Item 7.
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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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The following discussion and analysis presents our consolidated financial condition and results of operations for the years ended
December 31, 2017, 2016 and 2015. This discussion should be read together with the Summary Consolidated Financial Data, our consolidated financial statements and the notes thereto, and other financial data included in this document.
In addition to the historical information provided below, we have made certain estimates and forward-looking statements that involve risks and uncertainties. Our actual results could differ significantly from those anticipated in these estimates and
in the forward-looking statements as a result of certain factors, including those discussed in the section of this document captioned Risk Factors, and elsewhere in this document. 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 (Centennial). As of December 31, 2017, we had, on a consolidated basis, total assets of $14.45 billion, loans receivable, net of $10.22 billion, total deposits of $10.39 billion, and
stockholders equity of $2.20 billion.
We generate most of our revenue from interest on loans and investments, service charges,
and mortgage banking income. Deposits and FHLB borrowed funds are our primary source of funding. Our largest expenses are interest on our funding sources, salaries and related employee benefits and occupancy and equipment. We measure our performance
by calculating our net interest margin, return on average assets and return on average common equity. We also measure our performance by our efficiency ratio and core efficiency ratio
(non-GAAP).
The
efficiency ratio is calculated by dividing
non-interest
expense less amortization of core deposit intangibles by the sum of net interest income on a tax equivalent basis and
non-interest
income. The core efficiency ratio is a meaningful
non-GAAP
measure for management, as it excludes
non-core
items and
is calculated by dividing
non-interest
expense less amortization of core deposit intangibles by the sum of net interest income on a tax equivalent basis and
non-interest
income excluding
non-core
items such as merger expenses and/or gains and losses.
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Table 1: Key Financial Measures
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As of or for the Years Ended December 31,
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2017
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2016
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2015
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(Dollars in thousands, except per share data)
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Total assets
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$
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14,449,760
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$
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9,808,465
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$
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9,289,122
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Loans receivable
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10,331,188
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7,387,699
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6,641,571
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Allowance for loan losses
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110,266
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80,002
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69,224
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Total deposits
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10,388,502
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6,942,427
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6,438,509
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Total stockholders equity
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2,204,291
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1,327,490
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1,199,757
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Net income
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135,083
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177,146
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138,199
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Basic earnings per share
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0.90
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1.26
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1.01
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Diluted earnings per share
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0.89
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1.26
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1.01
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Net interest margin FTE
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4.51
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%
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4.81
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%
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4.98
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%
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Net interest margin FTE
(non-GAAP)
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4.12
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4.26
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4.23
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Efficiency ratio
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41.89
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37.65
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40.44
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Core efficiency ratio
(non-GAAP)
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37.66
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36.55
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39.48
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Return on average assets
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1.17
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1.85
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1.68
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Return on average common equity
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8.23
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14.08
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12.77
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48
2017 Overview
Our net income decreased $42.0 million, or 23.7%, to $135.1 million for the year ended December 31, 2017, from
$177.1 million for the same period in 2016. On a diluted earnings per share basis, our earnings were $0.89 per share and $1.26 per share for the years ended December 31, 2017 and 2016, respectively, representing a decrease of $0.37 per
share or 29.37% for the year ended 2017 when compared to the previous year. Excluding the $36.9 million
one-time
Tax Cuts and Jobs Act (TCJA) charge, $33.4 million of hurricane expense,
and $25.7 million of merger expenses associated with the 2017 acquisitions offset by $3.8 million of
one-time
non-taxable
gain on acquisition, 2017 annual
after-tax
earnings excluding
non-fundamental
items were $204.8 million, an increase of $27.8 million, or 15.7%, from 2016 annual
after-tax
earnings excluding
non-fundamental
items of $177.0 million (See Table 27 for the
non-GAAP
tabular reconciliation).
The $27.8 million increase in earnings excluding
non-fundamental
items is primarily associated with additional net interest income largely resulting from our acquisitions combined with $125.2 million
of organic loan growth plus a decrease in the
non-hurricane
related provision for loan losses during 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 on deposits and 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 4.81% for the year ended December 31, 2016 to 4.51% for the year ended December 31,
2017. For the year ended December 31, 2017 and 2016, we recognized $35.7 million and $42.3 million, respectively, in total net accretion for acquired loans and deposits. The
non-GAAP
margin
excluding accretion income was 4.12% and 4.26% for the years ended December 31, 2017 and 2016, respectively. Additionally, the
non-GAAP
yield on loans excluding accretion income was 5.21% and 5.10% for
the years ended December 31, 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 $13.1 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 2017.
Our efficiency ratio was 41.89% for the
year ended December 31, 2017, compared to 37.65% for the same period in 2016. For year ended 2017, our core efficiency ratio was 37.66% which increased from the 36.55% reported for the year ended 2016 (See Table 32 for the
non-GAAP
tabular reconciliation). 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 and/or gains and losses.
Our return on average assets was 1.17% for the year ended December 31, 2017, compared to 1.85% for
the same period in 2016. Excluding
non-fundamental
items, our return on average assets was 1.78% for the year ended December 31, 2017, compared to 1.85% for the same period in 2016 (See Table 29 for the
non-GAAP
tabular reconciliation). Our return on average common equity was 8.23% for the year ended December 31, 2017, compared to 14.08% for the same period in 2016. Excluding
non-fundamental
items, our return on average common equity was 12.48% for the year ended December 31, 2017, compared to 14.07% for the same period in 2016 (See Table 30 for the
non-GAAP
tabular reconciliation).
Our total assets as of December 31, 2017 increased
$4.64 billion to $14.45 billion from the $9.81 billion reported as of December 31, 2016. Our loan portfolio increased $2.94 billion to $10.33 billion as of December 31, 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 $876.8 million to $2.20 billion as of December 31, 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
$74.7 million increase in retained earnings offset by $3.8 million of comprehensive loss and the repurchase of $20.8 million of our common stock during 2017. The improvement in stockholders equity for 2017, excluding the
$77.5 million and $742.3 million of common stock issued to the GHI and Stonegate shareholders, respectively, was 4.3%.
49
As of December 31, 2017, our
non-performing
loans
decreased to $44.7 million, or 0.43%, 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 246.70% as of December 31, 2017, compared to 126.74% as of December 31, 2016.
Non-performing
loans from our Arkansas franchise were $15.5 million at December 31, 2017 compared
to $28.5 million as of December 31, 2016.
Non-performing
loans from our Florida franchise were $28.2 million at December 31, 2017 compared to $34.0 million as of December 31,
2016.
Non-performing
loans from our Alabama franchise were $929,000 at December 31, 2017 compared to $656,000 as of December 31, 2016. There were no
non-performing
loans from our Centennial CFG franchise.
As of December 31, 2017, our
non-performing
assets decreased to $63.6 million, or 0.44%, 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 $25.6 million at December 31, 2017 compared to $41.0 million as of December 31, 2016.
Non-performing
assets from our Florida franchise were $36.4 million at December 31, 2017 compared to $36.8 million as of December 31, 2016.
Non-performing
assets from our Alabama franchise were $1.6 million at December 31, 2017 compared to $1.2 million as of December 31, 2016. There were no
non-performing
assets from our Centennial CFG franchise.
2016 Overview
Our net income increased $38.9 million, or 28.2%, to $177.1 million for the year ended December 31, 2016, from
$138.2 million for the same period in 2015. On a diluted earnings per share basis, our earnings were $1.26 per share and $1.01 per share for the years ended December 31, 2016 and 2015, respectively, representing an increase of $0.25 per
share or 24.8% for the year ended 2016 when compared to the previous year. The $38.9 million increase in net income is primarily associated with additional net interest income during 2016 largely resulting from our 2015 acquisitions, organic
loan growth, a slight decrease in provision for loan losses, growth in
non-interest
income and the reduced amortization of the indemnification asset, when compared to the same period in 2015. These
improvements were partially offset by an increase in the costs associated with the asset growth when compared to the same period in 2015.
Our GAAP net interest margin decreased from 4.98% for the year ended December 31, 2015 to 4.81% for the year ended December 31,
2016. For the year ended December 31, 2016 and 2015, we recognized $42.3 million and $47.6 million, respectively, in total net accretion for acquired loans and deposits. The
non-GAAP
margin
excluding accretion income was flat at 4.24% and 4.23% for the year ended December 31, 2016 and 2015. Additionally, the
non-GAAP
yield on loans excluding accretion income was also relatively flat at 5.10%
and 5.05% for the year ended December 31, 2016 and 2015, respectively. Consequently, with a growth of the average loan balance of $1.25 billion, we experienced a decline in the GAAP yield on loans and net interest margin because the
organic loan growth was approximately at our lower
non-GAAP
loan yields.
Our efficiency ratio was
37.65% for the year ended December 31, 2016, compared to 40.44% for the same period in 2015. For year ended 2016, our core efficiency ratio was 36.55% which is improved from the 39.48% reported for the year ended 2015. While we have realized
the cost savings from our acquisitions and reduced costs from our recent branch closures, the improvement in the core efficiency ratio was primarily achieved through revenue from additional net interest income during 2016 resulting from our
acquisitions and our organic loan growth, growth in
non-interest
income and our July 2016
buy-out
of the FDIC loss share portfolio. 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-fundamental
items such as merger expenses, FDIC loss share
buy-out
expense and/or gains and
losses.
Our return on average assets was 1.85% for the year ended December 31, 2016, compared to 1.68% for the same period in 2015.
Our return on average common equity was 14.08% for the year ended December 31, 2016, compared to 12.77% for the same period in 2015. We have been making notable progress in improving the performance of our legacy and acquired franchises, which
is reflected in the improvement in our return on average assets and return on average common equity from 2015 to 2016.
50
Our total assets as of December 31, 2016 increased $519.3 million to $9.81 billion
from the $9.29 billion reported as of December 31, 2015. Our loan portfolio increased $746.1 million to $7.39 billion as of December 31, 2016, from $6.64 billion as of December 31, 2015. This increase is a result
of our organic loan growth since December 31, 2015. Stockholders equity increased $127.7 million to $1.33 billion as of December 31, 2016, compared to $1.20 billion as of December 31, 2015. The improvement in
stockholders equity for the year ended 2016 was 10.6%. The increase in stockholders equity is primarily associated with the $129.1 million increase in retained earnings.
As of December 31, 2016, our
non-performing
loans decreased to $63.1 million, or 0.85%, of
total loans from $63.5 million, or 0.96%, of total loans as of December 31, 2015. The allowance for loan losses as a percent of
non-performing
loans increased to 126.74% as of December 31, 2016,
compared to 109.00% as of December 31, 2015.
Non-performing
loans from our Arkansas franchise were $28.5 million at December 31, 2016 compared to $28.3 million as of December 31, 2015.
Non-performing
loans from our Florida franchise were $34.0 million at December 31, 2016 compared to $35.1 million as of December 31, 2015.
Non-performing
loans from our Alabama franchise were $656,000 at December 31, 2016 compared to $132,000 as of December 31, 2015. There were no
non-performing
loans from our Centennial CFG franchise.
As of December 31, 2016, our
non-performing
assets
decreased to $79.1 million, or 0.81%, of total assets from $82.7 million, or 0.89%, of total assets as of December 31, 2015.
Non-performing
assets from our Arkansas franchise were
$41.0 million at December 31, 2016 compared to $40.3 million as of December 31, 2015.
Non-performing
assets from our Florida franchise were $36.8 million at December 31, 2016
compared to $41.5 million as of December 31, 2015.
Non-performing
assets from our Alabama franchise were $1.2 million at December 31, 2016 compared to $892,000 as of December 31, 2015.
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.
51
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.
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.
52
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.
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.
53
Acquisitions
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.
Through our acquisition and merger of Stonegate 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 established a correspondent banking relationship with Banco Internacional de
Comercio, S.A. in Havana, Cuba. As of December 31, 2017, this correspondent banking relationship does not have a material impact to the Companys financial position and results of operations.
See Note 2 Business Combinations in the Notes to Consolidated Financial Statements for an additional discussion regarding the
acquisition of Stonegate.
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.
54
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.
See Note 2 Business Combinations in the Notes to Consolidated Financial Statements for an additional discussion regarding the
acquisition of BOC.
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.
See Note 2 Business Combinations in the Notes to
Consolidated Financial Statements for an additional discussion regarding the acquisition of GHI.
Florida Business BancGroup, Inc.
On October 1, 2015, we completed our acquisition of FBBI, parent company of Bay Cities Bank (Bay Cities). We paid
a purchase price to the FBBI shareholders of $104.1 million for the FBBI acquisition. Under the terms of the agreement, shareholders of FBBI received 4,159,708 shares of our common stock valued at approximately $83.8 million as of
October 1, 2015, plus approximately $20.3 million in cash in exchange for all outstanding shares of FBBI common stock. A portion of the cash consideration, $2.0 million, was placed into escrow with the FBBI shareholders having a
contingent right to receive their
pro-rata
portions of such amount. The amount, if any, of such escrowed funds to be released to FBBI shareholders would depend upon the amount of losses that the Company
incurred in the two years following the completion of the merger related to two class action lawsuits pending against Bay Cities. In August 2017, the Company distributed the full amount of this contingent cash consideration to the former FBBI
shareholders, less $10,000 for compensation paid to a representative designated by FBBI who acted on behalf of the FBBI shareholders in connection with the escrow arrangements.
FBBI formerly operated six branch locations and a loan production office in the Tampa Bay area and in Sarasota, Florida. Including the
effects of any purchase accounting adjustments, as of October 1, 2015, FBBI had approximately $564.5 million in total assets, $408.3 million in loans after $14.1 million of loan discounts, and $472.0 million in deposits.
See Note 2 Business Combinations in the Notes to Consolidated Financial Statements for an additional discussion regarding the
acquisition of FBBI.
55
Pool of National Commercial Real Estate Loans
On April 1, 2015, Centennial acquired a pool of national commercial real estate loans from AM PR LLC, an affiliate of J.C.
Flowers & Co., totaling approximately $289.1 million for a purchase price of 99% of the total principal value of the acquired loans. The acquired loans were originated by the former Doral Bank of San Juan, Puerto Rico within its Doral
Property Finance portfolio and were transferred to the Seller by Banco Popular of Puerto Rico (Popular) upon its acquisition of the assets and liabilities of Doral Bank from the FDIC, as receiver for the failed Doral Bank. This pool of
loans is now managed by a division of Centennial known as the Centennial Commercial Finance Group (Centennial CFG), which is responsible for servicing the acquired loan pool and originating new loan production.
In connection with this acquisition of loans, the Company opened a loan production office on April 23, 2015 in New York City, which
became a branch on September 1, 2016. Through the New York office, Centennial CFG is building out a national lending platform focusing on commercial real estate plus commercial and industrial loans. As of December 31, 2017 and 2016,
Centennial CFG had $1.44 billion and $1.11 billion in total loans net of discount, respectively.
Doral Banks
Florida Panhandle operations
On February 27, 2015, Centennial acquired all the deposits and substantially all the assets of
Doral Florida through an alliance agreement with Popular who was the successful lead bidder to acquire the assets and liabilities of the failed Doral Bank from the FDIC. Including the effects of the purchase accounting adjustments, the acquisition
provided us with loans of approximately $37.9 million net of loan discounts, deposits of approximately $467.6 million, plus a $428.2 million cash settlement to balance the transaction. We recorded a bargain purchase gain of
$1.6 million, in connection with the Doral Florida acquisition. The FDIC did not provide loss-sharing with respect to the acquired assets.
Prior to the acquisition, Doral Florida operated five branch locations in Panama City, Panama City Beach and Pensacola, Florida plus a loan
production office in Tallahassee, Florida. At the time of acquisition, Centennial operated 29 branch locations in the Florida Panhandle. As a result, we closed all five branch locations during the July 2015 systems conversion and returned the
facilities back to the FDIC.
See Note 2 Business Combinations in the Notes to Consolidated Financial
Statements for an additional discussion regarding the acquisition of Doral Florida.
Termination of Remaining Loss-Share Agreements
Effective July 27, 2016, we reached an agreement terminating our remaining loss-share agreements with the FDIC. As a result,
$57.4 million of these loans including their associated discounts previously classified as covered loans migrated to
non-covered
loans status during 2016. 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 will, however, 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.
56
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. During 2017, the Company opened a branch location in Clearwater, Florida and a loan production office in Los Angeles, California which is under the management of Centennial CFG.
As a result of our continued focus on efficiency, during 2017, we closed four branch locations in our Florida footprint and one branch
location in Daphne, Alabama.
During 2017,
the Company acquired a total of 33 branches through the acquisitions of GHI, BOC and Stonegate. In an effort to achieve efficiencies, primarily from the Stonegate acquisition, the Company plans to close or merge several Florida locations during the
first quarter of 2018. During the remainder of 2018, we may announce additional strategic consolidations where it improves efficiency in certain markets.
As of December 31, 2017, we had 170 branch locations. There were 76 branches in Arkansas, 88 branches in Florida, five branches in
Alabama and one branch in New York City.
Results of Operations for the Years Ended December 31, 2017, 2016 and 2015
Our net income decreased $42.0 million, or 23.7%, to $135.1 million for the year ended December 31, 2017, from
$177.1 million for the same period in 2016. On a diluted earnings per share basis, our earnings were $0.89 per share and $1.26 per share for the years ended December 31, 2017 and 2016, respectively, representing a decrease of $0.37 per
share or 29.37% for the year ended 2017 when compared to the previous year. Excluding the $36.9 million
one-time
TCJA charge, $33.4 million of hurricane expense, and $25.7 million of merger
expenses associated with the 2017 acquisitions offset by $3.8 million of
one-time
non-taxable
gain on acquisition, 2017 annual
after-tax
earnings excluding
non-fundamental
items were $204.8 million, an increase of $27.8 million, or 15.7%, from 2016 annual
after-tax
earnings excluding
non-fundamental
items of $177.0 million (See Table 27 for the
non-GAAP
tabular reconciliation).
The $27.8 million increase in earnings excluding
non-fundamental
items is primarily associated with additional net interest income largely resulting from our acquisitions combined with $125.2 million
of organic loan growth plus a decrease in the
non-hurricane
related provision for loan losses during 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 on deposits and 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 increased $38.9 million, or 28.2%, to $177.1 million for the year ended December 31, 2016, from
$138.2 million for the same period in 2015. On a diluted earnings per share basis, our earnings were $1.26 per share and $1.01 per share for the years ended December 31, 2016 and 2015, respectively, representing an increase of $0.25 per
share, or 24.8%, for the year ended 2016 when compared to the previous year. The $38.9 million increase in net income is primarily associated with additional net interest income during 2016 largely resulting from our 2015 acquisitions, organic
loan growth, a slight decrease in provision for loan losses, growth in
non-interest
income, and the reduced amortization of the indemnification asset, when compared to the same period in 2015. These
improvements were partially offset by an increase in the costs associated with the asset growth when compared to the same period in 2015.
57
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 and 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 years ended December 31, 2017, 2016 and 2015).
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 100 basis points and is currently at 1.50% to 1.25%.
Our GAAP
net interest margin decreased from 4.81% for the year ended December 31, 2016 to 4.51% for the year ended December 31, 2017. For the year ended December 31, 2017 and 2016, we recognized $35.7 million and $42.3 million,
respectively, in total net accretion for acquired loans and deposits. The
non-GAAP
margin excluding accretion income was 4.12% and 4.26% for the years ended December 31, 2017 and 2016, respectively.
Additionally, the
non-GAAP
yield on loans excluding accretion income was 5.21% and 5.10% for the years ended December 31, 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 $13.1 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 2017.
Net interest income on a fully taxable equivalent basis
increased $49.9 million, or 12.1%, to $463.8 million for the year ended December 31, 2017, from $413.9 million for the same period in 2016. This increase in net interest income was the result of an $83.6 million increase in
interest income combined with a $33.8 million increase in interest expense. The $83.6 million increase in interest income was primarily the result of a higher level of earning assets offset by lower yields on our loans. The higher level of
earning assets resulted in an increase in interest income of $84.9 million. The lower yield was primarily driven by the decline of loan accretion income on our historical acquisitions offset by increased loan production in the higher rate
environment, which resulted in a $1.3 million decrease in interest income. The $33.8 million increase in interest expense for the year ended December 31, 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 $22.0 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 $11.8 million.
Our net interest margin decreased from 4.98% for the year ended December 31, 2015 to 4.81% for the year ended December 31, 2016. For
the years ended December 31, 2016 and 2015, we recognized $42.3 million and $47.6 million, respectively, in total net accretion for acquired loans and deposits. The
non-GAAP
margin excluding
accretion income was flat at 4.24% and 4.23% for the years ended December 31, 2016 and 2015, respectively. Additionally, the
non-GAAP
yield on loans excluding accretion income was also relatively flat at
5.10% and 5.05% for the years ended December 31, 2016 and 2015, respectively. Consequently, with growth of the average loan balance of $1.25 billion, we experienced a decline in the GAAP yield on loans and net interest margin because the
organic loan growth was approximately at our lower
non-GAAP
loan yields.
58
Net interest income on a fully taxable equivalent basis increased $50.5 million, or 13.9%,
to $413.9 million for the year ended December 31, 2016, from $363.4 million for the same period in 2015. This increase in net interest income was the result of a $59.3 million increase in interest income combined with an
$8.8 million increase in interest expense. The $59.3 million increase in interest income was primarily the result of a higher level of earning assets offset by lower yields on our loans. The higher level of earning assets resulted in an
increase in interest income of $74.2 million. The lower yield was primarily driven by the repricing of our loans, which resulted in a $14.9 million decrease in interest income. The $8.8 million increase in interest expense for the
year ended December 31, 2016, is primarily the result of an increase in higher level of our interest bearing liabilities from our acquisitions combined with our interest bearing liabilities repricing in a slightly higher interest rate
environment. The higher level of our interest bearing liabilities resulted in an increase in interest expense of approximately $4.9 million. The repricing of our interest bearing liabilities in a slightly higher interest rate environment
resulted in a $3.9 million increase in interest expense.
Net interest margin, on a fully taxable equivalent basis, was 4.51% for the
year ended December 31, 2017, compared to 4.81% and 4.98% for the same periods in 2016 and 2015, respectively. The
non-GAAP
margin excluding accretion income was 4.12%, 4.26% and 4.23% for the years ended
December 31, 2017, 2016 and 2015, respectively.
Additional information and analysis for our net interest margin can be found in
Tables 24 through 26 of our
Non-GAAP
Financial Measurements section of this Managements Discussion and Analysis of Financial Condition and Results of Operations.
Tables 2 and 3 reflect an analysis of net interest income on a fully taxable equivalent basis for the years ended December 31, 2017, 2016
and 2015, as well as changes in fully taxable equivalent net interest margin for the years 2017 compared to 2016 and 2016 compared to 2015.
Table 2: Analysis of Net Interest Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
(Dollars in thousands)
|
|
Interest income
|
|
$
|
520,251
|
|
|
$
|
436,537
|
|
|
$
|
377,436
|
|
Fully taxable equivalent adjustment
|
|
|
7,856
|
|
|
|
7,924
|
|
|
|
7,710
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income fully taxable equivalent
|
|
|
528,107
|
|
|
|
444,461
|
|
|
|
385,146
|
|
Interest expense
|
|
|
64,346
|
|
|
|
30,579
|
|
|
|
21,724
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income fully taxable equivalent
|
|
$
|
463,761
|
|
|
$
|
413,882
|
|
|
$
|
363,422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yield on earning assets fully taxable equivalent
|
|
|
5.14
|
%
|
|
|
5.17
|
%
|
|
|
5.28
|
%
|
Cost of interest-bearing liabilities
|
|
|
0.82
|
|
|
|
0.46
|
|
|
|
0.38
|
|
Net interest spread fully taxable equivalent
|
|
|
4.32
|
|
|
|
4.71
|
|
|
|
4.90
|
|
Net interest margin fully taxable equivalent
|
|
|
4.51
|
|
|
|
4.81
|
|
|
|
4.98
|
|
Table 3: Changes in Fully Taxable Equivalent Net Interest Margin
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2017 vs. 2016
|
|
|
2016 vs. 2015
|
|
|
|
(In thousands)
|
|
Increase (decrease) in interest income due to change in earning assets
|
|
$
|
84,906
|
|
|
$
|
74,166
|
|
Increase (decrease) in interest income due to change in earning asset yields
|
|
|
(1,260
|
)
|
|
|
(14,850
|
)
|
(Increase) decrease in interest expense due to change in interest-bearing liabilities
|
|
|
(11,752
|
)
|
|
|
(4,903
|
)
|
(Increase) decrease in interest expense due to change in interest rates paid on
interest-bearing liabilities
|
|
|
(22,015
|
)
|
|
|
(3,953
|
)
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in net interest income
|
|
$
|
49,879
|
|
|
$
|
50,460
|
|
|
|
|
|
|
|
|
|
|
59
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 years ended December 31, 2017, 2016 and 2015. 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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
Average
Balance
|
|
|
Income /
Expense
|
|
|
Yield /
Rate
|
|
|
Average
Balance
|
|
|
Income /
Expense
|
|
|
Yield /
Rate
|
|
|
Average
Balance
|
|
|
Income /
Expense
|
|
|
Yield /
Rate
|
|
|
|
(Dollars in thousands)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing balances due from banks
|
|
$
|
220,231
|
|
|
$
|
2,309
|
|
|
|
1.05
|
%
|
|
$
|
117,022
|
|
|
$
|
471
|
|
|
|
0.40
|
%
|
|
$
|
108,315
|
|
|
$
|
233
|
|
|
|
0.22
|
%
|
Federal funds sold
|
|
|
6,308
|
|
|
|
10
|
|
|
|
0.16
|
|
|
|
1,764
|
|
|
|
9
|
|
|
|
0.51
|
|
|
|
9,250
|
|
|
|
24
|
|
|
|
0.26
|
|
Investment securities taxable
|
|
|
1,300,384
|
|
|
|
26,776
|
|
|
|
2.06
|
|
|
|
1,161,428
|
|
|
|
21,246
|
|
|
|
1.83
|
|
|
|
1,114,829
|
|
|
|
21,695
|
|
|
|
1.95
|
|
Investment securities
non-taxable
|
|
|
348,865
|
|
|
|
19,411
|
|
|
|
5.56
|
|
|
|
337,318
|
|
|
|
18,598
|
|
|
|
5.51
|
|
|
|
332,048
|
|
|
|
18,309
|
|
|
|
5.51
|
|
Loans receivable
|
|
|
8,403,154
|
|
|
|
479,601
|
|
|
|
5.71
|
|
|
|
6,986,759
|
|
|
|
404,137
|
|
|
|
5.78
|
|
|
|
5,732,315
|
|
|
|
344,885
|
|
|
|
6.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets
|
|
|
10,278,942
|
|
|
$
|
528,107
|
|
|
|
5.14
|
|
|
|
8,604,291
|
|
|
$
|
444,461
|
|
|
|
5.17
|
|
|
|
7,296,757
|
|
|
$
|
385,146
|
|
|
|
5.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-earning
assets
|
|
|
1,220,163
|
|
|
|
|
|
|
|
|
|
|
|
964,562
|
|
|
|
|
|
|
|
|
|
|
|
914,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
11,499,105
|
|
|
|
|
|
|
|
|
|
|
$
|
9,568,853
|
|
|
|
|
|
|
|
|
|
|
$
|
8,210,982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings and interest-bearing transaction accounts
|
|
$
|
4,823,626
|
|
|
$
|
23,176
|
|
|
|
0.48
|
%
|
|
$
|
3,717,880
|
|
|
$
|
8,978
|
|
|
|
0.24
|
%
|
|
$
|
3,218,745
|
|
|
$
|
6,306
|
|
|
|
0.20
|
%
|
Time deposits
|
|
|
1,444,828
|
|
|
|
10,601
|
|
|
|
0.73
|
|
|
|
1,362,680
|
|
|
|
6,948
|
|
|
|
0.51
|
|
|
|
1,381,562
|
|
|
|
6,665
|
|
|
|
0.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing deposits
|
|
|
6,268,454
|
|
|
|
33,777
|
|
|
|
0.54
|
|
|
|
5,080,560
|
|
|
|
15,926
|
|
|
|
0.31
|
|
|
|
4,600,307
|
|
|
|
12,971
|
|
|
|
0.28
|
|
Federal funds purchased
|
|
|
77
|
|
|
|
1
|
|
|
|
1.30
|
|
|
|
255
|
|
|
|
2
|
|
|
|
0.78
|
|
|
|
824
|
|
|
|
4
|
|
|
|
0.49
|
|
Securities sold under agreement to
repurchase
|
|
|
134,689
|
|
|
|
918
|
|
|
|
0.68
|
|
|
|
120,576
|
|
|
|
574
|
|
|
|
0.48
|
|
|
|
156,513
|
|
|
|
621
|
|
|
|
0.40
|
|
FHLB borrowed funds
|
|
|
1,117,817
|
|
|
|
14,513
|
|
|
|
1.30
|
|
|
|
1,376,364
|
|
|
|
12,484
|
|
|
|
0.91
|
|
|
|
902,852
|
|
|
|
6,774
|
|
|
|
0.75
|
|
Subordinated debentures
|
|
|
285,733
|
|
|
|
15,137
|
|
|
|
5.30
|
|
|
|
60,826
|
|
|
|
1,593
|
|
|
|
2.62
|
|
|
|
60,826
|
|
|
|
1,354
|
|
|
|
2.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities
|
|
|
7,806,770
|
|
|
|
64,346
|
|
|
|
0.82
|
|
|
|
6,638,581
|
|
|
|
30,579
|
|
|
|
0.46
|
|
|
|
5,721,322
|
|
|
|
21,724
|
|
|
|
0.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest
bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest
bearing deposits
|
|
|
2,005,632
|
|
|
|
|
|
|
|
|
|
|
|
1,619,128
|
|
|
|
|
|
|
|
|
|
|
|
1,358,905
|
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
|
45,425
|
|
|
|
|
|
|
|
|
|
|
|
53,218
|
|
|
|
|
|
|
|
|
|
|
|
48,170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
9,857,827
|
|
|
|
|
|
|
|
|
|
|
|
8,310,927
|
|
|
|
|
|
|
|
|
|
|
|
7,128,397
|
|
|
|
|
|
|
|
|
|
Stockholders equity
|
|
|
1,641,278
|
|
|
|
|
|
|
|
|
|
|
|
1,257,926
|
|
|
|
|
|
|
|
|
|
|
|
1,082,585
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
11,499,105
|
|
|
|
|
|
|
|
|
|
|
$
|
9,568,853
|
|
|
|
|
|
|
|
|
|
|
$
|
8,210,982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest spread
|
|
|
|
|
|
|
|
|
|
|
4.32
|
%
|
|
|
|
|
|
|
|
|
|
|
4.71
|
%
|
|
|
|
|
|
|
|
|
|
|
4.90
|
%
|
Net interest income and margin
|
|
|
|
|
|
$
|
463,761
|
|
|
|
4.51
|
|
|
|
|
|
|
$
|
413,882
|
|
|
|
4.81
|
|
|
|
|
|
|
$
|
363,422
|
|
|
|
4.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60
Table 5 shows changes in interest income and interest expense resulting from changes in volume
and changes in interest rates for the year ended December 31, 2017 compared to 2016 and 2016 compared to 2015 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
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2017 over 2016
|
|
|
2016 over 2015
|
|
|
|
Volume
|
|
|
Yield
/Rate
|
|
|
Total
|
|
|
Volume
|
|
|
Yield
/Rate
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Increase (decrease) in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing balances due from banks
|
|
$
|
651
|
|
|
$
|
1,187
|
|
|
$
|
1,838
|
|
|
$
|
20
|
|
|
$
|
218
|
|
|
$
|
238
|
|
Federal funds sold
|
|
|
10
|
|
|
|
(9
|
)
|
|
|
1
|
|
|
|
(28
|
)
|
|
|
13
|
|
|
|
(15
|
)
|
Investment securities taxable
|
|
|
2,698
|
|
|
|
2,832
|
|
|
|
5,530
|
|
|
|
885
|
|
|
|
(1,333
|
)
|
|
|
(448
|
)
|
Investment securities
non-taxable
|
|
|
641
|
|
|
|
172
|
|
|
|
813
|
|
|
|
291
|
|
|
|
(2
|
)
|
|
|
289
|
|
Loans receivable
|
|
|
80,906
|
|
|
|
(5,442
|
)
|
|
|
75,464
|
|
|
|
72,998
|
|
|
|
(13,746
|
)
|
|
|
59,252
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
|
84,906
|
|
|
|
(1,260
|
)
|
|
|
83,646
|
|
|
|
74,166
|
|
|
|
(14,850
|
)
|
|
|
59,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing transaction and savings deposits
|
|
|
3,281
|
|
|
|
10,917
|
|
|
|
14,198
|
|
|
|
1,069
|
|
|
|
1,603
|
|
|
|
2,672
|
|
Time deposits
|
|
|
441
|
|
|
|
3,212
|
|
|
|
3,653
|
|
|
|
(92
|
)
|
|
|
375
|
|
|
|
283
|
|
Federal funds purchased
|
|
|
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
Securities sold under agreement to repurchase
|
|
|
73
|
|
|
|
271
|
|
|
|
344
|
|
|
|
(158
|
)
|
|
|
111
|
|
|
|
(47
|
)
|
FHLB borrowed funds
|
|
|
(2,652
|
)
|
|
|
4,681
|
|
|
|
2,029
|
|
|
|
4,084
|
|
|
|
1,626
|
|
|
|
5,710
|
|
Subordinated debentures
|
|
|
10,609
|
|
|
|
2,935
|
|
|
|
13,544
|
|
|
|
|
|
|
|
239
|
|
|
|
239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
|
11,752
|
|
|
|
22,015
|
|
|
|
33,767
|
|
|
|
4,903
|
|
|
|
3,953
|
|
|
|
8,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in net interest income
|
|
$
|
73,154
|
|
|
$
|
(23,275
|
)
|
|
$
|
49,879
|
|
|
$
|
69,263
|
|
|
$
|
(18,803
|
)
|
|
$
|
50,460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 continued to improve, we cannot be certain that the current economic conditions will improve in the 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.
