Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2020 | Jul. 31, 2020 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Jun. 30, 2020 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2020 | |
Entity Registrant Name | HERITAGE COMMERCE CORP | |
Entity Central Index Key | 0001053352 | |
Entity File Number | 000-23877 | |
Entity Tax Identification Number | 77-0469558 | |
Entity Incorporation, State or Country Code | CA | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Address, Address Line One | 150 Almaden Boulevard | |
Entity Address, City or Town | San Jose | |
Entity Address, Postal Zip Code | 95113 | |
City Area Code | 408 | |
Local Phone Number | 947-6900 | |
Entity Address, State or Province | CA | |
Title of 12(b) Security | Common Stock, No Par Value | |
Trading Symbol | HTBK | |
Security Exchange Name | NASDAQ | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 59,875,967 | |
Amendment Flag | false |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Assets | ||
Cash and due from banks | $ 40,108 | $ 49,447 |
Other investments and interest-bearing deposits in other financial institutions | 885,792 | 407,923 |
Total cash and cash equivalents | 925,900 | 457,370 |
Securities available-for-sale, at fair value | 323,565 | 404,825 |
Securities held-to-maturity, at amortized cost, net of allowance for credit losses of $55 at June 30, 2020 (fair value of $332,452 at June 30, 2020 and $368,107 at December 31, 2019) | 322,677 | 366,560 |
Loans held-for-sale - SBA, at lower of cost or fair value, including deferred costs | 4,324 | 1,052 |
Loans, net of deferred fees | 2,686,389 | 2,533,844 |
Allowance for credit losses on loans(1) | (45,444) | (23,285) |
Loans, net | 2,640,945 | 2,510,559 |
Federal Home Loan Bank, Federal Reserve Bank stock and other investments, at cost | 33,509 | 29,842 |
Company-owned life insurance | 76,943 | 76,027 |
Premises and equipment, net | 9,500 | 8,250 |
Goodwill | 167,631 | 167,420 |
Other intangible assets | 18,593 | 20,415 |
Accrued interest receivable and other assets | 90,814 | 67,143 |
Total assets | 4,614,401 | 4,109,463 |
Deposits: | ||
Demand, noninterest-bearing | 1,714,058 | 1,450,873 |
Demand, interest-bearing | 934,780 | 798,375 |
Savings and money market | 1,091,740 | 982,430 |
Time deposits - under $250 | 49,493 | 54,361 |
Time deposits - $250 and over | 93,822 | 99,882 |
CDARS - interest-bearing demand, money market and time deposits | 16,333 | 28,847 |
Total deposits | 3,900,226 | 3,414,768 |
Subordinated debt, net of issuance costs | 39,646 | 39,554 |
Other short-term borrowings | 328 | |
Accrued interest payable and other liabilities | 99,722 | 78,105 |
Total liabilities | 4,039,594 | 3,532,755 |
Shareholders' equity: | ||
Preferred stock, no par value; 10,000,000 shares authorized; none issued and outstanding at June 30, 2020 and December 31, 2019 | ||
Common stock, no par value; 100,000,000 shares authorized at June 30, 2020 and authorized at December 31, 2019; 59,856,767 shares issued and outstanding at June 30, 2020 and 59,368,156 shares issued and outstanding at December 31, 2019 | 492,333 | 489,745 |
Retained earnings | 87,654 | 96,741 |
Accumulated other comprehensive loss | (5,180) | (9,778) |
Total shareholders' equity | 574,807 | 576,708 |
Total liabilities and shareholders' equity | $ 4,614,401 | $ 4,109,463 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Securities held-to-maturity | ||
Allowance for credit losses | $ (55) | |
Securities held-to-maturity, fair value (in dollars) | $ 332,452 | $ 368,107 |
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 | 100,000,000 |
Common stock, shares issued | 59,856,767 | 59,368,156 |
Common stock, shares outstanding | 59,856,767 | 59,368,156 |
CONSOLIDATED STATEMENTS OF INCO
CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Interest income: | ||||
Loans, including fees | $ 32,845 | $ 27,251 | $ 67,627 | $ 54,058 |
Securities, taxable | 3,155 | 4,136 | 7,103 | 8,645 |
Securities, exempt from Federal tax | 484 | 546 | 995 | 1,094 |
Other investments, interest-bearing deposits in other financial institutions and Federal funds sold | 648 | 1,556 | 2,349 | 3,141 |
Total interest income | 37,132 | 33,489 | 78,074 | 66,938 |
Interest expense: | ||||
Deposits | 1,615 | 1,995 | 3,400 | 3,831 |
Subordinated debt | 577 | 577 | 1,154 | 1,148 |
Short-term borrowings | 1 | 1 | ||
Total interest expense | 2,192 | 2,573 | 4,554 | 4,980 |
Net interest income before provision for credit losses on loans (1) | 34,940 | 30,916 | 73,520 | 61,958 |
Provision for credit losses on loans | 1,114 | (740) | 14,384 | (1,801) |
Net interest income after provision for credit losses on loans | 33,826 | 31,656 | 59,136 | 63,759 |
Noninterest income: | ||||
Non-interest income | $ 650 | $ 1,177 | $ 1,619 | $ 2,338 |
Revenue, Product and Service [Extensible List] | Service Charges And Fees On Deposit Accounts [Member] | Service Charges And Fees On Deposit Accounts [Member] | Service Charges And Fees On Deposit Accounts [Member] | Service Charges And Fees On Deposit Accounts [Member] |
Increase in cash surrender value of life insurance | $ 458 | $ 333 | $ 916 | $ 663 |
Servicing income | 205 | 150 | 388 | 341 |
Gain on sales of securities | 170 | 548 | 270 | 548 |
Gain on sales of SBA loans | 36 | 67 | 175 | |
Other | 595 | 521 | 1,220 | 1,168 |
Total noninterest income | 2,078 | 2,765 | 5,271 | 5,233 |
Noninterest expense: | ||||
Salaries and employee benefits | 12,300 | 10,698 | 26,503 | 21,468 |
Occupancy and equipment | 1,766 | 1,578 | 3,538 | 3,084 |
Professional fees | 1,155 | 753 | 2,590 | 1,571 |
Other | 5,791 | 5,416 | 14,155 | 10,240 |
Total noninterest expense | 21,012 | 18,445 | 46,786 | 36,363 |
Income before income taxes | 14,892 | 15,976 | 17,621 | 32,629 |
Income tax expense | 4,274 | 4,623 | 5,142 | 9,130 |
Net income | $ 10,618 | $ 11,353 | $ 12,479 | $ 23,499 |
Earnings per common share: | ||||
Basic (in dollars per share) | $ 0.18 | $ 0.26 | $ 0.21 | $ 0.54 |
Diluted (in dollars per share) | $ 0.18 | $ 0.26 | $ 0.21 | $ 0.54 |
Gain on the disposition of foreclosed assets | ||||
Noninterest income: | ||||
Non-interest income | $ 791 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||
Net income | $ 10,618 | $ 11,353 | $ 12,479 | $ 23,499 |
Other comprehensive income: | ||||
Change in net unrealized holding (losses) gains on available-for-sale securities and I/O strips | (556) | 4,333 | 6,621 | 9,204 |
Deferred income taxes | 161 | (1,261) | (1,920) | (2,728) |
Change in net unamortized unrealized gain on securities available-for-sale that were reclassified to securities held-to-maturity | (13) | (13) | (26) | (39) |
Deferred income taxes | 4 | 4 | 8 | 12 |
Reclassification adjustment for gains realized in income | (170) | (548) | (270) | (548) |
Deferred income taxes | 50 | 162 | 79 | 162 |
Change in unrealized (losses) gains on securities and I/O strips, net of deferred income taxes | (524) | 2,677 | 4,492 | 6,063 |
Change in net pension and other benefit plan liability adjustment | 75 | 11 | 150 | 23 |
Deferred income taxes | (22) | (3) | (44) | (7) |
Change in pension and other benefit plan liability, net of deferred income taxes | 53 | 8 | 106 | 16 |
Other comprehensive (losses) income | (471) | 2,685 | 4,598 | 6,079 |
Total comprehensive income | $ 10,147 | $ 14,038 | $ 17,077 | $ 29,578 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($) $ in Thousands | Common StockAdjusted Balance | Common Stock | Retained EarningsAdjusted Balance | Retained EarningsAdjustment | Retained Earnings | Accumulated Other Comprehensive Income / (Loss)Adjusted Balance | Accumulated Other Comprehensive Income / (Loss) | Adjusted Balance | Adjustment | Total |
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 | 12,146 | 12,146 | ||||||||
Other comprehensive income (loss) | 3,394 | 3,394 | ||||||||
Amortization of restricted stock awards, net of forfeitures and taxes | $ 271 | 271 | ||||||||
Cash dividend declared | (5,196) | (5,196) | ||||||||
Stock option expense, net of forfeitures and taxes | 166 | 166 | ||||||||
Stock options exercised | $ 269 | 269 | ||||||||
Stock options exercised (in shares) | 35,003 | |||||||||
Balance at Mar. 31, 2019 | $ 301,550 | 85,953 | (8,987) | 378,516 | ||||||
Balance (in shares) at Mar. 31, 2019 | 43,323,753 | |||||||||
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 | 23,499 | |||||||||
Other comprehensive income (loss) | 6,079 | 6,079 | ||||||||
Balance at Jun. 30, 2019 | $ 302,305 | 92,105 | (6,302) | 388,108 | ||||||
Balance (in shares) at Jun. 30, 2019 | 43,498,406 | |||||||||
Balance at Mar. 31, 2019 | $ 301,550 | 85,953 | (8,987) | 378,516 | ||||||
Balance (in shares) at Mar. 31, 2019 | 43,323,753 | |||||||||
Increase (Decrease) in Shareholders' Equity | ||||||||||
Net income | 11,353 | 11,353 | ||||||||
Other comprehensive income (loss) | 2,685 | 2,685 | ||||||||
Issuance of restricted stock awards, net (in shares) | 134,653 | |||||||||
Amortization of restricted stock awards, net of forfeitures and taxes | $ 303 | 303 | ||||||||
Cash dividend declared | (5,201) | (5,201) | ||||||||
Stock option expense, net of forfeitures and taxes | 155 | 155 | ||||||||
Stock options exercised | $ 297 | 297 | ||||||||
Stock options exercised (in shares) | 40,000 | |||||||||
Balance at Jun. 30, 2019 | $ 302,305 | 92,105 | (6,302) | 388,108 | ||||||
Balance (in shares) at Jun. 30, 2019 | 43,498,406 | |||||||||
Balance at Dec. 31, 2019 | $ 489,745 | $ 489,745 | $ 90,679 | $ (6,062) | 96,741 | $ (9,778) | (9,778) | $ 570,646 | $ (6,062) | 576,708 |
Balance (in shares) at Dec. 31, 2019 | 59,368,156 | 59,368,156 | ||||||||
Increase (Decrease) in Shareholders' Equity | ||||||||||
Net income | 1,861 | 1,861 | ||||||||
Other comprehensive income (loss) | 5,069 | 5,069 | ||||||||
Amortization of restricted stock awards, net of forfeitures and taxes | $ 348 | 348 | ||||||||
Cash dividend declared | (7,737) | (7,737) | ||||||||
Stock option expense, net of forfeitures and taxes | 148 | 148 | ||||||||
Stock options exercised | $ 1,106 | 1,106 | ||||||||
Stock options exercised (in shares) | 200,063 | |||||||||
Balance at Mar. 31, 2020 | $ 491,347 | 84,803 | (4,709) | 571,441 | ||||||
Balance (in shares) at Mar. 31, 2020 | 59,568,219 | |||||||||
Balance at Dec. 31, 2019 | $ 489,745 | $ 489,745 | $ 90,679 | $ (6,062) | 96,741 | $ (9,778) | (9,778) | $ 570,646 | $ (6,062) | 576,708 |
Balance (in shares) at Dec. 31, 2019 | 59,368,156 | 59,368,156 | ||||||||
Increase (Decrease) in Shareholders' Equity | ||||||||||
Net income | 12,479 | |||||||||
Other comprehensive income (loss) | 4,598 | 4,598 | ||||||||
Balance at Jun. 30, 2020 | $ 492,333 | 87,654 | (5,180) | 574,807 | ||||||
Balance (in shares) at Jun. 30, 2020 | 59,856,767 | |||||||||
Balance at Mar. 31, 2020 | $ 491,347 | 84,803 | (4,709) | 571,441 | ||||||
Balance (in shares) at Mar. 31, 2020 | 59,568,219 | |||||||||
Increase (Decrease) in Shareholders' Equity | ||||||||||
Net income | 10,618 | 10,618 | ||||||||
Other comprehensive income (loss) | (471) | (471) | ||||||||
Issuance of restricted stock awards, net (in shares) | 168,117 | |||||||||
Amortization of restricted stock awards, net of forfeitures and taxes | $ 463 | 463 | ||||||||
Cash dividend declared | (7,767) | (7,767) | ||||||||
Stock option expense, net of forfeitures and taxes | 139 | 139 | ||||||||
Stock options exercised | $ 384 | 384 | ||||||||
Stock options exercised (in shares) | 120,431 | |||||||||
Balance at Jun. 30, 2020 | $ 492,333 | $ 87,654 | $ (5,180) | $ 574,807 | ||||||
Balance (in shares) at Jun. 30, 2020 | 59,856,767 |
CONSOLIDATED STATEMENTS OF CH_2
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Parenthetical) - $ / shares | 3 Months Ended | |||
Jun. 30, 2020 | Mar. 31, 2020 | Jun. 30, 2019 | Mar. 31, 2019 | |
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY | ||||
Cash dividend declared per share (in dollars per share) | $ 0.13 | $ 0.13 | $ 0.12 | $ 0.12 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income | $ 12,479 | $ 23,499 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Amortization of discounts and premiums on securities | 1,453 | 1,132 |
Gain on sale of securities available-for-sale | (270) | (548) |
Gain on sale of SBA loans | (67) | (175) |
Proceeds from sale of SBA loans originated for sale | 916 | 2,528 |
SBA loans originated for sale | (4,121) | (4,906) |
Provision (credit) for credit losses on loans(1) | 14,384 | (1,801) |
Increase in cash surrender value of life insurance | (916) | (663) |
Depreciation and amortization | 475 | 401 |
Amortization of other intangible assets | 1,822 | 1,107 |
Stock option expense, net | 287 | 321 |
Amortization of restricted stock awards, net | 811 | 574 |
Amortization of subordinated debt issuance costs | 92 | 92 |
Effect of changes in: | ||
Accrued interest receivable and other assets | (23,437) | (186) |
Accrued interest payable and other liabilities | 21,963 | (3,767) |
Net cash provided by operating activities | 25,871 | 17,608 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Maturities/paydowns/calls of securities available-for-sale | 30,810 | 24,868 |
Maturities/paydowns/calls of securities held-to-maturity | 42,408 | 25,007 |
Proceeds from sales of securities available-for-sale | 56,598 | 59,878 |
Net change in loans | (152,881) | 9,222 |
Changes in Federal Home Loan Bank stock and other investments | (3,667) | (10) |
Purchase of premises and equipment | (1,725) | (239) |
Net cash provided (used in) by investing activities | (28,457) | 118,726 |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Net change in deposits | 485,458 | (15,059) |
Net change in short-term borrowings | (328) | |
Exercise of stock options | 1,490 | 566 |
Payment of cash dividends | (15,504) | (10,397) |
Net cash used in financing activities | 471,116 | (24,890) |
Net increase in cash and cash equivalents | 468,530 | 111,444 |
Cash and cash equivalents, beginning of period | 457,370 | 164,568 |
Cash and cash equivalents, end of period | 925,900 | 276,012 |
Supplemental disclosures of cash flow information: | ||
Interest paid | 4,584 | 4,733 |
Income taxes paid (net of refunds) | $ (524) | |
Income taxes paid (net of refunds) | 10,891 | |
Supplemental schedule of non-cash activity: | ||
Recording of right to use assets in exchange for lease obligations | $ 9,566 |
Basis of Presentation
Basis of Presentation | 6 Months Ended |
Jun. 30, 2020 | |
Basis of Presentation | |
Basis of Presentation | HERITAGE COMMERCE CORP NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2020 (Unaudited) 1) Basis of Presentation The unaudited consolidated financial statements of Heritage Commerce Corp (the “Company” or “HCC”) and its wholly owned subsidiary, Heritage Bank of Commerce (“HBC”), have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and notes required by accounting principles generally accepted in the United States of America (“GAAP”) for annual financial statements are not included herein. The interim statements should be read in conjunction with the consolidated financial statements and notes that were included in the Company’s Form 10-K for the year ended December 31, 2019. HBC is a commercial bank serving customers primarily located in Alameda, Contra Costa, Marin, San Benito, San Francisco, San Mateo, and Santa Clara 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, and provides business-essential working capital factoring financing to various industries throughout the United States. No In management’s opinion, all adjustments necessary for a fair presentation of these consolidated financial statements have been included and are of a normal and recurring nature. All intercompany transactions and balances have been eliminated. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ significantly from these estimates. The results for the three and six months ended June 30, 2020 are not necessarily indicative of the results expected for any subsequent period or for the entire year ending December 31, 2020. COVID-19 Capital and Liquidity While the Company believes that it has sufficient capital to withstand an extended economic recession brought about by COVID-19, its reported and regulatory capital ratios could be adversely impacted by credit losses. The Company relies on cash on hand as well as dividends from its subsidiary bank to service its debt. If the Company’s capital deteriorates such that its subsidiary bank is unable to pay dividends to it for an extended period of time, the Company may not be able to service its debt. The Company maintains access to multiple sources of liquidity. Wholesale funding markets have remained open to us, but rates for short term funding have recently been volatile. If funding costs are elevated for an extended period of time, it could have an adverse effect on the Company’s net interest margin. If an extended recession caused large numbers of the Company’s deposit customers to withdraw their funds, the Company might become more reliant on volatile or more expensive sources of funding. Asset Valuation While certain valuation assumptions and judgments will change to account for pandemic-related circumstances such as widening credit spreads, the Company does not anticipate significant changes in methodology used to determine the fair value of assets measured in accordance with GAAP. The extent to which the COVID-19 pandemic will impact our business, results of operations and financial condition will depend on future developments, which are highly uncertain and difficult to predict. Those developments and factors include the duration and spread of the pandemic, its severity, the actions to contain the pandemic or address its impact, and how quickly and to what extent normal economic and operating conditions can resume. We do not yet know the full extent of the impact. However, the effects could have a material adverse impact on our business, asset valuations, financial condition and results of operations. Material adverse impacts may include all or a combination of valuation impairments on our intangible assets, investments, loans, or deferred tax assets. Reclassifications Certain reclassifications of prior year balances have been made to conform to the current year presentation. These reclassifications had no impact on the Company’s consolidated financial position, results of operations or net change in cash and cash equivalents. Adoption of New Accounting Standards In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in this update replace the incurred loss impairment methodology in prior GAAP with a methodology that reflects expected life-of-instrument credit losses and requires consideration of a broader range of reasonable and supportable information to estimate future credit loss estimates. As Current Expected Credit Losses (“CECL”) encompasses all financial assets carried at amortized cost, the requirement that reserves be established based on an organization’s reasonable and supportable estimate of expected credit losses extends to held-to-maturity debt securities. The Company adopted CECL on January 1, 2020, using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures. Results for the reporting periods after January 1, 2020, are presented under Topic 326, while prior period amounts continue to be reported in accordance with previously applicable GAAP. The following table shows the impact of adopting CECL on January 1, 2020: As Reported Pre- Impact of Under Topic 326 Topic 326 Topic 326 Adoption Adoption (Dollars in thousands) Assets: Allowance for credit losses on debt securities Held to maturity municipal securities $ 58 $ - $ 58 Loans Commercial 6,790 10,453 (3,663) CRE - owner occupied 6,994 3,825 3,169 CRE - non-owner occupied 11,672 3,760 7,912 Land and construction 1,458 2,621 (1,163) Home equity 1,321 2,244 (923) Multifamily 1,253 57 1,196 Residential mortgage 678 243 435 Consumer and other 1,689 82 1,607 Allowance for credit losses on loans $ 31,855 $ 23,285 $ 8,570 Liabilities: Allowance for credit losses on off-balance sheet credit exposures $ 679 $ 886 $ (207) For CECL modeling purposes, the Company uses forecast data for the state of California including Gross Domestic Product (“GDP”) and unemployment projections provided by the California Economic Forecast (“CEF”, www.CaliforniaForecast.com). At January 1, 2020, the forecast for California GDP for 2020 was an annual increase in the low single digits and the forecasted California unemployment rate for 2020 was in the mid single digits. As of the implementation date of January 1, 2020, the Company recognized an increase of $8,570,000 to its allowance for credit losses for loans. The majority of this increase is related to loan portfolios acquired in our recent acquisitions that under the previous methodology were covered by the purchase discount on acquired loans. The cumulative-effect adjustment as a result of the adoption of this guidance was recorded, net of tax of $2.4 million, was a $6.1 million reduction to retained earnings effective January 1, 2020. As of the implementation date, there was a $58,000 allowance for losses recorded on the Company’s held-to-maturity municipal investment securities portfolio. For the six month ended June 30, 2020, there was a reduction of to the allowance for losses on the Company’s held-to-maturity municipal investment securities portfolio. This reduction was the result of a reduction in municipal securities amortized balances resulting from regular payments. The allowance for losses on held-to-maturity securities is based on historic loss rates of municipal securities by bond ratings and change in bond ratings of the municipal securities held by the Company will impact the reserve. The bond ratings for the Company’s municipal investment securities at June 30, 2020 were consistent with the ratings at January 1, 2020. Any ratings downgrades on these securities will impact the allowance for losses on these securities. In the normal course of business, the Company makes commitments to extend credit to its customers as long as there are no violations of any conditions established in contractual arrangements. These commitments are obligations that represent a potential credit risk to the Company, yet are not reflected in any form within the Company’s consolidated balance sheets. As of the implementation date, there was a reduction of $207,000 to the allowance for losses recorded for the Company’s off-balance sheet credit exposures. The reduction in reserves for off-balance sheet credit exposures at implementation was primarily driven by applying a lower estimated CECL loss factor for unfunded commercial loan and construction loan commitments. For the six month ended June 30, 2020, there was an increase of In January 2017, the FASB issued 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. |
Earnings Per Share
Earnings Per Share | 6 Months Ended |
Jun. 30, 2020 | |
Earnings Per Share. | |
Earnings Per Share | 2) Earnings Per Share Basic earnings per common share is computed by dividing net income 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 1,722,342 and 826,445 stock options for the three months ended June 30, 2020 and 2019, and 1,490,688, and 826,445 for the six months ended June 30, 2020 and 2019, 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: Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 (Dollars in thousands, except per share amounts) Net income $ 10,618 $ 11,353 $ 12,479 $ 23,499 Weighted average common shares outstanding for basic earnings per common share 59,420,592 43,202,562 59,353,759 43,155,360 Dilutive potential common shares 691,831 518,889 798,728 539,757 Shares used in computing diluted earnings per common share 60,112,423 43,721,451 60,152,487 43,695,117 Basic earnings per share $ 0.18 $ 0.26 $ 0.21 $ 0.54 Diluted earnings per share $ 0.18 $ 0.26 $ 0.21 $ 0.54 |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Income (Loss) ("AOCI") | 6 Months Ended |
Jun. 30, 2020 | |
Accumulated Other Comprehensive Income ("AOCI") | |
Accumulated Other Comprehensive Income ("AOCI") | 3) Accumulated Other Comprehensive Income (Loss) (“AOCI”) The following table reflects the changes in AOCI by component for the periods indicated: Three Months Ended June 30, 2020 and 2019 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(1) Total (Dollars in thousands) Beginning balance April 1, 2020, net of taxes $ 6,627 $ 289 $ (11,625) $ (4,709) Other comprehensive loss before reclassification, net of taxes (395) — (10) (405) Amounts reclassified from other comprehensive income (loss), net of taxes (120) (9) 63 (66) Net current period other comprehensive income (loss), net of taxes (515) (9) 53 (471) Ending balance June 30, 2020, net of taxes $ 6,112 $ 280 $ (11,572) $ (5,180) Beginning balance April 1, 2019, net of taxes $ (1,603) $ 326 $ (7,710) $ (8,987) Other comprehensive income (loss) before reclassification, net of taxes 3,072 — (7) 3,065 Amounts reclassified from other comprehensive income (loss), net of taxes (386) (9) 15 (380) Net current period other comprehensive income (loss), net of taxes 2,686 (9) 8 2,685 Ending balance June 30, 2019, net of taxes $ 1,083 $ 317 $ (7,702) $ (6,302) (1) This AOCI component is included in the computation of net periodic benefit cost (see Note 9—Benefit Plans) and includes split-dollar life insurance benefit plan. Six Months Ended June 30, 2020 and 2019 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(1) Total (Dollars in thousands) Beginning balance January 1, 2020, net of taxes $ 1,602 $ 298 $ (11,678) $ (9,778) Other comprehensive income (loss) before reclassification, net of taxes 4,701 — (6) 4,695 Amounts reclassified from other comprehensive income (loss), net of taxes (191) (18) 112 (97) Net current period other comprehensive income (loss), net of taxes 4,510 (18) 106 4,598 Ending balance June 30, 2020, net of taxes $ 6,112 $ 280 $ (11,572) $ (5,180) Beginning balance January 1, 2019, net of taxes $ (5,007) $ 344 $ (7,718) $ (12,381) Other comprehensive income (loss) before reclassification, net of taxes 6,476 — (14) 6,462 Amounts reclassified from other comprehensive income (loss), net of taxes (386) (27) 30 (383) Net current period other comprehensive income (loss), net of taxes 6,090 (27) 16 6,079 Ending balance June 30, 2019, net of taxes $ 1,083 $ 317 $ (7,702) $ (6,302) (1) This AOCI component is included in the computation of net periodic benefit cost (see Note 9—Benefit Plans) and includes split-dollar life insurance benefit plan. Amounts Reclassified from AOCI(1) Three Months Ended June 30, Affected Line Item Where Details About AOCI Components 2020 2019 Net Income is Presented (Dollars in thousands) Unrealized gains on available-for-sale securities and I/O strips $ 170 $ 548 Gain on sales of securities (50) (162) Income tax expense 120 386 Net of tax Amortization of unrealized gain on securities available- for-sale that were reclassified to securities held-to-maturity 13 13 Interest income on taxable securities (4) (4) Income tax expense 9 9 Net of tax Amortization of defined benefit pension plan items (1) Prior transition obligation 15 24 Actuarial losses (105) (46) (90) (22) Other noninterest expense 27 7 Income tax benefit (63) (15) Net of tax Total reclassification for the period $ 66 $ 380 Amounts Reclassified from AOCI(1) Six Months Ended June 30, Affected Line Item Where Details About AOCI Components 2020 2019 Net Income is Presented (Dollars in thousands) Unrealized gains on available-for-sale securities and I/O strips $ 270 $ 548 Gain on sales of securities (79) (162) Income tax expense 191 386 Net of tax Amortization of unrealized gain on securities available-for-sale that were reclassified to securities held-to-maturity 26 39 Interest income on taxable securities (8) (12) Income tax expense 18 27 Net of tax Amortization of defined benefit pension plan items (1) Prior transition obligation 30 49 Actuarial losses (190) (92) (160) (43) Other noninterest expense 48 13 Income tax benefit (112) (30) Net of tax Total reclassification from AOCI for the period $ 97 $ 383 (1) This AOCI component is included in the computation of net periodic benefit cost (see Note 9—Benefit Plans) and includes split-dollar life insurance benefit plan. |
