Management’s Assessment of Internal Control over Financial Reporting | 1 |
Reports of Independent Registered Public Accounting Firm | 2 - 5 |
Consolidated Balance Sheets as of December 31, 2018 and 2017 | 6 |
Consolidated Statements of Income for the Years Ended December 31, 2018, and 2017 and 2016 | 7 |
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2018, 2017 and 2016 | 8 |
Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2018, 2017 and 2016 | 9 |
Consolidated Statements of Cash Flows for the Years Ended December 31, 2018, 2017 and 2016 | 10 - 11 |
Notes to Consolidated Financial Statements | 12 - 79 |
FCB FINANCIAL HOLDINGS, INC. | ||
Date: | February 21, 2019 | |
Kent S. Ellert | ||
President and Chief Executive Officer | ||
(Principal Executive Officer) | ||
Date: | February 21, 2019 | |
Jack Partagas | ||
Senior Vice President and Chief Financial Officer | ||
(Principal Financial Officer and | ||
Principal Accounting Officer) |
GRANT THORNTON LLP | REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | |
1301 International Parkway, Suite 300 | ||
Fort Lauderdale, FL 33323 | ||
D +1 954 768 9900 | ||
F +1 954 768 9908 | ||
S linkedin/grantthorntonus | Board of Directors and Stockholders | |
twitter.com/granthorntonus | ||
Opinion on the financial statements We have audited the accompanying consolidated balance sheets of FCB Financial Holdings, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2018 and 2017, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2018, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America. | ||
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), and in accordance with auditing standards generally accepted in the United States of America the Company’s internal control over financial reporting as of December 31, 2018, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 21, 2019 expressed an unqualified opinion. | ||
Basis for opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. | ||
GT.COM | Grant Thornton LLP is the U.S. member firm of Grant Thornton International Ltd (GTIL). GTIL and each of its member firms are separate legal entities and are not a worldwide partnership. |
We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. | ||
We have served as the Company’s auditor since 2010. | ||
Fort Lauderdale, Florida | ||
February 21, 2019 |
GRANT THORNTON LLP | REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | |
1301 International Parkway, Suite 300 | ||
Fort Lauderdale, FL 33323 | ||
D +1 954 768 9900 | ||
F +1 954 768 9908 | ||
S linkedin/grantthorntonus | Board of Directors and Stockholders | |
twitter.com/granthorntonus | ||
Opinion on internal control over financial reporting We have audited the internal control over financial reporting of FCB Financial Holdings, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2018, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO. | ||
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), and in accordance with auditing standards generally accepted in the United States of America the consolidated financial statements of the Company as of and for the year ended December 31, 2018, and our report dated February 21, 2019 expressed an unqualified opinion on those financial statements. | ||
Basis for opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Assessment of Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. | ||
We conducted our audit in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. |
GT.COM | Grant Thornton LLP is the U.S. member firm of Grant Thornton International Ltd (GTIL). GTIL and each of its member firms are separate legal entities and are not a worldwide partnership. |
Definition and limitations of internal control over financial reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. | ||
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. | ||
Fort Lauderdale, Florida February 21, 2019 |
December 31, | ||||||||
2018 | 2017 | |||||||
Assets: | ||||||||
Cash and due from banks | $ | 54,550 | $ | 60,787 | ||||
Interest-earning deposits in other banks | 171,726 | 55,134 | ||||||
Investment securities: | ||||||||
Available for sale debt securities, at fair value | 2,304,509 | 2,030,696 | ||||||
Preferred stock and other equity securities, at fair value | 12,727 | 90,107 | ||||||
Federal Home Loan Bank and other bank stock, at cost | 40,412 | 56,881 | ||||||
Total investment securities | 2,357,648 | 2,177,684 | ||||||
Loans held for sale | 1,111 | 12,736 | ||||||
Loans: | ||||||||
New loans | 8,770,177 | 7,661,385 | ||||||
Acquired loans | 653,996 | 316,399 | ||||||
Allowance for loan losses | (50,910 | ) | (47,145 | ) | ||||
Loans, net | 9,373,263 | 7,930,639 | ||||||
Premises and equipment, net | 42,770 | 36,144 | ||||||
Other real estate owned | 10,243 | 14,906 | ||||||
Goodwill | 139,529 | 81,204 | ||||||
Core deposit intangible | 6,843 | 3,668 | ||||||
Deferred tax assets, net | 44,302 | 27,043 | ||||||
Bank-owned life insurance | 216,848 | 201,069 | ||||||
Other assets | 106,973 | 76,065 | ||||||
Total assets | $ | 12,525,806 | $ | 10,677,079 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Liabilities: | ||||||||
Deposits: | ||||||||
Transaction accounts: | ||||||||
Noninterest-bearing | $ | 1,516,583 | $ | 1,236,685 | ||||
Interest-bearing | 4,653,103 | 4,830,525 | ||||||
Total transaction accounts | 6,169,686 | 6,067,210 | ||||||
Time deposits | 4,718,487 | 2,606,717 | ||||||
Total deposits | 10,888,173 | 8,673,927 | ||||||
Borrowings (including FHLB advances of $150,000 and $670,000, respectively) | 179,139 | 749,113 | ||||||
Other liabilities | 55,942 | 74,867 | ||||||
Total liabilities | 11,123,254 | 9,497,907 | ||||||
Commitments and contingencies (Note 17) | ||||||||
Stockholders’ Equity: | ||||||||
Class A common stock, par value $0.001 per share; 100 million shares authorized; 49,563,735, 47,065,593 issued and 46,806,641, 44,371,104 outstanding | 50 | 47 | ||||||
Class B common stock, par value $0.001 per share; 50 million shares authorized; 192,132, 192,132 issued and 0, 0 outstanding | — | — | ||||||
Additional paid-in capital | 1,042,142 | 933,960 | ||||||
Retained earnings | 481,057 | 313,645 | ||||||
Accumulated other comprehensive income (loss) | (43,324 | ) | 8,893 | |||||
Treasury stock, at cost; 2,757,094, 2,694,489 Class A and 192,132, 192,132 Class B common shares | (77,373 | ) | (77,373 | ) | ||||
Total stockholders’ equity | 1,402,552 | 1,179,172 | ||||||
Total liabilities and stockholders’ equity | $ | 12,525,806 | $ | 10,677,079 |
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Interest income: | ||||||||||||
Interest and fees on loans | $ | 401,413 | $ | 295,400 | $ | 258,261 | ||||||
Interest and dividends on investment securities | 93,145 | 78,176 | 60,706 | |||||||||
Other interest income | 2,169 | 525 | 349 | |||||||||
Total interest income | 496,727 | 374,101 | 319,316 | |||||||||
Interest expense: | ||||||||||||
Interest on deposits | 125,128 | 66,066 | 44,329 | |||||||||
Interest on borrowings | 11,011 | 12,583 | 7,271 | |||||||||
Total interest expense | 136,139 | 78,649 | 51,600 | |||||||||
Net interest income | 360,588 | 295,452 | 267,716 | |||||||||
Provision for loan losses | 16,485 | 9,415 | 7,655 | |||||||||
Net interest income after provision for loan losses | 344,103 | 286,037 | 260,061 | |||||||||
Noninterest income: | ||||||||||||
Service charges and fees | 4,797 | 3,736 | 3,467 | |||||||||
Loan and other fees | 15,704 | 11,415 | 8,895 | |||||||||
Bank-owned life insurance income | 5,654 | 5,647 | 5,192 | |||||||||
Income from resolution of acquired assets | 1,196 | 1,973 | 3,345 | |||||||||
Gain (loss) on sales of other real estate owned | 109 | (176 | ) | 3,126 | ||||||||
Gain (loss) on investment securities and extinguishment of debt, net | 1,374 | 1,933 | 1,819 | |||||||||
Other noninterest income | 4,657 | 10,488 | 3,873 | |||||||||
Total noninterest income | 33,491 | 35,016 | 29,717 | |||||||||
Noninterest expense: | ||||||||||||
Salaries and employee benefits | 91,533 | 84,830 | 76,231 | |||||||||
Occupancy and equipment expenses | 15,693 | 13,463 | 13,591 | |||||||||
Loan and other real estate related expenses | 3,757 | 3,623 | 7,356 | |||||||||
Professional services | 8,935 | 5,940 | 5,207 | |||||||||
Data processing and network | 15,013 | 12,565 | 11,461 | |||||||||
Regulatory assessments and insurance | 10,533 | 8,971 | 7,872 | |||||||||
Amortization of intangibles | 1,405 | 1,023 | 1,189 | |||||||||
Marketing and promotions | 6,099 | 4,587 | 3,851 | |||||||||
Other operating expenses | 7,664 | 6,692 | 7,199 | |||||||||
Total noninterest expense | 160,632 | 141,694 | 133,957 | |||||||||
Income before income tax expense | 216,962 | 179,359 | 155,821 | |||||||||
Income tax expense | 48,824 | 54,165 | 55,905 | |||||||||
Net income | $ | 168,138 | $ | 125,194 | $ | 99,916 | ||||||
Earnings per share: | ||||||||||||
Basic | $ | 3.63 | $ | 2.92 | $ | 2.45 | ||||||
Diluted | $ | 3.47 | $ | 2.71 | $ | 2.31 | ||||||
Weighted average shares outstanding: | ||||||||||||
Basic | 46,343,401 | 42,887,142 | 40,716,588 | |||||||||
Diluted | 48,429,925 | 46,120,930 | 43,225,164 |
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Net income | $ | 168,138 | $ | 125,194 | $ | 99,916 | ||||||
Other comprehensive income (loss): | ||||||||||||
Net unrealized holding gains (losses) on investment securities available for sale, net of taxes of $16,917, $(9,244), and $(4,467), respectively | (50,883 | ) | 14,868 | 7,115 | ||||||||
Reclassification adjustment for realized (gains) losses on investment securities available for sale included in net income, net of taxes of $(186), $1,226, and $1,048, respectively | 559 | (1,980 | ) | (1,667 | ) | |||||||
Cumulative adjustment from adoption of new accounting standards (1) | 726 | — | — | |||||||||
Net change in unrealized gains (losses) on available for sale debt securities | (49,598 | ) | 12,888 | 5,448 | ||||||||
Unrealized losses on derivative instruments: | ||||||||||||
Net unrealized holding loss on derivative instrument, net of taxes of $871, $0, and $0, respectively | (2,619 | ) | — | — | ||||||||
Net change in unrealized loss on derivative instrument | (2,619 | ) | — | — | ||||||||
Net change in accumulated other comprehensive income (loss) | $ | (52,217 | ) | $ | 12,888 | $ | 5,448 | |||||
Total comprehensive income | $ | 115,921 | $ | 138,082 | $ | 105,364 |
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Dollars in thousands, except for share data)
Accumulated | ||||||||||||||||||||||||||||||||||||
Common Stock | Common Stock | Additional | Other | Total | ||||||||||||||||||||||||||||||||
Shares Outstanding | Issued | Paid in | Retained | Treasury | Comprehensive | Stockholders | ||||||||||||||||||||||||||||||
Class A | Class B | Class A | Class B | Capital | Earnings | Stock | Income (loss) | Equity | ||||||||||||||||||||||||||||
Balance as of January 1, 2016 | 37,126,571 | 3,733,882 | $ | 39 | $ | 4 | $ | 850,609 | $ | 88,535 | $ | (53,635 | ) | $ | (9,443 | ) | $ | 876,109 | ||||||||||||||||||
Net income | — | — | — | — | — | 99,916 | — | — | 99,916 | |||||||||||||||||||||||||||
Exchange of B shares to A shares | 3,545,408 | (3,545,408 | ) | 4 | (4 | ) | — | — | — | — | — | |||||||||||||||||||||||||
Stock-based compensation and warrant expense | — | — | — | — | 5,613 | — | — | — | 5,613 | |||||||||||||||||||||||||||
Excess tax benefit of stock-based compensation | — | — | — | — | 2,110 | — | — | — | 2,110 | |||||||||||||||||||||||||||
Treasury stock purchases | (717,115 | ) | — | — | — | — | — | (23,738 | ) | — | (23,738 | ) | ||||||||||||||||||||||||
Stock issued in connection with equity awards and warrants | 1,014,233 | — | 1 | — | 17,041 | — | — | — | 17,042 | |||||||||||||||||||||||||||
Other | — | — | — | — | (59 | ) | — | — | — | (59 | ) | |||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | — | 5,448 | 5,448 | |||||||||||||||||||||||||||
Balance as of December 31, 2016 | 40,969,097 | 188,474 | $ | 44 | $ | — | $ | 875,314 | $ | 188,451 | $ | (77,373 | ) | $ | (3,995 | ) | $ | 982,441 | ||||||||||||||||||
Net income | — | — | — | — | — | 125,194 | — | — | 125,194 | |||||||||||||||||||||||||||
Exchange of B shares to A shares | 188,474 | (188,474 | ) | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
Stock-based compensation and warrant expense | — | — | — | — | 8,038 | — | — | — | 8,038 | |||||||||||||||||||||||||||
Stock issued in connection with equity awards and warrants | 3,213,533 | — | 3 | — | 50,667 | — | — | — | 50,670 | |||||||||||||||||||||||||||
Other | — | — | — | — | (59 | ) | — | — | — | (59 | ) | |||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | — | 12,888 | 12,888 | |||||||||||||||||||||||||||
Balance as of December 31, 2017 | 44,371,104 | — | $ | 47 | $ | — | $ | 933,960 | $ | 313,645 | $ | (77,373 | ) | $ | 8,893 | $ | 1,179,172 | |||||||||||||||||||
Net income | — | — | — | — | — | 168,138 | — | — | 168,138 | |||||||||||||||||||||||||||
Cumulative effects of adoption of accounting standards (1) | — | — | — | — | — | (726 | ) | — | 726 | — | ||||||||||||||||||||||||||
Stock issued in connection with acquisition, net of issuance cost | 1,754,362 | — | 2 | — | 94,120 | — | — | — | 94,122 | |||||||||||||||||||||||||||
Stock-based compensation and warrant expense | — | — | — | — | 9,053 | — | — | — | 9,053 | |||||||||||||||||||||||||||
Stock issued in connection with equity awards and warrants | 743,780 | — | 1 | — | 8,439 | — | — | — | 8,440 | |||||||||||||||||||||||||||
Shares surrendered for tax withholding obligations | (62,605 | ) | — | — | — | (3,048 | ) | — | — | — | (3,048 | ) | ||||||||||||||||||||||||
Other | — | — | — | — | (382 | ) | — | — | — | (382 | ) | |||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | — | — | (52,943 | ) | (52,943 | ) | |||||||||||||||||||||||||
Balance as of December 31, 2018 | 46,806,641 | — | $ | 50 | $ | — | $ | 1,042,142 | $ | 481,057 | $ | (77,373 | ) | $ | (43,324 | ) | $ | 1,402,552 |
(1) Includes $1.0 million from adoption of ASU 2016-01 and $(1.7) million from adoption of ASU 2018-02. See Note 1 for additional information.
