Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2020 | Oct. 30, 2020 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Sep. 30, 2020 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Period Focus | Q3 | |
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 | 224 Airport Parkway | |
Entity Address, City or Town | San Jose | |
Entity Address, Postal Zip Code | 95110 | |
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 | 59,914,987 | |
Amendment Flag | false |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Assets | ||
Cash and due from banks | $ 33,353 | $ 49,447 |
Other investments and interest-bearing deposits in other financial institutions | 926,915 | 407,923 |
Total cash and cash equivalents | 960,268 | 457,370 |
Securities available-for-sale, at fair value | 294,438 | 404,825 |
Securities held-to-maturity, at amortized cost, net of allowance for credit losses of $55 at September 30, 2020 (fair value of $303,996 at September 30, 2020 and $368,107 at December 31, 2019) | 295,609 | 366,560 |
Loans held-for-sale - SBA, at lower of cost or fair value, including deferred costs | 3,565 | 1,052 |
Loans, net of deferred fees | 2,697,016 | 2,533,844 |
Allowance for credit losses on loans(1) | (45,422) | (23,285) |
Loans, net | 2,651,594 | 2,510,559 |
Federal Home Loan Bank, Federal Reserve Bank stock and other investments, at cost | 33,518 | 29,842 |
Company-owned life insurance | 77,059 | 76,027 |
Premises and equipment, net | 10,412 | 8,250 |
Goodwill | 167,631 | 167,420 |
Other intangible assets | 17,628 | 20,415 |
Accrued interest receivable and other assets | 95,063 | 67,143 |
Total assets | 4,606,785 | 4,109,463 |
Deposits: | ||
Demand, noninterest-bearing | 1,698,027 | 1,450,873 |
Demand, interest-bearing | 926,041 | 798,375 |
Savings and money market | 1,108,252 | 982,430 |
Time deposits - under $250 | 46,684 | 54,361 |
Time deposits - $250 and over | 92,276 | 99,882 |
CDARS - interest-bearing demand, money market and time deposits | 19,121 | 28,847 |
Total deposits | 3,890,401 | 3,414,768 |
Subordinated debt, net of issuance costs | 39,693 | 39,554 |
Other short-term borrowings | 328 | |
Accrued interest payable and other liabilities | 98,884 | 78,105 |
Total liabilities | 4,028,978 | 3,532,755 |
Shareholders' equity: | ||
Preferred stock, no par value; 10,000,000 shares authorized; none issued and outstanding at September 30, 2020 and December 31, 2019 | ||
Common stock, no par value; 100,000,000 shares authorized at September 30, 2020 and authorized at December 31, 2019; 59,914,987 shares issued and outstanding at September 30, 2020 and 59,368,156 shares issued and outstanding at December 31, 2019 | 493,126 | 489,745 |
Retained earnings | 91,065 | 96,741 |
Accumulated other comprehensive loss | (6,384) | (9,778) |
Total shareholders' equity | 577,807 | 576,708 |
Total liabilities and shareholders' equity | $ 4,606,785 | $ 4,109,463 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Securities held-to-maturity | ||
Allowance for credit losses | $ (55) | |
Securities held-to-maturity, fair value (in dollars) | $ 303,996 | $ 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 | 59,914,987 | 59,368,156 |
Common stock, shares outstanding | 59,914,987 | 59,368,156 |
CONSOLIDATED STATEMENTS OF INCO
CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Interest income: | ||||
Loans, including fees | $ 32,635 | $ 27,264 | $ 100,262 | $ 81,321 |
Securities, taxable | 2,481 | 3,504 | 9,584 | 12,149 |
Securities, exempt from Federal tax | 463 | 530 | 1,458 | 1,624 |
Other investments, interest-bearing deposits in other financial institutions and Federal funds sold | 673 | 1,952 | 3,022 | 5,094 |
Total interest income | 36,252 | 33,250 | 114,326 | 100,188 |
Interest expense: | ||||
Deposits | 1,504 | 2,042 | 4,904 | 5,873 |
Subordinated debt | 583 | 583 | 1,737 | 1,731 |
Short-term borrowings | 1 | |||
Total interest expense | 2,087 | 2,625 | 6,641 | 7,605 |
Net interest income before provision for credit losses on loans | 34,165 | 30,625 | 107,685 | 92,583 |
Provision (credit) for credit losses on loans | 197 | (576) | 14,581 | (2,377) |
Net interest income after provision for credit losses on loans | 33,968 | 31,201 | 93,104 | 94,960 |
Noninterest income: | ||||
Increase in cash surrender value of life insurance | 464 | 336 | 1,380 | 999 |
Gain on sales of SBA loans | 400 | 156 | 467 | 331 |
Servicing income | 187 | 139 | 575 | 480 |
Gain on sales of securities | 330 | 270 | 878 | |
Other | 912 | 625 | 2,132 | 1,793 |
Total noninterest income | 2,595 | 2,618 | 7,866 | 7,851 |
Noninterest expense: | ||||
Salaries and employee benefits | 11,967 | 10,467 | 38,470 | 31,935 |
Occupancy and equipment | 2,283 | 1,550 | 5,821 | 4,634 |
Professional fees | 1,352 | 789 | 3,942 | 2,360 |
Other | 5,566 | 5,103 | 19,721 | 15,343 |
Total noninterest expense | 21,168 | 17,909 | 67,954 | 54,272 |
Income before income taxes | 15,395 | 15,910 | 33,016 | 48,539 |
Income tax expense | 4,198 | 4,633 | 9,340 | 13,763 |
Net income | $ 11,197 | $ 11,277 | $ 23,676 | $ 34,776 |
Earnings per common share: | ||||
Basic (in dollars per share) | $ 0.19 | $ 0.26 | $ 0.40 | $ 0.81 |
Diluted (in dollars per share) | $ 0.19 | $ 0.26 | $ 0.39 | $ 0.80 |
Service charges and fees on deposit accounts | ||||
Noninterest income: | ||||
Non-interest income | $ 632 | $ 1,032 | $ 2,251 | $ 3,370 |
Revenue, Product and Service [Extensible List] | Service charges and fees on deposit accounts | Service charges and fees on deposit accounts | Service charges and fees on deposit accounts | Service charges and fees on deposit accounts |
Gain on the disposition of foreclosed assets | ||||
Noninterest income: | ||||
Non-interest income | $ 791 | |||
Revenue, Product and Service [Extensible List] | Gain on the disposition of foreclosed assets | Gain on the disposition of foreclosed assets |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||
Net income | $ 11,197 | $ 11,277 | $ 23,676 | $ 34,776 |
Other comprehensive income: | ||||
Change in net unrealized holding (losses) gains on available-for-sale securities and I/O strips | (1,783) | 1,041 | 4,838 | 10,245 |
Deferred income taxes | 517 | (304) | (1,403) | (3,032) |
Change in net unamortized unrealized gain on securities available-for-sale that were reclassified to securities held-to-maturity | (13) | (13) | (39) | (52) |
Deferred income taxes | 4 | 4 | 12 | 16 |
Reclassification adjustment for gains realized in income | (330) | (270) | (878) | |
Deferred income taxes | 98 | 79 | 260 | |
Change in unrealized (losses) gains on securities and I/O strips, net of deferred income taxes | (1,275) | 496 | 3,217 | 6,559 |
Change in net pension and other benefit plan liability adjustment | 101 | 11 | 251 | 34 |
Deferred income taxes | (30) | (3) | (74) | (10) |
Change in pension and other benefit plan liability, net of deferred income taxes | 71 | 8 | 177 | 24 |
Other comprehensive (losses) income | (1,204) | 504 | 3,394 | 6,583 |
Total comprehensive income | $ 9,993 | $ 11,781 | $ 27,070 | $ 41,359 |
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 | 34,776 | |||||||||
Other comprehensive income (loss) | 6,583 | 6,583 | ||||||||
Balance at Sep. 30, 2019 | $ 302,983 | 98,161 | (5,798) | 395,346 | ||||||
Balance (in shares) at Sep. 30, 2019 | 43,509,406 | |||||||||
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 | |||||||||
Increase (Decrease) in Shareholders' Equity | ||||||||||
Net income | 11,277 | 11,277 | ||||||||
Other comprehensive income (loss) | 504 | 504 | ||||||||
Forfeiture of restricted stock awards, net (in shares) | (6,000) | |||||||||
Amortization of restricted stock awards, net of forfeitures and taxes | $ 358 | 358 | ||||||||
Cash dividend declared | (5,221) | (5,221) | ||||||||
Stock option expense, net of forfeitures and taxes | 163 | 163 | ||||||||
Stock options exercised | $ 157 | 157 | ||||||||
Stock options exercised (in shares) | 17,000 | |||||||||
Balance at Sep. 30, 2019 | $ 302,983 | 98,161 | (5,798) | 395,346 | ||||||
Balance (in shares) at Sep. 30, 2019 | 43,509,406 | |||||||||
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 | 23,676 | |||||||||
Other comprehensive income (loss) | 3,394 | 3,394 | ||||||||
Balance at Sep. 30, 2020 | $ 493,126 | 91,065 | (6,384) | 577,807 | ||||||
Balance (in shares) at Sep. 30, 2020 | 59,914,987 | |||||||||
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 | |||||||||
Increase (Decrease) in Shareholders' Equity | ||||||||||
Net income | 11,197 | 11,197 | ||||||||
Other comprehensive income (loss) | (1,204) | (1,204) | ||||||||
Amortization of restricted stock awards, net of forfeitures and taxes | $ 439 | 439 | ||||||||
Cash dividend declared | (7,786) | (7,786) | ||||||||
Stock option expense, net of forfeitures and taxes | 136 | 136 | ||||||||
Stock options exercised | $ 218 | 218 | ||||||||
Stock options exercised (in shares) | 58,220 | |||||||||
Balance at Sep. 30, 2020 | $ 493,126 | $ 91,065 | $ (6,384) | $ 577,807 | ||||||
Balance (in shares) at Sep. 30, 2020 | 59,914,987 |
CONSOLIDATED STATEMENTS OF CH_2
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Parenthetical) - $ / shares | 3 Months Ended | |||||
Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | 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 | $ 0.13 | $ 0.12 | $ 0.12 | $ 0.12 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income | $ 23,676 | $ 34,776 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Amortization of discounts and premiums on securities | 2,608 | 1,821 |
Gain on sale of securities available-for-sale | (270) | (878) |
Gain on sale of SBA loans | (467) | (331) |
Proceeds from sale of SBA loans originated for sale | 6,465 | 4,692 |
SBA loans originated for sale | (8,511) | (5,977) |
Gain on the disposition of foreclosed assets | (791) | |
Provision (credit) for credit losses on loans(1) | 14,581 | (2,377) |
Increase in cash surrender value of life insurance | (1,380) | (999) |
Depreciation and amortization | 712 | 598 |
Amortization of other intangible assets | 2,787 | 1,661 |
Stock option expense, net | 423 | 484 |
Amortization of restricted stock awards, net | 1,250 | 932 |
Amortization of subordinated debt issuance costs | 139 | 138 |
Gain on proceeds from company owned life insurance | (20) | |
Effect of changes in: | ||
Accrued interest receivable and other assets | (520) | 1,863 |
Accrued interest payable and other liabilities | (5,453) | (3,120) |
Net cash provided by operating activities | 35,229 | 33,283 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchase of securities held-to-maturity | (8,386) | |
Maturities/paydowns/calls of securities available-for-sale | 57,627 | 36,956 |
Maturities/paydowns/calls of securities held-to-maturity | 68,839 | 42,255 |
Proceeds from sales of securities available-for-sale | 56,598 | 98,733 |
Proceeds from the disposition of foreclosed assets | 791 | |
Net change in loans | (163,727) | 12,136 |
Changes in Federal Home Loan Bank stock and other investments | (3,676) | (15) |
Purchase of premises and equipment | (2,874) | (310) |
Proceeds from redemption of company-owned life insurance | 368 | |
Net cash provided (used in) by investing activities | 13,946 | 181,369 |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Net change in deposits | 475,633 | 51,458 |
Net change in short-term borrowings | (328) | |
Exercise of stock options | 1,708 | 723 |
Payment of cash dividends | (23,290) | (15,618) |
Net cash provided by financing activities | 453,723 | 36,563 |
Net increase in cash and cash equivalents | 502,898 | 251,215 |
Cash and cash equivalents, beginning of period | 457,370 | 164,568 |
Cash and cash equivalents, end of period | 960,268 | 415,783 |
Supplemental disclosures of cash flow information: | ||
Interest paid | 6,117 | 6,693 |
Income taxes paid, net | 10,640 | 13,620 |
Supplemental schedule of non-cash activity: | ||
Recording of right to use assets in exchange for lease obligations | $ 26,654 | 9,566 |
Transfer of loans held-for-sale to loan portfolio | $ 694 |
Basis of Presentation
Basis of Presentation | 9 Months Ended |
Sep. 30, 2020 | |
Basis of Presentation | |
Basis of Presentation | HERITAGE COMMERCE CORP NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS September 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 customer accounts for more than 10% of revenue for HBC or the Company. The Company reports its results for two segments: banking and factoring. The Company’s management uses segment results in its operating and strategic planning. In management’s opinion, all adjustments necessary for a fair presentation of these consolidated financial statements have been included and are of a normal and recurring nature. All intercompany transactions and balances have been eliminated. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ significantly from these estimates. Material estimates that are particularly susceptible to significant change include the determination of the allowance for credit losses and any impairment of goodwill or intangible assets. It is reasonably possible the Company’s estimate of the allowance for credit losses and evaluation of impairment of goodwill or intangible assets could change as a result of the continued impact of the COVID-19 pandemic on the economy. The resulting change in these estimates could be material to the Company’s consolidated financial statements. The results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results expected for any subsequent period or for the entire year ending December 31, 2020. London Inter-Bank Offered Rate (“LIBOR”) Transition and Phase-Out We have loans and borrowings that are tied to LIBOR benchmark interest rates. It is anticipated that the LIBOR index will be phased-out by the end of 2021 and the Federal Reserve Bank of New York has established the Secured Overnight Financing Rate (“SOFR”) as its recommended alternative to LIBOR. We have created a sub-committee of our Asset Liability Management Committee to address LIBOR transition and phase-out issues. We are currently reviewing loan documentation, technology systems and procedures we will need to implement for the transition. 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 had no recognized allowance for loan losses until the estimated allowance exceeded the unaccreted discount. 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. 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. Any significant 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. The cumulative-effect adjustment as a result of the adoption of this guidance was recorded, net of tax of $2,359,000, as a $6,062,000 reduction to retained earnings effective January 1, 2020. 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 | 9 Months Ended |
Sep. 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 1,741,568 and 826,036 weighted average stock options outstanding for the three months ended September 30, 2020, and 2019, respectively, and 1,507,437, and 826,036 outstanding for the nine months ended September 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 Nine Months Ended September 30, September 30, 2020 2019 2020 2019 (Dollars in thousands, except per share amounts) Net income $ 11,197 $ 11,277 $ 23,676 $ 34,776 Weighted average common shares outstanding for basic earnings per common share 59,589,243 43,258,983 59,432,178 43,189,710 Dilutive potential common shares 552,169 537,921 711,585 538,375 Shares used in computing diluted earnings per common share 60,141,412 43,796,904 60,143,763 43,728,085 Basic earnings per share $ 0.19 $ 0.26 $ 0.40 $ 0.81 Diluted earnings per share $ 0.19 $ 0.26 $ 0.39 $ 0.80 |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Income (Loss) ("AOCI") | 9 Months Ended |
Sep. 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 September 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 July 1, 2020, net of taxes $ 6,112 $ 280 $ (11,572) $ (5,180) Other comprehensive loss before reclassification, net of taxes (1,266) — (130) (1,396) Amounts reclassified from other comprehensive income (loss), net of taxes — (9) 201 192 Net current period other comprehensive income (loss), net of taxes (1,266) (9) 71 (1,204) Ending balance September 30, 2020, net of taxes $ 4,846 $ 271 $ (11,501) $ (6,384) Beginning balance July 1, 2019, net of taxes $ 1,083 $ 317 $ (7,702) $ (6,302) Other comprehensive income (loss) before reclassification, net of taxes 737 — (8) 729 Amounts reclassified from other comprehensive income (loss), net of taxes (232) (9) 16 (225) Net current period other comprehensive income (loss), net of taxes 505 (9) 8 504 Ending balance September 30, 2019, net of taxes $ 1,588 $ 308 $ (7,694) $ (5,798) (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. Nine Months Ended September 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 3,435 — (136) 3,299 Amounts reclassified from other comprehensive income (loss), net of taxes (191) (27) 313 95 Net current period other comprehensive income (loss), net of taxes 3,244 (27) 177 3,394 Ending balance September 30, 2020, net of taxes $ 4,846 $ 271 $ (11,501) $ (6,384) Beginning balance January 1, 2019, net of taxes $ (5,007) $ 344 $ (7,718) $ (12,381) Other comprehensive income (loss) before reclassification, net of taxes 7,213 — (22) 7,191 Amounts reclassified from other comprehensive income (loss), net of taxes (618) (36) 46 (608) Net current period other comprehensive income (loss), net of taxes 6,595 (36) 24 6,583 Ending balance September 30, 2019, net of taxes $ 1,588 $ 308 $ (7,694) $ (5,798) (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 September 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 $ — $ 330 Gain on sales of securities — (98) Income tax expense — 232 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 (184) 24 Actuarial losses (101) (46) (285) (22) Other noninterest expense 84 6 Income tax benefit (201) (16) Net of tax Total reclassification for the period $ (192) $ 225 Amounts Reclassified from AOCI(1) Nine Months Ended September 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 $ 878 Gain on sales of securities (79) (260) Income tax expense 191 618 Net of tax Amortization of unrealized gain on securities available-for-sale that were reclassified to securities held-to-maturity 39 52 Interest income on taxable securities (12) (16) Income tax expense 27 36 Net of tax Amortization of defined benefit pension plan items (1) Prior transition obligation (154) 73 Actuarial losses (291) (138) (445) (65) Other noninterest expense 132 19 Income tax benefit (313) (46) Net of tax Total reclassification from AOCI for the period $ (95) $ 608 (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 | 9 Months Ended |
