The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2017, 2016 and 2015
Note 1 Summary of Significant Accounting Policies
Description of Business and Basis of Presentation
TriCo
Bancshares (the Company or we) is a California corporation organized to act as a bank holding company for Tri Counties Bank (the Bank). The Company and the Bank are headquartered in Chico, California. The Bank is
a California-chartered bank that is engaged in the general commercial banking business in 26 California counties. The Bank operates from 57 traditional branches, 9
in-store
branches and 2 loan production
offices. The Company has five capital subsidiary business trusts (collectively, the Capital Trusts) that issued trust preferred securities, including two organized by TriCo and three acquired with the acquisition of North Valley Bancorp.
See Note 17 Junior Subordinated Debt.
The consolidated financial statements are prepared in accordance with accounting policies generally accepted
in the United States of America and general practices in the banking industry. The financial statements include the accounts of the Company. All inter-company accounts and transactions have been eliminated in consolidation. For financial reporting
purposes, the Companys investments in the Capital Trusts of $1,721,000 are accounted for under the equity method and, accordingly, are not consolidated and are included in other assets on the consolidated balance sheet. The subordinated
debentures issued and guaranteed by the Company and held by the Capital Trusts are reflected as debt on the Companys consolidated balance sheet.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires Management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Significant Group Concentration of Credit Risk
The
Company grants agribusiness, commercial, consumer, and residential loans to customers located throughout the northern San Joaquin Valley, the Sacramento Valley and northern mountain regions of California. The Company has a diversified loan portfolio
within the business segments located in this geographical area. Management has determined that because all of the banking products and services offered by the Company are available in each branch of the Bank, all branches are located within the same
economic environment and management does not allocate resources based on the performance of different lending or transaction activities, it is appropriate to aggregate the Bank branches and report them as a single operating segment.
Cash and Cash Equivalents
For purposes of the
consolidated statements of cash flows, cash and cash equivalents include cash on hand, amounts due from banks, and federal funds sold. Net cash flows are reported for loan and deposit transactions and other borrowings.
Investment Securities
The Company classifies its debt
and marketable equity securities into one of three categories: trading, available for sale or held to maturity. Trading securities are bought and held principally for the purpose of selling in the near term. Held to maturity securities are those
securities which the Company has the ability and intent to hold until maturity. These securities are carried at cost adjusted for amortization of premium and accretion of discount, computed by the effective interest method over their contractual
lives. All other securities not included in trading or held to maturity are classified as available for sale. Available for sale securities are recorded at fair value. Unrealized gains and losses, net of the related tax effect, on available for sale
securities are reported as a separate component of other accumulated comprehensive income in shareholders equity until realized. Premiums and discounts are amortized or accreted over the life of the related investment security as an adjustment
to yield using the effective interest method. Dividend and interest income are recognized when earned. Realized gains and losses are derived from the amortized cost of the security sold using the specific identification method. During the year ended
December 31, 2017, the Company sold $24,796,000 of available for sale classified investment securities for $25,757,000 realizing a gain of $961,000. During the year ended December 31, 2016, the Company did not sell any investment
securities. At December 31, 2017 and 2016, the Company did not have any securities classified as trading.
The Company assesses other-than-temporary
impairment (OTTI) based on whether it intends to sell a security or if it is likely that the Company would be required to sell the security before recovery of the amortized cost basis of the investment, which may be maturity. For debt
securities, if we intend to sell the security or it is more likely than not that we will be required to sell the security before recovering its cost basis, the entire impairment loss would be recognized in earnings as an OTTI. If we do not intend to
sell the security and it is not likely that we will be required to sell the security but we do not expect to recover the entire amortized cost basis of the security, only the portion of the impairment loss representing credit losses would be
recognized in earnings. The credit loss on a security is measured as the difference between the amortized cost basis and the present value of the cash flows expected to be collected. Projected cash flows are discounted by the original or current
effective interest rate depending on the nature of the security being measured for potential OTTI. The remaining impairment related to all other factors, the difference between the present value of the cash flows expected to be collected and fair
value, is recognized as a charge to other comprehensive income (OCI). Impairment losses related to all other factors are presented as separate categories within OCI. The accretion of the amount recorded in OCI increases the carrying
value of the investment and does not affect earnings. If there is an indication of additional credit losses the security is
re-evaluated
according to the procedures described above. No OTTI losses were
recognized during the years ended December 31, 2017, 2016, and 2015.
59
Restricted Equity Securities
Restricted equity securities represent the Companys investment in the stock of the Federal Home Loan Bank of San Francisco (FHLB) and are
carried at par value, which reasonably approximates its fair value. While technically these are considered equity securities, there is no market for the FHLB stock. Therefore, the shares are considered as restricted investment securities. Management
periodically evaluates FHLB stock for other-than-temporary impairment. Managements determination of whether these investments are impaired is based on its assessment of the ultimate recoverability of cost rather than by recognizing temporary
declines in value. The determination of whether a decline affects the ultimate recoverability of cost is influenced by criteria such as (1) the significance of any decline in net assets of the FHLB as compared to the capital stock amount for
the FHLB and the length of time this situation has persisted, (2) commitments by the FHLB to make payments required by law or regulation and the level of such payments in relation to the operating performance of the FHLB, (3) the impact of
legislative and regulatory changes on institutions and, accordingly, the customer base of the FHLB, and (4) the liquidity position of the FHLB.
As a
member of the FHLB system, the Bank is required to maintain a minimum level of investment in FHLB stock based on specific percentages of its outstanding mortgages, total assets, or FHLB advances. The Bank may request redemption at par value of any
stock in excess of the minimum required investment. Stock redemptions are at the discretion of the FHLB.
Loans Held for Sale
Loans originated and intended for sale in the secondary market are carried at the lower of aggregate cost or fair value, as determined by aggregate outstanding
commitments from investors of current investor yield requirements. Net unrealized losses are recognized through a valuation allowance by charges to noninterest income.
Mortgage loans held for sale are generally sold with the mortgage servicing rights retained by the Company. Gains or losses on the sale of loans that are held
for sale are recognized at the time of the sale and determined by the difference between net sale proceeds and the net book value of the loans less the estimated fair value of any retained mortgage servicing rights.
Loans and Allowance for Loan Losses
Loans originated by
the Company, i.e., not purchased or acquired in a business combination, are referred to as originated loans. Originated loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at
the principal amount outstanding, net of deferred loan fees and costs. Loan origination and commitment fees and certain direct loan origination costs are deferred, and the net amount is amortized as an adjustment of the related loans yield
over the actual life of the loan. Originated loans on which the accrual of interest has been discontinued are designated as nonaccrual loans.
Originated
loans are placed in nonaccrual status when reasonable doubt exists as to the full, timely collection of interest or principal, or a loan becomes contractually past due by 90 days or more with respect to interest or principal and is not well secured
and in the process of collection. When an originated loan is placed on nonaccrual status, all interest previously accrued but not collected is reversed. Income on such loans is then recognized only to the extent that cash is received and where the
future collection of principal is probable. Interest accruals are resumed on such loans only when they are brought fully current with respect to interest and principal and when, in the judgment of Management, the loan is estimated to be fully
collectible as to both principal and interest.
An allowance for loan losses for originated loans is established through a provision for loan losses
charged to expense. The allowance is maintained at a level which, in Managements judgment, is adequate to absorb probable incurred credit losses inherent in the loan portfolio as of the balance sheet date. Originated loans and deposit related
overdrafts are charged against the allowance for loan losses when Management believes that the collectability of the principal is unlikely or, with respect to consumer installment loans, according to an established delinquency schedule. The
allowance is an amount that Management believes will be adequate to absorb probable incurred losses inherent in existing loans, based on evaluations of the collectability, impairment and prior loss experience of loans. The evaluations take into
consideration such factors as changes in the nature and size of the portfolio, overall portfolio quality, loan concentrations, specific problem loans, and current economic conditions that may affect the borrowers ability to pay. The Company
defines an originated loan as impaired when it is probable the Company will be unable to collect all amounts due according to the original contractual terms of the loan agreement. Impaired originated loans are measured based on the present value of
expected future cash flows discounted at the loans original effective interest rate. As a practical expedient, impairment may be measured based on the loans observable market price or the fair value of the collateral if the loan is
collateral dependent. When the measure of the impaired loan is less than the recorded investment in the loan, the impairment is recorded through a specific reserve allocation within the allowance for loan losses.
In situations related to originated loans where, for economic or legal reasons related to a borrowers financial difficulties, the Company grants a
concession for other than an insignificant period of time to the borrower that the Company would not otherwise consider, the related loan is classified as a troubled debt restructuring (TDR). The Company strives to identify borrowers in financial
difficulty early and work with them to modify to more affordable terms before their loan reaches nonaccrual status. These modified terms may include rate reductions, principal forgiveness, payment forbearance and other actions intended to minimize
the economic loss and to avoid foreclosure or repossession of the collateral. In cases where the Company grants the borrower new terms that result in the loan being classified as a TDR, the Company measures any impairment on the restructuring as
noted above for impaired loans. TDR loans are classified as impaired until they are fully paid off or charged off. Loans that are in nonaccrual status at the time they become TDR loans, remain in nonaccrual status until the borrower demonstrates a
sustained period of performance which the Company generally believes to be six consecutive months of payments, or equivalent. Otherwise, TDR loans are subject to the same nonaccrual and
charge-off
policies as
noted above with respect to their restructured principal balance.
60
Credit risk is inherent in the business of lending. As a result, the Company maintains an allowance for loan
losses to absorb probable incurred losses inherent in the Companys originated loan portfolio. This is maintained through periodic charges to earnings. These charges are included in the Consolidated Statements of Income as provision for loan
losses. All specifically identifiable and quantifiable losses are immediately charged off against the allowance. However, for a variety of reasons, not all losses are immediately known to the Company and, of those that are known, the full extent of
the loss may not be quantifiable at that point in time. The balance of the Companys allowance for originated loan losses is meant to be an estimate of these probable incurred losses inherent in the portfolio.
The Company formally assesses the adequacy of the allowance for originated loan losses on a quarterly basis. Determination of the adequacy is based on ongoing
assessments of the probable risk in the outstanding originated loan portfolio, and to a lesser extent the Companys originated loan commitments. These assessments include the periodic
re-grading
of
credits based on changes in their individual credit characteristics including delinquency, seasoning, recent financial performance of the borrower, economic factors, changes in the interest rate environment, growth of the portfolio as a whole or by
segment, and other factors as warranted. Loans are initially graded when originated. They are
re-graded
as they are renewed, when there is a new loan to the same borrower, when identified facts demonstrate
heightened risk of nonpayment, or if they become delinquent.
Re-grading
of larger problem loans occurs at least quarterly. Confirmation of the quality of the grading process is obtained by independent credit
reviews conducted by consultants specifically hired for this purpose and by various bank regulatory agencies.
The Companys method for assessing the
appropriateness of the allowance for originated loan losses includes specific allowances for impaired originated loans, formula allowance factors for pools of credits, and allowances for changing environmental factors (e.g., interest rates, growth,
economic conditions, etc.). Allowance factors for loan pools were based on historical loss experience by product type and prior risk rating.
Loans
purchased or acquired in a business combination are referred to as acquired loans. Acquired loans are valued as of the acquisition date in accordance with Financial Accounting Standards Board Accounting Standards Codification (FASB ASC)
Topic 805,
Business Combinations
. Loans acquired with evidence of credit deterioration since origination for which it is probable that all contractually required payments will not be collected are referred to as purchased credit impaired
(PCI) loans. PCI loans are accounted for under FASB ASC Topic
310-30,
Loans and Debt Securities Acquired with Deteriorated Credit Quality
. Under FASB ASC Topic 805 and FASB ASC Topic
310-30,
PCI loans are recorded at fair value at acquisition date, factoring in credit losses expected to be incurred over the life of the loan. Accordingly, an allowance for loan losses is not carried over or
recorded as of the acquisition date. Fair value is defined as the present value of the future estimated principal and interest payments of the loan, with the discount rate used in the present value calculation representing the estimated effective
yield of the loan. Default rates, loss severity, and prepayment speed assumptions are periodically reassessed and our estimate of future payments is adjusted accordingly. The difference between contractual future payments and estimated future
payments is referred to as the nonaccretable difference. The difference between estimated future payments and the present value of the estimated future payments is referred to as the accretable yield. The accretable yield represents the amount that
is expected to be recorded as interest income over the remaining life of the loan. If after acquisition, the Company determines that the estimated future cash flows of a PCI loan are expected to be more than originally estimated, an increase in the
discount rate (effective yield) would be made such that the newly increased accretable yield would be recognized, on a level yield basis, over the remaining estimated life of the loan. If, thereafter, the Company determines that the estimated future
cash flows of a PCI loan are expected to be less than previously estimated, an allowance for loan loss would be established through a provision for loan losses charged to expense to decrease the present value to the required level. If the estimated
cash flows improve after an allowance has been established for a loan, the allowance may be partially or fully reversed depending on the improvement in the estimated cash flows. Only after the allowance has been fully reversed may the discount rate
be increased. PCI loans are put on nonaccrual status when cash flows cannot be reasonably estimated. PCI loans on nonaccrual status are accounted for using the cost recovery method or cash basis method of income recognition. The Company refers to
PCI loans on nonaccrual status that are accounted for using the cash basis method of income recognition as PCI cash basis loans; and the Company refers to all other PCI loans as PCI other loans PCI loans are
charged off when evidence suggests cash flows are not recoverable. Foreclosed assets from PCI loans are recorded in foreclosed assets at fair value with the fair value at time of foreclosure representing cash flow from the loan. ASC
310-30
allows PCI loans with similar risk characteristics and acquisition time frame to be pooled and have their cash flows aggregated as if they were one loan. The Company elected to use the
pooled method of ASC
310-30
for PCI other loans in the acquisition of certain assets and liabilities of Granite Community Bank, N.A. (Granite) during 2010 and Citizens Bank of
Northern California (Citizens) during 2011.
Acquired loans that are not PCI loans are referred to as purchased not credit impaired (PNCI)
loans. PNCI loans are accounted for under FASB ASC Topic
310-20,
Receivables Nonrefundable Fees and Other Costs,
in which interest income is accrued on a level-yield basis for performing loans.
For income recognition purposes, this method assumes that all contractual cash flows will be collected, and no allowance for loan losses is established at the time of acquisition. Post-acquisition date, an allowance for loan losses may need to be
established for acquired loans through a provision charged to earnings for credit losses incurred subsequent to acquisition. Under ASC
310-20,
the loss would be measured based on the probable shortfall in
relation to the contractual note requirements, consistent with our allowance for loan loss policy for similar loans.
Throughout these financial
statements, and in particular in Note 4 and Note 5, when we refer to Loans or Allowance for loan losses we mean all categories of loans, including Originated, PNCI, PCI cash basis, and PCI other. When we are not
referring to all categories of loans, we will indicate which we are referring to Originated, PNCI, PCI cash basis, or PCI other.
When referring to PNCI and PCI loans we use the terms nonaccretable difference, accretable yield, or purchase discount.
Nonaccretable difference is the difference between undiscounted contractual cash flows due and undiscounted cash flows we expect to collect, or put another way, it is the undiscounted contractual cash flows we do not expect to collect. Accretable
yield is the difference between undiscounted cash flows we expect to collect and the value at which we have recorded the loan on our financial statements. On the
61
date of acquisition, all purchased loans are recorded on our consolidated financial statements at estimated fair value. Purchase discount is the difference between the estimated fair value of
loans on the date of acquisition and the principal amount owed by the borrower, net of charge offs, on the date of acquisition. We may also refer to discounts to principal balance of loans owed, net of charge-offs. Discounts to principal
balance of loans owed, net of charge-offs is the difference between principal balance of loans owed, net of charge-offs, and loans as recorded on our financial statements. Discounts to principal balance of loans owed, net of charge-offs arise from
purchase discounts, and equal the purchase discount on the acquisition date.
Loans are also categorized as covered or noncovered.
Covered loans refer to loans covered by a Federal Deposit Insurance Corporation (FDIC) loss sharing agreement. Noncovered loans refer to loans not covered by a FDIC loss sharing agreement.
Foreclosed Assets
Foreclosed assets include assets
acquired through, or in lieu of, loan foreclosure. Foreclosed assets are held for sale and are initially recorded at fair value less estimated costs to sell at the date of foreclosure, establishing a new cost basis. Physical possession of
residential real estate property collateralizing a consumer mortgage loan occurs when legal title is obtained upon completion of foreclosure or when the borrower conveys all interest in the property to satisfy the loan through completion of a deed
in lieu of foreclosure or through a similar legal agreement. Any write-downs based on the assets fair value less costs to sell at the date of acquisition are charged to the allowance for loan and lease losses. Any recoveries based on the
assets fair value less estimated costs to sell in excess of the recorded value of the loan at the date of acquisition are recorded to the allowance for loan and lease losses. These assets are subsequently accounted for at lower of cost or fair
value less estimated costs to sell. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense. Operating costs after acquisition are expensed. Revenue and expenses from operations and changes in the
valuation allowance are included in other noninterest expense. Gain or loss on sale of foreclosed assets is included in noninterest income. Foreclosed assets that are not subject to a FDIC loss-share agreement are referred to as noncovered
foreclosed assets.
Foreclosed assets acquired through FDIC-assisted acquisitions that are subject to a FDIC loss-share agreement, and all assets acquired
via foreclosure of covered loans are referred to as covered foreclosed assets. Covered foreclosed assets are reported exclusive of expected reimbursement cash flows from the FDIC. Foreclosed covered loan collateral is transferred into covered
foreclosed assets at the loans carrying value, inclusive of the acquisition date fair value discount.
Covered foreclosed assets are initially
recorded at estimated fair value less estimated costs to sell on the acquisition date based on similar market comparable valuations less estimated selling costs. Any subsequent valuation adjustments due to declines in fair value will be charged to
noninterest expense, and will be mostly offset by noninterest income representing the corresponding increase to the FDIC indemnification asset for the offsetting loss reimbursement amount. Any recoveries of previous valuation adjustments will be
credited to noninterest expense with a corresponding charge to noninterest income for the portion of the recovery that is due to the FDIC.
Premises
and Equipment
Land is carried at cost. Land improvements, buildings and equipment, including those acquired under capital lease, are stated at cost
less accumulated depreciation and amortization. Depreciation and amortization expenses are computed using the straight-line method over the shorter of the estimated useful lives of the related assets or lease terms. Asset lives range from
3-10
years for furniture and equipment and
15-40
years for land improvements and buildings.
Goodwill and Other Intangible Assets
Goodwill represents
the excess of costs over fair value of net assets of businesses acquired. Goodwill and other intangible assets acquired in a business combination and determined to have an indefinite useful life are not amortized, but instead tested for impairment
at least annually. Intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment.
The Company has an identifiable intangible asset consisting of core deposit intangibles (CDI). CDI are amortized over their respective estimated useful lives,
and reviewed for impairment.
Impairment of Long-Lived Assets and Goodwill
Long-lived assets, such as premises and equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to
be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be
disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposed group classified as held for
sale would be presented separately in the appropriate asset and liability sections of the consolidated balance sheet.
As of December 31 of each
year, goodwill is tested for impairment, and is tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the
assets fair value. This determination is made at the reporting unit level. The Company may choose to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely
than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, the Company determines it is not more likely than not that the fair value of a reporting unit is less
than its carrying amount, then goodwill is deemed not to be impaired. However, if the Company concludes otherwise, or if the Company elected not to first assess qualitative factors, then the Company performs the first step of a
two-step
62
impairment test by calculating the fair value of the reporting unit and comparing the fair value with the carrying amount of the reporting unit. Second, if the carrying amount of the reporting
unit exceeds its fair value, an impairment loss is recognized for any excess of the carrying amount of the reporting units goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating
the fair value of the reporting unit in a manner similar to a purchase price allocation. The residual fair value after this allocation is the implied fair value of the reporting unit goodwill. Currently, and historically, the Company is comprised of
only one reporting unit that operates within the business segment it has identified as community banking. Goodwill was not impaired as of December 31, 2017 because the fair value of the reporting unit exceeded its carrying value.
Mortgage Servicing Rights
Mortgage servicing rights
(MSR) represent the Companys right to a future stream of cash flows based upon the contractual servicing fee associated with servicing mortgage loans. Our MSR arise from residential and commercial mortgage loans that we originate and sell, but
retain the right to service the loans. The net gain from the retention of the servicing right is included in gain on sale of loans in noninterest income when the loan is sold. Fair value is based on market prices for comparable mortgage servicing
contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model incorporates assumptions that market participants would use in estimating
future net servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses. Servicing fees are recorded in noninterest income when
earned.
The Company accounts for MSR at fair value. The determination of fair value of our MSR requires management judgment because they are not actively
traded. The determination of fair value for MSR requires valuation processes which combine the use of discounted cash flow models and extensive analysis of current market data to arrive at an estimate of fair value. The cash flow and prepayment
assumptions used in our discounted cash flow model are based on empirical data drawn from the historical performance of our MSR, which we believe are consistent with assumptions used by market participants valuing similar MSR, and from data obtained
on the performance of similar MSR. The key assumptions used in the valuation of MSR include mortgage prepayment speeds and the discount rate. These variables can, and generally will, change from quarter to quarter as market conditions and projected
interest rates change. The key risks inherent with MSR are prepayment speed and changes in interest rates. The Company uses an independent third party to determine fair value of MSR.
Indemnification Asset/Liability
The Company accounts for
amounts receivable or payable under its loss-share agreements entered into with the FDIC in connection with its purchase and assumption of certain assets and liabilities of Granite as indemnification assets in accordance with FASB ASC Topic 805,
Business Combinations
. FDIC indemnification assets are initially recorded at fair value, based on the discounted value of expected future cash flows under the loss-share agreements. The difference between the fair value and the undiscounted
cash flows the Company expects to collect from or pay to the FDIC will be accreted into noninterest income over the life of the FDIC indemnification asset. FDIC indemnification assets are reviewed quarterly and adjusted for any changes in expected
cash flows based on recent performance and expectations for future performance of the covered portfolios. These adjustments are measured on the same basis as the related covered loans and covered other real estate owned. Any increases in cash flow
of the covered assets over those expected will reduce the FDIC indemnification asset and any decreases in cash flow of the covered assets under those expected will increase the FDIC indemnification asset. Increases and decreases to the FDIC
indemnification asset are recorded as adjustments to noninterest income.
Reserve for Unfunded Commitments
The reserve for unfunded commitments is established through a provision for losses unfunded commitments charged to noninterest expense. The reserve for
unfunded commitments is an amount that Management believes will be adequate to absorb probable losses inherent in existing commitments, including unused portions of revolving lines of credit and other loans, standby letters of credit, and unused
deposit account overdraft privileges. The reserve for unfunded commitments is based on evaluations of the collectability, and prior loss experience of unfunded commitments. The evaluations take into consideration such factors as changes in the
nature and size of the loan portfolio, overall loan portfolio quality, loan concentrations, specific problem loans and related unfunded commitments, and current economic conditions that may affect the borrowers or depositors ability to
pay.
Low Income Housing Tax Credits
The Company
accounts for low income housing tax credits and the related qualified affordable housing projects using the proportional amortization method. Under the proportional amortization method, the Company amortizes the initial cost of the investment in
proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense (benefit). Upon entering into a qualified affordable housing project, the
Company records, in other liabilities, the entire amount that it has agreed to invest in the project, and an equal amount, in other assets, representing its investment in the project. As the Company disburses cash to satisfy its investment
obligation, other liabilities are reduced. Over time, as the tax credits and other tax benefits of the project are realized by the Company, the investment recorded in other assets is reduced using the proportional amortization method.
Income Taxes
The Companys accounting for income
taxes is based on an asset and liability approach. The Company recognizes the amount of taxes payable or refundable for the current year, and deferred tax assets and liabilities for the future tax consequences that have been recognized in its
financial statements or tax returns. The measurement of tax assets and liabilities is based on the provisions of enacted tax laws. A valuation allowance, if needed, reduces deferred tax assets to the expected amount most likely to be realized.
Realization of deferred tax assets is dependent upon the generation of a sufficient level of future taxable income and recoverable taxes paid in prior years. Although realization is not assured, management believes it is more likely than not that
all of the deferred tax assets will be realized. Interest and/or penalties related to income taxes are reported as a component of noninterest income.
63
Off-Balance
Sheet Credit Related Financial Instruments
In the ordinary course of business, the Company has entered into commitments to extend credit, including commitments under credit card arrangements, commercial
letters of credit, and standby letters of credit. Such financial instruments are recorded when they are funded.
Geographical Descriptions
For the purpose of describing the geographical location of the Companys loans, the Company has defined northern California as that area of California
north of, and including, Stockton; central California as that area of the state south of Stockton, to and including, Bakersfield; and southern California as that area of the state south of Bakersfield.
Reclassifications
During the three months ended
September 30, 2017, the Company changed its classification of 1
st
lien and 2
nd
lien
non-owner
occupied
1-4
residential real estate mortgage loans from commercial real estate mortgage loans to residential real estate mortgage loans and consumer home equity loans, respectively. This change in loan
category classification was made to better align the Companys financial reporting classifications with regulatory reporting classifications, and to properly classify these loans for regulatory risk-based capital ratio calculations. As a result
of these reclassifications, at September 30, 2017, loans with balances of $60,957,000, and $5,620,000, that would have been classified as commercial real estate mortgage loans prior to this change, were classified as residential real estate
mortgage loans, and consumer home equity loans, respectively; and the Companys, and the Banks, Total risk based capital ratios, Tier 1 capital ratios, and Tier 1 common equity ratios were all recalculated to be
0.10%-0.20%
higher than they would have been prior to this change. Certain amounts reported in previous consolidated financial statements have been reclassified and recalculated to conform to the presentation in
this report. These reclassifications did not affect previously reported net income,
total loans
or total shareholders equity.
Recent
Accounting Pronouncements
FASB Accounting Standards Update (ASU)
No.2014-09,
Revenue from Contracts with
Customers
(Topic 606):
ASU
2014-09
is intended to clarify the principles for recognizing revenue, and to develop common revenue standards and disclosure requirements that would: (1) remove
inconsistencies and weaknesses in revenue requirements; (2) provide a more robust framework for addressing revenue issues; (3) improve comparability of revenue recognition practices across entities, industries, jurisdictions, and capital
markets; (4) provide more useful information to users of financial statements through improved disclosures; and (5) simplify the preparation of financial statements by reducing the number of requirements to which an entity must refer. The
guidance affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets. The core principle is that an entity should recognize revenue to depict the
transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides steps to follow to achieve the core principle.