The accompanying notes are an integral part of these consolidated financial statements
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Cash Flows From Operating Activities: | ||||||||||||
Net income (loss) | $ | 168,138 | $ | 125,194 | $ | 99,916 | ||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||||||
Provision for loan losses | 16,485 | 9,415 | 7,655 | |||||||||
Amortization of intangible assets | 1,405 | 1,023 | 1,189 | |||||||||
Depreciation and amortization of premises and equipment | 3,770 | 3,618 | 3,583 | |||||||||
Amortization of discount on loans | (3,068 | ) | (1,265 | ) | (930 | ) | ||||||
Net amortization (accretion) of premium (discount) on investment securities | 2,406 | 2,166 | 1,586 | |||||||||
Net amortization (accretion) of premium (discount) on time deposits | (253 | ) | — | (50 | ) | |||||||
Net amortization (accretion) on FHLB advances and other borrowings | — | (846 | ) | (2,635 | ) | |||||||
Impairment of other real estate owned | 1,223 | 670 | 1,751 | |||||||||
Impairment of fixed assets HFS | 110 | — | 48 | |||||||||
(Gain) loss on available for sale debt securities | 2,819 | (1,933 | ) | (1,819 | ) | |||||||
(Gain) loss on sale of loans | (782 | ) | (4,860 | ) | (1,635 | ) | ||||||
(Gain) loss on sale of other real estate owned | (109 | ) | 176 | (3,126 | ) | |||||||
(Gain) loss on debt extinguishment | (6,255 | ) | — | — | ||||||||
Unrealized (gain) loss on preferred stock and equity securities | 2,062 | — | — | |||||||||
(Gain) loss on sale of premises and equipment | 185 | (34 | ) | 48 | ||||||||
Deferred tax expense | 5,655 | 26,329 | 10,364 | |||||||||
Stock-based compensation and warrant expense | 9,053 | 8,038 | 5,613 | |||||||||
Increase in cash surrender value of BOLI | (5,654 | ) | (5,647 | ) | (5,192 | ) | ||||||
Net change in operating assets and liabilities: | ||||||||||||
Net change in loans held for sale | 1,644 | 9,535 | (16,071 | ) | ||||||||
Net change in other assets | (18,463 | ) | (14,112 | ) | 8,499 | |||||||
Net change in other liabilities | (8,519 | ) | 6,679 | (10,717 | ) | |||||||
Net cash provided by (used in) operating activities | 171,852 | 164,146 | 98,077 | |||||||||
Cash Flows From Investing Activities: | ||||||||||||
Purchase of equity securities | (56 | ) | (6,051 | ) | (72,989 | ) | ||||||
Purchase of available for sale debt securities | (820,279 | ) | (878,681 | ) | (677,493 | ) | ||||||
Sales of equity investment securities | 75,373 | 54,759 | 106,933 | |||||||||
Sales of available for sale debt securities | 112,145 | 168,967 | 235,204 | |||||||||
Paydown and maturities of available for sale debt securities | 358,920 | 451,974 | 89,421 | |||||||||
Purchase of FHLB and other bank stock | (99,058 | ) | (178,578 | ) | (113,362 | ) | ||||||
Sales of FHLB and other bank stock | 118,968 | 173,353 | 121,183 | |||||||||
Cash received in acquisition | 16,656 | — | — | |||||||||
Net change in loans | (1,041,587 | ) | (1,601,014 | ) | (1,357,875 | ) | ||||||
Purchase of loans | (8,543 | ) | (11,867 | ) | (200,480 | ) | ||||||
Proceeds from sale of loans | 30,285 | 271,854 | 106,450 |
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS – (CONTINUED)
(Dollars in thousands)
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Purchase of bank-owned life insurance | — | — | (25,000 | ) | ||||||||
Proceeds from sale of other real estate owned | 4,112 | 5,520 | 34,274 | |||||||||
Purchase of premises and equipment | (8,333 | ) | (3,163 | ) | (4,925 | ) | ||||||
Proceeds from the sale of premises and equipment | 1,067 | 87 | 1,548 | |||||||||
Capitalized expenditures on foreclosed real estate | — | — | (543 | ) | ||||||||
Proceeds from life insurance | 365 | 3,016 | — | |||||||||
Net cash provided by (used in) investing activities | (1,259,965 | ) | (1,549,824 | ) | (1,757,654 | ) | ||||||
Cash Flows From Financing Activities: | ||||||||||||
Net change in deposits | 1,832,166 | 1,368,256 | 1,875,083 | |||||||||
Net change in FHLB advances and other borrowings | (585,149 | ) | 77,750 | (214,250 | ) | |||||||
Net change in repurchase agreements | (51,959 | ) | (78,894 | ) | (15,195 | ) | ||||||
Repurchase of stock | — | — | (23,738 | ) | ||||||||
Cash paid for witholding taxes on share based payments | (4,648 | ) | — | — | ||||||||
Exercise of stock options | 8,440 | 50,670 | 17,042 | |||||||||
Excess tax benefit from share-based payments | — | — | 2,110 | |||||||||
Other financing costs | (382 | ) | (59 | ) | (59 | ) | ||||||
Net cash provided by (used in) financing activities | 1,198,468 | 1,417,723 | 1,640,993 | |||||||||
Net Change in Cash and Cash Equivalents | 110,355 | 32,045 | (18,584 | ) | ||||||||
Cash and Cash Equivalents at Beginning of Period | 115,921 | 83,876 | 102,460 | |||||||||
Cash and Cash Equivalents at End of Period | $ | 226,276 | $ | 115,921 | $ | 83,876 | ||||||
Supplemental Disclosures of Cash Flow Information: | ||||||||||||
Interest paid | $ | 132,156 | $ | 77,859 | $ | 50,631 | ||||||
Income taxes paid | 40,729 | 19,719 | 60,192 | |||||||||
Supplemental disclosure of noncash investing and financing activities: | ||||||||||||
Transfer of loans to other real estate owned | $ | 462 | $ | 2,044 | $ | 12,244 | ||||||
Transfer from loans held for sale to portfolio loans | 10,683 | — | — | |||||||||
(Purchase) sale of investment securities settled in subsequent period, net | 38,452 | (14,664 | ) | (23,788 | ) | |||||||
See Note 2 regarding non-cash transactions included in the acquisition |
The accompanying notes are an integral part of these consolidated financial statements
• | There is evidence of credit quality deterioration since origination resulting in a “Day 1” discount attributable, at least in part, to credit quality; |
• | The loans were acquired in a business combination or asset purchase; and |
• | The loans are not to be subsequently accounted for at fair value. |
• | Requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. |
• | Simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value. |
• | Eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet. |
• | Requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. |
• | Requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. |
• | Requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements. |
• | Clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. |
Acquisition Date Fair Value | ||||
(Dollars in thousands) | ||||
Consideration transferred: | ||||
Common stock issued | $ | 94,122 | ||
Liability incurred related to settlement of outstanding stock options | 5,198 | |||
Total consideration transferred | 99,320 | |||
Fair value of assets acquired: | ||||
Cash and cash equivalents | 16,656 | |||
Investment securities | 38,772 | |||
Loans | 425,894 | |||
Other real estate owned | 111 | |||
Core deposit intangible | 4,580 | |||
Fixed assets | 3,425 | |||
Deferred tax asset, net | 4,804 | |||
Bank-owned life insurance | 10,489 | |||
Other assets | 2,104 | |||
Total identifiable assets acquired | 506,835 | |||
Fair value of liabilities assumed: | ||||
Deposits | 382,333 | |||
FHLB advances and other borrowings | 73,389 | |||
Other liabilities | 10,118 | |||
Total liabilities assumed | 465,840 | |||
Fair value of net assets acquired | 40,995 | |||
Goodwill resulting from acquisition | $ | 58,325 |
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
NOTE 3. INVESTMENT SECURITIES
The amortized cost, gross unrealized gains and losses and approximate fair values of securities available for sale are as follows:
Amortized | Unrealized | Fair | ||||||||||||||
December 31, 2018 | Cost | Gains | Losses | Value | ||||||||||||
(Dollars in thousands) | ||||||||||||||||
Available for sale: | ||||||||||||||||
U.S. Government agencies and sponsored enterprises obligations | $ | 86,870 | $ | 31 | $ | 1,020 | $ | 85,881 | ||||||||
U.S. Government agencies and sponsored enterprises mortgage-backed securities | 730,367 | 3,827 | 12,477 | 721,717 | ||||||||||||
State and municipal obligations | 23,472 | 66 | 1,422 | 22,116 | ||||||||||||
Asset-backed securities | 784,329 | — | 20,780 | 763,549 | ||||||||||||
Corporate bonds and other debt securities | 733,710 | 1,909 | 24,373 | 711,246 | ||||||||||||
Preferred stock and other equity securities | 13,203 | — | 476 | 12,727 | ||||||||||||
Total available for sale | $ | 2,371,951 | $ | 5,833 | $ | 60,548 | $ | 2,317,236 |
Amortized | Unrealized | Fair | ||||||||||||||
December 31, 2017 | Cost | Gains | Losses | Value | ||||||||||||
(Dollars in thousands) | ||||||||||||||||
Available for sale: | ||||||||||||||||
U.S. Government agencies and sponsored enterprises obligations | $ | 43,471 | $ | 38 | $ | 671 | $ | 42,838 | ||||||||
U.S. Government agencies and sponsored enterprises mortgage-backed securities | 600,310 | 1,716 | 6,789 | 595,237 | ||||||||||||
State and municipal obligations | 26,766 | 125 | 719 | 26,172 | ||||||||||||
Asset-backed securities | 608,340 | 2,306 | 100 | 610,546 | ||||||||||||
Corporate bonds and other debt securities | 738,994 | 18,222 | 1,313 | 755,903 | ||||||||||||
Preferred stock and other equity securities | 88,520 | 2,279 | 692 | 90,107 | ||||||||||||
Total available for sale | $ | 2,106,401 | $ | 24,686 | $ | 10,284 | $ | 2,120,803 |
As part of the Company’s liquidity management strategy, the Company pledges loans and securities to secure borrowings from the FHLB and the FRB. The Company also pledges securities to collateralize repurchase agreements and interest rate swaps. Additionally, the Company has Letters of Credit with the FHLB to collateralize certain obligations. The carrying value of all pledged securities totaled $860.2 million and $834.9 million at December 31, 2018 and 2017, respectively.
The amortized cost and estimated fair value of securities available for sale, by contractual maturity, are as follows:
December 31, 2018 | Amortized Cost | Fair Value | ||||||
(Dollars in thousands) | ||||||||
Available for sale: | ||||||||
Due in one year or less | $ | — | $ | — | ||||
Due after one year through five years | 290,685 | 288,419 | ||||||
Due after five years through ten years | 138,682 | 135,806 | ||||||
Due after ten years | 327,815 | 309,137 | ||||||
U.S. Government agencies and sponsored enterprises obligations, mortgage-backed securities and tax-exempt mortgage securities, and asset-backed securities | 1,601,566 | 1,571,147 | ||||||
Preferred stock and other equity securities | 13,203 | 12,727 | ||||||
Total available for sale | $ | 2,371,951 | $ | 2,317,236 |
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
For purposes of the maturity table, U.S. Government agencies and sponsored enterprises obligations, agency mortgage-backed securities and asset-backed securities, the principal of which are repaid periodically, are presented as a single amount. The expected lives of these securities will differ from contractual maturities because borrowers may have the right to prepay the underlying loans with or without prepayment penalties.
The following tables present the estimated fair values and gross unrealized losses on investment securities available for sale, aggregated by investment category and length of time individual securities have been in a continuous unrealized loss position as of the periods presented:
Less than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||
December 31, 2018 | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | ||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Available for sale: | ||||||||||||||||||||||||
U.S. Government agencies and sponsored enterprises obligations | $ | 19,927 | $ | 73 | $ | 33,481 | $ | 947 | $ | 53,408 | $ | 1,020 | ||||||||||||
U.S. Government agencies and sponsored enterprises mortgage-backed securities | 108,074 | 1,745 | 403,416 | 10,733 | 511,490 | 12,478 | ||||||||||||||||||
State and municipal obligations | — | — | 20,006 | 1,422 | 20,006 | 1,422 | ||||||||||||||||||
Asset-backed securities | 681,484 | 20,685 | 6,966 | 95 | 688,450 | 20,780 | ||||||||||||||||||
Corporate bonds and other debt securities | 295,800 | 17,210 | 240,065 | 7,162 | 535,865 | 24,372 | ||||||||||||||||||
Preferred stock and other equity securities | — | — | 12,727 | 476 | 12,727 | 476 | ||||||||||||||||||
Total available for sale | $ | 1,105,285 | $ | 39,713 | $ | 716,661 | $ | 20,835 | $ | 1,821,946 | $ | 60,548 |
Less than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||
December 31, 2017 | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | ||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Available for sale: | ||||||||||||||||||||||||
U.S. Government agencies and sponsored enterprises obligations | $ | 31,518 | $ | 268 | $ | 7,157 | $ | 403 | $ | 38,675 | $ | 671 | ||||||||||||
U.S. Government agencies and sponsored enterprises mortgage-backed securities | 207,735 | 1,836 | 175,810 | 4,953 | 383,545 | 6,789 | ||||||||||||||||||
State and municipal obligations | 192 | 2 | 23,813 | 717 | 24,005 | 719 | ||||||||||||||||||
Asset-backed securities | 36,542 | 100 | — | — | 36,542 | 100 | ||||||||||||||||||
Corporate bonds and other debt securities | 186,052 | 1,240 | 10,842 | 73 | 196,894 | 1,313 | ||||||||||||||||||
Preferred stock and other equity securities | 6,041 | 26 | 20,337 | 666 | 26,378 | 692 | ||||||||||||||||||
Total available for sale | $ | 468,080 | $ | 3,472 | $ | 237,959 | $ | 6,812 | $ | 706,039 | $ | 10,284 |
At December 31, 2018, the Company’s security portfolio consisted of 333 securities, of which 267 securities were in an unrealized loss position. A total of 114 were in an unrealized loss position for less than 12 months. The unrealized losses for these securities resulted primarily from changes in interest rates and spreads.
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
The Company monitors its investment securities for OTTI. Impairment is evaluated on an individual security basis considering numerous factors, and their relative significance. The Company has evaluated the nature of unrealized losses in the investment securities portfolio to determine if OTTI exists. The unrealized losses relate to changes in market interest rates and market conditions that do not represent credit-related impairments. Furthermore, the Company does not intend to sell nor is it more likely than not that it will be required to sell these investments before the recovery of their amortized cost basis. Management has completed an assessment of each security in an unrealized loss position for credit impairment and has determined that no individual security was other-than-temporarily impaired at December 31, 2018 or 2017. The following describes the basis under which the Company has evaluated OTTI:
U.S. Government Agencies and Sponsored Enterprises Obligations and Agency Mortgage-Backed Securities (“MBS”):
The unrealized losses associated with U.S. Government agencies and sponsored enterprises obligations and agency MBS are primarily driven by changes in interest rates. These securities have either an explicit or implicit U.S. government guarantee.
Asset-Backed Securities and Corporate Bonds & Other Debt Securities:
Securities were generally underwritten in accordance with the Company’s investment standards prior to the decision to purchase, without relying on a bond issuer’s guarantee in making the investment decision. These investments are investment grade and will continue to be monitored as part of the Company’s ongoing impairment analysis, but are expected to perform in accordance with their terms.
Preferred Stock and Other Equity Securities:
The unrealized losses associated with preferred stock and other equity securities in large U.S. financial institutions are primarily driven by changes in interest rates and spreads. These securities were generally underwritten in accordance with the Company’s investment standards prior to the decision to purchase.
Gross realized gains and losses on the sale of securities available for sale are shown below. The cost of securities sold is based on the specific identification method.
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
(Dollars in thousands) | ||||||||||||
Gross realized gains | $ | 147 | $ | 4,364 | $ | 3,645 | ||||||
Gross realized losses | (3,661 | ) | (5,252 | ) | (2,066 | ) | ||||||
Net realized gains (losses) | $ | (3,514 | ) | $ | (888 | ) | $ | 1,579 |
The Company adopted ASU 2016-01 as of January 1, 2018. This guidance requires investments in equity securities with readily determinable fair values to be measured at fair value, with changes in the fair value recognized as a component of noninterest income in the Company’s Consolidated Statements of Income. The Company recognized $2.1 million of unrealized loss in noninterest income during the year ended December 31, 2018 related to equity securities.
NOTE 4. LOANS, NET
The Company’s loan portfolio consists of New and Acquired loans. The Company classifies originated loans and purchased loans not acquired through business combinations as New loans. The Company classifies loans acquired through business combinations as Acquired loans. All acquired loans not specifically excluded under ASC 310-30 are accounted for under ASC 310-30. The remaining portfolio of acquired loans excluded under ASC 310-30 are accounted for under ASC 310-20 and are classified as Non-ASC 310-30 loans.
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
The following tables summarize the Company’s loans by portfolio and segment as of the periods presented, net of deferred fees, costs, premiums and discounts:
December 31, 2018 | ASC 310-30 Loans | Non-ASC 310-30 Loans | New Loans (1) | Total | ||||||||||||
(Dollars in thousands) | ||||||||||||||||
Real estate loans: | ||||||||||||||||
Commercial real estate | $ | 131,368 | $ | 103,099 | $ | 2,614,327 | $ | 2,848,794 | ||||||||
Owner-occupied commercial real estate | — | 77,475 | 1,156,852 | 1,234,327 | ||||||||||||
1-4 single family residential | 30,551 | 141,866 | 2,280,901 | 2,453,318 | ||||||||||||
Construction, land and development | 26,984 | 31,241 | 746,477 | 804,702 | ||||||||||||
Home equity loans and lines of credit | — | 38,371 | 58,954 | 97,325 | ||||||||||||
Total real estate loans | $ | 188,903 | $ | 392,052 | $ | 6,857,511 | $ | 7,438,466 | ||||||||
Other loans: | ||||||||||||||||
Commercial and industrial | $ | 14,438 | $ | 44,921 | $ | 1,909,006 | $ | 1,968,365 | ||||||||
Consumer | 1,138 | 12,544 | 3,660 | 17,342 | ||||||||||||
Total other loans | 15,576 | 57,465 | 1,912,666 | 1,985,707 | ||||||||||||
Total loans held in portfolio | $ | 204,479 | $ | 449,517 | $ | 8,770,177 | $ | 9,424,173 | ||||||||
Allowance for loan losses | (50,910 | ) | ||||||||||||||
Loans held in portfolio, net | $ | 9,373,263 |
December 31, 2017 | ASC 310-30 Loans | Non-ASC 310-30 Loans | New Loans (1) | Total | ||||||||||||
(Dollars in thousands) | ||||||||||||||||
Real estate loans: | ||||||||||||||||
Commercial real estate | $ | 104,335 | $ | 37,736 | $ | 2,103,788 | $ | 2,245,859 | ||||||||
Owner-occupied commercial real estate | — | 16,100 | 987,781 | 1,003,881 | ||||||||||||
1-4 single family residential | 27,513 | 57,695 | 2,185,362 | 2,270,570 | ||||||||||||
Construction, land and development | 13,167 | 5,889 | 684,462 | 703,518 | ||||||||||||
Home equity loans and lines of credit | — | 34,589 | 59,636 | 94,225 | ||||||||||||
Total real estate loans | $ | 145,015 | $ | 152,009 | $ | 6,021,029 | $ | 6,318,053 | ||||||||
Other loans: | ||||||||||||||||
Commercial and industrial | $ | 12,631 | $ | 5,062 | $ | 1,634,372 | $ | 1,652,065 | ||||||||
Consumer | 1,423 | 259 | 5,984 | 7,666 | ||||||||||||
Total other loans | 14,054 | 5,321 | 1,640,356 | 1,659,731 | ||||||||||||
Total loans held in portfolio | $ | 159,069 | $ | 157,330 | $ | 7,661,385 | $ | 7,977,784 | ||||||||
Allowance for loan losses | (47,145 | ) | ||||||||||||||
Loans held in portfolio, net | $ | 7,930,639 |
(1) | Balance includes $(8.6) million and $(6.6) million of net deferred fees, costs, and premium and discount as of December 31, 2018 and 2017, respectively. |
At December 31, 2018 and 2017, the UPB of ASC 310-30 loans were $260.6 million and $183.9 million, respectively. At December 31, 2018 and 2017, the Company had pledged loans as collateral for FHLB advances of $3.50 billion and $3.36 billion, respectively. The recorded investments of consumer mortgage loans secured by 1-4 family residential real estate properties for which formal foreclosure proceedings are in process as of December 31, 2018 totaled $3.5 million. The balance of real estate owned includes $133 thousand and $1.2 million of residential real estate properties as of December 31, 2018 and 2017, respectively. The Company held $296.5 million and $289.1 million of syndicated national loans as of December 31, 2018 and 2017, respectively.
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
During the years ended December 31, 2018, 2017 and 2016 the Company purchased approximately $8.5 million, $22.9 million and $199.0 million, respectively, in loans from third parties.
During the years ended December 31, 2018, 2017 and 2016, the Company sold approximately $95.1 million, $383.6 million and $128.7 million, respectively, in loans to third parties.
The accretable discount on ASC 310-30 loans represents the amount by which the undiscounted expected cash flows on such loans exceed their carrying value. The change in expected cash flow for certain ASC 310-30 loan pools resulted in the reclassification of $16.9 million, $(2.3) million and $(28.7) million between non-accretable and accretable discount during the years ended December 31, 2018, 2017 and 2016, respectively.
Changes in accretable discount for ASC 310-30 loans were as follows:
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
(Dollars in thousands) | ||||||||||||
Balance at January 1, | $ | 41,162 | $ | 60,990 | $ | 144,152 | ||||||
Additions to accretable discount from Floridian acquisition | 14,393 | — | — | |||||||||
Accretion | (14,926 | ) | (17,523 | ) | (54,427 | ) | ||||||
Reclassifications from non-accretable difference | 16,859 | (2,305 | ) | (28,735 | ) | |||||||
Balance at December 31, | $ | 57,488 | $ | 41,162 | $ | 60,990 |
NOTE 5. ALLOWANCE FOR LOAN LOSSES
The Company’s accounting method for loans and the corresponding ALL differs depending on whether the loans are New or Acquired. The Company assesses and monitors credit risk and portfolio performance using distinct methodologies for Acquired loans, both ASC 310-30 loans and Non-ASC 310-30 Loans, and New Loans. Within each of these portfolios, the Company further disaggregates the portfolios into the following segments: Commercial real estate, Owner-occupied commercial real estate, 1-4 single family residential, Construction, land and development, Home equity loans and lines of credit, Commercial and industrial and Consumer. The ALL reflects management’s estimate of probable credit losses inherent in each of the segments.