Securities
Securities | 6 Months Ended |
Jun. 30, 2020 | |
Securities | |
Securities | 4) Securities The amortized cost and estimated fair value of securities were as follows for the periods indicated: Gross Gross Allowance Estimated Amortized Unrealized Unrealized for Credit Fair June 30, 2020 Cost Gains (Losses) Losses Value (Dollars in thousands) Securities available-for-sale: Agency mortgage-backed securities $ 225,429 $ 6,906 $ — $ — $ 232,335 U.S. Treasury 89,476 1,754 — — 91,230 Total $ 314,905 $ 8,660 $ — $ — $ 323,565 Gross Gross Estimated Allowance Amortized Unrecognized Unrecognized Fair for Credit June 30, 2020 Cost Gains (Losses) Value Losses (Dollars in thousands) Securities held-to-maturity: Agency mortgage-backed securities $ 249,070 $ 7,895 $ (1) $ 256,964 $ — Municipals - exempt from Federal tax 73,662 1,826 — 75,488 (55) Total $ 322,732 $ 9,721 $ (1) $ 332,452 $ (55) 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 Gross Gross Estimated Amortized Unrecognized Unrecognized Fair December 31, 2019 Cost Gains (Losses) Value (Dollars in thousands) 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 Securities with unrealized losses at June 30, 2020 and December 31, 2019, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position are as follows: Less Than 12 Months 12 Months or More Total Fair Unrealized Fair Unrealized Fair Unrealized June 30, 2020 Value (Losses) Value (Losses) Value (Losses) (Dollars in thousands) Securities held-to-maturity: Agency mortgage-backed securities $ 512 $ (1) $ — $ — $ 512 $ (1) Total $ 512 $ (1) $ — $ — $ 512 $ (1) 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) There were no 122 available-for-sale and 303 held-to-maturity), of which one had fair value below amortized cost. At June 30, 2020, there were $512,000 of agency mortgage-backed securities held-to-maturity, carried with an unrealized loss for less than 12 months. The total unrealized loss for securities less than 12 months was $1,000 at June 30, 2020. The unrealized loss was due to higher interest rates in comparison to when the security was purchased. The issuer is 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. Therefore, the Company does not consider these debt securities to have credit related losses as of June 30, 2020. The agency mortgage-backed securities and U.S. Treasury securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major credit rating agencies, and have a long history of no credit losses.Therefore, for those securities, we do not record expected credit losses. The proceeds from sales of securities and the resulting gains and losses were as follows for the periods indicated: Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 (Dollars in thousands) Proceeds $ 30,085 $ 59,878 $ 56,598 $ 59,878 Gross gains 170 608 270 608 Gross losses — (60) — (60) The amortized cost and estimated fair values of securities as of June 30, 2020 are shown by contractual maturity below. The expected maturities will differ from contractual maturities if borrowers have the right to call or pre-pay obligations with or without call or pre-payment penalties. Securities not due at a single maturity date are shown separately. Available-for-sale Amortized Estimated Cost Fair Value (Dollars in thousands) Due after 3 months through one year $ 74,608 75,861 Due after one through five years 14,868 15,369 Agency mortgage-backed securities 225,429 232,335 Total $ 314,905 $ 323,565 Held-to-maturity Amortized Estimated Cost Fair Value (Dollars in thousands) Due 3 months or less $ 530 $ 531 Due after 3 months through one year 914 917 Due after one through five years 7,283 7,537 Due after five through ten years 33,354 34,201 Due after ten years 31,581 32,302 Agency mortgage-backed securities 249,070 256,964 Total $ 322,732 $ 332,452 Securities with amortized cost of $43,398,000 and $32,773,000 as of June 30, 2020 and December 31, 2019 were pledged to secure public deposits and for other purposes as required or permitted by law or contract. The table below presents a rollforward by major security type for the six months ended June 30, 2020 of the allowance for credit losses on debt securities held-to-maturity held at period end: Municipals (Dollars in thousands) Beginning balance January 1, 2020 $ - Impact of adopting Topic 326 58 Provision (credit) for credit loss (3) Ending balance June 30, 2020 $ 55 |
Loans and Allowance for Credit
Loans and Allowance for Credit Losses on Loans | 6 Months Ended |
Jun. 30, 2020 | |
Allowance for Credit Losses on Loans | |
Allowance for Credit Losses on Loans | 5) Loans and Allowance for Credit Losses on Loans The allowance for credit losses on loans was calculated by pooling loans of similar credit risk characteristics and credit monitoring procedures. The loan portfolio is classified into eight segments of loans - commercial, commercial real estate – owner occupied, commercial real estate – non-owner occupied, land and construction, home equity, multifamily, residential mortgage and consumer and other. The risk characteristics of each loan portfolio segment are as follows: Commercial Commercial loans primarily rely on the identified cash flows of the borrower for repayment and secondarily on the underlying collateral provided by the borrower. However, the cash flows of the borrowers may not be as expected and the collateral securing these loans may vary in value. Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable, inventory or equipment and may incorporate a personal guarantee; however, some loans may be unsecured. Included in commercial loans are $324,550,000 of SBA Paycheck Protection Program ("PPP") loans. Commercial Real Estate (“CRE”) Commercial real estate loans rely primarily on the cash flows of the properties securing the loan and secondarily on the value of the property that is securing the loan. Commercial real estate loans comprise two segments differentiated by owner occupied commercial real estate and non-owner commercial real estate. Owner occupied commercial real estate loans are secured by commercial properties that are at least 50% occupied by the borrower or borrower affiliate. Non-owner occupied commercial real estate loans are secured by commercial properties that are less than 50% occupied by the borrower or borrower affiliate. Commercial real estate loans may be adversely affected by conditions in the real estate markets or in the general economy. Land and Construction Land and construction loans are generally based on estimates of costs and value associated with the complete project. Construction loans usually involve the disbursement of funds with repayment substantially dependent on the success of the completion of the project. Sources of repayment for these loans may be permanent loans from HBC or other lenders, or proceeds from the sales of the completed project. These loans are monitored by on-site inspections and are considered to have higher risk than other real estate loans due to the final repayment dependent on numerous factors including general economic conditions. Home Equity Home equity loans are secured by 1-4 family residences that are generally owner occupied. Repayment of these loans depends primarily on the personal income of the borrower and secondarily by the value of the property securing the loan which can be impacted by changes in economic conditions such as the unemployment rate and property values. Multifamily Multifamily loans are loans on residential properties with five or more units. These loans rely primarily on the cash flows of the properties securing the loan for repayment and secondarily on the value of the properties securing the loan. The cash flows of these borrowers can fluctuate along with the values of the underlying property depending on general economic conditions. Residential Mortgages Residential mortgage loans are secured by 1-4 family residences which are generally owner-occupied. Repayment of these loans depends primarily on the personal income of the borrower and secondarily by the value of the property securing the loan which can be impacted by changes in economic conditions such as the unemployment rate and property values. Consumer and Other Consumer and other loans are secured by personal property or are unsecured and rely primarily on the income of the borrower for repayment and secondarily on the collateral value for secured loans. Borrower income and collateral value can vary dependent on economic conditions. Loans by portfolio segment and the allowance for credit losses on loans were as follows for the periods indicated: June 30, December 31, 2020 2019 (Dollars in thousands) Loans held-for-investment: Commercial $ 878,393 $ 603,345 Real estate: CRE - owner occupied 553,463 548,907 CRE - non-owner occupied 725,776 767,821 Land and construction 138,284 147,189 Home equity 112,679 151,775 Multifamily 169,637 180,623 Residential mortgages 95,033 100,759 Consumer and other 22,759 33,744 Loans 2,696,024 2,534,163 Deferred loan fees, net (9,635) (319) Loans, net of deferred fees 2,686,389 2,533,844 Allowance for credit losses on loans (1) (45,444) (23,285) Loans, net $ 2,640,945 $ 2,510,559 (1) The loss estimates for each segment are derived using a discounted cash flow analysis that incorporates a forecast of economic factors that have historic correlation to loan losses. The most significant economic factor used in the calculation of estimated loan losses is the California unemployment rate which is used for each segment. California GDP, and California retail trade earnings, California home price index, and a commercial real estate value index are secondary economic factors used with California unemployment rate in various loan segments. A four quarter forecast of each economic factor is used for each loan segment and the economic factors are assumed to revert to the historic mean over an eight quarter period after the four quarter forecast period. Changes in the allowance for credit losses on loans were as follows for the three months ended June 30, 2020: CRE CRE Owner Non-owner Land & Home Multi- Residential Consumer Commercial Occupied Occupied Construction Equity Family Mortgage and Other Total (Dollars in thousands) Beginning of period balance $ 12,801 $ 7,737 $ 15,645 $ 2,603 $ 1,746 $ 1,622 $ 708 $ 1,841 $ 44,703 Charge-offs (465) — — — — — — — (465) Recoveries 46 1 — 13 31 — — 1 92 Net (charge-offs) recoveries (419) 1 — 13 31 — — 1 (373) Provision for credit losses on loans 797 809 (196) (64) 74 206 117 (629) 1,114 End of period balance $ 13,179 $ 8,547 $ 15,449 $ 2,552 $ 1,851 $ 1,828 $ 825 $ 1,213 $ 45,444 Changes in the allowance for loan losses were as follows for the three months ended June 30, 2019: Commercial Real Estate Consumer Total (Dollars in thousands) Beginning of period balance $ 15,557 $ 11,671 $ 90 $ 27,318 Charge-offs (76) — — (76) Recoveries 87 42 — 129 Net recoveries 11 42 — 53 Provision (credit) for loan losses (334) (406) — (740) End of period balance $ 15,234 $ 11,307 $ 90 $ 26,631 Changes in the allowance for credit losses on loans were as follows for the six months ended June 30, 2020: Owner Non-owner Land & Home Multi- Residential Consumer Commercial Occupied Occupied Construction Equity Family Mortgage and Other Total (Dollars in thousands) Beginning of period balance $ 10,453 $ 3,825 $ 3,760 $ 2,621 $ 2,244 $ 57 $ 243 $ 82 $ 23,285 Adoption of Topic 326 (3,663) 3,169 7,912 (1,163) (923) 1,196 435 1,607 8,570 Balance at adoption on January 1, 2020 6,790 6,994 11,672 1,458 1,321 1,253 678 1,689 31,855 Charge-offs (1,135) — — — — — — (3) (1,138) Recoveries 255 1 — 32 54 — — 1 343 Net (charge-offs) recoveries (880) 1 — 32 54 — — (2) (795) Provision for credit losses on loans 7,269 1,552 3,777 1,062 476 575 147 (474) 14,384 End of period balance $ 13,179 $ 8,547 $ 15,449 $ 2,552 $ 1,851 $ 1,828 $ 825 $ 1,213 $ 45,444 Changes in the allowance for loan losses were as follows for the six months ended June 30, 2019: Commercial Real Estate Consumer Total (Dollars in thousands) Beginning of period balance $ 17,061 $ 10,671 $ 116 $ 27,848 Charge-offs (302) — (302) Recoveries 802 84 — 886 Net recoveries 500 84 — 584 Provision (credit) for loan losses (2,327) 552 (26) (1,801) End of period balance $ 15,234 $ 11,307 $ 90 $ 26,631 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 Consumer Commercial Real Estate and other 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 598,535 1,891,620 33,744 2,523,899 Total loan balance $ 603,345 $ 1,897,074 $ 33,744 $ 2,534,163 The following table presents the amortized cost basis of nonperforming loans and loans past due over 90 days and still accruing at June 30, 2020: Restructured Nonaccrual Nonaccrual and Loans with no Specific with Specific over 90 Days Allowance for Allowance for Past Due Credit Credit and Still Losses Losses Accruing Total (Dollars in thousands) Commercial $ 747 $ 1,669 $ 668 $ 3,084 Real estate: CRE - Owner Occupied 3,679 — — 3,679 CRE - Non-Owner Occupied — — — — Land and construction — — — — Home equity 898 — — 898 Multifamily — — — — Residential mortgages — — — — Consumer and other — 1,464 — 1,464 Total $ 5,324 $ 3,133 $ 668 $ 9,125 The following table presents nonperforming loans by class at December 31, 2019: Restructured and Loans over 90 Days Past Due and Still Nonaccrual Accruing Total (Dollars in thousands) Commercial $ 3,444 $ 1,153 $ 4,597 Real estate: CRE 5,094 — 5,094 Home equity 137 — 137 Total $ 8,675 $ 1,153 $ 9,828 The following tables presents the aging of past due loans by class for the periods indicated: June 30, 2020 30 - 59 60 - 89 90 Days or Days Days Greater Total Past Due Past Due Past Due Past Due Current Total (Dollars in thousands) Commercial $ 5,195 $ 1,873 $ 988 $ 8,056 $ 870,337 $ 878,393 Real estate: CRE - Owner Occupied — — 29 29 553,434 553,463 CRE - Non-Owner Occupied — — — — 725,776 725,776 Land and construction — — — — 138,284 138,284 Home equity — — 898 898 111,781 112,679 Multifamily — — — — 169,637 169,637 Residential mortgages — — — — 95,033 95,033 Consumer and other 1,057 — 1,464 2,521 20,238 22,759 Total $ 6,252 $ 1,873 $ 3,379 $ 11,504 $ 2,684,520 $ 2,696,024 December 31, 2019 30 - 59 60 - 89 90 Days or Days Days Greater Total Past Due Past Due Past Due Past Due Current Total (Dollars in thousands) Commercial $ 4,770 $ 2,097 $ 3,217 $ 10,084 $ 593,261 $ 603,345 Real estate: CRE - Owner Occupied — — 5,094 5,094 543,813 548,907 CRE - Non-Owner Occupied — — — — 767,821 767,821 Land and construction — — — — 147,189 147,189 Home equity — 137 — 137 151,638 151,775 Multifamily — — — — 180,623 180,623 Residential mortgages — — — — 100,759 100,759 Consumer and other — — — — 33,744 33,744 Total $ 4,770 $ 2,234 $ 8,311 $ 15,315 $ 2,518,848 $ 2,534,163 Past due loans 30 days or greater totaled $11,504,000 and $15,315,000 at June 30, 2020 and December 31, 2019, respectively, of which $2,844,000 and $7,413,000 were on nonaccrual, respectively. At June 30, 2020, there were also $5,613,000 of loans less than 30 days past due included in nonaccrual loans held-for-investment. At December 31, 2019, there were also $1,262,000 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. Credit Quality Indicators Concentrations of credit risk arise when a number of customers are engaged in similar business activities, or activities in the same geographic region, or have similar features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic conditions. The Company’s loan portfolio is concentrated in commercial (primarily manufacturing, wholesale, and service) and real estate lending, with the remaining balance in consumer loans. While no specific industry concentration is considered significant, the Company’s lending operations are located in the Company’s market areas that are dependent on the technology and real estate industries and their supporting companies. Thus, the Company’s borrowers could be adversely impacted by a downturn in these sectors of the economy which could reduce the demand for loans and adversely impact the borrowers’ ability to repay their loans. The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, and 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. Loans categorized as special mention have potential weaknesses that may, if not checked or corrected, weaken the credit or inadequately protect the Company’s position at some future date. These loans pose elevated risk, but their weaknesses do not yet justify a substandard classification. Classified loans are those loans that are assigned a substandard, substandard-nonaccrual, or doubtful risk rating using the following definitions: Special Mention. A Special Mention asset has potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in a deterioration of the repayment prospects for the asset or in the credit position at some future date. Special Mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification. 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 will jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Substandard-Nonaccrual. Loans classified as substandard-nonaccrual are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any, and it is probable that the Company will not receive payment of the full contractual principal and interest. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. In addition, the Company no longer accrues interest on the loan because of the underlying weaknesses. Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Loss. Loans classified as loss are considered uncollectable or of so little value that their continuance as assets is not warranted. This classification does not necessarily mean that a loan has no recovery or salvage value; but rather, there is much doubt about whether, how much, or when the recovery would occur. Loans classified as loss are immediately charged off against the allowance for credit losses on loans. Therefore, there is no balance to report as of June 30, 2020 and December 31, 2019. The following table presents term loans amortized cost by vintage and loan grade classification, and revolving loans amortized cost by loan grade classification. The loan grade classifications are based on the Bank’s internal loan grading methodology. Loan grade categories for doubtful and loss rated loans are not included on the table below as there are no loans with those grades at June 30, 2020. The vintage year represents the period the loan was originated or in the case of renewed loans, the period last renewed. The amortized balance is the loan balance less any purchase discounts, and plus any loan purchase premiums. The loan categories are based on the loan segmentation in the Company's CECL reserve methodology based on loan purpose and type. Revolving Loans Term Loans Amortized Cost Basis by Originated Period Amortized 2015 and Cost 2020 2019 2018 2017 2016 Prior Basis Total (Dollars in thousands) Commercial: Pass and Watch $ 404,010 $ 47,578 $ 36,471 $ 19,571 $ 10,601 $ 15,674 $ 292,448 $ 826,353 Special Mention 30,835 - - - 320 - 2,607 33,762 Substandard 926 - 72 604 2,596 624 11,040 15,862 Substandard-Nonaccrual 1,449 59 340 - 178 61 329 2,416 Total 437,220 47,637 36,883 20,175 13,695 16,359 306,424 878,393 CRE - Owner Occupied: Pass and Watch 78,779 79,282 78,384 60,021 52,486 140,208 16,443 505,603 Special Mention 37,899 - 232 - - 2,619 - 40,750 Substandard - - - 2,250 715 466 - 3,431 Substandard-Nonaccrual 3,102 548 - - - 29 - 3,679 Total 119,780 79,830 78,616 62,271 53,201 143,322 16,443 553,463 CRE - Non-Owner Occupied: Pass and Watch 101,876 137,054 78,019 110,390 60,316 175,221 3,885 666,761 Special Mention 46,314 - 1,802 - 4,299 5,568 - 57,983 Substandard 1,032 - - - - - - 1,032 Substandard-Nonaccrual - - - - - - - - Total 149,222 137,054 79,821 110,390 64,615 180,789 3,885 725,776 Land and contruction: Pass and Watch 60,938 47,934 14,255 1,560 - 1,383 2,225 128,295 Special Mention 8,406 - - - - - - 8,406 Substandard 1,583 - - - - - - 1,583 Substandard-Nonaccrual - - - - - - - - Total 70,927 47,934 14,255 1,560 - 1,383 2,225 138,284 Home equity: Pass and Watch 276 - 89 - - - 108,875 109,240 Special Mention - - - - - - 1,718 1,718 Substandard - - - - - 143 680 823 Substandard-Nonaccrual - - - - - 123 775 898 Total 276 - 89 - - 266 112,048 112,679 Multifamily: Pass and Watch 17,007 40,571 18,628 27,700 16,401 37,322 845 158,474 Special Mention 5,967 - - - - 5,196 - 11,163 Substandard - - - - - - - - Substandard-Nonaccrual - - - - - - - - Total 22,974 40,571 18,628 27,700 16,401 42,518 845 169,637 Residential mortgage: Pass and Watch 8,607 10,237 4,970 11,011 34,304 15,889 - 85,018 Special Mention 6,848 - - 1,285 557 1,061 - 9,751 Substandard - - - - - 264 - 264 Substandard-Nonaccrual - - - - - - - - Total 15,455 10,237 4,970 12,296 34,861 17,214 - 95,033 Consumer and other: Pass and Watch 16 3,018 1,567 23 135 1,028 15,427 21,214 Special Mention 81 - - - - - - 81 Substandard - - - - - - - - Substandard-Nonaccrual - - 1,464 - - - - 1,464 Total 97 3,018 3,031 23 135 1,028 15,427 22,759 Total loans $ 815,951 $ 366,281 $ 236,293 $ 234,415 $ 182,908 $ 402,879 $ 457,297 $ 2,696,024 The following table provides a summary of the loan portfolio by loan type and credit quality classification for the period indicated: December 31, 2019 Nonclassified Classified Total Commercial $ 599,143 4,202 $ 603,345 Real estate: CRE - Owner Occupied 538,229 10,678 548,907 CRE - Non-Owner Occupied 761,801 6,020 767,821 Land and construction 144,108 3,081 147,189 Home equity 149,131 2,644 151,775 Multifamily 180,623 — 180,623 Residential mortgages 100,262 497 100,759 Consumer and other 28,287 5,457 33,744 Total $ 2,501,584 $ 32,579 $ 2,534,163 The following table presents the amortized cost basis of collateral-dependent loans by loan classification at June 30, 2020: Collateral Type Real Estate Business Property Assets Unsecured Total (Dollars in thousands) Commercial $ 60 $ 1,478 $ 131 $ 1,669 Real estate: - CRE - Owner Occupied - - - CRE - Non-Owner Occupied - - - - Land and construction - - - - Home equity - - - - Multifamily - - - - Residential mortgages - - - - Consumer and other 1,464 - - 1,464 Total $ 1,524 $ 1,478 $ 131 $ 3,133 When management determines that foreclosures are probable, expected credit losses for collateral-dependent loans are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. The class of loan represents the primary collateral type associated with the loan. Significant quarter over quarter changes are reflective of changes in nonaccrual status and not necessarily associated with credit quality indicators like appraisal value. The following table details the allowance for loan losses and recorded investment in loans by loan classification as of December 31, 2019, as determined in accordance with ASC 310 prior to adoption of Topic 326: Allowance Unpaid for Loan Principal Recorded Losses Balance Investment Allocated (Dollars in thousands) With no related allowance recorded: Commercial $ 2,113 $ 2,113 $ — Real estate: CRE 5,094 5,094 — Home Equity 360 360 — Total with no related allowance recorded 7,567 7,567 — With an allowance recorded: Commercial 2,697 2,697 1,835 Total with an allowance recorded 2,697 2,697 1,835 Total $ 10,264 $ 10,264 $ 1,835 The book balance of troubled debt restructurings at June 30, 2020 was $753,000, which included $597,000 of nonaccrual loans and $156,000 of accruing loans. 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. Approximately $9,000 and $20,000 of specific reserves were established with respect to these loans as of June 30, 2020 and December 31, 2019, respectively. The following table presents loans by class modified as troubled debt restructurings for the periods indicated: During the Six Months Ended June 30, 2020 Pre-modification Post-modification Number Outstanding Outstanding of Recorded Recorded Troubled Debt Restructurings: Contracts Investment Investment (Dollars in thousands) Commercial 3 $ 13 $ 13 Real estate: CRE - owner occupied — — — CRE - non-owner occupied — — — Land and construction — — — Home equity — — — Multifamily — — — Residential mortgages — — — Consumer and other — — — Total 3 $ 13 $ 13 There were no new loans modified as troubled debt restructurings during the three months ended June 30, 2020. There were no new loans modified as troubled debt restructurings during the three and six months ended June 30, 2019. During the three and six months ended June 30, 2020, there were no new loans modified as 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 credit losses on loans. A loan is considered to be in payment default when it is 30 days contractually past due under the modified terms. There were no defaults on troubled debt restructurings, within twelve months following the modification, during the three months ended June 30, 2020 and 2019. 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. |
