Notes to Unaudited Consolidated Financial Statements
NOTE A - ACCOUNTING POLICIES AND BASIS OF PRESENTATION
First Citizens BancShares, Inc. (BancShares) is a financial holding company organized under the laws of Delaware and conducts operations through its banking subsidiary, First-Citizens Bank & Trust Company (FCB), which is headquartered in Raleigh, North Carolina.
General
These consolidated financial statements and notes thereto are presented in accordance with instructions for Form 10-Q and Article 10 of Regulation S-X and, therefore, do not include all information and notes necessary for a complete presentation of financial position, results of operations and cash flow activity required in accordance with accounting principles generally accepted in the United States of America (GAAP). In the opinion of management, all normal recurring adjustments necessary for a fair presentation of the consolidated financial position and consolidated results of operations have been made. The unaudited interim consolidated financial statements included in this Form 10-Q should be read in conjunction with the consolidated financial statements and footnotes included in BancShares' Annual Report on Form 10-K for the year ended
December 31, 2016
.
Reclassifications
In certain instances, amounts reported in prior years' consolidated financial statements have been reclassified to conform to the current financial statement presentation. Such reclassifications had no effect on previously reported shareholders' equity or net income.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates, and different assumptions in the application of these policies could result in material changes in BancShares' consolidated financial position, the consolidated results of operations or related disclosures. Material estimates that are particularly susceptible to significant change include:
|
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•
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Allowance for loan and lease losses;
|
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|
•
|
Fair value of financial instruments, including acquired assets and assumed liabilities;
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•
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Pension plan assumptions;
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|
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•
|
Cash flow estimates on purchased credit-impaired loans;
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•
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Goodwill and other intangible assets;
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•
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Federal Deposit Insurance Corporation (FDIC) shared-loss payable; and
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•
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Income tax assets, liabilities and expense
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Recently Adopted Accounting Pronouncements
Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2017-03,
Accounting Changes and Error Corrections (Topic 250) and Investments - Equity Method and Joint Ventures (Topic 323): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings (SEC Update)
This ASU adds an SEC paragraph and amends other Topics pursuant to an SEC Staff Announcement that states a registrant should evaluate ASUs that have not yet been adopted, including ASU 2014-09,
Revenue from Contracts with Customers (Topic 606)
, ASU 2016-02,
Leases (Topic 842)
, and ASU 2016-13,
Financial Instruments–Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
, to determine the appropriate financial statement disclosures about the potential material effects of those ASUs on the financial statements when adopted. If a registrant does not know or cannot reasonably estimate the impact that adoption of the ASUs referenced are expected to have on the financial statements, then in addition to making a statement to that effect, the registrant should consider additional qualitative financial statement disclosures to assist the reader in assessing the significance of the impact the adoption will have on the financial statements, and a comparison to the registrant's current accounting policies. A registrant should describe the status of its process to implement the new standards and the significant matters yet to be addressed.
This ASU also addresses the accounting for tax benefits resulting from investments in qualified affordable housing projects where the decision to apply the proportional amortization method of accounting is an accounting policy decision to be applied consistently to all investments that meet the conditions, rather than a decision to be applied to individual investments that qualify for the use of the proportional amortization method.
The amendments in this ASU are effective upon issuance. We adopted the guidance effective in the first quarter of 2017. The disclosures required by this ASU are included within the “Recently Issued Accounting Pronouncements” section below. The adoption did not have an impact on our consolidated financial position or consolidated results of operations.
FASB ASU 2016-17,
Consolidation (Topic 810): Interests Held Through Related Parties That Are Under Common Control
This ASU does not change the characteristics of a primary beneficiary in current GAAP; however, it requires that a reporting entity, in determining whether it satisfies the second characteristic of a primary beneficiary, to include all of its direct variable interests in a VIE and, on a proportionate basis, its indirect variable interests in a VIE held through related parties, including related parties that are under common control with the reporting entity. If, after performing that assessment, a reporting entity that is the single decision maker of a VIE concludes that it does not have the characteristics of a primary beneficiary, the amendments continue to require that reporting entity to evaluate whether it and one or more of its related parties under common control, as a group, have the characteristics of a primary beneficiary, then the party within the related party group that is most closely associated with the VIE is the primary beneficiary.
The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. We adopted the guidance effective in the first quarter of 2017. The adoption did not have an impact on our consolidated financial position or consolidated results of operations.
FASB ASU 2016-07,
Investments—Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting
This ASU eliminates the requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. The ASU requires that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investor's previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. Therefore, upon qualifying for the equity method of accounting, no retroactive adjustment of the investment is required. Further, the ASU requires that an entity that has an available-for-sale equity security that becomes qualified for the equity method of accounting recognize through earnings, the unrealized gain or loss in accumulated other comprehensive income at the date the investment becomes qualified for use of the equity method.
The amendments in this ASU are effective for all entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. We adopted the guidance effective in the first quarter of 2017. The adoption did not have any impact on our consolidated financial position or consolidated results of operations.
Recently Issued Accounting Pronouncements
FASU ASU 2017-01,
Business Combinations (Topic 805), Clarifying the Definition of a Business
This ASU provides a more robust framework to use in determining when a set of assets and activities is a business, including narrowing the definition of outputs and align it with how outputs are described in Topic 606. This ASU provides a screen to determine when an integrated set of assets and activities (collectively referred to as a "set") is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired or disposed of is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This screen reduces the number of transactions that need to be further evaluated. If the screen is not met, the amendments in this ASU (1) require that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and (2) remove the evaluation of whether a market participant could replace missing elements. The framework includes two sets of criteria to consider that depend on whether a set has outputs.
The amendments in this ASU are effective for public business entities for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of this standard is not expected to have an impact on our consolidated financial position or results of operation and we will adopt the guidance during the first quarter of 2018.
FASB ASU 2017-07,
Compensation - Retirement Benefits (Topic 715),
Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost
This ASU requires that an employer report the service cost component in the same line item or line 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 and outside a subtotal of income from operations, if one is presented. Of the components of net periodic benefit cost, only the service cost component will be eligible for asset capitalization.
The amendments in this ASU are effective for public business entities for annual periods beginning after December 15, 2017, including interim periods within those annual periods. Early adoption is permitted as of the beginning of an annual reporting period. The amendments shall be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement and prospectively, on and after the effective date, for the capitalization of the service cost component of net periodic pension cost and net periodic postretirement benefit in assets. The adoption of this standard is not expected to have a significant impact on our consolidated financial position or results of operation and we will adopt the guidance during the first quarter of 2018.
FASB ASU 2017-04,
Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment
This ASU eliminates Step 2 from the goodwill impairment test. Under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, under the amendments in this ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. This ASU eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative test.
This ASU will be effective for BancShares' annual or interim goodwill impairment tests in fiscal year 2020. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The adoption of this standard is not expected to have an impact on our consolidated financial position or results of operation and we expect to adopt the guidance for our annual impairment test in fiscal year 2020.
FASB ASU 2016-18,
Statement of Cash Flows (Topic 230): Restricted Cash
The amendments in this ASU require 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. 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. This ASU does not provide a definition of restricted cash or restricted cash equivalents.
This ASU is effective for fiscal years beginning after December 15, 2017 for public business entities, including interim periods within those fiscal years. The adoption of this standard is not expected to have an impact on our Consolidated Statements of Cash Flows.
FASB ASU 2016-16,
Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory
This ASU states that an entity should recognize the income tax consequences of an intra-entity transfer of an asset other than inventory, such as intellectual property or property, plant and equipment, when the transfer occurs. This ASU does not change GAAP for an intra-entity transfer of inventory. Current GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party.
The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2017, including interim reporting periods within those annual reporting periods, and should be applied on a modified retrospective basis. The adoption of this standard is not expected to have an impact on our consolidated financial position or results of operation and we will adopt the guidance during the first quarter of 2018.
FASB ASU 2016-15,
Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments
This ASU addresses the diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments in this ASU provide guidance on (1) debt prepayment or debt extinguishment costs; (2) settlement of zero-coupon debt instruments; (3) contingent consideration payments made after a business combination; (4) proceeds from the settlement of insurance claims; (5) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; (6) distributions received from equity method investees; (7) beneficial interests in securitization transactions; and (8) separately identifiable cash flows and application of the predominance principle.
The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The guidance requires application using a retrospective transition method. We will adopt the guidance during the first quarter of 2018. The adoption of this standard is not expected to have a significant impact on our Consolidated Statements of Cash Flows.
FASB ASU 2016-13,
Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
This ASU eliminates the delayed recognition of the full amount of credit losses until the loss was probable of occurring and instead will reflect an entity's current estimate of all expected credit losses. The amendments in this ASU broaden the information that an entity must consider in developing its expected credit loss estimate for assets measured either collectively or individually. The ASU does not specify a method for measuring expected credit losses and allows an entity to apply methods that reasonably reflect its expectations of the credit loss estimate based on the entity's size, complexity and risk profile. In addition, the disclosures of credit quality indicators in relation to the amortized cost of financing receivables, a current disclosure requirement, are further disaggregated by year of origination.
The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018. For BancShares, the standard will apply to loans, unfunded loan commitments and debt securities available for sale. We will adopt the guidance by the first quarter of 2020 with a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption. We are currently evaluating the impact the new standard will have on our consolidated financial statement as the final impact will be dependent, among other items, upon the loan portfolio composition and quality at the adoption date, as well as economic conditions and forecasts at that time.
FASB ASU 2016-02,
Leases (Topic 842)
This ASU increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The key difference between existing standards and this ASU is the requirement for lessees to recognize on their balance sheet all lease contracts. An entity may make an accounting election by classification to not recognize leases with terms less than 12 months on their balance sheet. Both a right-of-use asset, representing the right to use the leased asset, and a lease liability, representing the contractual obligation, are required to be recognized on the balance sheet of the lessee at lease commencement. Further, this ASU requires lessees to classify leases as either operating or finance leases, which are substantially similar to the current operating and capital leases classifications. The distinction between these two classifications under the new standard does not relate to balance sheet treatment, but relates to treatment in the statements of income and cash flows. Lessor guidance remains largely unchanged with the exception of how a lessor determines the appropriate lease classification for each lease to better align the lessor guidance with revised lessee classification guidance.
The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. For BancShares, the impact of this ASU will primarily relate to its accounting and reporting of leases as a lessee. We will adopt during the first quarter of 2019. While we are currently evaluating the impact of the new standard, we expect an increase to the Consolidated Balance Sheets for right-of-use assets and associated lease liabilities, as well as resulting depreciation expense of the right-of-use assets and interest expense of the lease liabilities in the Consolidated Statements of Income, for arrangements previously accounted for as operating leases.
FASB ASU 2016-01,
Financial Instruments—Overall (Subtopic 825-10)
:
Recognition and Measurement of Financial Assets and Financial Liabilities
This ASU addresses certain aspects of recognition, measurement, presentation and disclosure of certain financial instruments. The amendments in this ASU (1) require equity investments to be measured at fair value with changes in fair value recognized in net income; (2) simplify the impairment assessment of equity investments without a readily determinable fair value; (3) eliminate the requirement to disclose the method(s) and significant assumptions used to estimate the fair value for financial instruments measured at amortized cost on the balance sheet; (4) require public business entities to use exit price notion, rather than entry prices, when measuring fair value of financial instruments for disclosure purposes; (5) require separate presentation of financial assets and financial liabilities by measurement category and form of financial assets on the balance sheet or the accompanying notes to the financial statements; (6) require separate presentation in other comprehensive income of the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the organization has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; and (7) state that a valuation allowance on deferred tax assets related to available-for-sale securities should be evaluated in combination with other deferred tax assets.
The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The ASU only permits early adoption of the instrument-specific credit risk provision. We will adopt during the first quarter of 2018 with a cumulative-effect adjustment from accumulated other comprehensive income (AOCI) to retained earnings as of the beginning of the year of adoption. We are currently evaluating the impact the new standard
will have on our consolidated financial statements. The cumulative-effect adjustment will be impacted by the equity securities portfolio composition and valuation at the date of adoption.
FASB ASU 2014-09,
Revenue from Contracts with Customers (Topic 606)
In May 2014, the FASB issued a standard on the recognition of revenue from contracts with customers with the core principle being for companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. The new standard also results in enhanced disclosures about revenue, provides guidance for transactions that were not previously addressed comprehensively and improves guidance for multiple-element arrangements. In March 2016, the FASB issued ASU 2016-08,
Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations
, to improve the operability and understandability of the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU 2016-10,
Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing
, to clarify guidance for identifying performance obligations and licensing implementation. In May 2016, the FASB issued ASU 2016-12,
Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients
, to clarify and improve the guidance for certain aspects of Topic 606. In December 2016, the FASB issued ASU 2016-20,
Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers
, to clarify guidance for certain aspects of Topic 606.
Per ASU 2015-14,
Deferral of the Effective Date
, this guidance was deferred and is effective for fiscal periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Early adoption is permitted for fiscal periods beginning after December 15, 2016. Our revenue is comprised of net interest income on financial assets and liabilities, which is explicitly excluded from the scope of the new guidance, and noninterest income. The contracts that are in scope of the guidance are primarily related to service charges on deposit accounts, cardholder and merchant income, wealth advisory services income, other service charges and fees, sales of other real estate, insurance commissions and miscellaneous fees. We continue to evaluate the impact of the new standard on our noninterest income and on our presentation and disclosures. We expect to adopt the ASU during the first quarter of 2018 with a cumulative-effect adjustment to opening retained earnings and the modified retrospective approach will likely be used.
NOTE B - BUSINESS COMBINATIONS
Harvest Community Bank
On January 13, 2017, FCB entered into an agreement with the FDIC, as Receiver, to purchase certain assets and assume certain liabilities of Harvest Community Bank (HCB) of Pennsville, New Jersey. The acquisition provides FCB with the opportunity to grow capital and enhance earnings.
The HCB transaction was accounted for under the acquisition method of accounting and, accordingly, assets acquired and liabilities assumed were recorded at their estimated fair values on the acquisition date. Fair values are preliminary and subject to refinement for up to one year after the closing date of the acquisition as additional information regarding closing date fair values becomes available.
The fair value of the assets acquired was
$111.6 million
, including
$85.1 million
in purchased credit-impaired (PCI) loans and
$850 thousand
of identifiable intangible assets. Liabilities assumed were
$121.8 million
of which the majority were deposits. As a result of the transaction, FCB recorded a gain on the acquisition of
$12.0 million
which is included in noninterest income in the Consolidated Statements of Income.
The following table provides the identifiable assets acquired and liabilities assumed at their estimated fair values as of the acquisition date.