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
Changes in the ALL by loan portfolio and segment for the years ended December 31, 2018, 2017, and 2016 are as follows:
Commercial Real Estate | Owner-Occupied Commercial Real Estate | 1- 4 Single Family Residential | Construction, Land and Development | Home Equity Loans and Lines of Credit | Commercial and Industrial | Consumer | Total | |||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||
Balance at January 1, 2018 | $ | 13,870 | $ | 3,365 | $ | 7,978 | $ | 4,345 | $ | 674 | $ | 15,141 | $ | 272 | $ | 47,145 | ||||||||||||||||
Provision (credit) for ASC 310-30 loans | (737 | ) | (3 | ) | (15 | ) | (249 | ) | — | (54 | ) | (22 | ) | (1,080 | ) | |||||||||||||||||
Provision (credit) for non-ASC 310-30 loans | (147 | ) | (35 | ) | (140 | ) | (20 | ) | (130 | ) | 152 | (5 | ) | (325 | ) | |||||||||||||||||
Provision (credit) for New loans | 2,967 | 429 | (1,048 | ) | 706 | (80 | ) | 16,479 | (63 | ) | 19,390 | |||||||||||||||||||||
Provision (credit) for Unallocated | — | — | — | — | — | — | — | (1,500 | ) | |||||||||||||||||||||||
Total provision | 2,083 | 391 | (1,203 | ) | 437 | (210 | ) | 16,577 | (90 | ) | 16,485 | |||||||||||||||||||||
Charge-offs for ASC 310-30 loans | (143 | ) | — | (22 | ) | — | — | (17 | ) | (11 | ) | (193 | ) | |||||||||||||||||||
Charge-offs for non-ASC 310-30 loans | (118 | ) | — | (14 | ) | — | (3 | ) | (443 | ) | — | (578 | ) | |||||||||||||||||||
Charge-offs for New loans | — | — | — | — | — | (12,531 | ) | — | (12,531 | ) | ||||||||||||||||||||||
Total charge-offs | (261 | ) | — | (36 | ) | — | (3 | ) | (12,991 | ) | (11 | ) | (13,302 | ) | ||||||||||||||||||
Recoveries for ASC 310-30 loans | 379 | 3 | 19 | 106 | — | 24 | — | 531 | ||||||||||||||||||||||||
Recoveries for non-ASC 310-30 loans | — | — | 23 | — | — | — | — | 23 | ||||||||||||||||||||||||
Recoveries for New loans | 11 | 15 | — | — | — | — | — | 26 | ||||||||||||||||||||||||
Total recoveries | 390 | 18 | 42 | 106 | — | 24 | — | 580 | ||||||||||||||||||||||||
Ending ALL balance | ||||||||||||||||||||||||||||||||
ASC 310-30 loans | 947 | — | 8 | 3 | — | 79 | 112 | 1,149 | ||||||||||||||||||||||||
Non-ASC 310-30 loans | 73 | 20 | 53 | 16 | 66 | 22 | 1 | 251 | ||||||||||||||||||||||||
New loans | 15,062 | 3,754 | 6,721 | 4,870 | 395 | 18,650 | 58 | 49,510 | ||||||||||||||||||||||||
Unallocated | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Balance at December 31, 2018 | $ | 16,082 | $ | 3,774 | $ | 6,782 | $ | 4,889 | $ | 461 | $ | 18,751 | $ | 171 | $ | 50,910 |
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
Commercial Real Estate | Owner- Occupied Commercial Real Estate | 1- 4 Single Family Residential | Construction, Land and Development | Home Equity Loans and Lines of Credit | Commercial and Industrial | Consumer | Total | |||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||
Balance at January 1, 2017 | $ | 10,123 | $ | 2,597 | $ | 7,379 | $ | 4,677 | $ | 648 | $ | 12,245 | $ | 228 | $ | 37,897 | ||||||||||||||||
Provision (credit) for ASC 310-30 loans | (839 | ) | — | 31 | (51 | ) | — | (192 | ) | (99 | ) | (1,150 | ) | |||||||||||||||||||
Provision (credit) for non-ASC 310-30 loans | (8 | ) | (6 | ) | (146 | ) | (11 | ) | (37 | ) | (64 | ) | (29 | ) | (301 | ) | ||||||||||||||||
Provision (credit) for New loans | 4,723 | 774 | 720 | (227 | ) | 73 | 3,260 | 43 | 9,366 | |||||||||||||||||||||||
Provision (credit) for Unallocated | — | — | — | — | — | — | — | 1,500 | ||||||||||||||||||||||||
Total provision | 3,876 | 768 | 605 | (289 | ) | 36 | 3,004 | (85 | ) | 9,415 | ||||||||||||||||||||||
Charge-offs for ASC 310-30 loans | (9 | ) | — | (35 | ) | (43 | ) | — | (29 | ) | — | (116 | ) | |||||||||||||||||||
Charge-offs for non-ASC 310-30 loans | (30 | ) | — | (69 | ) | — | (7 | ) | (3 | ) | — | (109 | ) | |||||||||||||||||||
Charge-offs for New loans | (131 | ) | — | — | — | (3 | ) | (150 | ) | — | (284 | ) | ||||||||||||||||||||
Total charge-offs | (170 | ) | — | (104 | ) | (43 | ) | (10 | ) | (182 | ) | — | (509 | ) | ||||||||||||||||||
Recoveries for ASC 310-30 loans | 41 | — | — | — | — | 70 | 100 | 211 | ||||||||||||||||||||||||
Recoveries for non-ASC 310-30 loans | — | — | 98 | — | — | 4 | 29 | 131 | ||||||||||||||||||||||||
Recoveries for New loans | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Total recoveries | 41 | — | 98 | — | — | 74 | 129 | 342 | ||||||||||||||||||||||||
Ending ALL balance | ||||||||||||||||||||||||||||||||
ASC 310-30 loans | 1,448 | — | 25 | 145 | — | 126 | 145 | 1,889 | ||||||||||||||||||||||||
Non-ASC 310-30 loans | 338 | 55 | 184 | 36 | 199 | 313 | 6 | 1,131 | ||||||||||||||||||||||||
New loans | 12,084 | 3,310 | 7,769 | 4,164 | 475 | 14,702 | 121 | 42,625 | ||||||||||||||||||||||||
Unallocated | — | — | — | — | — | — | — | 1,500 | ||||||||||||||||||||||||
Balance at December 31, 2017 | $ | 13,870 | $ | 3,365 | $ | 7,978 | $ | 4,345 | $ | 674 | $ | 15,141 | $ | 272 | $ | 47,145 |
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
Commercial Real Estate | Owner- Occupied Commercial Real Estate | 1- 4 Single Family Residential | Construction, Land and Development | Home Equity Loans and Lines of Credit | Commercial and Industrial | Consumer | Total | |||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||
Balance at January 1, 2016 | $ | 8,450 | $ | 2,243 | $ | 6,425 | $ | 3,404 | $ | 483 | $ | 7,665 | $ | 456 | $ | 29,126 | ||||||||||||||||
Provision (credit) for ASC 310-30 loans | (124 | ) | — | 3 | (128 | ) | — | (108 | ) | (156 | ) | (513 | ) | |||||||||||||||||||
Provision (credit) for non-ASC 310-30 loans | (1,512 | ) | (401 | ) | (31 | ) | 11 | (21 | ) | 316 | 8 | (1,630 | ) | |||||||||||||||||||
Provision (credit) for New loans | 2,024 | 756 | 982 | 1,351 | 213 | 4,440 | 32 | 9,798 | ||||||||||||||||||||||||
Total provision | 388 | 355 | 954 | 1,234 | 192 | 4,648 | (116 | ) | 7,655 | |||||||||||||||||||||||
Charge-offs for ASC 310-30 loans | (429 | ) | — | (31 | ) | (33 | ) | — | (79 | ) | (106 | ) | (678 | ) | ||||||||||||||||||
Charge-offs for non-ASC 310-30 loans | — | (1 | ) | — | — | (35 | ) | — | (6 | ) | (42 | ) | ||||||||||||||||||||
Charge-offs for New loans | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Total charge-offs | (429 | ) | (1 | ) | (31 | ) | (33 | ) | (35 | ) | (79 | ) | (112 | ) | (720 | ) | ||||||||||||||||
Recoveries for ASC 310-30 loans | 910 | — | 31 | 72 | — | 11 | — | 1,024 | ||||||||||||||||||||||||
Recoveries for non-ASC 310-30 loans | 804 | — | — | — | 8 | — | — | 812 | ||||||||||||||||||||||||
Recoveries for New loans | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Total recoveries | 1,714 | — | 31 | 72 | 8 | 11 | — | 1,836 | ||||||||||||||||||||||||
Ending ALL balance | ||||||||||||||||||||||||||||||||
ASC 310-30 loans | 2,255 | — | 29 | 239 | — | 277 | 144 | 2,944 | ||||||||||||||||||||||||
Non-ASC 310-30 loans | 376 | 61 | 301 | 47 | 243 | 376 | 6 | 1,410 | ||||||||||||||||||||||||
New loans | 7,492 | 2,536 | 7,049 | 4,391 | 405 | 11,592 | 78 | 33,543 | ||||||||||||||||||||||||
Balance at December 31, 2016 | $ | 10,123 | $ | 2,597 | $ | 7,379 | $ | 4,677 | $ | 648 | $ | 12,245 | $ | 228 | $ | 37,897 |
Net charge-offs to average loans receivable for the years ended December 31, 2018, 2017 and 2016 were 0.14%, 0.00% and (0.02)%, respectively.
Credit Quality Indicators
In evaluating credit risk, the Company looks at multiple factors; however, management considers delinquency status to be the most meaningful indicator of the credit quality of 1-4 single family residential, home equity loans and lines of credit and consumer loans. Delinquency statistics are updated at least monthly. Internal risk ratings are considered the most meaningful indicator of credit quality for Non-ASC 310-30 and New commercial, construction, land and development and commercial real estate loans. Internal risk ratings are updated on a continuous basis.
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
The following tables present an aging analysis of the recorded investment for delinquent loans by portfolio and segment (excluding loans accounted for under ASC 310-30):
Accruing | ||||||||||||||||||||
December 31, 2018 | 30 to 59 Days Past Due | 60 to 89 Days Past Due | 90 Days or More Past Due | Non- Accrual | Total | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
New loans: | ||||||||||||||||||||
Real estate loans: | ||||||||||||||||||||
Commercial real estate | $ | 7 | $ | — | $ | — | $ | 736 | $ | 743 | ||||||||||
Owner-occupied commercial real estate | — | — | — | 827 | 827 | |||||||||||||||
1-4 single family residential | 17,407 | 5,887 | 185 | 3,907 | 27,386 | |||||||||||||||
Construction, land and development | — | 99 | — | — | 99 | |||||||||||||||
Home equity loans and lines of credit | 317 | — | — | 126 | 443 | |||||||||||||||
Total real estate loans | $ | 17,731 | $ | 5,986 | $ | 185 | $ | 5,596 | $ | 29,498 | ||||||||||
Other loans: | ||||||||||||||||||||
Commercial and industrial | $ | 8,722 | $ | — | $ | — | $ | 4,484 | $ | 13,206 | ||||||||||
Consumer | — | — | — | — | — | |||||||||||||||
Total other loans | 8,722 | — | — | 4,484 | 13,206 | |||||||||||||||
Total New loans | $ | 26,453 | $ | 5,986 | $ | 185 | $ | 10,080 | $ | 42,704 | ||||||||||
Acquired loans: | ||||||||||||||||||||
Real estate loans: | ||||||||||||||||||||
Commercial real estate | $ | — | $ | — | $ | — | $ | 3,558 | $ | 3,558 | ||||||||||
Owner-occupied commercial real estate | — | 5,240 | — | 484 | 5,724 | |||||||||||||||
1-4 single family residential | 390 | 412 | — | 1,669 | 2,471 | |||||||||||||||
Construction, land and development | — | — | — | — | — | |||||||||||||||
Home equity loans and lines of credit | 653 | 464 | — | 2,423 | 3,540 | |||||||||||||||
Total real estate loans | $ | 1,043 | $ | 6,116 | $ | — | $ | 8,134 | $ | 15,293 | ||||||||||
Other loans: | ||||||||||||||||||||
Commercial and industrial | $ | 1,312 | $ | 55 | $ | — | $ | 2,422 | $ | 3,789 | ||||||||||
Consumer | — | — | — | — | — | |||||||||||||||
Total other loans | 1,312 | �� | 55 | — | 2,422 | 3,789 | ||||||||||||||
Total acquired loans | $ | 2,355 | $ | 6,171 | $ | — | $ | 10,556 | $ | 19,082 |
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
Accruing | ||||||||||||||||||||
December 31, 2017 | 30 to 59 Days Past Due | 60 to 89 Days Past Due | 90 Days or More Past Due | Non- Accrual | Total | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
New loans: | ||||||||||||||||||||
Real estate loans: | ||||||||||||||||||||
Commercial real estate | $ | 324 | $ | — | $ | — | $ | — | $ | 324 | ||||||||||
Owner-occupied commercial real estate | 843 | 150 | — | — | 993 | |||||||||||||||
1-4 single family residential | 1,179 | 1,310 | — | 3,167 | 5,656 | |||||||||||||||
Construction, land and development | — | — | — | — | — | |||||||||||||||
Home equity loans and lines of credit | — | — | — | 126 | 126 | |||||||||||||||
Total real estate loans | $ | 2,346 | $ | 1,460 | $ | — | $ | 3,293 | $ | 7,099 | ||||||||||
Other loans: | ||||||||||||||||||||
Commercial and industrial | $ | 4,980 | $ | 2,167 | $ | — | $ | — | $ | 7,147 | ||||||||||
Consumer | — | — | — | — | — | |||||||||||||||
Total other loans | 4,980 | 2,167 | — | — | 7,147 | |||||||||||||||
Total New loans | $ | 7,326 | $ | 3,627 | $ | — | $ | 3,293 | $ | 14,246 | ||||||||||
Acquired Loans: | ||||||||||||||||||||
Real estate loans: | ||||||||||||||||||||
Commercial real estate | $ | 360 | $ | — | $ | — | $ | 3,893 | $ | 4,253 | ||||||||||
Owner-occupied commercial real estate | 290 | — | — | 494 | 784 | |||||||||||||||
1-4 single family residential | 892 | 44 | — | 1,331 | 2,267 | |||||||||||||||
Construction, land and development | — | — | — | — | — | |||||||||||||||
Home equity loans and lines of credit | 1,128 | — | — | 1,720 | 2,848 | |||||||||||||||
Total real estate loans | $ | 2,670 | $ | 44 | $ | — | $ | 7,438 | $ | 10,152 | ||||||||||
Other loans: | ||||||||||||||||||||
Commercial and industrial | $ | 101 | $ | — | $ | — | $ | 394 | $ | 495 | ||||||||||
Consumer | — | — | — | — | — | |||||||||||||||
Total other loans | 101 | — | — | 394 | 495 | |||||||||||||||
Total acquired loans | $ | 2,771 | $ | 44 | $ | — | $ | 7,832 | $ | 10,647 |
Loans exhibiting potential credit weaknesses that deserve management’s close attention and that, if left uncorrected, may result in deterioration of the repayment capacity of the borrower, are categorized as special mention. Loans with well-defined credit weaknesses including payment defaults, declining collateral values, frequent overdrafts, operating losses, increasing balance sheet leverage, inadequate cash flow, project cost overruns, unreasonable construction delays, past due real estate taxes or exhausted interest reserves, are assigned an internal risk rating of substandard. A loan with a weakness so severe that collection in full is highly questionable or improbable will be assigned an internal risk rating of doubtful.
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
The following tables summarize the Company’s commercial Non-ASC 310-30 and New loans by key indicators of credit quality. Loans accounted for under ASC 310-30 are excluded from the following analysis because their related allowance is determined by loan pool performance:
December 31, 2018 | Pass | Special Mention | Substandard | Doubtful | ||||||||||||
(Dollars in thousands) | ||||||||||||||||
New loans: | ||||||||||||||||
Commercial real estate | $ | 2,600,810 | $ | 9,303 | $ | 4,214 | $ | — | ||||||||
Owner-occupied commercial real estate | 1,151,224 | 2,415 | 3,213 | — | ||||||||||||
Construction, land and development | 746,477 | — | — | — | ||||||||||||
Commercial and industrial | 1,888,274 | 5,090 | 15,642 | — | ||||||||||||
Total New loans | $ | 6,386,785 | $ | 16,808 | $ | 23,069 | $ | — | ||||||||
Acquired loans: | ||||||||||||||||
Commercial real estate | $ | 99,209 | $ | — | $ | 3,890 | $ | — | ||||||||
Owner-occupied commercial real estate | 72,348 | — | 5,127 | — | ||||||||||||
Construction, land and development | 31,241 | — | — | — | ||||||||||||
Commercial and industrial | 41,108 | 1,022 | 2,791 | — | ||||||||||||
Total acquired loans | $ | 243,906 | $ | 1,022 | $ | 11,808 | $ | — |
December 31, 2017 | Pass | Special Mention | Substandard | Doubtful | ||||||||||||
(Dollars in thousands) | ||||||||||||||||
New loans: | ||||||||||||||||
Commercial real estate | $ | 2,095,560 | $ | 6,066 | $ | 2,162 | $ | — | ||||||||
Owner-occupied commercial real estate | 987,781 | — | — | — | ||||||||||||
Construction, land and development | 684,462 | — | — | — | ||||||||||||
Commercial and industrial | 1,617,462 | 16,910 | — | — | ||||||||||||
Total New loans | $ | 5,385,265 | $ | 22,976 | $ | 2,162 | $ | — | ||||||||
Acquired loans: | ||||||||||||||||
Commercial real estate | $ | 33,496 | $ | — | $ | 4,240 | $ | — | ||||||||
Owner-occupied commercial real estate | 15,607 | — | 493 | — | ||||||||||||
Construction, land and development | 5,889 | — | — | — | ||||||||||||
Commercial and industrial | 4,324 | — | 738 | — | ||||||||||||
Total acquired loans | $ | 59,316 | $ | — | $ | 5,471 | $ | — |
Internal risk ratings are a key factor in identifying loans to be individually evaluated for impairment and impact management’s estimates of loss factors used in determining the amount of the ALL.
