Item 1: Financial Statements
Home BancShares, Inc.
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
(In thousands, except share data)
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
|
|
(Unaudited)
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
197,953
|
|
|
$
|
123,758
|
|
Interest-bearing deposits with other banks
|
|
|
354,367
|
|
|
|
92,891
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
552,320
|
|
|
|
216,649
|
|
Federal funds sold
|
|
|
4,545
|
|
|
|
1,550
|
|
Investment securities
available-for-sale
|
|
|
1,575,685
|
|
|
|
1,072,920
|
|
Investment securities
held-to-maturity
|
|
|
234,945
|
|
|
|
284,176
|
|
Loans receivable
|
|
|
10,286,193
|
|
|
|
7,387,699
|
|
Allowance for loan losses
|
|
|
(111,620
|
)
|
|
|
(80,002
|
)
|
|
|
|
|
|
|
|
|
|
Loans receivable, net
|
|
|
10,174,573
|
|
|
|
7,307,697
|
|
Bank premises and equipment, net
|
|
|
239,990
|
|
|
|
205,301
|
|
Foreclosed assets held for sale
|
|
|
21,701
|
|
|
|
15,951
|
|
Cash value of life insurance
|
|
|
146,158
|
|
|
|
86,491
|
|
Accrued interest receivable
|
|
|
41,071
|
|
|
|
30,838
|
|
Deferred tax asset, net
|
|
|
121,787
|
|
|
|
61,298
|
|
Goodwill
|
|
|
929,129
|
|
|
|
377,983
|
|
Core deposit and other intangibles
|
|
|
50,982
|
|
|
|
18,311
|
|
Other assets
|
|
|
163,081
|
|
|
|
129,300
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
14,255,967
|
|
|
$
|
9,808,465
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Equity
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
Demand and
non-interest-bearing
|
|
$
|
2,555,465
|
|
|
$
|
1,695,184
|
|
Savings and interest-bearing transaction accounts
|
|
|
6,341,883
|
|
|
|
3,963,241
|
|
Time deposits
|
|
|
1,551,422
|
|
|
|
1,284,002
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
|
10,448,770
|
|
|
|
6,942,427
|
|
Securities sold under agreements to repurchase
|
|
|
149,531
|
|
|
|
121,290
|
|
FHLB and other borrowed funds
|
|
|
1,044,333
|
|
|
|
1,305,198
|
|
Accrued interest payable and other liabilities
|
|
|
38,782
|
|
|
|
51,234
|
|
Subordinated debentures
|
|
|
367,835
|
|
|
|
60,826
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
12,049,251
|
|
|
|
8,480,975
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Common stock, par value $0.01; shares authorized 200,000,000 in 2017 and 2016; shares issued and
outstanding 173,665,904 in 2017 and 140,472,205 in 2016
|
|
|
1,737
|
|
|
|
1,405
|
|
Capital surplus
|
|
|
1,674,642
|
|
|
|
869,737
|
|
Retained earnings
|
|
|
526,448
|
|
|
|
455,948
|
|
Accumulated other comprehensive income
|
|
|
3,889
|
|
|
|
400
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
2,206,716
|
|
|
|
1,327,490
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
14,255,967
|
|
|
$
|
9,808,465
|
|
|
|
|
|
|
|
|
|
|
See Condensed Notes to Consolidated Financial Statements.
4
Home BancShares, Inc.
Consolidated Statements of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
(In thousands, except per share data)
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
(Unaudited)
|
|
Interest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
113,269
|
|
|
$
|
102,953
|
|
|
$
|
331,763
|
|
|
$
|
300,281
|
|
Investment securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable
|
|
|
7,071
|
|
|
|
5,583
|
|
|
|
18,983
|
|
|
|
16,178
|
|
Tax-exempt
|
|
|
3,032
|
|
|
|
2,720
|
|
|
|
8,942
|
|
|
|
8,358
|
|
Deposits other banks
|
|
|
538
|
|
|
|
117
|
|
|
|
1,573
|
|
|
|
325
|
|
Federal funds sold
|
|
|
3
|
|
|
|
2
|
|
|
|
9
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
|
123,913
|
|
|
|
111,375
|
|
|
|
361,270
|
|
|
|
325,149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on deposits
|
|
|
8,535
|
|
|
|
4,040
|
|
|
|
20,831
|
|
|
|
11,528
|
|
Federal funds purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
FHLB and other borrowed funds
|
|
|
3,408
|
|
|
|
3,139
|
|
|
|
10,707
|
|
|
|
9,283
|
|
Securities sold under agreements to repurchase
|
|
|
232
|
|
|
|
142
|
|
|
|
593
|
|
|
|
421
|
|
Subordinated debentures
|
|
|
4,969
|
|
|
|
401
|
|
|
|
10,203
|
|
|
|
1,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
|
17,144
|
|
|
|
7,722
|
|
|
|
42,334
|
|
|
|
22,398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
106,769
|
|
|
|
103,653
|
|
|
|
318,936
|
|
|
|
302,751
|
|
Provision for loan losses
|
|
|
35,023
|
|
|
|
5,536
|
|
|
|
39,324
|
|
|
|
16,905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses
|
|
|
71,746
|
|
|
|
98,117
|
|
|
|
279,612
|
|
|
|
285,846
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service charges on deposit accounts
|
|
|
6,408
|
|
|
|
6,527
|
|
|
|
18,356
|
|
|
|
18,607
|
|
Other service charges and fees
|
|
|
8,490
|
|
|
|
7,504
|
|
|
|
25,983
|
|
|
|
22,589
|
|
Trust fees
|
|
|
365
|
|
|
|
365
|
|
|
|
1,130
|
|
|
|
1,128
|
|
Mortgage lending income
|
|
|
3,172
|
|
|
|
3,932
|
|
|
|
9,713
|
|
|
|
10,276
|
|
Insurance commissions
|
|
|
472
|
|
|
|
534
|
|
|
|
1,482
|
|
|
|
1,808
|
|
Increase in cash value of life insurance
|
|
|
478
|
|
|
|
344
|
|
|
|
1,251
|
|
|
|
1,092
|
|
Dividends from FHLB, FRB, Bankers bank & other
|
|
|
834
|
|
|
|
808
|
|
|
|
2,455
|
|
|
|
2,147
|
|
Gain on acquisitions
|
|
|
|
|
|
|
|
|
|
|
3,807
|
|
|
|
|
|
Gain on sale of SBA loans
|
|
|
163
|
|
|
|
364
|
|
|
|
738
|
|
|
|
443
|
|
Gain (loss) on sale of branches, equipment and other assets, net
|
|
|
(1,337
|
)
|
|
|
(86
|
)
|
|
|
(962
|
)
|
|
|
701
|
|
Gain (loss) on OREO, net
|
|
|
335
|
|
|
|
132
|
|
|
|
849
|
|
|
|
(713
|
)
|
Gain (loss) on securities, net
|
|
|
136
|
|
|
|
|
|
|
|
939
|
|
|
|
25
|
|
FDIC indemnification accretion/(amortization), net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(772
|
)
|
Other income
|
|
|
1,941
|
|
|
|
1,590
|
|
|
|
6,603
|
|
|
|
5,892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-interest
income
|
|
|
21,457
|
|
|
|
22,014
|
|
|
|
72,344
|
|
|
|
63,223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
|
28,510
|
|
|
|
25,623
|
|
|
|
83,965
|
|
|
|
75,018
|
|
Occupancy and equipment
|
|
|
7,887
|
|
|
|
6,668
|
|
|
|
21,602
|
|
|
|
19,848
|
|
Data processing expense
|
|
|
2,853
|
|
|
|
2,791
|
|
|
|
8,439
|
|
|
|
8,221
|
|
Other operating expenses
|
|
|
31,596
|
|
|
|
15,944
|
|
|
|
62,984
|
|
|
|
41,174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-interest
expense
|
|
|
70,846
|
|
|
|
51,026
|
|
|
|
176,990
|
|
|
|
144,261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
22,357
|
|
|
|
69,105
|
|
|
|
174,966
|
|
|
|
204,808
|
|
Income tax expense
|
|
|
7,536
|
|
|
|
25,485
|
|
|
|
63,192
|
|
|
|
76,252
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
14,821
|
|
|
$
|
43,620
|
|
|
$
|
111,774
|
|
|
$
|
128,556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
0.10
|
|
|
$
|
0.31
|
|
|
$
|
0.78
|
|
|
$
|
0.92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
0.10
|
|
|
$
|
0.31
|
|
|
$
|
0.78
|
|
|
$
|
0.91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Condensed Notes to Consolidated Financial Statements.
5
Home BancShares, Inc.
Consolidated Statements of Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
(In thousands)
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
(Unaudited)
|
|
Net income
|
|
$
|
14,821
|
|
|
$
|
43,620
|
|
|
$
|
111,774
|
|
|
$
|
128,556
|
|
Net unrealized gain (loss) on
available-for-sale
securities
|
|
|
(4,065
|
)
|
|
|
(4,334
|
)
|
|
|
6,681
|
|
|
|
6,816
|
|
Less: reclassification adjustment for realized (gains) losses included in income
|
|
|
(136
|
)
|
|
|
|
|
|
|
(939
|
)
|
|
|
(25
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive (loss) income, before tax effect
|
|
|
(4,201
|
)
|
|
|
(4,334
|
)
|
|
|
5,742
|
|
|
|
6,791
|
|
Tax effect
|
|
|
1,648
|
|
|
|
1,701
|
|
|
|
(2,253
|
)
|
|
|
(2,664
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
(2,553
|
)
|
|
|
(2,633
|
)
|
|
|
3,489
|
|
|
|
4,127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
12,268
|
|
|
$
|
40,987
|
|
|
$
|
115,263
|
|
|
$
|
132,683
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home BancShares, Inc.
Consolidated Statements of Stockholders Equity
Nine Months Ended September 30, 2017 and 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands, except share data)
|
|
Common
Stock
|
|
|
Capital
Surplus
|
|
|
Retained
Earnings
|
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
|
Total
|
|
Balance at January 1, 2016
|
|
$
|
701
|
|
|
$
|
867,981
|
|
|
$
|
326,898
|
|
|
$
|
4,177
|
|
|
$
|
1,199,757
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
128,556
|
|
|
|
|
|
|
|
128,556
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,127
|
|
|
|
4,127
|
|
Net issuance of 461,737 shares of common stock from exercise of stock options plus issuance of
10,000 bonus shares of unrestricted common stock
|
|
|
2
|
|
|
|
1,351
|
|
|
|
|
|
|
|
|
|
|
|
1,353
|
|
Issuance of common stock
2-for-1
stock split
|
|
|
702
|
|
|
|
(702
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of 461,800 shares of common stock
|
|
|
(2
|
)
|
|
|
(8,840
|
)
|
|
|
|
|
|
|
|
|
|
|
(8,842
|
)
|
Tax benefit from stock options exercised
|
|
|
|
|
|
|
1,264
|
|
|
|
|
|
|
|
|
|
|
|
1,264
|
|
Share-based compensation net issuance of 239,070 shares of restricted common stock
|
|
|
2
|
|
|
|
5,256
|
|
|
|
|
|
|
|
|
|
|
|
5,258
|
|
Cash dividends Common Stock, $0.2525 per share
|
|
|
|
|
|
|
|
|
|
|
(35,455
|
)
|
|
|
|
|
|
|
(35,455
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at September 30, 2016 (unaudited)
|
|
|
1,405
|
|
|
|
866,310
|
|
|
|
419,999
|
|
|
|
8,304
|
|
|
|
1,296,018
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
48,590
|
|
|
|
|
|
|
|
48,590
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,904
|
)
|
|
|
(7,904
|
)
|
Net issuance of 31,002 shares of common stock from exercise of stock options
|
|
|
1
|
|
|
|
141
|
|
|
|
|
|
|
|
|
|
|
|
142
|
|
Repurchase of 48,808 shares of common stock
|
|
|
(1
|
)
|
|
|
(974
|
)
|
|
|
|
|
|
|
|
|
|
|
(975
|
)
|
Tax benefit from stock options exercised
|
|
|
|
|
|
|
2,890
|
|
|
|
|
|
|
|
|
|
|
|
2,890
|
|
Share-based compensation net issuance of 4,664 shares of restricted common stock
|
|
|
|
|
|
|
1,370
|
|
|
|
|
|
|
|
|
|
|
|
1,370
|
|
Cash dividends Common Stock, $0.09 per share
|
|
|
|
|
|
|
|
|
|
|
(12,641
|
)
|
|
|
|
|
|
|
(12,641
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2016
|
|
|
1,405
|
|
|
|
869,737
|
|
|
|
455,948
|
|
|
|
400
|
|
|
|
1,327,490
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
111,774
|
|
|
|
|
|
|
|
111,774
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,489
|
|
|
|
3,489
|
|
Net issuance of 160,237 shares of common stock from exercise of stock options
|
|
|
2
|
|
|
|
847
|
|
|
|
|
|
|
|
|
|
|
|
849
|
|
Issuance of 2,738,038 shares of common stock from acquisition of GHI, net of issuance costs of
approximately $195
|
|
|
27
|
|
|
|
77,290
|
|
|
|
|
|
|
|
|
|
|
|
77,317
|
|
Issuance of 30,863,658 shares of common stock from acquisition of Stonegate, net of issuance costs
of approximately $630
|
|
|
309
|
|
|
|
741,324
|
|
|
|
|
|
|
|
|
|
|
|
741,633
|
|
Repurchase of 800,000 shares of common stock
|
|
|
(8
|
)
|
|
|
(19,530
|
)
|
|
|
|
|
|
|
|
|
|
|
(19,538
|
)
|
Share-based compensation net issuance of 231,766 shares of restricted common stock
|
|
|
2
|
|
|
|
4,974
|
|
|
|
|
|
|
|
|
|
|
|
4,976
|
|
Cash dividends Common Stock, $0.29 per share
|
|
|
|
|
|
|
|
|
|
|
(41,274
|
)
|
|
|
|
|
|
|
(41,274
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at September 30, 2017 (unaudited)
|
|
$
|
1,737
|
|
|
$
|
1,674,642
|
|
|
$
|
526,448
|
|
|
$
|
3,889
|
|
|
$
|
2,206,716
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Condensed Notes to Consolidated Financial Statements.
6
Home BancShares, Inc.
Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
(In thousands)
|
|
2017
|
|
|
2016
|
|
|
|
(Unaudited)
|
|
Operating Activities
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
111,774
|
|
|
$
|
128,556
|
|
Adjustments to reconcile net income to net cash provided by (used in) operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
8,634
|
|
|
|
8,082
|
|
Amortization/(accretion)
|
|
|
12,087
|
|
|
|
11,461
|
|
Share-based compensation
|
|
|
4,976
|
|
|
|
5,258
|
|
Tax benefits from stock options exercised
|
|
|
|
|
|
|
(1,264
|
)
|
Gain on acquisitions
|
|
|
(3,807
|
)
|
|
|
|
|
(Gain) loss on assets
|
|
|
(1,720
|
)
|
|
|
3,425
|
|
Provision for loan losses
|
|
|
39,324
|
|
|
|
16,905
|
|
Deferred income tax effect
|
|
|
(15,867
|
)
|
|
|
12,466
|
|
Increase in cash value of life insurance
|
|
|
(1,251
|
)
|
|
|
(1,092
|
)
|
Originations of mortgage loans held for sale
|
|
|
(243,948
|
)
|
|
|
(261,964
|
)
|
Proceeds from sales of mortgage loans held for sale
|
|
|
250,784
|
|
|
|
257,666
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
Accrued interest receivable
|
|
|
(1,814
|
)
|
|
|
(266
|
)
|
Indemnification and other assets
|
|
|
(22,642
|
)
|
|
|
(9,407
|
)
|
Accrued interest payable and other liabilities
|
|
|
(35,436
|
)
|
|
|
(5,757
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
101,094
|
|
|
|
164,069
|
|
|
|
|
|
|
|
|
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
Net (increase) decrease in federal funds sold
|
|
|
(1,480
|
)
|
|
|
(300
|
)
|
Net (increase) decrease in loans, excluding purchased loans
|
|
|
(115,334
|
)
|
|
|
(492,795
|
)
|
Purchases of investment securities
available-for-sale
|
|
|
(522,329
|
)
|
|
|
(246,983
|
)
|
Proceeds from maturities of investment securities
available-for-sale
|
|
|
120,785
|
|
|
|
217,774
|
|
Proceeds from sale of investment securities
available-for-sale
|
|
|
28,368
|
|
|
|
2,221
|
|
Purchases of investment securities
held-to-maturity
|
|
|
(219
|
)
|
|
|
(123
|
)
|
Proceeds from maturities of investment securities
held-to-maturity
|
|
|
48,144
|
|
|
|
32,417
|
|
Proceeds from sale of investment securities
held-to-maturity
|
|
|
491
|
|
|
|
|
|
Proceeds from foreclosed assets held for sale
|
|
|
13,315
|
|
|
|
11,124
|
|
Proceeds from sale of SBA Loans
|
|
|
13,630
|
|
|
|
7,412
|
|
Purchases of premises and equipment, net
|
|
|
(4,383
|
)
|
|
|
(3,355
|
)
|
Return of investment on cash value of life insurance
|
|
|
592
|
|
|
|
|
|
Net cash proceeds (paid) received market acquisitions
|
|
|
227,845
|
|
|
|
|
|
Cash (paid) on FDIC loss share
buy-out
|
|
|
|
|
|
|
(6,613
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
(190,575
|
)
|
|
|
(479,221
|
)
|
|
|
|
|
|
|
|
|
|
Financing Activities
|
|
|
|
|
|
|
|
|
Net increase (decrease) in deposits, excluding deposits acquired
|
|
|
536,891
|
|
|
|
401,784
|
|
Net increase (decrease) in securities sold under agreements to repurchase
|
|
|
2,078
|
|
|
|
(19,039
|
)
|
Net increase (decrease) in FHLB and other borrowed funds
|
|
|
(350,230
|
)
|
|
|
14,424
|
|
Proceeds from exercise of stock options
|
|
|
849
|
|
|
|
1,353
|
|
Proceeds from issuance of subordinated notes
|
|
|
297,201
|
|
|
|
|
|
Repurchase of common stock
|
|
|
(19,538
|
)
|
|
|
(8,842
|
)
|
Common stock issuance costs market acquisitions
|
|
|
(825
|
)
|
|
|
|
|
Tax benefits from stock options exercised
|
|
|
|
|
|
|
1,264
|
|
Dividends paid on common stock
|
|
|
(41,274
|
)
|
|
|
(35,455
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
425,152
|
|
|
|
355,489
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
|
335,671
|
|
|
|
40,337
|
|
Cash and cash equivalents beginning of year
|
|
|
216,649
|
|
|
|
255,823
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents end of period
|
|
$
|
552,320
|
|
|
$
|
296,160
|
|
|
|
|
|
|
|
|
|
|
See Condensed Notes to Consolidated Financial Statements.
7
Home BancShares, Inc.
Condensed Notes to Consolidated Financial Statements
(Unaudited)
1. Nature of Operations and
Summary of Significant Accounting Policies
Nature of Operations
Home BancShares, Inc. (the Company or HBI) is a bank holding company headquartered in Conway, Arkansas. The Company is
primarily engaged in providing a full range of banking services to individual and corporate customers through its wholly-owned bank subsidiary Centennial Bank (sometimes referred to as Centennial or the Bank). The Bank
has branch locations in Arkansas, Florida, South Alabama and New York City. The Company is subject to competition from other financial institutions. The Company also is subject to the regulation of certain federal and state agencies and undergoes
periodic examinations by those regulatory authorities.
A summary of the significant accounting policies of the Company follows:
Operating Segments
Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the
chief operating decision maker in deciding how to allocate resources and in assessing performance. The Bank is the only significant subsidiary upon which management makes decisions regarding how to allocate resources and assess performance. Each of
the branches of the Bank provide a group of similar banking services, including such products and services as commercial, real estate and consumer loans, time deposits, checking and savings accounts. The individual bank branches have similar
operating and economic characteristics. While the chief decision maker monitors the revenue streams of the various products, services and branch locations, operations are managed and financial performance is evaluated on a Company-wide basis.
Accordingly, all of the banking services and branch locations are considered by management to be aggregated into one reportable operating segment.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Material estimates that are particularly susceptible to
significant change relate to the determination of the allowance for loan losses, the valuation of investment securities, the valuation of foreclosed assets and the valuations of assets acquired and liabilities assumed in business combinations. In
connection with the determination of the allowance for loan losses and the valuation of foreclosed assets, management obtains independent appraisals for significant properties.
Principles of Consolidation
The consolidated financial statements include the accounts of HBI and its subsidiaries. Significant intercompany accounts and transactions have
been eliminated in consolidation.
Reclassifications
Various items within the accompanying consolidated financial statements for previous years have been reclassified to provide more comparative
information. These reclassifications had no effect on net earnings or stockholders equity.
Interim financial information
The accompanying unaudited consolidated financial statements as of September 30, 2017 and 2016 have been prepared in
condensed format, and therefore do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.
8
The information furnished in these interim statements reflects all adjustments which are, in the
opinion of management, necessary for a fair statement of the results for each respective period presented. Such adjustments are of a normal recurring nature. The results of operations in the interim statements are not necessarily indicative of the
results that may be expected for any other quarter or for the full year. The interim financial information should be read in conjunction with the consolidated financial statements and notes thereto included in the Companys 2016 Form
10-K,
filed with the Securities and Exchange Commission.
Earnings per Share
Basic earnings per share is computed based on the weighted-average number of shares outstanding during each year. Diluted earnings per share is
computed using the weighted-average shares and all potential dilutive shares outstanding during the period. The following table sets forth the computation of basic and diluted earnings per share (EPS) for the following periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
(In thousands)
|
|
Net income
|
|
$
|
14,821
|
|
|
$
|
43,620
|
|
|
$
|
111,774
|
|
|
$
|
128,556
|
|
Average shares outstanding
|
|
|
144,238
|
|
|
|
140,436
|
|
|
|
143,111
|
|
|
|
140,403
|
|
Effect of common stock options
|
|
|
749
|
|
|
|
267
|
|
|
|
728
|
|
|
|
282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average diluted shares outstanding
|
|
|
144,987
|
|
|
|
140,703
|
|
|
|
143,839
|
|
|
|
140,685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
0.10
|
|
|
$
|
0.31
|
|
|
$
|
0.78
|
|
|
$
|
0.92
|
|
Diluted earnings per share
|
|
$
|
0.10
|
|
|
$
|
0.31
|
|
|
$
|
0.78
|
|
|
$
|
0.91
|
|
2. Business Combinations
Acquisition of Stonegate Bank
On September 26, 2017, the Company, completed the acquisition of all of the issued and outstanding shares of common stock of Stonegate
Bank (Stonegate), and merged Stonegate into Centennial. The Company paid a purchase price to the Stonegate shareholders of approximately $792.4 million for the Stonegate acquisition. Under the terms of the merger agreement,
shareholders of Stonegate received 30,863,658 shares of HBI common stock valued at approximately $742.3 million plus approximately $50.1 million in cash in exchange for all outstanding shares of Stonegate common stock. In addition, the
holders of outstanding stock options of Stonegate received approximately $27.6 million in cash in connection with the cancellation of their options immediately before the acquisition closed, for a total transaction value of approximately
$820.0 million.
Including the effects of the known purchase accounting adjustments, as of acquisition date, Stonegate had
approximately $2.89 billion in total assets, $2.37 billion in loans and $2.53 billion in customer deposits. Stonegate formerly operated its banking business from 24 locations in key Florida markets with significant presence in Broward
and Sarasota counties.
The purchase price allocation and certain fair value measurements remain preliminary due to the timing of the
acquisition. The Company will continue to review the estimated fair values of loans, deposits and intangible assets, and to evaluate the assumed tax positions and contingencies.
9
The Company has determined that the acquisition of the net assets of Stonegate constitutes a
business combination as defined by the ASC Topic 805. Accordingly, the assets acquired and liabilities assumed are presented at their fair values as required. Fair values were determined based on the requirements of ASC Topic 820. In many cases, the
determination of these fair values required management to make estimates about discount rates, future expected cash flows, market conditions and other future events that are highly subjective in nature and subject to change. The following schedule
is a breakdown of the assets acquired and liabilities assumed as of the acquisition date:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stonegate Bank
|
|
|
|
Acquired
from Stonegate
|
|
|
Fair Value
Adjustments
|
|
|
As Recorded
by HBI
|
|
|
|
(Dollars in thousands)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
100,958
|
|
|
$
|
|
|
|
$
|
100,958
|
|
Interest-bearing deposits with other banks
|
|
|
135,631
|
|
|
|
|
|
|
|
135,631
|
|
Federal funds sold
|
|
|
1,515
|
|
|
|
|
|
|
|
1,515
|
|
Investment securities
|
|
|
103,041
|
|
|
|
477
|
|
|
|
103,518
|
|
Loans receivable
|
|
|
2,446,149
|
|
|
|
(73,990
|
)
|
|
|
2,372,159
|
|
Allowance for loan losses
|
|
|
(21,507
|
)
|
|
|
21,507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable, net
|
|
|
2,424,642
|
|
|
|
(52,483
|
)
|
|
|
2,372,159
|
|
Bank premises and equipment, net
|
|
|
38,868
|
|
|
|
(3,572
|
)
|
|
|
35,296
|
|
Foreclosed assets held for sale
|
|
|
4,187
|
|
|
|
(801
|
)
|
|
|
3,386
|
|
Cash value of life insurance
|
|
|
48,000
|
|
|
|
|
|
|
|
48,000
|
|
Accrued interest receivable
|
|
|
7,088
|
|
|
|
|
|
|
|
7,088
|
|
Deferred tax asset, net
|
|
|
27,340
|
|
|
|
11,244
|
|
|
|
38,584
|
|
Goodwill
|
|
|
81,452
|
|
|
|
(81,452
|
)
|
|
|
|
|
Core deposit and other intangibles
|
|
|
10,505
|
|
|
|
20,364
|
|
|
|
30,869
|
|
Other assets
|
|
|
9,598
|
|
|
|
231
|
|
|
|
9,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets acquired
|
|
$
|
2,992,825
|
|
|
$
|
(105,992
|
)
|
|
$
|
2,886,833
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand and
non-interest-bearing
|
|
$
|
585,959
|
|
|
$
|
|
|
|
$
|
585,959
|
|
Savings and interest-bearing transaction accounts
|
|
|
1,776,256
|
|
|
|
|
|
|
|
1,776,256
|
|
Time deposits
|
|
|
163,567
|
|
|
|
(85
|
)
|
|
|
163,482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
|
2,525,782
|
|
|
|
(85
|
)
|
|
|
2,525,697
|
|
FHLB borrowed funds
|
|
|
32,667
|
|
|
|
184
|
|
|
|
32,851
|
|
Securities sold under agreements to repurchase
|
|
|
26,163
|
|
|
|
|
|
|
|
26,163
|
|
Accrued interest payable and other liabilities
|
|
|
8,100
|
|
|
|
5
|
|
|
|
8,105
|
|
Subordinated debentures
|
|
|
8,345
|
|
|
|
1,490
|
|
|
|
9,835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities assumed
|
|
|
2,601,057
|
|
|
|
1,594
|
|
|
|
2,602,651
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity assumed
|
|
|
391,768
|
|
|
|
(391,768
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity assumed
|
|
$
|
2,992,825
|
|
|
$
|
(390,174
|
)
|
|
|
2,602,651
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets acquired
|
|
|
|
|
|
|
|
|
|
|
284,182
|
|
Purchase price
|
|
|
|
|
|
|
|
|
|
|
792,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
$
|
508,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
The following is a description of the methods used to determine the fair values of significant
assets and liabilities presented above:
Cash and due from banks, interest-bearing deposits with other banks and federal funds sold
The carrying amount of these assets is a reasonable estimate of fair value based on the short-term nature of these assets.
Investment securities
Investment securities were acquired from Stonegate with an approximately $477,000 adjustment to market
value based upon quoted market prices.
Loans
Fair values for loans were based on a discounted cash flow methodology that
considered factors including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan and whether or not the loan was amortizing, and current discount rates. The discount rates used for loans are
based on current market rates for new originations of comparable loans and include adjustments for liquidity concerns.
The Company
evaluated $2.37 billion of the loans purchased in conjunction with the acquisition in accordance with the provisions of FASB ASC Topic
310-20,
Nonrefundable Fees and Other Costs,
which were
recorded with a $73.3 million discount. As a result, the fair value discount on these loans is being accreted into interest income over the weighted average life of the loans using a constant yield method. The remaining $74.3 million of
loans evaluated were considered purchased credit impaired loans within the provisions of FASB ASC Topic
310-30,
Loans and Debt Securities Acquired with Deteriorated Credit Quality,
and were recorded
with a $23.3 million discount. These purchase credit impaired loans will recognize interest income through accretion of the difference between the carrying amount of the loans and the expected cash flows. The acquired Stonegate loan balance and
the fair value adjustment on loans receivable includes $22.6 million of discount on purchased loans, respectively.
Bank premises
and equipment
Bank premises and equipment were acquired from Stonegate with a $3.6 million adjustment to market value. This represents the difference between current appraisals completed in connection with the acquisition and book
value acquired.
Foreclosed assets held for sale
These assets are presented at the estimated fair values that management
expects to receive when the properties are sold, net of related costs of disposal.
Cash value of life insurance
Cash value
of life insurance was acquired from Stonegate at market value.
Accrued interest receivable
Accrued interest receivable was
acquired from Stonegate at market value.
Deferred tax asset
The current and deferred income tax assets and liabilities are
recorded to reflect the differences in the carrying values of the acquired assets and assumed liabilities for financial reporting purposes and the cost basis for federal income tax purposes, at the Companys statutory federal and state income
tax rate of 39.225%.
Core deposit intangible
This intangible asset represents the value of the relationships that Stonegate
had with its deposit customers. The fair value of this intangible asset was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, cost of the deposit base, and the net
maintenance cost attributable to customer deposits. The Company recorded $30.9 million of core deposit intangible.
Deposits
The fair values used for the demand and savings deposits that comprise the transaction accounts acquired, by definition equal the amount payable on demand at the acquisition date. The $85,000 fair value adjustment applied for time deposits
was because the weighted average interest rate of Stonegates certificates of deposits were estimated to be below the current market rates.
FHLB borrowed funds
The fair value of FHLB borrowed funds is estimated based on borrowing rates currently available to the
Company for borrowings with similar terms and maturities.
Securities sold under agreements to repurchase
Securities sold
under agreements to repurchase were acquired from Stonegate at market value.
Accrued interest payable and other liabilities
Accrued interest payable and other liabilities were acquired from Stonegate at market value.
11
Subordinated debentures
The fair value of subordinated debentures is estimated
based on borrowing rates currently available to the Company for borrowings with similar terms and maturities.
The unaudited
pro-forma
combined consolidated financial information presents how the combined financial information of HBI and Stonegate might have appeared had the businesses actually been combined. The following schedule
represents the unaudited pro forma combined financial information as of the three and nine-month periods ended September 30, 2017 and 2016, assuming the acquisition was completed as of January 1, 2017 and 2016, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
(In thousands, except per share data)
|
|
Total interest income
|
|
$
|
154,425
|
|
|
$
|
136,063
|
|
|
$
|
451,716
|
|
|
$
|
396,952
|
|
Total
non-interest
income
|
|
|
24,072
|
|
|
|
24,081
|
|
|
|
79,887
|
|
|
|
69,302
|
|
Net income available to all shareholders
|
|
|
7,399
|
|
|
|
50,176
|
|
|
|
120,670
|
|
|
|
148,495
|
|
Basic earnings per common share
|
|
$
|
0.04
|
|
|
$
|
0.29
|
|
|
$
|
0.69
|
|
|
$
|
0.87
|
|
Diluted earnings per common share
|
|
|
0.04
|
|
|
|
0.29
|
|
|
|
0.69
|
|
|
|
0.87
|
|
The unaudited
pro-forma
consolidated financial information is
presented for illustrative purposes only and does not indicate the financial results of the combined company had the companies actually been combined at the beginning of the period presented and had the impact of possible significant revenue
enhancements and expense efficiencies from
in-market
cost savings, among other factors, been considered and, accordingly, does not attempt to predict or suggest future results. It also does not necessarily
reflect what the historical results of the combined company would have been had the companies been combined during this period.
Acquisition of Giant Holdings, Inc.
On February 23, 2017, the Company completed its acquisition of Giant Holdings, Inc. (GHI), parent company of Landmark Bank,
N.A. (Landmark), pursuant to a previously announced definitive agreement and plan of merger whereby GHI merged with and into HBI and, immediately thereafter, Landmark merged with and into Centennial. The Company paid a purchase price to
the GHI shareholders of approximately $96.0 million for the GHI acquisition. Under the terms of the agreement, shareholders of GHI received 2,738,038 shares of its common stock valued at approximately $77.5 million as of February 23,
2017, plus approximately $18.5 million in cash in exchange for all outstanding shares of GHI common stock.
GHI formerly operated six
branch locations in the Ft. Lauderdale, Florida area. Including the effects of the purchase accounting adjustments, as of acquisition date, GHI had approximately $398.1 million in total assets, $327.8 million in loans after
$8.1 million of loan discounts, and $304.0 million in deposits.
12
The Company has determined that the acquisition of the net assets of GHI constitutes a business
combination as defined by the ASC Topic 805. Accordingly, the assets acquired and liabilities assumed are presented at their fair values as required. Fair values were determined based on the requirements of ASC Topic 820. In many cases, the
determination of these fair values required management to make estimates about discount rates, future expected cash flows, market conditions and other future events that are highly subjective in nature and subject to change. The following schedule
is a breakdown of the assets acquired and liabilities assumed as of the acquisition date:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Giant Holdings, Inc.
|
|
|
|
Acquired
from GHI
|
|
|
Fair Value
Adjustments
|
|
|
As Recorded
by HBI
|
|
|
|
(Dollars in thousands)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
41,019
|
|
|
$
|
|
|
|
$
|
41,019
|
|
Interest-bearing deposits with other banks
|
|
|
4,057
|
|
|
|
1
|
|
|
|
4,058
|
|
Investment securities
|
|
|
1,961
|
|
|
|
(5
|
)
|
|
|
1,956
|
|
Loans receivable
|
|
|
335,886
|
|
|
|
(6,517
|
)
|
|
|
329,369
|
|
Allowance for loan losses
|
|
|
(4,568
|
)
|
|
|
4,568
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable, net
|
|
|
331,318
|
|
|
|
(1,949
|
)
|
|
|
329,369
|
|
Bank premises and equipment, net
|
|
|
2,111
|
|
|
|
608
|
|
|
|
2,719
|
|
Cash value of life insurance
|
|
|
10,861
|
|
|
|
|
|
|
|
10,861
|
|
Accrued interest receivable
|
|
|
850
|
|
|
|
|
|
|
|
850
|
|
Deferred tax asset, net
|
|
|
2,286
|
|
|
|
1,807
|
|
|
|
4,093
|
|
Core deposit and other intangibles
|
|
|
172
|
|
|
|
3,238
|
|
|
|
3,410
|
|
Other assets
|
|
|
254
|
|
|
|
(489
|
)
|
|
|
(235
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets acquired
|
|
$
|
394,889
|
|
|
$
|
3,211
|
|
|
$
|
398,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand and
non-interest-bearing
|
|
$
|
75,993
|
|
|
$
|
|
|
|
$
|
75,993
|
|
Savings and interest-bearing transaction accounts
|
|
|
139,459
|
|
|
|
|
|
|
|
139,459
|
|
Time deposits
|
|
|
88,219
|
|
|
|
324
|
|
|
|
88,543
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
|
303,671
|
|
|
|
324
|
|
|
|
303,995
|
|
FHLB borrowed funds
|
|
|
26,047
|
|
|
|
431
|
|
|
|
26,478
|
|
Accrued interest payable and other liabilities
|
|
|
14,552
|
|
|
|
18
|
|
|
|
14,570
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities assumed
|
|
|
344,270
|
|
|
|
773
|
|
|
|
345,043
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity assumed
|
|
|
50,619
|
|
|
|
(50,619
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity assumed
|
|
$
|
394,889
|
|
|
$
|
(49,846
|
)
|
|
|
345,043
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets acquired
|
|
|
|
|
|
|
|
|
|
|
53,057
|
|
Purchase price
|
|
|
|
|
|
|
|
|
|
|
96,015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
$
|
42,958
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
The following is a description of the methods used to determine the fair values of significant
assets and liabilities presented above:
Cash and due from banks and interest-bearing deposits with other banks
The carrying
amount of these assets is a reasonable estimate of fair value based on the short-term nature of these assets.
Investment
securities
Investment securities were acquired from GHI with an approximately $5,000 adjustment to market value based upon quoted market prices.
Loans
Fair values for loans were based on a discounted cash flow methodology that considered factors including the type of loan
and related collateral, classification status, fixed or variable interest rate, term of loan and whether or not the loan was amortizing, and current discount rates. The discount rates used for loans are based on current market rates for new
originations of comparable loans and include adjustments for liquidity concerns.
The Company evaluated $315.6 million of the loans
purchased in conjunction with the acquisition in accordance with the provisions of FASB ASC Topic
310-20,
Nonrefundable Fees and Other Costs,
which were recorded with a $3.6 million discount. As a
result, the fair value discount on these loans is being accreted into interest income over the weighted average life of the loans using a constant yield method. The remaining $20.3 million of loans evaluated were considered purchased credit
impaired loans within the provisions of FASB ASC Topic
310-30,
Loans and Debt Securities Acquired with Deteriorated Credit Quality,
and were recorded with a $4.5 million discount. These purchase
credit impaired loans will recognize interest income through accretion of the difference between the carrying amount of the loans and the expected cash flows. The acquired GHI loan balance includes $1.6 million of discount on purchased loans.
Bank premises and equipment
Bank premises and equipment were acquired from GHI with a $608,000 adjustment to market value.
This represents the difference between current appraisals completed in connection with the acquisition and book value acquired.
Cash
value of life insurance
Cash value of life insurance was acquired from GHI at market value.
Accrued interest receivable
Accrued interest receivable was acquired from GHI at market value.
Deferred tax asset
The current and deferred
income tax assets and liabilities are recorded to reflect the differences in the carrying values of the acquired assets and assumed liabilities for financial reporting purposes and the cost basis for federal income tax purposes, at the
Companys statutory federal and state income tax rate of 39.225%.
Core deposit intangible
This intangible asset
represents the value of the relationships that GHI had with its deposit customers. The fair value of this intangible asset was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition
rates, cost of the deposit base, and the net maintenance cost attributable to customer deposits. The Company recorded $3.4 million of core deposit intangible.
Deposits
The fair values used for the demand and savings deposits that comprise the transaction accounts acquired, by definition
equal the amount payable on demand at the acquisition date. The $324,000 fair value adjustment applied for time deposits was because the weighted average interest rate of GHIs certificates of deposits were estimated to be below the current
market rates.
FHLB borrowed funds
The fair value of FHLB borrowed funds is estimated based on borrowing rates currently
available to the Company for borrowings with similar terms and maturities.
Accrued interest payable and other liabilities
The fair value used represents the adjustments of certain estimated liabilities from GHI.
The Companys operating results for the
period ended September 30, 2017, include the operating results of the acquired assets and assumed liabilities subsequent to the acquisition date. Due to the fair value adjustments recorded and the fact GHI total assets acquired are less than 5%
of total assets as of September 30, 2017 excluding GHI as recorded by HBI as of acquisition date, historical results are not believed to be material to the Companys results, and thus no pro-forma information is presented.
14
Acquisition of The Bank of Commerce
On February 28, 2017, the Company completed its previously announced acquisition of all of the issued and outstanding shares of common
stock of The Bank of Commerce, a Florida state-chartered bank that operated in the Sarasota, Florida area (BOC), pursuant to an acquisition agreement, dated December 1, 2016, by and between HBI and Bank of Commerce Holdings, Inc.
(BCHI), parent company of BOC. The Company merged BOC with and into Centennial effective as of the close of business on February 28, 2017.