An entity should disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Qualitative and quantitative
information is required with regard to contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. ASU
2014-09
is effective
for annual reporting periods beginning after December 15, 2017, including interim periods therein, with early adoption permitted for reporting periods beginning after December 15, 2016. ASU
2014-09
does not apply to revenue associated with financial instruments such as loans and investments, which are accounted for under other provisions of GAAP. The Company adopted ASU
2014-09
on January 1, 2018
utilizing the modified retrospective approach, and the adoption of
ASU 2014-09
did not have a significant impact on the Companys consolidated financial statements.
FASB issued Accounting Standard Update (ASU)
No. 2016-02
,
Leases (Topic 842)
.
ASU 2016-2,
among other things, requires lessees to recognize most leases
on-balance
sheet, increasing reported assets and liabilities. Lessor accounting remains
substantially similar to current U.S. GAAP.
ASU 2016-02
will be effective for the Company on January 1, 2019, utilizing the modified retrospective transition approach. The Company is currently
evaluating the provisions of ASU No. 2016-02 and has determined that the adoption of this standard will result in an increase in assets to recognize the present value of the lease obligations with a corresponding increase in liabilities; however,
the Company does not expect this to have a material impact on the Companys results of operations or cash flows.
FASB issued Accounting Standard
Update (ASU)
No. 2016-09
, Compensation Stock Compensation (Topic 718).
ASU 2016-09,
among other things, requires: (i) that all excess tax
benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) should be recognized as income tax expense or benefit in the income statement, (ii) the tax effects of exercised or vested awards should be
treated as discrete items in the reporting period in which they occur, (iii) an entity also should recognize excess tax benefits regardless of whether the benefit reduces taxes payable in the current period, (iv) excess tax benefits should
be classified along with other income tax cash flows as an operating activity, (v) an entity can make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest (current GAAP) or account for
forfeitures when they occur, (vi) the threshold to qualify for equity classification permits withholding up to the maximum statutory tax rates in the applicable jurisdictions, and (vii) cash paid by an employer when directly withholding
shares for tax withholding purposes should be classified as a financing activity.
ASU 2016-09
was effective for the Company on January 1, 2017 and due to options exercised and restricted stock units
released during the year ended December, 2017, the Company recognized excess tax benefits totaling $906,000 during the year ended December 31, 2017.
FASB issued ASU
No. 2016-13,
Financial Instruments Credit Losses (Topic
326)
.
ASU
2016-13
is the final guidance on the new current expected credit loss (CECL) model. ASU
2016-13,
among other
things, requires the incurred loss impairment methodology in current GAAP be replaced with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to estimate future
credit loss estimates. As CECL encompasses all financial assets carried at amortized cost, the requirement that reserves be established based on an organizations reasonable and supportable estimate of expected credit losses extends to held to
maturity (HTM) debt securities. ASU
2016-13
amends the accounting for credit losses on
available-for-sale
securities (AFS), whereby credit losses will be presented as an allowance as opposed to a write-down. In addition, CECL will modify the accounting for purchased loans with credit deterioration since origination, so that
reserves are established at the date of acquisition for purchased loans. Lastly, ASU
2016-13
requires enhanced disclosures on the significant estimates and judgments used to estimate credit losses, as well as
on
64
the credit quality and underwriting standards of an organizations portfolio. These disclosures require organizations to present the currently required credit quality disclosures
disaggregated by the year of origination or vintage. ASU
2016-13
allows for a modified retrospective approach with a cumulative effect adjustment to the balance sheet upon adoption (charge to retained earnings
instead of the income statement). ASU
2016-13
will be effective for the Company on January 1, 2020, and early adoption is permitted. While the Company is currently evaluating the provisions of ASU
2016-13
to determine the potential impact the new standard will have on the Companys Consolidated Financial Statements, it has taken steps to prepare for the implementation when it becomes effective, such as
forming an internal task force, gathering pertinent data, consulting with outside professionals, and evaluating its current IT systems. Management expects to recognize a
one-time
cumulative effect adjustment
to the allowance for loan losses as of the first reporting period in which the new standard is effective, but cannot yet estimate the magnitude of the
one-time
adjustment or the overall impact of the new
guidance on the Companys financial position, results of operations or cash flows.
FASB issued ASU No.
2016-18,
Statement of Cash Flows - Restricted Cash (Topic 230).
ASU 2016-18
requires that a statement of cash flows explain the change during the period in
the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash
equivalents when reconciling the
beginning-of-period
and
end-of-period
total amounts
shown on the statement of cash flows.
ASU 2016-18
was effective for the Company on January 1, 2018 and did not have a significant impact on the Companys consolidated financial statements.
FASB issued ASU
No. 2017-01,
Business Combinations - Clarifying the Definition of a Business (Topic 805).
ASU 2017-01
clarifies the definition and provides a more robust framework to use in determining when a set of assets and activities constitutes a business.
ASU 2017-01
is intended to provide guidance when evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses.
ASU 2017-01
was effective for the Company on January 1, 2018 and did not have a significant impact on the Companys consolidated financial statements.
FASB issued ASU
No. 2017-04,
Intangibles - Goodwill and Other: Simplifying the Test for Goodwill
Impairment
(Topic 350).
ASU
2017-04
eliminates step two of the goodwill impairment test (the hypothetical purchase price allocation used to determine the implied fair value of goodwill) when step
one (determining if the carrying value of a reporting unit exceeds its fair value) is failed. Instead, entities simply will compare the fair value of a reporting unit to its carrying amount and record goodwill impairment for the amount by which the
reporting units carrying amount exceeds its fair value.
ASU 2017-04
will be effective for the Company on January 1, 2020 and is not expected to have a significant impact on the Companys
consolidated financial statements.
FASB issued ASU
No. 2017-07,
Compensation - Retirement Benefits (Topic
715).
ASU
2017-07
requires that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the
period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component.
ASU 2017-07
was effective for the Company on
January 1, 2018 and did not have a significant impact on the Companys consolidated financial statements.
FASB issued ASU
2017-08,
Receivables - Nonrefundable Fees and Other Costs (Topic 310).
ASU 2017-08
shortens the amortization period for certain callable debt securities held at a
premium to require such premiums to be amortized to the earliest call date unless applicable guidance related to certain pools of securities is applied to consider estimated prepayments. Under prior guidance, entities were generally required to
amortize premiums on individual,
non-pooled
callable debt securities as a yield adjustment over the contractual life of the security.
ASU 2017-08
does not change
the accounting for callable debt securities held at a discount.
ASU 2017-08
will be effective for the Company on January 1, 2019, and is not expected to have a significant impact on the
Companys consolidated financial statements.
FASB issued ASU
2017-09,
Compensation - Stock Compensation
(Topic 718).
ASU 2017-09
clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. Under
ASU 2017-09,
an entity will not apply modification accounting to a share-based payment award if all of the following are the same immediately before and after the change: (i) the awards fair
value, (ii) the awards vesting conditions and (iii) the awards classification as an equity or liability instrument.
ASU 2017-09
was effective for the Company on January 1, 2018
and did not have a significant impact on the Companys consolidated financial statements.
FASB issued ASU
2018-02,
Income Statement
- Reporting Comprehensive Income (Topic 220
)
.
ASU
2018-02
allows, but does not require, entities to
reclassify certain income tax effects in accumulated other comprehensive income (AOCI) to retained earnings that resulted from the Tax Cuts and Jobs Act (Tax Act) that was enacted on December 22, 2017. The Tax Act included a reduction to the
Federal corporate income tax rate from 35 percent to 21 percent effective January 1, 2018. The amount of the reclassification would be the difference between the income tax effects in AOCI calculated using the historical Federal
corporate income tax rate of 35 percent and the income tax effects in AOCI calculated using the newly enacted 21 percent Federal corporate income tax rate. The amendments in ASU
2018-02
are effective
for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company adopted ASU
2018-02
on January 1, 2018, and elected
to reclassify certain income tax effects in AOCI to retained earnings. This change in accounting principle was accounted for as a cumulative-effect adjustment to the balance sheet resulting in a $1,093,000 increase to retained earnings and a
corresponding decrease to AOCI on January 1, 2018.
65
Note 2 Business Combinations
Proposed Merger with FNB Bancorp
On December 11,
2017, the Company and FNB Bancorp, a California corporation (FNBB), entered into an Agreement and Plan of Merger and Reorganization (the Merger Agreement) pursuant to which FNBB will be merged with and into the Company, with
the Company as the surviving corporation (the Merger). Management expects the acquisition to close in the second quarter of 2018, subject to the satisfaction of customary closing conditions, including regulatory and shareholder
approvals. The Merger Agreement provides that immediately after the Merger, FNBBs bank subsidiary, First National Bank of Northern California (First National Bank), will merge with and into the Companys bank subsidiary, Tri
Counties Bank, with Tri Counties Bank as the surviving bank (the Bank Merger). The Merger and Bank Merger are collectively referred to as the Proposed Transaction.
The Merger Agreement provides that each share of FNBB common stock issued and outstanding immediately prior to the effective time of the Merger will be
canceled and converted into the right to receive 0.98 shares of the Companys common stock (the Exchange Ratio), with cash paid in lieu of fractional shares of the Companys common stock.
Based on the closing price of the Companys common stock of $41.64 on December 8, 2017, the consideration value was $40.81 per share of FNBB common
stock or approximately $315.3 million in aggregate. The value of the merger consideration will fluctuate until closing based on the value of the Companys stock and subject to a trading collar in certain circumstances. Upon
consummation of the Merger, the shareholders of FNBB will own approximately 24% of the combined company.
The Merger Agreement includes a trading collar
that could result in termination of the Merger Agreement or a change to the Exchange Ratio. First, The Company can elect to terminate the Merger Agreement if both (i) the average share price of the Companys common stock for the 20 day
period up to and including the fifth day prior to the closing date (the Average Closing Share Price) is greater than $49.78, which equals 120% of the average share price of the Companys Stock for the 20
trading-day
period up to and including December 8, 2017, which was $41.48 (the Initial Price) and (ii) the Companys common stock outperforms the KBW Regional Banking Index by more than
20%, unless FNBB agrees that the Exchange Ratio will be reduced and fewer shares of the Companys common stock will be issued to FNBB shareholders on a per share basis. Conversely, FNBB can terminate the Merger Agreement if both (i) the
Average Closing Share Price is less than $33.18, which is equivalent to 80% of the Initial Price, and (ii) the Companys common stock underperforms the KBW Regional Banking Index by more than 20%, unless the Company agrees that the
Exchange Ratio will be increased and more shares of the Company common stock will be issued to FNBB shareholders on a per share basis.
Upon consummation
of the Merger, each outstanding and unexercised option to acquire shares of FNBB common stock held by FNBBs employees and directors will be canceled and, in exchange, the holder of the option will be entitled to receive, whether or not the
option is fully vested, a lump sum cash payment equal to the product of (1) the number of shares of FNBB common stock remaining under the option multiplied by (2) the Exchange Ratio multiplied by (3) the amount, if any, by which the
Average Closing Share Price exceeds the exercise price of the option.
The consummation of the Merger is subject to a number of conditions, which include:
(i) the approval of the Merger Agreement by FNBBs shareholders and the approval of the Merger Agreement and the issuance of shares of the Company common stock by the Companys shareholders; (ii) as of the closing of the Merger,
FNBB shall have tangible common equity of not less than $119.0 million, subject to credit for certain merger-related expenses and certain assumptions and adjustments that are set forth in the Merger Agreement; (iii) the receipt of all
necessary regulatory approvals for the Proposed Transaction, without the imposition of conditions or requirements that the Companys Board of Directors reasonably determines in good faith would, individually or in the aggregate, materially
reduce the economic benefits of the Proposed Transaction; (iv) the absence of any regulation, judgment, decree, injunction or other order of a governmental authority which prohibits the consummation of the Proposed Transaction or which
prohibits or makes illegal the consummation of the Proposed Transaction; (v) the effective registration of the shares of the Companys Common Stock to be issued to FNBBs shareholders with the Securities and Exchange Commission (the
SEC) and the approval of such shares for listing on the Nasdaq Global Select Market; (vi) all representations and warranties made by the Company and FNBB in the Merger Agreement must remain true and correct, except for certain
inaccuracies that would not have, or would not reasonably be expected to have, a material adverse effect; and (vii) the Company and FNBB must have performed their respective obligations under the Merger Agreement in all material respects.
66
Note 2 Business Combinations (continued)
Acquisition of Three Bank Branches and Associated Deposits
On March 18, 2016, the Bank completed its acquisition of three branch banking offices from Bank of America originally announced October 28, 2015. The
acquired branches are located in Arcata, Eureka and Fortuna in Humboldt County on the North Coast of California, and have significant overlap compared to the Companys then-existing Northern California customer base and branch locations. As a
result, these branch acquisitions create potential cost savings and future growth potential. With the levels of capital at the time, the acquisitions fit well into the Companys growth strategy. Also on March 18, 2016, the electronic
customer service and other data processing systems of the acquired branches were converted into the Banks systems, and the effect of revenue and expenses from the operations of the acquired branches are included in the results of the Company.
The Bank paid a premium of $3,204,000 for deposit relationships with balances of $161,231,000 and loans with balances of $289,000, and received cash of $159,520,000 from Bank of America.
The assets acquired and liabilities assumed in the acquisition of these branches were accounted for in accordance with ASC 805 Business
Combinations, using the acquisition method of accounting and were recorded at their estimated fair values on the March 18, 2016 acquisition date, and the results of operations of the acquired branches are included in the Companys
consolidated statements of income since that date. The excess of the fair value of consideration transferred over total identifiable net assets was recorded as goodwill. The goodwill arising from the acquisition consists largely of the synergies and
economies of scale expected from combining the operations of the Company and the acquired branches. $849,000 of the goodwill is deductible for income tax purposes because the acquisition was accounted for as a purchase of assets and assumption of
liabilities for tax purposes.
The following table discloses the calculation of the fair value of consideration transferred, the total identifiable net
assets acquired and the resulting goodwill relating to the acquisition of three branch banking offices and certain deposits from Bank of America on March 18, 2016:
|
|
|
|
|
(in thousands)
|
|
March 18, 2016
|
|
Fair value of consideration transferred:
|
|
|
|
|
Cash consideration
|
|
$
|
3,204
|
|
|
|
|
|
|
Total fair value of consideration transferred
|
|
|
3,204
|
|
|
|
|
|
|
Asset acquired:
|
|
|
|
|
Cash and cash equivalents
|
|
|
159,520
|
|
Loans
|
|
|
289
|
|
Premises and equipment
|
|
|
1,590
|
|
Core deposit intangible
|
|
|
2,046
|
|
Other assets
|
|
|
141
|
|
|
|
|
|
|
Total assets acquired
|
|
|
163,586
|
|
|
|
|
|
|
Liabilities assumed:
|
|
|
|
|
Deposits
|
|
|
161,231
|
|
|
|
|
|
|
Total liabilities assumed
|
|
|
161,231
|
|
|
|
|
|
|
Total net assets acquired
|
|
|
2,355
|
|
|
|
|
|
|
Goodwill recognized
|
|
$
|
849
|
|
|
|
|
|
|
A summary of the cash paid and estimated fair value adjustments resulting in the goodwill recorded in the acquisition of three
branch banking offices and certain deposits from Bank of America on March 18, 2016 are presented below:
|
|
|
|
|
(in thousands)
|
|
March 18, 2016
|
|
Cash paid
|
|
$
|
3,204
|
|
Cost basis net assets acquired
|
|
|
|
|
Fair value adjustments:
|
|
|
|
|
Loans
|
|
|
|
|
Premises and Equipment
|
|
|
(309
|
)
|
Core deposit intangible
|
|
|
(2,046
|
)
|
|
|
|
|
|
Goodwill
|
|
$
|
849
|
|
|
|
|
|
|
As part of the acquisition of three branch banking offices from Bank of America, the Company performed a valuation of premises
and equipment acquired. This valuation resulted in a $309,000 increase in the net book value of the land and buildings acquired, and was based on current appraisals of such land and buildings.
The Company recognized a core deposit intangible of $2,046,000 related to the acquisition of the core deposits. The recorded core deposit intangibles
represented approximately 1.50% of the core deposits acquired and will be amortized over their estimated useful lives of 7 years.
A valuation of the time
deposits acquired was also performed as of the acquisition date. Time deposits were split into similar pools based on size, type of time deposits, and maturity. A discounted cash flow analysis was performed on the pools based on current market rates
currently paid on similar time deposits. The valuation resulted in no material fair value discount or premium, and none was recorded.
67
Note 3 Investment Securities
The amortized cost and estimated fair values of investments in debt and equity securities are summarized in the following tables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Estimated
Fair
Value
|
|
|
|
(in thousands)
|
|
Securities Available for Sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. government corporations and agencies
|
|
$
|
609,695
|
|
|
$
|
695
|
|
|
$
|
(5,601
|
)
|
|
$
|
604,789
|
|
Obligations of states and political subdivisions
|
|
|
121,597
|
|
|
|
1,888
|
|
|
|
(329
|
)
|
|
|
123,156
|
|
Marketable equity securities
|
|
|
3,000
|
|
|
|
|
|
|
|
(62
|
)
|
|
|
2,938
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities available for sale
|
|
$
|
734,292
|
|
|
$
|
2,583
|
|
|
$
|
(5,992
|
)
|
|
$
|
730,883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Held to Maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. government corporations and agencies
|
|
$
|
500,271
|
|
|
$
|
5,101
|
|
|
$
|
(1,889
|
)
|
|
$
|
503,483
|
|
Obligations of states and political subdivisions
|
|
|
14,573
|
|
|
|
146
|
|
|
|
(37
|
)
|
|
|
14,682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities held to maturity
|
|
$
|
514,844
|
|
|
$
|
5,247
|
|
|
$
|
(1,926
|
)
|
|
$
|
518,165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Estimated
Fair
Value
|
|
|
|
(in thousands)
|
|
Securities Available for Sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. government corporations and agencies
|
|
$
|
434,357
|
|
|
$
|
1,949
|
|
|
$
|
(6,628
|
)
|
|
$
|
429,678
|
|
Obligations of states and political subdivisions
|
|
|
121,746
|
|
|
|
267
|
|
|
|
(4,396
|
)
|
|
|
117,617
|
|
Marketable equity securities
|
|
|
3,000
|
|
|
|
|
|
|
|
(62
|
)
|
|
|
2,938
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities available for sale
|
|
$
|
559,103
|
|
|
$
|
2,216
|
|
|
$
|
(11,086
|
)
|
|
$
|
550,233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Held to Maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. government corporations and agencies
|
|
$
|
587,982
|
|
|
$
|
5,001
|
|
|
$
|
(4,199
|
)
|
|
$
|
588,784
|
|
Obligations of states and political subdivisions
|
|
|
14,554
|
|
|
|
56
|
|
|
|
(191
|
)
|
|
|
14,419
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities held to maturity
|
|
$
|
602,536
|
|
|
$
|
5,057
|
|
|
$
|
(4,390
|
)
|
|
$
|
603,203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During 2017 investment securities with cost basis of $24,796,000 were sold for $25,757,000, resulting in a gain of $961,000 on
sale. No investment securities were sold during 2016. Investment securities totaling $2,000 were sold in 2015 resulting in no gain or loss on sale. Investment securities with an aggregate carrying value of $285,596,000 and $292,737,000 at
December 31, 2017 and 2016, respectively, were pledged as collateral for specific borrowings, lines of credit and local agency deposits.
The
amortized cost and estimated fair value of debt securities at December 31, 2017 by contractual maturity are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties. At December 31, 2017, obligations of U.S. government corporations and agencies with a cost basis totaling $1,109,966,000 consist almost entirely of residential real estate mortgage-backed securities
whose contractual maturity, or principal repayment, will follow the repayment of the underlying mortgages. For purposes of the following table, the entire outstanding balance of these mortgage-backed securities issued by U.S. government corporations
and agencies is categorized based on final maturity date. At December 31, 2017, the Company estimates the average remaining life of these mortgage-backed securities issued by U.S. government corporations and agencies to be approximately 5.9
years. Average remaining life is defined as the time span after which the principal balance has been reduced by half.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for Sale
|
|
|
Held to Maturity
|
|
Investment Securities
(In thousands)
|
|
Amortized
Cost
|
|
|
Estimated
Fair Value
|
|
|
Amortized
Cost
|
|
|
Estimated
Fair Value
|
|
Due in one year
|
|
$
|
2
|
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
Due after one year through five years
|
|
|
211
|
|
|
|
211
|
|
|
$
|
1,207
|
|
|
$
|
1,226
|
|
Due after five years through ten years
|
|
|
2,231
|
|
|
|
2,281
|
|
|
|
14,011
|
|
|
|
14,067
|
|
Due after ten years
|
|
|
731,848
|
|
|
|
728,389
|
|
|
|
499,626
|
|
|
|
502,872
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
734,292
|
|
|
$
|
730,883
|
|
|
$
|
514,844
|
|
|
$
|
518,165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68
Gross unrealized losses on investment securities and the fair value of the related securities, aggregated by
investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 months
|
|
|
12 months or more
|
|
|
Total
|
|
December 31, 2017:
|
|
Fair
Value
|
|
|
Unrealized
Loss
|
|
|
Fair
Value
|
|
|
Unrealized
Loss
|
|
|
Fair
Value
|
|
|
Unrealized
Loss
|
|
|
|
(in thousands)
|
|
Securities Available for Sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. government corporations and agencies
|
|
$
|
284,367
|
|
|
$
|
(2,176
|
)
|
|
$
|
166,338
|
|
|
$
|
(3,425
|
)
|
|
$
|
450,705
|
|
|
$
|
(5,601
|
)
|
Obligations of states and political subdivisions
|
|
|
4,904
|
|
|
|
(35
|
)
|
|
|
17,085
|
|
|
|
(294
|
)
|
|
|
21,989
|
|
|
|
(329
|
)
|
Marketable equity securities
|
|
|
|
|
|
|
|
|
|
|
2,938
|
|
|
|
(62
|
)
|
|
|
2,938
|
|
|
|
(62
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities
available-for-sale
|
|
$
|
289,271
|
|
|
$
|
(2,211
|
)
|
|
$
|
186,361
|
|
|
$
|
(3,781
|
)
|
|
$
|
475,632
|
|
|
$
|
(5,992
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Held to Maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. government corporations and agencies
|
|
$
|
93,017
|
|
|
$
|
(567
|
)
|
|
$
|
95,367
|
|
|
$
|
(1,322
|
)
|
|
$
|
188,384
|
|
|
$
|
(1,889
|
)
|
Obligations of states and political subdivisions
|
|
|
1,488
|
|
|
|
(7
|
)
|
|
|
2,637
|
|
|
|
(30
|
)
|
|
|
4,125
|
|
|
|
(37
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities
held-to-maturity
|
|
$
|
94,505
|
|
|
$
|
(574
|
)
|
|
$
|
98,004
|
|
|
$
|
(1,352
|
)
|
|
$
|
192,509
|
|
|
$
|
(1,926
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 months
|
|
|
12 months or more
|
|
|
Total
|
|
December 31, 2016:
|
|
Fair
Value
|
|
|
Unrealized
Loss
|
|
|
Fair
Value
|
|
|
Unrealized
Loss
|
|
|
Fair
Value
|
|
|
Unrealized
Loss
|
|
|
|
(in thousands)
|
|
Securities Available for Sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. government corporations and agencies
|
|
$
|
370,389
|
|
|
$
|
(6,628
|
)
|
|
|
|
|
|
|
|
|
|
$
|
370,389
|
|
|
$
|
(6,628
|
)
|
Obligations of states and political subdivisions
|
|
|
90,825
|
|
|
|
(4,396
|
)
|
|
|
|
|
|
|
|
|
|
|
90,825
|
|
|
|
(4,396
|
)
|
Marketable equity securities
|
|
|
2,938
|
|
|
|
(62
|
)
|
|
|
|
|
|
|
|
|
|
|
2,938
|
|
|
|
(62
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities
available-for-sale
|
|
$
|
464,152
|
|
|
$
|
(11,086
|
)
|
|
|
|
|
|
|
|
|
|
$
|
464,152
|
|
|
$
|
(11,086
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Held to Maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. government corporations and agencies
|
|
$
|
280,497
|
|
|
$
|
(4,199
|
)
|
|
|
|
|
|
|
|
|
|
$
|
280,497
|
|
|
$
|
(4,199
|
)
|
Obligations of states and political subdivisions
|
|
|
9,984
|
|
|
|
(191
|
)
|
|
|
|
|
|
|
|
|
|
|
9,984
|
|
|
|
(191
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities
held-to-maturity
|
|
$
|
290,481
|
|
|
$
|
(4,390
|
)
|
|
|
|
|
|
|
|
|
|
$
|
290,481
|
|
|
$
|
(4,390
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. government corporations and agencies: Unrealized losses on investments in obligations of U.S.
government corporations and agencies are caused by interest rate increases. The contractual cash flows of these securities are guaranteed by U.S. Government Sponsored Entities (principally Fannie Mae and Freddie Mac). It is expected that the
securities would not be settled at a price less than the amortized cost of the investment. Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell and
more likely than not will not be required to sell, these investments are not considered other-than-temporarily impaired. At December 31, 2017, 69 debt securities representing obligations of U.S. government corporations and agencies had
unrealized losses with aggregate depreciation of 1.16% from the Companys amortized cost basis.
Obligations of states and political subdivisions:
The unrealized losses on investments in obligations of states and political subdivisions were caused by increases in required yields by investors in these types of securities. It is expected that the securities would not be settled at a price less
than the amortized cost of the investment. Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell and more likely than not will not be required to sell,
these investments are not considered other-than-temporarily impaired. At December 31, 2017, 29 debt securities representing obligations of states and political subdivisions had unrealized losses with aggregate depreciation of 1.38% from the
Companys amortized cost basis.
