 2019USD ($) |
Federal | IRS | |
Operating Loss Carryforward | |
Net operating loss carryforward | $ 17,438,000 |
State | California | |
Operating Loss Carryforward | |
Net operating loss carryforward | $ 17,372,000 |
Income Taxes - Tax Credit Carry
Income Taxes - Tax Credit Carryforwards (Details) | Dec. 31, 2019USD ($) |
California | State | |
Tax Credit Carryforwards | |
Total tax credit carryforwards | $ 57,328 |
Income Taxes - Carry Amounts of
Income Taxes - Carry Amounts of the Low Income Housing Investments (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Income Taxes | ||
Low income housing investments | $ 6,126 | $ 3,172 |
Future commitments | $ 625 | $ 273 |
Income Taxes - Components of Lo
Income Taxes - Components of Low Income Housing Investment (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Income Taxes | ||
Low income housing tax credits | $ 511,000 | $ 425,000 |
Low income housing investment expense | $ 520,000 | $ 437,000 |
Income Taxes - Future Commitmen
Income Taxes - Future Commitments of the Low Income Housing Investments (Details) - Low income housing investments | Dec. 31, 2019USD ($) |
Future Commitments | |
2019 | $ 28,000 |
2021 through 2023 | $ 597,000 |
Equity Plan - General Disclosur
Equity Plan - General Disclosures (Details) - USD ($) $ in Thousands | Oct. 11, 2019 | Dec. 31, 2019 | Dec. 31, 2018 |
Equity Plan | |||
Number of shares available for future grants | 796,957 | ||
Presidio bank | |||
Equity Plan | |||
Consideration for Presidio stock options exchanged for Heritage Commerce Corp stock options | $ 7,426 | $ 7,426 | |
Options | |||
Equity Plan | |||
Vesting period | 4 years | ||
Expiration term | 10 years | ||
Heritage Commerce Corp stock options | 2,712,846 | 1,570,603 | |
Options | Presidio bank | |||
Equity Plan | |||
Heritage Commerce Corp stock options | 1,176,757 | ||
Restricted stock | |||
Equity Plan | |||
Number of equity awards issued (in shares) | 134,653 | ||
Nonqualified stock options | |||
Equity Plan | |||
Number of equity awards issued (in shares) | 299,500 |
Equity Plan - Stock Option Acti
Equity Plan - Stock Option Activity (Details) - Options - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2019 | |
Number of Shares | ||
Outstanding at the beginning of the period (in shares) | 1,570,603 | |
Granted (in shares) | 299,500 | |
Heritage Commerce Corp stock options | 2,712,846 | 2,712,846 |
Exercised (in shares) | (266,689) | |
Forfeited or expired (in shares) | (67,325) | |
Outstanding at the end of the period (in shares) | 2,712,846 | |
Vested or expected to vest (in shares) | 2,550,075 | |
Exercisable at the end of the period (in shares) | 2,206,775 | |
Weighted Average Exercise Price | ||
Outstanding at the beginning of the period (in dollars per share) | $ 10.76 | |
Granted (in dollars per share) | 12.16 | |
Heritage Commerce Corp stock options | 8.80 | $ 8.80 |
Exercised (in dollars per share) | 6.10 | |
Forfeited or expired (in dollars per share) | 14.31 | |
Outstanding at the end of the period (in dollars per share) | $ 8.80 | |
Additional Information | ||
Weighted Average Remaining Contractual Life - Outstanding at the end of the period (in years) | 5 years 7 months 13 days | |
Weighted Average Remaining Contractual Life - Vested or expected to vest (in years) | 5 years 7 months 13 days | |
Weighted Average Remaining Contractual Life - Exercisable at the end of the period (in years) | 4 years 11 months 5 days | |
Aggregate Intrinsic Value - Outstanding at the end of the period (in dollars) | $ 12,369,413 | |
Aggregate Intrinsic Value - Vested or expected to vest (in dollars) | 11,627,248 | |
Aggregate Intrinsic Value - Exercisable at the end of the period (in dollars) | $ 12,151,054 | |
Presidio bank | ||
Number of Shares | ||
Heritage Commerce Corp stock options | 1,176,757 | 1,176,757 |
Outstanding at the end of the period (in shares) | 1,176,757 | |
Weighted Average Exercise Price | ||
Heritage Commerce Corp stock options | $ 5.05 | $ 5.05 |
Outstanding at the end of the period (in dollars per share) | $ 5.05 |
Equity Plan - Information Relat
Equity Plan - Information Related to the Equity Plans for each of the Last Three Years (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Information Related to the Equity Plans | |||
Cash received from option exercise | $ 1,626,000 | $ 2,667,000 | $ 1,368,000 |
Options | |||
Information Related to the Equity Plans | |||
Intrinsic value of options exercised | 1,618,615 | 1,844,909 | 1,342,794 |
Cash received from option exercise | 1,626,113 | 2,667,305 | 1,368,673 |
Tax benefit realized from option exercises | $ 258,037 | $ 534,638 | $ 547,817 |
Weighted average fair value of options granted (in dollars per share) | $ 1.91 | $ 3.03 | $ 2.66 |
Equity Plan - Unrecognized Comp
Equity Plan - Unrecognized Compensation Cost - Nonvested Stock Options (Details) - Options | 12 Months Ended |
Dec. 31, 2019USD ($) | |
Unrecognized Compensation Cost | |
Total unrecognized compensation cost related to nonvested stock options granted | $ 1,156,000 |
Expected weighted-average period for recognition of compensation costs related to nonvested stock options | 2 years 7 months 21 days |
Equity Plan - Assumptions Used
Equity Plan - Assumptions Used to Estimate Fair Value (Details) - Options | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Assumptions Used to Estimate Fair Value | |||