The acquisition of BOC was conducted in accordance with the provisions of Section 363 of the United States Bankruptcy Code (the
Bankruptcy Code) pursuant to a voluntary petition for relief under Chapter 11 of the Bankruptcy Code filed by BCHI with the United States Bankruptcy Court for the Middle District of Florida (the Bankruptcy Court). The sale of
BOC by BCHI was subject to certain bidding procedures approved by the Bankruptcy Court. On November 14, 2016, the Company submitted an initial bid to purchase the outstanding shares of BOC in accordance with the bidding procedures approved by
the Bankruptcy Court. An auction was subsequently conducted on November 16, 2016, and the Company was deemed to be the successful bidder. The Bankruptcy Court entered a final order on December 9, 2016 approving the sale of BOC to the
Company pursuant to and in accordance with the acquisition agreement.
Under the terms of the acquisition agreement, the Company paid an
aggregate of approximately $4.2 million in cash for the acquisition, which included the purchase of all outstanding shares of BOC common stock, the discounted purchase of certain subordinated debentures issued by BOC from the existing holders
of the subordinated debentures, and an expense reimbursement to BCHI for approved administrative claims in connection with the bankruptcy proceeding.
BOC formerly operated three branch locations in the Sarasota, Florida area. Including the effects of the purchase accounting adjustments, as
of acquisition date, BOC had approximately $178.1 million in total assets, $118.5 million in loans after $5.8 million of loan discounts, and $139.8 million in deposits.
15
The Company has determined that the acquisition of the net assets of BOC constitutes a business
combination as defined by the ASC Topic 805. Accordingly, the assets acquired and liabilities assumed are presented at their fair values as required. Fair values were determined based on the requirements of ASC Topic 820. In many cases, the
determination of these fair values required management to make estimates about discount rates, future expected cash flows, market conditions and other future events that are highly subjective in nature and subject to change. The following schedule
is a breakdown of the assets acquired and liabilities assumed as of the acquisition date:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Bank of Commerce
|
|
|
|
Acquired
from BOC
|
|
|
Fair Value
Adjustments
|
|
|
As Recorded
by HBI
|
|
|
|
(Dollars in thousands)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
4,610
|
|
|
$
|
|
|
|
$
|
4,610
|
|
Interest-bearing deposits with other banks
|
|
|
14,360
|
|
|
|
|
|
|
|
14,360
|
|
Investment securities
|
|
|
25,926
|
|
|
|
(113
|
)
|
|
|
25,813
|
|
Loans receivable
|
|
|
124,289
|
|
|
|
(5,751
|
)
|
|
|
118,538
|
|
Allowance for loan losses
|
|
|
(2,037
|
)
|
|
|
2,037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable, net
|
|
|
122,252
|
|
|
|
(3,714
|
)
|
|
|
118,538
|
|
Bank premises and equipment, net
|
|
|
1,887
|
|
|
|
|
|
|
|
1,887
|
|
Foreclosed assets held for sale
|
|
|
8,523
|
|
|
|
(3,165
|
)
|
|
|
5,358
|
|
Accrued interest receivable
|
|
|
481
|
|
|
|
|
|
|
|
481
|
|
Deferred tax asset, net
|
|
|
|
|
|
|
4,198
|
|
|
|
4,198
|
|
Core deposit intangible
|
|
|
|
|
|
|
968
|
|
|
|
968
|
|
Other assets
|
|
|
1,880
|
|
|
|
|
|
|
|
1,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets acquired
|
|
$
|
179,919
|
|
|
$
|
(1,826
|
)
|
|
$
|
178,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand and
non-interest-bearing
|
|
$
|
27,245
|
|
|
$
|
|
|
|
$
|
27,245
|
|
Savings and interest-bearing transaction accounts
|
|
|
32,300
|
|
|
|
|
|
|
|
32,300
|
|
Time deposits
|
|
|
79,945
|
|
|
|
270
|
|
|
|
80,215
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
|
139,490
|
|
|
|
270
|
|
|
|
139,760
|
|
FHLB borrowed funds
|
|
|
30,000
|
|
|
|
42
|
|
|
|
30,042
|
|
Accrued interest payable and other liabilities
|
|
|
564
|
|
|
|
(255
|
)
|
|
|
309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities assumed
|
|
$
|
170,054
|
|
|
$
|
57
|
|
|
|
170,111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets acquired
|
|
|
|
|
|
|
|
|
|
|
7,982
|
|
Purchase price
|
|
|
|
|
|
|
|
|
|
|
4,175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax
gain on acquisition
|
|
|
|
|
|
|
|
|
|
$
|
3,807
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following is a description of the methods used to determine the fair values of significant assets and
liabilities presented above:
Cash and due from banks and interest-bearing deposits with other banks
The carrying amount of
these assets is a reasonable estimate of fair value based on the short-term nature of these assets.
Investment securities
Investment securities were acquired from BOC with a $113,000 adjustment to market value based upon quoted market prices.
Loans
Fair values for loans were based on a discounted cash flow methodology that considered factors including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan and whether or not the loan
was amortizing, and current discount rates. The discount rates used for loans are based on current market rates for new originations of comparable loans and include adjustments for liquidity concerns.
16
The Company evaluated $106.8 million of the loans purchased in conjunction with the
acquisition in accordance with the provisions of FASB ASC Topic
310-20,
Nonrefundable Fees and Other Costs,
which were recorded with a $3.0 million discount. As a result, the fair value discount on
these loans is being accreted into interest income over the weighted average life of the loans using a constant yield method. The remaining $17.5 million of loans evaluated were considered purchased credit impaired loans within the provisions
of FASB ASC Topic
310-30,
Loans and Debt Securities Acquired with Deteriorated Credit Quality,
and were recorded with a $2.8 million discount. These purchase credit impaired loans will recognize
interest income through accretion of the difference between the carrying amount of the loans and the expected cash flows.
Bank
premises and equipment
Bank premises and equipment were acquired from BOC at market value.
Foreclosed assets held for
sale
These assets are presented at the estimated fair values that management expects to receive when the properties are sold, net of related costs to sell.
Accrued interest receivable
Accrued interest receivable was acquired from BOC at market value.
Deferred tax asset
The current and deferred income tax assets and liabilities are recorded to reflect the differences in the
carrying values of the acquired assets and assumed liabilities for financial reporting purposes and the cost basis for federal income tax purposes, at the Companys statutory federal and state income tax rate of 39.225%.
Core deposit intangible
This intangible asset represents the value of the relationships that BOC had with its deposit customers.
The fair value of this intangible asset was estimated based on a discounted cash flow methodology that gave appropriate consideration to expected customer attrition rates, cost of the deposit base, and the net maintenance cost attributable to
customer deposits. The Company recorded $968,000 of core deposit intangible.
Deposits
The fair values used for the demand
and savings deposits that comprise the transaction accounts acquired, by definition equal the amount payable on demand at the acquisition date. The $270,000 fair value adjustment applied for time deposits was because the weighted-average interest
rate of BOCs certificates of deposits were estimated to be below the current market rates.
FHLB borrowed funds
The
fair value of FHLB borrowed funds is estimated based on borrowing rates currently available to the Company for borrowings with similar terms and maturities.
Accrued interest payable and other liabilities
The fair value used represents the adjustment of certain estimated liabilities
from BOC.
The Companys operating results for the period ended September 30, 2017, include the operating results of the
acquired assets and assumed liabilities subsequent to the acquisition date. Due to the fair value adjustments recorded and the fact BOC total assets acquired are less than 5% of total assets as of September 30, 2017 excluding BOC as recorded by
HBI as of acquisition date, historical results are not believed to be material to the Companys results, and thus no
pro-forma
information is presented.
17
3. Investment Securities
The amortized cost and estimated fair value of investment securities that are classified as
available-for-sale
and
held-to-maturity
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
|
Available-for-Sale
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
(Losses)
|
|
|
Estimated
Fair Value
|
|
|
|
(In thousands)
|
|
U.S. government-sponsored enterprises
|
|
$
|
396,323
|
|
|
$
|
1,527
|
|
|
$
|
(658
|
)
|
|
$
|
397,192
|
|
Residential mortgage-backed securities
|
|
|
446,397
|
|
|
|
884
|
|
|
|
(1,534
|
)
|
|
|
445,747
|
|
Commercial mortgage-backed securities
|
|
|
446,651
|
|
|
|
1,272
|
|
|
|
(1,743
|
)
|
|
|
446,180
|
|
State and political subdivisions
|
|
|
244,746
|
|
|
|
4,924
|
|
|
|
(536
|
)
|
|
|
249,134
|
|
Other securities
|
|
|
35,168
|
|
|
|
2,642
|
|
|
|
(378
|
)
|
|
|
37,432
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,569,285
|
|
|
$
|
11,249
|
|
|
$
|
(4,849
|
)
|
|
$
|
1,575,685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-Maturity
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
(Losses)
|
|
|
Estimated
Fair Value
|
|
|
|
(In thousands)
|
|
U.S. government-sponsored enterprises
|
|
$
|
6,093
|
|
|
$
|
26
|
|
|
$
|
|
|
|
$
|
6,119
|
|
Residential mortgage-backed securities
|
|
|
60,755
|
|
|
|
233
|
|
|
|
(150
|
)
|
|
|
60,838
|
|
Commercial mortgage-backed securities
|
|
|
17,878
|
|
|
|
206
|
|
|
|
(5
|
)
|
|
|
18,079
|
|
State and political subdivisions
|
|
|
150,219
|
|
|
|
3,764
|
|
|
|
(2
|
)
|
|
|
153,981
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
234,945
|
|
|
$
|
4,229
|
|
|
$
|
(157
|
)
|
|
$
|
239,017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
Available-for-Sale
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
(Losses)
|
|
|
Estimated
Fair Value
|
|
|
|
(In thousands)
|
|
U.S. government-sponsored enterprises
|
|
$
|
237,439
|
|
|
$
|
963
|
|
|
$
|
(1,641
|
)
|
|
$
|
236,761
|
|
Residential mortgage-backed securities
|
|
|
259,037
|
|
|
|
1,226
|
|
|
|
(1,627
|
)
|
|
|
258,636
|
|
Commercial mortgage-backed securities
|
|
|
322,316
|
|
|
|
845
|
|
|
|
(2,342
|
)
|
|
|
320,819
|
|
State and political subdivisions
|
|
|
215,209
|
|
|
|
3,471
|
|
|
|
(2,181
|
)
|
|
|
216,499
|
|
Other securities
|
|
|
38,261
|
|
|
|
2,603
|
|
|
|
(659
|
)
|
|
|
40,205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,072,262
|
|
|
$
|
9,108
|
|
|
$
|
(8,450
|
)
|
|
$
|
1,072,920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-Maturity
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
(Losses)
|
|
|
Estimated
Fair Value
|
|
|
|
(In thousands)
|
|
U.S. government-sponsored enterprises
|
|
$
|
6,637
|
|
|
$
|
23
|
|
|
$
|
(32
|
)
|
|
$
|
6,628
|
|
Residential mortgage-backed securities
|
|
|
71,956
|
|
|
|
267
|
|
|
|
(301
|
)
|
|
|
71,922
|
|
Commercial mortgage-backed securities
|
|
|
35,863
|
|
|
|
107
|
|
|
|
(133
|
)
|
|
|
35,837
|
|
State and political subdivisions
|
|
|
169,720
|
|
|
|
3,100
|
|
|
|
(169
|
)
|
|
|
172,651
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
284,176
|
|
|
$
|
3,497
|
|
|
$
|
(635
|
)
|
|
$
|
287,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
Assets, principally investment securities, having a carrying value of approximately
$1.13 billion and $1.07 billion at September 30, 2017 and December 31, 2016, respectively, were pledged to secure public deposits and for other purposes required or permitted by law. This includes, investment securities pledged
as collateral for repurchase agreements which totaled approximately $149.5 million and $121.3 million at September 30, 2017 and December 31, 2016, respectively.
The amortized cost and estimated fair value of securities classified as
available-for-sale
and
held-to-maturity
at September 30, 2017, by contractual
maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-Sale
|
|
|
Held-to-Maturity
|
|
|
|
Amortized
Cost
|
|
|
Estimated
Fair Value
|
|
|
Amortized
Cost
|
|
|
Estimated
Fair Value
|
|
|
|
(In thousands)
|
|
Due in one year or less
|
|
$
|
137,401
|
|
|
$
|
139,500
|
|
|
$
|
36,805
|
|
|
$
|
38,016
|
|
Due after one year through five years
|
|
|
1,023,970
|
|
|
|
1,027,436
|
|
|
|
122,328
|
|
|
|
124,666
|
|
Due after five years through ten years
|
|
|
293,622
|
|
|
|
293,978
|
|
|
|
17,556
|
|
|
|
17,806
|
|
Due after ten years
|
|
|
114,292
|
|
|
|
114,771
|
|
|
|
58,256
|
|
|
|
58,529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,569,285
|
|
|
$
|
1,575,685
|
|
|
$
|
234,945
|
|
|
$
|
239,017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For purposes of the maturity tables, mortgage-backed securities, which are not due at a single maturity date,
have been allocated over maturity groupings based on anticipated maturities. The mortgage-backed securities may mature earlier than their weighted-average contractual maturities because of principal prepayments.
During the three and nine-month periods ended September 30, 2017, approximately $234,000 and $27.4 million, respectively, in
available-for-sale
securities were sold. The gross realized gains on the sale for the three-month period ended September 30, 2017 totaled approximately $136,000. The
gross realized gains and losses on the sales for the nine-month period ended September 30, 2017 totaled approximately $1.1 million and $127,000, respectively. The income tax expense/benefit to net security gains and losses was 39.225% of
the gross amounts.
During the three-month period ended September 30, 2016, no
available-for-sale
securities were sold. During the nine-month period ended September 30, 2016, approximately $2.2 million, in
available-for-sale
securities were sold. The gross realized gains on the sales for the nine-month period ended September 30, 2016 totaled approximately $25,000. The
income tax expense/benefit to net security gains and losses was 39.225% of the gross amounts.
During the three-month period ended
September 30, 2017, no
held-to-maturity
securities were sold. During the nine-month period ended September 30, 2017, one
held-to-maturity
security experienced its second downgrade in its credit rating. The Company made a strategic decision to sell this
held-to-maturity
security for approximately $483,000, which resulted in a gross realized loss on the sale for the nine-month period ended September 30, 2017 of
approximately $7,000.
The Company evaluates all securities quarterly to determine if any unrealized losses are deemed to be other than
temporary. In completing these evaluations the Company follows the requirements of FASB ASC 320,
InvestmentsDebt and Equity Securities.
Certain investment securities are valued less than their historical cost. These declines are
primarily the result of the rate for these investments yielding less than current market rates. Based on evaluation of available evidence, management believes the declines in fair value for these securities are temporary. The Company does not intend
to sell or believe it will be required to sell these investments before recovery of their amortized cost bases, which may be maturity. Should the impairment of any of these securities become other than temporary, the cost basis of the investment
will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified.
During
the three and nine-month periods ended September 30, 2017, no securities were deemed to have other-than-temporary impairment.
19
For the nine months ended September 30, 2017, the Company had investment securities with
approximately $2.4 million in unrealized losses, which have been in continuous loss positions for more than twelve months. Excluding impairment write downs taken in prior periods, the Companys assessments indicated that the cause of the
market depreciation was primarily the change in interest rates and not the issuers financial condition, or downgrades by rating agencies. In addition, 73.2% of the Companys investment portfolio matures in five years or less. As a result,
the Company has the ability and intent to hold such securities until maturity.
The following shows gross unrealized losses and estimated
fair value of investment securities classified as
available-for-sale
and
held-to-maturity
with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual investment securities have been in a continuous loss position as of September 30, 2017 and
December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
|
Less Than 12 Months
|
|
|
12 Months or More
|
|
|
Total
|
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
|
(In thousands)
|
|
U.S. government-sponsored enterprises
|
|
$
|
57,089
|
|
|
$
|
(263
|
)
|
|
$
|
51,593
|
|
|
$
|
(395
|
)
|
|
$
|
108,682
|
|
|
$
|
(658
|
)
|
Residential mortgage-backed securities
|
|
|
214,267
|
|
|
|
(1,086
|
)
|
|
|
42,101
|
|
|
|
(598
|
)
|
|
|
256,368
|
|
|
|
(1,684
|
)
|
Commercial mortgage-backed securities
|
|
|
154,103
|
|
|
|
(937
|
)
|
|
|
61,809
|
|
|
|
(811
|
)
|
|
|
215,912
|
|
|
|
(1,748
|
)
|
State and political subdivisions
|
|
|
30,323
|
|
|
|
(248
|
)
|
|
|
13,322
|
|
|
|
(290
|
)
|
|
|
43,645
|
|
|
|
(538
|
)
|
Other securities
|
|
|
1,476
|
|
|
|
(39
|
)
|
|
|
8,337
|
|
|
|
(339
|
)
|
|
|
9,813
|
|
|
|
(378
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
457,258
|
|
|
$
|
(2,573
|
)
|
|
$
|
177,162
|
|
|
$
|
(2,433
|
)
|
|
$
|
634,420
|
|
|
$
|
(5,006
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
Less Than 12 Months
|
|
|
12 Months or More
|
|
|
Total
|
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
Fair
Value
|
|
|
Unrealized
Losses
|
|
|
|
(In thousands)
|
|
U.S. government-sponsored enterprises
|
|
$
|
98,180
|
|
|
$
|
(1,031
|
)
|
|
$
|
75,044
|
|
|
$
|
(642
|
)
|
|
$
|
173,224
|
|
|
$
|
(1,673
|
)
|
Residential mortgage-backed securities
|
|
|
188,117
|
|
|
|
(1,742
|
)
|
|
|
8,902
|
|
|
|
(186
|
)
|
|
|
197,019
|
|
|
|
(1,928
|
)
|
Commercial mortgage-backed securities
|
|
|
202,289
|
|
|
|
(2,220
|
)
|
|
|
21,020
|
|
|
|
(255
|
)
|
|
|
223,309
|
|
|
|
(2,475
|
)
|
State and political subdivisions
|
|
|
94,309
|
|
|
|
(2,348
|
)
|
|
|
500
|
|
|
|
(2
|
)
|
|
|
94,809
|
|
|
|
(2,350
|
)
|
Other securities
|
|
|
1,540
|
|
|
|
(125
|
)
|
|
|
12,687
|
|
|
|
(534
|
)
|
|
|
14,227
|
|
|
|
(659
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
584,435
|
|
|
$
|
(7,466
|
)
|
|
$
|
118,153
|
|
|
$
|
(1,619
|
)
|
|
$
|
702,588
|
|
|
$
|
(9,085
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income earned on securities for the three and nine months ended September 30, 2017 and 2016, is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
(In thousands)
|
|
Taxable:
|
|
|
|
|
Available-for-sale
|
|
$
|
6,527
|
|
|
$
|
4,809
|
|
|
$
|
17,001
|
|
|
$
|
13,720
|
|
Held-to-maturity
|
|
|
544
|
|
|
|
774
|
|
|
|
1,982
|
|
|
|
2,458
|
|
Non-taxable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
|
|
|
1,627
|
|
|
|
1,528
|
|
|
|
4,757
|
|
|
|
4,667
|
|
Held-to-maturity
|
|
|
1,405
|
|
|
|
1,192
|
|
|
|
4,185
|
|
|
|
3,691
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
10,103
|
|
|
$
|
8,303
|
|
|
$
|
27,925
|
|
|
$
|
24,536
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
4. Loans Receivable
The various categories of loans receivable are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
September 30,
2017
|
|
|
December 31,
2016
|
|
|
|
(In thousands)
|
|
Real estate:
|
|
|
|
|
|
|
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
$
|
4,532,402
|
|
|
$
|
3,153,121
|
|
Construction/land development
|
|
|
1,648,923
|
|
|
|
1,135,843
|
|
Agricultural
|
|
|
88,295
|
|
|
|
77,736
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
1,968,688
|
|
|
|
1,356,136
|
|
Multifamily residential
|
|
|
497,910
|
|
|
|
340,926
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
8,736,218
|
|
|
|
6,063,762
|
|
Consumer
|
|
|
51,515
|
|
|
|
41,745
|
|
Commercial and industrial
|
|
|
1,296,485
|
|
|
|
1,123,213
|
|
Agricultural
|
|
|
57,489
|
|
|
|
74,673
|
|
Other
|
|
|
144,486
|
|
|
|
84,306
|
|
|
|
|
|
|
|
|
|
|
Total loans receivable
|
|
$
|
10,286,193
|
|
|
$
|
7,387,699
|
|
|
|
|
|
|
|
|
|
|
During the three and nine-month periods ended September 30, 2017, the Company sold $3.1 million and
$12.9 million, respectively, of the guaranteed portion of certain SBA loans, which resulted in a gain of approximately $163,000 and $738,000, respectively. During the three-month and nine-month periods ended September 30, 2016, the Company
sold $5.8 million and $7.0 million of the guaranteed portion of certain SBA loans, respectively, which resulted in gains of approximately $364,000 and $443,000, respectively.
Mortgage loans held for sale of approximately $49.4 million and $56.2 million at September 30, 2017 and December 31, 2016,
respectively, are included in residential
1-4
family loans. Mortgage loans held for sale are carried at the lower of cost or fair value, determined using an aggregate basis. Gains and losses resulting from
sales of mortgage loans are recognized when the respective loans are sold to investors. Gains and losses are determined by the difference between the selling price and the carrying amount of the loans sold, net of discounts collected or paid. The
Company obtains forward commitments to sell mortgage loans to reduce market risk on mortgage loans in the process of origination and mortgage loans held for sale. The forward commitments acquired by the Company for mortgage loans in process of
origination are considered mandatory forward commitments. Because these commitments are structured on a mandatory basis, the Company is required to substitute another loan or to buy back the commitment if the original loan does not fund. These
commitments are derivative instruments and their fair values at September 30, 2017 and December 31, 2016 were not material.
The
Company had $3.65 billion of purchased loans, which includes $158.0 million of discount for credit losses on purchased loans, at September 30, 2017. The Company had $55.1 million and $102.9 million remaining of
non-accretable
discount for credit losses on purchased loans and accretable discount for credit losses on purchased loans, respectively, as of September 30, 2017. The Company had $1.13 billion of purchased
loans, which includes $100.1 million of discount for credit losses on purchased loans, at December 31, 2016. The Company had $35.3 million and $64.9 million remaining of
non-accretable
discount for credit losses on purchased loans and accretable discount for credit losses on purchased loans, respectively, as of December 31, 2016.
21
5. Allowance for Loan Losses, Credit Quality and Other
The following table presents a summary of changes in the allowance for loan losses:
|
|
|
|
|
|
|
Nine Months Ended
September 30, 2017
|
|
|
|
(In thousands)
|
|
Allowance for loan losses:
|
|
|
|
|
Beginning balance
|
|
$
|
80,002
|
|
Loans charged off
|
|
|
(10,535
|
)
|
Recoveries of loans previously charged off
|
|
|
2,829
|
|
|
|
|
|
|
Net loans recovered (charged off)
|
|
|
(7,706
|
)
|
|
|
|
|
|
Provision for loan losses
|
|
|
39,324
|
|
|
|
|
|
|
Balance, September 30, 2017
|
|
$
|
111,620
|
|
|
|
|
|
|
22
The following tables present the balance in the allowance for loan losses for the three and
nine-month periods ended September 30, 2017, and the allowance for loan losses and recorded investment in loans based on portfolio segment by impairment method as of September 30, 2017. Allocation of a portion of the allowance to one type
of loans does not preclude its availability to absorb losses in other categories.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2017
|
|
|
|
Construction/
Land
Development
|
|
|
Other
Commercial
Real Estate
|
|
|
Residential
Real Estate
|
|
|
Commercial
& Industrial
|
|
|
Consumer
& Other
|
|
|
Unallocated
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Allowance for loan losses:
|
|
|
|
|
Beginning balance
|
|
$
|
12,842
|
|
|
$
|
27,843
|
|
|
$
|
17,715
|
|
|
$
|
12,828
|
|
|
$
|
3,063
|
|
|
$
|
5,847
|
|
|
$
|
80,138
|
|
Loans charged off
|
|
|
(182
|
)
|
|
|
(796
|
)
|
|
|
(309
|
)
|
|
|
(2,280
|
)
|
|
|
(857
|
)
|
|
|
|
|
|
|
(4,424
|
)
|
Recoveries of loans previously charged off
|
|
|
85
|
|
|
|
278
|
|
|
|
226
|
|
|
|
140
|
|
|
|
154
|
|
|
|
|
|
|
|
883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loans recovered (charged off)
|
|
|
(97
|
)
|
|
|
(518
|
)
|
|
|
(83
|
)
|
|
|
(2,140
|
)
|
|
|
(703
|
)
|
|
|
|
|
|
|
(3,541
|
)
|
Provision for loan losses
|
|
|
6,175
|
|
|
|
18,192
|
|
|
|
8,036
|
|
|
|
3,934
|
|
|
|
1,292
|
|
|
|
(2,606
|
)
|
|
|
35,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30
|
|
$
|
18,920
|
|
|
$
|
45,517
|
|
|
$
|
25,668
|
|
|
$
|
14,622
|
|
|
$
|
3,652
|
|
|
$
|
3,241
|
|
|
$
|
111,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2017
|
|
|
|
Construction/
Land
Development
|
|
|
Other
Commercial
Real Estate
|
|
|
Residential
Real Estate
|
|
|
Commercial
& Industrial
|
|
|
Consumer
& Other
|
|
|
Unallocated
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
11,522
|
|
|
$
|
28,188
|
|
|
$
|
16,517
|
|
|
$
|
12,756
|
|
|
$
|
4,188
|
|
|
$
|
6,831
|
|
|
$
|
80,002
|
|
Loans charged off
|
|
|
(508
|
)
|
|
|
(2,451
|
)
|
|
|
(2,597
|
)
|
|
|
(3,059
|
)
|
|
|
(1,920
|
)
|
|
|
|
|
|
|
(10,535
|
)
|
Recoveries of loans previously charged off
|
|
|
312
|
|
|
|
988
|
|
|
|
480
|
|
|
|
392
|
|
|
|
657
|
|
|
|
|
|
|
|
2,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loans recovered (charged off)
|
|
|
(196
|
)
|
|
|
(1,463
|
)
|
|
|
(2,117
|
)
|
|
|
(2,667
|
)
|
|
|
(1,263
|
)
|
|
|
|
|
|
|
(7,706
|
)
|
Provision for loan losses
|
|
|
7,594
|
|
|
|
18,792
|
|
|
|
11,268
|
|
|
|
4,533
|
|
|
|
727
|
|
|
|
(3,590
|
)
|
|
|
39,324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30
|
|
$
|
18,920
|
|
|
$
|
45,517
|
|
|
$
|
25,668
|
|
|
$
|
14,622
|
|
|
$
|
3,652
|
|
|
$
|
3,241
|
|
|
$
|
111,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2017
|
|
|
|
Construction/
Land
Development
|
|
|
Other
Commercial
Real Estate
|
|
|
Residential
Real Estate
|
|
|
Commercial
& Industrial
|
|
|
Consumer
& Other
|
|
|
Unallocated
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period end amount allocated to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment
|
|
$
|
1,066
|
|
|
$
|
995
|
|
|
$
|
306
|
|
|
$
|
512
|
|
|
$
|
8
|
|
|
$
|
|
|
|
$
|
2,887
|
|
Loans collectively evaluated for impairment
|
|
|
17,839
|
|
|
|
44,016
|
|
|
|
24,467
|
|
|
|
13,925
|
|
|
|
3,613
|
|
|
|
3,241
|
|
|
|
107,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans evaluated for impairment balance, September 30
|
|
|
18,905
|
|
|
|
45,011
|
|
|
|
24,773
|
|
|
|
14,437
|
|
|
|
3,621
|
|
|
|
3,241
|
|
|
|
109,988
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased credit impaired loans
|
|
|
15
|
|
|
|
506
|
|
|
|
895
|
|
|
|
185
|
|
|
|
31
|
|
|
|
|
|
|
|
1,632
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30
|
|
$
|
18,920
|
|
|
$
|
45,517
|
|
|
$
|
25,668
|
|
|
$
|
14,622
|
|
|
$
|
3,652
|
|
|
$
|
3,241
|
|
|
$
|
111,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period end amount allocated to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment
|
|
$
|
31,130
|
|
|
$
|
50,518
|
|
|
$
|
22,601
|
|
|
$
|
13,958
|
|
|
$
|
1,009
|
|
|
$
|
|
|
|
$
|
119,216
|
|
Loans collectively evaluated for impairment
|
|
|
1,601,961
|
|
|
|
4,442,747
|
|
|
|
2,392,014
|
|
|
|
1,265,189
|
|
|
|
250,074
|
|
|
|
|
|
|
|
9,951,985
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans evaluated for impairment balance, September 30
|
|
|
1,633,091
|
|
|
|
4,493,265
|
|
|
|
2,414,615
|
|
|
|
1,279,147
|
|
|
|
251,083
|
|
|
|
|
|
|
|
10,071,201
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased credit impaired loans
|
|
|
15,832
|
|
|
|
127,432
|
|
|
|
51,983
|
|
|
|
17,338
|
|
|
|
2,407
|
|
|
|
|
|
|
|
214,992
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30
|
|
$
|
1,648,923
|
|
|
$
|
4,620,697
|
|
|
$
|
2,466,598
|
|
|
$
|
1,296,485
|
|
|
$
|
253,490
|
|
|
$
|
|
|
|
$
|
10,286,193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
The following tables present the balances in the allowance for loan losses for the nine-month
period ended September 30, 2016 and the year ended December 31, 2016, and the allowance for loan losses and recorded investment in loans receivable based on portfolio segment by impairment method as of December 31, 2016. Allocation of
a portion of the allowance to one type of loans does not preclude its availability to absorb losses in other categories.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2016
|
|
|
|
Construction/
Land
Development
|
|
|
Other
Commercial
Real Estate
|
|
|
Residential
Real Estate
|
|
|
Commercial
& Industrial
|
|
|
Consumer
& Other
|
|
|
Unallocated
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Allowance for loan losses:
|
|
|
|
|
Beginning balance
|
|
$
|
10,782
|
|
|
$
|
26,798
|
|
|
$
|
14,818
|
|
|
$
|
9,324
|
|
|
$
|
5,016
|
|
|
$
|
2,486
|
|
|
$
|
69,224
|
|
Loans charged off
|
|
|
(334
|
)
|
|
|
(2,590
|
)
|
|
|
(3,810
|
)
|
|
|
(4,424
|
)
|
|
|
(1,507
|
)
|
|
|
|
|
|
|
(12,665
|
)
|
Recoveries of loans previously charged off
|
|
|
107
|
|
|
|
608
|
|
|
|
836
|
|
|
|
656
|
|
|
|
699
|
|
|
|
|
|
|
|
2,906
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loans recovered (charged off)
|
|
|
(227
|
)
|
|
|
(1,982
|
)
|
|
|
(2,974
|
)
|
|
|
(3,768
|
)
|
|
|
(808
|
)
|
|
|
|
|
|
|
(9,759
|
)
|
Provision for loan losses
|
|
|
171
|
|
|
|
274
|
|
|
|
4,181
|
|
|
|
9,049
|
|
|
|
448
|
|
|
|
2,782
|
|
|
|
16,905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30
|
|
|
10,726
|
|
|
|
25,090
|
|
|
|
16,025
|
|
|
|
14,605
|
|
|
|
4,656
|
|
|
|
5,268
|
|
|
|
76,370
|
|
Loans charged off
|
|
|
(48
|
)
|
|
|
(996
|
)
|
|
|
(1,787
|
)
|
|
|
(1,354
|
)
|
|
|
(651
|
)
|
|
|
|
|
|
|
(4,836
|
)
|
Recoveries of loans previously charged off
|
|
|
1,018
|
|
|
|
249
|
|
|
|
316
|
|
|
|
4,877
|
|
|
|
305
|
|
|
|
|
|
|
|
6,765
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loans recovered (charged off)
|
|
|
970
|
|
|
|
(747
|
)
|
|
|
(1,471
|
)
|
|
|
3,523
|
|
|
|
(346
|
)
|
|
|
|
|
|
|
1,929
|
|
Provision for loan losses
|
|
|
(174
|
)
|
|
|
3,845
|
|
|
|
1,963
|
|
|
|
(5,372
|
)
|
|
|
(122
|
)
|
|
|
1,563
|
|
|
|
1,703
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31
|
|
$
|
11,522
|
|
|
$
|
28,188
|
|
|
$
|
16,517
|
|
|
$
|
12,756
|
|
|
$
|
4,188
|
|
|
$
|
6,831
|
|
|
$
|
80,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2016
|
|
|
|
Construction/
Land
Development
|
|
|
Other
Commercial
Real Estate
|
|
|
Residential
Real Estate
|
|
|
Commercial
& Industrial
|
|
|
Consumer
& Other
|
|
|
Unallocated
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Allowance for loan losses:
|
|
|
|
|
Period end amount allocated to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment
|
|
$
|
15
|
|
|
$
|
1,416
|
|
|
$
|
103
|
|
|
$
|
95
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,629
|
|
Loans collectively evaluated for impairment
|
|
|
11,463
|
|
|
|
25,641
|
|
|
|
15,796
|
|
|
|
12,596
|
|
|
|
4,176
|
|
|
|
6,831
|
|
|
|
76,503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans evaluated for impairment balance, December 31
|
|
|
11,478
|
|
|
|
27,057
|
|
|
|
15,899
|
|
|
|
12,691
|
|
|
|
4,176
|
|
|
|
6,831
|
|
|
|
78,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased credit impaired loans
|
|
|
44
|
|
|
|
1,131
|
|
|
|
618
|
|
|
|
65
|
|
|
|
12
|
|
|
|
|
|
|
|
1,870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31
|
|
$
|
11,522
|
|
|
$
|
28,188
|
|
|
$
|
16,517
|
|
|
$
|
12,756
|
|
|
$
|
4,188
|
|
|
$
|
6,831
|
|
|
$
|
80,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period end amount allocated to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment
|
|
$
|
12,374
|
|
|
$
|
74,723
|
|
|
$
|
35,187
|
|
|
$
|
25,873
|
|
|
$
|
1,096
|
|
|
$
|
|
|
|
$
|
149,253
|
|
Loans collectively evaluated for impairment
|
|
|
1,105,921
|
|
|
|
3,080,201
|
|
|
|
1,608,805
|
|
|
|
1,085,891
|
|
|
|
198,064
|
|
|
|
|
|
|
|
7,078,882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans evaluated for impairment balance, December 31
|
|
|
1,118,295
|
|
|
|
3,154,924
|
|
|
|
1,643,992
|
|
|
|
1,111,764
|
|
|
|
199,160
|
|
|
|
|
|
|
|
7,228,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased credit impaired loans
|
|
|
17,548
|
|
|
|
75,933
|
|
|
|
53,070
|
|
|
|
11,449
|
|
|
|
1,564
|
|
|
|
|
|
|
|
159,564
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31
|
|
$
|
1,135,843
|
|
|
$
|
3,230,857
|
|
|
$
|
1,697,062
|
|
|
$
|
1,123,213
|
|
|
$
|
200,724
|
|
|
$
|
|
|
|
$
|
7,387,699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
The following is an aging analysis for loans receivable as of September 30, 2017 and
December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
|
Loans
Past Due
30-59 Days
|
|
|
Loans
Past Due
60-89 Days
|
|
|
Loans
Past Due
90 Days
or More
|
|
|
Total
Past Due
|
|
|
Current
Loans
|
|
|
Total Loans
Receivable
|
|
|
Accruing
Loans
Past Due
90 Days
or More
|
|
|
|
(In thousands)
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
$
|
3,806
|
|
|
$
|
2,684
|
|
|
$
|
27,418
|
|
|
$
|
33,908
|
|
|
$
|
4,498,494
|
|
|
$
|
4,532,402
|
|
|
$
|
16,482
|
|
Construction/land development
|
|
|
2,267
|
|
|
|
309
|
|
|
|
8,778
|
|
|
|
11,354
|
|
|
|
1,637,569
|
|
|
|
1,648,923
|
|
|
|
3,258
|
|
Agricultural
|
|
|
152
|
|
|
|
|
|
|
|
34
|
|
|
|
186
|
|
|
|
88,109
|
|
|
|
88,295
|
|
|
|
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
8,768
|
|
|
|
1,659
|
|
|
|
18,441
|
|
|
|
28,868
|
|
|
|
1,939,820
|
|
|
|
1,968,688
|
|
|
|
4,624
|
|
Multifamily residential
|
|
|
595
|
|
|
|
|
|
|
|
1,194
|
|
|
|
1,789
|
|
|
|
496,121
|
|
|
|
497,910
|
|
|
|
1,039
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
15,588
|
|
|
|
4,652
|
|
|
|
55,865
|
|
|
|
76,105
|
|
|
|
8,660,113
|
|
|
|
8,736,218
|
|
|
|
25,403
|
|
Consumer
|
|
|
729
|
|
|
|
18
|
|
|
|
142
|
|
|
|
889
|
|
|
|
50,626
|
|
|
|
51,515
|
|
|
|
3
|
|
Commercial and industrial
|
|
|
3,275
|
|
|
|
3,229
|
|
|
|
7,792
|
|
|
|
14,296
|
|
|
|
1,282,189
|
|
|
|
1,296,485
|
|
|
|
3,771
|
|
Agricultural and other
|
|
|
363
|
|
|
|
101
|
|
|
|
178
|
|
|
|
642
|
|
|
|
201,333
|
|
|
|
201,975
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
19,955
|
|
|
$
|
8,000
|
|
|
$
|
63,977
|
|
|
$
|
91,932
|
|
|
$
|
10,194,261
|
|
|
$
|
10,286,193
|
|
|
$
|
29,183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
Loans
Past Due
30-59 Days
|
|
|
Loans
Past Due
60-89 Days
|
|
|
Loans
Past Due
90 Days
or More
|
|
|
Total
Past Due
|
|
|
Current
Loans
|
|
|
Total Loans
Receivable
|
|
|
Accruing
Loans
Past Due
90 Days
or More
|
|
|
|
(In thousands)
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
$
|
2,036
|
|
|
$
|
686
|
|
|
$
|
27,518
|
|
|
$
|
30,240
|
|
|
$
|
3,122,881
|
|
|
$
|
3,153,121
|
|
|
$
|
9,530
|
|
Construction/land development
|
|
|
685
|
|
|
|
16
|
|
|
|
7,042
|
|
|
|
7,743
|
|
|
|
1,128,100
|
|
|
|
1,135,843
|
|
|
|
3,086
|
|
Agricultural
|
|
|
|
|
|
|
|
|
|
|
435
|
|
|
|
435
|
|
|
|
77,301
|
|
|
|
77,736
|
|
|
|
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
6,972
|
|
|
|
1,287
|
|
|
|
23,307
|
|
|
|
31,566
|
|
|
|
1,324,570
|
|
|
|
1,356,136
|
|
|
|
2,996
|
|
Multifamily residential
|
|
|
|
|
|
|
|
|
|
|
262
|
|
|
|
262
|
|
|
|
340,664
|
|
|
|
340,926
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
9,693
|
|
|
|
1,989
|
|
|
|
58,564
|
|
|
|
70,246
|
|
|
|
5,993,516
|
|
|
|
6,063,762
|
|
|
|
15,612
|
|
Consumer
|
|
|
117
|
|
|
|
66
|
|
|
|
161
|
|
|
|
344
|
|
|
|
41,401
|
|
|
|
41,745
|
|
|
|
21
|
|
Commercial and industrial
|
|
|
984
|
|
|
|
582
|
|
|
|
3,464
|
|
|
|
5,030
|
|
|
|
1,118,183
|
|
|
|
1,123,213
|
|
|
|
309
|
|
Agricultural and other
|
|
|
782
|
|
|
|
10
|
|
|
|
935
|
|
|
|
1,727
|
|
|
|
157,252
|
|
|
|
158,979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
11,576
|
|
|
$
|
2,647
|
|
|
$
|
63,124
|
|
|
$
|
77,347
|
|
|
$
|
7,310,352
|
|
|
$
|
7,387,699
|
|
|
$
|
15,942
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-accruing
loans at September 30, 2017 and December 31,
2016 were $34.8 million and $47.2 million, respectively.