Sep. 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 September 30, 2020 Cost Gains (Losses) Losses Value (Dollars in thousands) Securities available-for-sale: Agency mortgage-backed securities $ 197,921 $ 5,688 $ — $ — $ 203,609 U.S. Treasury 89,649 1,180 — — 90,829 Total $ 287,570 $ 6,868 $ — $ — $ 294,438 Gross Gross Estimated Allowance Amortized Unrecognized Unrecognized Fair for Credit September 30, 2020 Cost Gains (Losses) Value Losses (Dollars in thousands) Securities held-to-maturity: Agency mortgage-backed securities $ 223,453 $ 6,613 $ (1) $ 230,065 $ — Municipals - exempt from Federal tax 72,211 1,720 — 73,931 (55) Total $ 295,664 $ 8,333 $ (1) $ 303,996 $ (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 September 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 September 30, 2020 Value (Losses) Value (Losses) Value (Losses) (Dollars in thousands) Securities held-to-maturity: Agency mortgage-backed securities $ 245 (1) $ — $ — $ 245 $ (1) Total $ 245 $ (1) $ — $ — $ 245 $ (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 holdings of securities of any one issuer, other than the U.S. Government and its sponsored entities, in an amount greater than 10% of shareholders’ equity. At September 30, 2020, the Company held 421 securities ( 122 available-for-sale and 299 held-to-maturity), of which one had fair value below amortized cost. At September 30, 2020, there were $245,000 of agency mortgage-backed securities held-to-maturity, at amortized cost, with an unrealized loss for less than 12 months. The total unrealized loss for securities less than 12 months was ($1,000) at 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 Nine Months Ended September 30, September 30, 2020 2019 2020 2019 (Dollars in thousands) Proceeds $ — $ 38,855 $ 56,598 $ 98,733 Gross gains — 363 270 971 Gross losses — (33) — (93) The amortized cost and estimated fair values of securities as of September 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 3 months or less $ 24,980 $ 25,061 Due after 3 months through one year 59,758 60,708 Due after one through five years 4,911 5,060 Agency mortgage-backed securities 197,921 203,609 Total $ 287,570 $ 294,438 Held-to-maturity Amortized Estimated Cost Fair Value (Dollars in thousands) Due 3 months or less $ 910 $ 911 Due after 3 months through one year 490 498 Due after one through five years 9,762 10,133 Due after five through ten years 30,900 31,574 Due after ten years 30,149 30,815 Agency mortgage-backed securities 223,453 230,065 Total $ 295,664 $ 303,996 Securities with amortized cost of $38,777,000 and $32,773,000 as of September 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 nine months ended September 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 September 30, 2020 $ 55 For the nine months ended September 30, 2020, there was a reduction of $3,000 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 bond ratings for the Company’s municipal investment securities at September 30, 2020 were consistent with the ratings at January 1, 2020. |
Loans and Allowance for Credit
Loans and Allowance for Credit Losses on Loans | 9 Months Ended |
Sep. 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 $323,550,000 of SBA Paycheck Protection Program ("PPP") loans at September 30, 2020. 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: September 30, December 31, 2020 2019 (Dollars in thousands) Loans held-for-investment: Commercial $ 897,909 $ 603,345 Real estate: CRE - owner occupied 561,528 548,907 CRE - non-owner occupied 713,563 767,821 Land and construction 142,632 147,189 Home equity 111,468 151,775 Multifamily 169,791 180,623 Residential mortgages 91,077 100,759 Consumer and other 17,511 33,744 Loans 2,705,479 2,534,163 Deferred loan fees, net (8,463) (319) Loans, net of deferred fees 2,697,016 2,533,844 Allowance for credit losses on loans (1) (45,422) (23,285) Loans, net $ 2,651,594 $ 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, a 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. The allowance for credit losses for loans as of September 30, 2020 is primarily driven by the deterioration of projected economic conditions resulting from the COVID-19 pandemic with the change in California unemployment rate being the most significant driver. Changes in the allowance for credit losses on loans were as follows for the three months ended September 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 $ 13,179 $ 8,547 $ 15,449 $ 2,552 $ 1,851 $ 1,828 $ 825 $ 1,213 $ 45,444 Charge-offs (502) — — — — — — (96) (598) Recoveries 343 — — 19 16 — — 1 379 Net recoveries (159) — — 19 16 — — — (95) (219) Provision (credit) for credit losses on loans (220) 736 (124) (27) 14 21 (46) (157) 197 End of period balance $ 12,800 $ 9,283 $ 15,325 $ 2,544 $ 1,881 $ 1,849 $ 779 $ 961 $ 45,422 Changes in the allowance for loan losses were as follows for the three months ended September 30, 2019: Commercial Real Estate Consumer Total (Dollars in thousands) Beginning of period balance $ 15,234 $ 11,307 $ 90 $ 26,631 Charge-offs (315) — (3) (318) Recoveries 115 43 — 158 Net recoveries (200) 43 (3) (160) Provision (credit) for loan losses (378) (207) 9 (576) End of period balance $ 14,656 $ 11,143 $ 96 $ 25,895 Changes in the allowance for credit losses on loans were as follows for the nine months ended September 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 (1,637) — — — — — — (99) (1,736) Recoveries 598 1 — 51 70 — — 2 722 Net (charge-offs) recoveries (1,039) 1 — 51 70 — — (97) (1,014) Provision (credit) for credit losses on loans 7,049 2,288 3,653 1,035 490 596 101 (631) 14,581 End of period balance $ 12,800 $ 9,283 $ 15,325 $ 2,544 $ 1,881 $ 1,849 $ 779 $ 961 $ 45,422 Changes in the allowance for loan losses were as follows for the nine months ended September 30, 2019: Commercial Real Estate Consumer Total (Dollars in thousands) Beginning of period balance $ 17,061 $ 10,671 $ 116 $ 27,848 Charge-offs (617) — (3) (620) Recoveries 917 127 — 1,044 Net recoveries 300 127 (3) 424 Provision (credit) for loan losses (2,705) 345 (17) (2,377) End of period balance $ 14,656 $ 11,143 $ 96 $ 25,895 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 September 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 $ 973 $ 1,935 $ 601 $ 3,509 Real estate: CRE - Owner Occupied 4,328 — — 4,328 Home equity 961 — — 961 Consumer and other — 1,464 — 1,464 Total $ 6,262 $ 3,399 $ 601 $ 10,262 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: September 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 $ 4,419 $ 925 $ 951 $ 6,295 $ 891,614 $ 897,909 Real estate: CRE - Owner Occupied 3,301 — 29 3,330 558,198 561,528 CRE - Non-Owner Occupied — — — — 713,563 713,563 Land and construction — — — — 142,632 142,632 Home equity — — — 111,468 111,468 Multifamily — — — — 169,791 169,791 Residential mortgages — — — — 91,077 91,077 Consumer and other 496 — 1,464 1,960 15,551 17,511 Total $ 8,216 $ 925 $ 2,444 $ 11,585 $ 2,693,894 $ 2,705,479 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 $11,585,000 and $15,315,000 at September 30, 2020 and December 31, 2019, respectively, of which $2,441,000 and $7,413,000 were on nonaccrual, respectively. At September 30, 2020, there were also $7,220,000 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 Loans may be reviewed at any time throughout a loan’s duration. If new information is provided, a new risk assessment may be performed if warranted. Portfolios are reviewed prior to each quarter end. Those discussing the credits include Market Presidents/Department Managers, Team Leaders/Credit Officers, Credit Administration, including Credit Risk Management, and Executive Management. Portfolio reviews include additional break-out information for higher risk segments. This process now includes specific COVID-19 pandemic impact (covers loans such as deferments, PPP loans, and SBA 7(a) loans). Any loan graded a special mention or worse is detailed in reports and specifically discussed at a minimum prior to each quarter end. If the loan outstanding amount or relationship is greater than $250,000 (and graded a special mention or worse), it has a detailed report prepared/updated each quarter and is used as the basis for each discussion. 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 September 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 $ 457,725 $ 42,241 $ 26,085 $ 16,428 $ 8,742 $ 10,737 $ 307,076 $ 869,034 Special Mention 6,730 1,800 701 1,228 788 410 2,061 13,718 Substandard 4,681 - 57 513 2,383 79 4,536 12,249 Substandard-Nonaccrual 2,353 57 - - 152 56 290 2,908 Total 471,489 44,098 26,843 18,169 12,065 11,282 313,963 897,909 CRE - Owner Occupied: Pass 137,721 73,778 74,997 53,799 52,560 121,007 15,963 529,825 Special Mention 9,073 5,595 2,637 - - 4,648 - 21,953 Substandard 1,592 - 402 2,969 - 459 - 5,422 Substandard-Nonaccrual 3,756 543 - - - 29 - 4,328 Total 152,142 79,916 78,036 56,768 52,560 126,143 15,963 561,528 CRE - Non-Owner Occupied: Pass 152,894 131,920 74,919 104,221 58,363 166,232 2,598 691,147 Special Mention 19,159 - - - 485 349 - 19,993 Substandard 1,002 - 1,421 - - - - 2,423 Substandard-Nonaccrual - - - - - - - - Total 173,055 131,920 76,340 104,221 58,848 166,581 2,598 713,563 Land and construction: Pass 94,467 35,396 6,344 - - 1,351 3,715 141,273 Special Mention - - - - - - - - Substandard 1,359 - - - - - - 1,359 Substandard-Nonaccrual - - - - - - - - Total 95,826 35,396 6,344 - - 1,351 3,715 142,632 Home equity: Pass 275 - 78 - - - 109,396 109,749 Special Mention - - - - - - - - Substandard - - - - - 143 615 758 Substandard-Nonaccrual 123 - - - - - 838 961 Total 398 - 78 - - 143 110,849 111,468 Multifamily: Pass 26,559 39,858 18,506 26,837 16,319 34,787 845 163,711 Special Mention - - - - - 5,186 - 5,186 Substandard 894 - - - - - - 894 Substandard-Nonaccrual - - - - - - - - Total 27,453 39,858 18,506 26,837 16,319 39,973 845 169,791 Residential mortgage: Pass 12,673 10,163 3,289 8,775 32,403 15,735 - 83,038 Special Mention 5,098 - 1,630 - 1,053 - 7,781 Substandard - - - - - 258 - 258 Substandard-Nonaccrual - - - - - - - - Total 17,771 10,163 4,919 8,775 32,403 17,046 - 91,077 Consumer and other: Pass 12 539 1,500 21 128 1,008 12,839 16,047 Special Mention - - - - - - - - Substandard - - - - - - - - Substandard-Nonaccrual - - 1,464 - - - - 1,464 Total 12 539 2,964 21 128 1,008 12,839 17,511 Total loans $ 938,146 $ 341,890 $ 214,030 $ 214,791 $ 172,323 $ 363,527 $ 460,772 $ 2,705,479 Risk Grades:. Pass $ 882,326 $ 333,895 $ 205,718 $ 210,081 $ 168,515 $ 350,857 $ 452,432 $ 2,603,824 Special Mention 40,060 7,395 4,968 1,228 1,273 11,646 2,061 68,631 Substandard 9,528 - 1,880 3,482 2,383 939 5,151 23,363 Substandard-Nonaccrual 6,232 600 1,464 - 152 85 1,128 9,661 Grand Total $ 938,146 $ 341,890 $ 214,030 $ 214,791 $ 172,323 $ 363,527 $ 460,772 $ 2,705,479 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 September 30, 2020: Collateral Type Real Estate Business Property Assets Unsecured Total (Dollars in thousands) Commercial $ 55 $ 1,750 $ 130 $ 1,935 Consumer and other 1,464 - - 1,464 Total $ 1,519 $ 1,750 $ 130 $ 3,399 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. For loans which foreclosure is not probable, but for which repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty, management has elected the practical expedient under ASC 326 to estimate expected credit losses based on the fair value of collateral, 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 September 30, 2020 was $1,182,000, which included $1,033,000 of nonaccrual loans and $149,000 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 $357,000 and $20,000 of specific reserves were established with respect to these loans as of September 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 Three Months Ended September 30, 2020 Pre-modification Post-modification Number Outstanding Outstanding of Recorded Recorded Troubled Debt Restructurings: Contracts Investment Investment (Dollars in thousands) Commercial 7 $ 510 $ 510 Total 7 $ 510 $ 510 During the Nine Months Ended September 30, 2020 Pre-modification Post-modification Number Outstanding Outstanding of Recorded Recorded Troubled Debt Restructurings: Contracts Investment Investment (Dollars in thousands) Commercial 10 $ 520 $ 520 Total 10 $ 520 $ 520 During the Nine Months Ended September 30, 2019 Pre-modification Post-modification Number Outstanding Outstanding of Recorded Recorded Troubled Debt Restructurings: Contracts Investment Investment (Dollars in thousands) Commercial 2 $ 9 $ 9 Total 2 $ 9 $ 9 There were 7 new loans with total recorded investment of $510,000 that were modified as troubled debt restructurings during the three months ended September 30, 2020. There were 10 new loans with total recorded investment of $520,000 that were modified as troubled debt restructurings during the nine months ended September 30, 2020. During the three and nine months ended September 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 in 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 September 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. In accordance with new accounting guidance issued earlier this year by federal bank regulators, the Bank made accommodations for initial payment deferrals for a number of customers of up to 90 days, generally, with the potential, upon application, of an additional 90 days of payment deferral (180 days maximum). These short-term deferrals are not deemed to meet the criteria for reporting as troubled debt restructurings. |
Business Combinations
Business Combinations | 9 Months Ended |
Sep. 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) Represents cash paid for fractional shares in the transaction. (b) Represents the fair value adjustment on investment securities available-for-sale. (c) Represents the fair value adjustment to the net book value of loans includes an interest rate mark and credit mark adjustment. (d) Represents the elimination of Presidio’s allowance for loan losses. (e) Represents intangible assets recorded to reflect the fair value of core deposits and an above market lease. The core deposit asset was recorded as an identifiable intangible asset and is amortized on an accelerated basis over the estimated average life of the deposit base. The above market lease liability will be accreted on the straight line method over 60 months . (f) Represents an adjustment to net deferred tax assets resulting from the fair value adjustments related to the acquired assets, liabilities assumed and identifiable intangible assets recorded. (g) Represents the fair value adjustment on time deposits, which was amortized as interest expense. (h) The Company acquired $10,000,000 of subordinated debt from the Presidio transaction. The Presidio subordinated debt was redeemed on December 19, 2019. (i) Represents adjustments to accrued accounts payable. 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 September 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 September 30, 2020 from December 31, 2019 was due to adjustments to accrued accounts payable. |
Goodwill and Other Intangible A
Goodwill and Other Intangible Assets | 9 Months Ended |
Sep. 30, 2020 | |
Goodwill and Other Intangible Assets | |
Goodwill and Other Intangible Assets | 7) Goodwill and Other Intangible Assets Goodwill At September 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 nine months 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 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 Other Intangible Assets The Company’s intangible assets are summarized as follows for the periods indicated: September 30, 2020 Gross Carrying Accumulated Amount Amortization Total (Dollars in thousands) Core deposit intangibles $ 25,023 $ (8,300) $ 16,723 Customer relationship and brokered relationship intangibles 1,900 (1,124) 776 Below market leases 770 (641) 129 Total $ 27,693 $ (10,065) $ 17,628 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 $ 456 (4) $ 166 $ 43 $ 52 $ 4 $ 181 $ 47 $ 945 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 $ 9,453 $ (78) $ 3,861 $ 43 $ 1,164 $ 164 $ 2,245 $ 776 $ 17,628 Impairment testing of the intangible assets is performed at the individual asset level. Impairment exists if the carrying amount of the asset is not recoverable and exceeds its fair value at the date of the impairment test. For intangible assets, estimates of expected future cash flows (cash inflows less cash outflows) that are directly associated with an intangible asset are used to determine the fair value of that asset. Management makes certain estimates and assumptions in determining the expected future cash flows from core deposit and customer relationship intangibles including account attrition, expected lives, discount rates, interest rates, servicing costs and other factors. Significant changes in these estimates and assumptions could adversely impact the valuation of these intangible assets. If an impairment loss exists, the carrying amount of the intangible asset is adjusted to a new cost basis. The new cost basis is then amortized over the remaining useful life of the asset. Based on its assessment, management concluded that there was no impairment of intangible assets at September 30, 2020 and December 31, 2019. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 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 $27,842,000, and $24,302,000, at September 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 September 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: September 30, December 31, 2020 2019 (Dollars in thousands) Low income housing investments $ 5,457 $ 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 30, 2020 and 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 $630,000 and $319,000 for the nine months ended 30, 2020 and 30, 2019, and low income housing investment expense of $631,000 and $317,000 , respectively. |
Benefit Plans
Benefit Plans | 9 Months Ended |
