UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2018March 31, 2019
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 001-36827
001-36872
HANCOCK WHITNEY CORPORATION
(Exact name of registrant as specified in its charter)
Mississippi |
| |
| 64-0693170 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
|
| |
Hancock Whitney Plaza, 2510 14thStreet, Gulfport, Mississippi | 39501 | |
(Address of principal executive offices) | (Zip Code) |
(228) 868-4000
(Registrant’s telephone number, including area code)
NOT APPLICABLE
(Former name, address and fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitionsdefinition s of “large accelerated filer”,filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):Act:
Large accelerated filer | ☒ | Accelerated filer | ☐ | |
Non-accelerated filer | ☐ |
| Smaller reporting company | ☐ |
Emerging growth company | ☐ |
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading symbol(s) | Name of each exchange on which registered |
Common stock, par value $3.33 per share | HWC | Nasdaq |
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
85,166,40485,720,238 common shares were outstanding as of October 31, 2018.April 30, 2019.
1
HancockHancock Whitney Corporation
Part I. Financial Information | Page Number | |
ITEM 1. | 4 | |
| Consolidated Balance Sheets (unaudited) – | 4 |
| 5 | |
| 6 | |
| 7 | |
| 8 | |
| Notes to Consolidated Financial Statements (unaudited) – | 9 |
ITEM 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 35 |
ITEM 3. | 57 | |
ITEM 4. | 57 | |
Part II. Other Information |
| |
ITEM 1. | 59 | |
ITEM 1A. | 59 | |
ITEM 2. | 59 | |
ITEM 3. | N/A | |
ITEM 4. | N/A | |
ITEM 5. | N/A | |
ITEM 6. | 59 | |
60 |
2
2
Glossary of Defined Terms
Entities:
Hancock Whitney Corporation*Corporation –a financial holding companyregistered with the Securities and Exchange Commission
Hancock Whitney Bank*Bank –a wholly-owned subsidiary of Hancock Whitney Corporation through which Hancock Whitney Corporation conducts its banking operations
Company –Hancock Whitney Corporation and its wholly-owned subsidiaries
Parent –Hancock Whitney Corporation, exclusive of its subsidiaries
Bank –Hancock Whitney Bank
*On May 25, 2018, Hancock Whitney Corporation changed its name from Hancock Holding Company, and Hancock Whitney Bank changed its name from Whitney Bank.
Other Terms:
AFS –available for sale securities
AOCI – accumulated other comprehensive income or loss
ALLL – allowance for loan and lease losses
ASC – Accounting Standards Codification
ASU – Accounting Standards Update
ATM - automated teller machine
Basel II - Basel Committee's 2004 Regulatory Capital Framework (Second Accord)
Basel III -Basel Committee's 2010 Regulatory Capital Framework (Third Accord)
Beta – Basel Committee - Basel Committee on Banking Supervisionamount by which deposit or loan costs change in response to movement in short-term interest rates
Beige Book - Federal Reserve’s Summary of Commentary on Current Economic Conditions
BOLI – Bank-owned life insurance
bp(s) –Basis point(s)
C&I – commercial and industrial loans
Capital One – Capital One, National Association, from which the Company acquired a trust and asset management business in July 2018.
CECL – Current Expected Credit Losses, the Accounting Standards Update effective for the Company on January 1, 2020
CD –certificate of deposit
CDE – Community Development Entity
CMO – Collateralized Mortgage Obligation
CRE – commercial real estate
Dodd-Frank Act – The Dodd-Frank Wall Street Reform and Consumer Protection Act
FASB – Financial Accounting Standards Board
FDIC – Federal Deposit Insurance Corporation
Federal Reserve Bank – The 12 banks that are the operating arms of the U.S. central bank. They implement the
policies of the Federal Reserve Board and also conduct economic research.
Federal Reserve Board – The 7-member Board of Governors that oversees the Federal Reserve System, establishes
monetary policy (interest rates, credit, etc.), and monitors the economic health of the country. Its members are appointed
by the President subject to Senate confirmation, and serve 14-year terms.
Federal Reserve System – The 12 Federal Reserve Banks, with each one serving member banks in its own district.
This system, supervised by the Federal Reserve Board, has broad regulatory powers over the money supply and the
credit structure.
FHLB – Federal Home Loan Bank
FNBC – The former New Orleans, Louisiana based First NBC Bank that failed on April 28, 2017
FNBC I – acquired selected assets and liabilities from FNBC under agreement dated March 10, 2017
FNBC II – acquired selected assets and liabilities from the FDIC as receiver for FNBC under agreement dated April 28, 2017
GAAP – Generally Accepted Accounting Principles in the United States of America
HFC – Harrison Finance Company, a former consumer finance subsidiary
HTM – held to maturity securities
3
LIBOR – London Interbank Offered Rate
LIHTC – Low Income Housing Tax Credit
MD&A –management’s discussion and analysis of financial condition and results of operations
MidSouth – MidSouth Bancorp, Inc., an entity the Company has agreed to acquire under an Agreement and Plan of Merger dated April 30, 2019
NAICS – North American Industry Classification System
NII – Net interest income
n/m – not meaningful
OCIOCI – other comprehensive income
OFI – Louisiana Office of Financial Institutions
ORE – other real estate defined as foreclosed and surplus real estate
PCI – purchased credit impaired loans
Repos – securities sold under agreements to repurchase
SEC – U.S. Securities and Exchange Commission
Securities Act – Securities Act of 1933, as amended
Tax Act – Tax Cuts and Jobs Act of 2017
tete – taxable equivalent adjustment, or the term used to indicate that a financial measure is presented on a fully taxable equivalent basis
TDR – troubled debt restructuring (as defined in ASC 310-40)
TSR – total shareholder return
U.S. Treasury– The United States Department of the Treasury
3
4
Part I.FinanciFinancialal Information
Item 1.1. Financial Statements
Hancock Whitney Corporation and Subsidiaries
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, |
| December 31, | ||
(in thousands, except per share data) |
| 2018 |
| 2017 | ||
ASSETS |
|
|
|
|
|
|
Cash and due from banks |
| $ | 339,609 |
| $ | 386,948 |
Interest-bearing bank deposits |
|
| 107,635 |
|
| 92,157 |
Federal funds sold |
|
| 439 |
|
| 227 |
Securities available for sale, at fair value (amortized cost of $3,048,851 and $2,949,057) |
|
| 2,918,185 |
|
| 2,910,869 |
Securities held to maturity (fair value of $2,975,455 and $2,962,010) |
|
| 3,069,262 |
|
| 2,977,511 |
Loans held for sale |
|
| 29,043 |
|
| 39,865 |
Loans |
|
| 19,543,717 |
|
| 19,004,163 |
Less: allowance for loan losses |
|
| (214,550) |
|
| (217,308) |
Loans, net |
|
| 19,329,167 |
|
| 18,786,855 |
Property and equipment, net of accumulated depreciation of $221,295 and $214,998 |
|
| 343,833 |
|
| 333,663 |
Prepaid expenses |
|
| 35,470 |
|
| 28,015 |
Other real estate and foreclosed assets, net |
|
| 27,475 |
|
| 27,542 |
Accrued interest receivable |
|
| 87,567 |
|
| 82,191 |
Goodwill |
|
| 791,157 |
|
| 745,523 |
Other intangible assets, net |
|
| 101,438 |
|
| 90,640 |
Life insurance contracts |
|
| 550,261 |
|
| 541,081 |
Deferred tax asset, net |
|
| 59,570 |
|
| 53,979 |
Other assets |
|
| 308,064 |
|
| 239,020 |
Total assets |
| $ | 28,098,175 |
| $ | 27,336,086 |
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
Deposits |
|
|
|
|
|
|
Noninterest-bearing |
| $ | 8,140,530 |
| $ | 8,307,497 |
Interest-bearing |
|
| 14,277,277 |
|
| 13,945,705 |
Total deposits |
|
| 22,417,807 |
|
| 22,253,202 |
Short-term borrowings |
|
| 2,276,647 |
|
| 1,703,890 |
Long-term debt |
|
| 215,912 |
|
| 305,513 |
Accrued interest payable |
|
| 15,986 |
|
| 8,680 |
Other liabilities |
|
| 192,945 |
|
| 179,852 |
Total liabilities |
|
| 25,119,297 |
|
| 24,451,137 |
Stockholders' equity: |
|
|
|
|
|
|
Common stock |
|
| 292,716 |
|
| 292,716 |
Capital surplus |
|
| 1,735,444 |
|
| 1,718,117 |
Retained earnings |
|
| 1,170,897 |
|
| 1,008,518 |
Accumulated other comprehensive loss, net |
|
| (220,179) |
|
| (134,402) |
Total stockholders' equity |
|
| 2,978,878 |
|
| 2,884,949 |
Total liabilities and stockholders' equity |
| $ | 28,098,175 |
| $ | 27,336,086 |
Common shares authorized (par value of $3.33 per share) |
|
| 350,000 |
|
| 350,000 |
Common shares issued |
|
| 87,903 |
|
| 87,903 |
Common shares outstanding |
|
| 85,364 |
|
| 85,200 |
See notes to unaudited consolidated financial statements.
5
Hancock Whitney Corporation and Subsidiaries
Consolidated Statements of Income
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Nine Months Ended | ||||||||
|
| September 30, |
| September 30, | ||||||||
(in thousands, except per share data) |
| 2018 |
| 2017 |
| 2018 |
| 2017 | ||||
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
Loans, including fees |
| $ | 224,332 |
| $ | 199,702 |
| $ | 645,340 |
| $ | 566,663 |
Loans held for sale |
|
| 268 |
|
| 216 |
|
| 784 |
|
| 669 |
Securities-taxable |
|
| 32,482 |
|
| 26,616 |
|
| 92,566 |
|
| 74,385 |
Securities-tax exempt |
|
| 5,461 |
|
| 5,608 |
|
| 16,488 |
|
| 16,643 |
Short-term investments |
|
| 669 |
|
| 574 |
|
| 1,733 |
|
| 3,048 |
Total interest income |
|
| 263,212 |
|
| 232,716 |
|
| 756,911 |
|
| 661,408 |
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
| 34,190 |
|
| 21,789 |
|
| 91,019 |
|
| 52,972 |
Short-term borrowings |
|
| 11,780 |
|
| 4,425 |
|
| 24,547 |
|
| 11,598 |
Long-term debt |
|
| 3,048 |
|
| 3,645 |
|
| 9,940 |
|
| 12,573 |
Total interest expense |
|
| 49,018 |
|
| 29,859 |
|
| 125,506 |
|
| 77,143 |
Net interest income |
|
| 214,194 |
|
| 202,857 |
|
| 631,405 |
|
| 584,265 |
Provision for loan losses |
|
| 6,872 |
|
| 13,040 |
|
| 28,016 |
|
| 43,982 |
Net interest income after provision for loan losses |
|
| 207,322 |
|
| 189,817 |
|
| 603,389 |
|
| 540,283 |
Noninterest income: |
|
|
|
|
|
|
|
|
|
|
|
|
Service charges on deposit accounts |
|
| 21,377 |
|
| 21,444 |
|
| 63,806 |
|
| 60,711 |
Trust fees |
|
| 16,738 |
|
| 10,742 |
|
| 39,726 |
|
| 33,459 |
Bank card and ATM fees |
|
| 14,862 |
|
| 13,390 |
|
| 44,784 |
|
| 39,545 |
Investment and annuity fees and insurance commissions |
|
| 6,652 |
|
| 6,230 |
|
| 19,041 |
|
| 17,939 |
Secondary mortgage market operations |
|
| 4,333 |
|
| 4,157 |
|
| 11,699 |
|
| 11,965 |
Other income |
|
| 11,556 |
|
| 11,152 |
|
| 31,546 |
|
| 34,474 |
Total noninterest income |
|
| 75,518 |
|
| 67,115 |
|
| 210,602 |
|
| 198,093 |
Noninterest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Compensation expense |
|
| 84,389 |
|
| 82,242 |
|
| 244,374 |
|
| 237,486 |
Employee benefits |
|
| 18,084 |
|
| 16,901 |
|
| 55,316 |
|
| 54,869 |
Personnel expense |
|
| 102,473 |
|
| 99,143 |
|
| 299,690 |
|
| 292,355 |
Net occupancy expense |
|
| 11,895 |
|
| 12,448 |
|
| 35,221 |
|
| 36,285 |
Equipment expense |
|
| 4,520 |
|
| 3,779 |
|
| 12,328 |
|
| 11,457 |
Data processing expense |
|
| 20,492 |
|
| 16,798 |
|
| 55,214 |
|
| 48,993 |
Professional services expense |
|
| 9,555 |
|
| 10,062 |
|
| 32,191 |
|
| 31,691 |
Amortization of intangible assets |
|
| 5,638 |
|
| 6,070 |
|
| 16,578 |
|
| 16,532 |
Telecommunications and postage |
|
| 3,598 |
|
| 3,876 |
|
| 11,063 |
|
| 11,081 |
Deposit insurance and regulatory fees |
|
| 8,345 |
|
| 7,883 |
|
| 24,669 |
|
| 21,356 |
Other real estate (income) expense |
|
| 16 |
|
| 199 |
|
| (63) |
|
| (2,329) |
Other expense |
|
| 14,655 |
|
| 17,358 |
|
| 49,489 |
|
| 57,207 |
Total noninterest expense |
|
| 181,187 |
|
| 177,616 |
|
| 536,380 |
|
| 524,628 |
Income before income taxes |
|
| 101,653 |
|
| 79,316 |
|
| 277,611 |
|
| 213,748 |
Income taxes |
|
| 17,775 |
|
| 20,414 |
|
| 50,081 |
|
| 53,565 |
Net income |
| $ | 83,878 |
| $ | 58,902 |
| $ | 227,530 |
| $ | 160,183 |
Earnings per common share-basic |
| $ | 0.96 |
| $ | 0.68 |
| $ | 2.62 |
| $ | 1.85 |
Earnings per common share-diluted |
| $ | 0.96 |
| $ | 0.68 |
| $ | 2.61 |
| $ | 1.85 |
Dividends paid per share |
| $ | 0.27 |
| $ | 0.24 |
| $ | 0.75 |
| $ | 0.72 |
Weighted average shares outstanding-basic |
|
| 85,348 |
|
| 84,749 |
|
| 85,298 |
|
| 84,577 |
Weighted average shares outstanding-diluted |
|
| 85,539 |
|
| 84,980 |
|
| 85,482 |
|
| 84,818 |
See notes to unaudited consolidated financial statements.
6
Hancock Whitney Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income
|
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|
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|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Nine Months Ended | ||||||||
|
| September 30, |
| September 30, | ||||||||
(in thousands) |
| 2018 |
| 2017 |
| 2018 |
| 2017 | ||||
Net income |
| $ | 83,878 |
| $ | 58,902 |
| $ | 227,530 |
| $ | 160,183 |
Other comprehensive income/loss before income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
Net change in unrealized gain/loss on securities available for sale and cash flow hedges |
|
| (25,242) |
|
| 5,949 |
|
| (110,895) |
|
| 19,794 |
Reclassification of net losses realized and included in earnings |
|
| 2,547 |
|
| 1,374 |
|
| 6,560 |
|
| 4,479 |
Valuation adjustment for pension plan amendment |
|
| — |
|
| — |
|
| — |
|
| 17,315 |
Other valuation adjustments for employee benefit plans |
|
| — |
|
| 1,597 |
|
| (9,039) |
|
| (9,185) |
Amortization of unrealized net loss on securities transferred to held to maturity |
|
| 747 |
|
| 977 |
|
| 2,427 |
|
| 2,726 |
Other comprehensive income/loss before income taxes |
|
| (21,948) |
|
| 9,897 |
|
| (110,947) |
|
| 35,129 |
Income tax expense (benefit) |
|
| (4,978) |
|
| 3,609 |
|
| (25,170) |
|
| 12,748 |
Other comprehensive income/loss net of income taxes |
|
| (16,970) |
|
| 6,288 |
|
| (85,777) |
|
| 22,381 |
Comprehensive income |
| $ | 66,908 |
| $ | 65,190 |
| $ | 141,753 |
| $ | 182,564 |
|
| March 31, |
|
| December 31, |
| ||
(in thousands, except per share data) |
| 2019 |
|
| 2018 |
| ||
ASSETS |
|
|
|
|
|
|
|
|
Cash and due from banks |
| $ | 360,194 |
|
| $ | 383,372 |
|
Interest-bearing bank deposits |
|
| 163,232 |
|
|
| 110,579 |
|
Federal funds sold |
|
| 530 |
|
|
| 515 |
|
Securities available for sale, at fair value (amortized cost of $2,698,865 and $2,755,806) |
|
| 2,681,080 |
|
|
| 2,691,037 |
|
Securities held to maturity (fair value of $2,892,910 and $2,935,856) |
|
| 2,896,442 |
|
|
| 2,979,547 |
|
Loans held for sale |
|
| 27,437 |
|
|
| 28,150 |
|
Loans |
|
| 20,112,838 |
|
|
| 20,026,411 |
|
Less: allowance for loan losses |
|
| (194,688 | ) |
|
| (194,514 | ) |
Loans, net |
|
| 19,918,150 |
|
|
| 19,831,897 |
|
Property and equipment, net of accumulated depreciation of $233,078 and $225,969 |
|
| 358,205 |
|
|
| 353,668 |
|
Right of use assets, net of accumulated amortization of $3,064 |
|
| 113,447 |
|
|
| — |
|
Prepaid expenses |
|
| 39,153 |
|
|
| 35,047 |
|
Other real estate and foreclosed assets, net |
|
| 27,148 |
|
|
| 26,270 |
|
Accrued interest receivable |
|
| 94,404 |
|
|
| 86,681 |
|
Goodwill |
|
| 792,084 |
|
|
| 790,972 |
|
Other intangible assets, net |
|
| 91,013 |
|
|
| 96,151 |
|
Life insurance contracts |
|
| 553,893 |
|
|
| 549,300 |
|
Deferred tax asset, net |
|
| — |
|
|
| 22,967 |
|
Funded pension assets, net |
|
| 168,910 |
|
|
| 65,125 |
|
Other assets |
|
| 204,909 |
|
|
| 184,629 |
|
Total assets |
| $ | 28,490,231 |
|
| $ | 28,235,907 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
Deposits |
|
|
|
|
|
|
|
|
Noninterest-bearing |
| $ | 8,158,658 |
|
| $ | 8,499,027 |
|
Interest-bearing |
|
| 15,221,636 |
|
|
| 14,651,158 |
|
Total deposits |
|
| 23,380,294 |
|
|
| 23,150,185 |
|
Short-term borrowings |
|
| 1,388,735 |
|
|
| 1,589,128 |
|
Long-term debt |
|
| 224,962 |
|
|
| 224,993 |
|
Accrued interest payable |
|
| 18,031 |
|
|
| 12,267 |
|
Lease liabilities |
|
| 128,494 |
|
|
| — |
|
Deferred tax liability, net |
|
| 19,065 |
|
|
| — |
|
Other liabilities |
|
| 140,075 |
|
|
| 177,994 |
|
Total liabilities |
|
| 25,299,656 |
|
|
| 25,154,567 |
|
Stockholders' equity: |
|
|
|
|
|
|
|
|
Common stock |
|
| 292,716 |
|
|
| 292,716 |
|
Capital surplus |
|
| 1,731,148 |
|
|
| 1,725,741 |
|
Retained earnings |
|
| 1,299,220 |
|
|
| 1,243,592 |
|
Accumulated other comprehensive loss, net |
|
| (132,509 | ) |
|
| (180,709 | ) |
Total stockholders' equity |
|
| 3,190,575 |
|
|
| 3,081,340 |
|
Total liabilities and stockholders' equity |
| $ | 28,490,231 |
|
| $ | 28,235,907 |
|
Preferred shares authorized (par value of $20.00 per share) |
|
| 50,000 |
|
|
| 50,000 |
|
Preferred shares issued and outstanding |
|
| — |
|
|
| — |
|
Common shares authorized (par value of $3.33 per share) |
|
| 350,000 |
|
|
| 350,000 |
|
Common shares issued |
|
| 87,903 |
|
|
| 87,903 |
|
Common shares outstanding |
|
| 85,710 |
|
|
| 85,643 |
|
See notes to unaudited consolidated financial statements.
4
7
Hancock Whitney Corporationand Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other |
|
|
|
|
| Common Stock |
| Capital |
| Retained |
|
| Comprehensive |
|
|
| |||||
(in thousands, except per share data) |
| Shares Issued |
| Amount |
| Surplus |
| Earnings |
|
| Loss, Net |
|
| Total | |||
Balance, December 31, 2016 |
| 87,495 |
| $ | 291,358 |
| $ | 1,698,253 |
| $ | 850,689 |
| $ | (120,532) |
| $ | 2,719,768 |
Net income |
| — |
|
| — |
|
| — |
|
| 160,183 |
|
| — |
|
| 160,183 |
Other comprehensive income |
| — |
|
| — |
|
| — |
|
| — |
|
| 22,381 |
|
| 22,381 |
Comprehensive income |
| — |
|
| — |
|
| — |
|
| 160,183 |
|
| 22,381 |
|
| 182,564 |
Cash dividends declared ($0.72 per common share) |
| — |
|
| — |
|
| — |
|
| (62,400) |
|
| — |
|
| (62,400) |
Common stock activity, long-term incentive plan |
| — |
|
| — |
|
| 20,910 |
|
| 119 |
|
| — |
|
| 21,029 |
Issuance of stock from dividend reinvestment |
| — |
|
| — |
|
| 2,314 |
|
| — |
|
| — |
|
| 2,314 |
Balance, September 30, 2017 |
| 87,495 |
| $ | 291,358 |
| $ | 1,721,477 |
| $ | 948,591 |
| $ | (98,151) |
| $ | 2,863,275 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2017 |
| 87,903 |
| $ | 292,716 |
| $ | 1,718,117 |
| $ | 1,008,518 |
| $ | (134,402) |
| $ | 2,884,949 |
Net income |
| — |
|
| — |
|
| — |
|
| 227,530 |
|
| — |
|
| 227,530 |
Other comprehensive income |
| — |
|
| — |
|
| — |
|
| — |
|
| (85,777) |
|
| (85,777) |
Comprehensive income |
| — |
|
| — |
|
| — |
|
| 227,530 |
|
| (85,777) |
|
| 141,753 |
Cash dividends declared ($0.75 per common share) |
| — |
|
| — |
|
| — |
|
| (65,287) |
|
| — |
|
| (65,287) |
Common stock activity, long-term incentive plan |
| — |
|
| — |
|
| 14,832 |
|
| 136 |
|
| — |
|
| 14,968 |
Issuance of stock from dividend reinvestment and stock purchase plan |
| — |
|
| — |
|
| 2,495 |
|
| — |
|
| — |
|
| 2,495 |
Balance, September 30, 2018 |
| 87,903 |
| $ | 292,716 |
| $ | 1,735,444 |
| $ | 1,170,897 |
| $ | (220,179) |
| $ | 2,978,878 |
See notes to unaudited consolidated financial statements.
8
Hancock Whitney Corporation and Subsidiaries
Consolidated Statements of Cash FlowsIncome
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months Ended | ||||
|
| September 30, | ||||
(in thousands) |
| 2018 |
| 2017 | ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
Net income |
| $ | 227,530 |
| $ | 160,183 |
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
Depreciation and amortization |
|
| 19,740 |
|
| 20,942 |
Provision for loan losses |
|
| 28,016 |
|
| 43,982 |
Gain on other real estate owned |
|
| (313) |
|
| (1,865) |
Deferred tax expense |
|
| 20,342 |
|
| 8,072 |
Increase in cash surrender value of life insurance contracts |
|
| (6,714) |
|
| (10,855) |
Loss on disposal of other assets |
|
| 1,748 |
|
| 1,662 |
Loss on sale of business |
|
| 1,145 |
|
| — |
Net decrease in loans held for sale |
|
| 10,942 |
|
| 11,583 |
Net amortization of securities premium/discount |
|
| 25,440 |
|
| 24,119 |
Amortization of intangible assets |
|
| 16,578 |
|
| 16,532 |
Amortization of FDIC indemnification asset |
|
| — |
|
| 2,427 |
Stock-based compensation expense |
|
| 14,868 |
|
| 12,370 |
Decrease in interest payable and other liabilities |
|
| (2,662) |
|
| (5,038) |
Net cash receipts from FDIC for loss share claims |
|
| — |
|
| 2,300 |
Decrease in FDIC loss share receivable |
|
| — |
|
| 8,613 |
Increase (decrease) in payable to FDIC for loan servicing |
|
| (11,113) |
|
| 180,882 |
(Increase) decrease in other assets |
|
| (15,748) |
|
| 11,446 |
Other, net |
|
| 299 |
|
| 17,723 |
Net cash provided by operating activities |
|
| 330,098 |
|
| 505,078 |
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
Proceeds from sales of securities available for sale |
|
| — |
|
| 213,877 |
Proceeds from maturities of securities available for sale |
|
| 253,755 |
|
| 249,270 |
Purchases of securities available for sale |
|
| (365,529) |
|
| (578,690) |
Proceeds from maturities of securities held to maturity |
|
| 272,986 |
|
| 276,073 |
Purchases of securities held to maturity |
|
| (375,770) |
|
| (554,442) |
Net (increase) decrease in short-term investments |
|
| (15,690) |
|
| 331,746 |
Proceeds from sales of loans and leases |
|
| 47,481 |
|
| 44,823 |
Net increase in loans |
|
| (706,989) |
|
| (770,051) |
Purchase of life insurance contracts |
|
| (1,601) |
|
| (50,000) |
Purchases of property and equipment |
|
| (32,583) |
|
| (16,086) |
Proceeds from sales of property and equipment |
|
| 52 |
|
| 389 |
Proceeds from sales of other real estate |
|
| 10,114 |
|
| 15,357 |
Cash received in excess of cash paid for acquisitions |
|
| 141,769 |
|
| 476,801 |
Proceeds from the sale of business, net of cash sold |
|
| 77,648 |
|
| — |
Other, net |
|
| (50,987) |
|
| (28,976) |
Net cash used in investing activities |
|
| (745,344) |
|
| (389,909) |
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
Net increase (decrease) in deposits |
|
| (52,709) |
|
| 181,084 |
Net increase (decrease) in short-term borrowings |
|
| 572,757 |
|
| (84,890) |
Repayments of long-term debt |
|
| (90,142) |
|
| (198,690) |
Net proceeds from issuance of long-term debt |
|
| 124 |
|
| 124 |
Dividends paid |
|
| (65,287) |
|
| (62,400) |
Payroll tax remitted on net share settlement of equity awards |
|
| (563) |
|
| (3,235) |
Proceeds from exercise of stock options |
|
| 1,232 |
|
| 11,610 |
Proceeds from dividend reinvestment and stock purchase plans |
|
| 2,495 |
|
| 2,314 |
Net cash provided by (used in) financing activities |
|
| 367,907 |
|
| (154,083) |
NET DECREASE IN CASH AND DUE FROM BANKS |
|
| (47,339) |
|
| (38,914) |
CASH AND DUE FROM BANKS, BEGINNING |
|
| 386,948 |
|
| 372,689 |
CASH AND DUE FROM BANKS, ENDING |
| $ | 339,609 |
| $ | 333,775 |
SUPPLEMENTAL INFORMATION FOR NON-CASH |
|
|
|
|
|
|
INVESTING AND FINANCING ACTIVITIES |
|
|
|
|
|
|
Assets acquired in settlement of loans |
| $ | 19,542 |
| $ | 4,770 |
|
| Three Months Ended |
| |||||
|
| March 31, |
| |||||
(in thousands, except per share data) |
| 2019 |
|
| 2018 |
| ||
Interest income: |
|
|
|
|
|
|
|
|
Loans, including fees |
| $ | 238,282 |
|
| $ | 205,847 |
|
Loans held for sale |
|
| 253 |
|
|
| 221 |
|
Securities-taxable |
|
| 31,139 |
|
|
| 29,301 |
|
Securities-tax exempt |
|
| 5,446 |
|
|
| 5,537 |
|
Short-term investments |
|
| 1,163 |
|
|
| 489 |
|
Total interest income |
|
| 276,283 |
|
|
| 241,395 |
|
Interest expense: |
|
|
|
|
|
|
|
|
Deposits |
|
| 46,138 |
|
|
| 26,959 |
|
Short-term borrowings |
|
| 8,082 |
|
|
| 5,351 |
|
Long-term debt |
|
| 2,809 |
|
|
| 3,421 |
|
Total interest expense |
|
| 57,029 |
|
|
| 35,731 |
|
Net interest income |
|
| 219,254 |
|
|
| 205,664 |
|
Provision for loan losses |
|
| 18,043 |
|
|
| 12,253 |
|
Net interest income after provision for loan losses |
|
| 201,211 |
|
|
| 193,411 |
|
Noninterest income: |
|
|
|
|
|
|
|
|
Service charges on deposit accounts |
|
| 20,367 |
|
|
| 21,448 |
|
Trust fees |
|
| 15,124 |
|
|
| 11,335 |
|
Bank card and ATM fees |
|
| 15,290 |
|
|
| 14,458 |
|
Investment and annuity fees and insurance commissions |
|
| 6,528 |
|
|
| 6,125 |
|
Secondary mortgage market operations |
|
| 3,726 |
|
|
| 3,401 |
|
Other income |
|
| 9,468 |
|
|
| 9,485 |
|
Total noninterest income |
|
| 70,503 |
|
|
| 66,252 |
|
Noninterest expense: |
|
|
|
|
|
|
|
|
Compensation expense |
|
| 83,968 |
|
|
| 80,100 |
|
Employee benefits |
|
| 19,730 |
|
|
| 19,874 |
|
Personnel expense |
|
| 103,698 |
|
|
| 99,974 |
|
Net occupancy expense |
|
| 11,984 |
|
|
| 11,010 |
|
Equipment expense |
|
| 4,679 |
|
|
| 3,546 |
|
Data processing expense |
|
| 19,331 |
|
|
| 16,449 |
|
Professional services expense |
|
| 8,168 |
|
|
| 9,255 |
|
Amortization of intangible assets |
|
| 5,138 |
|
|
| 5,618 |
|
Deposit insurance and regulatory fees |
|
| 5,406 |
|
|
| 7,948 |
|
Other real estate (income) expense |
|
| (991 | ) |
|
| 210 |
|
Other expense |
|
| 18,287 |
|
|
| 16,781 |
|
Total noninterest expense |
|
| 175,700 |
|
|
| 170,791 |
|
Income before income taxes |
|
| 96,014 |
|
|
| 88,872 |
|
Income taxes |
|
| 16,850 |
|
|
| 16,397 |
|
Net income |
| $ | 79,164 |
|
| $ | 72,475 |
|
Earnings per common share-basic |
| $ | 0.91 |
|
| $ | 0.83 |
|
Earnings per common share-diluted |
| $ | 0.91 |
|
| $ | 0.83 |
|
Dividends paid per share |
| $ | 0.27 |
|
| $ | 0.24 |
|
Weighted average shares outstanding-basic |
|
| 85,688 |
|
|
| 85,241 |
|
Weighted average shares outstanding-diluted |
|
| 85,800 |
|
|
| 85,423 |
|
See notes to unaudited consolidated financial statements.
5
9
Hancock Whitney Corporationand Subsidiaries
Consolidated Statements of Comprehensive Income
(Unaudited)
|
| Three Months Ended |
| |||||
|
| March 31, |
| |||||
(in thousands) |
| 2019 |
|
| 2018 |
| ||
Net income |
| $ | 79,164 |
|
| $ | 72,475 |
|
Other comprehensive income/loss before income taxes: |
|
|
|
|
|
|
|
|
Net change in unrealized gain/loss on securities available for sale and cash flow hedges |
|
| 57,243 |
|
|
| (62,244 | ) |
Reclassification of net losses realized and included in earnings |
|
| 4,219 |
|
|
| 1,796 |
|
Amortization of unrealized net loss on securities transferred to held to maturity |
|
| 591 |
|
|
| 755 |
|
Other comprehensive income/loss before income taxes |
|
| 62,053 |
|
|
| (59,693 | ) |
Income tax expense (benefit) |
|
| 13,853 |
|
|
| (13,546 | ) |
Other comprehensive income/loss net of income taxes |
|
| 48,200 |
|
|
| (46,147 | ) |
Comprehensive income |
| $ | 127,364 |
|
| $ | 26,328 |
|
See notes to unaudited consolidated financial statements.
6
Hancock Whitney Corporationand Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
| |
|
| Common Stock |
|
|
|
|
|
|
|
|
|
| Other |
|
|
|
|
| ||||||
(in thousands, except per share data) |
| Shares Issued |
|
| Amount |
|
| Capital Surplus |
|
| Retained Earnings |
|
| Comprehensive Loss, Net |
|
| Total |
| ||||||
Balance, December 31, 2017 |
|
| 87,903 |
|
| $ | 292,716 |
|
| $ | 1,718,117 |
|
| $ | 1,008,518 |
|
| $ | (134,402 | ) |
| $ | 2,884,949 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 72,475 |
|
|
| — |
|
|
| 72,475 |
|
Other comprehensive loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (46,147 | ) |
|
| (46,147 | ) |
Comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 72,475 |
|
|
| (46,147 | ) |
|
| 26,328 |
|
Cash dividends declared ($0.24 per common share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (20,881 | ) |
|
| — |
|
|
| (20,881 | ) |
Common stock activity, long-term incentive plan |
|
| — |
|
|
| — |
|
|
| 4,735 |
|
|
| 70 |
|
|
| — |
|
|
| 4,805 |
|
Issuance of stock from dividend reinvestment and stock purchase plans |
|
| — |
|
|
| — |
|
|
| 837 |
|
|
| — |
|
|
| — |
|
|
| 837 |
|
Balance, March 31, 2018 |
|
| 87,903 |
|
| $ | 292,716 |
|
| $ | 1,723,689 |
|
| $ | 1,060,182 |
|
| $ | (180,549 | ) |
| $ | 2,896,038 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2018 |
|
| 87,903 |
|
| $ | 292,716 |
|
| $ | 1,725,741 |
|
| $ | 1,243,592 |
|
| $ | (180,709 | ) |
| $ | 3,081,340 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 79,164 |
|
|
| — |
|
|
| 79,164 |
|
Other comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 48,200 |
|
|
| 48,200 |
|
Comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 79,164 |
|
|
| 48,200 |
|
|
| 127,364 |
|
Cash dividends declared ($0.27 per common share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (23,581 | ) |
|
| — |
|
|
| (23,581 | ) |
Common stock activity, long-term incentive plan |
|
| — |
|
|
| — |
|
|
| 4,528 |
|
|
| 45 |
|
|
| — |
|
|
| 4,573 |
|
Issuance of stock from dividend reinvestment and stock purchase plans |
|
| — |
|
|
| — |
|
|
| 879 |
|
|
| — |
|
|
| — |
|
|
| 879 |
|
Balance, March 31, 2019 |
|
| 87,903 |
|
| $ | 292,716 |
|
| $ | 1,731,148 |
|
| $ | 1,299,220 |
|
| $ | (132,509 | ) |
| $ | 3,190,575 |
|
See notes to unaudited consolidated financial statements.
7
Hancock Whitney Corporationand Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
|
| Three Months Ended |
| |||||
|
| March 31, |
| |||||
(in thousands) |
| 2019 |
|
| 2018 |
| ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net income |
| $ | 79,164 |
|
| $ | 72,475 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 7,516 |
|
|
| 6,551 |
|
Provision for loan losses |
|
| 18,043 |
|
|
| 12,253 |
|
(Gain) loss on other real estate owned |
|
| (991 | ) |
|
| 210 |
|
Deferred tax expense |
|
| 30,829 |
|
|
| 14,790 |
|
Increase in cash surrender value of life insurance contracts |
|
| (3,772 | ) |
|
| (3,346 | ) |
Loss on sale of business |
|
| — |
|
|
| 1,145 |
|
Net decrease in loans held for sale |
|
| 5,714 |
|
|
| 18,172 |
|
Net amortization of securities premium/discount |
|
| 7,009 |
|
|
| 8,453 |
|
Amortization of intangible assets |
|
| 5,138 |
|
|
| 5,618 |
|
Stock-based compensation expense |
|
| 5,181 |
|
|
| 4,883 |
|
Contribution to pension plan |
|
| (100,000 | ) |
|
| — |
|
Decrease in interest payable and other liabilities |
|
| (15,478 | ) |
|
| (32,568 | ) |
Decrease in payable to FDIC for loan servicing |
|
| — |
|
|
| (11,107 | ) |
(Increase) decrease in other assets |
|
| (23,335 | ) |
|
| 6,821 |
|
Other, net |
|
| (1,595 | ) |
|
| 144 |
|
Net cash provided by operating activities |
|
| 13,423 |
|
|
| 104,494 |
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Proceeds from maturities of securities available for sale |
|
| 55,596 |
|
|
| 80,155 |
|
Purchases of securities available for sale |
|
| (1,502 | ) |
|
| (142,052 | ) |
Proceeds from maturities of securities held to maturity |
|
| 79,533 |
|
|
| 93,408 |
|
Purchases of securities held to maturity |
|
| — |
|
|
| (134,020 | ) |
Net (increase) decrease in short-term investments |
|
| (52,668 | ) |
|
| 30,843 |
|
Proceeds from sales of loans and leases |
|
| 42,059 |
|
|
| 12,211 |
|
Net increase in loans |
|
| (148,073 | ) |
|
| (196,328 | ) |
Purchases of property and equipment |
|
| (12,435 | ) |
|
| (7,904 | ) |
Proceeds from sales of property and equipment |
|
| 115 |
|
|
| 42 |
|
Proceeds from sales of other real estate |
|
| 4,613 |
|
|
| 1,641 |
|
Final cash settlement for acquisition of business |
|
| (1,112 | ) |
|
| — |
|
Proceeds from the sale of business, net of cash sold |
|
| — |
|
|
| 77,081 |
|
Other, net |
|
| (8,978 | ) |
|
| (8,915 | ) |
Net cash used in investing activities |
|
| (42,852 | ) |
|
| (193,838 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net increase in deposits |
|
| 230,109 |
|
|
| 232,638 |
|
Net decrease in short-term borrowings |
|
| (200,393 | ) |
|
| (251,793 | ) |
Repayments of long-term debt |
|
| (75 | ) |
|
| (5,268 | ) |
Net proceeds from issuance of long-term debt |
|
| — |
|
|
| 83 |
|
Dividends paid |
|
| (23,581 | ) |
|
| (20,881 | ) |
Payroll tax remitted on net share settlement of equity awards |
|
| (688 | ) |
|
| (142 | ) |
Proceeds from exercise of stock options |
|
| — |
|
|
| 782 |
|
Proceeds from dividend reinvestment and stock purchase plans |
|
| 879 |
|
|
| 837 |
|
Net cash provided by (used in) financing activities |
|
| 6,251 |
|
|
| (43,744 | ) |
NET DECREASE IN CASH AND DUE FROM BANKS |
|
| (23,178 | ) |
|
| (133,088 | ) |
CASH AND DUE FROM BANKS, BEGINNING |
|
| 383,372 |
|
|
| 386,948 |
|
CASH AND DUE FROM BANKS, ENDING |
| $ | 360,194 |
|
| $ | 253,860 |
|
SUPPLEMENTAL INFORMATION FOR NON-CASH |
|
|
|
|
|
|
|
|
INVESTING AND FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
Assets acquired in settlement of loans |
| $ | 4,273 |
|
| $ | 1,305 |
|
See notes to unaudited consolidated financial statements.
8
HANCOCK WHITNEY CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements include the accounts of Hancock Whitney Corporation and all other entities in which it has a controlling interest (the “Company”). The financial statements include all adjustments that are, in the opinion of management, necessary to fairly state the Company’s financial condition, results of operations, changes in stockholders’ equity and cash flows for the interim periods presented. The Company has also evaluated all subsequent events for potential recognition and disclosure through the date of the filing of this Quarterly Report on Form 10-Q. Some financial information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) have been condensed or omitted in this Quarterly Report on Form 10-Q pursuant to Securities and Exchange Commission rules and regulations. These financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.2018. Financial information reported in these financial statements is not necessarily indicative of the Company’s financial condition, results of operations, or cash flows for any other interim or annual period.
Certain prior period amounts have been reclassified to conform to the current period presentation. These changes in presentation did not have a material impact on the Company’s financial condition or operating results.
On May 25, 2018, the Company changed its name from Hancock Holding Company to Hancock Whitney Corporation, and its wholly- owned banking subsidiary changed its name from Whitney Bank to Hancock Whitney Bank. In connection with the name change, the Company changed its stock ticker symbol from “HBHC” to “HWC” on the NASDAQ Global Select Market.
Use of Estimates
The accounting principles the Company follows and the methods for applying these principles conform to GAAP and general practices followed by the banking industry. These accounting principles require management to make estimates and assumptions about future events that affect the amounts reported in the consolidated financial statements and the accompanying notes. Actual results could differ from those estimates.
Critical Accounting Policies and Estimates
There were no material changes or developments during the reporting period with respect to methodologies that the Company uses when applying what management believes are critical accounting policies and developing critical accounting estimates as disclosed in its Annual Report on Form 10-K for the year ended December 31, 2017.2018. Refer to Note 16 – Recent Accounting Pronouncements for a discussion of accounting standards adopted during the ninethree months ended September 30, 2018.
March 31, 2019.
2. Acquisitions and Divestiture
Acquisition
On July 13, 2018, the Company acquired the bank-managed high net worth individual and institutional investment management and trust business of Capital One, National Association (“Capital One”). The transaction added assets under management of $4 billion and assets under management and administration of $10.4 billion to the Company’s existing trust and asset management business. In addition, the Company assumed approximately $217 million of customer deposit liabilities. The net consideration received is subject to final settlement, which is expected to occur during the first quarter of 2019. The following table sets forth the preliminary acquisition date fair value of the assets acquired and the liabilities assumed, the consideration received, and the resulting goodwill.
| ||
| ||
|
| |
| ||
| ||
| ||
| ||
| ||
| ||
| ||
| ||
|
|
(in thousands) |
|
|
|
|
ASSETS |
|
|
|
|
Accounts receivable |
| $ | 2,803 |
|
Identifiable intangible assets |
|
| 27,562 |
|
Total identifiable assets |
|
| 30,365 |
|
LIABILITIES |
|
|
|
|
Deposit liabilities |
|
| 217,432 |
|
Other liabilities |
|
| 151 |
|
Total liabilities |
|
| 217,583 |
|
Net liabilities assumed |
|
| (187,218 | ) |
Consideration received |
|
| 140,657 |
|
Goodwill |
| $ | 46,561 |
|
10
Identifiable intangible assets include customer relationships that are being amortized using an accelerated method based on forecasted cash flows over a useful life of approximately 17 years. Goodwill represents the excess of the fair value of net liabilities assumed over the consideration received. It is comprised of estimated future economic benefits arising from the transaction that cannot be individually identified or do not qualify for separate recognition. These benefits include expanded presence in existing markets and entry into new
9
markets, and expected earnings streams and operational efficiencies that the Company believes will result from this business combination. The tax basis of the goodwill is expected to be deductible for federal income tax purposes.
The following table presents the change in the Company’s goodwill during the nineyear ended December 31, 2018 and the three months ended September 30, 2018.
(in thousands)March 31, 2019.
|
| |
| ||
|
|
(in thousands) |
|
|
|
|
Goodwill balance at December 31, 2017 |
| $ | 745,523 |
|
Intital goodwill recorded - acquisition of trust and asset management business |
|
| 45,634 |
|
Measurement period adjustments - acquisition of trust and asset management business |
|
| (185 | ) |
Goodwill balance at December 31, 2018 |
| $ | 790,972 |
|
Final settlement of cash consideration - acquisition of trust and asset management business |
|
| 1,112 |
|
Goodwill balance at March 31, 2019 |
| $ | 792,084 |
|
The acquired trust and asset management business added $4.9 million in trust fee revenue and $4.8 million of expense to the Company’s results of acquired businessoperations for the three months ended March 31, 2019. The results are not material to the Company’s results of operations. Asoperations and, as such, supplemental proforma financial information for the ninethree months ended September 30,March 31, 2018 and 2017 is not presented. During the ninethree months ended September 30,March 31, 2018, the Company incurred acquisition related costs of approximately $5.7$0.3 million.
On March 10, 2017, the Company, through its banking subsidiary, Hancock Whitney Bank (“Hancock Whitney”), acquired certain assets and assumed certain liabilities, including nine branches, from First NBC Bank (“FNBC”), referred to as the FNBC I transaction. Hancock Whitney paid approximately $323 million in cash consideration ($326 million cash paid net of $3 million in branch cash acquired), including a $41.6 million transaction premium for the earnings stream acquired.
On April 28, 2017, the Louisiana Office of Financial Institutions (“OFI”) closed FNBC and appointed the FDIC as receiver. Hancock Whitney entered into a purchase and assumption agreement with the FDIC, referred to as the FNBC II transaction. Pursuant to the agreement, Hancock Whitney acquired selected assets and assumed selected liabilities of the former FNBC, including substantially all of the transaction and savings deposits. Hancock Whitney paid a premium of $35 million to the FDIC for the earnings stream acquired and received approximately $800 million in cash ($642 million from the FDIC for the net liabilities assumed and $158 million in branch cash acquired). The terms of the agreement require the FDIC to indemnify Hancock Whitney against certain liabilities of FNBC and its affiliates not assumed or otherwise purchased by Hancock Whitney. Neither the Company nor Hancock Whitney acquired any assets, common stock, preferred stock or debt, or assumed any other obligations, of First NBC Bank Holding Company.
On March 9, 2018, the Company sold its consumer finance subsidiary, Harrison Finance Company (“HFC”). The Company received cash of approximately $78.9 million and recorded a loss on the sale of $1.1 million.
3. Securities
The amortized cost, gross unrealized gains and losses, and estimated fair value of securities classified as available for sale and held to maturity at March 31, 2019 and December 31, 2018 follow.