61
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 in virtually every asset class, particularly in our Florida markets, have improved in recent years. Our
Arkansas markets economies remained relatively stable during and after the recession with no significant boom or bust.
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.
Our 2017 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 the Companys financial condition and results of operations may not be known for some time, the Florida Keys appears to
be currently operating at approximately 75% of its normal business activity. We included in 2017 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, we have 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 December 31, 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. As of December 31, 2017, charge-offs of $2.2 million have been taken against the storm-related provision for loan losses. Additionally,
as a result of Hurricane Irma, we offered customers located in the disaster area a
90-day
deferment on outstanding loans. During the fourth quarter of 2017, customers with loan balances totaling approximately
$211.7 million accepted the
90-day
deferment. As of December 31, 2017, loan balances totaling approximately $63.6 million remained on the
90-day
deferment.
There was $44.3 million, $18.6 million and $25.2 million provision loan losses for years ended
December 31, 2017, 2016 and 2015, respectively. Excluding $32.9 million of additional provision for loan losses related to Hurricane Irma during 2017 and the reduced provision for loan losses as a result of a significant loan recovery
during 2016, we experienced a $12.3 million decrease in the provision for loan losses during 2017 versus the 2016. This $12.3 million decrease is primarily a result of lower organic loan growth versus 2016.
We experienced a $6.6 million decrease in the provision for loan losses during 2016 versus 2015. This $6.6 million decrease is
primarily a reflection of reduced provision for loan losses as a result of a significant loan recovery offset by lower organic loan growth versus the year ended 2015. We were able to reduce 2016 provision for loan losses as a result of a significant
loan recovery from a borrower which was
charged-off
in 2010. We estimate the 2016 provision for loan losses was reduced by $4.5 million as a result of this loan recovery.
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 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.
62
Non-Interest
Income
Total
non-interest
income was $99.6 million in 2017, compared to $87.1 million in 2016 and
$65.5 million in 2015. 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 years ended December 31, 2017, 2016, and 2015, respectively, as well as changes for the years 2017 compared to 2016 and 2016 compared to 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 6:
Non-Interest
Income
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
2017 Change
|
|
|
2016 Change
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
from 2016
|
|
|
from 2015
|
|
|
|
(Dollars in thousands)
|
|
Service charges on deposit accounts
|
|
$
|
24,922
|
|
|
$
|
25,049
|
|
|
$
|
24,252
|
|
|
$
|
(127
|
)
|
|
|
(0.5
|
)%
|
|
$
|
797
|
|
|
|
3.3
|
%
|
Other service charges and fees
|
|
|
36,127
|
|
|
|
30,200
|
|
|
|
26,186
|
|
|
|
5,927
|
|
|
|
19.6
|
|
|
|
4,014
|
|
|
|
15.3
|
|
Trust fees
|
|
|
1,678
|
|
|
|
1,457
|
|
|
|
2,381
|
|
|
|
221
|
|
|
|
15.2
|
|
|
|
(924
|
)
|
|
|
(38.8
|
)
|
Mortgage lending income
|
|
|
13,286
|
|
|
|
14,399
|
|
|
|
10,423
|
|
|
|
(1,113
|
)
|
|
|
(7.7
|
)
|
|
|
3,976
|
|
|
|
38.1
|
|
Insurance commissions
|
|
|
1,948
|
|
|
|
2,296
|
|
|
|
2,268
|
|
|
|
(348
|
)
|
|
|
(15.2
|
)
|
|
|
28
|
|
|
|
1.2
|
|
Increase in cash value of life insurance
|
|
|
1,989
|
|
|
|
1,412
|
|
|
|
1,199
|
|
|
|
577
|
|
|
|
40.9
|
|
|
|
213
|
|
|
|
17.8
|
|
Dividends from FHLB, FRB, Bankers bank & other
|
|
|
3,485
|
|
|
|
3,091
|
|
|
|
1,698
|
|
|
|
394
|
|
|
|
12.7
|
|
|
|
1,393
|
|
|
|
82.0
|
|
Gain on acquisitions
|
|
|
3,807
|
|
|
|
|
|
|
|
1,635
|
|
|
|
3,807
|
|
|
|
100.0
|
|
|
|
(1,635
|
)
|
|
|
(100.0
|
)
|
Gain on sale of SBA loans
|
|
|
738
|
|
|
|
1,088
|
|
|
|
541
|
|
|
|
(350
|
)
|
|
|
(32.2
|
)
|
|
|
547
|
|
|
|
101.1
|
|
Gain (loss) on sale of branches, equipment and other assets, net
|
|
|
(960
|
)
|
|
|
700
|
|
|
|
(214
|
)
|
|
|
(1,660
|
)
|
|
|
(237.1
|
)
|
|
|
914
|
|
|
|
427.1
|
|
Gain (loss) on OREO, net
|
|
|
1,025
|
|
|
|
(554
|
)
|
|
|
(317
|
)
|
|
|
1,579
|
|
|
|
285.0
|
|
|
|
(237
|
)
|
|
|
74.8
|
|
Gain (loss) on securities, net
|
|
|
2,132
|
|
|
|
669
|
|
|
|
4
|
|
|
|
1,463
|
|
|
|
218.7
|
|
|
|
665
|
|
|
|
16,625.0
|
|
FDIC indemnification
accretion/(amortization), net
|
|
|
|
|
|
|
(772
|
)
|
|
|
(9,391
|
)
|
|
|
772
|
|
|
|
(100.0
|
)
|
|
|
8,619
|
|
|
|
(91.8
|
)
|
Other income
|
|
|
9,459
|
|
|
|
8,016
|
|
|
|
4,833
|
|
|
|
1,443
|
|
|
|
18.0
|
|
|
|
3,183
|
|
|
|
65.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-interest
income
|
|
$
|
99,636
|
|
|
$
|
87,051
|
|
|
$
|
65,498
|
|
|
$
|
12,585
|
|
|
|
14.5
|
%
|
|
$
|
21,553
|
|
|
|
32.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest
income increased $12.6 million, or 14.5%, to
$99.6 million for the year ended December 31, 2017 from $87.1 million for the same period in 2016.
Non-interest
income excluding gain on acquisitions increased $8.8 million, or 10.1%, to
$95.8 million for the year ended December 31, 2017 from $87.1 million for the same period in 2016.
Excluding gain on
acquisitions, the primary factors that resulted in the increase from December 31, 2016 to December 31, 2017 were changes related to other service charges and fees, mortgage lending, net loss on branches, equipment and other assets, net
gain on OREO, net gain on securities, and amortization on our former FDIC indemnification asset and other income.
Additional details for
the year ended December 31, 2017 on some of the more significant changes are as follows:
|
|
|
The $5.9 million increase in other service charges and fees is primarily from our 2017 acquisitions plus additional loan payoff fees generated by Centennial CFG and approximately $1.3 million of MasterCard
incentive income received during 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 2017 combined with net gains on four
vacant properties during 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 2017 versus the revaluation of seven OREO properties during 2016.
|
63
|
|
|
The $1.5 million increase in gain (loss) on securities, net, is a result of a strategic decision to recognize the gains on sales of investment securities when compared to the same period in 2016.
|
|
|
|
The $1.1 million decrease in mortgage lending income is primarily the result of lower organic loan growth versus 2016 combined with the effects 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.
|
|
|
|
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.
|
|
|
|
Other income includes loan recoveries of $2.1 million on purchased loans and $3.0 million of investment brokerage fees.
|
Excluding gain on acquisitions, the primary factors that resulted in the increase from December 31, 2015 to December 31, 2016 were
changes related to service charges on deposit accounts, other service charges and fees, trust fees, mortgage lending, dividends, gain (loss) on sale of branches, equipment and other assets, net, amortization on our FDIC indemnification asset and
other income.
|
|
|
Additional details for the year ended December 31, 2016 on some of the more significant changes are as follows:
|
|
|
|
The $8.6 million increase in FDIC indemnification accretion/amortization, net, is primarily associated with the conclusion of the five-year covered loan loss-share agreements plus the termination of our loss share
agreements during 2016.
|
|
|
|
The $4.0 million increase in other service charges and fees is primarily from our 2015 acquisitions plus additional loan payoff fees generated by Centennial CFG.
|
|
|
|
The $4.0 million increase in mortgage lending income is from the additional lending volume from our 2015 acquisitions combined with organic loan growth. We hired a mortgage lending president during 2014 to oversee
this product offering. This additional management position is responsible for improved pricing and efficiencies which are ultimately generating more revenue from the organic growth.
|
|
|
|
The $1.4 million increase in dividends from FHLB, FRB, Bankers bank & other is primarily associated with additional dividends from the FHLB. We have been increasing our use of FHLB borrowings, which
has caused us to increase our ownership in the FHLB stock, plus the FHLB has been increasing the rate on their cash dividend.
|
|
|
|
The $924,000 decrease in trust fees is primarily associated with $865,000 in
12B-1
trust fees during the second quarter of 2015, of which the Company anticipates only $77,000 will
be received on a recurring basis.
|
|
|
|
The $914,000 increase in gain (loss) on sale of branches, equipment and other assets, net is primarily associated with a gain on the sale of our Clermont, Florida branch location and a gain on the sale of a piece of
software for $738,000 and $102,000, respectively, offset by a $140,000 net loss on sale of vacant properties from closed branches during 2016.
|
|
|
|
The $797,000 increase in service charges on deposit accounts primarily results from an increase in overdraft fees from additional volume from our 2015 acquisitions and deposit growth.
|
|
|
|
Other income includes $561,000 of additional other income for an item previously
charged-off
plus loan recoveries of $591,000 on our former FDIC covered transactions, $244,000 on
other purchased loans, $925,000 on other historical losses and $1.9 million of investment brokerage fees.
|
64
Non-Interest
Expense
Non-interest
expense 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 years ended December 31, 2017,
2016, and 2015, as well as changes for the years ended 2017 compared to 2016 and 2016 compared to 2015.
Table 7:
Non-Interest
Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
2017 Change
|
|
|
2016 Change
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
from 2016
|
|
|
from 2015
|
|
|
|
(Dollars in thousands)
|
|
Salaries and employee benefits
|
|
$
|
119,369
|
|
|
$
|
101,962
|
|
|
$
|
87,512
|
|
|
$
|
17,407
|
|
|
|
17.1
|
%
|
|
$
|
14,450
|
|
|
|
16.5
|
%
|
Occupancy and equipment
|
|
|
30,611
|
|
|
|
26,129
|
|
|
|
25,967
|
|
|
|
4,482
|
|
|
|
17.2
|
|
|
|
162
|
|
|
|
0.6
|
|
Data processing expense
|
|
|
11,998
|
|
|
|
10,499
|
|
|
|
10,774
|
|
|
|
1,499
|
|
|
|
14.3
|
|
|
|
(275
|
)
|
|
|
(2.6
|
)
|
Other operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising
|
|
|
3,203
|
|
|
|
3,332
|
|
|
|
2,986
|
|
|
|
(129
|
)
|
|
|
(3.9
|
)
|
|
|
346
|
|
|
|
11.6
|
|
Merger and acquisition expenses
|
|
|
25,743
|
|
|
|
433
|
|
|
|
4,800
|
|
|
|
25,310
|
|
|
|
100.0
|
|
|
|
(4,367
|
)
|
|
|
(91.0
|
)
|
FDIC loss share
buy-out
expense
|
|
|
|
|
|
|
3,849
|
|
|
|
|
|
|
|
(3,849
|
)
|
|
|
(100.0
|
)
|
|
|
3,849
|
|
|
|
100.0
|
|
Amortization of intangibles
|
|
|
4,207
|
|
|
|
3,132
|
|
|
|
4,079
|
|
|
|
1,075
|
|
|
|
34.3
|
|
|
|
(947
|
)
|
|
|
(23.2
|
)
|
Electronic banking expense
|
|
|
6,662
|
|
|
|
5,742
|
|
|
|
5,166
|
|
|
|
920
|
|
|
|
16.0
|
|
|
|
576
|
|
|
|
11.1
|
|
Directors fees
|
|
|
1,259
|
|
|
|
1,150
|
|
|
|
1,071
|
|
|
|
109
|
|
|
|
9.5
|
|
|
|
79
|
|
|
|
7.4
|
|
Due from bank service charges
|
|
|
1,602
|
|
|
|
1,354
|
|
|
|
1,096
|
|
|
|
248
|
|
|
|
18.3
|
|
|
|
258
|
|
|
|
23.5
|
|
FDIC and state assessment
|
|
|
5,239
|
|
|
|
5,491
|
|
|
|
5,287
|
|
|
|
(252
|
)
|
|
|
(4.6
|
)
|
|
|
204
|
|
|
|
3.9
|
|
Insurance
|
|
|
2,512
|
|
|
|
2,193
|
|
|
|
2,542
|
|
|
|
319
|
|
|
|
14.5
|
|
|
|
(349
|
)
|
|
|
(13.7
|
)
|
Legal and accounting
|
|
|
2,993
|
|
|
|
2,206
|
|
|
|
2,028
|
|
|
|
787
|
|
|
|
35.7
|
|
|
|
178
|
|
|
|
8.8
|
|
Other professional fees
|
|
|
5,359
|
|
|
|
4,049
|
|
|
|
3,226
|
|
|
|
1,310
|
|
|
|
32.4
|
|
|
|
823
|
|
|
|
25.5
|
|
Operating supplies
|
|
|
1,978
|
|
|
|
1,758
|
|
|
|
1,880
|
|
|
|
220
|
|
|
|
12.5
|
|
|
|
(122
|
)
|
|
|
(6.5
|
)
|
Postage
|
|
|
1,184
|
|
|
|
1,084
|
|
|
|
1,196
|
|
|
|
100
|
|
|
|
9.2
|
|
|
|
(112
|
)
|
|
|
(9.4
|
)
|
Telephone
|
|
|
1,374
|
|
|
|
1,751
|
|
|
|
1,917
|
|
|
|
(377
|
)
|
|
|
(21.5
|
)
|
|
|
(166
|
)
|
|
|
(8.7
|
)
|
Other expense
|
|
|
14,915
|
|
|
|
15,641
|
|
|
|
16,028
|
|
|
|
(726
|
)
|
|
|
(4.6
|
)
|
|
|
(387
|
)
|
|
|
(2.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-interest
expense
|
|
$
|
240,208
|
|
|
$
|
191,755
|
|
|
$
|
177,555
|
|
|
$
|
48,453
|
|
|
|
25.3
|
%
|
|
$
|
14,200
|
|
|
|
8.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest
expense, excluding merger expenses, increased
$23.1 million, or 12.1%, to $214.5 million for the year ended December 31, 2017, from $191.3 million for the same period in 2016.
Non-interest
expense, excluding merger expenses and FDIC
loss share
buy-out
expense, was $187.5 million for the year ended December 31, 2016 compared to $172.8 million for the same period in 2015.
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 $18.6 million of
non-interest
expense during the year ended
December 31, 2017, respectively, compared to $14.5 million of
non-interest
expense during the year ended December 31, 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 2017, the Company recorded a $556,000 charge related to direct damage expenses from Hurricane Irma incurred through December 31,
2017. Of the $556,000, approximately $185,000 remained at December 31, 2017.
During 2017 and 2016, the Company had write-downs on
vacant property from closed branches of approximately $47,000 and $2.3 million, respectively. These write-downs are included in other expense.
65
The change in
non-interest
expense for 2016 when compared
to 2015 is primarily related to the completion of our 2015 acquisitions, the opening of the Centennial CFG loan production office during the second quarter of 2015, the termination of the FDIC loss share agreements, write-downs on vacant properties
from closed branches and the normal increased cost of doing business.
Income Taxes
Income tax expense increased $30.5 million, or 28.9%, to $136.0 million for the year ended December 31, 2017, from
$105.5 million for 2016. The income tax expense increased $25.2 million, or 31.4%, to $105.5 million for the year ended December 31, 2016, from $80.3 million for 2015. The effective tax rate for the years ended
December 31, 2017, 2016 and 2015 were 50.17%, 37.33% and 36.75%, respectively.
In December 2017, President Trump signed into law the
TCJA. As a result, the Company was required to revalue its deferred tax assets and deferred tax liabilities to account for the future impact of lower corporate tax rates on these deferred amounts, which resulted in a
one-time
write-down of $36.9 million. This resulted in a dilution to tangible book value of $0.21 per share as of December 31, 2017. The Company historically had a marginal tax rate of 39.225%.
Beginning January 1, 2018, the Company will benefit from a marginal tax rate of 26.135%. The
one-time
write-down will result in an approximately eight month earn back for the dilution to tangible book
value.
Excluding the $36.9 million
one-time
TCJA charge, the income tax expense decreased
$6.4 million, or 6.1%, to $99.1 million for the year ended December 31, 2017, from $105.5 million for 2016. The primary cause of the decrease in taxes excluding the TCJA charge for the year ended December 31, 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 2017.
The primary cause of the increase in taxes from 2015 to 2016 is the result of higher earnings at our historical marginal tax rate of 39.225%.
Financial Condition as of and for the Years Ended December 31, 2017 and 2016
Our total assets as of December 31, 2017 increased $4.64 billion to $14.45 billion from the $9.81 billion reported as of
December 31, 2016. Our loan portfolio increased $2.94 billion to $10.33 billion as of December 31, 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 $876.8 million to $2.20 billion as of December 31, 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 $74.7 million increase in retained earnings offset by $3.8 million of comprehensive loss
and the repurchase of $20.8 million of our common stock during 2017. The improvement in stockholders equity for 2017, excluding the $77.5 million and $742.3 million of common stock issued to the GHI and Stonegate shareholders,
respectively, was 4.3%.
Our total assets as of December 31, 2016 increased $519.3 million to $9.81 billion from the
$9.29 billion reported as of December 31, 2015. Our loan portfolio increased $746.1 million to $7.39 billion as of December 31, 2016, from $6.64 billion as of December 31, 2015. This increase is a result of our
organic loan growth since December 31, 2015. Stockholders equity increased $127.7 million to $1.33 billion as of December 31, 2016, compared to $1.20 billion as of December 31, 2015. The improvement in
stockholders equity for the year ended 2016 was 10.6%. The increase in stockholders equity is primarily associated with the $129.1 million increase in retained earnings.
66
Loan Portfolio
Our loan portfolio averaged $8.40 billion and $6.99 billion during the years ended December 31, 2017 and 2016, respectively.
Loans receivable were $10.33 billion as of December 31, 2017 compared to $7.39 billion as of December 31, 2016, which is an increase of $2.94 billion, or 39.8%.
During 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 $7.51 billion as of December 31, 2017 compared to $7.39 billion as of December 31, 2016, which is $125.2 million of organic loan growth, or 1.69% increase. Centennial CFG
produced $295.5 million of net organic loan growth during 2017 while the legacy and Stonegate footprints experienced significant net payoffs during 2017, resulting in a net decline of $153.9 million and $16.5 million, respectively.
Centennial CFG had total loans of $1.44 billion at December 31, 2017.
On February 27, 2015, we acquired $37.9 million
of loans after $4.3 million of loan discounts from Doral Florida. On April 1, 2015, we acquired a pool of national commercial real estate loans from J.C. Flowers & Co. LLC totaling approximately $289.1 million. On
October 1, 2015, we acquired $408.3 million of loans, after $14.1 million of loan discounts, from FBBI. All of these acquired loans are being accounted for in accordance with the provisions of ASC Topic
310-20
and ASC Topic
310-30.
During 2015, the five-year
loss share coverage on the commercial real estate and commercial and industrial loans acquired through the FDIC-assisted acquisitions of Old Southern, Key West, Coastal, Bayside, Wakulla and Gulf State concluded. As a result, $145.2 million of
these loans including their associated discounts previously classified as covered loans migrated to
non-covered
loans status during 2015.
During 2016, we reached an agreement terminating our remaining loss-share agreements with the FDIC. As a result, $57.4 million of these
loans including their associated discounts previously classified as covered loans migrated to
non-covered
loans status during 2016.
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 $3.41 billion, $5.26 billion, $220.0 million and
$1.44 billion as of December 31, 2017 in Arkansas, Florida, Alabama and Centennial CFG, respectively.
As of December 31,
2017, we had $485.0 million of construction/land development loans which were collateralized by land. This consisted of $239.3 million for raw land and $245.6 million for land with commercial and/or residential lots.
67
Table 8 presents our loans receivable balances by category as of December 31, 2017, 2016,
2015, 2014, and 2013.
Table 8: Loans Receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
|
(In thousands)
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
$
|
4,600,117
|
|
|
$
|
3,153,121
|
|
|
$
|
2,968,335
|
|
|
$
|
2,081,869
|
|
|
$
|
1,856,832
|
|
Construction/land development
|
|
|
1,700,491
|
|
|
|
1,135,843
|
|
|
|
944,787
|
|
|
|
740,085
|
|
|
|
611,055
|
|
Agricultural
|
|
|
82,229
|
|
|
|
77,736
|
|
|
|
75,027
|
|
|
|
73,154
|
|
|
|
82,850
|
|
Residential real estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
1,970,311
|
|
|
|
1,356,136
|
|
|
|
1,190,279
|
|
|
|
1,051,299
|
|
|
|
1,011,735
|
|
Multifamily residential
|
|
|
441,303
|
|
|
|
340,926
|
|
|
|
430,256
|
|
|
|
258,839
|
|
|
|
223,610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
8,794,451
|
|
|
|
6,063,762
|
|
|
|
5,608,684
|
|
|
|
4,205,246
|
|
|
|
3,786,082
|
|
Consumer
|
|
|
46,148
|
|
|
|
41,745
|
|
|
|
52,258
|
|
|
|
56,736
|
|
|
|
69,590
|
|
Commercial and industrial
|
|
|
1,297,397
|
|
|
|
1,123,213
|
|
|
|
850,587
|
|
|
|
678,775
|
|
|
|
517,273
|
|
Agricultural
|
|
|
49,815
|
|
|
|
74,673
|
|
|
|
67,109
|
|
|
|
48,833
|
|
|
|
37,129
|
|
Other
|
|
|
143,377
|
|
|
|
84,306
|
|
|
|
62,933
|
|
|
|
67,912
|
|
|
|
66,879
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans receivable
|
|
$
|
10,331,188
|
|
|
$
|
7,387,699
|
|
|
$
|
6,641,571
|
|
|
$
|
5,057,502
|
|
|
$
|
4,476,953
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2017 and 2016 we had no covered loan balances. As of December 31, 2015, 2014 and
2013, we had covered loan balances of $62.2 million, $240.2 million and $282.5 million, respectively.
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 (where defined) 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 December 31, 2017, commercial real estate loans totaled
$6.38 billion, or 61.8% 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 $1.92 billion, $3.36 billion, $114.4 million and $995.7 million at December 31, 2017, respectively. Including the effects of the purchase accounting adjustments, we acquired approximately $1.69 billion of
commercial real estate loans, as of acquisition date from our 2017 acquisitions.
Residential Real Estate Loans.
We originate one
to four family, residential mortgage loans generally secured by property located in our primary market areas. Approximately 49.1% and 38.4% 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 December 31, 2017 with the remaining 12.5% relating to condos and
mobile homes. Residential real estate loans generally have a
loan-to-value
ratio of up to 90%. These loans are underwritten by giving consideration to many factors
including the borrowers ability to pay, stability of employment or source of income,
debt-to-income
ratio, credit history and
loan-to-value
ratio.
68
As of December 31, 2017, residential real estate loans totaled $2.41 billion, or 23.3%,
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 franchises in Arkansas, Florida, Alabama and Centennial CFG were $847.6 million,
$1.31 billion, $75.0 million and $182.4 million at December 31, 2017, respectively. Including the effects of the purchase accounting adjustments, we acquired approximately $670.8 million of residential real estate loans, as
of acquisition date from our 2017 acquisitions.
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 December 31, 2017, consumer loans totaled $46.2 million, or 0.4% of loans receivable, compared to $41.8 million, or 0.6%
of loans receivable, as of December 31, 2016. Consumer loans originated in our franchises in Arkansas, Florida, Alabama and Centennial CFG were $22.8 million, $22.4 million, $947,000 and zero at December 31, 2017, respectively.
Including the effects of the purchase accounting adjustments, we acquired approximately $12.7 million of consumer loans, as of acquisition date from our 2017 acquisitions.
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 December 31, 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 franchises in Arkansas, Florida, Alabama and Centennial CFG were $552.1 million, $454.5 million,
$27.6 million and $263.2 million at December 31, 2017, respectively. Including the effects of the purchase accounting adjustments, we acquired approximately $339.0 million of commercial and industrial loans, as of acquisition
date from our 2017 acquisitions.
Agricultural Loans
. Agricultural loans include loans for financing agricultural production,
including loans to businesses or individuals engaged in the production of timber, poultry, livestock or crops and are not categorized as part of real estate loans. Our agricultural loans are generally secured by farm machinery, livestock, crops,
vehicles or other agricultural-related collateral. A portion of our portfolio of agricultural loans is comprised of loans to individuals which would normally be characterized as consumer loans except for the fact that the individual borrowers are
primarily engaged in the production of timber, poultry, livestock or crops.
As of December 31, 2017, agricultural loans totaled
$49.8 million, or 0.5% of loans receivable, compared to the $74.7 million, or 1.0% of loans receivable as of December 31, 2016. Agricultural loans originated in our franchises in Arkansas, Florida, Alabama and Centennial CFG were
$38.9 million, $10.8 million, $101,000 and zero at December 31, 2017, respectively.
Table 9 presents the distribution of
the maturity of our total loans as of December 31, 2017. The table also presents the portion of our loans that have fixed interest rates and interest rates that fluctuate over the life of the loans based on changes in the interest rate
environment.
69
The loans acquired during our acquisitions accrete interest income through accretion of the
difference between the carrying amount of the loans and the expected cash flows. Increases in the credit quality or cash flows of loans (reflected as an adjustment to yield and accreted into income over the weighted-average life of the loans).
Table 9: Maturity of Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One Year
or Less
|
|
|
Over One
Year
Through
Five Years
|
|
|
Over Five
Years
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
$
|
764,149
|
|
|
$
|
2,047,620
|
|
|
$
|
1,788,348
|
|
|
$
|
4,600,117
|
|
Construction/land development
|
|
|
631,733
|
|
|
|
893,857
|
|
|
|
174,901
|
|
|
|
1,700,491
|
|
Agricultural
|
|
|
21,393
|
|
|
|
36,251
|
|
|
|
24,585
|
|
|
|
82,229
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
311,225
|
|
|
|
657,576
|
|
|
|
1,001,510
|
|
|
|
1,970,311
|
|
Multifamily residential
|
|
|
57,921
|
|
|
|
201,799
|
|
|
|
181,583
|
|
|
|
441,303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
1,786,421
|
|
|
|
3,837,103
|
|
|
|
3,170,927
|
|
|
|
8,794,451
|
|
Consumer
|
|
|
15,784
|
|
|
|
25,866
|
|
|
|
4,498
|
|
|
|
46,148
|
|
Commercial and industrial
|
|
|
337,749
|
|
|
|
677,458
|
|
|
|
282,190
|
|
|
|
1,297,397
|
|
Agricultural
|
|
|
17,566
|
|
|
|
21,890
|
|
|
|
10,359
|
|
|
|
49,815
|
|
Other
|
|
|
3,312
|
|
|
|
25,627
|
|
|
|
114,438
|
|
|
|
143,377
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans receivable
|
|
$
|
2,160,832
|
|
|
$
|
4,587,944
|
|
|
$
|
3,582,412
|
|
|
$
|
10,331,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed interest rates
|
|
$
|
1,094,559
|
|
|
$
|
3,029,216
|
|
|
$
|
853,553
|
|
|
$
|
4,977,328
|
|
Floating interest rates
|
|
|
1,013,139
|
|
|
|
1,460,261
|
|
|
|
2,682,408
|
|
|
|
5,155,808
|
|
Purchased credit impaired loans
|
|
|
53,134
|
|
|
|
98,467
|
|
|
|
46,451
|
|
|
|
198,052
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans receivable
|
|
$
|
2,160,832
|
|
|
$
|
4,587,944
|
|
|
$
|
3,582,412
|
|
|
$
|
10,331,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 December 31,
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 10
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.
70
Table 10 sets forth information with respect to our
non-performing
assets as of December 31, 2017, 2016, 2015, 2014, and 2013. As of these dates, all
non-performing
restructured loans are included in
non-accrual
loans.
Table 10:
Non-performing
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
|
(Dollars in thousands)
|
|
Non-accrual
loans
|
|
$
|
34,032
|
|
|
$
|
47,182
|
|
|
$
|
36,374
|
|
|
$
|
24,691
|
|
|
$
|
15,133
|
|
Loans past due 90 days or more (principal or interest payments)
|
|
|
10,665
|
|
|
|
15,942
|
|
|
|
27,137
|
|
|
|
37,364
|
|
|
|
58,983
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-performing
loans
|
|
|
44,697
|
|
|
|
63,124
|
|
|
|
63,511
|
|
|
|
62,055
|
|
|
|
74,116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
non-performing
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreclosed assets held for sale, net
|
|
|
18,867
|
|
|
|
15,951
|
|
|
|
19,140
|
|
|
|
24,822
|
|
|
|
50,868
|
|
Other
non-performing
assets
|
|
|
3
|
|
|
|
3
|
|
|
|
38
|
|
|
|
189
|
|
|
|
391
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other
non-performing
assets
|
|
|
18,870
|
|
|
|
15,954
|
|
|
|
19,178
|
|
|
|
25,011
|
|
|
|
51,259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-performing
assets
|
|
$
|
63,567
|
|
|
$
|
79,078
|
|
|
$
|
82,689
|
|
|
$
|
87,066
|
|
|
$
|
125,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses to
non-performing
loans
|
|
|
246.70
|
%
|
|
|
126.74
|
%
|
|
|
109.00
|
%
|
|
|
88.65
|
%
|
|
|
59.12
|
%
|
Non-performing
loans to total loans
|
|
|
0.43
|
|
|
|
0.85
|
|
|
|
0.96
|
|
|
|
1.23
|
|
|
|
1.66
|
|
Non-performing
assets to total assets
|
|
|
0.44
|
|
|
|
0.81
|
|
|
|
0.89
|
|
|
|
1.18
|
|
|
|
1.84
|
|
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 $44.7 million as of December 31, 2017, compared to $63.1 million as of December 31, 2016, for a decrease of $18.4 million. The $18.4 million decrease in
non-performing
loans is the result of a $13.0 million decrease in
non-performing
loans in our Arkansas franchise, a $5.7 million decrease in
non-performing
loans in our Florida franchise and a $273,000 increase in
non-performing
loans in our Alabama franchise.
Non-performing
loans at December 31, 2017 are $15.5 million, $28.2 million, $929,000 and zero in the Arkansas, Florida, Alabama and Centennial CFG franchises, respectively. Our acquisition of Stonegate during 2017 increased our
non-performing
loans accruing past due 90 days or more by $5.4 million as of December 31, 2017.
Although the current state of the real estate market has improved, future fluctuations in the economy have the potential 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 December 31, 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, we 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 December 31, 2017, we had $19.0 million of restructured loans that are in compliance with the modified terms and are not reported as past due or
non-accrual
in Table 10. Our Florida market contains $13.1 million and our Arkansas market contains $5.9 million of these restructured loans.
71
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 December 31, 2017, the amount of TDRs was $21.2 million, a decrease of 16.9% from $25.5 million at December 31, 2016. As of December 31, 2017 and 2016, 89.7% and 88.0%, respectively, of all restructured loans were
performing to the terms of the restructure.
Total foreclosed assets held for sale were $18.9 million as of December 31, 2017,
compared to $16.0 million as of December 31, 2016 for an increase of $2.9 million. The foreclosed assets held for sale as of December 31, 2017 are comprised of $10.1 million of assets located in Arkansas, $8.1 million
of assets located in Florida, $641,000 located in Alabama and zero from Centennial CFG. Our acquisition of Stonegate during 2017 increased our foreclosed assets held for sale by $2.8 million as of December 31, 2017.
As of December 31, 2017, we had three foreclosed properties with a carrying value greater than $1.0 million. The first property is a
development property in Northwest Arkansas which was foreclosed in the first quarter of 2011. The carrying value was $2.0 million at December 31, 2017. We were able to sell approximately $382,000 of this property during January 2018. The
second property was a development property in Florida acquired from BOC with a carrying value of $2.1 million at December 31, 2017. The last property was a nonfarm
non-residential
property in Florida
acquired from Stonegate with a carrying value of $1.8 million at December 31, 2017. The Company does not currently anticipate any additional losses on these properties. As of December 31, 2017, no other foreclosed assets held for sale
have a carrying value greater than $1.0 million.