Sep. 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 Plan assets. The following table presents the amount of periodic cost recognized for the periods indicated: Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 (Dollars in thousands) Components of net periodic benefit cost: Service cost $ 123 $ 55 $ 369 $ 165 Interest cost 234 264 701 792 Amortization of prior transition obligation 199 — 199 — Amortization of net actuarial loss 101 46 291 138 Net periodic benefit cost $ 657 $ 365 $ 1,560 $ 1,095 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: September 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 185 278 Actuarial loss (gain) (42) 1,017 Projected benefit obligation at end of period $ 8,341 $ 8,198 September 30, December 31, 2020 2019 (Dollars in thousands) Net actuarial loss $ 3,847 $ 3,776 Prior transition obligation 992 1,059 Accumulated other comprehensive loss $ 4,839 $ 4,835 Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 (Dollars in thousands) Amortization of prior transition obligation $ (15) $ (24) $ (45) $ (73) Interest cost 62 69 185 209 Net periodic benefit cost $ 47 $ 45 $ 140 $ 136 |
Fair Value
Fair Value | 9 Months Ended |
Sep. 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 September 30, 2020 Available-for-sale securities: Agency mortgage-backed securities $ 203,609 — $ 203,609 — U.S. Treasury 90,829 90,829 — — I/O strip receivables 491 — 491 — 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 September 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 September 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 $ 960,268 $ 960,268 $ — $ — $ 960,268 Securities available-for-sale 294,438 90,829 203,609 — 294,438 Securities held-to-maturity 295,609 — 303,996 — 303,996 Loans (including loans held-for-sale), net 2,655,159 — 3,565 2,657,620 2,661,185 FHLB stock, FRB stock, and other investments 33,518 — — — N/A Accrued interest receivable 10,704 520 1,761 8,423 10,704 I/O strips receivables 491 — 491 — 491 Liabilities: Time deposits $ 143,452 $ — $ 141,926 $ — $ 141,926 Other deposits 3,746,949 — 3,746,949 — 3,746,949 Subordinated debt 39,693 — 38,893 — 38,893 Accrued interest payable 1,092 — 1,092 — 1,092 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 | 9 Months Ended |
Sep. 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 nine months ended September 30, 2020, the Company granted 329,500 shares of nonqualified stock options and 168,117 shares of restricted stock. There were 2,396,382 shares available for the issuance of equity awards under the 2013 Plan as of September 30, 2020. 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 (378,714) $ 4.51 Forfeited or expired (101,661) $ 13.11 Outstanding at September 30, 2020 2,561,971 $ 9.31 5.70 $ 1,469,856 Vested or expected to vest 2,408,253 5.70 $ 1,381,664 Exercisable at September 30, 2020 1,955,429 4.73 $ 1,469,856 Information related to the equity plans for the periods indicated: Nine Months Ended September 30, 2020 2019 Intrinsic value of options exercised $ 2,242,512 $ 444,251 Cash received from option exercise $ 1,707,587 $ 723,397 Tax benefit realized from option exercises $ 58,575 $ 44,244 Weighted average fair value of options granted $ 1.15 $ 1.91 As of September 30, 2020, there was $1,052,000 of total unrecognized compensation cost related to nonvested stock options granted under the equity plans. That cost is expected to be recognized over a weighted-average period of approximately 2.82 years. The fair value of each option grant is estimated on the date of grant using the Black Scholes option pricing model that uses the assumptions noted in the following table, including the weighted average assumptions for the option grants for the periods indicated: Nine Months Ended September 30, 2020 2019 Expected life in months(1) 72 72 Volatility(1) 29 % 24 % Weighted average risk-free interest rate(2) 0.53 % 2.23 % 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 September 30, 2020 298,700 $ 10.83 As of September 30, 2020, there was $2,638,000 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 1.94 years. |
Subordinated Debt
Subordinated Debt | 9 Months Ended |
Sep. 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 $307,000 at September 30, 2020. See “ LIBOR Transition and Phase–Out 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 | 9 Months Ended |
Sep. 30, 2020 | |
Capital Requirements | |
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 September 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 September 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 September 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 September 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 September 30, 2020 Total Capital $ 479,366 16.0 % $ 315,142 10.5 % (to risk-weighted assets) Tier 1 Capital $ 404,973 13.5 % $ 255,115 8.5 % (to risk-weighted assets) Common Equity Tier 1 Capital $ 404,973 13.5 % $ 210,095 7.0 % (to risk-weighted assets) Tier 1 Capital $ 404,973 9.3 % $ 174,521 4.0 % (to average assets) (1) Includes 2.5% capital conservation buffer, 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, except the Tier 1 Capital to average assets ratio. HBC’s actual capital amounts and ratios are presented in the following table, together with capital adequacy requirements, under the Basel III regulatory requirements as of September 30, 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 September 30, 2020 Total Capital $ 457,069 15.2 % $ 299,993 10.0 % $ 314,992 10.5 % (to risk-weighted assets) Tier 1 Capital $ 422,369 14.1 % $ 239,994 8.0 % $ 254,994 8.5 % (to risk-weighted assets) Common Equity Tier 1 Capital $ 422,369 14.1 % $ 194,995 6.5 % $ 209,995 7.0 % (to risk-weighted assets) Tier 1 Capital $ 422,369 9.7 % $ 218,066 5.0 % $ 174,453 4.0 % (to average assets) (1) Includes 2.5% capital conservation buffer, 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, except the Tier 1 Capital to average assets ratio. The Subordinated Debt, net of unamortized issuance costs, totaled $39,693,000 at September 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 September 30, 2020, HBC would not be required to obtain regulatory approval, and the amount available for cash dividends is $29,996,000. 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 third, second and first quarters of 2020, for a total of $24,000,000. |
Commitments and Loss Contingenc
Commitments and Loss Contingencies | 9 Months Ended |
Sep. 30, 2020 | |
Commitments and Loss Contingencies | |
Commitments and Loss Contingencies | 14) Commitments and Loss Contingencies 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. Off-Balance Sheet Arrangements 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 the contractual arrangements. These commitments are obligations that represent a potential credit risk to the Company, but are not reflected on the Company’s consolidated balance sheets. Total unused commitments to extend credit were $1,185,077,000 at September 30, 2020, compared to $753,078,000 at September 30, 2019, and $1,120,638,000 at December 31, 2019. Unused commitments represented 44% outstanding gross loans at September 30, 2020, 40% at September 30, 2019, and 44% at December 31, 2019. The effect on the Company’s revenues, expenses, cash flows and liquidity from the unused portion of the commitments to provide credit cannot be reasonably predicted because there is no certainty that lines of credit and letters of credit will ever be fully utilized. The following table presents the Company’s commitments to extend credit for the periods indicated: September 30, 2020 2019 December 31, 2019 Fixed Variable Fixed Variable Fixed Variable Rate Rate Total Rate Rate Total Rate Rate Total (Dollars in thousands) Unused lines of credit and commitments to make loans $ 133,400 $ 1,026,450 $ 1,159,850 $ 148,011 $ 589,479 $ 737,490 $ 147,372 $ 951,206 $ 1,098,578 Standby letters of credit 4,089 21,138 25,227 2,244 13,344 15,588 11,445 10,615 22,060 $ 137,489 $ 1,047,588 $ 1,185,077 $ 150,255 $ 602,823 $ 753,078 $ 158,817 $ 961,821 $ 1,120,638 For the nine months ended September 30, 2020, there was an increase of $547,000 to the allowance for losses for the Company’s off-balance sheet credit exposures. The increase in the allowance for losses for off-balance sheet credit exposures in the first nine months of 2020 was driven by increased loss factors in the CECL model for all loan segments with off-balance sheet exposures which resulted from deterioration in the economic forecast assumptions used in the CECL model. |
Revenue Recognition
Revenue Recognition | 9 Months Ended |
Sep. 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 September 30, 2020 2019 (Dollars in thousands) Noninterest Income In-scope of Topic 606: Service charges and fees on deposit accounts $ 632 $ 1,032 Noninterest Income Out-of-scope of Topic 606 1,963 1,586 Total noninterest income $ 2,595 $ 2,618 Nine Months Ended September 30, 2020 2019 (Dollars in thousands) Noninterest Income In-scope of Topic 606: Service charges and fees on deposit accounts $ 2,251 $ 3,370 Gain on the disposition of foreclosed assets 791 — Total noninterest income in-scope of Topic 606 3,042 3,370 Noninterest Income Out-of-scope of Topic 606 4,824 4,481 Total noninterest income $ 7,866 $ 7,851 |
Noninterest Expense
Noninterest Expense | 9 Months Ended |
Sep. 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 Nine Months Ended September 30, September 30, 2020 2019 2020 2019 (Dollars in thousands) Salaries and employee benefits $ 11,967 $ 10,467 $ 38,470 $ 31,935 Occupancy and equipment 2,283 1,550 5,821 4,634 Professional fees 1,352 789 3,942 2,360 Amortization of intangible assets 965 554 2,787 1,661 Software subscriptions 641 601 2,276 1,746 Insurance expense 591 479 1,625 1,354 Supplemental retirement plan cost 585 310 1,344 930 Data processing 463 454 2,218 1,865 Other 2,321 2,705 9,471 7,787 Total noninterest expense $ 21,168 $ 17,909 $ 67,954 $ 54,272 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 Nine Months Ended September 30, September 30, September 30, September 30, 2020 2019 2020 2019 (Dollars in thousands) Salaries and employee benefits $ — $ — $ 356 $ — Other 17 661 2,144 1,201 Total merger-related costs $ 17 $ 661 $ 2,500 $ 1,201 |
Leases
Leases | 9 Months Ended |
Sep. 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 liabilities The following table presents the quantitative information for the Company’s leases for the periods indicated: Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 (Dollars in thousands) Operating Lease Cost (Cost resulting from lease payments) $ 1,664 $ 1,035 $ 5,166 $ 3,129 Operating Lease - Operating Cash Flows (Fixed Payments) $ 1,463 $ 1,040 $ 4,032 $ 3,066 Operating Lease - ROU assets $ 37,000 $ 7,089 $ 37,000 $ 7,089 Operating Lease - Liabilities $ 37,000 $ 7,089 $ 37,000 $ 7,089 Weighted Average Lease Term - Operating Leases 8.45 yrs 3.59 yrs 8.45 yrs 3.59 yrs Weighted Average Discount Rate - Operating Leases 4.54% 5.24% 4.54% 5.24% The following maturity analysis shows the undiscounted cash flows due on the Company’s operating lease liabilities: (Dollars in thousands) 2020 $ 1,539 2021 5,242 2022 5,668 2023 5,039 2024 4,692 Thereafter 23,061 Total undiscounted cash flows 45,241 Discount on cash flows (8,241) Total lease liability $ 37,000 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 completed the relocation of its corporate headquarters, San Jose Branch and factoring subsidiary, Bay View Funding to 224 Airport Parkway, San Jose, California in the third quarter of 2020. |
Business Segment Information
Business Segment Information | 9 Months Ended |
Sep. 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 September 30, 2020 Banking(1) Factoring Consolidated (Dollars in thousands) Interest income $ 33,820 2,432 $ 36,252 Intersegment interest allocations 184 (184) — Total interest expense 2,087 — 2,087 Net interest income 31,917 2,248 34,165 Provision for credit losses on loans 169 28 197 Net interest income after provision 31,748 2,220 33,968 Noninterest income 2,412 183 2,595 Noninterest expense (2) 19,594 1,574 21,168 Intersegment expense allocations 72 (72) — Income before income taxes 14,638 757 15,395 Income tax (benefit) expense 3,974 224 4,198 Net income $ 10,664 $ 533 $ 11,197 Total assets $ 4,541,331 $ 65,454 $ 4,606,785 Loans, net of deferred fees $ 2,649,334 $ 47,682 $ 2,697,016 Goodwill $ 154,587 $ 13,044 $ 167,631 Three Months Ended September 30, 2019 Banking(1) Factoring Consolidated (Dollars in thousands) Interest income $ 30,371 2,879 $ 33,250 Intersegment interest allocations 303 (303) — Total interest expense 2,625 — 2,625 Net interest income 28,049 2,576 30,625 Provision (credit) for loan losses (1,019) 443 (576) Net interest income after provision 29,068 2,133 31,201 Noninterest income 2,488 130 2,618 Noninterest expense (2) 16,204 1,705 17,909 Intersegment expense allocations 125 (125) — Income before income taxes 15,477 433 15,910 Income tax expense 4,505 128 4,633 Net income $ 10,972 $ 305 $ 11,277 Total assets $ 3,119,367 $ 63,104 $ 3,182,471 Loans, net of deferred fees $ 1,831,172 $ 44,215 $ 1,875,387 Goodwill $ 70,709 $ 13,044 $ 83,753 (1) Includes the holding company’s results of operations (2) The banking segment’s noninterest expense includes merger-related costs of Nine Months Ended September 30, 2020 Banking (1) Factoring Consolidated (Dollars in thousands) Interest income $ 106,455 $ 7,871 $ 114,326 Intersegment interest allocations 686 (686) — Total interest expense 6,641 — 6,641 Net interest income 100,500 7,185 107,685 Provision for credit losses on loans 14,150 431 14,581 Net interest income after provision 86,350 6,754 93,104 Noninterest income 7,318 548 7,866 Noninterest expense (2) 63,113 4,841 67,954 Intersegment expense allocations 307 (307) — Income before income taxes 30,862 2,154 33,016 Income tax expense 8,703 637 9,340 Net income $ 22,159 $ 1,517 $ 23,676 Total assets $ 4,541,331 $ 65,454 $ 4,606,785 Loans, net of deferred fees $ 2,649,334 $ 47,682 $ 2,697,016 Goodwill $ 154,587 $ 13,044 $ 167,631 Nine Months Ended September 30, 2019 Banking (1) Factoring Consolidated (Dollars in thousands) Interest income $ 91,388 $ 8,800 $ 100,188 Intersegment interest allocations 909 (909) — Total interest expense 7,605 — 7,605 Net interest income 84,692 7,891 92,583 Provision for loan losses (2,655) 278 (2,377) Net interest income after provision 87,347 7,613 94,960 Noninterest income 7,361 490 7,851 Noninterest expense (2) 49,189 5,083 54,272 Intersegment expense allocations 378 (378) — Income before income taxes 45,897 2,642 48,539 Income tax expense 12,982 781 13,763 Net income $ 32,915 $ 1,861 $ 34,776 Total assets $ 3,119,367 $ 63,104 $ 3,182,471 Loans, net of deferred fees $ 1,831,172 $ 44,215 $ 1,875,387 Goodwill $ 70,709 $ 13,044 $ 83,753 (1) Includes the holding company’s results of operations (2) The banking segment’s noninterest expense includes merger-related costs of $2,500,000 and $1,201,000 for the first nine months of 2020 and 2019, respectively. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2020 | |
Subsequent Events | |
Subsequent Events | 19) Subsequent Events On October 22, 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 November 20, 2020, to shareholders of record at close of business day on November 6, 2020. |
Basis of Presentation (Policies
Basis of Presentation (Policies) | 9 Months Ended |
Sep. 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 customer accounts for more than 10% of revenue for HBC or the Company. The Company reports its results for two segments: banking and factoring. The Company’s management uses segment results in its operating and strategic planning. In management’s opinion, all adjustments necessary for a fair presentation of these consolidated financial statements have been included and are of a normal and recurring nature. All intercompany transactions and balances have been eliminated. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ significantly from these estimates. Material estimates that are particularly susceptible to significant change include the determination of the allowance for credit losses and any impairment of goodwill or intangible assets. It is reasonably possible the Company’s estimate of the allowance for credit losses and evaluation of impairment of goodwill or intangible assets could change as a result of the continued impact of the COVID-19 pandemic on the economy. The resulting change in these estimates could be material to the Company’s consolidated financial statements. The results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results expected for any subsequent period or for the entire year ending December 31, 2020. London Inter-Bank Offered Rate (“LIBOR”) Transition and Phase-Out We have loans and borrowings that are tied to LIBOR benchmark interest rates. It is anticipated that the LIBOR index will be phased-out by the end of 2021 and the Federal Reserve Bank of New York has established the Secured Overnight Financing Rate (“SOFR”) as its recommended alternative to LIBOR. We have created a sub-committee of our Asset Liability Management Committee to address LIBOR transition and phase-out issues. We are currently reviewing loan documentation, technology systems and procedures we will need to implement for the transition. |
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 had no recognized allowance for loan losses until the estimated allowance exceeded the unaccreted discount. 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. 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. Any significant 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. The cumulative-effect adjustment as a result of the adoption of this guidance was recorded, net of tax of $2,359,000, as a $6,062,000 reduction to retained earnings effective January 1, 2020. 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) | 9 Months Ended |
Sep. 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) | 9 Months Ended |
Sep. 30, 2020 | |
Earnings Per Share. | |
Schedule of reconciliation of factors used in computing basic and diluted earnings per common share | Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 (Dollars in thousands, except per share amounts) Net income $ 11,197 $ 11,277 $ 23,676 $ 34,776 Weighted average common shares outstanding for basic earnings per common share 59,589,243 43,258,983 59,432,178 43,189,710 Dilutive potential common shares 552,169 537,921 711,585 538,375 Shares used in computing diluted earnings per common share 60,141,412 43,796,904 60,143,763 43,728,085 Basic earnings per share $ 0.19 $ 0.26 $ 0.40 $ 0.81 Diluted earnings per share $ 0.19 $ 0.26 $ 0.39 $ 0.80 |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Income ("AOCI") (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Accumulated Other Comprehensive Income ("AOCI") | |
