As of
March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12
Months
|
|
12 Months
or Longer
|
|
Total
|
(dollars in thousands)
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
Mortgage-backed securities
|
$
|
1,814
|
|
|
$
|
(13
|
)
|
|
$
|
7,187
|
|
|
$
|
(130
|
)
|
|
$
|
9,001
|
|
|
$
|
(143
|
)
|
As of
December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12
Months
|
|
12 Months
or Longer
|
|
Total
|
(dollars in thousands)
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
Mortgage-backed securities
|
$
|
1,315
|
|
|
$
|
(4
|
)
|
|
$
|
7,123
|
|
|
$
|
(242
|
)
|
|
$
|
8,438
|
|
|
$
|
(246
|
)
|
The amortized cost and fair value of
held to maturity
investment securities as of
March 31, 2019
and
December 31, 2018
, by contractual maturity, are shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
(dollars in thousands)
|
Amortized
Cost
|
|
Fair Value
|
|
Amortized
Cost
|
|
Fair Value
|
Mortgage-backed securities
(1)
|
$
|
10,457
|
|
|
$
|
10,324
|
|
|
$
|
8,684
|
|
|
$
|
8,438
|
|
(1) Expected maturities of mortgage-related securities may differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
As of
March 31, 2019
and
December 31, 2018
, the Corporation’s investment securities held in
trading
accounts totaled
$8.2 million
and
$7.5 million
, respectively, and primarily consist of deferred compensation trust accounts which are invested in listed mutual funds whose diversification is at the discretion of the deferred compensation plan participants and a rabbi trust account established to fund certain unqualified pension obligations. Investment securities held in trading accounts are reported at fair value, with adjustments in fair value reported through income.
Note
5
–
Loans and Leases
The loan and lease portfolio consists of loans and leases originated by the Corporation, as well as loans acquired in prior acquisitions. Certain tables in this footnote are presented with a breakdown between
originated
and
acquired
loans and leases.
A. The table below details
portfolio loans and leases as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
(dollars in thousands)
|
Originated
|
|
Acquired
|
|
Total Loans and Leases
|
|
Originated
|
|
Acquired
|
|
Total Loans and Leases
|
Loans held for sale
|
$
|
2,884
|
|
|
$
|
—
|
|
|
$
|
2,884
|
|
|
$
|
1,749
|
|
|
$
|
—
|
|
|
$
|
1,749
|
|
Real Estate Loans:
|
|
|
|
|
|
|
|
|
|
|
|
Commercial mortgage
|
$
|
1,436,611
|
|
|
$
|
310,084
|
|
|
$
|
1,746,695
|
|
|
$
|
1,327,822
|
|
|
$
|
329,614
|
|
|
$
|
1,657,436
|
|
Home equity lines and loans
|
180,075
|
|
|
24,716
|
|
|
204,791
|
|
|
181,506
|
|
|
25,845
|
|
|
207,351
|
|
Residential mortgage
|
423,638
|
|
|
78,741
|
|
|
502,379
|
|
|
411,022
|
|
|
83,333
|
|
|
494,355
|
|
Construction
|
157,572
|
|
|
2,189
|
|
|
159,761
|
|
|
174,592
|
|
|
6,486
|
|
|
181,078
|
|
Total real estate loans
|
$
|
2,197,896
|
|
|
$
|
415,730
|
|
|
$
|
2,613,626
|
|
|
$
|
2,094,942
|
|
|
$
|
445,278
|
|
|
$
|
2,540,220
|
|
Commercial and industrial
|
651,204
|
|
|
54,497
|
|
|
705,701
|
|
|
624,643
|
|
|
70,941
|
|
|
695,584
|
|
Consumer
|
45,229
|
|
|
2,592
|
|
|
47,821
|
|
|
44,099
|
|
|
2,715
|
|
|
46,814
|
|
Leases
|
137,941
|
|
|
18,425
|
|
|
156,366
|
|
|
121,567
|
|
|
22,969
|
|
|
144,536
|
|
Total portfolio loans and leases
|
$
|
3,032,270
|
|
|
$
|
491,244
|
|
|
$
|
3,523,514
|
|
|
$
|
2,885,251
|
|
|
$
|
541,903
|
|
|
$
|
3,427,154
|
|
Total loans and leases
|
$
|
3,035,154
|
|
|
$
|
491,244
|
|
|
$
|
3,526,398
|
|
|
$
|
2,887,000
|
|
|
$
|
541,903
|
|
|
$
|
3,428,903
|
|
Loans with fixed rates
|
$
|
1,252,613
|
|
|
$
|
288,679
|
|
|
$
|
1,541,292
|
|
|
$
|
1,204,070
|
|
|
$
|
323,604
|
|
|
$
|
1,527,674
|
|
Loans with adjustable or floating rates
|
1,782,541
|
|
|
202,565
|
|
|
1,985,106
|
|
|
1,682,930
|
|
|
218,299
|
|
|
1,901,229
|
|
Total loans and leases
|
$
|
3,035,154
|
|
|
$
|
491,244
|
|
|
$
|
3,526,398
|
|
|
$
|
2,887,000
|
|
|
$
|
541,903
|
|
|
$
|
3,428,903
|
|
Net deferred loan origination fees included in the above loan table
|
$
|
750
|
|
|
$
|
—
|
|
|
$
|
750
|
|
|
$
|
2,226
|
|
|
$
|
—
|
|
|
$
|
2,226
|
|
B. Components of the net investment in leases are detailed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
(dollars in thousands)
|
Originated
|
|
Acquired
|
|
Total Leases
|
|
Originated
|
|
Acquired
|
|
Total Leases
|
Minimum lease payments receivable
|
$
|
153,559
|
|
|
$
|
20,244
|
|
|
$
|
173,803
|
|
|
$
|
135,313
|
|
|
$
|
25,372
|
|
|
$
|
160,685
|
|
Unearned lease income
|
(21,737
|
)
|
|
(2,270
|
)
|
|
(24,007
|
)
|
|
(19,388
|
)
|
|
(3,005
|
)
|
|
(22,393
|
)
|
Initial direct costs and deferred fees
|
6,119
|
|
|
451
|
|
|
6,570
|
|
|
5,642
|
|
|
602
|
|
|
6,244
|
|
Total Leases
|
$
|
137,941
|
|
|
$
|
18,425
|
|
|
$
|
156,366
|
|
|
$
|
121,567
|
|
|
$
|
22,969
|
|
|
$
|
144,536
|
|
C. Non-Performing Loans and Leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
(dollars in thousands)
|
Originated
|
|
Acquired
|
|
Total Loans and Leases
|
|
Originated
|
|
Acquired
|
|
Total Loans and Leases
|
Commercial mortgage
|
$
|
3,458
|
|
|
$
|
2,100
|
|
|
$
|
5,558
|
|
|
$
|
435
|
|
|
$
|
2,133
|
|
|
$
|
2,568
|
|
Home equity lines and loans
|
6,878
|
|
|
26
|
|
|
6,904
|
|
|
3,590
|
|
|
26
|
|
|
3,616
|
|
Residential mortgage
|
2,293
|
|
|
570
|
|
|
2,863
|
|
|
2,813
|
|
|
639
|
|
|
3,452
|
|
Commercial and industrial
|
2,657
|
|
|
308
|
|
|
2,965
|
|
|
1,786
|
|
|
315
|
|
|
2,101
|
|
Consumer
|
36
|
|
|
44
|
|
|
80
|
|
|
45
|
|
|
63
|
|
|
108
|
|
Leases
|
429
|
|
|
484
|
|
|
913
|
|
|
392
|
|
|
583
|
|
|
975
|
|
Total non-performing loans and leases
|
$
|
15,751
|
|
|
$
|
3,532
|
|
|
$
|
19,283
|
|
|
$
|
9,061
|
|
|
$
|
3,759
|
|
|
$
|
12,820
|
|
D. Purchased Credit-Impaired Loans
The outstanding principal balance and related carrying amount of purchased credit-impaired loans, for which the Corporation applies ASC 310-30,
Accounting for Purchased Loans with Deteriorated Credit Quality
, to account for the interest earned, as of the dates indicated, are as follows:
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
March 31,
2019
|
|
December 31,
2018
|
Outstanding principal balance
|
$
|
15,845
|
|
|
$
|
17,904
|
|
Carrying amount
|
$
|
11,553
|
|
|
$
|
12,304
|
|
The following table presents changes in the accretable discount on purchased credit-impaired loans, for which the Corporation applies ASC 310-30, for the
three
months ended
March 31, 2019
:
|
|
|
|
|
(dollars in thousands)
|
Accretable
Discount
|
Balance, December 31, 2018
|
$
|
2,697
|
|
Accretion
|
(247
|
)
|
Reclassifications from nonaccretable difference
|
76
|
|
Additions/adjustments
|
—
|
|
Disposals
|
(108
|
)
|
Balance, March 31, 2019
|
$
|
2,418
|
|
E. Age Analysis of Past Due Loans and Leases
The following tables present an aging of
all
portfolio loans and leases as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accruing Loans and Leases
|
|
|
|
|
As of March 31, 2019
|
30 – 59
Days
Past Due
|
|
60 – 89
Days
Past Due
|
|
Over 89
Days
Past Due
|
|
Total Past
Due
|
|
Current
|
|
Total Accruing
Loans and Leases
|
|
Nonaccrual
Loans and Leases
|
|
Total
Loans and Leases
|
(dollars in thousands)
|
|
|
|
|
|
|
|
Commercial mortgage
|
$
|
1,106
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,106
|
|
|
$
|
1,740,031
|
|
|
$
|
1,741,137
|
|
|
$
|
5,558
|
|
|
$
|
1,746,695
|
|
Home equity lines and loans
|
376
|
|
|
144
|
|
|
—
|
|
|
520
|
|
|
197,367
|
|
|
197,887
|
|
|
6,904
|
|
|
204,791
|
|
Residential mortgage
|
2,357
|
|
|
320
|
|
|
—
|
|
|
2,677
|
|
|
496,839
|
|
|
499,516
|
|
|
2,863
|
|
|
502,379
|
|
Construction
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
159,761
|
|
|
159,761
|
|
|
—
|
|
|
159,761
|
|
Commercial and industrial
|
749
|
|
|
15
|
|
|
—
|
|
|
764
|
|
|
701,972
|
|
|
702,736
|
|
|
2,965
|
|
|
705,701
|
|
Consumer
|
64
|
|
|
64
|
|
|
—
|
|
|
128
|
|
|
47,613
|
|
|
47,741
|
|
|
80
|
|
|
47,821
|
|
Leases
|
971
|
|
|
265
|
|
|
—
|
|
|
1,236
|
|
|
154,217
|
|
|
155,453
|
|
|
913
|
|
|
156,366
|
|
Total portfolio loans and leases
|
$
|
5,623
|
|
|
$
|
808
|
|
|
$
|
—
|
|
|
$
|
6,431
|
|
|
$
|
3,497,800
|
|
|
$
|
3,504,231
|
|
|
$
|
19,283
|
|
|
$
|
3,523,514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accruing Loans and Leases
|
|
|
|
|
As of December 31, 2018
|
30 – 59
Days
Past Due
|
|
60 – 89
Days
Past Due
|
|
Over 89
Days
Past Due
|
|
Total Past
Due
|
|
Current
(1)
|
|
Total Accruing
Loans and Leases
|
|
Nonaccrual
Loans and Leases
|
|
Total
Loans and Leases
|
(dollars in thousands)
|
|
|
|
|
|
|
|
Commercial mortgage
|
$
|
821
|
|
|
$
|
251
|
|
|
$
|
—
|
|
|
$
|
1,072
|
|
|
$
|
1,653,796
|
|
|
$
|
1,654,868
|
|
|
$
|
2,568
|
|
|
$
|
1,657,436
|
|
Home equity lines and loans
|
92
|
|
|
—
|
|
|
—
|
|
|
92
|
|
|
203,643
|
|
|
203,735
|
|
|
3,616
|
|
|
207,351
|
|
Residential mortgage
|
2,330
|
|
|
218
|
|
|
—
|
|
|
2,548
|
|
|
488,355
|
|
|
490,903
|
|
|
3,452
|
|
|
494,355
|
|
Construction
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
181,078
|
|
|
181,078
|
|
|
—
|
|
|
181,078
|
|
Commercial and industrial
|
280
|
|
|
332
|
|
|
—
|
|
|
612
|
|
|
692,871
|
|
|
693,483
|
|
|
2,101
|
|
|
695,584
|
|
Consumer
|
35
|
|
|
5
|
|
|
—
|
|
|
40
|
|
|
46,666
|
|
|
46,706
|
|
|
108
|
|
|
46,814
|
|
Leases
|
641
|
|
|
460
|
|
|
—
|
|
|
1,101
|
|
|
142,460
|
|
|
143,561
|
|
|
975
|
|
|
144,536
|
|
Total portfolio loans and leases
|
$
|
4,199
|
|
|
$
|
1,266
|
|
|
$
|
—
|
|
|
$
|
5,465
|
|
|
$
|
3,408,869
|
|
|
$
|
3,414,334
|
|
|
$
|
12,820
|
|
|
$
|
3,427,154
|
|
(1) Included as “current” are
$3.2 million
of loans and leases as of
December 31, 2018
which were classified as administratively delinquent. An administratively delinquent loan is one which has been approved for a renewal or extension but has not had all the required documents fully executed as of the reporting date. Management does not consider these loans to be delinquent.
The following tables present an aging of
originated
portfolio loans and leases as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accruing Loans and Leases
|
|
|
|
|
As of March 31, 2019
|
30 – 59
Days
Past Due
|
|
60 – 89
Days
Past Due
|
|
Over 89
Days
Past Due
|
|
Total Past
Due
|
|
Current
|
|
Total Accruing
Loans and Leases
|
|
Nonaccrual
Loans and Leases
|
|
Total
Loans and Leases
|
(dollars in thousands)
|
|
|
|
|
|
|
|
Commercial mortgage
|
$
|
1,106
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,106
|
|
|
$
|
1,432,047
|
|
|
$
|
1,433,153
|
|
|
$
|
3,458
|
|
|
$
|
1,436,611
|
|
Home equity lines and loans
|
231
|
|
|
144
|
|
|
—
|
|
|
375
|
|
|
172,822
|
|
|
173,197
|
|
|
6,878
|
|
|
180,075
|
|
Residential mortgage
|
1,735
|
|
|
233
|
|
|
—
|
|
|
1,968
|
|
|
419,377
|
|
|
421,345
|
|
|
2,293
|
|
|
423,638
|
|
Construction
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
157,572
|
|
|
157,572
|
|
|
—
|
|
|
157,572
|
|
Commercial and industrial
|
520
|
|
|
15
|
|
|
—
|
|
|
535
|
|
|
648,012
|
|
|
648,547
|
|
|
2,657
|
|
|
651,204
|
|
Consumer
|
25
|
|
|
64
|
|
|
—
|
|
|
89
|
|
|
45,104
|
|
|
45,193
|
|
|
36
|
|
|
45,229
|
|
Leases
|
695
|
|
|
206
|
|
|
—
|
|
|
901
|
|
|
136,611
|
|
|
137,512
|
|
|
429
|
|
|
137,941
|
|
Total originated portfolio loans and leases
|
$
|
4,312
|
|
|
$
|
662
|
|
|
$
|
—
|
|
|
$
|
4,974
|
|
|
$
|
3,011,545
|
|
|
$
|
3,016,519
|
|
|
$
|
15,751
|
|
|
$
|
3,032,270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accruing Loans and Leases
|
|
|
|
|
As of December 31, 2018
|
30 – 59
Days
Past Due
|
|
60 – 89
Days
Past Due
|
|
Over 89
Days
Past Due
|
|
Total Past
Due
|
|
Current
(1)
|
|
Total Accruing
Loans and Leases
|
|
Nonaccrual
Loans and Leases
|
|
Total
Loans and Leases
|
(dollars in thousands)
|
|
|
|
|
|
|
|
Commercial mortgage
|
$
|
816
|
|
|
$
|
251
|
|
|
$
|
—
|
|
|
$
|
1,067
|
|
|
$
|
1,326,320
|
|
|
$
|
1,327,387
|
|
|
$
|
435
|
|
|
$
|
1,327,822
|
|
Home equity lines and loans
|
25
|
|
|
—
|
|
|
—
|
|
|
25
|
|
|
177,891
|
|
|
177,916
|
|
|
3,590
|
|
|
181,506
|
|
Residential mortgage
|
1,545
|
|
|
—
|
|
|
—
|
|
|
1,545
|
|
|
406,664
|
|
|
408,209
|
|
|
2,813
|
|
|
411,022
|
|
Construction
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
174,592
|
|
|
174,592
|
|
|
—
|
|
|
174,592
|
|
Commercial and industrial
|
280
|
|
|
332
|
|
|
—
|
|
|
612
|
|
|
622,245
|
|
|
622,857
|
|
|
1,786
|
|
|
624,643
|
|
Consumer
|
35
|
|
|
5
|
|
|
—
|
|
|
40
|
|
|
44,014
|
|
|
44,054
|
|
|
45
|
|
|
44,099
|
|
Leases
|
350
|
|
|
233
|
|
|
—
|
|
|
583
|
|
|
120,592
|
|
|
121,175
|
|
|
392
|
|
|
121,567
|
|
Total originated portfolio loans and leases
|
$
|
3,051
|
|
|
$
|
821
|
|
|
$
|
—
|
|
|
$
|
3,872
|
|
|
$
|
2,872,318
|
|
|
$
|
2,876,190
|
|
|
$
|
9,061
|
|
|
$
|
2,885,251
|
|
(1) Included as “current” are
$2.0 million
of loans and leases as of
December 31, 2018
which were classified as administratively delinquent. An administratively delinquent loan is one which has been approved for a renewal or extension but has not had all the required documents fully executed as of the reporting date. Management does not consider these loans to be delinquent.