Table 11 shows the summary of foreclosed assets held for sale as of
December 31, 2017, 2016, 2015, 2014 and 2013.
Table 11: Total Foreclosed Assets Held For Sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2017
|
|
|
As of December 31, 2016
|
|
|
|
Not
Covered by
Loss Share
|
|
|
Covered by
FDIC Loss
Share
|
|
|
Total
|
|
|
Not
Covered by
Loss Share
|
|
|
Covered by
FDIC Loss
Share
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
$
|
9,766
|
|
|
$
|
|
|
|
$
|
9,766
|
|
|
$
|
9,423
|
|
|
$
|
|
|
|
$
|
9,423
|
|
Construction/land development
|
|
|
5,920
|
|
|
|
|
|
|
|
5,920
|
|
|
|
4,009
|
|
|
|
|
|
|
|
4,009
|
|
Agricultural
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
2,654
|
|
|
|
|
|
|
|
2,654
|
|
|
|
2,076
|
|
|
|
|
|
|
|
2,076
|
|
Multifamily residential
|
|
|
527
|
|
|
|
|
|
|
|
527
|
|
|
|
443
|
|
|
|
|
|
|
|
443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total foreclosed assets held for sale
|
|
$
|
18,867
|
|
|
$
|
|
|
|
$
|
18,867
|
|
|
$
|
15,951
|
|
|
$
|
|
|
|
$
|
15,951
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2015
|
|
|
As of December 31, 2014
|
|
|
|
Not
Covered by
Loss Share
|
|
|
Covered by
FDIC Loss
Share
|
|
|
Total
|
|
|
Not
Covered by
Loss Share
|
|
|
Covered by
FDIC Loss
Share
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
$
|
9,787
|
|
|
$
|
|
|
|
$
|
9,787
|
|
|
$
|
6,894
|
|
|
$
|
3,935
|
|
|
$
|
10,829
|
|
Construction/land development
|
|
|
5,286
|
|
|
|
|
|
|
|
5,286
|
|
|
|
6,189
|
|
|
|
2,847
|
|
|
|
9,036
|
|
Agricultural
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
3
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
3,233
|
|
|
|
614
|
|
|
|
3,847
|
|
|
|
3,381
|
|
|
|
1,086
|
|
|
|
4,467
|
|
Multifamily residential
|
|
|
220
|
|
|
|
|
|
|
|
220
|
|
|
|
487
|
|
|
|
|
|
|
|
487
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total foreclosed assets held for sale
|
|
$
|
18,526
|
|
|
$
|
614
|
|
|
$
|
19,140
|
|
|
$
|
16,951
|
|
|
$
|
7,871
|
|
|
$
|
24,822
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2013
|
|
|
|
Not
Covered by
Loss Share
|
|
|
Covered by
FDIC Loss
Share
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
$
|
8,422
|
|
|
$
|
9,677
|
|
|
$
|
18,099
|
|
Construction/land development
|
|
|
17,675
|
|
|
|
5,517
|
|
|
|
23,192
|
|
Agricultural
|
|
|
|
|
|
|
651
|
|
|
|
651
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
3,772
|
|
|
|
5,154
|
|
|
|
8,926
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total foreclosed assets held for sale
|
|
$
|
29,869
|
|
|
$
|
20,999
|
|
|
$
|
50,868
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 December 31, 2017, average impaired loans
were $87.2 million compared to $89.6 million as of December 31, 2016. As of December 31, 2017, impaired loans were $75.6 million compared to $93.1 million as of December 31, 2016, for a decrease of
$17.5 million. This decrease is primarily associated with the $18.4 million decrease in
non-performing
loans since December 31, 2016. As of December 31, 2017, our Arkansas, Florida, Alabama
and Centennial CFG franchises accounted for approximately $33.9 million, $40.8 million, $929,000 and zero of the impaired loans, respectively.
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.
73
As of December 31, 2017 and 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 12 shows the summary
non-accrual
loans as of December 31, 2017, 2016, 2015, 2014 and 2013:
Table 12: Total
Non-Accrual
Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2017
|
|
|
As of December 31, 2016
|
|
|
|
Not
Covered
by Loss
Share
|
|
|
Covered
by FDIC
Loss Share
|
|
|
Total
|
|
|
Not
Covered
by Loss
Share
|
|
|
Covered
by FDIC
Loss Share
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
$
|
9,600
|
|
|
$
|
|
|
|
$
|
9,600
|
|
|
$
|
17,988
|
|
|
$
|
|
|
|
$
|
17,988
|
|
Construction/land development
|
|
|
5,011
|
|
|
|
|
|
|
|
5,011
|
|
|
|
3,956
|
|
|
|
|
|
|
|
3,956
|
|
Agricultural
|
|
|
19
|
|
|
|
|
|
|
|
19
|
|
|
|
435
|
|
|
|
|
|
|
|
435
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
14,437
|
|
|
|
|
|
|
|
14,437
|
|
|
|
20,311
|
|
|
|
|
|
|
|
20,311
|
|
Multifamily residential
|
|
|
153
|
|
|
|
|
|
|
|
153
|
|
|
|
262
|
|
|
|
|
|
|
|
262
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
29,220
|
|
|
|
|
|
|
|
29,220
|
|
|
|
42,952
|
|
|
|
|
|
|
|
42,952
|
|
Consumer
|
|
|
145
|
|
|
|
|
|
|
|
145
|
|
|
|
140
|
|
|
|
|
|
|
|
140
|
|
Commercial and industrial
|
|
|
4,584
|
|
|
|
|
|
|
|
4,584
|
|
|
|
3,155
|
|
|
|
|
|
|
|
3,155
|
|
Agricultural
|
|
|
54
|
|
|
|
|
|
|
|
54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
29
|
|
|
|
|
|
|
|
29
|
|
|
|
935
|
|
|
|
|
|
|
|
935
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-accrual
loans
|
|
$
|
34,032
|
|
|
$
|
|
|
|
$
|
34,032
|
|
|
$
|
47,182
|
|
|
$
|
|
|
|
$
|
47,182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2015
|
|
|
As of December 31, 2014
|
|
|
|
Not
Covered
by Loss
Share
|
|
|
Covered
by FDIC
Loss Share
|
|
|
Total
|
|
|
Not
Covered
by Loss
Share
|
|
|
Covered
by FDIC
Loss Share
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
$
|
15,811
|
|
|
$
|
|
|
|
$
|
15,811
|
|
|
$
|
8,901
|
|
|
$
|
|
|
|
$
|
8,901
|
|
Construction/land development
|
|
|
2,952
|
|
|
|
|
|
|
|
2,952
|
|
|
|
926
|
|
|
|
|
|
|
|
926
|
|
Agricultural
|
|
|
531
|
|
|
|
|
|
|
|
531
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
12,574
|
|
|
|
|
|
|
|
12,574
|
|
|
|
11,949
|
|
|
|
|
|
|
|
11,949
|
|
Multifamily residential
|
|
|
870
|
|
|
|
|
|
|
|
870
|
|
|
|
1,344
|
|
|
|
|
|
|
|
1,344
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
32,738
|
|
|
|
|
|
|
|
32,738
|
|
|
|
23,120
|
|
|
|
|
|
|
|
23,120
|
|
Consumer
|
|
|
239
|
|
|
|
|
|
|
|
239
|
|
|
|
279
|
|
|
|
|
|
|
|
279
|
|
Commercial and industrial
|
|
|
2,363
|
|
|
|
|
|
|
|
2,363
|
|
|
|
1,108
|
|
|
|
|
|
|
|
1,108
|
|
Agricultural
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
1,034
|
|
|
|
|
|
|
|
1,034
|
|
|
|
184
|
|
|
|
|
|
|
|
184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-accrual
loans
|
|
$
|
36,374
|
|
|
$
|
|
|
|
$
|
36,374
|
|
|
$
|
24,691
|
|
|
$
|
|
|
|
$
|
24,691
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2013
|
|
|
|
Not
Covered
by Loss
Share
|
|
|
Covered
by FDIC
Loss Share
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
$
|
5,093
|
|
|
$
|
|
|
|
$
|
5,093
|
|
Construction/land development
|
|
|
1,080
|
|
|
|
|
|
|
|
1,080
|
|
Agricultural
|
|
|
89
|
|
|
|
|
|
|
|
89
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
7,283
|
|
|
|
|
|
|
|
7,283
|
|
Multifamily residential
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
13,546
|
|
|
|
|
|
|
|
13,546
|
|
Consumer
|
|
|
124
|
|
|
|
|
|
|
|
124
|
|
Commercial and industrial
|
|
|
1,463
|
|
|
|
|
|
|
|
1,463
|
|
Agricultural
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-accrual
loans
|
|
$
|
15,133
|
|
|
$
|
|
|
|
$
|
15,133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
If the
non-accrual
loans had been accruing interest in accordance with
the original terms of their respective agreements, interest income of approximately $2.3 million for the year ended December 31, 2017, $2.4 million in 2016, and $1.8 million in 2015 would have been recorded. Interest income
recognized on the
non-accrual
loans for the years ended December 31, 2017, 2016 and 2015 was considered immaterial.
Table 13 shows the summary of accruing past due loans 90 days or more as of December 31, 2017, 2016, 2015, 2014 and 2013:
Table 13: Total Loans Accruing Past Due 90 Days or More
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2017
|
|
|
As of December 31, 2016
|
|
|
|
Not Covered
by Loss
Share
|
|
|
Covered
by FDIC
Loss Share
|
|
|
Total
|
|
|
Not Covered
by Loss
Share
|
|
|
Covered
by FDIC
Loss Share
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
$
|
3,119
|
|
|
$
|
|
|
|
$
|
3,119
|
|
|
$
|
9,530
|
|
|
$
|
|
|
|
$
|
9,530
|
|
Construction/land development
|
|
|
3,247
|
|
|
|
|
|
|
|
3,247
|
|
|
|
3,086
|
|
|
|
|
|
|
|
3,086
|
|
Agricultural
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
2,175
|
|
|
|
|
|
|
|
2,175
|
|
|
|
2,996
|
|
|
|
|
|
|
|
2,996
|
|
Multifamily residential
|
|
|
100
|
|
|
|
|
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
8,641
|
|
|
|
|
|
|
|
8,641
|
|
|
|
15,612
|
|
|
|
|
|
|
|
15,612
|
|
Consumer
|
|
|
26
|
|
|
|
|
|
|
|
26
|
|
|
|
21
|
|
|
|
|
|
|
|
21
|
|
Commercial and industrial
|
|
|
1,944
|
|
|
|
|
|
|
|
1,944
|
|
|
|
309
|
|
|
|
|
|
|
|
309
|
|
Agricultural and other
|
|
|
54
|
|
|
|
|
|
|
|
54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans accruing past due 90 days or more
|
|
$
|
10,665
|
|
|
$
|
|
|
|
$
|
10,665
|
|
|
$
|
15,942
|
|
|
$
|
|
|
|
$
|
15,942
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2015
|
|
|
As of December 31, 2014
|
|
|
|
Not Covered
by Loss
Share
|
|
|
Covered
by FDIC
Loss Share
|
|
|
Total
|
|
|
Not Covered
by Loss
Share
|
|
|
Covered
by FDIC
Loss Share
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
$
|
9,247
|
|
|
$
|
|
|
|
$
|
9,247
|
|
|
$
|
5,880
|
|
|
$
|
9,029
|
|
|
$
|
14,909
|
|
Construction/land development
|
|
|
4,176
|
|
|
|
|
|
|
|
4,176
|
|
|
|
734
|
|
|
|
4,376
|
|
|
|
5,110
|
|
Agricultural
|
|
|
30
|
|
|
|
|
|
|
|
30
|
|
|
|
34
|
|
|
|
72
|
|
|
|
106
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
3,915
|
|
|
|
3,292
|
|
|
|
7,207
|
|
|
|
4,128
|
|
|
|
7,597
|
|
|
|
11,725
|
|
Multifamily residential
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
691
|
|
|
|
|
|
|
|
691
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
17,369
|
|
|
|
3,292
|
|
|
|
20,661
|
|
|
|
11,467
|
|
|
|
21,074
|
|
|
|
32,541
|
|
Consumer
|
|
|
46
|
|
|
|
|
|
|
|
46
|
|
|
|
579
|
|
|
|
|
|
|
|
579
|
|
Commercial and industrial
|
|
|
6,430
|
|
|
|
|
|
|
|
6,430
|
|
|
|
2,825
|
|
|
|
1,387
|
|
|
|
4,212
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans accruing past due 90 days or more
|
|
$
|
23,845
|
|
|
$
|
3,292
|
|
|
$
|
27,137
|
|
|
$
|
14,871
|
|
|
$
|
22,493
|
|
|
$
|
37,364
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2013
|
|
|
|
Not
Covered
by Loss
Share
|
|
|
Covered
by FDIC
Loss Share
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
$
|
7,914
|
|
|
$
|
15,287
|
|
|
$
|
23,201
|
|
Construction/land development
|
|
|
4,879
|
|
|
|
8,410
|
|
|
|
13,289
|
|
Agricultural
|
|
|
|
|
|
|
162
|
|
|
|
162
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
6,492
|
|
|
|
10,177
|
|
|
|
16,669
|
|
Multifamily residential
|
|
|
1
|
|
|
|
357
|
|
|
|
358
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
19,286
|
|
|
|
34,393
|
|
|
|
53,679
|
|
Consumer
|
|
|
100
|
|
|
|
|
|
|
|
100
|
|
Commercial and industrial
|
|
|
3,755
|
|
|
|
825
|
|
|
|
4,580
|
|
Other
|
|
|
|
|
|
|
624
|
|
|
|
624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans accruing past due 90 days or more
|
|
$
|
23,141
|
|
|
$
|
35,842
|
|
|
$
|
58,983
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our total loans accruing past due 90 days or more and
non-accrual
loans to total loans was 0.43% and 0.85% as of December 31, 2017 and 2016, respectively. Our acquisition of Stonegate during 2017 increased our loans accruing past due 90 days or more by $5.4 million as of December 31, 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.
76
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.
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.
77
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 $2.86 billion from $7.08 billion at December 31, 2016 to $9.94 billion at December 31, 2017. Our acquisition of Stonegate during 2017 increased our loans collectively
evaluated by $2.32 billion as of December 31, 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 decreased
slightly from 1.08% at December 31, 2016 to 1.06% at December 31, 2017.
Charge-offs and Recoveries.
Total charge-offs
was $17.5 million for the years ended December 31, 2017 and 2016. Total recoveries decreased to $3.5 million for the year ended December 31, 2017, compared to $9.7 million for the same period in 2016.
The net loans charged off for the years ended December 31, 2017, 2016 and 2015 were $14.0 million, $7.8 million and
$12.4 million. For the years ended December 31, 2017, 2016 and 2015, approximately $10.0 million, $6.6 million and $9.3 million, respectively, of the net charge-offs are from our Arkansas market. For the years ended
December 31, 2017, 2016 and 2015, approximately $3.8 million, $1.3 million and $2.7 million, respectively, of the net charge-offs are from our Florida market. The remaining $215,000, $76,000 and $367,000 relates to net
charge-offs, net recoveries and net charge-offs, respectively, on loans in our Alabama market for the years ended December 31, 2017, 2016 and 2015, respectively. There have been zero charge-offs for Centennial CFG since the franchise was formed
in 2015.
While the 2017 charge-offs and recoveries consisted of many relationships, there were three individual relationships consisting
of a charge-offs greater than $1.0 million. The combined impact of these charge-offs was $4.5 million at December 31, 2017.
While the 2016 charge-offs and recoveries consisted of many relationships, there were two individual relationships consisting of charge-offs
greater than $1.0 million. The combined impact of these charge-offs was $4.0 million at December 31, 2016. During 2016, there was a substantial $5.3 million recovery from a large loan
charge-off
taken in 2010.
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.
78
Table 14 shows the allowance for loan losses, charge-offs and recoveries for loans as of and for
the years ended December 31, 2017, 2016, 2015, 2014 and 2013.
Table 14: Analysis of Allowance for Loan
Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
|
(Dollars in thousands)
|
|
Balance, beginning of year
|
|
$
|
80,002
|
|
|
$
|
69,224
|
|
|
$
|
55,011
|
|
|
$
|
43,815
|
|
|
$
|
50,632
|
|
Loans charged off
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
|
3,622
|
|
|
|
3,586
|
|
|
|
4,878
|
|
|
|
4,376
|
|
|
|
7,480
|
|
Construction/land development
|
|
|
1,632
|
|
|
|
382
|
|
|
|
644
|
|
|
|
1,099
|
|
|
|
1,903
|
|
Agricultural
|
|
|
127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
3,895
|
|
|
|
4,986
|
|
|
|
4,257
|
|
|
|
3,218
|
|
|
|
4,798
|
|
Multifamily residential
|
|
|
85
|
|
|
|
611
|
|
|
|
460
|
|
|
|
266
|
|
|
|
2,336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
9,361
|
|
|
|
9,565
|
|
|
|
10,239
|
|
|
|
8,959
|
|
|
|
16,517
|
|
Consumer
|
|
|
198
|
|
|
|
220
|
|
|
|
567
|
|
|
|
355
|
|
|
|
926
|
|
Commercial and industrial
|
|
|
5,578
|
|
|
|
5,778
|
|
|
|
2,638
|
|
|
|
2,323
|
|
|
|
694
|
|
Agricultural
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
2,334
|
|
|
|
1,938
|
|
|
|
2,508
|
|
|
|
2,440
|
|
|
|
1,374
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans charged off
|
|
|
17,471
|
|
|
|
17,501
|
|
|
|
15,952
|
|
|
|
14,077
|
|
|
|
19,511
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries of loans previously charged off
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
|
1,042
|
|
|
|
857
|
|
|
|
762
|
|
|
|
279
|
|
|
|
2,083
|
|
Construction/land development
|
|
|
462
|
|
|
|
1,125
|
|
|
|
236
|
|
|
|
474
|
|
|
|
49
|
|
Agricultural
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Residential real estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
621
|
|
|
|
1,098
|
|
|
|
845
|
|
|
|
1,473
|
|
|
|
1,052
|
|
Multifamily residential
|
|
|
55
|
|
|
|
54
|
|
|
|
70
|
|
|
|
37
|
|
|
|
102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
2,180
|
|
|
|
3,134
|
|
|
|
1,913
|
|
|
|
2,263
|
|
|
|
3,287
|
|
Consumer
|
|
|
119
|
|
|
|
209
|
|
|
|
61
|
|
|
|
246
|
|
|
|
145
|
|
Commercial and industrial
|
|
|
464
|
|
|
|
5,533
|
|
|
|
802
|
|
|
|
306
|
|
|
|
72
|
|
Agricultural
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
722
|
|
|
|
795
|
|
|
|
766
|
|
|
|
913
|
|
|
|
556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recoveries
|
|
|
3,485
|
|
|
|
9,671
|
|
|
|
3,542
|
|
|
|
3,728
|
|
|
|
4,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loans charged off (recovered)
|
|
|
13,986
|
|
|
|
7,830
|
|
|
|
12,410
|
|
|
|
10,349
|
|
|
|
15,451
|
|
Provision for loan losses
|
|
|
44,250
|
|
|
|
18,608
|
|
|
|
25,164
|
|
|
|
22,664
|
|
|
|
5,180
|
|
Increase in FDIC indemnification asset
|
|
|
|
|
|
|
|
|
|
|
1,459
|
|
|
|
(1,119
|
)
|
|
|
3,454
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of year
|
|
$
|
110,266
|
|
|
$
|
80,002
|
|
|
$
|
69,224
|
|
|
$
|
55,011
|
|
|
$
|
43,815
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs (recoveries) to average loans receivable
|
|
|
0.17
|
%
|
|
|
0.11
|
%
|
|
|
0.22
|
%
|
|
|
0.22
|
%
|
|
|
0.51
|
%
|
Allowance for loan losses to total loans
|
|
|
1.07
|
|
|
|
1.08
|
|
|
|
1.04
|
|
|
|
1.09
|
|
|
|
0.98
|
|
Allowance for loan losses to net charge-offs (recoveries)
|
|
|
788
|
|
|
|
1,022
|
|
|
|
558
|
|
|
|
532
|
|
|
|
284
|
|
79
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.
The Companys 2017 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 operations may not be known for some time, the
Company has included in 2017 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 accrued $32.9 million during 2017 to establish a storm-related provision for loan losses. For the year ended December 31, 2017, there were $2.2 million in charge-offs taken against
the $32.9 million storm-related provision for loan loss, which left the reserve balance at $30.7 million as of December 31, 2017.
The changes for the years ended December 31, 2017 and 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.
80
Table 15 presents the allocation of allowance for loan losses as of December 31, 2017, 2016,
2015, 2014 and 2013.
Table 15: Allocation of Allowance for Loan Losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
|
Allowance
Amount
|
|
|
% of
loans
(1)
|
|
|
Allowance
Amount
|
|
|
% of
loans
(1)
|
|
|
Allowance
Amount
|
|
|
% of
loans
(1)
|
|
|
Allowance
Amount
|
|
|
% of
loans
(1)
|
|
|
Allowance
Amount
|
|
|
% of
loans
(1)
|
|
|
|
(Dollars in thousands)
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
$
|
42,893
|
|
|
|
44.5
|
%
|
|
$
|
27,695
|
|
|
|
42.7
|
%
|
|
$
|
26,330
|
|
|
|
44.7
|
%
|
|
$
|
17,770
|
|
|
|
41.2
|
%
|
|
$
|
15,685
|
|
|
|
41.5
|
%
|
Construction/land development
|
|
|
20,343
|
|
|
|
16.4
|
|
|
|
11,522
|
|
|
|
15.4
|
|
|
|
10,782
|
|
|
|
14.3
|
|
|
|
8,548
|
|
|
|
14.6
|
|
|
|
7,989
|
|
|
|
13.6
|
|
Agricultural
|
|
|
1,046
|
|
|
|
0.8
|
|
|
|
493
|
|
|
|
1.1
|
|
|
|
468
|
|
|
|
1.1
|
|
|
|
387
|
|
|
|
1.5
|
|
|
|
254
|
|
|
|
1.8
|
|
Residential real estate loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
21,370
|
|
|
|
19.1
|
|
|
|
14,397
|
|
|
|
18.3
|
|
|
|
12,552
|
|
|
|
17.9
|
|
|
|
11,061
|
|
|
|
20.8
|
|
|
|
8,149
|
|
|
|
22.6
|
|
Multifamily residential
|
|
|
3,136
|
|
|
|
4.3
|
|
|
|
2,120
|
|
|
|
4.6
|
|
|
|
2,266
|
|
|
|
6.5
|
|
|
|
3,545
|
|
|
|
5.1
|
|
|
|
2,852
|
|
|
|
5.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
88,788
|
|
|
|
85.1
|
|
|
|
56,227
|
|
|
|
82.1
|
|
|
|
52,398
|
|
|
|
84.5
|
|
|
|
41,311
|
|
|
|
83.1
|
|
|
|
34,929
|
|
|
|
84.5
|
|
Consumer
|
|
|
462
|
|
|
|
0.4
|
|
|
|
398
|
|
|
|
0.6
|
|
|
|
544
|
|
|
|
0.8
|
|
|
|
763
|
|
|
|
1.1
|
|
|
|
632
|
|
|
|
1.6
|
|
Commercial and industrial
|
|
|
15,292
|
|
|
|
12.6
|
|
|
|
12,756
|
|
|
|
15.2
|
|
|
|
9,324
|
|
|
|
12.8
|
|
|
|
5,965
|
|
|
|
13.4
|
|
|
|
2,068
|
|
|
|
11.6
|
|
Agricultural
|
|
|
2,692
|
|
|
|
0.5
|
|
|
|
3,790
|
|
|
|
1.0
|
|
|
|
4,463
|
|
|
|
1.0
|
|
|
|
5,035
|
|
|
|
1.0
|
|
|
|
1,931
|
|
|
|
0.8
|
|
Other
|
|
|
180
|
|
|
|
1.4
|
|
|
|
|
|
|
|
1.1
|
|
|
|
9
|
|
|
|
0.9
|
|
|
|
3
|
|
|
|
1.3
|
|
|
|
|
|
|
|
1.5
|
|
Unallocated
|
|
|
2,852
|
|
|
|
|
|
|
|
6,831
|
|
|
|
|
|
|
|
2,486
|
|
|
|
|
|
|
|
1,934
|
|
|
|
|
|
|
|
4,255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
110,266
|
|
|
|
100.0
|
%
|
|
$
|
80,002
|
|
|
|
100.0
|
%
|
|
$
|
69,224
|
|
|
|
100.0
|
%
|
|
$
|
55,011
|
|
|
|
100.0
|
%
|
|
$
|
43,815
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Percentage of loans in each category to total loans receivable.
|
81
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 2.8 years as of December 31, 2017.
As of December 31, 2017 and 2016 we had $224.8 million and $284.2 million of
held-to-maturity
securities, respectively. Of the $224.8 million of
held-to-maturity
securities as of December 31,
2017, $5.8 million were invested in U.S. Government-sponsored enterprises, $73.6 million were invested in mortgage-backed securities and $145.4 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.
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 $1.66 billion and $1.07 billion as of December 31, 2017 and 2016, respectively.
As of December 31, 2017, $971.4 million, or 58.4%, 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, $250.3 million, or 15.0%, of our
available-for-sale
securities portfolio as of December 31, 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
$406.3 million, or 24.4%, invested in obligations of U.S. Government-sponsored enterprises as of December 31, 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.
82
Table 16 presents the carrying value and fair value of investment securities as of
December 31, 2017, 2016 and 2015.
Table 16: Investment Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2017
|
|
|
As of December 31, 2016
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Estimated
Fair Value
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Estimated
Fair Value
|
|
|
|
(In thousands)
|
|
Available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government-sponsored enterprises
|
|
$
|
407,387
|
|
|
$
|
899
|
|
|
$
|
(1,982
|
)
|
|
$
|
406,304
|
|
|
$
|
237,439
|
|
|
$
|
963
|
|
|
$
|
(1,641
|
)
|
|
$
|
236,761
|
|
Residential mortgage-backed securities
|
|
|
481,981
|
|
|
|
538
|
|
|
|
(4,919
|
)
|
|
|
477,600
|
|
|
|
259,037
|
|
|
|
1,226
|
|
|
|
(1,627
|
)
|
|
|
258,636
|
|
Commercial mortgage-backed securities
|
|
|
497,870
|
|
|
|
332
|
|
|
|
(4,430
|
)
|
|
|
493,772
|
|
|
|
322,316
|
|
|
|
845
|
|
|
|
(2,342
|
)
|
|
|
320,819
|
|
State and political subdivisions
|
|
|
247,292
|
|
|
|
3,783
|
|
|
|
(774
|
)
|
|
|
250,301
|
|
|
|
215,209
|
|
|
|
3,471
|
|
|
|
(2,181
|
)
|
|
|
216,499
|
|
Other securities
|
|
|
34,617
|
|
|
|
1,225
|
|
|
|
(302
|
)
|
|
|
35,540
|
|
|
|
38,261
|
|
|
|
2,603
|
|
|
|
(659
|
)
|
|
|
40,205
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,669,147
|
|
|
$
|
6,777
|
|
|
$
|
(12,407
|
)
|
|
$
|
1,663,517
|
|
|
$
|
1,072,262
|
|
|
$
|
9,108
|
|
|
$
|
(8,450
|
)
|
|
$
|
1,072,920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government-sponsored enterprises
|
|
$
|
5,791
|
|
|
$
|
15
|
|
|
$
|
(15
|
)
|
|
$
|
5,791
|
|
|
$
|
6,637
|
|
|
$
|
23
|
|
|
$
|
(32
|
)
|
|
$
|
6,628
|
|
Residential mortgage-backed securities
|
|
|
56,982
|
|
|
|
107
|
|
|
|
(402
|
)
|
|
|
56,687
|
|
|
|
71,956
|
|
|
|
267
|
|
|
|
(301
|
)
|
|
|
71,922
|
|
Commercial mortgage-backed securities
|
|
|
16,625
|
|
|
|
114
|
|
|
|
(40
|
)
|
|
|
16,699
|
|
|
|
35,863
|
|
|
|
107
|
|
|
|
(133
|
)
|
|
|
35,837
|
|
State and political subdivisions
|
|
|
145,358
|
|
|
|
3,031
|
|
|
|
(27
|
)
|
|
|
148,362
|
|
|
|
169,720
|
|
|
|
3,100
|
|
|
|
(169
|
)
|
|
|
172,651
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
224,756
|
|
|
$
|
3,267
|
|
|
$
|
(484
|
)
|
|
$
|
227,539
|
|
|
$
|
284,176
|
|
|
$
|
3,497
|
|
|
$
|
(635
|
)
|
|
$
|
287,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Estimated
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government-sponsored enterprises
|
|
$
|
367,911
|
|
|
$
|
1,875
|
|
|
$
|
(1,246
|
)
|
|
$
|
368,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage-backed securities
|
|
|
254,531
|
|
|
|
1,580
|
|
|
|
(1,356
|
)
|
|
|
254,755
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial mortgage-backed securities
|
|
|
311,279
|
|
|
|
994
|
|
|
|
(1,713
|
)
|
|
|
310,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and political subdivisions
|
|
|
211,546
|
|
|
|
7,723
|
|
|
|
(151
|
)
|
|
|
219,118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other securities
|
|
|
54,440
|
|
|
|
191
|
|
|
|
(1,024
|
)
|
|
|
53,607
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,199,707
|
|
|
$
|
12,363
|
|
|
$
|
(5,490
|
)
|
|
$
|
1,206,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government-sponsored enterprises
|
|
$
|
7,395
|
|
|
$
|
37
|
|
|
$
|
(17
|
)
|
|
$
|
7,415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage-backed securities
|
|
|
92,585
|
|
|
|
250
|
|
|
|
(282
|
)
|
|
|
92,553
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial mortgage-backed securities
|
|
|
41,579
|
|
|
|
155
|
|
|
|
(42
|
)
|
|
|
41,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
State and political subdivisions
|
|
|
167,483
|
|
|
|
4,870
|
|
|
|
(69
|
)
|
|
|
172,284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
309,042
|
|
|
$
|
5,312
|
|
|
$
|
(410
|
)
|
|
$
|
313,944
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83
Table 17 reflects the amortized cost and estimated fair value of debt securities as of
December 31, 2017, by contractual maturity and the weighted-average yields (for
tax-exempt
obligations on a fully taxable equivalent basis) of those securities. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or prepay obligations, with or without call or prepayment penalties.
Table 17: Maturity Distribution of Investment Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2017
|
|
|
|
1 Year
or Less
|
|
|
1 Year
Through
5 Years
|
|
|
5 Years
Through
10 Years
|
|
|
Over
10 Years
|
|
|
Total
Amortized
Cost
|
|
|
Total
Fair
Value
|
|
|
|
(Dollars in thousands)
|
|
Available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government-sponsored enterprises
|
|
$
|
164,892
|
|
|
$
|
180,138
|
|
|
$
|
43,974
|
|
|
$
|
18,383
|
|
|
$
|
407,387
|
|
|
$
|
406,304
|
|
Residential mortgage-backed securities
|
|
|
89,750
|
|
|
|
276,702
|
|
|
|
86,196
|
|
|
|
29,333
|
|
|
|
481,981
|
|
|
|
477,600
|
|
Commercial mortgage-backed securities
|
|
|
59,978
|
|
|
|
295,139
|
|
|
|
110,123
|
|
|
|
32,630
|
|
|
|
497,870
|
|
|
|
493,772
|
|
State and political subdivisions
|
|
|
42,777
|
|
|
|
153,018
|
|
|
|
38,564
|
|
|
|
12,933
|
|
|
|
247,292
|
|
|
|
250,301
|
|
Other securities
|
|
|
8,944
|
|
|
|
17,181
|
|
|
|
7,273
|
|
|
|
1,219
|
|
|
|
34,617
|
|
|
|
35,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
366,341
|
|
|
$
|
922,178
|
|
|
$
|
286,130
|
|
|
$
|
94,498
|
|
|
$
|
1,669,147
|
|
|
$
|
1,663,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of total amortized cost
|
|
|
21.9
|
%
|
|
|
55.3
|
%
|
|
|
17.1
|
%
|
|
|
5.7
|
%
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average yield
|
|
|
2.4
|
%
|
|
|
2.5
|
%
|
|
|
2.7
|
%
|
|
|
2.8
|
%
|
|
|
2.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government-sponsored enterprises
|
|
$
|
2,001
|
|
|
$
|
2,736
|
|
|
$
|
627
|
|
|
$
|
427
|
|
|
$
|
5,791
|
|
|
$
|
5,791
|
|
Residential mortgage-backed securities
|
|
|
12,491
|
|
|
|
35,800
|
|
|
|
4,946
|
|
|
|
3,745
|
|
|
|
56,982
|
|
|
|
56,687
|
|
Commercial mortgage-backed securities
|
|
|
4,100
|
|
|
|
5,438
|
|
|
|
5,796
|
|
|
|
1,291
|
|
|
|
16,625
|
|
|
|
16,699
|
|
State and political subdivisions
|
|
|
53,772
|
|
|
|
45,291
|
|
|
|
1,053
|
|
|
|
45,242
|
|
|
|
145,358
|
|
|
|
148,362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
72,364
|
|
|
$
|
89,265
|
|
|
$
|
12,422
|
|
|
$
|
50,705
|
|
|
$
|
224,756
|
|
|
$
|
227,539
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of total amortized cost
|
|
|
32.2
|
%
|
|
|
39.7
|
%
|
|
|
5.5
|
%
|
|
|
22.6
|
%
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average yield
|
|
|
3.8
|
%
|
|
|
3.3
|
%
|
|
|
2.7
|
%
|
|
|
5.8
|
%
|
|
|
4.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
Our deposits averaged $8.27 billion for the year ended December 31, 2017, and $6.70 billion for 2016. Total deposits increased
$3.45 billion, or 49.6%, to $10.39 billion as of December 31, 2017, from $6.94 billion as of December 31, 2016. Including the effects of the purchase accounting adjustments, we acquired approximately $2.97 billion of
deposits, as of acquisition date from our 2017 acquisitions. 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.