Schedule of changes in AOCI by component | Three Months Ended September 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 July 1, 2020, net of taxes $ 6,112 $ 280 $ (11,572) $ (5,180) Other comprehensive loss before reclassification, net of taxes (1,266) — (130) (1,396) Amounts reclassified from other comprehensive income (loss), net of taxes — (9) 201 192 Net current period other comprehensive income (loss), net of taxes (1,266) (9) 71 (1,204) Ending balance September 30, 2020, net of taxes $ 4,846 $ 271 $ (11,501) $ (6,384) Beginning balance July 1, 2019, net of taxes $ 1,083 $ 317 $ (7,702) $ (6,302) Other comprehensive income (loss) before reclassification, net of taxes 737 — (8) 729 Amounts reclassified from other comprehensive income (loss), net of taxes (232) (9) 16 (225) Net current period other comprehensive income (loss), net of taxes 505 (9) 8 504 Ending balance September 30, 2019, net of taxes $ 1,588 $ 308 $ (7,694) $ (5,798) (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. Nine Months Ended September 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 3,435 — (136) 3,299 Amounts reclassified from other comprehensive income (loss), net of taxes (191) (27) 313 95 Net current period other comprehensive income (loss), net of taxes 3,244 (27) 177 3,394 Ending balance September 30, 2020, net of taxes $ 4,846 $ 271 $ (11,501) $ (6,384) Beginning balance January 1, 2019, net of taxes $ (5,007) $ 344 $ (7,718) $ (12,381) Other comprehensive income (loss) before reclassification, net of taxes 7,213 — (22) 7,191 Amounts reclassified from other comprehensive income (loss), net of taxes (618) (36) 46 (608) Net current period other comprehensive income (loss), net of taxes 6,595 (36) 24 6,583 Ending balance September 30, 2019, net of taxes $ 1,588 $ 308 $ (7,694) $ (5,798) (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 September 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 $ — $ 330 Gain on sales of securities — (98) Income tax expense — 232 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 (184) 24 Actuarial losses (101) (46) (285) (22) Other noninterest expense 84 6 Income tax benefit (201) (16) Net of tax Total reclassification for the period $ (192) $ 225 Amounts Reclassified from AOCI(1) Nine Months Ended September 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 $ 878 Gain on sales of securities (79) (260) Income tax expense 191 618 Net of tax Amortization of unrealized gain on securities available-for-sale that were reclassified to securities held-to-maturity 39 52 Interest income on taxable securities (12) (16) Income tax expense 27 36 Net of tax Amortization of defined benefit pension plan items (1) Prior transition obligation (154) 73 Actuarial losses (291) (138) (445) (65) Other noninterest expense 132 19 Income tax benefit (313) (46) Net of tax Total reclassification from AOCI for the period $ (95) $ 608 (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) | 9 Months Ended |
Sep. 30, 2020 | |
Securities | |
Schedule of amortized cost and estimated fair value of securities | Gross Gross Allowance Estimated Amortized Unrealized Unrealized for Credit Fair September 30, 2020 Cost Gains (Losses) Losses Value (Dollars in thousands) Securities available-for-sale: Agency mortgage-backed securities $ 197,921 $ 5,688 $ — $ — $ 203,609 U.S. Treasury 89,649 1,180 — — 90,829 Total $ 287,570 $ 6,868 $ — $ — $ 294,438 Gross Gross Estimated Allowance Amortized Unrecognized Unrecognized Fair for Credit September 30, 2020 Cost Gains (Losses) Value Losses (Dollars in thousands) Securities held-to-maturity: Agency mortgage-backed securities $ 223,453 $ 6,613 $ (1) $ 230,065 $ — Municipals - exempt from Federal tax 72,211 1,720 — 73,931 (55) Total $ 295,664 $ 8,333 $ (1) $ 303,996 $ (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 September 30, 2020 Value (Losses) Value (Losses) Value (Losses) (Dollars in thousands) Securities held-to-maturity: Agency mortgage-backed securities $ 245 (1) $ — $ — $ 245 $ (1) Total $ 245 $ (1) $ — $ — $ 245 $ (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 Nine Months Ended September 30, September 30, 2020 2019 2020 2019 (Dollars in thousands) Proceeds $ — $ 38,855 $ 56,598 $ 98,733 Gross gains — 363 270 971 Gross losses — (33) — (93) |
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 3 months or less $ 24,980 $ 25,061 Due after 3 months through one year 59,758 60,708 Due after one through five years 4,911 5,060 Agency mortgage-backed securities 197,921 203,609 Total $ 287,570 $ 294,438 Held-to-maturity Amortized Estimated Cost Fair Value (Dollars in thousands) Due 3 months or less $ 910 $ 911 Due after 3 months through one year 490 498 Due after one through five years 9,762 10,133 Due after five through ten years 30,900 31,574 Due after ten years 30,149 30,815 Agency mortgage-backed securities 223,453 230,065 Total $ 295,664 $ 303,996 |
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 September 30, 2020 $ 55 |
Loans and Allowance for Credi_2
Loans and Allowance for Credit Losses on Loans (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Allowance for Credit Losses on Loans | |
Schedule of loans | September 30, December 31, 2020 2019 (Dollars in thousands) Loans held-for-investment: Commercial $ 897,909 $ 603,345 Real estate: CRE - owner occupied 561,528 548,907 CRE - non-owner occupied 713,563 767,821 Land and construction 142,632 147,189 Home equity 111,468 151,775 Multifamily 169,791 180,623 Residential mortgages 91,077 100,759 Consumer and other 17,511 33,744 Loans 2,705,479 2,534,163 Deferred loan fees, net (8,463) (319) Loans, net of deferred fees 2,697,016 2,533,844 Allowance for credit losses on loans (1) (45,422) (23,285) Loans, net $ 2,651,594 $ 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 $ 13,179 $ 8,547 $ 15,449 $ 2,552 $ 1,851 $ 1,828 $ 825 $ 1,213 $ 45,444 Charge-offs (502) — — — — — — (96) (598) Recoveries 343 — — 19 16 — — 1 379 Net recoveries (159) — — 19 16 — — — (95) (219) Provision (credit) for credit losses on loans (220) 736 (124) (27) 14 21 (46) (157) 197 End of period balance $ 12,800 $ 9,283 $ 15,325 $ 2,544 $ 1,881 $ 1,849 $ 779 $ 961 $ 45,422 Commercial Real Estate Consumer Total (Dollars in thousands) Beginning of period balance $ 15,234 $ 11,307 $ 90 $ 26,631 Charge-offs (315) — (3) (318) Recoveries 115 43 — 158 Net recoveries (200) 43 (3) (160) Provision (credit) for loan losses (378) (207) 9 (576) End of period balance $ 14,656 $ 11,143 $ 96 $ 25,895 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 (1,637) — — — — — — (99) (1,736) Recoveries 598 1 — 51 70 — — 2 722 Net (charge-offs) recoveries (1,039) 1 — 51 70 — — (97) (1,014) Provision (credit) for credit losses on loans 7,049 2,288 3,653 1,035 490 596 101 (631) 14,581 End of period balance $ 12,800 $ 9,283 $ 15,325 $ 2,544 $ 1,881 $ 1,849 $ 779 $ 961 $ 45,422 Commercial Real Estate Consumer Total (Dollars in thousands) Beginning of period balance $ 17,061 $ 10,671 $ 116 $ 27,848 Charge-offs (617) — (3) (620) Recoveries 917 127 — 1,044 Net recoveries 300 127 (3) 424 Provision (credit) for loan losses (2,705) 345 (17) (2,377) End of period balance $ 14,656 $ 11,143 $ 96 $ 25,895 |
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 $ 973 $ 1,935 $ 601 $ 3,509 Real estate: CRE - Owner Occupied 4,328 — — 4,328 Home equity 961 — — 961 Consumer and other — 1,464 — 1,464 Total $ 6,262 $ 3,399 $ 601 $ 10,262 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 | September 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 $ 4,419 $ 925 $ 951 $ 6,295 $ 891,614 $ 897,909 Real estate: CRE - Owner Occupied 3,301 — 29 3,330 558,198 561,528 CRE - Non-Owner Occupied — — — — 713,563 713,563 Land and construction — — — — 142,632 142,632 Home equity — — — 111,468 111,468 Multifamily — — — — 169,791 169,791 Residential mortgages — — — — 91,077 91,077 Consumer and other 496 — 1,464 1,960 15,551 17,511 Total $ 8,216 $ 925 $ 2,444 $ 11,585 $ 2,693,894 $ 2,705,479 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 $ 55 $ 1,750 $ 130 $ 1,935 Consumer and other 1,464 - - 1,464 Total $ 1,519 $ 1,750 $ 130 $ 3,399 |
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 $ 457,725 $ 42,241 $ 26,085 $ 16,428 $ 8,742 $ 10,737 $ 307,076 $ 869,034 Special Mention 6,730 1,800 701 1,228 788 410 2,061 13,718 Substandard 4,681 - 57 513 2,383 79 4,536 12,249 Substandard-Nonaccrual 2,353 57 - - 152 56 290 2,908 Total 471,489 44,098 26,843 18,169 12,065 11,282 313,963 897,909 CRE - Owner Occupied: Pass 137,721 73,778 74,997 53,799 52,560 121,007 15,963 529,825 Special Mention 9,073 5,595 2,637 - - 4,648 - 21,953 Substandard 1,592 - 402 2,969 - 459 - 5,422 Substandard-Nonaccrual 3,756 543 - - - 29 - 4,328 Total 152,142 79,916 78,036 56,768 52,560 126,143 15,963 561,528 CRE - Non-Owner Occupied: Pass 152,894 131,920 74,919 104,221 58,363 166,232 2,598 691,147 Special Mention 19,159 - - - 485 349 - 19,993 Substandard 1,002 - 1,421 - - - - 2,423 Substandard-Nonaccrual - - - - - - - - Total 173,055 131,920 76,340 104,221 58,848 166,581 2,598 713,563 Land and construction: Pass 94,467 35,396 6,344 - - 1,351 3,715 141,273 Special Mention - - - - - - - - Substandard 1,359 - - - - - - 1,359 Substandard-Nonaccrual - - - - - - - - Total 95,826 35,396 6,344 - - 1,351 3,715 142,632 Home equity: Pass 275 - 78 - - - 109,396 109,749 Special Mention - - - - - - - - Substandard - - - - - 143 615 758 Substandard-Nonaccrual 123 - - - - - 838 961 Total 398 - 78 - - 143 110,849 111,468 Multifamily: Pass 26,559 39,858 18,506 26,837 16,319 34,787 845 163,711 Special Mention - - - - - 5,186 - 5,186 Substandard 894 - - - - - - 894 Substandard-Nonaccrual - - - - - - - - Total 27,453 39,858 18,506 26,837 16,319 39,973 845 169,791 Residential mortgage: Pass 12,673 10,163 3,289 8,775 32,403 15,735 - 83,038 Special Mention 5,098 - 1,630 - 1,053 - 7,781 Substandard - - - - - 258 - 258 Substandard-Nonaccrual - - - - - - - - Total 17,771 10,163 4,919 8,775 32,403 17,046 - 91,077 Consumer and other: Pass 12 539 1,500 21 128 1,008 12,839 16,047 Special Mention - - - - - - - - Substandard - - - - - - - - Substandard-Nonaccrual - - 1,464 - - - - 1,464 Total 12 539 2,964 21 128 1,008 12,839 17,511 Total loans $ 938,146 $ 341,890 $ 214,030 $ 214,791 $ 172,323 $ 363,527 $ 460,772 $ 2,705,479 Risk Grades:. Pass $ 882,326 $ 333,895 $ 205,718 $ 210,081 $ 168,515 $ 350,857 $ 452,432 $ 2,603,824 Special Mention 40,060 7,395 4,968 1,228 1,273 11,646 2,061 68,631 Substandard 9,528 - 1,880 3,482 2,383 939 5,151 23,363 Substandard-Nonaccrual 6,232 600 1,464 - 152 85 1,128 9,661 Grand Total $ 938,146 $ 341,890 $ 214,030 $ 214,791 $ 172,323 $ 363,527 $ 460,772 $ 2,705,479 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 Three Months Ended September 30, 2020 Pre-modification Post-modification Number Outstanding Outstanding of Recorded Recorded Troubled Debt Restructurings: Contracts Investment Investment (Dollars in thousands) Commercial 7 $ 510 $ 510 Total 7 $ 510 $ 510 During the Nine Months Ended September 30, 2020 Pre-modification Post-modification Number Outstanding Outstanding of Recorded Recorded Troubled Debt Restructurings: Contracts Investment Investment (Dollars in thousands) Commercial 10 $ 520 $ 520 Total 10 $ 520 $ 520 During the Nine Months Ended September 30, 2019 Pre-modification Post-modification Number Outstanding Outstanding of Recorded Recorded Troubled Debt Restructurings: Contracts Investment Investment (Dollars in thousands) Commercial 2 $ 9 $ 9 Total 2 $ 9 $ 9 |
Business Combinations (Tables)
Business Combinations (Tables) | 9 Months Ended |
Sep. 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) Represents cash paid for fractional shares in the transaction. (b) Represents the fair value adjustment on investment securities available-for-sale. (c) Represents the fair value adjustment to the net book value of loans includes an interest rate mark and credit mark adjustment. (d) Represents the elimination of Presidio’s allowance for loan losses. (e) Represents intangible assets recorded to reflect the fair value of core deposits and an above market lease. The core deposit asset was recorded as an identifiable intangible asset and is amortized on an accelerated basis over the estimated average life of the deposit base. The above market lease liability will be accreted on the straight line method over 60 months . (f) Represents an adjustment to net deferred tax assets resulting from the fair value adjustments related to the acquired assets, liabilities assumed and identifiable intangible assets recorded. (g) Represents the fair value adjustment on time deposits, which was amortized as interest expense. (h) The Company acquired $10,000,000 of subordinated debt from the Presidio transaction. The Presidio subordinated debt was redeemed on December 19, 2019. (i) Represents adjustments to accrued accounts payable. |
Goodwill and Other Intangible_2
Goodwill and Other Intangible Assets (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Goodwill and Other Intangible Assets | |
Summary of Company's intangible assets | September 30, 2020 Gross Carrying Accumulated Amount Amortization Total (Dollars in thousands) Core deposit intangibles $ 25,023 $ (8,300) $ 16,723 Customer relationship and brokered relationship intangibles 1,900 (1,124) 776 Below market leases 770 (641) 129 Total $ 27,693 $ (10,065) $ 17,628 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 $ 456 (4) $ 166 $ 43 $ 52 $ 4 $ 181 $ 47 $ 945 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 $ 9,453 $ (78) $ 3,861 $ 43 $ 1,164 $ 164 $ 2,245 $ 776 $ 17,628 |
Income Taxes (Tables)
Income Taxes (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Income Taxes | |
Summary of carrying amount of low income tax housing investment | September 30, December 31, 2020 2019 (Dollars in thousands) Low income housing investments $ 5,457 $ 6,126 Future commitments $ 625 $ 625 |
Benefit Plans (Tables)
Benefit Plans (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Supplemental Retirement Plan | |
Benefit plans | |
Schedule of components of net periodic benefit cost | Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 (Dollars in thousands) Components of net periodic benefit cost: Service cost $ 123 $ 55 $ 369 $ 165 Interest cost 234 264 701 792 Amortization of prior transition obligation 199 — 199 — Amortization of net actuarial loss 101 46 291 138 Net periodic benefit cost $ 657 $ 365 $ 1,560 $ 1,095 |
Split-Dollar Life Insurance Benefit Plan | |
Benefit plans | |
Schedule of components of net periodic benefit cost | Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 (Dollars in thousands) Amortization of prior transition obligation $ (15) $ (24) $ (45) $ (73) Interest cost 62 69 185 209 Net periodic benefit cost $ 47 $ 45 $ 140 $ 136 |
Schedule of change in projected benefit obligation | September 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 185 278 Actuarial loss (gain) (42) 1,017 Projected benefit obligation at end of period $ 8,341 $ 8,198 |
Schedule of amounts recognized in accumulated other comprehensive loss | September 30, December 31, 2020 2019 (Dollars in thousands) Net actuarial loss $ 3,847 $ 3,776 Prior transition obligation 992 1,059 Accumulated other comprehensive loss $ 4,839 $ 4,835 |
Fair Value (Tables)
Fair Value (Tables) | 9 Months Ended |
Sep. 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 September 30, 2020 Available-for-sale securities: Agency mortgage-backed securities $ 203,609 — $ 203,609 — U.S. Treasury 90,829 90,829 — — I/O strip receivables 491 — 491 — 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 $ 960,268 $ 960,268 $ — $ — $ 960,268 Securities available-for-sale 294,438 90,829 203,609 — 294,438 Securities held-to-maturity 295,609 — 303,996 — 303,996 Loans (including loans held-for-sale), net 2,655,159 — 3,565 2,657,620 2,661,185 FHLB stock, FRB stock, and other investments 33,518 — — — N/A Accrued interest receivable 10,704 520 1,761 8,423 10,704 I/O strips receivables 491 — 491 — 491 Liabilities: Time deposits $ 143,452 $ — $ 141,926 $ — $ 141,926 Other deposits 3,746,949 — 3,746,949 — 3,746,949 Subordinated debt 39,693 — 38,893 — 38,893 Accrued interest payable 1,092 — 1,092 — 1,092 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) | 9 Months Ended |
Sep. 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 (378,714) $ 4.51 Forfeited or expired (101,661) $ 13.11 Outstanding at September 30, 2020 2,561,971 $ 9.31 5.70 $ 1,469,856 Vested or expected to vest 2,408,253 5.70 $ 1,381,664 Exercisable at September 30, 2020 1,955,429 4.73 $ 1,469,856 |
Schedule of information related to the equity Plan | Nine Months Ended September 30, 2020 2019 Intrinsic value of options exercised $ 2,242,512 $ 444,251 Cash received from option exercise $ 1,707,587 $ 723,397 Tax benefit realized from option exercises $ 58,575 $ 44,244 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 | Nine Months Ended September 30, 2020 2019 Expected life in months(1) 72 72 Volatility(1) 29 % 24 % Weighted average risk-free interest rate(2) 0.53 % 2.23 % 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 September 30, 2020 298,700 $ 10.83 |
Capital Requirements (Tables)
Capital Requirements (Tables) | 9 Months Ended |
Sep. 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 September 30, 2020 Total Capital $ 479,366 16.0 % $ 315,142 10.5 % (to risk-weighted assets) Tier 1 Capital $ 404,973 13.5 % $ 255,115 8.5 % (to risk-weighted assets) Common Equity Tier 1 Capital $ 404,973 13.5 % $ 210,095 7.0 % (to risk-weighted assets) Tier 1 Capital $ 404,973 9.3 % $ 174,521 4.0 % (to average assets) (1) Includes 2.5% capital conservation buffer, 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, 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 September 30, 2020 Total Capital $ 457,069 15.2 % $ 299,993 10.0 % $ 314,992 10.5 % (to risk-weighted assets) Tier 1 Capital $ 422,369 14.1 % $ 239,994 8.0 % $ 254,994 8.5 % (to risk-weighted assets) Common Equity Tier 1 Capital $ 422,369 14.1 % $ 194,995 6.5 % $ 209,995 7.0 % (to risk-weighted assets) Tier 1 Capital $ 422,369 9.7 % $ 218,066 5.0 % $ 174,453 4.0 % (to average assets) (1) Includes 2.5% capital conservation buffer, 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, except the Tier 1 Capital to average assets ratio. |
