The accompanying notes are an integral part of these
consolidated financial statements.
See accompanying notes to unaudited condensed consolidated financial statements.
See accompanying notes to unaudited condensed consolidated financial statements.
See accompanying notes to unaudited condensed consolidated financial statements.
See accompanying notes to unaudited condensed consolidated financial statements.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Summary of Significant Accounting Policies
Description of Business and Basis of Presentation
TriCo
Bancshares (the Company or we) is a California corporation organized to act as a bank holding company for Tri Counties Bank (the Bank). The Company and the Bank are headquartered in Chico, California. The Bank is
a California-chartered bank that is engaged in the general commercial banking business in 26 California counties. The Bank operates from 58 traditional branches and 10
in-store
branches. The Company has five
capital subsidiary business trusts (collectively, the Capital Trusts) that issued trust preferred securities, including two organized by TriCo and three acquired with the acquisition of North Valley Bancorp. See Note 17 Junior
Subordinated Debt.
The consolidated financial statements are prepared in accordance with accounting policies generally accepted in the United States of
America and general practices in the banking industry. The financial statements include the accounts of the Company. All inter-company accounts and transactions have been eliminated in consolidation. For financial reporting purposes, the
Companys investments in the Capital Trusts of $1,703,000 are accounted for under the equity method and, accordingly, are not consolidated and are included in other assets on the consolidated balance sheet. The subordinated debentures issued
and guaranteed by the Company and held by the Capital Trusts are reflected as debt on the Companys consolidated balance sheet.
Use of Estimates
in the Preparation of Financial Statements
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. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis
for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Significant Group Concentration of Credit Risk
The
Company grants agribusiness, commercial, consumer, and residential loans to customers located throughout the northern San Joaquin Valley, the Sacramento Valley and northern mountain regions of California. The Company has a diversified loan portfolio
within the business segments located in this geographical area. The Company currently classifies all its operation into one business segment that it denotes as community banking.
Cash and Cash Equivalents
For purposes of the
consolidated statements of cash flows, cash and cash equivalents include cash on hand, amounts due from banks, and federal funds sold. Net cash flows are reported for loan and deposit transactions and other borrowings.
Investment Securities
The Company classifies its debt
and marketable equity securities into one of three categories: trading, available for sale or held to maturity. Trading securities are bought and held principally for the purpose of selling in the near term. Held to maturity securities are those
securities which the Company has the ability and intent to hold until maturity. These securities are carried at cost adjusted for amortization of premium and accretion of discount, computed by the effective interest method over their contractual
lives. All other securities not included in trading or held to maturity are classified as available for sale. Available for sale securities are recorded at fair value. Unrealized gains and losses, net of the related tax effect, on available for sale
securities are reported as a separate component of other accumulated comprehensive income in shareholders equity until realized. Premiums and discounts are amortized or accreted over the life of the related investment security as an adjustment
to yield using the effective interest method. Dividend and interest income are recognized when earned. Realized gains and losses are derived from the amortized cost of the security sold. During the three months ended March 31, 2017 and
throughout 2016, the Company did not have any securities classified as trading.
The Company assesses other-than-temporary impairment (OTTI)
based on whether it intends to sell a security or if it is likely that the Company would be required to sell the security before recovery of the amortized cost basis of the investment, which may be maturity. For debt securities, if we intend to sell
the security or it is more likely than not that we will be required to sell the security before recovering its cost basis, the entire impairment loss would be recognized in earnings as an OTTI. If we do not intend to sell the security and it is not
likely that we will be required to sell the security but we do not expect to recover the entire amortized cost basis of the security, only the portion of the impairment loss representing credit losses would be recognized in earnings. The credit loss
on a security is measured as the difference between the amortized cost basis and the present value of the cash flows expected to be collected. Projected cash flows are discounted by the original or current effective interest rate depending on the
nature of the security being measured for potential OTTI. The remaining impairment related to all other factors, the difference between the present value of the cash flows expected to be collected and fair value, is recognized as a charge to other
comprehensive income (OCI). Impairment losses related to all other factors are presented as separate categories within OCI. The accretion of the amount recorded in OCI increases the carrying value of the investment and does not affect
earnings. If there is an indication of additional credit losses the security is
re-evaluated
according to the procedures described above. No OTTI losses were recognized during the three months ended
March 31, 2017 or the year ended December 31, 2016.
Restricted Equity Securities
Restricted equity securities represent the Companys investment in the stock of the Federal Home Loan Bank of San Francisco (FHLB) and are
carried at par value, which reasonably approximates its fair value. While technically these are considered equity securities, there is no market for the FHLB stock. Therefore, the shares are considered as restricted investment securities. Management
periodically evaluates FHLB stock for other-than-temporary impairment. Managements determination of whether these investments are impaired is based on its
6
assessment of the ultimate recoverability of cost rather than by recognizing temporary declines in value. The determination of whether a decline affects the ultimate recoverability of cost is
influenced by criteria such as (1) the significance of any decline in net assets of the FHLB as compared to the capital stock amount for the FHLB and the length of time this situation has persisted, (2) commitments by the FHLB to make
payments required by law or regulation and the level of such payments in relation to the operating performance of the FHLB, (3) the impact of legislative and regulatory changes on institutions and, accordingly, the customer base of the FHLB,
and (4) the liquidity position of the FHLB.
As a member of the FHLB system, the Bank is required to maintain a minimum level of investment in FHLB
stock based on specific percentages of its outstanding mortgages, total assets, or FHLB advances. The Bank may request redemption at par value of any stock in excess of the minimum required investment. Stock redemptions are at the discretion of the
FHLB.
Loans Held for Sale
Loans originated and
intended for sale in the secondary market are carried at the lower of aggregate cost or fair value, as determined by aggregate outstanding commitments from investors of current investor yield requirements. Net unrealized losses are recognized
through a valuation allowance by charges to noninterest income.
Mortgage loans held for sale are generally sold with the mortgage servicing rights
retained by the Company. Gains or losses on the sale of loans that are held for sale are recognized at the time of the sale and determined by the difference between net sale proceeds and the net book value of the loans less the estimated fair value
of any retained mortgage servicing rights.
Loans and Allowance for Loan Losses
Loans originated by the Company, i.e., not purchased or acquired in a business combination, are referred to as originated loans. Originated loans that
management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal amount outstanding, net of deferred loan fees and costs. Loan origination and commitment fees and certain direct loan
origination costs are deferred, and the net amount is amortized as an adjustment of the related loans yield over the actual life of the loan. Originated loans on which the accrual of interest has been discontinued are designated as nonaccrual
loans.
Originated loans are placed in nonaccrual status when reasonable doubt exists as to the full, timely collection of interest or principal, or a
loan becomes contractually past due by 90 days or more with respect to interest or principal and is not well secured and in the process of collection. When an originated loan is placed on nonaccrual status, all interest previously accrued but not
collected is reversed. Income on such loans is then recognized only to the extent that cash is received and where the future collection of principal is probable. Interest accruals are resumed on such loans only when they are brought fully current
with respect to interest and principal and when, in the judgment of Management, the loan is estimated to be fully collectible as to both principal and interest.
An allowance for loan losses for originated loans is established through a provision for loan losses charged to expense. The allowance is maintained at a
level which, in Managements judgment, is adequate to absorb probable incurred credit losses inherent in the loan portfolio as of the balance sheet date. Originated loans and deposit related overdrafts are charged against the allowance for loan
losses when Management believes that the collectability of the principal is unlikely or, with respect to consumer installment loans, according to an established delinquency schedule. The allowance is an amount that Management believes will be
adequate to absorb probable incurred losses inherent in existing loans, based on evaluations of the collectability, impairment and prior loss experience of loans. The evaluations take into consideration such factors as changes in the nature and size
of the portfolio, overall portfolio quality, loan concentrations, specific problem loans, and current economic conditions that may affect the borrowers ability to pay. The Company defines an originated loan as impaired when it is probable the
Company will be unable to collect all amounts due according to the original contractual terms of the loan agreement. Impaired originated loans are measured based on the present value of expected future cash flows discounted at the loans
original effective interest rate. As a practical expedient, impairment may be measured based on the loans observable market price or the fair value of the collateral if the loan is collateral dependent. When the measure of the impaired loan is
less than the recorded investment in the loan, the impairment is recorded through a specific reserve allocation within the allowance for loan losses.
In
situations related to originated loans where, for economic or legal reasons related to a borrowers financial difficulties, the Company grants a concession for other than an insignificant period of time to the borrower that the Company would
not otherwise consider, the related loan is classified as a troubled debt restructuring (TDR). The Company strives to identify borrowers in financial difficulty early and work with them to modify to more affordable terms before their loan reaches
nonaccrual status. These modified terms may include rate reductions, principal forgiveness, payment forbearance and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. In cases where the
Company grants the borrower new terms that result in the loan being classified as a TDR, the Company measures any impairment on the restructuring as noted above for impaired loans. TDR loans are classified as impaired until they are fully paid off
or charged off. Loans that are in nonaccrual status at the time they become TDR loans, remain in nonaccrual status until the borrower demonstrates a sustained period of performance which the Company generally believes to be six consecutive months of
payments, or equivalent. Otherwise, TDR loans are subject to the same nonaccrual and
charge-off
policies as noted above with respect to their restructured principal balance.
Credit risk is inherent in the business of lending. As a result, the Company maintains an allowance for loan losses to absorb probable incurred losses
inherent in the Companys originated loan portfolio. This is maintained through periodic charges to earnings. These charges are included in the Consolidated Statements of Income as provision for loan losses. All specifically identifiable and
quantifiable losses are immediately charged off against the allowance. However, for a variety of reasons, not all losses are immediately known to the Company and, of those that are known, the full extent of the loss may not be quantifiable at that
point in time. The balance of the Companys allowance for originated loan losses is meant to be an estimate of these probable incurred losses inherent in the portfolio.
7
The Company formally assesses the adequacy of the allowance for originated loan losses on a quarterly basis.
Determination of the adequacy is based on ongoing assessments of the probable risk in the outstanding originated loan portfolio, and to a lesser extent the Companys originated loan commitments. These assessments include the periodic
re-grading
of credits based on changes in their individual credit characteristics including delinquency, seasoning, recent financial performance of the borrower, economic factors, changes in the interest rate
environment, growth of the portfolio as a whole or by segment, and other factors as warranted. Loans are initially graded when originated. They are
re-graded
as they are renewed, when there is a new loan to
the same borrower, when identified facts demonstrate heightened risk of nonpayment, or if they become delinquent.
Re-grading
of larger problem loans occurs at least quarterly. Confirmation of the quality of
the grading process is obtained by independent credit reviews conducted by consultants specifically hired for this purpose and by various bank regulatory agencies.
The Companys method for assessing the appropriateness of the allowance for originated loan losses includes specific allowances for impaired originated
loans, formula allowance factors for pools of credits, and allowances for changing environmental factors (e.g., interest rates, growth, economic conditions, etc.). Allowance factors for loan pools were based on historical loss experience by product
type and prior risk rating.
Loans purchased or acquired in a business combination are referred to as acquired loans. Acquired loans are valued as of the
acquisition date in accordance with Financial Accounting Standards Board Accounting Standards Codification (FASB ASC) Topic 805,
Business Combinations
. Loans acquired with evidence of credit deterioration since origination for
which it is probable that all contractually required payments will not be collected are referred to as purchased credit impaired (PCI) loans. PCI loans are accounted for under FASB ASC Topic
310-30,
Loans
and Debt Securities Acquired with Deteriorated Credit Quality
. Under FASB ASC Topic 805 and FASB ASC Topic
310-30,
PCI loans are recorded at fair value at acquisition date, factoring in credit losses
expected to be incurred over the life of the loan. Accordingly, an allowance for loan losses is not carried over or recorded as of the acquisition date. Fair value is defined as the present value of the future estimated principal and interest
payments of the loan, with the discount rate used in the present value calculation representing the estimated effective yield of the loan. Default rates, loss severity, and prepayment speed assumptions are periodically reassessed and our estimate of
future payments is adjusted accordingly. The difference between contractual future payments and estimated future payments is referred to as the nonaccretable difference. The difference between estimated future payments and the present value of the
estimated future payments is referred to as the accretable yield. The accretable yield represents the amount that is expected to be recorded as interest income over the remaining life of the loan. If after acquisition, the Company determines that
the estimated future cash flows of a PCI loan are expected to be more than originally estimated, an increase in the discount rate (effective yield) would be made such that the newly increased accretable yield would be recognized, on a level yield
basis, over the remaining estimated life of the loan. If, thereafter, the Company determines that the estimated future cash flows of a PCI loan are expected to be less than previously estimated, an allowance for loan loss would be established
through a provision for loan losses charged to expense to decrease the present value to the required level. If the estimated cash flows improve after an allowance has been established for a loan, the allowance may be partially or fully reversed
depending on the improvement in the estimated cash flows. Only after the allowance has been fully reversed may the discount rate be increased. PCI loans are put on nonaccrual status when cash flows cannot be reasonably estimated. PCI loans on
nonaccrual status are accounted for using the cost recovery method or cash basis method of income recognition. The Company refers to PCI loans on nonaccrual status that are accounted for using the cash basis method of income recognition as PCI
cash basis loans; and the Company refers to all other PCI loans as PCI other loans PCI loans are charged off when evidence suggests cash flows are not recoverable. Foreclosed assets from PCI loans are recorded in
foreclosed assets at fair value with the fair value at time of foreclosure representing cash flow from the loan. ASC
310-30
allows PCI loans with similar risk characteristics and acquisition time frame to be
pooled and have their cash flows aggregated as if they were one loan. The Company elected to use the pooled method of ASC
310-30
for PCI other loans in the acquisition of certain
assets and liabilities of Granite Community Bank, N.A. (Granite) during 2010 and Citizens Bank of Northern California (Citizens) during 2011.
Acquired loans that are not PCI loans are referred to as purchased not credit impaired (PNCI) loans. PNCI loans are accounted for under FASB ASC Topic
310-20,
Receivables Nonrefundable Fees and Other Costs,
in which interest income is accrued on a level-yield basis for performing loans. For income recognition purposes, this method assumes that all
contractual cash flows will be collected, and no allowance for loan losses is established at the time of acquisition. Post-acquisition date, an allowance for loan losses may need to be established for acquired loans through a provision charged to
earnings for credit losses incurred subsequent to acquisition. Under ASC
310-20,
the loss would be measured based on the probable shortfall in relation to the contractual note requirements, consistent with our
allowance for loan loss policy for similar loans.
Throughout these financial statements, and in particular in Note 4 and Note 5, when we refer to
Loans or Allowance for loan losses we mean all categories of loans, including Originated, PNCI, PCI cash basis, and PCI - other. When we are not referring to all categories of loans, we will indicate which we are
referring to Originated, PNCI, PCI cash basis, or PCI - other.
When referring to PNCI and PCI loans we use the terms nonaccretable
difference, accretable yield, or purchase discount. Nonaccretable difference is the difference between undiscounted contractual cash flows due and undiscounted cash flows we expect to collect, or put another way, it is
the undiscounted contractual cash flows we do not expect to collect. Accretable yield is the difference between undiscounted cash flows we expect to collect and the value at which we have recorded the loan on our financial statements. On the date of
acquisition, all purchased loans are recorded on our consolidated financial statements at estimated fair value. Purchase discount is the difference between the estimated fair value of loans on the date of acquisition and the principal amount owed by
the borrower, net of charge offs, on the date of acquisition. We may also refer to discounts to principal balance of loans owed, net of charge-offs. Discounts to principal balance of loans owed, net of charge-offs is the difference
between principal balance of loans owed, net of charge-offs, and loans as recorded on our financial statements. Discounts to principal balance of loans owed, net of charge-offs arise from purchase discounts, and equal the purchase discount on the
acquisition date.
Loans are also categorized as covered or noncovered. Covered loans refer to loans covered by a Federal Deposit
Insurance Corporation (FDIC) loss sharing agreement. Noncovered loans refer to loans not covered by a FDIC loss sharing agreement.
8
Foreclosed Assets
Foreclosed assets include assets acquired through, or in lieu of, loan foreclosure. Foreclosed assets are held for sale and are initially recorded at fair
value less estimated costs to sell at the date of foreclosure, establishing a new cost basis. Physical possession of residential real estate property collateralizing a consumer mortgage loan occurs when legal title is obtained upon completion of
foreclosure or when the borrower conveys all interest in the property to satisfy the loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Any write-downs based on the assets fair value less costs to
sell at the date of acquisition are charged to the allowance for loan and lease losses. Any recoveries based on the assets fair value less estimated costs to sell in excess of the recorded value of the loan at the date of acquisition are
recorded to the allowance for loan and lease losses. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through
expense. Operating costs after acquisition are expensed. Revenue and expenses from operations and changes in the valuation allowance are included in other noninterest expense. Gain or loss on sale of foreclosed assets is included in noninterest
income. Foreclosed assets that are not subject to a FDIC loss-share agreement are referred to as noncovered foreclosed assets.
Foreclosed assets acquired
through FDIC-assisted acquisitions that are subject to a FDIC loss-share agreement, and all assets acquired via foreclosure of covered loans are referred to as covered foreclosed assets. Covered foreclosed assets are reported exclusive of expected
reimbursement cash flows from the FDIC. Foreclosed covered loan collateral is transferred into covered foreclosed assets at the loans carrying value, inclusive of the acquisition date fair value discount.
Covered foreclosed assets are initially recorded at estimated fair value less estimated costs to sell on the acquisition date based on similar market
comparable valuations less estimated selling costs. Any subsequent valuation adjustments due to declines in fair value will be charged to noninterest expense, and will be mostly offset by noninterest income representing the corresponding increase to
the FDIC indemnification asset for the offsetting loss reimbursement amount. Any recoveries of previous valuation adjustments will be credited to noninterest expense with a corresponding charge to noninterest income for the portion of the recovery
that is due to the FDIC.
Premises and Equipment
Land is carried at cost. Land improvements, buildings and equipment, including those acquired under capital lease, are stated at cost less accumulated
depreciation and amortization. Depreciation and amortization expenses are computed using the straight-line method over the shorter of the estimated useful lives of the related assets or lease terms. Asset lives range from
3-10
years for furniture and equipment and
15-40
years for land improvements and buildings.
Goodwill and Other Intangible Assets
Goodwill represents
the excess of costs over fair value of net assets of businesses acquired. Goodwill and other intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but instead tested for
impairment at least annually. Intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment.
The Company has an identifiable intangible asset consisting of core deposit intangibles (CDI). CDI are amortized over their respective estimated useful lives,
and reviewed for impairment.
Impairment of Long-Lived Assets and Goodwill
Long-lived assets, such as premises and equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to
be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be
disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposed group classified as held for
sale would be presented separately in the appropriate asset and liability sections of the consolidated balance sheet.
As of December 31 of each
year, goodwill is tested for impairment, and is tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the
assets fair value. This determination is made at the reporting unit level. The Company may choose to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely
than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, the Company determines it is not more likely than not that the fair value of a reporting unit is less
than its carrying amount, then goodwill is deemed not to be impaired. However, if the Company concludes otherwise, or if the Company elected not to first assess qualitative factors, then the Company performs the first step of a
two-step
impairment test by calculating the fair value of the reporting unit and comparing the fair value with the carrying amount of the reporting unit. Second, if the carrying amount of the reporting unit exceeds
its fair value, an impairment loss is recognized for any excess of the carrying amount of the reporting units goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value
of the reporting unit in a manner similar to a purchase price allocation. The residual fair value after this allocation is the implied fair value of the reporting unit goodwill. Currently, and historically, the Company is comprised of only one
reporting unit that operates within the business segment it has identified as community banking. Goodwill was not impaired as of December 31, 2016 because the fair value of the reporting unit exceeded its carrying value.
Mortgage Servicing Rights
Mortgage servicing rights
(MSR) represent the Companys right to a future stream of cash flows based upon the contractual servicing fee associated with servicing mortgage loans. Our MSR arise from residential and commercial mortgage loans that we originate and sell, but
9
retain the right to service the loans. The net gain from the retention of the servicing right is included in gain on sale of loans in noninterest income when the loan is sold. Fair value is based
on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model incorporates assumptions
that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses. Servicing
fees are recorded in noninterest income when earned.
The Company accounts for MSR at fair value. The determination of fair value of our MSR requires
management judgment because they are not actively traded. The determination of fair value for MSR requires valuation processes which combine the use of discounted cash flow models and extensive analysis of current market data to arrive at an
estimate of fair value. The cash flow and prepayment assumptions used in our discounted cash flow model are based on empirical data drawn from the historical performance of our MSR, which we believe are consistent with assumptions used by market
participants valuing similar MSR, and from data obtained on the performance of similar MSR. The key assumptions used in the valuation of MSR include mortgage prepayment speeds and the discount rate. These variables can, and generally will, change
from quarter to quarter as market conditions and projected interest rates change. The key risks inherent with MSR are prepayment speed and changes in interest rates. The Company uses an independent third party to determine fair value of MSR.
Indemnification Asset/Liability
The Company accounts for
amounts receivable or payable under its loss-share agreements entered into with the FDIC in connection with its purchase and assumption of certain assets and liabilities of Granite as indemnification assets in accordance with FASB ASC Topic 805,
Business Combinations
. FDIC indemnification assets are initially recorded at fair value, based on the discounted value of expected future cash flows under the loss-share agreements. The difference between the fair value and the undiscounted
cash flows the Company expects to collect from or pay to the FDIC will be accreted into noninterest income over the life of the FDIC indemnification asset. FDIC indemnification assets are reviewed quarterly and adjusted for any changes in expected
cash flows based on recent performance and expectations for future performance of the covered portfolios. These adjustments are measured on the same basis as the related covered loans and covered other real estate owned. Any increases in cash flow
of the covered assets over those expected will reduce the FDIC indemnification asset and any decreases in cash flow of the covered assets under those expected will increase the FDIC indemnification asset. Increases and decreases to the FDIC
indemnification asset are recorded as adjustments to noninterest income.
Reserve for Unfunded Commitments
The reserve for unfunded commitments is established through a provision for losses unfunded commitments charged to noninterest expense. The reserve for
unfunded commitments is an amount that Management believes will be adequate to absorb probable losses inherent in existing commitments, including unused portions of revolving lines of credits and other loans, standby letters of credits, and unused
deposit account overdraft privilege. The reserve for unfunded commitments is based on evaluations of the collectability, and prior loss experience of unfunded commitments. The evaluations take into consideration such factors as changes in the nature
and size of the loan portfolio, overall loan portfolio quality, loan concentrations, specific problem loans and related unfunded commitments, and current economic conditions that may affect the borrowers or depositors ability to pay.