84
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.
Table 18 reflects the classification of the brokered deposits as of December 31, 2017 and 2016.
Table 18: Brokered Deposits
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
December 31, 2016
|
|
|
|
(In thousands)
|
|
Time Deposits
|
|
$
|
60,022
|
|
|
$
|
70,028
|
|
CDARS
|
|
|
53,588
|
|
|
|
26,389
|
|
Insured Cash Sweep and Other Transaction Accounts
|
|
|
915,060
|
|
|
|
406,120
|
|
|
|
|
|
|
|
|
|
|
Total Brokered Deposits
|
|
$
|
1,028,670
|
|
|
$
|
502,537
|
|
|
|
|
|
|
|
|
|
|
The $526.1 million increase in our brokered deposits from December 31, 2016 to December 31,
2017 was primarily due to our 2017 acquisitions, of which approximately $378.3 million was related to Stonegate as of December 31, 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 100 basis points and is currently at 1.50% to 1.25%.
85
Table 19 reflects the classification of the average deposits and the average rate paid on each
deposit category which is in excess of 10 percent of average total deposits, for the years ended December 31, 2017, 2016, and 2015.
Table 19: Average Deposit Balances and Rates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
Average
Amount
|
|
|
Average
Rate
Paid
|
|
|
Average
Amount
|
|
|
Average
Rate
Paid
|
|
|
Average
Amount
|
|
|
Average
Rate
Paid
|
|
|
|
(Dollars in thousands)
|
|
Non-interest-bearing
transaction accounts
|
|
$
|
2,005,632
|
|
|
|
|
%
|
|
$
|
1,619,128
|
|
|
|
|
%
|
|
$
|
1,358,905
|
|
|
|
|
%
|
Interest-bearing transaction accounts
|
|
|
4,265,529
|
|
|
|
0.53
|
|
|
|
3,252,416
|
|
|
|
0.27
|
|
|
|
2,789,346
|
|
|
|
0.22
|
|
Savings deposits
|
|
|
558,097
|
|
|
|
0.11
|
|
|
|
465,464
|
|
|
|
0.06
|
|
|
|
429,399
|
|
|
|
0.06
|
|
Time deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$100,000 or more
|
|
|
961,371
|
|
|
|
0.86
|
|
|
|
868,839
|
|
|
|
0.58
|
|
|
|
780,815
|
|
|
|
0.53
|
|
Other time deposits
|
|
|
483,457
|
|
|
|
0.48
|
|
|
|
493,841
|
|
|
|
0.38
|
|
|
|
600,747
|
|
|
|
0.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
8,274,086
|
|
|
|
0.41
|
%
|
|
$
|
6,699,688
|
|
|
|
0.24
|
%
|
|
$
|
5,959,212
|
|
|
|
0.22
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 20 presents our maturities of large denomination time deposits as of December 31, 2017 and 2016.
Table 20: Maturities of Large Denomination Time Deposits ($100,000 or more)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
Balance
|
|
|
Percent
|
|
|
Balance
|
|
|
Percent
|
|
|
|
(Dollars in thousands)
|
|
Maturing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months or less
|
|
$
|
134,117
|
|
|
|
13.4
|
%
|
|
$
|
162,422
|
|
|
|
19.3
|
%
|
Over three months to six months
|
|
|
199,701
|
|
|
|
20.0
|
|
|
|
100,547
|
|
|
|
11.9
|
|
Over six months to 12 months
|
|
|
184,526
|
|
|
|
18.5
|
|
|
|
356,145
|
|
|
|
42.3
|
|
Over 12 months
|
|
|
479,999
|
|
|
|
48.1
|
|
|
|
223,767
|
|
|
|
26.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
998,343
|
|
|
|
100.0
|
%
|
|
$
|
842,881
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 $26.5 million, or 21.8%, from $121.3 million as of December 31, 2016 to $147.8 million as of December 31, 2017.
FHLB Borrowings
Our FHLB borrowed funds were $1.30 billion and $1.31 billion at December 31, 2017 and 2016, respectively. At December 31,
2017, $525.0 million and $774.2 million of the outstanding balance were issued as short-term and long-term advances, respectively. Including the effects of the purchase accounting adjustments, we acquired approximately $89.4 million
of FHLB borrowed funds, as of acquisition date from our 2017 acquisitions. 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 $1.96 billion and $718.2 million as of December 31, 2017 and 2016, respectively. Maturities of borrowings as of December 31, 2017 include: 2018 $984.3 million; 2019
$143.1 million; 2020 $146.4 million; 2021 zero; 2022 zero; after 2022 $25.4 million. Expected maturities will differ from contractual maturities because FHLB may have the right to call or we may have the
right to prepay certain obligations.
86
Subordinated Debentures
Subordinated debentures, which consist of subordinated debt securities and guaranteed payments on trust preferred securities, were
$368.0 million as of December 31, 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.
During 2017, we 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.
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 $2.20 billion at December 31, 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 $74.7 million increase in retained earnings
offset by $3.8 million of comprehensive loss and the repurchase of $20.8 million of our common stock during 2017. The improvement in stockholders equity for 2017 excluding the $819.8 million of common stock issued to both the
GHI and Stonegate shareholders was 4.3%. As of December 31, 2017 and 2016, our equity to asset ratio was 15.25% and 13.53%, respectively. Book value per common share was $12.70 at December 31, 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 December 31, 2017.
Common Stock
Cash Dividends.
We declared cash dividends on our common stock of $0.4000, $0.3425 and $0.2750 per share for the years ended December 31, 2017, 2016 and 2015, respectively. The common stock dividend payout ratio for the year ended
December 31, 2017, 2016 and 2015 was 44.69%, 27.15% and 27.19%, respectively.
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 2017, we utilized a portion of this stock repurchase program. We repurchased a total of 857,800 shares with a weighted-average stock price of $24.29 per share during 2017. Shares repurchased to date under the program total 4,524,864
shares. The remaining balance available for repurchase is 5,227,136 shares at December 31, 2017. Additionally, on February 21, 2018, the Board of Directors of the Company authorized the repurchase of up to an additional 5,000,000 shares of
Companys common stock under this repurchase program.
87
Liquidity and Capital Adequacy Requirements
Parent Company Liquidity.
The primary sources for payment of our operating expenses, and dividends are current cash on hand
($44.0 million as of December 31, 2017), dividends received from our bank subsidiary and a $20.0 million unfunded line of credit with another financial institution.
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.
In July 2013, the Federal Reserve Board and the other federal bank regulatory agencies issued a final rule
to revise their risk-based and leverage capital requirements and their method for calculating risk-weighted assets to make them consistent with the agreements that were reached by the Basel Committee on Banking Supervision in Basel III: A
Global Regulatory Framework for More Resilient Banks and Banking Systems and certain provisions of the Dodd-Frank Act (Basel III). Basel III applies to all depository institutions, bank holding companies with total consolidated
assets of $500 million or more, and savings and loan holding companies. Basel III became effective for the Company and its bank subsidiary on January 1, 2015. The capital conservation buffer requirement began being phased in beginning
January 1, 2016 at the 0.625% level and will increase by 0.625% on each subsequent January 1, until it reaches 2.5% on January 1, 2019 when the
phase-in
period ends and the full capital
conservation buffer requirement becomes effective.
Basel III amended the prompt corrective action rules to incorporate a common
equity Tier 1 capital requirement and to raise the capital requirements for certain capital categories. In order to be adequately capitalized for purposes of the prompt corrective action rules, a banking organization will be required to have
at least a 4.5% common equity Tier 1 risk-based capital ratio, a 4% Tier 1 leverage capital ratio, a 6% Tier 1 risk-based capital ratio and an 8% total risk-based capital ratio.
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 December 31, 2017 and 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.
88
Table 21 presents our risk-based capital ratios as of December 31, 2017 and 2016.
Table 21: Risk-Based Capital
|
|
|
|
|
|
|
|
|
|
|
As of
December 31,
2017
|
|
|
As of
December 31,
2016
|
|
|
|
(Dollars in thousands)
|
|
Tier 1 capital
|
|
|
|
|
|
|
|
|
Stockholders equity
|
|
$
|
2,204,291
|
|
|
$
|
1,327,490
|
|
Goodwill and core deposit intangibles, net
|
|
|
(966,890
|
)
|
|
|
(388,336
|
)
|
Unrealized (gain) loss on
available-for-sale
securities
|
|
|
3,421
|
|
|
|
(400
|
)
|
Deferred tax assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total common equity Tier 1 capital
|
|
|
1,240,822
|
|
|
|
938,754
|
|
Qualifying trust preferred securities
|
|
|
70,698
|
|
|
|
59,000
|
|
|
|
|
|
|
|
|
|
|
Total Tier 1 capital
|
|
|
1,311,520
|
|
|
|
997,754
|
|
|
|
|
|
|
|
|
|
|
Tier 2 capital
|
|
|
|
|
|
|
|
|
Qualifying subordinated notes
|
|
|
297,332
|
|
|
|
|
|
Qualifying allowance for loan losses
|
|
|
110,266
|
|
|
|
80,002
|
|
|
|
|
|
|
|
|
|
|
Total Tier 2 capital
|
|
|
407,598
|
|
|
|
80,002
|
|
|
|
|
|
|
|
|
|
|
Total risk-based capital
|
|
$
|
1,719,118
|
|
|
$
|
1,077,756
|
|
|
|
|
|
|
|
|
|
|
Average total assets for leverage ratio
|
|
$
|
13,147,046
|
|
|
$
|
9,388,812
|
|
|
|
|
|
|
|
|
|
|
Risk weighted assets
|
|
$
|
11,424,963
|
|
|
$
|
8,308,468
|
|
|
|
|
|
|
|
|
|
|
Ratios at end of period
|
|
|
|
|
|
|
|
|
Common equity Tier 1 capital
|
|
|
10.86
|
%
|
|
|
11.30
|
%
|
Leverage ratio
|
|
|
9.98
|
|
|
|
10.63
|
|
Tier 1 risk-based capital
|
|
|
11.48
|
|
|
|
12.01
|
|
Total risk-based capital
|
|
|
15.05
|
|
|
|
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.
89
Table 22 presents actual capital amounts and ratios as of December 31, 2017 and 2016, for
our bank subsidiary and us.
Table 22: Capital and Ratios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual
|
|
|
Minimum Capital
Requirement
Basel III
Phase-In
Schedule
|
|
|
Minimum Capital
Requirement
Basel III
Fully
Phased-In
|
|
|
Minimum To Be
Well-Capitalized
Under Prompt
Corrective Action
Provision
|
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
|
(Dollars in thousands)
|
|
As of December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common equity Tier 1 capital ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home BancShares
|
|
$
|
1,240,822
|
|
|
|
10.86
|
%
|
|
$
|
656,973
|
|
|
|
5.750
|
%
|
|
$
|
799,793
|
|
|
|
7.00
|
%
|
|
$
|
N/A
|
|
|
|
N/A
|
%
|
Centennial Bank
|
|
|
1,546,451
|
|
|
|
13.55
|
|
|
|
656,243
|
|
|
|
5.750
|
|
|
|
798,905
|
|
|
|
7.00
|
|
|
|
741,840
|
|
|
|
6.50
|
|
Leverage ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home BancShares
|
|
$
|
1,311,520
|
|
|
|
9.98
|
%
|
|
$
|
525,659
|
|
|
|
4.000
|
%
|
|
$
|
525,659
|
|
|
|
4.00
|
%
|
|
$
|
N/A
|
|
|
|
N/A
|
%
|
Centennial Bank
|
|
|
1,546,451
|
|
|
|
11.76
|
|
|
|
526,004
|
|
|
|
4.000
|
|
|
|
526,004
|
|
|
|
4.00
|
|
|
|
657,505
|
|
|
|
5.00
|
|
Tier 1 capital ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home BancShares
|
|
$
|
1,311,520
|
|
|
|
11.48
|
%
|
|
$
|
828,268
|
|
|
|
7.250
|
%
|
|
$
|
971,073
|
|
|
|
8.50
|
%
|
|
$
|
N/A
|
|
|
|
N/A
|
%
|
Centennial Bank
|
|
|
1,546,451
|
|
|
|
13.55
|
|
|
|
827,437
|
|
|
|
7.250
|
|
|
|
970,098
|
|
|
|
8.50
|
|
|
|
913,034
|
|
|
|
8.00
|
|
Total risk-based capital ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home BancShares
|
|
$
|
1,719,118
|
|
|
|
15.05
|
%
|
|
$
|
1,056,601
|
|
|
|
9.250
|
%
|
|
$
|
1,199,385
|
|
|
|
10.50
|
%
|
|
$
|
N/A
|
|
|
|
N/A
|
%
|
Centennial Bank
|
|
|
1,656,717
|
|
|
|
14.52
|
|
|
|
1,055,415
|
|
|
|
9.250
|
|
|
|
1,198,039
|
|
|
|
10.50
|
|
|
|
1,140,990
|
|
|
|
10.00
|
|
As of December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common equity Tier 1 capital ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home BancShares
|
|
$
|
938,754
|
|
|
|
11.30
|
%
|
|
$
|
425,762
|
|
|
|
5.125
|
%
|
|
$
|
581,529
|
|
|
|
7.00
|
%
|
|
$
|
N/A
|
|
|
|
N/A
|
%
|
Centennial Bank
|
|
|
920,232
|
|
|
|
11.10
|
|
|
|
424,882
|
|
|
|
5.125
|
|
|
|
580,326
|
|
|
|
7.00
|
|
|
|
538,875
|
|
|
|
6.50
|
|
Leverage ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home BancShares
|
|
$
|
997,754
|
|
|
|
10.63
|
%
|
|
$
|
375,448
|
|
|
|
4.000
|
%
|
|
$
|
375,448
|
|
|
|
4.00
|
%
|
|
$
|
N/A
|
|
|
|
N/A
|
%
|
Centennial Bank
|
|
|
920,232
|
|
|
|
9.81
|
|
|
|
375,222
|
|
|
|
4.000
|
|
|
|
375,222
|
|
|
|
4.00
|
|
|
|
469,028
|
|
|
|
5.00
|
|
Tier 1 capital ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home BancShares
|
|
$
|
997,754
|
|
|
|
12.01
|
%
|
|
$
|
550,385
|
|
|
|
6.625
|
%
|
|
$
|
706,154
|
|
|
|
8.50
|
%
|
|
$
|
N/A
|
|
|
|
N/A
|
%
|
Centennial Bank
|
|
|
920,232
|
|
|
|
11.10
|
|
|
|
549,238
|
|
|
|
6.625
|
|
|
|
704,682
|
|
|
|
8.50
|
|
|
|
663,230
|
|
|
|
8.00
|
|
Total risk-based capital ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home BancShares
|
|
$
|
1,077,756
|
|
|
|
12.97
|
%
|
|
$
|
716,704
|
|
|
|
8.625
|
%
|
|
$
|
872,509
|
|
|
|
10.50
|
%
|
|
$
|
N/A
|
|
|
|
N/A
|
%
|
Centennial Bank
|
|
|
1,000,234
|
|
|
|
12.07
|
|
|
|
714,749
|
|
|
|
8.625
|
|
|
|
870,129
|
|
|
|
10.50
|
|
|
|
828,694
|
|
|
|
10.00
|
|
Off-Balance
Sheet Arrangements and Contractual Obligations
In the normal course of business, we enter into a number of financial commitments. Examples of these commitments include but are
not limited to operating lease obligations, FHLB advances, lines of credit, subordinated debentures, unfunded loan commitments and letters of credit.
Commitments to extend credit and letters of credit are legally binding, conditional agreements generally having certain expiration or
termination dates. These commitments generally require customers to maintain certain credit standards and are established based on managements credit assessment of the customer. The commitments may expire without being drawn upon. Therefore,
the total commitment does not necessarily represent future requirements.
90
Standby letters of credit are conditional commitments issued by the Company to guarantee the
performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions. The credit risk involved in issuing letters
of credit is essentially the same as that involved in extending loans to customers. The Company had total outstanding letters of credit amounting to $70.5 million and $41.1 million at December 31, 2017 and 2016, respectively, with
maturities ranging from currently due to four years.
Table 23 presents the funding requirements of our most significant financial
commitments, excluding interest, as of December 31, 2017.
Table 23: Funding Requirements of Financial Commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
Less than
One Year
|
|
|
One-
Three
Years
|
|
|
Three-
Five
Years
|
|
|
Greater
than Five
Years
|
|
|
Total
|
|
|
|
(In thousands)
|
|
Operating lease obligations
|
|
$
|
8,543
|
|
|
$
|
14,978
|
|
|
$
|
9,867
|
|
|
$
|
28,799
|
|
|
$
|
62,187
|
|
FHLB advances by contractual maturity
|
|
|
984,279
|
|
|
|
289,498
|
|
|
|
|
|
|
|
25,411
|
|
|
|
1,299,188
|
|
Subordinated debentures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
368,031
|
|
|
|
368,031
|
|
Loan commitments
|
|
|
39,249
|
|
|
|
897,236
|
|
|
|
748,495
|
|
|
|
693,140
|
|
|
|
2,378,120
|
|
Letters of credit
|
|
|
56,372
|
|
|
|
13,512
|
|
|
|
531
|
|
|
|
38
|
|
|
|
70,453
|
|
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, 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 24 through 26 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:
91
Table 24: Average Yield on Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
(Dollars in thousands)
|
|
Interest income on loans receivable FTE
|
|
$
|
479,601
|
|
|
$
|
404,137
|
|
|
$
|
344,885
|
|
Purchase accounting accretion
|
|
|
35,257
|
|
|
|
41,070
|
|
|
|
46,509
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
interest income on loans receivable
FTE
|
|
$
|
444,344
|
|
|
$
|
363,067
|
|
|
$
|
298,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average loans
|
|
$
|
8,403,154
|
|
|
$
|
6,986,759
|
|
|
$
|
5,732,315
|
|
Average purchase accounting loan discounts
(1)
|
|
|
120,160
|
|
|
|
127,210
|
|
|
|
177,389
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average loans
(non-GAAP)
|
|
$
|
8,523,314
|
|
|
$
|
7,113,969
|
|
|
$
|
5,909,704
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average yield on loans (reported)
|
|
|
5.71
|
%
|
|
|
5.78
|
%
|
|
|
6.02
|
%
|
Average contractual yield on loans
(non-GAAP)
|
|
|
5.21
|
|
|
|
5.10
|
|
|
|
5.05
|
|
|
(1)
|
Balance includes $146.6 million, $100.1 million and $149.4 million of discount for credit losses on purchased loans as of December 31, 2017, 2016 and 2015, respectively.
|
Table 25: Average Cost of Deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
(Dollars in thousands)
|
|
Interest expense on deposits
|
|
$
|
33,777
|
|
|
$
|
15,926
|
|
|
$
|
12,971
|
|
Amortization of time deposit (premiums)/discounts, net
|
|
|
459
|
|
|
|
1,273
|
|
|
|
1,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
interest expense on deposits
|
|
$
|
34,236
|
|
|
$
|
17,199
|
|
|
$
|
14,072
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average interest-bearing deposits
|
|
$
|
6,268,454
|
|
|
$
|
5,080,560
|
|
|
$
|
4,600,307
|
|
Average unamortized CD (premium)/discount, net
|
|
|
(733
|
)
|
|
|
(930
|
)
|
|
|
(1,276
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average interest-bearing deposits
(non-GAAP)
|
|
$
|
6,267,721
|
|
|
$
|
5,079,630
|
|
|
$
|
4,599,031
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average cost of deposits (reported)
|
|
|
0.54
|
%
|
|
|
0.31
|
%
|
|
|
0.28
|
%
|
Average contractual cost of deposits
(non-GAAP)
|
|
|
0.55
|
|
|
|
0.34
|
|
|
|
0.31
|
|
Table 26: Net Interest Margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
(Dollars in thousands)
|
|
Net interest income FTE
|
|
$
|
463,761
|
|
|
$
|
413,882
|
|
|
$
|
363,422
|
|
Total purchase accounting accretion
|
|
|
35,716
|
|
|
|
42,343
|
|
|
|
47,610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
net interest income FTE
|
|
$
|
428,045
|
|
|
$
|
371,539
|
|
|
$
|
315,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average interest-earning assets
|
|
$
|
10,278,942
|
|
|
$
|
8,604,291
|
|
|
$
|
7,296,757
|
|
Average purchase accounting loan
discounts
(1)
|
|
|
120,160
|
|
|
|
127,210
|
|
|
|
177,389
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average interest-earning assets
(non-GAAP)
|
|
$
|
10,399,102
|
|
|
$
|
8,731,501
|
|
|
$
|
7,474,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin (reported)
|
|
|
4.51
|
%
|
|
|
4.81
|
%
|
|
|
4.98
|
%
|
Net interest margin
(non-GAAP)
|
|
|
4.12
|
|
|
|
4.26
|
|
|
|
4.23
|
|
|
(1)
|
Balance includes $146.6 million, $100.1 million and $149.4 million of discount for credit losses on purchased loans as of December 31, 2017, 2016 and 2015, respectively.
|
92
In tables 27 through 32 below, we have provided
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.
In Table 27 below, we have
provided a reconciliation of the
non-GAAP
calculation of the financial measure for the periods indicated.
Table 27: Earnings Excluding
Non-Fundamental
Items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
(In thousands, except per share data)
|
|
GAAP net income available to common shareholders (A)
|
|
$
|
135,083
|
|
|
$
|
177,146
|
|
|
$
|
138,199
|
|
Non-fundamental
items:
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on acquisitions
|
|
|
(3,807
|
)
|
|
|
|
|
|
|
(1,635
|
)
|
Merger expenses
|
|
|
25,743
|
|
|
|
433
|
|
|
|
4,800
|
|
FDIC loss share
buy-out
|
|
|
|
|
|
|
3,849
|
|
|
|
|
|
Reduced provision for loan losses as a result of a significant loan recovery
|
|
|
|
|
|
|
(4,457
|
)
|
|
|
|
|
Hurricane expenses
(1)
|
|
|
33,445
|
|
|
|
|
|
|
|
|
|
Effect of tax rate change
|
|
|
36,935
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-fundamental
items
|
|
|
92,316
|
|
|
|
(175
|
)
|
|
|
3,165
|
|
Tax-effect
of
non-fundamental
items
(2)
|
|
|
22,626
|
|
|
|
(69
|
)
|
|
|
1,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-fundamental
items
after-tax
(B)
|
|
|
69,690
|
|
|
|
(106
|
)
|
|
|
1,924
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings excluding
non-fundamental
items (C)
|
|
$
|
204,773
|
|
|
$
|
177,040
|
|
|
$
|
140,123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average diluted shares outstanding (D)
|
|
|
151,528
|
|
|
|
140,713
|
|
|
|
137,130
|
|
GAAP diluted earnings per share: A/D
|
|
$
|
0.89
|
|
|
$
|
1.26
|
|
|
$
|
1.01
|
|
Non-fundamental
items
after-tax:
B/D
|
|
|
0.46
|
|
|
|
|
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share excluding
non-fundamental
items: C/D
|
|
$
|
1.35
|
|
|
$
|
1.26
|
|
|
$
|
1.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 $977.3 million, $396.3 million, and $399.4 million total goodwill, core deposit intangibles and other intangible assets
as of December 31, 2017, 2016 and 2015, respectively. Because of our level of intangible assets and related amortization expenses, management believes diluted earnings per common share excluding intangible amortization, tangible book value per
common share, return on average assets excluding intangible amortization, return on average tangible common equity excluding intangible amortization and tangible common equity to tangible assets are useful in evaluating our company. These
calculations, which are similar to the GAAP calculation of diluted earnings per common share, book value, return on average assets, return on average common equity, and common equity to assets, are presented in Tables 28 through 31, respectively.
93
Table 28: Tangible Book Value Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
(In thousands, except per share data)
|
|
Book value per share: A/B
|
|
$
|
12.70
|
|
|
$
|
9.45
|
|
|
$
|
8.55
|
|
Tangible book value per share:
(A-C-D)/B
|
|
|
7.07
|
|
|
|
6.63
|
|
|
|
5.71
|
|
|
|
|
|
(A) Total equity
|
|
$
|
2,204,291
|
|
|
$
|
1,327,490
|
|
|
$
|
1,199,757
|
|
(B) Shares outstanding
|
|
|
173,633
|
|
|
|
140,472
|
|
|
|
140,241
|
|
(C) Goodwill
|
|
$
|
927,949
|
|
|
$
|
377,983
|
|
|
$
|
377,983
|
|
(D) Core deposit and other intangibles
|
|
|
49,351
|
|
|
|
18,311
|
|
|
|
21,443
|
|
Table 29: Return on Average Assets Excluding Intangible Amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
(Dollars in thousands)
|
|
Return on average assets: A/D
|
|
|
1.17
|
%
|
|
|
1.85
|
%
|
|
|
1.68
|
%
|
Return on average assets excluding intangible amortization:
B/(D-E)
|
|
|
1.26
|
|
|
|
1.95
|
|
|
|
1.79
|
|
Return on average assets excluding gain on acquisitions, merger expenses, FDIC loss share
buy-out
expense, reduced provision for loan losses as a result of a significant loan recovery, hurricane expenses & effect of tax rate change: (A+C)/D
|
|
|
1.78
|
|
|
|
1.85
|
|
|
|
1.71
|
|
(A) Net income
|
|
$
|
135,083
|
|
|
$
|
177,146
|
|
|
$
|
138,199
|
|
Intangible amortization
after-tax
|
|
|
2,557
|
|
|
|
1,903
|
|
|
|
2,479
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(B) Earnings excluding intangible amortization
|
|
$
|
137,640
|
|
|
$
|
179,049
|
|
|
$
|
140,678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(C) Non-fundamental
items
after-tax
|
|
$
|
69,690
|
|
|
$
|
(106
|
)
|
|
$
|
1,924
|
|
(D) Average assets
|
|
|
11,499,105
|
|
|
|
9,568,853
|
|
|
|
8,210,982
|
|
(E) Average goodwill, core deposits and other intangible assets
|
|
|
576,258
|
|
|
|
397,809
|
|
|
|
356,385
|
|
94
Table 30: Return on Average Tangible Equity Excluding Intangible Amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
(Dollars in thousands)
|
|
Return on average equity: A/C
|
|
|
8.23
|
%
|
|
|
14.08
|
%
|
|
|
12.77
|
%
|
Return on average tangible equity excluding intangible amortization:
B/(D-E)
|
|
|
12.92
|
|
|
|
20.82
|
|
|
|
19.37
|
|
Return on average equity excluding gain on acquisitions, merger expenses, FDIC loss share
buy-out
expense, reduced provision for loan losses as a result of a significant loan recovery, hurricane expenses & effect of tax rate change: (A+C)/D
|
|
|
12.48
|
|
|
|
14.07
|
|
|
|
12.94
|
|
|
|
|
|
(A) Net income
|
|
$
|
135,083
|
|
|
$
|
177,146
|
|
|
$
|
138,199
|
|
(B) Earnings excluding intangible amortization
|
|
|
137,640
|
|
|
|
179,049
|
|
|
|
140,678
|
|
(C) Non-fundamental
items
after-tax
|
|
|
69,690
|
|
|
|
(106
|
)
|
|
|
1,924
|
|
(D) Average equity
|
|
|
1,641,278
|
|
|
|
1,257,926
|
|
|
|
1,082,585
|
|
(E) Average goodwill, core deposits and other intangible assets
|
|
|
576,258
|
|
|
|
397,809
|
|
|
|
356,385
|
|
Table 31: Tangible Equity to Tangible Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
(Dollars in thousands)
|
|
Equity to assets: B/A
|
|
|
15.25
|
%
|
|
|
13.53
|
%
|
|
|
12.92
|
%
|
Tangible equity to tangible assets:
(B-C-D)/(A-C-D)
|
|
|
9.11
|
|
|
|
9.89
|
|
|
|
9.00
|
|
|
|
|
|
(A) Total assets
|
|
$
|
14,449,760
|
|
|
$
|
9,808,465
|
|
|
$
|
9,289,122
|
|
(B) Total equity
|
|
|
2,204,291
|
|
|
|
1,327,490
|
|
|
|
1,199,757
|
|
(C) Goodwill
|
|
|
927,949
|
|
|
|
377,983
|
|
|
|
377,983
|
|
(D) Core deposit and other intangibles
|
|
|
49,351
|
|
|
|
18,311
|
|
|
|
21,443
|
|
95
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 32 below, we have provided a reconciliation of the
non-GAAP
calculation of the financial measure for
the periods indicated.
Table 32: Core Efficiency Ratio
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
(Dollars in thousands)
|
|
Net interest income (A)
|
|
$
|
455,905
|
|
|
$
|
405,958
|
|
|
$
|
355,712
|
|
Non-interest
income (B)
|
|
|
99,636
|
|
|
|
87,051
|
|
|
|
65,498
|
|
Non-interest
expense (C)
|
|
|
240,208
|
|
|
|
191,755
|
|
|
|
177,555
|
|
FTE Adjustment (D)
|
|
|
7,856
|
|
|
|
7,924
|
|
|
|
7,710
|
|
Amortization of intangibles (E)
|
|
|
4,207
|
|
|
|
3,132
|
|
|
|
4,079
|
|
|
|
|
|
Non-core
items:
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on acquisitions
|
|
$
|
3,807
|
|
|
$
|
|
|
|
$
|
1,635
|
|
Gain (loss) on OREO, net
|
|
|
1,025
|
|
|
|
(554
|
)
|
|
|
(317
|
)
|
Gain (loss) on SBA loans
|
|
|
738
|
|
|
|
1,088
|
|
|
|
541
|
|
Gain (loss) on branches, equipment and other assets, net
|
|
|
(960
|
)
|
|
|
700
|
|
|
|
(214
|
)
|
Gain (loss) on securities, net
|
|
|
2,132
|
|
|
|
669
|
|
|
|
4
|
|
Other income
(1)
|
|
|
|
|
|
|
925
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-core
non-interest
income (F)
|
|
$
|
6,742
|
|
|
$
|
2,828
|
|
|
$
|
1,649
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger expenses
|
|
$
|
25,743
|
|
|
$
|
433
|
|
|
$
|
4,800
|
|
FDIC loss share
buy-out
|
|
|
|
|
|
|
3,849
|
|
|
|
|
|
Hurricane damage expense
|
|
|
556
|
|
|
|
|
|
|
|
|
|
Other expense
(2)
|
|
|
47
|
|
|
|
2,283
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-core
non-interest
expense (G)
|
|
$
|
26,346
|
|
|
$
|
6,565
|
|
|
$
|
4,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Efficiency ratio (reported):
((C-E)/(A+B+D))
|
|
|
41.89
|
%
|
|
|
37.65
|
%
|
|
|
40.44
|
%
|
Core efficiency ratio
(non-GAAP):
((C-E-G)/(A+B+D-F))
|
|
|
37.66
|
|
|
|
36.55
|
|
|
|
39.48
|
|
(1)
|
Amount includes recoveries on historical losses.
|
(2)
|
Amount includes vacant properties write-downs.
|
96
Table 33 presents selected unaudited quarterly financial information for 2017 and 2016.