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|
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(Dollars in thousands)
|
As recorded by FCB
|
Assets
|
|
Cash and cash equivalents
|
$
|
3,350
|
|
Overnight investments
|
7,478
|
|
Investment securities
|
14,455
|
|
Loans
|
85,149
|
|
Income earned not collected
|
31
|
|
Intangible assets
|
850
|
|
Other assets
|
237
|
|
Total assets acquired
|
111,550
|
|
Liabilities
|
|
Deposits
|
121,755
|
|
Other liabilities
|
74
|
|
Total liabilities assumed
|
121,829
|
|
Fair value of net liabilities assumed
|
(10,279
|
)
|
Cash received from FDIC
|
22,296
|
|
Gain on acquisition of HCB
|
$
|
12,017
|
|
Merger-related expenses of
$735 thousand
were recorded in the Consolidated Statements of Income for the
three
months ended
March 31, 2017
. Loan-related interest income generated from HCB was approximately
$1.0 million
for the
first quarter
of 2017.
All loans resulting from the HCB transaction were recorded at the acquisition date with a discount attributable, at least in part, to credit quality, and are therefore accounted for as PCI under ASC 310-30.
NOTE C - INVESTMENTS
The amortized cost and fair value of investment securities classified as available for sale and held to maturity at
March 31, 2017
and
December 31, 2016
, are as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
(Dollars in thousands)
|
Cost
|
|
Gross
unrealized gains
|
|
Gross unrealized
losses
|
|
Fair
value
|
Investment securities available for sale
|
|
|
|
|
|
|
|
U.S. Treasury
|
$
|
1,619,380
|
|
|
$
|
342
|
|
|
$
|
1,554
|
|
|
$
|
1,618,168
|
|
Government agency
|
40,185
|
|
|
36
|
|
|
—
|
|
|
40,221
|
|
Mortgage-backed securities
|
5,363,747
|
|
|
2,946
|
|
|
60,586
|
|
|
5,306,107
|
|
Equity securities
|
72,064
|
|
|
22,201
|
|
|
—
|
|
|
94,265
|
|
Corporate bonds
|
49,370
|
|
|
220
|
|
|
25
|
|
|
49,565
|
|
Other
|
11,702
|
|
|
45
|
|
|
212
|
|
|
11,535
|
|
Total investment securities available for sale
|
$
|
7,156,448
|
|
|
$
|
25,790
|
|
|
$
|
62,377
|
|
|
$
|
7,119,861
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Cost
|
|
Gross
unrealized gains
|
|
Gross unrealized
losses
|
|
Fair
value
|
U.S. Treasury
|
$
|
1,650,675
|
|
|
$
|
579
|
|
|
$
|
935
|
|
|
$
|
1,650,319
|
|
Government agency
|
40,291
|
|
|
107
|
|
|
—
|
|
|
40,398
|
|
Mortgage-backed securities
|
5,259,466
|
|
|
2,809
|
|
|
86,850
|
|
|
5,175,425
|
|
Equity securities
|
71,873
|
|
|
11,634
|
|
|
—
|
|
|
83,507
|
|
Corporate bonds
|
49,367
|
|
|
195
|
|
|
—
|
|
|
49,562
|
|
Other
|
7,615
|
|
|
—
|
|
|
246
|
|
|
7,369
|
|
Total investment securities available for sale
|
$
|
7,079,287
|
|
|
$
|
15,324
|
|
|
$
|
88,031
|
|
|
$
|
7,006,580
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
Cost
|
|
Gross
unrealized gains
|
|
Gross unrealized
losses
|
|
Fair
value
|
Investment securities held to maturity
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
$
|
83
|
|
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
89
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Cost
|
|
Gross
unrealized gains
|
|
Gross unrealized
losses
|
|
Fair
value
|
Mortgage-backed securities
|
$
|
98
|
|
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
104
|
|
Investments in mortgage-backed securities primarily represent securities issued by the Government National Mortgage Association, Federal National Mortgage Association and Federal Home Loan Mortgage Corporation. Investments in equity securities and corporate bonds represent positions in securities of other financial institutions. Other includes investments in trust preferred securities of financial institutions. The following table provides the amortized cost and fair value by contractual maturity. Expected maturities will differ from contractual maturities on certain securities because borrowers and issuers may have the right to call or prepay obligations with or without prepayment penalties. Repayments of mortgage-backed securities are dependent on the repayments of the underlying loan balances. Equity securities do not have a stated maturity date.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
December 31, 2016
|
(Dollars in thousands)
|
Cost
|
|
Fair
value
|
|
Cost
|
|
Fair
value
|
Investment securities available for sale
|
|
|
|
|
|
|
|
Non-amortizing securities maturing in:
|
|
|
|
|
|
|
|
One year or less
|
$
|
550,275
|
|
|
$
|
549,566
|
|
|
$
|
842,798
|
|
|
$
|
842,947
|
|
One through five years
|
1,109,290
|
|
|
1,108,823
|
|
|
848,168
|
|
|
847,770
|
|
Five through 10 years
|
49,370
|
|
|
49,565
|
|
|
49,367
|
|
|
49,562
|
|
Over 10 years
|
11,702
|
|
|
11,535
|
|
|
7,615
|
|
|
7,369
|
|
Mortgage-backed securities
|
5,363,747
|
|
|
5,306,107
|
|
|
5,259,466
|
|
|
5,175,425
|
|
Equity securities
|
72,064
|
|
|
94,265
|
|
|
71,873
|
|
|
83,507
|
|
Total investment securities available for sale
|
$
|
7,156,448
|
|
|
$
|
7,119,861
|
|
|
$
|
7,079,287
|
|
|
$
|
7,006,580
|
|
Investment securities held to maturity
|
|
|
|
|
|
|
|
Mortgage-backed securities held to maturity
|
$
|
83
|
|
|
$
|
89
|
|
|
$
|
98
|
|
|
$
|
104
|
|
For each period presented, realized securities gains (losses) included the following:
|
|
|
|
|
|
|
|
|
|
Three months ended March 31
|
(Dollars in thousands)
|
2017
|
|
2016
|
Gross gains on sales of investment securities available for sale
|
$
|
3
|
|
|
$
|
4,933
|
|
Gross losses on sales of investment securities available for sale
|
(27
|
)
|
|
(305
|
)
|
Total realized securities (losses) gains
|
$
|
(24
|
)
|
|
$
|
4,628
|
|
The following table provides information regarding securities with unrealized losses as of
March 31, 2017
and
December 31, 2016
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
Less than 12 months
|
|
12 months or more
|
|
Total
|
(Dollars in thousands)
|
Fair
value
|
|
Unrealized
losses
|
|
Fair
value
|
|
Unrealized
losses
|
|
Fair
value
|
|
Unrealized
losses
|
Investment securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury
|
$
|
1,068,144
|
|
|
$
|
1,554
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,068,144
|
|
|
$
|
1,554
|
|
Mortgage-backed securities
|
4,318,258
|
|
|
56,017
|
|
|
361,488
|
|
|
4,569
|
|
|
4,679,746
|
|
|
60,586
|
|
Corporate bonds
|
9,975
|
|
|
25
|
|
|
—
|
|
|
—
|
|
|
9,975
|
|
|
25
|
|
Other
|
5,294
|
|
|
212
|
|
|
—
|
|
|
—
|
|
|
5,294
|
|
|
212
|
|
Total
|
$
|
5,401,671
|
|
|
$
|
57,808
|
|
|
$
|
361,488
|
|
|
$
|
4,569
|
|
|
$
|
5,763,159
|
|
|
$
|
62,377
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Less than 12 months
|
|
12 months or more
|
|
Total
|
|
Fair
value
|
|
Unrealized
losses
|
|
Fair
value
|
|
Unrealized
losses
|
|
Fair
value
|
|
Unrealized
losses
|
Investment securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury
|
$
|
807,822
|
|
|
$
|
935
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
807,822
|
|
|
$
|
935
|
|
Mortgage-backed securities
|
4,442,700
|
|
|
82,161
|
|
|
362,351
|
|
|
4,689
|
|
|
4,805,051
|
|
|
86,850
|
|
Other
|
7,369
|
|
|
246
|
|
|
—
|
|
|
—
|
|
|
7,369
|
|
|
246
|
|
Total
|
$
|
5,257,891
|
|
|
$
|
83,342
|
|
|
$
|
362,351
|
|
|
$
|
4,689
|
|
|
$
|
5,620,242
|
|
|
$
|
88,031
|
|
Investment securities with an aggregate fair value of
$361.5 million
and
$362.4 million
had continuous unrealized losses for more than 12 months with a corresponding aggregate unrealized loss of
$4.6 million
and
$4.7 million
as of
March 31, 2017
and
December 31, 2016
, respectively. As of
March 31, 2017
, all
52
of these investments are government sponsored enterprise-issued mortgage-backed securities.
None
of the unrealized losses identified as of
March 31, 2017
or
December 31, 2016
relate to the marketability of the securities or the issuer’s ability to honor redemption obligations. Rather, the unrealized losses relate to changes in interest rates relative to when the investment securities were purchased. For all periods presented, BancShares had the ability and intent to retain these securities for a period of time sufficient to recover all unrealized losses. Therefore,
none
of the securities were deemed to be other than temporarily impaired.
Investment securities having an aggregate carrying value of
$5.01 billion
at
March 31, 2017
and
$4.55 billion
at
December 31, 2016
were pledged as collateral to secure public funds on deposit and certain short-term borrowings, and for other purposes as required by law.
NOTE D - LOANS AND LEASES
BancShares' accounting methods for loans and leases differ depending on whether they are purchased credit-impaired (PCI) or non-PCI. Non-PCI loans and leases include originated commercial, originated noncommercial, purchased non-impaired loans, purchased leases and certain purchased revolving credit. For purchased non-impaired loans to be included as non-PCI, it must be determined that the loans do not have any credit deterioration at the time of acquisition. Conversely, loans for which it is probable at acquisition that all required payments will not be collected in accordance with contractual terms are considered impaired and, therefore, classified as PCI loans. PCI loans are accounted for under the guidance in ASC Topic 310-30,
Loans and Debt Securities Acquired with Deteriorated Credit Quality
. PCI loans and leases are recorded at fair value at the date of acquisition. No allowance for loan and lease losses is recorded on the acquisition date as the fair value of the acquired assets incorporates assumptions regarding credit risk. An allowance is recorded if there is additional credit deterioration after the acquisition date.
BancShares reports PCI and non-PCI loan portfolios separately, and each portfolio is further divided into commercial and non-commercial based on the type of borrower, purpose, collateral, and/or our underlying credit management processes. Additionally, loans are assigned to loan classes, which further disaggregate loans based upon common risk characteristics.
Commercial
–
Commercial loans include construction and land development, commercial mortgage, other commercial real estate, commercial and industrial, lease financing and other.
Construction and land development
– Construction and land development consists of loans to finance land for development, investment, and use in a commercial business enterprise; multifamily apartments; and other commercial buildings that may be owner-occupied or income generating investments for the owner.
Commercial mortgage
– Commercial mortgage consists of loans to purchase or refinance owner-occupied nonresidential and investment properties. Investment properties include office buildings and other facilities that are rented or leased to unrelated parties.
Other commercial real estate
– Other commercial real estate consists of loans secured by farmland (including residential farms and other improvements) and multifamily (5 or more) residential properties.
Commercial and industrial
– Commercial and industrial consists of loans or lines of credit to finance corporate credit cards, accounts receivable, inventory and other general business purposes.
Lease financing
– Lease financing consists solely of lease financing agreements for business equipment, vehicles and other assets.
Other
– Other consists of all other commercial loans not classified in one of the preceding classes. These typically include loans to non-profit organizations such as churches, hospitals, educational and charitable organizations.
Noncommercial
–
Noncommercial consist of residential and revolving mortgage, construction and land development, and consumer loans.
Residential mortgage
– Residential real estate consists of loans to purchase, construct or refinance the borrower's primary dwelling, second residence or vacation home.
Revolving mortgage
– Revolving mortgage consists of home equity lines of credit that are secured by first or second liens on the borrower's primary residence.
Construction and land development
– Construction and land development consists of loans to construct the borrower's primary or secondary residence or vacant land upon which the owner intends to construct a dwelling at a future date.
Consumer
– Consumer loans consist of installment loans to finance purchases of vehicles, unsecured home improvements, student loans and revolving lines of credit that can be secured or unsecured, including personal credit cards.
Loans and leases outstanding included the following at
March 31, 2017
and
December 31, 2016
:
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
March 31, 2017
|
|
December 31, 2016
|
Non-PCI loans and leases:
|
|
|
|
Commercial:
|
|
|
|
Construction and land development
|
$
|
683,415
|
|
|
$
|
649,157
|
|
Commercial mortgage
|
9,173,612
|
|
|
9,026,220
|
|
Other commercial real estate
|
364,862
|
|
|
351,291
|
|
Commercial and industrial
|
2,477,911
|
|
|
2,567,501
|
|
Lease financing
|
840,201
|
|
|
826,270
|
|
Other
|
321,352
|
|
|
340,264
|
|
Total commercial loans
|
13,861,353
|
|
|
13,760,703
|
|
Noncommercial:
|
|
|
|
Residential mortgage
|
2,945,361
|
|
|
2,889,124
|
|
Revolving mortgage
|
2,604,156
|
|
|
2,601,344
|
|
Construction and land development
|
218,103
|
|
|
231,400
|
|
Consumer
|
1,428,660
|
|
|
1,446,138
|
|
Total noncommercial loans
|
7,196,280
|
|
|
7,168,006
|
|
Total non-PCI loans and leases
|
21,057,633
|
|
|
20,928,709
|
|
PCI loans:
|
|
|
|
Commercial:
|
|
|
|
Construction and land development
|
26,542
|
|
|
20,766
|
|
Commercial mortgage
|
455,551
|
|
|
453,013
|
|
Other commercial real estate
|
18,723
|
|
|
12,645
|
|
Commercial and industrial
|
27,794
|
|
|
11,844
|
|
Other
|
1,244
|
|
|
1,702
|
|
Total commercial loans
|
529,854
|
|
|
499,970
|
|
Noncommercial:
|
|
|
|
Residential mortgage
|
275,904
|
|
|
268,777
|
|
Revolving mortgage
|
40,345
|
|
|
38,650
|
|
Consumer
|
2,713
|
|
|
1,772
|
|
Total noncommercial loans
|
318,962
|
|
|
309,199
|
|
Total PCI loans
|
848,816
|
|
|
809,169
|
|
Total loans and leases
|
$
|
21,906,449
|
|
|
$
|
21,737,878
|
|
At
March 31, 2017
,
$75.9 million
of total loans and leases were covered under shared-loss agreements with the FDIC, compared to
$84.8 million
at
December 31, 2016
. The shared-loss agreements, for their terms, protect us from a substantial portion of the credit and asset quality risk we would otherwise incur.