Business Combinations
Business Combinations | 6 Months Ended |
Jun. 30, 2020 | |
Business Combinations | |
Business Combinations | 6) Business Combinations (Dollars in thousands) Issuance of to Presidio shareholders and holders of restricted stock (stock price = $ 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 17,916 211 (i) 18,127 Total liabilities assumed $ 802,618 $ 210 802,828 Net assets acquired 101,720 Purchase price 185,598 Goodwill recorded in the merger $ 83,878 Explanation of certain fair value related adjustments for the Presidio merger: (a) (b) (c) (d) (e) (f) (g) (h) (i) Presidio’s results of operations have been included in the Company’s results of operations beginning October 12, 2019. The Company believes the merger provided the opportunity to combine independent business banking franchises with similar philosophies and cultures into a business bank based in San Jose, California that exceeds $4.0 billion. The pooling of the banks’ resources and knowledge enhance the Company’s capabilities, operational efficiencies, and community outreach. The Company also believes the combined bank is much better positioned to meet the needs of the Company’s customers, shareholders and the community. The acquisition was accounted for under the acquisition method of accounting. 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 Purchased Credit Impaired Loans (“PCI”) as of December 31, 2019 and Pucharsed Credit Deteriorated (“PCD”) loans as of June 30, 2020. Goodwill of $83,878,000 arising from the Presidio merger is largely attributable to synergies and cost savings resulting from combining the operations of the companies. As this transaction was structured as a tax-free exchange, the goodwill will not be deductible for tax purposes. 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 table 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. The increase in Presidio goodwill at June 30, 2020 from December 31, 2019 was due to adjustments to accrued accounts payable. |
Goodwill and Other Intangible A
Goodwill and Other Intangible Assets | 6 Months Ended |
Jun. 30, 2020 | |
Goodwill and Other Intangible Assets | |
Goodwill and Other Intangible Assets | 7) Goodwill and Other Intangible Assets Goodwill At June 30, 2020, the carrying value of goodwill was $167,631,000, which included $13,044,000 of goodwill related to its acquisition of Bay View Funding, $32,619,000 from its acquisition of Focus Business Bank (“Bank”), $13,819,000 from its acquisition of Tri-Valley, $24,271,000 from its acquisition of United American and $83,878,000 from Presidio. 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 reporting units, including the existing goodwill and intangible assets, and estimating the fair value of each reporting unit. We performed our required annual goodwill impairment test as of November 30, 2019 and there was no impairment. During the first and second quarters of 2020 bank stocks in general as well as our market capitalization have declined as a result of events surrounding the current COVID-19 pandemic outbreak. As a result, we completed a qualitative goodwill impairment test as of June 30, 2020. This qualitative analysis included a review of our earnings, asset quality trends , capital levels and the economic conditions of our markets. Based on this qualitative analysis we do not believe this decline is indicative of a permanent deterioration of the fundamental value of our Company. As such we do not believe that it is more likely than not a goodwill impairment exists at June 30, 2020. Other Intangible Assets The Company’s intangible assets are summarized as follows for the periods indicated: June 30, 2020 Gross Carrying Accumulated Amount Amortization Total (Dollars in thousands) Core deposit intangibles $ 25,023 $ (7,446) $ 17,577 Customer relationship and brokered relationship intangibles 1,900 (1,076) 824 Below market leases 770 (578) 192 Total $ 27,693 $ (9,100) $ 18,593 December 31, 2019 Gross Carrying Accumulated Amount Amortization Total (Dollars in thousands) Core deposit intangibles $ 25,023 $ (5,846) $ 19,177 Customer relationship and brokered relationship intangibles 1,900 (981) 919 Below market leases 770 (451) 319 Total $ 27,693 $ (7,278) $ 20,415 Estimated amortization expense for the remainder of 2020, 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 $ 912 (9) $ 332 $ 109 $ 104 $ 8 $ 359 $ 95 1,910 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 18 346 159 2,186 2025 970 — 478 — 145 18 200 — 1,811 Thereafter 3,211 — 1,042 — 306 70 — — 4,629 $ 9,909 $ (83) $ 4,027 $ 109 $ 1,216 $ 168 $ 2,423 $ 824 $ 18,593 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 June 30, 2020 and December 31, 2019. |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2020 | |
Income Taxes | |
Income Taxes | 8) Income Taxes Some items of income and expense are recognized in one year for tax purposes, and another when applying generally accepted accounting principles, which leads to timing differences between the Company’s actual current tax liability and the amount accrued for this liability based on book income. These temporary differences comprise the “deferred” portion of the Company’s tax expense or benefit, which is accumulated on the Company’s books as a deferred tax asset or deferred tax liability until such time as they reverse. Under generally accepted accounting principles, a valuation allowance is required if it is “more likely than not” that a deferred tax asset will not be realized. The determination of the realizability of the deferred tax assets is highly subjective and dependent upon judgment concerning management’s evaluation of both positive and negative evidence, including forecasts of future income, cumulative losses, applicable tax planning strategies, and assessments of current and future economic and business conditions. The Company had net deferred tax assets of $27,223,000, and $24,302,000, at June 30, 2020 and December 31, 2019, respectively. After consideration of the matters in the preceding paragraph, the Company determined that it is more likely than not that the net deferred tax assets at June 30, 2020 and December 31, 2019 will be fully realized in future years. 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: June 30, December 31, 2020 2019 (Dollars in thousands) Low income housing investments $ 5,668 $ 6,126 Future commitments $ 625 $ 625 The Company expects $28,000 of the future commitments to be paid in 2020, and $597,000 in 2021 through 2023. For tax purposes, the Company had low income housing tax credits of $210,000 and $106,000 for the three months ended June 30, 2020 and June 30, 2019, and low income housing investment expense of $211,000 and $106,000 , respectively. For tax purposes, the Company had low income housing tax credits of $420,000 and $213,000 for the six months ended June 30, 2020 and June 30, 2019, and low income housing investment expense of $420,000 and $211,000 , respectively. |
Benefit Plans
Benefit Plans | 6 Months Ended |
Jun. 30, 2020 | |
Benefit Plans | |
Benefit Plans | 9) Benefit Plans Supplemental Retirement Plan The Company has a supplemental retirement plan (the “Plan”) covering some current and some former key employees and directors. The Plan is a nonqualified defined benefit plan. Benefits are unsecured as there are no Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 (Dollars in thousands) Components of net periodic benefit cost: Service cost $ 123 $ 55 $ 246 $ 110 Interest cost 236 264 467 528 Amortization of net actuarial loss 105 46 190 92 Net periodic benefit cost $ 464 $ 365 $ 903 $ 730 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. Split-Dollar Life Insurance Benefit Plan The Company maintains life insurance policies for some current and former directors and officers that are subject to split-dollar life insurance agreements. The following table sets forth the funded status of the split-dollar life insurance benefits for the periods indicated: June 30, December 31, 2020 2019 (Dollars in thousands) Change in projected benefit obligation: Projected benefit obligation at beginning of year $ 8,198 $ 6,903 Interest cost 124 278 Actuarial loss (gain) — 1,017 Projected benefit obligation at end of period $ 8,322 $ 8,198 June 30, December 31, 2020 2019 (Dollars in thousands) Net actuarial loss $ 3,851 $ 3,776 Prior transition obligation 1,014 1,059 Accumulated other comprehensive loss $ 4,865 $ 4,835 Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 (Dollars in thousands) Amortization of prior transition obligation $ (15) $ (24) $ (30) $ (49) Interest cost 62 70 124 140 Net periodic benefit cost $ 47 $ 46 $ 94 $ 91 |
Fair Value
Fair Value | 6 Months Ended |
Jun. 30, 2020 | |
Fair Value | |
Fair Value | 10) Fair Value Accounting guidance establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value: Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data (for example, interest rates and yield curves observable at commonly quoted intervals, prepayment speeds, credit risks, and default rates). Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. Financial Assets and Liabilities Measured on a Recurring Basis The fair values of securities available-for sale-are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). The fair value of interest-only (“I/O”) strip receivable assets is based on a valuation model used by a third party. The Company is able to compare the valuation model inputs and results to widely available published industry data for reasonableness (Level 2 inputs). Fair Value Measurements Using Significant Quoted Prices in Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs Balance (Level 1) (Level 2) (Level 3) (Dollars in thousands) Assets at June 30, 2020 Available-for-sale securities: Agency mortgage-backed securities $ 232,335 — $ 232,335 — U.S. Treasury 91,230 91,230 — — I/O strip receivables 482 — 482 — 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 — There were no transfers between Level 1 and Level 2 during the period for assets measured at fair value on a recurring basis. Assets and Liabilities Measured on a Non-Recurring Basis The fair value of collateral dependent loans individually evaluated with specific allocations of the allowance for loan losses is generally based on recent real estate appraisals. The appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Foreclosed assets are valued at the time the loan is foreclosed upon and the asset is transferred to foreclosed assets. The fair value is based primarily on third party appraisals, less costs to sell. The appraisals may utilize a single valuation approach or a combination of approaches including the comparable sales and income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value. At June 30, 2020 and December 31, 2019, there were no foreclosed assets on the balance sheet. The carrying amounts and estimated fair values of financial instruments at June 30, 2020 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 $ 925,900 $ 925,900 $ — $ — $ 925,900 Securities available-for-sale 323,565 91,230 232,335 — 323,565 Securities held-to-maturity 322,677 — 332,452 — 332,452 Loans (including loans held-for-sale), net 2,645,269 — 4,324 2,631,042 2,635,366 FHLB stock, FRB stock, and other investments 33,509 — — — N/A Accrued interest receivable 10,041 369 1,778 7,894 10,041 I/O strips receivables 482 — 482 — 482 Liabilities: Time deposits $ 150,261 $ — $ 146,776 $ — $ 146,776 Other deposits 3,749,965 — 3,749,965 — 3,749,965 Subordinated debt 39,646 — 38,946 — 38,946 Accrued interest payable 585 — 585 — 585 The carrying amounts and estimated fair values of the Company’s financial instruments at December 31, 2019: 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 |
Equity Plan
Equity Plan | 6 Months Ended |
Jun. 30, 2020 | |
Equity Plan | |
Equity Plan | 11) Equity Plan The Company maintained an Amended and Restated 2004 Equity Plan (the “2004 Plan”) for directors, officers, and key employees. The 2004 Plan was terminated on May 23, 2013. On May 23, 2013, the Company’s shareholders approved the 2013 Equity Incentive Plan (the “2013 Plan”). On May 21, 2020, the shareholders approved an amendment to the Heritage Commerce Corp 2013 Equity Incentive Plan to increase the number of shares available from 3,000,000 to 5,000,000 shares. The equity plans provide for the grant of incentive and nonqualified stock options and restricted stock. The equity plans provide that the option price for both incentive and nonqualified stock options will be determined by the Board of Directors at no less than the fair value at the date of grant. Options granted vest on a schedule determined by the Board of Directors at the time of grant. Generally options vest over four years . All options expire no later than ten years from the date of grant. Restricted stock is subject to time vesting. For the six months ended June 30, 2020, the Company granted 329,500 shares of nonqualified stock options and 168,117 shares of restricted stock. There were 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, 2020 2,712,846 $ 8.80 Granted 329,500 $ 9.11 Exercised (320,494) $ 4.65 Forfeited or expired (94,516) $ 13.58 Outstanding at June 30, 2020 2,627,336 $ 9.18 5.85 $ 2,403,351 Vested or expected to vest 2,469,696 5.85 $ 2,259,150 Exercisable at June 30, 2020 1,955,675 4.77 $ 2,403,351 Information related to the equity plans for the periods indicated: Six Months Ended June 30, 2020 2019 Intrinsic value of options exercised $ 2,057,914 $ 392,127 Cash received from option exercise $ 1,489,991 $ 566,197 Tax benefit realized from option exercises $ 33,783 $ 102,786 Weighted average fair value of options granted $ 1.15 $ 1.91 As of June 30, 2020, there was $1,187,000 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 3.02 years. The fair value of each option grant is estimated on the date of grant using the Black Scholes option pricing model that uses the assumptions noted in the following table, including the weighted average assumptions for the option grants for the periods indicated: Six Months Ended June 30, 2020 2019 Expected life in months(1) 72 72 Volatility(1) 29 % 24 % Weighted average risk-free interest rate(2) 0.53 % 2.24 % Expected dividends(3) 5.71 % 3.95 % (1) The expected life of employee stock options represents the weighted average period the stock options are expected to remain outstanding based on historical experience. Volatility is based on the historical volatility of the stock price over the same period of the expected life of the option. (2) Based on the U.S. Treasury constant maturity interest rate with a term consistent with the expected life of the option granted. (3) Each grant’s dividend yield is calculated by annualizing the most recent quarterly cash dividend and dividing that amount by the market price of the Company’s common stock as of the grant date Restricted stock activity under the equity plans is as follows: Weighted Average Grant Number Date Fair Total Restricted Stock Award of Shares Value Nonvested shares at January 1, 2020 239,453 $ 11.23 Granted 168,117 $ 9.20 Vested (108,870) $ 13.19 Forfeited or expired — $ — Nonvested shares at June 30, 2020 298,700 $ 12.22 As of June 30, 2020, there was $3,077,000 of total unrecognized compensation cost related to nonvested restricted stock awards granted under the equity plans. The cost is expected to be recognized over a weighted-average period of approximately 2.13 years. |
Subordinated Debt
Subordinated Debt | 6 Months Ended |
Jun. 30, 2020 | |
Subordinated Debt | |
Subordinated Debt | 12) 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 $354,000 at June 30, 2020. 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, suggested 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. ARRC, since its inception, has supported the Secured Overnight Financing Rate (“SOFR”) as a replacement index. ARRC’s April 2019 version of its suggested contract includes both an “amendment approach” (i.e., inserting a mechanism for the parties to agree to a replacement index after the occurrence of certain events regarding LIBOR); and a “hardwired approach” (i.e., inserting a mechanism to automatically implement a replacement index after the occurrence of certain events regarding LIBOR). As of June 30, 2020, ARRC has released an update recommending lenders start using the “hardwired approach” by the end of the third quarter of 2020 for new financings. With respect to such new financings, implementation of the ARRC’s proposed language (with variations as appropriate) into the documentation is contemplated. However, the events necessitating the replacement of LIBOR are not scheduled to occur until the end of 2021, and SOFR continues to be assessed from both financial and operational perspectives on an on-going basis, so it is expected that the “amendment approach” remains optimal for such documentation in the short term. 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. |
Capital Requirements
Capital Requirements | 6 Months Ended |
Jun. 30, 2020 | |
Banking and Thrift, Other Disclosures [Abstract] | |
Capital Requirements | 13) 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 June 30, 2020, that management believes have changed the categorization of the Company or HBC as “well-capitalized.” The Company’s consolidated capital ratios and the HBC’s capital ratios exceeded the regulatory guidelines for a well-capitalized financial institution under the Basel III regulatory requirements at June 30, 2020. As permitted by the interim final rule issued on March 27, 2020 by our federal regulatory agency, we elected the option to delay the estimated impact of the adoption of the CECL Standard in our regulatory capital for two years. This two-year delay is in addition to the three-year transition period the agency had already made available. The adoption will delay the effects of CECL on our regulatory capital for the next two years, after which the effects will be phased-in over a three-year period from January 1, 2022 through December 31, 2024. Under the interim final rule, the amount of adjustments to regulatory capital deferred until the phase-in period include both the initial impact of adoption of the CECL Standard at January 1, 2020 and 25% of subsequent changes in our allowance for credit losses during each quarter of the two-year period ending December 31, 2021. 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 June 30, 2020 and December 31, 2019, 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 June 30, 2020 and December 31, 2019. Required For Capital Adequacy Purposes Actual Under Basel III Amount Ratio Amount Ratio (1) (Dollars in thousands) As of June 30, 2020 Total Capital $ 473,095 15.9 % $ 313,273 10.5 % (to risk-weighted assets) Tier 1 Capital $ 396,142 13.3 % $ 253,602 8.5 % (to risk-weighted assets) Common Equity Tier 1 Capital $ 396,142 13.3 % $ 208,849 7.0 % (to risk-weighted assets) Tier 1 Capital $ 396,142 9.4 % $ 169,290 4.0 % (to average assets) (1) Includes 2.5% capital conservation buffer, effective January 1, 2019, except the Tier 1 Capital to average assets ratio. Required For Capital Adequacy Purposes Actual Under Basel III Amount Ratio Amount Ratio (1) (Dollars in thousands) As of December 31, 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) (2) Includes 2.5% capital conservation buffer, effective January 1, 2019, except the Tier 1 Capital to average assets ratio. HBC’s actual capital amounts and ratios are presented in the following table, together with capital adequacy requirements, under the Basel III regulatory requirements as of June 30, 2020, and December 31, 2019. 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 June 30, 2020 Total Capital $ 450,839 15.1 % $ 298,153 10.0 % $ 313,060 10.5 % (to risk-weighted assets) Tier 1 Capital $ 413,557 13.9 % $ 238,522 8.0 % $ 253,430 8.5 % (to risk-weighted assets) Common Equity Tier 1 Capital $ 413,557 13.9 % $ 193,799 6.5 % $ 208,707 7.0 % (to risk-weighted assets) Tier 1 Capital $ 413,557 9.8 % $ 211,518 5.0 % $ 169,214 4.0 % (to average assets) (1) Includes 2.5% capital conservation buffer, effective January 1, 2019, except the Tier 1 Capital to average assets ratio. 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) Includes 2.5% capital conservation buffer, effective January 1, 2019, except the Tier 1 Capital to average assets ratio. The Subordinated Debt, net of unamortized issuance costs, totaled $39,646,000 at June 30, 2020, and qualifies as Tier 2 capital for the Company under the guidelines established by the Federal Reserve Bank. 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. 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 June 30, 2020, HBC would not be required to obtain regulatory approval, and the amount available for cash dividends is $37,996,000. Similar restrictions applied to the amount and sum of loan advances and other transfers of funds from HBC to the parent company. HBC distributed to HCC dividends of $8,000,000, during the second and first quarters of 2020, for a total of $16,000,000. |
Loss Contingencies
Loss Contingencies | 6 Months Ended |
Jun. 30, 2020 | |
Loss Contingencies | |
Loss Contingencies | 14) 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. |
Revenue Recognition
Revenue Recognition | 6 Months Ended |
Jun. 30, 2020 | |
Revenue Recognition | |
Revenue Recognition | 15) Revenue Recognition On January 1, 2018, the Company adopted ASU No. 2014-09 (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 Company currently accounts for sales of foreclosed assets in accordance with Topic 360-20. In most cases the Company will seek to engage a real estate agent for the sale of foreclosed assets immediately upon foreclosure. However, in some cases, where there is clear demand for the property in question, the Company may elect to allow for a marketing period on no more than six months to attempt a direct sale of the property. We generally recognize the sale, and any associated gain or loss, of a real estate property when control of the property transfers. Any gains or losses from the sale are recorded to noninterest income/expense. The following presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the periods indicated: Three Months Ended June 30, 2020 2019 (Dollars in thousands) Noninterest Income In-scope of Topic 606: Service charges and fees on deposit accounts $ 650 $ 1,177 Noninterest Income Out-of-scope of Topic 606 1,428 1,588 Total noninterest income $ 2,078 $ 2,765 Six Months Ended June 30, 2020 2019 (Dollars in thousands) Noninterest Income In-scope of Topic 606: Service charges and fees on deposit accounts $ 1,619 $ 2,338 Gain on the disposition of foreclosed assets 791 — Total noninterest income in-scope of Topic 606 2,410 2,338 Noninterest Income Out-of-scope of Topic 606 2,861 2,895 Total noninterest income $ 5,271 $ 5,233 |
Noninterest Expense
Noninterest Expense | 6 Months Ended |
Jun. 30, 2020 | |
Noninterest Expense | |
Noninterest Expense | 16) Noninterest Expense The following table sets forth the various components of the Company’s noninterest expense for the periods indicated: Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 (Dollars in thousands) Salaries and employee benefits $ 12,300 $ 10,698 $ 26,503 $ 21,468 Occupancy and equipment 1,766 1,578 3,538 3,084 Professional fees 1,155 753 2,590 1,571 Data processing 779 732 1,755 1,411 Software subscriptions 746 556 1,635 1,145 Amortization of intangible assets 964 554 1,822 1,107 Insurance expense 516 439 1,034 875 Other 2,786 3,135 7,909 5,702 Total noninterest expense $ 21,012 $ 18,445 $ 46,786 $ 36,363 The following table presents the merger-related costs included in other and salaries and employee benefits by category for the periods indicated: Three Months Ended Six Months Ended MERGER-RELATED COSTS June 30, June 30, June 30, June 30, (in $000’s, unaudited) 2020 2019 2020 2019 Salaries and employee benefits $ — $ — $ 356 $ — Other 59 540 2,127 540 Total merger-related costs $ 59 $ 540 $ 2,483 $ 540 |
Leases
Leases | 6 Months Ended |
Jun. 30, 2020 | |
Leases | |
Leases | 17) 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 liabilities The following table presents the quantitative information for the Company’s leases for the periods indicated: Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 (Dollars in thousands) Operating Lease Cost (Cost resulting from lease payments) $ 1,733 $ 1,044 $ 3,502 $ 2,094 Operating Lease - Operating Cash Flows (Fixed Payments) $ 1,379 $ 1,012 $ 2,570 $ 2,025 Operating Lease - ROU assets $ 37,137 $ 7,425 $ 37,137 $ 7,425 Operating Lease - Liabilities $ 37,137 $ 7,425 $ 37,137 $ 7,425 Weighted Average Lease Term - Operating Leases 8.50 years 3.40 years 8.50 years 3.40 years Weighted Average Discount Rate - Operating Leases 4.53% 5.26% 4.53% 5.26% The following maturity analysis shows the undiscounted cash flows due on the Company’s operating lease liabilities: (Dollars in thousands) 2020 $ 3,040 2021 5,028 2022 5,448 2023 4,812 2024 4,574 Thereafter 22,664 Total undiscounted cash flows 45,566 Discount on cash flows (8,429) Total lease liability $ 37,137 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 into a lease agreement for 54,910 square feet of office space in San Jose, California, commencing on February 1, 2020. The Company was able to complete the move of its Bay View Funding office during the first quarter of 2020, and had intended to move the main office of the Company during the second quarter of 2020 to this new location. However, due to delays and restrictions created by California's and Santa Clara County's Shelter-in-Place declarations because of COVID-19, the Company was only able to move a portion of the main offices to this new space in second quarter of 2020 and the remaining main office moves are anticipated to be completed in the third quarter of 2020. |
Business Segment Information
Business Segment Information | 6 Months Ended |
Jun. 30, 2020 | |
Business Segment Information | |