25
The following is a summary of the impaired loans as of September 30, 2017 and
December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
Unpaid
Contractual
Principal
Balance
|
|
|
Total
Recorded
Investment
|
|
|
Allocation
of Allowance
for Loan
Losses
|
|
|
Average
Recorded
Investment
|
|
|
Interest
Recognized
|
|
|
Average
Recorded
Investment
|
|
|
Interest
Recognized
|
|
|
|
(In thousands)
|
|
Loans without a specific valuation allowance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
$
|
29
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
15
|
|
|
$
|
1
|
|
|
$
|
15
|
|
|
$
|
2
|
|
Construction/land development
|
|
|
66
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|
|
1
|
|
|
|
6
|
|
|
|
3
|
|
Agricultural
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
79
|
|
|
|
|
|
|
|
|
|
|
|
101
|
|
|
|
2
|
|
|
|
108
|
|
|
|
7
|
|
Multifamily residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
209
|
|
|
|
|
|
|
|
|
|
|
|
128
|
|
|
|
4
|
|
|
|
129
|
|
|
|
13
|
|
Consumer
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
|
101
|
|
|
|
|
|
|
|
|
|
|
|
41
|
|
|
|
2
|
|
|
|
51
|
|
|
|
6
|
|
Agricultural and other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans without a specific valuation allowance
|
|
|
314
|
|
|
|
|
|
|
|
|
|
|
|
169
|
|
|
|
6
|
|
|
|
180
|
|
|
|
19
|
|
Loans with a specific valuation allowance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
|
49,606
|
|
|
|
45,312
|
|
|
|
982
|
|
|
|
42,245
|
|
|
|
662
|
|
|
|
44,962
|
|
|
|
1,311
|
|
Construction/land development
|
|
|
13,897
|
|
|
|
12,875
|
|
|
|
1,066
|
|
|
|
11,177
|
|
|
|
58
|
|
|
|
10,173
|
|
|
|
192
|
|
Agricultural
|
|
|
281
|
|
|
|
319
|
|
|
|
13
|
|
|
|
218
|
|
|
|
4
|
|
|
|
259
|
|
|
|
7
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
24,833
|
|
|
|
21,042
|
|
|
|
231
|
|
|
|
20,893
|
|
|
|
116
|
|
|
|
23,294
|
|
|
|
298
|
|
Multifamily residential
|
|
|
2,812
|
|
|
|
2,681
|
|
|
|
75
|
|
|
|
2,168
|
|
|
|
32
|
|
|
|
1,358
|
|
|
|
64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
91,429
|
|
|
|
82,229
|
|
|
|
2,367
|
|
|
|
76,701
|
|
|
|
872
|
|
|
|
80,046
|
|
|
|
1,872
|
|
Consumer
|
|
|
153
|
|
|
|
149
|
|
|
|
|
|
|
|
145
|
|
|
|
|
|
|
|
156
|
|
|
|
|
|
Commercial and industrial
|
|
|
18,354
|
|
|
|
14,271
|
|
|
|
512
|
|
|
|
10,308
|
|
|
|
76
|
|
|
|
8,935
|
|
|
|
84
|
|
Agricultural and other
|
|
|
312
|
|
|
|
343
|
|
|
|
8
|
|
|
|
606
|
|
|
|
3
|
|
|
|
728
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans with a specific valuation allowance
|
|
|
110,248
|
|
|
|
96,992
|
|
|
|
2,887
|
|
|
|
87,760
|
|
|
|
951
|
|
|
|
89,865
|
|
|
|
1,961
|
|
Total impaired loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
|
49,635
|
|
|
|
45,312
|
|
|
|
982
|
|
|
|
42,260
|
|
|
|
663
|
|
|
|
44,977
|
|
|
|
1,313
|
|
Construction/land development
|
|
|
13,963
|
|
|
|
12,875
|
|
|
|
1,066
|
|
|
|
11,189
|
|
|
|
59
|
|
|
|
10,179
|
|
|
|
195
|
|
Agricultural
|
|
|
316
|
|
|
|
319
|
|
|
|
13
|
|
|
|
218
|
|
|
|
4
|
|
|
|
259
|
|
|
|
8
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
24,912
|
|
|
|
21,042
|
|
|
|
231
|
|
|
|
20,994
|
|
|
|
118
|
|
|
|
23,402
|
|
|
|
305
|
|
Multifamily residential
|
|
|
2,812
|
|
|
|
2,681
|
|
|
|
75
|
|
|
|
2,168
|
|
|
|
32
|
|
|
|
1,358
|
|
|
|
64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
91,638
|
|
|
|
82,229
|
|
|
|
2,367
|
|
|
|
76,829
|
|
|
|
876
|
|
|
|
80,175
|
|
|
|
1,885
|
|
Consumer
|
|
|
157
|
|
|
|
149
|
|
|
|
|
|
|
|
145
|
|
|
|
|
|
|
|
156
|
|
|
|
|
|
Commercial and industrial
|
|
|
18,455
|
|
|
|
14,271
|
|
|
|
512
|
|
|
|
10,349
|
|
|
|
78
|
|
|
|
8,986
|
|
|
|
90
|
|
Agricultural and other
|
|
|
312
|
|
|
|
343
|
|
|
|
8
|
|
|
|
606
|
|
|
|
3
|
|
|
|
728
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impaired loans
|
|
$
|
110,562
|
|
|
$
|
96,992
|
|
|
$
|
2,887
|
|
|
$
|
87,929
|
|
|
$
|
957
|
|
|
$
|
90,045
|
|
|
$
|
1,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note
:
Purchased credit impaired loans are accounted for on a pooled basis under ASC
310-30.
All of these pools are currently considered to be performing, resulting in none of the purchased credit impaired loans
being classified as impaired loans as of September 30, 2017.
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
Unpaid
Contractual
Principal
Balance
|
|
|
Total
Recorded
Investment
|
|
|
Allocation of
Allowance
for Loan
Losses
|
|
|
Average
Recorded
Investment
|
|
|
Interest
Recognized
|
|
|
|
(In thousands)
|
|
Loans without a specific valuation allowance
|
|
|
|
|
Real estate:
|
|
|
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
$
|
29
|
|
|
$
|
29
|
|
|
$
|
|
|
|
$
|
23
|
|
|
$
|
2
|
|
Construction/land development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
|
|
Agricultural
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
231
|
|
|
|
231
|
|
|
|
|
|
|
|
119
|
|
|
|
15
|
|
Multifamily residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
300
|
|
|
|
260
|
|
|
|
|
|
|
|
167
|
|
|
|
19
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
|
124
|
|
|
|
124
|
|
|
|
|
|
|
|
64
|
|
|
|
8
|
|
Agricultural and other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans without a specific valuation allowance
|
|
|
424
|
|
|
|
384
|
|
|
|
|
|
|
|
231
|
|
|
|
27
|
|
Loans with a specific valuation allowance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
|
52,477
|
|
|
|
50,355
|
|
|
|
1,414
|
|
|
|
42,979
|
|
|
|
1,335
|
|
Construction/land development
|
|
|
8,313
|
|
|
|
7,595
|
|
|
|
15
|
|
|
|
12,878
|
|
|
|
334
|
|
Agricultural
|
|
|
395
|
|
|
|
438
|
|
|
|
2
|
|
|
|
469
|
|
|
|
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
26,681
|
|
|
|
25,675
|
|
|
|
95
|
|
|
|
20,239
|
|
|
|
293
|
|
Multifamily residential
|
|
|
552
|
|
|
|
552
|
|
|
|
8
|
|
|
|
922
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
88,418
|
|
|
|
84,615
|
|
|
|
1,534
|
|
|
|
77,487
|
|
|
|
1,971
|
|
Consumer
|
|
|
165
|
|
|
|
161
|
|
|
|
|
|
|
|
223
|
|
|
|
3
|
|
Commercial and industrial
|
|
|
7,160
|
|
|
|
7,032
|
|
|
|
95
|
|
|
|
10,630
|
|
|
|
255
|
|
Agricultural and other
|
|
|
935
|
|
|
|
935
|
|
|
|
|
|
|
|
1,037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans with a specific valuation allowance
|
|
|
96,678
|
|
|
|
92,743
|
|
|
|
1,629
|
|
|
|
89,377
|
|
|
|
2,229
|
|
Total impaired loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
|
52,506
|
|
|
|
50,384
|
|
|
|
1,414
|
|
|
|
43,002
|
|
|
|
1,337
|
|
Construction/land development
|
|
|
8,313
|
|
|
|
7,595
|
|
|
|
15
|
|
|
|
12,884
|
|
|
|
334
|
|
Agricultural
|
|
|
435
|
|
|
|
438
|
|
|
|
2
|
|
|
|
469
|
|
|
|
2
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
26,912
|
|
|
|
25,906
|
|
|
|
95
|
|
|
|
20,358
|
|
|
|
308
|
|
Multifamily residential
|
|
|
552
|
|
|
|
552
|
|
|
|
8
|
|
|
|
941
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
88,718
|
|
|
|
84,875
|
|
|
|
1,534
|
|
|
|
77,654
|
|
|
|
1,990
|
|
Consumer
|
|
|
165
|
|
|
|
161
|
|
|
|
|
|
|
|
223
|
|
|
|
3
|
|
Commercial and industrial
|
|
|
7,284
|
|
|
|
7,156
|
|
|
|
95
|
|
|
|
10,694
|
|
|
|
263
|
|
Agricultural and other
|
|
|
935
|
|
|
|
935
|
|
|
|
|
|
|
|
1,037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impaired loans
|
|
$
|
97,102
|
|
|
$
|
93,127
|
|
|
$
|
1,629
|
|
|
$
|
89,608
|
|
|
$
|
2,256
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note
:
Purchased credit impaired loans are accounted for on a pooled basis under ASC
310-30.
All of these pools are currently considered to be performing, resulting in none of the purchased credit impaired loans
being classified as impaired loans as of December 31, 2016.
Interest recognized on impaired loans during the three months ended
September 30, 2017 and 2016 was approximately $957,000 and $597,000, respectively. Interest recognized on impaired loans during the nine months ended September 30, 2017 and 2016 was approximately $2.0 million and $1.7 million,
respectively. The amount of interest recognized on impaired loans on the cash basis is not materially different than the accrual basis.
27
Credit Quality Indicators.
As part of the
on-going
monitoring of the credit quality of the Companys loan portfolio, management tracks certain credit quality indicators including trends related to (i) the risk rating of loans, (ii) the level of classified loans, (iii) net
charge-offs,
(iv) non-performing
loans and (v) the general economic conditions in Arkansas, Florida, Alabama and New York.
The Company utilizes a risk rating matrix to assign a risk rating to each of its loans. Loans are rated on a scale from 1 to 8. Descriptions
of the general characteristics of the 8 risk ratings are as follows:
|
|
|
Risk rating 1 Excellent.
Loans in this category are to persons or entities of unquestionable financial strength, a highly liquid financial position, with collateral that is liquid and well
margined. These borrowers have performed without question on past obligations, and the Bank expects their performance to continue. Internally generated cash flow covers current maturities of long-term debt by a substantial
margin. Loans secured by bank certificates of deposit and savings accounts, with appropriate holds placed on the accounts, are to be rated in this category.
|
|
|
|
Risk rating 2 Good.
These are loans to persons or entities with strong financial condition and above-average liquidity that have previously satisfactorily handled their obligations with the
Bank. Collateral securing the Banks debt is margined in accordance with policy guidelines. Internally generated cash flow covers current maturities of long-term debt more than adequately. Unsecured loans to individuals supported
by strong financial statements and on which repayment is satisfactory may be included in this classification.
|
|
|
|
Risk rating 3 Satisfactory.
Loans to persons or entities with an average financial condition, adequate collateral margins, adequate cash flow to service long-term debt, and net worth comprised mainly
of fixed assets are included in this category. These entities are minimally profitable now, with projections indicating continued profitability into the foreseeable future. Closely held corporations or businesses where a majority of the
profits are withdrawn by the owners or paid in dividends are included in this rating category. Overall, these loans are basically sound.
|
|
|
|
Risk rating 4 Watch.
Borrowers who have marginal cash flow, marginal profitability or have experienced an unprofitable year and a declining financial condition characterize these loans. The borrower
has in the past satisfactorily handled debts with the Bank, but in recent months has either been late, delinquent in making payments, or made sporadic payments. While the Bank continues to be adequately secured, margins have decreased or are
decreasing, despite the borrowers continued satisfactory condition. Other characteristics of borrowers in this class include inadequate credit information, weakness of financial statement and repayment capacity, but with collateral that
appears to limit exposure. Included in this category are loans to borrowers in industries that are experiencing elevated risk.
|
|
|
|
Risk rating 5 Other Loans Especially Mentioned (OLEM)
. A loan criticized as OLEM has potential weaknesses that deserve managements close attention. If left uncorrected, these
potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institutions credit position at some future date. OLEM assets are not adversely classified and do not expose the institution to sufficient
risk to warrant adverse classification.
|
|
|
|
Risk rating 6 Substandard.
A loan classified as substandard is inadequately protected by the sound worth and paying capacity of the borrower or the collateral pledged. Loss potential, while
existing in the aggregate amount of substandard loans, does not have to exist in individual assets.
|
|
|
|
Risk rating 7 Doubtful.
A loan classified as doubtful has all the weaknesses inherent in a loan classified as substandard with the added characteristic that the weaknesses make collection or
liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. These are poor quality loans in which neither the collateral, if any, nor the financial condition of the borrower
presently ensure collectability in full in a reasonable period of time; in fact, there is permanent impairment in the collateral securing the loan.
|
|
|
|
Risk rating 8 Loss.
Assets classified as loss are considered uncollectible and of such little value that the continuance as bankable assets is not warranted. This classification does not mean that the
asset has absolutely no recovery or salvage value, but rather, it is not practical or desirable to defer writing off this basically worthless asset, even though partial recovery may occur in the future. This classification is based upon current
facts, not probabilities. Assets classified as loss should be
charged-off
in the period in which they became uncollectible.
|
28
The Companys classified loans include loans in risk ratings 6, 7 and 8. The following is a
presentation of classified loans (excluding loans accounted for under ASC Topic
310-30)
by class as of September 30, 2017 and December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
|
Risk Rated 6
|
|
|
Risk Rated 7
|
|
|
Risk Rated 8
|
|
|
Classified Total
|
|
|
|
(In thousands)
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
$
|
21,521
|
|
|
$
|
526
|
|
|
$
|
|
|
|
$
|
22,047
|
|
Construction/land development
|
|
|
24,427
|
|
|
|
114
|
|
|
|
|
|
|
|
24,541
|
|
Agricultural
|
|
|
341
|
|
|
|
|
|
|
|
|
|
|
|
341
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
22,852
|
|
|
|
573
|
|
|
|
|
|
|
|
23,425
|
|
Multifamily residential
|
|
|
941
|
|
|
|
|
|
|
|
|
|
|
|
941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
70,082
|
|
|
|
1,213
|
|
|
|
|
|
|
|
71,295
|
|
Consumer
|
|
|
184
|
|
|
|
10
|
|
|
|
|
|
|
|
194
|
|
Commercial and industrial
|
|
|
17,994
|
|
|
|
50
|
|
|
|
|
|
|
|
18,044
|
|
Agricultural and other
|
|
|
270
|
|
|
|
|
|
|
|
|
|
|
|
270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total risk rated loans
|
|
$
|
88,530
|
|
|
$
|
1,273
|
|
|
$
|
|
|
|
$
|
89,803
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
Risk Rated 6
|
|
|
Risk Rated 7
|
|
|
Risk Rated 8
|
|
|
Classified Total
|
|
|
|
(In thousands)
|
|
Real estate:
|
|
|
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
$
|
43,657
|
|
|
$
|
462
|
|
|
$
|
|
|
|
$
|
44,119
|
|
Construction/land development
|
|
|
8,619
|
|
|
|
33
|
|
|
|
|
|
|
|
8,652
|
|
Agricultural
|
|
|
759
|
|
|
|
|
|
|
|
|
|
|
|
759
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
28,846
|
|
|
|
445
|
|
|
|
|
|
|
|
29,291
|
|
Multifamily residential
|
|
|
1,391
|
|
|
|
|
|
|
|
|
|
|
|
1,391
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
83,272
|
|
|
|
940
|
|
|
|
|
|
|
|
84,212
|
|
Consumer
|
|
|
211
|
|
|
|
2
|
|
|
|
|
|
|
|
213
|
|
Commercial and industrial
|
|
|
16,991
|
|
|
|
170
|
|
|
|
|
|
|
|
17,161
|
|
Agricultural and other
|
|
|
935
|
|
|
|
|
|
|
|
|
|
|
|
935
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total risk rated loans
|
|
$
|
101,409
|
|
|
$
|
1,112
|
|
|
$
|
|
|
|
$
|
102,521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans may be classified, but not considered impaired, due to one of the following reasons: (1) The
Company has established minimum dollar amount thresholds for loan impairment testing. All loans over $2.0 million that are rated 5 8 are individually assessed for impairment on a quarterly basis. Loans rated 5 8 that fall under
the threshold amount are not individually tested for impairment and therefore are not included in impaired loans; (2) of the loans that are above the threshold amount and tested for impairment, after testing, some are considered to not be
impaired and are not included in impaired loans.
29
The following is a presentation of loans receivable by class and risk rating as of
September 30, 2017 and December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
|
Risk
Rated 1
|
|
|
Risk
Rated 2
|
|
|
Risk
Rated 3
|
|
|
Risk
Rated 4
|
|
|
Risk
Rated 5
|
|
|
Classified
Total
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Real estate:
|
|
|
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
$
|
1,021
|
|
|
$
|
566
|
|
|
$
|
2,523,273
|
|
|
$
|
1,818,301
|
|
|
$
|
39,968
|
|
|
$
|
22,047
|
|
|
$
|
4,405,176
|
|
Construction/land development
|
|
|
31
|
|
|
|
571
|
|
|
|
273,090
|
|
|
|
1,323,834
|
|
|
|
11,024
|
|
|
|
24,541
|
|
|
|
1,633,091
|
|
Agricultural
|
|
|
|
|
|
|
45
|
|
|
|
54,546
|
|
|
|
32,004
|
|
|
|
1,153
|
|
|
|
341
|
|
|
|
88,089
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
1,126
|
|
|
|
1,095
|
|
|
|
1,416,454
|
|
|
|
470,981
|
|
|
|
11,711
|
|
|
|
23,425
|
|
|
|
1,924,792
|
|
Multifamily residential
|
|
|
|
|
|
|
|
|
|
|
364,864
|
|
|
|
123,804
|
|
|
|
214
|
|
|
|
941
|
|
|
|
489,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
2,178
|
|
|
|
2,277
|
|
|
|
4,632,227
|
|
|
|
3,768,924
|
|
|
|
64,070
|
|
|
|
71,295
|
|
|
|
8,540,971
|
|
Consumer
|
|
|
15,239
|
|
|
|
362
|
|
|
|
25,404
|
|
|
|
9,272
|
|
|
|
78
|
|
|
|
194
|
|
|
|
50,549
|
|
Commercial and industrial
|
|
|
17,717
|
|
|
|
9,041
|
|
|
|
622,782
|
|
|
|
601,360
|
|
|
|
10,203
|
|
|
|
18,044
|
|
|
|
1,279,147
|
|
Agricultural and other
|
|
|
2,296
|
|
|
|
4,388
|
|
|
|
145,243
|
|
|
|
48,337
|
|
|
|
|
|
|
|
270
|
|
|
|
200,534
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total risk rated loans
|
|
$
|
37,430
|
|
|
$
|
16,068
|
|
|
$
|
5,425,656
|
|
|
$
|
4,427,893
|
|
|
$
|
74,351
|
|
|
$
|
89,803
|
|
|
|
10,071,201
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased credit impaired loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
214,992
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
10,286,193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
Risk
Rated 1
|
|
|
Risk
Rated 2
|
|
|
Risk
Rated 3
|
|
|
Risk
Rated 4
|
|
|
Risk
Rated 5
|
|
|
Classified
Total
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Real estate:
|
|
|
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
$
|
1,047
|
|
|
$
|
4,762
|
|
|
$
|
1,568,385
|
|
|
$
|
1,425,316
|
|
|
$
|
33,559
|
|
|
$
|
44,119
|
|
|
$
|
3,077,188
|
|
Construction/land development
|
|
|
400
|
|
|
|
981
|
|
|
|
180,094
|
|
|
|
921,081
|
|
|
|
7,087
|
|
|
|
8,652
|
|
|
|
1,118,295
|
|
Agricultural
|
|
|
|
|
|
|
157
|
|
|
|
53,753
|
|
|
|
22,238
|
|
|
|
829
|
|
|
|
759
|
|
|
|
77,736
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
2,336
|
|
|
|
1,683
|
|
|
|
941,760
|
|
|
|
324,045
|
|
|
|
10,360
|
|
|
|
29,291
|
|
|
|
1,309,475
|
|
Multifamily residential
|
|
|
|
|
|
|
|
|
|
|
278,514
|
|
|
|
45,742
|
|
|
|
8,870
|
|
|
|
1,391
|
|
|
|
334,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
3,783
|
|
|
|
7,583
|
|
|
|
3,022,506
|
|
|
|
2,738,422
|
|
|
|
60,705
|
|
|
|
84,212
|
|
|
|
5,917,211
|
|
Consumer
|
|
|
15,080
|
|
|
|
231
|
|
|
|
15,330
|
|
|
|
9,645
|
|
|
|
81
|
|
|
|
213
|
|
|
|
40,580
|
|
Commercial and industrial
|
|
|
13,117
|
|
|
|
3,644
|
|
|
|
500,220
|
|
|
|
558,413
|
|
|
|
19,209
|
|
|
|
17,161
|
|
|
|
1,111,764
|
|
Agricultural and other
|
|
|
3,379
|
|
|
|
976
|
|
|
|
82,641
|
|
|
|
70,649
|
|
|
|
|
|
|
|
935
|
|
|
|
158,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total risk rated loans
|
|
$
|
35,359
|
|
|
$
|
12,434
|
|
|
$
|
3,620,697
|
|
|
$
|
3,377,129
|
|
|
$
|
79,995
|
|
|
$
|
102,521
|
|
|
|
7,228,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased credit impaired loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
159,564
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,387,699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30
The following is a presentation of troubled debt restructurings (TDRs) by class as of
September 30, 2017 and December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
|
Number
of Loans
|
|
|
Pre-
Modification
Outstanding
Balance
|
|
|
Rate
Modification
|
|
|
Term
Modification
|
|
|
Rate
& Term
Modification
|
|
|
Post-
Modification
Outstanding
Balance
|
|
|
|
(Dollars in thousands)
|
|
Real estate:
|
|
|
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
|
16
|
|
|
$
|
18,162
|
|
|
$
|
11,395
|
|
|
$
|
253
|
|
|
$
|
5,432
|
|
|
$
|
17,080
|
|
Construction/land development
|
|
|
5
|
|
|
|
782
|
|
|
|
690
|
|
|
|
77
|
|
|
|
|
|
|
|
767
|
|
Agricultural
|
|
|
2
|
|
|
|
345
|
|
|
|
282
|
|
|
|
38
|
|
|
|
|
|
|
|
320
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
22
|
|
|
|
5,708
|
|
|
|
3,746
|
|
|
|
84
|
|
|
|
1,361
|
|
|
|
5,191
|
|
Multifamily residential
|
|
|
3
|
|
|
|
1,701
|
|
|
|
1,355
|
|
|
|
|
|
|
|
287
|
|
|
|
1,642
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
48
|
|
|
|
26,698
|
|
|
|
17,468
|
|
|
|
452
|
|
|
|
7,080
|
|
|
|
25,000
|
|
Consumer
|
|
|
2
|
|
|
|
7
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
7
|
|
Commercial and industrial
|
|
|
9
|
|
|
|
647
|
|
|
|
365
|
|
|
|
71
|
|
|
|
3
|
|
|
|
439
|
|
Other
|
|
|
1
|
|
|
|
166
|
|
|
|
166
|
|
|
|
|
|
|
|
|
|
|
|
166
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
60
|
|
|
$
|
27,518
|
|
|
$
|
17,999
|
|
|
$
|
530
|
|
|
$
|
7,083
|
|
|
$
|
25,612
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
Number
of Loans
|
|
|
Pre-
Modification
Outstanding
Balance
|
|
|
Rate
Modification
|
|
|
Term
Modification
|
|
|
Rate
& Term
Modification
|
|
|
Post-
Modification
Outstanding
Balance
|
|
|
|
(Dollars in thousands)
|
|
Real estate:
|
|
|
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
|
17
|
|
|
$
|
21,344
|
|
|
$
|
14,600
|
|
|
$
|
263
|
|
|
$
|
5,542
|
|
|
$
|
20,405
|
|
Construction/land development
|
|
|
1
|
|
|
|
560
|
|
|
|
556
|
|
|
|
|
|
|
|
|
|
|
|
556
|
|
Agricultural
|
|
|
2
|
|
|
|
146
|
|
|
|
|
|
|
|
43
|
|
|
|
80
|
|
|
|
123
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
21
|
|
|
|
5,179
|
|
|
|
2,639
|
|
|
|
124
|
|
|
|
1,017
|
|
|
|
3,780
|
|
Multifamily residential
|
|
|
1
|
|
|
|
295
|
|
|
|
|
|
|
|
|
|
|
|
290
|
|
|
|
290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
42
|
|
|
|
27,524
|
|
|
|
17,795
|
|
|
|
430
|
|
|
|
6,929
|
|
|
|
25,154
|
|
Commercial and industrial
|
|
|
6
|
|
|
|
395
|
|
|
|
237
|
|
|
|
115
|
|
|
|
10
|
|
|
|
362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
48
|
|
|
$
|
27,919
|
|
|
$
|
18,032
|
|
|
$
|
545
|
|
|
$
|
6,939
|
|
|
$
|
25,516
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following is a presentation of TDRs on
non-accrual
status as of
September 30, 2017 and December 31, 2016 because they are not in compliance with the modified terms:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
|
|
Number of Loans
|
|
|
Recorded Balance
|
|
|
Number of Loans
|
|
|
Recorded Balance
|
|
|
|
(Dollars in thousands)
|
|
Real estate:
|
|
|
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
|
2
|
|
|
$
|
2,284
|
|
|
|
2
|
|
|
$
|
696
|
|
Agricultural
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
123
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
4
|
|
|
|
124
|
|
|
|
13
|
|
|
|
2,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
6
|
|
|
|
2,408
|
|
|
|
17
|
|
|
|
3,059
|
|
Commercial and industrial
|
|
|
1
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
7
|
|
|
$
|
2,424
|
|
|
|
17
|
|
|
$
|
3,059
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
The following is a presentation of total foreclosed assets as of September 30, 2017 and
December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
September 30,
2017
|
|
|
December 31,
2016
|
|
|
|
(In thousands)
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
$
|
10,354
|
|
|
$
|
9,423
|
|
Construction/land development
|
|
|
6,328
|
|
|
|
4,009
|
|
Agricultural
|
|
|
|
|
|
|
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
3,733
|
|
|
|
2,076
|
|
Multifamily residential
|
|
|
1,286
|
|
|
|
443
|
|
|
|
|
|
|
|
|
|
|
Total foreclosed assets held for sale
|
|
$
|
21,701
|
|
|
$
|
15,951
|
|
|
|
|
|
|
|
|
|
|
The following is a summary of the purchased credit impaired loans acquired in the GHI, BOC and Stonegate
acquisitions during the first nine months of 2017 as of the dates of acquisition:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GHI
|
|
|
BOC
|
|
|
Stonegate
|
|
Contractually required principal and interest at acquisition
|
|
$
|
22,379
|
|
|
$
|
18,586
|
|
|
$
|
98,444
|
|
Non-accretable
difference (expected losses and foregone
interest)
|
|
|
4,462
|
|
|
|
2,811
|
|
|
|
23,297
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows expected to be collected at acquisition
|
|
|
17,917
|
|
|
|
15,775
|
|
|
|
75,147
|
|
Accretable yield
|
|
|
2,071
|
|
|
|
1,043
|
|
|
|
11,761
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis in purchased credit impaired loans at acquisition
|
|
$
|
15,846
|
|
|
$
|
14,732
|
|
|
$
|
63,386
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in the carrying amount of the accretable yield for purchased credit impaired loans were as follows for
the nine-month period ended September 30, 2017 for the Companys acquisitions:
|
|
|
|
|
|
|
|
|
|
|
Accretable Yield
|
|
|
Carrying
Amount of
Loans
|
|
|
|
(In thousands)
|
|
Balance at beginning of period
|
|
$
|
38,212
|
|
|
$
|
159,564
|
|
Reforecasted future interest payments for loan pools
|
|
|
3,739
|
|
|
|
|
|
Accretion recorded to interest income
|
|
|
(14,955
|
)
|
|
|
14,955
|
|
Acquisitions
|
|
|
14,875
|
|
|
|
93,964
|
|
Adjustment to yield
|
|
|
2,210
|
|
|
|
|
|
Transfers to foreclosed assets held for sale
|
|
|
|
|
|
|
(13,407
|
)
|
Payments received, net
|
|
|
|
|
|
|
(40,084
|
)
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
44,081
|
|
|
$
|
214,992
|
|
|
|
|
|
|
|
|
|
|
The loan pools were evaluated by the Company and are currently forecasted to have a slower
run-off
than originally expected. As a result, the Company has reforecast the total accretable yield expectations for those loan pools by $3.7 million. This updated forecast does not change the expected
weighted average yields on the loan pools.
During the 2017 impairment tests on the estimated cash flows of loans, the Company established
that several loan pools were determined to have a materially projected credit improvement. As a result of this improvement, the Company will recognize approximately $2.2 million as an additional adjustment to yield over the weighted average
life of the loans.
32
6. Goodwill and Core Deposits and Other Intangibles
Changes in the carrying amount and accumulated amortization of the Companys goodwill and core deposits and other intangibles at
September 30, 2017 and December 31, 2016, were as follows:
|
|
|
|
|
|
|
|
|
|
|
September 30,
2017
|
|
|
December 31,
2016
|
|
|
|
(In thousands)
|
|
Goodwill
|
|
|
|
|
Balance, beginning of period
|
|
$
|
377,983
|
|
|
$
|
377,983
|
|
Acquisitions
|
|
|
551,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
|
$
|
929,129
|
|
|
$
|
377,983
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2017
|
|
|
December 31,
2016
|
|
|
|
(In thousands)
|
|
Core Deposit and Other Intangibles
|
|
|
|
|
Balance, beginning of period
|
|
$
|
18,311
|
|
|
$
|
21,443
|
|
Acquisitions
|
|
|
35,247
|
|
|
|
|
|
Amortization expense
|
|
|
(2,576
|
)
|
|
|
(2,370
|
)
|
|
|
|
|
|
|
|
|
|
Balance, September 30
|
|
$
|
50,982
|
|
|
|
19,073
|
|
|
|
|
|
|
|
|
|
|
Amortization expense
|
|
|
|
|
|
|
(762
|
)
|
|
|
|
|
|
|
|
|
|
Balance, end of year
|
|
|
|
|
|
$
|
18,311
|
|
|
|
|
|
|
|
|
|
|
The carrying basis and accumulated amortization of core deposits and other intangibles at September 30,
2017 and December 31, 2016 were:
|
|
|
|
|
|
|
|
|
|
|
September 30,
2017
|
|
|
December 31,
2016
|
|
|
|
(In thousands)
|
|
|
|
|
|
Gross carrying basis
|
|
$
|
86,625
|
|
|
$
|
51,378
|
|
Accumulated amortization
|
|
|
(35,643
|
)
|
|
|
(33,067
|
)
|
|
|
|
|
|
|
|
|
|
Net carrying amount
|
|
$
|
50,982
|
|
|
$
|
18,311
|
|
|
|
|
|
|
|
|
|
|
Core deposit and other intangible amortization expense was approximately $906,000 and $762,000 for the three
months ended September 30, 2017 and 2016, respectively. Core deposit and other intangible amortization expense was approximately $2.6 million and $2.4 million for the nine months ended September 30, 2017 and 2016, respectively.
Including all of the mergers completed as of September 30, 2017, the Companys estimated amortization expense of core deposits and other intangibles for each of the years 2017 through 2021 is approximately: 2017 $4.1 million;
2018 $6.6 million; 2019 $6.5 million; 2020 $5.9 million; 2021 $5.7 million.
The carrying
amount of the Companys goodwill was $929.1 million and $378.0 million at September 30, 2017 and December 31, 2016, respectively. Goodwill is tested annually for impairment during the fourth quarter. If the implied fair
value of goodwill is lower than its carrying amount, goodwill impairment is indicated and goodwill is written down to its implied fair value. Subsequent increases in goodwill value are not recognized in the consolidated financial statements.
The purchase price allocation and certain fair value measurements related to the Stonegate acquisition remain preliminary due to the timing of
the acquisition. The Company will continue to review the estimated fair values of loans, deposits and intangible assets, and to evaluate the assumed tax positions and contingencies.
33
7. Other Assets
Other assets consists primarily of equity securities without a readily determinable fair value and other miscellaneous assets. As of
September 30, 2017 and December 31, 2016 other assets were $163.1 million and $129.3 million, respectively.
The
Company has equity securities without readily determinable fair values. These equity securities are outside the scope of ASC Topic 320,
Investments-Debt and Equity Securities
. They include items such as stock holdings in Federal Home Loan
Bank (FHLB), Federal Reserve Bank (Federal Reserve), Bankers Bank and other miscellaneous holdings. The equity securities without a readily determinable fair value were $134.6 million and $112.4 million at
September 30, 2017 and December 31, 2016, respectively, and are accounted for at cost.
8. Deposits
The aggregate amount of time deposits with a minimum denomination of $250,000 was $628.3 million and $569.1 million at
September 30, 2017 and December 31, 2016, respectively. The aggregate amount of time deposits with a minimum denomination of $100,000 was $1.02 billion and $842.9 million at September 30, 2017 and December 31, 2016,
respectively. Interest expense applicable to certificates in excess of $100,000 totaled $2.2 million and $1.1 million for the three months ended September 30, 2017 and 2016, respectively. Interest expense applicable to certificates in
excess of $100,000 totaled $5.8 million and $3.2 million for the nine months ended September 30, 2017 and 2016, respectively. As of September 30, 2017 and December 31, 2016, brokered deposits were $1.14 billion and
$502.5 million, respectively.
Deposits totaling approximately $1.32 billion and $1.23 billion at September 30, 2017
and December 31, 2016, respectively, were public funds obtained primarily from state and political subdivisions in the United States.
9.
Securities Sold Under Agreements to Repurchase
At September 30, 2017 and December 31, 2016, securities sold under agreements
to repurchase totaled $149.5 million and $121.3 million, respectively. For the three-month periods ended September 30, 2017 and 2016, securities sold under agreements to repurchase daily weighted-average totaled $135.9 million
and $118.2 million, respectively. For the nine-month periods ended September 30, 2017 and 2016, securities sold under agreements to repurchase daily weighted-average totaled $129.6 million and $121.0 million, respectively.
The remaining contractual maturity of securities sold under agreements to repurchase in the consolidated balance sheets as of
September 30, 2017 and December 31, 2016 is presented in the following tables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
|
Overnight and
Continuous
|
|
|
Up to 30
Days
|
|
|
30-90
Days
|
|
|
Greater than
90 Days
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Securities sold under agreements to repurchase:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government-sponsored enterprises
|
|
$
|
14,125
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
10,000
|
|
|
$
|
24,125
|
|
Mortgage-backed securities
|
|
|
29,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,677
|
|
State and political subdivisions
|
|
|
75,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,829
|
|
Other securities
|
|
|
19,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total borrowings
|
|
$
|
139,531
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
10,000
|
|
|
$
|
149,531
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
Overnight and
Continuous
|
|
|
Up to 30
Days
|
|
|
30-90
Days
|
|
|
Greater than
90 Days
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Securities sold under agreements to repurchase:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government-sponsored enterprises
|
|
$
|
1,918
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,918
|
|
Mortgage-backed securities
|
|
|
22,691
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,691
|
|
State and political subdivisions
|
|
|
74,559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74,559
|
|
Other securities
|
|
|
22,122
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,122
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total borrowings
|
|
$
|
121,290
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
121,290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10. FHLB Borrowed Funds
The Companys FHLB borrowed funds were $1.04 billion and $1.31 billion at September 30, 2017 and December 31, 2016,
respectively. At September 30, 2017, $245.0 million and $799.3 million of the outstanding balance were issued as short-term and long-term advances, respectively. At December 31, 2016, $40.0 million and $1.27 billion of
the outstanding balance were issued as short-term and long-term advances, respectively. The FHLB advances mature from the current year to 2027 with fixed interest rates ranging from 0.636% to 5.960% and are secured by loans and investments
securities. Maturities of borrowings as of September 30, 2017 include: 2017 $75.3 million; 2018 $409.5 million; 2019 $143.1 million; 2020 $146.4 million; 2021 zero; after 2021
$25.0 million. Expected maturities will differ from contractual maturities because FHLB may have the right to call or HBI may have the right to prepay certain obligations.
Additionally, the Company had $691.3 million and $516.2 million at September 30, 2017 and December 31, 2016, respectively,
in letters of credit under a FHLB blanket borrowing line of credit, which are used to collateralize public deposits at September 30, 2017 and December 31, 2016, respectively.
11. Other Borrowings
The Company had
zero other borrowings at September 30, 2017. The Company took out a $20.0 million line of credit for general corporate purposes during 2015, but the balance on this line of credit at September 30, 2017 and December 31, 2016 was
zero.
12. Subordinated Debentures
Subordinated debentures consists of subordinated debt securities and guaranteed payments on trust preferred securities. As of
September 30, 2017 and December 31, 2016, subordinated debentures were $367.8 million and $60.8 million, respectively.
35
Subordinated debentures at September 30, 2017 and December 31, 2016 contained the
following components:
|
|
|
|
|
|
|
|
|
|
|
As of
September 30,
2017
|
|
|
As of
December 31,
2016
|
|
|
|
(In thousands)
|
|
Trust preferred securities
|
|
|
|
|
|
|
|
|
Subordinated debentures, issued in 2006, due 2036, fixed rate of 6.75% during the first five years
and at a floating rate of 1.85% above the three-month LIBOR rate, reset quarterly, thereafter, currently callable without penalty
|
|
$
|
3,093
|
|
|
$
|
3,093
|
|
Subordinated debentures, issued in 2004, due 2034, fixed rate of 6.00% during the first five years
and at a floating rate of 2.00% above the three-month LIBOR rate, reset quarterly, thereafter, currently callable without penalty
|
|
|
15,464
|
|
|
|
15,464
|
|
Subordinated debentures, issued in 2005, due 2035, fixed rate of 5.84% during the first five years
and at a floating rate of 1.45% above the three-month LIBOR rate, reset quarterly, thereafter, currently callable without penalty
|
|
|
25,774
|
|
|
|
25,774
|
|
Subordinated debentures, issued in 2004, due 2034, fixed rate of 4.29% during the first five years
and at a floating rate of 2.50% above the three-month LIBOR rate, reset quarterly, thereafter, currently callable without penalty
|
|
|
16,495
|
|
|
|
16,495
|
|
Subordinated debentures, issued in 2005, due 2035, floating rate of 2.15% above the three-month
LIBOR rate, reset quarterly, currently callable without penalty
|
|
|
4,292
|
|
|
|
|
|
Subordinated debentures, issued in 2006, due 2036, fixed rate of 7.38% during the first five years
and at a floating rate of 1.62% above the three-month LIBOR rate, reset quarterly, thereafter, currently callable without penalty
|
|
|
5,545
|
|
|
|
|
|
Subordinated debt securities
|
|
|
|
|
|
|
|
|
Subordinated notes, net of issuance costs, issued in 2017, due 2027, fixed rate of 5.625% during
the first five years and at a floating rate of 3.575% above the then three-month LIBOR rate, reset quarterly, thereafter, callable in 2022 without penalty
|
|
|
297,172
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
367,835
|
|
|
$
|
60,826
|
|
|
|
|
|
|
|
|
|
|
Trust Preferred Securities
. The Company holds trust preferred securities with a face amount of
$73.3 million which are currently callable without penalty based on the terms of the specific agreements. The trust preferred securities are
tax-advantaged
issues that qualify for Tier 1 capital treatment
subject to certain limitations. Distributions on these securities are included in interest expense. Each of the trusts is a statutory business trust organized for the sole purpose of issuing trust securities and investing the proceeds in the
Companys subordinated debentures, the sole asset of each trust. The trust preferred securities of each trust represent preferred beneficial interests in the assets of the respective trusts and are subject to mandatory redemption upon payment
of the subordinated debentures held by the trust. The Company wholly owns the common securities of each trust. Each trusts ability to pay amounts due on the trust preferred securities is solely dependent upon the Company making payment on the
related subordinated debentures. The Companys obligations under the subordinated securities and other relevant trust agreements, in aggregate, constitute a full and unconditional guarantee by the Company of each respective trusts
obligations under the trust securities issued by each respective trust.