Table 33: Quarterly Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 Quarters
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
Total
|
|
|
|
(In thousands, except per share data)
|
|
Income statement data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
$
|
114,494
|
|
|
$
|
122,863
|
|
|
$
|
123,913
|
|
|
$
|
158,981
|
|
|
$
|
520,251
|
|
Total interest expense
|
|
|
9,679
|
|
|
|
15,511
|
|
|
|
17,144
|
|
|
|
22,012
|
|
|
|
64,346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
104,815
|
|
|
|
107,352
|
|
|
|
106,769
|
|
|
|
136,969
|
|
|
|
455,905
|
|
Provision for loan losses
|
|
|
3,914
|
|
|
|
387
|
|
|
|
35,023
|
|
|
|
4,926
|
|
|
|
44,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses
|
|
|
100,901
|
|
|
|
106,965
|
|
|
|
71,746
|
|
|
|
132,043
|
|
|
|
411,655
|
|
Total
non-interest
income
|
|
|
26,470
|
|
|
|
24,417
|
|
|
|
21,457
|
|
|
|
27,292
|
|
|
|
99,636
|
|
Total
non-interest
expense
|
|
|
55,141
|
|
|
|
51,003
|
|
|
|
70,846
|
|
|
|
63,218
|
|
|
|
240,208
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
72,230
|
|
|
|
80,379
|
|
|
|
22,357
|
|
|
|
96,117
|
|
|
|
271,083
|
|
Income tax expense
|
|
|
25,374
|
|
|
|
30,282
|
|
|
|
7,536
|
|
|
|
72,808
|
|
|
|
136,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
46,856
|
|
|
$
|
50,097
|
|
|
$
|
14,821
|
|
|
$
|
23,309
|
|
|
$
|
135,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share
|
|
$
|
0.33
|
|
|
$
|
0.35
|
|
|
$
|
0.10
|
|
|
$
|
0.13
|
|
|
$
|
0.90
|
|
Diluted earnings per common share
|
|
|
0.33
|
|
|
|
0.35
|
|
|
|
0.10
|
|
|
|
0.13
|
|
|
|
0.89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 Quarters
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
Total
|
|
|
|
(In thousands, except per share data)
|
|
Income statement data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
$
|
105,284
|
|
|
$
|
108,490
|
|
|
$
|
111,375
|
|
|
$
|
111,388
|
|
|
$
|
436,537
|
|
Total interest expense
|
|
|
7,227
|
|
|
|
7,449
|
|
|
|
7,722
|
|
|
|
8,181
|
|
|
|
30,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
98,057
|
|
|
|
101,041
|
|
|
|
103,653
|
|
|
|
103,207
|
|
|
|
405,958
|
|
Provision for loan losses
|
|
|
5,677
|
|
|
|
5,692
|
|
|
|
5,536
|
|
|
|
1,703
|
|
|
|
18,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses
|
|
|
92,380
|
|
|
|
95,349
|
|
|
|
98,117
|
|
|
|
101,504
|
|
|
|
387,350
|
|
Total
non-interest
income
|
|
|
19,437
|
|
|
|
21,772
|
|
|
|
22,014
|
|
|
|
23,828
|
|
|
|
87,051
|
|
Total
non-interest
expense
|
|
|
45,648
|
|
|
|
47,587
|
|
|
|
51,026
|
|
|
|
47,494
|
|
|
|
191,755
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
66,169
|
|
|
|
69,534
|
|
|
|
69,105
|
|
|
|
77,838
|
|
|
|
282,646
|
|
Income tax expense
|
|
|
24,742
|
|
|
|
26,025
|
|
|
|
25,485
|
|
|
|
29,248
|
|
|
|
105,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
41,427
|
|
|
$
|
43,509
|
|
|
$
|
43,620
|
|
|
$
|
48,590
|
|
|
$
|
177,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share
|
|
$
|
0.30
|
|
|
$
|
0.31
|
|
|
$
|
0.31
|
|
|
$
|
0.35
|
|
|
$
|
1.26
|
|
Diluted earnings per common share
|
|
|
0.29
|
|
|
|
0.31
|
|
|
|
0.31
|
|
|
|
0.35
|
|
|
|
1.26
|
|
Recent Accounting Pronouncements
See Note 25 to the Notes to Consolidated Financial Statements for a discussion of certain recent accounting pronouncements.
97
Item 8.
|
CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
Managements Report on Internal Control Over Financial Reporting
The management of Home BancShares, Inc. (the Company) is responsible for establishing and maintaining adequate internal control over financial
reporting as defined in Rule
13a-15(f)
under the Securities Exchange Act of 1934. The Companys internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation and fair presentation of the Companys financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.
Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Accordingly, even those systems determined
to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Management assessed the
effectiveness of the Companys internal control over financial reporting as of December 31, 2017. In making this assessment, management used the criteria set forth in
Internal Control Integrated Framework
(2013 edition)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). As permitted by SEC guidance, management excluded from its assessment the operations of the Stonegate acquisition made during 2017, which is described in Note 2
of the Consolidated Financial Statements. The total assets of the entity acquired in this acquisition represented approximately 20.7% of the Companys total consolidated assets as of December 31, 2017. Based on this assessment, management
has determined that the Companys internal control over financial reporting as of December 31, 2017 is effective based on the specified criteria.
BKD, LLP, the independent registered public accounting firm that audited the consolidated financial statements of the Company included in this Annual Report
on Form
10-K,
has issued an attestation report on the effectiveness of the Companys internal control over financial reporting as of December 31, 2017. The report, which expresses an unqualified
opinion on the effectiveness of the Companys internal control over financial reporting as of December 31, 2017, is included herein.
102
Report of Independent Registered Public Accounting Firm
Audit Committee, Board of Directors and Stockholders
Home
BancShares, Inc.
Conway, Arkansas
Opinion on the
Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Home BancShares, Inc. (the Company) as of
December 31, 2017 and 2016, and the related consolidated statements of income, comprehensive income, stockholders equity and cash flows for each of the years in the three-year period ended December 31, 2017, and the related notes
(collectively referred to as the financial statements). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2017
and 2016, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
Companys internal control over financial reporting as of December 31, 2017, based on criteria established in
Internal Control Integrated Framework
(2013 edition) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) and our report dated February 27, 2018, expressed an unqualified opinion on the effectiveness of the Companys internal control over financial reporting.
Basis for Opinion
These financial statements are
the responsibility of the Companys management. Our responsibility is to express an opinion on the Companys financial statements based on our audits.
We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance
with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included
performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.
/s/
BKD,
LLP
We have served as the Companys auditor since 2005.
Little Rock, Arkansas
February 27, 2018
103
Report of Independent Registered Public Accounting Firm
Audit Committee, Board of Directors and Stockholders
Home
BancShares, Inc.
Conway, Arkansas
Opinion on the
Internal Control Over Financial Reporting
We have audited Home BancShares, Inc.s (the Company) internal control over financial reporting as
of December 31, 2017, based on criteria established in Internal Control Integrated Framework (2013 edition) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on
criteria established in Internal Control Integrated Framework: (2013) issued by COSO.
We also have audited, in accordance with the standards
of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements of the Company and our report dated February 27, 2018, expressed an unqualified opinion thereon.
Basis for Opinion
The Companys management
is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Managements Report on Internal Control
Over Financial Reporting. Our responsibility is to express an opinion on the Companys internal control over financial reporting based on our audit.
We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance
with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists and testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
Definitions and Limitations of Internal Control Over Financial Reporting
A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors
of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the companys assets that could have a material effect on the financial statements.
104
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may
deteriorate.
As permitted, the Company excluded the operations of the acquisition of Stonegate Bank (Stonegate) acquired during 2017, which is described
in Note 2 of the consolidated financial statements, from the scope of managements report on internal control over financial reporting. As such, Stonegate has also been excluded from the scope of our audit of internal control over financial
reporting.
/s/
BKD,
LLP
Little Rock, Arkansas
February 27, 2018
105
Home BancShares, Inc.
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
(In thousands, except share data)
|
|
2017
|
|
|
2016
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
166,915
|
|
|
$
|
123,758
|
|
Interest-bearing deposits with other banks
|
|
|
469,018
|
|
|
|
92,891
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
635,933
|
|
|
|
216,649
|
|
Federal funds sold
|
|
|
24,109
|
|
|
|
1,550
|
|
Investment securities
available-for-sale
|
|
|
1,663,517
|
|
|
|
1,072,920
|
|
Investment securities
held-to-maturity
|
|
|
224,756
|
|
|
|
284,176
|
|
Loans receivable
|
|
|
10,331,188
|
|
|
|
7,387,699
|
|
Allowance for loan losses
|
|
|
(110,266
|
)
|
|
|
(80,002
|
)
|
|
|
|
|
|
|
|
|
|
Loans receivable, net
|
|
|
10,220,922
|
|
|
|
7,307,697
|
|
Bank premises and equipment, net
|
|
|
237,439
|
|
|
|
205,301
|
|
Foreclosed assets held for sale
|
|
|
18,867
|
|
|
|
15,951
|
|
Cash value of life insurance
|
|
|
146,866
|
|
|
|
86,491
|
|
Accrued interest receivable
|
|
|
45,708
|
|
|
|
30,838
|
|
Deferred tax asset, net
|
|
|
76,564
|
|
|
|
61,298
|
|
Goodwill
|
|
|
927,949
|
|
|
|
377,983
|
|
Core deposit and other intangibles
|
|
|
49,351
|
|
|
|
18,311
|
|
Other assets
|
|
|
177,779
|
|
|
|
129,300
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
14,449,760
|
|
|
$
|
9,808,465
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Equity
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
Demand and
non-interest-bearing
|
|
$
|
2,385,252
|
|
|
$
|
1,695,184
|
|
Savings and interest-bearing transaction accounts
|
|
|
6,476,819
|
|
|
|
3,963,241
|
|
Time deposits
|
|
|
1,526,431
|
|
|
|
1,284,002
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
|
10,388,502
|
|
|
|
6,942,427
|
|
Securities sold under agreements to repurchase
|
|
|
147,789
|
|
|
|
121,290
|
|
FHLB and other borrowed funds
|
|
|
1,299,188
|
|
|
|
1,305,198
|
|
Accrued interest payable and other liabilities
|
|
|
41,959
|
|
|
|
51,234
|
|
Subordinated debentures
|
|
|
368,031
|
|
|
|
60,826
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
12,245,469
|
|
|
|
8,480,975
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Common stock, par value $0.01; shares authorized 200,000,000 in 2017 and 2016; shares issued and
outstanding 173,632,983 in 2017 and 140,472,205 in 2016
|
|
|
1,736
|
|
|
|
1,405
|
|
Capital surplus
|
|
|
1,675,318
|
|
|
|
869,737
|
|
Retained earnings
|
|
|
530,658
|
|
|
|
455,948
|
|
Accumulated other comprehensive (loss) income
|
|
|
(3,421
|
)
|
|
|
400
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
2,204,291
|
|
|
|
1,327,490
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
14,449,760
|
|
|
$
|
9,808,465
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
106
Home BancShares, Inc.
Consolidated Statements of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(In thousands, except per share data)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Interest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
479,189
|
|
|
$
|
403,394
|
|
|
$
|
344,290
|
|
Investment securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable
|
|
|
26,776
|
|
|
|
21,246
|
|
|
|
21,695
|
|
Tax-exempt
|
|
|
11,967
|
|
|
|
11,417
|
|
|
|
11,194
|
|
Deposits other banks
|
|
|
2,309
|
|
|
|
471
|
|
|
|
233
|
|
Federal funds sold
|
|
|
10
|
|
|
|
9
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
|
520,251
|
|
|
|
436,537
|
|
|
|
377,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on deposits
|
|
|
33,777
|
|
|
|
15,926
|
|
|
|
12,971
|
|
Federal funds purchased
|
|
|
1
|
|
|
|
2
|
|
|
|
4
|
|
FHLB and other borrowed funds
|
|
|
14,513
|
|
|
|
12,484
|
|
|
|
6,774
|
|
Securities sold under agreements to repurchase
|
|
|
918
|
|
|
|
574
|
|
|
|
621
|
|
Subordinated debentures
|
|
|
15,137
|
|
|
|
1,593
|
|
|
|
1,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest expense
|
|
|
64,346
|
|
|
|
30,579
|
|
|
|
21,724
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
455,905
|
|
|
|
405,958
|
|
|
|
355,712
|
|
Provision for loan losses
|
|
|
44,250
|
|
|
|
18,608
|
|
|
|
25,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses
|
|
|
411,655
|
|
|
|
387,350
|
|
|
|
330,548
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Service charges on deposit accounts
|
|
|
24,922
|
|
|
|
25,049
|
|
|
|
24,252
|
|
Other service charges and fees
|
|
|
36,127
|
|
|
|
30,200
|
|
|
|
26,186
|
|
Trust fees
|
|
|
1,678
|
|
|
|
1,457
|
|
|
|
2,381
|
|
Mortgage lending income
|
|
|
13,286
|
|
|
|
14,399
|
|
|
|
10,423
|
|
Insurance commissions
|
|
|
1,948
|
|
|
|
2,296
|
|
|
|
2,268
|
|
Increase in cash value of life insurance
|
|
|
1,989
|
|
|
|
1,412
|
|
|
|
1,199
|
|
Dividends from FHLB, FRB, Bankers bank & other
|
|
|
3,485
|
|
|
|
3,091
|
|
|
|
1,698
|
|
Gain on acquisitions
|
|
|
3,807
|
|
|
|
|
|
|
|
1,635
|
|
Gain on sale of SBA loans
|
|
|
738
|
|
|
|
1,088
|
|
|
|
541
|
|
Gain (loss) on sale of branches, equipment and other assets, net
|
|
|
(960
|
)
|
|
|
700
|
|
|
|
(214
|
)
|
Gain (loss) on OREO, net
|
|
|
1,025
|
|
|
|
(554
|
)
|
|
|
(317
|
)
|
Gain (loss) on securities, net
|
|
|
2,132
|
|
|
|
669
|
|
|
|
4
|
|
FDIC indemnification accretion/(amortization), net
|
|
|
|
|
|
|
(772
|
)
|
|
|
(9,391
|
)
|
Other income
|
|
|
9,459
|
|
|
|
8,016
|
|
|
|
4,833
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-interest
income
|
|
|
99,636
|
|
|
|
87,051
|
|
|
|
65,498
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
|
|
119,369
|
|
|
|
101,962
|
|
|
|
87,512
|
|
Occupancy and equipment
|
|
|
30,611
|
|
|
|
26,129
|
|
|
|
25,967
|
|
Data processing expense
|
|
|
11,998
|
|
|
|
10,499
|
|
|
|
10,774
|
|
Other operating expenses
|
|
|
78,230
|
|
|
|
53,165
|
|
|
|
53,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-interest
expense
|
|
|
240,208
|
|
|
|
191,755
|
|
|
|
177,555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
271,083
|
|
|
|
282,646
|
|
|
|
218,491
|
|
Income tax expense
|
|
|
136,000
|
|
|
|
105,500
|
|
|
|
80,292
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
135,083
|
|
|
$
|
177,146
|
|
|
$
|
138,199
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share
|
|
$
|
0.90
|
|
|
$
|
1.26
|
|
|
$
|
1.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share
|
|
$
|
0.89
|
|
|
$
|
1.26
|
|
|
$
|
1.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
107
Home BancShares, Inc.
Consolidated Statements of Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(In thousands)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Net income available to all stockholders
|
|
$
|
135,083
|
|
|
$
|
177,146
|
|
|
$
|
138,199
|
|
Net unrealized gain (loss) on
available-for-sale
securities
|
|
|
(3,419
|
)
|
|
|
(5,546
|
)
|
|
|
(4,656
|
)
|
Less: reclassification adjustment for realized (gains) losses included in income
|
|
|
(2,132
|
)
|
|
|
(669
|
)
|
|
|
(4
|
)
|
Effect of tax rate change on unrealized gain (loss) on
available-for-sale
securities
|
|
|
(737
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss), before tax effect
|
|
|
(6,288
|
)
|
|
|
(6,215
|
)
|
|
|
(4,660
|
)
|
Tax effect on other comprehensive (loss) income
|
|
|
2,467
|
|
|
|
2,438
|
|
|
|
1,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
(3,821
|
)
|
|
|
(3,777
|
)
|
|
|
(2,832
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
131,262
|
|
|
$
|
173,369
|
|
|
$
|
135,367
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home BancShares, Inc.
Consolidated Statements of Stockholders Equity
Years Ended December 31, 2017, 2016 and 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands, except share data)
|
|
Common
Stock
|
|
|
Capital
Surplus
|
|
|
Retained
Earnings
|
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
|
Total
|
|
Balances at January 1, 2015
|
|
$
|
676
|
|
|
$
|
781,328
|
|
|
$
|
226,279
|
|
|
$
|
7,009
|
|
|
$
|
1,015,292
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
138,199
|
|
|
|
|
|
|
|
138,199
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,832
|
)
|
|
|
(2,832
|
)
|
Net issuance of 409,072 shares of common stock from exercise of stock options
|
|
|
2
|
|
|
|
387
|
|
|
|
|
|
|
|
|
|
|
|
389
|
|
Issuance of 4,159,708 shares of common stock from acquisition of FBBI, net of issuance costs of
approximately $60
|
|
|
21
|
|
|
|
83,753
|
|
|
|
|
|
|
|
|
|
|
|
83,774
|
|
Repurchase of 134,664 shares of common stock
|
|
|
(1
|
)
|
|
|
(2,014
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,015
|
)
|
Tax benefit from stock options exercised
|
|
|
|
|
|
|
605
|
|
|
|
|
|
|
|
|
|
|
|
605
|
|
Share-based compensation net issuance of 665,668 shares of restricted common stock
|
|
|
3
|
|
|
|
3,922
|
|
|
|
|
|
|
|
|
|
|
|
3,925
|
|
Cash dividends - Common Stock, $0.2750 per share
|
|
|
|
|
|
|
|
|
|
|
(37,580
|
)
|
|
|
|
|
|
|
(37,580
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2015
|
|
|
701
|
|
|
|
867,981
|
|
|
|
326,898
|
|
|
|
4,177
|
|
|
|
1,199,757
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
177,146
|
|
|
|
|
|
|
|
177,146
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,777
|
)
|
|
|
(3,777
|
)
|
Net issuance of 492,739 shares of common stock from exercise of stock options plus issuance of
10,000 bonus shares of unrestricted common stock
|
|
|
3
|
|
|
|
1,492
|
|
|
|
|
|
|
|
|
|
|
|
1,495
|
|
Issuance of common stock
2-for-1
stock split
|
|
|
702
|
|
|
|
(702
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of 510,608 shares of common stock
|
|
|
(3
|
)
|
|
|
(9,814
|
)
|
|
|
|
|
|
|
|
|
|
|
(9,817
|
)
|
Tax benefit from stock options exercised
|
|
|
|
|
|
|
4,154
|
|
|
|
|
|
|
|
|
|
|
|
4,154
|
|
Share-based compensation net issuance of 243,734 shares of restricted common stock
|
|
|
2
|
|
|
|
6,626
|
|
|
|
|
|
|
|
|
|
|
|
6,628
|
|
Cash dividends Common Stock, $0.3425 per share
|
|
|
|
|
|
|
|
|
|
|
(48,096
|
)
|
|
|
|
|
|
|
(48,096
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2016
|
|
|
1,405
|
|
|
|
869,737
|
|
|
|
455,948
|
|
|
|
400
|
|
|
|
1,327,490
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
135,083
|
|
|
|
|
|
|
|
135,083
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,821
|
)
|
|
|
(3,821
|
)
|
Net issuance of 185,116 shares of common stock from exercise of stock options
|
|
|
2
|
|
|
|
1,080
|
|
|
|
|
|
|
|
|
|
|
|
1,082
|
|
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 857,800 shares of common stock
|
|
|
(9
|
)
|
|
|
(20,816
|
)
|
|
|
|
|
|
|
|
|
|
|
(20,825
|
)
|
Share-based compensation net issuance of 231,766 shares of restricted common stock
|
|
|
2
|
|
|
|
6,703
|
|
|
|
|
|
|
|
|
|
|
|
6,705
|
|
Cash dividends Common Stock, $0.4000 per share
|
|
|
|
|
|
|
|
|
|
|
(60,373
|
)
|
|
|
|
|
|
|
(60,373
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2017
|
|
$
|
1,736
|
|
|
$
|
1,675,318
|
|
|
$
|
530,658
|
|
|
$
|
(3,421
|
)
|
|
$
|
2,204,291
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
108
Home BancShares, Inc.
Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(In thousands)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
135,083
|
|
|
$
|
177,146
|
|
|
$
|
138,199
|
|
Adjustments to reconcile net income to net cash provided by (used in) operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
11,995
|
|
|
|
10,644
|
|
|
|
10,296
|
|
Amortization/(accretion)
|
|
|
17,638
|
|
|
|
15,495
|
|
|
|
21,783
|
|
Share-based compensation
|
|
|
6,705
|
|
|
|
6,628
|
|
|
|
3,925
|
|
Tax benefits from stock options exercised
|
|
|
|
|
|
|
(4,154
|
)
|
|
|
(605
|
)
|
(Gain) loss on assets
|
|
|
(4,223
|
)
|
|
|
1,978
|
|
|
|
(6
|
)
|
Gain on acquisitions
|
|
|
(3,807
|
)
|
|
|
|
|
|
|
(1,635
|
)
|
Provision for loan losses
|
|
|
44,250
|
|
|
|
18,608
|
|
|
|
25,164
|
|
Deferred income tax effect
|
|
|
34,084
|
|
|
|
12,705
|
|
|
|
7,168
|
|
Increase in cash value of life insurance
|
|
|
(1,989
|
)
|
|
|
(1,412
|
)
|
|
|
(1,199
|
)
|
Originations of mortgage loans held for sale
|
|
|
(333,558
|
)
|
|
|
(354,481
|
)
|
|
|
(280,858
|
)
|
Proceeds from sales of mortgage loans held for sale
|
|
|
345,501
|
|
|
|
337,128
|
|
|
|
272,107
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued interest receivable
|
|
|
(6,451
|
)
|
|
|
(1,706
|
)
|
|
|
(3,615
|
)
|
Indemnification and other assets
|
|
|
(37,285
|
)
|
|
|
(11,520
|
)
|
|
|
(10,312
|
)
|
Accrued interest payable and other liabilities
|
|
|
(31,033
|
)
|
|
|
10,985
|
|
|
|
24,651
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
176,910
|
|
|
|
218,044
|
|
|
|
205,063
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (increase) decrease in federal funds sold
|
|
|
(21,044
|
)
|
|
|
|
|
|
|
(1,300
|
)
|
Net (increase) decrease in loans, excluding loans acquired
|
|
|
(172,935
|
)
|
|
|
(764,665
|
)
|
|
|
(874,092
|
)
|
Purchases of investment securities
available-for-sale
|
|
|
(692,482
|
)
|
|
|
(253,458
|
)
|
|
|
(382,631
|
)
|
Proceeds from maturities of investment securities
available-for-sale
|
|
|
184,280
|
|
|
|
284,392
|
|
|
|
290,506
|
|
Proceeds from sale of investment securities
available-for-sale
|
|
|
32,732
|
|
|
|
87,157
|
|
|
|
4,034
|
|
Purchases of investment securities
held-to-maturity
|
|
|
(281
|
)
|
|
|
(25,933
|
)
|
|
|
(6,563
|
)
|
Proceeds from maturities of investment securities
held-to-maturity
|
|
|
58,162
|
|
|
|
49,231
|
|
|
|
52,127
|
|
Proceeds from qualified sale of investment securities
held-to-maturity
|
|
|
491
|
|
|
|
|
|
|
|
|
|
Proceeds from foreclosed assets held for sale
|
|
|
18,734
|
|
|
|
13,978
|
|
|
|
20,928
|
|
Proceeds from sale of SBA loans
|
|
|
13,630
|
|
|
|
17,910
|
|
|
|
8,256
|
|
Proceeds from sale of insurance book of business
|
|
|
|
|
|
|
|
|
|
|
2,938
|
|
Purchases of premises and equipment, net
|
|
|
(5,191
|
)
|
|
|
(3,082
|
)
|
|
|
(10,536
|
)
|
Return of investment on cash value of life insurance
|
|
|
592
|
|
|
|
57
|
|
|
|
27
|
|
Net cash proceeds (paid) received market acquisitions
|
|
|
227,842
|
|
|
|
|
|
|
|
144,097
|
|
Cash (paid) on FDIC loss share
buy-out
|
|
|
|
|
|
|
(6,613
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
(355,470
|
)
|
|
|
(601,026
|
)
|
|
|
(752,209
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in deposits, excluding deposits acquired
|
|
|
476,623
|
|
|
|
503,918
|
|
|
|
74,992
|
|
Net increase (decrease) in securities sold under agreements to repurchase
|
|
|
336
|
|
|
|
(7,099
|
)
|
|
|
(48,076
|
)
|
Net increase (decrease) in FHLB and other borrowed funds
|
|
|
(95,375
|
)
|
|
|
(100,747
|
)
|
|
|
702,186
|
|
Proceeds from exercise of stock options
|
|
|
1,082
|
|
|
|
1,495
|
|
|
|
389
|
|
Proceeds from issuance of subordinated debentures
|
|
|
297,201
|
|
|
|
|
|
|
|
|
|
Repurchase of common stock
|
|
|
(20,825
|
)
|
|
|
(9,817
|
)
|
|
|
(2,015
|
)
|
Common stock issuance costs market acquisitions
|
|
|
(825
|
)
|
|
|
|
|
|
|
(60
|
)
|
Tax benefits from stock options exercised
|
|
|
|
|
|
|
4,154
|
|
|
|
605
|
|
Dividends paid on common stock
|
|
|
(60,373
|
)
|
|
|
(48,096
|
)
|
|
|
(37,580
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
597,844
|
|
|
|
343,808
|
|
|
|
690,441
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
|
419,284
|
|
|
|
(39,174
|
)
|
|
|
143,295
|
|
Cash and cash equivalents beginning of year
|
|
|
216,649
|
|
|
|
255,823
|
|
|
|
112,528
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents end of year
|
|
$
|
635,933
|
|
|
$
|
216,649
|
|
|
$
|
255,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
109
Home BancShares, Inc.
Notes to Consolidated Financial Statements
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.
110
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, cash held as demand deposits at various banks and the Federal Reserve Bank (FRB)
and interest-bearing deposits with other banks. The Bank is required to maintain an average reserve balance with either the FRB or in the form of cash on hand. The required reserve balance at December 31, 2017 was $103.2 million.
Investment Securities
Interest on investment securities is recorded as income as earned. Amortization of premiums and accretion of discounts are recorded as interest
income from securities. Realized gains and losses are recorded as net security gains (losses). Gains or losses on the sale of securities are determined using the specific identification method.
Management determines the classification of securities as
available-for-sale,
held-to-maturity,
or trading at the time of purchase 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 Company has no trading securities.
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, net of taxes. Securities
that are held as
available-for-sale
are used as a part of HBIs 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.
Securities
held-to-maturity
include any security for which the
Company has the positive intent and ability to hold until maturity, are reported at historical cost and are 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
Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are
reported at their outstanding principal balance adjusted for any charge-offs, deferred fees or costs on originated loans. Interest income on loans is accrued over the term of the loans based on the principal balance outstanding. Loan origination
fees and direct origination costs are capitalized and recognized as adjustments to yield on the related loans.
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 existing loans that may become
uncollectible and probable credit losses inherent in the remainder of the loan portfolio. The amounts of provisions to the allowance 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.
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 classified loans less than $2.0 million 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 accounted for under FASB ASC
310-30,
Loans Acquired with Deteriorated Credit Quality,
after an
assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating data.
111
Loans considered impaired, under FASB ASC
310-10-35,
are loans for which, based on current information and events, it is probable that the Company 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 borrower may be unable to meet payments as they become due. When accrual of interest is
discontinued, all unpaid accrued interest is reversed.
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, but payments received are usually
applied to principal.
Non-accrual
loans are generally returned to accrual status after being current for a period of at least six months. An exception to this
six-month
period can be made if it can be proven that the borrower has historically demonstrated repayment performance consistent with the terms of the loan and the Company expects to collect all principal and interest.
Acquisition Accounting and Acquired Loans
The Company accounts for its acquisitions under FASB ASC Topic 805,
Business Combinations
, which requires the use of the purchase 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 loans acquired incorporates
assumptions regarding credit risk. Loans acquired 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 loans, the Company continues to estimate cash flows expected to be collected on individual loans or on pools of
loans sharing common risk characteristics and are treated in the aggregate when applying various valuation techniques. The Company evaluates at each balance sheet date whether the present value of its loans determined using the effective interest
rates has significantly decreased and if so, recognizes a provision for loan loss in its consolidated statement of income. For any significant increases in cash flows expected to be collected, the Company adjusts the amount of accretable yield
recognized on a prospective basis over the loans or pools weighted-average life.
For further discussion of the Companys
acquisitions, see Note 2 to the Notes to Consolidated Financial Statements.
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
less cost to sell 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.
112
Bank Premises and Equipment
Bank premises and equipment are carried at cost or fair market value at the date of acquisition less accumulated depreciation. Depreciation
expense is computed using the straight-line method over the estimated useful lives of the assets. Accelerated depreciation methods are used for tax purposes. Leasehold improvements are capitalized and amortized using the straight-line method over
the terms of the respective leases or the estimated useful lives of the improvements whichever is shorter. The assets estimated useful lives for book purposes are as follows:
|
|
|
Bank premises
|
|
15-40 years
|
Furniture, fixtures, and equipment
|
|
3-15 years
|
Cash value of life insurance
The Company has purchased life insurance policies on certain key employees. Life insurance owned by the Company is recorded at the amount that
can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.
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. The Company performed its annual impairment test of goodwill and core deposit intangibles during 2017, 2016 and
2015, as required by FASB ASC 350,
Intangibles - Goodwill and Other
. The 2017, 2016 and 2015 tests indicated no impairment of the Companys goodwill or core deposit intangibles.
Securities Sold Under Agreements to Repurchase
Securities sold under agreements to repurchase consist of obligations of the Company to other parties. At the point funds deposited by
customers become investable, those funds are used to purchase securities owned by the Company and held in its general account with the designation of Customers Securities. A third party maintains control over the securities underlying
overnight repurchase agreements. The securities involved in these transactions are generally U.S. Treasury or Federal Agency issues. Securities sold under agreements to repurchase generally mature on the banking day following that on which the
investment was initially purchased and are treated as collateralized financing transactions which are recorded at the amounts at which the securities were sold plus accrued interest. Interest rates and maturity dates of the securities involved vary
and are not intended to be matched with funds from customers.
Derivative Financial Instruments
The Company may enter into derivative contracts for the purposes of managing exposure to interest rate risk. The Company records all
derivatives on the consolidated balance sheet at fair value. Historically the Companys policy has been not to invest in derivative type investments.
During 2017, the Company acquired standalone derivative financial instruments from Stonegate. These derivative financial instruments consist
of interest rate swaps and are recognized as assets and liabilities in the consolidated statements of financial condition at fair value. The Banks derivative instruments have not been designated as hedging instruments. These undesignated
derivative instruments are recognized on the consolidated balance sheet at fair value, with changes in fair value recorded in other noninterest income. As of December 31, 2017, these derivative instruments are not considered to be material to
the Companys financial position and results of operations. In addition, as of December 31, 2017, the Company had derivative contracts outstanding associated with the mortgage loans held for sale portfolio.
As of December 31, 2016, the Company had no derivative contracts outstanding except for commitments associated with the mortgage loans
held for sale portfolio.
113
Stock Options
The Company accounts for stock options in accordance with FASB ASC 718,
Compensation - Stock Compensation,
and FASB ASC
505-50,
Equity-Based Payments to
Non-Employees
, which establishes standards for the accounting for transactions in which an entity (i) exchanges its equity
instruments for goods and services, or (ii) incurs liabilities in exchange for goods and services that are based on the fair value of the entitys equity instruments or that may be settled by the issuance of the equity instruments. FASB
ASC 718 requires that such transactions be recognized as compensation cost in the income statement based on their fair values on the measurement date, which is generally the date of the grant.
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 share-based payment awards to employees, including the accounting for income taxes, forfeitures, statutory tax withholding
requirements and classification in the statement of cash flows. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted in any annual or
interim period for which financial statements have not yet been issued, and all amendments in the ASU that apply must be adopted in the same period. The Company adopted the new guidance in the first quarter of 2017. Under the new guidance, excess
tax benefits related to equity compensation has been recognized in the income tax expense in the consolidated statements of income rather than in capital surplus in the consolidated balance sheets and has been applied on a prospective basis. Changes
to the statements of cash flows related to the classification of excess tax benefits and employee taxes paid for share-based payment arrangements has been implemented on a retrospective basis. 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 operations as a result of the adoption and
implementation of ASU
2016-09.
For additional information on the stock-based compensation plan, see Note 14.
Termination of Remaining Loss-Share Agreements
Effective July 27, 2016, we reached an agreement terminating our remaining loss-share agreements with the FDIC. As a result,
$57.4 million of the loans, previously under loss-share agreements including their associated discounts which were previously classified as covered loans, migrated to
non-covered
loans status during 2016.
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.
Income Taxes
The Company accounts 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. The Company determines 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.
114
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
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.
The Company and its subsidiaries file consolidated tax returns. Its subsidiary provides for income taxes on a separate return basis, and
remits to the Company amounts determined to be currently payable.
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 years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
(In thousands, except per share data)
|
|
Net income
|
|
$
|
135,083
|
|
|
$
|
177,146
|
|
|
$
|
138,199
|
|
Average common shares outstanding
|
|
|
150,806
|
|
|
|
140,418
|
|
|
|
136,615
|
|
Effect of common stock options
|
|
|
722
|
|
|
|
295
|
|
|
|
515
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted common shares outstanding
|
|
|
151,528
|
|
|
|
140,713
|
|
|
|
137,130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share
|
|
$
|
0.90
|
|
|
$
|
1.26
|
|
|
$
|
1.01
|
|
Diluted earnings per common share
|
|
$
|
0.89
|
|
|
$
|
1.26
|
|
|
$
|
1.01
|
|
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.