The following tables present an aging of
acquired
portfolio loans and leases as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accruing Loans and Leases
|
|
|
|
|
As of March 31, 2019
|
30 – 59
Days
Past Due
|
|
60 – 89
Days
Past Due
|
|
Over 89
Days
Past Due
|
|
Total Past
Due
|
|
Current
|
|
Total Accruing
Loans and Leases
|
|
Nonaccrual
Loans and Leases
|
|
Total
Loans and Leases
|
(dollars in thousands)
|
|
|
|
|
|
|
|
Commercial mortgage
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
307,984
|
|
|
$
|
307,984
|
|
|
$
|
2,100
|
|
|
$
|
310,084
|
|
Home equity lines and loans
|
145
|
|
|
—
|
|
|
—
|
|
|
145
|
|
|
24,545
|
|
|
24,690
|
|
|
26
|
|
|
24,716
|
|
Residential mortgage
|
622
|
|
|
87
|
|
|
—
|
|
|
709
|
|
|
77,462
|
|
|
78,171
|
|
|
570
|
|
|
78,741
|
|
Construction
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,189
|
|
|
2,189
|
|
|
—
|
|
|
2,189
|
|
Commercial and industrial
|
229
|
|
|
—
|
|
|
—
|
|
|
229
|
|
|
53,960
|
|
|
54,189
|
|
|
308
|
|
|
54,497
|
|
Consumer
|
39
|
|
|
—
|
|
|
—
|
|
|
39
|
|
|
2,509
|
|
|
2,548
|
|
|
44
|
|
|
2,592
|
|
Leases
|
276
|
|
|
59
|
|
|
—
|
|
|
335
|
|
|
17,606
|
|
|
17,941
|
|
|
484
|
|
|
18,425
|
|
Total acquired portfolio loans and leases
|
$
|
1,311
|
|
|
$
|
146
|
|
|
$
|
—
|
|
|
$
|
1,457
|
|
|
$
|
486,255
|
|
|
$
|
487,712
|
|
|
$
|
3,532
|
|
|
$
|
491,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accruing Loans and Leases
|
|
|
|
|
As of December 31, 2018
|
30 – 59
Days
Past Due
|
|
60 – 89
Days
Past Due
|
|
Over 89
Days
Past Due
|
|
Total Past
Due
|
|
Current
(1)
|
|
Total Accruing
Loans and Leases
|
|
Nonaccrual
Loans and Leases
|
|
Total
Loans and Leases
|
(dollars in thousands)
|
|
|
|
|
|
|
|
Commercial mortgage
|
$
|
5
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5
|
|
|
$
|
327,476
|
|
|
$
|
327,481
|
|
|
$
|
2,133
|
|
|
$
|
329,614
|
|
Home equity lines and loans
|
67
|
|
|
—
|
|
|
—
|
|
|
67
|
|
|
25,752
|
|
|
25,819
|
|
|
26
|
|
|
25,845
|
|
Residential mortgage
|
785
|
|
|
218
|
|
|
—
|
|
|
1,003
|
|
|
81,691
|
|
|
82,694
|
|
|
639
|
|
|
83,333
|
|
Construction
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,486
|
|
|
6,486
|
|
|
—
|
|
|
6,486
|
|
Commercial and industrial
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
70,626
|
|
|
70,626
|
|
|
315
|
|
|
70,941
|
|
Consumer
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,652
|
|
|
2,652
|
|
|
63
|
|
|
2,715
|
|
Leases
|
291
|
|
|
227
|
|
|
—
|
|
|
518
|
|
|
21,868
|
|
|
22,386
|
|
|
583
|
|
|
22,969
|
|
Total acquired portfolio loans and leases
|
$
|
1,148
|
|
|
$
|
445
|
|
|
$
|
—
|
|
|
$
|
1,593
|
|
|
$
|
536,551
|
|
|
$
|
538,144
|
|
|
$
|
3,759
|
|
|
$
|
541,903
|
|
(1) Included as “current” are
$1.2 million
of loans and leases as of
December 31, 2018
which were classified as administratively delinquent. An administratively delinquent loan is one which has been approved for a renewal or extension but has not had all the required documents fully executed as of the reporting date. Management does not consider these loans to be delinquent.
F. Allowance for Loan and Lease Losses (the “Allowance”)
The following tables detail the roll-forward of the Allowance for the
three
months ended
March 31, 2019
and
2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
Commercial
Mortgage
|
|
Home Equity
Lines and
Loans
|
|
Residential
Mortgage
|
|
Construction
|
|
Commercial
and
Industrial
|
|
Consumer
|
|
Leases
|
|
Unallocated
|
|
Total
|
Balance,
December 31, 2018
|
$
|
7,567
|
|
|
$
|
1,003
|
|
|
$
|
1,813
|
|
|
$
|
1,485
|
|
|
$
|
5,461
|
|
|
$
|
229
|
|
|
$
|
1,868
|
|
|
$
|
—
|
|
|
$
|
19,426
|
|
Charge-offs
|
(1,388
|
)
|
|
(47
|
)
|
|
(331
|
)
|
|
—
|
|
|
(405
|
)
|
|
(105
|
)
|
|
(568
|
)
|
|
—
|
|
|
(2,844
|
)
|
Recoveries
|
15
|
|
|
1
|
|
|
1
|
|
|
1
|
|
|
15
|
|
|
11
|
|
|
254
|
|
|
—
|
|
|
298
|
|
Provision for loan and lease losses
|
2,047
|
|
|
81
|
|
|
408
|
|
|
(300
|
)
|
|
817
|
|
|
193
|
|
|
490
|
|
|
—
|
|
|
3,736
|
|
Balance,
March 31, 2019
|
$
|
8,241
|
|
|
$
|
1,038
|
|
|
$
|
1,891
|
|
|
$
|
1,186
|
|
|
$
|
5,888
|
|
|
$
|
328
|
|
|
$
|
2,044
|
|
|
$
|
—
|
|
|
$
|
20,616
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
Commercial
Mortgage
|
|
Home Equity
Lines and
Loans
|
|
Residential
Mortgage
|
|
Construction
|
|
Commercial
and
Industrial
|
|
Consumer
|
|
Leases
|
|
Unallocated
|
|
Total
|
Balance,
December 31, 2017
|
$
|
7,550
|
|
|
$
|
1,086
|
|
|
$
|
1,926
|
|
|
$
|
937
|
|
|
$
|
5,038
|
|
|
$
|
246
|
|
|
$
|
742
|
|
|
$
|
—
|
|
|
$
|
17,525
|
|
Charge-offs
|
—
|
|
|
(25
|
)
|
|
—
|
|
|
—
|
|
|
(283
|
)
|
|
(49
|
)
|
|
(596
|
)
|
|
—
|
|
|
(953
|
)
|
Recoveries
|
3
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|
55
|
|
|
—
|
|
|
60
|
|
Provision for loan and lease losses
|
(379
|
)
|
|
(16
|
)
|
|
(28
|
)
|
|
(94
|
)
|
|
606
|
|
|
93
|
|
|
848
|
|
|
—
|
|
|
1,030
|
|
Balance,
March 31, 2018
|
$
|
7,174
|
|
|
$
|
1,045
|
|
|
$
|
1,898
|
|
|
$
|
844
|
|
|
$
|
5,361
|
|
|
$
|
291
|
|
|
$
|
1,049
|
|
|
$
|
—
|
|
|
$
|
17,662
|
|
The following tables detail the allocation of the Allowance for
all
portfolio loans and leases by portfolio segment based on the methodology used to evaluate the loans and leases for impairment as of
March 31, 2019
and
December 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
March 31, 2019
|
Commercial
Mortgage
|
|
Home Equity
Lines and
Loans
|
|
Residential
Mortgage
|
|
Construction
|
|
Commercial
and
Industrial
|
|
Consumer
|
|
Leases
|
|
Unallocated
|
|
Total
|
(dollars in thousands)
|
|
|
|
|
|
|
|
|
Allowance on loans and leases:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
$
|
—
|
|
|
$
|
149
|
|
|
$
|
259
|
|
|
$
|
—
|
|
|
$
|
160
|
|
|
$
|
37
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
605
|
|
Collectively evaluated for impairment
|
8,241
|
|
|
889
|
|
|
1,632
|
|
|
1,186
|
|
|
5,728
|
|
|
291
|
|
|
2,044
|
|
|
—
|
|
|
20,011
|
|
Purchased credit-impaired
(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
$
|
8,241
|
|
|
$
|
1,038
|
|
|
$
|
1,891
|
|
|
$
|
1,186
|
|
|
$
|
5,888
|
|
|
$
|
328
|
|
|
$
|
2,044
|
|
|
$
|
—
|
|
|
$
|
20,616
|
|
(1) Purchased credit-impaired loans are evaluated for impairment on an individual basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
December 31, 2018
|
Commercial
Mortgage
|
|
Home Equity
Lines and
Loans
|
|
Residential
Mortgage
|
|
Construction
|
|
Commercial
and
Industrial
|
|
Consumer
|
|
Leases
|
|
Unallocated
|
|
Total
|
(dollars in thousands)
|
|
|
|
|
|
|
|
|
Allowance on loans and leases:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
$
|
—
|
|
|
$
|
162
|
|
|
$
|
272
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
28
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
462
|
|
Collectively evaluated for impairment
|
7,567
|
|
|
841
|
|
|
1,541
|
|
|
1,485
|
|
|
5,461
|
|
|
201
|
|
|
1,868
|
|
|
—
|
|
|
18,964
|
|
Purchased credit-impaired
(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
$
|
7,567
|
|
|
$
|
1,003
|
|
|
$
|
1,813
|
|
|
$
|
1,485
|
|
|
$
|
5,461
|
|
|
$
|
229
|
|
|
$
|
1,868
|
|
|
$
|
—
|
|
|
$
|
19,426
|
|
(1) Purchased credit-impaired loans are evaluated for impairment on an individual basis.
The following tables detail the carrying value for
all
portfolio loans and leases by portfolio segment based on the methodology used to evaluate the loans and leases for impairment as of
March 31, 2019
and
December 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
March 31, 2019
|
Commercial
Mortgage
|
|
Home Equity
Lines and
Loans
|
|
Residential
Mortgage
|
|
Construction
|
|
Commercial
and
Industrial
|
|
Consumer
|
|
Leases
|
|
Total
|
(dollars in thousands)
|
|
|
|
|
|
|
|
Carrying value of loans and leases:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
$
|
5,558
|
|
|
$
|
8,291
|
|
|
$
|
6,106
|
|
|
$
|
—
|
|
|
$
|
3,358
|
|
|
$
|
106
|
|
|
$
|
—
|
|
|
$
|
23,419
|
|
Collectively evaluated for impairment
|
1,731,170
|
|
|
195,986
|
|
|
496,271
|
|
|
159,761
|
|
|
701,293
|
|
|
47,715
|
|
|
156,366
|
|
|
3,488,562
|
|
Purchased credit-impaired
(1)
|
9,967
|
|
|
514
|
|
|
2
|
|
|
—
|
|
|
1,050
|
|
|
—
|
|
|
—
|
|
|
11,533
|
|
Total
|
$
|
1,746,695
|
|
|
$
|
204,791
|
|
|
$
|
502,379
|
|
|
$
|
159,761
|
|
|
$
|
705,701
|
|
|
$
|
47,821
|
|
|
$
|
156,366
|
|
|
$
|
3,523,514
|
|
(1) Purchased credit-impaired loans are evaluated for impairment on an individual basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
December 31, 2018
|
Commercial
Mortgage
|
|
Home Equity
Lines and
Loans
|
|
Residential
Mortgage
|
|
Construction
|
|
Commercial
and
Industrial
|
|
Consumer
|
|
Leases
|
|
Total
|
(dollars in thousands)
|
|
|
|
|
|
|
|
Carrying value of loans and leases:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
$
|
7,008
|
|
|
$
|
4,998
|
|
|
$
|
6,608
|
|
|
$
|
—
|
|
|
$
|
2,629
|
|
|
$
|
134
|
|
|
$
|
—
|
|
|
$
|
21,377
|
|
Collectively evaluated for impairment
|
1,642,117
|
|
|
201,841
|
|
|
487,747
|
|
|
178,673
|
|
|
691,879
|
|
|
46,680
|
|
|
144,536
|
|
|
3,393,473
|
|
Purchased credit-impaired
(1)
|
8,311
|
|
|
512
|
|
|
—
|
|
|
2,405
|
|
|
1,076
|
|
|
—
|
|
|
—
|
|
|
12,304
|
|
Total
|
$
|
1,657,436
|
|
|
$
|
207,351
|
|
|
$
|
494,355
|
|
|
$
|
181,078
|
|
|
$
|
695,584
|
|
|
$
|
46,814
|
|
|
$
|
144,536
|
|
|
$
|
3,427,154
|
|
(1) Purchased credit-impaired loans are evaluated for impairment on an individual basis.