Low Income Housing Tax Credits
The Company accounts
for low income housing tax credits and the related qualified affordable housing projects using the proportional amortization method. Under the proportional amortization method, the Company amortizes the initial cost of the investment in proportion
to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense (benefit). Upon entering into a qualified affordable housing project, the Company records,
in other liabilities, the entire amount that it has agreed to invest in the project, and an equal amount, in other assets, representing its investment in the project. As the Company disburses cash to satisfy its investment obligation, other
liabilities are reduced. Over time, as the tax credits and other tax benefits of the project are realized by the Company, the investment recorded in other assets is reduced using the proportional amortization method.
Income Taxes
The Companys accounting for income
taxes is based on an asset and liability approach. The Company recognizes the amount of taxes payable or refundable for the current year, and deferred tax assets and liabilities for the future tax consequences that have been recognized in its
financial statements or tax returns. The measurement of tax assets and liabilities is based on the provisions of enacted tax laws. A valuation allowance, if needed, reduces deferred tax assets to the expected amount most likely to be realized.
Realization of deferred tax assets is dependent upon the generation of a sufficient level of future taxable income and recoverable taxes paid in prior years. Although realization is not assured, management believes it is more likely than not that
all of the deferred tax assets will be realized. Interest and/or penalties related to income taxes are reported as a component of noninterest income.
Off-Balance
Sheet Credit Related Financial Instruments
In the ordinary course of business, the Company has entered
into commitments to extend credit, including commitments under credit card arrangements, commercial letters of credit, and standby letters of credit. Such financial instruments are recorded when they are funded.
Geographical Descriptions
For the purpose of describing
the geographical location of the Companys loans, the Company has defined northern California as that area of California north of, and including, Stockton; central California as that area of the state south of Stockton, to and including,
Bakersfield; and southern California as that area of the state south of Bakersfield.
10
Recent Accounting Pronouncements
FASB issued Accounting Standard Update (ASU)
No. 2016-02
,
Leases (Topic 842)
.
ASU 2016-2,
among other things, requires lessees to recognize most leases
on-balance
sheet, increasing reported assets and liabilities. Lessor accounting remains
substantially similar to current U.S. GAAP.
ASU 2016-02
will be effective for the Company on January 1, 2019, utilizing the modified retrospective transition approach. The Company is currently
evaluating the impact of adopting ASU
2016-02
on the Companys consolidated financial statements.
FASB
issued Accounting Standard Update (ASU)
No. 2016-09
, Compensation Stock Compensation (Topic 718).
ASU 2016-09,
among other things, requires:
(i) that all excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) should be recognized as income tax expense or benefit in the income statement, (ii) the tax effects of exercised or
vested awards should be treated as discrete items in the reporting period in which they occur, (iii) an entity also should recognize excess tax benefits regardless of whether the benefit reduces taxes payable in the current period,
(iv) excess tax benefits should be classified along with other income tax cash flows as an operating activity, (v) an entity can make an entity-wide accounting policy election to either estimate the number of awards that are expected to
vest (current GAAP) or account for forfeitures when they occur, (vi) the threshold to qualify for equity classification permits withholding up to the maximum statutory tax rates in the applicable jurisdictions, and (vii) cash paid by an
employer when directly withholding shares for tax withholding purposes should be classified as a financing activity.
ASU 2016-09
was effective for the Company on January 1, 2017 and due to the
options exercised during the three months ended March 31, 2017, resulted in the recognition of $90,000 in excess tax benefits.
FASB issued ASU
No. 2016-13,
Financial Instruments Credit Losses (Topic 326)
.
ASU
2016-13
is the final guidance on the new current expected credit loss
(CECL) model. ASU
2016-13,
among other things, requires the incurred loss impairment methodology in current GAAP be replaced with a methodology that reflects expected credit losses and
requires consideration of a broader range of reasonable and supportable information to estimate future credit loss estimates. As CECL encompasses all financial assets carried at amortized cost, the requirement that reserves be established based on
an organizations reasonable and supportable estimate of expected credit losses extends to held to maturity (HTM) debt securities. ASU
2016-13
amends the accounting for credit
losses on
available-for-sale
securities (AFS), whereby credit losses will be presented as an allowance as opposed to a write-down. In addition,
CECL will modify the accounting for purchased loans with credit deterioration since origination, so that reserves are established at the date of acquisition for purchased loans. Lastly, ASU
2016-13
requires
enhanced disclosures on the significant estimates and judgments used to estimate credit losses, as well as on the credit quality and underwriting standards of an organizations portfolio. These disclosures require organizations to present the
currently required credit quality disclosures disaggregated by the year of origination or vintage. ASU
2016-13
allows for a modified retrospective approach with a cumulative effect adjustment to the balance
sheet upon adoption (charge to retained earnings instead of the income statement). ASU
2016-13
will be effective for the Company on January 1, 2020, and early adoption is permitted. While the Company is
currently evaluating the provisions of ASU 2016-13 to determine the potential impact the new standard will have on the Companys Consolidated Financial Statements, it has taken steps to prepare for the implementation when it becomes effective,
such as forming an internal task force, gathering pertinent data, consulting with outside professionals, and evaluating its current IT systems. Management expects to recognize a one-time cumulative effect adjustment to the allowance for loan losses
as of the first reporting period in which the new standard is effective, but cannot yet estimate the magnitude of the one-time adjustment or the overall impact of the new guidance on the Companys financial position, results of operations or
cash flows.
FASB issued ASU No.
2016-18,
Statement of Cash Flows - Restricted Cash (Topic 230).
ASU 2016-18
requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash
equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the
beginning-of-period
and
end-of-period
total amounts shown on the statement of cash flows.
ASU 2016-18
will be effective for the Company on January 1, 2018 and is not expected to have a significant impact on the Companys consolidated financial statements.
FASB issued ASU
No. 2017-01,
Business Combinations - Clarifying the Definition of a Business (Topic 805).
ASU 2017-01
clarifies the definition and provides a more robust framework to use in determining when a set of assets and activities constitutes a business.
ASU 2017-01
is intended to provide guidance when evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses.
ASU 2017-01
will be effective for us on January 1, 2018 and is not expected to have a significant impact on our financial statements.
FASB issued ASU
No. 2017-04,
IntangiblesGoodwill and Other: Simplifying the Test for Goodwill
Impairment
(Topic 350):
ASU
2017-04
eliminates step two of the goodwill impairment test (the hypothetical purchase price allocation used to determine the implied fair value of goodwill) when step
one (determining if the carrying value of a reporting unit exceeds its fair value) is failed. Instead, entities simply will compare the fair value of a reporting unit to its carrying amount and record goodwill impairment for the amount by which the
reporting units carrying amount exceeds its fair value.
ASU 2017-04
will be effective for the Company on January 1, 2020 and is not expected to have a significant impact on the Companys
consolidated financial statements.
11
Note 2 - Business Combinations
On March 18, 2016, the Bank completed its acquisition of three branch banking offices from Bank of America originally announced October 28, 2015. The
acquired branches are located in Arcata, Eureka and Fortuna in Humboldt County on the North Coast of California, and have significant overlap compared to the Companys then-existing Northern California customer base and branch locations.
Beginning March 18, 2016, the revenue and expenses from the operations of the acquired branches are included in the results of the Company. The Bank paid a premium of $3,204,000 for deposit relationships with balances of $161,231,000 and loans
with balances of $289,000.
The assets acquired and liabilities assumed in the acquisition of these branches were accounted for in accordance with ASC 805
Business Combinations, using the acquisition method of accounting and were recorded at their estimated fair values on the March 18, 2016 acquisition date, and the results of operations of the acquired branches are included in the
Companys consolidated statements of income since that date. The excess of the fair value of consideration transferred over total identifiable net assets was recorded as goodwill. The goodwill arising from the acquisition consists largely of
the synergies and economies of scale expected from combining the operations of the Company and the acquired branches. $849,000 of the goodwill is deductible for income tax purposes because the acquisition was accounted for as a purchase of assets
and assumption of liabilities for tax purposes.
The following table discloses the calculation of the fair value of consideration transferred, the total
identifiable net assets acquired and the resulting goodwill relating to the acquisition of three branch banking offices and certain deposits from Bank of America on March 18, 2016:
|
|
|
|
|
(in thousands)
|
|
March 18, 2016
|
|
Fair value of consideration transferred:
|
|
|
|
|
Cash consideration
|
|
$
|
3,204
|
|
|
|
|
|
|
Total fair value of consideration transferred
|
|
|
3,204
|
|
|
|
|
|
|
Asset acquired:
|
|
|
|
|
Cash and cash equivalents
|
|
|
159,520
|
|
Loans
|
|
|
289
|
|
Premises and equipment
|
|
|
1,590
|
|
Core deposit intangible
|
|
|
2,046
|
|
Other assets
|
|
|
141
|
|
|
|
|
|
|
Total assets acquired
|
|
|
163,586
|
|
|
|
|
|
|
Liabilities assumed:
|
|
|
|
|
Deposits
|
|
|
161,231
|
|
|
|
|
|
|
Total liabilities assumed
|
|
|
161,231
|
|
|
|
|
|
|
Total net assets acquired
|
|
|
2,355
|
|
|
|
|
|
|
Goodwill recognized
|
|
$
|
849
|
|
|
|
|
|
|
A summary of the cash paid and estimated fair value adjustments resulting in the goodwill recorded in the acquisition of three
branch banking offices and certain deposits from Bank of America on March 18, 2016 are presented below:
|
|
|
|
|
|
|
March 18, 2016
|
|
(in thousands)
|
|
|
|
Cash paid
|
|
$
|
3,204
|
|
Cost basis net assets acquired
|
|
|
|
|
Fair value adjustments:
|
|
|
|
|
Loans
|
|
|
|
|
Premises and Equipment
|
|
|
(309
|
)
|
Core deposit intangible
|
|
|
(2,046
|
)
|
|
|
|
|
|
Goodwill
|
|
$
|
849
|
|
|
|
|
|
|
As part of the acquisition of three branch banking offices from Bank of America, the Company performed a valuation of premises
and equipment acquired. This valuation resulted in a $309,000 increase in the net book value of the land and buildings acquired, and was based on current appraisals of such land and buildings.
The Company recognized a core deposit intangible of $2,046,000 related to the acquisition of the core deposits. The recorded core deposit intangibles
represented approximately 1.50% of the core deposits acquired and will be amortized over their estimated useful lives of 7 years.
12
A valuation of the time deposits acquired was also performed as of the acquisition date. Time deposits were split
into similar pools based on size, type of time deposits, and maturity. A discounted cash flow analysis was performed on the pools based on current market rates currently paid on similar time deposits. The valuation resulted in no material fair value
discount or premium, and none was recorded.
13
Note 3 - Investment Securities
The amortized cost and estimated fair values of investments in debt and equity securities are summarized in the following tables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Estimated
Fair
Value
|
|
|
|
(in thousands)
|
|
Securities Available for Sale
|
|
|
|
|
Obligations of U.S. government corporations and agencies
|
|
$
|
455,093
|
|
|
$
|
1,846
|
|
|
$
|
(6,323
|
)
|
|
$
|
450,616
|
|
Obligations of states and political subdivisions
|
|
|
121,709
|
|
|
|
321
|
|
|
|
(3,865
|
)
|
|
|
118,165
|
|
Marketable equity securities
|
|
|
3,000
|
|
|
|
|
|
|
|
(62
|
)
|
|
|
2,938
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities available for sale
|
|
$
|
579,802
|
|
|
$
|
2,167
|
|
|
$
|
(10,250
|
)
|
|
$
|
571,719
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Held to Maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. government corporations and agencies
|
|
$
|
565,578
|
|
|
$
|
5,652
|
|
|
$
|
(3,906
|
)
|
|
$
|
567,324
|
|
Obligations of states and political subdivisions
|
|
|
14,559
|
|
|
|
101
|
|
|
|
(168
|
)
|
|
|
14,492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities held to maturity
|
|
$
|
580,137
|
|
|
$
|
5,753
|
|
|
$
|
(4,074
|
)
|
|
$
|
581,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Estimated
Fair
Value
|
|
|
|
(in thousands)
|
|
Securities Available for Sale
|
|
|
|
|
Obligations of U.S. government corporations and agencies
|
|
$
|
434,357
|
|
|
$
|
1,949
|
|
|
$
|
(6,628
|
)
|
|
$
|
429,678
|
|
Obligations of states and political subdivisions
|
|
|
121,746
|
|
|
|
267
|
|
|
|
(4,396
|
)
|
|
|
117,617
|
|
Marketable equity securities
|
|
|
3,000
|
|
|
|
|
|
|
|
(62
|
)
|
|
|
2,938
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities available for sale
|
|
$
|
559,103
|
|
|
$
|
2,216
|
|
|
$
|
(11,086
|
)
|
|
$
|
550,233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Held to Maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. government corporations and agencies
|
|
$
|
587,982
|
|
|
$
|
5,001
|
|
|
$
|
(4,199
|
)
|
|
$
|
588,784
|
|
Obligations of states and political subdivisions
|
|
|
14,554
|
|
|
|
56
|
|
|
|
(191
|
)
|
|
|
14,419
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities held to maturity
|
|
$
|
602,536
|
|
|
$
|
5,057
|
|
|
$
|
(4,390
|
)
|
|
$
|
603,203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No investment securities were sold during the three months ended March 31, 2017 or the three months ended March 31,
2016. Investment securities with an aggregate carrying value of $280,534,000 and $292,737,000 at March 31, 2017 and December 31, 2016, respectively, were pledged as collateral for specific borrowings, lines of credit and local agency
deposits.
The amortized cost and estimated fair value of debt securities at March 31, 2017 by contractual maturity are shown below. Actual
maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. At March 31, 2017, obligations of U.S. government corporations and agencies with
a cost basis totaling $1,020,671,000 consist almost entirely of residential real estate mortgage-backed securities whose contractual maturity, or principal repayment, will follow the repayment of the underlying mortgages. For purposes of the
following table, the entire outstanding balance of these mortgage-backed securities issued by U.S. government corporations and agencies is categorized based on final maturity date. At March 31, 2017, the Company estimates the average remaining
life of these mortgage-backed securities issued by U.S. government corporations and agencies to be approximately 6.0 years. Average remaining life is defined as the time span after which the principal balance has been reduced by half.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Securities
|
|
Available for Sale
|
|
|
Held to Maturity
|
|
(In thousands)
|
|
Amortized
Cost
|
|
|
Estimated
Fair Value
|
|
|
Amortized
Cost
|
|
|
Estimated
Fair Value
|
|
Due in one year
|
|
$
|
5
|
|
|
$
|
5
|
|
|
|
|
|
|
|
|
|
Due after one year through five years
|
|
|
8,290
|
|
|
|
8,519
|
|
|
$
|
1,184
|
|
|
$
|
1,213
|
|
Due after five years through ten years
|
|
|
13,806
|
|
|
|
14,344
|
|
|
|
4,539
|
|
|
|
4,574
|
|
Due after ten years
|
|
|
557,701
|
|
|
|
548,851
|
|
|
|
574,414
|
|
|
|
576,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
579,802
|
|
|
$
|
571,719
|
|
|
$
|
580,137
|
|
|
$
|
581,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
Gross unrealized losses on investment securities and the fair value of the related securities, aggregated by
investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 months
|
|
|
12 months or more
|
|
|
Total
|
|
|
|
Fair
Value
|
|
|
Unrealized
Loss
|
|
|
Fair
Value
|
|
|
Unrealized
Loss
|
|
|
Fair
Value
|
|
|
Unrealized
Loss
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
March 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Available for Sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. government corporations and agencies
|
|
$
|
359,657
|
|
|
$
|
(6,323
|
)
|
|
|
|
|
|
|
|
|
|
$
|
359,657
|
|
|
$
|
(6,323
|
)
|
Obligations of states and political subdivisions
|
|
|
83,818
|
|
|
|
(3,865
|
)
|
|
|
|
|
|
|
|
|
|
|
83,818
|
|
|
|
(3,865
|
)
|
Marketable equity securities
|
|
|
2,938
|
|
|
|
(62
|
)
|
|
|
|
|
|
|
|
|
|
|
2,938
|
|
|
|
(62
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities
available-for-sale
|
|
$
|
446,413
|
|
|
$
|
(10,250
|
)
|
|
|
|
|
|
|
|
|
|
$
|
446,413
|
|
|
$
|
(10,250
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Held to Maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. government corporations and agencies
|
|
$
|
226,101
|
|
|
$
|
(3,906
|
)
|
|
|
|
|
|
|
|
|
|
$
|
226,101
|
|
|
$
|
(3,906
|
)
|
Obligations of states and political subdivisions
|
|
|
7,867
|
|
|
|
(168
|
)
|
|
|
|
|
|
|
|
|
|
|
7,867
|
|
|
|
(168
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities
held-to-maturity
|
|
$
|
233,968
|
|
|
$
|
(4,074
|
)
|
|
|
|
|
|
|
|
|
|
$
|
233,968
|
|
|
$
|
(4,074
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 months
|
|
|
12 months or more
|
|
|
Total
|
|
|
|
Fair
Value
|
|
|
Unrealized
Loss
|
|
|
Fair
Value
|
|
|
Unrealized
Loss
|
|
|
Fair
Value
|
|
|
Unrealized
Loss
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Available for Sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. government corporations and agencies
|
|
$
|
370,389
|
|
|
$
|
(6,628
|
)
|
|
|
|
|
|
|
|
|
|
$
|
370,389
|
|
|
$
|
(6,628
|
)
|
Obligations of states and political subdivisions
|
|
|
90,825
|
|
|
|
(4,396
|
)
|
|
|
|
|
|
|
|
|
|
|
90,825
|
|
|
|
(4,396
|
)
|
Marketable equity securities
|
|
|
2,938
|
|
|
|
(62
|
)
|
|
|
|
|
|
|
|
|
|
|
2,938
|
|
|
|
(62
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities
available-for-sale
|
|
$
|
464,152
|
|
|
$
|
(11,086
|
)
|
|
|
|
|
|
|
|
|
|
$
|
464,152
|
|
|
$
|
(11,086
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Held to Maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. government corporations and agencies
|
|
$
|
280,497
|
|
|
$
|
(4,199
|
)
|
|
|
|
|
|
|
|
|
|
$
|
280,497
|
|
|
$
|
(4,199
|
)
|
Obligations of states and political subdivisions
|
|
|
9,984
|
|
|
|
(191
|
)
|
|
|
|
|
|
|
|
|
|
|
9,984
|
|
|
|
(191
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities
held-to-maturity
|
|
$
|
290,481
|
|
|
$
|
(4,390
|
)
|
|
|
|
|
|
|
|
|
|
$
|
290,481
|
|
|
$
|
(4,390
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. government corporations and agencies: Unrealized losses on investments in obligations of U.S.
government corporations and agencies are caused by interest rate increases. The contractual cash flows of these securities are guaranteed by U.S. Government Sponsored Entities (principally Fannie Mae and Freddie Mac). It is expected that the
securities would not be settled at a price less than the amortized cost of the investment. Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell and
more likely than not will not be required to sell, these investments are not considered other-than-temporarily impaired. At March 31, 2017, 58 debt securities representing obligations of U.S. government corporations and agencies had unrealized
losses with aggregate depreciation of (1.72%) from the Companys amortized cost basis.
Obligations of states and political subdivisions: The
unrealized losses on investments in obligations of states and political subdivisions were caused by increases in required yields by investors in these types of securities. It is expected that the securities would not be settled at a price less than
the amortized cost of the investment. Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell and more likely than not will not be required to sell, these
investments are not considered other-than-temporarily impaired. At March 31, 2017, 100 debt securities representing obligations of states and political subdivisions had unrealized losses with aggregate depreciation of (4.21%) from the
Companys amortized cost basis.
Marketable equity securities: At March 31, 2017, 2 marketable equity securities had unrealized losses with
aggregate depreciation of (2.07%) from the Companys amortized cost basis. The Company has the intent and ability to hold these securities for the foreseeable future and no credit quality deterioration associated with these securities has been
identified, therefore, management does not believe that they are other than temporarily impaired.