Securities Available for Sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
| March 31, 2019 |
|
| December 31, 2018 |
| ||||||||||||||||||||||||||
|
|
|
|
|
| Gross |
|
| Gross |
|
|
|
|
|
|
|
|
| Gross |
|
|
|
|
|
|
|
|
| ||||
|
| Amortized |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
|
| Amortized |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
| ||||||||
|
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
|
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
| ||||||||
U.S. Treasury and government agency securities |
| $ | 73,426 |
|
|
| — |
|
|
| 1,283 |
|
| $ | 72,143 |
|
| $ | 74,339 |
|
| $ | — |
|
| $ | 2,633 |
|
| $ | 71,706 |
|
Municipal obligations |
|
| 245,707 |
|
|
| 1,833 |
|
|
| 1,600 |
|
|
| 245,940 |
|
|
| 246,713 |
|
|
| 360 |
|
|
| 6,646 |
|
|
| 240,427 |
|
Residential mortgage-backed securities |
|
| 1,418,881 |
|
|
| 9,964 |
|
|
| 15,813 |
|
|
| 1,413,032 |
|
|
| 1,468,912 |
|
|
| 4,284 |
|
|
| 29,794 |
|
|
| 1,443,402 |
|
Commercial mortgage-backed securities |
|
| 798,447 |
|
|
| 4,594 |
|
|
| 15,207 |
|
|
| 787,834 |
|
|
| 799,060 |
|
|
| 1,953 |
|
|
| 30,936 |
|
|
| 770,077 |
|
Collateralized mortgage obligations |
|
| 158,904 |
|
|
| 1,212 |
|
|
| 1,485 |
|
|
| 158,631 |
|
|
| 163,282 |
|
|
| 903 |
|
|
| 2,260 |
|
|
| 161,925 |
|
Corporate debt securities |
|
| 3,500 |
|
|
| — |
|
|
| — |
|
|
| 3,500 |
|
|
| 3,500 |
|
|
| — |
|
|
| — |
|
|
| 3,500 |
|
|
| $ | 2,698,865 |
|
| $ | 17,603 |
|
| $ | 35,388 |
|
| $ | 2,681,080 |
|
| $ | 2,755,806 |
|
| $ | 7,500 |
|
| $ | 72,269 |
|
| $ | 2,691,037 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| March 31, 2019 |
|
| December 31, 2018 |
| ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross |
|
| Gross |
|
|
|
|
|
|
|
|
| Gross |
|
|
|
|
|
|
|
|
| ||||
Securities Available for Sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||
Securities Held to Maturity |
| Amortized |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
|
| Amortized |
|
| Unrealized |
|
| Unrealized |
|
| Fair |
| ||||||||||||||||||||||||||||||||
(in thousands) |
| September 30, 2018 |
| December 31, 2017 |
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
|
| Cost |
|
| Gains |
|
| Losses |
|
| Value |
| ||||||||||||||||||||||||||||
|
|
|
| Gross |
| Gross |
|
|
|
|
| Gross |
| Gross |
|
| ||||||||||||||||||||||||||||||||||||||||
|
| Amortized |
| Unrealized |
| Unrealized |
| Fair |
| Amortized |
| Unrealized |
| Unrealized |
| Fair | ||||||||||||||||||||||||||||||||||||||||
|
| Cost |
| Gains |
| Losses |
| Value |
| Cost |
| Gains |
| Losses |
| Value | ||||||||||||||||||||||||||||||||||||||||
U.S. Treasury and government agency securities |
| $ | 94,366 |
|
| — |
|
| 5,054 |
|
| 89,312 |
| $ | 99,535 |
| $ | — |
| $ | 2,263 |
| $ | 97,272 |
| $ | 50,000 |
|
|
| — |
|
|
| 317 |
|
| $ | 49,683 |
|
| $ | 50,000 |
|
| $ | — |
|
| $ | 478 |
|
| $ | 49,522 |
|
Municipal obligations |
|
| 243,546 |
|
| 95 |
|
| 10,928 |
|
| 232,713 |
|
| 245,997 |
|
| 1,135 |
|
| 3,346 |
|
| 243,786 |
|
| 676,651 |
|
|
| 11,247 |
|
|
| 1,726 |
|
|
| 686,172 |
|
|
| 688,201 |
|
|
| 2,347 |
|
|
| 9,503 |
|
|
| 681,045 |
|
Residential mortgage-backed securities |
|
| 1,793,698 |
|
| 1,969 |
|
| 64,392 |
|
| 1,731,275 |
|
| 1,729,989 |
|
| 5,611 |
|
| 20,387 |
|
| 1,715,213 |
|
| 613,964 |
|
|
| 3,701 |
|
|
| 3,148 |
|
|
| 614,517 |
|
|
| 640,393 |
|
|
| 1,461 |
|
|
| 6,117 |
|
|
| 635,737 |
|
Commercial mortgage-backed securities |
|
| 770,245 |
|
| — |
|
| 47,363 |
|
| 722,882 |
|
| 704,518 |
|
| 480 |
|
| 17,863 |
|
| 687,135 |
|
| 356,919 |
|
|
| 1,233 |
|
|
| 3,780 |
|
|
| 354,372 |
|
|
| 357,175 |
|
|
| 376 |
|
|
| 10,882 |
|
|
| 346,669 |
|
Collateralized mortgage obligations |
|
| 143,496 |
|
| — |
|
| 4,993 |
|
| 138,503 |
|
| 165,518 |
|
| 4 |
|
| 1,559 |
|
| 163,963 |
|
| 1,198,908 |
|
|
| 3,285 |
|
|
| 14,027 |
|
|
| 1,188,166 |
|
|
| 1,243,778 |
|
|
| 1,598 |
|
|
| 22,493 |
|
|
| 1,222,883 |
|
Corporate debt securities |
|
| 3,500 |
|
| — |
|
| — |
|
| 3,500 |
|
| 3,500 |
|
| — |
|
| — |
|
| 3,500 | ||||||||||||||||||||||||||||||||
|
| $ | 3,048,851 |
| $ | 2,064 |
| $ | 132,730 |
| $ | 2,918,185 |
| $ | 2,949,057 |
| $ | 7,230 |
| $ | 45,418 |
| $ | 2,910,869 |
| $ | 2,896,442 |
|
| $ | 19,466 |
|
| $ | 22,998 |
|
| $ | 2,892,910 |
|
| $ | 2,979,547 |
|
| $ | 5,782 |
|
| $ | 49,473 |
|
| $ | 2,935,856 |
|
10
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities Held to Maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
(in thousands) |
| September 30, 2018 |
| December 31, 2017 | ||||||||||||||||||||
|
|
|
| Gross |
| Gross |
|
|
|
|
| Gross |
| Gross |
|
| ||||||||
|
| Amortized |
| Unrealized |
| Unrealized |
| Fair |
| Amortized |
| Unrealized |
| Unrealized |
| Fair | ||||||||
|
| Cost |
| Gains |
| Losses |
| Value |
| Cost |
| Gains |
| Losses |
| Value | ||||||||
U.S. Treasury and government agency securities |
| $ | 50,000 |
|
| — |
|
| 708 |
|
| 49,292 |
| $ | 50,000 |
| $ | — |
| $ | 289 |
| $ | 49,711 |
Municipal obligations |
|
| 699,470 |
|
| 355 |
|
| 17,809 |
|
| 682,016 |
|
| 723,094 |
|
| 8,323 |
|
| 4,245 |
|
| 727,172 |
Residential mortgage-backed securities |
|
| 668,320 |
|
| — |
|
| 15,501 |
|
| 652,819 |
|
| 725,748 |
|
| 4,175 |
|
| 2,690 |
|
| 727,233 |
Commercial mortgage-backed securities |
|
| 357,428 |
|
| — |
|
| 17,429 |
|
| 339,999 |
|
| 317,185 |
|
| 40 |
|
| 3,915 |
|
| 313,310 |
Collateralized mortgage obligations |
|
| 1,294,044 |
|
| — |
|
| 42,715 |
|
| 1,251,329 |
|
| 1,161,484 |
|
| 572 |
|
| 17,472 |
|
| 1,144,584 |
|
| $ | 3,069,262 |
| $ | 355 |
| $ | 94,162 |
| $ | 2,975,455 |
| $ | 2,977,511 |
| $ | 13,110 |
| $ | 28,611 |
| $ | 2,962,010 |
The following tables present the amortized cost and estimated fair value of debt securities available for sale and held to maturity at September 30, 2018March 31, 2019 by contractual maturity. Actual maturities will differ from contractual maturities because of rights to call or repay obligations with or without penalties and scheduled and unscheduled principal payments on mortgage-backed securities and collateralized mortgage obligations.
|
|
|
|
| ||||||||||
|
|
|
|
| ||||||||||
Debt Securities Available for Sale |
| Amortized |
| Fair |
| Amortized |
|
| Fair |
| ||||
(in thousands) |
| Cost |
| Value |
| Cost |
|
| Value |
| ||||
Due in one year or less |
| $ | 4,814 |
| $ | 4,820 |
| $ | 368 |
|
| $ | 374 |
|
Due after one year through five years |
| 54,339 |
| 54,077 |
|
| 107,225 |
|
|
| 108,866 |
| ||
Due after five years through ten years |
| 1,259,696 |
| 1,196,235 |
|
| 1,184,905 |
|
|
| 1,175,070 |
| ||
Due after ten years |
|
| 1,730,002 |
|
| 1,663,053 |
|
| 1,406,367 |
|
|
| 1,396,770 |
|
Total available for sale debt securities |
| $ | 3,048,851 |
| $ | 2,918,185 |
| $ | 2,698,865 |
|
| $ | 2,681,080 |
|
|
|
|
|
|
|
| ||||||||
Debt Securities Held to Maturity |
| Amortized |
| Fair | ||||||||||
(in thousands) |
| Cost |
| Value | ||||||||||
Due in one year or less |
| $ | 24,832 |
| $ | 24,909 | ||||||||
Due after one year through five years |
| 130,348 |
| 127,950 | ||||||||||
Due after five years through ten years |
| 1,452,690 |
| 1,407,279 | ||||||||||
Due after ten years |
|
| 1,461,392 |
|
| 1,415,317 | ||||||||
Total held to maturity securities |
| $ | 3,069,262 |
| $ | 2,975,455 |
Debt Securities Held to Maturity |
| Amortized |
|
| Fair |
| ||
(in thousands) |
| Cost |
|
| Value |
| ||
Due in one year or less |
| $ | 80,915 |
|
| $ | 80,716 |
|
Due after one year through five years |
|
| 67,617 |
|
|
| 67,418 |
|
Due after five years through ten years |
|
| 1,392,654 |
|
|
| 1,398,880 |
|
Due after ten years |
|
| 1,355,256 |
|
|
| 1,345,896 |
|
Total held to maturity securities |
| $ | 2,896,442 |
|
| $ | 2,892,910 |
|
The Company held no securities classified as trading at September 30, 2018 orMarch 31, 2019 and December 31, 2017.2018.
The fair value and gross unrealized losses for securities classified as available for sale with unrealized losses for the periods indicated follow.
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| ||||||||||||||||||||||||||||||
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|
|
|
|
| ||||||||||||||||||||||||||||||
Available for Sale |
|
|
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|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
| ||||||
September 30, 2018 |
| Losses < 12 months |
| Losses 12 months or > |
| Total | ||||||||||||||||||||||||||||||||||||
|
|
|
| Gross |
|
|
| Gross |
|
|
| Gross | ||||||||||||||||||||||||||||||
|
| Fair |
| Unrealized |
| Fair |
| Unrealized |
| Fair |
| Unrealized | ||||||||||||||||||||||||||||||
March 31, 2019 |
| Losses < 12 months |
|
| Losses 12 months or > |
|
| Total |
| |||||||||||||||||||||||||||||||||
(in thousands) |
| Value |
| Losses |
| Value |
| Losses |
| Value |
| Losses |
| Fair Value |
|
| Gross Unrealized Losses |
|
| Fair Value |
|
| Gross Unrealized Losses |
|
| Fair Value |
|
| Gross Unrealized Losses |
| ||||||||||||
U.S. Treasury and government agency securities |
| $ | 41,765 |
|
| 2,027 |
|
| 47,547 |
|
| 3,027 |
| $ | 89,312 |
| $ | 5,054 |
| $ | - |
|
|
| - |
|
|
| 72,143 |
|
|
| 1,283 |
|
| $ | 72,143 |
|
| $ | 1,283 |
|
Municipal obligations |
| 53,337 |
| 1,568 |
| 165,732 |
| 9,360 |
| 219,069 |
| 10,928 |
|
| 2,270 |
|
|
| 40 |
|
|
| 106,042 |
|
|
| 1,560 |
|
|
| 108,312 |
|
|
| 1,600 |
| ||||||
Residential mortgage-backed securities |
| 652,504 |
| 11,892 |
| 1,029,004 |
| 52,500 |
| 1,681,508 |
| 64,392 |
|
| 640 |
|
|
| 6 |
|
|
| 852,716 |
|
|
| 15,807 |
|
|
| 853,356 |
|
|
| 15,813 |
| ||||||
Commercial mortgage-backed securities |
| 247,504 |
| 8,368 |
| 475,379 |
| 38,995 |
| 722,883 |
| 47,363 |
|
| - |
|
|
| - |
|
|
| 583,978 |
|
|
| 15,207 |
|
|
| 583,978 |
|
|
| 15,207 |
| ||||||
Collateralized mortgage obligations |
|
| 82,853 |
|
| 2,836 |
|
| 55,650 |
|
| 2,157 |
|
| 138,503 |
|
| 4,993 |
|
| - |
|
|
| - |
|
|
| 108,798 |
|
|
| 1,485 |
|
|
| 108,798 |
|
|
| 1,485 |
|
|
| $ | 1,077,963 |
| $ | 26,691 |
| $ | 1,773,312 |
| $ | 106,039 |
| $ | 2,851,275 |
| $ | 132,730 |
| $ | 2,910 |
|
| $ | 46 |
|
| $ | 1,723,677 |
|
| $ | 35,342 |
|
| $ | 1,726,587 |
|
| $ | 35,388 |
|
Available for Sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018 |
| Losses < 12 months |
|
| Losses 12 months or > |
|
| Total |
| |||||||||||||||
|
|
|
|
|
| Gross |
|
|
|
|
|
| Gross |
|
| Gross |
|
|
|
|
| |||
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
| ||||||
(in thousands) |
| Value |
|
| Losses |
|
| Value |
|
| Losses |
|
| Value |
|
| Losses |
| ||||||
U.S. Treasury and government agency securities |
| $ | — |
|
|
| — |
|
| $ | 71,706 |
|
| $ | 2,633 |
|
| $ | 71,706 |
|
| $ | 2,633 |
|
Municipal obligations |
|
| 41,203 |
|
|
| 591 |
|
|
| 170,883 |
|
|
| 6,054 |
|
|
| 212,086 |
|
|
| 6,645 |
|
Residential mortgage-backed securities |
|
| 305,090 |
|
|
| 2,485 |
|
|
| 762,826 |
|
|
| 27,309 |
|
|
| 1,067,916 |
|
|
| 29,794 |
|
Commercial mortgage-backed securities |
|
| 96,226 |
|
|
| 1,851 |
|
|
| 570,485 |
|
|
| 29,085 |
|
|
| 666,711 |
|
|
| 30,936 |
|
Collateralized mortgage obligations |
|
| 254 |
|
|
| 1 |
|
|
| 111,804 |
|
|
| 2,259 |
|
|
| 112,058 |
|
|
| 2,260 |
|
|
| $ | 442,773 |
|
| $ | 4,928 |
|
| $ | 1,687,704 |
|
| $ | 67,340 |
|
| $ | 2,130,477 |
|
| $ | 72,268 |
|
11
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for Sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017 |
| Losses < 12 months |
| Losses 12 months or > |
| Total | ||||||||||||
|
|
|
| Gross |
|
|
| Gross |
|
|
| Gross | ||||||
|
| Fair |
| Unrealized |
| Fair |
| Unrealized |
| Fair |
| Unrealized | ||||||
(in thousands) |
| Value |
| Losses |
| Value |
| Losses |
| Value |
| Losses | ||||||
U.S. Treasury and government agency securities |
| $ | 45,616 |
| $ | 42 |
| $ | 51,157 |
| $ | 2,221 |
| $ | 96,773 |
| $ | 2,263 |
Municipal obligations |
|
| 2,768 |
|
| 11 |
|
| 173,530 |
|
| 3,335 |
|
| 176,298 |
|
| 3,346 |
Residential mortgage-backed securities |
|
| 461,835 |
|
| 4,195 |
|
| 898,099 |
|
| 16,192 |
|
| 1,359,934 |
|
| 20,387 |
Commercial mortgage-backed securities |
|
| 203,618 |
|
| 995 |
|
| 411,046 |
|
| 16,868 |
|
| 614,664 |
|
| 17,863 |
Collateralized mortgage obligations |
|
| 128,174 |
|
| 1,076 |
|
| 35,488 |
|
| 483 |
|
| 163,662 |
|
| 1,559 |
|
| $ | 842,011 |
| $ | 6,319 |
| $ | 1,569,320 |
| $ | 39,099 |
| $ | 2,411,331 |
| $ | 45,418 |
The fair value and gross unrealized losses for securities classified as held to maturity with unrealized losses for the periods indicated follow.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held to maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2018 |
| Losses < 12 months |
| Losses 12 months or > |
| Total | ||||||||||||
|
|
|
| Gross |
|
|
| Gross |
|
|
| Gross | ||||||
|
| Fair |
| Unrealized |
| Fair |
| Unrealized |
| Fair |
| Unrealized | ||||||
(in thousands) |
| Value |
| Losses |
| Value |
| Losses |
| Value |
| Losses | ||||||
U.S. Treasury and government agency securities |
| $ | — |
|
| — |
|
| 49,292 |
|
| 708 |
| $ | 49,292 |
| $ | 708 |
Municipal obligations |
|
| 378,622 |
|
| 7,288 |
|
| 217,955 |
|
| 10,521 |
|
| 596,577 |
|
| 17,809 |
Residential mortgage-backed securities |
|
| 454,003 |
|
| 6,996 |
|
| 198,816 |
|
| 8,505 |
|
| 652,819 |
|
| 15,501 |
Commercial mortgage-backed securities |
|
| 270,664 |
|
| 11,146 |
|
| 69,335 |
|
| 6,283 |
|
| 339,999 |
|
| 17,429 |
Collateralized mortgage obligations |
|
| 572,469 |
|
| 11,263 |
|
| 678,860 |
|
| 31,452 |
|
| 1,251,329 |
|
| 42,715 |
|
| $ | 1,675,758 |
| $ | 36,693 |
| $ | 1,214,258 |
| $ | 57,469 |
| $ | 2,890,016 |
| $ | 94,162 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
Held to maturity |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
December 31, 2017 |
| Losses < 12 months |
| Losses 12 months or > |
| Total | ||||||||||||||||||||||||||||||||||||
Held to Maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
March 31, 2019 |
| Losses < 12 months |
|
| Losses 12 months or > |
|
| Total |
| |||||||||||||||||||||||||||||||||
|
|
|
| Gross |
|
|
| Gross |
|
|
| Gross |
|
|
|
|
| Gross |
|
|
|
|
|
| Gross |
|
|
|
|
|
| Gross |
| |||||||||
|
| Fair |
| Unrealized |
| Fair |
| Unrealized |
| Fair |
| Unrealized |
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
| ||||||||||||
(in thousands) |
| Value |
| Losses |
| Value |
| Losses |
| Value |
| Losses |
| Value |
|
| Losses |
|
| Value |
|
| Losses |
|
| Value |
|
| Losses |
| ||||||||||||
U.S. Treasury and government agency securities |
| $ | — |
| $ | — |
| $ | 49,711 |
| $ | 289 |
| $ | 49,711 |
| $ | 289 |
| $ | — |
|
|
| — |
|
| $ | 49,682 |
|
| $ | 317 |
|
| $ | 49,682 |
|
| $ | 317 |
|
Municipal obligations |
| 14,603 |
| 19 |
| 230,960 |
| 4,226 |
| 245,563 |
| 4,245 |
|
| 8,750 |
|
|
| 63 |
|
|
| 169,931 |
|
|
| 1,663 |
|
|
| 178,681 |
|
|
| 1,726 |
| ||||||
Residential mortgage-backed securities |
| 8,815 |
| 99 |
| 230,277 |
| 2,591 |
| 239,092 |
| 2,690 |
|
| — |
|
|
| — |
|
|
| 186,221 |
|
|
| 3,148 |
|
|
| 186,221 |
|
|
| 3,148 |
| ||||||
Commercial mortgage-backed securities |
| 174,882 |
| 744 |
| 72,499 |
| 3,171 |
| 247,381 |
| 3,915 |
|
| — |
|
|
| — |
|
|
| 312,296 |
|
|
| 3,780 |
|
|
| 312,296 |
|
|
| 3,780 |
| ||||||
Collateralized mortgage obligations |
|
| 570,289 |
|
| 5,653 |
|
| 472,536 |
|
| 11,819 |
|
| 1,042,825 |
|
| 17,472 |
|
| — |
|
|
| — |
|
|
| 860,183 |
|
|
| 14,027 |
|
|
| 860,183 |
|
|
| 14,027 |
|
|
| $ | 768,589 |
| $ | 6,515 |
| $ | 1,055,983 |
| $ | 22,096 |
| $ | 1,824,572 |
|
| 28,611 |
| $ | 8,750 |
|
| $ | 63 |
|
| $ | 1,578,313 |
|
| $ | 22,935 |
|
| $ | 1,587,063 |
|
| $ | 22,998 |
|
Held to Maturity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
December 31, 2018 |
| Losses < 12 months |
|
| Losses 12 months or > |
|
| Total |
| |||||||||||||||||||||||||||||||||
|
|
|
|
|
| Gross |
|
| Gross |
|
|
|
|
|
| Gross |
|
|
|
|
| |||||||||||||||||||||
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
| ||||||||||||||||||||||||
(in thousands) |
| Value |
|
| Losses |
|
| Value |
|
| Losses |
|
| Value |
|
| Losses |
| ||||||||||||||||||||||||
U.S. Treasury and government agency securities |
| $ | — |
|
| $ | — |
|
| $ | 49,521 |
|
| $ | 478 |
|
| $ | 49,521 |
|
| $ | 478 |
| ||||||||||||||||||
Municipal obligations |
|
| 233,469 |
|
|
| 2,256 |
|
|
| 233,280 |
|
|
| 7,247 |
|
|
| 466,749 |
|
|
| 9,503 |
| ||||||||||||||||||
Residential mortgage-backed securities |
|
| 90,730 |
|
|
| 123 |
|
|
| 235,251 |
|
|
| 5,994 |
|
|
| 325,981 |
|
|
| 6,117 |
| ||||||||||||||||||
Commercial mortgage-backed securities |
|
| — |
|
|
| — |
|
|
| 305,419 |
|
|
| 10,882 |
|
|
| 305,419 |
|
|
| 10,882 |
| ||||||||||||||||||
Collateralized mortgage obligations |
|
| 77,394 |
|
|
| 281 |
|
|
| 897,153 |
|
|
| 22,212 |
|
|
| 974,547 |
|
|
| 22,493 |
| ||||||||||||||||||
|
| $ | 401,593 |
|
| $ | 2,660 |
|
| $ | 1,720,624 |
|
| $ | 46,813 |
|
| $ | 2,122,217 |
|
| $ | 49,473 |
|
The unrealized losses relate primarily to changes in market rates on fixed rate debt securities since the respective purchase dates. In all cases, the indicated impairment on these debt securities would be recovered no later than the security’s maturity date or possibly earlier if the market price for the security increases with a reduction in the yield required by the market. None of the unrealized losses relate to the marketability of the securities or the issuers’ abilities to meet contractual obligations. The Company had adequate liquidity as of September 30, 2018March 31, 2019 and December 31, 20172018 and did not intend to nor believe that it would be required to sell these securities before recovery of the indicated impairment. Accordingly, the unrealized losses on these securities were determined to be temporary. Should the Company’s intent to sell these securities change, the difference between the amortized cost and the fair value will be recognized into earnings at that time.
There were no sales of securities during the ninethree months ended September 30,March 31, 2019 and 2018. Proceeds from the sales of securities were approximately $213.9 million with no gain or loss for the nine months ended September 30, 2017.
Securities with carrying values totaling $3.1$3.7 billion and $3.3$3.4 billion at September 30, 2018March 31, 2019 and December 31, 2017,2018, respectively, were pledged as collateral, primarily to secure public deposits or securities sold under agreements to repurchase.
13
4. Loans and Allowance for Loan Losses
The Company generally makes loans in its market areas of south Mississippi, southern and central Alabama, south Louisiana, the Houston, Texas area, the northern, central, and panhandle regions of Florida, and Nashville, Tennessee. Loans, net of unearned income, by portfolio are presented in the table below.
|
|
|
|
| ||||||||||
|
|
|
|
| ||||||||||
|
| September 30, |
| December 31, |
| March 31, |
|
| December 31, |
| ||||
(in thousands) |
| 2018 |
| 2017 |
| 2019 |
|
| 2018 |
| ||||
Commercial non-real estate |
| $ | 8,438,884 |
| $ | 8,297,937 |
| $ | 8,656,326 |
|
| $ | 8,620,601 |
|
Commercial real estate - owner occupied |
|
| 2,300,271 |
|
| 2,142,439 |
|
| 2,515,428 |
|
|
| 2,457,748 |
|
Total commercial and industrial |
|
| 10,739,155 |
|
| 10,440,376 |
|
| 11,171,754 |
|
|
| 11,078,349 |
|
Commercial real estate - income producing |
| 2,311,699 |
| 2,384,599 |
|
| 2,563,394 |
|
|
| 2,341,779 |
| ||
Construction and land development |
| 1,523,419 |
| 1,373,421 |
|
| 1,340,067 |
|
|
| 1,548,335 |
| ||
Residential mortgages |
| 2,846,916 |
| 2,690,472 |
|
| 2,933,251 |
|
|
| 2,910,081 |
| ||
Consumer |
|
| 2,122,528 |
|
| 2,115,295 |
|
| 2,104,372 |
|
|
| 2,147,867 |
|
Total loans |
| $ | 19,543,717 |
| $ | 19,004,163 |
| $ | 20,112,838 |
|
| $ | 20,026,411 |
|
12
The following briefly describes the composition of each loan category.
Commercial and industrial
Commercial and industrial loans are made available to businesses for working capital (including financing of inventory and receivables), business expansion, to facilitate the acquisition of a business, and the purchase of equipment and machinery, including equipment leasing. These loans are primarily made based on the identified cash flows of the borrower and, when secured, have the added strength of the underlying collateral.
Commercial non-real estate loans may be secured by the assets being financed or other tangible or intangible business assets such as accounts receivable, inventory, ownership, enterprise value or commodity interests, and may incorporate a personal or corporate guarantee; however, some short-term loans may be made on an unsecured basis, including a small portfolio of corporate credit cards, generally issued as a part of overall customer relationships.
Commercial real estate – owner occupied loans consist of commercial mortgages on properties where repayment is generally dependent on the cash flow from the ongoing operations and activities of the borrower. Like commercial non-real estate, these loans are primarily made based on the identified cash flows of the borrower, but also have the added strength of the value of underlying real estate collateral.
Commercial real estate – income producing
Commercial real estate – income producing loans consist of loans secured by commercial mortgages on properties where the loan is made to real estate developers or investors and repayment is dependent on the sale, refinance, or income generated from the operation of the property. Properties financed include retail, office, multifamily, senior housing, hotel/motel, skilled nursing facilities and other commercial properties.
Construction and land development
Construction and land development loans are made to facilitate the acquisition, development, improvement and construction of both commercial and residential-purpose properties. Such loans are made to builders and investors where repayment is expected to be made from the sale, refinance or operation of the property or to businesses to be used in their business operations. This portfolio also includes a small amount of residential construction loans and loans secured by raw land not yet under development.
Residential mortgages
Residential mortgages consist of closed-end loans secured by first liens on 1- 4 family residential properties. The portfolio includes both fixed and adjustable rate loans, although most longer term, fixed rate loans originated are sold in the secondary mortgage market.
Consumer
Consumer loans include second lien mortgage home loans, home equity lines of credit and nonresidential consumer purpose loans. Nonresidential consumer loans include both direct and indirect loans. Direct nonresidential consumer loans are made to finance the purchase of personal property, including automobiles, recreational vehicles and boats, and for other personal purposes (secured and unsecured), and deposit account secured loans. Indirect nonresidential consumer loans include automobile financing provided to the consumer through an agreement with automobile dealerships. Consumer loans also include a small portfolio of credit card receivables issued on the basis of applications received through referrals from the Bank’s branches, online and other marketing efforts.
13
14
The following tables show activity in the allowance for loan losses by portfolio class for the ninethree months ended September 30,March 31, 2019 and 2018, and 2017, as well as the corresponding recorded investment in loans at the end of each period. Charge-off, recovery and provision activity in the purchased credit impaired portfolio previously segregated has been collapsed into the remainder of the portfolio’s activity as it is no longer material, and the respective reclassifications have been made to the prior period to conform to the current presentation.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
|
|
|
|
| Commercial |
|
|
|
| Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commercial |
|
| Total |
|
| Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
| Commercial |
| real estate- |
| Total |
| real estate- |
| Construction |
|
|
|
|
|
|
|
|
|
| Commercial |
|
| real estate- |
|
| commercial |
|
| real estate- |
|
| Construction |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
|
| non-real |
| owner |
| commercial |
| income |
| and land |
| Residential |
|
|
|
|
|
|
| non-real |
|
| owner |
|
| and |
|
| income |
|
| and land |
|
| Residential |
|
|
|
|
|
|
|
|
| |||||||||||
(in thousands) |
| estate |
| occupied |
| and industrial |
| producing |
| development |
| mortgages |
| Consumer |
| Total |
| estate |
|
| occupied |
|
| industrial |
|
| producing |
|
| development |
|
| mortgages |
|
| Consumer |
|
| Total |
| ||||||||||||||||
|
| Nine Months Ended September 30, 2018 |
| Three Months Ended March 31, 2019 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
| $ | 127,918 |
| $ | 12,962 |
| $ | 140,880 |
| $ | 13,709 |
| $ | 7,372 |
| $ | 24,844 |
| $ | 30,503 |
| $ | 217,308 |
| $ | 97,752 |
|
| $ | 13,757 |
|
| $ | 111,509 |
|
| $ | 17,638 |
|
| $ | 15,647 |
|
| $ | 23,782 |
|
| $ | 25,938 |
|
| $ | 194,514 |
|
Charge-offs |
|
| (15,401) |
|
| (7,330) |
|
| (22,731) |
|
| (1,633) |
|
| (265) |
|
| (585) |
|
| (18,599) |
|
| (43,813) |
|
| (16,344 | ) |
|
| — |
|
|
| (16,344 | ) |
|
| (10 | ) |
|
| — |
|
|
| (406 | ) |
|
| (4,231 | ) |
|
| (20,991 | ) |
Recoveries |
|
| 13,234 |
|
| 282 |
|
| 13,516 |
|
| 221 |
|
| 68 |
|
| 1,854 |
|
| 4,028 |
|
| 19,687 |
|
| 1,926 |
|
|
| 17 |
|
|
| 1,943 |
|
|
| 2 |
|
|
| 11 |
|
|
| 162 |
|
|
| 1,004 |
|
|
| 3,122 |
|
Net provision for loan losses |
|
| (5,073) |
|
| 7,203 |
|
| 2,130 |
|
| 6,288 |
|
| 6,248 |
|
| (1,803) |
|
| 15,153 |
|
| 28,016 |
|
| 14,186 |
|
|
| 33 |
|
|
| 14,219 |
|
|
| 3,173 |
|
|
| (1,631 | ) |
|
| (3 | ) |
|
| 2,285 |
|
|
| 18,043 |
|
Reduction as a result of sale of subsidiary |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (6,648) |
|
| (6,648) | ||||||||||||||||||||||||||||||||
Ending balance |
| $ | 120,678 |
| $ | 13,117 |
| $ | 133,795 |
| $ | 18,585 |
| $ | 13,423 |
| $ | 24,310 |
| $ | 24,437 |
| $ | 214,550 |
| $ | 97,520 |
|
| $ | 13,807 |
|
| $ | 111,327 |
|
| $ | 20,803 |
|
| $ | 14,027 |
|
| $ | 23,535 |
|
| $ | 24,996 |
|
| $ | 194,688 |
|
Ending balance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance: |
| September 30, 2018 |
|
|
| |||||||||||||||||||||||||||||||||||||||||||||||||||
Individually evaluated for impairment |
| $ | 23,101 |
| $ | 225 |
| $ | 23,326 |
| $ | 285 |
| $ | 1 |
| $ | 163 |
| $ | 131 |
| $ | 23,906 |
| $ | 1,775 |
|
| $ | 205 |
|
| $ | 1,980 |
|
| $ | 143 |
|
| $ | 1 |
|
| $ | 219 |
|
| $ | 347 |
|
| $ | 2,690 |
|
Amounts related to purchased credit impaired loans |
|
| 327 |
|
| 403 |
|
| 730 |
|
| 45 |
|
| 91 |
|
| 10,109 |
|
| 433 |
|
| 11,408 |
|
| 288 |
|
|
| 185 |
|
|
| 473 |
|
|
| 35 |
|
|
| 78 |
|
|
| 9,162 |
|
|
| 341 |
|
|
| 10,089 |
|
Collectively evaluated for impairment |
|
| 97,250 |
|
| 12,489 |
|
| 109,739 |
|
| 18,255 |
|
| 13,331 |
|
| 14,038 |
|
| 23,873 |
|
| 179,236 |
|
| 95,457 |
|
|
| 13,417 |
|
|
| 108,874 |
|
|
| 20,625 |
|
|
| 13,948 |
|
|
| 14,154 |
|
|
| 24,308 |
|
|
| 181,909 |
|
Total allowance |
| $ | 120,678 |
| $ | 13,117 |
| $ | 133,795 |
| $ | 18,585 |
| $ | 13,423 |
| $ | 24,310 |
| $ | 24,437 |
| $ | 214,550 |
| $ | 97,520 |
|
| $ | 13,807 |
|
| $ | 111,327 |
|
| $ | 20,803 |
|
| $ | 14,027 |
|
| $ | 23,535 |
|
| $ | 24,996 |
|
| $ | 194,688 |
|
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment |
| $ | 275,966 |
| $ | 22,437 |
| $ | 298,403 |
| $ | 4,615 |
| $ | 112 |
| $ | 3,061 |
| $ | 890 |
| $ | 307,081 |
| $ | 231,506 |
|
| $ | 16,974 |
|
| $ | 248,480 |
|
| $ | 2,668 |
|
| $ | 19 |
|
| $ | 5,397 |
|
| $ | 1,508 |
|
| $ | 258,072 |
|
Purchased credit impaired loans |
|
| 7,907 |
|
| 7,113 |
|
| 15,020 |
|
| 3,790 |
|
| 4,232 |
|
| 107,535 |
|
| 4,458 |
|
| 135,035 |
|
| 6,445 |
|
|
| 5,472 |
|
|
| 11,917 |
|
|
| 4,267 |
|
|
| 2,897 |
|
|
| 102,199 |
|
|
| 3,615 |
|
|
| 124,895 |
|
Collectively evaluated for impairment |
|
| 8,155,011 |
|
| 2,270,721 |
|
| 10,425,732 |
|
| 2,303,294 |
|
| 1,519,075 |
|
| 2,736,320 |
|
| 2,117,180 |
|
| 19,101,601 |
|
| 8,418,375 |
|
|
| 2,492,982 |
|
|
| 10,911,357 |
|
|
| 2,556,459 |
|
|
| 1,337,151 |
|
|
| 2,825,655 |
|
|
| 2,099,249 |
|
|
| 19,729,871 |
|
Total loans |
| $ | 8,438,884 |
| $ | 2,300,271 |
| $ | 10,739,155 |
| $ | 2,311,699 |
| $ | 1,523,419 |
| $ | 2,846,916 |
| $ | 2,122,528 |
| $ | 19,543,717 |
| $ | 8,656,326 |
|
| $ | 2,515,428 |
|
| $ | 11,171,754 |
|
| $ | 2,563,394 |
|
| $ | 1,340,067 |
|
| $ | 2,933,251 |
|
| $ | 2,104,372 |
|
| $ | 20,112,838 |
|
|
|
|
|
|
| Commercial |
|
| Total |
|
| Commercial |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
| Commercial |
|
| real estate- |
|
| commercial |
|
| real estate- |
|
| Construction |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
| non-real |
|
| owner |
|
| and |
|
| income |
|
| and land |
|
| Residential |
|
|
|
|
|
|
|
|
| ||||||
(in thousands) |
| estate |
|
| occupied |
|
| industrial |
|
| producing |
|
| development |
|
| mortgages |
|
| Consumer |
|
| Total |
| ||||||||
|
| Three Months Ended March 31, 2018 |
| |||||||||||||||||||||||||||||
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
| $ | 127,918 |
|
| $ | 12,962 |
|
| $ | 140,880 |
|
| $ | 13,709 |
|
| $ | 7,372 |
|
| $ | 24,844 |
|
| $ | 30,503 |
|
| $ | 217,308 |
|
Charge-offs |
|
| (9,335 | ) |
|
| (851 | ) |
|
| (10,186 | ) |
|
| — |
|
|
| (10 | ) |
|
| (192 | ) |
|
| (8,048 | ) |
|
| (18,436 | ) |
Recoveries |
|
| 4,146 |
|
|
| 88 |
|
|
| 4,234 |
|
|
| 63 |
|
|
| 29 |
|
|
| 116 |
|
|
| 1,794 |
|
|
| 6,236 |
|
Net provision for loan losses |
|
| 3,877 |
|
|
| 1,421 |
|
|
| 5,298 |
|
|
| (787 | ) |
|
| 2,533 |
|
|
| 150 |
|
|
| 5,059 |
|
|
| 12,253 |
|
Reduction as a result of sale of subsidiary |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (6,648 | ) |
|
| (6,648 | ) |
Ending balance |
| $ | 126,606 |
|
| $ | 13,620 |
|
| $ | 140,226 |
|
| $ | 12,985 |
|
| $ | 9,924 |
|
| $ | 24,918 |
|
| $ | 22,660 |
|
| $ | 210,713 |
|
Ending balance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment |
| $ | 20,356 |
|
| $ | 2,475 |
|
| $ | 22,831 |
|
| $ | 1,261 |
|
| $ | 1 |
|
| $ | 276 |
|
| $ | 232 |
|
| $ | 24,601 |
|
Amounts related to purchased credit impaired loans |
|
| 471 |
|
|
| 495 |
|
|
| 966 |
|
|
| 576 |
|
|
| 173 |
|
|
| 11,720 |
|
|
| 612 |
|
|
| 14,047 |
|
Collectively evaluated for impairment |
|
| 105,779 |
|
|
| 10,650 |
|
|
| 116,429 |
|
|
| 11,148 |
|
|
| 9,750 |
|
|
| 12,922 |
|
|
| 21,816 |
|
|
| 172,065 |
|
Total allowance |
| $ | 126,606 |
|
| $ | 13,620 |
|
| $ | 140,226 |
|
| $ | 12,985 |
|
| $ | 9,924 |
|
| $ | 24,918 |
|
| $ | 22,660 |
|
| $ | 210,713 |
|
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment |
| $ | 323,913 |
|
| $ | 30,318 |
|
| $ | 354,231 |
|
| $ | 14,071 |
|
| $ | 113 |
|
| $ | 8,338 |
|
| $ | 617 |
|
| $ | 377,370 |
|
Purchased credit impaired loans |
|
| 8,510 |
|
|
| 8,384 |
|
|
| 16,894 |
|
|
| 4,361 |
|
|
| 5,843 |
|
|
| 116,409 |
|
|
| 5,876 |
|
|
| 149,383 |
|
Collectively evaluated for impairment |
|
| 8,003,799 |
|
|
| 2,146,841 |
|
|
| 10,150,640 |
|
|
| 2,376,430 |
|
|
| 1,407,922 |
|
|
| 2,608,074 |
|
|
| 2,022,685 |
|
|
| 18,565,751 |
|
Total loans |
| $ | 8,336,222 |
|
| $ | 2,185,543 |
|
| $ | 10,521,765 |
|
| $ | 2,394,862 |
|
| $ | 1,413,878 |
|
| $ | 2,732,821 |
|
| $ | 2,029,178 |
|
| $ | 19,092,504 |
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Commercial |
|
|
|
| Commercial |
|
|
|
|
|
|
|
|
|
|
|
| ||
|
| Commercial |
| real estate- |
| Total |
| real estate- |
| Construction |
|
|
|
|
|
|
|
|
| |||||
|
| non-real |
| owner |
| commercial |
| income |
| and land |
| Residential |
|
|
|
|
|
| ||||||
(in thousands) |
| estate |
| occupied |
| and industrial |
| producing |
| development |
| mortgages |
| Consumer |
| Total | ||||||||
|
| Nine Months Ended September 30, 2017 | ||||||||||||||||||||||
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
| $ | 147,052 |
| $ | 11,083 |
| $ | 158,135 |
| $ | 13,509 |
| $ | 6,271 |
| $ | 25,361 |
| $ | 26,142 |
| $ | 229,418 |
Charge-offs |
|
| (35,247) |
|
| (527) |
|
| (35,774) |
|
| (160) |
|
| (670) |
|
| (2,485) |
|
| (22,844) |
|
| (61,933) |
Recoveries |
|
| 6,442 |
|
| 447 |
|
| 6,889 |
|
| 655 |
|
| 1,050 |
|
| 339 |
|
| 5,248 |
|
| 14,181 |
Net provision for loan losses |
|
| 15,895 |
|
| 2,556 |
|
| 18,451 |
|
| 486 |
|
| (70) |
|
| 4,163 |
|
| 20,952 |
|
| 43,982 |
Decrease in FDIC loss share receivable |
|
| (47) |
|
| — |
|
| (47) |
|
| — |
|
| — |
|
| (2,344) |
|
| (135) |
|
| (2,526) |
Ending balance |
| $ | 134,095 |
| $ | 13,559 |
| $ | 147,654 |
| $ | 14,490 |
| $ | 6,581 |
| $ | 25,034 |
| $ | 29,363 |
| $ | 223,122 |
Ending balance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment |
| $ | 20,880 |
| $ | 477 |
| $ | 21,357 |
| $ | 1,321 |
| $ | 1 |
| $ | 406 |
| $ | 405 |
| $ | 23,490 |
Amounts related to purchased credit impaired loans |
|
| 417 |
|
| 784 |
|
| 1,201 |
|
| 199 |
|
| 254 |
|
| 12,795 |
|
| 863 |
|
| 15,312 |
Collectively evaluated for impairment |
|
| 112,798 |
|
| 12,298 |
|
| 125,096 |
|
| 12,970 |
|
| 6,326 |
|
| 11,833 |
|
| 28,095 |
|
| 184,320 |
Total allowance |
| $ | 134,095 |
| $ | 13,559 |
| $ | 147,654 |
| $ | 14,490 |
| $ | 6,581 |
| $ | 25,034 |
| $ | 29,363 |
| $ | 223,122 |
Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment |
| $ | 271,024 |
| $ | 6,351 |
| $ | 277,375 |
| $ | 14,295 |
| $ | 480 |
| $ | 8,942 |
| $ | 1,306 |
| $ | 302,398 |
Purchased credit impaired loans |
|
| 20,186 |
|
| 13,021 |
|
| 33,207 |
|
| 5,353 |
|
| 6,670 |
|
| 123,244 |
|
| 7,637 |
|
| 176,111 |
Collectively evaluated for impairment |
|
| 7,838,219 |
|
| 2,056,642 |
|
| 9,894,861 |
|
| 2,492,160 |
|
| 1,365,898 |
|
| 2,464,506 |
|
| 2,090,351 |
|
| 18,307,776 |
Total loans |
| $ | 8,129,429 |
| $ | 2,076,014 |
| $ | 10,205,443 |
| $ | 2,511,808 |
| $ | 1,373,048 |
| $ | 2,596,692 |
| $ | 2,099,294 |
| $ | 18,786,285 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
The following table shows the composition of nonaccrual loans by portfolio class. Purchased credit impaired loans accounted for in pools with an accretable yield are considered to be performing and are excluded from the table.
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
| ||||||||
|
| September 30, |
| December 31, |
| March 31, |
|
| December 31, |
| ||||
(in thousands) |
| 2018 |
| 2017 |
| 2019 |
|
| 2018 |
| ||||
Commercial non-real estate |
| $ | 126,429 |
| $ | 152,863 |
| $ | 126,992 |
|
| $ | 110,653 |
|
Commercial real estate - owner occupied |
|
| 20,719 |
|
| 25,989 |
|
| 14,466 |
|
|
| 16,895 |
|
Total commercial and industrial |
|
| 147,148 |
|
| 178,852 |
|
| 141,458 |
|
|
| 127,548 |
|
Commercial real estate - income producing |
|
| 3,941 |
|
| 14,574 |
|
| 4,205 |
|
|
| 4,991 |
|
Construction and land development |
|
| 3,249 |
|
| 3,807 |
|
| 2,013 |
|
|
| 2,146 |
|
Residential mortgages |
|
| 31,732 |
|
| 40,480 |
|
| 39,275 |
|
|
| 35,866 |
|
Consumer |
|
| 15,576 |
|
| 15,087 |
|
| 17,880 |
|
|
| 16,744 |
|
Total loans |
| $ | 201,646 |
| $ | 252,800 |
| $ | 204,831 |
|
| $ | 187,295 |
|
Nonaccrual loans include nonaccruing loans modified in troubled debt restructurings (“TDRs”) of $92.7$105.9 million and $99.2$85.5 million at September 30, 2018March 31, 2019 and December 31, 2017,2018, respectively. Total TDRs, both accruing and nonaccruing, were $254.9$223.4 million at September 30, 2018March 31, 2019 and $219.7$224.6 million at December 31, 2017.2018. All TDRs are individually evaluated for impairment. At September 30, 2018March 31, 2019 and December 31, 2017,2018, the Company had unfunded commitments of $8.2$8.5 million and $7.3$2.1 million, respectively, to borrowers whose loan terms have been modified in a TDR.
The tables below detail by portfolio class TDRs that were modified during the three and nine months ended September 30, 2018March 31, 2019 and 2017:
2018:
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| Three Months Ended | ||||||||||||||||||||||
($ in thousands) |
| September 30, 2018 |
|
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| September 30, 2017 |
| ||||||||||||||||
|
|
|
|
| Pre-Modification |
| Post-Modification |
|
|
|
|
| Pre-Modification |
| Post-Modification | ||||||||
|
| Number |
|
| Outstanding |
| Outstanding |
|
| Number |
|
| Outstanding |
| Outstanding |
| |||||||
|
| of |
|
| Recorded |
| Recorded |
|
| of |
|
| Recorded |
| Recorded | ||||||||
Troubled Debt Restructurings: |
| Contracts |
|
| Investment |
| Investment |
| Contracts |
| Investment |
| Investment | ||||||||||
Commercial non-real estate |
| 11 |
|
| $ | 23,347 |
|
| $ | 23,347 |
|
|
| 13 |
|
|
| 42,148 |
|
|
| 42,148 |
|
Commercial real estate - owner occupied |
| 1 |
|
|
| 229 |
|
|
| 229 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total commercial and industrial |
| 12 |
|
|
| 23,576 |
|
|
| 23,576 |
|
|
| 13 |
|
|
| 42,148 |
|
|
| 42,148 |
|
Commercial real estate - income producing |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Construction and land development |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Residential mortgages |
| 8 |
|
|
| 930 |
|
|
| 930 |
|
|
| 7 |
|
|
| 970 |
|
|
| 970 |
|
Consumer |
| 6 |
|
|
| 89 |
|
|
| 89 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total loans |
| 26 |
|
| $ | 24,595 |
|
| $ | 24,595 |
|
|
| 20 |
|
|
| 43,118 |
|
|
| 43,118 |
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| ||||||||||||||||||||||||||||||
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| ||||||||||||||||||||||||||||||
| Nine Months Ended |
| Three Months Ended |
| ||||||||||||||||||||||||||||||||||||||||||
($ in thousands) |
| September 30, 2018 |
|
|
| September 30, 2017 |
| March 31, 2019 |
|
| March 31, 2018 |
| ||||||||||||||||||||||||||||||||||
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|
|
| Pre-Modification |
| Post-Modification |
|
|
|
|
| Pre-Modification |
| Post-Modification |
|
|
|
|
| Pre- Modification |
|
| Post- Modification |
|
|
|
|
|
| Pre- Modification |
|
| Post- Modification |
| |||||||||||
|
| Number |
|
| Outstanding |
| Outstanding |
|
| Number |
|
| Outstanding |
| Outstanding |
| Number |
|
| Outstanding |
|
| Outstanding |
|
| Number |
|
| Outstanding |
|
| Outstanding |
| |||||||||||||
|
| of |
|
| Recorded |
| Recorded |
|
| of |
|
| Recorded |
| Recorded |
| of |
|
| Recorded |
|
| Recorded |
|
| of |
|
| Recorded |
|
| Recorded |
| |||||||||||||
Troubled Debt Restructurings: |
| Contracts |
|
| Investment |
| Investment |
| Contracts |
| Investment |
| Investment |
| Contracts |
|
| Investment |
|
| Investment |
|
| Contracts |
|
| Investment |
|
| Investment |
| |||||||||||||||
Commercial non-real estate |
| 29 |
|
| $ | 85,306 |
|
| $ | 85,306 |
|
|
| 50 |
|
| $ | 135,926 |
|
| $ | 135,926 |
|
| 7 |
|
| $ | 13,803 |
|
| $ | 13,803 |
|
|
| 13 |
|
| $ | 55,482 |
|
| $ | 55,482 |
|
Commercial real estate - owner occupied |
| 2 |
|
|
| 6,138 |
|
| 6,138 |
|
|
| 4 |
|
|
| 3,734 |
|
| 3,734 |
|
| 1 |
|
|
| 167 |
|
|
| 167 |
|
|
| 1 |
|
|
| 5,909 |
|
|
| 5,909 |
| ||
Total commercial and industrial |
| 31 |
|
|
| 91,444 |
|
| 91,444 |
|
|
| 54 |
|
|
| 139,660 |
|
| 139,660 |
|
| 8 |
|
|
| 13,970 |
|
|
| 13,970 |
|
|
| 14 |
|
|
| 61,391 |
|
|
| 61,391 |
| ||
Commercial real estate - income producing |
| 1 |
|
|
| 1,564 |
|
| 1,564 |
|
|
| 5 |
|
|
| 5,684 |
|
| 5,684 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1 |
|
|
| 1,564 |
|
|
| 1,564 |
| ||
Construction and land development |
| — |
|
|
| — |
|
| — |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1 |
|
|
| 43 |
|
|
| 43 |
| |||
Residential mortgages |
| 11 |
|
|
| 1,048 |
|
| 1,048 |
|
|
| 13 |
|
| 2,068 |
|
| 2,068 |
|
| 5 |
|
|
| 1,264 |
|
|
| 1,264 |
|
|
| — |
|
|
| — |
|
|
| — |
| |||
Consumer |
| 7 |
|
|
| 311 |
|
| 311 |
|
|
| 1 |
|
|
| 40 |
|
| 42 |
|
| 2 |
|
|
| 46 |
|
|
| 46 |
|
|
| 1 |
|
|
| 222 |
|
|
| 222 |
| ||
Total loans |
| 50 |
|
| $ | 94,367 |
| $ | 94,367 |
|
|
| 73 |
|
| $ | 147,452 |
| $ | 147,454 |
|
| 15 |
|
| $ | 15,280 |
|
| $ | 15,280 |
|
|
| 17 |
|
| $ | 63,220 |
|
| $ | 63,220 |
|
The TDRs modified during the ninethree months ended September 30, 2018March 31, 2019 reflected in the table above include $50.7$0.1 million of loans with extended amortization terms or other payment concessions, $8.8 million with significant covenant waivers and $6.4 million with other modifications. The TDRs modified during the three months ended March 31, 2018 include $48.4 million of loans with extended amortization terms or other payment concessions, $14.6 million with significant covenant waivers and $29.1 million with other modifications. The TDRs modified during the nine months ended September 30, 2017 include $96.1 million of loans with extended amortization terms or other payment concessions, $50.1 million with significant covenant waivers and $1.3$0.2 million with other modifications.
16
One residential mortgage totaling $0.2 million and one owner-occupied commercial real estate loan totaling $1.9 million that defaulted during the nine months ended September 30, 2018 were modified in TDRs during the twelve months prior to default. There were no defaults on loans during the ninethree months ended September 30, 2017March 31, 2019 or 2018 that had been modified in a TDR during the prior twelve months.
15
The tables below present loans that are individually evaluated for impairment disaggregated by portfolio class at September 30, 2018March 31, 2019 and December 31, 2017.2018. Loans individually evaluated for impairment include TDRs and loans that are determined to be impaired and have aggregate relationship balances of $1 million or more.
