Notes to Unaudited Consolidated Financial Statements
March 31, 2019
NOTE 1 – BASIS OF PRESENTATION AND ACCOUNTING POLICIES
Nature of Business
Ameris Bancorp (the “Company” or “Ameris”) is a financial holding company headquartered in Moultrie, Georgia. Ameris conducts substantially all of its operations through its wholly owned banking subsidiary, Ameris Bank (the “Bank”). At
March 31, 2019
, the Bank operated
114
branches in select markets in Georgia, Alabama, Florida and South Carolina. Our business model capitalizes on the efficiencies of a large financial services company, while still providing the community with the personalized banking service expected by our customers. We manage our Bank through a balance of decentralized management responsibilities and efficient centralized operating systems, products and loan underwriting standards. The Company’s Board of Directors and senior managers establish corporate policy, strategy and administrative policies. Within our established guidelines and policies, the banker closest to the customer responds to the differing needs and demands of his or her unique market.
Basis of Presentation
The accompanying unaudited consolidated financial statements for Ameris have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and Regulation S-X. Accordingly, the financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statement presentation. The interim consolidated financial statements included herein are unaudited but reflect all adjustments, consisting of normal recurring adjustments, which, in the opinion of management, are necessary for a fair presentation of the consolidated financial position and results of operations for the interim periods presented. All significant intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the period ended
March 31, 2019
are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the financial statements and notes thereto and the report of our registered independent public accounting firm included in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2018
.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include cash on hand, cash items in process of collection, amounts due from banks, interest-bearing deposits in banks and federal funds sold. The Bank is required to maintain reserve balances in cash or on deposit with the Federal Reserve Bank of Atlanta. The reserve requirement as of
March 31, 2019
and
December 31, 2018
was
$52.7 million
and
$61.2 million
, respectively, and was met by cash on hand which is reported on the Company's consolidated balance sheets in cash and due from banks.
Intangible Assets
Intangible assets include core deposit premiums acquired in connection with business combinations and are based on the established value of acquired customer deposits. The core deposit premium is initially recognized based on a valuation performed as of the consummation date and is amortized over an estimated useful life of
seven
to
ten years
. Intangible assets also include insurance agent relationships, trade name and non-compete agreement intangible assets acquired in the acquisition of US Premium Finance Holding Company. These agent relationship, trade name and non-compete agreement intangible assets were initially recognized based on a valuation performed as of the consummation date and are amortized over estimated useful lives ranging from
three
to
eight years
.
Reclassifications
Certain reclassifications of prior year amounts have been made to conform with the current year presentations. The reclassifications had no effect on net income or shareholders' equity as previously reported.
Accounting Standards Adopted in
2019
ASU 2016-02 –
Leases (Topic 842)
(“ASU 2016-02”). ASU 2016-02 amends the existing standards for lease accounting effectively requiring that most leases be carried on the balance sheets of the related lessees by requiring them to recognize a right-of-use asset and a corresponding lease liability. ASU 2016-02 includes qualitative and quantitative disclosure requirements intended to provide
greater insight into the nature of an entity’s leasing activities. The standard may be adopted using a modified retrospective transition method with a cumulative effect adjustment to equity as of the beginning of the period in which it is adopted. Alternatively, the standard may be adopted using an optional transition method where initial application of the provisions of ASU 2016-02 are applied as the date of adoption, resulting in no adjustment to amounts reported in prior periods. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods. The Company adopted ASU 2016-02 during the first quarter of 2019 and elected the optional transition method. The Company also elected the package of practical expedients provided in the guidance which permits the Company to not reassess under the new standard the prior conclusions about lease identification, lease classification and initial direct costs. The Company also elected the hindsight practical expedient to determine lease term and in assessing impairment of the Company's right-of-use asset. The adoption of ASU 2016-02 resulted in the recognition of a right-of-use asset of
$27.3 million
, a lease liability of
$29.7 million
and a cumulative effect decrease to retained earnings of
$276,000
. The right-of-use asset and lease liability are recorded in the consolidated balance sheets in other assets and other liabilities, respectively.
Accounting Standards Pending Adoption
ASU 2018-15
– Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs incurred in a Cloud Computing Arrangement That Is a Service Contract
("ASU 2018-15"). ASU 2018-15 requires that application development stage implementation costs incurred in a Cloud Computing Arrangement ("CCA") that are service contracts be capitalized and amortized over the term of the hosting arrangement, including renewal option terms if the customer entity is reasonably certain to exercise the option. Costs incurred in the preliminary project and post-implementation stages are expensed as incurred. Training costs and certain data conversion costs also cannot be capitalized for a CCA that is a service contract. Amortization expense of capitalized implementation costs will be presented in the same income statement caption as the CCA fees. Similarly, capitalized implementation costs will be presented in the same balance sheet caption as any prepaid CCA fees, and cash flows from capitalized implementation costs will be classified in the statement of cash flows in the same manner as payments made for the CCA fees. The requirements of ASU 2018-15 should be applied either retrospectively or prospectively to all implementation costs incurred after the adoption date. ASU 2018-15 is effective for interim and annual periods beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the impact this ASU will have on the Company’s consolidated balance sheet, consolidated statement of income and comprehensive income, consolidated statement of shareholders’ equity and consolidated statement of cash flows, but it is not expected to have a material impact.
ASU 2018-13
–
Fair Value Measurement (Topic 820): Disclosure Framework
–
Changes to the Disclosure Requirements for Fair Value Measurement
("ASU 2018-13). ASU 2018-13 changes fair value measurement disclosure requirements by removing certain requirements, modifying certain requirements and adding certain new requirements. Disclosure requirements removed include the following: transfers between Level 1 and Level 2 of the fair value hierarchy; the policy for determining when transfers between any of the three levels have occurred; the valuation processes for Level 3 measurements; and the changes in unrealized gains or losses presented in earnings for Level 3 instruments held at end of the reporting period. Disclosure requirements that have been modified include the following: for investments in certain entities that calculate net asset value, an entity is required to disclose the timing of liquidation of an investee's assets and the date when restrictions from redemption might lapse only if the investee has communicated the timing to the entity or announced the timing publicly; and clarification that the Level 3 measurement uncertainty disclosure should communicate information about the uncertainty at the balance sheet date. New disclosure requirements include the following: the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 instruments held at the end of the reporting period; and the range and weighted average of significant unobservable inputs used for Level 3 measurements or disclosure of other quantitative information in place of the weighted average to the extent that it would be a more reasonable and rational method to reflect the distribution of unobservable inputs. ASU 2018-13 is effective for interim and annual periods beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the impact this standard will have on the Company’s fair value measurement disclosures, but it is not expected to have a material impact.
ASU 2017-04 –
Intangibles: Goodwill and Other: Simplifying the Test for Goodwill Impairment
(“ASU 2017-04”). ASU 2017-04 eliminates Step 2 from the goodwill impairment test to simplify the subsequent measurement of goodwill. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, the income tax effects of tax deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable. ASU 2017-04 also eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The standard must be adopted using a prospective basis and the nature and reason for the change in accounting principle should be disclosed upon transition. ASU 2017-04 is effective for annual or any interim goodwill impairment tests in reporting periods beginning after December 15, 2019. Early adoption is
permitted on testing dates after January 1, 2017. The Company is currently evaluating the impact this ASU will have on the Company’s results of operations, financial position and disclosures, but it is not expected to have a material impact.
ASU 2016-13 –
Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
(“ASU 2016-13”). ASU 2016-13 significantly changes how entities will measure credit losses for financial assets measured at amortized cost and certain other instruments that are not measured at fair value through net income. The standard will replace the current incurred loss approach with an expected loss model, referred to as the current expected credit loss (“CECL”) model. The new standard will apply to financial assets subject to credit losses and measured at amortized cost and certain off-balance-sheet credit exposures, which include, but are not limited to, loans, leases, held-to-maturity securities, loan commitments and financial guarantees. ASU 2016-13 simplifies the accounting for purchased credit-impaired debt securities and loans and expands the disclosure requirements regarding an entity’s assumptions, models and methods for estimating the allowance for loan and lease losses. In addition, entities will need to disclose the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination. ASU 2016-13 is effective for interim and annual reporting periods beginning after December 15, 2019. Early adoption is permitted for interim and annual reporting periods beginning after December 15, 2018. The Company will adopt the new guidance on January 1, 2020. Upon adoption, ASU 2016-13 provides for a modified retrospective transition by means of a cumulative effect adjustment to equity as of the beginning of the period in which the guidance is effective. While the Company is currently evaluating the impact this ASU will have on the results of operations, financial position and disclosures, the Company expects to recognize a one-time cumulative effect adjustment to equity and the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective. The impact of implementation will be influenced by the composition, characteristics and quality of our portfolios, as well as the economic conditions and forecasts at the adoption date.
The Company has established a steering committee which includes the appropriate members of management to evaluate the impact this ASU will have on Company’s financial position, results of operations and financial statement disclosures and determine the most appropriate method of implementing the amendments in this ASU as well as any resources needed to implement the amendments. An evaluation of accounting policies is in progress and it has been determined that current policy elections will need to be modified. This committee has contracted with the software vendor of choice for implementation, established an implementation time-line, conducts regular meetings to monitor the project's status, and continues to stay current on implementation issues and concerns. During the third quarter of 2018, work began with the software vendor to source and test required data feeds. During the fourth quarter of 2018, work with the software vendor continued with sourcing of required data from the Company's loan systems and testing of data feeds. Additionally, the committee has engaged consulting services from a leading international accounting professional services firm to assist management with the technical accounting, internal control, and project management aspects of the Company's CECL implementation. During the first quarter of 2019, four CECL work streams have been established: accounting and reporting, credit risk modeling, systems and data, and processes and controls. Significant attention has been devoted to each of these areas detailing current processes, determining areas requiring attention, and developing timelines to address those areas. Identification of financial assets in scope for ASU 2016-13 is substantially complete.
NOTE 2 – PENDING ACQUISITION
On December 17, 2018, the Company and Fidelity Southern Corporation, a Georgia corporation ("Fidelity"), entered into an Agreement and Plan of Merger (the "Fidelity Merger Agreement") pursuant to which Fidelity will merge into Ameris, with Ameris as the surviving entity and immediately thereafter, Fidelity Bank, a Georgia bank wholly owned by Fidelity, will be merged into Ameris Bank, with Ameris Bank as the surviving entity.
At March 31, 2019, Fidelity Bank operated
70
full-service banking locations,
51
of which were located in Georgia and
19
of which were located Florida, providing financial products and services to customers primarily in the metropolitan markets of Atlanta, Georgia, and Jacksonville, Orlando, Tallahassee, and Sarasota-Bradenton, Florida. Under the terms of the Fidelity Merger Agreement, Fidelity's shareholders will receive
0.80
shares of Ameris common stock for each share of Fidelity common stock they hold. Each outstanding Fidelity restricted stock award will fully vest and be converted into the right to receive
0.80
shares of Ameris common stock for each share of Fidelity common stock underlying such award. Each outstanding Fidelity stock option will fully vest and be converted into an option to purchase shares of Ameris common stock, with the number of underlying shares and per share exercise price of such option adjusted to reflect the exchange ratio of
0.80
. The estimated purchase price is
$750.7 million
in the aggregate based upon the
$34.02
per share closing price of the Company's common stock as of December 14, 2018, the last trading date before announcement. The merger is subject to customary closing conditions, including the receipt of regulatory approvals. The transaction is expected to close during the second quarter of 2019. As of December 31, 2018, Fidelity reported assets of
$4.73 billion
, gross loans of
$3.92 billion
and deposits of
$3.98 billion
. The purchase price will be allocated among the net assets of Fidelity acquired as appropriate, with the remaining balance being reported as goodwill.
NOTE 3 – BUSINESS COMBINATIONS
In accounting for business combinations, the Company uses the acquisition method of accounting in accordance with ASC 805,
Business Combinations
. Under the acquisition method of accounting, assets acquired, liabilities assumed and consideration exchanged are recorded at their respective acquisition date fair values. Any identifiable intangible assets that are acquired in a business combination are recognized at fair value on the acquisition date. Identifiable intangible assets are recognized separately if they arise from contractual or other legal rights or if they are separable (i.e., capable of being sold, transferred, licensed, rented or exchanged separately from the entity). If the consideration given exceeds the fair value of the net assets received, goodwill is recognized. Determining the fair value of assets and liabilities is a complicated process involving significant judgment regarding methods and assumptions used to calculate estimated fair values. Fair values are subject to refinement for up to one year after the closing date of the acquisition as additional information regarding the closing date fair values becomes available. In addition, management will assess and record the deferred tax assets and deferred tax liabilities resulting from differences in the carrying value of acquired assets and assumed liabilities for financial reporting purposes and their basis for income tax purposes, including acquired net operating loss carryforwards and other acquired assets with built-in losses that are expected to be settled or otherwise recovered in future periods where the realization of such benefits would be subject to applicable limitations under Section 382 of the Internal Revenue Code of 1986, as amended.
Hamilton State Bancshares, Inc.
On June 29, 2018, the Company completed its acquisition of Hamilton State Bancshares, Inc. ("Hamilton"), a bank holding company headquartered in Hoschton, Georgia. Upon consummation of the acquisition, Hamilton was merged with and into the Company, with Ameris as the surviving entity in the merger. At that time, Hamilton's wholly owned banking subsidiary, Hamilton State Bank, was also merged with and into the Bank. The acquisition expanded the Company's existing market presence, as Hamilton State Bank had a total of
28
full-service branches located in Atlanta, Georgia and the surrounding area, as well as in Gainesville, Georgia. Under the terms of the merger agreement, Hamilton's shareholders received
0.16
shares of Ameris common stock and
$0.93
in cash for each share of Hamilton voting common stock or nonvoting common stock they previously held. As a result, the Company issued
6,548,385
common shares at a fair value of
$349.4 million
and paid
$47.8 million
in cash to the former shareholders of Hamilton as merger consideration.
The following table presents the assets acquired and liabilities assumed of Hamilton as of June 29, 2018, and their fair value estimates. The fair value estimates are subject to refinement for up to one year after the closing date of the acquisition for new information obtained about facts and circumstances that existed at the acquisition date. The Company continues its evaluation of the facts and circumstances available as of June 29, 2018, to assign fair values to assets acquired and liabilities assumed which could result in further adjustments to the fair values presented below. Because final external valuations were not complete as of
March 31, 2019
, management continues to evaluate fair value adjustments related to loans, premises, intangibles, interest-bearing deposits, other borrowings, subordinated deferrable interest debentures, other liabilities and deferred tax assets
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
As Recorded
by Hamilton
|
|
Initial
Fair Value
Adjustments
|
|
|
Subsequent
Adjustments
|
|
|
As Recorded
by Ameris
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
$
|
14,405
|
|
|
$
|
—
|
|
|
|
$
|
(478
|
)
|
(j)
|
|
$
|
13,927
|
|
|
Federal funds sold and interest-bearing deposits in banks
|
102,156
|
|
|
—
|
|
|
|
—
|
|
|
|
102,156
|
|
|
Time deposits in other banks
|
11,558
|
|
|
—
|
|
|
|
—
|
|
|
|
11,558
|
|
|
Investment securities
|
288,206
|
|
|
(2,376
|
)
|
(a)
|
|
—
|
|
|
|
285,830
|
|
|
Other investments
|
2,094
|
|
|
—
|
|
|
|
—
|
|
|
|
2,094
|
|
|
Loans
|
1,314,264
|
|
|
(15,528
|
)
|
(b)
|
|
(696
|
)
|
(k)
|
|
1,298,040
|
|
|
Less allowance for loan losses
|
(11,183
|
)
|
|
11,183
|
|
(c)
|
|
—
|
|
|
|
—
|
|
|
Loans, net
|
1,303,081
|
|
|
(4,345
|
)
|
|
|
(696
|
)
|
|
|
1,298,040
|
|
|
Other real estate owned
|
847
|
|
|
—
|
|
|
|
—
|
|
|
|
847
|
|
|
Premises and equipment
|
27,483
|
|
|
—
|
|
|
|
(723
|
)
|
(l)
|
|
26,760
|
|
|
Other intangible assets, net
|
18,755
|
|
|
(2,755
|
)
|
(d)
|
|
7,610
|
|
(m)
|
|
23,610
|
|
|
Cash value of bank owned life insurance
|
4,454
|
|
|
—
|
|
|
|
—
|
|
|
|
4,454
|
|
|
Deferred income taxes, net
|
12,445
|
|
|
(6,308
|
)
|
(e)
|
|
343
|
|
(n)
|
|
6,480
|
|
|
Other assets
|
13,053
|
|
|
—
|
|
|
|
(17
|
)
|
(o)
|
|
13,036
|
|
|
Total assets
|
$
|
1,798,537
|
|
|
$
|
(15,784
|
)
|
|
|
$
|
6,039
|
|
|
|
$
|
1,788,792
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing
|
$
|
381,039
|
|
|
$
|
—
|
|
|
|
$
|
—
|
|
|
|
$
|
381,039
|
|
|
Interest-bearing
|
1,201,324
|
|
|
(1,896
|
)
|
(f)
|
|
4,783
|
|
(p)
|
|
1,204,211
|
|
|
Total deposits
|
1,582,363
|
|
|
(1,896
|
)
|
|
|
4,783
|
|
|
|
1,585,250
|
|
|
Other borrowings
|
10,687
|
|
|
(66
|
)
|
(g)
|
|
286
|
|
(q)
|
|
10,907
|
|
|
Subordinated deferrable interest debentures
|
3,093
|
|
|
(658
|
)
|
(h)
|
|
(143
|
)
|
(r)
|
|
2,292
|
|
|
Other liabilities
|
10,460
|
|
|
2,391
|
|
(i)
|
|
—
|
|
|
|
12,851
|
|
|
Total liabilities
|
1,606,603
|
|
|
(229
|
)
|
|
|
4,926
|
|
|
|
1,611,300
|
|
|
Net identifiable assets acquired over (under) liabilities assumed
|
191,934
|
|
|
(15,555
|
)
|
|
|
1,113
|
|
|
|
177,492
|
|
|
Goodwill
|
—
|
|
|
220,713
|
|
|
|
(1,070
|
)
|
|
|
219,643
|
|
|
Net assets acquired over liabilities assumed
|
$
|
191,934
|
|
|
$
|
205,158
|
|
|
|
$
|
43
|
|
|
|
$
|
397,135
|
|
|
Consideration:
|
|
|
|
|
|
|
|
|
|
|
Ameris Bancorp common shares issued
|
6,548,385
|
|
|
|
|
|
|
|
|
|
|
Price per share of the Company's common stock
|
$
|
53.35
|
|
|
|
|
|
|
|
|
|
|
Company common stock issued
|
$
|
349,356
|
|
|
|
|
|
|
|
|
|
|
Cash exchanged for shares
|
$
|
47,779
|
|
|
|
|
|
|
|
|
|
|
Fair value of total consideration transferred
|
$
|
397,135
|
|
|
|
|
|
|
|
|
|
____________________________________________________________
Explanation of fair value adjustments
|
|
|
|
(a)
|
Adjustment reflects the fair value adjustments of the portfolio of investment securities as of the acquisition date.