At
March 31, 2017
,
$8.32 billion
in noncovered loans with a lendable collateral value of
$5.57 billion
were used to secure
$660.2 million
in Federal Home Loan Bank (FHLB) of Atlanta advances, resulting in additional borrowing capacity of
$4.91 billion
. At
December 31, 2016
,
$8.26 billion
in noncovered loans with a lendable collateral value of
$5.50 billion
were used to secure
$660.2 million
in FHLB of Atlanta advances, resulting in additional borrowing capacity of
$4.84 billion
. At
March 31, 2017
,
$2.66 billion
in noncovered loans with a lendable collateral value of
$1.98 billion
were used to secure additional borrowing capacity at the Federal Reserve Bank (FRB). There were no loans used to secure additional borrowing capacity at the FRB at
December 31, 2016
.
Net deferred fees on originated non-PCI loans and leases, including unearned income and unamortized costs, fees, premiums and discounts, were
$5.0 million
and
$6.7 million
at
March 31, 2017
and
December 31, 2016
, respectively. The unamortized discount related to purchased non-PCI loans and leases in the Cordia transaction was
$3.7 million
and
$4.2 million
at
March 31, 2017
and
December 31, 2016
, respectively. The unamortized discount related to purchased non-PCI loans and leases from the First Citizens Bancorporation, Inc. merger was
$24.7 million
and
$27.4 million
at
March 31, 2017
and
December 31, 2016
, respectively. During both the
three
months ended
March 31, 2017
and
March 31, 2016
, accretion income on non-PCI loans was
$3.2 million
.
During the first quarter of 2017, certain residential mortgage loans totaling
$32.5 million
were sold, resulting in a gain of
$164 thousand
.
Credit quality indicators
Loans and leases are monitored for credit quality on a recurring basis. The credit quality indicators used are dependent on the portfolio segment to which the loan relates. Commercial and noncommercial loans and leases have different credit quality indicators as a result of the unique characteristics of the loan segment being evaluated. The credit quality indicators for non-PCI and PCI commercial loans and leases are developed through a review of individual borrowers on an ongoing basis. Each commercial loan is evaluated annually with more frequent evaluation of more severely criticized loans or leases. The credit quality indicators for non-PCI and PCI noncommercial loans are based on the delinquency status of the borrower. As the borrower becomes more delinquent, the likelihood of loss increases. The indicators represent the rating for loans or leases as of the date presented based on the most recent assessment performed. These credit quality indicators are defined as follows:
Pass
– A pass rated asset is not adversely classified because it does not display any of the characteristics for adverse classification.
Special mention
– A special mention asset has potential weaknesses that deserve management’s close attention. If left uncorrected, such potential weaknesses may result in deterioration of the repayment prospects or collateral position at some future date. Special mention assets are not adversely classified and do not warrant adverse classification.
Substandard
– A substandard asset is inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged, if any. Assets classified as substandard generally have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. These assets are characterized by the distinct possibility of loss if the deficiencies are not corrected.
Doubtful
– An asset classified as doubtful has all the weaknesses inherent in an asset classified substandard with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable on the basis of currently existing facts, conditions and values.
Loss
– Assets classified as loss are considered uncollectible and of such little value that it is inappropriate to be carried as an asset. This classification is not necessarily equivalent to no potential for recovery or salvage value, but rather that it is not appropriate to defer a full charge-off even though partial recovery may be affected in the future.
Ungraded
– Ungraded loans represent loans that are not included in the individual credit grading process due to their relatively small balances or borrower type. The majority of ungraded loans at
March 31, 2017
and
December 31, 2016
relate to business credit cards. Business credit card loans are subject to automatic charge-off when they become 120 days past due in the same manner as unsecured consumer lines of credit. The remaining balance is comprised of a small amount of commercial mortgage, lease financing and other commercial real estate loans.
Non-PCI loans and leases outstanding at
March 31, 2017
and
December 31, 2016
by credit quality indicator are provided below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
(Dollars in thousands)
|
Non-PCI commercial loans and leases
|
Grade:
|
Construction and land
development
|
|
Commercial
mortgage
|
|
Other
commercial real estate
|
|
Commercial and
industrial
|
|
Lease financing
|
|
Other
|
|
Total non-PCI commercial loans and leases
|
Pass
|
$
|
675,254
|
|
|
$
|
8,977,705
|
|
|
$
|
360,981
|
|
|
$
|
2,303,778
|
|
|
$
|
829,872
|
|
|
$
|
314,857
|
|
|
$
|
13,462,447
|
|
Special mention
|
2,144
|
|
|
72,007
|
|
|
592
|
|
|
23,335
|
|
|
3,560
|
|
|
1,006
|
|
|
102,644
|
|
Substandard
|
5,979
|
|
|
123,588
|
|
|
3,289
|
|
|
19,585
|
|
|
6,761
|
|
|
5,488
|
|
|
164,690
|
|
Doubtful
|
38
|
|
|
312
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
357
|
|
Ungraded
|
—
|
|
|
—
|
|
|
—
|
|
|
131,206
|
|
|
8
|
|
|
1
|
|
|
131,215
|
|
Total
|
$
|
683,415
|
|
|
$
|
9,173,612
|
|
|
$
|
364,862
|
|
|
$
|
2,477,911
|
|
|
$
|
840,201
|
|
|
$
|
321,352
|
|
|
$
|
13,861,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Non-PCI commercial loans and leases
|
|
Construction and land
development
|
|
Commercial
mortgage
|
|
Other
commercial real estate
|
|
Commercial and
industrial
|
|
Lease financing
|
|
Other
|
|
Total non-PCI commercial loans and leases
|
Pass
|
$
|
645,232
|
|
|
$
|
8,821,439
|
|
|
$
|
347,509
|
|
|
$
|
2,402,659
|
|
|
$
|
818,008
|
|
|
$
|
335,831
|
|
|
$
|
13,370,678
|
|
Special mention
|
2,236
|
|
|
76,084
|
|
|
1,433
|
|
|
22,804
|
|
|
2,675
|
|
|
1,020
|
|
|
106,252
|
|
Substandard
|
1,683
|
|
|
126,863
|
|
|
2,349
|
|
|
17,870
|
|
|
5,415
|
|
|
3,413
|
|
|
157,593
|
|
Doubtful
|
6
|
|
|
334
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
348
|
|
Ungraded
|
—
|
|
|
1,500
|
|
|
—
|
|
|
124,160
|
|
|
172
|
|
|
—
|
|
|
125,832
|
|
Total
|
$
|
649,157
|
|
|
$
|
9,026,220
|
|
|
$
|
351,291
|
|
|
$
|
2,567,501
|
|
|
$
|
826,270
|
|
|
$
|
340,264
|
|
|
$
|
13,760,703
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
Non-PCI noncommercial loans and leases
|
(Dollars in thousands)
|
Residential
mortgage
|
|
Revolving
mortgage
|
|
Construction
and land
development
|
|
Consumer
|
|
Total non-PCI noncommercial
loans and leases
|
Current
|
$
|
2,899,295
|
|
|
$
|
2,582,739
|
|
|
$
|
215,112
|
|
|
$
|
1,418,899
|
|
|
$
|
7,116,045
|
|
30-59 days past due
|
27,662
|
|
|
11,702
|
|
|
610
|
|
|
5,661
|
|
|
45,635
|
|
60-89 days past due
|
3,885
|
|
|
3,162
|
|
|
1,378
|
|
|
2,214
|
|
|
10,639
|
|
90 days or greater past due
|
14,519
|
|
|
6,553
|
|
|
1,003
|
|
|
1,886
|
|
|
23,961
|
|
Total
|
$
|
2,945,361
|
|
|
$
|
2,604,156
|
|
|
$
|
218,103
|
|
|
$
|
1,428,660
|
|
|
$
|
7,196,280
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Non-PCI noncommercial loans and leases
|
|
Residential
mortgage
|
|
Revolving
mortgage
|
|
Construction
and land
development
|
|
Consumer
|
|
Total non-PCI noncommercial
loans and leases
|
Current
|
$
|
2,839,045
|
|
|
$
|
2,576,942
|
|
|
$
|
229,106
|
|
|
$
|
1,434,658
|
|
|
$
|
7,079,751
|
|
30-59 days past due
|
27,760
|
|
|
14,290
|
|
|
1,139
|
|
|
6,775
|
|
|
49,964
|
|
60-89 days past due
|
7,039
|
|
|
2,698
|
|
|
598
|
|
|
2,779
|
|
|
13,114
|
|
90 days or greater past due
|
15,280
|
|
|
7,414
|
|
|
557
|
|
|
1,926
|
|
|
25,177
|
|
Total
|
$
|
2,889,124
|
|
|
$
|
2,601,344
|
|
|
$
|
231,400
|
|
|
$
|
1,446,138
|
|
|
$
|
7,168,006
|
|
PCI loans outstanding at
March 31, 2017
and
December 31, 2016
by credit quality indicator are provided below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
(Dollars in thousands)
|
PCI commercial loans
|
Grade:
|
Construction
and land
development
|
|
Commercial
mortgage
|
|
Other
commercial
real estate
|
|
Commercial
and
industrial
|
|
Other
|
|
Total PCI commercial
loans
|
Pass
|
$
|
11,129
|
|
|
$
|
243,473
|
|
|
$
|
14,896
|
|
|
$
|
18,204
|
|
|
$
|
642
|
|
|
$
|
288,344
|
|
Special mention
|
1,509
|
|
|
66,969
|
|
|
641
|
|
|
2,449
|
|
|
—
|
|
|
71,568
|
|
Substandard
|
10,776
|
|
|
131,350
|
|
|
2,516
|
|
|
2,901
|
|
|
602
|
|
|
148,145
|
|
Doubtful
|
3,128
|
|
|
13,759
|
|
|
670
|
|
|
4,215
|
|
|
—
|
|
|
21,772
|
|
Ungraded
|
—
|
|
|
—
|
|
|
—
|
|
|
25
|
|
|
—
|
|
|
25
|
|
Total
|
$
|
26,542
|
|
|
$
|
455,551
|
|
|
$
|
18,723
|
|
|
$
|
27,794
|
|
|
$
|
1,244
|
|
|
$
|
529,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
PCI commercial loans
|
|
Construction
and land
development
|
|
Commercial
mortgage
|
|
Other
commercial
real estate
|
|
Commercial
and
industrial
|
|
Other
|
|
Total PCI commercial
loans
|
Pass
|
$
|
8,103
|
|
|
$
|
234,023
|
|
|
$
|
8,744
|
|
|
$
|
7,253
|
|
|
$
|
696
|
|
|
$
|
258,819
|
|
Special mention
|
950
|
|
|
67,848
|
|
|
102
|
|
|
620
|
|
|
—
|
|
|
69,520
|
|
Substandard
|
7,850
|
|
|
138,312
|
|
|
3,462
|
|
|
3,648
|
|
|
1,006
|
|
|
154,278
|
|
Doubtful
|
3,863
|
|
|
12,830
|
|
|
337
|
|
|
303
|
|
|
—
|
|
|
17,333
|
|
Ungraded
|
—
|
|
|
—
|
|
|
—
|
|
|
20
|
|
|
—
|
|
|
20
|
|
Total
|
$
|
20,766
|
|
|
$
|
453,013
|
|
|
$
|
12,645
|
|
|
$
|
11,844
|
|
|
$
|
1,702
|
|
|
$
|
499,970
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
PCI noncommercial loans
|
(Dollars in thousands)
|
Residential
mortgage
|
|
Revolving
mortgage
|
|
Consumer
|
|
Total PCI noncommercial
loans
|
Current
|
$
|
236,294
|
|
|
$
|
34,868
|
|
|
$
|
2,541
|
|
|
$
|
273,703
|
|
30-59 days past due
|
10,017
|
|
|
1,231
|
|
|
48
|
|
|
11,296
|
|
60-89 days past due
|
4,935
|
|
|
349
|
|
|
3
|
|
|
5,287
|
|
90 days or greater past due
|
24,658
|
|
|
3,897
|
|
|
121
|
|
|
28,676
|
|
Total
|
$
|
275,904
|
|
|
$
|
40,345
|
|
|
$
|
2,713
|
|
|
$
|
318,962
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
PCI noncommercial loans
|
|
Residential
mortgage
|
|
Revolving
mortgage
|
|
Consumer
|
|
Total PCI noncommercial
loans
|
Current
|
$
|
230,065
|
|
|
$
|
33,827
|
|
|
$
|
1,637
|
|
|
$
|
265,529
|
|
30-59 days past due
|
9,595
|
|
|
618
|
|
|
68
|
|
|
10,281
|
|
60-89 days past due
|
6,528
|
|
|
268
|
|
|
4
|
|
|
6,800
|
|
90 days or greater past due
|
22,589
|
|
|
3,937
|
|
|
63
|
|
|
26,589
|
|
Total
|
$
|
268,777
|
|
|
$
|
38,650
|
|
|
$
|
1,772
|
|
|
$
|
309,199
|
|
The aging of the outstanding non-PCI loans and leases, by class, at
March 31, 2017
and
December 31, 2016
is provided in the table below.
