NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 – Basis of Presentation
The accompanying unaudited Consolidated Financial Statements of the Corporation have been prepared in conformity with GAAP for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities as of the date of the financial statements as well as revenues and expenses during the period. Actual results could differ from those estimates. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the notes thereto included in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2020. Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. The Corporation evaluates subsequent events through the date of filing of this Form 10-Q with the SEC.
CECL Adoption
On January 1, 2020, the Corporation adopted ASU 2016-13, Financial Instruments - Credit Losses (ASC Topic 326): Measurement of Credit Losses on Financial Instruments. The Corporation adopted CECL using the modified retrospective method for all financial assets measured at amortized cost, net of investments in leases and OBS credit exposures. The Corporation recorded an increase of $58.3 million to the ACL on January 1, 2020 as a result of the adoption of CECL. Retained earnings decreased $43.8 million and deferred tax assets increased by $12.4 million. Included in the $58.3 million increase to the ACL was $2.1 million for certain OBS credit exposures that was previously recognized in other liabilities before the adoption of CECL.
CARES Act and Consolidated Appropriations Act - 2021
On March 27, 2020 the CARES Act was signed into law. The CARES Act includes an option for financial institutions to suspend the requirements of GAAP for certain loan modifications that would otherwise be categorized as a TDR. Certain conditions must be met with respect to the loan modification including that the modification is related to COVID-19 and the modified loan was not more than 30 days past due on December 31, 2019. On December 27, 2020, the 2021 Consolidated Appropriations Act was signed into law and this Act extended the relief for TDR treatment that was set to expire on December 31, 2020 to the earlier of 60 days after the national emergency termination date or January 1, 2022. The Corporation is applying the option under the CARES act for all loan modifications that qualify.
Recently Adopted Accounting Standards
On January 1, 2021, the Corporation adopted ASC Update 2019-12 Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The Corporation adopted this standards update effective with its March 31, 2021 quarterly report on Form 10-Q and it did not have a material impact on the consolidated financial statements.
On January 1, 2021, the Corporation adopted ASC Update 2021-01 Reference Rate Reform (Topic 848). This update permits entities to apply optional expedients in Topic 848 to derivative instruments modified because of LIBOR transition affected by changes to the interest rates used for discounting, margining or contract price alignment due to reference rate reform. This update was effective upon issuance and entities may elect to apply the guidance to modifications either retrospectively, as of any date from the beginning of any interim period that includes or is subsequent to March 12, 2020, or prospectively to new modifications from any date in an interim period that includes or is subsequent to January 7, 2021. The Corporation adopted this standards update retrospectively effective with its March 31, 2021 quarterly report on Form 10-Q and it did not have a material impact on the consolidated financial statements.
NOTE 2 – Restrictions on Cash and Cash Equivalents
The Bank is required to maintain reserves against its deposit liabilities. Prior to March 2020, reserves were in the form of cash and balances with the FRB. The FRB suspended cash reserve requirements effective March 26, 2020.
In addition, cash collateral is posted by the Corporation with counterparties to secure derivative and other contracts. The amounts of such cash collateral as of March 31, 2021 and December 31, 2020 were $243.6 million and $408.1 million, respectively.
NOTE 3 – Investment Securities
The following table presents the amortized cost and estimated fair values of investment securities for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated
Fair
Value
|
|
Available for Sale
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and municipal securities
|
$
|
953,601
|
|
|
$
|
42,412
|
|
|
$
|
(1,253)
|
|
|
$
|
994,760
|
|
|
Corporate debt securities
|
348,162
|
|
|
11,970
|
|
|
(761)
|
|
|
359,371
|
|
|
Collateralized mortgage obligations
|
390,253
|
|
|
10,633
|
|
|
(1,005)
|
|
|
399,881
|
|
|
Residential mortgage-backed securities
|
257,409
|
|
|
1,941
|
|
|
(3,986)
|
|
|
255,364
|
|
|
Commercial mortgage-backed securities
|
668,144
|
|
|
12,455
|
|
|
(7,582)
|
|
|
673,017
|
|
|
Auction rate securities
|
76,350
|
|
|
—
|
|
|
(146)
|
|
|
76,204
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
2,693,919
|
|
|
$
|
79,411
|
|
|
$
|
(14,733)
|
|
|
$
|
2,758,597
|
|
|
|
|
|
|
|
|
|
|
|
Held to Maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage-backed securities
|
$
|
467,461
|
|
|
$
|
16,303
|
|
|
$
|
(8,025)
|
|
|
$
|
475,739
|
|
|
Commercial mortgage-backed securities
|
385,952
|
|
|
—
|
|
|
(17,948)
|
|
|
368,004
|
|
|
Total
|
$
|
853,413
|
|
|
$
|
16,303
|
|
|
$
|
(25,973)
|
|
|
$
|
843,743
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated
Fair
Value
|
|
Available for Sale
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and municipal securities
|
$
|
891,327
|
|
|
$
|
61,286
|
|
|
$
|
—
|
|
|
$
|
952,613
|
|
|
Corporate debt securities
|
348,391
|
|
|
19,445
|
|
|
(691)
|
|
|
367,145
|
|
|
Collateralized mortgage obligations
|
491,321
|
|
|
12,560
|
|
|
(115)
|
|
|
503,766
|
|
|
Residential mortgage-backed securities
|
373,779
|
|
|
4,246
|
|
|
(27)
|
|
|
377,998
|
|
|
Commercial mortgage-backed securities
|
741,172
|
|
|
22,384
|
|
|
(1,141)
|
|
|
762,415
|
|
|
Auction rate securities
|
101,510
|
|
|
—
|
|
|
(3,304)
|
|
|
98,206
|
|
|
Total
|
$
|
2,947,500
|
|
|
$
|
119,921
|
|
|
$
|
(5,278)
|
|
|
$
|
3,062,143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held to Maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage-backed securities
|
$
|
278,281
|
|
|
$
|
18,576
|
|
|
$
|
—
|
|
|
$
|
296,857
|
|
|
|
|
|
|
|
|
|
|
During the first quarter of 2021, the Corporation transferred residential and commercial mortgage backed securities from the AFS classification to the HTM classification. The amortized cost and estimated fair value of the securities transferred were both $376.2 million.
Securities carried at $1.1 billion at March 31, 2021 and $520.5 million at December 31, 2020 were pledged as collateral to secure public and trust deposits and customer repurchase agreements.
The amortized cost and estimated fair values of debt securities as of March 31, 2021, by contractual maturity, are shown in the following table. Actual maturities may differ from contractual maturities as certain investment securities are subject to call or prepayment with or without call or prepayment penalties.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
|
|
Available for Sale
|
|
Held to Maturity
|
|
|
|
Amortized
Cost
|
|
Estimated
Fair Value
|
|
Amortized
Cost
|
|
Estimated
Fair Value
|
|
|
(in thousands)
|
|
Due in one year or less
|
|
$
|
13,107
|
|
|
$
|
13,171
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Due from one year to five years
|
|
37,176
|
|
|
38,417
|
|
|
—
|
|
|
—
|
|
|
Due from five years to ten years
|
|
343,642
|
|
|
355,683
|
|
|
—
|
|
|
—
|
|
|
Due after ten years
|
|
984,188
|
|
|
1,023,064
|
|
|
—
|
|
|
—
|
|
|
|
|
1,378,113
|
|
|
1,430,335
|
|
|
—
|
|
|
—
|
|
|
Residential mortgage-backed securities(1)
|
|
257,409
|
|
|
255,364
|
|
|
467,461
|
|
|
475,739
|
|
|
Commercial mortgage-backed securities(1)
|
|
668,144
|
|
|
673,017
|
|
|
385,952
|
|
|
368,004
|
|
|
Collateralized mortgage obligations(1)
|
|
390,253
|
|
|
399,881
|
|
|
—
|
|
|
—
|
|
|
Total
|
|
$
|
2,693,919
|
|
|
$
|
2,758,597
|
|
|
$
|
853,413
|
|
|
$
|
843,743
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Mortgage-backed securities and collateralized mortgage obligations do not have stated maturities and are dependent upon the interest rate environment and prepayments on the underlying loans.
|
The following table presents information related to the gross realized gains and losses on the sales of investment securities for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Realized Gains
|
|
Gross Realized Losses
|
|
|
|
Net Gains
|
|
Three months ended
|
(in thousands)
|
|
March 31, 2021
|
$
|
34,016
|
|
|
$
|
(541)
|
|
|
|
|
$
|
33,475
|
|
|
March 31, 2020
|
117
|
|
|
(71)
|
|
|
|
|
46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the first quarter of 2021, the Corporation completed a balance sheet restructuring that included a $34.0 million gain on the sale of Visa Shares, offset by net losses on other securities of $400,000, primarily in connection with the sale of $24.6 million of ARCs. In addition, debt extinguishment costs of $32.2 million included in non-interest expense and a write-off of $841,000 in unamortized discounts was recognized in net interest income in connection with the cash tender offer for certain of its outstanding senior and subordinated notes and the prepayment of certain term FHLB advances. See Note 14, "Long-Term Debt" for further details.
The following tables present the gross unrealized losses and estimated fair values of investment securities, aggregated by category and length of time that individual securities have been in a continuous unrealized loss position for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
|
Less than 12 months
|
|
12 months or longer
|
|
Total
|
|
|
Number of Securities
|
|
Estimated
Fair Value
|
|
Unrealized
Losses
|
|
Number of Securities
|
|
Estimated
Fair Value
|
|
Unrealized
Losses
|
|
Estimated
Fair Value
|
|
Unrealized
Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for Sale
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and municipal securities
|
21
|
|
|
$
|
88,141
|
|
|
$
|
(1,253)
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
88,141
|
|
|
$
|
(1,253)
|
|
|
Corporate debt securities
|
7
|
|
|
41,956
|
|
|
(582)
|
|
|
2
|
|
|
15,328
|
|
|
(179)
|
|
|
57,284
|
|
|
(761)
|
|
|
Collateralized mortgage obligations
|
2
|
|
|
55,305
|
|
|
(1,005)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
55,305
|
|
|
(1,005)
|
|
|
Residential mortgage-backed securities
|
8
|
|
|
173,908
|
|
|
(3,986)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
173,908
|
|
|
(3,986)
|
|
|
Commercial mortgage-backed securities
|
10
|
|
|
183,175
|
|
|
(7,582)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
183,175
|
|
|
(7,582)
|
|
|
Auction rate securities
|
—
|
|
|
—
|
|
|
—
|
|
|
118
|
|
|
76,204
|
|
|
(146)
|
|
|
76,204
|
|
|
(146)
|
|
|
Total available for sale
|
48
|
|
|
$
|
542,485
|
|
|
$
|
(14,408)
|
|
|
120
|
|
|
$
|
91,532
|
|
|
$
|
(325)
|
|
|
$
|
634,017
|
|
|
$
|
(14,733)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held to Maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage-backed securities
|
12
|
|
|
$
|
205,072
|
|
|
$
|
(8,025)
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
205,072
|
|
|
$
|
(8,025)
|
|
|
Commercial mortgage-backed securities
|
21
|
|
|
368,004
|
|
|
(17,948)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
368,004
|
|
|
(17,948)
|
|
|
Total
|
33
|
|
|
$
|
573,076
|
|
|
$
|
(25,973)
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
573,076
|
|
|
$
|
(25,973)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
Less than 12 months
|
|
12 months or longer
|
|
Total
|
|
|
Number of Securities
|
|
Estimated
Fair Value
|
|
Unrealized
Losses
|
|
Number of Securities
|
|
Estimated
Fair Value
|
|
Unrealized
Losses
|
|
Estimated
Fair Value
|
|
Unrealized
Losses
|
|
Available for Sale
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities
|
9
|
|
|
$
|
44,528
|
|
|
$
|
(377)
|
|
|
1
|
|
|
$
|
6,871
|
|
|
$
|
(314)
|
|
|
$
|
51,399
|
|
|
$
|
(691)
|
|
|
Collateralized mortgage obligations
|
3
|
|
|
57,601
|
|
|
(115)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
57,601
|
|
|
(115)
|
|
|
Residential mortgage-backed securities
|
1
|
|
|
20,124
|
|
|
(27)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20,124
|
|
|
(27)
|
|
|
Commercial mortgage-backed securities
|
9
|
|
|
144,383
|
|
|
(1,141)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
144,383
|
|
|
(1,141)
|
|
|
Auction rate securities
|
—
|
|
|
—
|
|
|
—
|
|
|
162
|
|
|
98,206
|
|
|
(3,304)
|
|
|
98,206
|
|
|
(3,304)
|
|
|
Total available for sale(1)
|
22
|
|
|
$
|
266,636
|
|
|
$
|
(1,660)
|
|
|
163
|
|
|
$
|
105,077
|
|
|
$
|
(3,618)
|
|
|
$
|
371,713
|
|
|
$
|
(5,278)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) No HTM securities were in an unrealized loss position as of December 31, 2020.
The Corporation’s collateralized mortgage obligations and mortgage-backed securities have contractual terms that generally do not permit the issuer to settle the securities at a price less than the amortized cost of the investment. The change in fair value of these securities is attributable to changes in interest rates and not credit quality. The Corporation does not have the intent to sell and does not believe it will more likely than not be required to sell any of these securities prior to a recovery of their fair value to amortized cost. Therefore, the Corporation does not have an ACL for these investments as of March 31, 2021.
Based on management’s evaluations, no ACL was required for municipal securities, corporate debt securities or ARCs as of March 31, 2021. The Corporation does not have the intent to sell and does not believe it will more likely than not be required to sell any of these securities prior to a recovery of their fair value to amortized cost, which may be at maturity.
NOTE 4 - Loans and Allowance for Credit Losses
Net Loans are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2021
|
|
December 31, 2020
|
|
|
(in thousands)
|
|
Real estate - commercial mortgage
|
$
|
7,142,137
|
|
|
$
|
7,105,092
|
|
|
Commercial and industrial (1)
|
5,675,714
|
|
|
5,670,828
|
|
|
Real-estate - residential mortgage
|
3,254,058
|
|
|
3,141,915
|
|
|
Real-estate - home equity
|
1,149,958
|
|
|
1,202,913
|
|
|
Real-estate - construction
|
1,083,494
|
|
|
1,047,218
|
|
|
Consumer
|
451,857
|
|
|
466,772
|
|
|
Equipment lease financing and other
|
252,930
|
|
|
284,377
|
|
|
Overdrafts
|
1,373
|
|
|
4,806
|
|
|
Gross loans
|
19,011,521
|
|
|
18,923,921
|
|
|
Unearned income
|
(20,535)
|
|
|
(23,101)
|
|
|
Net Loans
|
$
|
18,990,986
|
|
|
$
|
18,900,820
|
|
(1) Includes PPP loans totaling $1.7 billion and $1.6 billion as of March 31, 2021 and December 31, 2020, respectively.
