Notes to Unaudited Consolidated Financial Statements
NOTE A - ACCOUNTING POLICIES AND BASIS OF PRESENTATION
First Citizens BancShares, Inc. (BancShares) is a financial holding company organized under the laws of Delaware and conducts operations through its banking subsidiary, First-Citizens Bank & Trust Company (FCB), which is headquartered in Raleigh, North Carolina.
General
These consolidated financial statements and notes are presented in accordance with instructions for Form 10-Q and Article 10 of Regulation S-X and, therefore, do not include all information and notes necessary for a complete presentation of financial position, results of operations and cash flow activity required in accordance with accounting principles generally accepted in the United States of America (GAAP). In the opinion of management, all normal recurring adjustments necessary for a fair presentation of the consolidated financial position and consolidated results of operations have been made. The unaudited interim consolidated financial statements included in this Form 10-Q should be read in conjunction with the consolidated financial statements and footnotes included in BancShares' Annual Report on Form 10-K for the year ended
December 31, 2013
.
Reclassifications
In certain instances, amounts reported in prior years' consolidated financial statements have been reclassified to conform to the current financial statement presentation. Such reclassifications had no effect on previously reported shareholders' equity or net income.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates, and different assumptions in the application of these policies could result in material changes in BancShares' consolidated financial position, the consolidated results of its operations or related disclosures. Material estimates that are particularly susceptible to significant change include the determination of the allowance for loan and lease losses; determination of the fair value of financial instruments; pension plan assumptions; cash flow estimates on acquired loans; the receivable from and payable to the Federal Deposit Insurance Corporation (FDIC) for loss share agreements; purchase accounting-related adjustments; and income tax assets, liabilities and expense.
Recent Accounting Pronouncements
Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2014-12, “Compensation-Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period)”
This ASU requires a reporting entity to treat a performance target that affects vesting and that could be achieved after the requisite service period as a performance condition. A reporting entity should apply FASB ASC Topic 718, Compensation—Stock Compensation, to awards with performance conditions that affect vesting.
The guidance in this ASU is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015. This update may be adopted either prospectively for share-based payment awards granted or modified on or after the effective date, or retrospectively, using a modified retrospective approach. The modified retrospective approach would apply to share-based payment awards outstanding as of the beginning of the earliest annual period presented in the financial statements on adoption, and to all new or modified awards thereafter. BancShares will adopt the standard effective the first quarter of 2016. Since BancShares does not currently have any share-based stock compensation plans, adoption of Topic 718 is not projected to have an impact on BancShares' consolidated financial position or consolidated results of operations.
FASB ASU 2014-11, “Transfers and Servicing (Topic 860)”
This ASU aligns the accounting for repurchase-to-maturity transactions and repurchase agreements executed as a repurchase financing with the accounting for other typical repurchase agreements. Going forward, these transactions would all be accounted for as secured borrowings. The guidance eliminates sale accounting for repurchase-to-maturity transactions and supersedes the guidance under which a transfer of financial asset and a contemporaneous repurchase financing could be accounted for on a combined basis as a forward agreement, which has resulted in outcomes referred to as off-balance-sheet accounting. The ASU requires a new disclosure for transactions economically similar to repurchase agreements in which the transferor retains substantially all of the exposure to the economic return on the transferred financial assets throughout the term of the transaction. The ASU also requires expanded disclosures about the nature of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings.
The accounting changes in this ASU are effective for fiscal years beginning after December 15, 2014. In addition, the disclosure for certain transactions accounted for as a sale is effective for the fiscal period beginning after December 15, 2014, the disclosure for transactions accounted for as secured borrowings is required to be presented for fiscal periods beginning after December 15, 2014, and interim periods beginning after March 15, 2015. Early adoption is not permitted. We will adopt the guidance effective in the first quarter of 2015, and we do not anticipate any effect on our consolidated financial position or consolidated results of operations as a result of adoption.
FASB ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”
In May 2014, the FASB issued a standard on the recognition of revenue from contracts with customers with the core principle being for companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. The new standard also results in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively and improve guidance for multiple-element arrangements.
The guidance in this ASU is effective for fiscal periods beginning after December 15, 2016, including interim reporting periods within that reporting period. Early adoption is not permitted. We are currently evaluating the impact of the new standard and we will adopt during the first quarter of 2017.
FASB ASU 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity”
This ASU limits presentation of discontinued operations and disclosure of disposals to disposals representing a strategic shift in operations in which the strategic shifts should have a major effect on the organization's operations and financial results. Additionally, the new guidance requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations. The new guidance also requires disclosure of pre-tax income attributable to a disposal of a significant part of an organization that does not qualify for discontinued operations reporting.
The new standard is effective in the first quarter of 2015 for public companies with a calendar year end. We will adopt the standard effective in the first quarter of 2015, and we do not anticipate any effect on our consolidated financial position or consolidated results of operations as a result of adoption.
FASB ASU 2014-04, “Receivables-Troubled Debt Restructurings by Creditors (Subtopic 310-40)”
This ASU clarifies that an in-substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction.
The amendments in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. BancShares will adopt the guidance effective in the first quarter of 2015, and is currently evaluating the impact of the new standard on the financial statement disclosures. BancShares does not anticipate any effect on our consolidated financial position or consolidated results of operations as a result of adoption.
FASB ASU 2014-01 "Investments - Equity Method and Joint Ventures (Topic 323) - Accounting for Investments in Qualified Affordable Housing Projects”
This ASU permits an accounting policy election to account for investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met. Under the proportional amortization method, the initial cost of the investment is amortized in proportion to the tax credits and other tax benefits received and recognize the net investment performance in the income statement as a component of income tax expense (benefit).
For those investments in qualified affordable housing projects not accounted for using the proportional amortization method, the investment should be accounted for as an equity method investment or a cost method investment in accordance with Subtopic 970-323.
The decision to apply the proportional amortization method of accounting will be applied consistently to all qualifying affordable housing project investments rather than a decision to be applied to individual investments.
The amendments in this ASU should be applied retrospectively to all periods presented and are effective for annual periods and interim reporting periods within those annual periods, beginning after December 15, 2014. Early adoption is permitted.
BancShares is currently evaluating the impact of the new standard and is targeting a December 31, 2014, adoption and implementation for qualifying affordable housing project investments.
FASB ASU 2013-11, “Income Taxes (Topic 740)”
This ASU states that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows: to the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require BancShares to use, and BancShares does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date.
The provisions of this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. BancShares adopted the guidance effective in the first quarter of 2014. The initial adoption had no effect on our consolidated financial position or consolidated results of operations.
FASB ASU 2013-04, “Liabilities”
This ASU provides guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this ASU is fixed at the reporting date, except for obligations addressed within existing guidance in GAAP.
The amendments in this update are effective for fiscal years beginning after December 31, 2013. BancShares adopted the guidance effective first quarter of 2014. The initial adoption did not have any effect on our consolidated financial position or consolidated results of operations.
NOTE B - BUSINESS COMBINATIONS
Merger Agreement with First Citizens Bancorporation, Inc.
On June 10, 2014, BancShares and First Citizens Bancorporation, Inc. (Bancorporation) entered into an Agreement and Plan of Merger (the Merger Agreement). Pursuant to the Merger Agreement, Bancorporation will merge with and into BancShares, whereupon the separate corporate existence of Bancorporation will cease and BancShares will continue (the Merger). The Merger is expected to be completed during the fourth quarter of 2014. Sometime thereafter, First Citizens Bank and Trust Company, Inc. (FCB-SC), a wholly-owned subsidiary of Bancorporation, will merge with and into FCB, whereupon the separate corporate existence of FCB-SC will cease and FCB will continue.
Under the terms of the Merger Agreement, each share of Bancorporation common stock will be converted into the right to receive
4.00
shares of BancShares' Class A common stock and
$50.00
cash, unless the holder elects for each share to be converted into the right to receive
3.58
shares of BancShares' Class A common stock and
0.42
shares of BancShares' Class B common stock.
Consummation of the Merger is subject to customary conditions, including, among others, approval of the shareholders of each company and receipt of regulatory approvals.
The Merger Agreement includes certain termination rights for both BancShares and Bancorporation and under specified circumstances Bancorporation may be required to pay BancShares a termination fee equal to
$6.5 million
,
$10.0 million
or
$22.6 million
, depending on the circumstances of the termination.
1st Financial Services Corporation Merger
On
January 1, 2014
, FCB completed its merger with 1st Financial Services Corporation (1st Financial) of Hendersonville, NC and its wholly-owned subsidiary, Mountain 1st Bank & Trust Company (Mountain 1st). The merger allowed FCB to expand its presence in Western North Carolina. Mountain 1st had twelve branches located in Asheville, Brevard, Columbus, Etowah, Fletcher, Forest City, Hendersonville, Hickory, Marion, Shelby and Waynesville. FCB requested and received approval from the North Carolina Commissioner of Banks and the FDIC to close seven Mountain 1st branches due to their proximity to legacy FCB branches. The branches in Asheville, Brevard, Fletcher, Forest City, Hendersonville, Hickory and Marion were closed in May. All customer relationships assigned to those branches were transferred to the nearest FCB branch.
FCB paid
$10.0 million
to acquire 1st Financial, including payments of
$8.0 million
to the U.S. Treasury to acquire and subsequently retire 1st Financial's Troubled Asset Relief Program (TARP) obligation and
$2.0 million
paid to the shareholders of 1st Financial. As a result of the merger, FCB recorded
$24.5 million
in goodwill and
$3.8 million
in core deposit intangibles.
The 1st Financial transaction was accounted for under the acquisition method of accounting, and the purchased assets, assumed liabilities and identifiable intangible assets were recorded at their estimated fair values as of the acquisition date. Fair values are subject to refinement for up to one year after the closing date of the transaction as additional information regarding closing date fair values becomes available. During the second quarter of
2014
, no adjustments were deemed necessary.
The following table provides the carrying value of acquired assets and assumed liabilities, as recorded by 1st Financial, the fair value adjustments calculated at the time of the merger and the resulting fair value recorded by FCB.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2014
|
(Dollars in thousands)
|
As recorded by
1st Financial
|
|
Fair value adjustments
|
|
As recorded by FCB
|
Assets
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
28,194
|
|
|
$
|
—
|
|
|
$
|
28,194
|
|
Investment securities
|
246,890
|
|
|
(9,452
|
)
|
|
237,438
|
|
Loans held for sale
|
1,183
|
|
|
—
|
|
|
1,183
|
|
Restricted equity securities
|
3,105
|
|
|
671
|
|
|
3,776
|
|
Loans
|
338,170
|
|
|
(21,843
|
)
|
|
316,327
|
|
Less: allowance for loan losses
|
(7,796
|
)
|
|
7,796
|
|
|
—
|
|
Premises and equipment
|
3,871
|
|
|
(1,185
|
)
|
|
2,686
|
|
Other real estate owned
|
12,896
|
|
|
(1,305
|
)
|
|
11,591
|
|
Intangible asset
|
—
|
|
|
3,780
|
|
|
3,780
|
|
Other assets
|
16,811
|
|
|
(465
|
)
|
|
16,346
|
|
Total assets acquired
|
$
|
643,324
|
|
|
$
|
(22,003
|
)
|
|
$
|
621,321
|
|
Liabilities
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
Noninterest-bearing
|
$
|
152,444
|
|
|
$
|
—
|
|
|
$
|
152,444
|
|
Interest-bearing
|
477,881
|
|
|
1,546
|
|
|
479,427
|
|
Total deposits
|
630,325
|
|
|
1,546
|
|
|
631,871
|
|
Short-term borrowings
|
406
|
|
|
—
|
|
|
406
|
|
Other liabilities
|
3,392
|
|
|
167
|
|
|
3,559
|
|
Total liabilities assumed
|
$
|
634,123
|
|
|
$
|
1,713
|
|
|
635,836
|
|
Fair value of net liabilities assumed
|
|
|
|
|
14,515
|
|
Cash paid to shareholders
|
|
|
|
|
2,000
|
|
Cash paid to acquire TARP securities
|
|
|
|
|
8,000
|
|
Goodwill recorded for 1st Financial
|
|
|
|
|
$
|
24,515
|
|
Goodwill recorded for 1st Financial represents future revenues to be derived from the existing customer base, including efficiencies that will result from combining operations and other non-identifiable intangible assets. The 1st Financial transaction is a taxable asset acquisition, and goodwill resulting from the transaction is deductible for income tax purposes.
Merger costs related to the 1st Financial transaction are estimated to be between
$5.5 million
and
$6.0 million
. Loan related interest income generated from 1st Financial was approximately
$4.2 million
for the
second quarter
of
2014
and
$8.6 million
for the year to date.
All loans acquired with the 1st Financial transaction are accounted for under the expected cash flow method (ASC 310-30).
For loans acquired from 1st Financial, the contractually required payments including principal and interest, cash flows expected to be collected and fair values as of the merger date were:
|
|
|
|
|
(Dollars in thousands)
|
January 1, 2014
|
Contractually required payments
|
$
|
414,233
|
|
Cash flows expected to be collected
|
400,622
|
|
Fair value at acquisition date
|
316,327
|
|
The recorded fair values of loans acquired in the 1st Financial transaction as of the merger date were as follows:
|
|
|
|
|
(Dollars in thousands)
|
January 1, 2014
|
Commercial:
|
|
Construction and land development
|
$
|
41,516
|
|
Commercial mortgage
|
123,925
|
|
Other commercial real estate
|
6,698
|
|
Commercial and industrial
|
29,126
|
|
Total commercial loans
|
201,265
|
|
Noncommercial:
|
|
Residential mortgage
|
113,177
|
|
Consumer
|
1,885
|
|
Total noncommercial loans
|
115,062
|
|
Total loans acquired from 1st Financial
|
$
|
316,327
|
|
NOTE C - INVESTMENTS
The amortized cost and fair value of investment securities classified as available for sale and held to maturity at
June 30, 2014
and
December 31, 2013
, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
(Dollars in thousands)
|
Cost
|
|
Gross
unrealized
gains
|
|
Gross unrealized
losses
|
|
Fair
value
|
Investment securities available for sale
|
|
|
|
|
|
|
|
U.S. Treasury
|
$
|
1,623,564
|
|
|
$
|
2,084
|
|
|
$
|
18
|
|
|
$
|
1,625,630
|
|
Government agency
|
1,281,724
|
|
|
2,020
|
|
|
178
|
|
|
1,283,566
|
|
Mortgage-backed securities
|
2,605,333
|
|
|
8,251
|
|
|
17,298
|
|
|
2,596,286
|
|
Equity securities
|
543
|
|
|
31,955
|
|
|
—
|
|
|
32,498
|
|
Municipal securities
|
185
|
|
|
1
|
|
|
—
|
|
|
186
|
|
Total investment securities available for sale
|
$
|
5,511,349
|
|
|
$
|
44,311
|
|
|
$
|
17,494
|
|
|
$
|
5,538,166
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013
|
|
Cost
|
|
Gross
unrealized
gains
|
|
Gross unrealized
losses
|
|
Fair
value
|
U.S. Treasury
|
$
|
373,223
|
|
|
$
|
259
|
|
|
$
|
45
|
|
|
$
|
373,437
|
|
Government agency
|
2,543,223
|
|
|
1,798
|
|
|
792
|
|
|
2,544,229
|
|
Mortgage-backed securities
|
2,486,297
|
|
|
4,526
|
|
|
43,950
|
|
|
2,446,873
|
|
Equity securities
|
543
|
|
|
21,604
|
|
|
—
|
|
|
22,147
|
|
Municipal securities
|
186
|
|
|
1
|
|
|
—
|
|
|
187
|
|
Other
|
863
|
|
|
—
|
|
|
33
|
|
|
830
|
|
Total investment securities available for sale
|
$
|
5,404,335
|
|
|
$
|
28,188
|
|
|
$
|
44,820
|
|
|
$
|
5,387,703
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
|
Cost
|
|
Gross
unrealized
gains
|
|
Gross unrealized
losses
|
|
Fair
value
|
Investment securities held to maturity
|
|
|
|
|
|
|
|
Mortgage-backed securities
|
$
|
693
|
|
|
$
|
36
|
|
|
$
|
—
|
|
|
$
|
729
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013
|
|
Cost
|
|
Gross
unrealized
gains
|
|
Gross unrealized
losses
|
|
Fair
value
|
Mortgage-backed securities
|
$
|
907
|
|
|
$
|
67
|
|
|
$
|
—
|
|
|
$
|
974
|
|
A single subordinated debt security, previously classified within other, was called during the
second quarter
of
2014
.