|
|
|
|
|
(b)
|
Adjustment reflects the fair value adjustments based on the Company's evaluation of the acquired loan portfolio, net of the reversal of Hamilton's unamortized accounting adjustments from their prior acquisitions, loan premiums, loan discounts, deferred loan origination costs and deferred loan origination fees.
|
|
|
|
|
(c)
|
Adjustment reflects the elimination of Hamilton's allowance for loan losses.
|
|
|
|
|
(d)
|
Adjustment reflects the recording of core deposit intangible on the acquired core deposit accounts, net of reversal of Hamilton's remaining intangible assets from its past acquisitions.
|
|
|
|
|
(e)
|
Adjustment reflects the deferred taxes on the differences in the carrying values of acquired assets and assumed liabilities for financial reporting purposes and their basis for federal income tax purposes.
|
|
|
|
|
(f)
|
Adjustment reflects the fair value adjustments based on the Company's evaluation of the acquired deposits.
|
|
|
|
|
(g)
|
Adjustment reflects the reversal of Hamilton's unamortized accounting adjustments for other borrowings from its past acquisitions.
|
|
|
|
|
(h)
|
Adjustment reflects the fair value adjustment to the subordinated deferrable interest debenture at the acquisition date.
|
|
|
|
|
(i)
|
Adjustment reflects the fair value adjustment to the FDIC loss-share clawback liability included in other liabilities.
|
|
|
|
|
(j)
|
Subsequent to acquisition, cash and due from banks were adjusted for Hamilton reconciling items.
|
|
|
|
|
(k)
|
Adjustment reflects additional recording of fair value adjustments to the acquired loan portfolio.
|
|
|
|
|
(l)
|
Adjustment reflects the recording of fair value adjustment to premises and equipment.
|
|
|
|
|
(m)
|
Adjustment reflects additional recording of fair value adjustments to the core deposit intangible on the acquired core deposit accounts.
|
|
|
|
|
(n)
|
Adjustment reflects additional recording of deferred taxes on the differences in the carrying values of acquired assets and assumed liabilities for financial reporting purposes and their basis for federal income tax purposes.
|
|
|
|
|
(o)
|
Adjustment reflects the fair value adjustment to other assets.
|
|
|
|
|
(p)
|
Adjustment reflects additional recording of fair value adjustments on the acquired deposits.
|
|
|
|
|
(q)
|
Adjustment reflects the fair value adjustment to other borrowings.
|
|
|
|
|
(r)
|
Adjustment reflects additional recording of fair value adjustments to the subordinated deferrable interest debenture.
|
Goodwill of
$219.6 million
, which is the excess of the purchase price over the fair value of net assets acquired, was recorded in the Hamilton acquisition and is the result of expected operational synergies and other factors. This goodwill is not expected to be deductible for tax purposes.
In the acquisition, the Company purchased
$1.30 billion
of loans at fair value, net of
$16.2 million
, or
1.23%
, estimated discount to the outstanding principal balance. Of the total loans acquired, management identified
$18.3 million
that were considered to be credit impaired and are accounted for under ASC Topic 310-30. The table below summarizes the total contractually required principal and interest cash payments, management’s estimate of expected total cash payments and fair value of the loans as of the acquisition date for purchased credit impaired loans. Contractually required principal and interest payments have been adjusted for estimated prepayments.
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
|
Contractually required principal and interest
|
$
|
21,223
|
|
|
Non-accretable difference
|
(2,090
|
)
|
|
Cash flows expected to be collected
|
19,133
|
|
|
Accretable yield
|
(794
|
)
|
|
Total purchased credit-impaired loans acquired
|
$
|
18,339
|
|
The following table presents the acquired loan data for the Hamilton acquisition.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
Fair Value of
Acquired Loans at
Acquisition Date
|
|
Gross Contractual
Amounts Receivable
at Acquisition Date
|
|
Estimate at
Acquisition Date of
Contractual Cash
Flows Not Expected
to be Collected
|
|
Acquired receivables subject to ASC 310-30
|
$
|
18,339
|
|
|
$
|
21,223
|
|
|
$
|
2,090
|
|
|
Acquired receivables not subject to ASC 310-30
|
$
|
1,279,701
|
|
|
$
|
1,441,534
|
|
|
$
|
—
|
|
Atlantic Coast Financial Corporation
On May 25, 2018, the Company completed its acquisition of Atlantic Coast Financial Corporation ("Atlantic"), a bank holding company headquartered in Jacksonville, Florida. Upon consummation of the acquisition, Atlantic was merged with and into the Company, with Ameris as the surviving entity in the merger. At that time, Atlantic's wholly owned banking subsidiary, Atlantic Coast Bank, was also merged with and into the Bank. The acquisition expanded the Company's existing market presence, as Atlantic Coast Bank had a total of
12
full-service branches located in Jacksonville and Jacksonville Beach, Duval County, Florida, Waycross, Georgia and Douglas, Georgia. Under the terms of the merger agreement, Atlantic's shareholders received
0.17
shares of Ameris common stock and
$1.39
in cash for each share of Atlantic common stock they previously held. As a result, the Company issued
2,631,520
common shares at a fair value of
$147.8 million
and paid
$21.5 million
in cash to the former shareholders of Atlantic as merger consideration.
The following table presents the assets acquired and liabilities assumed of Atlantic as of May 25, 2018, and their fair value estimates. The fair value estimates are subject to refinement for up to one year after the closing date of the acquisition for new information obtained about facts and circumstances that existed at the acquisition date. The Company continues its evaluation of the facts and circumstances available as of May 25, 2018, to assign fair values to assets acquired and liabilities assumed which could result in further adjustments to the fair values presented below. Because final external valuations were not complete as of
March 31, 2019
, management continues to evaluate fair value adjustments related to loans, intangibles, interest-bearing deposits, other liabilities and deferred tax assets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
As Recorded
by Atlantic
|
|
Initial
Fair Value
Adjustments
|
|
|
Subsequent
Adjustments
|
|
|
As Recorded
by Ameris
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
$
|
3,990
|
|
|
$
|
—
|
|
|
|
$
|
—
|
|
|
|
$
|
3,990
|
|
|
Federal funds sold and interest-bearing deposits in banks
|
22,149
|
|
|
—
|
|
|
|
—
|
|
|
|
22,149
|
|
|
Investment securities
|
35,186
|
|
|
(60
|
)
|
(a)
|
|
—
|
|
|
|
35,126
|
|
|
Other investments
|
9,576
|
|
|
—
|
|
|
|
—
|
|
|
|
9,576
|
|
|
Loans held for sale
|
358
|
|
|
—
|
|
|
|
—
|
|
|
|
358
|
|
|
Loans
|
777,605
|
|
|
(19,423
|
)
|
(b)
|
|
(2,478
|
)
|
(k)
|
|
755,704
|
|
|
Less allowance for loan losses
|
(8,573
|
)
|
|
8,573
|
|
(c)
|
|
—
|
|
|
|
—
|
|
|
Loans, net
|
769,032
|
|
|
(10,850
|
)
|
|
|
(2,478
|
)
|
|
|
755,704
|
|
|
Other real estate owned
|
1,837
|
|
|
(796
|
)
|
(d)
|
|
—
|
|
|
|
1,041
|
|
|
Premises and equipment
|
12,591
|
|
|
(1,695
|
)
|
(e)
|
|
—
|
|
|
|
10,896
|
|
|
Other intangible assets, net
|
—
|
|
|
5,937
|
|
(f)
|
|
1,551
|
|
(l)
|
|
7,488
|
|
|
Cash value of bank owned life insurance
|
18,182
|
|
|
—
|
|
|
|
—
|
|
|
|
18,182
|
|
|
Deferred income taxes, net
|
5,782
|
|
|
709
|
|
(g)
|
|
1,595
|
|
(m)
|
|
8,086
|
|
|
Other assets
|
3,604
|
|
|
(634
|
)
|
(h)
|
|
82
|
|
(n)
|
|
3,052
|
|
|
Total assets
|
$
|
882,287
|
|
|
$
|
(7,389
|
)
|
|
|
$
|
750
|
|
|
|
$
|
875,648
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing
|
$
|
69,761
|
|
|
$
|
—
|
|
|
|
$
|
—
|
|
|
|
$
|
69,761
|
|
|
Interest-bearing
|
514,935
|
|
|
(554
|
)
|
(i)
|
|
1,025
|
|
(o)
|
|
515,406
|
|
|
Total deposits
|
584,696
|
|
|
(554
|
)
|
|
|
1,025
|
|
|
|
585,167
|
|
|
Other borrowings
|
204,475
|
|
|
—
|
|
|
|
—
|
|
|
|
204,475
|
|
|
Other liabilities
|
8,367
|
|
|
(13
|
)
|
(j)
|
|
—
|
|
|
|
8,354
|
|
|
Total liabilities
|
797,538
|
|
|
(567
|
)
|
|
|
1,025
|
|
|
|
797,996
|
|
|
Net identifiable assets acquired over (under) liabilities assumed
|
84,749
|
|
|
(6,822
|
)
|
|
|
(275
|
)
|
|
|
77,652
|
|
|
Goodwill
|
—
|
|
|
91,360
|
|
|
|
275
|
|
|
|
91,635
|
|
|
Net assets acquired over liabilities assumed
|
$
|
84,749
|
|
|
$
|
84,538
|
|
|
|
$
|
—
|
|
|
|
$
|
169,287
|
|
|
Consideration:
|
|
|
|
|
|
|
|
|
|
|
Ameris Bancorp common shares issued
|
2,631,520
|
|
|
|
|
|
|
|
|
|
|
Price per share of the Company's common stock
|
$
|
56.15
|
|
|
|
|
|
|
|
|
|
|
Company common stock issued
|
$
|
147,760
|
|
|
|
|
|
|
|
|
|
|
Cash exchanged for shares
|
$
|
21,527
|
|
|
|
|
|
|
|
|
|
|
Fair value of total consideration transferred
|
$
|
169,287
|
|
|
|
|
|
|
|
|
|
____________________________________________________________
Explanation of fair value adjustments
|
|
|
|
(a)
|
Adjustment reflects the fair value adjustments of the portfolio of investment securities as of the acquisition date.
|
|
|
|
|
(b)
|
Adjustment reflects the fair value adjustments based on the Company's evaluation of the acquired loan portfolio, net of the reversal of Atlantic's unamortized accounting adjustments from loan premiums, loan discounts, deferred loan origination costs and deferred loan origination fees.
|
|
|
|
|
(c)
|
Adjustment reflects the elimination of Atlantic's allowance for loan losses.
|
|
|
|
|
(d)
|
Adjustment reflects the fair value adjustment based on the Company's evaluation of the acquired OREO portfolio.
|
|
|
|
|
(e)
|
Adjustment reflects the fair value adjustments based on the Company's evaluation of the acquired premises and equipment.
|
|
|
|
|
(f)
|
Adjustment reflects the recording of core deposit intangible on the acquired core deposit accounts.
|
|
|
|
|
(g)
|
Adjustment reflects the deferred taxes on the differences in the carrying values of acquired assets and assumed liabilities for financial reporting purposes and their basis for federal income tax purposes.
|
|
|
|
|
(h)
|
Adjustment reflects the fair value adjustments based on the Company's evaluation of the acquired other assets.
|
|
|
|
|
(i)
|
Adjustment reflects the fair value adjustments based on the Company's evaluation of the acquired deposits.
|
|
|
|
|
(j)
|
Adjustment reflects the fair value adjustments based on the Company's evaluation of the acquired other liabilities.
|
|
|
|
|
(k)
|
Adjustment reflects additional recording of fair value adjustments of the acquired loan portfolio.
|
|
|
|
|
(l)
|
Adjustment reflects additional recording of fair value adjustments to the core deposit intangible on the acquired core deposit accounts.
|
|
|
|
|
(m)
|
Adjustment reflects additional recording of deferred taxes on the differences in the carrying values of acquired assets and assumed liabilities for financial reporting purposes and their basis for federal income tax purposes.
|
|
|
|
|
(n)
|
Adjustment reflects additional fair value adjustments on acquired other assets.
|
|
|
|
|
(o)
|
Adjustment reflects additional fair value adjustments on the acquired deposits.
|
Goodwill of
$91.6 million
, which is the excess of the purchase price over the fair value of net assets acquired, was recorded in the Atlantic acquisition and is the result of expected operational synergies and other factors. This goodwill is not expected to be deductible for tax purposes.
In the acquisition, the Company purchased
$755.7 million
of loans at fair value, net of
$21.9 million
, or
2.82%
, estimated discount to the outstanding principal balance. Of the total loans acquired, management identified
$10.8 million
that were considered to be credit impaired and are accounted for under ASC Topic 310-30. The table below summarizes the total contractually required principal and interest cash payments, management’s estimate of expected total cash payments and fair value of the loans as of the acquisition date for purchased credit impaired loans. Contractually required principal and interest payments have been adjusted for estimated prepayments.
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
|
Contractually required principal and interest
|
$
|
16,077
|
|
|
Non-accretable difference
|
(4,115
|
)
|
|
Cash flows expected to be collected
|
11,962
|
|
|
Accretable yield
|
(1,199
|
)
|
|
Total purchased credit-impaired loans acquired
|
$
|
10,763
|
|
The following table presents the acquired loan data for the Atlantic acquisition.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
Fair Value of
Acquired Loans at
Acquisition Date
|
|
Gross Contractual
Amounts Receivable
at Acquisition Date
|
|
Estimate at
Acquisition Date of
Contractual Cash
Flows Not Expected
to be Collected
|
|
Acquired receivables subject to ASC 310-30
|
$
|
10,763
|
|
|
$
|
16,077
|
|
|
$
|
4,115
|
|
|
Acquired receivables not subject to ASC 310-30
|
$
|
744,941
|
|
|
$
|
1,041,768
|
|
|
$
|
—
|
|
US Premium Finance Holding Company
On January 31, 2018, the Company closed on the purchase of the final
70%
of the outstanding shares of common stock of US Premium Finance Holding Company, a Florida corporation ("USPF"), completing its acquisition of USPF and making USPF a wholly owned subsidiary of the Company. Through a series of
three
acquisition transactions that closed on January 18, 2017, January 3, 2018 and January 31, 2018, the Company issued a total of
1,073,158
shares of its common stock at a fair value of
$55.9 million
and paid
$21.4 million
in cash to the former shareholders of USPF. Pursuant to the terms of the Stock Purchase Agreement dated January 25, 2018 under which the Company purchased the final
70%
of the outstanding shares of common stock of USPF, the selling shareholders of USPF may receive additional cash payments aggregating up to
$5.8 million
based on the achievement by the Company's premium finance division of certain income targets, between January 1, 2018 and June 30, 2019. As of the January 31, 2018 acquisition date, the present value of the contingent earn-out consideration expected to be paid was
$5.7 million
. Including the fair value of the Company's common stock issued, cash paid and the present value of the contingent earn-out consideration expected to be paid, the aggregate purchase price of USPF amounted to
$83.0 million
.
Prior to the January 31, 2018 completion of the acquisition, the Company's
30%
investment in USPF was carried at its
$23.9 million
original cost basis. Once the acquisition was completed, the
$83.0 million
aggregate purchase price equaled the fair value of USPF which was determined utilizing the incremental projected earnings. Accordingly, no gain or loss was recorded by the Company in the consolidated statement of income and comprehensive income as a result of remeasuring to fair value the prior minority equity investment in USPF held by the Company immediately before the business combination was completed.
The following table presents the assets acquired and liabilities assumed of USPF as of January 31, 2018 at their initial and subsequent fair value estimates, as recorded by the Company. The fair value estimates were subject to refinement for up to one year after the closing date of the acquisition for new information obtained about facts and circumstances that existed at the acquisition date. The assets acquired include only identifiable intangible assets related to insurance agent relationships that lead to referral of insurance premium finance loans to USPF, the "US Premium Finance" trade name and a non-compete agreement with a former USPF shareholder.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
As Recorded
by USPF
|
|
Initial
Fair Value
Adjustments
|
|
|
Subsequent
Adjustments
|
|
|
As Recorded
by Ameris
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
Intangible asset - insurance agent relationships
|
$
|
—
|
|
|
$
|
20,000
|
|
(a)
|
|
$
|
2,351
|
|
(e)
|
|
$
|
22,351
|
|
|
Intangible asset - US Premium Finance trade name
|
—
|
|
|
1,136
|
|
(b)
|
|
(42
|
)
|
(f)
|
|
1,094
|
|
|
Intangible asset - non-compete agreement
|
—
|
|
|
178
|
|
(c)
|
|
(16
|
)
|
(g)
|
|
162
|
|
|
Total assets
|
$
|
—
|
|
|
$
|
21,314
|
|
|
|
$
|
2,293
|
|
|
|
$
|
23,607
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liability
|
$
|
—
|
|
|
$
|
5,492
|
|
(d)
|
|
$
|
(368
|
)
|
(h)
|
|
$
|
5,124
|
|
|
Total liabilities
|
—
|
|
|
5,492
|
|
|
|
(368
|
)
|
|
|
5,124
|
|
|
Net identifiable assets acquired over liabilities assumed
|
—
|
|
|
15,822
|
|
|
|
2,661
|
|
|
|
18,483
|
|
|
Goodwill
|
—
|
|
|
67,159
|
|
|
|
(2,661
|
)
|
|
|
64,498
|
|
|
Net assets acquired over liabilities assumed
|
$
|
—
|
|
|
$
|
82,981
|
|
|
|
$
|
—
|
|
|
|
$
|
82,981
|
|
|
Consideration:
|
|
|
|
|
|
|
|
|
|
|
Ameris Bancorp common shares issued
|
1,073,158
|
|
|
|
|
|
|
|
|
|
|
Price per share of the Company's common stock
(weighted average)
|
$
|
52.047
|
|
|
|
|
|
|
|
|
|
|
Company common stock issued
|
$
|
55,855
|
|
|
|
|
|
|
|
|
|
|
Cash exchanged for shares
|
$
|
21,421
|
|
|
|
|
|
|
|
|
|
|
Present value of contingent earn-out consideration
expected to be paid
|
$
|
5,705
|
|
|
|
|
|
|
|
|
|
|
Fair value of total consideration transferred
|
$
|
82,981
|
|
|
|
|
|
|
|
|
|
____________________________________________________________
Explanation of fair value adjustments
|
|
|
|
(a)
|
Adjustment reflects the recording of the fair value of the insurance agent relationships intangible.
|
|
|
|
|
(b)
|
Adjustment reflect the recording of the fair value of the trade name intangible.
|
|
|
|
|
(c)
|
Adjustment reflects the recording of the fair value of the non-compete agreement intangible.
|
|
|
|
|
(d)
|
Adjustment reflects the deferred taxes on the differences in the carrying values of acquired intangible assets for financial reporting purposes and their basis for federal income tax purposes.
|
|
|
|
|
(e)
|
Adjustment reflects additional fair value adjustment for the insurance agent relationships intangible.
|
|
|
|
|
(f)
|
Adjustment reflects additional fair value adjustment for the trade name intangible.
|
|
|
|
|
(g)
|
Adjustment reflects additional fair value adjustment for the non-compete agreement intangible.
|
|
|
|
|
(h)
|
Adjustment reflects additional recording of deferred taxes on the differences in the carrying values of acquired intangible assets for financial reporting purposes and their basis for federal income tax purposes.
|
Goodwill of
$64.5 million
, which is the excess of the purchase price over the fair value of net assets acquired, was recorded in the USPF acquisition and is the result of expected operational synergies and other factors. This goodwill is not expected to be deductible for tax purposes.