The Bank acquired $12.5 million in trust preferred
securities with a fair value of $9.8 million from the Stonegate acquisition. The difference between the fair value purchased of $9.8 million and the $12.5 million face amount, will be amortized into interest expense over the remaining
life of the debentures. The associated subordinated debentures are redeemable, in whole or in part, prior to maturity at our option on a quarterly basis when interest is due and payable and in whole at any time within 90 days following the
occurrence and continuation of certain changes in the tax treatment or capital treatment of the debentures.
36
Subordinated Debt Securities
. On April 3, 2017, the Company completed an underwritten
public offering of $300.0 million in aggregate principal amount of its 5.625%
Fixed-to-Floating
Rate Subordinated Notes due 2027 (the Notes) for net
proceeds, after underwriting discounts and issuance costs, of approximately $297.0 million. The Notes are unsecured, subordinated debt obligations and mature on April 15, 2027. From and including the date of issuance to, but excluding
April 15, 2022, the Notes bear interest at an initial rate of 5.625% per annum. From and including April 15, 2022 to, but excluding the maturity date or earlier redemption, the Notes will bear interest at a floating rate equal to
three-month LIBOR as calculated on each applicable date of determination plus a spread of 3.575%; provided, however, that in the event three-month LIBOR is less than zero, then three-month LIBOR shall be deemed to be zero.
The Company may, beginning with the interest payment date of April 15, 2022, and on any interest payment date thereafter, redeem the
Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the Notes to be redeemed plus accrued and unpaid interest to but excluding the date of redemption. The Company may also redeem the Notes at any time,
including prior to April 15, 2022, at its option, in whole but not in part, if: (i) a change or prospective change in law occurs that could prevent the Company from deducting interest payable on the Notes for U.S. federal income tax
purposes; (ii) a subsequent event occurs that could preclude the Notes from being recognized as Tier 2 capital for regulatory capital purposes; or (iii) the Company is required to register as an investment company under the Investment
Company Act of 1940, as amended; in each case, at a redemption price equal to 100% of the principal amount of the Notes plus any accrued and unpaid interest to but excluding the redemption date. The Notes provide the Company with additional Tier 2
regulatory capital to support expected future growth.
13. Income Taxes
The following is a summary of the components of the provision (benefit) for income taxes for the three and nine-month periods ended
September 30, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
(In thousands)
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
17,289
|
|
|
$
|
15,523
|
|
|
$
|
65,958
|
|
|
$
|
53,216
|
|
State
|
|
|
3,434
|
|
|
|
3,083
|
|
|
|
13,101
|
|
|
|
10,570
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
|
|
|
20,723
|
|
|
|
18,606
|
|
|
|
79,059
|
|
|
|
63,786
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(11,002
|
)
|
|
|
5,739
|
|
|
|
(13,238
|
)
|
|
|
10,400
|
|
State
|
|
|
(2,185
|
)
|
|
|
1,140
|
|
|
|
(2,629
|
)
|
|
|
2,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred
|
|
|
(13,187
|
)
|
|
|
6,879
|
|
|
|
(15,867
|
)
|
|
|
12,466
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
$
|
7,536
|
|
|
$
|
25,485
|
|
|
$
|
63,192
|
|
|
$
|
76,252
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The reconciliation between the statutory federal income tax rate and effective income tax rate is as follows
for the three and nine-month periods ended September 30, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Statutory federal income tax rate
|
|
|
35.00
|
%
|
|
|
35.00
|
%
|
|
|
35.00
|
%
|
|
|
35.00
|
%
|
Effect of
non-taxable
interest income
|
|
|
(4.48
|
)
|
|
|
(1.47
|
)
|
|
|
(1.82
|
)
|
|
|
(1.54
|
)
|
Effect of gain on acquisitions
|
|
|
|
|
|
|
|
|
|
|
(0.76
|
)
|
|
|
|
|
Stock compensation
|
|
|
(0.09
|
)
|
|
|
|
|
|
|
(0.49
|
)
|
|
|
|
|
State income taxes, net of federal benefit
|
|
|
3.91
|
|
|
|
4.07
|
|
|
|
4.01
|
|
|
|
4.07
|
|
Other
|
|
|
(0.63
|
)
|
|
|
(0.72
|
)
|
|
|
0.18
|
|
|
|
(0.30
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective income tax rate
|
|
|
33.71
|
%
|
|
|
36.88
|
%
|
|
|
36.12
|
%
|
|
|
37.23
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37
The types of temporary differences between the tax basis of assets and liabilities and their
financial reporting amounts that give rise to deferred income tax assets and liabilities, and their approximate tax effects, are as follows:
|
|
|
|
|
|
|
|
|
|
|
September 30,
2017
|
|
|
December 31,
2016
|
|
|
|
(In thousands)
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
$
|
52,181
|
|
|
$
|
31,381
|
|
Deferred compensation
|
|
|
3,430
|
|
|
|
3,925
|
|
Stock compensation
|
|
|
1,605
|
|
|
|
669
|
|
Real estate owned
|
|
|
3,697
|
|
|
|
2,296
|
|
Loan discounts
|
|
|
16,634
|
|
|
|
9,157
|
|
Tax basis premium/discount on acquisitions
|
|
|
32,833
|
|
|
|
14,757
|
|
Investments
|
|
|
1,368
|
|
|
|
1,957
|
|
Other
|
|
|
21,597
|
|
|
|
8,361
|
|
|
|
|
|
|
|
|
|
|
Gross deferred tax assets
|
|
|
133,345
|
|
|
|
72,503
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Accelerated depreciation on premises and equipment
|
|
|
(1,200
|
)
|
|
|
2,154
|
|
Unrealized gain on securities
available-for-sale
|
|
|
2,018
|
|
|
|
258
|
|
Core deposit intangibles
|
|
|
5,352
|
|
|
|
4,950
|
|
FHLB dividends
|
|
|
1,926
|
|
|
|
1,926
|
|
Other
|
|
|
3,462
|
|
|
|
1,917
|
|
|
|
|
|
|
|
|
|
|
Gross deferred tax liabilities
|
|
|
11,558
|
|
|
|
11,205
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
121,787
|
|
|
$
|
61,298
|
|
|
|
|
|
|
|
|
|
|
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and the states of
Arkansas, Alabama, Florida, New York and California. The Company is no longer subject to U.S. federal and state tax examinations by tax authorities for years before 2013.
The purchase price allocation and certain fair value measurements related to the Stonegate acquisition remain preliminary due to the timing of
the acquisition. The Company will continue to review the estimated fair values of loans, deposits and intangible assets, and to evaluate the assumed tax positions and contingencies.
14. Common Stock, Compensation Plans and Other
Common Stock
The
Company also has the authority to issue up to 5,500,000 shares of preferred stock, par value $0.01 per share under the Companys Restated Articles of Incorporation.
Stock Repurchases
On January 20, 2017, the Companys Board of Directors authorized the repurchase of up to an additional 5,000,000 shares of its
common stock under the previously approved stock repurchase program, which brought the total amount of authorized shares to repurchase to 9,752,000 shares. During the first nine months of 2017, the Company utilized a portion of this stock repurchase
program.
38
The following table sets forth information with respect to purchases made by or on behalf of the
Company of shares of the Companys common stock during the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period
|
|
Number of
Shares
Purchased
|
|
|
Average Price
Paid Per Share
Purchased
|
|
|
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
|
|
|
Maximum
Number of
Shares That
May Yet Be
Purchased
Under the Plans
or Programs
|
|
July 1 through July 31, 2017
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
5,664,936
|
|
August 1 through August 31, 2017
|
|
|
380,000
|
|
|
|
24.36
|
|
|
|
380,000
|
|
|
|
5,284,936
|
|
September 1 through September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,284,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
380,000
|
|
|
|
|
|
|
|
380,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During first nine months of 2017, the Company repurchased a total of 800,000 shares with a weighted-average
stock price of $24.44 per share. The 2017 earnings were used to fund the repurchases during the year. Shares repurchased under the program as of September 30, 2017 total 4,467,064 shares. The remaining balance available for repurchase is
5,284,936 shares at September 30, 2017.
Stock Compensation Plans
The Company has a stock option and performance incentive plan known as the Amended and Restated 2006 Stock Option and Performance Incentive
Plan (the Plan). The purpose of the Plan is to attract and retain highly qualified officers, directors, key employees, and other persons, and to motivate those persons to improve the Companys business results. On April 21,
2016 at the Annual Meeting of Shareholders of the Company, the shareholders approved, as proposed in the Proxy Statement, an amendment to the Plan to increase the number of shares of the Companys common stock available for issuance under the
Plan by 2,000,000 shares to 11,288,000 shares. The Plan provides for the granting of incentive and
non-qualified
stock options to and other equity awards, including the issuance of restricted shares. As of
September 30, 2017, the maximum total number of shares of the Companys common stock available for issuance under the Plan was 11,288,000. At September 30, 2017, the Company had approximately 2,405,000 shares of common stock remaining
available for future grants and approximately 4,729,000 shares of common stock reserved for issuance pursuant to outstanding awards under the Plan.
The intrinsic value of the stock options outstanding and stock options vested at September 30, 2017 was $20.9 million and
$12.1 million, respectively. Total unrecognized compensation cost, net of income tax benefit, related to
non-vested
stock option awards, which are expected to be recognized over the vesting periods, was
approximately $5.7 million as of September 30, 2017. For the first nine months of 2017, the Company has expensed approximately $1.2 million for the
non-vested
awards.
The table below summarizes the stock option transactions under the Plan at September 30, 2017 and December 31, 2016 and changes
during the nine-month period and year then ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months
Ended September 30, 2017
|
|
|
For the Year Ended
December 31, 2016
|
|
|
|
Shares (000)
|
|
|
Weighted-
Average
Exercisable
Price
|
|
|
Shares (000)
|
|
|
Weighted-
Average
Exercisable
Price
|
|
Outstanding, beginning of year
|
|
|
2,397
|
|
|
$
|
15.19
|
|
|
|
2,794
|
|
|
$
|
12.71
|
|
Granted
|
|
|
80
|
|
|
|
25.96
|
|
|
|
140
|
|
|
|
21.25
|
|
Forfeited/Expired
|
|
|
|
|
|
|
|
|
|
|
(14
|
)
|
|
|
17.28
|
|
Exercised
|
|
|
(178
|
)
|
|
|
7.60
|
|
|
|
(523
|
)
|
|
|
3.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, end of period
|
|
|
2,299
|
|
|
|
16.15
|
|
|
|
2,397
|
|
|
|
15.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, end of period
|
|
|
1,017
|
|
|
$
|
13.32
|
|
|
|
639
|
|
|
$
|
8.88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39
Stock-based compensation expense for stock-based compensation awards granted is based on the
grant-date fair value. For stock option awards, the fair value is estimated at the date of grant using the Black-Scholes option-pricing model. This model requires the input of highly subjective assumptions, changes to which can materially affect the
fair value estimate. Additionally, there may be other factors that would otherwise have a significant effect on the value of employee stock options granted but are not considered by the model. Accordingly, while management believes that the
Black-Scholes option-pricing model provides a reasonable estimate of fair value, the model does not necessarily provide the best single measure of fair value for the Companys employee stock options. The weighted-average fair value of options
granted during the nine months ended September 30, 2017 was $7.10 per share. The weighted-average fair value of options granted during the year ended December 31, 2016 was $5.08 per share. The fair value of each option granted is estimated
on the date of grant using the Black-Scholes option-pricing model based on the weighted-average assumptions for expected dividend yield, expected stock price volatility, risk-free interest rate, and expected life of options granted.
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended
September 30, 2017
|
|
|
For the Year Ended
December 31, 2016
|
|
Expected dividend yield
|
|
|
1.39
|
%
|
|
|
1.65
|
%
|
Expected stock price volatility
|
|
|
28.47
|
%
|
|
|
26.66
|
%
|
Risk-free interest rate
|
|
|
2.06
|
%
|
|
|
1.65
|
%
|
Expected life of options
|
|
|
6.5 years
|
|
|
|
6.5 years
|
|
The following is a summary of currently outstanding and exercisable options at September 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
Exercise Prices
|
|
Options
Outstanding
Shares
(000)
|
|
|
Weighted-
Average
Remaining
Contractual
Life (in years)
|
|
|
Weighted-
Average
Exercise
Price
|
|
|
Options
Exercisable
Shares (000)
|
|
|
Weighted-
Average
Exercise
Price
|
|
$ 2.10 to $2.66
|
|
|
18
|
|
|
|
1.49
|
|
|
$
|
2.56
|
|
|
|
18
|
|
|
$
|
2.56
|
|
$ 4.27 to $4.30
|
|
|
91
|
|
|
|
0.29
|
|
|
|
4.28
|
|
|
|
91
|
|
|
|
4.28
|
|
$ 5.68 to $6.56
|
|
|
103
|
|
|
|
3.81
|
|
|
|
6.43
|
|
|
|
103
|
|
|
|
6.43
|
|
$ 8.62 to $9.54
|
|
|
284
|
|
|
|
5.43
|
|
|
|
9.09
|
|
|
|
224
|
|
|
|
9.08
|
|
$14.71 to $16.86
|
|
|
262
|
|
|
|
7.01
|
|
|
|
16.00
|
|
|
|
124
|
|
|
|
16.12
|
|
$17.12 to $17.40
|
|
|
211
|
|
|
|
7.18
|
|
|
|
17.19
|
|
|
|
90
|
|
|
|
17.22
|
|
$18.46 to $18.46
|
|
|
1,050
|
|
|
|
7.90
|
|
|
|
18.46
|
|
|
|
329
|
|
|
|
18.46
|
|
$20.16 to $20.58
|
|
|
80
|
|
|
|
8.02
|
|
|
|
20.37
|
|
|
|
14
|
|
|
|
20.34
|
|
$21.25 to $21.25
|
|
|
120
|
|
|
|
8.56
|
|
|
|
21.25
|
|
|
|
24
|
|
|
|
21.25
|
|
$25.96 to $25.96
|
|
|
80
|
|
|
|
9.56
|
|
|
|
25.96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,299
|
|
|
|
|
|
|
|
|
|
|
|
1,017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table below summarized the activity for the Companys restricted stock issued and outstanding at
September 30, 2017 and December 31, 2016 and changes during the period and year then ended:
|
|
|
|
|
|
|
|
|
|
|
As of
September 30, 2017
|
|
|
As of
December 31, 2016
|
|
|
|
(In thousands)
|
|
Beginning of year
|
|
|
958
|
|
|
|
975
|
|
Issued
|
|
|
232
|
|
|
|
244
|
|
Vested
|
|
|
(45
|
)
|
|
|
(256
|
)
|
Forfeited
|
|
|
|
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
End of period
|
|
|
1,145
|
|
|
|
958
|
|
|
|
|
|
|
|
|
|
|
Amount of expense for nine months and twelve months ended, respectively
|
|
$
|
3,815
|
|
|
$
|
4,049
|
|
|
|
|
|
|
|
|
|
|
Total unrecognized compensation cost, net of income tax benefit, related to
non-vested
restricted stock awards, which are expected to be recognized over the vesting periods, was approximately $14.3 million as of September 30, 2017.
40
15.
Non-Interest
Expense
The table below shows the components of
non-interest
expense for the three and nine months ended
September 30, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
(In thousands)
|
|
Salaries and employee benefits
|
|
$
|
28,510
|
|
|
$
|
25,623
|
|
|
$
|
83,965
|
|
|
$
|
75,018
|
|
Occupancy and equipment
|
|
|
7,887
|
|
|
|
6,668
|
|
|
|
21,602
|
|
|
|
19,848
|
|
Data processing expense
|
|
|
2,853
|
|
|
|
2,791
|
|
|
|
8,439
|
|
|
|
8,221
|
|
Other operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising
|
|
|
795
|
|
|
|
866
|
|
|
|
2,305
|
|
|
|
2,422
|
|
Merger and acquisition expenses
|
|
|
18,227
|
|
|
|
|
|
|
|
25,743
|
|
|
|
|
|
FDIC loss share
buy-out
expense
|
|
|
|
|
|
|
3,849
|
|
|
|
|
|
|
|
3,849
|
|
Amortization of intangibles
|
|
|
906
|
|
|
|
762
|
|
|
|
2,576
|
|
|
|
2,370
|
|
Electronic banking expense
|
|
|
1,712
|
|
|
|
1,428
|
|
|
|
4,885
|
|
|
|
4,121
|
|
Directors fees
|
|
|
309
|
|
|
|
292
|
|
|
|
946
|
|
|
|
856
|
|
Due from bank service charges
|
|
|
472
|
|
|
|
319
|
|
|
|
1,348
|
|
|
|
961
|
|
FDIC and state assessment
|
|
|
1,293
|
|
|
|
1,502
|
|
|
|
3,763
|
|
|
|
4,394
|
|
Insurance
|
|
|
577
|
|
|
|
553
|
|
|
|
1,698
|
|
|
|
1,630
|
|
Legal and accounting
|
|
|
698
|
|
|
|
583
|
|
|
|
1,799
|
|
|
|
1,764
|
|
Other professional fees
|
|
|
1,436
|
|
|
|
1,137
|
|
|
|
3,822
|
|
|
|
3,106
|
|
Operating supplies
|
|
|
432
|
|
|
|
437
|
|
|
|
1,376
|
|
|
|
1,292
|
|
Postage
|
|
|
280
|
|
|
|
269
|
|
|
|
861
|
|
|
|
815
|
|
Telephone
|
|
|
305
|
|
|
|
449
|
|
|
|
1,027
|
|
|
|
1,391
|
|
Other expense
|
|
|
4,154
|
|
|
|
3,498
|
|
|
|
10,835
|
|
|
|
12,203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other operating expenses
|
|
|
31,596
|
|
|
|
15,944
|
|
|
|
62,984
|
|
|
|
41,174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-interest
expense
|
|
$
|
70,846
|
|
|
$
|
51,026
|
|
|
$
|
176,990
|
|
|
$
|
144,261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16. Significant Estimates and Concentrations of Credit Risks
Accounting principles generally accepted in the United States of America require disclosure of certain significant estimates and current
vulnerabilities due to certain concentrations. Estimates related to the allowance for loan losses and certain concentrations of credit risk are reflected in Note 5, while deposit concentrations are reflected in Note 8.
The Companys primary market areas are in Arkansas, Florida, South Alabama and New York. The Company primarily grants loans to customers
located within these markets unless the borrower has an established relationship with the Company.
The diversity of the Companys
economic base tends to provide a stable lending environment. Although the Company has a loan portfolio that is diversified in both industry and geographic area, a substantial portion of its debtors ability to honor their contracts is dependent
upon real estate values, tourism demand and the economic conditions prevailing in its market areas.
Although the Company has a
diversified loan portfolio, at September 30, 2017 and December 31, 2016, commercial real estate loans represented 61.0% and 59.1% of total loans receivable, respectively, and 284.1% and 328.9% of total stockholders equity,
respectively. Residential real estate loans represented 24.0% and 23.0% of total loans receivable and 111.8% and 127.8% of total stockholders equity at September 30, 2017 and December 31, 2016, respectively.
Approximately 91.0% of the Companys total loans and 91.9% of the Companys real estate loans as of September 30, 2017, are to
borrowers whose collateral is located in Alabama, Arkansas, Florida and New York, the states in which the Company has its branch locations.
41
Although general economic conditions in the Companys market areas have improved, both
nationally and locally, over the past three years and have shown signs of continued improvement, financial institutions still face circumstances and challenges which, in some cases, have resulted and could potentially result, in large declines in
the fair values of investments and other assets, constraints on liquidity and significant credit quality problems, including severe volatility in the valuation of real estate and other collateral supporting loans. The financial statements have been
prepared using values and information currently available to the Company.
Any future volatility in the economy could cause the values of
assets and liabilities recorded in the financial statements to change rapidly, resulting in material future adjustments in asset values, the allowance for loan losses and capital that could negatively impact the Companys ability to meet
regulatory capital requirements and maintain sufficient liquidity.
17. Commitments and Contingencies
In the ordinary course of business, the Company makes various commitments and incurs certain contingent liabilities to fulfill the financing
needs of their customers. These commitments and contingent liabilities include lines of credit and commitments to extend credit and issue standby letters of credit. The Company applies the same credit policies and standards as they do in the lending
process when making these commitments. The collateral obtained is based on the assessed creditworthiness of the borrower.
At
September 30, 2017 and December 31, 2016, commitments to extend credit of $2.31 billion and $1.82 billion, respectively, were outstanding. A percentage of these balances are participated out to other banks; therefore, the Company
can call on the participating banks to fund future draws. Since some of these commitments are expected to expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements.
Outstanding standby letters of credit are contingent commitments issued by the Company, generally to guarantee the performance of a customer
in third-party borrowing arrangements. The term of the guarantee is dependent upon the creditworthiness of the borrower, some of which are long-term. The amount of collateral obtained, if deemed necessary, is based on managements credit
evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, commercial real estate and residential real estate. Management uses the same credit policies in granting lines of
credit as it does for
on-balance-sheet
instruments. The maximum amount of future payments the Company could be required to make under these guarantees at September 30, 2017 and December 31, 2016, is
$76.8 million and $41.1 million, respectively.
The Company and/or its bank subsidiary have various unrelated legal proceedings,
most of which involve loan foreclosure activity pending, which, in the aggregate, are not expected to have a material adverse effect on the financial position or results of operations or cash flows of the Company and its subsidiary.
18. Regulatory Matters
The Bank is
subject to a legal limitation on dividends that can be paid to the parent company without prior approval of the applicable regulatory agencies. Arkansas bank regulators have specified that the maximum dividend limit state banks may pay to the parent
company without prior approval is 75% of the current year earnings plus 75% of the retained net earnings of the preceding year. Since the Bank is also under supervision of the Federal Reserve, it is further limited if the total of all dividends
declared in any calendar year by the Bank exceeds the Banks net profits to date for that year combined with its retained net profits for the preceding two years. During the first nine months of 2017, the Company requested approximately
$64.5 million in regular dividends from its banking subsidiary. This dividend is equal to approximately 52.7% of the Companys banking subsidiarys
year-to-date
2017 earnings.
42
The Companys banking subsidiary is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the
Companys consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of the Companys
assets, liabilities and certain
off-balance-sheet
items as calculated under regulatory accounting practices. The Companys capital amounts and classifications are also subject to qualitative judgments by
the regulators about components, risk weightings and other factors. Furthermore, the Companys regulators could require adjustments to regulatory capital not reflected in the consolidated financial statements.
Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios of
total, common Tier 1 equity and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier 1 capital (as defined) to average assets (as defined). Management believes that, as of September 30, 2017, the
Company meets all capital adequacy requirements to which it is subject.
The Federal Reserve Boards risk-based capital guidelines
include the definitions for (1) a well-capitalized institution, (2) an adequately-capitalized institution, and (3) an undercapitalized institution. Under Basel III, the criteria for a well-capitalized institution are now: a 6.5%
common equity Tier 1 risk-based capital ratio, a 5% Tier 1 leverage capital ratio, an 8% Tier 1 risk-based capital ratio, and a 10% total risk-based capital ratio. As of September 30, 2017, the
Bank met the capital standards for a well-capitalized institution. The Companys common equity Tier 1 risk-based capital ratio, Tier 1 leverage capital ratio, Tier 1 risk-based capital ratio, and total
risk-based capital ratio were 10.86%, 13.17%, 11.46%, and 15.06%, respectively, as of September 30, 2017.
19. Additional Cash Flow
Information
In connection with the GHI acquisition, accounted for using the purchase method, the Company acquired approximately
$398.1 million in assets, including $41.0 million in cash and cash equivalents, assumed $345.0 million in liabilities, issued 2,738,038 shares of its common stock valued at approximately $77.5 million as of February 23,
2017, and paid approximately $18.5 million in cash in exchange for all outstanding shares of GHI common stock.
In connection with
the BOC acquisition, accounted for using the purchase method, the Company acquired approximately $178.1 million in assets, including $4.6 million in cash and cash equivalents, assumed $170.1 million in liabilities, issued no equity
and paid approximately $4.2 million in cash. As a result, the Company recorded a bargain purchase gain of $3.8 million.
In
connection with the Stonegate acquisition, accounted for using the purchase method, the Company acquired approximately $2.89 billion in assets, including $101.0 million in cash and cash equivalents, assumed $2.60 billion in
liabilities, issued 30,863,658 shares of its common stock valued at approximately $742.3 million as of September 26, 2017, and paid $50.1 million in cash in exchange for all outstanding shares of Stonegate common stock.
The following is a summary of the Companys additional cash flow information during the nine-month periods ended:
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(In thousands)
|
|
Interest paid
|
|
$
|
34,573
|
|
|
$
|
22,295
|
|
Income taxes paid
|
|
|
117,025
|
|
|
|
66,450
|
|
Assets acquired by foreclosure
|
|
|
9,255
|
|
|
|
9,448
|
|
43
20. Financial Instruments
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of three levels of inputs that may be used to measure fair value:
|
|
|
Level 1
|
|
Quoted prices in active markets for identical assets or liabilities
|
|
|
Level 2
|
|
Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market
data for substantially the full term of the assets or liabilities
|
|
|
Level 3
|
|
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities
|
Available-for-sale
securities
are the only material instruments valued on a recurring basis which are held by the Company at fair value. The Company does not have any Level 1 securities. Primarily all of the Companys securities are considered to be Level 2
securities. These Level 2 securities consist primarily of U.S. government-sponsored enterprises, mortgage-backed securities plus state and political subdivisions. For these securities, the Company obtains fair value measurements from an
independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment
speeds, credit information and the bonds terms and conditions, among other things. As of September 30, 2017 and December 31, 2016, Level 3 securities were immaterial. In addition, there were no material transfers between
hierarchy levels during 2017 and 2016.
The Company reviews the prices supplied by the independent pricing service, as well as their
underlying pricing methodologies, for reasonableness and to ensure such prices are aligned with traditional pricing matrices. In general, the Company does not purchase investment portfolio securities with complicated structures. Pricing for the
Companys investment securities is fairly generic and is easily obtained.
Impaired loans that are collateral dependent are the only
material financial assets valued on a
non-recurring
basis which are held by the Company at fair value. Loan impairment is reported when full payment under the loan terms is not expected. Impaired loans are
carried at the net realizable value of the collateral if the loan is collateral dependent. A portion of the allowance for loan losses is allocated to impaired loans if the value of such loans is deemed to be less than the unpaid balance. If these
allocations cause the allowance for loan losses to require an increase, such increase is reported as a component of the provision for loan losses. The fair value of loans with specific allocated losses was $94.1 million and $91.5 million as of
September 30, 2017 and December 31, 2016, respectively. This valuation is considered Level 3, consisting of appraisals of underlying collateral. The Company reversed approximately $314,000 and $156,000 of accrued interest
receivable when
non-covered
impaired loans were put on
non-accrual
status during the three months ended September 30, 2017 and 2016, respectively. The Company
reversed approximately $523,000 and $457,000 of accrued interest receivable when
non-covered
impaired loans were put on
non-accrual
status during the nine months ended
September 30, 2017 and 2016, respectively.
Foreclosed assets held for sale are the only material
non-financial
assets valued on a
non-recurring
basis which are held by the Company at fair value, less estimated costs to sell. At foreclosure, if the fair value, less
estimated costs to sell, of the real estate acquired is less than the Companys recorded investment in the related loan, a write-down is recognized through a charge to the allowance for loan losses. Additionally, valuations are periodically
performed by management and any subsequent reduction in value is recognized by a charge to income. The fair value of foreclosed assets held for sale is estimated using Level 3 inputs based on appraisals of underlying collateral. As of
September 30, 2017 and December 31, 2016, the fair value of foreclosed assets held for sale, less estimated costs to sell, was $21.7 million and $16.0 million, respectively.
Foreclosed assets held for sale with a carrying value of approximately $394,000 were remeasured during the nine months ended
September 30, 2017, resulting in a write-down of approximately $306,000.
Regulatory guidelines require us to reevaluate the fair
value of foreclosed assets held for sale on at least an annual basis. The Companys policy is to comply with the regulatory guidelines.
44
The significant unobservable (Level 3) inputs used in the fair value measurement of collateral
for collateral-dependent impaired loans and foreclosed assets primarily relate to customized discounting criteria applied to the customers reported amount of collateral. The amount of the collateral discount depends upon the condition and
marketability of the underlying collateral. As the Companys primary objective in the event of default would be to monetize the collateral to settle the outstanding balance of the loan, less marketable collateral would receive a larger
discount. During the reported periods, collateral discounts ranged from 20% to 50% for commercial and residential real estate collateral.
Fair
Values of Financial Instruments
The following methods and assumptions were used by the Company in estimating fair values of
financial instruments as disclosed in these notes:
Cash and cash equivalents and federal funds sold
For these short-term
instruments, the carrying amount is a reasonable estimate of fair value.
Investment securities
held-to-maturity
These securities consist primarily of mortgage-backed securities plus state and political subdivisions. For these securities, the Company
obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution
data, market consensus prepayment speeds, credit information and the bonds terms and conditions, among other things.
Loans
receivable, net of impaired loans and allowance
For variable-rate loans that reprice frequently and with no significant change in credit risk, fair values are assumed to approximate the carrying amounts. The fair values for fixed-rate
loans are estimated using discounted cash flow analysis, based on interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. Loan fair value estimates include judgments regarding future expected loss
experience and risk characteristics. Fair values for acquired loans are based on a discounted cash flow methodology that considers factors including the type of loan and related collateral, classification status, fixed or variable interest rate,
term of loan, current discount rates and whether or not the loan is amortizing. Loans are grouped together according to similar characteristics and are treated in the aggregate when applying various valuation techniques. The discount rates used for
loans are based on current market rates for new originations of comparable loans and include adjustments for liquidity concerns. The discount rate does not include a factor for credit losses as that has been included in the estimated cash flows.
Accrued interest receivable
The carrying amount of accrued interest receivable approximates its fair value.
Deposits and securities sold under agreements to repurchase
The fair values of demand deposits, savings deposits and securities
sold under agreements to repurchase are, by definition, equal to the amount payable on demand and, therefore, approximate their carrying amounts. The fair values for time deposits are estimated using a discounted cash flow calculation that utilizes
interest rates currently being offered on time deposits with similar contractual maturities.
FHLB and other borrowed funds
For short-term instruments, the carrying amount is a reasonable estimate of fair value. The fair value of long-term debt is estimated based on the current rates available to the Company for debt with similar terms and remaining maturities.
Accrued interest payable
The carrying amount of accrued interest payable approximates its fair value.
Subordinated debentures
The fair value of subordinated debentures is estimated using the rates that would be charged for
subordinated debentures of similar remaining maturities.
Commitments to extend credit, letters of credit and lines of credit
The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate
loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair values of letters of credit and lines of credit are based on fees currently charged for similar agreements or on
the estimated cost to terminate or otherwise settle the obligations with the counterparties at the reporting date. The fair value of these commitments is not material.
45
The following table presents the estimated fair values of the Companys financial
instruments. The fair values of certain of these instruments were calculated by discounting expected cash flows, which involves significant judgments by management and uncertainties. Fair value is the estimated amount at which financial assets or
liabilities could be exchanged in a current transaction between willing parties other than in a forced or liquidation sale. Because no market exists for certain of these financial instruments and because management does not intend to sell these
financial instruments, the Company does not know whether the fair values shown below represent values at which the respective financial instruments could be sold individually or in the aggregate.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
|
Carrying
Amount
|
|
|
Fair Value
|
|
|
Level
|
|
|
|
(In thousands)
|
|
|
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
552,320
|
|
|
$
|
552,320
|
|
|
|
1
|
|
Federal funds sold
|
|
|
4,545
|
|
|
|
4,545
|
|
|
|
1
|
|
Investment securities
held-to-maturity
|
|
|
234,945
|
|
|
|
239,017
|
|
|
|
2
|
|
Loans receivable, net of impaired loans and allowance
|
|
|
10,080,468
|
|
|
|
9,966,022
|
|
|
|
3
|
|
Accrued interest receivable
|
|
|
41,071
|
|
|
|
41,071
|
|
|
|
1
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand and
non-interest
bearing
|
|
$
|
2,555,465
|
|
|
$
|
2,555,465
|
|
|
|
1
|
|
Savings and interest-bearing transaction accounts
|
|
|
6,341,883
|
|
|
|
6,341,883
|
|
|
|
1
|
|
Time deposits
|
|
|
1,551,422
|
|
|
|
1,571,618
|
|
|
|
3
|
|
Federal funds purchased
|
|
|
|
|
|
|
|
|
|
|
N/A
|
|
Securities sold under agreements to repurchase
|
|
|
149,531
|
|
|
|
149,531
|
|
|
|
1
|
|
FHLB and other borrowed funds
|
|
|
1,044,333
|
|
|
|
1,044,936
|
|
|
|
2
|
|
Accrued interest payable
|
|
|
10,964
|
|
|
|
10,964
|
|
|
|
1
|
|
Subordinated debentures
|
|
|
367,835
|
|
|
|
384,485
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
Carrying
Amount
|
|
|
Fair Value
|
|
|
Level
|
|
|
|
(In thousands)
|
|
|
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
216,649
|
|
|
$
|
216,649
|
|
|
|
1
|
|
Federal funds sold
|
|
|
1,550
|
|
|
|
1,550
|
|
|
|
1
|
|
Investment securities
held-to-maturity
|
|
|
284,176
|
|
|
|
287,038
|
|
|
|
2
|
|
Loans receivable, net of impaired loans and allowance
|
|
|
7,216,199
|
|
|
|
7,131,199
|
|
|
|
3
|
|
Accrued interest receivable
|
|
|
30,838
|
|
|
|
30,838
|
|
|
|
1
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand and
non-interest
bearing
|
|
$
|
1,695,184
|
|
|
$
|
1,695,184
|
|
|
|
1
|
|
Savings and interest-bearing transaction accounts
|
|
|
3,963,241
|
|
|
|
3,963,241
|
|
|
|
1
|
|
Time deposits
|
|
|
1,284,002
|
|
|
|
1,275,634
|
|
|
|
3
|
|
Securities sold under agreements to repurchase
|
|
|
121,290
|
|
|
|
121,290
|
|
|
|
1
|
|
FHLB and other borrowed funds
|
|
|
1,305,198
|
|
|
|
1,311,280
|
|
|
|
2
|
|
Accrued interest payable
|
|
|
1,920
|
|
|
|
1,920
|
|
|
|
1
|
|
Subordinated debentures
|
|
|
60,826
|
|
|
|
60,826
|
|
|
|
3
|
|
46
21. Recent Accounting Pronouncements
In May 2014, the FASB issued ASU
2014-09,
Revenue from Contracts with Customers (Topic 606)
. ASU
2014-09
provides guidance that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to
be entitled in exchange for those goods and services. In August 2015, the FASB issued ASU
No. 2015-14,
Revenue from Contracts with Customers (Topic 606)
, which defers the effective date of this
standard to annual and interim periods beginning after December 15, 2017; however, early adoption is permitted for annual and interim reporting periods beginning after December 15, 2016. In April 2016, the FASB issued ASU
2016-10,
Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing
, which amends certain aspects of the guidance in ASU
2014-09
(FASBs new revenue standard) on (1) identifying performance obligations and (2) licensing. ASU
2014-10s
effective date and transition
provisions are aligned with the requirements in ASU
2014-09.
In May 2016, the FASB issued ASU
2016-12,
Revenue from Contracts with Customers (Topic 606): Narrow-Scope
Improvements and Practical Expedients
, which amends certain aspects of the FASBs new revenue standard, ASU
2014-09.
ASU
2016-12s
effective date and
transition provisions are aligned with the requirements in ASU
2014-09
The guidance issued in ASU
2014-09,
ASU
2015-14,
ASU
2016-10
and ASU
2016-12
permit two implementation approaches,
one requiring retrospective application of the new standard with restatement of prior years and one requiring prospective application of the new standard with disclosure of results under old standards. The Company plans to adopt the new standard
effective January 1, 2018 and apply it prospectively. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements. Only a portion of the Companys revenues are impacted by this guidance
because the guidance does not apply to revenue on contracts accounted for under the financial instruments or insurance contracts standards. The Companys evaluation process includes, but is not limited to, identifying contracts within the scope
of the guidance, reviewing and documenting its accounting for these contracts, and identifying and determining the accounting for any related contract costs. The Company is also identifying and implementing changes to its business processes, systems
and controls to support adoption of the new standard in 2018.
In January 2016, the FASB issued ASU
2016-01,
Financial InstrumentsOverall
(Subtopic
825-10):
Recognition and Measurement of Financial Assets and Financial Liabilities
. Changes to the
current GAAP model primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, ASU
2016-01
clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on
available-for-sale
securities. The new guidance is effective for annual reporting period and interim reporting periods within those annual periods, beginning after
December 15, 2017. Management is currently evaluating the impact of the adoption of this guidance to the Companys financial statements, but does not anticipate the guidance to have a material effect on the Companys financial
position or results of operations as the Companys equity investments are immaterial. However, the amendments will have an impact on certain items that are disclosed at fair value that are not currently utilizing the exit price notion when
measuring fair value. At this time, the Company cannot quantify the change in the fair value of such disclosures since the Company is currently evaluating the full impact of the standards and is in the planning stages of developing appropriate
procedures and processes to comply with the disclosure requirements of such amendments. The current accounting policies and procedures will be adjusted after the Company has fully evaluated the standard to comply with the accounting changes
mentioned above. For additional information on fair value of assets and liabilities, see Note 20.
In February 2016, the FASB issued ASU
2016-02,
Leases (Topic 842).
The amendments in ASU
2016-02
address several aspects of lease accounting with the significant change being the recognition of lease assets
and lease liabilities for leases previously classified as operating leases. ASU
2016-02
is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal
years. Early application of the amendments in ASU
2016-02
is permitted for all entities. The Company has several lease agreements for which the amendments will require the Company to recognize a lease
liability to make lease payments and a
right-of-use
asset which will represent its right to use the underlying asset for the lease term. The Company is currently
reviewing the amendments to ensure it is fully compliant by the adoption date and doesnt expect to early adopt. The impact is not expected to have a material effect on the Companys financial position or results of operations as the
Company does not have a material amount of lease agreements. In addition, the Company will change its current accounting policies to comply with the amendments with such changes as mentioned above. For additional information on the Companys
leases, see Note 18 Leases in the Notes to Consolidated Financial Statements in the Companys Annual Report on Form
10-K
for the year ended December 31, 2016.
47
In March 2016, the FASB issued ASU
2016-09,
Compensation
Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting
, which simplifies several aspects of the accounting for employee share-based payment transactions for both public and
nonpublic entities, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. ASU
2016-09
is effective for
annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company adopted the amendments effective January 1, 2017. The Company has a stock-based compensation plan for which the ASU
2016-09
guidance results in the associated excess tax benefits or deficiencies being recognized as tax expense or benefit in the income statement instead of the previous accounting treatment, which requires excess
tax benefits to be recognized as an adjustment to additional
paid-in
capital and excess tax deficiencies to be recognized as either an offset to accumulated excess tax benefits, if any, or to the income
statement. In addition, such amounts are now classified as an operating activity in the statement of cash flows instead of the current accounting treatment, which required it to be classified as both an operating and a financing activity. The
Companys stock-based compensation plan has not historically generated material amounts of excess tax benefits or deficiencies and, therefore, the Company has not experienced a material change in the Companys financial position or results
of operation as a result of the adoption and implementation of ASU
2016-09.