Investments in mortgage-backed securities primarily represent securities issued by the Government National Mortgage Association, Federal National Mortgage Association and Federal Home Loan Mortgage Corporation.
The following table provides the amortized cost and fair value by contractual maturity. Expected maturities will differ from contractual maturities on certain securities because borrowers and issuers may have the right to call or prepay obligations with or without prepayment penalties. Repayments of mortgage-backed securities are dependent on the repayments of the underlying loan balances. Equity securities do not have a stated maturity date.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
|
December 31, 2013
|
(Dollars in thousands)
|
Cost
|
|
Fair
value
|
|
Cost
|
|
Fair
value
|
Investment securities available for sale
|
|
|
|
|
|
|
|
Non-amortizing securities maturing in:
|
|
|
|
|
|
|
|
One year or less
|
$
|
683,598
|
|
|
$
|
684,265
|
|
|
$
|
839,956
|
|
|
$
|
840,883
|
|
One through five years
|
2,221,875
|
|
|
2,225,117
|
|
|
2,077,539
|
|
|
2,077,800
|
|
Mortgage-backed securities
|
2,605,333
|
|
|
2,596,286
|
|
|
2,486,297
|
|
|
2,446,873
|
|
Equity securities
|
543
|
|
|
32,498
|
|
|
543
|
|
|
22,147
|
|
Total investment securities available for sale
|
$
|
5,511,349
|
|
|
$
|
5,538,166
|
|
|
$
|
5,404,335
|
|
|
$
|
5,387,703
|
|
Investment securities held to maturity
|
|
|
|
|
|
|
|
Mortgage-backed securities held to maturity
|
$
|
693
|
|
|
$
|
729
|
|
|
$
|
907
|
|
|
$
|
974
|
|
There were
no
realized securities gains (losses) during any period presented.
The following table provides information regarding securities with unrealized losses as of
June 30, 2014
and
December 31, 2013
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
|
Less than 12 months
|
|
12 months or more
|
|
Total
|
(Dollars in thousands)
|
Fair
value
|
|
Unrealized
losses
|
|
Fair
value
|
|
Unrealized
losses
|
|
Fair
value
|
|
Unrealized
losses
|
Investment securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury
|
$
|
135,712
|
|
|
$
|
18
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
135,712
|
|
|
$
|
18
|
|
Government agency
|
242,563
|
|
|
178
|
|
|
—
|
|
|
—
|
|
|
242,563
|
|
|
178
|
|
Mortgage-backed securities
|
728,997
|
|
|
2,163
|
|
|
1,109,829
|
|
|
15,135
|
|
|
1,838,826
|
|
|
17,298
|
|
Total
|
$
|
1,107,272
|
|
|
$
|
2,359
|
|
|
$
|
1,109,829
|
|
|
$
|
15,135
|
|
|
$
|
2,217,101
|
|
|
$
|
17,494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013
|
|
Less than 12 months
|
|
12 months or more
|
|
Total
|
|
Fair
value
|
|
Unrealized
losses
|
|
Fair
value
|
|
Unrealized
losses
|
|
Fair
value
|
|
Unrealized
losses
|
Investment securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury
|
$
|
102,105
|
|
|
$
|
45
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
102,105
|
|
|
$
|
45
|
|
Government agency
|
780,552
|
|
|
761
|
|
|
29,969
|
|
|
31
|
|
|
810,521
|
|
|
792
|
|
Mortgage-backed securities
|
2,221,213
|
|
|
42,876
|
|
|
26,861
|
|
|
1,074
|
|
|
2,248,074
|
|
|
43,950
|
|
Other
|
830
|
|
|
33
|
|
|
—
|
|
|
—
|
|
|
830
|
|
|
33
|
|
Total
|
$
|
3,104,700
|
|
|
$
|
43,715
|
|
|
$
|
56,830
|
|
|
$
|
1,105
|
|
|
$
|
3,161,530
|
|
|
$
|
44,820
|
|
Investment securities with an aggregate fair value of
$1.11 billion
and
$56.8 million
have had continuous unrealized losses for more than 12 months as of
June 30, 2014
and
December 31, 2013
, with an aggregate unrealized loss of
$15.1 million
and
$1.1 million
, respectively. As of
June 30, 2014
, all
104
of these investments are U.S. government agency and government sponsored enterprise-issued mortgage-backed securities.
None
of the unrealized losses identified as of
June 30, 2014
or
December 31, 2013
relate to the marketability of the securities or the issuer’s ability to honor redemption obligations. For all periods presented, BancShares had the ability and intent to retain these securities for a period of time sufficient to recover all unrealized losses. Therefore,
none
of the securities were deemed to be other than temporarily impaired.
Investment securities having an aggregate carrying value of
$2.85 billion
at
June 30, 2014
and
$2.75 billion
at
December 31, 2013
were pledged as collateral to secure public funds on deposit and certain short-term borrowings, and for other purposes as required by law.
NOTE D - LOANS AND LEASES
BancShares reports acquired and originated loan portfolios separately, and each portfolio is further divided into commercial and non-commercial based on the type of borrower, purpose, collateral, and/or our underlying credit management processes. Additionally, loans are assigned to loan classes, which further disaggregate loans based upon common risk characteristics.
Commercial
–
Commercial loans include construction and land development, mortgage, other commercial real estate, commercial and industrial, lease financing and other.
Construction and land development
– Construction and land development consists of loans to finance land for development, investment, and use in a commercial business enterprise, multifamily apartments and other commercial building that may be owner-occupied or income generating investments for the owner.
Commercial mortgage
– Commercial mortgage consists of loans to purchase or refinance owner-occupied nonresidential and investment properties. Investment properties include office buildings and other facilities that are rented or leased to unrelated parties.
Other commercial real estate
– Other commercial real estate consists of loans secured by farmland (including farm residential and other improvements) and multifamily (5 or more) residential properties.
Commercial and industrial
– Commercial and industrial loans consists of lines of credit to finance corporate credit cards, accounts receivable, inventory and other general business purposes.
Lease financing
– Lease financing consists solely of lease financing agreements.
Other
– Other loans consists of all other commercial loans not classified in one of the preceding classes. These typically include loans to non-profit organizations such as churches, hospitals, educational and charitable organizations.
Noncommercial
–
Noncommercial loans consist of residential and revolving mortgage, construction and land development, and consumer.
Residential mortgage
– Residential real estate consists of loans to purchase, construct or refinance the borrower's primary dwelling, second residence or vacation home.
Revolving mortgage
– Revolving mortgage consists of home equity lines of credit that are secured by first or second liens on the borrower's primary residence.
Construction and land development
– Construction and land development consists of loans to construct the borrower's primary or secondary residence or vacant land upon which the owner intends to construct a dwelling at a future date.
Consumer
– Consumer loans consist of installment loans to finance purchases of vehicles, unsecured home improvements and revolving lines of credit that can be secured or unsecured, including personal credit cards.
Loans and leases outstanding include the following at
June 30, 2014
and
December 31, 2013
:
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
June 30, 2014
|
|
December 31, 2013
|
Acquired loans
|
|
|
|
Commercial:
|
|
|
|
Construction and land development
|
$
|
80,827
|
|
|
$
|
78,915
|
|
Commercial mortgage
|
637,481
|
|
|
642,891
|
|
Other commercial real estate
|
34,688
|
|
|
41,381
|
|
Commercial and industrial
|
33,851
|
|
|
17,254
|
|
Other
|
1,270
|
|
|
866
|
|
Total commercial loans
|
788,117
|
|
|
781,307
|
|
Noncommercial:
|
|
|
|
Residential mortgage
|
270,688
|
|
|
213,851
|
|
Revolving mortgage
|
20,129
|
|
|
30,834
|
|
Construction and land development
|
28,759
|
|
|
2,583
|
|
Consumer
|
2,240
|
|
|
851
|
|
Total noncommercial loans
|
321,816
|
|
|
248,119
|
|
Total acquired loans
|
1,109,933
|
|
|
1,029,426
|
|
Originated loans and leases:
|
|
|
|
Commercial:
|
|
|
|
Construction and land development
|
342,021
|
|
|
319,847
|
|
Commercial mortgage
|
6,367,096
|
|
|
6,362,490
|
|
Other commercial real estate
|
178,899
|
|
|
178,754
|
|
Commercial and industrial
|
1,292,213
|
|
|
1,081,158
|
|
Lease financing
|
413,422
|
|
|
381,763
|
|
Other
|
131,051
|
|
|
175,336
|
|
Total commercial loans
|
8,724,702
|
|
|
8,499,348
|
|
Noncommercial:
|
|
|
|
Residential mortgage
|
1,071,089
|
|
|
982,421
|
|
Revolving mortgage
|
2,122,675
|
|
|
2,113,285
|
|
Construction and land development
|
119,420
|
|
|
122,792
|
|
Consumer
|
377,137
|
|
|
386,452
|
|
Total noncommercial loans
|
3,690,321
|
|
|
3,604,950
|
|
Total originated loans and leases
|
12,415,023
|
|
|
12,104,298
|
|
Total loans and leases
|
$
|
13,524,956
|
|
|
$
|
13,133,724
|
|
At
June 30, 2014
,
$816.3 million
in acquired loans were covered under loss share agreements, compared to
$1.03 billion
at
December 31, 2013
. The remaining acquired loans as of
June 30, 2014
are primarily from the 1st Financial merger. The loss share protection will expire for non-single family residential loans acquired from Temecula Valley Bank (TVB) and Venture Bank (VB) during the third quarter of 2014. The acquired loan balance at
June 30, 2014
for the expiring agreements from TVB and VB is
$195.4 million
and
$73.3 million
, respectively.
At
June 30, 2014
,
$2.65 billion
in originated loans were pledged to secure debt obligations, compared to
$2.56 billion
at
December 31, 2013
.
Credit quality indicators
Loans and leases are monitored for credit quality on a recurring basis. The credit quality indicators used are dependent on the portfolio segment to which the loan relates. Originated commercial loans and leases, originated noncommercial loans and leases and acquired loans have different credit quality indicators as a result of the unique characteristics relative to each loan segment being evaluated.
The credit quality indicators for commercial loans and leases are developed through a review of individual borrowers on an ongoing basis. Each commercial loan is evaluated annually with more frequent evaluation of more severely criticized loans or leases. The credit quality indicators for noncommercial loans are based on the delinquency status of the borrower. As the
borrower becomes more delinquent, the likelihood of loss increases. Acquired loans are bifurcated into commercial and noncommercial segments and credit quality indicators are assigned in the same manner as the originated portfolio. The indicators represent the rating for loans or leases as of the date presented based on the most recent assessment performed. These credit quality indicators are defined as follows:
Pass
– A pass rated asset is one in which repayment is considered highly likely and there are no observable weaknesses in the asset. Such an asset does not meet any of the characteristics for adverse classification.
Special mention
– A special mention asset has potential weaknesses that deserve management’s close attention. If left uncorrected, such potential weaknesses may result in deterioration of the repayment prospects or collateral position at some future date. Special mention assets are not adversely classified and do not warrant adverse classification.
Substandard
– A substandard asset is inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged, if any. Assets classified as substandard generally have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. These assets are characterized by the distinct possibility of loss if the deficiencies are not corrected.
Doubtful
– An asset classified as doubtful has all the weaknesses inherent in an asset classified substandard with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable on the basis of currently existing facts, conditions and values.
Loss
– Assets classified as loss are considered uncollectible and of such little value that it is inappropriate to be carried as an asset. This classification is not necessarily equivalent to no potential for recovery or salvage value, but rather that it is not appropriate to defer a full charge-off even though partial recovery may be effected in the future.
Ungraded
– Ungraded loans represent loans that are not included in the individual credit grading process due to their relatively small balances or borrower type. The majority of originated, ungraded loans at
June 30, 2014
and
December 31, 2013
relate to business credit cards. Business credit card loans are subject to automatic charge-off when they become 120 days past due in the same manner as unsecured consumer lines of credit. The remaining balance is comprised of a small amount of commercial mortgage loans and other commercial real estate loans. As of
December 31, 2013
, ungraded loans also included tobacco buyout loans classified as commercial and industrial loans. Final payment from the Commodity Credit Corporation was received during January 2014 for tobacco buyout loans held by FCB. As of
June 30, 2014
, ungraded also includes
$94.7 million
of loans resulting from the 1st Financial merger.