During the second quarter of 2018, the Company recorded
$2.0 million
in other noninterest income in the consolidated statements of income and comprehensive income to reflect a decrease in the estimated contingent consideration liability. During the fourth quarter of 2018, the Company recorded
$2.5 million
in other noninterest income in the consolidated statements of income and comprehensive income to reflect a further decrease in the estimated contingent consideration liability. These decreases in the
estimated contingent consideration liability were based on projected results of the premium finance division for the entire measurement period from January 1, 2018 through June 30, 2019. No additional adjustment to the estimated contingent consideration liability was considered necessary for the first quarter of 2019.
Pro Forma Financial Information
The results of operations of USPF subsequent to its acquisition date are included in the Company’s consolidated statements of income and comprehensive income. The following unaudited pro forma information reflects the Company’s estimated consolidated results of operations as if the acquisition had occurred on January 1, 2017, unadjusted for potential cost savings.
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
(dollars in thousands, except per share data; shares in thousands)
|
|
2018
|
|
Net interest income and noninterest income
|
|
$
|
95,265
|
|
|
Net income
|
|
$
|
26,876
|
|
|
Net income available to common shareholders
|
|
$
|
26,876
|
|
|
Income per common share available to common shareholders – basic
|
|
$
|
0.70
|
|
|
Income per common share available to common shareholders – diluted
|
|
$
|
0.70
|
|
|
Average number of shares outstanding, basic
|
|
38,246
|
|
|
Average number of shares outstanding, diluted
|
|
38,529
|
|
NOTE 4 – INVESTMENT SECURITIES
The amortized cost and estimated fair value of investment securities available for sale, along with unrealized gains and losses, are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated
Fair
Value
|
|
March 31, 2019
|
|
|
|
|
|
|
|
|
|
State, county and municipal securities
|
|
$
|
106,468
|
|
|
$
|
1,312
|
|
|
$
|
(40
|
)
|
|
$
|
107,740
|
|
|
Corporate debt securities
|
|
56,901
|
|
|
412
|
|
|
(161
|
)
|
|
57,152
|
|
|
Mortgage-backed securities
|
|
1,072,783
|
|
|
5,867
|
|
|
(9,107
|
)
|
|
1,069,543
|
|
|
Total debt securities
|
|
$
|
1,236,152
|
|
|
$
|
7,591
|
|
|
$
|
(9,308
|
)
|
|
$
|
1,234,435
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
|
State, county and municipal securities
|
|
$
|
149,670
|
|
|
$
|
1,367
|
|
|
$
|
(304
|
)
|
|
$
|
150,733
|
|
|
Corporate debt securities
|
|
67,123
|
|
|
718
|
|
|
(527
|
)
|
|
67,314
|
|
|
Mortgage-backed securities
|
|
982,183
|
|
|
4,172
|
|
|
(11,979
|
)
|
|
974,376
|
|
|
Total debt securities
|
|
$
|
1,198,976
|
|
|
$
|
6,257
|
|
|
$
|
(12,810
|
)
|
|
$
|
1,192,423
|
|
The amortized cost and estimated fair value of available for sale securities at
March 31, 2019
by contractual maturity are summarized in the table below. Expected maturities for mortgage-backed securities may differ from contractual maturities because in certain cases borrowers can prepay obligations without prepayment penalties. Therefore, these securities are shown separately.
|
|
|
|
|
|
|
|
|
|
|
|
|
(
dollars in thousands)
|
|
Amortized
Cost
|
|
Estimated
Fair
Value
|
|
Due in one year or less
|
|
$
|
14,170
|
|
|
$
|
14,178
|
|
|
Due from one year to five years
|
|
60,032
|
|
|
60,448
|
|
|
Due from five to ten years
|
|
67,648
|
|
|
68,541
|
|
|
Due after ten years
|
|
21,519
|
|
|
21,725
|
|
|
Mortgage-backed securities
|
|
1,072,783
|
|
|
1,069,543
|
|
|
|
|
$
|
1,236,152
|
|
|
$
|
1,234,435
|
|
Securities with a carrying value of approximately
$477.8 million
serve as collateral to secure public deposits, securities sold under agreements to repurchase and for other purposes required or permitted by law at
March 31, 2019
, compared with
$510.0 million
at
December 31, 2018
.
The following table details the gross unrealized losses and estimated fair value of securities aggregated by category and duration of continuous unrealized loss position at
March 31, 2019
and
December 31, 2018
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Than 12 Months
|
|
12 Months or More
|
|
Total
|
|
(dollars in thousands)
|
|
Estimated
Fair
Value
|
|
Unrealized
Losses
|
|
Estimated
Fair
Value
|
|
Unrealized
Losses
|
|
Estimated
Fair
Value
|
|
Unrealized
Losses
|
|
March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State, county and municipal securities
|
|
$
|
5,641
|
|
|
$
|
(3
|
)
|
|
$
|
13,157
|
|
|
$
|
(37
|
)
|
|
$
|
18,798
|
|
|
$
|
(40
|
)
|
|
Corporate debt securities
|
|
9,168
|
|
|
(60
|
)
|
|
8,049
|
|
|
(101
|
)
|
|
17,217
|
|
|
(161
|
)
|
|
Mortgage-backed securities
|
|
78,426
|
|
|
(174
|
)
|
|
478,497
|
|
|
(8,933
|
)
|
|
556,923
|
|
|
(9,107
|
)
|
|
Total debt securities
|
|
$
|
93,235
|
|
|
$
|
(237
|
)
|
|
$
|
499,703
|
|
|
$
|
(9,071
|
)
|
|
$
|
592,938
|
|
|
$
|
(9,308
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State, county and municipal securities
|
|
$
|
23,784
|
|
|
$
|
(52
|
)
|
|
$
|
33,873
|
|
|
$
|
(252
|
)
|
|
$
|
57,657
|
|
|
$
|
(304
|
)
|
|
Corporate debt securities
|
|
17,291
|
|
|
(111
|
)
|
|
17,952
|
|
|
(416
|
)
|
|
35,243
|
|
|
(527
|
)
|
|
Mortgage-backed securities
|
|
119,745
|
|
|
(580
|
)
|
|
435,749
|
|
|
(11,399
|
)
|
|
555,494
|
|
|
(11,979
|
)
|
|
Total debt securities
|
|
$
|
160,820
|
|
|
$
|
(743
|
)
|
|
$
|
487,574
|
|
|
$
|
(12,067
|
)
|
|
$
|
648,394
|
|
|
$
|
(12,810
|
)
|
As of
March 31, 2019
, the Company’s securities portfolio consisted of
488
securities,
246
of which were in an unrealized loss position. The majority of unrealized losses are related to the Company’s mortgage-backed securities, as discussed below.
At
March 31, 2019
, the Company held
225
mortgage-backed securities that were in an unrealized loss position, all of which were issued by U.S. government-sponsored entities and agencies. Because the decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality, and because the Company does not have the intent to sell these mortgage-backed securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at
March 31, 2019
.
At
March 31, 2019
, the Company held
13
state, county and municipal securities and
eight
corporate debt securities that were in an unrealized loss position. Because the decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality, and because the Company does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at
March 31, 2019
.
The Company’s investments in corporate debt include investments in regional and super-regional banks on which the Company prepares regular analysis through review of financial information and credit ratings. Investments in preferred securities are also concentrated in the preferred obligations of regional and super-regional banks through non-pooled investment structures. The Company did not have investments in “pooled” trust preferred securities at
March 31, 2019
or
December 31, 2018
.
Management and the Company’s Asset and Liability Committee (the “ALCO Committee”) evaluate securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market conditions warrant such evaluation. While the majority of the unrealized losses on debt securities relate to changes in interest rates, corporate debt securities have also been affected by reduced levels of liquidity and higher risk premiums. Occasionally, management engages independent third parties to evaluate the Company’s position in certain corporate debt securities to aid management and the ALCO Committee in its determination regarding the status of impairment. The Company believes that each investment poses minimal credit risk and further, that the Company does not intend to sell these investment securities at an unrealized loss position at
March 31, 2019
, and it is more likely than not that the Company will not be required to sell these securities prior to recovery or maturity. Therefore, at
March 31, 2019
, these investments are not considered impaired on an other-than-temporary basis.
At
March 31, 2019
and
December 31, 2018
, all of the Company’s mortgage-backed securities were obligations of government-sponsored agencies.
The following table is a summary of sales activities in the Company’s investment securities available for sale for the
three months ended
March 31, 2019
and
2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
March 31,
2019
|
|
March 31,
2018
|
|
Gross gains on sales of securities
|
|
$
|
522
|
|
|
$
|
332
|
|
|
Gross losses on sales of securities
|
|
(464
|
)
|
|
(295
|
)
|
|
Net realized gains on sales of securities available for sale
|
|
$
|
58
|
|
|
$
|
37
|
|
|
|
|
|
|
|
|
Sales proceeds
|
|
$
|
64,995
|
|
|
$
|
36,685
|
|
Total gain on securities reported on the consolidated statements of income and comprehensive income is comprised of the following for the
three months ended
March 31, 2019
and
2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
March 31,
2019
|
|
March 31,
2018
|
|
Net realized gains on sales of securities available for sale
|
|
$
|
58
|
|
|
$
|
37
|
|
|
Unrealized holding gains on equity securities
|
|
8
|
|
|
—
|
|
|
Total gain on securities
|
|
$
|
66
|
|
|
$
|
37
|
|
NOTE 5 – LOANS
The Bank engages in a full complement of lending activities, including real estate-related loans, agriculture-related loans, commercial and financial loans and consumer installment loans within select markets in Georgia, Alabama, Florida and South Carolina. The Bank purchased residential mortgage loan pools during 2015 and 2016 collateralized by properties located outside our Southeast markets, specifically in California, Washington and Illinois. During the third quarter of 2016, the Bank began purchasing from unrelated third parties consumer installment home improvement loans made to borrowers throughout the United States. As of
March 31, 2019
and
December 31, 2018
, the net carrying value of these consumer installment home improvement loans was approximately
$382.5 million
and
$399.9 million
, respectively, and such loans are reported in the consumer installment loan category. During the fourth quarter of 2016, the Bank purchased a pool of commercial insurance premium finance loans made to borrowers throughout the United States and began to originate, administer and service these types of loans. As of
March 31, 2019
and
December 31, 2018
, the net carrying value of commercial insurance premium loans was approximately
$487.0 million
and
$413.5 million
, respectively, and such loans are reported in the commercial, financial and agricultural loan category.
The Bank concentrates the majority of its lending activities in real estate loans. While risk of loss in the Company’s portfolio is primarily tied to the credit quality of the various borrowers, risk of loss may increase due to factors beyond the Company’s control, such as local, regional and/or national economic downturns. General conditions in the real estate market may also impact the relative risk in the real estate portfolio. A substantial portion of the Bank’s loans are secured by real estate in the Bank’s primary market area. In addition, a substantial portion of the OREO is located in those same markets. Accordingly, the ultimate collectability of a substantial portion of the Bank’s loan portfolio and the recovery of a substantial portion of the carrying amount of OREO are susceptible to changes in real estate conditions in the Bank’s primary market area.
Commercial, financial and agricultural loans include both secured and unsecured loans for working capital, expansion, crop production, commercial insurance premium finance, and other business purposes. Commercial, financial and agricultural loans also include SBA loans and municipal loans. Short-term working capital loans are secured by non-real estate collateral such as accounts receivable, crops, inventory and equipment. The Bank evaluates the financial strength, cash flow, management, credit history of the borrower and the quality of the collateral securing the loan. The Bank often requires personal guarantees and secondary sources of repayment on commercial, financial and agricultural loans.
Real estate loans include construction and development loans, commercial and farmland loans and residential loans. Construction and development loans include loans for the development of residential neighborhoods, one-to-four family home residential construction loans to builders and consumers, and commercial real estate construction loans, primarily for owner-occupied properties. The Company limits its construction lending risk through adherence to established underwriting procedures. Commercial real estate loans include loans secured by owner-occupied commercial buildings for office, storage, retail and warehouse space as well as farmland. They also include non-owner occupied commercial buildings such as leased retail and office space. Commercial real estate loans may be larger in size and may involve a greater degree of risk than one-to-four family residential mortgage loans. Payments on such loans are often dependent on successful operation or management of the properties. The Company’s residential loans represent permanent mortgage financing and are secured by residential properties located within the Bank's market areas, along with warehouse lines of credit secured by residential mortgages.
Consumer installment loans include home improvement loans, automobile loans, boat and recreational vehicle financing, and secured and unsecured personal loans. Consumer loans carry greater risks than other loans, as the collateral can consist of rapidly depreciating assets such as automobiles and equipment that may not provide an adequate source of repayment of the loan in the case of default.
Loans are stated at unpaid balances, net of unearned income and deferred loan fees. Balances within the major loans receivable categories are presented in the following table, excluding purchased loans:
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
March 31,
2019
|
|
December 31,
2018
|
|
Commercial, financial and agricultural
|
$
|
1,382,907
|
|
|
$
|
1,316,359
|
|
|
Real estate – construction and development
|
676,563
|
|
|
671,198
|
|
|
Real estate – commercial and farmland
|
1,894,937
|
|
|
1,814,529
|
|
|
Real estate – residential
|
1,365,482
|
|
|
1,403,000
|
|
|
Consumer installment
|
436,469
|
|
|
455,371
|
|
|
|
$
|
5,756,358
|
|
|
$
|
5,660,457
|
|
Purchased loans are defined as loans that were acquired in bank acquisitions including those that are covered by a loss-sharing agreement with the Federal Deposit Insurance Corporation (the “FDIC”). Purchased loans totaling $
2.47 billion
and
$2.59 billion
at
March 31, 2019
and
December 31, 2018
, respectively, are not included in the above schedule.
Purchased loans are shown below according to major loan type as of the end of the periods shown:
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
March 31,
2019
|
|
December 31,
2018
|
|
Commercial, financial and agricultural
|
$
|
327,972
|
|
|
$
|
372,686
|
|
|
Real estate – construction and development
|
239,413
|
|
|
227,900
|
|
|
Real estate – commercial and farmland
|
1,280,515
|
|
|
1,337,859
|
|
|
Real estate – residential
|
597,735
|
|
|
623,199
|
|
|
Consumer installment
|
26,636
|
|
|
27,188
|
|
|
|
$
|
2,472,271
|
|
|
$
|
2,588,832
|
|
A rollforward of purchased loans for the
three months ended
March 31, 2019
and
2018
is shown below:
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
March 31,
2019
|
|
March 31,
2018
|
|
Balance, January 1
|
$
|
2,588,832
|
|
|
$
|
861,595
|
|
|
Charge-offs
|
(184
|
)
|
|
(151
|
)
|
|
Accretion
|
2,980
|
|
|
1,571
|
|
|
Transfers to purchased other real estate owned
|
(2,523
|
)
|
|
(457
|
)
|
|
Payments received, net of principal advances
|
(116,834
|
)
|
|
(43,971
|
)
|
|
Ending balance
|
$
|
2,472,271
|
|
|
$
|
818,587
|
|
The following is a summary of changes in the accretable discounts of purchased loans during the
three months ended
March 31, 2019
and
2018
:
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
March 31,
2019
|
|
March 31,
2018
|
|
Balance, January 1
|
$
|
40,496
|
|
|
$
|
20,192
|
|
|
Accretion
|
(2,980
|
)
|
|
(1,571
|
)
|
|
Transfers between non-accretable and accretable discounts, net
|
(1,869
|
)
|
|
146
|
|
|
Ending balance
|
$
|
35,647
|
|
|
$
|
18,767
|
|
Purchased loan pools are defined as groups of residential mortgage loans that were not acquired in bank acquisitions or FDIC-assisted transactions. As of
March 31, 2019
, purchased loan pools totaled
$253.7 million
and consisted of whole-loan residential mortgages on properties outside the Company’s markets, with principal balances totaling
$252.0 million
and
$1.7 million
of remaining purchase premium paid at acquisition. As of
December 31, 2018
, purchased loan pools totaled
$262.6 million
with principal balances totaling
$260.5 million
and
$2.1 million
of remaining purchase premium paid at acquisition.
At
March 31, 2019
, purchased loan pools included principal balances of
$400,000
risk-rated grade 7 (Substandard), while all other loans included in the purchased loan pools were performing current loans risk-rated grade 3 (Good Credit). At
March 31, 2019
,
purchased loan pools included principal balances of
$400,000
on nonaccrual status and had
no
loans accounted for as troubled debt restructurings.
At
December 31, 2018
, all loans in purchased loan pools were performing current loans risk-rated grade 3 (Good Credit). At
December 31, 2018
, purchased loan pools had
no
loans on nonaccrual status and had
no
loans classified as troubled debt restructurings.