Marketable equity securities: At December 31, 2017, marketable equity securities had unrealized losses
representing aggregate depreciation of 2.07% from the Companys amortized cost basis. Because the Company has the ability to hold these equity investment securities and management does not intend to sell and more likely than not will not be
required to sell these securities prior to the recovery of value, management does not believe these securities to be other than temporarily impaired.
69
Note 4 Loans
A summary of loan balances follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
|
Originated
|
|
|
PNCI
|
|
|
PCI -
Cash basis
|
|
|
PCI -
Other
|
|
|
Total
|
|
Mortgage loans on real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
$
|
320,522
|
|
|
$
|
63,519
|
|
|
|
|
|
|
$
|
1,385
|
|
|
$
|
385,426
|
|
Commercial
|
|
|
1,690,510
|
|
|
|
215,823
|
|
|
|
|
|
|
|
8,563
|
|
|
|
1,914,896
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage loan on real estate
|
|
|
2,011,032
|
|
|
|
279,342
|
|
|
|
|
|
|
|
9,948
|
|
|
|
2,300,322
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines of credit
|
|
|
269,942
|
|
|
|
16,248
|
|
|
|
2,069
|
|
|
|
429
|
|
|
|
288,688
|
|
Home equity loans
|
|
|
39,848
|
|
|
|
2,698
|
|
|
|
|
|
|
|
485
|
|
|
|
43,031
|
|
Other
|
|
|
22,859
|
|
|
|
2,251
|
|
|
|
|
|
|
|
45
|
|
|
|
25,155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer loans
|
|
|
332,649
|
|
|
|
21,197
|
|
|
|
2,069
|
|
|
|
959
|
|
|
|
356,874
|
|
Commercial
|
|
|
209,437
|
|
|
|
8,391
|
|
|
|
|
|
|
|
2,584
|
|
|
|
220,412
|
|
Construction:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
67,920
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
67,930
|
|
Commercial
|
|
|
69,364
|
|
|
|
263
|
|
|
|
|
|
|
|
|
|
|
|
69,627
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total construction
|
|
|
137,284
|
|
|
|
273
|
|
|
|
|
|
|
|
|
|
|
|
137,557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, net of deferred loan fees and discounts
|
|
$
|
2,690,402
|
|
|
$
|
309,203
|
|
|
$
|
2,069
|
|
|
$
|
13,491
|
|
|
$
|
3,015,165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total principal balance of loans owed, net of charge-offs
|
|
$
|
2,699,053
|
|
|
$
|
316,238
|
|
|
$
|
5,863
|
|
|
$
|
17,318
|
|
|
$
|
3,038,472
|
|
Unamortized net deferred loan fees
|
|
|
(8,651
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,651
|
)
|
Discounts to principal balance of loans owed, net of charge-offs
|
|
|
|
|
|
|
(7,035
|
)
|
|
|
(3,794
|
)
|
|
|
(3,827
|
)
|
|
|
(14,656
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, net of unamortized deferred loan fees and discounts
|
|
$
|
2,690,402
|
|
|
$
|
309,203
|
|
|
$
|
2,069
|
|
|
$
|
13,491
|
|
|
$
|
3,015,165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncovered loans
|
|
$
|
2,690,402
|
|
|
$
|
309,203
|
|
|
$
|
2,069
|
|
|
$
|
13,491
|
|
|
$
|
3,015,165
|
|
Covered loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, net of unamortized deferred loan fees and discounts
|
|
$
|
2,690,402
|
|
|
$
|
309,203
|
|
|
$
|
2,069
|
|
|
$
|
13,491
|
|
|
$
|
3,015,165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
$
|
(29,122
|
)
|
|
$
|
(929
|
)
|
|
$
|
(17
|
)
|
|
$
|
(255
|
)
|
|
$
|
(30,323
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70
Note 4 Loans (continued)
A summary of loan balances follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
Originated
|
|
|
PNCI
|
|
|
PCI -
Cash basis
|
|
|
PCI -
Other
|
|
|
Total
|
|
Mortgage loans on real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
$
|
284,539
|
|
|
$
|
82,335
|
|
|
|
|
|
|
$
|
1,469
|
|
|
$
|
368,343
|
|
Commercial
|
|
|
1,425,828
|
|
|
|
246,491
|
|
|
|
|
|
|
|
12,802
|
|
|
|
1,685,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage loan on real estate
|
|
|
1,710,367
|
|
|
|
328,826
|
|
|
|
|
|
|
|
14,271
|
|
|
|
2,053,464
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines of credit
|
|
|
263,590
|
|
|
|
21,765
|
|
|
|
2,983
|
|
|
|
1,377
|
|
|
|
289,715
|
|
Home equity loans
|
|
|
40,736
|
|
|
|
3,764
|
|
|
|
|
|
|
|
1,682
|
|
|
|
46,182
|
|
Other
|
|
|
28,167
|
|
|
|
2,534
|
|
|
|
|
|
|
|
65
|
|
|
|
30,766
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer loans
|
|
|
332,493
|
|
|
|
28,063
|
|
|
|
2,983
|
|
|
|
3,124
|
|
|
|
366,663
|
|
Commercial
|
|
|
200,735
|
|
|
|
12,321
|
|
|
|
|
|
|
|
3,991
|
|
|
|
217,047
|
|
Construction:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
54,613
|
|
|
|
141
|
|
|
|
|
|
|
|
675
|
|
|
|
55,429
|
|
Commercial
|
|
|
58,119
|
|
|
|
8,871
|
|
|
|
|
|
|
|
|
|
|
|
66,990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total construction
|
|
|
112,732
|
|
|
|
9,012
|
|
|
|
|
|
|
|
675
|
|
|
|
122,419
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, net of deferred loan fees and discounts
|
|
$
|
2,356,327
|
|
|
$
|
378,222
|
|
|
$
|
2,983
|
|
|
$
|
22,061
|
|
|
$
|
2,759,593
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total principal balance of loans owed, net of charge-offs
|
|
$
|
2,363,243
|
|
|
$
|
388,139
|
|
|
$
|
8,280
|
|
|
$
|
25,650
|
|
|
$
|
2,785,312
|
|
Unamortized net deferred loan fees
|
|
|
(6,916
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,916
|
)
|
Discounts to principal balance of loans owed, net of charge-offs
|
|
|
|
|
|
|
(9,917
|
)
|
|
|
(5,297
|
)
|
|
|
(3,589
|
)
|
|
|
(18,803
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, net of unamortized deferred loan fees and discounts
|
|
$
|
2,356,327
|
|
|
$
|
378,222
|
|
|
$
|
2,983
|
|
|
$
|
22,061
|
|
|
$
|
2,759,593
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncovered loans
|
|
$
|
2,356,327
|
|
|
$
|
378,222
|
|
|
$
|
2,983
|
|
|
$
|
18,885
|
|
|
$
|
2,756,417
|
|
Covered loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,176
|
|
|
|
3,176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, net of unamortized deferred loan fees and discounts
|
|
$
|
2,356,327
|
|
|
$
|
378,222
|
|
|
$
|
2,983
|
|
|
$
|
22,061
|
|
|
$
|
2,759,593
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
$
|
(28,141
|
)
|
|
$
|
(1,665
|
)
|
|
$
|
(17
|
)
|
|
$
|
(2,680
|
)
|
|
$
|
(32,503
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following is a summary of the change in accretable yield for PCI other loans during the periods indicated (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Change in accretable yield:
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
10,348
|
|
|
$
|
13,255
|
|
Accretion to interest income
|
|
|
(2,809
|
)
|
|
|
(4,011
|
)
|
Reclassification (to) from nonaccretable difference
|
|
|
(3,277
|
)
|
|
|
1,104
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
4,262
|
|
|
$
|
10,348
|
|
|
|
|
|
|
|
|
|
|
71
Note 5 Allowance for Loan Losses
The following tables summarize the activity in the allowance for loan losses, and ending balance of loans, net of unearned fees for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Loan Losses - Year Ended December 31, 2017
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(in thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consum.
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
Beginning balance
|
|
$
|
2,748
|
|
|
$
|
11,517
|
|
|
$
|
7,044
|
|
|
$
|
2,644
|
|
|
|
|
|
|
$
|
622
|
|
|
$
|
5,831
|
|
|
$
|
1,417
|
|
|
$
|
680
|
|
|
$
|
32,503
|
|
Charge-offs
|
|
|
(60
|
)
|
|
|
(186
|
)
|
|
|
(98
|
)
|
|
|
(332
|
)
|
|
|
|
|
|
|
(1,186
|
)
|
|
|
(1,444
|
)
|
|
|
(1,104
|
)
|
|
|
|
|
|
|
(4,410
|
)
|
Recoveries
|
|
|
|
|
|
|
397
|
|
|
|
698
|
|
|
|
242
|
|
|
|
|
|
|
|
375
|
|
|
|
428
|
|
|
|
|
|
|
|
1
|
|
|
|
2,141
|
|
(Benefit) provision
|
|
|
(371
|
)
|
|
|
(287
|
)
|
|
|
(1,844
|
)
|
|
|
(713
|
)
|
|
|
|
|
|
|
775
|
|
|
|
1,697
|
|
|
|
871
|
|
|
|
(39
|
)
|
|
|
89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
2,317
|
|
|
$
|
11,441
|
|
|
$
|
5,800
|
|
|
$
|
1,841
|
|
|
|
|
|
|
$
|
586
|
|
|
$
|
6,512
|
|
|
$
|
1,184
|
|
|
$
|
642
|
|
|
$
|
30,323
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individ. evaluated for impairment
|
|
$
|
230
|
|
|
$
|
30
|
|
|
$
|
427
|
|
|
$
|
107
|
|
|
|
|
|
|
$
|
57
|
|
|
$
|
1,848
|
|
|
|
|
|
|
|
|
|
|
$
|
2,699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans pooled for evaluation
|
|
$
|
1,932
|
|
|
$
|
11,351
|
|
|
$
|
5,356
|
|
|
$
|
1,734
|
|
|
|
|
|
|
$
|
529
|
|
|
$
|
4,624
|
|
|
$
|
1,184
|
|
|
$
|
642
|
|
|
$
|
27,352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans acquired with deteriorated credit quality
|
|
$
|
155
|
|
|
$
|
60
|
|
|
$
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
40
|
|
|
|
|
|
|
|
|
|
|
$
|
272
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, net of unearned fees As of December 31, 2017
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(in thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consum.
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
Ending balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
$
|
385,426
|
|
|
$
|
1,914,896
|
|
|
$
|
288,688
|
|
|
$
|
43,031
|
|
|
|
|
|
|
$
|
25,155
|
|
|
$
|
220,412
|
|
|
$
|
67,930
|
|
|
$
|
69,627
|
|
|
$
|
3,015,165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individ. evaluated for impairment
|
|
$
|
5,298
|
|
|
$
|
13,911
|
|
|
$
|
2,688
|
|
|
$
|
1,470
|
|
|
|
|
|
|
$
|
257
|
|
|
$
|
4,470
|
|
|
$
|
140
|
|
|
|
|
|
|
$
|
28,234
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans pooled for evaluation
|
|
$
|
378,743
|
|
|
$
|
1,892,422
|
|
|
$
|
283,502
|
|
|
$
|
41,076
|
|
|
|
|
|
|
$
|
24,853
|
|
|
$
|
213,358
|
|
|
$
|
67,790
|
|
|
$
|
69,627
|
|
|
$
|
2,971,371
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans acquired with deteriorated credit quality
|
|
$
|
1,385
|
|
|
$
|
8,563
|
|
|
$
|
2,498
|
|
|
$
|
485
|
|
|
|
|
|
|
$
|
45
|
|
|
$
|
2,584
|
|
|
|
|
|
|
|
|
|
|
$
|
15,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Loan Losses - Year Ended December 31, 2016
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(in thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consum.
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
Beginning balance
|
|
$
|
2,896
|
|
|
$
|
11,015
|
|
|
$
|
11,253
|
|
|
$
|
3,177
|
|
|
|
|
|
|
$
|
688
|
|
|
$
|
5,271
|
|
|
$
|
899
|
|
|
$
|
812
|
|
|
$
|
36,011
|
|
Charge-offs
|
|
|
(321
|
)
|
|
|
(827
|
)
|
|
|
(585
|
)
|
|
|
(219
|
)
|
|
|
|
|
|
|
(823
|
)
|
|
|
(455
|
)
|
|
|
|
|
|
|
|
|
|
|
(3,230
|
)
|
Recoveries
|
|
|
880
|
|
|
|
920
|
|
|
|
2,317
|
|
|
|
590
|
|
|
|
|
|
|
|
449
|
|
|
|
404
|
|
|
|
54
|
|
|
|
78
|
|
|
|
5,692
|
|
(Benefit) provision
|
|
|
(707
|
)
|
|
|
409
|
|
|
|
(5,941
|
)
|
|
|
(904
|
)
|
|
|
|
|
|
|
308
|
|
|
|
611
|
|
|
|
464
|
|
|
|
(210
|
)
|
|
|
(5,970
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
2,748
|
|
|
$
|
11,517
|
|
|
$
|
7,044
|
|
|
$
|
2,644
|
|
|
|
|
|
|
$
|
622
|
|
|
$
|
5,831
|
|
|
$
|
1,417
|
|
|
$
|
680
|
|
|
$
|
32,503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individ. evaluated for impairment
|
|
$
|
258
|
|
|
$
|
4
|
|
|
$
|
411
|
|
|
$
|
215
|
|
|
|
|
|
|
$
|
28
|
|
|
$
|
1,130
|
|
|
|
|
|
|
|
|
|
|
$
|
2,046
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans pooled for evaluation
|
|
$
|
2,304
|
|
|
$
|
10,064
|
|
|
$
|
6,616
|
|
|
$
|
2,365
|
|
|
|
|
|
|
$
|
594
|
|
|
$
|
3,765
|
|
|
$
|
1,372
|
|
|
$
|
680
|
|
|
$
|
27,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans acquired with deteriorated credit quality
|
|
$
|
186
|
|
|
$
|
1,449
|
|
|
$
|
17
|
|
|
$
|
64
|
|
|
|
|
|
|
|
|
|
|
$
|
936
|
|
|
$
|
45
|
|
|
|
|
|
|
$
|
2,697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, net of unearned fees As of December 31, 2016
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(in thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consum.
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
Ending balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
$
|
368,343
|
|
|
$
|
1,685,121
|
|
|
$
|
289,715
|
|
|
$
|
46,182
|
|
|
|
|
|
|
$
|
30,766
|
|
|
$
|
217,047
|
|
|
$
|
55,429
|
|
|
$
|
66,990
|
|
|
$
|
2,759,593
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individ. evaluated for impairment
|
|
$
|
4,094
|
|
|
$
|
15,081
|
|
|
$
|
3,196
|
|
|
$
|
1,508
|
|
|
|
|
|
|
$
|
154
|
|
|
$
|
4,096
|
|
|
$
|
11
|
|
|
|
|
|
|
$
|
28,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans pooled for evaluation
|
|
$
|
362,780
|
|
|
$
|
1,657,238
|
|
|
$
|
282,159
|
|
|
$
|
42,992
|
|
|
|
|
|
|
$
|
30,547
|
|
|
$
|
208,960
|
|
|
$
|
54,743
|
|
|
$
|
66,990
|
|
|
$
|
2,706,409
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans acquired with deteriorated credit quality
|
|
$
|
1,469
|
|
|
$
|
12,802
|
|
|
$
|
4,360
|
|
|
$
|
1,682
|
|
|
|
|
|
|
$
|
65
|
|
|
$
|
3,991
|
|
|
$
|
675
|
|
|
|
|
|
|
$
|
25,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72
Note 5 Allowance for Loan Losses (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Loan Losses - Year Ended December 31, 2015
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(in thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consum.
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
Beginning balance
|
|
$
|
3,086
|
|
|
$
|
9,227
|
|
|
$
|
15,676
|
|
|
$
|
1,797
|
|
|
$
|
9
|
|
|
$
|
719
|
|
|
$
|
4,226
|
|
|
$
|
1,434
|
|
|
$
|
411
|
|
|
$
|
36,585
|
|
Charge-offs
|
|
|
(224
|
)
|
|
|
|
|
|
|
(694
|
)
|
|
|
(242
|
)
|
|
|
(4
|
)
|
|
|
(972
|
)
|
|
|
(680
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,816
|
)
|
Recoveries
|
|
|
204
|
|
|
|
243
|
|
|
|
666
|
|
|
|
252
|
|
|
|
42
|
|
|
|
500
|
|
|
|
677
|
|
|
|
1,728
|
|
|
|
140
|
|
|
|
4,452
|
|
(Benefit) provision
|
|
|
(170
|
)
|
|
|
1,545
|
|
|
|
(4,395
|
)
|
|
|
1,370
|
|
|
|
(47
|
)
|
|
|
441
|
|
|
|
1,048
|
|
|
|
(2,263
|
)
|
|
|
261
|
|
|
|
(2,210
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
2,896
|
|
|
$
|
11,015
|
|
|
$
|
11,253
|
|
|
$
|
3,177
|
|
|
|
|
|
|
$
|
688
|
|
|
$
|
5,271
|
|
|
$
|
899
|
|
|
$
|
812
|
|
|
$
|
36,011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individ. evaluated for impairment
|
|
$
|
335
|
|
|
$
|
396
|
|
|
$
|
605
|
|
|
$
|
294
|
|
|
|
|
|
|
$
|
74
|
|
|
$
|
1,187
|
|
|
|
|
|
|
|
|
|
|
$
|
2,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans pooled for evaluation
|
|
$
|
2,501
|
|
|
$
|
9,167
|
|
|
$
|
10,423
|
|
|
$
|
2,883
|
|
|
|
|
|
|
$
|
614
|
|
|
$
|
2,983
|
|
|
$
|
844
|
|
|
$
|
812
|
|
|
$
|
30,227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans acquired with deteriorated credit quality
|
|
$
|
60
|
|
|
$
|
1,452
|
|
|
$
|
225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,101
|
|
|
$
|
55
|
|
|
|
|
|
|
$
|
2,893
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, net of unearned fees As of December 31, 2015
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(in thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consum.
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
Ending balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
$
|
314,265
|
|
|
$
|
1,497,567
|
|
|
$
|
322,492
|
|
|
$
|
40,362
|
|
|
|
|
|
|
$
|
32,429
|
|
|
$
|
194,913
|
|
|
$
|
46,135
|
|
|
$
|
74,774
|
|
|
$
|
2,522,937
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individ. evaluated for impairment
|
|
$
|
6,767
|
|
|
$
|
32,407
|
|
|
$
|
5,747
|
|
|
$
|
1,731
|
|
|
|
|
|
|
$
|
288
|
|
|
$
|
2,671
|
|
|
$
|
4
|
|
|
$
|
490
|
|
|
$
|
50,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans pooled for evaluation
|
|
$
|
305,353
|
|
|
$
|
1,442,100
|
|
|
$
|
309,007
|
|
|
$
|
37,004
|
|
|
|
|
|
|
$
|
32,077
|
|
|
$
|
187,393
|
|
|
$
|
45,410
|
|
|
$
|
74,284
|
|
|
$
|
2,432,628
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans acquired with deteriorated credit quality
|
|
$
|
2,145
|
|
|
$
|
23,060
|
|
|
$
|
7,738
|
|
|
$
|
1,627
|
|
|
|
|
|
|
$
|
64
|
|
|
$
|
4,849
|
|
|
$
|
721
|
|
|
|
|
|
|
$
|
40,204
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As part of the
on-going
monitoring of the credit quality of the Companys loan
portfolio, management tracks certain credit quality indicators including, but not limited to, trends relating to (i) the level of criticized and classified loans, (ii) net charge-offs,
(iii) non-performing
loans, and (iv) delinquency within the portfolio.
The Company utilizes a risk
grading system to assign a risk grade to each of its loans. Loans are graded on a scale ranging from Pass to Loss. A description of the general characteristics of the risk grades is as follows:
|
|
|
Pass
This grade represents loans ranging from acceptable to very little or no credit risk. These loans typically meet most if not all policy standards in regard to: loan amount as a percentage of
collateral value, debt service coverage, profitability, leverage, and working capital.
|
|
|
|
Special Mention
This grade represents Other Assets Especially Mentioned in accordance with regulatory guidelines and includes loans that display some potential weaknesses which, if left
unaddressed, may result in deterioration of the repayment prospects for the asset or may inadequately protect the Companys position in the future. These loans warrant more than normal supervision and attention.
|
|
|
|
Substandard
This grade represents Substandard loans in accordance with regulatory guidelines. Loans within this rating typically exhibit weaknesses that are well defined to the point that
repayment is jeopardized. Loss potential is, however, not necessarily evident. The underlying collateral supporting the credit appears to have sufficient value to protect the Company from loss of principal and accrued interest, or the loan has been
written down to the point where this is true. There is a definite need for a well defined workout/rehabilitation program.
|
|
|
|
Doubtful
This grade represents Doubtful loans in accordance with regulatory guidelines. An asset classified as Doubtful has all the weaknesses inherent in a loan classified 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. Pending factors include proposed merger, acquisition, or
liquidation procedures, capital injection, perfecting liens on additional collateral, and financing plans.
|
|
|
|
Loss
This grade represents Loss loans in accordance with regulatory guidelines. A loan classified as Loss is considered uncollectible and of such little value that its continuance as a bankable
asset is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off the loan, even though some recovery may be affected in the
future. The portion of the loan that is graded loss should be charged off no later than the end of the quarter in which the loss is identified.
|
73
Note 5 Allowance for Loan Losses (continued)
The following tables present ending loan balances by loan category and risk grade for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Quality Indicators As of December 31, 2017
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(in thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consum.
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
Originated loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
$
|
315,120
|
|
|
$
|
1,649,333
|
|
|
$
|
265,345
|
|
|
$
|
37,428
|
|
|
|
|
|
|
$
|
22,432
|
|
|
$
|
195,208
|
|
|
$
|
67,813
|
|
|
$
|
64,492
|
|
|
$
|
2,617,171
|
|
Special mention
|
|
|
2,234
|
|
|
|
18,434
|
|
|
|
2,558
|
|
|
|
800
|
|
|
|
|
|
|
|
272
|
|
|
|
9,492
|
|
|
|
|
|
|
|
4,872
|
|
|
|
38,662
|
|
Substandard
|
|
|
3,168
|
|
|
|
22,743
|
|
|
|
2,039
|
|
|
|
1,620
|
|
|
|
|
|
|
|
155
|
|
|
|
4,737
|
|
|
|
107
|
|
|
|
|
|
|
|
34,569
|
|
Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total originated
|
|
$
|
320,522
|
|
|
$
|
1,690,510
|
|
|
$
|
269,942
|
|
|
$
|
39,848
|
|
|
|
|
|
|
$
|
22,859
|
|
|
$
|
209,437
|
|
|
$
|
67,920
|
|
|
$
|
69,364
|
|
|
$
|
2,690,402
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PNCI loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
$
|
61,411
|
|
|
$
|
203,751
|
|
|
$
|
14,866
|
|
|
$
|
2,433
|
|
|
|
|
|
|
$
|
2,207
|
|
|
$
|
8,390
|
|
|
$
|
10
|
|
|
$
|
263
|
|
|
$
|
293,331
|
|
Special mention
|
|
|
218
|
|
|
|
11,513
|
|
|
|
450
|
|
|
|
188
|
|
|
|
|
|
|
|
38
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
12,408
|
|
Substandard
|
|
|
1,890
|
|
|
|
559
|
|
|
|
932
|
|
|
|
77
|
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,464
|
|
Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total PNCI
|
|
$
|
63,519
|
|
|
$
|
215,823
|
|
|
$
|
16,248
|
|
|
$
|
2,698
|
|
|
|
|
|
|
$
|
2,251
|
|
|
$
|
8,391
|
|
|
$
|
10
|
|
|
$
|
263
|
|
|
$
|
309,203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PCI loans
|
|
$
|
1,385
|
|
|
$
|
8,563
|
|
|
$
|
2,498
|
|
|
$
|
485
|
|
|
|
|
|
|
$
|
45
|
|
|
$
|
2,584
|
|
|
|
|
|
|
|
|
|
|
$
|
15,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
$
|
385,426
|
|
|
$
|
1,914,896
|
|
|
$
|
288,688
|
|
|
$
|
43,031
|
|
|
|
|
|
|
|
25,155
|
|
|
$
|
220,412
|
|
|
$
|
67,930
|
|
|
$
|
69,627
|
|
|
$
|
3,015,165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Quality Indicators As of December 31, 2016
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(in thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consum.
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
Originated loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
$
|
278,635
|
|
|
$
|
1,399,936
|
|
|
$
|
258,024
|
|
|
$
|
37,844
|
|
|
|
|
|
|
$
|
27,542
|
|
|
$
|
190,902
|
|
|
$
|
54,602
|
|
|
$
|
57,808
|
|
|
$
|
2,305,293
|
|
Special mention
|
|
|
2,992
|
|
|
|
14,341
|
|
|
|
2,518
|
|
|
|
891
|
|
|
|
|
|
|
|
385
|
|
|
|
6,133
|
|
|
|
|
|
|
|
311
|
|
|
|
27,571
|
|
Substandard
|
|
|
2,912
|
|
|
|
11,551
|
|
|
|
3,048
|
|
|
|
2,001
|
|
|
|
|
|
|
|
240
|
|
|
|
3,700
|
|
|
|
11
|
|
|
|
|
|
|
|
23,463
|
|
Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total originated
|
|
$
|
284,539
|
|
|
$
|
1,425,828
|
|
|
$
|
263,590
|
|
|
$
|
40,736
|
|
|
|
|
|
|
$
|
28,167
|
|
|
$
|
200,735
|
|
|
$
|
54,613
|
|
|
$
|
58,119
|
|
|
$
|
2,356,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PNCI loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
$
|
79,000
|
|
|
$
|
233,326
|
|
|
$
|
20,442
|
|
|
$
|
3,506
|
|
|
|
|
|
|
$
|
2,437
|
|
|
$
|
12,320
|
|
|
$
|
141
|
|
|
$
|
8,871
|
|
|
$
|
360,043
|
|
Special mention
|
|
|
1,849
|
|
|
|
5,925
|
|
|
|
509
|
|
|
|
173
|
|
|
|
|
|
|
|
92
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
8,549
|
|
Substandard
|
|
|
1,486
|
|
|
|
7,240
|
|
|
|
814
|
|
|
|
85
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,630
|
|
Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total PNCI
|
|
$
|
82,335
|
|
|
$
|
246,491
|
|
|
$
|
21,765
|
|
|
$
|
3,764
|
|
|
|
|
|
|
$
|
2,534
|
|
|
$
|
12,321
|
|
|
$
|
141
|
|
|
$
|
8,871
|
|
|
$
|
378,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PCI loans
|
|
$
|
1,469
|
|
|
$
|
12,802
|
|
|
$
|
4,360
|
|
|
$
|
1,682
|
|
|
|
|
|
|
$
|
65
|
|
|
$
|
3,991
|
|
|
$
|
675
|
|
|
|
|
|
|
$
|
25,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
$
|
368,343
|
|
|
$
|
1,685,121
|
|
|
$
|
289,715
|
|
|
$
|
46,182
|
|
|
|
|
|
|
$
|
30,766
|
|
|
$
|
217,047
|
|
|
$
|
55,429
|
|
|
$
|
66,990
|
|
|
$
|
2,759,593
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer loans, whether unsecured or secured by real estate, automobiles, or other personal property, are susceptible to three
primary risks;
non-payment
due to income loss, over-extension of credit and, when the borrower is unable to pay, shortfall in collateral value. Typically
non-payment
is
due to loss of job and will follow general economic trends in the marketplace driven primarily by rises in the unemployment rate. Loss of collateral value can be due to market demand shifts, damage to collateral itself or a combination of the two.