Originated loans and leases outstanding at
June 30, 2014
and
December 31, 2013
by credit quality indicator are provided below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
(Dollars in thousands)
|
Originated commercial loans and leases
|
Grade:
|
Construction and land
development
|
|
Commercial
mortgage
|
|
Other
commercial real estate
|
|
Commercial and
industrial
|
|
Lease financing
|
|
Other
|
|
Total originated commercial loans and leases
|
Pass
|
$
|
330,946
|
|
|
$
|
6,102,219
|
|
|
$
|
175,413
|
|
|
$
|
1,178,124
|
|
|
$
|
405,495
|
|
|
$
|
130,997
|
|
|
$
|
8,323,194
|
|
Special mention
|
7,901
|
|
|
121,824
|
|
|
1,370
|
|
|
25,606
|
|
|
4,324
|
|
|
8
|
|
|
161,033
|
|
Substandard
|
3,174
|
|
|
138,451
|
|
|
1,966
|
|
|
6,474
|
|
|
3,122
|
|
|
46
|
|
|
153,233
|
|
Doubtful
|
—
|
|
|
3,296
|
|
|
—
|
|
|
460
|
|
|
481
|
|
|
—
|
|
|
4,237
|
|
Ungraded
|
—
|
|
|
1,306
|
|
|
150
|
|
|
81,549
|
|
|
—
|
|
|
—
|
|
|
83,005
|
|
Total
|
$
|
342,021
|
|
|
$
|
6,367,096
|
|
|
$
|
178,899
|
|
|
$
|
1,292,213
|
|
|
$
|
413,422
|
|
|
$
|
131,051
|
|
|
$
|
8,724,702
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013
|
|
Originated commercial loans and leases
|
|
Construction and land
development
|
|
Commercial
mortgage
|
|
Other
commercial real estate
|
|
Commercial and
industrial
|
|
Lease financing
|
|
Other
|
|
Total originated commercial loans and leases
|
Pass
|
$
|
308,231
|
|
|
$
|
6,094,505
|
|
|
$
|
174,913
|
|
|
$
|
964,840
|
|
|
$
|
375,371
|
|
|
$
|
174,314
|
|
|
$
|
8,092,174
|
|
Special mention
|
8,620
|
|
|
119,515
|
|
|
1,362
|
|
|
14,686
|
|
|
2,160
|
|
|
982
|
|
|
147,325
|
|
Substandard
|
2,944
|
|
|
141,913
|
|
|
2,216
|
|
|
6,352
|
|
|
3,491
|
|
|
40
|
|
|
156,956
|
|
Doubtful
|
52
|
|
|
5,159
|
|
|
75
|
|
|
144
|
|
|
592
|
|
|
—
|
|
|
6,022
|
|
Ungraded
|
—
|
|
|
1,398
|
|
|
188
|
|
|
95,136
|
|
|
149
|
|
|
—
|
|
|
96,871
|
|
Total
|
$
|
319,847
|
|
|
$
|
6,362,490
|
|
|
$
|
178,754
|
|
|
$
|
1,081,158
|
|
|
$
|
381,763
|
|
|
$
|
175,336
|
|
|
$
|
8,499,348
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
|
Originated noncommercial loans and leases
|
(Dollars in thousands)
|
Residential
mortgage
|
|
Revolving
mortgage
|
|
Construction
and land
development
|
|
Consumer
|
|
Total originated noncommercial
loans
|
Current
|
$
|
1,047,270
|
|
|
$
|
2,107,889
|
|
|
$
|
118,078
|
|
|
$
|
373,579
|
|
|
$
|
3,646,816
|
|
30-59 days past due
|
11,219
|
|
|
7,690
|
|
|
949
|
|
|
1,949
|
|
|
21,807
|
|
60-89 days past due
|
4,693
|
|
|
2,434
|
|
|
229
|
|
|
843
|
|
|
8,199
|
|
90 days or greater past due
|
7,907
|
|
|
4,662
|
|
|
164
|
|
|
766
|
|
|
13,499
|
|
Total
|
$
|
1,071,089
|
|
|
$
|
2,122,675
|
|
|
$
|
119,420
|
|
|
$
|
377,137
|
|
|
$
|
3,690,321
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013
|
|
Originated noncommercial loans and leases
|
|
Residential
mortgage
|
|
Revolving
mortgage
|
|
Construction
and land
development
|
|
Consumer
|
|
Total originated noncommercial
loans
|
Current
|
$
|
955,300
|
|
|
$
|
2,095,480
|
|
|
$
|
121,026
|
|
|
$
|
382,710
|
|
|
$
|
3,554,516
|
|
30-59 days past due
|
12,885
|
|
|
10,977
|
|
|
1,193
|
|
|
2,114
|
|
|
27,169
|
|
60-89 days past due
|
4,658
|
|
|
2,378
|
|
|
317
|
|
|
955
|
|
|
8,308
|
|
90 days or greater past due
|
9,578
|
|
|
4,450
|
|
|
256
|
|
|
673
|
|
|
14,957
|
|
Total
|
$
|
982,421
|
|
|
$
|
2,113,285
|
|
|
$
|
122,792
|
|
|
$
|
386,452
|
|
|
$
|
3,604,950
|
|
Acquired loans and leases outstanding at
June 30, 2014
and
December 31, 2013
by credit quality indicator are provided below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
(Dollars in thousands)
|
Acquired loans
|
Grade:
|
Construction
and land
development -
commercial
|
|
Commercial
mortgage
|
|
Other
commercial
real estate
|
|
Commercial
and
industrial
|
|
Residential
mortgage
|
|
Revolving
mortgage
|
|
Construction
and land
development -
noncommercial
|
|
Consumer
and other
|
|
Total acquired
loans
|
Pass
|
$
|
14,193
|
|
|
$
|
349,009
|
|
|
$
|
11,422
|
|
|
$
|
26,313
|
|
|
$
|
138,836
|
|
|
$
|
15,238
|
|
|
$
|
112
|
|
|
$
|
1,469
|
|
|
$
|
556,592
|
|
Special mention
|
10,957
|
|
|
106,582
|
|
|
16,014
|
|
|
3,869
|
|
|
5,543
|
|
|
2,375
|
|
|
—
|
|
|
—
|
|
|
145,340
|
|
Substandard
|
49,746
|
|
|
148,880
|
|
|
7,252
|
|
|
3,221
|
|
|
44,396
|
|
|
1,696
|
|
|
1,237
|
|
|
2
|
|
|
256,430
|
|
Doubtful
|
2,214
|
|
|
32,503
|
|
|
—
|
|
|
431
|
|
|
1,401
|
|
|
612
|
|
|
295
|
|
|
—
|
|
|
37,456
|
|
Ungraded
|
3,717
|
|
|
507
|
|
|
—
|
|
|
17
|
|
|
80,512
|
|
|
208
|
|
|
27,115
|
|
|
2,039
|
|
|
114,115
|
|
Total
|
$
|
80,827
|
|
|
$
|
637,481
|
|
|
$
|
34,688
|
|
|
$
|
33,851
|
|
|
$
|
270,688
|
|
|
$
|
20,129
|
|
|
$
|
28,759
|
|
|
$
|
3,510
|
|
|
$
|
1,109,933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013
|
|
Acquired loans
|
|
Construction
and land
development -
commercial
|
|
Commercial
mortgage
|
|
Other
commercial
real estate
|
|
Commercial
and
industrial
|
|
Residential
mortgage
|
|
Revolving
mortgage
|
|
Construction
and land
development -
noncommercial
|
|
Consumer
and other
|
|
Total acquired
loans
|
Pass
|
$
|
2,619
|
|
|
$
|
296,824
|
|
|
$
|
22,225
|
|
|
$
|
8,021
|
|
|
$
|
135,326
|
|
|
$
|
26,322
|
|
|
$
|
149
|
|
|
$
|
1,345
|
|
|
$
|
492,831
|
|
Special mention
|
15,530
|
|
|
125,295
|
|
|
3,431
|
|
|
2,585
|
|
|
6,301
|
|
|
2,608
|
|
|
—
|
|
|
—
|
|
|
155,750
|
|
Substandard
|
52,228
|
|
|
179,657
|
|
|
7,012
|
|
|
5,225
|
|
|
52,774
|
|
|
1,013
|
|
|
2,139
|
|
|
—
|
|
|
300,048
|
|
Doubtful
|
7,436
|
|
|
40,471
|
|
|
8,713
|
|
|
1,257
|
|
|
2,058
|
|
|
891
|
|
|
295
|
|
|
—
|
|
|
61,121
|
|
Ungraded
|
1,102
|
|
|
644
|
|
|
—
|
|
|
166
|
|
|
17,392
|
|
|
—
|
|
|
—
|
|
|
372
|
|
|
19,676
|
|
Total
|
$
|
78,915
|
|
|
$
|
642,891
|
|
|
$
|
41,381
|
|
|
$
|
17,254
|
|
|
$
|
213,851
|
|
|
$
|
30,834
|
|
|
$
|
2,583
|
|
|
$
|
1,717
|
|
|
$
|
1,029,426
|
|
The aging of the outstanding loans and leases, by class, at
June 30, 2014
and
December 31, 2013
(excluding loans and leases acquired with deteriorated credit quality) is provided in the table below.
The calculation of days past due begins on the day after payment is due and includes all days through which all required interest or principal has not been paid. Loans and leases 30 days or less past due are considered current as various grace periods allow borrowers to make payments within a stated period after the due date and still remain in compliance with the loan agreement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
(Dollars in thousands)
|
30-59 days
past due
|
|
60-89 days
past due
|
|
90 days or greater
|
|
Total past
due
|
|
Current
|
|
Total loans
and leases
|
Originated loans and leases:
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land development - commercial
|
$
|
657
|
|
|
$
|
40
|
|
|
$
|
462
|
|
|
$
|
1,159
|
|
|
$
|
340,862
|
|
|
$
|
342,021
|
|
Commercial mortgage
|
11,755
|
|
|
3,089
|
|
|
10,501
|
|
|
25,345
|
|
|
6,341,751
|
|
|
6,367,096
|
|
Other commercial real estate
|
149
|
|
|
—
|
|
|
52
|
|
|
201
|
|
|
178,698
|
|
|
178,899
|
|
Commercial and industrial
|
5,459
|
|
|
805
|
|
|
593
|
|
|
6,857
|
|
|
1,285,356
|
|
|
1,292,213
|
|
Lease financing
|
1,110
|
|
|
8
|
|
|
97
|
|
|
1,215
|
|
|
412,207
|
|
|
413,422
|
|
Other
|
343
|
|
|
—
|
|
|
—
|
|
|
343
|
|
|
130,708
|
|
|
131,051
|
|
Residential mortgage
|
11,219
|
|
|
4,693
|
|
|
7,907
|
|
|
23,819
|
|
|
1,047,270
|
|
|
1,071,089
|
|
Revolving mortgage
|
7,690
|
|
|
2,434
|
|
|
4,662
|
|
|
14,786
|
|
|
2,107,889
|
|
|
2,122,675
|
|
Construction and land development - noncommercial
|
949
|
|
|
229
|
|
|
164
|
|
|
1,342
|
|
|
118,078
|
|
|
119,420
|
|
Consumer
|
1,949
|
|
|
843
|
|
|
766
|
|
|
3,558
|
|
|
373,579
|
|
|
377,137
|
|
Total originated loans and leases
|
$
|
41,280
|
|
|
$
|
12,141
|
|
|
$
|
25,204
|
|
|
$
|
78,625
|
|
|
$
|
12,336,398
|
|
|
$
|
12,415,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013
|
|
30-59 days
past due
|
|
60-89 days
past due
|
|
90 days or greater
|
|
Total past
due
|
|
Current
|
|
Total loans
and leases
|
Originated loans and leases:
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land development - commercial
|
$
|
1,603
|
|
|
$
|
9
|
|
|
$
|
457
|
|
|
$
|
2,069
|
|
|
$
|
317,778
|
|
|
$
|
319,847
|
|
Commercial mortgage
|
11,131
|
|
|
3,601
|
|
|
14,407
|
|
|
29,139
|
|
|
6,333,351
|
|
|
6,362,490
|
|
Other commercial real estate
|
139
|
|
|
210
|
|
|
470
|
|
|
819
|
|
|
177,935
|
|
|
178,754
|
|
Commercial and industrial
|
3,336
|
|
|
682
|
|
|
436
|
|
|
4,454
|
|
|
1,076,704
|
|
|
1,081,158
|
|
Lease financing
|
789
|
|
|
1,341
|
|
|
101
|
|
|
2,231
|
|
|
379,532
|
|
|
381,763
|
|
Other
|
—
|
|
|
85
|
|
|
—
|
|
|
85
|
|
|
175,251
|
|
|
175,336
|
|
Residential mortgage
|
12,885
|
|
|
4,658
|
|
|
9,578
|
|
|
27,121
|
|
|
955,300
|
|
|
982,421
|
|
Revolving mortgage
|
10,977
|
|
|
2,378
|
|
|
4,450
|
|
|
17,805
|
|
|
2,095,480
|
|
|
2,113,285
|
|
Construction and land development - noncommercial
|
1,193
|
|
|
317
|
|
|
256
|
|
|
1,766
|
|
|
121,026
|
|
|
122,792
|
|
Consumer
|
2,114
|
|
|
955
|
|
|
673
|
|
|
3,742
|
|
|
382,710
|
|
|
386,452
|
|
Total originated loans and leases
|
$
|
44,167
|
|
|
$
|
14,236
|
|
|
$
|
30,828
|
|
|
$
|
89,231
|
|
|
$
|
12,015,067
|
|
|
$
|
12,104,298
|
|
The recorded investment, by class, in loans and leases on nonaccrual status, and loans and leases greater than 90 days past due and still accruing at
June 30, 2014
and
December 31, 2013
(excluding acquired loans and leases) are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
|
December 31, 2013
|
(Dollars in thousands)
|
Nonaccrual
loans and
leases
|
|
Loans and
leases > 90
days and
accruing
|
|
Nonaccrual
loans and
leases
|
|
Loans and
leases > 90
days and
accruing
|
Originated loans and leases:
|
|
|
|
|
|
|
|
Construction and land development - commercial
|
$
|
659
|
|
|
$
|
—
|
|
|
$
|
544
|
|
|
$
|
—
|
|
Other commercial real estate
|
1,385
|
|
|
41
|
|
|
1,610
|
|
|
—
|
|
Commercial mortgage
|
28,591
|
|
|
1,802
|
|
|
33,529
|
|
|
1,113
|
|
Commercial and industrial
|
1,367
|
|
|
502
|
|
|
1,428
|
|
|
294
|
|
Lease financing
|
624
|
|
|
5
|
|
|
832
|
|
|
—
|
|
Residential mortgage
|
13,836
|
|
|
1,930
|
|
|
14,701
|
|
|
1,998
|
|
Revolving mortgage
|
—
|
|
|
4,662
|
|
|
—
|
|
|
4,450
|
|
Construction and land development - noncommercial
|
—
|
|
|
164
|
|
|
457
|
|
|
256
|
|
Consumer
|
23
|
|
|
766
|
|
|
69
|
|
|
673
|
|
Total originated loans and leases
|
$
|
46,485
|
|
|
$
|
9,872
|
|
|
$
|
53,170
|
|
|
$
|
8,784
|
|
Acquired Loans
The following table provides changes in the recorded investment of acquired loans during the
six
months ended
June 30, 2014
and
June 30, 2013
:
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
2014
|
|
2013
|
Balance at January 1
|
$
|
1,029,426
|
|
|
$
|
1,809,235
|
|
Fair value of acquired loans
|
316,327
|
|
|
—
|
|
Accretion
|
60,660
|
|
|
131,909
|
|
Payments received and other changes, net
|
(296,480
|
)
|
|
(497,808
|
)
|
Balance at June 30
|
$
|
1,109,933
|
|
|
$
|
1,443,336
|
|
Outstanding principal balance at June 30
|
$
|
1,888,475
|
|
|
$
|
2,456,347
|
|
The recorded investment of acquired loans on the cost recovery method was
$54.0 million
at
June 30, 2014
and
$28.5 million
at
December 31, 2013
. This increase is primarily driven by one large acquired loan relationship that was moved to cost recovery during the first quarter. The cost recovery method is applied to loans when the timing of future cash flows is not reasonably estimable due to borrower nonperformance or uncertainty in the timing and amount of ultimate disposition of the asset.
The following table documents changes to the amount of accretable yield for the first
six
months of
2014
and
2013
.