The Corporation segments its loan portfolio by "portfolio segments," as presented in the table above. Certain portfolio segments are further disaggregated by "class segment" for the purpose of estimating credit losses.
Allowance for Credit Losses
The Corporation has elected to exclude accrued interest receivable from the measurement of its ACL. When a loan is placed on non-accrual status, any outstanding accrued interest is reversed against interest income.
Loans: The ACL for loans is an estimate of the expected losses to be realized over the life of the loans in the portfolio. The ACL is determined for two distinct categories of loans: 1) loans evaluated collectively for expected credit losses and 2) loans evaluated individually for expected credit losses.
Loans Evaluated Collectively: Loans evaluated collectively for expected credit losses include loans on accrual status, excluding accruing TDRs, and loans initially evaluated individually, but determined not to have enhanced credit risk characteristics. This category includes loans on non-accrual status and TDRs where the total commitment amount is less than $1 million. The ACL is estimated by applying a PD and LGD to the EAD at the loan level. In order to determine the PD, LGD, and EAD calculation inputs:
•Loans are aggregated into pools based on similar risk characteristics.
•The PD and LGD rates are determined by historical credit loss experience for each pool of loans.
•The loan segment PD rates are estimated using six econometric regression models that use the Corporation’s historical credit loss experience and incorporate reasonable and supportable economic forecasts for various macroeconomic variables that are statistically correlated with expected loss behavior in the loan segment.
•The reasonable and supportable forecast for each macroeconomic variable is sourced from an external third party and is applied over the contractual term of the Corporation’s loan portfolio. The Corporation’s economic forecast considers the general health of the economy, the interest rate environment, real estate pricing and market risk.
•A single baseline forecast scenario is used for each macroeconomic variable.
•The loan segment lifetime LGD rates are estimated using a loss rate approach based on the Corporation’s historical charge-off experience and the balance at the time of loan default.
•The LGD rates are adjusted for the Corporation’s recovery experience.
•To calculate the EAD, the corporation estimates contractual cash flows over the remaining life of each loan. Certain cash flow assumptions are established for each loan using maturity date, amortization schedule and interest rate. In addition, a prepayment rate is used in determining the EAD estimate.
Loans Evaluated Individually: Loans evaluated individually for expected credit losses include loans on non-accrual status and TDRs where the commitment amount equals or exceeds $1.0 million. The required ACL for such loans is determined using either the present value of expected future cash flows, observable market price or the fair value of collateral.
Loans evaluated individually may have specific allocations of the ACL assigned if the measured value of the loan using one of the noted techniques is less than its current carrying value. For loans measured using the fair value of collateral, if the analysis determines that sufficient collateral value would be available for repayment of the debt, then no allocations would be assigned to those loans. Collateral could be in the form of real estate or business assets, such as accounts receivable or inventory, in the case of commercial and industrial loans. Commercial and industrial loans may also be secured by real estate.
For loans secured by real estate, estimated fair values are determined primarily through appraisals performed by third-party appraisers, discounted to arrive at expected net sale proceeds. For collateral dependent loans, estimated real estate fair values are also net of estimated selling costs. When a real estate secured loan is impaired, a decision is made regarding whether an updated appraisal of the real estate is necessary. This decision is based on various considerations, including: the age of the most recent appraisal; the loan-to-value ratio based on the original appraisal; the condition of the property; the Corporation’s experience and knowledge of the real estate market; the purpose of the loan; market factors; payment status; the strength of any guarantors; and the existence and age of other indications of value such as broker price opinions, among others. The Corporation generally obtains updated appraisals performed by third-party appraisers for impaired loans secured predominantly by real estate every 12 months.
When updated appraisals are not obtained for loans secured by real estate, fair values are estimated based on the original appraisal values, as long as the original appraisal indicated an acceptable loan-to-value position and there has not been a significant deterioration in the collateral value since the original appraisal was performed.
For loans with principal balances greater than or equal to $1.0 million secured by non-real estate collateral, such as accounts receivable or inventory, estimated fair values are determined based on borrower financial statements, inventory listings, accounts receivable agings or borrowing base certificates. Indications of value from these sources are generally discounted based on the age of the financial information or the quality of the assets. Liquidation or collection discounts are applied to these assets based upon existing loan evaluation policies.
Management regularly reviews loans in the portfolio to assess credit quality indicators and to determine appropriate loan classification. For commercial loans, commercial mortgages and construction loans to commercial borrowers, an internal risk rating process is used. The Corporation believes that internal risk ratings are the most relevant credit quality indicator for these types of loans. The migration of loans through the various internal risk rating categories is a significant component of the ACL methodology for these loans, which bases the PD on this migration. Assigning risk ratings involves judgment. Risk ratings may be changed based on ongoing monitoring procedures, or if specific loan review assessments identify a deterioration or an improvement in the loan.
The ACL is reviewed to evaluate its appropriateness in relation to the overall risk profile of the loan portfolio. The Corporation considers risk factors such as: local and national economic conditions; trends in delinquencies and non-accrual loans; the diversity of borrower industry types; and the composition of the portfolio by loan type.
Qualitative and Other Adjustments to ACL: In addition to the quantitative credit loss estimates for loans evaluated collectively, qualitative factors that may not be fully captured in the quantitative results are also evaluated. These qualitative factors include changes in lending policy, the nature and volume of the portfolio, overall business conditions in the economy, credit concentrations, specific industry risks, competition, model imprecision and legal and regulatory requirements. Qualitative adjustments are judgmental and are based on management’s knowledge of the portfolio and the markets in which the Corporation operates. Qualitative adjustments are evaluated and approved on a quarterly basis. Additionally, the ACL includes other allowance categories that are not directly incorporated in the quantitative results. These categories include but are not limited to loans-in-process, trade acceptances and overdrafts.
OBS Credit Exposures: The ACL for OBS credit exposures is recorded in other liabilities on the consolidated balance sheets. This portion of the ACL represents management’s estimate of expected losses in its unfunded loan commitments and other OBS credit exposures. The ACL specific to unfunded commitments is determined by estimating future draws and applying the expected loss rates on those draws. Future draws are based on historical averages of utilization rates (i.e., the likelihood of draws taken). The ACL for OBS credit exposures is increased or decreased by charges or reductions to expense, through the provision for credit losses.
The following table presents the components of the ACL:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
|
(in thousands)
|
|
ACL - loans
|
$
|
265,986
|
|
|
$
|
277,567
|
|
|
ACL - OBS credit exposure
|
14,273
|
|
|
14,373
|
|
|
Total ACL
|
$
|
280,259
|
|
|
$
|
291,940
|
|
The following table presents the activity in the ACL:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
Balance at beginning of period
|
$
|
291,940
|
|
|
$
|
166,209
|
|
|
|
|
|
|
|
|
Impact of adopting CECL on January 1, 2020 (1)
|
—
|
|
|
58,349
|
|
|
|
|
|
|
|
|
Loans charged off
|
(8,202)
|
|
|
(14,003)
|
|
|
|
|
|
|
|
|
Recoveries of loans previously charged off
|
2,021
|
|
|
2,887
|
|
|
|
|
|
|
|
|
Net loans charged off
|
(6,181)
|
|
|
(11,116)
|
|
|
|
|
|
|
|
|
Provision for credit losses (2)
|
(5,500)
|
|
|
44,029
|
|
|
|
|
|
|
|
|
Balance at end of period
|
$
|
280,259
|
|
|
$
|
257,471
|
|
|
|
|
|
|
|
(1) Includes $12.6 million of reserves for OBS credit exposures as of January 1, 2020.
(2) Includes $(100,000) and $3.8 million related to OBS credit exposures for the three months ended March 31, 2021 and 2020, respectively.
The following table presents the activity in the ACL - loans by portfolio segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate -
Commercial
Mortgage
|
|
Commercial and
Industrial
|
|
Real Estate -
Home
Equity
|
|
Real Estate -
Residential
Mortgage
|
|
Real Estate
-
Construction
|
|
Consumer
|
|
Equipment lease financing, other
and overdrafts
|
|
Total
|
|
|
(in thousands)
|
|
Three months ended March 31, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2020
|
$
|
103,425
|
|
|
$
|
74,771
|
|
|
$
|
14,232
|
|
|
$
|
51,995
|
|
|
$
|
15,608
|
|
|
$
|
10,905
|
|
|
$
|
6,633
|
|
|
$
|
277,567
|
|
|
Loans charged off
|
(1,837)
|
|
|
(4,319)
|
|
|
(212)
|
|
|
(192)
|
|
|
(39)
|
|
|
(635)
|
|
|
(968)
|
|
|
(8,202)
|
|
|
Recoveries of loans previously charged off
|
174
|
|
|
769
|
|
|
51
|
|
|
95
|
|
|
384
|
|
|
389
|
|
|
159
|
|
|
2,021
|
|
|
Net loans recovered (charged off)
|
(1,663)
|
|
|
(3,550)
|
|
|
(161)
|
|
|
(97)
|
|
|
345
|
|
|
(246)
|
|
|
(809)
|
|
|
(6,181)
|
|
|
Provision for loan losses (1)
|
(786)
|
|
|
(27)
|
|
|
(341)
|
|
|
(1,903)
|
|
|
(874)
|
|
|
(1,247)
|
|
|
(222)
|
|
|
(5,400)
|
|
|
Balance at March 31, 2021
|
$
|
100,976
|
|
|
$
|
71,194
|
|
|
$
|
13,730
|
|
|
$
|
49,995
|
|
|
$
|
15,079
|
|
|
$
|
9,412
|
|
|
$
|
5,602
|
|
|
$
|
265,986
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2019
|
$
|
45,610
|
|
|
$
|
68,602
|
|
|
$
|
17,744
|
|
|
$
|
19,771
|
|
|
$
|
4,443
|
|
|
$
|
3,762
|
|
|
$
|
3,690
|
|
|
$
|
163,622
|
|
|
Impact of adopting CECL on January 1, 2020
|
29,361
|
|
|
(18,576)
|
|
|
(65)
|
|
|
21,235
|
|
|
4,015
|
|
|
5,969
|
|
|
3,784
|
|
|
45,723
|
|
|
Loans charged off
|
(855)
|
|
|
(10,899)
|
|
|
(316)
|
|
|
(187)
|
|
|
—
|
|
|
(1,213)
|
|
|
(533)
|
|
|
(14,003)
|
|
|
Recoveries of loans previously charged off
|
244
|
|
|
1,734
|
|
|
646
|
|
|
85
|
|
|
70
|
|
|
—
|
|
|
108
|
|
|
2,887
|
|
|
Net loans (charged off) recovered
|
(611)
|
|
|
(9,165)
|
|
|
330
|
|
|
(102)
|
|
|
70
|
|
|
(1,213)
|
|
|
(425)
|
|
|
(11,116)
|
|
|
Provision for loan losses (1)
|
15,959
|
|
|
22,745
|
|
|
(2,756)
|
|
|
1,523
|
|
|
(130)
|
|
|
1,347
|
|
|
1,591
|
|
|
40,279
|
|
|
Balance at March 31, 2020
|
$
|
90,319
|
|
|
$
|
63,606
|
|
|
$
|
15,253
|
|
|
$
|
42,427
|
|
|
$
|
8,398
|
|
|
$
|
9,865
|
|
|
$
|
8,640
|
|
|
$
|
238,508
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Provision included in the table only includes the portion related to Net Loans.
Several factors as of the end of the first quarter of 2021 in comparison to the end of the fourth quarter of 2020, including improved economic forecasts and a decrease in specific allocations within the ACL for loans evaluated individually, reduced the level of the ACL determined to be necessary as of March 31, 2021, resulting in the negative provision for credit losses for the three months ended March 31, 2021. The higher provision expense during the first three months of 2020 was largely driven by the overall downturn in economic forecasts due to COVID-19, resulting in higher expected future credit losses under CECL.
Qualitative adjustments during the first three months of 2020 increased compared to those at the time of the adoption of CECL on January 1, 2020 primarily as a result of uncertainties related to the economic impact of COVID-19, including consideration for the future performance of loans that received deferrals or forbearances as a result of COVID-19 and the impact COVID-19 had on certain industries where the quantitative models were not fully capturing the appropriate level of risk at that time. PPP loans issued are fully guaranteed by the SBA and, as such, no ACL was recorded against the PPP loan portfolio.
Non-accrual Loans
All loans individually evaluated for impairment are measured for losses on a quarterly basis. As of March 31, 2021 and December 31, 2020, substantially all of the Corporation’s individually evaluated loans with total commitments greater than or equal to $1.0 million were measured based on the estimated fair value of each loan’s collateral, if any. Collateral could be in the form of real estate, in the case of commercial mortgages and construction loans, or business assets, such as accounts receivable or inventory, in the case of commercial and industrial loans. Commercial and industrial loans may also be secured by real estate.
As of March 31, 2021 and December 31, 2020, approximately 97% and 83%, respectively, of loans evaluated individually for impairment with principal balances greater than or equal to $1.0 million, whose primary collateral consisted of real estate, were measured at estimated fair value using appraisals performed by state certified third-party appraisers that had been updated in the preceding 12 months.
The following table presents total non-accrual loans, by class segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
|
With a Related Allowance
|
|
Without a Related Allowance
|
|
Total
|
|
With a Related Allowance
|
|
Without a Related Allowance
|
|
Total
|
|
|
(in thousands)
|
|
Real estate - commercial mortgage
|
$
|
21,107
|
|
|
$
|
30,870
|
|
|
$
|
51,977
|
|
|
$
|
19,909
|
|
|
$
|
31,561
|
|
|
$
|
51,470
|
|
|
Commercial and industrial
|
13,012
|
|
|
18,640
|
|
|
31,652
|
|
|
13,937
|
|
|
18,056
|
|
|
31,993
|
|
|
Real estate - residential mortgage
|
31,203
|
|
|
2,198
|
|
|
33,401
|
|
|
24,590
|
|
|
1,517
|
|
|
26,107
|
|
|
Real estate - home equity
|
9,368
|
|
|
—
|
|
|
9,368
|
|
|
9,398
|
|
|
190
|
|
|
9,588
|
|
|
Real estate - construction
|
544
|
|
|
897
|
|
|
1,441
|
|
|
437
|
|
|
958
|
|
|
1,395
|
|
|
Consumer
|
301
|
|
|
—
|
|
|
301
|
|
|
332
|
|
|
—
|
|
|
332
|
|
|
Equipment lease financing and other
|
6,462
|
|
|
9,287
|
|
|
15,749
|
|
|
—
|
|
|
16,313
|
|
|
16,313
|
|
|
|
$
|
81,997
|
|
|
$
|
61,892
|
|
|
$
|
143,889
|
|
|
$
|
68,603
|
|
|
$
|
68,595
|
|
|
$
|
137,198
|
|
As of March 31, 2021 and December 31, 2020, there were $61.9 million and $68.6 million, respectively, of non-accrual loans that did not have a related allowance for credit losses. The estimated fair values of the collateral securing these loans exceeded their carrying amount, or the loans were previously charged down to realizable collateral values. Accordingly, no specific valuation allowance was considered to be necessary.