Expected life in months | 72 months | 72 months | 72 months |
Volatility (as a percent) | 24.00% | 21.00% | 24.00% |
Weighted average risk-free interest rate (as a percent) | 2.23% | 2.88% | 1.94% |
Expected dividends (as a percent) | 3.95% | 2.64% | 2.78% |
Equity Plan - Restricted Stock
Equity Plan - Restricted Stock Activity (Details) - Restricted stock | 12 Months Ended |
Dec. 31, 2019$ / sharesshares | |
Number of Shares | |
Nonvested shares at the beginning of the period (in shares) | shares | 193,298 |
Granted (in shares) | shares | 134,653 |
Vested (in shares) | shares | (82,498) |
Forfeited or expired (in shares) | shares | (6,000) |
Nonvested shares at the end of the period (in shares) | shares | 239,453 |
Weighted Average Grant Date Fair Value | |
Nonvested shares at the beginning of the period (in dollars per share) | $ / shares | $ 11.04 |
Granted (in dollars per share) | $ / shares | 12.16 |
Vested (in dollars per share) | $ / shares | 12.37 |
Forfeited or expired (in dollars per share) | $ / shares | 17.11 |
Nonvested shares at the end of the period (in dollars per share) | $ / shares | $ 11.23 |
Equity Plan - Unrecognized Co_2
Equity Plan - Unrecognized Compensation Cost - Nonvested Restricted Stock Awards (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Unrecognized Compensation Cost | |||
Total compensation cost | $ 1,924,000 | $ 1,817,000 | $ 1,750,000 |
Total income tax benefit on share-based compensation cost | 239,000 | $ 424,000 | $ 146,000 |
Restricted stock | |||
Unrecognized Compensation Cost | |||
Total unrecognized compensation cost related to nonvested restricted stock awards | $ 2,340,000 | ||
Expected weighted-average period for recognition of compensation costs related to nonvested restricted stock awards | 2 years 1 month 10 days |
Benefit Plans - 401(k) Savings
Benefit Plans - 401(k) Savings Plan (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
401(k) Savings Plan | |||
Maximum discretionary contribution matched by employer for each employee's contribution | $ 3,000 | $ 2,500 | |
Contribution expense | $ 934,000 | $ 749,000 | $ 535,000 |
Benefit Plans - Employee Stock
Benefit Plans - Employee Stock Ownership Plan (Details) | 12 Months Ended |
Dec. 31, 2019itemshares | |
Employee Stock Ownership Plan | |
Minimum number of hours of service required for plan eligibility | item | 1,000 |
Number of shares of Company's common stock owned by ESOP | shares | 102,834 |
Benefit Plans - Deferred Compen
Benefit Plans - Deferred Compensation Plan (Details) - employee | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Deferred Compensation Plan | ||
Maximum percentage of bonus into deferred account | 100.00% | |
Percentage of regular salary into deferred account | 50.00% | |
Number of employees elected to participate in deferred compensation | 5 | 7 |
Benefit Plans - Defined Benefit
Benefit Plans - Defined Benefit Plans - Nonqualified Defined Benefit Pension Plan (Details) - Supplemental Retirement Plan $ in Thousands | 12 Months Ended |
Dec. 31, 2019USD ($) | |
Supplemental Retirement Plan | |
Plan assets associated with the plan | $ 0 |
Vesting period of defined benefit stated amount, minimum | 9 years |
Benefit Plans - Defined Benef_2
Benefit Plans - Defined Benefit Plans - Change in Projected Benefit Obligation (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Split-Dollar Life Insurance Benefit Plan | ||
Change in projected benefit obligation: | ||
Projected benefit obligation at beginning of year | $ 6,903 | $ 6,711 |
Actuarial loss (gain) | 1,017 | (35) |
Interest cost | 278 | 227 |
Net actuarial loss | 3,776 | 2,573 |
Projected benefit obligation at end of period | 8,198 | 6,903 |
Supplemental Retirement Plan | ||
Change in projected benefit obligation: | ||
Projected benefit obligation at beginning of year | 26,781 | 28,510 |
Projected benefit obligation of SERP agreements acquired from Presidio | 2,541 | |
Service cost | 263 | 249 |
Actuarial loss (gain) | (4,182) | 1,885 |
Interest cost | 1,059 | 947 |
Benefits paid | (1,137) | (1,040) |
Net actuarial loss | 9,670 | 5,672 |
Projected benefit obligation at end of period | $ 33,689 | $ 26,781 |
Benefit Plans - Defined Benef_3
Benefit Plans - Defined Benefit Plans - Amounts Recognized in Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Split-Dollar Life Insurance Benefit Plan | ||
Amounts Recognized in Accumulated Other Comprehensive Loss | ||
Net actuarial loss | $ 3,776 | $ 2,573 |
Prior transition obligation | 1,059 | 1,149 |
Accumulated other comprehensive loss | 4,835 | 3,722 |
Supplemental Retirement Plan | ||
Amounts Recognized in Accumulated Other Comprehensive Loss | ||
Net actuarial loss | $ 9,670 | $ 5,672 |
Benefit Plans - Defined Benef_4
Benefit Plans - Defined Benefit Plans - Weighted-average Assumptions Used to Determine the Benefit Obligation at Year-end (Details) | Dec. 31, 2019 | Dec. 31, 2018 |
Supplemental Retirement Plan | ||
Weighted-average Assumptions Used to Determine the Benefit Obligation at Year-end | ||
Discount rate | 3.01% | 4.03% |
Split-Dollar Life Insurance Benefit Plan | ||
Weighted-average Assumptions Used to Determine the Benefit Obligation at Year-end | ||
Discount rate | 3.01% | 4.03% |
Benefit Plans - Defined Benef_5
