NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The Consolidated Financial Statements (the “financial statements”) of Berkshire Hills Bancorp, Inc. and its subsidiaries (the “Company” or “Berkshire”) have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The Company is a Delaware corporation, headquartered in Boston, Massachusetts, and the holding company for Berkshire Bank (the “Bank”), a Massachusetts-chartered trust company headquartered in Pittsfield, Massachusetts, and Berkshire Insurance Group, Inc. These financial statements include the accounts of the Company, its wholly-owned subsidiaries and the Bank’s consolidated subsidiaries. In consolidation, all significant intercompany accounts and transactions are eliminated. The results of operations of companies or assets acquired are included only from the dates of acquisition. All material wholly-owned and majority-owned subsidiaries are consolidated unless GAAP requires otherwise.
The Company has evaluated subsequent events for potential recognition and/or disclosure through the date these financial statements were issued.
These interim financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X, and accordingly, certain information and footnote disclosures normally included in financial statements prepared according to GAAP have been omitted.
The results for any interim period are not necessarily indicative of results for the full year. These consolidated financial statements should be read in conjunction with the audited financial statements and disclosures Berkshire Hills Bancorp, Inc. previously filed with the Securities and Exchange Commission in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. In management’s opinion, all adjustments necessary for a fair statement are reflected in the interim periods presented.
Reclassifications
Certain items in prior financial statements have been reclassified to conform to the current presentation.
Recently Adopted Accounting Principles
In January 2017, the FASB issued ASU No. 2017-04, “Intangibles: Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” The ASU simplifies the test for goodwill impairment by eliminating the second step of the current two-step method. Under the new accounting guidance, entities will compare the fair value of a reporting unit with its carrying amount. If the carrying amount exceeds the reporting unit’s fair value, the entity is required to recognize an impairment charge for this amount. Current guidance requires an entity to proceed to a second step, whereby the entity would determine the fair value of its assets and liabilities. The new method applies to all reporting units. The performance of a qualitative assessment is still allowable. This accounting guidance is effective prospectively for interim and annual reporting periods beginning after December 15, 2019. The adoption of ASU No. 2017-04 did not impact the Company's Consolidated Financial Statements.
In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.” This ASU eliminates, adds, and modifies certain disclosure requirements for fair value measurements. Among the changes, entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. ASU No. 2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019. Entities are also allowed to elect early adoption for the eliminated or modified disclosure requirements and delay adoption of the new disclosure requirements until their effective date. As ASU No. 2018-13 only revises disclosure requirements, it did not have a material impact on the Company’s Consolidated Financial Statements.
In August 2018, the FASB issued ASU No. 2018-15, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” ASU No. 2018-15 clarifies certain aspects of ASU No. 2015-05, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Computing Arrangement,” which was issued in April 2015. Specifically, ASU No. 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). ASU No. 2018-15 does not affect the accounting for the service element of a hosting arrangement that is a service contract. ASU No. 2018-15 is effective for interim and annual reporting periods beginning after December 15, 2019. The adoption did not have a material impact on the Company's Consolidated Financial Statements.
In June 2016, the FASB issued ASU No. 2016-13 “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” and related subsequent amendments, which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. The measurement of expected losses under the CECL methodology is applicable to financial assets measured at amortized cost, as well as unfunded commitments that are considered off-balance sheet credit exposures at the reporting date. The measurement is based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to enhance their credit loss estimates. The update requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. For available for sale debt securities with unrealized losses, Topic 326 requires credit losses to be recognized as an allowance rather than a reduction in the amortized cost of the securities. As a result, improvements to estimated credit losses are recognized immediately in earnings rather than as interest income over time. The current expected credit loss measurement will be used to estimate the allowance for credit losses (“ACL”) over the life of the financial assets. The amendments in this update became effective for annual periods and interim periods within those annual periods beginning after December 15, 2019.
As previously disclosed, the Company assembled a cross-functional working group that met regularly to oversee the implementation plan which included assessment and documentation of processes and internal controls, model development and documentation, assessing existing loan and loss data, assessing models for default and loss estimates, and conducting parallel runs and reviews through December 31, 2019.
Under CECL the Company determines its allowance for credit losses on loans using pools of assets with similar risk characteristics. The Company evaluates its risk characteristics of loans based on regulatory call report code with sub-segmentation based on underlying collateral for certain loan types. Loans that no longer match the risk profile of the pool are individually assessed for credit losses. The Company’s lifetime credit loss models are based on historical data and incorporate forecasts of macroeconomic variables, expected prepayments and recoveries. Enhancements were made in the third quarter of 2020 to the Company’s economic adjustment calculation. The Company implemented segment-level loss calculations based on the equation of the fit line which replaced the previous calculation using a range. This allows the model to calculate a specific point estimate for the loss rate as compared to using a mid-point of a range. Additionally, the Company utilized actual loan runoff by segment whereas previously a calculation was utilized for the weighted average life period. The enhancements to the economic adjustment calculation were accounted for as a change in estimate and were not considered material to the overall calculation. Outside of the model, non-economic qualitative factors are applied to further refine the expected loss calculation for each portfolio. A seven quarter reasonable and supportable forecast period with a 1 year reversion period is currently used for all loan portfolios. When the risk characteristics of a loan no longer match the characteristics of the collective pool, the loan is removed from the pool and individually assessed for credit losses. Generally, non-accrual loans above a threshold deemed appropriate by management, TDRs, potential TDRs, and collateral dependent loans are individually assessed.
The individual assessment for credit impairment is generally based on a discounted cash flow approach unless the asset is collateral dependent. A loan is considered collateral dependent when repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. Collateral dependent loans are individually assessed and the expected credit loss is based on the fair value of the collateral. The fair value is reduced for estimated costs to sell if the value of the collateral is expected to be realized through sale.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company has elected to present accrued interest receivable separately from the amortized cost basis on the balance sheet and is not currently estimating an allowance for credit loss on accrued interest. This election applies to loans as well as debt securities. The Company's non-accrual policies have not changed as a result of adopting CECL.
The Company adopted CECL on January 1, 2020 using the modified retrospective method for all financial assets measured at amortized cost and off-balance-sheet credit exposures. Results for the reporting periods after January 1, 2020 are presented under Topic 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. On the adoption date, the Company increased the allowance for credit losses for loans by $25.4 million and increased the allowance for credit losses for unfunded loan commitments by $8.0 million (in other liabilities). The increase related to the Company's acquired loan portfolio totaled $15.3 million. Under the previously applicable accounting guidance, any remaining unamortized loan discount on an individual loan could be used to offset a charge-off for that loan, so the allowance for loan losses needed for the acquired loans was reduced by the remaining loan discounts. The new ASU removes the ability to offset a charge-off against the remaining loan discount and requires an allowance for credit losses to be recognized in addition to the loan discount. The impact of adopting the ASU, and at each subsequent reporting period, is highly dependent on credit quality, macroeconomic forecasts and conditions, composition of our loans and available-for-sale securities portfolio, along with other management judgments. The FASB provided transition relief, allowing entities to irrevocably elect, upon adoption of CECL, the fair value option (FVO) on financial instruments that were previously recorded at amortized cost and are within the scope of ASC 326-20 if the instruments are eligible for the FVO under ASC 825-10. It is applied through a cumulative-effect adjustment to retained earnings. The Company elected the FVO for the taxi medallion portfolio resulting in a $15.3 million reduction in loan valuation. As of January 1, 2020, the Company recorded a cumulative-effect adjustment of $24.4 million decrease in retained earnings, net of deferred tax balances of $9.0 million.
The Company recorded an allowance for credit losses as of January 1, 2020 on its securities held to maturity of $0.3 million.
The Company adopted CECL using the prospective transition approach for financial assets purchased with credit deterioration (“PCD”) that were previously classified as purchased credit impaired and accounted for under ASC 310-30. In accordance with the standard, Berkshire did not reassess whether PCI assets met the definition of PCD assets as of the date of adoption. On January 1, 2020, the amortized cost basis of the PCD assets were adjusted to reflect the addition of $15.3 million to the allowance for credit losses for loans which is net of $11.9 million adjustment for confirmed losses. The remaining noncredit discount in the amount of $3.2 million will be accreted into interest income at the effective interest rate as of January 1, 2020.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The impact of the January 1, 2020, adoption entry is summarized in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
December 31, 2019 Pre-ASC 326 Adoption
|
|
Impact of Adoption
|
|
January 1, 2020 Post-ASC 326 Adoption
|
Assets:
|
|
|
|
|
|
|
Loans
|
|
9,502,428
|
|
|
—
|
|
|
9,502,428
|
|
PCD gross up
|
|
—
|
|
|
15,326
|
|
|
15,326
|
|
Fair value option
|
|
—
|
|
|
(15,291)
|
|
|
(15,291)
|
|
Total loans
|
|
9,502,428
|
|
|
35
|
|
|
9,502,463
|
|
Allowance for credit losses on loans
|
|
63,575
|
|
|
25,434
|
|
|
89,009
|
|
Allowance for credit losses on securities
|
|
—
|
|
|
309
|
|
|
309
|
|
Deferred tax assets, net
|
|
51,165
|
|
|
8,993
|
|
|
60,158
|
|
|
|
|
|
|
|
|
Liabilities and shareholders' equity:
|
|
|
|
|
|
|
Other liabilities (ACL unfunded loan commitments)
|
|
100
|
|
|
7,993
|
|
|
8,093
|
|
Retained earnings
|
|
361,082
|
|
|
(24,380)
|
|
|
336,702
|
|
In December 2018, the OCC, the Board of Governors of the Federal Reserve System, and the FDIC approved a final rule to address changes to credit loss accounting under GAAP, including banking organizations’ implementation of CECL. The final rule provides banking organizations the option to phase in over a three-year period the day-one adverse effects on regulatory capital that may result from the adoption of the new accounting standard. In March 2020, the OCC, the Board of Governors of the Federal Reserve System, and the FDIC announced an interim final rule to delay the estimated impact on regulatory capital stemming from the implementation of CECL. The interim final rule maintains the three-year transition option in the previous rule and provides banks the option to delay for two years an estimate of CECL’s effect on regulatory capital, relative to the incurred loss methodology’s effect on regulatory capital, followed by a three-year transition period (five-year transition option). The Company is adopting the capital transition relief over the permissible five-year period.
On March 27, 2020, the Coronavirus, Aid, Relief, and Economic Security ("CARES") Act, which provides relief from certain requirements under GAAP, was signed into law. Section 4013 of the CARES Act gives entities temporary relief from the accounting and disclosure requirements for troubled debt restructurings ("TDRs") under ASC 310-40 in certain situations. In addition, on April 7, 2020, certain regulatory banking agencies issued an interagency statement that offers practical expedients for evaluating whether loan modifications in response to the COVID-19 pandemic are TDRs. The interagency statement was originally issued on March 22, 2020, but was revised to address the relationship between their original TDR guidance and the guidance in Section 4013 of the CARES Act. To qualify for TDR accounting and disclosure relief under the CARES Act, the applicable loan must not have been more than 30 days past due as of December 31, 2019, and the modification must be executed during the period beginning on March 1, 2020, and ending on the earlier of December 31, 2020, or the date that is 60 days after the termination date of the national emergency declared by the president on March 13, 2020, under the National Emergencies Act related to the outbreak of COVID-19. The CARES Act applies to modifications made as a result of COVID-19, including forbearance agreements, interest rate modifications, repayment plans, and other arrangements to defer or delay payment of principal or interest. The interagency statement does not require the modification to be completed within a certain time period if it is related to COVID-19 and the loan was not more than 30 days past due as of the date of the Company’s implementation of its modification programs. Moreover, the interagency statement applies to short-term modifications including payment deferrals, fee waivers, extensions of repayment terms, or other insignificant payment delays as a result of COVID-19. The Company will apply Section 4013 of the CARES Act and the interagency statement in connection with applicable modifications. For modifications that qualify under either the CARES Act or the interagency statement, TDR accounting and reporting is suspended through the period of the modification; however, the Company will continue to apply its existing non-accrual policies including consideration of the loan's past due status which is determined on the basis of the contractual terms of the loan. Once a loan has been contractually modified, the past due status is generally based on the updated terms including payment deferrals.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Future Application of Accounting Pronouncements
In August 2018, the FASB issued ASU No. 2018-14, “Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans.” This ASU amends and modifies the disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans. The amendments in this update remove disclosures that no longer are considered cost beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as relevant. ASU No. 2018-14 is effective for fiscal years ending after December 15, 2020, with early adoption permitted. As ASU No. 2018-14 only revises disclosure requirements, it will not have a material impact on the Consolidated Financial Statements.
In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” ASU No. 2019-12 removes specific exceptions to the general principles in FASB ASC Topic 740. It eliminates the need for an organization to analyze whether the following apply in a given period: (1) exception to the incremental approach for intraperiod tax allocation; (2) exceptions to accounting for basis differences when there are ownership changes in foreign investments; and (3) exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses. ASU 2019-12 also improves financial statement preparers’ application of income tax-related guidance and simplifies: (1) franchise taxes that are partially based on income; (2) transactions with a government that result in a step up in the tax basis of goodwill; (3) separate financial statements of legal entities that are not subject to tax; and (4) enacted changes in tax laws in interim periods. The amendments in this ASU become effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of adopting the new guidance on the Consolidated Financial Statements.
In January 2020, the FASB issued ASU No. 2020-01, “Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions Between Topic 321, Topic 323, and Topic 815 (a consensus of the FASB Emerging Issues Task Force)”. ASU No. 2020-01 clarifies the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815. The amendments clarify that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method. In addition, this ASU provides direction that a company should not consider whether the underlying securities would be accounted for under the equity method or the fair value option when it is determining the accounting for certain forward contracts and purchased options, upon either settlement or exercise. The amendments in this ASU become effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted, and the amendments are to be applied prospectively. The Company is currently evaluating the impact of adopting the new guidance on the Consolidated Financial Statements.
In March 2020, the FASB issued ASU No. 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU No. 2020-04 provides temporary optional expedients and exceptions to GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as SOFR. For instance, entities can elect not to apply certain modification accounting requirements to contracts affected by reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Entities can also elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met. Finally, entities can make a one-time election to sell and/or reclassify held-to-maturity debt securities that reference an interest rate affected by reference rate reform. It is anticipated that this ASU will simplify any modifications that are executed between the selected start date (yet to be determined) and December 31, 2022 that are directly related to LIBOR transition by allowing prospective recognition of the continuation of the contract, rather than extinguishment of the old contract resulting in writing off unamortized fees/costs. The Company is currently evaluating the impact of adopting the new guidance on the Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. DISCONTINUED OPERATIONS
During the first quarter of 2019, the Company reached the decision to pursue the sale of the national mortgage banking operations of First Choice Loan Services, Inc. (“FCLS”) – a subsidiary of the Bank. The decision was based on a number of strategic priorities and other factors, including the competitiveness of the mortgage industry. FCLS continued to operate and serve its customers as the Company initiated the process of identifying a buyer. As a result of these actions, the Company classified the operations of FCLS as discontinued under ASC 205-20. The Consolidated Balance Sheets, Consolidated Statements of Income, and Consolidated Statements of Cash Flows present discontinued operations retrospectively for current and prior periods.
On May 7, 2020, the Company completed a transaction to sell certain assets and liabilities related to the operations of FCLS. The Company continued to wind-down the operations of FCLS through the third quarter of 2020 and intends to complete a second transaction to transfer licenses and other intellectual property by the end of the year. Operating results for the three and nine months ended September 30, 2020, include expenses related to the wind-down of operations.
The following is a summary of the assets and liabilities of the discontinued operations of FCLS at September 30, 2020 and December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
September 30, 2020
|
|
December 31, 2019
|
Assets
|
|
|
|
|
Loans held for sale, at fair value
|
|
$
|
1,742
|
|
|
$
|
132,655
|
|
Premises and equipment, net
|
|
—
|
|
|
1,073
|
|
Other real estate owned
|
|
361
|
|
|
—
|
|
Mortgage servicing rights, at fair value
|
|
3,855
|
|
|
12,299
|
|
Mortgage banking derivatives
|
|
—
|
|
|
2,329
|
|
Right-of-use asset
|
|
1,773
|
|
|
3,462
|
|
Other assets
|
|
5,235
|
|
|
2,314
|
|
Total assets
|
|
$
|
12,966
|
|
|
$
|
154,132
|
|
Liabilities
|
|
|
|
|
Customer payments in process
|
|
$
|
11,698
|
|
|
$
|
15,372
|
|
Lease liability
|
|
1,773
|
|
|
3,494
|
|
Other liabilities
|
|
1,476
|
|
|
7,615
|
|
Total liabilities
|
|
$
|
14,947
|
|
|
$
|
26,481
|
|
FCLS funds its lending operations and maintains working capital through an intercompany line-of-credit with the Bank. Although the sale of FCLS will contemplate settlement of these borrowings, debt was not allocated to discontinued operations due to the intercompany nature of the borrowings.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following presents operating results of the discontinued operations of FCLS for the three and nine months ended September 30, 2020 and September 30, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
(In thousands)
|
|
2020
|
|
2019
|
2020
|
|
2019
|
Interest income
|
|
$
|
23
|
|
|
$
|
1,765
|
|
$
|
1,516
|
|
|
$
|
4,627
|
|
Interest expense
|
|
3
|
|
|
1,030
|
|
390
|
|
|
2,676
|
|
Net interest income
|
|
20
|
|
|
735
|
|
1,126
|
|
|
1,951
|
|
Non-interest income
|
|
(286)
|
|
|
15,055
|
|
(4,175)
|
|
|
37,114
|
|
Total net revenue
|
|
(266)
|
|
|
15,790
|
|
(3,049)
|
|
|
39,065
|
|
Non-interest expense
|
|
2,211
|
|
|
13,043
|
|
18,692
|
|
|
35,090
|
|
(Loss)/income from discontinued operations before income taxes
|
|
(2,477)
|
|
|
2,747
|
|
(21,741)
|
|
|
3,975
|
|
Income tax (benefit)/expense
|
|
(659)
|
|
|
790
|
|
(5,789)
|
|
|
1,161
|
|
Net (loss)/income from discontinued operations
|
|
$
|
(1,818)
|
|
|
$
|
1,957
|
|
$
|
(15,952)
|
|
|
$
|
2,814
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. TRADING SECURITY
The Company holds a tax-advantaged economic development bond accounted for at fair value. The security had an amortized cost of $8.8 million and $9.4 million, and a fair value of $9.5 million and $10.8 million, at September 30, 2020 and December 31, 2019, respectively. As discussed further in Note 9 - Derivative Financial Instruments and Hedging Activities, the Company entered into a swap contract to swap-out the fixed rate of the security in exchange for a variable rate. The Company does not purchase securities with the intent of selling them in the near term, and there were no other securities in the trading portfolio at September 30, 2020 or December 31, 2019.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. SECURITIES AVAILABLE FOR SALE, HELD TO MATURITY, AND MARKETABLE
EQUITY SECURITIES
The following is a summary of securities available for sale, held to maturity, and marketable equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Amortized Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
|
Allowance
|
September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale
|
|
|
|
|
|
|
|
|
|
|
Municipal bonds and obligations
|
|
$
|
97,463
|
|
|
$
|
7,057
|
|
|
$
|
(13)
|
|
|
$
|
104,507
|
|
|
$
|
—
|
|
Agency collateralized mortgage obligations
|
|
722,124
|
|
|
19,469
|
|
|
(124)
|
|
|
741,469
|
|
|
—
|
|
Agency mortgage-backed securities
|
|
322,252
|
|
|
4,202
|
|
|
(437)
|
|
|
326,017
|
|
|
—
|
|
Agency commercial mortgage-backed securities
|
|
263,406
|
|
|
10,304
|
|
|
(102)
|
|
|
273,608
|
|
|
—
|
|
Corporate bonds
|
|
74,357
|
|
|
842
|
|
|
(222)
|
|
|
74,977
|
|
|
—
|
|
Other bonds and obligations
|
|
52,958
|
|
|
1,762
|
|
|
(9)
|
|
|
54,711
|
|
|
—
|
|
Total securities available for sale
|
|
1,532,560
|
|
|
43,636
|
|
|
(907)
|
|
|
1,575,289
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities held to maturity
|
|
|
|
|
|
|
|
|
|
|
Municipal bonds and obligations
|
|
242,666
|
|
|
18,401
|
|
|
—
|
|
|
261,067
|
|
|
67
|
|
Agency collateralized mortgage obligations
|
|
68,124
|
|
|
6,535
|
|
|
—
|
|
|
74,659
|
|
|
—
|
|
Agency mortgage-backed securities
|
|
5,280
|
|
|
208
|
|
|
—
|
|
|
5,488
|
|
|
—
|
|
Agency commercial mortgage-backed securities
|
|
10,305
|
|
|
671
|
|
|
—
|
|
|
10,976
|
|
|
—
|
|
Tax advantaged economic development bonds
|
|
3,527
|
|
|
32
|
|
|
(9)
|
|
|
3,550
|
|
|
29
|
|
Other bonds and obligations
|
|
295
|
|
|
—
|
|
|
—
|
|
|
295
|
|
|
—
|
|
Total securities held to maturity
|
|
330,197
|
|
|
25,847
|
|
|
(9)
|
|
|
356,035
|
|
|
96
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable equity securities
|
|
34,179
|
|
|
1,480
|
|
|
(3,666)
|
|
|
31,993
|
|
|
—
|
|
Total
|
|
$
|
1,896,936
|
|
|
$
|
70,963
|
|
|
$
|
(4,582)
|
|
|
$
|
1,963,317
|
|
|
$
|
96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Amortized Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
|
Allowance
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale
|
|
|
|
|
|
|
|
|
|
|
Municipal bonds and obligations
|
|
$
|
104,325
|
|
|
$
|
5,813
|
|
|
$
|
—
|
|
|
$
|
110,138
|
|
|
$
|
—
|
|
Agency collateralized mortgage obligations
|
|
742,550
|
|
|
6,431
|
|
|
(169)
|
|
|
748,812
|
|
|
—
|
|
Agency mortgage-backed securities
|
|
146,589
|
|
|
1,515
|
|
|
(360)
|
|
|
147,744
|
|
|
—
|
|
Agency commercial mortgage-backed securities
|
|
148,066
|
|
|
176
|
|
|
(1,146)
|
|
|
147,096
|
|
|
—
|
|
Corporate bonds
|
|
115,395
|
|
|
1,788
|
|
|
(607)
|
|
|
116,576
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Other bonds and obligations
|
|
40,414
|
|
|
780
|
|
|
(5)
|
|
|
41,189
|
|
|
—
|
|
Total securities available for sale
|
|
1,297,339
|
|
|
16,503
|
|
|
(2,287)
|
|
|
1,311,555
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities held to maturity
|
|
|
|
|
|
|
|
|
|
|
Municipal bonds and obligations
|
|
252,936
|
|
|
13,095
|
|
|
(5)
|
|
|
266,026
|
|
|
—
|
|
Agency collateralized mortgage obligations
|
|
69,667
|
|
|
2,870
|
|
|
(50)
|
|
|
72,487
|
|
|
—
|
|
Agency mortgage-backed securities
|
|
6,271
|
|
|
29
|
|
|
—
|
|
|
6,300
|
|
|
—
|
|
Agency commercial mortgage-backed securities
|
|
10,353
|
|
|
51
|
|
|
—
|
|
|
10,404
|
|
|
—
|
|
Tax advantaged economic development bonds
|
|
18,456
|
|
|
218
|
|
|
(910)
|
|
|
17,764
|
|
|
—
|
|
Other bonds and obligations
|
|
296
|
|
|
—
|
|
|
—
|
|
|
296
|
|
|
—
|
|
Total securities held to maturity
|
|
357,979
|
|
|
16,263
|
|
|
(965)
|
|
|
373,277
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable equity securities
|
|
37,138
|
|
|
5,147
|
|
|
(729)
|
|
|
41,556
|
|
|
—
|
|
Total
|
|
$
|
1,692,456
|
|
|
$
|
37,913
|
|
|
$
|
(3,981)
|
|
|
$
|
1,726,388
|
|
|
$
|
—
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the activity in the allowance for credit losses for debt securities held to maturity by security type for the three and nine months ended September 30, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Municipal bonds and obligations
|
|
Tax advantaged economic development bonds
|
|
Total
|
Balance at June 30, 2020
|
(62)
|
|
|
(51)
|
|
|
(113)
|
|
Provision for credit losses- reversal
|
(5)
|
|
|
22
|
|
|
17
|
|
Balance at September 30, 2020
|
(67)
|
|
|
(29)
|
|
|
(96)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
Municipal bonds and obligations
|
|
Tax advantaged economic development bonds
|
|
Total
|
Balance at December 31, 2019
|
—
|
|
|
—
|
|
|
—
|
|
Impact of ASC 326 adoption
|
(83)
|
|
|
(226)
|
|
|
(309)
|
|
Provision for credit losses- reversal
|
16
|
|
|
197
|
|
|
213
|
|
Balance at September 30, 2020
|
(67)
|
|
|
(29)
|
|
|
(96)
|
|
Credit Quality Information
The Company monitors the credit quality of held to maturity securities through credit ratings from various rating agencies. Credit ratings express opinions about the credit quality of a security and are utilized by the Company to make informed decisions. Investment grade securities are rated BBB-/Baa3 or higher and generally considered by the rating agencies and market participants to be of low credit risk. Conversely, securities rated below investment grade are considered to have distinctively higher credit risk than investment grade securities. For securities without credit ratings, the Company utilizes other financial information indicating the financial health of the underlying municipality, agency, or organization.
