Notes to Unaudited Consolidated Financial Statements
Note
1
–
Basis of Presentation
General
In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the consolidated balance sheets, statements of income, comprehensive income, changes in stockholders’ equity and cash flows of Nicolet Bankshares, Inc. (the “Company” or “Nicolet”) and its subsidiaries, for the periods presented, and all such adjustments are of a normal recurring nature. All material intercompany transactions and balances have been eliminated. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the entire year.
These interim consolidated financial statements have been prepared according to the rules and regulations of the Securities and Exchange Commission and, therefore, certain information and footnote disclosures normally presented in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) have been omitted or abbreviated. These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2018
.
Critical Accounting Policies and Estimates
Preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying disclosures. These estimates are based on management’s best knowledge of current events and actions the Company may undertake in the future. Estimates are used in accounting for, among other items, the allowance for loan losses, valuation of loans in acquisition transactions, useful lives for depreciation and amortization, fair value of financial instruments, other-than-temporary impairment calculations, valuation of deferred tax assets, uncertain income tax positions and contingencies. Estimates that are particularly susceptible to significant change for the Company include the determination of the allowance for loan losses, the determination and assessment of deferred tax assets and liabilities, and the valuation of loans acquired in acquisition transactions; therefore, these are critical accounting policies. Factors that may cause sensitivity to the aforementioned estimates include but are not limited to: external market factors such as market interest rates and employment rates, changes to operating policies and procedures, changes in applicable banking or tax regulations, and changes to deferred tax estimates. Actual results may ultimately differ from estimates, although management does not generally believe such differences would materially affect the consolidated financial statements in any individual reporting period presented.
There have been no material changes or developments with respect to the assumptions or methodologies that the Company uses when applying what management believes are critical accounting policies and developing critical accounting estimates as disclosed in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2018
.
Recent Accounting Developments Adopted
In August 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-12,
Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities
. ASU 2017-12 expands the activities that qualify for hedge accounting and simplifies the rules for reporting hedging transactions. The updated guidance is effective for interim and annual reporting periods beginning after December 15, 2018, with early adoption permitted. The Company adopted the updated guidance effective January 1, 2019 with no material impact on its consolidated financial statements, because the Company does not have any significant derivatives and does not currently apply hedge accounting to derivatives.
In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842)
, with several subsequent updates. Topic 842 introduced a new accounting model for lessors and lessees. For lessees, almost all leases are now recognized on the balance sheet as a right-of-use ("ROU") asset and lease liability, unlike previous GAAP which required only capital leases to be recognized on the balance sheet. The accounting applied by lessors is largely unchanged from existing guidance. Topic 842 also requires additional disclosures concerning the amount, timing and uncertainty of cash flows arising from leases. The updated guidance is effective for annual reporting periods beginning after December 15, 2018, and provides a modified retrospective transition approach that allows lessees to recognize and measure leases on the balance sheet at the beginning of either the earliest period presented or as of the beginning of the period of adoption (the "effective date" method), with the option to elect certain practical expedients. Nicolet adopted the new guidance prospectively as of January 1, 2019, using the effective date method; thus, prior comparative periods have not been restated.
Upon adoption, Nicolet recognized an ROU asset and lease liability of approximately
$5 million
. There was no impact to its consolidated statements of income or cash flows compared to the prior lease accounting model. The ROU asset and lease liability are recorded in other assets and other liabilities, respectively, in the consolidated balance sheets. As part of the adoption, Nicolet elected the package of practical expedients permitted under the transition guidance of the new standard which allowed the carry forward of the historical lease classification. Nicolet also elected the practical expedient to group lease and non-lease components as a single lease component; thus, the Company's leases include both lease (e.g., fixed payments including rent, taxes, and insurance
costs) and non-lease components (e.g., common area or other maintenance costs). See Note 9 for the new disclosures required by Topic 842.
Operating Segment
While the chief-operating decision makers monitor the revenue streams of the various products and services, and evaluate costs, balance sheet positions and quality, all such products, services and activities are directly or indirectly related to the business of community banking, with no regular, formal or material segment delineations. Operations are managed and financial performance is evaluated on a company-wide basis, and accordingly, all the financial service operations are considered by management to be aggregated in
one
reportable operating segment.
Reclassifications
Certain amounts in the
2018
consolidated financial statements have been reclassified to conform to the
2019
presentation.
Note
2
–
Earnings per Common Share
Basic earnings per common share are calculated by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per common share are calculated by dividing net income available to common shareholders by the weighted average number of shares adjusted for the dilutive effect of common stock awards (outstanding stock options and unvested restricted stock), if any. Presented below are the calculations for basic and diluted earnings per common share.
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
(In thousands, except per share data)
|
2019
|
|
2018
|
Net income attributable to Nicolet Bankshares, Inc.
|
$
|
10,267
|
|
|
$
|
9,577
|
|
Weighted average common shares outstanding
|
9,461
|
|
|
9,765
|
|
Effect of dilutive common stock awards
|
297
|
|
|
460
|
|
Diluted weighted average common shares outstanding
|
9,758
|
|
|
10,225
|
|
Basic earnings per common share*
|
$
|
1.09
|
|
|
$
|
0.98
|
|
Diluted earnings per common share*
|
$
|
1.05
|
|
|
$
|
0.94
|
|
*Cumulative quarterly per share performance may not equal annual per share totals due to the effects of the amount and timing of capital increases. When computing earnings per share for an interim period, the denominator is based on the weighted average shares outstanding during the interim period, and not on an annualized weighted average basis. Accordingly, the sum of the earnings per share data for the quarters will not necessarily equal the year to date earnings per share data.
For the
three months ended
March 31, 2019
and
2018
, options to purchase approximately
0.1 million
shares are excluded from the calculation of diluted earnings per common share as the effect of their exercise would have been anti-dilutive.
Note
3
–
Stock-Based Compensation
The Company may grant stock options and restricted stock under its stock-based compensation plans to certain officers, employees and directors. These plans are administered by a committee of the Board of Directors. At
March 31, 2019
, approximately
129,000
shares were available for grant under these stock-based compensation plans.
A Black-Scholes model is utilized to estimate the fair value of stock option grants, while the market price of the Company’s stock at the date of grant is used to estimate the fair value of restricted stock awards. The weighted average assumptions used in the Black-Scholes model for valuing stock option grants were as follows. There were
no
stock options granted during the
three months ended
March 31, 2019
.
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2019
|
|
2018
|
Dividend yield
|
—
|
%
|
|
—
|
%
|
Expected volatility
|
—
|
%
|
|
25
|
%
|
Risk-free interest rate
|
—
|
%
|
|
2.48
|
%
|
Expected average life
|
0 years
|
|
|
7 years
|
|
Weighted average per share fair value of options
|
$
|
—
|
|
|
$
|
17.60
|
|
A summary of the Company’s stock option activity is summarized below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
Option Shares
Outstanding
|
|
Weighted
Average
Exercise Price
|
|
Weighted
Average
Remaining
Life (Years)
|
|
Aggregate
Intrinsic
Value (in
thousands)
|
Outstanding - December 31, 2018
|
|
1,581,699
|
|
|
$
|
40.77
|
|
|
|
|
|
Granted
|
|
—
|
|
|
—
|
|
|
|
|
|
Exercise of stock options *
|
|
(32,623
|
)
|
|
21.41
|
|
|
|
|
|
Forfeited
|
|
(2,938
|
)
|
|
25.44
|
|
|
|
|
|
Outstanding - March 31, 2019
|
|
1,546,138
|
|
|
$
|
41.20
|
|
|
7.2
|
|
$
|
28,445
|
|
Exercisable - March 31, 2019
|
|
597,788
|
|
|
$
|
33.14
|
|
|
6.1
|
|
$
|
15,816
|
|
* The terms of the stock option agreements permit having a number of shares of stock withheld, the fair market value of which as of the date of exercise is sufficient to satisfy the exercise price and/or tax withholding requirements. For the
three months ended
March 31, 2019
,
no
such shares were surrendered to the Company.
Intrinsic value represents the amount by which the fair market value of the underlying stock exceeds the exercise price of the stock options. The intrinsic value of options exercised for the
three months ended
March 31, 2019
and
2018
was approximately
$1.1 million
and
$0.7 million
, respectively.
A summary of the Company’s restricted stock activity is summarized below.
|
|
|
|
|
|
|
|
|
Restricted Stock
|
|
Weighted
Average Grant
Date Fair Value
|
|
Restricted
Shares
Outstanding
|
Outstanding - December 31, 2018
|
|
$
|
39.37
|
|
|
29,512
|
|
Granted
|
|
—
|
|
|
—
|
|
Vested *
|
|
34.75
|
|
|
(4,000
|
)
|
Forfeited
|
|
16.50
|
|
|
(408
|
)
|
Outstanding - March 31, 2019
|
|
$
|
40.48
|
|
|
25,104
|
|
* The terms of the restricted stock agreements permit the surrender of shares to the Company upon vesting in order to satisfy applicable tax withholding requirements at the minimum statutory withholding rate, and accordingly,
1,373
shares were surrendered during the
three months ended
March 31, 2019
.
The Company recognized approximately
$1.1 million
and
$1.2 million
of stock-based compensation expense (included in personnel on the consolidated statements of income) during the
three months ended
March 31, 2019
and
2018
, respectively, associated with its common stock awards granted to officers and employees. As of
March 31, 2019
, there was approximately
$11.9 million
of unrecognized compensation cost related to equity award grants. The cost is expected to be recognized over the remaining vesting period of approximately
three
years.