Commitments and Loss Continge_2
Commitments and Loss Contingencies (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Commitments and Loss Contingencies | |
Schedule of commitments to extend credit | September 30, 2020 2019 December 31, 2019 Fixed Variable Fixed Variable Fixed Variable Rate Rate Total Rate Rate Total Rate Rate Total (Dollars in thousands) Unused lines of credit and commitments to make loans $ 133,400 $ 1,026,450 $ 1,159,850 $ 148,011 $ 589,479 $ 737,490 $ 147,372 $ 951,206 $ 1,098,578 Standby letters of credit 4,089 21,138 25,227 2,244 13,344 15,588 11,445 10,615 22,060 $ 137,489 $ 1,047,588 $ 1,185,077 $ 150,255 $ 602,823 $ 753,078 $ 158,817 $ 961,821 $ 1,120,638 |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Revenue Recognition | |
Schedule of noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606 | Three Months Ended September 30, 2020 2019 (Dollars in thousands) Noninterest Income In-scope of Topic 606: Service charges and fees on deposit accounts $ 632 $ 1,032 Noninterest Income Out-of-scope of Topic 606 1,963 1,586 Total noninterest income $ 2,595 $ 2,618 Nine Months Ended September 30, 2020 2019 (Dollars in thousands) Noninterest Income In-scope of Topic 606: Service charges and fees on deposit accounts $ 2,251 $ 3,370 Gain on the disposition of foreclosed assets 791 — Total noninterest income in-scope of Topic 606 3,042 3,370 Noninterest Income Out-of-scope of Topic 606 4,824 4,481 Total noninterest income $ 7,866 $ 7,851 |
Noninterest Expense (Tables)
Noninterest Expense (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Noninterest Expense | |
Schedule of noninterest expense | Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 (Dollars in thousands) Salaries and employee benefits $ 11,967 $ 10,467 $ 38,470 $ 31,935 Occupancy and equipment 2,283 1,550 5,821 4,634 Professional fees 1,352 789 3,942 2,360 Amortization of intangible assets 965 554 2,787 1,661 Software subscriptions 641 601 2,276 1,746 Insurance expense 591 479 1,625 1,354 Supplemental retirement plan cost 585 310 1,344 930 Data processing 463 454 2,218 1,865 Other 2,321 2,705 9,471 7,787 Total noninterest expense $ 21,168 $ 17,909 $ 67,954 $ 54,272 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 Nine Months Ended September 30, September 30, September 30, September 30, 2020 2019 2020 2019 (Dollars in thousands) Salaries and employee benefits $ — $ — $ 356 $ — Other 17 661 2,144 1,201 Total merger-related costs $ 17 $ 661 $ 2,500 $ 1,201 |
Leases (Tables)
Leases (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Leases | |
Schedule of leases | Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 (Dollars in thousands) Operating Lease Cost (Cost resulting from lease payments) $ 1,664 $ 1,035 $ 5,166 $ 3,129 Operating Lease - Operating Cash Flows (Fixed Payments) $ 1,463 $ 1,040 $ 4,032 $ 3,066 Operating Lease - ROU assets $ 37,000 $ 7,089 $ 37,000 $ 7,089 Operating Lease - Liabilities $ 37,000 $ 7,089 $ 37,000 $ 7,089 Weighted Average Lease Term - Operating Leases 8.45 yrs 3.59 yrs 8.45 yrs 3.59 yrs Weighted Average Discount Rate - Operating Leases 4.54% 5.24% 4.54% 5.24% |
Schedule of maturity analysis shows the undiscounted cash flows due on the Company's operating lease liabilities | (Dollars in thousands) 2020 $ 1,539 2021 5,242 2022 5,668 2023 5,039 2024 4,692 Thereafter 23,061 Total undiscounted cash flows 45,241 Discount on cash flows (8,241) Total lease liability $ 37,000 |
Business Segment Information (T
Business Segment Information (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Business Segment Information | |
Schedule of information by operating segment | Three Months Ended September 30, 2020 Banking(1) Factoring Consolidated (Dollars in thousands) Interest income $ 33,820 2,432 $ 36,252 Intersegment interest allocations 184 (184) — Total interest expense 2,087 — 2,087 Net interest income 31,917 2,248 34,165 Provision for credit losses on loans 169 28 197 Net interest income after provision 31,748 2,220 33,968 Noninterest income 2,412 183 2,595 Noninterest expense (2) 19,594 1,574 21,168 Intersegment expense allocations 72 (72) — Income before income taxes 14,638 757 15,395 Income tax (benefit) expense 3,974 224 4,198 Net income $ 10,664 $ 533 $ 11,197 Total assets $ 4,541,331 $ 65,454 $ 4,606,785 Loans, net of deferred fees $ 2,649,334 $ 47,682 $ 2,697,016 Goodwill $ 154,587 $ 13,044 $ 167,631 Three Months Ended September 30, 2019 Banking(1) Factoring Consolidated (Dollars in thousands) Interest income $ 30,371 2,879 $ 33,250 Intersegment interest allocations 303 (303) — Total interest expense 2,625 — 2,625 Net interest income 28,049 2,576 30,625 Provision (credit) for loan losses (1,019) 443 (576) Net interest income after provision 29,068 2,133 31,201 Noninterest income 2,488 130 2,618 Noninterest expense (2) 16,204 1,705 17,909 Intersegment expense allocations 125 (125) — Income before income taxes 15,477 433 15,910 Income tax expense 4,505 128 4,633 Net income $ 10,972 $ 305 $ 11,277 Total assets $ 3,119,367 $ 63,104 $ 3,182,471 Loans, net of deferred fees $ 1,831,172 $ 44,215 $ 1,875,387 Goodwill $ 70,709 $ 13,044 $ 83,753 (1) Includes the holding company’s results of operations (2) The banking segment’s noninterest expense includes merger-related costs of Nine Months Ended September 30, 2020 Banking (1) Factoring Consolidated (Dollars in thousands) Interest income $ 106,455 $ 7,871 $ 114,326 Intersegment interest allocations 686 (686) — Total interest expense 6,641 — 6,641 Net interest income 100,500 7,185 107,685 Provision for credit losses on loans 14,150 431 14,581 Net interest income after provision 86,350 6,754 93,104 Noninterest income 7,318 548 7,866 Noninterest expense (2) 63,113 4,841 67,954 Intersegment expense allocations 307 (307) — Income before income taxes 30,862 2,154 33,016 Income tax expense 8,703 637 9,340 Net income $ 22,159 $ 1,517 $ 23,676 Total assets $ 4,541,331 $ 65,454 $ 4,606,785 Loans, net of deferred fees $ 2,649,334 $ 47,682 $ 2,697,016 Goodwill $ 154,587 $ 13,044 $ 167,631 Nine Months Ended September 30, 2019 Banking (1) Factoring Consolidated (Dollars in thousands) Interest income $ 91,388 $ 8,800 $ 100,188 Intersegment interest allocations 909 (909) — Total interest expense 7,605 — 7,605 Net interest income 84,692 7,891 92,583 Provision for loan losses (2,655) 278 (2,377) Net interest income after provision 87,347 7,613 94,960 Noninterest income 7,361 490 7,851 Noninterest expense (2) 49,189 5,083 54,272 Intersegment expense allocations 378 (378) — Income before income taxes 45,897 2,642 48,539 Income tax expense 12,982 781 13,763 Net income $ 32,915 $ 1,861 $ 34,776 Total assets $ 3,119,367 $ 63,104 $ 3,182,471 Loans, net of deferred fees $ 1,831,172 $ 44,215 $ 1,875,387 Goodwill $ 70,709 $ 13,044 $ 83,753 (1) Includes the holding company’s results of operations (2) The banking segment’s noninterest expense includes merger-related costs of $2,500,000 and $1,201,000 for the first nine months of 2020 and 2019, respectively. |
Basis of Presentation (Details)
Basis of Presentation (Details) | 3 Months Ended | 9 Months Ended | |||||||||
Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2020USD ($)segment | Sep. 30, 2019USD ($) | Jun. 30, 2020USD ($) | Mar. 31, 2020USD ($) | Jan. 01, 2020USD ($) | Dec. 31, 2019USD ($) | Jun. 30, 2019USD ($) | 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 | 2,705,479,000 | 2,705,479,000 | $ 2,534,163,000 | ||||||||
Allowance for credit losses on loans | 45,422,000 | $ 25,895,000 | 45,422,000 | $ 25,895,000 | $ 45,444,000 | 31,855,000 | 23,285,000 | $ 26,631,000 | $ 27,848,000 | ||
Allowance for credit losses on off-balance sheet credit exposures | 679,000 | ||||||||||
Cumulative-effect adjustment as a result of the adoption of ASU 2016-03 | 577,807,000 | 395,346,000 | 577,807,000 | 395,346,000 | 574,807,000 | $ 571,441,000 | 576,708,000 | $ 388,108,000 | $ 378,516,000 | $ 367,466,000 | |
Retained earnings | 91,065,000 | 91,065,000 | 96,741,000 | ||||||||
Income tax expense | 4,198,000 | $ 4,633,000 | 9,340,000 | $ 13,763,000 | |||||||
Debt Securities, Held-to-maturity, Credit Loss reduction | 3,000 | ||||||||||
Off-Balance Sheet, Credit Loss, Liability, Credit Loss Expenses (Reduction) | 547,000 | ||||||||||
ASU 2016-03 - Topic 326 | |||||||||||
Allowance for credit losses on loans | 8,570,000 | ||||||||||
Cumulative-effect adjustment as a result of the adoption of ASU 2016-03 | 58,000 | 58,000 | |||||||||
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) | ||||||||||
Cumulative-effect adjustment as a result of the adoption of ASU 2016-03 | 2,359,000 | ||||||||||
Retained earnings | (6,062,000) | ||||||||||
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 | 897,909,000 | 897,909,000 | 6,790,000 | ||||||||
Allowance for credit losses on loans | 12,800,000 | 12,800,000 | 13,179,000 | 6,790,000 | 10,453,000 | ||||||
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 | 561,528,000 | 561,528,000 | 6,994,000 | ||||||||
Allowance for credit losses on loans | 9,283,000 | 9,283,000 | 8,547,000 | 6,994,000 | 3,825,000 | ||||||
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 | 713,563,000 | 713,563,000 | 11,672,000 | 767,821,000 | |||||||
Allowance for credit losses on loans | 15,325,000 | 15,325,000 | 15,449,000 | 11,672,000 | 3,760,000 | ||||||
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 | 142,632,000 | 142,632,000 | 1,458,000 | ||||||||
Allowance for credit losses on loans | 2,544,000 | 2,544,000 | 2,552,000 | 1,458,000 | 2,621,000 | ||||||
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 | 111,468,000 | 111,468,000 | 1,321,000 | ||||||||
Allowance for credit losses on loans | 1,881,000 | 1,881,000 | 1,851,000 | 1,321,000 | 2,244,000 | ||||||
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 | 169,791,000 | 169,791,000 | 1,253,000 | ||||||||
Allowance for credit losses on loans | 1,849,000 | 1,849,000 | 1,828,000 | 1,253,000 | 57,000 | ||||||
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 | 91,077,000 | 91,077,000 | 678,000 | ||||||||
Allowance for credit losses on loans | 779,000 | 779,000 | 825,000 | 678,000 | 243,000 | ||||||
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 | 17,511,000 | 17,511,000 | 1,689,000 | ||||||||
Allowance for credit losses on loans | $ 961,000 | $ 961,000 | $ 1,213,000 | $ 1,689,000 | 82,000 | ||||||
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 | 9 Months Ended | ||||||
Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Reconciliation of factors used in computing basic and diluted earnings per common share | ||||||||
Net income | $ 11,197 | $ 10,618 | $ 1,861 | $ 11,277 | $ 11,353 | $ 12,146 | $ 23,676 | $ 34,776 |
Weighted average common shares outstanding for basic earnings per common share (in shares) | 59,589,243 | 43,258,983 | 59,432,178 | 43,189,710 | ||||
Dilutive potential common shares | 552,169 | 537,921 | 711,585 | 538,375 | ||||
Shares used in computing diluted earnings per common share (in shares) | 60,141,412 | 43,796,904 | 60,143,763 | 43,728,085 | ||||
Basic earnings per share (in dollars per share) | $ 0.19 | $ 0.26 | $ 0.40 | $ 0.81 | ||||
Diluted earnings per share (in dollars per share) | $ 0.19 | $ 0.26 | $ 0.39 | $ 0.80 | ||||
Number of shares not in computing diluted earnings per common share | 1,741,568 | 826,036 | 1,507,437 | 826,036 |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Income (''AOCI'') - Changes in AOCI by Component (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2020 | Sep. 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 | $ (1,204) | $ (471) | 5,069 | $ 504 | $ 2,685 | $ 3,394 | 3,394 | $ 6,583 |
Balance at the end of the period, net of taxes | (6,384) | (6,384) | ||||||
Accumulated Other Comprehensive Income / (Loss) | ||||||||
Changes in AOCI by Component | ||||||||
Balance at the beginning of the period, net of taxes | (5,180) | (9,778) | (6,302) | (12,381) | (9,778) | (12,381) | ||
Other comprehensive loss before reclassification, net of taxes | (1,396) | 729 | 3,299 | 7,191 | ||||
Amounts reclassified from other comprehensive income (loss), net of taxes | 192 | (225) | 95 | (608) | ||||
Net current period other comprehensive income (loss), net of taxes | (1,204) | (471) | 5,069 | 504 | 2,685 | 3,394 | 3,394 | 6,583 |
Balance at the end of the period, net of taxes | (6,384) | (5,180) | (5,798) | (6,302) | (6,384) | (5,798) | ||
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 | 6,112 | 1,602 | 1,083 | (5,007) | 1,602 | (5,007) | ||
Other comprehensive loss before reclassification, net of taxes | (1,266) | 737 | 3,435 | 7,213 | ||||
Amounts reclassified from other comprehensive income (loss), net of taxes | (232) | (191) | (618) | |||||
Net current period other comprehensive income (loss), net of taxes | (1,266) | 505 | 3,244 | 6,595 | ||||
Balance at the end of the period, net of taxes | 4,846 | 6,112 | 1,588 | 1,083 | 4,846 | 1,588 | ||
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 | 280 | 298 | 317 | 344 | 298 | 344 | ||
Amounts reclassified from other comprehensive income (loss), net of taxes | (9) | (9) | (27) | (36) | ||||
Net current period other comprehensive income (loss), net of taxes | (9) | (9) | (27) | (36) | ||||
Balance at the end of the period, net of taxes | 271 | 280 | 308 | 317 | 271 | 308 | ||
Defined Benefit Pension Plan Items | ||||||||
Changes in AOCI by Component | ||||||||
Balance at the beginning of the period, net of taxes | (11,572) | $ (11,678) | (7,702) | $ (7,718) | (11,678) | (7,718) | ||
Other comprehensive loss before reclassification, net of taxes | (130) | (8) | (136) | (22) | ||||
Amounts reclassified from other comprehensive income (loss), net of taxes | 201 | 16 | 313 | 46 | ||||
Net current period other comprehensive income (loss), net of taxes | 71 | 8 | 177 | 24 | ||||
Balance at the end of the period, net of taxes | $ (11,501) | $ (11,572) | $ (7,694) | $ (7,702) | $ (11,501) | $ (7,694) |
Accumulated Other Comprehensi_4
Accumulated Other Comprehensive Income (''AOCI'') - Amount Reclassified from AOCI (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Amount Reclassified from AOCI | ||||||||
Gain on sales of securities | $ 330 | $ 270 | $ 878 | |||||
Interest income on taxable securities | $ 2,481 | 3,504 | 9,584 | 12,149 | ||||
Income tax expense | (4,198) | (4,633) | (9,340) | (13,763) | ||||
Net income | 11,197 | $ 10,618 | $ 1,861 | 11,277 | $ 11,353 | $ 12,146 | 23,676 | 34,776 |
Amount Reclassified from AOCI | ||||||||
Amount Reclassified from AOCI | ||||||||
Other noninterest expense | (445) | (65) | ||||||
Income tax benefit | 132 | 19 | ||||||
Net of tax | (313) | (46) | ||||||
Unrealized Gains (Losses) on Available-for-Sale Securities and I/O Strips | ||||||||
Amount Reclassified from AOCI | ||||||||
Net of tax | 232 | 191 | 618 | |||||
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 | 330 | 270 | 878 | |||||
Income tax expense | (98) | (79) | (260) | |||||
Net income | 232 | 191 | 618 | |||||
Unamortized Unrealized Gain on Available-for-Sale Securities Reclassified to Held-to-Maturity | ||||||||
Amount Reclassified from AOCI | ||||||||
Net of tax | 9 | 9 | 27 | 36 | ||||
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 | 39 | 52 | ||||
Income tax expense | (4) | (4) | (12) | (16) | ||||
Net income | 9 | 9 | 27 | 36 | ||||
Defined Benefit Pension Plan Items | ||||||||
Amount Reclassified from AOCI | ||||||||
Net of tax | (201) | (16) | (313) | (46) | ||||
Defined Benefit Pension Plan Items | Amount Reclassified from AOCI | ||||||||
Amount Reclassified from AOCI | ||||||||
Other noninterest expense | (285) | (22) | ||||||
Income tax benefit | 84 | 6 | ||||||
Net of tax | (201) | (16) | ||||||
Prior transition obligation | Amount Reclassified from AOCI | ||||||||
Amount Reclassified from AOCI | ||||||||
Other noninterest expense | (184) | 24 | (154) | 73 | ||||
Actuarial losses | Amount Reclassified from AOCI | ||||||||
Amount Reclassified from AOCI | ||||||||
Other noninterest expense | (101) | (46) | (291) | (138) | ||||
Accumulated Other Comprehensive Income / (Loss) | ||||||||
Amount Reclassified from AOCI | ||||||||
Net of tax | (192) | 225 | (95) | 608 | ||||
Accumulated Other Comprehensive Income / (Loss) | Amount Reclassified from AOCI | ||||||||
Amount Reclassified from AOCI | ||||||||
Net of tax | $ (192) | $ 225 | $ (95) | $ 608 |
Securities - Amortized Cost and
Securities - Amortized Cost and Estimated Fair Value of Securities - Securities Available-for-sale (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Securities available-for-sale: | ||
Amortized Cost | $ 287,570 | $ 402,537 |
Gross Unrealized Gains | 6,868 | 2,459 |
Gross Unrealized (Losses) | (171) | |
Estimated Fair Value | 294,438 | 404,825 |
Agency mortgage-backed securities | ||
Securities available-for-sale: | ||
Amortized Cost | 197,921 | 283,598 |
Gross Unrealized Gains | 5,688 | 934 |
Gross Unrealized (Losses) | (171) | |
Estimated Fair Value | 203,609 | 284,361 |
U.S. Treasury | ||
Securities available-for-sale: | ||
Amortized Cost | 89,649 | 118,939 |
Gross Unrealized Gains | 1,180 | 1,525 |
Estimated Fair Value | $ 90,829 | $ 120,464 |
Securities - Amortized Cost a_2
Securities - Amortized Cost and Estimated Fair Value of Securities - Securities Held-to-maturity (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Jan. 01, 2020 | Dec. 31, 2019 |
Securities held-to-maturity: | |||
Amortized Cost | $ 295,664 | $ 366,560 | |
Gross Unrealized Gains | 8,333 | 2,519 | |
Gross Unrealized (Losses) | (1) | (972) | |
Allowance for credit losses | (55) | $ (58) | |
Estimated Fair Value | 303,996 | 368,107 | |
Agency mortgage-backed securities | |||
Securities held-to-maturity: | |||
Amortized Cost | 223,453 | 285,344 | |
Gross Unrealized Gains | 6,613 | 1,206 | |
Gross Unrealized (Losses) | (1) | (968) | |
Estimated Fair Value | 230,065 | 285,582 | |
Municipals - exempt from Federal tax | |||
Securities held-to-maturity: | |||
Amortized Cost | 72,211 | 81,216 | |
Gross Unrealized Gains | 1,720 | 1,313 | |
Gross Unrealized (Losses) | (4) | ||
Allowance for credit losses | (55) | ||
Estimated Fair Value | $ 73,931 | $ 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 ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Held-to-maturity, Fair Value | ||
Less Than 12 Months | $ 245,000 | $ 51,616,000 |
12 Months or More | 88,128,000 | |
Total | 245,000 | 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 | 245,000 | 50,060,000 |