As of September 30, 2020, none of the Company's investment securities were delinquent or in non-accrual status.
The amortized cost and estimated fair value of available for sale (“AFS”) and held to maturity (“HTM”) securities segregated by contractual maturity at September 30, 2020 are presented below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Mortgage-backed securities are shown in total, as their maturities are highly variable.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale
|
|
Held to maturity
|
|
|
Amortized
|
|
Fair
|
|
Amortized
|
|
Fair
|
(In thousands)
|
|
Cost
|
|
Value
|
|
Cost
|
|
Value
|
|
|
|
|
|
|
|
|
|
Within 1 year
|
|
$
|
38,196
|
|
|
$
|
38,234
|
|
|
$
|
2,526
|
|
|
$
|
2,528
|
|
Over 1 year to 5 years
|
|
12,714
|
|
|
12,610
|
|
|
4,006
|
|
|
4,022
|
|
Over 5 years to 10 years
|
|
75,351
|
|
|
76,403
|
|
|
23,066
|
|
|
23,897
|
|
Over 10 years
|
|
98,517
|
|
|
106,948
|
|
|
216,890
|
|
|
234,465
|
|
Total bonds and obligations
|
|
224,778
|
|
|
234,195
|
|
|
246,488
|
|
|
264,912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
|
1,307,782
|
|
|
1,341,094
|
|
|
83,709
|
|
|
91,123
|
|
Total
|
|
$
|
1,532,560
|
|
|
$
|
1,575,289
|
|
|
$
|
330,197
|
|
|
$
|
356,035
|
|
During the three months ended September 30, 2020, purchases of AFS securities totaled $319.2 million and the proceeds from the sale of AFS securities totaled $64.2 million. During the nine months ended September 30, 2020, purchases of AFS securities totaled $635.2 million and the proceeds from the sale of AFS securities totaled $71.8 million. During the three months ended September 30, 2019, purchases of AFS securities totaled $14.9 million. During the three months ended September 30, 2019, there were no securities sold. During the nine months ended September 30, 2019, purchases of AFS securities totaled $30.0 million and the proceeds from the sale of AFS securities totaled $83.0 million. During the three months ended September 30, 2020, gross gains on AFS securities totaled $704.6 thousand and there were $698.6 thousand gross losses. During the nine months ended September 30, 2020, gross gains on AFS securities totaled $705.4 thousand and gross losses totaled $699.9 thousand. During the
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
three months ended September 30,2019, gross gains on AFS securities totaled $5 thousand and gross losses totaled $1 thousand. During the nine months ended September 30, 2019, gross gains totaled $11 thousand and gross losses totaled $7 thousand. These gains and losses are included in gain/(loss) on securities, net on the consolidated statements of income.
Securities available for sale and held to maturity with unrealized losses, segregated by the duration of their continuous unrealized loss positions, are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Than Twelve Months
|
|
Over Twelve Months
|
|
Total
|
|
|
Gross
|
|
|
|
Gross
|
|
|
|
Gross
|
|
|
|
|
Unrealized
|
|
Fair
|
|
Unrealized
|
|
Fair
|
|
Unrealized
|
|
Fair
|
(In thousands)
|
|
Losses
|
|
Value
|
|
Losses
|
|
Value
|
|
Losses
|
|
Value
|
September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal bonds and obligations
|
|
$
|
13
|
|
|
$
|
3,451
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
13
|
|
|
$
|
3,451
|
|
Agency collateralized mortgage obligations
|
|
124
|
|
|
44,785
|
|
|
—
|
|
|
—
|
|
|
124
|
|
|
44,785
|
|
Agency mortgage-backed securities
|
|
434
|
|
|
133,536
|
|
|
3
|
|
|
257
|
|
|
437
|
|
|
133,793
|
|
Agency commercial mortgage-backed securities
|
|
102
|
|
|
22,336
|
|
|
—
|
|
|
—
|
|
|
102
|
|
|
22,336
|
|
Corporate bonds
|
|
222
|
|
|
10,663
|
|
|
—
|
|
|
—
|
|
|
222
|
|
|
10,663
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other bonds and obligations
|
|
—
|
|
|
—
|
|
|
9
|
|
|
1,064
|
|
|
9
|
|
|
1,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities available for sale
|
|
895
|
|
|
214,771
|
|
|
12
|
|
|
1,321
|
|
|
907
|
|
|
216,092
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities held to maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax advantaged economic development bonds
|
|
9
|
|
|
1,430
|
|
|
—
|
|
|
—
|
|
|
9
|
|
|
1,430
|
|
Total securities held to maturity
|
|
9
|
|
|
1,430
|
|
|
—
|
|
|
—
|
|
|
9
|
|
|
1,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
904
|
|
|
$
|
216,201
|
|
|
$
|
12
|
|
|
$
|
1,321
|
|
|
$
|
916
|
|
|
$
|
217,522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency collateralized mortgage obligations
|
|
127
|
|
|
52,623
|
|
|
42
|
|
|
6,267
|
|
|
169
|
|
|
58,890
|
|
Agency mortgage-backed securities
|
|
59
|
|
|
10,640
|
|
|
301
|
|
|
23,404
|
|
|
360
|
|
|
34,044
|
|
Agency commercial mortgage-backed securities
|
|
1,097
|
|
|
116,324
|
|
|
49
|
|
|
11,250
|
|
|
1,146
|
|
|
127,574
|
|
Corporate bonds
|
|
—
|
|
|
—
|
|
|
607
|
|
|
42,823
|
|
|
607
|
|
|
42,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other bonds and obligations
|
|
4
|
|
|
1,239
|
|
|
1
|
|
|
29
|
|
|
5
|
|
|
1,268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities available for sale
|
|
1,287
|
|
|
180,826
|
|
|
1,000
|
|
|
83,773
|
|
|
2,287
|
|
|
264,599
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities held to maturity
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal bonds and obligations
|
|
5
|
|
|
800
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
800
|
|
Agency collateralized mortgage obligations
|
|
50
|
|
|
9,778
|
|
|
—
|
|
|
—
|
|
|
50
|
|
|
9,778
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax advantaged economic development bonds
|
|
—
|
|
|
—
|
|
|
910
|
|
|
6,925
|
|
|
910
|
|
|
6,925
|
|
Total securities held to maturity
|
|
55
|
|
|
10,578
|
|
|
910
|
|
|
6,925
|
|
|
965
|
|
|
17,503
|
|
Total
|
|
$
|
1,342
|
|
|
$
|
191,404
|
|
|
$
|
1,910
|
|
|
$
|
90,698
|
|
|
$
|
3,252
|
|
|
$
|
282,102
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Debt Securities
The Company expects to recover its amortized cost basis on all debt securities in its AFS and HTM portfolios. Furthermore, the Company does not intend to sell nor does it anticipate that it will be required to sell any of its securities in an unrealized loss position as of September 30, 2020, prior to this recovery. The Company’s ability and intent to hold these securities until recovery is supported by the Company’s strong capital and liquidity positions as well as its historically low portfolio turnover.
The following summarizes, by investment security type, the basis for the conclusion that the debt securities in an unrealized loss position within the Company’s AFS and HTM portfolios were not other-than-temporarily impaired at September 30, 2020:
AFS municipal bonds and obligations
At September 30, 2020, 2 of the 174 securities in the Company’s portfolio of AFS municipal bonds and obligations were in unrealized loss positions. Aggregate unrealized losses represented 0.4% of the amortized cost of securities in unrealized loss positions. The Company continually monitors the municipal bond sector of the market carefully and periodically evaluates the appropriate level of exposure to the market. At this time, the Company feels the bonds in this portfolio carry minimal risk of default and the Company is appropriately compensated for that risk. There were no material underlying credit downgrades during the quarter. All securities are performing.
AFS collateralized mortgage obligations
At September 30, 2020, 14 of the 257 securities in the Company’s portfolio of AFS collateralized mortgage obligations were in unrealized loss positions. Aggregate unrealized losses represented 0.3% of the amortized cost of securities in unrealized loss positions. The Federal National Mortgage Association (“FNMA”), Federal Home Loan Mortgage Corporation (“FHLMC”), and Government National Mortgage Association (“GNMA”) guarantee the contractual cash flows of all of the Company’s collateralized mortgage obligations. The securities are investment grade rated and there were no material underlying credit downgrades during the quarter. All securities are performing.
AFS commercial and residential mortgage-backed securities
At September 30, 2020, 15 of the 122 securities in the Company’s portfolio of AFS mortgage-backed securities were in unrealized loss positions. Aggregate unrealized losses represented 0.3% of the amortized cost of securities in unrealized loss positions. The FNMA, FHLMC, and GNMA guarantee the contractual cash flows of all of the Company’s mortgage-backed securities. The securities are investment grade rated and there were no material underlying credit downgrades during the quarter. All securities are performing.
AFS corporate bonds
At September 30, 2020, 3 of the 18 securities in the Company’s portfolio of AFS corporate bonds were in unrealized loss positions. Aggregate unrealized losses represents 10.4% of the amortized cost of bonds in unrealized loss positions. The Company reviews the financial strength of all of these bonds and has concluded that the amortized cost remains supported by the expected future cash flows of these securities.
AFS other bonds and obligations
At September 30, 2020, 3 of the 7 securities in the Company’s portfolio of other bonds and obligations were in unrealized loss positions. Aggregate unrealized losses represented 0.8% of the amortized cost of securities in unrealized loss positions. The securities are all investment grade rated, and there were no material underlying credit downgrades during the quarter. All securities are performing.
HTM tax-advantaged economic development bonds
At September 30, 2020, 1 of the 3 securities in the Company’s portfolio of tax-advantaged economic development bonds was in an unrealized loss position. Aggregate unrealized losses represented 0.6% of the amortized cost of the security in an unrealized loss position. The Company believes that more likely than not all the principal outstanding will be collected. All securities are performing.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. LOANS AND ALLOWANCE FOR CREDIT LOSSES
Upon adoption of ASC 326, the Company evaluates its risk characteristics of loans based on regulatory call report code with sub-segmentation based on underlying collateral for certain loan types. Prior to the adoption of ASC 326, under the incurred loss model, the Company evaluated its risk characteristics of loans based on purpose of the loans. The composition of loans by portfolio segment as of December 31, 2019 and January 1, 2020 follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
December 31, 2019 Statement Balance
|
|
Impact of ASC 326 Adoption
|
|
January 1, 2020 Post-ASC 326 Adoption
|
Loans:
|
|
|
|
|
|
|
Construction
|
|
$
|
448,452
|
|
|
$
|
187
|
|
|
$
|
448,639
|
|
Commercial multifamily
|
|
631,740
|
|
|
252
|
|
|
631,992
|
|
Commercial real estate owner occupied
|
|
673,308
|
|
|
3,185
|
|
|
676,493
|
|
Commercial real estate non-owner occupied
|
|
2,189,780
|
|
|
6,540
|
|
|
2,196,320
|
|
Commercial and industrial
|
|
1,522,059
|
|
|
(13,372)
|
|
|
1,508,687
|
|
Commercial and industrial - other
|
|
321,624
|
|
|
1,160
|
|
|
322,784
|
|
Residential real estate
|
|
2,853,385
|
|
|
1,868
|
|
|
2,855,253
|
|
Home equity
|
|
378,793
|
|
|
10
|
|
|
378,803
|
|
Consumer other
|
|
483,287
|
|
|
205
|
|
|
483,492
|
|
Total
|
|
$
|
9,502,428
|
|
|
$
|
35
|
|
|
$
|
9,502,463
|
|
|
|
|
|
|
|
|
Allowance:
|
|
|
|
|
|
|
Construction
|
|
$
|
2,713
|
|
|
$
|
(342)
|
|
|
$
|
2,371
|
|
Commercial multifamily
|
|
4,413
|
|
|
(1,842)
|
|
|
2,571
|
|
Commercial real estate owner occupied
|
|
4,880
|
|
|
6,062
|
|
|
10,942
|
|
Commercial real estate non-owner occupied
|
|
16,344
|
|
|
11,201
|
|
|
27,545
|
|
Commercial and industrial
|
|
17,243
|
|
|
(2,696)
|
|
|
14,547
|
|
Commercial and industrial - other
|
|
2,856
|
|
|
507
|
|
|
3,363
|
|
Residential real estate
|
|
9,970
|
|
|
6,799
|
|
|
16,769
|
|
Home equity
|
|
1,470
|
|
|
4,884
|
|
|
6,354
|
|
Consumer other
|
|
3,686
|
|
|
861
|
|
|
4,547
|
|
Total
|
|
$
|
63,575
|
|
|
$
|
25,434
|
|
|
$
|
89,009
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following is a summary of total loans by regulatory call report code with sub-segmentation based on underlying collateral for certain loan types:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
September 30, 2020
|
|
December 31, 2019
|
Construction
|
|
$
|
490,111
|
|
|
$
|
448,452
|
|
Commercial multifamily
|
|
535,936
|
|
|
631,740
|
|
Commercial real estate owner occupied
|
|
595,791
|
|
|
673,308
|
|
Commercial real estate non-owner occupied
|
|
2,258,935
|
|
|
2,189,780
|
|
Commercial and industrial
|
|
1,819,175
|
|
|
1,522,059
|
|
Commercial and industrial - other
|
|
311,505
|
|
|
321,624
|
|
Residential real estate
|
|
2,270,458
|
|
|
2,853,385
|
|
Home equity
|
|
349,274
|
|
|
378,793
|
|
Consumer other
|
|
351,151
|
|
|
483,287
|
|
Total loans
|
|
$
|
8,982,336
|
|
|
$
|
9,502,428
|
|
|
|
|
|
|
Allowance for credit losses
|
|
134,414
|
|
|
63,575
|
|
Net loans
|
|
$
|
8,847,922
|
|
|
$
|
9,438,853
|
|
As of September 30, 2020, loans originated under the Small Business Administration ("SBA") Paycheck Protection Program ("PPP") totaled $708.1 million. These loans are 100% guaranteed by the SBA and the full principal amount of the loan may qualify for forgiveness. These loans are included in commercial and industrial.
Risk characteristics relevant to each portfolio segment are as follows:
Construction - Loans in this segment primarily include real estate development loans for which payment is derived from sale of the property or long term financing at completion. Credit risk is affected by cost overruns, time to sell at an adequate price, and market conditions
Commercial real estate multifamily, owner occupied and non-owner - Loans in these segments are primarily owner-occupied or income-producing properties throughout New England and Northeastern New York. The underlying cash flows generated by the properties are adversely impacted by a downturn in the economy, which in turn, will have an effect on the credit quality in this segment. Management monitors the cash flows of these loans.
Commercial and industrial loans - Loans in this segment are made to businesses and are generally secured by assets of the business such as accounts receivable, inventory, marketable securities, other liquid collateral, equipment and other business assets. Repayment is expected from the cash flows of the business. Loans in this segment include asset based loans which generally have no scheduled repayment and which are closely monitored against formula based collateral advance ratios. A weakened economy, and resultant decreased consumer spending, will have an effect on the credit quality in this segment.
Commercial and industrial other loans - Loans in this segment are primarily equipment financing loans. These loans are typically term loans secured by business assets. Credit quality on these loans are impacted by a weakened economy and resultant decreased consumer spending.
Residential real estate - All loans in this segment are collateralized by residential real estate and repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality in this segment.
Home equity and other consumer loans - Loans in this segment are primarily home equity lines of credit, automobile loans and other consumer loans. The overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality in this segment.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Allowance for Credit Losses for Loans
The Allowance for Credit Losses for Loans (“ACLL”) is comprised of the allowance for loan losses and the allowance for unfunded commitments which is accounted for as a separate liability in other liabilities on the balance sheet. The level of the ACLL represents management’s estimate of expected credit losses over the expected life of the loans at the balance sheet date. The Company uses a static pool migration analysis method, applying expected historical loss trend and observed economic metrics. The level of the ACLL is based on management’s ongoing review of all relevant information, from internal and external sources, relating to past and current events, utilizing a 7 quarter reasonable and supportable forecast period with a 1 year reversion period. The ACLL reserve is overlaid with qualitative factors based upon:
•the existence and growth of concentrations of credit;
•the volume and severity of past due financial assets, including nonaccrual assets;
•the institutions lending and credit review as well as the experience and ability of relevant management and staff and;
•the effect of other external factors such as regulatory, competition, regional market conditions, legal and technological environment and other events such as natural disasters;
•the effect of other economic factors such as economic stimulus and customer forbearance programs.
The allowance for unfunded commitments is maintained at a level by the Company to be sufficient to absorb expected lifetime losses related to unfunded credit facilities (including unfunded loan commitments and letters of credit).