Problem consumer loans are generally identified by payment history of the borrower (delinquency). The Bank manages its consumer loan portfolios by
monitoring delinquency and contacting borrowers to encourage repayment, suggest modifications if appropriate, and, when continued scheduled payments become unrealistic, initiate repossession or foreclosure through appropriate channels. Collateral
values may be determined by appraisals obtained through Bank approved, licensed appraisers, qualified independent third parties, public value information (blue book values for autos), sales invoices, or other appropriate means. Appropriate
valuations are obtained at initiation of the credit and periodically (every
3-12
months depending on collateral type) once repayment is questionable and the loan has been classified.
Commercial real estate loans generally fall into two categories, owner-occupied and
non-owner
occupied. Loans secured
by owner occupied real estate are primarily susceptible to changes in the business conditions of the related business. This may be driven by, among other things, industry changes, geographic business changes, changes in the individual fortunes of
the business owner, and general economic conditions and changes in business cycles. These same risks apply to commercial loans whether secured by equipment or other personal property or unsecured. Losses on loans secured by owner occupied real
estate, equipment, or other personal property generally are dictated by the value of underlying collateral at the time of default and liquidation of the collateral. When default is driven by issues related specifically to the business owner,
collateral values tend to provide better repayment support and may result in little or no loss. Alternatively, when default is driven by more general economic conditions, underlying collateral generally has devalued more and results in larger losses
due to default. Loans secured by
non-owner
occupied real estate are primarily susceptible to risks associated with swings in occupancy or vacancy and related shifts in lease rates, rental rates or room rates.
Most often these shifts are a result of changes in general economic or market conditions or overbuilding and resultant over-supply. Losses are dependent on value of underlying collateral at the time of default. Values are generally driven by these
same factors and influenced by interest rates and required rates of return as well as changes in occupancy costs.
74
Note 5 Allowance for Loan Losses (continued)
Construction loans, whether owner occupied or
non-owner
occupied
commercial real estate loans or residential development loans, are not only susceptible to the related risks described above but the added risks of construction itself including cost over-runs, mismanagement of the project, or lack of demand or
market changes experienced at time of completion. Again, losses are primarily related to underlying collateral value and changes therein as described above.
Problem C&I loans are generally identified by periodic review of financial information which may include financial statements, tax returns, rent rolls and
payment history of the borrower (delinquency). Based on this information the Bank may decide to take any of several courses of action including demand for repayment, additional collateral or guarantors, and, when repayment becomes unlikely through
borrowers income and cash flow, repossession or foreclosure of the underlying collateral.
Collateral values may be determined by appraisals
obtained through Bank approved, licensed appraisers, qualified independent third parties, public value information (blue book values for autos), sales invoices, or other appropriate means. Appropriate valuations are obtained at initiation of the
credit and periodically (every
3-12
months depending on collateral type) once repayment is questionable and the loan has been classified.
Once a loan becomes delinquent and repayment becomes questionable, a Bank collection officer will address collateral shortfalls with the borrower and attempt
to obtain additional collateral. If this is not forthcoming and payment in full is unlikely, the Bank will estimate its probable loss, using a recent valuation as appropriate to the underlying collateral less estimated costs of sale, and charge the
loan down to the estimated net realizable amount. Depending on the length of time until ultimate collection, the Bank may revalue the underlying collateral and take additional charge-offs as warranted. Revaluations may occur as often as every
3-12
months depending on the underlying collateral and volatility of values. Final charge-offs or recoveries are taken when collateral is liquidated and actual loss is known. Unpaid balances on loans after or during
collection and liquidation may also be pursued through lawsuit and attachment of wages or judgment liens on borrowers other assets.
The following
table shows the ending balance of current, past due, and nonaccrual originated loans by loan category as of the date indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Analysis of Past Due and Nonaccrual Originated Loans As of December 31, 2017
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(in thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
Consum.
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
Originated loan balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Past due:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-59 Days
|
|
$
|
1,740
|
|
|
$
|
158
|
|
|
$
|
528
|
|
|
$
|
511
|
|
|
|
|
$
|
56
|
|
|
$
|
956
|
|
|
$
|
34
|
|
|
|
|
|
|
$
|
3,983
|
|
60-89 Days
|
|
|
510
|
|
|
|
987
|
|
|
|
48
|
|
|
|
107
|
|
|
|
|
|
36
|
|
|
|
738
|
|
|
|
|
|
|
|
|
|
|
|
2,426
|
|
> 90 Days
|
|
|
243
|
|
|
|
|
|
|
|
372
|
|
|
|
373
|
|
|
|
|
|
3
|
|
|
|
1,527
|
|
|
|
|
|
|
|
|
|
|
|
2,518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total past due
|
|
$
|
2,493
|
|
|
$
|
1,145
|
|
|
$
|
948
|
|
|
$
|
991
|
|
|
|
|
$
|
95
|
|
|
$
|
3,221
|
|
|
$
|
34
|
|
|
|
|
|
|
$
|
8,927
|
|
Current
|
|
|
318,029
|
|
|
|
1,689,365
|
|
|
|
268,994
|
|
|
|
38,857
|
|
|
|
|
|
22,764
|
|
|
|
206,216
|
|
|
|
67,886
|
|
|
$
|
69,364
|
|
|
|
2,681,475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total orig. loans
|
|
$
|
320,522
|
|
|
$
|
1,690,510
|
|
|
$
|
269,942
|
|
|
$
|
39,848
|
|
|
|
|
$
|
22,859
|
|
|
$
|
209,437
|
|
|
$
|
67,920
|
|
|
$
|
69,364
|
|
|
$
|
2,690,402
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
> 90 Days and still accruing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual loans
|
|
$
|
1,725
|
|
|
$
|
8,144
|
|
|
$
|
811
|
|
|
$
|
1,106
|
|
|
|
|
$
|
7
|
|
|
$
|
3,669
|
|
|
|
|
|
|
|
|
|
|
$
|
15,462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table shows the ending balance of current, past due, and nonaccrual PNCI loans by loan category as of the date
indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Analysis of Past Due and Nonaccrual PNCI Loans As of December 31, 2017
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(in thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consum.
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
PNCI loan balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Past due:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-59 Days
|
|
$
|
1,495
|
|
|
$
|
70
|
|
|
$
|
298
|
|
|
$
|
30
|
|
|
|
|
|
|
$
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,899
|
|
60-89 Days
|
|
|
90
|
|
|
|
|
|
|
|
228
|
|
|
|
|
|
|
|
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
344
|
|
> 90 Days
|
|
|
109
|
|
|
|
|
|
|
|
330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total past due
|
|
$
|
1,694
|
|
|
$
|
70
|
|
|
$
|
856
|
|
|
$
|
30
|
|
|
|
|
|
|
$
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,682
|
|
Current
|
|
|
61,825
|
|
|
|
215,753
|
|
|
|
15,392
|
|
|
|
2,668
|
|
|
|
|
|
|
|
2,219
|
|
|
$
|
8,391
|
|
|
$
|
10
|
|
|
$
|
263
|
|
|
|
306,521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total PNCI loans
|
|
$
|
63,519
|
|
|
$
|
215,823
|
|
|
$
|
16,248
|
|
|
$
|
2,698
|
|
|
|
|
|
|
$
|
2,251
|
|
|
$
|
8,391
|
|
|
$
|
10
|
|
|
$
|
263
|
|
|
$
|
309,203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
> 90 Days and still accruing
|
|
$
|
81
|
|
|
|
|
|
|
$
|
200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
281
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual loans
|
|
$
|
1,012
|
|
|
|
|
|
|
$
|
402
|
|
|
$
|
44
|
|
|
|
|
|
|
$
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75
Note 5 Allowance for Loan Losses (continued)
The following table shows the ending balance of current, past due, and nonaccrual originated loans by loan
category as of the date indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Analysis of Past Due and Nonaccrual Originated Loans As of December 31, 2016
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(in thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consum.
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
Originated loan balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Past due:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-59
Days
|
|
$
|
552
|
|
|
$
|
317
|
|
|
$
|
754
|
|
|
$
|
646
|
|
|
|
|
|
|
$
|
16
|
|
|
$
|
1,148
|
|
|
$
|
921
|
|
|
|
|
|
|
$
|
4,354
|
|
60-89
Days
|
|
|
269
|
|
|
|
1,387
|
|
|
|
|
|
|
|
395
|
|
|
|
|
|
|
|
30
|
|
|
|
84
|
|
|
|
|
|
|
$
|
421
|
|
|
|
2,586
|
|
> 90 Days
|
|
|
|
|
|
|
216
|
|
|
|
687
|
|
|
|
184
|
|
|
|
|
|
|
|
15
|
|
|
|
634
|
|
|
|
11
|
|
|
|
|
|
|
|
1,747
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total past due
|
|
$
|
821
|
|
|
$
|
1,920
|
|
|
$
|
1,441
|
|
|
$
|
1,225
|
|
|
|
|
|
|
$
|
61
|
|
|
$
|
1,866
|
|
|
$
|
932
|
|
|
$
|
421
|
|
|
$
|
8,687
|
|
Current
|
|
|
283,718
|
|
|
|
1,423,908
|
|
|
|
262,149
|
|
|
|
39,511
|
|
|
|
|
|
|
|
28,106
|
|
|
|
198,869
|
|
|
|
53,681
|
|
|
|
57,698
|
|
|
|
2,347,640
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total orig. loans
|
|
$
|
284,539
|
|
|
$
|
1,425,828
|
|
|
$
|
263,590
|
|
|
$
|
40,736
|
|
|
|
|
|
|
$
|
28,167
|
|
|
$
|
200,735
|
|
|
$
|
54,613
|
|
|
$
|
58,119
|
|
|
$
|
2,356,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
> 90 Days and still accruing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual loans
|
|
$
|
255
|
|
|
$
|
7,651
|
|
|
$
|
1,211
|
|
|
$
|
803
|
|
|
|
|
|
|
$
|
33
|
|
|
$
|
2,930
|
|
|
$
|
11
|
|
|
|
|
|
|
$
|
12,894
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table shows the ending balance of current, past due, and nonaccrual PNCI loans by loan category as of the date
indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Analysis of Past Due and Nonaccrual PNCI Loans As of December 31, 2016
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(in thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consum.
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
PNCI loan balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Past due:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-59
Days
|
|
$
|
1,510
|
|
|
$
|
73
|
|
|
$
|
274
|
|
|
$
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,896
|
|
60-89
Days
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
> 90 Days
|
|
|
21
|
|
|
|
81
|
|
|
|
589
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
704
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total past due
|
|
$
|
1,531
|
|
|
$
|
154
|
|
|
$
|
863
|
|
|
$
|
52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,600
|
|
Current
|
|
|
80,804
|
|
|
|
246,337
|
|
|
|
20,902
|
|
|
|
3,712
|
|
|
|
|
|
|
$
|
2,534
|
|
|
$
|
12,321
|
|
|
$
|
141
|
|
|
$
|
8,871
|
|
|
|
375,622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total PNCI loans
|
|
$
|
82,335
|
|
|
$
|
246,491
|
|
|
$
|
21,765
|
|
|
$
|
3,764
|
|
|
|
|
|
|
$
|
2,534
|
|
|
$
|
12,321
|
|
|
$
|
141
|
|
|
$
|
8,871
|
|
|
$
|
378,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
> 90 Days and still accruing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual loans
|
|
$
|
194
|
|
|
$
|
1,826
|
|
|
$
|
742
|
|
|
$
|
67
|
|
|
|
|
|
|
$
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired originated loans are those where management has concluded that it is probable that the borrower will be unable to pay
all amounts due under the contractual terms. The following tables show the recorded investment (financial statement balance), unpaid principal balance, average recorded investment, and interest income recognized for impaired Originated and PNCI
loans, segregated by those with no related allowance recorded and those with an allowance recorded for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired Originated Loans As of December 31, 2017
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(in thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consum.
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment
|
|
$
|
2,058
|
|
|
$
|
13,101
|
|
|
$
|
1,093
|
|
|
$
|
1,107
|
|
|
|
|
|
|
$
|
4
|
|
|
$
|
575
|
|
|
$
|
140
|
|
|
|
|
|
|
$
|
18,078
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid principal
|
|
$
|
2,109
|
|
|
$
|
13,360
|
|
|
$
|
1,175
|
|
|
$
|
1,429
|
|
|
|
|
|
|
$
|
52
|
|
|
$
|
585
|
|
|
$
|
140
|
|
|
|
|
|
|
$
|
18,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average recorded Investment
|
|
$
|
1,875
|
|
|
$
|
13,123
|
|
|
$
|
1,287
|
|
|
$
|
852
|
|
|
|
|
|
|
$
|
10
|
|
|
$
|
668
|
|
|
$
|
76
|
|
|
|
|
|
|
$
|
17,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income Recognized
|
|
$
|
85
|
|
|
$
|
609
|
|
|
$
|
39
|
|
|
$
|
14
|
|
|
|
|
|
|
|
|
|
|
$
|
18
|
|
|
$
|
9
|
|
|
|
|
|
|
$
|
774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment
|
|
$
|
1,881
|
|
|
$
|
810
|
|
|
$
|
401
|
|
|
$
|
198
|
|
|
|
|
|
|
$
|
3
|
|
|
$
|
3,895
|
|
|
|
|
|
|
|
|
|
|
$
|
7,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid principal
|
|
$
|
1,914
|
|
|
$
|
826
|
|
|
$
|
406
|
|
|
$
|
198
|
|
|
|
|
|
|
$
|
3
|
|
|
$
|
3,981
|
|
|
|
|
|
|
|
|
|
|
$
|
7,328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related allowance
|
|
$
|
230
|
|
|
$
|
30
|
|
|
$
|
111
|
|
|
$
|
10
|
|
|
|
|
|
|
$
|
3
|
|
|
$
|
1,848
|
|
|
|
|
|
|
|
|
|
|
$
|
2,232
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average recorded Investment
|
|
$
|
1,626
|
|
|
$
|
728
|
|
|
$
|
415
|
|
|
$
|
341
|
|
|
|
|
|
|
$
|
10
|
|
|
$
|
3,615
|
|
|
|
|
|
|
|
|
|
|
$
|
6,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income Recognized
|
|
$
|
58
|
|
|
$
|
36
|
|
|
$
|
8
|
|
|
$
|
10
|
|
|
|
|
|
|
|
|
|
|
$
|
166
|
|
|
|
|
|
|
|
|
|
|
$
|
278
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76
Note 5 Allowance for Loan Losses (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired PNCI Loans As of December 31, 2017
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(in thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consum.
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment
|
|
$
|
1,359
|
|
|
|
|
|
|
$
|
591
|
|
|
$
|
44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,994
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid principal
|
|
$
|
1,404
|
|
|
|
|
|
|
$
|
612
|
|
|
$
|
57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average recorded Investment
|
|
$
|
911
|
|
|
$
|
913
|
|
|
$
|
663
|
|
|
$
|
56
|
|
|
|
|
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,545
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income Recognized
|
|
$
|
24
|
|
|
|
|
|
|
$
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment
|
|
|
|
|
|
|
|
|
|
$
|
603
|
|
|
$
|
121
|
|
|
|
|
|
|
$
|
250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
974
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid principal
|
|
|
|
|
|
|
|
|
|
$
|
604
|
|
|
$
|
121
|
|
|
|
|
|
|
$
|
250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related allowance
|
|
|
|
|
|
|
|
|
|
$
|
316
|
|
|
$
|
97
|
|
|
|
|
|
|
$
|
54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
467
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average recorded Investment
|
|
$
|
130
|
|
|
$
|
66
|
|
|
$
|
577
|
|
|
$
|
61
|
|
|
|
|
|
|
$
|
184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income Recognized
|
|
|
|
|
|
|
|
|
|
$
|
26
|
|
|
$
|
6
|
|
|
|
|
|
|
$
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired Originated Loans As of December 31, 2016
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(in thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consum.
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment
|
|
$
|
1,820
|
|
|
$
|
12,898
|
|
|
$
|
1,480
|
|
|
$
|
715
|
|
|
|
|
|
|
$
|
15
|
|
|
$
|
762
|
|
|
$
|
11
|
|
|
|
|
|
|
$
|
17,701
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid principal
|
|
$
|
1,829
|
|
|
$
|
13,145
|
|
|
$
|
1,561
|
|
|
$
|
1,135
|
|
|
|
|
|
|
$
|
29
|
|
|
$
|
926
|
|
|
$
|
16
|
|
|
|
|
|
|
$
|
18,641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average recorded Investment
|
|
$
|
2,853
|
|
|
$
|
20,003
|
|
|
$
|
2,221
|
|
|
$
|
831
|
|
|
$
|
1
|
|
|
$
|
16
|
|
|
$
|
669
|
|
|
$
|
7
|
|
|
|
|
|
|
$
|
26,601
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income Recognized
|
|
$
|
92
|
|
|
$
|
570
|
|
|
$
|
40
|
|
|
$
|
6
|
|
|
|
|
|
|
$
|
1
|
|
|
$
|
48
|
|
|
|
|
|
|
|
|
|
|
$
|
757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment
|
|
$
|
1,551
|
|
|
$
|
357
|
|
|
$
|
430
|
|
|
$
|
594
|
|
|
|
|
|
|
$
|
19
|
|
|
$
|
3,334
|
|
|
|
|
|
|
|
|
|
|
$
|
6,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid principal
|
|
$
|
1,552
|
|
|
$
|
358
|
|
|
$
|
440
|
|
|
$
|
595
|
|
|
|
|
|
|
$
|
19
|
|
|
$
|
3,385
|
|
|
|
|
|
|
|
|
|
|
$
|
6,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related allowance
|
|
$
|
180
|
|
|
$
|
4
|
|
|
$
|
110
|
|
|
$
|
107
|
|
|
|
|
|
|
$
|
13
|
|
|
$
|
1,130
|
|
|
|
|
|
|
|
|
|
|
$
|
1,544
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average recorded Investment
|
|
$
|
1,779
|
|
|
$
|
888
|
|
|
$
|
1,076
|
|
|
$
|
634
|
|
|
|
|
|
|
$
|
9
|
|
|
$
|
2,714
|
|
|
|
|
|
|
|
|
|
|
$
|
7,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income Recognized
|
|
$
|
65
|
|
|
$
|
22
|
|
|
$
|
9
|
|
|
$
|
31
|
|
|
|
|
|
|
$
|
2
|
|
|
$
|
77
|
|
|
|
|
|
|
|
|
|
|
$
|
206
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired PNCI Loans As of December 31, 2016
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(in thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consum.
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment
|
|
$
|
463
|
|
|
$
|
1,826
|
|
|
$
|
735
|
|
|
$
|
67
|
|
|
|
|
|
|
$
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,094
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid principal
|
|
$
|
486
|
|
|
$
|
2,031
|
|
|
$
|
746
|
|
|
$
|
74
|
|
|
|
|
|
|
$
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average recorded Investment
|
|
$
|
669
|
|
|
$
|
1,479
|
|
|
$
|
594
|
|
|
$
|
69
|
|
|
|
|
|
|
$
|
18
|
|
|
$
|
1
|
|
|
|
|
|
|
$
|
245
|
|
|
$
|
3,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income Recognized
|
|
$
|
7
|
|
|
|
|
|
|
$
|
9
|
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment
|
|
$
|
259
|
|
|
|
|
|
|
$
|
551
|
|
|
$
|
132
|
|
|
|
|
|
|
$
|
118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid principal
|
|
$
|
259
|
|
|
|
|
|
|
$
|
551
|
|
|
$
|
132
|
|
|
|
|
|
|
$
|
118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related allowance
|
|
$
|
79
|
|
|
|
|
|
|
$
|
300
|
|
|
$
|
108
|
|
|
|
|
|
|
$
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average recorded Investment
|
|
$
|
130
|
|
|
$
|
1,374
|
|
|
$
|
579
|
|
|
$
|
85
|
|
|
|
|
|
|
$
|
176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,344
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income Recognized
|
|
$
|
10
|
|
|
|
|
|
|
$
|
27
|
|
|
$
|
7
|
|
|
|
|
|
|
$
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77
Note 5 Allowance for Loan Losses (continued)
At December 31, 2017, $12,517,000 of Originated loans were TDRs and classified as impaired. The Company
had obligations to lend $1,000 of additional funds on these TDRs as of December 31, 2017. At December 31, 2017, $1,352,000 of PNCI loans were TDRs and classified as impaired. The Company had no obligations to lend additional funds on these
TDRs as of December 31, 2017.
At December 31, 2016, $12,371,000 of Originated loans were TDRs and classified as impaired. The Company had
obligations to lend $25,000 of additional funds on these TDRs as of December 31, 2016. At December 31, 2016, $1,324,000 of PNCI loans were TDRs and classified as impaired. The Company had no obligations to lend additional funds on these
TDRs as of December 31, 2016.
At December 31, 2015, $29,269,000 of Originated loans were TDRs and classified as impaired. The Company had
obligations to lend $35,000 of additional funds on these TDRs as of December 31, 2015. At December 31, 2015, $1,396,000 of PNCI loans were TDRs and classified as impaired. The Company had no obligations to lend additional funds on these
TDRs as of December 31, 2015.
The following tables show certain information regarding Troubled Debt Restructurings (TDRs) that occurred during the
periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TDR Information for the Year Ended December 31, 2017
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(dollars in thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consum.
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
Number
|
|
|
1
|
|
|
|
8
|
|
|
|
3
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
11
|
|
|
|
1
|
|
|
|
|
|
|
|
26
|
|
Pre-mod
outstanding principal balance
|
|
$
|
939
|
|
|
$
|
3,721
|
|
|
$
|
187
|
|
|
$
|
252
|
|
|
|
|
|
|
$
|
14
|
|
|
$
|
1,854
|
|
|
$
|
144
|
|
|
|
|
|
|
$
|
7,111
|
|
Post-mod
outstanding principal balance
|
|
$
|
939
|
|
|
$
|
3,695
|
|
|
$
|
187
|
|
|
$
|
252
|
|
|
|
|
|
|
$
|
14
|
|
|
$
|
1,747
|
|
|
$
|
144
|
|
|
|
|
|
|
$
|
6,978
|
|
Financial impact due to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TDR taken as additional provision
|
|
$
|
169
|
|
|
$
|
(111
|
)
|
|
$
|
27
|
|
|
|
|
|
|
|
|
|
|
$
|
11
|
|
|
$
|
37
|
|
|
|
|
|
|
|
|
|
|
$
|
133
|
|
Number that defaulted during the period
|
|
|
2
|
|
|
|
1
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
Recorded investment of TDRs that subsequently defaulted during the 12 month period after
modification
|
|
$
|
223
|
|
|
$
|
219
|
|
|
$
|
127
|
|
|
$
|
55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
624
|
|
Financial impact due to the default of previous
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TDR taken as charge-offs or additional provisions
|
|
|
|
|
|
|
|
|
|
$
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(5
|
)
|
|
|
|
|
TDR Information for the Year Ended December 31, 2016
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(dollars in thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consum.
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
Number
|
|
|
3
|
|
|
|
5
|
|
|
|
9
|
|
|
|
1
|
|
|
|
|
|
|
|
2
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
24
|
|
Pre-mod
outstanding principal balance
|
|
$
|
650
|
|
|
$
|
423
|
|
|
$
|
707
|
|
|
$
|
105
|
|
|
|
|
|
|
$
|
27
|
|
|
$
|
77
|
|
|
|
|
|
|
|
|
|
|
$
|
1,989
|
|
Post-mod
outstanding principal balance
|
|
$
|
656
|
|
|
$
|
461
|
|
|
$
|
709
|
|
|
$
|
105
|
|
|
|
|
|
|
$
|
27
|
|
|
$
|
77
|
|
|
|
|
|
|
|
|
|
|
$
|
2,035
|
|
Financial impact due to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TDR taken as additional provision
|
|
$
|
50
|
|
|
$
|
46
|
|
|
$
|
205
|
|
|
|
|
|
|
|
|
|
|
$
|
2
|
|
|
$
|
23
|
|
|
|
|
|
|
|
|
|
|
$
|
326
|
|
Number that defaulted during the period
|
|
|
2
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
Recorded investment of TDRs that subsequently defaulted during the 12 month period after
modification
|
|
$
|
101
|
|
|
|
|
|
|
$
|
229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
330
|
|
Financial impact due to the default of previous
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TDR taken as charge-offs or additional provisions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TDR Information for the Year Ended December 31, 2015
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(dollars in thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consum.