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| ||||||||||||||||
| September 30, 2018 | ||||||||||||||||||||||||||
|
| Recorded investment |
|
| Recorded investment |
|
| Unpaid |
|
|
|
| March 31, 2019 |
| |||||||||||||
(in thousands) |
| without an allowance |
|
| with an allowance |
|
| principal balance |
|
| Related allowance |
| Recorded investment without an allowance |
|
| Recorded investment with an allowance |
|
| Unpaid principal balance |
|
| Related allowance |
| ||||
Commercial non-real estate | $ | 140,504 |
| $ | 135,462 |
| $ | 293,012 |
| $ | 23,101 |
| $ | 158,767 |
|
| $ | 72,739 |
|
| $ | 278,392 |
|
| $ | 1,775 |
|
Commercial real estate - owner occupied |
| 13,259 |
|
| 9,178 |
|
| 26,787 |
|
| 225 |
|
| 10,442 |
|
|
| 6,532 |
|
|
| 20,888 |
|
|
| 205 |
|
Total commercial and industrial |
| 153,763 |
|
| 144,640 |
|
| 319,799 |
|
| 23,326 |
|
| 169,209 |
|
|
| 79,271 |
|
|
| 299,280 |
|
|
| 1,980 |
|
Commercial real estate - income producing |
| 2,977 |
|
| 1,638 |
|
| 5,474 |
|
| 285 |
|
| 1,130 |
|
|
| 1,538 |
|
|
| 3,403 |
|
|
| 143 |
|
Construction and land development |
| 100 |
|
| 12 |
|
| 112 |
|
| 1 |
|
| - |
|
|
| 19 |
|
|
| 20 |
|
|
| 1 |
|
Residential mortgages |
| 1,482 |
|
| 1,579 |
|
| 3,609 |
|
| 163 |
|
| 3,630 |
|
|
| 1,767 |
|
|
| 5,942 |
|
|
| 219 |
|
Consumer |
| 279 |
|
| 611 |
|
| 1,136 |
|
| 131 |
|
| 471 |
|
|
| 1,037 |
|
|
| 1,753 |
|
|
| 347 |
|
Total loans | $ | 158,601 |
| $ | 148,480 |
| $ | 330,130 |
| $ | 23,906 |
| $ | 174,440 |
|
| $ | 83,632 |
|
| $ | 310,398 |
|
| $ | 2,690 |
|
|
|
|
|
|
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| ||||||||||||||||
|
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|
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|
|
|
|
|
| ||||||||||||||||
| December 31, 2017 | ||||||||||||||||||||||||||
|
| Recorded investment |
|
| Recorded investment |
|
| Unpaid |
|
|
| ||||||||||||||||
(in thousands) |
| without an allowance |
|
| with an allowance |
|
| principal balance |
|
| Related allowance | ||||||||||||||||
Commercial non-real estate | $ | 116,682 |
| $ | 151,199 |
| $ | 285,685 |
| $ | 16,129 | ||||||||||||||||
Commercial real estate - owner occupied |
| 16,927 |
|
| 4,564 |
|
| 24,829 |
|
| 793 | ||||||||||||||||
Total commercial and industrial |
| 133,609 |
|
| 155,763 |
|
| 310,514 |
|
| 16,922 | ||||||||||||||||
Commercial real estate - income producing |
| 5,101 |
|
| 10,429 |
|
| 15,687 |
|
| 1,326 | ||||||||||||||||
Construction and land development |
| 100 |
|
| 263 |
|
| 363 |
|
| 11 | ||||||||||||||||
Residential mortgages |
| 8,245 |
|
| 2,395 |
|
| 13,855 |
|
| 189 | ||||||||||||||||
Consumer |
| — |
|
| 1,292 |
|
| 1,294 |
|
| 118 | ||||||||||||||||
Total loans | $ | 147,055 |
| $ | 170,142 |
| $ | 341,713 |
| $ | 18,566 |
|
| December 31, 2018 |
| |||||||||||||
(in thousands) |
| Recorded investment without an allowance |
|
| Recorded investment with an allowance |
|
| Unpaid principal balance |
|
| Related allowance |
| ||||
Commercial non-real estate |
| $ | 144,625 |
|
| $ | 94,759 |
|
| $ | 273,290 |
|
| $ | 3,636 |
|
Commercial real estate - owner occupied |
|
| 13,027 |
|
|
| 8,639 |
|
|
| 25,888 |
|
|
| 607 |
|
Total commercial and industrial |
|
| 157,652 |
|
|
| 103,398 |
|
|
| 299,178 |
|
|
| 4,243 |
|
Commercial real estate - income producing |
|
| 1,138 |
|
|
| 1,563 |
|
|
| 3,428 |
|
|
| 210 |
|
Construction and land development |
|
| 100 |
|
|
| 21 |
|
|
| 121 |
|
|
| 1 |
|
Residential mortgages |
|
| 2,058 |
|
|
| 1,818 |
|
|
| 4,421 |
|
|
| 444 |
|
Consumer |
|
| 279 |
|
|
| 728 |
|
|
| 1,253 |
|
|
| 216 |
|
Total loans |
| $ | 161,227 |
|
| $ | 107,528 |
|
| $ | 308,401 |
|
| $ | 5,114 |
|
17
The tables below present the average balances and interest income for total impaired loans for the three and nine months ended September 30, 2018March 31, 2019 and 2017.2018. Interest income recognized represents interest on accruing loans modified in a TDR.
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|
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| Three Months Ended | ||||||||||
|
| September 30, 2018 |
| September 30, 2017 | ||||||||
(in thousands) |
| Average |
| Interest |
| Average |
| Interest | ||||
Commercial non-real estate |
| $ | 283,519 |
| $ | 2,275 |
| $ | 260,640 |
| $ | 872 |
Commercial real estate - owner occupied |
|
| 24,702 |
|
| 90 |
|
| 6,916 |
|
| 24 |
Total commercial and industrial |
|
| 308,221 |
|
| 2,365 |
|
| 267,556 |
|
| 896 |
Commercial real estate - income producing |
|
| 6,718 |
|
| 15 |
|
| 14,604 |
|
| 35 |
Construction and land development |
|
| 113 |
|
| — |
|
| 663 |
|
| 1 |
Residential mortgages |
|
| 3,397 |
|
| 4 |
|
| 6,204 |
|
| 7 |
Consumer |
|
| 745 |
|
| 10 |
|
| 1,179 |
|
| 4 |
Total loans |
| $ | 319,194 |
| $ | 2,394 |
| $ | 290,206 |
| $ | 943 |
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
| Nine Months Ended |
| Three Months Ended |
| |||||||||||||||||||||||
|
| September 30, 2018 |
| September 30, 2017 |
| March 31, 2019 |
|
| March 31, 2018 |
| ||||||||||||||||||
(in thousands) |
| Average |
| Interest |
| Average |
| Interest |
| Average Recorded Investment |
|
| Interest Income Recognized |
|
| Average Recorded Investment |
|
| Interest Income Recognized |
| ||||||||
Commercial non-real estate |
| $ | 295,636 |
| $ | 5,863 |
| $ | 251,129 |
| $ | 1,806 |
| $ | 235,445 |
|
| $ | 1,696 |
|
| $ | 295,897 |
|
| $ | 1,586 |
|
Commercial real estate - owner occupied |
|
| 26,416 |
|
| 258 |
|
| 5,895 |
|
| 46 |
|
| 19,320 |
|
|
| 80 |
|
|
| 25,905 |
|
|
| 66 |
|
Total commercial and industrial |
|
| 322,052 |
|
| 6,121 |
|
| 257,024 |
|
| 1,852 |
|
| 254,765 |
|
|
| 1,776 |
|
|
| 321,802 |
|
|
| 1,652 |
|
Commercial real estate - income producing |
|
| 10,988 |
|
| 64 |
|
| 14,449 |
|
| 112 |
|
| 2,685 |
|
|
| 7 |
|
|
| 14,801 |
|
|
| 25 |
|
Construction and land development |
| 155 |
| — |
| 1,216 |
| 1 |
|
| 70 |
|
|
| — |
|
|
| 238 |
|
|
| — |
| ||||
Residential mortgages |
| 6,307 |
| 14 |
| 4,449 |
| 12 |
|
| 4,637 |
|
|
| 5 |
|
|
| 9,489 |
|
|
| 5 |
| ||||
Consumer |
|
| 769 |
|
| 28 |
|
| 1,644 |
|
| 9 |
|
| 1,258 |
|
|
| 16 |
|
|
| 955 |
|
|
| 9 |
|
Total loans |
| $ | 340,271 |
| $ | 6,227 |
| $ | 278,782 |
| $ | 1,986 |
| $ | 263,415 |
|
| $ | 1,804 |
|
| $ | 347,285 |
|
| $ | 1,691 |
|
16
The tables below present the age analysis of past due loans by portfolio class at September 30, 2018March 31, 2019 and December 31, 2017.2018. Purchased credit impaired loans accounted for in pools with an accretable yield are considered to be current.
March 31, 2019 |
| 30-59 days past due |
|
| 60-89 days past due |
|
| Greater than 90 days past due |
|
| Total past due |
|
| Current |
|
| Total Loans |
|
| Recorded investment > 90 days and still accruing |
| |||||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial non-real estate |
| $ | 19,036 |
|
| $ | 2,527 |
|
| $ | 69,249 |
|
| $ | 90,812 |
|
| $ | 8,565,514 |
|
| $ | 8,656,326 |
|
| $ | 13,920 |
|
Commercial real estate - owner occupied |
|
| 4,543 |
|
|
| 561 |
|
|
| 16,336 |
|
|
| 21,440 |
|
|
| 2,493,988 |
|
|
| 2,515,428 |
|
|
| 3,937 |
|
Total commercial and industrial |
|
| 23,579 |
|
|
| 3,088 |
|
|
| 85,585 |
|
|
| 112,252 |
|
|
| 11,059,502 |
|
|
| 11,171,754 |
|
|
| 17,857 |
|
Commercial real estate - income producing |
|
| 6,124 |
|
|
| - |
|
|
| 5,854 |
|
|
| 11,978 |
|
|
| 2,551,416 |
|
|
| 2,563,394 |
|
|
| 1,876 |
|
Construction and land development |
|
| 8,328 |
|
|
| 186 |
|
|
| 1,757 |
|
|
| 10,271 |
|
|
| 1,329,796 |
|
|
| 1,340,067 |
|
|
| 721 |
|
Residential mortgages |
|
| 39,534 |
|
|
| 8,045 |
|
|
| 19,299 |
|
|
| 66,878 |
|
|
| 2,866,373 |
|
|
| 2,933,251 |
|
|
| 679 |
|
Consumer |
|
| 15,738 |
|
|
| 4,120 |
|
|
| 9,225 |
|
|
| 29,083 |
|
|
| 2,075,289 |
|
|
| 2,104,372 |
|
|
| 660 |
|
Total |
| $ | 93,303 |
|
| $ | 15,439 |
|
| $ | 121,720 |
|
| $ | 230,462 |
|
| $ | 19,882,376 |
|
| $ | 20,112,838 |
|
| $ | 21,793 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Recorded | |
|
|
|
|
|
| Greater than |
|
|
|
|
|
|
|
| investment | ||||||
|
| 30-59 days |
| 60-89 days |
| 90 days |
| Total |
|
|
| Total |
| > 90 days and | |||||||
September 30, 2018 |
| past due |
| past due |
| past due |
| past due |
| Current |
| Loans |
| still accruing | |||||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial non-real estate |
| $ | 10,752 |
| $ | 26,454 |
| $ | 116,791 |
| $ | 153,997 |
| $ | 8,284,887 |
| $ | 8,438,884 |
| $ | 27,606 |
Commercial real estate - owner occupied |
|
| 2,001 |
|
| 459 |
|
| 16,377 |
|
| 18,837 |
|
| 2,281,434 |
|
| 2,300,271 |
|
| 641 |
Total commercial and industrial |
|
| 12,753 |
|
| 26,913 |
|
| 133,168 |
|
| 172,834 |
|
| 10,566,321 |
|
| 10,739,155 |
|
| 28,247 |
Commercial real estate - income producing |
|
| 1,541 |
|
| 198 |
|
| 6,371 |
|
| 8,110 |
|
| 2,303,589 |
|
| 2,311,699 |
|
| 1,830 |
Construction and land development |
|
| 11,976 |
|
| 1,532 |
|
| 2,044 |
|
| 15,552 |
|
| 1,507,867 |
|
| 1,523,419 |
|
| 78 |
Residential mortgages |
|
| 36,632 |
|
| 11,976 |
|
| 18,006 |
|
| 66,614 |
|
| 2,780,302 |
|
| 2,846,916 |
|
| — |
Consumer |
|
| 14,582 |
|
| 4,919 |
|
| 9,162 |
|
| 28,663 |
|
| 2,093,865 |
|
| 2,122,528 |
|
| 371 |
Total |
| $ | 77,484 |
| $ | 45,538 |
| $ | 168,751 |
| $ | 291,773 |
| $ | 19,251,944 |
| $ | 19,543,717 |
| $ | 30,526 |
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Recorded | |||||||||||||||||||||||||||||
|
|
|
|
|
|
| Greater than |
|
|
|
|
|
|
|
| investment | |||||||||||||||||||||||||||||||||
|
| 30-59 days |
| 60-89 days |
| 90 days |
| Total |
|
|
| Total |
| > 90 days and | |||||||||||||||||||||||||||||||||||
December 31, 2017 |
| past due |
| past due |
| past due |
| past due |
| Current |
| Loans |
| still accruing | |||||||||||||||||||||||||||||||||||
December 31, 2018 |
| 30-59 days past due |
|
| 60-89 days past due |
|
| Greater than 90 days past due |
|
| Total past due |
|
| Current |
|
| Total Loans |
|
| Recorded investment > 90 days and still accruing |
| ||||||||||||||||||||||||||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial non-real estate |
| $ | 62,766 |
| $ | 10,761 |
| $ | 92,982 |
| $ | 166,509 |
| $ | 8,131,428 |
| $ | 8,297,937 |
| $ | 21,989 |
| $ | 12,257 |
|
| $ | 3,895 |
|
| $ | 77,551 |
|
| $ | 93,703 |
|
| $ | 8,526,898 |
|
|
| 8,620,601 |
|
| $ | 10,823 |
|
Commercial real estate - owner occupied |
|
| 8,493 |
|
| 648 |
|
| 15,517 |
|
| 24,658 |
|
| 2,117,781 |
|
| 2,142,439 |
|
| 2,032 |
|
| 2,394 |
|
|
| 1,570 |
|
|
| 14,542 |
|
|
| 18,506 |
|
|
| 2,439,242 |
|
|
| 2,457,748 |
|
|
| 380 |
|
Total commercial and industrial |
|
| 71,259 |
|
| 11,409 |
|
| 108,499 |
|
| 191,167 |
|
| 10,249,209 |
|
| 10,440,376 |
|
| 24,021 |
|
| 14,651 |
|
|
| 5,465 |
|
|
| 92,093 |
|
|
| 112,209 |
|
|
| 10,966,140 |
|
|
| 11,078,349 |
|
|
| 11,203 |
|
Commercial real estate - income producing |
|
| 5,315 |
|
| 2,165 |
|
| 6,081 |
|
| 13,561 |
|
| 2,371,038 |
|
| 2,384,599 |
|
| 489 |
|
| 2,371 |
|
|
| 772 |
|
|
| 5,495 |
|
|
| 8,638 |
|
|
| 2,333,141 |
|
|
| 2,341,779 |
|
|
| 1,844 |
|
Construction and land development |
|
| 4,113 |
|
| 1,056 |
|
| 3,412 |
|
| 8,581 |
|
| 1,364,840 |
|
| 1,373,421 |
|
| 477 |
|
| 7,397 |
|
|
| 1,129 |
|
|
| 2,165 |
|
|
| 10,691 |
|
|
| 1,537,644 |
|
|
| 1,548,335 |
|
|
| 644 |
|
Residential mortgages |
|
| 33,621 |
|
| 10,554 |
|
| 30,537 |
|
| 74,712 |
|
| 2,615,760 |
|
| 2,690,472 |
|
| 2,208 |
|
| 32,869 |
|
|
| 14,706 |
|
|
| 23,175 |
|
|
| 70,750 |
|
|
| 2,839,331 |
|
|
| 2,910,081 |
|
|
| — |
|
Consumer |
|
| 22,959 |
|
| 7,816 |
|
| 8,553 |
|
| 39,328 |
|
| 2,075,967 |
|
| 2,115,295 |
|
| 571 |
|
| 20,402 |
|
|
| 4,695 |
|
|
| 9,665 |
|
|
| 34,762 |
|
|
| 2,113,105 |
|
|
| 2,147,867 |
|
|
| 618 |
|
Total |
| $ | 137,267 |
| $ | 33,000 |
| $ | 157,082 |
| $ | 327,349 |
| $ | 18,676,814 |
| $ | 19,004,163 |
| $ | 27,766 |
| $ | 77,690 |
|
| $ | 26,767 |
|
| $ | 132,593 |
|
| $ | 237,050 |
|
| $ | 19,789,361 |
|
| $ | 20,026,411 |
|
| $ | 14,309 |
|
Credit Quality Indicators
The following tables present the credit quality indicators by segments and portfolio class of loans at September 30, 2018March 31, 2019 and December 31, 2017. 2018.
|
| March 31, 2019 |
| |||||||||||||||||||||
(in thousands) |
| Commercial non-real estate |
|
| Commercial real estate - owner- occupied |
|
| Total commercial and industrial |
|
| Commercial real estate - income producing |
|
| Construction and land development |
|
| Total commercial |
| ||||||
Grade: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
| $ | 8,028,706 |
|
| $ | 2,342,948 |
|
| $ | 10,371,654 |
|
| $ | 2,450,517 |
|
| $ | 1,319,519 |
|
| $ | 14,141,690 |
|
Pass-Watch |
|
| 166,406 |
|
|
| 91,434 |
|
|
| 257,840 |
|
|
| 81,718 |
|
|
| 9,743 |
|
|
| 349,301 |
|
Special Mention |
|
| 62,830 |
|
|
| 16,159 |
|
|
| 78,989 |
|
|
| 10,760 |
|
|
| 890 |
|
|
| 90,639 |
|
Substandard |
|
| 398,384 |
|
|
| 64,887 |
|
|
| 463,271 |
|
|
| 20,399 |
|
|
| 9,915 |
|
|
| 493,585 |
|
Doubtful |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total |
| $ | 8,656,326 |
|
| $ | 2,515,428 |
|
| $ | 11,171,754 |
|
| $ | 2,563,394 |
|
| $ | 1,340,067 |
|
| $ | 15,075,215 |
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
|
| September 30, 2018 |
| December 31, 2018 |
| ||||||||||||||||||||||||||||||||||||||
(in thousands) |
| Commercial non-real estate |
| Commercial real estate - owner-occupied |
| Total commercial and industrial |
| Commercial real estate - income producing |
| Construction and land development |
| Total commercial |
|
| Commercial non-real estate |
|
| Commercial real estate - owner- occupied |
|
| Total commercial and industrial |
|
| Commercial real estate - income producing |
|
| Construction and land development |
|
| Total commercial |
| ||||||||||||
Grade: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass |
| $ | 7,593,629 |
| $ | 2,106,568 |
| $ | 9,700,197 |
| $ | 2,211,829 |
| $ | 1,473,080 |
| $ | 13,385,106 |
|
| $ | 7,875,588 |
|
| $ | 2,274,211 |
|
| $ | 10,149,799 |
|
|
| 2,265,087 |
|
| $ | 1,487,599 |
|
| $ | 13,902,485 |
|
Pass-Watch |
|
| 201,226 |
|
| 70,831 |
|
| 272,057 |
|
| 46,155 |
|
| 37,100 |
|
| 355,312 |
|
|
| 260,510 |
|
|
| 84,271 |
|
|
| 344,781 |
|
|
| 46,535 |
|
|
| 49,099 |
|
|
| 440,415 |
|
Special Mention |
|
| 89,825 |
|
| 34,133 |
|
| 123,958 |
|
| 26,086 |
|
| 952 |
|
| 150,996 |
|
|
| 75,752 |
|
|
| 23,149 |
|
|
| 98,901 |
|
|
| 5,510 |
|
|
| 816 |
|
|
| 105,227 |
|
Substandard |
|
| 554,184 |
|
| 88,739 |
|
| 642,923 |
|
| 27,629 |
|
| 12,287 |
|
| 682,839 |
|
|
| 408,751 |
|
|
| 76,117 |
|
|
| 484,868 |
|
|
| 24,647 |
|
|
| 10,821 |
|
|
| 520,336 |
|
Doubtful |
|
| 20 |
|
| — |
|
| 20 |
|
| — |
|
| — |
|
| 20 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total |
| $ | 8,438,884 |
| $ | 2,300,271 |
| $ | 10,739,155 |
| $ | 2,311,699 |
| $ | 1,523,419 |
| $ | 14,574,273 |
|
| $ | 8,620,601 |
|
| $ | 2,457,748 |
|
| $ | 11,078,349 |
|
| $ | 2,341,779 |
|
| $ | 1,548,335 |
|
| $ | 14,968,463 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
|
| December 31, 2017 | |||||||||||||||||||||||||||||||||||||||||
(in thousands) |
| Commercial non-real estate |
| Commercial real estate - owner-occupied |
| Total commercial and industrial |
| Commercial real estate - income producing |
| Construction and land development |
| Total commercial |
| ||||||||||||||||||||||||||||||
Grade: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Pass |
| $ | 7,190,604 |
| $ | 1,896,366 |
| $ | 9,086,970 |
| $ | 2,223,245 |
| $ | 1,291,638 |
| $ | 12,601,853 |
| ||||||||||||||||||||||||
Pass-Watch |
|
| 293,069 |
|
| 82,913 |
|
| 375,982 |
|
| 83,444 |
|
| 60,804 |
|
| 520,230 |
| ||||||||||||||||||||||||
Special Mention |
|
| 80,649 |
|
| 27,456 |
|
| 108,105 |
|
| 13,244 |
|
| 4,788 |
|
| 126,137 |
| ||||||||||||||||||||||||
Substandard |
|
| 733,558 |
|
| 135,704 |
|
| 869,262 |
|
| 64,658 |
|
| 16,191 |
|
| 950,111 |
| ||||||||||||||||||||||||
Doubtful |
|
| 57 |
|
| — |
|
| 57 |
|
| 8 |
|
| — |
|
| 65 |
| ||||||||||||||||||||||||
Total |
| $ | 8,297,937 |
| $ | 2,142,439 |
| $ | 10,440,376 |
| $ | 2,384,599 |
| $ | 1,373,421 |
| $ | 14,198,396 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
|
| September 30, 2018 |
| December 31, 2017 |
| March 31, 2019 |
|
| December 31, 2018 |
| |||||||||||||||||||||||||||||||||
(in thousands) |
| Residential mortgage |
| Consumer |
| Total |
| Residential mortgage |
| Consumer |
| Total |
|
| Residential mortgage |
|
| Consumer |
|
| Total |
|
| Residential mortgage |
|
| Consumer |
|
| Total |
| ||||||||||||
Performing |
| $ | 2,815,184 |
| $ | 2,106,581 |
| $ | 4,921,765 |
| $ | 2,647,784 |
| $ | 2,099,637 |
| $ | 4,747,421 |
|
| $ | 2,893,635 |
|
| $ | 2,085,456 |
|
| $ | 4,979,091 |
|
| $ | 2,873,669 |
|
| $ | 2,130,395 |
|
| $ | 5,004,064 |
|
Nonperforming |
|
| 31,732 |
|
| 15,947 |
|
| 47,679 |
|
| 42,688 |
|
| 15,658 |
|
| 58,346 |
|
|
| 39,616 |
|
|
| 18,916 |
|
|
| 58,532 |
|
|
| 36,412 |
|
|
| 17,472 |
|
|
| 53,884 |
|
Total |
| $ | 2,846,916 |
| $ | 2,122,528 |
| $ | 4,969,444 |
| $ | 2,690,472 |
| $ | 2,115,295 |
| $ | 4,805,767 |
|
| $ | 2,933,251 |
|
| $ | 2,104,372 |
|
| $ | 5,037,623 |
|
| $ | 2,910,081 |
|
| $ | 2,147,867 |
|
| $ | 5,057,948 |
|
Below are the definitions of the Company’s internally assigned grades:
Commercial:
|
|
Pass – loans properly approved, documented, collateralized, and performing which do not reflect an abnormal credit risk.
|
|
Pass-Watch – credits in this category are of sufficient risk to cause concern. This category is reserved for credits that display negative performance trends. The “Watch” grade should be regarded as a transition category.
|
|
Special Mention – a criticized asset category defined as having potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may, at some future date, result in the deterioration of the repayment prospects for the credit or the institution’s credit position. Special mention credits are not considered part of the Classified credit categories and do not expose the institution to sufficient risk to warrant adverse classification.
Substandard – an asset that is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
Doubtful – an asset that has all the weaknesses inherent in one classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.
Loss – credits classified as Loss are considered uncollectable and are charged off promptly once so classified.
Residential and Consumer:
19Performing – accruing loans that have not been modified in a troubled debt restructuring.
Nonperforming – loans for which there are good reasons to doubt that payments will be made in full. All loans with nonaccrual status and all loans that have been modified in a troubled debt restructuring are classified as nonperforming.
18
|
|
|
|
|
|
Residential and Consumer:
|
|
|
|
Purchased Credit Impaired Loans
Changes in the carrying amount of purchased credit impaired loans and related accretable yield are presented in the following table for the ninethree months ended September 30, 2018March 31, 2019 and the year ended December 31, 2017.
2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
| September 30, 2018 |
| December 31, 2017 | ||||||||||||||||||||||||||
|
| Carrying |
|
|
|
| Carrying |
|
|
| ||||||||||||||||||||
|
| Amount |
| Accretable |
|
| Amount |
| Accretable |
|
| March 31, 2019 |
|
| December 31, 2018 |
| ||||||||||||||
(in thousands) |
| of Loans |
| Yield |
|
| of Loans |
| Yield |
|
| Carrying Amount of Loans |
|
| Accretable Yield |
|
| Carrying Amount of Loans |
|
| Accretable Yield |
| ||||||||
Balance at beginning of period |
| $ | 153,403 |
| $ | 62,517 |
|
| $ | 190,915 |
| $ | 113,686 |
|
| $ | 129,596 |
|
| $ | 37,294 |
|
| $ | 153,403 |
|
| $ | 62,517 |
|
Addition of cost recovery loans - FNBC I |
|
| — |
|
| — |
|
|
| 15,000 |
|
| — |
| ||||||||||||||||
Payments received, net |
|
| (30,448) |
|
| (4,564) |
|
|
| (69,591) |
|
| (7,412) |
|
|
| (8,286 | ) |
|
| (1,100 | ) |
|
| (39,556 | ) |
|
| (5,779 | ) |
Accretion |
|
| 12,080 |
|
| (12,080) |
|
|
| 17,079 |
|
| (17,079) |
|
|
| 3,584 |
|
|
| (3,584 | ) |
|
| 15,749 |
|
|
| (15,749 | ) |
Decrease in expected cash flows based on actual cash flows and changes in cash flow assumptions |
|
| — |
|
| (2,801) |
|
|
| — |
|
| (30,379) |
|
|
| — |
|
|
| (872 | ) |
|
| — |
|
|
| (3,695 | ) |
Net transfers from nonaccretable difference to accretable yield |
|
| — |
|
| — |
|
|
| — |
|
| 3,701 |
| ||||||||||||||||
Balance at end of period |
| $ | 135,035 |
| $ | 43,072 |
|
| $ | 153,403 |
| $ | 62,517 |
|
| $ | 124,894 |
|
| $ | 31,738 |
|
| $ | 129,596 |
|
| $ | 37,294 |
|
Certain of the Company’s purchased credit impaired loans were covered by a loss share agreement with the FDIC. The agreement was terminated by the Company during the third quarter of 2017. Prior to termination, the Company carried a receivable from the FDIC representing an indemnification asset arising from the agreement. The receivable was accounted for separately from the covered loans as the agreement was not contractually part of the loans and were not transferrable should the Company have disposed of the loans.
Residential Mortgage Loans in Process of Foreclosure
Included in loans are $6.9$7.3 million and $7.5$7.1 million of consumer loans secured by single family residential real estate that are in process of foreclosure as of September 30, 2018March 31, 2019 and December 31, 2017,2018, respectively. Loans in process of foreclosure include those for which formal foreclosure proceedings are in process according to local requirements of the applicable jurisdiction. In addition to the single family residential real estate loans in process of foreclosure, the Company also held $1.9$2.2 million and $3.4$1.8 million of foreclosed single family residential properties in other real estate owned as of September 30, 2018at March 31, 2019 and December 31, 2017,2018, respectively.
5. Operating Leases
Effective January 1, 2019, the Company adopted the amended provisions of Financial Accounting Standards Codification Topic 842, “Leases,” using the modified retrospective approach, impacting the reporting and disclosures for operating leases. The core principle of Topic 842 is that a lessee should recognize in the statement of financial position a liability representing the present value of future lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset over the lease term, as well as the disclosure of key information about operating leasing arrangements.
The Company has amended its accounting policy related to leases to comply with the new standard as follows. The Company determines if an arrangement is a lease at inception of the contract and assesses the appropriate classification as finance or operating. Operating leases with terms greater than one year are included in right-of-use lease assets and lease obligations on the Company’s balance sheets. The lease term includes payments to be made in optional or renewal periods only if the lessee is reasonably certain to exercise an option to extend the lease or not to exercise an option to terminate the lease. Right-of-use assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term using the interest rate implicit in the contract, when available, or the Company’s incremental collateralized borrowing rate with similar terms. Agreements with both lease and non-lease components are accounted for separately, with only the lease component capitalized. The right-of-use asset is the amount of the lease liability adjusted for prepaid or accrued lease payments, remaining balance of any lease incentives received, unamortized initial direct costs, and impairment. Lease expense is recorded on a straight-line basis over the lease term through amortization of the right-of-use asset plus implicit interest accreted on the operating lease liability obligation, and is reflected in Net Occupancy Expense in the Consolidated Statement of Income.
Some of the Company’s leases contain variable components, such as annual changes to rent based on the consumer price index. Operating lease liabilities are not re-measured as a result of changes to variable components unless the lease must be re-measured for some other reason such as a renewal that was not reasonably certain of being exercised. Changes to the variable components are treated as variable lease payments and recognized in the period in which the obligation for those payments was incurred.
The standard provides several practical expedients available for use in transition. The Company elected to use the standard’s “package of practical expedients,” which allows the use of previous conclusions about lease identification, lease classification and the accounting treatment for initial direct costs. The Company also elected the short-term lease recognition exemption for all leases with lease terms of one year or less; as such, the Company will not recognize right-of-use assets or lease liabilities on the consolidated balance sheet for such leases. The Company valued its lease obligation using incremental collateralized borrowing rates as of January 1, 2019 for the remaining term of each identified lease. At adoption, the Company recorded a right-of-use asset totaling $115.9 million and a liability for lease payment obligations totaling $130.7 million, offset by the elimination of $14.8 million of existing lease incentive and other deferred rent liabilities. Accounting for leases in accordance with Topic 842 has not had a material impact upon the consolidated results of operations, and is not expected to in future periods.
19
5.The Company has operating leases on a number of its branches, certain regional headquarters and other properties to limit its exposure to ownership risks such as fluctuations in real estate prices and obsolescence. The Company leases real estate with lease terms generally from five to 20 years, some of which have renewal options from one to 20 years. As these extension options are not generally considered reasonably certain of renewal, they are not included in the lease term. The Company is not a lessee in any contracts classified as finance leases.
Supplemental balance sheet information pertaining to operating leases:
(dollars in thousands) |
| Three months ended March 31, 2019 |
| |
Cash paid for amounts included in the measurement of lease liabilities for operating leases |
| $ | 4,007 |
|
Right of use assets obtained in exchange for lease liabilities |
| $ | 116,618 |
|
|
|
|
|
|
|
| March 31, 2019 |
| |
Weighted average remaining lease term (in years) |
|
| 13.12 |
|
Weighted average discount rate |
|
| 3.56 | % |
The following table sets forth the maturities of the Company’s lease liabilities and the present value discount at March 31, 2019.
(in thousands) |
|
|
|
|
2019 |
| $ | 12,198 |
|
2020 |
|
| 15,421 |
|
2021 |
|
| 14,587 |
|
2022 |
|
| 14,391 |
|
2023 |
|
| 13,109 |
|
Thereafter |
|
| 95,414 |
|
Total |
| $ | 165,120 |
|
Present value discount |
|
| (36,626 | ) |
Lease liability |
| $ | 128,494 |
|
The following table sets forth the components of the Company’s lease expense for the three months ended March 31, 2019.
(in thousands) |
|
|
|
|
Operating lease expense |
| $ | 4,253 |
|
Short-term lease expense |
|
| 19 |
|
Variable lease expense |
|
| 12 |
|
Sublease income |
|
| (116 | ) |
Total |
| $ | 4,168 |
|
6. Securities Sold under Agreements to Repurchase
Included in short-term borrowings are customer securities sold under agreements to repurchase (“repurchase agreements”) that mature daily and are secured by U.S. agency securities totaling $416.0$478.3 million and $430.6$428.6 million at September 30, 2018March 31, 2019 and December 31, 2017,2018, respectively. The Company borrows funds on a secured basis by selling securities under agreements to repurchase, mainly in connection with treasury management services offered to its deposit customers. As the Company maintains effective control over assets sold under agreements to repurchase, the securities continue to be carried on the consolidated statements of financial condition. Because the Company acts as borrower transferring assets to the counterparty, and the agreements mature daily, the Company’s risk is limited.
20
6.7. Derivatives
On January 1, 2018, the Company adopted the provisions of Accounting Standards Update (ASU) 2017-12, “Derivatives and Hedging,” using the modified retrospective transition approach. As a result of adoption of the update, the Company has made certain adjustments to its existing designation documentation for active hedging relationships to take advantage of specific provisions of the update. Adoption of this guidance did not have a material impact on the Company’s financial condition or results of operations. Following is a discussion of the provisions of the guidance relevant to the Company:
Ineffectiveness measurement and presentation
The provisions of the update eliminate the concept of ineffectiveness from an accounting perspective. The guidance provides that, as long as a hedging instrument is designated and the results of the effectiveness testing support that the instrument qualifies for hedge accounting treatment, there will be no periodic measurement or recognition of ineffectiveness. Rather, the full impact of hedge gains and losses will be recognized in the period in which the hedged transactions impact the entity’s earnings.
Presentation of reclassifications from Accumulated Other Comprehensive Income
The update provides that amounts in Accumulated Other Comprehensive Income that are included in the assessment of effectiveness should be reclassified into earnings in the same period in which the hedged forecasted transactions impact earnings. As such, the Company will recognize all reclassifications out of Other Comprehensive Income in the same statement of income line item in which the earnings effect of the hedged item is presented.
Changes to hedged risk
The update also states that if the designated hedged risk changes during the life of the hedging relationship, an entity may continue to apply hedge accounting as long as the hedging instrument is highly effective at achieving offsetting cash flows attributable to the revised hedged risk. Regardless of the description of the hedged transactions contained in the initial designation documentation, the Company intends to utilize this provision in the updated guidance to the extent possible.
Risk component hedging in fair value hedges
The update allows an entity to make a one-time transition election regarding the fair value measurement methodology applied to fair value hedges in place at adoption. The Company did not elect either of the one-time transition options; rather, it will continue to measure the hedged items as documented in the initial hedge documentation.
Risk Management Objective of Using Derivatives
The Company enters into derivative financial instruments to manage risks related to differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments, currently related to select pools of variable rate loans and fixed rate brokered deposits. The Bank also enters into interest rate derivative agreements as a service to certain qualifying customers. The Bank manages a matched book with respect to these customer derivatives in order to minimize its net risk exposure resulting from such agreements. The Bank also enters into risk participation agreements under which it may either sell or buy
20
credit risk associated with a customer’s performance under certain interest rate derivative contracts related to loans in which participation interests have been sold to or purchased from other banks.
21
Fair Values of Derivative Instruments on the Balance Sheet
The table below presents the notional or contractual amounts and fair values of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of September 30, 2018at March 31, 2019 and December 31, 2017.2018.
|
|
|
| March 31, 2019 |
|
| December 31, 2018 |
| ||||||||||||||||||
|
|
|
|
|
|
|
| Derivative (1) |
|
|
|
|
|
| Derivative (1) |
| ||||||||||
(in thousands) |
| Type of Hedge |
| Notional or Contractual Amount |
|
| Assets |
|
| Liabilities |
|
| Notional or Contractual Amount |
|
| Assets |
|
| Liabilities |
| ||||||
Derivatives designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
| Cash Flow |
| $ | 975,000 |
|
| $ | 9,765 |
|
| $ | 4,899 |
|
| $ | 875,000 |
|
| $ | 3,954 |
|
| $ | 9,173 |
|
Interest rate swaps |
| Fair Value |
|
| 388,110 |
|
|
| — |
|
|
| 960 |
|
|
| 483,110 |
|
|
| — |
|
|
| 2,089 |
|
|
|
|
|
| 1,363,110 |
|
|
| 9,765 |
|
|
| 5,859 |
|
|
| 1,358,110 |
|
|
| 3,954 |
|
|
| 11,262 |
|
Derivatives not designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps (2) |
| N/A |
|
| 1,373,378 |
|
|
| 28,570 |
|
|
| 30,506 |
|
|
| 1,277,404 |
|
|
| 23,670 |
|
|
| 24,669 |
|
Risk participation agreements |
| N/A |
|
| 169,317 |
|
|
| 10 |
|
|
| 162 |
|
|
| 171,222 |
|
|
| 10 |
|
|
| 131 |
|
Forward commitments to sell residential mortgage loans |
| N/A |
|
| 82,845 |
|
|
| 21 |
|
|
| 607 |
|
|
| 77,208 |
|
|
| 110 |
|
|
| 664 |
|
Interest rate-lock commitments on residential mortgage loans |
| N/A |
|
| 69,931 |
|
|
| 493 |
|
|
| 1 |
|
|
| 59,119 |
|
|
| 464 |
|
|
| 67 |
|
Foreign exchange forward contracts |
| N/A |
|
| 39,029 |
|
|
| 482 |
|
|
| 448 |
|
|
| 37,749 |
|
|
| 751 |
|
|
| 718 |
|
Visa Class B derivative contract |
| N/A |
|
| 43,753 |
|
|
| — |
|
|
| 6,953 |
|
|
| 43,753 |
|
|
| — |
|
|
| 7,304 |
|
|
|
|
|
| 1,778,253 |
|
|
| 29,576 |
|
|
| 38,677 |
|
|
| 1,666,455 |
|
|
| 25,005 |
|
|
| 33,553 |
|
Total derivatives |
|
|
| $ | 3,141,363 |
|
| $ | 39,341 |
|
| $ | 44,536 |
|
| $ | 3,024,565 |
|
| $ | 28,959 |
|
| $ | 44,815 |
|
Less: netting adjustment (3) |
|
|
|
|
|
|
|
| (13,514 | ) |
|
| (26,407 | ) |
|
|
|
|
|
| (11,979 | ) |
|
| (22,588 | ) |
Total derivative assets/liabilities |
|
|
|
|
|
|
| $ | 25,827 |
|
| $ | 18,129 |
|
|
|
|
|
| $ | 16,980 |
|
| $ | 22,227 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, 2018 |
| December 31, 2017 | |||||||||||||
|
|
|
|
|
|
| Derivative (1) |
|
|
| Derivative (1) | |||||||||
(in thousands) |
| Type of Hedge |
|
| Notional or Contractual Amount |
| Assets |
| Liabilities |
| Notional or Contractual Amount |
| Assets |
| Liabilities | |||||
Derivatives designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
| Cash Flow |
| $ | 875,000 |
| $ | — |
| $ | 23,131 |
| $ | 875,000 |
| $ | — |
| $ | 14,020 |
Interest rate swaps |
| Fair Value |
|
| 483,110 |
|
| — |
|
| 3,408 |
|
| 483,110 |
|
| — |
|
| 2,475 |
|
|
|
|
| 1,358,110 |
|
| — |
|
| 26,539 |
|
| 1,358,110 |
|
| — |
|
| 16,495 |
Derivatives not designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps (2) |
| N/A |
|
| 1,223,626 |
|
| 28,397 |
|
| 28,239 |
|
| 1,144,789 |
|
| 15,408 |
|
| 15,857 |
Risk participation agreements |
| N/A |
|
| 173,066 |
|
| 5 |
|
| 56 |
|
| 119,951 |
|
| 23 |
|
| 109 |
Forward commitments to sell residential mortgage loans |
| N/A |
|
| 79,432 |
|
| 882 |
|
| 330 |
|
| 80,462 |
|
| 1,000 |
|
| 290 |
Interest rate-lock commitments on residential mortgage loans |
| N/A |
|
| 55,502 |
|
| 227 |
|
| 784 |
|
| 53,724 |
|
| 186 |
|
| 782 |
Foreign exchange forward contracts |
| N/A |
|
| 38,742 |
|
| 1,457 |
|
| 1,429 |
|
| 42,260 |
|
| 2,453 |
|
| 2,419 |
|
|
|
|
| 1,570,368 |
|
| 30,968 |
|
| 30,838 |
|
| 1,441,186 |
|
| 19,070 |
|
| 19,457 |
Total derivatives |
|
|
| $ | 2,928,478 |
| $ | 30,968 |
| $ | 57,377 |
| $ | 2,799,296 |
| $ | 19,070 |
| $ | 35,952 |
Less: netting adjustment (3) |
|
|
|
|
|
|
| (19,557) |
|
| (28,586) |
|
|
|
|
| (4,913) |
|
| (21,563) |
Total derivative assets/liabilities |
|
|
|
|
|
| $ | 11,411 |
| $ | 28,791 |
|
|
|
| $ | 14,157 |
| $ | 14,389 |
(1) | Derivative assets and liabilities are reported at fair value in other assets or other liabilities, respectively, in the consolidated balance sheets. |
(2) | The notional amount represents both the customer accommodation agreements and offsetting agreements with unrelated financial |
(3) | Represents balance sheet netting of derivative assets and liabilities for variation margin collateral held or placed with the same central clearing counterparty. See offsetting assets and liabilities for further information. |
Cash Flow Hedges of Interest Rate Risk
The Company is party to various interest rate swap agreements designated and qualifying as cash flow hedges of the Company’s forecasted variable cash flows for pools of variable rate loans. For each agreement, the Company receives interest at a fixed rate and pays at a variable rate. During the ninethree months ended September 30,March 31, 2018, the Company terminated five of its shorter-term swap agreements with notional amounts totaling $450 million and entered into five longer-term agreements with notional amounts totaling $450 million. The Company paid termination fees of approximately $10.6 million to settle the interest rate swap liabilities, and the resulting accumulated other comprehensive loss is being amortized over the remaining maturities of the designated instruments. Amortization of other comprehensive loss on terminated cash flow hedges totaled $1.6$1.4 million and $4.1$1.0 million for the three and nine months ended September 30,March 31, 2019 and 2018, respectively. The notional amounts of the swap agreements in place at September 30, 2018March 31, 2019 expire as follows: $425$50 million in 2021; $475 million in 2022; $350 million in 2023; and $100 million in 2024.
Fair Value Hedges of Interest Rate Risk
The Company enters into interest rate swap agreements that modify the Company’s exposure to interest rate risk by effectively converting a portion of the Company’s brokered certificates of deposit from fixed rates to variable rates. The maturities and call features of these interest rate swaps match the features of the hedged deposits. As interest rates fall, the decline in the value of the certificates of deposit is offset by the increase in the value of the interest rate swaps. Conversely, as interest rates rise, the value of the underlying hedged deposits increases, but the value of the interest rate swaps decreases, resulting in no impact on earnings. Interest expense is adjusted by the difference between the fixed and floating rates for the period the swaps are in effect.
21
22
Derivatives Not Designated as Hedges
Customer interest rate derivative program
The Bank enters into interest rate derivative agreements, primarily rate swaps, with commercial banking customers to facilitate their risk management strategies. The Bank enters into offsetting agreements with unrelated financial institutions, thereby mitigating its net risk exposure resulting from such transactions. Because the interest rate derivatives associated with this program do not meet hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings.
Risk participation agreements
The Bank also enters into risk participation agreements under which it may either assume or sell credit risk associated with a borrower’s performance under certain interest rate derivative contracts. In those instances where the Bank has assumed credit risk, it is not a direct counterparty to the derivative contract with the borrower and has entered into the risk participation agreement because it is a party to the related loan agreement with the borrower. In those instances in which the Bank has sold credit risk, it is the sole counterparty to the derivative contract with the borrower and has entered into the risk participation agreement because other banks participate in the related loan agreement. The Bank manages its credit risk under risk participation agreements by monitoring the creditworthiness of the borrower, based on the Bank’s normal credit review process.
Mortgage banking derivatives
The Bank also enters into certain derivative agreements as part of its mortgage banking activities. These agreements include interest rate lock commitments on prospective residential mortgage loans and forward commitments to sell these loans to investors on a best efforts delivery basis.
Customer foreign exchange forward contract derivatives
The Bank enters into foreign exchange forward derivative agreements, primarily forward foreign currency contracts, with commercial banking customers to facilitate their risk management strategies. The Bank manages its risk exposure from such transactions by entering into offsetting agreements with unrelated financial institutions. Because the foreign exchange forward contract derivatives associated with this program do not meet hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings.
Visa Class B derivative contract
The Company is a member of Visa USA. During the fourth quarter of 2018, the Company sold the majority of its Visa Class B holdings, at which time it entered into a derivative agreement with the purchaser whereby the Company will make or receive cash payments whenever the conversion ratio of the Visa Class B shares into Visa Class A shares is adjusted. The conversion ratio changes when Visa deposits funds to a litigation escrow established by Visa to pay settlements for certain litigation, for which Visa is indemnified by Visa USA members. The Company is also required to make periodic financing payments to the purchaser until all of Visa’s covered litigation matters are resolved. Thus, the derivative contract extends until the end of Visa’s covered litigation matters, the timing of which is uncertain.
The contract includes a contingent accelerated termination clause based on the credit ratings of the Company. At March 31, 2019 and December 31, 2018 the fair value of the liability associated with this contract was $6.9 million and $7.3 million, respectively. Refer to Note 15 – Fair Value of Financial Instruments for discussion of the valuation inputs for this derivative liability.
22
Effect of Derivative Instruments on the Statement of Income
The effects of derivative instruments on the consolidated statements of income for the three and nine months ended September 30,March 31, 2019 and 2018 and 2017 are presented in the table below. For the three and nine months ended September 30,March 31, 2019 and 2018, the reduction of interest income attributable to cash flow hedges includes amortization of accumulated other comprehensive loss that resulted from termination of five interest rate swap contracts.
|
|
|
|
|
|
|
|
|
| ||||||||||||||
|
|
| Three Months Ended |
| Nine Months Ended |
|
|
| Three Months Ended |
| |||||||||||||
|
|
| September 30, |
| September 30, |
|
|
| March 31, |
| |||||||||||||
Derivative Instruments: | Location of Gain (Loss) Recognized in the Statement of Income: |
|
| 2018 |
|
| 2017 |
|
| 2018 |
|
| 2017 |
| Location of Gain (Loss) Recognized in the Statement of Income: |
| 2019 |
|
| 2018 |
| ||
Interest rate swaps - cash flow hedges | Interest income |
| $ | (1,276) |
| $ | (126) |
| $ | (2,841) |
| $ | (222) |
| Interest income |
| $ | (2,016 | ) |
| $ | (618 | ) |
Interest rate swaps - fair value hedges | Interest expense |
| (725) |
| 176 |
| (1,371) |
| 620 |
| Interest expense |
|
| (988 | ) |
|
| (126 | ) | ||||
All other instruments | Other noninterest income |
|
| 1,363 |
|
| 1,339 |
|
| 4,474 |
|
| 4,484 |
| Other noninterest income |
|
| 809 |
|
|
| 1,523 |
|
Total |
|
| $ | (638) |
| $ | 1,389 |
| $ | 262 |
| $ | 4,882 |
|
|
| $ | (2,195 | ) |
| $ | 779 |
|
Credit Risk-Related Contingent Features
Certain of the Bank’s derivative instruments contain provisions allowing the financial institution counterparty to terminate the contracts in certain circumstances, such as a downgrade of the Bank’s credit ratings below specified levels, a default by the Bank on its indebtedness, or the failure of the Bank to maintain specified minimum regulatory capital ratios or its regulatory status as a well-capitalized institution. These derivative agreements also contain provisions regarding the posting of collateral by each party. As of September 30, 2018,At March 31, 2019, the Company was not in violation of any such provisions.
23
Offsetting Assets and Liabilities
The Bank’s derivative instruments with certain counterparties contain legally enforceable netting provisions that allow for net settlement of multiple transactions to a single amount, which may be positive, negative, or zero. Agreements with certain bilateral counterparties require both parties to maintain collateral in the event that the fair values of derivative instruments exceed established exposure thresholds. For centrally cleared derivatives, the Company is subject to initial margin posting and daily variation margin exchange with the central clearinghouses. Offsetting information in regards to all derivative assets and liabilities, including accrued interest, subject to these master netting agreements at September 30, 2018March 31, 2019 and December 31, 20172018 is presented in the following tables.