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
The following tables show the Company’s investment in loans disaggregated based on the method of evaluating impairment:
Loans - Recorded Investment | Allowance for Credit Loss | |||||||||||||||||||||||
December 31, 2018 | Individually Evaluated for Impairment | Collectively Evaluated for Impairment | ASC 310-30 Loans | Individually Evaluated for Impairment | Collectively Evaluated for Impairment | ASC 310-30 Loans | ||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
New loans: | ||||||||||||||||||||||||
Real estate loans: | ||||||||||||||||||||||||
Commercial real estate | $ | — | $ | 2,614,327 | $ | — | $ | — | $ | 15,062 | $ | — | ||||||||||||
Owner-occupied commercial real estate | 3,418 | 1,153,434 | — | 35 | 3,719 | — | ||||||||||||||||||
1-4 single family residential | 1,637 | 2,279,264 | — | — | 6,721 | — | ||||||||||||||||||
Construction, land and development | — | 746,477 | — | — | 4,870 | — | ||||||||||||||||||
Home equity loans and lines of credit | 495 | 58,459 | — | — | 395 | — | ||||||||||||||||||
Total real estate loans | $ | 5,550 | $ | 6,851,961 | $ | — | $ | 35 | $ | 30,767 | $ | — | ||||||||||||
Other loans | ||||||||||||||||||||||||
Commercial and industrial | $ | 4,177 | $ | 1,904,829 | $ | — | $ | — | $ | 18,650 | $ | — | ||||||||||||
Consumer | — | 3,660 | — | — | 58 | — | ||||||||||||||||||
Total other loans | $ | 4,177 | $ | 1,908,489 | $ | — | $ | — | $ | 18,708 | $ | — | ||||||||||||
Acquired loans: | ||||||||||||||||||||||||
Real estate loans: | ||||||||||||||||||||||||
Commercial real estate | $ | 3,339 | $ | 99,760 | $ | 131,368 | $ | — | $ | 73 | $ | 947 | ||||||||||||
Owner-occupied commercial real estate | — | 77,475 | — | — | 20 | — | ||||||||||||||||||
1-4 single family residential | 816 | 141,050 | 30,551 | — | 53 | 8 | ||||||||||||||||||
Construction, land and development | — | 31,241 | 26,984 | — | 16 | 3 | ||||||||||||||||||
Home equity loans and lines of credit | 494 | 37,877 | — | — | 66 | — | ||||||||||||||||||
Total real estate loans | $ | 4,649 | $ | 387,403 | $ | 188,903 | $ | — | $ | 228 | $ | 958 | ||||||||||||
Other loans | ||||||||||||||||||||||||
Commercial and industrial | 2,422 | 42,499 | 14,438 | — | 22 | 79 | ||||||||||||||||||
Consumer | — | 12,544 | 1,138 | — | 1 | 112 | ||||||||||||||||||
Total other loans | $ | 2,422 | $ | 55,043 | $ | 15,576 | $ | — | $ | 23 | $ | 191 |
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
Loans - Recorded Investment | Allowance for Credit Loss | |||||||||||||||||||||||
December 31, 2017 | Individually Evaluated for Impairment | Collectively Evaluated for Impairment | ASC 310-30 Loans | Individually Evaluated for Impairment | Collectively Evaluated for Impairment | ASC 310-30 Loans | ||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
New loans: | ||||||||||||||||||||||||
Real estate loans: | ||||||||||||||||||||||||
Commercial real estate | $ | — | $ | 2,103,788 | $ | — | $ | — | $ | 12,084 | $ | — | ||||||||||||
Owner-occupied commercial real estate | — | 987,781 | — | — | 3,310 | — | ||||||||||||||||||
1-4 single family residential | 1,096 | 2,184,266 | — | — | 7,769 | — | ||||||||||||||||||
Construction, land and development | — | 684,462 | — | — | 4,164 | — | ||||||||||||||||||
Home equity loans and lines of credit | 130 | 59,506 | — | 66 | 409 | — | ||||||||||||||||||
Total real estate loans | $ | 1,226 | $ | 6,019,803 | $ | — | $ | 66 | $ | 27,736 | $ | — | ||||||||||||
Other loans | ||||||||||||||||||||||||
Commercial and industrial | — | 1,634,372 | — | — | 14,702 | — | ||||||||||||||||||
Consumer | — | 5,984 | — | — | 121 | — | ||||||||||||||||||
Total other loans | $ | — | $ | 1,640,356 | $ | — | $ | — | $ | 14,823 | $ | — | ||||||||||||
Acquired Loans: | ||||||||||||||||||||||||
Real estate loans: | ||||||||||||||||||||||||
Commercial real estate | $ | 3,893 | $ | 33,843 | $ | 104,335 | $ | 129 | $ | 209 | $ | 1,448 | ||||||||||||
Owner-occupied commercial real estate | — | 16,100 | — | — | 55 | — | ||||||||||||||||||
1-4 single family residential | 267 | 57,428 | 27,513 | — | 184 | 25 | ||||||||||||||||||
Construction, land and development | — | 5,889 | 13,167 | — | 36 | 145 | ||||||||||||||||||
Home equity loans and lines of credit | 495 | 34,094 | — | — | 199 | — | ||||||||||||||||||
Total real estate loans | $ | 4,655 | $ | 147,354 | $ | 145,015 | $ | 129 | $ | 683 | $ | 1,618 | ||||||||||||
Other loans | ||||||||||||||||||||||||
Commercial and industrial | 272 | 4,790 | 12,631 | 272 | 41 | 126 | ||||||||||||||||||
Consumer | — | 259 | 1,423 | — | 6 | 145 | ||||||||||||||||||
Total other loans | $ | 272 | $ | 5,049 | $ | 14,054 | $ | 272 | $ | 47 | $ | 271 | ||||||||||||
Total Loans | ||||||||||||||||||||||||
Unallocated | $ | — | $ | 7,977,784 | $ | — | $ | — | $ | 1,500 | $ | — |
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
The following tables set forth certain information regarding the Company’s impaired loans (excluding loans accounted for under ASC 310-30) that were evaluated for specific reserves:
Impaired Loans - With Allowance | Impaired Loans - With no Allowance | |||||||||||||||||||
December 31, 2018 | Recorded Investment | Unpaid Principal Balance | Related Allowance | Recorded Investment | Unpaid Principal Balance | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
New loans: | ||||||||||||||||||||
Real estate loans: | ||||||||||||||||||||
Commercial real estate | $ | — | $ | — | $ | — | $ | 736 | $ | 753 | ||||||||||
Owner-occupied commercial real estate | 665 | 665 | 35 | 2,386 | 2,386 | |||||||||||||||
1-4 single family residential | — | — | — | 1,637 | 1,641 | |||||||||||||||
Construction, land and development | — | — | — | — | — | |||||||||||||||
Home equity loans and lines of credit | — | — | — | 126 | 129 | |||||||||||||||
Total real estate loans | $ | 665 | $ | 665 | $ | 35 | $ | 4,885 | $ | 4,909 | ||||||||||
Other loans | ||||||||||||||||||||
Commercial and industrial | — | — | — | 4,177 | 16,708 | |||||||||||||||
Consumer | — | — | — | — | — | |||||||||||||||
Total other loans | $ | — | $ | — | $ | — | $ | 4,177 | $ | 16,708 | ||||||||||
Acquired loans: | ||||||||||||||||||||
Real estate loans: | ||||||||||||||||||||
Commercial real estate | $ | — | $ | — | $ | — | $ | 3,339 | $ | 4,991 | ||||||||||
Owner-occupied commercial real estate | — | — | — | — | — | |||||||||||||||
1-4 single family residential | — | — | — | 816 | 831 | |||||||||||||||
Construction, land and development | — | — | — | — | — | |||||||||||||||
Home equity loans and lines of credit | — | — | — | 494 | 495 | |||||||||||||||
Total real estate loans | $ | — | $ | — | $ | — | $ | 4,649 | $ | 6,317 | ||||||||||
Other loans | ||||||||||||||||||||
Commercial and industrial | — | — | — | 2,422 | 3,250 | |||||||||||||||
Consumer | — | — | — | — | — | |||||||||||||||
Total other loans | $ | — | $ | — | $ | — | $ | 2,422 | $ | 3,250 |
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
Impaired Loans - With Allowance | Impaired Loans - With no Allowance | |||||||||||||||||||
December 31, 2017 | Recorded Investment | Unpaid Principal Balance | Related Allowance | Recorded Investment | Unpaid Principal Balance | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
New loans: | ||||||||||||||||||||
Real estate loans: | ||||||||||||||||||||
Commercial real estate | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Owner-occupied commercial real estate | — | — | — | — | — | |||||||||||||||
1-4 single family residential | — | — | — | 1,096 | 1,096 | |||||||||||||||
Construction, land and development | — | — | — | — | — | |||||||||||||||
Home equity loans and lines of credit | 66 | 66 | 66 | 63 | 63 | |||||||||||||||
Total real estate loans | $ | 66 | $ | 66 | $ | 66 | $ | 1,159 | $ | 1,159 | ||||||||||
Other loans | ||||||||||||||||||||
Commercial and industrial | — | — | — | — | — | |||||||||||||||
Consumer | — | — | — | — | — | |||||||||||||||
Total other loans | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Acquired loans: | ||||||||||||||||||||
Real estate loans: | ||||||||||||||||||||
Commercial real estate | $ | 336 | $ | 347 | $ | 129 | $ | 3,557 | $ | 4,991 | ||||||||||
Owner-occupied commercial real estate | — | — | — | — | — | |||||||||||||||
1-4 single family residential | — | — | — | 267 | 267 | |||||||||||||||
Construction, land and development | — | — | — | — | — | |||||||||||||||
Home equity loans and lines of credit | — | — | — | 495 | 495 | |||||||||||||||
Total real estate loans | $ | 336 | $ | 347 | $ | 129 | $ | 4,319 | $ | 5,753 | ||||||||||
Other loans | ||||||||||||||||||||
Commercial and industrial | 272 | 272 | 272 | — | — | |||||||||||||||
Consumer | — | — | — | — | — | |||||||||||||||
Total other loans | $ | 272 | $ | 272 | $ | 272 | $ | — | $ | — |
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
The following table presents the average recorded investment and interest income recognized during the period subsequent to impairment on loans individually evaluated for impairment:
Years Ended December 31, | ||||||||||||||||
2018 | 2017 | |||||||||||||||
Average Recorded Investment | Interest Income Recognized | Average Recorded Investment | Interest Income Recognized | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Impaired loans with no related allowance: | ||||||||||||||||
Real estate loans: | ||||||||||||||||
Commercial real estate | $ | 3,816 | $ | — | $ | 3,653 | $ | — | ||||||||
Owner-occupied commercial real estate | 1,399 | — | — | — | ||||||||||||
1-4 single family residential | 1,762 | — | 1,363 | — | ||||||||||||
Construction, land and development | — | — | — | — | ||||||||||||
Home equity loans and lines of credit | 574 | — | 670 | — | ||||||||||||
Total real estate loans | $ | 7,551 | $ | — | $ | 5,686 | $ | — | ||||||||
Other loans: | ||||||||||||||||
Commercial and industrial | 4,999 | — | — | — | ||||||||||||
Consumer | — | — | — | — | ||||||||||||
Total other loans | $ | 4,999 | $ | — | $ | — | $ | — | ||||||||
Impaired loans with an allowance: | ||||||||||||||||
Real estate loans: | ||||||||||||||||
Commercial real estate | $ | — | $ | — | $ | 480 | $ | — | ||||||||
Owner-occupied commercial real estate | — | — | — | — | ||||||||||||
1-4 single family residential | — | — | — | — | ||||||||||||
Construction, land and development | — | — | — | — | ||||||||||||
Home equity loans and lines of credit | 49 | — | 66 | — | ||||||||||||
Total real estate loans | $ | 49 | $ | — | $ | 546 | $ | — | ||||||||
Other loans: | ||||||||||||||||
Commercial and industrial | 8,622 | — | 317 | — | ||||||||||||
Consumer | — | — | — | — | ||||||||||||
Total other loans | $ | 8,622 | $ | — | $ | 317 | $ | — |
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
NOTE 6. PREMISES AND EQUIPMENT
The major components of premises and equipment are as follows:
December 31, | ||||||||
2018 | 2017 | |||||||
(Dollars in thousands) | ||||||||
Land | $ | 9,030 | $ | 7,624 | ||||
Building and improvements | 27,154 | 24,653 | ||||||
Furniture, fixtures and equipment | 17,195 | 14,956 | ||||||
Leasehold improvements | 6,513 | 5,164 | ||||||
Construction in process | 2,232 | 663 | ||||||
Software | 4,061 | 3,354 | ||||||
Total | 66,185 | 56,414 | ||||||
Less: Accumulated depreciation | (23,415 | ) | (20,270 | ) | ||||
Total premises and equipment, net | $ | 42,770 | $ | 36,144 |
Total depreciation expense for the years ended December 31, 2018, 2017 and 2016 totaled $3.8 million, $3.6 million and $3.6 million, respectively.
Operating Leases
The Company has entered into various operating leases for premises and equipment used in its operation. Total rental expense for the years ended December 31, 2018, 2017 and 2016 totaled $8.8 million, $7.6 million, and $7.6 million, respectively.
As of December 31, 2018, future minimum lease payments under non-cancellable operating leases were as follows:
Years Ended December 31, | ||||||||||||||||||||||||||||
2019 | 2020 | 2021 | 2022 | 2023 | Thereafter | Total | ||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||
Future minimum lease payments | $ | 5,553 | $ | 5,227 | $ | 3,822 | $ | 3,013 | $ | 2,129 | $ | 12,722 | $ | 32,466 |
NOTE 7. GOODWILL AND INTANGIBLES
Goodwill and other intangible assets are summarized as follows:
December 31, | ||||||||
2018 | 2017 | |||||||
(Dollars in thousands) | ||||||||
Goodwill | ||||||||
Balance at January 1 | $ | 81,204 | $ | 81,204 | ||||
Additions to Goodwill from Floridian acquisition | 58,325 | — | ||||||
Balance at December 31, | $ | 139,529 | $ | 81,204 | ||||
Core Deposit Intangible | 18,950 | 14,370 | ||||||
Less: Accumulated amortization | (12,107 | ) | (10,702 | ) | ||||
Net core deposit intangible | $ | 6,843 | $ | 3,668 |
Amortization expense for core deposit intangibles for the years ended December 31, 2018, 2017, and 2016 totaled $1.4 million, $1.0 million and $1.2 million, respectively.
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
The estimated amount of amortization expense for core deposit intangible assets to be recognized over the next five fiscal years is as follows:
2019 | 2020 | 2021 | 2022 | 2023 | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Core deposit intangible | $ | 1,481 | $ | 968 | $ | 818 | $ | 818 | $ | 818 |
NOTE 8. DERIVATIVES
The Company uses interest rate swaps to manage interest rate risk related to borrowings that expose the Company to variability in cash flows due to changes in interest rates. The Company entered into a LIBOR-based forward interest rate swap that is designated as a cash flow hedge with the objective of limiting the variability of forecasted interest payment cash flows resulting from changes in the benchmark interest rate LIBOR. Changes in the fair value of interest rate swaps designated as cash flow hedging instruments are reported in accumulated other comprehensive income (“AOCI”) and subsequently reclassified into interest expense in the same period in which the related interest on the floating-rate borrowings affects earnings.
The Company is also a party to interest rate derivatives that are not designated as hedging instruments. The Company uses interest rate derivative contracts, such as swaps and caps, in the normal course of business to meet the financial needs of its customers. The interest rate swaps that the Company enters into with customers allow the customers to convert variable rate loans to fixed rates. At the same time the interest rate swap is entered into with the customer, an offsetting interest rate swap is entered into with another financial institution. The changes in the fair value of the swaps offset each other, except for any differences in the credit risk of the counterparties, which is determined by considering the risk rating, probability of default and loss given default of each counterparty. The Company recorded $12.5 million, $6.8 million and $4.4 million of derivative contract fees in noninterest income in the accompanying consolidated statements of income for the years ended December 31, 2018, 2017, and 2016, respectively.
In addition, the Company has entered into three risk participation agreements. The notional amount of the risk participation agreements sold was $34.1 million as of December 31, 2018. Assuming all underlying third party customers referenced in the swap agreements defaulted at December 31, 2018, there would be an immaterial amount of exposure to the Company. These risk participation agreements mature in 2021.
No credit changes in counterparty credit were identified. There was no change in the fair value of derivative assets and derivative liabilities attributable to credit risk included in noninterest expense in the consolidated statements of income for the years ended December 31, 2018, 2017, and 2016.
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
The following tables summarize the Company’s derivatives outstanding included in other assets and other liabilities in the accompanying consolidated balance sheets:
Derivative Assets | Derivative Liabilities | |||||||||||||||
December 31, 2018 | Notional | Fair Value | Notional | Fair Value | ||||||||||||
(Dollars in thousands) | ||||||||||||||||
Derivatives designated as cash flow hedges: | ||||||||||||||||
Interest rate contracts - pay fixed, receive floating | ||||||||||||||||
$ | — | $ | — | $ | 250,000 | $ | 3,490 | |||||||||
Total cash flow hedges | — | — | 250,000 | 3,490 | ||||||||||||
Derivatives not designated as hedges: | ||||||||||||||||
Interest rate contracts—pay floating, receive fixed | $ | 827,914 | $ | 26,110 | $ | 740,659 | $ | 8,880 | ||||||||
Interest rate contracts—pay fixed, receive floating | 740,659 | 3,597 | 827,914 | 20,827 | ||||||||||||
Interest rate caps—purchased | 94,413 | 167 | — | — | ||||||||||||
Interest rate caps—sold | — | — | 94,413 | 167 | ||||||||||||
Risk participation agreements | — | — | 34,075 | 4 | ||||||||||||
Total derivatives not designated as hedges | $ | 1,662,986 | $ | 29,874 | $ | 1,697,061 | $ | 29,878 | ||||||||
Total derivatives | $ | 1,662,986 | $ | 29,874 | $ | 1,947,061 | $ | 33,368 |
Derivative Assets | Derivative Liabilities | |||||||||||||||
December 31, 2017 | Notional | Fair Value | Notional | Fair Value | ||||||||||||
(Dollars in thousands) | ||||||||||||||||
Derivatives not designated as hedges: | ||||||||||||||||
Interest rate contracts—pay floating, receive fixed | $ | 757,887 | $ | 11,678 | $ | 380,233 | $ | 4,180 | ||||||||
Interest rate contracts—pay fixed, receive floating | 380,233 | — | 757,887 | 7,498 | ||||||||||||
Interest rate caps—purchased | 94,884 | 155 | — | — | ||||||||||||
Interest rate caps—sold | — | — | 94,884 | 155 | ||||||||||||
Total derivatives | $ | 1,233,004 | $ | 11,833 | $ | 1,233,004 | $ | 11,833 |
December 31, 2018 | Amount of Gain (Loss) Recognized in AOCI | Amount of Gain (Loss) Reclassified from AOCI to Interest Expense | Location of Gain (Loss) Reclassified from AOCI into Income | ||||||||
(Dollar in thousands) | |||||||||||
Derivatives designated as cash flow hedges: | |||||||||||
Interest rate contracts - pay fixed, receive floating | (2,619 | ) | — | Interest on borrowings |
During the year ended December 31, 2018, no derivative positions designated as cash flow hedges were discontinued and none of the gains or losses reported in AOCI were reclassified into earnings as a result of the discontinuance of cash flow hedges.
The derivative transactions entered into with a financial institution are subject to an enforceable master netting arrangement.
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
The following table summarizes the gross and net fair values of the Company’s derivatives outstanding with this counterparty included in other liabilities in the accompanying consolidated balance sheets:
December 31, 2018 | Gross amounts of recognized liabilities | Gross amounts offset in the consolidated balance sheets | Net amounts in the consolidated balance sheets | |||||||||
(Dollars in thousands) | ||||||||||||
Offsetting derivative liabilities | ||||||||||||
Centrally Cleared - Interest rate contracts | 20,903 | (76 | ) | 20,827 |
December 31, 2017 | Gross amounts of recognized liabilities | Gross amounts offset in the consolidated balance sheets | Net amounts in the consolidated balance sheets | |||||||||
(Dollars in thousands) | ||||||||||||
Offsetting derivative liabilities | ||||||||||||
Counterparty A—Interest rate contracts | $ | 11,833 | $ | (4,491 | ) | $ | 7,342 |
As of December 31, 2018 and 2017, substantially all of the floating rate terms within the interest rate contracts held by the Company were indexed to 1-month LIBOR.
The fair value of the derivative assets and liabilities are included in a table in Note 19 “Fair Value Measurements,” in the line items “Derivative assets” and “Derivative liabilities.”
NOTE 9. DEPOSITS
The following table sets forth the Company’s deposits by category:
December 31, | ||||||||
2018 | 2017 | |||||||
(Dollars in thousands) | ||||||||
Noninterest-bearing demand deposits | $ | 1,516,583 | $ | 1,236,685 | ||||
Interest-bearing demand deposits | 1,175,848 | 1,454,097 | ||||||
Interest-bearing NOW accounts | 492,168 | 363,191 | ||||||
Savings and money market accounts | 2,985,087 | 3,013,237 | ||||||
Time deposits | 4,718,487 | 2,606,717 | ||||||
Total deposits | $ | 10,888,173 | $ | 8,673,927 | ||||
Time deposits $100,000 and greater | $ | 3,388,564 | $ | 1,983,445 | ||||
Time deposits greater than $250,000 | 1,990,317 | 1,078,702 |
The aggregate amount of overdraft demand deposits reclassified to loans was $1.6 million at December 31, 2018. The aggregate amount of maturities for time deposits for each of the five years following the latest balance sheet date totaled $4.38 billion, $277.6 million, $28.3 million, $14.0 million and $18.2 million, respectively. The Company holds brokered deposits through an insured deposit sweep program of $745.0 million and $656.4 million at December 31, 2018 and 2017, respectively. The Company holds brokered certificates of deposit of $498.5 million and $85.2 million at December 31, 2018 and 2017, respectively.
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
The following table sets forth the Company’s deposits average balance, interest expense and yield by category:
Twelve months ended December 31, | |||||||||||||||||||||||||||||||||
2018 | 2017 | 2016 | |||||||||||||||||||||||||||||||
Average Balance (1) | Interest / Expense (2) | Yield/ Rate | Average Balance (1) | Interest / Expense (2) | Yield /Rate | Average Balance (1) | Interest / Expense (2) | Yield/ Rate | |||||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||||||||
Transaction accounts | |||||||||||||||||||||||||||||||||
Noninterest-bearing demand deposits | $ | 1,415,292 | $ | 1,098,831 | $ | 764,383 | |||||||||||||||||||||||||||
Interest-bearing demand deposits | 1,319,447 | $ | 15,789 | 1.20 | % | 1,150,274 | $ | 9,920 | 0.86 | % | 767,788 | $ | 4,211 | 0.55 | % | ||||||||||||||||||
Interest-bearing NOW accounts | 436,074 | 4,786 | 1.10 | % | 391,017 | 2,546 | 0.65 | % | 412,745 | 1,538 | 0.37 | % | |||||||||||||||||||||
Total transaction accounts | 3,170,813 | 20,575 | 2,640,122 | 12,466 | 1,944,916 | 5,749 | |||||||||||||||||||||||||||
Savings and money market accounts | 2,741,788 | 36,551 | 1.33 | % | 2,899,330 | 26,235 | 0.90 | % | 2,327,175 | 14,617 | 0.63 | % | |||||||||||||||||||||
Time deposits (3) | 3,683,865 | $ | 68,002 | 1.85 | % | 2,199,677 | $ | 27,365 | 1.24 | % | 2,075,196 | $ | 23,963 | 1.15 | % | ||||||||||||||||||
Total average deposits | $ | 9,596,466 | $ | 125,128 | $ | 7,739,129 | $ | 66,066 | $ | 6,347,287 | $ | 44,329 |
(1) Average balances presented are derived from daily average balances.