Note
4
–
Securities Available for Sale
Amortized cost and fair value of securities available for sale are summarized as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
(in thousands)
|
Amortized Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
U.S. government agency securities
|
$
|
16,596
|
|
|
$
|
—
|
|
|
$
|
208
|
|
|
$
|
16,388
|
|
State, county and municipals
|
158,652
|
|
|
248
|
|
|
1,355
|
|
|
157,545
|
|
Mortgage-backed securities
|
147,721
|
|
|
1,277
|
|
|
1,487
|
|
|
147,511
|
|
Corporate debt securities
|
84,753
|
|
|
1,598
|
|
|
102
|
|
|
86,249
|
|
Total
|
$
|
407,722
|
|
|
$
|
3,123
|
|
|
$
|
3,152
|
|
|
$
|
407,693
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
(in thousands)
|
Amortized Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
U.S. government agency securities
|
$
|
22,467
|
|
|
$
|
—
|
|
|
$
|
818
|
|
|
$
|
21,649
|
|
State, county and municipals
|
163,702
|
|
|
76
|
|
|
3,252
|
|
|
160,526
|
|
Mortgage-backed securities
|
134,350
|
|
|
328
|
|
|
3,034
|
|
|
131,644
|
|
Corporate debt securities
|
87,352
|
|
|
66
|
|
|
1,093
|
|
|
86,325
|
|
Total
|
$
|
407,871
|
|
|
$
|
470
|
|
|
$
|
8,197
|
|
|
$
|
400,144
|
|
The following table represents gross unrealized losses and the related estimated fair value of investment securities available for sale, aggregated by investment category and length of time individual securities have been in a continuous unrealized loss position.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
Less than 12 months
|
|
12 months or more
|
|
Total
|
($ in thousands)
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Number of
Securities
|
U.S. government agency securities
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
16,388
|
|
|
$
|
208
|
|
|
$
|
16,388
|
|
|
$
|
208
|
|
|
3
|
|
State, county and municipals
|
4,428
|
|
|
8
|
|
|
114,613
|
|
|
1,347
|
|
|
119,041
|
|
|
1,355
|
|
|
340
|
|
Mortgage-backed securities
|
10,311
|
|
|
16
|
|
|
82,041
|
|
|
1,471
|
|
|
92,352
|
|
|
1,487
|
|
|
190
|
|
Corporate debt securities
|
—
|
|
|
—
|
|
|
5,999
|
|
|
102
|
|
|
5,999
|
|
|
102
|
|
|
3
|
|
Total
|
$
|
14,739
|
|
|
$
|
24
|
|
|
$
|
219,041
|
|
|
$
|
3,128
|
|
|
$
|
233,780
|
|
|
$
|
3,152
|
|
|
536
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
Less than 12 months
|
|
12 months or more
|
|
Total
|
($ in thousands)
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Number of
Securities
|
U.S. government agency securities
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
21,649
|
|
|
$
|
818
|
|
|
$
|
21,649
|
|
|
$
|
818
|
|
|
3
|
|
State, county and municipals
|
16,136
|
|
|
98
|
|
|
130,975
|
|
|
3,154
|
|
|
147,111
|
|
|
3,252
|
|
|
440
|
|
Mortgage-backed securities
|
20,568
|
|
|
132
|
|
|
89,189
|
|
|
2,902
|
|
|
109,757
|
|
|
3,034
|
|
|
204
|
|
Corporate debt securities
|
51,592
|
|
|
677
|
|
|
9,757
|
|
|
416
|
|
|
61,349
|
|
|
1,093
|
|
|
33
|
|
Total
|
$
|
88,296
|
|
|
$
|
907
|
|
|
$
|
251,570
|
|
|
$
|
7,290
|
|
|
$
|
339,866
|
|
|
$
|
8,197
|
|
|
680
|
|
As of
March 31, 2019
, the Company does not consider its securities AFS with unrealized losses to be other-than-temporarily impaired, as the unrealized losses in each category have occurred as a result of changes in interest rates, market spreads and market conditions subsequent to purchase, not credit deterioration. The Company has the ability and intent to hold its securities to maturity. There were
no
other-than-temporary impairments charged to earnings during the
three months ended
March 31, 2019
or
2018
.
The amortized cost and fair value of securities AFS by contractual maturity are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties; as this is particularly inherent in mortgage-backed securities, these securities are not included in the maturity categories below.
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
(in thousands)
|
Amortized Cost
|
|
Fair Value
|
Due in less than one year
|
$
|
20,418
|
|
|
$
|
20,401
|
|
Due in one year through five years
|
181,031
|
|
|
181,210
|
|
Due after five years through ten years
|
52,144
|
|
|
51,918
|
|
Due after ten years
|
6,408
|
|
|
6,653
|
|
|
260,001
|
|
|
260,182
|
|
Mortgage-backed securities
|
147,721
|
|
|
147,511
|
|
Securities AFS
|
$
|
407,722
|
|
|
$
|
407,693
|
|
Proceeds and realized gains / losses from the sale of securities AFS were as follows.
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
(in thousands)
|
2019
|
|
2018
|
Gross gains
|
$
|
133
|
|
|
$
|
—
|
|
Gross losses
|
(120
|
)
|
|
—
|
|
Gains (losses) on sales of securities AFS, net
|
$
|
13
|
|
|
$
|
—
|
|
Proceeds from sales of securities AFS
|
$
|
8,076
|
|
|
$
|
—
|
|
Note
5
–
Loans, Allowance for Loan Losses, and Credit Quality
The loan composition is summarized as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
(in thousands)
|
Amount
|
|
% of
Total
|
|
Amount
|
|
% of
Total
|
Commercial & industrial
|
$
|
711,505
|
|
|
32
|
%
|
|
$
|
684,920
|
|
|
32
|
%
|
Owner-occupied commercial real estate (“CRE”)
|
439,440
|
|
|
20
|
|
|
441,353
|
|
|
20
|
|
Agricultural (“AG”) production
|
35,143
|
|
|
2
|
|
|
35,625
|
|
|
2
|
|
AG real estate
|
53,935
|
|
|
2
|
|
|
53,444
|
|
|
2
|
|
CRE investment
|
342,343
|
|
|
16
|
|
|
343,652
|
|
|
16
|
|
Construction & land development
|
82,308
|
|
|
4
|
|
|
80,599
|
|
|
4
|
|
Residential construction
|
34,425
|
|
|
2
|
|
|
30,926
|
|
|
1
|
|
Residential first mortgage
|
350,661
|
|
|
16
|
|
|
357,841
|
|
|
17
|
|
Residential junior mortgage
|
113,628
|
|
|
5
|
|
|
111,328
|
|
|
5
|
|
Retail & other
|
26,300
|
|
|
1
|
|
|
26,493
|
|
|
1
|
|
Loans
|
2,189,688
|
|
|
100
|
%
|
|
2,166,181
|
|
|
100
|
%
|
Less allowance for loan losses (“ALLL”)
|
13,370
|
|
|
|
|
13,153
|
|
|
|
Loans, net
|
$
|
2,176,318
|
|
|
|
|
$
|
2,153,028
|
|
|
|
Allowance for loan losses to loans
|
0.61
|
%
|
|
|
|
0.61
|
%
|
|
|
As a further breakdown, loans are summarized by originated and acquired as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
(in thousands)
|
Originated
Amount
|
|
% of
Total
|
|
Acquired
Amount
|
|
% of
Total
|
|
Originated
Amount
|
|
% of
Total
|
|
Acquired
Amount
|
|
% of
Total
|
Commercial & industrial
|
$
|
594,419
|
|
|
39
|
%
|
|
$
|
117,086
|
|
|
18
|
%
|
|
$
|
568,100
|
|
|
38
|
%
|
|
$
|
116,820
|
|
|
17
|
%
|
Owner-occupied CRE
|
290,387
|
|
|
19
|
|
|
149,053
|
|
|
22
|
|
|
283,531
|
|
|
19
|
|
|
157,822
|
|
|
23
|
|
AG production
|
10,934
|
|
|
1
|
|
|
24,209
|
|
|
4
|
|
|
11,113
|
|
|
1
|
|
|
24,512
|
|
|
4
|
|
AG real estate
|
32,868
|
|
|
2
|
|
|
21,067
|
|
|
3
|
|
|
31,374
|
|
|
2
|
|
|
22,070
|
|
|
3
|
|
CRE investment
|
171,009
|
|
|
11
|
|
|
171,334
|
|
|
26
|
|
|
171,087
|
|
|
12
|
|
|
172,565
|
|
|
25
|
|
Construction & land development
|
68,396
|
|
|
5
|
|
|
13,912
|
|
|
2
|
|
|
66,478
|
|
|
4
|
|
|
14,121
|
|
|
2
|
|
Residential construction
|
34,310
|
|
|
2
|
|
|
115
|
|
|
—
|
|
|
30,926
|
|
|
2
|
|
|
—
|
|
|
—
|
|
Residential first mortgage
|
219,115
|
|
|
14
|
|
|
131,546
|
|
|
20
|
|
|
220,368
|
|
|
15
|
|
|
137,473
|
|
|
20
|
|
Residential junior mortgage
|
82,860
|
|
|
5
|
|
|
30,768
|
|
|
5
|
|
|
78,379
|
|
|
5
|
|
|
32,949
|
|
|
5
|
|
Retail & other
|
24,243
|
|
|
2
|
|
|
2,057
|
|
|
—
|
|
|
23,809
|
|
|
2
|
|
|
2,684
|
|
|
1
|
|
Loans
|
1,528,541
|
|
|
100
|
%
|
|
661,147
|
|
|
100
|
%
|
|
1,485,165
|
|
|
100
|
%
|
|
681,016
|
|
|
100
|
%
|
Less ALLL
|
11,669
|
|
|
|
|
1,701
|
|
|
|
|
11,448
|
|
|
|
|
1,705
|
|
|
|
Loans, net
|
$
|
1,516,872
|
|
|
|
|
$
|
659,446
|
|
|
|
|
$
|
1,473,717
|
|
|
|
|
$
|
679,311
|
|
|
|
ALLL to loans
|
0.76
|
%
|
|
|
|
0.26
|
%
|
|
|
|
0.77
|
%
|
|
|
|
0.25
|
%
|
|
|
As a percent of total loans
|
70
|
%
|
|
|
|
30
|
%
|
|
|
|
69
|
%
|
|
|
|
31
|
%
|
|
|
Practically all of the Company’s loans, commitments, and letters of credit have been granted to customers in the Company’s market area. Although the Company has a diversified loan portfolio, the credit risk in the loan portfolio is largely influenced by general economic conditions and trends of the counties and markets in which the debtors operate, and the resulting impact on the operations of borrowers or on the value of underlying collateral, if any.