Asset Quality
Maintaining an appropriate ACL is dependent on various factors, including the ability to identify potential problem loans in a timely manner. For commercial construction, residential construction, commercial and industrial, and commercial real estate, an internal risk rating process is used. The Corporation believes that internal risk ratings are the most relevant credit quality indicator for these types of loans. The migration of loans through the various internal risk rating categories is a significant component of the ACL methodology for these loans, which bases the probability of default on this migration. Assigning risk ratings involves judgment. The Corporation's loan review officers provide a separate assessment of risk rating accuracy. Risk ratings may be changed based on the ongoing monitoring procedures performed by loan officers or credit administration staff or if specific loan review assessments identify a deterioration or an improvement in the loans.
The following is a summary of the Corporation's internal risk rating categories:
•Pass: These loans do not currently pose undue credit risk and can range from the highest to average quality, depending on the degree of potential risk.
•Special Mention: These loans have a heightened credit risk, but not to the point of justifying a classification of Substandard. Loans in this category are currently acceptable but, are nevertheless potentially weak.
•Substandard or Lower: These loans are inadequately protected by current sound worth and paying capacity of the borrower. There exists a well-defined weakness or weaknesses that jeopardize the normal repayment of the debt.
The following table summarizes designated internal risk rating categories by portfolio segment and loan class, by origination year, in the current period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
|
|
Term Loans Amortized Cost Basis by Origination Year
|
Revolving Loans
|
Revolving Loans converted to Term Loans
|
|
|
|
|
(dollars in thousands)
|
Amortized
|
Amortized
|
|
|
|
2021
|
2020
|
2019
|
2018
|
2017
|
Prior
|
Cost Basis
|
Cost Basis
|
Total
|
|
Real estate - construction(1)
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
$
|
14,615
|
|
$
|
233,770
|
|
$
|
201,440
|
|
$
|
218,467
|
|
$
|
80,686
|
|
$
|
142,339
|
|
$
|
36,046
|
|
$
|
—
|
|
$
|
927,363
|
|
|
|
Special Mention
|
110
|
|
—
|
|
—
|
|
—
|
|
—
|
|
13,195
|
|
—
|
|
—
|
|
13,305
|
|
|
|
Substandard or Lower
|
—
|
|
—
|
|
154
|
|
—
|
|
1,976
|
|
3,520
|
|
406
|
|
—
|
|
6,056
|
|
|
|
Total real estate - construction
|
14,725
|
|
233,770
|
|
201,594
|
|
218,467
|
|
82,662
|
|
159,054
|
|
36,452
|
|
—
|
|
946,724
|
|
|
Real estate - construction(1)
|
|
|
|
|
|
|
|
|
|
|
Current period gross charge-offs
|
—
|
|
—
|
|
(39)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(39)
|
|
|
|
Current period recoveries
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
384
|
|
—
|
|
—
|
|
384
|
|
|
|
Total net (charge-offs) recoveries
|
—
|
|
—
|
|
(39)
|
|
—
|
|
—
|
|
384
|
|
—
|
|
—
|
|
345
|
|
|
Commercial and industrial
|
|
|
|
|
|
|
|
|
|
|
Pass
|
885,616
|
|
1,624,535
|
|
481,038
|
|
290,788
|
|
201,910
|
|
726,981
|
|
1,205,065
|
|
—
|
|
5,415,933
|
|
|
|
Special Mention
|
143
|
|
9,136
|
|
20,949
|
|
16,337
|
|
10,413
|
|
30,861
|
|
48,939
|
|
—
|
|
136,778
|
|
|
|
Substandard or Lower
|
—
|
|
2,847
|
|
7,167
|
|
13,503
|
|
10,638
|
|
34,805
|
|
54,043
|
|
—
|
|
123,003
|
|
|
|
Total commercial and industrial
|
885,759
|
|
1,636,518
|
|
509,154
|
|
320,628
|
|
222,961
|
|
792,647
|
|
1,308,047
|
|
—
|
|
5,675,714
|
|
|
Commercial and industrial
|
|
|
|
|
|
|
|
|
|
|
Current period gross charge-offs
|
—
|
|
—
|
|
(613)
|
|
(2,871)
|
|
(60)
|
|
(775)
|
|
—
|
|
—
|
|
(4,319)
|
|
|
|
Current period recoveries
|
—
|
|
—
|
|
37
|
|
126
|
|
36
|
|
570
|
|
—
|
|
—
|
|
769
|
|
|
|
Total net (charge-offs) recoveries
|
—
|
|
—
|
|
(576)
|
|
(2,745)
|
|
(24)
|
|
(205)
|
|
—
|
|
—
|
|
(3,550)
|
|
|
Real estate - commercial mortgage
|
|
|
|
|
|
|
|
|
|
|
Pass
|
200,885
|
|
993,776
|
|
926,352
|
|
670,684
|
|
767,399
|
|
2,800,409
|
|
49,207
|
|
321
|
|
6,409,033
|
|
|
|
Special Mention
|
—
|
|
23,282
|
|
30,629
|
|
92,800
|
|
75,417
|
|
248,403
|
|
2,406
|
|
—
|
|
472,937
|
|
|
|
Substandard or Lower
|
—
|
|
1,028
|
|
24,008
|
|
10,673
|
|
46,460
|
|
174,421
|
|
3,577
|
|
—
|
|
260,167
|
|
|
|
Total real estate - commercial mortgage
|
200,885
|
|
1,018,086
|
|
980,989
|
|
774,157
|
|
889,276
|
|
3,223,233
|
|
55,190
|
|
321
|
|
7,142,137
|
|
|
Real estate - commercial mortgage
|
|
|
|
|
|
|
|
|
|
|
Current period gross charge-offs
|
—
|
|
—
|
|
—
|
|
—
|
|
(1,719)
|
|
(118)
|
|
—
|
|
—
|
|
(1,837)
|
|
|
|
Current period recoveries
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
174
|
|
—
|
|
—
|
|
174
|
|
|
|
Total net (charge-offs) recoveries
|
—
|
|
—
|
|
—
|
|
—
|
|
(1,719)
|
|
56
|
|
—
|
|
—
|
|
(1,663)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
Pass
|
$
|
1,101,116
|
|
$
|
2,852,081
|
|
$
|
1,608,830
|
|
$
|
1,179,939
|
|
$
|
1,049,995
|
|
$
|
3,669,729
|
|
$
|
1,290,318
|
|
$
|
321
|
|
$
|
12,752,329
|
|
|
|
Special Mention
|
253
|
|
32,418
|
|
51,578
|
|
109,137
|
|
85,830
|
|
292,459
|
|
51,345
|
|
—
|
|
623,020
|
|
|
|
Substandard or Lower
|
—
|
|
3,875
|
|
31,329
|
|
24,176
|
|
59,074
|
|
212,746
|
|
58,026
|
|
—
|
|
389,226
|
|
|
|
Total
|
$
|
1,101,369
|
|
$
|
2,888,374
|
|
$
|
1,691,737
|
|
$
|
1,313,252
|
|
$
|
1,194,899
|
|
$
|
4,174,934
|
|
$
|
1,399,689
|
|
$
|
321
|
|
$
|
13,764,575
|
|
(1) Excludes real estate - construction - other.
The Corporation does not assign internal risk ratings to smaller balance, homogeneous loans, such as home equity, residential mortgage, construction loans to individuals secured by residential real estate, consumer and equipment lease financing. For these loans, the most relevant credit quality indicator is delinquency status. The migration of loans through the various delinquency status categories is a significant component of the ACL methodology for those loans, which bases the PD on this migration.
The following table summarizes designated internal risk rating categories by portfolio segment and loan class, by origination year, in the prior period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
|
Term Loans Amortized Cost Basis by Origination Year
|
Revolving Loans
|
Revolving Loans converted to Term Loans
|
|
|
|
|
(dollars in thousands)
|
Amortized
|
Amortized
|
|
|
|
2020
|
2019
|
2018
|
2017
|
2016
|
Prior
|
Cost Basis
|
Cost Basis
|
Total
|
|
Real estate - construction(1)
|
|
|
|
|
|
|
|
|
|
|
Pass
|
$
|
185,883
|
|
$
|
229,097
|
|
$
|
217,604
|
|
$
|
81,086
|
|
$
|
37,976
|
|
$
|
110,470
|
|
$
|
38,026
|
|
$
|
—
|
|
$
|
900,142
|
|
|
|
Special Mention
|
—
|
|
—
|
|
—
|
|
—
|
|
7,047
|
|
6,212
|
|
—
|
|
—
|
|
13,259
|
|
|
|
Substandard or Lower
|
—
|
|
447
|
|
—
|
|
2,000
|
|
753
|
|
1,637
|
|
632
|
|
—
|
|
5,469
|
|
|
|
Total real estate - construction
|
185,883
|
|
229,544
|
|
217,604
|
|
83,086
|
|
45,776
|
|
118,319
|
|
38,658
|
|
—
|
|
918,870
|
|
|
Real estate - construction(1)
|
|
|
|
|
|
|
|
|
|
|
Current period gross charge-offs
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(17)
|
|
—
|
|
—
|
|
(17)
|
|
|
|
Current period recoveries
|
—
|
|
—
|
|
—
|
|
—
|
|
68
|
|
5,054
|
|
—
|
|
—
|
|
5,122
|
|
|
|
Total net (charge-offs) recoveries
|
—
|
|
—
|
|
—
|
|
—
|
|
68
|
|
5,037
|
|
—
|
|
—
|
|
5,105
|
|
|
Commercial and industrial
|
|
|
|
|
|
|
|
|
|
|
Pass
|
2,283,533
|
|
508,541
|
|
298,567
|
|
214,089
|
|
208,549
|
|
596,646
|
|
1,278,689
|
|
—
|
|
5,388,614
|
|
|
|
Special Mention
|
6,633
|
|
23,834
|
|
29,167
|
|
10,945
|
|
11,506
|
|
25,960
|
|
45,994
|
|
—
|
|
154,039
|
|
|
|
Substandard or Lower
|
3,221
|
|
5,947
|
|
8,434
|
|
11,251
|
|
11,192
|
|
23,852
|
|
64,278
|
|
—
|
|
128,175
|
|
|
|
Total commercial and industrial
|
2,293,387
|
|
538,322
|
|
336,168
|
|
236,285
|
|
231,247
|
|
646,458
|
|
1,388,961
|
|
—
|
|
5,670,828
|
|
|
Commercial and industrial
|
|
|
|
|
|
|
|
|
|
|
Current period gross charge-offs
|
—
|
|
(114)
|
|
(30)
|
|
(488)
|
|
(393)
|
|
(520)
|
|
(17,370)
|
|
—
|
|
(18,915)
|
|
|
|
Current period recoveries
|
—
|
|
43
|
|
486
|
|
216
|
|
162
|
|
4,531
|
|
5,958
|
|
—
|
|
11,396
|
|
|
|
Total net (charge-offs) recoveries
|
—
|
|
(71)
|
|
456
|
|
(272)
|
|
(231)
|
|
4,011
|
|
(11,412)
|
|
—
|
|
(7,519)
|
|
|
Real estate - commercial mortgage
|
|
|
|
|
|
|
|
|
|
|
Pass
|
973,664
|
|
917,510
|
|
708,946
|
|
794,955
|
|
783,094
|
|
2,213,343
|
|
53,041
|
|
404
|
|
6,444,957
|
|
|
|
Special Mention
|
13,639
|
|
40,874
|
|
84,047
|
|
80,705
|
|
89,112
|
|
167,424
|
|
2,364
|
|
—
|
|
478,165
|
|
|
|
Substandard or Lower
|
1,238
|
|
6,681
|
|
6,247
|
|
39,027
|
|
22,605
|
|
103,007
|
|
2,225
|
|
940
|
|
181,970
|
|
|
|
Total real estate - commercial mortgage
|
988,541
|
|
965,065
|
|
799,240
|
|
914,687
|
|
894,811
|
|
2,483,774
|
|
57,630
|
|
1,344
|
|
7,105,092
|
|
|
Real estate - commercial mortgage
|
|
|
|
|
|
|
|
|
|
|
Current period gross charge-offs
|
(60)
|
|
(21)
|
|
(36)
|
|
(2,515)
|
|
(29)
|
|
(1,547)
|
|
(17)
|
|
—
|
|
(4,225)
|
|
|
|
Current period recoveries
|
—
|
|
6
|
|
—
|
|
—
|
|
1
|
|
1,020
|
|
—
|
|
—
|
|
1,027
|
|
|
|
Total net (charge-offs) recoveries
|
(60)
|
|
(15)
|
|
(36)
|
|
(2,515)
|
|
(28)
|
|
(527)
|
|
(17)
|
|
—
|
|
(3,198)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
Pass
|
$
|
3,443,080
|
|
$
|
1,655,148
|
|
$
|
1,225,117
|
|
$
|
1,090,130
|
|
$
|
1,029,619
|
|
$
|
2,920,459
|
|
$
|
1,369,756
|
|
$
|
404
|
|
$
|
12,733,713
|
|
|
|
Special Mention
|
20,272
|
|
64,708
|
|
113,214
|
|
91,650
|
|
107,665
|
|
199,596
|
|
48,358
|
|
—
|
|
645,463
|
|
|
|
Substandard or Lower
|
4,459
|
|
13,075
|
|
14,681
|
|
52,278
|
|
34,550
|
|
128,496
|
|
67,135
|
|
940
|
|
315,614
|
|
|
|
Total
|
$
|
3,467,811
|
|
$
|
1,732,931
|
|
$
|
1,353,012
|
|
$
|
1,234,058
|
|
$
|
1,171,834
|
|
$
|
3,248,551
|
|
$
|
1,485,249
|
|
$
|
1,344
|
|
$
|
13,694,790
|
|
(1) Excludes real estate - construction - other.