(2) Interest income is presented on an actual basis and does not include taxable equivalent adjustments.
(3) Interest expense includes the impact from premium amortization.
NOTE 10. FHLB AND OTHER BORROWINGS
Advances from the FHLB and other borrowings outstanding are as follows:
December 31, 2018 | Range of Contractual Interest Rates | |||||||
(Dollars in thousands) | ||||||||
Repayable during the years ending December 31, | ||||||||
2021 and beyond | $ | 150,000 | 0.23% | |||||
Total FHLB advances | 150,000 | |||||||
Retail repurchase agreements | 29,139 | 0.25% - 1.75% | ||||||
Total contractual outstanding | 179,139 | |||||||
Total Borrowings | $ | 179,139 |
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
December 31, 2017 | Range of Contractual Interest Rates | |||||||
Repayable during the years ending December 31, | ||||||||
2018 | $ | 270,000 | 1.41% - 1.59% | |||||
2019 | — | —% | ||||||
2020 and beyond | 400,000 | 1.34% - 2.28% | ||||||
Total FHLB advances | 670,000 | |||||||
Securities sold under repurchase agreements | 50,336 | 1.87% - 2.41% | ||||||
Retail repurchase agreements | 28,777 | 0.25% | ||||||
Total contractual outstanding | 749,113 | |||||||
Total Borrowings | $ | 749,113 |
For the years ended December 31, 2018 and 2017, the Company maintained advances with the FHLB averaging $771.6 million and $798.4 million, respectively, with an average cost of approximately 1.23% and 1.45%, respectively. The FHLB advances outstanding at December 31, 2018 are floating until February 13, 2019 and then convert to a fixed rate of 3.42% through maturity. Substantially all FHLB advances outstanding at December 31, 2017 had fixed interest rates. Interest expense on FHLB advances was $9.5 million, $11.6 million and $5.8 million for the years ended December 31, 2018, 2017 and 2016.
The Company pledges loans and securities as collateral for FHLB advances and FRB Discount Window borrowings. See Notes 3 and 4 to these consolidated financial statements for further information. At December 31, 2018, the Company had additional capacity to borrow from the FHLB of $2.26 billion. Also, at December 31, 2018, the Company has unused credit lines with financial institutions of $540.0 million.
For the year ended December 31, 2018, the Company recognized a gain of $6.3 million on the extinguishment of FHLB advances.
NOTE 11. REGULATORY CAPITAL
The Company and the Bank are subject to regulatory capital adequacy requirements promulgated by federal regulatory agencies. The Board of Governors of the Federal Reserve System establishes capital requirements, including well capitalized standards, for the Company, and the OCC has similar requirements for the Bank. 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. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.
Banking regulations identify five capital categories for insured depository institutions: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. As of December 31, 2018 and 2017, all capital ratios of the Company and the Bank exceeded the well capitalized levels under the applicable regulatory capital adequacy guidelines.
The ability of the Company and the Bank to pay dividends is subject to statutory and regulatory restrictions on the payment of cash dividends.
Quantitative measures established by regulation to ensure capital adequacy require the Company and Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier I capital (as defined) to average assets (as defined). Management believes, at December 31, 2018 and 2017, that the Company and Bank met all capital adequacy requirements to which they are subject.
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
The Bank’s and Company’s regulatory capital levels are as follows:
Actual | Minimum Capital Requirement | Minimum To Be Well Capitalized | ||||||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
December 31, 2018 | ||||||||||||||||||||||||
Tier 1 leverage ratio | ||||||||||||||||||||||||
Company | $ | 1,294,474 | 10.4 | % | $ | 496,290 | 4.0 | % | $ | 620,363 | 5.0 | % | ||||||||||||
Bank | 1,168,288 | 9.5 | % | 489,584 | 4.0 | % | 611,980 | 5.0 | % | |||||||||||||||
Common equity tier 1 capital ratio | ||||||||||||||||||||||||
Company | 1,294,474 | 12.2 | % | 477,740 | 4.5 | % | 690,069 | 6.5 | % | |||||||||||||||
Bank | 1,168,288 | 11.1 | % | 472,648 | 4.5 | % | 682,713 | 6.5 | % | |||||||||||||||
Tier 1 risk-based capital ratio | ||||||||||||||||||||||||
Company | 1,294,474 | 12.2 | % | 636,987 | 6.0 | % | 849,316 | 8.0 | % | |||||||||||||||
Bank | 1,168,288 | 11.1 | % | 630,197 | 6.0 | % | 840,262 | 8.0 | % | |||||||||||||||
Total risk-based capital ratio | ||||||||||||||||||||||||
Company | 1,346,124 | 12.7 | % | 849,316 | 8.0 | % | 1,061,645 | 10.0 | % | |||||||||||||||
Bank | 1,219,938 | 11.6 | % | 840,262 | 8.0 | % | 1,050,328 | 10.0 | % |
Actual | Minimum Capital Requirement | Minimum To Be Well Capitalized | ||||||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
December 31, 2017 | ||||||||||||||||||||||||
Tier 1 leverage ratio | ||||||||||||||||||||||||
Company | $ | 1,079,851 | 10.5 | % | $ | 411,177 | 4.0 | % | $ | 513,972 | 5.0 | % | ||||||||||||
Bank | 927,426 | 9.2 | % | 403,527 | 4.0 | % | 504,409 | 5.0 | % | |||||||||||||||
Common equity tier 1 capital ratio | ||||||||||||||||||||||||
Company | 1,079,851 | 11.9 | % | 409,482 | 4.5 | % | 591,475 | 6.5 | % | |||||||||||||||
Bank | 927,426 | 10.4 | % | 400,187 | 4.5 | % | 578,047 | 6.5 | % | |||||||||||||||
Tier 1 risk-based capital ratio | ||||||||||||||||||||||||
Company | 1,079,851 | 11.9 | % | 545,977 | 6.0 | % | 727,969 | 8.0 | % | |||||||||||||||
Bank | 927,426 | 10.4 | % | 533,582 | 6.0 | % | 711,443 | 8.0 | % | |||||||||||||||
Total risk-based capital ratio | ||||||||||||||||||||||||
Company | 1,128,889 | 12.4 | % | 727,969 | 8.0 | % | 909,961 | 10.0 | % | |||||||||||||||
Bank | 975,663 | 11.0 | % | 711,443 | 8.0 | % | 889,304 | 10.0 | % |
The Bank is subject to regulations of certain federal and state agencies and can be periodically examined by those authorities. As a consequence, the Bank’s business is susceptible to the impacts of federal legislation and regulations issued by, but not limited to, the Board of Governors of the Federal Reserve System, OCC and FDIC.
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
NOTE 12. ACCUMULATED OTHER COMPREHENSIVE INCOME
Changes in AOCI for the periods indicated are summarized as follows:
Year Ended December 31, 2018 | ||||||||||||
Before Tax | Tax Effect | Net of Tax | ||||||||||
(Dollars in thousands) | ||||||||||||
Balance at beginning of period | $ | 14,402 | $ | (5,509 | ) | $ | 8,893 | |||||
Unrealized gain (loss) on investment securities available for sale: | ||||||||||||
Net unrealized holdings gain (loss) arising during the period | (67,800 | ) | 16,917 | (50,883 | ) | |||||||
Amounts reclassified to (gain) loss on investment securities | 745 | (186 | ) | 559 | ||||||||
Cumulative adjustment from adoption of new accounting standard | (1,587 | ) | 2,313 | 726 | ||||||||
Balance at end of period | $ | (54,240 | ) | $ | 13,535 | $ | (40,705 | ) | ||||
Unrealized gains (losses) on derivative instruments: | ||||||||||||
Balance at beginning of period | — | — | — | |||||||||
Net unrealized holding gains (losses) arising during the period | (3,490 | ) | 871 | (2,619 | ) | |||||||
Balance at end of period | (3,490 | ) | 871 | (2,619 | ) | |||||||
Total accumulated other comprehensive income (loss) | (57,730 | ) | 14,406 | (43,324 | ) |
Year Ended December 31, 2017 | ||||||||||||
Before Tax | Tax Effect | Net of Tax | ||||||||||
(Dollars in thousands) | ||||||||||||
Balance at beginning of period | $ | (6,504 | ) | $ | 2,509 | $ | (3,995 | ) | ||||
Unrealized gain (loss) on investment securities available for sale: | ||||||||||||
Net unrealized holdings gain (loss) arising during the period | 24,112 | (9,244 | ) | 14,868 | ||||||||
Amounts reclassified to (gain) loss on investment securities | (3,206 | ) | 1,226 | (1,980 | ) | |||||||
Balance at end of period | $ | 14,402 | $ | (5,509 | ) | $ | 8,893 |
Year Ended December 31, 2016 | ||||||||||||
Before Tax | Tax Effect | Net of Tax | ||||||||||
(Dollars in thousands) | ||||||||||||
Balance at beginning of period | $ | (15,371 | ) | $ | 5,928 | $ | (9,443 | ) | ||||
Unrealized gain (loss) on investment securities available for sale: | ||||||||||||
Net unrealized holdings gain (loss) arising during the period | 11,582 | (4,467 | ) | 7,115 | ||||||||
Amounts reclassified to (gain) loss on investment securities | (2,715 | ) | 1,048 | (1,667 | ) | |||||||
Balance at end of period | $ | (6,504 | ) | $ | 2,509 | $ | (3,995 | ) |
NOTE 13. STOCKHOLDERS’ EQUITY
Class A and Class B Common Stock
The shares of common stock of the Company are divided into two classes: Class A common stock and Class B common stock. The Class A common stock possesses all of the voting power for all matters requiring action by holders of the Company’s common stock, with certain limited exceptions. Each share of Class B common stock is convertible into one share of Class A common stock, subject to certain restrictions. The Class A common stock is not convertible. Other than with respect to voting rights and the restrictions on transfer and conversion relating to the Class B common stock, the Class A common stock and the Class B common stock are treated equally and identically, including with respect to distributions.
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
In 2017 and 2016, the Company converted 188,474 and 3,545,408, respectively, Class B common shares to Class A common shares in a voluntary exchange with certain shareholders. This exchange was made on 1:1 ratio and no consideration was paid or received by the Company. Total Class B common shares issued and outstanding decreased by 188,474 and 3,545,408 while Class A common shares issued and outstanding increased by 188,474 and 3,545,408 for the years ended December 31, 2017 and 2016, respectively. This is recorded as “Exchange of B shares to A shares” in the consolidated statements of changes in stockholders’ equity.
Preferred Stock
There are 10 million preferred shares authorized and none issued and outstanding at December 31, 2018 or 2017. Preferred stock has a par value of $.001.
Treasury Stock
During the years ended December 31, 2018 and 2017, the Company made no purchases of shares of Class A common stock.
Warrants
The following table presents the activity during the years ended December 31, 2018, 2017 and 2016 related to the Amended 2009 Warrants:
Amended 2009 Warrants | ||||||||||||||||
Warrants | Weighted Average Exercise Price Per Share | Aggregate Intrinsic Value | Weighted Average Remaining Contractual Life (Years) | |||||||||||||
(Dollars in thousands, except per share data) | ||||||||||||||||
Outstanding at January 1, 2018 | 1,274,022 | $ | 26.75 | |||||||||||||
Granted | — | — | ||||||||||||||
Exercised | (408,932 | ) | 26.56 | $ | 12,191 | |||||||||||
Forfeited | — | — | ||||||||||||||
Expired | — | — | ||||||||||||||
Outstanding at December 31, 2018 | 865,090 | 26.84 | 5,917 | 0.87 | ||||||||||||
Exercisable at December 31, 2018 | 865,090 | 26.84 | 5,917 | 0.87 | ||||||||||||
Vested at December 31, 2018 | 865,090 | 26.84 | 5,917 | 0.87 | ||||||||||||
Vested and expected to vest at December 31, 2018 | 865,090 | 26.84 | 5,917 | 0.87 |
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
Amended 2009 Warrants | ||||||||||||||||
Warrants | Weighted Average Exercise Price Per Share | Aggregate Intrinsic Value | Weighted Average Remaining Contractual Life (Years) | |||||||||||||
(Dollars in thousands, except per share data) | ||||||||||||||||
Outstanding at January 1, 2017 | 2,685,927 | $ | 26.48 | |||||||||||||
Granted | — | — | ||||||||||||||
Exercised | (1,411,905 | ) | 26.24 | $ | 31,895 | |||||||||||
Forfeited | — | — | ||||||||||||||
Expired | — | — | ||||||||||||||
Outstanding at December 31, 2017 | 1,274,022 | 26.75 | 30,640 | 1.87 | ||||||||||||
Exercisable at December 31, 2017 | 1,274,022 | 26.75 | 30,640 | 1.87 | ||||||||||||
Vested at December 31, 2017 | 1,274,022 | 26.75 | 30,640 | 1.87 | ||||||||||||
Vested and expected to vest at December 31, 2017 | 1,274,022 | 26.75 | 30,640 | 1.87 |
Amended 2009 Warrants | ||||||||||||||||
Warrants | Weighted Average Exercise Price Per Share | Aggregate Intrinsic Value | Weighted Average Remaining Contractual Life (Years) | |||||||||||||
(Dollars in thousands, except per share data) | ||||||||||||||||
Outstanding at January 1, 2016 | 3,024,123 | $ | 26.42 | |||||||||||||
Granted | — | — | ||||||||||||||
Exercised | (338,196 | ) | 25.96 | $ | 2,821 | |||||||||||
Forfeited | — | — | ||||||||||||||
Expired | — | — | ||||||||||||||
Outstanding at December 31, 2016 | 2,685,927 | 26.48 | 56,993 | 2.87 | ||||||||||||
Exercisable at December 31, 2016 | 1,582,449 | 25.23 | 35,564 | 2.87 | ||||||||||||
Vested at December 31, 2016 | 2,685,927 | 26.48 | 56,993 | 2.87 | ||||||||||||
Vested and expected to vest at December 31, 2016 | 2,685,927 | 26.48 | 56,993 | 2.87 |
As of December 31, 2018, there were 865,090 outstanding Amended 2009 Warrants with an expiration date of November 12, 2019. There is no remaining expense to be recognized from the Amended 2009 Warrants.
NOTE 14. STOCK-BASED COMPENSATION AND OTHER BENEFIT PLANS
2009 Equity Incentive Plan
In 2009, the Company approved the 2009 Equity Incentive Plan (the “2009 Option Plan”) covering its directors, employees and affiliates. The 2009 Option Plan provided for the grant of options to acquire shares of common stock up to an aggregate of the lesser of 10% of issued common stock or 4.375 million shares of common stock. When the options are exercised, the shares issued upon such exercise will be newly issued shares.
In November 2014, the 2009 Option Plan expired on the fifth anniversary of plan’s adoption date.
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
The following tables present the activity during the years ended December 31, 2018, 2017 and 2016 related to the 2009 Option Plan:
2009 Option Plan | ||||||||||||||||
Options | Weighted Average Exercise Price Per Share | Aggregate Intrinsic Value | Weighted Average Remaining Contractual Life (Years) | |||||||||||||
(Dollars in thousands, except per share data) | ||||||||||||||||
Outstanding at January 1, 2018 | 1,314,924 | $ | 20.65 | |||||||||||||
Granted | — | — | ||||||||||||||
Exercised | (149,124 | ) | 21.22 | $ | 4,929 | |||||||||||
Forfeited | — | — | ||||||||||||||
Expired | — | — | ||||||||||||||
Outstanding at December 31, 2018 | 1,165,800 | 20.57 | 15,282 | 3.47 | ||||||||||||
Exercisable at December 31, 2018 | 1,165,800 | 20.57 | 15,282 | 3.47 | ||||||||||||
Vested at December 31, 2018 | 1,165,800 | 20.57 | 15,282 | 3.47 | ||||||||||||
Vested and expected to vest at December 31, 2018 | 1,165,800 | 20.57 | 15,282 | 3.47 |
2009 Option Plan | ||||||||||||||||
Options | Weighted Average Exercise Price Per Share | Aggregate Intrinsic Value | Weighted Average Remaining Contractual Life (Years) | |||||||||||||
(Dollars in thousands, except per share data) | ||||||||||||||||
Outstanding at January 1, 2017 | 3,107,235 | $ | 20.62 | |||||||||||||
Granted | — | — | ||||||||||||||
Exercised | (1,768,652 | ) | 20.58 | $ | 47,180 | |||||||||||
Forfeited | (21,322 | ) | 22.72 | |||||||||||||
Expired | (2,337 | ) | 22.97 | |||||||||||||
Outstanding at December 31, 2017 | 1,314,924 | 20.65 | 39,651 | 4.49 | ||||||||||||
Exercisable at December 31, 2017 | 1,314,924 | 20.65 | 39,651 | 4.49 | ||||||||||||
Vested at December 31, 2017 | 1,314,924 | 20.65 | 39,651 | 4.49 | ||||||||||||
Vested and expected to vest at December 31, 2017 | 1,314,924 | 20.65 | 39,651 | 4.49 |
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
2009 Option Plan | ||||||||||||||||
Options | Weighted Average Exercise Price Per Share | Aggregate Intrinsic Value | Weighted Average Remaining Contractual Life (Years) | |||||||||||||
(Dollars in thousands, except per share data) | ||||||||||||||||
Outstanding at January 1, 2016 | 3,707,898 | $ | 20.67 | |||||||||||||
Granted | — | — | ||||||||||||||
Exercised | (549,928 | ) | 20.78 | $ | 9,547 | |||||||||||
Forfeited | (49,984 | ) | 22.34 | |||||||||||||
Expired | (751 | ) | 22.97 | |||||||||||||
Outstanding at December 31, 2016 | 3,107,235 | 20.62 | 84,138 | 4.69 | ||||||||||||
Exercisable at December 31, 2016 | 2,937,302 | 20.55 | 79,745 | 4.52 | ||||||||||||
Vested at December 31, 2016 | 2,937,302 | 20.55 | 79,745 | 4.52 | ||||||||||||
Vested and expected to vest at December 31, 2016 | 3,107,235 | 20.62 | 84,138 | 4.69 |
A summary of selected data related to stock-based compensation expense follows:
2009 Option Plan | ||||||||||||
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
(Dollars in thousands) | ||||||||||||
Stock-based compensation expense | $ | — | $ | 760 | $ | 1,707 | ||||||
Tax benefit realized from stock awards exercised | 1,903 | 19,070 | 3,622 | |||||||||
Fair value of stock-based awards that vested during the year | — | 1,075 | 1,882 | |||||||||
Amount of cash received from exercise of awards | 3,165 | 36,392 | 11,427 | |||||||||
Total intrinsic value of awards exercised during the year | 4,929 | 47,180 | 9,547 |
2009 Option Plan | ||||||||||||
December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
(Dollars in thousands) | ||||||||||||
Unrecognized compensation expense related to stock-based compensation | $ | — | $ | — | $ | 569 | ||||||
Weighted-average life over which expense is expected to be recognized (years) | — | — | 0.78 |
2013 Stock Incentive Plan
In 2013, the Company approved the 2013 Stock Incentive Plan (the “2013 Incentive Plan”) covering its executive management, directors, individual consultants and employees. The 2013 Incentive Plan provides that awards may be granted under the plan with respect to an aggregate of 3,000,000 shares of common stock of the Company. Awards may be made under the 2013 Incentive Plan in the form of (a) incentive stock options, (b) options that do not qualify as incentive stock options, (c) stock appreciation rights, (d) restricted stock, (e) restricted stock units and (f) unrestricted stock; provided, that the number of shares of restricted stock, restricted stock units, and shares of unrestricted stock awarded under the Plan shall not exceed 500,000, in the aggregate. When the options are exercised, the shares issued upon such exercise will be newly issued shares.