At
March 31, 2019
and
December 31, 2018
, the Company had allocated
$697,000
and
$732,000
, respectively, of allowance for loan losses for the purchased loan pools.
As part of the due diligence process prior to purchasing an individual mortgage pool, a complete re-underwrite of the individual loan files was conducted. The underwriting process included a review of all income, asset, credit and property related documentation that was used to originate the loan. Underwriters utilized the originating lender’s program guidelines, as well as general prudent mortgage lending standards, to assess each individual loan file. Additional research was conducted to assess the real estate market conditions and market expectations in the geographic areas where a collateral concentration existed. As part of this review, an automated valuation model was employed to provide current collateral valuations and to support individual loan-to-value ratios. Additionally, a sample of site inspections was completed to provide further assurance. The results of the due diligence review were evaluated by officers of the Company in order to determine overall conformance to the Bank’s credit and lending policies.
Nonaccrual and Past-Due Loans
A loan is placed on nonaccrual status when, in management’s judgment, the collection of the interest income appears doubtful. Interest receivable that has been accrued and is subsequently determined to have doubtful collectability is charged against interest income. Interest on loans that are classified as nonaccrual is subsequently applied to principal until the loans are returned to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Past-due loans are loans whose principal or interest is past due
30
days or more. In some cases, where borrowers are experiencing financial difficulties, loans may be restructured to provide terms significantly different from the original contractual terms.
The following table presents an analysis of loans accounted for on a nonaccrual basis, excluding purchased loans:
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
March 31,
2019
|
|
December 31,
2018
|
|
Commercial, financial and agricultural
|
$
|
1,349
|
|
|
$
|
1,412
|
|
|
Real estate – construction and development
|
1,244
|
|
|
892
|
|
|
Real estate – commercial and farmland
|
3,496
|
|
|
4,654
|
|
|
Real estate – residential
|
11,118
|
|
|
10,465
|
|
|
Consumer installment
|
426
|
|
|
529
|
|
|
|
$
|
17,633
|
|
|
$
|
17,952
|
|
The following table presents an analysis of purchased loans accounted for on a nonaccrual basis:
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
March 31,
2019
|
|
December 31,
2018
|
|
Commercial, financial and agricultural
|
$
|
3,857
|
|
|
$
|
1,199
|
|
|
Real estate – construction and development
|
5,933
|
|
|
6,119
|
|
|
Real estate – commercial and farmland
|
5,061
|
|
|
5,534
|
|
|
Real estate – residential
|
8,402
|
|
|
10,769
|
|
|
Consumer installment
|
593
|
|
|
486
|
|
|
|
$
|
23,846
|
|
|
$
|
24,107
|
|
The following table presents an analysis of past-due loans, excluding purchased past-due loans as of
March 31, 2019
and
December 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
Loans
30-59
Days Past
Due
|
|
Loans
60-89
Days
Past Due
|
|
Loans 90
or More
Days Past
Due
|
|
Total
Loans
Past Due
|
|
Current
Loans
|
|
Total
Loans
|
|
Loans 90
Days or
More Past
Due and
Still
Accruing
|
|
March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial and agricultural
|
$
|
5,270
|
|
|
$
|
2,784
|
|
|
$
|
4,222
|
|
|
$
|
12,276
|
|
|
$
|
1,370,631
|
|
|
$
|
1,382,907
|
|
|
$
|
3,416
|
|
|
Real estate – construction and development
|
957
|
|
|
531
|
|
|
692
|
|
|
2,180
|
|
|
674,383
|
|
|
676,563
|
|
|
—
|
|
|
Real estate – commercial and farmland
|
2,784
|
|
|
3,276
|
|
|
2,652
|
|
|
8,712
|
|
|
1,886,225
|
|
|
1,894,937
|
|
|
—
|
|
|
Real estate – residential
|
13,394
|
|
|
1,287
|
|
|
9,895
|
|
|
24,576
|
|
|
1,340,906
|
|
|
1,365,482
|
|
|
—
|
|
|
Consumer installment
|
1,752
|
|
|
929
|
|
|
541
|
|
|
3,222
|
|
|
433,247
|
|
|
436,469
|
|
|
260
|
|
|
Total
|
$
|
24,157
|
|
|
$
|
8,807
|
|
|
$
|
18,002
|
|
|
$
|
50,966
|
|
|
$
|
5,705,392
|
|
|
$
|
5,756,358
|
|
|
$
|
3,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial and agricultural
|
$
|
6,479
|
|
|
$
|
5,295
|
|
|
$
|
4,763
|
|
|
$
|
16,537
|
|
|
$
|
1,299,822
|
|
|
$
|
1,316,359
|
|
|
$
|
3,808
|
|
|
Real estate – construction and development
|
1,218
|
|
|
481
|
|
|
725
|
|
|
2,424
|
|
|
668,774
|
|
|
671,198
|
|
|
—
|
|
|
Real estate – commercial and farmland
|
1,625
|
|
|
530
|
|
|
3,645
|
|
|
5,800
|
|
|
1,808,729
|
|
|
1,814,529
|
|
|
—
|
|
|
Real estate – residential
|
11,423
|
|
|
4,631
|
|
|
8,923
|
|
|
24,977
|
|
|
1,378,023
|
|
|
1,403,000
|
|
|
—
|
|
|
Consumer installment
|
2,344
|
|
|
1,167
|
|
|
735
|
|
|
4,246
|
|
|
451,125
|
|
|
455,371
|
|
|
414
|
|
|
Total
|
$
|
23,089
|
|
|
$
|
12,104
|
|
|
$
|
18,791
|
|
|
$
|
53,984
|
|
|
$
|
5,606,473
|
|
|
$
|
5,660,457
|
|
|
$
|
4,222
|
|
The following table presents an analysis of purchased past-due loans as of
March 31, 2019
and
December 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
Loans
30-59
Days Past
Due
|
|
Loans
60-89
Days
Past Due
|
|
Loans 90
or More
Days Past
Due
|
|
Total
Loans
Past Due
|
|
Current
Loans
|
|
Total
Loans
|
|
Loans 90
Days or
More Past
Due and
Still
Accruing
|
|
March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial and agricultural
|
$
|
3,551
|
|
|
$
|
45
|
|
|
$
|
1,209
|
|
|
$
|
4,805
|
|
|
$
|
323,167
|
|
|
$
|
327,972
|
|
|
$
|
—
|
|
|
Real estate – construction and development
|
1,112
|
|
|
—
|
|
|
5,473
|
|
|
6,585
|
|
|
232,828
|
|
|
239,413
|
|
|
—
|
|
|
Real estate – commercial and farmland
|
3,003
|
|
|
170
|
|
|
2,403
|
|
|
5,576
|
|
|
1,274,939
|
|
|
1,280,515
|
|
|
—
|
|
|
Real estate – residential
|
7,488
|
|
|
1,747
|
|
|
5,317
|
|
|
14,552
|
|
|
583,183
|
|
|
597,735
|
|
|
—
|
|
|
Consumer installment
|
732
|
|
|
97
|
|
|
269
|
|
|
1,098
|
|
|
25,538
|
|
|
26,636
|
|
|
—
|
|
|
Total
|
$
|
15,886
|
|
|
$
|
2,059
|
|
|
$
|
14,671
|
|
|
$
|
32,616
|
|
|
$
|
2,439,655
|
|
|
$
|
2,472,271
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial and agricultural
|
$
|
421
|
|
|
$
|
416
|
|
|
$
|
1,015
|
|
|
$
|
1,852
|
|
|
$
|
370,834
|
|
|
$
|
372,686
|
|
|
$
|
—
|
|
|
Real estate – construction and development
|
627
|
|
|
370
|
|
|
5,273
|
|
|
6,270
|
|
|
221,630
|
|
|
227,900
|
|
|
—
|
|
|
Real estate – commercial and farmland
|
1,935
|
|
|
736
|
|
|
1,698
|
|
|
4,369
|
|
|
1,333,490
|
|
|
1,337,859
|
|
|
—
|
|
|
Real estate – residential
|
12,531
|
|
|
2,407
|
|
|
7,005
|
|
|
21,943
|
|
|
601,256
|
|
|
623,199
|
|
|
—
|
|
|
Consumer installment
|
679
|
|
|
237
|
|
|
249
|
|
|
1,165
|
|
|
26,023
|
|
|
27,188
|
|
|
—
|
|
|
Total
|
$
|
16,193
|
|
|
$
|
4,166
|
|
|
$
|
15,240
|
|
|
$
|
35,599
|
|
|
$
|
2,553,233
|
|
|
$
|
2,588,832
|
|
|
$
|
—
|
|
Impaired Loans
Loans are considered impaired when, based on current information and events, it is probable the Company will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreements. Impaired loans include loans on nonaccrual status and accruing troubled debt restructurings. When determining if the Company will be unable to collect all principal and interest payments due in accordance with the contractual terms of the loan agreement, the Company considers the borrower’s capacity to pay, which includes such factors as the borrower’s current financial statements, an analysis of global cash flow sufficient to pay all debt obligations and an evaluation of secondary sources of repayment, such as guarantor support and collateral value. The Company individually assesses for impairment all nonaccrual loans greater than
$100,000
and all troubled debt restructurings greater than
$100,000
(including all troubled debt restructurings, whether or not currently classified as such). The tables below include all loans deemed impaired, whether or not individually assessed for impairment. If a loan is deemed impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured, in which case interest is recognized on a cash basis.
The following is a summary of information pertaining to impaired loans, excluding purchased loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the Period Ended
|
|
(dollars in thousands)
|
March 31,
2019
|
|
December 31,
2018
|
|
March 31,
2018
|
|
Nonaccrual loans
|
$
|
17,633
|
|
|
$
|
17,952
|
|
|
$
|
14,420
|
|
|
Troubled debt restructurings not included above
|
11,463
|
|
|
9,323
|
|
|
11,375
|
|
|
Total impaired loans
|
$
|
29,096
|
|
|
$
|
27,275
|
|
|
$
|
25,795
|
|
|
|
|
|
|
|
|
|
Quarter-to-date interest income recognized on impaired loans
|
$
|
182
|
|
|
$
|
202
|
|
|
$
|
239
|
|
|
Quarter-to-date foregone interest income on impaired loans
|
$
|
209
|
|
|
$
|
217
|
|
|
$
|
190
|
|
The following table presents an analysis of information pertaining to impaired loans, excluding purchased loans as of
March 31, 2019
,
December 31, 2018
and
March 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
Unpaid
Contractual
Principal
Balance
|
|
Recorded
Investment
With No
Allowance
|
|
Recorded
Investment
With
Allowance
|
|
Total
Recorded
Investment
|
|
Related
Allowance
|
|
Three
Month
Average
Recorded
Investment
|
|
March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial and agricultural
|
$
|
1,761
|
|
|
$
|
871
|
|
|
$
|
593
|
|
|
$
|
1,464
|
|
|
$
|
180
|
|
|
$
|
1,566
|
|
|
Real estate – construction and development
|
1,727
|
|
|
621
|
|
|
764
|
|
|
1,385
|
|
|
209
|
|
|
1,211
|
|
|
Real estate – commercial and farmland
|
7,066
|
|
|
663
|
|
|
5,788
|
|
|
6,451
|
|
|
578
|
|
|
6,984
|
|
|
Real estate – residential
|
19,693
|
|
|
6,893
|
|
|
12,466
|
|
|
19,359
|
|
|
712
|
|
|
17,934
|
|
|
Consumer installment
|
453
|
|
|
437
|
|
|
—
|
|
|
437
|
|
|
—
|
|
|
491
|
|
|
Total
|
$
|
30,700
|
|
|
$
|
9,485
|
|
|
$
|
19,611
|
|
|
$
|
29,096
|
|
|
$
|
1,679
|
|
|
$
|
28,186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
Unpaid
Contractual
Principal
Balance
|
|
Recorded
Investment
With No
Allowance
|
|
Recorded
Investment
With
Allowance
|
|
Total
Recorded
Investment
|
|
Related
Allowance
|
|
Three
Month
Average
Recorded
Investment
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial and agricultural
|
$
|
1,902
|
|
|
$
|
1,155
|
|
|
$
|
513
|
|
|
$
|
1,668
|
|
|
$
|
4
|
|
|
$
|
1,736
|
|
|
Real estate – construction and development
|
1,378
|
|
|
613
|
|
|
424
|
|
|
1,037
|
|
|
3
|
|
|
1,229
|
|
|
Real estate – commercial and farmland
|
8,950
|
|
|
867
|
|
|
6,649
|
|
|
7,516
|
|
|
1,591
|
|
|
7,537
|
|
|
Real estate – residential
|
16,885
|
|
|
5,144
|
|
|
11,365
|
|
|
16,509
|
|
|
867
|
|
|
14,719
|
|
|
Consumer installment
|
561
|
|
|
545
|
|
|
—
|
|
|
545
|
|
|
—
|
|
|
584
|
|
|
Total
|
$
|
29,676
|
|
|
$
|
8,324
|
|
|
$
|
18,951
|
|
|
$
|
27,275
|
|
|
$
|
2,465
|
|
|
$
|
25,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
Unpaid
Contractual
Principal
Balance
|
|
Recorded
Investment
With No
Allowance
|
|
Recorded
Investment
With
Allowance
|
|
Total
Recorded
Investment
|
|
Related
Allowance
|
|
Three
Month
Average
Recorded
Investment
|
|
March 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial and agricultural
|
$
|
1,874
|
|
|
$
|
985
|
|
|
$
|
602
|
|
|
$
|
1,587
|
|
|
$
|
136
|
|
|
$
|
1,467
|
|
|
Real estate – construction and development
|
746
|
|
|
567
|
|
|
127
|
|
|
694
|
|
|
1
|
|
|
833
|
|
|
Real estate – commercial and farmland
|
9,515
|
|
|
522
|
|
|
7,639
|
|
|
8,161
|
|
|
1,216
|
|
|
7,753
|
|
|
Real estate – residential
|
14,908
|
|
|
4,912
|
|
|
9,946
|
|
|
14,858
|
|
|
980
|
|
|
14,891
|
|
|
Consumer installment
|
526
|
|
|
495
|
|
|
—
|
|
|
495
|
|
|
—
|
|
|
492
|
|
|
Total
|
$
|
27,569
|
|
|
$
|
7,481
|
|
|
$
|
18,314
|
|
|
$
|
25,795
|
|
|
$
|
2,333
|
|
|
$
|
25,436
|
|
The following is a summary of information pertaining to purchased impaired loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the Period Ended
|
|
(dollars in thousands)
|
March 31,
2019
|
|
December 31,
2018
|
|
March 31,
2018
|
|
Nonaccrual loans
|
$
|
23,846
|
|
|
$
|
24,107
|
|
|
$
|
15,940
|
|
|
Troubled debt restructurings not included above
|
19,443
|
|
|
18,740
|
|
|
20,649
|
|
|
Total impaired loans
|
$
|
43,289
|
|
|
$
|
42,847
|
|
|
$
|
36,589
|
|
|
|
|
|
|
|
|
|
Quarter-to-date interest income recognized on impaired loans
|
$
|
672
|
|
|
$
|
918
|
|
|
$
|
696
|
|
|
Quarter-to-date foregone interest income on impaired loans
|
$
|
520
|
|
|
$
|
451
|
|
|
$
|
245
|
|
The following table presents an analysis of information pertaining to purchased impaired loans as of
March 31, 2019
,
December 31, 2018
and
March 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
Unpaid
Contractual
Principal
Balance
|
|
Recorded
Investment
With No
Allowance
|
|
Recorded
Investment
With
Allowance
|
|
Total
Recorded
Investment
|
|
Related
Allowance
|
|
Three
Month
Average
Recorded
Investment
|
|
March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial and agricultural
|
$
|
11,125
|
|
|
$
|
2,795
|
|
|
$
|
1,094
|
|
|
$
|
3,889
|
|
|
$
|
—
|
|
|
$
|
2,560
|
|
|
Real estate – construction and development
|
13,295
|
|
|
605
|
|
|
6,339
|
|
|
6,944
|
|
|
497
|
|
|
7,039
|
|
|
Real estate – commercial and farmland
|
13,448
|
|
|
1,546
|
|
|
9,618
|
|
|
11,164
|
|
|
670
|
|
|
11,431
|
|
|
Real estate – residential
|
22,825
|
|
|
8,823
|
|
|
11,876
|
|
|
20,699
|
|
|
629
|
|
|
21,500
|
|
|
Consumer installment
|
680
|
|
|
593
|
|
|
—
|
|
|
593
|
|
|
—
|
|
|
540
|
|
|
Total
|
$
|
61,373
|
|
|
$
|
14,362
|
|
|
$
|
28,927
|
|
|
$
|
43,289
|
|
|
$
|
1,796
|
|
|
$
|
43,070
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
Unpaid
Contractual
Principal
Balance
|
|
Recorded
Investment
With No
Allowance
|
|
Recorded
Investment
With
Allowance
|
|
Total
Recorded
Investment
|
|
Related
Allowance
|
|
Three
Month
Average
Recorded
Investment
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial and agricultural
|
$
|
5,717
|
|
|
$
|
473
|
|
|
$
|
757
|
|
|
$
|
1,230
|
|
|
$
|
—
|
|
|
$
|
1,101
|
|
|
Real estate – construction and development
|
13,714
|
|
|
623
|
|
|
6,511
|
|
|
7,134
|
|
|
476
|
|
|
7,240
|
|
|
Real estate – commercial and farmland
|
14,766
|
|
|
1,115
|
|
|
10,581
|
|
|
11,696
|
|
|
684
|
|
|
13,514
|
|
|
Real estate – residential
|
24,839
|
|
|
8,185
|
|
|
14,116
|
|
|
22,301
|
|
|
773
|
|
|
23,146
|
|
|
Consumer installment
|
526
|
|
|
486
|
|
|
—
|
|
|
486
|
|
|
—
|
|
|
487
|
|
|
Total
|
$
|
59,562
|
|
|
$
|
10,882
|
|
|
$
|
31,965
|
|
|
$
|
42,847
|
|
|
$
|
1,933
|
|
|
$
|
45,488
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
Unpaid
Contractual
Principal
Balance
|
|
Recorded
Investment
With No
Allowance
|
|
Recorded
Investment
With
Allowance
|
|
Total
Recorded
Investment
|
|
Related
Allowance
|
|
Three
Month
Average
Recorded
Investment
|
|
March 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial and agricultural
|
$
|
4,050
|
|
|
$
|
52
|
|
|
$
|
744
|
|
|
$
|
796
|
|
|
$
|
396
|
|
|
$
|
805
|
|
|
Real estate – construction and development
|
9,012
|
|
|
426
|
|
|
3,720
|
|
|
4,146
|
|
|
913
|
|
|
4,152
|
|
|
Real estate – commercial and farmland
|
12,590
|
|
|
861
|
|
|
10,230
|
|
|
11,091
|
|
|
767
|
|
|
11,744
|
|
|
Real estate – residential
|
22,820
|
|
|
8,426
|
|
|
12,093
|
|
|
20,519
|
|
|
745
|
|
|
19,502
|
|
|
Consumer installment
|
46
|
|
|
37
|
|
|
—
|
|
|
37
|
|
|
—
|
|
|
43
|
|
|
Total
|
$
|
48,518
|
|
|
$
|
9,802
|
|
|
$
|
26,787
|
|
|
$
|
36,589
|
|
|
$
|
2,821
|
|
|
$
|
36,246
|
|
Credit Quality Indicators
The Company uses a nine category risk grading system to assign a risk grade to each loan in the portfolio. The following is a description of the general characteristics of the grades:
Grade 1 – Prime Credit
– This grade represents loans to the Company’s most creditworthy borrowers or loans that are secured by cash or cash equivalents.