115
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
|
|
|
|
474
|
|
|
|
103,515
|
|
Loans receivable
|
|
|
2,446,149
|
|
|
|
(74,067
|
)
|
|
|
2,372,082
|
|
Allowance for loan losses
|
|
|
(21,507
|
)
|
|
|
21,507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable, net
|
|
|
2,424,642
|
|
|
|
(52,560
|
)
|
|
|
2,372,082
|
|
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
|
|
|
|
11,990
|
|
|
|
39,330
|
|
Goodwill
|
|
|
81,452
|
|
|
|
(81,452
|
)
|
|
|
|
|
Core deposit and other intangibles
|
|
|
10,505
|
|
|
|
20,364
|
|
|
|
30,869
|
|
Other assets
|
|
|
9,598
|
|
|
|
255
|
|
|
|
9,853
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets acquired
|
|
$
|
2,992,825
|
|
|
$
|
(105,302
|
)
|
|
$
|
2,887,523
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
(484
|
)
|
|
|
7,616
|
|
Subordinated debentures
|
|
|
8,345
|
|
|
|
1,489
|
|
|
|
9,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities assumed
|
|
|
2,601,057
|
|
|
|
1,104
|
|
|
|
2,602,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity assumed
|
|
|
391,768
|
|
|
|
(391,768
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity assumed
|
|
$
|
2,992,825
|
|
|
$
|
(390,664
|
)
|
|
|
2,602,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets acquired
|
|
|
|
|
|
|
|
|
|
|
285,362
|
|
Purchase price
|
|
|
|
|
|
|
|
|
|
|
792,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
$
|
507,008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 $474,000 adjustment to market value based upon quoted market prices.
116
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
The fair value used represents the adjustments of certain estimated liabilities from Stonegate.
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.
117
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 years
ended December 31, 2017 and 2016, assuming the acquisition was completed as of January 1, 2017 and 2016, respectively:
|
|
|
|
|
|
|
|
|
|
|
Years Ended
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(In thousands, except per share data)
|
|
Total interest income
|
|
$
|
610,697
|
|
|
$
|
538,258
|
|
Total
non-interest
income
|
|
|
107,179
|
|
|
|
95,555
|
|
Net income available to all shareholders
|
|
|
143,979
|
|
|
|
206,081
|
|
|
|
|
Basic earnings per common share
|
|
$
|
0.79
|
|
|
$
|
1.20
|
|
Diluted earnings per common share
|
|
|
0.79
|
|
|
|
1.20
|
|
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 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 (BOC), a Florida state-chartered bank that operated in the Sarasota, Florida area, 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.
118
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.
119
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 above 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 December 31, 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 December 31, 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.
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.
120
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
121
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 above 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 December 31, 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 December 31, 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.
Acquisition of Florida Business BancGroup, Inc.
On October 1, 2015, the Company completed its acquisition of Florida Business BancGroup, Inc. (FBBI), parent company of Bay
Cities Bank (Bay Cities). The Company paid a purchase price to the FBBI shareholders of $104.1 million for the FBBI acquisition. Under the terms of the agreement, shareholders of FBBI received 4,159,708 shares of its common stock
valued at approximately $83.8 million as of October 1, 2015, plus approximately $20.3 million in cash in exchange for all outstanding shares of FBBI common stock. A portion of the cash consideration, $2.0 million, was placed into
escrow with the FBBI shareholders having a contingent right to receive their
pro-rata
portions of such amount. The amount, if any, of such escrowed funds to be released to FBBI shareholders would depend upon
the amount of losses that the Company incurred in the two years following the completion of the merger related to two class action lawsuits pending against Bay Cities. In August 2017, the Company distributed the contingent cash consideration to the
former FBBI shareholders, less $10,000 for compensation paid to a representative designated by FBBI who acted on behalf of the FBBI shareholders in connection with the escrow arrangements.
122
FBBI formerly operated six branch locations and a loan production office in the Tampa Bay area
and in Sarasota, Florida. Including the effects of any purchase accounting adjustments, as of October 1, 2015, FBBI had approximately $529.6 million in total assets, $408.3 million in loans after $14.1 million of loan discounts,
and $472.0 million in deposits.
The Company has determined that the acquisition of the net assets of FBBI 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Florida Business BancGroup, Inc.
|
|
|
|
Acquired
from FBBI
|
|
|
Fair Value
Adjustments
|
|
|
As Recorded
by HBI
|
|
|
|
(Dollars in thousands)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
23,597
|
|
|
$
|
|
|
|
$
|
23,597
|
|
Investment securities
|
|
|
61,384
|
|
|
|
611
|
|
|
|
61,995
|
|
Loans
|
|
|
422,363
|
|
|
|
(14,096
|
)
|
|
|
408,267
|
|
Allowance for loan losses
|
|
|
(5,714
|
)
|
|
|
5,714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans receivable
|
|
|
416,649
|
|
|
|
(8,382
|
)
|
|
|
408,267
|
|
Bank premises and equipment, net
|
|
|
6,922
|
|
|
|
(1,697
|
)
|
|
|
5,225
|
|
Foreclosed assets held for sale
|
|
|
205
|
|
|
|
(43
|
)
|
|
|
162
|
|
Cash value of life insurance
|
|
|
9,540
|
|
|
|
|
|
|
|
9,540
|
|
Accrued interest receivable
|
|
|
1,442
|
|
|
|
|
|
|
|
1,442
|
|
Deferred tax asset
|
|
|
10,608
|
|
|
|
1,070
|
|
|
|
11,678
|
|
Core deposit intangible
|
|
|
|
|
|
|
3,477
|
|
|
|
3,477
|
|
Other assets
|
|
|
1,289
|
|
|
|
2,890
|
|
|
|
4,179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets acquired
|
|
$
|
531,636
|
|
|
$
|
(2,074
|
)
|
|
$
|
529,562
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand and
non-interest-bearing
|
|
$
|
150,625
|
|
|
$
|
|
|
|
$
|
150,625
|
|
Savings and interest-bearing transaction accounts
|
|
|
166,990
|
|
|
|
|
|
|
|
166,990
|
|
Time deposits
|
|
|
153,230
|
|
|
|
1,127
|
|
|
|
154,357
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
|
470,845
|
|
|
|
1,127
|
|
|
|
471,972
|
|
FHLB borrowed funds
|
|
|
5,000
|
|
|
|
802
|
|
|
|
5,802
|
|
Accrued interest payable and other liabilities
|
|
|
3,208
|
|
|
|
(319
|
)
|
|
|
2,889
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities assumed
|
|
|
479,053
|
|
|
|
1,610
|
|
|
|
480,663
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity assumed
|
|
|
52,583
|
|
|
|
(52,583
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity assumed
|
|
$
|
531,636
|
|
|
$
|
(50,973
|
)
|
|
|
480,663
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets acquired
|
|
|
|
|
|
|
|
|
|
|
48,899
|
|
Purchase Price
|
|
|
|
|
|
|
|
|
|
|
104,154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
$
|
55,255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
123
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
The carrying amount of these assets is a reasonable
estimate of fair value based on the short-term nature of these assets. The $20.3 million adjustment primarily consists of the cash settlement paid to FBBI shareholders on the closing date and
cash-in-lieu
of fractional shares.
Investment securities
Investment securities
were acquired from FBBI with a $611,000 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 $390.9 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 $7.0 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 $31.5 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 $7.1 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 FBBI with a $1.7 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 to sell.
Cash value of life insurance
Cash value of life
insurance was acquired from FBBI at market value.
Accrued interest receivable
Accrued interest receivable was acquired from
FBBI 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%.
Goodwill
The consideration paid as a result of the acquisition exceeded the fair value of the assets acquired; therefore,
the Company recorded $55.3 million of goodwill.
Core deposit intangible
This intangible asset represents the value of
the relationships that FBBI 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 $3.5 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 $1.1 million fair value adjustment applied for time deposits was because the weighted-average interest rate of FBBIs certificates of deposits were estimated to be above 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 FBBI.
124
The Companys operating results for the period ended December 31, 2015, 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 FBBI total assets acquired are less than 5% of total assets as of December 31, 2015
excluding FBBI 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.
Acquisition of Pool of National Commercial Real Estate Loans
On April 1, 2015, Centennial entered into an agreement with AM PR LLC, an affiliate of J.C. Flowers & Co. (collectively, the
Seller) to purchase a pool of national commercial real estate loans totaling approximately $289.1 million for a purchase price of 99% of the total principal value of the acquired loans. The purchase of the loans was completed on
April 1, 2015. The acquired loans were originated by the former Doral Bank of San Juan, Puerto Rico within its Doral Property Finance portfolio and were transferred to the Seller by Banco Popular of Puerto Rico (Popular) upon its
acquisition of the assets and liabilities of Doral Bank from FDIC, as receiver for the failed Doral Bank. This pool of loans is now managed by a division of Centennial known as the Centennial Commercial Finance Group (Centennial CFG),
which is responsible for servicing the acquired loan pool and originating new loan production.
In connection with this acquisition of
loans, the Company opened a loan production office on April 23, 2015 in New York City, which became a branch on September 1, 2016. Through this branch office, Centennial CFG is building out a national lending platform focusing on
commercial real estate plus commercial and industrial loans.
Acquisition of Doral Banks Florida Panhandle operations
On February 27, 2015, Centennial acquired all the deposits and substantially all the assets of Doral Banks Florida Panhandle
operations (Doral Florida) through an alliance agreement with Popular who was the successful lead bidder to acquire the assets and liabilities of the failed Doral Bank from the FDIC. Including the effects of the purchase accounting
adjustments, the acquisition provided the Company with loans of approximately $37.9 million net of loan discounts, deposits of approximately $467.6 million, plus a $428.2 million cash settlement to balance the transaction. The FDIC in
did not provide loss-sharing with respect to the acquired assets.
Prior to the acquisition, Doral Florida operated five branch locations
in Panama City, Panama City Beach and Pensacola, Florida plus a loan production office in Tallahassee, Florida. At the time of acquisition, Centennial operated 29 branch locations in the Florida Panhandle. As a result, the Company closed all five
branch locations during the July 2015 systems conversion and returned the facilities back to the FDIC.
125
The Company has determined that the acquisition of the net assets of Doral Florida constitutes a
business combination as defined by the FASB ASC Topic 805,
Business Combinations
. Accordingly, the assets acquired and liabilities assumed are presented at their fair values as required. Fair values were determined based on the requirements
of FASB ASC Topic 820,
Fair Value Measurements
. 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Doral Banks Florida Panhandle
operations
|
|
|
|
Acquired
from FDIC
|
|
|
Fair Value
Adjustments
|
|
|
As Recorded
by HBI
|
|
|
|
(Dollars in thousands)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
1,688
|
|
|
$
|
|
|
|
$
|
1,688
|
|
Loans receivable
|
|
|
42,244
|
|
|
|
(4,300
|
)
|
|
|
37,944
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans receivable
|
|
|
42,244
|
|
|
|
(4,300
|
)
|
|
|
37,944
|
|
Core deposit intangible
|
|
|
|
|
|
|
1,363
|
|
|
|
1,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets acquired
|
|
$
|
43,932
|
|
|
$
|
(2,937
|
)
|
|
$
|
40,995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand and
non-interest-bearing
|
|
$
|
3,130
|
|
|
$
|
|
|
|
$
|
3,130
|
|
Savings and interest-bearing transaction accounts
|
|
|
119,865
|
|
|
|
|
|
|
|
119,865
|
|
Time deposits
|
|
|
343,271
|
|
|
|
1,308
|
|
|
|
344,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
|
466,266
|
|
|
|
1,308
|
|
|
|
467,574
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities assumed
|
|
$
|
466,266
|
|
|
$
|
1,308
|
|
|
|
467,574
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets acquired (liabilities assumed)
|
|
|
|
|
|
|
|
|
|
|
(426,579
|
)
|
Cash settlement received
|
|
|
|
|
|
|
|
|
|
|
(428,214
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre-tax
gain on acquisition
|
|
|
|
|
|
|
|
|
|
$
|
1,635
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
The carrying amount of these assets is a reasonable estimate of fair
value based on the short-term nature of these assets.
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 $36.9 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
, and were recorded with a $3.4 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 approximately $5.3 million of loans evaluated were considered purchased credit impaired loans with in the provisions of FASB ASC Topic
310-30,
Loans and Debt Securities Acquired with Deteriorated Credit Quality
, and were recorded with a $950,000 discount. These purchased credit impaired loans will recognize interest income through accretion
of the difference between the carrying amount of the loans and the expected cash flows.
Core deposit intangible
This
intangible asset represents the value of the relationships that Doral Florida 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 $1.4 million of core deposit intangible.
126
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 Bank was able to reset deposit rates. However, the Bank did not lower the deposit rates as low as the market rates currently offered. As a
result, a $1.3 million fair value adjustment was applied for time deposits because the estimated weighted-average interest rate of Doral Floridas certificates of deposits were still estimated to be above the current market rates after the
rate reset.
The Companys operating results for the period ended December 31, 2015, 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 Doral Florida total assets acquired excluding the cash settlement received is less than 1% of total assets as of
acquisition date, historical results are not believed to be material to the Companys results, and thus no
pro-forma
information is presented.
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
|
Available-for-Sale
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
(Losses)
|
|
|
Estimated
Fair Value
|
|
|
|
(In thousands)
|
|
U.S. government-sponsored enterprises
|
|
$
|
407,387
|
|
|
$
|
899
|
|
|
$
|
(1,982
|
)
|
|
$
|
406,304
|
|
Residential mortgage-backed securities
|
|
|
481,981
|
|
|
|
538
|
|
|
|
(4,919
|
)
|
|
|
477,600
|
|
Commercial mortgage-backed securities
|
|
|
497,870
|
|
|
|
332
|
|
|
|
(4,430
|
)
|
|
|
493,772
|
|
State and political subdivisions
|
|
|
247,292
|
|
|
|
3,783
|
|
|
|
(774
|
)
|
|
|
250,301
|
|
Other securities
|
|
|
34,617
|
|
|
|
1,225
|
|
|
|
(302
|
)
|
|
|
35,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,669,147
|
|
|
$
|
6,777
|
|
|
$
|
(12,407
|
)
|
|
$
|
1,663,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-Maturity
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
(Losses)
|
|
|
Estimated
Fair Value
|
|
|
|
(In thousands)
|
|
U.S. government-sponsored enterprises
|
|
$
|
5,791
|
|
|
$
|
15
|
|
|
$
|
(15
|
)
|
|
$
|
5,791
|
|
Residential mortgage-backed securities
|
|
|
56,982
|
|
|
|
107
|
|
|
|
(402
|
)
|
|
|
56,687
|
|
Commercial mortgage-backed securities
|
|
|
16,625
|
|
|
|
114
|
|
|
|
(40
|
)
|
|
|
16,699
|
|
State and political subdivisions
|
|
|
145,358
|
|
|
|
3,031
|
|
|
|
(27
|
)
|
|
|
148,362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
224,756
|
|
|
$
|
3,267
|
|
|
$
|
(484
|
)
|
|
$
|
227,539
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets, principally investment securities, having an amortized cost of approximately $1.18 billion and
$1.07 billion at December 31, 2017 and 2016, respectively, were pledged to secure public deposits and for other purposes required or permitted by law. Also, investment securities pledged as collateral for repurchase agreements totaled
approximately $147.8 million and $121.3 million at December 31, 2017 and 2016, respectively.
The amortized cost and
estimated fair value of securities classified as
available-for-sale
and
held-to-maturity
at December 31, 2017, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-Sale
|
|
|
Held-to-Maturity
|
|
|
|
Amortized
|
|
|
Estimated
|
|
|
Amortized
|
|
|
Estimated
|
|
|
|
Cost
|
|
|
Fair Value
|
|
|
Cost
|
|
|
Fair Value
|
|
|
|
(In thousands)
|
|
Due in one year or less
|
|
$
|
366,341
|
|
|
$
|
365,526
|
|
|
$
|
72,364
|
|
|
$
|
74,079
|
|
Due after one year through five years
|
|
|
922,178
|
|
|
|
918,743
|
|
|
|
89,265
|
|
|
|
90,262
|
|
Due after five years through ten years
|
|
|
286,130
|
|
|
|
284,935
|
|
|
|
12,422
|
|
|
|
12,488
|
|
Due after ten years
|
|
|
94,498
|
|
|
|
94,313
|
|
|
|
50,705
|
|
|
|
50,710
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,669,147
|
|
|
$
|
1,663,517
|
|
|
$
|
224,756
|
|
|
$
|
227,539
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 year ended December 31, 2017, approximately $30.6 million in
available-for-sale
securities were sold. The gross realized gains and losses on the sales for the year ended December 31, 2017 totaled approximately $2.3 million and $127,000, respectively. The
income tax expense/benefit to net security gains and losses was 39.225% of the gross amounts.
128
During the year ended December 31, 2016, approximately $87.2 million, in
available-for-sale
securities were sold. There were approximately $795,000 in gains and $126,000 in losses on the
available-for-sale
securities sold. The income tax expense/benefit to net security gains and losses was 39.225% of the gross amounts.
During the year ended December 31, 2015, approximately $4.0 million, in
available-for-sale
securities were sold. The gross realized gains on these sales totaled approximately $4,000. There were no losses on the
available-for-sale
securities sold. The income tax expense/benefit to net security gains and losses was 39.225% of the gross amounts.
During 2015 and 2016, no
held-to-maturity
securities were
sold. During 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 year ended December 31, 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,
Investments - Debt 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.
For the year ended December 31, 2017,
the Company had approximately $5.3 million in unrealized losses, which were 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, approximately 76.6% 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.
For the year ended
December 31, 2016, the Company had approximately $1.6 million in unrealized losses, which were 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, approximately 78.5% 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 December 31, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
|
Less Than 12 Months
|
|
|
12 Months or More
|
|
|
Total
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
|
(In thousands)
|
|
U.S. government-sponsored enterprises
|
|
$
|
234,213
|
|
|
$
|
(1,288
|
)
|
|
$
|
40,122
|
|
|
$
|
(709
|
)
|
|
$
|
274,335
|
|
|
$
|
(1,997
|
)
|
Residential mortgage-backed securities
|
|
|
389,541
|
|
|
|
(3,656
|
)
|
|
|
99,989
|
|
|
|
(1,665
|
)
|
|
|
489,530
|
|
|
|
(5,321
|
)
|
Commercial mortgage-backed securities
|
|
|
314,301
|
|
|
|
(2,343
|
)
|
|
|
120,365
|
|
|
|
(2,127
|
)
|
|
|
434,666
|
|
|
|
(4,470
|
)
|
State and political subdivisions
|
|
|
41,299
|
|
|
|
(331
|
)
|
|
|
20,980
|
|
|
|
(470
|
)
|
|
|
62,279
|
|
|
|
(801
|
)
|
Other securities
|
|
|
|
|
|
|
|
|
|
|
9,852
|
|
|
|
(302
|
)
|
|
|
9,852
|
|
|
|
(302
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
979,354
|
|
|
$
|
(7,618
|
)
|
|
$
|
291,308
|
|
|
$
|
(5,273
|
)
|
|
$
|
1,270,662
|
|
|
$
|
(12,891
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
Less Than 12 Months
|
|
|
12 Months or More
|
|
|
Total
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
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 years ended is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
(In thousands)
|
|
Taxable:
|
|
|
|
|
Available-for-sale
|
|
$
|
24,231
|
|
|
$
|
17,880
|
|
|
$
|
17,881
|
|
Held-to-maturity
|
|
|
2,545
|
|
|
|
3,366
|
|
|
|
3,814
|
|
Tax-exempt:
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
|
|
|
6,441
|
|
|
|
6,238
|
|
|
|
5,767
|
|
Held-to-maturity
|
|
|
5,526
|
|
|
|
5,179
|
|
|
|
5,427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
38,743
|
|
|
$
|
32,663
|
|
|
$
|
32,889
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4. Loans Receivable
The various categories of loans receivable are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(In thousands)
|
|
Real estate:
|
|
|
|
|
|
|
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
$
|
4,600,117
|
|
|
$
|
3,153,121
|
|
Construction/land development
|
|
|
1,700,491
|
|
|
|
1,135,843
|
|
Agricultural
|
|
|
82,229
|
|
|
|
77,736
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
1,970,311
|
|
|
|
1,356,136
|
|
Multifamily residential
|
|
|
441,303
|
|
|
|
340,926
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
8,794,451
|
|
|
|
6,063,762
|
|
Consumer
|
|
|
46,148
|
|
|
|
41,745
|
|
Commercial and industrial
|
|
|
1,297,397
|
|
|
|
1,123,213
|
|
Agricultural
|
|
|
49,815
|
|
|
|
74,673
|
|
Other
|
|
|
143,377
|
|
|
|
84,306
|
|
|
|
|
|
|
|
|
|
|
Loans receivable
|
|
$
|
10,331,188
|
|
|
$
|
7,387,699
|
|
|
|
|
|
|
|
|
|
|
During the year ended December 31, 2017, the Company sold $12.9 million of the guaranteed portion of
certain SBA loans, which resulted in a gain of approximately $738,000. During the year ended December 31, 2016, the Company sold $16.8 million of the guaranteed portion of certain SBA loans, which resulted in a gain of approximately
$1.1 million. During the year ended December 31, 2015, the Company sold $7.7 million of the guaranteed portion of certain SBA loans, which resulted in a gain of approximately $541,000.
130
Mortgage loans held for sale of approximately $44.3 million and $56.2 million at
December 31, 2017 and 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 December 31, 2017 and 2016 were not material.
The Company had $3.46 billion of purchased loans, which includes $146.6 million of discount for credit losses on purchased loans, at
December 31, 2017. The Company had $51.9 million and $94.7 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, 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.
5. Allowance for Loan Losses, Credit Quality and Other
The Companys 2017 allowance for loan loss was 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. 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 established a $32.9 million storm-related provision for loan losses as of December 31, 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. As of December 31, 2017, charge-offs of $2.2 million have been taken against the storm-related provision for loan losses.
The following table presents a summary of changes in the allowance for loan losses:
|
|
|
|
|
|
|
December 31, 2017
|
|
|
|
(In thousands)
|
|
Allowance for loan losses:
|
|
|
|
|
Beginning balance
|
|
$
|
80,002
|
|
Loans charged off
|
|
|
(17,471
|
)
|
Recoveries of loans previously charged off
|
|
|
3,485
|
|
|
|
|
|
|
Net loans recovered (charged off)
|
|
|
(13,986
|
)
|
|
|
|
|
|
Provision for loan losses
|
|
|
44,250
|
|
|
|
|
|
|
Balance, December 31, 2017
|
|
$
|
110,266
|
|
|
|
|
|
|
131
The following tables present the balance in the allowance for loan losses for the year ended
December 31, 2017, and the allowance for loan losses and recorded investment in loans based on portfolio segment by impairment method as of December 31, 2017. 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, 2017
|
|
|
|
Construction/
Land
Development
|
|
|
Other
Commercial
Real Estate
|
|
|
Residential
Real Estate
|
|
|
Commercial
& Industrial
|
|
|
Consumer
& Other
|
|
|
Unallocated
|
|
|
Total
|
|
Allowance for loan losses:
|
|
(In thousands)
|
|
Beginning balance
|
|
$
|
11,522
|
|
|
$
|
28,188
|
|
|
$
|
16,517
|
|
|
$
|
12,756
|
|
|
$
|
4,188
|
|
|
$
|
6,831
|
|
|
$
|
80,002
|
|
Loans charged off
|
|
|
(1,632
|
)
|
|
|
(3,749
|
)
|
|
|
(3,980
|
)
|
|
|
(5,578
|
)
|
|
|
(2,532
|
)
|
|
|
|
|
|
|
(17,471
|
)
|
Recoveries of loans previously charged off
|
|
|
462
|
|
|
|
1,042
|
|
|
|
676
|
|
|
|
464
|
|
|
|
841
|
|
|
|
|
|
|
|
3,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loans recovered (charged off)
|
|
|
(1,170
|
)
|
|
|
(2,707
|
)
|
|
|
(3,304
|
)
|
|
|
(5,114
|
)
|
|
|
(1,691
|
)
|
|
|
|
|
|
|
(13,986
|
)
|
Provision for loan losses
|
|
|
9,991
|
|
|
|
18,458
|
|
|
|
11,293
|
|
|
|
7,650
|
|
|
|
837
|
|
|
|
(3,979
|
)
|
|
|
44,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31
|
|
$
|
20,343
|
|
|
$
|
43,939
|
|
|
$
|
24,506
|
|
|
$
|
15,292
|
|
|
$
|
3,334
|
|
|
$
|
2,852
|
|
|
$
|
110,266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2017
|
|
|
|
Construction/
Land
Development
|
|
|
Other
Commercial
Real Estate
|
|
|
Residential
Real Estate
|
|
|
Commercial
& Industrial
|
|
|
Consumer
& Other
|
|
|
Unallocated
|
|
|
Total
|
|
Allowance for loan losses:
|
|
(In thousands)
|
|
Period end amount allocated to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment
|
|
$
|
1,378
|
|
|
$
|
768
|
|
|
$
|
188
|
|
|
$
|
843
|
|
|
$
|
7
|
|
|
$
|
|
|
|
$
|
3,184
|
|
Loans collectively evaluated for impairment
|
|
|
18,954
|
|
|
|
42,824
|
|
|
|
23,341
|
|
|
|
14,290
|
|
|
|
3,310
|
|
|
|
2,852
|
|
|
|
105,571
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans evaluated for impairment balance, December 31
|
|
|
20,332
|
|
|
|
43,592
|
|
|
|
23,529
|
|
|
|
15,133
|
|
|
|
3,317
|
|
|
|
2,852
|
|
|
|
108,755
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased credit impaired loans
|
|
|
11
|
|
|
|
347
|
|
|
|
977
|
|
|
|
159
|
|
|
|
17
|
|
|
|
|
|
|
|
1,511
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31
|
|
$
|
20,343
|
|
|
$
|
43,939
|
|
|
$
|
24,506
|
|
|
$
|
15,292
|
|
|
$
|
3,334
|
|
|
$
|
2,852
|
|
|
$
|
110,266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period end amount allocated to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment
|
|
$
|
26,860
|
|
|
$
|
124,124
|
|
|
$
|
20,431
|
|
|
$
|
21,867
|
|
|
$
|
500
|
|
|
$
|
|
|
|
$
|
193,782
|
|
Loans collectively evaluated for impairment
|
|
|
1,658,519
|
|
|
|
4,442,201
|
|
|
|
2,341,081
|
|
|
|
1,261,161
|
|
|
|
236,392
|
|
|
|
|
|
|
|
9,939,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans evaluated for impairment balance, December 31
|
|
|
1,685,379
|
|
|
|
4,566,325
|
|
|
|
2,361,512
|
|
|
|
1,283,028
|
|
|
|
236,892
|
|
|
|
|
|
|
|
10,133,136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased credit impaired loans
|
|
|
15,112
|
|
|
|
116,021
|
|
|
|
50,102
|
|
|
|
14,369
|
|
|
|
2,448
|
|
|
|
|
|
|
|
198,052
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31
|
|
$
|
1,700,491
|
|
|
$
|
4,682,346
|
|
|
$
|
2,411,614
|
|
|
$
|
1,297,397
|
|
|
$
|
239,340
|
|
|
$
|
|
|
|
$
|
10,331,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
132
The following tables present the balance in the allowance for loan losses for the loan portfolio
for the year ended December 31, 2016, and the allowance for loan losses and recorded investment in loans 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
|
|
Allowance for loan losses:
|
|
(In thousands)
|
|
Beginning balance
|
|
$
|
10,782
|
|
|
$
|
26,798
|
|
|
$
|
14,818
|
|
|
$
|
9,324
|
|
|
$
|
5,016
|
|
|
$
|
2,486
|
|
|
$
|
69,224
|
|
Loans charged off
|
|
|
(382
|
)
|
|
|
(3,586
|
)
|
|
|
(5,597
|
)
|
|
|
(5,778
|
)
|
|
|
(2,158
|
)
|
|
|
|
|
|
|
(17,501
|
)
|
Recoveries of loans previously charged off
|
|
|
1,125
|
|
|
|
857
|
|
|
|
1,152
|
|
|
|
5,533
|
|
|
|
1,004
|
|
|
|
|
|
|
|
9,671
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loans recovered (charged off)
|
|
|
743
|
|
|
|
(2,729
|
)
|
|
|
(4,445
|
)
|
|
|
(245
|
)
|
|
|
(1,154
|
)
|
|
|
|
|
|
|
(7,830
|
)
|
Provision for loan losses
|
|
|
(3
|
)
|
|
|
4,119
|
|
|
|
6,144
|
|
|
|
3,677
|
|
|
|
326
|
|
|
|
4,345
|
|
|
|
18,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
Allowance for loan losses:
|
|
(In thousands)
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
133
The following tables present the balance in the allowance for loan losses for the loan portfolio
for the year ended December 31, 2015, and the allowance for loan losses and recorded investment in loans based on portfolio segment by impairment method as of December 31, 2015. 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, 2015
|
|
|
|
Construction/
Land
Development
|
|
|
Other
Commercial
Real Estate
|
|
|
Residential
Real Estate
|
|
|
Commercial
&
Industrial
|
|
|
Consumer
& Other
|
|
|
Unallocated
|
|
|
Total
|
|
Allowance for loan losses:
|
|
(In thousands)
|
|
Beginning balance
|
|
$
|
8,548
|
|
|
$
|
18,157
|
|
|
$
|
14,607
|
|
|
$
|
5,966
|
|
|
$
|
5,799
|
|
|
$
|
1,934
|
|
|
$
|
55,011
|
|
Loans charged off
|
|
|
(644
|
)
|
|
|
(4,878
|
)
|
|
|
(4,717
|
)
|
|
|
(2,638
|
)
|
|
|
(3,075
|
)
|
|
|
|
|
|
|
(15,952
|
)
|
Recoveries of loans previously charged off
|
|
|
236
|
|
|
|
762
|
|
|
|
915
|
|
|
|
802
|
|
|
|
827
|
|
|
|
|
|
|
|
3,542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loans recovered (charged off)
|
|
|
(408
|
)
|
|
|
(4,116
|
)
|
|
|
(3,802
|
)
|
|
|
(1,836
|
)
|
|
|
(2,248
|
)
|
|
|
|
|
|
|
(12,410
|
)
|
Provision for loan losses
|
|
|
2,273
|
|
|
|
11,862
|
|
|
|
3,818
|
|
|
|
5,204
|
|
|
|
1,455
|
|
|
|
552
|
|
|
|
25,164
|
|
Increase in FDIC indemnification asset
|
|
|
369
|
|
|
|
895
|
|
|
|
195
|
|
|
|
(10
|
)
|
|
|
10
|
|
|
|
|
|
|
|
1,459
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31
|
|
$
|
10,782
|
|
|
$
|
26,798
|
|
|
$
|
14,818
|
|
|
$
|
9,324
|
|
|
$
|
5,016
|
|
|
$
|
2,486
|
|
|
$
|
69,224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2015
|
|
|
|
Construction/
Land
Development
|
|
|
Other
Commercial
Real Estate
|
|
|
Residential
Real Estate
|
|
|
Commercial
&
Industrial
|
|
|
Consumer
& Other
|
|
|
Unallocated
|
|
|
Total
|
|
Allowance for loan losses:
|
|
(In thousands)
|
|
Period end amount allocated to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment
|
|
$
|
1,149
|
|
|
$
|
2,115
|
|
|
$
|
186
|
|
|
$
|
921
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
4,371
|
|
Loans collectively evaluated for impairment
|
|
|
9,506
|
|
|
|
24,511
|
|
|
|
12,157
|
|
|
|
8,383
|
|
|
|
5,006
|
|
|
|
2,486
|
|
|
|
62,049
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans evaluated for impairment balance, December 31
|
|
|
10,655
|
|
|
|
26,626
|
|
|
|
12,343
|
|
|
|
9,304
|
|
|
|
5,006
|
|
|
|
2,486
|
|
|
|
66,420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased credit impaired loans
|
|
|
127
|
|
|
|
172
|
|
|
|
2,475
|
|
|
|
20
|
|
|
|
10
|
|
|
|
|
|
|
|
2,804
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31
|
|
$
|
10,782
|
|
|
$
|
26,798
|
|
|
$
|
14,818
|
|
|
$
|
9,324
|
|
|
$
|
5,016
|
|
|
$
|
2,486
|
|
|
$
|
69,224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period end amount allocated to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment
|
|
$
|
21,215
|
|
|
$
|
55,858
|
|
|
$
|
18,240
|
|
|
$
|
6,290
|
|
|
$
|
1,053
|
|
|
$
|
|
|
|
$
|
102,656
|
|
Loans collectively evaluated for impairment
|
|
|
901,147
|
|
|
|
2,887,880
|
|
|
|
1,490,866
|
|
|
|
825,640
|
|
|
|
179,391
|
|
|
|
|
|
|
|
6,284,924
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans evaluated for impairment balance, December 31
|
|
|
922,362
|
|
|
|
2,943,738
|
|
|
|
1,509,106
|
|
|
|
831,930
|
|
|
|
180,444
|
|
|
|
|
|
|
|
6,387,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased credit impaired loans
|
|
|
22,425
|
|
|
|
99,624
|
|
|
|
111,429
|
|
|
|
18,657
|
|
|
|
1,856
|
|
|
|
|
|
|
|
253,991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31
|
|
$
|
944,787
|
|
|
$
|
3,043,362
|
|
|
$
|
1,620,535
|
|
|
$
|
850,587
|
|
|
$
|
182,300
|
|
|
$
|
|
|
|
$
|
6,641,571
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
134
The following is an aging analysis for loans receivable for the years ended December 31,
2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 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
|
|
Real estate:
|
|
(In thousands)
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
$
|
6,331
|
|
|
$
|
1,480
|
|
|
$
|
12,719
|
|
|
$
|
20,530
|
|
|
$
|
4,579,587
|
|
|
$
|
4,600,117
|
|
|
$
|
3,119
|
|
Construction/land development
|
|
|
834
|
|
|
|
13
|
|
|
|
8,258
|
|
|
|
9,105
|
|
|
|
1,691,386
|
|
|
|
1,700,491
|
|
|
|
3,247
|
|
Agricultural
|
|
|
|
|
|
|
221
|
|
|
|
19
|
|
|
|
240
|
|
|
|
81,989
|
|
|
|
82,229
|
|
|
|
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
9,066
|
|
|
|
2,013
|
|
|
|
16,612
|
|
|
|
27,691
|
|
|
|
1,942,620
|
|
|
|
1,970,311
|
|
|
|
2,175
|
|
Multifamily residential
|
|
|
|
|
|
|
|
|
|
|
253
|
|
|
|
253
|
|
|
|
441,050
|
|
|
|
441,303
|
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
16,231
|
|
|
|
3,727
|
|
|
|
37,861
|
|
|
|
57,819
|
|
|
|
8,736,632
|
|
|
|
8,794,451
|
|
|
|
8,641
|
|
Consumer
|
|
|
252
|
|
|
|
51
|
|
|
|
171
|
|
|
|
474
|
|
|
|
45,674
|
|
|
|
46,148
|
|
|
|
26
|
|
Commercial and industrial
|
|
|
2,073
|
|
|
|
1,030
|
|
|
|
6,528
|
|
|
|
9,631
|
|
|
|
1,287,766
|
|
|
|
1,297,397
|
|
|
|
1,944
|
|
Agricultural and other
|
|
|
288
|
|
|
|
113
|
|
|
|
137
|
|
|
|
538
|
|
|
|
192,654
|
|
|
|
193,192
|
|
|
|
54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
18,844
|
|
|
$
|
4,921
|
|
|
$
|
44,697
|
|
|
$
|
68,462
|
|
|
$
|
10,262,726
|
|
|
$
|
10,331,188
|
|
|
$
|
10,665
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
Real estate:
|
|
(In thousands)
|
|
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 December 31, 2017 and 2016 were
$34.0 million and $47.2 million, respectively.