15
Note 4 Loans
A summary of loan balances follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
|
|
Originated
|
|
|
PNCI
|
|
|
PCI -
Cash basis
|
|
|
PCI -
Other
|
|
|
Total
|
|
Mortgage loans on real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
$
|
237,336
|
|
|
$
|
71,006
|
|
|
|
|
|
|
$
|
1,359
|
|
|
$
|
309,701
|
|
Commercial
|
|
|
1,509,374
|
|
|
|
239,390
|
|
|
|
|
|
|
|
12,350
|
|
|
|
1,761,114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage loan on real estate
|
|
|
1,746,710
|
|
|
|
310,396
|
|
|
|
|
|
|
|
13,709
|
|
|
|
2,070,815
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines of credit
|
|
|
259,969
|
|
|
|
19,622
|
|
|
$
|
2,753
|
|
|
|
1,252
|
|
|
|
283,596
|
|
Home equity loans
|
|
|
35,725
|
|
|
|
3,383
|
|
|
|
|
|
|
|
1,133
|
|
|
|
40,241
|
|
|
|
|
|
|
|
Other
|
|
|
26,777
|
|
|
|
2,470
|
|
|
|
|
|
|
|
66
|
|
|
|
29,313
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer loans
|
|
|
322,471
|
|
|
|
25,475
|
|
|
|
2,753
|
|
|
|
2,451
|
|
|
|
353,150
|
|
Commercial
|
|
|
198,554
|
|
|
|
10,350
|
|
|
|
|
|
|
|
3,781
|
|
|
|
212,685
|
|
Construction:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
58,718
|
|
|
|
137
|
|
|
|
|
|
|
|
844
|
|
|
|
59,699
|
|
Commercial
|
|
|
55,872
|
|
|
|
8,971
|
|
|
|
|
|
|
|
|
|
|
|
64,843
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total construction
|
|
|
114,590
|
|
|
|
9,108
|
|
|
|
|
|
|
|
844
|
|
|
|
124,542
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, net of deferred loan fees and discounts
|
|
$
|
2,382,325
|
|
|
$
|
355,329
|
|
|
$
|
2,753
|
|
|
$
|
20,785
|
|
|
$
|
2,761,192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total principal balance of loans owed, net of charge-offs
|
|
$
|
2,389,038
|
|
|
$
|
364,451
|
|
|
$
|
7,848
|
|
|
$
|
23,981
|
|
|
$
|
2,785,318
|
|
Unamortized net deferred loan fees
|
|
|
(6,713
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,713
|
)
|
Discounts to principal balance of loans owed, net of charge-offs
|
|
|
|
|
|
|
(9,122
|
)
|
|
|
(5,095
|
)
|
|
|
(3,196
|
)
|
|
|
(17,413
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, net of unamortized deferred loan fees and discounts
|
|
$
|
2,382,325
|
|
|
$
|
355,329
|
|
|
$
|
2,753
|
|
|
$
|
20,785
|
|
|
$
|
2,761,192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncovered loans
|
|
$
|
2,382,325
|
|
|
$
|
355,329
|
|
|
$
|
2,753
|
|
|
$
|
17,804
|
|
|
$
|
2,758,211
|
|
Covered loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,981
|
|
|
|
2,981
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, net of unamortized deferred loan fees and discounts
|
|
$
|
2,382,325
|
|
|
$
|
355,329
|
|
|
$
|
2,753
|
|
|
$
|
20,785
|
|
|
$
|
2,761,192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
$
|
(27,180
|
)
|
|
$
|
(1,406
|
)
|
|
$
|
(8
|
)
|
|
$
|
(2,423
|
)
|
|
$
|
(31,017
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
Note 4 Loans (continued)
A summary of loan balances follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
Originated
|
|
|
PNCI
|
|
|
PCI -
Cash basis
|
|
|
PCI -
Other
|
|
|
Total
|
|
Mortgage loans on real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
1-4
family
|
|
$
|
229,609
|
|
|
$
|
78,935
|
|
|
|
|
|
|
$
|
1,363
|
|
|
$
|
309,907
|
|
Commercial
|
|
|
1,484,420
|
|
|
|
250,037
|
|
|
|
|
|
|
|
13,460
|
|
|
|
1,747,917
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mortgage loan on real estate
|
|
|
1,714,029
|
|
|
|
328,972
|
|
|
|
|
|
|
|
14,823
|
|
|
|
2,057,824
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity lines of credit
|
|
|
263,590
|
|
|
|
21,765
|
|
|
$
|
2,983
|
|
|
|
1,377
|
|
|
|
289,715
|
|
Home equity loans
|
|
|
37,074
|
|
|
|
3,618
|
|
|
|
|
|
|
|
1,130
|
|
|
|
41,822
|
|
Other
|
|
|
28,167
|
|
|
|
2,534
|
|
|
|
|
|
|
|
65
|
|
|
|
30,766
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer loans
|
|
|
328,831
|
|
|
|
27,917
|
|
|
|
2,983
|
|
|
|
2,572
|
|
|
|
362,303
|
|
Commercial
|
|
|
200,735
|
|
|
|
12,321
|
|
|
|
|
|
|
|
3,991
|
|
|
|
217,047
|
|
Construction:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
54,613
|
|
|
|
141
|
|
|
|
|
|
|
|
675
|
|
|
|
55,429
|
|
Commercial
|
|
|
58,119
|
|
|
|
8,871
|
|
|
|
|
|
|
|
|
|
|
|
66,990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total construction
|
|
|
112,732
|
|
|
|
9,012
|
|
|
|
|
|
|
|
675
|
|
|
|
122,419
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, net of deferred loan fees and discounts
|
|
$
|
2,356,327
|
|
|
$
|
378,222
|
|
|
$
|
2,983
|
|
|
$
|
22,061
|
|
|
$
|
2,759,593
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total principal balance of loans owed, net of charge-offs
|
|
$
|
2,363,243
|
|
|
$
|
388,139
|
|
|
$
|
8,280
|
|
|
$
|
25,650
|
|
|
$
|
2,785,312
|
|
Unamortized net deferred loan fees
|
|
|
(6,916
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,916
|
)
|
Discounts to principal balance of loans owed, net of charge-offs
|
|
|
|
|
|
|
(9,917
|
)
|
|
|
(5,297
|
)
|
|
|
(3,589
|
)
|
|
|
(18,803
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, net of unamortized deferred loan fees and discounts
|
|
$
|
2,356,327
|
|
|
$
|
378,222
|
|
|
$
|
2,983
|
|
|
$
|
22,061
|
|
|
$
|
2,759,593
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncovered loans
|
|
$
|
2,356,327
|
|
|
$
|
378,222
|
|
|
$
|
2,983
|
|
|
$
|
18,885
|
|
|
$
|
2,756,417
|
|
Covered loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,176
|
|
|
|
3,176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, net of unamortized deferred loan fees and discounts
|
|
$
|
2,356,327
|
|
|
$
|
378,222
|
|
|
$
|
2,983
|
|
|
$
|
22,061
|
|
|
$
|
2,759,593
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
$
|
(28,141
|
)
|
|
$
|
(1,665
|
)
|
|
$
|
(17
|
)
|
|
$
|
(2,680
|
)
|
|
$
|
(32,503
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following is a summary of the change in accretable yield for PCI other loans during the periods indicated (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
Change in accretable yield:
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
10,348
|
|
|
$
|
13,255
|
|
Accretion to interest income
|
|
|
(902
|
)
|
|
|
(1,091
|
)
|
Reclassification from (to) nonaccretable difference
|
|
|
114
|
|
|
|
(184
|
)
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
9,560
|
|
|
$
|
11,980
|
|
|
|
|
|
|
|
|
|
|
17
Note 5 Allowance for Loan Losses
The following tables summarize the activity in the allowance for loan losses, and ending balance of loans, net of unearned fees for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Loan Losses Three Months Ended March 31, 2017
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(in thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consum.
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
Beginning balance
|
|
$
|
2,387
|
|
|
$
|
11,905
|
|
|
$
|
7,044
|
|
|
$
|
2,617
|
|
|
|
|
|
|
$
|
622
|
|
|
$
|
5,831
|
|
|
$
|
1,417
|
|
|
$
|
680
|
|
|
$
|
32,503
|
|
Charge-offs
|
|
|
|
|
|
|
|
|
|
|
(71
|
)
|
|
|
(31
|
)
|
|
|
|
|
|
|
(174
|
)
|
|
|
(133
|
)
|
|
|
|
|
|
|
|
|
|
|
(409
|
)
|
Recoveries
|
|
|
|
|
|
|
110
|
|
|
|
46
|
|
|
|
12
|
|
|
|
|
|
|
|
141
|
|
|
|
170
|
|
|
|
|
|
|
|
1
|
|
|
|
480
|
|
(Benefit) provision
|
|
|
(105
|
)
|
|
|
(62
|
)
|
|
|
(489
|
)
|
|
|
(178
|
)
|
|
|
|
|
|
|
6
|
|
|
|
(542
|
)
|
|
|
(78
|
)
|
|
|
(109
|
)
|
|
|
(1,557
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
2,282
|
|
|
$
|
11,953
|
|
|
$
|
6,530
|
|
|
$
|
2,420
|
|
|
|
|
|
|
$
|
595
|
|
|
$
|
5,326
|
|
|
$
|
1,339
|
|
|
$
|
572
|
|
|
$
|
31,017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individ. evaluated for impairment
|
|
$
|
249
|
|
|
$
|
124
|
|
|
$
|
400
|
|
|
$
|
57
|
|
|
|
|
|
|
$
|
31
|
|
|
$
|
811
|
|
|
$
|
14
|
|
|
|
|
|
|
$
|
1,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans pooled for evaluation
|
|
$
|
1,808
|
|
|
$
|
10,382
|
|
|
$
|
6,122
|
|
|
$
|
2,297
|
|
|
|
|
|
|
$
|
564
|
|
|
$
|
3,873
|
|
|
$
|
1,282
|
|
|
$
|
572
|
|
|
$
|
26,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans acquired with deteriorated credit quality
|
|
$
|
225
|
|
|
$
|
1,447
|
|
|
$
|
8
|
|
|
$
|
66
|
|
|
|
|
|
|
|
|
|
|
$
|
642
|
|
|
$
|
43
|
|
|
|
|
|
|
$
|
2,431
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, net of unearned fees As of March 31, 2017
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(in thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consum.
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
Ending balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
$
|
309,701
|
|
|
$
|
1,761,114
|
|
|
$
|
283,596
|
|
|
$
|
40,241
|
|
|
|
|
|
|
$
|
29,313
|
|
|
$
|
212,685
|
|
|
$
|
59,699
|
|
|
$
|
64,843
|
|
|
$
|
2,761,192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individ. evaluated for impairment
|
|
$
|
3,849
|
|
|
$
|
16,979
|
|
|
$
|
2,204
|
|
|
$
|
1,241
|
|
|
|
|
|
|
$
|
280
|
|
|
$
|
3,072
|
|
|
$
|
25
|
|
|
|
|
|
|
$
|
27,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans pooled for evaluation
|
|
$
|
304,493
|
|
|
$
|
1,731,785
|
|
|
$
|
277,388
|
|
|
$
|
37,867
|
|
|
|
|
|
|
$
|
28,967
|
|
|
$
|
205,832
|
|
|
$
|
58,830
|
|
|
$
|
64,843
|
|
|
$
|
2,710,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans acquired with Deteriorated credit quality
|
|
$
|
1,359
|
|
|
$
|
12,350
|
|
|
$
|
4,004
|
|
|
$
|
1,133
|
|
|
|
|
|
|
$
|
66
|
|
|
$
|
3,781
|
|
|
$
|
844
|
|
|
|
|
|
|
$
|
23,537
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Loan Losses - Year Ended December 31, 2016
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(in thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consum.
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
Beginning balance
|
|
$
|
2,507
|
|
|
$
|
11,443
|
|
|
$
|
11,253
|
|
|
$
|
3,138
|
|
|
|
|
|
|
$
|
688
|
|
|
$
|
5,271
|
|
|
$
|
899
|
|
|
$
|
812
|
|
|
$
|
36,011
|
|
Charge-offs
|
|
|
(321
|
)
|
|
|
(827
|
)
|
|
|
(585
|
)
|
|
|
(219
|
)
|
|
|
|
|
|
|
(823
|
)
|
|
|
(455
|
)
|
|
|
|
|
|
|
|
|
|
|
(3,230
|
)
|
Recoveries
|
|
|
880
|
|
|
|
920
|
|
|
|
2,317
|
|
|
|
590
|
|
|
|
|
|
|
|
449
|
|
|
|
404
|
|
|
|
54
|
|
|
|
78
|
|
|
|
5,692
|
|
(Benefit) provision
|
|
|
(679
|
)
|
|
|
369
|
|
|
|
(5,941
|
)
|
|
|
(892
|
)
|
|
|
|
|
|
|
308
|
|
|
|
611
|
|
|
|
464
|
|
|
|
(210
|
)
|
|
|
(5,970
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
2,387
|
|
|
$
|
11,905
|
|
|
$
|
7,044
|
|
|
$
|
2,617
|
|
|
|
|
|
|
$
|
622
|
|
|
$
|
5,831
|
|
|
$
|
1,417
|
|
|
$
|
680
|
|
|
$
|
32,503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individ. evaluated for impairment
|
|
$
|
249
|
|
|
$
|
127
|
|
|
$
|
410
|
|
|
$
|
102
|
|
|
|
|
|
|
$
|
28
|
|
|
$
|
1,130
|
|
|
|
|
|
|
|
|
|
|
$
|
2,046
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans pooled for evaluation
|
|
$
|
1,952
|
|
|
$
|
10,329
|
|
|
$
|
6,618
|
|
|
$
|
2,451
|
|
|
|
|
|
|
$
|
594
|
|
|
$
|
3,765
|
|
|
$
|
1,371
|
|
|
$
|
680
|
|
|
$
|
27,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans acquired with deteriorated credit quality
|
|
$
|
186
|
|
|
$
|
1,449
|
|
|
$
|
17
|
|
|
$
|
64
|
|
|
|
|
|
|
|
|
|
|
$
|
936
|
|
|
$
|
45
|
|
|
|
|
|
|
$
|
2,697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, net of unearned fees As of December 31, 2016
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(in thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consum.
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
Ending balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
$
|
309,907
|
|
|
$
|
1,747,917
|
|
|
$
|
289,715
|
|
|
$
|
41,822
|
|
|
|
|
|
|
$
|
30,766
|
|
|
$
|
217,047
|
|
|
$
|
55,429
|
|
|
$
|
66,990
|
|
|
$
|
2,759,593
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individ. evaluated for impairment
|
|
$
|
3,785
|
|
|
$
|
15,748
|
|
|
$
|
3,196
|
|
|
$
|
1,150
|
|
|
|
|
|
|
$
|
154
|
|
|
$
|
4,096
|
|
|
$
|
11
|
|
|
|
|
|
|
$
|
28,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans pooled for evaluation
|
|
$
|
304,759
|
|
|
$
|
1,718,709
|
|
|
$
|
282,159
|
|
|
$
|
39,542
|
|
|
|
|
|
|
$
|
30,547
|
|
|
$
|
208,960
|
|
|
$
|
54,743
|
|
|
$
|
66,990
|
|
|
$
|
2,706,409
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans acquired with deteriorated credit quality
|
|
$
|
1,363
|
|
|
$
|
13,460
|
|
|
$
|
4,360
|
|
|
$
|
1,130
|
|
|
|
|
|
|
$
|
65
|
|
|
$
|
3,991
|
|
|
$
|
675
|
|
|
|
|
|
|
$
|
25,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
Note 5 Allowance for Loan Losses (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Loan Losses Three Months Ended March 31, 2016
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(in thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consum.
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
Beginning balance
|
|
$
|
2,507
|
|
|
$
|
11,443
|
|
|
$
|
11,253
|
|
|
$
|
3,138
|
|
|
|
|
|
|
$
|
688
|
|
|
$
|
5,271
|
|
|
$
|
899
|
|
|
$
|
812
|
|
|
$
|
36,011
|
|
Charge-offs
|
|
|
(37
|
)
|
|
|
(793
|
)
|
|
|
(214
|
)
|
|
|
|
|
|
|
|
|
|
|
(207
|
)
|
|
|
(38
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,289
|
)
|
Recoveries
|
|
|
2
|
|
|
|
817
|
|
|
|
281
|
|
|
|
49
|
|
|
|
|
|
|
|
130
|
|
|
|
177
|
|
|
|
|
|
|
|
1
|
|
|
|
1,457
|
|
(Benefit) provision
|
|
|
293
|
|
|
|
428
|
|
|
|
(1,413
|
)
|
|
|
(76
|
)
|
|
|
|
|
|
|
76
|
|
|
|
729
|
|
|
|
167
|
|
|
|
5
|
|
|
|
209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
2,765
|
|
|
$
|
11,895
|
|
|
$
|
9,907
|
|
|
$
|
3,111
|
|
|
|
|
|
|
$
|
687
|
|
|
$
|
6,139
|
|
|
$
|
1,066
|
|
|
$
|
818
|
|
|
$
|
36,388
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individ. evaluated for impairment
|
|
$
|
454
|
|
|
$
|
295
|
|
|
$
|
705
|
|
|
$
|
248
|
|
|
|
|
|
|
$
|
84
|
|
|
$
|
1,934
|
|
|
|
|
|
|
|
|
|
|
$
|
3,720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans pooled for evaluation
|
|
$
|
2,094
|
|
|
$
|
10,141
|
|
|
$
|
9,083
|
|
|
$
|
2,864
|
|
|
|
|
|
|
$
|
603
|
|
|
$
|
3,053
|
|
|
$
|
1,014
|
|
|
$
|
818
|
|
|
$
|
29,670
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans acquired with deteriorated credit quality
|
|
$
|
217
|
|
|
$
|
1,459
|
|
|
$
|
117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,153
|
|
|
$
|
52
|
|
|
|
|
|
|
$
|
2,998
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, net of unearned fees As of March 31, 2016
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
|
|
|
Other
|
|
|
|
|
|
Construction
|
|
|
|
|
(in thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
Indirect
|
|
|
Consum.
|
|
|
C&I
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Total
|
|
Ending balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
$
|
315,135
|
|
|
$
|
1,513,853
|
|
|
$
|
312,691
|
|
|
$
|
41,365
|
|
|
|
|
|
|
$
|
32,945
|
|
|
$
|
196,557
|
|
|
$
|
52,983
|
|
|
$
|
76,018
|
|
|
$
|
2,541,547
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individ. evaluated for impairment
|
|
$
|
7,015
|
|
|
$
|
12,230
|
|
|
$
|
5,994
|
|
|
$
|
1,928
|
|
|
|
|
|
|
$
|
300
|
|
|
$
|
3,871
|
|
|
|
|
|
|
|
|
|
|
$
|
31,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans pooled for evaluation
|
|
$
|
306,484
|
|
|
$
|
1,484,434
|
|
|
$
|
299,407
|
|
|
$
|
37,800
|
|
|
|
|
|
|
$
|
32,581
|
|
|
$
|
188,155
|
|
|
$
|
52,271
|
|
|
$
|
76,018
|
|
|
$
|
2,477,150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans acquired with Deteriorated credit quality
|
|
$
|
1,636
|
|
|
$
|
17,189
|
|
|
$
|
7,290
|
|
|
$
|
1,637
|
|
|
|
|
|
|
$
|
64
|
|
|
$
|
4,531
|
|
|
$
|
712
|
|
|
|
|
|
|
$
|
33,059
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As part of the
on-going
monitoring of the credit quality of the Companys loan
portfolio, management tracks certain credit quality indicators including, but not limited to, trends relating to (i) the level of criticized and classified loans, (ii) net charge-offs,
(iii) non-performing
loans, and (iv) delinquency within the portfolio.
The Company utilizes a risk
grading system to assign a risk grade to each of its loans. Loans are graded on a scale ranging from Pass to Loss. A description of the general characteristics of the risk grades is as follows:
|
|
|
Pass
This grade represents loans ranging from acceptable to very little or no credit risk. These loans typically meet most if not all policy standards in regard to: loan amount as a percentage of
collateral value, debt service coverage, profitability, leverage, and working capital.
|
|
|
|
Special Mention
This grade represents Other Assets Especially Mentioned in accordance with regulatory guidelines and includes loans that display some potential weaknesses which, if left
unaddressed, may result in deterioration of the repayment prospects for the asset or may inadequately protect the Companys position in the future. These loans warrant more than normal supervision and attention.
|
|
|
|
Substandard
This grade represents Substandard loans in accordance with regulatory guidelines. Loans within this rating typically exhibit weaknesses that are well defined to the point that
repayment is jeopardized. Loss potential is, however, not necessarily evident. The underlying collateral supporting the credit appears to have sufficient value to protect the Company from loss of principal and accrued interest, or the loan has been
written down to the point where this is true. There is a definite need for a well defined workout/rehabilitation program.
|
|
|
|
Doubtful
This grade represents Doubtful loans in accordance with regulatory guidelines. An asset classified as Doubtful has all the weaknesses inherent in a loan classified 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. Pending factors include proposed merger, acquisition, or
liquidation procedures, capital injection, perfecting liens on additional collateral, and financing plans.
|
|
|
|
Loss
This grade represents Loss loans in accordance with regulatory guidelines. A loan classified as Loss is considered uncollectible and of such little value that its continuance as a bankable
asset is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off the loan, even though some recovery may be affected in the
future. The portion of the loan that is graded loss should be charged off no later than the end of the quarter in which the loss is identified.
|
19
Note 5 Allowance for Loan Losses (continued)
The following tables present ending loan balances by loan category and risk grade for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Quality Indicators As of March 31, 2017
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
Indirect
|
|
|
Other
Consum.
|
|
|
C&I
|
|
|
Construction
|
|
|
Total
|
|
(in thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Originated loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
$
|
233,189
|
|
|
$
|
1,476,126
|
|
|
$
|
255,326
|
|
|
$
|
32,480
|
|
|
|
|
|
|
$
|
26,181
|
|
|
$
|
187,333
|
|
|
$
|
58,707
|
|
|
$
|
48,636
|
|
|
$
|
2,317,978
|
|
Special mention
|
|
|
2,031
|
|
|
|
21,022
|
|
|
|
2,401
|
|
|
|
1,352
|
|
|
|
|
|
|
|
389
|
|
|
|
5,222
|
|
|
|
|
|
|
|
7,236
|
|
|
|
39,653
|
|
Substandard
|
|
|
2,116
|
|
|
|
12,226
|
|
|
|
2,242
|
|
|
|
1,893
|
|
|
|
|
|
|
|
207
|
|
|
|
5,999
|
|
|
|
11
|
|
|
|
|
|
|
|
24,694
|
|
Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total originated
|
|
$
|
237,336
|
|
|
$
|
1,509,374
|
|
|
$
|
259,969
|
|
|
$
|
35,725
|
|
|
|
|
|
|
$
|
26,777
|
|
|
$
|
198,554
|
|
|
$
|
58,718
|
|
|
$
|
55,872
|
|
|
$
|
2,382,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PNCI loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
$
|
68,062
|
|
|
$
|
227,038
|
|
|
$
|
18,231
|
|
|
$
|
3,180
|
|
|
|
|
|
|
$
|
2,409
|
|
|
$
|
10,349
|
|
|
$
|
137
|
|
|
$
|
8,971
|
|
|
$
|
338,377
|
|
Special mention
|
|
|
1,723
|
|
|
|
5,973
|
|
|
|
688
|
|
|
|
90
|
|
|
|
|
|
|
|
58
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
8,533
|
|
Substandard
|
|
|
1,221
|
|
|
|
6,379
|
|
|
|
703
|
|
|
|
113
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,419
|
|
Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total PNCI
|
|
$
|
71,006
|
|
|
$
|
239,390
|
|
|
$
|
19,622
|
|
|
$
|
3,383
|
|
|
|
|
|
|
$
|
2,470
|
|
|
$
|
10,350
|
|
|
$
|
137
|
|
|
$
|
8,971
|
|
|
$
|
355,329
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PCI loans
|
|
$
|
1,359
|
|
|
$
|
12,350
|
|
|
$
|
4,005
|
|
|
$
|
1,133
|
|
|
|
|
|
|
$
|
66
|
|
|
$
|
3,781
|
|
|
$
|
844
|
|
|
|
|
|
|
$
|
23,538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
$
|
309,701
|
|
|
$
|
1,761,114
|
|
|
$
|
283,596
|
|
|
$
|
40,241
|
|
|
|
|
|
|
$
|
29,313
|
|
|
$
|
212,685
|
|
|
$
|
59,699
|
|
|
$
|
64,843
|
|
|
$
|
2,761,192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Quality Indicators As of December 31, 2016
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
Indirect
|
|
|
Other
Consum.
|
|
|
C&I
|
|
|
Construction
|
|
|
Total
|
|
(in thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Originated loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
$
|
224,988
|
|
|
$
|
1,457,128
|
|
|
$
|
258,024
|
|
|
$
|
34,299
|
|
|
|
|
|
|
$
|
27,542
|
|
|
$
|
190,902
|
|
|
$
|
54,602
|
|
|
$
|
57,808
|
|
|
$
|
2,305,293
|
|
Special mention
|
|
|
2,225
|
|
|
|
15,108
|
|
|
|
2,518
|
|
|
|
891
|
|
|
|
|
|
|
|
385
|
|
|
|
6,133
|
|
|
|
|
|
|
|
311
|
|
|
|
27,571
|
|
Substandard
|
|
|
2,396
|
|
|
|
12,184
|
|
|
|
3,048
|
|
|
|
1,884
|
|
|
|
|
|
|
|
240
|
|
|
|
3,700
|
|
|
|
11
|
|
|
|
|
|
|
|
23,463
|
|
Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total originated
|
|
$
|
229,609
|
|
|
$
|
1,484,420
|
|
|
$
|
263,590
|
|
|
$
|
37,074
|
|
|
|
|
|
|
$
|
28,167
|
|
|
$
|
200,735
|
|
|
$
|
54,613
|
|
|
$
|
58,119
|
|
|
$
|
2,356,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PNCI loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
$
|
75,600
|
|
|
$
|
236,740
|
|
|
$
|
20,442
|
|
|
$
|
3,492
|
|
|
|
|
|
|
$
|
2,437
|
|
|
$
|
12,320
|
|
|
$
|
141
|
|
|
$
|
8,871
|
|
|
$
|
360,043
|
|
Special mention
|
|
|
1,849
|
|
|
|
6,057
|
|
|
|
509
|
|
|
|
41
|
|
|
|
|
|
|
|
92
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
8,549
|
|
Substandard
|
|
|
1,486
|
|
|
|
7,240
|
|
|
|
814
|
|
|
|
85
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,630
|
|
Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total PNCI
|
|
$
|
78,935
|
|
|
$
|
250,037
|
|
|
$
|
21,765
|
|
|
$
|
3,618
|
|
|
|
|
|
|
$
|
2,534
|
|
|
$
|
12,321
|
|
|
$
|
141
|
|
|
$
|
8,871
|
|
|
$
|
378,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PCI loans
|
|
$
|
1,363
|
|
|
$
|
13,460
|
|
|
$
|
4,360
|
|
|
$
|
1,130
|
|
|
|
|
|
|
$
|
65
|
|
|
$
|
3,991
|
|
|
$
|
675
|
|
|
|
|
|
|
$
|
25,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
$
|
309,907
|
|
|
$
|
1,747,917
|
|
|
$
|
289,715
|
|
|
$
|
41,822
|
|
|
|
|
|
|
$
|
30,766
|
|
|
$
|
217,047
|
|
|
$
|
55,429
|
|
|
$
|
66,990
|
|
|
$
|
2,759,593
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer loans, whether unsecured or secured by real estate, automobiles, or other personal property, are susceptible to three
primary risks;
non-payment
due to income loss, over-extension of credit and, when the borrower is unable to pay, shortfall in collateral value. Typically
non-payment
is
due to loss of job and will follow general economic trends in the marketplace driven primarily by rises in the unemployment rate. Loss of collateral value can be due to market demand shifts, damage to collateral itself or a combination of the two.