Benefit Plans - Defined Benefit Plans - Estimated Benefit Payments over the Next Ten Years (Details) - Supplemental Retirement Plan $ in Thousands | Dec. 31, 2019USD ($) |
Estimated Benefit Payments | |
2020 | $ 1,509 |
2021 | 1,717 |
2022 | 1,863 |
2023 | 1,974 |
2024 | 2,011 |
2025 to 2029 | 11,366 |
Total | $ 20,440 |
Benefit Plans - Defined Benef_6
Benefit Plans - Defined Benefit Plans - Components of Pension Cost (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Supplemental Retirement Plan | ||
Components of net periodic benefit cost: | ||
Service cost | $ 263 | $ 249 |
Interest cost | 1,059 | 947 |
Amortization of net actuarial loss | 184 | 292 |
Accelerated benefits for Presidio SERP agreements due to change in control | 1,465 | |
Net periodic benefit cost | 2,971 | 1,488 |
Amount recognized in other comprehensive income | 2,847 | 1,577 |
Split-Dollar Life Insurance Benefit Plan | ||
Components of net periodic benefit cost: | ||
Interest cost | 278 | 227 |
Amortization of prior transition obligation | (96) | (65) |
Net periodic benefit cost | 182 | 162 |
Amount recognized in other comprehensive income | $ 1,113 | $ (30) |
Benefit Plans - Defined Benef_7
Benefit Plans - Defined Benefit Plans - Estimated Net Actuarial Loss and Prior Service Cost (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Supplemental Retirement Plan | ||
Estimated net actuarial loss and prior service cost that will be amortized from accumulated other comprehensive loss into net periodic cost over next fiscal year | ||
Estimated net actuarial loss and prior service cost that will be amortized from accumulated other comprehensive loss into net periodic cost over next fiscal year | $ 387,000 | $ 183,000 |
Split-Dollar Life Insurance Benefit Plan | ||
Estimated net actuarial loss and prior service cost that will be amortized from accumulated other comprehensive loss into net periodic cost over next fiscal year | ||
Estimated net actuarial loss and prior service cost that will be amortized from accumulated other comprehensive loss into net periodic cost over next fiscal year | $ 90,000 | $ 90,000 |
Benefit Plans - Defined Benef_8
Benefit Plans - Defined Benefit Plans - Weighted-average Assumptions Used to Determine Net Periodic Cost (Details) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Supplemental Retirement Plan | ||
Weighted-average Assumption Used to Determine Net Periodic Benefit Cost: | ||
Discount rate | 4.03% | 3.38% |
Split-Dollar Life Insurance Benefit Plan | ||
Weighted-average Assumption Used to Determine Net Periodic Benefit Cost: | ||
Discount rate | 4.03% | 3.38% |
Fair Value - Financial Assets a
Fair Value - Financial Assets and Liabilities Measured on a Recurring Basis (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Financial Assets and Liabilities Measured on a Recurring Basis | ||
Securities available-for-sale | $ 404,825 | $ 459,043 |
I/O strip receivables | 503 | 568 |
Agency mortgage-backed securities | ||
Financial Assets and Liabilities Measured on a Recurring Basis | ||
Securities available-for-sale | 284,361 | 302,854 |
U.S. Treasury | ||
Financial Assets and Liabilities Measured on a Recurring Basis | ||
Securities available-for-sale | 120,464 | 148,753 |
U.S. Government sponsored entities | ||
Financial Assets and Liabilities Measured on a Recurring Basis | ||
Securities available-for-sale | 7,436 | |
Quoted Prices in Active Markets for Identical Assets (Level 1) | U.S. Treasury | ||
Financial Assets and Liabilities Measured on a Recurring Basis | ||
Securities available-for-sale | 120,464 | 148,753 |
Significant Other Observable Inputs (Level 2) | ||
Financial Assets and Liabilities Measured on a Recurring Basis | ||
I/O strip receivables | 503 | 568 |
Significant Other Observable Inputs (Level 2) | Agency mortgage-backed securities | ||
Financial Assets and Liabilities Measured on a Recurring Basis | ||
Securities available-for-sale | 284,361 | 302,854 |
Significant Other Observable Inputs (Level 2) | U.S. Government sponsored entities | ||
Financial Assets and Liabilities Measured on a Recurring Basis | ||
Securities available-for-sale | 7,436 | |
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 Assets_2
Fair Value - Financial Assets and Liabilities Measured on a Non-Recurring Basis (Details) - Non-recurring basis - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Financial Assets and Liabilities Measured on a Non-Recurring Basis | ||
Impaired loans - held-for-investment: | $ 862 | $ 702 |
Significant Unobservable Inputs (Level 3) | ||
Financial Assets and Liabilities Measured on a Non-Recurring Basis | ||
Impaired loans - held-for-investment: | 862 | 702 |
Commercial | Commercial | ||
Financial Assets and Liabilities Measured on a Non-Recurring Basis | ||
Impaired loans - held-for-investment: | 862 | 702 |
Commercial | Commercial | Significant Unobservable Inputs (Level 3) | ||
Financial Assets and Liabilities Measured on a Non-Recurring Basis | ||
Impaired loans - held-for-investment: | $ 862 | $ 702 |
Fair Value - Impaired Loans Hel
Fair Value - Impaired Loans Held-for-investment - Tabular Disclosure (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Impaired Loans Held-for-investment | ||
Impaired loans held-for-investment | $ 10,264,000 | $ 15,140,000 |
Carried at fair value | ||
Impaired Loans Held-for-investment | ||
Impaired loans held-for-investment | 2,697,000 | 7,646,000 |