(in thousands) |
|
|
|
|
| Gross Amounts |
|
| Net Amounts |
|
| Gross Amounts Not Offset in the Statement of Income |
| |||||||||||
Description |
| Gross Amounts Recognized |
|
| Offset in the Statement of Income |
|
| Presented in the Statement of Income |
|
| Financial Instruments |
|
| Cash Collateral |
|
| Net Amount |
| ||||||
As of March 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Assets |
| $ | 17,165 |
|
| $ | (15,439 | ) |
| $ | 1,726 |
|
| $ | 1,726 |
|
| $ | — |
|
| $ | — |
|
Derivative Liabilities |
| $ | 30,630 |
|
| $ | (26,032 | ) |
| $ | 4,598 |
|
| $ | 1,726 |
|
| $ | 6,986 |
|
| $ | (4,114 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
|
|
| Gross |
| Net Amounts |
| Gross Amounts Not Offset in the Statement | |||||||||
Description |
| Gross |
| Offset in |
| Presented in |
| Financial |
| Cash |
| Net | ||||||
As of September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Assets |
| $ | 26,648 |
| $ | (19,897) |
| $ | 6,751 |
| $ | 309 |
| $ | — |
| $ | 6,442 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Liabilities |
| $ | 26,437 |
| $ | (26,128) |
| $ | 309 |
| $ | 309 |
| $ | 2,263 |
| $ | (2,263) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
(in thousands) |
|
|
|
| Gross |
| Net Amounts |
| Gross Amounts Not Offset in the Statement |
|
|
|
|
| Gross Amounts |
|
| Net Amounts |
|
| Gross Amounts Not Offset in the Statement of Income |
| ||||||||||||||||||||
Description |
| Gross |
| Offset in |
| Presented in |
| Financial |
| Cash |
| Net |
| Gross Amounts Recognized |
|
| Offset in the Statement of Income |
|
| Presented in the Statement of Income |
|
| Financial Instruments |
|
| Cash Collateral |
|
| Net Amount |
| ||||||||||||
As of December 31, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
As of December 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Derivative Assets |
| $ | 7,155 |
| $ | (5,007) |
| $ | 2,148 |
| $ | 2,148 |
| $ | — |
| $ | — |
| $ | 16,167 |
|
| $ | (12,842 | ) |
| $ | 3,325 |
|
| $ | 1,846 |
|
| $ | — |
|
| $ | 1,479 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Derivative Liabilities |
| $ | 24,015 |
| $ | (20,077) |
| $ | 3,938 |
| $ | 2,148 |
| $ | 4,099 |
| $ | (2,309) |
| $ | 23,811 |
|
| $ | (21,651 | ) |
| $ | 2,160 |
|
| $ | 1,846 |
|
| $ | 2,871 |
|
| $ | (2,557 | ) |
The Company has excess collateral compared to total exposure due to initial margin requirements for day-to-day rate volatility.
23
8. Stockholders’ Equity
Common Shares Outstanding
Common shares outstanding excludes treasury shares totaling 1.1 million and 1.20.9 million at September 30, 2018March 31, 2019 and December 31, 2017, respectively,2018, with a first-in-first-out cost basis of $23.8$16.6 million and $25.5$18.5 million at September 30, 2018March 31, 2019 and December 31, 2017,2018, respectively. Shares outstanding also excludes unvested restricted share awards totaling 1.51.3 million at September 30, 2018March 31, 2019 and December 31, 2017.2018.
Stock Buyback Program
On May 24, 2018, the Company’s board of directors approved a stock buyback program that authorized the repurchase of up to 5%, or approximately 4.3 million shares, of its outstanding common stock. The approved program allows the Company to repurchase its common shares either in the open market in compliance with Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended, or in privately negotiated transactions with non-affiliated sellers or as otherwise determined by the Company in one or more transactions, from time to time until December 31, 2019. The Company is not obligated to purchase any shares under this program, and the board of directors may terminate or amend the program at any time prior to the expiration date. As of September 30, 2018, noMarch 31, 2019, 200,000 shares of the Company’s common stock had been purchased at an average price of $41.30 per share under this program.
24
Accumulated Other Comprehensive Loss
The components of Accumulated Other Comprehensive Loss and changes in those components are presented in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
|
| Available |
| HTM Securities |
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
|
| for Sale |
| Transferred |
| Employee |
| Cash |
|
|
|
| Available for Sale Securities |
|
| HTM Securities Transferred from AFS |
|
| Employee Benefit Plans |
|
| Cash Flow Hedges |
|
| Equity Method Investment |
|
| Total |
| ||||||||||
(in thousands) |
| Securities |
| from AFS |
| Benefit Plans |
| Flow Hedges |
| Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Balance, December 31, 2016 |
| $ | (28,679) |
| $ | (14,392) |
| $ | (72,501) |
| $ | (4,960) |
| $ | (120,532) | ||||||||||||||||||||||||
Other comprehensive income (loss) before income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net change in unrealized gain (loss) |
|
| 21,026 |
|
| — |
|
| — |
|
| (1,232) |
|
| 19,794 | ||||||||||||||||||||||||
Balance, December 31, 2017 |
| $ | (29,512 | ) |
| $ | (14,585 | ) |
| $ | (79,078 | ) |
| $ | (11,227 | ) |
| $ | — |
|
| $ | (134,402 | ) | |||||||||||||||
Other comprehensive income/loss before income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Net change in unrealized loss |
|
| (55,114 | ) |
|
| — |
|
|
| — |
|
|
| (7,130 | ) |
|
| — |
|
|
| (62,244 | ) | |||||||||||||||
Reclassification of net loss realized and included in earnings |
|
| — |
|
| — |
|
| 4,144 |
|
| 335 |
|
| 4,479 |
|
| — |
|
|
| — |
|
|
| 1,177 |
|
|
| 619 |
|
|
| — |
|
|
| 1,796 |
|
Valuation adjustment for pension plan amendment |
|
| — |
|
| — |
|
| 17,315 |
|
| — |
|
| 17,315 | ||||||||||||||||||||||||
Other valuation adjustments for employee benefit plan |
|
| — |
|
| — |
|
| (9,185) |
|
| — |
|
| (9,185) | ||||||||||||||||||||||||
Amortization of unrealized net loss on securities transferred to HTM |
|
| — |
|
| 2,726 |
|
| — |
|
| — |
|
| 2,726 |
|
| — |
|
|
| 755 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 755 |
|
Income tax expense (benefit) |
|
| 7,649 |
|
| 1,012 |
|
| 4,416 |
|
| (329) |
|
| 12,748 |
|
| (12,508 | ) |
|
| 171 |
|
|
| 267 |
|
|
| (1,476 | ) |
|
| — |
|
|
| (13,546 | ) |
Balance, September 30, 2017 |
| $ | (15,302) |
| $ | (12,678) |
| $ | (64,643) |
| $ | (5,528) |
| $ | (98,151) | ||||||||||||||||||||||||
Balance, December 31, 2017 |
| $ | (29,512) |
| $ | (14,585) |
| $ | (79,078) |
| $ | (11,227) |
| $ | (134,402) | ||||||||||||||||||||||||
Balance, March 31, 2018 |
| $ | (72,118 | ) |
| $ | (14,001 | ) |
| $ | (78,168 | ) |
| $ | (16,262 | ) |
| $ | — |
|
| $ | (180,549 | ) | |||||||||||||||
Balance, December 31, 2018 |
| $ | (50,125 | ) |
| $ | (12,044 | ) |
| $ | (110,247 | ) |
| $ | (8,293 | ) |
| $ | — |
|
| $ | (180,709 | ) | |||||||||||||||
Other comprehensive income (loss) before income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in unrealized losses |
|
| (92,477) |
|
| — |
|
| — |
|
| (18,418) |
|
| (110,895) | ||||||||||||||||||||||||
Reclassification of net losses realized and included in earnings |
|
| — |
|
| — |
|
| 3,719 |
|
| 2,841 |
|
| 6,560 | ||||||||||||||||||||||||
Other valuation adjustments for employee benefit plan |
|
| — |
|
| — |
|
| (9,039) |
|
| — |
|
| (9,039) | ||||||||||||||||||||||||
Net change in unrealized gain or loss |
|
| 46,984 |
|
|
| — |
|
|
| — |
|
|
| 9,475 |
|
|
| 784 |
|
|
| 57,243 |
| |||||||||||||||
Reclassification of net loss realized and included in earnings |
|
| — |
|
|
| — |
|
|
| 2,203 |
|
|
| 2,016 |
|
|
| — |
|
|
| 4,219 |
| |||||||||||||||
Amortization of unrealized net loss on securities transferred to HTM |
|
| — |
|
| 2,427 |
|
| — |
|
| — |
|
| 2,427 |
|
| — |
|
|
| 591 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 591 |
|
Income tax expense (benefit) |
|
| (20,985) |
|
| 550 |
|
| (1,205) |
|
| (3,530) |
|
| (25,170) | ||||||||||||||||||||||||
Balance, September 30, 2018 |
| $ | (101,004) |
| $ | (12,708) |
| $ | (83,193) |
| $ | (23,274) |
| $ | (220,179) | ||||||||||||||||||||||||
Income tax expense |
|
| 10,623 |
|
|
| 134 |
|
|
| 498 |
|
|
| 2,598 |
|
|
| — |
|
|
| 13,853 |
| |||||||||||||||
Balance, March 31, 2019 |
| $ | (13,764 | ) |
| $ | (11,587 | ) |
| $ | (108,542 | ) |
| $ | 600 |
|
| $ | 784 |
|
| $ | (132,509 | ) |
Accumulated Other Comprehensive Income or Loss (“AOCI”) is reported as a component of stockholders’ equity. AOCI can include, among other items, unrealized holding gains and losses on securities available for sale (“AFS”), including the Company’s share of unrealized gains and losses reported by a partnership accounted for under the equity method, gains and losses associated with pension or other post-retirement benefits that are not recognized immediately as a component of net periodic benefit cost, and gains and losses on derivative instruments that are designated as, and qualify as, cash flow hedges. Net unrealized gains and losses on AFS securities reclassified as securities held to maturity (“HTM”) also continue to be reported as a component of AOCI and will be amortized over the estimated remaining life of the securities as an adjustment to interest income. Subject to certain thresholds, unrealized losses on employee benefit plans will be reclassified into income as pension and post-retirement costs are recognized over the remaining service period of plan participants. Accumulated gains or losses on the cash flow hedge of the variable rate loans described in Note 67 will be reclassified into income over the life of the hedge. Accumulated other comprehensive loss resulting from the terminated interest rate
24
swaps will be amortized over the remaining maturities of the designated instruments. Gains and losses within AOCI are net of deferred income taxes.taxes, where applicable.
The following table shows the line items of the consolidated statements of income affected by amounts reclassified from AOCI.
|
|
|
|
|
|
|
| |||||||||||
|
|
|
|
|
|
|
| |||||||||||
|
| Nine Months Ended |
|
|
| Three Months Ended |
|
|
| |||||||||
Amount reclassified from AOCI (a) |
| September 30, |
| Affected line item on |
| March 31, |
|
| Affected line item on | |||||||||
(in thousands) |
|
| 2018 |
|
| 2017 |
| the statement of income |
| 2019 |
|
| 2018 |
|
| the statement of income | ||
Amortization of unrealized net loss on securities transferred to HTM |
| $ | (2,427) |
| $ | (2,726) |
| Interest income |
| $ | (591 | ) |
| $ | (755 | ) |
| Interest income |
Tax effect |
|
| 550 |
|
| 1,012 |
| Income taxes |
|
| 134 |
|
|
| 171 |
|
| Income taxes |
Net of tax |
|
| (1,877) |
|
| (1,714) |
| Net income |
|
| (457 | ) |
|
| (584 | ) |
| Net income |
Amortization of defined benefit pension and post-retirement items |
|
| (3,719) |
|
| (4,144) |
| Other noninterest expense (b) |
|
| (2,203 | ) |
|
| (1,177 | ) |
| Other noninterest expense (b) |
Tax effect |
|
| 842 |
|
| 1,491 |
| Income taxes |
|
| 498 |
|
|
| 267 |
|
| Income taxes |
Net of tax |
|
| (2,877) |
|
| (2,653) |
| Net income |
|
| (1,705 | ) |
|
| (910 | ) |
| Net income |
Reclassification of unrealized gain on cash flow hedges |
|
| 1,264 |
|
| — |
| Interest income | ||||||||||
Reclassification of unrealized gain (loss) on cash flow hedges |
|
| (610 | ) |
|
| 336 |
|
| Interest income | ||||||||
Tax effect |
|
| (286) |
|
| — |
| Income taxes |
|
| 138 |
|
|
| (76 | ) |
| Income taxes |
Net of tax |
|
| 978 |
|
| — |
| Net income |
|
| (472 | ) |
|
| 260 |
|
| Net income |
Amortization of loss on terminated cash flow hedges |
|
| (4,105) |
|
| (335) |
| Interest income |
|
| (1,406 | ) |
|
| (954 | ) |
| Interest income |
Tax effect |
|
| 930 |
|
| 123 |
| Income taxes |
|
| 318 |
|
|
| 216 |
|
| Income taxes |
Net of tax |
|
| (3,175) |
|
| (212) |
| Net income |
|
| (1,088 | ) |
|
| (738 | ) |
| Net income |
Total reclassifications, net of tax |
| $ | (6,951) |
| $ | (4,579) |
| Net income |
| $ | (3,722 | ) |
| $ | (1,972 | ) |
| Net income |
(a) | Amounts in parentheses indicate reduction in net income. |
(b) | These AOCI components are included in the computation of net periodic pension and post-retirement cost that is reported with employee benefits expense (see Note 12 – Retirement Plans for additional details). |
25
8. Revenue Recognition
Effective January 1, 2018, the Company adopted the amended provisions of the Financial Accounting Standards Codification Topic 606, “Revenue from Contracts with Customers,” using the modified retrospective approach. The standard applies to most of the Company’s noninterest income, with a significant portion of the Company’s revenue excluded from the scope of the standard, including interest and loan origination fees associated with financial instruments, gains and losses on investment securities, derivatives and sales of financial instruments.
The Company’s evaluation of contracts for compliance with the standard did not identify any material changes to the timing of revenue recognition as the standard was largely consistent with the existing guidance and current practices. Therefore, the adoption of this guidance did not have a material impact on the Company’s financial condition or results of operations and there was no cumulative effect adjustment to opening retained earnings. However, upon adoption the Company has begun presenting certain underwriting costs (previously offset against Investment and Annuity Fees), as well as certain subadvisor costs (previously offset against Trust Fees) gross as noninterest expense, neither of which are material to operating results.
Due to the nature of the Company’s primary sources of revenue, there are no significant receivables, contract assets or contract liabilities not otherwise disclosed. The Company has assessed that its current disclosures are consistent with the requirements of the standard to present revenue disaggregated into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. The following provides additional qualitative disclosures about the Company’s noninterest income and revenue recognition policies.
Service Charges on Deposit Accounts
Service charges on deposit accounts include transaction based fees for non-sufficient funds, account analysis fees, and other service charges on deposits, including monthly account service fees. Non-sufficient funds fees are recognized at the time when the account overdraft occurs in accordance with regulatory guidelines. Account analysis fees consist of fees charged on certain business deposit accounts based upon account activity as well as other monthly account fees, and are recorded under the accrual method of accounting as services are performed.
Other service charges are earned by providing depositors safeguard and remittance of funds as well as by providing other elective services for depositors that are performed upon the depositor’s request. Charges for deposit services for the safeguard and remittance of funds are recognized at the end of the statement cycle, after services are provided, as the customer retains funds in the account. Revenue for other elective services is earned at the point in time the customer uses the service.
Trust Fees
Trust fee income represents revenue generated from asset management services provided to individuals, businesses, and institutions. The Company has a fiduciary responsibility to the beneficiary of the trust to perform agreed upon services which can include investing assets, periodic reporting, and providing tax information regarding the trust. In exchange for these trust and custodial services, the Company collects fee income from beneficiaries as contractually determined via fee schedules. The Company’s performance obligation is primarily satisfied over time as the services are performed and provided to the customer. These fees are recorded under the accrual method of accounting as the services are performed. The Company generally acts as the principal in these transactions and records revenue and expenses on a gross basis.
Bank Card and Automated Teller Machine (“ATM”) Fees
Bank card and ATM fees include credit card, debit card and ATM transaction revenue. The majority of this revenue is card interchange fees earned through a third party network. Performance obligations are satisfied for each transaction when the card is used and the funds are remitted. The network establishes interchange fees that the merchant remits for each transaction, and costs are incurred from the network for facilitating the interchange with the merchant. Card fees also include merchant services fees earned for providing merchants with card processing capabilities.
ATM income is generated from allowing customers to withdraw funds from other banks’ machines and from allowing a non-customer cardholder to withdraw funds from the Company’s machines. The Company satisfies its performance obligations for each transaction at the point in time that the withdrawal is processed.
Bank card and ATM fee income is recorded on accrual basis as services are provided with the related expense reflected in data processing expense.
26
Investment and Annuity Fees and Insurance Commissions
Investment and annuity services fee income represents income earned from investment and advisory services. The Company provides its customers with access to investment products through the use of third party carriers to meet their financial needs and investment objectives. Upon selection of an investment product, the customer enters into a policy with the carrier. The performance obligation is satisfied by fulfilling its responsibility to acquire the investment for which a commission fee is earned from the carrier based on agreed-upon fee percentages on a trade date basis. The Company has a contractual relationship with a third party broker dealer to provide full service brokerage and investment advisory activities. As the agent in the arrangement, the Company recognizes the investment services commissions on a net basis. Investment revenue also includes portfolio management fees, which represent monthly fees charged on a contractual basis to customers for the management of their investment portfolios and are recorded under the accrual method of accounting on a gross basis, with expenses recorded in the appropriate expense line item.
This revenue line item includes investment banking income, which includes fees for services arising from securities offerings or placements in which the Company acts as a principal. Revenue is recognized at the time the underwriting is completed and the revenue is reasonably determinable.
Insurance commission revenue is recognized, net of cost, as of the effective date of the insurance policy as the Company’s performance obligation is connecting the customer to the insurance products. The Company also receives contingent commissions from insurance companies as additional incentive for achieving specified premium volume goals and/or the loss experience of the insurance placed. Contingent commissions from insurance companies are recognized when determinable, which is generally when such commissions are received or when we receive data from the insurance companies that allows the reasonable estimation of these amounts.
Secondary Mortgage Market Operations
Secondary mortgage market operations revenue is primarily comprised of service release premiums earned on the sale of closed-end mortgage loans to other financial institutions or government agencies that are recognized in revenue as each sales transaction occurs.
Income from Bank-Owned Life Insurance
Bank-owned life insurance income primarily represents income earned from the appreciation of the cash surrender value of insurance contracts held and the proceeds of insurance benefits. Revenue from the proceeds of insurance benefits is recognized at the time a claim is confirmed.
Credit Related Fee Income
Credit-related fee income includes letters of credit fees and unused commercial commitment fees. Revenue for letters of credit fees is recognized over time. Revenue for unused commercial commitment fees are recognized based on contractual terms, generally when collected.
Income from Derivatives
Income from derivatives consists primarily of interest rate swap fees, net of fair value adjustments for customer derivatives and the related offsetting agreements with unrelated financial institutions for which the derivative instruments are not designated as hedges. This line item also includes the resulting gain or loss from ineffectiveness on derivatives that are designated as hedged items.
Gain (Loss) on Sales of Assets
Gain (loss) on sales of assets reflects the excess (deficiency) of proceeds received over the carrying amount of assets sold plus cost to sell for various assets other than foreclosed real estate. Gain or loss on the sale of assets are recognized as each transaction occurs.
Other Miscellaneous Income
Other miscellaneous income represents a variety of revenue streams, including safe deposit box income, wire transfer fees, syndication fees and any other income not reflected above. Income is recorded once the performance obligation is satisfied, generally on the accrual basis or on a cash basis if not material and/or considered constrained.
27
9. Other Noninterest Income
Components of other noninterest income are as follows:
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
|
| Three Months Ended |
| Nine Months Ended |
| Three Months Ended |
| |||||||||||||
|
| September 30, |
| September 30, |
| March 31, |
| |||||||||||||
(in thousands) |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| 2019 |
|
| 2018 |
| ||||||
Income from bank-owned life insurance |
| $ | 3,100 |
| $ | 3,097 |
| $ | 9,283 |
| $ | 8,632 |
| $ | 3,265 |
|
| $ | 3,070 |
|
Credit related fees |
|
| 2,762 |
| 2,521 |
| 7,900 |
|
| 8,297 |
|
| 2,595 |
|
|
| 2,722 |
| ||
Income from derivatives |
|
| 1,363 |
| 1,339 |
| 4,474 |
|
| 4,484 |
|
| 809 |
|
|
| 1,523 |
| ||
Gain (loss) on sales of assets |
|
| 989 |
| 400 |
| (177) |
| 4,465 |
|
| 397 |
|
|
| (1,207 | ) | |||
Amortization of FDIC loss share receivable |
|
| — |
| — |
| — |
| (2,427) | |||||||||||
Other miscellaneous |
|
| 3,342 |
|
| 3,795 |
|
| 10,066 |
|
| 11,023 |
|
| 2,402 |
|
|
| 3,377 |
|
Total other noninterest income |
| $ | 11,556 |
| $ | 11,152 |
| $ | 31,546 |
| $ | 34,474 |
| $ | 9,468 |
|
| $ | 9,485 |
|
10. Other Noninterest Expense
Components of other noninterest expense are as follows:
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
| Three Months Ended |
| Nine Months Ended |
| Three Months Ended |
| |||||||||||||
|
| September 30, |
| September 30, |
| March 31, |
| |||||||||||||
(in thousands) |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| 2019 |
|
| 2018 |
| ||||||
Advertising |
| $ | 2,553 |
| $ | 3,910 |
| $ | 8,596 |
| $ | 11,971 |
| $ | 3,080 |
|
| $ | 2,526 |
|
Corporate value and franchise taxes |
|
| 3,718 |
|
| 3,387 |
|
| 10,735 |
|
| 9,942 |
|
| 4,042 |
|
|
| 3,440 |
|
Printing and supplies |
|
| 1,287 |
|
| 1,421 |
|
| 4,261 |
|
| 3,929 |
|
| 1,169 |
|
|
| 1,286 |
|
Telecommunications and postage |
|
| 3,466 |
|
|
| 3,850 |
| ||||||||||||
Travel expense |
|
| 1,365 |
|
| 1,226 |
|
| 3,872 |
|
| 3,635 |
|
| 1,098 |
|
|
| 1,066 |
|
Entertainment and contributions |
|
| 2,539 |
|
| 2,322 |
|
| 8,250 |
|
| 6,087 |
|
| 2,708 |
|
|
| 2,518 |
|
Tax credit investment amortization |
|
| 1,560 |
|
| 1,212 |
|
| 3,309 |
|
| 3,637 |
|
| 1,138 |
|
|
| 874 |
|
FDIC loss share agreement termination |
|
| — |
|
| — |
|
| — |
|
| 6,603 | ||||||||
Other retirement expense |
|
| (4,664) |
|
| (4,402) |
|
| (13,585) |
|
| (10,850) |
|
| (4,105 | ) |
|
| (4,463 | ) |
Loss on restructuring of bank-owned life insurance contracts |
|
| — |
|
| — |
|
| 3,240 |
|
| — | ||||||||
Other miscellaneous |
|
| 6,297 |
|
| 8,282 |
|
| 20,811 |
|
| 22,253 |
|
| 5,691 |
|
|
| 5,684 |
|
Total other noninterest expense |
| $ | 14,655 |
| $ | 17,358 |
| $ | 49,489 |
| $ | 57,207 |
| $ | 18,287 |
|
| $ | 16,781 |
|
25
11. Earnings Per Common Share
The Company calculates earnings per share using the two-class method. The two-class method allocates net income to each class of common stock and participating security according to common dividends declared and participation rights in undistributed earnings. Participating securities consist of nonvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents.
A summary of the information used in the computation of earnings per common share follows.
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||
|
| Three Months Ended |
| Nine Months Ended |
| Three Months Ended |
| |||||||||||||
|
| September 30, |
| September 30, |
| March 31, |
| |||||||||||||
(in thousands, except per share data) |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| 2019 |
|
| 2018 |
| ||||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income to common shareholders |
| $ | 83,878 |
| $ | 58,902 |
| $ | 227,530 |
| $ | 160,183 |
| $ | 79,164 |
|
| $ | 72,475 |
|
Net income allocated to participating securities - basic and diluted |
|
| 1,544 |
|
| 1,244 |
|
| 4,238 |
|
| 3,566 |
|
| 1,337 |
|
|
| 1,366 |
|
Net income allocated to common shareholders - basic and diluted |
| $ | 82,334 |
| $ | 57,658 |
| $ | 223,292 |
| $ | 156,617 |
| $ | 77,827 |
|
| $ | 71,109 |
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares - basic |
| $ | 85,348 |
| $ | 84,749 |
| $ | 85,298 |
| $ | 84,577 |
|
| 85,688 |
|
|
| 85,241 |
|
Dilutive potential common shares |
|
| 191 |
|
| 231 |
|
| 184 |
|
| 241 |
|
| 112 |
|
|
| 182 |
|
Weighted-average common shares - diluted |
| $ | 85,539 |
| $ | 84,980 |
| $ | 85,482 |
| $ | 84,818 |
|
| 85,800 |
|
|
| 85,423 |
|
Earnings per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | 0.96 |
| $ | 0.68 |
| $ | 2.62 |
| $ | 1.85 |
| $ | 0.91 |
|
| $ | 0.83 |
|
Diluted |
| $ | 0.96 |
| $ | 0.68 |
| $ | 2.61 |
| $ | 1.85 |
| $ | 0.91 |
|
| $ | 0.83 |
|
28
Potential common shares consist of stock options, nonvested performance-based awards, and nonvested restricted share awards deferred under the Company’s nonqualified deferred compensation plan. These potential common shares do not enter into the calculation of diluted earnings per share if the impact would be antidilutive, i.e., increase earnings per share or reduce a loss per share. Weighted average antidilutive potential common shares totaled 14,904 and 18,257, respectively,1,281 for the three and nine months ended September 30, 2018. Weighted averageMarch 31, 2019. There were no antidilutive potential common shares totaled 1,380 and 11,057, respectively,excluded from the calculation of diluted earnings per share for the three and nine months ended September 30, 2017.
March 31, 2018.
12. Retirement Plans
The Company sponsors a qualified defined benefit pension plan, the Hancock Whitney Corporation Pension Plan (“Pension Plan”), covering certain eligible associates. Eligibility is based on minimum age and service-related requirements. During the second quarter of 2017, the Pension Plan was amended to exclude any individualThose hired or rehired by the Company afterprior to June 30, 2017 from eligibilityare eligible to participate. The Pension Plan amendment further provided thatparticipate; however, the accrued benefits of each participant in the Pension Plan whose combined age plus years of service as of January 1, 2018 totalstotaled less than 55 were to be frozen as of January 1, 2018 and will not thereafter not increase. The Company makes contributions to the Pension Plan in amounts sufficient to meet funding requirements set forth in federal employee benefit and tax laws, plus such additional amounts as the Company may determine to be appropriate. During the first quarter of 2019, the Company made a discretionary contribution of $100 million to the Pension Plan. During the third quarter of 2018, the Company made a discretionary contribution of $39 million to the Pension Plan designated to the 2017 plan year.
The Company also offers a defined contribution retirement benefit plan, the Hancock Whitney Corporation 401(k) Savings Plan (“401(k) Plan”), that covers substantially all associates who have been employed 60 days and meet a minimum age requirement and employment classification criteria. The Company matches 100% of the first 1% of compensation saved by a participant, and 50% of the next 5% of compensation saved. Newly eligible associates are automatically enrolled at an initial 3% savings rate unless the associate actively opts out of participation in the plan. The 401(k)Beginning January 1, 2018, the Company makes an additional basic contribution to associates hired or rehired after June 30, 2017 in an amount equal to 2% of the associate’s eligible compensation. For Pension Plan was also amended during the second quarter of 2017 for participants whose benefits arewere frozen underas of January 1, 2018, the Pension401(k) Plan to addprovides an enhanced Company contribution beginning January 1, 2018, in the amount of 2%, 4% or 6% of such participant’s eligible compensation, based on the participant’s age and years of service with the Company. The 401(k) Plan’s amendment further provided that the Company will contribute to the benefit of those associates of the Company hired or rehired after June 30, 2017 and those associates of the Company never enrolled in the Pension Plan an additional basic contribution in an amount equal to 2% of the associate’s eligible compensation beginning January 1, 2018. Participants will vest in the new basic and enhanced Company contributions upon completion of three years of service.
The Company sponsors a nonqualified defined benefit plan covering certain legacy Whitney employees that was frozen as of December 31, 2012 and no future benefits are accrued under this plan.
The Company sponsors defined benefit postretirement plans for both legacy Hancock and legacy Whitney employees that provide health care and life insurance benefits. Benefits under the Hancock plan are not available to employees hired on or after January 1, 2000. Benefits under the Whitney plan are restricted to retirees who were already receiving benefits at the time of plan amendments in 2007 or active participants who were eligible to receive benefits as of December 31, 2007.
26
The following tables show the components of net periodic benefits cost included in expense for the plans for the periods indicated.
|
|
|
|
|
|
|
|
|
| Other Post- |
| |||||
(in thousands) |
| Pension Benefits |
|
| Retirement Benefits |
| ||||||||||
For the Three Months Ended March 31, |
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||
Service cost |
| $ | 2,775 |
|
| $ | 2,925 |
|
| $ | 29 |
|
| $ | 35 |
|
Interest cost |
|
| 4,863 |
|
|
| 3,923 |
|
|
| 128 |
|
|
| 137 |
|
Expected return on plan assets |
|
| (11,300 | ) |
|
| (9,700 | ) |
|
| — |
|
|
| — |
|
Amortization of net loss and prior service costs |
|
| 2,430 |
|
|
| 1,326 |
|
|
| (227 | ) |
|
| (149 | ) |
Net periodic benefit cost (reduction of cost) |
| $ | (1,232 | ) |
| $ | (1,526 | ) |
| $ | (70 | ) |
| $ | 23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other Post- | ||||
(in thousands) |
| Pension Benefits |
| Retirement Benefits | ||||||||
Three Months Ended September 30, 2018 |
| 2018 |
| 2017 |
| 2018 |
| 2017 | ||||
Service cost |
| $ | 3,163 |
| $ | 3,769 |
| $ | 28 |
| $ | 17 |
Interest cost |
|
| 4,279 |
|
| 4,056 |
|
| 161 |
|
| 155 |
Expected return on plan assets |
|
| (10,375) |
|
| (9,652) |
|
| — |
|
| — |
Amortization of net loss and prior service costs |
|
| 1,366 |
|
| 1,167 |
|
| (95) |
|
| (128) |
Net periodic benefit cost (reduction of cost) |
| $ | (1,567) |
| $ | (660) |
| $ | 94 |
| $ | 44 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other Post- | ||||
(in thousands) |
| Pension Benefits |
| Retirement Benefits | ||||||||
Nine Months Ended September 30, 2018 |
| 2018 |
| 2017 |
| 2018 |
| 2017 | ||||
Service cost |
| $ | 9,251 |
|
| 11,612 |
| $ | 91 |
|
| 112 |
Interest cost |
|
| 12,481 |
|
| 12,470 |
|
| 459 |
|
| 514 |
Expected return on plan assets |
|
| (30,244) |
|
| (27,978) |
|
| — |
|
| — |
Amortization of net loss and prior service costs |
|
| 4,057 |
|
| 4,368 |
|
| (338) |
|
| (224) |
Net periodic benefit cost (reduction of cost) |
| $ | (4,455) |
| $ | 472 |
| $ | 212 |
| $ | 402 |
Effective January 1, 2018, the Company adopted ASU 2017-07, “Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Costs.” In accordance with the Update, only the service component of net periodic benefit cost is included in the Employee Benefits line item on the Company’s Consolidated Statements of Income. All other components have been included in Other Noninterest Expense. Prior period amounts have been reclassified to conform to current presentation.
29
13. Share-Based Payment Arrangements
The Company maintains incentive compensation plans that provide for awards of share-based compensation to employees and directors. These plans have been approved by the Company’s shareholders. Detailed descriptions of these plans were included in Note 17 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. 2018.
A summary of stock option activity for the ninethree months ended September 30, 2018March 31, 2019 is presented below:
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
|
|
|
|
|
| Weighted |
|
|
| ||||||||||||||||
|
|
|
|
|
|
| Average |
|
|
|
|
|
|
|
|
|
|
|
| Weighted |
|
|
|
|
| |
|
|
|
| Weighted |
| Remaining |
|
|
|
|
|
|
|
| Weighted |
|
| Average |
|
|
|
|
| |||
|
|
|
| Average |
| Contractual |
| Aggregate |
|
|
|
|
| Average |
|
| Remaining |
|
| Aggregate |
| |||||
|
| Number of |
| Exercise |
| Term |
| Intrinsic |
| Number of |
|
| Exercise |
|
| Contractual |
|
| Intrinsic |
| ||||||
Options |
| Shares |
| Price |
| (Years) |
| Value ($000) |
| Shares |
|
| Price |
|
| Term (Years) |
|
| Value ($000) |
| ||||||
Outstanding at January 1, 2018 |
| 88,301 |
| $ | 34.84 |
| 2.8 |
| $ | 1,294 | ||||||||||||||||
Outstanding at January 1, 2019 |
|
| 46,865 |
|
| $ | 31.88 |
|
|
| 2.6 |
|
| $ | 164 |
| ||||||||||
Exercised/Released |
| (35,317) |
|
| 37.39 |
|
|
|
| 592 |
|
| — |
|
|
| — |
|
|
|
|
|
|
| — |
|
Cancelled/Forfeited |
| — |
|
| — |
|
|
|
| — |
|
| — |
|
|
| — |
|
|
|
|
|
|
| — |
|
Expired |
| (2,298) |
|
| 44.91 |
|
|
|
| 10 |
|
| — |
|
|
| — |
|
|
|
|
|
|
| — |
|
Outstanding at September 30, 2018 |
| 50,686 |
| $ | 32.61 |
| 2.6 |
| $ | 757 | ||||||||||||||||
Exercisable at September 30, 2018 |
| 50,686 |
| $ | 32.61 |
| 2.6 |
| $ | 757 | ||||||||||||||||
Outstanding at March 31, 2019 |
|
| 46,865 |
|
| $ | 31.88 |
|
|
| 2.3 |
|
| $ | 399 |
| ||||||||||
Exercisable at March 31, 2019 |
|
| 46,865 |
|
| $ | 31.88 |
|
|
| 2.3 |
|
| $ | 399 |
|
There were no exercises of stock options during the three months ended March 31, 2019. The total intrinsic value of options exercised forduring the ninethree months ended September 30,March 31, 2018 and 2017 was $0.6 million and $4.1 million, respectively. $0.5 million.
The Company’s restricted and performance-based share awards to certain employees and directors are subject to service requirements. A summary of the status of the Company’s nonvested restricted and performance-based share awards as of September 30, 2018at March 31, 2019 and changes during the ninethree months ended September 30, 2018,March 31, 2019, are presented in the following table.
|
|
|
|
|
|
|
|
|
|
| Weighted |
| |
|
|
|
|
|
|
|
|
|
|
| Average |
| |
|
|
|
|
| Weighted |
| Number of |
|
| Grant Date |
| ||
|
|
|
|
| Average |
| Shares |
|
| Fair Value |
| ||
|
| Number of |
|
| Grant Date | ||||||||
|
| Shares |
|
| Fair Value | ||||||||
Nonvested at January 1, 2018 |
| 1,708,942 |
| $ | 37.05 | ||||||||
Nonvested at January 1, 2019 |
|
| 1,494,041 |
|
| $ | 39.89 |
| |||||
Granted |
| 94,958 |
|
| 49.57 |
|
| 72,081 |
|
|
| 34.20 |
|
Vested |
| (41,502) |
|
| 31.85 |
|
| (8,028 | ) |
|
| 47.17 |
|
Forfeited |
| (60,859) |
|
| 36.79 |
|
| (20,499 | ) |
|
| 38.92 |
|
Nonvested at September 30, 2018 |
| 1,701,539 |
| $ | 37.88 | ||||||||
Nonvested at March 31, 2019 |
|
| 1,537,595 |
|
| $ | 39.60 |
|
As of September 30, 2018,At March 31, 2019, there was $39.0$51.0 million of total unrecognized compensation expense related to nonvested restricted and performance shares expected to vest. This compensation is expected to be recognized in expense over a weighted average period of 2.973.3 years. The total fair value of shares which vested during the ninethree months ended September 30,March 31, 2019 and 2018 and 2017 was $2.0$0.1 million and $10.1$0.3 million, respectively.
During the ninethree months ended September 30, 2018,March 31, 2019, the Company granted 26,14733,691 performance share awards subject to a total shareholder return (“TSR”) performance metric with a grant date fair value of $51.13$35.27 per share and 26,14733,691 performance shares subject to an operating earnings per share performance metric with a grant date fair value of $44.84$32.15 per share to key members of executive management. The number of performance shares subject to TSR that ultimately vest at the end of the three-year performance period, if any, will be based on the relative rank of the Company’s three-year TSR among the TSRs of a peer group of 4342 regional banks. The fair
27
value of the performance shares subject to TSR at the grant date was determined using a Monte Carlo simulation method. The number of performance shares subject to core earnings per share that ultimately vest will be based on the Company’s attainment of certain coreoperating earnings per share goals over the two-year performance period. The maximum number of performance shares that could vest is 200% of the target award. Compensation expense for these performance shares is recognized on a straight line basis over the three-year service period.
30
14. Commitments and Contingencies
In the normal course of business, the Bank enters into financial instruments, such as commitments to extend credit and letters of credit, to meet the financing needs of its customers. Such instruments are not reflected in the accompanying consolidated financial statements until they are funded, although they expose the Bank to varying degrees of credit risk and interest rate risk in much the same way as funded loans. Under regulatory capital guidelines, the Company and Bank must include unfunded commitments meeting certain criteria in risk-weighted capital calculations.
Commitments to extend credit include revolving commercial credit lines, nonrevolving loan commitments issued mainly to finance the acquisition and development or construction of real property or equipment, and credit card and personal credit lines. The availability of funds under commercial credit lines and loan commitments generally depends on whether the borrower continues to meet credit standards established in the underlying contract and has not violated other contractual conditions. Loan commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee by the borrower. Credit card and personal credit lines are generally subject to cancellation if the borrower’s credit quality deteriorates. A number of commercial and personal credit lines are used only partially or, in some cases, not at all before they expire, and the total commitment amounts do not necessarily represent future cash requirements of the Company.
A substantial majority of the letters of credit are standby agreements that obligate the Bank to fulfill a customer’s financial commitments to a third party if the customer is unable to perform. The Bank issues standby letters of credit primarily to provide credit enhancement to its customers’ other commercial or public financing arrangements and to help them demonstrate financial capacity to vendors of essential goods and services.
The contract amounts of these instruments reflect the Company’s exposure to credit risk. The Company undertakes the same credit evaluation in making loan commitments and assuming conditional obligations as it does for on-balance sheet instruments and may require collateral or other credit support. The following table presents a summary of the Company’s off-balance sheet financial instruments as of September 30, 2018March 31, 2019 and December 31, 2017:
2018:
|
|
|
|
|
| |||||||||
|
|
| September 30, |
|
| December 31, |
| March 31, |
|
| December 31, |
| ||
(in thousands) |
|
| 2018 |
|
| 2017 |
| 2019 |
|
| 2018 |
| ||
Commitments to extend credit |
| $ | 7,212,886 |
| $ | 6,689,033 |
| $ | 7,198,032 |
|
| $ | 7,234,528 |
|
Letters of credit |
|
| 353,490 |
| 348,377 |
|
| 336,419 |
|
|
| 365,498 |
|
Legal Proceedings
The Company is party to various legal proceedings arising in the ordinary course of business. Management does not believe that loss contingencies, if any, arising from pending litigation and regulatory matters will have a material adverse effect on the consolidated financial position or liquidity of the Company.
15. Fair Value Measurements
The Financial Accounting Standards Board (“FASB”) defines fair value as the exchange price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The FASB’s guidance also establishes a fair value hierarchy that prioritizes the inputs to these valuation techniques used to measure fair value, giving preference to quoted prices in active markets for identical assets or liabilities (“level 1”) and the lowest priority to unobservable inputs such as a reporting entity’s own data (“level 3”).Level 2inputs includequoted prices for similar assets or liabilities in active markets, quoted prices for identical assets or liabilities in markets that are not active, observable inputs other than quoted prices, such as interest rates and yield curves, and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
28
31
Fair Value of Assets and Liabilities Measured on a Recurring Basis
The following tables present for each of the fair value hierarchy levels the Company’s assets and liabilities that are measured at fair value on a recurring basis in the consolidated balance sheets.
sheets at March 31, 2019 and December 31, 2018:
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
| September 30, 2018 |
| March 31, 2019 |
| |||||||||||||||||||||||
(in thousands) |
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
U.S. Treasury and government agency securities |
| $ | — |
| $ | 89,312 |
| $ | — |
| $ | 89,312 |
| $ | — |
|
| $ | 72,143 |
|
| $ | — |
|
| $ | 72,143 |
|
Municipal obligations |
|
| — |
| 232,713 |
| — |
| 232,713 |
|
| — |
|
|
| 245,940 |
|
|
| — |
|
|
| 245,940 |
| |||
Corporate debt securities |
|
| — |
| 3,500 |
| — |
| 3,500 |
|
| — |
|
|
| 3,500 |
|
|
| — |
|
|
| 3,500 |
| |||
Residential mortgage-backed securities |
|
| — |
| 1,731,275 |
| — |
| 1,731,275 |
|
| — |
|
|
| 1,413,032 |
|
|
| — |
|
|
| 1,413,032 |
| |||
Commercial mortgage-backed securities |
|
| — |
| 722,882 |
| — |
| 722,882 |
|
| — |
|
|
| 787,834 |
|
|
| — |
|
|
| 787,834 |
| |||
Collateralized mortgage obligations |
|
| — |
|
| 138,503 |
|
| — |
|
| 138,503 |
|
| — |
|
|
| 158,631 |
|
|
| — |
|
|
| 158,631 |
|
Total available for sale securities |
|
| — |
|
| 2,918,185 |
|
| — |
|
| 2,918,185 |
|
| — |
|
|
| 2,681,080 |
|
|
| — |
|
|
| 2,681,080 |
|
Derivative assets (1) |
|
| — |
|
| 11,411 |
|
| — |
|
| 11,411 |
|
| — |
|
|
| 25,827 |
|
|
| — |
|
|
| 25,827 |
|
Total recurring fair value measurements - assets |
| $ | — |
| $ | 2,929,596 |
| $ | — |
| $ | 2,929,596 |
|
| — |
|
| $ | 2,706,907 |
|
|
| — |
|
| $ | 2,706,907 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities (1) |
| $ | — |
| $ | 28,791 |
| $ | — |
| $ | 28,791 |
| $ | — |
|
| $ | 11,176 |
|
| $ | 6,953 |
|
| $ | 18,129 |
|
Total recurring fair value measurements - liabilities |
| $ | — |
| $ | 28,791 |
| $ | — |
| $ | 28,791 |
| $ | — |
|
| $ | 11,176 |
|
| $ | 6,953 |
|
| $ | 18,129 |
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
| December 31, 2017 |
| December 31, 2018 |
| |||||||||||||||||||||||
(in thousands) |
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale debt securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
U.S. Treasury and government agency securities |
| $ | — |
| $ | 97,272 |
| $ | — |
| $ | 97,272 |
| $ | — |
|
| $ | 71,706 |
|
| $ | — |
|
| $ | 71,706 |
|
Municipal obligations |
| — |
| 243,786 |
| — |
| 243,786 |
|
| — |
|
|
| 240,427 |
|
|
| — |
|
|
| 240,427 |
| ||||
Corporate debt securities |
|
| — |
| 3,500 |
| — |
| 3,500 |
|
| — |
|
|
| 3,500 |
|
|
| — |
|
|
| 3,500 |
| |||
Residential mortgage-backed securities |
|
| — |
| 1,715,213 |
| — |
| 1,715,213 |
|
| — |
|
|
| 1,443,402 |
|
|
| — |
|
|
| 1,443,402 |
| |||
Commercial mortgage-backed securities |
|
| — |
| 687,135 |
| — |
| 687,135 |
|
| — |
|
|
| 770,077 |
|
|
| — |
|
|
| 770,077 |
| |||
Collateralized mortgage obligations |
|
| — |
|
| 163,963 |
|
| — |
|
| 163,963 |
|
| — |
|
|
| 161,925 |
|
|
| — |
|
|
| 161,925 |
|
Total available for sale securities |
|
| — |
|
| 2,910,869 |
|
| — |
|
| 2,910,869 |
|
| — |
|
|
| 2,691,037 |
|
|
| — |
|
|
| 2,691,037 |
|
Derivative assets (1) |
|
| — |
|
| 14,157 |
|
| — |
|
| 14,157 |
|
| — |
|
|
| 16,980 |
|
|
| — |
|
|
| 16,980 |
|
Total recurring fair value measurements - assets |
| $ | — |
| $ | 2,925,026 |
| $ | — |
| $ | 2,925,026 |
|
| — |
|
| $ | 2,708,017 |
|
|
| — |
|
| $ | 2,708,017 |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities (1) |
| $ | — |
| $ | 14,389 |
| $ | — |
| $ | 14,389 |
| $ | — |
|
| $ | 14,923 |
|
| $ | 7,304 |
|
| $ | 22,227 |
|
Total recurring fair value measurements - liabilities |
| $ | — |
| $ | 14,389 |
| $ | — |
| $ | 14,389 |
| $ | — |
|
| $ | 14,923 |
|
| $ | 7,304 |
|
| $ | 22,227 |
|
(1) | For further disaggregation of derivative assets and liabilities, see Note |
Securities classified as level 2 include obligations of U.S. Government agencies and U.S. Government-sponsored agencies, residential and commercial mortgage-backed securities and collateralized mortgage obligations that are issued or guaranteed by U.S. government agencies, and state and municipal bonds. The level 2 fair value measurements for investment securities are obtained quarterly from a third-party pricing service that uses industry-standard pricing models. Substantially all of the model inputs are observable in the marketplace or can be supported by observable data.
The Company invests only in securities of investment grade quality with a targeted duration, for the overall portfolio, generally between two and five and a half years. Company policies generally limit investments to U.S. agency securities and municipal securities determined to be investment grade according to an internally generated score which generally includes a rating of not less than “Baa” or its equivalent by a nationally recognized statistical rating agency.
The fair value29
For the Company’s derivative financial instruments which are predominantlydesignated as hedges and those under the customer interest rate swaps,program, the fair value is obtained from a third-party pricing service that uses an industry-standard discounted cash flow model that relies on inputs, LIBOR swap curves, and Overnight Index swap rate curves, observable in the marketplace. To comply with the accounting guidance, credit valuation adjustments are incorporated in the fair values to appropriately reflect nonperformance risk for both the Company and the counterparties. Although the Company has determined that the majority of the inputs used to value thethese derivative instruments fall within level 2 of the fair value hierarchy, the credit value adjustments utilize level 3 inputs, such as estimates of current credit spreads. The Company has determined that the impact of the credit valuation adjustments is not significant to the overall valuation of these derivatives. As a result, the Company has classified its derivative valuations in their entiretyfor these instruments in level 2 of the fair value hierarchy. The Company’s policy is to
32
measure counterparty credit risk quarterly for all derivative instruments including those subject to master netting arrangements consistent with how market participants would price the net risk exposure at the measurement date.
The Company also has certain derivative instruments associated with the Bank’s mortgage bankingmortgage-banking activities. These derivative instruments include interest rate lock commitments on prospective residential mortgage loans and forward commitments to sell these loans to investors on a best efforts delivery basis. The fair value of these derivative instruments is measured using observable market prices for similar instruments and is classified as a level 2 measurement.
The Company’s Level 3 liability consists of a derivative contract with the purchaser of 192,163 shares of Visa Class B common stock. Pursuant to the agreement, the Company retains the risks associated with the ultimate conversion of the Visa Class B common shares into shares of Visa Class A common stock, such that the counterparty will be compensated for any dilutive adjustments to the conversion ratio and the Company will be compensated for any anti-dilutive adjustments to the ratio. The agreement also requires periodic payments by the Company to the counterparty calculated by reference to the market price of Visa Class A common shares at the time of sale and a fixed rate of interest that steps up once after the eighth scheduled quarterly payment. The fair value of the liability is determined using a discounted cash flow methodology. The significant unobservable inputs used in the fair value measurement are the Company’s own assumptions about estimated changes in the conversion rate of the Visa Class B common shares into Visa Class A common shares, the date on which such conversion is expected to occur and the estimated growth rate of the Visa Class A common share price. Refer to Note 7 – Derivatives for information about the derivative contract with the counterparty.
The Company believes its valuation methods for its assets and liabilities carried at fair value are appropriate; however, the use of different methodologies or assumptions, particularly as applied to Level 3 assets and liabilities, could have a material effect on the computation of their estimated fair values.
Changes in Level 3 Fair Value Measurements and Quantitative Information about Level 3 Fair Value Measurements
The table below presents a rollforward of the amounts on the consolidated balance sheets for the three months ended March 31, 2019 and the year ended December 31, 2018 for financial instruments of a material nature that are classified within Level 3 of the fair value hierarchy and are measured at fair value on a recurring basis:
(in thousands) |
|
|
|
|
Liability balance at December 31, 2017 |
| $ | — |
|
Entry into derivative contract |
|
| 7,304 |
|
Liability balance at December 31, 2018 |
|
| 7,304 |
|
Cash settlement |
|
| (414 | ) |
Losses included in earnings |
|
| 63 |
|
Liability balance at March 31, 2019 |
| $ | 6,953 |
|
The table below provides an overview of the valuation techniques and significant unobservable inputs used in those techniques to measure the financial instrument measured on a recurring basis and classified within Level 3 of the valuation. The range of sensitivities that management utilized in its fair value calculations is deemed acceptable in the industry with respect to the identified financial instrument.
($ in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Fair Value |
|
|
|
|
|
|
| |||||
Level 3 Class |
| March 31, 2019 |
|
| December 31, 2018 |
|
| Valuation Technique |
| Unobservable Input |
| Values Utilized | ||
|
|
|
|
|
|
|
|
|
|
|
| Visa Class A appreciation |
| 6% - 18% |
Derivative liability |
| $ | 6,953 |
|
| $ | 7,304 |
|
| Discounted cash flow |
| Conversion rate |
| 1.62x - 1.59x |
|
|
|
|
|
|
|
|
|
|
|
| Time until resolution |
| 24-48 months |
30
The Company’s policy is to recognize transfers between valuation hierarchy levels as of the end of a reporting period. There were no transfers between levels during the periods presented.