The Corporation considers the performance of the loan portfolio and its impact on the ACL. For certain loan classes, the Corporation evaluates credit quality based on the aging status of the loan. The following tables present the amortized cost of these loans based on payment activity, by origination year, for the periods shown:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
|
|
Term Loans Amortized Cost Basis by Origination Year
|
Revolving Loans
|
Revolving Loans converted to Term Loans
|
|
|
|
|
(dollars in thousands)
|
Amortized
|
Amortized
|
|
|
|
|
2021
|
2020
|
2019
|
2018
|
2017
|
Prior
|
Cost Basis
|
Cost Basis
|
Total
|
|
Real estate - home equity
|
|
|
|
|
|
|
|
|
|
|
|
Performing
|
$
|
4,491
|
|
$
|
29,767
|
|
$
|
8,140
|
|
$
|
12,312
|
|
$
|
9,997
|
|
$
|
119,037
|
|
$
|
948,645
|
|
$
|
4,845
|
|
$
|
1,137,234
|
|
|
|
Nonperforming
|
—
|
|
—
|
|
88
|
|
23
|
|
264
|
|
2,597
|
|
9,545
|
|
207
|
|
12,724
|
|
|
|
Total real estate - home equity
|
4,491
|
|
29,767
|
|
8,228
|
|
12,335
|
|
10,261
|
|
121,634
|
|
958,190
|
|
5,052
|
|
1,149,958
|
|
|
Real estate - home equity
|
|
|
|
|
|
|
|
|
|
|
|
Current period gross charge-offs
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(212)
|
|
—
|
|
(212)
|
|
|
|
Current period recoveries
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
51
|
|
—
|
|
51
|
|
|
|
Total net (charge-offs) recoveries
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(161)
|
|
—
|
|
(161)
|
|
|
Real estate - residential mortgage
|
|
|
|
|
|
|
|
|
|
|
Performing
|
358,906
|
|
1,240,446
|
|
513,892
|
|
181,509
|
|
292,014
|
|
630,996
|
|
—
|
|
—
|
|
3,217,763
|
|
|
|
Nonperforming
|
—
|
|
3,927
|
|
1,654
|
|
3,450
|
|
2,945
|
|
24,319
|
|
—
|
|
—
|
|
36,295
|
|
|
|
Total real estate - residential mortgage
|
358,906
|
|
1,244,373
|
|
515,546
|
|
184,959
|
|
294,959
|
|
655,315
|
|
—
|
|
—
|
|
3,254,058
|
|
|
Real estate - residential mortgage
|
|
|
|
|
|
|
|
|
|
|
Current period gross charge-offs
|
—
|
|
—
|
|
(40)
|
|
(47)
|
|
—
|
|
(105)
|
|
—
|
|
—
|
|
(192)
|
|
|
|
Current period recoveries
|
—
|
|
—
|
|
—
|
|
3
|
|
1
|
|
—
|
|
92
|
|
—
|
|
96
|
|
|
|
Total net (charge-offs) recoveries
|
—
|
|
—
|
|
(40)
|
|
(44)
|
|
1
|
|
(105)
|
|
92
|
|
—
|
|
(96)
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
Performing
|
27,910
|
|
103,924
|
|
90,185
|
|
85,837
|
|
38,190
|
|
56,885
|
|
48,371
|
|
—
|
|
451,302
|
|
|
|
Nonperforming
|
—
|
|
127
|
|
37
|
|
63
|
|
35
|
|
243
|
|
50
|
|
—
|
|
555
|
|
|
|
Total consumer
|
27,910
|
|
104,051
|
|
90,222
|
|
85,900
|
|
38,225
|
|
57,128
|
|
48,421
|
|
—
|
|
451,857
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
Current period gross charge-offs
|
—
|
|
(95)
|
|
(94)
|
|
(111)
|
|
(79)
|
|
(229)
|
|
(27)
|
|
—
|
|
(635)
|
|
|
|
Current period recoveries
|
—
|
|
33
|
|
5
|
|
11
|
|
19
|
|
321
|
|
—
|
|
—
|
|
389
|
|
|
|
Total net (charge-offs) recoveries
|
—
|
|
(62)
|
|
(89)
|
|
(100)
|
|
(60)
|
|
92
|
|
(27)
|
|
—
|
|
(246)
|
|
|
Equipment lease financing and other
|
|
|
|
|
|
|
|
|
|
|
Performing
|
25,663
|
|
68,641
|
|
51,804
|
|
36,350
|
|
22,506
|
|
13,054
|
|
—
|
|
—
|
|
218,018
|
|
|
|
Nonperforming
|
—
|
|
—
|
|
—
|
|
—
|
|
15,724
|
|
26
|
|
—
|
|
—
|
|
15,750
|
|
|
|
Total leasing and other
|
25,663
|
|
68,641
|
|
51,804
|
|
36,350
|
|
38,230
|
|
13,080
|
|
—
|
|
—
|
|
233,768
|
|
|
Equipment lease financing and other
|
|
|
|
|
|
|
|
|
|
|
Current period gross charge-offs
|
—
|
|
(968)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(968)
|
|
|
|
Current period recoveries
|
—
|
|
120
|
|
39
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
159
|
|
|
|
Total net (charge-offs) recoveries
|
—
|
|
(848)
|
|
39
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(809)
|
|
|
Construction - other
|
|
|
|
|
|
|
|
|
|
|
|
Performing
|
17,458
|
|
97,829
|
|
16,172
|
|
4,755
|
|
—
|
|
16
|
|
—
|
|
—
|
|
136,230
|
|
|
|
Nonperforming
|
—
|
|
—
|
|
364
|
|
—
|
|
176
|
|
—
|
|
—
|
|
—
|
|
540
|
|
|
|
Total construction - other
|
17,458
|
|
97,829
|
|
16,536
|
|
4,755
|
|
176
|
|
16
|
|
—
|
|
—
|
|
136,770
|
|
|
Construction - other
|
|
|
|
|
|
|
|
|
|
|
|
Current period gross charge-offs
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
Current period recoveries
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
Total net (charge-offs) recoveries
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Performing
|
$
|
434,428
|
|
$
|
1,540,607
|
|
$
|
680,193
|
|
$
|
320,763
|
|
$
|
362,707
|
|
$
|
819,988
|
|
$
|
997,016
|
|
$
|
4,845
|
|
$
|
5,160,547
|
|
|
|
Nonperforming
|
—
|
|
4,054
|
|
2,143
|
|
3,536
|
|
19,144
|
|
27,185
|
|
9,595
|
|
207
|
|
65,864
|
|
|
|
Total
|
$
|
434,428
|
|
$
|
1,544,661
|
|
$
|
682,336
|
|
$
|
324,299
|
|
$
|
381,851
|
|
$
|
847,173
|
|
$
|
1,006,611
|
|
$
|
5,052
|
|
$
|
5,226,411
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
|
Term Loans Amortized Cost Basis by Origination Year
|
Revolving Loans
|
Revolving Loans converted to Term Loans
|
|
|
|
|
(dollars in thousands)
|
Amortized
|
Amortized
|
|
|
|
|
2020
|
2019
|
2018
|
2017
|
2016
|
Prior
|
Cost Basis
|
Cost Basis
|
Total
|
|
Real estate - home equity
|
|
|
|
|
|
|
|
|
|
|
|
Performing
|
$
|
31,445
|
|
$
|
8,176
|
|
$
|
13,906
|
|
$
|
11,024
|
|
$
|
11,667
|
|
$
|
126,749
|
|
$
|
982,285
|
|
$
|
5,321
|
|
$
|
1,190,573
|
|
|
|
Nonperforming
|
—
|
|
88
|
|
23
|
|
233
|
|
221
|
|
2,290
|
|
9,485
|
|
—
|
|
12,340
|
|
|
|
Total real estate - home equity
|
31,445
|
|
8,264
|
|
13,929
|
|
11,257
|
|
11,888
|
|
129,039
|
|
991,770
|
|
5,321
|
|
1,202,913
|
|
|
Real estate - home equity
|
|
|
|
|
|
|
|
|
|
|
|
Current period gross charge-offs
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(34)
|
|
(1,159)
|
|
—
|
|
(1,193)
|
|
|
|
Current period recoveries
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
138
|
|
366
|
|
—
|
|
504
|
|
|
|
Total net (charge-offs) recoveries
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
104
|
|
(793)
|
|
—
|
|
(689)
|
|
|
Real estate - residential mortgage
|
|
|
|
|
|
|
|
|
|
|
Performing
|
1,255,532
|
|
585,878
|
|
228,398
|
|
341,563
|
|
264,990
|
|
434,889
|
|
—
|
|
—
|
|
3,111,250
|
|
|
|
Nonperforming
|
217
|
|
2,483
|
|
3,177
|
|
2,483
|
|
722
|
|
21,583
|
|
—
|
|
—
|
|
30,665
|
|
|
|
Total real estate - residential mortgage
|
1,255,749
|
|
588,361
|
|
231,575
|
|
344,046
|
|
265,712
|
|
456,472
|
|
—
|
|
—
|
|
3,141,915
|
|
|
Real estate - residential mortgage
|
|
|
|
|
|
|
|
|
|
|
Current period gross charge-offs
|
—
|
|
(68)
|
|
(101)
|
|
(190)
|
|
(7)
|
|
(254)
|
|
—
|
|
—
|
|
(620)
|
|
|
|
Current period recoveries
|
—
|
|
68
|
|
16
|
|
1
|
|
1
|
|
405
|
|
—
|
|
—
|
|
491
|
|
|
|
Total net (charge-offs) recoveries
|
—
|
|
—
|
|
(85)
|
|
(189)
|
|
(6)
|
|
151
|
|
—
|
|
—
|
|
(129)
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
Performing
|
114,399
|
|
98,587
|
|
95,072
|
|
43,334
|
|
25,804
|
|
36,086
|
|
52,698
|
|
42
|
|
466,022
|
|
|
|
Nonperforming
|
168
|
|
19
|
|
124
|
|
141
|
|
114
|
|
150
|
|
34
|
|
—
|
|
750
|
|
|
|
Total consumer
|
114,567
|
|
98,606
|
|
95,196
|
|
43,475
|
|
25,918
|
|
36,236
|
|
52,732
|
|
42
|
|
466,772
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
Current period gross charge-offs
|
(134)
|
|
(542)
|
|
(524)
|
|
(444)
|
|
(489)
|
|
(769)
|
|
(498)
|
|
—
|
|
(3,400)
|
|
|
|
Current period recoveries
|
—
|
|
64
|
|
165
|
|
159
|
|
94
|
|
101
|
|
1,292
|
|
—
|
|
1,875
|
|
|
|
Total net (charge-offs) recoveries
|
(134)
|
|
(478)
|
|
(359)
|
|
(285)
|
|
(395)
|
|
(668)
|
|
794
|
|
—
|
|
(1,525)
|
|
|
Equipment lease financing and other
|
|
|
|
|
|
|
|
|
|
|
Performing
|
102,324
|
|
65,303
|
|
49,453
|
|
34,995
|
|
15,631
|
|
5,040
|
|
—
|
|
—
|
|
272,746
|
|
|
|
Nonperforming
|
—
|
|
—
|
|
30
|
|
15,983
|
|
142
|
|
282
|
|
—
|
|
—
|
|
16,437
|
|
|
|
Total leasing and other
|
102,324
|
|
65,303
|
|
49,483
|
|
50,978
|
|
15,773
|
|
5,322
|
|
—
|
|
—
|
|
289,183
|
|
|
Equipment lease financing and other
|
|
|
|
|
|
|
|
|
|
|
Current period gross charge-offs
|
(606)
|
|
(1,581)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(2,187)
|
|
|
|
Current period recoveries
|
185
|
|
349
|
|
21
|
|
18
|
|
11
|
|
21
|
|
—
|
|
—
|
|
605
|
|
|
|
Total net (charge-offs) recoveries
|
(421)
|
|
(1,232)
|
|
21
|
|
18
|
|
11
|
|
21
|
|
—
|
|
—
|
|
(1,582)
|
|
|
Construction - other
|
|
|
|
|
|
|
|
|
|
|
|
Performing
|
96,444
|
|
24,888
|
|
6,822
|
|
—
|
|
16
|
|
—
|
|
—
|
|
—
|
|
128,170
|
|
|
|
Nonperforming
|
—
|
|
—
|
|
—
|
|
178
|
|
—
|
|
—
|
|
—
|
|
—
|
|
178
|
|
|
|
Total construction - other
|
96,444
|
|
24,888
|
|
6,822
|
|
178
|
|
16
|
|
—
|
|
—
|
|
—
|
|
128,348
|
|
|
Construction - other
|
|
|
|
|
|
|
|
|
|
|
|
Current period gross charge-offs
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
Current period recoveries
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
|
Total net (charge-offs) recoveries
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Performing
|
$
|
1,600,144
|
|
$
|
782,832
|
|
$
|
393,651
|
|
$
|
430,916
|
|
$
|
318,108
|
|
$
|
602,764
|
|
$
|
1,034,983
|
|
$
|
5,363
|
|
$
|
5,168,761
|
|
|
|
Nonperforming
|
385
|
|
2,590
|
|
3,354
|
|
19,018
|
|
1,199
|
|
24,305
|
|
9,519
|
|
—
|
|
60,370
|
|
|
|
Total
|
$
|
1,600,529
|
|
$
|
785,422
|
|
$
|
397,005
|
|
$
|
449,934
|
|
$
|
319,307
|
|
$
|
627,069
|
|
$
|
1,044,502
|
|
$
|
5,363
|
|
$
|
5,229,131
|
|
The following table presents non-performing assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2021
|
|
December 31,
2020
|
|
|
(in thousands)
|
|
Non-accrual loans
|
$
|
143,889
|
|
|
$
|
137,198
|
|
|
Loans 90 days or more past due and still accruing
|
8,559
|
|
|
9,929
|
|
|
Total non-performing loans
|
152,448
|
|
|
147,127
|
|
|
OREO (1)
|
3,664
|
|
|
4,178
|
|
|
Total non-performing assets
|
$
|
156,112
|
|
|
$
|
151,305
|
|
(1) Excludes $7.6 million and $8.1 million of residential mortgage properties for which formal foreclosure proceedings were in process as of March 31, 2021 and December 31, 2020, respectively.