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
Number
|
|
|
4
|
|
|
|
5
|
|
|
|
2
|
|
|
|
2
|
|
|
|
|
|
|
|
2
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
23
|
|
Pre-mod outstanding principal balance
|
|
$
|
800
|
|
|
$
|
1,518
|
|
|
$
|
301
|
|
|
$
|
315
|
|
|
|
|
|
|
$
|
89
|
|
|
$
|
956
|
|
|
|
|
|
|
|
|
|
|
$
|
3,979
|
|
Post-mod outstanding principal balance
|
|
$
|
801
|
|
|
$
|
1,517
|
|
|
$
|
301
|
|
|
$
|
321
|
|
|
|
|
|
|
$
|
89
|
|
|
$
|
944
|
|
|
|
|
|
|
|
|
|
|
$
|
3,973
|
|
Financial impact due to TDR taken as additional provision
|
|
$
|
8
|
|
|
$
|
(5
|
)
|
|
|
|
|
|
$
|
38
|
|
|
|
|
|
|
$
|
5
|
|
|
$
|
405
|
|
|
|
|
|
|
|
|
|
|
$
|
451
|
|
Number that defaulted during the period
|
|
|
4
|
|
|
|
2
|
|
|
|
3
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
Recorded investment of TDRs that subsequently defaulted during the 12 month period after
modification
|
|
$
|
221
|
|
|
$
|
280
|
|
|
$
|
182
|
|
|
$
|
53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
736
|
|
Financial impact due to the default of previous TDR taken as charge-offs or additional
provisions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(9
|
)
|
Modifications classified as Troubled Debt Restructurings can include one or a combination of the following: rate
modifications, term extensions, interest only modifications, either temporary or long-term, payment modifications, and collateral substitutions/additions.
78
Note 5 Allowance for Loan Losses (continued)
For all new Troubled Debt Restructurings, an impairment analysis is conducted. If the loan is determined to
be collateral dependent, any additional amount of impairment will be calculated based on the difference between estimated collectible value and the current carrying balance of the loan. This difference could result in an increased provision and is
typically charged off. If the asset is determined not to be collateral dependent, the impairment is measured on the net present value difference between the expected cash flows of the restructured loan and the cash flows which would have been
received under the original terms. The effect of this could result in a requirement for additional provision to the reserve. The effect of these required provisions for the period are indicated above.
Typically if a TDR defaults during the period, the loan is then considered collateral dependent and, if it was not already considered collateral dependent, an
appropriate provision will be reserved or charge will be taken. The additional provisions required resulting from default of previously modified TDRs are noted above.
Note 6 Foreclosed Assets
A summary of the
activity in the balance of foreclosed assets follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2017
|
|
|
Year ended December 31, 2016
|
|
|
|
Noncovered
|
|
|
Covered
|
|
|
Total
|
|
|
Noncovered
|
|
|
Covered
|
|
|
Total
|
|
Beginning balance, net
|
|
$
|
3,763
|
|
|
$
|
223
|
|
|
$
|
3,986
|
|
|
$
|
5,369
|
|
|
|
|
|
|
$
|
5,369
|
|
Additions/transfers from loans
|
|
|
1,563
|
|
|
|
|
|
|
|
1,563
|
|
|
|
2,282
|
|
|
$
|
223
|
|
|
|
2,505
|
|
Dispositions/sales
|
|
|
(1,938
|
)
|
|
$
|
(223
|
)
|
|
|
(2,161
|
)
|
|
|
(3,748
|
)
|
|
|
|
|
|
|
(3,748
|
)
|
Valuation adjustments
|
|
|
(162
|
)
|
|
|
|
|
|
|
(162
|
)
|
|
|
(140
|
)
|
|
|
|
|
|
|
(140
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance, net
|
|
$
|
3,226
|
|
|
|
|
|
|
$
|
3,226
|
|
|
$
|
3,763
|
|
|
$
|
223
|
|
|
$
|
3,986
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending valuation allowance
|
|
$
|
(200
|
)
|
|
|
|
|
|
$
|
(200
|
)
|
|
$
|
(314
|
)
|
|
|
|
|
|
$
|
(314
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending number of foreclosed assets
|
|
|
16
|
|
|
|
|
|
|
|
16
|
|
|
|
14
|
|
|
|
1
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of foreclosed assets
|
|
$
|
2,656
|
|
|
$
|
216
|
|
|
$
|
2,872
|
|
|
$
|
4,010
|
|
|
|
|
|
|
$
|
4,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of foreclosed assets
|
|
$
|
718
|
|
|
$
|
(7
|
)
|
|
$
|
711
|
|
|
$
|
262
|
|
|
|
|
|
|
$
|
262
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2017, the balance of real estate owned includes $1,186,000 of foreclosed residential real estate
properties recorded as a result of obtaining physical possession of the property. At December 31, 2017, the recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings
are underway is $178,000.
Note 7 Premises and Equipment
Premises and equipment were comprised of:
|
|
|
|
|
|
|
|
|
|
|
December 31,
2017
|
|
|
December 31,
2016
|
|
|
|
(In thousands)
|
|
Land & land improvements
|
|
$
|
9,959
|
|
|
$
|
9,522
|
|
Buildings
|
|
|
50,340
|
|
|
|
42,345
|
|
Furniture and equipment
|
|
|
35,939
|
|
|
|
31,428
|
|
|
|
|
|
|
|
|
|
|
|
|
|
96,238
|
|
|
|
83,295
|
|
Less: Accumulated depreciation
|
|
|
(40,644
|
)
|
|
|
(37,412
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
55,594
|
|
|
|
45,883
|
|
Construction in progress
|
|
|
2,148
|
|
|
|
2,523
|
|
|
|
|
|
|
|
|
|
|
Total premises and equipment
|
|
$
|
57,742
|
|
|
$
|
48,406
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense for premises and equipment amounted to $5,686,000, $5,314,000, and $5,043,000 in 2017, 2016, and 2015,
respectively.
79
Note 8 Cash Value of Life Insurance
A summary of the activity in the balance of cash value of life insurance follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Beginning balance
|
|
$
|
95,912
|
|
|
$
|
94,560
|
|
Increase in cash value of life insurance
|
|
|
2,685
|
|
|
|
2,717
|
|
Death benefit receivable in excess of cash value
|
|
|
108
|
|
|
|
238
|
|
Death benefit receivable
|
|
|
(922
|
)
|
|
|
(1,603
|
)
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
97,783
|
|
|
$
|
95,912
|
|
|
|
|
|
|
|
|
|
|
End of period death benefit
|
|
$
|
165,587
|
|
|
$
|
165,669
|
|
Number of policies owned
|
|
|
182
|
|
|
|
185
|
|
Insurance companies used
|
|
|
14
|
|
|
|
14
|
|
Current and former employees and directors covered
|
|
|
57
|
|
|
|
58
|
|
As of December 31, 2017, the Bank was the owner and beneficiary of 182 life insurance policies, issued by 14 life
insurance companies, covering 57 current and former employees and directors. These life insurance policies are recorded on the Companys financial statements at their reported cash (surrender) values. As a result of current tax law and the
nature of these policies, the Bank records any increase in cash value of these policies as nontaxable noninterest income. If the Bank decided to surrender any of the policies prior to the death of the insured, such surrender may result in a tax
expense related to the
life-to-date
cumulative increase in cash value of the policy. If the Bank retains such policies until the death of the insured, the Bank would
receive nontaxable proceeds from the insurance company equal to the death benefit of the policies. The Bank has entered into Joint Beneficiary Agreements (JBAs) with certain of the insured that for certain of the policies provide some level of
sharing of the death benefit, less the cash surrender value, among the Bank and the beneficiaries of the insured upon the receipt of death benefits. See Note 15 of these consolidated financial statements for additional information on JBAs.
Note 9 Goodwill and Other Intangible Assets
The
following table summarizes the Companys goodwill intangible as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
December 31,
|
|
(Dollar in Thousands)
|
|
2017
|
|
|
Additions
|
|
|
Reductions
|
|
|
2016
|
|
Goodwill
|
|
$
|
64,311
|
|
|
|
|
|
|
|
|
|
|
$
|
64,311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes the Companys core deposit intangibles as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
Reductions/
|
|
|
Fully
|
|
|
December 31,
|
|
(Dollar in Thousands)
|
|
2017
|
|
|
Additions
|
|
|
Amortization
|
|
|
Depreciated
|
|
|
2016
|
|
Core deposit intangibles
|
|
$
|
9,558
|
|
|
|
|
|
|
|
|
|
|
$
|
(562
|
)
|
|
$
|
10,120
|
|
Accumulated amortization
|
|
|
(4,384
|
)
|
|
|
|
|
|
$
|
(1,389
|
)
|
|
$
|
562
|
|
|
|
(3,557
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core deposit intangibles, net
|
|
$
|
5,174
|
|
|
|
|
|
|
$
|
(1,389
|
)
|
|
|
|
|
|
$
|
6,563
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company recorded additions to its CDI of $2,046,000 in conjunction with the acquisition of three branch offices from Bank
of America on March 18, 2016, $6,614,000 in conjunction with the North Valley Bancorp acquisition on October 3, 2014, $898,000 in conjunction with the Citizens acquisition on September 23, 2011, and $562,000 in conjunction with the
Granite acquisition on May 28, 2010. The following table summarizes the Companys estimated core deposit intangible amortization (dollars in thousands):
|
|
|
|
|
|
|
Estimated Core Deposit
|
|
Years Ended
|
|
Intangible Amortization
|
|
2018
|
|
$
|
1,324
|
|
2019
|
|
|
1,228
|
|
2020
|
|
|
1,228
|
|
2021
|
|
|
969
|
|
2022
|
|
|
280
|
|
Thereafter
|
|
|
145
|
|
80
Note 10 Mortgage Servicing Rights
The following tables summarize the activity in, and the main assumptions we used to determine the fair value of mortgage servicing rights for the periods
indicated (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Balance at beginning of period
|
|
$
|
6,595
|
|
|
$
|
7,618
|
|
|
$
|
7,378
|
|
Acquisition
|
|
|
|
|
|
|
|
|
|
|
|
|
Originations
|
|
|
810
|
|
|
|
1,161
|
|
|
|
941
|
|
Change in fair value
|
|
|
(718
|
)
|
|
|
(2,184
|
)
|
|
|
(701
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
6,687
|
|
|
$
|
6,595
|
|
|
$
|
7,618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractually specified servicing fees, late fees and ancillary fees earned
|
|
$
|
2,076
|
|
|
$
|
2,065
|
|
|
$
|
2,164
|
|
Balance of loans serviced at:
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
$
|
816,623
|
|
|
$
|
817,917
|
|
|
$
|
840,288
|
|
End of period
|
|
$
|
811,065
|
|
|
$
|
816,623
|
|
|
$
|
817,917
|
|
Weighted-average prepayment speed (CPR)
|
|
|
8.9
|
%
|
|
|
8.8
|
%
|
|
|
9.8
|
%
|
Weighted-average discount rate
|
|
|
13.0
|
%
|
|
|
14.0
|
%
|
|
|
10.0
|
%
|
The changes in fair value of MSRs during 2017 were primarily due to changes in investor required rate of return, or discount
rate, of the MSRs. The changes in fair value of MSRs during 2016 were primarily due to changes in principal balances, changes in mortgage prepayment speeds, and changes in investor required rate of return, or discount rate, of the MSRs. The changes
in fair value of MSRs that occurred during 2015 were primarily due to changes in principal balances and changes in estimate life of the MSRs.
Note 11
Indemnification Asset
A summary of the activity in the balance of indemnification asset (liability) included in other assets is follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Beginning balance
|
|
$
|
(744
|
)
|
|
$
|
(521
|
)
|
|
$
|
(349
|
)
|
Effect of actual covered losses (recoveries) and increase (decrease) in estimated future covered
losses
|
|
|
(192
|
)
|
|
|
(412
|
)
|
|
|
(93
|
)
|
Change in estimated true up liability
|
|
|
(32
|
)
|
|
|
(86
|
)
|
|
|
(71
|
)
|
Reimbursable expenses, net
|
|
|
|
|
|
|
2
|
|
|
|
4
|
|
Payments made (received)
|
|
|
256
|
|
|
|
273
|
|
|
|
(12
|
)
|
Gain on termination of loss share agreement
|
|
|
712
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
|
|
|
|
$
|
(744
|
)
|
|
$
|
(521
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of indemnification asset (liability) recorded in other assets
|
|
|
|
|
|
$
|
(60
|
)
|
|
$
|
77
|
|
Amount of indemnification liability recorded in other liabilities
|
|
|
|
|
|
|
(684
|
)
|
|
|
(598
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
|
|
|
|
$
|
(744
|
)
|
|
$
|
(521
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During May 2015, the indemnification portion of the Companys agreement with the FDIC related to the Companys
acquisition of certain nonresidential real estate loans of Granite in May 2010 expired. The indemnification portion of the Companys agreement with the FDIC related to the Companys acquisition of certain residential real estate loans of
Granite in May 2010 was set to expire in May 2018. The agreement specified that recoveries of losses that are claimed by the Company and indemnified by the FDIC under the agreement that are recovered by the Company through May 2020 are to be shared
with the FDIC in the same proportion as they were indemnified by the FDIC. In addition, the agreement specified that at the end of the agreement in May 2020, to the extent that total claimed losses plus servicing expenses, net of recoveries, claimed
under the agreement over the entire ten year period of the agreement did not meet a certain threshold, the Company would have been required to pay to the FDIC a true up amount equal to fifty percent of the difference of the threshold and
actual claimed losses plus servicing expenses, net of recoveries. On May 9, 2017, the Company and the FDIC terminated their loss sharing agreements. As part of the termination agreement, the Company paid the FDIC $184,000, and recorded a
$712,000 gain representing the difference between the Companys payment to the FDIC and the recorded payable balance on May 9, 2017.
81
Note 12 Other Assets
Other assets were comprised of (in thousands):
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Deferred tax asset, net (Note 22)
|
|
$
|
21,697
|
|
|
$
|
36,199
|
|
Prepaid expense
|
|
|
4,111
|
|
|
|
3,045
|
|
Software
|
|
|
1,126
|
|
|
|
2,039
|
|
Advanced compensation
|
|
|
16
|
|
|
|
249
|
|
Capital Trusts
|
|
|
1,706
|
|
|
|
1,702
|
|
Investment in Low Housing Tax Credit Funds
|
|
|
16,854
|
|
|
|
18,465
|
|
Life insurance proceeds receivable
|
|
|
2,242
|
|
|
|
2,120
|
|
Prepaid Taxes
|
|
|
4,754
|
|
|
|
6,460
|
|
Premises held for sale
|
|
|
|
|
|
|
2,896
|
|
Miscellaneous other assets
|
|
|
2,545
|
|
|
|
1,568
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
$
|
55,051
|
|
|
$
|
74,743
|
|
|
|
|
|
|
|
|
|
|
Note 13 Deposits
A summary of the balances of deposits follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Noninterest-bearing demand
|
|
$
|
1,368,218
|
|
|
$
|
1,275,745
|
|
Interest-bearing demand
|
|
|
971,459
|
|
|
|
887,625
|
|
Savings
|
|
|
1,364,518
|
|
|
|
1,397,036
|
|
Time certificates, over $250,000
|
|
|
73,596
|
|
|
|
75,184
|
|
Other time certificates
|
|
|
231,340
|
|
|
|
259,970
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
$
|
4,009,131
|
|
|
$
|
3,895,560
|
|
|
|
|
|
|
|
|
|
|
Certificate of deposit balances of $50,000,000 from the State of California were included in time certificates over $250,000
at December 31, 2017 and 2016. The Bank participates in a deposit program offered by the State of California whereby the State may make deposits at the Banks request subject to collateral and credit worthiness constraints. The negotiated
rates on these State deposits are generally more favorable than other wholesale funding sources available to the Bank. Overdrawn deposit balances of $1,366,000 and $1,191,000 were classified as consumer loans at December 31, 2017 and 2016,
respectively.
At December 31, 2017, the scheduled maturities of time deposits were as follows (in thousands):
|
|
|
|
|
|
|
Scheduled
|
|
|
|
Maturities
|
|
2018
|
|
|
|
|
2019
|
|
$
|
250,277
|
|
2020
|
|
|
23,577
|
|
2021
|
|
|
17,699
|
|
2020
|
|
|
8,887
|
|
Thereafter
|
|
|
4,496
|
|
|
|
|
|
|
Total
|
|
$
|
304,936
|
|
|
|
|
|
|
Note 14 Reserve for Unfunded Commitments
The following tables summarize the activity in reserve for unfunded commitments for the periods indicated (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Balance at beginning of period
|
|
$
|
2,719
|
|
|
$
|
2,475
|
|
|
$
|
2,145
|
|
Provision for losses Unfunded commitments
|
|
|
445
|
|
|
|
244
|
|
|
|
330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
3,164
|
|
|
$
|
2,719
|
|
|
$
|
2,475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82
Note 15 Other Liabilities
Other liabilities were comprised of (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Deferred compensation
|
|
$
|
6,605
|
|
|
$
|
6,525
|
|
Pension liability
|
|
|
28,472
|
|
|
|
26,645
|
|
Joint beneficiary agreements
|
|
|
3,365
|
|
|
|
3,007
|
|
Low income housing tax credit fund commitments
|
|
|
8,554
|
|
|
|
15,176
|
|
Accrued salaries and benefits expense
|
|
|
6,619
|
|
|
|
5,704
|
|
Loan escrow and servicing payable
|
|
|
1,958
|
|
|
|
2,146
|
|
Deferred revenue
|
|
|
1,228
|
|
|
|
726
|
|
Litigation contingency
|
|
|
1,450
|
|
|
|
1,450
|
|
Miscellaneous other liabilities
|
|
|
5,007
|
|
|
|
5,985
|
|
|
|
|
|
|
|
|
|
|
Total other liabilities
|
|
$
|
63,258
|
|
|
$
|
67,364
|
|
|
|
|
|
|
|
|
|
|
Note 16 Other Borrowings
A summary of the balances of other borrowings follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(in thousands)
|
|
FHLB collateralized borrowing, fixed rate, as of December 31, 2017 of 1.38%, payable on
January 2, 2018
|
|
$
|
104,729
|
|
|
|
|
|
Other collateralized borrowings, fixed rate, as of December 31, 2017 of 0.05%, payable on
January 2, 2018
|
|
|
17,437
|
|
|
$
|
17,493
|
|
|
|
|
|
|
|
|
|
|
Total other borrowings
|
|
$
|
122,166
|
|
|
$
|
17,493
|
|
|
|
|
|
|
|
|
|
|
The Company did not enter into any other borrowings or repurchase agreements during 2017 or 2016.
The Company maintains a collateralized line of credit with the FHLB. Based on the FHLB stock requirements at December 31, 2017, this line provided for
maximum borrowings of $1,365,325,000 of which $104,729,000 was outstanding, leaving $1,260,596,000 available. As of December 31, 2017, the Company had designated investment securities with a fair value of $67,325,000 and loans totaling
$1,992,980,000 as potential collateral under this collateralized line of credit with the FHLB.
The Company had $17,437,000 and $17,493,000 of other
collateralized borrowings at December 31, 2017 and 2016, respectively. Other collateralized borrowings are generally overnight maturity borrowings from
non-financial
institutions that are collateralized
by securities owned by the Company. As of December 31, 2017, the Company has pledged as collateral and sold under agreements to repurchase investment securities with fair value of $33,531,000 under these other collateralized borrowings.
The Company maintains a collateralized line of credit with the Federal Reserve Bank of San Francisco (FRB). As of December 31, 2017, this
line provided for maximum borrowings of $134,660,000 of which none was outstanding, leaving $134,660,000 available. As of December 31, 2017, the Company has designated investment securities with fair value of $17,000 and
loans totaling $245,532,000 as potential collateral under this collateralized line of credit with the FRB.
The Company has available unused correspondent
banking lines of credit from commercial banks totaling $20,000,000 for federal funds transactions at December 31, 2017.
Note 17 Junior
Subordinated Debt
At December 31, 2017, the Company had five wholly-owned subsidiary business trusts that had issued $62.9 million of trust
preferred securities (the Capital Trusts). Trust preferred securities accrue and pay distributions periodically at specified annual rates as provided in the indentures. The trusts used the net proceeds from the offering to purchase a
like amount of subordinated debentures (the Debentures) of the Company. The Debentures are the sole assets of the trusts. The Companys obligations under the subordinated debentures and related documents, taken together, constitute
a full and unconditional guarantee by the Company of the obligations of the trusts. The trust preferred securities are mandatorily redeemable upon the maturity of the Debentures, or upon earlier redemption as provided in the indentures. The Company
has the right to redeem the Debentures in whole (but not in part) on or after specific dates, at a redemption price specified in the indentures plus any accrued but unpaid interest to the redemption date. The Company also has a right to defer
consecutive payments of interest on the debentures for up to five years.
The Company organized two of the Capital Trusts. The Company acquired its three
other Capital Trusts and assumed their related Debentures as a result of its acquisition of North Valley Bancorp. At the acquisition date of October 3, 2014, the Debentures associated with North Valley Bancorps three Capital Trusts were
recorded on the Companys books at their fair values of $5,006,000, $3,918,000, and $6,063,000, respectively. The related fair value discounts to face value of these Debentures will be amortized over the remaining time to maturity for each of
these Debentures using the effective interest method. Similar, and proportional, discounts were applied to the acquired common stock interests in each of the acquired Capital Trusts and these discounts will be proportionally amortized over the
remaining time to maturity for each related debenture.
83
Note 17 Junior Subordinated Debt (continued)
The recorded book values of the Debentures issued by the Capital Trusts are reflected as junior subordinated
debt in the Companys consolidated balance sheets. The common stock issued by the Capital Trusts and owned by the Company is recorded in other assets in the Companys consolidated balance sheets. The recorded book value of the debentures
issued by the Capital Trusts, less the recorded book value of the common stock of the Capital Trusts owned by the Company, continues to qualify as Tier 1 or Tier 2 capital under interim guidance issued by the Board of Governors of the Federal
Reserve System.
The following table summarizes the terms and recorded balance of each subordinated debenture as of the date indicated (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coupon Rate
|
|
As of December 31, 2017
|
|
Subordinated
|
|
Maturity
|
|
Face
|
|
(Variable)
|
|
Current
|
|
Recorded
|
|
Debt Series
|
|
Date
|
|
Value
|
|
3 mo. LIBOR +
|
|
Coupon Rate
|
|
Book Value
|
|
TriCo Cap Trust I
|
|
10/7/2033
|
|
$20,619
|
|
3.05%
|
|
4.41%
|
|
$
|
20,619
|
|
TriCo Cap Trust II
|
|
7/23/2034
|
|
20,619
|
|
2.55%
|
|
3.91%
|
|
|
20,619
|
|
North Valley Trust II
|
|
4/24/2033
|
|
6,186
|
|
3.25%
|
|
4.63%
|
|
|
5,135
|
|
North Valley Trust III
|
|
4/24/2034
|
|
5,155
|
|
2.80%
|
|
4.16%
|
|
|
4,041
|
|
North Valley Trust IV
|
|
3/15/2036
|
|
10,310
|
|
1.33%
|
|
2.92%
|
|
|
6,444
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$62,889
|
|
|
|
|
|
$
|
56,858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 18 Commitments and Contingencies
Restricted Cash Balances
Reserves (in the form of deposits with the San Francisco Federal Reserve Bank) of $82,068,000 and $78,183,000 were
maintained to satisfy Federal regulatory requirements at December 31, 2017 and 2016. These reserves are included in cash and due from banks in the accompanying consolidated balance sheets.
Lease Commitments
The Company leases 48 sites under
non-cancelable
operating leases. The leases contain
various provisions for increases in rental rates, based either on changes in the published Consumer Price Index or a predetermined escalation schedule. Substantially all of the leases provide the Company with the option to extend the lease term one
or more times following expiration of the initial term. The Company currently does not have any capital leases. At December 31, 2017, future minimum commitments under
non-cancelable
operating leases with
initial or remaining terms of one year or more are as follows:
|
|
|
|
|
|
|
Operating Leases
|
|
|
|
(in thousands)
|
|
2018
|
|
$
|
3,278
|
|
2019
|
|
|
2,499
|
|
2020
|
|
|
1,847
|
|
2021
|
|
|
1,488
|
|
2022
|
|
|
757
|
|
Thereafter
|
|
|
798
|
|
|
|
|
|
|
Future minimum lease payments
|
|
$
|
10,667
|
|
|
|
|
|
|
Rent expense under operating leases was $5,885,000 in 2017, $6,082,000 in 2016, and $6,241,000 in 2015. Rent expense was
offset by rent income of $44,000 in 2017, $220,000 in 2016, and $217,000 in 2015.
Financial Instruments with
Off-Balance-Sheet
Risk
The Company is a party to financial instruments with
off-balance
sheet risk in the normal course of business to meet the financing needs
of its customers. These financial instruments include commitments to extend credit, standby letters of credit, and deposit account overdraft privilege. Those instruments involve, to varying degrees, elements of risk in excess of the amount
recognized in the balance sheet. The contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.
The Companys exposure to loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby
letters of credit written is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for
on-balance
sheet instruments. The Companys exposure to loss in the event of nonperformance by the other party to the financial instrument for deposit account overdraft privilege is represented by the overdraft privilege amount disclosed to the deposit
account holder.
84
Note 18 Commitments and Contingencies (continued)
The following table presents a summary of the Banks commitments and contingent liabilities:
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
December 31,
2017
|
|
|
December 31,
2016
|
|
Financial instruments whose amounts represent risk:
|
|
|
|
|
|
|
|
|
Commitments to extend credit:
|
|
|
|
|
|
|
|
|
Commercial loans
|
|
$
|
257,220
|
|
|
$
|
220,836
|
|
Consumer loans
|
|
|
422,958
|
|
|
|
406,855
|
|
Real estate mortgage loans
|
|
|
66,267
|
|
|
|
42,184
|
|
Real estate construction loans
|
|
|
187,097
|
|
|
|
97,399
|
|
Standby letters of credit
|
|
|
13,075
|
|
|
|
12,763
|
|
Deposit account overdraft privilege
|
|
|
98,260
|
|
|
|
98,583
|
|
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition
established in the contract. Commitments generally have fixed expiration dates of one year or less or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the
total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customers credit worthiness on a
case-by-case
basis. The
amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on Managements credit evaluation of the customer. Collateral held varies, but may include accounts receivable, inventory, property, plant and
equipment, residential properties, and income-producing commercial properties.
Standby letters of credit are conditional commitments issued by the
Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support private borrowing arrangements. Most standby letters of credit are issued for one year or less. The credit risk involved in issuing
letters of credit is essentially the same as that involved in extending loan facilities to customers. Collateral requirements vary, but in general follow the requirements for other loan facilities.