Fair Value of Assets Measured on a Nonrecurring Basis
Certain assets and liabilities are measured at fair value on a nonrecurring basis. Collateral-dependent impaired loans are level 2 assets measured at the fair value of the underlying collateral based on independent third-party appraisals that take into consideration market-based information such as recent sales activity for similar assets in the property’s market.
Other real estate owned and foreclosed assets, including both foreclosed property and surplus banking property, are level 3 assets that are adjusted to fair value, less estimated selling costs, upon transfer to other real estate owned. Subsequently, other real estate owned is carried at the lower of carrying value or fair value less estimated selling costs. Fair values are determined by sales agreement or third-party appraisals as discounted for estimated selling costs, information from comparable sales, and marketability of the property.
The fair value information presented below is not as of the period end, rather it was as of the date the fair value adjustment was recorded during the twelve months for each of the dates presented below, and excludes nonrecurring fair value measurements of assets no longer on the balance sheet.
The following tables present the Company’s financial assets that are measured at fair value on a nonrecurring basis for each of the fair value hierarchy levels.
|
| March 31, 2019 |
| |||||||||||||
(in thousands) |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
Collateral-dependent impaired loans |
| $ | — |
|
| $ | 163,781 |
|
| $ | — |
|
| $ | 163,781 |
|
Other real estate owned and foreclosed assets, net |
|
| — |
|
|
| — |
|
|
| 7,688 |
|
|
| 7,688 |
|
Total nonrecurring fair value measurements |
| $ | — |
|
| $ | 163,781 |
|
| $ | 7,688 |
|
| $ | 171,469 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
|
| September 30, 2018 |
| December 31, 2018 |
| |||||||||||||||||||||||
(in thousands) |
| Level 1 |
| Level 2 |
| Level 3 |
| Total |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||||||
Collateral-dependent impaired loans |
| $ | — |
| $ | 180,730 |
| $ | — |
| $ | 180,730 |
| $ | — |
|
| $ | 170,918 |
|
| $ | — |
|
| $ | 170,918 |
|
Other real estate owned and foreclosed assets, net |
|
| — |
|
| — |
|
| 24,900 |
|
| 24,900 |
|
| — |
|
|
| — |
|
|
| 14,594 |
|
|
| 14,594 |
|
Total nonrecurring fair value measurements |
| $ | — |
| $ | 180,730 |
| $ | 24,900 |
| $ | 205,630 |
| $ | — |
|
| $ | 170,918 |
|
| $ | 14,594 |
|
| $ | 185,512 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, 2017 | ||||||||||
(in thousands) |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Collateral-dependent impaired loans |
| $ | — |
| $ | 184,205 |
| $ | — |
| $ | 184,205 |
Other real estate owned and foreclosed assets, net |
|
| — |
|
| — |
|
| 19,595 |
|
| 19,595 |
Total nonrecurring fair value measurements |
| $ | — |
| $ | 184,205 |
| $ | 19,595 |
| $ | 203,800 |
Accounting guidance from the FASB requires the disclosure of estimated fair value information about certain on- and off-balance sheet financial instruments, including those financial instruments that are not measured and reported at fair value on a recurring basis. The significant methods and assumptions used by the Company to estimate the fair value of financial instruments are discussed below.
Cash, Short‑TermShort-Term Investments and Federal Funds Sold –For these short‑termshort-term instruments, the carrying amount is a reasonable estimate of fair value.
SecuritiesSecurities – The fair value measurement for securities available for sale was discussed earlier in the note. The same measurement techniques were applied to the valuation of securities held to maturity.
Loans, Net–The fair value measurement for certain impaired loans was discussed earlier in the note. For the remaining portfolio, fair values were generally determined by discounting scheduled cash flows using discount rates determined with reference to current market rates at which loans with similar terms would be made to borrowers of similar credit quality.
Loans Held for Sale – These loans are recorded at fair value and carried at the lower of cost or market. The carrying amount is considered a reasonable estimate of fair value.
DepositsDeposits – The accounting guidance requires that the fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits, interest-bearing checking and savings accounts, be assigned fair values equal to amounts payable upon demand (“carrying amounts”). The fair value of fixed maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities.
33
Securities Sold under Agreements to Repurchase, Federal Funds Purchased, and FHLB Borrowings – For these short-term liabilities, the carrying amount is a reasonable estimate of fair value.
31
Long-Term Debt – The fair value is estimated by discounting the future contractual cash flows using current market rates at which debt with similar terms could be obtained.
Derivative Financial Instruments – The fair value measurement for derivative financial instruments was discussed earlier in the note.
The following tables present the estimated fair values of the Company’s financial instruments by fair value hierarchy levels and the corresponding carrying amount at September 30, 2018 and December 31, 2017.
amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
| September 30, 2018 |
| March 31, 2019 |
| ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| Total Fair |
| Carrying |
|
|
|
|
|
|
|
|
|
|
|
|
| Total Fair |
|
| Carrying |
| ||||
(in thousands) |
| Level 1 |
| Level 2 |
| Level 3 |
| Value |
| Amount |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Value |
|
| Amount |
| ||||||||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, interest-bearing bank deposits, and federal funds sold |
| $ | 447,683 |
| $ | — |
| $ | — |
| $ | 447,683 |
| $ | 447,683 |
| $ | 523,956 |
|
| $ | — |
|
| $ | — |
|
| $ | 523,956 |
|
| $ | 523,956 |
|
Available for sale securities |
|
| — |
|
| 2,918,185 |
|
| — |
|
| 2,918,185 |
|
| 2,918,185 |
|
| — |
|
|
| 2,681,080 |
|
|
| — |
|
|
| 2,681,080 |
|
|
| 2,681,080 |
|
Held to maturity securities |
|
| — |
|
| 2,975,455 |
|
| — |
|
| 2,975,455 |
|
| 3,069,262 |
|
| — |
|
|
| 2,892,910 |
|
|
| — |
|
|
| 2,892,910 |
|
|
| 2,896,442 |
|
Loans, net |
|
| — |
|
| 180,730 |
|
| 18,843,738 |
|
| 19,024,468 |
|
| 19,329,167 |
|
| — |
|
|
| 163,781 |
|
|
| 19,646,070 |
|
|
| 19,809,851 |
|
|
| 19,918,150 |
|
Loans held for sale |
|
| — |
|
| 29,043 |
|
| — |
|
| 29,043 |
|
| 29,043 |
|
| — |
|
|
| 27,437 |
|
|
| — |
|
|
| 27,437 |
|
|
| 27,437 |
|
Derivative financial instruments |
|
| — |
|
| 11,411 |
|
| — |
|
| 11,411 |
|
| 11,411 |
|
| — |
|
|
| 25,827 |
|
|
| — |
|
|
| 25,827 |
|
|
| 25,827 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
| $ | — |
| $ | — |
| $ | 22,373,052 |
| $ | 22,373,052 |
| $ | 22,417,807 |
| $ | — |
|
| $ | — |
|
| $ | 23,351,829 |
|
| $ | 23,351,829 |
|
| $ | 23,380,294 |
|
Federal funds purchased |
|
| 50,325 |
|
| — |
|
| — |
|
| 50,325 |
|
| 50,325 |
|
| 450 |
|
|
| — |
|
|
| — |
|
|
| 450 |
|
|
| 450 |
|
Securities sold under agreements to repurchase |
|
| 415,960 |
|
| — |
|
| — |
|
| 415,960 |
|
| 415,960 |
|
| 478,285 |
|
|
| — |
|
|
| — |
|
|
| 478,285 |
|
|
| 478,285 |
|
FHLB short-term borrowings |
|
| 1,810,362 |
|
| — |
|
| — |
|
| 1,810,362 |
|
| 1,810,362 |
|
| 910,000 |
|
|
| — |
|
|
| — |
|
|
| 910,000 |
|
|
| 910,000 |
|
Long-term debt |
|
| — |
|
| 213,076 |
|
| — |
|
| 213,076 |
|
| 215,912 |
|
| — |
|
|
| 227,206 |
|
|
| — |
|
|
| 227,206 |
|
|
| 224,962 |
|
Derivative financial instruments |
|
| — |
|
| 28,791 |
|
| — |
|
| 28,791 |
|
| 28,791 |
|
| — |
|
|
| 11,176 |
|
|
| 6,953 |
|
|
| 18,129 |
|
|
| 18,129 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
| December 31, 2017 | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| Total Fair |
| Carrying |
| December 31, 2018 |
| |||||||||||||||||||
(in thousands) |
| Level 1 |
| Level 2 |
| Level 3 |
| Value |
| Amount |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total Fair Value |
|
| Carrying Amount |
| ||||||||||
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, interest-bearing bank deposits, and federal funds sold |
| $ | 479,332 |
| $ | — |
| $ | — |
| $ | 479,332 |
| $ | 479,332 |
| $ | 494,466 |
|
| $ | — |
|
| $ | — |
|
| $ | 494,466 |
|
| $ | 494,466 |
|
Available for sale securities |
|
| — |
|
| 2,910,869 |
|
| — |
|
| 2,910,869 |
|
| 2,910,869 |
|
| — |
|
|
| 2,691,037 |
|
|
| — |
|
|
| 2,691,037 |
|
|
| 2,691,037 |
|
Held to maturity securities |
|
| — |
|
| 2,962,010 |
|
| — |
|
| 2,962,010 |
|
| 2,977,511 |
|
| — |
|
|
| 2,935,856 |
|
|
| — |
|
|
| 2,935,856 |
|
|
| 2,979,547 |
|
Loans, net |
|
| — |
|
| 184,205 |
|
| 18,403,303 |
|
| 18,587,508 |
|
| 18,786,855 |
|
| — |
|
|
| 170,918 |
|
|
| 19,555,969 |
|
|
| 19,726,887 |
|
|
| 19,831,897 |
|
Loans held for sale |
|
| — |
|
| 39,865 |
|
| — |
|
| 39,865 |
|
| 39,865 |
|
| — |
|
|
| 28,150 |
|
|
| — |
|
|
| 28,150 |
|
|
| 28,150 |
|
Derivative financial instruments |
|
| — |
|
| 14,157 |
|
| — |
|
| 14,157 |
|
| 14,157 |
|
| — |
|
|
| 16,980 |
|
|
| — |
|
|
| 16,980 |
|
|
| 16,980 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
| $ | — |
| $ | — |
| $ | 22,238,847 |
| $ | 22,238,847 |
| $ | 22,253,202 |
| $ | — |
|
| $ | — |
|
| $ | 23,129,574 |
|
| $ | 23,129,574 |
|
| $ | 23,150,185 |
|
Federal funds purchased |
|
| 140,754 |
|
| — |
|
| — |
|
| 140,754 |
|
| 140,754 |
|
| 425 |
|
|
| — |
|
|
| — |
|
|
| 425 |
|
|
| 425 |
|
Securities sold under agreements to repurchase |
|
| 430,569 |
|
| — |
|
| — |
|
| 430,569 |
|
| 430,569 |
|
| 428,599 |
|
|
| — |
|
|
| — |
|
|
| 428,599 |
|
|
| 428,599 |
|
FHLB short-term borrowings |
|
| 1,132,567 |
|
| — |
|
| — |
|
| 1,132,567 |
|
| 1,132,567 |
|
| 1,160,104 |
|
|
| — |
|
|
| — |
|
|
| 1,160,104 |
|
|
| 1,160,104 |
|
Long-term debt |
|
| — |
|
| 303,631 |
|
| — |
|
| 303,631 |
|
| 305,513 |
|
| — |
|
|
| 223,135 |
|
|
| — |
|
|
| 223,135 |
|
|
| 224,993 |
|
Derivative financial instruments |
|
| — |
|
| 14,389 |
|
| — |
|
| 14,389 |
|
| 14,389 |
|
| — |
|
|
| 14,923 |
|
|
| 7,304 |
|
|
| 22,227 |
|
|
| 22,227 |
|
34
16. Recent Accounting Pronouncements
Accounting Standards Adopted in 20182019
In August 2018,February 2016, the FASB issued ASU 2018-15, “Intangibles – Goodwill2016-02, “Leases (Topic 842),” to increase transparency and Other – Internal-Use Software (Subtopic 350-40): Customer’scomparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. With the exception of short-term leases, lessees are required to recognize a lease liability representing the lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and a right-of-use asset representing the lessee’s right to use, or control the use of, a specified asset for the lease term upon adoption. Lessor accounting was largely unchanged under the new guidance, except for clarification of the definition of initial direct costs which provided additional guidance on the timing of recognition of those costs. Subsequent to the issuance of this update, the FASB issued three additional ASUs that provide codification improvements and certain transition elections, including ASU 2018-11, which permits an additional transition method whereby an entity may elect to record a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company was required to and did adopt the standard effective January 1, 2019, using the modified retrospective transition method permitted by
32
ASU 2018-11. Thus, the Company’s reporting for the comparative period presented in the financial statements and disclosures continues to be in accordance with GAAP Topic 840. Upon adoption, the Company recorded a gross-up of assets and liabilities in its Consolidated Balance Sheet, with approximately $116 million for right of use assets and $131 million of lease payment obligations offset by the elimination of $15 million of existing lease incentive and other deferred rent liabilities. Accounting for Implementation Costs Incurredleases in a Cloud Computing Arrangement That Is a Service Contract.” The amendments in this Update improve current GAAP by clarifying the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract, which alignsaccordance with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. The Company early adopted this standard during the third quarter of 2018. Adoption of this standard didTopic 842 has not havehad a material impact upon the Company’s financial condition orconsolidated results of operations.
In March 2018, the FASB issued ASU 2018-05, “Income Taxes (Topic 740): Amendmentsoperations, and is not expected to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118.” The ASU amends Topic 740 to incorporate SEC guidance issued in its Staff Bulletin No. 118 (SAB 118). SAB 118 addressed the application of GAAP in situations when a registrant does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Cuts and Jobs Act. The amendments in this update were effective upon issuance, at which time the Company adopted the standard. Adoption of this standard did not have a material impact on the Company’s financial condition or results of operations.
In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities,” with the objective of improving financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. The update provides changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The amendments in this update are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early application is permitted in any interim period after issuance of the update. All transition requirements and elections are to be applied to hedging relationships existing on the date of adoption, and the effect of the adoption should be reflected as of the beginning of the fiscal year of adoption. The Company early adopted this standard effective January 1, 2018 and has made certain adjustments to its existing designation documentation for active hedging relationships in order to take advantage of specific provisions in the new guidance and to fully align its documentation with the ASU. The adoption of this standard did not have a material impact on the Company’s financial condition or results of operations. See further discussion in Note 6 – Derivatives.
In March 2017, the FASB issued ASU 2017-07, “Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Costs,” to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost. The amendments require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. The amendments also allow only the service cost component to be eligible for capitalization when applicable. These amendments are effective for public business entities for annual periods beginning after December 15, 2017, including interim periods within those annualfuture periods. Disclosures of the nature of and reason for the change in accounting principle are required in the first interim and annual periods of adoption. The Company adopted the standard effective January 1, 2018 and the amendments were applied retrospectively for the presentation of the service cost component and the other components of net periodic pension and postretirement benefit costs in the statement of income. Refer to Note 125 – Retirement Plans –Operating Leases for detail on the componentsfurther information related to operating lease accounting policy, practical expedient elections for adoption and operating leasing information at adoption and as of net periodic pension and post-retirement benefit costs that were reclassified for each reporting period. The provisions of this update apply only to presentation and therefore did not have a material impact on the Company’s financial condition or results of operations.
In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” affecting any entity that enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. The core principle of this standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Most revenue associated with financial instruments, including interest and loan origination fees, is outside the scope of the guidance. Gains and losses on investment securities, derivatives, and sales of financial instruments are also excluded from the scope. Subsequent to issuance of the revenue recognition guidance, the FASB has issued several updates that deferred by one year the effective date for revenue recognition guidance; clarified its guidance for performing the principal-versus-agent analysis; clarified guidance for identifying performance obligations allowing entities to ignore immaterial promised goods and services in the context of a contract with a customer and other clarifying guidance and technical corrections. Entities could elect to adopt the guidance either on a full or modified retrospective basis. The standard was effective and the Company adopted this guidance on January 1, 2018, using the modified retrospective approach. The Company inventoried and evaluated its contracts with customers for compliance with the standard. The Company did not identify material changes to the timing of revenue recognition and the adoption of
35March 31, 2019.
this guidance did not have a material impact on its financial condition or results of operations. See Note 8 - Revenue Recognition for additional information regarding the implementation of this standard.
Additionally, the following ASUs were adopted by the Company on January 1, 2018, but did not have a significant impact on the Company’s consolidated financial statements:
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Issued but Not Yet Adopted Accounting Standards
In August 2018, the FASB issued ASU 2018-14, “Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20): Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans.” The amendments in this Update modify certain disclosure requirements by removing disclosures that are no longer considered cost beneficial, clarifying specific requirements of disclosures, and adding disclosure requirements identified as relevant. The amendments in this Update are effective for fiscal years ending after December 15, 2020 for public business entities, and early adoption is permitted. The Company is currently assessing the impact of adoption of this guidance upon its pension and postretirement plan disclosures. Adoption of this guidance will have no impact upon the Company’s results of operations or financial condition.
In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.” The amendments in this Update modify certain disclosure requirements on fair value measurements set forth in Topic 820, Fair Value Measurements. In addition, the amendments in this Update eliminate the phrase “an entity shall disclose at a minimum” to promote the appropriate exercise of discretion by entities when considering fair value measurement disclosures to clarify that materiality is an appropriate consideration of entities and their auditors when evaluating disclosure requirements. The amendments in this Update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 31, 2019, and early adoption is permitted. The Company is currently assessing the impact of adoption of this guidance upon its fair value measurements disclosures. Adoption of this guidance will have no impact upon the Company’s results of operations or financial condition.
In July 2018, the FASB issued ASU 2018-09, “Codification Improvements,” that clarifies certain topics within the Accounting Standards Codification (“ASC”) in an effort to correct unintended application of guidance. The amendments in this Update affect a wide variety of Topics in the Codification, some topics of which are applicable to the Company. The amendments apply to all reporting entities within the scope of the affected accounting guidance. The transition and effective date guidance is based on the facts and circumstances of each amendment, with some of the amendments effective upon issuance of this Update and with other transition guidance effective for annual periods beginning after December 15, 2018 for public business entities. The Company is currently assessing the impact of adoption of this guidance, but does not expect it to have a material impact upon its financial condition or results of operations.
In June 2018, the FASB issued ASU 2018-07, “Compensation – Stock Compensation – (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting,” to expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods and services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide financing to the issuer or awards granted in conjunction with the selling of goods or services to customers as part of a contract accounted for under Topic 606, “Revenue from Contracts with Customers.” The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. The Company does not expect the adoption of this guidance to have a material impact upon its financial condition or results of operations.
36
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The ASU, more commonly referred to as Current Expected Credit Losses, or CECL, requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques currently applied will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. In addition, the ASU amends the accounting for credit losses on debt securities and purchased financial assets with credit deterioration. The ASU is effective for SEC filers for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption. Early application is permitted for all organizations for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is not planning to early adopt this guidance. The Company has engaged third party consultants and formed cross-functional working groups comprised of individuals from various areas including credit, finance, treasury, risk management and information technology for implementation. Five work streams have been created to develop the expected credit loss models; execute system implementation; complete balance sheet scoping; ensure the design of effective internal controls surrounding new processes; and provide executive oversight of the project. Balance sheet scoping is largely complete. The Company has contracted withcompleted the configuration of a vendor for aprovided software solution for which testing and has begun configuration for an implementation is expected to be complete in second quarter of 2019. An internal analytics teamValidation of models began in the first quarter of 2019 and is developing and testing credit loss models expected to be used incompleted during the calculation.second quarter of 2019. While the Company has not yet quantified the financial impact of adoption, the expectation is that application of this guidance will result in an increase in the allowance for loan losses given the change in methodology from covering losses inherent in the portfolio to covering losses over the remaining expected life of the portfolio, and the reclassification of nonaccretable difference on purchased credit impaired loans to allowance (offset by an increase in the carrying value of the related loans).portfolio. Application of the guidance is also expected to result in the establishment of an allowance for credit loss on held to maturity debt securities. The amount of the increase in these allowances will be impacted by the portfolio composition and quality at the adoption date as well as economic conditions and forecasts at that time.
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. With the exception of short-term leases, lessees will be required to recognize a lease liability representing the lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and a right-of-use asset representing the lessee’s right to use, or control the use of, a specified asset for the lease term. Consequently, lessees will no longer be able to utilize leases as a source of off-balance sheet financing. Lessor accounting is largely unchanged under the new guidance, except for clarification of the definition of initial direct costs which may impact the timing of recognition of those costs. Subsequent to the issuance of this Update, the FASB issued three additional ASUs that provide codification improvements and certain transition elections, including ASU 2018-11, which permits an additional transition method whereby an entity may elect to record a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Consequently, the entity’s reporting for the comparative periods presented in the financial statements in which the entity adopts the new lease requirements would continue to be in accordance with current GAAP (Topic 840), including disclosures. The Company plans to elect this transition method. Public business entities are required to apply the amendments for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company has preliminarily determined the practical expedients expected to be applied and continues to review existing service contracts that may include embedded leases. The Company has completed the upgrade of its existing third-party leasing software and has tested the capitalization functionality of the platform. The Company will record a gross-up of its Consolidated Balance Sheets as a result of recognizing lease liabilities and right of use assets upon adoption. The impact upon the Company’s consolidated financial statements will be based on the present value of future minimum lease payments as adjusted for lease incentives for the population of leases on the date of adoption and interest rates on the date of adoption. As such, the amount is not yet known. The Company does not expect material changes to its consolidated results of operations as a result of the application of this guidance.
33
37
On April 30, 2019, the Company announced its entry to an Agreement and Plan of Merger providing for, among other things, the acquisition of MidSouth Bancorp, Inc. (“MidSouth”) (NYSE: MSL), parent company of MidSouth Bank, N.A. At March 31, 2019, MidSouth had approximately $1.7 billion in assets, including $0.9 billion of loans, and $1.4 billion of deposits. Under the terms of the agreement, each share of MidSouth common stock outstanding will convert, pursuant to a fixed conversion ratio, into the right to receive 0.2952 shares of the Company’s common stock. In addition, the merger agreement allows for the redemption of all of MidSouth’s outstanding preferred stock at closing, subject to receipt of applicable governmental approvals. The value of the stock-based consideration will be determined at the time of closing based on the fixed conversion ratio. The approximate transaction value based on an average of the Company’s share price at the date of the agreement, April 30, 2019, was $213 million. The acquisition is subject to the satisfaction of customary closing conditions, including the receipt of regulatory approvals and approval by the shareholders of MidSouth. The transaction is expected to close late in the third quarter of 2019.
34
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning and protections of section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended. Important factors that could cause actual results to differ materially from the forward-looking statements we make in this Quarterly Report on Form 10-Q and in other reports or documents that we file from time to time with the SEC and include, but are not limited to, the following:
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balance sheet and revenue growth expectations may differ from actual results;
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the risk that our provision for loan losses may be inadequate or may be negatively affected by credit risk exposure;
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loan growth expectations;
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management’s predictions about charge-offs, including energy-related credits, the impact of changes in oil and gas prices on our energy portfolio, and the downstream impact on businesses that support that sector, especially in the Gulf Coast Region;
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the risk that our enterprise risk management framework may not identify or address risks adequately, which may result in unexpected losses;
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the impact of the trust and asset management transaction, the proposed MidSouth acquisition, or future business combinations on our performance and financial condition including our ability to successfully integrate the businesses;
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deposit trends;
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credit quality trends;
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changes in interest rates;
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net interest margin trends;
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future expense levels;
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success of revenue-generating initiatives;
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the effectiveness of derivative financial instruments and hedging activities to manage risks;
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risks related to our reliance on third parties to provide key components of our business infrastructure, including the risks related to disruptions in services or financial difficulties of a third-party vendor;
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risks related to the ability of our operational framework to manage risks associated with our business such as credit risk and operation risk, including third-party vendors and other service providers, which could among other things, result in a breach of operating or security systems as a result of a cyber-attack or similar act;
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projected tax rates;
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future profitability;
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purchase accounting impacts, such as accretion levels;
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our ability to identify and address potential cybersecurity risks, including data security breaches, credential stuffing, malware, “denial-of-service” attacks, “hacking” and identify theft, a failure of which could disrupt our business and result in the disclosure of and/or misuse or misappropriation of confidential or proprietary information, disruption or damage to our systems, increased costs, losses, or adverse effects to our reputation;
our ability to receive dividends from Hancock Whitney Bank could affect our liquidity, including our ability to pay dividends or take other capital actions; |
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the impact on our financial results, reputation, and business if we are unable to comply with all applicable federal and state regulations or other supervisory actions or directives and any necessary capital initiatives;
our ability to effectively compete with other traditional and non-traditional financial services companies, some of whom possess greater financial resources than we do or are subject to different regulatory standards than we are;
our ability to maintain adequate internal controls over financial reporting;
potential claims, damages, penalties, fines and reputational damage resulting from pending or future litigation, regulatory proceedings and enforcement actions;
the financial impact of future tax legislation; and
changes in laws and regulations affecting our businesses, including legislation and regulations relating to bank products and services, as well as changes in the enforcement and interpretation of such laws and regulations by applicable governmental and self-regulatory agencies, which could require us to change certain business practices, increase compliance risk, reduce our revenue, impose additional costs on us, or otherwise negatively affect our businesses.
Also, any statement that does not describe historical or current facts is a forward-looking statement. These statements often include the words “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “forecast,” “goals,” “targets,” “initiatives,” “focus,” “potentially,” “probably,” “projects,” “outlook,” or similar expressions or future conditional verbs such as “may,” “will,” “should,” “would,” and “could.” Forward-looking statements are based upon the current beliefs and expectations of management and on information currently available to management. Our statements speak as of the date hereof, and we do not assume any obligation to update these statements or to update the reasons why actual results could differ from those contained in such statements in light of new information or future events.
35
Forward-looking statements are subject to significant risks and uncertainties. Investors are cautioned against placing undue reliance on such statements. Actual results may differ materially from those set forth in the forward looking statements. Additional factors that could cause actual results to differ materially from those described in the forward-looking statements can be found in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 20172018 and in other periodic reports that we file with the SEC.
You are cautioned not to place undue reliance on these forward-looking statements. We do not intend, and undertake no obligation, to update or revise any forward-looking statements, whether as a result of differences in actual results, changes in assumptions or changes in other factors affecting such statements, except as required by law.
OVERVIEW
Non-GAAP Financial Measures
Management’s Discussion and Analysis of Financial Condition and Results of Operations include non-GAAP measures used to describe our performance. These non-GAAP financial measures have inherent limitations as analytical tools and should not be considered on a standalone basis or as a substitute for analyses of financial condition and results as reported under GAAP. Non-GAAP financial measures are not standardized and therefore, it may not be possible to compare these measures with other companies that present measures having the same or similar names. These disclosures should not be considered an alternative to GAAP.
A reconciliation of those measures to GAAP measures are provided within the Selected Financial Data section on page 48 ofthat appears later in this report.item. The following is a summary of these non-GAAP measures and an explanation as to why they are deemed useful.
Consistent with Securities and Exchange Commission Industry Guide 3, we present net interest income, net interest margin and efficiency ratios on a fully taxable equivalent (“te”) basis. The te basis adjusts for the tax-favored status of net interest income from certain loans and investments using a statutory federal tax ratesrate of 21% and 35% for 2018 and 2017, respectively, to increase tax-exempt interest income to a taxable equivalent basis. We believe this measure to be the preferred industry measurement of net interest income, and that it enhances comparability of net interest income arising from taxable and tax-exempt sources.
38
We present certain additional non-GAAP financial measures to assist the reader with a better understanding of the Company’s performance period over period, as well as to provide investors with assistance in understanding the success management has experienced in executing its strategic initiatives. These non-GAAP measures may reference the concepts “core” orconcept “operating.” We use the term “core” to describe a financial measure that excludes income or expense arising from accretion or amortization of fair value adjustments recorded as part of purchase accounting. We use the term “operating” to describe a financial measure that excludes income or expense considered to be nonoperating in nature. Items identified as nonoperating are those that, when excluded from a reported financial measure, provide management or the reader with a measure that may be more indicative of forward-looking trends in our business.
We define Core Net Interest Income as net interest income (te) excluding net purchase accounting accretion and amortization. We define Core Net Interest Margin as core net interest income expressed as a percentage of average earning assets. Management believes that core net interest income and core net interest margin provide investors with meaningful financial measures of the Company’s performance over time.
We define Operating Revenue as net interest income (te) and noninterest income less nonoperating revenue. We define Operating Pre-Provision Net Revenue as operating revenue (te) less noninterest expense, excluding nonoperating items. Management believes that operating pre-provision net revenue is a useful financial measure because it enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle.
We define Operating Earnings as reported net income excluding nonoperating items net of income tax. We define Operating Earnings per Share as operating earnings expressed as an amount available to each common shareholder on a diluted basis.
Rebranding
Pending Acquisition
On May 24, 2018,April 30, 2019, we announced our shareholders approvedentry into an agreement to acquire MidSouth Bancorp, Inc. (“MidSouth”) (NYSE: MSL) in a stock-for-stock transaction. MidSouth Bank N.A., the Company’s proposal to changewholly-owned banking subsidiary of MidSouth, operates 42 locations in Louisiana and Texas and had approximately $1.7 billion of assets, including $0.9 billion of loans, and $1.4 billion of deposits at March 31, 2019. At the nameclosing, each share of the organization from “Hancock Holding Company” to “Hancock Whitney Corporation.” RelatedMidSouth’s common stock will convert to the name change,right to receive 0.2952 shares of our common stock. The merger agreement also allows for the redemption of MidSouth’s outstanding preferred stock at closing, subject to the receipt of applicable governmental approvals. The Company also changed its common stock ticker from “HBHC”expects acquisition-related expenses to “HWC.” Both changes were effective May 25, 2018.
Additional corporate changes resulting from rebranding are as follows:
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Acquisitions
On July 13, 2018, we completedapproximate $38 million in 2019 and expects the acquisitiontransaction to be accretive to income beginning in the first quarter of the bank-managed high net worth individual and institutional investment management and trust business of Capital One, National Association (“Capital One”). In addition, we assumed approximately $217 million of customer deposit liabilities.2020. The combination brings assets under administration and assets under management to approximately $26 billion and $10 billion, respectively, andtransaction is expected to provideadd approximately $0.13 to $0.15 to earnings once fully phased-in. The transaction provides the opportunity for both enhanced growth in several of our current markets, such as MidSouth’s home market of Lafayette, Louisiana, as well as opportunities for expansion into new markets in Louisiana and Texas. The acquisition is subject to develop relationships for other private, wholesalethe satisfaction of customary closing conditions, including the receipt of regulatory approvals and retail services.
On March 10, 2017, our wholly-owned subsidiary, Hancock Whitney Bank (“Hancock Whitney”), completed a transaction with First NBC Bank (“FNBC”), whereby Hancock Whitney acquired approximately $1.2 billion in loans (netapproval by the shareholders of fair value discount or “loan mark”), nine branch locations with $398 million in deposits, and assumed $604 million in FHLB borrowings.MidSouth. The operational conversion of the branch locations occurred in the second quarter of 2017, along with the simultaneous closure of 10 overlapping branches. This transaction is referredexpected to as the FNBC I transaction throughout this document.
On April 28, 2017, Hancock Whitney entered intoclose with a purchase and assumption agreement with the FDIC (“Agreement”), which acted as the receiver for the Louisiana Office of Financial Institutions (OFI) following the OFI’s closure of FNBC. This transaction is referred to as the FNBC II transaction throughout this document. Pursuant to the Agreement, Hancock Whitney acquired selected assets and liabilities of FNBC from the FDIC and continued to operate the 29 former FNBC branch locations untilsimultaneous systems conversion which occurredlate in July 2017. In the third quarter of 2017, Hancock Whitney exercised its option to acquire seven former FNBC locations and closed and consolidated 25 overlapping branch locations.2019.
36
Under the Agreement, Hancock Whitney assumed approximately $1.6 billion in deposits and customer repurchase agreements and acquired $165 million in performing loans, and $791 million in other assets. Hancock Whitney paid a premium of $35 million to the FDIC for the earnings stream acquired and received approximately $800 million in cash ($642 million from the FDIC for the net liabilities assumed and $158 million in branch cash acquired).
The terms of the Agreement require the FDIC to indemnify Hancock Whitney against certain liabilities of FNBC and its affiliates not assumed or otherwise purchased by Hancock Whitney. Neither the Company nor Hancock Whitney acquired any assets, common stock, preferred stock or debt, or assumed any other obligations, of First NBC Bank Holding Company.
39
Divestiture
On March 9, 2018, we sold our consumer finance subsidiary, Harrison Finance Company (“HFC”), due to a change in corporate strategy. The subsidiary operated in 35 branches with 137 employees and had $95 million in loans as of December 31, 2017. The transaction resulted in a loss on sale totaling $1.1 million.
Most of our market area experienced a solidmodest to moderate expansion in economic activity during the thirdfirst quarter of 2018,2019, according to the Federal Reserve’s Summary of Commentary on Current Economic Conditions (“Beige Book”). Overall, the economic outlook remains positive, with some uncertainty onpositive. Activity in the impact of tariffs on trade. Drillingenergy sector expanded and outlooks improved compared to the prior quarter. Oil and gas production rose at a slow pace; however, spending for drilling activity leveled off for energy related businesses operating mainly in our south Louisiana and Houston, Texas markets due to pipeline capacity constraints. However, outlooks remained positivedeclined as additional pipeline capacity is expected in 2019. firms invested less into new equipment.
The commercialCommercial real estate market maintained strong demandconditions continued to advance in most of our footprint, with the pace of nonresidential construction activity at least matched with the year-ago level except for retail construction, which was unchanged to down.markets. In theour Houston market, a large number of new apartments continued to suppress rent growthapartment rents were flat and office space net absorption remained weak in part due to the broader national trend among firms to move out of larger spaces into more efficient, smaller ones.industrial leasing slowed.
The residential real estate market has a variedpositive outlook with most of our markets reporting modestthat lower mortgage rates are helping to boost growth from the prior report, but ongoing growth, with an increase in construction activity. However, constraints onflat to the availability of lotsprior year and land as welloptimistic as the construction labor market may affect growth in the short term. In our Houston market, new home sales were slower than expected and existing home sales were flat but remained near recent highs. There was also some concern regarding higher interest rates, rising building costs, and uncertainty surrounding trade and immigration policies on future sales, with some expectation that sales will start to flatten in the near term.spring selling season gets underway.
Retail sales activity and consumer spending outlook was positive with an increasegrew slightly in most of our markets. The Houston market reported flat sales levels.and slower demand. Auto sales were updown in all of our markets. The labor market remained tight citing low availability of quality labor as a growing challenge.in our markets with an increase in wages for hard-to-fill or in-demand positions.
Economic reports indicatedata indicates that loan growth slowedwas stable in most of our markets, as higher interest rates and savings from tax reform impactedwith an increase in loan demand.volumes in our Houston market, primarily with construction real estate lending. Reports also indicated that financial institutions were relying more on borrowings and noncore depositsable to fund asset growth,the majority of lending with thetheir deposit base, although competition for core deposits fueling an increase in mergers and acquisitions. However,continues to increase. Our total loan demand expanded in our Houston market, with broad based growth. Our loan production inbalance increased $86.4 million, or 2% annualized, during the thirdfirst quarter of 2018 was up $173 million, or 4% annualized.2019.
Highlights of ThirdFirst Quarter 2018
2019
Net income for the thirdfirst quarter of 20182019 was $83.9$79.2 million, or $.96$.91 per diluted common share (EPS), compared to $71.2$96.2 million, or $.82$1.10 EPS in the secondfourth quarter of 2018 and $58.9$72.5 million, or $.68$.83 EPS, in the thirdfirst quarter of 2017.2018. The thirdfirst quarter of 2019 included a $10.1 million ($.09 per share after-tax impact) provision for loan losses related to the previously disclosed potential fraud associated with DC Solar (further discussion of this matter appears in the Provision for Loan Losses section later in this Item). The fourth quarter of 2018 included $4.8$1.9 million ($.05 per share after-tax impact) of nonoperating items. The second quarter of 2018 included $15.8 million ($.14.02 per share impact) of nonoperating items and the thirdfirst quarter of 20172018 included nonoperating items of $11.4$7.0 million ($.08.07 per share impact).
of nonoperating items.
Highlights of our thirdfirst quarter 2019 results (compared to fourth quarter 2018):
Net income was $79.2 million, or $.91 per diluted share, a decrease of $17.1 million, or $.19 per share. Excluding nonoperating items, net income was $87.1 million, a decrease of $10.6 million, or $.12 per share.
The first quarter results were impacted by a charge-off to the provision taken related to potential fraud on an equipment finance lease with DC Solar ($.09). Fourth quarter 2018 results (comparedwere impacted by benefits realized on tax reform-related initiatives ($.11).
Net interest margin expanded 7 bps to second3.46%.
Criticized commercial loans declined $41 million, or 7% ($15 million energy and $26 million nonenergy).
Improved mix within the energy portfolio of 55% in exploration & production, transportation and storage, and 45% in onshore and offshore support services.
The first quarter 2018):
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40
Results2019 reflects improvements in the net interest margin and asset quality, two key areas of focus. During the thirdfourth quarter reflect steady progress towards achieving our goals and enhancing shareholder value. We achieved our corporate strategic objective (“CSO”) for operating EPS this quarter at $1.01, and our operating return of average asset ratio of 1.24% is just below the top end2018, we restructured a portion of our targeted range.investment and loan portfolios whereby we sold certain lower yielding securities and loans and reinvested in higher yielding assets. The portfolio restructuring and other improvements in our earning asset mix, along with the December 2018 interest rate increase, contributed to the expansion in the net interest margin. Asset quality improved with criticized commercial loans down in both the energy and nonenergy down compared to prior quarter. Loan growth was positive despite the continued decline of the energy portfolio, which is now below 5% of total loans, and more balanced among upstream reserve-based lending, midstream and support services. We completed the trust and asset management acquisition, which contributed to the quarter’s improved operating leverage.portfolios.
RESULTS OF OPERATIONS
Net Interest Income
Net interest income (te) for the thirdfirst quarter of 20182019 was $218.3$223.1 million, a $2.7$1.6 million, or 1%, increase from the secondfourth quarter of 2018. Over the same period, core net interest income increased $3.6 million. Net interest income (te) for the thirdfirst quarter of 20182019 increased $6.9$13.5 million, or 3%6%, compared to the thirdfirst quarter of 2017, while core net interest income was up $9.0 million, or 4%, over the same period.2018. The linked quarter increase is primarily attributable to one additional accrual daya full quarter impact of the fourth quarter portfolio restructure and a higher level of average earning assets,the December 2018 rate increase, partially offset by a lower net interest margin.two fewer accrual days.
37
The net interest margin (te) was 3.36%3.46 % for the thirdfirst quarter of 2018, down 4 basis points (bps)2019, up 7 bps from the secondfourth quarter of 2018. The decrease in the netNet interest margin (te) fromwas favorably impacted by the prior quarter reflects an 11 bp increaselate 2018 portfolio restructuring. The restructuring and other improvements in the cost of funds, partially offset byearning asset mix and the recent interest rate increase resulted in a positive impact from a 614 bp increaseimprovement in the average earning asset yield, (an 8 bp increaseincluding increases in the loan yield of 13 bps, bond portfolio yield of 7 bps, and a 5 bp increase inshort term investments yield onof 17 bps. Partially offsetting the securities portfolio. The core net interest margin for the thirdlinked quarter of 2018 was 3.28%, down 3 bps from the second quarter of 2018. Contributing to the declineimprovement in the marginearning asset yield was an increase inthe movement of our deposit beta from 17% in the second quarter of 2018 to 35% this quarter while ourand loan beta increased to 52% from 44% in the second quarter.betas at differing intervals. The deposit and loan betas are defined as the amount by which deposit and loan costs change in response to the movement in short-term interest rates. TheOur deposit beta increased partly duemoved from 31% to the higher-cost deposits that we assumed50% in the trust and asset management acquisition,first quarter of 2019, while our loan beta moved from 40% to 54% over the same period. The movement in the deposit beta was influenced by a 2420 bp increase in the cost of brokered CDs, and a 1420 bp increase in the rate paid on public fund deposits. Also contributing
Compared to the decline infirst quarter of 2018, the net interest margin was the impact from narrowing of the spread of the 30 day LIBOR to federal funds had on the loan yield and a shift in funding mix to higher cost Federal Home Loan Bank advances. We expect some improvement in funding mix in the fourth quarter of 2018 with the usual inflow of seasonal deposits and expect loan yields to improve with the full quarter impact of the September rate increase.
Compared to the third quarter of 2017, the net interest margin decreased 8increased 9 bps, and the core net interest margin was down 4 bps. The net interest margin was negatively impacted by 8 bps from lower taxable equivalent adjustment as a result of a lower statutory income tax rate. Excluding the tax rate change, the margin was flat to the third quarter of 2017, primarily due to an improvement in the benefits from the increased average earning asset yield being offset bymix and the increased rates paid on interest bearing liabilities along with unfavorable changes to the funding mix.
Net interest income (te) for the nine months ended September 30, 2018 totaled $643.5 million, up $33.8 million, or 6%,net benefit from the nine months ended September 30 2017. Core net interest income was up $36.0 million, which is net of a decline in the taxable equivalent adjustment of $13.3 million. Interest earned on loans, excluding purchase accounting accretion, increased $72.5 million as average total loans grew $1.1 billion, or 6%, due to the FNBC transactions and organic loan growth and a 26 bp increase in loan yield. The securities yield of 2.50% was flat compared to the same period in 2017, which reflects a negative impact of 10 bps from tax reform. The cost of funds was up 23 bps to .66%, due in part to interest rate hikes, promotional pricing campaigns aimed at attracting and retaining deposits, and a less favorable mix in funding sources.increases during 2018.
41
The following tables detail the components of our net interest income (te) and net interest margin.
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| June 30, 2018 |
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(dollars in millions) |
| Volume |
| Interest |
| Rate |
| Volume |
| Interest |
| Rate |
| Volume |
| Interest |
| Rate |
| Volume |
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| Interest (d) |
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| Rate |
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| Volume |
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| Interest (d) |
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| Rate |
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| Volume |
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Average earning assets |
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Commercial & real estate loans (te) (a) |
| $ | 14,542.3 |
| $ | 168.9 |
| 4.61 | % |
| $ | 14,380.9 |
| $ | 162.3 |
| 4.53 | % |
| $ | 13,945.8 |
| $ | 151.3 |
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| 4.31 | % |
| $ | 15,062.1 |
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| $ | 180.5 |
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| 4.86 | % |
| $ | 14,794.9 |
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| $ | 172.8 |
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| 4.64 | % |
| $ | 14,224.4 |
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| $ | 150.9 |
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| 4.30 | % | |
Residential mortgage loans |
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| 2,816.2 |
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| 29.4 |
| 4.17 |
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| 2,754.3 |
|
| 28.1 |
| 4.08 |
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| 2,549.3 |
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| 25.0 |
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| 3.94 |
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| 2,942.4 |
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| 31.1 |
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| 4.23 | % |
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| 2,888.2 |
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| 29.2 |
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| 4.04 | % |
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| 2,718.4 |
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| 27.9 |
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| 4.10 | % | |
Consumer loans |
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| 2,106.2 |
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| 28.6 |
| 5.39 |
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| 2,058.0 |
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| 27.2 |
| 5.30 |
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| 2,096.1 |
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| 29.4 |
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| 5.57 |
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| 2,122.4 |
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| 29.9 |
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| 5.72 | % |
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| 2,134.6 |
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| 32.5 |
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| 6.04 | % |
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| 2,085.7 |
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| 29.0 |
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| 5.64 | % | |
Loan fees & late charges |
|
| — |
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| — |
| — |
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| — |
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| 0.2 |
| — |
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| — |
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| (0.5) |
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| — |
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| — |
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| (0.9 | ) |
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| 0.00 | % |
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| — |
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| 0.6 |
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| 0.00 | % |
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| — |
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| 0.5 |
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| 0.00 | % | |
Total loans (te) (b) |
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| 19,464.7 |
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| 226.9 |
| 4.63 |
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| 19,193.2 |
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| 217.8 |
| 4.55 |
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| 18,591.2 |
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| 205.2 |
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| 4.39 |
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| 20,126.9 |
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| 240.6 |
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| 4.84 | % |
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| 19,817.7 |
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| 235.1 |
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| 4.71 | % |
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| 19,028.5 |
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| 208.3 |
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| 4.43 | % | |
Loans held for sale |
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| 26.0 |
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| 0.3 |
| 3.60 |
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| 22.6 |
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| 0.3 |
| 5.22 |
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| 21.7 |
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| 0.2 |
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| 3.97 |
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| 20.6 |
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| 0.3 |
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| 4.92 | % |
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| 22.2 |
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| 0.2 |
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| 2.91 | % |
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| 32.2 |
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| 0.2 |
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| 2.75 | % | |
US Treasury and government agency securities |
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| 144.7 |
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| 0.8 |
| 2.21 |
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| 145.6 |
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| 0.8 |
| 2.22 |
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| 125.6 |
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| 0.7 |
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| 2.08 |
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| 123.8 |
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| 0.7 |
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| 2.25 | % |
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| 131.8 |
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| 0.8 |
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| 2.23 | % |
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| 148.4 |
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| 0.8 |
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| 2.21 | % | |
Mortgage-backed securities and collateralized mortgage obligations |
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| 5,092.4 |
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| 31.1 |
| 2.44 |
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| 4,932.0 |
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| 29.3 |
| 2.38 |
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| 4,575.0 |
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| 25.4 |
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| 2.21 |
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| 4,599.4 |
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| 29.9 |
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| 2.60 | % |
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| 4,896.2 |
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| 30.9 |
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| 2.53 | % |
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| 4,785.3 |
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| 27.9 |
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| 2.33 | % | |
Municipals (te) |
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| 945.7 |
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| 7.5 |
| 3.19 |
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| 951.0 |
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| 7.6 |
| 3.18 |
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| 975.4 |
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| 9.2 |
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| 3.80 |
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| 930.0 |
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| 7.4 |
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| 3.17 | % |
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| 933.9 |
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| 7.4 |
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| 3.17 | % |
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| 960.1 |
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| 7.6 |
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| 3.18 | % | |
Other securities |
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| 3.6 |
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| — |
| 2.81 |
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| 3.5 |
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| — |
| 2.84 |
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| 3.8 |
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| — |
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| 1.94 |
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| 3.5 |
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| 0.0 |
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| 3.09 | % |
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| 3.6 |
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| 0.0 |
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| 2.77 | % |
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| 3.5 |
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| 0.0 |
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| 2.06 | % | ||||
Total securities (te) (c) |
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| 6,186.4 |
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| 39.4 |
| 2.55 |
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| 6,032.1 |
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| 37.7 |
| 2.50 |
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| 5,679.8 |
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| 35.3 |
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| 2.48 |
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| 5,656.7 |
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| 38.0 |
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| 2.69 | % |
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| 5,965.5 |
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| 39.1 |
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| 2.62 | % |
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| 5,897.3 |
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| 36.3 |
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| 2.46 | % | |
Total short-term investments |
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| 155.3 |
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| 0.7 |
| 1.71 |
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| 143.1 |
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| 0.6 |
| 1.61 |
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| 194.7 |
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| 0.6 |
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| 1.17 |
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| 216.2 |
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| 1.2 |
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| 2.18 | % |
|
| 205.8 |
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| 1.0 |
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| 2.01 | % |
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| 148.3 |
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| 0.5 |
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| 1.34 | % | |
Total earning assets (te) |
| $ | 25,832.4 |
| $ | 267.3 |
| 4.11 | % |
| $ | 25,391.0 |
| $ | 256.4 |
| 4.05 | % |
| $ | 24,487.4 |
| $ | 241.3 |
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| 3.92 | % |
| $ | 26,020.4 |
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| $ | 280.1 |
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| 4.35 | % |
| $ | 26,011.2 |
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| $ | 275.4 |
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| 4.21 | % |
| $ | 25,106.3 |
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| $ | 245.3 |
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| 3.95 | % | |
Average interest-bearing liabilities |
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Interest-bearing transaction and savings deposits |
| $ | 7,944.3 |
| $ | 10.9 |
| 0.54 | % |
| $ | 7,860.0 |
| $ | 9.3 |
| 0.47 | % |
| $ | 8,097.4 |
| $ | 8.4 |
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| 0.41 | % |
| $ | 8,082.6 |
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| $ | 14.7 |
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| 0.74 | % |
| $ | 7,940.7 |
|
| $ | 12.4 |
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| 0.62 | % |
| $ | 8,043.2 |
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| $ | 9.1 |
|
|
| 0.46 | % | |
Time deposits |
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| 3,377.6 |
|
| 14.1 |
| 1.66 |
|
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| 3,121.8 |
|
| 11.5 |
| 1.48 |
|
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| 2,711.6 |
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| 7.7 |
|
| 1.12 |
|
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| 3,743.3 |
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| 18.0 |
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| 1.95 | % |
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| 3,616.2 |
|
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| 16.6 |
|
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| 1.82 | % |
|
| 2,979.0 |
|
|
| 9.7 |
|
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| 1.32 | % | |
Public funds |
|
| 2,682.3 |
|
| 9.2 |
| 1.36 |
|
|
| 2,970.1 |
|
| 9.1 |
| 1.22 |
|
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| 2,764.9 |
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| 5.7 |
|
| 0.82 |
|
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| 3,060.5 |
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| 13.4 |
|
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| 1.78 | % |
|
| 2,680.8 |
|
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| 10.7 |
|
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| 1.58 | % |
|
| 3,070.1 |
|
|
| 8.1 |
|
|
| 1.07 | % | |
Total interest-bearing deposits |
|
| 14,004.2 |
|
| 34.2 |
| 0.97 |
|
|
| 13,951.9 |
|
| 29.9 |
| 0.86 |
|
|
| 13,573.9 |
|
| 21.8 |
|
| 0.64 |
|
|
| 14,886.4 |
|
|
| 46.1 |
|
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| 1.26 | % |
|
| 14,237.7 |
|
|
| 39.7 |
|
|
| 1.11 | % |
|
| 14,092.3 |
|
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| 26.9 |
|
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| 0.78 | % | |
Short-term borrowings |
|
| 2,610.2 |
|
| 11.8 |
| 1.81 |
|
|
| 1,989.4 |
|
| 7.4 |
| 1.49 |
|
|
| 1,909.4 |
|
| 4.4 |
|
| 0.92 |
|
|
| 1,684.9 |
|
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| 8.1 |
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| 1.92 | % |
|
| 2,330.3 |
|
|
| 11.5 |
|
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| 1.98 | % |
|
| 1,823.1 |
|
|
| 5.4 |
|
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| 1.17 | % | |
Long-term debt |
|
| 241.5 |
|
| 3.0 |
| 5.05 |
|
|
| 299.7 |
|
| 3.5 |
| 4.63 |
|
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| 339.5 |
|
| 3.6 |
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| 4.29 |
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| 225.0 |
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| 2.8 |
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| 4.99 | % |
|
| 222.3 |
|
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| 2.7 |
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| 4.82 | % |
|
| 305.1 |
|
|
| 3.4 |
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| 4.48 | % | |
Total borrowings |
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| 2,851.7 |
|
| 14.8 |
| 2.07 |
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|
| 2,289.1 |
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| 10.9 |
| 1.91 |
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| 2,248.9 |
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| 8.0 |
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| 1.43 |
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| 1,909.9 |
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| 10.9 |
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| 2.30 | % |
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| 2,552.6 |
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| 14.2 |
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| 2.21 | % |
|
| 2,128.2 |
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|
| 8.8 |
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|
| 1.66 | % | |
Total interest-bearing liabilities |
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| 16,855.9 |
|
| 49.0 |
| 1.15 | % |
|
| 16,241.0 |
|
| 40.8 |
| 1.01 | % |
|
| 15,822.8 |
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| 29.8 |
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| 0.75 | % |
|
| 16,796.3 |
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| 57.0 |
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| 1.38 | % |
|
| 16,790.3 |
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| 53.9 |
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| 1.27 | % |
|
| 16,220.5 |
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|
| 35.7 |
|
|
| 0.89 | % | |
Net interest-free funding sources |
|
| 8,976.5 |
|
|
|
|
|
|
|
| 9,150.0 |
|
|
|
|
|
|
|
| 8,664.6 |
|
|
|
|
|
|
|
|
| 9,224.1 |
|
|
|
|
|
|
|
|
|
|
| 9,220.9 |
|
|
|
|
|
|
|
|
|
|
| 8,885.8 |
|
|
|
|
|
|
|
|
| |
Total cost of funds |
| $ | 25,832.4 |
| $ | 49.0 |
| 0.75 | % |
| $ | 25,391.0 |
| $ | 40.8 |
| 0.64 | % |
| $ | 24,487.4 |
| $ | 29.8 |
|
| 0.48 | % |
| $ | 26,020.4 |
|
| $ | 57.0 |
|
|
| 0.89 | % |
| $ | 26,011.2 |
|
| $ | 53.9 |
|
|
| 0.82 | % |
| $ | 25,106.3 |
|
| $ | 35.7 |
|
|
| 0.58 | % | |
Net interest spread (te) |
|
|
|
| $ | 218.3 |
| 2.96 | % |
|
|
|
| $ | 215.6 |
| 3.04 | % |
|
|
|
| $ | 211.5 |
|
| 3.17 | % |
|
|
|
|
| $ | 223.1 |
|
|
| 2.97 | % |
|
|
|
|
| $ | 221.5 |
|
|
| 2.94 | % |
|
|
|
|
| $ | 209.6 |
|
|
| 3.05 | % | |
Net interest margin |
| $ | 25,832.4 |
| $ | 218.3 |
| 3.36 | % |
| $ | 25,391.0 |
| $ | 215.6 |
| 3.40 | % |
| $ | 24,487.4 |
| $ | 211.5 |
|
| 3.44 | % |
| $ | 26,020.4 |
|
| $ | 223.1 |
|
|
| 3.46 | % |
| $ | 26,011.2 |
|
| $ | 221.5 |
|
|
| 3.39 | % |
| $ | 25,106.3 |
|
| $ | 209.6 |
|
|
| 3.37 | % |
(a) | Taxable equivalent (te) amounts were calculated using a federal income tax rate of 21% |
(b) | Includes nonaccrual loans. |
(c) | Average securities do not include unrealized holding gains/losses on available for sale securities. |
(d) Included in interest income is net purchase accounting accretion of $5.0 million for the three months ended March 31, 2019 and December 31, 2018 and $6.8 million for the three months ended March 31, 2018.