The calculation of days past due begins on the day after payment is due and includes all days through which all required interest or principal has not been paid. Loans and leases 30 days or less past due are considered current as various grace periods allow borrowers to make payments within a stated period after the due date and still remain in compliance with the loan agreement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
(Dollars in thousands)
|
30-59 days
past due
|
|
60-89 days
past due
|
|
90 days or greater
|
|
Total past
due
|
|
Current
|
|
Total loans
and leases
|
Non-PCI loans and leases:
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land development - commercial
|
$
|
3,897
|
|
|
$
|
2
|
|
|
$
|
102
|
|
|
$
|
4,001
|
|
|
$
|
679,414
|
|
|
$
|
683,415
|
|
Commercial mortgage
|
16,294
|
|
|
3,633
|
|
|
8,750
|
|
|
28,677
|
|
|
9,144,935
|
|
|
9,173,612
|
|
Other commercial real estate
|
181
|
|
|
172
|
|
|
530
|
|
|
883
|
|
|
363,979
|
|
|
364,862
|
|
Commercial and industrial
|
9,543
|
|
|
1,576
|
|
|
3,229
|
|
|
14,348
|
|
|
2,463,563
|
|
|
2,477,911
|
|
Lease financing
|
992
|
|
|
733
|
|
|
290
|
|
|
2,015
|
|
|
838,186
|
|
|
840,201
|
|
Residential mortgage
|
27,662
|
|
|
3,885
|
|
|
14,519
|
|
|
46,066
|
|
|
2,899,295
|
|
|
2,945,361
|
|
Revolving mortgage
|
11,702
|
|
|
3,162
|
|
|
6,553
|
|
|
21,417
|
|
|
2,582,739
|
|
|
2,604,156
|
|
Construction and land development - noncommercial
|
610
|
|
|
1,378
|
|
|
1,003
|
|
|
2,991
|
|
|
215,112
|
|
|
218,103
|
|
Consumer
|
5,661
|
|
|
2,214
|
|
|
1,886
|
|
|
9,761
|
|
|
1,418,899
|
|
|
1,428,660
|
|
Other
|
194
|
|
|
—
|
|
|
161
|
|
|
355
|
|
|
320,997
|
|
|
321,352
|
|
Total non-PCI loans and leases
|
$
|
76,736
|
|
|
$
|
16,755
|
|
|
$
|
37,023
|
|
|
$
|
130,514
|
|
|
$
|
20,927,119
|
|
|
$
|
21,057,633
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
30-59 days
past due
|
|
60-89 days
past due
|
|
90 days or greater
|
|
Total past
due
|
|
Current
|
|
Total loans
and leases
|
Non-PCI loans and leases:
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land development - commercial
|
$
|
1,845
|
|
|
$
|
39
|
|
|
$
|
286
|
|
|
$
|
2,170
|
|
|
$
|
646,987
|
|
|
$
|
649,157
|
|
Commercial mortgage
|
11,592
|
|
|
2,773
|
|
|
10,329
|
|
|
24,694
|
|
|
9,001,526
|
|
|
9,026,220
|
|
Other commercial real estate
|
310
|
|
|
—
|
|
|
—
|
|
|
310
|
|
|
350,981
|
|
|
351,291
|
|
Commercial and industrial
|
7,918
|
|
|
2,102
|
|
|
1,051
|
|
|
11,071
|
|
|
2,556,430
|
|
|
2,567,501
|
|
Lease financing
|
1,175
|
|
|
444
|
|
|
863
|
|
|
2,482
|
|
|
823,788
|
|
|
826,270
|
|
Residential mortgage
|
27,760
|
|
|
7,039
|
|
|
15,280
|
|
|
50,079
|
|
|
2,839,045
|
|
|
2,889,124
|
|
Revolving mortgage
|
14,290
|
|
|
2,698
|
|
|
7,414
|
|
|
24,402
|
|
|
2,576,942
|
|
|
2,601,344
|
|
Construction and land development - noncommercial
|
1,139
|
|
|
598
|
|
|
557
|
|
|
2,294
|
|
|
229,106
|
|
|
231,400
|
|
Consumer
|
6,775
|
|
|
2,779
|
|
|
1,926
|
|
|
11,480
|
|
|
1,434,658
|
|
|
1,446,138
|
|
Other
|
72
|
|
|
—
|
|
|
198
|
|
|
270
|
|
|
339,994
|
|
|
340,264
|
|
Total non-PCI loans and leases
|
$
|
72,876
|
|
|
$
|
18,472
|
|
|
$
|
37,904
|
|
|
$
|
129,252
|
|
|
$
|
20,799,457
|
|
|
$
|
20,928,709
|
|
The recorded investment, by class, in loans and leases on nonaccrual status, and loans and leases greater than 90 days past due and still accruing at
March 31, 2017
and
December 31, 2016
for non-PCI loans and leases, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
December 31, 2016
|
(Dollars in thousands)
|
Nonaccrual
loans and
leases
|
|
Loans and
leases > 90
days and
accruing
|
|
Nonaccrual
loans and
leases
|
|
Loans and
leases > 90
days and
accruing
|
Non-PCI loans and leases:
|
|
|
|
|
|
|
|
Construction and land development - commercial
|
$
|
778
|
|
|
$
|
—
|
|
|
$
|
606
|
|
|
$
|
—
|
|
Commercial mortgage
|
25,709
|
|
|
962
|
|
|
26,527
|
|
|
482
|
|
Other commercial real estate
|
687
|
|
|
—
|
|
|
86
|
|
|
—
|
|
Commercial and industrial
|
4,023
|
|
|
584
|
|
|
4,275
|
|
|
440
|
|
Lease financing
|
1,281
|
|
|
—
|
|
|
359
|
|
|
683
|
|
Residential mortgage
|
36,257
|
|
|
191
|
|
|
32,470
|
|
|
37
|
|
Revolving mortgage
|
13,931
|
|
|
—
|
|
|
14,308
|
|
|
—
|
|
Construction and land development - noncommercial
|
1,315
|
|
|
—
|
|
|
1,121
|
|
|
—
|
|
Consumer
|
1,830
|
|
|
1,245
|
|
|
2,236
|
|
|
1,076
|
|
Other
|
275
|
|
|
—
|
|
|
319
|
|
|
—
|
|
Total non-PCI loans and leases
|
$
|
86,086
|
|
|
$
|
2,982
|
|
|
$
|
82,307
|
|
|
$
|
2,718
|
|
Purchased credit-impaired loans (PCI) loans
The following table relates to PCI loans acquired in the HCB acquisition and summarizes the contractually required payments, which include principal and interest, expected cash flows to be collected, and the fair value of PCI loans at the acquisition date.
|
|
|
|
|
(Dollars in thousands)
|
|
Contractually required payments
|
$
|
111,250
|
|
Cash flows expected to be collected
|
101,802
|
|
Fair value of loans at acquisition
|
85,149
|
|
The recorded fair values of PCI loans acquired in the HCB acquisition as of the acquisition date were as follows:
|
|
|
|
|
(Dollars in thousands)
|
|
Commercial:
|
|
Construction and land development
|
$
|
7,061
|
|
Commercial mortgage
|
21,836
|
|
Other commercial real estate
|
6,404
|
|
Commercial and industrial
|
19,675
|
|
Total commercial loans
|
54,976
|
|
Noncommercial:
|
|
Residential mortgage
|
25,857
|
|
Revolving mortgage
|
3,434
|
|
Consumer
|
882
|
|
Total noncommercial loans
|
30,173
|
|
Total PCI loans
|
$
|
85,149
|
|
The following table provides changes in the carrying value of all purchased credit-impaired loans during the
three
months ended
March 31, 2017
and
March 31, 2016
:
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
2017
|
|
2016
|
Balance at January 1
|
$
|
809,169
|
|
|
$
|
950,516
|
|
Fair value of acquired loans
|
85,149
|
|
|
35,416
|
|
Accretion
|
19,351
|
|
|
21,398
|
|
Payments received and other changes, net
|
(64,853
|
)
|
|
(61,443
|
)
|
Balance at March 31
|
$
|
848,816
|
|
|
$
|
945,887
|
|
Unpaid principal balance at March 31
|
$
|
1,155,034
|
|
|
$
|
1,665,896
|
|
The carrying value of loans on the cost recovery method was
$480 thousand
at
March 31, 2017
and
$498 thousand
at
December 31, 2016
. The cost recovery method is applied to loans when the timing of future cash flows is not reasonably estimable due to borrower nonperformance or uncertainty in the ultimate disposition of the asset. Cash payments from cost recovery loans are 100 percent
applied to principal. The recorded investment of PCI loans on nonaccrual status was
$1.5 million
and
$3.5 million
at
March 31, 2017
and
December 31, 2016
, respectively.
During the
three
months ended
March 31, 2017
and
March 31, 2016
, accretion income on PCI loans was
$19.4 million
and
$21.4 million
, respectively.
The following table documents changes to the amount of accretable yield for the first
three
months of
2017
and
2016
.
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
2017
|
|
2016
|
Balance at January 1
|
$
|
335,074
|
|
|
$
|
343,856
|
|
Additions from acquisitions
|
16,653
|
|
|
6,176
|
|
Accretion
|
(19,351
|
)
|
|
(21,398
|
)
|
Reclassifications from nonaccretable difference
|
11,277
|
|
|
9,905
|
|
Changes in expected cash flows that do not affect nonaccretable difference
|
(2,179
|
)
|
|
4,418
|
|
Balance at March 31
|
$
|
341,474
|
|
|
$
|
342,957
|
|
For PCI loans, improved credit loss expectations generally result in the reclassification of nonaccretable difference to accretable yield. Changes in expected cash flows not related to credit improvements or deterioration do not affect the nonaccretable difference.
NOTE E - ALLOWANCE FOR LOAN AND LEASE LOSSES (ALLL)
The following tables present the activity in the ALLL for non-PCI loan and lease losses by loan class for the
three
months ended
March 31, 2017
and
March 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2017
|
(Dollars in thousands)
|
Construction
and land
development
- commercial
|
|
Commercial
mortgage
|
|
Other commercial real estate
|
|
Commercial
and industrial
|
|
Lease
financing
|
|
Other
|
|
Residential
mortgage
|
|
Revolving
mortgage
|
|
Construction
and land
development
- non-
commercial
|
|
Consumer
|
|
Total
|
Non-PCI Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan and lease losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1
|
$
|
28,877
|
|
|
$
|
48,278
|
|
|
$
|
3,269
|
|
|
$
|
50,225
|
|
|
$
|
5,907
|
|
|
$
|
3,127
|
|
|
$
|
23,094
|
|
|
$
|
12,366
|
|
|
$
|
1,596
|
|
|
$
|
28,287
|
|
|
$
|
205,026
|
|
Provision
|
2,536
|
|
|
6
|
|
|
304
|
|
|
3,592
|
|
|
575
|
|
|
517
|
|
|
1,061
|
|
|
840
|
|
|
(83
|
)
|
|
1,728
|
|
|
11,076
|
|
Charge-offs
|
(77
|
)
|
|
(37
|
)
|
|
(5
|
)
|
|
(3,253
|
)
|
|
(173
|
)
|
|
(123
|
)
|
|
(250
|
)
|
|
(825
|
)
|
|
—
|
|
|
(3,966
|
)
|
|
(8,709
|
)
|
Recoveries
|
55
|
|
|
364
|
|
|
4
|
|
|
265
|
|
|
6
|
|
|
13
|
|
|
287
|
|
|
552
|
|
|
—
|
|
|
1,080
|
|
|
2,626
|
|
Balance at March 31
|
$
|
31,391
|
|
|
$
|
48,611
|
|
|
$
|
3,572
|
|
|
$
|
50,829
|
|
|
$
|
6,315
|
|
|
$
|
3,534
|
|
|
$
|
24,192
|
|
|
$
|
12,933
|
|
|
$
|
1,513
|
|
|
$
|
27,129
|
|
|
$
|
210,019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2016
|
(Dollars in thousands)
|
Construction
and land
development
- commercial
|
|
Commercial
mortgage
|
|
Other commercial real estate
|
|
Commercial
and industrial
|
|
Lease
financing
|
|
Other
|
|
Residential
mortgage
|
|
Revolving
mortgage
|
|
Construction
and land
development
- non-
commercial
|
|
Consumer
|
|
Total
|
Balance at January 1
|
$
|
16,288
|
|
|
$
|
69,896
|
|
|
$
|
2,168
|
|
|
$
|
43,116
|
|
|
$
|
5,524
|
|
|
$
|
1,855
|
|
|
$
|
14,105
|
|
|
$
|
15,971
|
|
|
$
|
1,485
|
|
|
$
|
19,496
|
|
|
$
|
189,904
|
|
Provision
|
943
|
|
|
394
|
|
|
(104
|
)
|
|
2,201
|
|
|
(282
|
)
|
|
(328
|
)
|
|
776
|
|
|
1,158
|
|
|
87
|
|
|
1,995
|
|
|
6,840
|
|
Charge-offs
|
(426
|
)
|
|
(90
|
)
|
|
—
|
|
|
(1,317
|
)
|
|
—
|
|
|
(71
|
)
|
|
(174
|
)
|
|
(1,036
|
)
|
|
—
|
|
|
(3,108
|
)
|
|
(6,222
|
)
|
Recoveries
|
80
|
|
|
256
|
|
|
143
|
|
|
479
|
|
|
180
|
|
|
321
|
|
|
20
|
|
|
32
|
|
|
3
|
|
|
990
|
|
|
2,504
|
|
Balance at March 31
|
$
|
16,885
|
|
|
$
|
70,456
|
|
|
$
|
2,207
|
|
|
$
|
44,479
|
|
|
$
|
5,422
|
|
|
$
|
1,777
|
|
|
$
|
14,727
|
|
|
$
|
16,125
|
|
|
$
|
1,575
|
|
|
$
|
19,373
|
|
|
$
|
193,026
|
|
The following tables present the allowance for non-PCI loan losses and the recorded investment in loans, by loan class, based on impairment method as of
March 31, 2017
and
December 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
(Dollars in thousands)
|
Construction
and land
development
- commercial
|
|
Commercial
mortgage
|
|
Other
commercial
real estate
|
|
Commercial and industrial
|
|
Lease
financing
|
|
Other
|
|
Residential
mortgage
|
|
Revolving
mortgage
|
|
Construction
and land
development
- non-commercial
|
|
Consumer
|
|
Total
|
Allowance for loan and lease losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ALLL for loans and leases individually evaluated for impairment
|
$
|
151
|
|
|
$
|
3,122
|
|
|
$
|
132
|
|
|
$
|
1,043
|
|
|
$
|
213
|
|
|
$
|
21
|
|
|
$
|
3,189
|
|
|
$
|
287
|
|
|
$
|
103
|
|
|
$
|
591
|
|
|
$
|
8,852
|
|
ALLL for loans and leases collectively evaluated for impairment
|
31,240
|
|
|
45,489
|
|
|
3,440
|
|
|
49,786
|
|
|
6,102
|
|
|
3,513
|
|
|
21,003
|
|
|
12,646
|
|
|
1,410
|
|
|
26,538
|
|
|
201,167
|
|
Total allowance for loan and lease losses
|
$
|
31,391
|
|
|
$
|
48,611
|
|
|
$
|
3,572
|
|
|
$
|
50,829
|
|
|
$
|