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company’s activity in the allowance for credit losses for loans for the three and nine months ended September 30, 2020 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Balance at Beginning of Period
|
|
Impact of Adopting ASC 326
|
|
Sub-total
|
|
Charge-offs
|
|
Recoveries
|
|
Provision for Credit Losses
|
|
Balance at End of Period
|
Three months ended September 30, 2020
|
Construction
|
|
$
|
7,779
|
|
|
$
|
—
|
|
|
$
|
7,779
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(1,122)
|
|
|
$
|
6,657
|
|
Commercial multifamily
|
|
4,299
|
|
|
—
|
|
|
4,299
|
|
|
—
|
|
|
—
|
|
|
(518)
|
|
|
3,781
|
|
Commercial real estate owner occupied
|
|
11,552
|
|
|
—
|
|
|
11,552
|
|
|
(58)
|
|
|
38
|
|
|
(537)
|
|
|
10,995
|
|
Commercial real estate non-owner occupied
|
|
34,707
|
|
|
—
|
|
|
34,707
|
|
|
—
|
|
|
155
|
|
|
(2,088)
|
|
|
32,774
|
|
Commercial and industrial
|
|
17,779
|
|
|
—
|
|
|
17,779
|
|
|
(2,358)
|
|
|
161
|
|
|
1,346
|
|
|
16,928
|
|
Commercial and industrial - other
|
|
5,317
|
|
|
—
|
|
|
5,317
|
|
|
(3,610)
|
|
|
245
|
|
|
1,968
|
|
|
3,920
|
|
Residential real estate
|
|
39,004
|
|
|
—
|
|
|
39,004
|
|
|
(1,085)
|
|
|
842
|
|
|
1,130
|
|
|
39,891
|
|
Home equity
|
|
8,021
|
|
|
—
|
|
|
8,021
|
|
|
(88)
|
|
|
36
|
|
|
1,352
|
|
|
9,321
|
|
Consumer other
|
|
10,936
|
|
|
—
|
|
|
10,936
|
|
|
(577)
|
|
|
102
|
|
|
(314)
|
|
|
10,147
|
|
Total allowance for credit losses
|
|
$
|
139,394
|
|
|
$
|
—
|
|
|
$
|
139,394
|
|
|
$
|
(7,776)
|
|
|
$
|
1,579
|
|
|
$
|
1,217
|
|
|
$
|
134,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Balance at Beginning of Period
|
|
Impact of Adopting ASC 326
|
|
Sub-total
|
|
Charge-offs
|
|
Recoveries
|
|
Provision for Credit Losses
|
|
Balance at End of Period
|
Nine months ended September 30, 2020
|
Construction
|
|
$
|
2,713
|
|
|
$
|
(342)
|
|
|
$
|
2,371
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,286
|
|
|
$
|
6,657
|
|
Commercial multifamily
|
|
4,413
|
|
|
(1,842)
|
|
|
2,571
|
|
|
(50)
|
|
|
—
|
|
|
1,260
|
|
|
3,781
|
|
Commercial real estate owner occupied
|
|
4,880
|
|
|
6,062
|
|
|
10,942
|
|
|
(8,670)
|
|
|
907
|
|
|
7,816
|
|
|
10,995
|
|
Commercial real estate non-owner occupied
|
|
16,344
|
|
|
11,201
|
|
|
27,545
|
|
|
(135)
|
|
|
290
|
|
|
5,074
|
|
|
32,774
|
|
Commercial and industrial
|
|
17,243
|
|
|
(2,696)
|
|
|
14,547
|
|
|
(7,480)
|
|
|
3,709
|
|
|
6,152
|
|
|
16,928
|
|
Commercial and industrial - other
|
|
2,856
|
|
|
507
|
|
|
3,363
|
|
|
(6,773)
|
|
|
316
|
|
|
7,014
|
|
|
3,920
|
|
Residential real estate
|
|
9,970
|
|
|
6,799
|
|
|
16,769
|
|
|
(2,212)
|
|
|
936
|
|
|
24,398
|
|
|
39,891
|
|
Home equity
|
|
1,470
|
|
|
4,884
|
|
|
6,354
|
|
|
(322)
|
|
|
136
|
|
|
3,153
|
|
|
9,321
|
|
Consumer other
|
|
3,686
|
|
|
861
|
|
|
4,547
|
|
|
(1,840)
|
|
|
502
|
|
|
6,938
|
|
|
10,147
|
|
Total allowance for credit losses
|
|
$
|
63,575
|
|
|
$
|
25,434
|
|
|
$
|
89,009
|
|
|
$
|
(27,482)
|
|
|
$
|
6,796
|
|
|
$
|
66,091
|
|
|
$
|
134,414
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company’s allowance for credit losses on unfunded commitments is recognized as a liability (other liability on consolidated balance sheet), with adjustments to the reserve recognized in other noninterest expense in the consolidated statement of operations. The Company’s activity in the allowance for credit losses on unfunded commitments for the three and nine months ended September 30, 2020 was as follows:
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Total
|
Balance at June 30, 2020
|
|
$
|
8,593
|
|
Expense for credit losses
|
|
—
|
|
Balance at September 30, 2020
|
|
$
|
8,593
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Total
|
Balance at December 31, 2019
|
|
$
|
100
|
|
Impact of adopting ASC 326
|
|
7,993
|
|
Sub-Total
|
|
8,093
|
|
Expense for credit losses
|
|
500
|
|
Balance at September 30, 2020
|
|
$
|
8,593
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Credit Quality Information
The Company monitors the credit quality of its portfolio by using internal risk ratings that are based on regulatory guidance. Loans that are given a Pass rating are not considered a problem credit. Loans that are classified as Special Mention loans are considered to have potential weaknesses and are evaluated closely by management. Substandard, including non-accruing loans, are loans for which a definitive weakness has been identified and which may make full collection of contractual cash flows questionable. Doubtful loans are those with identified weaknesses that make full collection of contractual cash flows, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.
For commercial credits, the Company assigns an internal risk rating at origination and reviews the rating annual, semiannually, or quarterly depending on the risk rating. The rating is also reassessed at any point in time when management becomes aware of information that may affect the borrower’s ability to fulfill their obligations.
The Company risk rates its residential mortgages, including 1-4 family and residential construction loans, based on a three rating system: Pass, Special Mention, and Substandard. Loans that are current within 59 days are rated Pass. Residential mortgages that are 60-89 days delinquent are rated Special Mention. Loans delinquent for 90 days or greater are rated Substandard and generally placed on non-accrual status.
The following table presents the Company’s loans by risk category:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term Loans Amortized Cost Basis by Origination Year
|
|
|
|
(In thousands)
|
2020
|
2019
|
2018
|
2017
|
2016
|
Prior
|
Revolving Loans Amortized Cost Basis
|
Revolving Loans Converted to Term
|
Total
|
As of September 30, 2020
|
Construction
|
|
|
|
|
|
|
|
|
|
Risk rating
|
|
|
|
|
|
|
|
|
|
Pass
|
$
|
35,430
|
|
$
|
241,497
|
|
$
|
155,695
|
|
$
|
29,807
|
|
$
|
17,600
|
|
$
|
3,115
|
|
$
|
933
|
|
$
|
—
|
|
$
|
484,077
|
|
Special Mention
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Substandard
|
—
|
|
—
|
|
2,034
|
|
4,000
|
|
—
|
|
—
|
|
—
|
|
—
|
|
6,034
|
|
Total
|
$
|
35,430
|
|
$
|
241,497
|
|
$
|
157,729
|
|
$
|
33,807
|
|
$
|
17,600
|
|
$
|
3,115
|
|
$
|
933
|
|
$
|
—
|
|
$
|
490,111
|
|
|
|
|
|
|
|
|
|
|
|
Commercial multifamily:
|
Risk rating
|
|
|
|
|
|
|
|
|
|
Pass
|
$
|
28,876
|
|
$
|
56,630
|
|
$
|
79,397
|
|
$
|
72,790
|
|
$
|
89,041
|
|
$
|
185,276
|
|
$
|
29
|
|
$
|
—
|
|
$
|
512,039
|
|
Special Mention
|
—
|
|
—
|
|
—
|
|
13,595
|
|
—
|
|
—
|
|
—
|
|
—
|
|
13,595
|
|
Substandard
|
—
|
|
—
|
|
—
|
|
—
|
|
47
|
|
10,108
|
|
147
|
|
—
|
|
10,302
|
|
Total
|
$
|
28,876
|
|
$
|
56,630
|
|
$
|
79,397
|
|
$
|
86,385
|
|
$
|
89,088
|
|
$
|
195,384
|
|
$
|
176
|
|
$
|
—
|
|
$
|
535,936
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate owner occupied:
|
Risk rating
|
|
|
|
|
|
|
|
|
|
Pass
|
$
|
44,304
|
|
$
|
90,869
|
|
$
|
112,768
|
|
$
|
71,574
|
|
$
|
38,231
|
|
$
|
205,814
|
|
$
|
3,461
|
|
$
|
—
|
|
$
|
567,021
|
|
Special Mention
|
—
|
|
2,123
|
|
1,815
|
|
—
|
|
—
|
|
2,001
|
|
—
|
|
—
|
|
5,939
|
|
Substandard
|
—
|
|
—
|
|
5,638
|
|
1,622
|
|
1,704
|
|
13,867
|
|
—
|
|
—
|
|
22,831
|
|
Total
|
$
|
44,304
|
|
$
|
92,992
|
|
$
|
120,221
|
|
$
|
73,196
|
|
$
|
39,935
|
|
$
|
221,682
|
|
$
|
3,461
|
|
$
|
—
|
|
$
|
595,791
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term Loans Amortized Cost Basis by Origination Year
|
|
|
|
(In thousands)
|
2020
|
2019
|
2018
|
2017
|
2016
|
Prior
|
Revolving Loans Amortized Cost Basis
|
Revolving Loans Converted to Term
|
Total
|
Commercial real estate non-owner occupied:
|
Risk rating
|
|
|
|
|
|
|
|
|
|
Pass
|
$
|
133,231
|
|
$
|
291,079
|
|
$
|
469,033
|
|
$
|
250,093
|
|
$
|
314,902
|
|
$
|
583,861
|
|
$
|
16,967
|
|
$
|
—
|
|
$
|
2,059,166
|
|
Special Mention
|
—
|
|
295
|
|
3,094
|
|
17,254
|
|
12,901
|
|
68,838
|
|
495
|
|
—
|
|
102,877
|
|
Substandard
|
7,804
|
|
6,844
|
|
3,817
|
|
11,368
|
|
2,950
|
|
63,914
|
|
195
|
|
—
|
|
96,892
|
|
Total
|
$
|
141,035
|
|
$
|
298,218
|
|
$
|
475,944
|
|
$
|
278,715
|
|
$
|
330,753
|
|
$
|
716,613
|
|
$
|
17,657
|
|
$
|
—
|
|
$
|
2,258,935
|
|
|
Commercial and industrial:
|
Risk rating
|
|
|
|
|
|
|
|
|
|
Pass
|
$
|
755,987
|
|
$
|
96,675
|
|
$
|
189,565
|
|
$
|
121,633
|
|
$
|
47,911
|
|
$
|
150,299
|
|
$
|
401,356
|
|
$
|
—
|
|
$
|
1,763,426
|
|
Special Mention
|
—
|
|
1,507
|
|
5,950
|
|
693
|
|
604
|
|
—
|
|
20,614
|
|
—
|
|
29,368
|
|
Substandard
|
1,354
|
|
275
|
|
6,354
|
|
1,661
|
|
1,965
|
|
5,848
|
|
8,522
|
|
—
|
|
25,979
|
|
Doubtful
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
402
|
|
—
|
|
402
|
|
Total
|
$
|
757,341
|
|
$
|
98,457
|
|
$
|
201,869
|
|
$
|
123,987
|
|
$
|
50,480
|
|
$
|
156,147
|
|
$
|
430,894
|
|
$
|
—
|
|
$
|
1,819,175
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial - other:
|
Risk rating
|
|
|
|
|
|
|
|
|
|
Pass
|
$
|
34,814
|
|
$
|
78,318
|
|
$
|
78,149
|
|
$
|
33,573
|
|
$
|
7,717
|
|
$
|
14,585
|
|
$
|
4,614
|
|
$
|
—
|
|
$
|
251,770
|
|
Special Mention
|
933
|
|
1,100
|
|
1,944
|
|
741
|
|
497
|
|
64
|
|
—
|
|
—
|
|
5,279
|
|
Substandard
|
2,543
|
|
29,372
|
|
12,006
|
|
4,542
|
|
3,286
|
|
307
|
|
2,400
|
|
—
|
|
54,456
|
|
Doubtful
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Total
|
$
|
38,290
|
|
$
|
108,790
|
|
$
|
92,099
|
|
$
|
38,856
|
|
$
|
11,500
|
|
$
|
14,956
|
|
$
|
7,014
|
|
$
|
—
|
|
$
|
311,505
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate
|
Risk rating
|
|
|
|
|
|
|
|
|
|
Pass
|
$
|
133,186
|
|
$
|
163,232
|
|
$
|
373,222
|
|
$
|
399,237
|
|
$
|
391,953
|
|
$
|
794,072
|
|
$
|
3,260
|
|
$
|
—
|
|
$
|
2,258,162
|
|
Special Mention
|
39
|
|
—
|
|
—
|
|
—
|
|
—
|
|
468
|
|
38
|
|
—
|
|
545
|
|
Substandard
|
—
|
|
97
|
|
539
|
|
1,162
|
|
429
|
|
9,515
|
|
9
|
|
—
|
|
11,751
|
|
Total
|
$
|
133,225
|
|
$
|
163,329
|
|
$
|
373,761
|
|
$
|
400,399
|
|
$
|
392,382
|
|
$
|
804,055
|
|
$
|
3,307
|
|
$
|
—
|
|
$
|
2,270,458
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For home equity and consumer other loan portfolio segments, Berkshire evaluates credit quality based on the aging status of the loan and by payment activity. The performing or nonperforming status is updated on an ongoing basis dependent upon improvement and deterioration in credit quality. The following table presents the amortized cost based on payment activity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term Loans Amortized Cost Basis by Origination Year
|
|
|
|
(In thousands)
|
2020
|
2019
|
2018
|
2017
|
2016
|
Prior
|
Revolving Loans Amortized Cost Basis
|
Revolving Loans Converted to Term
|
Total
|
As of September 30, 2020
|
Home equity:
|
|
|
|
|
|
|
|
|
|
Payment performance
|
|
|
|
|
|
|
|
|
|
Performing
|
$
|
2,191
|
|
$
|
1,995
|
|
$
|
432
|
|
$
|
1,990
|
|
$
|
515
|
|
$
|
1,954
|
|
$
|
336,569
|
|
$
|
—
|
|
$
|
345,646
|
|
Nonperforming
|
—
|
|
—
|
|
2
|
|
—
|
|
—
|
|
—
|
|
3,626
|
|
—
|
|
3,628
|
|
Total
|
$
|
2,191
|
|
$
|
1,995
|
|
$
|
434
|
|
$
|
1,990
|
|
$
|
515
|
|
$
|
1,954
|
|
$
|
340,195
|
|
$
|
—
|
|
$
|
349,274
|
|
|
|
|
|
|
|
|
|
|
|
Consumer other:
|
|
|
|
|
|
|
|
|
|
Payment performance
|
|
|
|
|
|
|
|
|
|
Performing
|
$
|
11,381
|
|
$
|
39,877
|
|
$
|
121,304
|
|
$
|
80,701
|
|
$
|
43,513
|
|
$
|
37,256
|
|
$
|
11,464
|
|
$
|
—
|
|
$
|
345,496
|
|
Nonperforming
|
34
|
|
404
|
|
1,563
|
|
1,480
|
|
1,698
|
|
447
|
|
29
|
|
—
|
|
5,655
|
|
Total
|
$
|
11,415
|
|
$
|
40,281
|
|
$
|
122,867
|
|
$
|
82,181
|
|
$
|
45,211
|
|
$
|
37,703
|
|
$
|
11,493
|
|
$
|
—
|
|
$
|
351,151
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following is a summary of loans by past due status at September 30, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
30-59 Days Past Due
|
|
60-89 Days Past Due
|
|
90 Days or Greater Past Due
|
|
Total Past Due
|
|
Current
|
|
Total Loans
|
September 30, 2020
|
Construction
|
|
$
|
50
|
|
|
$
|
46
|
|
|
$
|
2,034
|
|
|
$
|
2,130
|
|
|
$
|
487,981
|
|
|
$
|
490,111
|
|
Commercial multifamily
|
|
278
|
|
|
3,584
|
|
|
1,047
|
|
|
4,909
|
|
|
531,027
|
|
|
535,936
|
|
Commercial real estate owner occupied
|
|
896
|
|
|
948
|
|
|
8,470
|
|
|
10,314
|
|
|
585,477
|
|
|
595,791
|
|
Commercial real estate non-owner occupied
|
|
1,377
|
|
|
2,826
|
|
|
10,412
|
|
|
14,615
|
|
|
2,244,320
|
|
|
2,258,935
|
|
Commercial and industrial
|
|
3,832
|
|
|
2,592
|
|
|
13,743
|
|
|
20,167
|
|
|
1,799,008
|
|
|
1,819,175
|
|
Commercial and industrial - other
|
|
766
|
|
|
232
|
|
|
3,969
|
|
|
4,967
|
|
|
306,538
|
|
|
311,505
|
|
Residential real estate
|
|
4,080
|
|
|
999
|
|
|
10,865
|
|
|
15,944
|
|
|
2,254,514
|
|
|
2,270,458
|
|
Home equity
|
|
598
|
|
|
181
|
|
|
4,022
|
|
|
4,801
|
|
|
344,473
|
|
|
349,274
|
|
Consumer other
|
|
3,437
|
|
|
904
|
|
|
5,704
|
|
|
10,045
|
|
|
341,106
|
|
|
351,151
|
|
Total
|
|
$
|
15,314
|
|
|
$
|
12,312
|
|
|
$
|
60,266
|
|
|
$
|
87,892
|
|
|
$
|
8,894,444
|
|
|
$
|
8,982,336
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following is a summary of loans on nonaccrual status and loans past due 90 days or more and still accruing as of September 30, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2020
|
|
June 30, 2020
|
|
September 30, 2020
|
(In thousands)
|
|
Nonaccrual Amortized Cost
|
|
Nonaccrual Amortized Cost
|
|
Nonaccrual Amortized Cost
|
|
Nonaccrual With No Related Allowance
|
|
Past Due 90 Days or Greater and Accruing
|
|
Interest Income Recognized on Nonaccrual
|
Construction
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,034
|
|
|
$
|
2,034
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Commercial multifamily
|
|
811
|
|
|
753
|
|
|
884
|
|
|
598
|
|
|
163
|
|
|
—
|
|
Commercial real estate owner occupied
|
|
15,389
|
|
|
6,513
|
|
|
8,291
|
|
|
2,429
|
|
|
179
|
|
|
—
|
|
Commercial real estate non-owner occupied
|
|
1,031
|
|
|
2,372
|
|
|
3,074
|
|
|
2,170
|
|
|
7,338
|
|
|
—
|
|
Commercial and industrial
|
|
5,465
|
|
|
8,103
|
|
|
10,300
|
|
|
3,869
|
|
|
3,443
|
|
|
—
|
|
Commercial and industrial - other
|
|
5,753
|
|
|
6,173
|
|
|
3,969
|
|
|
2,959
|
|
|
—
|
|
|
—
|
|
Residential real estate
|
|
6,411
|
|
|
13,997
|
|
|
9,555
|
|
|
5,876
|
|
|
1,310
|
|
|
—
|
|
Home equity
|
|
1,798
|
|
|
2,405
|
|
|
3,628
|
|
|
490
|
|
|
394
|
|
|
—
|
|
Consumer other
|
|
2,982
|
|
|
4,568
|
|
|
5,655
|
|
|
49
|
|
|
49
|
|
|
—
|
|
Total
|
|
$
|
39,640
|
|
|
$
|
44,884
|
|
|
$
|
47,390
|
|
|
$
|
20,474
|
|
|
$
|
12,876
|
|
|
$
|
—
|
|
The commercial and industrial loans nonaccrual amortized cost includes medallion loans with a fair value of $2.8 million and a contractual balance of $66.4 million.
A financial asset is considered collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. Expected credit losses for collateral-dependent loans are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. Significant quarter over quarter changes are reflective of changes in nonaccrual status and not necessarily associated with credit quality indicators like appraisal value. The following table presents the amortized cost basis of individually analyzed collateral-dependent loans by loan portfolio segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Type of Collateral
|
(In thousands)
|
|
Real Estate
|
|
|
|
Investment Securities/Cash
|
|
|
|
Other
|
September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
Construction
|
|
$
|
2,389
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
Commercial multifamily
|
|
598
|
|
|
|
|
—
|
|
|
|
|
—
|
|
Commercial real estate owner occupied
|
|
8,956
|
|
|
|
|
—
|
|
|
|
|
—
|
|
Commercial real estate non-owner occupied
|
|
3,819
|
|
|
|
|
—
|
|
|
|
|
—
|
|
Commercial and industrial
|
|
2,506
|
|
|
|
|
59
|
|
|
|
|
245
|
|
Commercial and industrial - other
|
|
—
|
|
|
|
|
—
|
|
|
|
|
2,958
|
|
Residential real estate
|
|
5,290
|
|
|
|
|
—
|
|
|
|
|
—
|
|
Home equity
|
|
272
|
|
|
|
|
—
|
|
|
|
|
—
|
|
Consumer other
|
|
26
|
|
|
|
|
—
|
|
|
|
|
—
|
|
Total loans
|
|
$
|
23,856
|
|
|
|
|
$
|
59
|
|
|
|
|
$
|
3,203
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Troubled Debt Restructuring Loans
The Company’s loan portfolio also includes certain loans that have been modified in a Troubled Debt Restructuring ("TDR"), where economic concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties. These concessions typically result from the Company’s loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance, or other actions. Certain TDRs are classified as nonperforming at the time of restructure and may only be returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period, generally six months. TDRs are evaluated individually for impairment and may result in a specific allowance amount allocated to an individual loan.