A roll forward of the allowance for loan losses is summarized as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Year Ended
|
(in thousands)
|
March 31, 2019
|
|
March 31, 2018
|
|
December 31, 2018
|
Beginning balance
|
$
|
13,153
|
|
|
$
|
12,653
|
|
|
$
|
12,653
|
|
Provision for loan losses
|
200
|
|
|
510
|
|
|
1,600
|
|
Charge-offs
|
(10
|
)
|
|
(430
|
)
|
|
(1,213
|
)
|
Recoveries
|
27
|
|
|
32
|
|
|
113
|
|
Net (charge-offs) recoveries
|
17
|
|
|
(398
|
)
|
|
(1,100
|
)
|
Ending balance
|
$
|
13,370
|
|
|
$
|
12,765
|
|
|
$
|
13,153
|
|
The following tables present the balance and activity in the ALLL by portfolio segment and the recorded investment in loans by portfolio segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL – Three Months Ended March 31, 2019
|
(in thousands)
|
Commercial
& industrial
|
|
Owner-
occupied
CRE
|
|
AG
production
|
|
AG real
estate
|
|
CRE
investment
|
|
Construction & land
development
|
|
Residential
construction
|
|
Residential
first mortgage
|
|
Residential
junior
mortgage
|
|
Retail
& other
|
|
Total
|
ALLL:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
$
|
5,271
|
|
|
$
|
2,847
|
|
|
$
|
121
|
|
|
$
|
301
|
|
|
$
|
1,470
|
|
|
$
|
510
|
|
|
$
|
211
|
|
|
$
|
1,646
|
|
|
$
|
472
|
|
|
$
|
304
|
|
|
$
|
13,153
|
|
Provision
|
(49
|
)
|
|
20
|
|
|
120
|
|
|
19
|
|
|
77
|
|
|
11
|
|
|
22
|
|
|
(20
|
)
|
|
19
|
|
|
(19
|
)
|
|
200
|
|
Charge-offs
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10
|
)
|
|
(10
|
)
|
Recoveries
|
16
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
8
|
|
|
27
|
|
Net (charge-offs) recoveries
|
16
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
(2
|
)
|
|
17
|
|
Ending balance
|
$
|
5,238
|
|
|
$
|
2,868
|
|
|
$
|
241
|
|
|
$
|
320
|
|
|
$
|
1,547
|
|
|
$
|
521
|
|
|
$
|
233
|
|
|
$
|
1,626
|
|
|
$
|
493
|
|
|
$
|
283
|
|
|
$
|
13,370
|
|
As % of ALLL
|
39.2
|
%
|
|
21.5
|
%
|
|
1.8
|
%
|
|
2.4
|
%
|
|
11.6
|
%
|
|
3.9
|
%
|
|
1.7
|
%
|
|
12.2
|
%
|
|
3.7
|
%
|
|
2.0
|
%
|
|
100.0
|
%
|
ALLL:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
152
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
152
|
|
Collectively evaluated
|
5,238
|
|
|
2,868
|
|
|
89
|
|
|
320
|
|
|
1,547
|
|
|
521
|
|
|
233
|
|
|
1,626
|
|
|
493
|
|
|
283
|
|
|
13,218
|
|
Ending balance
|
$
|
5,238
|
|
|
$
|
2,868
|
|
|
$
|
241
|
|
|
$
|
320
|
|
|
$
|
1,547
|
|
|
$
|
521
|
|
|
$
|
233
|
|
|
$
|
1,626
|
|
|
$
|
493
|
|
|
$
|
283
|
|
|
$
|
13,370
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated
|
$
|
3,973
|
|
|
$
|
3,041
|
|
|
$
|
1,100
|
|
|
$
|
950
|
|
|
$
|
1,670
|
|
|
$
|
578
|
|
|
$
|
—
|
|
|
$
|
2,675
|
|
|
$
|
230
|
|
|
$
|
12
|
|
|
$
|
14,229
|
|
Collectively evaluated
|
707,532
|
|
|
436,399
|
|
|
34,043
|
|
|
52,985
|
|
|
340,673
|
|
|
81,730
|
|
|
34,425
|
|
|
347,986
|
|
|
113,398
|
|
|
26,288
|
|
|
2,175,459
|
|
Total loans
|
$
|
711,505
|
|
|
$
|
439,440
|
|
|
$
|
35,143
|
|
|
$
|
53,935
|
|
|
$
|
342,343
|
|
|
$
|
82,308
|
|
|
$
|
34,425
|
|
|
$
|
350,661
|
|
|
$
|
113,628
|
|
|
$
|
26,300
|
|
|
$
|
2,189,688
|
|
Less ALLL
|
5,238
|
|
|
2,868
|
|
|
241
|
|
|
320
|
|
|
1,547
|
|
|
521
|
|
|
233
|
|
|
1,626
|
|
|
493
|
|
|
283
|
|
|
13,370
|
|
Net loans
|
$
|
706,267
|
|
|
$
|
436,572
|
|
|
$
|
34,902
|
|
|
$
|
53,615
|
|
|
$
|
340,796
|
|
|
$
|
81,787
|
|
|
$
|
34,192
|
|
|
$
|
349,035
|
|
|
$
|
113,135
|
|
|
$
|
26,017
|
|
|
$
|
2,176,318
|
|
As a further breakdown, the ALLL is summarized by originated and acquired as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Originated – Three Months Ended March 31, 2019
|
(in thousands)
|
Commercial
& industrial
|
|
Owner-
occupied
CRE
|
|
AG
production
|
|
AG real
estate
|
|
CRE
investment
|
|
Construction
& land
development
|
|
Residential
construction
|
|
Residential
first
mortgage
|
|
Residential
junior
mortgage
|
|
Retail
& other
|
|
Total
|
ALLL:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
$
|
4,683
|
|
|
$
|
2,439
|
|
|
$
|
110
|
|
|
$
|
255
|
|
|
$
|
1,230
|
|
|
$
|
431
|
|
|
$
|
211
|
|
|
$
|
1,400
|
|
|
$
|
408
|
|
|
$
|
281
|
|
|
$
|
11,448
|
|
Provision
|
(46
|
)
|
|
32
|
|
|
118
|
|
|
18
|
|
|
88
|
|
|
13
|
|
|
(12
|
)
|
|
(8
|
)
|
|
20
|
|
|
(18
|
)
|
|
205
|
|
Charge-offs
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10
|
)
|
|
(10
|
)
|
Recoveries
|
16
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
8
|
|
|
26
|
|
Net (charge-offs) recoveries
|
16
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
(2
|
)
|
|
16
|
|
Ending balance
|
$
|
4,653
|
|
|
$
|
2,472
|
|
|
$
|
228
|
|
|
$
|
273
|
|
|
$
|
1,318
|
|
|
$
|
444
|
|
|
$
|
199
|
|
|
$
|
1,392
|
|
|
$
|
429
|
|
|
$
|
261
|
|
|
$
|
11,669
|
|
As % of ALLL
|
39.9
|
%
|
|
21.2
|
%
|
|
2.0
|
%
|
|
2.3
|
%
|
|
11.3
|
%
|
|
3.8
|
%
|
|
1.7
|
%
|
|
11.9
|
%
|
|
3.7
|
%
|
|
2.2
|
%
|
|
100.0
|
%
|
ALLL:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
152
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
152
|
|
Collectively evaluated
|
4,653
|
|
|
2,472
|
|
|
76
|
|
|
273
|
|
|
1,318
|
|
|
444
|
|
|
199
|
|
|
1,392
|
|
|
429
|
|
|
261
|
|
|
11,517
|
|
Ending balance
|
$
|
4,653
|
|
|
$
|
2,472
|
|
|
$
|
228
|
|
|
$
|
273
|
|
|
$
|
1,318
|
|
|
$
|
444
|
|
|
$
|
199
|
|
|
$
|
1,392
|
|
|
$
|
429
|
|
|
$
|
261
|
|
|
$
|
11,669
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated
|
$
|
1,210
|
|
|
$
|
1,890
|
|
|
$
|
1,100
|
|
|
$
|
893
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,093
|
|
Collectively evaluated
|
593,209
|
|
|
288,497
|
|
|
9,834
|
|
|
31,975
|
|
|
171,009
|
|
|
68,396
|
|
|
34,310
|
|
|
219,115
|
|
|
82,860
|
|
|
24,243
|
|
|
1,523,448
|
|
Total loans
|
$
|
594,419
|
|
|
$
|
290,387
|
|
|
$
|
10,934
|
|
|
$
|
32,868
|
|
|
$
|
171,009
|
|
|
$
|
68,396
|
|
|
$
|
34,310
|
|
|
$
|
219,115
|
|
|
$
|
82,860
|
|
|
$
|
24,243
|
|
|
$
|
1,528,541
|
|
Less ALLL
|
4,653
|
|
|
2,472
|
|
|
228
|
|
|
273
|
|
|
1,318
|
|
|
444
|
|
|
199
|
|
|
1,392
|
|
|
429
|
|
|
261
|
|
|
11,669
|
|
Net loans
|
$
|
589,766
|
|
|
$
|
287,915
|
|
|
$
|
10,706
|
|
|
$
|
32,595
|
|
|
$
|
169,691
|
|
|
$
|
67,952
|
|
|
$
|
34,111
|
|
|
$
|
217,723
|
|
|
$
|
82,431
|
|
|
$
|
23,982
|
|
|
$
|
1,516,872
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired – Three Months Ended March 31, 2019
|
(in thousands)
|
Commercial
& industrial
|
|
Owner-
occupied
CRE
|
|
AG
production
|
|
AG real
estate
|
|
CRE
investment
|
|
Construction
& land
development
|
|
Residential
construction
|
|
Residential
first mortgage
|
|
Residential
junior
mortgage
|
|
Retail
& other
|
|
Total
|
ALLL:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
$
|
588
|
|
|
$
|
408
|
|
|
$
|
11
|
|
|
$
|
46
|
|
|
$
|
240
|
|
|
$
|
79
|
|
|
$
|
—
|
|
|
$
|
246
|
|
|
$
|
64
|
|
|
$
|
23
|
|
|
$
|
1,705
|
|
Provision
|
(3
|
)
|
|
(12
|
)
|
|
2
|
|
|
1
|
|
|
(11
|
)
|
|
(2
|
)
|
|
34
|
|
|
(12
|
)
|
|
(1
|
)
|
|
(1
|
)
|
|
(5
|
)
|
Charge-offs
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Recoveries
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
Net (charge-offs) recoveries
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
Ending balance
|
$
|
585
|
|
|
$
|
396
|
|
|
$
|
13
|
|
|
$
|
47
|
|
|
$
|
229
|
|
|
$
|
77
|
|
|
$
|
34
|
|
|
$
|
234
|
|
|
$
|
64
|
|
|
$
|
22
|
|
|
$
|
1,701
|
|
As % of ALLL
|
34.4
|
%
|
|
23.3
|
%
|
|
0.8
|
%
|
|
2.8
|
%
|
|
13.5
|
%
|
|
4.5
|
%
|
|
2.0
|
%
|
|
13.8
|
%
|
|
3.8
|
%
|
|
1.1
|
%
|
|
100.0
|
%
|
ALLL:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Collectively evaluated
|
585
|
|
|
396
|
|
|
13
|
|
|
47
|
|
|
229
|
|
|
77
|
|
|
34
|
|
|
234
|
|
|
64
|
|
|
22
|
|
|
1,701
|
|
Ending balance
|
$
|
585
|
|
|
$
|
396
|
|
|
$
|
13
|
|
|
$
|
47
|
|
|
$
|
229
|
|
|
$
|
77
|
|
|
$
|
34
|
|
|
$
|
234
|
|
|
$
|
64
|
|
|
$
|
22
|
|
|
$
|
1,701
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated
|
$
|
2,763
|
|
|
$
|
1,151
|
|
|
$
|
—
|
|
|
$
|
57
|
|
|
$
|
1,670
|
|
|
$
|
578
|
|
|
$
|
—
|
|
|
$
|
2,675
|
|
|
$
|
230
|
|
|
$
|
12
|
|
|
$
|
9,136
|
|
Collectively evaluated
|
114,323
|
|
|
147,902
|
|
|
24,209
|
|
|
21,010
|
|
|
169,664
|
|
|
13,334
|
|
|
115
|
|
|
128,871
|
|
|
30,538
|
|
|
2,045
|
|
|
652,011
|
|
Total loans
|
$
|
117,086
|
|
|
$
|
149,053
|
|
|
$
|
24,209
|
|
|
$
|
21,067
|
|
|
$
|
171,334
|
|
|
$
|
13,912
|
|
|
$
|
115
|
|
|
$
|
131,546
|
|
|
$
|
30,768
|
|
|
$
|
2,057
|
|
|
$
|
661,147
|
|
Less ALLL
|
585
|
|
|
396
|
|
|
13
|
|
|
47
|
|
|
229
|
|
|
77
|
|
|
34
|
|
|
234
|
|
|
64
|
|
|
22
|
|
|
1,701
|
|
Net loans
|
$
|
116,501
|
|
|
$
|
148,657
|
|
|
$
|
24,196
|
|
|
$
|
21,020
|
|
|
$
|
171,105
|
|
|
$
|
13,835
|
|
|
$
|
81
|
|
|
$
|
131,312
|
|
|
$
|
30,704
|
|
|
$
|
2,035
|
|
|
$
|
659,446
|
|
For comparison purposes, the following tables present the balance and activity in the ALLL by portfolio segment and the recorded investment in loans by portfolio segment for the prior year-end period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL – Year Ended December 31, 2018
|
(in thousands)
|
Commercial
& industrial
|
|
Owner-
occupied
CRE
|
|
AG
production
|
|
AG real
estate
|
|
CRE
investment
|
|
Construction
& land
development
|
|
Residential
construction
|
|
Residential
first
mortgage
|
|
Residential
junior
mortgage
|
|
Retail &
other
|
|
Total
|
ALLL:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
$
|
4,934
|
|
|
$
|
2,607
|
|
|
$
|
129
|
|
|
$
|
296
|
|
|
$
|
1,388
|
|
|
$
|
726
|
|
|
$
|
251
|
|
|
$
|
1,609
|
|
|
$
|
488
|
|
|
$
|
225
|
|
|
$
|
12,653
|
|
Provision
|
1,107
|
|
|
300
|
|
|
(8
|
)
|
|
5
|
|
|
119
|
|
|
(216
|
)
|
|
(40
|
)
|
|
117
|
|
|
(51
|
)
|
|
267
|
|
|
1,600
|
|
Charge-offs
|
(813
|
)
|
|
(74
|
)
|
|
—
|
|
|
—
|
|
|
(37
|
)
|
|
—
|
|
|
—
|
|
|
(85
|
)
|
|
—
|
|
|
(204
|
)
|
|
(1,213
|
)
|
Recoveries
|
43
|
|
|
14
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
35
|
|
|
16
|
|
|
113
|
|
Net (charge-offs) recoveries
|
(770
|
)
|
|
(60
|
)
|
|
—
|
|
|
—
|
|
|
(37
|
)
|
|
—
|
|
|
—
|
|
|
(80
|
)
|
|
35
|
|
|
(188
|
)
|
|
(1,100
|
)
|
Ending balance
|
$
|
5,271
|
|
|
$
|
2,847
|
|
|
$
|
121
|
|
|
$
|
301
|
|
|
$
|
1,470
|
|
|
$
|
510
|
|
|
$
|
211
|
|
|
$
|
1,646
|
|
|
$
|
472
|
|
|
$
|
304
|
|
|
$
|
13,153
|
|
As % of ALLL
|
40.1
|
%
|
|
21.6
|
%
|
|
0.9
|
%
|
|
2.3
|
%
|
|
11.2
|
%
|
|
3.9
|
%
|
|
1.6
|
%
|
|
12.5
|
%
|
|
3.6
|
%
|
|
2.3
|
%
|
|
100.0
|
%
|
ALLL:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Collectively evaluated
|
5,271
|
|
|
2,847
|
|
|
121
|
|
|
301
|
|
|
1,470
|
|
|
510
|
|
|
211
|
|
|
1,646
|
|
|
472
|
|
|
304
|
|
|
13,153
|
|
Ending balance
|
$
|
5,271
|
|
|
$
|
2,847
|
|
|
$
|
121
|
|
|
$
|
301
|
|
|
$
|
1,470
|
|
|
$
|
510
|
|
|
$
|
211
|
|
|
$
|
1,646
|
|
|
$
|
472
|
|
|
$
|
304
|
|
|
$
|
13,153
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated
|
$
|
2,927
|
|
|
$
|
1,506
|
|
|
$
|
—
|
|
|
$
|
222
|
|
|
$
|
1,686
|
|
|
$
|
603
|
|
|
$
|
—
|
|
|
$
|
2,750
|
|
|
$
|
233
|
|
|
$
|
12
|
|
|
$
|
9,939
|
|
Collectively evaluated
|
681,993
|
|
|
439,847
|
|
|
35,625
|
|
|
53,222
|
|
|
341,966
|
|
|
79,996
|
|
|
30,926
|
|
|
355,091
|
|
|
111,095
|
|
|
26,481
|
|
|
2,156,242
|
|
Total loans
|
$
|
684,920
|
|
|
$
|
441,353
|
|
|
$
|
35,625
|
|
|
$
|
53,444
|
|
|
$
|
343,652
|
|
|
$
|
80,599
|
|
|
$
|
30,926
|
|
|
$
|
357,841
|
|
|
$
|
111,328
|
|
|
$
|
26,493
|
|
|
$
|
2,166,181
|
|
Less ALLL
|
5,271
|
|
|
2,847
|
|
|
121
|
|
|
301
|
|
|
1,470
|
|
|
510
|
|
|
211
|
|
|
1,646
|
|
|
472
|
|
|
304
|
|
|
13,153
|
|
Net loans
|
$
|
679,649
|
|
|
$
|
438,506
|
|
|
$
|
35,504
|
|
|
$
|
53,143
|
|
|
$
|
342,182
|
|
|
$
|
80,089
|
|
|
$
|
30,715
|
|
|
$
|
356,195
|
|
|
$
|
110,856
|
|
|
$
|
26,189
|
|
|
$
|
2,153,028
|
|
As a further breakdown, the ALLL is summarized by originated and acquired as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Originated – Year Ended December 31, 2018
|
(in thousands)
|
Commercial
& industrial
|
|
Owner-
occupied
CRE
|
|
AG
production
|
|
AG real
estate
|
|
CRE
investment
|
|
Construction
& land
development
|
|
Residential
construction
|
|
Residential
first
mortgage
|
|
Residential
junior
mortgage
|
|
Retail &
other
|
|
Total
|
ALLL:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
$
|
4,192
|
|
|
$
|
2,115
|
|
|
$
|
112
|
|
|
$
|
235
|
|
|
$
|
1,154
|
|
|
$
|
628
|
|
|
$
|
200
|
|
|
$
|
1,297
|
|
|
$
|
409
|
|
|
$
|
200
|
|
|
$
|
10,542
|
|
Provision
|
1,262
|
|
|
385
|
|
|
(2
|
)
|
|
20
|
|
|
113
|
|
|
(197
|
)
|
|
11
|
|
|
187
|
|
|
(31
|
)
|
|
266
|
|
|
2,014
|
|
Charge-offs
|
(813
|
)
|
|
(64
|
)
|
|
—
|
|
|
—
|
|
|
(37
|
)
|
|
—
|
|
|
—
|
|
|
(85
|
)
|
|
—
|
|
|
(201
|
)
|
|
(1,200
|
)
|
Recoveries
|
42
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
30
|
|
|
16
|
|
|
92
|
|
Net (charge-offs) recoveries
|
(771
|
)
|
|
(61
|
)
|
|
—
|
|
|
—
|
|
|
(37
|
)
|
|
—
|
|
|
—
|
|
|
(84
|
)
|
|
30
|
|
|
(185
|
)
|
|
(1,108
|
)
|
Ending balance
|
$
|
4,683
|
|
|
$
|
2,439
|
|
|
$
|
110
|
|
|
$
|
255
|
|
|
$
|
1,230
|
|
|
$
|
431
|
|
|
$
|
211
|
|
|
$
|
1,400
|
|
|
$
|
408
|
|
|
$
|
281
|
|
|
$
|
11,448
|
|
As % of ALLL
|
40.9
|
%
|
|
21.3
|
%
|
|
1.0
|
%
|
|
2.2
|
%
|
|
10.7
|
%
|
|
3.8
|
%
|
|
1.8
|
%
|
|
12.2
|
%
|
|
3.6
|
%
|
|
2.5
|
%
|
|
100.0
|
%
|
ALLL:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Collectively evaluated
|
4,683
|
|
|
2,439
|
|
|
110
|
|
|
255
|
|
|
1,230
|
|
|
431
|
|
|
211
|
|
|
1,400
|
|
|
408
|
|
|
281
|
|
|
11,448
|
|
Ending balance
|
$
|
4,683
|
|
|
$
|
2,439
|
|
|
$
|
110
|
|
|
$
|
255
|
|
|
$
|
1,230
|
|
|
$
|
431
|
|
|
$
|
211
|
|
|
$
|
1,400
|
|
|
$
|
408
|
|
|
$
|
281
|
|
|
$
|
11,448
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated
|
$
|
227
|
|
|
$
|
321
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
548
|
|
Collectively evaluated
|
567,873
|
|
|
283,210
|
|
|
11,113
|
|
|
31,374
|
|
|
171,087
|
|
|
66,478
|
|
|
30,926
|
|
|
220,368
|
|
|
78,379
|
|
|
23,809
|
|
|
1,484,617
|
|
Total loans
|
$
|
568,100
|
|
|
$
|
283,531
|
|
|
$
|
11,113
|
|
|
$
|
31,374
|
|
|
$
|
171,087
|
|
|
$
|
66,478
|
|
|
$
|
30,926
|
|
|
$
|
220,368
|
|
|
$
|
78,379
|
|
|
$
|
23,809
|
|
|
$
|
1,485,165
|
|
Less ALLL
|
4,683
|
|
|
2,439
|
|
|
110
|
|
|
255
|
|
|
1,230
|
|
|
431
|
|
|
211
|
|
|
1,400
|
|
|
408
|
|
|
281
|
|
|
11,448
|
|
Net loans
|
$
|
563,417
|
|
|
$
|
281,092
|
|
|
$
|
11,003
|
|
|
$
|
31,119
|
|
|
$
|
169,857
|
|
|
$
|
66,047
|
|
|
$
|
30,715
|
|
|
$
|
218,968
|
|
|
$
|
77,971
|
|
|
$
|
23,528
|
|
|
$
|
1,473,717
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired – Year Ended December 31, 2018
|
(in thousands)
|
Commercial
& industrial
|
|
Owner-
occupied
CRE
|
|
AG
production
|
|
AG real
estate
|
|
CRE
investment
|
|
Construction
& land
development
|
|
Residential
construction
|
|
Residential
first
mortgage
|
|
Residential
junior
mortgage
|
|
Retail &
other
|
|
Total
|
ALLL:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
$
|
742
|
|
|
$
|
492
|
|
|
$
|
17
|
|
|
$
|
61
|
|
|
$
|
234
|
|
|
$
|
98
|
|
|
$
|
51
|
|
|
$
|
312
|
|
|
$
|
79
|
|
|
$
|
25
|
|
|
$
|
2,111
|
|
Provision
|
(155
|
)
|
|
(85
|
)
|
|
(6
|
)
|
|
(15
|
)
|
|
6
|
|
|
(19
|
)
|
|
(51
|
)
|
|
(70
|
)
|
|
(20
|
)
|
|
1
|
|
|
(414
|
)
|
Charge-offs
|
—
|
|
|
(10
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
(13
|
)
|
Recoveries
|
1
|
|
|
11
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
5
|
|
|
—
|
|
|
21
|
|
Net (charge-offs) recoveries
|
1
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
5
|
|
|
(3
|
)
|
|
8
|
|
Ending balance
|
$
|
588
|
|
|
$
|
408
|
|
|
$
|
11
|
|
|
$
|
46
|
|
|
$
|
240
|
|
|
$
|
79
|
|
|
$
|
—
|
|
|
$
|
246
|
|
|
$
|
64
|
|
|
$
|
23
|
|
|
$
|
1,705
|
|
As % of ALLL
|
34.5
|
%
|
|
23.9
|
%
|
|
0.6
|
%
|
|
2.7
|
%
|
|
14.1
|
%
|
|
4.6
|