The following tables detail the allocation of the Allowance for
originated
portfolio loans and leases by portfolio segment based on the methodology used to evaluate the loans and leases for impairment as of
March 31, 2019
and
December 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
March 31, 2019
|
Commercial
Mortgage
|
|
Home Equity
Lines and
Loans
|
|
Residential
Mortgage
|
|
Construction
|
|
Commercial
and
Industrial
|
|
Consumer
|
|
Leases
|
|
Total
|
(dollars in thousands)
|
|
|
|
|
|
|
|
Allowance on loans and leases:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
$
|
—
|
|
|
$
|
149
|
|
|
$
|
170
|
|
|
$
|
—
|
|
|
$
|
160
|
|
|
$
|
37
|
|
|
$
|
—
|
|
|
$
|
516
|
|
Collectively evaluated for impairment
|
8,241
|
|
|
889
|
|
|
1,632
|
|
|
1,186
|
|
|
5,728
|
|
|
291
|
|
|
2,036
|
|
|
20,003
|
|
Total
|
$
|
8,241
|
|
|
$
|
1,038
|
|
|
$
|
1,802
|
|
|
$
|
1,186
|
|
|
$
|
5,888
|
|
|
$
|
328
|
|
|
$
|
2,036
|
|
|
$
|
20,519
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
December 31, 2018
|
Commercial
Mortgage
|
|
Home Equity
Lines and
Loans
|
|
Residential
Mortgage
|
|
Construction
|
|
Commercial
and
Industrial
|
|
Consumer
|
|
Leases
|
|
Total
|
(dollars in thousands)
|
|
|
|
|
|
|
|
Allowance on loans and leases:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
$
|
—
|
|
|
$
|
162
|
|
|
$
|
175
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
28
|
|
|
$
|
—
|
|
|
$
|
365
|
|
Collectively evaluated for impairment
|
7,567
|
|
|
841
|
|
|
1,541
|
|
|
1,485
|
|
|
5,461
|
|
|
201
|
|
|
1,868
|
|
|
18,964
|
|
Total
|
$
|
7,567
|
|
|
$
|
1,003
|
|
|
$
|
1,716
|
|
|
$
|
1,485
|
|
|
$
|
5,461
|
|
|
$
|
229
|
|
|
$
|
1,868
|
|
|
$
|
19,329
|
|
The following tables detail the carrying value for
originated
portfolio loans and leases by portfolio segment based on the methodology used to evaluate the loans and leases for impairment as of
March 31, 2019
and
December 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
March 31, 2019
|
Commercial
Mortgage
|
|
Home Equity
Lines and
Loans
|
|
Residential
Mortgage
|
|
Construction
|
|
Commercial
and
Industrial
|
|
Consumer
|
|
Leases
|
|
Total
|
(dollars in thousands)
|
|
|
|
|
|
|
|
Carrying value of loans and leases:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
$
|
3,458
|
|
|
$
|
8,265
|
|
|
$
|
4,719
|
|
|
$
|
—
|
|
|
$
|
3,050
|
|
|
$
|
62
|
|
|
$
|
—
|
|
|
$
|
19,554
|
|
Collectively evaluated for impairment
|
1,433,153
|
|
|
171,810
|
|
|
418,919
|
|
|
157,572
|
|
|
648,154
|
|
|
45,167
|
|
|
137,941
|
|
|
3,012,716
|
|
Total
|
$
|
1,436,611
|
|
|
$
|
180,075
|
|
|
$
|
423,638
|
|
|
$
|
157,572
|
|
|
$
|
651,204
|
|
|
$
|
45,229
|
|
|
$
|
137,941
|
|
|
$
|
3,032,270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
December 31, 2018
|
Commercial
Mortgage
|
|
Home Equity
Lines and
Loans
|
|
Residential
Mortgage
|
|
Construction
|
|
Commercial
and
Industrial
|
|
Consumer
|
|
Leases
|
|
Total
|
(dollars in thousands)
|
|
|
|
|
|
|
|
Carrying value of loans and leases:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
$
|
4,874
|
|
|
$
|
4,972
|
|
|
$
|
5,106
|
|
|
$
|
—
|
|
|
$
|
2,314
|
|
|
$
|
71
|
|
|
$
|
—
|
|
|
$
|
17,337
|
|
Collectively evaluated for impairment
|
1,322,948
|
|
|
176,534
|
|
|
405,916
|
|
|
174,592
|
|
|
622,329
|
|
|
44,028
|
|
|
121,567
|
|
|
2,867,914
|
|
Total
|
$
|
1,327,822
|
|
|
$
|
181,506
|
|
|
$
|
411,022
|
|
|
$
|
174,592
|
|
|
$
|
624,643
|
|
|
$
|
44,099
|
|
|
$
|
121,567
|
|
|
$
|
2,885,251
|
|
The following tables detail the allocation of the Allowance for
acquired
portfolio loans and leases by portfolio segment based on the methodology used to evaluate the loans and leases for impairment as of
March 31, 2019
and
December 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
March 31, 2019
|
Commercial
Mortgage
|
|
Home Equity
Lines and
Loans
|
|
Residential
Mortgage
|
|
Construction
|
|
Commercial
and
Industrial
|
|
Consumer
|
|
Leases
|
|
Total
|
(dollars in thousands)
|
|
|
|
|
|
|
|
Allowance on loans and leases:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
89
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
89
|
|
Collectively evaluated for impairment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
8
|
|
Purchased credit-impaired
(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
89
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8
|
|
|
$
|
97
|
|
(1) Purchased credit-impaired loans are evaluated for impairment on an individual basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
December 31, 2018
|
Commercial
Mortgage
|
|
Home Equity
Lines and
Loans
|
|
Residential
Mortgage
|
|
Construction
|
|
Commercial
and
Industrial
|
|
Consumer
|
|
Leases
|
|
Total
|
(dollars in thousands)
|
|
|
|
|
|
|
|
Allowance on loans and leases:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
97
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
97
|
|
Collectively evaluated for impairment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Purchased credit-impaired
(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
97
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
97
|
|
(1) Purchased credit-impaired loans are evaluated for impairment on an individual basis.
The following tables detail the carrying value for
acquired
portfolio loans and leases by portfolio segment based on the methodology used to evaluate the loans and leases for impairment as of
March 31, 2019
and
December 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
March 31, 2019
|
Commercial
Mortgage
|
|
Home Equity
Lines and
Loans
|
|
Residential
Mortgage
|
|
Construction
|
|
Commercial
and
Industrial
|
|
Consumer
|
|
Leases
|
|
Total
|
(dollars in thousands)
|
|
|
|
|
|
|
|
Carrying value of loans and leases:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
$
|
2,100
|
|
|
$
|
26
|
|
|
$
|
1,387
|
|
|
$
|
—
|
|
|
$
|
308
|
|
|
$
|
44
|
|
|
$
|
—
|
|
|
$
|
3,865
|
|
Collectively evaluated for impairment
|
298,017
|
|
|
24,176
|
|
|
77,352
|
|
|
2,189
|
|
|
53,139
|
|
|
2,548
|
|
|
18,425
|
|
|
475,846
|
|
Purchased credit-impaired
(1)
|
9,967
|
|
|
514
|
|
|
2
|
|
|
—
|
|
|
1,050
|
|
|
—
|
|
|
—
|
|
|
11,533
|
|
Total
|
$
|
310,084
|
|
|
$
|
24,716
|
|
|
$
|
78,741
|
|
|
$
|
2,189
|
|
|
$
|
54,497
|
|
|
$
|
2,592
|
|
|
$
|
18,425
|
|
|
$
|
491,244
|
|
(1) Purchased credit-impaired loans are evaluated for impairment on an individual basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
December 31, 2018
|
Commercial
Mortgage
|
|
Home Equity
Lines and
Loans
|
|
Residential
Mortgage
|
|
Construction
|
|
Commercial
and
Industrial
|
|
Consumer
|
|
Leases
|
|
Total
|
(dollars in thousands)
|
|
|
|
|
|
|
Carrying value of loans and leases:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
$
|
2,134
|
|
|
$
|
26
|
|
|
$
|
1,502
|
|
|
$
|
—
|
|
|
$
|
315
|
|
|
$
|
63
|
|
|
$
|
—
|
|
|
$
|
4,040
|
|
Collectively evaluated for impairment
|
319,169
|
|
|
25,307
|
|
|
81,831
|
|
|
4,081
|
|
|
69,550
|
|
|
2,652
|
|
|
22,969
|
|
|
525,559
|
|
Purchased credit-impaired
(1)
|
8,311
|
|
|
512
|
|
|
—
|
|
|
2,405
|
|
|
1,076
|
|
|
—
|
|
|
—
|
|
|
12,304
|
|
Total
|
$
|
329,614
|
|
|
$
|
25,845
|
|
|
$
|
83,333
|
|
|
$
|
6,486
|
|
|
$
|
70,941
|
|
|
$
|
2,715
|
|
|
$
|
22,969
|
|
|
$
|
541,903
|
|
(1) Purchased credit-impaired loans are evaluated for impairment on an individual basis.
As part of the process of determining the Allowance for the different segments of the loan and lease portfolio, management considers certain credit quality indicators. For the commercial mortgage, construction and commercial and industrial loan segments, periodic reviews of the individual loans are performed by both in-house staff as well as external loan reviewers. The result of these reviews is reflected in the risk grade assigned to each loan. These internally assigned grades are as follows:
|
|
•
|
Pass – Loans considered satisfactory with no indications of deterioration.
|
|
|
•
|
Special mention - Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.
|
|
|
•
|
Substandard - Loans classified as substandard are inadequately protected by the current net worth and payment capacity of the obligor or of the collateral pledged, if any. Substandard loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
|
|
|
•
|
Doubtful - Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.
|
In addition, for the remaining segments of the loan and lease portfolio, which include residential mortgage, home equity lines and loans, consumer, and leases, the credit quality indicator used to determine this component of the Allowance is based on performance status.
The following tables detail the carrying value of
all
portfolio loans and leases by portfolio segment based on the credit quality indicators used to determine the Allowance as of
March 31, 2019
and
December 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Risk Profile by Internally Assigned Grade - All Loans and Leases
|
As of March 31, 2019
|
|
|
(dollars in thousands)
|
|
Pass
|
|
Special Mention
|
|
Substandard
|
|
Doubtful
|
|
Total
|
Commercial mortgage
|
|
$
|
1,714,426
|
|
|
$
|
10,571
|
|
|
$
|
21,292
|
|
|
$
|
406
|
|
|
$
|
1,746,695
|
|
Home equity loans and lines
|
|
197,373
|
|
|
—
|
|
|
7,418
|
|
|
—
|
|
|
204,791
|
|
Residential
|
|
499,339
|
|
|
—
|
|
|
3,040
|
|
|
—
|
|
|
502,379
|
|
Construction
|
|
152,120
|
|
|
937
|
|
|
6,704
|
|
|
—
|
|
|
159,761
|
|
Commercial & Industrial
|
|
691,708
|
|
|
2,581
|
|
|
11,412
|
|
|
—
|
|
|
705,701
|
|
Consumer
|
|
47,195
|
|
|
—
|
|
|
626
|
|
|
—
|
|
|
47,821
|
|
Leases
|
|
155,453
|
|
|
—
|
|
|
913
|
|
|
—
|
|
|
156,366
|
|
Total
|
|
$
|
3,457,614
|
|
|
$
|
14,089
|
|
|
$
|
51,405
|
|
|
$
|
406
|
|
|
$
|
3,523,514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Risk Profile by Internally Assigned Grade - All Loans and Leases
|
As of December 31, 2018
|
|
|
(dollars in thousands)
|
|
Pass
|
|
Special Mention
|
|
Substandard
|
|
Doubtful
|
|
Total
|
Commercial mortgage
|
|
$
|
1,635,068
|
|
|
$
|
631
|
|
|
$
|
20,639
|
|
|
$
|
1,098
|
|
|
$
|
1,657,436
|
|
Home equity loans and lines
|
|
203,037
|
|
|
—
|
|
|
4,314
|
|
|
—
|
|
|
207,351
|
|
Residential
|
|
490,789
|
|
|
—
|
|
|
3,566
|
|
|
—
|
|
|
494,355
|
|
Construction
|
|
171,353
|
|
|
938
|
|
|
8,787
|
|
|
—
|
|
|
181,078
|
|
Commercial & Industrial
|
|
684,444
|
|
|
2,737
|
|
|
8,402
|
|
|
1
|
|
|
695,584
|
|
Consumer
|
|
46,588
|
|
|
—
|
|
|
226
|
|
|
—
|
|
|
46,814
|
|
Leases
|
|
143,561
|
|
|
—
|
|
|
975
|
|
|
—
|
|
|
144,536
|
|
Total
|
|
$
|
3,374,840
|
|
|
$
|
4,306
|
|
|
$
|
46,909
|
|
|
$
|
1,099
|
|
|
$
|
3,427,154
|
|
The following tables detail the carrying value of
originated
portfolio loans and leases by portfolio segment based on the credit quality indicators used to determine the Allowance as of
March 31, 2019
and
December 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Risk Profile by Internally Assigned Grade - Originated Loans and Leases
|
As of March 31, 2019
|
|
|
(dollars in thousands)
|
|
Pass
|
|
Special Mention
|
|
Substandard
|
|
Doubtful
|
|
Total
|
Commercial mortgage
|
|
$
|
1,428,214
|
|
|
$
|
4,325
|
|
|
$
|
4,072
|
|
|
$
|
—
|
|
|
$
|
1,436,611
|
|
Home equity loans and lines
|
|
173,197
|
|
|
—
|
|
|
6,878
|
|
|
—
|
|
|
180,075
|
|
Residential
|
|
421,168
|
|
|
—
|
|
|
2,470
|
|
|
—
|
|
|
423,638
|
|
Construction
|
|
149,931
|
|
|
937
|
|
|
6,704
|
|
|
—
|
|
|
157,572
|
|
Commercial & Industrial
|
|
639,463
|
|
|
2,352
|
|
|
9,389
|
|
|
—
|
|
|
651,204
|
|
Consumer
|
|
44,647
|
|
|
—
|
|
|
582
|
|
|
—
|
|
|
45,229
|
|
Leases
|
|
137,513
|
|
|
—
|
|
|
428
|
|
|
—
|
|
|
137,941
|
|
Total
|
|
$
|
2,994,133
|
|
|
$
|
7,614
|
|
|
$
|
30,523
|
|
|
$
|
—
|
|
|
$
|
3,032,270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Risk Profile by Internally Assigned Grade - Originated Loans and Leases
|
As of December 31, 2018
|
|
|
(dollars in thousands)
|
|
Pass
|
|
Special Mention
|
|
Substandard
|
|
Doubtful
|
|
Total
|
Commercial mortgage
|
|
$
|
1,321,973
|
|
|
$
|
631
|
|
|
$
|
5,218
|
|
|
$
|
—
|
|
|
$
|
1,327,822
|
|
Home equity loans and lines
|
|
177,916
|
|
|
—
|
|
|
3,590
|
|
|
—
|
|
|
181,506
|
|
Residential
|
|
408,095
|
|
|
—
|
|
|
2,927
|
|
|
—
|
|
|
411,022
|
|
Construction
|
|
167,272
|
|
|
938
|
|
|
6,382
|
|
|
—
|
|
|
174,592
|
|
Commercial & Industrial
|
|
615,817
|
|
|
2,511
|
|
|
6,314
|
|
|
1
|
|
|
624,643
|
|
Consumer
|
|
43,936
|
|
|
—
|
|
|
163
|
|
|
—
|
|
|
44,099
|
|
Leases
|
|
121,175
|
|
|
—
|
|
|
392
|
|
|
—
|
|
|
121,567
|
|
Total
|
|
$
|
2,856,184
|
|
|
$
|
4,080
|
|
|
$
|
24,986
|
|
|
$
|
1
|
|
|
$
|
2,885,251
|
|
The following tables detail the carrying value of
acquired
portfolio loans and leases by portfolio segment based on the credit quality indicators used to determine the Allowance as of
March 31, 2019
and
December 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Risk Profile by Internally Assigned Grade - Acquired Loans and Leases
|
As of March 31, 2019
|
|
|
(dollars in thousands)
|
|
Pass
|
|
Special Mention
|
|
Substandard
|
|
Doubtful
|
|
Total
|
Commercial mortgage
|
|
$
|
286,212
|
|
|
$
|
6,246
|
|
|
$
|
17,220
|
|
|
$
|
406
|
|
|
$
|
310,084
|
|
Home equity loans and lines
|
|
24,176
|
|
|
—
|
|
|
540
|
|
|
—
|
|
|
24,716
|
|
Residential
|
|
78,171
|
|
|
—
|
|
|
570
|
|
|
—
|
|
|
78,741
|
|
Construction
|
|
2,189
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,189
|
|
Commercial & Industrial
|
|
52,245
|
|
|
229
|
|
|
2,023
|
|
|
—
|
|
|
54,497
|
|
Consumer
|
|
2,548
|
|
|
—
|
|
|
44
|
|
|
—
|
|
|
2,592
|
|
Leases
|
|
17,940
|
|
|
—
|
|
|
485
|
|
|
—
|
|
|
18,425
|
|
Total
|
|
$
|
463,481
|
|
|
$
|
6,475
|
|
|
$
|
20,882
|
|
|
$
|
406
|
|
|
$
|
491,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Risk Profile by Internally Assigned Grade - Acquired Loans and Leases
|
As of December 31, 2018
|
|
|
(dollars in thousands)
|
|
Pass
|
|
Special Mention
|
|
Substandard
|
|
Doubtful
|
|
Total
|
Commercial mortgage
|
|
$
|
313,095
|
|
|
$
|
—
|
|
|
$
|
15,421
|
|
|
$
|
1,098
|
|
|
$
|
329,614
|
|
Home equity loans and lines
|
|
25,121
|
|
|
—
|
|
|
724
|
|
|
—
|
|
|
25,845
|
|
Residential
|
|
82,694
|
|
|
—
|
|
|
639
|
|
|
—
|
|
|
83,333
|
|
Construction
|
|
4,081
|
|
|
—
|
|
|
2,405
|
|
|
—
|
|
|
6,486
|
|
Commercial & Industrial
|
|
68,627
|
|
|
226
|
|
|
2,088
|
|
|
—
|
|
|
70,941
|
|
Consumer
|
|
2,652
|
|
|
—
|
|
|
63
|
|
|
—
|
|
|
2,715
|
|
Leases
|
|
22,386
|
|
|
—
|
|
|
583
|
|
|
—
|
|
|
22,969
|
|
Total
|
|
$
|
518,656
|
|
|
$
|
226
|
|
|
$
|
21,923
|
|
|
$
|
1,098
|
|
|
$
|
541,903
|
|
G. Troubled Debt Restructurings (“TDRs”)
The restructuring of a loan is considered a “troubled debt restructuring” if both of the following conditions are met: (i) the borrower is experiencing financial difficulties, and (ii) the creditor has granted a concession. The most common concessions granted include one or more modifications to the terms of the debt, such as (a) a reduction in the interest rate for the remaining life of the debt, (b) an extension of the maturity date at an interest rate lower than the current market rate for new debt with similar risk, (c) a temporary period of interest-only payments, (d) a reduction in the contractual payment amount for either a short period or remaining term of the loan, and (e) for leases, a reduced lease payment. A less common concession granted is the forgiveness of a portion of the principal.