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
2014
|
|
2013
|
Balance at January 1
|
$
|
439,990
|
|
|
$
|
539,564
|
|
Additions
|
84,295
|
|
|
—
|
|
Accretion
|
(60,660
|
)
|
|
(131,909
|
)
|
Reclassifications from nonaccretable difference
|
9,992
|
|
|
72,149
|
|
Changes in expected cash flows that do not affect nonaccretable difference
|
(17,126
|
)
|
|
42,402
|
|
Balance at June 30
|
$
|
456,491
|
|
|
$
|
522,206
|
|
NOTE E - ALLOWANCE FOR LOAN AND LEASE LOSSES
The following tables present the activity in the allowance for originated loan and lease losses by loan class for the
three
and
six
months ended
June 30, 2014
and
June 30, 2013
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2014
|
(Dollars in thousands)
|
Construction
and land
development
- commercial
|
|
Commercial
mortgage
|
|
Other commercial real estate
|
|
Commercial
and industrial
|
|
Lease
financing
|
|
Other
|
|
Residential
mortgage
|
|
Revolving
mortgage
|
|
Construction
and land
development
- non-
commercial
|
|
Consumer
|
|
Non-
specific
|
|
Total
|
Originated Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan and lease losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at April 1
|
$
|
12,246
|
|
|
$
|
94,217
|
|
|
$
|
945
|
|
|
$
|
24,021
|
|
|
$
|
4,183
|
|
|
$
|
454
|
|
|
$
|
10,944
|
|
|
$
|
16,408
|
|
|
$
|
1,249
|
|
|
$
|
13,282
|
|
|
$
|
—
|
|
|
$
|
177,949
|
|
Provision
|
(1,135
|
)
|
|
(1,961
|
)
|
|
(155
|
)
|
|
3,033
|
|
|
176
|
|
|
163
|
|
|
(1,557
|
)
|
|
1,252
|
|
|
(323
|
)
|
|
2,737
|
|
|
—
|
|
|
2,230
|
|
Charge-offs
|
—
|
|
|
(272
|
)
|
|
—
|
|
|
(531
|
)
|
|
(14
|
)
|
|
(5
|
)
|
|
(234
|
)
|
|
(1,064
|
)
|
|
(23
|
)
|
|
(2,628
|
)
|
|
—
|
|
|
(4,771
|
)
|
Recoveries
|
5
|
|
|
145
|
|
|
16
|
|
|
386
|
|
|
20
|
|
|
—
|
|
|
148
|
|
|
201
|
|
|
2
|
|
|
584
|
|
|
—
|
|
|
1,507
|
|
Balance at June 30
|
$
|
11,116
|
|
|
$
|
92,129
|
|
|
$
|
806
|
|
|
$
|
26,909
|
|
|
$
|
4,365
|
|
|
$
|
612
|
|
|
$
|
9,301
|
|
|
$
|
16,797
|
|
|
$
|
905
|
|
|
$
|
13,975
|
|
|
$
|
—
|
|
|
$
|
176,915
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2013
|
|
Construction
and land
development
- commercial
|
|
Commercial
mortgage
|
|
Other commercial real estate
|
|
Commercial
and industrial
|
|
Lease
financing
|
|
Other
|
|
Residential
mortgage
|
|
Revolving
mortgage
|
|
Construction
and land
development
- non-
commercial
|
|
Consumer
|
|
Non-
specific
|
|
Total
|
Balance at April 1
|
$
|
4,311
|
|
|
$
|
82,119
|
|
|
$
|
1,915
|
|
|
$
|
13,661
|
|
|
$
|
3,543
|
|
|
$
|
1,490
|
|
|
$
|
3,790
|
|
|
$
|
24,499
|
|
|
$
|
1,419
|
|
|
$
|
24,027
|
|
|
$
|
15,772
|
|
|
$
|
176,546
|
|
Provision
|
3,296
|
|
|
(4,976
|
)
|
|
(51
|
)
|
|
(1,203
|
)
|
|
1,775
|
|
|
155
|
|
|
878
|
|
|
907
|
|
|
(244
|
)
|
|
1,694
|
|
|
—
|
|
|
2,231
|
|
Charge-offs
|
(1,286
|
)
|
|
(213
|
)
|
|
(18
|
)
|
|
(988
|
)
|
|
(92
|
)
|
|
—
|
|
|
(450
|
)
|
|
(878
|
)
|
|
—
|
|
|
(2,569
|
)
|
|
—
|
|
|
(6,494
|
)
|
Recoveries
|
270
|
|
|
491
|
|
|
26
|
|
|
288
|
|
|
19
|
|
|
3
|
|
|
61
|
|
|
307
|
|
|
23
|
|
|
643
|
|
|
—
|
|
|
2,131
|
|
Reclassification
(1)
|
5,141
|
|
|
27,421
|
|
|
(815
|
)
|
|
7,551
|
|
|
(253
|
)
|
|
(1,288
|
)
|
|
5,717
|
|
|
(9,838
|
)
|
|
(478
|
)
|
|
(10,018
|
)
|
|
(15,772
|
)
|
|
7,368
|
|
Balance at June 30
|
$
|
11,732
|
|
|
$
|
104,842
|
|
|
$
|
1,057
|
|
|
$
|
19,309
|
|
|
$
|
4,992
|
|
|
$
|
360
|
|
|
$
|
9,996
|
|
|
$
|
14,997
|
|
|
$
|
720
|
|
|
$
|
13,777
|
|
|
$
|
—
|
|
|
$
|
181,782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2014
|
|
Construction
and land
development
- commercial
|
|
Commercial
mortgage
|
|
Other commercial real estate
|
|
Commercial
and industrial
|
|
Lease
financing
|
|
Other
|
|
Residential
mortgage
|
|
Revolving
mortgage
|
|
Construction
and land
development
- non-
commercial
|
|
Consumer
|
|
Non-
specific
|
|
Total
|
Balance at January 1
|
$
|
10,335
|
|
|
$
|
100,257
|
|
|
$
|
1,009
|
|
|
$
|
22,362
|
|
|
$
|
4,749
|
|
|
$
|
190
|
|
|
$
|
10,511
|
|
|
$
|
16,239
|
|
|
$
|
681
|
|
|
$
|
13,541
|
|
|
$
|
—
|
|
|
$
|
179,874
|
|
Provision
|
750
|
|
|
(8,940
|
)
|
|
(229
|
)
|
|
5,009
|
|
|
(348
|
)
|
|
435
|
|
|
(948
|
)
|
|
2,605
|
|
|
254
|
|
|
4,012
|
|
|
—
|
|
|
2,600
|
|
Charge-offs
|
—
|
|
|
(440
|
)
|
|
—
|
|
|
(1,027
|
)
|
|
(72
|
)
|
|
(13
|
)
|
|
(418
|
)
|
|
(2,324
|
)
|
|
(94
|
)
|
|
(4,805
|
)
|
|
—
|
|
|
(9,193
|
)
|
Recoveries
|
31
|
|
|
1,252
|
|
|
26
|
|
|
565
|
|
|
36
|
|
|
—
|
|
|
156
|
|
|
277
|
|
|
64
|
|
|
1,227
|
|
|
—
|
|
|
3,634
|
|
Balance at June 30
|
$
|
11,116
|
|
|
$
|
92,129
|
|
|
$
|
806
|
|
|
$
|
26,909
|
|
|
$
|
4,365
|
|
|
$
|
612
|
|
|
$
|
9,301
|
|
|
$
|
16,797
|
|
|
$
|
905
|
|
|
$
|
13,975
|
|
|
$
|
—
|
|
|
$
|
176,915
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2013
|
|
Construction
and land
development
- commercial
|
|
Commercial
mortgage
|
|
Other commercial real estate
|
|
Commercial
and industrial
|
|
Lease
financing
|
|
Other
|
|
Residential
mortgage
|
|
Revolving
mortgage
|
|
Construction
and land
development
- non-
commercial
|
|
Consumer
|
|
Non-
specific
|
|
Total
|
Balance at January 1
|
$
|
6,031
|
|
|
$
|
80,229
|
|
|
$
|
2,059
|
|
|
$
|
14,050
|
|
|
$
|
3,521
|
|
|
$
|
1,175
|
|
|
$
|
3,836
|
|
|
$
|
25,185
|
|
|
$
|
1,721
|
|
|
$
|
25,389
|
|
|
$
|
15,850
|
|
|
$
|
179,046
|
|
Provision
|
1,462
|
|
|
(2,438
|
)
|
|
(151
|
)
|
|
(703
|
)
|
|
1,797
|
|
|
476
|
|
|
1,611
|
|
|
2,338
|
|
|
(357
|
)
|
|
2,290
|
|
|
(78
|
)
|
|
6,247
|
|
Charge-offs
|
(1,540
|
)
|
|
(869
|
)
|
|
(72
|
)
|
|
(2,246
|
)
|
|
(92
|
)
|
|
(6
|
)
|
|
(1,268
|
)
|
|
(3,066
|
)
|
|
(245
|
)
|
|
(5,157
|
)
|
|
—
|
|
|
(14,561
|
)
|
Recoveries
|
638
|
|
|
499
|
|
|
36
|
|
|
657
|
|
|
19
|
|
|
3
|
|
|
100
|
|
|
378
|
|
|
79
|
|
|
1,273
|
|
|
—
|
|
|
3,682
|
|
Reclassification
(1)
|
5,141
|
|
|
27,421
|
|
|
(815
|
)
|
|
7,551
|
|
|
(253
|
)
|
|
(1,288
|
)
|
|
5,717
|
|
|
(9,838
|
)
|
|
(478
|
)
|
|
(10,018
|
)
|
|
(15,772
|
)
|
|
7,368
|
|
Balance at June 30
|
$
|
11,732
|
|
|
$
|
104,842
|
|
|
$
|
1,057
|
|
|
$
|
19,309
|
|
|
$
|
4,992
|
|
|
$
|
360
|
|
|
$
|
9,996
|
|
|
$
|
14,997
|
|
|
$
|
720
|
|
|
$
|
13,777
|
|
|
$
|
—
|
|
|
$
|
181,782
|
|
(1)
Reclassification results from enhancements to the ALLL calculation during the second quarter of 2013 that resulted in the allocation of
$15.8 million
previously designated as 'non-specific' to other loan classes and the absorption of
$7.4 million
of the reserve for unfunded commitments related to unfunded, revocable loan commitments into the ALLL.
The provision for construction and land development - commercial was a credit of
$1.1 million
for the quarter ended
June 30, 2014
compared to expense of
$3.3 million
for the same period in the prior year. Provision expense for the six month periods ended
June 30, 2014
and
June 30, 2013
was
$0.8 million
and
$1.5 million
, respectively. The decrease in provision expense for both comparative periods is due to improvements in credit risk rating and lower credit default trends.
The commercial mortgage loan class had a net credit provision of
$2.0 million
and
$8.9 million
for the
three
and six months ended
June 30, 2014
, respectively. The net credit provision for the three and six months ended
June 30, 2013
was
$5.0 million
and
$2.4 million
, respectively. The net credit provision for all periods was primarily the result of improvements in the credit risk rating mix and lower credit default trends within this loan class.
The provision for commercial and industrial loans totaled
$3.0 million
and
$5.0 million
for the
three
and six months ended
June 30, 2014
, respectively. The
2014
provision expense was a result of increased loans during the respective periods. Conversely, the three and six months ended
June 30, 2013
credit provisions of
$1.2 million
and
$0.7 million
, respectively, resulted from a decline in the outstanding loan balances.
The residential mortgage loan class had a net credit provision of
$1.6 million
and
$0.9 million
for the
three
and six months ended
June 30, 2014
, respectively. Provision expense for the
three
and six months ended
June 30, 2013
was
$0.9 million
and
$1.6 million
. The decrease in provision expense can be attributed to a decline in past due residential mortgage loans.
The following tables present the allowance for originated loan losses and the recorded investment in originated loans, by loan class, based on impairment method as of
June 30, 2014
and
December 31, 2013
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
(Dollars in thousands)
|
Construction
and land
development
- commercial
|
|
Commercial
mortgage
|
|
Other
commercial
real estate
|
|
Commercial
and industrial
|
|
Lease
financing
|
|
Other
|
|
Residential
mortgage
|
|
Revolving
mortgage
|
|
Construction
and land
development
- non-commercial
|
|
Consumer
|
|
Total
|
Allowance for loan and lease losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ALLL for loans and leases individually evaluated for impairment
|
$
|
155
|
|
|
$
|
7,704
|
|
|
$
|
179
|
|
|
$
|
1,425
|
|
|
$
|
297
|
|
|
$
|
—
|
|
|
$
|
1,613
|
|
|
$
|
1,024
|
|
|
$
|
201
|
|
|
$
|
653
|
|
|
$
|
13,251
|
|
ALLL for loans and leases collectively evaluated for impairment
|
10,961
|
|
|
84,425
|
|
|
627
|
|
|
25,484
|
|
|
4,068
|
|
|
612
|
|
|
7,688
|
|
|
15,773
|
|
|
704
|
|
|
13,322
|
|
|
163,664
|
|
Total allowance for loan and lease losses
|
$
|
11,116
|
|
|
$
|
92,129
|
|
|
$
|
806
|
|
|
$
|
26,909
|
|
|
$
|
4,365
|
|
|
$
|
612
|
|
|
$
|
9,301
|
|
|
$
|
16,797
|
|
|
$
|
905
|
|
|
$
|
13,975
|
|
|
$
|
176,915
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and leases:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and leases individually evaluated for impairment
|
$
|
2,573
|
|
|
$
|
87,046
|
|
|
$
|
1,962
|
|
|
$
|
10,811
|
|
|
$
|
376
|
|
|
$
|
46
|
|
|
$
|
15,448
|
|
|
$
|
3,754
|
|
|
$
|
1,934
|
|
|
$
|
937
|
|
|
$
|
124,887
|
|
Loans and leases collectively evaluated for impairment
|
339,448
|
|
|
6,280,050
|
|
|
176,937
|
|
|
1,281,402
|
|
|
413,046
|
|
|
131,005
|
|
|
1,055,641
|
|
|
2,118,921
|
|
|
117,486
|
|
|
376,200
|
|
|
12,290,136
|
|
Total loan and leases
|
$
|
342,021
|
|
|
$
|
6,367,096
|
|
|
$
|
178,899
|
|
|
$
|
1,292,213
|
|
|
$
|
413,422
|
|
|
$
|
131,051
|
|
|
$
|
1,071,089
|
|
|
$
|
2,122,675
|
|
|
$
|
119,420
|
|
|
$
|
377,137
|
|
|
$
|
12,415,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013
|
(Dollars in thousands)
|
Construction
and land
development
- commercial
|
|
Commercial
mortgage
|
|
Other
commercial
real estate
|
|
Commercial
and industrial
|
|
Lease
financing
|
|
Other
|
|
Residential
mortgage
|
|
Revolving
mortgage
|
|
Construction
and land
development
- non-commercial
|
|
Consumer
|
|
Total
|
Allowance for loan and lease losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ALLL for loans and leases individually evaluated for impairment
|
$
|
103
|
|
|
$
|
6,873
|
|
|
$
|
209
|
|
|
$
|
771
|
|
|
$
|
54
|
|
|
$
|
—
|
|
|
$
|
1,586
|
|
|
$
|
372
|
|
|
$
|
72
|
|
|
$
|
121
|
|
|
$
|
10,161
|
|
ALLL for loans and leases collectively evaluated for impairment
|
10,232
|
|
|
93,384
|
|
|
800
|
|
|
21,591
|
|
|
4,695
|
|
|
190
|
|
|
8,925
|
|
|
15,867
|
|
|
609
|
|
|
13,420
|
|
|
169,713
|
|
Total allowance for loan and lease losses
|
$
|
10,335
|
|
|
$
|
100,257
|
|
|
$
|
1,009
|
|
|
$
|
22,362
|
|
|
$
|
4,749
|
|
|
$
|
190
|
|
|
$
|
10,511
|
|
|
$
|
16,239
|
|
|
$
|
681
|
|
|
$
|
13,541
|
|
|
$
|
179,874
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and leases:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and leases individually evaluated for impairment
|
$
|
2,272
|
|
|
$
|
97,111
|
|
|
$
|
1,878
|
|
|
$
|
9,300
|
|
|
$
|
188
|
|
|
$
|
—
|
|
|
$
|
15,539
|
|
|
$
|
3,596
|
|
|
$
|
1,108
|
|
|
$
|
1,154
|
|
|
$
|
132,146
|
|
Loans and leases collectively evaluated for impairment
|
317,575
|
|
|
6,265,379
|
|
|
176,876
|
|
|
1,071,858
|
|
|
381,575
|
|
|
175,336
|
|
|
966,882
|
|
|
2,109,689
|
|
|
121,684
|
|
|
385,298
|
|
|
11,972,152
|
|
Total loan and leases
|
$
|
319,847
|
|
|
$
|
6,362,490
|
|
|
$
|
178,754
|
|
|
$
|
1,081,158
|
|
|
$
|
381,763
|
|
|
$
|
175,336
|
|
|
$
|
982,421
|
|
|
$
|
2,113,285
|
|
|
$
|
122,792
|
|
|
$
|
386,452
|
|
|
$
|
12,104,298
|
|
The total reserves for individually impaired loans increased during the second quarter of 2014 due to enhancements in the TDR impairment calculation. TDR impairment evaluation, for performing TDRs, has historically been calculated on pools of homogeneous loan groups, as determined by loan type with similar risk characteristics and performance trends, using a discounted cash flow analysis. Management enhanced
this process during the second quarter to include individual loan level impairment analysis for performing TDRs which resulted in higher impairment estimates for some TDR loans.