%
|
|
—
|
%
|
|
14.4
|
%
|
|
3.8
|
%
|
|
1.4
|
%
|
|
100.0
|
%
|
ALLL:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Collectively evaluated
|
588
|
|
|
408
|
|
|
11
|
|
|
46
|
|
|
240
|
|
|
79
|
|
|
—
|
|
|
246
|
|
|
64
|
|
|
23
|
|
|
1,705
|
|
Ending balance
|
$
|
588
|
|
|
$
|
408
|
|
|
$
|
11
|
|
|
$
|
46
|
|
|
$
|
240
|
|
|
$
|
79
|
|
|
$
|
—
|
|
|
$
|
246
|
|
|
$
|
64
|
|
|
$
|
23
|
|
|
$
|
1,705
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated
|
$
|
2,700
|
|
|
$
|
1,185
|
|
|
$
|
—
|
|
|
$
|
222
|
|
|
$
|
1,686
|
|
|
$
|
603
|
|
|
$
|
—
|
|
|
$
|
2,750
|
|
|
$
|
233
|
|
|
$
|
12
|
|
|
$
|
9,391
|
|
Collectively evaluated
|
114,120
|
|
|
156,637
|
|
|
24,512
|
|
|
21,848
|
|
|
170,879
|
|
|
13,518
|
|
|
—
|
|
|
134,723
|
|
|
32,716
|
|
|
2,672
|
|
|
671,625
|
|
Total loans
|
$
|
116,820
|
|
|
$
|
157,822
|
|
|
$
|
24,512
|
|
|
$
|
22,070
|
|
|
$
|
172,565
|
|
|
$
|
14,121
|
|
|
$
|
—
|
|
|
$
|
137,473
|
|
|
$
|
32,949
|
|
|
$
|
2,684
|
|
|
$
|
681,016
|
|
Less ALLL
|
588
|
|
|
408
|
|
|
11
|
|
|
46
|
|
|
240
|
|
|
79
|
|
|
—
|
|
|
246
|
|
|
64
|
|
|
23
|
|
|
1,705
|
|
Net loans
|
$
|
116,232
|
|
|
$
|
157,414
|
|
|
$
|
24,501
|
|
|
$
|
22,024
|
|
|
$
|
172,325
|
|
|
$
|
14,042
|
|
|
$
|
—
|
|
|
$
|
137,227
|
|
|
$
|
32,885
|
|
|
$
|
2,661
|
|
|
$
|
679,311
|
|
The following table presents nonaccrual loans by portfolio segment in total and then as a further breakdown by originated or acquired.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Nonaccrual Loans
|
(in thousands)
|
March 31, 2019
|
|
% of Total
|
|
December 31, 2018
|
|
% of Total
|
Commercial & industrial
|
$
|
3,871
|
|
|
44
|
%
|
|
$
|
2,816
|
|
|
52
|
%
|
Owner-occupied CRE
|
2,784
|
|
|
32
|
|
|
673
|
|
|
12
|
|
AG production
|
174
|
|
|
2
|
|
|
—
|
|
|
—
|
|
AG real estate
|
—
|
|
|
—
|
|
|
164
|
|
|
3
|
|
CRE investment
|
333
|
|
|
4
|
|
|
210
|
|
|
4
|
|
Construction & land development
|
80
|
|
|
1
|
|
|
80
|
|
|
1
|
|
Residential construction
|
333
|
|
|
4
|
|
|
1
|
|
|
—
|
|
Residential first mortgage
|
899
|
|
|
10
|
|
|
1,265
|
|
|
23
|
|
Residential junior mortgage
|
250
|
|
|
3
|
|
|
262
|
|
|
5
|
|
Retail & other
|
8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Nonaccrual loans
|
$
|
8,732
|
|
|
100
|
%
|
|
$
|
5,471
|
|
|
100
|
%
|
Percent of total loans
|
0.4
|
%
|
|
|
|
0.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
(in thousands)
|
Originated
Amount
|
|
% of
Total
|
|
Acquired
Amount
|
|
% of
Total
|
|
Originated
Amount
|
|
% of
Total
|
|
Acquired
Amount
|
|
% of
Total
|
Commercial & industrial
|
$
|
1,342
|
|
|
30
|
%
|
|
$
|
2,529
|
|
|
59
|
%
|
|
$
|
352
|
|
|
25
|
%
|
|
$
|
2,464
|
|
|
61
|
%
|
Owner-occupied CRE
|
1,931
|
|
|
43
|
|
|
853
|
|
|
20
|
|
|
362
|
|
|
26
|
|
|
311
|
|
|
8
|
|
AG production
|
174
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
AG real estate
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
164
|
|
|
4
|
|
CRE investment
|
—
|
|
|
—
|
|
|
333
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
210
|
|
|
5
|
|
Construction & land development
|
—
|
|
|
—
|
|
|
80
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
80
|
|
|
2
|
|
Residential construction
|
333
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Residential first mortgage
|
621
|
|
|
14
|
|
|
278
|
|
|
7
|
|
|
629
|
|
|
45
|
|
|
636
|
|
|
15
|
|
Residential junior mortgage
|
64
|
|
|
1
|
|
|
186
|
|
|
4
|
|
|
65
|
|
|
4
|
|
|
197
|
|
|
5
|
|
Retail & other
|
—
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Nonaccrual loans
|
$
|
4,465
|
|
|
100
|
%
|
|
$
|
4,267
|
|
|
100
|
%
|
|
$
|
1,409
|
|
|
100
|
%
|
|
$
|
4,062
|
|
|
100
|
%
|
Percent of nonaccrual loans
|
51
|
%
|
|
|
|
49
|
%
|
|
|
|
26
|
%
|
|
|
|
74
|
%
|
|
|
The following tables present past due loans by portfolio segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
(in thousands)
|
30-89 Days Past
Due (accruing)
|
|
90 Days & Over or nonaccrual
|
|
Current
|
|
Total
|
Commercial & industrial
|
$
|
498
|
|
|
$
|
3,871
|
|
|
$
|
707,136
|
|
|
$
|
711,505
|
|
Owner-occupied CRE
|
—
|
|
|
2,784
|
|
|
436,656
|
|
|
439,440
|
|
AG production
|
989
|
|
|
174
|
|
|
33,980
|
|
|
35,143
|
|
AG real estate
|
—
|
|
|
—
|
|
|
53,935
|
|
|
53,935
|
|
CRE investment
|
—
|
|
|
333
|
|
|
342,010
|
|
|
342,343
|
|
Construction & land development
|
35
|
|
|
80
|
|
|
82,193
|
|
|
82,308
|
|
Residential construction
|
451
|
|
|
333
|
|
|
33,641
|
|
|
34,425
|
|
Residential first mortgage
|
1,283
|
|
|
899
|
|
|
348,479
|
|
|
350,661
|
|
Residential junior mortgage
|
69
|
|
|
250
|
|
|
113,309
|
|
|
113,628
|
|
Retail & other
|
79
|
|
|
8
|
|
|
26,213
|
|
|
26,300
|
|
Total loans
|
$
|
3,404
|
|
|
$
|
8,732
|
|
|
$
|
2,177,552
|
|
|
$
|
2,189,688
|
|
Percent of total loans
|
0.2
|
%
|
|
0.4
|
%
|
|
99.4
|
%
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
(in thousands)
|
30-89 Days Past
Due (accruing)
|
|
90 Days & Over or nonaccrual
|
|
Current
|
|
Total
|
Commercial & industrial
|
$
|
—
|
|
|
$
|
2,816
|
|
|
$
|
682,104
|
|
|
$
|
684,920
|
|
Owner-occupied CRE
|
557
|
|
|
673
|
|
|
440,123
|
|
|
441,353
|
|
AG production
|
19
|
|
|
—
|
|
|
35,606
|
|
|
35,625
|
|
AG real estate
|
35
|
|
|
164
|
|
|
53,245
|
|
|
53,444
|
|
CRE investment
|
180
|
|
|
210
|
|
|
343,262
|
|
|
343,652
|
|
Construction & land development
|
—
|
|
|
80
|
|
|
80,519
|
|
|
80,599
|
|
Residential construction
|
—
|
|
|
1
|
|
|
30,925
|
|
|
30,926
|
|
Residential first mortgage
|
758
|
|
|
1,265
|
|
|
355,818
|
|
|
357,841
|
|
Residential junior mortgage
|
12
|
|
|
262
|
|
|
111,054
|
|
|
111,328
|
|
Retail & other
|
10
|
|
|
—
|
|
|
26,483
|
|
|
26,493
|
|
Total loans
|
$
|
1,571
|
|
|
$
|
5,471
|
|
|
$
|
2,159,139
|
|
|
$
|
2,166,181
|
|
Percent of total loans
|
0.1
|
%
|
|
0.2
|
%
|
|
99.7
|
%
|
|
100.0
|
%
|
A description of the loan risk categories used by the Company follows.
Grades 1-4, Pass: Credits exhibit adequate cash flows, appropriate management and financial ratios within industry norms and/or are supported by sufficient collateral. Some credits in these rating categories may require a need for monitoring but elements of concern are not severe enough to warrant an elevated rating.
Grade 5, Watch: Credits with this rating are adequately secured and performing but are being monitored due to the presence of various short-term weaknesses which may include unexpected, short-term adverse financial performance, managerial problems, potential impact of a decline in the entire industry or local economy and delinquency issues. Loans to individuals or loans supported by guarantors with marginal net worth or collateral may be included in this rating category.
Grade 6, Special Mention: Credits with this rating have potential weaknesses that, without the Company’s attention and correction may result in deterioration of repayment prospects. These assets are considered Criticized Assets. Potential weaknesses may include adverse financial trends for the borrower or industry, repeated lack of compliance with Company requests, increasing debt to net worth, serious management conditions and decreasing cash flow.
Grade 7, Substandard: Assets with this rating are characterized by the distinct possibility the Company will sustain some loss if deficiencies are not corrected. All foreclosures, liquidations, and nonaccrual loans are considered to be categorized in this rating, regardless of collateral sufficiency.
Grade 8, Doubtful: Assets with this rating exhibit all the weaknesses as one rated Substandard with the added characteristic that such weaknesses make collection or liquidation in full highly questionable.
Grade 9, Loss: Assets in this category are considered uncollectible. Pursuing any recovery or salvage value is impractical but does not preclude partial recovery in the future.