The determination of whether a borrower is experiencing financial difficulties takes into account not only the current financial condition of the borrower, but also the potential financial condition of the borrower, were a concession not granted. Similarly, the determination of whether a concession has been granted is very subjective in nature. For example, simply extending the term of a loan at its original interest rate or even at a higher interest rate could be interpreted as a concession unless the borrower could readily obtain similar credit terms from a different lender.
The following table presents the balance of TDRs as of the indicated dates:
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
March 31, 2019
|
|
December 31, 2018
|
TDRs included in nonperforming loans and leases
|
$
|
4,057
|
|
|
$
|
1,217
|
|
TDRs in compliance with modified terms
|
5,149
|
|
|
9,745
|
|
Total TDRs
|
$
|
9,206
|
|
|
$
|
10,962
|
|
The following table presents information regarding loan and lease modifications categorized as TDRs for the three months ended
March 31, 2019
:
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2019
|
(dollars in thousands)
|
Number of Contracts
|
|
Pre-Modification Outstanding
Recorded Investment
|
|
Post-Modification Outstanding
Recorded Investment
|
Home equity loans and lines
|
—
|
|
$
|
—
|
|
|
$
|
—
|
|
Residential mortgages
|
—
|
|
—
|
|
|
—
|
|
Leases
|
2
|
|
38
|
|
|
38
|
|
Total
|
2
|
|
$
|
38
|
|
|
$
|
38
|
|
The following table presents information regarding the types of loan and lease modifications made for the three months ended
March 31, 2019
:
|
|
|
|
|
|
|
|
|
|
|
|
Number of Contracts
|
|
Loan Term Extension
|
|
Interest Rate Change and Term Extension
|
|
Interest Rate Change and/or Interest-Only Period
|
|
Contractual
Payment Reduction
(Leases only)
|
|
Temporary Payment Deferral
|
Home equity loans and lines
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
Residential mortgages
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
Leases
|
1
|
|
—
|
|
—
|
|
1
|
|
—
|
Total
|
1
|
|
—
|
|
—
|
|
1
|
|
—
|
H. Impaired Loans
The following tables detail the recorded investment and principal balance of impaired loans by portfolio segment, their related Allowance and interest income recognized for the
three
months ended
March 31, 2019
and
2018
(purchased credit-impaired loans are not included in the tables):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the Three Months Ended
March 31, 2019
|
Recorded
Investment
(2)
|
|
Contractual
Principal
Balance
|
|
Related
Allowance
|
|
Average
Recorded
Investment
|
|
Interest Income
Recognized
|
|
Cash-Basis
Interest Income
Recognized
|
(dollars in thousands)
|
|
|
|
|
|
Impaired loans with related allowance:
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines and loans
|
$
|
1,178
|
|
|
$
|
1,178
|
|
|
$
|
149
|
|
|
$
|
1,182
|
|
|
$
|
10
|
|
|
$
|
—
|
|
Residential mortgage
|
1,917
|
|
|
1,917
|
|
|
259
|
|
|
1,921
|
|
|
23
|
|
|
—
|
|
Commercial and industrial
|
334
|
|
|
339
|
|
|
160
|
|
|
335
|
|
|
—
|
|
|
—
|
|
Consumer
|
59
|
|
|
59
|
|
|
37
|
|
|
59
|
|
|
—
|
|
|
—
|
|
Total
|
$
|
3,488
|
|
|
$
|
3,493
|
|
|
$
|
605
|
|
|
$
|
3,497
|
|
|
$
|
33
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans without related allowance
(1)
:
|
|
|
|
|
|
|
|
|
|
|
|
Commercial mortgage
|
$
|
5,558
|
|
|
$
|
7,191
|
|
|
$
|
—
|
|
|
$
|
6,982
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Home equity lines and loans
|
7,113
|
|
|
7,167
|
|
|
—
|
|
|
7,180
|
|
|
2
|
|
|
—
|
|
Residential mortgage
|
4,191
|
|
|
4,294
|
|
|
—
|
|
|
4,239
|
|
|
21
|
|
|
—
|
|
Commercial and industrial
|
3,023
|
|
|
3,653
|
|
|
—
|
|
|
3,030
|
|
|
5
|
|
|
—
|
|
Consumer
|
47
|
|
|
62
|
|
|
—
|
|
|
47
|
|
|
—
|
|
|
—
|
|
Total
|
$
|
19,932
|
|
|
$
|
22,367
|
|
|
$
|
—
|
|
|
$
|
21,478
|
|
|
$
|
28
|
|
|
$
|
—
|
|
Grand total
|
$
|
23,420
|
|
|
$
|
25,860
|
|
|
$
|
605
|
|
|
$
|
24,975
|
|
|
$
|
61
|
|
|
$
|
—
|
|
(1) The table above does not include the recorded investment of
$1.0 million
of impaired leases without a related Allowance.
(2) Recorded investment equals principal balance less partial charge-offs and interest payments on non-performing loans that have been applied to principal.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the Three Months Ended
March 31, 2018
|
Recorded
Investment
(2)
|
|
Contractual
Principal
Balance
|
|
Related
Allowance
|
|
Average
Recorded
Investment
|
|
Interest Income
Recognized
|
|
Cash-Basis
Interest Income
Recognized
|
(dollars in thousands)
|
|
|
|
|
|
Impaired loans with related allowance:
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines and loans
|
$
|
574
|
|
|
$
|
574
|
|
|
$
|
19
|
|
|
$
|
575
|
|
|
$
|
6
|
|
|
$
|
—
|
|
Residential mortgage
|
1,796
|
|
|
1,796
|
|
|
224
|
|
|
1,801
|
|
|
21
|
|
|
—
|
|
Commercial and industrial
|
54
|
|
|
110
|
|
|
40
|
|
|
97
|
|
|
—
|
|
|
—
|
|
Consumer
|
27
|
|
|
27
|
|
|
4
|
|
|
27
|
|
|
—
|
|
|
—
|
|
Total
|
$
|
2,451
|
|
|
$
|
2,507
|
|
|
$
|
287
|
|
|
$
|
2,500
|
|
|
$
|
27
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans without related allowance
(1)
:
|
|
|
|
|
|
|
|
|
|
|
|
Commercial mortgage
|
$
|
1,394
|
|
|
$
|
1,483
|
|
|
$
|
—
|
|
|
$
|
1,394
|
|
|
$
|
23
|
|
|
$
|
—
|
|
Home equity lines and loans
|
2,052
|
|
|
2,114
|
|
|
—
|
|
|
2,094
|
|
|
2
|
|
|
—
|
|
Residential mortgage
|
3,554
|
|
|
3,758
|
|
|
—
|
|
|
154
|
|
|
—
|
|
|
—
|
|
Commercial and industrial
|
2,700
|
|
|
3,498
|
|
|
—
|
|
|
2,872
|
|
|
5
|
|
|
—
|
|
Total
|
$
|
9,700
|
|
|
$
|
10,853
|
|
|
$
|
—
|
|
|
$
|
6,514
|
|
|
$
|
30
|
|
|
$
|
—
|
|
Grand total
|
$
|
12,151
|
|
|
$
|
13,360
|
|
|
$
|
287
|
|
|
$
|
9,014
|
|
|
$
|
57
|
|
|
$
|
—
|
|
(1) The table above does not include the recorded investment of
$510 thousand
of impaired leases without a related Allowance.
(2) Recorded investment equals principal balance less partial charge-offs and interest payments on non-performing loans that have been applied to principal.
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
Recorded
Investment
(2)
|
|
Principal
Balance
|
|
Related
Allowance
|
As of
December 31, 2018
|
|
|
Impaired loans with related allowance:
|
|
|
|
|
|
Home equity lines and loans
|
$
|
1,280
|
|
|
$
|
1,280
|
|
|
$
|
162
|
|
Residential mortgage
|
1,966
|
|
|
1,966
|
|
|
272
|
|
Consumer
|
50
|
|
|
50
|
|
|
28
|
|
Total
|
$
|
3,296
|
|
|
$
|
3,296
|
|
|
$
|
462
|
|
Impaired loans without related allowance
(1)
:
|
|
|
|
|
|
Commercial mortgage
|
$
|
7,007
|
|
|
$
|
7,264
|
|
|
$
|
—
|
|
Home equity lines and loans
|
3,718
|
|
|
3,724
|
|
|
—
|
|
Residential mortgage
|
4,641
|
|
|
4,728
|
|
|
—
|
|
Commercial and industrial
|
2,629
|
|
|
3,803
|
|
|
—
|
|
Consumer
|
83
|
|
|
86
|
|
|
|
Total
|
$
|
18,078
|
|
|
$
|
19,605
|
|
|
$
|
—
|
|
Grand total
|
$
|
21,374
|
|
|
$
|
22,901
|
|
|
$
|
462
|
|
(1) The table above does not include the recorded investment of
$1.2 million
of impaired leases without a related Allowance.
(2) Recorded investment equals principal balance less partial charge-offs and interest payments on non-performing loans that have been applied to principal.
I. Loan Mark
Loans acquired in mergers and acquisitions are recorded at fair value as of the date of the transaction. This adjustment to the acquired principal amount is referred to as the “Loan Mark.” With the exception of purchased credit impaired loans, for which the Loan Mark is accounted under ASC 310-30, the Loan Mark is amortized or accreted as an adjustment to yield over the lives of the loans.
The following tables detail, for
acquired loans
, the outstanding principal, remaining Loan Mark, and recorded investment, by portfolio segment, as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2019
|
(dollars in thousands)
|
Outstanding
Principal
|
|
Remaining
Loan Mark
|
|
Recorded
Investment
|
Commercial mortgage
|
$
|
318,488
|
|
|
$
|
(8,404
|
)
|
|
$
|
310,084
|
|
Home equity lines and loans
|
26,981
|
|
|
(2,265
|
)
|
|
24,716
|
|
Residential mortgage
|
81,372
|
|
|
(2,631
|
)
|
|
78,741
|
|
Construction
|
2,190
|
|
|
(1
|
)
|
|
2,189
|
|
Commercial and industrial
|
56,400
|
|
|
(1,903
|
)
|
|
54,497
|
|
Consumer
|
2,680
|
|
|
(88
|
)
|
|
2,592
|
|
Leases
|
18,974
|
|
|
(549
|
)
|
|
18,425
|
|
Total
|
$
|
507,085
|
|
|
$
|
(15,841
|
)
|
|
$
|
491,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2018
|
(dollars in thousands)
|
Outstanding
Principal
|
|
Remaining
Loan Mark
|
|
Recorded
Investment
|
Commercial mortgage
|
$
|
339,241
|
|
|
$
|
(9,627
|
)
|
|
$
|
329,614
|
|
Home equity lines and loans
|
28,212
|
|
|
(2,367
|
)
|
|
25,845
|
|
Residential mortgage
|
86,111
|
|
|
(2,778
|
)
|
|
83,333
|
|
Construction
|
6,780
|
|
|
(294
|
)
|
|
6,486
|
|
Commercial and industrial
|
72,948
|
|
|
(2,007
|
)
|
|
70,941
|
|
Consumer
|
2,828
|
|
|
(113
|
)
|
|
2,715
|
|
Leases
|
23,695
|
|
|
(726
|
)
|
|
22,969
|
|
Total
|
$
|
559,815
|
|
|
$
|
(17,912
|
)
|
|
$
|
541,903
|
|
Note
6
– Mortgage Servicing Rights
The following table summarizes the Corporation’s activity related to mortgage servicing rights (“MSRs”) for the
three
months ended
March 31, 2019
and
2018
:
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
(dollars in thousands)
|
2019
|
|
2018
|
Balance, beginning of period
|
$
|
5,047
|
|
|
$
|
5,861
|
|
Additions
|
—
|
|
|
16
|
|
Amortization
|
(120
|
)
|
|
(221
|
)
|
(Impairment) / Recovery
|
(17
|
)
|
|
50
|
|
Balance, end of period
|
$
|
4,910
|
|
|
$
|
5,706
|
|
|
|
|
|
Fair value
|
$
|
5,754
|
|
|
$
|
6,791
|
|
Residential mortgage loans serviced for others
|
$
|
564,884
|
|
|
$
|
634,970
|
|
As of
March 31, 2019
, and
December 31, 2018
, key economic assumptions and the sensitivity of the current fair value of MSRs to immediate
10%
and
20%
adverse changes in those assumptions are as follows:
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
March 31,
2019
|
|
December 31,
2018
|
Fair value amount of MSRs
|
$
|
5,754
|
|
|
$
|
6,277
|
|
Weighted average life (in years)
|
6.3
|
|
|
6.7
|
|
Prepayment speeds (constant prepayment rate)
(1)
|
10.2
|
%
|
|
9.1
|
%
|
Impact on fair value:
|
|
|
|
10% adverse change
|
$
|
(161
|
)
|
|
$
|
(124
|
)
|
20% adverse change
|
$
|
(324
|
)
|
|
$
|
(257
|
)
|
Discount rate
|
9.55
|
%
|
|
9.55
|
%
|
Impact on fair value:
|
|
|
|
10% adverse change
|
$
|
(207
|
)
|
|
$
|
(234
|
)
|
20% adverse change
|
$
|
(400
|
)
|
|
$
|
(451
|
)
|
(1)
Represents the weighted average prepayment rate for the life of the MSR asset.
At
March 31, 2019
and
December 31, 2018
the fair value of the MSRs was
$5.8 million
and
$6.3 million
, respectively. The fair value of the MSRs for these dates was determined using values obtained from a third party which utilizes a valuation model which calculates the present value of estimated future servicing income. The model incorporates assumptions that market participants use in estimating future net servicing income, including estimates of prepayment speeds and discount rates. Mortgage loan prepayment speed is the annual rate at which borrowers are forecasted to repay their mortgage loan principal and is based on historical experience. The discount rate is used to determine the present value of future net servicing income. Another key assumption in the model is the required rate of return the market would expect for an asset with similar risk. These assumptions can, and generally will, change quarterly valuations as market conditions and interest rates change. Management reviews, annually, the process utilized by its independent third-party valuation experts.
These assumptions and sensitivities are hypothetical and should be used with caution. As the figures indicate, changes in fair value based on a 10% variation in assumptions generally cannot be extrapolated because the relationship of the change in assumptions to the change in fair value may not be linear. Also, the effect of a variation in a particular assumption on the fair value of the MSRs is calculated without changing any other assumption. In reality, changes in one factor may result in changes in another, which could magnify or counteract the sensitivities.