6,315
|
|
|
$
|
3,534
|
|
|
$
|
24,192
|
|
|
$
|
12,933
|
|
|
$
|
1,513
|
|
|
$
|
27,129
|
|
|
$
|
210,019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and leases:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and leases individually evaluated for impairment
|
$
|
1,058
|
|
|
$
|
74,788
|
|
|
$
|
1,497
|
|
|
$
|
10,864
|
|
|
$
|
2,054
|
|
|
$
|
259
|
|
|
$
|
34,484
|
|
|
$
|
8,272
|
|
|
$
|
2,577
|
|
|
$
|
1,858
|
|
|
$
|
137,711
|
|
Loans and leases collectively evaluated for impairment
|
682,357
|
|
|
9,098,824
|
|
|
363,365
|
|
|
2,467,047
|
|
|
838,147
|
|
|
321,093
|
|
|
2,910,877
|
|
|
2,595,884
|
|
|
215,526
|
|
|
1,426,802
|
|
|
20,919,922
|
|
Total loan and leases
|
$
|
683,415
|
|
|
$
|
9,173,612
|
|
|
$
|
364,862
|
|
|
$
|
2,477,911
|
|
|
$
|
840,201
|
|
|
$
|
321,352
|
|
|
$
|
2,945,361
|
|
|
$
|
2,604,156
|
|
|
$
|
218,103
|
|
|
$
|
1,428,660
|
|
|
$
|
21,057,633
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
(Dollars in thousands)
|
Construction
and land
development
- commercial
|
|
Commercial
mortgage
|
|
Other
commercial
real estate
|
|
Commercial and industrial
|
|
Lease
financing
|
|
Other
|
|
Residential
mortgage
|
|
Revolving
mortgage
|
|
Construction
and land
development
- non-commercial
|
|
Consumer
|
|
Total
|
Allowance for loan and lease losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ALLL for loans and leases individually evaluated for impairment
|
$
|
151
|
|
|
$
|
3,488
|
|
|
$
|
152
|
|
|
$
|
1,732
|
|
|
$
|
75
|
|
|
$
|
23
|
|
|
$
|
2,447
|
|
|
$
|
366
|
|
|
$
|
109
|
|
|
$
|
667
|
|
|
$
|
9,210
|
|
ALLL for loans and leases collectively evaluated for impairment
|
28,726
|
|
|
44,790
|
|
|
3,117
|
|
|
48,493
|
|
|
5,832
|
|
|
3,104
|
|
|
20,647
|
|
|
12,000
|
|
|
1,487
|
|
|
27,620
|
|
|
195,816
|
|
Total allowance for loan and lease losses
|
$
|
28,877
|
|
|
$
|
48,278
|
|
|
$
|
3,269
|
|
|
$
|
50,225
|
|
|
$
|
5,907
|
|
|
$
|
3,127
|
|
|
$
|
23,094
|
|
|
$
|
12,366
|
|
|
$
|
1,596
|
|
|
$
|
28,287
|
|
|
$
|
205,026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and leases:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and leases individually evaluated for impairment
|
$
|
1,045
|
|
|
$
|
76,361
|
|
|
$
|
1,563
|
|
|
$
|
12,600
|
|
|
$
|
1,074
|
|
|
$
|
142
|
|
|
$
|
31,476
|
|
|
$
|
7,613
|
|
|
$
|
2,613
|
|
|
$
|
1,912
|
|
|
$
|
136,399
|
|
Loans and leases collectively evaluated for impairment
|
648,112
|
|
|
8,949,859
|
|
|
349,728
|
|
|
2,554,901
|
|
|
825,196
|
|
|
340,122
|
|
|
2,857,648
|
|
|
2,593,731
|
|
|
228,787
|
|
|
1,444,226
|
|
|
20,792,310
|
|
Total loan and leases
|
$
|
649,157
|
|
|
$
|
9,026,220
|
|
|
$
|
351,291
|
|
|
$
|
2,567,501
|
|
|
$
|
826,270
|
|
|
$
|
340,264
|
|
|
$
|
2,889,124
|
|
|
$
|
2,601,344
|
|
|
$
|
231,400
|
|
|
$
|
1,446,138
|
|
|
$
|
20,928,709
|
|
The following tables show the activity in the allowance for PCI loan and lease losses by loan class for the
three
months ended
March 31, 2017
and
March 31, 2016
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2017
|
(Dollars in thousands)
|
Construction
and land
development -
commercial
|
|
Commercial
mortgage
|
|
Other
commercial
real estate
|
|
Commercial
and
industrial
|
|
Residential
mortgage
|
|
Revolving
mortgage
|
|
Consumer
and other
|
|
Total
|
PCI Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan and lease losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1
|
$
|
483
|
|
|
$
|
6,423
|
|
|
$
|
502
|
|
|
$
|
504
|
|
|
$
|
4,818
|
|
|
$
|
956
|
|
|
$
|
83
|
|
|
$
|
13,769
|
|
Provision
|
(186
|
)
|
|
(1,230
|
)
|
|
(158
|
)
|
|
(142
|
)
|
|
(545
|
)
|
|
(550
|
)
|
|
(34
|
)
|
|
(2,845
|
)
|
Charge-offs
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Recoveries
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Balance at March 31
|
$
|
297
|
|
|
$
|
5,193
|
|
|
$
|
344
|
|
|
$
|
362
|
|
|
$
|
4,273
|
|
|
$
|
406
|
|
|
$
|
49
|
|
|
$
|
10,924
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2016
|
(Dollars in thousands)
|
Construction
and land
development -
commercial
|
|
Commercial
mortgage
|
|
Other
commercial
real estate
|
|
Commercial
and
industrial
|
|
Residential
mortgage
|
|
Revolving
mortgage
|
|
Consumer
and other
|
|
Total
|
Balance at January 1
|
$
|
1,082
|
|
|
$
|
7,838
|
|
|
$
|
773
|
|
|
$
|
445
|
|
|
$
|
5,398
|
|
|
$
|
523
|
|
|
$
|
253
|
|
|
$
|
16,312
|
|
Provision
|
(349
|
)
|
|
(980
|
)
|
|
2
|
|
|
(220
|
)
|
|
(347
|
)
|
|
(108
|
)
|
|
5
|
|
|
(1,997
|
)
|
Charge-offs
|
—
|
|
|
(108
|
)
|
|
(5
|
)
|
|
—
|
|
|
(371
|
)
|
|
—
|
|
|
(74
|
)
|
|
(558
|
)
|
Recoveries
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Balance at March 31
|
$
|
733
|
|
|
$
|
6,750
|
|
|
$
|
770
|
|
|
$
|
225
|
|
|
$
|
4,680
|
|
|
$
|
415
|
|
|
$
|
184
|
|
|
$
|
13,757
|
|
As of
March 31, 2017
, and
December 31, 2016
,
$275.8 million
and
$359.7 million
, respectively, in PCI loans experienced an adverse change in expected cash flows since the date of acquisition. The corresponding valuation reserve was
$10.9 million
and
$13.8 million
, respectively.
The following tables show the ending balances of PCI loans and leases and related allowance by class of loans as of
March 31, 2017
and
December 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
(Dollars in thousands)
|
Construction
and land
development -
commercial
|
|
Commercial
mortgage
|
|
Other
commercial
real estate
|
|
Commercial
and
industrial
|
|
Residential
mortgage
|
|
Revolving
mortgage
|
|
Consumer
and other
|
|
Total
|
ALLL for loans and leases acquired with deteriorated credit quality
|
$
|
297
|
|
|
$
|
5,193
|
|
|
$
|
344
|
|
|
$
|
362
|
|
|
$
|
4,273
|
|
|
$
|
406
|
|
|
$
|
49
|
|
|
$
|
10,924
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and leases acquired with deteriorated credit quality
|
26,542
|
|
|
455,551
|
|
|
18,723
|
|
|
27,794
|
|
|
275,904
|
|
|
40,345
|
|
|
3,957
|
|
|
848,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
(Dollars in thousands)
|
Construction
and land
development -
commercial
|
|
Commercial
mortgage
|
|
Other
commercial
real estate
|
|
Commercial
and
industrial
|
|
Residential
mortgage
|
|
Revolving
mortgage
|
|
Consumer
and other
|
|
Total
|
ALLL for loans and leases acquired with deteriorated credit quality
|
$
|
483
|
|
|
$
|
6,423
|
|
|
$
|
502
|
|
|
$
|
504
|
|
|
$
|
4,818
|
|
|
$
|
956
|
|
|
$
|
83
|
|
|
$
|
13,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and leases acquired with deteriorated credit quality
|
20,766
|
|
|
453,013
|
|
|
12,645
|
|
|
11,844
|
|
|
268,777
|
|
|
38,650
|
|
|
3,474
|
|
|
809,169
|
|
The following tables provide information on non-PCI impaired loans and leases, exclusive of loans and leases evaluated collectively as a homogeneous group, as of
March 31, 2017
and
December 31, 2016
including interest income recognized in the period during which the loans and leases were considered impaired.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
(Dollars in thousands)
|
With a
recorded
allowance
|
|
With no
recorded
allowance
|
|
Total
|
|
Unpaid
principal
balance
|
|
Related
allowance
recorded
|
Non-PCI impaired loans and leases:
|
|
|
|
|
|
|
|
|
|
Construction and land development - commercial
|
$
|
750
|
|
|
$
|
308
|
|
|
$
|
1,058
|
|
|
$
|
1,191
|
|
|
$
|
151
|
|
Commercial mortgage
|
38,730
|
|
|
36,058
|
|
|
74,788
|
|
|
81,232
|
|
|
3,122
|
|
Other commercial real estate
|
1,052
|
|
|
445
|
|
|
1,497
|
|
|
1,810
|
|
|
132
|
|
Commercial and industrial
|
8,053
|
|
|
2,811
|
|
|
10,864
|
|
|
13,244
|
|
|
1,043
|
|
Lease financing
|
1,808
|
|
|
246
|
|
|
2,054
|
|
|
2,054
|
|
|
213
|
|
Other
|
116
|
|
|
143
|
|
|
259
|
|
|
274
|
|
|
21
|
|
Residential mortgage
|
21,606
|
|
|
12,878
|
|
|
34,484
|
|
|
35,863
|
|
|
3,189
|
|
Revolving mortgage
|
1,627
|
|
|
6,645
|
|
|
8,272
|
|
|
9,535
|
|
|
287
|
|
Construction and land development - noncommercial
|
862
|
|
|
1,715
|
|
|
2,577
|
|
|
3,044
|
|
|
103
|
|
Consumer
|
1,425
|
|
|
433
|
|
|
1,858
|
|
|
2,056
|
|
|
591
|
|
Total non-PCI impaired loans and leases
|
$
|
76,029
|
|
|
$
|
61,682
|
|
|
$
|
137,711
|
|
|
$
|
150,303
|
|
|
$
|
8,852
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
(Dollars in thousands)
|
With a
recorded
allowance
|
|
With no
recorded
allowance
|
|
Total
|
|
Unpaid
principal
balance
|
|
Related
allowance
recorded
|
Non-PCI impaired loans and leases:
|
|
|
|
|
|
|
|
|
|
Construction and land development - commercial
|
$
|
1,002
|
|
|
$
|
43
|
|
|
$
|
1,045
|
|
|
$
|
1,172
|
|
|
$
|
151
|
|
Commercial mortgage
|
42,875
|
|
|
33,486
|
|
|
76,361
|
|
|
82,658
|
|
|
3,488
|
|
Other commercial real estate
|
1,279
|
|
|
284
|
|
|
1,563
|
|
|
1,880
|
|
|
152
|
|
Commercial and industrial
|
8,920
|
|
|
3,680
|
|
|
12,600
|
|
|
16,637
|
|
|
1,732
|
|
Lease financing
|
1,002
|
|
|
72
|
|
|
1,074
|
|
|
1,074
|
|
|
75
|
|
Other
|
142
|
|
|
—
|
|
|
142
|
|
|
233
|
|
|
23
|
|
Residential mortgage
|
20,269
|
|
|
11,207
|
|
|
31,476
|
|
|
32,588
|
|
|
2,447
|
|
Revolving mortgage
|
1,825
|
|
|
5,788
|
|
|
7,613
|
|
|
8,831
|
|
|
366
|
|
Construction and land development - noncommercial
|
645
|
|
|
1,968
|
|
|
2,613
|
|
|
3,030
|
|
|
109
|
|
Consumer
|
1,532
|
|
|
380
|
|
|
1,912
|
|
|
2,086
|
|
|
667
|
|
Total non-PCI impaired loans and leases
|
$
|
79,491
|
|
|
$
|
56,908
|
|
|
$
|
136,399
|
|
|
$
|
150,189
|
|
|
$
|
9,210
|
|
The following tables show the average non-PCI impaired loan balance and the interest income recognized by loan class for the
three
months ended
March 31, 2017
and
March 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2017
|
|
Three months ended March 31, 2016
|
(Dollars in thousands)
|
Average
balance
|
|
Interest income recognized
|
|
Average
balance
|
|
Interest income recognized
|
Non-PCI impaired loans and leases:
|
|
|
|
|
|
|
|
Construction and land development - commercial
|
$
|
1,055
|
|
|
$
|
12
|
|
|
$
|
3,164
|
|
|
$
|
41
|
|
Commercial mortgage
|
75,310
|
|
|
642
|
|
|
92,945
|
|
|
766
|
|
Other commercial real estate
|
1,584
|
|
|
8
|
|
|
423
|
|
|
5
|
|
Commercial and industrial
|
11,529
|
|
|
104
|
|
|
15,551
|
|
|
151
|
|
Lease financing
|
1,568
|
|
|
14
|
|
|
1,657
|
|
|
20
|
|
Other
|
196
|
|
|
2
|
|
|
1,072
|
|
|
14
|
|
Residential mortgage
|
32,963
|
|
|
253
|
|
|
23,500
|
|
|
172
|
|
Revolving mortgage
|
7,969
|
|
|
57
|
|
|
6,309
|
|
|
32
|
|
Construction and land development - noncommercial
|
2,605
|
|
|
33
|
|
|
556
|
|
|
6
|
|
Consumer
|
1,900
|
|
|
23
|
|
|
1,265
|
|
|
18
|
|
Total non-PCI impaired loans and leases
|
$
|
136,679
|
|
|
$
|
1,148
|
|
|
$
|
146,442
|
|
|
$
|
1,225
|
|
Troubled Debt Restructurings
BancShares accounts for certain loan modifications or restructurings as troubled debt restructurings (TDRs). In general, the modification or restructuring of a loan is considered a TDR if, for economic reasons or legal reasons related to a borrower's financial difficulties, a concession is granted to the borrower that creditors would not otherwise grant. Concessions may relate to the contractual interest rate, maturity date, payment structure or other actions. In accordance with GAAP, acquired loans accounted for under ASC 310-30,
Loans and Debt Securities Acquired with Deteriorated Credit Quality,
are not initially considered to be TDRs, but can be classified as such if a modification is made subsequent to acquisition. Subsequent modifications of a PCI loan accounted for in a pool that would otherwise meet the definition of a TDR is not reported, or accounted for, as a TDR since pooled PCI loans are excluded from the scope of TDR accounting.