The following tables present total loans by risk categories.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
(in thousands)
|
Grades 1- 4
|
|
Grade 5
|
|
Grade 6
|
|
Grade 7
|
|
Grade 8
|
|
Grade 9
|
|
Total
|
Commercial & industrial
|
$
|
670,243
|
|
|
$
|
22,283
|
|
|
$
|
3,002
|
|
|
$
|
15,977
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
711,505
|
|
Owner-occupied CRE
|
400,918
|
|
|
25,455
|
|
|
1,471
|
|
|
11,596
|
|
|
—
|
|
|
—
|
|
|
439,440
|
|
AG production
|
26,346
|
|
|
4,338
|
|
|
1,286
|
|
|
3,173
|
|
|
—
|
|
|
—
|
|
|
35,143
|
|
AG real estate
|
44,550
|
|
|
3,744
|
|
|
2,104
|
|
|
3,537
|
|
|
—
|
|
|
—
|
|
|
53,935
|
|
CRE investment
|
331,733
|
|
|
7,914
|
|
|
865
|
|
|
1,831
|
|
|
—
|
|
|
—
|
|
|
342,343
|
|
Construction & land development
|
82,212
|
|
|
—
|
|
|
16
|
|
|
80
|
|
|
—
|
|
|
—
|
|
|
82,308
|
|
Residential construction
|
34,425
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
34,425
|
|
Residential first mortgage
|
346,418
|
|
|
1,444
|
|
|
745
|
|
|
2,054
|
|
|
—
|
|
|
—
|
|
|
350,661
|
|
Residential junior mortgage
|
113,351
|
|
|
17
|
|
|
—
|
|
|
260
|
|
|
—
|
|
|
—
|
|
|
113,628
|
|
Retail & other
|
26,300
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
26,300
|
|
Total loans
|
$
|
2,076,496
|
|
|
$
|
65,195
|
|
|
$
|
9,489
|
|
|
$
|
38,508
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,189,688
|
|
Percent of total
|
94.8
|
%
|
|
3.0
|
%
|
|
0.4
|
%
|
|
1.8
|
%
|
|
—
|
|
|
—
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
(in thousands)
|
Grades 1- 4
|
|
Grade 5
|
|
Grade 6
|
|
Grade 7
|
|
Grade 8
|
|
Grade 9
|
|
Total
|
Commercial & industrial
|
$
|
649,475
|
|
|
$
|
16,145
|
|
|
$
|
6,178
|
|
|
$
|
13,122
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
684,920
|
|
Owner-occupied CRE
|
405,198
|
|
|
22,776
|
|
|
6,569
|
|
|
6,810
|
|
|
—
|
|
|
—
|
|
|
441,353
|
|
AG production
|
29,363
|
|
|
3,302
|
|
|
2,351
|
|
|
609
|
|
|
—
|
|
|
—
|
|
|
35,625
|
|
AG real estate
|
46,248
|
|
|
3,246
|
|
|
2,983
|
|
|
967
|
|
|
—
|
|
|
—
|
|
|
53,444
|
|
CRE investment
|
334,080
|
|
|
6,792
|
|
|
—
|
|
|
2,780
|
|
|
—
|
|
|
—
|
|
|
343,652
|
|
Construction & land development
|
75,365
|
|
|
5,138
|
|
|
16
|
|
|
80
|
|
|
—
|
|
|
—
|
|
|
80,599
|
|
Residential construction
|
30,926
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
30,926
|
|
Residential first mortgage
|
353,239
|
|
|
1,406
|
|
|
510
|
|
|
2,686
|
|
|
—
|
|
|
—
|
|
|
357,841
|
|
Residential junior mortgage
|
111,037
|
|
|
17
|
|
|
—
|
|
|
274
|
|
|
—
|
|
|
—
|
|
|
111,328
|
|
Retail & other
|
26,493
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
26,493
|
|
Total loans
|
$
|
2,061,424
|
|
|
$
|
58,822
|
|
|
$
|
18,607
|
|
|
$
|
27,328
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,166,181
|
|
Percent of total
|
95.1
|
%
|
|
2.7
|
%
|
|
0.9
|
%
|
|
1.3
|
%
|
|
—
|
|
|
—
|
|
|
100.0
|
%
|
The following tables present impaired loans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Impaired Loans – March 31, 2019
|
(in thousands)
|
Recorded
Investment
|
|
Unpaid Principal
Balance
|
|
Related
Allowance
|
|
Average Recorded
Investment
|
|
Interest Income
Recognized
|
Commercial & industrial
|
$
|
3,973
|
|
|
$
|
8,622
|
|
|
$
|
—
|
|
|
$
|
3,952
|
|
|
$
|
840
|
|
Owner-occupied CRE
|
3,041
|
|
|
3,516
|
|
|
—
|
|
|
3,069
|
|
|
148
|
|
AG production
|
1,100
|
|
|
1,101
|
|
|
152
|
|
|
1,100
|
|
|
1
|
|
AG real estate
|
950
|
|
|
950
|
|
|
—
|
|
|
951
|
|
|
—
|
|
CRE investment
|
1,670
|
|
|
2,649
|
|
|
—
|
|
|
1,678
|
|
|
181
|
|
Construction & land development
|
578
|
|
|
1,545
|
|
|
—
|
|
|
590
|
|
|
64
|
|
Residential construction
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Residential first mortgage
|
2,675
|
|
|
2,836
|
|
|
—
|
|
|
2,692
|
|
|
69
|
|
Residential junior mortgage
|
230
|
|
|
240
|
|
|
—
|
|
|
231
|
|
|
2
|
|
Retail & other
|
12
|
|
|
12
|
|
|
—
|
|
|
12
|
|
|
—
|
|
Total
|
$
|
14,229
|
|
|
$
|
21,471
|
|
|
$
|
152
|
|
|
$
|
14,275
|
|
|
$
|
1,305
|
|
Originated impaired loans
|
$
|
5,093
|
|
|
$
|
5,157
|
|
|
$
|
152
|
|
|
$
|
5,114
|
|
|
$
|
56
|
|
Acquired impaired loans
|
9,136
|
|
|
16,314
|
|
|
—
|
|
|
9,161
|
|
|
1,249
|
|
Total
|
$
|
14,229
|
|
|
$
|
21,471
|
|
|
$
|
152
|
|
|
$
|
14,275
|
|
|
$
|
1,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Impaired Loans – December 31, 2018
|
(in thousands)
|
Recorded
Investment
|
|
Unpaid Principal
Balance
|
|
Related
Allowance
|
|
Average Recorded
Investment
|
|
Interest Income
Recognized
|
Commercial & industrial
|
$
|
2,927
|
|
|
$
|
6,736
|
|
|
$
|
—
|
|
|
$
|
4,041
|
|
|
$
|
660
|
|
Owner-occupied CRE
|
1,506
|
|
|
1,833
|
|
|
—
|
|
|
1,659
|
|
|
137
|
|
AG production
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
AG real estate
|
222
|
|
|
281
|
|
|
—
|
|
|
238
|
|
|
26
|
|
CRE investment
|
1,686
|
|
|
2,484
|
|
|
—
|
|
|
1,606
|
|
|
163
|
|
Construction & land development
|
603
|
|
|
1,506
|
|
|
—
|
|
|
603
|
|
|
21
|
|
Residential construction
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Residential first mortgage
|
2,750
|
|
|
2,907
|
|
|
—
|
|
|
2,478
|
|
|
176
|
|
Residential junior mortgage
|
233
|
|
|
262
|
|
|
—
|
|
|
62
|
|
|
15
|
|
Retail & other
|
12
|
|
|
12
|
|
|
—
|
|
|
12
|
|
|
1
|
|
Total
|
$
|
9,939
|
|
|
$
|
16,021
|
|
|
$
|
—
|
|
|
$
|
10,699
|
|
|
$
|
1,199
|
|
Originated impaired loans
|
$
|
548
|
|
|
$
|
548
|
|
|
$
|
—
|
|
|
$
|
899
|
|
|
$
|
154
|
|
Acquired impaired loans
|
9,391
|
|
|
15,473
|
|
|
—
|
|
|
9,800
|
|
|
1,045
|
|
Total
|
$
|
9,939
|
|
|
$
|
16,021
|
|
|
$
|
—
|
|
|
$
|
10,699
|
|
|
$
|
1,199
|
|
Total purchased credit impaired loans (in aggregate since the Company’s 2013 acquisitions) were initially recorded at a fair value of
$43.6 million
on their respective acquisition dates, net of an initial
$34.4 million
nonaccretable mark and a
zero
accretable mark. At
March 31, 2019
,
$9.1 million
of the
$43.6 million
remain in impaired loans.
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccretable discount on purchased credit impaired loans:
|
Three Months Ended
|
|
Year Ended
|
(in thousands)
|
March 31, 2019
|
|
March 31, 2018
|
|
December 31, 2018
|
Balance at beginning of period
|
$
|
6,408
|
|
|
$
|
9,471
|
|
|
$
|
9,471
|
|
Accretion to loan interest income
|
(221
|
)
|
|
(1,544
|
)
|
|
(1,976
|
)
|
Transferred to accretable
|
—
|
|
|
(55
|
)
|
|
(990
|
)
|
Disposals of loans
|
—
|
|
|
—
|
|
|
(97
|
)
|
Balance at end of period
|
$
|
6,187
|
|
|
$
|
7,872
|
|
|
$
|
6,408
|
|
Troubled Debt Restructurings
At
March 31, 2019
, there were
ten
loans classified as troubled debt restructurings with a current outstanding balance of
$3.9 million
(including performing TDRs of
$0.5 million
and the remainder on nonaccrual) and pre-modification balance of
$4.5 million
. In comparison, at
December 31, 2018
, there were
four
loans classified as troubled debt restructurings with an outstanding balance of
$0.6 million
and pre-modification balance of
$2.7 million
. There were no loans classified as troubled debt restructurings during the previous twelve months that subsequently defaulted during the
three months ended
March 31, 2019
. As of
March 31, 2019
, there were no commitments to lend additional funds to debtors whose terms have been modified in troubled debt restructurings.
Note
6
–
Goodwill and Other Intangibles and Mortgage Servicing Rights
Management periodically reviews the carrying value of its intangible assets to determine if any impairment has occurred, in which case an impairment charge would be recorded as an expense in the period of impairment, or whether changes in circumstances have occurred that would require a revision to the remaining useful life which would impact expense prospectively. In making such determination, management evaluates whether there are any adverse qualitative factors indicating that an impairment may exist, as well as the performance, on an undiscounted basis, of the underlying operations or assets which give rise to the intangible. The Company’s quarterly assessment indicated no impairment charge on goodwill, core deposit intangibles or customer list intangibles was required for the year ended
December 31, 2018
or the
three months ended
March 31, 2019
. A summary of goodwill and other intangibles was as follows.
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Year Ended
|
(in thousands)
|
March 31, 2019
|
|
December 31, 2018
|
Goodwill
|
$
|
107,366
|
|
|
$
|
107,366
|
|
Core deposit intangibles
|
11,636
|
|
|
12,562
|
|
Customer list intangibles
|
4,252
|
|
|
4,379
|
|
Other intangibles
|
15,888
|
|
|
16,941
|
|
Goodwill and other intangibles, net
|
$
|
123,254
|
|
|
$
|
124,307
|
|
Goodwill
: Goodwill was
$107.4 million
at both
March 31, 2019
and
December 31, 2018
.