The following table presents activity in TDRs for the three and nine months ended September 30, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Balance at Beginning of Period
|
|
Principal Payments
|
|
TDR Status Change
|
|
Other Additions/(Reductions)
|
|
Newly Identified TDRs
|
|
Balance at End of Period
|
Three months ended September 30, 2020
|
Construction
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Commercial multifamily
|
|
779
|
|
|
(12)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
767
|
|
Commercial real estate owner occupied
|
|
2,919
|
|
|
(19)
|
|
|
—
|
|
|
—
|
|
|
18
|
|
|
2,918
|
|
Commercial real estate non-owner occupied
|
|
11,166
|
|
|
—
|
|
|
—
|
|
|
1,241
|
|
|
194
|
|
|
12,601
|
|
Commercial and industrial
|
|
1,080
|
|
|
(12)
|
|
|
—
|
|
|
(2)
|
|
|
—
|
|
|
1,066
|
|
Commercial and industrial - other
|
|
1,483
|
|
|
(115)
|
|
|
—
|
|
|
(56)
|
|
|
399
|
|
|
1,711
|
|
Residential real estate
|
|
1,968
|
|
|
(57)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,911
|
|
Home equity
|
|
275
|
|
|
(3)
|
|
|
—
|
|
|
(72)
|
|
|
—
|
|
|
200
|
|
Consumer other
|
|
43
|
|
|
(3)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
40
|
|
Total
|
|
$
|
19,713
|
|
|
$
|
(221)
|
|
|
$
|
—
|
|
|
$
|
1,111
|
|
|
$
|
611
|
|
|
$
|
21,214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Balance at Beginning of Period
|
|
Principal Payments
|
|
TDR Status Change
|
|
Other Additions/(Reductions)
|
|
Newly Identified TDRs
|
|
Balance at End of Period
|
Nine months ended September 30, 2020
|
Construction
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Commercial multifamily
|
|
793
|
|
|
(26)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
767
|
|
Commercial real estate owner occupied
|
|
13,331
|
|
|
(5,721)
|
|
|
—
|
|
|
(4,710)
|
|
|
18
|
|
|
2,918
|
|
Commercial real estate non-owner occupied
|
|
1,373
|
|
|
—
|
|
|
—
|
|
|
1,241
|
|
|
9,987
|
|
|
12,601
|
|
Commercial and industrial
|
|
1,109
|
|
|
(41)
|
|
|
—
|
|
|
(2)
|
|
|
—
|
|
|
1,066
|
|
Commercial and industrial - other
|
|
340
|
|
|
(157)
|
|
|
—
|
|
|
(58)
|
|
|
1,586
|
|
|
1,711
|
|
Residential real estate
|
|
2,045
|
|
|
(134)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,911
|
|
Home equity
|
|
277
|
|
|
(5)
|
|
|
—
|
|
|
(72)
|
|
|
—
|
|
|
200
|
|
Consumer other
|
|
48
|
|
|
(8)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
40
|
|
Total
|
|
$
|
19,316
|
|
|
$
|
(6,092)
|
|
|
$
|
—
|
|
|
$
|
(3,601)
|
|
|
$
|
11,591
|
|
|
$
|
21,214
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents loans modified as TDRs that occurred during the three and nine months ended September 30, 2020 and 2019:
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Total
|
Three months ended September 30, 2020
|
|
|
TDR:
|
|
|
Number of loans
|
|
10
|
|
Pre-modification outstanding recorded investment
|
|
$
|
611
|
|
Post-modification outstanding recorded investment
|
|
$
|
611
|
|
|
|
|
Three months ended September 30, 2019
|
|
|
TDR:
|
|
|
Number of loans
|
|
2
|
|
Pre-modification outstanding recorded investment
|
|
$
|
65
|
|
Post-modification outstanding recorded investment
|
|
$
|
65
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Total
|
Nine months ended September 30, 2020
|
|
|
TDR:
|
|
|
Number of loans
|
|
15
|
|
Pre-modification outstanding recorded investment
|
|
$
|
11,591
|
|
Post-modification outstanding recorded investment
|
|
$
|
11,591
|
|
|
|
|
Nine months ended September 30, 2019
|
|
|
TDR:
|
|
|
Number of loans
|
|
7
|
|
Pre-modification outstanding recorded investment
|
|
$
|
685
|
|
Post-modification outstanding recorded investment
|
|
$
|
682
|
|
There were no TDRs for which there was a payment default within twelve months following the modification during the three and nine months ended September 30, 2020 and 2019.
Beginning in March 2020, the Company has offered three-month payment deferrals for customers with a current payment status who were negatively impacted by economic disruption caused by the COVID-19 pandemic. Refer to Note 11 - Other Commitments, Contingencies, and Off-Balance Sheet Activities for more information regarding these modifications.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Prior to the adoption of ASC 326 on January 1, 2020, the Company calculated allowance for loan losses using incurred losses methodology. The following tables are disclosures related to loans in prior periods.
The following is a summary of total loans as of December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
(In thousands)
|
Business
Activities Loans
|
Acquired
Loans
|
Total
|
Commercial real estate:
|
|
|
|
Construction
|
$
|
382,014
|
|
$
|
47,792
|
|
$
|
429,806
|
|
|
|
|
|
Other commercial real estate
|
2,414,942
|
|
1,189,521
|
|
3,604,463
|
|
Total commercial real estate
|
2,796,956
|
|
1,237,313
|
|
4,034,269
|
|
|
|
|
|
Commercial and industrial loans:
|
1,442,617
|
|
397,891
|
|
1,840,508
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial loans
|
4,239,573
|
|
1,635,204
|
|
5,874,777
|
|
|
|
|
|
Residential mortgages:
|
|
|
|
1-4 family
|
2,143,817
|
|
533,536
|
|
2,677,353
|
|
Construction
|
4,641
|
|
3,478
|
|
8,119
|
|
Total residential mortgages
|
2,148,458
|
|
537,014
|
|
2,685,472
|
|
|
|
|
|
Consumer loans:
|
|
|
|
Home equity
|
273,867
|
|
106,724
|
|
380,591
|
|
Auto and other
|
504,599
|
|
56,989
|
|
561,588
|
|
Total consumer loans
|
778,466
|
|
163,713
|
|
942,179
|
|
|
|
|
|
Total loans
|
$
|
7,166,497
|
|
$
|
2,335,931
|
|
$
|
9,502,428
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Total unamortized net costs and premiums included in the December 31, 2019 total loans for business activity loans were the following:
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
December 31, 2019
|
Unamortized net loan origination costs
|
|
$
|
13,259
|
|
Unamortized net premium on purchased loans
|
|
2,643
|
|
Total unamortized net costs and premiums
|
|
$
|
15,902
|
|
The following table summarizes activity in the accretable yield for the acquired loan portfolio that falls under the purview of ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Three Months Ended September 30, 2019
|
|
Nine Months Ended September 30, 2019
|
Balance at beginning of period
|
|
$
|
5,420
|
|
|
$
|
2,840
|
|
Acquisitions
|
|
—
|
|
|
4,200
|
|
Accretion
|
|
(2,872)
|
|
|
(6,470)
|
|
|
|
|
|
|
|
|
|
|
|
Net reclassification from nonaccretable difference
|
|
2,066
|
|
|
4,195
|
|
Payments received, net
|
|
(196)
|
|
|
(356)
|
|
Reclassification to TDR
|
|
—
|
|
|
9
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
4,418
|
|
|
$
|
4,418
|
|
The following is a summary of past due loans at December 31, 2019:
Business Activities Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
30-59 Days
Past Due
|
|
60-89 Days
Past Due
|
|
>90 Days Past Due
|
|
Total Past
Due
|
|
Current
|
|
Total Loans
|
|
Past Due >
90 days and
Accruing
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
382,014
|
|
|
$
|
382,014
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
423
|
|
|
89
|
|
|
15,623
|
|
|
16,135
|
|
|
2,398,807
|
|
|
2,414,942
|
|
|
—
|
|
Total
|
|
423
|
|
|
89
|
|
|
15,623
|
|
|
16,135
|
|
|
2,780,821
|
|
|
2,796,956
|
|
|
—
|
|
Commercial and industrial loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
2,841
|
|
|
2,033
|
|
|
10,662
|
|
|
15,536
|
|
|
1,427,081
|
|
|
1,442,617
|
|
|
122
|
|
Residential mortgages:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-4 family
|
|
1,669
|
|
|
714
|
|
|
3,350
|
|
|
5,733
|
|
|
2,138,084
|
|
|
2,143,817
|
|
|
800
|
|
Construction
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,641
|
|
|
4,641
|
|
|
—
|
|
Total
|
|
1,669
|
|
|
714
|
|
|
3,350
|
|
|
5,733
|
|
|
2,142,725
|
|
|
2,148,458
|
|
|
800
|
|
Consumer loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity
|
|
149
|
|
|
—
|
|
|
1,147
|
|
|
1,296
|
|
|
272,571
|
|
|
273,867
|
|
|
52
|
|
Auto and other
|
|
4,709
|
|
|
990
|
|
|
2,729
|
|
|
8,428
|
|
|
496,171
|
|
|
504,599
|
|
|
1
|
|
Total
|
|
4,858
|
|
|
990
|
|
|
3,876
|
|
|
9,724
|
|
|
768,742
|
|
|
778,466
|
|
|
53
|
|
Total
|
|
$
|
9,791
|
|
|
$
|
3,826
|
|
|
$
|
33,511
|
|
|
$
|
47,128
|
|
|
$
|
7,119,369
|
|
|
$
|
7,166,497
|
|
|
$
|
975
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Acquired Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
30-59 Days
Past Due
|
|
60-89 Days
Past Due
|
|
>90 Days Past Due
|
|
Total Past
Due
|
|
Acquired
Credit
Impaired
|
|
Total Loans
|
|
Past Due >
90 days and
Accruing
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,396
|
|
|
$
|
47,792
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial real estate
|
|
3,907
|
|
|
245
|
|
|
10,247
|
|
|
14,399
|
|
|
21,639
|
|
|
1,189,521
|
|
|
5,751
|
|
Total
|
|
3,907
|
|
|
245
|
|
|
10,247
|
|
|
14,399
|
|
|
23,035
|
|
|
1,237,313
|
|
|
5,751
|
|
Commercial and industrial loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
888
|
|
|
299
|
|
|
1,275
|
|
|
2,462
|
|
|
26,718
|
|
|
397,891
|
|
|
442
|
|
Residential mortgages:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-4 family
|
|
745
|
|
|
491
|
|
|
932
|
|
|
2,168
|
|
|
10,840
|
|
|
533,536
|
|
|
139
|
|
Construction
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,478
|
|
|
—
|
|
Total
|
|
745
|
|
|
491
|
|
|
932
|
|
|
2,168
|
|
|
10,840
|
|
|
537,014
|
|
|
139
|
|
Consumer loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity
|
|
346
|
|
|
222
|
|
|
789
|
|
|
1,357
|
|
|
540
|
|
|
106,724
|
|
|
72
|
|
Auto and other
|
|
120
|
|
|
22
|
|
|
265
|
|
|
407
|
|
|
286
|
|
|
56,989
|
|
|
—
|
|
Total
|
|
466
|
|
|
244
|
|
|
1,054
|
|
|
1,764
|
|
|
826
|
|
|
163,713
|
|
|
72
|
|
Total
|
|
$
|
6,006
|
|
|
$
|
1,279
|
|
|
$
|
13,508
|
|
|
$
|
20,793
|
|
|
$
|
61,419
|
|
|
$
|
2,335,931
|
|
|
$
|
6,404
|
|
The following is summary information pertaining to non-accrual loans at December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
(In thousands)
|
|
Business Activities
Loans
|
|
Acquired Loans
|
|
Total
|
Commercial real estate:
|
|
|
|
|
|
|
Construction
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
Other commercial real estate
|
|
15,623
|
|
|
4,496
|
|
|
20,119
|
|
Total
|
|
15,623
|
|
|
4,496
|
|
|
20,119
|
|
Commercial and industrial loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
10,540
|
|
|
833
|
|
|
11,373
|
|
|
|
|
|
|
|
|
Residential mortgages:
|
|
|
|
|
|
|
1-4 family
|
|
2,550
|
|
|
793
|
|
|
3,343
|
|
Construction
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
2,550
|
|
|
793
|
|
|
3,343
|
|
Consumer loans:
|
|
|
|
|
|
|
Home equity
|
|
1,095
|
|
|
717
|
|
|
1,812
|
|
Auto and other
|
|
2,728
|
|
|
265
|
|
|
2,993
|
|
Total
|
|
3,823
|
|
|
982
|
|
|
4,805
|
|
|
|
|
|
|
|
|
Total non-accrual loans
|
|
$
|
32,536
|
|
|
$
|
7,104
|
|
|
$
|
39,640
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Loans evaluated for impairment as of December 31, 2019 were as follows:
Business Activities Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Commercial
real estate
|
|
Commercial
and industrial
|
|
Residential
mortgages
|
|
Consumer
|
|
Total
|
Loans receivable:
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
19,192
|
|
|
$
|
9,167
|
|
|
$
|
3,019
|
|
|
$
|
630
|
|
|
$
|
32,008
|
|
Collectively evaluated
|
|
2,777,764
|
|
|
1,433,450
|
|
|
2,145,439
|
|
|
777,836
|
|
|
7,134,489
|
|
Total
|
|
$
|
2,796,956
|
|
|
$
|
1,442,617
|
|
|
$
|
2,148,458
|
|
|
$
|
778,466
|
|
|
$
|
7,166,497
|
|
Acquired Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Commercial
real estate
|
|
Commercial
and industrial
|
|
Residential
mortgages
|
|
Consumer
|
|
Total
|
Loans receivable:
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
|
|
$
|
4,241
|
|
|
$
|
464
|
|
|
$
|
372
|
|
|
$
|
575
|
|
|
$
|
5,652
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased credit-impaired loans
|
|
23,035
|
|
|
26,718
|
|
|
10,840
|
|
|
826
|
|
|
61,419
|
|
Collectively evaluated
|
|
1,210,037
|
|
|
370,709
|
|
|
525,802
|
|
|
162,312
|
|
|
2,268,860
|
|
Total
|
|
$
|
1,237,313
|
|
|
$
|
397,891
|
|
|
$
|
537,014
|
|
|
$
|
163,713
|
|
|
$
|
2,335,931
|
|
The following is a summary of impaired loans at December 31, 2019:
Business Activities Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
(In thousands)
|
|
Recorded Investment (1)
|
|
Unpaid Principal
Balance (2)
|
|
Related Allowance
|
With no related allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other commercial real estate loans
|
|
$
|
18,676
|
|
|
$
|
37,493
|
|
|
$
|
—
|
|
Commercial and industrial loans
|
|
4,805
|
|
|
10,104
|
|
|
—
|
|
Residential mortgages - 1-4 family
|
|
433
|
|
|
699
|
|
|
—
|
|
Consumer - home equity
|
|
32
|
|
|
238
|
|
|
—
|
|
Consumer - other
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other commercial real estate loans
|
|
$
|
550
|
|
|
$
|
1,411
|
|
|
$
|
20
|
|
Commercial and industrial loans
|
|
4,166
|
|
|
12,136
|
|
|
122
|
|
Residential mortgages - 1-4 family
|
|
2,615
|
|
|
2,924
|
|
|
109
|
|
Consumer - home equity
|
|
594
|
|
|
614
|
|
|
42
|
|
Consumer - other
|
|
8
|
|
|
8
|
|
|
1
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
19,226
|
|
|
$
|
38,904
|
|
|
$
|
20
|
|
Commercial and industrial loans
|
|
8,971
|
|
|
22,240
|
|
|
122
|
|
Residential mortgages
|
|
3,048
|
|
|
3,623
|
|
|
109
|
|
Consumer
|
|
634
|
|
|
860
|
|
|
43
|
|
Total impaired loans
|
|
$
|
31,879
|
|
|
$
|
65,627
|
|
|
$
|
294
|
|
(1) The Recorded Investment represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, and unamortized premium or discount, and reflects direct charge-offs. This amount is a component of total loans on the Consolidated Balance Sheet.
(2) The Unpaid Principal Balance represents the customer's legal obligation to the Company.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Acquired Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
(In thousands)
|
|
Recorded Investment (1)
|
|
Unpaid Principal
Balance (2)
|
|
Related Allowance
|
With no related allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other commercial real estate loans
|
|
$
|
3,200
|
|
|
$
|
6,021
|
|
|
$
|
—
|
|
Other commercial and industrial loans
|
|
437
|
|
|
532
|
|
|
—
|
|
Residential mortgages - 1-4 family
|
|
292
|
|
|
293
|
|
|
—
|
|
Consumer - home equity
|
|
416
|
|
|
844
|
|
|
—
|
|
Consumer - other
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other commercial real estate loans
|
|
$
|
1,033
|
|
|
$
|
1,050
|
|
|
$
|
97
|
|
Commercial and industrial loans
|
|
28
|
|
|
30
|
|
|
1
|
|
Residential mortgages - 1-4 family
|
|
84
|
|
|
110
|
|
|
8
|
|
Consumer - home equity
|
|
121
|
|
|
123
|
|
|
6
|
|
Consumer - other
|
|
39
|
|
|
37
|
|
|
6
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
Commercial real estate
|
|
$
|
4,233
|
|
|
$
|
7,071
|
|
|
$
|
97
|
|
Commercial and industrial loans
|
|
465
|
|
|
562
|
|
|
1
|
|
Residential mortgages
|
|
376
|
|
|
403
|
|
|
8
|
|
Consumer
|
|
576
|
|
|
1,004
|
|
|
12
|
|
Total impaired loans
|
|
$
|
5,650
|
|
|
$
|
9,040
|
|
|
$
|
118
|
|
(1) The Recorded Investment represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, and unamortized premium or discount, and reflects direct charge-offs. This amount is a component of total loans on the Consolidated Balance Sheet.
(2) The Unpaid Principal Balance represents the customer's legal obligation to the Company.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following is a summary of the average recorded investment and interest income recognized on impaired loans as of December 31, 2019:
Business Activities Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
(in thousands)
|
|
Average Recorded
Investment
|
|
Cash Basis Interest
Income Recognized
|
With no related allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other commercial real estate
|
|
$
|
19,805
|
|
|
$
|
586
|
|
Other commercial and industrial
|
|
3,165
|
|
|
523
|
|
Residential mortgages - 1-4 family
|
|
185
|
|
|
17
|
|
Consumer-home equity
|
|
148
|
|
|
3
|
|
Consumer-other
|
|
—
|
|
|
—
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other commercial real estate
|
|
$
|
374
|
|
|
$
|
107
|
|
Other commercial and industrial
|
|
2,533
|
|
|
793
|
|
Residential mortgages - 1-4 family
|
|
2,427
|
|
|
150
|
|
Consumer-home equity
|
|
349
|
|
|
32
|
|
Consumer - other
|
|
11
|
|
|
1
|
|
|
|
|
|
|
Total
|
|
|
|
|
Commercial real estate
|
|
$
|
20,179
|
|
|
$
|
693
|
|
Commercial and industrial
|
|
5,698
|
|
|
1,316
|
|
Residential mortgages
|
|
2,612
|
|
|
167
|
|
Consumer loans
|
|
508
|
|
|
36
|
|
Total impaired loans
|
|
$
|
28,997
|
|
|
$
|
2,212
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Acquired Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
(in thousands)
|
|
Average Recorded
Investment
|
|
Cash Basis Interest
Income Recognized
|
With no related allowance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other commercial real estate
|
|
$
|
1,603
|
|
|
$
|
117
|
|
Other commercial and industrial
|
|
441
|
|
|
51
|
|
Residential mortgages - 1-4 family
|
|
241
|
|
|
11
|
|
Consumer - home equity
|
|
475
|
|
|
23
|
|
Consumer - other
|
|
—
|
|
|
—
|
|
|
|
|
|
|
With an allowance recorded:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other commercial real estate
|
|
$
|
1,005
|
|
|
$
|
59
|
|
Other commercial and industrial
|
|
29
|
|
|
2
|
|
Residential mortgages - 1-4 family
|
|
88
|
|
|
7
|
|
Consumer - home equity
|
|
68
|
|
|
6
|
|
Consumer - other
|
|
41
|
|
|
2
|
|
|
|
|
|
|
Total
|
|
|
|
|
Commercial real estate
|
|
$
|
2,608
|
|
|
$
|
176
|
|
Commercial and industrial
|
|
470
|
|
|
53
|
|
Residential mortgages
|
|
329
|
|
|
18
|
|
Consumer loans
|
|
584
|
|
|
31
|
|
Total impaired loans
|
|
$
|
3,991
|
|
|
$
|
278
|
|
No additional funds are committed to be advanced in connection with impaired loans.
The modifications for the three and nine months ended September 30, 2019 were attributable to interest rate concessions, maturity date extensions, modified payment terms, reamortization, and accelerated maturity.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Modifications by Class
For the three months ending September 30, 2019
|
|
|
Number of
Modifications
|
|
Pre-Modification
Outstanding Recorded
Investment (In thousands)
|
|
Post-Modification
Outstanding Recorded
Investment
|
Troubled Debt Restructurings
|
|
|
|
|
|
|
Commercial real estate
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Commercial and industrial loans
|
|
—
|
|
|
—
|
|
|
—
|
|
Residential mortgages - 1-4 family
|
|
2
|
|
|
65
|
|
|
65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
$
|
65
|
|
|
$
|
65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Modifications by Class
For the nine months ending September 30, 2019
|
|
|
Number of
Modifications
|
|
Pre-Modification
Outstanding Recorded
Investment (In thousands)
|
|
Post-Modification
Outstanding Recorded
Investment
|
Troubled Debt Restructurings
|
|
|
|
|
|
|
Commercial real estate
|
|
2
|
|
|
$
|
145
|
|
|
$
|
145
|
|
Commercial and industrial loans
|
|
3
|
|
|
475
|
|
|
472
|
|
Residential mortgages - 1-4 family
|
|
2
|
|
|
65
|
|
|
65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
$
|
685
|
|
|
$
|
682
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
There were no TDRs that defaulted within twelve months of modifications during the three and nine months ended September 30, 2019.
The following table presents the Company’s TDR activity for the three and nine months ended September 30, 2019:
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Three Months Ended September 30, 2019
|
Balance at beginning of year
|
|
$
|
25,089
|
|
Principal payments
|
|
(3,876)
|
|
TDR status change (1)
|
|
—
|
|
Other reductions (2)
|
|
(1,548)
|
|
Newly identified TDRs
|
|
65
|
|
Balance at end of year
|
|
$
|
19,730
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Nine Months Ended September 30, 2019
|
Balance at beginning of year
|
|
$
|
27,415
|
|
Principal payments
|
|
(5,664)
|
|
TDR status change (1)
|
|
—
|
|
Other reductions (2)
|
|
(2,703)
|
|
Newly identified TDRs
|
|
682
|
|
Balance at end of year
|
|
$
|
19,730
|
|
_____________________
(1) TDR status change classification represents TDR loans with a specified interest rate equal to or greater than the rate that the Company was willing to accept at the time of the restructuring for a new loan with comparable risk and the loan was on current payment status and not impaired based on the terms specified by the restructuring agreement.
(2) Other reductions classification consists of transfer to other real estate owned, charge-offs to loans, and other loan sale payoffs.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Allowance for Loan Losses
Prior to the adoption of ASC 326 on January 1, 2020, the Company calculated allowance for loan losses using incurred losses methodology. The following tables are disclosures related to the allowance for loan losses in prior periods.