Specific valuation allowance | (1,835,000) | (6,944,000) |
Impaired loans held-for-investment carried at fair value, net | 862,000 | 702,000 |
Portion carried at cost | ||
Impaired Loans Held-for-investment | ||
Impaired loans held-for-investment | $ 7,567,000 | $ 7,494,000 |
Fair Value - Impaired Loans H_2
Fair Value - Impaired Loans Held-for-investment - Additional Disclosures (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Impaired Loans Held-for-investment | ||
Impaired loans held-for-investment | $ 10,264,000 | $ 15,140,000 |
Additional provision (credit) for loan losses | 2,128,000 | (7,042,000,000) |
Carrying amount | ||
Impaired Loans Held-for-investment | ||
Foreclosed assets | 0 | 0 |
Carried at fair value | ||
Impaired Loans Held-for-investment | ||
Impaired loans held-for-investment | 2,697,000 | 7,646,000 |
Specific valuation allowance | 1,835,000 | 6,944,000 |
Portion carried at cost | ||
Impaired Loans Held-for-investment | ||
Impaired loans held-for-investment | $ 7,567,000 | $ 7,494,000 |
Fair Value - Quantitative Infor
Fair Value - Quantitative Information about Level 3 Fair Value Measurements (Details) - Non-recurring basis $ in Thousands | Dec. 31, 2019USD ($)item | Dec. 31, 2018USD ($)item |
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 | $ 862 | $ 702 |
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 | 862 | 702 |
Commercial | Commercial | ||
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 | 862 | 702 |
Commercial | Commercial | 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 | $ 862 | $ 702 |
Commercial | Commercial | Significant Unobservable Inputs (Level 3) | 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 - Impaired loan held for investment (as a percent) | item | 0.01 | 0 |
Commercial | Commercial | Significant Unobservable Inputs (Level 3) | 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 - Impaired loan held for investment (as a percent) | item | 1 |
Fair Value - Carrying Amounts a
Fair Value - Carrying Amounts and Estimated Fair Values of Financial Instruments (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Assets | ||
Securities available-for-sale | $ 404,825 | $ 459,043 |
Securities held-to-maturity | 368,107 | 366,175 |
Federal Home Loan Bank, Federal Reserve Bank stock and other investments, at cost | 29,842 | 25,216 |
I/O strips receivables | 503 | 568 |
Liabilities | ||
Subordinated Debt. | 39,554 | 39,369 |
Significant Other Observable Inputs (Level 2) | ||
Assets | ||
I/O strips receivables | 503 | 568 |
Carrying amount | ||
Assets | ||
Cash and cash equivalents | 457,370 | 164,568 |
Securities available-for-sale | 404,825 | 459,043 |
Securities held-to-maturity | 366,560 | 377,198 |
Loans (including loans held-for-sale), net | 2,511,611 | 1,861,206 |
Federal Home Loan Bank, Federal Reserve Bank stock and other investments, at cost | 29,842 | 25,216 |
Accrued interest receivable | 10,915 | 9,577 |
I/O strips receivables | 503 | 568 |
Liabilities | ||
Time deposits | 168,034 | 147,560 |
Other deposits | 3,246,734 | 2,489,972 |
Subordinated Debt. | 39,554 | 39,369 |
Accrued interest payable | 707 | 497 |
Carried at fair value | ||
Assets | ||
Cash and cash equivalents | 457,370 | 164,568 |
Securities available-for-sale | 404,825 | 459,043 |
Securities held-to-maturity | 368,107 | 366,175 |
Loans (including loans held-for-sale), net | 2,513,329 | 1,829,303 |
Accrued interest receivable | 10,915 | 9,577 |
I/O strips receivables | 503 | 568 |
Liabilities | ||
Time deposits | 158,704 | 147,916 |
Other deposits | 3,246,734 | 2,489,972 |
Subordinated Debt. | 40,404 | 38,969 |
Accrued interest payable | 707 | 497 |
Carried at fair value | Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Assets | ||
Cash and cash equivalents | 457,370 | 164,568 |
Securities available-for-sale | 120,464 | 148,753 |
Accrued interest receivable | 446 | 597 |
Carried at fair value | Significant Other Observable Inputs (Level 2) | ||
Assets | ||
Securities available-for-sale | 284,361 | 310,290 |
Securities held-to-maturity | 368,107 | 366,175 |
Loans (including loans held-for-sale), net | 1,052 | 2,649 |
Accrued interest receivable | 2,218 | 2,274 |
I/O strips receivables | 503 | 568 |
Liabilities | ||
Time deposits | 158,704 | 147,916 |
Other deposits | 3,246,734 | 2,489,972 |
Subordinated Debt. | 40,404 | 38,969 |
Accrued interest payable | 707 | 497 |
Carried at fair value | Significant Unobservable Inputs (Level 3) | ||
Assets | ||
Loans (including loans held-for-sale), net | 2,512,277 | 1,826,654 |
Accrued interest receivable | $ 8,251 | $ 6,706 |
Commitments and Contingencies -
Commitments and Contingencies - Financial Instruments with Off-Balance Sheet Risk (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Commitments and Contingencies | ||
Commitments to extend credit, fixed rate | $ 158,817,000 | $ 133,641,000 |
Commitments to extend credit, variable rate | 961,821,000 | 606,738,000 |
Commitment to extend credit, total | $ 1,120,638,000 | 740,379,000 |
Expiration term of commitments (in years) | 1 year | |
Reserves in the form of vault cash and balances at Federal Reserve Bank of San Francisco | $ 48,717,000 | |
Unused lines of credit and commitments to make loans | ||
Commitments and Contingencies | ||
Commitments to extend credit, fixed rate | 147,372,000 | 130,871,000 |