Business Segment Information | 18) 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 credit losses on loans is allocated based on the segment’s allowance for loan loss determination which considers the effects of charge-offs. Noninterest income and expense directly attributable to a segment are assigned to it. Taxes are paid on a consolidated basis and allocated for segment purposes. The Factoring segment includes only factoring originated by Bay View Funding. Three Months Ended June 30, 2020 Banking(1) Factoring Consolidated (Dollars in thousands) Interest income $ 34,570 2,562 $ 37,132 Intersegment interest allocations 218 (218) — Total interest expense 2,192 — 2,192 Net interest income 32,596 2,344 34,940 Provision for credit losses on loans 1,107 7 1,114 Net interest income after provision 31,489 2,337 33,826 Noninterest income 1,883 195 2,078 Noninterest expense 19,336 1,676 21,012 Intersegment expense allocations 106 (106) — Income before income taxes 14,142 750 14,892 Income tax (benefit) expense 4,052 222 4,274 Net income $ 10,090 $ 528 $ 10,618 Total assets $ 4,546,199 $ 68,202 $ 4,614,401 Loans, net of deferred fees $ 2,644,480 $ 41,909 $ 2,686,389 Goodwill $ 154,587 $ 13,044 $ 167,631 Three Months Ended June 30, 2019 Banking(1) Factoring Consolidated (Dollars in thousands) Interest income $ 30,521 2,968 $ 33,489 Intersegment interest allocations 292 (292) — Total interest expense 2,573 — 2,573 Net interest income 28,240 2,676 30,916 Provision (credit) for loan losses (744) 4 (740) Net interest income after provision 28,984 2,672 31,656 Noninterest income 2,641 124 2,765 Noninterest expense 16,784 1,661 18,445 Intersegment expense allocations 132 (132) — Income before income taxes 14,973 1,003 15,976 Income tax expense 4,327 296 4,623 Net income $ 10,646 $ 707 $ 11,353 Total assets $ 3,045,378 $ 62,653 $ 3,108,031 Loans, net of deferred fees $ 1,827,936 $ 49,831 $ 1,877,767 Goodwill $ 70,709 $ 13,044 $ 83,753 (1) Includes the holding company’s results of operations Six Months Ended June 30, 2020 Banking (1) Factoring Consolidated (Dollars in thousands) Interest income $ 72,635 $ 5,439 $ 78,074 Intersegment interest allocations 502 (502) — Total interest expense 4,554 — 4,554 Net interest income 68,583 4,937 73,520 Provision for credit losses on loans 13,981 403 14,384 Net interest income after provision 54,602 4,534 59,136 Noninterest income 4,906 365 5,271 Noninterest expense 43,519 3,267 46,786 Intersegment expense allocations 235 (235) — Income before income taxes 16,224 1,397 17,621 Income tax expense 4,729 413 5,142 Net income $ 11,495 $ 984 $ 12,479 Total assets $ 4,546,199 $ 68,202 $ 4,614,401 Loans, net of deferred fees $ 2,644,480 $ 41,909 $ 2,686,389 Goodwill $ 154,587 $ 13,044 $ 167,631 Six Months Ended June 30, 2019 Banking (1) Factoring Consolidated (Dollars in thousands) Interest income $ 61,017 $ 5,921 $ 66,938 Intersegment interest allocations 606 (606) — Total interest expense 4,980 — 4,980 Net interest income 56,643 5,315 61,958 Provision for loan losses (1,636) (165) (1,801) Net interest income after provision 58,279 5,480 63,759 Noninterest income 4,873 360 5,233 Noninterest expense 32,985 3,378 36,363 Intersegment expense allocations 253 (253) — Income before income taxes 30,420 2,209 32,629 Income tax expense 8,477 653 9,130 Net income $ 21,943 $ 1,556 $ 23,499 Total assets $ 3,045,378 $ 62,653 $ 3,108,031 Loans, net of deferred fees $ 1,827,936 $ 49,831 $ 1,877,767 Goodwill $ 70,709 $ 13,044 $ 83,753 (1) Includes the holding company’s results of operations |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2020 | |
Subsequent Events | |
Subsequent Events | 19) Subsequent Events On July 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 payable on August 20, 2020, to shareholders of record at close of business day on August 6, 2020. |
Basis of Presentation (Policies
Basis of Presentation (Policies) | 6 Months Ended |
Jun. 30, 2020 | |
Basis of Presentation | |
Basis of Presentation | The unaudited consolidated financial statements of Heritage Commerce Corp (the “Company” or “HCC”) and its wholly owned subsidiary, Heritage Bank of Commerce (“HBC”), have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and notes required by accounting principles generally accepted in the United States of America (“GAAP”) for annual financial statements are not included herein. The interim statements should be read in conjunction with the consolidated financial statements and notes that were included in the Company’s Form 10-K for the year ended December 31, 2019. HBC is a commercial bank serving customers primarily located in Alameda, Contra Costa, Marin, San Benito, San Francisco, San Mateo, and Santa Clara 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, and provides business-essential working capital factoring financing to various industries throughout the United States. No In management’s opinion, all adjustments necessary for a fair presentation of these consolidated financial statements have been included and are of a normal and recurring nature. All intercompany transactions and balances have been eliminated. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ significantly from these estimates. The results for the three and six months ended June 30, 2020 are not necessarily indicative of the results expected for any subsequent period or for the entire year ending December 31, 2020. |
Capital and Liquidity | Capital and Liquidity While the Company believes that it has sufficient capital to withstand an extended economic recession brought about by COVID-19, its reported and regulatory capital ratios could be adversely impacted by credit losses. The Company relies on cash on hand as well as dividends from its subsidiary bank to service its debt. If the Company’s capital deteriorates such that its subsidiary bank is unable to pay dividends to it for an extended period of time, the Company may not be able to service its debt. The Company maintains access to multiple sources of liquidity. Wholesale funding markets have remained open to us, but rates for short term funding have recently been volatile. If funding costs are elevated for an extended period of time, it could have an adverse effect on the Company’s net interest margin. If an extended recession caused large numbers of the Company’s deposit customers to withdraw their funds, the Company might become more reliant on volatile or more expensive sources of funding. |
Asset Valuation | Asset Valuation While certain valuation assumptions and judgments will change to account for pandemic-related circumstances such as widening credit spreads, the Company does not anticipate significant changes in methodology used to determine the fair value of assets measured in accordance with GAAP. The extent to which the COVID-19 pandemic will impact our business, results of operations and financial condition will depend on future developments, which are highly uncertain and difficult to predict. Those developments and factors include the duration and spread of the pandemic, its severity, the actions to contain the pandemic or address its impact, and how quickly and to what extent normal economic and operating conditions can resume. We do not yet know the full extent of the impact. However, the effects could have a material adverse impact on our business, asset valuations, financial condition and results of operations. Material adverse impacts may include all or a combination of valuation impairments on our intangible assets, investments, loans, or deferred tax assets. |
Reclassifications | Reclassifications Certain reclassifications of prior year balances have been made to conform to the current year presentation. These reclassifications had no impact on the Company’s consolidated financial position, results of operations or net change in cash and cash equivalents. |
Adoption of New Accounting Standards | Adoption of New Accounting Standards In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in this update replace the incurred loss impairment methodology in prior GAAP with a methodology that reflects expected life-of-instrument credit losses and requires consideration of a broader range of reasonable and supportable information to estimate future credit loss estimates. As Current Expected Credit Losses (“CECL”) encompasses all financial assets carried at amortized cost, the requirement that reserves be established based on an organization’s reasonable and supportable estimate of expected credit losses extends to held-to-maturity debt securities. The Company adopted CECL on January 1, 2020, using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures. Results for the reporting periods after January 1, 2020, are presented under Topic 326, while prior period amounts continue to be reported in accordance with previously applicable GAAP. The following table shows the impact of adopting CECL on January 1, 2020: As Reported Pre- Impact of Under Topic 326 Topic 326 Topic 326 Adoption Adoption (Dollars in thousands) Assets: Allowance for credit losses on debt securities Held to maturity municipal securities $ 58 $ - $ 58 Loans Commercial 6,790 10,453 (3,663) CRE - owner occupied 6,994 3,825 3,169 CRE - non-owner occupied 11,672 3,760 7,912 Land and construction 1,458 2,621 (1,163) Home equity 1,321 2,244 (923) Multifamily 1,253 57 1,196 Residential mortgage 678 243 435 Consumer and other 1,689 82 1,607 Allowance for credit losses on loans $ 31,855 $ 23,285 $ 8,570 Liabilities: Allowance for credit losses on off-balance sheet credit exposures $ 679 $ 886 $ (207) For CECL modeling purposes, the Company uses forecast data for the state of California including Gross Domestic Product (“GDP”) and unemployment projections provided by the California Economic Forecast (“CEF”, www.CaliforniaForecast.com). At January 1, 2020, the forecast for California GDP for 2020 was an annual increase in the low single digits and the forecasted California unemployment rate for 2020 was in the mid single digits. As of the implementation date of January 1, 2020, the Company recognized an increase of $8,570,000 to its allowance for credit losses for loans. The majority of this increase is related to loan portfolios acquired in our recent acquisitions that under the previous methodology were covered by the purchase discount on acquired loans. The cumulative-effect adjustment as a result of the adoption of this guidance was recorded, net of tax of $2.4 million, was a $6.1 million reduction to retained earnings effective January 1, 2020. As of the implementation date, there was a $58,000 allowance for losses recorded on the Company’s held-to-maturity municipal investment securities portfolio. For the six month ended June 30, 2020, there was a reduction of to the allowance for losses on the Company’s held-to-maturity municipal investment securities portfolio. This reduction was the result of a reduction in municipal securities amortized balances resulting from regular payments. The allowance for losses on held-to-maturity securities is based on historic loss rates of municipal securities by bond ratings and change in bond ratings of the municipal securities held by the Company will impact the reserve. The bond ratings for the Company’s municipal investment securities at June 30, 2020 were consistent with the ratings at January 1, 2020. Any ratings downgrades on these securities will impact the allowance for losses on these securities. In the normal course of business, the Company makes commitments to extend credit to its customers as long as there are no violations of any conditions established in contractual arrangements. These commitments are obligations that represent a potential credit risk to the Company, yet are not reflected in any form within the Company’s consolidated balance sheets. As of the implementation date, there was a reduction of $207,000 to the allowance for losses recorded for the Company’s off-balance sheet credit exposures. The reduction in reserves for off-balance sheet credit exposures at implementation was primarily driven by applying a lower estimated CECL loss factor for unfunded commercial loan and construction loan commitments. For the six month ended June 30, 2020, there was an increase of In January 2017, the FASB issued 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. |
Basis of Presentation (Tables)
Basis of Presentation (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Basis of Presentation | |
Schedule of impact of adopting CECL | As Reported Pre- Impact of Under Topic 326 Topic 326 Topic 326 Adoption Adoption (Dollars in thousands) Assets: Allowance for credit losses on debt securities Held to maturity municipal securities $ 58 $ - $ 58 Loans Commercial 6,790 10,453 (3,663) CRE - owner occupied 6,994 3,825 3,169 CRE - non-owner occupied 11,672 3,760 7,912 Land and construction 1,458 2,621 (1,163) Home equity 1,321 2,244 (923) Multifamily 1,253 57 1,196 Residential mortgage 678 243 435 Consumer and other 1,689 82 1,607 Allowance for credit losses on loans $ 31,855 $ 23,285 $ 8,570 Liabilities: Allowance for credit losses on off-balance sheet credit exposures $ 679 $ 886 $ (207) |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Earnings Per Share. | |
Schedule of reconciliation of factors used in computing basic and diluted earnings per common share | Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 (Dollars in thousands, except per share amounts) Net income $ 10,618 $ 11,353 $ 12,479 $ 23,499 Weighted average common shares outstanding for basic earnings per common share 59,420,592 43,202,562 59,353,759 43,155,360 Dilutive potential common shares 691,831 518,889 798,728 539,757 Shares used in computing diluted earnings per common share 60,112,423 43,721,451 60,152,487 43,695,117 Basic earnings per share $ 0.18 $ 0.26 $ 0.21 $ 0.54 Diluted earnings per share $ 0.18 $ 0.26 $ 0.21 $ 0.54 |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Income ("AOCI") (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Accumulated Other Comprehensive Income ("AOCI") | |
Schedule of changes in AOCI by component | Three Months Ended June 30, 2020 and 2019 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(1) Total (Dollars in thousands) Beginning balance April 1, 2020, net of taxes $ 6,627 $ 289 $ (11,625) $ (4,709) Other comprehensive loss before reclassification, net of taxes (395) — (10) (405) Amounts reclassified from other comprehensive income (loss), net of taxes (120) (9) 63 (66) Net current period other comprehensive income (loss), net of taxes (515) (9) 53 (471) Ending balance June 30, 2020, net of taxes $ 6,112 $ 280 $ (11,572) $ (5,180) Beginning balance April 1, 2019, net of taxes $ (1,603) $ 326 $ (7,710) $ (8,987) Other comprehensive income (loss) before reclassification, net of taxes 3,072 — (7) 3,065 Amounts reclassified from other comprehensive income (loss), net of taxes (386) (9) 15 (380) Net current period other comprehensive income (loss), net of taxes 2,686 (9) 8 2,685 Ending balance June 30, 2019, net of taxes $ 1,083 $ 317 $ (7,702) $ (6,302) (1) This AOCI component is included in the computation of net periodic benefit cost (see Note 9—Benefit Plans) and includes split-dollar life insurance benefit plan. Six Months Ended June 30, 2020 and 2019 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(1) Total (Dollars in thousands) Beginning balance January 1, 2020, net of taxes $ 1,602 $ 298 $ (11,678) $ (9,778) Other comprehensive income (loss) before reclassification, net of taxes 4,701 — (6) 4,695 Amounts reclassified from other comprehensive income (loss), net of taxes (191) (18) 112 (97) Net current period other comprehensive income (loss), net of taxes 4,510 (18) 106 4,598 Ending balance June 30, 2020, net of taxes $ 6,112 $ 280 $ (11,572) $ (5,180) Beginning balance January 1, 2019, net of taxes $ (5,007) $ 344 $ (7,718) $ (12,381) Other comprehensive income (loss) before reclassification, net of taxes 6,476 — (14) 6,462 Amounts reclassified from other comprehensive income (loss), net of taxes (386) (27) 30 (383) Net current period other comprehensive income (loss), net of taxes 6,090 (27) 16 6,079 Ending balance June 30, 2019, net of taxes $ 1,083 $ 317 $ (7,702) $ (6,302) (1) This AOCI component is included in the computation of net periodic benefit cost (see Note 9—Benefit Plans) and includes split-dollar life insurance benefit plan. Amounts Reclassified from AOCI(1) Three Months Ended June 30, Affected Line Item Where Details About AOCI Components 2020 2019 Net Income is Presented (Dollars in thousands) Unrealized gains on available-for-sale securities and I/O strips $ 170 $ 548 Gain on sales of securities (50) (162) Income tax expense 120 386 Net of tax Amortization of unrealized gain on securities available- for-sale that were reclassified to securities held-to-maturity 13 13 Interest income on taxable securities (4) (4) Income tax expense 9 9 Net of tax Amortization of defined benefit pension plan items (1) Prior transition obligation 15 24 Actuarial losses (105) (46) (90) (22) Other noninterest expense 27 7 Income tax benefit (63) (15) Net of tax Total reclassification for the period $ 66 $ 380 Amounts Reclassified from AOCI(1) Six Months Ended June 30, Affected Line Item Where Details About AOCI Components 2020 2019 Net Income is Presented (Dollars in thousands) Unrealized gains on available-for-sale securities and I/O strips $ 270 $ 548 Gain on sales of securities (79) (162) Income tax expense 191 386 Net of tax Amortization of unrealized gain on securities available-for-sale that were reclassified to securities held-to-maturity 26 39 Interest income on taxable securities (8) (12) Income tax expense 18 27 Net of tax Amortization of defined benefit pension plan items (1) Prior transition obligation 30 49 Actuarial losses (190) (92) (160) (43) Other noninterest expense 48 13 Income tax benefit (112) (30) Net of tax Total reclassification from AOCI for the period $ 97 $ 383 (1) This AOCI component is included in the computation of net periodic benefit cost (see Note 9—Benefit Plans) and includes split-dollar life insurance benefit plan. |
Schedule of reclassifications out of AOCI into net income |
Securities (Tables)
Securities (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Securities | |
Schedule of amortized cost and estimated fair value of securities | Gross Gross Allowance Estimated Amortized Unrealized Unrealized for Credit Fair June 30, 2020 Cost Gains (Losses) Losses Value (Dollars in thousands) Securities available-for-sale: Agency mortgage-backed securities $ 225,429 $ 6,906 $ — $ — $ 232,335 U.S. Treasury 89,476 1,754 — — 91,230 Total $ 314,905 $ 8,660 $ — $ — $ 323,565 Gross Gross Estimated Allowance Amortized Unrecognized Unrecognized Fair for Credit June 30, 2020 Cost Gains (Losses) Value Losses (Dollars in thousands) Securities held-to-maturity: Agency mortgage-backed securities $ 249,070 $ 7,895 $ (1) $ 256,964 $ — Municipals - exempt from Federal tax 73,662 1,826 — 75,488 (55) Total $ 322,732 $ 9,721 $ (1) $ 332,452 $ (55) 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 Gross Gross Estimated Amortized Unrecognized Unrecognized Fair December 31, 2019 Cost Gains (Losses) Value (Dollars in thousands) 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 |
Schedule of securities with unrealized losses | Less Than 12 Months 12 Months or More Total Fair Unrealized Fair Unrealized Fair Unrealized June 30, 2020 Value (Losses) Value (Losses) Value (Losses) (Dollars in thousands) Securities held-to-maturity: Agency mortgage-backed securities $ 512 $ (1) $ — $ — $ 512 $ (1) Total $ 512 $ (1) $ — $ — $ 512 $ (1) 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) |
Schedule of proceeds from sales of securities and the resulting gains and losses | Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 (Dollars in thousands) Proceeds $ 30,085 $ 59,878 $ 56,598 $ 59,878 Gross gains 170 608 270 608 Gross losses — (60) — (60) |
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 $ 74,608 75,861 Due after one through five years 14,868 15,369 Agency mortgage-backed securities 225,429 232,335 Total $ 314,905 $ 323,565 Held-to-maturity Amortized Estimated Cost Fair Value (Dollars in thousands) Due 3 months or less $ 530 $ 531 Due after 3 months through one year 914 917 Due after one through five years 7,283 7,537 Due after five through ten years 33,354 34,201 Due after ten years 31,581 32,302 Agency mortgage-backed securities 249,070 256,964 Total $ 322,732 $ 332,452 |
Schedule of rollforward by major security type of the allowance for credit losses on debt securities held-to-maturity | Municipals (Dollars in thousands) Beginning balance January 1, 2020 $ - Impact of adopting Topic 326 58 Provision (credit) for credit loss (3) Ending balance June 30, 2020 $ 55 |
Loans and Allowance for Credi_2
Loans and Allowance for Credit Losses on Loans (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Allowance for Credit Losses on Loans | |
Schedule of loans | June 30, December 31, 2020 2019 (Dollars in thousands) Loans held-for-investment: Commercial $ 878,393 $ 603,345 Real estate: CRE - owner occupied 553,463 548,907 CRE - non-owner occupied 725,776 767,821 Land and construction 138,284 147,189 Home equity 112,679 151,775 Multifamily 169,637 180,623 Residential mortgages 95,033 100,759 Consumer and other 22,759 33,744 Loans 2,696,024 2,534,163 Deferred loan fees, net (9,635) (319) Loans, net of deferred fees 2,686,389 2,533,844 Allowance for credit losses on loans (1) (45,444) (23,285) Loans, net $ 2,640,945 $ 2,510,559 (1) |
Schedule of changes in allowance for loan (credit) losses | CRE CRE Owner Non-owner Land & Home Multi- Residential Consumer Commercial Occupied Occupied Construction Equity Family Mortgage and Other Total (Dollars in thousands) Beginning of period balance $ 12,801 $ 7,737 $ 15,645 $ 2,603 $ 1,746 $ 1,622 $ 708 $ 1,841 $ 44,703 Charge-offs (465) — — — — — — — (465) Recoveries 46 1 — 13 31 — — 1 92 Net (charge-offs) recoveries (419) 1 — 13 31 — — 1 (373) Provision for credit losses on loans 797 809 (196) (64) 74 206 117 (629) 1,114 End of period balance $ 13,179 $ 8,547 $ 15,449 $ 2,552 $ 1,851 $ 1,828 $ 825 $ 1,213 $ 45,444 Commercial Real Estate Consumer Total (Dollars in thousands) Beginning of period balance $ 15,557 $ 11,671 $ 90 $ 27,318 Charge-offs (76) — — (76) Recoveries 87 42 — 129 Net recoveries 11 42 — 53 Provision (credit) for loan losses (334) (406) — (740) End of period balance $ 15,234 $ 11,307 $ 90 $ 26,631 Owner Non-owner Land & Home Multi- Residential Consumer Commercial Occupied Occupied Construction Equity Family Mortgage and Other Total (Dollars in thousands) Beginning of period balance $ 10,453 $ 3,825 $ 3,760 $ 2,621 $ 2,244 $ 57 $ 243 $ 82 $ 23,285 Adoption of Topic 326 (3,663) 3,169 7,912 (1,163) (923) 1,196 435 1,607 8,570 Balance at adoption on January 1, 2020 6,790 6,994 11,672 1,458 1,321 1,253 678 1,689 31,855 Charge-offs (1,135) — — — — — — (3) (1,138) Recoveries 255 1 — 32 54 — — 1 343 Net (charge-offs) recoveries (880) 1 — 32 54 — — (2) (795) Provision for credit losses on loans 7,269 1,552 3,777 1,062 476 575 147 (474) 14,384 End of period balance $ 13,179 $ 8,547 $ 15,449 $ 2,552 $ 1,851 $ 1,828 $ 825 $ 1,213 $ 45,444 Commercial Real Estate Consumer Total (Dollars in thousands) Beginning of period balance $ 17,061 $ 10,671 $ 116 $ 27,848 Charge-offs (302) — (302) Recoveries 802 84 — 886 Net recoveries 500 84 — 584 Provision (credit) for loan losses (2,327) 552 (26) (1,801) End of period balance $ 15,234 $ 11,307 $ 90 $ 26,631 |
Schedule of balance in allowance for loan losses and recorded investment in loans by portfolio segment, based on impairment method | Allowance Unpaid for Loan Principal Recorded Losses Balance Investment Allocated (Dollars in thousands) With no related allowance recorded: Commercial $ 2,113 $ 2,113 $ — Real estate: CRE 5,094 5,094 — Home Equity 360 360 — Total with no related allowance recorded 7,567 7,567 — With an allowance recorded: Commercial 2,697 2,697 1,835 Total with an allowance recorded 2,697 2,697 1,835 Total $ 10,264 $ 10,264 $ 1,835 |
Schedule of loans held-for-investment individually evaluated for impairment by class of loans | December 31, 2019 Consumer Commercial Real Estate and other 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 598,535 1,891,620 33,744 2,523,899 Total loan balance $ 603,345 $ 1,897,074 $ 33,744 $ 2,534,163 |
Schedule of nonperforming loans by class | Restructured Nonaccrual Nonaccrual and Loans with no Specific with Specific over 90 Days Allowance for Allowance for Past Due Credit Credit and Still Losses Losses Accruing Total (Dollars in thousands) Commercial $ 747 $ 1,669 $ 668 $ 3,084 Real estate: CRE - Owner Occupied 3,679 — — 3,679 CRE - Non-Owner Occupied — — — — Land and construction — — — — Home equity 898 — — 898 Multifamily — — — — Residential mortgages — — — — Consumer and other — 1,464 — 1,464 Total $ 5,324 $ 3,133 $ 668 $ 9,125 Restructured and Loans over 90 Days Past Due and Still Nonaccrual Accruing Total (Dollars in thousands) Commercial $ 3,444 $ 1,153 $ 4,597 Real estate: CRE 5,094 — 5,094 Home equity 137 — 137 Total $ 8,675 $ 1,153 $ 9,828 |
Schedule of aging of past due loans by class of loans | June 30, 2020 30 - 59 60 - 89 90 Days or Days Days Greater Total Past Due Past Due Past Due Past Due Current Total (Dollars in thousands) Commercial $ 5,195 $ 1,873 $ 988 $ 8,056 $ 870,337 $ 878,393 Real estate: CRE - Owner Occupied — — 29 29 553,434 553,463 CRE - Non-Owner Occupied — — — — 725,776 725,776 Land and construction — — — — 138,284 138,284 Home equity — — 898 898 111,781 112,679 Multifamily — — — — 169,637 169,637 Residential mortgages — — — — 95,033 95,033 Consumer and other 1,057 — 1,464 2,521 20,238 22,759 Total $ 6,252 $ 1,873 $ 3,379 $ 11,504 $ 2,684,520 $ 2,696,024 December 31, 2019 30 - 59 60 - 89 90 Days or Days Days Greater Total Past Due Past Due Past Due Past Due Current Total (Dollars in thousands) Commercial $ 4,770 $ 2,097 $ 3,217 $ 10,084 $ 593,261 $ 603,345 Real estate: CRE - Owner Occupied — — 5,094 5,094 543,813 548,907 CRE - Non-Owner Occupied — — — — 767,821 767,821 Land and construction — — — — 147,189 147,189 Home equity — 137 — 137 151,638 151,775 Multifamily — — — — 180,623 180,623 Residential mortgages — — — — 100,759 100,759 Consumer and other — — — — 33,744 33,744 Total $ 4,770 $ 2,234 $ 8,311 $ 15,315 $ 2,518,848 $ 2,534,163 |
Schedule of amortized cost basis of collateral-dependent loans | Collateral Type Real Estate Business Property Assets Unsecured Total (Dollars in thousands) Commercial $ 60 $ 1,478 $ 131 $ 1,669 Real estate: - CRE - Owner Occupied - - - CRE - Non-Owner Occupied - - - - Land and construction - - - - Home equity - - - - Multifamily - - - - Residential mortgages - - - - Consumer and other 1,464 - - 1,464 Total $ 1,524 $ 1,478 $ 131 $ 3,133 |