Problem consumer loans are generally identified by payment history of the borrower (delinquency). The Bank manages its consumer loan portfolios by
monitoring delinquency and contacting borrowers to encourage repayment, suggest modifications if appropriate, and, when continued scheduled payments become unrealistic, initiate repossession or foreclosure through appropriate channels. Collateral
values may be determined by appraisals obtained through Bank approved, licensed appraisers, qualified independent third parties, public value information (blue book values for autos), sales invoices, or other appropriate means. Appropriate
valuations are obtained at initiation of the credit and periodically (every
3-12
months depending on collateral type) once repayment is questionable and the loan has been classified.
Commercial real estate loans generally fall into two categories, owner-occupied and
non-owner
occupied. Loans secured
by owner occupied real estate are primarily susceptible to changes in the business conditions of the related business. This may be driven by, among other things, industry changes, geographic business changes, changes in the individual fortunes of
the business owner, and general economic conditions and changes in business cycles. These same risks apply to commercial loans whether secured by equipment or other personal property or unsecured. Losses on loans secured by owner occupied real
estate, equipment, or other personal property generally are dictated by the value of underlying collateral at the time of default and liquidation of the collateral. When default is driven by issues related specifically to the business owner,
collateral values tend to provide better repayment support and may result in little or no loss. Alternatively, when default is driven by more general economic conditions, underlying collateral generally has devalued more and results in larger losses
due to default. Loans secured by
non-owner
occupied real estate are primarily susceptible to risks associated with swings in occupancy or vacancy and related shifts in lease rates, rental rates or room rates.
Most often these shifts are a result of changes in general economic or market conditions or overbuilding and resultant over-supply. Losses are dependent on value of underlying collateral at the time of default. Values are generally driven by these
same factors and influenced by interest rates and required rates of return as well as changes in occupancy costs.
20
Note 5 Allowance for Loan Losses (continued)
Construction loans, whether owner occupied or
non-owner
occupied
commercial real estate loans or residential development loans, are not only susceptible to the related risks described above but the added risks of construction itself including cost over-runs, mismanagement of the project, or lack of demand or
market changes experienced at time of completion. Again, losses are primarily related to underlying collateral value and changes therein as described above.
Problem C&I loans are generally identified by periodic review of financial information which may include financial statements, tax returns, rent rolls and
payment history of the borrower (delinquency). Based on this information the Bank may decide to take any of several courses of action including demand for repayment, additional collateral or guarantors, and, when repayment becomes unlikely through
borrowers income and cash flow, repossession or foreclosure of the underlying collateral.
Collateral values may be determined by appraisals
obtained through Bank approved, licensed appraisers, qualified independent third parties, public value information (blue book values for autos), sales invoices, or other appropriate means. Appropriate valuations are obtained at initiation of the
credit and periodically (every
3-12
months depending on collateral type) once repayment is questionable and the loan has been classified.
Once a loan becomes delinquent and repayment becomes questionable, a Bank collection officer will address collateral shortfalls with the borrower and attempt
to obtain additional collateral. If this is not forthcoming and payment in full is unlikely, the Bank will estimate its probable loss, using a recent valuation as appropriate to the underlying collateral less estimated costs of sale, and charge the
loan down to the estimated net realizable amount. Depending on the length of time until ultimate collection, the Bank may revalue the underlying collateral and take additional charge-offs as warranted. Revaluations may occur as often as every
3-12
months depending on the underlying collateral and volatility of values. Final charge-offs or recoveries are taken when collateral is liquidated and actual loss is known. Unpaid balances on loans after or during
collection and liquidation may also be pursued through lawsuit and attachment of wages or judgment liens on borrowers other assets.
The following
table shows the ending balance of current, past due, and nonaccrual originated loans by loan category as of the date indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Analysis of Past Due and Nonaccrual Originated Loans As of March 31, 2017
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
Indirect
|
|
|
Other
Consum.
|
|
|
C&I
|
|
|
Construction
|
|
|
Total
|
|
(in thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Originated loan balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Past due:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-59
Days
|
|
$
|
845
|
|
|
$
|
1,855
|
|
|
$
|
424
|
|
|
$
|
640
|
|
|
|
|
|
|
$
|
119
|
|
|
$
|
1,727
|
|
|
|
|
|
|
$
|
421
|
|
|
$
|
6,031
|
|
60-89
Days
|
|
|
|
|
|
|
74
|
|
|
|
461
|
|
|
|
176
|
|
|
|
|
|
|
|
9
|
|
|
|
1,527
|
|
|
|
|
|
|
|
|
|
|
|
2,247
|
|
> 90 Days
|
|
|
|
|
|
|
1,835
|
|
|
|
104
|
|
|
|
319
|
|
|
|
|
|
|
|
5
|
|
|
|
570
|
|
|
$
|
11
|
|
|
|
|
|
|
|
2,844
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total past due
|
|
|
845
|
|
|
|
3,764
|
|
|
|
989
|
|
|
|
1,135
|
|
|
|
|
|
|
|
133
|
|
|
|
3,824
|
|
|
|
11
|
|
|
|
421
|
|
|
|
11,122
|
|
Current
|
|
|
236,491
|
|
|
|
1,505,610
|
|
|
|
258,981
|
|
|
|
34,590
|
|
|
|
|
|
|
|
26,644
|
|
|
|
194,730
|
|
|
|
58,707
|
|
|
|
55,451
|
|
|
|
2,371,204
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total orig. loans
|
|
$
|
237,336
|
|
|
$
|
1,509,374
|
|
|
$
|
259,970
|
|
|
$
|
35,725
|
|
|
|
|
|
|
$
|
26,777
|
|
|
$
|
198,554
|
|
|
$
|
58,718
|
|
|
$
|
55,872
|
|
|
$
|
2,382,326
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
> 90 Days and still accruing
|
|
|
|
|
|
$
|
1,712
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
125
|
|
|
|
|
|
|
|
|
|
|
$
|
1,837
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual loans
|
|
$
|
473
|
|
|
$
|
7,485
|
|
|
$
|
798
|
|
|
$
|
822
|
|
|
|
|
|
|
$
|
12
|
|
|
$
|
1,769
|
|
|
$
|
25
|
|
|
|
|
|
|
$
|
11,384
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table shows the ending balance of current, past due, and nonaccrual PNCI loans by loan category as of the date
indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Analysis of Past Due and Nonaccrual PNCI Loans As of March 31, 2017
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
Indirect
|
|
|
Other
Consum.
|
|
|
C&I
|
|
|
Construction
|
|
|
Total
|
|
(in thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
|
|
|
Resid.
|
|
|
Comm.
|
|
|
PNCI loan balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Past due:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-59
Days
|
|
$
|
367
|
|
|
$
|
669
|
|
|
$
|
270
|
|
|
|
|
|
|
|
|
|
|
$
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,309
|
|
60-89
Days
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
> 90 Days
|
|
|
63
|
|
|
|
81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total past due
|
|
|
430
|
|
|
|
750
|
|
|
|
270
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,453
|
|
Current
|
|
|
70,576
|
|
|
|
238,640
|
|
|
|
19,352
|
|
|
$
|
3,383
|
|
|
|
|
|
|
|
2,467
|
|
|
$
|
10,350
|
|
|
$
|
137
|
|
|
$
|
8,971
|
|
|
|
353,876
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total PNCI loans
|
|
$
|
71,006
|
|
|
$
|
239,390
|
|
|
$
|
19,622
|
|
|
$
|
3,383
|
|
|
|
|
|
|
$
|
2,470
|
|
|
$
|
10,350
|
|
|
$
|
137
|
|
|
$
|
8,971
|
|
|
$
|
355,329
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
> 90 Days and still accruing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual loans
|
|
$
|
164
|
|
|
$
|
1,760
|
|
|
$
|
151
|
|
|
$
|
58
|
|
|
|
|
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
Note 5 Allowance for Loan Losses (continued)
The following table shows the ending balance of current, past due, and nonaccrual originated loans by loan
category as of the date indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Analysis of Past Due and Nonaccrual Originated Loans As of December 31, 2016
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
Indirect
|
|
|
Other
Consum.
|
|
|
C&I
|
|
|
Construction
|
|
|
Total
|
|
(in thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Originated loan balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Past due:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-59
Days
|
|
$
|
552
|
|
|
$
|
317
|
|
|
$
|
754
|
|
|
$
|
646
|
|
|
|
|
|
|
$
|
16
|
|
|
$
|
1,148
|
|
|
$
|
921
|
|
|
|
|
|
|
$
|
4,354
|
|
60-89
Days
|
|
|
139
|
|
|
|
1,517
|
|
|
|
|
|
|
|
395
|
|
|
|
|
|
|
|
30
|
|
|
|
84
|
|
|
|
|
|
|
$
|
421
|
|
|
|
2,586
|
|
> 90 Days
|
|
|
|
|
|
|
216
|
|
|
|
687
|
|
|
|
184
|
|
|
|
|
|
|
|
15
|
|
|
|
634
|
|
|
|
11
|
|
|
|
|
|
|
|
1,747
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total past due
|
|
$
|
691
|
|
|
$
|
2,050
|
|
|
$
|
1,441
|
|
|
$
|
1,225
|
|
|
|
|
|
|
$
|
61
|
|
|
$
|
1,866
|
|
|
$
|
932
|
|
|
$
|
421
|
|
|
$
|
8,687
|
|
Current
|
|
|
228,918
|
|
|
|
1,482,370
|
|
|
|
262,149
|
|
|
|
35,849
|
|
|
|
|
|
|
|
28,106
|
|
|
|
198,869
|
|
|
|
53,681
|
|
|
|
57,698
|
|
|
|
2,347,640
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total orig. loans
|
|
$
|
229,609
|
|
|
$
|
1,484,420
|
|
|
$
|
263,590
|
|
|
$
|
37,074
|
|
|
|
|
|
|
$
|
28,167
|
|
|
$
|
200,735
|
|
|
$
|
54,613
|
|
|
$
|
58,119
|
|
|
$
|
2,356,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
> 90 Days and still accruing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual loans
|
|
$
|
255
|
|
|
$
|
7,736
|
|
|
$
|
1,211
|
|
|
$
|
718
|
|
|
|
|
|
|
$
|
33
|
|
|
$
|
2,930
|
|
|
$
|
11
|
|
|
|
|
|
|
$
|
12,894
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table shows the ending balance of current, past due, and nonaccrual PNCI loans by loan category as of the date
indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Analysis of Past Due and Nonaccrual PNCI Loans As of December 31, 2016
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
Indirect
|
|
|
Other
Consum.
|
|
|
C&I
|
|
|
Construction
|
|
|
Total
|
|
(in thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
|
|
|
Resid.
|
|
|
Comm.
|
|
|
PNCI loan balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Past due:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-59
Days
|
|
$
|
1,510
|
|
|
$
|
73
|
|
|
$
|
274
|
|
|
$
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,896
|
|
60-89
Days
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
> 90 Days
|
|
|
21
|
|
|
|
81
|
|
|
|
589
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
704
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total past due
|
|
$
|
1,531
|
|
|
$
|
154
|
|
|
$
|
863
|
|
|
$
|
52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,600
|
|
Current
|
|
|
77,404
|
|
|
|
249,883
|
|
|
|
20,902
|
|
|
|
3,566
|
|
|
|
|
|
|
$
|
2,534
|
|
|
$
|
12,321
|
|
|
$
|
141
|
|
|
$
|
8,871
|
|
|
|
375,622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total PNCI loans
|
|
$
|
78,935
|
|
|
$
|
250,037
|
|
|
$
|
21,765
|
|
|
$
|
3,618
|
|
|
|
|
|
|
$
|
2,534
|
|
|
$
|
12,321
|
|
|
$
|
141
|
|
|
$
|
8,871
|
|
|
$
|
378,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
> 90 Days and still accruing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual loans
|
|
$
|
194
|
|
|
$
|
1,826
|
|
|
$
|
742
|
|
|
$
|
67
|
|
|
|
|
|
|
$
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired originated loans are those where management has concluded that it is probable that the borrower will be unable to pay
all amounts due under the original contractual terms. The following tables show the recorded investment (financial statement balance), unpaid principal balance, average recorded investment, and interest income recognized for impaired Originated and
PNCI loans, segregated by those with no related allowance recorded and those with an allowance recorded for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired Originated Loans As of, or for the Three Months Ended, March 31, 2017
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
Indirect
|
|
|
Other
Consum.
|
|
|
C&I
|
|
|
Construction
|
|
|
Total
|
|
(in thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
|
|
|
Resid.
|
|
|
Comm.
|
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment
|
|
$
|
1,782
|
|
|
$
|
14,431
|
|
|
$
|
1,064
|
|
|
$
|
743
|
|
|
|
|
|
|
$
|
5
|
|
|
$
|
1,289
|
|
|
$
|
11
|
|
|
|
|
|
|
$
|
19,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid principal
|
|
$
|
1,793
|
|
|
$
|
14,881
|
|
|
$
|
1,144
|
|
|
$
|
1,085
|
|
|
|
|
|
|
$
|
6
|
|
|
$
|
1,312
|
|
|
$
|
16
|
|
|
|
|
|
|
$
|
20,237
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average recorded Investment
|
|
$
|
2,834
|
|
|
$
|
20,770
|
|
|
$
|
2,013
|
|
|
$
|
845
|
|
|
$
|
1
|
|
|
$
|
11
|
|
|
$
|
932
|
|
|
$
|
7
|
|
|
|
|
|
|
$
|
27,413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income Recognized
|
|
$
|
20
|
|
|
$
|
98
|
|
|
$
|
6
|
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
$
|
7
|
|
|
|
|
|
|
|
|
|
|
$
|
132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment
|
|
$
|
1,378
|
|
|
$
|
640
|
|
|
$
|
427
|
|
|
$
|
440
|
|
|
|
|
|
|
$
|
21
|
|
|
$
|
1,783
|
|
|
$
|
14
|
|
|
|
|
|
|
$
|
4,703
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid principal
|
|
$
|
1,382
|
|
|
$
|
640
|
|
|
$
|
440
|
|
|
$
|
443
|
|
|
|
|
|
|
$
|
22
|
|
|
$
|
1,842
|
|
|
$
|
14
|
|
|
|
|
|
|
$
|
4,783
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related allowance
|
|
$
|
172
|
|
|
$
|
18
|
|
|
$
|
106
|
|
|
$
|
57
|
|
|
|
|
|
|
$
|
14
|
|
|
$
|
811
|
|
|
$
|
14
|
|
|
|
|
|
|
$
|
1,192
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average recorded Investment
|
|
$
|
1,692
|
|
|
$
|
1,029
|
|
|
$
|
1,076
|
|
|
$
|
557
|
|
|
|
|
|
|
$
|
11
|
|
|
$
|
1,938
|
|
|
$
|
7
|
|
|
|
|
|
|
$
|
6,310
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income Recognized
|
|
$
|
11
|
|
|
$
|
9
|
|
|
$
|
1
|
|
|
$
|
5
|
|
|
|
|
|
|
|
|
|
|
$
|
14
|
|
|
|
|
|
|
|
|
|
|
$
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
Note 5 Allowance for Loan Losses (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired PNCI Loans As of, or for the Three Months Ended, March 31, 2017
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
Indirect
|
|
|
Other
Consum.
|
|
|
C&I
|
|
|
Construction
|
|
|
Total
|
|
(in thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
|
|
|
Resid.
|
|
|
Comm.
|
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment
|
|
$
|
433
|
|
|
$
|
1,777
|
|
|
$
|
220
|
|
|
$
|
58
|
|
|
|
|
|
|
$
|
138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,626
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid principal
|
|
$
|
455
|
|
|
$
|
2,011
|
|
|
$
|
233
|
|
|
$
|
67
|
|
|
|
|
|
|
$
|
139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average recorded Investment
|
|
$
|
654
|
|
|
$
|
1,455
|
|
|
$
|
337
|
|
|
$
|
64
|
|
|
|
|
|
|
$
|
86
|
|
|
$
|
1
|
|
|
|
|
|
|
$
|
245
|
|
|
$
|
2,842
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income Recognized
|
|
$
|
2
|
|
|
|
|
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment
|
|
$
|
256
|
|
|
$
|
131
|
|
|
$
|
493
|
|
|
|
|
|
|
|
|
|
|
$
|
116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid principal
|
|
$
|
256
|
|
|
$
|
131
|
|
|
$
|
493
|
|
|
|
|
|
|
|
|
|
|
$
|
116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related allowance
|
|
$
|
77
|
|
|
$
|
106
|
|
|
$
|
295
|
|
|
|
|
|
|
|
|
|
|
$
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average recorded Investment
|
|
$
|
128
|
|
|
$
|
1,440
|
|
|
$
|
550
|
|
|
$
|
19
|
|
|
|
|
|
|
$
|
175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income Recognized
|
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
5
|
|
|
|
|
|
|
|
|
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired Originated Loans As of December 31, 2016
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
Indirect
|
|
|
Other
Consum.
|
|
|
C&I
|
|
|
Construction
|
|
|
Total
|
|
(in thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
|
|
|
Resid.
|
|
|
Comm.
|
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment
|
|
$
|
1,691
|
|
|
$
|
13,144
|
|
|
$
|
1,480
|
|
|
$
|
598
|
|
|
|
|
|
|
$
|
15
|
|
|
$
|
762
|
|
|
$
|
11
|
|
|
|
|
|
|
$
|
17,701
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid principal
|
|
$
|
1,699
|
|
|
$
|
13,488
|
|
|
$
|
1,561
|
|
|
$
|
922
|
|
|
|
|
|
|
$
|
29
|
|
|
$
|
926
|
|
|
$
|
16
|
|
|
|
|
|
|
$
|
18,641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average recorded Investment
|
|
$
|
2,788
|
|
|
$
|
20,126
|
|
|
$
|
2,221
|
|
|
$
|
773
|
|
|
$
|
1
|
|
|
$
|
16
|
|
|
$
|
669
|
|
|
$
|
7
|
|
|
|
|
|
|
$
|
26,601
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income Recognized
|
|
$
|
83
|
|
|
$
|
581
|
|
|
$
|
40
|
|
|
$
|
4
|
|
|
|
|
|
|
$
|
1
|
|
|
$
|
48
|
|
|
|
|
|
|
|
|
|
|
$
|
757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment
|
|
$
|
1,372
|
|
|
$
|
646
|
|
|
$
|
430
|
|
|
$
|
485
|
|
|
|
|
|
|
$
|
18
|
|
|
$
|
3,334
|
|
|
|
|
|
|
|
|
|
|
$
|
6,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid principal
|
|
$
|
1,372
|
|
|
$
|
646
|
|
|
$
|
440
|
|
|
$
|
487
|
|
|
|
|
|
|
$
|
19
|
|
|
$
|
3,385
|
|
|
|
|
|
|
|
|
|
|
$
|
6,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related allowance
|
|
$
|
170
|
|
|
$
|
19
|
|
|
$
|
110
|
|
|
$
|
102
|
|
|
|
|
|
|
$
|
13
|
|
|
$
|
1,130
|
|
|
|
|
|
|
|
|
|
|
$
|
1,544
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average recorded Investment
|
|
$
|
1,689
|
|
|
$
|
1,032
|
|
|
$
|
1,077
|
|
|
$
|
579
|
|
|
|
|
|
|
$
|
9
|
|
|
$
|
2,714
|
|
|
|
|
|
|
|
|
|
|
$
|
7,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income Recognized
|
|
$
|
56
|
|
|
$
|
37
|
|
|
$
|
9
|
|
|
$
|
25
|
|
|
|
|
|
|
$
|
2
|
|
|
$
|
77
|
|
|
|
|
|
|
|
|
|
|
$
|
206
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired PNCI Loans As of December 31, 2016
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
Indirect
|
|
|
Other
Consum.
|
|
|
C&I
|
|
|
Construction
|
|
|
Total
|
|
(in thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
|
|
|
Resid.
|
|
|
Comm.