Commitments to extend credit, variable rate | 951,206,000 | 593,839,000 |
Commitment to extend credit, total | 1,098,578,000 | 724,710,000 |
Standby letters of credit | ||
Commitments and Contingencies | ||
Commitments to extend credit, fixed rate | 11,445,000 | 2,770,000 |
Commitments to extend credit, variable rate | 10,615,000 | 12,899,000 |
Commitment to extend credit, total | $ 22,060,000 | $ 15,669,000 |
Shareholders' Equity and Earn_3
Shareholders' Equity and Earnings Per Share - Dividends (Details) - $ / shares | Jan. 23, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 |
Dividends | ||||
Quarterly cash dividends declared to holders of common stock | $ 0.48 | $ 0.44 | $ 0.40 | |
Subsequent Event | ||||
Dividends | ||||
Quarterly cash dividends declared to holders of common stock | $ 0.13 |
Shareholders' Equity and Earn_4
Shareholders' Equity and Earnings Per Share - Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Reconciliation of factors used in computing basic and diluted earnings per common share | |||||||||||
Net income | $ 5,685 | $ 11,277 | $ 11,353 | $ 12,146 | $ 13,232 | $ 12,375 | $ 915 | $ 8,809 | $ 40,461 | $ 35,331 | $ 23,828 |
Weighted average common shares outstanding for basic earnings per common share (in shares) | 46,684,384 | 41,469,211 | 38,095,250 | ||||||||
Dilutive potential common shares | 1,221,845 | 713,728 | 515,565 | ||||||||
Shares used in computing diluted earnings per common share (in shares) | 47,906,229 | 42,182,939 | 38,610,815 | ||||||||
Basic earnings per share (in dollars per share) | $ 0.10 | $ 0.26 | $ 0.26 | $ 0.28 | $ 0.31 | $ 0.29 | $ 0.02 | $ 0.23 | $ 0.87 | $ 0.85 | $ 0.63 |
Diluted earnings per share (in dollars per share) | $ 0.10 | $ 0.26 | $ 0.26 | $ 0.28 | $ 0.30 | $ 0.28 | $ 0.02 | $ 0.23 | $ 0.84 | $ 0.84 | $ 0.62 |
Number of shares not in computing diluted earnings per common share | 789,065 | 534,106 | 346,500 |
Capital Requirements - General
Capital Requirements - General Information (Details) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
HBC (Wholly-owned Subsidiary) | ||
Capital Requirements | ||
Capital conservation buffer (as a percent) | 2.50% | 1.875% |
Capital Requirements - Tabular
Capital Requirements - Tabular Disclosure (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Total Capital (to risk-weighted assets) | ||
Actual, Amount | $ 457,158 | $ 344,597 |
Required For Capital Adequacy Purposes, Amount | $ 329,306 | $ 227,514 |
Actual, Ratio (as a percent) | 14.60% | 15.00% |
Required For Capital Adequacy Purposes, Ratio (as a percent) | 10.50% | 9.875% |
Tier 1 Capital (to risk-weighted assets) | ||
Actual, Amount | $ 393,432 | $ 276,675 |
Required For Capital Adequacy Purposes, Amount | $ 266,581 | $ 181,435 |
Actual, Ratio (as a percent) | 12.50% | 12.00% |
Required For Capital Adequacy Purposes, Ratio (as a percent) | 8.50% | 7.875% |
Common Equity Tier 1 Capital (to risk-weighted assets) | ||
Actual, Amount | $ 393,432 | $ 276,675 |
Required For Capital Adequacy Purposes, Amount | $ 219,538 | $ 146,876 |
Actual, Ratio (as a percent) | 12.50% | 12.00% |
Required For Capital Adequacy Purposes, Ratio (as a percent) | 7.00% | 6.375% |
Tier 1 Capital (to average assets) | ||
Actual, Amount | $ 393,432 | $ 276,675 |
Required For Capital Adequacy Purposes, Amount | $ 161,677 | $ 124,726 |
Actual, Ratio (as a percent) | 9.70% | 8.90% |
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 | $ 435,757 | $ 322,283 |
To Be Well Capitalized Under Regulatory Requirements, Amount | 313,485 | 230,275 |
Required For Capital Adequacy Purposes, Amount | $ 329,159 | $ 227,397 |
Actual, Ratio (as a percent) | 13.90% | 14.00% |
To Be Well Capitalized Under Regulatory Requirements, Ratio (as a percent) | 10.00% | 10.00% |
Required For Capital Adequacy Purposes, Ratio (as a percent) | 10.50% | 9.875% |
Tier 1 Capital (to risk-weighted assets) | ||
Actual, Amount | $ 411,585 | $ 293,730 |
To Be Well Capitalized Under Regulatory Requirements, Amount | 250,788 | 184,220 |
Required For Capital Adequacy Purposes, Amount | $ 266,462 | $ 181,342 |
Actual, Ratio (as a percent) | 13.10% | 12.80% |
To Be Well Capitalized Under Regulatory Requirements, Ratio (as a percent) | 8.00% | 8.00% |
Required For Capital Adequacy Purposes, Ratio (as a percent) | 8.50% | 7.875% |
Common Equity Tier 1 Capital (to risk-weighted assets) | ||
Actual, Amount | $ 411,585 | $ 293,730 |
To Be Well Capitalized Under Regulatory Requirements, Amount | 203,765 | 149,679 |
Required For Capital Adequacy Purposes, Amount | $ 219,439 | $ 146,800 |
Actual, Ratio (as a percent) | 13.10% | 12.80% |
To Be Well Capitalized Under Regulatory Requirements, Ratio (as a percent) | 6.50% | 6.50% |
Required For Capital Adequacy Purposes, Ratio (as a percent) | 7.00% | 6.375% |
Tier 1 Capital (to average assets) | ||
Actual, Amount | $ 411,585 | $ 293,730 |
To Be Well Capitalized Under Regulatory Requirements, Amount | 202,013 | 155,832 |
Required For Capital Adequacy Purposes, Amount | $ 161,611 | $ 124,666 |
Actual, Ratio (as a percent) | 10.20% | 9.40% |
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 ($) | 12 Months Ended | |||
Dec. 31, 2019 | Dec. 31, 2018 | Aug. 27, 2019 | Aug. 26, 2019 | |
Cash dividend | ||||
Common stock, shares authorized | 100,000,000 | 60,000,000 | 100,000,000 | 60,000,000 |
Subordinated Debt. | $ 39,554,000 | $ 39,369,000 | ||