For additional information on the stock-based compensation plan, see Note 14.
In May 2016, the FASB issued ASU
2016-11,
Revenue Recognition (Topic 605) and Derivatives and
Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates
2014-09
and
2014-16
Pursuant to Staff Announcements at the
March
3, 2016 EITF Meeting (SEC Update)
, which rescinds certain SEC guidance from the FASB Accounting Standards Codification in response to announcements made by the SEC staff at the Emerging Issues Task Forces
(EITF) March 3, 2016, meeting. ASU
2016-11
is effective at the same time as ASU
2014-09
and ASU
2014-16.
The
Company is currently evaluating the impact, if any, ASU
2016-11
will have on its financial position, results of operations, and its financial statement disclosures. The Companys evaluation process
includes, but is not limited to, identifying transactions and accounts within the scope of the guidance, reviewing its accounting and disclosures for these transactions and accounts, and identifying and implementing any necessary changes to its
accounting and disclosures as a result of the guidance. The Company is also identifying and implementing changes to its business processes, systems and controls to support adoption of the new standard in 2018.
In June 2016, the FASB issued ASU
2016-13,
Measurement of Credit Losses on Financial
Instruments
, which amends the FASBs guidance on the impairment of financial instruments. The amendments in ASU
2016-13
replace the incurred loss model with a methodology that reflects expected credit
losses over the life of the loan and requires consideration of a broader range of reasonable and supportable information to calculate credit loss estimates, known as the current expected credit loss (CECL) model. Under the new guidance,
an entity recognizes as an allowance its estimate of expected credit losses, which the FASB believes will result in more timely recognition of such losses. ASU
2016-13
is also intended to reduce the complexity
of U.S. GAAP by decreasing the number of credit impairment models that entities use to account for debt instruments. ASU
2016-13
is effective for fiscal years beginning after December 15, 2019, including
interim periods within those fiscal years. Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The allowance for loan losses is a material estimate of the Company
and given the change from an incurred loss model to a methodology that considers the credit loss over the life of the loan, there is the potential for an increase in the allowance for loan losses at adoption date. The Company is anticipating a
significant change in the processes and procedures to calculate the allowance for loan losses, including changes in assumptions and estimates to consider expected credit losses over the life of the loan versus the current accounting practice that
utilizes the incurred loss model. The Company will also develop new procedures for determining an allowance for credit losses relating to
held-to-maturity
investment
securities. In addition, the current accounting policy and procedures for other-than-temporary impairment on
available-for-sale
investment securities will be replaced
with an allowance approach. The Company is currently evaluating the impact, if any, ASU
2016-13
will have on its financial position and results of operations and currently does not know or cannot reasonably
quantify the impact of the adoption of the amendments as a result of the complexity and extensive changes from the amendments. It is too early to assess the impact that the implementation of this guidance will have on the Companys consolidated
financial statements; however, the Company has begun developing processes and procedures to ensure it is fully compliant with the amendments at the required adoption date. Among other things, the Company has initiated data gathering and assessment
to support forecasting of asset quality, loan balances, and portfolio net charge-offs and have developed an
in-house
data warehouse as well as developed asset quality forecast models in preparation for the
implementation of this standard. For additional information on the allowance for loan losses, see Note 5.
48
In August 2016, the FASB issued ASU
2016-15,
Classification of Certain Cash Receipts and Cash Payments,
which amends the guidance in ASC 230 on the classification of certain cash receipts and payments in the statement of cash flows. The primary purpose of ASU
2016-15
is to reduce the diversity in practice that has resulted from the lack of consistent principles on this topic. ASU
2016-15s
amendments add or clarify guidance on
eight cash flow issues including debt prepayment or debt extinguishment costs; settlement of
zero-coupon
debt instruments or other debt instruments with coupon interest rates that are insignificant in relation
to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies;
including bank-owned life insurance policies; distributions received from equity method investees; beneficial interests in securitization transactions and separately identifiable cash flows and application of the predominance principle. ASU
2016-15
is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted and the guidance must be applied retrospectively to all
periods presented but may be applied prospectively from the earliest date practicable if retrospective application would be impracticable. The Company is currently evaluating the impact, if any, ASU
2016-15
will have on its financial position, results of operations, and its financial statement disclosures. The Companys evaluation process includes, but is not limited to, identifying transactions and accounts within the scope of the guidance,
reviewing its accounting and disclosures for these transactions and accounts, and identifying and implementing any necessary changes to its accounting and disclosures as a result of the guidance. The Company is also identifying and implementing
changes to its business processes, systems and controls to support adoption of the new standard in 2018.
In October 2016, the FASB issued
ASU
2016-16,
Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory
, which requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset
other than inventory when the transfer occurs. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, and should be applied on a modified retrospective basis through a
cumulative-effect adjustment directly to retained earnings at the beginning period of adoption. Early adoption is permitted in the first interim period of an annual reporting period for which financial statements have not been issued. The Company is
currently evaluating the impact, if any, ASU
2016-16
will have on its financial position, results of operations, and its financial statement disclosure. The Companys evaluation process includes, but is
not limited to, identifying transactions and accounts within the scope of the guidance, reviewing its accounting and disclosures for these transactions and accounts, and identifying and implementing any necessary changes to its accounting and
disclosures as a result of the guidance. The Company is also identifying and implementing changes to its business processes, systems and controls to support adoption of the new standard in 2018.
In November 2016, the FASB issued ASU
2016-18,
Statement of Cash Flows (Topic 230): Restricted Cash
(a consensus of the FASB Emerging Issues Task Force)
, which clarifies how entities should present restricted cash and restricted cash equivalents in the statement of cash flows, and, as a result, entities will no longer present transfers between
cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. An entity with a material balance of restricted cash and restricted cash equivalents must disclose information about the nature of the
restrictions. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted and the new guidance must be applied retrospectively to all periods
presented. The Company is currently evaluating the impact, if any, ASU
2016-18
will have on its financial position, results of operations, and its financial statement disclosure. The Companys evaluation
process includes, but is not limited to, identifying transactions and accounts within the scope of the guidance, reviewing its accounting and disclosures for these transactions and accounts, and identifying and implementing any necessary changes to
its accounting and disclosures as a result of the guidance. The Company is also identifying and implementing changes to its business processes, systems and controls to support adoption of the new standard in 2018.
49
In January 2017, the FASB issued ASU
2017-01,
Business
Combinations (Topic 805): Clarifying the Definition of a Business
, which provides guidance to entities to assist with evaluating when a set of transferred assets and activities (collectively, the set) is a business and provides a
screen to determine when a set is not a business. Under the new guidance, when substantially all of the fair value of gross assets acquired (or disposed of) is concentrated in a single identifiable asset, or group of similar assets, the assets
acquired would not represent a business. Also, to be considered a business, an acquisition would have to include an input and a substantive process that together significantly contribute to the ability to produce outputs. The new standard is
effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, and should be applied on a prospective basis to any transactions occurring within the period of adoption. Early adoption is permitted
for interim or annual periods in which the financial statements have not been issued. The Company is currently evaluating the impact, if any, ASU
2017-01
will have on its financial position, results of
operations, and its financial statement disclosure. The Companys evaluation process includes, but is not limited to, identifying transactions and accounts within the scope of the guidance, reviewing its accounting and disclosures for these
transactions and accounts, and identifying and implementing any necessary changes to its accounting and disclosures as a result of the guidance. The Company is also identifying and implementing changes to its business processes, systems and controls
to support adoption of the new standard in 2018.
In January 2017, the FASB issued ASU
2017-03,
Accounting Changes and Error Corrections (Topic 250) and InvestmentsEquity Method and Joint Ventures (Topic 323)
. The amendments in the update relate to SEC paragraphs pursuant to Staff Announcements at the September 22, 2016 and
November 17, 2016 EITF meetings related to disclosure of the impact of recently issued accounting standards. The SEC staffs view that a registrant should evaluate ASC updates that have not yet been adopted to determine the appropriate
financial disclosures about the potential material effects of the updates on the financial statements when adopted. If a registrant does not know or cannot reasonably estimate the impact of an update, then in addition to making a statement to that
effect, the registrant should consider additional qualitative financial statement disclosures to assist the reader in assessing the significance of the impact. The staff expects the additional qualitative disclosures to include a description of the
effect of the accounting policies expected to be applied compared to current accounting policies. Also, the registrant should describe the status of its process to implement the new standards and the significant implementation matters yet to be
addressed. The amendments specifically addressed recent ASC amendments to ASU
2016-02,
Leases
, and ASU
2014-09,
Revenue from Contracts with Customers
,
although, the amendments apply to any subsequent amendments to guidance in the ASC. The Company adopted the amendments in this update during the fourth quarter of 2016 and appropriate disclosures have been included in this Note for each recently
issued accounting standard.
In January 2017, the FASB issued ASU
2017-04,
IntangiblesGoodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment
, which eliminates the requirement to determine the fair value of individual assets and liabilities of a reporting unit to measure goodwill
impairment. Under the amendments in the new ASU, goodwill impairment testing will be performed by comparing the fair value of the reporting unit with its carrying amount and recognizing an impairment charge for the amount by which the carrying
amount exceeds the reporting units fair value; however, the loss should not exceed the total amount of goodwill allocated to that reporting unit. The new standard is effective for annual and interim goodwill impairment tests in fiscal years
beginning after December 15, 2019, and should be applied on a prospective basis. Early adoption is permitted for annual or interim goodwill impairment testing performed after January 1, 2017. The Company has goodwill from prior business
combinations and performs an annual impairment test or more frequently if changes or circumstances occur that would
more-likely-than-not
reduce the fair value of the reporting unit below its carrying value.
During 2016, the Company performed its impairment assessment and determined the fair value of the aggregated reporting units exceed the carrying value, such that the Companys goodwill was not considered impaired. Although the Company cannot
anticipate future goodwill impairment assessments, based on the most recent assessment it is unlikely that an impairment amount would need to be calculated and, therefore, does not anticipate a material impact from these amendments to the
Companys financial position and results of operations. The current accounting policies and processes are not anticipated to change, except for the elimination of the Step 2 analysis.
50
In February 2017, the FASB issued ASU
2017-05,
Other
Income: Gains and Losses from the Derecognition of Nonfinancial Assets
, which clarifies the scope of the FASBs guidance on nonfinancial asset derecognition (ASC
610-20)
as well as the accounting for
partial sales of nonfinancial assets. The ASU conforms the derecognition guidance on nonfinancial assets with the model for transactions in the new revenue standard (ASC 606, as amended). The ASU requires an entity to derecognize the nonfinancial
asset or
in-substance
nonfinancial asset in a partial sale transaction when (1) the entity ceases to have a controlling financial interest in a subsidiary under ASC 810 and (2) control of the asset
is transferred in accordance with ASC 606. The entity therefore has to consider repurchase agreements (e.g., a call option to repurchase the ownership interest in a subsidiary) in its assessment and may not be able to derecognize the nonfinancial
assets, even though it no longer has a controlling financial interest in a subsidiary in accordance with ASC 810. The ASU illustrates the application of this guidance in ASC
610-20-55-15
and
55-16.
The effective date of the new guidance is aligned with the requirements in the new revenue standard, which is effective for public
entities for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2017, and for nonpublic entities for annual reporting periods beginning after December 15, 2018, and interim
reporting periods within annual reporting periods beginning after December 15, 2019. If the entity decides to early adopt the ASUs guidance, it must also early adopt ASC 606 (and vice versa). The Company is currently evaluating the
impact, if any, ASU
2017-05
will have on its financial position, results of operations, and its financial statement disclosures. The Companys evaluation process includes, but is not limited to,
identifying transactions and accounts within the scope of the guidance, reviewing its accounting and disclosures for these transactions and accounts, and identifying and implementing any necessary changes to its accounting and disclosures as a
result of the guidance. The Company is also identifying and implementing changes to its business processes, systems and controls to support adoption of the new standard in 2018.
In March 2017, the FASB issued ASU
2017-08,
ReceivablesNonrefundable Fees and Other Costs
(Topic 310): Premium Amortization on Purchased Callable Debt Securities
, which amends the amortization period for certain purchased callable debt securities held at a premium. This ASU will shorten the amortization period for the premium to be
amortized to the earliest call date. This ASU does not apply to securities held at a discount, which will continue to be amortized to maturity. This ASU is effective for interim and annual reporting periods beginning after December 15, 2018.
The guidance should be applied using a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Early adoption is permitted, including adoption in an interim
period. The Company is currently evaluating the impact, if any, ASU
2017-08
will have on its financial position, results of operations, and its financial statement disclosures. The Companys evaluation
process includes, but is not limited to, identifying transactions and accounts within the scope of the guidance, reviewing its accounting and disclosures for these transactions and accounts, and identifying and implementing any necessary changes to
its accounting and disclosures as a result of the guidance. The Company is also identifying and implementing changes to its business processes, systems and controls to support adoption of the new standard in 2018.
In May 2017, the FASB issued ASU
2017-09,
CompensationStock Compensation (Topic 718): Scope
of Modification Accounting
, which amends the scope of modification accounting for share-based payment arrangements. Specifically, an entity would not apply modification accounting if the fair value, vesting conditions, and classification of the
awards are the same immediately before and after the modification. The amendments in ASU
2017-09
should be applied prospectively to an award modified on or after the adoption date. This ASU is effective for
interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. The Company does not anticipate any modifications to its existing awards and therefore the adoption of
ASU
2017-09
is not expected to have a significant impact on the Companys financial position, results of operations, or its financial statement disclosures.
51
In July 2017, the FASB issued ASU
2017-11,
Earnings
Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite Deferral for Mandatorily
Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable
Non-controlling
Interests with a Scope Exception.
Part I of this update addresses the complexity of
accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future
equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire
instrument or conversion option. Part II of this update addresses the difficulty of navigating
Topic 480, Distinguishing Liabilities from Equity
, because of the existence of extensive pending content in the FASB Accounting Standards
Codification. This pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable
non-controlling
interests. The amendments in Part II of this update do not have an accounting effect. This ASU is effective for interim and annual reporting periods beginning after December 15, 2018.
Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact, if any, ASU
2017-11
will have on its financial position, results of operations, and its
financial statement disclosures. The Companys evaluation process includes, but is not limited to, identifying transactions and accounts within the scope of the guidance, reviewing its accounting and disclosures for these transactions and
accounts, and identifying and implementing any necessary changes to its accounting and disclosures as a result of the guidance. The Company is also identifying and implementing changes to its business processes, systems and controls to support
adoption of the new standard in 2018.
52
Report of Independent Registered Public Accounting Firm
Audit Committee, Board of Directors and Stockholders
Home
BancShares, Inc.
Conway, Arkansas
We have reviewed the
accompanying condensed consolidated balance sheet of Home BancShares, Inc. (the Company) as of September 30, 2017, and the related condensed consolidated statements of income and comprehensive income for the three- and nine-month periods ended
September 30, 2017 and 2016, and the related statements of stockholders equity and cash flows for the nine-month periods ended September 30, 2017 and 2016. These interim financial statements are the responsibility of the
Companys management.
We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A
review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit
conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to
above for them to be in conformity with accounting principles generally accepted in the United States of America.
We have previously audited, in
accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2016, and the related consolidated statements of income, comprehensive income, stockholders
equity and cash flows for the year then ended (not presented herein); and in our report dated February 28, 2017, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of December 31, 2016, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
/s/
BKD,
LLP
Little Rock, Arkansas
November 7, 2017
53
Item 2:
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
The following discussion should be read in conjunction with our Form
10-K,
filed with the Securities
and Exchange Commission on February 28, 2017, which includes the audited financial statements for the year ended December 31, 2016.
Unless the context requires otherwise, the terms Company, us, we,
and our refer to Home BancShares, Inc. on a consolidated basis.
General
We are a bank holding company headquartered in Conway, Arkansas, offering a broad array of financial services through our wholly-owned bank
subsidiary, Centennial Bank (sometimes referred to as Centennial or the Bank). As of September 30, 2017, we had, on a consolidated basis, total assets of $14.26 billion, loans receivable, net of $10.17 billion,
total deposits of $10.45 billion, and stockholders equity of $2.21 billion.
We generate most of our revenue from interest
on loans and investments, service charges, and mortgage banking income. Deposits and Federal Home Loan Bank (FHLB) and other borrowed funds are our primary source of funding. Our largest expenses are interest on our funding sources,
salaries and related employee benefits and occupancy and equipment. We measure our performance by calculating our return on average common equity, return on average assets and net interest margin. We also measure our performance by our efficiency
ratio, which is calculated by dividing
non-interest
expense less amortization of core deposit intangibles by the sum of net interest income on a tax equivalent basis and
non-interest
income.
Table 1: Key Financial Measures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of or for the Three Months
Ended September 30,
|
|
|
As of or for the Nine Months
Ended September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
(Dollars in thousands, except per share data)
|
|
Total assets
|
|
$
|
14,255,967
|
|
|
$
|
9,764,238
|
|
|
$
|
14,255,967
|
|
|
$
|
9,764,238
|
|
Loans receivable
|
|
|
10,286,193
|
|
|
|
7,112,291
|
|
|
|
10,286,193
|
|
|
|
7,112,291
|
|
Allowance for loan losses
|
|
|
111,620
|
|
|
|
76,370
|
|
|
|
111,620
|
|
|
|
76,370
|
|
Total deposits
|
|
|
10,448,770
|
|
|
|
6,840,293
|
|
|
|
10,448,770
|
|
|
|
6,840,293
|
|
Total stockholders equity
|
|
|
2,206,716
|
|
|
|
1,296,018
|
|
|
|
2,206,716
|
|
|
|
1,296,018
|
|
Net income
|
|
|
14,821
|
|
|
|
43,620
|
|
|
|
111,774
|
|
|
|
128,556
|
|
Basic earnings per share
|
|
|
0.10
|
|
|
|
0.31
|
|
|
|
0.78
|
|
|
|
0.92
|
|
Diluted earnings per share
|
|
|
0.10
|
|
|
|
0.31
|
|
|
|
0.78
|
|
|
|
0.91
|
|
Annualized net interest margin FTE
|
|
|
4.40
|
%
|
|
|
4.86
|
%
|
|
|
4.53
|
%
|
|
|
4.83
|
%
|
Efficiency ratio
|
|
|
53.77
|
|
|
|
39.41
|
|
|
|
43.92
|
|
|
|
38.16
|
|
Annualized return on average assets
|
|
|
0.54
|
|
|
|
1.81
|
|
|
|
1.41
|
|
|
|
1.81
|
|
Annualized return on average common equity
|
|
|
3.88
|
|
|
|
13.62
|
|
|
|
10.33
|
|
|
|
13.83
|
|
54
Overview
The Companys third quarter earnings were significantly impacted by Hurricane Irma which made initial landfall in the Florida Keys and a
second landfall just south of Naples, Florida, as a Category 4 hurricane on September 10, 2017. While the total impact of this hurricane on Home BancShares financial condition and results of operation may not be known for some time, the
Company has included in third quarter earnings, certain charges, including the establishment of reserves, related to the hurricane. Based on initial assessments of the potential credit impact and damage to the approximately $2.41 billion in
loans receivable we have in the disaster area, the Company has accrued $33.4 million of
pre-tax
hurricane expenses. The $33.4 million of hurricane expenses include the following items:
$32.9 million to establish a storm-related provision for loan losses and a $556,000 charge related to direct damage expenses incurred through September 30, 2017.
Results of Operations for Three Months Ended September 30, 2017 and 2016
Our net income decreased $28.8 million, or 66.0%, to $14.8 million for the three-month period ended September 30, 2017, from
$43.6 million for the same period in 2016. On a diluted earnings per share basis, our earnings were $0.10 per share and $0.31 per share for the three-month periods ended September 30, 2017 and 2016, respectively. Excluding the
$51.7 million of merger expenses and hurricane expenses, net income was $46.4 million, and diluted earnings per share was $0.32 per share for the three months ended September 30, 2017. Excluding the $3.8 million of FDIC loss
share
buy-out
expense, net income was $46.0 million, and diluted earnings per share for the three months ended September 30, 2016 was $0.33 per share. Net income excluding merger expenses, hurricane
expenses and FDIC loss share
buy-out
expense for the third quarter of 2017 increased $489,000 when compared to the third quarter of 2016. This increase is primarily associated with additional net interest
income largely resulting from our acquisitions and our organic loan growth plus a decrease in the
non-hurricane
related provision for loan losses in third quarter of 2017 when compared to the same period in
2016. These improvements were partially offset by an increase in the costs associated with the asset growth plus an increase in interest expense related to the issuance of $300 million of subordinated notes during the second quarter of 2017
when compared to the same period in 2016.
Our GAAP net interest margin decreased from 4.86% for the three-month period ended
September 30, 2016 to 4.40% for the three-month period ended September 30, 2017. The yield on loans was 5.66% and 5.84% for the three months ended September 30, 2017 and 2016, respectively. For the three months ended
September 30, 2017 and 2016, we recognized $7.2 million and $11.9 million, respectively, in total net accretion for acquired loans and deposits. The
non-GAAP
margin excluding accretion
income was 4.07% and 4.25% for the three months ended September 30, 2017 and 2016, respectively. Additionally, the
non-GAAP
yield on loans excluding accretion income was 5.24% and 5.10% for the three
months ended September 30, 2017 and 2016, respectively. Other than the previously mentioned reduction in net accretion income for acquired loans and deposits, the net interest margin was negatively impacted by our April 2017 issuance of
$300 million of 5.625%
fixed-to-floating
rate subordinated notes, which added approximately $4.3 million of interest expense when compared to the same quarter
in 2016.
Our efficiency ratio was 53.77% for the three months ended September 30, 2017, compared to 39.41% for the same period in
2016. For the third quarter of 2017, our core efficiency ratio was 39.12%, which increased from the 36.51% reported for third quarter of 2016. The core efficiency ratio is a
non-GAAP
measure and is calculated
by dividing
non-interest
expense less amortization of core deposit intangibles by the sum of net interest income on a tax equivalent basis and
non-interest
income
excluding
non-core
items such as merger expenses, FDIC loss share
buy-out
expense and/or gains and losses.
Our annualized return on average assets was 0.54% for the three months ended September 30, 2017, compared to 1.81% for the same period in
2016. Excluding merger expenses, hurricane expenses and FDIC loss share
buy-out
expense, our annualized return on average assets was 1.70% for the three months ended September 30, 2017, compared to 1.90%
for the same period in 2016. Our annualized return on average common equity was 3.88% for the three months ended September 30, 2017, compared to 13.62% for the same period in 2016. Excluding merger expenses, hurricane expenses and FDIC loss
share
buy-out
expense, our annualized return on average common equity was 12.17% for the three months ended September 30, 2017, compared to 14.35% for the same period in 2016.
55
Results of Operations for Nine Months Ended September 30, 2017 and 2016
Our net income decreased $16.8 million, or 13.1%, to $111.8 million for the nine-month period ended September 30, 2017, from
$128.6 million for the same period in 2016. On a diluted earnings per share basis, our earnings were $0.78 per share and $0.91 per share for the nine-month periods ended September 30, 2017 and 2016, respectively. Excluding the
$3.8 million of gain on acquisition, $25.7 million of merger expenses, and $33.4 million of hurricane expenses, net income was $144.5 million and diluted earnings per share was $1.00 per share for the nine months ended
September 30, 2017. Excluding the $3.8 million of FDIC loss share
buy-out
expense, net income was $130.9 million and diluted earnings per share for the nine months ended September 30, 2016
was $0.93 per share. The $13.6 million increase in net income, excluding gain on acquisitions, merger expenses, hurricane expenses and FDIC loss share
buy-out
expense, is primarily associated with
additional net interest income largely resulting from our acquisitions and our organic loan growth plus a decrease in the
non-hurricane
related provision for loan losses in first nine months of 2017, growth in
non-interest
income and the reduced amortization of the indemnification asset when compared to the same period in 2016. These improvements were partially offset by an increase in the costs associated with the
asset growth plus an increase in interest expense related to the issuance of $300 million of subordinated notes during the second quarter of 2017 when compared to the same period in 2016.
Our GAAP net interest margin decreased from 4.83% for the nine-month period ended September 30, 2016 to 4.53% for the nine-month period
ended September 30, 2017. The yield on loans was 5.70% and 5.82% for the nine months ended September 30, 2017 and 2016, respectively. For the nine months ended September 30, 2017 and 2016, we recognized $23.3 million and
$33.7 million, respectively, in total net accretion for acquired loans and deposits. The
non-GAAP
margin excluding accretion income was 4.16% and 4.24% for the nine months ended September 30,
2017 and 2016, respectively. Additionally, the
non-GAAP
yield on loans excluding accretion income was 5.24% and 5.09% for the nine months ended September 30, 2017 and 2016, respectively. Other than
the previously mentioned reduction in net accretion income for acquired loans and deposits, the net interest margin was negatively impacted by our April 2017 issuance of $300 million of 5.625%
fixed-to-floating
rate subordinated notes, which added approximately $8.5 million of interest expense when compared to the same period in 2016, and by our strategic decision to keep excess cash liquidity
on the books during the first nine months of 2017.
Our efficiency ratio was 43.92% for the nine months ended September 30, 2017,
compared to 38.16% for the same period in 2016. For the first nine months of 2017, our core efficiency ratio was 37.79%, which increased from the 36.75% reported for first nine months of 2016. The core efficiency ratio is a
non-GAAP
measure and is calculated by dividing
non-interest
expense less amortization of core deposit intangibles by the sum of net interest income on a tax equivalent basis
and
non-interest
income excluding
non-core
items such as merger expenses, hurricane damage expense, FDIC loss share
buy-out
expense and/or gains and losses.
Our annualized return on average assets was 1.41% for the nine months ended September 30, 2017,
compared to 1.81% for the same period in 2016. Excluding gain on acquisitions, merger expenses, hurricane expenses and FDIC loss share
buy-out
expense, our annualized return on average assets was 1.82% for the
nine months ended September 30, 2017, compared to 1.84% for the same period in 2016. Our annualized return on average common equity was 10.33% for the nine months ended September 30, 2017, compared to 13.83% for the same period in 2016.
Excluding gain on acquisitions, merger expenses, hurricane expenses and FDIC loss share
buy-out
expense, our annualized return on average common equity was 13.36% for the nine months ended September 30,
2017, compared to 14.08% for the same period in 2016.
Financial Condition as of and for the Period Ended September 30, 2017
and December 31, 2016
Our total assets as of September 30, 2017 increased $4.45 billion to $14.26 billion from
the $9.81 billion reported as of December 31, 2016. Our loan portfolio increased $2.90 billion to $10.29 billion as of September 30, 2017, from $7.39 billion as of December 31, 2016. This increase is primarily a
result of our acquisitions since December 31, 2016. Stockholders equity increased $879.2 million to $2.21 billion as of September 30, 2017, compared to $1.33 billion as of December 31, 2016. The increase in
stockholders equity is primarily associated with the $77.5 million and $742.3 million of common stock issued to the GHI and Stonegate shareholders, respectively, plus the $70.5 million increase in retained earnings combined with
$3.5 million of comprehensive income and $5.0 million of share-based compensation offset by the repurchase of $19.5 million of our common stock during the first nine months of 2017. The annualized improvement in stockholders
equity for the first nine months of 2017, excluding the $742.3 million and $77.5 million of common stock issued to the Stonegate and GHI shareholders, respectively, was 6.0%.
56
As of September 30, 2017, our
non-performing
loans
increased to $64.0 million, or 0.62%, of total loans from $63.1 million, or 0.85%, of total loans as of December 31, 2016. The allowance for loan losses as a percentage of
non-performing
loans
increased to 174.47% as of September 30, 2017, compared to 126.74% as of December 31, 2016.
Non-performing
loans from our Arkansas franchise were $24.3 million at September 30, 2017
compared to $28.5 million as of December 31, 2016.
Non-performing
loans from our Florida franchise were $39.6 million at September 30, 2017 compared to $34.0 million as of
December 31, 2016.
Non-performing
loans from our Alabama franchise were $83,000 at September 30, 2017 compared to $656,000 as of December 31, 2016. There were no
non-performing
loans from our Centennial CFG franchise.
As of September 30, 2017, our
non-performing
assets increased to $85.7 million, or 0.60%, of total assets from $79.1 million, or 0.81%, of total assets as of December 31, 2016.
Non-performing
assets from our Arkansas franchise were $36.4 million at September 30, 2017 compared to $41.0 million as of December 31, 2016.
Non-performing
assets from our Florida franchise were $48.6 million at September 30, 2017 compared to $36.8 million as of December 31, 2016.
Non-performing
assets from our Alabama franchise were $724,000 at September 30, 2017 compared to $1.2 million as of December 31, 2016. There were no
non-performing
assets from our Centennial CFG franchise.
Critical Accounting Policies
Overview.
We prepare our consolidated financial statements based on the selection of certain accounting policies, generally accepted
accounting principles and customary practices in the banking industry. These policies, in certain areas, require us to make significant estimates and assumptions. Our accounting policies are described in detail in the notes to our consolidated
financial statements included as part of this document.
We consider a policy critical if (i) the accounting estimate requires
assumptions about matters that are highly uncertain at the time of the accounting estimate; and (ii) different estimates that could reasonably have been used in the current period, or changes in the accounting estimate that are reasonably
likely to occur from period to period, would have a material impact on our financial statements. Using these criteria, we believe that the accounting policies most critical to us are those associated with our lending practices, including the
accounting for the allowance for loan losses, foreclosed assets, investments, intangible assets, income taxes and stock options.
Investments
Available-for-sale.
Securities
available-for-sale
are reported at fair value with unrealized holding gains and losses reported as a separate component of stockholders equity and other comprehensive
income (loss), net of taxes. Securities that are held as
available-for-sale
are used as a part of our asset/liability management strategy. Securities that may be sold in
response to interest rate changes, changes in prepayment risk, the need to increase regulatory capital, and other similar factors are classified as
available-for-sale.
Investments
Held-to-Maturity
. Securities
held-to-maturity,
which include any security for which we have the positive intent and ability to hold until maturity, are reported at historical cost adjusted for
amortization of premiums and accretion of discounts. Premiums and discounts are amortized and accreted, respectively, to interest income using the constant yield method over the period to maturity.
Loans Receivable and Allowance for Loan Losses.
Except for loans acquired during our acquisitions, substantially all of our loans
receivable are reported at their outstanding principal balance adjusted for any charge-offs, as it is managements intent to hold them for the foreseeable future or until maturity or payoff, except for mortgage loans held for sale. Interest
income on loans is accrued over the term of the loans based on the principal balance outstanding.
The allowance for loan losses is
established through a provision for loan losses charged against income. The allowance represents an amount that, in managements judgment, will be adequate to absorb probable credit losses on identifiable loans that may become uncollectible and
probable credit losses inherent in the remainder of the loan portfolio. The amounts of provisions for loan losses are based on managements analysis and evaluation of the loan portfolio for identification of problem credits, internal and
external factors that may affect collectability, relevant credit exposure, particular risks inherent in different kinds of lending, current collateral values and other relevant factors.
57
The allowance consists of allocated and general components. The allocated component relates to
loans that are classified as impaired. For those loans that are classified as impaired, an allowance is established when the discounted cash flows, collateral value or observable market price of the impaired loan is lower than the carrying value of
that loan. The general component covers
non-classified
loans and is based on historical
charge-off
experience and expected loss given default derived from the
banks internal risk rating process. Other adjustments may be made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating
data.
Loans considered impaired, under FASB ASC
310-10-35,
are loans for which, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual
terms of the loan agreement. The aggregate amount of impairment of loans is utilized in evaluating the adequacy of the allowance for loan losses and amount of provisions thereto. Losses on impaired loans are charged against the allowance for loan
losses when in the process of collection it appears likely that such losses will be realized. The accrual of interest on impaired loans is discontinued when, in managements opinion the collection of interest is doubtful, or generally when
loans are 90 days or more past due. When accrual of interest is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are
returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
Groups of loans with similar risk characteristics are collectively evaluated for impairment based on the groups historical loss
experience adjusted for changes in trends, conditions and other relevant factors that affect repayment of the loans.
Loans are placed on
non-accrual
status when management believes that the borrowers financial condition, after giving consideration to economic and business conditions and collection efforts, is such that collection of interest is
doubtful, or generally when loans are 90 days or more past due. Loans are charged against the allowance for loan losses when management believes that the collectability of the principal is unlikely. Accrued interest related to
non-accrual
loans is generally charged against the allowance for loan losses when accrued in prior years and reversed from interest income if accrued in the current year. Interest income on
non-accrual
loans may be recognized to the extent cash payments are received, although the majority of payments received are usually applied to principal.
Non-accrual
loans
are generally returned to accrual status when principal and interest payments are less than 90 days past due, the customer has made required payments for at least six months, and we reasonably expect to collect all principal and interest.
Acquisition Accounting and Acquired Loans.
We account for our acquisitions under FASB ASC Topic 805,
Business Combinations
,
which requires the use of the acquisition method of accounting. All identifiable assets acquired, including loans, are recorded at fair value. No allowance for loan losses related to the acquired loans is recorded on the acquisition date as the fair
value of the purchased loans incorporates assumptions regarding credit risk. All purchased loans are recorded at fair value in accordance with the fair value methodology prescribed in FASB ASC Topic 820,
Fair Value Measurements
. The fair
value estimates associated with the loans include estimates related to expected prepayments and the amount and timing of undiscounted expected principal, interest and other cash flows.
Over the life of the purchased credit impaired loans, we continue to estimate cash flows expected to be collected on pools of loans sharing
common risk characteristics, which are treated in the aggregate when applying various valuation techniques. We evaluate at each balance sheet date whether the present value of our pools of loans determined using the effective interest rates has
decreased and if so, recognize a provision for loan loss in its consolidated statement of income. For any increases in cash flows expected to be collected, we adjust the amount of accretable yield recognized on a prospective basis over the
pools remaining life.
Foreclosed Assets Held for Sale.
Real estate and personal properties acquired through or in lieu of
loan foreclosure are to be sold and are initially recorded at fair value at the date of foreclosure, establishing a new cost basis. Valuations are periodically performed by management, and the real estate and personal properties are carried at fair
value less costs to sell. Gains and losses from the sale of other real estate and personal properties are recorded in
non-interest
income, and expenses used to maintain the properties are included in
non-interest
expenses.
58
Intangible Assets.
Intangible assets consist of goodwill and core deposit intangibles.
Goodwill represents the excess purchase price over the fair value of net assets acquired in business acquisitions. The core deposit intangible represents the excess intangible value of acquired deposit customer relationships as determined by
valuation specialists. The core deposit intangibles are being amortized over 48 to 121 months on a straight-line basis. Goodwill is not amortized but rather is evaluated for impairment on at least an annual basis. We perform an annual impairment
test of goodwill and core deposit intangibles as required by FASB ASC 350,
IntangiblesGoodwill and Other,
in the fourth quarter.
Income Taxes.
We account for income taxes in accordance with income tax accounting guidance (ASC 740,
Income Taxes
). The income
tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable
income or excess of deductions over revenues. We determine deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the
book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur.
Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are recognized if
it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms
examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the
more-likely-than-not
recognition threshold is
initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The
determination of whether or not a tax position has met the
more-likely-than-not
recognition threshold considers the facts, circumstances and information available at the reporting date and is subject to the
managements judgment. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.
Both we and our subsidiary file consolidated tax returns. Our subsidiary provides for income taxes on a separate return basis, and remits to
us amounts determined to be currently payable.
Stock Compensation.
In accordance with FASB ASC 718,
CompensationStock
Compensation,
and FASB ASC
505-50,
Equity-Based Payments to
Non-Employees
, the fair value of each option award is estimated on the date of grant. We recognize
compensation expense for the grant-date fair value of the option award over the vesting period of the award.
Acquisitions
Acquisition of Stonegate Bank
On September 26, 2017, the Company completed the acquisition of all of the issued and outstanding shares of common stock of Stonegate Bank
(Stonegate), and merged Stonegate into Centennial. The Company paid a purchase price to the Stonegate shareholders of approximately $792.4 million for the Stonegate acquisition. Under the terms of the merger agreement, shareholders
of Stonegate received 30,863,658 shares of HBI common stock valued at approximately $742.3 million plus approximately $50.1 million in cash in exchange for all outstanding shares of Stonegate common stock. In addition, the holders of
outstanding stock options of Stonegate received approximately $27.6 million in cash in connection with the cancellation of their options immediately before the acquisition closed, for a total transaction value of approximately
$820.0 million.
Including the effects of the known purchase accounting adjustments, as of acquisition date, Stonegate had
approximately $2.89 billion in total assets, $2.37 billion in loans and $2.53 billion in customer deposits. Stonegate formerly operated its banking business from 24 locations in key Florida markets with significant presence in Broward
and Sarasota counties.
The purchase price allocation and certain fair value measurements remain preliminary due to the timing of the
acquisition. The Company will continue to review the estimated fair values of loans, deposits and intangible assets, and to evaluate the assumed tax positions and contingencies.
59
Through our recently completed acquisition and merger of Stonegate Bank into Centennial, we
maintain a customer relationship to handle the accounts for Cubas diplomatic missions at the United Nations and for the Cuban Interests Section (now the Cuban Embassy) in Washington, D.C. This relationship was established in May 2015 pursuant
to a special license granted to Stonegate Bank by the U.S. Treasury Departments Office of Foreign Assets Control in connection with the reestablishment of diplomatic relations between the U.S. and Cuba. In July 2015, Stonegate Bank established
a correspondent banking relationship with Banco Internacional de Comercio, S.A. in Havana, Cuba.
Acquisition of Giant Holdings,
Inc.
On February 23, 2017, the Company completed its acquisition of Giant Holdings, Inc. (GHI), parent company of
Landmark Bank, N.A. (Landmark), pursuant to a previously announced definitive agreement and plan of merger whereby GHI merged with and into HBI and, immediately thereafter, Landmark merged with and into Centennial. The Company paid a
purchase price to the GHI shareholders of approximately $96.0 million for the GHI acquisition. Under the terms of the agreement, shareholders of GHI received 2,738,038 shares of its common stock valued at approximately $77.5 million as of
February 23, 2017, plus approximately $18.5 million in cash in exchange for all outstanding shares of GHI common stock.
GHI
formerly operated six branch locations in the Ft. Lauderdale, Florida area. Including the effects of the purchase accounting adjustments, as of acquisition date, GHI had approximately $398.1 million in total assets, $327.8 million in loans
after $8.1 million of loan discounts, and $304.0 million in deposits.
Acquisition of The Bank of Commerce
On February 28, 2017, the Company completed its previously announced acquisition of all of the issued and outstanding shares of common
stock of The Bank of Commerce, a Florida state-chartered bank that operated in the Sarasota, Florida area (BOC), pursuant to an acquisition agreement, dated December 1, 2016, by and between the Company and Bank of Commerce Holdings,
Inc. (BCHI), parent company of BOC. The Company merged BOC with and into Centennial effective as of the close of business on February 28, 2017.
The acquisition of BOC was conducted in accordance with the provisions of Section 363 of the United States Bankruptcy Code (the
Bankruptcy Code) pursuant to a voluntary petition for relief under Chapter 11 of the Bankruptcy Code filed by BCHI with the United States Bankruptcy Court for the Middle District of Florida (the Bankruptcy Court). The sale of
BOC by BCHI was subject to certain bidding procedures approved by the Bankruptcy Court. On November 14, 2016, the Company submitted an initial bid to purchase the outstanding shares of BOC in accordance with the bidding procedures approved by
the Bankruptcy Court. An auction was subsequently conducted on November 16, 2016, and the Company was deemed to be the successful bidder. The Bankruptcy Court entered a final order on December 9, 2016 approving the sale of BOC to the
Company pursuant to and in accordance with the acquisition agreement.
Under the terms of the acquisition agreement, the Company paid an
aggregate of approximately $4.2 million in cash for the acquisition, which included the purchase of all outstanding shares of BOC common stock, the discounted purchase of certain subordinated debentures issued by BOC from the existing holders
of the subordinated debentures, and an expense reimbursement to BCHI for approved administrative claims in connection with the bankruptcy proceeding.