Grade 2 – Strong Credit
– This grade includes loans that exhibit one or more characteristics better than that of a Good Credit. Generally, the debt service coverage and borrower’s liquidity is materially better than required by the Company’s loan policy.
Grade 3 – Good Credit
– This grade is assigned to loans to borrowers who exhibit satisfactory credit histories, contain acceptable loan structures and demonstrate ability to repay.
Grade 4 – Satisfactory Credit
– This grade includes loans which exhibit all the characteristics of a Good Credit, but warrant more than normal level of banker supervision due to (i) circumstances which elevate the risks of performance (such as start-up operations, untested management, heavy leverage and interim losses); (ii) adverse, extraordinary events that have affected, or could affect, the borrower’s cash flow, financial condition, ability to continue operating profitability or refinancing (such as death of principal, fire and divorce); (iii) loans that require more than the normal servicing requirements (such as any type of construction financing, acquisition and development loans, accounts receivable or inventory loans and floor plan loans); (iv) existing technical exceptions which raise some doubts about the Bank’s perfection in its collateral position or the continued financial capacity of the borrower; or (v) improvements in formerly criticized borrowers, which may warrant banker supervision.
Grade 5 – Fair Credit
– This grade is assigned to loans that are currently performing and supported by adequate financial information that reflects repayment capacity but exhibits a loan-to-value ratio greater than
110%
, based on a documented collateral valuation.
Grade 6 – Other Assets Especially Mentioned
– This grade includes loans that exhibit potential weaknesses that deserve management’s close attention. If left uncorrected, these weaknesses may result in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date.
Grade 7 – Substandard
– This grade represents loans which are inadequately protected by the current credit worthiness and paying capacity of the borrower or of the collateral pledged, if any. These assets exhibit a well-defined weakness or are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. These weaknesses may be characterized by past due performance, operating losses or questionable collateral values.
Grade 8 – Doubtful
– This grade includes loans which exhibit all of the characteristics of a substandard loan with the added provision that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable or improbable.
Grade 9 – Loss
– This grade is assigned to loans which are considered uncollectible and of such little value that their continuance as active assets of the Bank is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing it off.
The following table presents the loan portfolio, excluding purchased loans, by risk grade as of
March 31, 2019
and
December 31, 2018
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk
Grade
|
|
Commercial,
Financial and
Agricultural
|
|
Real Estate -
Construction and
Development
|
|
Real Estate -
Commercial and
Farmland
|
|
Real Estate -
Residential
|
|
Consumer
Installment
|
|
Total
|
|
March 31, 2019
|
|
1
|
|
$
|
528,386
|
|
|
$
|
—
|
|
|
$
|
724
|
|
|
$
|
694
|
|
|
$
|
10,842
|
|
|
$
|
540,646
|
|
|
2
|
|
521,486
|
|
|
516
|
|
|
33,656
|
|
|
31,944
|
|
|
20
|
|
|
587,622
|
|
|
3
|
|
152,722
|
|
|
66,180
|
|
|
923,222
|
|
|
1,206,722
|
|
|
23,269
|
|
|
2,372,115
|
|
|
4
|
|
161,089
|
|
|
593,309
|
|
|
834,693
|
|
|
98,050
|
|
|
401,672
|
|
|
2,088,813
|
|
|
5
|
|
13,131
|
|
|
11,560
|
|
|
56,333
|
|
|
6,741
|
|
|
20
|
|
|
87,785
|
|
|
6
|
|
3,557
|
|
|
1,415
|
|
|
23,534
|
|
|
4,372
|
|
|
71
|
|
|
32,949
|
|
|
7
|
|
2,536
|
|
|
3,583
|
|
|
22,775
|
|
|
16,959
|
|
|
575
|
|
|
46,428
|
|
|
8
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total
|
|
$
|
1,382,907
|
|
|
$
|
676,563
|
|
|
$
|
1,894,937
|
|
|
$
|
1,365,482
|
|
|
$
|
436,469
|
|
|
$
|
5,756,358
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
1
|
|
$
|
530,864
|
|
|
$
|
40
|
|
|
$
|
500
|
|
|
$
|
16
|
|
|
$
|
10,744
|
|
|
$
|
542,164
|
|
|
2
|
|
452,250
|
|
|
681
|
|
|
37,079
|
|
|
33,043
|
|
|
48
|
|
|
523,101
|
|
|
3
|
|
174,811
|
|
|
74,657
|
|
|
888,433
|
|
|
1,246,383
|
|
|
23,844
|
|
|
2,408,128
|
|
|
4
|
|
137,038
|
|
|
582,456
|
|
|
814,068
|
|
|
94,143
|
|
|
419,983
|
|
|
2,047,688
|
|
|
5
|
|
13,714
|
|
|
6,264
|
|
|
30,364
|
|
|
8,634
|
|
|
78
|
|
|
59,054
|
|
|
6
|
|
5,130
|
|
|
4,091
|
|
|
20,959
|
|
|
4,881
|
|
|
57
|
|
|
35,118
|
|
|
7
|
|
2,552
|
|
|
3,009
|
|
|
23,126
|
|
|
15,900
|
|
|
617
|
|
|
45,204
|
|
|
8
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total
|
|
$
|
1,316,359
|
|
|
$
|
671,198
|
|
|
$
|
1,814,529
|
|
|
$
|
1,403,000
|
|
|
$
|
455,371
|
|
|
$
|
5,660,457
|
|
The following table presents the purchased loan portfolio by risk grade as of
March 31, 2019
and
December 31, 2018
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk
Grade
|
|
Commercial,
Financial and
Agricultural
|
|
Real Estate -
Construction and
Development
|
|
Real Estate -
Commercial and
Farmland
|
|
Real Estate -
Residential
|
|
Consumer
Installment
|
|
Total
|
|
March 31, 2019
|
|
1
|
|
$
|
80,138
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
544
|
|
|
$
|
80,682
|
|
|
2
|
|
5,313
|
|
|
—
|
|
|
9,446
|
|
|
70,003
|
|
|
142
|
|
|
84,904
|
|
|
3
|
|
20,562
|
|
|
12,759
|
|
|
270,517
|
|
|
371,501
|
|
|
2,379
|
|
|
677,718
|
|
|
4
|
|
168,472
|
|
|
207,413
|
|
|
913,144
|
|
|
116,762
|
|
|
22,562
|
|
|
1,428,353
|
|
|
5
|
|
22,982
|
|
|
4,765
|
|
|
48,763
|
|
|
13,847
|
|
|
34
|
|
|
90,391
|
|
|
6
|
|
10,614
|
|
|
4,598
|
|
|
15,816
|
|
|
7,441
|
|
|
130
|
|
|
38,599
|
|
|
7
|
|
19,891
|
|
|
9,878
|
|
|
22,829
|
|
|
18,181
|
|
|
839
|
|
|
71,618
|
|
|
8
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
6
|
|
|
Total
|
|
$
|
327,972
|
|
|
$
|
239,413
|
|
|
$
|
1,280,515
|
|
|
$
|
597,735
|
|
|
$
|
26,636
|
|
|
$
|
2,472,271
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
1
|
|
$
|
90,205
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
570
|
|
|
$
|
90,775
|
|
|
2
|
|
2,648
|
|
|
—
|
|
|
7,407
|
|
|
74,398
|
|
|
164
|
|
|
84,617
|
|
|
3
|
|
20,489
|
|
|
18,022
|
|
|
230,089
|
|
|
385,279
|
|
|
2,410
|
|
|
656,289
|
|
|
4
|
|
215,096
|
|
|
195,079
|
|
|
1,034,943
|
|
|
118,082
|
|
|
23,177
|
|
|
1,586,377
|
|
|
5
|
|
14,445
|
|
|
2,728
|
|
|
29,468
|
|
|
16,937
|
|
|
35
|
|
|
63,613
|
|
|
6
|
|
11,601
|
|
|
1,459
|
|
|
10,063
|
|
|
7,231
|
|
|
94
|
|
|
30,448
|
|
|
7
|
|
18,202
|
|
|
10,612
|
|
|
25,889
|
|
|
21,272
|
|
|
738
|
|
|
76,713
|
|
|
8
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total
|
|
$
|
372,686
|
|
|
$
|
227,900
|
|
|
$
|
1,337,859
|
|
|
$
|
623,199
|
|
|
$
|
27,188
|
|
|
$
|
2,588,832
|
|
Troubled Debt Restructurings
The restructuring of a loan is considered a “troubled debt restructuring” if both (i) the borrower is experiencing financial difficulties and (ii) the Company has granted a concession. Concessions may include interest rate reductions to below market interest rates, principal forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses. The Company has exhibited the greatest success for rehabilitation of the loan by a reduction in the rate alone (maintaining the amortization of the debt) or a combination of a rate reduction and the forbearance of previously past due interest or principal. This has most typically been evidenced in certain commercial real estate loans whereby a disruption in the borrower’s cash flow resulted in an extended past due status, of which the borrower was unable to catch up completely as the cash flow of the property ultimately stabilized at a level lower than its original level. A reduction in rate, coupled with a forbearance of unpaid principal and/or interest, allowed the net cash flows to service the debt under the modified terms.
The Company’s policy requires a restructure request to be supported by a current, well-documented credit evaluation of the borrower’s financial condition and a collateral evaluation that is no older than six months from the date of the restructure. Key factors of that evaluation include the documentation of current, recurring cash flows, support provided by the guarantor(s) and the current valuation of the collateral. If the appraisal in the file is older than six months, an evaluation must be made as to the continued reasonableness of the valuation. For certain income-producing properties, current rent rolls and/or other income information can be utilized to support the appraisal valuation, when coupled with documented cap rates within our markets and a physical inspection of the collateral to validate the current condition.
The Company’s policy states that in the event a loan has been identified as a troubled debt restructuring, it should be assigned a grade of substandard and placed on nonaccrual status until such time the borrower has demonstrated the ability to service the loan payments based on the restructured terms – generally defined as six months of satisfactory payment history. Missed payments under the original loan terms are not considered under the new structure; however, subsequent missed payments are considered non-performance and are not considered toward the six month required term of satisfactory payment history. The Company’s loan policy states that a nonaccrual loan may be returned to accrual status when (i) none of its principal and interest is due and unpaid, and the Company expects repayment of the remaining contractual principal and interest or (ii) it otherwise becomes well secured and in the process of collection. Restoration to accrual status on any given loan must be supported by a well-documented credit evaluation of the borrower’s financial condition and the prospects for full repayment and approved by the Company’s Chief Credit Officer.
In the normal course of business, the Company renews loans with a modification of the interest rate or terms that are not deemed as troubled debt restructurings because the borrower is not experiencing financial difficulty. The Company modified loans in the first
three
months of
2019
and
2018
totaling
$26.9 million
and
$28.6 million
, respectively, under such parameters.
As of
March 31, 2019
and
December 31, 2018
, the Company had a balance of
$12.9 million
and
$11.0 million
, respectively, in troubled debt restructurings, excluding purchased loans. The Company has recorded
$893,000
and
$890,000
in previous charge-offs on such loans at
March 31, 2019
and
December 31, 2018
, respectively. The Company’s balance in the allowance for loan losses allocated to such troubled debt restructurings was
$728,000
and
$820,000
at
March 31, 2019
and
December 31, 2018
, respectively. At
March 31, 2019
, the Company did not have any commitments to lend additional funds to debtors whose terms have been modified in troubled restructurings.
During the
three months ended
March 31, 2019
and
2018
, the Company modified loans as troubled debt restructurings, excluding purchased loans, with principal balances of
$2.2 million
and
$1.2 million
, respectively, and these modifications did not have a material impact on the Company’s allowance for loan loss. The following table presents the loans by class modified as troubled debt restructurings, excluding purchased loans, which occurred during the
three months ended
March 31, 2019
and
2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
March 31, 2018
|
|
Loan Class
|
#
|
|
Balance
(in thousands)
|
|
#
|
|
Balance
(in thousands)
|
|
Commercial, financial and agricultural
|
1
|
|
$
|
7
|
|
|
2
|
|
$
|
125
|
|
|
Real estate – construction and development
|
—
|
|
—
|
|
|
1
|
|
4
|
|
|
Real estate – commercial and farmland
|
1
|
|
33
|
|
|
1
|
|
303
|
|
|
Real estate – residential
|
7
|
|
2,109
|
|
|
2
|
|
710
|
|
|
Consumer installment
|
3
|
|
12
|
|
|
2
|
|
13
|
|
|
Total
|
12
|
|
$
|
2,161
|
|
|
8
|
|
$
|
1,155
|
|
Troubled debt restructurings, excluding purchased loans, with an outstanding balance of
$837,000
and
$3.0 million
defaulted during the
three months ended
March 31, 2019
and
2018
, respectively, and these defaults did not have a material impact on the Company’s allowance for loan loss. The following table presents for loans, excluding purchased loans, the troubled debt restructurings by class that defaulted (defined as
30
days past due) during the
three months ended
March 31, 2019
and
2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
March 31, 2018
|
|
Loan Class
|
#
|
|
Balance
(in thousands)
|
|
#
|
|
Balance
(in thousands)
|
|
Commercial, financial and agricultural
|
—
|
|
$
|
—
|
|
|
—
|
|
$
|
—
|
|
|
Real estate – construction and development
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
Real estate – commercial and farmland
|
—
|
|
—
|
|
|
2
|
|
1,971
|
|
|
Real estate – residential
|
7
|
|
837
|
|
|
17
|
|
1,047
|
|
|
Consumer installment
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
Total
|
7
|
|
$
|
837
|
|
|
19
|
|
$
|
3,018
|
|
The following table presents the amount of troubled debt restructurings by loan class, excluding purchased loans, classified separately as accrual and nonaccrual at
March 31, 2019
and
December 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
Accruing Loans
|
|
Non-Accruing Loans
|
|
Loan Class
|
#
|
|
Balance
(in thousands)
|
|
#
|
|
Balance
(in thousands)
|
|
Commercial, financial and agricultural
|
3
|
|
$
|
116
|
|
|
14
|
|
$
|
138
|
|
|
Real estate – construction and development
|
4
|
|
142
|
|
|
1
|
|
2
|
|
|
Real estate – commercial and farmland
|
13
|
|
2,954
|
|
|
4
|
|
450
|
|
|
Real estate – residential
|
78
|
|
8,240
|
|
|
19
|
|
832
|
|
|
Consumer installment
|
5
|
|
11
|
|
|
22
|
|
63
|
|
|
Total
|
103
|
|
$
|
11,463
|
|
|
60
|
|
$
|
1,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
Accruing Loans
|
|
Non-Accruing Loans
|
|
Loan Class
|
#
|
|
Balance
(in thousands)
|
|
#
|
|
Balance
(in thousands)
|
|
Commercial, financial and agricultural
|
5
|
|
$
|
256
|
|
|
14
|
|
$
|
138
|
|
|
Real estate – construction and development
|
5
|
|
145
|
|
|
1
|
|
2
|
|
|
Real estate – commercial and farmland
|
12
|
|
2,863
|
|
|
3
|
|
426
|
|
|
Real estate – residential
|
71
|
|
6,043
|
|
|
20
|
|
1,119
|
|
|
Consumer installment
|
6
|
|
16
|
|
|
24
|
|
69
|
|
|
Total
|
99
|
|
$
|
9,323
|
|
|
62
|
|
$
|
1,754
|
|
As of
March 31, 2019
and
December 31, 2018
, the Company had a balance of
$22.3 million
and
$22.2 million
, respectively, in troubled debt restructurings included in purchased loans. The Company has recorded
$1.1 million
and
$940,000
in previous charge-offs on such loans at
March 31, 2019
and
December 31, 2018
, respectively. At
March 31, 2019
, the Company did not have any commitments to lend additional funds to debtors whose terms have been modified in troubled restructurings.
During the
three months ended
March 31, 2019
and
2018
, the Company modified purchased loans as troubled debt restructurings, with principal balances of
$773,000
and
$186,000
, respectively, and these modifications did not have a material impact on the Company’s allowance for loan loss. The following table presents the purchased loans by class modified as troubled debt restructurings, which occurred during the
three months ended
March 31, 2019
and
2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
March 31, 2018
|
|
Loan Class
|
#
|
|
Balance
(in thousands)
|
|
#
|
|
Balance
(in thousands)
|
|
Commercial, financial and agricultural
|
—
|
|
$
|
—
|
|
|
1
|
|
$
|
7
|
|
|
Real estate – construction and development
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
Real estate – commercial and farmland
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
Real estate – residential
|
10
|
|
740
|
|
|
2
|
|
179
|
|
|
Consumer installment
|
3
|
|
33
|
|
|
—
|
|
—
|
|
|
Total
|
13
|
|
$
|
773
|
|
|
3
|
|
$
|
186
|
|
Troubled debt restructurings included in purchased loans with an outstanding balance of
$831,000
and
$906,000
defaulted during the
three months ended
March 31, 2019
and
2018
, respectively, and these defaults did not have a material impact on the Company’s allowance for loan loss.