2013 Incentive Plan – Stock Options
On February 23, 2016, the Company granted 80,000 options from the 2013 Option Plan to directors that vest at a rate of 25% per calendar quarter in 2016. The options have an exercise price of $29.98, the estimated fair value of the Company’s stock on the date of grant and an aggregate fair value of $527 thousand. The options granted to directors expire 10 years from grant date.
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
The following tables present the activity during the year ended December 31, 2018 related to the 2013 Plan Options:
2013 Plan Options | ||||||||||||||||
Options | Weighted Average Exercise Price Per Share | Aggregate Intrinsic Value | Weighted Average Remaining Contractual Life (Years) | |||||||||||||
(Dollars in thousands, except per share data) | ||||||||||||||||
Outstanding at January 1, 2018 | 1,424,953 | $ | 20.79 | |||||||||||||
Granted | — | — | ||||||||||||||
Exercised | (256,145 | ) | 20.59 | $ | 8,322 | |||||||||||
Forfeited | — | — | ||||||||||||||
Expired | — | — | ||||||||||||||
Outstanding at December 31, 2018 | 1,168,808 | 20.83 | 15,016 | 5.22 | ||||||||||||
Exercisable at December 31, 2018 | 1,168,808 | 20.83 | 15,016 | 5.22 | ||||||||||||
Vested at December 31, 2018 | 1,168,808 | 20.83 | 15,016 | 5.22 | ||||||||||||
Vested and expected to vest at December 31, 2018 | 1,168,808 | 20.83 | 15,016 | 5.22 |
2013 Plan Options | ||||||||||||||||
Options | Weighted Average Exercise Price Per Share | Aggregate Intrinsic Value | Weighted Average Remaining Contractual Life (Years) | |||||||||||||
(Dollars in thousands, except per share data) | ||||||||||||||||
Outstanding at January 1, 2017 | 2,164,258 | $ | 20.63 | |||||||||||||
Granted | — | — | ||||||||||||||
Exercised | (725,970 | ) | 20.18 | $ | 20,633 | |||||||||||
Forfeited | (13,335 | ) | 27.23 | |||||||||||||
Expired | — | — | ||||||||||||||
Outstanding at December 31, 2017 | 1,424,953 | 20.79 | 42,764 | 6.21 | ||||||||||||
Exercisable at December 31, 2017 | 1,408,115 | 20.71 | 42,372 | 6.20 | ||||||||||||
Vested at December 31, 2017 | 1,408,115 | 20.71 | 42,372 | 6.20 | ||||||||||||
Vested and expected to vest at December 31, 2017 | 1,424,953 | 20.79 | 42,764 | 6.21 |
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
2013 Plan Options | ||||||||||||||||
Options | Weighted Average Exercise Price Per Share | Aggregate Intrinsic Value | Weighted Average Remaining Contractual Life (Years) | |||||||||||||
(Dollars in thousands, except per share data) | ||||||||||||||||
Outstanding at January 1, 2016 | 2,367,187 | $ | 20.37 | |||||||||||||
Granted | 80,000 | 29.98 | ||||||||||||||
Exercised | (248,760 | ) | 20.85 | $ | 3,888 | |||||||||||
Forfeited | (34,169 | ) | 23.03 | |||||||||||||
Expired | — | — | ||||||||||||||
Outstanding at December 31, 2016 | 2,164,258 | 20.63 | 58,596 | 7.16 | ||||||||||||
Exercisable at December 31, 2016 | 1,381,232 | 20.60 | 37,427 | 7.18 | ||||||||||||
Vested at December 31, 2016 | 1,881,236 | 20.38 | 51,402 | 7.09 | ||||||||||||
Vested and expected to vest at December 31, 2016 | 2,164,258 | 20.63 | 58,596 | 7.16 |
The fair value of the 2013 Plan Options granted for the year ended December 31, 2016 were determined utilizing the Black- Scholes option pricing model methodology. No awards were granted from the 2013 Plan during the years ended December 31, 2017 and 2018. A summary of assumptions used to calculate the fair values of the 2013 Plan Options awards is presented below:
2013 Plan Options Years Ended December 31, | ||||
2016 | ||||
Expected volatility | 24.7 | % | ||
Expected dividend yield | 1.25 | % | ||
Expected term (years) | 6.0 | |||
Risk-free interest rate | 1.37 | % | ||
Weighted average grant date fair value | $ | 6.57 |
The expected volatility is based on the volatility of comparable peer banks. The expected term represents the period of time that the 2013 Plan Option awards are expected to be outstanding from the date of grant. The risk-free interest rate is based on the US Treasury yields for the expected term of the instrument.
A summary of selected data related to stock-based compensation expense follows:
2013 Plan Options | ||||||||||||
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
(Dollars in thousands) | ||||||||||||
Stock-based compensation expense | $ | 41 | $ | 226 | $ | 1,655 | ||||||
Tax benefit realized from stock awards exercised | 3,212 | 8,019 | 1,380 | |||||||||
Grant date fair value of stock-based awards that vested during the year | 162 | 3,732 | 4,313 | |||||||||
Amount of cash received from exercise of option awards | 5,274 | 14,652 | 5,186 | |||||||||
Total intrinsic value of awards exercised during the year | 8,322 | 20,633 | 3,888 |
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
2013 Plan Options | ||||||||||||
December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
(Dollars in thousands) | ||||||||||||
Unrecognized compensation expense related to stock-based compensation | $ | — | $ | 41 | $ | 333 | ||||||
Weighted-average life over which expense is expected to be recognized (years) | — | 0.28 | 1.24 |
2016 Stock Incentive Plan
In 2016, the Company approved the FCB Financial Holdings, Inc. 2016 Stock Incentive Plan (the “2016 Incentive Plan”) covering its executive management, directors, individual consultants and employees. The 2016 Incentive Plan provides that awards may be granted under the plan with respect to an aggregate of 2,000,000 shares of Class A Common Stock of the Company. Awards may be made under the Plan in the form of (a) incentive stock options, (b) options that do not qualify as incentive stock options, (c) stock appreciation rights, (d) restricted stock, (e) restricted stock units and (f) unrestricted stock. Awards under the 2016 Incentive Plan may also be made in the form of performance awards by making the awards subject to the achievement of performance criteria described in the 2016 Incentive Plan or other performance criteria. An incentive stock option may be granted only to a person who is an employee of the Company or a parent or subsidiary of the Company on the date of grant. Shares issued pursuant to the 2016 Incentive Plan may be authorized but unissued Common Stock, authorized and issued Common Stock held in the Company’s treasury or Common Stock acquired by the Company for the purposes of the Plan.
2016 Incentive Plan - Stock Options
In August 2016, the Company granted 827,500 options that vest in-full (i.e. cliff vesting) on the 5-year anniversary of the grant date from the 2016 Incentive Plan to employees with an exercise price of $36.11, the estimated fair value of the Company’s stock on the date of grant and an aggregate fair value of $7.1 million. The options granted to employees expire 10 years from the grant date.
On four different dates during the year ended December 31, 2017, the Company granted 37,500 options that vest in-full (i.e. cliff vesting) on the 5-year anniversary of the grant date from the 2016 Incentive Plan to employees with a weighted average exercise price of $46.89, the estimated fair value of the Company’s stock on the date of grant and an aggregate fair value of $440 thousand. The options granted to employees expire 10 years from the grant date.
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
The following tables present the activity during the year ended December 31, 2018 related to the 2016 Incentive Plan Options:
2016 Plan Options | |||||||||||||
Options | Weighted Average Exercise Price Per Share | Aggregate Intrinsic Value | Weighted Average Remaining Contractual Life (Years) | ||||||||||
(Dollars in thousands, except per share data) | |||||||||||||
Outstanding at January 1, 2018 | 762,500 | $ | 36.64 | ||||||||||
Granted | — | — | |||||||||||
Exercised | — | — | — | ||||||||||
Forfeited | (35,000 | ) | 36.11 | ||||||||||
Expired | — | — | |||||||||||
Outstanding at December 31, 2018 | 727,500 | 36.67 | — | 7.65 | |||||||||
Exercisable at December 31, 2018 | — | — | — | — | |||||||||
Vested at December 31, 2018 | — | — | — | — | |||||||||
Vested and expected to vest at December 31, 2018 | 727,500 | 36.67 | — | 7.65 |
2016 Plan Options | |||||||||||||
Options | Weighted Average Exercise Price Per Share | Aggregate Intrinsic Value | Weighted Average Remaining Contractual Life (Years) | ||||||||||
(Dollars in thousands, except per share data) | |||||||||||||
Outstanding at January 1, 2017 | 827,500 | $ | 36.11 | ||||||||||
Granted | 37,500 | 46.89 | |||||||||||
Exercised | — | — | $ | — | |||||||||
Forfeited | (102,500 | ) | 36.11 | ||||||||||
Expired | — | — | |||||||||||
Outstanding at December 31, 2017 | 762,500 | 36.64 | 10,797 | 8.64 | |||||||||
Exercisable at December 31, 2017 | — | — | — | — | |||||||||
Vested at December 31, 2017 | — | — | — | — | |||||||||
Vested and expected to vest at December 31, 2017 | 762,500 | 36.64 | 10,797 | 8.64 |
2016 Plan Options | |||||||||||||
Options | Weighted Average Exercise Price Per Share | Aggregate Intrinsic Value | Weighted Average Remaining Contractual Life (Years) | ||||||||||
(Dollars in thousands, except per share data) | |||||||||||||
Outstanding at January 1, 2016 | — | $ | — | ||||||||||
Granted | 827,500 | 36.11 | |||||||||||
Exercised | — | — | $ | — | |||||||||
Forfeited | — | — | |||||||||||
Expired | — | — | |||||||||||
Outstanding at December 31, 2016 | 827,500 | 36.11 | 9,591 | 9.61 | |||||||||
Exercisable at December 31, 2016 | — | — | — | — | |||||||||
Vested at December 31, 2016 | — | — | — | — | |||||||||
Vested and expected to vest at December 31, 2016 | 827,500 | 36.11 | 9,591 | 9.61 |
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
The fair value of the 2016 Incentive Plan Options granted for the year ended December 31, 2017 and 2016 were determined utilizing the Black-Scholes option pricing model methodology. No options were granted during the year ended December 31, 2018 under the 2016 Incentive Plan. A summary of assumptions used to calculate the fair values of the 2016 Incentive Plan Options awards is presented below:
2016 Plan Options December 31, | |||||||
2017 | 2016 | ||||||
Expected volatility | 22.6% - 23.4 | % | 24.0 | % | |||
Expected dividend yield | 1.25 | % | 1.25 | % | |||
Expected term (years) | 7.5 | 7.5 | |||||
Risk-free interest rate | 2.04% - 2.17 | % | 1.42 | % | |||
Weighted average grant date fair value | $ | 11.73 | $ | 8.62 |
The expected volatility is based on the volatility of comparable peer banks. The expected term represents the period of time that the 2016 Plan Option awards are expected to be outstanding from the date of grant. The risk-free interest rate is based on the US Treasury yields for the expected term of the instrument.
A summary of selected data related to stock-based compensation expense for the years ended December 31, 2018, 2017 and 2016 are as follows:
2016 Plan Options December 31, | ||||||||||
2018 | 2017 | 2016 | ||||||||
(Dollars in thousands) | ||||||||||
Stock-based compensation expense | $ | 1,299 | $ | 1,431 | $ | 570 | ||||
Unrecognized compensation expense related to stock-based | 3,389 | 4,882 | 6,563 | |||||||
Weighted-average life over which expense is expected to be recognized (years) | 2.67 | 3.66 | 4.61 |
2016 Incentive Plan - Restricted Stock Awards and Restricted Stock Unit Awards
On March 29, 2016, the Compensation Committee granted 121,212 restricted shares (the “Award”) of Class A Common Stock to certain Executives. Shareholder’s approved the 2016 Incentive Plan at the 2016 Annual Meeting of Stockholders on May 16, 2016 which was determined to be the grant date of the Award. The fair value of the Awards on the grant date was $4.2 million and was recognized as compensation expense over the requisite vesting period ending December 31, 2018.
On February 7, 2017, the Compensation Committee granted certain non-employee Directors of the Company a portion of their Directors’ compensation for fiscal year 2017 in the form of restricted stock units (the “Directors’ RSU Award”). Each RSU constitutes the right to receive from the Company on the date the RSU is settled, one share of Class A Common Stock of the Company. A total of 24,800 Directors’ RSUs were granted with a grant date fair value of $1.1 million. Twenty-five percent (25%) of the RSUs vested on each of March 30, 2017, June 30, 2017, September 30, 2017 and December 31, 2017. Compensation expense was recognized on a straight-line basis over the requisite vesting period ending December 31, 2017.
On March 28, 2017, the Compensation Committee granted 83,593 restricted shares (the “Executive RS Award”) of Class A Common Stock to certain Executives. The fair value of the Executive RS Awards on the grant date was $4.0 million and is recognized as compensation expense over the requisite vesting period ending December 31, 2019.
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
On March 28, 2017, the Compensation Committee granted a target of 73,144 and a maximum of 91,430 restricted stock units (the “Performance RSU Award”) of Class A Common Stock to a certain Executive. The total target grant date fair value of the Performance RSU Award was $3.5 million, up to a maximum of $4.4 million, and compensation expense is recognized on a straight-line basis over the requisite vesting period ending December 31, 2019.
On five different dates during the year ended December 31, 2017, the Company granted 81,815 restricted shares (the “Employee RSU Award”) to employees that vest in-full (i.e. cliff vesting) on the 5-year anniversary of the grant date from the 2016 Incentive Plan. The fair value of the Awards on the grant date was $4.1 million and is recognized as compensation expense over the requisite vesting period ending on the respective 5-year anniversary of the Employee RSU Award’s grant date.
On February 21, 2018, the Compensation Committee granted certain non-employee Directors of the Company a portion of their Directors’ compensation for fiscal year 2018 in the form of restricted stock units (the “Directors’ RSU Award”). Each RSU constitutes the right to receive from the Company on the date the RSU is settled, one share of Class A Common Stock of the Company. A total of 19,015 Directors’ RSUs were granted with a grant date fair value of $1.1 million. Twenty-five percent (25%) of the RSUs vested on each of March 31, 2018, June 30, 2018, September 30, 2018 and December 31, 2018. Compensation expense was recognized on a straight-line basis over the requisite vesting period ending December 31, 2018.
On March 21, 2018, the Compensation Committee granted a target of 84,836 and a maximum of 106,043 restricted stock units (the “Executive RSUs”) of Class A Common Stock to certain Executives. The total target grant date fair value of the RSU Award was $4.8 million, up to a maximum of $5.9 million, and is recognized on a straight-line basis as compensation expense over the requisite vesting period ending December 31, 2020.
On four different dates during the year ended December 31, 2018, the Company granted 49,301 restricted shares (the “Employee RSU Award”) to employees that vest in-full (i.e. cliff vesting) on the 5-year anniversary of the grant date from the 2016 Incentive Plan. The fair value of the Awards on the grant date was $2.8 million and is recognized as compensation expense over the requisite vesting period ending on the respective 5-year anniversary of the Employee RSU Award’s grant date. On June 30, 2018, an Employee RSU Award of 4,251 was granted that vests in-full (i.e. cliff vesting) on the 3-year anniversary of the grant date from the 2016 Incentive Plan. The fair value of the Awards on the grant date was $250 thousand and is recognized as compensation expense over the requisite vesting period ending on the respective 3-year anniversary of the Employee RSU Award’s grant date.
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
The following tables present the activity during the years ended December 31, 2018, 2017 and 2016 related to restricted stock from the 2016 Plan:
2016 Stock Incentive Plan | ||||||||||||||||||||||||
Restricted Stock Awards | Restricted Stock Unit Awards | Performance Restricted Stock Unit Awards | ||||||||||||||||||||||
Shares | Weighted Average Grant Date Fair Value | Shares | Weighted Average Grant Date Fair Value | Shares | Weighted Average Grant Date Fair Value | |||||||||||||||||||
(Dollars in thousands, except per share data) | ||||||||||||||||||||||||
Outstanding at January 1, 2016 | — | $ | — | — | $ | — | — | $ | — | |||||||||||||||
Granted | 121,212 | 34.47 | — | — | — | — | ||||||||||||||||||
Vested | (40,404 | ) | 34.47 | — | — | — | — | |||||||||||||||||
Canceled or forfeited | — | — | — | — | — | — | ||||||||||||||||||
Outstanding at December 31, 2016 | 80,808 | $ | 34.47 | — | $ | — | — | $ | — | |||||||||||||||
Granted | 83,593 | 47.85 | 106,615 | 49.49 | 73,144 | 47.85 | ||||||||||||||||||
Vested | (68,268 | ) | 39.93 | (18,600 | ) | 45.45 | — | — | ||||||||||||||||
Canceled or forfeited | — | — | — | — | — | — | ||||||||||||||||||
Outstanding at December 31, 2017 | 96,133 | $ | 42.23 | 88,015 | $ | 50.34 | 73,144 | $ | 47.85 | |||||||||||||||
Granted | — | — | 72,567 | 56.52 | 84,836 | 56.10 | ||||||||||||||||||
Vested | (68,268 | ) | 39.93 | (25,215 | ) | 52.95 | — | — | ||||||||||||||||
Canceled or forfeited | — | — | (6,232 | ) | 52.85 | — | — | |||||||||||||||||
Outstanding at December 31, 2018 | 27,865 | $ | 47.85 | 129,135 | $ | 53.18 | 157,980 | $ | 52.28 |
The actual number of Performance Restricted Stock Units issued at the vesting date could range from 0% to 125% of the initial grant, depending on actual performance achieved.
A summary of selected data related to stock-based compensation expense for the years ended December 31, 2018, 2017 and 2016 are as follows:
Restricted Stock Awards | Restricted Stock Unit Awards | Performance Restricted Stock Unit Awards | ||||||||||||||||||||||||||||||||||
December 31, | December 31, | December 31, | ||||||||||||||||||||||||||||||||||
2018 | 2017 | 2016 | 2018 | 2017 | 2016 | 2018 | 2017 | 2016 | ||||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||||||
Stock-based compensation | $ | 2,631 | $ | 3,672 | $ | 1,393 | $ | 2,330 | $ | 1,225 | $ | — | $ | 2,604 | $ | 968 | $ | — | ||||||||||||||||||
Unrecognized compensation expense related to stock-based compensation | $ | 482 | $ | 3,113 | $ | 2,785 | $ | 5,522 | $ | 4,051 | $ | — | $ | 4,687 | $ | 2,532 | $ | — | ||||||||||||||||||
Weighted-average life over which expense is expected to be recognized (years) | 1.00 | 1.31 | 2.00 | 3.97 | 4.88 | 0.00 | 1.73 | 2.00 | 0.00 |
Florida Community Bank, N.A. 401(k) Plan
The Company sponsors the Florida Community Bank, N.A. 401(k) Plan, a tax-qualified, deferred compensation plan (the “401(k) Plan”). Under the terms of the 401(k) Plan eligible employees may contribute a portion of compensation not exceeding the limits set by law. Employees are eligible to participate in the plan after the first month following 90 days of service. The 401(k) Plan allows a matching employer contribution equal to 100% of elective deferrals that do not exceed 3% of compensation. Matching contributions are fully vested after three years of service. Total 401(k) matching employer contribution expense totaled $1.2 million, $1.1 million and $978 thousand for the years ended December 31, 2018, 2017 and 2016 respectively.
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
Executive Incentive Plan
During the year ended December 31, 2015, the Compensation Committee of the Board of Directors of the Company approved the adoption of the FCB Financial Holdings, Inc. Executive Incentive Plan (the “EIP”). The EIP provides for Annual Incentive Awards and Long-Term Incentive Awards, both of which are subject to achievement of specified performance goals.