HCC (Parent) | ||||
Cash dividend | ||||
Subordinated Debt. | 39,554,000 | 39,369,000 | ||
HBC (Wholly-owned Subsidiary) | ||||
Cash dividend | ||||
Cash dividend available | 20,636,000 | |||
Dividends paid to parent company | $ 22,500,000 | $ 17,000,000 |
Revenue Recognition (Details)
Revenue Recognition (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Revenue Recognition | |||||||||||
Non-interest Income In-scope of Topic 606 | $ 4,510 | $ 4,113 | |||||||||
Non-interest Income Out-of-scope of Topic 606 | 5,734 | 5,461 | |||||||||
Total noninterest income | $ 2,393 | $ 2,618 | $ 2,765 | $ 2,468 | $ 2,393 | $ 2,206 | $ 2,780 | $ 2,195 | $ 10,244 | $ 9,574 | $ 9,612 |
Noninterest Expense (Details)
Noninterest Expense (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Noninterest Expense | |||||||||||
Salaries and employee benefits | $ 50,754,000 | $ 43,762,000 | $ 35,719,000 | ||||||||
Occupancy and equipment | 6,647,000 | 5,411,000 | 4,578,000 | ||||||||
Professional fees | 3,259,000 | 1,969,000 | 2,982,000 | ||||||||
Data processing | 2,890,000 | 1,978,000 | 1,483,000 | ||||||||
Amortization of intangible assets | 2,739,000 | 1,943,000 | 1,361,000 | ||||||||
Software subscriptions | 2,397,000 | 2,343,000 | 1,831,000 | ||||||||
Insurance expense | 1,864,000 | 1,685,000 | 1,529,000 | ||||||||
Other, excluding merger-related costs | 14,348,000 | 16,430,000 | 11,255,000 | ||||||||
Total noninterest expense, excluding merger-related costs | 84,898,000 | 75,521,000 | 60,738,000 | ||||||||
Salaries and employee benefits merger-related costs | 6,580,000 | 3,569,000 | |||||||||
Other merger-related costs | 4,500,000 | 5,598,000 | 671,000 | ||||||||
Pre-tax acquisition costs | $ 9,879,000 | $ 661,000 | $ 540,000 | $ 139,000 | $ 199,000 | $ 8,214,000 | $ 615,000 | 11,080,000 | 9,167,000 | 671,000 | |
Total noninterest expense | $ 30,626,000 | $ 17,909,000 | $ 18,445,000 | $ 17,918,000 | $ 16,941,000 | $ 17,728,000 | $ 24,862,000 | $ 15,990,000 | $ 84,898,000 | $ 75,521,000 | $ 60,738,000 |
Business Segment Information -
Business Segment Information - Business Segments (Details) | 12 Months Ended |
Dec. 31, 2019segment | |
Focus | |
Business Segment Information | |
Number of business segments | 2 |
Business Segment Information _2
Business Segment Information - Operating Statements (Details) - USD ($) | 3 Months Ended | 12 Months Ended | ||||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Operating Income | ||||||||||||
Interest income | $ 42,471,000 | $ 33,250,000 | $ 33,489,000 | $ 33,449,000 | $ 35,378,000 | $ 34,610,000 | $ 31,980,000 | $ 27,877,000 | $ 142,659,000 | $ 129,845,000 | $ 106,911,000 | |
Total interest expense | 3,242,000 | 2,625,000 | 2,573,000 | 2,407,000 | 2,318,000 | 2,159,000 | 1,816,000 | 1,529,000 | 10,847,000 | 7,822,000 | 5,387,000 | |
Net interest income | 39,229,000 | 30,625,000 | 30,916,000 | 31,042,000 | 33,060,000 | 32,451,000 | 30,164,000 | 26,348,000 | 131,812,000 | 122,023,000 | 101,524,000 | |
Provision for loan losses | 3,223,000 | (576,000) | (740,000) | (1,061,000) | 142,000 | (425,000) | 7,198,000 | 506,000 | 846,000 | 7,421,000 | 99,000 | |
Net interest income after provision | 36,006,000 | 31,201,000 | 31,656,000 | 32,103,000 | 32,918,000 | 32,876,000 | 22,966,000 | 25,842,000 | 130,966,000 | 114,602,000 | 101,425,000 | |
Noninterest income | 2,393,000 | 2,618,000 | 2,765,000 | 2,468,000 | 2,393,000 | 2,206,000 | 2,780,000 | 2,195,000 | 10,244,000 | 9,574,000 | 9,612,000 | |
Noninterest expense | 30,626,000 | 17,909,000 | 18,445,000 | 17,918,000 | 16,941,000 | 17,728,000 | 24,862,000 | 15,990,000 | 84,898,000 | 75,521,000 | 60,738,000 | |
Income before income taxes | 7,773,000 | 15,910,000 | 15,976,000 | 16,653,000 | 18,370,000 | 17,354,000 | 884,000 | 12,047,000 | 56,312,000 | 48,655,000 | 50,299,000 | |
Income tax expense | 2,088,000 | 4,633,000 | 4,623,000 | 4,507,000 | 5,138,000 | 4,979,000 | (31,000) | 3,238,000 | 15,851,000 | 13,324,000 | 26,471,000 | |
Net income | 5,685,000 | 11,277,000 | 11,353,000 | $ 12,146,000 | 13,232,000 | 12,375,000 | 915,000 | 8,809,000 | 40,461,000 | 35,331,000 | 23,828,000 | |
Total assets | 4,109,463,000 | 3,096,562,000 | $ 2,843,452,000 | 4,109,463,000 | 3,096,562,000 | 2,843,452,000 | ||||||
Loans, net of deferred fees | 2,533,844,000 | 1,886,405,000 | 1,582,667,000 | 2,533,844,000 | 1,886,405,000 | 1,582,667,000 | ||||||
Goodwill | 167,420,000 | 83,753,000 | 45,664,000 | 167,420,000 | 83,753,000 | 45,664,000 | ||||||
Business Combination, Acquisition Related Costs | 9,879,000 | 661,000 | 540,000 | 139,000 | 199,000 | 8,214,000 | 615,000 | 11,080,000 | 9,167,000 | 671,000 | ||
Pre-tax acquisition costs | 9,879,000 | $ 661,000 | $ 540,000 | 139,000 | $ 199,000 | $ 8,214,000 | $ 615,000 | 11,080,000 | 9,167,000 | 671,000 | ||
Tax Cuts and Jobs Act of 2017 effect on re-measurement of net deferred tax assets | 7,103,000 | 7,103,000 | ||||||||||
Banking | ||||||||||||
Operating Income | ||||||||||||
Interest income | 130,971,000 | 115,147,000 | 95,027,000 | |||||||||
Intersegment interest allocations | 1,182,000 | 1,856,000 | 1,126,000 | |||||||||
Total interest expense | 10,847,000 | 7,822,000 | 5,387,000 | |||||||||
Net interest income | 121,306,000 | 109,181,000 | 90,766,000 | |||||||||
Provision for loan losses | 517,000 | 7,224,000 | 102,000 | |||||||||