The following table provides a summary of total TDRs by accrual status.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
December 31, 2016
|
(Dollars in thousands)
|
Accruing
|
|
Nonaccruing
|
|
Total
|
|
Accruing
|
|
Nonaccruing
|
|
Total
|
Commercial loans
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land development -
commercial
|
$
|
3,228
|
|
|
$
|
329
|
|
|
$
|
3,557
|
|
|
$
|
3,292
|
|
|
$
|
308
|
|
|
$
|
3,600
|
|
Commercial mortgage
|
64,447
|
|
|
15,282
|
|
|
79,729
|
|
|
70,263
|
|
|
14,435
|
|
|
84,698
|
|
Other commercial real estate
|
863
|
|
|
608
|
|
|
1,471
|
|
|
1,635
|
|
|
80
|
|
|
1,715
|
|
Commercial and industrial
|
9,124
|
|
|
652
|
|
|
9,776
|
|
|
9,193
|
|
|
1,436
|
|
|
10,629
|
|
Lease financing
|
1,135
|
|
|
917
|
|
|
2,052
|
|
|
882
|
|
|
192
|
|
|
1,074
|
|
Other
|
184
|
|
|
74
|
|
|
258
|
|
|
64
|
|
|
78
|
|
|
142
|
|
Total commercial TDRs
|
78,981
|
|
|
17,862
|
|
|
96,843
|
|
|
85,329
|
|
|
16,529
|
|
|
101,858
|
|
Noncommercial
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
35,292
|
|
|
6,374
|
|
|
41,666
|
|
|
34,012
|
|
|
5,117
|
|
|
39,129
|
|
Revolving mortgage
|
6,712
|
|
|
1,725
|
|
|
8,437
|
|
|
6,346
|
|
|
1,431
|
|
|
7,777
|
|
Construction and land development -
noncommercial
|
240
|
|
|
—
|
|
|
240
|
|
|
240
|
|
|
—
|
|
|
240
|
|
Consumer and other
|
1,531
|
|
|
326
|
|
|
1,857
|
|
|
1,603
|
|
|
309
|
|
|
1,912
|
|
Total noncommercial TDRs
|
43,775
|
|
|
8,425
|
|
|
52,200
|
|
|
42,201
|
|
|
6,857
|
|
|
49,058
|
|
Total TDRs
|
$
|
122,756
|
|
|
$
|
26,287
|
|
|
$
|
149,043
|
|
|
$
|
127,530
|
|
|
$
|
23,386
|
|
|
$
|
150,916
|
|
The majority of TDRs are included in the special mention, substandard or doubtful grading categories. When a restructured loan subsequently defaults, it is evaluated and downgraded if appropriate. The more severely graded the loan, the lower the estimated expected cash flows and the greater the allowance recorded. TDRs are evaluated individually for impairment through a review of collateral values or analysis of cash flows.
The following table shows the accrual status of non-PCI and PCI TDRs.
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
March 31, 2017
|
|
December 31, 2016
|
Accruing TDRs:
|
|
|
|
PCI
|
$
|
20,296
|
|
|
$
|
26,068
|
|
Non-PCI
|
102,460
|
|
|
101,462
|
|
Total accruing TDRs
|
122,756
|
|
|
127,530
|
|
Nonaccruing TDRs:
|
|
|
|
PCI
|
298
|
|
|
301
|
|
Non-PCI
|
25,989
|
|
|
23,085
|
|
Total nonaccruing TDRs
|
26,287
|
|
|
23,386
|
|
All TDRs:
|
|
|
|
PCI
|
20,594
|
|
|
26,369
|
|
Non-PCI
|
128,449
|
|
|
124,547
|
|
Total TDRs
|
$
|
149,043
|
|
|
$
|
150,916
|
|
The following table provides the types of non-PCI TDRs made during the
three
months ended
March 31, 2017
and
March 31, 2016
, as well as a summary of loans that were modified as a TDR during the twelve month periods ended
March 31, 2017
and
March 31, 2016
that subsequently defaulted during the
three
months ended
March 31, 2017
and
March 31, 2016
. BancShares defines payment default as movement of the TDR to nonaccrual status, which is generally 90 days past due for TDRs, foreclosure or charge-off, whichever occurs first.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2017
|
|
Three months ended March 31, 2016
|
|
All restructurings
|
|
Restructurings with payment default
|
|
All restructurings
|
|
Restructurings with payment default
|
(Dollars in thousands)
|
Number of Loans
|
Recorded investment at period end
|
|
Number of Loans
|
Recorded investment at period end
|
|
Number of Loans
|
Recorded investment at period end
|
|
Number of Loans
|
Recorded investment at period end
|
Non-PCI loans and leases
|
|
|
|
|
|
|
|
|
|
|
|
Interest only period provided
|
|
|
|
|
|
|
|
|
|
|
|
Commercial mortgage
|
—
|
|
$
|
—
|
|
|
—
|
|
$
|
—
|
|
|
1
|
|
$
|
252
|
|
|
1
|
|
$
|
252
|
|
Total interest only
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
1
|
|
252
|
|
|
1
|
|
252
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan term extension
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land development - commercial
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
1
|
|
404
|
|
|
—
|
|
—
|
|
Commercial mortgage
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
1
|
|
—
|
|
|
—
|
|
—
|
|
Other commercial real estate
|
—
|
|
—
|
|
|
1
|
|
530
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
Commercial and industrial
|
2
|
|
94
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
Residential mortgage
|
1
|
|
32
|
|
|
1
|
|
47
|
|
|
1
|
|
34
|
|
|
—
|
|
—
|
|
Consumer
|
2
|
|
14
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
Total loan term extension
|
5
|
|
140
|
|
|
2
|
|
577
|
|
|
3
|
|
438
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Below market interest rate
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land development - commercial
|
1
|
|
60
|
|
|
—
|
|
—
|
|
|
1
|
|
18
|
|
|
1
|
|
18
|
|
Commercial mortgage
|
10
|
|
2,512
|
|
|
1
|
|
92
|
|
|
10
|
|
1,422
|
|
|
4
|
|
511
|
|
Other commercial real estate
|
1
|
|
4
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
Commercial and industrial
|
3
|
|
108
|
|
|
1
|
|
—
|
|
|
3
|
|
12
|
|
|
—
|
|
—
|
|
Lease financing
|
3
|
|
839
|
|
|
2
|
|
769
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
Residential mortgage
|
30
|
|
1,543
|
|
|
15
|
|
824
|
|
|
46
|
|
3,288
|
|
|
13
|
|
841
|
|
Construction and land development - noncommercial
|
2
|
|
412
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
Consumer
|
2
|
|
14
|
|
|
—
|
|
—
|
|
|
2
|
|
73
|
|
|
—
|
|
—
|
|
Other
|
1
|
|
143
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
Total below market interest rate
|
53
|
|
5,635
|
|
|
19
|
|
1,685
|
|
|
62
|
|
4,813
|
|
|
18
|
|
1,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discharged from bankruptcy
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land development - commercial
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
1
|
|
16
|
|
Commercial mortgage
|
—
|
|
—
|
|
|
1
|
|
190
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
Lease financing
|
16
|
|
227
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
Residential mortgage
|
3
|
|
140
|
|
|
1
|
|
978
|
|
|
1
|
|
144
|
|
|
—
|
|
—
|
|
Revolving mortgage
|
4
|
|
99
|
|
|
9
|
|
649
|
|
|
8
|
|
347
|
|
|
8
|
|
277
|
|
Consumer
|
18
|
|
193
|
|
|
10
|
|
128
|
|
|
7
|
|
68
|
|
|
4
|
|
59
|
|
Total discharged from bankruptcy
|
41
|
|
659
|
|
|
21
|
|
1,945
|
|
|
16
|
|
559
|
|
|
13
|
|
352
|
|
Total non-PCI restructurings
|
99
|
|
$
|
6,434
|
|
|
42
|
|
$
|
4,207
|
|
|
82
|
|
$
|
6,062
|
|
|
32
|
|
$
|
1,974
|
|
The following table provides the types of PCI TDRs made during the
three
months ended
March 31, 2017
and
March 31, 2016
, as well as a summary of loans that were modified as a TDR during the twelve month periods ended
March 31, 2017
and
March 31, 2016
that subsequently defaulted during the
three
months ended
March 31, 2017
and
March 31, 2016
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2017
|
|
Three months ended March 31, 2016
|
|
All restructurings
|
|
Restructurings with payment default
|
|
All restructurings
|
|
Restructurings with payment default
|
(Dollars in thousands)
|
Number of loans
|
Recorded investment at period end
|
|
Number of loans
|
Recorded investment at period end
|
|
Number of loans
|
Recorded investment at period end
|
|
Number of loans
|
Recorded investment at period end
|
PCI loans
|
|
|
|
|
|
|
|
|
|
|
|
Below market interest rate
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land development - commercial
|
—
|
|
$
|
—
|
|
|
—
|
|
$
|
—
|
|
|
1
|
|
$
|
14
|
|
|
—
|
|
$
|
—
|
|
Commercial mortgage
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
3
|
|
2,016
|
|
|
—
|
|
—
|
|
Residential mortgage
|
2
|
|
181
|
|
|
1
|
|
73
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
Total below market interest rate
|
2
|
|
181
|
|
|
1
|
|
73
|
|
|
4
|
|
2,030
|
|
|
—
|
|
—
|
|
Total PCI restructurings
|
2
|
|
$
|
181
|
|
|
1
|
|
$
|
73
|
|
|
4
|
|
$
|
2,030
|
|
|
—
|
|
$
|
—
|
|
For the
three
months ended
March 31, 2017
and
March 31, 2016
, the pre-modification and post-modification outstanding recorded investments of loans modified as TDRs were not materially different.
NOTE F - OTHER REAL ESTATE OWNED (OREO)
The following table explains changes in other real estate owned during the
three months ended March 31, 2017
and
March 31, 2016
.
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
Covered
|
|
Noncovered
|
|
Total
|
Balance at December 31, 2015
|
$
|
6,817
|
|
|
$
|
58,742
|
|
|
$
|
65,559
|
|
Additions
|
3,936
|
|
|
6,044
|
|
|
9,980
|
|
Additions acquired in the North Milwaukee State Bank acquisition
|
—
|
|
|
330
|
|
|
330
|
|
Sales
|
(523
|
)
|
|
(7,547
|
)
|
|
(8,070
|
)
|
Write-downs
|
(496
|
)
|
|
(2,235
|
)
|
|
(2,731
|
)
|
Balance at March 31, 2016
|
$
|
9,734
|
|
|
$
|
55,334
|
|
|
$
|
65,068
|
|
|
|
|
|
|
|
Balance at December 31, 2016
|
$
|
472
|
|
|
$
|
60,759
|
|
|
$
|
61,231
|
|
Additions
|
—
|
|
|
5,822
|
|
|
5,822
|
|
Sales
|
(71
|
)
|
|
(9,048
|
)
|
|
(9,119
|
)
|
Write-downs
|
(52
|
)
|
|
(1,391
|
)
|
|
(1,443
|
)
|
Balance at March 31, 2017
|
$
|
349
|
|
|
$
|
56,142
|
|
|
$
|
56,491
|
|
At
March 31, 2017
and
December 31, 2016
, BancShares had
$15.2 million
and
$15.0 million
, respectively, of foreclosed residential real estate property in OREO. The recorded investment in consumer mortgage loans collateralized by residential real estate property in the process of foreclosure was
$21.8 million
at both
March 31, 2017
and
December 31, 2016
.
NOTE G - FDIC SHARED-LOSS RECEIVABLE AND PAYABLE
BancShares completed six FDIC-assisted transactions with shared-loss agreements during the period beginning in 2009 through 2011. Prior to its merger into BancShares, First Citizens Bancorporation, Inc. (Bancorporation) completed three FDIC-assisted transactions with shared-loss agreements: Georgian Bank (acquired in 2009); Williamsburg First National Bank (acquired in 2010); and Atlantic Bank & Trust (acquired in 2011).
During the first quarter of 2017, FCB entered into an agreement with the FDIC to terminate the shared-loss agreement for Venture
Bank (VB). Under the terms of the agreement, FCB made a payment of
$285 thousand
to the FDIC as consideration for early termination of the shared-loss agreement. The early termination resulted in an adjustment of
$240 thousand
to the FDIC shared-loss receivable and a
$45 thousand
loss on the termination of the shared-loss agreement. In addition to the shared-loss agreement termination for VB, FCB terminated five shared-loss agreements in 2016, including Temecula Valley Bank, Sun American Bank, Williamsburg First National Bank, Atlantic Bank & Trust and Colorado Capital Bank.
As of
March 31, 2017
, shared-loss protection has expired or has been terminated for all non-single family residential loans. Shared-loss protection remains only for
$75.9 million
of single family residential loans acquired from United Western Bank and Georgian Bank.
The following table provides changes in the receivable from the FDIC for the
three
months ended
March 31, 2017
and
March 31, 2016
.
|
|
|
|
|
|
|
|
|
|
Three months ended March 31
|
(Dollars in thousands)
|
2017
|
|
2016
|
Beginning balance
|
$
|
4,172
|
|
|
$
|
4,054
|
|
Amortization
|
(600
|
)
|
|
(2,375
|
)
|
Net cash payments to FDIC
|
2,760
|
|
|
9,871
|
|
Post-acquisition adjustments
|
(2,591
|
)
|
|
(4,076
|
)
|
Termination of FDIC shared-loss agreement
|
240
|
|
|
—
|
|
Ending balance
|
$
|
3,981
|
|
|
$
|
7,474
|
|
NOTE H - MORTGAGE SERVICING RIGHTS
Our portfolio of residential mortgage loans serviced for third parties was
$2.55 billion
and
$2.49 billion
as of
March 31, 2017
and
December 31, 2016
, respectively. These loans were originated by BancShares and sold to third parties on a non-recourse basis
with servicing rights retained. These retained servicing rights are recorded as a servicing asset and reported in other intangible assets on the Consolidated Balance Sheets. The mortgage servicing rights are initially recorded at fair value and then carried at the lower of amortized cost or fair market value.
The activity of the servicing asset for the
three
months ended
March 31
,
2017
and
2016
is presented in the following table:
|
|
|
|
|
|
|
|
|
|
Three months ended March 31
|
(Dollars in thousands)
|
2017
|
|
2016
|
Beginning balance
|
$
|
20,415
|
|
|
$
|
19,351
|
|
Servicing rights originated
|
1,702
|
|
|
977
|
|
Amortization
|
(1,350
|
)
|
|
(1,268
|
)
|
Valuation allowance reversal (provision)
|
4
|
|
|
(1,874
|
)
|
Ending balance
|
$
|
20,771
|
|
|
$
|
17,186
|
|
The following table presents the activity in the servicing asset valuation allowance for the
three
months ended
March 31
,
2017
and
2016
:
|
|
|
|
|
|
|
|
|
|
Three months ended March 31
|
(Dollars in thousands)
|
2017
|
|
2016
|
Beginning balance
|
$
|
4
|
|
|
$
|
95
|
|
Valuation allowance (reversal) provision
|
(4
|
)
|
|
1,874
|
|
Ending balance
|
$
|
—
|
|
|
$
|
1,969
|
|
Contractually specified mortgage servicing fees, late fees, and ancillary fees earned for the
three
months ended
March 31, 2017
and
2016
were
$1.7 million
and
$1.4 million
, respectively, and reported in mortgage income in the Consolidated Statements of Income.
The amortization expense related to mortgage servicing rights, included as a reduction of mortgage income in the Consolidated Statements of Income, was
$1.4 million
and
$1.3 million
for the
three
months ended
March 31, 2017
and
2016
, respectively. Mortgage income included an impairment reversal of
$4 thousand
for the
three
months ended
March 31, 2017
and an impairment of
$1.9 million
for the
three
months ended
March 31, 2016
.