BOC formerly operated three branch locations in the Sarasota, Florida area. Including the effects of the purchase accounting adjustments, as
of acquisition date, BOC had approximately $178.1 million in total assets, $118.5 million in loans after $5.8 million of loan discounts, and $139.8 million in deposits.
60
Termination of Remaining Loss-Share Agreements
Effective July 27, 2016, we reached an agreement terminating our remaining loss-share agreements with the FDIC. Under the terms of the
agreement, Centennial made a net payment of $6.6 million to the FDIC as consideration for the early termination of the loss share agreements, and all rights and obligations of Centennial and the FDIC under the loss share agreements, including
the clawback provisions and the settlement of loss share and expense reimbursement claims, have been resolved and terminated. This transaction with the FDIC created a
one-time
acceleration of the
indemnification asset plus the negotiated settlement for the
true-up
liability, and resulted in a negative $3.8 million
pre-tax
financial impact to the third
quarter of 2016. It has and will create a positive financial impact to earnings of approximately $1.5 million annually on a
pre-tax
basis through the year 2020 as a result of the
one-time
acceleration of the indemnification asset amortization.
Future Acquisitions
In our continuing evaluation of our growth plans, we believe properly priced bank acquisitions can complement our organic growth and
de
novo
branching growth strategies. In the near term, our principal acquisition focus will be to continue to expand our presence in Arkansas, Florida and Alabama and into other contiguous markets through pursuing both
non-FDIC-assisted
and FDIC-assisted bank acquisitions. However, as financial opportunities in other market areas arise, we may expand into those areas.
We will continue evaluating all types of potential bank acquisitions to determine what is in the best interest of our Company. Our goal in
making these decisions is to maximize the return to our investors.
Branches
As opportunities arise, we will continue to open new (commonly referred to as
de novo
) branches in our current markets and in other
attractive market areas.
As a result of our continued focus on efficiency, during the fourth quarter of 2017, we plan to close a branch
location in Daphne, Alabama. As a result of Hurricane Irma, our Naples, Florida branch location will remain closed until further notice.
During the third quarter of 2017, the Company acquired a total of 24 branches through the acquisition of Stonegate. In an effort to achieve
efficiencies primarily from the Stonegate acquisition, the Company plans to close or merge several Florida locations during 2018. During the remainder of 2017, we may announce additional strategic consolidations where it improves efficiency in
certain markets.
As of September 30, 2017, we had 76 branches in Arkansas, 89 branches in Florida, 6 branches in Alabama and one
branch in New York City.
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Results of Operations
For the Three and Nine Months Ended September 30, 2017 and 2016
Our net income decreased $28.8 million, or 66.0%, to $14.8 million for the three-month period ended September 30, 2017, from
$43.6 million for the same period in 2016. On a diluted earnings per share basis, our earnings were $0.10 per share and $0.31 per share for the three-month periods ended September 30, 2017 and 2016, respectively. Excluding the
$51.7 million of merger expenses and hurricane expenses, net income was $46.4 million, and diluted earnings per share was $0.32 per share for the three months ended September 30, 2017. Excluding the $3.8 million of FDIC loss
share
buy-out
expense, net income was $46.0 million, and diluted earnings per share for the three months ended September 30, 2016 was $0.33 per share. Net income excluding merger expenses, hurricane
expenses and FDIC loss share
buy-out
expense for the third quarter of 2017 increased $489,000 when compared to the third quarter of 2016. This increase is primarily associated with additional net interest
income largely resulting from our acquisitions and our organic loan growth plus a decrease in the
non-hurricane
related provision for loan losses in third quarter of 2017 when compared to the same period in
2016. These improvements were partially offset by an increase in the costs associated with the asset growth plus an increase in interest expense related to the issuance of $300 million of subordinated notes during the second quarter of 2017
when compared to the same period in 2016.
Our net income decreased $16.8 million, or 13.1%, to $111.8 million for the
nine-month period ended September 30, 2017, from $128.6 million for the same period in 2016. On a diluted earnings per share basis, our earnings were $0.78 per share and $0.91 per share for the nine-month periods ended September 30,
2017 and 2016, respectively. Excluding the $3.8 million of gain on acquisition, $25.7 million of merger expenses, and $33.4 million of hurricane expenses, net income was $144.5 million and diluted earnings per share was $1.00 per
share for the nine months ended September 30, 2017. Excluding the $3.8 million of FDIC loss share
buy-out
expense, net income was $130.9 million and diluted earnings per share for the nine
months ended September 30, 2016 was $0.93 per share. The $13.6 million increase in net income, excluding gain on acquisitions, merger expenses, hurricane expenses and FDIC loss share
buy-out
expense,
is primarily associated with additional net interest income largely resulting from our acquisitions and our organic loan growth plus a decrease in the
non-hurricane
related provision for loan losses in first
nine months of 2017, growth in
non-interest
income and the reduced amortization of the indemnification asset when compared to the same period in 2016. These improvements were partially offset by an increase in
the costs associated with the asset growth plus an increase in interest expense related to the issuance of $300 million of subordinated notes during the second quarter of 2017 when compared to the same period in 2016.
Net Interest Income
Net interest income, our principal source of earnings, is the difference between the interest income generated by earning assets and the total
interest cost of the deposits and borrowings obtained to fund those assets. Factors affecting the level of net interest income include the volume of earning assets and interest-bearing liabilities, yields earned on loans and investments, rates paid
on deposits and other borrowings, the level of
non-performing
loans and the amount of
non-interest-bearing
liabilities supporting earning assets. Net interest income is
analyzed in the discussion and tables below on a fully taxable equivalent basis. The adjustment to convert certain income to a fully taxable equivalent basis consists of dividing
tax-exempt
income by one minus
the combined federal and state income tax rate (39.225% for the three and nine-month periods ended September 30, 2017 and 2016).
The
Federal Reserve Board sets various benchmark rates, including the Federal Funds rate, and thereby influences the general market rates of interest, including the deposit and loan rates offered by financial institutions. The Federal Funds target rate,
which is the cost to banks of immediately available overnight funds, was lowered on December 16, 2008 to a historic low of 0.25% to 0%, where it remained until December 16, 2015, when the target rate was increased slightly to 0.50% to
0.25%. Since December 31, 2016, the Federal Funds target rate has increased 75 basis points and is currently at 1.25% to 1.00%.
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Our GAAP net interest margin decreased from 4.86% for the three-month period ended
September 30, 2016 to 4.40% for the three-month period ended September 30, 2017. The yield on loans was 5.66% and 5.84% for the three months ended September 30, 2017 and 2016, respectively. For the three months ended
September 30, 2017 and 2016, we recognized $7.2 million and $11.9 million, respectively, in total net accretion for acquired loans and deposits. The
non-GAAP
margin excluding accretion
income was 4.07% and 4.25% for the three months ended September 30, 2017 and 2016, respectively. Additionally, the
non-GAAP
yield on loans excluding accretion income was 5.24% and 5.10% for the three
months ended September 30, 2017 and 2016, respectively. Other than the previously mentioned reduction in net accretion income for acquired loans and deposits, the net interest margin was negatively impacted by our April 2017 issuance of
$300 million of 5.625%
fixed-to-floating
rate subordinated notes, which added approximately $4.3 million of interest expense when compared to the same quarter
in 2016.
Our GAAP net interest margin decreased from 4.83% for the nine-month period ended September 30, 2016 to 4.53% for the
nine-month period ended September 30, 2017. The yield on loans was 5.70% and 5.82% for the nine months ended September 30, 2017 and 2016, respectively. For the nine months ended September 30, 2017 and 2016, we recognized
$23.3 million and $33.7 million, respectively, in total net accretion for acquired loans and deposits. The
non-GAAP
margin excluding accretion income was 4.16% and 4.24% for the nine months
ended September 30, 2017 and 2016, respectively. Additionally, the
non-GAAP
yield on loans excluding accretion income was 5.24% and 5.09% for the nine months ended September 30, 2017 and 2016,
respectively. Other than the previously mentioned reduction in net accretion income for acquired loans and deposits, the net interest margin was negatively impacted by our April 2017 issuance of $300 million of 5.625%
fixed-to-floating
rate subordinated notes, which added approximately $8.5 million of interest expense when compared to the same period in 2016, and by our strategic
decision to keep excess cash liquidity on the books during the first nine months of 2017.
Net interest income on a fully taxable
equivalent basis increased $3.1 million, or 2.93%, to $108.6 million for the three-month period ended September 30, 2017, from $105.5 million for the same period in 2016. This increase in net interest income for the three-month
period ended September 30, 2017 was the result of a $12.5 million increase in interest income on a fully taxable equivalent basis offset by a $9.4 million increase in interest expense. The $12.5 million increase in interest
income was primarily the result of a higher level of earning assets offset by lower yields on our interest earning assets, specifically on our loans. The higher level of earning assets resulted in an increase in interest income of approximately
$14.2 million. The lower yield, primarily caused by a $4.5 million reduction in loan accretion income, resulted in an approximately $1.7 million decrease in interest income. The $9.4 million increase in interest expense for the
three-month period ended September 30, 2017, is primarily the result of an increase in interest bearing liabilities repricing in a rising interest rate environment combined with a higher level of our interest bearing liabilities. The repricing
of our interest bearing liabilities in a rising interest rate environment resulted in an approximately $6.2 million increase in interest expense. The higher level of our interest bearing liabilities, primarily subordinated debentures, resulted
in an increase in interest expense of approximately $3.2 million.
Net interest income on a fully taxable equivalent basis increased
$16.3 million, or 5.26%, to $324.8 million for the nine-month period ended September 30, 2017, from $308.6 million for the same period in 2016. This increase in net interest income on a fully taxable equivalent basis for the
nine-month period ended September 30, 2017 was the result of a $36.2 million increase in interest income offset by a $19.9 million increase in interest expense. The $36.2 million increase in interest income was primarily the
result of a higher level of earning assets offset by lower yields on our interest earning assets, specifically on our loans. The higher level of earning assets resulted in an increase in interest income of approximately $39.4 million. The lower
yield, primarily caused by a $9.6 million reduction in loan accretion income, resulted in an approximately $3.2 million decrease in interest income. The $19.9 million increase in interest expense for the nine-month period ended
September 30, 2017, is primarily the result of an increase in interest bearing liabilities repricing in a rising interest rate environment combined with a higher level of our interest bearing liabilities. The repricing of our interest bearing
liabilities in a rising interest rate environment resulted in an approximately $13.3 million increase in interest expense. The higher level of our interest bearing liabilities, primarily subordinated debentures, resulted in an increase in
interest expense of approximately $6.6 million.
Additional information and analysis for our net interest margin can be found in
Tables 18 through 20 of our
Non-GAAP
Financial Measurements section of the Management Discussion and Analysis.
63
Tables 2 and 3 reflect an analysis of net interest income on a fully taxable equivalent basis for
the three and nine-month periods ended September 30, 2017 and 2016, as well as changes in fully taxable equivalent net interest margin for the three and nine-month periods ended September 30, 2017 compared to the same periods in 2016.
Table 2: Analysis of Net Interest Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
(Dollars in thousands)
|
|
Interest income
|
|
$
|
123,913
|
|
|
$
|
111,375
|
|
|
$
|
361,270
|
|
|
$
|
325,149
|
|
Fully taxable equivalent adjustment
|
|
|
1,846
|
|
|
|
1,869
|
|
|
|
5,873
|
|
|
|
5,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income fully taxable equivalent
|
|
|
125,759
|
|
|
|
113,244
|
|
|
|
367,143
|
|
|
|
330,965
|
|
Interest expense
|
|
|
17,144
|
|
|
|
7,722
|
|
|
|
42,334
|
|
|
|
22,398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income fully taxable equivalent
|
|
$
|
108,615
|
|
|
$
|
105,522
|
|
|
$
|
324,809
|
|
|
$
|
308,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yield on earning assets fully taxable equivalent
|
|
|
5.09
|
%
|
|
|
5.21
|
%
|
|
|
5.12
|
%
|
|
|
5.18
|
%
|
Cost of interest-bearing liabilities
|
|
|
0.92
|
|
|
|
0.46
|
|
|
|
0.78
|
|
|
|
0.45
|
|
Net interest spread fully taxable equivalent
|
|
|
4.17
|
|
|
|
4.75
|
|
|
|
4.34
|
|
|
|
4.73
|
|
Net interest margin fully taxable equivalent
|
|
|
4.40
|
|
|
|
4.86
|
|
|
|
4.53
|
|
|
|
4.83
|
|
Table 3: Changes in Fully Taxable Equivalent Net Interest Margin
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
2017 vs. 2016
|
|
|
Nine Months Ended
September 30,
2017 vs. 2016
|
|
|
|
(In thousands)
|
|
Increase (decrease) in interest income due to change in earning assets
|
|
$
|
14,194
|
|
|
$
|
39,390
|
|
Increase (decrease) in interest income due to change in earning asset yields
|
|
|
(1,679
|
)
|
|
|
(3,212
|
)
|
(Increase) decrease in interest expense due to change in interest-bearing liabilities
|
|
|
(3,212
|
)
|
|
|
(6,610
|
)
|
(Increase) decrease in interest expense due to change in interest rates paid on interest-bearing
liabilities
|
|
|
(6,210
|
)
|
|
|
(13,326
|
)
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in net interest income
|
|
$
|
3,093
|
|
|
$
|
16,242
|
|
|
|
|
|
|
|
|
|
|
64
Table 4 shows, for each major category of earning assets and interest-bearing liabilities, the
average amount outstanding, the interest income or expense on that amount and the average rate earned or expensed for the three and nine-month periods ended September 30, 2017 and 2016, respectively. The table also shows the average rate earned
on all earning assets, the average rate expensed on all interest-bearing liabilities, the net interest spread and the net interest margin for the same periods. The analysis is presented on a fully taxable equivalent basis.
Non-accrual
loans were included in average loans for the purpose of calculating the rate earned on total loans.
Table 4: Average Balance Sheets and Net Interest Income Analysis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
Average
Balance
|
|
|
Income /
Expense
|
|
|
Yield /
Rate
|
|
|
Average
Balance
|
|
|
Income /
Expense
|
|
|
Yield /
Rate
|
|
|
|
(Dollars in thousands)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing balances due from banks
|
|
$
|
180,368
|
|
|
$
|
538
|
|
|
|
1.18
|
%
|
|
$
|
110,993
|
|
|
$
|
117
|
|
|
|
0.42
|
%
|
Federal funds sold
|
|
|
878
|
|
|
|
3
|
|
|
|
1.36
|
|
|
|
1,136
|
|
|
|
2
|
|
|
|
0.70
|
|
Investment securities taxable
|
|
|
1,326,117
|
|
|
|
7,071
|
|
|
|
2.12
|
|
|
|
1,177,284
|
|
|
|
5,583
|
|
|
|
1.89
|
|
Investment securities
non-taxable
|
|
|
348,920
|
|
|
|
4,908
|
|
|
|
5.58
|
|
|
|
328,979
|
|
|
|
4,407
|
|
|
|
5.33
|
|
Loans receivable
|
|
|
7,938,716
|
|
|
|
113,239
|
|
|
|
5.66
|
|
|
|
7,027,634
|
|
|
|
103,135
|
|
|
|
5.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets
|
|
|
9,794,999
|
|
|
$
|
125,759
|
|
|
|
5.09
|
|
|
|
8,646,026
|
|
|
|
113,244
|
|
|
|
5.21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-earning
assets
|
|
|
1,058,560
|
|
|
|
|
|
|
|
|
|
|
|
956,337
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
10,853,559
|
|
|
|
|
|
|
|
|
|
|
$
|
9,602,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings and interest-bearing transaction accounts
|
|
$
|
4,512,785
|
|
|
$
|
5,755
|
|
|
|
0.51
|
%
|
|
$
|
3,721,019
|
|
|
$
|
2,268
|
|
|
|
0.24
|
%
|
Time deposits
|
|
|
1,444,662
|
|
|
|
2,780
|
|
|
|
0.76
|
|
|
|
1,361,589
|
|
|
|
1,772
|
|
|
|
0.52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing deposits
|
|
|
5,957,447
|
|
|
|
8,535
|
|
|
|
0.57
|
|
|
|
5,082,608
|
|
|
|
4,040
|
|
|
|
0.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities sold under agreement to repurchase
|
|
|
135,855
|
|
|
|
232
|
|
|
|
0.68
|
|
|
|
118,183
|
|
|
|
142
|
|
|
|
0.48
|
|
FHLB and other borrowed funds
|
|
|
920,754
|
|
|
|
3,408
|
|
|
|
1.47
|
|
|
|
1,357,716
|
|
|
|
3,139
|
|
|
|
0.92
|
|
Subordinated debentures
|
|
|
358,347
|
|
|
|
4,969
|
|
|
|
5.50
|
|
|
|
60,826
|
|
|
|
401
|
|
|
|
2.62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities
|
|
|
7,372,403
|
|
|
|
17,144
|
|
|
|
0.92
|
|
|
|
6,619,333
|
|
|
|
7,722
|
|
|
|
0.46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest
bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest
bearing deposits
|
|
|
1,924,933
|
|
|
|
|
|
|
|
|
|
|
|
1,663,621
|
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
|
42,394
|
|
|
|
|
|
|
|
|
|
|
|
45,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
9,339,730
|
|
|
|
|
|
|
|
|
|
|
|
8,328,286
|
|
|
|
|
|
|
|
|
|
Stockholders equity
|
|
|
1,513,829
|
|
|
|
|
|
|
|
|
|
|
|
1,274,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
10,853,559
|
|
|
|
|
|
|
|
|
|
|
$
|
9,602,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest spread
|
|
|
|
|
|
|
|
|
|
|
4.17
|
%
|
|
|
|
|
|
|
|
|
|
|
4.75
|
%
|
Net interest income and margin
|
|
|
|
|
|
$
|
108,615
|
|
|
|
4.40
|
%
|
|
|
|
|
|
$
|
105,522
|
|
|
|
4.86
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65
Table 4: Average Balance Sheets and Net Interest Income Analysis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
Average
Balance
|
|
|
Income /
Expense
|
|
|
Yield /
Rate
|
|
|
Average
Balance
|
|
|
Income /
Expense
|
|
|
Yield /
Rate
|
|
|
|
(Dollars in thousands)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing balances due from banks
|
|
$
|
218,324
|
|
|
$
|
1,573
|
|
|
|
0.96
|
%
|
|
$
|
110,893
|
|
|
$
|
325
|
|
|
|
0.39
|
%
|
Federal funds sold
|
|
|
1,161
|
|
|
|
9
|
|
|
|
1.04
|
|
|
|
1,895
|
|
|
|
7
|
|
|
|
0.49
|
|
Investment securities taxable
|
|
|
1,231,619
|
|
|
|
18,983
|
|
|
|
2.06
|
|
|
|
1,174,998
|
|
|
|
16,178
|
|
|
|
1.84
|
|
Investment securities
non-taxable
|
|
|
347,578
|
|
|
|
14,506
|
|
|
|
5.58
|
|
|
|
333,336
|
|
|
|
13,616
|
|
|
|
5.46
|
|
Loans receivable
|
|
|
7,785,925
|
|
|
|
332,072
|
|
|
|
5.70
|
|
|
|
6,909,240
|
|
|
|
300,839
|
|
|
|
5.82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets
|
|
|
9,584,607
|
|
|
$
|
367,143
|
|
|
|
5.12
|
|
|
|
8,530,362
|
|
|
|
330,965
|
|
|
|
5.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-earning
assets
|
|
|
1,033,310
|
|
|
|
|
|
|
|
|
|
|
|
968,553
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
10,617,917
|
|
|
|
|
|
|
|
|
|
|
$
|
9,498,915
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings and interest-bearing transaction accounts
|
|
$
|
4,316,032
|
|
|
$
|
13,445
|
|
|
|
0.42
|
%
|
|
$
|
3,664,401
|
|
|
$
|
6,426
|
|
|
|
0.23
|
%
|
Time deposits
|
|
|
1,415,383
|
|
|
|
7,386
|
|
|
|
0.70
|
|
|
|
1,382,657
|
|
|
|
5,102
|
|
|
|
0.49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing deposits
|
|
|
5,731,415
|
|
|
|
20,831
|
|
|
|
0.49
|
|
|
|
5,047,058
|
|
|
|
11,528
|
|
|
|
0.31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal funds purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
312
|
|
|
|
2
|
|
|
|
0.86
|
|
Securities sold under agreement to repurchase
|
|
|
129,580
|
|
|
|
593
|
|
|
|
0.61
|
|
|
|
120,966
|
|
|
|
421
|
|
|
|
0.46
|
|
FHLB and other borrowed funds
|
|
|
1,155,503
|
|
|
|
10,707
|
|
|
|
1.24
|
|
|
|
1,376,145
|
|
|
|
9,283
|
|
|
|
0.90
|
|
Subordinated debentures
|
|
|
258,032
|
|
|
|
10,203
|
|
|
|
5.29
|
|
|
|
60,826
|
|
|
|
1,164
|
|
|
|
2.56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities
|
|
|
7,274,530
|
|
|
|
42,334
|
|
|
|
0.78
|
|
|
|
6,605,307
|
|
|
|
22,398
|
|
|
|
0.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest
bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest
bearing deposits
|
|
|
1,847,843
|
|
|
|
|
|
|
|
|
|
|
|
1,596,603
|
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
|
48,804
|
|
|
|
|
|
|
|
|
|
|
|
55,411
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
9,171,177
|
|
|
|
|
|
|
|
|
|
|
|
8,257,321
|
|
|
|
|
|
|
|
|
|
Stockholders equity
|
|
|
1,446,740
|
|
|
|
|
|
|
|
|
|
|
|
1,241,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
10,617,917
|
|
|
|
|
|
|
|
|
|
|
$
|
9,498,915
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest spread
|
|
|
|
|
|
|
|
|
|
|
4.34
|
%
|
|
|
|
|
|
|
|
|
|
|
4.73
|
%
|
Net interest income and margin
|
|
|
|
|
|
$
|
324,809
|
|
|
|
4.53
|
%
|
|
|
|
|
|
$
|
308,567
|
|
|
|
4.83
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66
Table 5 shows changes in interest income and interest expense resulting from changes in volume
and changes in interest rates for the three and nine-month periods ended September 30, 2017 compared to the same periods in 2016, on a fully taxable basis. The changes in interest rate and volume have been allocated to changes in average volume
and changes in average rates, in proportion to the relationship of absolute dollar amounts of the changes in rates and volume.
Table 5:
Volume/Rate Analysis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
2017 over 2016
|
|
|
Nine Months Ended September 30,
2017 over 2016
|
|
|
|
Volume
|
|
|
Yield/Rate
|
|
|
Total
|
|
|
Volume
|
|
|
Yield/Rate
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Increase (decrease) in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing balances due from banks
|
|
$
|
107
|
|
|
$
|
314
|
|
|
$
|
421
|
|
|
$
|
498
|
|
|
$
|
750
|
|
|
$
|
1,248
|
|
Federal funds sold
|
|
|
|
|
|
|
1
|
|
|
|
1
|
|
|
|
(4
|
)
|
|
|
6
|
|
|
|
2
|
|
Investment securities taxable
|
|
|
750
|
|
|
|
738
|
|
|
|
1,488
|
|
|
|
807
|
|
|
|
1,998
|
|
|
|
2,805
|
|
Investment securities
non-taxable
|
|
|
274
|
|
|
|
227
|
|
|
|
501
|
|
|
|
590
|
|
|
|
300
|
|
|
|
890
|
|
Loans receivable
|
|
|
13,063
|
|
|
|
(2,959
|
)
|
|
|
10,104
|
|
|
|
37,499
|
|
|
|
(6,266
|
)
|
|
|
31,233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
|
14,194
|
|
|
|
(1,679
|
)
|
|
|
12,515
|
|
|
|
39,390
|
|
|
|
(3,212
|
)
|
|
|
36,178
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing transaction and
savings deposits
|
|
|
569
|
|
|
|
2,918
|
|
|
|
3,487
|
|
|
|
1,308
|
|
|
|
5,711
|
|
|
|
7,019
|
|
Time deposits
|
|
|
114
|
|
|
|
894
|
|
|
|
1,008
|
|
|
|
124
|
|
|
|
2,160
|
|
|
|
2,284
|
|
Federal funds purchased
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
(2
|
)
|
Securities sold under agreement to
repurchase
|
|
|
23
|
|
|
|
67
|
|
|
|
90
|
|
|
|
32
|
|
|
|
140
|
|
|
|
172
|
|
FHLB borrowed funds
|
|
|
(1,222
|
)
|
|
|
1,491
|
|
|
|
269
|
|
|
|
(1,655
|
)
|
|
|
3,079
|
|
|
|
1,424
|
|
Subordinated debentures
|
|
|
3,728
|
|
|
|
840
|
|
|
|
4,568
|
|
|
|
6,802
|
|
|
|
2,237
|
|
|
|
9,039
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
|
3,212
|
|
|
|
6,210
|
|
|
|
9,422
|
|
|
|
6,610
|
|
|
|
13,326
|
|
|
|
19,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in net interest income
|
|
$
|
10,982
|
|
|
$
|
(7,889
|
)
|
|
$
|
3,093
|
|
|
$
|
32,780
|
|
|
$
|
(16,538
|
)
|
|
$
|
16,242
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for Loan Losses
Our management assesses the adequacy of the allowance for loan losses by applying the provisions of FASB ASC
310-10-35.
Specific allocations are determined for loans considered to be impaired and loss factors are assigned to the remainder of the loan portfolio to determine an appropriate level in the allowance for
loan losses. The allowance is increased, as necessary, by making a provision for loan losses. The specific allocations for impaired loans are assigned based on an estimated net realizable value after a thorough review of the credit relationship. The
potential loss factors associated with the remainder of the loan portfolio are based on an internal net loss experience, as well as managements review of trends within the portfolio and related industries.
While general economic trends have improved recently, we cannot be certain that the current economic conditions will considerably improve in
the near future. Recent and ongoing events at the national and international levels can create uncertainty in the financial markets. Despite these economic uncertainties, we continue to follow our historically conservative procedures for lending and
evaluating the provision and allowance for loan losses. Our practice continues to be primarily traditional real estate lending with strong
loan-to-value
ratios.
Generally, commercial, commercial real estate, and residential real estate loans are assigned a level of risk at origination. Thereafter,
these loans are reviewed on a regular basis. The periodic reviews generally include loan payment and collateral status, the borrowers financial data, and key ratios such as cash flows, operating income, liquidity, and leverage. A material
change in the borrowers credit analysis can result in an increase or decrease in the loans assigned risk grade. Aggregate dollar volume by risk grade is monitored on an
on-going
basis.
67
Our management reviews certain key loan quality indicators on a monthly basis, including current
economic conditions, delinquency trends and ratios, portfolio mix changes, and other information management deems necessary. This review process provides a degree of objective measurement that is used in conjunction with periodic internal
evaluations. To the extent that this review process yields differences between estimated and actual observed losses, adjustments are made to the loss factors used to determine the appropriate level of the allowance for loan losses.
Our Company is primarily a real estate lender in the markets we serve. As such, we are subject to declines in asset quality when real estate
prices fall. The recession in the latter years of the last decade harshly impacted the real estate market in Florida. The economic conditions particularly in our Florida markets have improved recently, although not to
pre-recession
levels. Our Arkansas markets economies have been fairly stable over the past several years with no boom or bust. As a result, the Arkansas economy fared better with its real estate values
during this time period.
The provision for loan losses represents managements determination of the amount necessary to be charged
against the current periods earnings, to maintain the allowance for loan losses at a level that is considered adequate in relation to the estimated risk inherent in the loan portfolio.
The Companys third quarter earnings were significantly impacted by Hurricane Irma which made initial landfall in the Florida Keys and a
second landfall just south of Naples, Florida, as a Category 4 hurricane on September 10, 2017. While the total impact of this hurricane on Home BancSharess financial condition and results of operation may not be known for some time, the
Company has included in third quarter earnings, certain charges, including the establishment of reserves, related to the hurricane. Based on initial assessments of the potential credit impact and damage to the approximately $2.41 billion in
legacy loans receivable we have in the disaster area, the Company has accrued $33.4 million of
pre-tax
hurricane expenses. The $33.4 million of hurricane expenses include the following items:
$32.9 million to establish a storm-related provision for loan losses and a $556,000 charge related to direct damage expenses incurred through September 30, 2017. The $32.9 million of storm-related provision for loan losses was
calculated by taking a 5.0% allocation on the loans in the Florida Key loans receivable balances, a 5.0% allocation on specific large loans located in the path of the hurricane on the mainland of Florida, and a 0.75% allocation on balances in the
remaining counties within the FEMA-designated disaster areas. Additionally, as a result of Hurricane Irma, the Company offered customers located in the disaster area a
90-day
deferment on outstanding loans. As
of November 1, 2017, customers with loan balances totaling approximately $205.8 million have accepted the
90-day
deferment.
There was $35.0 million and $5.5 million of provision for loan losses for the three months ended September 30, 2017 and 2016,
respectively. Excluding $32.9 million of additional provision for loan losses related to Hurricane Irma, we experienced a $3.4 million decrease in the provision for loan losses during the third quarter of 2017 versus the third quarter of
2016. The $3.4 million decrease in provision for loan losses was primarily due to the Company not needing to take any additional provision related to charge-offs during the third quarter of 2017 because of a $2.0 million loan
charge-off
having a specific allocation that did not need to be replenished in the general allowance allocation plus lower organic loan growth during the third quarter of 2017 versus the third quarter of 2016.
There was $39.3 million and $16.9 million of provision for loan losses for the nine months ended September 30, 2017 and 2016,
respectively. Excluding $32.9 million of additional provision for loan losses related to Hurricane Irma, we experienced a $10.5 million decrease in the provision for loan losses during the first nine months of 2017 versus the first nine
months of 2016. This $10.5 million decrease is primarily a result of reduced provisioning from lower net charge-offs and lower organic loan growth versus the first nine months of 2016.
Based upon current accounting guidance, the allowance for loan losses is not carried over in an acquisition. As a result, none of the acquired
loans had any allocation of the allowance for loan losses at merger date. This is the result of all purchased loans being recorded at fair value in accordance with the fair value methodology prescribed in ASC Topic 820. However, as the acquired
loans pay off or renew and the acquired footprint originates new loan production, it is necessary to establish an allowance which represents an amount that, in managements judgment, will be adequate to absorb credit losses. The allowance for
loan loss methodology for all originated loans as disclosed in Note 1 to the Notes to Consolidated Financial Statements in our Form
10-K
was used for these loans. Our current or historical provision levels
should not be relied upon as a predictor or indicator of future levels going forward.
68
Non-Interest
Income
Total
non-interest
income was $21.5 million and $72.3 million for the three and nine-month
periods ended September 30, 2017, compared to $22.0 million and $63.2 million for the same periods in 2016, respectively. Our recurring
non-interest
income includes service charges on deposit
accounts, other service charges and fees, trust fees, mortgage lending, insurance, increase in cash value of life insurance and dividends.
Table 6 measures the various components of our
non-interest
income for the three and nine-month
periods ended September 30, 2017 and 2016, respectively, as well as changes for the three and nine-month periods ended September 30, 2017 compared to the same period in 2016.
Table 6:
Non-Interest
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
2017 Change
|
|
|
Nine Months Ended
September 30,
|
|
|
2017 Change
|
|
|
|
2017
|
|
|
2016
|
|
|
from 2016
|
|
|
2017
|
|
|
2016
|
|
|
from 2016
|
|
|
|
(Dollars in thousands)
|
|
Service charges on deposit accounts
|
|
$
|
6,408
|
|
|
$
|
6,527
|
|
|
$
|
(119
|
)
|
|
|
(1.8
|
)%
|
|
$
|
18,356
|
|
|
$
|
18,607
|
|
|
$
|
(251
|
)
|
|
|
(1.3
|
)%
|
Other service charges and fees
|
|
|
8,490
|
|
|
|
7,504
|
|
|
|
986
|
|
|
|
13.1
|
|
|
|
25,983
|
|
|
|
22,589
|
|
|
|
3,394
|
|
|
|
15.0
|
|
Trust fees
|
|
|
365
|
|
|
|
365
|
|
|
|
|
|
|
|
|
|
|
|
1,130
|
|
|
|
1,128
|
|
|
|
2
|
|
|
|
0.2
|
|
Mortgage lending income
|
|
|
3,172
|
|
|
|
3,932
|
|
|
|
(760
|
)
|
|
|
(19.3
|
)
|
|
|
9,713
|
|
|
|
10,276
|
|
|
|
(563
|
)
|
|
|
(5.5
|
)
|
Insurance commissions
|
|
|
472
|
|
|
|
534
|
|
|
|
(62
|
)
|
|
|
(11.6
|
)
|
|
|
1,482
|
|
|
|
1,808
|
|
|
|
(326
|
)
|
|
|
(18.0
|
)
|
Increase in cash value of life insurance
|
|
|
478
|
|
|
|
344
|
|
|
|
134
|
|
|
|
39.0
|
|
|
|
1,251
|
|
|
|
1,092
|
|
|
|
159
|
|
|
|
14.6
|
|
Dividends from FHLB, FRB, Bankers Bank & other
|
|
|
834
|
|
|
|
808
|
|
|
|
26
|
|
|
|
3.2
|
|
|
|
2,455
|
|
|
|
2,147
|
|
|
|
308
|
|
|
|
14.3
|
|
Gain on acquisitions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,807
|
|
|
|
|
|
|
|
3,807
|
|
|
|
100.0
|
|
Gain (loss) on SBA loans
|
|
|
163
|
|
|
|
364
|
|
|
|
(201
|
)
|
|
|
(55.2
|
)
|
|
|
738
|
|
|
|
443
|
|
|
|
295
|
|
|
|
66.6
|
|
Gain (loss) on branches, equipment and other assets, net
|
|
|
(1,337
|
)
|
|
|
(86
|
)
|
|
|
(1,251
|
)
|
|
|
1,454.7
|
|
|
|
(962
|
)
|
|
|
701
|
|
|
|
(1,663
|
)
|
|
|
(237.2
|
)
|
Gain (loss) on OREO, net
|
|
|
335
|
|
|
|
132
|
|
|
|
203
|
|
|
|
153.8
|
|
|
|
849
|
|
|
|
(713
|
)
|
|
|
1,562
|
|
|
|
219.1
|
|
Gain (loss) on securities, net
|
|
|
136
|
|
|
|
|
|
|
|
136
|
|
|
|
100.0
|
|
|
|
939
|
|
|
|
25
|
|
|
|
914
|
|
|
|
3,656.0
|
|
FDIC indemnification accretion/(amortization), net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(772
|
)
|
|
|
772
|
|
|
|
(100.0
|
)
|
Other income
|
|
|
1,941
|
|
|
|
1,590
|
|
|
|
351
|
|
|
|
22.1
|
|
|
|
6,603
|
|
|
|
5,892
|
|
|
|
711
|
|
|
|
12.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-interest
income
|
|
$
|
21,457
|
|
|
$
|
22,014
|
|
|
$
|
(557
|
)
|
|
|
(2.5
|
)%
|
|
$
|
72,344
|
|
|
$
|
63,223
|
|
|
$
|
9,121
|
|
|
|
14.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest
income decreased $557,000, or 2.5%, to $21.5 million
for the three-month period ended September 30, 2017 from $22.0 million for the same period in 2016.
Non-interest
income increased $9.1 million, or 14.4%, to $72.3 million for the nine-month
period ended September 30, 2017 from $63.2 million for the same period in 2016.
Non-interest
income excluding gain on acquisitions increased $5.3 million, or 8.4%, to $68.5 million for the
nine months ended September 30, 2017 from $63.2 million for the same period in 2016.
The primary factors that resulted in the
increase for the three month period ended September 30, 2017 when compared to the same period in 2016 were changes related to other service charges and fees, mortgage lending income, and net loss on branches, equipment and other assets.
Additional details for the three months ended September 30, 2017 on some of the more significant changes are as follows:
|
|
|
The $986,000 increase in other service charges and fees is primarily from our first quarter 2017 acquisitions plus additional loan payoff fees generated by Centennial CFG.
|
|
|
|
The $760,000 decrease in mortgage lending income is primarily the result of Hurricane Irma during September 2017 when compared to the same period in 2016. The disruption from the hurricane resulted in very little
mortgage processing for nearly a two week period during the third quarter of 2017.
|
69
|
|
|
The $1.3 million decrease in gain (loss) on branches, equipment and other assets, net, is primarily related to losses on three vacant properties during the third quarter of 2017.
|
Excluding gain on acquisitions, the primary factors that resulted in the increase for the nine month period ended September 30, 2017 when
compared to the same period in 2016 were changes related to other service charges and fees, net loss on branches, equipment and other assets, net gain on OREO, net gain on securities, and amortization on our former FDIC indemnification asset.
Additional details for the nine months ended September 30, 2017 on some of the more significant changes are as follows:
|
|
|
The $3.4 million increase in other service charges and fees is primarily from our first quarter 2017 acquisitions plus additional loan payoff fees generated by Centennial CFG and approximately $615,000 of
MasterCard incentive income received in the first quarter of 2017.
|
|
|
|
The $1.7 million decrease in gain (loss) on branches, equipment and other assets, net, is primarily related to net losses on eleven vacant properties from closed branches during the first nine months of 2017
combined with net gains on four vacant properties during the first nine months of 2016 plus a gain on the sale of a piece of software during the second quarter of 2016.
|
|
|
|
The $1.6 million increase in gain (loss) on OREO is primarily related to realizing gains on sale from OREO properties during the first nine months of 2017 versus the revaluation of seven OREO properties during the
first nine months of 2016.
|
|
|
|
The $914,000 increase in gain (loss) on securities, net, is a result of a strategic decision to recognize the long-term capital gains on sales of investment securities when compared to the same period in 2016.
|
|
|
|
The $772,000 increase in FDIC indemnification accretion/amortization, net, is a result of the
buy-out
of the FDIC loss share portfolio during the third quarter of 2016.
|
|
|
|
The $563,000 decrease in mortgage lending income is primarily the result of Hurricane Irma during September 2017 when compared to the same period in 2016. The disruption from the hurricane resulted in very little
mortgage processing for nearly a two week period during the third quarter of 2017.
|
70
Non-Interest
Expense
Non-interest
expense primarily consists of salaries and employee benefits, occupancy and equipment,
data processing, and other expenses such as advertising, merger and acquisition expenses, amortization of intangibles, electronic banking expense, FDIC and state assessment, insurance, legal and accounting fees and other professional fees.
Table 7 below sets forth a summary of
non-interest
expense for the three and nine-month periods ended
September 30, 2017 and 2016, as well as changes for the three and nine-month periods ended September 30, 2017 compared to the same period in 2016.