38
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months Ended | |||||||||||||||||
|
|
|
| September 30, 2018 |
|
|
| September 30, 2017 |
| |||||||||||
(dollars in millions) |
|
|
| Volume |
|
| Interest |
| Rate |
|
|
| Volume |
|
| Interest |
| Rate | ||
Average earning assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial & real estate loans (te) (a) |
|
| $ | 14,383.7 |
| $ | 482.2 |
| 4.48 | % |
|
| $ | 13,634.7 |
| $ | 430.1 |
| 4.22 | % |
Residential mortgage loans |
|
|
| 2,763.3 |
|
| 85.4 |
| 4.12 |
|
|
|
| 2,379.6 |
|
| 68.7 |
| 3.85 |
|
Consumer loans |
|
|
| 2,083.4 |
|
| 84.8 |
| 5.44 |
|
|
|
| 2,078.3 |
|
| 85.3 |
| 5.49 |
|
Loan fees & late charges |
|
|
| — |
|
| 0.7 |
| — |
|
|
|
| — |
|
| (0.9) |
| — |
|
Total loans (te) (b) |
|
|
| 19,230.4 |
|
| 653.1 |
| 4.54 |
|
|
|
| 18,092.6 |
|
| 583.2 |
| 4.31 |
|
Loans held for sale |
|
|
| 26.9 |
|
| 0.8 |
| 3.89 |
|
|
|
| 21.8 |
|
| 0.7 |
| 4.09 |
|
US Treasury and government agency securities |
|
|
| 146.2 |
|
| 2.4 |
| 2.21 |
|
|
|
| 122.6 |
|
| 1.9 |
| 2.07 |
|
Mortgage-backed securities and collateralized mortgage obligations |
|
|
| 4,937.7 |
|
| 88.2 |
| 2.38 |
|
|
|
| 4,208.4 |
|
| 70.1 |
| 2.22 |
|
Municipals (te) |
|
|
| 952.2 |
|
| 22.7 |
| 3.18 |
|
|
|
| 967.0 |
|
| 27.7 |
| 3.82 |
|
Other securities |
|
|
| 3.5 |
|
| 0.1 |
| 2.57 |
|
|
|
| 24.0 |
|
| 0.3 |
| 1.92 |
|
Total securities (te) (c) |
|
|
| 6,039.6 |
|
| 113.4 |
| 2.50 |
|
|
|
| 5,322.0 |
|
| 100.0 |
| 2.50 |
|
Total short-term investments |
|
|
| 149.0 |
|
| 1.7 |
| 1.56 |
|
|
|
| 435.1 |
|
| 3.0 |
| 0.94 |
|
Total earning assets (te) |
|
| $ | 25,445.9 |
| $ | 769.0 |
| 4.04 | % |
|
| $ | 23,871.5 |
| $ | 686.9 |
| 3.84 | % |
Average interest-bearing liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing transaction and savings deposits |
|
| $ | 7,948.8 |
| $ | 29.3 |
| 0.49 | % |
|
| $ | 7,685.2 |
| $ | 21.0 |
| 0.37 | % |
Time deposits |
|
|
| 3,160.9 |
|
| 35.4 |
| 1.50 |
|
|
|
| 2,543.9 |
|
| 19.3 |
| 1.01 |
|
Public funds |
|
|
| 2,906.1 |
|
| 26.4 |
| 1.21 |
|
|
|
| 2,618.2 |
|
| 12.6 |
| 0.64 |
|
Total interest-bearing deposits |
|
|
| 14,015.8 |
|
| 91.1 |
| 0.87 |
|
|
|
| 12,847.3 |
|
| 52.9 |
| 0.55 |
|
Short-term borrowings |
|
|
| 2,143.8 |
|
| 24.5 |
| 1.53 |
|
|
|
| 2,089.0 |
|
| 11.7 |
| 0.75 |
|
Long-term debt |
|
|
| 281.9 |
|
| 9.9 |
| 4.70 |
|
|
|
| 408.2 |
|
| 12.6 |
| 4.11 |
|
Total borrowings |
|
|
| 2,425.7 |
|
| 34.4 |
| 1.90 |
|
|
|
| 2,497.2 |
|
| 24.3 |
| 1.29 |
|
Total interest-bearing liabilities |
|
|
| 16,441.5 |
|
| 125.5 |
| 1.02 | % |
|
|
| 15,344.5 |
|
| 77.2 |
| 0.67 | % |
Net interest-free funding sources |
|
|
| 9,004.4 |
|
|
|
|
|
|
|
|
| 8,527.0 |
|
|
|
|
|
|
Total cost of funds |
|
| $ | 25,445.9 |
| $ | 125.5 |
| 0.66 | % |
|
| $ | 23,871.5 |
| $ | 77.2 |
| 0.43 | % |
Net interest spread (te) |
|
|
|
|
| $ | 643.5 |
| 3.02 | % |
|
|
|
|
| $ | 609.7 |
| 3.17 | % |
Net interest margin |
|
| $ | 25,445.9 |
| $ | 643.5 |
| 3.38 | % |
|
| $ | 23,871.5 |
| $ | 609.7 |
| 3.41 | % |
|
|
|
|
|
|
During the thirdfirst quarter of 2018,2019, we recorded a provision for loan losses of $6.9$18.0 million, down $2.0up $9.9 million from the secondfourth quarter of 20182019 and down $6.2up $5.8 million from the thirdfirst quarter of 2017. For2018. Included in the nine months ended September 30, 2018, we recordedcurrent quarter’s provision is a total provision for loan losses of $28.0$10.1 million charge-off related to the DC Solar credit discussed below and a relatively flat allowance compared to $44.0the prior quarter.
The Company had a lease financing facility to DC Solar, a company that sold and managed mobile solar generators. In February 2019, the borrower filed for Chapter 11 bankruptcy protection and we became aware of an affidavit from a Federal Bureau of Investigation special agent that alleged that this borrower was operating a potentially fraudulent Ponzi-type scheme and that the majority of mobile solar generators sold to investors and managed by the borrower and the majority of the related lease revenues claimed to have been received by the borrower may not have existed. The $10.1 million charged-off taken in the quarter represents the majority of our exposure to this borrower. There could be potential for some recovery in the nine months ended September 30, 2017.future depending on our ability to sell or re-lease the solar units.
The provision includes net charge-offs totaling $6.9$17.9 million, which represents 0.14%0.36% of average total loans on an annualized basis in the thirdfirst quarter of 2018,2019, or 0.16% when adjusted to exclude the DC Solar charge-off, compared to $5.1net charge-offs of $28.1 million, or 0.11%0.56 % of average total loans in the secondfourth quarter of 2018. In the energy portfolio, there were no net charge offs in the third quarter of 2018, compared to a $1.9 million net recovery in the second quarter of 2018. The provision for the nine months ended September 30, 2018 included net charge-offs totaling $24.1 million compared to $47.8 million in the nine months ended September 30, 2017, with energy related net charge-offs down $24 million.
The provision for loan losses reflects a continued decline in energy allowance, with reduced exposure and an overall improvement in portfolio performance, and an increase in nonenergy allowance as that portfolio continues to grow. The discussion of Allowance for Loan Losses and Asset Quality later in this Item provides additional information on changes in the allowance for loan losses and general credit quality.
Noninterest Income
Noninterest income totaled $75.5$70.5 million for the thirdfirst quarter of 2018, up $6.72019, down $4.0 million, or 10%,5% from the secondfourth quarter of 2018 and up $8.4$4.3 million, or 13%6%, compared to the thirdfirst quarter of 2017.2018. Excluding nonoperating items related to a portfolio restructure in the fourth quarter of 2018 and a loss on the sale of a subsidiary in the first quarter of 2018, noninterest income was down $3.4 million, or 5% from the fourth quarter of 2018 and up $3.1 million, or 5%, from the first quarter of 2018. The increase overdecrease from the prior quarter was primarily driven by decreases due to seasonality, market conditions and fewer business days in the quarter discussed in more detail below. The increase compared to the first quarter of 2018 was largely driven by an increase in trust fees as a result of thefollowing the trust and asset management acquisition. The increase compared to the third quarter of 2017 was also largely driven by higher trust feesacquisition, as well as higher bank card and ATM fees discussed in more detail below.fees.
43
The components of operating and nonoperating noninterest income are presented in the following table for the indicated periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| March 31, |
|
| December 31, |
|
| March 31, |
| ||||
|
| Three Months Ended |
| Nine Months Ended |
| 2019 |
|
| 2018 |
|
| 2018 |
| |||||||||||||||
|
| September 30, |
| June 30, |
| September 30, |
| September 30, | ||||||||||||||||||||
(in thousands) |
| 2018 |
| 2018 |
| 2017 |
| 2018 |
| 2017 | ||||||||||||||||||
Service charges on deposit accounts |
| $ | 21,377 |
| $ | 20,981 |
| $ | 21,444 |
| $ | 63,806 |
| $ | 60,711 |
| $ | 20,367 |
|
| $ | 21,466 |
|
| $ | 21,448 |
| |
Trust fees |
|
| 16,738 |
|
| 11,653 |
|
| 10,742 |
|
| 39,726 |
|
| 33,459 |
|
| 15,124 |
|
|
| 15,762 |
|
|
| 11,335 |
| |
Bank card and ATM fees |
|
| 14,862 |
|
| 15,464 |
|
| 13,390 |
|
| 44,784 |
|
| 39,545 |
|
| 15,290 |
|
|
| 15,656 |
|
|
| 14,458 |
| |
Investment and annuity fees and insurance commissions |
|
| 6,652 |
|
| 6,264 |
|
| 6,230 |
|
| 19,041 |
|
| 17,939 |
|
| 6,528 |
|
|
| 6,307 |
|
|
| 6,125 |
| |
Secondary mortgage market operations |
|
| 4,333 |
|
| 3,965 |
|
| 4,157 |
|
| 11,699 |
|
| 11,965 |
|
| 3,726 |
|
|
| 3,933 |
|
|
| 3,401 |
| |
Amortization of FDIC loss share receivable |
|
|
| — |
|
| — |
|
| — |
|
| — |
|
| (2,427) | ||||||||||||
Income from bank-owned life insurance |
|
|
| 3,100 |
|
| 3,113 |
|
| 3,097 |
|
| 9,283 |
|
| 8,632 |
|
| 3,265 |
|
|
| 3,141 |
|
|
| 3,070 |
|
Credit related fees |
|
|
| 2,762 |
|
| 2,416 |
|
| 2,521 |
|
| 7,900 |
|
| 8,297 |
|
| 2,595 |
|
|
| 3,165 |
|
|
| 2,722 |
|
Income from derivatives |
|
|
| 1,363 |
|
| 1,588 |
|
| 1,339 |
|
| 4,474 |
|
| 4,484 |
|
| 809 |
|
|
| 893 |
|
|
| 1,523 |
|
Gain (loss) on sales of assets |
|
|
| 989 |
|
| 41 |
|
| 400 |
|
| 968 |
|
| 113 |
|
| 397 |
|
|
| (151 | ) |
|
| (62 | ) |
Other miscellaneous |
|
|
| 3,342 |
|
| 3,347 |
|
| 3,795 |
|
| 10,066 |
|
| 11,023 |
|
| 2,402 |
|
|
| 3,762 |
|
|
| 3,377 |
|
Total noninterest operating income |
| $ | 75,518 |
| $ | 68,832 |
| $ | 67,115 |
| $ | 211,747 |
| $ | 193,741 |
| $ | 70,503 |
|
| $ | 73,934 |
|
| $ | 67,397 |
| |
Nonoperating income items |
|
| — |
|
| — |
|
| — |
|
| (1,145) |
|
| 4,352 |
|
| — |
|
|
| 604 |
|
|
| (1,145 | ) | |
Total noninterest income |
| $ | 75,518 |
| $ | 68,832 |
| $ | 67,115 |
| $ | 210,602 |
| $ | 198,093 |
| $ | 70,503 |
|
| $ | 74,538 |
|
| $ | 66,252 |
|
39
| Three Months Ended |
| ||||||||||
|
| March 31, |
|
| December 31, |
|
| March 31, |
| |||
(in thousands) |
| 2019 |
|
| 2018 |
|
| 2018 |
| |||
Gain (loss) on portfolio restructure: |
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of Visa Class B common shares |
| $ | - |
|
| $ | 33,229 |
|
| $ | - |
|
Loss on sale of investment securities |
|
| - |
|
|
| (25,480 | ) |
|
| - |
|
Loss on sale of loans |
|
| - |
|
|
| (7,145 | ) |
|
| - |
|
Total net gain on portfolio restructure |
| $ | - |
|
| $ | 604 |
|
| $ | - |
|
Loss on sale of subsidiary |
|
| - |
|
|
| - |
|
|
| (1,145 | ) |
Total nonoperating income |
| $ | - |
|
| $ | 604 |
|
| $ | (1,145 | ) |
Service charges on deposits totaled $21.4$20.4 million for the thirdfirst quarter of 2018, up $0.42019, down $1.1 million, or 2%5%, from both the secondfourth quarter of 2018 and down $0.1 million, or less than 1%, from the thirdfirst quarter of 2017.2018. The increasedecrease from the prior quarter was primarily due to afewer business days and seasonal increasedecrease in consumer overdraft fees. The decrease from the thirdfirst quarter of 2017 is2018 was due to lower consumer overdraft fees and service charges, partially offset by increased check printing fees.
Trust fees increased $5.1decreased $0.6 million, or 44%4%, linked quarter largely as a result of market conditions, which began to decline towards the acquisitionend of a trustfourth quarter 2018 and asset management business on July 13, 2018. Trust fee income ingradually recovered over the thirdcurrent quarter. Compared to the first quarter of 2018, attributable to the acquired business was approximately $5.5 million. Compared to the third quarter of 2017, trust fees increased $6.0$3.8 million, or 56%33%, also largely due to the July 2018 trust and asset management acquisition.
Bank card and ATM fees totaled $14.9$15.3 million for the thirdfirst quarter of 2018,2019, down $0.6$0.4 million, or 4%2%, from the secondfourth quarter of 2018, due to seasonally lower activityfewer days in the thirdfirst quarter. Compared to the thirdfirst quarter of 2017,2018, bank card and ATM fees were up $1.5$0.8 million, or 11%6%, primarily due to increased card activity.
Investment and annuity fees and insurance commissions increased $0.4$0.2 million, or 6%4%, compared to secondfourth quarter 2018 primarily due to bond trading fees attributable to a higher annuityvolume of institutional brokerage sales volume and underwriting activity, partially offset by a decrease in insurance and annuity sales. Investment and annuity fees and insurance commissions increased $0.4 million, or 7%, compared to thirdfirst quarter 2017.2018.
Fee income from secondary mortgage market operations was up $0.4down $0.2 million, or 9%5%, from secondfourth quarter of 2018 with seasonally higher sales activity,and up $0.3 million, or 10%, from the first quarter of 2018. These fees will vary based on origination volume and the timing of subsequent sales.
Income from bank-owned life insurance was $3.3 million in the first quarter of 2019, up $0.1 million, or 4%, from the fourth quarter of 2018 and up $0.2 million, or 4%6%, from the first quarter of 2018. The increase from the prior quarter is related to a mortality gain and the increase from the first quarter of 2018 is related to the restructure of a portion of our bank owned life insurance contracts during the third quarter of 2017. 2018.
Credit related fees were $2.6 million for the first quarter of 2019, down $0.6 million, or 18%, from the fourth quarter of 2018 and down $0.1 million, or 5%, from the first quarter of 2018. The linked-quarter decline was due to lower letter of credit and unused commitment fees, primarily attributable to fewer energy-related participation relationships.
Income from our customer interest rate derivative program resulted in a $1.4$0.8 million net gain for the thirdfirst quarter of 20182019 compared to net gains of $1.6$0.9 million in the secondfourth quarter of 2018 and $1.3$1.5 million for the thirdfirst quarter of 2017.2018. Derivative income can be volatile and is dependent upon both customer sales activity as well asand market value adjustments due to market interest rate movement.
Noninterest incomeGain on disposal of assets was $210.6$0.4 million forin the nine months ended September 30, 2018, up $12.5 million, or 6%, from the same period in 2017. Excluding nonoperating items, which include a loss relatedfirst quarter of 2019, primarily attributable to the sale of Harrison Finance inmortgage loans. In the fourth quarter of 2018, andwe recorded a gain related to the saleloss of select Hancock Horizon funds in 2017, noninterest income was $211.7 million, up $18.0 million, or 9%, from the first nine months of 2017. Trust fees were up $6.3 million, or 19%, at $39.7 million, due primarily to the July 13, 2018 trust and asset management acquisition. Bank card and ATM fees were up $5.2 million, or 13%, at $44.8 million due to increased card activity. Service charges were up $3.1 million, or 5%, at $63.8$0.2 million, primarily dueattributable to an increase in check printing fees and overdraft fees driven from the sustained overdraft fee introduced in the third quarter of 2017. The loss share agreements with the FDIC were terminated in July 2017, resulting in an increase infixed asset retirements.
Other miscellaneous income from the prior year of $2.4 million duewas down $1.4 million, or 36%, compared to the eliminationfourth quarter of amortization2018 and $1.0 million, or 29%, compared to the first quarter of the FDIC loss share receivable. Investment and annuity2018. The decrease compared to both periods was due largely to lower syndication fees and insurance commissions totaled $19.0 million, an increase of $1.1 million, or 6%, mostly due to increased annuity income partially offset by lower insurance commissions due to the sale of Harrison Finance on March 9, 2018.earnings from community development entities and other investments.
44
Noninterest Expense
Noninterest expense for the thirdfirst quarter of 20182019 was $181.2$175.7 million, down $3.2$3.7 million, or 2%, from the secondfourth quarter of 2018, and up $3.6$4.9 million, or 2%3%, from the thirdfirst quarter of 2017.2018. Excluding nonoperating expenses, operating expense for the thirdfirst quarter of 2019 was down $1.2 million, or less than 1%, and up $10.9 million, or 7%, from the first quarter of 2018.
There were no nonoperating noninterest expenses in the first quarter of 2019. Nonoperating noninterest expenses in the fourth quarter of 2018 totaled $176.4 million, an increase of $7.8 million, or 5%, linked quarter and up $10.1 million, or 6%, from the third quarter of 2017. For the nine months ended September 30, 2018, total noninterest expense was $536.4 million, an $11.8 million, or 2%, increase over the same period in 2017. Excluding nonoperating expenses, operating expense for the nine months ended September 30, 2018 totaled $509.9 million, up $13.7 million, or 3%, over the same period in 2017.
Nonoperating expenses in the third quarter of 2018 totaled $4.8$2.5 million and primarily included costs associated with the trust and asset management acquisition. Nonoperating expenses in the second quarter of 2018 were $15.8 million and included costs associated with the brand consolidation project,Hurricane Michael damage, the trust and asset management acquisition and a charge related to the restructuringmove of the New Orleans Main regional headquarters. Nonoperating noninterest expenses for the first quarter of
40
2018 included costs of a portionone-time bonus, the brand consolidation project, the sale of our bank-owned life insurance contracts. The year-to-date 2018 nonoperating expenses of $26.5 million also includes a one-time all hands bonus. The nonoperating expenses in the third quarter of 2017consumer finance company, and the nine months ended September 30, 2017 of $11.4 million and $28.5 million, respectively, included costs associated with the FNBC transactions. The nine months ended September 30, 2017 also included costs associated with terminationacquisition of the FDIC loss share agreements.trust and asset management business. The components of noninterest operating and nonoperating expense are presented in the following tables for the indicated periods.
|
| Three Months Ended |
| |||||||||
|
| March 31, |
|
| December 31, |
|
| March 31, |
| |||
(in thousands) |
| 2019 |
|
| 2018 |
|
| 2018 |
| |||
Operating expense |
|
|
|
|
|
|
|
|
|
|
|
|
Compensation expense |
| $ | 83,968 |
|
| $ | 86,508 |
|
| $ | 76,743 |
|
Employee benefits |
|
| 19,730 |
|
|
| 18,400 |
|
|
| 19,623 |
|
Personnel expense |
|
| 103,698 |
|
|
| 104,908 |
|
|
| 96,366 |
|
Net occupancy expense |
|
| 11,984 |
|
|
| 12,153 |
|
|
| 10,943 |
|
Equipment expense |
|
| 4,679 |
|
|
| 3,827 |
|
|
| 3,493 |
|
Data processing expense |
|
| 19,331 |
|
|
| 18,492 |
|
|
| 16,368 |
|
Professional services expense |
|
| 8,168 |
|
|
| 9,390 |
|
|
| 7,847 |
|
Amortization of intangible assets |
|
| 5,138 |
|
|
| 5,472 |
|
|
| 5,618 |
|
Deposit insurance and regulatory fees |
|
| 5,406 |
|
|
| 6,754 |
|
|
| 7,948 |
|
Other real estate (income) expense |
|
| (991 | ) |
|
| (2,924 | ) |
|
| 210 |
|
Advertising |
|
| 3,080 |
|
|
| 3,934 |
|
|
| 2,341 |
|
Corporate value and franchise taxes |
|
| 4,042 |
|
|
| 2,860 |
|
|
| 3,440 |
|
Printing and supplies |
|
| 1,169 |
|
|
| 1,209 |
|
|
| 1,031 |
|
Telecommunications and postage |
|
| 3,466 |
|
|
| 3,555 |
|
|
| 3,850 |
|
Travel expense |
|
| 1,098 |
|
|
| 1,462 |
|
|
| 1,064 |
|
Entertainment and contributions |
|
| 2,708 |
|
|
| 2,899 |
|
|
| 2,509 |
|
Tax credit investment expense |
|
| 1,138 |
|
|
| 1,857 |
|
|
| 874 |
|
Other retirement expense |
|
| (4,105 | ) |
|
| (5,076 | ) |
|
| (4,463 | ) |
Other miscellaneous |
|
| 5,691 |
|
|
| 6,136 |
|
|
| 5,499 |
|
Total operating expense |
| $ | 175,700 |
|
| $ | 176,908 |
|
| $ | 164,938 |
|
Nonoperating expense items |
|
| - |
|
|
| 2,458 |
|
|
| 5,853 |
|
Total noninterest expense |
| $ | 175,700 |
|
| $ | 179,366 |
|
| $ | 170,791 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Nine Months Ended | |||||||||||
|
| September 30, |
| June 30, |
| September 30, |
| September 30, | |||||||
(in thousands) |
| 2018 |
| 2018 |
| 2017 |
| 2018 |
| 2017 | |||||
Operating expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation expense |
| $ | 83,212 |
| $ | 79,670 |
| $ | 80,358 |
| $ | 239,625 |
| $ | 234,239 |
Employee benefits |
|
| 17,961 |
|
| 17,165 |
|
| 16,665 |
|
| 54,749 |
|
| 54,454 |
Personnel expense |
|
| 101,173 |
|
| 96,835 |
|
| 97,023 |
|
| 294,374 |
|
| 288,693 |
Net occupancy expense |
|
| 11,829 |
|
| 11,698 |
|
| 12,101 |
|
| 34,470 |
|
| 35,832 |
Equipment expense |
|
| 3,624 |
|
| 3,641 |
|
| 3,626 |
|
| 10,758 |
|
| 11,133 |
Data processing expense |
|
| 18,418 |
|
| 17,279 |
|
| 15,869 |
|
| 52,065 |
|
| 48,019 |
Professional services expense |
|
| 8,917 |
|
| 8,189 |
|
| 7,208 |
|
| 24,953 |
|
| 22,010 |
Amortization of intangible assets |
|
| 5,638 |
|
| 5,322 |
|
| 6,070 |
|
| 16,578 |
|
| 16,532 |
Telecommunications and postage |
|
| 3,567 |
|
| 3,250 |
|
| 3,848 |
|
| 10,667 |
|
| 11,013 |
Deposit insurance and regulatory fees |
|
| 8,345 |
|
| 8,376 |
|
| 7,563 |
|
| 24,669 |
|
| 21,036 |
Other real estate (income) expense |
|
| 16 |
|
| (289) |
|
| 199 |
|
| (63) |
|
| (818) |
Advertising |
|
| 2,913 |
|
| 2,390 |
|
| 3,552 |
|
| 7,644 |
|
| 10,582 |
Corporate value and franchise taxes |
|
| 3,718 |
|
| 3,577 |
|
| 3,387 |
|
| 10,735 |
|
| 9,942 |
Printing and supplies |
|
| 1,282 |
|
| 842 |
|
| 1,248 |
|
| 3,155 |
|
| 3,746 |
Travel expense |
|
| 1,333 |
|
| 1,436 |
|
| 1,188 |
|
| 3,833 |
|
| 3,438 |
Entertainment and contributions |
|
| 2,448 |
|
| 2,950 |
|
| 2,016 |
|
| 7,907 |
|
| 5,757 |
Tax credit investment amortization |
|
| 1,560 |
|
| 875 |
|
| 1,212 |
|
| 3,309 |
|
| 3,637 |
Other retirement expense |
|
| (4,664) |
|
| (4,458) |
|
| (4,402) |
|
| (13,585) |
|
| (10,850) |
Other miscellaneous |
|
| 6,243 |
|
| 6,684 |
|
| 4,515 |
|
| 18,426 |
|
| 16,453 |
Total operating expense |
| $ | 176,360 |
| $ | 168,597 |
| $ | 166,223 |
| $ | 509,895 |
| $ | 496,155 |
Nonoperating expense items |
|
| 4,827 |
|
| 15,805 |
|
| 11,393 |
|
| 26,485 |
|
| 28,473 |
Total noninterest expense |
| $ | 181,187 |
| $ | 184,402 |
| $ | 177,616 |
| $ | 536,380 |
| $ | 524,628 |
|
| Three Months Ended |
| |||||||||
|
| March 31, |
|
| December 31, |
|
| March 31, |
| |||
(in thousands) |
| 2019 |
|
| 2018 |
|
| 2018 |
| |||
Nonoperating expense |
|
|
|
|
|
|
|
|
|
|
|
|
Personnel expense |
| $ | — |
|
| $ | 97 |
|
| $ | 3,608 |
|
Net occupancy expense |
|
| — |
|
|
| 421 |
|
|
| 67 |
|
Equipment expense |
|
| — |
|
|
| 212 |
|
|
| 53 |
|
Data processing expense |
|
| — |
|
|
| 423 |
|
|
| 81 |
|
Professional services expense |
|
| — |
|
|
| (2 | ) |
|
| 1,408 |
|
Advertising |
|
| — |
|
|
| (196 | ) |
|
| 185 |
|
Printing and supplies |
|
| — |
|
|
| 78 |
|
|
| 255 |
|
Loss on restructure of bank-owned life insurance contracts |
|
| — |
|
|
| 62 |
|
|
| — |
|
Other expense |
|
| — |
|
|
| 1,363 |
|
|
| 196 |
|
Total nonoperating expenses |
| $ | — |
|
| $ | 2,458 |
|
| $ | 5,853 |
|
45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Nine Months Ended | |||||||||||
|
| September 30, |
| June 30, |
| September 30, |
| September 30, | |||||||
(in thousands) |
| 2018 |
| 2018 |
| 2017 |
|
| 2018 |
|
| 2017 | |||
Nonoperating expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel expense |
| $ | 1,300 |
| $ | 408 |
| $ | 2,120 |
| $ | 5,316 |
| $ | 3,662 |
Net occupancy and equipment expense |
|
| 962 |
|
| 1,239 |
|
| 500 |
|
| 2,321 |
|
| 777 |
Data processing expense |
|
| 2,074 |
|
| 994 |
|
| 929 |
|
| 3,149 |
|
| 974 |
Professional services expense |
|
| 638 |
|
| 5,192 |
|
| 2,854 |
|
| 7,238 |
|
| 9,681 |
Other real estate (income) expense |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (1,511) |
Advertising |
|
| (360) |
|
| 1,127 |
|
| 358 |
|
| 952 |
|
| 1,389 |
Printing and supplies |
|
| 5 |
|
| 846 |
|
| 173 |
|
| 1,106 |
|
| 183 |
Write-down related to FDIC loss share termination |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 6,603 |
Loss on restructure of bank-owned life insurance contracts |
|
| — |
|
| 3,240 |
|
| — |
|
| 3,240 |
|
| — |
Other expense |
|
| 208 |
|
| 2,759 |
|
| 4,459 |
|
| 3,163 |
|
| 6,715 |
Total nonoperating expenses |
| $ | 4,827 |
| $ | 15,805 |
| $ | 11,393 |
| $ | 26,485 |
| $ | 28,473 |
The following discussion of the components of operating expense excludes nonoperating items for each period.
Personnel expense totaled $101.2$103.7 million for the thirdfirst quarter of 2018, up $4.32019, down $1.2 million, or 4%1%, compared to the prior quarter, primarily due to two fewer payroll days in the addition of trust and asset management employees and higher incentives.quarter. Personnel costs arewere up $4.2$7.3 million, or 4%8%, compared to the thirdfirst quarter of 20172018 due to merit increases and the additional payroll expense related toheadcount following the trust and asset management acquisition. Year to date September 30, 2018 personnel expense was up $5.7 million, or 2%, compared to the prior year.
Occupancy and equipment expenses totaled $15.5$16.7 million in the thirdfirst quarter of 2018,2019, up $0.1$ 0.7 million, or 1%4%, from the secondfourth quarter of 2018 and down $0.3up $2.2 million, or 15%, from the thirdfirst quarter of 2017.2018. The increase compared to the prior quarter is primarilylargely due to higher depreciation expense on furniture and equipment following the move of the New Orleans regional headquarters. The increase compared to first quarter of 2018 is attributable to both the move of the regional headquarters and an increase in depreciation related toof new signage following the Company’s rebranding. The reduction compared to the prior year is due largely to costs related to FNBC branches that had not yet been consolidated. Occupancy and equipment expenses totaled $45.2
41
Data processing expense was $19.3 million for the first nine monthsquarter of 2018, $1.72019, up $0.8 million, or 4%, less than the first nine months of 2017, due to previously mentioned items.
Data processing expense was $18.4 million for the third quarter of 2018, up $1.1 million, or 7%5%, from the secondfourth quarter of 2018, and up $2.5$3.0 million, or 16%18%, from the thirdfirst quarter of 2017. Data processing expense was $52.1 million for the first nine months of 2018, $4.0 million, or 8%, over the first nine months of 2017. The increase in expense is attributable to revenue-generating initiatives related to new digital offerings, higher card transaction processing costs resulting from increased card activity and additional processing cost associated with the acquired trust and asset management business that is awaiting system conversion.2018.
Professional service expense totaled $8.9$8.2 million in the thirdfirst quarter of 2018, up $0.72019, down $1.2 million, or 9%13%, compared to the previous quarter and up $1.7$0.3 million, or 24%4% compared to the same quarter last year. Professional service expense totaled $25.0 million forThe decrease from the first nine months of 2018, up $2.9 million, or 13%, compared to the first nine months of 2017. The increase over the previousprior quarter was largely due to loan collectiona decrease in costs and various other projects.associated with problem credits. Professional service expense includes legal, audit, accounting and other consulting services.
Deposit insurance and regulatory fees and corporate value and franchise taxes were $12.1$9.4 million, an increasea decrease of $0.1$0.2 million, or 1%2%, from the secondfourth quarter of 2018 and up $1.1down $1.9 million, or 10%, from the third quarter of 2017. Deposit insurance and regulatory fees and corporate value and franchise taxes totaled $35.4 million for the first nine months of 2018, up $4.4 million, or 14%17%, from the first nine monthsquarter of 2017.2018. Deposit insurance and regulatory fees and corporate value and franchise taxes were updown both quarter over quarter and year over year primarily due to asset growth.
a reduction in the risk-based deposit insurance assessment fees, with the year-over-year variance impacted by the elimination of the quarterly deposit insurance fund surcharge.
Business development-related expenses (including advertising, travel and entertainment and contributions) were $6.7$6.9 million for the thirdfirst quarter of 2018,2019, down $0.1$1.4 million, or 1%17%, from the secondfourth quarter of 2018 and down $0.1up $1.0 million, or 1%16%, from the thirdfirst quarter of 2017. Business development expense totaled $19.42018. The primary driver of the decrease from the prior quarter and the increase from the same quarter a year ago is advertising expenditures.
Other real estate income was $1.0 million for the first nine monthsquarter of 2018, $0.42019 compared to $2.9 million or 2%, less than the first nine months of 2017.
There was virtually no other real estate (“ORE”) expense in the third quarter of 2018, compared to net gains on ORE dispositions of $0.3 million during the secondfourth quarter of 2018 and a net ORE costsexpense of $0.2 million in the thirdfirst quarter of 2017. Net2018. The first quarter of 2019 and fourth quarter of 2018 reflect gains on ORE dispositions exceeded ORE costs by $0.1 million for the nine months ended September 30, 2018 and $0.8 million for the same periodof properties in 2017. ORE income/loss can vary from period to period.
excess of holding costs.
All other expenses, excluding amortization of intangibles and nonoperating expense items, totaled $8.0$7.4 million for the thirdfirst quarter of 2018, up $0.82019, down $0.3 million, or 11%4%, from the secondfourth quarter of 2018, and up $1.6 million, or 24%, from the third quarter of 2017. All other expenses, excluding amortization of intangibles and nonoperating expense items, totaled $22.0 million for the first nine months of
46
2018, down $2.0$0.6 million, or 8%, from the first nine monthsquarter of 2017.2018. The decreasevariances compared to prior quarter and prior year are primarily due to lowerwere largely driven by changes in tax credit investment expense, the net credit for other retirement expense and the elimination of FNBC related costs through branch consolidation.other miscellaneous expense.
Income Taxes
The effective income tax rate for the thirdfirst quarter of 20182019 was approximately 17.5%17.6%, compared to 18.3%7.9% in the secondfourth quarter of 2018 and 25.7%18.5% in the thirdfirst quarter of 2017.2018. The decrease in the effective tax rate fromwas lower in the prior quarter is due to an expected increase in investments in new market tax credits, and the decrease from the thirdfourth quarter of 2017 is2018 primarily due to the enactment$9.9 million income tax benefit attributable to the 2017 tax savings initiatives implemented following the passage of the Tax Cuts and Jobs Act (“Tax Act”) on December 22, 2017. The Tax Act significantly revised U.S. corporate income tax laws by,, which, among other things, loweringlowered the statutory corporate federal income tax rate from 35% to 21%, eliminating or reducing the deductibility of certain meals and entertainment expenses, limiting the deduction of FDIC insurance premiums, as well as modifying the deductibility of executive compensation through the elimination of the performance-based compensation exception and changes to the definition of a covered employee.
Our deferred tax assets and liabilities were re-measured to reflect the lower income. The fourth quarter 2018 effective tax rate during the fourth quarter of 2017. Pursuant to ASU 2018-05, entities have a measurement period not to exceed one year from the enactment date of the Tax Act to record provisional amounts related to theexcluding impact of the Tax Act. As of September 30, 2018, no adjustment hadtax savings initiatives would have been made17.5%, which is comparable to the provisional benefit recorded.first quarter 2019 effective tax rate. Management does not expect to adjustexpects the provisional benefit recorded unless new guidance is issued by federal and/or stateeffective tax authorities that would require us to reevaluate our original estimate of provisional impact. If so, any such adjustments could materially impact income tax expenserate for 2019 will be in the period in which the adjustments are made.range of 17%-19% based on current forecasts.
Our effective tax rate has historically varied from the federal statutory rate primarily because of tax-exempt income and tax credits. Interest income on bonds issued by or loans to state and municipal governments and authorities, and earnings from the bank-owned life insurance contract program are the major components of tax-exempt income. The $3.2 million charge recorded during the second quarter of 2018 related to restructuring a portion of our bank-owned life insurance contracts negatively impacted the tax benefit attributable to life insurance contracts, as reflected in the table below.
The main source of tax credits has been investments in tax-advantaged securities and tax credit projects. These investments are made primarily in the markets the Company serves and are directed at tax credits issued under the Qualified Zone Academy Bonds (“QZAB”), Qualified School Construction Bonds (“QSCB”) andas well as Federal and State New Market Tax Credit (“NMTC”) programs. The investments generate tax credits, which reduce current and future taxes and are recognized when earned as a benefit in the provision for income taxes. The Tax Act repealed the provision related to tax credit bonds effective for bonds issued after December 31, 2017. As such, these bonds are no longer viable alternatives for lowering our effective tax rate.
We have invested in NMTC projects through investments in our own Community Development Entity (“CDE”), as well as other unrelated CDEs. These investments are expected to generate approximately $104 million in federal and state tax credits. Federal tax credits from NMTC investments are recognized over a seven-year period, while recognition of the benefits from state tax credits varies from three to five years. In February 2018,
Based on tax credit investments that have been made to date and those anticipated to be made utilizing the U.S. Departmentremaining portion of Treasury announced the 2017 New Market Tax Credit allocation. We were awarded a New Market Tax Credit allocation that will allow us to investour $50 million NMTC allocation award received in tax credit projects2018, we expect to realize benefits from federal and receive a total of $19.5 million instate tax credits to be recognized over a seven-year period.
the next three years totaling $7.5 million, $5.6 million and $4.9 million for 2020, 2021 and 2022, respectively. We intend to continue making investments in tax credit projects. However, our ability to access new credits will depend upon, among other factors, federal and state tax policies and the level of competition for such credits. Based on tax credit investments that have been made to date and those we expect to make from our new allocation award, we expect to realize benefits from federal and state tax credits totaling $8.2 million, $5.8 million and $3.8 million for 2019, 2020 and 2021, respectively.
Additionally, the effective tax rate is affected by other items that may impact comparability from quarter to quarter, such as the excess benefit of vested employee share-based compensation. As of September 30, 2018, the year to date excess benefit of vested share-based compensation decreased income tax expense by $0.5 million. Management expects an effective tax rate of 8% to 10% for the fourth quarter of 2018 and 15% to 17% for the year ended December 31, 2018 due to fourth quarter stock compensation vesting and other tax reform related strategies that together will generate an additional income tax benefit of approximately $9 to $11 million, based on the Company’s share price at September 28, 2018.42
47
The following table reconciles reported income tax expense to that computed at the statutory federal tax rate for the indicated periods.