|
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment
|
|
$
|
463
|
|
|
$
|
1,826
|
|
|
$
|
735
|
|
|
$
|
67
|
|
|
|
|
|
|
$
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,094
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid principal
|
|
$
|
486
|
|
|
$
|
2,031
|
|
|
$
|
746
|
|
|
$
|
74
|
|
|
|
|
|
|
$
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average recorded Investment
|
|
$
|
669
|
|
|
$
|
1,479
|
|
|
$
|
594
|
|
|
$
|
69
|
|
|
|
|
|
|
$
|
18
|
|
|
$
|
1
|
|
|
|
|
|
|
$
|
245
|
|
|
$
|
3,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income Recognized
|
|
$
|
7
|
|
|
|
|
|
|
$
|
9
|
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment
|
|
$
|
259
|
|
|
$
|
132
|
|
|
$
|
551
|
|
|
|
|
|
|
|
|
|
|
$
|
118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid principal
|
|
$
|
259
|
|
|
$
|
132
|
|
|
$
|
551
|
|
|
|
|
|
|
|
|
|
|
$
|
118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related allowance
|
|
$
|
79
|
|
|
$
|
108
|
|
|
$
|
300
|
|
|
|
|
|
|
|
|
|
|
$
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average recorded Investment
|
|
$
|
130
|
|
|
$
|
1,440
|
|
|
$
|
579
|
|
|
$
|
19
|
|
|
|
|
|
|
$
|
176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,344
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income Recognized
|
|
$
|
10
|
|
|
$
|
7
|
|
|
$
|
27
|
|
|
|
|
|
|
|
|
|
|
$
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
Note 5 Allowance for Loan Losses (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired Originated Loans As of, or for the Three Months Ended, March 31, 2016
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
Indirect
|
|
|
Other
Consum.
|
|
|
C&I
|
|
|
Construction
|
|
|
Total
|
|
(in thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
|
|
|
Resid.
|
|
|
Comm.
|
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment
|
|
$
|
3,806
|
|
|
$
|
7,917
|
|
|
$
|
3,457
|
|
|
$
|
1,154
|
|
|
$
|
1
|
|
|
$
|
10
|
|
|
$
|
520
|
|
|
|
|
|
|
|
|
|
|
$
|
16,865
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid principal
|
|
$
|
5,963
|
|
|
$
|
8,393
|
|
|
$
|
6,325
|
|
|
$
|
1,598
|
|
|
$
|
10
|
|
|
$
|
14
|
|
|
$
|
635
|
|
|
$
|
63
|
|
|
|
|
|
|
$
|
23,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average recorded Investment
|
|
$
|
3,846
|
|
|
$
|
17,513
|
|
|
$
|
3,210
|
|
|
$
|
1,051
|
|
|
$
|
2
|
|
|
$
|
13
|
|
|
$
|
548
|
|
|
$
|
2
|
|
|
|
|
|
|
$
|
26,185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income Recognized
|
|
$
|
19
|
|
|
$
|
72
|
|
|
$
|
8
|
|
|
$
|
3
|
|
|
|
|
|
|
|
|
|
|
$
|
7
|
|
|
|
|
|
|
|
|
|
|
$
|
109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment
|
|
$
|
1,991
|
|
|
$
|
1,440
|
|
|
$
|
1,304
|
|
|
$
|
666
|
|
|
|
|
|
|
|
|
|
|
$
|
3,351
|
|
|
|
|
|
|
|
|
|
|
$
|
8,752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid principal
|
|
$
|
2,065
|
|
|
$
|
1,480
|
|
|
$
|
1,393
|
|
|
$
|
696
|
|
|
|
|
|
|
|
|
|
|
$
|
3,376
|
|
|
|
|
|
|
|
|
|
|
$
|
9,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related allowance
|
|
$
|
324
|
|
|
$
|
175
|
|
|
$
|
474
|
|
|
$
|
248
|
|
|
|
|
|
|
|
|
|
|
$
|
1,934
|
|
|
|
|
|
|
|
|
|
|
$
|
3,155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average recorded Investment
|
|
$
|
1,998
|
|
|
$
|
1,429
|
|
|
$
|
1,514
|
|
|
$
|
670
|
|
|
|
|
|
|
$
|
1
|
|
|
$
|
2,722
|
|
|
|
|
|
|
|
|
|
|
$
|
8,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income Recognized
|
|
$
|
13
|
|
|
$
|
20
|
|
|
$
|
4
|
|
|
$
|
5
|
|
|
|
|
|
|
|
|
|
|
$
|
34
|
|
|
|
|
|
|
|
|
|
|
$
|
76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired PNCI Loans As of, or for the Three Months Ended, March 31, 2016
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
Indirect
|
|
|
Other
Consum.
|
|
|
C&I
|
|
|
Construction
|
|
|
Total
|
|
(in thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
|
|
|
Resid.
|
|
|
Comm.
|
|
|
With no related allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment
|
|
$
|
604
|
|
|
$
|
844
|
|
|
$
|
539
|
|
|
$
|
108
|
|
|
|
|
|
|
$
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid principal
|
|
$
|
643
|
|
|
$
|
908
|
|
|
$
|
597
|
|
|
$
|
112
|
|
|
|
|
|
|
$
|
51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average recorded Investment
|
|
$
|
740
|
|
|
$
|
988
|
|
|
$
|
497
|
|
|
$
|
89
|
|
|
|
|
|
|
$
|
32
|
|
|
$
|
1
|
|
|
|
|
|
|
$
|
245
|
|
|
$
|
2,592
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income Recognized
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment
|
|
$
|
614
|
|
|
$
|
2,029
|
|
|
$
|
694
|
|
|
|
|
|
|
|
|
|
|
$
|
258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,595
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid principal
|
|
$
|
614
|
|
|
$
|
2,142
|
|
|
$
|
694
|
|
|
|
|
|
|
|
|
|
|
$
|
258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related allowance
|
|
$
|
130
|
|
|
$
|
120
|
|
|
$
|
231
|
|
|
|
|
|
|
|
|
|
|
$
|
84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average recorded Investment
|
|
$
|
307
|
|
|
$
|
2,389
|
|
|
$
|
650
|
|
|
$
|
19
|
|
|
|
|
|
|
$
|
246
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,611
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income Recognized
|
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
7
|
|
|
|
|
|
|
|
|
|
|
$
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2017, $12,285,000 of originated loans were TDR and classified as impaired. The Company had obligations to
lend $70,000 of additional funds on these TDR as of March 31, 2017. At March 31, 2017, $1,470,000 of PNCI loans were TDR and classified as impaired. The Company had no obligations to lend additional funds on these TDR as of March 31,
2017.
At December 31, 2016, $12,371,000 of Originated loans were TDRs and classified as impaired. The Company had obligations to lend $25,000 of
additional funds on these TDRs as of December 31, 2016. At December 31, 2016, $1,324,000 of PNCI loans were TDRs and classified as impaired. The Company had no obligations to lend additional funds on these TDRs as of December 31,
2016.
At March 31, 2016, $15,921,000 of originated loans were TDR and classified as impaired. The Company had obligations to lend $15,000 of
additional funds on these TDR as of March 31, 2016. At March 31, 2016, $1,792,000 of PNCI loans were TDR and classified as impaired. The Company had no obligations to lend additional funds on these TDR as of March 31, 2016.
24
Note 5 Allowance for Loan Losses (continued)
The following tables show certain information regarding Troubled Debt Restructurings (TDRs) that occurred
during the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TDR Information for the Three Months Ended March 31, 2017
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
Indirect
|
|
|
Other
Consum.
|
|
|
C&I
|
|
|
Construction
|
|
|
Total
|
|
(dollars in thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Number
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
Pre-mod
outstanding principal balance
|
|
|
|
|
|
|
|
|
|
$
|
20
|
|
|
|
|
|
|
|
|
|
|
$
|
14
|
|
|
$
|
100
|
|
|
|
|
|
|
|
|
|
|
$
|
134
|
|
Post-mod
outstanding principal balance
|
|
|
|
|
|
|
|
|
|
$
|
20
|
|
|
|
|
|
|
|
|
|
|
$
|
14
|
|
|
$
|
100
|
|
|
|
|
|
|
|
|
|
|
$
|
134
|
|
Financial impact due to TDR taken as additional provision
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
11
|
|
|
$
|
94
|
|
|
|
|
|
|
|
|
|
|
$
|
105
|
|
Number that defaulted during the period
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Recorded investment of TDRs that defaulted during the period
|
|
|
|
|
|
$
|
124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
124
|
|
Financial impact due to the default of previous TDR taken as charge-offs or additional
provisions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following tables show certain information regarding TDRs that occurred during the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TDR Information for the Three Months Ended March 31, 2016
|
|
|
|
RE Mortgage
|
|
|
Home Equity
|
|
|
Auto
Indirect
|
|
|
Other
Consum.
|
|
|
C&I
|
|
|
Construction
|
|
|
Total
|
|
(dollars in thousands)
|
|
Resid.
|
|
|
Comm.
|
|
|
Lines
|
|
|
Loans
|
|
|
|
|
|
Resid.
|
|
|
Comm.
|
|
|
Number
|
|
|
|
|
|
|
2
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
Pre-mod
outstanding principal balance
|
|
|
|
|
|
$
|
78
|
|
|
$
|
132
|
|
|
$
|
105
|
|
|
|
|
|
|
|
|
|
|
$
|
12
|
|
|
|
|
|
|
|
|
|
|
$
|
327
|
|
Post-mod
outstanding principal balance
|
|
|
|
|
|
$
|
115
|
|
|
$
|
132
|
|
|
$
|
105
|
|
|
|
|
|
|
|
|
|
|
$
|
12
|
|
|
|
|
|
|
|
|
|
|
$
|
364
|
|
Financial impact due to TDR taken as additional provision
|
|
|
|
|
|
|
|
|
|
$
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8
|
|
|
|
|
|
|
|
|
|
|
$
|
27
|
|
Number that defaulted during the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded investment of TDRs that defaulted during the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial impact due to the default of previous TDR taken as charge-offs or additional
provisions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Modifications classified as TDRs can include one or a combination of the following: rate modifications, term extensions,
interest only modifications, either temporary or long-term, payment modifications, and collateral substitutions/additions.
For all new TDRs, an
impairment analysis is conducted. If the loan is determined to be collateral dependent, any additional amount of impairment will be calculated based on the difference between estimated collectible value and the current carrying balance of the loan.
This difference could result in an increased provision and is typically charged off. If the asset is determined not to be collateral dependent, the impairment is measured on the net present value difference between the expected cash flows of the
restructured loan and the cash flows which would have been received under the original terms. The effect of this could result in a requirement for additional provision to the reserve. The effect of these required provisions for the period are
indicated above.
Typically if a TDR defaults during the period, the loan is then considered collateral dependent and, if it was not already considered
collateral dependent, an appropriate provision will be reserved or charge will be taken. The additional provisions required resulting from default of previously modified TDRs are noted above.
25
Note 6 Foreclosed Assets
A summary of the activity in the balance of foreclosed assets follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2017
|
|
|
Three months ended March 31, 2016
|
|
|
|
Noncovered
|
|
|
Covered
|
|
|
Total
|
|
|
Noncovered
|
|
|
Covered
|
|
|
Total
|
|
Beginning balance, net
|
|
$
|
3,763
|
|
|
$
|
223
|
|
|
$
|
3,986
|
|
|
$
|
5,369
|
|
|
|
|
|
|
$
|
5,369
|
|
Additions/transfers from loans
|
|
|
85
|
|
|
|
|
|
|
|
85
|
|
|
|
416
|
|
|
|
|
|
|
|
416
|
|
Dispositions/sales
|
|
|
(385
|
)
|
|
|
(223
|
)
|
|
|
(608
|
)
|
|
|
(1,325
|
)
|
|
|
|
|
|
|
(1,325
|
)
|
Valuation adjustments
|
|
|
66
|
|
|
|
|
|
|
|
66
|
|
|
|
11
|
|
|
|
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance, net
|
|
$
|
3,529
|
|
|
|
|
|
|
$
|
3,529
|
|
|
$
|
4,471
|
|
|
|
|
|
|
$
|
4,471
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending valuation allowance
|
|
$
|
(300
|
)
|
|
|
|
|
|
$
|
(300
|
)
|
|
$
|
572
|
|
|
|
|
|
|
$
|
572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending number of foreclosed assets
|
|
|
12
|
|
|
|
|
|
|
|
12
|
|
|
|
21
|
|
|
|
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of foreclosed assets
|
|
$
|
510
|
|
|
$
|
216
|
|
|
$
|
726
|
|
|
$
|
1,417
|
|
|
|
|
|
|
$
|
1,417
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of foreclosed assets
|
|
$
|
125
|
|
|
$
|
(7
|
)
|
|
$
|
118
|
|
|
$
|
92
|
|
|
|
|
|
|
$
|
92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2017, $1,207,000 of foreclosed residential real estate properties, all of which the Company has obtained
physical possession of, are included in foreclosed assets. At March 31, 2017, the recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are underway is $160,000.
Note 7 - Premises and Equipment
Premises and
equipment were comprised of:
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(In thousands)
|
|
Land & land improvements
|
|
$
|
9,522
|
|
|
$
|
9,522
|
|
Buildings
|
|
|
43,600
|
|
|
|
42,345
|
|
Furniture and equipment
|
|
|
33,077
|
|
|
|
31,428
|
|
|
|
|
|
|
|
|
|
|
|
|
|
86,199
|
|
|
|
83,295
|
|
Less: Accumulated depreciation
|
|
|
(38,719
|
)
|
|
|
(37,412
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
47,480
|
|
|
|
45,883
|
|
Construction in progress
|
|
|
2,028
|
|
|
|
2,523
|
|
|
|
|
|
|
|
|
|
|
Total premises and equipment
|
|
$
|
49,508
|
|
|
$
|
48,406
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense for premises and equipment amounted to $1,311,000 and $1,271,000 for the three months ended
March 31, 2017 and 2016, respectively.
Note 8 Cash Value of Life Insurance
A summary of the activity in the balance of cash value of life insurance follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
Beginning balance
|
|
$
|
95,912
|
|
|
$
|
94,560
|
|
Increase in cash value of life insurance
|
|
|
685
|
|
|
|
696
|
|
Gain on death benefit
|
|
|
107
|
|
|
|
|
|
Insurance proceeds receivable reclassified to other assets
|
|
|
(921
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
95,783
|
|
|
$
|
95,256
|
|
|
|
|
|
|
|
|
|
|
End of period death benefit
|
|
$
|
164,574
|
|
|
$
|
166,216
|
|
Number of policies owned
|
|
|
183
|
|
|
|
187
|
|
Insurance companies used
|
|
|
14
|
|
|
|
14
|
|
Current and former employees and directors covered
|
|
|
58
|
|
|
|
59
|
|
As of March 31, 2017, the Bank was the owner and beneficiary of 183 life insurance policies, issued by 14 life insurance
companies, covering 58 current and former employees and directors. These life insurance policies are recorded on the Companys financial statements at their reported cash (surrender) values. As a result of current tax law and the nature of
these policies, the Bank records any increase in cash value of these policies as nontaxable noninterest income. If the Bank decided to surrender any of the policies prior to the death of the insured, such surrender may result in a tax expense
related to the
life-to-date
cumulative increase in cash value of the policy. If the Bank retains such policies until the death of the insured, the Bank would receive
nontaxable proceeds from the insurance company equal to the death benefit of the policies. The Bank has entered into Joint Beneficiary Agreements (JBAs) with certain of the insured that for certain of the policies provide some level of sharing of
the death benefit, less the cash surrender value, among the Bank and the beneficiaries of the insured upon the receipt of death benefits. See Note 15 of these condensed consolidated financial statements for additional information on JBAs.
26
Note 9 - Goodwill and Other Intangible Assets
The following table summarizes the Companys goodwill intangible as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
|
|
|
|
|
|
December 31,
|
|
(dollar in thousands)
|
|
2017
|
|
|
Additions
|
|
|
Reductions
|
|
|
2016
|
|
Goodwill
|
|
$
|
64,311
|
|
|
|
|
|
|
|
|
|
|
$
|
64,311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes the Companys core deposit intangibles as of the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
|
|
|
Reductions/
|
|
|
Fully
|
|
|
December 31,
|
|
(dollar in thousands)
|
|
2017
|
|
|
Additions
|
|
|
Amortization
|
|
|
Depreciated
|
|
|
2016
|
|
Core deposit intangibles
|
|
$
|
10,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
10,120
|
|
Accumulated amortization
|
|
|
(3,916
|
)
|
|
|
|
|
|
$
|
(359
|
)
|
|
|
|
|
|
|
(3,557
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core deposit intangibles, net
|
|
$
|
6,204
|
|
|
|
|
|
|
$
|
(359
|
)
|
|
|
|
|
|
$
|
6,563
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company recorded additions to its CDI of $2,046,000 in conjunction with the acquisition of three branch offices from Bank
of America on March 18, 2016, $6,614,000 in conjunction with the North Valley Bancorp acquisition on October 3, 2014, $898,000 in conjunction with the Citizens acquisition on September 23, 2011, and $562,000 in conjunction with the
Granite acquisition on May 28, 2010. The following table summarizes the Companys remaining estimated core deposit intangible amortization (dollars in thousands):
|
|
|
|
|
|
|
Estimated Core Deposit
|
|
Years Ended
|
|
Intangible Amortization
|
|
2017
|
|
$
|
1,030
|
|
2018
|
|
|
1,324
|
|
2019
|
|
|
1,228
|
|
2020
|
|
|
1,228
|
|
2021
|
|
|
969
|
|
Thereafter
|
|
|
425
|
|
Note 10 - Mortgage Servicing Rights
The following tables summarize the activity in, and the main assumptions used to determine the fair value of mortgage servicing rights (MSRs) for
the periods indicated (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
Balance at beginning of period
|
|
$
|
6,595
|
|
|
$
|
7,618
|
|
Additions
|
|
|
278
|
|
|
|
220
|
|
Change in fair value
|
|
|
(13
|
)
|
|
|
(698
|
)
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
6,860
|
|
|
$
|
7,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractually specified servicing fees, late fees and ancillary fees earned
|
|
$
|
521
|
|
|
$
|
517
|
|
Balance of loans serviced at:
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
$
|
816,623
|
|
|
$
|
817,917
|
|
End of period
|
|
$
|
822,506
|
|
|
$
|
813,800
|
|
Weighted-average prepayment speed (CPR)
|
|
|
8.3
|
%
|
|
|
11.6
|
%
|
Weighted-average discount rate
|
|
|
14.0
|
%
|
|
|
10.0
|
%
|
The changes in fair value of MSRs that occurred during the three months ended March 31, 2017 and 2016 were mainly due to
changes in principal balances, changes in mortgage prepayment speeds, and changes in investor required rate of return, or discount rate, of the MSRs.
Note 11 - Indemnification Asset
A summary of the
activity in the balance of indemnification asset follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
Beginning balance
|
|
$
|
(744
|
)
|
|
$
|
(521
|
)
|
Effect of actual and estimated future covered losses and recoveries
|
|
|
(191
|
)
|
|
|
(111
|
)
|
Reimbursable (revenue) expenses incurred
|
|
|
(32
|
)
|
|
|
(4
|
)
|
Payments made to (received from) FDIC
|
|
|
72
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
(895
|
)
|
|
$
|
(607
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of indemnification asset (liability) recorded in other assets
|
|
$
|
(179
|
)
|
|
$
|
11
|
|
Amount of indemnification asset (liability) recorded in other liabilities
|
|
|
(716
|
)
|
|
|
(618
|
)
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
(895
|
)
|
|
$
|
(607
|
)
|
|
|
|
|
|
|
|
|
|
27
Note 12 Other Assets
Other assets were comprised of (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Deferred tax asset, net
|
|
$
|
35,764
|
|
|
$
|
36,199
|
|
Prepaid expense
|
|
|
4,219
|
|
|
|
3,045
|
|
Software
|
|
|
1,805
|
|
|
|
2,039
|
|
Advanced compensation
|
|
|
220
|
|
|
|
249
|
|
Capital Trusts
|
|
|
1,733
|
|
|
|
1,702
|
|
Investment in Low Housing Tax Credit Funds
|
|
|
18,184
|
|
|
|
18,465
|
|
Life insurance proceeds receivable
|
|
|
2,759
|
|
|
|
2,120
|
|
Tax refund receivable
|
|
|
|
|
|
|
6,460
|
|
Premises held for sale
|
|
|
|
|
|
|
2,896
|
|
Miscellaneous other assets
|
|
|
1,970
|
|
|
|
1,568
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
$
|
66,654
|
|
|
$
|
74,743
|
|
|
|
|
|
|
|
|
|
|
Note 13 - Deposits
A
summary of the balances of deposits follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Noninterest-bearing demand
|
|
$
|
1,254,431
|
|
|
$
|
1,275,745
|
|
Interest-bearing demand
|
|
|
947,006
|
|
|
|
887,625
|
|
Savings
|
|
|
1,370,015
|
|
|
|
1,397,036
|
|
Time certificates, over $250,000
|
|
|
76,372
|
|
|
|
75,184
|
|
Other time certificates
|
|
|
251,060
|
|
|
|
259,970
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
$
|
3,898,884
|
|
|
$
|
3,895,560
|
|
|
|
|
|
|
|
|
|
|
Certificate of deposit balances of $50,000,000 from the State of California were included in time certificates, $250,000 and
over, at each of March 31, 2017 and December 31, 2016. The Bank participates in a deposit program offered by the State of California whereby the State may make deposits at the Banks request subject to collateral and credit worthiness
constraints. The negotiated rates on these State deposits are generally more favorable than other wholesale funding sources available to the Bank. Overdrawn deposit balances of $985,000 and $1,191,000 were classified as consumer loans at
March 31, 2017 and December 31, 2016, respectively.
Note 14 Reserve for Unfunded Commitments
The following tables summarize the activity in reserve for unfunded commitments for the periods indicated (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
Balance at beginning of period
|
|
$
|
2,719
|
|
|
$
|
2,475
|
|
Provision for losses Unfunded commitments
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
2,734
|
|
|
$
|
2,475
|
|
|
|
|
|
|
|
|
|
|
Note 15 Other Liabilities
Other liabilities were comprised of (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Deferred compensation
|
|
$
|
6,683
|
|
|
$
|
6,525
|
|
Pension liability
|
|
|
26,868
|
|
|
|
26,645
|
|
Joint beneficiary agreements
|
|
|
3,069
|
|
|
|
3,007
|
|
Low income housing tax credit fund commitments
|
|
|
14,380
|
|
|
|
15,176
|
|
Accrued salaries and benefits expense
|
|
|
6,742
|
|
|
|
5,704
|
|
Loan escrow and servicing payable
|
|
|
1,140
|
|
|
|
2,146
|
|
Litigation contingency
|
|
|
1,450
|
|
|
|
1,450
|
|
Taxes payable
|
|
|
546
|
|
|
|
|
|
Miscellaneous other liabilities
|
|
|
6,060
|
|
|
|
6,711
|
|
|
|
|
|
|
|
|
|
|
Total other liabilities
|
|
$
|
66,938
|
|
|
$
|
67,364
|
|
|
|
|
|
|
|
|
|
|
Note 16 - Other Borrowings
A summary of the balances of other borrowings follows:
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(in thousands)
|
|
Other collateralized borrowings, fixed rate, as of March 31, 2017 of 0.05%, payable on
April 3, 2017
|
|
$
|
15,197
|
|
|
$
|
17,493
|
|
|
|
|
|
|
|
|
|
|
Total other borrowings
|
|
$
|
15,197
|
|
|
$
|
17,493
|
|
|
|
|
|
|
|
|
|
|
28
The Company did not enter into any repurchase agreements during the three months ended March 31, 2017 or the
year ended December 31, 2016.