Table 7:
Non-Interest
Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
2017 Change
|
|
|
Nine Months Ended
September 30,
|
|
|
2017 Change
|
|
|
|
2017
|
|
|
2016
|
|
|
from 2016
|
|
|
2017
|
|
|
2016
|
|
|
from 2016
|
|
|
|
(Dollars in thousands)
|
|
Salaries and employee benefits
|
|
$
|
28,510
|
|
|
$
|
25,623
|
|
|
$
|
2,887
|
|
|
|
11.3
|
%
|
|
$
|
83,965
|
|
|
$
|
75,018
|
|
|
$
|
8,947
|
|
|
|
11.9
|
%
|
Occupancy and equipment
|
|
|
7,887
|
|
|
|
6,668
|
|
|
|
1,219
|
|
|
|
18.3
|
|
|
|
21,602
|
|
|
|
19,848
|
|
|
|
1,754
|
|
|
|
8.8
|
|
Data processing expense
|
|
|
2,853
|
|
|
|
2,791
|
|
|
|
62
|
|
|
|
2.2
|
|
|
|
8,439
|
|
|
|
8,221
|
|
|
|
218
|
|
|
|
2.7
|
|
Other operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising
|
|
|
795
|
|
|
|
866
|
|
|
|
(71
|
)
|
|
|
(8.2
|
)
|
|
|
2,305
|
|
|
|
2,422
|
|
|
|
(117
|
)
|
|
|
(4.8
|
)
|
Merger and acquisition expenses
|
|
|
18,227
|
|
|
|
|
|
|
|
18,227
|
|
|
|
100.0
|
|
|
|
25,743
|
|
|
|
|
|
|
|
25,743
|
|
|
|
100.0
|
|
FDIC loss share
buy-out
expense
|
|
|
|
|
|
|
3,849
|
|
|
|
(3,849
|
)
|
|
|
(100.0
|
)
|
|
|
|
|
|
|
3,849
|
|
|
|
(3,849
|
)
|
|
|
(100.0
|
)
|
Amortization of intangibles
|
|
|
906
|
|
|
|
762
|
|
|
|
144
|
|
|
|
18.9
|
|
|
|
2,576
|
|
|
|
2,370
|
|
|
|
206
|
|
|
|
8.7
|
|
Electronic banking expense
|
|
|
1,712
|
|
|
|
1,428
|
|
|
|
284
|
|
|
|
19.9
|
|
|
|
4,885
|
|
|
|
4,121
|
|
|
|
764
|
|
|
|
18.5
|
|
Directors fees
|
|
|
309
|
|
|
|
292
|
|
|
|
17
|
|
|
|
5.8
|
|
|
|
946
|
|
|
|
856
|
|
|
|
90
|
|
|
|
10.5
|
|
Due from bank service charges
|
|
|
472
|
|
|
|
319
|
|
|
|
153
|
|
|
|
48.0
|
|
|
|
1,348
|
|
|
|
961
|
|
|
|
387
|
|
|
|
40.3
|
|
FDIC and state assessment
|
|
|
1,293
|
|
|
|
1,502
|
|
|
|
(209
|
)
|
|
|
(13.9
|
)
|
|
|
3,763
|
|
|
|
4,394
|
|
|
|
(631
|
)
|
|
|
(14.4
|
)
|
Insurance
|
|
|
577
|
|
|
|
553
|
|
|
|
24
|
|
|
|
4.3
|
|
|
|
1,698
|
|
|
|
1,630
|
|
|
|
68
|
|
|
|
4.2
|
|
Legal and accounting
|
|
|
698
|
|
|
|
583
|
|
|
|
115
|
|
|
|
19.7
|
|
|
|
1,799
|
|
|
|
1,764
|
|
|
|
35
|
|
|
|
2.0
|
|
Other professional fees
|
|
|
1,436
|
|
|
|
1,137
|
|
|
|
299
|
|
|
|
26.3
|
|
|
|
3,822
|
|
|
|
3,106
|
|
|
|
716
|
|
|
|
23.1
|
|
Operating supplies
|
|
|
432
|
|
|
|
437
|
|
|
|
(5
|
)
|
|
|
(1.1
|
)
|
|
|
1,376
|
|
|
|
1,292
|
|
|
|
84
|
|
|
|
6.5
|
|
Postage
|
|
|
280
|
|
|
|
269
|
|
|
|
11
|
|
|
|
4.1
|
|
|
|
861
|
|
|
|
815
|
|
|
|
46
|
|
|
|
5.6
|
|
Telephone
|
|
|
305
|
|
|
|
449
|
|
|
|
(144
|
)
|
|
|
(32.1
|
)
|
|
|
1,027
|
|
|
|
1,391
|
|
|
|
(364
|
)
|
|
|
(26.2
|
)
|
Other expense
|
|
|
4,154
|
|
|
|
3,498
|
|
|
|
656
|
|
|
|
18.8
|
|
|
|
10,835
|
|
|
|
12,203
|
|
|
|
(1,368
|
)
|
|
|
(11.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-interest
expense
|
|
$
|
70,846
|
|
|
$
|
51,026
|
|
|
$
|
19,820
|
|
|
|
38.8
|
%
|
|
$
|
176,990
|
|
|
$
|
144,261
|
|
|
$
|
32,729
|
|
|
|
22.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest
expense increased $19.8 million, or 38.8%, to
$70.8 million for the three months ended September 30, 2017 from $51.0 million for the same period in 2016.
Non-interest
expense increased $32.7 million, or 22.7%, to $177.0 million
for the nine months ended September 30, 2017 from $144.3 million for the same period in 2016.
Non-interest
expense, excluding merger expenses and FDIC loss share
buy-out
expense, was $52.6 million and $151.2 million for the three and nine months ended September 30, 2017, respectively, compared to $47.2 million and $140.4 million for the same
periods in 2016, respectively.
The change in
non-interest
expense for 2017 excluding merger
expenses and FDIC loss share
buy-out
expense when compared to 2016 is primarily related to the completion of our acquisitions, the normal increased cost of doing business and Centennial CFG.
Centennial CFG incurred $4.8 million and $13.8 million of
non-interest
expense during the
three and nine months ended September 30, 2017, respectively, compared to $3.7 million and $10.5 million of
non-interest
expense during the three and nine months ended September 30, 2016,
respectively. While the cost of doing business in New York City and Los Angeles is significantly higher than our Arkansas, Florida and Alabama markets, we are still committed to cost-saving measures while achieving our goals of growing the Company.
During the third quarter of 2017 and 2016, the Company had no write-downs on vacant properties.
During the first nine months of 2017 and 2016, the Company had write-downs on vacant property from closed branches of approximately $47,000
and $1.9 million, respectively. These write-downs are included in other expense.
71
Income Taxes
The income tax expense decreased $17.9 million, or 70.4%, to $7.5 million for the three-month period ended September 30, 2017,
from $25.5 million for the same period in 2016. The income tax expense decreased $13.1 million, or 17.1%, to $63.2 million for the nine-month period ended September 30, 2017, from $76.3 million for the same period in 2016.
The effective income tax rate was 33.71% and 36.12% for the three and nine-month periods ended September 30, 2017, compared to 36.88% and 37.23% for the same periods in 2016.
The primary cause of the decrease in taxes for the three months ended September 30, 2017 when compared to the same period in 2016 is our
lower quarterly
pre-tax
earnings at our marginal tax rate of 39.225% adjusted for the $570,000 of
non-deductible
merger expenses during the third quarter of 2017.
The primary cause of the decrease in taxes for the nine months ended September 30, 2017 when compared to the same period in 2016 is our
lower
pre-tax
earnings at our marginal tax rate of 39.225% adjusted for the $3.8 million of
non-taxable
gain on acquisitions offset by approximately
$1.5 million of
non-deductible
merger expenses during the first nine months of 2017.
Financial Condition
as of and for the Period Ended September 30, 2017 and December 31, 2016
Our total assets as of September 30, 2017
increased $4.45 billion to $14.26 billion from the $9.81 billion reported as of December 31, 2016. Our loan portfolio increased $2.90 million to $10.29 billion as of September 30, 2017, from $7.39 billion as
of December 31, 2016. This increase is primarily a result of our acquisitions since December 31, 2016. Stockholders equity increased $879.2 million to $2.21 billion as of September 30, 2017, compared to
$1.33 billion as of December 31, 2016. The increase in stockholders equity is primarily associated with the $77.5 million and $742.3 million of common stock issued to the GHI and Stonegate shareholders, respectively, plus
the $70.5 million increase in retained earnings combined with $3.5 million of comprehensive income and $5.0 million of share-based compensation offset by the repurchase of $19.5 million of our common stock during the first nine
months of 2017. The annualized improvement in stockholders equity for the first nine months of 2017, excluding the $742.3 million and $77.5 million of common stock issued to the Stonegate and GHI shareholders, respectively, was 6.0%.
Loan Portfolio
Loans
Receivable
Our loan portfolio averaged $7.94 billion and $7.03 billion during the three-month periods ended
September 30, 2017 and 2016, respectively. Our loan portfolio averaged $7.79 billion and $6.91 billion during the nine-month periods ended September 30, 2017 and 2016, respectively. Loans receivable were $10.29 billion as of
September 30, 2017 compared to $7.39 billion as of December 31, 2016.
During the first nine months of 2017, the Company
acquired $2.82 billion of loans, net of purchase accounting discounts. Excluding the $2.82 billion of acquired loans during 2017, loans receivable were $7.47 billion as of September 30, 2017 compared to $7.39 billion as of
December 31, 2016, which is $73.8 million of organic loan growth, or 1.33% annualized increase. Centennial CFG produced $113.7 million of net organic loan growth during the first nine months of 2017 while the legacy footprint
experienced significant net payoffs during the first nine months of 2017, resulting in a decline of $39.9 million.
The most
significant components of the loan portfolio were commercial real estate, residential real estate, consumer and commercial and industrial loans. These loans are generally secured by residential or commercial real estate or business or personal
property. Although these loans are primarily originated within our franchises in Arkansas, Florida, South Alabama and Centennial CFG, the property securing these loans may not physically be located within our market areas of Arkansas, Florida,
Alabama and New York. Loans receivable were approximately $3.50 billion, $5.34 billion, $224.4 million and $1.22 billion as of September 30, 2017 in Arkansas, Florida, Alabama and Centennial CFG, respectively.
72
As of September 30, 2017, we had approximately $502.8 million of construction land
development loans which were collateralized by land. This consisted of approximately $257.9 million for raw land and approximately $244.8 million for land with commercial and or residential lots.
Table 8 presents our loans receivable balances by category as of September 30, 2017 and December 31, 2016.
Table 8: Loans Receivable
|
|
|
|
|
|
|
|
|
|
|
As of
September 30, 2017
|
|
|
As of
December 31, 2016
|
|
|
|
(In thousands)
|
|
Real estate:
|
|
|
|
|
|
|
|
|
Commercial real estate loans:
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
$
|
4,532,402
|
|
|
$
|
3,153,121
|
|
Construction/land development
|
|
|
1,648,923
|
|
|
|
1,135,843
|
|
Agricultural
|
|
|
88,295
|
|
|
|
77,736
|
|
Residential real estate loans:
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
1,968,688
|
|
|
|
1,356,136
|
|
Multifamily residential
|
|
|
497,910
|
|
|
|
340,926
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
8,736,218
|
|
|
|
6,063,762
|
|
Consumer
|
|
|
51,515
|
|
|
|
41,745
|
|
Commercial and industrial
|
|
|
1,296,485
|
|
|
|
1,123,213
|
|
Agricultural
|
|
|
57,489
|
|
|
|
74,673
|
|
Other
|
|
|
144,486
|
|
|
|
84,306
|
|
|
|
|
|
|
|
|
|
|
Total loans receivable
|
|
$
|
10,286,193
|
|
|
$
|
7,387,699
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate Loans.
We originate
non-farm
and
non-residential
loans (primarily secured by commercial real estate), construction/land development loans, and agricultural loans, which are generally secured by real estate located in our market areas. Our
commercial mortgage loans are generally collateralized by first liens on real estate and amortized over a 15 to 25 year period with balloon payments due at the end of one to five years. These loans are generally underwritten by assessing cash flow
(debt service coverage), primary and secondary source of repayment, the financial strength of any guarantor, the strength of the tenant (if any), the borrowers liquidity and leverage, management experience, ownership structure, economic
conditions and industry specific trends and collateral. Generally, we will loan up to 85% of the value of improved property, 65% of the value of raw land and 75% of the value of land to be acquired and developed. A first lien on the property and
assignment of lease is required if the collateral is rental property, with second lien positions considered on a
case-by-case
basis.
As of September 30, 2017, commercial real estate loans totaled $6.27 billion, or 61.0% of loans receivable, as compared to
$4.37 billion, or 59.1% of loans receivable, as of December 31, 2016. Commercial real estate loans originated in our Arkansas, Florida, Alabama and Centennial CFG franchises were $1.96 billion, $3.32 billion, $120.4 million
and $866.4 million at September 30, 2017, respectively. Including the effects of the purchase accounting adjustments, we acquired approximately $1.41 billion of commercial real estate loans, as of acquisition date from Stonegate.
Residential Real Estate Loans.
We originate one to four family, residential mortgage loans generally secured by property located in our
primary market areas. Approximately 49.71% and 37.59% of our residential mortgage loans consist of owner occupied
1-4
family properties and
non-owner
occupied
1-4
family properties (rental), respectively, as of September 30, 2017. Residential real estate loans generally have a
loan-to-value
ratio of up to 90%. These loans are underwritten by giving consideration to the borrowers ability to pay, stability of employment or source of
income,
debt-to-income
ratio, credit history and
loan-to-value
ratio.
As of September 30, 2017, residential real estate loans totaled $2.47 billion, or 24.0%, of loans receivable, compared to
$1.70 billion, or 23.0% of loans receivable, as of December 31, 2016. Residential real estate loans originated in our Arkansas, Florida, Alabama and Centennial CFG franchises were $870.1 million, $1.36 billion, $74.9 million
and $162.7 million at September 30, 2017, respectively. Including the effects of the purchase accounting adjustments, we acquired approximately $551.3 million of residential real estate loans, as of acquisition date from Stonegate.
73
Consumer Loans.
Our consumer loans are composed of secured and unsecured loans originated
by our bank. The performance of consumer loans will be affected by the local and regional economies as well as the rates of personal bankruptcies, job loss, divorce and other individual-specific characteristics.
As of September 30, 2017, consumer loans totaled $51.5 million, or 0.5% of loans receivable, compared to $41.8 million, or 0.6%
of loans receivable, as of December 31, 2016. Consumer loans originated in our Arkansas, Florida, Alabama and Centennial CFG franchises were $24.1 million, $26.5 million, $1.0 million and zero at September 30, 2017,
respectively. Including the effects of the purchase accounting adjustments, we acquired approximately $11.7 million of consumer loans, as of acquisition date from Stonegate.
Commercial and Industrial Loans.
Commercial and industrial loans are made for a variety of business purposes, including working
capital, inventory, equipment and capital expansion. The terms for commercial loans are generally one to seven years. Commercial loan applications must be supported by current financial information on the borrower and, where appropriate, by adequate
collateral. Commercial loans are generally underwritten by addressing cash flow (debt service coverage), primary and secondary sources of repayment, the financial strength of any guarantor, the borrowers liquidity and leverage, management
experience, ownership structure, economic conditions and industry specific trends and collateral. The loan to value ratio depends on the type of collateral. Generally speaking, accounts receivable are financed at between 50% and 80% of accounts
receivable less than 60 days past due. Inventory financing will range between 50% and 60% (with no work in process) depending on the borrower and nature of inventory. We require a first lien position for those loans.
As of September 30, 2017, commercial and industrial loans totaled $1.30 billion, or 12.6% of loans receivable, which is comparable
to $1.12 billion, or 15.2% of loans receivable, as of December 31, 2016. Commercial and industrial loans originated in our Arkansas, Florida, Alabama and Centennial CFG franchises were $573.7 million, $503.7 million,
$26.2 million and $193.0 million at September 30, 2017, respectively. Including the effects of the purchase accounting adjustments, we acquired approximately $301.0 million of commercial and industrial loans, as of acquisition
date from Stonegate.
Non-Performing
Assets
We classify our problem loans into three categories: past due loans, special mention loans and classified loans (accruing and
non-accruing).
When management determines that a loan is no longer performing, and that collection of
interest appears doubtful, the loan is placed on
non-accrual
status. Loans that are 90 days past due are placed on
non-accrual
status unless they are adequately secured
and there is reasonable assurance of full collection of both principal and interest. Our management closely monitors all loans that are contractually 90 days past due, treated as special mention or otherwise classified or on
non-accrual
status.
We have purchased loans with deteriorated credit quality in our September 30,
2017 financial statements as a result of our historical acquisitions. The credit metrics most heavily impacted by our acquisitions of acquired loans with deteriorated credit quality were the following credit quality indicators listed in Table 9
below:
|
|
|
Allowance for loan losses to
non-performing
loans;
|
|
|
|
Non-performing
loans to total loans; and
|
|
|
|
Non-performing
assets to total assets.
|
On the date of
acquisition, acquired credit-impaired loans are initially recognized at fair value, which incorporates the present value of amounts estimated to be collectible. As a result of the application of this accounting methodology, certain credit-related
ratios, including those referenced above, may not necessarily be directly comparable with periods prior to the acquisition of the credit-impaired loans and
non-performing
assets, or comparable with other
institutions.
74
Table 9 sets forth information with respect to our
non-performing
assets as of September 30, 2017 and December 31, 2016. As of these dates, all
non-performing
restructured loans are included in
non-accrual
loans.
Table 9:
Non-performing
Assets
|
|
|
|
|
|
|
|
|
|
|
As of
September 30,
2017
|
|
|
As of
December 31,
2016
|
|
|
|
(Dollars in thousands)
|
|
Non-accrual
loans
|
|
$
|
34,794
|
|
|
$
|
47,182
|
|
Loans past due 90 days or more (principal or interest payments)
|
|
|
29,183
|
|
|
|
15,942
|
|
|
|
|
|
|
|
|
|
|
Total
non-performing
loans
|
|
|
63,977
|
|
|
|
63,124
|
|
|
|
|
|
|
|
|
|
|
Other
non-performing
assets
|
|
|
|
|
|
|
|
|
Foreclosed assets held for sale, net
|
|
|
21,701
|
|
|
|
15,951
|
|
Other
non-performing
assets
|
|
|
3
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
Total other
non-performing
assets
|
|
|
21,704
|
|
|
|
15,954
|
|
|
|
|
|
|
|
|
|
|
Total
non-performing
assets
|
|
$
|
85,681
|
|
|
$
|
79,078
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses to
non-performing
loans
|
|
|
174.47
|
%
|
|
|
126.74
|
%
|
Non-performing
loans to total loans
|
|
|
0.62
|
|
|
|
0.85
|
|
Non-performing
assets to total assets
|
|
|
0.60
|
|
|
|
0.81
|
|
Our
non-performing
loans are comprised of
non-accrual
loans and accruing loans that are contractually past due 90 days. Our bank subsidiary recognizes income principally on the accrual basis of accounting. When loans are classified as
non-accrual,
the accrued interest is charged off and no further interest is accrued, unless the credit characteristics of the loan improve. If a loan is determined by management to be uncollectible, the portion of
the loan determined to be uncollectible is then charged to the allowance for loan losses.
Total
non-performing
loans were $64.0 million as of September 30, 2017, compared to $63.1 million as of December 31, 2016, for an increase of $853,000. The $853,000 increase in
non-performing
loans is the result of a $4.2 million decrease in
non-performing
loans in our Arkansas franchise, a $5.6 million increase in
non-performing
loans in our Florida franchise and a $573,000 decrease in
non-performing
loans in our Alabama franchise.
Non-performing
loans at September 30, 2017 are $24.3 million, $39.6 million, $83,000 and zero in the Arkansas, Florida, Alabama and Centennial CFG franchises, respectively. During the third quarter of 2017, we completed our acquisition of Stonegate
which increased our
non-performing
loans accruing past due 90 days or more by $6.3 million as of September 30, 2017.
Although the current state of the real estate market has improved, uncertainties still present in the economy may continue to increase our
level of
non-performing
loans. While we believe our allowance for loan losses is adequate and our purchased loans are adequately discounted at September 30, 2017, as additional facts become known about
relevant internal and external factors that affect loan collectability and our assumptions, it may result in us making additions to the provision for loan losses during 2017. Our current or historical provision levels should not be relied upon as a
predictor or indicator of future levels going forward.
Troubled debt restructurings (TDRs) generally occur when a borrower is
experiencing, or is expected to experience, financial difficulties in the near term. As a result, the Bank will work with the borrower to prevent further difficulties, and ultimately to improve the likelihood of recovery on the loan. In those
circumstances it may be beneficial to restructure the terms of a loan and work with the borrower for the benefit of both parties, versus forcing the property into foreclosure and having to dispose of it in an unfavorable and depressed real estate
market. When we have modified the terms of a loan, we usually either reduce the monthly payment and/or interest rate for generally about three to twelve months. For our TDRs that accrue interest at the time the loan is restructured, it would be a
rare exception to have
charged-off
any portion of the loan. Only
non-performing
restructured loans are included in our
non-performing
loans. As of September 30, 2017, we had $23.2 million of restructured loans that are in compliance with the modified terms and are not reported as past due or
non-accrual
in Table 9. Our Florida franchise contains $17.0 million and our Arkansas franchise contains $6.2 million of these restructured loans.
75
A loan modification that might not otherwise be considered may be granted resulting in
classification as a TDR. These loans can involve loans remaining on
non-accrual,
moving to
non-accrual,
or continuing on an accrual status, depending on the individual
facts and circumstances of the borrower. Generally, a
non-accrual
loan that is restructured remains on
non-accrual
for a period of six months to demonstrate that the
borrower can meet the restructured terms. However, performance prior to the restructuring, or significant events that coincide with the restructuring, are considered in assessing whether the borrower can pay under the new terms and may result in the
loan being returned to an accrual status after a shorter performance period. If the borrowers ability to meet the revised payment schedule is not reasonably assured, the loan will remain in a
non-accrual
status.
The majority of the Banks loan modifications relate to commercial lending and involve reducing the interest rate, changing
from a principal and interest payment to interest-only, a lengthening of the amortization period, or a combination of some or all of the three. In addition, it is common for the Bank to seek additional collateral or guarantor support when modifying
a loan. At September 30, 2017, the amount of TDRs was $25.6 million, an increase of 0.4% from $25.5 million at December 31, 2016. As of September 30, 2017 and December 31, 2016, 90.5% and 88.0%, respectively, of all
restructured loans were performing to the terms of the restructure.
Total foreclosed assets held for sale were $21.7 million as of
September 30, 2017, compared to $16.0 million as of December 31, 2016 for an increase of $5.7 million. The foreclosed assets held for sale as of September 30, 2017 are comprised of $12.1 million of assets located in
Arkansas, $9.0 million of assets located in Florida, $641,000 located in Alabama and zero from Centennial CFG. During the third quarter of 2017, we completed our acquisition of Stonegate which increased our foreclosed assets held for sale by
$3.4 million as of September 30, 2017.
During the first nine months of 2017, we had four foreclosed properties with a carrying
value greater than $1.0 million. The first property is a development loan in Northwest Arkansas which was foreclosed in the first quarter of 2011. The carrying value was $2.0 million at September 30, 2017. The second property was a
non-farm,
non-residential
property in Central Arkansas which was foreclosed in the third quarter of 2017. The carrying value was $1.5 million at September 30, 2017.
The third property was a development property in Florida acquired from BOC with a carrying value of $2.1 million at September 30, 2017. The last property was a
non-farm,
non-residential
property in Florida acquired from Stonegate with a carrying value of $1.8 million at September 30, 2017. The Company does not currently anticipate any additional losses on these properties.
As of September 30, 2017, no other foreclosed assets held for sale have a carrying value greater than $1.0 million.
Table 10
shows the summary of foreclosed assets held for sale as of September 30, 2017 and December 31, 2016.
Table 10: Foreclosed
Assets Held For Sale
|
|
|
|
|
|
|
|
|
|
|
As of
September 30, 2017
|
|
|
As of
December 31, 2016
|
|
|
|
(In thousands)
|
|
Real estate:
|
|
|
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
$
|
10,354
|
|
|
$
|
9,423
|
|
Construction/land development
|
|
|
6,328
|
|
|
|
4,009
|
|
Agricultural
|
|
|
|
|
|
|
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
3,733
|
|
|
|
2,076
|
|
Multifamily residential
|
|
|
1,286
|
|
|
|
443
|
|
|
|
|
|
|
|
|
|
|
Total foreclosed assets held for sale
|
|
$
|
21,701
|
|
|
$
|
15,951
|
|
|
|
|
|
|
|
|
|
|
A loan is considered impaired when it is probable that we will not receive all amounts due according to the
contracted terms of the loans. Impaired loans include
non-performing
loans (loans past due 90 days or more and
non-accrual
loans), criticized and/or classified loans
with a specific allocation, loans categorized as TDRs and certain other loans identified by management that are still performing (loans included in multiple categories are only included once). As of September 30, 2017, average impaired loans
were $90.0 million compared to $89.6 million as of December 31, 2016. As of September 30, 2017, impaired loans were $97.0 million compared to $93.1 million as of December 31, 2016, for an increase of
$3.9 million. This increase is primarily associated with an increase in loan balances with a specific allocation. As of September 30, 2017, our Arkansas, Florida, Alabama and Centennial CFG franchises accounted for approximately
$42.8 million, $54.1 million, $83,000 and zero of the impaired loans, respectively.
76
We evaluated loans purchased in conjunction with our historical acquisitions for impairment in
accordance with the provisions of FASB ASC Topic
310-30,
Loans and Debt Securities Acquired with Deteriorated Credit Quality
. Purchased loans are considered impaired if there is evidence of credit
deterioration since origination and if it is probable that not all contractually required payments will be collected. Purchased credit impaired loans are not classified as
non-performing
assets for the
recognition of interest income as the pools are considered to be performing. However, for the purpose of calculating the
non-performing
credit metrics, we have included all of the loans which are contractually
90 days past due and still accruing, including those in performing pools. Therefore, interest income, through accretion of the difference between the carrying amount of the loans and the expected cash flows, is being recognized on all purchased
impaired loans.
All purchased loans with deteriorated credit quality are considered impaired loans at the date of acquisition. Since the
loans are accounted for on a pooled basis under ASC
310-30,
individual loans are not classified as impaired. Since the loans are accounted for on a pooled basis under ASC
310-30,
individual loans subsequently restructured within the pools are not classified as TDRs in accordance with ASC
310-30-40.
For purchased loans with deteriorated credit quality that were deemed TDRs prior to our acquisition of them, these loans are also not considered TDRs as they are accounted for under ASC
310-30.
As of September 30, 2017 and December 31, 2016, there was not a material amount of purchased loans with deteriorated credit quality
on
non-accrual
status as a result of most of the loans being accounted for on the pool basis and the pools are considered to be performing for the accruing of interest income. Also, acquired loans
contractually past due 90 days or more are accruing interest because the pools are considered to be performing for the purpose of accruing interest income.
Past Due and
Non-Accrual
Loans
Table 11 shows the summary of
non-accrual
loans as of September 30, 2017 and December 31,
2016:
Table 11: Total
Non-Accrual
Loans
|
|
|
|
|
|
|
|
|
|
|
As of
September 30, 2017
|
|
|
As of
December 31, 2016
|
|
|
|
(In thousands)
|
|
Real estate:
|
|
|
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
$
|
10,936
|
|
|
$
|
17,988
|
|
Construction/land development
|
|
|
5,520
|
|
|
|
3,956
|
|
Agricultural
|
|
|
34
|
|
|
|
435
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
13,817
|
|
|
|
20,311
|
|
Multifamily residential
|
|
|
155
|
|
|
|
262
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
30,462
|
|
|
|
42,952
|
|
Consumer
|
|
|
139
|
|
|
|
140
|
|
Commercial and industrial
|
|
|
4,021
|
|
|
|
3,155
|
|
Agricultural
|
|
|
171
|
|
|
|
|
|
Other
|
|
|
1
|
|
|
|
935
|
|
|
|
|
|
|
|
|
|
|
Total
non-accrual
loans
|
|
$
|
34,794
|
|
|
$
|
47,182
|
|
|
|
|
|
|
|
|
|
|
If the
non-accrual
loans had been accruing interest in accordance with
the original terms of their respective agreements, interest income of approximately $479,000 and $558,000, respectively, would have been recorded for the three-month periods ended September 30, 2017 and 2016. If the
non-accrual
loans had been accruing interest in accordance with the original terms of their respective agreements, interest income of approximately $1.7 million would have been recorded for each of the
nine-month periods ended September 30, 2017 and 2016, respectively. The interest income recognized on the
non-accrual
loans for the three and nine-month periods ended September 30, 2017 and 2016 was
considered immaterial.
77
Table 12 shows the summary of accruing past due loans 90 days or more as of September 30,
2017 and December 31, 2016:
Table 12: Loans Accruing Past Due 90 Days or More
|
|
|
|
|
|
|
|
|
|
|
As of
September 30, 2017
|
|
|
As of
December 31, 2016
|
|
|
|
(In thousands)
|
|
Real estate:
|
|
|
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
$
|
16,482
|
|
|
$
|
9,530
|
|
Construction/land development
|
|
|
3,258
|
|
|
|
3,086
|
|
Agricultural
|
|
|
|
|
|
|
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
4,624
|
|
|
|
2,996
|
|
Multifamily residential
|
|
|
1,039
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
25,403
|
|
|
|
15,612
|
|
Consumer
|
|
|
3
|
|
|
|
21
|
|
Commercial and industrial
|
|
|
3,771
|
|
|
|
309
|
|
Agricultural
|
|
|
6
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans accruing past due 90 days or more
|
|
$
|
29,183
|
|
|
$
|
15,942
|
|
|
|
|
|
|
|
|
|
|
Our total loans accruing past due 90 days or more and
non-accrual
loans to total loans was 0.62% and 0.85% as of September 30, 2017 and December 31, 2016, respectively. During the third quarter of 2017, we completed our acquisition of Stonegate which increased our loans accruing past due 90 days or more
by $6.3 million as of September 30, 2017.
Allowance for Loan Losses
Overview.
The allowance for loan losses is maintained at a level which our management believes is adequate to absorb all probable losses
on loans in the loan portfolio. The amount of the allowance is affected by: (i) loan charge-offs, which decrease the allowance; (ii) recoveries on loans previously charged off, which increase the allowance; and (iii) the provision of
possible loan losses charged to income, which increases the allowance. In determining the provision for possible loan losses, it is necessary for our management to monitor fluctuations in the allowance resulting from actual charge-offs and
recoveries and to periodically review the size and composition of the loan portfolio in light of current and anticipated economic conditions. If actual losses exceed the amount of allowance for loan losses, our earnings could be adversely affected.
As we evaluate the allowance for loan losses, we categorize it as follows: (i) specific allocations; (ii) allocations for
criticized and classified assets not individually evaluated for impairment; (iii) general allocations; and (iv) miscellaneous allocations.
Specific Allocations.
As a general rule, if a specific allocation is warranted, it is the result of an analysis of a previously
classified credit or relationship. Typically, when it becomes evident through the payment history or a financial statement review that a loan or relationship is no longer supported by the cash flows of the asset and/or borrower and has become
collateral dependent, we will use appraisals or other collateral analysis to determine if collateral impairment has occurred. The amount or likelihood of loss on this credit may not yet be evident, so a
charge-off
would not be prudent. However, if the analysis indicates that an impairment has occurred, then a specific allocation will be determined for this loan. If our existing appraisal is outdated or the
collateral has been subject to significant market changes, we will obtain a new appraisal for this impairment analysis. The majority of our impaired loans are collateral dependent at the present time, so third-party appraisals were used to determine
the necessary impairment for these loans. Cash flow available to service debt was used for the other impaired loans. This analysis is performed each quarter in connection with the preparation of the analysis of the adequacy of the allowance for loan
losses, and if necessary, adjustments are made to the specific allocation provided for a particular loan.
78
For collateral dependent loans, we do not consider an appraisal outdated simply due to the
passage of time. However, if an appraisal is older than 13 months and if market or other conditions have deteriorated and we believe that the current market value of the property is not within approximately 20% of the appraised value, we will
consider the appraisal outdated and order either a new appraisal or an internal validation report for the impairment analysis. The recognition of any provision or related
charge-off
on a collateral dependent
loan is either through annual credit analysis or, many times, when the relationship becomes delinquent. If the borrower is not current, we will update our credit and cash flow analysis to determine the borrowers repayment ability. If we
determine this ability does not exist and it appears that the collection of the entire principal and interest is not likely, then the loan could be placed on
non-accrual
status. In any case, loans are
classified as
non-accrual
no later than 105 days past due. If the loan requires a quarterly impairment analysis, this analysis is completed in conjunction with the completion of the analysis of the adequacy of
the allowance for loan losses. Any exposure identified through the impairment analysis is shown as a specific reserve on the individual impairment. If it is determined that a new appraisal or internal validation report is required, it is ordered and
will be taken into consideration during completion of the next impairment analysis.
In estimating the net realizable value of the
collateral, management may deem it appropriate to discount the appraisal based on the applicable circumstances. In such case, the amount charged off may result in loan principal outstanding being below fair value as presented in the appraisal.
Between the receipt of the original appraisal and the updated appraisal, we monitor the loans repayment history. If the loan is
$1.0 million or greater or the total loan relationship is $2.0 million or greater, our policy requires an annual credit review. Our policy requires financial statements from the borrowers and guarantors at least annually. In addition, we
calculate the global repayment ability of the borrower/guarantors at least annually.
As a general rule, when it becomes evident that the
full principal and accrued interest of a loan may not be collected, or by law at 105 days past due, we will reflect that loan as
non-performing.
It will remain
non-performing
until it performs in a manner that it is reasonable to expect that we will collect the full principal and accrued interest.
When the amount or likelihood of a loss on a loan has been determined, a
charge-off
should be taken in
the period it is determined. If a partial
charge-off
occurs, the quarterly impairment analysis will determine if the loan is still impaired, and thus continues to require a specific allocation.
Allocations for Criticized and Classified Assets not Individually Evaluated for Impairment.
We establish allocations for loans rated
special mention through loss in accordance with the guidelines established by the regulatory agencies. A percentage rate is applied to each loan category to determine the level of dollar allocation.
General Allocations.
We establish general allocations for each major loan category. This section also includes allocations to loans,
which are collectively evaluated for loss such as residential real estate, commercial real estate, consumer loans and commercial and industrial loans that fall below $2.0 million. The allocations in this section are based on a historical review
of loan loss experience and past due accounts. We give consideration to trends, changes in loan mix, delinquencies, prior losses, and other related information.
Miscellaneous Allocations.
Allowance allocations other than specific, classified, and general are included in our miscellaneous
section.
Loans Collectively Evaluated for Impairment
. Loans receivable collectively evaluated for impairment increased by
approximately $2.87 billion from $7.08 billion at December 31, 2016 to $9.95 billion at September 30, 2017. During the third quarter of 2017, we completed our acquisition of Stonegate which increased our loans collectively
evaluated by $2.37 billion as of September 30, 2017. The percentage of the allowance for loan losses allocated to loans receivable collectively evaluated for impairment to the total loans collectively evaluated for impairment remained
unchanged at 1.08% from December 31, 2016 to September 30, 2017.
79
Charge-offs and Recoveries.
Total charge-offs were $4.4 million for both the three
months ended September 30, 2017 and 2016. Total charge-offs decreased to $10.5 million for the nine months ended September 30, 2017, compared to $12.7 million for the same period in 2016. Total recoveries increased to $883,000
for the three months ended September 30, 2017, compared to $844,000 for the same period in 2016. Total recoveries decreased to $2.8 million for the nine months ended September 30, 2017, compared to $2.9 million for the same
period in 2016. For the three months ended September 30, 2017, net charge-offs were $3.5 million for Arkansas, $16,000 for Alabama and zero for Centennial CFG, and net recoveries were $16,000 for Florida, equaling a net
charge-off
position of $3.5 million. For the nine months ended September 30, 2017, net charge-offs were $7.3 million for Arkansas, $201,000 for Florida, $236,000 for Alabama and zero for Centennial
CFG, equaling a net
charge-off
position of $7.7 million. While the 2017 charge-offs and recoveries consisted of many relationships, there was only one individual relationship consisting of a
charge-off
greater than $1.0 million. This
charge-off
held a balance of $2.0 million at September 30, 2017.
We have not charged off an amount less than what was determined to be the fair value of the collateral as presented in the appraisal, less
estimated costs to sell (for collateral dependent loans), for any period presented. Loans partially
charged-off
are placed on
non-accrual
status until it is proven that
the borrowers repayment ability with respect to the remaining principal balance can be reasonably assured. This is usually established over a period of
6-12
months of timely payment performance.
80
Table 13 shows the allowance for loan losses, charge-offs and recoveries as of and for the three
and nine-month periods ended September 30, 2017 and 2016.
Table 13: Analysis of Allowance for Loan Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
(Dollars in thousands)
|
|
Balance, beginning of period
|
|
$
|
80,138
|
|
|
$
|
74,341
|
|
|
$
|
80,002
|
|
|
$
|
69,224
|
|
Loans charged off
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
|
796
|
|
|
|
741
|
|
|
|
2,324
|
|
|
|
2,590
|
|
Construction/land development
|
|
|
182
|
|
|
|
181
|
|
|
|
508
|
|
|
|
334
|
|
Agricultural
|
|
|
|
|
|
|
|
|
|
|
127
|
|
|
|
|
|
Residential real estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
309
|
|
|
|
1,069
|
|
|
|
2,512
|
|
|
|
3,345
|
|
Multifamily residential
|
|
|
|
|
|
|
435
|
|
|
|
85
|
|
|
|
465
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
1,287
|
|
|
|
2,426
|
|
|
|
5,556
|
|
|
|
6,734
|
|
Consumer
|
|
|
14
|
|
|
|
23
|
|
|
|
158
|
|
|
|
131
|
|
Commercial and industrial
|
|
|
2,280
|
|
|
|
1,388
|
|
|
|
3,059
|
|
|
|
4,424
|
|
Agricultural
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
843
|
|
|
|
514
|
|
|
|
1,762
|
|
|
|
1,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans charged off
|
|
|
4,424
|
|
|
|
4,351
|
|
|
|
10,535
|
|
|
|
12,665
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries of loans previously charged off
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
|
278
|
|
|
|
380
|
|
|
|
988
|
|
|
|
608
|
|
Construction/land development
|
|
|
85
|
|
|
|
74
|
|
|
|
312
|
|
|
|
107
|
|
Agricultural
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
188
|
|
|
|
140
|
|
|
|
430
|
|
|
|
814
|
|
Multifamily residential
|
|
|
38
|
|
|
|
8
|
|
|
|
50
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
589
|
|
|
|
602
|
|
|
|
1,780
|
|
|
|
1,551
|
|
Consumer
|
|
|
25
|
|
|
|
19
|
|
|
|
91
|
|
|
|
55
|
|
Commercial and industrial
|
|
|
140
|
|
|
|
42
|
|
|
|
392
|
|
|
|
656
|
|
Agricultural
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
129
|
|
|
|
181
|
|
|
|
566
|
|
|
|
644
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recoveries
|
|
|
883
|
|
|
|
844
|
|
|
|
2,829
|
|
|
|
2,906
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loans charged off (recovered)
|
|
|
3,541
|
|
|
|
3,507
|
|
|
|
7,706
|
|
|
|
9,759
|
|
Provision for loan losses
|
|
|
35,023
|
|
|
|
5,536
|
|
|
|
39,324
|
|
|
|
16,905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30
|
|
$
|
111,620
|
|
|
$
|
76,370
|
|
|
$
|
111,620
|
|
|
$
|
76,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs (recoveries) to average loans receivable
|
|
|
0.18
|
%
|
|
|
0.20
|
%
|
|
|
0.13
|
%
|
|
|
0.19
|
%
|
Allowance for loan losses to total loans
|
|
|
1.09
|
|
|
|
1.07
|
|
|
|
1.09
|
|
|
|
1.07
|
|
Allowance for loan losses to net charge-offs (recoveries)
|
|
|
795
|
|
|
|
547
|
|
|
|
1,083
|
|
|
|
586
|
|
Allocated Allowance for Loan Losses.
We use a risk rating and specific reserve methodology in the
calculation and allocation of our allowance for loan losses. While the allowance is allocated to various loan categories in assessing and evaluating the level of the allowance, the allowance is available to cover charge-offs incurred in all loan
categories. Because a portion of our portfolio has not matured to the degree necessary to obtain reliable loss data from which to calculate estimated future losses, the unallocated portion of the allowance is an integral component of the total
allowance. Although unassigned to a particular credit relationship or product segment, this portion of the allowance is vital to safeguard against the imprecision inherent in estimating credit losses.
81
The Companys third quarter earnings were significantly impacted by Hurricane Irma which
made initial landfall in the Florida Keys and a second landfall just south of Naples, Florida, as a Category 4 hurricane on September 10, 2017. While the total impact of this hurricane on Home BancSharess financial condition and results
of operation may not be known for some time, the Company has included in third quarter earnings, certain charges, including the establishment of reserves, related to the hurricane. Based on initial assessments of the potential credit impact and
damage to the approximately $2.41 billion in loans receivable we have in the disaster area, the Company has accrued $33.4 million of
pre-tax
hurricane expenses. The $33.4 million of hurricane
expenses include the following items: $32.9 million to establish a storm-related provision for loan losses and a $556,000 charge related to direct damage expenses incurred through September 30, 2017.