The following tables show the activity in the allowance for acquired loan and lease losses by loan class for the
three
and
six
months ended
June 30, 2014
and
June 30, 2013
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2014
|
(Dollars in thousands)
|
Construction
and land
development -
commercial
|
|
Commercial
mortgage
|
|
Other
commercial
real estate
|
|
Commercial
and
industrial
|
|
Residential
mortgage
|
|
Revolving
mortgage
|
|
Construction
and land
development -
noncommercial
|
|
Consumer
and other
|
|
Total
|
Acquired Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan and lease losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at April 1
|
$
|
4,476
|
|
|
$
|
23,003
|
|
|
$
|
1,204
|
|
|
$
|
2,256
|
|
|
$
|
9,764
|
|
|
$
|
3,493
|
|
|
$
|
583
|
|
|
$
|
214
|
|
|
$
|
44,993
|
|
Provision
|
(77
|
)
|
|
(1,185
|
)
|
|
(797
|
)
|
|
(1,729
|
)
|
|
(2,176
|
)
|
|
(3,031
|
)
|
|
(583
|
)
|
|
49
|
|
|
(9,529
|
)
|
Charge-offs
|
(596
|
)
|
|
(4,503
|
)
|
|
—
|
|
|
(152
|
)
|
|
(495
|
)
|
|
(381
|
)
|
|
—
|
|
|
(6
|
)
|
|
(6,133
|
)
|
Recoveries
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Balance at June 30
|
$
|
3,803
|
|
|
$
|
17,315
|
|
|
$
|
407
|
|
|
$
|
375
|
|
|
$
|
7,093
|
|
|
$
|
81
|
|
|
$
|
—
|
|
|
$
|
257
|
|
|
$
|
29,331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2013
|
(Dollars in thousands)
|
Construction
and land
development -
commercial
|
|
Commercial
mortgage
|
|
Other
commercial
real estate
|
|
Commercial
and
industrial
|
|
Residential
mortgage
|
|
Revolving
mortgage
|
|
Construction
and land
development -
noncommercial
|
|
Consumer
and other
|
|
Total
|
Balance at April 1
|
$
|
13,306
|
|
|
$
|
38,293
|
|
|
$
|
5,172
|
|
|
$
|
11,876
|
|
|
$
|
17,603
|
|
|
$
|
7,135
|
|
|
$
|
2,756
|
|
|
$
|
332
|
|
|
$
|
96,473
|
|
Provision
|
(5,091
|
)
|
|
(2,522
|
)
|
|
(576
|
)
|
|
(4,936
|
)
|
|
55
|
|
|
(869
|
)
|
|
(1,524
|
)
|
|
(10
|
)
|
|
(15,473
|
)
|
Charge-offs
|
(626
|
)
|
|
(2,183
|
)
|
|
—
|
|
|
(1,004
|
)
|
|
(386
|
)
|
|
(235
|
)
|
|
—
|
|
|
(32
|
)
|
|
(4,466
|
)
|
Recoveries
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Balance at June 30
|
$
|
7,589
|
|
|
$
|
33,588
|
|
|
$
|
4,596
|
|
|
$
|
5,936
|
|
|
$
|
17,272
|
|
|
$
|
6,031
|
|
|
$
|
1,232
|
|
|
$
|
290
|
|
|
$
|
76,534
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2014
|
(Dollars in thousands)
|
Construction
and land
development -
commercial
|
|
Commercial
mortgage
|
|
Other
commercial
real estate
|
|
Commercial
and
industrial
|
|
Residential
mortgage
|
|
Revolving
mortgage
|
|
Construction
and land
development -
noncommercial
|
|
Consumer
and other
|
|
Total
|
Balance at January 1
|
$
|
1,320
|
|
|
$
|
29,906
|
|
|
$
|
1,354
|
|
|
$
|
5,275
|
|
|
$
|
11,802
|
|
|
$
|
2,959
|
|
|
$
|
682
|
|
|
$
|
222
|
|
|
$
|
53,520
|
|
Provision
|
3,278
|
|
|
(4,571
|
)
|
|
(947
|
)
|
|
(2,065
|
)
|
|
(4,476
|
)
|
|
(2,397
|
)
|
|
(682
|
)
|
|
58
|
|
|
(11,802
|
)
|
Charge-offs
|
(795
|
)
|
|
(8,020
|
)
|
|
—
|
|
|
(2,835
|
)
|
|
(233
|
)
|
|
(481
|
)
|
|
—
|
|
|
(23
|
)
|
|
(12,387
|
)
|
Recoveries
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Balance at June 30
|
$
|
3,803
|
|
|
$
|
17,315
|
|
|
$
|
407
|
|
|
$
|
375
|
|
|
$
|
7,093
|
|
|
$
|
81
|
|
|
$
|
—
|
|
|
$
|
257
|
|
|
$
|
29,331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2013
|
(Dollars in thousands)
|
Construction
and land
development -
commercial
|
|
Commercial
mortgage
|
|
Other
commercial
real estate
|
|
Commercial
and
industrial
|
|
Residential
mortgage
|
|
Revolving
mortgage
|
|
Construction
and land
development -
noncommercial
|
|
Consumer
and other
|
|
Total
|
Balance at January 1
|
$
|
31,186
|
|
|
$
|
50,275
|
|
|
$
|
11,234
|
|
|
$
|
8,897
|
|
|
$
|
19,837
|
|
|
$
|
9,754
|
|
|
$
|
8,287
|
|
|
$
|
502
|
|
|
$
|
139,972
|
|
Provision
|
(18,238
|
)
|
|
(4,606
|
)
|
|
(5,707
|
)
|
|
(704
|
)
|
|
(1,450
|
)
|
|
(3,373
|
)
|
|
(3,837
|
)
|
|
(180
|
)
|
|
(38,095
|
)
|
Charge-offs
|
(5,359
|
)
|
|
(12,081
|
)
|
|
(931
|
)
|
|
(2,257
|
)
|
|
(1,115
|
)
|
|
(350
|
)
|
|
(3,218
|
)
|
|
(32
|
)
|
|
(25,343
|
)
|
Recoveries
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Balance at June 30
|
$
|
7,589
|
|
|
$
|
33,588
|
|
|
$
|
4,596
|
|
|
$
|
5,936
|
|
|
$
|
17,272
|
|
|
$
|
6,031
|
|
|
$
|
1,232
|
|
|
$
|
290
|
|
|
$
|
76,534
|
|
The following tables show the ending balances of acquired loans and leases and related allowance by class of loans as of
June 30, 2014
and
December 31, 2013
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
(Dollars in thousands)
|
Construction
and land
development -
commercial
|
|
Commercial
mortgage
|
|
Other
commercial
real estate
|
|
Commercial
and
industrial
|
|
Residential
mortgage
|
|
Revolving
mortgage
|
|
Construction
and land
development -
noncommercial
|
|
Consumer
and other
|
|
Total
|
ALLL for loans and leases acquired with deteriorated credit quality
|
$
|
3,803
|
|
|
$
|
17,315
|
|
|
$
|
407
|
|
|
$
|
375
|
|
|
$
|
7,093
|
|
|
$
|
81
|
|
|
$
|
—
|
|
|
$
|
257
|
|
|
$
|
29,331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and leases acquired with deteriorated credit quality
|
80,827
|
|
|
637,481
|
|
|
34,688
|
|
|
33,851
|
|
|
270,688
|
|
|
20,129
|
|
|
28,759
|
|
|
3,510
|
|
|
1,109,933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013
|
(Dollars in thousands)
|
Construction
and land
development -
commercial
|
|
Commercial
mortgage
|
|
Other
commercial
real estate
|
|
Commercial
and
industrial
|
|
Residential
mortgage
|
|
Revolving
mortgage
|
|
Construction
and land
development -
noncommercial
|
|
Consumer
and other
|
|
Total
|
ALLL for loans and leases acquired with deteriorated credit quality
|
$
|
1,320
|
|
|
$
|
29,906
|
|
|
$
|
1,354
|
|
|
$
|
5,275
|
|
|
$
|
11,802
|
|
|
$
|
2,959
|
|
|
$
|
682
|
|
|
$
|
222
|
|
|
$
|
53,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and leases acquired with deteriorated credit quality
|
78,915
|
|
|
642,891
|
|
|
41,381
|
|
|
17,254
|
|
|
213,851
|
|
|
30,834
|
|
|
2,583
|
|
|
1,717
|
|
|
1,029,426
|
|
As of
June 30, 2014
and
December 31, 2013
,
$454.8 million
and
$459.9 million
, respectively, in acquired loans experienced an adverse change in expected cash flows since the date of acquisition.
The following tables provide information on originated loans and leases that are individually evaluated for impairment as of
June 30, 2014
and
December 31, 2013
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
(Dollars in thousands)
|
With a
recorded
allowance
|
|
With no
recorded
allowance
|
|
Total
|
|
Unpaid
principal
balance
|
|
Related
allowance
recorded
|
Impaired originated loans and leases
|
|
|
|
|
|
|
|
|
|
Construction and land development - commercial
|
$
|
1,305
|
|
|
$
|
1,268
|
|
|
$
|
2,573
|
|
|
$
|
3,539
|
|
|
$
|
155
|
|
Commercial mortgage
|
58,223
|
|
|
28,823
|
|
|
87,046
|
|
|
92,164
|
|
|
7,704
|
|
Other commercial real estate
|
741
|
|
|
1,221
|
|
|
1,962
|
|
|
2,361
|
|
|
179
|
|
Commercial and industrial
|
8,371
|
|
|
2,440
|
|
|
10,811
|
|
|
11,939
|
|
|
1,425
|
|
Lease financing
|
376
|
|
|
—
|
|
|
376
|
|
|
376
|
|
|
297
|
|
Other
|
—
|
|
|
46
|
|
|
46
|
|
|
46
|
|
|
—
|
|
Residential mortgage
|
10,016
|
|
|
5,432
|
|
|
15,448
|
|
|
15,903
|
|
|
1,613
|
|
Revolving mortgage
|
3,537
|
|
|
217
|
|
|
3,754
|
|
|
4,801
|
|
|
1,024
|
|
Construction and land development - noncommercial
|
1,934
|
|
|
—
|
|
|
1,934
|
|
|
1,934
|
|
|
201
|
|
Consumer
|
936
|
|
|
1
|
|
|
937
|
|
|
968
|
|
|
653
|
|
Total impaired originated loans and leases
|
$
|
85,439
|
|
|
$
|
39,448
|
|
|
$
|
124,887
|
|
|
$
|
134,031
|
|
|
$
|
13,251
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013
|
(Dollars in thousands)
|
With a
recorded
allowance
|
|
With no
recorded
allowance
|
|
Total
|
|
Unpaid
principal
balance
|
|
Related
allowance
recorded
|
Impaired originated loans and leases
|
|
|
|
|
|
|
|
|
|
Construction and land development - commercial
|
$
|
1,025
|
|
|
$
|
1,247
|
|
|
$
|
2,272
|
|
|
$
|
7,306
|
|
|
$
|
103
|
|
Commercial mortgage
|
57,819
|
|
|
39,292
|
|
|
97,111
|
|
|
103,522
|
|
|
6,873
|
|
Other commercial real estate
|
783
|
|
|
1,095
|
|
|
1,878
|
|
|
2,279
|
|
|
209
|
|
Commercial and industrial
|
7,197
|
|
|
2,103
|
|
|
9,300
|
|
|
10,393
|
|
|
771
|
|
Lease financing
|
133
|
|
|
55
|
|
|
188
|
|
|
188
|
|
|
54
|
|
Residential mortgage
|
11,534
|
|
|
4,005
|
|
|
15,539
|
|
|
15,939
|
|
|
1,586
|
|
Revolving mortgage
|
3,382
|
|
|
214
|
|
|
3,596
|
|
|
3,596
|
|
|
372
|
|
Construction and land development - noncommercial
|
651
|
|
|
457
|
|
|
1,108
|
|
|
1,108
|
|
|
72
|
|
Consumer
|
1,154
|
|
|
—
|
|
|
1,154
|
|
|
1,154
|
|
|
121
|
|
Total impaired originated loans and leases
|
$
|
83,678
|
|
|
$
|
48,468
|
|
|
$
|
132,146
|
|
|
$
|
145,485
|
|
|
$
|
10,161
|
|
The following tables show the average impaired originated loan balance and the interest income recognized by loan class for the
three
and
six
months ended
June 30, 2014
and
June 30, 2013
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2014
|
|
Three months ended June 30, 2013
|
(Dollars in thousands)
|
Average
balance
|
|
Interest income recognized
|
|
Average
balance
|
|
Interest income recognized
|
Impaired originated loans and leases:
|
|
|
|
|
|
|
|
Construction and land development - commercial
|
$
|
2,592
|
|
|
$
|
28
|
|
|
$
|
8,541
|
|
|
$
|
101
|
|
Commercial mortgage
|
87,687
|
|
|
799
|
|
|
102,356
|
|
|
1,413
|
|
Other commercial real estate
|
1,981
|
|
|
7
|
|
|
2,647
|
|
|
37
|
|
Commercial and industrial
|
11,208
|
|
|
113
|
|
|
10,298
|
|
|
139
|
|
Lease financing
|
384
|
|
|
4
|
|
|
531
|
|
|
9
|
|
Other
|
48
|
|
|
1
|
|
|
—
|
|
|
—
|
|
Residential mortgage
|
15,592
|
|
|
107
|
|
|
13,855
|
|
|
184
|
|
Revolving mortgage
|
3,779
|
|
|
29
|
|
|
6,976
|
|
|
47
|
|
Construction and land development - noncommercial
|
2,061
|
|
|
26
|
|
|
913
|
|
|
13
|
|
Consumer
|
986
|
|
|
17
|
|
|
1,587
|
|
|
25
|
|
Average impaired originated loans and leases
|
$
|
126,318
|
|
|
$
|
1,131
|
|
|
$
|
147,704
|
|
|
$
|
1,968
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2014
|
|
Six months ended June 30, 2013
|
(Dollars in thousands)
|
Average
balance
|
|
Interest income recognized
|
|
Average
balance
|
|
Interest income recognized
|
Impaired originated loans and leases:
|
|
|
|
|
|
|
|
Construction and land development - commercial
|
$
|
1,413
|
|
|
$
|
31
|
|
|
$
|
8,899
|
|
|
$
|
213
|
|
Commercial mortgage
|
84,359
|
|
|
1,716
|
|
|
103,032
|
|
|
2,838
|
|
Other commercial real estate
|
2,731
|
|
|
60
|
|
|
3,028
|
|
|
82
|
|
Commercial and industrial
|
15,690
|
|
|
353
|
|
|
14,465
|
|
|
406
|
|
Lease financing
|
732
|
|
|
21
|
|
|
408
|
|
|
14
|
|
Other
|
24
|
|
|
1
|
|
|
—
|
|
|
—
|
|
Residential mortgage
|
15,824
|
|
|
284
|
|
|
15,003
|
|
|
412
|
|
Revolving mortgage
|
4,262
|
|
|
76
|
|
|
6,390
|
|
|
72
|
|
Construction and land development - noncommercial
|
1,946
|
|
|
50
|
|
|
783
|
|
|
25
|
|
Consumer
|
2,058
|
|
|
51
|
|
|
1,611
|
|
|
29
|
|
Average impaired originated loans and leases
|
$
|
129,039
|
|
|
$
|
2,643
|
|
|
$
|
153,619
|
|
|
$
|
4,091
|
|
Troubled Debt Restructurings
BancShares accounts for certain loan modifications or restructurings as troubled debt restructurings (TDRs). In general, the modification or restructuring of a loan is considered a TDR if, for economic reasons or legal reasons related to a borrower's financial difficulties, a concession is granted to the borrower that creditors would not otherwise grant. Concessions may relate to the contractual interest rate, maturity date, payment structure or other actions. In accordance with GAAP, loans acquired under ASC 310-30,
Loans and Debt Securities Acquired with Deteriorated Credit Quality,
are not initially considered to be TDRs, but can be classified as such if a modification is made subsequent to acquisition. Modifications of acquired loans that are part of a pool are not designated as TDRs. The following table provides a summary of total TDRs by accrual status.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
|
December 31, 2013
|
(Dollars in thousands)
|
Accruing
|
|
Nonaccruing
|
|
Total
|
|
Accruing
|
|
Nonaccruing
|
|
Total
|
Commercial loans
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land development - commercial
|
$
|
5,946
|
|
|
$
|
2,248
|
|
|
$
|
8,194
|
|
|
$
|
21,032
|
|
|
$
|
1,002
|
|
|
$
|
22,034
|
|
Commercial mortgage
|
99,843
|
|
|
32,019
|
|
|
131,862
|
|
|
113,323
|
|
|
23,387
|
|
|
136,710
|
|
Other commercial real estate
|
3,203
|
|
|
1,277
|
|
|
4,480
|
|
|
3,470
|
|
|
1,150
|
|
|
4,620
|
|
Commercial and industrial
|
10,935
|
|
|
818
|
|
|
11,753
|
|
|
9,838
|
|
|
1,142
|
|
|
10,980
|
|
Lease
|
233
|
|
|
144
|
|
|
377
|
|
|
49
|
|
|
—
|
|
|
49
|
|
Other
|
46
|
|
|
—
|
|
|
46
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total commercial TDRs
|
120,206
|
|
|
36,506
|
|
|
156,712
|
|
|
147,712
|
|
|
26,681
|
|
|
174,393
|
|
Noncommercial
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
29,598
|
|
|
2,919
|
|
|
32,517
|
|
|
23,343
|
|
|
3,663
|
|
|
27,006
|
|
Revolving mortgage
|
3,821
|
|
|
—
|
|
|
3,821
|
|
|
3,095
|
|
|
—
|
|
|
3,095
|
|
Construction and land development - noncommercial
|
1,934
|
|
|
—
|
|
|
1,934
|
|
|
651
|
|
|
457
|
|
|
1,108
|
|
Consumer and other
|
937
|
|
|
—
|
|
|
937
|
|
|
1,154
|
|
|
—
|
|
|
1,154
|
|
Total noncommercial TDRs
|
36,290
|
|
|
2,919
|
|
|
39,209
|
|
|
28,243
|
|
|
4,120
|
|
|
32,363
|
|
Total TDRs
|
$
|
156,496
|
|
|
$
|
39,425
|
|
|
$
|
195,921
|
|
|
$
|
175,955
|
|
|
$
|
30,801
|
|
|
$
|
206,756
|
|
The following table shows the accrual status of acquired and originated TDRs.
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
June 30, 2014
|
|
December 31, 2013
|
Accruing TDRs:
|
|
|
|
Acquired
|
$
|
62,592
|
|
|
$
|
90,829
|
|
Originated
|
93,904
|
|
|
85,126
|
|
Total accruing TDRs
|
156,496
|
|
|
175,955
|
|
Nonaccruing TDRs:
|
|
|
|
Acquired
|
17,861
|
|
|
11,479
|
|
Originated
|
21,564
|
|
|
19,322
|
|
Total nonaccruing TDRs
|
39,425
|
|
|
30,801
|
|
All TDRs:
|
|
|
|
Acquired
|
80,453
|
|
|
102,308
|
|
Originated
|
115,468
|
|
|
104,448
|
|
Total TDRs
|
$
|
195,921
|
|
|
$
|
206,756
|
|
All TDRs are impaired loans. TDRs are, therefore, evaluated for impairment on a quarterly basis or more frequently as needed. The impairment evaluations for performing TDRs has historically been performed by pools of homogeneous loan groups, as determined by loan type with similar risk characteristics and performance trends, using a discounted cash flow analysis. Management enhanced this process during the second quarter to include individual loan level impairment analyses for all performing TDRs.
Impairment is evaluated using one of three approved valuation methodologies: discounted cash flows, market prices or collateral values. Based on the accrual status and credit grade, management determines the most appropriate method to reasonably assess expectations for recovery of the investment. Expected cash flows are discounted at the loan’s original effective interest rate. Specific valuation allowances are established for discounted cash flows or partial charge-offs and are recorded for TDRs in the amount equal to the calculated impairment.