Note
7
– Goodwill and Intangible Assets
The following table presents activity in the Corporation's goodwill by its reporting units and finite-lived and indefinite-lived intangible assets, other than MSRs, for the
three
months ended
March 31, 2019
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
Balance
December 31, 2018
|
|
Additions
|
|
Adjustments
|
|
Amortization
|
|
Balance
March 31, 2019
|
|
Amortization
Period
|
Goodwill – Wealth
|
$
|
20,412
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
20,412
|
|
|
Indefinite
|
Goodwill – Banking
|
156,991
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
156,991
|
|
|
Indefinite
|
Goodwill – Insurance
|
6,609
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,609
|
|
|
Indefinite
|
Total Goodwill
|
$
|
184,012
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
184,012
|
|
|
|
Core deposit intangible
|
$
|
5,906
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(327
|
)
|
|
$
|
5,579
|
|
|
10 years
|
Customer relationships
|
13,607
|
|
|
18
|
|
|
—
|
|
|
(438
|
)
|
|
13,187
|
|
|
10 to 20 years
|
Non-compete agreements
|
1,101
|
|
|
—
|
|
|
—
|
|
|
(48
|
)
|
|
1,053
|
|
|
5 to 10 years
|
Trade name
|
2,149
|
|
|
—
|
|
|
—
|
|
|
(125
|
)
|
|
2,024
|
|
|
3 to 5 years
|
Domain name
|
151
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
151
|
|
|
Indefinite
|
Favorable lease assets
|
541
|
|
|
—
|
|
|
(541
|
)
|
|
—
|
|
|
—
|
|
|
|
Total Intangible Assets
|
$
|
23,455
|
|
|
$
|
18
|
|
|
$
|
(541
|
)
|
|
$
|
(938
|
)
|
|
$
|
21,994
|
|
|
|
Total Goodwill and Intangible Assets
|
$
|
207,467
|
|
|
$
|
18
|
|
|
$
|
(541
|
)
|
|
$
|
(938
|
)
|
|
$
|
206,006
|
|
|
|
Management conducted its annual impairment tests for goodwill and indefinite-lived intangible assets as of October 31, 2018 using generally accepted valuation methods. Management determined that
no
impairment of goodwill or indefinite-lived
intangible assets was identified as a result of the annual impairment analyses. Future impairment testing will be conducted each October 31, unless a triggering event occurs in the interim that would suggest possible impairment, in which case it would be tested as of the date of the triggering event. For the five months ended
March 31, 2019
, management determined there were
no
events that would necessitate impairment testing of goodwill or indefinite-lived intangible assets.
Note
8
–
Deposits
The following table details the components of deposits:
|
|
|
|
|
|
|
|
|
|
March 31,
2019
|
|
December 31,
2018
|
(dollars in thousands)
|
|
|
|
Interest-bearing demand
|
$
|
664,683
|
|
|
$
|
664,749
|
|
Money market
|
961,348
|
|
|
862,644
|
|
Savings
|
265,613
|
|
|
247,081
|
|
Retail time deposits
|
531,522
|
|
|
542,702
|
|
Wholesale non-maturity deposits
|
47,744
|
|
|
55,031
|
|
Wholesale time deposits
|
284,397
|
|
|
325,261
|
|
Total interest-bearing deposits
|
$
|
2,755,307
|
|
|
$
|
2,697,468
|
|
Noninterest-bearing deposits
|
882,310
|
|
|
901,619
|
|
Total deposits
|
$
|
3,637,617
|
|
|
$
|
3,599,087
|
|
Note
9
–
Short-Term Borrowings and Long-Term FHLB Advances
A. Short-term borrowings
The Corporation’s short-term borrowings (original maturity of one year or less), which consist of funds obtained from overnight repurchase agreements with commercial customers, FHLB advances with original maturities of one year or less and overnight fed funds, are detailed below.
A summary of short-term borrowings is as follows:
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
March 31,
2019
|
|
December 31,
2018
|
Repurchase agreements
(1)
– commercial customers
|
$
|
11,304
|
|
|
$
|
22,717
|
|
Short-term FHLB advances
|
104,910
|
|
|
229,650
|
|
Overnight federal funds
|
8,000
|
|
|
—
|
|
Total short-term borrowings
|
$
|
124,214
|
|
|
$
|
252,367
|
|
(1) Overnight repurchase agreements with no expiration date
The following table sets forth information concerning short-term borrowings:
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
(dollars in thousands)
|
2019
|
|
2018
|
Balance at period-end
|
$
|
124,214
|
|
|
$
|
173,704
|
|
Maximum amount outstanding at any month end
|
$
|
184,257
|
|
|
$
|
173,704
|
|
Average balance outstanding during the period
|
$
|
179,754
|
|
|
$
|
172,532
|
|
|
|
|
|
Weighted-average interest rate:
|
|
|
|
As of the period-end
|
2.47
|
%
|
|
1.76
|
%
|
Paid during the period
|
2.43
|
%
|
|
1.48
|
%
|
Average balances outstanding during the year represent daily average balances and average interest rates represent interest expense divided by the related average balance.
B.
Long-term
FHLB Advances
As of
March 31, 2019
and
December 31, 2018
, the Corporation had
$55.4 million
and
$55.4 million
, respectively, of long-term FHLB advances (original maturities exceeding one year).
The following table presents the remaining periods until maturity of long-term FHLB advances:
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
March 31,
2019
|
|
December 31,
2018
|
Within one year
|
$
|
33,105
|
|
|
$
|
28,105
|
|
Over one year through five years
|
22,302
|
|
|
27,269
|
|
Total
|
$
|
55,407
|
|
|
$
|
55,374
|
|
The following table presents rate and maturity information on FHLB advances and other borrowings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturity Range
(1)
|
|
Weighted Average Rate
(1)
|
|
Coupon Rate
(1)
|
|
Balance at
|
Description
|
From
|
|
To
|
|
|
From
|
|
To
|
|
March 31,
2019
|
|
December 31,
2018
|
Bullet maturity – fixed rate
|
5/20/2019
|
|
8/24/2021
|
|
1.76
|
%
|
|
1.40
|
%
|
|
2.13
|
%
|
|
$
|
55,407
|
|
|
$
|
55,374
|
|
(1) Maturity range, weighted average rate and coupon rate range refers to
March 31, 2019
balances.
C. Other Borrowings Information
In connection with its FHLB borrowings, the Corporation is required to hold the capital stock of the FHLB. The amount of capital stock held was
$10.5 million
at
March 31, 2019
, and
$14.5 million
at
December 31, 2018
. The carrying amount of the FHLB stock approximates its redemption value.
The level of required investment in FHLB stock is based on the balance of outstanding borrowings the Corporation has from the FHLB. Although FHLB stock is a financial instrument that represents an equity interest in the FHLB, it does not have a readily determinable fair value. FHLB stock is generally viewed as a long-term investment. Accordingly, when evaluating FHLB stock for impairment, its value should be determined based on the ultimate recoverability of the par value rather than by recognizing temporary declines in value.
The Corporation had a maximum borrowing capacity with the FHLB of
$1.56 billion
as of
March 31, 2019
of which the unused capacity was
$1.40 billion
. In addition, there were
$71.0 million
in the overnight federal funds line available and
$145.5 million
of Federal Reserve Discount Window capacity.
Note
10
– Subordinated Notes
On December 13, 2017, BMBC completed the issuance of
$70.0 million
in aggregate principal amount of fixed-to-floating rate subordinated notes due 2027 (the "2027 Notes") in an underwritten public offering. On August 6, 2015, BMBC completed the issuance of
$30.0 million
in aggregate principal amount of fixed-to-floating rate subordinated notes due 2025 (the "2025 Notes") in a private placement transaction to institutional accredited investors. The net proceeds of both offerings increased Tier II regulatory capital at BMBC.
The following tables detail the subordinated notes, including debt issuance costs, as of
March 31, 2019
, and
December 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
(dollars in thousands)
|
Balance
|
|
Rate
(1)(2)
|
|
Balance
|
|
Rate
(1)(2)
|
Subordinated notes – due 2027
|
$
|
68,916
|
|
|
4.25
|
%
|
|
$
|
68,885
|
|
|
4.25
|
%
|
Subordinated notes – due 2025
|
29,655
|
|
|
4.75
|
%
|
|
29,641
|
|
|
4.75
|
%
|
Total subordinated notes
|
$
|
98,571
|
|
|
|
|
$
|
98,526
|
|
|
|
(1) The 2027 Notes bear interest at an annual fixed rate of
4.25%
from the date of issuance until and including December 14, 2022, and will thereafter bear interest at a variable rate that will reset quarterly to a level equal to the then-current three-month LIBOR rate plus
2.050%
until December 15, 2027, or any early redemption date.
(2) The 2025 Notes bear interest at an annual fixed rate of
4.75%
from the date of issuance until and including August 14, 2020, and will thereafter bear interest at a variable rate that will reset quarterly to a level equal to the then-current three-month LIBOR rate plus
3.068%
until August 15, 2025, or any early redemption date.
Note 11 – Junior Subordinated Debentures
In connection with the RBPI Merger, BMBC acquired Royal Bancshares Capital Trust I (“Trust I”) and Royal Bancshares Capital Trust II (“Trust II”) (collectively, the “Trusts”), which were utilized for the sole purpose of issuing and selling capital securities representing preferred beneficial interests. Although BMBC owns
$774 thousand
of the common securities of Trust I and Trust II, the Trusts are not consolidated into the Corporation’s Consolidated Financial Statements as the Corporation is not deemed to be the primary beneficiary of these entities. In connection with the issuance and sale of the capital securities, RBPI issued, and the Corporation assumed as a result of the RBPI Merger, junior subordinated debentures to the Trusts of
$10.7 million
each, totaling
$21.4 million
representing the Corporation’s maximum exposure to loss. The junior subordinated debentures incur interest at a coupon rate of
4.76%
as of
March 31, 2019
. The rate resets quarterly based on 3-month LIBOR plus
2.15%
.
Each of Trust I and Trust II issued an aggregate principal amount of
$12.5 million
of capital securities initially bearing fixed and/or fixed/floating interest rates corresponding to the debt securities held by each trust to an unaffiliated investment vehicle and an aggregate principal amount of
$387 thousand
of common securities bearing fixed and/or fixed/floating interest rates corresponding to the debt securities held by each trust to the Corporation. As a result of the RBPI Merger, the Corporation has fully and unconditionally guaranteed all of the obligations of the Trusts, including any distributions and payments on liquidation or redemption of the capital securities.
The rights of holders of common securities of the Trusts are subordinate to the rights of the holders of capital securities only in the event of a default; otherwise, the common securities’ economic and voting rights are pari passu with the capital securities. The capital and common securities of the Trusts are subject to mandatory redemption upon the maturity or call of the junior subordinated debentures held by each. Unless earlier dissolved, the Trusts will dissolve on December 15, 2034. The junior subordinated debentures are the sole assets of Trusts, mature on December 15, 2034, and may be called at par by the Corporation any time after December 15, 2009. The Corporation records its investments in the Trusts’ common securities of
$387 thousand
each as investments in unconsolidated entities and records dividend income upon declaration by Trust I and Trust II.
Note 12 – Operating Leases
On January 1, 2019, the Company adopted ASU 2016-02 (Topic 842), “Leases”, as further explained in Note 2, Recent Accounting Pronouncements.
The Corporation’s operating leases consist of various retail branch locations and corporate offices. As of
March 31, 2019
, the Corporation’s leases have remaining lease terms ranging from
nine
months to
23
years, including extension options that the Corporation is reasonably certain will be exercised.
The Corporation’s leases include fixed rental payments, and certain of our leases also include variable rental payments where lease payments may increase at pre-determined dates based on the change in the consumer price index. The Corporation’s lease agreements include gross leases as well as leases in which we make separate payments to the lessor for items such as the property taxes assessed on the property or a portion of the common area maintenance associated with the property. We have elected the practical expedient not to separate lease and non-lease components for all of our building leases. The Corporation also elected to not recognize ROU assets and lease liabilities for short-term leases, which consist of certain leases of the Corporation’s limited-hour retirement community offices.
As of
March 31, 2019
the Corporation’s ROU assets and related lease liabilities were
$44.0 million
and
$48.2 million
, respectively.
The components of lease expense were as follows:
|
|
|
|
|
|
Three Months Ended
March 31, 2019
|
(dollars in thousands)
|
|
Operating lease expense
|
$
|
1,330
|
|
Short term lease expense
|
15
|
|
Variable lease expense
|
418
|
|
Sublease income
|
(9
|
)
|
Total lease expense
|
$
|
1,754
|
|
Supplemental cash flow information related to leases was as follows:
|
|
|
|
|
|
Three Months Ended
March 31, 2019
|
(dollars in thousands)
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
Operating cash flows from operating leases
|
$
|
1,266
|
|
ROU assets obtained in exchange for lease liabilities
|
$
|
44,899
|
|
Maturities of operating lease liabilities under FASB ASC 842 "Leases" as of
March 31, 2019
are as follows:
|
|
|
|
|
|
March 31, 2019
|
(dollars in thousands)
|
|
2019
|
$
|
3,904
|
|
2020
|
4,700
|
|
2021
|
4,478
|
|
2022
|
4,203
|
|
2023
|
4,051
|
|
2024 and thereafter
|
41,845
|
|
Total lease payments
|
$
|
63,181
|
|
Less: imputed interest
|
14,957
|
|
Present value of operating lease liabilities
|
$
|
48,224
|
|
As of
March 31, 2019
, the weighted-average remaining lease term, including extension options that the Corporation is reasonably certain will be exercised, for all operating leases is
14.65
years.
Because we generally do not have access to the rate implicit in the lease, we utilize our incremental borrowing rate as the discount rate. The weighted average discount rate associated with operating leases as of
March 31, 2019
is
3.55%
.
As of
March 31, 2019
, the Corporation had not entered into any material leases that have not yet commenced.
Future minimum cash rent commitments from various operating leases under FASB ASC 840 "Leases" as of
December 31, 2018
are as follows:
|
|
|
|
|
(dollars in thousands)
|
December 31,
2018
|
2019
|
$
|
5,211
|
|
2020
|
4,700
|
|
2021
|
4,478
|
|
2022
|
4,203
|
|
2023
|
4,051
|
|
2024 and thereafter
|
41,845
|
|
Total
|
$
|
64,488
|
|
Note 13
– Derivative Instruments and Hedging Activities
Derivative financial instruments involve, to varying degrees, interest rate, market and credit risk. Management manages these risks as part of its asset and liability management process and through credit policies and procedures. Management seeks to minimize counterparty credit risk by establishing credit limits and collateral agreements and utilizes certain derivative financial instruments to enhance its ability to manage interest rate risk that exists as part of its ongoing business operations. The derivative transactions entered into by the Corporation are an economic hedge of a derivative offerings to Bank customers. The Corporation does not use derivative financial instruments for trading purposes.
Customer Derivatives – Interest Rate Swaps
. The Corporation enters into interest rate swaps that allow commercial loan customers to effectively convert a variable-rate commercial loan agreement to a fixed-rate commercial loan agreement. Under these agreements, the Corporation originates variable-rate loans with customers in addition to interest rate swap agreements, which serve to effectively swap the customers’ variable-rate loans into fixed-rate loans. The Corporation then enters into corresponding swap agreements with swap dealer counterparties to economically hedge its exposure on the variable and fixed components of the customer agreements. The interest rate swaps with both the customers and third parties are not designated as hedges under FASB ASC 815 and are marked to market through earnings. As the interest rate swaps are structured to offset each other, changes to the underlying benchmark interest rates considered in the valuation of these instruments do not result in an impact to earnings; however, there may be fair value adjustments related to credit quality variations between counterparties, which may impact earnings as required by FASB ASC 820. As of
March 31, 2019
, there were no fair value adjustments related to credit quality.
Foreign Exchange Forward Contracts.