Annual Incentive Awards-The Compensation Committee approved Annual Awards under the EIP in respect to the Company’s Core Pre-Tax Profits for fiscal years 2018, 2017 and 2016. The Company recognized $6.0 million, $6.0 million, and $6.0 million of compensation expense for the years ended December 31, 2018, 2017 and 2016, respectively.
Long-Term Incentive Awards-The Compensation Committee granted a Long-Term Award of cash phantom units (“CPUs”) under the Long-Term Incentive component of the EIP which covered a three-year period ending December 31, 2017 (the “Performance Period”). The value of the award is determined by the Company’s common share price at the end of the performance period. Based on the estimated value of the award, the Company recognized $105 thousand and $377 thousand of compensation expense for the years ended December 31, 2017, and 2016 respectively. No compensation expense was recognized in the year ended December 31, 2018. On January 2, 2018, upon conclusion of the Performance Period, it was determined by the Compensation Committee that the total award to be settled under this Long-Term Award plan be 103,456 shares of Class A Common Stock of the Company.
On March 21, 2018, the Compensation Committee granted a Long-Term Award of cash phantom units (“CPUs”) under the Long-Term Incentive component of the EIP which covers a three-year period ending December 31, 2020 (the “Performance Period”). Granted under the award is a target of 18,050 CPUs and a maximum of 22,562 CPUs to a certain Executive. Each CPU is the equivalent in value of a share of Class A Common Stock of the Company, par value $0.001 per share. The total target grant date fair value of the CPU Award was $1.0 million, up to a maximum of $1.3 million, and will be recognized on a straight-line basis as compensation expense over the requisite period ending December 31, 2020. The Company recognized $285 thousand of compensation expense for the year ended December 31, 2018.
Management Long-Term Incentive Plan
During the year ended December 31, 2015, the Compensation Committee of the Board of Directors of the Company approved the FCB Financial Holdings, Inc. Management Long-Term Incentive Plan (“MLTIP”) for certain employees of the Company. The MLTIP provides participants the opportunity to receive a cash award that may be adjusted for the Company’s performance over a three year period ending on December 31, 2018.
The estimated award amount was recognized over the three year service period beginning on January 1, 2016. The Company recognized $833 thousand, $792 thousand and $1.1 million in compensation expense related to this plan for the years ended December 31, 2018, 2017 and 2016, respectively.
NOTE 15. BASIC AND DILUTED EARNINGS PER SHARE
Basic EPS is calculated by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS reflects the effect of common stock equivalents, including stock options, warrants and unvested shares, calculated using the treasury stock method. Common stock equivalents are excluded from the computation of diluted EPS in periods in which the effect is anti-dilutive.
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
The following table presents the computation of basic and diluted EPS:
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
(Dollars in thousands, except share and per share data) | ||||||||||||
Net income available to common stockholders | $ | 168,138 | $ | 125,194 | $ | 99,916 | ||||||
Weighted average number of common shares—basic | 46,343,401 | 42,887,142 | 40,716,588 | |||||||||
Effect of dilutive securities: | ||||||||||||
Employee stock-based compensation awards and warrants | 2,086,524 | 3,233,788 | 2,508,576 | |||||||||
Weighted average number of common shares—diluted | 48,429,925 | 46,120,930 | 43,225,164 | |||||||||
Basic earnings per share | $ | 3.63 | $ | 2.92 | $ | 2.45 | ||||||
Diluted earnings per share | $ | 3.47 | $ | 2.71 | $ | 2.31 | ||||||
Weighted average number of anti-dilutive equity awards | 76,305 | 29,114 | 330,095 |
NOTE 16. INCOME TAXES
The components of the expense for income taxes for the periods presented are as follows:
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
(Dollars in thousands) | ||||||||||||
Current income tax expense: | ||||||||||||
Federal | $ | 34,499 | $ | 24,036 | $ | 39,528 | ||||||
State | 8,718 | 3,800 | 6,013 | |||||||||
Total current income tax expense | 43,217 | 27,836 | 45,541 | |||||||||
Deferred income tax expense: | ||||||||||||
Federal | 4,403 | 24,795 | 9,161 | |||||||||
State | 1,204 | 1,534 | 1,203 | |||||||||
Total deferred income tax expense | 5,607 | 26,329 | 10,364 | |||||||||
Total income tax expense | $ | 48,824 | $ | 54,165 | $ | 55,905 |
A reconciliation of the expected income tax expense or benefit at the statutory federal income tax rate of 21% to the Company’s actual income tax expense or benefit and effective tax rate for the periods presented is as follows:
Years Ended December 31, | ||||||||||||||||||||||||
2018 | 2017 | 2016 | ||||||||||||||||||||||
Amount | % | Amount | % | Amount | % | |||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Tax expense at statutory federal income tax rate | $ | 45,562 | 21.00 | % | $ | 62,776 | 35.00 | % | $ | 54,537 | 35.00 | % | ||||||||||||
Increase (decrease) resulting from: | ||||||||||||||||||||||||
Bank-owned life insurance | (1,252 | ) | (0.58 | )% | (3,186 | ) | (1.78 | )% | (1,817 | ) | (1.17 | )% | ||||||||||||
Stock compensation and excess tax benefit | (3,302 | ) | (1.52 | )% | (20,098 | ) | (11.21 | )% | 234 | 0.15 | % | |||||||||||||
Dividends received deduction | (383 | ) | (0.18 | )% | (1,631 | ) | (0.91 | )% | (1,919 | ) | (1.23 | )% | ||||||||||||
State tax, net of federal benefit | 7,706 | 3.55 | % | 3,528 | 1.97 | % | 4,777 | 3.07 | % | |||||||||||||||
Federal tax rate change | — | — | % | 14,301 | 7.97 | % | — | — | % | |||||||||||||||
Other | 493 | 0.17 | % | (1,525 | ) | (0.85 | )% | 93 | 0.06 | % | ||||||||||||||
Total | $ | 48,824 | 22.44 | % | $ | 54,165 | 30.19 | % | $ | 55,905 | 35.88 | % |
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
Deferred income tax assets and liabilities reflect the tax effect of estimated temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for the same items for income tax reporting purposes.
The significant components of the net deferred tax assets and liabilities for the periods presented are as follows:
December 31, | ||||||||
2018 | 2017 | |||||||
(Dollars in thousands) | ||||||||
Deferred tax assets: | ||||||||
Excess tax basis over carrying value of assets: | ||||||||
Other real estate owned | $ | 1,645 | $ | 1,456 | ||||
Total | 1,645 | 1,456 | ||||||
Net operating loss carry forward: | ||||||||
Federal | 4,982 | 5,755 | ||||||
State | 910 | 534 | ||||||
Total | 5,892 | 6,289 | ||||||
Amortization | 8,286 | 11,717 | ||||||
Loans | 3,187 | — | ||||||
Allowance for loan losses | 12,211 | 11,087 | ||||||
Non-qualified stock options and restricted stock | 5,222 | 3,869 | ||||||
Unrealized losses on securities available for sale | 13,531 | — | ||||||
Unrealized losses on cash flow hedge | 871 | — | ||||||
Other | — | 469 | ||||||
Gross deferred tax assets | 50,845 | 34,887 | ||||||
Valuation allowance | — | — | ||||||
Gross deferred tax assets, net of valuation allowance | 50,845 | 34,887 | ||||||
Deferred tax liabilities: | ||||||||
Loans | — | (947 | ) | |||||
Depreciation | (1,776 | ) | (239 | ) | ||||
Restricted securities | (1,468 | ) | (1,475 | ) | ||||
Unrealized gains on securities available for sale | — | (3,594 | ) | |||||
Other | (3,299 | ) | (1,589 | ) | ||||
Gross deferred tax liabilities | (6,543 | ) | (7,844 | ) | ||||
Deferred tax assets, net | $ | 44,302 | $ | 27,043 |
At December 31, 2018, the Company had deferred tax assets for federal and state net operating losses of $5.0 million and $910 thousand, respectively. The federal and state net operating loss carryforwards are attributable to the acquisition of Great Florida Bank and are subject to an annual limitation. These deferred tax assets for net operating losses will expire in years 2028 through 2034.
The Company records a valuation allowance to reduce its deferred tax assets if, based on the weight of available evidence, both positive and negative, for each respective tax jurisdiction, it is more likely than not that some portion or all of such deferred tax assets will not be realized. Management believes the Company will realize the benefits from certain federal and state net operating loss carryforwards and as such, no valuation allowance is necessary.
The Company is subject to U.S. federal income tax as well as state income tax for Florida and New York.
The Company had no uncertain tax positions at December 31, 2018, 2017 or 2016. The Company’s policy is to classify interest and penalties associated with income taxes within other expenses. The Company did not incur interest or penalties associated with income taxes during the years end December 31, 2018, 2017 or 2016.
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
NOTE 17. COMMITMENTS AND CONTINGENCIES
The Company issues off-balance sheet financial instruments in connection with its lending activities and to meet the financing needs of its customers. These financial instruments include commitments to fund loans and lines of credit as well as commercial and standby letters of credit. These commitments expose the Company to varying degrees of credit and market risk which are essentially the same as those involved in extending loans to customers. The Company follows the same credit policies in making commitments as it does for instruments recorded on the Company’s consolidated balance sheet. Collateral is obtained based on management’s assessment of the customer’s credit risk.
The Company’s exposure to credit loss is represented by the contractual amount of these commitments. The Company’s reserve for unfunded commitments totaled $0.7 million as of December 31, 2018 and $1.1 million as of December 31, 2017.
Fees collected on off-balance sheet financial instruments represent the fair value of those commitments and are deferred and amortized over their term.
Financial Instruments Commitments
Unfunded commitments are as follows:
December 31, | ||||||||
2018 | 2017 | |||||||
(Dollars in thousands) | ||||||||
Commitments to fund loans | $ | 1,043,453 | $ | 926,405 | ||||
Unused lines of credit | 733,222 | 571,587 | ||||||
Commercial and standby letters of credit | 54,138 | 46,520 | ||||||
Total | $ | 1,830,813 | $ | 1,544,512 |
Commitments to fund loans:
Commitments to fund loans are agreements to lend funds to customers as long as there is no violation of any condition established in the contract. To accommodate the financial needs of customers, the Company makes commitments under various terms to lend funds to consumers and businesses. Commitments to fund loans generally have fixed expiration dates or other termination clauses and may require payment of a fee. Many of these commitments are expected to expire without being funded and, therefore, the total commitment amounts do not necessarily represent future liquidity requirements.
The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral required in connection with a commitment to fund is based on management’s credit evaluation of the counterparty.
Unused lines of credit:
Unfunded commitments under lines of credit include commercial, commercial real estate, home equity and consumer lines of credit to existing customers. Some of these commitments may mature without being fully funded.
Commercial and standby letters of credit:
Letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Letters of credit are primarily issued to support trade transactions or guarantee arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Company generally holds collateral supporting those commitments if deemed necessary.
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
Other Commitments and Contingencies
Legal Proceedings
The Company, from time to time, is involved as plaintiff or defendant in various legal actions arising in the normal course of business. While the ultimate outcome of any such proceedings cannot be predicted with certainty, it is the opinion of management, based upon advice of legal counsel, that no proceedings exist, either individually or in the aggregate, which, if determined adversely to the Company, would have a material effect on the Company’s consolidated balance sheet, results of operations or cash flows.
NOTE 18. PARENT COMPANY FINANCIAL STATEMENTS
Condensed Balance Sheets of FCB Financial Holdings, Inc. (Parent company only) for the periods presented are as follows:
PARENT COMPANY
CONDENSED BALANCE SHEETS
December 31, | ||||||||
2018 | 2017 | |||||||
(Dollars in thousands) | ||||||||
Assets: | ||||||||
Cash and due from banks | $ | 5,231 | $ | 10,271 | ||||
Available for sale securities | 99,243 | 179,815 | ||||||
Investment in bank subsidiary | 1,280,254 | 1,025,677 | ||||||
Other assets | 17,856 | 13,894 | ||||||
Total assets | $ | 1,402,584 | $ | 1,229,657 | ||||
Liabilities and stockholders’ equity: | ||||||||
Total liabilities | 32 | 50,783 | ||||||
Stockholders’ equity | 1,402,552 | 1,178,874 | ||||||
Total liabilities and stockholders’ equity | $ | 1,402,584 | $ | 1,229,657 |
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
Condensed Statements of Income of FCB Financial Holdings, Inc. (Parent company only) for the periods presented are as follows:
PARENT COMPANY
CONDENSED STATEMENTS OF INCOME
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
(Dollars in thousands) | ||||||||||||
Income: | ||||||||||||
Interest and dividends on investment securities | $ | 8,216 | $ | 8,079 | $ | 7,831 | ||||||
Gain (loss) on investment securities | (3,655 | ) | 2,032 | (586 | ) | |||||||
Other non-interest income | (1,780 | ) | — | — | ||||||||
Total income | 2,781 | 10,111 | 7,245 | |||||||||
Expense: | ||||||||||||
Interest on borrowings | 1,409 | 770 | 884 | |||||||||
Stock-based compensation expense | 1,056 | 1,126 | 577 | |||||||||
Professional services | 4,713 | 922 | 707 | |||||||||
Directors fees | 501 | 401 | 800 | |||||||||
Insurance expense | 679 | 768 | 1,034 | |||||||||
Other noninterest expense | 8,369 | 8,372 | 7,261 | |||||||||
Total expense | 16,727 | 12,359 | 11,263 | |||||||||
Income (loss) before income taxes and equity in undistributed | ||||||||||||
income of subsidiaries | (13,946 | ) | (2,248 | ) | (4,018 | ) | ||||||
Income tax expense (benefit) | (4,090 | ) | (5,494 | ) | (3,671 | ) | ||||||
Income (loss) before equity in undistributed income of subsidiaries | (9,856 | ) | 3,246 | (347 | ) | |||||||
Equity in income of subsidiary | 177,994 | 121,948 | 100,263 | |||||||||
Net income | $ | 168,138 | $ | 125,194 | $ | 99,916 |
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
Condensed Statements of Comprehensive Income of FCB Financial Holdings, Inc. (Parent company only) for periods presented are as follows:
PARENT COMPANY
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
(Dollars in thousands) | ||||||||||||
Net income | $ | 168,138 | $ | 125,194 | $ | 99,916 | ||||||
Other comprehensive income (loss): | ||||||||||||
Unrealized net holding gains (losses) on investment securities available for sale, net of taxes of $39, $(1,644), and $(620), respectively | (64 | ) | 2,685 | 988 | ||||||||
Reclassification adjustment for (gains) losses on investment securities available for sale included in net income, net of taxes of $(317), $1,050, and $63, respectively | 951 | (1,696 | ) | (100 | ) | |||||||
Total other comprehensive income (loss) | 887 | 989 | 888 | |||||||||
Total comprehensive income | $ | 169,025 | $ | 126,183 | $ | 100,804 |
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
Condensed Statements of Cash Flows of FCB Financial Holdings, Inc. (Parent company only) for periods presented are as follows:
PARENT COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
(Dollars in thousands) | ||||||||||||
Cash flows from operating activities: | ||||||||||||
Net income | $ | 168,138 | $ | 125,194 | $ | 99,916 | ||||||
Adjustments to reconcile net income to net cash used in operating activities: | ||||||||||||
Equity in earnings of subsidiaries | (177,947 | ) | (121,948 | ) | (100,263 | ) | ||||||
Amortization (accretion) of premium (discount) on investment securities | (76 | ) | (13 | ) | — | |||||||
(Gain) loss on investment securities | 3,655 | (2,032 | ) | 586 | ||||||||
Stock-based compensation and warrant expense | 1,055 | 1,124 | 577 | |||||||||
Deferred tax expense | (887 | ) | 3,126 | (735 | ) | |||||||
Net change in operating assets and liabilities: | ||||||||||||
(Increase)/decrease in due from subsidiaries | (8,121 | ) | (472 | ) | 4,478 | |||||||
Increase/(decrease) in due to subsidiaries | — | (1,745 | ) | 1,745 | ||||||||
Net change in other assets | 7,700 | 1,332 | 1,382 | |||||||||
Net change in other liabilities | (416 | ) | (8,109 | ) | (4,365 | ) | ||||||
Net cash provided by (used in) operating activities | (6,899 | ) | (3,543 | ) | 3,321 | |||||||
Cash flows from investing activities: | ||||||||||||
Purchases of investment securities available for sale | — | (102,988 | ) | (67,934 | ) | |||||||
Sales of investment securities available for sale | 71,717 | 56,791 | 106,347 | |||||||||
Payments and maturities of investment securities | — | — | — | |||||||||
Capital contribution | (121,999 | ) | — | — | ||||||||
Net cash provided by (used in) investing activities | (50,282 | ) | (46,197 | ) | 38,413 | |||||||
Cash flows from financing activities: | ||||||||||||
Net cash paid for acquisition | 94,120 | — | — | |||||||||
Repurchase common stock | — | — | (23,738 | ) | ||||||||
Exercise of stock options | 8,442 | 50,670 | 17,042 | |||||||||
Excess tax benefit from share-based payments | — | — | 2,110 | |||||||||
Net change in repurchase agreements | (50,335 | ) | (8,785 | ) | (28,134 | ) | ||||||
Other | (86 | ) | — | — | ||||||||
Net cash provided by (used in) financing activities | 52,141 | 41,885 | (32,720 | ) | ||||||||
Net Change in Cash | (5,040 | ) | (7,855 | ) | 9,014 | |||||||
Cash at Beginning of Period | 10,271 | 18,126 | 9,112 | |||||||||
Cash at End of Period | $ | 5,231 | $ | 10,271 | $ | 18,126 |
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
NOTE 19. FAIR VALUE MEASUREMENTS
When determining the fair value measurements for assets and liabilities and the related fair value hierarchy, the Company considers the principal or most advantageous market in which it would transact and the assumptions that market participants would use when pricing the asset or liability. When possible, the Company looks to active and observable markets to price identical assets or liabilities. When identical assets and liabilities are not traded in active markets, the Company looks to market observable data for similar assets and liabilities. It is the Company’s policy to maximize the use of observable inputs, minimize the use of unobservable inputs and use unobservable inputs to measure fair value to the extent that observable inputs are not available. The need to use unobservable inputs generally results from the lack of market liquidity, resulting in diminished observability of both actual trades and assumptions that would otherwise be available to value instruments, or the value of underlying collateral is not market observable. Although third party price indications may be available for an asset or liability, limited trading activity would make it difficult to support the observability of these quotations.
Financial Instruments Carried at Fair Value on a Recurring Basis
The following is a description of the valuation methodologies used for financial instruments measured at fair value on a recurring basis, as well as the general classification of each instrument under the valuation hierarchy.
Investment Securities—Investment securities available for sale are carried at fair value on a recurring basis. When available, fair value is based on quoted prices for the identical security in an active market and as such, would be classified as Level 1. If quoted market prices are not available, fair values are estimated using quoted prices of securities with similar characteristics, discounted cash flows or matrix pricing models. Investment securities available for sale for which Level 1 valuations are not available are classified as Level 2 if the valuation incorporates primarily observable inputs. Level 2 securities include U.S. Government agencies and sponsored enterprises obligations and agency mortgage-backed securities; state and municipal obligations; asset-backed securities; and corporate debt and other securities. Pricing of these securities is generally spread driven.
Observable inputs that may impact the valuation of these securities include benchmark yield curves, credit spreads, reported trades, dealer quotes, bids, issuer spreads, current rating, historical constant prepayment rates, historical voluntary prepayment rates, structural and waterfall features of individual securities, published collateral data, and for certain securities, historical constant default rates and default severities.
Interest Rate Derivatives—Interest rate derivatives are reported at estimated fair value utilizing Level 2 inputs and are included in other assets and other liabilities and consist of interest rate swaps and caps where there is no significant deterioration in the counterparties (loan customers) credit risk since origination of the interest rate swap or cap. The Company values its interest rate swap and cap positions using market prices provided by a third party which uses primarily observable market inputs. Interest rate derivatives are further described in Note 8 “Derivatives.”