Summary of loan portfolio by loan type and credit quality classification | Revolving Loans Term Loans Amortized Cost Basis by Originated Period Amortized 2015 and Cost 2020 2019 2018 2017 2016 Prior Basis Total (Dollars in thousands) Commercial: Pass and Watch $ 404,010 $ 47,578 $ 36,471 $ 19,571 $ 10,601 $ 15,674 $ 292,448 $ 826,353 Special Mention 30,835 - - - 320 - 2,607 33,762 Substandard 926 - 72 604 2,596 624 11,040 15,862 Substandard-Nonaccrual 1,449 59 340 - 178 61 329 2,416 Total 437,220 47,637 36,883 20,175 13,695 16,359 306,424 878,393 CRE - Owner Occupied: Pass and Watch 78,779 79,282 78,384 60,021 52,486 140,208 16,443 505,603 Special Mention 37,899 - 232 - - 2,619 - 40,750 Substandard - - - 2,250 715 466 - 3,431 Substandard-Nonaccrual 3,102 548 - - - 29 - 3,679 Total 119,780 79,830 78,616 62,271 53,201 143,322 16,443 553,463 CRE - Non-Owner Occupied: Pass and Watch 101,876 137,054 78,019 110,390 60,316 175,221 3,885 666,761 Special Mention 46,314 - 1,802 - 4,299 5,568 - 57,983 Substandard 1,032 - - - - - - 1,032 Substandard-Nonaccrual - - - - - - - - Total 149,222 137,054 79,821 110,390 64,615 180,789 3,885 725,776 Land and contruction: Pass and Watch 60,938 47,934 14,255 1,560 - 1,383 2,225 128,295 Special Mention 8,406 - - - - - - 8,406 Substandard 1,583 - - - - - - 1,583 Substandard-Nonaccrual - - - - - - - - Total 70,927 47,934 14,255 1,560 - 1,383 2,225 138,284 Home equity: Pass and Watch 276 - 89 - - - 108,875 109,240 Special Mention - - - - - - 1,718 1,718 Substandard - - - - - 143 680 823 Substandard-Nonaccrual - - - - - 123 775 898 Total 276 - 89 - - 266 112,048 112,679 Multifamily: Pass and Watch 17,007 40,571 18,628 27,700 16,401 37,322 845 158,474 Special Mention 5,967 - - - - 5,196 - 11,163 Substandard - - - - - - - - Substandard-Nonaccrual - - - - - - - - Total 22,974 40,571 18,628 27,700 16,401 42,518 845 169,637 Residential mortgage: Pass and Watch 8,607 10,237 4,970 11,011 34,304 15,889 - 85,018 Special Mention 6,848 - - 1,285 557 1,061 - 9,751 Substandard - - - - - 264 - 264 Substandard-Nonaccrual - - - - - - - - Total 15,455 10,237 4,970 12,296 34,861 17,214 - 95,033 Consumer and other: Pass and Watch 16 3,018 1,567 23 135 1,028 15,427 21,214 Special Mention 81 - - - - - - 81 Substandard - - - - - - - - Substandard-Nonaccrual - - 1,464 - - - - 1,464 Total 97 3,018 3,031 23 135 1,028 15,427 22,759 Total loans $ 815,951 $ 366,281 $ 236,293 $ 234,415 $ 182,908 $ 402,879 $ 457,297 $ 2,696,024 December 31, 2019 Nonclassified Classified Total Commercial $ 599,143 4,202 $ 603,345 Real estate: CRE - Owner Occupied 538,229 10,678 548,907 CRE - Non-Owner Occupied 761,801 6,020 767,821 Land and construction 144,108 3,081 147,189 Home equity 149,131 2,644 151,775 Multifamily 180,623 — 180,623 Residential mortgages 100,262 497 100,759 Consumer and other 28,287 5,457 33,744 Total $ 2,501,584 $ 32,579 $ 2,534,163 |
Schedule of loans by class modified as troubled debt restructurings | During the Six Months Ended June 30, 2020 Pre-modification Post-modification Number Outstanding Outstanding of Recorded Recorded Troubled Debt Restructurings: Contracts Investment Investment (Dollars in thousands) Commercial 3 $ 13 $ 13 Real estate: CRE - owner occupied — — — CRE - non-owner occupied — — — Land and construction — — — Home equity — — — Multifamily — — — Residential mortgages — — — Consumer and other — — — Total 3 $ 13 $ 13 |
Business Combinations2 (Tables)
Business Combinations2 (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Business Acquisition [Line Items] | |
Summary of consideration paid | (Dollars in thousands) Issuance of to Presidio shareholders and holders of restricted stock (stock price = $ 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 |
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 17,916 211 (i) 18,127 Total liabilities assumed $ 802,618 $ 210 802,828 Net assets acquired 101,720 Purchase price 185,598 Goodwill recorded in the merger $ 83,878 Explanation of certain fair value related adjustments for the Presidio merger: (a) (b) (c) (d) (e) (f) (g) (h) (i) |
Goodwill and Other Intangible_2
Goodwill and Other Intangible Assets (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Goodwill and Other Intangible Assets | |
Summary of Company's intangible assets | June 30, 2020 Gross Carrying Accumulated Amount Amortization Total (Dollars in thousands) Core deposit intangibles $ 25,023 $ (7,446) $ 17,577 Customer relationship and brokered relationship intangibles 1,900 (1,076) 824 Below market leases 770 (578) 192 Total $ 27,693 $ (9,100) $ 18,593 December 31, 2019 Gross Carrying Accumulated Amount Amortization Total (Dollars in thousands) Core deposit intangibles $ 25,023 $ (5,846) $ 19,177 Customer relationship and brokered relationship intangibles 1,900 (981) 919 Below market leases 770 (451) 319 Total $ 27,693 $ (7,278) $ 20,415 |
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 $ 912 (9) $ 332 $ 109 $ 104 $ 8 $ 359 $ 95 1,910 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 18 346 159 2,186 2025 970 — 478 — 145 18 200 — 1,811 Thereafter 3,211 — 1,042 — 306 70 — — 4,629 $ 9,909 $ (83) $ 4,027 $ 109 $ 1,216 $ 168 $ 2,423 $ 824 $ 18,593 |
Income Taxes (Tables)
Income Taxes (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Income Taxes | |
Summary of carrying amount of low income tax housing investment | June 30, December 31, 2020 2019 (Dollars in thousands) Low income housing investments $ 5,668 $ 6,126 Future commitments $ 625 $ 625 |
Benefit Plans (Tables)
Benefit Plans (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Supplemental Retirement Plan | |
Benefit plans | |
Schedule of components of net periodic benefit cost | Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 (Dollars in thousands) Components of net periodic benefit cost: Service cost $ 123 $ 55 $ 246 $ 110 Interest cost 236 264 467 528 Amortization of net actuarial loss 105 46 190 92 Net periodic benefit cost $ 464 $ 365 $ 903 $ 730 |
Split-Dollar Life Insurance Benefit Plan | |
Benefit plans | |
Schedule of components of net periodic benefit cost | Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 (Dollars in thousands) Amortization of prior transition obligation $ (15) $ (24) $ (30) $ (49) Interest cost 62 70 124 140 Net periodic benefit cost $ 47 $ 46 $ 94 $ 91 |
Schedule of change in projected benefit obligation | June 30, December 31, 2020 2019 (Dollars in thousands) Change in projected benefit obligation: Projected benefit obligation at beginning of year $ 8,198 $ 6,903 Interest cost 124 278 Actuarial loss (gain) — 1,017 Projected benefit obligation at end of period $ 8,322 $ 8,198 |
Schedule of amounts recognized in accumulated other comprehensive loss | June 30, December 31, 2020 2019 (Dollars in thousands) Net actuarial loss $ 3,851 $ 3,776 Prior transition obligation 1,014 1,059 Accumulated other comprehensive loss $ 4,865 $ 4,835 |
Fair Value (Tables)
Fair Value (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
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 June 30, 2020 Available-for-sale securities: Agency mortgage-backed securities $ 232,335 — $ 232,335 — U.S. Treasury 91,230 91,230 — — I/O strip receivables 482 — 482 — 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 — |
Schedule of carrying amounts and estimated fair values of financial instruments | 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 $ 925,900 $ 925,900 $ — $ — $ 925,900 Securities available-for-sale 323,565 91,230 232,335 — 323,565 Securities held-to-maturity 322,677 — 332,452 — 332,452 Loans (including loans held-for-sale), net 2,645,269 — 4,324 2,631,042 2,635,366 FHLB stock, FRB stock, and other investments 33,509 — — — N/A Accrued interest receivable 10,041 369 1,778 7,894 10,041 I/O strips receivables 482 — 482 — 482 Liabilities: Time deposits $ 150,261 $ — $ 146,776 $ — $ 146,776 Other deposits 3,749,965 — 3,749,965 — 3,749,965 Subordinated debt 39,646 — 38,946 — 38,946 Accrued interest payable 585 — 585 — 585 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 |
Equity Plan (Tables)
Equity Plan (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
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, 2020 2,712,846 $ 8.80 Granted 329,500 $ 9.11 Exercised (320,494) $ 4.65 Forfeited or expired (94,516) $ 13.58 Outstanding at June 30, 2020 2,627,336 $ 9.18 5.85 $ 2,403,351 Vested or expected to vest 2,469,696 5.85 $ 2,259,150 Exercisable at June 30, 2020 1,955,675 4.77 $ 2,403,351 |
Schedule of information related to the equity Plan | Six Months Ended June 30, 2020 2019 Intrinsic value of options exercised $ 2,057,914 $ 392,127 Cash received from option exercise $ 1,489,991 $ 566,197 Tax benefit realized from option exercises $ 33,783 $ 102,786 Weighted average fair value of options granted $ 1.15 $ 1.91 |
Schedule of assumptions used to estimate the fair value of each option grant on the date of grant | Six Months Ended June 30, 2020 2019 Expected life in months(1) 72 72 Volatility(1) 29 % 24 % Weighted average risk-free interest rate(2) 0.53 % 2.24 % Expected dividends(3) 5.71 % 3.95 % (1) The expected life of employee stock options represents the weighted average period the stock options are expected to remain outstanding based on historical experience. Volatility is based on the historical volatility of the stock price over the same period of the expected life of the option. (2) Based on the U.S. Treasury constant maturity interest rate with a term consistent with the expected life of the option granted. (3) Each grant’s dividend yield is calculated by annualizing the most recent quarterly cash dividend and dividing that amount by the market price of the Company’s common stock as of the grant date |
Schedule of restricted stock activity under the equity plans | Weighted Average Grant Number Date Fair Total Restricted Stock Award of Shares Value Nonvested shares at January 1, 2020 239,453 $ 11.23 Granted 168,117 $ 9.20 Vested (108,870) $ 13.19 Forfeited or expired — $ — Nonvested shares at June 30, 2020 298,700 $ 12.22 |
Capital Requirements (Tables)
Capital Requirements (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
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 June 30, 2020 Total Capital $ 473,095 15.9 % $ 313,273 10.5 % (to risk-weighted assets) Tier 1 Capital $ 396,142 13.3 % $ 253,602 8.5 % (to risk-weighted assets) Common Equity Tier 1 Capital $ 396,142 13.3 % $ 208,849 7.0 % (to risk-weighted assets) Tier 1 Capital $ 396,142 9.4 % $ 169,290 4.0 % (to average assets) (1) Includes 2.5% capital conservation buffer, effective January 1, 2019, except the Tier 1 Capital to average assets ratio. Required For Capital Adequacy Purposes Actual Under Basel III Amount Ratio Amount Ratio (1) (Dollars in thousands) As of December 31, 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) (2) Includes 2.5% capital conservation buffer, effective January 1, 2019, except the Tier 1 Capital to average assets ratio. |
HBC (Wholly-owned Subsidiary) | |
Capital Requirements | |
Schedule of actual capital and required amounts and ratios | Required For Capital To Be Well-Capitalized Adequacy Under Basel III PCA Regulatory Purposes Actual Requirements Under Basel III Amount Ratio Amount Ratio Amount Ratio (1) (Dollars in thousands) As of June 30, 2020 Total Capital $ 450,839 15.1 % $ 298,153 10.0 % $ 313,060 10.5 % (to risk-weighted assets) Tier 1 Capital $ 413,557 13.9 % $ 238,522 8.0 % $ 253,430 8.5 % (to risk-weighted assets) Common Equity Tier 1 Capital $ 413,557 13.9 % $ 193,799 6.5 % $ 208,707 7.0 % (to risk-weighted assets) Tier 1 Capital $ 413,557 9.8 % $ 211,518 5.0 % $ 169,214 4.0 % (to average assets) (1) Includes 2.5% capital conservation buffer, effective January 1, 2019, except the Tier 1 Capital to average assets ratio. 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) Includes 2.5% capital conservation buffer, effective January 1, 2019, except the Tier 1 Capital to average assets ratio. |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Revenue Recognition | |
Schedule of noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606 | Three Months Ended June 30, 2020 2019 (Dollars in thousands) Noninterest Income In-scope of Topic 606: Service charges and fees on deposit accounts $ 650 $ 1,177 Noninterest Income Out-of-scope of Topic 606 1,428 1,588 Total noninterest income $ 2,078 $ 2,765 Six Months Ended June 30, 2020 2019 (Dollars in thousands) Noninterest Income In-scope of Topic 606: Service charges and fees on deposit accounts $ 1,619 $ 2,338 Gain on the disposition of foreclosed assets 791 — Total noninterest income in-scope of Topic 606 2,410 2,338 Noninterest Income Out-of-scope of Topic 606 2,861 2,895 Total noninterest income $ 5,271 $ 5,233 |
Noninterest Expense (Tables)
Noninterest Expense (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Noninterest Expense | |
Schedule of noninterest expense | Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 (Dollars in thousands) Salaries and employee benefits $ 12,300 $ 10,698 $ 26,503 $ 21,468 Occupancy and equipment 1,766 1,578 3,538 3,084 Professional fees 1,155 753 2,590 1,571 Data processing 779 732 1,755 1,411 Software subscriptions 746 556 1,635 1,145 Amortization of intangible assets 964 554 1,822 1,107 Insurance expense 516 439 1,034 875 Other 2,786 3,135 7,909 5,702 Total noninterest expense $ 21,012 $ 18,445 $ 46,786 $ 36,363 The following table presents the merger-related costs included in other and salaries and employee benefits by category for the periods indicated: Three Months Ended Six Months Ended MERGER-RELATED COSTS June 30, June 30, June 30, June 30, (in $000’s, unaudited) 2020 2019 2020 2019 Salaries and employee benefits $ — $ — $ 356 $ — Other 59 540 2,127 540 Total merger-related costs $ 59 $ 540 $ 2,483 $ 540 |
Leases (Tables)
Leases (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Leases | |
Schedule of leases | Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 (Dollars in thousands) Operating Lease Cost (Cost resulting from lease payments) $ 1,733 $ 1,044 $ 3,502 $ 2,094 Operating Lease - Operating Cash Flows (Fixed Payments) $ 1,379 $ 1,012 $ 2,570 $ 2,025 Operating Lease - ROU assets $ 37,137 $ 7,425 $ 37,137 $ 7,425 Operating Lease - Liabilities $ 37,137 $ 7,425 $ 37,137 $ 7,425 Weighted Average Lease Term - Operating Leases 8.50 years 3.40 years 8.50 years 3.40 years Weighted Average Discount Rate - Operating Leases 4.53% 5.26% 4.53% 5.26% |
Schedule of maturity analysis shows the undiscounted cash flows due on the Company's operating lease liabilities | (Dollars in thousands) 2020 $ 3,040 2021 5,028 2022 5,448 2023 4,812 2024 4,574 Thereafter 22,664 Total undiscounted cash flows 45,566 Discount on cash flows (8,429) Total lease liability $ 37,137 |
Business Segment Information (T
Business Segment Information (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Business Segment Information | |
Schedule of information by operating segment | Three Months Ended June 30, 2020 Banking(1) Factoring Consolidated (Dollars in thousands) Interest income $ 34,570 2,562 $ 37,132 Intersegment interest allocations 218 (218) — Total interest expense 2,192 — 2,192 Net interest income 32,596 2,344 34,940 Provision for credit losses on loans 1,107 7 1,114 Net interest income after provision 31,489 2,337 33,826 Noninterest income 1,883 195 2,078 Noninterest expense 19,336 1,676 21,012 Intersegment expense allocations 106 (106) — Income before income taxes 14,142 750 14,892 Income tax (benefit) expense 4,052 222 4,274 Net income $ 10,090 $ 528 $ 10,618 Total assets $ 4,546,199 $ 68,202 $ 4,614,401 Loans, net of deferred fees $ 2,644,480 $ 41,909 $ 2,686,389 Goodwill $ 154,587 $ 13,044 $ 167,631 Three Months Ended June 30, 2019 Banking(1) Factoring Consolidated (Dollars in thousands) Interest income $ 30,521 2,968 $ 33,489 Intersegment interest allocations 292 (292) — Total interest expense 2,573 — 2,573 Net interest income 28,240 2,676 30,916 Provision (credit) for loan losses (744) 4 (740) Net interest income after provision 28,984 2,672 31,656 Noninterest income 2,641 124 2,765 Noninterest expense 16,784 1,661 18,445 Intersegment expense allocations 132 (132) — Income before income taxes 14,973 1,003 15,976 Income tax expense 4,327 296 4,623 Net income $ 10,646 $ 707 $ 11,353 Total assets $ 3,045,378 $ 62,653 $ 3,108,031 Loans, net of deferred fees $ 1,827,936 $ 49,831 $ 1,877,767 Goodwill $ 70,709 $ 13,044 $ 83,753 (1) Includes the holding company’s results of operations Six Months Ended June 30, 2020 Banking (1) Factoring Consolidated (Dollars in thousands) Interest income $ 72,635 $ 5,439 $ 78,074 Intersegment interest allocations 502 (502) — Total interest expense 4,554 — 4,554 Net interest income 68,583 4,937 73,520 Provision for credit losses on loans 13,981 403 14,384 Net interest income after provision 54,602 4,534 59,136 Noninterest income 4,906 365 5,271 Noninterest expense 43,519 3,267 46,786 Intersegment expense allocations 235 (235) — Income before income taxes 16,224 1,397 17,621 Income tax expense 4,729 413 5,142 Net income $ 11,495 $ 984 $ 12,479 Total assets $ 4,546,199 $ 68,202 $ 4,614,401 Loans, net of deferred fees $ 2,644,480 $ 41,909 $ 2,686,389 Goodwill $ 154,587 $ 13,044 $ 167,631 Six Months Ended June 30, 2019 Banking (1) Factoring Consolidated (Dollars in thousands) Interest income $ 61,017 $ 5,921 $ 66,938 Intersegment interest allocations 606 (606) — Total interest expense 4,980 — 4,980 Net interest income 56,643 5,315 61,958 Provision for loan losses (1,636) (165) (1,801) Net interest income after provision 58,279 5,480 63,759 Noninterest income 4,873 360 5,233 Noninterest expense 32,985 3,378 36,363 Intersegment expense allocations 253 (253) — Income before income taxes 30,420 2,209 32,629 Income tax expense 8,477 653 9,130 Net income $ 21,943 $ 1,556 $ 23,499 Total assets $ 3,045,378 $ 62,653 $ 3,108,031 Loans, net of deferred fees $ 1,827,936 $ 49,831 $ 1,877,767 Goodwill $ 70,709 $ 13,044 $ 83,753 (1) Includes the holding company’s results of operations |
Basis of Presentation (Details)
Basis of Presentation (Details) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||||
Jun. 30, 2020USD ($) | Jun. 30, 2019USD ($) | Jun. 30, 2020USD ($)segment | Jun. 30, 2019USD ($) | Dec. 31, 2019USD ($) | Mar. 31, 2020USD ($) | Jan. 01, 2020USD ($) | Mar. 31, 2019USD ($) | Dec. 31, 2018USD ($) | |
Number of customers accounting for more than 10 percent of revenue for HBC or the Company | 0 | ||||||||
Number of operating segments | segment | 2 | ||||||||
Allowance for credit losses on debt securities | $ 55,000 | $ 55,000 | $ 58,000 | ||||||
Loans, net of deferred fees | 2,696,024,000 | 2,696,024,000 | $ 2,534,163,000 | ||||||
Allowance for credit losses on loans | 45,444,000 | $ 26,631,000 | 45,444,000 | $ 26,631,000 | 23,285,000 | $ 44,703,000 | 31,855,000 | $ 27,318,000 | $ 27,848,000 |
Allowance for credit losses on off-balance sheet credit exposures | 679,000 | ||||||||
Retained earnings | 87,654,000 | 87,654,000 | 96,741,000 | ||||||
Income tax expense | 4,274,000 | $ 4,623,000 | 5,142,000 | $ 9,130,000 | |||||
Debt Securities, Held-to-maturity, Credit Loss reduction | (3,000) | ||||||||
Off-Balance Sheet, Credit Loss, Liability, Credit Loss reduction | (522,000) | ||||||||
ASU 2016-03 - Topic 326 | |||||||||
Allowance for credit losses on loans | 8,570,000 | ||||||||
ASU 2016-03 - Topic 326 | Restatement Adjustment | |||||||||
Allowance for credit losses on debt securities | 58,000 | ||||||||
Allowance for credit losses on loans | 8,570,000 | ||||||||
Allowance for credit losses on off-balance sheet credit exposures | (207,000) | ||||||||
Retained earnings | (6,100,000) | ||||||||
Income tax expense | 2,400,000 | ||||||||
ASU 2016-03 - Topic 326 | Previously Reported | |||||||||
Allowance for credit losses on loans | 23,285,000 | ||||||||
Allowance for credit losses on off-balance sheet credit exposures | 886,000 | ||||||||
Commercial | |||||||||
Loans, net of deferred fees | 878,393,000 | 878,393,000 | 6,790,000 | ||||||
Allowance for credit losses on loans | 13,179,000 | 13,179,000 | 10,453,000 | 12,801,000 | 6,790,000 | ||||
Commercial | ASU 2016-03 - Topic 326 | |||||||||
Allowance for credit losses on loans | (3,663,000) | ||||||||
Commercial | ASU 2016-03 - Topic 326 | Restatement Adjustment | |||||||||
Loans, net of deferred fees | (3,663,000) | ||||||||
Commercial | ASU 2016-03 - Topic 326 | Previously Reported | |||||||||
Loans, net of deferred fees | 10,453,000 | ||||||||
CRE - owner occupied | |||||||||
Loans, net of deferred fees | 553,463,000 | 553,463,000 | 6,994,000 | ||||||
Allowance for credit losses on loans | 8,547,000 | 8,547,000 | 3,825,000 | 7,737,000 | 6,994,000 | ||||
CRE - owner occupied | ASU 2016-03 - Topic 326 | |||||||||
Allowance for credit losses on loans | 3,169,000 | ||||||||
CRE - owner occupied | ASU 2016-03 - Topic 326 | Restatement Adjustment | |||||||||
Loans, net of deferred fees | 3,169,000 | ||||||||
CRE - owner occupied | ASU 2016-03 - Topic 326 | Previously Reported | |||||||||
Loans, net of deferred fees | 3,825,000 | ||||||||
CRE - non-owner occupied | |||||||||
Loans, net of deferred fees | 725,776,000 | 725,776,000 | 767,821,000 | 11,672,000 | |||||
Allowance for credit losses on loans | 15,449,000 | 15,449,000 | 3,760,000 | 15,645,000 | 11,672,000 | ||||
CRE - non-owner occupied | ASU 2016-03 - Topic 326 | |||||||||
Allowance for credit losses on loans | 7,912,000 | ||||||||
CRE - non-owner occupied | ASU 2016-03 - Topic 326 | Restatement Adjustment | |||||||||
Loans, net of deferred fees | 7,912,000 | ||||||||
CRE - non-owner occupied | ASU 2016-03 - Topic 326 | Previously Reported | |||||||||
Loans, net of deferred fees | 3,760,000 | ||||||||
Land and construction | |||||||||
Loans, net of deferred fees | 138,284,000 | 138,284,000 | 1,458,000 | ||||||
Allowance for credit losses on loans | 2,552,000 | 2,552,000 | 2,621,000 | 2,603,000 | 1,458,000 | ||||
Land and construction | ASU 2016-03 - Topic 326 | |||||||||
Allowance for credit losses on loans | (1,163,000) | ||||||||
Land and construction | ASU 2016-03 - Topic 326 | Restatement Adjustment | |||||||||
Loans, net of deferred fees | (1,163,000) | ||||||||
Land and construction | ASU 2016-03 - Topic 326 | Previously Reported | |||||||||
Loans, net of deferred fees | 2,621,000 | ||||||||
Home equity | |||||||||
Loans, net of deferred fees | 112,679,000 | 112,679,000 | 1,321,000 | ||||||
Allowance for credit losses on loans | 1,851,000 | 1,851,000 | 2,244,000 | 1,746,000 | 1,321,000 | ||||
Home equity | ASU 2016-03 - Topic 326 | |||||||||
Allowance for credit losses on loans | (923,000) | ||||||||
Home equity | ASU 2016-03 - Topic 326 | Restatement Adjustment | |||||||||
Loans, net of deferred fees | (923,000) | ||||||||
Home equity | ASU 2016-03 - Topic 326 | Previously Reported | |||||||||
Loans, net of deferred fees | 2,244,000 | ||||||||
Multi-family | |||||||||
Loans, net of deferred fees | 169,637,000 | 169,637,000 | 1,253,000 | ||||||
Allowance for credit losses on loans | 1,828,000 | 1,828,000 | 57,000 | 1,622,000 | 1,253,000 | ||||
Multi-family | ASU 2016-03 - Topic 326 | |||||||||
Allowance for credit losses on loans | 1,196,000 | ||||||||
Multi-family | ASU 2016-03 - Topic 326 | Restatement Adjustment | |||||||||
Loans, net of deferred fees | 1,196,000 | ||||||||
Multi-family | ASU 2016-03 - Topic 326 | Previously Reported | |||||||||
Loans, net of deferred fees | 57,000 | ||||||||
Residential mortgages | |||||||||
Loans, net of deferred fees | 95,033,000 | 95,033,000 | 678,000 | ||||||
Allowance for credit losses on loans | 825,000 | 825,000 | 243,000 | 708,000 | 678,000 | ||||
Residential mortgages | ASU 2016-03 - Topic 326 | |||||||||
Allowance for credit losses on loans | 435,000 | ||||||||
Residential mortgages | ASU 2016-03 - Topic 326 | Restatement Adjustment | |||||||||
Loans, net of deferred fees | 435,000 | ||||||||
Residential mortgages | ASU 2016-03 - Topic 326 | Previously Reported | |||||||||
Loans, net of deferred fees | 243,000 | ||||||||
Consumer and other | |||||||||
Loans, net of deferred fees | 22,759,000 | 22,759,000 | 1,689,000 | ||||||
Allowance for credit losses on loans | $ 1,213,000 | $ 1,213,000 | 82,000 | $ 1,841,000 | $ 1,689,000 | ||||
Consumer and other | ASU 2016-03 - Topic 326 | |||||||||
Allowance for credit losses on loans | 1,607,000 | ||||||||
Consumer and other | ASU 2016-03 - Topic 326 | Restatement Adjustment | |||||||||
Loans, net of deferred fees | 1,607,000 | ||||||||
Consumer and other | ASU 2016-03 - Topic 326 | Previously Reported | |||||||||
Loans, net of deferred fees | $ 82,000 |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | ||||
Jun. 30, 2020 | Mar. 31, 2020 | Jun. 30, 2019 | Mar. 31, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Reconciliation of factors used in computing basic and diluted earnings per common share | ||||||
Net income | $ 10,618 | $ 1,861 | $ 11,353 | $ 12,146 | $ 12,479 | $ 23,499 |
Weighted average common shares outstanding for basic earnings per common share (in shares) | 59,420,592 | 43,202,562 | 59,353,759 | 43,155,360 | ||
Dilutive potential common shares | 691,831 | 518,889 | 798,728 | 539,757 | ||
Shares used in computing diluted earnings per common share (in shares) | 60,112,423 | 43,721,451 | 60,152,487 | 43,695,117 | ||
Basic earnings per share (in dollars per share) | $ 0.18 | $ 0.26 | $ 0.21 | $ 0.54 | ||
Diluted earnings per share (in dollars per share) | $ 0.18 | $ 0.26 | $ 0.21 | $ 0.54 | ||
Number of shares not in computing diluted earnings per common share | 1,722,342 | 826,445 | 1,490,688 | 826,445 |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Income (''AOCI'') - Changes in AOCI by Component (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||||
Jun. 30, 2020 | Mar. 31, 2020 | Jun. 30, 2019 | Mar. 31, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Changes in AOCI by Component | ||||||
Balance at the beginning of the period, net of taxes | $ (9,778) | $ (9,778) | ||||
Net current period other comprehensive income (loss), net of taxes | $ (471) | 5,069 | $ 2,685 | $ 3,394 | 4,598 | $ 6,079 |
Balance at the end of the period, net of taxes | (5,180) | (5,180) | ||||
Accumulated Other Comprehensive Income / (Loss) | ||||||
Changes in AOCI by Component | ||||||
Balance at the beginning of the period, net of taxes | (4,709) | (9,778) | (8,987) | (12,381) | (9,778) | (12,381) |
Other comprehensive loss before reclassification, net of taxes | (405) | 3,065 | 4,695 | 6,462 | ||