135
The following is a summary of the impaired loans as of December 31, 2017, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
|
Unpaid
Contractual
Principal
Balance
|
|
|
Total
Recorded
Investment
|
|
|
Allocation
of Allowance
for Loan
Losses
|
|
|
Year Ended
|
|
|
|
|
|
|
Average
Recorded
Investment
|
|
|
Interest
Recognized
|
|
Loans without a specific valuation allowance
|
|
(In thousands)
|
|
Real estate:
|
|
|
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
$
|
29
|
|
|
$
|
29
|
|
|
$
|
|
|
|
$
|
23
|
|
|
$
|
2
|
|
Construction/land development
|
|
|
64
|
|
|
|
64
|
|
|
|
|
|
|
|
31
|
|
|
|
3
|
|
Agricultural
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
115
|
|
|
|
115
|
|
|
|
|
|
|
|
135
|
|
|
|
7
|
|
Multifamily residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
227
|
|
|
|
208
|
|
|
|
|
|
|
|
189
|
|
|
|
13
|
|
Consumer
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Commercial and industrial
|
|
|
105
|
|
|
|
105
|
|
|
|
|
|
|
|
85
|
|
|
|
7
|
|
Agricultural and other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans without a specific valuation allowance
|
|
|
350
|
|
|
|
313
|
|
|
|
|
|
|
|
274
|
|
|
|
21
|
|
Loans with a specific valuation allowance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
|
29,666
|
|
|
|
29,040
|
|
|
|
757
|
|
|
|
41,772
|
|
|
|
1,498
|
|
Construction/land development
|
|
|
12,976
|
|
|
|
12,157
|
|
|
|
1,378
|
|
|
|
10,556
|
|
|
|
262
|
|
Agricultural
|
|
|
281
|
|
|
|
303
|
|
|
|
11
|
|
|
|
268
|
|
|
|
11
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
19,770
|
|
|
|
18,689
|
|
|
|
124
|
|
|
|
22,347
|
|
|
|
363
|
|
Multifamily residential
|
|
|
1,627
|
|
|
|
1,627
|
|
|
|
64
|
|
|
|
1,412
|
|
|
|
81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
64,320
|
|
|
|
61,816
|
|
|
|
2,334
|
|
|
|
76,355
|
|
|
|
2,215
|
|
Consumer
|
|
|
179
|
|
|
|
191
|
|
|
|
|
|
|
|
163
|
|
|
|
|
|
Commercial and industrial
|
|
|
16,777
|
|
|
|
13,007
|
|
|
|
843
|
|
|
|
9,726
|
|
|
|
121
|
|
Agricultural and other
|
|
|
297
|
|
|
|
309
|
|
|
|
7
|
|
|
|
644
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans with a specific valuation allowance
|
|
|
81,573
|
|
|
|
75,323
|
|
|
|
3,184
|
|
|
|
86,888
|
|
|
|
2,344
|
|
Total impaired loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
|
29,695
|
|
|
|
29,069
|
|
|
|
757
|
|
|
|
41,795
|
|
|
|
1,500
|
|
Construction/land development
|
|
|
13,040
|
|
|
|
12,221
|
|
|
|
1,378
|
|
|
|
10,587
|
|
|
|
265
|
|
Agricultural
|
|
|
300
|
|
|
|
303
|
|
|
|
11
|
|
|
|
268
|
|
|
|
12
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
19,885
|
|
|
|
18,804
|
|
|
|
124
|
|
|
|
22,482
|
|
|
|
370
|
|
Multifamily residential
|
|
|
1,627
|
|
|
|
1,627
|
|
|
|
64
|
|
|
|
1,412
|
|
|
|
81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
64,547
|
|
|
|
62,024
|
|
|
|
2,334
|
|
|
|
76,544
|
|
|
|
2,228
|
|
Consumer
|
|
|
197
|
|
|
|
191
|
|
|
|
|
|
|
|
163
|
|
|
|
1
|
|
Commercial and industrial
|
|
|
16,882
|
|
|
|
13,112
|
|
|
|
843
|
|
|
|
9,811
|
|
|
|
128
|
|
Agricultural and other
|
|
|
297
|
|
|
|
309
|
|
|
|
7
|
|
|
|
644
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impaired loans
|
|
$
|
81,923
|
|
|
$
|
75,636
|
|
|
$
|
3,184
|
|
|
$
|
87,162
|
|
|
$
|
2,365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2017.
136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
Unpaid
Contractual
Principal
Balance
|
|
|
Total
Recorded
Investment
|
|
|
Allocation
of Allowance
for Loan
Losses
|
|
|
Year Ended
|
|
|
|
|
|
|
Average
Recorded
Investment
|
|
|
Interest
Recognized
|
|
Loans without a specific valuation allowance
|
|
(In thousands)
|
|
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.
137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
|
Unpaid
Contractual
Principal
Balance
|
|
|
Total
Recorded
Investment
|
|
|
Allocation
of Allowance
for Loan
Losses
|
|
|
Year Ended
|
|
|
|
|
|
|
Average
Recorded
Investment
|
|
|
Interest
Recognized
|
|
Loans without a specific valuation allowance
|
|
(In thousands)
|
|
Real estate:
|
|
|
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
$
|
29
|
|
|
$
|
29
|
|
|
$
|
|
|
|
$
|
6
|
|
|
$
|
2
|
|
Construction/land development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agricultural
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
80
|
|
|
|
80
|
|
|
|
|
|
|
|
21
|
|
|
|
6
|
|
Multifamily residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
109
|
|
|
|
109
|
|
|
|
|
|
|
|
27
|
|
|
|
8
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
|
12
|
|
|
|
12
|
|
|
|
|
|
|
|
2
|
|
|
|
1
|
|
Agricultural and other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans without a specific valuation allowance
|
|
|
121
|
|
|
|
121
|
|
|
|
|
|
|
|
29
|
|
|
|
8
|
|
Loans with a specific valuation allowance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
|
47,861
|
|
|
|
44,872
|
|
|
|
2,115
|
|
|
|
43,900
|
|
|
|
1,139
|
|
Construction/land development
|
|
|
17,025
|
|
|
|
15,077
|
|
|
|
1,149
|
|
|
|
16,026
|
|
|
|
303
|
|
Agricultural
|
|
|
583
|
|
|
|
561
|
|
|
|
|
|
|
|
153
|
|
|
|
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
18,454
|
|
|
|
17,373
|
|
|
|
168
|
|
|
|
16,947
|
|
|
|
390
|
|
Multifamily residential
|
|
|
1,160
|
|
|
|
1,160
|
|
|
|
18
|
|
|
|
3,281
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
85,083
|
|
|
|
79,043
|
|
|
|
3,450
|
|
|
|
80,307
|
|
|
|
1,866
|
|
Consumer
|
|
|
306
|
|
|
|
286
|
|
|
|
|
|
|
|
570
|
|
|
|
7
|
|
Commercial and industrial
|
|
|
13,385
|
|
|
|
11,169
|
|
|
|
921
|
|
|
|
6,542
|
|
|
|
191
|
|
Agricultural and other
|
|
|
1,034
|
|
|
|
1,034
|
|
|
|
|
|
|
|
614
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans with a specific valuation allowance
|
|
|
99,808
|
|
|
|
91,532
|
|
|
|
4,371
|
|
|
|
88,033
|
|
|
|
2,069
|
|
Total impaired loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
|
47,890
|
|
|
|
44,887
|
|
|
|
2,115
|
|
|
|
43,906
|
|
|
|
1,141
|
|
Construction/land development
|
|
|
17,025
|
|
|
|
15,077
|
|
|
|
1,149
|
|
|
|
16,026
|
|
|
|
303
|
|
Agricultural
|
|
|
583
|
|
|
|
561
|
|
|
|
|
|
|
|
153
|
|
|
|
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
18,534
|
|
|
|
17,413
|
|
|
|
168
|
|
|
|
16,968
|
|
|
|
396
|
|
Multifamily residential
|
|
|
1,160
|
|
|
|
1,160
|
|
|
|
18
|
|
|
|
3,281
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
85,192
|
|
|
|
79,098
|
|
|
|
3,450
|
|
|
|
80,334
|
|
|
|
1,874
|
|
Consumer
|
|
|
306
|
|
|
|
286
|
|
|
|
|
|
|
|
570
|
|
|
|
7
|
|
Commercial and industrial
|
|
|
13,397
|
|
|
|
11,175
|
|
|
|
921
|
|
|
|
6,544
|
|
|
|
192
|
|
Agricultural and other
|
|
|
1,034
|
|
|
|
1,034
|
|
|
|
|
|
|
|
614
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impaired loans
|
|
$
|
99,929
|
|
|
$
|
91,593
|
|
|
$
|
4,371
|
|
|
$
|
88,062
|
|
|
$
|
2,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2015.
Interest recognized on impaired loans during the years ended December 31,
2017, 2016 and 2015 was approximately $2.4 million, $2.3 million and $2.1 million, respectively. The amount of interest recognized on impaired loans on the cash basis is not materially different than the accrual basis.
138
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.
|
139
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 December 31, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
|
Risk Rated 6
|
|
|
Risk Rated 7
|
|
|
Risk Rated 8
|
|
|
Classified Total
|
|
Real estate:
|
|
(In thousands)
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
$
|
20,933
|
|
|
$
|
518
|
|
|
$
|
|
|
|
$
|
21,451
|
|
Construction/land development
|
|
|
24,013
|
|
|
|
204
|
|
|
|
|
|
|
|
24,217
|
|
Agricultural
|
|
|
321
|
|
|
|
|
|
|
|
|
|
|
|
321
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
23,420
|
|
|
|
564
|
|
|
|
|
|
|
|
23,984
|
|
Multifamily residential
|
|
|
939
|
|
|
|
|
|
|
|
|
|
|
|
939
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
69,626
|
|
|
|
1,286
|
|
|
|
|
|
|
|
70,912
|
|
Consumer
|
|
|
159
|
|
|
|
9
|
|
|
|
|
|
|
|
168
|
|
Commercial and industrial
|
|
|
12,818
|
|
|
|
80
|
|
|
|
|
|
|
|
12,898
|
|
Agricultural and other
|
|
|
136
|
|
|
|
|
|
|
|
|
|
|
|
136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
82,739
|
|
|
$
|
1,375
|
|
|
$
|
|
|
|
$
|
84,114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
Risk Rated 6
|
|
|
Risk Rated 7
|
|
|
Risk Rated 8
|
|
|
Classified Total
|
|
Real estate:
|
|
(In thousands)
|
|
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
|
|
$
|
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.
140
The following is a presentation of loans receivable by class and risk rating as of
December 31, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
|
Risk
Rated 1
|
|
|
Risk
Rated 2
|
|
|
Risk
Rated 3
|
|
|
Risk
Rated 4
|
|
|
Risk
Rated 5
|
|
|
Classified
Total
|
|
|
Total
|
|
Real estate:
|
|
(In thousands)
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
$
|
1,015
|
|
|
$
|
558
|
|
|
$
|
2,595,844
|
|
|
$
|
1,745,778
|
|
|
$
|
119,656
|
|
|
$
|
21,451
|
|
|
$
|
4,484,302
|
|
Construction/land development
|
|
|
28
|
|
|
|
583
|
|
|
|
280,980
|
|
|
|
1,373,133
|
|
|
|
6,438
|
|
|
|
24,217
|
|
|
|
1,685,379
|
|
Agricultural
|
|
|
|
|
|
|
19
|
|
|
|
53,018
|
|
|
|
27,515
|
|
|
|
1,150
|
|
|
|
321
|
|
|
|
82,023
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
1,140
|
|
|
|
969
|
|
|
|
1,414,849
|
|
|
|
475,619
|
|
|
|
11,658
|
|
|
|
23,984
|
|
|
|
1,928,219
|
|
Multifamily residential
|
|
|
|
|
|
|
|
|
|
|
329,070
|
|
|
|
103,071
|
|
|
|
213
|
|
|
|
939
|
|
|
|
433,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
2,183
|
|
|
|
2,129
|
|
|
|
4,673,761
|
|
|
|
3,725,116
|
|
|
|
139,115
|
|
|
|
70,912
|
|
|
|
8,613,216
|
|
Consumer
|
|
|
13,106
|
|
|
|
808
|
|
|
|
22,479
|
|
|
|
8,532
|
|
|
|
70
|
|
|
|
168
|
|
|
|
45,163
|
|
Commercial and industrial
|
|
|
20,870
|
|
|
|
7,543
|
|
|
|
627,316
|
|
|
|
592,088
|
|
|
|
22,313
|
|
|
|
12,898
|
|
|
|
1,283,028
|
|
Agricultural and other
|
|
|
1,986
|
|
|
|
3,914
|
|
|
|
147,323
|
|
|
|
38,370
|
|
|
|
|
|
|
|
136
|
|
|
|
191,729
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total risk rated loans
|
|
$
|
38,145
|
|
|
$
|
14,394
|
|
|
$
|
5,470,879
|
|
|
$
|
4,364,106
|
|
|
$
|
161,498
|
|
|
$
|
84,114
|
|
|
|
10,133,136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased credit impaired loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
198,052
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
10,331,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
Risk
Rated 1
|
|
|
Risk
Rated 2
|
|
|
Risk
Rated 3
|
|
|
Risk
Rated 4
|
|
|
Risk
Rated 5
|
|
|
Classified
Total
|
|
|
Total
|
|
Real estate:
|
|
(In thousands)
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
141
The following is a presentation of troubled debt restructurings (TDRs) by class as of
December 31, 2017, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
|
Number
of Loans
|
|
|
Pre-
Modification
Outstanding
Balance
|
|
|
Rate
Modification
|
|
|
Term
Modification
|
|
|
Rate
& Term
Modification
|
|
|
Post-
Modification
Outstanding
Balance
|
|
Real estate:
|
|
(Dollars in thousands)
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
|
16
|
|
|
$
|
16,853
|
|
|
$
|
8,815
|
|
|
$
|
250
|
|
|
$
|
5,513
|
|
|
$
|
14,578
|
|
Construction/land development
|
|
|
5
|
|
|
|
782
|
|
|
|
689
|
|
|
|
75
|
|
|
|
|
|
|
|
764
|
|
Agricultural
|
|
|
2
|
|
|
|
345
|
|
|
|
282
|
|
|
|
22
|
|
|
|
|
|
|
|
304
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
21
|
|
|
|
5,607
|
|
|
|
1,926
|
|
|
|
81
|
|
|
|
1,238
|
|
|
|
3,245
|
|
Multifamily residential
|
|
|
3
|
|
|
|
1,701
|
|
|
|
1,340
|
|
|
|
|
|
|
|
287
|
|
|
|
1,627
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
47
|
|
|
|
25,288
|
|
|
|
13,052
|
|
|
|
428
|
|
|
|
7,038
|
|
|
|
20,518
|
|
Consumer
|
|
|
3
|
|
|
|
19
|
|
|
|
|
|
|
|
18
|
|
|
|
|
|
|
|
18
|
|
Commercial and industrial
|
|
|
11
|
|
|
|
951
|
|
|
|
445
|
|
|
|
50
|
|
|
|
1
|
|
|
|
496
|
|
Agricultural and other
|
|
|
1
|
|
|
|
166
|
|
|
|
166
|
|
|
|
|
|
|
|
|
|
|
|
166
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
62
|
|
|
$
|
26,424
|
|
|
$
|
13,663
|
|
|
$
|
496
|
|
|
$
|
7,039
|
|
|
$
|
21,198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
Number
of Loans
|
|
|
Pre-
Modification
Outstanding
Balance
|
|
|
Rate
Modification
|
|
|
Term
Modification
|
|
|
Rate
& Term
Modification
|
|
|
Post-
Modification
Outstanding
Balance
|
|
Real estate:
|
|
(Dollars in thousands)
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
|
Number
of Loans
|
|
|
Pre-
Modification
Outstanding
Balance
|
|
|
Rate
Modification
|
|
|
Term
Modification
|
|
|
Rate
& Term
Modification
|
|
|
Post-
Modification
Outstanding
Balance
|
|
Real estate:
|
|
(Dollars in thousands)
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
|
13
|
|
|
$
|
14,422
|
|
|
$
|
9,189
|
|
|
$
|
273
|
|
|
$
|
4,626
|
|
|
$
|
14,088
|
|
Construction/land development
|
|
|
2
|
|
|
|
1,026
|
|
|
|
1,018
|
|
|
|
|
|
|
|
|
|
|
|
1,018
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
8
|
|
|
|
2,813
|
|
|
|
811
|
|
|
|
1,925
|
|
|
|
|
|
|
|
2,736
|
|
Multifamily residential
|
|
|
1
|
|
|
|
295
|
|
|
|
|
|
|
|
|
|
|
|
290
|
|
|
|
290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
24
|
|
|
|
18,556
|
|
|
|
11,018
|
|
|
|
2,198
|
|
|
|
4,916
|
|
|
|
18,132
|
|
Commercial and industrial
|
|
|
2
|
|
|
|
69
|
|
|
|
|
|
|
|
69
|
|
|
|
|
|
|
|
69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
26
|
|
|
$
|
18,625
|
|
|
$
|
11,018
|
|
|
$
|
2,267
|
|
|
$
|
4,916
|
|
|
$
|
18,201
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
142
The following is a presentation of TDRs on
non-accrual
status as of December 31, 2017, 2016 and 2015 because they are not in compliance with the modified terms:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
December 31, 2016
|
|
|
December 31, 2015
|
|
|
|
Number
of Loans
|
|
|
Recorded
Balance
|
|
|
Number
of Loans
|
|
|
Recorded
Balance
|
|
|
Number
of Loans
|
|
|
Recorded
Balance
|
|
Real estate:
|
|
(Dollars in thousands)
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
|
2
|
|
|
$
|
1,161
|
|
|
|
2
|
|
|
$
|
696
|
|
|
|
3
|
|
|
$
|
1,604
|
|
Agricultural
|
|
|
1
|
|
|
|
22
|
|
|
|
2
|
|
|
|
123
|
|
|
|
|
|
|
|
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
8
|
|
|
|
850
|
|
|
|
13
|
|
|
|
2,240
|
|
|
|
2
|
|
|
|
1,812
|
|
Multifamily residential
|
|
|
1
|
|
|
|
153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate
|
|
|
12
|
|
|
|
2,186
|
|
|
|
17
|
|
|
|
3,059
|
|
|
|
5
|
|
|
|
3,416
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
13
|
|
|
$
|
2,186
|
|
|
|
17
|
|
|
$
|
3,059
|
|
|
|
5
|
|
|
$
|
3,416
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following is a presentation of total foreclosed assets as of December 31, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
December 31, 2016
|
|
|
|
(In thousands)
|
|
Commercial real estate loans
|
|
|
|
|
|
|
|
|
Non-farm/non-residential
|
|
$
|
9,766
|
|
|
$
|
9,423
|
|
Construction/land development
|
|
|
5,920
|
|
|
|
4,009
|
|
Agricultural
|
|
|
|
|
|
|
|
|
Residential real estate loans
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
|
2,654
|
|
|
|
2,076
|
|
Multifamily residential
|
|
|
527
|
|
|
|
443
|
|
|
|
|
|
|
|
|
|
|
Total foreclosed assets held for sale
|
|
$
|
18,867
|
|
|
$
|
15,951
|
|
|
|
|
|
|
|
|
|
|
The following is a summary of the purchased credit impaired loans acquired in the GHI, BOC and Stonegate
acquisitions during 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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
143
Changes in the carrying amount of the accretable yield for purchased credit impaired loans were
as follows for the year ended December 31, 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
|
|
|
5,586
|
|
|
|
|
|
Accretion recorded to interest income
|
|
|
(19,886
|
)
|
|
|
19,886
|
|
Acquisitions
|
|
|
14,875
|
|
|
|
93,964
|
|
Adjustment to yield
|
|
|
3,016
|
|
|
|
|
|
Transfers to foreclosed assets held for sale
|
|
|
|
|
|
|
(13,957
|
)
|
Payments received, net
|
|
|
|
|
|
|
(61,405
|
)
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
41,803
|
|
|
$
|
198,052
|
|
|
|
|
|
|
|
|
|
|
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 $5.6 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 $3.0 million as an additional adjustment to yield over the weighted-average
life of the loans.
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
December 31, 2017 and 2016, were as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
December 31, 2016
|
|
Goodwill
|
|
(In thousands)
|
|
Balance, beginning of period
|
|
$
|
377,983
|
|
|
$
|
377,983
|
|
Acquisitions
|
|
|
549,966
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
|
$
|
927,949
|
|
|
$
|
377,983
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
December 31, 2016
|
|
Core Deposit and Other Intangibles
|
|
(In thousands)
|
|
Balance, beginning of period
|
|
$
|
18,311
|
|
|
$
|
21,443
|
|
Acquisitions
|
|
|
35,247
|
|
|
|
|
|
Amortization expense
|
|
|
(4,207
|
)
|
|
|
(3,132
|
)
|
|
|
|
|
|
|
|
|
|
Balance, end of year
|
|
$
|
49,351
|
|
|
$
|
18,311
|
|
|
|
|
|
|
|
|
|
|
The carrying basis and accumulated amortization of core deposits and other intangibles at December 31,
2017 and 2016 were:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
December 31, 2016
|
|
|
|
(In thousands)
|
|
Gross carrying amount
|
|
$
|
86,625
|
|
|
$
|
51,378
|
|
Accumulated amortization
|
|
|
(37,274
|
)
|
|
|
(33,067
|
)
|
|
|
|
|
|
|
|
|
|
Net carrying amount
|
|
$
|
49,351
|
|
|
$
|
18,311
|
|
|
|
|
|
|
|
|
|
|
144
Core deposit and other intangible amortization expense for the years ended December 31,
2017, 2016 and 2015 was approximately $4.2 million, $3.1 million and $4.1 million, respectively. Core deposit and other intangibles are tested annually for impairment during the fourth quarter. During the 2017 review, no impairment
was found. Including all of the mergers completed as of December 31, 2017, HBIs estimated amortization expense of core deposits and other intangibles for each of the years 2018 through 2022 is approximately: 2018 $6.6 million;
2019 $6.5 million; 2020 $5.9 million; 2021 $5.7 million; 2022 $5.7 million.
The carrying
amount of the Companys goodwill was $927.9 million and $378.0 million at December 31, 2017 and 2016, respectively. Goodwill is tested annually for impairment during the fourth quarter. During the 2017 review, no impairment was
found. 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.
7. Other Assets
Other assets consists primarily of equity securities without a readily determinable fair value and other miscellaneous assets. As of
December 31, 2017 and 2016 other assets were $177.8 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 $156.0 million and $112.4 million at
December 31, 2017 and 2016, respectively, and are accounted for at cost.
8. Deposits
The aggregate amount of time deposits with a minimum denomination of $250,000 was $636.9 million and $569.1 million at
December 31, 2017 and 2016, respectively. The aggregate amount of time deposits with a minimum denomination of $100,000 was $998.3 million and $842.9 million at December 31, 2017 and 2016,
respectively. Interest expense applicable to certificates in excess of $100,000 totaled $8.3 million, $4.4 million and $5.0 million for the years ended December 31, 2017, 2016 and 2015, respectively. As of
December 31, 2017 and 2016, brokered deposits were $1.03 billion and $502.5 million, respectively.
The following is a
summary of the scheduled maturities of all time deposits at December 31, 2017 (in thousands):
|
|
|
|
|
One month or less
|
|
$
|
176,900
|
|
Over 1 month to 3 months
|
|
|
194,764
|
|
Over 3 months to 6 months
|
|
|
339,928
|
|
Over 6 months to 12 months
|
|
|
355,144
|
|
Over 12 months to 2 years
|
|
|
337,453
|
|
Over 2 years to 3 years
|
|
|
63,217
|
|
Over 3 years to 5 years
|
|
|
57,046
|
|
Over 5 years
|
|
|
1,979
|
|
|
|
|
|
|
Total time deposits
|
|
$
|
1,526,431
|
|
|
|
|
|
|
Deposits totaling approximately $1.51 billion and $1.23 billion at December 31, 2017 and 2016,
respectively, were public funds obtained primarily from state and political subdivisions in the United States.
145
9. Securities Sold Under Agreements to Repurchase
At December 31, 2017 and 2016, securities sold under agreements to repurchase totaled $147.8 million and $121.3 million,
respectively. For the years ended December 31, 2017 and 2016, securities sold under agreements to repurchase daily weighted-average totaled $134.7 million and $120.6 million, respectively.
The gross amount of recognized liabilities for securities sold under agreements to repurchase was $147.8 million and $121.3 million
at December 31, 2017 and 2016, respectively. The remaining contractual maturity of securities sold under agreements to repurchase in the consolidated balance sheets as of December 31, 2017 and 2016 is presented in the following tables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 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
|
|
$
|
11,525
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
10,000
|
|
|
$
|
21,525
|
|
Mortgage-backed securities
|
|
|
21,255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,255
|
|
State and political subdivisions
|
|
|
85,428
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
85,428
|
|
Other securities
|
|
|
19,581
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,581
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total borrowings
|
|
$
|
137,789
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
10,000
|
|
|
$
|
147,789
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
146
10. FHLB Borrowed Funds
The Companys FHLB borrowed funds, which are secured by our loan portfolio, were $1.30 billion and $1.31 billion at
December 31, 2017 and 2016, respectively. At December 31, 2017, $525.0 million and $774.2 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 2025 with fixed interest rates ranging from
0.636% to 5.96% and are secured by loans and investments securities. Expected maturities will differ from contractual maturities because FHLB may have the right to call or HBI the right to prepay certain obligations.
Additionally, the Company had $695.3 million and $516.2 million at December 31, 2017 and 2016, respectively, in letters of
credit under a FHLB blanket borrowing line of credit, which are used to collateralize public deposits at December 31, 2017 and 2016, respectively.
Maturities of borrowings with original maturities exceeding one year at December 31, 2017, are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
By
Contractual
Maturity
|
|
|
By
Call Date
|
|
2018
|
|
$
|
984,279
|
|
|
$
|
984,279
|
|
2019
|
|
|
143,070
|
|
|
|
143,070
|
|
2020
|
|
|
146,428
|
|
|
|
146,428
|
|
2021
|
|
|
|
|
|
|
|
|
2022
|
|
|
|
|
|
|
|
|
Thereafter
|
|
|
25,411
|
|
|
|
25,411
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,299,188
|
|
|
$
|
1,299,188
|
|
|
|
|
|
|
|
|
|
|
11. Other Borrowings
The Company had zero other borrowings at December 31, 2017 and 2016. Additionally, the Company took out a $20.0 million line of
credit for general corporate purposes during 2015. The balance on this line of credit at December 31, 2017 and 2016 was zero.
12. Subordinated
Debentures
Subordinated debentures consists of subordinated debt securities and guaranteed payments on trust preferred securities. As
of December 31, 2017 and 2016, subordinated debentures were $368.0 million and $60.8 million, respectively.
147
Subordinated debentures at December 31, 2017 and 2016 contained the following components:
|
|
|
|
|
|
|
|
|
|
|
As of
December 31,
|
|
|
As of
December 31,
|
|
|
|
2017
|
|
|
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
|
|
|
4,304
|
|
|
|
|
|
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
|
|
|
5,569
|
|
|
|
|
|
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
|
|
|
297,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
368,031
|
|
|
$
|
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.
148
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
On December 22, 2017, the Tax Cuts and Jobs Act (TCJA) was signed into law. The TCJA makes broad and complex changes to the
U.S. tax code that affected our income tax rate in 2017. The TCJA reduces the U.S. federal corporate income tax rate from 35% to 21%. The TCJA also establishes new tax laws that will affect 2018.
ASC 740 requires a company to record the effects of a tax law change in the period of enactment, however, shortly after the enactment of the
TCJA, the SEC staff issued SAB 118, which allows a company to record a provisional amount when it does not have the necessary information available, prepared, or analyzed in reasonable detail to complete its accounting for the change in the tax law.
The measurement period ends when the company has obtained, prepared and analyzed the information necessary to finalize its accounting, but cannot extend beyond one year.
The following is a summary of the components of the provision (benefit) for income taxes for the years ended December 31, 2017, 2016 and
2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
(In thousands)
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
76,569
|
|
|
$
|
77,418
|
|
|
$
|
61,007
|
|
State
|
|
|
25,347
|
|
|
|
15,377
|
|
|
|
12,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
|
|
|
101,916
|
|
|
|
92,795
|
|
|
|
73,124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
25,607
|
|
|
|
10,600
|
|
|
|
5,980
|
|
State
|
|
|
8,477
|
|
|
|
2,105
|
|
|
|
1,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred
|
|
|
34,084
|
|
|
|
12,705
|
|
|
|
7,168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
$
|
136,000
|
|
|
$
|
105,500
|
|
|
$
|
80,292
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
149
The reconciliation between the statutory federal income tax rate and effective income tax rate is
as follows for the years ended December 31, 2017, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Statutory federal income tax rate
|
|
|
35.00
|
%
|
|
|
35.00
|
%
|
|
|
35.00
|
%
|
Effect of
non-taxable
interest income
|
|
|
(1.57
|
)
|
|
|
(1.52
|
)
|
|
|
(1.91
|
)
|
Effect of gain on acquisitions
|
|
|
(0.49
|
)
|
|
|
|
|
|
|
(0.26
|
)
|
Stock compensation
|
|
|
(0.67
|
)
|
|
|
|
|
|
|
|
|
State income taxes, net of federal benefit
|
|
|
4.05
|
|
|
|
4.08
|
|
|
|
4.02
|
|
Effect of tax rate change
|
|
|
13.62
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
0.23
|
|
|
|
(0.23
|
)
|
|
|
(0.10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective income tax rate
|
|
|
50.17
|
%
|
|
|
37.33
|
%
|
|
|
36.75
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2017, the Company performed an analysis to determine the impact of the revaluation of
the deferred tax asset of approximately $113.5 million. The impact as of December 31, 2017 of this was a
one-time
non-cash
charge to the income statement of
approximately $36.9 million that reduced the Companys 2017 earnings.
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:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
December 31, 2016
|
|
|
|
(In thousands)
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
$
|
29,515
|
|
|
$
|
31,381
|
|
Deferred compensation
|
|
|
1,142
|
|
|
|
3,925
|
|
Stock compensation
|
|
|
2,731
|
|
|
|
669
|
|
Real estate owned
|
|
|
1,731
|
|
|
|
2,296
|
|
Unrealized loss on securities
available-for-sale
|
|
|
1,471
|
|
|
|
|
|
Loan discounts
|
|
|
32,784
|
|
|
|
9,157
|
|
Tax basis premium/discount on acquisitions
|
|
|
8,802
|
|
|
|
14,757
|
|
Investments
|
|
|
1,155
|
|
|
|
1,957
|
|
Other
|
|
|
11,663
|
|
|
|
8,361
|
|
|
|
|
|
|
|
|
|
|
Gross deferred tax assets
|
|
|
90,994
|
|
|
|
72,503
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Accelerated depreciation on premises and equipment
|
|
|
291
|
|
|
|
2,154
|
|
Unrealized gain on securities
available-for-sale
|
|
|
|
|
|
|
258
|
|
Core deposit intangibles
|
|
|
11,258
|
|
|
|
4,950
|
|
FHLB dividends
|
|
|
1,625
|
|
|
|
1,926
|
|
Other
|
|
|
1,256
|
|
|
|
1,917
|
|
|
|
|
|
|
|
|
|
|
Gross deferred tax liabilities
|
|
|
14,430
|
|
|
|
11,205
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
76,564
|
|
|
$
|
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 Company recognizes interest accrued related to unrecognized tax benefits and penalties in income tax expense. During the years ended
December 31, 2017, 2016 and 2015, the Company did not recognize any significant interest or penalties. The Company did not have any interest or penalties accrued at December 31, 2017, 2016 and 2015.