Activity in the allowance for loan losses for the three and nine months ended September 30, 2019 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At or for the three months ended September 30, 2019
|
Business Activities Loans
(In thousands)
|
|
Commercial
real estate
|
|
Commercial and
industrial loans
|
|
Residential
mortgages
|
|
Consumer
|
|
Total
|
Balance at beginning of period
|
|
$
|
22,408
|
|
|
$
|
18,849
|
|
|
$
|
8,834
|
|
|
$
|
5,341
|
|
|
$
|
55,432
|
|
Charged-off loans
|
|
3,061
|
|
|
19,315
|
|
|
95
|
|
|
760
|
|
|
23,231
|
|
Recoveries on charged-off loans
|
|
286
|
|
|
469
|
|
|
—
|
|
|
53
|
|
|
808
|
|
Provision/(releases) for loan losses
|
|
3,815
|
|
|
18,929
|
|
|
23
|
|
|
420
|
|
|
23,187
|
|
Balance at end of period
|
|
$
|
23,448
|
|
|
$
|
18,932
|
|
|
$
|
8,762
|
|
|
$
|
5,054
|
|
|
$
|
56,196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At or for the nine months ended September 30, 2019
|
Business Activities Loans
(In thousands)
|
|
Commercial
real estate
|
|
Commercial and
industrial loans
|
|
Residential
mortgages
|
|
Consumer
|
|
Total
|
Balance at beginning of period
|
|
$
|
21,732
|
|
|
$
|
16,504
|
|
|
$
|
10,535
|
|
|
$
|
7,368
|
|
|
$
|
56,139
|
|
Charged-off loans
|
|
5,019
|
|
|
22,171
|
|
|
343
|
|
|
2,536
|
|
|
30,069
|
|
Recoveries on charged-off loans
|
|
561
|
|
|
895
|
|
|
58
|
|
|
186
|
|
|
1,700
|
|
Provision/(releases) for loan losses
|
|
6,174
|
|
|
23,704
|
|
|
(1,488)
|
|
|
36
|
|
|
28,426
|
|
Balance at end of period
|
|
$
|
23,448
|
|
|
$
|
18,932
|
|
|
$
|
8,762
|
|
|
$
|
5,054
|
|
|
$
|
56,196
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At or for the three months ended September 30, 2019
|
Acquired Loans
(In thousands)
|
|
Commercial
real estate
|
|
Commercial and
industrial loans
|
|
Residential
mortgages
|
|
Consumer
|
|
Total
|
Balance at beginning of period
|
|
$
|
4,562
|
|
|
$
|
870
|
|
|
$
|
882
|
|
|
$
|
410
|
|
|
$
|
6,724
|
|
Charged-off loans
|
|
20
|
|
|
89
|
|
|
97
|
|
|
87
|
|
|
293
|
|
Recoveries on charged-off loans
|
|
36
|
|
|
85
|
|
|
52
|
|
|
17
|
|
|
190
|
|
Provision/(releases) for loan losses
|
|
(648)
|
|
|
20
|
|
|
7
|
|
|
34
|
|
|
(587)
|
|
Balance at end of period
|
|
$
|
3,930
|
|
|
$
|
886
|
|
|
$
|
844
|
|
|
$
|
374
|
|
|
$
|
6,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At or for the nine months ended September 30, 2019
|
Acquired Loans
(In thousands)
|
|
Commercial
real estate
|
|
Commercial and
industrial loans
|
|
Residential
mortgages
|
|
Consumer
|
|
Total
|
Balance at beginning of period
|
|
$
|
3,153
|
|
|
$
|
1,064
|
|
|
$
|
630
|
|
|
$
|
483
|
|
|
$
|
5,330
|
|
Charged-off loans
|
|
824
|
|
|
460
|
|
|
201
|
|
|
515
|
|
|
2,000
|
|
Recoveries on charged-off loans
|
|
536
|
|
|
311
|
|
|
112
|
|
|
103
|
|
|
1,062
|
|
Provision/(releases) for loan losses
|
|
1,065
|
|
|
(29)
|
|
|
303
|
|
|
303
|
|
|
1,642
|
|
Balance at end of period
|
|
$
|
3,930
|
|
|
$
|
886
|
|
|
$
|
844
|
|
|
$
|
374
|
|
|
$
|
6,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following tables present the Company’s loans by risk rating at December 31, 2019:
Business Activities Loans
Commercial Real Estate
Credit Risk Profile by Creditworthiness Category
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
(In thousands)
|
|
Construction
|
|
Real Estate
|
|
Total Commercial Real Estate
|
Grade:
|
|
|
|
|
|
|
Pass
|
|
$
|
382,014
|
|
|
$
|
2,354,375
|
|
|
$
|
2,736,389
|
|
Special mention
|
|
—
|
|
|
12,167
|
|
|
12,167
|
|
Substandard
|
|
—
|
|
|
48,400
|
|
|
48,400
|
|
Total
|
|
$
|
382,014
|
|
|
$
|
2,414,942
|
|
|
$
|
2,796,956
|
|
Commercial and Industrial Loans
Credit Risk Profile by Creditworthiness Category
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
(In thousands)
|
|
Total Commercial and Industrial Loans
|
Grade:
|
|
|
Pass
|
|
$
|
1,366,342
|
|
Special mention
|
|
50,072
|
|
Substandard
|
|
24,112
|
|
Doubtful
|
|
2,091
|
|
Total
|
|
$
|
1,442,617
|
|
Residential Mortgages
Credit Risk Profile by Internally Assigned Grade
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
(In thousands)
|
|
1-4 Family
|
|
Construction
|
|
Total Residential Mortgages
|
Grade:
|
|
|
|
|
|
|
Pass
|
|
$
|
2,139,753
|
|
|
$
|
4,641
|
|
|
$
|
2,144,394
|
|
Special mention
|
|
714
|
|
|
—
|
|
|
714
|
|
Substandard
|
|
3,350
|
|
|
—
|
|
|
3,350
|
|
Total
|
|
$
|
2,143,817
|
|
|
$
|
4,641
|
|
|
$
|
2,148,458
|
|
Consumer Loans
Credit Risk Profile Based on Payment Activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
(In thousands)
|
|
Home Equity
|
|
Auto and Other
|
|
Total Consumer Loans
|
Performing
|
|
$
|
272,772
|
|
|
$
|
501,871
|
|
|
$
|
774,643
|
|
Nonperforming
|
|
1,095
|
|
|
2,728
|
|
|
3,823
|
|
Total
|
|
$
|
273,867
|
|
|
$
|
504,599
|
|
|
$
|
778,466
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Acquired Loans
Commercial Real Estate
Credit Risk Profile by Creditworthiness Category
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
(In thousands)
|
|
Construction
|
|
Real Estate
|
|
Total Commercial Real Estate
|
Grade:
|
|
|
|
|
|
|
Pass
|
|
$
|
46,396
|
|
|
$
|
1,130,333
|
|
|
$
|
1,176,729
|
|
Special mention
|
|
—
|
|
|
5,993
|
|
|
5,993
|
|
Substandard
|
|
1,396
|
|
|
53,195
|
|
|
54,591
|
|
Total
|
|
$
|
47,792
|
|
|
$
|
1,189,521
|
|
|
$
|
1,237,313
|
|
Commercial and Industrial Loans
Credit Risk Profile by Creditworthiness Category
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
(In thousands)
|
|
Total Commercial and Industrial Loans
|
Grade:
|
|
|
Pass
|
|
$
|
373,744
|
|
Special mention
|
|
4,404
|
|
Substandard
|
|
19,743
|
|
|
|
|
Total
|
|
$
|
397,891
|
|
Residential Mortgages
Credit Risk Profile by Internally Assigned Grade
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
(In thousands)
|
|
1-4 Family
|
|
Construction
|
|
Total Residential Mortgages
|
Grade:
|
|
|
|
|
|
|
Pass
|
|
$
|
528,282
|
|
|
$
|
3,478
|
|
|
$
|
531,760
|
|
Special mention
|
|
592
|
|
|
—
|
|
|
592
|
|
Substandard
|
|
4,662
|
|
|
—
|
|
|
4,662
|
|
Total
|
|
$
|
533,536
|
|
|
$
|
3,478
|
|
|
$
|
537,014
|
|
Consumer Loans
Credit Risk Profile Based on Payment Activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
(In thousands)
|
|
Home Equity
|
|
Auto and Other
|
|
Total Consumer Loans
|
Performing
|
|
$
|
106,007
|
|
|
$
|
56,724
|
|
|
$
|
162,731
|
|
Nonperforming
|
|
717
|
|
|
265
|
|
|
982
|
|
Total
|
|
$
|
106,724
|
|
|
$
|
56,989
|
|
|
$
|
163,713
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes information about total loans rated Special Mention or lower at December 31, 2019. The table below includes consumer loans that are Special Mention and Substandard accruing that are classified in the above table as performing based on payment activity.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
(In thousands)
|
|
Business
Activities Loans
|
|
Acquired Loans
|
|
Total
|
Non-Accrual
|
|
$
|
32,536
|
|
|
$
|
7,104
|
|
|
$
|
39,640
|
|
Substandard Accruing
|
|
49,293
|
|
|
73,131
|
|
|
122,424
|
|
Total Classified
|
|
81,829
|
|
|
80,235
|
|
|
162,064
|
|
Special Mention
|
|
63,943
|
|
|
11,341
|
|
|
75,284
|
|
Total Criticized
|
|
$
|
145,772
|
|
|
$
|
91,576
|
|
|
$
|
237,348
|
|
NOTE 6. GOODWILL
Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in a business combination. Goodwill is assessed annually for impairment and more frequently if events or changes in circumstances indicate that there may be an impairment. The Company tests goodwill impairment annually as of June 30 using second quarter data.
The Company compares the fair value of the reporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. The fair value of the reporting unit was determined using the guideline public company method. As a result of the assessment, the Company recognized a full goodwill impairment for the nine months ended September 30, 2020.
The primary causes of the goodwill impairment were economic and industry conditions resulting from the COVID-19 pandemic that caused volatility and reductions in the market capitalization of the Company and its peer banks, increased loan provision estimates, increased discount rates and other changes in variables driven by the uncertain macro-environment that resulted in the estimated fair value of the reporting unit being less than the reporting unit’s carrying value.
NOTE 7. DEPOSITS
A summary of time deposits is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
September 30,
2020
|
|
December 31,
2019
|
Time less than $100,000
|
|
$
|
780,654
|
|
|
$
|
905,190
|
|
Time $100,000 through $250,000
|
|
1,504,455
|
|
|
2,027,717
|
|
Time more than $250,000
|
|
604,984
|
|
|
656,462
|
|
Total time deposits
|
|
$
|
2,890,093
|
|
|
$
|
3,589,369
|
|
Included in total deposits are brokered deposits of $0.8 billion and $1.2 billion at September 30, 2020 and December 31, 2019, respectively. Included in total deposits are reciprocal deposits of $128.9 million and $91.7 million at September 30, 2020 and December 31, 2019, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. BORROWED FUNDS
Borrowed funds at September 30, 2020 and December 31, 2019 are summarized, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
December 31, 2019
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
|
Average
|
|
|
|
Average
|
(Dollars in thousands)
|
|
Principal
|
|
Rate
|
|
Principal
|
|
Rate
|
Short-term borrowings:
|
|
|
|
|
|
|
|
|
Advances from the FHLB
|
|
$
|
110,000
|
|
|
1.16
|
%
|
|
$
|
125,000
|
|
|
2.06
|
%
|
|
|
|
|
|
|
|
|
|
Total short-term borrowings:
|
|
110,000
|
|
|
1.16
|
|
|
125,000
|
|
|
2.06
|
|
Long-term borrowings:
|
|
|
|
|
|
|
|
|
Advances from the FHLB and other borrowings
|
|
494,859
|
|
|
1.90
|
|
|
605,501
|
|
|
2.16
|
|
Paycheck Protection Program Liquidity Facility ("PPPLF")
|
|
624
|
|
|
0.35
|
|
|
—
|
|
|
—
|
|
Subordinated borrowings
|
|
74,366
|
|
|
7.00
|
|
|
74,232
|
|
|
7.00
|
|
Junior subordinated borrowing - Trust I
|
|
15,464
|
|
|
2.11
|
|
|
15,464
|
|
|
3.76
|
|
Junior subordinated borrowing - Trust II
|
|
7,393
|
|
|
1.95
|
|
|
7,353
|
|
|
3.59
|
|
|
|
|
|
|
|
|
|
|
Total long-term borrowings:
|
|
592,706
|
|
|
2.55
|
|
|
702,550
|
|
|
2.72
|
|
Total
|
|
$
|
702,706
|
|
|
2.33
|
%
|
|
$
|
827,550
|
|
|
2.62
|
%
|
Short-term debt includes Federal Home Loan Bank (“FHLB”) advances with an original maturity of less than one year and a short-term line-of-credit drawdown through a correspondent bank. The Bank also maintains a $3.0 million secured line of credit with the FHLB that bears a daily adjustable rate calculated by the FHLB. There was no outstanding balance on the FHLB line of credit for the periods ended September 30, 2020 and December 31, 2019. The Bank's available borrowing capacity with the FHLB was $1.6 billion for both the periods ended September 30, 2020 and December 31, 2019.
The Bank is approved to borrow on a short-term basis from the Federal Reserve Bank of Boston as a non-member bank. The Bank has pledged certain loans and securities to the Federal Reserve Bank to support this arrangement. No borrowings with the Federal Reserve Bank under this arrangement took place for the periods ended September 30, 2020 and December 31, 2019. As a participant in the SBA Paycheck Protection Program ("PPP"), the Bank may pledge originated loans as collateral at face value to the Federal Reserve Bank of Boston for term financings. As of September 30, 2020, the Bank had pledged PPP loans of $624 thousand, which is equal to the amount borrowed. The Bank's available borrowing capacity with the Federal Reserve Bank was $870.2 million and $201.3 million for the periods ended September 30, 2020 and December 31, 2019, respectively.
Long-term FHLB advances consist of advances with an original maturity of more than one year and are subject to prepayment penalties. The advances outstanding at September 30, 2020 included callable advances totaling $10.0 million and amortizing advances totaling $5.5 million. The advances outstanding at December 31, 2019 included callable advances totaling $10.0 million and amortizing advances totaling $4.4 million. All FHLB borrowings, including the line of credit, are secured by a blanket security agreement on certain qualified collateral, principally all residential first mortgage loans and certain securities.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A summary of maturities of FHLB advances as of September 30, 2020 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
|
(In thousands, except rates)
|
|
Principal
|
|
Rate
|
|
|
|
|
Fixed rate advances maturing:
|
|
|
|
|
|
|
|
|
2020
|
|
$
|
129,994
|
|
|
1.57
|
%
|
|
|
|
|
2021
|
|
395,476
|
|
|
1.80
|
|
|
|
|
|
2022
|
|
58,706
|
|
|
1.92
|
|
|
|
|
|
2023
|
|
11,170
|
|
|
2.19
|
|
|
|
|
|
2023 and beyond
|
|
9,513
|
|
|
1.61
|
|
|
|
|
|
Total FHLB advances
|
|
$
|
604,859
|
|
|
1.77
|
%
|
|
|
|
|
The Company did not have variable-rate FHLB advances for the periods ended September 30, 2020 and December 31, 2019.
In September 2012, the Company issued fifteen year subordinated notes in the amount of $75.0 million at a discount of 1.15%. The interest rate is fixed at 6.875% for the first ten years. After ten years, the notes become callable and convert to an interest rate of three-month LIBOR rate plus 5.113%. The subordinated note includes reduction to the note principal balance of $246 thousand and $338 thousand for unamortized debt issuance costs as of September 30, 2020 and December 31 2019, respectively.
The Company holds 100% of the common stock of Berkshire Hills Capital Trust I (“Trust I”) which is included in other assets with a cost of $0.5 million. The sole asset of Trust I is $15.5 million of the Company’s junior subordinated debentures due in 2035. These debentures bear interest at a variable rate equal to LIBOR plus 1.85% and had a rate of 2.11% and 3.76% at September 30, 2020 and December 31, 2019, respectively. The Company has the right to defer payments of interest for up to five years on the debentures at any time, or from time to time, with certain limitations, including a restriction on the payment of dividends to shareholders while such interest payments on the debentures have been deferred. The Company has not exercised this right to defer payments. The Company has the right to redeem the debentures at par value. Trust I is considered a variable interest entity for which the Company is not the primary beneficiary. Accordingly, Trust I is not consolidated into the Company’s financial statements.
The Company holds 100% of the common stock of SI Capital Trust II (“Trust II”) which is included in other assets with a cost of $0.2 million. The sole asset of Trust II is $8.2 million of the Company’s junior subordinated debentures due in 2036. These debentures bear interest at a variable rate equal to LIBOR plus 1.70% and had a rate of 1.95% and 3.59% at September 30, 2020 and December 31, 2019, respectively. The Company has the right to defer payments of interest for up to five years on the debentures at any time, or from time to time, with certain limitations, including a restriction on the payment of dividends to shareholders while such interest payments on the debentures have been deferred. The Company has not exercised this right to defer payments. The Company has the right to redeem the debentures at par value. Trust II is considered a variable interest entity for which the Company is not the primary beneficiary. Accordingly, Trust II is not consolidated into the Company’s financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
As of September 30, 2020, the Company held derivatives with a total notional amount of $3.8 billion. The Company had economic hedges totaling $3.8 billion and $75.1 million non-hedging derivatives, which are not designated as hedges for accounting purposes with changes in fair value recorded directly through earnings. Economic hedges included interest rate swaps totaling $3.4 billion, risk participation agreements with dealer banks of $0.3 billion, and $17.6 million in forward commitment contracts. Forward sale commitments and commitments to lend are included in discontinued operations. See Note 2 - Discontinued Operations for more information on assets and liabilities classified as discontinued operations.
As part of the Company’s risk management strategy, the Company enters into interest rate swap agreements to mitigate the interest rate risk inherent in certain of the Company’s assets and liabilities. Interest rate swap agreements involve the risk of dealing with both Bank customers and institutional derivative counterparties and their ability to meet contractual terms. The agreements are entered into with counterparties that meet established credit standards and contain master netting and collateral provisions protecting the at-risk party. The derivatives program is overseen by the Risk Management and Capital Committee of the Company’s Board of Directors. Based on adherence to the Company’s credit standards and the presence of the netting and collateral provisions, the Company believes that the credit risk inherent in these contracts was not significant at September 30, 2020.
The Company pledged collateral to derivative counterparties in the form of cash totaling $77.1 million and securities with an amortized cost of $38.6 million and a fair value of $38.9 million as of September 30, 2020. The Company does not typically require its commercial customers to post cash or securities as collateral on its program of back-to-back economic hedges. However certain language is written into the International Swaps Dealers Association, Inc. (“ISDA”) and loan documents where, in default situations, the Bank is allowed to access collateral supporting the loan relationship to recover any losses suffered on the derivative asset or liability. The Company may need to post additional collateral in the future in proportion to potential increases in unrealized loss positions.
Information about derivative assets and liabilities at September 30, 2020, follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
Weighted Average Rate
|
|
Estimated
|
|
Notional
|
|
Average
|
|
|
|
Contract
|
|
Fair Value
|
|
Amount
|
|
Maturity
|
|
Received
|
|
pay rate
|
|
Asset (Liability)
|
|
(In thousands)
|
|
(In years)
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Economic hedges:
|
|
|
|
|
|
|
|
|
|
Interest rate swap on tax advantaged economic development bond
|
$
|
8,843
|
|
|
9.2
|
|
0.52
|
%
|
|
5.09
|
%
|
|
$
|
(1,933)
|
|
Interest rate swaps on loans with commercial loan customers
|
1,713,149
|
|
|
6.0
|
|
4.28
|
%
|
|
1.93
|
%
|
|
177,731
|
|
Offsetting interest rate swaps on loans with commercial loan customers (1)
|
1,713,149
|
|
|
6.0
|
|
1.93
|
%
|
|
4.28
|
%
|
|
(72,386)
|
|
Risk participation agreements with dealer banks
|
315,936
|
|
|
7.0
|
|
|
|
|
|
660
|
|
Forward sale commitments (2)
|
17,594
|
|
|
0.2
|
|
|
|
|
|
397
|
|
Total economic hedges
|
3,768,671
|
|
|
|
|
|
|
|
|
104,469
|
|
|
|
|
|
|
|
|
|
|
|
Non-hedging derivatives:
|
|
|
|
|
|
|
|
|
|
Commitments to lend (2)
|
75,090
|
|
|
0.2
|
|
|
|
|
|
1,498
|
|
Total non-hedging derivatives
|
75,090
|
|
|
|
|
|
|
|
|
1,498
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
3,843,761
|
|
|
|
|
|
|
|
|
$
|
105,967
|
|
(1) Fair value estimates include the impact of $109 million settled to market contract agreements.
(2) Includes the impact of discontinued operations.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Information about derivative assets and liabilities at December 31, 2019, follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
Weighted Average Rate
|
|
Estimated
|
|
Notional
|
|
Average
|
|
|
|
Contract
|
|
Fair Value
|
|
Amount
|
|
Maturity
|
|
Received
|
|
pay rate
|
|
Asset (Liability)
|
|
(In thousands)
|
|
(In years)
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Economic hedges:
|
|
|
|
|
|
|
|
|
|
Interest rate swap on tax advantaged economic development bond
|
$
|
9,390
|
|
|
9.9
|
|
2.08
|
%
|
|
5.09
|
%
|
|
$
|
(1,488)
|
|
Interest rate swaps on loans with commercial loan customers
|
1,669,895
|
|
|
6.4
|
|
4.38
|
%
|
|
3.28
|
%
|
|
75,326
|
|
Offsetting interest rate swaps on loans with commercial loan customers
|
1,669,895
|
|
|
6.4
|
|
3.28
|
%
|
|
4.38
|
%
|
|
(77,051)
|
|
Risk participation agreements with dealer banks
|
315,140
|
|
|
7.5
|
|
|
|
|
|
320
|
|
Forward sale commitments (1)
|
237,412
|
|
|
0.2
|
|
|
|
|
|
(227)
|
|
Total economic hedges
|
3,901,732
|
|
|
|
|
|
|
|
|
(3,120)
|
|
|
|
|
|
|
|
|
|
|
|
Non-hedging derivatives:
|
|
|
|
|
|
|
|
|
|
Commitments to lend (1)
|
168,997
|
|
|
0.2
|
|
|
|
|
|
2,628
|
|
Total non-hedging derivatives
|
168,997
|
|
|
|
|
|
|
|
|
2,628
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
$
|
4,070,729
|
|
|
|
|
|
|
|
|
$
|
(492)
|
|
(1) Includes the impact of discontinued operations.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Economic hedges
As of September 30, 2020, the Company has an interest rate swap with a $9.4 million notional amount to swap out the fixed rate of interest on an economic development bond bearing a fixed rate of 5.09%, currently within the Company’s trading portfolio under the fair value option, in exchange for a LIBOR-based floating rate. The intent of the economic hedge is to improve the Company’s asset sensitivity to changing interest rates in anticipation of favorable average floating rates of interest over the 21-year life of the bond. The fair value changes of the economic development bond are mostly offset by fair value changes of the related interest rate swap.