Valuation of mortgage servicing rights is performed using a pooling methodology. Similar loans are pooled together and evaluated on a discounted earnings basis to determine the present value of future earnings. Key economic assumptions used to value mortgage servicing rights as of
March 31, 2017
and
December 31, 2016
were as follows:
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
December 31, 2016
|
Discount rate - conventional fixed loans
|
9.39
|
%
|
|
9.45
|
%
|
Discount rate - all loans excluding conventional fixed loans
|
10.39
|
%
|
|
10.45
|
%
|
Weighted average constant prepayment rate
|
9.82
|
%
|
|
10.42
|
%
|
Weighted average cost to service a loan
|
$
|
63.84
|
|
|
$
|
62.75
|
|
NOTE I
- REPURCHASE AGREEMENTS
BancShares utilizes securities sold under agreements to repurchase to facilitate the needs of customers and secure short-term funding needs. Repurchase agreements are transactions whereby BancShares offers to sell to a counterparty an undivided interest in an eligible security at an agreed upon purchase price, and which obligates BancShares to repurchase the security on an agreed upon date at an agreed upon repurchase price plus interest at an agreed upon rate. Securities sold under agreements to repurchase are recorded at the amount of cash received in connection with the transaction and are generally reflected as short-term borrowings on the Consolidated Balance Sheets.
BancShares monitors collateral levels on a continuous basis and maintains records of each transaction specifically describing the applicable security and the counterparty’s fractional interest in that security, and segregates the security from general assets in accordance with regulations governing custodial holdings of securities. The primary risk with repurchase agreements is market risk associated with the investments securing the transactions, as additional collateral may be required based on fair value changes of the underlying investments. Securities pledged as collateral under repurchase agreements are maintained with safekeeping agents. The carrying value of available for sale investment securities pledged as collateral under repurchase agreements was
$769.8 million
and
$690.8 million
at
March 31, 2017
and
December 31, 2016
, respectively.
The remaining contractual maturity of the securities sold under agreements to repurchase by class of collateral pledged included in the Consolidated Balance Sheets as of
March 31, 2017
and
December 31, 2016
is presented in the following tables.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
Remaining Contractual Maturity of the Agreements
|
(Dollars in thousands)
|
Overnight and continuous
|
|
Up to 30 Days
|
|
30-90 Days
|
|
Greater than 90 Days
|
|
Total
|
Repurchase agreements
|
|
|
|
|
|
|
|
|
|
U.S. Treasury
|
$
|
677,603
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
30,000
|
|
|
$
|
707,603
|
|
Total borrowings
|
$
|
677,603
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
30,000
|
|
|
$
|
707,603
|
|
Gross amount of recognized liabilities for repurchase agreements
|
|
$
|
707,603
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Remaining Contractual Maturity of the Agreements
|
|
Overnight and continuous
|
|
Up to 30 Days
|
|
30-90 Days
|
|
Greater than 90 Days
|
|
Total
|
Repurchase agreements
|
|
|
|
|
|
|
|
|
|
U.S. Treasury
|
$
|
590,772
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
30,000
|
|
|
$
|
620,772
|
|
Total borrowings
|
$
|
590,772
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
30,000
|
|
|
$
|
620,772
|
|
Gross amount of recognized liabilities for repurchase agreements
|
|
$
|
620,772
|
|
NOTE J - ESTIMATED FAIR VALUES
Fair value estimates are intended to represent the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. Where there is no active market for a financial instrument, BancShares has made estimates using discounted cash flows or other valuation techniques. Inputs to these valuation methods are subjective in nature, involve uncertainties and require significant judgment and therefore cannot be determined with precision. Accordingly, the derived fair value estimates presented below are not necessarily indicative of the amounts BancShares could realize in a current market exchange.
ASC 820,
Fair Value Measurements and Disclosures
, indicates that assets and liabilities are recorded at fair value according to a fair value hierarchy comprised of three levels. The levels are based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. The level within the fair value hierarchy for an asset or liability is based on the highest level of input that is significant to the fair value measurement (with level 1 considered highest and level 3 considered lowest). A brief description of each level follows:
|
|
•
|
Level 1 values are based on quoted prices for identical instruments in active markets.
|
|
|
•
|
Level 2 values are based on 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 values are generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates that market participants would use in pricing the asset or liability. Valuation techniques include the use of discounted cash flow models and similar techniques.
|
Valuation adjustments, such as those pertaining to counterparty and BancShares' own credit quality and liquidity, may be necessary to ensure that assets and liabilities are recorded at fair value. Credit valuation adjustments are made when market pricing does not accurately reflect the counterparty's credit quality. As determined by BancShares management, liquidity valuation adjustments may be made to the fair value of certain assets to reflect the uncertainty in the pricing and trading of the instruments when recent market transactions for identical or similar instruments are not observed.
BancShares management reviews any changes to its valuation methodologies to ensure they are appropriate and justified, and refines valuation methodologies as more market-based data becomes available. Transfers between levels of the fair value hierarchy are recognized at the end of the reporting period.
The methodologies used to estimate the fair value of financial assets and financial liabilities are discussed below:
Investment securities available for sale
. U.S. Treasury, government agency, mortgage-backed securities, municipal securities, corporate bonds and trust preferred securities are generally measured at fair value using a third party pricing service or recent comparable market transactions in similar or identical securities and are classified as level 2 instruments. Equity securities are measured at fair value using observable closing prices and the valuation also considers the amount of market activity by examining the trade volume of each security. Equity securities are classified as Level 1 if they are traded on a heavily active market and as Level 2 if the observable closing price is from a less than active market.
Loans held for sale.
Certain residential real estate loans are originated to be sold to investors, which are carried at fair value as BancShares elected the fair value option on loans held for sale. The fair value is based on quoted market prices for similar types of loans. Accordingly, the inputs used to calculate fair value of residential real estate loans held for sale are classified as level 2 inputs.
Net loans and leases (PCI and Non-PCI).
Fair value is estimated based on discounted future cash flows using the current interest rates at which loans with similar terms would be made to borrowers of similar credit quality. An additional valuation adjustment is made for liquidity. The inputs used in the fair value measurements for loans and leases are considered level 3 inputs.
FHLB stock
. The carrying amount of FHLB stock is a reasonable estimate of fair value as these securities are not readily marketable and are evaluated for impairment based on the ultimate recoverability of the par value. BancShares considers positive and negative evidence, including the profitability and asset quality of the issuer, dividend payment history and recent redemption experience, when determining the ultimate recoverability of the par value. BancShares believes its investment in FHLB stock is ultimately recoverable at par. The inputs used in the fair value measurement for the FHLB stock are considered level 2 inputs.
Mortgage servicing rights.
Mortgage servicing rights are carried at the lower of amortized cost or market and are, therefore, carried at fair value only when fair value is less than the asset cost. The fair value of mortgage servicing rights is performed using a pooling methodology. Similar loans are pooled together and a model that relies on discount rates, estimates of prepayment rates and the weighted average cost to service the loans is used to determine the fair value. The inputs used in the fair value measurement for mortgage servicing rights are considered level 3 inputs.
Deposits.
For non-time deposits, carrying value is a reasonable estimate of fair value. The fair value of time deposits is estimated by discounting future cash flows using the interest rates currently offered for deposits of similar remaining maturities. The inputs used in the fair value measurement for deposits are considered level 2 inputs.
Long-term obligations.
For fixed rate trust preferred securities, the fair values are determined based on recent trades of the actual security if available. For other long-term obligations, fair values are estimated by discounting future cash flows using current interest rates for similar financial instruments. The inputs used in the fair value measurement for long-term obligations are considered level 2 inputs.
Payable to the FDIC for shared-loss agreements.
The fair value of the payable to the FDIC for shared-loss agreements is determined by the projected cash flows based on expected payments to the FDIC in accordance with the shared-loss agreements. Cash flows are discounted using current discount rates to reflect the timing of the estimated amounts due to the FDIC. The inputs used in the fair value measurement for the payable to the FDIC are considered level 3 inputs.
Off-balance-sheet commitments and contingencies.
Carrying amounts are reasonable estimates of the fair values for such financial instruments. Carrying amounts include unamortized fee income and, in some cases, reserves for any credit losses from those financial instruments. These amounts are not material to BancShares' financial position.
For all other financial assets and financial liabilities, the carrying value is a reasonable estimate of the fair value as of
March 31, 2017
and
December 31, 2016
. The carrying value and fair value for these assets and liabilities are equivalent because they are relatively short term in nature and there is no interest rate or credit risk that would cause the fair value to differ from the carrying value. Cash and due from banks is classified on the fair value hierarchy as level 1. Overnight investments, income earned not collected, short-term borrowings and accrued interest payable are considered level 2. Lastly, the receivable from the FDIC for shared-loss agreements is designated as level 3.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
March 31, 2017
|
|
December 31, 2016
|
Carrying value
|
|
Fair value
|
|
Carrying value
|
|
Fair value
|
Cash and due from banks
|
$
|
502,273
|
|
|
$
|
502,273
|
|
|
$
|
539,741
|
|
|
$
|
539,741
|
|
Overnight investments
|
2,736,514
|
|
|
2,736,514
|
|
|
1,872,594
|
|
|
1,872,594
|
|
Investment securities available for sale
|
7,119,861
|
|
|
7,119,861
|
|
|
7,006,580
|
|
|
7,006,580
|
|
Investment securities held to maturity
|
83
|
|
|
89
|
|
|
98
|
|
|
104
|
|
Loans held for sale
|
49,952
|
|
|
49,952
|
|
|
74,401
|
|
|
74,401
|
|
Net loans and leases
|
21,685,506
|
|
|
20,727,792
|
|
|
21,519,083
|
|
|
20,614,548
|
|
Receivable from the FDIC for shared-loss agreements
|
3,981
|
|
|
3,981
|
|
|
4,172
|
|
|
4,172
|
|
Income earned not collected
|
80,456
|
|
|
80,456
|
|
|
79,839
|
|
|
79,839
|
|
Federal Home Loan Bank stock
|
43,495
|
|
|
43,495
|
|
|
43,495
|
|
|
43,495
|
|
Mortgage servicing rights
|
20,771
|
|
|
25,690
|
|
|
20,415
|
|
|
24,446
|
|
Deposits
|
29,002,768
|
|
|
28,976,211
|
|
|
28,161,343
|
|
|
28,135,698
|
|
Short-term borrowings
|
795,587
|
|
|
795,587
|
|
|
603,487
|
|
|
603,487
|
|
Long-term obligations
|
727,500
|
|
|
713,402
|
|
|
832,942
|
|
|
832,201
|
|
Payable to the FDIC for shared-loss agreements
|
98,013
|
|
|
100,948
|
|
|
97,008
|
|
|
100,069
|
|
Accrued interest payable
|
3,947
|
|
|
3,947
|
|
|
3,797
|
|
|
3,797
|
|
Among BancShares' assets and liabilities, investment securities available for sale, loans held for sale and interest rates swaps accounted for as cash flow hedges are reported at their fair values on a recurring basis. For assets and liabilities carried at fair value on a recurring basis, the following table provides fair value information as of
March 31, 2017
and
December 31, 2016
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
|
|
Fair value measurements using:
|
(Dollars in thousands)
|
Fair value
|
|
Level 1 inputs
|
|
Level 2 inputs
|
|
Level 3 inputs
|
Assets measured at fair value
|
|
|
|
|
|
|
|
Investment securities available for sale
|
|
|
|
|
|
|
|
U.S. Treasury
|
$
|
1,618,168
|
|
|
$
|
—
|
|
|
$
|
1,618,168
|
|
|
$
|
—
|
|
Government agency
|
40,221
|
|
|
—
|
|
|
40,221
|
|
|
—
|
|
Mortgage-backed securities
|
5,306,107
|
|
|
—
|
|
|
5,306,107
|
|
|
—
|
|
Equity securities
|
94,265
|
|
|
30,345
|
|
|
63,920
|
|
|
—
|
|
Corporate bonds
|
49,565
|
|
|
—
|
|
|
49,565
|
|
|
—
|
|
Other
|
11,535
|
|
|
—
|
|
|
11,535
|
|
|
—
|
|
Total investment securities available for sale
|
$
|
7,119,861
|
|
|
$
|
30,345
|
|
|
$
|
7,089,516
|
|
|
$
|
—
|
|
Loans held for sale
|
$
|
49,952
|
|
|
$
|
—
|
|
|
$
|
49,952
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
Fair value measurements using:
|
|
Fair value
|
|
Level 1 inputs
|
|
Level 2 inputs
|
|
Level 3 inputs
|
Assets measured at fair value
|
|
|
|
|
|
|
|
Investment securities available for sale
|
|
|
|
|
|
|
|
U.S. Treasury
|
$
|
1,650,319
|
|
|
$
|
—
|
|
|
$
|
1,650,319
|
|
|
$
|
—
|
|
Government agency
|
40,398
|
|
|
—
|
|
|
40,398
|
|
|
—
|
|
Mortgage-backed securities
|
5,175,425
|
|
|
—
|
|
|
5,175,425
|
|
|
—
|
|
Equity securities
|
83,507
|
|
|
29,145
|
|
|
54,362
|
|
|
—
|
|
Corporate bonds
|
49,562
|
|
|
—
|
|
|
49,562
|
|
|
—
|
|
Other
|
7,369
|
|
|
—
|
|
|
7,369
|
|
|
—
|
|
Total investment securities available for sale
|
$
|
7,006,580
|
|
|
$
|
29,145
|
|
|
$
|
6,977,435
|
|
|
$
|
—
|
|
Loans held for sale
|
$
|
74,401
|
|
|
$
|
—
|
|
|
$
|
74,401
|
|
|
$
|
—
|
|
There were
no
transfers between levels during the
three months ended March 31, 2017
.
Fair Value Option
BancShares has elected the fair value option for residential real estate loans held for sale. This election reduces certain timing differences in the Consolidated Statement of Income and better aligns with the management of the portfolio from a business perspective.
The following table summarizes the difference between the aggregate fair value and the aggregate unpaid principal balance for residential real estate loans held for sale measured at fair value as of
March 31, 2017
and
December 31, 2016
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
(Dollars in thousands)
|
Fair Value
|
|
Aggregate Unpaid Principal Balance
|
|
Difference
|
Loans held for sale
|
$
|
49,952
|
|
|
$
|
48,283
|
|
|
$
|
1,669
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Fair Value
|
|
Aggregate Unpaid Principal Balance
|
|
Difference
|
Loans held for sale
|
$
|
74,401
|
|
|
$
|
75,893
|
|
|
$
|
(1,492
|
)
|
No loans held for sale were 90 or more days past due or on nonaccrual status as of
March 31, 2017
or
December 31, 2016
.