The following table presents purchased loan troubled debt restructurings by class that defaulted (defined as
30
days past due) during the
three months ended
March 31, 2019
and
2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
March 31, 2018
|
|
Loan Class
|
#
|
|
Balance
(in thousands)
|
|
#
|
|
Balance
(in thousands)
|
|
Commercial, financial and agricultural
|
1
|
|
$
|
3
|
|
|
—
|
|
$
|
—
|
|
|
Real estate – construction and development
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
Real estate – commercial and farmland
|
1
|
|
163
|
|
|
1
|
|
351
|
|
|
Real estate – residential
|
8
|
|
637
|
|
|
8
|
|
555
|
|
|
Consumer installment
|
2
|
|
28
|
|
|
—
|
|
—
|
|
|
Total
|
12
|
|
$
|
831
|
|
|
9
|
|
$
|
906
|
|
The following table presents the amount of troubled debt restructurings by loan class of purchased loans, classified separately as accrual and nonaccrual at
March 31, 2019
and
December 31, 2018
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
Accruing Loans
|
|
Non-Accruing Loans
|
|
Loan Class
|
#
|
|
Balance
(in thousands)
|
|
#
|
|
Balance
(in thousands)
|
|
Commercial, financial and agricultural
|
1
|
|
$
|
31
|
|
|
3
|
|
$
|
29
|
|
|
Real estate – construction and development
|
4
|
|
1,011
|
|
|
4
|
|
268
|
|
|
Real estate – commercial and farmland
|
12
|
|
6,104
|
|
|
7
|
|
1,577
|
|
|
Real estate – residential
|
119
|
|
12,297
|
|
|
21
|
|
917
|
|
|
Consumer installment
|
—
|
|
—
|
|
|
7
|
|
50
|
|
|
Total
|
136
|
|
$
|
19,443
|
|
|
42
|
|
$
|
2,841
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
Accruing Loans
|
|
Non-Accruing Loans
|
|
Loan Class
|
#
|
|
Balance
(in thousands)
|
|
#
|
|
Balance
(in thousands)
|
|
Commercial, financial and agricultural
|
1
|
|
$
|
31
|
|
|
3
|
|
$
|
32
|
|
|
Real estate – construction and development
|
4
|
|
1,015
|
|
|
5
|
|
293
|
|
|
Real estate – commercial and farmland
|
12
|
|
6,162
|
|
|
7
|
|
1,685
|
|
|
Real estate – residential
|
115
|
|
11,532
|
|
|
24
|
|
1,424
|
|
|
Consumer installment
|
—
|
|
—
|
|
|
4
|
|
17
|
|
|
Total
|
132
|
|
$
|
18,740
|
|
|
43
|
|
$
|
3,451
|
|
Allowance for Loan Losses
The allowance for loan losses represents an allowance for probable incurred losses in the loan portfolio. The adequacy of the allowance for loan losses is evaluated periodically based on a review of all significant loans, with a particular emphasis on non-accruing, past-due and other loans that management believes might be potentially impaired or warrant additional attention. The Company segregates the loan portfolio by type of loan and utilizes this segregation in evaluating exposure to risks within the portfolio. In addition, based on internal reviews and external reviews performed by regulatory authorities, the Company further segregates the loan portfolio by loan grades based on an assessment of risk for a particular loan or group of loans. Certain reviewed loans are assigned specific allowances when a review of relevant data determines that a general allocation is not sufficient or when the review affords management the opportunity to adjust the amount of exposure in a given credit. In establishing allowances, management considers historical loan loss experience but adjusts this data with a significant emphasis on current loan quality trends, current economic conditions and other factors in the markets where the Company operates. Factors considered include, among others, current valuations of real estate in the Company’s markets, unemployment rates, the effect of weather conditions on agricultural related entities and other significant local economic events, such as major plant closings.
The Company has developed a methodology for determining the adequacy of the allowance for loan losses which is monitored by the Company’s Chief Credit Officer. Procedures provide for the assignment of a risk rating for every loan included in the total loan portfolio. Commercial insurance premium finance loans, overdraft protection loans, and certain residential mortgage loans and consumer loans serviced by outside processors are treated as pools for risk rating purposes. The risk rating schedule provides nine ratings of which five ratings are classified as pass ratings and four ratings are classified as criticized ratings. Each risk rating is assigned a percentage factor to be applied to the loan balance to determine the adequate amount of reserve. The Bank’s independent internal loan review department reviews on an annual basis a sample of relationships in excess of
$1,000,000
, as well as selective sampling of loans below this threshold. Sampling is based on a number of factors unique to the Bank’s portfolio risks, including, but not limited to, lending divisions, industry, risk grades, and new originations. As a result of these loan reviews, certain loans
may be identified as having deteriorating credit quality. Other loans that surface as problem loans may also be assigned specific reserves. Past-due loans are assigned risk ratings based on the number of days past due. The calculation of the allowance for loan losses, including underlying data and assumptions, is reviewed regularly by the Company’s Chief Financial Officer and the independent internal loan review department.
Loan losses are charged against the allowance when management believes the collection of a loan’s principal is unlikely. Subsequent recoveries are credited to the allowance. Consumer loans are charged off in accordance with the Federal Financial Institutions Examination Council’s (“FFIEC”) Uniform Retail Credit Classification and Account Management Policy. Commercial loans are charged off when they are deemed uncollectible, which usually involves a triggering event within the collection effort. If the loan is collateral dependent, the loss is more easily identified and is charged off when it is identified, usually based upon receipt of an appraisal. However, when a loan has guarantor support, the Company may carry the estimated loss as a reserve against the loan while collection efforts with the guarantor are pursued. If, after collection efforts with the guarantor are complete, the deficiency is still considered uncollectible, the loss is charged off and any further collections are treated as recoveries. In all situations, when a loan is downgraded to an Asset Quality Rating of
9
(Loss per the regulatory guidance), the uncollectible portion is charged off.
The following tables detail activity in the allowance for loan losses by portfolio segment for the
three
-month period ended
March 31, 2019
, the year ended
December 31, 2018
and the
three
-month period ended
March 31, 2018
. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
Commercial,
Financial and
Agricultural
|
|
Real Estate –
Construction and
Development
|
|
Real Estate –
Commercial and
Farmland
|
|
Real Estate –
Residential
|
|
Consumer
Installment
|
|
Purchased
Loans
|
|
Purchased
Loan
Pools
|
|
Total
|
|
Three Months Ended
March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2018
|
$
|
4,287
|
|
|
$
|
3,734
|
|
|
$
|
8,975
|
|
|
$
|
5,363
|
|
|
$
|
3,795
|
|
|
$
|
1,933
|
|
|
$
|
732
|
|
|
$
|
28,819
|
|
|
Provision for loan losses
|
1,180
|
|
|
218
|
|
|
841
|
|
|
(240
|
)
|
|
1,870
|
|
|
(426
|
)
|
|
(35
|
)
|
|
3,408
|
|
|
Loans charged off
|
(2,004
|
)
|
|
(25
|
)
|
|
(1,253
|
)
|
|
(20
|
)
|
|
(1,893
|
)
|
|
(184
|
)
|
|
—
|
|
|
(5,379
|
)
|
|
Recoveries of loans previously charged off
|
1,065
|
|
|
1
|
|
|
4
|
|
|
104
|
|
|
164
|
|
|
473
|
|
|
—
|
|
|
1,811
|
|
|
Balance, March 31, 2019
|
$
|
4,528
|
|
|
$
|
3,928
|
|
|
$
|
8,567
|
|
|
$
|
5,207
|
|
|
$
|
3,936
|
|
|
$
|
1,796
|
|
|
$
|
697
|
|
|
$
|
28,659
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period-end allocation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment
(1)
|
$
|
680
|
|
|
$
|
209
|
|
|
$
|
578
|
|
|
$
|
712
|
|
|
$
|
—
|
|
|
$
|
1,796
|
|
|
$
|
1
|
|
|
$
|
3,976
|
|
|
Loans collectively evaluated for impairment
|
3,848
|
|
|
3,719
|
|
|
7,989
|
|
|
4,495
|
|
|
3,936
|
|
|
—
|
|
|
696
|
|
|
24,683
|
|
|
Ending balance
|
$
|
4,528
|
|
|
$
|
3,928
|
|
|
$
|
8,567
|
|
|
$
|
5,207
|
|
|
$
|
3,936
|
|
|
$
|
1,796
|
|
|
$
|
697
|
|
|
$
|
28,659
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
(1)
|
$
|
2,699
|
|
|
$
|
764
|
|
|
$
|
5,788
|
|
|
$
|
12,466
|
|
|
$
|
—
|
|
|
$
|
29,097
|
|
|
$
|
400
|
|
|
$
|
51,214
|
|
|
Collectively evaluated for impairment
|
1,380,208
|
|
|
675,799
|
|
|
1,889,149
|
|
|
1,353,016
|
|
|
436,469
|
|
|
2,361,145
|
|
|
253,310
|
|
|
8,349,096
|
|
|
Acquired with deteriorated credit quality
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
82,029
|
|
|
—
|
|
|
82,029
|
|
|
Ending balance
|
$
|
1,382,907
|
|
|
$
|
676,563
|
|
|
$
|
1,894,937
|
|
|
$
|
1,365,482
|
|
|
$
|
436,469
|
|
|
$
|
2,472,271
|
|
|
$
|
253,710
|
|
|
$
|
8,482,339
|
|
(1) At
March 31, 2019
, loans individually evaluated for impairment includes all nonaccrual loans greater than
$100,000
and all troubled debt restructurings greater than
$100,000
, including all troubled debt restructurings and not only those currently classified as troubled debt restructurings.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
Commercial,
Financial and
Agricultural
|
|
Real Estate –
Construction and
Development
|
|
Real Estate –
Commercial and
Farmland
|
|
Real Estate –
Residential
|
|
Consumer
Installment
|
|
Purchased
Loans
|
|
Purchased
Loan
Pools
|
|
Total
|
|
Twelve Months Ended
December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2017
|
$
|
3,631
|
|
|
$
|
3,629
|
|
|
$
|
7,501
|
|
|
$
|
4,786
|
|
|
$
|
1,916
|
|
|
$
|
3,253
|
|
|
$
|
1,075
|
|
|
$
|
25,791
|
|
|
Provision for loan losses
|
10,690
|
|
|
277
|
|
|
1,636
|
|
|
1,002
|
|
|
5,569
|
|
|
(2,164
|
)
|
|
(343
|
)
|
|
16,667
|
|
|
Loans charged off
|
(13,803
|
)
|
|
(292
|
)
|
|
(338
|
)
|
|
(771
|
)
|
|
(4,189
|
)
|
|
(1,738
|
)
|
|
—
|
|
|
(21,131
|
)
|
|
Recoveries of loans previously charged off
|
3,769
|
|
|
120
|
|
|
176
|
|
|
346
|
|
|
499
|
|
|
2,582
|
|
|
—
|
|
|
7,492
|
|
|
Balance, December 31, 2018
|
$
|
4,287
|
|
|
$
|
3,734
|
|
|
$
|
8,975
|
|
|
$
|
5,363
|
|
|
$
|
3,795
|
|
|
$
|
1,933
|
|
|
$
|
732
|
|
|
$
|
28,819
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period-end allocation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment
(1)
|
$
|
570
|
|
|
$
|
3
|
|
|
$
|
1,591
|
|
|
$
|
867
|
|
|
$
|
—
|
|
|
$
|
1,933
|
|
|
$
|
—
|
|
|
$
|
4,964
|
|
|
Loans collectively evaluated for impairment
|
3,717
|
|
|
3,731
|
|
|
7,384
|
|
|
4,496
|
|
|
3,795
|
|
|
—
|
|
|
732
|
|
|
23,855
|
|
|
Ending balance
|
$
|
4,287
|
|
|
$
|
3,734
|
|
|
$
|
8,975
|
|
|
$
|
5,363
|
|
|
$
|
3,795
|
|
|
$
|
1,933
|
|
|
$
|
732
|
|
|
$
|
28,819
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
(1)
|
$
|
3,211
|
|
|
$
|
424
|
|
|
$
|
6,649
|
|
|
$
|
11,364
|
|
|
$
|
—
|
|
|
$
|
32,244
|
|
|
$
|
—
|
|
|
$
|
53,892
|
|
|
Collectively evaluated for impairment
|
1,313,148
|
|
|
670,774
|
|
|
1,807,880
|
|
|
1,391,636
|
|
|
455,371
|
|
|
2,468,996
|
|
|
262,625
|
|
|
8,370,430
|
|
|
Acquired with deteriorated credit quality
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
87,592
|
|
|
—
|
|
|
87,592
|
|
|
Ending balance
|
$
|
1,316,359
|
|
|
$
|
671,198
|
|
|
$
|
1,814,529
|
|
|
$
|
1,403,000
|
|
|
$
|
455,371
|
|
|
$
|
2,588,832
|
|
|
$
|
262,625
|
|
|
$
|
8,511,914
|
|
(1) At
December 31, 2018
, loans individually evaluated for impairment includes all nonaccrual loans greater than
$100,000
and all troubled debt restructurings greater than
$100,000
, including all troubled debt restructurings and not only those currently classified as troubled debt restructurings.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
Commercial,
Financial and
Agricultural
|
|
Real Estate –
Construction and
Development
|
|
Real Estate –
Commercial and
Farmland
|
|
Real Estate –
Residential
|
|
Consumer
Installment
|
|
Purchased
Loans
|
|
Purchased
Loan
Pools
|
|
Total
|
|
Three Months Ended
March 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2017
|
$
|
3,631
|
|
|
$
|
3,629
|
|
|
$
|
7,501
|
|
|
$
|
4,786
|
|
|
$
|
1,916
|
|
|
$
|
3,253
|
|
|
$
|
1,075
|
|
|
$
|
25,791
|
|
|
Provision for loan losses
|
783
|
|
|
(171
|
)
|
|
689
|
|
|
177
|
|
|
1,151
|
|
|
(747
|
)
|
|
(81
|
)
|
|
1,801
|
|
|
Loans charged off
|
(1,449
|
)
|
|
—
|
|
|
(142
|
)
|
|
(198
|
)
|
|
(962
|
)
|
|
(121
|
)
|
|
—
|
|
|
(2,872
|
)
|
|
Recoveries of loans previously charged off
|
656
|
|
|
114
|
|
|
24
|
|
|
182
|
|
|
67
|
|
|
437
|
|
|
—
|
|
|
1,480
|
|
|
Balance, March 31, 2018
|
$
|
3,621
|
|
|
$
|
3,572
|
|
|
$
|
8,072
|
|
|
$
|
4,947
|
|
|
$
|
2,172
|
|
|
$
|
2,822
|
|
|
$
|
994
|
|
|
$
|
26,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period-end allocation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment
(1)
|
$
|
533
|
|
|
$
|
1
|
|
|
$
|
1,216
|
|
|
$
|
980
|
|
|
$
|
—
|
|
|
$
|
2,822
|
|
|
$
|
176
|
|
|
$
|
5,728
|
|
|
Loans collectively evaluated for impairment
|
3,088
|
|
|
3,571
|
|
|
6,856
|
|
|
3,967
|
|
|
2,172
|
|
|
—
|
|
|
818
|
|
|
20,472
|
|
|
Ending balance
|
$
|
3,621
|
|
|
$
|
3,572
|
|
|
$
|
8,072
|
|
|
$
|
4,947
|
|
|
$
|
2,172
|
|
|
$
|
2,822
|
|
|
$
|
994
|
|
|
$
|
26,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
(1)
|
$
|
2,147
|
|
|
$
|
126
|
|
|
$
|
7,639
|
|
|
$
|
9,946
|
|
|
$
|
—
|
|
|
$
|
28,167
|
|
|
$
|
902
|
|
|
$
|
48,927
|
|
|
Collectively evaluated for impairment
|
1,385,290
|
|
|
631,378
|
|
|
1,629,015
|
|
|
1,070,082
|
|
|
316,363
|
|
|
683,784
|
|
|
318,696
|
|
|
6,034,608
|
|
|
Acquired with deteriorated credit quality
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
106,636
|
|
|
—
|
|
|
106,636
|
|
|
Ending balance
|
$
|
1,387,437
|
|
|
$
|
631,504
|
|
|
$
|
1,636,654
|
|
|
$
|
1,080,028
|
|
|
$
|
316,363
|
|
|
$
|
818,587
|
|
|
$
|
319,598
|
|
|
$
|
6,190,171
|
|
(1) At
March 31, 2018
, loans individually evaluated for impairment includes all nonaccrual loans greater than
$100,000
and all troubled debt restructurings greater than
$100,000
, including all troubled debt restructurings and not only those currently classified as troubled debt restructurings.
NOTE 6 – OTHER REAL ESTATE OWNED
The following is a summary of the activity in OREO during the
three months ended
March 31, 2019
and
2018
:
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
March 31,
2019
|
|
March 31,
2018
|
|
Beginning balance, January 1
|
$
|
7,218
|
|
|
$
|
8,464
|
|
|
Loans transferred to other real estate owned
|
264
|
|
|
1,176
|
|
|
Net gains (losses) on sale and write-downs recorded in statement of income
|
(100
|
)
|
|
101
|
|
|
Sales proceeds
|
(1,368
|
)
|
|
(495
|
)
|
|
Other
|
—
|
|
|
(75
|
)
|
|
Ending balance
|
$
|
6,014
|
|
|
$
|
9,171
|
|
The following is a summary of the activity in purchased OREO during the
three months ended
March 31, 2019
and
2018
:
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
March 31,
2019
|
|
March 31,
2018
|
|
Beginning balance, January 1
|
$
|
9,535
|
|
|
$
|
9,011
|
|
|
Loans transferred to other real estate owned
|
2,523
|
|
|
457
|
|
|
Portion of gains (losses) on sale and write-downs payable to (receivable from) the FDIC under loss-sharing agreements
|
(31
|
)
|
|
—
|
|
|
Net gains (losses) on sale and write-downs recorded in statement of income
|
91
|
|
|
(134
|
)
|
|
Sales proceeds
|
(1,242
|
)
|
|
(2,611
|
)
|
|
Other
|
(19
|
)
|
|
—
|
|
|
Ending balance
|
$
|
10,857
|
|
|
$
|
6,723
|
|
NOTE 7 – SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
The Company classifies the sales of securities under agreements to repurchase as short-term borrowings. The amounts received under these agreements are reflected as a liability in the Company’s consolidated balance sheets and the investment securities underlying these agreements are included in investment securities in the Company’s consolidated balance sheets. At
March 31, 2019
and
December 31, 2018
, all securities sold under agreements to repurchase mature on a daily basis. The market value of the securities fluctuate on a daily basis due to market conditions. The Company monitors the market value of the securities underlying these agreements on a daily basis and is required to transfer additional securities if the market value of the securities falls below the repurchase agreement price. The Company maintains an unpledged securities portfolio that it believes is sufficient to protect against a decline in the market value of the securities sold under agreements to repurchase.