Other intangible assets
: Other intangible assets, consisting of core deposit intangibles and customer list intangibles, are amortized over their estimated finite lives.
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Year Ended
|
(in thousands)
|
March 31, 2019
|
|
December 31, 2018
|
Core deposit intangibles:
|
|
|
|
Gross carrying amount
|
$
|
29,015
|
|
|
$
|
29,015
|
|
Accumulated amortization
|
(17,379
|
)
|
|
(16,453
|
)
|
Net book value
|
$
|
11,636
|
|
|
$
|
12,562
|
|
Additions during the period
|
$
|
—
|
|
|
$
|
—
|
|
Amortization during the period
|
$
|
926
|
|
|
$
|
3,915
|
|
Customer list intangibles:
|
|
|
|
Gross carrying amount
|
$
|
5,523
|
|
|
$
|
5,523
|
|
Accumulated amortization
|
(1,271
|
)
|
|
(1,144
|
)
|
Net book value
|
$
|
4,252
|
|
|
$
|
4,379
|
|
Additions during the period
|
$
|
—
|
|
|
$
|
290
|
|
Amortization during the period
|
$
|
127
|
|
|
$
|
474
|
|
Mortgage servicing rights
: Mortgage servicing rights are amortized in proportion to and over the period of estimated net servicing income, and assessed for impairment at each reporting date, with the amortization recorded in mortgage income, net, in the consolidated statements of income. Mortgage servicing rights are carried at the lower of the initial capitalized amount, net of accumulated amortization, or estimated fair value, and are included in other assets in the consolidated balance sheets. A summary of the changes in the mortgage servicing rights asset was as follows.
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Year Ended
|
(in thousands)
|
March 31, 2019
|
|
December 31, 2018
|
Mortgage servicing rights ("MSR") asset:
|
|
|
|
MSR asset at beginning of year
|
$
|
3,749
|
|
|
$
|
3,187
|
|
Capitalized MSR
|
319
|
|
|
1,203
|
|
Amortization during the period
|
(188
|
)
|
|
(641
|
)
|
MSR asset at end of period
|
$
|
3,880
|
|
|
$
|
3,749
|
|
Fair value of MSR asset at end of period
|
$
|
6,471
|
|
|
$
|
6,347
|
|
Residential mortgage loans serviced for others
|
$
|
620,653
|
|
|
$
|
603,446
|
|
Net book value of MSR asset to loans serviced for others
|
0.63
|
%
|
|
0.62
|
%
|
The Company periodically evaluates its mortgage servicing rights asset for impairment. At each reporting date, impairment is assessed based on estimated fair value using estimated prepayment speeds of the underlying mortgage loans serviced and stratifications based on the risk characteristics of the underlying loans (predominantly loan type and note interest rate). No valuation allowance or impairment charge was recorded for the year ended
December 31, 2018
or the
three months ended
March 31, 2019
. See Note
8
for additional information on the fair value of the MSR asset.
The following table shows the estimated future amortization expense for amortizing intangible assets and the MSR asset. The projections are based on existing asset balances, the current interest rate environment and prepayment speeds as of
March 31, 2019
. The actual amortization expense the Company recognizes in any given period may be significantly different depending upon acquisition or sale activities, changes in interest rates, prepayment speeds, market conditions, regulatory requirements and events or circumstances that indicate the carrying amount of an asset may not be recoverable.
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
Core deposit
intangibles
|
|
Customer list
intangibles
|
|
MSR asset
|
Year ending December 31,
|
|
|
|
|
|
2019 (remaining nine months)
|
$
|
2,411
|
|
|
$
|
380
|
|
|
$
|
548
|
|
2020
|
2,657
|
|
|
507
|
|
|
714
|
|
2021
|
2,167
|
|
|
507
|
|
|
564
|
|
2022
|
1,735
|
|
|
507
|
|
|
564
|
|
2023
|
1,273
|
|
|
483
|
|
|
451
|
|
2024
|
841
|
|
|
449
|
|
|
276
|
|
Thereafter
|
552
|
|
|
1,419
|
|
|
763
|
|
Total
|
$
|
11,636
|
|
|
$
|
4,252
|
|
|
$
|
3,880
|
|
Note
7
–
Short and Long-Term Borrowings
Short-Term Borrowings:
The Company did not have any short-term borrowings (borrowing with an original maturity of one year or less) outstanding at
March 31, 2019
or
December 31, 2018
.
Long-Term Borrowings:
The components of long-term borrowings (borrowing with an original maturity greater than one year) were as follows.
|
|
|
|
|
|
|
|
|
(in thousands)
|
March 31, 2019
|
|
December 31, 2018
|
FHLB advances
|
$
|
35,187
|
|
|
$
|
35,252
|
|
Junior subordinated debentures
|
30,216
|
|
|
30,096
|
|
Subordinated notes
|
11,966
|
|
|
11,957
|
|
Total long-term borrowings
|
$
|
77,369
|
|
|
$
|
77,305
|
|
Percent of fixed rate long-term borrowings
|
69
|
%
|
|
69
|
%
|
Percent of floating rate long-term borrowings
|
31
|
%
|
|
31
|
%
|
FHLB Advances
: The FHLB advances bear fixed rates, require interest-only monthly payments, and have maturity dates through 2022. The weighted average rate of the FHLB advances was
1.72%
at both
March 31, 2019
and
December 31, 2018
.
Junior Subordinated Debentures
:
The following table shows the breakdown of junior subordinated debentures. Interest on all debentures is current. Any applicable discounts (initially recorded to carry an acquired debenture at its then estimated fair market value) are being accreted to interest expense over the remaining life of the debentures. All the debentures below are currently callable and may be redeemed in part or in full at par plus any accrued but unpaid interest. At
March 31, 2019
and
December 31, 2018
,
$29.1 million
and
$28.9 million
, respectively, qualify as Tier 1 capital.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Junior Subordinated Debentures
|
(in thousands)
|
|
Maturity
Date
|
|
Par
|
|
3/31/2019
Unamortized
Discount
|
|
3/31/2019
Carrying
Value
|
|
12/31/2018
Carrying
Value
|
2004 Nicolet Bankshares Statutory Trust
(1)
|
|
7/15/2034
|
|
$
|
6,186
|
|
|
$
|
—
|
|
|
$
|
6,186
|
|
|
$
|
6,186
|
|
2005 Mid-Wisconsin Financial Services, Inc.
(2)
|
|
12/15/2035
|
|
10,310
|
|
|
(3,321
|
)
|
|
6,989
|
|
|
6,939
|
|
2006 Baylake Corp.
(3)
|
|
9/30/2036
|
|
16,598
|
|
|
(4,061
|
)
|
|
12,537
|
|
|
12,478
|
|
2004 First Menasha Bancshares, Inc.
(4)
|
|
3/17/2034
|
|
5,155
|
|
|
(651
|
)
|
|
4,504
|
|
|
4,493
|
|
Total
|
|
|
|
$
|
38,249
|
|
|
$
|
(8,033
|
)
|
|
$
|
30,216
|
|
|
$
|
30,096
|
|
|
|
(1)
|
The interest rate is
8.00%
fixed.
|
|
|
(2)
|
The debentures, assumed in April 2013 as the result of an acquisition, have a floating rate of the three-month LIBOR plus
1.43%
, adjusted quarterly. The interest rates were
4.04%
and
4.22%
as of
March 31, 2019
and
December 31, 2018
, respectively.
|
|
|
(3)
|
The debentures, assumed in April 2016 as a result of an acquisition, have a floating rate of the three-month LIBOR plus
1.35%
, adjusted quarterly. The interest rates were
3.94%
and
4.15%
as of
March 31, 2019
and
December 31, 2018
, respectively.
|
|
|
(4)
|
The debentures, assumed in April 2017 as the result of an acquisition, have a floating rate of the three-month LIBOR plus
2.79%
, adjusted quarterly. The interest rates were
5.40%
and
5.58%
as of
March 31, 2019
and
December 31, 2018
, respectively.
|
Subordinated Notes
:
In 2015, the Company placed an aggregate of
$12 million
in subordinated Notes in private placements with certain accredited investors. All Notes were issued with
10
-year maturities, have a fixed annual interest rate of
5%
payable quarterly, are callable on or after the fifth anniversary of their respective issuances dates, and qualify for Tier 2 capital for regulatory purposes.
Note
8
–
Fair Value Measurements
Fair value represents the estimated price at which an orderly transaction to sell an asset or transfer a liability would take place between market participants at the measurement date under current market conditions (i.e., an exit price concept), and is a market-based measurement versus an entity-specific measurement.
The Company records and/or discloses financial instruments on a fair value basis. These financial assets and financial liabilities are measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the observability of the assumptions used to determine fair value. These levels are:
|
|
•
|
Level 1 – quoted market prices in active markets for identical assets or liabilities that a company has the ability to access at the measurement date
|
|
|
•
|
Level 2 – inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly
|
|
|
•
|
Level 3 – significant unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity
|
In instances where the fair value measurement is based on inputs from different levels, the level within which the entire fair value measurement will be categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. This assessment of the significance of an input requires management judgment.
Recurring basis fair value measurements:
The following table presents the balances of assets and liabilities measured at fair value on a recurring basis for the periods presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
Fair Value Measurements Using
|
Measured at Fair Value on a Recurring Basis:
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
March 31, 2019
|
|
|
|
|
|
|
|
|
U.S. government agency securities
|
|
$
|
16,388
|
|
|
$
|
—
|
|
|
$
|
16,388
|
|
|
$
|
—
|
|
State, county and municipals
|
|
157,545
|
|
|
—
|
|
|
157,479
|
|
|
66
|
|
Mortgage-backed securities
|
|
147,511
|
|
|
—
|
|
|
147,511
|
|
|
—
|
|
Corporate debt securities
|
|
86,249
|
|
|
—
|
|
|
78,398
|
|
|
7,851
|
|
Securities AFS
|
|
$
|
407,693
|
|
|
$
|
—
|
|
|
$
|
399,776
|
|
|
$
|
7,917
|
|
Other investments (equity securities)
|
|
$
|
2,809
|
|
|
$
|
2,809
|
|
|
$
|
—
|
|
|
$
|
—
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
U.S. government agency securities
|
|
$
|
21,649
|
|
|
$
|
—
|
|
|
$
|
21,649
|
|
|
$
|
—
|
|
State, county and municipals
|
|
160,526
|
|
|
—
|
|
|
160,460
|
|
|
66
|
|
Mortgage-backed securities
|
|
131,644
|
|
|
—
|
|
|
131,644
|
|
|
—
|
|
Corporate debt securities
|
|
86,325
|
|
|
—
|
|
|
77,901
|
|
|
8,424
|
|
Securities AFS
|
|
$
|
400,144
|
|
|
$
|
—
|
|
|
$
|
391,654
|
|
|
$
|
8,490
|
|
Other investments (equity securities)
|
|
$
|
2,650
|
|
|
$
|
2,650
|
|
|
$
|
—
|
|
|
$
|
—
|
|
The following is a description of the valuation methodologies used by the Company for the securities AFS and equity securities measured at fair value on a recurring basis, noted in the tables above. Where quoted market prices on securities exchanges are available, the investments are classified as Level 1. Level 1 investments primarily include exchange-traded equity securities. If quoted market prices are not available, fair value is generally determined using prices obtained from independent pricing vendors who use pricing models (with typical inputs including benchmark yields, reported trades for similar securities, issuer spreads or relationship to other benchmark quoted securities), or discounted cash flows, and are classified as Level 2. Examples of these investments include U.S. government agency securities, mortgage-backed securities, obligations of state, county and municipals, and certain corporate debt securities. Finally, in certain cases where there is limited activity or less transparency around inputs to the estimated fair value, investments are classified within Level 3 of the hierarchy. Examples of these include private municipal bonds and corporate debt securities, which include trust preferred security investments. At
March 31, 2019
and
December 31, 2018
, it was determined that carrying value was the best approximation of fair value for these Level 3 securities, based primarily on the internal analysis on these securities.