The changes in fair value for residential real estate loans held for sale for which the fair value option was elected are recorded as a component of mortgage income on the Consolidated Statements of Income and are included in the table below for the
three
months ended
March 31, 2017
and
2016
.
|
|
|
|
|
|
|
|
|
|
Three months ended March 31
|
(Dollars in thousands)
|
2017
|
|
2016
|
Gains from fair value changes on loans held for sale
|
$
|
3,161
|
|
|
$
|
763
|
|
Certain other assets are adjusted to their fair value on a nonrecurring basis, including impaired loans, OREO, and goodwill, which are periodically tested for impairment, and mortgage servicing rights, which are carried at the lower of amortized cost or market. Non-impaired loans held for investment, deposits, short-term borrowings and long-term obligations are not reported at fair value.
Impaired loans are deemed to be at fair value if an associated allowance or current period charge-off has been recorded. The value of impaired loans is determined by either collateral valuations or discounted present value of the expected cash flow calculations. Collateral values are determined using appraisals or other third-party value estimates of the subject property with discounts generally between 8 and 12 percent applied for estimated holding and selling costs and other external factors that may impact the marketability of the property. Expected cash flows are determined using expected payment information at the individual loan level, discounted using the effective interest rate. The effective interest rate generally ranges between 2 and 16 percent.
OREO is measured and reported at fair value using asset valuations. Asset values are determined using appraisals or other third-party value estimates of the subject property with discounts generally between 8 and 12 percent applied for estimated holding and selling costs and other external factors that may impact the marketability of the property. Changes to the value of the assets between scheduled valuation dates are monitored through continued communication with brokers and monthly reviews by the asset manager assigned to each asset. If there are any significant changes in the market or the subject property, valuations are adjusted or new appraisals ordered to ensure the reported values reflect the most current information. OREO that has been acquired or written down in the current year is deemed to be at fair value and included in the table below.
Mortgage servicing rights are carried at the lower of cost or market and are, therefore, carried at fair value only when fair value is less than the amortized asset cost. The fair value of mortgage servicing rights is performed using a pooling methodology. Similar loans are pooled together and a discounted cash flow model, which takes into consideration discount rates, prepayment rates, and the weighted average cost to service the loans, is used to determine the fair value.
For financial assets and liabilities carried at fair value on a nonrecurring basis, the following table provides fair value information as of
March 31, 2017
and
December 31, 2016
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
|
|
Fair value measurements using:
|
(Dollars in thousands)
|
Fair value
|
|
Level 1 inputs
|
|
Level 2 inputs
|
|
Level 3 inputs
|
Impaired loans
|
$
|
67,235
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
67,235
|
|
Other real estate not covered under shared-loss agreements remeasured during current year
|
12,874
|
|
|
—
|
|
|
—
|
|
|
12,874
|
|
Other real estate covered under shared-loss agreements remeasured during current year
|
122
|
|
|
—
|
|
|
—
|
|
|
122
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
Fair value measurements using:
|
|
Fair value
|
|
Level 1 inputs
|
|
Level 2 inputs
|
|
Level 3 inputs
|
Impaired loans
|
$
|
70,977
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
70,977
|
|
Other real estate not covered under shared-loss agreements remeasured during current year
|
44,963
|
|
|
—
|
|
|
—
|
|
|
44,963
|
|
Other real estate covered under shared-loss agreements remeasured during current year
|
439
|
|
|
—
|
|
|
—
|
|
|
439
|
|
Mortgage servicing rights
|
342
|
|
|
—
|
|
|
—
|
|
|
342
|
|
No
financial liabilities were carried at fair value on a nonrecurring basis as of
March 31, 2017
and
December 31, 2016
.
NOTE K - EMPLOYEE BENEFIT PLANS
BancShares sponsors noncontributory defined benefit pension plans for its qualifying employees (BancShares Plan) and former First Citizens Bancorporation, Inc. employees (Bancorporation Plan). Net periodic benefit cost is a component of employee benefits expense.
BancShares Plan
For the
three
months ended
March 31, 2017
and
2016
, the components of net periodic benefit cost are as follows:
|
|
|
|
|
|
|
|
|
|
Three months ended March 31
|
(Dollars in thousands)
|
2017
|
|
2016
|
Service cost
|
$
|
3,376
|
|
|
$
|
3,220
|
|
Interest cost
|
7,380
|
|
|
7,180
|
|
Expected return on assets
|
(10,698
|
)
|
|
(9,159
|
)
|
Amortization of prior service cost
|
52
|
|
|
52
|
|
Amortization of net actuarial loss
|
2,234
|
|
|
1,600
|
|
Net periodic benefit cost
|
$
|
2,344
|
|
|
$
|
2,893
|
|
Bancorporation Plan
For the
three
months ended
March 31, 2017
and
2016
, the components of net periodic benefit cost are as follows:
|
|
|
|
|
|
|
|
|
|
Three months ended March 31
|
(Dollars in thousands)
|
2017
|
|
2016
|
Service cost
|
$
|
671
|
|
|
$
|
650
|
|
Interest cost
|
1,683
|
|
|
1,675
|
|
Expected return on assets
|
(2,796
|
)
|
|
(2,779
|
)
|
Amortization of net actuarial loss
|
214
|
|
|
—
|
|
Net periodic benefit cost
|
$
|
(228
|
)
|
|
$
|
(454
|
)
|
No contributions were made during the
three
months ended
March 31, 2017
to the BancShares or Bancorporation pension plans. BancShares does not expect to make any contributions to either of the defined benefit pension plans during
2017
.
NOTE L
- COMMITMENTS AND CONTINGENCIES
To meet the financing needs of its customers, BancShares and its subsidiaries have financial instruments with off-balance sheet risk. These financial instruments include commitments to extend credit, standby letters of credit and recourse obligations on mortgage loans sold. These instruments involve elements of credit, interest rate or liquidity risk.
Commitments to extend credit are legally binding agreements to lend to customers. Commitments generally have fixed expiration dates or other termination clauses and may require payment of fees. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future liquidity requirements. Established credit standards control the credit risk exposure associated with these commitments. In some cases, BancShares requires that collateral be pledged to secure the commitment, including cash deposits, securities and other assets. At
March 31, 2017
, BancShares had unused commitments that were
$9.03 billion
, compared to
$8.81 billion
at
December 31, 2016
. Total unfunded commitments relating to investments in affordable housing projects was
$61.9 million
and
$57.1 million
at
March 31, 2017
and
December 31, 2016
, respectively, and are included in other liabilities on BancShares' Consolidated Balance Sheets. Affordable housing project investments were
$116.7 million
and
$109.8 million
at
March 31, 2017
and
December 31, 2016
, respectively, and are included in other assets on the Consolidated Balance Sheets.
Standby letters of credit are commitments guaranteeing performance of a customer to a third party. Those commitments are primarily issued to support public and private borrowing arrangements. To mitigate its risk, BancShares’ follows its credit policies in the issuance of standby letters of credit. At
March 31, 2017
and
December 31, 2016
, BancShares had standby letters of credit amounting to
$80.3 million
and
$83.8 million
, respectively. The credit risk related to the issuance of these letters of credit is essentially the same as that involved in extending loans to clients and, therefore, these letters of credit are collateralized when necessary.
Pursuant to standard representations and warranties relating to residential mortgage loan sales, contingent obligations exist for various events that may occur following the loan sale. If underwriting or documentation deficiencies are discovered at any point in the life of the loan or if the loan fails to perform per the terms of the loan purchase agreement, typically within
180 days
from the date of sale, the investor may require BancShares to repurchase the loan or to repay a portion of the sale proceeds. Other liabilities included reserves of
$3.0 million
as of
March 31, 2017
and
December 31, 2016
for estimated losses arising from these standard representation and warranty provisions.
BancShares has a receivable from the FDIC totaling
$4.0 million
and
$4.2 million
as of
March 31, 2017
and
December 31, 2016
, respectively, for the expected reimbursement of losses on assets covered under various shared-loss agreements. The shared-loss agreements are subject to interpretation by both the FDIC and BancShares, and disagreements may arise regarding coverage of losses, expenses and contingencies and requests for reimbursement may be delayed or disallowed for noncompliance. See Note G for additional information on the receivable from the FDIC regarding the early termination of a shared-loss agreement during the first quarter of 2017.
The shared-loss agreements for two FDIC-assisted transactions include provisions related to payments that may be owed to the FDIC at the termination of the agreements (clawback liability)
.
The clawback liability represents a payment by BancShares to the FDIC if actual cumulative losses on acquired covered assets are lower than the cumulative losses originally estimated by the FDIC at the time of acquisition. The clawback liability is estimated by discounting estimated future payments and is recorded in the Consolidated Balance Sheets as a payable to the FDIC under the relevant shared-loss agreements. As of
March 31, 2017
and
December 31, 2016
, the estimated clawback liability was
$98.0 million
and
$97.0 million
, respectively.
BancShares entered into forward-starting advances with the FHLB of Atlanta in June 2016 to receive
$200.0 million
of fixed rate long-term funding. There are two advances of
$100.0 million
each scheduled to fund in June 2018 with maturity dates of June 2026 and 2028.
BancShares and various subsidiaries have been named as defendants in legal actions arising from their normal business activities in which damages in various amounts are claimed. Although the amount of any ultimate liability with respect to such matters cannot be determined, in the opinion of management, any such liability will not have a material effect on BancShares’ consolidated financial statements.
NOTE M - ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
Accumulated other comprehensive loss included the following as of
March 31, 2017
and
December 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
December 31, 2016
|
(Dollars in thousands)
|
Accumulated
other
comprehensive
loss
|
|
Deferred
tax benefit
|
|
Accumulated
other
comprehensive
loss,
net of tax
|
|
Accumulated
other
comprehensive
loss
|
|
Deferred
tax benefit
|
|
Accumulated
other
comprehensive
loss,
net of tax
|
Unrealized losses on investment securities available for sale
|
$
|
(36,587
|
)
|
|
$
|
(13,404
|
)
|
|
$
|
(23,183
|
)
|
|
$
|
(72,707
|
)
|
|
$
|
(26,832
|
)
|
|
$
|
(45,875
|
)
|
Funded status of defined benefit plans
|
(139,274
|
)
|
|
(51,516
|
)
|
|
(87,758
|
)
|
|
(141,774
|
)
|
|
(52,457
|
)
|
|
(89,317
|
)
|
Total
|
$
|
(175,861
|
)
|
|
$
|
(64,920
|
)
|
|
$
|
(110,941
|
)
|
|
$
|
(214,481
|
)
|
|
$
|
(79,289
|
)
|
|
$
|
(135,192
|
)
|
The following table highlights changes in accumulated other comprehensive (loss) income by component for the
three months ended March 31, 2017
and
March 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2017
|
(Dollars in thousands)
|
Unrealized (losses) gains on available for sale securities
1
|
|
(Losses) gains on cash flow hedges
1
|
|
Defined benefit pension items
1
|
|
Total
|
Beginning balance
|
$
|
(45,875
|
)
|
|
$
|
—
|
|
|
$
|
(89,317
|
)
|
|
$
|
(135,192
|
)
|
Other comprehensive income before reclassifications
|
22,677
|
|
|
—
|
|
|
—
|
|
|
22,677
|
|
Amounts reclassified from accumulated other comprehensive (loss) income
|
15
|
|
|
—
|
|
|
1,559
|
|
|
1,574
|
|
Net current period other comprehensive income
|
22,692
|
|
|
—
|
|
|
1,559
|
|
|
24,251
|
|
Ending balance
|
$
|
(23,183
|
)
|
|
$
|
—
|
|
|
$
|
(87,758
|
)
|
|
$
|
(110,941
|
)
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2016
|
|
Unrealized (losses) gains on available for sale securities
1
|
|
(Losses) gains on cash flow hedges
1
|
|
Defined benefit pension items
1
|
|
Total
|
Beginning balance
|
$
|
(15,125
|
)
|
|
$
|
(892
|
)
|
|
$
|
(48,423
|
)
|
|
$
|
(64,440
|
)
|
Other comprehensive income before reclassifications
|
42,017
|
|
|
437
|
|
|
—
|
|
|
42,454
|
|
Amounts reclassified from accumulated other comprehensive (loss) income
|
(2,858
|
)
|
|
—
|
|
|
1,020
|
|
|
(1,838
|
)
|
Net current period other comprehensive income
|
39,159
|
|
|
437
|
|
|
1,020
|
|
|
40,616
|
|
Ending balance
|
$
|
24,034
|
|
|
$
|
(455
|
)
|
|
$
|
(47,403
|
)
|
|
$
|
(23,824
|
)
|
1
All amounts are net of tax. Amounts in parentheses indicate debits.
The following table presents the amounts reclassified from accumulated other comprehensive (loss) income and the line item affected in the statement where net income is presented for the
three months ended March 31, 2017
and
March 31, 2016
:
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
Three months ended March 31, 2017
|
Details about accumulated other comprehensive income (loss)
|
|
Amounts reclassified from accumulated other comprehensive income (loss)
1
|
|
Affected line item in the statement where net income is presented
|
Unrealized gains and losses on available for sale securities
|
|
$
|
(24
|
)
|
|
Securities (losses) gains
|
|
|
9
|
|
|
Income taxes
|
|
|
$
|
(15
|
)
|
|
Net income
|
Amortization of defined benefit pension items
|
|
|
|
|
Prior service costs
|
|
$
|
(52
|
)
|
|
Employee benefits
|
Actuarial losses
|
|
(2,234
|
)
|
|
Employee benefits
|
|
|
(2,500
|
)
|
|
Employee benefits
|
|
|
941
|
|
|
Income taxes
|
|
|
$
|
(1,559
|
)
|
|
Net income
|
Total reclassifications for the period
|
|
$
|
(1,574
|
)
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2016
|
Details about accumulated other comprehensive income (loss)
|
|
Amounts reclassified from accumulated other comprehensive income (loss)
1
|
|
Affected line item in the statement where net income is presented
|
Unrealized gains and losses on available for sale securities
|
|
$
|
4,628
|
|
|
Securities (losses) gains
|
|
|
(1,770
|
)
|
|
Income taxes
|
|
|
$
|
2,858
|
|
|
Net income
|
Amortization of defined benefit pension items
|
|
|
|
|
Prior service costs
|
|
$
|
(52
|
)
|
|
Employee benefits
|
Actuarial losses
|
|
(1,600
|
)
|
|
Employee benefits
|
|
|
(1,652
|
)
|
|
Employee benefits
|
|
|
632
|
|
|
Income taxes
|
|
|
$
|
(1,020
|
)
|
|
Net income
|
Total reclassifications for the period
|
|
$
|
1,838
|
|
|
|
1
Amounts in parentheses indicate debits to profit/loss.