The following is a summary of the Company’s securities sold under agreements to repurchase at
March 31, 2019
and
December 31, 2018
.
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
March 31,
2019
|
|
December 31, 2018
|
|
Securities sold under agreements to repurchase
|
$
|
4,259
|
|
|
$
|
20,384
|
|
At
March 31, 2019
and
December 31, 2018
, the investment securities underlying these agreements were comprised of mortgage-backed securities.
NOTE 8 – OTHER BORROWINGS
Other borrowings consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
March 31,
2019
|
|
December 31,
2018
|
|
FHLB borrowings:
|
|
|
|
|
|
|
Convertible Flipper Advance due May 22, 2019; current interest rate of 4.68%
|
$
|
1,505
|
|
|
$
|
1,514
|
|
|
Principal Reducing Advance due June 20, 2019; fixed interest rate of 1.274%
|
250
|
|
|
500
|
|
|
Fixed Rate Advance due December 9, 2030; fixed interest rate of 4.55%
|
1,431
|
|
|
1,434
|
|
|
Fixed Rate Advance due December 9, 2030; fixed interest rate of 4.55%
|
990
|
|
|
993
|
|
|
Principal Reducing Advance due September 29, 2031; fixed interest rate of 3.095%
|
1,822
|
|
|
1,858
|
|
|
Subordinated notes payable:
|
|
|
|
|
|
|
Subordinated notes payable due March 15, 2027 net of unamortized debt issuance cost of $1,041 and $1,074, respectively; fixed interest rate of 5.75% through March 14, 2022; variable interest rate thereafter at three-month LIBOR plus 3.616%
|
73,959
|
|
|
73,926
|
|
|
Other debt:
|
|
|
|
|
|
|
Advance from correspondent bank due October 5, 2019; secured by a loan receivable; fixed interest rate of 4.25%
|
13
|
|
|
20
|
|
|
Advance from correspondent bank due September 5, 2026; secured by a loan receivable; fixed interest rate of 2.09%
|
1,484
|
|
|
1,529
|
|
|
Advances under revolving credit agreement with a regional bank due September 26, 2020; secured by subsidiary bank stock; variable interest rate at 90-day LIBOR plus 3.50% (6.13% at March 31, 2019)
|
70,000
|
|
|
70,000
|
|
|
Total
|
$
|
151,454
|
|
|
$
|
151,774
|
|
The advances from the FHLB are collateralized by a blanket lien on all eligible first mortgage loans and other specific loans in addition to FHLB stock. At
March 31, 2019
,
$2.04 billion
was available for borrowing on lines with the FHLB.
At
March 31, 2019
, the Company had a revolving credit arrangement with a regional bank with a maximum line amount of
$100.0 million
. This line of credit is secured by subsidiary bank stock, expires on September 26, 2020, and bears a variable interest rate of 90-day LIBOR plus
3.50%
. At
March 31, 2019
, there was
$30.0 million
available for borrowing under the revolving credit arrangement.
As of
March 31, 2019
, the Bank maintained credit arrangements with various financial institutions to purchase federal funds up to
$117.0 million
.
The Bank also participates in the Federal Reserve discount window borrowings program. At
March 31, 2019
, the Company had
$1.60 billion
of loans pledged at the Federal Reserve discount window and had
$1.11 billion
available for borrowing.
NOTE 9 – SHAREHOLDERS’ EQUITY
Common Stock Repurchase Program
On October 25, 2018, the Company announced that its Board of Directors authorized the Company to repurchase up to
$100.0 million
of its outstanding common stock. Repurchases of shares, which are authorized to occur within the succeeding twelve months, must be made in accordance with applicable securities laws and may be made from time to time in the open market or by negotiated transactions. The amount and timing of repurchases will be based on a variety of factors, including share acquisition price, regulatory limitations and other market and economic factors. The program does not require the Company to repurchase any specific number of shares. As of
March 31, 2019
,
no
shares of the Company's common stock had been repurchased under the program.
Hamilton Acquisition
On June 29, 2018, the Company issued
6,548,385
shares of its common stock to the shareholders of Hamilton. Such shares had a value of
$53.35
per share at the time of issuance, resulting in an increase in shareholders’ equity of
$349.4 million
.
For additional information regarding the Hamilton acquisition, see
Note 3
.
Atlantic Acquisition
On May 25, 2018, the Company issued
2,631,520
shares of its common stock to the shareholders of Atlantic. Such shares had a value of
$56.15
per share at the time of issuance, resulting in an increase in shareholders’ equity of
$147.8 million
.
For additional information regarding the Atlantic acquisition, see
Note 3
.
USPF Acquisition
On January 18, 2017, in exchange for
4.99%
of the outstanding shares of common stock of USPF, the Company issued
128,572
unregistered shares of its common stock to a selling shareholder of USPF. A registration statement was filed with the Securities and Exchange Commission on February 13, 2017 to register the resale or other disposition of these shares. The issuance of the
128,572
common shares, valued at
$45.45
per share at the time of issuance, resulted in an increase in shareholders’ equity of
$5.8 million
.
On January 3, 2018, in exchange for
25.01%
of the outstanding shares of common stock of USPF, the Company issued
114,285
unregistered shares of its common stock and paid
$12.5 million
in cash to a selling shareholder of USPF. The issuance of the
114,285
common shares, valued at
$48.55
per share at the time of issuance, resulted in an increase in shareholders’ equity of
$5.5 million
.
On January 31, 2018, in exchange for the final
70%
of the outstanding shares of common stock of USPF, the Company issued
830,301
unregistered shares of its common stock and paid
$8.9 million
in cash to the selling shareholders of USPF. The issuance of the
830,301
common shares, valued at
$53.55
per share at the time of issuance, resulted in an increase in shareholders’ equity of
$44.5 million
. The selling shareholders of USPF may receive additional cash payments aggregating up to
$5.8 million
based on the achievement by the Company's premium finance division of certain income targets, between January 1, 2018 and June 30, 2019.
On February 16, 2018, a registration statement was filed with the Securities and Exchange Commission to register the resale or other disposition of the combined
944,586
shares issued on January 3, 2018 and January 31, 2018.
For additional information regarding the USPF acquisition, see
Note 3
.
NOTE 10 – ACCUMULATED OTHER COMPREHENSIVE LOSS
Accumulated other comprehensive income (loss) for the Company consists of changes in net unrealized gains and losses on investment securities available for sale and an interest rate swap derivative designated as a cash flow hedge. The reclassification of gains included in net income is recorded in gain on securities in the consolidated statement of income and comprehensive income. The following tables present a summary of the accumulated other comprehensive loss balances, net of tax, as of
March 31, 2019
and
2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Unrealized
Gain (Loss)
on Derivatives
|
|
Unrealized
Gain (Loss)
on Securities
|
|
Accumulated
Other Comprehensive
Loss
|
|
Balance, December 31, 2018
|
|
$
|
351
|
|
|
$
|
(5,177
|
)
|
|
$
|
(4,826
|
)
|
|
Reclassification for gains included in net income, net of tax
|
|
—
|
|
|
(46
|
)
|
|
(46
|
)
|
|
Current year changes, net of tax
|
|
(173
|
)
|
|
3,867
|
|
|
3,694
|
|
|
Balance, March 31, 2019
|
|
$
|
178
|
|
|
$
|
(1,356
|
)
|
|
$
|
(1,178
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Unrealized
Gain (Loss)
on Derivatives
|
|
Unrealized
Gain (Loss)
on Securities
|
|
Accumulated
Other Comprehensive
Loss
|
|
Balance, December 31, 2017
|
|
$
|
292
|
|
|
$
|
(1,572
|
)
|
|
$
|
(1,280
|
)
|
|
Reclassification to retained earnings due to change in federal corporate tax rate
|
|
(53
|
)
|
|
(339
|
)
|
|
(392
|
)
|
|
Adjusted balance, January 1, 2018
|
|
239
|
|
|
(1,911
|
)
|
|
(1,672
|
)
|
|
Reclassification for gains included in net income, net of tax
|
|
—
|
|
|
(29
|
)
|
|
(29
|
)
|
|
Current year changes, net of tax
|
|
281
|
|
|
(9,403
|
)
|
|
(9,122
|
)
|
|
Balance, March 31, 2018
|
|
$
|
520
|
|
|
$
|
(11,343
|
)
|
|
$
|
(10,823
|
)
|
NOTE 11 – WEIGHTED AVERAGE SHARES OUTSTANDING
Earnings per share have been computed based on the following weighted average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
(share data in thousands)
|
2019
|
|
2018
|
|
Average common shares outstanding
|
47,366
|
|
|
37,967
|
|
|
Common share equivalents:
|
|
|
|
|
|
|
Stock options
|
—
|
|
|
18
|
|
|
Nonvested restricted share grants
|
90
|
|
|
265
|
|
|
Average common shares outstanding, assuming dilution
|
47,456
|
|
|
38,250
|
|
For the
three
-month periods ended
March 31, 2019
and
2018
, there were no potential common shares with strike prices that would cause them to be anti-dilutive.
NOTE 12 – LEASES
The Company has entered into various operating leases for certain branch locations, ATM locations, loan production offices, and corporate support services locations with terms extending through June 2028. Generally, these leases have initial lease terms of
ten years
or less. Many of the leases have one or more lease renewal options. The exercise of lease renewal options is at our sole discretion. The Company does not consider exercise of any lease renewal options reasonably certain. Certain of our lease agreements contain early termination options. No renewal options or early termination options have been included in the calculation of the operating right-of-use assets or operating lease liabilities. Certain of our lease agreements provide for periodic adjustments to rental payments for inflation. As the majority of the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate at the commencement date in determining the present value of lease payments. The incremental borrowing rate is based on the term of the lease. Incremental borrowing rates on January 1, 2019 were used for operating leases that commenced prior to that date. Leases with an initial term of 12 months or less are not recorded on the balance sheet. For these short-term leases, lease expense is recognized on a straight-line basis over the lease term. At
March 31, 2019
, the Company had
no
leases classified as finance leases.
Operating lease cost was
$1.8 million
for the three months ended
March 31, 2019
. For the three months ended
March 31, 2019
, the Company had no sublease income offsetting operating lease cost. Variable rent expense and short-term lease expense were not material for the three months ended
March 31, 2019
.
The following table presents the impact of leases on the Company's consolidated balance sheet at
March 31, 2019
:
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
Location
|
|
March 31, 2019
|
|
Operating lease right-of-use assets
|
Other assets
|
|
$
|
25,739
|
|
|
Operating lease liabilities
|
Other liabilities
|
|
28,080
|
|
Future maturities of the Company's operating lease liabilities are summarized as follows:
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
|
|
Twelve Months Ended March 31,
|
|
Lease Liability
|
|
2020
|
|
$
|
6,025
|
|
|
2021
|
|
5,175
|
|
|
2022
|
|
4,679
|
|
|
2023
|
|
4,244
|
|
|
2024
|
|
3,307
|
|
|
After March 31, 2024
|
|
7,467
|
|
|
Total lease payments
|
|
$
|
30,897
|
|
|
Less: Interest
|
|
(2,817
|
)
|
|
Present value of lease liabilities
|
|
$
|
28,080
|
|
|
|
|
|
|
|
|
|
Supplemental lease information
|
|
|
(dollars in thousands)
|
March 31, 2019
|
|
Weighted-average remaining lease term (years)
|
6.4
|
|
|
Weighted-average discount rate
|
2.93
|
%
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
Operating cash flows from operating leases (cash payments)
|
$
|
1,775
|
|
|
Operating cash flows from operating leases (lease liability reduction)
|
$
|
1,571
|
|
|
Operating lease right-of-use assets obtained in exchange for leases entered into during the period
|
$
|
—
|
|
NOTE 13 – FAIR VALUE MEASURES
The fair value of an asset or liability is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various assets and liabilities. In cases where quoted market prices are not available, fair value is based on discounted cash flows or other valuation techniques. These techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the asset or liability. The accounting standard for disclosures about the fair value measures excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.
The Company's loans held for sale are carried at fair value and are comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
March 31,
2019
|
|
December 31,
2018
|
|
Mortgage loans held for sale
|
$
|
109,442
|
|
|
$
|
107,428
|
|
|
SBA loans held for sale
|
2,628
|
|
|
3,870
|
|
|
Total loans held for sale
|
$
|
112,070
|
|
|
$
|
111,298
|
|
The Company has elected to record mortgage loans held for sale at fair value in order to eliminate the complexities and inherent difficulties of achieving hedge accounting and to better align reported results with the underlying economic changes in value of the loans and related hedge instruments. This election impacts the timing and recognition of origination fees and costs, as well as servicing value, which are now recognized in earnings at the time of origination. Interest income on mortgage loans held for sale is recorded on an accrual basis in the consolidated statements of income and comprehensive income under the heading interest income – interest and fees on loans. The servicing value is included in the fair value of the interest rate lock commitments (“IRLCs”) with borrowers. The mark to market adjustments related to mortgage loans held for sale and the associated economic hedges are captured in mortgage banking activities. Net losses of
$150,000
and
$1.6 million
resulting from fair value changes of these mortgage loans were recorded in income during the
three months ended
March 31, 2019
and
2018
, respectively. Net gains of
$2.5 million
and
$1.6 million
resulting from changes in the fair value of the related derivative financial instruments used to hedge exposure to the market-related risks associated with these mortgage loans were recorded in income during the
three months ended
March 31, 2019
and
2018
, respectively. The change in fair value of both mortgage loans held for sale and the related derivative financial instruments are recorded in mortgage banking activity in the consolidated statements of income and comprehensive income. The Company’s valuation of mortgage loans held for sale incorporates an assumption for credit risk; however, given the short-term period that the Company holds these loans, valuation adjustments attributable to instrument-specific credit risk is nominal.
The following table summarizes the difference between the fair value and the principal balance for mortgage loans held for sale measured at fair value as of
March 31, 2019
and
December 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
March 31,
2019
|
|
December 31,
2018
|
|
Aggregate fair value of mortgage loans held for sale
|
$
|
109,442
|
|
|
$
|
107,428
|
|
|
Aggregate unpaid principal balance
|
105,482
|
|
|
103,319
|
|
|
Past-due loans of 90 days or more
|
—
|
|
|
—
|
|
|
Nonaccrual loans
|
—
|
|
|
—
|
|
The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Securities available for sale, loans held for sale and derivative financial instruments are recorded at fair value on a recurring basis. From time to time, the Company may be required to record at fair value other assets on a nonrecurring
basis, such as impaired loans and OREO. Additionally, the Company is required to disclose, but not record, the fair value of other financial instruments.
Fair Value Hierarchy
The Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:
Level 1
–
Quoted prices in active markets for identical assets or liabilities.
Level 2
–
Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3
–
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The following methods and assumptions were used by the Company in estimating the fair value of its assets and liabilities recorded at fair value and for estimating the fair value of its financial instruments:
Cash and Due From Banks, Federal Funds Sold and Interest-Bearing Deposits in Banks, and Time Deposits in Other Banks:
The carrying amount of cash and due from banks, federal funds sold and interest-bearing deposits in banks, and time deposits in other banks approximates fair value.
Investment Securities Available for Sale:
The fair value of securities available for sale is determined by various valuation methodologies. Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows. Level 2 securities include certain U.S. agency bonds, mortgage-backed securities, collateralized mortgage and debt obligations, and municipal securities. The Level 2 fair value pricing is provided by an independent third party and is based upon similar securities in an active market. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy and may include certain residual municipal securities and other less liquid securities.
Loans Held for Sale:
The Company records loans held for sale at fair value. The fair value of loans held for sale is determined on outstanding commitments from third party investors in the secondary markets and is classified within Level 2 of the valuation hierarchy.
Loans:
The fair value for loans held for investment is estimated using an exit price methodology. An exit price methodology considers expected cash flows that take into account contractual loan terms, as applicable, prepayment expectations, probability of default, loss severity in the event of default, recovery lag and, in the case of variable rate loans, expectations for future interest rate movements. These cash flows are present valued at a risk adjusted discount rate, which considers the cost of funding, liquidity, servicing costs, and other factors. Because observable quoted prices seldom exist for identical or similar assets carried in loans held for investment, Level 3 inputs are primarily used to determine fair value exit pricing. The fair value of impaired loans is estimated based on discounted contractual cash flows or underlying collateral values, where applicable. A loan is determined to be impaired if the Company believes it is probable that all principal and interest amounts due according to the terms of the note will not be collected as scheduled. The fair value of impaired loans is determined in accordance with ASC 310-10,
Accounting by Creditors for Impairment of a Loan
, and generally results in a specific reserve established through a charge to the provision for loan losses. Losses on impaired loans are charged to the allowance when management believes the uncollectability of a loan is confirmed. Management has determined that the majority of impaired loans are Level 3 assets due to the extensive use of market appraisals.
Other Real Estate Owned:
The fair value of OREO is determined using certified appraisals and internal evaluations that value the property at its highest and best uses by applying traditional valuation methods common to the industry. The Company does not hold any OREO for profit purposes and all other real estate is actively marketed for sale. In most cases, management has determined that additional write-downs are required beyond what is calculable from the appraisal to carry the property at levels that would attract buyers. Because this additional write-down is not based on observable inputs, management has determined that OREO should be classified as Level 3.
Accrued Interest Receivable/Payable:
The carrying amount of accrued interest receivable and accrued interest payable approximates fair value.
Deposits:
The carrying amount of demand deposits, savings deposits and variable-rate certificates of deposit approximates fair value. The fair value of fixed-rate certificates of deposit is estimated based on discounted contractual cash flows using interest rates currently being offered for certificates of similar maturities.
Securities Sold under Agreements to Repurchase and Other Borrowings:
The carrying amount of securities sold under agreements to repurchase approximates fair value and is classified as Level 1. The carrying amount of variable rate other borrowings approximates fair value and is classified as Level 1. The fair value of fixed rate other borrowings is estimated based on discounted contractual cash flows using the current incremental borrowing rates for similar borrowing arrangements and is classified as Level 2.
Subordinated Deferrable Interest Debentures:
The fair value of the Company’s trust preferred securities is based on discounted cash flows using rates for securities with similar terms and remaining maturities and are classified as Level 2.