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
|
| Three Months Ended |
| Nine Months Ended |
| Three Months Ended |
| ||||||||||||||||||||
|
| September 30, |
| June 30, |
| September 30, |
| September 30, |
| March 31, |
|
| December 31, |
|
| March 31, |
| ||||||||||
(in thousands) |
| 2018 |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| 2019 |
|
| 2018 |
|
| 2018 |
| ||||||||
Taxes computed at statutory rate |
| $ | 21,347 |
| $ | 18,288 |
| $ | 27,761 |
| $ | 58,298 |
| $ | 74,812 |
| $ | 20,163 |
|
| $ | 21,946 |
|
| $ | 18,663 |
|
Tax credits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
QZAB/QSCB |
| (760) |
| (760) |
| (643) |
| (2,279) |
| (1,928) |
|
| (710 | ) |
|
| (759 | ) |
|
| (759 | ) | |||||
NMTC - Federal and State |
|
| (1,379) |
|
| (1,378) |
|
| (1,679) |
|
| (4,136) |
|
| (5,037) |
|
| (1,402 | ) |
|
| (3,805 | ) |
|
| (1,379 | ) |
LIHTC and other tax credits |
|
| — |
|
|
| (365 | ) |
|
| — |
| |||||||||||||||
Total tax credits |
|
| (2,139) |
|
| (2,138) |
|
| (2,322) |
|
| (6,415) |
|
| (6,965) |
|
| (2,112 | ) |
|
| (4,929 | ) |
|
| (2,138 | ) |
State income taxes, net of federal income tax benefit |
| 1,989 |
| 1,924 |
| 1,167 |
| 5,957 |
| 3,143 |
|
| 1,905 |
|
|
| 2,813 |
|
|
| 2,044 |
| |||||
Tax-exempt interest |
| (2,720) |
| (2,761) |
| (4,629) |
| (8,267) |
| (14,021) |
|
| (2,417 | ) |
|
| (2,536 | ) |
|
| (2,786 | ) | |||||
Life insurance contracts |
| (866) |
| 306 |
| (1,248) |
| (1,490) |
| (3,241) |
|
| (678 | ) |
|
| (529 | ) |
|
| (930 | ) | |||||
Employee share-based compensation |
| (146) |
| (176) |
| (202) |
| (461) |
| (2,003) |
|
| (272 | ) |
|
| (919 | ) |
|
| (140 | ) | |||||
Impact from interim estimated effective tax rate |
| (664) |
| (844) |
| (471) |
| (1,152) |
| 2,230 |
|
| (776 | ) |
|
| 1,152 |
|
|
| 356 |
| |||||
FDIC Assessment Disallowance |
| 748 |
| 758 |
| — |
| 2,252 |
| — | |||||||||||||||||
FDIC assessment disallowance |
|
| 545 |
|
|
| 566 |
|
|
| 747 |
| |||||||||||||||
Return to provision adjustment |
|
| — |
|
|
| (9,942 | ) |
|
| — |
| |||||||||||||||
Other, net |
|
| 226 |
|
| 552 |
|
| 358 |
|
| 1,359 |
|
| (390) |
|
| 492 |
|
|
| 643 |
|
|
| 581 |
|
Income tax expense |
| $ | 17,775 |
| $ | 15,909 |
| $ | 20,414 |
| $ | 50,081 |
| $ | 53,565 |
| $ | 16,850 |
|
| $ | 8,265 |
|
| $ | 16,397 |
|
48
Selected Financial Data
The following tables contain selected financial data as of the dates and for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
| Three Months Ended |
| Nine Months Ended |
| Three Months Ended |
| ||||||||||||||||||||
|
| September 30, |
| June 30, |
| September 30, |
| September 30, |
| March 31, |
|
| December 31, |
|
| March 31, |
| ||||||||||
|
| 2018 |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| 2019 |
|
| 2018 |
|
| 2018 |
| ||||||||
Common Share Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Basic |
| $ | 0.96 |
| $ | 0.82 |
| $ | 0.68 |
| $ | 2.62 |
| $ | 1.85 |
| $ | 0.91 |
|
| $ | 1.11 |
|
| $ | 0.83 |
|
Diluted |
| $ | 0.96 |
| $ | 0.82 |
| $ | 0.68 |
| $ | 2.61 |
| $ | 1.85 |
| $ | 0.91 |
|
| $ | 1.10 |
|
| $ | 0.83 |
|
Cash dividends paid |
| $ | 0.27 |
| $ | 0.24 |
| $ | 0.24 |
| $ | 0.75 |
| $ | 0.72 |
| $ | 0.27 |
|
| $ | 0.27 |
|
| $ | 0.24 |
|
Book value per share (period-end) |
| $ | 34.90 |
| $ | 34.33 |
| $ | 33.78 |
| $ | 34.90 |
| $ | 33.78 |
| $ | 37.23 |
|
| $ | 35.98 |
|
| $ | 33.96 |
|
Tangible book value per share (period-end) |
| $ | 24.44 |
| $ | 24.66 |
| $ | 23.92 |
| $ | 24.44 |
| $ | 23.92 |
| $ | 26.92 |
|
| $ | 25.62 |
|
| $ | 24.22 |
|
Weighted average number of shares (000s): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Basic |
| 85,348 |
|
| 85,305 |
|
| 84,749 |
|
| 85,298 |
|
| 84,577 |
|
| 85,688 |
|
|
| 85,522 |
|
|
| 82,241 |
| |
Diluted |
| 85,539 |
|
| 85,483 |
|
| 84,980 |
|
| 85,482 |
|
| 84,818 |
|
| 85,800 |
|
|
| 85,677 |
|
|
| 85,423 |
| |
Period-end number of shares (000s) |
| 85,364 |
|
| 85,335 |
|
| 84,767 |
|
| 85,364 |
|
| 84,767 |
|
| 85,710 |
|
|
| 85,643 |
|
|
| 85,285 |
| |
Market data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
High sales price |
| $ | 53.00 |
| $ | 55.00 |
| $ | 50.40 |
| $ | 56.40 |
| $ | 52.94 |
| $ | 44.34 |
|
| $ | 49.22 |
|
| $ | 56.40 |
|
Low sales price |
| $ | 46.05 |
| $ | 45.76 |
| $ | 41.05 |
| $ | 45.76 |
| $ | 41.05 |
| $ | 34.11 |
|
| $ | 32.59 |
|
| $ | 49.48 |
|
Period-end closing price |
| $ | 47.55 |
| $ | 46.65 |
| $ | 48.45 |
| $ | 47.55 |
| $ | 48.45 |
| $ | 40.40 |
|
| $ | 34.77 |
|
| $ | 51.70 |
|
Trading volume (000s) (a) |
| 28,332 |
|
| 35,705 |
|
| 33,243 |
|
| 99,407 |
|
| 117,397 |
|
| 28,124 |
|
|
| 33,269 |
|
|
| 35,459 |
|
(a) | Trading volume is based on the total volume as determined by NASDAQ on the last day of the quarter. |
43
49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Nine Months Ended | |||||||||||
|
| September 30, |
| June 30, |
| September 30, |
| September 30, | |||||||
(in thousands) |
| 2018 |
| 2018 |
| 2017 |
| 2018 |
| 2017 | |||||
Income Statement: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
| $ | 263,212 |
| $ | 252,304 |
| $ | 232,716 |
| $ | 756,911 |
| $ | 661,408 |
Interest income (te) (a) |
|
| 267,307 |
|
| 256,385 |
|
| 241,295 |
|
| 769,050 |
|
| 686,849 |
Interest expense |
|
| 49,018 |
|
| 40,757 |
|
| 29,859 |
|
| 125,506 |
|
| 77,143 |
Net interest income (te) |
|
| 218,289 |
|
| 215,628 |
|
| 211,436 |
|
| 643,544 |
|
| 609,706 |
Provision for loan losses |
|
| 6,872 |
|
| 8,891 |
|
| 13,040 |
|
| 28,016 |
|
| 43,982 |
Noninterest income |
|
| 75,518 |
|
| 68,832 |
|
| 67,115 |
|
| 210,602 |
|
| 198,093 |
Noninterest expense (excluding amortization of intangibles) |
|
| 175,549 |
|
| 179,080 |
|
| 171,546 |
|
| 519,802 |
|
| 508,096 |
Amortization of intangibles |
|
| 5,638 |
|
| 5,322 |
|
| 6,070 |
|
| 16,578 |
|
| 16,532 |
Income before income taxes |
|
| 101,653 |
|
| 87,086 |
|
| 79,316 |
|
| 277,611 |
|
| 213,748 |
Income tax expense |
|
| 17,775 |
|
| 15,909 |
|
| 20,414 |
|
| 50,081 |
|
| 53,565 |
Net income |
| $ | 83,878 |
| $ | 71,177 |
| $ | 58,902 |
| $ | 227,530 |
| $ | 160,183 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings excluding nonoperating items |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 83,878 |
| $ | 71,177 |
| $ | 58,902 |
| $ | 227,530 |
| $ | 160,183 |
Nonoperating income |
|
| — |
|
| — |
|
| — |
|
| 1,145 |
|
| (4,352) |
Nonoperating expense |
|
| 4,827 |
|
| 15,805 |
|
| 11,393 |
|
| 26,485 |
|
| 28,473 |
Income tax benefit |
|
| (1,014) |
|
| (3,319) |
|
| (3,988) |
|
| (5,549) |
|
| (8,442) |
Nonoperating items, net of applicable income tax benefit |
|
| 3,813 |
|
| 12,486 |
|
| 7,405 |
|
| 22,081 |
|
| 15,679 |
Operating earnings |
| $ | 87,691 |
| $ | 83,663 |
| $ | 66,307 |
| $ | 249,611 |
| $ | 175,862 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months ended |
|
| Nine Months ended | |||||||||||||||
|
|
| September 30, |
|
| June 30, |
|
| September 30, |
|
| September 30, | ||||||||
|
| 2018 |
| 2018 |
| 2017 |
| 2018 |
| 2017 | ||||||||||
Performance Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets |
|
| 1.19 | % |
|
| 1.04 | % |
|
| 0.88 | % |
|
| 1.10 | % |
|
| 0.82 | % |
Return on average common equity |
|
| 11.27 | % |
|
| 9.81 | % |
|
| 8.23 | % |
|
| 10.45 | % |
|
| 7.69 | % |
Return on average tangible common equity |
|
| 16.11 | % |
|
| 13.72 | % |
|
| 11.68 | % |
|
| 14.75 | % |
|
| 10.77 | % |
Earning asset yield (te) (a) |
|
| 4.11 | % |
|
| 4.05 | % |
|
| 3.92 | % |
|
| 4.04 | % |
|
| 3.84 | % |
Total cost of funds |
|
| 0.75 | % |
|
| 0.64 | % |
|
| 0.48 | % |
|
| 0.66 | % |
|
| 0.43 | % |
Net interest margin (te) |
|
| 3.36 | % |
|
| 3.40 | % |
|
| 3.44 | % |
|
| 3.38 | % |
|
| 3.41 | % |
Noninterest income to total revenue (te) |
|
| 25.70 | % |
|
| 24.20 | % |
|
| 24.09 | % |
|
| 24.66 | % |
|
| 24.52 | % |
Average loan/deposit ratio |
|
| 88.39 | % |
|
| 86.84 | % |
|
| 87.08 | % |
|
| 87.19 | % |
|
| 88.18 | % |
FTE employees (period-end) |
|
| 3,858 |
|
|
| 3,780 |
|
|
| 3,979 |
|
|
| 3,858 |
|
|
| 3,979 |
|
Capital Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stockholders' equity to total assets |
|
| 10.60 | % |
|
| 10.49 | % |
|
| 10.68 | % |
|
| 10.60 | % |
|
| 10.68 | % |
Tangible common equity ratio (b) |
|
| 7.67 | % |
|
| 7.76 | % |
|
| 7.80 | % |
|
| 7.67 | % |
|
| 7.80 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Select performance measures excluding nonoperating items |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings per share - diluted (d) |
| $ | 1.01 |
|
| $ | 0.96 |
|
| $ | 0.76 |
|
| $ | 2.87 |
|
| $ | 2.03 |
|
Return on average assets - operating |
|
| 1.24 | % |
|
| 1.22 | % |
|
| 0.99 | % |
|
| 1.21 | % |
|
| 0.90 | % |
Return on average common equity - operating |
|
| 11.78 | % |
|
| 11.54 | % |
|
| 9.27 | % |
|
| 11.46 | % |
|
| 8.44 | % |
Return on average tangible common equity - operating |
|
| 16.84 | % |
|
| 16.12 | % |
|
| 13.14 | % |
|
| 16.18 | % |
|
| 11.82 | % |
Efficiency ratio (c) |
|
| 58.11 | % |
|
| 57.40 | % |
|
| 57.50 | % |
|
| 57.68 | % |
|
| 59.70 | % |
Noninterest income as a percent of total revenue (te) - operating |
|
| 25.70 | % |
|
| 24.20 | % |
|
| 24.09 | % |
|
| 24.76 | % |
|
| 24.11 | % |
|
| Three Months Ended |
| |||||||||
|
| March 31, |
|
| December 31, |
|
| March 31, |
| |||
(in thousands) |
| 2019 |
|
| 2018 |
|
| 2018 |
| |||
Income Statement: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
| $ | 276,283 |
|
| $ | 271,357 |
|
| $ | 241,395 |
|
Interest income (te) (a) |
|
| 280,107 |
|
|
| 275,395 |
|
|
| 245,358 |
|
Interest expense |
|
| 57,029 |
|
|
| 53,924 |
|
|
| 35,731 |
|
Net interest income (te) |
|
| 223,078 |
|
|
| 221,471 |
|
|
| 209,627 |
|
Provision for loan and lease losses |
|
| 18,043 |
|
|
| 8,100 |
|
|
| 12,253 |
|
Noninterest income |
|
| 70,503 |
|
|
| 74,538 |
|
|
| 66,252 |
|
Noninterest expense (excluding amortization of intangibles) |
|
| 170,562 |
|
|
| 173,894 |
|
|
| 165,173 |
|
Amortization of intangibles |
|
| 5,138 |
|
|
| 5,472 |
|
|
| 5,618 |
|
Income before income taxes |
|
| 96,014 |
|
|
| 104,505 |
|
|
| 88,872 |
|
Income tax expense |
|
| 16,850 |
|
|
| 8,265 |
|
|
| 16,397 |
|
Net income |
| $ | 79,164 |
|
| $ | 96,240 |
|
| $ | 72,475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings excluding nonoperating items |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 79,164 |
|
| $ | 96,240 |
|
| $ | 72,475 |
|
Provision for alleged fraud (b) |
| $ | 10,084 |
|
|
| — |
|
|
| — |
|
Nonoperating income |
|
| — |
|
|
| (604 | ) |
|
| 1,145 |
|
Nonoperating expense |
|
| — |
|
|
| 2,458 |
|
|
| 5,853 |
|
Income tax benefit |
|
| (2,118 | ) |
|
| (389 | ) |
|
| (1,216 | ) |
Nonoperating items, net of applicable income tax benefit |
|
| 7,966 |
|
|
| 1,465 |
|
|
| 5,782 |
|
Operating earnings |
| $ | 87,130 |
|
| $ | 97,705 |
|
| $ | 78,257 |
|
|
| Three Months Ended |
| |||||||||
|
| March 31, |
|
| December 31, |
|
| March 31, |
| |||
|
| 2019 |
|
| 2018 |
|
| 2018 |
| |||
Performance Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
Return on average assets |
|
| 1.13 | % |
|
| 1.35 | % |
|
| 1.08 | % |
Return on average common equity |
|
| 10.30 | % |
|
| 12.76 | % |
|
| 10.23 | % |
Return on average tangible common equity |
|
| 14.38 | % |
|
| 18.15 | % |
|
| 14.41 | % |
Earning asset yield (te) (a) |
|
| 4.35 | % |
|
| 4.21 | % |
|
| 3.95 | % |
Total cost of funds |
|
| 0.89 | % |
|
| 0.82 | % |
|
| 0.58 | % |
Net interest margin (te) |
|
| 3.46 | % |
|
| 3.39 | % |
|
| 3.37 | % |
Noninterest income to total revenue (te) |
|
| 24.01 | % |
|
| 25.18 | % |
|
| 24.01 | % |
Average loan/deposit ratio |
|
| 87.08 | % |
|
| 88.09 | % |
|
| 86.32 | % |
FTE employees (period-end) |
|
| 3,885 |
|
|
| 3,933 |
|
|
| 3,775 |
|
Capital Ratios |
|
|
|
|
|
|
|
|
|
|
|
|
Common stockholders' equity to total assets |
|
| 11.20 | % |
|
| 10.91 | % |
|
| 10.61 | % |
Tangible common equity ratio (c) |
|
| 8.36 | % |
|
| 8.02 | % |
|
| 7.80 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
Select performance measures excluding nonoperating items |
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings per share - diluted (d) |
| $ | 1.00 |
|
| $ | 1.12 |
|
| $ | 0.90 |
|
Return on average assets - operating |
|
| 1.24 | % |
|
| 1.37 | % |
|
| 1.17 | % |
Return on average common equity - operating |
|
| 11.33 | % |
|
| 12.95 | % |
|
| 11.05 | % |
Return on average tangible common equity - operating |
|
| 15.83 | % |
|
| 18.43 | % |
|
| 15.56 | % |
Efficiency ratio (e) |
|
| 58.10 | % |
|
| 58.03 | % |
|
| 57.51 | % |
Noninterest income as a percent of total revenue (te) - operating |
|
| 24.01 | % |
|
| 25.03 | % |
|
| 24.33 | % |
(a) | Taxable equivalent (te) amounts were calculated using a federal income tax rate of 21% |
(b) | Provision for loan loss in response to circumstances surrounding the bankruptcy filing and alleged fraud by DC Solar. |
(c) | The tangible common equity ratio is common stockholders’ equity less intangible assets divided by total assets less intangible assets. |
(d) |
|
(e) | The efficiency ratio is noninterest expense to total net interest (te) and noninterest income, excluding amortization of purchased intangibles and nonoperating items. |
|
|
44
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
| Three Months Ended |
| Nine Months Ended |
| Three Months Ended |
| |||||||||||||||||||||||||
|
| September 30, |
| June 30, |
| September 30, |
| September 30, |
| September 30, |
| March 31, |
|
| December 31, |
|
| March 31, |
| |||||||||||||
($ in thousands) |
| 2018 |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| 2019 |
|
| 2018 |
|
| 2018 |
| |||||||||||||
Asset Quality Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual loans (a) |
| $ | 201,646 |
|
| $ | 241,681 |
|
| $ | 269,676 |
|
| $ | 201,646 |
|
| $ | 269,676 |
|
| $ | 204,831 |
|
| $ | 187,295 |
|
| $ | 275,179 |
|
Restructured loans - still accruing |
|
| 162,189 |
|
|
| 152,507 |
|
|
| 96,735 |
|
|
| 162,189 |
|
|
| 96,735 |
|
|
| 117,578 |
|
|
| 139,042 |
|
|
| 166,520 |
|
Total nonperforming loans |
|
| 363,835 |
|
|
| 394,188 |
|
|
| 366,411 |
|
|
| 363,835 |
|
|
| 366,411 |
|
|
| 322,409 |
|
|
| 326,337 |
|
|
| 441,699 |
|
Other real estate (ORE) and foreclosed assets |
|
| 27,475 |
|
|
| 22,342 |
|
|
| 21,219 |
|
|
| 27,475 |
|
|
| 21,219 |
|
|
| 27,148 |
|
|
| 26,270 |
|
|
| 26,630 |
|
Total nonperforming assets |
| $ | 391,310 |
|
| $ | 416,530 |
|
| $ | 387,630 |
|
| $ | 391,310 |
|
| $ | 387,630 |
|
| $ | 349,557 |
|
| $ | 352,607 |
|
| $ | 468,329 |
|
Accruing loans 90 days past due (a) |
| $ | 24,460 |
|
| $ | 7,941 |
|
| $ | 28,850 |
|
| $ | 24,460 |
|
| $ | 28,850 |
| ||||||||||||
Accruing loans 90 days past due (b) |
| $ | 20,308 |
|
| $ | 5,589 |
|
| $ | 12,724 |
| ||||||||||||||||||||
Net charge-offs |
|
| 6,852 |
|
|
| 5,074 |
|
|
| 11,783 |
|
|
| 24,126 |
|
|
| 47,752 |
|
|
| 17,869 |
|
|
| 28,136 |
|
|
| 12,200 |
|
Allowance for loan losses |
|
| 214,550 |
|
|
| 214,530 |
|
|
| 223,122 |
|
|
| 214,550 |
|
|
| 223,122 |
| ||||||||||||
Provision for loan losses |
|
| 6,872 |
|
|
| 8,891 |
|
|
| 13,040 |
|
|
| 28,016 |
|
|
| 43,982 |
| ||||||||||||
Allowance for loan and lease losses |
|
| 194,688 |
|
|
| 194,514 |
|
|
| 210,713 |
| ||||||||||||||||||||
Provision for loan and lease losses |
|
| 18,043 |
|
|
| 8,100 |
|
|
| 12,253 |
| ||||||||||||||||||||
Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming assets to loans, ORE and foreclosed assets |
|
| 2.00 | % |
|
| 2.15 | % |
|
| 2.06 | % |
|
| 2.00 | % |
|
| 2.06 | % |
|
| 1.74 | % |
|
| 1.76 | % |
|
| 2.45 | % |
Accruing loans 90 days past due to loans |
|
| 0.13 | % |
|
| 0.04 | % |
|
| 0.15 | % |
|
| 0.13 | % |
|
| 0.15 | % |
|
| 0.10 | % |
|
| 0.03 | % |
|
| 0.07 | % |
Nonperforming assets + accruing loans 90 days past due to loans, ORE and foreclosed assets |
|
| 2.12 | % |
|
| 2.19 | % |
|
| 2.21 | % |
|
| 2.12 | % |
|
| 2.21 | % |
|
| 1.84 | % |
|
| 1.79 | % |
|
| 2.52 | % |
Net charge-offs to average loans |
|
| 0.14 | % |
|
| 0.11 | % |
|
| 0.25 | % |
|
| 0.17 | % |
|
| 0.35 | % |
|
| 0.36 | % |
|
| 0.56 | % |
|
| 0.26 | % |
Allowance for loan losses to period-end loans |
|
| 1.10 | % |
|
| 1.11 | % |
|
| 1.19 | % |
|
| 1.10 | % |
|
| 1.19 | % |
|
| 0.97 | % |
|
| 0.97 | % |
|
| 1.10 | % |
Allowance for loan losses to nonperforming loans + accruing loans 90 days past due |
|
| 55.25 | % |
|
| 53.35 | % |
|
| 56.45 | % |
|
| 55.25 | % |
|
| 56.45 | % |
|
| 56.81 | % |
|
| 58.60 | % |
|
| 46.37 | % |
(a) | Included in nonaccrual loans are nonaccruing restructured loans totaling $105.9 million, $85.5 million and $118.0 million at 3/31/2019, 12/31/2018 and 3/31/2018, respectively. Nonaccrual loans and accruing loans past due 90 days or more do not include purchased credit impaired loans |
(b) | Excludes 90+ accruing troubled debt restructured loans already reflected in |
45
51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
| September 30, |
| June 30, |
| March 31, |
| December 31, |
| September 30, | |||||
(in thousands) |
| 2018 |
| 2018 |
| 2018 |
| 2017 |
| 2017 | |||||
Period-End Balance Sheet |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, net of unearned income (a) |
| $ | 19,543,717 |
| $ | 19,370,917 |
| $ | 19,092,504 |
| $ | 19,004,163 |
| $ | 18,786,285 |
Loans held for sale |
|
| 29,043 |
|
| 36,047 |
|
| 21,827 |
|
| 39,865 |
|
| 23,236 |
Securities |
|
| 5,987,447 |
|
| 6,113,873 |
|
| 5,930,076 |
|
| 5,888,380 |
|
| 5,624,552 |
Short-term investments |
|
| 108,074 |
|
| 104,210 |
|
| 61,541 |
|
| 92,384 |
|
| 111,725 |
Earning assets |
|
| 25,668,281 |
|
| 25,625,047 |
|
| 25,105,948 |
|
| 25,024,792 |
|
| 24,545,798 |
Allowance for loan losses |
|
| (214,550) |
|
| (214,530) |
|
| (210,713) |
|
| (217,308) |
|
| (223,122) |
Goodwill |
|
| 791,157 |
|
| 745,523 |
|
| 745,523 |
|
| 745,523 |
|
| 739,403 |
Other intangible assets, net |
|
| 101,438 |
|
| 79,700 |
|
| 85,021 |
|
| 90,640 |
|
| 96,525 |
Other assets |
|
| 1,751,849 |
|
| 1,689,707 |
|
| 1,571,558 |
|
| 1,692,439 |
|
| 1,658,151 |
Total assets |
| $ | 28,098,175 |
| $ | 27,925,447 |
| $ | 27,297,337 |
| $ | 27,336,086 |
| $ | 26,816,755 |
Noninterest-bearing deposits |
| $ | 8,140,530 |
| $ | 8,165,796 |
| $ | 8,230,060 |
| $ | 8,307,497 |
| $ | 7,896,384 |
Interest-bearing transaction and savings deposits |
|
| 7,972,417 |
|
| 7,711,542 |
|
| 8,058,793 |
|
| 8,181,554 |
|
| 7,893,546 |
Interest-bearing public funds deposits |
|
| 2,613,858 |
|
| 2,854,839 |
|
| 3,108,008 |
|
| 3,040,318 |
|
| 2,762,048 |
Time deposits |
|
| 3,691,002 |
|
| 3,503,161 |
|
| 3,088,861 |
|
| 2,723,833 |
|
| 2,981,881 |
Total interest-bearing deposits |
|
| 14,277,277 |
|
| 14,069,542 |
|
| 14,255,662 |
|
| 13,945,705 |
|
| 13,637,475 |
Total deposits |
|
| 22,417,807 |
|
| 22,235,338 |
|
| 22,485,722 |
|
| 22,253,202 |
|
| 21,533,859 |
Short-term borrowings |
|
| 2,276,647 |
|
| 2,314,190 |
|
| 1,452,097 |
|
| 1,703,890 |
|
| 1,737,151 |
Long-term debt |
|
| 215,912 |
|
| 266,009 |
|
| 300,443 |
|
| 305,513 |
|
| 331,179 |
Other liabilities |
|
| 208,931 |
|
| 180,355 |
|
| 163,037 |
|
| 188,532 |
|
| 351,291 |
Stockholders' equity |
|
| 2,978,878 |
|
| 2,929,555 |
|
| 2,896,038 |
|
| 2,884,949 |
|
| 2,863,275 |
Total liabilities & stockholders' equity |
| $ | 28,098,175 |
| $ | 27,925,447 |
| $ | 27,297,337 |
| $ | 27,336,086 |
| $ | 26,816,755 |
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
|
| Three Months Ended |
| Nine Months Ended | |||||||||||||||||||||||||||||||
|
| September 30, |
| June 30, |
| September 30, |
| September 30, |
| June 30, |
| March 31, |
|
| December 31, |
|
| September 30, |
|
| June 30, |
|
| March 31, |
| ||||||||||
(in thousands) |
| 2018 |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| 2019 |
|
| 2018 |
|
| 2018 |
|
| 2018 |
|
| 2018 |
| ||||||||||
Average Balance Sheet |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Total loans, net of unearned income (a) |
| $ | 19,464,639 |
| $ | 19,193,234 |
| $ | 18,591,219 |
| $ | 19,230,385 |
| $ | 18,092,622 | ||||||||||||||||||||
Period-End Balance Sheet |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total loans, net of unearned income |
| $ | 20,112,838 |
|
| $ | 20,026,411 |
|
| $ | 19,543,717 |
|
| $ | 19,370,917 |
|
| $ | 19,092,504 |
| |||||||||||||||
Loans held for sale |
| 25,992 |
| 22,575 |
| 21,723 |
| 26,898 |
| 21,815 |
|
| 27,437 |
|
|
| 28,150 |
|
|
| 29,043 |
|
|
| 36,047 |
|
|
| 21,827 |
| |||||
Securities (b) |
| 6,186,410 |
| 6,032,058 |
| 5,679,841 |
| 6,039,645 |
| 5,321,974 | |||||||||||||||||||||||||
Securities |
|
| 5,577,522 |
|
|
| 5,670,584 |
|
|
| 5,987,447 |
|
|
| 6,113,873 |
|
|
| 5,930,076 |
| |||||||||||||||
Short-term investments |
|
| 155,331 |
|
| 143,158 |
|
| 194,643 |
|
| 148,958 |
|
| 435,066 |
|
| 163,762 |
|
|
| 111,094 |
|
|
| 108,074 |
|
|
| 104,210 |
|
|
| 61,541 |
|
Earning assets |
|
| 25,832,372 |
|
| 25,391,025 |
|
| 24,487,426 |
|
| 25,445,886 |
|
| 23,871,477 |
|
| 25,881,559 |
|
|
| 25,836,239 |
|
|
| 25,668,281 |
|
|
| 25,625,047 |
|
|
| 25,105,948 |
|
Allowance for loan losses |
| (214,376) |
| (212,766) |
| (224,537) |
| (214,637) |
| (222,623) |
|
| (194,688 | ) |
|
| (194,514 | ) |
|
| (214,550 | ) |
|
| (214,530 | ) |
|
| (210,713 | ) | |||||
Goodwill and other intangible assets |
| 886,226 |
| 827,760 |
| 837,107 |
| 849,279 |
| 798,050 |
|
| 883,097 |
|
|
| 887,123 |
|
|
| 892,595 |
|
|
| 825,223 |
|
|
| 830,544 |
| |||||
Other assets |
|
| 1,522,701 |
|
| 1,479,033 |
|
| 1,577,577 |
|
| 1,505,382 |
|
| 1,546,910 |
|
| 1,920,263 |
|
|
| 1,707,059 |
|
|
| 1,751,849 |
|
|
| 1,689,707 |
|
|
| 1,571,558 |
|
Total assets |
| $ | 28,026,923 |
| $ | 27,485,052 |
| $ | 26,677,573 |
| $ | 27,585,910 |
| $ | 25,993,814 |
| $ | 28,490,231 |
|
| $ | 28,235,907 |
|
| $ | 28,098,175 |
|
| $ | 27,925,447 |
|
| $ | 27,297,337 |
|
Noninterest-bearing deposits |
| $ | 8,017,353 |
| $ | 8,149,521 |
| $ | 7,775,913 |
| $ | 8,039,574 |
| $ | 7,670,517 |
| $ | 8,158,658 |
|
| $ | 8,499,027 |
|
| $ | 8,140,530 |
|
| $ | 8,165,796 |
|
| $ | 8,230,060 |
|
Interest-bearing transaction and savings deposits |
|
| 7,944,349 |
|
| 7,860,019 |
|
| 8,097,370 |
|
| 7,948,819 |
|
| 7,685,213 |
|
| 8,224,203 |
|
|
| 8,000,093 |
|
|
| 7,972,417 |
|
|
| 7,711,542 |
|
|
| 8,058,793 |
|
Interest-bearing public fund deposits |
| 2,682,269 |
| 2,970,117 |
| 2,764,961 |
| 2,906,067 |
| 2,618,215 | |||||||||||||||||||||||||
Interest-bearing public funds deposits |
|
| 3,229,589 |
|
|
| 3,006,516 |
|
|
| 2,613,858 |
|
|
| 2,854,839 |
|
|
| 3,108,008 |
| |||||||||||||||
Time deposits |
|
| 3,377,588 |
|
| 3,121,817 |
|
| 2,711,574 |
|
| 3,160,943 |
|
| 2,543,834 |
|
| 3,767,844 |
|
|
| 3,644,549 |
|
|
| 3,691,002 |
|
|
| 3,503,161 |
|
|
| 3,088,861 |
|
Total interest-bearing deposits |
|
| 14,004,206 |
|
| 13,951,953 |
|
| 13,573,905 |
|
| 14,015,829 |
|
| 12,847,262 |
|
| 15,221,636 |
|
|
| 14,651,158 |
|
|
| 14,277,277 |
|
|
| 14,069,542 |
|
|
| 14,255,662 |
|
Total deposits |
|
| 22,021,559 |
|
| 22,101,474 |
|
| 21,349,818 |
|
| 22,055,403 |
|
| 20,517,779 |
|
| 23,380,294 |
|
|
| 23,150,185 |
|
|
| 22,417,807 |
|
|
| 22,235,338 |
|
|
| 22,485,722 |
|
Short-term borrowings |
| 2,610,176 |
| 1,989,416 |
| 1,909,365 |
| 2,143,759 |
| 2,089,024 |
|
| 1,388,735 |
|
|
| 1,589,128 |
|
|
| 2,276,647 |
|
|
| 2,314,190 |
|
|
| 1,452,097 |
| |||||
Long-term debt |
| 241,517 |
| 299,695 |
| 339,535 |
| 281,876 |
| 408,191 |
|
| 224,962 |
|
|
| 224,993 |
|
|
| 215,912 |
|
|
| 266,009 |
|
|
| 300,443 |
| |||||
Other liabilities |
| 201,240 |
| 185,470 |
| 240,338 |
| 193,166 |
| 192,376 |
|
| 305,665 |
|
|
| 190,261 |
|
|
| 208,931 |
|
|
| 180,355 |
|
|
| 163,037 |
| |||||
Stockholders' equity |
|
| 2,952,431 |
|
| 2,908,997 |
|
| 2,838,517 |
|
| 2,911,706 |
|
| 2,786,444 |
|
| 3,190,575 |
|
|
| 3,081,340 |
|
|
| 2,978,878 |
|
|
| 2,929,555 |
|
|
| 2,896,038 |
|
Total liabilities & stockholders' equity |
| $ | 28,026,923 |
| $ | 27,485,052 |
| $ | 26,677,573 |
| $ | 27,585,910 |
| $ | 25,993,814 |
| $ | 28,490,231 |
|
| $ | 28,235,907 |
|
| $ | 28,098,175 |
|
| $ | 27,925,447 |
|
| $ | 27,297,337 |
|
|
| Three Months Ended |
| |||||||||
|
| March 31, |
|
| December 31, |
|
| March 31, |
| |||
(in thousands) |
| 2019 |
|
| 2018 |
|
| 2018 |
| |||
Average Balance Sheet |
|
|
|
|
|
|
|
|
|
|
|
|
Total loans, net of unearned income |
| $ | 20,126,948 |
|
| $ | 19,817,729 |
|
| $ | 19,028,490 |
|
Loans held for sale |
|
| 20,618 |
|
|
| 22,187 |
|
|
| 32,194 |
|
Securities (a) |
|
| 5,656,689 |
|
|
| 5,965,461 |
|
|
| 5,897,290 |
|
Short-term investments |
|
| 216,192 |
|
|
| 205,806 |
|
|
| 148,309 |
|
Earning assets |
|
| 26,020,447 |
|
|
| 26,011,183 |
|
|
| 25,106,283 |
|
Allowance for loan losses |
|
| (196,384 | ) |
|
| (213,902 | ) |
|
| (216,796 | ) |
Goodwill and other intangible assets |
|
| 885,381 |
|
|
| 889,820 |
|
|
| 833,269 |
|
Other assets |
|
| 1,742,104 |
|
|
| 1,572,862 |
|
|
| 1,514,321 |
|
Total assets |
| $ | 28,451,548 |
|
| $ | 28,259,963 |
|
| $ | 27,237,077 |
|
Noninterest-bearing deposits |
| $ | 8,227,698 |
|
| $ | 8,260,487 |
|
| $ | 7,951,121 |
|
Interest-bearing transaction and savings deposits |
|
| 8,082,584 |
|
|
| 7,940,670 |
|
|
| 8,043,176 |
|
Interest-bearing public fund deposits |
|
| 3,060,565 |
|
|
| 2,680,837 |
|
|
| 3,070,079 |
|
Time deposits |
|
| 3,743,292 |
|
|
| 3,616,151 |
|
|
| 2,979,043 |
|
Total interest-bearing deposits |
|
| 14,886,441 |
|
|
| 14,237,658 |
|
|
| 14,092,298 |
|
Total deposits |
|
| 23,114,139 |
|
|
| 22,498,145 |
|
|
| 22,043,419 |
|
Short-term borrowings |
|
| 1,684,904 |
|
|
| 2,330,280 |
|
|
| 1,823,033 |
|
Long-term debt |
|
| 224,966 |
|
|
| 222,339 |
|
|
| 305,117 |
|
Other liabilities |
|
| 309,488 |
|
|
| 215,934 |
|
|
| 192,695 |
|
Stockholders' equity |
|
| 3,118,051 |
|
|
| 2,993,265 |
|
|
| 2,872,813 |
|
Total liabilities & stockholders' equity |
| $ | 28,451,548 |
|
| $ | 28,259,963 |
|
| $ | 27,237,077 |
|
(a) |
|
| Average securities do not include unrealized holding gains/losses on available for sale securities. |
46
52
Reconciliation of Non-GAAP Measures
Reported to core net interest income (te) and core net interest margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended |
| Nine Months Ended | ||||||||||||||||
| September 30, |
| June 30, |
| September 30, |
| September 30, | ||||||||||||
($ in thousands) | 2018 |
| 2018 |
| 2017 |
| 2018 |
| 2017 | ||||||||||
Net interest income | $ | 214,194 |
|
| $ | 211,547 |
|
| $ | 202,857 |
|
| $ | 631,405 |
|
| $ | 584,265 |
|
Tax-equivalent adjustment (te)(a) |
| 4,095 |
|
|
| 4,081 |
|
|
| 8,579 |
|
|
| 12,139 |
|
|
| 25,441 |
|
Net interest income (te) | $ | 218,289 |
|
| $ | 215,628 |
|
| $ | 211,436 |
|
| $ | 643,544 |
|
| $ | 609,706 |
|
Purchase accounting adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan discount accretion (b) |
| 5,415 |
|
|
| 6,376 |
|
|
| 7,711 |
|
|
| 18,899 |
|
|
| 21,529 |
|
Bond premium amortization (c) |
| (221) |
|
|
| (259) |
|
|
| (364) |
|
|
| (795) |
|
|
| (1,216) |
|
Total net purchase accounting adjustments |
| 5,194 |
|
|
| 6,117 |
|
|
| 7,347 |
|
|
| 18,104 |
|
|
| 20,313 |
|
Net interest income (te) - core | $ | 213,095 |
|
| $ | 209,511 |
|
| $ | 204,089 |
|
| $ | 625,440 |
|
| $ | 589,393 |
|
Average earning assets | $ | 25,832,372 |
|
| $ | 25,391,025 |
|
| $ | 24,487,426 |
|
| $ | 25,445,886 |
|
| $ | 23,871,477 |
|
Net interest margin - reported |
| 3.36 | % |
|
| 3.40 | % |
|
| 3.44 | % |
|
| 3.38 | % |
|
| 3.41 | % |
Net purchase accounting adjustments |
| 0.08 | % |
|
| 0.09 | % |
|
| 0.12 | % |
|
| 0.10 | % |
|
| 0.11 | % |
Net interest margin - core |
| 3.28 | % |
|
| 3.31 | % |
|
| 3.32 | % |
|
| 3.28 | % |
|
| 3.30 | % |
Operating revenue (te) and operating pre-provision net revenue (te)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
| Three Months Ended |
| Nine Months Ended |
| Three Months Ended |
| ||||||||||||||||||||||||||||
| September 30, |
| June 30, |
| September 30, |
| September 30, |
| March 31, |
|
| December 31, |
|
| September 30, |
|
| June 30, |
|
| March 31, |
| ||||||||||||
(in thousands) | 2018 |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| 2019 |
|
| 2018 |
|
| 2018 |
|
| 2018 |
|
| 2018 |
| ||||||||||
Net interest income | $ | 214,194 |
| $ | 211,547 |
| $ | 202,857 |
| $ | 631,405 |
| $ | 584,265 |
| $ | 219,254 |
|
| $ | 217,433 |
|
| $ | 214,194 |
|
| $ | 211,547 |
|
| $ | 205,664 |
|
Noninterest income |
| 75,518 |
|
| 68,832 |
|
| 67,115 |
|
| 210,602 |
|
| 198,093 |
|
| 70,503 |
|
|
| 74,538 |
|
|
| 75,518 |
|
|
| 68,832 |
|
|
| 66,252 |
|
Total revenue | $ | 289,712 |
| $ | 280,379 |
| $ | 269,972 |
| $ | 842,007 |
| $ | 782,358 |
| $ | 289,757 |
|
| $ | 291,971 |
|
| $ | 289,712 |
|
| $ | 280,379 |
|
| $ | 271,916 |
|
Tax-equivalent adjustment (a) |
| 4,095 |
|
| 4,081 |
|
| 8,579 |
|
| 12,139 |
|
| 25,441 |
|
| 3,824 |
|
|
| 4,038 |
|
|
| 4,095 |
|
|
| 4,081 |
|
|
| 3,963 |
|
Nonoperating revenue |
| — |
|
| — |
|
| — |
|
| 1,145 |
|
| (4,352) |
|
| — |
|
|
| (604 | ) |
|
| — |
|
|
| — |
|
|
| 1,145 |
|
Operating revenue (te) | $ | 293,807 |
| $ | 284,460 |
| $ | 278,551 |
| $ | 855,291 |
| $ | 803,447 |
| $ | 293,581 |
|
| $ | 295,405 |
|
| $ | 293,807 |
|
| $ | 284,460 |
|
| $ | 277,024 |
|
Noninterest expense |
| (181,187) |
|
| (184,402) |
|
| (177,616) |
|
| (536,380) |
|
| (524,628) |
|
| (175,700 | ) |
|
| (179,366 | ) |
|
| (181,187 | ) |
|
| (184,402 | ) |
|
| (170,791 | ) |
Nonoperating expense |
| 4,827 |
|
| 15,805 |
|
| 11,393 |
|
| 26,485 |
|
| 28,473 |
|
| - |
|
|
| 2,458 |
|
|
| 4,827 |
|
|
| 15,805 |
|
|
| 5,853 |
|
Operating pre-prevision net revenue (te) | $ | 117,447 |
| $ | 115,863 |
| $ | 112,328 |
| $ | 345,396 |
| $ | 307,292 | ||||||||||||||||||||
Operating pre-provision net revenue (te) |
| $ | 117,881 |
|
| $ | 118,497 |
|
| $ | 117,447 |
|
| $ | 115,863 |
|
| $ | 112,086 |
|
Operating earnings per share - diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
| Three Months Ended | Nine Months Ended |
| Three Months Ended |
| |||||||||||||||||||||||||||||
| September 30, |
| June 30, |
| September 30, |
| September 30, |
| March 31, |
|
| December 31, |
|
| September 30, |
|
| June 30, |
|
| March 31, |
| ||||||||||||
(in thousands) | 2018 |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| 2019 |
|
| 2018 |
|
| 2018 |
|
| 2018 |
|
| 2018 |
| ||||||||||
Net income | $ | 83,878 |
| $ | 71,177 |
| $ | 58,902 |
| $ | 227,530 |
| $ | 160,183 |
| $ | 79,164 |
|
| $ | 96,240 |
|
| $ | 83,878 |
|
| $ | 71,177 |
|
| $ | 72,475 |
|
Net income allocated to participating securities |
| (1,544) |
|
| (1,328) |
|
| (1,244) |
|
| (4,238) |
|
| (3,566) |
|
| (1,337 | ) |
|
| (1,691 | ) |
|
| (1,544 | ) |
|
| (1,328 | ) |
|
| (1,366 | ) |
Net income available to common shareholders |
| 82,334 |
|
| 69,849 |
| $ | 57,658 |
| $ | 223,292 |
| $ | 156,617 |
|
| 77,827 |
|
|
| 94,549 |
|
|
| 82,334 |
|
|
| 69,849 |
|
|
| 71,109 |
|
Nonoperating items, net of applicable income tax |
| 3,813 |
|
| 12,486 |
|
| 7,405 |
|
| 22,081 |
|
| 15,679 |
|
| 7,966 |
|
|
| 1,465 |
|
|
| 3,813 |
|
|
| 12,486 |
|
|
| 5,782 |
|
Nonoperating items allocated to participating securities |
| (71) |
|
| (233) |
|
| (156) |
|
| (413) |
|
| (342) |
|
| (134 | ) |
|
| (26 | ) |
|
| (71 | ) |
|
| (233 | ) |
|
| (109 | ) |
Operating earnings available to common shareholders | $ | 86,076 |
| $ | 82,102 |
|
| 64,907 |
|
| 244,960 |
|
| 171,954 |
|
| 85,659 |
|
|
| 95,988 |
|
|
| 86,076 |
|
|
| 82,102 |
|
|
| 76,782 |
|
Weighted average common shares - diluted |
| 85,539 |
|
| 85,483 |
|
| 84,980 |
|
| 85,482 |
|
| 84,818 |
|
| 85,800 |
|
|
| 85,677 |
|
|
| 85,539 |
|
|
| 85,483 |
|
|
| 85,423 |
|
Earnings per share -diluted | $ | 0.96 |
| $ | 0.82 |
| $ | 0.68 |
| $ | 2.61 |
| $ | 1.85 | ||||||||||||||||||||
Earnings per share - diluted |
| $ | 0.91 |
|
| $ | 1.10 |
|
| $ | 0.96 |
|
| $ | 0.82 |
|
| $ | 0.83 |
| ||||||||||||||
Operating earnings per share - diluted | $ | 1.01 |
| $ | 0.96 |
| $ | 0.76 |
| $ | 2.87 |
| $ | 2.03 |
| $ | 1.00 |
|
| $ | 1.12 |
|
| $ | 1.01 |
|
| $ | 0.96 |
|
| $ | 0.90 |
|
(a) | Taxable equivalent adjustment (te) amounts |
|
|
|
|
53
LIQUIDITY
Liquidity management is focused on ensuring that funds are available to meet the cash flow requirements of our depositors and borrowers, while also meeting the operating, capital and strategic cash flow needs of the Company, the Bank and other subsidiaries. We develop liquidity management strategies and measure and regularly monitor liquidity risk as part of our overall asset/liability management process.
The asset portion of the balance sheet provides liquidity primarily through loan principal repayments, as well as maturities and repayments of investment securities.securities and occasional sales of various assets. Short-term investments such as federal funds sold, securities purchased under agreements to resell and interest-bearing deposits with the Federal Reserve Bank or with other commercial banks are additional sources of liquidity to meet cash flow requirements. Free securities represent unpledged securities that can be sold or used as collateral for borrowings, and include unpledged securities assigned to short-term dealer repurchase agreements or to the Federal Reserve Bank discount window. Management has established an internal target for the ratio of free securities to total securities to be 20% or more. As shown in the table below, our ratio of free securities to total securities was 48.90%33.57% at September 30, 2018,March 31, 2019, compared to 49.31%41.39% at June 30,December 31, 2018 and 36.61%43.35% at September 30, 2017.March 31, 2018. The total of pledged securities at September 30, 2018March 31, 2019 was $3.1$3.7 billion, down $29up $391.2 million from June 30, 2018December 31, 2018. Securities are pledged as collateral related to seasonal public fund tax deposits was released.funds and repurchase agreements. Total securities of $5.6 billion at September 30,March 31, 2019 were down $93.1 million compared to December 31, 2018 was $0.4 billion higherand $297.7 million lower than at September 30, 2017.March 31, 2018.
47
|
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|
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|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
|
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|
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|
|
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|
|
| ||||||||||||||||||||
|
| September 30, |
| June 30, |
| March 31, |
|
| December 31, |
| September 30, |
| March 31, |
|
| December 31, |
|
| September 30, |
|
| June 30, |
|
| March 31, |
| |||||||||
Liquidity Metrics |
| 2018 |
| 2018 |
| 2018 |
|
| 2017 |
| 2017 |
| 2019 |
|
| 2018 |
|
| 2018 |
|
| 2018 |
|
| 2018 |
| |||||||||
Free securities / total securities |
| 48.90 | % |
| 49.31 | % |
| 43.35 | % |
| 44.15 | % |
| 36.61 | % |
|
| 33.57 | % |
|
| 41.39 | % |
|
| 48.90 | % |
|
| 49.31 | % |
|
| 43.35 | % |
Core deposits / total deposits |
| 89.71 | % |
| 89.65 | % |
| 90.84 | % |
| 93.03 | % |
| 91.70 | % |
|
| 89.98 | % |
|
| 90.47 | % |
|
| 89.71 | % |
|
| 89.65 | % |
|
| 90.94 | % |
Wholesale funds / core deposits |
| 19.34 | % |
| 19.93 | % |
| 14.44 | % |
| 13.76 | % |
| 15.94 | % |
|
| 13.61 | % |
|
| 14.53 | % |
|
| 19.34 | % |
|
| 19.93 | % |
|
| 14.32 | % |
Quarter-to-date average loans /quarter-to-date average deposits |
| 88.39 | % |
| 86.84 | % |
| 86.32 | % |
| 86.57 | % |
| 87.08 | % | ||||||||||||||||||||
Quarterly average loans /quarterly average deposits |
|
| 87.08 | % |
|
| 88.09 | % |
|
| 88.39 | % |
|
| 86.84 | % |
|
| 86.32 | % |
The liability portion of the balance sheet provides liquidity mainly through the Company’s ability to use cash sourced from various customers’ interest-bearing and noninterest-bearing deposit and sweep accounts. At March 31, 2019, deposits totaled $23.4 billion, an increase of $230.1 million, or 1%, from December 31, 2018 and an increase of $894.6 million, or 4%, from March 31, 2018. Core deposits consist of total deposits excluding certificates of deposit (“CDs”) of $250,000 or more and brokered deposits. Core deposits totaled $21.0 billion at March 31, 2019, an increase of $93.6 million from December 31, 2018, and $591.2 million from March 31, 2018. The ratio of core deposits to total deposits was 89.71%89.98% at September 30, 2018,March 31, 2019, compared to 89.65%90.47% at June 30,December31, 2018 and 91.70%90.94% at September 30, 2017. CoreMarch 31, 2018. Brokered deposits totaled $20.1$1.2 billion at September 30, 2018,as of March 31, 2019, an increase of $0.2 billion from June 30, 2018, and $0.4 billion from September 30, 2017. Brokered deposits totaled $1.4 billion as of September 30, 2018, a $26 million increase compared to June 30, 2018 and $354$21.2 million compared to September 30, 2017.December 31, 2018 and $74.9 million compared to March 31, 2018. The use of brokered deposits as a funding source is subject to strict parameterscertain policies regarding the amount, term and interest rate.
Purchases of federal funds, securities sold under agreements to repurchase and other short-term borrowings from customers provide additional sources of liquidity to meet short-term funding requirements. Besides funding from customer sources, the Bank has a line of credit with the FHLB that is secured by blanket pledges of certain mortgage loans. At September 30, 2018,March 31, 2019, the Bank had borrowings of approximately $1.8 billion$900 million and had approximately $2.8$3.8 billion available under this line. The Bank also has unused borrowing capacity at the Federal Reserve’s discount window of approximately $2.3$2.7 billion; there were no outstanding borrowings with the Federal Reserve at any date during the twelve months ended September 30, 2018.any period covered by this report.
Wholesale funds, which are comprised of short-term borrowings, long-term debt and brokered deposits were 19.34%13.61% of core deposits at September 30, 2018,March 31, 2019, compared to 19.93%14.53% at June 30,December 31, 2018 and 15.94%14.32% at September 30, 2017.March 31, 2018. The linked quarter decrease in wholesale funds was primarily related to decreases in FHLB borrowings, customer repurchase agreements, and long-term debt, partially offset by an increase in federal funds purchased.borrowings. The year over year increasedecrease in wholesale funds was primarily related to increasesdecreases in FHLB borrowings, long-term debt and brokered deposits,federal funds purchased, partially offset by a decreaseincreases in long-term debt. Managementbrokered deposits and repurchase agreements. The Company has established an internal target for wholesale funds to be less than 25% of core deposits.
Another key measure used to monitor our liquidity position is the loan-to-deposit ratio (average loans outstanding for the reporting period divided by average deposits outstanding). The loan-to-deposit ratio measures the amount of funds the Company lends for each dollar of deposits on hand. Our loan-to-deposit ratio for the thirdfirst quarter of 20182019 was 88.39%87.08%, compared to 86.84%88.09% for the secondfourth quarter of 2018 and 87.08%86.32% for the thirdfirst quarter of 2017.2018. Management has an established target range for itsthe loan-to-deposit ratio of 83%87% to 87%, but will operate temporarily outside of that range depending on market conditions.89%.
Cash generated from operations is another important source of funds to meet liquidity needs. The consolidated statements of cash flows present operating cash flows and summarize all significant sources and uses of funds for the ninethree months ended September 30, 2018March 31, 2019 and 2017.2018.
Dividends received from the Bank have been the primary source of funds available to the Parent for the payment of dividends to our stockholders and for servicing its debt. The liquidity management process takes into account the various regulatory provisions that can limit the amount of dividends the Bank can distribute to the Parent. The Parent targets cash and other liquid assets to provide liquidity in an amount sufficient to fund approximately six quarters of anticipated common stockholder dividends. dividends, but will temporarily operate below that level if a return to the target can be achieved in the near-term.
54
CAPITAL RESOURCES
Stockholders’ equity totaled $3.0$3.2 billion at September 30, 2018,March 31, 2019, up $49 million, or 2% from June 30, 2018 and up $116$109 million, or 4%, from September 30, 2017.December 31, 2018 and up $295 million, or 10%, from March 31, 2018. The tangible common equity ratio was 7.67%8.36 % at September 30, 2018,March 31, 2019, compared to 7.76%8.02% at June 30,December 31, 2018 and 7.80% at September 30, 2017.March 31, 2018. The decreaseincrease in the ratio from prior quarter is due to increaseincreases in goodwill and other intangibles resulting from the trust and asset management acquisition, partially offset by net tangible retained earnings.earnings and net gains on fair value adjustments of securities available for sale included in other comprehensive income. The decreaseincrease from September 30, 2017March 31, 2018 was primarily related to the change in net tangible retained earnings and the reduction in accumulated other comprehensive loss,losses, partially offset by tangible asset growth and an increase in intangible assets related to acquisition transactions, partially offset by an increase in net tangible retained earnings.transactions. Management has established an internal target for the tangible common equity ratio of at least 8.00%; however, management will allow the tangible common equity ratio to drop below 8.00% on a temporary basis if it believes that the shortfall can be replenished through normal operations. We expect to be backoperations within our target range in the first halfa short time frame.
48
The regulatory capital ratios of the Company and the Bank as of September 30, 2018 declined comparedMarch 31, 2019 continued to prior quarter due mostly to the intangible assets generated from the trustimprove and asset management transaction and asset growth, however, the ratios remain strong and areremained well in excess of current regulatory minimum requirements. The Company and the Bank have been categorized as “well-capitalized” in the most recent notices received from our regulators. Both entities currently exceed all capital requirements of the Basel III requirements, including the fully phased-in conservation buffer. SeeRefer to the Supervision and Regulation section in the Company’s Annual Report on Form 10-K for the year ended December 31, 20172018 for further discussion of our capital requirements.