12 Months or More | 88,128,000 | |
Total | 245,000 | 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 | 9 Months Ended | ||
Sep. 30, 2020USD ($)securityitem | Dec. 31, 2019USD ($) | Sep. 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 | 421 | ||
Number of available for sale securities held | item | 122 | ||
Number of held to maturity securities held | item | 299 | ||
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 | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Proceeds from Sales of Securities and the Resulting Gains and Losses | |||
Proceeds | $ 38,855 | $ 56,598 | $ 98,733 |
Gross gains | 363 | $ 270 | 971 |
Gross losses | $ (33) | $ (93) |
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 | Sep. 30, 2020 | Dec. 31, 2019 |
Available-for-sale, Amortized Cost | ||
Due 3 months or less | $ 24,980 | |
Due after 3 months through one year | 59,758 | |
Due after one year through five years | 4,911 | |
Agency mortgage-backed securities | 197,921 | |
Total | 287,570 | $ 402,537 |
Available-for-sale, Estimated Fair Value | ||
Due 3 months or less | 25,061 | |
Due after 3 months through one year | 60,708 | |
Due after one year through five years | 5,060 | |
Agency mortgage-backed securities | 203,609 | |
Total | $ 294,438 | $ 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 | Sep. 30, 2020 | Dec. 31, 2019 |
Held-to-maturity, Amortized Cost | ||
Due 3 months or less | $ 910 | |
Due after 3 months through one year | 490 | |
Due after one year through five years | 9,762 | |
Due after five years through ten years | 30,900 | |
Due after ten years | 30,149 | |
Agency mortgage-backed securities | 223,453 | |
Total | 295,664 | |
Held-to-maturity, Estimated Fair Value | ||
Due 3 months or less | 911 | |
Due after 3 months through one year | 498 | |
Due after one year through five years | 10,133 | |
Due after five years through ten years | 31,574 | |
Due after ten years | 30,815 | |
Agency mortgage-backed securities | 230,065 | |
Total | $ 303,996 | $ 368,107 |
Securities - Securities Pledged
Securities - Securities Pledged to Secure Public Deposits and for Other Purposes (Details) - USD ($) $ in Thousands | Sep. 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 | $ 38,777 | $ 32,773 |
Securities - Rollforward by maj
Securities - Rollforward by major security type (Details) - USD ($) $ in Thousands | 9 Months Ended | |||||||
Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | |
Schedule of Held-to-maturity Securities [Line Items] | ||||||||
Shareholder's equity | $ 577,807 | $ 574,807 | $ 571,441 | $ 576,708 | $ 395,346 | $ 388,108 | $ 378,516 | $ 367,466 |
Provision (credit) for credit loss | 3 | |||||||
Debt Securities, Held-to-maturity, Allowance for Credit Loss, Ending Balance | 55 | |||||||
ASU 2016-03 - Topic 326 | ||||||||
Schedule of Held-to-maturity Securities [Line Items] | ||||||||
Shareholder's equity | 58 | |||||||
Adjustment | ||||||||
Schedule of Held-to-maturity Securities [Line Items] | ||||||||
Shareholder's equity | (6,062) | |||||||
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 | |||||||
Shareholder's equity | $ 2,359 |
Loans and Allowance for Credi_3
Loans and Allowance for Credit Losses on Loans - Loans Balance (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||||||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Jun. 30, 2020 | Jan. 01, 2020 | Dec. 31, 2019 | Jun. 30, 2019 | Dec. 31, 2018 | |
Loans held-for-investment: | |||||||||
Total loan balance | $ 2,705,479 | $ 2,705,479 | $ 2,534,163 | ||||||
Deferred loan fees, net | (8,463) | (8,463) | (319) | ||||||
Loans, net of deferred fees | 2,697,016 | $ 1,875,387 | 2,697,016 | $ 1,875,387 | 2,533,844 | ||||
Allowance for credit losses on loans(1) | (45,422) | (25,895) | (45,422) | (25,895) | $ (45,444) | $ (31,855) | (23,285) | $ (26,631) | $ (27,848) |
Loans, net | 2,651,594 | 2,651,594 | 2,510,559 | ||||||
Income tax expense | 4,198 | 4,633 | 9,340 | 13,763 | |||||
Retained earnings | 91,065 | 91,065 | 96,741 | ||||||
Commercial | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 603,345 | ||||||||
Allowance for credit losses on loans(1) | (14,656) | (14,656) | (10,453) | (15,234) | (17,061) | ||||
Commercial | SBA Paycheck Protection Program ("PPP") | |||||||||
Loans held-for-investment: | |||||||||
Loans, net | 323,550 | 323,550 | |||||||
Real estate | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 1,897,074 | ||||||||
Allowance for credit losses on loans(1) | (11,143) | (11,143) | (12,750) | (11,307) | (10,671) | ||||
Consumer | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 33,744 | ||||||||
Allowance for credit losses on loans(1) | $ (96) | $ (96) | (82) | $ (90) | $ (116) | ||||
Commercial | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 897,909 | 897,909 | 6,790 | ||||||
Allowance for credit losses on loans(1) | (12,800) | (12,800) | (13,179) | (6,790) | (10,453) | ||||
Commercial | Commercial | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 897,909 | 897,909 | 603,345 | ||||||
SBA Paycheck Protection Program ("PPP") loans | Commercial | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 323,550 | 323,550 | |||||||
CRE - owner occupied | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 561,528 | 561,528 | 6,994 | ||||||
Allowance for credit losses on loans(1) | (9,283) | (9,283) | (8,547) | (6,994) | (3,825) | ||||
CRE - owner occupied | Real estate | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 561,528 | 561,528 | 548,907 | ||||||
CRE - non-owner occupied | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 713,563 | 713,563 | 11,672 | 767,821 | |||||
Allowance for credit losses on loans(1) | (15,325) | (15,325) | (15,449) | (11,672) | (3,760) | ||||
CRE - non-owner occupied | Real estate | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 713,563 | 713,563 | 767,821 | ||||||
Land and construction | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 142,632 | 142,632 | 1,458 | ||||||
Allowance for credit losses on loans(1) | (2,544) | (2,544) | (2,552) | (1,458) | (2,621) | ||||
Land and construction | Real estate | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 142,632 | 142,632 | 147,189 | ||||||
Home equity | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 111,468 | 111,468 | 1,321 | ||||||
Allowance for credit losses on loans(1) | (1,881) | (1,881) | (1,851) | (1,321) | (2,244) | ||||
Home equity | Real estate | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 111,468 | 111,468 | 151,775 | ||||||
Multi-family | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 169,791 | 169,791 | 1,253 | ||||||
Allowance for credit losses on loans(1) | (1,849) | (1,849) | (1,828) | (1,253) | (57) | ||||
Multi-family | Real estate | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 169,791 | 169,791 | 180,623 | ||||||
Residential mortgages | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 91,077 | 91,077 | 678 | ||||||
Allowance for credit losses on loans(1) | (779) | (779) | (825) | (678) | (243) | ||||
Residential mortgages | Real estate | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 91,077 | 91,077 | 100,759 | ||||||
Consumer and other | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | 17,511 | 17,511 | 1,689 | ||||||
Allowance for credit losses on loans(1) | (961) | (961) | $ (1,213) | $ (1,689) | (82) | ||||
Consumer and other | Consumer | |||||||||
Loans held-for-investment: | |||||||||
Total loan balance | $ 17,511 | $ 17,511 | 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) | ||||||||
Retained earnings | (6,062) | ||||||||
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 | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Changes in the Allowance for Loan Losses | ||||
Beginning of period balance | $ 45,444 | $ 26,631 | $ 23,285 | $ 27,848 |
Charge-offs | (598) | (318) | (1,736) | (620) |
Recoveries | 379 | 158 | 722 | 1,044 |
Net (charge-offs) recoveries | (219) | (160) | (1,014) | 424 |
Provision (credit) for credit losses on loans | 197 | (576) | 14,581 | (2,377) |
End of period balance | 45,422 | 25,895 | 45,422 | 25,895 |
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 | 15,234 | 10,453 | 17,061 | |
Charge-offs | (315) | (617) | ||
Recoveries | 115 | 917 | ||
Net (charge-offs) recoveries | (200) | 300 | ||
Provision (credit) for credit losses on loans | (378) | (2,705) | ||
End of period balance | 14,656 | 14,656 | ||
Real estate | ||||
Changes in the Allowance for Loan Losses | ||||
Beginning of period balance | 11,307 | 12,750 | 10,671 | |
Recoveries | 43 | 127 | ||
Net (charge-offs) recoveries | 43 | 127 | ||
Provision (credit) for credit losses on loans | (207) | 345 | ||
End of period balance | 11,143 | 11,143 | ||
Consumer | ||||
Changes in the Allowance for Loan Losses | ||||
Beginning of period balance | 90 | 82 | 116 | |
Charge-offs | (3) | (3) | ||
Net (charge-offs) recoveries | (3) | (3) | ||
Provision (credit) for credit losses on loans | 9 | (17) | ||
End of period balance | $ 96 | $ 96 | ||
Commercial | ||||
Changes in the Allowance for Loan Losses | ||||
Beginning of period balance | 13,179 | 10,453 | ||
Charge-offs | (502) | (1,637) | ||
Recoveries | 343 | 598 | ||
Net (charge-offs) recoveries | (159) | (1,039) | ||
Provision (credit) for credit losses on loans | (220) | 7,049 | ||
End of period balance | 12,800 | 12,800 | ||
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 | 8,547 | 3,825 | ||
Recoveries | 1 | |||
Net (charge-offs) recoveries | 1 | |||
Provision (credit) for credit losses on loans | 736 | 2,288 | ||
End of period balance | 9,283 | 9,283 | ||
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 | 15,449 | 3,760 | ||
Provision (credit) for credit losses on loans | (124) | 3,653 | ||
End of period balance | 15,325 | 15,325 | ||
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 | 2,552 | 2,621 | ||
Recoveries | 19 | 51 | ||
Net (charge-offs) recoveries | 19 | 51 | ||
Provision (credit) for credit losses on loans | (27) | 1,035 | ||
End of period balance | 2,544 | 2,544 | ||
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 | 1,851 | 2,244 | ||
Recoveries | 16 | 70 | ||
Net (charge-offs) recoveries | 16 | 70 | ||
Provision (credit) for credit losses on loans | 14 | 490 | ||
End of period balance | 1,881 | 1,881 | ||
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 | 1,828 | 57 | ||
Provision (credit) for credit losses on loans | 21 | 596 | ||
End of period balance | 1,849 | 1,849 | ||
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 | 825 | 243 | ||
Provision (credit) for credit losses on loans | (46) | 101 | ||
End of period balance | 779 | 779 | ||
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 | 1,213 | 82 | ||
Charge-offs | (96) | (99) | ||
Recoveries | 1 | 2 | ||
Net (charge-offs) recoveries | (95) | (97) | ||
Provision (credit) for credit losses on loans | (157) | (631) | ||
End of period balance | $ 961 | 961 | ||
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 | Sep. 30, 2020 | Jun. 30, 2020 | Jan. 01, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 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 | $ 45,422 | $ 45,444 | $ 31,855 | 23,285 | $ 25,895 | $ 26,631 | $ 27,848 |
Loans, Individually evaluated for impairment | 10,264 | ||||||
Loans, Collectively evaluated for impairment | 2,523,899 | ||||||
Total loan balance | $ 2,705,479 | 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 | 14,656 | 15,234 | 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 | 11,143 | 11,307 | 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 | $ 96 | $ 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 | Sep. 30, 2020 | Dec. 31, 2019 |
Nonperforming Loans by Class | ||
Nonaccrual Financing Receivable, no special allowance | $ 6,262 | |
Nonaccrual Financing Receivable, with special allowance | 3,399 | $ 1,153 |
Nonaccrual with special allowance for credit losses | 2,697 | |
Nonaccrual loans | 8,675 | |
Loans Over 90 Days Past Due and Still Accruing | 601 | |
Total | 10,262 | 9,828 |
Commercial | ||
Nonperforming Loans by Class | ||
Nonaccrual Financing Receivable, no special allowance | 973 | |
Nonaccrual Financing Receivable, with special allowance | 1,935 | 1,153 |
Nonaccrual loans | 3,444 | |
Loans Over 90 Days Past Due and Still Accruing | 601 | |
Total | 3,509 | 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 | 4,328 | |
Nonaccrual loans | 5,094 | |
Total | 4,328 | 5,094 |
Home equity | Real estate | ||
Nonperforming Loans by Class | ||
Nonaccrual Financing Receivable, no special allowance | 961 | |
Nonaccrual loans | 137 | |
Total | $ 961 | $ 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 ($) | Sep. 30, 2020 | Jan. 01, 2020 | Dec. 31, 2019 |
Aging of Past Due Loans by Class of Loans | |||
Total Past Due | $ 11,585,000 | $ 15,315,000 | |
Current | 2,693,894,000 | 2,518,848,000 | |
Total loan balance | 2,705,479,000 | 2,534,163,000 | |
30-59 Days Past Due | |||
Aging of Past Due Loans by Class of Loans | |||
Total Past Due | 8,216,000 | 4,770,000 | |
60-89 Days Past Due | |||
Aging of Past Due Loans by Class of Loans | |||
Total Past Due | 925,000 | 2,234,000 | |
90 Days or Greater Past Due | |||
Aging of Past Due Loans by Class of Loans | |||
Total Past Due | 2,444,000 | 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 | 897,909,000 | $ 6,790,000 | |
Commercial | Commercial | |||
Aging of Past Due Loans by Class of Loans | |||
Total Past Due | 6,295,000 | 10,084,000 | |
Current | 891,614,000 | 593,261,000 | |
Total loan balance | 897,909,000 | 603,345,000 | |
Commercial | Commercial | 30-59 Days Past Due | |||
Aging of Past Due Loans by Class of Loans | |||
Total Past Due | 4,419,000 | 4,770,000 | |
Commercial | Commercial | 60-89 Days Past Due | |||
Aging of Past Due Loans by Class of Loans | |||
Total Past Due | 925,000 | 2,097,000 | |
Commercial | Commercial | 90 Days or Greater Past Due | |||
Aging of Past Due Loans by Class of Loans | |||
Total Past Due | 951,000 | 3,217,000 | |
CRE - owner occupied | |||
Aging of Past Due Loans by Class of Loans | |||
Total loan balance | 561,528,000 | 6,994,000 | |
CRE - owner occupied | Real estate | |||
Aging of Past Due Loans by Class of Loans | |||
Total Past Due | 3,330,000 | 5,094,000 | |
Current | 558,198,000 | 543,813,000 | |
Total loan balance | 561,528,000 | 548,907,000 | |
CRE - owner occupied | Real estate | 30-59 Days Past Due | |||
Aging of Past Due Loans by Class of Loans | |||
Total Past Due | 3,301,000 | ||
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 | 713,563,000 | 767,821,000 | |
Total loan balance | 713,563,000 | 11,672,000 | 767,821,000 |
CRE - non-owner occupied | Real estate | |||
Aging of Past Due Loans by Class of Loans | |||
Total loan balance | 713,563,000 | 767,821,000 | |
Land and construction | |||
Aging of Past Due Loans by Class of Loans | |||
Total loan balance | 142,632,000 | 1,458,000 | |
Land and construction | Real estate | |||
Aging of Past Due Loans by Class of Loans | |||
Current | 142,632,000 | 147,189,000 | |
Total loan balance | 142,632,000 | 147,189,000 | |
Home equity | |||
Aging of Past Due Loans by Class of Loans | |||
Total loan balance | 111,468,000 | 1,321,000 | |
Home equity | Real estate | |||
Aging of Past Due Loans by Class of Loans | |||
Total Past Due | 137,000 | ||
Current | 111,468,000 | 151,638,000 | |
Total loan balance | 111,468,000 | 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 | ||
Multi-family | |||
Aging of Past Due Loans by Class of Loans | |||
Total loan balance | 169,791,000 | 1,253,000 | |
Multi-family | Real estate | |||
Aging of Past Due Loans by Class of Loans | |||
Current | 169,791,000 | 180,623,000 | |
Total loan balance | 169,791,000 | 180,623,000 | |
Residential mortgages | |||
Aging of Past Due Loans by Class of Loans | |||
Total loan balance | 91,077,000 | 678,000 | |
Residential mortgages | Real estate | |||
Aging of Past Due Loans by Class of Loans | |||
Current | 91,077,000 | 100,759,000 | |
Total loan balance | 91,077,000 | 100,759,000 | |
Consumer and other | |||
Aging of Past Due Loans by Class of Loans | |||
Total loan balance | 17,511,000 | $ 1,689,000 | |
Consumer and other | Consumer | |||
Aging of Past Due Loans by Class of Loans | |||
Total Past Due | 1,960,000 | ||
Current | 15,551,000 | 33,744,000 | |
Total loan balance | 17,511,000 | $ 33,744,000 | |
Consumer and other | Consumer | 30-59 Days Past Due | |||
Aging of Past Due Loans by Class of Loans | |||
Total Past Due | 496,000 | ||
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 ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Aging of Past Due Loans by Class of Loans | ||
Past due loans 30 day or greater | $ 11,585,000 | $ 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 | 2,441,000 | 7,413,000 |
Less than 30 days past due | ||
Aging of Past Due Loans by Class of Loans | ||
Nonaccrual loans | $ 7,220,000 | |
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 | Sep. 30, 2020 | Jan. 01, 2020 | Dec. 31, 2019 |
Loans | |||
Total | $ 2,705,479 | $ 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 | 897,909 | $ 6,790 | |
Commercial | Commercial | |||
Loans | |||
Total | 897,909 | 603,345 | |
Commercial | Commercial | Nonclassified | |||
Loans | |||
Total | 599,143 | ||
Commercial | Commercial | Classified | |||
Loans | |||
Total | 4,202 | ||
CRE - owner occupied | |||
Loans | |||
Total | 561,528 | 6,994 | |
CRE - owner occupied | Real estate | |||
Loans | |||
Total | 561,528 | 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 | 713,563 | 11,672 | 767,821 |
CRE - non-owner occupied | Real estate | |||
Loans | |||
Total | 713,563 | 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 | 142,632 | 1,458 | |
Land and construction | Real estate | |||
Loans | |||
Total | 142,632 | 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 | 111,468 | 1,321 | |
Home equity | Real estate | |||
Loans | |||
Total | 111,468 | 151,775 | |
Home equity | Real estate | Nonclassified | |||
Loans | |||
Total | 149,131 | ||
Home equity | Real estate | Classified | |||
Loans | |||
Total | 2,644 | ||
Multi-family | |||
Loans | |||
Total | 169,791 | 1,253 | |
Multi-family | Real estate | |||
Loans | |||
Total | 169,791 | 180,623 | |
Multi-family | Real estate | Nonclassified | |||
Loans | |||
Total | 180,623 | ||
Residential mortgages | |||
Loans | |||
Total | 91,077 | 678 | |
Residential mortgages | Real estate | |||
Loans | |||
Total | 91,077 | 100,759 | |
Residential mortgages | Real estate | Nonclassified | |||
Loans | |||