Amounts reclassified from other comprehensive income (loss), net of taxes | (66) | (380) | (97) | (383) | ||
Net current period other comprehensive income (loss), net of taxes | (471) | 5,069 | 2,685 | 3,394 | 4,598 | 6,079 |
Balance at the end of the period, net of taxes | (5,180) | (4,709) | (6,302) | (8,987) | (5,180) | (6,302) |
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 | 6,627 | 1,602 | (1,603) | (5,007) | 1,602 | (5,007) |
Other comprehensive loss before reclassification, net of taxes | (395) | 3,072 | 4,701 | 6,476 | ||
Amounts reclassified from other comprehensive income (loss), net of taxes | (120) | (386) | (191) | (386) | ||
Net current period other comprehensive income (loss), net of taxes | (515) | 2,686 | 4,510 | 6,090 | ||
Balance at the end of the period, net of taxes | 6,112 | 6,627 | 1,083 | (1,603) | 6,112 | 1,083 |
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 | 289 | 298 | 326 | 344 | 298 | 344 |
Amounts reclassified from other comprehensive income (loss), net of taxes | (9) | (9) | (18) | (27) | ||
Net current period other comprehensive income (loss), net of taxes | (9) | (9) | (18) | (27) | ||
Balance at the end of the period, net of taxes | 280 | 289 | 317 | 326 | 280 | 317 |
Defined Benefit Pension Plan Items | ||||||
Changes in AOCI by Component | ||||||
Balance at the beginning of the period, net of taxes | (11,625) | (11,678) | (7,710) | (7,718) | (11,678) | (7,718) |
Other comprehensive loss before reclassification, net of taxes | (10) | (7) | (6) | (14) | ||
Amounts reclassified from other comprehensive income (loss), net of taxes | 63 | 15 | 112 | 30 | ||
Net current period other comprehensive income (loss), net of taxes | 53 | 8 | 106 | 16 | ||
Balance at the end of the period, net of taxes | $ (11,572) | $ (11,625) | $ (7,702) | $ (7,710) | $ (11,572) | $ (7,702) |
Accumulated Other Comprehensi_4
Accumulated Other Comprehensive Income (''AOCI'') - Amount Reclassified from AOCI (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||||
Jun. 30, 2020 | Mar. 31, 2020 | Jun. 30, 2019 | Mar. 31, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Amount Reclassified from AOCI | ||||||
Gain on sales of securities | $ 170 | $ 548 | $ 270 | $ 548 | ||
Interest income on taxable securities | 3,155 | 4,136 | 7,103 | 8,645 | ||
Income tax expense | (4,274) | (4,623) | (5,142) | (9,130) | ||
Net income | 10,618 | $ 1,861 | 11,353 | $ 12,146 | 12,479 | 23,499 |
Amount Reclassified from AOCI | ||||||
Amount Reclassified from AOCI | ||||||
Other noninterest expense | (160) | (43) | ||||
Income tax benefit | 48 | 13 | ||||
Net of tax | (112) | (30) | ||||
Unrealized Gains (Losses) on Available-for-Sale Securities and I/O Strips | ||||||
Amount Reclassified from AOCI | ||||||
Net of tax | 120 | 386 | 191 | 386 | ||
Unrealized Gains (Losses) on Available-for-Sale Securities and I/O Strips | Amount Reclassified from AOCI | ||||||
Amount Reclassified from AOCI | ||||||
Gain on sales of securities | 170 | 548 | 270 | 548 | ||
Income tax expense | (50) | (162) | (79) | (162) | ||
Net income | 120 | 386 | 191 | 386 | ||
Unamortized Unrealized Gain on Available-for-Sale Securities Reclassified to Held-to-Maturity | ||||||
Amount Reclassified from AOCI | ||||||
Net of tax | 9 | 9 | 18 | 27 | ||
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 | 13 | 13 | 26 | 39 | ||
Income tax expense | (4) | (4) | (8) | (12) | ||
Net income | 9 | 9 | 18 | 27 | ||
Defined Benefit Pension Plan Items | ||||||
Amount Reclassified from AOCI | ||||||
Net of tax | (63) | (15) | (112) | (30) | ||
Defined Benefit Pension Plan Items | Amount Reclassified from AOCI | ||||||
Amount Reclassified from AOCI | ||||||
Other noninterest expense | (90) | (22) | ||||
Income tax benefit | 27 | 7 | ||||
Net of tax | (63) | (15) | ||||
Prior transition obligation | Amount Reclassified from AOCI | ||||||
Amount Reclassified from AOCI | ||||||
Other noninterest expense | 15 | 24 | 30 | 49 | ||
Actuarial losses | Amount Reclassified from AOCI | ||||||
Amount Reclassified from AOCI | ||||||
Other noninterest expense | (105) | (46) | (190) | (92) | ||
Accumulated Other Comprehensive Income / (Loss) | ||||||
Amount Reclassified from AOCI | ||||||
Net of tax | 66 | 380 | 97 | 383 | ||
Accumulated Other Comprehensive Income / (Loss) | Amount Reclassified from AOCI | ||||||
Amount Reclassified from AOCI | ||||||
Net of tax | $ 66 | $ 380 | $ 97 | $ 383 |
Securities - Amortized Cost and
Securities - Amortized Cost and Estimated Fair Value of Securities - Securities Available-for-sale (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Securities available-for-sale: | ||
Amortized Cost | $ 314,905 | $ 402,537 |
Gross Unrealized Gains | 8,660 | 2,459 |
Gross Unrealized (Losses) | (171) | |
Allowances for Credit Losses | 404,825 | |
Estimated Fair Value | 323,565 | 404,825 |
Agency mortgage-backed securities | ||
Securities available-for-sale: | ||
Amortized Cost | 225,429 | 283,598 |
Gross Unrealized Gains | 6,906 | 934 |
Gross Unrealized (Losses) | (171) | |
Allowances for Credit Losses | 284,361 | |
Estimated Fair Value | 232,335 | 284,361 |
U.S. Treasury | ||
Securities available-for-sale: | ||
Amortized Cost | 89,476 | 118,939 |
Gross Unrealized Gains | 1,754 | 1,525 |
Allowances for Credit Losses | 120,464 | |
Estimated Fair Value | $ 91,230 | $ 120,464 |
Securities - Amortized Cost a_2
Securities - Amortized Cost and Estimated Fair Value of Securities - Securities Held-to-maturity (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Jan. 01, 2020 | Dec. 31, 2019 |
Securities held-to-maturity: | |||
Amortized Cost | $ 322,732 | $ 366,560 | |
Gross Unrealized Gains | 9,721 | 2,519 | |
Gross Unrealized (Losses) | (1) | (972) | |
Allowance for credit losses on debt securities | 55 | $ 58 | |
Estimated Fair Value | 332,452 | 368,107 | |
Agency mortgage-backed securities | |||
Securities held-to-maturity: | |||
Amortized Cost | 249,070 | 285,344 | |
Gross Unrealized Gains | 7,895 | 1,206 | |
Gross Unrealized (Losses) | (1) | (968) | |
Estimated Fair Value | 256,964 | 285,582 | |
Municipals - exempt from Federal tax | |||
Securities held-to-maturity: | |||
Amortized Cost | 73,662 | 81,216 | |
Gross Unrealized Gains | 1,826 | 1,313 | |
Gross Unrealized (Losses) | (4) | ||
Allowance for credit losses on debt securities | (55) | ||
Estimated Fair Value | $ 75,488 | $ 82,525 |
Securities - Securities with Un
Securities - Securities with Unrealized Losses - Securities Available-for-sale (Details) $ in Thousands | Dec. 31, 2019USD ($) |
Available-for-sale, Fair Value | |
Less Than 12 Months | $ 100,816 |
12 Months or More | 27,534 |
Total | 128,350 |
Available-for-sale, Unrealized (Losses) | |
Less Than 12 Months | (105) |
12 Months or More | (66) |
Total | (171) |
Agency mortgage-backed securities | |
Available-for-sale, Fair Value | |
Less Than 12 Months | 100,816 |
12 Months or More | 27,534 |
Total | 128,350 |
Available-for-sale, Unrealized (Losses) | |
Less Than 12 Months | (105) |
12 Months or More | (66) |
Total | $ (171) |
Securities - Securities with _2
Securities - Securities with Unrealized Losses - Securities Held-to-maturity (Details) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Held-to-maturity, Fair Value | ||
Less Than 12 Months | $ 512,000 | $ 51,616,000 |
12 Months or More | 88,128,000 | |
Total | 512,000 | 139,744,000 |
Held-to-maturity, Unrealized (Losses) | ||
Less Than 12 Months | (1,000) | (182,000) |
12 Months or More | (790,000) | |
Total | (1,000) | (972,000) |
Agency mortgage-backed securities | ||
Held-to-maturity, Fair Value | ||
Less Than 12 Months | 512,000 | 50,060,000 |
12 Months or More | 88,128,000 | |
Total | 512,000 | 138,188,000 |
Held-to-maturity, Unrealized (Losses) | ||
Less Than 12 Months | (1,000) | (178,000) |
12 Months or More | (790,000) | |
Total | $ (1,000) | (968,000) |
Municipals - exempt from Federal tax | ||
Held-to-maturity, Fair Value | ||
Less Than 12 Months | 1,556,000 | |
Total | 1,556,000 | |
Held-to-maturity, Unrealized (Losses) | ||
Less Than 12 Months | (4,000) | |
Total | $ (4,000) |
Securities - Additional Informa
Securities - Additional Information (Details) $ in Thousands | 6 Months Ended | ||
Jun. 30, 2020USD ($)security | Dec. 31, 2019USD ($) | Jun. 30, 2019item | |
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 | item | 425 | ||
Number of available for sale securities held | item | 122 | ||
Number of held to maturity securities held | item | 303 | ||
12 Months or More | $ 88,128 | ||
Total unrealized loss for securities less than 12 months | $ 1 | ||
Available-for-sale securities carried with an unrealized loss for over 12 months | 27,534 | ||
Held-to-maturity securities carried with an unrealized loss for over 12 months | $ 88,128 |
Securities - Proceeds from Sale
Securities - Proceeds from Sales of Securities and the Resulting Gains and Losses (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Proceeds from Sales of Securities and the Resulting Gains and Losses | ||||
Proceeds | $ 30,085 | $ 59,878 | $ 56,598 | $ 59,878 |
Gross gains | $ 170 | 608 | $ 270 | 608 |
Gross losses | $ (60) | $ (60) |
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 | Jun. 30, 2020 | Dec. 31, 2019 |
Available-for-sale, Amortized Cost | ||
Due after 3 months through one year | $ 74,608 | |
Due after one year through five years | 14,868 | |
Agency mortgage-backed securities | 225,429 | |
Total | 314,905 | $ 402,537 |
Available-for-sale, Estimated Fair Value | ||
Due after 3 months through one year | 75,861 | |
Due after one year through five years | 15,369 | |
Agency mortgage-backed securities | 232,335 | |
Total | $ 323,565 | $ 404,825 |
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 | Jun. 30, 2020 | Dec. 31, 2019 |
Held-to-maturity, Amortized Cost | ||
Due 3 months or less | $ 530 | |
Due after 3 months through one year | 914 | |
Due after one year through five years | 7,283 | |
Due after five years through ten years | 33,354 | |
Due after ten years | 31,581 | |
Agency mortgage-backed securities | 249,070 | |
Total | 322,732 | |
Held-to-maturity, Estimated Fair Value | ||
Due 3 months or less | 531 | |
Due after 3 months through one year | 917 | |
Due after one year through five years | 7,537 | |
Due after five years through ten years | 34,201 | |
Due after ten years | 32,302 | |
Agency mortgage-backed securities | 256,964 | |
Total | $ 332,452 | $ 368,107 |
Securities - Securities Pledged
Securities - Securities Pledged to Secure Public Deposits and for Other Purposes (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
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 | $ 43,398 | $ 32,773 |
Securities - Rollforward by maj
Securities - Rollforward by major security type (Details) - USD ($) $ in Thousands | 6 Months Ended | |||||
Jun. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | |
Schedule of Held-to-maturity Securities [Line Items] | ||||||
Shareholder's equity | $ 574,807 | $ 571,441 | $ 576,708 | $ 388,108 | $ 378,516 | $ 367,466 |
Provision (credit) for credit loss | (3) | |||||
Debt Securities, Held-to-maturity, Allowance for Credit Loss, Ending Balance | 55 | |||||
Held-to-maturity Securities [Member] | ||||||
Schedule of Held-to-maturity Securities [Line Items] | ||||||
Provision (credit) for credit loss | (3) | |||||
Debt Securities, Held-to-maturity, Allowance for Credit Loss, Ending Balance | 55 | |||||
Adjustment | ||||||
Schedule of Held-to-maturity Securities [Line Items] | ||||||
Shareholder's equity | $ (6,062) | |||||
Adjustment | Held-to-maturity Securities [Member] | ASU 2016-03 - Topic 326 | ||||||
Schedule of Held-to-maturity Securities [Line Items] | ||||||
Shareholder's equity | 58 | |||||
Restatement Adjustment | ASU 2016-03 - Topic 326 | ||||||
Schedule of Held-to-maturity Securities [Line Items] | ||||||
Debt Securities, Held-to-maturity, Allowance for Credit Loss, Beginning Balance | $ 58 |
Loans and Allowance for Credi_3
Loans and Allowance for Credit Losses on Loans - Loans Balance (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||||||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 | Mar. 31, 2020 | Jan. 01, 2020 | Mar. 31, 2019 | Dec. 31, 2018 | |
Loans held-for-investment: | |||||||||
Total loan balance | $ 2,696,024 | $ 2,696,024 | $ 2,534,163 | ||||||
Deferred loan fees, net | (9,635) | (9,635) | (319) | ||||||
Loans, net of deferred fees | 2,686,389 | $ 1,877,767 | 2,686,389 | $ 1,877,767 | 2,533,844 | ||||
Allowance for credit losses on loans(1) | (45,444) | (26,631) | (45,444) | (26,631) | (23,285) | $ (44,703) | $ (31,855) | $ (27,318) | $ (27,848) |
Loans, net | 2,640,945 | 2,640,945 | 2,510,559 | ||||||
Income tax expense | 4,274 | 4,623 | 5,142 | 9,130 | |||||
Retained earnings | 87,654 | 87,654 | 96,741 | ||||||
Commercial | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 603,345 | ||||||||
Allowance for credit losses on loans(1) | (15,234) | (15,234) | (10,453) | (15,557) | (17,061) | ||||
Real estate | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 1,897,074 | ||||||||
Allowance for credit losses on loans(1) | (11,307) | (11,307) | (12,750) | (11,671) | (10,671) | ||||
Consumer | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 33,744 | ||||||||
Allowance for credit losses on loans(1) | $ (90) | $ (90) | (82) | $ (90) | $ (116) | ||||
Commercial | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 878,393 | 878,393 | 6,790 | ||||||
Allowance for credit losses on loans(1) | (13,179) | (13,179) | (10,453) | (12,801) | (6,790) | ||||
Commercial | Commercial | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 878,393 | 878,393 | 603,345 | ||||||
SBA Paycheck Protection Program ("PPP") loans | Commercial | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 324,550 | 324,550 | |||||||
CRE - owner occupied | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 553,463 | 553,463 | 6,994 | ||||||
Allowance for credit losses on loans(1) | (8,547) | (8,547) | (3,825) | (7,737) | (6,994) | ||||
CRE - owner occupied | Real estate | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 553,463 | 553,463 | 548,907 | ||||||
CRE - non-owner occupied | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 725,776 | 725,776 | 767,821 | 11,672 | |||||
Allowance for credit losses on loans(1) | (15,449) | (15,449) | (3,760) | (15,645) | (11,672) | ||||
CRE - non-owner occupied | Real estate | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 725,776 | 725,776 | 767,821 | ||||||
Land and construction | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 138,284 | 138,284 | 1,458 | ||||||
Allowance for credit losses on loans(1) | (2,552) | (2,552) | (2,621) | (2,603) | (1,458) | ||||
Land and construction | Real estate | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 138,284 | 138,284 | 147,189 | ||||||
Home equity | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 112,679 | 112,679 | 1,321 | ||||||
Allowance for credit losses on loans(1) | (1,851) | (1,851) | (2,244) | (1,746) | (1,321) | ||||
Home equity | Real estate | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 112,679 | 112,679 | 151,775 | ||||||
Multi-family | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 169,637 | 169,637 | 1,253 | ||||||
Allowance for credit losses on loans(1) | (1,828) | (1,828) | (57) | (1,622) | (1,253) | ||||
Multi-family | Real estate | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 169,637 | 169,637 | 180,623 | ||||||
Residential mortgages | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 95,033 | 95,033 | 678 | ||||||
Allowance for credit losses on loans(1) | (825) | (825) | (243) | (708) | (678) | ||||
Residential mortgages | Real estate | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 95,033 | 95,033 | 100,759 | ||||||
Consumer and other | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 22,759 | 22,759 | 1,689 | ||||||
Allowance for credit losses on loans(1) | (1,213) | (1,213) | (82) | $ (1,841) | $ (1,689) | ||||
Consumer and other | Consumer | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | $ 22,759 | $ 22,759 | 33,744 | ||||||
ASU 2016-03 - Topic 326 | |||||||||
Loans held-for-investment: | |||||||||
Allowance for credit losses on loans(1) | (8,570) | ||||||||
ASU 2016-03 - Topic 326 | Commercial | |||||||||
Loans held-for-investment: | |||||||||
Allowance for credit losses on loans(1) | 3,663 | ||||||||
ASU 2016-03 - Topic 326 | CRE - owner occupied | |||||||||
Loans held-for-investment: | |||||||||
Allowance for credit losses on loans(1) | (3,169) | ||||||||
ASU 2016-03 - Topic 326 | CRE - non-owner occupied | |||||||||
Loans held-for-investment: | |||||||||
Allowance for credit losses on loans(1) | (7,912) | ||||||||
ASU 2016-03 - Topic 326 | Land and construction | |||||||||
Loans held-for-investment: | |||||||||
Allowance for credit losses on loans(1) | 1,163 | ||||||||
ASU 2016-03 - Topic 326 | Home equity | |||||||||
Loans held-for-investment: | |||||||||
Allowance for credit losses on loans(1) | 923 | ||||||||
ASU 2016-03 - Topic 326 | Multi-family | |||||||||
Loans held-for-investment: | |||||||||
Allowance for credit losses on loans(1) | (1,196) | ||||||||
ASU 2016-03 - Topic 326 | Residential mortgages | |||||||||
Loans held-for-investment: | |||||||||
Allowance for credit losses on loans(1) | (435) | ||||||||
ASU 2016-03 - Topic 326 | Consumer and other | |||||||||
Loans held-for-investment: | |||||||||
Allowance for credit losses on loans(1) | (1,607) | ||||||||
Restatement Adjustment | ASU 2016-03 - Topic 326 | |||||||||
Loans held-for-investment: | |||||||||
Allowance for credit losses on loans(1) | (8,570) | ||||||||
Income tax expense | 2,400 | ||||||||
Retained earnings | (6,100) | ||||||||
Restatement Adjustment | ASU 2016-03 - Topic 326 | Commercial | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | (3,663) | ||||||||
Restatement Adjustment | ASU 2016-03 - Topic 326 | CRE - owner occupied | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 3,169 | ||||||||
Restatement Adjustment | ASU 2016-03 - Topic 326 | CRE - non-owner occupied | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 7,912 | ||||||||
Restatement Adjustment | ASU 2016-03 - Topic 326 | Land and construction | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | (1,163) | ||||||||
Restatement Adjustment | ASU 2016-03 - Topic 326 | Home equity | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | (923) | ||||||||
Restatement Adjustment | ASU 2016-03 - Topic 326 | Multi-family | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 1,196 | ||||||||
Restatement Adjustment | ASU 2016-03 - Topic 326 | Residential mortgages | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 435 | ||||||||
Restatement Adjustment | ASU 2016-03 - Topic 326 | Consumer and other | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 1,607 | ||||||||
Previously Reported | ASU 2016-03 - Topic 326 | |||||||||
Loans held-for-investment: | |||||||||
Allowance for credit losses on loans(1) | (23,285) | ||||||||
Previously Reported | ASU 2016-03 - Topic 326 | Commercial | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 10,453 | ||||||||
Previously Reported | ASU 2016-03 - Topic 326 | CRE - owner occupied | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 3,825 | ||||||||
Previously Reported | ASU 2016-03 - Topic 326 | CRE - non-owner occupied | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 3,760 | ||||||||
Previously Reported | ASU 2016-03 - Topic 326 | Land and construction | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 2,621 | ||||||||
Previously Reported | ASU 2016-03 - Topic 326 | Home equity | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 2,244 | ||||||||
Previously Reported | ASU 2016-03 - Topic 326 | Multi-family | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 57 | ||||||||
Previously Reported | ASU 2016-03 - Topic 326 | Residential mortgages | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 243 | ||||||||
Previously Reported | ASU 2016-03 - Topic 326 | Consumer and other | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | $ 82 |
Loans and Allowance for Credi_4
Loans and Allowance for Credit Losses on Loans - Changes in the Allowance for Loan Losses (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Changes in the Allowance for Loan Losses | ||||
Beginning of period balance | $ 44,703 | $ 27,318 | $ 23,285 | $ 27,848 |
Charge-offs | (465) | (76) | (1,138) | (302) |
Recoveries | 92 | 129 | 343 | 886 |
Net (charge-offs) recoveries | (373) | 53 | (795) | 584 |
Provision for credit losses on loans | 1,114 | (740) | 14,384 | (1,801) |
End of period balance | 45,444 | 26,631 | 45,444 | 26,631 |
ASU 2016-03 - Topic 326 | ||||
Changes in the Allowance for Loan Losses | ||||
Beginning of period balance | 8,570 | |||
Commercial | ||||
Changes in the Allowance for Loan Losses | ||||
Beginning of period balance | 15,557 | 10,453 | 17,061 | |
Charge-offs | (76) | (302) | ||
Recoveries | 87 | 802 | ||
Net (charge-offs) recoveries | 11 | 500 | ||
Provision for credit losses on loans | (334) | (2,327) | ||
End of period balance | 15,234 | 15,234 | ||
Real estate | ||||
Changes in the Allowance for Loan Losses | ||||
Beginning of period balance | 11,671 | 12,750 | 10,671 | |
Recoveries | 42 | 84 | ||
Net (charge-offs) recoveries | 42 | 84 | ||
Provision for credit losses on loans | (406) | 552 | ||
End of period balance | 11,307 | 11,307 | ||
Consumer | ||||
Changes in the Allowance for Loan Losses | ||||
Beginning of period balance | 90 | 82 | 116 | |
Provision for credit losses on loans | (26) | |||
End of period balance | $ 90 | $ 90 | ||
Commercial | ||||
Changes in the Allowance for Loan Losses | ||||
Beginning of period balance | 12,801 | 10,453 | ||
Charge-offs | (465) | (1,135) | ||
Recoveries | 46 | 255 | ||
Net (charge-offs) recoveries | (419) | (880) | ||
Provision for credit losses on loans | 797 | 7,269 | ||
End of period balance | 13,179 | 13,179 | ||
Commercial | ASU 2016-03 - Topic 326 | ||||
Changes in the Allowance for Loan Losses | ||||
Beginning of period balance | (3,663) | |||
CRE - owner occupied | ||||
Changes in the Allowance for Loan Losses | ||||
Beginning of period balance | 7,737 | 3,825 | ||
Recoveries | 1 | 1 | ||
Net (charge-offs) recoveries | 1 | 1 | ||
Provision for credit losses on loans | 809 | 1,552 | ||
End of period balance | 8,547 | 8,547 | ||
CRE - owner occupied | ASU 2016-03 - Topic 326 | ||||
Changes in the Allowance for Loan Losses | ||||
Beginning of period balance | 3,169 | |||
CRE - non-owner occupied | ||||
Changes in the Allowance for Loan Losses | ||||
Beginning of period balance | 15,645 | 3,760 | ||
Provision for credit losses on loans | (196) | 3,777 | ||
End of period balance | 15,449 | 15,449 | ||
CRE - non-owner occupied | ASU 2016-03 - Topic 326 | ||||
Changes in the Allowance for Loan Losses | ||||
Beginning of period balance | 7,912 | |||
Land and construction | ||||
Changes in the Allowance for Loan Losses | ||||
Beginning of period balance | 2,603 | 2,621 | ||
Recoveries | 13 | 32 | ||
Net (charge-offs) recoveries | 13 | 32 | ||
Provision for credit losses on loans | (64) | 1,062 | ||
End of period balance | 2,552 | 2,552 | ||
Land and construction | ASU 2016-03 - Topic 326 | ||||
Changes in the Allowance for Loan Losses | ||||
Beginning of period balance | (1,163) | |||
Home equity | ||||
Changes in the Allowance for Loan Losses | ||||
Beginning of period balance | 1,746 | 2,244 | ||
Recoveries | 31 | 54 | ||
Net (charge-offs) recoveries | 31 | 54 | ||
Provision for credit losses on loans | 74 | 476 | ||
End of period balance | 1,851 | 1,851 | ||
Home equity | ASU 2016-03 - Topic 326 | ||||
Changes in the Allowance for Loan Losses | ||||
Beginning of period balance | (923) | |||
Multi-family | ||||
Changes in the Allowance for Loan Losses | ||||
Beginning of period balance | 1,622 | 57 | ||
Provision for credit losses on loans | 206 | 575 | ||
End of period balance | 1,828 | 1,828 | ||
Multi-family | ASU 2016-03 - Topic 326 | ||||
Changes in the Allowance for Loan Losses | ||||
Beginning of period balance | 1,196 | |||
Residential mortgages | ||||
Changes in the Allowance for Loan Losses | ||||
Beginning of period balance | 708 | 243 | ||
Provision for credit losses on loans | 117 | 147 | ||
End of period balance | 825 | 825 | ||
Residential mortgages | ASU 2016-03 - Topic 326 | ||||
Changes in the Allowance for Loan Losses | ||||
Beginning of period balance | 435 | |||
Consumer and other | ||||
Changes in the Allowance for Loan Losses | ||||
Beginning of period balance | 1,841 | 82 | ||
Charge-offs | (3) | |||
Recoveries | 1 | 1 | ||
Net (charge-offs) recoveries | 1 | (2) | ||
Provision for credit losses on loans | (629) | (474) | ||
End of period balance | $ 1,213 | 1,213 | ||
Consumer and other | ASU 2016-03 - Topic 326 | ||||
Changes in the Allowance for Loan Losses | ||||
Beginning of period balance | $ 1,607 |
Loans and Allowance for Credi_5
Loans and Allowance for Credit Losses on 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 | Jun. 30, 2020 | Mar. 31, 2020 | Jan. 01, 2020 | Dec. 31, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 |
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 | ||||||
Allowance for loan losses, Collectively evaluated for impairment | 21,450 | ||||||
Total allowance balance | $ 45,444 | $ 44,703 | $ 31,855 | 23,285 | $ 26,631 | $ 27,318 | $ 27,848 |
Loans, Individually evaluated for impairment | 10,264 | ||||||
Loans, Collectively evaluated for impairment | 2,523,899 | ||||||
Total loan balance | $ 2,696,024 | 2,534,163 | |||||
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 | ||||||
Allowance for loan losses, Collectively evaluated for impairment | 8,618 | ||||||
Total allowance balance | 10,453 | 15,234 | 15,557 | 17,061 | |||
Loans, Individually evaluated for impairment | 4,810 | ||||||
Loans, Collectively evaluated for impairment | 598,535 | ||||||
Total loan balance | 603,345 | ||||||
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 | ||||||
Total allowance balance | 12,750 | 11,307 | 11,671 | 10,671 | |||
Loans, Individually evaluated for impairment | 5,454 | ||||||
Loans, Collectively evaluated for impairment | 1,891,620 | ||||||
Total loan balance | 1,897,074 | ||||||
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 | ||||||
Total allowance balance | 82 | $ 90 | $ 90 | $ 116 | |||
Loans, Collectively evaluated for impairment | 33,744 | ||||||
Total loan balance | $ 33,744 |
Loans and Allowance for Credi_6