The Corporation enters into foreign exchange forward contracts (“FX forwards”) with customers to exchange one currency for another on an agreed date in the future at an agreed exchange rate. The Corporation then enters into corresponding FX forwards with swap dealer counterparties to economically hedge its exposure on the exchange rate component of the customer agreements. The FX forwards with both the customers and third parties are not designated as hedges under FASB ASC 815 and are marked to market through earnings. Exposure to gains and losses on these contracts increase or decrease over their respective lives as currency exchange and interest rates fluctuate. As the FX forwards are structured to offset each other, changes to the underlying term structure of currency exchange rates considered in the valuation of these instruments do not result in an impact to earnings; however, there may be fair value adjustments related to credit quality variations between counterparties, which may impact earnings as required by FASB ASC 820. As of
March 31, 2019
, there were no fair value adjustments related to credit quality.
Risk Participation Agreements
. The Corporation may enter into a risk participation agreement (“RPA”) with another institution as a means to assume a portion of the credit risk associated with a loan structure which includes a derivative instrument, in exchange for fee income commensurate with the risk assumed. This type of derivative is referred to as an “RPA sold.” In addition, in an effort to reduce the credit risk associated with an interest rate swap agreement with a borrower for whom the Corporation has provided a loan structured with a derivative, the Corporation may purchase an RPA from an institution participating in the facility in exchange for a fee commensurate with the risk shared. This type of derivative is referred to as an “RPA purchased.”
The following tables detail the derivative instruments as of
March 31, 2019
and
December 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives
|
|
Liability Derivatives
|
(dollars in thousands)
|
Notional
Amount
|
|
Fair
Value
|
|
Notional
Amount
|
|
Fair
Value
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
As of March 31, 2019:
|
|
|
|
|
|
|
|
Customer derivatives – interest rate swaps
|
$
|
452,558
|
|
|
$
|
23,405
|
|
|
$
|
452,558
|
|
|
$
|
23,404
|
|
FX forwards
|
3,754
|
|
|
7
|
|
|
—
|
|
|
—
|
|
RPAs sold
|
—
|
|
|
—
|
|
|
848
|
|
|
2
|
|
RPAs purchased
|
35,141
|
|
|
87
|
|
|
—
|
|
|
—
|
|
Total derivatives
|
$
|
491,453
|
|
|
$
|
23,499
|
|
|
$
|
453,406
|
|
|
$
|
23,406
|
|
As of December 31, 2018:
|
|
|
|
|
|
|
|
Customer derivatives – interest rate swaps
|
$
|
369,623
|
|
|
$
|
12,550
|
|
|
$
|
369,623
|
|
|
$
|
12,549
|
|
RPAs sold
|
—
|
|
|
—
|
|
|
854
|
|
|
2
|
|
RPAs purchased
|
35,305
|
|
|
71
|
|
|
—
|
|
|
—
|
|
Total derivatives
|
$
|
404,928
|
|
|
$
|
12,621
|
|
|
$
|
370,477
|
|
|
$
|
12,551
|
|
The Corporation has International Swaps and Derivatives Association agreements with third parties that requires a minimum dollar transfer amount upon a margin call. This requirement is dependent on certain specified credit measures. The amount of collateral posted with third parties at
March 31, 2019
and
December 31, 2018
was
$24.5 million
and
$8.8 million
, respectively. The amount of collateral posted with third parties is deemed to be sufficient to collateralize both the fair market value change as well as any additional amounts that may be required as a result of a change in the specified credit measures. The aggregate fair value of all derivative financial instruments in a liability position with credit measure contingencies and entered into with third parties was
$23.1 million
and
$11.5 million
as of
March 31, 2019
and
December 31, 2018
, respectively.
Note 14 – Accounting for Uncertainty in Income Taxes
The Corporation recognizes the financial statement benefit of a tax position only after determining that the Corporation would be more likely than not to sustain the position following an examination. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon settlement with the relevant tax authority.
The Corporation is subject to income taxes in the United States federal jurisdiction and multiple state jurisdictions. The Corporation is no longer subject to U.S. federal income tax examination by taxing authorities for years before 2014.
The Corporation’s policy is to record interest and penalties on uncertain tax positions as income tax expense.
No
interest or penalties were accrued for the
three
months ended
March 31, 2019
or
2018
.
Note 15
– Shareholders’ Equity
Dividend
On April 18, 2019, BMBC’s Board of Directors declared a regular quarterly dividend of
$0.25
per share payable June 1, 2019 to shareholders of record as of May 1, 2019. During the first quarter of 2019, the Corporation paid or accrued, as applicable, a regular quarterly dividend of
$0.25
per share. This dividend totaled
$5.1 million
, based on outstanding shares and restricted stock units as of February 1, 2019 of
20,381,859
shares.
S-3 Shelf Registration Statement and Offerings Thereunder
In May 2018, BMBC filed a shelf registration statement on Form S-3, SEC File No. 333-224849 (the “Shelf Registration Statement”). The Shelf Registration Statement allows BMBC to raise additional capital from time to time through offers and sales of registered securities consisting of common stock, debt securities, warrants, purchase contracts, rights and units or units consisting of any combination of the foregoing securities. BMBC may sell these securities using the prospectus in the Shelf Registration Statement, together with applicable prospectus supplements, from time to time, in one or more offerings.
In addition, BMBC has in place a Dividend Reinvestment and Stock Purchase Plan (the “Plan”), which allows it to issue up to
1,500,000
shares of registered common stock. The Plan allows for the grant of a request for waiver (“RFW”) above the Plan’s maximum investment of
$120 thousand
per account per year. A RFW is granted based on a variety of factors, including BMBC’s current and projected capital needs, prevailing market prices of BMBC’s common stock and general economic and market conditions.
For the three months ended
March 31, 2019
, BMBC did not issue any shares under the Plan. The Plan administrator conducted dividend reinvestments for Plan participants through open market purchases. No RFWs were approved during the three months ended
March 31, 2019
. No other sales of equity securities were executed under the Shelf Registration Statement during the three months ended
March 31, 2019
.
Option Exercises and Vesting of Restricted Stock Units ("RSUs") and Performance Stock Units ("PSUs")
In addition to shares that may be issued through the Plan, BMBC also issues shares through the exercise of stock options and the vesting of RSUs and PSUs. During the
three
months ended
March 31, 2019
,
29,600
shares were issued pursuant to the exercise of stock options, increasing shareholders’ equity by
$540 thousand
. The increase in shareholders’ equity related to the vesting of RSUs and PSUs, which is recognized over the vesting period through stock based compensation expense, was
$1.1 million
for the
three
months ended
March 31, 2019
.
Stock Repurchases
On August 6, 2015, BMBC announced a stock repurchase program (the “2015 Program”) under which the Corporation may repurchase up to
1,200,000
shares of BMBC’s common stock, at an aggregate purchase price not to exceed
$40 million
. During the three months ended
March 31, 2019
,
12,702
shares were repurchased under the 2015 Program. As of
March 31, 2019
, the maximum number of shares remaining authorized for repurchase under the 2015 Program was
27,314
. In addition to the 2015 Program, it is BMBC’s practice to retire shares to its treasury account upon the vesting of stock awards to certain officers in order to cover the statutory income tax withholdings related to such vestings.
On April 18, 2019, BMBC announced a new stock repurchase program (the "2019 Program") under which the Corporation may repurchase up to
1,000,000
shares of BMBC's common stock. Under the 2019 Program, the Corporation may repurchase BMBC's common stock at any price, but the aggregate purchase price is not to exceed
$45 million
. The 2019 Program will become effective upon the completion of BMBC’s existing 2015 Program.
Note 16 – Accumulated Other Comprehensive (Loss) Income
The following table details the components of accumulated other comprehensive (loss) income for the
three
months ended
March 31, 2019
and
2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
Net Change in
Unrealized Gains
on Available-for-
Sale Investment
Securities
|
|
Net Change in
Unfunded
Pension Liability
|
|
Accumulated
Other
Comprehensive
Loss
|
Balance, December 31, 2018
|
$
|
(6,229
|
)
|
|
$
|
(1,284
|
)
|
|
$
|
(7,513
|
)
|
Other comprehensive income
|
4,219
|
|
|
16
|
|
|
4,235
|
|
Balance, March 31, 2019
|
$
|
(2,010
|
)
|
|
$
|
(1,268
|
)
|
|
$
|
(3,278
|
)
|
|
|
|
|
|
|
Balance, December 31, 2017
|
$
|
(2,861
|
)
|
|
$
|
(1,553
|
)
|
|
$
|
(4,414
|
)
|
Other comprehensive (loss) income
|
(5,296
|
)
|
|
46
|
|
|
(5,250
|
)
|
Balance, March 31, 2018
|
$
|
(8,157
|
)
|
|
$
|
(1,507
|
)
|
|
$
|
(9,664
|
)
|
The following table details the amounts reclassified from each component of accumulated other comprehensive loss to each component’s applicable income statement line, for the
three
months ended
March 31, 2019
and
2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount Reclassified from Accumulated Other Comprehensive Loss
|
|
|
Description of Accumulated Other
Comprehensive Loss Component
|
|
Three Months Ended
March 31,
|
|
Affected Income Statement Category
|
|
|
2019
|
|
2018
|
|
|
Net unrealized gain on investment securities available for sale:
|
|
|
|
|
|
|
Realization of gain on sale of investment securities available for sale
|
|
$
|
—
|
|
|
$
|
(7
|
)
|
|
Net gain on sale of available for sale investment securities
|
Realization of gain on transfer of investment securities available for sale to trading
|
|
—
|
|
|
(417
|
)
|
|
Other operating income
|
Total
|
|
$
|
—
|
|
|
$
|
(424
|
)
|
|
|
Income tax effect
|
|
—
|
|
|
89
|
|
|
Income tax expense
|
Net of income tax
|
|
$
|
—
|
|
|
$
|
(335
|
)
|
|
Net income
|
|
|
|
|
|
|
|
Unfunded pension liability:
|
|
|
|
|
|
|
Amortization of net loss included in net periodic pension costs
(1)
|
|
$
|
11
|
|
|
$
|
25
|
|
|
Other operating expenses
|
Income tax effect
|
|
(2
|
)
|
|
(5
|
)
|
|
Income tax expense
|
Net of income tax
|
|
$
|
9
|
|
|
$
|
20
|
|
|
Net income
|
(1) Accumulated other comprehensive loss components are included in the computation of net periodic pension cost.
Note 17 – Earnings per Common Share
Basic earnings per common share excludes dilution and is computed by dividing income available to common shareholders by the weighted-average common shares outstanding during the period. Diluted earnings per common share takes into account the potential dilution that would occur if in-the-money stock options were exercised and converted into common shares and RSUs and PSUs were vested. Proceeds assumed to have been received on option exercises are assumed to be used to purchase shares of BMBC’s common stock at the average market price during the period, as required by the treasury stock method of accounting. The effects of stock options are excluded from the computation of diluted earnings per share in periods in which the effect would be antidilutive.
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
(dollars in thousands except share and per share data)
|
2019
|
|
2018
|
Numerator:
|
|
|
|
Net income available to common shareholders
|
$
|
10,677
|
|
|
$
|
15,286
|
|
Denominator for basic earnings per share –
weighted average shares outstanding
|
20,168,498
|
|
|
20,202,969
|
|
Effect of dilutive common shares
|
103,163
|
|
|
247,525
|
|
Denominator for diluted earnings per share –
adjusted weighted average shares outstanding
|
20,271,661
|
|
|
20,450,494
|
|
Basic earnings per share
|
$
|
0.53
|
|
|
$
|
0.76
|
|
Diluted earnings per share
|
$
|
0.53
|
|
|
$
|
0.75
|
|
Antidilutive shares excluded from computation of average dilutive earnings per share
|
63,765
|
|
|
870
|
|
Note 18 –
Revenue from Contracts with Customers
All of the Corporation’s revenue from contracts with customers in the scope of ASC 606 is recognized within noninterest income. The following table presents the Corporation’s noninterest income by revenue stream and reportable segment for the
three
months ended
March 31, 2019
and
2018
. Items outside the scope of ASC 606 are noted as such.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2019
|
|
Three Months Ended March 31, 2018
|
(dollars in thousands)
|
Banking
|
|
Wealth
Management
|
|
Consolidated
|
|
Banking
|
|
Wealth
Management
|
|
Consolidated
|
Fees for wealth management services
|
$
|
—
|
|
|
$
|
10,392
|
|
|
$
|
10,392
|
|
|
$
|
—
|
|
|
$
|
10,308
|
|
|
$
|
10,308
|
|
Insurance commissions
|
—
|
|
|
1,672
|
|
|
1,672
|
|
|
—
|
|
|
1,693
|
|
|
1,693
|
|
Capital markets revenue
(1)
|
2,219
|
|
|
—
|
|
|
2,219
|
|
|
666
|
|
|
—
|
|
|
666
|
|
Service charges on deposit accounts
|
808
|
|
|
—
|
|
|
808
|
|
|
713
|
|
|
—
|
|
|
713
|
|
Loan servicing and other fees
(1)
|
609
|
|
|
—
|
|
|
609
|
|
|
686
|
|
|
—
|
|
|
686
|
|
Net gain on sale of loans
(1)
|
319
|
|
|
—
|
|
|
319
|
|
|
518
|
|
|
—
|
|
|
518
|
|
Net gain on sale of investment securities available for sale
(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
7
|
|
Net (loss) / gain on sale of other real estate owned
|
(24
|
)
|
|
—
|
|
|
(24
|
)
|
|
176
|
|
|
—
|
|
|
176
|
|
Dividends on FHLB and FRB stock
(1)
|
411
|
|
|
—
|
|
|
411
|
|
|
431
|
|
|
—
|
|
|
431
|
|
Other operating income
(2)
|
2,826
|
|
|
21
|
|
|
2,847
|
|
|
4,294
|
|
|
44
|
|
|
4,338
|
|
Total noninterest income
|
$
|
7,168
|
|
|
$
|
12,085
|
|
|
$
|
19,253
|
|
|
$
|
7,491
|
|
|
$
|
12,045
|
|
|
$
|
19,536
|
|
(1) Not within the scope of ASC 606.
(2) Other operating income includes Visa debit card income, safe deposit box rentals, and rent income totaling
$512 thousand
and
$521 thousand
for the three months ended
March 31, 2019
and
2018
, respectively, which are within the scope of ASC 606.
A description of the Corporation’s primary revenue streams accounted for under ASC 606 follows:
Service Charges on Deposit Accounts:
The Corporation earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees, which include services such as ATM use fees, stop payment charges, statement rendering, and ACH fees, are recognized at the time the transaction is executed as that is the point in time the Corporation fulfills the customer’s request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Corporation satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer’s account balance.
Wealth Management Fees:
The Corporation earns wealth management fee revenue from a variety of sources including fees from trust administration and other related fiduciary services, custody, investment management and advisory services, employee benefit account and IRA administration, estate settlement, tax service fees, shareholder service fees and brokerage.
Fees that are determined based on the market value of the assets held in their accounts are generally billed monthly or quarterly, in arrears, based on the market value of assets at the end of the previous billing period. Other related services that are based on a fixed fee schedule are recognized when the services are rendered. Fees that are transaction based, including trade execution services, are recognized at the point in time that the transaction is executed, i.e. the trade date.
Included in other assets on the balance sheet is a receivable for wealth management fees that have been earned but not yet collected.
Insurance Commissions:
The Corporation earns commissions from the sale of insurance policies, which are generally calculated as a percentage of the policy premium, and contingent income, which is calculated based on the volume and performance of the policies held by each carrier. Obligations for the sale of insurance policies are generally satisfied at the point in time which the policy is executed and are recognized at the point in time in which the amounts are known
and collection is reasonably assured. Performance metrics for contingent income are generally satisfied over time, not exceeding one year, and are recognized at the point in time in which the amounts are known and collection is reasonably assured.
Visa Debit Card Income:
The Corporation earns income fees from debit cardholder transactions conducted through the Visa payment network. Fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder.
Gains/Losses on Sales of OREO:
The Corporation records a gain or loss from the sale of OREO when control of the property transfers to the buyer, which generally occurs at the time of an executed deed.