Total | 100,262 | ||
Residential mortgages | Real estate | Classified | |||
Loans | |||
Total | 497 | ||
Consumer and other | |||
Loans | |||
Total | 17,511 | $ 1,689 | |
Consumer and other | Consumer | |||
Loans | |||
Total | $ 17,511 | 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 | Sep. 30, 2020 | Jan. 01, 2020 | Dec. 31, 2019 |
Loans | |||
2020 | $ 938,146 | ||
2019 | 341,890 | ||
2018 | 214,030 | ||
2017 | 214,791 | ||
2016 | 172,323 | ||
2015 and Prior | 363,527 | ||
Revolving | 460,772 | ||
Total loan balance | 2,705,479 | $ 2,534,163 | |
Balance to report | 2,651,594 | 2,510,559 | |
Loan classified as loss | |||
Loans | |||
Balance to report | 0 | 0 | |
Commercial | |||
Loans | |||
2020 | 471,489 | ||
2019 | 44,098 | ||
2018 | 26,843 | ||
2017 | 18,169 | ||
2016 | 12,065 | ||
2015 and Prior | 11,282 | ||
Revolving | 313,963 | ||
Total loan balance | 897,909 | $ 6,790 | |
Commercial | Pass [Member] | |||
Loans | |||
2020 | 457,725 | ||
2019 | 42,241 | ||
2018 | 26,085 | ||
2017 | 16,428 | ||
2016 | 8,742 | ||
2015 and Prior | 10,737 | ||
Revolving | 307,076 | ||
Total loan balance | 869,034 | ||
Commercial | Special Mention [Member] | |||
Loans | |||
2020 | 6,730 | ||
2019 | 1,800 | ||
2018 | 701 | ||
2017 | 1,228 | ||
2016 | 788 | ||
2015 and Prior | 410 | ||
Revolving | 2,061 | ||
Total loan balance | 13,718 | ||
Commercial | Substandard [Member] | |||
Loans | |||
2020 | 4,681 | ||
2018 | 57 | ||
2017 | 513 | ||
2016 | 2,383 | ||
2015 and Prior | 79 | ||
Revolving | 4,536 | ||
Total loan balance | 12,249 | ||
Commercial | Substandard-Nonaccrual [Member] | |||
Loans | |||
2020 | 2,353 | ||
2019 | 57 | ||
2016 | 152 | ||
2015 and Prior | 56 | ||
Revolving | 290 | ||
Total loan balance | 2,908 | ||
CRE - owner occupied | |||
Loans | |||
2020 | 152,142 | ||
2019 | 79,916 | ||
2018 | 78,036 | ||
2017 | 56,768 | ||
2016 | 52,560 | ||
2015 and Prior | 126,143 | ||
Revolving | 15,963 | ||
Total loan balance | 561,528 | 6,994 | |
CRE - owner occupied | Pass [Member] | |||
Loans | |||
2020 | 137,721 | ||
2019 | 73,778 | ||
2018 | 74,997 | ||
2017 | 53,799 | ||
2016 | 52,560 | ||
2015 and Prior | 121,007 | ||
Revolving | 15,963 | ||
Total loan balance | 529,825 | ||
CRE - owner occupied | Special Mention [Member] | |||
Loans | |||
2020 | 9,073 | ||
2019 | 5,595 | ||
2018 | 2,637 | ||
2015 and Prior | 4,648 | ||
Total loan balance | 21,953 | ||
CRE - owner occupied | Substandard [Member] | |||
Loans | |||
2020 | 1,592 | ||
2018 | 402 | ||
2017 | 2,969 | ||
2015 and Prior | 459 | ||
Total loan balance | 5,422 | ||
CRE - owner occupied | Substandard-Nonaccrual [Member] | |||
Loans | |||
2020 | 3,756 | ||
2019 | 543 | ||
2015 and Prior | 29 | ||
Total loan balance | 4,328 | ||
CRE - non-owner occupied | |||
Loans | |||
2020 | 173,055 | ||
2019 | 131,920 | ||
2018 | 76,340 | ||
2017 | 104,221 | ||
2016 | 58,848 | ||
2015 and Prior | 166,581 | ||
Revolving | 2,598 | ||
Total loan balance | 713,563 | 11,672 | $ 767,821 |
CRE - non-owner occupied | Pass [Member] | |||
Loans | |||
2020 | 152,894 | ||
2019 | 131,920 | ||
2018 | 74,919 | ||
2017 | 104,221 | ||
2016 | 58,363 | ||
2015 and Prior | 166,232 | ||
Revolving | 2,598 | ||
Total loan balance | 691,147 | ||
CRE - non-owner occupied | Special Mention [Member] | |||
Loans | |||
2020 | 19,159 | ||
2016 | 485 | ||
2015 and Prior | 349 | ||
Total loan balance | 19,993 | ||
CRE - non-owner occupied | Substandard [Member] | |||
Loans | |||
2020 | 1,002 | ||
2018 | 1,421 | ||
Total loan balance | 2,423 | ||
Land and construction | |||
Loans | |||
2020 | 95,826 | ||
2019 | 35,396 | ||
2018 | 6,344 | ||
2015 and Prior | 1,351 | ||
Revolving | 3,715 | ||
Total loan balance | 142,632 | 1,458 | |
Land and construction | Pass [Member] | |||
Loans | |||
2020 | 94,467 | ||
2019 | 35,396 | ||
2018 | 6,344 | ||
2015 and Prior | 1,351 | ||
Revolving | 3,715 | ||
Total loan balance | 141,273 | ||
Land and construction | Substandard [Member] | |||
Loans | |||
2020 | 1,359 | ||
Total loan balance | 1,359 | ||
Home equity | |||
Loans | |||
2020 | 398 | ||
2018 | 78 | ||
2015 and Prior | 143 | ||
Revolving | 110,849 | ||
Total loan balance | 111,468 | 1,321 | |
Home equity | Pass [Member] | |||
Loans | |||
2020 | 275 | ||
2018 | 78 | ||
Revolving | 109,396 | ||
Total loan balance | 109,749 | ||
Home equity | Substandard [Member] | |||
Loans | |||
2015 and Prior | 143 | ||
Revolving | 615 | ||
Total loan balance | 758 | ||
Home equity | Substandard-Nonaccrual [Member] | |||
Loans | |||
2020 | 123 | ||
Revolving | 838 | ||
Total loan balance | 961 | ||
Multi-family | |||
Loans | |||
2020 | 27,453 | ||
2019 | 39,858 | ||
2018 | 18,506 | ||
2017 | 26,837 | ||
2016 | 16,319 | ||
2015 and Prior | 39,973 | ||
Revolving | 845 | ||
Total loan balance | 169,791 | 1,253 | |
Multi-family | Pass [Member] | |||
Loans | |||
2020 | 26,559 | ||
2019 | 39,858 | ||
2018 | 18,506 | ||
2017 | 26,837 | ||
2016 | 16,319 | ||
2015 and Prior | 34,787 | ||
Revolving | 845 | ||
Total loan balance | 163,711 | ||
Multi-family | Special Mention [Member] | |||
Loans | |||
2015 and Prior | 5,186 | ||
Total loan balance | 5,186 | ||
Multi-family | Substandard [Member] | |||
Loans | |||
2020 | 894 | ||
Total loan balance | 894 | ||
Residential mortgages | |||
Loans | |||
2020 | 17,771 | ||
2019 | 10,163 | ||
2018 | 4,919 | ||
2017 | 8,775 | ||
2016 | 32,403 | ||
2015 and Prior | 17,046 | ||
Total loan balance | 91,077 | 678 | |
Residential mortgages | Pass [Member] | |||
Loans | |||
2020 | 12,673 | ||
2019 | 10,163 | ||
2018 | 3,289 | ||
2017 | 8,775 | ||
2016 | 32,403 | ||
2015 and Prior | 15,735 | ||
Total loan balance | 83,038 | ||
Residential mortgages | Special Mention [Member] | |||
Loans | |||
2020 | 5,098 | ||
2018 | 1,630 | ||
2015 and Prior | 1,053 | ||
Total loan balance | 7,781 | ||
Residential mortgages | Substandard [Member] | |||
Loans | |||
2015 and Prior | 258 | ||
Total loan balance | 258 | ||
Consumer and other | |||
Loans | |||
2020 | 12 | ||
2019 | 539 | ||
2018 | 2,964 | ||
2017 | 21 | ||
2016 | 128 | ||
2015 and Prior | 1,008 | ||
Revolving | 12,839 | ||
Total loan balance | 17,511 | $ 1,689 | |
Consumer and other | Pass [Member] | |||
Loans | |||
2020 | 12 | ||
2019 | 539 | ||
2018 | 1,500 | ||
2017 | 21 | ||
2016 | 128 | ||
2015 and Prior | 1,008 | ||
Revolving | 12,839 | ||
Total loan balance | 16,047 | ||
Consumer and other | Substandard-Nonaccrual [Member] | |||
Loans | |||
2018 | 1,464 | ||
Total loan balance | 1,464 | ||
Risk Grades [Member] | |||
Loans | |||
2020 | 938,146 | ||
2019 | 341,890 | ||
2018 | 214,030 | ||
2017 | 214,791 | ||
2016 | 172,323 | ||
2015 and Prior | 363,527 | ||
Revolving | 460,772 | ||
Total loan balance | 2,705,479 | ||
Risk Grades [Member] | Pass [Member] | |||
Loans | |||
2020 | 882,326 | ||
2019 | 333,895 | ||
2018 | 205,718 | ||
2017 | 210,081 | ||
2016 | 168,515 | ||
2015 and Prior | 350,857 | ||
Revolving | 452,432 | ||
Total loan balance | 2,603,824 | ||
Risk Grades [Member] | Special Mention [Member] | |||
Loans | |||
2020 | 40,060 | ||
2019 | 7,395 | ||
2018 | 4,968 | ||
2017 | 1,228 | ||
2016 | 1,273 | ||
2015 and Prior | 11,646 | ||
Revolving | 2,061 | ||
Total loan balance | 68,631 | ||
Risk Grades [Member] | Substandard [Member] | |||
Loans | |||
2020 | 9,528 | ||
2018 | 1,880 | ||
2017 | 3,482 | ||
2016 | 2,383 | ||
2015 and Prior | 939 | ||
Revolving | 5,151 | ||
Total loan balance | 23,363 | ||
Risk Grades [Member] | Substandard-Nonaccrual [Member] | |||
Loans | |||
2020 | 6,232 | ||
2019 | 600 | ||
2018 | 1,464 | ||
2016 | 152 | ||
2015 and Prior | 85 | ||
Revolving | 1,128 | ||
Total loan balance | $ 9,661 |
Loans and Allowance for Cred_11
Loans and Allowance for Credit Losses on Loans - Amortized Cost Basis of Collateral-dependent Loans (Details) $ in Thousands | Sep. 30, 2020USD ($) |
Financing Receivable, Recorded Investment, Past Due [Line Items] | |
Collateral dependent loans | $ 1,935 |
Consumer | |
Financing Receivable, Recorded Investment, Past Due [Line Items] | |
Collateral dependent loans | 3,399 |
Real Estate | |
Financing Receivable, Recorded Investment, Past Due [Line Items] | |
Collateral dependent loans | 55 |
Real Estate | Consumer | |
Financing Receivable, Recorded Investment, Past Due [Line Items] | |
Collateral dependent loans | 1,519 |
Business Assets | |
Financing Receivable, Recorded Investment, Past Due [Line Items] | |
Collateral dependent loans | 1,750 |
Business Assets | Consumer | |
Financing Receivable, Recorded Investment, Past Due [Line Items] | |
Collateral dependent loans | 1,750 |
Uncollateralized | |
Financing Receivable, Recorded Investment, Past Due [Line Items] | |
Collateral dependent loans | 130 |
Uncollateralized | Consumer | |
Financing Receivable, Recorded Investment, Past Due [Line Items] | |
Collateral dependent loans | 130 |
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 | Sep. 30, 2020 | Dec. 31, 2019 |
Allowance for Credit Losses on Loans | ||
Recorded investment of troubled debt restructurings | $ 1,182 | $ 1,039 |
Troubled debt restructurings, nonaccrual loans | 1,033 | 590 |
Troubled debt restructurings, accruing loans | 149 | 449 |
Specific reserves | $ 357 | $ 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 | 9 Months Ended | |||||
Sep. 30, 2020contract | Sep. 30, 2020USD ($) | Sep. 30, 2020loan | Sep. 30, 2020contract | Sep. 30, 2020USD ($) | Sep. 30, 2020loan | Sep. 30, 2019USD ($)contract | |
Troubled Debt Restructurings by Class | |||||||
Number of loans modified as troubled debt restructurings during the period | 7 | 7 | 10 | 10 | 2 | ||
Pre-modification Outstanding Recorded Investment | $ 510 | $ 520 | $ 9 | ||||
Post-modification Outstanding Recorded Investment | 510 | 520 | $ 9 | ||||
Commercial | |||||||
Troubled Debt Restructurings by Class | |||||||
Number of loans modified as troubled debt restructurings during the period | contract | 7 | 10 | 2 | ||||
Pre-modification Outstanding Recorded Investment | 510 | 520 | $ 9 | ||||
Post-modification Outstanding Recorded Investment | $ 510 | $ 520 | $ 9 |
Loans and Allowance for Cred_15
Loans and Allowance for Credit Losses on Loans - Defaults on Troubled Debt Restructurings (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | |||||||
Sep. 30, 2020USD ($)contract | Sep. 30, 2020USD ($)loan | Sep. 30, 2020USD ($)item | Sep. 30, 2019item | Sep. 30, 2020USD ($) | Sep. 30, 2020USD ($)contract | Sep. 30, 2020USD ($)loan | Sep. 30, 2019contract | Dec. 31, 2019USD ($) | |
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 | 7 | 7 | 10 | 10 | 2 | ||||
Recorded investment of troubled debt restructurings | $ | $ 1,182 | $ 1,182 | $ 1,182 | $ 1,182 | $ 1,182 | $ 1,182 | $ 1,039 | ||
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 | 9 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Allowance for Credit Losses on Loans | |||||
Loans, net | $ 2,651,594 | $ 2,651,594 | $ 2,510,559 | ||
Interest Income generated from Loans | 32,635 | $ 27,264 | 100,262 | $ 81,321 | |
Deferred loan fees | $ 8,463 | $ 8,463 | $ 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) $ in Thousands | Oct. 11, 2019USD ($)shares |
Business Combinations | |
Aggregate transaction value | $ 185,598 |
Shares issued in acquisition | shares | 15,684,064 |
Total cash paid | $ 1 |
Issuance of shares of common stock to holders of restricted stock | $ 178,171 |
Business combinations - Presidi
Business combinations - Presidio (Details) | Oct. 11, 2019USD ($)$ / sharesshares | Oct. 31, 2019 | Sep. 30, 2020USD ($) | Dec. 31, 2019USD ($) | Sep. 30, 2019USD ($) |
Liabilities assumed: | |||||
Subordinate debt | $ 39,693,000 | $ 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 | 9 Months Ended | ||||
Sep. 30, 2020USD ($)loan | Sep. 30, 2019USD ($) | Sep. 30, 2020USD ($)loan | Sep. 30, 2019USD ($) | Dec. 31, 2019USD ($)loan | Oct. 11, 2019USD ($) | |
Other merger-related costs | $ 17 | $ 661 | $ 2,144 | $ 1,201 | ||
Salaries and employee benefits merger-related costs | 356 | |||||
Total merger-related costs | $ 17 | 661 | $ 2,500 | 1,201 | ||
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 | 9 Months Ended | |||
Sep. 30, 2020 | Dec. 31, 2019 | Oct. 11, 2019 | Sep. 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 | Sep. 30, 2020 | Dec. 31, 2019 |
Other Intangible Assets | ||
Gross Carrying amount | $ 27,693 | $ 27,693 |
Accumulated Amortization | (10,065) | (7,278) |
Total | 17,628 | 20,415 |
Core deposit | ||
Other Intangible Assets | ||
Gross Carrying amount | 25,023 | 25,023 |
Accumulated Amortization | (8,300) | (5,846) |
Total | 16,723 | 19,177 |
Below market-value lease | ||
Other Intangible Assets | ||
Gross Carrying amount | 770 | 770 |
Accumulated Amortization | (641) | (451) |
Total | 129 | 319 |
Customer relationship and brokered relationship | ||
Other Intangible Assets | ||
Gross Carrying amount | 1,900 | 1,900 |
Accumulated Amortization | (1,124) | (981) |
Total | 776 | $ 919 |
United American Bank | Core deposit | ||
Other Intangible Assets | ||
Total | 3,861 | |
United American Bank | Below market-value lease | ||
Other Intangible Assets | ||
Total | 43 | |
Tri Valley Bank | Core deposit | ||
Other Intangible Assets | ||
Total | 1,164 | |
Tri Valley Bank | Below market-value lease | ||
Other Intangible Assets | ||
Total | 164 | |
Presidio bank | Core deposit | ||
Other Intangible Assets | ||
Total | 9,453 | |
Presidio bank | Below or Above market-value lease | ||
Other Intangible Assets | ||
Total | (78) | |
Focus | Core deposit | ||
Other Intangible Assets | ||
Total | 2,245 | |
BVF/CSNK | Customer relationship and brokered relationship | ||
Other Intangible Assets | ||
Total | $ 776 |
Goodwill and Other Intangible_5
Goodwill and Other Intangible Assets - Estimated Amortization Expense (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Estimated Amortization Expense | ||
2020 | $ 945 | |
2021 | 3,017 | |
2022 | 2,635 | |
2023 | 2,405 | |
2024 | 2,186 | |
2025 | 1,811 | |
Thereafter | 4,629 | |
Total | 17,628 | $ 20,415 |
Core deposit | ||
Estimated Amortization Expense | ||
Total | 16,723 | 19,177 |
Below market-value lease | ||
Estimated Amortization Expense | ||
Total | 129 | 319 |
Customer relationship and brokered relationship | ||
Estimated Amortization Expense | ||
Total | 776 | $ 919 |
United American Bank | Core deposit | ||
Estimated Amortization Expense | ||
2020 | 166 | |
2021 | 602 | |
2022 | 553 | |
2023 | 521 | |
2024 | 499 | |
2025 | 478 | |
Thereafter | 1,042 | |
Total | 3,861 | |
United American Bank | Below market-value lease | ||
Estimated Amortization Expense | ||
2020 | 43 | |
Total | 43 | |
Tri Valley Bank | Core deposit | ||
Estimated Amortization Expense | ||
2020 | 52 | |
2021 | 184 | |
2022 | 167 | |
2023 | 158 | |
2024 | 152 | |
2025 | 145 | |
Thereafter | 306 | |
Total | 1,164 | |
Tri Valley Bank | Below market-value lease | ||
Estimated Amortization Expense | ||
2020 | 4 | |
2021 | 18 | |
2022 | 18 | |
2023 | 18 | |
2024 | 18 | |
2025 | 18 | |
Thereafter | 70 | |
Total | 164 | |
Presidio bank | Core deposit | ||
Estimated Amortization Expense | ||
2020 | 456 | |
2021 | 1,447 | |
2022 | 1,225 | |
2023 | 1,118 | |
2024 | 1,026 | |
2025 | 970 | |
Thereafter | 3,211 | |
Total | 9,453 | |
Presidio bank | Below or Above market-value lease | ||
Estimated Amortization Expense | ||
2020 | (4) | |
2021 | (20) | |
2022 | (20) | |
2023 | (20) | |
2024 | (14) | |
Total | (78) | |
Focus | Core deposit | ||
Estimated Amortization Expense | ||
2020 | 181 | |
2021 | 596 | |
2022 | 502 | |
2023 | 420 | |
2024 | 346 | |
2025 | 200 | |
Total | 2,245 | |
BVF/CSNK | Customer relationship and brokered relationship | ||
Estimated Amortization Expense | ||
2020 | 47 | |
2021 | 190 | |
2022 | 190 | |
2023 | 190 | |
2024 | 159 | |
Total | $ 776 |
Goodwill and Other Intangible_6
Goodwill and Other Intangible Assets - Impairment of Intangible Assets (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 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 | Sep. 30, 2020 | Dec. 31, 2019 |
Net deferred tax assets | ||
Net deferred tax assets | $ 27,842 | $ 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 | Sep. 30, 2020 | Dec. 31, 2019 |
Income Taxes | ||
Low income housing investments | $ 5,457 | $ 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 | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Income Taxes | ||||
Low income housing tax credits | $ 210 | $ 106 | $ 630 | $ 319 |
Low income housing investment expense | $ 211 | $ 106 | $ 631 | $ 317 |
Income Taxes - Future Commitmen
Income Taxes - Future Commitments of the Low Income Housing Investments (Details) - Low income housing investments $ in Thousands | Sep. 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 | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Supplemental Retirement Plan | |||||
Components of net periodic benefit cost: | |||||
Service cost | $ 123 | $ 55 | $ 369 | $ 165 | |
Interest cost | 234 | 264 | 701 | 792 | |
Amortization of prior transition obligation | 199 | 199 | |||
Amortization of net actuarial loss | 101 | 46 | 291 | 138 | |
Net periodic benefit cost | 657 | 365 | 1,560 | 1,095 | |
Plan assets associated with the plan | 0 | 0 | |||
Split-Dollar Life Insurance Benefit Plan | |||||
Components of net periodic benefit cost: | |||||
Interest cost | 62 | 69 | 185 | 209 | $ 278 |
Amortization of prior transition obligation | (15) | (24) | (45) | (73) | |
Net periodic benefit cost | $ 47 | $ 45 | $ 140 | $ 136 |
Benefit Plans - Defined Benef_2
Benefit Plans - Defined Benefit Plans - Change in Projected Benefit Obligation (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 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 | $ 69 | 185 | 209 | 278 |
Actuarial loss (gain) | (42) | 1,017 | |||
Projected benefit obligation at end of period | 8,341 | 8,341 | $ 8,198 | ||
Supplemental Retirement Plan | |||||
Change in projected benefit obligation: | |||||
Interest cost | $ 234 | $ 264 | $ 701 | $ 792 |
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 | Sep. 30, 2020 | Dec. 31, 2019 |
Amounts Recognized in Accumulated Other Comprehensive Loss | ||
Net actuarial loss | $ 3,847 | $ 3,776 |
Prior transition obligation | 992 | 1,059 |
Accumulated other comprehensive loss | $ 4,839 | $ 4,835 |
Fair Value - Financial Assets a
Fair Value - Financial Assets and Liabilities Measured on a Recurring Basis (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Financial Assets and Liabilities Measured on a Recurring Basis | ||
Securities available-for-sale | $ 294,438 | $ 404,825 |