For purposes of potential valuation adjustments to our derivative positions, the Company evaluates the credit risk of its counterparties as well as its own credit risk. Accordingly, the Company has considered factors such as the likelihood of default, expected loss given default, net exposures and remaining contractual life, among other things, in determining if any estimated fair value adjustments related to credit risk are required. The Company reviews counterparty exposure quarterly, and when necessary, appropriate adjustments are made to reflect the exposure.
For the years ended December 31, 2018, 2017 or 2016, the Company has not realized any losses due to a counterparty’s inability to pay any net uncollateralized position. As of December 31, 2018, there were no interest rate derivatives classified as Level 3.
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
The following table presents the assets and liabilities measured at fair value on a recurring basis:
December 31, 2018 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Assets: | ||||||||||||||||
U.S. Government agencies and sponsored enterprises obligations | $ | — | $ | 85,881 | $ | — | $ | 85,881 | ||||||||
U.S. Government agencies and sponsored enterprises mortgage-backed securities | — | 721,717 | — | 721,717 | ||||||||||||
State and municipal obligations | — | 22,116 | — | 22,116 | ||||||||||||
Asset-backed securities | — | 763,549 | — | 763,549 | ||||||||||||
Corporate bonds and other debt securities | 50,317 | 660,929 | — | 711,246 | ||||||||||||
Preferred stocks and other equity securities | 12,727 | — | — | 12,727 | ||||||||||||
Derivative assets—Interest rate contracts | 29,878 | — | 29,878 | |||||||||||||
Total | $ | 63,044 | $ | 2,284,070 | $ | — | $ | 2,347,114 | ||||||||
Liabilities: | ||||||||||||||||
Derivative liabilities—Interest rate contracts | $ | — | $ | 33,368 | $ | — | $ | 33,368 | ||||||||
Total | $ | — | $ | 33,368 | $ | — | $ | 33,368 |
December 31, 2017 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Assets: | ||||||||||||||||
U.S. Government agencies and sponsored enterprises obligations | $ | — | $ | 42,838 | $ | — | $ | 42,838 | ||||||||
U.S. Government agencies and sponsored enterprises mortgage-backed securities | — | 595,237 | — | 595,237 | ||||||||||||
State and municipal obligations | — | 26,172 | — | 26,172 | ||||||||||||
Asset-backed securities | — | 610,546 | — | 610,546 | ||||||||||||
Corporate bonds and other debt securities | 55,970 | 699,933 | — | 755,903 | ||||||||||||
Preferred stocks and other equity securities | 12,954 | 77,153 | — | 90,107 | ||||||||||||
Derivative assets—Interest rate contracts | 11,833 | — | 11,833 | |||||||||||||
Total | $ | 68,924 | $ | 2,063,712 | $ | — | $ | 2,132,636 | ||||||||
Liabilities: | ||||||||||||||||
Derivative liabilities—Interest rate contracts | $ | — | $ | 11,833 | $ | — | $ | 11,833 | ||||||||
Total | $ | — | $ | 11,833 | $ | — | $ | 11,833 |
The Company’s policy is to recognize transfers into or out of a level of the fair value hierarchy as of the end of the reporting period. There were no financial assets transferred from level 2 to level 1 of the fair value hierarchy during the years ended December 31, 2018 and 2017.
For the years ended December 31, 2018 and 2017, there was not a change in the methods or significant assumptions used to estimate fair value.
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
Financial Instruments Measured at Fair Value on a Non-Recurring Basis
The following is a description of the methodologies used to estimate the fair values of assets and liabilities measured at fair value on a non-recurring basis, and the level within the fair value hierarchy in which those measurements are typically classified.
Impaired loans and OREO—The carrying amount of collateral dependent impaired loans is typically based on the fair value of the underlying collateral, which may be real estate or other business assets, less estimated costs to sell. The carrying value of OREO is initially measured based on the fair value, less estimated cost to sell, of the real estate acquired in foreclosure and subsequently adjusted to the lower of cost or estimated fair value, less estimated cost to sell. Fair values of real estate collateral are typically based on real estate appraisals which utilize market and income valuation techniques incorporating both observable and unobservable inputs. When current appraisals are not available, the Company may use brokers’ price opinions, home price indices, or other available information about changes in real estate market conditions to adjust the latest appraised value available. These adjustments to appraised values may be subjective and involve significant management judgment. The fair value of collateral consisting of other business assets is generally based on appraisals that use market approaches to valuation, incorporating primarily unobservable inputs. Fair value measurements related to collateral dependent impaired loans and OREO are classified within level 3 of the fair value hierarchy.
The following table shows significant unobservable inputs used in the non-recurring fair value measurement of level 3 assets and liabilities:
Level 3 Assets: | December 31, 2018 | December 31, 2017 | Valuation Technique | Unobservable Inputs | Range (Weighted Average) | |||||||||||||
(Dollars in thousands) | ||||||||||||||||||
Impaired loans | $ | 16,798 | $ | 6,153 | Third party appraisals and discounted cash flows | Collateral discounts and discount rates | 0% - 100% (0.2%) | |||||||||||
Other real estate owned | 10,243 | 14,906 | Third party appraisals | Collateral discounts and estimated cost to sell | 10 | % |
The following table provides information about certain assets measured at fair value on a non-recurring basis:
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
(Dollars in thousands) | ||||||||||||
Negative valuation adjustments: | ||||||||||||
Impaired loans | $ | 9,237 | $ | — | $ | 700 | ||||||
Foreclosed real estate | 1,232 | 670 | 1,219 |
Impairment charges resulting from the non-recurring changes in fair value of underlying collateral of impaired loans are included in the provision for loan losses in the consolidated statement of income. Impairment charges resulting from the non-recurring changes in fair value of OREO are included in other real estate and acquired assets resolution expenses in the consolidated statement of income.
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
The carrying amounts and estimated fair values, as well as the level within the fair value hierarchy, of the Company’s financial instruments are as follows:
December 31, 2018 | Carrying Value | Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Financial Assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 226,276 | $ | 226,276 | $ | 226,276 | $ | — | $ | — | ||||||||||
Available for sale securities | 2,304,509 | 2,304,509 | 50,317 | 2,254,192 | — | |||||||||||||||
Preferred stocks and other equity securities | 12,727 | 12,727 | 12,727 | — | — | |||||||||||||||
FHLB and other bank stock | 40,412 | 40,412 | — | 40,412 | — | |||||||||||||||
Loans, net | 9,373,263 | 9,263,916 | — | — | 9,263,916 | |||||||||||||||
Loans held for sale | 1,111 | 1,111 | — | 1,111 | — | |||||||||||||||
Bank-owned life insurance | 216,848 | 216,848 | — | 216,848 | — | |||||||||||||||
Derivative assets—Interest rate contracts | 29,874 | 29,874 | — | 29,874 | — | |||||||||||||||
Financial Liabilities: | ||||||||||||||||||||
Deposits | $ | 10,888,173 | $ | 10,866,049 | $ | — | $ | 10,866,049 | $ | — | ||||||||||
Advances from the FHLB and other borrowings | 179,139 | 182,375 | — | 182,375 | — | |||||||||||||||
Derivative liabilities—Interest rate contracts | 33,368 | 33,368 | — | 33,368 | — |
December 31, 2017 | Carrying Value | Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Financial Assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 115,921 | $ | 115,921 | $ | 115,921 | $ | — | $ | — | ||||||||||
Available for sale securities | 2,030,696 | 2,030,696 | 55,970 | 1,974,726 | — | |||||||||||||||
Preferred stocks and other equity securities | 90,107 | 90,107 | 12,954 | 77,153 | — | |||||||||||||||
FHLB and other bank stock | 56,881 | 56,881 | — | 56,881 | — | |||||||||||||||
Loans, net | 7,930,639 | 7,877,094 | — | — | 7,877,094 | |||||||||||||||
Loans held for sale | 12,736 | 12,736 | — | 12,736 | — | |||||||||||||||
Bank-owned life insurance | 201,069 | 201,069 | — | 201,069 | — | |||||||||||||||
Derivative assets—Interest rate contracts | 11,833 | 11,833 | — | 11,833 | — | |||||||||||||||
Financial Liabilities: | ||||||||||||||||||||
Deposits | $ | 8,673,927 | $ | 8,664,125 | $ | — | $ | 8,664,125 | $ | — | ||||||||||
Advances from the FHLB and other | ||||||||||||||||||||
borrowings | 749,113 | 740,941 | — | 740,941 | — | |||||||||||||||
Derivative liabilities—Interest rate contracts | 11,833 | 11,833 | — | 11,833 | — |
Certain financial instruments are carried at amounts that approximate fair value due to their short-term nature and generally negligible credit risk. Financial instruments for which fair value approximates the carrying amount at December 31, 2018 and 2017, include cash and cash equivalents.
The following methods and assumptions were used to estimate the fair value of each class of financial instruments. Estimates may differ from actual exit value as defined by ASC Topic 820.
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
FHLB and Other Bank Stock:
FHLB and other bank stock can be liquidated only by redemption by the issuer, as there is no market for these securities. These securities are carried at par, which has historically represented the redemption price and is therefore considered to approximate fair value.
Loans:
Fair values for loans are based on a discounted cash flow methodology that considers various factors, including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan, whether or not the loan was amortizing and current discount rates. Loans are grouped together according to similar characteristics and are treated in the aggregate when applying various valuation techniques. The discount rates used for loans are based on current market rates for new originations of comparable credit risk and include adjustments for liquidity concerns. The ALL is considered a reasonable estimate of the required adjustment to fair value to reflect the impact of credit risk.
Loans Held for Sale:
Fair values of mortgage loans held for sale are based on commitments on hand from investors or prevailing market prices.
Bank-owned Life Insurance:
The Company holds life insurance policies on certain officers. The carrying value of these policies approximates fair value as it is based on the cash surrender value adjusted for other charges or amounts due that are probable at settlement.
Deposits:
The fair value of demand deposits, savings accounts and money market deposits is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated using discounted cash flow analysis and using the rates currently offered for deposits of similar remaining maturities.
Advances from the FHLB and Other Borrowings:
The fair value of advances from the FHLB and other borrowings are estimated by discounting the future cash flows using the current rate at which similar borrowings with similar remaining maturities could be obtained.
NOTE 20. REVENUE RECOGNITION
On January 1, 2018, the Company adopted ASU No. 2014-09 “Revenue from Contracts with Customers (Topic 606)” and all subsequent ASUs that modified Topic 606. As stated in Note 1. “Summary of Significant Accounting Policies”, the implementation of the new standard did not have a material impact on the measurement or recognition of revenue; as such, a cumulative effect adjustment to opening retained earnings was not deemed necessary. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts were not adjusted and continue to be reported in accordance with the Company’s historic accounting under Topic 605.
Topic 606 does not apply to revenue associated with financial instruments, including revenue from loans and securities. In addition, certain noninterest income streams such as fees associated with financial guarantees, derivatives, transfers and servicing of loans and lease contracts are also not in scope of the new guidance. Topic 606 is applicable to noninterest revenue streams such as service charges and deposit related fees, interchange fees, merchant income and sales of other real estate owned. However, the recognition of these revenue streams did not change significantly upon adoption of Topic 606. Substantially all of the Company’s revenue is generated from contracts with customers. Noninterest revenue streams in-scope of Topic 606 are discussed below.
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
Service Charges and Fees
Service charges and fees consist of insufficient funds fees, continuous overdraft fees, monthly service charge fees, excessive transaction fees, stop payment fees and other deposit account related fees. Based on the Company’s review of the depository contracts and the nature of these fees, the Company grouped the service charges and deposit-related fees embedded in the contracts into two distinct categories, either transactional or non-transactional fees.
Transactional Fees
With respect to transactional fees, the Company recognizes revenue at the time of service. The depository contracts with our customers stipulate that we will continue to provide services until the contract is terminated. Each party can immediately terminate the contract without compensating the other party for the termination (that is, there is no termination penalty). Since the duration of the depository contract doesn’t extend beyond the services already provided because either party can cancel the contract without compensating the other party, the relationship is, in effect, a day-to-day contract. Because the contract doesn’t extend beyond the services performed, the Company recognizes revenue at the time of service as there is no future contract under which to allocate consideration.
Non-Transactional Fees
With respect to monthly non-transactional fees, the Company recognizes revenue each month if it is entitled to the fee because the customer did not meet one of the agreed-upon criteria. Because the contract term does not extend beyond the services already provided (either party can immediately terminate the depository contract without compensating the other party), the Company will not need to make estimates about future monthly fees from a customer. Instead, the Company will recognize revenue for the maintenance fee if the customer does not meet one of the criteria and it would not recognize revenue for the maintenance fee if the customer meets one of the criteria.
Other Noninterest Income
Other noninterest income consists of debit card swipe fees, foreign ATM fees, merchant services revenue, referral income, check printing fees, early withdraw fees, collection fees, wire transfer fees, gain (loss) on sale of other real estate owned, and other miscellaneous fees.
Debit card swipe fees are triggered by cardholder usage and are earned when the customer chooses “debit or credit” at the point of sale. The Bank receives a fee from the network (Interlink, STAR, and PLUS). The VISA international fee is earned when a customer uses a debit card overseas. ATM fees are primarily generated when a Company cardholder uses a non-Company ATM or a non-Company cardholder uses a Company ATM. Merchant services income mainly represents fees charged to merchants to process their debit and credit card transactions, in addition to account management fees. Referral fees are earned by either (i) matching a bank customer with a vendor’s credit card where the bank is paid a fee for each approved credit card application, or (ii) refer a customer to a third party for investment services. Check printing fees and other deposit account related fees are largely transactional based, and therefore, the Company’s performance obligation is satisfied, and related revenue recognized, when the services are rendered or upon completion.
The Company records a gain or loss from the sale of OREO when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When the Company finances the sale of OREO to the buyer, the Company assesses whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the OREO asset is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determining the gain or loss on the sale, the Company adjusts the transaction price and related gain (loss) on sale if the Company financing is not at a market rate.
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
The following table presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the periods presented:
Year Ended December 31, | |||||||||||||
2018 | 2017 | 2016 | |||||||||||
(Dollars in thousands) | |||||||||||||
Noninterest Income | |||||||||||||
In-scope of Topic 606: | |||||||||||||
NSF/OD Fees | $ | 1,575 | $ | 1,471 | $ | 1,911 | |||||||
Fees on deposit accounts | 3,222 | 2,265 | 1,556 | ||||||||||
Service charges and fees | 4,797 | 3,736 | 3,467 | ||||||||||
ATM and debit card income | 1,847 | 2,371 | 2,255 | ||||||||||
Safe deposit box | 92 | 86 | 80 | ||||||||||
Merchant revenue | 850 | 729 | 631 | ||||||||||
Ancillary fees and income | 589 | 355 | 342 | ||||||||||
CD custody income and fees | 546 | — | — | ||||||||||
Misc other income | 838 | 4,104 | 607 | ||||||||||
Gain / (loss) on sales of other real estate owned | 109 | (176 | ) | 3,126 | |||||||||
Noninterest Income (in-scope of Topic 606) | $ | 9,668 | $ | 11,205 | $ | 10,508 | |||||||
Out-of-scope of Topic 606: | |||||||||||||
Gain/(loss) on sale of loans | $ | 80 | $ | 2,809 | $ | — | |||||||
Gain (loss) on sale of fixed assets | (185 | ) | 34 | (42 | ) | ||||||||
Loan and other fees | 15,704 | 11,415 | 8,895 | ||||||||||
Bank-owned life insurance income | 5,654 | 5,647 | 5,192 | ||||||||||
Income from resolution of acquired assets | 1,196 | 1,973 | 3,345 | ||||||||||
Gain on investment securities and extinguishment of debt | 1,374 | 1,933 | 1,819 | ||||||||||
Noninterest Income (out-of-scope of Topic 606) | 23,823 | 23,811 | 19,209 | ||||||||||
Total noninterest income | $ | 33,491 | $ | 35,016 | $ | 29,717 |
NOTE 21. QUARTERLY FINANCIAL DATA (UNAUDITED)
The summary quarterly financial information set forth below for each of the last eight quarters has been derived from the Company’s unaudited interim consolidated financial statements and other financial information. The summary historical quarterly financial information includes all adjustments consisting of normal recurring accruals that the Company considers necessary for a fair presentation of the financial position and the results of operations for these periods.
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)
The information below is only a summary and should be read in conjunction with the consolidated historical financial statements and the related notes.
Quarters Ended December 31, 2018 | ||||||||||||||||
Q4 | Q3 | Q2 | Q1 | |||||||||||||
(Dollars in thousands, except per share data) | ||||||||||||||||
Selected Income Statement data: | ||||||||||||||||
Interest income | $ | 136,601 | $ | 129,010 | $ | 122,559 | $ | 108,557 | ||||||||
Interest expense | 41,653 | 36,372 | 31,740 | 26,374 | ||||||||||||
Net interest income | 94,948 | 92,638 | 90,819 | 82,183 | ||||||||||||
Provision for loan losses | 10,684 | 2,220 | 1,505 | 2,076 | ||||||||||||
Net interest income after provision for loan losses | 84,264 | 90,418 | 89,314 | 80,107 | ||||||||||||
Noninterest income | 9,550 | 8,764 | 7,954 | 7,223 | ||||||||||||
Noninterest expense | 38,217 | 42,328 | 40,926 | 39,161 | ||||||||||||
Income before income tax expense | 55,597 | 56,854 | 56,342 | 48,169 | ||||||||||||
Income tax expense | 13,772 | 13,374 | 13,608 | 8,070 | ||||||||||||
Net income | $ | 41,825 | $ | 43,480 | $ | 42,734 | $ | 40,099 | ||||||||
Earnings per share: | ||||||||||||||||
Basic | $ | 0.90 | $ | 0.93 | $ | 0.92 | $ | 0.89 | ||||||||
Diluted | $ | 0.87 | $ | 0.89 | $ | 0.87 | $ | 0.84 |
Quarters Ended December 31, 2017 | ||||||||||||||||
Q4 | Q3 | Q2 | Q1 | |||||||||||||
(Dollars in thousands, except per share data) | ||||||||||||||||
Selected Income Statement data: | ||||||||||||||||
Interest income | $ | 101,490 | $ | 96,816 | $ | 90,573 | $ | 85,222 | ||||||||
Interest expense | 23,376 | 21,035 | 18,686 | 15,552 | ||||||||||||
Net interest income | 78,114 | 75,781 | 71,887 | 69,670 | ||||||||||||
Provision for loan losses | 2,786 | 2,871 | 2,115 | 1,643 | ||||||||||||
Net interest income after provision for loan losses | 75,328 | 72,910 | 69,772 | 68,027 | ||||||||||||
Noninterest income | 7,731 | 8,425 | 8,873 | 9,987 | ||||||||||||
Noninterest expense | 36,119 | 35,239 | 35,252 | 35,084 | ||||||||||||
Income before income tax expense | 46,940 | 46,096 | 43,393 | 42,930 | ||||||||||||
Income tax expense | 27,976 | 13,936 | 8,312 | 3,941 | ||||||||||||
Net income | $ | 18,964 | $ | 32,160 | $ | 35,081 | $ | 38,989 | ||||||||
Earnings per share: | ||||||||||||||||
Basic | $ | 0.43 | $ | 0.74 | $ | 0.82 | $ | 0.93 | ||||||||
Diluted | $ | 0.41 | $ | 0.70 | $ | 0.76 | $ | 0.86 |
NOTE 22. SUBSEQUENT EVENTS
Subsequent events have been evaluated through the date that the consolidated financial statements were available to be issued, February 21, 2019. Except for the following, the Company has not identified any events that would have a material impact on the financial position, results of operations or cash flows of the Company as of and for the period ended December 31, 2018.
The Company was acquired by Synovus on January 1, 2019. Refer to Note 1 for additional information on the transaction.
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