The Company also offers certain derivative products directly to qualified commercial borrowers. The Company economically hedges derivative transactions executed with commercial borrowers by entering into mirror-image, offsetting derivatives with third-party financial institutions. The transaction allows the Company’s customer to convert a variable-rate loan to a fixed rate loan. Because the Company acts as an intermediary for its customer, changes in the fair value of the underlying derivative contracts mostly offset each other in earnings. Credit valuation loss adjustments arising from the difference in credit worthiness of the commercial loan and financial institution counterparties totaled $2.0 million as of September 30, 2020. The interest income and expense on these mirror image swaps exactly offset each other.
The Company has risk participation agreements with dealer banks. Risk participation agreements occur when the Company participates on a loan and a swap where another bank is the lead. The Company gets paid a fee to take on the risk associated with having to make the lead bank whole on Berkshire’s portion of the pro-rated swap should the borrower default. Changes in fair value are recorded in current period earnings.
The Company utilizes forward sale commitments to hedge interest rate risk and the associated effects on the fair value of interest rate lock commitments and loans originated for sale. The forward sale commitments are accounted for as derivatives with changes in fair value recorded in current period earnings. Forward sale commitments are included in discontinued operations. See Note 2 - Discontinued Operations for more information on assets and liabilities classified as discontinued operations.
The Company uses the following types of forward sale commitments contracts:
•Best efforts loan sales,
•Mandatory delivery loan sales, and
•To Be Announced (“TBA”) mortgage-backed securities sales.
A best efforts contract refers to a loan sale agreement where the Company commits to deliver an individual mortgage loan of a specified principal amount and quality to an investor if the loan to the underlying borrower closes. The Company may enter into a best efforts contract once the price is known, which is shortly after the potential borrower’s interest rate is locked.
A mandatory delivery contract is a loan sale agreement where the Company commits to deliver a certain principal amount of mortgage loans to an investor at a specified price on or before a specified date. Generally, the Company may enter into mandatory delivery contracts shortly after the loan closes with a customer.
The Company may sell TBA mortgage-backed securities to hedge the changes in fair value of interest rate lock commitments and held for sale loans, which do not have corresponding best efforts or mandatory delivery contracts. These security sales transactions are closed once mandatory contracts are written. On the closing date the price of the security is locked-in, and the sale is paired-off with a purchase of the same security. Settlement of the security purchase/sale transaction is done with cash on a net-basis.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Non-hedging derivatives
The Company enters into interest rate lock commitments (“IRLCs”), or commitments to lend, for residential mortgage loans, which commit the Company to lend funds to a potential borrower at a specific interest rate and within a specified period of time. IRLCs that relate to the origination of mortgage loans that will be held for sale are considered derivative financial instruments under applicable accounting guidance. Outstanding IRLCs expose the Company to the risk that the price of the mortgage loans underlying the commitments may decline due to increases in mortgage interest rates from inception of the rate lock to the funding of the loan. The IRLCs are free-standing derivatives which are carried at fair value with changes recorded in discontinued operations in the Company’s consolidated statements of income. Changes in the fair value of IRLCs subsequent to inception are based on changes in the fair value of the underlying loan resulting from the fulfillment of the commitment and changes in the probability that the loan will fund within the terms of the commitment, which is affected primarily by changes in interest rates and the passage of time. Commitments to lend are included in discontinued operations. See Note 2 - Discontinued Operations for more information on assets and liabilities classified as discontinued operations.
Amounts included in the Consolidated Statements of Income related to economic hedges and non-hedging derivatives were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
(In thousands)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Economic hedges
|
|
|
|
|
|
|
|
Interest rate swap on industrial revenue bond:
|
|
|
|
|
|
|
|
Unrealized gain/(loss) recognized in other non-interest income
|
$
|
106
|
|
|
$
|
(120)
|
|
|
$
|
(444)
|
|
|
$
|
(463)
|
|
|
|
|
|
|
|
|
|
Interest rate swaps on loans with commercial loan customers:
|
|
|
|
|
|
|
|
Unrealized (loss)/gain recognized in other non-interest income
|
(10,219)
|
|
|
26,975
|
|
|
104,434
|
|
|
91,931
|
|
Favorable/(unfavorable) change in credit valuation adjustment recognized in other non-interest income
|
406
|
|
|
(872)
|
|
|
(2,029)
|
|
|
(2,156)
|
|
|
|
|
|
|
|
|
|
Offsetting interest rate swaps on loans with commercial loan customers:
|
|
|
|
|
|
|
|
Unrealized gain/(loss) recognized in other non-interest income
|
10,219
|
|
|
(26,975)
|
|
|
(104,434)
|
|
|
(91,931)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk participation agreements:
|
|
|
|
|
|
|
|
Unrealized (loss)/gain recognized in other non-interest income
|
(26)
|
|
|
68
|
|
|
339
|
|
|
174
|
|
|
|
|
|
|
|
|
|
Forward commitments:
|
|
|
|
|
|
|
|
Unrealized (loss)/gain recognized in discontinued operations
|
(50)
|
|
|
1,090
|
|
|
624
|
|
|
680
|
|
Realized gain/(loss) in discontinued operations
|
48
|
|
|
(3,343)
|
|
|
(8,283)
|
|
|
(9,142)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-hedging derivatives
|
|
|
|
|
|
|
|
Commitments to lend
|
|
|
|
|
|
|
|
Unrealized gain/(loss) recognized in discontinued operations
|
$
|
349
|
|
|
$
|
(1,921)
|
|
|
$
|
(1,130)
|
|
|
$
|
3,157
|
|
|
|
|
|
|
|
|
|
Realized gain in discontinued operations
|
1,563
|
|
|
20,476
|
|
|
14,532
|
|
|
48,189
|
|
|
|
|
|
|
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Assets and Liabilities Subject to Enforceable Master Netting Arrangements
Interest Rate Swap Agreements (“Swap Agreements”)
The Company enters into swap agreements to facilitate the risk management strategies for commercial banking customers. The Company mitigates this risk by entering into equal and offsetting swap agreements with highly rated third party financial institutions. The swap agreements are free-standing derivatives and are recorded at fair value in the Company’s consolidated statements of condition. The Company is party to master netting arrangements with its financial institution counterparties; however, the Company does not offset assets and liabilities under these arrangements for financial statement presentation purposes. The master netting arrangements provide for a single net settlement of all swap agreements, as well as collateral, in the event of default on, or termination of, any one contract. Collateral generally in the form of marketable securities is received or posted by the counterparty with net liability positions, respectively, in accordance with contract thresholds.
The Company had net asset positions with its financial institution counterparties totaling $1.1 million and $0.6 million as of September 30, 2020 and December 31, 2019, respectively. The Company had net asset positions with its commercial banking counterparties totaling $177.7 million and $76.4 million as of September 30, 2020 and December 31, 2019, respectively. The Company had net liability positions with its financial institution counterparties totaling $74.8 million and $78.8 million as of September 30, 2020 and December 31, 2019, respectively. The Company had no net liability positions with its commercial banking counterparties as of September 30, 2020. The Company had net liability positions with its commercial banking counterparties totaling $1.1 million as of December 31, 2019. The Company has collateral pledged to cover this liability.
The following table presents the assets and liabilities subject to an enforceable master netting arrangement as of September 30, 2020 and December 31, 2019:
Offsetting of Financial Assets and Derivative Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Amounts of
|
|
Gross Amounts
Offset in the
|
|
Net Amounts
of Assets
Presented in the
|
|
Gross Amounts Not Offset in
the Statements of Condition
|
|
|
|
|
Recognized
|
|
Statements of
|
|
Statements of
|
|
Financial
|
|
Cash
|
|
|
(In thousands)
|
|
Assets
|
|
Condition
|
|
Condition
|
|
Instruments
|
|
Collateral Received
|
|
Net Amount
|
September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Swap Agreements:
|
|
|
|
|
|
|
|
|
|
|
|
|
Institutional counterparties
|
|
$
|
1,199
|
|
|
$
|
(92)
|
|
|
$
|
1,107
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,107
|
|
Commercial counterparties
|
|
177,731
|
|
|
—
|
|
|
177,731
|
|
|
—
|
|
|
—
|
|
|
177,731
|
|
Total
|
|
$
|
178,930
|
|
|
$
|
(92)
|
|
|
$
|
178,838
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
178,838
|
|
Offsetting of Financial Liabilities and Derivative Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Amounts of
|
|
Gross Amounts
Offset in the
|
|
Net Amounts
of Liabilities
Presented in the
|
|
Gross Amounts Not Offset in
the Statements of Condition
|
|
|
|
|
Recognized
|
|
Statements of
|
|
Statements of
|
|
Financial
|
|
Cash
|
|
|
(In thousands)
|
|
Liabilities
|
|
Condition
|
|
Condition
|
|
Instruments
|
|
Collateral Pledged
|
|
Net Amount
|
September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Swap Agreements:
|
|
|
|
|
|
|
|
|
|
|
|
|
Institutional counterparties
|
|
$
|
(184,018)
|
|
|
$
|
109,253
|
|
|
$
|
(74,765)
|
|
|
$
|
38,893
|
|
|
$
|
77,075
|
|
|
$
|
41,203
|
|
Commercial counterparties
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
$
|
(184,018)
|
|
|
$
|
109,253
|
|
|
$
|
(74,765)
|
|
|
$
|
38,893
|
|
|
$
|
77,075
|
|
|
$
|
41,203
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Offsetting of Financial Assets and Derivative Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Amounts of
|
|
Gross Amounts
Offset in the
|
|
Net Amounts
of Assets
Presented in the
|
|
Gross Amounts Not Offset in
the Statements of Condition
|
|
|
|
|
Recognized
|
|
Statements of
|
|
Statements of
|
|
Financial
|
|
Cash
|
|
|
(In thousands)
|
|
Assets
|
|
Condition
|
|
Condition
|
|
Instruments
|
|
Collateral Received
|
|
Net Amount
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Swap Agreements:
|
|
|
|
|
|
|
|
|
|
|
|
|
Institutional counterparties
|
|
$
|
640
|
|
|
$
|
(54)
|
|
|
$
|
586
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
586
|
|
Commercial counterparties
|
|
76,428
|
|
|
(22)
|
|
|
76,406
|
|
|
—
|
|
|
—
|
|
|
76,406
|
|
Total
|
|
$
|
77,068
|
|
|
$
|
(76)
|
|
|
$
|
76,992
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
76,992
|
|
Offsetting of Financial Liabilities and Derivative Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Amounts of
|
|
Gross Amounts
Offset in the
|
|
Net Amounts
of Liabilities
Presented in the
|
|
Gross Amounts Not Offset in
the Statements of Condition
|
|
|
|
|
Recognized
|
|
Statements of
|
|
Statements of
|
|
Financial
|
|
Cash
|
|
|
(In thousands)
|
|
Liabilities
|
|
Condition
|
|
Condition
|
|
Instruments
|
|
Collateral Pledged
|
|
Net Amount
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Swap Agreements:
|
|
|
|
|
|
|
|
|
|
|
|
|
Institutional counterparties
|
|
$
|
(80,024)
|
|
|
$
|
1,219
|
|
|
$
|
(78,805)
|
|
|
$
|
25,828
|
|
|
$
|
96,310
|
|
|
$
|
43,333
|
|
Commercial counterparties
|
|
(1,080)
|
|
|
—
|
|
|
(1,080)
|
|
|
—
|
|
|
—
|
|
|
(1,080)
|
|
Total
|
|
$
|
(81,104)
|
|
|
$
|
1,219
|
|
|
$
|
(79,885)
|
|
|
$
|
25,828
|
|
|
$
|
96,310
|
|
|
$
|
42,253
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10. LEASES
Substantially all of the leases in which the Company is the lessee are comprised of real estate property for branches, ATM locations, and office space. Most of the Company’s leases are classified as operating leases. At September 30, 2020, lease expiration dates ranged from 1 month to 20 years.
The following table represents the Consolidated Balance Sheets classification of the Company’s right-of-use (“ROU”) assets and lease liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
September 30, 2020
|
|
December 31, 2019
|
Lease Right-of-Use Assets
|
|
Classification
|
|
|
|
|
Operating lease right-of-use assets (1)
|
|
Other assets
|
|
$
|
71,937
|
|
|
$
|
76,332
|
|
Finance lease right-of-use assets
|
|
Premises and equipment, net
|
|
7,328
|
|
|
7,720
|
|
Total Lease Right-of-Use Assets
|
|
|
|
$
|
79,265
|
|
|
$
|
84,052
|
|
|
|
|
|
|
|
|
Lease Liabilities
|
|
|
|
|
|
|
Operating lease liabilities (2)
|
|
Other liabilities
|
|
$
|
76,185
|
|
|
$
|
80,734
|
|
Finance lease liabilities
|
|
Other liabilities
|
|
10,510
|
|
|
10,883
|
|
Total Lease Liabilities
|
|
|
|
$
|
86,695
|
|
|
$
|
91,617
|
|
(1) Includes operating lease right-of-use assets classified as discontinued operations of $1.8 million and $3.5 million as of September 30, 2020 and December 31, 2019, respectively.
(2) Includes operating lease liabilities classified as discontinued operations of $1.8 million and $3.5 million as of September 30, 2020 and December 31, 2019, respectively.
Supplemental information related to leases was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
December 31, 2019
|
Weighted-Average Remaining Lease Term (in years)
|
|
|
|
Operating leases
|
9.9
|
|
10.3
|
Finance leases
|
14.1
|
|
14.8
|
|
|
|
|
Weighted-Average Discount Rate
|
|
|
|
Operating leases
|
3.02
|
%
|
|
3.36
|
%
|
Finance leases
|
5.00
|
%
|
|
5.00
|
%
|
The Company has lease agreements with lease and non-lease components, which are generally accounted for separately. For real estate leases, non-lease components and other non-components, such as common area maintenance charges, real estate taxes, and insurance are not included in the measurement of the lease liability since they are generally able to be segregated.
The Company does not have any material sub-lease agreements.
Lease expense for operating leases for the three months ended September 30, 2020 was $3.4 million, of which $0.2 million was related to FCLS and is reported as discontinued operations. Lease expense for operating leases for the nine months ended September 30, 2020 was $10.2 million, of which $0.9 million was related to FCLS and is reported as discontinued operations. Variable lease components, such as consumer price index adjustments, are expensed as incurred and not included in ROU assets and operating lease liabilities.
Lease expense for operating leases for the three months ended September 30, 2019 was $3.7 million, of which $0.7 million was related to FCLS and is reported as discontinued operations. Lease expense for operating leases for the nine months ended September 30, 2019 was $10.7 million, of which $2.2 million was related to FCLS and is reported as discontinued operations.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Variable lease components, such as consumer price index adjustments, are expensed as incurred and not included in ROU assets and operating lease liabilities.
Supplemental cash flow information related to leases was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
(In thousands)
|
|
September 30, 2020
|
|
September 30, 2019
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
Operating cash flows from operating leases (1)
|
|
$
|
2,441
|
|
|
$
|
3,829
|
|
Operating cash flows from finance leases
|
|
133
|
|
|
159
|
|
Financing cash flows from finance leases
|
|
125
|
|
|
119
|
|
(1) Includes operating cash flows from operating leases related to discontinued operations of $0.2 million and $0.7 million at September 30, 2020 and September 30, 2019 respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
(In thousands)
|
|
September 30, 2020
|
|
September 30, 2019
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
Operating cash flows from operating leases (1)
|
|
$
|
10,461
|
|
|
$
|
10,984
|
|
Operating cash flows from finance leases
|
|
399
|
|
|
478
|
|
Financing cash flows from finance leases
|
|
374
|
|
|
315
|
|
(1) Includes operating cash flows from operating leases related to discontinued operations of $0.9 million and $2.2 million at September 30, 2020 and September 30, 2019 respectively.
The following table presents a maturity analysis of the Company’s lease liability by lease classification at September 30, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Operating Leases
|
|
Finance Leases
|
2020
|
|
$
|
3,396
|
|
|
$
|
250
|
|
2021
|
|
12,826
|
|
|
1,031
|
|
2022
|
|
11,671
|
|
|
1,031
|
|
2023
|
|
9,738
|
|
|
1,037
|
|
2024
|
|
8,345
|
|
|
1,037
|
|
Thereafter
|
|
42,438
|
|
|
10,260
|
|
Total undiscounted lease payments (1)
|
|
88,414
|
|
|
14,646
|
|
Less amounts representing interest (1)
|
|
(12,229)
|
|
|
(4,136)
|
|
Lease liability (1)
|
|
$
|
76,185
|
|
|
$
|
10,510
|
|
(1) Includes $1.8 million of discontinued operations.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11. OTHER COMMITMENTS, CONTINGENCIES, AND OFF-BALANCE SHEET ACTIVITIES
In December 2019, a novel strain of coronavirus (“COVID-19”) was reported to have surfaced in China and has since spread to a number of other countries, including the United States. In March 2020, the World Health Organization declared COVID-19 a global pandemic and the United States declared a National Public Health Emergency. The impact of the COVID-19 pandemic is fluid and continues to evolve, which is adversely affecting some of the Company’s clients. The COVID-19 pandemic and its associated impacts on trade (including supply chains and export levels), travel, employee productivity, unemployment, consumer spending, and other economic activities has resulted in less economic activity, lower equity market valuations and significant volatility and disruption in financial markets and has had an adverse effect on the Company’s business, financial condition and results of operations. The ultimate extent of the impact of the COVID-19 pandemic on the Company’s business, financial condition and results of operations is currently uncertain and will depend on various developments and other factors, including, among others, the duration and scope of the pandemic, as well as governmental, regulatory and private sector responses to the pandemic, and the associated impacts on the economy, financial markets, and our clients, employees, and vendors.
The Company’s business, financial condition and results of operations generally rely upon the ability of the Company’s borrowers to repay their loans, the value of collateral underlying the Company’s secured loans, and demand for loans and other products and services the Company offers, which are highly dependent on the business environment in the Company’s primary markets where it operates and in the United States as a whole.
During the current year, the Company’s results of operations were negatively impacted by full impairment of the Company's goodwill, an increase in its provision for credit losses and related allowance for credit losses, a decline in the fair value of its equity portfolio, and a decline in valuation of assets accounted for pursuant to the fair value option. At this time, it is difficult to quantify the impact COVID-19 will have on the Company during the remainder of 2020. These circumstances could cause the Company to experience a material adverse effect on our business operations, asset valuations, financial condition, results of operations and prospects. Material adverse impacts may include all or a combination of valuation impairments on the Company’s intangible assets, investments, loans, loan servicing rights, deferred tax assets, lease right-of-use assets, or counter-party risk derivatives.
Beginning in March 2020, the Company has offered three-month payment deferrals for customers with a current payment status who were negatively impacted by economic disruption caused by the COVID-19 pandemic. Through September 30, 2020, the Company had modified 5,884 loans with a carrying value of $1.6 billion. As of September 30, 2020, the Company had 728 active modified loans outstanding with a carrying value of $231.7 million, which excluded loans returning to payment or awaiting evaluation for further deferral. The Company continues to accrue interest on these loans during the deferral period. In accordance with interagency guidance issued in March 2020 and Section 4013 (Temporary Relief from Troubled Debt Restructurings) of the CARES Act, these short-term deferrals are not considered troubled debt restructurings (“TDRs”) unless the borrower was previously experiencing financial difficulty. In addition, the risk-ratings on COVID-19 modified loans did not automatically change as a result of payment deferrals, and these loans will not be considered past due until after the deferral period is over and scheduled payments resume. Refer to Note 1 - Basis of Presentation for additional information regarding the Company's accounting policy regarding these modifications.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12. CAPITAL RATIOS AND SHAREHOLDERS’ EQUITY
The actual and required capital ratios were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2020
|
|
Regulatory
Minimum to be
Well Capitalized
|
|
December 31,
2019
|
|
Regulatory
Minimum to be
Well Capitalized
|
Company (consolidated)
|
|
|
|
|
|
|
|
|
Total capital to risk weighted assets
|
|
15.4
|
%
|
|
N/A
|
|
13.7
|
%
|
|
N/A
|
Common equity tier 1 capital to risk weighted assets
|
|
13.2
|
|
|
N/A
|
|
12.1
|
|
|
N/A
|
Tier 1 capital to risk weighted assets
|
|
13.4
|
|
|
N/A
|
|
12.3
|
|
|
N/A
|
Tier 1 capital to average assets
|
|
9.2
|
|
|
N/A
|
|
9.3
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
Bank
|
|
|
|
|
|
|
|
|
Total capital to risk weighted assets
|
|
14.3
|
%
|
|
10.0
|
%
|
|
12.8
|
%
|
|
10.0
|
%
|
Common equity tier 1 capital to risk weighted assets
|
|
13.2
|
|
|
6.5
|
|
|
12.2
|
|
|
6.5
|
|
Tier 1 capital to risk weighted assets
|
|
13.2
|
|
|
8.0
|
|
|
12.2
|
|
|
8.0
|
|
Tier 1 capital to average assets
|
|
9.0
|
|
|
5.0
|
|
|
9.1
|
|
|
5.0
|
|
At each date shown, the Bank met the conditions to be classified as “well capitalized” under the relevant regulatory framework. To be categorized as well capitalized, an institution must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table above.
Effective January 1, 2015, the Company and the Bank became subject to the Basel III rule that requires the Company and the Bank to assess their Common equity Tier 1 capital to risk weighted assets. The Bank's Common equity Tier 1 capital to risk weighted assets exceeds the minimum to be well capitalized. In addition, the final capital rules added a requirement to maintain a minimum conservation buffer, composed of Common equity Tier 1 capital, of 2.5% of risk-weighted assets, to be phased in over three years and applied to the Common equity Tier 1 risk-based capital ratio, the Tier 1 risk-based capital ratio, and the Total risk-based capital ratio. As of January 1, 2019, banking organizations must maintain a minimum Common equity Tier 1 risk-based capital ratio of 7.0%, a minimum Tier 1 risk-based capital ratio of 8.5%, and a minimum Total risk-based capital ratio of 10.5%. The final capital rules impose restrictions on capital distributions and certain discretionary cash bonus payments if the minimum capital conservation buffer is not met.