FDIC Loss-Share Payable:
Because the FDIC will reimburse the Company for certain acquired loans should the Company experience a loss, an indemnification asset is recorded at fair value at the acquisition date. The indemnification asset is recognized at the same time as the indemnified loans, and measured on the same basis, subject to collectability or contractual limitations. The shared loss agreements on the acquisition date reflect the reimbursements expected to be received from the FDIC, using an appropriate discount rate, which reflects counterparty credit risk and other uncertainties. The shared loss agreements continue to be measured on the same basis as the related indemnified loans, and the loss-share receivable is impacted by changes in estimated cash flows associated with these loans.
Pursuant to the clawback provisions of the loss-sharing agreements for the Company’s FDIC-assisted acquisitions, the Company may be required to reimburse the FDIC should actual losses be less than certain thresholds established in each loss-sharing agreement. The amount of the clawback provision for each acquisition is measured and recorded at fair value. The clawback amount, which is payable to the FDIC upon termination of the applicable loss-sharing agreement, is discounted using an appropriate discount rate.
Off-Balance-Sheet Instruments:
Because commitments to extend credit and standby letters of credit are typically made using variable rates and have short maturities, the carrying value and fair value are immaterial for disclosure.
Derivatives:
The Company has entered into derivative financial instruments to manage interest rate risk. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the derivatives. This analysis reflects the contractual terms of the derivative, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The fair value of the derivatives is determined using the market standard methodology of netting the discounted future fixed cash receipts and the discounted expected variable cash payments. The variable cash payments are based on an expectation of future interest rates (forward curves derived from observable market interest rate curves).
The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting any applicable credit enhancements such as collateral postings, thresholds, mutual puts and guarantees.
Although the Company has determined that the majority of the inputs used to value its derivative fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself or the counterparty. However, as of
March 31, 2019
and
December 31, 2018
, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustment is not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuation in its entirety is classified in Level 2 of the fair value hierarchy.
The following table presents the fair value measurements of assets and liabilities measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall as of
March 31, 2019
and
December 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recurring Basis
Fair Value Measurements
|
|
|
March 31, 2019
|
|
(dollars in thousands)
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
State, county and municipal securities
|
$
|
107,740
|
|
|
$
|
—
|
|
|
$
|
107,740
|
|
|
$
|
—
|
|
|
Corporate debt securities
|
57,152
|
|
|
—
|
|
|
55,652
|
|
|
1,500
|
|
|
Mortgage-backed securities
|
1,069,543
|
|
|
—
|
|
|
1,069,543
|
|
|
—
|
|
|
Loans held for sale
|
112,070
|
|
|
—
|
|
|
112,070
|
|
|
—
|
|
|
Mortgage banking derivative instruments
|
5,118
|
|
|
—
|
|
|
5,118
|
|
|
—
|
|
|
Total recurring assets at fair value
|
$
|
1,351,623
|
|
|
$
|
—
|
|
|
$
|
1,350,123
|
|
|
$
|
1,500
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments
|
$
|
31
|
|
|
$
|
—
|
|
|
$
|
31
|
|
|
$
|
—
|
|
|
Mortgage banking derivative instruments
|
1,315
|
|
|
—
|
|
|
1,315
|
|
|
—
|
|
|
Total recurring liabilities at fair value
|
$
|
1,346
|
|
|
$
|
—
|
|
|
$
|
1,346
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recurring Basis
Fair Value Measurements
|
|
|
December 31, 2018
|
|
(dollars in thousands)
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
State, county and municipal securities
|
$
|
150,733
|
|
|
$
|
—
|
|
|
$
|
150,733
|
|
|
$
|
—
|
|
|
Corporate debt securities
|
67,314
|
|
|
—
|
|
|
65,814
|
|
|
1,500
|
|
|
Mortgage-backed securities
|
974,376
|
|
|
—
|
|
|
974,376
|
|
|
—
|
|
|
Loans held for sale
|
111,298
|
|
|
—
|
|
|
111,298
|
|
|
—
|
|
|
Derivative financial instruments
|
102
|
|
|
—
|
|
|
102
|
|
|
—
|
|
|
Mortgage banking derivative instruments
|
2,537
|
|
|
—
|
|
|
2,537
|
|
|
—
|
|
|
Total recurring assets at fair value
|
$
|
1,306,360
|
|
|
$
|
—
|
|
|
$
|
1,304,860
|
|
|
$
|
1,500
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage banking derivative instruments
|
$
|
1,276
|
|
|
$
|
—
|
|
|
$
|
1,276
|
|
|
$
|
—
|
|
|
Total recurring liabilities at fair value
|
$
|
1,276
|
|
|
$
|
—
|
|
|
$
|
1,276
|
|
|
$
|
—
|
|
The following table presents the fair value measurements of assets measured at fair value on a non-recurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy as of
March 31, 2019
and
December 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonrecurring Basis
Fair Value Measurements
|
|
(dollars in thousands)
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans carried at fair value
|
$
|
31,397
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
31,397
|
|
|
Purchased other real estate owned
|
10,857
|
|
|
—
|
|
|
—
|
|
|
10,857
|
|
|
Total nonrecurring assets at fair value
|
$
|
42,254
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
42,254
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans carried at fair value
|
$
|
28,653
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
28,653
|
|
|
Other real estate owned
|
408
|
|
|
—
|
|
|
—
|
|
|
408
|
|
|
Purchased other real estate owned
|
9,535
|
|
|
—
|
|
|
—
|
|
|
9,535
|
|
|
Total nonrecurring assets at fair value
|
$
|
38,596
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
38,596
|
|
The inputs used to determine estimated fair value of impaired loans include market conditions, loan terms, underlying collateral characteristics and discount rates. The inputs used to determine fair value of OREO include market conditions, estimated marketing period or holding period, underlying collateral characteristics and discount rates.
For the
three months ended
March 31, 2019
and the year ended
December 31, 2018
, there was not a change in the methods and significant assumptions used to estimate fair value.
The following table shows significant unobservable inputs used in the fair value measurement of Level 3 assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Fair Value
|
|
Valuation
Technique
|
|
Unobservable Inputs
|
|
Range of
Discounts
|
|
Weighted
Average
Discount
|
|
March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Recurring:
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities available for sale
|
|
$
|
1,500
|
|
|
Discounted par values
|
|
Credit quality of underlying issuer
|
|
0%
|
|
0%
|
|
Nonrecurring:
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
31,397
|
|
|
Third-party appraisals and discounted cash flows
|
|
Collateral discounts and
discount rates
|
|
20% - 92%
|
|
27%
|
|
Purchased other real estate owned
|
|
$
|
10,857
|
|
|
Third-party appraisals
|
|
Collateral discounts and estimated
costs to sell
|
|
10% - 75%
|
|
36%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Recurring:
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities available for sale
|
|
$
|
1,500
|
|
|
Discounted par values
|
|
Credit quality of underlying issuer
|
|
0%
|
|
0%
|
|
Nonrecurring:
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
28,653
|
|
|
Third-party appraisals and discounted cash flows
|
|
Collateral discounts and
discount rates
|
|
3% - 53%
|
|
30%
|
|
Other real estate owned
|
|
$
|
408
|
|
|
Third-party appraisals and sales contracts
|
|
Collateral discounts and estimated
costs to sell
|
|
15% - 69%
|
|
31%
|
|
Purchased other real estate owned
|
|
$
|
9,535
|
|
|
Third-party appraisals
|
|
Collateral discounts and estimated
costs to sell
|
|
6% - 74%
|
|
39%
|
The carrying amount and estimated fair value of the Company’s financial instruments, not shown elsewhere in these financial statements, were as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements
|
|
|
|
|
March 31, 2019
|
|
(dollars in thousands)
|
Carrying
Amount
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
$
|
144,801
|
|
|
$
|
144,801
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
144,801
|
|
|
Federal funds sold and interest-bearing deposits in banks
|
712,199
|
|
|
712,199
|
|
|
—
|
|
|
—
|
|
|
712,199
|
|
|
Time deposits in other banks
|
7,371
|
|
|
—
|
|
|
7,371
|
|
|
—
|
|
|
7,371
|
|
|
Loans, net
|
8,422,283
|
|
|
—
|
|
|
—
|
|
|
8,357,110
|
|
|
8,357,110
|
|
|
Accrued interest receivable
|
37,411
|
|
|
—
|
|
|
5,366
|
|
|
32,045
|
|
|
37,411
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
$
|
9,800,875
|
|
|
$
|
—
|
|
|
$
|
9,797,905
|
|
|
$
|
—
|
|
|
$
|
9,797,905
|
|
|
Securities sold under agreements to repurchase
|
4,259
|
|
|
4,259
|
|
|
—
|
|
|
—
|
|
|
4,259
|
|
|
Other borrowings
|
151,454
|
|
|
—
|
|
|
152,655
|
|
|
—
|
|
|
152,655
|
|
|
Subordinated deferrable interest debentures
|
89,529
|
|
|
—
|
|
|
88,900
|
|
|
—
|
|
|
88,900
|
|
|
FDIC loss-share payable
|
18,834
|
|
|
—
|
|
|
—
|
|
|
18,847
|
|
|
18,847
|
|
|
Accrued interest payable
|
5,462
|
|
|
—
|
|
|
5,462
|
|
|
—
|
|
|
5,462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements
|
|
|
|
|
December 31, 2018
|
|
(dollars in thousands)
|
Carrying
Amount
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
$
|
172,036
|
|
|
$
|
172,036
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
172,036
|
|
|
Federal funds sold and interest-bearing deposits in banks
|
507,491
|
|
|
507,491
|
|
|
—
|
|
|
—
|
|
|
507,491
|
|
|
Time deposits in other banks
|
10,812
|
|
|
—
|
|
|
10,812
|
|
|
—
|
|
|
10,812
|
|
|
Loans, net
|
8,454,442
|
|
|
—
|
|
|
—
|
|
|
8,365,293
|
|
|
8,365,293
|
|
|
Accrued interest receivable
|
36,970
|
|
|
—
|
|
|
5,456
|
|
|
31,514
|
|
|
36,970
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
$
|
9,649,313
|
|
|
$
|
—
|
|
|
$
|
9,645,617
|
|
|
$
|
—
|
|
|
$
|
9,645,617
|
|
|
Securities sold under agreements to repurchase
|
20,384
|
|
|
20,384
|
|
|
—
|
|
|
—
|
|
|
20,384
|
|
|
Other borrowings
|
151,774
|
|
|
—
|
|
|
152,873
|
|
|
—
|
|
|
152,873
|
|
|
Subordinated deferrable interest debentures
|
89,187
|
|
|
—
|
|
|
90,180
|
|
|
—
|
|
|
90,180
|
|
|
FDIC loss-share payable
|
19,487
|
|
|
—
|
|
|
—
|
|
|
19,576
|
|
|
19,576
|
|
|
Accrued interest payable
|
5,669
|
|
|
—
|
|
|
5,669
|
|
|
—
|
|
|
5,669
|
|
NOTE 14 – COMMITMENTS AND CONTINGENCIES
Loan Commitments
The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. They involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amount recognized in the Company’s balance sheets.
The Company’s exposure to credit loss is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.
A summary of the Company’s commitments is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
March 31,
2019
|
|
December 31,
2018
|
|
Commitments to extend credit
|
$
|
1,818,407
|
|
|
$
|
1,671,419
|
|
|
Unused home equity lines of credit
|
105,780
|
|
|
112,310
|
|
|
Financial standby letters of credit
|
25,599
|
|
|
24,596
|
|
|
Mortgage interest rate lock commitments
|
158,141
|
|
|
81,833
|
|
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. These commitments, predominantly at variable interest rates, generally have fixed expiration dates of one year or less or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the customer.
Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. Collateral is required in instances which the Company deems necessary.
Other Commitments
As of
March 31, 2019
, a
$75.0 million
letter of credit issued by the FHLB was used to guarantee the Bank’s performance related to public fund deposit balances.
Contingencies
Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed.
NOTE 15 – SEGMENT REPORTING
The Company has the following
five
reportable segments: Banking Division, Retail Mortgage Division, Warehouse Lending Division, SBA Division and Premium Finance Division. The Banking Division derives its revenues from the delivery of full-service financial services, including commercial loans, consumer loans and deposit accounts. The Retail Mortgage Division derives its revenues from the origination, sales and servicing of one-to-four family residential mortgage loans. The Warehouse Lending Division derives its revenues from the origination and servicing of warehouse lines to other businesses that are secured by underlying one-to-four family residential mortgage loans. The SBA Division derives its revenues from the origination, sales and servicing of SBA loans. The Premium Finance Division derives its revenues from the origination and servicing of commercial insurance premium finance loans.
The Banking, Retail Mortgage, Warehouse Lending, SBA and Premium Finance Divisions are managed as separate business units because of the different products and services they provide. The Company evaluates performance and allocates resources based on profit or loss from operations. There are no material intersegment sales or transfers.
The following tables present selected financial information with respect to the Company’s reportable business segments for the three months ended
March 31, 2019
and
2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2019
|
|
(dollars in thousands)
|
Banking
Division
|
|
Retail
Mortgage
Division
|
|
Warehouse
Lending
Division
|
|
SBA
Division
|
|
Premium
Finance
Division
|
|
Total
|
|
Interest income
|
$
|
97,874
|
|
|
$
|
12,512
|
|
|
$
|
4,804
|
|
|
$
|
2,174
|
|
|
$
|
7,565
|
|
|
$
|
124,929
|
|
|
Interest expense
|
12,835
|
|
|
6,759
|
|
|
2,114
|
|
|
1,088
|
|
|
2,738
|
|
|
25,534
|
|
|
Net interest income
|
85,039
|
|
|
5,753
|
|
|
2,690
|
|
|
1,086
|
|
|
4,827
|
|
|
99,395
|
|
|
Provision for loan losses
|
2,058
|
|
|
136
|
|
|
—
|
|
|
231
|
|
|
983
|
|
|
3,408
|
|
|
Noninterest income
|
14,370
|
|
|
14,290
|
|
|
379
|
|
|
1,730
|
|
|
2
|
|
|
30,771
|
|
|
Noninterest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
27,932
|
|
|
8,207
|
|
|
161
|
|
|
765
|
|
|
1,305
|
|
|
38,370
|
|
|
Equipment and occupancy expenses
|
7,281
|
|
|
766
|
|
|
1
|
|
|
59
|
|
|
97
|
|
|
8,204
|
|
|
Data processing and telecommunications expenses
|
7,592
|
|
|
330
|
|
|
30
|
|
|
2
|
|
|
437
|
|
|
8,391
|
|
|
Other expenses
|
16,956
|
|
|
2,114
|
|
|
68
|
|
|
349
|
|
|
973
|
|
|
20,460
|
|
|
Total noninterest expense
|
59,761
|
|
|
11,417
|
|
|
260
|
|
|
1,175
|
|
|
2,812
|
|
|
75,425
|
|
|
Income before income tax expense
|
37,590
|
|
|
8,490
|
|
|
2,809
|
|
|
1,410
|
|
|
1,034
|
|
|
51,333
|
|
|
Income tax expense
|
8,775
|
|
|
1,613
|
|
|
590
|
|
|
296
|
|
|
154
|
|
|
11,428
|
|
|
Net income
|
$
|
28,815
|
|
|
$
|
6,877
|
|
|
$
|
2,219
|
|
|
$
|
1,114
|
|
|
$
|
880
|
|
|
$
|
39,905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
$
|
9,457,529
|
|
|
$
|
1,184,097
|
|
|
$
|
296,357
|
|
|
$
|
142,769
|
|
|
$
|
575,523
|
|
|
$
|
11,656,275
|
|
|
Goodwill
|
436,810
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
64,498
|
|
|
501,308
|
|
|
Other intangible assets, net
|
35,455
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20,102
|
|
|
55,557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2018
|
|
(dollars in thousands)
|
Banking
Division
|
|
Retail
Mortgage
Division
|
|
Warehouse
Lending
Division
|
|
SBA
Division
|
|
Premium
Finance
Division
|
|
Total
|
|
Interest income
|
$
|
60,896
|
|
|
$
|
6,822
|
|
|
$
|
2,752
|
|
|
$
|
1,431
|
|
|
$
|
7,611
|
|
|
$
|
79,512
|
|
|
Interest expense
|
5,537
|
|
|
1,825
|
|
|
897
|
|
|
507
|
|
|
1,945
|
|
|
10,711
|
|
|
Net interest income
|
55,359
|
|
|
4,997
|
|
|
1,855
|
|
|
924
|
|
|
5,666
|
|
|
68,801
|
|
|
Provision for loan losses
|
888
|
|
|
217
|
|
|
—
|
|
|
537
|
|
|
159
|
|
|
1,801
|
|
|
Noninterest income
|
13,099
|
|
|
11,585
|
|
|
397
|
|
|
1,370
|
|
|
13
|
|
|
26,464
|
|
|
Noninterest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
22,068
|
|
|
7,742
|
|
|
138
|
|
|
740
|
|
|
1,401
|
|
|
32,089
|
|
|
Equipment and occupancy expenses
|
5,477
|
|
|
593
|
|
|
—
|
|
|
58
|
|
|
70
|
|
|
6,198
|
|
|
Data processing and telecommunications expenses
|
6,304
|
|
|
389
|
|
|
33
|
|
|
9
|
|
|
400
|
|
|
7,135
|
|
|
Other expenses
|
11,080
|
|
|
1,731
|
|
|
52
|
|
|
236
|
|
|
577
|
|
|
13,676
|
|
|
Total noninterest expense
|
44,929
|
|
|
10,455
|
|
|
223
|
|
|
1,043
|
|
|
2,448
|
|
|
59,098
|
|
|
Income before income tax expense
|
22,641
|
|
|
5,910
|
|
|
2,029
|
|
|
714
|
|
|
3,072
|
|
|
34,366
|
|
|
Income tax expense
|
5,242
|
|
|
1,244
|
|
|
426
|
|
|
150
|
|
|
644
|
|
|
7,706
|
|
|
Net income
|
$
|
17,399
|
|
|
$
|
4,666
|
|
|
$
|
1,603
|
|
|
$
|
564
|
|
|
$
|
2,428
|
|
|
$
|
26,660
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
$
|
6,464,130
|
|
|
$
|
613,706
|
|
|
$
|
247,257
|
|
|
$
|
109,011
|
|
|
$
|
588,724
|
|
|
$
|
8,022,828
|
|
|
Goodwill
|
125,532
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
82,981
|
|
|
208,513
|
|
|
Other intangible assets, net
|
12,562
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12,562
|
|