The following tables present the aging of the amortized cost basis of loans, by class segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-59
|
|
60-89
|
|
≥ 90 Days
|
|
|
|
|
|
|
|
|
|
|
Days Past
|
|
Days Past
|
|
Past Due
|
|
|
|
Non-
|
|
|
|
|
|
|
Due
|
|
Due
|
|
and Accruing
|
|
|
|
Accrual
|
|
Current
|
|
Total
|
|
|
(in thousands)
|
|
March 31, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate – commercial mortgage
|
$
|
9,596
|
|
|
$
|
1,516
|
|
|
$
|
2,187
|
|
|
|
|
$
|
51,977
|
|
|
$
|
7,076,861
|
|
|
$
|
7,142,137
|
|
|
Commercial and industrial
|
1,718
|
|
|
1,894
|
|
|
219
|
|
|
|
|
31,652
|
|
|
5,640,231
|
|
|
5,675,714
|
|
|
Real estate – residential mortgage
|
8,485
|
|
|
933
|
|
|
2,750
|
|
|
|
|
33,401
|
|
|
3,208,489
|
|
|
3,254,058
|
|
|
Real estate – home equity
|
2,795
|
|
|
1,062
|
|
|
3,148
|
|
|
|
|
9,368
|
|
|
1,133,585
|
|
|
1,149,958
|
|
|
Real estate – construction
|
170
|
|
|
—
|
|
|
—
|
|
|
|
|
1,441
|
|
|
1,081,883
|
|
|
1,083,494
|
|
|
Consumer
|
1,224
|
|
|
491
|
|
|
255
|
|
|
|
|
301
|
|
|
449,586
|
|
|
451,857
|
|
|
Equipment lease financing and other
|
101
|
|
|
142
|
|
|
—
|
|
|
|
|
15,749
|
|
|
217,776
|
|
|
233,768
|
|
|
Total
|
$
|
24,089
|
|
|
$
|
6,038
|
|
|
$
|
8,559
|
|
|
|
|
$
|
143,889
|
|
|
$
|
18,808,411
|
|
|
$
|
18,990,986
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-59 Days Past
Due
|
|
60-89
Days Past
Due
|
|
≥ 90 Days
Past Due
and
Accruing
|
|
Non-
accrual
|
|
Current
|
|
Total
|
|
|
(in thousands)
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate – commercial mortgage
|
$
|
14,999
|
|
|
$
|
9,273
|
|
|
$
|
1,177
|
|
|
$
|
51,470
|
|
|
$
|
7,028,173
|
|
|
$
|
7,105,092
|
|
|
Commercial and industrial
|
11,285
|
|
|
1,068
|
|
|
616
|
|
|
31,993
|
|
|
5,625,866
|
|
|
5,670,828
|
|
|
Real estate – residential mortgage
|
22,281
|
|
|
7,675
|
|
|
4,687
|
|
|
26,107
|
|
|
3,081,165
|
|
|
3,141,915
|
|
|
Real estate – home equity
|
5,622
|
|
|
1,654
|
|
|
2,753
|
|
|
9,588
|
|
|
1,183,296
|
|
|
1,202,913
|
|
|
Real estate – construction
|
1,938
|
|
|
—
|
|
|
155
|
|
|
1,395
|
|
|
1,043,730
|
|
|
1,047,218
|
|
|
Consumer
|
3,036
|
|
|
501
|
|
|
417
|
|
|
332
|
|
|
462,486
|
|
|
466,772
|
|
|
Equipment lease financing and other
|
838
|
|
|
150
|
|
|
124
|
|
|
16,313
|
|
|
248,657
|
|
|
266,082
|
|
|
Total
|
$
|
59,999
|
|
|
$
|
20,321
|
|
|
$
|
9,929
|
|
|
$
|
137,198
|
|
|
$
|
18,673,373
|
|
|
$
|
18,900,820
|
|
Collateral-Dependent Loans
A financial asset is considered to be collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. For all classes of financial assets deemed collateral-dependent, the Corporation elected the practical expedient to estimate expected credit losses based on the collateral’s fair value less cost to sell. In most cases, the Corporation records a partial charge-off to reduce the loan’s carrying value to the collateral’s fair value less cost to sell. Substantially all of the collateral supporting collateral-dependent financial assets consists
of various types of real estate, including residential properties, commercial properties, such as retail centers, office buildings, and lodging, agriculture land, and vacant land.
Troubled Debt Restructurings
The following table presents TDRs, by class segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2021
|
|
December 31,
2020
|
|
|
(in thousands)
|
|
Real estate - commercial mortgage
|
$
|
27,961
|
|
|
$
|
28,451
|
|
|
Commercial and industrial
|
7,041
|
|
|
6,982
|
|
|
Real estate - residential mortgage
|
18,214
|
|
|
18,602
|
|
|
Real estate - home equity
|
13,674
|
|
|
14,391
|
|
|
Real estate - construction
|
154
|
|
|
—
|
|
|
Consumer
|
5
|
|
|
—
|
|
|
|
|
|
|
|
Total accruing TDRs
|
67,049
|
|
|
68,426
|
|
|
Non-accrual TDRs (1)
|
44,986
|
|
|
35,755
|
|
|
Total TDRs
|
$
|
112,035
|
|
|
$
|
104,181
|
|
(1)Included in non-accrual loans in the preceding table detailing non-performing assets.
The following table presents TDRs, by class segment, for loans that were modified during the three months ended March 31, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
Number of Loans
|
|
Recorded Investment
|
|
Number of Loans
|
|
Recorded Investment
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Commercial and industrial
|
4
|
|
|
$
|
1,894
|
|
|
1
|
|
|
$
|
74
|
|
|
|
|
|
|
|
|
|
|
Real estate - commercial mortgage
|
2
|
|
|
4,162
|
|
|
1
|
|
|
392
|
|
|
|
|
|
|
|
|
|
|
Real estate - residential mortgage
|
23
|
|
|
7,626
|
|
|
7
|
|
|
660
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate - home equity
|
5
|
|
|
148
|
|
|
8
|
|
|
577
|
|
|
|
|
|
|
|
|
|
|
Real estate - construction
|
1
|
|
|
154
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
35
|
|
|
$
|
13,984
|
|
|
17
|
|
|
$
|
1,703
|
|
|
|
|
|
|
|
|
|
Restructured loan modifications may include payment schedule modifications, interest rate concessions, bankruptcies, principal reduction or some combination of these concessions. The restructured loan modifications primarily included maturity date extensions, rate modifications and payment schedule modifications.
In accordance with regulatory guidance, payment schedule modifications granted after March 13, 2020 to borrowers impacted by the effects of the COVID-19 pandemic and who were not delinquent at the time of the payment schedule modifications have been excluded from TDRs. As of March 31, 2021 and 2020, payment schedule modifications having a recorded investment of $3.6 billion and $1.0 billion, respectively, were excluded from TDRs based on this regulatory guidance.
NOTE 5 – Mortgage Servicing Rights
The following table summarizes the changes in MSRs, which are included in other assets on the consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
(in thousands)
|
|
Amortized cost:
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
$
|
38,745
|
|
|
$
|
39,267
|
|
|
|
|
|
|
Originations of MSRs
|
2,811
|
|
|
1,478
|
|
|
|
|
|
|
Amortization
|
(3,753)
|
|
|
(1,891)
|
|
|
|
|
|
|
Balance at end of period
|
$
|
37,803
|
|
|
$
|
38,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance:
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
$
|
(10,500)
|
|
|
$
|
—
|
|
|
|
|
|
|
Reduction (addition) to valuation allowance
|
6,100
|
|
|
(1,100)
|
|
|
|
|
|
|
Balance at end of period
|
$
|
(4,400)
|
|
|
$
|
(1,100)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net MSRs at end of period
|
$
|
33,403
|
|
|
$
|
37,754
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MSRs represent the economic value of contractual rights to service mortgage loans that have been sold. The total portfolio of mortgage loans serviced by the Corporation for unrelated third parties was $4.6 billion and $4.7 billion as of March 31, 2021 and December 31, 2020, respectively. Actual and expected prepayments of the underlying mortgage loans can impact the fair values of the MSRs. The Corporation accounts for MSRs at the lower of amortized cost or fair value.
The fair value of MSRs is estimated by discounting the estimated cash flows from servicing income, net of expense, over the expected life of the underlying loans at a discount rate commensurate with the risk associated with these assets. Expected life is based on the contractual terms of the loans, as adjusted for prepayment projections. The fair values of MSRs were $33.4 million and $28.2 million at March 31, 2021 and December 31, 2020, respectively. Based on its fair value analysis as of March 31, 2021, the Corporation determined that a $6.1 million reduction to the valuation allowance was required for the three months ended March 31, 2021, resulting in a total valuation allowance of $4.4 million as of March 31, 2021. The decrease to the valuation allowance was recorded as an increase to mortgage banking income on the consolidated statements of income for the three months ended March 31, 2021.
NOTE 6 – Derivative Financial Instruments
The Corporation manages its exposure to certain interest rate and foreign currency risks through the use of derivatives. Certain of the Corporation's outstanding derivative contracts are designated as hedges, and none are entered into for speculative purposes. The Corporation does enter into derivative contracts that are intended to economically hedge certain of its risks, even if hedge accounting does not apply or the Corporation elects not to apply hedge accounting.
The Corporation records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Corporation has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. For derivatives where hedge accounting is applied, changes in fair value are recognized in other comprehensive income. For derivatives where hedge accounting does not apply, changes in fair value are recognized in earnings as components of interest income, non-interest income or non-interest expense on the consolidated statements of income.
Derivative contracts create counterparty credit risk with both the Corporation's customers and with institutional derivative counterparties. The Corporation manages counterparty credit risk through its credit approval processes, monitoring procedures
and obtaining adequate collateral, when the Corporation determines it is appropriate to do so and in accordance with counterparty contracts.
For each of the derivatives, gross derivative assets and liabilities are recorded in other assets and other liabilities, respectively, on the consolidated balance sheets. Related gains and losses on these derivative instruments are recorded in other changes, net on the consolidated statement of cash flows.
Mortgage Banking Derivatives
In connection with its mortgage banking activities, the Corporation enters into commitments to originate certain fixed-rate residential mortgage loans for customers, also referred to as interest rate locks. In addition, the Corporation enters into forward commitments for the future sales or purchases of mortgage-backed securities to or from third-party counterparties to hedge the effect of changes in interest rates on the values of both the interest rate locks and mortgage loans held for sale. Forward sales commitments may also be in the form of commitments to sell individual mortgage loans at a fixed price at a future date. The amount necessary to settle each interest rate lock is based on the price that secondary market investors would pay for loans with similar characteristics, including interest rate and term, as of the date fair value is measured.
Interest Rate Swaps - Non-Designated Hedges
The Corporation enters into interest rate swaps with certain qualifying commercial loan customers to meet their interest rate risk management needs. The Corporation simultaneously enters into interest rate swaps with dealer counterparties, with identical notional amounts and terms. The net result of these interest rate swaps is that the customer pays a fixed rate of interest and the Corporation receives a floating rate. As the interest rate derivatives associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings. The Corporation’s existing credit derivatives result from participations in interest rate swaps provided by external lenders as part of loan participation arrangements, therefore, are not used to manage interest rate risk in the Corporation’s assets or liabilities. Derivatives not designated as hedges are not speculative and result from a service the Corporation provides to certain lenders which participate in loans. The Corporation is required to clear all eligible interest rate swap contracts with a clearing agent and is subject to the regulations of the Commodity Futures Trading Commission.
Cash Flow Hedges of Interest Rate Risk
The Corporation’s objectives in using interest rate derivatives are to reduce volatility in net interest income and to manage its exposure to interest rate movements. To accomplish this objective, the Corporation primarily uses interest rate swaps as part of its interest rate risk management strategy. During the first quarter of 2021, the Corporation entered into interest rate swaps designated as cash flow hedges to hedge the variable cash flows associated with existing floating rate loans. These hedge contracts involve the receipt of fixed-rate amounts from a counterparty in exchange for the Corporation making floating-rate payments over the life of the agreements without exchange of the underlying notional amount.
For derivatives designated and that qualify as cash flow hedges of interest rate risk, the unrealized gain or loss on the derivative is recorded in AOCI and subsequently reclassified into interest income in the same period during which the hedged transaction affects earnings. Amounts reported in AOCI related to derivatives will be reclassified to interest income as interest payments are made on the Corporation’s variable-rate liabilities. During the next twelve months, the Corporation estimates that an additional $3.4 million will be reclassified as an increase to interest income.
Foreign Exchange Contracts
The Corporation enters into foreign exchange contracts to accommodate the needs of its customers. Foreign exchange contracts are commitments to buy or sell foreign currency on a specific date at a contractual price. The Corporation limits its foreign exchange exposure with customers by entering into contracts with institutional counterparties to mitigate its foreign exchange risk. The Corporation also holds certain amounts of foreign currency with international correspondent banks ("Foreign Currency Nostro Accounts"). The Corporation limits the total overnight net foreign currency open positions, which is defined as an aggregate of all outstanding contracts and Foreign Currency Nostro Account balances, to $500,000.
The following table presents a summary of the notional amounts and fair values of derivative financial instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
|
Notional
Amount
|
|
Asset
(Liability)
Fair Value
|
|
Notional
Amount
|
|
Asset
(Liability)
Fair Value
|
|
|
(in thousands)
|
|
Interest Rate Locks with Customers
|
|
|
|
|
|
|
|
|
Positive fair values
|
$
|
274,909
|
|
|
$
|
2,198
|
|
|
$
|
382,903
|
|
|
$
|
8,034
|
|
|
Negative fair values
|
40,007
|
|
|
(316)
|
|
|
3,154
|
|
|
(35)
|
|
|
|
|
|
|
|
|
|
|
|
Forward Commitments
|
|
|
|
|
|
|
|
|
Positive fair values
|
91,264
|
|
|
4,650
|
|
|
—
|
|
|
—
|
|
|
Negative fair values
|
—
|
|
|
—
|
|
|
292,262
|
|
|
(2,263)
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Swaps with Customers
|
|
|
|
|
|
|
|
|
Positive fair values
|
3,169,658
|
|
|
179,934
|
|
|
3,834,062
|
|
|
330,951
|
|
|
Negative fair values
|
769,300
|
|
|
(9,721)
|
|
|
45,640
|
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Swaps with Dealer Counterparties
|
|
|
|
|
|
|
|
|
Positive fair values
|
769,300
|
|
|
9,721
|
|
|
45,640
|
|
|
2
|
|
|
Negative fair values
|
3,169,658
|
|
|
(98,368)
|
|
|
3,834,062
|
|
|
(165,205)
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Swaps used in Cash Flow Hedges
|
|
|
|
|
|
|
|
|
Positive fair values
|
—
|
|
|
305
|
|
|
—
|
|
|
—
|
|
|
Negative fair values
|
500,000
|
|
|
(492)
|
|
|
—
|
|
|
—
|
|
|
Foreign Exchange Contracts with Customers
|
|
|
|
|
|
|
|
|
Positive fair values
|
12,196
|
|
|
280
|
|
|
1,121
|
|
|
5
|
|
|
Negative fair values
|
552
|
|
|
(14)
|
|
|
5,963
|
|
|
(275)
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Exchange Contracts with Correspondent Banks
|
|
|
|
|
|
|
|
|
Positive fair values
|
2,821
|
|
|
43
|
|
|
6,372
|
|
|
318
|
|
|
Negative fair values
|
12,213
|
|
|
(258)
|
|
|
1,422
|
|
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents the effect of fair value and cash flow hedge accounting on accumulated other comprehensive income for the three months ended March 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Loss Recognized in OCI on Derivative
|
|
Amount of Loss Recognized in OCI Included Component
|
|
Amount of Gain or (Loss) Recognized in OCI Excluded Component
|
|
Location of Gain or (Loss) Recognized from AOCI into Income
|
|
Amount of Gain Reclassified from AOCI into Income
|
|
Amount of Gain Reclassified from AOCI into Income Included Component
|
|
Amount of Gain or (Loss) Reclassified from AOCI into Income Excluded Component
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Derivatives in Cash Flow Hedging Relationships:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Products
|
$
|
(2,065)
|
|
|
$
|
(2,065)
|
|
|
$
|
—
|
|
|
Interest Income
|
|
$
|
144
|
|
|
$
|
144
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents the effect of fair value and cash flow hedge accounting on the consolidated statements of income for the three months ended March 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statements of Income Classification
|
|
|
Interest Income
|
|
|
|
|
|
|
|
|
Total amounts of income line items presented in the consolidated statements of income in which the effects of fair value or cash flow hedges are recorded
|
$
|
144
|
|
|
|
|
The effects of fair value and cash flow hedging:
|
|
|
|
|
Gain or (loss) on cash flow hedging relationships
|
—
|
|
|
|
|
Interest contracts:
|
|
|
|
|
Amount of gain reclassified from AOCI into income
|
144
|
|
|
|
|
Amount of gain or (loss) reclassified from AOCI into income as a result that a forecasted transaction is no longer probable of occurring
|
—
|
|
|
|
|
Amount of Gain Reclassified from AOCI into Income - Included Component
|
144
|
|
|
|
|
Amount of Gain or (Loss) Reclassified from AOCI into Income - Excluded Component
|
—
|
|
|
|
The following table presents a summary of the fair value gains (losses) on derivative financial instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statements of Income Classification
|
|
Three months ended March 31
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Mortgage banking derivatives (1)
|
Mortgage banking income
|
|
$
|
796
|
|
|
$
|
1,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
Other expense
|
|
(104)
|
|
|
72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
Other income
|
|
8
|
|
|
119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net fair value gains on derivative financial instruments
|
|
$
|
700
|
|
|
$
|
1,231
|
|
|
|
|
|
(1) Includes interest rate locks with customers and forward commitments.