The majority of TDRs are included in the special mention, substandard or doubtful grading categories. When a restructured loan subsequently defaults, it is evaluated and downgraded if appropriate. The more severely graded the loan, the lower the estimated expected cash flows and the greater the allowance recorded.
The following tables provide the types of TDRs made during the
three
and
six
months ended
June 30, 2014
and
June 30, 2013
for originated loans, as well as a summary of originated loans that were modified as a TDR during the
12 months ended June 30, 2014
and
June 30, 2013
that subsequently defaulted during the
three
and
six
months ended
June 30, 2014
and
June 30, 2013
. BancShares defines payment default as movement of the TDR to nonaccrual status, which is generally 90 days past due for TDRs, foreclosure or charge-off, whichever occurs first.
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2014
|
|
Three months ended June 30, 2013
|
|
All restructurings
|
|
Restructurings with payment default
|
|
All restructurings
|
|
Restructurings with payment default
|
(Dollars in thousands)
|
Number of Loans
|
Recorded investment at period end
|
|
Number of Loans
|
Recorded investment at period end
|
|
Number of Loans
|
Recorded investment at period end
|
|
Number of Loans
|
Recorded investment at period end
|
Originated loans
|
|
|
|
|
|
|
|
|
|
|
|
Interest only period provided
|
|
|
|
|
|
|
|
|
|
|
|
Commercial mortgage
|
2
|
|
$
|
720
|
|
|
1
|
|
$
|
494
|
|
|
1
|
|
$
|
71
|
|
|
—
|
|
$
|
—
|
|
Other commercial real estate
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
1
|
|
100
|
|
|
—
|
|
—
|
|
Other
|
1
|
|
46
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
Total interest only
|
3
|
|
766
|
|
|
1
|
|
494
|
|
|
2
|
|
171
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan term extension
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land development - commercial
|
2
|
|
191
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
Commercial mortgage
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
1
|
|
242
|
|
|
1
|
|
223
|
|
Commercial and industrial
|
4
|
|
2,069
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
1
|
|
22
|
|
Residential mortgage
|
6
|
|
260
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
1
|
|
106
|
|
Consumer
|
1
|
|
10
|
|
|
—
|
|
—
|
|
|
1
|
|
46
|
|
|
—
|
|
—
|
|
Total loan term extension
|
13
|
|
2,530
|
|
|
—
|
|
—
|
|
|
2
|
|
288
|
|
|
3
|
|
351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Below market interest rate
|
|
|
|
|
|
|
|
|
|
|
|
Commercial mortgage
|
3
|
|
1,991
|
|
|
5
|
|
1,563
|
|
|
7
|
|
2,035
|
|
|
—
|
|
—
|
|
Commercial and industrial
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
3
|
|
831
|
|
|
—
|
|
—
|
|
Other commercial real estate
|
1
|
|
365
|
|
|
—
|
|
—
|
|
|
3
|
|
753
|
|
|
—
|
|
—
|
|
Residential mortgage
|
10
|
|
427
|
|
|
—
|
|
—
|
|
|
6
|
|
885
|
|
|
1
|
|
99
|
|
Revolving mortgage
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
1
|
|
99
|
|
|
—
|
|
—
|
|
Construction and land development - noncommercial
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
2
|
|
521
|
|
|
—
|
|
—
|
|
Total below market interest rate
|
14
|
|
2,783
|
|
|
5
|
|
1,563
|
|
|
22
|
|
5,124
|
|
|
1
|
|
99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discharged from bankruptcy
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
1
|
|
13
|
|
|
—
|
|
—
|
|
|
2
|
|
87
|
|
|
—
|
|
—
|
|
Revolving mortgage
|
2
|
|
39
|
|
|
—
|
|
—
|
|
|
9
|
|
727
|
|
|
—
|
|
—
|
|
Consumer
|
2
|
|
8
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
Total discharged from bankruptcy
|
5
|
|
60
|
|
|
—
|
|
—
|
|
|
11
|
|
814
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total originated restructurings
|
35
|
|
$
|
6,139
|
|
|
6
|
|
$
|
2,057
|
|
|
37
|
|
$
|
6,397
|
|
|
4
|
|
$
|
450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2014
|
|
Six months ended June 30, 2013
|
|
All restructurings
|
|
Restructurings with payment default
|
|
All restructurings
|
|
Restructurings with payment default
|
(Dollars in thousands)
|
Number of Loans
|
Recorded investment at period end
|
|
Number of Loans
|
Recorded investment at period end
|
|
Number of Loans
|
Recorded investment at period end
|
|
Number of Loans
|
Recorded investment at period end
|
Originated loans
|
|
|
|
|
|
|
|
|
|
|
|
Interest only period provided
|
|
|
|
|
|
|
|
|
|
|
|
Commercial mortgage
|
6
|
|
$
|
2,600
|
|
|
2
|
|
$
|
708
|
|
|
8
|
|
$
|
3,406
|
|
|
—
|
|
$
|
—
|
|
Commercial and industrial
|
1
|
|
196
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
Other commercial real estate
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
1
|
|
100
|
|
|
—
|
|
—
|
|
Residential mortgage
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
1
|
|
630
|
|
|
—
|
|
—
|
|
Lease financing
|
2
|
|
144
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
Other
|
1
|
|
46
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
Total interest only
|
10
|
|
2,986
|
|
|
2
|
|
708
|
|
|
10
|
|
4,136
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan term extension
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land development - commercial
|
2
|
|
191
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
Commercial mortgage
|
5
|
|
2,584
|
|
|
—
|
|
—
|
|
|
5
|
|
1,972
|
|
|
1
|
|
223
|
|
Commercial and industrial
|
4
|
|
2,069
|
|
|
—
|
|
—
|
|
|
1
|
|
229
|
|
|
1
|
|
22
|
|
Lease financing
|
2
|
|
224
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
Residential mortgage
|
11
|
|
593
|
|
|
—
|
|
—
|
|
|
3
|
|
51
|
|
|
1
|
|
106
|
|
Consumer
|
3
|
|
44
|
|
|
—
|
|
—
|
|
|
1
|
|
46
|
|
|
—
|
|
—
|
|
Total loan term extension
|
27
|
|
5,705
|
|
|
—
|
|
—
|
|
|
10
|
|
2,298
|
|
|
3
|
|
351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Below market interest rate
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land development - commercial
|
10
|
|
363
|
|
|
—
|
|
—
|
|
|
1
|
|
224
|
|
|
—
|
|
—
|
|
Commercial mortgage
|
15
|
|
6,591
|
|
|
6
|
|
2,011
|
|
|
12
|
|
5,819
|
|
|
—
|
|
—
|
|
Commercial and industrial
|
6
|
|
143
|
|
|
—
|
|
—
|
|
|
4
|
|
846
|
|
|
—
|
|
—
|
|
Other commercial real estate
|
1
|
|
365
|
|
|
—
|
|
—
|
|
|
3
|
|
753
|
|
|
—
|
|
—
|
|
Residential mortgage
|
18
|
|
820
|
|
|
1
|
|
140
|
|
|
14
|
|
1,579
|
|
|
1
|
|
99
|
|
Revolving mortgage
|
5
|
|
274
|
|
|
—
|
|
—
|
|
|
1
|
|
99
|
|
|
—
|
|
—
|
|
Construction & land development - noncommercial
|
8
|
|
1,248
|
|
|
—
|
|
—
|
|
|
2
|
|
521
|
|
|
—
|
|
—
|
|
Consumer
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
3
|
|
235
|
|
|
—
|
|
—
|
|
Total below market interest rate
|
63
|
|
9,804
|
|
|
7
|
|
2,151
|
|
|
40
|
|
10,076
|
|
|
1
|
|
99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discharged from bankruptcy
|
|
|
|
|
|
|
|
|
|
|
|
Commercial mortgage
|
1
|
|
983
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
Residential mortgage
|
8
|
|
649
|
|
|
2
|
|
85
|
|
|
3
|
|
352
|
|
|
—
|
|
—
|
|
Revolving mortgage
|
7
|
|
442
|
|
|
—
|
|
—
|
|
|
30
|
|
2,383
|
|
|
3
|
|
93
|
|
Construction & land development - noncommercial
|
1
|
|
62
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
Consumer
|
3
|
|
26
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
Total discharged from bankruptcy
|
20
|
|
2,162
|
|
|
2
|
|
85
|
|
|
33
|
|
2,735
|
|
|
3
|
|
93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total originated restructurings
|
120
|
|
$
|
20,657
|
|
|
11
|
|
$
|
2,944
|
|
|
93
|
|
$
|
19,245
|
|
|
7
|
|
$
|
543
|
|
The following tables provide the types of TDRs made during the
three
and
six
months ended
June 30, 2014
and
June 30, 2013
for acquired loans, as well as a summary of acquired loans that were modified as a TDR during the
12 months ended June 30, 2014
and
June 30, 2013
that subsequently defaulted during the
three
and
six
months ended
June 30, 2014
and
June 30, 2013
. BancShares defines payment default as movement of the TDR to nonaccrual status, which is generally 90 days past due for TDRs, foreclosure or charge-off, whichever occurs first.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2014
|
|
Three months ended June 30, 2013
|
|
All restructurings
|
|
Restructurings with payment default
|
|
All restructurings
|
|
Restructurings with payment default
|
(Dollars in thousands)
|
Number of loans
|
Recorded investment at period end
|
|
Number of loans
|
Recorded investment at period end
|
|
Number of loans
|
Recorded investment at period end
|
|
Number of loans
|
Recorded investment at period end
|
Acquired loans
|
|
|
|
|
|
|
|
|
|
|
|
Interest only period provided
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land development - commercial
|
—
|
|
$
|
—
|
|
|
—
|
|
$
|
—
|
|
|
—
|
|
$
|
—
|
|
|
1
|
|
$
|
104
|
|
Commercial mortgage
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
1
|
|
1,699
|
|
Residential mortgage
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
1
|
|
134
|
|
|
—
|
|
—
|
|
Total interest only
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
1
|
|
134
|
|
|
2
|
|
1,803
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan term extension
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
1
|
|
53
|
|
|
1
|
|
53
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
Total loan term extension
|
1
|
|
53
|
|
|
1
|
|
53
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Below market interest rate
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land development - commercial
|
1
|
|
273
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
Commercial mortgage
|
5
|
|
1,811
|
|
|
—
|
|
—
|
|
|
1
|
|
813
|
|
|
—
|
|
—
|
|
Commercial and industrial
|
1
|
|
23
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
Residential mortgage
|
23
|
|
2,963
|
|
|
1
|
|
23
|
|
|
2
|
|
997
|
|
|
1
|
|
224
|
|
Total below market interest rate
|
30
|
|
5,070
|
|
|
1
|
|
23
|
|
|
3
|
|
1,810
|
|
|
1
|
|
224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discharged from bankruptcy
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
26
|
|
1,828
|
|
|
2
|
|
94
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
Total discharged from bankruptcy
|
26
|
|
1,828
|
|
|
2
|
|
94
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total acquired restructurings
|
57
|
|
$
|
6,951
|
|
|
4
|
|
$
|
170
|
|
|
4
|
|
$
|
1,944
|
|
|
3
|
|
$
|
2,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2014
|
|
Six months ended June 30, 2013
|
|
All restructurings
|
|
Restructurings with payment default
|
|
All restructurings
|
|
Restructurings with payment default
|
(Dollars in thousands)
|
Number of loans
|
Recorded investment at period end
|
|
Number of loans
|
Recorded investment at period end
|
|
Number of loans
|
Recorded investment at period end
|
|
Number of loans
|
Recorded investment at period end
|
Acquired loans
|
|
|
|
|
|
|
|
|
|
|
|
Interest only period provided
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land development - commercial
|
—
|
|
$
|
—
|
|
|
—
|
|
$
|
—
|
|
|
—
|
|
$
|
—
|
|
|
1
|
|
$
|
104
|
|
Commercial mortgage
|
2
|
|
—
|
|
|
2
|
|
44
|
|
|
1
|
|
290
|
|
|
2
|
|
1,989
|
|
Residential mortgage
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
2
|
|
177
|
|
|
—
|
|
—
|
|
Total interest only
|
2
|
|
—
|
|
|
2
|
|
44
|
|
|
3
|
|
467
|
|
|
3
|
|
2,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan term extension
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land development - commercial
|
1
|
|
276
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
Residential mortgage
|
1
|
|
53
|
|
|
1
|
|
53
|
|
|
1
|
|
199
|
|
|
—
|
|
—
|
|
Total loan term extension
|
2
|
|
329
|
|
|
1
|
|
53
|
|
|
1
|
|
199
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Below market interest rate
|
|
|
|
|
|
|
|
|
|
|
|
Construction and land development - commercial
|
2
|
|
308
|
|
|
—
|
|
—
|
|
|
4
|
|
3,331
|
|
|
—
|
|
—
|
|
Commercial mortgage
|
9
|
|
5,060
|
|
|
1
|
|
39
|
|
|
5
|
|
11,871
|
|
|
3
|
|
3,145
|
|
Commercial and industrial
|
1
|
|
23
|
|
|
—
|
|
—
|
|
|
2
|
|
435
|
|
|
—
|
|
—
|
|
Residential mortgage
|
25
|
|
3,066
|
|
|
2
|
|
23
|
|
|
7
|
|
2,484
|
|
|
3
|
|
931
|
|
Total below market interest rate
|
37
|
|
8,457
|
|
|
3
|
|
62
|
|
|
18
|
|
18,121
|
|
|
6
|
|
4,076
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discharged from bankruptcy
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
26
|
|
1,828
|
|
|
2
|
|
94
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
Total discharged from bankruptcy
|
26
|
|
1,828
|
|
|
2
|
|
94
|
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total acquired restructurings
|
67
|
|
$
|
10,614
|
|
|
8
|
|
$
|
253
|
|
|
22
|
|
$
|
18,787
|
|
|
9
|
|
$
|
6,169
|
|
For the
three
and
six
months ended
June 30, 2014
and
June 30, 2013
, the recorded investment in TDRs subsequent to modification was not materially impacted by the modification since forgiveness of principal is not a restructuring option frequently used by BancShares.
NOTE F - OTHER REAL ESTATE OWNED (OREO)
The following table explains changes in other real estate owned during the
six months ended June 30, 2014
and
June 30, 2013
.
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
Covered
|
|
Noncovered
|
|
Total
|
Balance at December 31, 2012
|
$
|
102,577
|
|
|
$
|
43,513
|
|
|
$
|
146,090
|
|
Additions
|
41,315
|
|
|
16,615
|
|
|
57,930
|
|
Sales
|
(53,676
|
)
|
|
(21,026
|
)
|
|
(74,702
|
)
|
Writedowns
|
(5,383
|
)
|
|
(2,160
|
)
|
|
(7,543
|
)
|
Balance at June 30, 2013
|
$
|
84,833
|
|
|
$
|
36,942
|
|
|
$
|
121,775
|
|
Balance at December 31, 2013
|
$
|
47,081
|
|
|
$
|
36,898
|
|
|
$
|
83,979
|
|
Additions
1
|
16,186
|
|
|
20,485
|
|
|
36,671
|
|
Sales
|
(18,522
|
)
|
|
(19,150
|
)
|
|
(37,672
|
)
|
Writedowns
|
(4,609
|
)
|
|
(3,082
|
)
|
|
(7,691
|
)
|
Balance at June 30, 2014
|
$
|
40,136
|
|
|
$
|
35,151
|
|
|
$
|
75,287
|
|
1
Noncovered additions include
$11.6 million
from the 1st Financial merger.
NOTE G - FDIC LOSS SHARE RECEIVABLE
The following table provides changes in the receivable from the FDIC for the
three
-month and
six
-month periods ended
June 30, 2014
and
June 30, 2013
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
(Dollars in thousands)
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Beginning balance
|
$
|
74,784
|
|
|
$
|
195,942
|
|
|
$
|
93,397
|
|
|
$
|
270,192
|
|
Amortization
|
(12,922
|
)
|
|
(19,069
|
)
|
|
(30,667
|
)
|
|
(45,181
|
)
|
Cash payments to (from) FDIC
|
859
|
|
|
(4,015
|
)
|
|
4,350
|
|
|
(46,534
|
)
|
Post-acquisition adjustments
|
(12,762
|
)
|
|
(14,845
|
)
|
|
(17,121
|
)
|
|
(20,464
|
)
|
Ending balance
|
$
|
49,959
|
|
|
$
|
158,013
|
|
|
$
|
49,959
|
|
|
$
|
158,013
|
|
The receivable from the FDIC for loss share agreements is measured separately from the related covered assets and is recorded at fair value at the acquisition date using projected cash flows based on the expected reimbursements for losses and the applicable loss share percentages. See Note
J
for information related to FCB's recorded payable to the FDIC for loss share agreements.