Net interest income after provision | 120,789,000 | 101,957,000 | 90,664,000 | |||||||||
Noninterest income | 9,643,000 | 8,662,000 | 8,559,000 | |||||||||
Noninterest expense | 78,159,000 | 69,164,000 | 53,860,000 | |||||||||
Intersegment expense allocations | 547,000 | 753,000 | 528,000 | |||||||||
Income before income taxes | 52,820,000 | 42,208,000 | 45,891,000 | |||||||||
Income tax expense | 14,819,000 | 11,418,000 | 24,266,000 | |||||||||
Net income | 38,001,000 | 30,790,000 | 21,625,000 | |||||||||
Total assets | 4,045,801,000 | 3,028,721,000 | 2,780,286,000 | 4,045,801,000 | 3,028,721,000 | 2,780,286,000 | ||||||
Loans, net of deferred fees | 2,487,864,000 | 1,832,815,000 | 1,533,841,000 | 2,487,864,000 | 1,832,815,000 | 1,533,841,000 | ||||||
Goodwill | 154,376,000 | 70,709,000 | 32,620,000 | 154,376,000 | 70,709,000 | 32,620,000 | ||||||
Business Combination, Acquisition Related Costs | 11,080,000 | 9,167,000 | ||||||||||
Pre-tax acquisition costs | 11,080,000 | 9,167,000 | ||||||||||
Tax Cuts and Jobs Act of 2017 effect on re-measurement of net deferred tax assets | 6,749,000 | |||||||||||
Factoring | ||||||||||||
Operating Income | ||||||||||||
Interest income | 11,688,000 | 14,698,000 | 11,884,000 | |||||||||
Intersegment interest allocations | (1,182,000) | (1,856,000) | (1,126,000) | |||||||||
Net interest income | 10,506,000 | 12,842,000 | 10,758,000 | |||||||||
Provision for loan losses | 329,000 | 197,000 | (3,000) | |||||||||
Net interest income after provision | 10,177,000 | 12,645,000 | 10,761,000 | |||||||||
Noninterest income | 601,000 | 912,000 | 1,053,000 | |||||||||
Noninterest expense | 6,739,000 | 6,357,000 | 6,878,000 | |||||||||
Intersegment expense allocations | (547,000) | (753,000) | (528,000) | |||||||||
Income before income taxes | 3,492,000 | 6,447,000 | 4,408,000 | |||||||||
Income tax expense | 1,032,000 | 1,906,000 | 2,205,000 | |||||||||
Net income | 2,460,000 | 4,541,000 | 2,203,000 | |||||||||
Total assets | 63,662,000 | 67,841,000 | 63,166,000 | 63,662,000 | 67,841,000 | 63,166,000 | ||||||
Loans, net of deferred fees | 45,980,000 | 53,590,000 | 48,826,000 | 45,980,000 | 53,590,000 | 48,826,000 | ||||||
Goodwill | 13,044,000 | 13,044,000 | $ 13,044,000 | 13,044,000 | 13,044,000 | 13,044,000 | ||||||
Tax Cuts and Jobs Act of 2017 effect on re-measurement of net deferred tax assets | 354,000 | |||||||||||
HCC (Parent) | ||||||||||||
Operating Income | ||||||||||||
Total interest expense | 2,314,000 | 2,315,000 | 1,394,000 | |||||||||
Income before income taxes | 17,223,000 | 11,655,000 | 12,450,000 | |||||||||
Income tax expense | (1,481,000) | (1,515,000) | (1,300,000) | |||||||||
Net income | 40,461,000 | 35,331,000 | 23,828,000 | |||||||||
Total assets | $ 616,889,000 | $ 407,068,000 | $ 616,889,000 | $ 407,068,000 | ||||||||
Tri Valley Bank and United American Bank | Banking | ||||||||||||
Operating Income | ||||||||||||
Business Combination, Acquisition Related Costs | 671,000 | |||||||||||
Pre-tax acquisition costs | $ 671,000 |
Parent Company only Condensed_3
Parent Company only Condensed Financial Information - Balance Sheets (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Assets | ||||
Cash and cash equivalents | $ 457,370 | $ 164,568 | ||
Total assets | 4,109,463 | 3,096,562 | $ 2,843,452 | |
Liabilities and Shareholders' Equity | ||||
Subordinated debt, net of issuance costs | 39,554 | 39,369 | ||
Shareholder's equity | 576,708 | 367,466 | $ 271,239 | $ 259,850 |
Total liabilities and shareholders' equity | 4,109,463 | 3,096,562 | ||
HCC (Parent) | ||||
Assets | ||||
Cash and cash equivalents | 20,260 | 21,358 | ||
Investment in subsidiary bank | 594,868 | 384,516 | ||
Other assets | 1,761 | 1,194 | ||
Total assets | 616,889 | 407,068 | ||
Liabilities and Shareholders' Equity | ||||
Subordinated debt, net of issuance costs | 39,554 | 39,369 | ||
Other liabilities | 627 | 233 | ||
Shareholder's equity | 576,708 | 367,466 | ||
Total liabilities and shareholders' equity | $ 616,889 | $ 407,068 |
Parent Company only Condensed_4
Parent Company only Condensed Financial Information - Statements of Operations (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Condensed statements of income | |||||||||||
Interest expense | $ (3,242) | $ (2,625) | $ (2,573) | $ (2,407) | $ (2,318) | $ (2,159) | $ (1,816) | $ (1,529) | $ (10,847) | $ (7,822) | $ (5,387) |
Income before income taxes | 7,773 | 15,910 | 15,976 | 16,653 | 18,370 | 17,354 | 884 | 12,047 | 56,312 | 48,655 | 50,299 |
Equity in undistributed net income of subsidiary bank: | |||||||||||
Income tax benefit | (2,088) | (4,633) | (4,623) | (4,507) | (5,138) | (4,979) | 31 | (3,238) | (15,851) | (13,324) | (26,471) |
Net income | $ 5,685 | $ 11,277 | $ 11,353 | $ 12,146 | $ 13,232 | $ 12,375 | $ 915 | $ 8,809 | 40,461 | 35,331 | 23,828 |
HCC (Parent) | |||||||||||
Condensed statements of income | |||||||||||
Dividend from subsidiary bank | 22,500 | 17,000 | 16,000 | ||||||||
Other Income | 121 | 114 | |||||||||
Interest expense | (2,314) | (2,315) | (1,394) | ||||||||
Other expenses | (3,084) | (3,030) | (2,270) | ||||||||
Income before income taxes | 17,223 | 11,655 | 12,450 | ||||||||
Equity in undistributed net income of subsidiary bank: | |||||||||||
Undistributed net income of subsidiary bank | 21,757 | 22,161 | 10,078 | ||||||||
Income tax benefit | 1,481 | 1,515 | 1,300 | ||||||||