At September 30, 2020, the capital levels of both the Company and the Bank exceeded all regulatory capital requirements and the Bank's regulatory capital ratios were above the minimum levels required to be considered well capitalized for regulatory purposes. The capital levels of both the Company and the Bank at September 30, 2020 also exceeded the minimum capital requirements including the currently applicable capital conservation buffer of 2.5%.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Accumulated other comprehensive income
Components of accumulated other comprehensive income is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
September 30,
2020
|
|
December 31,
2019
|
Other accumulated comprehensive income, before tax:
|
|
|
|
|
Net unrealized holding gain on AFS securities
|
|
$
|
46,792
|
|
|
$
|
19,263
|
|
|
|
|
|
|
Net unrealized holding (loss) on pension plans
|
|
(3,023)
|
|
|
(3,023)
|
|
|
|
|
|
|
Income taxes related to items of accumulated other comprehensive income:
|
|
|
|
|
Net unrealized tax (expense) on AFS securities
|
|
(12,155)
|
|
|
(5,059)
|
|
|
|
|
|
|
Net unrealized tax benefit on pension plans
|
|
812
|
|
|
812
|
|
Accumulated other comprehensive income
|
|
$
|
32,426
|
|
|
$
|
11,993
|
|
The following table presents the components of other comprehensive income for the three and nine months ended September 30, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Before Tax
|
|
Tax Effect
|
|
Net of Tax
|
Three Months Ended September 30, 2020
|
|
|
|
|
|
|
Net unrealized holding gain on AFS securities:
|
|
x
|
|
|
|
|
Net unrealized gains arising during the period
|
|
$
|
(1,079)
|
|
|
$
|
270
|
|
|
$
|
(809)
|
|
Less: reclassification adjustment for gains realized in net income
|
|
6
|
|
|
(2)
|
|
|
4
|
|
Net unrealized holding gain on AFS securities
|
|
(1,085)
|
|
|
272
|
|
|
(813)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
$
|
(1,085)
|
|
|
$
|
272
|
|
|
$
|
(813)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2019
|
|
|
|
|
|
|
Net unrealized holding gain on AFS securities:
|
|
|
|
|
|
|
Net unrealized gains arising during the period
|
|
$
|
6,159
|
|
|
$
|
(1,576)
|
|
|
$
|
4,583
|
|
Less: reclassification adjustment for (losses) realized in net income
|
|
5
|
|
|
(1)
|
|
|
4
|
|
Net unrealized holding gain on AFS securities
|
|
6,154
|
|
|
(1,575)
|
|
|
4,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
$
|
6,154
|
|
|
$
|
(1,575)
|
|
|
$
|
4,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Before Tax
|
|
Tax Effect
|
|
Net of Tax
|
Nine Months Ended September 30, 2020
|
|
|
|
|
|
|
Net unrealized holding gain on AFS securities:
|
|
x
|
|
|
|
|
Net unrealized gains arising during the period
|
|
$
|
27,534
|
|
|
$
|
(7,097)
|
|
|
$
|
20,437
|
|
Less: reclassification adjustment for (losses) realized in net income
|
|
5
|
|
|
(1)
|
|
|
4
|
|
Net unrealized holding gain on AFS securities
|
|
27,529
|
|
|
(7,096)
|
|
|
20,433
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
$
|
27,529
|
|
|
$
|
(7,096)
|
|
|
$
|
20,433
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2019
|
|
|
|
|
|
|
Net unrealized holding gain on AFS securities:
|
|
|
|
|
|
|
Net unrealized gains arising during the period
|
|
$
|
39,486
|
|
|
$
|
(10,129)
|
|
|
$
|
29,357
|
|
Less: reclassification adjustment for gains realized in net income
|
|
9
|
|
|
(2)
|
|
|
7
|
|
Net unrealized holding gain on AFS securities
|
|
39,477
|
|
|
(10,127)
|
|
|
29,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
$
|
39,477
|
|
|
$
|
(10,127)
|
|
|
$
|
29,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the changes in each component of accumulated other comprehensive income, for the three and nine ended September 30, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Net unrealized
holding loss
on AFS Securities
|
|
|
|
|
|
Net unrealized
holding loss
on pension plans
|
|
Total
|
Three Months Ended September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
Balance at Beginning of Period
|
|
$
|
35,450
|
|
|
|
|
|
|
$
|
(2,211)
|
|
|
$
|
33,239
|
|
Other comprehensive income before reclassifications
|
|
(809)
|
|
|
|
|
|
|
—
|
|
|
(809)
|
|
Less: amounts reclassified from accumulated other comprehensive income
|
|
4
|
|
|
|
|
|
|
—
|
|
|
4
|
|
Total other comprehensive income
|
|
(813)
|
|
|
|
|
|
|
—
|
|
|
(813)
|
|
Balance at End of Period
|
|
$
|
34,637
|
|
|
|
|
|
|
$
|
(2,211)
|
|
|
$
|
32,426
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
Balance at Beginning of Period
|
|
$
|
13,318
|
|
|
|
|
|
|
$
|
(2,017)
|
|
|
$
|
11,301
|
|
Other comprehensive income before reclassifications
|
|
4,583
|
|
|
|
|
|
|
—
|
|
|
4,583
|
|
Less: amounts reclassified from accumulated other comprehensive income
|
|
4
|
|
|
|
|
|
|
—
|
|
|
4
|
|
Total other comprehensive income
|
|
4,579
|
|
|
|
|
|
|
—
|
|
|
4,579
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at End of Period
|
|
$
|
17,897
|
|
|
|
|
|
|
$
|
(2,017)
|
|
|
$
|
15,880
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2020
|
|
|
|
|
|
|
|
|
|
|
Balance at Beginning of Period
|
|
$
|
14,204
|
|
|
|
|
|
|
$
|
(2,211)
|
|
|
$
|
11,993
|
|
Other comprehensive income before reclassifications
|
|
20,437
|
|
|
|
|
|
|
—
|
|
|
20,437
|
|
Less: amounts reclassified from accumulated other comprehensive income
|
|
4
|
|
|
|
|
|
|
—
|
|
|
4
|
|
Total other comprehensive income
|
|
20,433
|
|
|
|
|
|
|
—
|
|
|
20,433
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at End of Period
|
|
$
|
34,637
|
|
|
|
|
|
|
$
|
(2,211)
|
|
|
$
|
32,426
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
Balance at Beginning of Period
|
|
$
|
(11,453)
|
|
|
|
|
|
|
$
|
(2,017)
|
|
|
$
|
(13,470)
|
|
Other comprehensive income before reclassifications
|
|
29,357
|
|
|
|
|
|
|
—
|
|
|
29,357
|
|
Less: amounts reclassified from accumulated other comprehensive income
|
|
7
|
|
|
|
|
|
|
—
|
|
|
7
|
|
Total other comprehensive income
|
|
29,350
|
|
|
|
|
|
|
—
|
|
|
29,350
|
|
Balance at End of Period
|
|
$
|
17,897
|
|
|
|
|
|
|
$
|
(2,017)
|
|
|
$
|
15,880
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the amounts reclassified out of each component of accumulated other comprehensive income for the three and nine ended September 30, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Affected Line Item in the
|
|
|
Three Months Ended September 30,
|
|
Statement where Net Income
|
(In thousands)
|
|
2020
|
|
2019
|
|
is Presented
|
Realized gains on AFS securities:
|
|
|
|
|
|
|
|
|
$
|
6
|
|
|
$
|
5
|
|
|
Non-interest income
|
|
|
|
|
|
|
|
|
|
(2)
|
|
|
(1)
|
|
|
Tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
4
|
|
|
Net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total reclassifications for the period
|
|
$
|
4
|
|
|
$
|
4
|
|
|
Net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Affected Line Item in the
|
|
|
Nine Months Ended September 30,
|
|
Statement where Net Income
|
(In thousands)
|
|
2020
|
|
2019
|
|
is Presented
|
Realized gains on AFS securities:
|
|
|
|
|
|
|
|
|
$
|
5
|
|
|
$
|
9
|
|
|
Non-interest income
|
|
|
|
|
|
|
|
|
|
(1)
|
|
|
(2)
|
|
|
Tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
7
|
|
|
Net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total reclassifications for the period
|
|
$
|
4
|
|
|
$
|
7
|
|
|
Net of tax
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13. EARNINGS/(LOSS) PER SHARE
Earnings/(loss) per share have been computed based on the following (average diluted shares outstanding are calculated using the treasury stock method):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
(In thousands, except per share data)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Income/(loss) from continuing operations
|
$
|
23,043
|
|
|
$
|
20,659
|
|
|
$
|
(532,074)
|
|
|
$
|
68,885
|
|
(Loss)/income from discontinued operations
|
(1,818)
|
|
|
1,957
|
|
|
(15,952)
|
|
|
2,814
|
|
Net income/(loss)
|
$
|
21,225
|
|
|
$
|
22,616
|
|
|
$
|
(548,026)
|
|
|
$
|
71,699
|
|
|
|
|
|
|
|
|
|
Average number of common shares issued
|
51,903
|
|
|
51,903
|
|
|
51,903
|
|
|
49,068
|
|
Less: average number of treasury shares
|
1,560
|
|
|
1,089
|
|
|
1,674
|
|
|
855
|
|
Less: average number of unvested stock award shares
|
536
|
|
|
435
|
|
|
499
|
|
|
410
|
|
Plus: average participating preferred shares
|
522
|
|
|
1,043
|
|
|
526
|
|
|
1,043
|
|
Average number of basic shares outstanding
|
50,329
|
|
|
51,422
|
|
|
50,256
|
|
|
48,846
|
|
Plus: dilutive effect of unvested stock award shares
|
—
|
|
|
87
|
|
|
—
|
|
|
109
|
|
Plus: dilutive effect of stock options outstanding
|
—
|
|
|
36
|
|
|
—
|
|
|
32
|
|
Average number of diluted shares outstanding
|
50,329
|
|
|
51,545
|
|
|
50,256
|
|
|
48,987
|
|
|
|
|
|
|
|
|
|
Basic earnings/(loss) per common share:
|
|
|
|
|
|
|
|
Continuing operations
|
$
|
0.46
|
|
|
$
|
0.40
|
|
|
$
|
(10.58)
|
|
|
$
|
1.41
|
|
Discontinued operations
|
(0.04)
|
|
|
0.04
|
|
|
(0.32)
|
|
|
0.06
|
|
Total
|
$
|
0.42
|
|
|
$
|
0.44
|
|
|
$
|
(10.90)
|
|
|
$
|
1.47
|
|
|
|
|
|
|
|
|
|
Diluted earnings/(loss) per common share:
|
|
|
|
|
|
|
|
Continuing operations
|
$
|
0.46
|
|
|
$
|
0.40
|
|
|
$
|
(10.58)
|
|
|
$
|
1.40
|
|
Discontinued operations
|
(0.04)
|
|
|
0.04
|
|
|
(0.32)
|
|
|
0.06
|
|
Total
|
$
|
0.42
|
|
|
$
|
0.44
|
|
|
$
|
(10.90)
|
|
|
$
|
1.46
|
|
Due to the Company's average stock price during the period, all unvested restricted stock and options were considered anti-dilutive for the three months ended September 30, 2020. Due to the year-to-date net loss, all unvested restricted stock and options were considered anti-dilutive for the nine months ended September 30, 2020. For the three months ended September 30, 2019, 348 thousand shares of restricted stock and 125 thousand options were anti-dilutive and therefore excluded from the earnings per share calculation. For the nine months ended September 30, 2019, 296 thousand shares of restricted stock and 60 thousand options were anti-dilutive and therefore excluded from the earnings per share calculations.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14. STOCK-BASED COMPENSATION PLANS
A combined summary of activity in the Company’s stock award and stock option plans for the nine months ended September 30, 2020 is presented in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Vested Stock Awards Outstanding
|
|
Stock Options Outstanding
|
(Shares in thousands)
|
|
|
Number of Shares
|
|
Weighted-Average Grant Date Fair Value
|
|
Number of Shares
|
|
Weighted-Average Exercise Price
|
December 31, 2019
|
|
|
450
|
|
|
$
|
32.47
|
|
|
153
|
|
|
$
|
22.00
|
|
Granted
|
|
|
306
|
|
|
16.84
|
|
|
—
|
|
|
—
|
|
Acquired
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Stock options exercised
|
|
|
—
|
|
|
—
|
|
|
(33)
|
|
|
18.38
|
|
Stock awards vested
|
|
|
(133)
|
|
|
33.84
|
|
|
—
|
|
|
—
|
|
Forfeited
|
|
|
(87)
|
|
|
30.23
|
|
|
—
|
|
|
—
|
|
Expired
|
|
|
—
|
|
|
—
|
|
|
(1)
|
|
|
9.85
|
|
September 30, 2020
|
|
|
536
|
|
|
$
|
28.35
|
|
|
119
|
|
|
$
|
22.72
|
|
Exercisable options at September 30, 2020
|
|
119
|
|
|
$
|
22.72
|
|
During the three ended September 30, 2020 there were no options exercised. During the nine months ended September 30, 2020, proceeds from stock option exercises totaled $607 thousand. During the three and nine months ended September 30, 2019, proceeds from stock option exercises totaled $55 thousand and $69 thousand. During the three and nine months ended September 30, 2020, there were 37 thousand and 133 thousand shares vested in connection with stock awards, respectively. During the three and nine months ended September 30, 2019, there were 3 thousand and 130 thousand shares issued in connection with vested stock awards, respectively. All of these shares were issued from available treasury stock. Stock-based compensation expense totaled $0.6 million and $1.5 million during the three months ended September 30, 2020 and 2019, respectively. Stock-based compensation expense totaled $3.5 million and $3.5 million during the nine months ended September 30, 2020 and 2019, respectively. Stock-based compensation expense is recognized over the requisite service period for all awards.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15. FAIR VALUE MEASUREMENTS
A description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to all of the Company’s financial assets and financial liabilities that are carried at fair value, including assets classified as discontinued operations on the consolidated balance sheets. See Note 2 - Discontinued Operations for more information on assets and liabilities classified as discontinued operations.
Recurring Fair Value Measurements
The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of September 30, 2020 and December 31, 2019, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
(In thousands)
|
Inputs
|
|
Inputs
|
|
Inputs
|
|
Fair Value
|
Trading security
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9,525
|
|
|
$
|
9,525
|
|
Securities available for sale:
|
|
|
|
|
|
|
|
Municipal bonds and obligations
|
—
|
|
|
104,507
|
|
|
—
|
|
|
104,507
|
|
Agency collateralized mortgage obligations
|
—
|
|
|
741,469
|
|
|
—
|
|
|
741,469
|
|
Agency residential mortgage-backed securities
|
—
|
|
|
326,017
|
|
|
—
|
|
|
326,017
|
|
Agency commercial mortgage-backed securities
|
—
|
|
|
273,608
|
|
|
—
|
|
|
273,608
|
|
Corporate bonds
|
—
|
|
|
49,152
|
|
|
25,825
|
|
|
74,977
|
|
|
|
|
|
|
|
|
|
Other bonds and obligations
|
—
|
|
|
54,711
|
|
|
—
|
|
|
54,711
|
|
Marketable equity securities
|
31,321
|
|
|
672
|
|
|
—
|
|
|
31,993
|
|
Loans held for investment at fair value
|
—
|
|
|
—
|
|
|
2,774
|
|
|
2,774
|
|
Loans held for sale (1)
|
—
|
|
|
17,596
|
|
|
—
|
|
|
17,596
|
|
Derivative assets (1)
|
—
|
|
|
177,731
|
|
|
1,895
|
|
|
179,626
|
|
Capitalized servicing rights (1)
|
—
|
|
|
—
|
|
|
3,855
|
|
|
3,855
|
|
Derivative liabilities (1)
|
—
|
|
|
73,659
|
|
|
—
|
|
|
73,659
|
|
(1) Includes assets and liabilities classified as discontinued operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
(In thousands)
|
Inputs
|
|
Inputs
|
|
Inputs
|
|
Fair Value
|
Trading security
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
10,769
|
|
|
$
|
10,769
|
|
Securities available for sale:
|
|
|
|
|
|
|
|
Municipal bonds and obligations
|
—
|
|
|
110,138
|
|
|
—
|
|
|
110,138
|
|
Agency collateralized mortgage obligations
|
—
|
|
|
748,812
|
|
|
—
|
|
|
748,812
|
|
Agency residential mortgage-backed securities
|
—
|
|
|
147,744
|
|
|
—
|
|
|
147,744
|
|
Agency commercial mortgage-backed securities
|
—
|
|
|
147,096
|
|
|
—
|
|
|
147,096
|
|
Corporate bonds
|
—
|
|
|
73,610
|
|
|
42,966
|
|
|
116,576
|
|
|
|
|
|
|
|
|
|
Other bonds and obligations
|
—
|
|
|
41,189
|
|
|
—
|
|
|
41,189
|
|
Marketable equity securities
|
40,499
|
|
|
1,057
|
|
|
—
|
|
|
41,556
|
|
Loans held for investment at fair value
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Loans held for sale (1)
|
—
|
|
|
140,280
|
|
|
—
|
|
|
140,280
|
|
Derivative assets (1)
|
—
|
|
|
77,562
|
|
|
2,628
|
|
|
80,190
|
|
Capitalized servicing rights (1)
|
—
|
|
|
—
|
|
|
12,229
|
|
|
12,229
|
|
Derivative liabilities (1)
|
227
|
|
|
80,454
|
|
|
—
|
|
|
80,681
|
|
(1) Includes assets and liabilities classified as discontinued operations.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
There were no transfers between levels during the three or nine months ended September 30, 2020.
Trading Security at Fair Value. The Company holds one security designated as a trading security. It is a tax-advantaged economic development bond issued to the Company by a local nonprofit which provides wellness and health programs. The fair value of this security is determined based on a discounted cash flow methodology. Certain inputs to the fair value calculation are unobservable and there is little to no market activity in the security; therefore, the security meets the definition of a Level 3 security. The discount rate used in the valuation of the security is sensitive to movements in the 3-month LIBOR rate.
Securities Available for Sale and Marketable Equity Securities. Marketable equity securities classified as Level 1 consist of publicly-traded equity securities for which the fair values can be obtained through quoted market prices in active exchange markets. Marketable equity securities classified as Level 2 consist of securities with infrequent trades in active exchange markets, and pricing is primarily sourced from third party pricing services. AFS securities classified as Level 2 include most of the Company’s debt securities. The pricing on Level 2 and Level 3 was primarily sourced from third party pricing services, overseen by management, and is based on models that consider standard input factors such as dealer quotes, market spreads, cash flows, the U.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms and condition, among other things. Level 3 pricing includes inputs unobservable to market participants.
Loans Held for Investment. The Company’s held for investment loan portfolio includes loans originated by Company and loans acquired through business combinations. The Company intends to hold these assets until maturity as a part of its business operations. For one acquired portfolio subset, the Company previously accounted for these purchased-credit impaired loans as a pool under ASC 310, as they were determined to have common risk characteristics. These loans were recorded at fair value on acquisition date and subsequently evaluated for impairment collectively. Upon adoption of ASC 326, the Company elected the fair value option on this portfolio, recognizing a $11.2 million fair value write-down charged to Retained Earnings, net of deferred tax impact, as of January 1, 2020. The fair value of this loan portfolio is determined based on a discounted cash flow methodology. Certain inputs to the fair value calculation are unobservable; therefore, the loans meet the definition of Level 3 assets. The discount rate used in the valuation is consistent with assets that have significant credit deterioration. The cash flow assumptions include payment schedules for loans with current payment histories and estimated collateral value for delinquent loans. All of these loans were nonperforming as of September 30, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate Fair Value
|
September 30, 2020
|
|
Aggregate
|
|
Aggregate
|
|
Less Aggregate
|
(In thousands)
|
|
Fair Value
|
|
Unpaid Principal
|
|
Unpaid Principal
|
Loans held for investment at fair value
|
|
$
|
2,774
|
|
|
$
|
66,381
|
|
|
$
|
(63,607)
|
|
Loans Held for Sale. The Company elected the fair value option for all loans held for sale (HFS) originated for sale on or after May 1, 2012. Loans HFS are classified as Level 2 as the fair value is based on input factors such as quoted prices for similar loans in active markets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate Fair Value
|
September 30, 2020
|
|
Aggregate
|
|
Aggregate
|
|
Less Aggregate
|
(In thousands)
|
|
Fair Value
|
|
Unpaid Principal
|
|
Unpaid Principal
|
Loans held for sale - continuing operations
|
|
$
|
15,854
|
|
|
$
|
15,430
|
|
|
$
|
424
|
|
Loans held for sale - discontinued operations
|
|
1,742
|
|
|
1,811
|
|
|
(69)
|
|
Total loans held for sale
|
|
$
|
17,596
|
|
|
$
|
17,241
|
|
|
$
|
355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate Fair Value
|
December 31, 2019
|
|
Aggregate
|
|
Aggregate
|
|
Less Aggregate
|
(In thousands)
|
|
Fair Value
|
|
Unpaid Principal
|
|
Unpaid Principal
|
Loans held for sale - continuing operations
|
|
$
|
7,625
|
|
|
$
|
7,485
|
|
|
$
|
140
|
|
Loans held for sale - discontinued operations
|
|
132,655
|
|
|
129,622
|
|
|
3,033
|
|
Total loans held for sale
|
|
$
|
140,280
|
|
|
$
|
137,107
|
|
|
$
|
3,173
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The changes in fair value of loans held for sale for the three months ended September 30, 2020, were losses of $6 thousand from continuing operations and gains of $0.9 million from discontinued operations. The changes in fair value of loans held for sale for the nine months ended September 30, 2020 were gains of $284 thousand from continuing operations and losses of $3.1 million from discontinued operations. During the three months ended September 30, 2020, originations of loans held for sale from continuing operations totaled $70.6 million and sales of loans originated for sale from continuing operations totaled $74.1 million.