Cash payments to (from) FDIC represent the net impact of loss share loan recoveries, charge-offs and related expenses as calculated and reported in FDIC loss share certificates. Post-acquisition adjustments represent the net change in loss estimates related to acquired loans and covered OREO as a result of changes in expected cash flows and the allowance for loan and lease losses related to those covered loans. For loans covered by loss share agreements, subsequent decreases in the amount expected to be collected from the borrower or collateral liquidation result in a provision for loan and lease losses, an increase in the allowance for loan and lease losses and a proportional adjustment to the receivable from the FDIC for the estimated amount to be reimbursed. Subsequent increases in the amount expected to be collected from the borrower or collateral liquidation result in the reversal of some or all previously recorded provision for loan and lease losses, a decrease in the related allowance for loan and lease losses and a proportional adjustment to the receivable from the FDIC, or prospective adjustment to the accretable yield and the related receivable from the FDIC if no provision for loan and lease losses had been recorded previously. Two of the loss share agreements expire during the third quarter of 2014, and two expire during the first quarter of 2015.
NOTE H - ESTIMATED FAIR VALUES
Fair value estimates are intended to represent the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. Where there is no active market for a financial instrument, BancShares has made estimates using discounted cash flows or other valuation techniques. Inputs to these valuation methods are subjective in nature, involve uncertainties and require significant judgment and therefore cannot be determined with precision. Accordingly, the derived fair value estimates presented below are not necessarily indicative of the amounts BancShares could realize in a current market exchange.
Assets and liabilities are recorded at fair value according to a fair value hierarchy comprised of three levels. The levels are based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. The level within the fair value hierarchy for an asset or liability is based on the highest level of input that is significant to the fair value measurement (with level 1 considered highest and level 3 considered lowest). A brief description of each level follows:
|
|
•
|
Level 1 values are based on quoted prices for identical instruments in active markets.
|
|
|
•
|
Level 2 values are based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market.
|
|
|
•
|
Level 3 values are generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates that market participants would use in pricing the asset or liability. Valuation techniques include the use of discounted cash flow models and similar techniques.
|
The methodologies used to estimate the fair value of financial assets and financial liabilities are discussed below:
Investment securities available for sale
. U.S.Treasury, government agency, mortgage-backed securities and municipal securities are generally measured at fair value using a third party pricing service and are classified as level 2 instruments. Equity securities are measured at fair value using observable closing prices. Management also considers the amount of market activity by examining the trade volume of each security. Due to the relatively inactive nature of the markets for the existing equity securities at BancShares, the inputs used for these equity securities are considered level 2 inputs.
Loans held for sale.
Loans held for sale are carried at the lower of aggregate cost or fair value and are, therefore, carried at fair value only when fair value is less than the asset cost. These loans are generally traded in active secondary markets and are priced using current market pricing for similar securities adjusted for servicing, interest rate risk and credit risk. Accordingly, the inputs used to calculate fair value of residential real estate loans are classified as Level 2 inputs.
Net loans and leases (acquired and originated).
Fair value is estimated based on discounted future cash flows using the current interest rates at which loans with similar terms would be made to borrowers of similar credit quality. An additional valuation adjustment is made for liquidity. The inputs used in the fair value measurements for loans and leases are considered level 3 inputs.
Receivable from the FDIC for loss share agreements
. Fair value is estimated based on discounted future cash flows using current discount rates. Due to post-acquisition improvements in expected losses, significant portions of the FDIC receivable will be recovered through amortization of the receivable over the remaining life of the loss share agreement rather than by cash flows from the FDIC. The estimated amounts to be amortized in future periods have no fair value. The inputs used in the fair value measurement for the FDIC receivable are considered level 3 inputs. The FDIC loss share agreements are not transferable and, accordingly, there is no market for this receivable.
FHLB stock
. The carrying amount of FHLB stock is a reasonable estimate of fair value as these securities are not readily marketable and are evaluated for impairment based on the ultimate recoverability of the par value. BancShares considers positive and negative evidence, including the profitability and asset quality of the issuer, dividend payment history and recent redemption experience, when determining the ultimate recoverability of the par value. BancShares believes its investment in FHLB stock is ultimately recoverable at par. The inputs used in the fair value measurement for the FHLB stock are considered level 2 inputs.
Preferred stock issued under the TARP program and other acquired financial assets
. Preferred securities issued under the Troubled Asset Recovery Program are recorded at cost and are evaluated quarterly for impairment based on the ultimate recoverability of the purchase price. The fair value of these securities is derived from a third-party proprietary model that is considered to be a level 3 input. Other acquired financial assets represent acquired investments in various entities for Community Reinvestment Act and correspondent banking purposes. These investments were recorded at fair value at acquisition date based on level 2 inputs.
Deposits.
For non-time deposits, carrying value is a reasonable estimate of fair value. The fair value of time deposits is estimated by discounting future cash flows using the interest rates currently offered for deposits of similar remaining maturities. The inputs used in the fair value measurement for deposits are considered level 2 inputs.
Long-term obligations.
For fixed rate trust preferred securities, the fair values are determined based on recent trades of the actual security. For other long-term obligations, fair values are estimated by discounting future cash flows using current interest rates for similar financial instruments. The inputs used in the fair value measurement for long-term obligations are considered level 2 inputs.
Payable to the FDIC for loss share agreements.
The fair value of the payable to the FDIC for loss share agreements is determined by the projected cash flows based on expected payments to the FDIC in accordance with the loss share agreements. Cash flows are discounted using current discount rates to reflect the timing of the estimated amounts due to the FDIC. The inputs used in the fair value measurement for the payable to the FDIC are considered level 3 inputs. See Note
J
for more information on the payable to the FDIC.
Interest rate swap
. Under the terms of the existing cash flow hedge, BancShares pays a fixed payment to the counterparty in exchange for receipt of a variable payment that is determined based on the three-month LIBOR rate. The fair value of the cash flow hedge is, therefore, based on projected LIBOR rates for the duration of the hedge, values that, while observable in the market, are subject to adjustment due to pricing considerations for the specific instrument. The inputs used in the fair value measurement of the interest rate swap are considered level 2 inputs.
Off-balance-sheet commitments and contingencies.
Carrying amounts are reasonable estimates of the fair values for such financial instruments. Carrying amounts include unamortized fee income and, in some cases, reserves for any credit losses from those financial instruments. These amounts are not material to BancShares' financial position.
For all other financial assets and financial liabilities, the carrying value is a reasonable estimate of the fair value as of
June 30, 2014
and
December 31, 2013
. The carrying value and fair value for these assets and liabilities are equivalent because they are
relatively short term in nature and there is no interest rate or credit risk that would cause the fair value to differ from the carrying value.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
June 30, 2014
|
|
December 31, 2013
|
Carrying value
|
|
Fair value
|
|
Carrying value
|
|
Fair value
|
Cash and due from banks
|
$
|
566,952
|
|
|
$
|
566,952
|
|
|
$
|
533,599
|
|
|
$
|
533,599
|
|
Overnight investments
|
1,118,474
|
|
|
1,118,474
|
|
|
859,324
|
|
|
859,324
|
|
Investment securities available for sale
|
5,538,166
|
|
|
5,538,166
|
|
|
5,387,703
|
|
|
5,387,703
|
|
Investment securities held to maturity
|
693
|
|
|
729
|
|
|
907
|
|
|
974
|
|
Loans held for sale
|
49,851
|
|
|
50,675
|
|
|
47,271
|
|
|
47,956
|
|
Net loans and leases
|
13,318,710
|
|
|
12,846,888
|
|
|
12,900,330
|
|
|
12,545,537
|
|
Receivable from the FDIC for loss share agreements
(1)
|
49,959
|
|
|
22,741
|
|
|
93,397
|
|
|
38,438
|
|
Income earned not collected
|
49,019
|
|
|
49,019
|
|
|
48,390
|
|
|
48,390
|
|
Federal Home Loan Bank stock
|
32,878
|
|
|
32,878
|
|
|
40,819
|
|
|
40,819
|
|
Preferred stock and other acquired financial assets
|
15,462
|
|
|
16,199
|
|
|
33,564
|
|
|
34,786
|
|
Deposits
|
18,556,758
|
|
|
18,113,243
|
|
|
17,874,066
|
|
|
17,898,570
|
|
Short-term borrowings
|
788,540
|
|
|
788,540
|
|
|
511,418
|
|
|
511,418
|
|
Long-term obligations
|
314,529
|
|
|
324,874
|
|
|
510,769
|
|
|
526,037
|
|
Payable to the FDIC for loss share agreements
|
114,281
|
|
|
119,465
|
|
|
109,378
|
|
|
111,941
|
|
Accrued interest payable
|
7,297
|
|
|
7,297
|
|
|
6,737
|
|
|
6,737
|
|
Interest rate swap
|
5,933
|
|
|
5,933
|
|
|
7,220
|
|
|
7,220
|
|
(1)
The fair value of the FDIC receivable excludes amortization expected to be recognized in prospective periods.
Among BancShares’ assets and liabilities, investment securities available for sale and interest rate swaps accounted for as cash flow hedges are reported at their fair values on a recurring basis. Certain other assets are adjusted to their fair value on a nonrecurring basis, including loans held for sale, which are carried at the lower of cost or fair value, and impaired loans, OREO, goodwill and other intangible assets, which are periodically tested for impairment. Non-impaired loans held for investment, deposits, short-term borrowings and long-term obligations are not reported at fair value. BancShares did not elect to voluntarily report any assets or liabilities at fair value.
For assets and liabilities carried at fair value on a recurring basis, the following table provides fair value information as of
June 30, 2014
and
December 31, 2013
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
|
|
|
Fair value measurements using:
|
(Dollars in thousands)
|
Fair value
|
|
Level 1 inputs
|
|
Level 2 inputs
|
|
Level 3 inputs
|
Assets measured at fair value
|
|
|
|
|
|
|
|
Investment securities available for sale
|
|
|
|
|
|
|
|
U.S. Treasury
|
$
|
1,625,630
|
|
|
$
|
—
|
|
|
$
|
1,625,630
|
|
|
$
|
—
|
|
Government agency
|
1,283,566
|
|
|
—
|
|
|
1,283,566
|
|
|
—
|
|
Mortgage-backed securities
|
2,596,286
|
|
|
—
|
|
|
2,596,286
|
|
|
—
|
|
Equity securities
|
32,498
|
|
|
—
|
|
|
32,498
|
|
|
—
|
|
Municipal securities
|
186
|
|
|
—
|
|
|
186
|
|
|
—
|
|
Total
|
$
|
5,538,166
|
|
|
$
|
—
|
|
|
$
|
5,538,166
|
|
|
$
|
—
|
|
Liabilities measured at fair value
|
|
|
|
|
|
|
|
Interest rate swaps accounted for as cash flow hedges
|
$
|
5,933
|
|
|
$
|
—
|
|
|
$
|
5,933
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013
|
|
|
|
Fair value measurements using:
|
|
Fair value
|
|
Level 1 inputs
|
|
Level 2 inputs
|
|
Level 3 inputs
|
Assets measured at fair value
|
|
|
|
|
|
|
|
Investment securities available for sale
|
|
|
|
|
|
|
|
U.S. Treasury
|
$
|
373,437
|
|
|
$
|
—
|
|
|
$
|
373,437
|
|
|
$
|
—
|
|
Government agency
|
2,544,229
|
|
|
—
|
|
|
2,544,229
|
|
|
—
|
|
Mortgage-backed securities
|
2,446,873
|
|
|
—
|
|
|
2,446,873
|
|
|
—
|
|
Equity securities
|
22,147
|
|
|
—
|
|
|
22,147
|
|
|
—
|
|
Municipal securities
|
187
|
|
|
—
|
|
|
187
|
|
|
—
|
|
Other
|
830
|
|
|
—
|
|
|
830
|
|
|
—
|
|
Total
|
$
|
5,387,703
|
|
|
$
|
—
|
|
|
$
|
5,387,703
|
|
|
$
|
—
|
|
Liabilities measured at fair value
|
|
|
|
|
|
|
|
Interest rate swaps accounted for as cash flow hedges
|
$
|
7,220
|
|
|
$
|
—
|
|
|
$
|
7,220
|
|
|
$
|
—
|
|
There were
no
transfers between levels during the
six months ended June 30, 2014
. A single subordinated debt security, previously classified within other, was called during the
second quarter
of
2014
.
Certain financial assets and liabilities are carried at fair value on a nonrecurring basis, including loans held for sale, impaired loans and OREO.
Impaired loans are deemed to be at fair value if an associated allowance or current period charge-off has been recorded. The value of impaired loans is determined by either collateral valuations or discounted present value of the expected cash flow calculations. Collateral values are determined using appraisals or other third-party value estimates of the subject property with discounts generally between 10 and 14 percent applied for estimated holding and selling costs and other external factors that may impact the marketability of the property. Impaired loans are assigned to an asset manager and monitored monthly for significant changes since the last valuation. If significant changes are noted, the asset manager orders a new valuation or adjusts the valuation accordingly. Expected cash flows are determined using expected loss rates developed from historic experience for loans with similar risk characteristics, discounted using the effective interest rate.
OREO is measured and reported at fair value using collateral valuations. Collateral values are determined using appraisals or other third-party value estimates of the subject property with discounts generally between 10 and 14 percent applied for estimated holding and selling costs and other external factors that may impact the marketability of the property. Changes to the value of the assets between scheduled valuation dates are monitored through continued communication with brokers and monthly reviews by the asset manager assigned to each asset. The asset manager uses the information gathered from brokers
and other market sources to identify any significant changes in the market or the subject property as they occur. Valuations are then adjusted or new appraisals are ordered to ensure the reported values reflect the most current information. OREO that has been recently remeasured is deemed to be at fair value and included in the table below.
For financial assets and liabilities carried at fair value on a nonrecurring basis, the following table provides fair value information as of
June 30, 2014
and
December 31, 2013
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
|
|
|
Fair value measurements using:
|
(Dollars in thousands)
|
Fair value
|
|
Level 1 inputs
|
|
Level 2 inputs
|
|
Level 3 inputs
|
Loans held for sale
|
$
|
32,551
|
|
|
$
|
—
|
|
|
$
|
32,551
|
|
|
$
|
—
|
|
Originated impaired loans
|
73,881
|
|
|
—
|
|
|
—
|
|
|
73,881
|
|
Other real estate not covered under loss share agreements remeasured during current year
|
9,101
|
|
|
—
|
|
|
—
|
|
|
9,101
|
|
Other real estate covered under loss share agreements remeasured during current year
|
22,927
|
|
|
—
|
|
|
—
|
|
|
22,927
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013
|
|
|
|
Fair value measurements using:
|
|
Fair value
|
|
Level 1 inputs
|
|
Level 2 inputs
|
|
Level 3 inputs
|
Loans held for sale
|
29,389
|
|
|
—
|
|
|
29,389
|
|
|
—
|
|
Originated impaired loans
|
77,817
|
|
|
—
|
|
|
—
|
|
|
77,817
|
|
Other real estate not covered under loss share agreements remeasured during current year
|
20,526
|
|
|
—
|
|
|
—
|
|
|
20,526
|
|
Other real estate covered under loss share agreements remeasured during current year
|
37,587
|
|
|
—
|
|
|
—
|
|
|
37,587
|
|
No
financial liabilities were carried at fair value on a nonrecurring basis as of
June 30, 2014
and
December 31, 2013
.
NOTE I - EMPLOYEE BENEFIT PLANS
Pension expense is a component of employee benefits expense. For the
three
and
six
months ended
June 30, 2014
and
2013
, the components of pension expense are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30
|
|
Six months ended June 30
|
(Dollars in thousands)
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Service cost
|
$
|
2,785
|
|
|
$
|
4,261
|
|
|
$
|
6,166
|
|
|
$
|
8,483
|
|
Interest cost
|
6,251
|
|
|
6,409
|
|
|
12,807
|
|
|
12,304
|
|
Expected return on assets
|
(8,340
|
)
|
|
(7,474
|
)
|
|
(16,152
|
)
|
|
(14,405
|
)
|
Amortization of prior service cost
|
52
|
|
|
53
|
|
|
105
|
|
|
105
|
|
Amortization of net actuarial loss
|
1,546
|
|
|
4,241
|
|
|
3,092
|
|
|
8,493
|
|
Total pension expense
|
$
|
2,294
|
|
|
$
|
7,490
|
|
|
$
|
6,018
|
|
|
$
|
14,980
|
|
The assumed discount rate for
2014
is
4.90 percent
, the expected long-term rate of return on plan assets is
7.50 percent
and the assumed rate of salary increases is
4.00 percent
. For
2013
, the assumed discount rate was
4.00 percent
, expected long-term rate of return was
7.25 percent
and the assumed rate of salary increases was
4.00 percent
.