Deposit account overdraft privilege amount represents the unused overdraft privilege balance available to the Companys deposit account holders who have
deposit accounts covered by an overdraft privilege. The Company has established an overdraft privilege for certain of its deposit account products whereby all holders of such accounts who bring their accounts to a positive balance at least once
every thirty days receive the overdraft privilege. The overdraft privilege allows depositors to overdraft their deposit account up to a predetermined level. The predetermined overdraft limit is set by the Company based on account type.
Legal Proceedings
On September 15, 2014, a former Personal Banker at one of the Banks
in-store
branches filed a Class Action Complaint against the Bank in Butte County Superior Court, alleging causes of action related to the observance of meal and rest periods and seeking to represent a
class of current and former branch employees with the same or similar job duties, employed by the Bank within the State of California during the preceding four years. On or about June 25, 2015, Plaintiff filed an Amended Complaint expanding the
class definition to include all current and former
non-exempt
branch employees employed by the Bank within the State of California at any time during the period of September 15, 2010 to the entry of
judgment. The Bank responded to the First Amended Complaint by denying the charges and the parties engaged in written discovery. The parties then engaged in
non-binding
mediation during the third quarter of
2016.
In addition to this, on January 20, 2015, a then-current Personal Banker at one of the Banks
in-store
branches filed a First Amended Complaint against the Bank and the Company in Sacramento County Superior Court, alleging causes of action related to wage statement violations. As part of the Complaint
Plaintiff is seeking to represent a class of current and former exempt and
non-exempt
employees who worked for the Company and/or the Bank during the time period of December 12, 2013 to the date of filing
the action. The Company and the Bank responded to the First Amended Complaint by denying the charges and engaging in written discovery with Plaintiff. The parties then engaged in
non-binding
mediation of the
action during the third quarter of 2016 as well. This matter was transferred to the Butte County Superior Court and consolidated with the case above, effective August 25, 2017.
As part of the mediations, which took place concurrently, the Bank agreed in principal to settle the two matters in a consolidated settlement proceeding. The
agreement was preliminarily approved by the court and notices were sent to the members of the purported classes. After reviewing the received claims, on January 12, 2018, the final settlement agreement was approved by the court. The total cost
to the bank was $1,469,000, as compared to the balance accrued for litigation contingencies as of December 31, 2017 and 2016 of $1,450,000.
Neither the
Company nor its subsidiaries are a party to any other pending legal proceedings that are material, nor is their property the subject of any other material pending legal proceeding at this time. All other legal proceedings are routine and arise out
of the ordinary course of the Banks business. None of those proceedings are currently expected to have a material adverse impact upon the Companys and the Banks business, their consolidated financial position nor their operations
in any material amount not already accrued, after taking into consideration any applicable insurance.
85
Note 18 Commitments and Contingencies (continued)
Other Commitments and Contingencies
The Company has entered into employment agreements or change
of control agreements with certain officers of the Company providing severance payments and accelerated vesting of benefits under supplemental retirement agreements to the officers in the event of a change in control of the Company and termination
for other than cause or after a substantial and material change in the officers title, compensation or responsibilities.
The Bank owns 13,396
shares of Class B common stock of Visa Inc. which are convertible into Class A common stock at a conversion ratio of 1.648265 per Class B share. As of December 31, 2017, the value of the Class A shares was $114.02 per
share. Utilizing the conversion ratio, the value of unredeemed Class A equivalent shares owned by the Bank was $2,518,000 as of December 31, 2017, and has not been reflected in the accompanying financial statements. The shares of Visa
Class B common stock are restricted and may not be transferred. Visa Member Banks are required to fund an escrow account to cover settlements, resolution of pending litigation and related claims. If the funds in the escrow account are
insufficient to settle all the covered litigation, Visa may sell additional Class A shares, use the proceeds to settle litigation, and further reduce the conversion ratio. If funds remain in the escrow account after all litigation is settled,
the Class B conversion ratio will be increased to reflect that surplus.
Mortgage loans sold to investors may be sold with servicing rights retained,
with only the standard legal representations and warranties regarding recourse to the Bank. Management believes that any liabilities that may result from such recourse provisions are not significant.
Note 19 Shareholders Equity
Dividends
Paid
The Bank paid to the Company cash dividends in the aggregate amounts of $19,236,000, $16,758,000, and $13,304,000 in 2017, 2016, and 2015,
respectively. The Bank is regulated by the Federal Deposit Insurance Corporation (FDIC) and the State of California Department of Business Oversight. Absent approval from the Commissioner of the Department of Business Oversight, California banking
laws generally limit the Banks ability to pay dividends to the lesser of (1) retained earnings or (2) net income for the last three fiscal years, less cash distributions paid during such period. Under this law, at December 31,
2017, the Bank could have paid dividends of $85,254,000 to the Company without the approval of the Commissioner of the Department of Business Oversight.
Stock Repurchase Plan
On August 21, 2007, the Board
of Directors adopted a plan to repurchase, as conditions warrant, up to 500,000 shares of the Companys common stock on the open market. The timing of purchases and the exact number of shares to be purchased will depend on market conditions.
The 500,000 shares authorized for repurchase under this stock repurchase plan represented approximately 3.2% of the Companys 15,814,662 outstanding common shares as of August 21, 2007. This stock repurchase plan has no expiration date. As
of December 31, 2017, the Company had repurchased 166,600 shares under this plan. During the year ended December 31, 2017, there were no shares of common stock repurchased under this plan.
Stock Repurchased Under Equity Compensation Plans
During
the years ended December 31, 2017, 2016, and 2015, employees tendered 107,390, 264,800, and 106,355 of the Companys common stock with market value of $3,854,000, $7,879,000, and $2,868,000, respectively, in lieu of cash to exercise
options to purchase shares of the Companys stock and to pay income taxes related to such exercises as permitted by the Companys shareholder-approved equity compensation plans. The tendered shares were retired. The market value of
tendered shares is the last market trade price at closing on the day an option is exercised. Stock repurchased under equity incentive plans are not included in the total of stock repurchased under the stock repurchase plan announced August 21,
2007.
86
Note 20 Stock Options and Other Equity-Based Incentive Instruments
In March 2009, the Companys Board of Directors adopted the TriCo Bancshares 2009 Equity Incentive Plan (2009 Plan) covering officers, employees,
directors of, and consultants to, the Company. The 2009 Plan was approved by the Companys shareholders in May 2009. The 2009 Plan allows for the granting of the following types of stock awards (Awards): incentive stock options,
nonstatutory stock options, performance awards, restricted stock, restricted stock unit (RSU) awards and stock appreciation rights. RSUs that vest based solely on the grantee remaining in the service of the Company for a certain amount of time, are
referred to as service condition vesting RSUs. RSUs that vest based on the grantee remaining in the service of the Company for a certain amount of time and a market condition such as the total return of the Companys common stock
versus the total return of an index of bank stocks, are referred to as market plus service condition vesting RSUs. In May 2013, the Companys shareholders approved an amendment to the 2009 Plan increasing the
maximum aggregate number of shares of TriCos common stock which may be issued pursuant to or subject to Awards from 650,000 to 1,650,000. The number of shares available for issuance under the 2009 Plan is reduced by: (i) one share for
each share of common stock issued pursuant to a stock option or a Stock Appreciation Right and (ii) two shares for each share of common stock issued pursuant to a performance award, a restricted stock award or a RSU. When Awards made under the
2009 Plan expire or are forfeited or cancelled, the underlying shares will become available for future Awards under the 2009 Plan. To the extent that a share of common stock pursuant to an Award that counted as two shares against the number of
shares again becomes available for issuance under the 2009 Plan, the number of shares of common stock available for issuance under the 2009 Plan shall increase by two shares. Shares awarded and delivered under the 2009 Plan may be authorized but
unissued, or reacquired shares. As of December 31, 2017, 411,900 options for the purchase of common shares, and 121,286 RSUs were outstanding, and 527,039 shares remain available for issuance, under the 2009 Plan.
In May 2001, the Company adopted the TriCo Bancshares 2001 Stock Option Plan (2001 Plan) covering officers, employees, directors of, and consultants to, the
Company. Under the 2001 Plan, the option exercise price cannot be less than the fair market value of the Common Stock at the date of grant except in the case of substitute options. Options for the 2001 Plan expire on the tenth anniversary of the
grant date. Vesting schedules under the 2001 Plan are determined individually for each grant. As of December 31, 2017, 34,500 options for the purchase of common shares were outstanding under the 2001 Plan. As of May 2009, as a result of the
shareholder approval of the 2009 Plan, no new options may be granted under the 2001 Plan.
Stock option activity is summarized in the following table for
the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
|
Option Price
per Share
|
|
|
Weighted
Average
Exercise
Price
|
|
Outstanding at December 31, 2016
|
|
|
592,250
|
|
|
$
|
12.63
|
|
|
|
to
|
|
|
$
|
23.21
|
|
|
$
|
17.12
|
|
Options granted
|
|
|
|
|
|
|
|
|
|
|
to
|
|
|
|
|
|
|
|
|
|
Options exercised
|
|
|
(145,850
|
)
|
|
$
|
14.54
|
|
|
|
to
|
|
|
$
|
22.54
|
|
|
$
|
17.97
|
|
Options forfeited
|
|
|
|
|
|
|
|
|
|
|
to
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2017
|
|
|
446,400
|
|
|
$
|
12.63
|
|
|
|
to
|
|
|
$
|
23.21
|
|
|
$
|
16.84
|
|
The following table shows the number, weighted-average exercise price, intrinsic value, and weighted average remaining
contractual life of options exercisable, options not yet exercisable and total options outstanding as of December 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currently
Exercisable
|
|
|
Currently Not
Exercisable
|
|
|
Total
Outstanding
|
|
Number of options
|
|
|
422,100
|
|
|
|
24,300
|
|
|
|
446,400
|
|
Weighted average exercise price
|
|
$
|
16.65
|
|
|
$
|
20.21
|
|
|
$
|
16.84
|
|
Intrinsic value (in thousands)
|
|
$
|
8,953
|
|
|
$
|
429
|
|
|
$
|
9,382
|
|
Weighted average remaining contractual term (yrs.)
|
|
|
3.8
|
|
|
|
5.7
|
|
|
|
3.9
|
|
The 24,300 options that are currently not exercisable as of December 31, 2017 are expected to vest, on a weighted-average
basis, over the next 0.7 years, and the Company is expected to recognize $108,000 of
pre-tax
compensation costs related to these options as they vest. The Company did not modify any option grants during 2017
or 2016.
The following table shows the total intrinsic value of options exercised, the total fair value of options vested, total compensation costs for
options recognized in income, and total tax benefit recognized in income related to compensation costs for options during the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Intrinsic value of options exercised
|
|
$
|
2,657,000
|
|
|
$
|
3,483,000
|
|
|
$
|
969,000
|
|
Fair value of options that vested
|
|
$
|
259,000
|
|
|
$
|
580,000
|
|
|
$
|
734,000
|
|
Total compensation costs for options recognized in income
|
|
$
|
259,000
|
|
|
$
|
580,000
|
|
|
$
|
734,000
|
|
Total tax benefit recognized in income related to compensation costs for options
|
|
$
|
109,000
|
|
|
$
|
244,000
|
|
|
$
|
380,000
|
|
Excess tax benefit recognized in income
|
|
$
|
906,000
|
|
|
|
|
|
|
|
|
|
During 2017, 2016 and 2015, the Company granted no options.
87
Note 20 Stock Options and Other Equity-Based Incentive Instruments (continued)
Restricted stock unit (RSU) activity is summarized in the following table for the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service Condition Vesting RSUs
|
|
|
Market Plus Service Condition Vesting RSUs
|
|
|
|
Number
of RSUs
|
|
|
Weighted
Average Fair
Value on
Date of Grant
|
|
|
Number
of RSUs
|
|
|
Weighted
Average Fair
Value on
Date of Grant
|
|
Outstanding at December 31, 2016
|
|
|
68,450
|
|
|
|
|
|
|
|
47,426
|
|
|
|
|
|
RSUs granted
|
|
|
29,669
|
|
|
|
$35.36
|
|
|
|
17,939
|
|
|
|
$32.95
|
|
Additional market plus service condition RSUs vested
|
|
|
|
|
|
|
|
|
|
|
6,269
|
|
|
|
|
|
RSUs added through dividend credits
|
|
|
1,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs released
|
|
|
(30,896
|
)
|
|
|
|
|
|
|
(18,805
|
)
|
|
|
|
|
RSUs forfeited/expired
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2017
|
|
|
68,457
|
|
|
|
|
|
|
|
52,829
|
|
|
|
|
|
The 68,457 of service condition vesting RSUs outstanding as of December 31, 2017 include a feature whereby each RSU
outstanding is credited with a dividend amount equal to any common stock cash dividend declared and paid, and the credited amount is divided by the closing price of the Companys stock on the dividend payable date to arrive at an additional
amount of RSUs outstanding under the original grant. The 68,457 of service condition vesting RSUs outstanding as of December 31, 2017 are expected to vest, and be released, on a weighted-average basis, over the next 1.2 years. The Company
expects to recognize $1,448,000 of
pre-tax
compensation costs related to these service condition vesting RSUs between December 31, 2017 and their vesting dates. The Company did not modify any service
condition vesting RSUs during 2017 or 2016.
The 52,829 of market plus service condition vesting RSUs outstanding as of December 31, 2017 are
expected to vest, and be released, on a weighted-average basis, over the next 1.4 years. The Company expects to recognize $724,000 of
pre-tax
compensation costs related to these RSUs between December 31,
2017 and their vesting dates. As of December 31, 2017, the number of market plus service condition vesting RSUs outstanding that will actually vest, and be released, may be reduced to zero or increased to 79,243 depending on the total return of
the Companys common stock versus the total return of an index of bank stocks from the grant date to the vesting date. The Company did not modify any market plus service condition vesting RSUs during 2017 or 2016.
The following table shows the compensation costs for RSUs recognized in income for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Total compensation costs for RSUs recognized in income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Service condition vesting RSUs
|
|
$
|
895,000
|
|
|
$
|
616,000
|
|
|
$
|
458,000
|
|
Market plus service condition vesting RSUs
|
|
$
|
432,000
|
|
|
$
|
271,000
|
|
|
$
|
179,000
|
|
88
Note 21 Noninterest Income and Expense
The components of other noninterest income were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Service charges on deposit accounts
|
|
$
|
16,056
|
|
|
$
|
14,365
|
|
|
$
|
14,276
|
|
ATM and interchange fees
|
|
|
16,727
|
|
|
|
15,859
|
|
|
|
13,364
|
|
Other service fees
|
|
|
3,282
|
|
|
|
3,121
|
|
|
|
2,977
|
|
Mortgage banking service fees
|
|
|
2,076
|
|
|
|
2,065
|
|
|
|
2,164
|
|
Change in value of mortgage servicing rights
|
|
|
(718
|
)
|
|
|
(2,184
|
)
|
|
|
(701
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total service charges and fees
|
|
|
37,423
|
|
|
|
33,226
|
|
|
|
32,080
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of loans
|
|
|
3,109
|
|
|
|
4,037
|
|
|
|
3,064
|
|
Commissions on sale of
non-deposit
investment
products
|
|
|
2,729
|
|
|
|
2,329
|
|
|
|
3,349
|
|
Increase in cash value of life insurance
|
|
|
2,685
|
|
|
|
2,717
|
|
|
|
2,786
|
|
Gain on sale of investments
|
|
|
961
|
|
|
|
|
|
|
|
|
|
Lease brokerage income
|
|
|
782
|
|
|
|
711
|
|
|
|
712
|
|
Gain on sale of foreclosed assets
|
|
|
711
|
|
|
|
262
|
|
|
|
991
|
|
Change in indemnification asset
|
|
|
490
|
|
|
|
(493
|
)
|
|
|
(207
|
)
|
Sale of customer checks
|
|
|
372
|
|
|
|
408
|
|
|
|
492
|
|
Life insurance benefit in excess of cash value
|
|
|
108
|
|
|
|
238
|
|
|
|
155
|
|
Loss on disposal of fixed assets
|
|
|
(142
|
)
|
|
|
(147
|
)
|
|
|
(129
|
)
|
Other
|
|
|
793
|
|
|
|
1,275
|
|
|
|
2,054
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other noninterest income
|
|
|
12,598
|
|
|
|
11,337
|
|
|
|
13,267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income
|
|
$
|
50,021
|
|
|
$
|
44,563
|
|
|
$
|
45,347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loan servicing fees, net of change in fair value of mortgage loan servicing rights, totaling $1,358,000, $(119,000),
and $1,463,000 were recorded in service charges and fees noninterest income for the years ended December 31, 2017, 2016, and 2015, respectively.
The
components of noninterest expense were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Base salaries, net of deferred loan origination costs
|
|
$
|
54,589
|
|
|
$
|
53,169
|
|
|
$
|
46,822
|
|
Incentive compensation
|
|
|
9,227
|
|
|
|
8,872
|
|
|
|
6,964
|
|
Benefits and other compensation costs
|
|
|
19,114
|
|
|
|
18,683
|
|
|
|
17,619
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total salaries and benefits expense
|
|
|
82,930
|
|
|
|
80,724
|
|
|
|
71,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
10,894
|
|
|
|
10,139
|
|
|
|
10,126
|
|
Data processing and software
|
|
|
10,448
|
|
|
|
8,846
|
|
|
|
7,670
|
|
Equipment
|
|
|
7,141
|
|
|
|
6,597
|
|
|
|
5,997
|
|
ATM & POS network charges
|
|
|
4,752
|
|
|
|
4,999
|
|
|
|
4,190
|
|
Advertising
|
|
|
4,101
|
|
|
|
3,829
|
|
|
|
3,992
|
|
Professional fees
|
|
|
3,745
|
|
|
|
5,409
|
|
|
|
4,545
|
|
Telecommunications
|
|
|
2,713
|
|
|
|
2,749
|
|
|
|
3,007
|
|
Assessments
|
|
|
1,676
|
|
|
|
2,105
|
|
|
|
2,572
|
|
Operational losses
|
|
|
1,394
|
|
|
|
1,564
|
|
|
|
737
|
|
Intangible amortization
|
|
|
1,389
|
|
|
|
1,377
|
|
|
|
1,157
|
|
Postage
|
|
|
1,296
|
|
|
|
1,603
|
|
|
|
1,296
|
|
Courier service
|
|
|
1,035
|
|
|
|
998
|
|
|
|
1,154
|
|
Change in reserve for unfunded commitments
|
|
|
445
|
|
|
|
244
|
|
|
|
330
|
|
Foreclosed assets expense
|
|
|
231
|
|
|
|
266
|
|
|
|
490
|
|
Provision for foreclosed asset losses
|
|
|
162
|
|
|
|
140
|
|
|
|
502
|
|
Legal settlement
|
|
|
|
|
|
|
1,450
|
|
|
|
|
|
Merger & acquisition expense
|
|
|
530
|
|
|
|
784
|
|
|
|
586
|
|
Miscellaneous other
|
|
|
12,142
|
|
|
|
12,174
|
|
|
|
11,085
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other noninterest expense
|
|
|
64,094
|
|
|
|
65,273
|
|
|
|
59,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense
|
|
$
|
147,024
|
|
|
$
|
145,997
|
|
|
$
|
130,841
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger and acquisition expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Base salaries, net of loan origination costs
|
|
|
|
|
|
$
|
187
|
|
|
|
|
|
Data processing and software
|
|
|
|
|
|
|
|
|
|
$
|
108
|
|
Professional fees
|
|
$
|
513
|
|
|
|
342
|
|
|
|
120
|
|
Other
|
|
|
17
|
|
|
|
255
|
|
|
|
358
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total merger expense
|
|
$
|
530
|
|
|
$
|
784
|
|
|
$
|
586
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
89
Note 22 Income Taxes
The components of consolidated income tax expense are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
Current tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
17,835
|
|
|
$
|
17,401
|
|
|
$
|
21,076
|
|
State
|
|
|
6,650
|
|
|
|
7,121
|
|
|
|
7,139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
24,485
|
|
|
|
24,522
|
|
|
|
28,215
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
11,418
|
|
|
|
2,735
|
|
|
|
408
|
|
State
|
|
|
1,055
|
|
|
|
455
|
|
|
|
273
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,473
|
|
|
|
3,190
|
|
|
|
681
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total tax expense
|
|
$
|
36,958
|
|
|
$
|
27,712
|
|
|
$
|
28,896
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A deferred tax asset or liability is recognized for the tax consequences of temporary differences in the recognition of
revenue and expense for financial and tax reporting purposes. The net change during the year in the deferred tax asset or liability results in a deferred tax expense or benefit.
On December 22, 2017, President Donald Trump signed into law H.R.1, commonly known as the Tax Cuts and Jobs Act, which among
other items reduces the Federal corporate tax rate from 35% to 21%. The Companys deferred tax expense as of December 31, 2017 includes $7,416,000 from the
re-measurement
of deferred taxes and
$226,000 from an acceleration of amortization expense on the low income housing tax credit investments.
Taxes recorded directly to shareholders
equity are not included in the preceding table. These taxes relating to changes in unfunded status of the supplemental retirement plans amounting to $400,000 in 2017, $429,000 in 2016, and $904,000 in 2015, taxes (benefits) related to unrealized
gains and losses on
available-for-sale
investment securities amounting to $2,722,000 in 2017, $(4,631,000) in 2016, and $(797,000) in 2015, taxes (benefits) related to
equity compensation of $0 in 2017, $(170,000) in 2016, and $(28,000) in 2015, were recorded directly to shareholders equity.
The Company
recognized, as components of tax expense, tax credits and other tax benefits, and amortization expense relating to our investments in Qualified Affordable Housing Projects as followers for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
Tax credits and other tax benefits decrease in tax expense
|
|
$
|
(1,753
|
)
|
|
$
|
(954
|
)
|
|
$
|
(354
|
)
|
Amortization increase in tax expense
|
|
$
|
1,611
|
|
|
$
|
757
|
|
|
$
|
277
|
|
The carrying value of Low Income Housing Tax Credit Funds was $16,854,000 and $18,465,000 as of December 31, 2017 and
2016, respectively. As of December 31, 2017, the Company has committed to make additional capital contributions to the Low Income Housing Tax Credit Funds in the amount of $8,554,000, and these contributions are expected to be made over the
next several years.
The provisions for income taxes applicable to income before taxes for the years ended December 31, 2017, 2016 and 2015 differ
from amounts computed by applying the statutory Federal income tax rates to income before taxes. The effective tax rate and the statutory federal income tax rate are reconciled as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Federal statutory income tax rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
State income taxes, net of federal tax benefit
|
|
|
6.9
|
|
|
|
6.8
|
|
|
|
6.6
|
|
Tax Cuts and Jobs Act impact on deferred
re-measurement
|
|
|
9.6
|
|
|
|
|
|
|
|
|
|
Tax-exempt
interest on municipal obligations
|
|
|
(1.9
|
)
|
|
|
(1.8
|
)
|
|
|
(0.7
|
)
|
Tax-exempt
life insurance related income
|
|
|
(1.3
|
)
|
|
|
(1.3
|
)
|
|
|
(1.3
|
)
|
Equity compensation
|
|
|
(1.2
|
)
|
|
|
|
|
|
|
|
|
Low income housing tax credit benefits
|
|
|
(2.3
|
)
|
|
|
(1.3
|
)
|
|
|
(0.4
|
)
|
Low income housing tax credit amortization
|
|
|
2.1
|
|
|
|
0.8
|
|
|
|
|
|
Non-deductible
joint beneficiary agreement
expense
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
0.1
|
|
Non-deductible
merger expense
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
0.5
|
|
|
|
(0.1
|
)
|
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective Tax Rate
|
|
|
47.7
|
%
|
|
|
38.2
|
%
|
|
|
39.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90
Note 22 Income Taxes (continued)
The temporary differences, tax effected, which give rise to the Companys net deferred tax asset
recorded in other assets are as follows as of December 31 for the years indicated:
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(in thousands)
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Allowance for losses and reserve for unfunded commitments
|
|
$
|
9,900
|
|
|
$
|
14,809
|
|
Deferred compensation
|
|
|
1,953
|
|
|
|
2,743
|
|
Accrued pension liability
|
|
|
6,835
|
|
|
|
9,220
|
|
Accrued bonus
|
|
|
171
|
|
|
|
1,727
|
|
Other accrued expenses
|
|
|
522
|
|
|
|
781
|
|
Unfunded status of the supplemental retirement plans
|
|
|
1,582
|
|
|
|
1,982
|
|
State taxes
|
|
|
1,397
|
|
|
|
2,257
|
|
Share based compensation
|
|
|
1,322
|
|
|
|
2,063
|
|
Nonaccrual interest
|
|
|
282
|
|
|
|
408
|
|
OREO write downs
|
|
|
59
|
|
|
|
132
|
|
Indemnification asset
|
|
|
|
|
|
|
313
|
|
Acquisition cost basis
|
|
|
2,187
|
|
|
|
3,996
|
|
Unrealized loss on securities
|
|
|
1,008
|
|
|
|
3,730
|
|
Tax credits
|
|
|
581
|
|
|
|
491
|
|
Net operating loss carryforwards
|
|
|
1,801
|
|
|
|
3,354
|
|
Other
|
|
|
508
|
|
|
|
981
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
30,108
|
|
|
|
48,987
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Securities income
|
|
|
(958
|
)
|
|
|
(1,362
|
)
|
Depreciation
|
|
|
(1,987
|
)
|
|
|
(3,032
|
)
|
Merger related fixed asset valuations
|
|
|
(30
|
)
|
|
|
(54
|
)
|
Securities accretion
|
|
|
(315
|
)
|
|
|
(478
|
)
|
Mortgage servicing rights valuation
|
|
|
(1,943
|
)
|
|
|
(2,710
|
)
|
Core deposit intangible
|
|
|
(916
|
)
|
|
|
(1,813
|
)
|
Junior subordinated debt
|
|
|
(1,783
|
)
|
|
|
(2,616
|
)
|
Prepaid expenses and other
|
|
|
(479
|
)
|
|
|
(723
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax liability
|
|
|
(8,411
|
)
|
|
|
(12,788
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset
|
|
$
|
21,697
|
|
|
$
|
36,199
|
|
|
|
|
|
|
|
|
|
|
As part of the merger with North Valley Bancorp in 2014, TriCo acquired federal and state net operating loss carryforwards,
capital loss carryforwards, and tax credit carryforwards. These tax attribute carryforwards will be subject to provisions of the tax law that limit the use of such losses and credits generated by a company prior to the date certain ownership changes
occur. The amount of the Companys net operating loss carryforwards that would be subject to these limitations as of December 31, 2017 were $21.4 million for California. The amount of the Companys tax credits that would be
subject to these limitations as of December 31, 2017 are $69,000 and $648,000 for federal and California, respectively. Due to the limitation, a significant portion of the state tax credits will expire regardless of whether the Company
generates future taxable income. As such, the Company has recorded the future benefit of these tax credits on the books at the value which is more likely than not to be realized. These tax loss and tax credit carryforwards expire at various dates
beginning in 2018.