During the three months ended September 30, 2019, originations of loans held for sale from continuing operations totaled $22.6 million and sales of loans originated for sale from continuing operations totaled $25.1 million. During the nine months ended September 30, 2020, originations of loans held for sale from continuing operations totaled $149.5 million and sales of loans originated for sale from continuing operations totaled $141.3 million. During the nine months ended September 30, 2019, originations of loans held for sale from continuing operations totaled $51.5 million and sales of loans originated for sale from continuing operations totaled $48.6 million.
Interest Rate Swaps. The valuation of the Company’s interest rate swaps is obtained from a third-party pricing service and is determined using a discounted cash flow analysis on the expected cash flows of each derivative. The pricing analysis is based on observable inputs for the contractual terms of the derivatives, including the period to maturity and interest rate curves. The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings.
Although the Company has determined that the majority of the inputs used to value its interest rate derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of September 30, 2020, the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.
Commitments to Lend. The Company enters into commitments to lend for residential mortgage loans intended for sale, which commit the Company to lend funds to a potential borrower at a specific interest rate and within a specified period of time. The estimated fair value of commitments to originate residential mortgage loans for sale is based on quoted prices for similar loans in active markets. However, this value is adjusted by a factor which considers the likelihood that the loan in a lock position will ultimately close, and by the non-refundable costs of originating the loan. The closing ratio is derived from the Bank’s internal data and is adjusted using significant management judgment. The costs to originate are primarily based on the Company’s internal commission rates that are not observable. As such, these commitments are classified as Level 3 measurements. Commitments to lend are included in discontinued operations. See Note 2 - Discontinued Operations for more information on assets and liabilities classified as discontinued operations.
Forward Sale Commitments. The Company utilizes forward sale commitments as economic hedges against potential changes in the values of the commitments to lend and loans originated for sale. To Be Announced (“TBA”) mortgage-backed securities forward commitment sales are used as the hedging instrument, are classified as Level 1, and consist of publicly-traded debt securities for which identical fair values can be obtained through quoted market prices in active exchange markets. The fair values of the Company’s best efforts and mandatory delivery loan sale commitments are determined similarly to the commitments to lend using quoted prices in the market place that are observable. However, costs to originate and closing ratios included in the calculation are internally generated and are based on management’s judgment and prior experience, which are considered factors that are not observable. As such, best efforts and mandatory forward commitments are classified as Level 3 measurements. Forward sale commitments are included in discontinued operations. See Note 2 - Discontinued Operations for more information on assets and liabilities classified as discontinued operations.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Capitalized Servicing Rights. The Company accounts for certain capitalized servicing rights at fair value in its Consolidated Financial Statements, as the Company is permitted to elect the fair value option for each specific instrument. A loan servicing right asset represents the amount by which the present value of the estimated future net cash flows to be received from servicing loans exceed adequate compensation for performing the servicing. The fair value of servicing rights is estimated using a present value cash flow model. The most important assumptions used in the valuation model are the anticipated rate of the loan prepayments and discount rates. Although some assumptions in determining fair value are based on standards used by market participants, some are based on unobservable inputs and therefore are classified in Level 3 of the valuation hierarchy. Capitalized servicing rights held at fair value are included in discontinued operations on the consolidated balance sheet. See Note 2 - Discontinued Operations for more information on assets and liabilities classified as discontinued operations.
The table below presents the changes in Level 3 assets and liabilities that were measured at fair value on a recurring basis for the three and nine months ended September 30, 2020 and 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets (Liabilities)
|
|
|
|
Securities
|
|
Loans
|
|
|
|
|
|
Capitalized
|
|
Trading
|
|
Available
|
|
Held for
|
|
Commitments
|
|
Forward
|
|
Servicing
|
(In thousands)
|
Security
|
|
for Sale
|
|
Investment
|
|
to Lend (1)
|
|
Commitments (1)
|
|
Rights (1)
|
Three Months Ended September 30, 2020
|
June 30, 2020
|
$
|
9,519
|
|
|
$
|
25,600
|
|
|
$
|
3,140
|
|
|
$
|
1,149
|
|
|
$
|
447
|
|
|
$
|
4,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain/(loss), net recognized in other non-interest income
|
190
|
|
|
—
|
|
|
1,189
|
|
|
—
|
|
|
(50)
|
|
|
—
|
|
Unrealized gain included in accumulated other comprehensive income
|
—
|
|
|
225
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Unrealized gain/(loss), net recognized in discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
2,124
|
|
|
—
|
|
|
(973)
|
|
Paydown of asset
|
(184)
|
|
|
—
|
|
|
(1,555)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfers to held for sale loans
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,775)
|
|
|
—
|
|
|
—
|
|
Additions to servicing rights
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
September 30, 2020
|
$
|
9,525
|
|
|
$
|
25,825
|
|
|
$
|
2,774
|
|
|
$
|
1,498
|
|
|
$
|
397
|
|
|
$
|
3,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2020
|
December 31, 2019
|
$
|
10,769
|
|
|
$
|
42,966
|
|
|
$
|
—
|
|
|
$
|
2,628
|
|
|
$
|
—
|
|
|
$
|
12,299
|
|
Adoption of ASC 326
|
—
|
|
|
—
|
|
|
7,660
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Maturity of AFS security
|
—
|
|
|
(17,000)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized (loss)/gain, net recognized in other non-interest income
|
(698)
|
|
|
—
|
|
|
(2,523)
|
|
|
—
|
|
|
397
|
|
|
—
|
|
Unrealized (loss) included in accumulated other comprehensive income
|
—
|
|
|
(141)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Unrealized gain/(loss), net recognized in discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
15,877
|
|
|
—
|
|
|
(8,255)
|
|
Transfers to Level 2
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Paydown of asset
|
(546)
|
|
|
—
|
|
|
(2,363)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Transfers to held for sale loans
|
—
|
|
|
—
|
|
|
0
|
|
(17,007)
|
|
|
—
|
|
|
—
|
|
Additions to servicing rights
|
—
|
|
|
—
|
|
|
0
|
|
—
|
|
|
—
|
|
|
(189)
|
|
September 30, 2020
|
$
|
9,525
|
|
|
$
|
25,825
|
|
|
$
|
2,774
|
|
|
$
|
1,498
|
|
|
$
|
397
|
|
|
$
|
3,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain/(loss) relating to instruments still held at September 30, 2020
|
$
|
682
|
|
|
$
|
(643)
|
|
|
$
|
—
|
|
|
$
|
1,498
|
|
|
$
|
397
|
|
|
$
|
—
|
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
Loans
|
|
|
|
|
|
Capitalized
|
|
Trading
|
|
Available
|
|
Held for
|
|
Commitments
|
|
|
|
Servicing
|
(In thousands)
|
Security
|
|
for Sale
|
|
Investment
|
|
to Lend (1)
|
|
|
|
Rights (1)
|
Three Months Ended September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
$
|
11,210
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9,005
|
|
|
|
|
$
|
11,206
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain, net recognized in other non-interest income
|
109
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain/(loss), net recognized in discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
19,915
|
|
|
|
|
(1,381)
|
|
Paydown of trading security
|
(174)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfers to held for sale loans
|
—
|
|
|
—
|
|
|
—
|
|
|
(21,836)
|
|
|
|
|
—
|
|
Additions to servicing rights
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
6,588
|
|
September 30, 2019
|
$
|
11,145
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,084
|
|
|
|
|
$
|
16,413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
$
|
11,212
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,927
|
|
|
|
|
$
|
11,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain, net recognized in other non-interest income
|
454
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
Unrealized gain/(loss), net recognized in discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
48,254
|
|
|
|
|
(4,495)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paydown of trading security
|
(521)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
Transfers to held for sale loans
|
—
|
|
|
—
|
|
|
—
|
|
|
(45,097)
|
|
|
|
|
—
|
|
Additions to servicing rights
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
9,423
|
|
September 30, 2018
|
$
|
11,145
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,084
|
|
|
|
|
$
|
16,413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains relating to instruments still held at September 30, 2019
|
$
|
1,576
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,084
|
|
|
|
|
$
|
—
|
|
(1) Classified as assets from discontinued operations on the consolidated balance sheets.
Quantitative information about the significant unobservable inputs within Level 3 recurring assets and liabilities is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
|
|
|
|
Significant
Unobservable Input
|
(In thousands)
|
|
September 30, 2020
|
|
Valuation Techniques
|
|
Unobservable Inputs
|
|
Value
|
Assets (Liabilities)
|
|
|
|
|
|
|
|
|
Trading security
|
|
$
|
9,525
|
|
|
Discounted Cash Flow
|
|
Discount Rate
|
|
3.75
|
%
|
AFS Securities
|
|
25,825
|
|
|
Indication from Market Maker
|
|
Price
|
|
97% - 100%
|
Loan held for investment
|
|
2,774
|
|
|
Discounted Cash Flow
|
|
Discount Rate
|
|
30.00
|
%
|
|
|
|
|
|
|
Collateral Value
|
|
$8.8 - $26.5
|
Commitments to lend (1)
|
|
1,498
|
|
|
Historical Trend
|
|
Closing Ratio
|
|
74.40
|
%
|
|
|
|
|
Pricing Model
|
|
Origination Costs, per loan
|
|
$
|
3
|
|
Forward commitments (1)
|
|
397
|
|
|
Historical Trend
|
|
Closing Ratio
|
|
74.40
|
%
|
|
|
|
|
Pricing Model
|
|
Origination Costs, per loan
|
|
$
|
3
|
|
Capitalized servicing rights (1)
|
|
3,855
|
|
|
Discounted cash flow
|
|
Constant Prepayment Rate (CPR)
|
|
25.35
|
%
|
|
|
|
|
|
|
Discount Rate
|
|
10.00
|
%
|
Total
|
|
$
|
43,874
|
|
|
|
|
|
|
|
(1) Classified as assets from discontinued operations on the consolidated balance sheets.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
|
|
|
|
Significant
Unobservable Input
|
(In thousands)
|
|
December 31, 2019
|
|
Valuation Techniques
|
|
Unobservable Inputs
|
|
Value
|
Assets (Liabilities)
|
|
|
|
|
|
|
|
|
Trading security
|
|
$
|
10,769
|
|
|
Discounted Cash Flow
|
|
Discount Rate
|
|
2.21
|
%
|
AFS Securities
|
|
42,966
|
|
|
Indication from Market Maker
|
|
Price
|
|
97% - 100%
|
Commitments to lend (1)
|
|
2,628
|
|
|
Historical Trend
|
|
Closing Ratio
|
|
77.81
|
%
|
|
|
|
|
Pricing Model
|
|
Origination Costs, per loan
|
|
$
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized servicing rights (1)
|
|
12,299
|
|
|
Discounted Cash Flow
|
|
Constant Prepayment Rate (CPR)
|
|
11.50
|
%
|
|
|
|
|
|
|
Discount Rate
|
|
10.00
|
%
|
Total
|
|
$
|
68,662
|
|
|
|
|
|
|
|
(1) Classified as assets from discontinued operations on the consolidated balance sheets.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Non-Recurring Fair Value Measurements
The Company is required, on a non-recurring basis, to adjust the carrying value or provide valuation allowances for certain assets using fair value measurements in accordance with GAAP. The following is a summary of applicable non-recurring fair value measurements. There are no liabilities measured at fair value on a non-recurring basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
December 31, 2019
|
|
|
|
|
|
Fair Value Measurement Date as of September 30, 2020
|
|
|
Level 3
|
|
Level 3
|
|
|
|
|
|
Level 3
|
(In thousands)
|
|
Inputs
|
|
Inputs
|
|
|
|
|
|
Inputs
|
Assets
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated loans
|
|
$
|
41,312
|
|
|
$
|
8,831
|
|
|
|
|
|
|
September 2020
|
Capitalized servicing rights
|
|
13,694
|
|
|
14,152
|
|
|
|
|
|
|
September 2020
|
Other real estate owned (1)
|
|
401
|
|
|
—
|
|
|
|
|
|
|
September 2020
|
Total
|
|
$
|
55,407
|
|
|
$
|
22,983
|
|
|
|
|
|
|
|
(1) Includes discontinued operations.
Quantitative information about the significant unobservable inputs within Level 3 non-recurring assets is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
|
|
|
|
|
(In thousands)
|
|
September 30, 2020
|
|
Valuation Techniques
|
|
Unobservable Inputs
|
|
Range (Weighted Average) (1)
|
Assets
|
|
|
|
|
|
|
|
|
Individually evaluated loans
|
|
$
|
41,312
|
|
|
Fair Value of Collateral
|
|
Discounted Cash Flow - Loss Severity
|
|
0.04% to 100.00% (48.31%)
|
|
|
|
|
|
|
Appraised Value
|
|
$0 to $10,972 ($8,258)
|
Capitalized servicing rights
|
|
13,694
|
|
|
Discounted Cash Flow
|
|
Constant Prepayment Rate (CPR)
|
|
14.98% to 22.05% (17.08%)
|
|
|
|
|
|
|
Discount Rate
|
|
8.25% to 11.00% (9.17%)
|
Other Real Estate Owned (2)
|
|
401
|
|
|
Fair Value of Collateral
|
|
Appraised Value
|
|
$94 - $361
|
Total
|
|
$
|
55,407
|
|
|
|
|
|
|
|
(1) Where dollar amounts are disclosed, the amounts represent the lowest and highest fair value of the respective assets in the population except for adjustments for market/property conditions, which represents the range of adjustments to individuals properties.
(2) Includes discontinued operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
|
|
|
|
|
(In thousands)
|
|
December 31, 2019
|
|
Valuation Techniques
|
|
Unobservable Inputs
|
|
Range (Weighted Average) (1)
|
Assets
|
|
|
|
|
|
|
|
|
Impaired Loans
|
|
$
|
8,831
|
|
|
Fair Value of Collateral
|
|
Discounted Cash Flow - loss severity
|
|
15.72% to 0.12% (4.50%)
|
|
|
|
|
|
|
Appraised Value
|
|
$8 to $1,548 ($736)
|
Capitalized servicing rights
|
|
14,152
|
|
|
Discounted Cash Flow
|
|
Constant Prepayment Rate (CPR)
|
|
9.44% to 14.12% (12.25%)
|
|
|
|
|
|
|
Discount Rate
|
|
10.00% to 13.50% (11.78%)
|
Other Real Estate Owned
|
|
—
|
|
|
Fair Value of Collateral
|
|
Appraised Value
|
|
—
|
Total
|
|
$
|
22,983
|
|
|
|
|
|
|
|
(1) Where dollar amounts are disclosed, the amounts represent the lowest and highest fair value of the respective assets in the population except for adjustments for market/property conditions, which represents the range of adjustments to individuals properties.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
There were no Level 1 or Level 2 nonrecurring fair value measurements for the periods ended September 30, 2020 and December 31, 2019.
Individually evaluated loans. Loans are generally not recorded at fair value on a recurring basis. Periodically, the Company records non-recurring adjustments to the carrying value of loans based on fair value measurements for partial charge-offs of the uncollectible portions of those loans. Non-recurring adjustments can also include certain impairment amounts for collateral-dependent loans calculated when establishing the allowance for credit losses. Such amounts are generally based on the fair value of the underlying collateral supporting the loan and, as a result, the carrying value of the loan less the calculated valuation amount does not necessarily represent the fair value of the loan. Real estate collateral is typically valued using appraisals or other indications of value based on recent comparable sales of similar properties or assumptions generally observable in the marketplace. However, the choice of observable data is subject to significant judgment, and there are often adjustments based on judgment in order to make observable data comparable and to consider the impact of time, the condition of properties, interest rates, and other market factors on current values. Additionally, commercial real estate appraisals frequently involve discounting of projected cash flows, which relies inherently on unobservable data. Therefore, nonrecurring fair value measurement adjustments that relate to real estate collateral have generally been classified as Level 3. Estimates of fair value for other collateral that supports commercial loans are generally based on assumptions not observable in the marketplace and therefore such valuations have been classified as Level 3.
Capitalized loan servicing rights. A loan servicing right asset represents the amount by which the present value of the estimated future net cash flows to be received from servicing loans exceed adequate compensation for performing the servicing. The fair value of servicing rights is estimated using a present value cash flow model. The most important assumptions used in the valuation model are the anticipated rate of the loan prepayments and discount rates. Adjustments are only recorded when the discounted cash flows derived from the valuation model are less than the carrying value of the asset. Although some assumptions in determining fair value are based on standards used by market participants, some are based on unobservable inputs and therefore are classified in Level 3 of the valuation hierarchy.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Summary of Estimated Fair Values of Financial Instruments
The following tables summarize the estimated fair values (represents exit price), and related carrying amounts, of the Company’s financial instruments. Certain financial instruments and all non-financial instruments are excluded. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company. Certain assets and liabilities in the following disclosures include balances classified as discontinued operations. See Note 2 - Discontinued Operations for more information on these assets and liabilities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
|
Carrying
|
|
Fair
|
|
|
|
|
|
|
(In thousands)
|
|
Amount
|
|
Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
935,292
|
|
|
$
|
935,292
|
|
|
$
|
935,292
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Trading security
|
|
9,525
|
|
|
9,525
|
|
|
—
|
|
|
—
|
|
|
9,525
|
|
Marketable equity securities
|
|
31,993
|
|
|
31,993
|
|
|
31,321
|
|
|
672
|
|
|
—
|
|
Securities available for sale
|
|
1,575,289
|
|
|
1,575,289
|
|
|
—
|
|
|
1,549,464
|
|
|
25,825
|
|
Securities held to maturity
|
|
330,197
|
|
|
356,035
|
|
|
—
|
|
|
352,485
|
|
|
3,550
|
|
FHLB bank stock and restricted securities
|
|
40,520
|
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
Net loans
|
|
8,847,922
|
|
|
9,172,009
|
|
|
—
|
|
|
—
|
|
|
9,172,009
|
|
Loans held for sale (1)
|
|
17,596
|
|
|
17,596
|
|
|
—
|
|
|
17,596
|
|
|
—
|
|
Accrued interest receivable
|
|
48,467
|
|
|
48,467
|
|
|
—
|
|
|
48,467
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative assets (1)
|
|
179,626
|
|
|
179,626
|
|
|
—
|
|
|
177,731
|
|
|
1,895
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
$
|
10,466,559
|
|
|
$
|
10,483,734
|
|
|
$
|
—
|
|
|
$
|
10,483,734
|
|
|
$
|
—
|
|
Short-term debt
|
|
110,000
|
|
|
110,214
|
|
|
—
|
|
|
110,214
|
|
|
—
|
|
Long-term Federal Home Loan Bank advances and other
|
|
495,483
|
|
|
500,933
|
|
|
—
|
|
|
500,933
|
|
|
—
|
|
Subordinated borrowings
|
|
97,223
|
|
|
94,287
|
|
|
—
|
|
|
94,287
|
|
|
—
|
|
Derivative liabilities (1)
|
|
73,659
|
|
|
73,659
|
|
|
—
|
|
|
73,659
|
|
|
—
|
|
(1) Includes assets and liabilities classified as discontinued operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
Carrying
|
|
Fair
|
|
|
|
|
|
|
(In thousands)
|
|
Amount
|
|
Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
579,829
|
|
|
$
|
579,829
|
|
|
$
|
579,829
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Trading security
|
|
10,769
|
|
|
10,769
|
|
|
—
|
|
|
—
|
|
|
10,769
|
|
Marketable equity securities
|
|
41,556
|
|
|
41,556
|
|
|
40,499
|
|
|
1,057
|
|
|
—
|
|
Securities available for sale and other
|
|
1,311,555
|
|
|
1,311,555
|
|
|
—
|
|
|
1,267,573
|
|
|
43,982
|
|
Securities held to maturity
|
|
357,979
|
|
|
373,277
|
|
|
—
|
|
|
355,513
|
|
|
17,764
|
|
FHLB bank stock and restricted securities
|
|
48,019
|
|
|
N/A
|
|
N/A
|
|
N/A
|
|
N/A
|
Net loans
|
|
9,438,853
|
|
|
9,653,550
|
|
|
—
|
|
|
—
|
|
|
9,653,550
|
|
Loans held for sale (1)
|
|
169,319
|
|
|
169,319
|
|
|
—
|
|
|
140,280
|
|
|
29,039
|
|
Accrued interest receivable
|
|
36,462
|
|
|
36,462
|
|
|
—
|
|
|
36,462
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative assets (1)
|
|
80,190
|
|
|
80,190
|
|
|
—
|
|
|
77,562
|
|
|
2,628
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
$
|
10,335,977
|
|
|
$
|
10,338,993
|
|
|
$
|
—
|
|
|
$
|
10,338,993
|
|
|
$
|
—
|
|
Short-term debt
|
|
125,000
|
|
|
125,081
|
|
|
—
|
|
|
125,081
|
|
|
—
|
|
Long-term Federal Home Loan Bank advances
|
|
605,501
|
|
|
606,381
|
|
|
—
|
|
|
606,381
|
|
|
—
|
|
Subordinated borrowings
|
|
97,049
|
|
|
101,055
|
|
|
—
|
|
|
101,055
|
|
|
—
|
|
Derivative liabilities (1)
|
|
80,681
|
|
|
80,681
|
|
|
227
|
|
|
80,454
|
|
|
—
|
|
(1) Includes assets and liabilities classified as discontinued operations.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16. NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES
Presented below is net interest income after provision for credit losses for the three and nine months ended September 30, 2020 and 2019, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
(In thousands)
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Net interest income from continuing operations
|
|
$
|
77,055
|
|
|
$
|
96,871
|
|
|
$
|
241,073
|
|
|
$
|
273,925
|
|
Provision for credit losses
|
|
1,200
|
|
|
22,600
|
|
|
65,878
|
|
|
30,068
|
|
Net interest income from continuing operations after provision for credit losses
|
|
$
|
75,855
|
|
|
$
|
74,271
|
|
|
$
|
175,195
|
|
|
$
|
243,857
|
|