Fair Value Option
The Corporation has elected to measure mortgage loans held for sale at fair value. The following table presents a summary of mortgage loans held for sale and the impact of the fair value election on the consolidated financial statements as of the periods shown:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2021
|
|
December 31,
2020
|
|
|
(in thousands)
|
|
Amortized cost (1)
|
$
|
33,801
|
|
|
$
|
80,662
|
|
|
Fair value
|
34,092
|
|
|
83,886
|
|
(1) Cost basis of mortgage loans held for sale represents the unpaid principal balance.
Losses related to changes in fair values of mortgage loans held for sale were $2.9 million for the three months ended March 31, 2021 compared to gains of $733,000 for the three months ended March 31, 2020.
Balance Sheet Offsetting
Although certain financial assets and liabilities may be eligible for offset on the consolidated balance sheets because they are subject to master netting arrangements or similar agreements, the Corporation elects to not offset such qualifying assets and liabilities.
The Corporation is a party to interest rate swaps with financial institution counterparties and customers. Under these agreements, the Corporation has the right to net-settle multiple contracts with the same counterparty in the event of default on,
or termination of, any one contract. Cash collateral is posted by the party with a net liability position in accordance with contract thresholds and can be used to settle the fair value of the interest rate swap agreements in the event of default. A daily settlement occurs through a clearing agent for changes in the fair value of centrally cleared derivatives. Not all of the derivatives are required to be cleared daily through a clearing agent. As a result, the total fair values of interest rate swap derivative assets and liabilities recognized on the consolidated balance sheet are not equal and offsetting.
The Corporation is also a party to foreign currency exchange contracts with financial institution counterparties, under which the Corporation has the right to net-settle multiple contracts with the same counterparty in the event of default on, or termination of, any one contract. As with interest rate swaps, collateral is posted by the party with a net liability position in accordance with contract thresholds and can be used to settle the fair value of the foreign currency exchange contracts in the event of default.
The Corporation also enters into agreements with customers in which it sells securities subject to an obligation to repurchase the same or similar securities, referred to as repurchase agreements. Under these agreements, the Corporation may transfer legal control over the assets but still maintain effective control through agreements that both entitle and obligate the Corporation to repurchase the assets. Therefore, repurchase agreements are reported as secured borrowings, classified in short-term borrowings on the consolidated balance sheets, while the securities underlying the repurchase agreements remain classified with AFS investment securities on the consolidated balance sheets. The Corporation has no intention of setting off these amounts, therefore, these repurchase agreements are not eligible for offset.
As of March 31, 2021, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $492,000. As of March 31, 2021, the Company has minimum collateral posting thresholds with certain of its derivative counterparties and has posted collateral of $143.1 million. If the Company had breached any of these provisions at March 31, 2021, it could have been required to settle its obligations under the agreements at their termination value of $492,000.
The following table presents the Corporation's financial instruments that are eligible for offset, and the effects of offsetting, on the consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Amounts
|
|
Gross Amounts Not Offset
|
|
|
|
|
Recognized
|
|
on the Consolidated
|
|
|
|
|
on the
|
|
Balance Sheets
|
|
|
|
|
Consolidated
|
|
Financial
|
|
Cash
|
|
Net
|
|
|
Balance Sheets
|
|
Instruments(1)
|
|
Collateral (2)
|
|
Amount
|
|
|
(in thousands)
|
|
March 31, 2021
|
|
|
|
|
|
|
|
|
Interest rate swap derivative assets
|
$
|
189,960
|
|
|
$
|
(11,779)
|
|
|
$
|
—
|
|
|
$
|
178,181
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange derivative assets with correspondent banks
|
43
|
|
|
(43)
|
|
|
—
|
|
|
—
|
|
|
Total
|
$
|
190,003
|
|
|
$
|
(11,822)
|
|
|
$
|
—
|
|
|
$
|
178,181
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap derivative liabilities
|
$
|
108,581
|
|
|
$
|
(11,779)
|
|
|
$
|
(96,802)
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange derivative liabilities with correspondent banks
|
258
|
|
|
(43)
|
|
|
—
|
|
|
215
|
|
|
Total
|
$
|
108,839
|
|
|
$
|
(11,822)
|
|
|
$
|
(96,802)
|
|
|
$
|
215
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
Interest rate swap derivative assets
|
$
|
330,951
|
|
|
$
|
(2)
|
|
|
$
|
—
|
|
|
$
|
330,949
|
|
|
Foreign exchange derivative assets with correspondent banks
|
318
|
|
|
(5)
|
|
|
—
|
|
|
313
|
|
|
Total
|
$
|
331,269
|
|
|
$
|
(7)
|
|
|
$
|
—
|
|
|
$
|
331,262
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swap derivative liabilities
|
$
|
165,205
|
|
|
$
|
(2)
|
|
|
$
|
(165,203)
|
|
|
$
|
—
|
|
|
Foreign exchange derivative liabilities with correspondent banks
|
5
|
|
|
(5)
|
|
|
—
|
|
|
—
|
|
|
Total
|
$
|
165,210
|
|
|
$
|
(7)
|
|
|
$
|
(165,203)
|
|
|
$
|
—
|
|
(1)For interest rate swap assets, amounts represent any derivative liability fair values that could be offset in the event of counterparty or customer default. For interest rate swap liabilities, amounts represent any derivative asset fair values that could be offset in the event of counterparty or customer default.
(2)Amounts represent cash collateral received from the counterparty or posted by the Corporation on interest rate swap transactions and foreign exchange contracts with financial institution counterparties. Interest rate swaps with customers are collateralized by the same collateral securing the underlying loans to those borrowers. Cash and securities collateral amounts are included in the table only to the extent of the net derivative fair values.
NOTE 7 – Tax Credit Investments
TCIs are primarily for investments promoting qualified affordable housing projects and investments in community development entities. Investments in these projects generate a return primarily through the realization of federal income tax credits and deductions for operating losses over a specified time period.
The TCIs are included in other assets, with any unfunded equity commitments recorded in other liabilities on the consolidated balance sheets. Certain TCIs qualify for the proportional amortization method and are amortized over the period the Corporation expects to receive the tax credits, with the expense included within income taxes on the consolidated statements of income. Other TCIs are accounted for under the equity method of accounting, with amortization included within non-interest expense on the consolidated statements of income. This amortization includes equity in partnership losses and the systematic write-down of investments over the period in which income tax credits are earned. All of the TCIs are evaluated for impairment at the end of each reporting period.
The following table presents the balances of the Corporation's TCIs and related unfunded commitments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
December 31,
|
|
|
|
|
2021
|
|
2020
|
|
Included in other assets:
|
|
(in thousands)
|
|
Affordable housing tax credit investment, net
|
|
$
|
145,888
|
|
|
$
|
152,203
|
|
|
Other tax credit investments, net
|
|
58,782
|
|
|
59,224
|
|
|
|
Total TCIs, net
|
|
$
|
204,670
|
|
|
$
|
211,427
|
|
|
Included in other liabilities:
|
|
|
|
|
|
Unfunded affordable housing tax credit commitments
|
|
$
|
30,762
|
|
|
$
|
31,562
|
|
|
Other tax credit liabilities
|
|
49,491
|
|
|
49,491
|
|
|
|
Total unfunded tax credit commitments and liabilities
|
|
$
|
80,253
|
|
|
$
|
81,053
|
|
The following table presents other information relating to the Corporation's TCIs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
|
|
|
March 31
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
Components of income taxes:
|
|
(in thousands)
|
|
Affordable housing tax credits and other tax benefits
|
|
$
|
(6,488)
|
|
|
$
|
(7,194)
|
|
|
|
|
|
|
Other tax credit investment credits and tax benefits
|
|
(723)
|
|
|
(941)
|
|
|
|
|
|
|
Amortization of affordable housing investments, net of tax benefit
|
|
4,366
|
|
|
5,024
|
|
|
|
|
|
|
Deferred tax expense
|
|
160
|
|
|
208
|
|
|
|
|
|
|
|
Total net reduction in income tax expense
|
|
$
|
(2,685)
|
|
|
$
|
(2,903)
|
|
|
|
|
|
|
Amortization of TCIs:
|
|
|
|
|
|
|
|
|
|
Affordable housing tax credits investment
|
|
$
|
986
|
|
|
$
|
1,022
|
|
|
|
|
|
|
Other tax credit investment amortization
|
|
545
|
|
|
428
|
|
|
|
|
|
|
|
Total amortization of TCIs
|
|
$
|
1,531
|
|
|
$
|
1,450
|
|
|
|
|
|
NOTE 8 – Accumulated Other Comprehensive Income
The following table presents changes in OCI:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Before-Tax Amount
|
|
Tax Effect
|
|
Net of Tax Amount
|
|
Three months ended March 31, 2021
|
(in thousands)
|
|
Unrealized loss on securities
|
$
|
(51,751)
|
|
|
$
|
11,753
|
|
|
$
|
(39,999)
|
|
|
|
|
|
|
|
|
|
Reclassification adjustment for securities gains included in net income (1)
|
487
|
|
|
(110)
|
|
|
377
|
|
|
|
|
|
|
|
|
|
Amortization of net unrealized losses on AFS securities transferred to HTM (2)
|
2,312
|
|
|
(525)
|
|
|
1,787
|
|
|
Net unrealized loss on interest rate swaps used in cash flow hedges (3)
|
(2,209)
|
|
|
502
|
|
|
(1,707)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of net unrecognized pension and postretirement items (4)
|
370
|
|
|
(81)
|
|
|
289
|
|
|
Total OCI
|
$
|
(50,791)
|
|
|
$
|
11,538
|
|
|
$
|
(39,253)
|
|
|
Three months ended March 31, 2020
|
|
|
|
|
|
|
Unrealized gain on securities
|
$
|
22,380
|
|
|
$
|
(4,949)
|
|
|
$
|
17,431
|
|
|
|
|
|
|
|
|
|
Reclassification adjustment for securities gains included in net income (1)
|
(46)
|
|
|
10
|
|
|
(36)
|
|
|
Amortization of net unrealized losses on AFS securities transferred to HTM (2)
|
1,022
|
|
|
(227)
|
|
|
795
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of net unrecognized pension and postretirement items (4)
|
328
|
|
|
(73)
|
|
|
255
|
|
|
Total OCI
|
$
|
23,684
|
|
|
$
|
(5,239)
|
|
|
$
|
18,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Amounts reclassified out of AOCI. Before-tax amounts included in "Investment securities gains, net" on the Consolidated Statements of Income. See Note 3, "Investment Securities," for additional details.
(2) Amounts reclassified out of AOCI. Before-tax amounts included as a reduction to "Interest Income" on the Consolidated Statements of Income.
(3) Amounts reclassified out of AOCI. Before-tax amounts included in "Interest Income" on the Consolidated Statements of Income.
(4) Amounts reclassified out of AOCI. Before-tax amounts included in "Salaries and employee benefits" on the Consolidated Statements of Income. See Note 12, "Employee Benefit Plans," for additional details.
The following table presents changes in each component of accumulated other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized Gains (Losses) on Investment Securities
|
|
Net Unrealized (Loss) on Interest Rate Swaps used in Cash Flow Hedges
|
|
|
|
Unrecognized Pension and Postretirement Plan Income (Costs)
|
|
Total
|
|
|
(in thousands)
|
|
Three months ended March 31, 2021
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2020
|
$
|
81,604
|
|
|
$
|
—
|
|
|
|
|
$
|
(16,513)
|
|
|
$
|
65,091
|
|
|
OCI before reclassifications
|
(39,999)
|
|
|
—
|
|
|
|
|
—
|
|
|
(39,999)
|
|
|
Amounts reclassified from AOCI
|
377
|
|
|
(1,707)
|
|
|
|
|
289
|
|
|
(1,042)
|
|
|
Amortization of net unrealized losses on AFS securities transferred to HTM
|
1,787
|
|
|
—
|
|
|
|
|
—
|
|
|
1,787
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2021
|
$
|
43,769
|
|
|
$
|
(1,707)
|
|
|
|
|
$
|
(16,224)
|
|
|
$
|
25,838
|
|
|
Three months ended March 31, 2020
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2019
|
$
|
14,864
|
|
|
$
|
—
|
|
|
|
|
$
|
(15,001)
|
|
|
$
|
(137)
|
|
|
OCI before reclassifications
|
17,431
|
|
|
—
|
|
|
|
|
—
|
|
|
17,431
|
|
|
Amounts reclassified from AOCI
|
(36)
|
|
|
—
|
|
|
|
|
255
|
|
|
219
|
|
|
Amortization of net unrealized losses on AFS securities transferred to HTM
|
795
|
|
|
—
|
|
|
|
|
—
|
|
|
795
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2020
|
$
|
33,054
|
|
|
$
|
—
|
|
|
|
|
$
|
(14,746)
|
|
|
$
|
18,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 9 – Fair Value Measurements
FASB ASC Topic 820 establishes a fair value hierarchy for the inputs to valuation techniques used to measure assets and liabilities at fair value using the following three categories (from highest to lowest priority):
•Level 1 – Inputs that represent quoted prices for identical instruments in active markets.