The changes for the period ended September 30, 2017 and the year ended December 31, 2016 in the allocation of the allowance for loan
losses for the individual types of loans are primarily associated with changes in the ASC 310 calculations, both individual and aggregate, and changes in the ASC 450 calculations. These calculations are affected by changes in individual loan
impairments, changes in asset quality, net charge-offs during the period and normal changes in the outstanding loan portfolio, as well any changes to the general allocation factors due to changes within the actual characteristics of the loan
portfolio.
Table 14 presents the allocation of allowance for loan losses as of September 30, 2017 and December 31, 2016.
Table 14: Allocation of Allowance for Loan Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2017
|
|
|
As of December 31, 2016
|
|
|
|
Allowance
Amount
|
|
|
% of
loans
(1)
|
|
|
Allowance
Amount
|
|
|
% of
loans
(1)
|
|
|
|
(Dollars in thousands)
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
$
|
44,414
|
|
|
|
44.1
|
%
|
|
$
|
27,695
|
|
|
|
42.7
|
%
|
Construction/land development
|
|
|
18,920
|
|
|
|
16.0
|
|
|
|
11,522
|
|
|
|
15.4
|
|
Agricultural
|
|
|
1,103
|
|
|
|
0.9
|
|
|
|
493
|
|
|
|
1.1
|
|
Residential real estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
22,156
|
|
|
|
19.1
|
|
|
|
14,397
|
|
|
|
18.3
|
|
Multifamily residential
|
|
|
3,512
|
|
|
|
4.8
|
|
|
|
2,120
|
|
|
|
4.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
90,105
|
|
|
|
84.9
|
|
|
|
56,227
|
|
|
|
82.1
|
|
Consumer
|
|
|
467
|
|
|
|
0.5
|
|
|
|
398
|
|
|
|
0.6
|
|
Commercial and industrial
|
|
|
14,622
|
|
|
|
12.6
|
|
|
|
12,756
|
|
|
|
15.2
|
|
Agricultural
|
|
|
2,998
|
|
|
|
0.6
|
|
|
|
3,790
|
|
|
|
1.0
|
|
Other
|
|
|
187
|
|
|
|
1.4
|
|
|
|
|
|
|
|
1.1
|
|
Unallocated
|
|
|
3,241
|
|
|
|
|
|
|
|
6,831
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total allowance for loan losses
|
|
$
|
111,620
|
|
|
|
100.0
|
%
|
|
$
|
80,002
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Percentage of loans in each category to total loans receivable.
|
Investment Securities
Our securities portfolio is the second largest component of earning assets and provides a significant source of revenue.
Securities within the portfolio are classified as
held-to-maturity,
available-for-sale,
or trading based on the intent and objective of the investment and the ability to hold to maturity. Fair values of securities are based on quoted market prices where available. If quoted market prices are not available, estimated fair values are
based on quoted market prices of comparable securities. The estimated effective duration of our securities portfolio was 2.7 years as of September 30, 2017.
As of September 30, 2017 and December 31, 2016, we had $234.9 million and $284.2 million of
held-to-maturity
securities, respectively. Of the $234.9 million of
held-to-maturity
securities as of September 30, 2017, $6.1 million were invested in U.S. Government-sponsored enterprises, $78.6 million were invested in mortgage-backed securities and $150.2 million were invested in state and political
subdivisions. Of the $284.2 million of
held-to-maturity
securities as of December 31, 2016, $6.6 million were invested in U.S. Government-sponsored
enterprises, $107.8 million were invested in mortgage-backed securities and $169.7 million were invested in state and political subdivisions.
82
Securities
available-for-sale
are reported at fair value with unrealized holding gains and losses reported as a separate component of stockholders equity as other
comprehensive income. Securities that are held as
available-for-sale
are used as a part of our asset/liability management strategy. Securities that may be sold in
response to interest rate changes, changes in prepayment risk, the need to increase regulatory capital, and other similar factors are classified as
available-for-sale.
Available-for-sale
securities were $1.58 billion and $1.07 billion as of September 30, 2017 and December 31, 2016, respectively.
As of September 30, 2017, $891.9 million, or 56.6%, of our
available-for-sale
securities were invested in mortgage-backed securities, compared to $579.5 million, or 54.0%, of our
available-for-sale
securities as of December 31, 2016. To reduce our income tax burden, $249.1 million, or 15.8%, of our
available-for-sale
securities portfolio as of September 30, 2017, was primarily invested in
tax-exempt
obligations of state
and political subdivisions, compared to $216.5 million, or 20.2%, of our
available-for-sale
securities as of December 31, 2016. Also, we had approximately
$397.2 million, or 25.2%, invested in obligations of U.S. Government-sponsored enterprises as of September 30, 2017, compared to $236.8 million, or 22.1%, of our
available-for-sale
securities as of December 31, 2016.
Certain investment securities are valued at less than their historical cost. These declines are primarily the result of the rate for these
investments yielding less than current market rates. Based on evaluation of available evidence, we believe the declines in fair value for these securities are temporary. It is our intent to hold these securities to recovery. Should the impairment of
any of these securities become other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other than temporary impairment is identified.
See Note 3 Investment Securities in the Condensed Notes to Consolidated Financial Statements for the carrying value and fair value
of investment securities.
Deposits
Our deposits averaged $7.88 billion and $7.58 billion for the three and nine-month periods ended September 30, 2017. Total
deposits as of September 30, 2017 were $10.45 billion. Excluding $2.97 billion of deposits acquired through the 2017 acquisitions, total deposits as of September 30, 2017 were $7.48 billion, for an annualized increase of
10.3% from December 31, 2016. Deposits are our primary source of funds. We offer a variety of products designed to attract and retain deposit customers. Those products consist of checking accounts, regular savings deposits, NOW accounts, money
market accounts and certificates of deposit. Deposits are gathered from individuals, partnerships and corporations in our market areas. In addition, we obtain deposits from state and local entities and, to a lesser extent, U.S. Government and other
depository institutions.
Our policy also permits the acceptance of brokered deposits. From time to time, when appropriate in order to
fund strong loan demand, we accept brokered time deposits, generally in denominations of less than $250,000, from a regional brokerage firm, and other national brokerage networks. Additionally, we participate in the Certificates of Deposit Account
Registry Service (CDARS), which provides for reciprocal
(two-way)
transactions among banks for the purpose of giving our customers the potential for multi-million-dollar FDIC insurance
coverage. Although classified as brokered deposits for regulatory purposes, funds placed through the CDARS program are our customer relationships that management views as core funding. We also participate in the
One-Way
Buy Insured Cash Sweep (ICS) service, which provides for
one-way
buy transactions among banks for the purpose of purchasing cost-effective
floating-rate funding without collateralization or stock purchase requirements. Management believes these sources represent a reliable and cost efficient alternative funding source for the Company. However, to the extent that our condition or
reputation deteriorates, or to the extent that there are significant changes in market interest rates which we do not elect to match, we may experience an outflow of brokered deposits. In that event we would be required to obtain alternate sources
for funding.
83
Table 15 reflects the classification of the brokered deposits as of September 30, 2017 and
December 31, 2016.
Table 15: Brokered Deposits
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
December 31, 2016
|
|
|
|
(In thousands)
|
|
Time Deposits
|
|
$
|
60,022
|
|
|
$
|
70,028
|
|
CDARS
|
|
|
46,959
|
|
|
|
26,389
|
|
Insured Cash Sweep and Other Transaction Accounts
|
|
|
1,023,363
|
|
|
|
406,120
|
|
|
|
|
|
|
|
|
|
|
Total Brokered Deposits
|
|
$
|
1,130,344
|
|
|
$
|
502,537
|
|
|
|
|
|
|
|
|
|
|
During the third quarter of 2017, we completed our acquisition of Stonegate which increased our brokered
deposits by $488.2 million as of September 30, 2017.
The interest rates paid are competitively priced for each particular
deposit product and structured to meet our funding requirements. We will continue to manage interest expense through deposit pricing. We may allow higher rate deposits to run off during periods of limited loan demand. We believe that additional
funds can be attracted and deposit growth can be realized through deposit pricing if we experience increased loan demand or other liquidity needs.
The Federal Reserve Board sets various benchmark rates, including the Federal Funds rate, and thereby influences the general market rates of
interest, including the deposit and loan rates offered by financial institutions. The Federal Funds target rate, which is the cost to banks of immediately available overnight funds, was lowered on December 16, 2008 to a historic low of 0.25% to
0%, where it remained until December 16, 2015, when the target rate was increased slightly to 0.50% to 0.25%. Since December 31, 2016, the Federal Funds target rate has increased 75 basis points and is currently at 1.25% to 1.00%.
Table 16 reflects the classification of the average deposits and the average rate paid on each deposit category, which are in excess of
10 percent of average total deposits, for the three and nine-month periods ended September 30, 2017 and 2016.
Table 16:
Average Deposit Balances and Rates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
Average
Amount
|
|
|
Average
Rate Paid
|
|
|
Average
Amount
|
|
|
Average
Rate Paid
|
|
|
|
(Dollars in thousands)
|
|
Non-interest-bearing
transaction accounts
|
|
$
|
1,924,933
|
|
|
|
|
%
|
|
$
|
1,663,621
|
|
|
|
|
%
|
Interest-bearing transaction accounts
|
|
|
3,973,270
|
|
|
|
0.56
|
|
|
|
3,243,984
|
|
|
|
0.27
|
|
Savings deposits
|
|
|
539,515
|
|
|
|
0.10
|
|
|
|
477,035
|
|
|
|
0.06
|
|
Time deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$100,000 or more
|
|
|
989,697
|
|
|
|
0.89
|
|
|
|
880,098
|
|
|
|
0.60
|
|
Other time deposits
|
|
|
454,965
|
|
|
|
0.48
|
|
|
|
481,491
|
|
|
|
0.37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
7,882,380
|
|
|
|
0.43
|
%
|
|
$
|
6,746,229
|
|
|
|
0.24
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
Average
Amount
|
|
|
Average
Rate Paid
|
|
|
Average
Amount
|
|
|
Average
Rate Paid
|
|
|
|
(Dollars in thousands)
|
|
Non-interest-bearing
transaction accounts
|
|
$
|
1,847,843
|
|
|
|
|
%
|
|
$
|
1,596,603
|
|
|
|
|
%
|
Interest-bearing transaction accounts
|
|
|
3,792,388
|
|
|
|
0.46
|
|
|
|
3,202,095
|
|
|
|
0.26
|
|
Savings deposits
|
|
|
523,644
|
|
|
|
0.09
|
|
|
|
462,306
|
|
|
|
0.06
|
|
Time deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$100,000 or more
|
|
|
949,493
|
|
|
|
0.82
|
|
|
|
874,648
|
|
|
|
0.55
|
|
Other time deposits
|
|
|
465,890
|
|
|
|
0.44
|
|
|
|
508,009
|
|
|
|
0.39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
7,579,258
|
|
|
|
0.37
|
%
|
|
$
|
6,643,661
|
|
|
|
0.23
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84
Securities Sold Under Agreements to Repurchase
We enter into short-term purchases of securities under agreements to resell (resale agreements) and sales of securities under agreements to
repurchase (repurchase agreements) of substantially identical securities. The amounts advanced under resale agreements and the amounts borrowed under repurchase agreements are carried on the balance sheet at the amount advanced. Interest incurred on
repurchase agreements is reported as interest expense. Securities sold under agreements to repurchase increased $28.2 million, or 23.3%, from $121.3 million as of December 31, 2016 to $149.5 million as of September 30, 2017.
FHLB Borrowed Funds
Our FHLB borrowed funds were $1.04 billion and $1.31 billion at September 30, 2017 and December 31, 2016, respectively.
During the third quarter of 2017, approximately $300.2 million of FHLB advances matured. Due to the issuance of the $300 million of subordinated notes during the second quarter of 2017, we made the strategic decision to not renew all of
the matured advances. At September 30, 2017, $245.0 million and $799.3 million of the outstanding balance were issued as short-term and long-term advances, respectively. At December 31, 2016, $40.0 million and
$1.27 billion of the outstanding balance were issued as short-term and long-term advances, respectively. Our remaining FHLB borrowing capacity was $1.23 billion and $718.2 million as of September 30, 2017 and December 31,
2016, respectively. Maturities of borrowings as of September 30, 2017 include: 2017 $75.3 million; 2018 $409.5 million; 2019 $143.1 million; 2020 $146.4 million; 2021 zero; after 2021
$25.0 million. Expected maturities will differ from contractual maturities because FHLB may have the right to call or HBI the right to prepay certain obligations.
Subordinated Debentures
Subordinated debentures, which consist of subordinated debt securities and guaranteed payments on trust preferred securities, were
$367.8 million as of September 30, 2017. As of December 31, 2016, subordinated debentures consisted only of $60.8 million of guaranteed payments on trust preferred securities.
The trust preferred securities are
tax-advantaged
issues that qualify for Tier 1 capital treatment
subject to certain limitations. Distributions on these securities are included in interest expense. Each of the trusts is a statutory business trust organized for the sole purpose of issuing trust securities and investing the proceeds in our
subordinated debentures, the sole asset of each trust. The trust preferred securities of each trust represent preferred beneficial interests in the assets of the respective trusts and are subject to mandatory redemption upon payment of the
subordinated debentures held by the trust. We wholly own the common securities of each trust. Each trusts ability to pay amounts due on the trust preferred securities is solely dependent upon our making payment on the related subordinated
debentures. Our obligations under the subordinated securities and other relevant trust agreements, in aggregate, constitute a full and unconditional guarantee by us of each respective trusts obligations under the trust securities issued by
each respective trust.
On April 3, 2017, the Company completed an underwritten public offering of $300 million in aggregate
principal amount of its 5.625%
Fixed-to-Floating
Rate Subordinated Notes due 2027 (the Notes). The Notes were issued at 99.997% of par, resulting in net
proceeds, after underwriting discounts and issuance costs, of approximately $297.0 million. The Notes are unsecured, subordinated debt obligations of the Company and will mature on April 15, 2027. The Notes qualify as Tier 2 capital for
regulatory purposes.
Stockholders Equity
Stockholders equity was $2.21 billion at September 30, 2017 compared to $1.33 billion at December 31, 2016. The
increase in stockholders equity is primarily associated with the $77.5 million and $742.3 million of common stock issued to the GHI and Stonegate shareholders, respectively, plus the $70.5 million increase in retained earnings
combined with $3.5 million of comprehensive income and $5.0 million of share-based compensation offset by the repurchase of $19.5 million of our common stock during the first nine months of 2017. The annualized improvement in
stockholders equity for the first nine months of 2017 excluding the $819.8 million of common stock issued to both the GHI and Stonegate shareholders was 6.0%. As of September 30, 2017 and December 31, 2016, our equity to asset
ratio was 15.48% and 13.53%, respectively. Book value per common share was $12.71 at September 30, 2017 compared to $9.45 at December 31, 2016. The acquisition of Stonegate added $2.45 per share to book value per common share as of
September 30, 2017.
85
Common Stock Cash Dividends.
We declared cash dividends on our common stock of $0.11 per
share and $0.09 per share for the three-month periods ended September 30, 2017 and 2016, respectively. The common stock dividend payout ratio for the three months ended September 30, 2017 and 2016 was 106.03% and 28.97%, respectively. The
common stock dividend payout ratio for the nine months ended September 30, 2017 and 2016 was 36.93% and 27.58%, respectively. For the fourth quarter of 2017, the Board of Directors declared a regular $0.11 per share quarterly cash dividend
payable December 6, 2017, to shareholders of record November 15, 2017.
Stock Repurchase Program.
On
January 20, 2017, our Board of Directors authorized the repurchase of up to an additional 5,000,000 shares of our common stock under our previously approved stock repurchase program, which brought the total amount of authorized shares to
repurchase to 9,752,000 shares. During the first nine months of 2017, we utilized a portion of this stock repurchase program. We repurchased a total of 800,000 shares with a weighted-average stock price of $24.44 per share during the first nine
months of 2017. Shares repurchased to date under the program total 4,467,064 shares. The remaining balance available for repurchase is 5,284,936 shares at September 30, 2017.
Liquidity and Capital Adequacy Requirements
Risk-Based Capital.
We, as well as our bank subsidiary, are subject to various regulatory capital requirements administered by the
federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and other discretionary actions by regulators that, if enforced, could have a direct material effect on our financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action, we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities and certain
off-balance-sheet
items as calculated under regulatory accounting practices. Our capital amounts and classifications are also subject to qualitative judgments by the regulators as to components, risk
weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy require us to maintain minimum
amounts and ratios (set forth in the table below) of total and Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets. Management believes that, as of September 30, 2017 and December 31, 2016, we met all regulatory
capital adequacy requirements to which we were subject.
On April 3, 2017, the Company completed an underwritten public offering of
$300 million in aggregate principal amount of its Notes which were issued at 99.997% of par, resulting in net proceeds, after underwriting discounts and issuance costs, of approximately $297.0 million. The Notes are unsecured, subordinated
debt obligations of the Company and will mature on April 15, 2027. The Notes qualify as Tier 2 capital for regulatory purposes.
Due
to the timing of the closing of our acquisition of Stonegate, our reported leverage ratio is artificially inflated as of September 30, 2017 since Stonegates assets are included in the average asset balance for only four days during the
quarter. Had the acquisition closed at the beginning of the third quarter, our leverage ratio would have been approximately 9.89% on a
pro-forma
basis as of September 30, 2017.
86
Table 17 presents our risk-based capital ratios on a consolidated basis as of September 30,
2017 and December 31, 2016.
Table 17: Risk-Based Capital
|
|
|
|
|
|
|
|
|
|
|
As of
September 30,
2017
|
|
|
As of
December 31,
2016
|
|
|
|
(Dollars in thousands)
|
|
Tier 1 capital
|
|
|
|
|
|
|
|
|
Stockholders equity
|
|
$
|
2,206,716
|
|
|
$
|
1,327,490
|
|
Goodwill and core deposit intangibles, net
|
|
|
(969,258
|
)
|
|
|
(388,336
|
)
|
Unrealized (gain) loss on
available-for-sale
securities
|
|
|
(3,889
|
)
|
|
|
(400
|
)
|
Deferred tax assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total common equity Tier 1 capital
|
|
|
1,233,569
|
|
|
|
938,754
|
|
Qualifying trust preferred securities
|
|
|
68,461
|
|
|
|
59,000
|
|
|
|
|
|
|
|
|
|
|
Total Tier 1 capital
|
|
|
1,302,030
|
|
|
|
997,754
|
|
|
|
|
|
|
|
|
|
|
Tier 2 capital
|
|
|
|
|
|
|
|
|
Qualifying subordinated notes
|
|
|
297,172
|
|
|
|
|
|
Qualifying allowance for loan losses
|
|
|
111,620
|
|
|
|
80,002
|
|
|
|
|
|
|
|
|
|
|
Total Tier 2 capital
|
|
|
408,792
|
|
|
|
80,002
|
|
|
|
|
|
|
|
|
|
|
Total risk-based capital
|
|
$
|
1,710,822
|
|
|
$
|
1,077,756
|
|
|
|
|
|
|
|
|
|
|
Average total assets for leverage ratio
|
|
$
|
9,884,301
|
|
|
$
|
9,388,812
|
|
|
|
|
|
|
|
|
|
|
Risk weighted assets
|
|
$
|
11,361,791
|
|
|
$
|
8,308,468
|
|
|
|
|
|
|
|
|
|
|
Ratios at end of period
|
|
|
|
|
|
|
|
|
Common equity Tier 1 capital
|
|
|
10.86
|
%
|
|
|
11.30
|
%
|
Leverage ratio
|
|
|
13.17
|
|
|
|
10.63
|
|
Tier 1 risk-based capital
|
|
|
11.46
|
|
|
|
12.01
|
|
Total risk-based capital
|
|
|
15.06
|
|
|
|
12.97
|
|
Minimum guidelines Basel III
phase-in
schedule
|
|
|
|
|
|
|
|
|
Common equity Tier 1 capital
|
|
|
5.75
|
%
|
|
|
5.125
|
%
|
Leverage ratio
|
|
|
4.00
|
|
|
|
4.000
|
|
Tier 1 risk-based capital
|
|
|
7.25
|
|
|
|
6.625
|
|
Total risk-based capital
|
|
|
9.25
|
|
|
|
8.625
|
|
Minimum guidelines Basel III fully
phased-in
|
|
|
|
|
|
|
|
|
Common equity Tier 1 capital
|
|
|
7.00
|
%
|
|
|
7.00
|
%
|
Leverage ratio
|
|
|
4.00
|
|
|
|
4.00
|
|
Tier 1 risk-based capital
|
|
|
8.50
|
|
|
|
8.50
|
|
Total risk-based capital
|
|
|
10.50
|
|
|
|
10.50
|
|
Well-capitalized guidelines
|
|
|
|
|
|
|
|
|
Common equity Tier 1 capital
|
|
|
6.50
|
%
|
|
|
6.50
|
%
|
Leverage ratio
|
|
|
5.00
|
|
|
|
5.00
|
|
Tier 1 risk-based capital
|
|
|
8.00
|
|
|
|
8.00
|
|
Total risk-based capital
|
|
|
10.00
|
|
|
|
10.00
|
|
As of the most recent notification from regulatory agencies, our bank subsidiary was
well-capitalized under the regulatory framework for prompt corrective action. To be categorized as well-capitalized, we, as well as our banking subsidiary, must maintain minimum common equity Tier 1 capital, leverage, Tier 1
risk-based capital, and total risk-based capital ratios as set forth in the table. There are no conditions or events since that notification that we believe have changed the bank subsidiarys category.
87
Non-GAAP
Financial Measurements
Our accounting and reporting policies conform to generally accepted accounting principles in the United States (GAAP) and the
prevailing practices in the banking industry. However, due to the application of purchase accounting from our significant number of historical acquisitions (especially Liberty and Stonegate), we believe certain
non-GAAP
measures and ratios that exclude the impact of these items are useful to the investors and users of our financial statements to evaluate our performance, including net interest margin and efficiency
ratio.
Because of our significant number of historical acquisitions, our net interest margin was impacted by accretion and amortization
of the fair value adjustments recorded in purchase accounting. The accretion and amortization affect certain operating ratios as we accrete loan discounts to interest income and amortize premiums and discounts on time deposits to interest expense.
We believe these
non-GAAP
measures and ratios, when taken together with the corresponding GAAP
measures and ratios, provide meaningful supplemental information regarding our performance. We believe investors benefit from referring to these
non-GAAP
measures and ratios in assessing our operating results
and related trends, and when planning and forecasting future periods. However, these
non-GAAP
measures and ratios should be considered in addition to, and not as a substitute for or preferable to, ratios
prepared in accordance with GAAP. In Tables 18 through 20 below, we have provided a reconciliation of, where applicable, the most comparable GAAP financial measures and ratios to the
non-GAAP
financial
measures and ratios, or a reconciliation of the
non-GAAP
calculation of the financial measure for the periods indicated:
Table 18: Average Yield on Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
(Dollars in thousands)
|
|
Interest income on loans receivable FTE
|
|
$
|
113,239
|
|
|
$
|
103,135
|
|
|
$
|
332,072
|
|
|
$
|
300,839
|
|
Purchase accounting accretion
|
|
|
7,068
|
|
|
|
11,576
|
|
|
|
23,019
|
|
|
|
32,590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
interest income on loans receivable
FTE
|
|
$
|
106,171
|
|
|
$
|
91,559
|
|
|
$
|
309,053
|
|
|
$
|
268,249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average loans
|
|
$
|
7,938,716
|
|
|
$
|
7,027,634
|
|
|
$
|
7,785,925
|
|
|
$
|
6,909,240
|
|
Average purchase accounting loan discounts
(1)
|
|
|
97,978
|
|
|
|
115,766
|
|
|
|
97,158
|
|
|
|
131,506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average loans
(non-GAAP)
|
|
$
|
8,036,694
|
|
|
$
|
7,143,400
|
|
|
$
|
7,883,083
|
|
|
$
|
7,040,746
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average yield on loans (reported)
|
|
|
5.66
|
%
|
|
|
5.84
|
%
|
|
|
5.70
|
%
|
|
|
5.82
|
%
|
Average contractual yield on loans
(non-GAAP)
|
|
|
5.24
|
|
|
|
5.10
|
|
|
|
5.24
|
|
|
|
5.09
|
|
(1)
|
Balance includes $158.0 million and $108.0 million of discount for credit losses on purchased loans as of September 30, 2017 and 2016, respectively.
|
Table 19: Average Cost of Deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
(Dollars in thousands)
|
|
Interest expense on interest-bearing deposits
|
|
$
|
8,535
|
|
|
$
|
4,040
|
|
|
$
|
20,831
|
|
|
$
|
11,528
|
|
Amortization of time deposit (premiums)/discounts, net
|
|
|
106
|
|
|
|
361
|
|
|
|
300
|
|
|
|
1,094
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
interest expense on interest-bearing
deposits
|
|
$
|
8,641
|
|
|
$
|
4,401
|
|
|
$
|
21,131
|
|
|
$
|
12,622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average interest-bearing deposits
|
|
$
|
5,957,447
|
|
|
$
|
5,082,608
|
|
|
$
|
5,731,415
|
|
|
$
|
5,047,058
|
|
Average unamortized CD (premium)/discount, net
|
|
|
(733
|
)
|
|
|
(732
|
)
|
|
|
(721
|
)
|
|
|
(1,096
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average interest-bearing deposits
(non-GAAP)
|
|
$
|
5,956,714
|
|
|
$
|
5,081,876
|
|
|
$
|
5,730,694
|
|
|
$
|
5,045,962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average cost of deposits (reported)
|
|
|
0.57
|
%
|
|
|
0.32
|
%
|
|
|
0.49
|
%
|
|
|
0.31
|
%
|
Average contractual cost of deposits
(non-GAAP)
|
|
|
0.58
|
|
|
|
0.34
|
|
|
|
0.49
|
|
|
|
0.33
|
|
88
Table 20: Net Interest Margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
(Dollars in thousands)
|
|
Net interest income FTE
|
|
$
|
108,615
|
|
|
$
|
105,522
|
|
|
$
|
324,809
|
|
|
$
|
308,567
|
|
Total purchase accounting accretion
|
|
|
7,174
|
|
|
|
11,937
|
|
|
|
23,319
|
|
|
|
33,684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
net interest income FTE
|
|
$
|
101,441
|
|
|
$
|
93,585
|
|
|
$
|
301,490
|
|
|
$
|
274,883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average interest-earning assets
|
|
$
|
9,794,999
|
|
|
$
|
8,646,026
|
|
|
$
|
9,584,607
|
|
|
$
|
8,530,362
|
|
Average purchase accounting loan discounts
(1)
|
|
|
97,978
|
|
|
|
115,766
|
|
|
|
97,158
|
|
|
|
131,506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average interest-earning assets
(non-GAAP)
|
|
$
|
9,892,977
|
|
|
$
|
8,761,792
|
|
|
$
|
9,681,765
|
|
|
$
|
8,661,868
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin (reported)
|
|
|
4.40
|
%
|
|
|
4.86
|
%
|
|
|
4.53
|
%
|
|
|
4.83
|
%
|
Net interest margin
(non-GAAP)
|
|
|
4.07
|
|
|
|
4.25
|
|
|
|
4.16
|
|
|
|
4.24
|
|
(1)
|
Balance includes $158.0 million and $108.0 million of discount for credit losses on purchased loans as of September 30, 2017 and 2016, respectively.
|
The tables below present
non-GAAP
reconciliations of earnings excluding
non-fundamental
items and diluted earnings per share excluding
non-fundamental
items as well as the
non-GAAP
computations of
tangible book value per share, return on average assets excluding intangible amortization, return on average tangible equity excluding intangible amortization, tangible equity to tangible assets and the core efficiency ratio. The
non-fundamental
items used in these calculations are included in financial results presented in accordance with generally accepted accounting principles (GAAP).
Earnings excluding
non-fundamental
items is a meaningful
non-GAAP
financial measure for management, as it excludes
non-fundamental
items such as merger expenses and/or gains and losses. Management believes the exclusion of
these
non-fundamental
items in expressing earnings provides a meaningful foundation for
period-to-period
and
company-to-company
comparisons, which management believes will aid both investors and analysts in analyzing our fundamental financial measures and predicting future
performance. These
non-GAAP
financial measures are also used by management to assess the performance of our business, because management does not consider these
non-fundamental
items to be relevant to ongoing financial performance.
89
In Table 21 below, we have provided a reconciliation of the
non-GAAP
calculation of the financial measure for the periods indicated.
Table 21: Earnings
Excluding
Non-Fundamental
Items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
(Dollars in thousands)
|
|
GAAP net income available to common shareholders (A)
|
|
$
|
14,821
|
|
|
$
|
43,620
|
|
|
$
|
111,774
|
|
|
$
|
128,556
|
|
Non-fundamental
items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on acquisitions
|
|
|
|
|
|
|
|
|
|
|
(3,807
|
)
|
|
|
|
|
Merger expenses
|
|
|
18,227
|
|
|
|
|
|
|
|
25,743
|
|
|
|
|
|
FDIC loss share
buy-out
|
|
|
|
|
|
|
3,849
|
|
|
|
|
|
|
|
3,849
|
|
Hurricane expenses
(1)
|
|
|
33,445
|
|
|
|
|
|
|
|
33,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-fundamental
items
|
|
|
51,672
|
|
|
|
3,849
|
|
|
|
55,381
|
|
|
|
3,849
|
|
Tax-effect
of
non-fundamental
items
(2)
|
|
|
20,045
|
|
|
|
1,510
|
|
|
|
22,626
|
|
|
|
1,510
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-fundamental
items
after-tax
(B)
|
|
|
31,627
|
|
|
|
2,339
|
|
|
|
32,755
|
|
|
|
2,339
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings excluding
non-fundamental
items (C)
|
|
$
|
46,448
|
|
|
$
|
45,959
|
|
|
$
|
144,529
|
|
|
$
|
130,895
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average diluted shares outstanding (D)
|
|
|
144,987
|
|
|
|
140,703
|
|
|
|
143,839
|
|
|
|
140,685
|
|
GAAP diluted earnings per share: A/D
|
|
$
|
0.10
|
|
|
$
|
0.31
|
|
|
$
|
0.78
|
|
|
$
|
0.91
|
|
Non-fundamental
items
after-tax:
B/D
|
|
|
0.22
|
|
|
|
0.02
|
|
|
|
0.22
|
|
|
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share excluding non-
fundamental items: C/D
|
|
$
|
0.32
|
|
|
$
|
0.33
|
|
|
$
|
1.00
|
|
|
$
|
0.93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Hurricane expenses includes $32,889 of provision for loan losses and $556 of damage expense related to Hurricane Irma.
|
(2)
|
Effective tax rate of 39.225%, adjusted for
non-taxable
gain on acquisition and
non-deductible
merger-related costs.
|
We had $980.1 million, $396.3 million, and $397.1 million total goodwill, core deposit intangibles and other intangible assets
as of September 30, 2017, December 31, 2016 and September 30, 2016, respectively. Because of our level of intangible assets and related amortization expenses, management believes tangible book value per share, return on average assets
excluding intangible amortization, return on average tangible equity excluding intangible amortization and tangible equity to tangible assets are useful in evaluating our company. These calculations, which are similar to the GAAP calculation of
diluted earnings per share, tangible book value, return on average assets, return on average equity, and equity to assets, are presented in Tables 22 through 25, respectively.
Table 22: Tangible Book Value Per Share
|
|
|
|
|
|
|
|
|
|
|
As of
September 30, 2017
|
|
|
As of
December 31, 2016
|
|
|
|
(In thousands, except per share data)
|
|
Book value per share: A/B
|
|
$
|
12.71
|
|
|
$
|
9.45
|
|
Tangible book value per share:
(A-C-D)/B
|
|
|
7.06
|
|
|
|
6.63
|
|
(A) Total equity
|
|
$
|
2,206,716
|
|
|
$
|
1,327,490
|
|
(B) Shares outstanding
|
|
|
173,666
|
|
|
|
140,472
|
|
(C) Goodwill
|
|
$
|
929,129
|
|
|
$
|
377,983
|
|
(D) Core deposit and other intangibles
|
|
|
50,982
|
|
|
|
18,311
|
|
90
Table 23: Return on Average Assets Excluding Intangible Amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
(Dollars in thousands)
|
|
Return on average assets: A/D
|
|
|
0.54
|
%
|
|
|
1.81
|
%
|
|
|
1.41
|
%
|
|
|
1.81
|
%
|
Return on average assets excluding intangible amortization:
B/(D-E)
|
|
|
0.59
|
|
|
|
1.91
|
|
|
|
1.49
|
|
|
|
1.91
|
|
Return on average assets excluding gain on acquisitions, merger expenses, FDIC loss share
buy-out
expense and hurricane expenses: (A+C)/D
|
|
|
1.70
|
|
|
|
1.90
|
|
|
|
1.82
|
|
|
|
1.84
|
|
(A) Net income
|
|
$
|
14,821
|
|
|
$
|
43,620
|
|
|
$
|
111,774
|
|
|
$
|
128,556
|
|
Intangible amortization
after-tax
|
|
|
551
|
|
|
|
463
|
|
|
|
1,566
|
|
|
|
1,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(B) Earnings excluding intangible amortization
|
|
$
|
15,372
|
|
|
$
|
44,083
|
|
|
$
|
113,340
|
|
|
$
|
129,996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(C)
Non-fundamental
items
after-tax
|
|
$
|
31,627
|
|
|
$
|
2,339
|
|
|
$
|
32,755
|
|
|
$
|
2,339
|
|
(D) Average assets
|
|
|
10,853,559
|
|
|
|
9,602,363
|
|
|
|
10,617,917
|
|
|
|
9,498,915
|
|
(E) Average goodwill, core deposits and other intangible assets
|
|
|
462,799
|
|
|
|
397,429
|
|
|
|
440,465
|
|
|
|
398,195
|
|
Table 24: Return on Average Tangible Equity Excluding Intangible Amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
(Dollars in thousands)
|
|
Return on average equity: A/D
|
|
|
3.88
|
%
|
|
|
13.62
|
%
|
|
|
10.33
|
%
|
|
|
13.83
|
%
|
Return on average tangible equity excluding intangible amortization:
B/(D-E)
|
|
|
5.80
|
|
|
|
20.01
|
|
|
|
15.06
|
|
|
|
20.59
|
|
Return on average equity excluding gain on acquisitions, merger expenses, FDIC loss share
buy-out
expense and hurricane expenses: (A+C)/D
|
|
|
12.17
|
|
|
|
14.35
|
|
|
|
13.36
|
|
|
|
14.08
|
|
(A) Net income
|
|
$
|
14,821
|
|
|
$
|
43,620
|
|
|
$
|
111,774
|
|
|
$
|
128,556
|
|
(B) Earnings excluding intangible amortization
|
|
|
15,372
|
|
|
|
44,083
|
|
|
|
113,340
|
|
|
|
129,996
|
|
(C)
Non-fundamental
items
after-tax
|
|
|
31,627
|
|
|
|
2,339
|
|
|
|
32,755
|
|
|
|
2,339
|
|
(D) Average equity
|
|
|
1,513,829
|
|
|
|
1,274,077
|
|
|
|
1,446,740
|
|
|
|
1,241,594
|
|
(E) Average goodwill, core deposits and other intangible assets
|
|
|
462,799
|
|
|
|
397,429
|
|
|
|
440,465
|
|
|
|
398,195
|
|
Table 25: Tangible Equity to Tangible Assets
|
|
|
|
|
|
|
|
|
|
|
As of
September 30,
2017
|
|
|
As of
December 31,
2016
|
|
|
|
(Dollars in thousands)
|
|
Equity to assets: B/A
|
|
|
15.48
|
%
|
|
|
13.53
|
%
|
Tangible equity to tangible assets:
(B-C-D)/(A-C-D)
|
|
|
9.24
|
|
|
|
9.89
|
|
(A) Total assets
|
|
$
|
14,255,967
|
|
|
$
|
9,808,465
|
|
(B) Total equity
|
|
|
2,206,716
|
|
|
|
1,327,490
|
|
(C) Goodwill
|
|
|
929,129
|
|
|
|
377,983
|
|
(D) Core deposit and other intangibles
|
|
|
50,982
|
|
|
|
18,311
|
|
91
The efficiency ratio is a standard measure used in the banking industry and is calculated by
dividing
non-interest
expense less amortization of core deposit intangibles by the sum of net interest income on a tax equivalent basis and
non-interest
income. The core
efficiency ratio is a meaningful
non-GAAP
measure for management, as it excludes
non-core
items and is calculated by dividing
non-interest
expense less amortization of core deposit intangibles by the sum of net interest income on a tax equivalent basis and
non-interest
income excluding
non-core
items such as merger expenses and/or gains and losses. In Table 26 below, we have provided a reconciliation of the
non-GAAP
calculation of the financial measure for
the periods indicated.
Table 26: Core Efficiency Ratio
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
(Dollars in thousands)
|
|
Net interest income (A)
|
|
$
|
106,769
|
|
|
$
|
103,653
|
|
|
$
|
318,936
|
|
|
$
|
302,751
|
|
Non-interest
income (B)
|
|
|
21,457
|
|
|
|
22,014
|
|
|
|
72,344
|
|
|
|
63,223
|
|
Non-interest
expense (C)
|
|
|
70,846
|
|
|
|
51,026
|
|
|
|
176,990
|
|
|
|
144,261
|
|
FTE Adjustment (D)
|
|
|
1,846
|
|
|
|
1,869
|
|
|
|
5,873
|
|
|
|
5,816
|
|
Amortization of intangibles (E)
|
|
|
906
|
|
|
|
762
|
|
|
|
2,576
|
|
|
|
2,370
|
|
Non-core
items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on acquisitions
|
|
$
|
|
|
|
$
|
|
|
|
$
|
3,807
|
|
|
$
|
|
|
Gain (loss) on OREO, net
|
|
|
335
|
|
|
|
132
|
|
|
|
849
|
|
|
|
(713
|
)
|
Gain (loss) on SBA loans
|
|
|
163
|
|
|
|
364
|
|
|
|
738
|
|
|
|
443
|
|
Gain (loss) on branches, equipment and other assets, net
|
|
|
(1,337
|
)
|
|
|
(86
|
)
|
|
|
(962
|
)
|
|
|
701
|
|
Gain (loss) on securities, net
|
|
|
136
|
|
|
|
|
|
|
|
939
|
|
|
|
25
|
|
Other income
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
925
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-core
non-interest
income (F)
|
|
$
|
(703
|
)
|
|
$
|
410
|
|
|
$
|
5,371
|
|
|
$
|
1,381
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger expenses
|
|
$
|
18,227
|
|
|
$
|
|
|
|
$
|
25,743
|
|
|
$
|
|
|
FDIC loss share
buy-out
|
|
|
|
|
|
|
3,849
|
|
|
|
|
|
|
|
3,849
|
|
Hurricane damage expense
|
|
|
556
|
|
|
|
|
|
|
|
556
|
|
|
|
|
|
Other expense
(2)
|
|
|
|
|
|
|
|
|
|
|
47
|
|
|
|
1,914
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-core
non-interest
expense (G)
|
|
$
|
18,783
|
|
|
$
|
3,849
|
|
|
$
|
26,346
|
|
|
$
|
5,763
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Efficiency ratio (reported):
((C-E)/(A+B+D))
|
|
|
53.77
|
%
|
|
|
39.41
|
%
|
|
|
43.92
|
%
|
|
|
38.16
|
%
|
Core efficiency ratio
(non-GAAP):
((C-E-G)/(A+B+D-F))
|
|
|
39.12
|
|
|
|
36.51
|
|
|
|
37.79
|
|
|
|
36.75
|
|
(3)
|
Amount includes recoveries on historical losses.
|
(4)
|
Amount includes vacant properties write-downs.
|
Recently Issued Accounting Pronouncements
See Note 21 in the Condensed Notes to Consolidated Financial Statements for a discussion of certain recently issued and recently adopted
accounting pronouncements.
92