The following table presents the changes in the Level 3 securities AFS measured at fair value on a recurring basis.
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Three Months Ended
|
|
Year Ended
|
Level 3 Fair Value Measurements:
|
|
March 31, 2019
|
|
December 31, 2018
|
Balance at beginning of year
|
|
$
|
8,490
|
|
|
$
|
9,151
|
|
Paydowns/Sales/Settlements
|
|
(573
|
)
|
|
(661
|
)
|
Balance at end of period
|
|
$
|
7,917
|
|
|
$
|
8,490
|
|
Nonrecurring basis fair value measurements:
The following table presents the Company’s assets measured at fair value on a nonrecurring basis, aggregated by level in the fair value hierarchy within which those measurements fall.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
Fair Value Measurements Using
|
Measured at Fair Value on a Nonrecurring Basis:
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
March 31, 2019
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
14,077
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
14,077
|
|
Other real estate owned (“OREO”)
|
|
420
|
|
|
—
|
|
|
—
|
|
|
420
|
|
MSR asset
|
|
6,471
|
|
|
—
|
|
|
—
|
|
|
6,471
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
9,939
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9,939
|
|
OREO
|
|
420
|
|
|
—
|
|
|
—
|
|
|
420
|
|
MSR asset
|
|
6,347
|
|
|
—
|
|
|
—
|
|
|
6,347
|
|
The following is a description of the valuation methodologies used by the Company for the items noted in the table above. For individually evaluated impaired loans, the amount of impairment is based upon the present value of expected future cash flows discounted at the loan’s effective interest rate, the estimated fair value of the underlying collateral for collateral-dependent loans, or the estimated liquidity of the note. For OREO, the fair value is based upon the estimated fair value of the underlying collateral adjusted for the expected costs to sell. To estimate the fair value of the MSR asset, the underlying serviced loan pools are stratified by interest rate tranche and term of the loan, and a valuation model is used to calculate the present value of the expected future cash flows for each stratum. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as costs to service, a discount rate, ancillary income, default rates and losses, and prepayment speeds. Although some of these assumptions are based on observable market data, other assumptions are based on unobservable estimates of what market participants would use to measure fair value.
Financial instruments:
The carrying amounts and estimated fair values of the Company’s financial instruments are shown below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
(in thousands)
|
|
Carrying
Amount
|
|
Estimated
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
154,761
|
|
|
$
|
154,761
|
|
|
$
|
154,761
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Certificates of deposit in other banks
|
|
992
|
|
|
992
|
|
|
—
|
|
|
992
|
|
|
—
|
|
Securities AFS
|
|
407,693
|
|
|
407,693
|
|
|
—
|
|
|
399,776
|
|
|
7,917
|
|
Other investments, including equity securities
|
|
18,219
|
|
|
18,219
|
|
|
2,809
|
|
|
13,227
|
|
|
2,183
|
|
Loans held for sale
|
|
1,831
|
|
|
1,876
|
|
|
—
|
|
|
1,876
|
|
|
—
|
|
Loans, net
|
|
2,176,318
|
|
|
2,169,584
|
|
|
—
|
|
|
—
|
|
|
2,169,584
|
|
BOLI
|
|
66,769
|
|
|
66,769
|
|
|
66,769
|
|
|
—
|
|
|
—
|
|
MSR asset
|
|
3,880
|
|
|
6,471
|
|
|
—
|
|
|
—
|
|
|
6,471
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
2,538,486
|
|
|
$
|
2,539,170
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,539,170
|
|
Long-term borrowings
|
|
77,369
|
|
|
76,340
|
|
|
—
|
|
|
35,189
|
|
|
41,151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
(in thousands)
|
|
Carrying
Amount
|
|
Estimated
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
249,526
|
|
|
$
|
249,526
|
|
|
$
|
249,526
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Certificates of deposit in other banks
|
|
993
|
|
|
993
|
|
|
—
|
|
|
993
|
|
|
—
|
|
Securities AFS
|
|
400,144
|
|
|
400,144
|
|
|
—
|
|
|
391,654
|
|
|
8,490
|
|
Other investments, including equity securities
|
|
17,997
|
|
|
17,997
|
|
|
2,650
|
|
|
13,189
|
|
|
2,158
|
|
Loans held for sale
|
|
1,639
|
|
|
1,662
|
|
|
—
|
|
|
1,662
|
|
|
—
|
|
Loans, net
|
|
2,153,028
|
|
|
2,139,322
|
|
|
—
|
|
|
—
|
|
|
2,139,322
|
|
BOLI
|
|
66,310
|
|
|
66,310
|
|
|
66,310
|
|
|
—
|
|
|
—
|
|
MSR asset
|
|
3,749
|
|
|
6,347
|
|
|
—
|
|
|
—
|
|
|
6,347
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
2,614,138
|
|
|
$
|
2,614,995
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,614,995
|
|
Long-term borrowings
|
|
77,305
|
|
|
75,923
|
|
|
—
|
|
|
34,907
|
|
|
41,016
|
|
The carrying value of certain assets and liabilities such as cash and cash equivalents, BOLI, and nonmaturing deposits, approximate their estimated fair value. For those financial instruments not previously disclosed, the following is a description of the valuation methodologies used.
Certificates of deposits in other banks:
Fair values are estimated using discounted cash flow analysis based on current interest rates being offered by instruments with similar terms and represents a Level 2 measurement.
Other investments:
The valuation methodologies utilized for exchange-traded equity securities are discussed under “Recurring basis fair value measurements” above. The carrying amount of Federal Reserve Bank, Bankers Bank, Federal Agricultural Mortgage Corporation, and FHLB stock is a reasonably accepted fair value estimate given their restricted nature. Fair value is the redeemable (carrying) value based on the redemption provisions of the instruments which is considered a Level 2 measurement. The carrying amount of the remaining other investments (particularly common stocks of companies or other banks that are not publicly traded)
approximates their fair value, determined primarily by analysis of company financial statements and recent capital issuances of the respective companies or banks, if any, and represents a Level 3 measurement.
Loans held for sale:
The fair value estimation process for the loans held for sale portfolio is segregated by loan type. The estimated fair value was based on what secondary markets are currently offering for portfolios with similar characteristics and represents a Level 2 measurement.
Loans, net
: For variable-rate loans that reprice frequently and with no significant change in credit risk or other optionality, fair values are based on carrying values. Fair values for all other loans are estimated by discounting contractual cash flows using estimated market discount rates, which reflect the credit and interest rate risk inherent in the loan. Collateral-dependent impaired loans are included in loans, net. The fair value of loans is considered to be a Level 3 measurement due to internally developed discounted cash flow measurements.
Deposits
: The fair value of deposits with no stated maturity (such as demand deposits, savings, interest and noninterest checking, and money market accounts) is, by definition, equal to the amount payable on demand at the reporting date. Fair values for fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies interest rates currently being offered in the market place on certificates of similar remaining maturities. Use of internal discounted cash flows provides a Level 3 fair value measurement.
Long-term borrowings
: The fair value of the FHLB advances is obtained from the FHLB which uses a discounted cash flow analysis based on current market rates of similar maturity debt securities and represents a Level 2 measurement. The fair values of the junior subordinated debentures and subordinated notes utilize a discounted cash flow analysis based on an estimate of current interest rates being offered by instruments with similar terms and credit quality. Since the market for these instruments is limited, the internal evaluation represents a Level 3 measurement.
Lending-related commitments
: At
March 31, 2019
and
December 31, 2018
, the estimated fair value of letters of credit, interest rate lock commitments on residential mortgage loans, and outstanding mandatory commitments to sell residential mortgage loans into the secondary market were not insignificant.
Limitations
: Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Fair value estimates may not be realizable in an immediate settlement of the instrument. In some instances, there are no quoted market prices for the Company’s various financial instruments, in which case fair values may be based on estimates using present value or other valuation techniques, or based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of the financial instruments, or other factors. Those techniques are significantly affected by the assumptions used, including the discount rate and estimate of future cash flows. Subsequent changes in assumptions could significantly affect the estimates.
Note
9
–
Operating Leases
As of January 1, 2019, the Company adopted ASU 2016-02 (Topic 842) on a prospective basis using the effective date method. The adoption of the new standard did not have a material impact on Nicolet's financial statements; however, additional disclosures have been added in accordance with the ASU. See Note 1 for additional information on this new accounting standard.
The operating lease ROU asset represents the right to use an underlying asset during the lease term, while the operating lease liability represents the obligation to make lease payments arising from the lease. The ROU asset and lease liability are recognized at lease commencement based on the present value of the remaining lease payments, considering a discount rate that represents Nicolet's incremental borrowing rate. Operating lease expense is recognized on a straight-line basis over the lease term and is recognized in occupancy, equipment, and office on the consolidated statements of income.
Nicolet leases space under non-cancelable operating lease agreements for certain bank and nonbank branch facilities with remaining lease terms of
2
to
7
years. Certain lease arrangements contain extension options which typically range from
5
to
10
years at the then fair market rental rates. The lease asset and liability considers renewal options when they are reasonably certain of being exercised.
A summary of net lease cost and selected other information related to operating leases was as follows.
|
|
|
|
|
|
Three Months Ended
|
($ in thousands)
|
March 31, 2019
|
Net lease cost:
|
|
Operating lease cost
|
$
|
281
|
|
Variable lease cost
|
56
|
|
Net lease cost
|
$
|
337
|
|
Selected other operating lease information:
|
|
Weighted average remaining lease term (years)
|
5
|
|
Weighted average discount rate
|
2.5
|
%
|
The following table summarizes the maturity of remaining lease liabilities.
|
|
|
|
|
(in thousands)
|
|
Year ending December 31,
|
|
2019 (remaining nine months)
|
$
|
850
|
|
2020
|
1,129
|
|
2021
|
1,017
|
|
2022
|
961
|
|
2023
|
718
|
|
2024
|
613
|
|
Thereafter
|
151
|
|
Total future minimum lease payments
|
5,439
|
|
Less: amount representing interest
|
(136
|
)
|
Present value of net future minimum lease payments
|
$
|
5,303
|
|