Loans and Allowance for Credit Losses on Loans - Nonaccrual Status and Loans Past Due Over 90 Days (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Nonperforming Loans by Class | ||
Nonaccrual Financing Receivable, no special allowance | $ 5,324 | |
Nonaccrual Financing Receivable, with special allowance | 3,133 | $ 1,153 |
Nonaccrual with special allowance for credit losses | 2,697 | |
Nonaccrual loans | 8,675 | |
Loans Over 90 Days Past Due and Still Accruing | 668 | |
Total | 9,125 | 9,828 |
Commercial | ||
Nonperforming Loans by Class | ||
Nonaccrual Financing Receivable, no special allowance | 747 | |
Nonaccrual Financing Receivable, with special allowance | 1,669 | 1,153 |
Nonaccrual loans | 3,444 | |
Loans Over 90 Days Past Due and Still Accruing | 668 | |
Total | 3,084 | 4,597 |
Consumer | ||
Nonperforming Loans by Class | ||
Nonaccrual Financing Receivable, with special allowance | 1,464 | |
Total | 1,464 | |
Commercial | ||
Nonperforming Loans by Class | ||
Nonaccrual with special allowance for credit losses | 2,697 | |
CRE | Real estate | ||
Nonperforming Loans by Class | ||
Nonaccrual Financing Receivable, no special allowance | 3,679 | |
Nonaccrual loans | 5,094 | |
Total | 3,679 | 5,094 |
Home equity | Real estate | ||
Nonperforming Loans by Class | ||
Nonaccrual Financing Receivable, no special allowance | 898 | |
Nonaccrual loans | 137 | |
Total | $ 898 | $ 137 |
Loans and Allowance for Credi_7
Loans and Allowance for Credit Losses on Loans - Aging of Past Due Loans by Class of Loans (Details) - USD ($) | Jun. 30, 2020 | Jan. 01, 2020 | Dec. 31, 2019 |
Aging of Past Due Loans by Class of Loans | |||
Total Past Due | $ 11,504,000 | $ 15,315,000 | |
Current | 2,684,520,000 | 2,518,848,000 | |
Total loan balance | 2,696,024,000 | 2,534,163,000 | |
30-59 Days Past Due | |||
Aging of Past Due Loans by Class of Loans | |||
Total Past Due | 6,252,000 | 4,770,000 | |
60-89 Days Past Due | |||
Aging of Past Due Loans by Class of Loans | |||
Total Past Due | 1,873,000 | 2,234,000 | |
90 Days or Greater Past Due | |||
Aging of Past Due Loans by Class of Loans | |||
Total Past Due | 3,379,000 | 8,311,000 | |
Commercial | |||
Aging of Past Due Loans by Class of Loans | |||
Total loan balance | 603,345,000 | ||
Real estate | |||
Aging of Past Due Loans by Class of Loans | |||
Total loan balance | 1,897,074,000 | ||
Consumer | |||
Aging of Past Due Loans by Class of Loans | |||
Total loan balance | 33,744,000 | ||
Commercial | |||
Aging of Past Due Loans by Class of Loans | |||
Total loan balance | 878,393,000 | $ 6,790,000 | |
Commercial | Commercial | |||
Aging of Past Due Loans by Class of Loans | |||
Total Past Due | 8,056,000 | 10,084,000 | |
Current | 870,337,000 | 593,261,000 | |
Total loan balance | 878,393,000 | 603,345,000 | |
Commercial | Commercial | 30-59 Days Past Due | |||
Aging of Past Due Loans by Class of Loans | |||
Total Past Due | 5,195,000 | 4,770,000 | |
Commercial | Commercial | 60-89 Days Past Due | |||
Aging of Past Due Loans by Class of Loans | |||
Total Past Due | 1,873,000 | 2,097,000 | |
Commercial | Commercial | 90 Days or Greater Past Due | |||
Aging of Past Due Loans by Class of Loans | |||
Total Past Due | 988,000 | 3,217,000 | |
CRE - owner occupied | |||
Aging of Past Due Loans by Class of Loans | |||
Total loan balance | 553,463,000 | 6,994,000 | |
CRE - owner occupied | Real estate | |||
Aging of Past Due Loans by Class of Loans | |||
Total Past Due | 29,000 | 5,094,000 | |
Current | 553,434,000 | 543,813,000 | |
Total loan balance | 553,463,000 | 548,907,000 | |
CRE - owner occupied | Real estate | 90 Days or Greater Past Due | |||
Aging of Past Due Loans by Class of Loans | |||
Total Past Due | 29,000 | 5,094,000 | |
CRE - non-owner occupied | |||
Aging of Past Due Loans by Class of Loans | |||
Current | 725,776,000 | 767,821,000 | |
Total loan balance | 725,776,000 | 11,672,000 | 767,821,000 |
CRE - non-owner occupied | Real estate | |||
Aging of Past Due Loans by Class of Loans | |||
Total loan balance | 725,776,000 | 767,821,000 | |
Land and construction | |||
Aging of Past Due Loans by Class of Loans | |||
Total loan balance | 138,284,000 | 1,458,000 | |
Land and construction | Real estate | |||
Aging of Past Due Loans by Class of Loans | |||
Current | 138,284,000 | 147,189,000 | |
Total loan balance | 138,284,000 | 147,189,000 | |
Home equity | |||
Aging of Past Due Loans by Class of Loans | |||
Total loan balance | 112,679,000 | 1,321,000 | |
Home equity | Real estate | |||
Aging of Past Due Loans by Class of Loans | |||
Total Past Due | 898,000 | 137,000 | |
Current | 111,781,000 | 151,638,000 | |
Total loan balance | 112,679,000 | 151,775,000 | |
Home equity | Real estate | 60-89 Days Past Due | |||
Aging of Past Due Loans by Class of Loans | |||
Total Past Due | 137,000 | ||
Home equity | Real estate | 90 Days or Greater Past Due | |||
Aging of Past Due Loans by Class of Loans | |||
Total Past Due | 898,000 | ||
Multi-family | |||
Aging of Past Due Loans by Class of Loans | |||
Total loan balance | 169,637,000 | 1,253,000 | |
Multi-family | Real estate | |||
Aging of Past Due Loans by Class of Loans | |||
Current | 169,637,000 | 180,623,000 | |
Total loan balance | 169,637,000 | 180,623,000 | |
Residential mortgages | |||
Aging of Past Due Loans by Class of Loans | |||
Total loan balance | 95,033,000 | 678,000 | |
Residential mortgages | Real estate | |||
Aging of Past Due Loans by Class of Loans | |||
Current | 95,033,000 | 100,759,000 | |
Total loan balance | 95,033,000 | 100,759,000 | |
Consumer and other | |||
Aging of Past Due Loans by Class of Loans | |||
Total loan balance | 22,759,000 | $ 1,689,000 | |
Consumer and other | Consumer | |||
Aging of Past Due Loans by Class of Loans | |||
Total Past Due | 2,521,000 | ||
Current | 20,238,000 | 33,744,000 | |
Total loan balance | 22,759,000 | $ 33,744,000 | |
Consumer and other | Consumer | 30-59 Days Past Due | |||
Aging of Past Due Loans by Class of Loans | |||
Total Past Due | 1,057,000 | ||
Consumer and other | Consumer | 90 Days or Greater Past Due | |||
Aging of Past Due Loans by Class of Loans | |||
Total Past Due | $ 1,464,000 |
Loans and Allowance for Credi_8
Loans and Allowance for Credit Losses on Loans - Aging of Past Due Loans by Class of Loans - Additional Information (Details) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Aging of Past Due Loans by Class of Loans | ||
Past due loans 30 day or greater | $ 11,504,000 | $ 15,315,000 |
Nonaccrual loans | 8,675,000 | |
30 days or greater past due | ||
Aging of Past Due Loans by Class of Loans | ||
Nonaccrual loans | 2,844,000 | 7,413,000 |
Less than 30 days past due | ||
Aging of Past Due Loans by Class of Loans | ||
Nonaccrual loans | $ 5,613,000 | |
Less than 30 days past due nonaccrual loans held-for-investment | $ 1,262,000 |
Loans and Allowance for Credi_9
Loans and Allowance for Credit Losses on Loans - Credit Quality Classification (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Jan. 01, 2020 | Dec. 31, 2019 |
Loans | |||
Total | $ 2,696,024 | $ 2,534,163 | |
Nonclassified | |||
Loans | |||
Total | 2,501,584 | ||
Classified | |||
Loans | |||
Total | 32,579 | ||
Commercial | |||
Loans | |||
Total | 603,345 | ||
Real estate | |||
Loans | |||
Total | 1,897,074 | ||
Consumer | |||
Loans | |||
Total | 33,744 | ||
Commercial | |||
Loans | |||
Total | 878,393 | $ 6,790 | |
Commercial | Commercial | |||
Loans | |||
Total | 878,393 | 603,345 | |
Commercial | Commercial | Nonclassified | |||
Loans | |||
Total | 599,143 | ||
Commercial | Commercial | Classified | |||
Loans | |||
Total | 4,202 | ||
CRE - owner occupied | |||
Loans | |||
Total | 553,463 | 6,994 | |
CRE - owner occupied | Real estate | |||
Loans | |||
Total | 553,463 | 548,907 | |
CRE - owner occupied | Real estate | Nonclassified | |||
Loans | |||
Total | 538,229 | ||
CRE - owner occupied | Real estate | Classified | |||
Loans | |||
Total | 10,678 | ||
CRE - non-owner occupied | |||
Loans | |||
Total | 725,776 | 11,672 | 767,821 |
CRE - non-owner occupied | Real estate | |||
Loans | |||
Total | 725,776 | 767,821 | |
CRE - non-owner occupied | Real estate | Nonclassified | |||
Loans | |||
Total | 761,801 | ||
CRE - non-owner occupied | Real estate | Classified | |||
Loans | |||
Total | 6,020 | ||
Land and construction | |||
Loans | |||
Total | 138,284 | 1,458 | |
Land and construction | Real estate | |||
Loans | |||
Total | 138,284 | 147,189 | |
Land and construction | Real estate | Nonclassified | |||
Loans | |||
Total | 144,108 | ||
Land and construction | Real estate | Classified | |||
Loans | |||
Total | 3,081 | ||
Home equity | |||
Loans | |||
Total | 112,679 | 1,321 | |
Home equity | Real estate | |||
Loans | |||
Total | 112,679 | 151,775 | |
Home equity | Real estate | Nonclassified | |||
Loans | |||
Total | 149,131 | ||
Home equity | Real estate | Classified | |||
Loans | |||
Total | 2,644 | ||
Multi-family | |||
Loans | |||
Total | 169,637 | 1,253 | |
Multi-family | Real estate | |||
Loans | |||
Total | 169,637 | 180,623 | |
Multi-family | Real estate | Nonclassified | |||
Loans | |||
Total | 180,623 | ||
Residential mortgages | |||
Loans | |||
Total | 95,033 | 678 | |
Residential mortgages | Real estate | |||
Loans | |||
Total | 95,033 | 100,759 | |
Residential mortgages | Real estate | Nonclassified | |||
Loans | |||
Total | 100,262 | ||
Residential mortgages | Real estate | Classified | |||
Loans | |||
Total | 497 | ||
Consumer and other | |||
Loans | |||
Total | 22,759 | $ 1,689 | |
Consumer and other | Consumer | |||
Loans | |||
Total | $ 22,759 | 33,744 | |
Consumer and other | Consumer | Nonclassified | |||
Loans | |||
Total | 28,287 | ||
Consumer and other | Consumer | Classified | |||
Loans | |||
Total | $ 5,457 |
Loans and Allowance for Cred_10
Loans and Allowance for Credit Losses on Loans - Credit Quality Indicators (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Jan. 01, 2020 | Dec. 31, 2019 |
Loans | |||
2020 | $ 815,951 | ||
2019 | 366,281 | ||
2018 | 236,293 | ||
2017 | 234,415 | ||
2016 | 182,908 | ||
2015 and Prior | 402,879 | ||
Revolving | 457,297 | ||
Total loan balance | 2,696,024 | $ 2,534,163 | |
Balance to report | 2,640,945 | 2,510,559 | |
Loan classified as loss | |||
Loans | |||
Balance to report | 0 | 0 | |
Commercial | |||
Loans | |||
2020 | 437,220 | ||
2019 | 47,637 | ||
2018 | 36,883 | ||
2017 | 20,175 | ||
2016 | 13,695 | ||
2015 and Prior | 16,359 | ||
Revolving | 306,424 | ||
Total loan balance | 878,393 | $ 6,790 | |
Commercial | Pass And Watch [Member] | |||
Loans | |||
2020 | 404,010 | ||
2019 | 47,578 | ||
2018 | 36,471 | ||
2017 | 19,571 | ||
2016 | 10,601 | ||
2015 and Prior | 15,674 | ||
Revolving | 292,448 | ||
Total loan balance | 826,353 | ||
Commercial | Special Mention [Member] | |||
Loans | |||
2020 | 30,835 | ||
2016 | 320 | ||
Revolving | 2,607 | ||
Total loan balance | 33,762 | ||
Commercial | Substandard [Member] | |||
Loans | |||
2020 | 926 | ||
2018 | 72 | ||
2017 | 604 | ||
2016 | 2,596 | ||
2015 and Prior | 624 | ||
Revolving | 11,040 | ||
Total loan balance | 15,862 | ||
Commercial | Substandard-Nonaccrual [Member] | |||
Loans | |||
2020 | 1,449 | ||
2019 | 59 | ||
2018 | 340 | ||
2016 | 178 | ||
2015 and Prior | 61 | ||
Revolving | 329 | ||
Total loan balance | 2,416 | ||
CRE - owner occupied | |||
Loans | |||
2020 | 119,780 | ||
2019 | 79,830 | ||
2018 | 78,616 | ||
2017 | 62,271 | ||
2016 | 53,201 | ||
2015 and Prior | 143,322 | ||
Revolving | 16,443 | ||
Total loan balance | 553,463 | 6,994 | |
CRE - owner occupied | Pass And Watch [Member] | |||
Loans | |||
2020 | 78,779 | ||
2019 | 79,282 | ||
2018 | 78,384 | ||
2017 | 60,021 | ||
2016 | 52,486 | ||
2015 and Prior | 140,208 | ||
Revolving | 16,443 | ||
Total loan balance | 505,603 | ||
CRE - owner occupied | Special Mention [Member] | |||
Loans | |||
2020 | 37,899 | ||
2018 | 232 | ||
2015 and Prior | 2,619 | ||
Total loan balance | 40,750 | ||
CRE - owner occupied | Substandard [Member] | |||
Loans | |||
2017 | 2,250 | ||
2016 | 715 | ||
2015 and Prior | 466 | ||
Total loan balance | 3,431 | ||
CRE - owner occupied | Substandard-Nonaccrual [Member] | |||
Loans | |||
2020 | 3,102 | ||
2019 | 548 | ||
2015 and Prior | 29 | ||
Total loan balance | 3,679 | ||
CRE - non-owner occupied | |||
Loans | |||
2020 | 149,222 | ||
2019 | 137,054 | ||
2018 | 79,821 | ||
2017 | 110,390 | ||
2016 | 64,615 | ||
2015 and Prior | 180,789 | ||
Revolving | 3,885 | ||
Total loan balance | 725,776 | 11,672 | $ 767,821 |
CRE - non-owner occupied | Pass And Watch [Member] | |||
Loans | |||
2020 | 101,876 | ||
2019 | 137,054 | ||
2018 | 78,019 | ||
2017 | 110,390 | ||
2016 | 60,316 | ||
2015 and Prior | 175,221 | ||
Revolving | 3,885 | ||
Total loan balance | 666,761 | ||
CRE - non-owner occupied | Special Mention [Member] | |||
Loans | |||
2020 | 46,314 | ||
2018 | 1,802 | ||
2016 | 4,299 | ||
2015 and Prior | 5,568 | ||
Total loan balance | 57,983 | ||
CRE - non-owner occupied | Substandard [Member] | |||
Loans | |||
2020 | 1,032 | ||
Total loan balance | 1,032 | ||
Land and construction | |||
Loans | |||
2020 | 70,927 | ||
2019 | 47,934 | ||
2018 | 14,255 | ||
2017 | 1,560 | ||
2015 and Prior | 1,383 | ||
Revolving | 2,225 | ||
Total loan balance | 138,284 | 1,458 | |
Land and construction | Pass And Watch [Member] | |||
Loans | |||
2020 | 60,938 | ||
2019 | 47,934 | ||
2018 | 14,255 | ||
2017 | 1,560 | ||
2015 and Prior | 1,383 | ||
Revolving | 2,225 | ||
Total loan balance | 128,295 | ||
Land and construction | Special Mention [Member] | |||
Loans | |||
2020 | 8,406 | ||
Total loan balance | 8,406 | ||
Land and construction | Substandard [Member] | |||
Loans | |||
2020 | 1,583 | ||
Total loan balance | 1,583 | ||
Home equity | |||
Loans | |||
2020 | 276 | ||
2018 | 89 | ||
2015 and Prior | 266 | ||
Revolving | 112,048 | ||
Total loan balance | 112,679 | 1,321 | |
Home equity | Pass And Watch [Member] | |||
Loans | |||
2020 | 276 | ||
2018 | 89 | ||
Revolving | 108,875 | ||
Total loan balance | 109,240 | ||
Home equity | Special Mention [Member] | |||
Loans | |||
Revolving | 1,718 | ||
Total loan balance | 1,718 | ||
Home equity | Substandard [Member] | |||
Loans | |||
2015 and Prior | 143 | ||
Revolving | 680 | ||
Total loan balance | 823 | ||
Home equity | Substandard-Nonaccrual [Member] | |||
Loans | |||
2015 and Prior | 123 | ||
Revolving | 775 | ||
Total loan balance | 898 | ||
Multi-family | |||
Loans | |||
2020 | 22,974 | ||
2019 | 40,571 | ||
2018 | 18,628 | ||
2017 | 27,700 | ||
2016 | 16,401 | ||
2015 and Prior | 42,518 | ||
Revolving | 845 | ||
Total loan balance | 169,637 | 1,253 | |
Multi-family | Pass And Watch [Member] | |||
Loans | |||
2020 | 17,007 | ||
2019 | 40,571 | ||
2018 | 18,628 | ||
2017 | 27,700 | ||
2016 | 16,401 | ||
2015 and Prior | 37,322 | ||
Revolving | 845 | ||
Total loan balance | 158,474 | ||
Multi-family | Special Mention [Member] | |||
Loans | |||
2020 | 5,967 | ||
2015 and Prior | 5,196 | ||
Total loan balance | 11,163 | ||
Residential mortgages | |||
Loans | |||
2020 | 15,455 | ||
2019 | 10,237 | ||
2018 | 4,970 | ||
2017 | 12,296 | ||
2016 | 34,861 | ||
2015 and Prior | 17,214 | ||
Total loan balance | 95,033 | 678 | |
Residential mortgages | Pass And Watch [Member] | |||
Loans | |||
2020 | 8,607 | ||
2019 | 10,237 | ||
2018 | 4,970 | ||
2017 | 11,011 | ||
2016 | 34,304 | ||
2015 and Prior | 15,889 | ||
Total loan balance | 85,018 | ||
Residential mortgages | Special Mention [Member] | |||
Loans | |||
2020 | 6,848 | ||
2017 | 1,285 | ||
2016 | 557 | ||
2015 and Prior | 1,061 | ||
Total loan balance | 9,751 | ||
Residential mortgages | Substandard [Member] | |||
Loans | |||
2015 and Prior | 264 | ||
Total loan balance | 264 | ||
Consumer and other | |||
Loans | |||
2020 | 97 | ||
2019 | 3,018 | ||
2018 | 3,031 | ||
2017 | 23 | ||
2016 | 135 | ||
2015 and Prior | 1,028 | ||
Revolving | 15,427 | ||
Total loan balance | 22,759 | $ 1,689 | |
Consumer and other | Pass And Watch [Member] | |||
Loans | |||
2020 | 16 | ||
2019 | 3,018 | ||
2018 | 1,567 | ||
2017 | 23 | ||
2016 | 135 | ||
2015 and Prior | 1,028 | ||
Revolving | 15,427 | ||
Total loan balance | 21,214 | ||
Consumer and other | Special Mention [Member] | |||
Loans | |||
2020 | 81 | ||
Total loan balance | 81 | ||
Consumer and other | Substandard-Nonaccrual [Member] | |||
Loans | |||
2018 | 1,464 | ||
Total loan balance | $ 1,464 |
Loans and Allowance for Cred_11
Loans and Allowance for Credit Losses on Loans - Amortized Cost Basis of Collateral-dependant Loans (Details) $ in Thousands | Jun. 30, 2020USD ($) |
Financing Receivable, Recorded Investment, Past Due [Line Items] | |
Collateral dependent loans | $ 1,669 |
Consumer | |
Financing Receivable, Recorded Investment, Past Due [Line Items] | |
Collateral dependent loans | 3,133 |
Real Estate | |
Financing Receivable, Recorded Investment, Past Due [Line Items] | |
Collateral dependent loans | 60 |
Real Estate | Consumer | |
Financing Receivable, Recorded Investment, Past Due [Line Items] | |
Collateral dependent loans | 1,524 |
Business Assets | |
Financing Receivable, Recorded Investment, Past Due [Line Items] | |
Collateral dependent loans | 1,478 |
Business Assets | Consumer | |
Financing Receivable, Recorded Investment, Past Due [Line Items] | |
Collateral dependent loans | 1,478 |
Uncollateralized | |
Financing Receivable, Recorded Investment, Past Due [Line Items] | |
Collateral dependent loans | 131 |
Uncollateralized | Consumer | |
Financing Receivable, Recorded Investment, Past Due [Line Items] | |
Collateral dependent loans | 131 |
Consumer and other | |
Financing Receivable, Recorded Investment, Past Due [Line Items] | |
Collateral dependent loans | 1,464 |
Consumer and other | Real Estate | |
Financing Receivable, Recorded Investment, Past Due [Line Items] | |
Collateral dependent loans | $ 1,464 |
Loans and Allowance for Cred_12
Loans and Allowance for Credit Losses on Loans - Allowance for credit losses and recorded investment in loans by loan classification and by impairment method (Details) $ in Thousands | Dec. 31, 2019USD ($) |
Unpaid Principal Balance | |
Total with no related allowance recorded | $ 7,567 |
Total with an allowance recorded | 2,697 |
Total | 10,264 |
Recorded Investment | |
Total with no related allowance recorded | 7,567 |
Total with an allowance recorded | 2,697 |
Total | 10,264 |
Total with an allowance recorded, Allowance for Loan Losses Allocated | 1,835 |
Commercial | |
Unpaid Principal Balance | |
Total with no related allowance recorded | 2,113 |
Total with an allowance recorded | 2,697 |
Recorded Investment | |
Total with no related allowance recorded | 2,113 |
Total with an allowance recorded | 2,697 |
Total with an allowance recorded, Allowance for Loan Losses Allocated | 1,835 |
Home equity | |
Unpaid Principal Balance | |
Total with no related allowance recorded | 360 |
Recorded Investment | |
Total with no related allowance recorded | 360 |
CRE | |
Unpaid Principal Balance | |
Total with no related allowance recorded | 5,094 |
Recorded Investment | |
Total with no related allowance recorded | $ 5,094 |
Loans and Allowance for Cred_13
Loans and Allowance for Credit Losses on Loans - Troubled Debt Restructurings (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Allowance for Credit Losses on Loans | ||
Recorded investment of troubled debt restructurings | $ 753 | $ 1,039 |
Troubled debt restructurings, nonaccrual loans | 597 | 590 |
Troubled debt restructurings, accruing loans | 156 | 449 |
Specific reserves | $ 9 | $ 20 |
Loans and Allowance for Cred_14
Loans and Allowance for Credit Losses on Loans - Troubled Debt Restructurings by Class (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020loan | Jun. 30, 2019loan | Jun. 30, 2020USD ($)contract | Jun. 30, 2019loan | |
Troubled Debt Restructurings by Class | ||||
Number of loans modified as troubled debt restructurings during the period | 0 | 0 | 3 | 0 |
Pre-modification Outstanding Recorded Investment | $ 13 | |||
Post-modification Outstanding Recorded Investment | $ 13 | |||
Commercial | ||||
Troubled Debt Restructurings by Class | ||||
Number of loans modified as troubled debt restructurings during the period | contract | 3 | |||
Pre-modification Outstanding Recorded Investment | $ 13 | |||
Post-modification Outstanding Recorded Investment | $ 13 |
Loans and Allowance for Cred_15
Loans and Allowance for Credit Losses on Loans - Defaults on Troubled Debt Restructurings (Details) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020loanitem | Jun. 30, 2019loanitem | Jun. 30, 2020contractloan | Jun. 30, 2019loan | |
Allowance for Credit Losses on Loans | ||||
Number of troubled debt restructurings in which the amount of principal or accrued interest owed from the borrower was forgiven | loan | 0 | 0 | ||
Number of loans modified as troubled debt restructurings during the period | 0 | 0 | 3 | 0 |
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 and Allowance for Cred_16
Loans and Allowance for Credit Losses on Loans - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 | |
Allowance for Credit Losses on Loans | |||||
Loans, net | $ 2,640,945 | $ 2,640,945 | $ 2,510,559 | ||
Interest Income generated from Loans | 32,845 | $ 27,251 | 67,627 | $ 54,058 | |
Deferred loan fees | $ 9,635 | $ 9,635 | $ 319 |
Business Combinations - Tri-Val
Business Combinations - Tri-Valley (Details) $ in Thousands | Oct. 11, 2019USD ($)shares |
Business Combinations | |
Aggregate transaction value | $ 185,598 |
Shares issued in acquisition | shares | 15,684,064 |
Issuance of 1,889,613 shares of common stock to Tri-Valley shareholders at $16.26 per share at Closing | $ 178,171 |
Total cash paid | $ 1 |
Business Combinations - United
Business Combinations - United American (Details) - USD ($) $ in Thousands | Oct. 11, 2019 | Jun. 30, 2020 |
Business Combinations | ||
Aggregate transaction value | $ 185,598 | |
Shares issued in acquisition | 15,684,064 | |
Total cash paid | $ 1 | |
Issuance of shares of common stock to holders of restricted stock | $ 178,171 | |
Tax refund | $ 524 |
Business combinations - Presidi
Business combinations - Presidio (Details) | Oct. 11, 2019USD ($)$ / sharesshares | Oct. 31, 2019 | Jun. 30, 2020USD ($) | Dec. 31, 2019USD ($) | Jun. 30, 2019USD ($) |
Liabilities assumed: | |||||
Subordinate debt | $ 39,646,000 | $ 39,554,000 | |||
Goodwill recorded in the merger | 167,631,000 | $ 167,420,000 | $ 83,753,000 | ||
Aggregate transaction value | $ 185,598,000 | ||||
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 | ||||
Cash paid for fractional shares | 1,000 | ||||
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 | ||||
Other borrowings | 442,000 | ||||
Other liabilities | 18,127,000 | ||||
Total liabilities assumed | 802,828,000 | ||||
Net assets acquired | 101,720,000 | ||||
Purchase price | 185,598,000 | ||||
Goodwill recorded in the merger | 83,878,000 | ||||
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 | ||||
Amortized intangible assets | 60 months | ||||
Previously Reported | 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 | ||||
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) | ||||
Other liabilities | 211,000 | ||||
Total liabilities assumed | $ 210,000 |
Business Combinations (Details)
Business Combinations (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | ||||
Jun. 30, 2020USD ($)loan | Jun. 30, 2019USD ($) | Jun. 30, 2020USD ($)loan | Jun. 30, 2019USD ($) | Dec. 31, 2019USD ($)loan | Oct. 11, 2019USD ($) | |
Other merger-related costs | $ 59 | $ 540 | $ 2,127 | $ 540 | ||
Salaries and employee benefits merger-related costs | 356 | |||||
Total merger-related costs | $ 59 | 540 | $ 2,483 | 540 | ||
Number of loan classified as PCI loan | loan | 0 | 0 | 0 | |||
Goodwill | $ 167,631 | $ 83,753 | $ 167,631 | $ 83,753 | $ 167,420 | |
Minimum | ||||||
Combined business value after business combination | $ 4,000,000 | $ 4,000,000 | ||||
Presidio bank | ||||||
Goodwill | $ 83,878 |
Goodwill and Other Intangible_3
Goodwill and Other Intangible Assets - Goodwill (Details) - USD ($) $ in Thousands | 6 Months Ended | |||
Jun. 30, 2020 | Dec. 31, 2019 | Oct. 11, 2019 | Jun. 30, 2019 | |
Goodwill | ||||
Goodwill | $ 167,631 | $ 167,420 | $ 83,753 | |
BVF/CSNK | ||||
Goodwill | ||||
Goodwill acquired | 13,044 | |||
Focus | ||||
Goodwill | ||||
Goodwill acquired | 32,619 | |||
Tri Valley Bank | ||||
Goodwill | ||||
Goodwill acquired | 13,819 | |||
United American Bank | ||||
Goodwill | ||||
Goodwill acquired | 24,271 | |||
Presidio bank | ||||
Goodwill | ||||
Goodwill | $ 83,878 | |||
Goodwill acquired | 83,878,000 | |||
Banking | ||||
Goodwill | ||||
Goodwill | 154,587 | 70,709 | ||
Factoring | ||||
Goodwill | ||||
Goodwill | $ 13,044 | $ 13,044 |
Goodwill and Other Intangible_4
Goodwill and Other Intangible Assets - Other Intangible Assets (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Other Intangible Assets | ||
Gross Carrying amount | $ 27,693 | $ 27,693 |
Accumulated Amortization | (9,100) | (7,278) |
Total | 18,593 | 20,415 |
Core deposit | ||
Other Intangible Assets | ||
Gross Carrying amount | 25,023 | 25,023 |
Accumulated Amortization | (7,446) | (5,846) |
Total | 17,577 | 19,177 |
Below market-value lease | ||
Other Intangible Assets | ||
Gross Carrying amount | 770 | 770 |
Accumulated Amortization | (578) | (451) |
Total | 192 | 319 |
Customer relationship and brokered relationship | ||
Other Intangible Assets | ||
Gross Carrying amount | 1,900 | 1,900 |
Accumulated Amortization | (1,076) | (981) |
Total | 824 | $ 919 |
United American Bank | Core deposit | ||
Other Intangible Assets | ||
Total | 4,027 | |
United American Bank | Below market-value lease | ||
Other Intangible Assets | ||
Total | 109 | |
Tri Valley Bank | Core deposit | ||
Other Intangible Assets | ||
Total | 1,216 | |
Tri Valley Bank | Below market-value lease | ||
Other Intangible Assets | ||
Total | 168 | |
Presidio bank | Core deposit | ||
Other Intangible Assets | ||
Total | 9,909 | |
Presidio bank | Below or Above market-value lease | ||
Other Intangible Assets | ||
Total | (83) | |
Focus | Core deposit | ||
Other Intangible Assets | ||
Total | 2,423 | |
BVF/CSNK | Customer relationship and brokered relationship | ||
Other Intangible Assets | ||
Total | $ 824 |
Goodwill and Other Intangible_5
Goodwill and Other Intangible Assets - Estimated Amortization Expense (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Estimated Amortization Expense | ||
2020 | $ 1,910 | |
2021 | 3,017 | |
2022 | 2,635 | |
2023 | 2,405 | |
2024 | 2,186 | |
2025 | 1,811 | |
Thereafter | 4,629 | |