The Company believes that a valuation allowance is not needed to reduce the deferred tax assets as it is more likely than not that the
results of future operations will generate sufficient taxable income to realize the deferred tax assets, including the tax attribute carryforwards acquired as part of the North Valley Bancorp merger.
As part of the North Valley Bancorp merger, TriCo inherited an unrecognized tax benefit for tax positions claimed on prior year tax returns filed by North
Valley Bancorp. The Company had an unrecognized tax benefit of $60,000 as of December 31, 2017, the recognition of which would reduce the Companys tax expense by $34,000. Management does not expect the unrecognized tax benefit will
materially change in the next 12 months. A summary of changes in the Companys unrecognized tax benefit (including interest and penalties) in 2017 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
UTB
|
|
|
Interest/Penalties
|
|
|
Total
|
|
As of December 31, 2016
|
|
$
|
114
|
|
|
$
|
7
|
|
|
$
|
121
|
|
Lapse of the applicable statute of limitations
|
|
|
(54
|
)
|
|
|
(5
|
)
|
|
|
(59
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2017
|
|
$
|
60
|
|
|
$
|
2
|
|
|
$
|
62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the years ended December 31, 2017 and December 31, 2016 the Company recognized no interest and penalties
related to taxes. The Company files income tax returns in the U.S. federal jurisdiction, and California. With few exceptions, the Company is no longer subject to U.S. federal and state/local income tax examinations by tax authorities for years
before 2014 and 2013, respectively.
91
Note 23 Earnings per Share
Basic earnings per share represents income available to common shareholders divided by the weighted-average number of common shares outstanding during the
period. Diluted earnings per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustments to income that would result from assumed issuance. Potential common
shares that may be issued by the Company relate solely from outstanding stock options, and are determined using the treasury stock method. Earnings per share have been computed based on the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Net income (in thousands)
|
|
$
|
40,554
|
|
|
$
|
44,811
|
|
|
$
|
43,818
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(number of shares in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of common shares outstanding
|
|
|
22,912
|
|
|
|
22,814
|
|
|
|
22,750
|
|
Effect of dilutive stock options
|
|
|
338
|
|
|
|
273
|
|
|
|
248
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of common shares outstanding used to calculate diluted earnings per share
|
|
|
23,250
|
|
|
|
23,087
|
|
|
|
22,998
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Based on an average of quarterly computations, there were 0, 13,825, and 20,625 options and restricted stock units excluded
from the computation of annual diluted earnings per share for the years ended December 31, 2017, 2016 and 2015, respectively, because the effect of these options and restricted stock units were antidilutive.
Note 24 Comprehensive Income
Accounting
principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on
available-for-sale
securities, are reported as a separate component of the equity section of the balance sheet, such items, along with net income, are components of comprehensive income. The components of
other comprehensive income and related tax effects are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
(in thousands)
|
|
Unrealized holding losses on available for sale securities before reclassifications
|
|
$
|
6,422
|
|
|
$
|
(11,015
|
)
|
|
$
|
(1,895
|
)
|
Amounts reclassified out of accumulated other comprehensive income
|
|
|
(961
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding losses on available for sale securities after reclassifications
|
|
|
5,461
|
|
|
|
(11,015
|
)
|
|
|
(1,895
|
)
|
Tax effect
|
|
|
(2,296
|
)
|
|
|
4,631
|
|
|
|
797
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding losses on available for sale securities, net of tax
|
|
|
3,165
|
|
|
|
(6,384
|
)
|
|
|
(1,098
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unfunded status of the supplemental retirement plans before reclassifications
|
|
|
(1,016
|
)
|
|
|
511
|
|
|
|
1,384
|
|
Amounts reclassified out of accumulated other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of prior service cost
|
|
|
(12
|
)
|
|
|
(40
|
)
|
|
|
(57
|
)
|
Amortization of actuarial losses
|
|
|
390
|
|
|
|
550
|
|
|
|
823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amounts reclassified out of accumulated other comprehensive income
|
|
|
378
|
|
|
|
510
|
|
|
|
766
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unfunded status of the supplemental retirement plans after reclassifications
|
|
|
(638
|
)
|
|
|
1,021
|
|
|
|
2,150
|
|
Tax effect
|
|
|
268
|
|
|
|
(429
|
)
|
|
|
(904
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unfunded status of the supplemental retirement plans, net of tax
|
|
|
(370
|
)
|
|
|
592
|
|
|
|
1,246
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in joint beneficiary agreement liability before reclassifications
|
|
|
(110
|
)
|
|
|
(343
|
)
|
|
|
277
|
|
Amounts reclassified out of accumulated other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in joint beneficiary agreement liability after reclassifications
|
|
|
(110
|
)
|
|
|
(343
|
)
|
|
|
277
|
|
Tax effect
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in joint beneficiary agreement liability, net of tax
|
|
|
(110
|
)
|
|
|
(343
|
)
|
|
|
277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income (loss)
|
|
$
|
2,685
|
|
|
$
|
(6,135
|
)
|
|
$
|
425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
92
Note 24 Comprehensive Income (continued)
The components of accumulated other comprehensive income, included in shareholders equity, are as
follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(in thousands)
|
|
Net unrealized gains on available for sale securities
|
|
$
|
(3,409
|
)
|
|
$
|
(8,870
|
)
|
Tax effect
|
|
|
1,008
|
|
|
|
3,729
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains on available for sale securities, net of tax
|
|
|
(2,401
|
)
|
|
|
(5,141
|
)
|
|
|
|
|
|
|
|
|
|
Unfunded status of the supplemental retirement plans
|
|
|
(5,352
|
)
|
|
|
(4,714
|
)
|
Tax effect
|
|
|
2,250
|
|
|
|
1,982
|
|
|
|
|
|
|
|
|
|
|
Unfunded status of the supplemental retirement plans, net of tax
|
|
|
(3,102
|
)
|
|
|
(2,732
|
)
|
|
|
|
|
|
|
|
|
|
Joint beneficiary agreement liability
|
|
|
(150
|
)
|
|
|
(40
|
)
|
Tax effect
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joint beneficiary agreement liability, net of tax
|
|
|
(150
|
)
|
|
|
(40
|
)
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss
|
|
$
|
(5,228
|
)
|
|
$
|
(7,913
|
)
|
|
|
|
|
|
|
|
|
|
Note 25 Retirement Plans
401(k) Plan
The Company sponsors a 401(k) Plan whereby
substantially all employees age 21 and over with 90 days of service may participate. Participants may contribute a portion of their compensation subject to certain limits based on federal tax laws. Prior to July 1, 2015, the Company did not
contribute to the 401(k) Plan. Effective July 1, 2015, the Company initiated a discretionary matching contribution equal to 50% of participants elective deferrals each quarter, up to 4% of eligible compensation. The Company recorded
$776,000, $678,000, and $300,000, of salaries & benefits expense attributable to the 401(k) Plan matching contribution during the years 2017, 2016, and 2015, respectively. The Company made $767,000, $811,000, and $0, of 401(k) Plan matching
contributions during the years 2017, 2016, and 2015, respectively.
Employee Stock Ownership Plan
Substantially all employees with at least one year of service are covered by a discretionary employee stock ownership plan (ESOP). Contributions are made to
the plan at the discretion of the Board of Directors. Contributions to the plan totaling $2,073,000, $1,368,000, and $2,651,000 were made during 2017, 2016, and 2015, respectively. Expenses related to the Companys ESOP, are included in
benefits and other compensation costs under salaries and benefits expense, and were $2,149,000, $1,831,000, and $2,282,000 during 2017, 2016, and 2015, respectively. Company shares owned by the ESOP are paid dividends and included in the calculation
of earnings per share exactly as other common shares outstanding.
Deferred Compensation Plans
The Company has deferred compensation plans for certain directors and key executives, which allow certain directors and key executives designated by the Board
of Directors of the Company to defer a portion of their compensation. The Company has purchased insurance on the lives of the participants and intends to hold these policies until death as a cost recovery of the Companys deferred compensation
obligations of $6,605,000, and $6,525,000 at December 31, 2017 and 2016, respectively. Earnings credits on deferred balances totaling $478,000 in 2017, $487,000 in 2016, and $538,000 in 2015 are included in noninterest expense.
Supplemental Retirement Plans
The Company has
supplemental retirement plans for certain directors and key executives. These plans are
non-qualified
defined benefit plans and are unsecured and unfunded. The Company has purchased insurance on the lives of
the participants and intends to hold these policies until death as a cost recovery of the Companys retirement obligations. The cash values of the insurance policies purchased to fund the deferred compensation obligations and the supplemental
retirement obligations were $97,783,000 and $95,912,000 at December 31, 2017 and 2016, respectively.
The Company recorded in other liabilities the
unfunded status of the supplemental retirement plans of $5,352,000 and $4,714,000 related to the supplemental retirement plans as of December 31, 2017 and 2016, respectively. These amounts represent the amount by which the projected benefit
obligations for these retirement plans exceeded the fair value of plan assets plus amounts previously accrued related to the plans. The projected benefit obligation is recorded in other liabilities.
93
Note 25 Retirement Plans (continued)
At December 31, 2017 and 2016, the unfunded status of the supplemental retirement plans of $5,352,000
and $4,714,000 were offset by a reduction of shareholders equity accumulated other comprehensive loss of $3,102,000 and $2,732,000, respectively, representing the
after-tax
impact of the unfunded status
of the supplemental retirement plans, and the related deferred tax asset of $2,250,000 and $1,982,000, respectively. Amounts recognized as a component of accumulated other comprehensive loss as of
year-end
that have not been recognized as a component of the combined net period benefit cost of the Companys defined benefit pension plans are presented in the following table. The Company expects to recognize approximately $509,000 of the net
actuarial loss reported in the following table as of December 31, 2017 as a component of net periodic benefit cost during 2018.
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
(in thousands)
|
|
2017
|
|
|
2016
|
|
Transition obligation
|
|
$
|
4
|
|
|
$
|
7
|
|
Prior service cost
|
|
|
(248
|
)
|
|
|
(75
|
)
|
Net actuarial loss
|
|
|
5,596
|
|
|
|
4,782
|
|
|
|
|
|
|
|
|
|
|
Amount included in accumulated other comprehensive loss
|
|
|
5,352
|
|
|
|
4,714
|
|
Deferred tax benefit
|
|
|
(2,250
|
)
|
|
|
(1,982
|
)
|
|
|
|
|
|
|
|
|
|
Amount included in accumulated other comprehensive loss, net of tax
|
|
$
|
3,102
|
|
|
$
|
2,732
|
|
|
|
|
|
|
|
|
|
|
Information pertaining to the activity in the supplemental retirement plans, using a measurement date of December 31, is
as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(in thousands)
|
|
Change in benefit obligation:
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of year
|
|
$
|
(26,645
|
)
|
|
$
|
(26,184
|
)
|
Acquisition
|
|
|
|
|
|
|
|
|
Service cost
|
|
|
(941
|
)
|
|
|
(1,042
|
)
|
Interest cost
|
|
|
(991
|
)
|
|
|
(1,025
|
)
|
Actuarial (loss)/gain
|
|
|
(1,203
|
)
|
|
|
511
|
|
Plan amendments
|
|
|
185
|
|
|
|
|
|
Benefits paid
|
|
|
1,123
|
|
|
|
1,095
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at end of year
|
|
$
|
(28,472
|
)
|
|
$
|
(26,645
|
)
|
|
|
|
|
|
|
|
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of year
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end of year
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Funded status
|
|
$
|
(28,472
|
)
|
|
$
|
(26,645
|
)
|
Unrecognized net obligation existing at January 1, 1986
|
|
|
4
|
|
|
|
7
|
|
Unrecognized net actuarial loss
|
|
|
5,596
|
|
|
|
4,782
|
|
Unrecognized prior service cost
|
|
|
(248
|
)
|
|
|
(75
|
)
|
Accumulated other comprehensive income
|
|
|
(5,352
|
)
|
|
|
(4,714
|
)
|
|
|
|
|
|
|
|
|
|
Accrued benefit cost
|
|
$
|
(28,472
|
)
|
|
$
|
(26,645
|
)
|
|
|
|
|
|
|
|
|
|
Accumulated benefit obligation
|
|
$
|
(26,432
|
)
|
|
$
|
(25,241
|
)
|
The following table sets forth the net periodic benefit cost recognized for the supplemental retirement plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
(in thousands)
|
|
Net pension cost included the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost-benefits earned during the period
|
|
$
|
941
|
|
|
$
|
1,042
|
|
|
$
|
1,023
|
|
Interest cost on projected benefit obligation
|
|
|
991
|
|
|
|
1,025
|
|
|
|
957
|
|
Amortization of net obligation at transition
|
|
|
2
|
|
|
|
2
|
|
|
|
2
|
|
Amortization of prior service cost
|
|
|
(12
|
)
|
|
|
(41
|
)
|
|
|
(57
|
)
|
Recognized net actuarial loss
|
|
|
390
|
|
|
|
549
|
|
|
|
823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension cost
|
|
$
|
2,312
|
|
|
$
|
2,577
|
|
|
$
|
2,748
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
94
Note 25 Retirement Plans (continued)
The following table sets forth assumptions used in accounting for the plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Discount rate used to calculate benefit obligation
|
|
|
3.40
|
%
|
|
|
3.80
|
%
|
|
|
4.00
|
%
|
Discount rate used to calculate net periodic pension cost
|
|
|
3.84
|
%
|
|
|
4.00
|
%
|
|
|
3.65
|
%
|
Average annual increase in executive compensation
|
|
|
3.25
|
%
|
|
|
2.50
|
%
|
|
|
2.50
|
%
|
Average annual increase in director compensation
|
|
|
0.00
|
%
|
|
|
2.50
|
%
|
|
|
2.50
|
%
|
The following table sets forth the expected benefit payments to participants and estimated contributions to be made by the
Company under the supplemental retirement plans for the years indicated:
|
|
|
|
|
|
|
|
|
Years Ended
|
|
Expected Benefit
Payments to
Participants
|
|
|
Estimated
Company
Contributions
|
|
|
|
(in thousands)
|
|
2018
|
|
$
|
1,106
|
|
|
$
|
1,106
|
|
2019
|
|
|
1,067
|
|
|
|
1,067
|
|
2020
|
|
|
1,233
|
|
|
|
1,233
|
|
2021
|
|
|
1,859
|
|
|
|
1,859
|
|
2022
|
|
|
2,008
|
|
|
|
2,008
|
|
2023-2027
|
|
$
|
10,169
|
|
|
$
|
10,169
|
|
Note 26 Related Party Transactions
Certain directors, officers, and companies with which they are associated were customers of, and had banking transactions with, the Company or the Bank in the
ordinary course of business.
The following table summarizes the activity in these loans for the periods indicated (in thousands):
|
|
|
|
|
Balance December 31, 2015
|
|
$
|
4,201
|
|
Advances/new loans
|
|
|
730
|
|
Removed/payments
|
|
|
(2,499
|
)
|
|
|
|
|
|
Balance December 31, 2016
|
|
$
|
2,432
|
|
Advances/new loans
|
|
|
437
|
|
Removed/payments
|
|
|
(721
|
)
|
|
|
|
|
|
Balance December 31, 2017
|
|
$
|
2,148
|
|
|
|
|
|
|
Deposits of directors, officers and other related parties to the Bank totaled $46,025,000 and $69,755,000 at December 31,
2017 and 2016, respectively.
Note 27 Fair Value Measurement
The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. In
estimating fair value, the Company utilizes valuation techniques that are consistent with the market approach, income approach, and/or the cost approach. Inputs to valuation techniques include the assumptions that market participants would use in
pricing an asset or liability including assumptions about the risk inherent in a particular valuation technique, the effect of a restriction on the sale or use of an asset and the risk of nonperformance. Securities
available-for-sale
and mortgage servicing rights are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a
nonrecurring basis, such as loans held for sale, loans held for investment and certain other assets. These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or impairment write-downs of
individual assets.
The Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are
traded and the observable nature of the assumptions used to determine fair value. These levels are:
|
|
|
Level 1 -
|
|
Valuation is based upon quoted prices for identical instruments traded in active markets.
|
|
|
Level 2 -
|
|
Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant
assumptions are observable in the market.
|
|
|
Level 3 -
|
|
Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in
pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.
|
95
Securities available for sale
- Securities available for sale are recorded at fair value on a recurring
basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash
flows, adjusted for the securitys credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury
securities that are traded by dealers or brokers in active
over-the-counter
markets and money market funds. Level 2 securities include mortgage-backed securities
issued by government sponsored entities, municipal bonds and corporate debt securities. The Company had no securities classified as Level 3 during any of the periods covered in these financial statements.
Loans held for sale
Loans held for sale are carried at the lower of cost or fair value. The fair value of loans held for sale is based on what
secondary markets are currently offering for loans with similar characteristics. As such, we classify those loans subjected to nonrecurring fair value adjustments as Level 2.
Impaired originated and PNCI loans
Originated and PNCI loans are not recorded at fair value on a recurring basis. However, from time to time, an
originated or PNCI loan is considered impaired and an allowance for loan losses is established. Originated and PNCI loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of
the loan agreement are considered impaired. The fair value of an impaired originated or PNCI loan is estimated using one of several methods, including collateral value, fair value of similar debt, enterprise value, liquidation value and discounted
cash flows. Those impaired originated and PNCI loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. Impaired originated and PNCI loans where
an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price or a current appraised value which uses substantially
observable data, the Company records the impaired originated or PNCI loan as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value,
or the appraised value contains a significant unobservable assumption, such as deviations from comparable sales, and there is no observable market price, the Company records the impaired originated or PNCI loan as nonrecurring Level 3.
Foreclosed assets
- Foreclosed assets include assets acquired through, or in lieu of, loan foreclosure. Foreclosed assets are held for sale and are
initially recorded at fair value at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, management periodically performs valuations and the assets are carried at the lower of carrying amount or fair value less cost to
sell. When the fair value of foreclosed assets is based on an observable market price or a current appraised value which uses substantially observable data, the Company records the impaired originated loan as nonrecurring Level 2. When an
appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value, or the appraised value contains a significant unobservable assumption, such as deviations from comparable
sales, and there is no observable market price, the Company records the foreclosed asset as nonrecurring Level 3. Revenue and expenses from operations and changes in the valuation allowance are included in other noninterest expense.
Mortgage servicing rights
- Mortgage servicing rights are carried at fair value. A valuation model, which utilizes a discounted cash flow analysis
using a discount rate and prepayment speed assumptions is used in the computation of the fair value measurement. While the prepayment speed assumption is currently quoted for comparable instruments, the discount rate assumption currently requires a
significant degree of management judgment and is therefore considered an unobservable input. As such, the Company classifies mortgage servicing rights subjected to recurring fair value adjustments as Level 3. Additional information regarding
mortgage servicing rights can be found in Note 10 in the consolidated financial statements at Item 1 of this report.
The table below presents the
recorded amount of assets and liabilities measured at fair value on a recurring basis (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Fair value at December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. government corporations and agencies
|
|
$
|
604,789
|
|
|
|
|
|
|
$
|
604,789
|
|
|
|
|
|
Obligations of states and political subdivisions
|
|
|
123,156
|
|
|
|
|
|
|
|
123,156
|
|
|
|
|
|
Marketable equity securities
|
|
|
2,938
|
|
|
$
|
2,938
|
|
|
|
|
|
|
|
|
|
Mortgage servicing rights
|
|
|
6,687
|
|
|
|
|
|
|
|
|
|
|
$
|
6,687
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets measured at fair value
|
|
$
|
737,570
|
|
|
$
|
2,938
|
|
|
$
|
727,945
|
|
|
$
|
6,687
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Fair value at December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. government corporations and agencies
|
|
$
|
429,678
|
|
|
|
|
|
|
$
|
429,678
|
|
|
|
|
|
Obligations of states and political subdivisions
|
|
|
117,617
|
|
|
|
|
|
|
|
117,617
|
|
|
|
|
|
Marketable equity securities
|
|
|
2,938
|
|
|
$
|
2,938
|
|
|
|
|
|
|
|
|
|
Mortgage servicing rights
|
|
|
6,595
|
|
|
|
|
|
|
|
|
|
|
$
|
6,595
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets measured at fair value
|
|
$
|
556,828
|
|
|
$
|
2,938
|
|
|
$
|
547,295
|
|
|
$
|
6,595
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
96
Note 27 Fair Value Measurement (continued)
Transfers between levels of the fair value hierarchy are recognized on the actual date of the event or
circumstances that caused the transfer, which generally corresponds with the Companys quarterly valuation process. There were no transfers between any levels during 2017 or 2016.
The following table provides a reconciliation of assets and liabilities measured at fair value using significant unobservable inputs (Level 3) on a recurring
basis during the years ended December 31, 2017, 2016, and 2015. Had there been any transfer into or out of Level 3 during 2017, 2016, or 2015, the amount included in the Transfers into (out of) Level 3 column would
represent the beginning balance of an item in the period (interim quarter) during which it was transferred (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
Balance
|
|
|
Transfers
into (out of)
Level 3
|
|
|
Change
Included
in Earnings
|
|
|
Issuances
|
|
|
Beginning
Balance
|
|
Year ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017: Mortgage servicing rights
|
|
$
|
6,687
|
|
|
|
|
|
|
$
|
(718
|
)
|
|
$
|
810
|
|
|
$
|
6,595
|
|
2016: Mortgage servicing rights
|
|
$
|
6,595
|
|
|
|
|
|
|
$
|
(2,184
|
)
|
|
$
|
1,161
|
|
|
$
|
7,618
|
|
2015: Mortgage servicing rights
|
|
$
|
7,618
|
|
|
|
|
|
|
$
|
(701
|
)
|
|
$
|
941
|
|
|
$
|
7,378
|
|
The Companys method for determining the fair value of mortgage servicing rights is described in Note 1. The key
unobservable inputs used in determining the fair value of mortgage servicing rights are mortgage prepayment speeds and the discount rate used to discount cash projected cash flows. Generally, any significant increases in the mortgage prepayment
speed and discount rate utilized in the fair value measurement of the mortgage servicing rights will result in a negative fair value adjustments (and decrease in the fair value measurement). Conversely, a decrease in the mortgage prepayment speed
and discount rate will result in a positive fair value adjustment (and increase in the fair value measurement). Note 10 contains additional information regarding mortgage servicing rights.
The following table presents quantitative information about recurring Level 3 fair value measurements at December 31, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
(in thousands)
|
|
|
Valuation
Technique
|
|
|
Unobservable
Inputs
|
|
|
Range,
Weighted Average
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage Servicing Rights
|
|
$
|
6,687
|
|
|
|
Discounted cash flow
|
|
|
|
Constant prepayment rate
|
|
|
|
6.2%-22.0%, 8.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
|
13.0%-15.0%, 13.0%
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage Servicing Rights
|
|
$
|
6,595
|
|
|
|
Discounted cash flow
|
|
|
|
Constant prepayment rate
|
|
|
|
6.9%-16.6%, 8.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
|
14.0%-16.0%, 14.0%
|
|
The tables below present the recorded amount of assets and liabilities measured at fair value on a nonrecurring basis, as of
the dates indicated, that had a write-down or an additional allowance provided during the periods indicated (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total Gains
(Losses)
|
|
Year ended December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired Originated & PNCI loans
|
|
$
|
2,767
|
|
|
|
|
|
|
|
|
|
|
$
|
2,767
|
|
|
$
|
(1,452
|
)
|
Foreclosed assets
|
|
|
2,217
|
|
|
|
|
|
|
|
|
|
|
|
2,217
|
|
|
|
(135
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets measured at fair value
|
|
$
|
4,984
|
|
|
|
|
|
|
|
|
|
|
$
|
4,984
|
|
|
$
|
(1,587
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total Gains
(Losses)
|
|
Year ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired Originated & PNCI loans
|
|
$
|
1,107
|
|
|
|
|
|
|
|
|
|
|
$
|
1,107
|
|
|
$
|
(409
|
)
|
Foreclosed assets
|
|
|
2,253
|
|
|
|
|
|
|
|
|
|
|
|
2,253
|
|
|
|
(86
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets measured at fair value
|
|
$
|
3,360
|
|
|
|
|
|
|
|
|
|
|
$
|
3,360
|
|
|
$
|
(495
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The impaired Originated and PNCI loan amount above represents impaired, collateral dependent loans that have been adjusted to
fair value. When we identify a collateral dependent loan as impaired, we measure the impairment using the current fair value of the collateral, less selling costs. Depending on the characteristics of a loan, the fair value of collateral is
generally estimated by obtaining external appraisals. If we determine that the value of the impaired loan is less than the recorded investment in the loan, we recognize this impairment and adjust the carrying value of the loan to fair value
through the allowance for loan and lease losses. The loss represents charge-offs or impairments on collateral dependent loans for fair value adjustments based on the fair value of collateral. The carrying value of loans fully
charged-off
is zero.
The foreclosed assets amount above represents impaired real estate that has been adjusted to fair
value. Foreclosed assets represent real estate which the Bank has taken control of in partial or full satisfaction of loans. At the time of foreclosure, other real estate owned is recorded at fair value less costs to sell, which becomes the
propertys new basis. Any write-downs based on the assets fair value at the date of acquisition are charged to the allowance for loan and lease losses. After foreclosure, management periodically performs valuations such that the real
estate is carried at the lower of its new cost basis or fair value, net of estimated costs to sell. Fair value adjustments on other real estate owned are recognized within net loss on real estate owned. The loss represents impairments on
non-covered
other real estate owned for fair value adjustments based on the fair value of the real estate.