Net income | $ 40,461 | $ 35,331 | $ 23,828 |
Parent Company only Condensed_5
Parent Company only Condensed Financial Information - Statements of Cash Flows (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Cash flows from operating activities: | |||||||||||
Net Income | $ 5,685 | $ 11,277 | $ 11,353 | $ 12,146 | $ 13,232 | $ 12,375 | $ 915 | $ 8,809 | $ 40,461 | $ 35,331 | $ 23,828 |
Adjustments to reconcile net income to net cash provided by operations: | |||||||||||
Amortization of restricted stock award, net | 1,283 | 1,109 | 912 | ||||||||
Net cash provided by operating activities | 50,343 | 48,572 | 41,358 | ||||||||
Cash flows from financing activities: | |||||||||||
Issuance of subordinated debt, net of issuance costs | 39,073 | ||||||||||
Proceeds from exercise of stock options | 1,626 | 2,667 | 1,368 | ||||||||
Net cash provided by (used in) financing activities | (28,780) | (277,882) | 246,052 | ||||||||
Net increase (decrease) in cash and cash equivalents | 292,802 | (151,654) | 50,119 | ||||||||
Cash and cash equivalents, beginning of period | 164,568 | 316,222 | 164,568 | 316,222 | 266,103 | ||||||
Cash and cash equivalents, end of period | 457,370 | 164,568 | 457,370 | 164,568 | 316,222 | ||||||
HCC (Parent) | |||||||||||
Cash flows from operating activities: | |||||||||||
Net Income | 40,461 | 35,331 | 23,828 | ||||||||
Adjustments to reconcile net income to net cash provided by operations: | |||||||||||
Amortization of restricted stock award, net | 1,283 | 1,109 | 912 | ||||||||
Equity in undistributed net income of subsidiary bank | (21,757) | (22,161) | (10,078) | ||||||||
Net change in other assets and liabilities | 12 | (64) | 224 | ||||||||
Net cash provided by operating activities | 19,999 | 14,215 | 14,886 | ||||||||
Cash flows from financing activities: | |||||||||||
Equity investment in subsidiary bank | (20,000) | ||||||||||
Payment of cash dividends | (22,723) | (18,464) | (15,238) | ||||||||
Issuance of subordinated debt, net of issuance costs | 39,073 | ||||||||||
Proceeds from exercise of stock options | 1,626 | 2,667 | 1,368 | ||||||||
Net cash provided by (used in) financing activities | (21,097) | (15,797) | 5,203 | ||||||||
Net increase (decrease) in cash and cash equivalents | (1,098) | (1,582) | 20,089 | ||||||||
Cash and cash equivalents, beginning of period | $ 21,358 | $ 22,940 | 21,358 | 22,940 | 2,851 | ||||||
Cash and cash equivalents, end of period | $ 20,260 | $ 21,358 | $ 20,260 | $ 21,358 | $ 22,940 |
Quarterly Financial Data (Una_3
Quarterly Financial Data (Unaudited) - Selected Unaudited Quarterly Financial Data (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Quarterly Financial Data (Unaudited) | |||||||||||
Interest income | $ 42,471 | $ 33,250 | $ 33,489 | $ 33,449 | $ 35,378 | $ 34,610 | $ 31,980 | $ 27,877 | $ 142,659 | $ 129,845 | $ 106,911 |
Interest expense | 3,242 | 2,625 | 2,573 | 2,407 | 2,318 | 2,159 | 1,816 | 1,529 | 10,847 | 7,822 | 5,387 |
Net interest income | 39,229 | 30,625 | 30,916 | 31,042 | 33,060 | 32,451 | 30,164 | 26,348 | 131,812 | 122,023 | 101,524 |
Provision (credit) for loan losses | 3,223 | (576) | (740) | (1,061) | 142 | (425) | 7,198 | 506 | 846 | 7,421 | 99 |
Net interest income after provision for loan losses | 36,006 | 31,201 | 31,656 | 32,103 | 32,918 | 32,876 | 22,966 | 25,842 | 130,966 | 114,602 | 101,425 |
Noninterest income | 2,393 | 2,618 | 2,765 | 2,468 | 2,393 | 2,206 | 2,780 | 2,195 | 10,244 | 9,574 | 9,612 |
Noninterest expense | 30,626 | 17,909 | 18,445 | 17,918 | 16,941 | 17,728 | 24,862 | 15,990 | 84,898 | 75,521 | 60,738 |
Income before income taxes | 7,773 | 15,910 | 15,976 | 16,653 | 18,370 | 17,354 | 884 | 12,047 | 56,312 | 48,655 | 50,299 |
Income tax expense | 2,088 | 4,633 | 4,623 | 4,507 | 5,138 | 4,979 | (31) | 3,238 | 15,851 | 13,324 | 26,471 |
Net income | $ 5,685 | $ 11,277 | $ 11,353 | $ 12,146 | $ 13,232 | $ 12,375 | $ 915 | $ 8,809 | $ 40,461 | $ 35,331 | $ 23,828 |
Earnings per common share: | |||||||||||
Basic (in dollars per share) | $ 0.10 | $ 0.26 | $ 0.26 | $ 0.28 | $ 0.31 | $ 0.29 | $ 0.02 | $ 0.23 | $ 0.87 | $ 0.85 | $ 0.63 |
Diluted (in dollars per share) | $ 0.10 | $ 0.26 | $ 0.26 | $ 0.28 | $ 0.30 | $ 0.28 | $ 0.02 | $ 0.23 | $ 0.84 | $ 0.84 | $ 0.62 |
Quarterly Financial Data (Una_4
Quarterly Financial Data (Unaudited) - Acquisition and Integration Costs (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Business Combinations | |||||||||||
Pre-tax acquisition costs | $ 9,879,000 | $ 661,000 | $ 540,000 | $ 139,000 | $ 199,000 | $ 8,214,000 | $ 615,000 | $ 11,080,000 | $ 9,167,000 | $ 671,000 | |
Tax Cuts and Jobs Act of 2017 effect on re-measurement of net deferred tax assets | $ 7,103,000 | 7,103,000 | |||||||||
Banking | |||||||||||
Business Combinations | |||||||||||
Pre-tax acquisition costs | $ 11,080,000 | $ 9,167,000 | |||||||||
Tax Cuts and Jobs Act of 2017 effect on re-measurement of net deferred tax assets | $ 6,749,000 |
Subsequent Events (Details)
Subsequent Events (Details) - $ / shares | Jan. 23, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 |
Subsequent Event [Line Items] | ||||
Quarterly cash dividends declared to holders of common stock | $ 0.48 | $ 0.44 | $ 0.40 | |
Subsequent Event | ||||
Subsequent Event [Line Items] | ||||
Quarterly cash dividends declared to holders of common stock | $ 0.13 |