•Level 2 – Inputs that represent quoted prices for similar instruments in active markets, or quoted prices for identical instruments in non-active markets. Also includes valuation techniques whose inputs are derived principally from observable market data other than quoted prices, such as interest rates or other market-corroborated means.
•Level 3 – Inputs that are largely unobservable, as little or no market data exists for the instrument being valued.
All assets and liabilities measured at fair value on both a recurring and nonrecurring basis, have been categorized into the above three levels. The following tables present assets and liabilities measured at fair value on a recurring basis and reported on the consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
(in thousands)
|
|
Loans held for sale
|
$
|
—
|
|
|
$
|
34,092
|
|
|
$
|
—
|
|
|
$
|
34,092
|
|
|
Available for sale investment securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and municipal securities
|
—
|
|
|
994,760
|
|
|
—
|
|
|
994,760
|
|
|
Corporate debt securities
|
—
|
|
|
359,371
|
|
|
—
|
|
|
359,371
|
|
|
Collateralized mortgage obligations
|
—
|
|
|
399,881
|
|
|
—
|
|
|
399,881
|
|
|
Residential mortgage-backed securities
|
—
|
|
|
255,364
|
|
|
—
|
|
|
255,364
|
|
|
Commercial mortgage-backed securities
|
—
|
|
|
673,017
|
|
|
—
|
|
|
673,017
|
|
|
Auction rate securities
|
—
|
|
|
—
|
|
|
76,204
|
|
|
76,204
|
|
|
Total available for sale investment securities
|
—
|
|
|
2,682,393
|
|
|
76,204
|
|
|
2,758,597
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
Investments held in Rabbi Trust
|
25,374
|
|
|
—
|
|
|
—
|
|
|
25,374
|
|
|
Derivative assets
|
323
|
|
|
196,808
|
|
|
—
|
|
|
197,131
|
|
|
Total assets
|
$
|
25,697
|
|
|
$
|
2,913,293
|
|
|
$
|
76,204
|
|
|
$
|
3,015,194
|
|
|
Other liabilities:
|
|
|
|
|
|
|
|
|
Deferred compensation liabilities
|
$
|
25,374
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
25,374
|
|
|
Derivative liabilities
|
272
|
|
|
108,897
|
|
|
—
|
|
|
109,169
|
|
|
Total liabilities
|
$
|
25,646
|
|
|
$
|
108,897
|
|
|
$
|
—
|
|
|
$
|
134,543
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
(in thousands)
|
|
Loans held for sale
|
$
|
—
|
|
|
$
|
83,886
|
|
|
$
|
—
|
|
|
$
|
83,886
|
|
|
Available for sale investment securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and municipal securities
|
—
|
|
|
952,613
|
|
|
—
|
|
|
952,613
|
|
|
Corporate debt securities
|
—
|
|
|
367,145
|
|
|
—
|
|
|
367,145
|
|
|
Collateralized mortgage obligations
|
—
|
|
|
503,766
|
|
|
—
|
|
|
503,766
|
|
|
Residential mortgage-backed securities
|
—
|
|
|
377,998
|
|
|
—
|
|
|
377,998
|
|
|
Commercial mortgage-backed securities
|
—
|
|
|
762,415
|
|
|
—
|
|
|
762,415
|
|
|
Auction rate securities
|
—
|
|
|
—
|
|
|
98,206
|
|
|
98,206
|
|
|
Total available for sale investment securities
|
—
|
|
|
2,963,937
|
|
|
98,206
|
|
|
3,062,143
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
Investments held in Rabbi Trust
|
24,383
|
|
|
—
|
|
|
—
|
|
|
24,383
|
|
|
Derivative assets
|
323
|
|
|
338,987
|
|
|
—
|
|
|
339,310
|
|
|
Total assets
|
$
|
24,706
|
|
|
$
|
3,386,810
|
|
|
$
|
98,206
|
|
|
$
|
3,509,722
|
|
|
Other liabilities:
|
|
|
|
|
|
|
|
|
Deferred compensation liabilities
|
$
|
24,383
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
24,383
|
|
|
Derivative liabilities
|
280
|
|
|
167,505
|
|
|
—
|
|
|
167,785
|
|
|
Total liabilities
|
$
|
24,663
|
|
|
$
|
167,505
|
|
|
$
|
—
|
|
|
$
|
192,168
|
|
The valuation techniques used to measure fair value for the items in the preceding tables are as follows:
Loans held for sale – This category includes mortgage loans held for sale that are measured at fair value. Fair values as of March 31, 2021 and December 31, 2020 were based on the price that secondary market investors were offering for loans with similar characteristics. See "Note 6 - Derivative Financial Instruments" for details related to the Corporation’s election to measure assets and liabilities at fair value.
Available for sale investment securities – Included in this asset category are debt securities. Level 2 investment securities are valued by a third-party pricing service. The pricing service uses pricing models that vary based on asset class and incorporate available market information, including quoted prices of investment securities with similar characteristics. Because many fixed income securities do not trade on a daily basis, pricing models use available information, as applicable, through processes such as benchmark yield curves, benchmarking of like securities, sector groupings and matrix pricing.
Standard market inputs include: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data, including market research publications. For certain security types, additional inputs may be used, or some of the standard market inputs may not be applicable.
•State and municipal securities/Collateralized mortgage obligations/Residential mortgage-backed securities/Commercial mortgage-backed securities – These debt securities are classified as Level 2. Fair values are determined by a third-party pricing service, as detailed above.
•Corporate debt securities – This category consists of subordinated debt and senior debt issued by financial institutions ($355.0 million at March 31, 2021 and $362.8 million at December 31, 2020) and other corporate debt issued by non-financial institutions ($4.4 million at both March 31, 2021 and December 31, 2020).
•Auction rate securities – Due to their illiquidity, ARCs are classified as Level 3 investment securities and are valued through the use of an expected cash flows model prepared by a third-party valuation expert. The assumptions used in preparing the expected cash flows model include estimates for coupon rates, time to maturity and market rates of return. The most significant unobservable input to the expected cash flows model is an assumed return to market liquidity sometime in the next five years. If the assumed return to market liquidity was lengthened beyond the next five years, this would result in a decrease in the fair value of these ARCs. The Corporation believes that the trusts underlying the ARCs will self-liquidate as student loans are repaid. All of the loans underlying the ARCs have
principal payments which are guaranteed by the federal government. Level 3 fair values are tested by management through the performance of a trend analysis of the market price and discount rate. Changes in the price and discount rates are compared to changes in market data, including bond ratings, parity ratios, balances and delinquency levels.
Investments held in Rabbi Trust – This category consists of mutual funds that are held in trust for employee deferred compensation plans that the Corporation has elected to measure at fair value. Shares of mutual funds are valued based on net asset value, which represent quoted market prices for the underlying shares held in the mutual funds, and as such, are classified as Level 1.
Derivative assets – Fair value of foreign currency exchange contracts classified as Level 1 assets ($323,000 at both March 31, 2021 and December 31, 2020). The mutual funds and foreign exchange prices used to measure these items at fair value are based on quoted prices for identical instruments in active markets.
Level 2 assets, representing the fair value of mortgage banking derivatives in the form of interest rate locks and forward commitments with secondary market investors ($6.8 million at March 31, 2021 and $8.0 million at December 31, 2020) and the fair value of interest rate swaps ($190.0 million at March 31, 2021 and $331.0 million at December 31, 2020). The fair values of the Corporation’s interest rate locks, forward commitments and interest rate swaps represent the amounts that would be required to settle the derivative financial instruments at the balance sheet date. See "Note 6 - Derivative Financial Instruments," for additional information.
Deferred compensation liabilities – Fair value of amounts due to employees under deferred compensation plans, classified as Level 1 liabilities and are included in other liabilities on the consolidated balance sheets. The fair values of these liabilities are determined in the same manner as the related assets, as described under the heading "Investments held in Rabbi Trust" above.
Derivative liabilities – Level 1 liabilities, representing the fair value of foreign currency exchange contracts ($272,000 at March 31, 2021 and $280,000 at December 31, 2020).
Level 2 liabilities, representing the fair value of mortgage banking derivatives in the form of interest rate locks and forward commitments with secondary market investors ($316,000 at March 31, 2021 and $2.3 million at December 31, 2020 and the fair value of interest rate swaps ($108.6 million at March 31, 2021 and $165.2 million at December 31, 2020).
The fair values of these liabilities are determined in the same manner as the related assets, as described under the heading "Derivative assets" above.
The following table presents the changes in the Corporation’s available for sale investment securities measured at fair value on a recurring basis using unobservable inputs (Level 3):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Single-issuer
Trust Preferred
Securities
|
|
ARCs
|
|
Three months ended March 31, 2021
|
|
(in thousands)
|
|
Balance at December 31, 2020
|
|
|
$
|
—
|
|
|
$
|
98,206
|
|
|
Sales
|
|
|
—
|
|
|
(24,619)
|
|
|
|
|
|
|
|
|
|
Unrealized adjustment to fair value (1)
|
|
|
—
|
|
|
2,617
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2021
|
|
|
$
|
—
|
|
|
$
|
76,204
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2020
|
|
|
|
|
|
|
Balance at December 31, 2019
|
|
|
$
|
2,400
|
|
|
$
|
101,926
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized adjustment to fair value (1)
|
|
|
(242)
|
|
|
(8,260)
|
|
|
|
|
|
|
|
|
|
Discount accretion
|
|
|
2
|
|
|
—
|
|
|
Balance at March 31, 2020
|
|
|
$
|
2,160
|
|
|
$
|
93,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)Pooled trust preferred securities, single-issuer trust preferred securities and ARCs are classified as available for sale investment securities; as such, the unrealized adjustment to fair value was recorded as an unrealized holding gain (loss) and included as a component of "available for sale at estimated fair value" on the consolidated balance sheets.
Certain assets are not measured at fair value on an ongoing basis, but are subject to fair value measurement in certain circumstances, such as upon their acquisition or when there is evidence of impairment. The following table presents Level 3 financial assets measured at fair value on a nonrecurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
|
(in thousands)
|
|
Loans, net
|
$
|
122,962
|
|
|
$
|
116,584
|
|
|
OREO
|
3,664
|
|
|
4,178
|
|
|
MSRs (1)
|
33,403
|
|
|
28,245
|
|
|
Total assets
|
$
|
160,029
|
|
|
$
|
149,007
|
|
(1)Amounts shown are estimated fair value. MSRs are recorded on the Corporation's consolidated balance sheets at the lower of amortized cost or fair value. See "Note 5 - Mortgage Servicing Rights" for additional information.
The valuation techniques used to measure fair value for the items in the table above are as follows:
•Net Loans – This category consists of loans that were individually evaluated for impairment and have been classified as Level 3 assets. See "Note 4 - Loans and Allowance for Credit Losses," for additional details.
•OREO – This category consists of OREO classified as Level 3 assets, for which the fair values were based on estimated selling prices less estimated selling costs for similar assets in active markets.
•MSRs - This category consists of MSRs, which were initially recorded at fair value upon the sale of residential mortgage loans to secondary market investors, and subsequently carried at the lower of amortized cost or fair value. MSRs are amortized as a reduction to servicing income over the estimated lives of the underlying loans. MSRs are stratified by product type and evaluated for impairment by comparing each stratum's carrying amount to its estimated fair value. Fair values are determined at the end of each quarter through a discounted cash flows valuation performed by a third-party valuation expert. Significant inputs to the valuation included expected net servicing income, the discount rate and the expected life of the underlying loans. Expected life is based on the contractual terms of the loans, as adjusted for prepayment projections. The weighted average annual constant prepayment rate and the weighted average discount rate used in the March 31, 2021 valuation were 15.3% and 9.5%, respectively. Management reviews the reasonableness of the significant inputs to the third-party valuation in comparison to market data. See "Note 5 - Mortgage Servicing Rights," for additional information.
In 2007, the Corporation received the Visa Shares in connection with a corporate restructuring undertaken by Visa, Inc. in contemplation of its initial public offering. These securities were considered equity securities without readily determinable fair values. As such, the approximately 133,000 Visa Shares owned were carried at a zero cost basis. During the first quarter of 2021, the Corporation sold all of its Visa Shares and recognized a $34.0 million gain.