97
Note 27 Fair Value Measurement (continued)
The Companys property appraisals are primarily based on the sales comparison approach and income
approach methodologies, which consider recent sales of comparable properties, including their income generating characteristics, and then make adjustments to reflect the general assumptions that a market participant would make when analyzing the
property for purchase. These adjustments may increase or decrease an appraised value and can vary significantly depending on the location, physical characteristics and income producing potential of each property. Additionally, the quality and volume
of market information available at the time of the appraisal can vary from period to period and cause significant changes to the nature and magnitude of comparable sale adjustments. Given these variations, comparable sale adjustments are generally
not a reliable indicator for how fair value will increase or decrease from period to period. Under certain circumstances, management discounts are applied based on specific characteristics of an individual property.
The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a
nonrecurring basis at December 31, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
Fair Value
(in thousands)
|
|
|
Valuation
Technique
|
|
Unobservable
Inputs
|
|
Range,
Weighted Average
|
Impaired Originated & PNCI loans
|
|
$
|
2,767
|
|
|
Sales comparison approach
Income approach
|
|
Adjustment for differences between comparable sales Capitalization rate
|
|
Not meaningful N/A
|
Foreclosed assets (Land & construction)
|
|
$
|
1,341
|
|
|
Sales comparison approach
|
|
Adjustment for differences between comparable sales
|
|
Not meaningful
|
Foreclosed assets (residential (Residential real estate)
|
|
$
|
622
|
|
|
Sales comparison approach
|
|
Adjustment for differences between comparable sales
|
|
Not meaningful
|
Foreclosed assets (Commercial real estate)
|
|
$
|
254
|
|
|
Sales comparison approach
|
|
Adjustment for differences between comparable sales
|
|
Not meaningful
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Fair Value
(in thousands)
|
|
|
Valuation
Technique
|
|
Unobservable
Inputs
|
|
Range,
Weighted Average
|
Impaired Originated & PNCI loans
|
|
$
|
1,107
|
|
|
Sales comparison approach
Income approach
|
|
Adjustment for differences between comparable sales Capitalization rate
|
|
Not meaningful N/A
|
Foreclosed assets (Land & construction)
|
|
$
|
15
|
|
|
Sales comparison approach
|
|
Adjustment for differences between comparable sales
|
|
Not meaningful
|
Foreclosed assets (residential (Residential real estate)
|
|
$
|
1,564
|
|
|
Sales comparison approach
|
|
Adjustment for differences between comparable sales
|
|
Not meaningful
|
Foreclosed assets (Commercial real estate)
|
|
$
|
674
|
|
|
Sales comparison approach
|
|
Adjustment for differences between comparable sales
|
|
Not meaningful
|
In addition to the methods and assumptions used to estimate the fair value of each class of financial instrument noted above,
the following methods and assumptions were used to estimate the fair value of other classes of financial instruments for which it is practical to estimate the fair value.
Short-term Instruments
- Cash and due from banks, fed funds purchased and sold, interest receivable and payable, and short-term borrowings are
considered short-term instruments. For these short-term instruments their carrying amount approximates their fair value.
Securities held to
maturity
The fair value of securities held to maturity is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such
as the present value of future cash flows, adjusted for the securitys credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New
York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active
over-the-counter
markets and money market funds. Level 2 securities
include mortgage-backed securities issued by government sponsored entities, municipal bonds and corporate debt securities. The Company had no securities held to maturity classified as Level 3 during any of the periods covered in these financial
statements.
Restricted Equity Securities
- It is not practical to determine the fair value of restricted equity securities due to restrictions
placed on their transferability.
Originated and PNCI loans
- The fair value of variable rate originated and PNCI loans is the current carrying
value. The interest rates on these originated and PNCI loans are regularly adjusted to market rates. The fair value of other types of fixed rate originated and PNCI loans is estimated by discounting the future cash flows using current rates at which
similar loans would be made to borrowers with similar credit ratings for the same remaining maturities. The allowance for loan losses is a reasonable estimate of the valuation allowance needed to adjust computed fair values for credit quality of
certain originated and PNCI loans in the portfolio.
PCI Loans
-
PCI loans are measured at estimated fair value on the date of acquisition.
Carrying value is calculated as the present value of expected cash flows and approximates fair value.
Deposit Liabilities
- The fair value of
demand deposits, savings accounts, and certain money market deposits is the amount payable on demand at the reporting date. These values do not consider the estimated fair value of the Companys core deposit intangible, which is a significant
unrecognized asset of the Company. The fair value of time deposits and other borrowings is based on the discounted value of contractual cash flows.
Other Borrowings
- The fair value of other borrowings is calculated based on the discounted value of the contractual cash flows using current rates at
which such borrowings can currently be obtained.
98
Note 27 Fair Value Measurement (continued)
Junior Subordinated Debentures
- The fair value of junior subordinated debentures is estimated using a
discounted cash flow model. The future cash flows of these instruments are extended to the next available redemption date or maturity date as appropriate based upon the spreads of recent issuances or quotes from brokers for comparable bank holding
companies compared to the contractual spread of each junior subordinated debenture measured at fair value.
Accrued Interest Receivable and
Payable
- Specific identification of the carrying value and fair value of accrued interest receivable and payable are not considered significant for financial reporting purposes, however, their fair value hierarchy would be based on the
of the related asset or liability.
Commitments to Extend Credit and Standby Letters of Credit
- The fair value of commitments is estimated using
the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present credit worthiness of the counter parties. For fixed rate loan commitments, fair value also considers the
difference between current levels of interest rates and the committed rates. The fair value of letters of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate them or otherwise settle the obligation
with the counter parties at the reporting date.
Fair values for financial instruments are managements estimates of the values at which the
instruments could be exchanged in a transaction between willing parties. These estimates are subjective and may vary significantly from amounts that would be realized in actual transactions. In addition, other significant assets are not considered
financial assets including, any mortgage banking operations, deferred tax assets, and premises and equipment. Further, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on the fair
value estimates and have not been considered in any of these estimates.
The estimated fair values of financial instruments that are reported at amortized
cost in the Corporations consolidated balance sheets, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value, were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
December 31, 2016
|
|
|
|
Carrying
Amount
|
|
|
Fair
Value
|
|
|
Carrying
Amount
|
|
|
Fair
Value
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1 inputs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
105,968
|
|
|
$
|
105,968
|
|
|
$
|
92,197
|
|
|
$
|
92,197
|
|
Cash at Federal Reserve and other banks
|
|
|
99,460
|
|
|
|
99,460
|
|
|
|
213,415
|
|
|
|
213,415
|
|
Level 2 inputs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities held to maturity
|
|
|
514,844
|
|
|
|
518,165
|
|
|
|
602,536
|
|
|
|
603,203
|
|
Restricted equity securities
|
|
|
16,956
|
|
|
|
N/A
|
|
|
|
16,596
|
|
|
|
N/A
|
|
Loans held for sale
|
|
|
4,616
|
|
|
|
4,616
|
|
|
|
2,998
|
|
|
|
2,998
|
|
Level 3 inputs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, net
|
|
|
2,984,842
|
|
|
|
2,992,225
|
|
|
|
2,727,090
|
|
|
|
2,763,473
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 2 inputs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
4,009,131
|
|
|
|
4,006,620
|
|
|
|
3,895,560
|
|
|
|
3,893,941
|
|
Other borrowings
|
|
|
122,166
|
|
|
|
122,166
|
|
|
|
17,493
|
|
|
|
17,493
|
|
Level 3 inputs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Junior subordinated debt
|
|
$
|
56,858
|
|
|
$
|
58,466
|
|
|
$
|
56,667
|
|
|
$
|
49,033
|
|
|
|
|
|
|
|
|
Contract
Amount
|
|
|
Fair
Value
|
|
|
Contract
Amount
|
|
|
Fair
Value
|
|
Off-balance
sheet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3 inputs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments
|
|
$
|
933,542
|
|
|
$
|
9,335
|
|
|
$
|
767,274
|
|
|
$
|
7,673
|
|
Standby letters of credit
|
|
$
|
13,075
|
|
|
$
|
131
|
|
|
$
|
12,763
|
|
|
$
|
128
|
|
Overdraft privilege commitments
|
|
$
|
98,260
|
|
|
$
|
983
|
|
|
$
|
98,583
|
|
|
$
|
986
|
|
99
Note 28 TriCo Bancshares Condensed Financial Statements (Parent Only)
|
|
|
|
|
|
|
|
|
Condensed Balance Sheets
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(in thousands)
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and Cash equivalents
|
|
$
|
3,924
|
|
|
$
|
2,802
|
|
Investment in Tri Counties Bank
|
|
|
557,538
|
|
|
|
529,907
|
|
Other assets
|
|
|
1,721
|
|
|
|
1,711
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
563,183
|
|
|
$
|
534,420
|
|
|
|
|
|
|
|
|
|
|
Liabilities and shareholders equity
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
$
|
517
|
|
|
$
|
406
|
|
Junior subordinated debt
|
|
|
56,858
|
|
|
|
56,667
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
57,375
|
|
|
|
57,073
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity:
|
|
|
|
|
|
|
|
|
Common stock, no par value: authorized 50,000,000 shares; issued and outstanding
22,955,963 and 22,867,802 shares, respectively
|
|
|
255,836
|
|
|
|
252,820
|
|
Retained earnings
|
|
|
255,200
|
|
|
|
232,440
|
|
Accumulated other comprehensive loss, net
|
|
|
(5,228
|
)
|
|
|
(7,913
|
)
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
505,808
|
|
|
|
477,347
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
$
|
563,183
|
|
|
$
|
534,420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Statements of Income
|
|
Years ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
(in thousands)
|
|
Interest expense
|
|
$
|
(2,535
|
)
|
|
$
|
(2,229
|
)
|
|
$
|
(1,977
|
)
|
Administration expense
|
|
|
(915
|
)
|
|
|
(725
|
)
|
|
|
(814
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before equity in net income of Tri Counties Bank
|
|
|
(3,450
|
)
|
|
|
(2,954
|
)
|
|
|
(2,791
|
)
|
Equity in net income of Tri Counties Bank:
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributed
|
|
|
19,236
|
|
|
|
16,758
|
|
|
|
13,304
|
|
Undistributed
|
|
|
23,359
|
|
|
|
29,764
|
|
|
|
32,131
|
|
Income tax benefit
|
|
|
1,409
|
|
|
|
1,243
|
|
|
|
1,174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
40,554
|
|
|
$
|
44,811
|
|
|
$
|
43,818
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Statements of Comprehensive Income
|
|
Years ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
(in thousands)
|
|
Net income
|
|
$
|
40,554
|
|
|
$
|
44,811
|
|
|
$
|
43,818
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains (losses) on securities arising during the period
|
|
|
3,165
|
|
|
|
(6,384
|
)
|
|
|
(1,098
|
)
|
Change in minimum pension liability
|
|
|
(370
|
)
|
|
|
592
|
|
|
|
1,246
|
|
Change in joint beneficiary agreement liability
|
|
|
(110
|
)
|
|
|
(343
|
)
|
|
|
277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
2,685
|
|
|
|
(6,135
|
)
|
|
|
425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
43,239
|
|
|
$
|
38,676
|
|
|
$
|
44,243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Statements of Cash Flows
|
|
Years ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
(in thousands)
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
40,554
|
|
|
$
|
44,811
|
|
|
$
|
43,818
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Undistributed equity in earnings of Tri Counties Bank
|
|
|
(23,359
|
)
|
|
|
(29,764
|
)
|
|
|
(32,131
|
)
|
Equity compensation vesting expense
|
|
|
1,586
|
|
|
|
1,467
|
|
|
|
1,370
|
|
Equity compensation tax effect
|
|
|
|
|
|
|
(155
|
)
|
|
|
68
|
|
Net change in other assets and liabilities
|
|
|
(1,295
|
)
|
|
|
(1,210
|
)
|
|
|
(1,120
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
17,486
|
|
|
|
15,149
|
|
|
|
12,005
|
|
Investing activities: None
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock through option exercise
|
|
|
396
|
|
|
|
518
|
|
|
|
660
|
|
Equity compensation tax effect
|
|
|
|
|
|
|
155
|
|
|
|
(68
|
)
|
Repurchase of common stock
|
|
|
(1,629
|
)
|
|
|
(1,890
|
)
|
|
|
(412
|
)
|
Cash dividends paid common
|
|
|
(15,131
|
)
|
|
|
(13,695
|
)
|
|
|
(11,849
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used for financing activities
|
|
|
(16,364
|
)
|
|
|
(14,912
|
)
|
|
|
(11,669
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in cash and cash equivalents
|
|
|
1,122
|
|
|
|
237
|
|
|
|
336
|
|
Cash and cash equivalents at beginning of year
|
|
|
2,802
|
|
|
|
2,565
|
|
|
|
2,229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
$
|
3,924
|
|
|
$
|
2,802
|
|
|
$
|
2,565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100
Note 29 Regulatory Matters
The Company is subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Companys consolidated financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of the Companys assets, liabilities and certain
off-balance-sheet
items as calculated under regulatory accounting practices. The Companys capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Quantitative measures
established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios (set forth in the table below) of total, Tier 1, and common equity Tier 1capital to risk-weighted assets, and of Tier 1 capital to
average assets.
The following tables present actual and required capital ratios as of December 31, 2017 and 2016 for the Company and the Bank under
Basel III Capital Rules. The minimum capital amounts presented include the minimum required capital levels as of December 31, 2017 and 2016 based on the
phased-in
provisions of the Basel III Capital Rules
and the minimum required capital levels as of January 1, 2019 when the Basel III Capital Rules have been fully
phased-in.
Capital levels required to be considered well capitalized are based upon prompt
corrective action regulations, as amended to reflect the changes under the Basel III Capital Rules.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual
|
|
|
Minimum Capital
Required Basel III
Phase-in
Schedule
|
|
|
Minimum Capital
Required Basel III
Fully Phased In
|
|
|
Required to be
Considered Well
Capitalized
|
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
|
(dollars in thousands)
|
|
As of December 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(to Risk Weighted Assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
528,805
|
|
|
|
14.07
|
%
|
|
$
|
347,694
|
|
|
|
9.250
|
%
|
|
$
|
394,679
|
|
|
|
10.50
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
Tri Counties Bank
|
|
$
|
525,384
|
|
|
|
13.98
|
%
|
|
$
|
347,535
|
|
|
|
9.250
|
%
|
|
$
|
394,499
|
|
|
|
10.50
|
%
|
|
$
|
375,713
|
|
|
|
10.00
|
%
|
Tier 1 Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(to Risk Weighted Assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
495,318
|
|
|
|
13.18
|
%
|
|
$
|
272,517
|
|
|
|
7.250
|
%
|
|
$
|
319,502
|
|
|
|
8.50
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
Tri Counties Bank
|
|
$
|
491,897
|
|
|
|
13.09
|
%
|
|
$
|
272,392
|
|
|
|
7.250
|
%
|
|
$
|
319,356
|
|
|
|
8.50
|
%
|
|
$
|
300,570
|
|
|
|
8.00
|
%
|
Common equity Tier 1 Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(to Risk Weighted Assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
440,643
|
|
|
|
11.72
|
%
|
|
$
|
216,134
|
|
|
|
5.750
|
%
|
|
$
|
263,120
|
|
|
|
7.00
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
Tri Counties Bank
|
|
$
|
491,897
|
|
|
|
13.09
|
%
|
|
$
|
216,035
|
|
|
|
5.750
|
%
|
|
$
|
262,999
|
|
|
|
7.00
|
%
|
|
$
|
244,214
|
|
|
|
6.50
|
%
|
Tier 1 Capital (to Average Assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
495,318
|
|
|
|
10.80
|
%
|
|
$
|
183,400
|
|
|
|
4.000
|
%
|
|
$
|
183,400
|
|
|
|
4.00
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
Tri Counties Bank
|
|
$
|
491,897
|
|
|
|
10.73
|
%
|
|
$
|
183,394
|
|
|
|
4.000
|
%
|
|
$
|
183,394
|
|
|
|
4.00
|
%
|
|
$
|
229,243
|
|
|
|
5.00
|
%
|
|
|
|
|
|
|
|
|
|
As of December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(to Risk Weighted Assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
503,283
|
|
|
|
14.77
|
%
|
|
$
|
293,854
|
|
|
|
8.625
|
%
|
|
$
|
357,735
|
|
|
|
10.50
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
Tri Counties Bank
|
|
$
|
500,876
|
|
|
|
14.71
|
%
|
|
$
|
293,706
|
|
|
|
8.625
|
%
|
|
$
|
357,556
|
|
|
|
10.50
|
%
|
|
$
|
340,529
|
|
|
|
10.00
|
%
|
Tier 1 Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(to Risk Weighted Assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
468,061
|
|
|
|
13.74
|
%
|
|
$
|
225,714
|
|
|
|
6.625
|
%
|
|
$
|
289,595
|
|
|
|
8.50
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
Tri Counties Bank
|
|
$
|
465,654
|
|
|
|
13.67
|
%
|
|
$
|
225,601
|
|
|
|
6.625
|
%
|
|
$
|
289,450
|
|
|
|
8.50
|
%
|
|
$
|
274,725
|
|
|
|
8.00
|
%
|
Common equity Tier 1 Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(to Risk Weighted Assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
414,632
|
|
|
|
12.17
|
%
|
|
$
|
174,609
|
|
|
|
5.125
|
%
|
|
$
|
238,490
|
|
|
|
7.00
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
Tri Counties Bank
|
|
$
|
465,654
|
|
|
|
13.66
|
%
|
|
$
|
174,521
|
|
|
|
5.125
|
%
|
|
$
|
238,370
|
|
|
|
7.00
|
%
|
|
$
|
221,344
|
|
|
|
6.50
|
%
|
Tier 1 Capital (to Average Assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
468,061
|
|
|
|
10.62
|
%
|
|
$
|
176,346
|
|
|
|
4.000
|
%
|
|
$
|
176,346
|
|
|
|
4.00
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
Tri Counties Bank
|
|
$
|
465,654
|
|
|
|
10.56
|
%
|
|
$
|
176,341
|
|
|
|
4.000
|
%
|
|
$
|
176,341
|
|
|
|
4.00
|
%
|
|
$
|
220,426
|
|
|
|
5.00
|
%
|
As of December 31, 2017, capital levels at the Company and the Bank exceed all capital adequacy requirements under the
Basel III Capital Rules on a fully
phased-in
basis. Also, at December 31, 2017 and December 31, 2016, the Banks capital levels exceeded the minimum amounts necessary to be considered well
capitalized under the current regulatory framework for prompt corrective action.
Beginning January 1, 2016, the Basel III Capital Rules implemented
a requirement for all banking organizations to maintain a capital conservation buffer above the minimum risk-based capital requirements in order to avoid certain limitations on capital distributions, stock repurchases and discretionary bonus
payments to executive officers. The capital conservation buffer is exclusively composed of common equity tier 1 capital, and it applies to each of the risk-based capital ratios but not the leverage ratio. At December 31, 2017 and 2016, the
Company and the Bank were in compliance with the capital conservation buffer requirements, which were 1.25% and 0.625%, respectively. The three risk-based capital ratios will increase by 0.625% each year through 2019, at which point, the common
equity tier 1 risk-based, tier 1 risk-based and total risk-based capital ratio minimums will be 7.0%, 8.5% and 10.5%, respectively.
101
Note 30 Summary of Quarterly Results of Operations (unaudited)
The following table sets forth the results of operations for the four quarters of 2017 and 2016, and is unaudited; however, in the opinion of Management, it
reflects all adjustments (which include only normal recurring adjustments) necessary to present fairly the summarized results for such periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 Quarters Ended
|
|
|
|
December 31,
|
|
|
September 30,
|
|
|
June 30,
|
|
|
March 31,
|
|
|
|
(dollars in thousands, except per share data)
|
|
Interest and dividend income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount accretion PCI cash basis
|
|
$
|
516
|
|
|
$
|
398
|
|
|
$
|
386
|
|
|
$
|
112
|
|
Discount accretion PCI other
|
|
|
445
|
|
|
|
407
|
|
|
|
797
|
|
|
|
631
|
|
Discount accretion PNCI
|
|
|
528
|
|
|
|
559
|
|
|
|
987
|
|
|
|
798
|
|
All other loan interest income
|
|
|
36,705
|
|
|
|
35,904
|
|
|
|
34,248
|
|
|
|
33,373
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loan interest income
|
|
|
38,194
|
|
|
|
37,268
|
|
|
|
36,418
|
|
|
|
34,914
|
|
Debt securities, dividends and interest bearing cash at Banks (not FTE)
|
|
|
8,767
|
|
|
|
8,645
|
|
|
|
8,626
|
|
|
|
8,570
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
|
46,961
|
|
|
|
45,913
|
|
|
|
45,044
|
|
|
|
43,484
|
|
Interest expense
|
|
|
1,868
|
|
|
|
1,829
|
|
|
|
1,610
|
|
|
|
1,491
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
45,093
|
|
|
|
44,084
|
|
|
|
43,434
|
|
|
|
41,993
|
|
Provision for (benefit from reversal of provision for) loan losses
|
|
|
1,677
|
|
|
|
765
|
|
|
|
(796
|
)
|
|
|
(1,557
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses
|
|
|
43,416
|
|
|
|
43,319
|
|
|
|
44,230
|
|
|
|
43,550
|
|
Noninterest income
|
|
|
12,478
|
|
|
|
12,930
|
|
|
|
12,910
|
|
|
|
11,703
|
|
Noninterest expense
|
|
|
38,076
|
|
|
|
37,222
|
|
|
|
35,904
|
|
|
|
35,822
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
17,818
|
|
|
|
19,027
|
|
|
|
21,236
|
|
|
|
19,431
|
|
Income tax expense
|
|
|
14,829
|
|
|
|
7,130
|
|
|
|
7,647
|
|
|
|
7,352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
2,989
|
|
|
$
|
11,897
|
|
|
$
|
13,589
|
|
|
$
|
12,079
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (diluted)
|
|
$
|
0.13
|
|
|
$
|
0.51
|
|
|
$
|
0.58
|
|
|
$
|
0.52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
|
|
$
|
0.17
|
|
|
$
|
0.17
|
|
|
$
|
0.17
|
|
|
$
|
0.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 Quarters Ended
|
|
|
|
December 31,
|
|
|
September 30,
|
|
|
June 30,
|
|
|
March 31,
|
|
|
|
(dollars in thousands, except per share data)
|
|
Interest and dividend income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount accretion PCI cash basis
|
|
$
|
483
|
|
|
$
|
777
|
|
|
$
|
426
|
|
|
$
|
269
|
|
Discount accretion PCI other
|
|
|
658
|
|
|
|
569
|
|
|
|
415
|
|
|
|
(45
|
)
|
Discount accretion PNCI
|
|
|
637
|
|
|
|
883
|
|
|
|
1,459
|
|
|
|
868
|
|
All other loan interest income
|
|
|
34,463
|
|
|
|
33,540
|
|
|
|
32,038
|
|
|
|
33,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loan interest income
|
|
|
36,241
|
|
|
|
35,769
|
|
|
|
34,338
|
|
|
|
34,738
|
|
Debt securities, dividends and interest bearing cash at Banks (not FTE)
|
|
|
8,374
|
|
|
|
7,940
|
|
|
|
8,252
|
|
|
|
8,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
|
44,615
|
|
|
|
43,709
|
|
|
|
42,590
|
|
|
|
42,794
|
|
Interest expense
|
|
|
1,460
|
|
|
|
1,439
|
|
|
|
1,430
|
|
|
|
1,392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
43,155
|
|
|
|
42,270
|
|
|
|
41,160
|
|
|
|
41,402
|
|
(Benefit from reversal of) provision for loan losses
|
|
|
(1,433
|
)
|
|
|
(3,973
|
)
|
|
|
(773
|
)
|
|
|
209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses
|
|
|
44,588
|
|
|
|
46,243
|
|
|
|
41,933
|
|
|
|
41,193
|
|
Noninterest income
|
|
|
12,462
|
|
|
|
11,066
|
|
|
|
11,245
|
|
|
|
9,790
|
|
Noninterest expense
|
|
|
36,563
|
|
|
|
37,416
|
|
|
|
38,267
|
|
|
|
33,751
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
20,487
|
|
|
|
19,893
|
|
|
|
14,911
|
|
|
|
17,232
|
|
Income tax expense
|
|
|
7,954
|
|
|
|
7,694
|
|
|
|
5,506
|
|
|
|
6,558
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
12,533
|
|
|
$
|
12,199
|
|
|
$
|
9,405
|
|
|
$
|
10,674
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (diluted)
|
|
$
|
0.54
|
|
|
$
|
0.53
|
|
|
$
|
0.41
|
|
|
$
|
0.46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
|
|
$
|
0.15
|
|
|
$
|
0.15
|
|
|
$
|
0.15
|
|
|
$
|
0.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
102
MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of TriCo Bancshares is responsible for establishing and maintaining effective internal control over financial reporting. Internal control over
financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting
principles.
Under the supervision and with the participation of management, including the principal executive officer and principal financial officer,
the Company conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in the 2013 Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on this evaluation under the framework in the 2013 Internal Control Integrated Framework, management of the Company has concluded the Company maintained effective internal control over financial reporting, as such term is
defined in Securities Exchange Act of 1934
Rules 13a-15(f),
as of December 31, 2017.
Internal control
over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is
subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting can also be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material
misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the
process safeguards to reduce, though not eliminate, this risk.
Management is also responsible for the preparation and fair presentation of the
consolidated financial statements and other financial information contained in this report. The accompanying consolidated financial statements were prepared in conformity with U.S. generally accepted accounting principles and include, as necessary,
best estimates and judgments by management.
In addition to managements assessment, Crowe Horwath LLP, an independent registered public accounting
firm, has audited the Companys consolidated financial statements as of and for the year ended December 31, 2017, and the Companys effectiveness of internal control over financial reporting as of December 31, 2017, dated March
1, 2018, as stated in its report, which is included herein.
|
/s/ Richard P. Smith
|
Richard P. Smith
|
President and Chief Executive Officer
|
|
/s/ Thomas J. Reddish
|
Thomas J. Reddish
|
Executive Vice President and Chief Financial Officer
|
|
March 1, 2018
|
103