I/O strip receivables | 491 | 503 |
Agency mortgage-backed securities | ||
Financial Assets and Liabilities Measured on a Recurring Basis | ||
Securities available-for-sale | 203,609 | 284,361 |
U.S. Treasury | ||
Financial Assets and Liabilities Measured on a Recurring Basis | ||
Securities available-for-sale | 90,829 | 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 | 90,829 | 120,464 |
Significant Other Observable Inputs (Level 2) | ||
Financial Assets and Liabilities Measured on a Recurring Basis | ||
I/O strip receivables | 491 | 503 |
Significant Other Observable Inputs (Level 2) | Agency mortgage-backed securities | ||
Financial Assets and Liabilities Measured on a Recurring Basis | ||
Securities available-for-sale | 203,609 | 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 ($) | Sep. 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 | Sep. 30, 2020 | Dec. 31, 2019 |
Assets | ||
Securities available-for-sale | $ 294,438 | $ 404,825 |
Securities held-to-maturity | 303,996 | 368,107 |
Federal Home Loan Bank, Federal Reserve Bank stock and other investments, at cost | 33,518 | 29,842 |
I/O strips receivables | 491 | 503 |
Liabilities | ||
Subordinated Debt. | 39,693 | 39,554 |
Significant Other Observable Inputs (Level 2) | ||
Assets | ||
I/O strips receivables | 491 | 503 |
Carrying amount | ||
Assets | ||
Cash and cash equivalents | 960,268 | 457,370 |
Securities available-for-sale | 294,438 | 404,825 |
Securities held-to-maturity | 295,609 | 366,560 |
Loans (including loans held-for-sale), net | 2,655,159 | 2,511,611 |
Federal Home Loan Bank, Federal Reserve Bank stock and other investments, at cost | 33,518 | 29,842 |
Accrued interest receivable | 10,704 | 10,915 |
I/O strips receivables | 491 | 503 |
Liabilities | ||
Time deposits | 143,452 | 168,034 |
Other deposits | 3,746,949 | 3,246,734 |
Subordinated Debt. | 39,693 | 39,554 |
Accrued interest payable | 1,092 | 707 |
Carried at fair value | ||
Assets | ||
Cash and cash equivalents | 960,268 | 457,370 |
Securities available-for-sale | 294,438 | 404,825 |
Securities held-to-maturity | 303,996 | 368,107 |
Loans (including loans held-for-sale), net | 2,661,185 | 2,513,329 |
Accrued interest receivable | 10,704 | 10,915 |
I/O strips receivables | 491 | 503 |
Liabilities | ||
Time deposits | 141,926 | 158,704 |
Other deposits | 3,746,949 | 3,246,734 |
Subordinated Debt. | 38,893 | 40,404 |
Accrued interest payable | 1,092 | 707 |
Carried at fair value | Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Assets | ||
Cash and cash equivalents | 960,268 | 457,370 |
Securities available-for-sale | 90,829 | 120,464 |
Accrued interest receivable | 520 | 446 |
Carried at fair value | Significant Other Observable Inputs (Level 2) | ||
Assets | ||
Securities available-for-sale | 203,609 | 284,361 |
Securities held-to-maturity | 303,996 | 368,107 |
Loans (including loans held-for-sale), net | 3,565 | 1,052 |
Accrued interest receivable | 1,761 | 2,218 |
I/O strips receivables | 491 | 503 |
Liabilities | ||
Time deposits | 141,926 | 158,704 |
Other deposits | 3,746,949 | 3,246,734 |
Subordinated Debt. | 38,893 | 40,404 |
Accrued interest payable | 1,092 | 707 |
Carried at fair value | Significant Unobservable Inputs (Level 3) | ||
Assets | ||
Loans (including loans held-for-sale), net | 2,657,620 | 2,512,277 |
Accrued interest receivable | $ 8,423 | $ 8,251 |
Equity Plan - General Disclosur
Equity Plan - General Disclosures (Details) - USD ($) | Oct. 11, 2019 | Sep. 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 | 2,396,382 | ||||
Options | |||||
Equity Plan | |||||
Vesting period | 4 years | ||||
Expiration term | 10 years | ||||
Heritage Commerce Corp stock options | 2,561,971 | 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 ($) | 9 Months Ended | |
Sep. 30, 2020 | Sep. 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 | 2,561,971 | 2,561,971 |
Exercised (in shares) | (378,714) | |
Forfeited or expired (in shares) | (101,661) | |
Outstanding at the end of the period (in shares) | 2,561,971 | |
Vested or expected to vest (in shares) | 2,408,253 | |
Exercisable at the end of the period (in shares) | 1,955,429 | |
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 | 9.31 | $ 9.31 |
Exercised (in dollars per share) | 4.51 | |
Forfeited or expired (in dollars per share) | 13.11 | |
Outstanding at the end of the period (in dollars per share) | $ 9.31 | |
Additional Information | ||
Weighted Average Remaining Contractual Life - Outstanding at the end of the period (in years) | 5 years 8 months 12 days | |
Weighted Average Remaining Contractual Life - Vested or expected to vest (in years) | 5 years 8 months 12 days | |
Weighted Average Remaining Contractual Life - Exercisable at the end of the period (in years) | 4 years 8 months 23 days | |
Aggregate Intrinsic Value - Outstanding at the end of the period (in dollars) | $ 1,469,856 | |
Aggregate Intrinsic Value - Vested or expected to vest (in dollars) | 1,381,664 | |
Aggregate Intrinsic Value - Exercisable at the end of the period (in dollars) | $ 1,469,856 | |
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 | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Information Related to the Equity Plans | ||
Cash received from option exercise | $ 1,708 | $ 723 |
Options | ||
Information Related to the Equity Plans | ||
Intrinsic value of options exercised | 2,242,512 | 444,251 |
Cash received from option exercise | 1,707,587 | 723,397 |
Tax benefit realized from option exercises | $ 58,575 | $ 44,244 |
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 | 9 Months Ended |
Sep. 30, 2020USD ($) | |
Unrecognized Compensation Cost | |
Total unrecognized compensation cost related to nonvested stock options granted | $ 1,052 |
Expected weighted-average period for recognition of compensation costs related to nonvested stock options | 2 years 9 months 25 days |
Equity Plan - Assumptions Used
Equity Plan - Assumptions Used to Estimate Fair Value (Details) - Options | 9 Months Ended | |
Sep. 30, 2020 | Sep. 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% | 2.23% |
Expected dividends (as a percent) | 5.71% | 3.95% |
Equity Plan - Restricted Stock
Equity Plan - Restricted Stock Activity (Details) - Restricted stock | 9 Months Ended |
Sep. 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 | $ 10.83 |
Equity Plan - Unrecognized Co_2
Equity Plan - Unrecognized Compensation Cost - Nonvested Restricted Stock Awards (Details) - Restricted stock $ in Thousands | 9 Months Ended |
Sep. 30, 2020USD ($) | |
Unrecognized Compensation Cost | |
Total unrecognized compensation cost related to nonvested restricted stock awards | $ 2,638 |
Expected weighted-average period for recognition of compensation costs related to nonvested restricted stock awards | 1 year 11 months 8 days |
Subordinate Debt (Details)
Subordinate Debt (Details) - USD ($) | May 26, 2017 | Dec. 31, 2019 | Sep. 30, 2020 | Dec. 19, 2019 | Oct. 11, 2019 |
Debt Instrument [Line Items] | |||||
Principal amount | $ 40,000,000 | ||||
Debt Issuance Costs | $ 307,000 | ||||
Fixed interest rate (as a percent) | 5.25% | ||||
Subordinate debt | $ 39,554,000 | $ 39,693,000 | |||
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 | Sep. 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 | Sep. 30, 2020USD ($) | Dec. 31, 2019USD ($) |
Total Capital (to risk-weighted assets) | ||
Actual, Amount | $ 479,366 | $ 457,158 |
Required For Capital Adequacy Purposes, Amount | $ 315,142 | $ 329,306 |
Actual, Ratio (as a percent) | 0.160 | 0.146 |
Required For Capital Adequacy Purposes, Ratio (as a percent) | 0.105 | 0.105 |
Tier 1 Capital (to risk-weighted assets) | ||
Actual, Amount | $ 404,973 | $ 393,432 |
Required For Capital Adequacy Purposes, Amount | $ 255,115 | $ 266,581 |
Actual, Ratio (as a percent) | 0.135 | 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 | $ 404,973 | $ 393,432 |
Required For Capital Adequacy Purposes, Amount | $ 210,095 | $ 219,538 |
Actual, Ratio (as a percent) | 0.135% | 0.125% |
Required For Capital Adequacy Purposes, Ratio (as a percent) | 0.07% | 0.07% |
Tier 1 Capital (to average assets) | ||
Actual, Amount | $ 404,973 | $ 393,432 |
Required For Capital Adequacy Purposes, Amount | $ 174,521 | $ 161,677 |
Actual, Ratio (as a percent) | 0.093 | 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 | $ 457,069 | $ 435,757 |
To Be Well Capitalized Under Regulatory Requirements, Amount | 299,993 | 313,485 |
Required For Capital Adequacy Purposes, Amount | $ 314,992 | $ 329,159 |
Actual, Ratio (as a percent) | 0.152 | 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 | $ 422,369 | $ 411,585 |
To Be Well Capitalized Under Regulatory Requirements, Amount | 239,994 | 250,788 |
Required For Capital Adequacy Purposes, Amount | $ 254,994 | $ 266,462 |
Actual, Ratio (as a percent) | 0.141 | 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 | $ 422,369 | $ 411,585 |
To Be Well Capitalized Under Regulatory Requirements, Amount | 194,995 | 203,765 |
Required For Capital Adequacy Purposes, Amount | $ 209,995 | $ 219,439 |
Actual, Ratio (as a percent) | 0.141% | 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 | $ 422,369 | $ 411,585 |
To Be Well Capitalized Under Regulatory Requirements, Amount | 218,066 | 202,013 |
Required For Capital Adequacy Purposes, Amount | $ 174,453 | $ 161,611 |
Actual, Ratio (as a percent) | 0.097 | 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 | 9 Months Ended | |||
Mar. 31, 2020 | Sep. 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. | $ 39,693 | $ 39,554 | |||
HBC (Wholly-owned Subsidiary) | |||||
Cash dividend | |||||
Cash dividend available | 29,996 | ||||
Dividends paid to parent company | $ 24,000 | $ 8,000 |
Commitments and Loss Continge_3
Commitments and Loss Contingencies - Financial Instruments with Off-Balance Sheet Risk (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Commitments and Contingencies | |||
Commitments to extend credit, fixed rate | $ 137,489 | $ 150,255 | $ 158,817 |
Commitments to extend credit, variable rate | 1,047,588 | 602,823 | 961,821 |
Commitment to extend credit, total | $ 1,185,077 | $ 753,078 | $ 1,120,638 |
Percentage of unused commitments to outstanding gross loans | 44.00% | 40.00% | 44.00% |
Off-Balance Sheet, Credit Loss, Liability, Credit Loss Expenses (Reduction) | $ 547 | ||
Unused lines of credit and commitments to make loans | |||
Commitments and Contingencies | |||
Commitments to extend credit, fixed rate | 133,400 | $ 148,011 | $ 147,372 |
Commitments to extend credit, variable rate | 1,026,450 | 589,479 | 951,206 |
Commitment to extend credit, total | 1,159,850 | 737,490 | 1,098,578 |
Standby letters of credit | |||
Commitments and Contingencies | |||
Commitments to extend credit, fixed rate | 4,089 | 2,244 | 11,445 |
Commitments to extend credit, variable rate | 21,138 | 13,344 | 10,615 |
Commitment to extend credit, total | $ 25,227 | $ 15,588 | $ 22,060 |
Revenue Recognition (Details)
Revenue Recognition (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Disaggregation of Revenue [Line Items] | ||||
Non-interest Income In-scope of Topic 606 | $ 3,042 | $ 3,370 | ||
Non-interest Income Out-of-scope of Topic 606 | $ 1,963 | $ 1,586 | 4,824 | 4,481 |
Total noninterest income | 2,595 | 2,618 | 7,866 | 7,851 |
Service charges and fees on deposit accounts | ||||
Disaggregation of Revenue [Line Items] | ||||
Non-interest Income In-scope of Topic 606 | $ 632 | $ 1,032 | $ 2,251 | $ 3,370 |
Revenue, Product and Service [Extensible List] | Service charges and fees on deposit accounts | Service charges and fees on deposit accounts | Service charges and fees on deposit accounts | Service charges and fees on deposit accounts |
Gain on the disposition of foreclosed assets | ||||
Disaggregation of Revenue [Line Items] | ||||
Non-interest Income In-scope of Topic 606 | $ 791 | |||
Revenue, Product and Service [Extensible List] | Gain on the disposition of foreclosed assets | Gain on the disposition of foreclosed assets |
Noninterest Expense (Details)
Noninterest Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Noninterest Expense | ||||
Salaries and employee benefits | $ 11,967 | $ 10,467 | $ 38,470 | $ 31,935 |
Occupancy and equipment | 2,283 | 1,550 | 5,821 | 4,634 |
Professional fees | 1,352 | 789 | 3,942 | 2,360 |
Amortization of intangible assets | 965 | 554 | 2,787 | 1,661 |
Software subscriptions | 641 | 601 | 2,276 | 1,746 |
Insurance expense | 591 | 479 | 1,625 | 1,354 |
Supplemental retirement plan cost | 585 | 310 | 1,344 | 930 |
Data processing | 463 | 454 | 2,218 | 1,865 |
Other | 2,321 | 2,705 | 9,471 | 7,787 |
Total noninterest expense, excluding merger-related costs | 21,168 | 17,909 | 67,954 | 54,272 |
Salaries and employee benefits merger-related costs | 356 | |||
Other merger-related costs | 17 | 661 | 2,144 | 1,201 |
Total merger-related costs | $ 17 | $ 661 | $ 2,500 | $ 1,201 |
Leases (Details)
Leases (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2020USD ($) | Dec. 31, 2019USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) | Jun. 30, 2019ft² | |
Lessee, Lease, Description [Line Items] | ||||||
Lessee, Operating Lease, Option to renew | true | |||||
Operating Lease Cost (Cost resulting from lease payments) | $ 1,664 | $ 1,035 | $ 5,166 | $ 3,129 | ||
Operating Lease - Operating Cash Flows (Fixed Payments) | 1,463 | 1,040 | 4,032 | 3,066 | ||
Operating Lease - ROU assets | 37,000 | 7,089 | 37,000 | 7,089 | ||
Operating Lease - Liabilities | $ 37,000 | $ 7,089 | $ 37,000 | $ 7,089 | ||
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 5 months 12 days | 3 years 7 months 2 days | 8 years 5 months 12 days | 3 years 7 months 2 days | ||
Weighted Average Discount Rate - Operating Leases | 4.54% | 5.24% | 4.54% | 5.24% | ||
Area of office space | ft² | 54,910 | |||||
Wallnut creek | ||||||
Lessee, Lease, Description [Line Items] | ||||||
Lease impairment and write-off of fixed assets and tenant improvements | $ 434 | |||||
San Mateo | ||||||
Lessee, Lease, Description [Line Items] | ||||||
Lease impairment and write-off of fixed assets and tenant improvements | $ 625 |
Leases - Maturity Analysis (Det
Leases - Maturity Analysis (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Sep. 30, 2019 |
Operating Lease Payments Due | ||
2020 | $ 1,539 | |
2021 | 5,242 | |
2022 | 5,668 | |
2023 | 5,039 | |
2024 | 4,692 | |
Thereafter | 23,061 | |
Total undiscounted cash flows | 45,241 | |
Discount on cash flows | (8,241) | |
Total lease liability | $ 37,000 | $ 7,089 |
Business Segment Information -
Business Segment Information - Business Segments (Details) | 9 Months Ended |
Sep. 30, 2020segment | |
Business Segment Information | |
Number of business segments | 2 |
Focus | |
Business Segment Information | |
Number of business segments | 2 |
Business Segment Information _2
Business Segment Information - Operating Statements (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||||||
Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Operating Income | |||||||||
Interest income | $ 36,252 | $ 33,250 | $ 114,326 | $ 100,188 | |||||
Total interest expense | 2,087 | 2,625 | 6,641 | 7,605 | |||||
Net interest income | 34,165 | 30,625 | 107,685 | 92,583 | |||||
Provision (credit) for credit losses on loans | 197 | (576) | 14,581 | (2,377) | |||||
Net interest income after provision | 33,968 | 31,201 | 93,104 | 94,960 | |||||
Noninterest income | 2,595 | 2,618 | 7,866 | 7,851 | |||||
Noninterest expense | 21,168 | 17,909 | 67,954 | 54,272 | |||||
Income before income taxes | 15,395 | 15,910 | 33,016 | 48,539 | |||||
Income tax expense | 4,198 | 4,633 | 9,340 | 13,763 | |||||
Net income | 11,197 | $ 10,618 | $ 1,861 | 11,277 | $ 11,353 | $ 12,146 | 23,676 | 34,776 | |
Total assets | 4,606,785 | 3,182,471 | 4,606,785 | 3,182,471 | $ 4,109,463 | ||||
Loans, net of deferred fees | 2,697,016 | 1,875,387 | 2,697,016 | 1,875,387 | 2,533,844 | ||||
Goodwill | 167,631 | 83,753 | 167,631 | 83,753 | $ 167,420 | ||||
Noninterest expense includes merger-related costs | 17 | 661 | 2,500 | 1,201 | |||||
Banking | |||||||||
Operating Income | |||||||||
Interest income | 33,820 | 30,371 | 106,455 | 91,388 | |||||
Intersegment interest allocations | 184 | 303 | 686 | 909 | |||||
Total interest expense | 2,087 | 2,625 | 6,641 | 7,605 | |||||
Net interest income | 31,917 | 28,049 | 100,500 | 84,692 | |||||
Provision (credit) for credit losses on loans | 169 | (1,019) | 14,150 | (2,655) | |||||
Net interest income after provision | 31,748 | 29,068 | 86,350 | 87,347 | |||||
Noninterest income | 2,412 | 2,488 | 7,318 | 7,361 | |||||
Noninterest expense | 19,594 | 16,204 | 63,113 | 49,189 | |||||
Intersegment expense allocations | 72 | 125 | 307 | 378 | |||||
Income before income taxes | 14,638 | 15,477 | 30,862 | 45,897 | |||||
Income tax expense | 3,974 | 4,505 | 8,703 | 12,982 | |||||
Net income | 10,664 | 10,972 | 22,159 | 32,915 | |||||
Total assets | 4,541,331 | 3,119,367 | 4,541,331 | 3,119,367 | |||||
Loans, net of deferred fees | 2,649,334 | 1,831,172 | 2,649,334 | 1,831,172 | |||||
Goodwill | 154,587 | 70,709 | 154,587 | 70,709 | |||||
Factoring | |||||||||
Operating Income | |||||||||
Interest income | 2,432 | 2,879 | 7,871 | 8,800 | |||||
Intersegment interest allocations | (184) | (303) | (686) | (909) | |||||
Net interest income | 2,248 | 2,576 | 7,185 | 7,891 | |||||
Provision (credit) for credit losses on loans | 28 | 443 | 431 | 278 | |||||
Net interest income after provision | 2,220 | 2,133 | 6,754 | 7,613 | |||||
Noninterest income | 183 | 130 | 548 | 490 | |||||
Noninterest expense | 1,574 | 1,705 | 4,841 | 5,083 | |||||
Intersegment expense allocations | (72) | (125) | (307) | (378) | |||||
Income before income taxes | 757 | 433 | 2,154 | 2,642 | |||||
Income tax expense | 224 | 128 | 637 | 781 | |||||
Net income | 533 | 305 | 1,517 | 1,861 | |||||
Total assets | 65,454 | 63,104 | 65,454 | 63,104 | |||||
Loans, net of deferred fees | 47,682 | 44,215 | 47,682 | 44,215 | |||||
Goodwill | $ 13,044 | $ 13,044 | $ 13,044 | $ 13,044 |
Subsequent Events (Details)
Subsequent Events (Details) - $ / shares | Oct. 22, 2020 | Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 |
Subsequent Event [Line Items] | |||||||
Quarterly cash dividends declared to holders of common stock | $ 0.13 | $ 0.13 | $ 0.13 | $ 0.12 | $ 0.12 | $ 0.12 | |
Subsequent Event | |||||||
Subsequent Event [Line Items] | |||||||
Quarterly cash dividends declared to holders of common stock | $ 0.13 |