The Company had $15,197,000 and $17,493,000 of other collateralized borrowings at March 31, 2017 and
December 31, 2016, respectively. Other collateralized borrowings are generally overnight maturity borrowings from
non-financial
institutions that are collateralized by securities owned by the Company. As
of March 31, 2017, the Company has pledged as collateral and sold under agreements to repurchase investment securities with fair value of $36,421,000 under these other collateralized borrowings.
The Company maintains a collateralized line of credit with the Federal Home Loan Bank of San Francisco. Based on the FHLB stock requirements at March 31,
2017, this line provided for maximum borrowings of $1,302,432,000 of which none was outstanding, leaving $1,302,432,000 available. As of March 31, 2017, the Company has designated investment securities with fair value of $72,323,000 and loans
totaling $1,881,915,000 as potential collateral under this collateralized line of credit with the FHLB.
The Company maintains a collateralized line of
credit with the San Francisco Federal Reserve Bank. As of March 31, 2017, this line provided for maximum borrowings of $127,355,000 of which none was outstanding, leaving $127,355,000 available. As of March 31, 2017, the Company has
designated investment securities with fair value of $20,000 and loans totaling $220,287,000 as potential collateral under this collateralized line of credit with the San Francisco Federal Reserve Bank.
The Company had available unused correspondent banking lines of credit from commercial banks totaling $20,000,000 for federal funds transactions at
March 31, 2017.
Note 17 Junior Subordinated Debt
At March 31, 2017, the Company had five wholly-owned subsidiary business trusts that had issued $62.9 million of trust preferred securities (the
Capital Trusts). Trust preferred securities accrue and pay distributions periodically at specified annual rates as provided in the indentures. The trusts used the net proceeds from the offering to purchase a like amount of subordinated
debentures (the Debentures) of the Company. The Debentures are the sole assets of the trusts. The Companys obligations under the subordinated debentures and related documents, taken together, constitute a full and unconditional
guarantee by the Company of the obligations of the trusts. The trust preferred securities are mandatorily redeemable upon the maturity of the Debentures, or upon earlier redemption as provided in the indentures. The Company has the right to redeem
the Debentures in whole (but not in part) on or after specific dates, at a redemption price specified in the indentures plus any accrued but unpaid interest to the redemption date. The Company also has a right to defer consecutive payments of
interest on the debentures for up to five years.
The Company organized two of the Capital Trusts. The Company acquired its three other Capital Trusts and
assumed their related Debentures as a result of its acquisition of North Valley Bancorp. At the acquisition date of October 3, 2014, the Debentures associated with North Valley Bancorps three Capital Trusts were recorded on the
Companys books at their fair values of $5,006,000, $3,918,000, and $6,063,000, respectively. The related fair value discounts to face value of these Debentures will be amortized over the remaining time to maturity for each of these Debentures
using the effective interest method. Similar, and proportional, discounts were applied to the acquired common stock interests in each of the acquired Capital Trusts and these discounts will be proportionally amortized over the remaining time to
maturity for each related debenture.
The recorded book values of the Debentures issued by the Capital Trusts are reflected as junior subordinated debt in
the Companys consolidated balance sheets. The common stock issued by the Capital Trusts and owned by the Company is recorded in other assets in the Companys consolidated balance sheets. The recorded book value of the debentures issued by
the Capital Trusts, less the recorded book value of the common stock of the Capital Trusts owned by the Company, continues to qualify as Tier 1 or Tier 2 capital under interim guidance issued by the Board of Governors of the Federal Reserve System.
The following table summarizes the terms and recorded balance of each subordinated debenture as of the date indicated (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated Debt Series
|
|
Maturity
Date
|
|
|
Face
Value
|
|
|
Coupon Rate
(Variable)
3 mo. LIBOR +
|
|
|
As of March 31, 2017
|
|
|
December 31, 2016
|
|
|
|
|
|
Current
|
|
|
Recorded
|
|
|
Recorded
|
|
|
|
|
|
Coupon Rate
|
|
|
Book Value
|
|
|
Book Value
|
|
TriCo Cap Trust I
|
|
|
10/7/2033
|
|
|
$
|
20,619
|
|
|
|
3.05
|
%
|
|
|
4.07
|
%
|
|
$
|
20,619
|
|
|
$
|
20,619
|
|
TriCo Cap Trust II
|
|
|
7/23/2034
|
|
|
|
20,619
|
|
|
|
2.55
|
%
|
|
|
3.59
|
%
|
|
|
20,619
|
|
|
|
20,619
|
|
North Valley Trust II
|
|
|
4/24/2033
|
|
|
|
6,186
|
|
|
|
3.25
|
%
|
|
|
4.29
|
%
|
|
|
5,105
|
|
|
|
5,095
|
|
North Valley Trust III
|
|
|
4/24/2034
|
|
|
|
5,155
|
|
|
|
2.80
|
%
|
|
|
3.84
|
%
|
|
|
4,013
|
|
|
|
4,005
|
|
North Valley Trust IV
|
|
|
3/15/2036
|
|
|
|
10,310
|
|
|
|
1.33
|
%
|
|
|
2.46
|
%
|
|
|
6,357
|
|
|
|
6,329
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
62,889
|
|
|
|
|
|
|
|
|
|
|
$
|
56,713
|
|
|
$
|
56,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the three months ended March 31, 2017, the balance of Junior Subordinated Debt increased $46,000 to $56,713,000
due to purchase fair value discount amortization.
29
Note 18 - Commitments and Contingencies
Restricted Cash Balances
Reserves (in the form of deposits with the San Francisco Federal Reserve Bank) of $81,740,000 and $78,183,000 were
maintained to satisfy Federal regulatory requirements at March 31, 2017 and December 31, 2016. These reserves are included in cash and due from banks in the accompanying consolidated balance sheets.
Lease Commitments
The Company leases 44 sites under
non-cancelable
operating leases. The leases contain
various provisions for increases in rental rates, based either on changes in the published Consumer Price Index or a predetermined escalation schedule. Substantially all of the leases provide the Company with the option to extend the lease term one
or more times following expiration of the initial term. The Company currently does not have any capital leases.
At December 31, 2016, future minimum
commitments under
non-cancelable
operating leases with initial or remaining terms of one year or more are as follows:
|
|
|
|
|
|
|
Operating Leases
|
|
|
|
(in thousands)
|
|
2017
|
|
$
|
3,320
|
|
2018
|
|
|
2,523
|
|
2019
|
|
|
1,924
|
|
2020
|
|
|
1,325
|
|
2021
|
|
|
963
|
|
Thereafter
|
|
|
1,696
|
|
|
|
|
|
|
Future minimum lease payments
|
|
$
|
11,751
|
|
|
|
|
|
|
Rent expense under operating leases was $1,047,000 and $981,000 during the three months ended March 31, 2017 and 2016,
respectively. Rent expense was offset by rent income of $13,000 and $58,000 during the three months ended March 31, 2017 and 2016, respectively.
Financial Instruments with
Off-Balance-Sheet
Risk
The Company is a party to financial instruments with
off-balance
sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby letters of credit, and deposit account
overdraft privilege. Those instruments involve, to varying degrees, elements of risk in excess of the amount recognized in the balance sheet. The contract amounts of those instruments reflect the extent of involvement the Company has in particular
classes of financial instruments.
The Companys exposure to loss in the event of nonperformance by the other party to the financial instrument for
commitments to extend credit and standby letters of credit written is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for
on-balance
sheet instruments. The Companys exposure to loss in the event of nonperformance by the other party to the financial instrument for deposit account overdraft privilege is represented by the overdraft
privilege amount disclosed to the deposit account holder.
The following table presents a summary of the Banks commitments and contingent
liabilities:
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
March 31,
2017
|
|
|
December 31,
2016
|
|
Financial instruments whose amounts represent risk:
|
|
|
|
|
|
|
|
|
Commitments to extend credit:
|
|
|
|
|
|
|
|
|
Commercial loans
|
|
$
|
228,892
|
|
|
$
|
220,836
|
|
Consumer loans
|
|
|
412,821
|
|
|
|
406,855
|
|
Real estate mortgage loans
|
|
|
38,589
|
|
|
|
42,184
|
|
Real estate construction loans
|
|
|
88,301
|
|
|
|
97,399
|
|
Standby letters of credit
|
|
|
11,639
|
|
|
|
12,763
|
|
Deposit account overdraft privilege
|
|
|
99,029
|
|
|
|
98,583
|
|
30
Note 18 - Commitments and Contingencies (continued)
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any
condition established in the contract. Commitments generally have fixed expiration dates of one year or less or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn
upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customers credit worthiness on a
case-by-case
basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on Managements credit evaluation of the customer. Collateral held varies, but may include accounts receivable, inventory, property,
plant and equipment, residential properties, and income-producing commercial properties.
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 private borrowing arrangements. Most standby letters of credit are issued for one year or less. The credit risk involved in
issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Collateral requirements vary, but in general follow the requirements for other loan facilities.
Deposit account overdraft privilege amount represents the unused overdraft privilege balance available to the Companys deposit account holders who have
deposit accounts covered by an overdraft privilege. The Company has established an overdraft privilege for certain of its deposit account products whereby all holders of such accounts who bring their accounts to a positive balance at least once
every thirty days receive the overdraft privilege. The overdraft privilege allows depositors to overdraft their deposit account up to a predetermined level. The predetermined overdraft limit is set by the Company based on account type.
Legal Proceedings
On September 15, 2014, a former Personal Banker at one of the Banks
in-store
branches filed a Class Action Complaint against the Bank in Butte County Superior Court, alleging causes of action related to the observance of meal and rest periods and seeking to represent a
class of current and former branch employees with the same or similar job duties, employed by the Bank within the State of California during the preceding four years. On or about June 25, 2015, Plaintiff filed an Amended Complaint
expanding the class definition to include all current and former
non-exempt
branch employees employed by the Bank within the State of California at any time during the period of September 15, 2010 to the
entry of judgment. The Bank responded to the First Amended Complaint by denying the charges and the parties engaged in written discovery. The parties then engaged in
non-binding
mediation during the
third quarter of 2016.
In addition to this, on January 20, 2015, a then-current Personal Banker at one of the Banks
in-store
branches filed a First Amended Complaint against the Bank and the Company in Sacramento County Superior Court, alleging causes of action related to wage statement violations. As part of the Complaint
Plaintiff is seeking to represent a class of current and former exempt and
non-exempt
employees who worked for the Company and/or the Bank during the time period of December 12, 2013 to October 21,
2016. The Company and the Bank responded to the First Amended Complaint by denying the charges and engaging in written discovery with Plaintiff. The parties then engaged in
non-binding
mediation of
the action during the third quarter of 2016 as well.
As part of the mediations, which took place concurrently, the Bank agreed in principal to settle the
two matters. In connection with the settlement and in consideration of a full release of all claims raised in both the actions, the Bank has agreed to pay up to $1.9 million though the actual cost of the settlement will depend on the
number of claims submitted by the members of the purported classes. As a result, the Bank estimates the actual cost of the settlement may be approximately $1,450,000, and recorded such estimate. The settlement is subject to customary
conditions, including court approval following notice to the members of the purported classes. Provided the parties can agree on the language to be included in the settlement agreement and then enter into a stipulation regarding the settlement,
court hearings will be scheduled where the court will consider the terms of the settlement. But it should be noted there are no assurances the court will approve the settlement even if the parties enter into such a stipulation.
Neither the Company nor its subsidiaries are a party to any other pending legal proceedings that are material, nor is their property the subject of any other
material pending legal proceeding at this time. All other legal proceedings are routine and arise out of the ordinary course of the Banks business. None of those proceedings are currently expected to have a material adverse impact upon the
Companys and the Banks business, their consolidated financial position nor their operations in any material amount not already accrued, after taking into consideration any applicable insurance.
Other Commitments and Contingencies
The Company has entered into employment agreements or change of control agreements with certain officers of
the Company providing severance payments and accelerated vesting of benefits under supplemental retirement agreements to the officers in the event of a change in control of the Company and termination for other than cause or after a substantial and
material change in the officers title, compensation or responsibilities.
The Bank owns 13,396 shares of Class B common stock of Visa Inc. which are convertible into Class A common stock at a conversion ratio of
1.648265 per Class B share. As of March 31, 2017, the value of the Class A shares was $88.87 per share. Utilizing the conversion ratio, the value of unredeemed Class A equivalent shares owned by the Bank was $1,962,000 as of
March 31, 2017, and has not been reflected in the accompanying financial statements. The shares of Visa Class B common stock are restricted and may not be transferred. Visa Member Banks are required to fund an escrow account to cover
settlements, resolution of pending litigation and related claims. If the funds in the escrow account are insufficient to settle all the covered litigation, Visa may sell additional Class A shares, use the proceeds to settle litigation, and
further reduce the conversion ratio. If funds remain in the escrow account after all litigation is settled, the Class B conversion ratio will be increased to reflect that surplus.
Mortgage loans sold to investors may be sold with servicing rights retained, with only the standard legal representations and warranties regarding recourse to
the Bank. Management believes that any liabilities that may result from such recourse provisions are not significant.
Note 19
Shareholders Equity
Dividends Paid
The
Bank paid to the Company cash dividends in the aggregate amounts of $4,042,000 and $3,680,000 during the three months ended March 31, 2017 and 2016, respectively. The Bank is regulated by the Federal Deposit Insurance Corporation (FDIC) and the
State of California Department of Business Oversight. Absent approval from the Commissioner of the Department of Business Oversight, California banking laws generally limit the Banks ability to pay dividends to the lesser of (1) retained
earnings or (2) net income for the last three fiscal years, less cash distributions paid during such period. Under this law, at December 31, 2016, the Bank could have paid dividends of $82,615,000 to the Company without the approval of the
Commissioner of the Department of Business Oversight.
Stock Repurchase Plan
On August 21, 2007, the Board of Directors adopted a plan to repurchase, as conditions warrant, up to 500,000 shares of the Companys common stock on
the open market. The timing of purchases and the exact number of shares to be purchased will depend on market conditions. The 500,000 shares authorized for repurchase under this stock repurchase plan represented approximately 3.2% of the
Companys 15,814,662 outstanding common shares as of August 21, 2007. This stock repurchase plan has no expiration date. As of March 31, 2017, the Company had repurchased 166,600 shares under this plan.
31
Stock Repurchased Under Equity Compensation Plans
During the three months ended March 31, 2017 and 2016, employees tendered 16,251 and 0 shares, respectively, of the Companys common stock with
market value of $604,000, and $0, respectively, in lieu of cash to exercise options to purchase shares of the Companys stock and to pay income taxes related to equity compensation plan instruments as permitted by the Companys
shareholder-approved equity compensation plans. The tendered shares were retired. The market value of tendered shares is the last market trade price at closing on the day an option is exercised. Stock repurchased under equity incentive plans are not
included in the total of stock repurchased under the stock repurchase plan announced on August 21, 2007.
Note 20 - Stock Options and Other
Equity-Based Incentive Instruments
In March 2009, the Companys Board of Directors adopted the TriCo Bancshares 2009 Equity Incentive Plan (2009
Plan) covering officers, employees, directors of, and consultants to, the Company. The 2009 Plan was approved by the Companys shareholders in May 2009. The 2009 Plan allows for the granting of the following types of stock awards
(Awards): incentive stock options, nonstatutory stock options, performance awards, restricted stock, restricted stock unit (RSU) awards and stock appreciation rights. RSUs that vest based solely on the grantee remaining in the service of the Company
for a certain amount of time, are referred to as service condition vesting RSUs. RSUs that vest based on the grantee remaining in the service of the Company for a certain amount of time and a market condition such as the total return of
the Companys common stock versus the total return of an index of bank stocks, are referred to as market plus service condition vesting RSUs. In May 2013, the Companys shareholders approved an amendment to the 2009 Plan
increasing the maximum aggregate number of shares of TriCos common stock which may be issued pursuant to or subject to Awards from 650,000 to 1,650,000. The number of shares available for issuance under the 2009 Plan is reduced by:
(i) one share for each share of common stock issued pursuant to a stock option or a Stock Appreciation Right and (ii) two shares for each share of common stock issued pursuant to a Performance Award, a Restricted Stock Award or a
Restricted Stock Unit Award. When Awards made under the 2009 Plan expire or are forfeited or cancelled, the underlying shares will become available for future Awards under the 2009 Plan. To the extent that a share of common stock pursuant to an
Award that counted as two shares against the number of shares again becomes available for issuance under the 2009 Plan, the number of shares of common stock available for issuance under the 2009 Plan shall increase by two shares. Shares awarded and
delivered under the 2009 Plan may be authorized but unissued, or reacquired shares. As of March 31, 2017, 475,900 options for the purchase of common shares, and 116,593 restricted stock units were outstanding, and 635,220 shares remain
available for issuance, under the 2009 Plan.
In May 2001, the Company adopted the TriCo Bancshares 2001 Stock Option Plan (2001 Plan) covering officers,
employees, directors of, and consultants to, the Company. Under the 2001 Plan, the option exercise price cannot be less than the fair market value of the Common Stock at the date of grant except in the case of substitute options. Options for the
2001 Plan expire on the tenth anniversary of the grant date. Vesting schedules under the 2001 Plan are determined individually for each grant. As of March 31, 2017, 94,900 options for the purchase of common shares were outstanding under the
2001 Plan. As of May 2009, as a result of the shareholder approval of the 2009 Plan, no new options may be granted under the 2001 Plan.
Stock option
activity during the three months ended March 31, 2017 is summarized in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of Shares
|
|
|
Option Price
per Share
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average Fair
Value on
Date of Grant
|
|
Outstanding at December 31, 2016
|
|
|
592,250
|
|
|
$12.63 to $23.21
|
|
$
|
17.12
|
|
|
|
|
|
Options granted
|
|
|
|
|
|
to
|
|
|
|
|
|
|
|
|
Options exercised
|
|
|
(21,450
|
)
|
|
$14.54 to $22.54
|
|
$
|
20.30
|
|
|
|
|
|
Options forfeited
|
|
|
|
|
|
to
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2017
|
|
|
570,800
|
|
|
$12.63 to $23.21
|
|
$
|
17.00
|
|
|
|
|
|
The following table shows the number, weighted-average exercise price, intrinsic value, and weighted average remaining
contractual life of options exercisable, options not yet exercisable and total options outstanding as of March 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currently
Exercisable
|
|
|
Currently Not
Exercisable
|
|
|
Total
Outstanding
|
|
Number of options
|
|
|
499,200
|
|
|
|
71,600
|
|
|
|
570,800
|
|
Weighted average exercise price
|
|
$
|
16.77
|
|
|
$
|
18.64
|
|
|
$
|
17.00
|
|
Intrinsic value (in thousands)
|
|
$
|
9,367
|
|
|
$
|
1,209
|
|
|
$
|
10,576
|
|
Weighted average remaining contractual term (yrs.)
|
|
|
3.9
|
|
|
|
6.0
|
|
|
|
4.2
|
|
The 71,600 options that are currently not exercisable as of March 31, 2017 are expected to vest, on a weighted-average
basis, over the next 1.0 years, and the Company is expected to recognize $280,000 of
pre-tax
compensation costs related to these options as they vest. The Company did not modify any option grants during 2016
or the three months ended March 31, 2017.
32
Restricted stock unit (RSU) activity is summarized in the following table for the dates indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service Condition Vesting RSUs
|
|
|
Market Plus Service Condition Vesting RSUs
|
|
|
|
Number
of RSUs
|
|
|
Weighted
Average Fair
Value on
Date of Grant
|
|
|
Number
of RSUs
|
|
|
Weighted
Average Fair
Value on
Date of Grant
|
|
Outstanding at December 31, 2016
|
|
|
68,450
|
|
|
|
|
|
|
|
47,426
|
|
|
|
|
|
RSUs granted
|
|
|
730
|
|
|
$
|
36.47
|
|
|
|
|
|
|
|
|
|
RSUs added through dividend credits
|
|
|
291
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs released
|
|
|
(304
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs forfeited/expired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2017
|
|
|
69,167
|
|
|
|
|
|
|
|
47,426
|
|
|
|
|
|
The 69,167 of service condition vesting RSUs outstanding as of March 31, 2017 include a feature whereby each RSU
outstanding is credited with a dividend amount equal to any common stock cash dividend declared and paid, and the credited amount is divided by the closing price of the Companys stock on the dividend payable date to arrive at an additional
amount of RSUs outstanding under the original grant. The 69,167 of service condition vesting RSUs outstanding as of March 31, 2017 are expected to vest, and be released, on a weighted-average basis, over the next 1.2 years. The Company expects
to recognize $1,116,000 of
pre-tax
compensation costs related to these service condition vesting RSUs between March 31, 2017 and their vesting dates. The Company did not modify any service condition
vesting RSUs during 2016 or the three months ended March 31, 2017.
The 47,426 of market plus service condition vesting RSUs outstanding as of
March 31, 2017 are expected to vest, and be released, on a weighted-average basis, over the next 1.3 years. The Company expects to recognize $476,000 of
pre-tax
compensation costs related to these RSUs
between March 31, 2017 and their vesting dates. As of March 31, 2017, the number of market plus service condition vesting RSUs outstanding that will actually vest, and be released, may be reduced to zero or increased to 71,139 depending on
the total return of the Companys common stock versus the total return of an index of bank stocks from the grant date to the vesting date. The Company did not modify any market plus service condition vesting RSUs during 2016 or the three months
ended March 31, 2017.