The following tables present the carrying amounts and estimated fair values of the Corporation’s financial instruments for the current period. A general description of the methods and assumptions used to estimate such fair values follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
|
|
Estimated Fair Value
|
|
|
Carrying Amount
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|
|
(in thousands)
|
|
FINANCIAL ASSETS
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
1,661,876
|
|
$
|
1,661,876
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,661,876
|
|
|
FRB and FHLB stock
|
66,209
|
|
—
|
|
66,209
|
|
—
|
|
66,209
|
|
|
Loans held for sale
|
34,092
|
|
—
|
|
34,092
|
|
—
|
|
34,092
|
|
|
AFS securities
|
2,758,597
|
|
—
|
|
2,682,393
|
|
76,204
|
|
2,758,597
|
|
|
HTM securities
|
853,413
|
|
—
|
|
843,743
|
|
—
|
|
843,743
|
|
|
Net Loans
|
18,725,000
|
|
—
|
|
—
|
|
18,354,532
|
|
18,354,532
|
|
|
Accrued interest receivable
|
65,649
|
|
65,649
|
|
—
|
|
—
|
|
65,649
|
|
|
Other assets
|
510,534
|
|
276,659
|
|
196,808
|
|
37,067
|
|
510,534
|
|
|
FINANCIAL LIABILITIES
|
|
|
|
|
|
|
Demand and savings deposits
|
$
|
19,250,538
|
|
$
|
19,250,538
|
|
$
|
—
|
|
$
|
—
|
|
$
|
19,250,538
|
|
|
Brokered deposits
|
309,873
|
|
289,873
|
|
21,001
|
|
—
|
|
310,874
|
|
|
Time deposits
|
2,073,427
|
|
—
|
|
2,087,663
|
|
—
|
|
2,087,663
|
|
|
Short-term borrowings
|
520,989
|
|
520,989
|
|
—
|
|
—
|
|
520,989
|
|
|
Accrued interest payable
|
5,618
|
|
5,618
|
|
—
|
|
—
|
|
5,618
|
|
|
Long-term borrowings
|
626,407
|
|
—
|
|
607,577
|
|
—
|
|
607,577
|
|
|
Other liabilities
|
297,069
|
|
173,899
|
|
108,897
|
|
14,273
|
|
297,069
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
|
Estimated Fair Value
|
|
|
Carrying Amount
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|
|
(in thousands)
|
|
FINANCIAL ASSETS
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
1,847,832
|
|
$
|
1,847,832
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,847,832
|
|
|
FRB and FHLB stock
|
92,129
|
|
—
|
|
92,129
|
|
—
|
|
92,129
|
|
|
Loans held for sale
|
83,886
|
|
—
|
|
83,886
|
|
—
|
|
83,886
|
|
|
AFS securities
|
3,062,143
|
|
—
|
|
2,963,937
|
|
98,206
|
|
3,062,143
|
|
|
HTM securities
|
278,281
|
|
—
|
|
296,857
|
|
—
|
|
296,857
|
|
|
Net Loans
|
18,623,253
|
|
—
|
|
—
|
|
18,354,532
|
|
18,354,532
|
|
|
Accrued interest receivable
|
72,942
|
|
72,942
|
|
—
|
|
—
|
|
72,942
|
|
|
Other assets
|
650,425
|
|
279,015
|
|
338,987
|
|
32,423
|
|
650,425
|
|
|
FINANCIAL LIABILITIES
|
|
|
|
|
|
|
Demand and savings deposits
|
$
|
18,279,358
|
|
$
|
18,279,358
|
|
$
|
—
|
|
$
|
—
|
|
$
|
18,279,358
|
|
|
Brokered deposits
|
335,185
|
|
295,185
|
|
41,206
|
|
—
|
|
336,391
|
|
|
Time deposits
|
2,224,665
|
|
—
|
|
2,246,457
|
|
—
|
|
2,246,457
|
|
|
Short-term borrowings
|
630,066
|
|
630,066
|
|
—
|
|
—
|
|
630,066
|
|
|
Accrued interest payable
|
10,365
|
|
10,365
|
|
—
|
|
—
|
|
10,365
|
|
|
Long-term borrowings
|
1,296,263
|
|
—
|
|
1,332,041
|
|
—
|
|
1,332,041
|
|
|
Other liabilities
|
338,747
|
|
156,869
|
|
167,505
|
|
14,373
|
|
338,747
|
|
Fair values of financial instruments are significantly affected by the assumptions used, principally the timing of future cash flows and discount rates. Because assumptions are inherently subjective in nature, the estimated fair values cannot be substantiated by comparison to independent market quotes and, in many cases, the estimated fair values could not necessarily be realized in an immediate sale or settlement of the instrument. The aggregate fair value amounts presented do not necessarily represent management’s estimate of the underlying value of the Corporation.
For short-term financial instruments, defined as those with remaining maturities of 90 days or less, and excluding those recorded at fair value on the Corporation’s consolidated balance sheets, book value was considered to be a reasonable estimate of fair value.
The following instruments are predominantly short-term:
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
Liabilities
|
|
Cash and cash equivalents
|
|
Demand and savings deposits
|
|
Accrued interest receivable
|
|
Short-term borrowings
|
|
|
|
Accrued interest payable
|
FRB and FHLB stock represent restricted investments and are carried at cost on the consolidated balance sheets, which is a reasonable estimate of fair value.
As of March 31, 2021, fair values for loans and time deposits were estimated by discounting future cash flows using the current rates, as adjusted for liquidity considerations, at which similar loans would be made to borrowers and similar deposits would be issued to customers for the same remaining maturities. Fair values of loans also include estimated credit losses that would be assumed in a market transaction, which represents estimated exit prices.
Brokered deposits consists of demand and saving deposits, which are classified as Level 1, and time deposits, which are classified as Level 2. The fair value of these deposits are determined in a manner consistent with the respective type of deposits discussed above.
NOTE 10 – Net Income Per Share
Basic net income per share is calculated as net income available to common shareholders divided by the weighted average number of shares outstanding.
Diluted net income per share is calculated as net income available to common shareholders divided by the weighted average number of shares outstanding plus the incremental number of shares added as a result of converting common stock equivalents, calculated using the treasury stock method. The Corporation’s common stock equivalents consist of outstanding stock options, restricted stock, RSUs, and PSUs. PSUs are required to be included in weighted average diluted shares outstanding if performance measures, as defined in each PSU award agreement, are met as of the end of the period.
A reconciliation of weighted average shares outstanding used to calculate basic and diluted net income per share follows (in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
Weighted average shares outstanding (basic)
|
162,441
|
|
|
163,475
|
|
|
|
|
|
|
Impact of common stock equivalents
|
1,296
|
|
|
942
|
|
|
|
|
|
|
Weighted average shares outstanding (diluted)
|
163,737
|
|
|
164,417
|
|
|
|
|
|
|
Per share:
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.43
|
|
|
$
|
0.16
|
|
|
|
|
|
|
Diluted
|
0.43
|
|
|
0.16
|
|
|
|
|
|
NOTE 11 – Stock-Based Compensation
The Corporation grants equity awards to employees in the form of stock options, restricted stock, RSUs or PSUs under its Amended and Restated Equity and Cash Incentive Compensation Plan ("Employee Equity Plan"). Recent grants of equity awards under the Employee Equity Plan have generally been limited to RSUs and PSUs. In addition, employees may purchase stock under the Corporation’s Employee Stock Purchase Plan. The fair value of equity awards granted to employees is recognized as compensation expense over the period during which employees are required to provide service in exchange for such awards. Compensation expense for PSUs is also recognized over the period during which employees are required to provide service in exchange for such awards, however, compensation expense may vary based on the expectations for actual performance relative to defined performance measures.
The Corporation also grants equity awards to non-employee members of its board of directors and subsidiary bank boards of directors under the 2011 Directors’ Equity Participation Plan, which was amended and approved by shareholders as the Amended and Restated Directors’ Equity Participation Plan in 2019 ("Directors’ Plan"). Under the Directors’ Plan, the Corporation can grant equity awards to non-employee holding company and subsidiary bank directors in the form of stock options, restricted stock, RSUs or common stock. Recent grants of equity awards under the Directors’ Plan have been limited to RSUs.
Equity awards under the Employee Equity Plan are generally granted annually and become fully vested over or after a three-year vesting period. The vesting period for non-performance-based awards represents the period during which employees are required to provide service in exchange for such awards. Equity awards under the Directors' Plan are generally granted annually and become fully vested after a one-year vesting period. Certain events, as defined in the Employee Equity Plan and the Directors' Plan, result in the acceleration of the vesting of equity awards.
Fair values for RSUs and a majority of PSUs are based on the trading price of the Corporation’s stock on the date of grant and earn dividend equivalents during the vesting period, which are forfeitable if the awards do not vest. The fair value of certain PSUs are estimated through the use of the Monte Carlo valuation methodology as of the date of grant.
As of March 31, 2021, the Employee Equity Plan had 9.3 million shares reserved for future grants through 2023, and the Directors’ Plan had approximately 176,000 shares reserved for future grants through 2029.
The following table presents compensation expense and the related tax benefits for equity awards recognized in the consolidated statements of income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
(in thousands)
|
|
Compensation expense
|
$
|
1,902
|
|
|
$
|
1,619
|
|
|
|
|
|
|
Tax benefit
|
(414)
|
|
|
(344)
|
|
|
|
|
|
|
Stock-based compensation expense, net of tax benefit
|
$
|
1,488
|
|
|
$
|
1,275
|
|
|
|
|
|
NOTE 12 – Employee Benefit Plans
The net periodic pension cost for the Corporation’s Defined Benefit Pension Plan ("Pension Plan") consisted of the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
Interest cost
|
$
|
561
|
|
|
$
|
681
|
|
|
|
|
|
|
Expected return on plan assets
|
(1,011)
|
|
|
(982)
|
|
|
|
|
|
|
Net amortization and deferral
|
504
|
|
|
465
|
|
|
|
|
|
|
Net periodic pension cost
|
$
|
54
|
|
|
$
|
164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of the net benefit for the Corporation’s Postretirement Benefits Plan ("Postretirement Plan") consisted of the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
(in thousands)
|
|
Interest cost
|
$
|
8
|
|
|
$
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net accretion and deferral
|
(134)
|
|
|
(137)
|
|
|
|
|
|
|
Net periodic benefit
|
$
|
(126)
|
|
|
$
|
(126)
|
|
|
|
|
|
The Corporation recognizes the funded status of its Pension Plan and Postretirement Plan on the consolidated balance sheets and recognizes the change in that funded status through other comprehensive income.
NOTE 13 – Commitments and Contingencies
Commitments
The Corporation is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers.
Those financial instruments include commitments to extend credit and letters of credit, which involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amounts recognized on the Corporation’s consolidated balance sheets. Exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and letters of credit is represented by the outstanding amount of those instruments.
The Corporation records a reserve for unfunded lending commitments, included in ACL - OBS credit exposures, which represents management’s estimate of credit losses associated with unused commitments to extend credit and letters of credit. As of March 31, 2021 and December 31, 2020, the ACL - OBS credit exposures for unfunded lending commitments was $9.7 million and $9.1 million, respectively. See "Note 4 - Loans and Allowance for Credit Losses," for additional details.
The following table presents the Corporation's commitments to extend credit and letters of credit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2021
|
|
December 31, 2020
|
|
|
(in thousands)
|
|
Commitments to extend credit
|
$
|
9,018,523
|
|
|
$
|
8,651,055
|
|
|
Standby letters of credit
|
295,516
|
|
|
298,750
|
|
|
Commercial letters of credit
|
57,917
|
|
|
56,229
|
|
Residential Lending
The Corporation originates and sells residential mortgages to secondary market investors. The Corporation provides customary representations and warranties to secondary market investors that specify, among other things, that the loans have been underwritten to the standards of the secondary market investor. The Corporation may be required to repurchase specific loans, or reimburse the investor for a credit loss incurred on a sold loan if it is determined that the representations and warranties have not been met. Under some agreements with secondary market investors, the Corporation may have additional credit exposure beyond customary representations and warranties, based on the specific terms of those agreements.
The Corporation maintains a reserve for estimated losses related to loans sold to investors. As of both March 31, 2021 and December 31, 2020, the total reserve for losses on residential mortgage loans sold was $1.1 million, including reserves for both representation and warranty and credit loss exposures. With the adoption of CECL on January 1, 2020 the reserve for estimated losses on certain residential mortgage loans sold to investors was reclassified to ACL - OBS credit exposures. This reclassification resulted in a $2.1 million increase to ACL - OBS credit exposures and a corresponding decrease to the reserve for estimated losses related to loans sold to investors in the first quarter of 2020.
Legal Proceedings
The Corporation is involved in various pending and threatened claims and other legal proceedings in the ordinary course of its business activities. The Corporation evaluates the possible impact of these matters, taking into consideration the most recent information available. A loss reserve is established for those matters for which the Corporation believes a loss is both probable and reasonably estimable. Once established, the reserve is adjusted as appropriate to reflect any subsequent developments. Actual losses with respect to any such matter may be more or less than the amount estimated by the Corporation. For matters where a loss is not probable, or the amount of the loss cannot be reasonably estimated by the Corporation, no loss reserve is established.
In addition, from time to time, the Corporation is involved in investigations or other forms of regulatory or governmental inquiry covering a range of possible issues and, in some cases, these may be part of similar reviews of the specified activities of other companies. These inquiries or investigations could lead to administrative, civil or criminal proceedings involving the Corporation, and could result in fines, penalties, restitution, other types of sanctions or restrictions, or the need for the Corporation to undertake remedial actions, or to alter its business, financial or accounting practices. The Corporation’s practice is to cooperate fully with regulatory and governmental inquiries and investigations.
As of the date of this report, the Corporation believes that any liabilities, individually or in the aggregate, which may result from the final outcomes of pending legal proceedings, or regulatory or governmental inquiries or investigations, will not have a material adverse effect on the financial condition of the Corporation. However, legal proceedings, inquiries and investigations are often unpredictable, and it is possible that the ultimate resolution of any such matters, if unfavorable, may be material to the Corporation’s results of operations in any future period, depending, in part, upon the size of the loss or liability imposed and the operating results for the period, and could have a material adverse effect on the Corporation’s business. In addition, regardless of the ultimate outcome of any such legal proceeding, inquiry or investigation, any such matter could cause the Corporation to incur additional expenses, which could be significant, and possibly material, to the Corporation’s results of operations in any future period.
Kress v. Fulton Bank, N.A.
On October 15, 2019, a former Fulton Bank teller supervisor, D. Kress filed a putative collective and class action lawsuit on behalf of herself and other teller supervisors, tellers, and other similar non-exempt employees in the U.S. District Court for the District of New Jersey, D. Kress v. Fulton Bank, N.A., Case No. 1:19-cv-18985. Fulton Bank accepted summons without a formal service of process on January 20, 2020. The lawsuit alleges that Fulton Bank did not record or otherwise account for the amount of time D. Kress and putative collective and class members spent conducting branch opening security procedures. The allegation is that, as a result, Fulton Bank did not properly compensate those employees for their regular and overtime wages. The lawsuit alleges that by doing so, Fulton violated: (i) the federal Fair Labor Standards Act and seeks back overtime wages for a period of three years, liquidated damages and attorney fees and costs; (ii) the New Jersey State Wage and Hour Law and seeks back overtime wages for a period of six years, treble damages and attorney fees and costs; and (iii) the New Jersey Wage Payment Law and seeks back wages for a period of six years, treble damages and attorney fees and costs. The lawsuit also asserts New Jersey common law claims seeking compensatory damages and interest. The Corporation and counsel representing plaintiffs ("Plaintiffs’ Counsel") have reached and executed a formal Settlement Agreement to resolve this lawsuit. Plaintiffs’ Counsel has filed a Motion for Preliminary Approval of Class and Collective Settlement and Provisional Certification of Settlement Class and Collective ("the Motion") with the U.S. District Court for the District of New Jersey ("the Court"). The Corporation is not able to provide any assurance that the Court will grant the Motion. If the Court does grant the Motion, the Settlement Agreement will be administered according to its terms and thereafter subject to final approval by the Court. The financial terms of the Settlement Agreement are not expected to be material to the Corporation. The Corporation established an accrued liability during the third quarter of 2020 for the costs expected to be incurred in connection with the Settlement Agreement.
NOTE 14 – Long-Term Borrowings
Pursuant to a cash tender offer, the Corporation purchased $75.0 million and $60.0 million of its subordinated notes which mature on November 15, 2024 and its senior notes which mature on March 16, 2022, respectively. The subordinated notes carry a fixed rate of 4.50% and an effective rate of 4.87% and the senior notes carry a fixed rate of 3.60% and an effective rate of 3.95%. The Corporation incurred $11.3 million in debt extinguishment costs and expensed $841,000 of unamortized discount costs. In addition, the Corporation prepaid $536.0 million of long-term FHLB advances and incurred $20.9 million in prepayment penalties.