Note
19
–
Stock-Based Compensation
A. General Information
BMBC permits the issuance of stock options, dividend equivalents, performance stock awards, stock appreciation rights and restricted stock units or awards to employees and directors of the Corporation under several plans. The performance awards and restricted awards may be in the form of stock awards or stock units. Stock awards and stock units differ in that for a stock award, shares of restricted stock are issued in the name of the grantee, whereas a stock unit constitutes a promise to issue shares of stock upon vesting. The accounting for awards and units is identical. The terms and conditions of awards under the plans are determined by the Corporation’s Management Development and Compensation Committee.
Prior to April 25, 2007, all shares authorized for grant as stock-based compensation were limited to grants of stock options. On April 25, 2007, the shareholders approved BMBC’s “2007 Long-Term Incentive Plan” (the “2007 LTIP”) under which a total of
428,996
shares of BMBC’s common stock were made available for award grants. On April 28, 2010, the shareholders approved BMBC’s “2010 Long Term Incentive Plan” under which a total of
445,002
shares of BMBC’s common stock were made available for award grants, and on April 30, 2015, the shareholders approved an amendment and restatement of such plan (as amended and restated, the “2010 LTIP”) to, among other things, increase the number of shares available for award grants by
500,000
to
945,002
.
In addition to the shareholder-approved plans mentioned in the preceding paragraph, BMBC periodically authorizes grants of stock-based compensation as inducement awards to new employees. This type of award does not require shareholder approval in accordance with Rule 5635(c)(4) of the NASDAQ listing rules.
The equity awards are authorized to be in the form of, among others, options to purchase BMBC’s common stock, RSUs and PSUs.
RSUs have a restriction based on the passage of time. The grant date fair value of the RSUs is based on the closing price on the date of the grant.
PSUs have restrictions based on performance criteria and the passage of time. The performance criteria may be a market-based criteria measured by BMBC’s total shareholder return (“TSR”) relative to the performance of the community bank index for the respective period. The fair value of the PSUs based on BMBC’s TSR relative to the performance of a designated peer group or the NASDAQ Community Bank Index is calculated using the Monte Carlo Simulation method. The performance criteria may also be based on a non-market-based criteria such as return on average equity relative to that designated peer group. The grant date fair value of these PSUs is based on the closing price of BMBC’s stock on the date of the grant. PSU grants may have a vesting percent ranging from
0%
to
150%
.
B. Other Stock Option Information
The following table provides information about options outstanding for the three months ended
March 31, 2019
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Grant Date
Fair Value
|
Options outstanding, December 31, 2018
|
50,601
|
|
|
$
|
18.28
|
|
|
$
|
4.68
|
|
Forfeited
|
—
|
|
|
—
|
|
|
—
|
|
Expired
|
—
|
|
|
—
|
|
|
—
|
|
Exercised
|
(29,600
|
)
|
|
$
|
18.25
|
|
|
$
|
4.48
|
|
Options outstanding, March 31, 2019
|
21,001
|
|
|
$
|
18.32
|
|
|
$
|
4.95
|
|
As of
March 31, 2019
there were
no
unvested options.
Proceeds, related tax benefits realized from options exercised and intrinsic value of options exercised were as follows:
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
(dollars in thousands)
|
2019
|
|
2018
|
Proceeds from exercise of stock options
|
$
|
540
|
|
|
$
|
992
|
|
Related tax benefit recognized
|
137
|
|
|
210
|
|
Net proceeds of options exercised
|
$
|
677
|
|
|
$
|
1,202
|
|
|
|
|
|
Intrinsic value of options exercised
|
$
|
652
|
|
|
$
|
999
|
|
The following table provides information about options outstanding and exercisable at
March 31, 2019
:
|
|
|
|
|
|
|
|
|
(dollars in thousands, except share data and exercise price)
|
Outstanding
|
|
Exercisable
|
Number of shares
|
21,001
|
|
|
21,001
|
|
Weighted average exercise price
|
$
|
18.32
|
|
|
$
|
18.32
|
|
Aggregate intrinsic value
|
$
|
374
|
|
|
$
|
374
|
|
Weighted average remaining contractual term in years
|
0.5
|
|
|
0.5
|
|
C. Restricted Stock Units and Performance Stock
Units
The Corporation has granted RSUs and PSUs under the 2007 LTIP and 2010 LTIP and in accordance with Rule 5635(c)(4) of the NASDAQ listing standards.
RSUs
The compensation expense for the RSUs is measured based on the market price of the stock on the day prior to the grant date and is recognized on a straight-line basis over the vesting period.
For the
three
months ended
March 31, 2019
, the Corporation recognized
$476 thousand
of expense related to the Corporation’s RSUs. As of
March 31, 2019
, there was
$3.1 million
of unrecognized compensation cost related to RSUs. This cost will be recognized over a weighted average period of
2.5
years.
During the first quarter of 2019, the Corporation adopted a voluntary Years of Service Incentive Program (the “Incentive Program”) which offers certain benefits to eligible employees who meet the Incentive Program requirements and voluntarily exit from service with the Corporation, the Bank or one of their subsidiaries. As part of the Incentive Program, the Corporation elected to remove the service requirement as an RSU vesting condition for employees who held RSUs and chose to participate in the Incentive Program. As a result,
3,494
RSUs were modified which resulted in
$112 thousand
of incremental expense recognized during the three months ended March 31, 2019.
The following table details the RSUs for the
three
months ended
March 31, 2019
:
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2019
|
|
Number of Shares
|
|
Weighted
Average
Grant Date
Fair Value
|
Beginning balance
|
76,746
|
|
|
$
|
39.71
|
|
Granted
|
36,690
|
|
|
$
|
34.75
|
|
Vested
|
(2,300
|
)
|
|
$
|
31.68
|
|
Forfeited
|
(3,501
|
)
|
|
$
|
41.13
|
|
Ending balance
|
107,635
|
|
|
$
|
38.14
|
|
PSUs
For the
three
months ended
March 31, 2019
, the Corporation recognized
$661 thousand
of expense related to the Corporation's PSUs. As of
March 31, 2019
, there was
$3.5 million
of unrecognized compensation cost related to PSUs. This cost will be recognized over a weighted average period of
2.2
years.
As part of the Incentive Program, the Corporation elected to remove the service requirement as a PSU vesting condition for employees who held PSUs and chose to participate in the Incentive Program. As a result,
8,208
PSUs were modified which resulted in
$250 thousand
of incremental expense recognized during the three months ended March 31, 2019.
The following table details the PSUs for the
three
months ended
March 31, 2019
:
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, 2019
|
|
Number of Shares
|
|
Weighted
Average
Grant Date
Fair Value
|
Beginning balance
|
121,656
|
|
|
$
|
36.82
|
|
Granted
|
46,395
|
|
|
$
|
33.00
|
|
Vested
|
—
|
|
|
$
|
—
|
|
Forfeited
|
(8,254
|
)
|
|
$
|
39.28
|
|
Ending balance
|
159,797
|
|
|
$
|
35.58
|
|
Note
20
–
Fair Value Measurement
FASB ASC 820, “Fair Value Measurements and Disclosures
,
” defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. FASB ASC 820 also establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
The three levels of the fair value hierarchy under FASB ASC Topic 820 are:
Level 1
– Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2
– Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active and model derived valuations whose inputs are observable or whose significant value drivers are observable.
Level 3
– Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
A.
Assets and liabilities measured on a recurring basis
A description of the valuation methodologies used for financial instruments measured at fair value on a recurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.
Investment Securities
The value of the Corporation’s available for sale investment securities, which include obligations of the U.S. government and its agencies, mortgage-backed securities issued by U.S. government- and U.S. government sponsored agencies, obligations of state and political subdivisions, corporate bonds and other debt securities are determined by the Corporation, taking into account the input of an independent third party valuation service provider. The third party’s evaluations are based on market data, utilizing pricing models that vary by asset and incorporate available trade, bid and other market information. For securities that do not trade on a daily basis, their pricing models apply available information such as benchmarking and matrix pricing. The market inputs normally sought in the evaluation of securities include benchmark yields, reported trades, broker/dealer quotes (only obtained from market makers or broker/dealers recognized as market participants), issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data. For certain securities, additional inputs may be used or some market inputs may not be applicable. Inputs are prioritized differently on any given day based on market conditions. Management reviews, annually, the process utilized by its independent third-party valuation service provider. On a quarterly basis, management tests the validity of the prices provided by the third party by selecting a representative sample of the portfolio and obtaining actual trade results, or if actual trade results are not available, competitive broker pricing. On an annual basis, management evaluates, for appropriateness, the methodology utilized by the independent third-party valuation service provider.
U.S. Government agencies are evaluated and priced using multi-dimensional relational models and option adjusted spreads. State and municipal securities are evaluated on a series of matrices including reported trades and material event notices. Mortgage-backed securities are evaluated using matrix correlation to treasury or floating index benchmarks, prepayment speeds, monthly payment information and other benchmarks. Other available-for-sale investments are evaluated using a broker-quote based application, including quotes from issuers.
Interest Rate Swaps, FX Forwards, and Risk Participation Agreements
The Corporation’s interest rate swaps, FX forwards, and RPAs are reported at fair value utilizing Level 2 inputs. Prices of these instruments are obtained through an independent pricing source utilizing pricing information which may include market observed quotations for swaps, LIBOR rates, forward rates and rate volatility. When entering into a derivative contract, the Corporation is exposed to fair value changes due to interest rate movements, and the potential non-performance of our contract counterparty. The Corporation has developed a methodology to value the non-performance risk based on internal credit risk metrics and the unique characteristics of derivative instruments, which include notional exposure rather than principle at risk and interest payment netting. The results of this methodology are used to adjust the base fair value of the instrument for the potential counterparty credit risk.
The following tables present the Corporation’s assets measured at fair value on a recurring basis as of
March 31, 2019
and
December 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2019
|
|
|
|
|
|
|
|
(dollars in thousands)
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Investment securities available for sale:
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
$
|
100
|
|
|
$
|
100
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Obligations of U.S. government & agencies
|
186,746
|
|
|
—
|
|
|
186,746
|
|
|
—
|
|
Obligations of state & political subdivisions
|
8,638
|
|
|
—
|
|
|
8,638
|
|
|
—
|
|
Mortgage-backed securities
|
322,913
|
|
|
—
|
|
|
322,913
|
|
|
—
|
|
Collateralized mortgage obligations
|
40,486
|
|
|
—
|
|
|
40,486
|
|
|
—
|
|
Other investment securities
|
1,100
|
|
|
—
|
|
|
1,100
|
|
|
—
|
|
Total investment securities available for sale
|
$
|
559,983
|
|
|
$
|
100
|
|
|
$
|
559,883
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
Investment securities trading:
|
|
|
|
|
|
|
|
Mutual funds
|
$
|
8,189
|
|
|
$
|
8,189
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
Derivatives:
|
|
|
|
|
|
|
|
Interest rate swaps
|
$
|
23,405
|
|
|
$
|
—
|
|
|
$
|
23,405
|
|
|
$
|
—
|
|
RPAs purchased
|
87
|
|
|
—
|
|
|
87
|
|
|
—
|
|
FX forwards
|
7
|
|
|
—
|
|
|
7
|
|
|
—
|
|
Total derivatives
|
$
|
23,499
|
|
|
$
|
—
|
|
|
$
|
23,499
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
Total recurring fair value measurements
|
$
|
591,671
|
|
|
$
|
8,289
|
|
|
$
|
583,382
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2018
|
|
|
|
|
|
|
|
(dollars in thousands)
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Investment securities available for sale:
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
$
|
200,013
|
|
|
$
|
200,013
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Obligations of U.S. government & agencies
|
195,855
|
|
|
—
|
|
|
195,855
|
|
|
—
|
|
Obligations of state & political subdivisions
|
11,332
|
|
|
—
|
|
|
11,332
|
|
|
—
|
|
Mortgage-backed securities
|
289,890
|
|
|
—
|
|
|
289,890
|
|
|
—
|
|
Collateralized mortgage obligations
|
39,252
|
|
|
—
|
|
|
39,252
|
|
|
—
|
|
Other investment securities
|
1,100
|
|
|
—
|
|
|
1,100
|
|
|
—
|
|
Total investment securities available for sale
|
$
|
737,442
|
|
|
$
|
200,013
|
|
|
$
|
537,429
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
Investment securities trading:
|
|
|
|
|
|
|
|
Mutual funds
|
$
|
7,502
|
|
|
$
|
7,502
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
Derivatives:
|
|
|
|
|
|
|
|
Interest rate swaps
|
$
|
12,550
|
|
|
$
|
—
|
|
|
$
|
12,550
|
|
|
$
|
—
|
|
RPAs purchased
|
71
|
|
|
—
|
|
|
71
|
|
|
—
|
|
Total derivatives
|
$
|
12,621
|
|
|
$
|
—
|
|
|
$
|
12,621
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
Total recurring fair value measurements
|
$
|
757,565
|
|
|
$
|
207,515
|
|
|
$
|
550,050
|
|
|
$
|
—
|
|
There have been no transfers between levels during the
three
months ended
March 31, 2019
.
B.
Assets and liabilities measured on a
non-recurring basis
Fair value is used on a nonrecurring basis to evaluate certain financial assets and financial liabilities in specific circumstances. Similarly, fair value is used on a nonrecurring basis for nonfinancial assets and nonfinancial liabilities such as foreclosed assets, OREO, intangible assets, nonfinancial assets and liabilities evaluated in a goodwill impairment analysis and other nonfinancial assets measured at fair value for purposes of assessing impairment. A description of the valuation methodologies used for financial and nonfinancial assets and liabilities measured at fair value, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy, is set forth below.
Impaired Loans
Management evaluates and values impaired loans at the time the loan is identified as impaired, and the fair values of such loans are estimated using Level 3 inputs in the fair value hierarchy. Each loan’s collateral has a unique appraisal and management’s discount of the value is based on the factors unique to each impaired loan. The significant unobservable input in determining the fair value is management’s subjective discount on appraisals of the collateral securing the loan, which range from
10%
-
50%
. Collateral may consist of real estate and/or business assets including equipment, inventory and/or accounts receivable and the value of these assets is determined based on the appraisals by qualified licensed appraisers hired by the Corporation. Appraised and reported values may be discounted based on management’s historical knowledge, changes in market conditions from the time of valuation, estimated costs to sell, and/or management’s expertise and knowledge of the client and the client’s business.
The Corporation has an appraisal policy in which an appraisal is obtained for a commercial loan at the point at which the loan either becomes nonperforming or is downgraded to a substandard or worse classification. For consumer loans, management obtains updated appraisals when a loan becomes 90 days past due or when it receives other information that may indicate possible impairment. Based on the appraisals obtained by the Corporation, a partial or full charge-off may be necessary.
Other Real Estate Owned ("OREO")
OREO consists of properties acquired as a result of foreclosures and deeds in-lieu-of foreclosure. Properties classified as OREO are reported at the lower of cost or fair value less cost to sell, and are classified as Level 3 in the fair value hierarchy.
Mortgage Servicing Rights
The model to value MSRs estimates the present value of projected net servicing cash flows of the remaining servicing portfolio based on various assumptions, including changes in anticipated loan prepayment rates, the discount rate, reflective of a market participant's required return on an investment for similar assets, and other market-based economic factors. All of these assumptions are considered to be unobservable inputs. Accordingly, MSRs are classified within Level 3 of the fair value hierarchy.
The following tables present the Corporation’s assets measured at fair value on a non-recurring basis as of
March 31, 2019
and
December 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2019
|
|
|
|
|
|
|
|
(dollars in thousands)
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
MSRs
|
$
|
5,754
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,754
|
|
Impaired loans and leases
|
23,815
|
|
|
—
|
|
|
—
|
|
|
23,815
|
|
OREO
|
84
|
|
|
—
|
|
|
—
|
|
|
84
|
|
Total non-recurring fair value measurements
|
$
|
29,653
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
29,653
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2018
|
|
|
|
|
|
|
|
(dollars in thousands)
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
MSRs
|
$
|
6,277
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,277
|
|
Impaired loans and leases
|
22,112
|
|
|
—
|
|
|
—
|
|
|
22,112
|
|
OREO
|
417
|
|
|
—
|
|
|
—
|
|
|
417
|
|
Total non-recurring fair value measurements
|
$
|
28,806
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
28,806
|
|
During the
three
months ended
March 31, 2019
, an increase of
$143 thousand
was recorded in the Allowance as a result of adjusting the carrying value and estimated fair value of the impaired loans in the above tables.