Note 21 - Noninterest Income and Expense
The components of other noninterest income were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
Service charges on deposit accounts
|
|
$
|
3,619
|
|
|
$
|
3,365
|
|
ATM and interchange fees
|
|
|
4,015
|
|
|
|
3,393
|
|
Other service fees
|
|
|
765
|
|
|
|
728
|
|
Mortgage banking service fees
|
|
|
521
|
|
|
|
517
|
|
Change in value of mortgage servicing rights
|
|
|
(13
|
)
|
|
|
(698
|
)
|
|
|
|
|
|
|
|
|
|
Total service charges and fees
|
|
|
8,907
|
|
|
|
7,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of loans
|
|
|
910
|
|
|
|
803
|
|
Commissions on sale of
non-deposit
investment
products
|
|
|
607
|
|
|
|
532
|
|
Increase in cash value of life insurance
|
|
|
685
|
|
|
|
696
|
|
Change in indemnification asset
|
|
|
(221
|
)
|
|
|
(115
|
)
|
Gain on sale of foreclosed assets
|
|
|
118
|
|
|
|
92
|
|
Sale of customer checks
|
|
|
104
|
|
|
|
119
|
|
Lease brokerage income
|
|
|
206
|
|
|
|
195
|
|
Loss on disposal of fixed assets
|
|
|
|
|
|
|
(31
|
)
|
Life insurance proceeds in excess of cash value
|
|
|
107
|
|
|
|
|
|
Other
|
|
|
280
|
|
|
|
194
|
|
|
|
|
|
|
|
|
|
|
Total other noninterest income
|
|
|
2,796
|
|
|
|
2,485
|
|
|
|
|
|
|
|
|
|
|
Total noninterest income
|
|
$
|
11,703
|
|
|
$
|
9,790
|
|
|
|
|
|
|
|
|
|
|
Mortgage loan servicing fees, net of change in fair value of mortgage loan servicing rights, totaling $508,000 and $(181,000)
were recorded in service charges and fees noninterest income for the three months ended March 31, 2017 and 2016, respectively.
33
The components of noninterest expense were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
Base salaries, net of deferred loan origination costs
|
|
$
|
13,390
|
|
|
$
|
12,708
|
|
Incentive compensation
|
|
|
2,198
|
|
|
|
1,739
|
|
Benefits and other compensation costs
|
|
|
5,305
|
|
|
|
4,818
|
|
|
|
|
|
|
|
|
|
|
Total salaries and benefits expense
|
|
|
20,893
|
|
|
|
19,265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Occupancy
|
|
|
2,692
|
|
|
|
2,308
|
|
Equipment
|
|
|
1,723
|
|
|
|
1,386
|
|
Data processing and software
|
|
|
2,396
|
|
|
|
1,843
|
|
ATM and POS network charges
|
|
|
853
|
|
|
|
1,229
|
|
Telecommunications
|
|
|
643
|
|
|
|
685
|
|
Postage
|
|
|
404
|
|
|
|
463
|
|
Courier service
|
|
|
254
|
|
|
|
271
|
|
Advertising
|
|
|
967
|
|
|
|
895
|
|
Assessments
|
|
|
405
|
|
|
|
632
|
|
Operational losses
|
|
|
435
|
|
|
|
164
|
|
Professional fees
|
|
|
766
|
|
|
|
809
|
|
Foreclosed assets expense
|
|
|
38
|
|
|
|
46
|
|
Reversal of foreclosed asset losses
|
|
|
(66
|
)
|
|
|
(11
|
)
|
Change in reserve for unfunded commitments
|
|
|
15
|
|
|
|
|
|
Intangible amortization
|
|
|
359
|
|
|
|
299
|
|
Merger and acquisition expense
|
|
|
|
|
|
|
622
|
|
Other miscellaneous expense
|
|
|
3,045
|
|
|
|
2,845
|
|
|
|
|
|
|
|
|
|
|
Total other noninterest expense
|
|
|
14,929
|
|
|
|
14,486
|
|
|
|
|
|
|
|
|
|
|
Total noninterest expense
|
|
$
|
35,822
|
|
|
$
|
33,751
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger and acquisition expense:
|
|
|
|
|
|
|
|
|
Base salaries (outside temporary help)
|
|
|
|
|
|
$
|
187
|
|
Data processing and software
|
|
|
|
|
|
|
|
|
Professional fees
|
|
|
|
|
|
|
180
|
|
Advertising and marketing
|
|
|
|
|
|
|
114
|
|
Other miscellaneous expense
|
|
|
|
|
|
|
141
|
|
|
|
|
|
|
|
|
|
|
Total merger and acquisition expense
|
|
|
|
|
|
$
|
622
|
|
|
|
|
|
|
|
|
|
|
Note 22 Income Taxes
The provisions for income taxes applicable to income before taxes differ from amounts computed by applying the statutory Federal income tax rates to income
before taxes. The effective tax rate and the statutory federal income tax rate are reconciled for the periods indicated as follows:
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
Federal statutory income tax rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
State income taxes, net of federal tax benefit
|
|
|
6.9
|
|
|
|
6.3
|
|
Tax-exempt
interest on municipal obligations
|
|
|
(1.9
|
)
|
|
|
(1.8
|
)
|
Increase in cash value of insurance policies
|
|
|
(1.4
|
)
|
|
|
(1.4
|
)
|
Tax credits
|
|
|
(0.4
|
)
|
|
|
|
|
Equity compensation
|
|
|
(0.5
|
)
|
|
|
|
|
Other
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective Tax Rate
|
|
|
37.8
|
%
|
|
|
38.1
|
%
|
|
|
|
|
|
|
|
|
|
Note 23 Earnings Per Share
Basic earnings per share represent income available to common shareholders divided by the weighted-average number of common shares outstanding during the
period. Diluted earnings per share reflect additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustments to income that would result from assumed issuance. Potential common
shares that may be issued by the Company relate solely from outstanding stock options, and are determined using the treasury stock method. Earnings per share have been computed based on the following:
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
March 31,
|
|
(In thousands)
|
|
2017
|
|
|
2016
|
|
Net income
|
|
$
|
12,079
|
|
|
$
|
10,674
|
|
Average number of common shares outstanding
|
|
|
22,870
|
|
|
|
22,783
|
|
Effect of dilutive stock options and restricted stock
|
|
|
362
|
|
|
|
263
|
|
|
|
|
|
|
|
|
|
|
Average number of common shares outstanding used to calculate diluted earnings per share
|
|
|
23,232
|
|
|
|
23,046
|
|
|
|
|
|
|
|
|
|
|
Options excluded from diluted earnings per share because the effect of these options was
antidilutive
|
|
|
|
|
|
|
23
|
|
34
Note 24 Comprehensive Income
Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and
liabilities, such as unrealized gains and losses on
available-for-sale
securities, are reported as a separate component of the equity section of the balance sheet, such
items, along with net income, are components of comprehensive income. The components of other comprehensive income and related tax effects are as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2017
|
|
|
2016
|
|
(in thousands)
|
|
|
|
|
|
|
Unrealized holding gains (losses) on available for sale securities before
reclassifications
|
|
$
|
787
|
|
|
$
|
6,125
|
|
Amounts reclassified out of accumulated other comprehensive income-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains (losses) on available for sale securities after
reclassifications
|
|
|
787
|
|
|
|
6,125
|
|
Tax effect
|
|
|
(330
|
)
|
|
|
(2,575
|
)
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains (losses) on available for sale securities, net of tax
|
|
|
457
|
|
|
|
3,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unfunded status of the supplemental retirement plans before reclassifications
|
|
|
|
|
|
|
|
|
Amounts reclassified out of accumulated other comprehensive income:
|
|
|
|
|
|
|
|
|
Amortization of prior service cost
|
|
|
(3
|
)
|
|
|
|
|
Amortization of actuarial losses
|
|
|
96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amounts reclassified out of accumulated other comprehensive income
|
|
|
93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unfunded status of the supplemental retirement plans after reclassifications
|
|
|
|
|
|
|
|
|
Tax effect
|
|
|
(39
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unfunded status of the supplemental retirement plans, net of tax
|
|
|
54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in joint beneficiary agreement liability before reclassifications
|
|
|
|
|
|
|
|
|
Amounts reclassified out of accumulated other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in joint beneficiary agreement liability after reclassifications
|
|
|
|
|
|
|
|
|
Tax effect
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in joint beneficiary agreement liability, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive gain (loss)
|
|
$
|
511
|
|
|
$
|
3,550
|
|
|
|
|
|
|
|
|
|
|
The components of accumulated other comprehensive income, included in shareholders equity, are as follows:
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(in thousands)
|
|
Net unrealized loss on available for sale securities
|
|
$
|
(8,083
|
)
|
|
$
|
(8,870
|
)
|
Tax effect
|
|
|
3,399
|
|
|
|
3,729
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding loss on available for sale securities, net of tax
|
|
|
(4,684
|
)
|
|
|
(5,141
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Unfunded status of the supplemental retirement plans
|
|
|
(4,621
|
)
|
|
|
(4,714
|
)
|
Tax effect
|
|
|
1,943
|
|
|
|
1,982
|
|
|
|
|
|
|
|
|
|
|
Unfunded status of the supplemental retirement plans, net of tax
|
|
|
(2,678
|
)
|
|
|
(2,732
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Joint beneficiary agreement liability
|
|
|
(40
|
)
|
|
|
(40
|
)
|
Tax effect
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joint beneficiary agreement liability, net of tax
|
|
|
(40
|
)
|
|
|
(40
|
)
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss
|
|
$
|
(7,402
|
)
|
|
$
|
(7,913
|
)
|
|
|
|
|
|
|
|
|
|
35
Note 25 - Retirement Plans
401(k) Plan
The Company sponsors a 401(k) Plan that
allows participants to contribute a portion of their compensation subject to certain limits based on federal tax laws. Prior to July 1, 2015, the Company did not contribute to the 401(k) Plan. Effective July 1, 2015, the Company initiated
a discretionary matching contribution equal to 50% of participants elective deferrals each quarter, up to 4% of eligible compensation. The Company recorded $186,000, and $160,000 of salaries & benefits expense attributable to the
401(k) Plan matching contributions during the three months ended March 31, 2017 and 2016, respectively. The Company made contributions to the 401(k) Plan of $179,000 and $293,000 during the three months ended March 31, 2017 and 2016,
respectively.
Employee Stock Ownership Plan
Substantially all employees with at least one year of service are covered by a discretionary employee stock ownership plan (ESOP). Contributions are made to
the plan at the discretion of the Board of Directors. Contributions to the plan totaling $525,000 and $441,000 during the three months ended March 31, 2017 and 2016, respectively, are included in salary expense. Company shares owned by the ESOP
are paid dividends and included in the calculation of earnings per share exactly as other common shares outstanding.
Deferred Compensation Plans
The Company has deferred compensation plans for certain directors and key executives, which allow certain directors and key executives designated by
the Board of Directors of the Company to defer a portion of their compensation. The Company has purchased insurance on the lives of the participants and intends to hold these policies until death as a cost recovery of the Companys deferred
compensation obligations of $6,683,000 and $6,525,000 at March 31, 2017 and December 31, 2016, respectively. Earnings credits on deferred balances totaling $145,000 and $126,000 during the three months ended March 31, 2017 and 2016,
respectively, are included in noninterest expense.
Supplemental Retirement Plans
The Company has supplemental retirement plans for current and former directors and key executives. These plans are
non-qualified
defined benefit plans and are unsecured and unfunded. The Company has purchased insurance on the lives of the participants and intends (but is not required) to use the cash values of these
policies to pay the retirement obligations. The following table sets forth the net periodic benefit cost recognized for the plans:
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(In thousands)
|
|
Net pension cost included the following components:
|
|
|
|
|
|
|
|
|
Service cost-benefits earned during the period
|
|
$
|
235
|
|
|
$
|
260
|
|
Interest cost on projected benefit obligation
|
|
|
249
|
|
|
|
256
|
|
Amortization of net obligation at transition
|
|
|
1
|
|
|
|
|
|
Amortization of prior service cost
|
|
|
(3
|
)
|
|
|
(10
|
)
|
Recognized net actuarial loss
|
|
|
96
|
|
|
|
138
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension cost
|
|
$
|
578
|
|
|
$
|
644
|
|
|
|
|
|
|
|
|
|
|
During the three months ended March 31, 2017 and 2016, the Company contributed and paid out as benefits $259,000 and
$269,000, respectively, to participants under the plans. For the year ending December 31, 2017, the Company expects to contribute and pay out as benefits $1,067,000 to participants under the plans.
Note 26 - Related Party Transactions
Certain directors,
officers, and companies with which they are associated were customers of, and had banking transactions with, the Company or the Bank in the ordinary course of business.
The following table summarizes the activity in these loans for periods indicated (in thousands):
|
|
|
|
|
Balance December 31, 2015
|
|
$
|
4,201
|
|
Advances/new loans
|
|
|
730
|
|
Removed/payments
|
|
|
(2,499
|
)
|
|
|
|
|
|
Balance December 31, 2016
|
|
|
2,432
|
|
Advances/new loans
|
|
|
160
|
|
Removed/payments
|
|
|
(19
|
)
|
|
|
|
|
|
Balance March 31, 2017
|
|
$
|
2,573
|
|
|
|
|
|
|
36
Note 27 - Fair Value Measurement
The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. In
estimating fair value, the Company utilizes valuation techniques that are consistent with the market approach, income approach, and/or the cost approach. Inputs to valuation techniques include the assumptions that market participants would use in
pricing an asset or liability including assumptions about the risk inherent in a particular valuation technique, the effect of a restriction on the sale or use of an asset and the risk of nonperformance. Securities
available-for-sale
and mortgage servicing rights are recorded at fair value on a recurring basis. Additionally, from time to time, the Company may be required to record at fair value other assets on a
nonrecurring basis, such as loans held for sale, loans held for investment and certain other assets. These nonrecurring fair value adjustments typically involve application of lower of cost or market accounting or impairment write-downs of
individual assets.
The Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are
traded and the observable nature of the assumptions used to determine fair value. These levels are:
|
|
|
Level 1 -
|
|
Valuation is based upon quoted prices for identical instruments traded in active markets.
|
|
|
Level 2 -
|
|
Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant
assumptions are observable in the market.
|
|
|
Level 3 -
|
|
Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in
pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.
|
Securities available for sale
- Securities available for sale are recorded at fair value on a recurring basis. Fair
value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows,
adjusted for the securitys credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury
securities that are traded by dealers or brokers in active
over-the-counter
markets and money market funds. Level 2 securities include mortgage-backed securities
issued by government sponsored entities, municipal bonds and corporate debt securities. The Company had no securities classified as Level 3 during any of the periods covered in these financial statements.
Loans held for sale
Loans held for sale are carried at the lower of cost or fair value. The fair value of loans held for sale is based on what
secondary markets are currently offering for loans with similar characteristics. As such, we classify those loans subjected to nonrecurring fair value adjustments as Level 2.
Impaired originated and PNCI loans
Originated and PNCI loans are not recorded at fair value on a recurring basis. However, from time to time, an
originated or PNCI loan is considered impaired and an allowance for loan losses is established. Originated and PNCI loans for which it is probable that payment of interest and principal will not be made in accordance with the original contractual
terms of the loan agreement are considered impaired. The fair value of an impaired originated or PNCI loan is estimated using one of several methods, including collateral value, fair value of similar debt, enterprise value, liquidation value and
discounted cash flows. Those impaired originated and PNCI loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. Impaired originated and PNCI
loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price or a current appraised value which uses
substantially observable data, the Company records the impaired originated or PNCI loan as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the
appraised value, or the appraised value contains a significant unobservable assumption, such as deviations from comparable sales, and there is no observable market price, the Company records the impaired originated or PNCI loan as nonrecurring
Level 3.
Foreclosed assets
- Foreclosed assets include assets acquired through, or in lieu of, loan foreclosure. Foreclosed assets are held
for sale and are initially recorded at fair value at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, management periodically performs valuations and the assets are carried at the lower of carrying amount or fair
value less cost to sell. When the fair value of foreclosed assets is based on an observable market price or a current appraised value which uses substantially observable data, the Company records the impaired originated loan as nonrecurring
Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value, or the appraised value contains a significant unobservable assumption, such as deviations
from comparable sales, and there is no observable market price, the Company records the foreclosed asset as nonrecurring Level 3. Revenue and expenses from operations and changes in the valuation allowance are included in other noninterest
expense.
Mortgage servicing rights
- Mortgage servicing rights are carried at fair value. A valuation model, which utilizes a discounted cash flow
analysis using a discount rate and prepayment speed assumptions is used in the computation of the fair value measurement. While the prepayment speed assumption is currently quoted for comparable instruments, the discount rate assumption currently
requires a significant degree of management judgment and is therefore considered an unobservable input. As such, the Company classifies mortgage servicing rights subjected to recurring fair value adjustments as Level 3. Additional information
regarding mortgage servicing rights can be found in Note 10 in the consolidated financial statements at Item 1 of this report.
37
The table below presents the recorded amount of assets and liabilities measured at fair value on a recurring
basis (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value at March 31, 2017
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. government corporations and agencies
|
|
$
|
450,616
|
|
|
|
|
|
|
$
|
450,616
|
|
|
|
|
|
Obligations of states and political subdivisions
|
|
|
118,165
|
|
|
|
|
|
|
|
118,165
|
|
|
|
|
|
Corporate debt securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable equity services
|
|
|
2,938
|
|
|
$
|
2,938
|
|
|
|
|
|
|
|
|
|
Mortgage servicing rights
|
|
|
6,860
|
|
|
|
|
|
|
|
|
|
|
$
|
6,860
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets measured at fair value
|
|
$
|
578,579
|
|
|
$
|
2,938
|
|
|
$
|
568,781
|
|
|
$
|
6,860
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value at December 31, 2016
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Securities
available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of U.S. government corporations and agencies
|
|
$
|
429,678
|
|
|
|
|
|
|
$
|
429,678
|
|
|
|
|
|
Obligations of states and political subdivisions
|
|
|
117,617
|
|
|
|
|
|
|
|
117,617
|
|
|
|
|
|
Marketable equity securities
|
|
|
2,938
|
|
|
$
|
2,938
|
|
|
|
|
|
|
|
|
|
Mortgage servicing rights
|
|
|
6,595
|
|
|
|
|
|
|
|
|
|
|
$
|
6,595
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets measured at fair value
|
|
$
|
556,828
|
|
|
$
|
2,938
|
|
|
$
|
547,295
|
|
|
$
|
6,595
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfers between levels of the fair value hierarchy are recognized on the actual date of the event or circumstances that
caused the transfer, which generally corresponds with the Companys quarterly valuation process. There were no transfers between any levels during the three months ended March 31, 2017 or the year ended December 31, 2016.
The following table provides a reconciliation of assets and liabilities measured at fair value using significant unobservable inputs (Level 3) on a
recurring basis during the time periods indicated. Had there been any transfer into or out of Level 3 during the time periods indicated, the amount included in the Transfers into (out of) Level 3 column would represent the
beginning balance of an item in the period (interim quarter) during which it was transferred (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
Beginning
Balance
|
|
|
Transfers
into (out of)
Level 3
|
|
|
Change
Included
in Earnings
|
|
|
Issuances
|
|
|
Ending
Balance
|
|
2017: Mortgage servicing rights
|
|
$
|
6,595
|
|
|
|
|
|
|
$
|
(13
|
)
|
|
$
|
278
|
|
|
$
|
6,860
|
|
2016: Mortgage servicing rights
|
|
$
|
7,618
|
|
|
|
|
|
|
$
|
(698
|
)
|
|
$
|
220
|
|
|
$
|
7,140
|
|
The Companys method for determining the fair value of mortgage servicing rights is described in Note 1. The key
unobservable inputs used in determining the fair value of mortgage servicing rights are mortgage prepayment speeds and the discount rate used to discount cash projected cash flows. Generally, any significant increases in the mortgage prepayment
speed and discount rate utilized in the fair value measurement of the mortgage servicing rights will result in a negative fair value adjustments (and decrease in the fair value measurement). Conversely, a decrease in the mortgage prepayment speed
and discount rate will result in a positive fair value adjustment (and increase in the fair value measurement). Note 10 contains additional information regarding mortgage servicing rights.
The following table presents quantitative information about recurring Level 3 fair value measurements at March 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
(in thousands)
|
|
|
Valuation
Technique
|
|
Unobservable
Inputs
|
|
Range,
Weighted Average
|
|
|
|
|
|
Mortgage Servicing Rights
|
|
$
|
6,860
|
|
|
Discounted cash flow
|
|
Constant prepayment rate
|
|
6.2%-18.8%, 8.3%
|
|
|
|
|
|
|
|
|
Discount rate
|
|
14.0%-16.0%, 14.0%
|
The following table presents quantitative information about recurring Level 3 fair value measurements at
December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
(in thousands)
|
|
|
Valuation
Technique
|
|
Unobservable
Inputs
|
|
Range,
Weighted Average
|
|
|
|
|
|
Mortgage Servicing Rights
|
|
$
|
6,595
|
|
|
Discounted cash flow
|
|
Constant prepayment rate
|
|
6.9%-16.6%, 8.8%
|
|
|
|
|
|
|
|
|
Discount rate
|
|
14.0%-16.0%, 14.0%
|
38
The tables below present the recorded investment in assets and liabilities measured at fair value on a
nonrecurring basis, as of the dates indicated (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2017
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total Gains
(Losses)
|
|
Fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired Originated & PNCI loans
|
|
$
|
824
|
|
|
|
|
|
|
|
|
|
|
$
|
824
|
|
|
$
|
30
|
|
Foreclosed assets
|
|
|
1,528
|
|
|
|
|
|
|
|
|
|
|
|
1,528
|
|
|
|
(22
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets measured at fair value
|
|
$
|
2,352
|
|
|
|
|
|
|
|
|
|
|
$
|
2,352
|
|
|
$
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2016
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total Gains
(Losses)
|
|
Fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired Originated & PNCI loans
|
|
$
|
1,107
|
|
|
|
|
|
|
|
|
|
|
$
|
1,107
|
|
|
$
|
(409
|
)
|
Foreclosed assets
|
|
|
2,253
|
|
|
|
|
|
|
|
|
|
|
|
2,253
|
|
|
|
(86
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets measured at fair value
|
|
$
|
3,360
|
|
|
|
|
|
|
|
|
|
|
$
|
3,360
|
|
|
$
|
(495
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2016
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total Gains
(Losses)
|
|
Fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired Originated & PNCI loans
|
|
$
|
4,355
|
|
|
|
|
|
|
|
|
|
|
$
|
4,355
|
|
|
$
|
(828
|
)
|
Foreclosed assets
|
|
|
1,383
|
|
|
|
|
|
|
|
|
|
|
|
1,383
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets measured at fair value
|
|
$
|
5,738
|
|
|
|
|
|
|
|
|
|
|
$
|
5,738
|
|
|
$
|
(828
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The impaired Originated and PNCI loan amount above represents impaired, collateral dependent loans that have been adjusted to
fair value. When we identify a collateral dependent loan as impaired, we measure the impairment using the current fair value of the collateral, less selling costs. Depending on the characteristics of a loan, the fair value of collateral is
generally estimated by obtaining external appraisals. If we determine that the value of the impaired loan is less than the recorded investment in the loan, we recognize this impairment and adjust the carrying value of the loan to fair value
through the allowance for loan and lease losses. The loss represents charge-offs or impairments on collateral dependent loans for fair value adjustments based on the fair value of collateral. The carrying value of loans fully
charged-off
is zero.