NOTE
J
- COMMITMENTS AND CONTINGENCIES
To meet the financing needs of its customers, BancShares and its subsidiaries have financial instruments with off-balance sheet risk. These financial instruments include commitments to extend credit, standby letters of credit and recourse obligations on mortgage loans sold. These instruments involve elements of credit, interest rate or liquidity risk.
Commitments to extend credit are legally binding agreements to lend to customers. Commitments generally have fixed expiration dates or other termination clauses and may require payment of fees. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future liquidity requirements. Established credit standards control the credit risk exposure associated with these commitments. In some cases, BancShares requires that collateral be pledged to secure the commitment, including cash deposits, securities and other assets. At
June 30, 2014
, BancShares had unused commitments totaling
$6.20 billion
, compared to
$5.84 billion
at
December 31, 2013
.
Standby letters of credit are commitments guaranteeing performance of a customer to a third party. Those commitments are primarily issued to support public and private borrowing arrangements. To mitigate its risk, BancShares’ follows its credit policies in the issuance of standby letters of credit. At
June 30, 2014
and
December 31, 2013
, BancShares had standby letters of credit amounting to
$61.4 million
and
$54.8 million
, respectively. The credit risk related to the issuance of these letters of credit is essentially the same as that involved in extending loans to clients and, therefore, these letters of credit are collateralized when necessary.
Pursuant to standard representations and warranties relating to residential mortgage loan sales, contingent obligations exist for various events that may occur following the loan sale. If underwriting or documentation deficiencies are discovered at any point in the life of the loan or if the loan becomes nonperforming within
120 days
of its sale, the investor may require BancShares to repurchase the loan or to repay a portion of the sale proceeds. Other liabilities included reserves of
$3.3 million
and
$3.6 million
as of
June 30, 2014
and
December 31, 2013
, respectively, for estimated losses arising from these standard representation and warranty provisions.
BancShares has recorded a receivable from the FDIC totaling
$50.0 million
and
$93.4 million
as of
June 30, 2014
and
December 31, 2013
, respectively, for the expected reimbursement of losses on assets covered under the various loss share agreements. These loss share agreements impose certain obligations on us that, in the event of noncompliance, could result in the delay or disallowance of some or all of our rights under those agreements. Requests for reimbursement are subject to FDIC review and may be delayed or disallowed for noncompliance. The loss share agreements are subject to interpretation by both the FDIC and BancShares, and disagreements may arise regarding coverage of losses, expenses and contingencies.
The loss share agreements for four FDIC-assisted transactions include provisions related to contingent payments that may be owed to the FDIC at the termination of the agreements (clawback liability)
.
The clawback liability represents a payment by BancShares to the FDIC if actual cumulative losses on acquired covered assets are lower than the cumulative losses originally estimated by the FDIC at the time of acquisition. The clawback liability is estimated by discounting estimated future payments and is recorded in the Consolidated Balance Sheets as a payable to the FDIC under the relevant loss share agreements. As of
June 30, 2014
and
December 31, 2013
, the estimated clawback liability was
$114.3 million
and
$109.4 million
, respectively.
Following announcement of the proposed merger with Bancorporation, BancShares received a shareholder demand from the City of Providence, Rhode Island, pursuant to Section 220 of the Delaware General Corporation Law (“DGCL”) for access to certain books and records of BancShares. The purported basis for the demand was to investigate potential breaches of fiduciary duty and other wrongdoing by BancShares’ officers and directors in connection with the merger. The City of Providence concurrently filed a putative class action lawsuit in the Delaware Court of Chancery against BancShares and its directors challenging Article X, Section 8 of BancShares’ Bylaws, which requires certain litigation to be brought only in North Carolina courts to the fullest extent permitted by law. The Delaware complaint alleges that the Bylaw violates the DGCL and that adoption of the Bylaw constituted a breach of fiduciary duty by BancShares' directors. While not directly challenging the merger, the complaint contains allegations referencing the merger and seeks a declaration that any stockholder action regarding the merger may be brought in the Delaware Court of Chancery. On July 31, 2014, the City of Providence filed a second litigation in Delaware Court of Chancery challenging the merger and seeking to enjoin the BancShares stockholder vote. Any potential claim for damages is not reasonably calculable at this time. BancShares and its directors have moved to dismiss both complaints.
BancShares and various subsidiaries have been named as defendants in legal actions arising from their normal business activities in which damages in various amounts are claimed. BancShares is also exposed to litigation risk relating to the prior business activities of banks from which assets were acquired and liabilities assumed in the various FDIC-assisted transactions. Although the amount of any ultimate liability with respect to such matters cannot be determined, in the opinion of management, any such liability will not have a material effect on BancShares’ consolidated financial statements.
NOTE K - DERIVATIVES
At
June 30, 2014
, BancShares had an interest rate swap entered into during 2011 that qualifies as a cash flow hedge under GAAP. For all periods presented, the fair value of the outstanding derivative is included in other liabilities in the consolidated balance sheets, and the net change in fair value is included in the consolidated statements of cash flows under the caption net change in other liabilities.
The interest rate swap is used for interest rate risk management purposes and converts variable-rate exposure on outstanding debt to a fixed rate. The 2011 interest rate swap has a notional amount of
$93.5 million
, representing the amount of variable rate trust preferred capital securities issued during 2006 and still outstanding at the swap inception date. The 2011 interest rate
swap hedges interest payments through June 2016 and requires fixed-rate payments by BancShares at
5.50 percent
in exchange for variable-rate payments of
175
basis points above the three-month LIBOR, which is equal to the interest paid to the holders of the trust preferred capital securities. Settlement of the swap occurs quarterly. As of
June 30, 2014
, collateral with a fair value of
$7.0 million
was pledged to secure the existing obligation under the interest rate swap.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
|
December 31, 2013
|
(Dollars in thousands)
|
Notional amount
|
|
Estimated fair value of liability
|
|
Notional amount
|
|
Estimated fair value of liability
|
2011 interest rate swap hedging variable rate exposure on trust preferred securities 2011-2016
|
$
|
93,500
|
|
|
$
|
5,933
|
|
|
$
|
93,500
|
|
|
$
|
7,220
|
|
For cash flow hedges, the effective portion of the gain or loss due to changes in the fair value of the derivative hedging instrument is included in other comprehensive income, while the ineffective portion, representing the excess of the cumulative change in the fair value of the derivative over the cumulative change in expected future discounted cash flows on the hedged transaction, is recorded in the consolidated income statement. BancShares’ interest rate swap has been fully effective since inception. Therefore, changes in the fair value of the interest rate swap has had no impact on net income. For the
three
months ended
June 30, 2014
and
2013
, BancShares recognized interest expense of
$0.8 million
during both periods, resulting from incremental interest paid to the interest rate swap counterparty, none of which related to ineffectiveness. For the
six
months ended
June 30, 2014
and
2013
, BancShares recognized interest expense of
$1.7 million
and
$1.6 million
, respectively, resulting from incremental interest paid to the interest rate swap counterparty, none of which related to ineffectiveness. BancShares monitors the credit risk of the interest rate swap counterparty.
NOTE L - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Accumulated other comprehensive income (loss) included the following as of
June 30, 2014
and
December 31, 2013
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
|
December 31, 2013
|
(Dollars in thousands)
|
Accumulated
other
comprehensive
income (loss)
|
|
Deferred
tax expense
(benefit)
|
|
Accumulated
other
comprehensive
income (loss),
net of tax
|
|
Accumulated
other
comprehensive
loss
|
|
Deferred
tax
benefit
|
|
Accumulated
other
comprehensive
loss,
net of tax
|
Unrealized gains (losses) on investment securities available for sale, net
|
$
|
26,817
|
|
|
$
|
10,327
|
|
|
$
|
16,490
|
|
|
$
|
(16,632
|
)
|
|
$
|
(6,541
|
)
|
|
$
|
(10,091
|
)
|
Unrealized loss on cash flow hedge
|
(5,933
|
)
|
|
(2,290
|
)
|
|
(3,643
|
)
|
|
(7,220
|
)
|
|
(2,786
|
)
|
|
(4,434
|
)
|
Funded status of defined benefit plan
|
(14,385
|
)
|
|
(5,595
|
)
|
|
(8,790
|
)
|
|
(17,582
|
)
|
|
(6,839
|
)
|
|
(10,743
|
)
|
Total
|
$
|
6,499
|
|
|
$
|
2,442
|
|
|
$
|
4,057
|
|
|
$
|
(41,434
|
)
|
|
$
|
(16,166
|
)
|
|
$
|
(25,268
|
)
|
The following table highlights changes in accumulated other comprehensive income (loss) by component for the
three
and
six months ended June 30, 2014
and
June 30, 2013
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2014
|
(Dollars in thousands)
|
Unrealized gains (losses) on available for sale securities
1
|
|
Gains (losses) on cash flow hedges
1
|
|
Defined benefit pension items
1
|
|
Total
|
Beginning balance
|
$
|
(2,835
|
)
|
|
$
|
(3,993
|
)
|
|
$
|
(9,766
|
)
|
|
$
|
(16,594
|
)
|
Other comprehensive income before reclassifications
|
19,325
|
|
|
350
|
|
|
—
|
|
|
19,675
|
|
Amounts reclassified from accumulated other comprehensive loss
|
—
|
|
|
—
|
|
|
976
|
|
|
976
|
|
Net current period other comprehensive income
|
19,325
|
|
|
350
|
|
|
976
|
|
|
20,651
|
|
Ending balance
|
$
|
16,490
|
|
|
$
|
(3,643
|
)
|
|
$
|
(8,790
|
)
|
|
$
|
4,057
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2013
|
|
Unrealized gains (losses) on available for sale securities
1
|
|
Gains (losses) on cash flow hedges
1
|
|
Defined benefit pension items
1
|
|
Total
|
Beginning balance
|
$
|
19,606
|
|
|
$
|
(5,799
|
)
|
|
$
|
(93,712
|
)
|
|
$
|
(79,905
|
)
|
Other comprehensive (loss) income before reclassifications
|
(23,723
|
)
|
|
840
|
|
|
—
|
|
|
(22,883
|
)
|
Amounts reclassified from accumulated other comprehensive loss
|
—
|
|
|
—
|
|
|
2,612
|
|
|
2,612
|
|
Net current period other comprehensive (loss) income
|
(23,723
|
)
|
|
840
|
|
|
2,612
|
|
|
(20,271
|
)
|
Ending balance
|
$
|
(4,117
|
)
|
|
$
|
(4,959
|
)
|
|
$
|
(91,100
|
)
|
|
$
|
(100,176
|
)
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2014
|
|
Unrealized gains (losses) on available for sale securities
1
|
|
Gains (losses) on cash flow hedges
1
|
|
Defined benefit pension items
1
|
|
Total
|
Beginning balance
|
$
|
(10,091
|
)
|
|
$
|
(4,434
|
)
|
|
$
|
(10,743
|
)
|
|
$
|
(25,268
|
)
|
Other comprehensive income before reclassifications
|
26,581
|
|
|
791
|
|
|
—
|
|
|
27,372
|
|
Amounts reclassified from accumulated other comprehensive loss
|
—
|
|
|
—
|
|
|
1,953
|
|
|
1,953
|
|
Net current period other comprehensive income
|
26,581
|
|
|
791
|
|
|
1,953
|
|
|
29,325
|
|
Ending balance
|
$
|
16,490
|
|
|
$
|
(3,643
|
)
|
|
$
|
(8,790
|
)
|
|
$
|
4,057
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2013
|
|
Unrealized gains (losses) on available for sale securities
1
|
|
Gains (losses) on cash flow hedges
1
|
|
Defined benefit pension items
1
|
|
Total
|
Beginning balance
|
$
|
20,517
|
|
|
$
|
(6,292
|
)
|
|
$
|
(96,331
|
)
|
|
$
|
(82,106
|
)
|
Other comprehensive (loss) income before reclassifications
|
(24,634
|
)
|
|
1,333
|
|
|
—
|
|
|
(23,301
|
)
|
Amounts reclassified from accumulated other comprehensive loss
|
—
|
|
|
—
|
|
|
5,231
|
|
|
5,231
|
|
Net current period other comprehensive (loss) income
|
(24,634
|
)
|
|
1,333
|
|
|
5,231
|
|
|
(18,070
|
)
|
Ending balance
|
$
|
(4,117
|
)
|
|
$
|
(4,959
|
)
|
|
$
|
(91,100
|
)
|
|
$
|
(100,176
|
)
|
1
All amounts are net of tax.
The following table presents the amounts reclassified from accumulated other comprehensive income (loss) and the line item affected in the statement where net income is presented for the
three
and
six months ended June 30, 2014
and
June 30, 2013
:
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2014
|
Details about accumulated other comprehensive income (loss)
|
|
Amount reclassified from accumulated other comprehensive income (loss)
1
|
|
Affected line item in the statement where net income is presented
|
|
|
|
|
|
Amortization of defined benefit pension items
|
|
|
|
|
Prior service costs
|
|
$
|
(52
|
)
|
|
Employee benefits
|
Actuarial losses
|
|
(1,546
|
)
|
|
Employee benefits
|
|
|
(1,598
|
)
|
|
Income before income taxes
|
|
|
622
|
|
|
Provision for income taxes
|
|
|
$
|
(976
|
)
|
|
Net income
|
Total reclassifications for the period
|
|
$
|
(976
|
)
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2013
|
Details about accumulated other comprehensive income (loss)
|
|
Amount reclassified from accumulated other comprehensive income (loss)
1
|
|
Affected line item in the statement where net income is presented
|
Amortization of defined benefit pension items
|
|
|
|
|
Prior service costs
|
|
$
|
(53
|
)
|
|
Employee benefits
|
Actuarial losses
|
|
(4,241
|
)
|
|
Employee benefits
|
|
|
(4,294
|
)
|
|
Income before income taxes
|
|
|
1,682
|
|
|
Provision for income taxes
|
|
|
$
|
(2,612
|
)
|
|
Net income
|
Total reclassifications for the period
|
|
$
|
(2,612
|
)
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2014
|
Details about accumulated other comprehensive income (loss)
|
|
Amount reclassified from accumulated other comprehensive income (loss)
1
|
|
Affected line item in the statement where net income is presented
|
Amortization of defined benefit pension items
|
|
|
|
|
Prior service costs
|
|
$
|
(105
|
)
|
|
Employee benefits
|
Actuarial losses
|
|
(3,092
|
)
|
|
Employee benefits
|
|
|
(3,197
|
)
|
|
Income before income taxes
|
|
|
1,244
|
|
|
Provision for income taxes
|
|
|
$
|
(1,953
|
)
|
|
Net income
|
Total reclassifications for the period
|
|
$
|
(1,953
|
)
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2013
|
Details about accumulated other comprehensive income (loss)
|
|
Amount reclassified from accumulated other comprehensive income (loss)
1
|
|
Affected line item in the statement where net income is presented
|
Amortization of defined benefit pension items
|
|
|
|
|
Prior service costs
|
|
$
|
(105
|
)
|
|
Employee benefits
|
Actuarial losses
|
|
(8,493
|
)
|
|
Employee benefits
|
|
|
(8,598
|
)
|
|
Income before income taxes
|
|
|
3,367
|
|
|
Provision for income taxes
|
|
|
$
|
(5,231
|
)
|
|
Net income
|
Total reclassifications for the period
|
|
$
|
(5,231
|
)
|
|
|
NOTE M - SUBSEQUENT EVENTS
During July, BancShares purchased
$25.0 million
of FCB/SC Capital Trust II's outstanding Trust Preferred Securities from an unaffiliated third party. BancShares paid approximately
$23.0 million
, plus unpaid accrued distributions on the securities for the current distribution period, for the Trust Preferred Securities. FCB/SC Capital Trust II is a trust subsidiary of First Citizens Bancorporation, Inc. (Bancorporation). The Trust Preferred Securities pay interest at a floating rate based on three month LIBOR plus
2.25 percent
, reset quarterly, and mature on June 15, 2034. The securities represent preferred beneficial interests in
a junior subordinated deferrable interest debenture in a like principal amount issued by Bancorporation and held by FCB/SC Capital Trust II.
BancShares historically has considered Bancorporation and its subsidiaries to be related persons for purposes of BancShares' related person transaction approval policy. BancShares' Audit Committee reviewed and approved BancShares' purchase of Trust Preferred Securities described above.