Note 21
– Fair Value of Financial Instruments
FASB ASC 825, “Disclosures about Fair Value of Financial Instruments” requires disclosure of the fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate such value. The methodologies for estimating the fair value of financial assets and financial liabilities measured at fair value on a recurring and non-recurring basis are discussed above. The estimated fair value amounts have been determined by management using available market information and appropriate valuation methodologies, are based on the exit price notion. In cases where quoted market prices are not available, fair values are based on estimates using present value or other market value techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. The aggregate fair value amounts presented below do not represent the underlying value of the Corporation.
The carrying amount and fair value of the Corporation’s financial instruments are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2019
|
|
As of December 31, 2018
|
(dollars in thousands)
|
Fair Value
Hierarchy
Level
(1)
|
|
Carrying
Amount
|
|
Fair Value
|
|
Carrying
Amount
|
|
Fair Value
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
Level 1
|
|
$
|
43,105
|
|
|
$
|
43,105
|
|
|
$
|
48,456
|
|
|
$
|
48,456
|
|
Investment securities - available for sale
|
See Note 19
|
|
559,983
|
|
|
559,983
|
|
|
737,442
|
|
|
737,442
|
|
Investment securities - trading
|
See Note 19
|
|
8,189
|
|
|
8,189
|
|
|
7,502
|
|
|
7,502
|
|
Investment securities – held to maturity
|
Level 2
|
|
10,457
|
|
|
10,324
|
|
|
8,684
|
|
|
8,438
|
|
Loans held for sale
|
Level 2
|
|
2,884
|
|
|
2,884
|
|
|
1,749
|
|
|
1,749
|
|
Net portfolio loans and leases
|
Level 3
|
|
3,502,898
|
|
|
3,473,442
|
|
|
3,407,728
|
|
|
3,414,921
|
|
MSRs
|
Level 3
|
|
4,910
|
|
|
5,754
|
|
|
5,047
|
|
|
6,277
|
|
Interest rate swaps
|
Level 2
|
|
23,405
|
|
|
23,405
|
|
|
12,550
|
|
|
12,550
|
|
FX forwards
|
Level 2
|
|
7
|
|
|
7
|
|
|
—
|
|
|
—
|
|
RPAs purchased
|
Level 2
|
|
87
|
|
|
87
|
|
|
71
|
|
|
71
|
|
Other assets
|
Level 3
|
|
40,175
|
|
|
40,175
|
|
|
43,641
|
|
|
43,641
|
|
Total financial assets
|
|
|
$
|
4,196,100
|
|
|
$
|
4,167,355
|
|
|
$
|
4,272,870
|
|
|
$
|
4,281,047
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
Deposits
|
Level 2
|
|
$
|
3,637,617
|
|
|
$
|
3,634,820
|
|
|
$
|
3,599,087
|
|
|
$
|
3,594,123
|
|
Short-term borrowings
|
Level 2
|
|
124,214
|
|
|
124,214
|
|
|
252,367
|
|
|
252,367
|
|
Long-term FHLB advances
|
Level 2
|
|
55,407
|
|
|
55,120
|
|
|
55,374
|
|
|
54,803
|
|
Subordinated notes
|
Level 2
|
|
98,571
|
|
|
99,472
|
|
|
98,526
|
|
|
100,120
|
|
Junior subordinated debentures
|
Level 2
|
|
21,622
|
|
|
26,427
|
|
|
21,580
|
|
|
31,176
|
|
Interest rate swaps
|
Level 2
|
|
23,404
|
|
|
23,404
|
|
|
12,549
|
|
|
12,549
|
|
RPAs sold
|
Level 2
|
|
2
|
|
|
2
|
|
|
2
|
|
|
2
|
|
Other liabilities
|
Level 3
|
|
47,824
|
|
|
47,824
|
|
|
60,847
|
|
|
60,847
|
|
Total financial liabilities
|
|
|
$
|
4,008,661
|
|
|
$
|
4,011,283
|
|
|
$
|
4,100,332
|
|
|
$
|
4,105,987
|
|
(1) See Note 20 in the Notes to Unaudited Consolidated Financial Statements above for a description of hierarchy levels.
Note 22
– Financial Instruments with Off-Balance Sheet Risk, Contingencies and Concentration of Credit Risk
Off-Balance Sheet Arrangements
The Corporation 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. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated statements of financial condition. The contractual amounts of those instruments reflect the extent of involvement the Corporation has in particular classes of financial instruments.
The Corporation’s exposure to credit loss in the event of nonperformance by the counterparty to the financial instrument of commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Corporation uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet financial instruments.
Commitments to extend credit, which include unused lines of credit and unfunded commitments to originate loans, are agreements to lend to a customer as long as there is no violation of any condition established in the agreement. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Some of the commitments are expected to expire without being drawn upon, and the total commitment amounts do not necessarily represent future cash requirements. Total commitments to extend credit at
March 31, 2019
and
December 31, 2018
were
$823.8 million
and
$867.2 million
, respectively. Management evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Corporation upon extension of credit, is based on a credit evaluation of the counterparty. Collateral varies but may include accounts receivable, marketable securities, inventory, property, plant and equipment, residential real estate, and income-producing commercial properties.
Standby letters of credit are conditional commitments issued by the Bank to a customer for a third party. Such standby letters of credit are issued to support private borrowing arrangements. The credit risk involved in issuing standby letters of credit is similar to that involved in extending loan facilities to customers. The collateral varies, but may include accounts receivable, marketable securities, inventory, property, plant and equipment, and residential real estate for those commitments for which collateral is deemed necessary. The Corporation’s obligations under standby letters of credit as of
March 31, 2019
and
December 31, 2018
were
$27.4 million
and
$21.2 million
, respectively.
Contingencies
Legal Matters
In the ordinary course of its operations, BMBC and its subsidiaries are parties to various claims, litigation, investigations, and legal and administrative cases and proceedings. Such pending or threatened claims, litigation, investigations, legal and administrative cases and proceedings typically entail matters that are considered ordinary routine litigation incidental to our business. Claims for significant monetary damages may be asserted in many of these types of legal actions. Based on the information currently available, management believes it has meritorious defenses to the claims asserted against it in its currently outstanding legal proceedings and with respect to such legal proceedings, intends to continue to defend itself vigorously, litigating or settling cases according to management’s judgment as to what is in the best interests of the Corporation and its shareholders.
On a regular basis, liabilities and contingencies in connection with outstanding legal proceedings are assessed utilizing the latest information available. For those matters where it is probable that the Corporation will incur a loss and the amount of the loss can be reasonably estimated, a liability may be recorded in the Consolidated Financial Statements. These legal reserves may be increased or decreased to reflect any relevant developments on at least a quarterly basis. For other matters, where a loss is not probable or the amount or range of the loss is not estimable, legal reserves are not accrued. While the outcome of legal proceedings is inherently uncertain, based on information currently available, advice of counsel and available insurance coverage, management believes that the established legal reserves are adequate and the liabilities arising from legal proceedings will not have a material adverse effect on the consolidated financial position, consolidated results of operations or consolidated cash flows. However, in the event of unexpected future developments, it is possible that the ultimate resolution of these matters, if unfavorable, may be material to the consolidated financial position, consolidated results of operations or consolidated cash flows of the Corporation.
Crusader Servicing Corporation (“Crusader”), which was an
80%
owned subsidiary of Royal Bank America that was acquired by the Bank in the RBPI merger, along with the Bank as successor-in-interest to Royal Bank America, are defendants in the case captioned Snyder v. Crusader Servicing Corporation et al., Case No. 2007-01027, in the Court of Common Pleas of Montgomery County, Pennsylvania. The case involves claims brought by a former Crusader shareholder in 2007 against Crusader, its former directors and remaining shareholders related, among other things, to a purported failure to pay amounts allegedly due to Snyder for his shares of Crusader stock. Subsequent to the end of the first quarter of 2019, on May 1, 2019, the Court rendered a decision against Crusader. Crusader is vigorously exploring its strategic options including post-trial motions and potential appeal of this matter. We do not believe that this ruling and the monetary award, if any, ultimately payable by Crusader will be material to the consolidated financial position, consolidated results of operations or consolidated cash flows of the Corporation.
Indemnifications
In general, the Corporation does not sell loans with recourse, except to the extent that it arises from standard loan-sale contract provisions. These provisions cover violations of representations and warranties and, under certain circumstances, first payment default by borrowers. These indemnifications may include the repurchase of loans by the Corporation, and are considered customary provisions in the secondary market for conforming mortgage loan sales. Repurchases and losses have been rare and no provision is made for losses at the time of sale. There were no such repurchases for the three months ended March 31, 2019.
Concentrations of Credit Risk
The Corporation has a material portion of its loans in real estate-related loans. A predominant percentage of the Corporation’s real estate exposure, both commercial and residential, is in the Corporation’s primary trade area which includes portions of Delaware, Chester, Montgomery and Philadelphia counties in Southeastern Pennsylvania. Management is aware of this concentration and attempts to mitigate this risk to the extent possible in many ways, including the underwriting and assessment of borrower’s capacity to repay. See Note 5 – “Loans and Leases” for additional information.
Note 23 – Segment Information
FASB Codification 280 – “Segment Reporting” identifies operating segments as components of an enterprise which are evaluated regularly by the Corporation’s chief operating decision maker, our Chief Executive Officer, in deciding how to allocate resources and assess performance. The Corporation has applied the aggregation criterion set forth in this codification to the results of its operations.
The Corporation’s Banking segment consists of commercial and retail banking. The Banking segment is evaluated as a single strategic unit which generates revenues from a variety of products and services. The Banking segment generates interest income from its lending (including leases) and investing activities and is dependent on the gathering of lower cost deposits from its branch network or borrowed funds from other sources for funding its loans, resulting in the generation of net interest income. The Banking segment also derives revenues from other sources including gains on the sale in available for sale investment securities, gains on the sale of residential mortgage loans, service charges on deposit accounts, cash sweep fees, overdraft fees, bank owned life insurance ("BOLI") income and revenue associated with its Visa Check Card offering. Also included in the Banking segment are two subsidiaries of the Bank, KCMI Capital, Inc. and Bryn Mawr Equipment Financing, Inc., both of which provide specialized lending solutions to our customers.
The Wealth Management segment has responsibility for a number of activities within the Corporation, including trust administration, other related fiduciary services, custody, investment management and advisory services, employee benefits and IRA administration, estate settlement, tax services and brokerage. Bryn Mawr Trust of Delaware and Lau Associates are included in the Wealth Management segment of the Corporation since they have similar economic characteristics, products and services to those of the Wealth Management Division of the Corporation. BMT Investment Advisers, formed in May 2017, which serves as investment adviser to BMT Investment Funds, a Delaware statutory trust, is also reported under the Wealth Management segment. In addition, the Wealth Management Division oversees all insurance services of the Corporation, which are conducted through the Bank’s insurance subsidiary, BMT Insurance Advisors, Inc., and are reported in the Wealth Management segment.
The accounting policies of the Corporation are applied by segment in the following tables. The segments are presented on a pre-tax basis.
The following tables detail the Corporation’s segments for the
three
months ended
March 31, 2019
and
2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2019
|
|
Three Months Ended March 31, 2018
|
(dollars in thousands)
|
Banking
|
|
Wealth
Management
|
|
Consolidated
|
|
Banking
|
|
Wealth
Management
|
|
Consolidated
|
Net interest income
|
$
|
37,645
|
|
|
$
|
2
|
|
|
$
|
37,647
|
|
|
$
|
37,438
|
|
|
$
|
1
|
|
|
$
|
37,439
|
|
Provision for loan and lease losses
|
3,736
|
|
|
—
|
|
|
3,736
|
|
|
1,030
|
|
|
—
|
|
|
1,030
|
|
Net interest income after loan loss provision
|
33,909
|
|
|
2
|
|
|
33,911
|
|
|
36,408
|
|
|
1
|
|
|
36,409
|
|
Noninterest income:
|
|
|
|
|
|
|
|
|
|
|
|
Fees for wealth management services
|
—
|
|
|
10,392
|
|
|
10,392
|
|
|
—
|
|
|
10,308
|
|
|
10,308
|
|
Insurance commissions
|
—
|
|
|
1,672
|
|
|
1,672
|
|
|
—
|
|
|
1,693
|
|
|
1,693
|
|
Capital markets revenue
|
2,219
|
|
|
—
|
|
|
2,219
|
|
|
666
|
|
|
—
|
|
|
666
|
|
Service charges on deposit accounts
|
808
|
|
|
—
|
|
|
808
|
|
|
713
|
|
|
—
|
|
|
713
|
|
Loan servicing and other fees
|
609
|
|
|
—
|
|
|
609
|
|
|
686
|
|
|
—
|
|
|
686
|
|
Net gain on sale of loans
|
319
|
|
|
—
|
|
|
319
|
|
|
518
|
|
|
—
|
|
|
518
|
|
Net gain on sale of investment securities available for sale
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
7
|
|
Net gain on sale of OREO
|
(24
|
)
|
|
—
|
|
|
(24
|
)
|
|
176
|
|
|
—
|
|
|
176
|
|
Other operating income
|
3,237
|
|
|
21
|
|
|
3,258
|
|
|
4,725
|
|
|
44
|
|
|
4,769
|
|
Total noninterest income
|
7,168
|
|
|
12,085
|
|
|
19,253
|
|
|
7,491
|
|
|
12,045
|
|
|
19,536
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Salaries & wages
|
15,775
|
|
|
5,126
|
|
|
20,901
|
|
|
11,156
|
|
|
4,826
|
|
|
15,982
|
|
Employee benefits
|
3,172
|
|
|
994
|
|
|
4,166
|
|
|
2,676
|
|
|
1,032
|
|
|
3,708
|
|
Occupancy and bank premises
|
2,732
|
|
|
520
|
|
|
3,252
|
|
|
2,576
|
|
|
474
|
|
|
3,050
|
|
Amortization of intangible assets
|
327
|
|
|
611
|
|
|
938
|
|
|
398
|
|
|
481
|
|
|
879
|
|
Professional fees
|
1,163
|
|
|
157
|
|
|
1,320
|
|
|
729
|
|
|
19
|
|
|
748
|
|
Other operating expenses
|
7,269
|
|
|
1,878
|
|
|
9,147
|
|
|
10,431
|
|
|
1,232
|
|
|
11,663
|
|
Total noninterest expenses
|
30,438
|
|
|
9,286
|
|
|
39,724
|
|
|
27,966
|
|
|
8,064
|
|
|
36,030
|
|
Segment profit
|
10,639
|
|
|
2,801
|
|
|
13,440
|
|
|
15,933
|
|
|
3,982
|
|
|
19,915
|
|
Intersegment (revenues) expenses
(1)
|
(123
|
)
|
|
123
|
|
|
—
|
|
|
(149
|
)
|
|
149
|
|
|
—
|
|
Pre-tax segment profit after eliminations
|
$
|
10,516
|
|
|
$
|
2,924
|
|
|
$
|
13,440
|
|
|
$
|
15,784
|
|
|
$
|
4,131
|
|
|
$
|
19,915
|
|
% of segment pre-tax profit after eliminations
|
78.2
|
%
|
|
21.8
|
%
|
|
100.0
|
%
|
|
79.3
|
%
|
|
20.7
|
%
|
|
100.0
|
%
|
Segment assets
(dollars in millions)
|
$
|
4,577.7
|
|
|
$
|
54.3
|
|
|
$
|
4,632.0
|
|
|
$
|
4,248.4
|
|
|
$
|
52.0
|
|
|
$
|
4,300.4
|
|
(1)
Inter-segment revenues consist of rental payments, interest on deposits and management fees.
Wealth Management Segment Information
|
|
|
|
|
|
|
|
|
(dollars in millions)
|
March 31,
2019
|
|
December 31,
2018
|
Assets under management, administration, supervision and brokerage
|
$
|
14,736.5
|
|
|
$
|
13,429.5
|
|