Total | 18,593 | $ 20,415 |
Core deposit | ||
Estimated Amortization Expense | ||
Total | 17,577 | 19,177 |
Below market-value lease | ||
Estimated Amortization Expense | ||
Total | 192 | 319 |
Customer relationship and brokered relationship | ||
Estimated Amortization Expense | ||
Total | 824 | $ 919 |
United American Bank | Core deposit | ||
Estimated Amortization Expense | ||
2020 | 332 | |
2021 | 602 | |
2022 | 553 | |
2023 | 521 | |
2024 | 499 | |
2025 | 478 | |
Thereafter | 1,042 | |
Total | 4,027 | |
United American Bank | Below market-value lease | ||
Estimated Amortization Expense | ||
2020 | 109 | |
Total | 109 | |
Tri Valley Bank | Core deposit | ||
Estimated Amortization Expense | ||
2020 | 104 | |
2021 | 184 | |
2022 | 167 | |
2023 | 158 | |
2024 | 152 | |
2025 | 145 | |
Thereafter | 306 | |
Total | 1,216 | |
Tri Valley Bank | Below market-value lease | ||
Estimated Amortization Expense | ||
2020 | 8 | |
2021 | 18 | |
2022 | 18 | |
2023 | 18 | |
2024 | 18 | |
2025 | 18 | |
Thereafter | 70 | |
Total | 168 | |
Presidio bank | Core deposit | ||
Estimated Amortization Expense | ||
2020 | 912 | |
2021 | 1,447 | |
2022 | 1,225 | |
2023 | 1,118 | |
2024 | 1,026 | |
2025 | 970 | |
Thereafter | 3,211 | |
Total | 9,909 | |
Presidio bank | Below or Above market-value lease | ||
Estimated Amortization Expense | ||
2020 | (9) | |
2021 | (20) | |
2022 | (20) | |
2023 | (20) | |
2024 | (14) | |
Total | (83) | |
Focus | Core deposit | ||
Estimated Amortization Expense | ||
2020 | 359 | |
2021 | 596 | |
2022 | 502 | |
2023 | 420 | |
2024 | 346 | |
2025 | 200 | |
Total | 2,423 | |
BVF/CSNK | Customer relationship and brokered relationship | ||
Estimated Amortization Expense | ||
2020 | 95 | |
2021 | 190 | |
2022 | 190 | |
2023 | 190 | |
2024 | 159 | |
Total | $ 824 |
Goodwill and Other Intangible_6
Goodwill and Other Intangible Assets - Impairment of Intangible Assets (Details) - USD ($) $ in Thousands | 6 Months Ended | 12 Months Ended |
Jun. 30, 2020 | Dec. 31, 2019 | |
Impairment of Intangible Assets | ||
Impairment of intangible assets | $ 0 | $ 0 |
Income Taxes - Net Deferred Tax
Income Taxes - Net Deferred Tax Assets (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Net deferred tax assets | ||
Net deferred tax assets | $ 27,223 | $ 24,302 |
Valuation allowance for deferred tax assets | $ 0 | $ 0 |
Income Taxes - Carry Amounts of
Income Taxes - Carry Amounts of the Low Income Housing Investments (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Income Taxes | ||
Low income housing investments | $ 5,668 | $ 6,126 |
Future commitments | $ 625 | $ 625 |
Income Taxes - Components of Lo
Income Taxes - Components of Low Income Housing Investment (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Income Taxes | ||||
Low income housing tax credits | $ 210 | $ 106 | $ 420 | $ 213 |
Low income housing investment expense | $ 211 | $ 106 | $ 420 | $ 211 |
Income Taxes - Future Commitmen
Income Taxes - Future Commitments of the Low Income Housing Investments (Details) - Low income housing investments $ in Thousands | Jun. 30, 2020USD ($) |
Future Commitments | |
2020 | $ 28 |
2021 through 2023 | $ 597 |
Benefit Plans - Defined Benefit
Benefit Plans - Defined Benefit Plans - Components of Pension Cost (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 | |
Supplemental Retirement Plan | |||||
Components of net periodic benefit cost: | |||||
Service cost | $ 123 | $ 55 | $ 246 | $ 110 | |
Interest cost | 236 | 264 | 467 | 528 | |
Amortization of net actuarial loss | 105 | 46 | 190 | 92 | |
Net periodic benefit cost | 464 | 365 | 903 | 730 | |
Plan assets associated with the plan | 0 | 0 | |||
Split-Dollar Life Insurance Benefit Plan | |||||
Components of net periodic benefit cost: | |||||
Interest cost | 62 | 70 | 124 | 140 | $ 278 |
Amortization of prior transition obligation | (15) | (24) | (30) | (49) | |
Net periodic benefit cost | $ 47 | $ 46 | $ 94 | $ 91 |
Benefit Plans - Defined Benef_2
Benefit Plans - Defined Benefit Plans - Change in Projected Benefit Obligation (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 | |
Split-Dollar Life Insurance Benefit Plan | |||||
Change in projected benefit obligation: | |||||
Projected benefit obligation at beginning of year | $ 8,198 | $ 6,903 | $ 6,903 | ||
Interest cost | $ 62 | $ 70 | 124 | 140 | 278 |
Actuarial loss (gain) | 1,017 | ||||
Projected benefit obligation at end of period | 8,322 | 8,322 | $ 8,198 | ||
Supplemental Retirement Plan | |||||
Change in projected benefit obligation: | |||||
Interest cost | $ 236 | $ 264 | $ 467 | $ 528 |
Benefit Plans - Defined Benef_3
Benefit Plans - Defined Benefit Plans - Amounts Recognized in Accumulated Other Comprehensive Loss (Details) - Split-Dollar Life Insurance Benefit Plan - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Amounts Recognized in Accumulated Other Comprehensive Loss | ||
Net actuarial loss | $ 3,851 | $ 3,776 |
Prior transition obligation | 1,014 | 1,059 |
Accumulated other comprehensive loss | $ 4,865 | $ 4,835 |
Fair Value - Financial Assets a
Fair Value - Financial Assets and Liabilities Measured on a Recurring Basis (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Financial Assets and Liabilities Measured on a Recurring Basis | ||
Securities available-for-sale | $ 323,565 | $ 404,825 |
I/O strip receivables | 482 | 503 |
Agency mortgage-backed securities | ||
Financial Assets and Liabilities Measured on a Recurring Basis | ||
Securities available-for-sale | 232,335 | 284,361 |
U.S. Treasury | ||
Financial Assets and Liabilities Measured on a Recurring Basis | ||
Securities available-for-sale | 91,230 | 120,464 |
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 | 91,230 | 120,464 |
Significant Other Observable Inputs (Level 2) | ||
Financial Assets and Liabilities Measured on a Recurring Basis | ||
I/O strip receivables | 482 | 503 |
Significant Other Observable Inputs (Level 2) | Agency mortgage-backed securities | ||
Financial Assets and Liabilities Measured on a Recurring Basis | ||
Securities available-for-sale | 232,335 | 284,361 |
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 - Impaired Loans Hel
Fair Value - Impaired Loans Held-for-investment - Additional Disclosures (Details) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Carrying amount | ||
Impaired Loans Held-for-investment | ||
Foreclosed assets | $ 0 | $ 0 |
Fair Value - Carrying Amounts a
Fair Value - Carrying Amounts and Estimated Fair Values of Financial Instruments (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Assets | ||
Securities available-for-sale | $ 323,565 | $ 404,825 |
Securities held-to-maturity | 332,452 | 368,107 |
Federal Home Loan Bank, Federal Reserve Bank stock and other investments, at cost | 33,509 | 29,842 |
I/O strips receivables | 482 | 503 |
Liabilities | ||
Subordinated Debt. | 39,646 | 39,554 |
Significant Other Observable Inputs (Level 2) | ||
Assets | ||
I/O strips receivables | 482 | 503 |
Carrying amount | ||
Assets | ||
Cash and cash equivalents | 925,900 | 457,370 |
Securities available-for-sale | 323,565 | 404,825 |
Securities held-to-maturity | 322,677 | 366,560 |
Loans (including loans held-for-sale), net | 2,645,269 | 2,511,611 |
Federal Home Loan Bank, Federal Reserve Bank stock and other investments, at cost | 33,509 | 29,842 |
Accrued interest receivable | 10,041 | 10,915 |
I/O strips receivables | 482 | 503 |
Liabilities | ||
Time deposits | 150,261 | 168,034 |
Other deposits | 3,749,965 | 3,246,734 |
Subordinated Debt. | 39,646 | 39,554 |
Accrued interest payable | 585 | 707 |
Carried at fair value | ||
Assets | ||
Cash and cash equivalents | 925,900 | 457,370 |
Securities available-for-sale | 323,565 | 404,825 |
Securities held-to-maturity | 332,452 | 368,107 |
Loans (including loans held-for-sale), net | 2,635,366 | 2,513,329 |
Accrued interest receivable | 10,041 | 10,915 |
I/O strips receivables | 482 | 503 |
Liabilities | ||
Time deposits | 146,776 | 158,704 |
Other deposits | 3,749,965 | 3,246,734 |
Subordinated Debt. | 38,946 | 40,404 |
Accrued interest payable | 585 | 707 |
Carried at fair value | Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Assets | ||
Cash and cash equivalents | 925,900 | 457,370 |
Securities available-for-sale | 91,230 | 120,464 |
Accrued interest receivable | 369 | 446 |
Carried at fair value | Significant Other Observable Inputs (Level 2) | ||
Assets | ||
Securities available-for-sale | 232,335 | 284,361 |
Securities held-to-maturity | 332,452 | 368,107 |
Loans (including loans held-for-sale), net | 4,324 | 1,052 |
Accrued interest receivable | 1,778 | 2,218 |
I/O strips receivables | 482 | 503 |
Liabilities | ||
Time deposits | 146,776 | 158,704 |
Other deposits | 3,749,965 | 3,246,734 |
Subordinated Debt. | 38,946 | 40,404 |
Accrued interest payable | 585 | 707 |
Carried at fair value | Significant Unobservable Inputs (Level 3) | ||
Assets | ||
Loans (including loans held-for-sale), net | 2,631,042 | 2,512,277 |
Accrued interest receivable | $ 7,894 | $ 8,251 |
Equity Plan - General Disclosur
Equity Plan - General Disclosures (Details) - USD ($) | Oct. 11, 2019 | Jun. 30, 2020 | May 21, 2020 | May 20, 2020 | Dec. 31, 2019 |
Equity Plan | |||||
Consideration for Presidio stock options exchanged for Heritage Commerce Corp stock options | $ 7,426,000 | ||||
Presidio bank | |||||
Equity Plan | |||||
Consideration for Presidio stock options exchanged for Heritage Commerce Corp stock options | $ 7,426,000 | $ 7,426,000 | |||
2013 Plan | |||||
Equity Plan | |||||
Number of shares authorized for equity plan | 5,000,000 | 3,000,000 | |||
Number of shares available for future grants | 2,393,378 | ||||
Options | |||||
Equity Plan | |||||
Vesting period | 4 years | ||||
Expiration term | 10 years | ||||
Heritage Commerce Corp stock options | 2,627,336 | 2,712,846 | |||
Options | Presidio bank | |||||
Equity Plan | |||||
Heritage Commerce Corp stock options | 1,176,757 | ||||
Restricted stock | |||||
Equity Plan | |||||
Number of equity awards issued (in shares) | 168,117 | ||||
Nonqualified stock options | |||||
Equity Plan | |||||
Number of equity awards issued (in shares) | 329,500 |
Equity Plan - Stock Option Acti
Equity Plan - Stock Option Activity (Details) - Options - USD ($) | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2020 | |
Number of Shares | ||
Outstanding at the beginning of the period (in shares) | 2,712,846 | |
Granted (in shares) | 329,500 | |
Heritage Commerce Corp stock options | 2,627,336 | 2,627,336 |
Exercised (in shares) | (320,494) | |
Forfeited or expired (in shares) | (94,516) | |
Outstanding at the end of the period (in shares) | 2,627,336 | |
Vested or expected to vest (in shares) | 2,469,696 | |
Exercisable at the end of the period (in shares) | 1,955,675 | |
Weighted Average Exercise Price | ||
Outstanding at the beginning of the period (in dollars per share) | $ 8.80 | |
Granted (in dollars per share) | 9.11 | |
Heritage Commerce Corp stock options | 9.18 | $ 9.18 |
Exercised (in dollars per share) | 4.65 | |
Forfeited or expired (in dollars per share) | 13.58 | |
Outstanding at the end of the period (in dollars per share) | $ 9.18 | |
Additional Information | ||
Weighted Average Remaining Contractual Life - Outstanding at the end of the period (in years) | 5 years 10 months 6 days | |
Weighted Average Remaining Contractual Life - Vested or expected to vest (in years) | 5 years 10 months 6 days | |
Weighted Average Remaining Contractual Life - Exercisable at the end of the period (in years) | 4 years 9 months 7 days | |
Aggregate Intrinsic Value - Outstanding at the end of the period (in dollars) | $ 2,403,351 | |
Aggregate Intrinsic Value - Vested or expected to vest (in dollars) | 2,259,150 | |
Aggregate Intrinsic Value - Exercisable at the end of the period (in dollars) | $ 2,403,351 | |
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 |
Equity Plan - Information Relat
Equity Plan - Information Related to the Equity Plans for each of the Last Three Years (Details) - USD ($) $ / shares in Units, $ in Thousands | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Information Related to the Equity Plans | ||
Cash received from option exercise | $ 1,490 | $ 566 |
Options | ||
Information Related to the Equity Plans | ||
Intrinsic value of options exercised | 2,057,914 | 392,127 |
Cash received from option exercise | 1,489,991 | 566,197 |
Tax benefit realized from option exercises | $ 33,783 | $ 102,786 |
Weighted average fair value of options granted (in dollars per share) | $ 1.15 | $ 1.91 |
Equity Plan - Unrecognized Comp
Equity Plan - Unrecognized Compensation Cost - Nonvested Stock Options (Details) - Options $ in Thousands | 6 Months Ended |
Jun. 30, 2020USD ($) | |
Unrecognized Compensation Cost | |
Total unrecognized compensation cost related to nonvested stock options granted | $ 1,187 |
Expected weighted-average period for recognition of compensation costs related to nonvested stock options | 3 years 7 days |
Equity Plan - Assumptions Used
Equity Plan - Assumptions Used to Estimate Fair Value (Details) - Options | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Assumptions Used to Estimate Fair Value | ||
Expected life in months | 72 months | 72 months |
Volatility (as a percent) | 29.00% | 24.00% |
Weighted average risk-free interest rate (as a percent) | 0.53% | 2.24% |
Expected dividends (as a percent) | 5.71% | 3.95% |
Equity Plan - Restricted Stock
Equity Plan - Restricted Stock Activity (Details) - Restricted stock | 6 Months Ended |
Jun. 30, 2020$ / sharesshares | |
Number of Shares | |
Nonvested shares at the beginning of the period (in shares) | shares | 239,453 |
Granted (in shares) | shares | 168,117 |
Vested (in shares) | shares | (108,870) |
Nonvested shares at the end of the period (in shares) | shares | 298,700 |
Weighted Average Grant Date Fair Value | |
Nonvested shares at the beginning of the period (in dollars per share) | $ / shares | $ 11.23 |
Granted (in dollars per share) | $ / shares | 9.20 |
Vested (in dollars per share) | $ / shares | 13.19 |
Nonvested shares at the end of the period (in dollars per share) | $ / shares | $ 12.22 |
Equity Plan - Unrecognized Co_2
Equity Plan - Unrecognized Compensation Cost - Nonvested Restricted Stock Awards (Details) - Restricted stock $ in Thousands | 6 Months Ended |
Jun. 30, 2020USD ($) | |
Unrecognized Compensation Cost | |
Total unrecognized compensation cost related to nonvested restricted stock awards | $ 3,077 |
Expected weighted-average period for recognition of compensation costs related to nonvested restricted stock awards | 2 years 1 month 17 days |
Subordinate Debt (Details)
Subordinate Debt (Details) - USD ($) | May 26, 2017 | Dec. 31, 2019 | Jun. 30, 2020 | Dec. 19, 2019 | Oct. 11, 2019 |
Debt Instrument [Line Items] | |||||
Principal amount | $ 40,000,000 | ||||
Debt Issuance Costs | $ 354,000 | ||||
Fixed interest rate (as a percent) | 5.25% | ||||
Subordinate debt | $ 39,554,000 | $ 39,646,000 | |||
LIBOR | |||||
Debt Instrument [Line Items] | |||||
Rate of interest added to base rate | 336.50% | ||||
Presidio bank | |||||
Debt Instrument [Line Items] | |||||
Fixed interest rate (as a percent) | 8.00% | ||||
Subordinate debt | $ 10,000,000 | ||||
Pre-payment penalty | $ 300,000 |
Capital Requirements - General
Capital Requirements - General Information (Details) | Mar. 27, 2020 | Jun. 30, 2020 | Dec. 31, 2019 |
Capital Requirements | |||
Period to delay the estimated impact of the adoption of the CECL Standard to regulatory capital as the company elected the option | 2 years | ||
Addition period for transition | 3 years | ||
Capital conservation buffer (as a percent) | 2.50% | 2.50% | |
HBC (Wholly-owned Subsidiary) | |||
Capital Requirements | |||
Capital conservation buffer (as a percent) | 2.50% | 2.50% |
Capital Requirements - Tabular
Capital Requirements - Tabular Disclosure (Details) $ in Thousands | Jun. 30, 2020USD ($) | Dec. 31, 2019USD ($) |
Total Capital (to risk-weighted assets) | ||
Actual, Amount | $ 473,095 | $ 457,158 |
Required For Capital Adequacy Purposes, Amount | $ 313,273 | $ 329,306 |
Actual, Ratio (as a percent) | 0.159 | 0.146 |
Required For Capital Adequacy Purposes, Ratio (as a percent) | 0.105 | 0.105 |
Tier 1 Capital (to risk-weighted assets) | ||
Actual, Amount | $ 396,142 | $ 393,432 |
Required For Capital Adequacy Purposes, Amount | $ 253,602 | $ 266,581 |
Actual, Ratio (as a percent) | 0.133 | 0.125 |
Required For Capital Adequacy Purposes, Ratio (as a percent) | 0.085 | 0.085 |
Common Equity Tier 1 Capital (to risk-weighted assets) | ||
Actual, Amount | $ 396,142 | $ 393,432 |
Required For Capital Adequacy Purposes, Amount | $ 208,849 | $ 219,538 |
Actual, Ratio (as a percent) | 0.133% | 0.125% |
Required For Capital Adequacy Purposes, Ratio (as a percent) | 0.07% | 0.07% |
Tier 1 Capital (to average assets) | ||
Actual, Amount | $ 396,142 | $ 393,432 |
Required For Capital Adequacy Purposes, Amount | $ 169,290 | $ 161,677 |
Actual, Ratio (as a percent) | 0.094 | 0.097 |
Required For Capital Adequacy Purposes, Ratio (as a percent) | 0.040 | 0.040 |
HBC (Wholly-owned Subsidiary) | ||
Total Capital (to risk-weighted assets) | ||
Actual, Amount | $ 450,839 | $ 435,757 |
To Be Well Capitalized Under Regulatory Requirements, Amount | 298,153 | 313,485 |
Required For Capital Adequacy Purposes, Amount | $ 313,060 | $ 329,159 |
Actual, Ratio (as a percent) | 0.151 | 0.139 |
To Be Well Capitalized Under Regulatory Requirements, Ratio (as a percent) | 0.100 | 0.100 |
Required For Capital Adequacy Purposes, Ratio (as a percent) | 0.105 | 0.105 |
Tier 1 Capital (to risk-weighted assets) | ||
Actual, Amount | $ 413,557 | $ 411,585 |
To Be Well Capitalized Under Regulatory Requirements, Amount | 238,522 | 250,788 |
Required For Capital Adequacy Purposes, Amount | $ 253,430 | $ 266,462 |
Actual, Ratio (as a percent) | 0.139 | 0.131 |
To Be Well Capitalized Under Regulatory Requirements, Ratio (as a percent) | 0.080 | 0.080 |
Required For Capital Adequacy Purposes, Ratio (as a percent) | 0.085 | 0.085 |
Common Equity Tier 1 Capital (to risk-weighted assets) | ||
Actual, Amount | $ 413,557 | $ 411,585 |
To Be Well Capitalized Under Regulatory Requirements, Amount | 193,799 | 203,765 |
Required For Capital Adequacy Purposes, Amount | $ 208,707 | $ 219,439 |
Actual, Ratio (as a percent) | 0.139% | 0.131% |
To Be Well Capitalized Under Regulatory Requirements, Ratio (as a percent) | 0.065% | 0.065% |
Required For Capital Adequacy Purposes, Ratio (as a percent) | 0.07% | 0.07% |
Tier 1 Capital (to average assets) | ||
Actual, Amount | $ 413,557 | $ 411,585 |
To Be Well Capitalized Under Regulatory Requirements, Amount | 211,518 | 202,013 |
Required For Capital Adequacy Purposes, Amount | $ 169,214 | $ 161,611 |
Actual, Ratio (as a percent) | 0.098 | 0.102 |
To Be Well Capitalized Under Regulatory Requirements, Ratio (as a percent) | 0.050 | 0.050 |
Required For Capital Adequacy Purposes, Ratio (as a percent) | 0.040 | 0.040 |
Capital Requirements - Dividend
Capital Requirements - Dividends to Parent (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Mar. 31, 2020 | Jun. 30, 2020 | Dec. 31, 2019 | Aug. 27, 2019 | Aug. 26, 2019 | |
Cash dividend | |||||
Common stock, shares authorized | 100,000,000 | 100,000,000 | 100,000,000 | 60,000,000 | |
Subordinated Debt. | $ 39,646 | $ 39,554 | |||
HBC (Wholly-owned Subsidiary) | |||||
Cash dividend | |||||
Cash dividend available | 37,996 | ||||
Dividends paid to parent company | $ 16,000 | $ 8,000 |
Revenue Recognition (Details)
Revenue Recognition (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Disaggregation of Revenue [Line Items] | ||||
Non-interest Income In-scope of Topic 606 | $ 2,410 | $ 2,338 | ||
Non-interest Income Out-of-scope of Topic 606 | $ 1,428 | $ 1,588 | 2,861 | 2,895 |
Total noninterest income | 2,078 | 2,765 | 5,271 | 5,233 |
Service charges and fees on deposit accounts | ||||
Disaggregation of Revenue [Line Items] | ||||
Non-interest Income In-scope of Topic 606 | $ 650 | $ 1,177 | 1,619 | $ 2,338 |
Gain on the disposition of foreclosed assets | ||||
Disaggregation of Revenue [Line Items] | ||||
Non-interest Income In-scope of Topic 606 | $ 791 |
Noninterest Expense (Details)
Noninterest Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Noninterest Expense | ||||
Salaries and employee benefits | $ 12,300 | $ 10,698 | $ 26,503 | $ 21,468 |
Occupancy and equipment | 1,766 | 1,578 | 3,538 | 3,084 |
Professional fees | 1,155 | 753 | 2,590 | 1,571 |
Data processing | 779 | 732 | 1,755 | 1,411 |
Software subscriptions | 746 | 556 | 1,635 | 1,145 |
Amortization of intangible assets | 964 | 554 | 1,822 | 1,107 |
Insurance expense | 516 | 439 | 1,034 | 875 |
Other | 2,786 | 3,135 | 7,909 | 5,702 |
Total noninterest expense, excluding merger-related costs | 21,012 | 18,445 | 46,786 | 36,363 |
Salaries and employee benefits merger-related costs | 356 | |||
Other merger-related costs | 59 | 540 | 2,127 | 540 |
Total merger-related costs | $ 59 | $ 540 | $ 2,483 | $ 540 |
Leases (Details)
Leases (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2020USD ($) | Dec. 31, 2019USD ($) | Jun. 30, 2019USD ($)ft² | Jun. 30, 2020USD ($) | Jun. 30, 2019USD ($)ft² | |
Lessee, Lease, Description [Line Items] | |||||
Lessee, Operating Lease, Option to renew | true | ||||
Operating Lease Cost (Cost resulting from lease payments) | $ 1,733 | $ 1,044 | $ 3,502 | $ 2,094 | |
Operating Lease - Operating Cash Flows (Fixed Payments) | 1,379 | 1,012 | 2,570 | 2,025 | |
Operating Lease - ROU assets | 37,137 | 7,425 | 37,137 | 7,425 | |
Operating Lease - Liabilities | $ 37,137 | $ 7,425 | $ 37,137 | $ 7,425 | |
Operating Lease, Liability, Statement of Financial Position [Extensible List] | Operating Lease - Liabilities | Operating Lease - Liabilities | Operating Lease - Liabilities | Operating Lease - Liabilities | |
Weighted Average Lease Term - Operating Leases | 8 years 6 months | 3 years 4 months 24 days | 8 years 6 months | 3 years 4 months 24 days | |
Weighted Average Discount Rate - Operating Leases | 4.53% | 5.26% | 4.53% | 5.26% | |
Area of office space | ft² | 54,910 | 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 |
Leases - Maturity Analysis (Det
Leases - Maturity Analysis (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Jun. 30, 2019 |
Operating Lease Payments Due | ||
2020 | $ 3,040 | |
2021 | 5,028 | |
2022 | 5,448 | |
2023 | 4,812 | |
2024 | 4,574 | |
Thereafter | 22,664 | |
Total undiscounted cash flows | 45,566 | |
Discount on cash flows | (8,429) | |
Total lease liability | $ 37,137 | $ 7,425 |
Business Segment Information -
Business Segment Information - Business Segments (Details) | 6 Months Ended |
Jun. 30, 2020itemsegment | |
Business Segment Information | |
Number of business segments | segment | 2 |
Focus | |
Business Segment Information | |
Number of business segments | item | 2 |
Business Segment Information _2
Business Segment Information - Operating Statements (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||||
Jun. 30, 2020 | Mar. 31, 2020 | Jun. 30, 2019 | Mar. 31, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 | |
Operating Income | |||||||
Interest income | $ 37,132 | $ 33,489 | $ 78,074 | $ 66,938 | |||
Total interest expense | 2,192 | 2,573 | 4,554 | 4,980 | |||
Net interest income | 34,940 | 30,916 | 73,520 | 61,958 | |||
Provision for credit losses on loans | 1,114 | (740) | 14,384 | (1,801) | |||
Net interest income after provision | 33,826 | 31,656 | 59,136 | 63,759 | |||
Noninterest income | 2,078 | 2,765 | 5,271 | 5,233 | |||
Noninterest expense | 21,012 | 18,445 | 46,786 | 36,363 | |||
Income before income taxes | 14,892 | 15,976 | 17,621 | 32,629 | |||
Income tax expense | 4,274 | 4,623 | 5,142 | 9,130 | |||
Net income | 10,618 | $ 1,861 | 11,353 | $ 12,146 | 12,479 | 23,499 | |
Total assets | 4,614,401 | 3,108,031 | 4,614,401 | 3,108,031 | $ 4,109,463 | ||
Loans, net of deferred fees | 2,686,389 | 1,877,767 | 2,686,389 | 1,877,767 | 2,533,844 | ||
Goodwill | 167,631 | 83,753 | 167,631 | 83,753 | $ 167,420 | ||
Business Combination, Acquisition Related Costs | 59 | 540 | 2,483 | 540 | |||
Total merger-related costs | 59 | 540 | 2,483 | 540 | |||
Banking | |||||||
Operating Income | |||||||
Interest income | 34,570 | 30,521 | 72,635 | 61,017 | |||
Intersegment interest allocations | 218 | 292 | 502 | 606 | |||
Total interest expense | 2,192 | 2,573 | 4,554 | 4,980 | |||
Net interest income | 32,596 | 28,240 | 68,583 | 56,643 | |||
Provision for credit losses on loans | 1,107 | (744) | 13,981 | (1,636) | |||
Net interest income after provision | 31,489 | 28,984 | 54,602 | 58,279 | |||
Noninterest income | 1,883 | 2,641 | 4,906 | 4,873 | |||
Noninterest expense | 19,336 | 16,784 | 43,519 | 32,985 | |||
Intersegment expense allocations | 106 | 132 | 235 | 253 | |||
Income before income taxes | 14,142 | 14,973 | 16,224 | 30,420 | |||
Income tax expense | 4,052 | 4,327 | 4,729 | 8,477 | |||
Net income | 10,090 | 10,646 | 11,495 | 21,943 | |||
Total assets | 4,546,199 | 3,045,378 | 4,546,199 | 3,045,378 | |||
Loans, net of deferred fees | 2,644,480 | 1,827,936 | 2,644,480 | 1,827,936 | |||
Goodwill | 154,587 | 70,709 | 154,587 | 70,709 | |||
Factoring | |||||||
Operating Income | |||||||
Interest income | 2,562 | 2,968 | 5,439 | 5,921 | |||
Intersegment interest allocations | (218) | (292) | (502) | (606) | |||
Net interest income | 2,344 | 2,676 | 4,937 | 5,315 | |||
Provision for credit losses on loans | 7 | 4 | 403 | (165) | |||
Net interest income after provision | 2,337 | 2,672 | 4,534 | 5,480 | |||
Noninterest income | 195 | 124 | 365 | 360 | |||
Noninterest expense | 1,676 | 1,661 | 3,267 | 3,378 | |||
Intersegment expense allocations | (106) | (132) | (235) | (253) | |||
Income before income taxes | 750 | 1,003 | 1,397 | 2,209 | |||
Income tax expense | 222 | 296 | 413 | 653 | |||
Net income | 528 | 707 | 984 | 1,556 | |||
Total assets | 68,202 | 62,653 | 68,202 | 62,653 | |||
Loans, net of deferred fees | 41,909 | 49,831 | 41,909 | 49,831 | |||
Goodwill | $ 13,044 | $ 13,044 | $ 13,044 | $ 13,044 |
Subsequent Events (Details)
Subsequent Events (Details) - $ / shares | Jul. 23, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Jun. 30, 2019 | Mar. 31, 2019 |
Subsequent Event [Line Items] | |||||
Quarterly cash dividends declared to holders of common stock | $ 0.13 | $ 0.13 | $ 0.12 | $ 0.12 | |
Subsequent Event | |||||
Subsequent Event [Line Items] | |||||
Quarterly cash dividends declared to holders of common stock | $ 0.13 |