150
14. Common Stock, Compensation Plans and Other
Common Stock
The Companys
Restated Articles of Incorporation, as amended, authorize the issuance of up to 200,000,000 shares of common stock, par value $0.01 per share.
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 2017, the Company utilized a portion of this stock repurchase program.
During 2017, the Company repurchased a total of 857,800 shares with a weighted-average stock price of $24.29 per share. The 2017 earnings were
used to fund the repurchases during the year. Shares repurchased under the program as of December 31, 2017 total 4,524,864 shares. The remaining balance available for repurchase is 5,227,136 shares at December 31, 2017. Additionally, on
February 21, 2018, the Board of Directors of the Company authorized the repurchase of up to an additional 5,000,000 shares of Companys common stock under this repurchase program.
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. The Plan provides for the granting of incentive and
non-qualified
stock options and
other equity awards, including the issuance of restricted shares. As of December 31, 2017, the maximum total number of shares of the Companys common stock available for issuance under the Plan was 11,288,000. At December 31, 2017,
the Company had approximately 2,319,000 shares of common stock remaining available for future grants and approximately 4,593,000 shares of common stock reserved for issuance pursuant to outstanding awards under the Plan.
The intrinsic value of the stock options outstanding at December 31, 2017, 2016, and 2015 was $16.2 million, $30.2 million and
$21.1 million, respectively. The intrinsic value of the stock options vested at December 31, 2017, 2016 and 2015 was $9.9 million, $12.1 million and $14.5 million, respectively.
The intrinsic value of the stock options exercised during 2017, 2016 and 2015 was $3.7 million, $8.0 million, and $7.2 million,
respectively.
Total unrecognized compensation cost, net of income tax benefit, related to
non-vested
awards, which are expected to be recognized over the vesting periods, was approximately $4.8 million as of December 31, 2017.
151
The table below summarized the stock option transactions under the Plan at December 31,
2017, 2016 and 2015 and changes during the years then ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
Shares
(000)
|
|
|
Weighted-
average
Exercisable
Price
|
|
|
Shares
(000)
|
|
|
Weighted-
average
Exercisable
Price
|
|
|
Shares
(000)
|
|
|
Weighted-
average
Exercisable
Price
|
|
Outstanding, beginning of year
|
|
|
2,397
|
|
|
$
|
15.19
|
|
|
|
2,794
|
|
|
$
|
12.71
|
|
|
|
1,810
|
|
|
$
|
5.90
|
|
Granted
|
|
|
80
|
|
|
|
25.96
|
|
|
|
140
|
|
|
|
21.25
|
|
|
|
1,486
|
|
|
|
18.15
|
|
Forfeited/Expired
|
|
|
|
|
|
|
|
|
|
|
(14
|
)
|
|
|
17.28
|
|
|
|
(40
|
)
|
|
|
20.16
|
|
Exercised
|
|
|
(203
|
)
|
|
|
7.82
|
|
|
|
(523
|
)
|
|
|
3.50
|
|
|
|
(462
|
)
|
|
|
2.90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, end of year
|
|
|
2,274
|
|
|
|
16.23
|
|
|
|
2,397
|
|
|
|
15.19
|
|
|
|
2,794
|
|
|
|
12.71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, end of year
|
|
|
1,016
|
|
|
$
|
13.55
|
|
|
|
639
|
|
|
$
|
8.88
|
|
|
|
960
|
|
|
$
|
5.13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 year ended December 31, 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.
The assumptions used in determining the fair value of 2017, 2016 and 2015 stock option grants were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Expected dividend yield
|
|
|
1.39
|
%
|
|
|
1.65
|
%
|
|
|
1.60
|
%
|
Expected stock price volatility
|
|
|
28.47
|
%
|
|
|
26.66
|
%
|
|
|
25.91
|
%
|
Risk-free interest rate
|
|
|
2.06
|
%
|
|
|
1.65
|
%
|
|
|
1.74
|
%
|
Expected life of options
|
|
|
6.5 years
|
|
|
|
6.5 years
|
|
|
|
6.5 years
|
|
152
The following is a summary of currently outstanding and exercisable options at December 31,
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
|
|
|
17
|
|
|
|
1.34
|
|
|
$
|
2.58
|
|
|
|
17
|
|
|
$
|
2.58
|
|
$ 4.27 to $ 4.30
|
|
|
81
|
|
|
|
0.04
|
|
|
|
4.27
|
|
|
|
81
|
|
|
|
4.27
|
|
$ 5.68 to $ 6.56
|
|
|
102
|
|
|
|
3.56
|
|
|
|
6.43
|
|
|
|
102
|
|
|
|
6.43
|
|
$ 8.62 to $ 9.54
|
|
|
279
|
|
|
|
5.17
|
|
|
|
9.08
|
|
|
|
219
|
|
|
|
9.07
|
|
$14.71 to $16.86
|
|
|
262
|
|
|
|
6.75
|
|
|
|
16.00
|
|
|
|
124
|
|
|
|
16.12
|
|
$17.12 to $17.40
|
|
|
203
|
|
|
|
6.91
|
|
|
|
17.19
|
|
|
|
93
|
|
|
|
17.25
|
|
$18.46 to $18.46
|
|
|
1,050
|
|
|
|
7.65
|
|
|
|
18.46
|
|
|
|
329
|
|
|
|
18.46
|
|
$20.16 to $20.58
|
|
|
80
|
|
|
|
7.76
|
|
|
|
20.37
|
|
|
|
27
|
|
|
|
20.34
|
|
$21.25 to $21.25
|
|
|
120
|
|
|
|
8.31
|
|
|
|
21.25
|
|
|
|
24
|
|
|
|
21.25
|
|
$25.96 to $25.96
|
|
|
80
|
|
|
|
9.30
|
|
|
|
25.96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,274
|
|
|
|
|
|
|
|
|
|
|
|
1,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table below summarizes the activity for the Companys restricted stock issued and outstanding at
December 31, 2017, 2016 and 2015 and changes during the years then ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
(In thousands)
|
|
Beginning of year
|
|
|
958
|
|
|
|
975
|
|
|
|
514
|
|
Issued
|
|
|
232
|
|
|
|
244
|
|
|
|
704
|
|
Vested
|
|
|
(45
|
)
|
|
|
(256
|
)
|
|
|
(204
|
)
|
Forfeited
|
|
|
|
|
|
|
(5
|
)
|
|
|
(39
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of year
|
|
|
1,145
|
|
|
|
958
|
|
|
|
975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of expense for twelve months ended
|
|
$
|
5,237
|
|
|
$
|
4,049
|
|
|
$
|
2,511
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total unrecognized compensation cost, net of income tax benefit, related to
non-vested
restricted stock awards, which are expected to be recognized over the weighted-average remaining contractual life of 3.14 years, was approximately $12.9 million as of December 31, 2017.
153
15.
Non-Interest
Expense
The table below shows the components of
non-interest
expense for years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
(In thousands)
|
|
Salaries and employee benefits
|
|
$
|
119,369
|
|
|
$
|
101,962
|
|
|
$
|
87,512
|
|
Occupancy and equipment
|
|
|
30,611
|
|
|
|
26,129
|
|
|
|
25,967
|
|
Data processing expense
|
|
|
11,998
|
|
|
|
10,499
|
|
|
|
10,774
|
|
Other operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising
|
|
|
3,203
|
|
|
|
3,332
|
|
|
|
2,986
|
|
Merger and acquisition expenses
|
|
|
25,743
|
|
|
|
433
|
|
|
|
4,800
|
|
FDIC loss share
buy-out
expense
|
|
|
|
|
|
|
3,849
|
|
|
|
|
|
Amortization of intangibles
|
|
|
4,207
|
|
|
|
3,132
|
|
|
|
4,079
|
|
Electronic banking expense
|
|
|
6,662
|
|
|
|
5,742
|
|
|
|
5,166
|
|
Directors fees
|
|
|
1,259
|
|
|
|
1,150
|
|
|
|
1,071
|
|
Due from bank service charges
|
|
|
1,602
|
|
|
|
1,354
|
|
|
|
1,096
|
|
FDIC and state assessment
|
|
|
5,239
|
|
|
|
5,491
|
|
|
|
5,287
|
|
Insurance
|
|
|
2,512
|
|
|
|
2,193
|
|
|
|
2,542
|
|
Legal and accounting
|
|
|
2,993
|
|
|
|
2,206
|
|
|
|
2,028
|
|
Other professional fees
|
|
|
5,359
|
|
|
|
4,049
|
|
|
|
3,226
|
|
Operating supplies
|
|
|
1,978
|
|
|
|
1,758
|
|
|
|
1,880
|
|
Postage
|
|
|
1,184
|
|
|
|
1,084
|
|
|
|
1,196
|
|
Telephone
|
|
|
1,374
|
|
|
|
1,751
|
|
|
|
1,917
|
|
Other expense
|
|
|
14,915
|
|
|
|
15,641
|
|
|
|
16,028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other operating expenses
|
|
|
78,230
|
|
|
|
53,165
|
|
|
|
53,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
non-interest
expense
|
|
$
|
240,208
|
|
|
$
|
191,755
|
|
|
$
|
177,555
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16. Employee Benefit Plans
401(k) Plan
The Company has a
retirement savings 401(k) plan in which substantially all employees may participate. The Company matches employees contributions based on a percentage of salary contributed by participants. While the plan also allows for discretionary employer
contributions, no discretionary contributions were made for the years ended 2017, 2016 and 2015. The Companys expense for the plan was approximately $1.6 million, $1.4 million and $1.2 million in 2017, 2016 and 2015,
respectively, which is included in salaries and employee benefits expense.
Chairmans Retirement Plan
On April 20, 2007, the Companys Board of Directors approved a Chairmans Retirement Plan for John W. Allison, the
Companys Chairman. The Chairmans Retirement Plan provides a supplemental retirement benefit of $250,000 a year for 10 consecutive years or until Mr. Allisons death, whichever occurs later. During 2011, Mr. Allison
reached the age of 65 and became 100% vested in the plan. Therefore, he began receiving the supplemental retirement benefit due to him. He received $250,000 of this benefit during 2017, 2016 and 2015, respectively. An expense of approximately
$148,000, $155,000 and $163,000 was accrued for 2017, 2016 and 2015 for this plan, respectively.
154
17. Related Party Transactions
In the ordinary course of business, loans may be made to officers and directors and their affiliated companies at substantially the same terms
as comparable transactions with other borrowers. At December 31, 2017 and 2016, related party loans were approximately $57.1 million and $51.6 million, respectively. New loans and advances on prior commitments made to the related
parties were $12.0 million and $5.0 million for the years ended December 31, 2017 and 2016, respectively. Repayments of loans made by the related parties were $6.0 million and $4.7 million for the years ended
December 31, 2017 and 2016, respectively.
At December 31, 2017 and 2016, directors, officers, and other related interest
parties had demand,
non-interest-bearing
deposits of approximately $2.0 million and $849,000, respectively, savings and interest-bearing transaction accounts of approximately $10.3 million and
$25.9 million, respectively, and time certificates of deposit of approximately $445,000 and $957,000, respectively.
During each of
2017, 2016 and 2015, rent expense totaling approximately $100,000 was paid to related parties.
In September 2017, the Company purchased a
used airplane that was formerly owned by Capital Buyers, a company owned by the Companys Chairman, John W. Allison, for a cash purchase price of $3.3 million. The purchase price paid by the Company was determined based on an independent
third party appraisal.
In May 2017, the Company sold its 50% interest in the previous airplane to the unaffiliated third party with whom
the Company
co-owned
that plane. Prior to such sale, the Company and the third party each contributed $50,000 annually, and our Chairman, Mr. Allison, contributed $25,000 annually, toward the fixed cost
of the plane. Each of us, the Company, the third party and Mr. Allison, shared an aggregate time allotment for use of the plane, split 40%, 40% and 20%, respectively. Any user that went over its or his time allotment was billed at a rate of
$600 per hour. The Company continues to lease a hangar from Mr. Allison for an aggregate annual rent of $9,000.
18. Leases
The Company leases certain premises and equipment under noncancelable operating leases with terms up to 21 years which are charged to expense
over the lease term as it becomes payable. The Companys leases do not have rent holidays. In addition, any rent escalations are tied to the consumer price index or contain nominal increases and are not included in the calculation of current
lease expense due to the immaterial amount. At December 31, 2017, the minimum rental commitments under these noncancelable operating leases are as follows (in thousands):
|
|
|
|
|
2018
|
|
$
|
8,543
|
|
2019
|
|
|
7,811
|
|
2020
|
|
|
7,167
|
|
2021
|
|
|
5,685
|
|
2022
|
|
|
4,182
|
|
Thereafter
|
|
|
28,799
|
|
|
|
|
|
|
|
|
$
|
62,187
|
|
|
|
|
|
|
19. 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.
155
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 December 31, 2017 and 2016, commercial real estate loans represented 61.8%
and 59.1% of total loans receivable, respectively, and 289.6% and 328.9% of total stockholders equity, respectively. Residential real estate loans represented 23.3% and 23.0% of total loans receivable and 109.4% and 127.8% of total
stockholders equity at December 31, 2017 and 2016, respectively.
Approximately 90.4% of the Companys total loans and
90.8% of the Companys real estate loans as of December 31, 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.
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.
20. 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
December 31, 2017 and 2016, commitments to extend credit of $2.38 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 December 31, 2017 and 2016, is $70.5 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.
156
21. 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 December 31, 2017 and 2016, Level 3 securities were immaterial. In addition, there were no material transfers between hierarchy levels during
2017, 2016 and 2015.
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. Starting in 2016, the Company began using a third party comparison pricing vendor in order to reflect consistency in the fair values of the investment securities sampled by the Company
each quarter.
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 $72.5 million and $91.5 million as of December 31, 2017 and 2016,
respectively. This valuation is considered Level 3, consisting of appraisals of underlying collateral. The Company reversed approximately $662,000 and $954,000 of accrued interest receivable when impaired loans were put on
non-accrual
status during the years ended December 31, 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 December 31, 2017 and 2016, the fair value of foreclosed assets held for sale, less estimated costs to sell, was $18.9 million and $16.0 million, respectively.
Foreclosed assets held for sale with a carrying value of approximately $1.2 million were remeasured during year ended December 31,
2017, resulting in a write-down of approximately $636,000.
Regulatory guidelines require the Company 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.
157
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.
158
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
|
Carrying
Amount
|
|
|
Fair Value
|
|
|
Level
|
|
|
|
(In thousands)
|
|
|
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
635,933
|
|
|
$
|
635,933
|
|
|
|
1
|
|
Federal funds sold
|
|
|
24,109
|
|
|
|
24,109
|
|
|
|
1
|
|
Investment securities
held-to-maturity
|
|
|
224,756
|
|
|
|
227,539
|
|
|
|
2
|
|
Loans receivable, net of impaired loans and allowance
|
|
|
10,148,470
|
|
|
|
10,055,901
|
|
|
|
3
|
|
Accrued interest receivable
|
|
|
45,708
|
|
|
|
45,708
|
|
|
|
1
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand and
non-interest
bearing
|
|
$
|
2,385,252
|
|
|
$
|
2,385,252
|
|
|
|
1
|
|
Savings and interest-bearing transaction accounts
|
|
|
6,476,819
|
|
|
|
6,476,819
|
|
|
|
1
|
|
Time deposits
|
|
|
1,526,431
|
|
|
|
1,514,670
|
|
|
|
3
|
|
Securities sold under agreements to repurchase
|
|
|
147,789
|
|
|
|
147,789
|
|
|
|
1
|
|
FHLB and other borrowed funds
|
|
|
1,299,188
|
|
|
|
1,299,961
|
|
|
|
2
|
|
Accrued interest payable
|
|
|
5,583
|
|
|
|
5,583
|
|
|
|
1
|
|
Subordinated debentures
|
|
|
368,031
|
|
|
|
379,146
|
|
|
|
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
|
|
159
22. 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 2017, the Company requested approximately $86.7 million in regular dividends from its banking subsidiary. This dividend is equal to approximately 57.5% of the Companys banking
subsidiarys
year-to-date
2017 earnings.
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 December 31, 2017, the Company meets all capital adequacy requirements to which it is subject.
In July 2013, the Federal Reserve Board and the other federal bank regulatory agencies issued a final rule to revise their risk-based and
leverage capital requirements and their method for calculating risk-weighted assets to make them consistent with the agreements that were reached by the Basel Committee on Banking Supervision in Basel III: A Global Regulatory Framework for
More Resilient Banks and Banking Systems and certain provisions of the Dodd-Frank Act (Basel III). Basel III applies to all depository institutions, bank holding companies with total consolidated assets of $500 million or
more, and savings and loan holding companies. Basel III became effective for the Company and its bank subsidiary on January 1, 2015. The capital conservation buffer requirement began being phased in beginning January 1, 2016 at the 0.625%
level and will increase by 0.625% on each subsequent January 1, until it reaches 2.5% on January 1, 2019 when the
phase-in
period ends and the full capital conservation buffer requirement becomes
effective.
Basel III amended the prompt corrective action rules to incorporate a common equity Tier 1 capital requirement and
to raise the capital requirements for certain capital categories. In order to be adequately capitalized for purposes of the prompt corrective action rules, a banking organization will be required to have at least a 4.5% common equity Tier 1
risk-based capital ratio, a 4% Tier 1 leverage capital ratio, a 6% Tier 1 risk-based capital ratio and an 8% total risk-based capital ratio.
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 December 31, 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%, 9.98%, 11.48%, and 15.05%,
respectively, as of December 31, 2017.
160
The Companys actual capital amounts and ratios along with the Companys bank
subsidiary are presented in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual
|
|
|
Minimum Capital
Requirement
Basel III
Phase-In
Schedule
|
|
|
Minimum Capital
Requirement
Basel III
Fully
Phased-In
|
|
|
Minimum To Be
Well-Capitalized
Under Prompt
Corrective Action
Provision
|
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
|
(Dollars in thousands)
|
|
As of December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common equity Tier 1 capital ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home BancShares
|
|
$
|
1,240,822
|
|
|
|
10.86
|
%
|
|
$
|
656,973
|
|
|
|
5.750
|
%
|
|
$
|
799,793
|
|
|
|
7.00
|
%
|
|
$
|
N/A
|
|
|
|
N/A
|
%
|
Centennial Bank
|
|
|
1,546,451
|
|
|
|
13.55
|
|
|
|
656,243
|
|
|
|
5.750
|
|
|
|
798,905
|
|
|
|
7.00
|
|
|
|
741,840
|
|
|
|
6.50
|
|
Leverage ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home BancShares
|
|
$
|
1,311,520
|
|
|
|
9.98
|
%
|
|
$
|
525,659
|
|
|
|
4.000
|
%
|
|
$
|
525,659
|
|
|
|
4.00
|
%
|
|
$
|
N/A
|
|
|
|
N/A
|
%
|
Centennial Bank
|
|
|
1,546,451
|
|
|
|
11.76
|
|
|
|
526,004
|
|
|
|
4.000
|
|
|
|
526,004
|
|
|
|
4.00
|
|
|
|
657,505
|
|
|
|
5.00
|
|
Tier 1 capital ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home BancShares
|
|
$
|
1,311,520
|
|
|
|
11.48
|
%
|
|
$
|
828,268
|
|
|
|
7.250
|
%
|
|
$
|
971,073
|
|
|
|
8.50
|
%
|
|
$
|
N/A
|
|
|
|
N/A
|
%
|
Centennial Bank
|
|
|
1,546,451
|
|
|
|
13.55
|
|
|
|
827,437
|
|
|
|
7.250
|
|
|
|
970,098
|
|
|
|
8.50
|
|
|
|
913,034
|
|
|
|
8.00
|
|
Total risk-based capital ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home BancShares
|
|
$
|
1,719,118
|
|
|
|
15.05
|
%
|
|
$
|
1,056,601
|
|
|
|
9.250
|
%
|
|
$
|
1,199,385
|
|
|
|
10.50
|
%
|
|
$
|
N/A
|
|
|
|
N/A
|
%
|
Centennial Bank
|
|
|
1,656,717
|
|
|
|
14.52
|
|
|
|
1,055,415
|
|
|
|
9.250
|
|
|
|
1,198,039
|
|
|
|
10.50
|
|
|
|
1,140,990
|
|
|
|
10.00
|
|
As of December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common equity Tier 1 capital ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home BancShares
|
|
$
|
938,754
|
|
|
|
11.30
|
%
|
|
$
|
425,762
|
|
|
|
5.125
|
%
|
|
$
|
581,529
|
|
|
|
7.00
|
%
|
|
$
|
N/A
|
|
|
|
N/A
|
%
|
Centennial Bank
|
|
|
920,232
|
|
|
|
11.10
|
|
|
|
424,882
|
|
|
|
5.125
|
|
|
|
580,326
|
|
|
|
7.00
|
|
|
|
538,875
|
|
|
|
6.50
|
|
Leverage ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home BancShares
|
|
$
|
997,754
|
|
|
|
10.63
|
%
|
|
$
|
375,448
|
|
|
|
4.000
|
%
|
|
$
|
375,448
|
|
|
|
4.00
|
%
|
|
$
|
N/A
|
|
|
|
N/A
|
%
|
Centennial Bank
|
|
|
920,232
|
|
|
|
9.81
|
|
|
|
375,222
|
|
|
|
4.000
|
|
|
|
375,222
|
|
|
|
4.00
|
|
|
|
469,028
|
|
|
|
5.00
|
|
Tier 1 capital ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home BancShares
|
|
$
|
997,754
|
|
|
|
12.01
|
%
|
|
$
|
550,385
|
|
|
|
6.625
|
%
|
|
$
|
706,154
|
|
|
|
8.50
|
%
|
|
$
|
N/A
|
|
|
|
N/A
|
%
|
Centennial Bank
|
|
|
920,232
|
|
|
|
11.10
|
|
|
|
549,238
|
|
|
|
6.625
|
|
|
|
704,682
|
|
|
|
8.50
|
|
|
|
663,230
|
|
|
|
8.00
|
|
Total risk-based capital ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home BancShares
|
|
$
|
1,077,756
|
|
|
|
12.97
|
%
|
|
$
|
716,704
|
|
|
|
8.625
|
%
|
|
$
|
872,509
|
|
|
|
10.50
|
%
|
|
$
|
N/A
|
|
|
|
N/A
|
%
|
Centennial Bank
|
|
|
1,000,234
|
|
|
|
12.07
|
|
|
|
714,749
|
|
|
|
8.625
|
|
|
|
870,129
|
|
|
|
10.50
|
|
|
|
828,694
|
|
|
|
10.00
|
|
23. 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.
161
The following is summary of the Companys additional cash flow information during the years
ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
|
(In thousands)
|
|
Interest paid
|
|
$
|
61,930
|
|
|
$
|
30,463
|
|
|
$
|
21,040
|
|
Income taxes paid
|
|
|
124,830
|
|
|
|
81,900
|
|
|
|
79,740
|
|
Assets acquired by foreclosure
|
|
|
10,318
|
|
|
|
10,957
|
|
|
|
19,874
|
|
24. Condensed Financial Information (Parent Company Only)
Condensed Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
(In thousands)
|
|
2017
|
|
|
2016
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
44,046
|
|
|
$
|
53,589
|
|
Investment securities
|
|
|
2,831
|
|
|
|
7,873
|
|
Investments in wholly-owned subsidiaries
|
|
|
2,509,375
|
|
|
|
1,307,811
|
|
Investments in unconsolidated subsidiaries
|
|
|
2,201
|
|
|
|
1,826
|
|
Premises and equipment
|
|
|
7,026
|
|
|
|
7,126
|
|
Other assets
|
|
|
12,530
|
|
|
|
12,107
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,578,009
|
|
|
$
|
1,390,332
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Subordinated debentures
|
|
$
|
368,031
|
|
|
$
|
60,826
|
|
Other liabilities
|
|
|
5,687
|
|
|
|
2,016
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
373,718
|
|
|
|
62,842
|
|
|
|
|
|
|
|
|
|
|
Stockholders Equity
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
1,736
|
|
|
|
1,405
|
|
Capital surplus
|
|
|
1,675,318
|
|
|
|
869,737
|
|
Retained earnings
|
|
|
530,658
|
|
|
|
455,948
|
|
Accumulated other comprehensive income (loss)
|
|
|
(3,421
|
)
|
|
|
400
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
2,204,291
|
|
|
|
1,327,490
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
2,578,009
|
|
|
$
|
1,390,332
|
|
|
|
|
|
|
|
|
|
|
Condensed Statements of Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
(In thousands)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends from banking subsidiary
|
|
$
|
86,695
|
|
|
$
|
44,623
|
|
|
$
|
76,168
|
|
Other income
|
|
|
2,241
|
|
|
|
608
|
|
|
|
51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income
|
|
|
88,936
|
|
|
|
45,231
|
|
|
|
76,219
|
|
Expenses
|
|
|
26,634
|
|
|
|
12,514
|
|
|
|
8,387
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes and equity in undistributed net income of subsidiaries
|
|
|
62,302
|
|
|
|
32,717
|
|
|
|
67,832
|
|
Tax benefit for income taxes
|
|
|
8,826
|
|
|
|
4,787
|
|
|
|
3,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before equity in undistributed net income of subsidiaries
|
|
|
71,128
|
|
|
|
37,504
|
|
|
|
70,880
|
|
Equity in undistributed net income of subsidiaries
|
|
|
63,955
|
|
|
|
139,642
|
|
|
|
67,319
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
135,083
|
|
|
$
|
177,146
|
|
|
$
|
138,199
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
162
Condensed Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
(In thousands)
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
135,083
|
|
|
$
|
177,146
|
|
|
$
|
138,199
|
|
Items not requiring (providing) cash
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
213
|
|
|
|
141
|
|
|
|
|
|
Amortization/(accretion)
|
|
|
612
|
|
|
|
176
|
|
|
|
|
|
Share-based compensation
|
|
|
6,705
|
|
|
|
6,628
|
|
|
|
3,925
|
|
Tax benefit from stock options exercised
|
|
|
|
|
|
|
(4,154
|
)
|
|
|
(605
|
)
|
(Gain) loss on assets
|
|
|
(2,393
|
)
|
|
|
(410
|
)
|
|
|
|
|
Equity in undistributed income of subsidiaries
|
|
|
(63,955
|
)
|
|
|
(139,642
|
)
|
|
|
(67,319
|
)
|
Changes in other assets
|
|
|
(10,748
|
)
|
|
|
5,888
|
|
|
|
5,308
|
|
Changes in other liabilities
|
|
|
14,202
|
|
|
|
(6,694
|
)
|
|
|
(576
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
79,719
|
|
|
|
39,079
|
|
|
|
78,932
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of premises and equipment, net
|
|
|
(4,075
|
)
|
|
|
(7,273
|
)
|
|
|
(5,927
|
)
|
Proceeds from sale of premises and equipment, net
|
|
|
3,957
|
|
|
|
3,293
|
|
|
|
|
|
Capital contribution to subsidiary
|
|
|
(250,000
|
)
|
|
|
(24
|
)
|
|
|
|
|
Purchase of Florida Business BancGroup, Inc.
|
|
|
|
|
|
|
|
|
|
|
(17,445
|
)
|
Purchase of Giant Holdings, Inc.
|
|
|
(16,591
|
)
|
|
|
|
|
|
|
|
|
Purchase of Bank of Commerce
|
|
|
(4,175
|
)
|
|
|
|
|
|
|
|
|
Disposition of RCA Air, LLC
|
|
|
382
|
|
|
|
|
|
|
|
|
|
Purchase of Stonegate Bank
|
|
|
(40,649
|
)
|
|
|
|
|
|
|
|
|
Proceeds from sale of investment securities
|
|
|
5,629
|
|
|
|
2,104
|
|
|
|
|
|
Purchase of investment securities
|
|
|
|
|
|
|
|
|
|
|
(6,946
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
(305,522
|
)
|
|
|
(1,900
|
)
|
|
|
(30,318
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options
|
|
|
1,082
|
|
|
|
1,495
|
|
|
|
389
|
|
Common stock issuance costs market acquisitions
|
|
|
(825
|
)
|
|
|
|
|
|
|
(60
|
)
|
Tax benefit from stock options exercised
|
|
|
|
|
|
|
4,154
|
|
|
|
605
|
|
Repurchase of common stock
|
|
|
(20,825
|
)
|
|
|
(9,817
|
)
|
|
|
(2,015
|
)
|
Proceeds from issuance of subordinated debt
|
|
|
297,201
|
|
|
|
|
|
|
|
|
|
Dividends paid
|
|
|
(60,373
|
)
|
|
|
(48,096
|
)
|
|
|
(37,580
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
216,260
|
|
|
|
(52,264
|
)
|
|
|
(38,661
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
(9,543
|
)
|
|
|
(15,085
|
)
|
|
|
9,953
|
|
Cash and cash equivalents, beginning of year
|
|
|
53,589
|
|
|
|
68,674
|
|
|
|
58,721
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of year
|
|
$
|
44,046
|
|
|
$
|
53,589
|
|
|
$
|
68,674
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
163
25. 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 adopted the guidance effective
January 1, 2018 and its adoption did not have a significant impact on our financial position or financial statement disclosures.
In
January 2016, the FASB issued ASU
2016-01,
Financial Instruments Overall
(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. The Company has
adopted the new standard effective January 1, 2018. Management evaluated the impact of the adoption of this guidance to the Companys financial statements, and 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. The current accounting policies and procedures have been adjusted to comply with the accounting changes mentioned above. For additional information on fair value of assets and liabilities, see Note 21.
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, 2017.
164
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 operations 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 adopted the guidance effective January 1, 2018 and its adoption did not have a significant impact on our financial position or financial statement disclosures.
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 has developed an
in-house
data warehouse, developed asset quality forecast models and evaluated potential software
vendors in preparation for the implementation of this standard. For additional information on the allowance for loan losses, see Note 5.
165
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 adopted the guidance effective January 1, 2018 and its adoption did not have a significant
impact on our financial position or financial statement disclosures.
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
adopted the guidance effective January 1, 2018 and its adoption did not have a significant impact on our financial position or financial statement disclosures.
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 adopted the guidance effective January 1, 2018 and its adoption did not have a significant impact on our financial position or financial statement disclosures.
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 adopted the guidance effective January 1, 2018 and its adoption is not anticipated to have a significant impact on our financial position or financial statement disclosures.
166
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,
Intangibles
Goodwill 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 2017, 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.
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. The Company adopted the guidance effective January 1, 2018 and its adoption is not anticipated to have a significant impact on our financial position or
financial statement disclosures.
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In March 2017, the FASB issued ASU
2017-08,
Receivables Nonrefundable 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 early adopted the guidance effective January 1, 2018 and its adoption is not anticipated to have a significant impact on our financial position or financial statement
disclosures.
In May 2017, the FASB issued ASU
2017-09,
Compensation Stock 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 adopted the guidance effective January 1, 2018. 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.
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 2019.
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In August 2017, the FASB issued ASU
2017-12,
Derivatives and Hedging (Topic 815) Targeted Improvements to Accounting for Hedging Activities
, which amends the hedge accounting model to provide better insight to risk management activities in the financial statements, reduces
the complexity in cash flow hedges of interest rate risk, eliminates the requirement to separately measure and report hedge ineffectiveness, requires the entire change in the fair value of a hedging instrument included in the assessment of the hedge
effectiveness to be recorded in other comprehensive income, with amounts reclassified to earnings to be presented in the same line item used to present the earnings effect of the hedged item when the hedged item affects earnings and allows the
initial prospective quantitative assessment of hedge effectiveness to be performed at any time after hedge designation, but no later than the first quarterly effectiveness testing date. This ASU is effective for interim and annual periods beginning
after December 15, 2018, and early adoption is permitted. The amendments in this standard must be applied using the modified retrospective approach for cash flow and net investment hedge relationships existing on the date of adoption. The
Company is currently evaluating the impact, if any, ASU
2017-12
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 2019.
In February 2018, the FASB issued ASU
2018-02,
Income Statement Reporting Comprehensive
Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
, which was issued to address the income tax accounting treatment of the stranded tax effects within other comprehensive income due to the
prohibition of backward tracing due to an income tax rate change that was initially recorded in other comprehensive income. This issue came about from the enactment of the TCJA on December 22, 2017 that changed the Companys federal income
tax rate from 35% to 21%. The ASU changed current accounting whereby an entity may elect to reclassify the stranded tax effect from accumulated other comprehensive income to retained earnings. The amendments in this ASU are effective for interim and
annual reporting periods beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. Adoption of this ASU is to be applied either in the period of adoption or retrospectively to each period in which
the effect of the change in the tax laws or rates were recognized. The Company is currently evaluating the impact, if any, ASU
2018-02
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 2019.
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