The foreclosed assets amount above represents impaired real estate that has been adjusted to fair
value. Foreclosed assets represent real estate which the Bank has taken control of in partial or full satisfaction of loans. At the time of foreclosure, other real estate owned is recorded at fair value less costs to sell, which becomes the
propertys new basis. Any write-downs based on the assets fair value at the date of acquisition are charged to the allowance for loan and lease losses. After foreclosure, management periodically performs valuations such that the real
estate is carried at the lower of its new cost basis or fair value, net of estimated costs to sell. Fair value adjustments on other real estate owned are recognized within net loss on real estate owned. The loss represents impairments on
non-covered
other real estate owned for fair value adjustments based on the fair value of the real estate.
The
Companys property appraisals are primarily based on the sales comparison approach and income approach methodologies, which consider recent sales of comparable properties, including their income generating characteristics, and then make
adjustments to reflect the general assumptions that a market participant would make when analyzing the property for purchase. These adjustments may increase or decrease an appraised value and can vary significantly depending on the location,
physical characteristics and income producing potential of each property. Additionally, the quality and volume of market information available at the time of the appraisal can vary from period to period and cause significant changes to the nature
and magnitude of comparable sale adjustments. Given these variations, comparable sale adjustments are generally not a reliable indicator for how fair value will increase or decrease from period to period. Under certain circumstances, management
discounts are applied based on specific characteristics of an individual property.
The following table presents quantitative information about Level 3 fair value measurements for financial instruments measured at fair value on a
nonrecurring basis at March 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
(in thousands)
|
|
|
Valuation
Technique
|
|
Unobservable
Inputs
|
|
Range,
Weighted Average
|
|
|
|
|
|
Impaired Originated & PNCI loans
|
|
$
|
824
|
|
|
Sales comparison
approach
|
|
Adjustment for differences between comparable sales
|
|
(20.7)%-46.3%, 1.9%
|
|
|
|
|
|
|
Income approach
|
|
Capitalization rate
|
|
N/A
|
Foreclosed assets
(Land & construction)
|
|
|
|
|
|
Sales comparison
approach
|
|
Adjustment for differences between comparable sales
|
|
N/A
|
Foreclosed assets (residential
(Residential real estate)
|
|
$
|
657
|
|
|
Sales comparison
approach
|
|
Adjustment for differences between comparable sales
|
|
(22.6)%-14.3%, 0.1%
|
Foreclosed assets
(Commercial real estate)
|
|
$
|
xxx
|
|
|
Sales comparison
approach
|
|
Adjustment for differences between comparable sales
|
|
(65.0)%-62.5%, (6.9)%
|
39
The following table presents quantitative information about Level 3 fair value measurements for financial
instruments measured at fair value on a nonrecurring basis at December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
(in thousands)
|
|
|
Valuation
Technique
|
|
Unobservable
Inputs
|
|
Range,
Weighted Average
|
|
|
|
|
|
Impaired Originated & PNCI loans
|
|
$
|
1,107
|
|
|
Sales comparison
approach
Income approach
|
|
Adjustment for differences between comparable sales Capitalization rate
|
|
Not meaningful
N/A
|
Foreclosed assets
(Land & construction)
|
|
$
|
15
|
|
|
Sales comparison
approach
|
|
Adjustment for differences between comparable sales
|
|
Not meaningful
|
Foreclosed assets (residential
(Residential real estate)
|
|
$
|
1,564
|
|
|
Sales comparison
approach
|
|
Adjustment for differences between comparable sales
|
|
Not meaningful
|
Foreclosed assets
(Commercial real estate)
|
|
$
|
674
|
|
|
Sales comparison
approach
|
|
Adjustment for differences between comparable sales
|
|
Not meaningful
|
In addition to the methods and assumptions used to estimate the fair value of each class of financial instrument noted above,
the following methods and assumptions were used to estimate the fair value of other classes of financial instruments for which it is practical to estimate the fair value.
Short-term Instruments
- Cash and due from banks, fed funds purchased and sold, interest receivable and payable, and short-term borrowings are
considered short-term instruments. For these short-term instruments their carrying amount approximates their fair value.
Securities held to
maturity
The fair value of securities held to maturity is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such
as the present value of future cash flows, adjusted for the securitys credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New
York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active
over-the-counter
markets and money market funds. Level 2 securities
include mortgage-backed securities issued by government sponsored entities, municipal bonds and corporate debt securities. The Company had no securities held to maturity classified as Level 3 during any of the periods covered in these financial
statements.
Restricted Equity Securities
- It is not practical to determine the fair value of restricted equity securities due to restrictions
placed on their transferability.
Originated and PNCI loans
- The fair value of variable rate originated and PNCI loans is the current carrying
value. The interest rates on these originated and PNCI loans are regularly adjusted to market rates. The fair value of other types of fixed rate originated and PNCI loans is estimated by discounting the future cash flows using current rates at which
similar loans would be made to borrowers with similar credit ratings for the same remaining maturities. The allowance for loan losses is a reasonable estimate of the valuation allowance needed to adjust computed fair values for credit quality of
certain originated and PNCI loans in the portfolio.
PCI Loans
-
PCI loans are measured at estimated fair value on the date of acquisition.
Carrying value is calculated as the present value of expected cash flows and approximates fair value.
FDIC Indemnification Asset -
The fair value
of the FDIC indemnification asset is based on the discounted value of expected future cash flows under the loss-share agreement.
Deposit Liabilities
- The fair value of demand deposits, savings accounts, and certain money market deposits is the amount payable on demand at the reporting date. These values do not consider the estimated fair value of the Companys core deposit intangible,
which is a significant unrecognized asset of the Company. The fair value of time deposits and other borrowings is based on the discounted value of contractual cash flows.
Other Borrowings
- The fair value of other borrowings is calculated based on the discounted value of the contractual cash flows using current rates at
which such borrowings can currently be obtained.
Junior Subordinated Debentures
- The fair value of junior subordinated debentures is estimated
using a discounted cash flow model. The future cash flows of these instruments are extended to the next available redemption date or maturity date as appropriate based upon the spreads of recent issuances or quotes from brokers for comparable bank
holding companies compared to the contractual spread of each junior subordinated debenture measured at fair value.
Commitments to Extend Credit and
Standby Letters 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 credit worthiness of the counter
parties. For fixed rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of letters of credit is based on fees currently charged for similar agreements or on
the estimated cost to terminate them or otherwise settle the obligation with the counter parties at the reporting date.
40
Fair values for financial instruments are managements estimates of the values at which the instruments
could be exchanged in a transaction between willing parties. These estimates are subjective and may vary significantly from amounts that would be realized in actual transactions. In addition, other significant assets are not considered financial
assets including, any mortgage banking operations, deferred tax assets, and premises and equipment. Further, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on the fair value
estimates and have not been considered in any of these estimates.
The estimated fair values of financial instruments that are reported at amortized cost
in the Corporations consolidated balance sheets, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value, were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
|
|
Carrying
Amount
|
|
|
Fair
Value
|
|
|
Carrying
Amount
|
|
|
Fair
Value
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1 inputs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
|
$
|
113,569
|
|
|
$
|
113,569
|
|
|
$
|
92,197
|
|
|
$
|
92,197
|
|
Cash at Federal Reserve and other banks
|
|
|
210,137
|
|
|
|
210,137
|
|
|
|
213,415
|
|
|
|
213,415
|
|
Level 2 inputs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities held to maturity
|
|
|
580,137
|
|
|
|
581,816
|
|
|
|
602,536
|
|
|
|
603,203
|
|
Restricted equity securities
|
|
|
16,956
|
|
|
|
N/A
|
|
|
|
16,956
|
|
|
|
N/A
|
|
Loans held for sale
|
|
|
1,176
|
|
|
|
1,176
|
|
|
|
2,998
|
|
|
|
2,998
|
|
Level 3 inputs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans, net
|
|
|
2,730,175
|
|
|
|
2,758,388
|
|
|
|
2,727,090
|
|
|
|
2,763,473
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 2 inputs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
3,898,884
|
|
|
|
3,897,029
|
|
|
|
3,895,560
|
|
|
|
3,893,941
|
|
Other borrowings
|
|
|
15,197
|
|
|
|
15,197
|
|
|
|
17,493
|
|
|
|
17,493
|
|
Level 3 inputs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Junior subordinated debt
|
|
$
|
56,713
|
|
|
$
|
51,177
|
|
|
$
|
56,667
|
|
|
$
|
49,033
|
|
|
|
|
|
|
|
|
Contract
Amount
|
|
|
Fair
Value
|
|
|
Contract
Amount
|
|
|
Fair
Value
|
|
Off-balance
sheet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3 inputs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments
|
|
$
|
768,603
|
|
|
$
|
7,686
|
|
|
$
|
767,274
|
|
|
$
|
7,673
|
|
Standby letters of credit
|
|
$
|
11,639
|
|
|
$
|
116
|
|
|
$
|
12,763
|
|
|
$
|
128
|
|
Overdraft privilege commitments
|
|
$
|
99,029
|
|
|
$
|
990
|
|
|
$
|
98,583
|
|
|
$
|
986
|
|
41
Note 28 - TriCo Bancshares Condensed Financial Statements (Parent Only)
|
|
|
|
|
|
|
|
|
Condensed Balance Sheets
|
|
March 31,
2017
|
|
|
December 31,
2016
|
|
|
|
(In thousands)
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and Cash equivalents
|
|
$
|
2,840
|
|
|
$
|
2,802
|
|
Investment in Tri Counties Bank
|
|
|
539,273
|
|
|
|
529,907
|
|
Other assets
|
|
|
1,738
|
|
|
|
1,711
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
543,851
|
|
|
$
|
534,420
|
|
|
|
|
|
|
|
|
|
|
Liabilities and shareholders equity
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
$
|
420
|
|
|
$
|
406
|
|
Junior subordinated debt
|
|
|
56,713
|
|
|
|
56,667
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
57,133
|
|
|
|
57,073
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity:
|
|
|
|
|
|
|
|
|
Common stock, no par value: authorized 50,000,000 shares; issued and outstanding 22,873,305 and
22,867,802 shares, respectively
|
|
|
253,456
|
|
|
|
252,820
|
|
Retained earnings
|
|
|
240,664
|
|
|
|
232,440
|
|
Accumulated other comprehensive loss, net
|
|
|
(7,402
|
)
|
|
|
(7,913
|
)
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
486,718
|
|
|
|
477,347
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
$
|
543,851
|
|
|
$
|
534,420
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Statements of Income
|
|
Three months ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(In thousands)
|
|
Interest expense
|
|
$
|
595
|
|
|
$
|
535
|
|
Administration expense
|
|
|
159
|
|
|
|
149
|
|
|
|
|
|
|
|
|
|
|
Loss before equity in net income of Tri Counties Bank
|
|
|
(754
|
)
|
|
|
(684
|
)
|
Equity in net income of Tri Counties Bank:
|
|
|
|
|
|
|
|
|
Distributed
|
|
|
4,042
|
|
|
|
3,680
|
|
Under distributed
|
|
|
8,474
|
|
|
|
7,390
|
|
Income tax benefit
|
|
|
317
|
|
|
|
288
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
12,079
|
|
|
$
|
10,674
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Statements of Comprehensive Income
|
|
Three months ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(In thousands)
|
|
Net income
|
|
$
|
12,079
|
|
|
$
|
10,674
|
|
Other comprehensive loss, net of tax:
|
|
|
|
|
|
|
|
|
Increase (decrease) in unrealized gains on available for sale securities arising during the
period
|
|
|
457
|
|
|
|
3,550
|
|
Change in minimum pension liability
|
|
|
54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
|
511
|
|
|
|
3,550
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
12,590
|
|
|
$
|
14,224
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Statements of Cash Flows
|
|
Three months ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(In thousands)
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
12,079
|
|
|
$
|
10,674
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Under distributed equity in earnings of Tri Counties Bank
|
|
|
(8,474
|
)
|
|
|
(7,390
|
)
|
Equity compensation vesting expense
|
|
|
381
|
|
|
|
331
|
|
Stock option excess tax benefits
|
|
|
|
|
|
|
(10
|
)
|
Net change in other assets and liabilities
|
|
|
(348
|
)
|
|
|
(249
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
3,638
|
|
|
|
3,356
|
|
Investing activities: None
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
Stock option excess tax benefits
|
|
|
|
|
|
|
10
|
|
Issuance of common stock through option exercise
|
|
|
|
|
|
|
173
|
|
Repurchase of common stock
|
|
|
(169
|
)
|
|
|
|
|
Cash dividends paid common
|
|
|
(3,431
|
)
|
|
|
(3,418
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used for financing activities
|
|
|
(3,600
|
)
|
|
|
(3,235
|
)
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
|
38
|
|
|
|
121
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of year
|
|
|
2,802
|
|
|
|
2,565
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
$
|
2,840
|
|
|
$
|
2,686
|
|
|
|
|
|
|
|
|
|
|
42
Note 29 - Regulatory Matters
The Company is subject to various regulatory capital requirements administered by 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 classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios (set forth in the table
below) of total, Tier 1, and common equity Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets.
The following tables present
actual and required capital ratios as of March 31, 2017 and December 31, 2016 for the Company and the Bank under Basel III Capital Rules. The minimum capital amounts presented include the minimum required capital levels as of
March 31, 2017 (1.25%) and December 31, 2016 (0.625%) based on the then
phased-in
provisions of the Basel III Capital Rules and the minimum required capital levels as of January 1, 2019 when the
Basel III Capital Rules have been fully
phased-in.
Capital levels required to be considered well capitalized are based upon prompt corrective action regulations, as amended to reflect the changes under the
Basel III Capital Rules.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual
|
|
|
Minimum Capital
Required Basel III
Phase-in
Schedule
|
|
|
Minimum Capital
Required Basel III
Fully Phased In
|
|
|
Required to be
Considered Well
Capitalized
|
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
As of March 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(to Risk Weighted Assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
509,690
|
|
|
|
14.86
|
%
|
|
$
|
317,437
|
|
|
|
9.25
|
%
|
|
$
|
360,237
|
|
|
|
10.50
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
Tri Counties Bank
|
|
$
|
507,235
|
|
|
|
14.79
|
%
|
|
$
|
317,276
|
|
|
|
9.25
|
%
|
|
$
|
360,054
|
|
|
|
10.50
|
%
|
|
$
|
342,909
|
|
|
|
10.00
|
%
|
Tier 1 Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(to Risk Weighted Assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
475,939
|
|
|
|
13.87
|
%
|
|
$
|
248,802
|
|
|
|
7.25
|
%
|
|
$
|
291,620
|
|
|
|
8.50
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
Tri Counties Bank
|
|
$
|
473,484
|
|
|
|
13.81
|
%
|
|
$
|
248,676
|
|
|
|
7.25
|
%
|
|
$
|
291,473
|
|
|
|
8.50
|
%
|
|
$
|
274,327
|
|
|
|
8.00
|
%
|
Common equity Tier 1 Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(to Risk Weighted Assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
421,698
|
|
|
|
12.29
|
%
|
|
$
|
197,325
|
|
|
|
5.75
|
%
|
|
$
|
240,158
|
|
|
|
7.00
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
Tri Counties Bank
|
|
$
|
473,484
|
|
|
|
13.81
|
%
|
|
$
|
197,225
|
|
|
|
5.75
|
%
|
|
$
|
240,036
|
|
|
|
7.00
|
%
|
|
$
|
222,891
|
|
|
|
6.50
|
%
|
Tier 1 Capital (to Average Assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
475,939
|
|
|
|
10.77
|
%
|
|
$
|
176,753
|
|
|
|
4.00
|
%
|
|
$
|
176,753
|
|
|
|
4.00
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
Tri Counties Bank
|
|
$
|
473,484
|
|
|
|
10.72
|
%
|
|
$
|
176,749
|
|
|
|
4.00
|
%
|
|
$
|
176,749
|
|
|
|
4.00
|
%
|
|
$
|
220,936
|
|
|
|
5.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual
|
|
|
Minimum Capital
Required Basel III
Phase-in
Schedule
|
|
|
Minimum Capital
Required Basel III
Fully Phased In
|
|
|
Required to be
Considered Well
Capitalized
|
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
As of December 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(to Risk Weighted Assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
503,283
|
|
|
|
14.65
|
%
|
|
$
|
296,336
|
|
|
|
8.625
|
%
|
|
$
|
360,756
|
|
|
|
10.50
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
Tri Counties Bank
|
|
$
|
500,876
|
|
|
|
14.59
|
%
|
|
$
|
296,188
|
|
|
|
8.625
|
%
|
|
$
|
360,577
|
|
|
|
10.50
|
%
|
|
$
|
343,407
|
|
|
|
10.00
|
%
|
Tier 1 Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(to Risk Weighted Assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
468,061
|
|
|
|
13.62
|
%
|
|
$
|
227,620
|
|
|
|
6.625
|
%
|
|
$
|
292,041
|
|
|
|
8.50
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
Tri Counties Bank
|
|
$
|
465,654
|
|
|
|
13.56
|
%
|
|
$
|
227,507
|
|
|
|
6.625
|
%
|
|
$
|
291,896
|
|
|
|
8.50
|
%
|
|
$
|
274,725
|
|
|
|
8.00
|
%
|
Common equity Tier 1 Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(to Risk Weighted Assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
414,632
|
|
|
|
12.07
|
%
|
|
$
|
176,084
|
|
|
|
5.125
|
%
|
|
$
|
240,504
|
|
|
|
7.00
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
Tri Counties Bank
|
|
$
|
465,654
|
|
|
|
13.56
|
%
|
|
$
|
175,996
|
|
|
|
5.125
|
%
|
|
$
|
240,385
|
|
|
|
7.00
|
%
|
|
$
|
223,214
|
|
|
|
6.50
|
%
|
Tier 1 Capital (to Average Assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
468,061
|
|
|
|
10.62
|
%
|
|
$
|
176,346
|
|
|
|
4.00
|
%
|
|
$
|
176,346
|
|
|
|
4.00
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
Tri Counties Bank
|
|
$
|
465,654
|
|
|
|
10.56
|
%
|
|
$
|
176,341
|
|
|
|
4.00
|
%
|
|
$
|
176,341
|
|
|
|
4.00
|
%
|
|
$
|
220,426
|
|
|
|
5.00
|
%
|
As of March 31, 2017, capital levels at the Company and the Bank exceed all capital adequacy requirements under the Basel III
Capital Rules on a fully phased-in basis. Also, at March 31, 2017 and December 31, 2016, the Banks capital levels exceeded the minimum amounts necessary to be considered well capitalized under the current regulatory framework for prompt
corrective action.
Beginning January 1, 2016, the Basel III Capital Rules implemented a requirement for all banking organizations to maintain a capital
conservation buffer above the minimum risk-based capital requirements in order to avoid certain limitations on capital distributions, stock repurchases and discretionary bonus payments to executive officers. The capital conservation buffer is
exclusively composed of common equity tier 1 capital, and it applies to each of the risk-based capital ratios but not the leverage ratio. At March 31, 2017, the Company and the Bank are in compliance with the capital conservation buffer requirement.
The three risk-based capital ratios will increase by 0.625% each year through 2019, at which point, the common equity tier 1 risk-based, tier 1 risk-based and total risk-based capital ratio minimums will be 7.0%, 8.5% and 10.5%, respectively.
43
Note 30 - Summary of Quarterly Results of Operations (unaudited)
The following table sets forth the results of operations for the periods indicated, and is unaudited; however, in the opinion of Management, it reflects all
adjustments (which include only normal recurring adjustments) necessary to present fairly the summarized results for such periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 Quarters Ended
|
|
|
|
December 31,
|
|
|
September 30,
|
|
|
June 30,
|
|
|
March 31,
|
|
|
|
(dollars in thousands, except per share data)
|
|
Interest and dividend income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount accretion PCI cash basis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
112
|
|
Discount accretion PCI other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
631
|
|
Discount accretion PNCI
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
798
|
|
All other loan interest income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,373
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loan interest income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,914
|
|
Debt securities, dividends and interest bearing cash at Banks (not FTE)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,570
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,484
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,491
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,993
|
|
(Benefit from reversal of) provision for loan losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,557
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,550
|
|
Noninterest income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,703
|
|
Noninterest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,822
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,431
|
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
12,079
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (diluted)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 Quarters Ended
|
|
|
|
December 31,
|
|
|
September 30,
|
|
|
June 30,
|
|
|
March 31,
|
|
|
|
(dollars in thousands, except per share data)
|
|
Interest and dividend income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount accretion PCI cash basis
|
|
$
|
483
|
|
|
$
|
777
|
|
|
$
|
426
|
|
|
$
|
269
|
|
Discount accretion PCI other
|
|
|
658
|
|
|
|
569
|
|
|
|
415
|
|
|
|
(45
|
)
|
Discount accretion PNCI
|
|
|
637
|
|
|
|
883
|
|
|
|
1,459
|
|
|
|
868
|
|
All other loan interest income
|
|
|
34,463
|
|
|
|
33,540
|
|
|
|
32,038
|
|
|
|
33,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loan interest income
|
|
|
36,241
|
|
|
|
35,769
|
|
|
|
34,338
|
|
|
|
34,738
|
|
Debt securities, dividends and interest bearing cash at Banks (not FTE)
|
|
|
8,374
|
|
|
|
7,940
|
|
|
|
8,252
|
|
|
|
8,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
|
44,615
|
|
|
|
43,709
|
|
|
|
42,590
|
|
|
|
42,794
|
|
Interest expense
|
|
|
1,460
|
|
|
|
1,439
|
|
|
|
1,430
|
|
|
|
1,392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
43,155
|
|
|
|
42,270
|
|
|
|
41,160
|
|
|
|
41,402
|
|
(Benefit from reversal of) provision for loan losses
|
|
|
(1,433
|
)
|
|
|
(3,973
|
)
|
|
|
(773
|
)
|
|
|
209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses
|
|
|
44,588
|
|
|
|
46,243
|
|
|
|
41,933
|
|
|
|
41,193
|
|
Noninterest income
|
|
|
12,462
|
|
|
|
11,066
|
|
|
|
11,245
|
|
|
|
9,790
|
|
Noninterest expense
|
|
|
36,563
|
|
|
|
37,416
|
|
|
|
38,267
|
|
|
|
33,751
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
20,487
|
|
|
|
19,893
|
|
|
|
14,911
|
|
|
|
17,232
|
|
Income tax expense
|
|
|
7,954
|
|
|
|
7,694
|
|
|
|
5,506
|
|
|
|
6,558
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
12,533
|
|
|
$
|
12,199
|
|
|
$
|
9,405
|
|
|
$
|
10,674
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (diluted)
|
|
$
|
0.54
|
|
|
$
|
0.53
|
|
|
$
|
0.41
|
|
|
$
|
0.46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
|
|
$
|
0.15
|
|
|
$
|
0.15
|
|
|
$
|
0.15
|
|
|
$
|
0.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44