The following table shows the regulatory capital ratios for the Company and the Bank as calculated under current rules for the indicated periods. The Company’s and Bank’s regulatory filings for quarters endingquarter ended March 31, 2018 and prior were filed in the names of Hancock Holding Company and Whitney Bank, respectively.
|
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|
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|
| Well- |
| September 30, |
| June 30, |
| March 31, |
| December 31, |
| September 30, | ||||||
|
| Capitalized |
| 2018 |
| 2018 |
| 2018 |
|
| 2017 |
| 2017 | |||||
Total capital (to risk weighted assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hancock Whitney Corporation |
| 10.00 | % |
| 11.98 | % |
| 12.12 | % |
| 12.00 | % |
| 11.90 | % |
| 11.84 | % |
Hancock Whitney Bank |
| 10.00 | % |
| 11.25 | % |
| 11.57 | % |
| 11.60 | % |
| 11.55 | % |
| 11.35 | % |
Tier 1 common equity capital (to risk weighted assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hancock Whitney Corporation |
| 6.50 | % |
| 10.36 | % |
| 10.48 | % |
| 10.35 | % |
| 10.21 | % |
| 10.10 | % |
Hancock Whitney Bank |
| 6.50 | % |
| 10.30 | % |
| 10.60 | % |
| 10.63 | % |
| 10.54 | % |
| 10.31 | % |
Tier 1 capital (to risk weighted assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hancock Whitney Corporation |
| 8.00 | % |
| 10.36 | % |
| 10.48 | % |
| 10.35 | % |
| 10.21 | % |
| 10.10 | % |
Hancock Whitney Bank |
| 8.00 | % |
| 10.30 | % |
| 10.60 | % |
| 10.63 | % |
| 10.54 | % |
| 10.31 | % |
Tier 1 leverage capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hancock Whitney Corporation |
| 5.00 | % |
| 8.50 | % |
| 8.66 | % |
| 8.51 | % |
| 8.43 | % |
| 8.34 | % |
Hancock Whitney Bank |
| 5.00 | % |
| 8.46 | % |
| 8.77 | % |
| 8.75 | % |
| 8.72 | % |
| 8.53 | % |
Regulatory definitions:
|
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|
|
|
|
| Well- |
|
| March 31, |
|
| December 31, |
|
| September 30, |
|
| June 30, |
|
| March 31, |
| ||||||
|
| Capitalized |
|
| 2019 |
|
| 2018 |
|
| 2018 |
|
| 2018 |
|
| 2018 |
| ||||||
Total capital (to risk weighted assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hancock Whitney Corporation |
|
| 10.00 | % |
|
| 12.24 | % |
|
| 11.99 | % |
|
| 11.98 | % |
|
| 12.12 | % |
|
| 12.00 | % |
Hancock Whitney Bank |
|
| 10.00 | % |
|
| 11.73 | % |
|
| 11.17 | % |
|
| 11.25 | % |
|
| 11.57 | % |
|
| 11.60 | % |
Tier 1 common equity capital (to risk weighted assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hancock Whitney Corporation |
|
| 6.50 | % |
|
| 10.74 | % |
|
| 10.48 | % |
|
| 10.36 | % |
|
| 10.48 | % |
|
| 10.35 | % |
Hancock Whitney Bank |
|
| 6.50 | % |
|
| 10.88 | % |
|
| 10.32 | % |
|
| 10.30 | % |
|
| 10.60 | % |
|
| 10.63 | % |
Tier 1 capital (to risk weighted assets) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hancock Whitney Corporation |
|
| 8.00 | % |
|
| 10.74 | % |
|
| 10.48 | % |
|
| 10.36 | % |
|
| 10.48 | % |
|
| 10.35 | % |
Hancock Whitney Bank |
|
| 8.00 | % |
|
| 10.88 | % |
|
| 10.32 | % |
|
| 10.30 | % |
|
| 10.60 | % |
|
| 10.63 | % |
Tier 1 leverage capital |
|
|
|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
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|
|
Hancock Whitney Corporation |
|
| 5.00 | % |
|
| 8.85 | % |
|
| 8.67 | % |
|
| 8.50 | % |
|
| 8.66 | % |
|
| 8.51 | % |
Hancock Whitney Bank |
|
| 5.00 | % |
|
| 8.97 | % |
|
| 8.54 | % |
|
| 8.46 | % |
|
| 8.77 | % |
|
| 8.75 | % |
On May 24, 2018, our board of directors approved a stock buyback program that authorized the repurchase of up to 5%, or approximately 4.3 million shares, of its outstanding common stock. The approved program allows us to repurchase shares of our common stock either in the open market in compliance with Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended, or in privately negotiated transactions with non-affiliated sellers or as otherwise determined by the Company in one or more transactions, from time to time until December 31, 2019. The Company is not obligated to purchase any shares under this program and the board of directors may terminate or amend the program at any time prior to the expiration. As of September 30, 2018,March 31, 2019, we had not purchased any200,000 shares of our common stock at an average price of $41.30 per share under this program.
On July 26, 2018, theJanuary 28, 2019, our board of directors declared the regular thirdfirst quarter cash dividend at $0.27 per share, a 12.5% increase from the same as prior quarter. The annual cash dividend payable rate increased to $1.08 per share, compared to the previous rate of $0.96 per share. The Company has paid uninterrupted quarterquarterly dividends to shareholders since 1967.
55
BALANCE SHEET ANALYSIS
Securities
InvestmentsInvestment in securities totaled approximately $6.0$5.6 billion at September 30, 2018,March 31, 2019, down $126$93.1 million, or 2%, from June 30,at December 31, 2018 and up $363down $352.6 million, or 6%, from September 30, 2017.March 31, 2018. At September 30, 2018,March 31, 2019, securities available for sale totaled $2.9$2.7 billion and securities held to maturity totaled $3.1$2.9 billion.
TheOur securities portfolio consists mainly of residential and commercial mortgage-backed securities and collateralized mortgage obligations that are issued or guaranteed by U.S. government agencies. The portfolio is designed to enhance liquidity while providing an acceptable rate of return. The Company investsWe invest only in high quality investment grade securities with a targeted effective duration for the overall portfolio ofgenerally between two and five and a half years. The effective duration calculates the price sensitivity to changes in interest rates. At September 30, 2018,March 31, 2019, the average expected maturity of the portfolio was 5.615.52 years with an effective duration of 4.904.37 years and a nominal weighted-average yield of 2.54%2.75%. Management simulations indicate that the effective duration would decreaseincrease to 4.844.59 years with a 100 bpsbp increase in the yield curve and increase to 4.914.75 years with a 200 bpsbp increase. At June 30,December 31, 2018, the average expected maturity of the portfolio was 6.095.67 years with an effective duration of 4.894.67 years and a nominal weighted-average yield of 2.53%2.75%. The averagechange in expected maturity, effective duration, and nominal weighted-average yield is primarily related to securities prepayments and maturities during the first quarter of the portfolio at September 30, 2017 was 5.57 years, while the duration was 4.64 years, and the nominal weighted average yield was 2.36%.2019.
Loans
Total loans at September 30, 2018March 31, 2019 were $19.5$20.1 billion, up approximately $173$86.4 million, or less than 1%, from June 30,December 31, 2018, and up $757 million,$1.0 billion, or 4%5.3%, from September 30, 2017. The increaseMarch 31, 2018. Growth from June 30,December 31, 2018 iswas impacted by unanticipated paydowns, approximately $42 million of
49
mortgage loan sales, and $17.9 million in net of approximately $90 million of paydowns on two relationships that occurred at quarter end, approximately halfcharge-offs, of which $10.1 million was inrelated to the energy related transportation sector, where we are working to reduce our exposure.DC Solar alleged fraud. Net loan growth continues to be diversified both regionallyacross products and in areas identified as a part of the Company’s revenue generating initiatives, including equipment finance and healthcare. Loansfootprint. Management anticipates $75 million to energy related entities decreased $58$125 million of period end loan growth during thirdthe second quarter of 2018 and are down $206 million compared2019, with full year average percentage growth expected to September 30, 2017 as we continue to reduce our exposure to the energy sector. be in mid-single digits.
The following table shows the composition of our loan portfolio:
portfolio at each date indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
|
| |||||||||||||||||||||||||||||||||
|
| September 30, |
| June 30, |
| March 31, |
| December 31, |
| September 30, |
| March 31, |
|
| December 31, |
|
| September 30, |
|
| June 30, |
|
| March 31, |
| ||||||||||
(in thousands) |
| 2018 |
| 2018 |
| 2018 |
| 2017 |
| 2017 |
| 2019 |
|
| 2018 |
|
| 2018 |
|
| 2018 |
|
| 2018 |
| ||||||||||
Total loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial non-real estate |
| $ | 8,438,884 |
| $ | 8,410,961 |
| $ | 8,336,222 |
| $ | 8,297,937 |
| $ | 8,129,429 |
| $ | 8,656,326 |
|
| $ | 8,620,601 |
|
| $ | 8,438,884 |
|
| $ | 8,410,961 |
|
| $ | 8,336,222 |
|
Commercial real estate - owner occupied |
|
| 2,300,271 |
|
| 2,233,794 |
|
| 2,185,543 |
|
| 2,142,439 |
|
| 2,076,014 |
|
| 2,515,428 |
|
|
| 2,457,748 |
|
|
| 2,300,271 |
|
|
| 2,233,794 |
|
|
| 2,185,543 |
|
Total commercial and industrial |
|
| 10,739,155 |
|
| 10,644,755 |
|
| 10,521,765 |
|
| 10,440,376 |
|
| 10,205,443 |
|
| 11,171,754 |
|
|
| 11,078,349 |
|
|
| 10,739,155 |
|
|
| 10,644,755 |
|
|
| 10,521,765 |
|
Commercial real estate - income producing |
|
| 2,311,699 |
|
| 2,342,192 |
|
| 2,394,862 |
|
| 2,384,599 |
|
| 2,511,808 |
|
| 2,563,394 |
|
|
| 2,341,779 |
|
|
| 2,311,699 |
|
|
| 2,342,192 |
|
|
| 2,394,862 |
|
Construction and land development |
|
| 1,523,419 |
|
| 1,515,233 |
|
| 1,413,878 |
|
| 1,373,421 |
|
| 1,373,048 |
|
| 1,340,067 |
|
|
| 1,548,335 |
|
|
| 1,523,419 |
|
|
| 1,515,233 |
|
|
| 1,413,878 |
|
Residential mortgages |
|
| 2,846,916 |
|
| 2,780,359 |
|
| 2,732,821 |
|
| 2,690,472 |
|
| 2,596,692 |
|
| 2,933,251 |
|
|
| 2,910,081 |
|
|
| 2,846,916 |
|
|
| 2,780,359 |
|
|
| 2,732,821 |
|
Consumer |
|
| 2,122,528 |
|
| 2,088,378 |
|
| 2,029,178 |
|
| 2,115,295 |
|
| 2,099,294 |
|
| 2,104,372 |
|
|
| 2,147,867 |
|
|
| 2,122,528 |
|
|
| 2,088,378 |
|
|
| 2,029,178 |
|
Total loans |
| $ | 19,543,717 |
| $ | 19,370,917 |
| $ | 19,092,504 |
| $ | 19,004,163 |
| $ | 18,786,285 |
| $ | 20,112,838 |
|
| $ | 20,026,411 |
|
| $ | 19,543,717 |
|
| $ | 19,370,917 |
|
| $ | 19,092,504 |
|
Our commercial customer base is diversified over a range of industries, including energy, healthcare, wholesale and retail trade in various durable and nondurable products and the manufacture of such products, marine transportation and maritime construction, financial and professional services, and agricultural production.
56
The following table provides detail of the more significant industry concentrations for our commercial and industrial loan portfolio, which is based on NAICS codes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
|
| September 30, |
| June 30, |
| March 31, |
| December 31, |
| September 30, | ||||||||||||||||||||
|
| 2018 |
| 2018 |
| 2018 |
| 2017 |
| 2017 | ||||||||||||||||||||
|
|
|
|
| Pct of |
|
|
|
| Pct of |
|
|
|
| Pct of |
|
|
|
| Pct of |
|
|
|
| Pct of | |||||
($ in thousands) |
| Balance |
| Total |
| Balance |
| Total |
| Balance |
| Total |
| Balance |
| Total |
| Balance |
| Total | ||||||||||
Commercial & industrial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate and Rental and Leasing |
| $ | 1,232,737 |
| 11 | % |
| $ | 1,195,278 |
| 11 | % |
| $ | 1,154,304 |
| 11 | % |
| $ | 1,122,389 |
| 11 | % |
| $ | 1,134,451 |
| 12 | % |
Health Care and Social Assistance |
|
| 1,135,040 |
| 11 |
|
|
| 1,152,593 |
| 11 |
|
|
| 1,159,214 |
| 11 |
|
|
| 1,118,288 |
| 11 |
|
|
| 1,023,939 |
| 10 |
|
Retail Trade (a) |
|
| 930,134 |
| 9 |
|
|
| 901,020 |
| 8 |
|
|
| 869,662 |
| 8 |
|
|
| 757,998 |
| 7 |
|
|
| 761,418 |
| 7 |
|
Mining, Quarrying, and Oil and Gas Extraction (a) |
|
| 874,223 |
| 8 |
|
|
| 932,113 |
| 9 |
|
|
| 972,580 |
| 9 |
|
|
| 992,179 |
| 10 |
|
|
| 1,074,822 |
| 11 |
|
Manufacturing (a) |
|
| 846,447 |
| 8 |
|
|
| 820,135 |
| 8 |
|
|
| 795,014 |
| 8 |
|
|
| 745,744 |
| 7 |
|
|
| 726,339 |
| 7 |
|
Public Administration |
|
| 842,199 |
| 8 |
|
|
| 866,052 |
| 8 |
|
|
| 857,736 |
| 8 |
|
|
| 840,773 |
| 8 |
|
|
| 832,638 |
| 8 |
|
Transportation and Warehousing (a) |
|
| 700,698 |
| 6 |
|
|
| 702,615 |
| 7 |
|
|
| 651,869 |
| 6 |
|
|
| 609,011 |
| 6 |
|
|
| 563,263 |
| 6 |
|
Construction |
|
| 582,761 |
| 5 |
|
|
| 632,592 |
| 6 |
|
|
| 626,013 |
| 6 |
|
|
| 619,956 |
| 6 |
|
|
| 564,444 |
| 6 |
|
Wholesale Trade (a) |
|
| 559,638 |
| 5 |
|
|
| 523,839 |
| 5 |
|
|
| 536,791 |
| 5 |
|
|
| 578,037 |
| 6 |
|
|
| 513,086 |
| 5 |
|
Finance and Insurance |
|
| 524,836 |
| 5 |
|
|
| 460,803 |
| 4 |
|
|
| 437,547 |
| 4 |
|
|
| 501,157 |
| 5 |
|
|
| 559,092 |
| 5 |
|
Professional, Scientific, and Technical Services (a) |
|
| 439,153 |
| 4 |
|
|
| 440,727 |
| 4 |
|
|
| 433,169 |
| 4 |
|
|
| 429,637 |
| 4 |
|
|
| 356,560 |
| 3 |
|
Educational Services |
|
| 430,238 |
| 4 |
|
|
| 437,484 |
| 4 |
|
|
| 440,272 |
| 4 |
|
|
| 462,595 |
| 4 |
|
|
| 438,247 |
| 4 |
|
Other Services (except Public Administration) |
|
| 391,040 |
| 4 |
|
|
| 382,737 |
| 4 |
|
|
| 371,913 |
| 4 |
|
|
| 356,787 |
| 3 |
|
|
| 349,711 |
| 3 |
|
Accommodation and Food Services |
|
| 331,604 |
| 3 |
|
|
| 366,240 |
| 3 |
|
|
| 357,693 |
| 3 |
|
|
| 324,619 |
| 3 |
|
|
| 340,551 |
| 3 |
|
Other (a) |
|
| 918,407 |
| 9 |
|
|
| 830,527 |
| 8 |
|
|
| 857,988 |
| 9 |
|
|
| 981,206 |
| 9 |
|
|
| 966,882 |
| 10 |
|
Total commercial & industrial loans |
| $ | 10,739,155 |
| 100 | % |
| $ | 10,644,755 |
| 100 | % |
| $ | 10,521,765 |
| 100 | % |
| $ | 10,440,376 |
| 100 | % |
| $ | 10,205,443 |
| 100 | % |
(a) Certain balances within each of these industry categories may contain loans considered to be energy related lending, as our definition of energy related is based on the borrower’s source of revenue. The energy related portfolio totaled approximately $.9 billion at September 30, 2018, $1.0 billion at June 30, 2018, and $1.1 billion atAt March 31, 2018, December 31, 2017 and September 30, 2017.
At September 30, 2018,2019, commercial and industrial (“C&I”) loans, including both non-real estate and owner occupied real estate secured loans, totaled approximately $10.7$11.2 billion, or 56% of the total loan portfolio, an increase of $94$93 million, or 1%, from June 30,December 31, 2018. Included in C&I are $927 million in energy related loans, which are comprised of credits to both the exploration and production segment and the support services segment. Energy related loans comprised 4.7% of total loans at September 30, 2018, down from 12.4% in fourth quarter of 2014, the beginning of the downturn in the energy cycle, meeting our strategic target to reduce concentration of energy loans to 5% or lower. The energy portfolio is also more balancedgrowth was across the segments with 53%Company’s footprint and in support servicesmany major lines including real estate, manufacturing, retail and 47% in upstream and midstream at September 30, 2018, compared to 62% and 38%, respectively, at June 30, 2018. Third quarter 2018 activity in the energy portfolio included payoffs and paydowns of approximately $151 million, partially offset by approximately $93 million in draws on existing lines of credit. There were no energy charge-offs during the third quarter of 2018.transportation.
The Bank lends mainly to middle market and smaller commercial entities, although it participates in larger shared credit loan facilities. Shared national credits funded at September 30, 2018March 31, 2019 totaling approximately $1.8$2.1 billion, or 9%,10% of total loans, were up $77.9$96.6 million from June 30,December 31, 2018. Approximately $458$555.6 million of our shared national credits were with energy relatedenergy-related customers at September 30,March 31, 2019.
Loans to borrowers in the energy sector totaled $1.1 billion, relatively unchanged from December 31, 2018 and March 31, 2018. We intend to maintain our total energy concentration at approximately 5% while continuing to shift the mix within the portfolio to approximately one-third support services subsector and two-thirds exploration and production and midstream subsectors. At March 31, 2019, approximately $580 million, or 55%, of the portfolio was comprised of customers engaged in exploration and production, transportation, and storage activities. The remaining $483 million, or 45%, of the portfolio was comprised of customers engaged in onshore and offshore services and products to support exploration and production activities.
50
The following table provide s detail of the more significant industry concentrations for our commercial and industrial loan portfolio, which is based on NAICS codes.
|
| March 31, |
|
| December 31, |
|
| September 30, |
|
| June 30, |
|
| March 31, |
| |||||||||||||||||||||||||
|
| 2019 |
|
| 2018 |
|
| 2018 |
|
| 2018 |
|
| 2018 |
| |||||||||||||||||||||||||
|
|
|
|
|
| Pct of |
|
|
|
|
|
| Pct of |
|
|
|
|
|
| Pct of |
|
|
|
|
|
| Pct of |
|
|
|
|
|
| Pct of |
| |||||
( $ in thousands ) |
| Balance |
|
| Total |
|
| Balance |
|
| Total |
|
| Balance |
|
| Total |
|
| Balance |
|
| Total |
|
| Balance |
|
| Total |
| ||||||||||
Commercial & industrial loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate and Rental and Leasing |
| $ | 1,430,878 |
|
|
| 13 | % |
| $ | 1,349,674 |
|
|
| 12 | % |
| $ | 1,232,737 |
|
|
| 11 | % |
| $ | 1,195,278 |
|
|
| 11 | % |
| $ | 1,154,304 |
|
|
| 11 | % |
Health Care and Social Assistance |
|
| 1,083,469 |
|
|
| 10 | % |
|
| 1,120,799 |
|
|
| 10 | % |
|
| 1,135,040 |
|
|
| 11 | % |
|
| 1,152,593 |
|
|
| 11 | % |
|
| 1,159,214 |
|
|
| 11 | % |
Mining, Quarrying, and Oil and Gas Extraction (a) |
|
| 957,590 |
|
|
| 8 | % |
|
| 1,016,870 |
|
|
| 9 | % |
|
| 874,223 |
|
|
| 8 | % |
|
| 932,113 |
|
|
| 9 | % |
|
| 972,580 |
|
|
| 9 | % |
Retail Trade (a) |
|
| 932,857 |
|
|
| 8 | % |
|
| 902,783 |
|
|
| 8 | % |
|
| 930,134 |
|
|
| 9 | % |
|
| 901,020 |
|
|
| 8 | % |
|
| 869,662 |
|
|
| 8 | % |
Manufacturing (a) |
|
| 913,363 |
|
|
| 8 | % |
|
| 866,079 |
|
|
| 8 | % |
|
| 846,447 |
|
|
| 8 | % |
|
| 820,135 |
|
|
| 8 | % |
|
| 795,014 |
|
|
| 8 | % |
Public Administration |
|
| 799,237 |
|
|
| 7 | % |
|
| 814,442 |
|
|
| 7 | % |
|
| 842,199 |
|
|
| 8 | % |
|
| 866,052 |
|
|
| 8 | % |
|
| 857,736 |
|
|
| 8 | % |
Transportation and Warehousing (a) |
|
| 746,837 |
|
|
| 7 | % |
|
| 717,746 |
|
|
| 7 | % |
|
| 700,698 |
|
|
| 6 | % |
|
| 702,615 |
|
|
| 7 | % |
|
| 651,869 |
|
|
| 6 | % |
Wholesale Trade (a) |
|
| 657,685 |
|
|
| 6 | % |
|
| 602,052 |
|
|
| 6 | % |
|
| 559,638 |
|
|
| 5 | % |
|
| 523,839 |
|
|
| 5 | % |
|
| 536,791 |
|
|
| 5 | % |
Construction |
|
| 645,107 |
|
|
| 6 | % |
|
| 643,932 |
|
|
| 6 | % |
|
| 582,761 |
|
|
| 5 | % |
|
| 632,592 |
|
|
| 6 | % |
|
| 626,013 |
|
|
| 6 | % |
Finance and Insurance |
|
| 595,373 |
|
|
| 5 | % |
|
| 605,663 |
|
|
| 6 | % |
|
| 524,836 |
|
|
| 5 | % |
|
| 460,803 |
|
|
| 4 | % |
|
| 437,547 |
|
|
| 4 | % |
Other Services (except Public Administration) |
|
| 450,153 |
|
|
| 4 | % |
|
| 436,390 |
|
|
| 4 | % |
|
| 391,040 |
|
|
| 4 | % |
|
| 382,737 |
|
|
| 4 | % |
|
| 371,913 |
|
|
| 4 | % |
Professional, Scientific, and Technical Services (a) |
|
| 421,999 |
|
|
| 4 | % |
|
| 462,984 |
|
|
| 4 | % |
|
| 439,153 |
|
|
| 4 | % |
|
| 440,727 |
|
|
| 4 | % |
|
| 433,169 |
|
|
| 4 | % |
Accommodation and Food Services |
|
| 410,754 |
|
|
| 4 | % |
|
| 383,087 |
|
|
| 3 | % |
|
| 331,604 |
|
|
| 3 | % |
|
| 366,240 |
|
|
| 3 | % |
|
| 357,693 |
|
|
| 3 | % |
Educational Services |
|
| 353,803 |
|
|
| 3 | % |
|
| 359,997 |
|
|
| 3 | % |
|
| 430,238 |
|
|
| 4 | % |
|
| 437,484 |
|
|
| 4 | % |
|
| 440,272 |
|
|
| 4 | % |
Other (a) |
|
| 772,649 |
|
|
| 7 | % |
|
| 795,851 |
|
|
| 7 | % |
|
| 918,407 |
|
|
| 9 | % |
|
| 830,527 |
|
|
| 8 | % |
|
| 857,988 |
|
|
| 9 | % |
Total commercial & industrial loans |
| $ | 11,171,754 |
|
|
| 100 | % |
| $ | 11,078,349 |
|
|
| 100 | % |
| $ | 10,739,155 |
|
|
| 100 | % |
| $ | 10,644,755 |
|
|
| 100 | % |
| $ | 10,521,765 |
|
|
| 100 | % |
(a) | Certain balances within each of these industry categories may contain loans considered to be energy related lending, as our definition of energy related is based on the borrower’s source of revenue. The energy related portfolio totaled approximately $1.1 billion at March 31, 2019 and December 31, 2018, $0.9 billion at September 30, 2018, $1.0 billion at June 30, 2018, and $1.1 billion at March 31, 2018. |
Commercial real estate – income producing loans totaled approximately $2.3$2.6 billion at September 30, 2018, a decreaseMarch 31, 2019, an increase of $30.5$222 million, or 1%9%, from June 30,December 31, 2018. The decrease was related primarilyincrease reflects the transfer of loans from construction to healthcarepermanent financing, as well as new production that included increases for senior care facilities, multifamily properties and multifamilyretail properties. The following table details for the preceding five quarters the end-of-period commercial real estate – income producing loan balances by property type.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||||||
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| September 30, |
| June 30, |
| March 31, |
| December 31, |
| September 30, |
| March 31, |
|
| December 31, |
|
| September 30, |
|
| June 30, |
|
| March 31, |
| |||||||||||||||||||||||||||||||||||||||||||||
|
| 2018 |
| 2018 |
| 2018 |
| 2017 |
| 2017 |
| 2019 |
|
| 2018 |
|
| 2018 |
|
| 2018 |
|
| 2018 |
| |||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
| Pct of |
|
|
|
| Pct of |
|
|
|
| Pct of |
|
|
|
| Pct of |
|
|
|
| Pct of |
|
|
|
|
| Pct of |
|
|
|
|
|
| Pct of |
|
|
|
|
|
| Pct of |
|
|
|
|
|
| Pct of |
|
|
|
|
|
| Pct of |
| ||||||||||
($ in thousands) |
| Balance |
| Total |
| Balance |
| Total |
| Balance |
| Total |
| Balance |
| Total |
| Balance |
| Total |
| Balance |
|
| Total |
|
| Balance |
|
| Total |
|
| Balance |
|
| Total |
|
| Balance |
|
| Total |
|
| Balance |
|
| Total |
| ||||||||||||||||||||
Commercial real estate - income producing loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
| $ | 499,395 |
| 22 | % |
| $ | 502,809 |
| 22 | % |
| $ | 521,607 |
| 22 | % |
| $ | 526,929 |
| 22 | % |
| $ | 550,720 |
| 22 | % |
| $ | 542,904 |
|
|
| 21 | % |
| $ | 507,129 |
|
|
| 22 | % |
| $ | 499,395 |
|
|
| 22 | % |
| $ | 502,809 |
|
|
| 22 | % |
| $ | 521,607 |
|
|
| 22 | % |
Office |
|
| 421,965 |
| 18 |
|
| 430,319 |
| 18 |
|
|
| 436,789 |
| 18 |
|
|
| 441,539 |
| 19 |
|
|
| 472,169 |
| 19 |
|
|
| 436,819 |
|
|
| 17 | % |
|
| 444,973 |
|
|
| 19 | % |
|
| 421,965 |
|
|
| 18 | % |
|
| 430,319 |
|
|
| 18 | % |
|
| 436,789 |
|
|
| 18 | % | |
Hotel/Motel |
|
| 346,735 |
| 15 |
|
| 332,411 |
| 14 |
|
|
| 336,724 |
| 14 |
|
|
| 328,238 |
| 14 |
|
|
| 299,796 |
| 12 |
|
|
| 377,674 |
|
|
| 15 | % |
|
| 374,430 |
|
|
| 16 | % |
|
| 346,735 |
|
|
| 15 | % |
|
| 332,411 |
|
|
| 14 | % |
|
| 336,724 |
|
|
| 14 | % | |
Multifamily |
|
| 333,144 |
| 15 |
|
| 347,732 |
| 15 |
|
|
| 379,932 |
| 16 |
|
|
| 341,783 |
| 14 |
|
|
| 339,656 |
| 13 |
|
|
| 369,041 |
|
|
| 14 | % |
|
| 332,145 |
|
|
| 14 | % |
|
| 333,144 |
|
|
| 15 | % |
|
| 347,732 |
|
|
| 15 | % |
|
| 379,932 |
|
|
| 16 | % | |
Industrial |
|
| 285,292 |
| 12 |
|
| 279,041 |
| 12 |
|
|
| 270,812 |
| 11 |
|
|
| 272,133 |
| 11 |
|
|
| 327,048 |
| 13 |
|
|
| 353,804 |
|
|
| 14 | % |
|
| 311,933 |
|
|
| 13 | % |
|
| 285,292 |
|
|
| 12 | % |
|
| 279,041 |
|
|
| 12 | % |
|
| 270,812 |
|
|
| 11 | % | |
Other |
|
| 425,168 |
| 18 |
|
|
| 449,880 |
| 19 |
|
|
| 448,998 |
| 19 |
|
|
| 473,977 |
| 20 |
|
|
| 522,419 |
| 21 |
|
|
| 483,152 |
|
|
| 19 | % |
|
| 371,169 |
|
|
| 16 | % |
|
| 425,168 |
|
|
| 18 | % |
|
| 449,880 |
|
|
| 19 | % |
|
| 448,998 |
|
|
| 19 | % |
Total commercial real estate - income producing loans |
| $ | 2,311,699 |
| 100 | % |
| $ | 2,342,192 |
| 100 | % |
| $ | 2,394,862 |
| 100 | % |
| $ | 2,384,599 |
| 100 | % |
| $ | 2,511,808 |
| 100 | % |
| $ | 2,563,394 |
|
|
| 100 | % |
| $ | 2,341,779 |
|
|
| 100 | % |
| $ | 2,311,699 |
|
|
| 100 | % |
| $ | 2,342,192 |
|
|
| 100 | % |
| $ | 2,394,862 |
|
|
| 100 | % |
57
Construction and land development loans, totaling approximately $1.5$1.3 billion at September 30, 2018,March 31, 2019, decreased $208.3 million from December 31, 2018. The decrease was relatively unchangedprimarily due to the reclassification of loans from June 30, 2018.construction and land development loans to commercial real estate loans as noted above. Residential mortgages increased $66.6$23.2 million and consumer loans increased $34.2decreased $43.5 million during the thirdfirst quarter of 2018. 2019.
51
We currently expect a slight slowdown in production in the fourth quarter of 2018, with end of period fourth quarter net loan growth estimated at $200 to $225 million.
Allowance for Loan Losses and Asset Quality
The Company's total allowance for loan losses was $214.5$194.7 million at September 30, 2018March 31, 2019 virtually unchanged from June 30,December 31, 2018 and down $2.8$16.0 million from $217.3 million at Decembercompared to March 31, 2017.2018. The ratio of the allowance for loan losses to period-end loans decreased slightly to 1.10%, compared to 1.11%of 0.97% at June 30, 2018 and 1.14% at year end.March 31, 2019 was unchanged from December 31, 2018. The allowance for loan losses at March 31, 2019 compared to second quarterDecember 31, 2018 reflects a net build in the net of an $8.8 million increase in allowance for loan losses on thecommercial nonenergy portfolio of $3.0 million, partially offset by a decreasenet release of $8.8$1.7 million in the energy reserves.portfolio. The increaseconsumer and residential mortgage allowances had releases of $0.9 million and $0.2 million, respectively. The relatively flat allowance reflects the favorable impact of improvement in criticized levels and other credit metrics across most of the loan portfolios, offset by slightly elevated loss coverage ratios in the nonenergy allowance reflects increased growthcommercial portfolio as we continue to grow and diversification of this portfolio, the impactdiversify that rising interest rates may have on abilityportfolio. Energy performance continues to repaybe stable with increasing oil prices and a continued decline in criticized and nonperforming levels that, while down compared to the prior period-end, remain elevated compared to the last several years. The decline in energy reserves reflects the stabilization in crude oil prices, a sizable decline in energy exposure and a significant reduction in criticized loan balances. While there are a few problem energy credits for which we anticipate future charge-offs, management believes the allowance level is sufficient to cover that potential.quarter.
The Company’s balance of criticized commercial loans totaled $0.8 billion$584 million at September 30, 2018,March 31, 2019, down $63$41 million, or 7%, compared to June 30,December 31, 2018, with a$26 million of the decrease inattributable to the commercial nonenergy criticized loans of $12portfolio and $15 million and a decrease inattributable to the energy of $51 million.portfolio. Commercial criticized loans are down $242$500 million, or 46%, compared to December 31, 2017,first quarter of 2018, with $259 million of the decrease attributable to the energy portfolio down $193and $241 million andattributable to the commercial nonenergy down $49 million.portfolio. Criticized loans are defined as those having potential weaknesses that deserve management’s close attention (risk-rated as special mention, substandard and doubtful), including both accruing and nonaccruing loans. Our commercial nonenergy criticized portfolio, totaling $477$320 million at September 30, 2018March 31, 2019, is comprised of loans that are diversified as to both industry and geography, and the level ofgeography. Commercial nonenergy criticized loans as a percentagecomprised 2.12% of total loans is not outside of historical norms.that portfolio at March 31, 2019, compared to 2.31% at December 31, 2018 and 3.91% at March 31, 2018. As of September 30, 2018,March 31, 2019, criticized loans in the energy portfolio were $357$264 million, or approximately 39%,25% of that portfolio. Energy related loans delinquent for more than 30 days, including accrual and nonaccrual loans, totaled $71 million, or 8%, of the energy portfolio at September 30, 2018, up from $62 million, or 6%, at June 30, 2018.
Management continues to closely monitor the ability of our energy relatedenergy-related customers to service their debt, including reviews of customers’ balance sheets, leverage ratios, collateral values and other critical lending metrics. With oil prices approximating $70 per barrel, and continued stabilization in prices, we anticipate the cycle for us could end soon. We believe we are adequately reserved for losses on remaining credits, and do not expect a significant provision for any additional issues. Management maintains the estimate that net charge offs from energy related credits could be as high as $95 million over the duration of the cycle, which started in the fourth quarter of 2014. To date, we haveThe Company has recorded approximately $79$95 million in energy related net charge-offs sinceduring the latest down cycle began. See Item 7that began in our Annual Report on Form 10-K for the year ended December 31, 2017 for further discussion of our energy portfolio and its potential impact on the allowance for loan losses.late 2014.
The following table provides a breakout of the allowance for loan loss for the energy portfolio, allocated by sector, as of September 30, 2018 and December 31, 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, 2018 |
| December 31, 2017 | ||||||||||||
(in millions) |
| Outstanding Balance |
| Allocated Allowance for Loan and Lease Losses |
| Allowance for Loan and Lease Losses as a % of Loans |
| Outstanding Balance |
| Allocated Allowance for Loan and Lease Losses |
| Allowance for Loan and Lease Losses as a % of Loans | ||||
Upstream (reserve-based lending) |
| $ | 375 |
| $ | 7.6 |
| 2.0% |
| $ | 353 |
| $ | 11.4 |
| 3.2% |
Midstream |
|
| 57 |
|
| 0.7 |
| 1.2% |
|
| 52 |
|
| 0.4 |
| 0.7% |
Support - drilling |
|
| 110 |
|
| 6.3 |
| 5.7% |
|
| 121 |
|
| 10.5 |
| 8.6% |
Support - nondrilling |
|
| 385 |
|
| 35.6 |
| 9.2% |
|
| 529 |
|
| 47.9 |
| 9.1% |
Total |
| $ | 927 |
| $ | 50.2 |
| 5.4% |
| $ | 1,055 |
| $ | 70.2 |
| 6.7% |
Net charge-offscharge- offs were $6.9$17.9 million, or 0.14%0.36%, of average total loans on an annualized basis in the thirdfirst quarter of 2018, up2019, down from $5.1$28.1 million, or 0.11%,0.56% of average total loans in the secondfourth quarter of 2018. Commercial net charge-offs totaled $14.4 million in the first quarter of 2019 compared to $24.3 million in the fourth quarter of 2018. The first quarter net charge-offs included $10.1 million related to the alleged fraud associated with the DC Solar equipment finance credit. There were no energy net charge-offs during the thirdfirst quarter of 20182019 compared to a$15.8 million of net recoverycharge-offs in the second quarter of 2018 of $1.9 million. Commercial nonenergy net charge-offs were up $0.4 million to $3.2 million in thirdfourth quarter of 2018. Consumer loan net charge-offs of $4.7$3.2 million were up $1.1down $1.0 million compared to the secondfourth quarter of 2018 but were more in line withand down $3.0 million compared to the first quarter 2018. The first quarter of 2018 and fourth quarter 2017 when adjustedincluded $1.5 million of net charge-offs related to exclude Harrisonthe consumer finance subsidiary that was sold on March 9, 2018.
52
58
Finance. The mortgage portfolio continued to perform well during third quarter of 2018 with a net recovery of $1.1 million compared to net recovery of $0.3 million in second quarter of 2018.
The following table sets forth activity in the allowance for loan losses for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
|
| Three Months Ended |
| Nine Months Ended |
|
| Three Months Ended |
| ||||||||||||||||||||
|
| September 30, |
| June 30, |
| September 30, |
| September 30, |
|
| March 31, |
|
| December 31, |
|
| March 31, |
| ||||||||||
(in thousands) |
| 2018 |
| 2018 |
| 2017 |
| 2018 |
| 2017 |
|
| 2019 |
|
| 2018 |
|
| 2018 |
| ||||||||
Allowance for loan losses at beginning of period |
| $ | 214,530 |
| $ | 210,713 |
| $ | 221,865 |
| $ | 217,308 |
| $ | 229,418 |
|
| $ | 194,514 |
|
| $ | 214,550 |
|
| $ | 217,308 |
|
Loans charged-off: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial non real estate |
|
| 3,556 |
|
| 2,510 |
|
| 9,029 |
|
| 15,401 |
|
| 35,247 |
|
|
| 16,344 |
|
|
| 24,668 |
|
|
| 9,335 |
|
Commercial real estate - owner-occupied |
|
| 526 |
|
| 5,953 |
|
| 10 |
|
| 7,330 |
|
| 527 |
|
|
| — |
|
|
| 729 |
|
|
| 851 |
|
Total commercial & industrial |
|
| 4,082 |
|
| 8,463 |
|
| 9,039 |
|
| 22,731 |
|
| 35,774 |
|
|
| 16,344 |
|
|
| 25,397 |
|
|
| 10,186 |
|
Commercial real estate - income producing |
|
| 29 |
|
| 1,604 |
|
| — |
|
| 1,633 |
|
| 160 |
|
|
| 10 |
|
|
| - |
|
|
| — |
|
Construction and land development |
|
| 45 |
|
| 210 |
|
| 498 |
|
| 265 |
|
| 670 |
|
|
| — |
|
|
| 69 |
|
|
| 10 |
|
Total commercial |
|
| 4,156 |
|
| 10,277 |
|
| 9,537 |
|
| 24,629 |
|
| 36,604 |
|
|
| 16,354 |
|
|
| 25,466 |
|
|
| 10,196 |
|
Residential mortgages |
|
| 87 |
|
| 306 |
|
| 1,709 |
|
| 585 |
|
| 2,485 |
|
|
| 406 |
|
|
| 29 |
|
|
| 192 |
|
Consumer |
|
| 5,635 |
|
| 4,916 |
|
| 7,584 |
|
| 18,599 |
|
| 22,844 |
|
|
| 4,231 |
|
|
| 5,314 |
|
|
| 8,048 |
|
Total charge-offs |
|
| 9,878 |
|
| 15,499 |
|
| 18,830 |
|
| 43,813 |
|
| 61,933 |
|
|
| 20,991 |
|
|
| 30,809 |
|
|
| 18,436 |
|
Commercial non real estate |
|
| 758 |
|
| 8,330 |
|
| 4,624 |
|
| 13,234 |
|
| 6,442 |
|
|
| 1,926 |
|
|
| 1,151 |
|
|
| 4,146 |
|
Commercial real estate - owner-occupied |
|
| 7 |
|
| 187 |
|
| 111 |
|
| 282 |
|
| 447 |
|
|
| 17 |
|
|
| 35 |
|
|
| 88 |
|
Total commercial & industrial |
|
| 765 |
|
| 8,517 |
|
| 4,735 |
|
| 13,516 |
|
| 6,889 |
|
|
| 1,943 |
|
|
| 1,186 |
|
|
| 4,234 |
|
Commercial real estate - income producing |
|
| 156 |
|
| 2 |
|
| 257 |
|
| 221 |
|
| 655 |
|
|
| 2 |
|
|
| - |
|
|
| 63 |
|
Construction and land development |
|
| 30 |
|
| 9 |
|
| 295 |
|
| 68 |
|
| 1,050 |
|
|
| 11 |
|
|
| 28 |
|
|
| 29 |
|
Total commercial |
|
| 951 |
|
| 8,528 |
|
| 5,287 |
|
| 13,805 |
|
| 8,594 |
|
|
| 1,956 |
|
|
| 1,214 |
|
|
| 4,326 |
|
Residential mortgages |
|
| 1,142 |
|
| 596 |
|
| 58 |
|
| 1,854 |
|
| 339 |
|
|
| 162 |
|
|
| 325 |
|
|
| 116 |
|
Consumer |
|
| 933 |
|
| 1,301 |
|
| 1,702 |
|
| 4,028 |
|
| 5,248 |
|
|
| 1,004 |
|
|
| 1,134 |
|
|
| 1,794 |
|
Total recoveries |
|
| 3,026 |
|
| 10,425 |
|
| 7,047 |
|
| 19,687 |
|
| 14,181 |
|
|
| 3,122 |
|
|
| 2,673 |
|
|
| 6,236 |
|
Total net charge-offs |
|
| 6,852 |
|
| 5,074 |
|
| 11,783 |
|
| 24,126 |
|
| 47,752 |
|
|
| 17,869 |
|
|
| 28,136 |
|
|
| 12,200 |
|
Provision for loan losses |
|
| 6,872 |
|
| 8,891 |
|
| 13,040 |
|
| 28,016 |
|
| 43,982 |
|
|
| 18,043 |
|
|
| 8,100 |
|
|
| 12,253 |
|
Decrease in allowance as a result of sale of subsidiary |
|
| — |
|
| — |
|
| — |
|
| (6,648) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (6,648 | ) |
Increase (decrease) in FDIC loss share receivable |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (2,526) |
| ||||||||||||
Allowance for loan losses at end of period |
| $ | 214,550 |
| $ | 214,530 |
| $ | 223,122 |
| $ | 214,550 |
| $ | 223,122 |
|
| $ | 194,688 |
|
| $ | 194,514 |
|
| $ | 210,713 |
|
Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross charge-offs to average loans |
|
| 0.20 | % |
| 0.32 | % |
| 0.40 | % |
| 0.30 | % |
| 0.46 | % |
|
| 0.42 | % |
|
| 0.62 | % |
|
| 0.39 | % |
Recoveries to average loans |
|
| 0.06 | % |
| 0.22 | % |
| 0.15 | % |
| 0.14 | % |
| 0.10 | % |
|
| 0.06 | % |
|
| 0.05 | % |
|
| 0.13 | % |
Net charge-offs to average loans |
|
| 0.14 | % |
| 0.11 | % |
| 0.25 | % |
| 0.17 | % |
| 0.35 | % |
|
| 0.36 | % |
|
| 0.56 | % |
|
| 0.26 | % |
Allowance for loan losses to period-end loans |
|
| 1.10 | % |
| 1.11 | % |
| 1.19 | % |
| 1.10 | % |
| 1.19 | % |
|
| 0.97 | % |
|
| 0.97 | % |
|
| 1.10 | % |
53
59
The following table sets forth nonperforming assets by type for the periods indicated, consisting of nonaccrual loans, troubled debt restructurings and foreclosed and surplus ORE and other foreclosed assets. Loans past due 90 days or more and still accruing are also disclosed.
|
|
|
|
|
|
| |||||||||
|
|
|
|
|
|
| |||||||||
|
| September 30, |
| December 31, |
|
| March 31, |
|
| December 31, |
| ||||
(in thousands) |
| 2018 |
| 2017 |
|
| 2019 |
|
| 2018 |
| ||||
Loans accounted for on a nonaccrual basis: (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial non-real estate |
| $ | 35,334 |
| $ | 63,387 |
|
| $ | 22,933 |
|
| $ | 26,617 |
|
Commercial non-real estate - restructured |
|
| 91,095 |
|
| 89,476 |
|
|
| 104,060 |
|
|
| 84,036 |
|
Total commercial non-real estate |
|
| 126,429 |
|
| 152,863 |
|
|
| 126,993 |
|
|
| 110,653 |
|
Commercial real estate - owner occupied |
|
| 20,501 |
|
| 23,549 |
|
|
| 14,104 |
|
|
| 16,682 |
|
Commercial real estate - owner-occupied - restructured |
|
| 218 |
|
| 2,440 |
|
|
| 362 |
|
|
| 213 |
|
Total commercial real estate - owner-occupied |
|
| 20,719 |
|
| 25,989 |
|
|
| 14,466 |
|
|
| 16,895 |
|
Commercial real estate - income producing |
|
| 3,656 |
|
| 9,054 |
|
|
| 4,205 |
|
|
| 4,991 |
|
Commercial real estate - income producing - restructured |
|
| 285 |
|
| 5,520 |
|
|
| — |
|
|
| — |
|
Total commercial real estate - income producing |
|
| 3,941 |
|
| 14,574 |
|
|
| 4,205 |
|
|
| 4,991 |
|
Construction and land development |
|
| 3,237 |
|
| 3,791 |
|
|
| 2,002 |
|
|
| 2,134 |
|
Construction and land development - restructured |
|
| 12 |
|
| 16 |
|
|
| 11 |
|
|
| 12 |
|
Total construction and land development |
|
| 3,249 |
|
| 3,807 |
|
|
| 2,013 |
|
|
| 2,146 |
|
Residential mortgage |
|
| 30,608 |
|
| 38,703 |
|
|
| 37,849 |
|
|
| 34,594 |
|
Residential mortgage - restructured |
|
| 1,124 |
|
| 1,777 |
|
|
| 1,426 |
|
|
| 1,272 |
|
Total residential mortgage |
|
| 31,732 |
|
| 40,480 |
|
|
| 39,275 |
|
|
| 35,866 |
|
Consumer |
|
| 15,576 |
|
| 15,087 |
|
|
| 17,879 |
|
|
| 16,744 |
|
Consumer - restructured |
|
| — |
|
| — |
|
|
| — |
|
|
| — |
|
Total consumer |
|
| 15,576 |
|
| 15,087 |
|
|
| 17,879 |
|
|
| 16,744 |
|
Total nonaccrual loans |
| $ | 201,646 |
| $ | 252,800 |
|
| $ | 204,831 |
|
| $ | 187,295 |
|
Restructured loans - still accruing: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial non-real estate |
| $ | 151,613 |
| $ | 114,224 |
|
| $ | 109,872 |
|
| $ | 130,075 |
|
Commercial real estate - owner occupied |
|
| 8,827 |
|
| 1,578 |
|
|
| 5,928 |
|
|
| 7,286 |
|
Commercial real estate - income producing |
|
| 401 |
|
| 3,827 |
|
|
| 391 |
|
|
| 398 |
|
Construction and land development |
|
| — |
|
| — |
|
|
| 9 |
|
|
| 9 |
|
Residential mortgage |
|
| 737 |
|
| 480 |
|
|
| 341 |
|
|
| 546 |
|
Consumer |
|
| 611 |
|
| 384 |
|
|
| 1,037 |
|
|
| 728 |
|
Total restructured loans - still accruing |
|
| 162,189 |
|
| 120,493 |
|
|
| 117,578 |
|
|
| 139,042 |
|
Total nonperforming loans |
|
| 363,835 |
|
| 373,293 |
|
|
| 322,409 |
|
|
| 326,337 |
|
ORE and foreclosed assets |
|
| 27,475 |
|
| 27,542 |
|
|
| 27,148 |
|
|
| 26,270 |
|
Total nonperforming assets (b) |
| $ | 391,310 |
| $ | 400,835 |
|
| $ | 349,557 |
|
| $ | 352,607 |
|
Loans 90 days past due still accruing to loans (c) |
| $ | 24,460 |
| $ | 27,766 |
|
| $ | 20,308 |
|
| $ | 5,589 |
|
Total restructured loans |
| $ | 254,923 |
| $ | 219,722 |
|
| $ | 223,437 |
|
| $ | 224,575 |
|
Ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Nonperforming assets to loans plus ORE and foreclosed assets |
|
| 2.00 | % |
| 2.11 | % |
|
| 1.74 | % |
|
| 1.76 | % |
Allowance for loan losses to nonperforming loans and accruing loans 90 days past due |
|
| 55.25 | % |
| 54.18 | % |
|
| 56.81 | % |
|
| 58.60 | % |
Loans 90 days past due still accruing to loans |
|
| 0.13 | % |
| 0.15 | % | ||||||||
Loans 90 days past due still accruing to loans (c) |
|
| 0.10 | % |
|
| 0.03 | % |
(a) | Nonaccrual loans and accruing loans past due 90 days or more do not include purchased credit impaired loans which were written down to fair value upon acquisition and accrete interest income over the remaining life of the loan. |
(b) | Includes total nonaccrual loans, total restructured loans - still accruing and ORE and foreclosed assets. |
(c) | Excludes 90+ accruing TDR already reflected as a restructured accruing |
Nonperforming assets totaled $391.3$349.6 million at September 30, 2018,March 31, 2019, down $25.2 million from June 30, 2018 and $9.5$3.1 million from December 31, 2017, but up $3.72018 and $118.8 million from September 30, 2017.March 31, 2018. Nonperforming loans decreased approximately $30.4$3.9 million compared to June 30,December 31, 2018 with a continued reduction in energy nonperforming loans of $15 million, partially offset by an increase in commercial nonenergy nonperforming loans of $11 million. Our nonperforming loans included $117.8 million of accruing restructured loans, or approximately one-third of total nonperforming loans, most within energy credits that endured challenges during the energy portfolio down $17.5 million and nonenergy down $12.9 million.cycle. Nonperforming assets as a percent of total loans, ORE and other foreclosed assets was 2.00%1.74% at September 30, 2018,March 31, 2019, down 15 bps from June 30, 2018, 112 bps from December 31, 2017,2018 and 671 bps from September 30, 2017. March 31, 2018.
54
60
Short-term liquidity investments, including interest-bearing bank deposits and federal funds sold, were $163.8 million at March 31, 2019. This represents an increase of $52.7 million from December 31, 2018 and an increase of $102.2 million from March 31, 2018. These assets are volatile on a daily basis depending upon movement in customer loan and deposit accounts. Average short-term investments of $216.2 million for the first quarter of 2019 were up $10.4 million compared to the fourth quarter of 2018, and up $67.9 million compared to the first quarter of 2018. Short-term liquidity assets are held to ensure funds are available to meet the cash flow needs of both borrowers and depositors. Short-term liquidity investments, including interest-bearing bank deposits and federal funds sold, were $108.1 million at September 30, 2018. This represents an increase of $3.9 million from June 30, 2018 and a decrease of $3.7 million compared to September 30, 2017. These assets are highly volatile on a daily basis depending upon movement in customer loan and deposit accounts. Average short-term investments of $155.3 million for the third quarter of 2018 were up $12.2 million compared to the second quarter of 2018, and down $39.3 million compared to the third quarter of 2017. See the Liquidity section earlier in this Item for further discussion regarding the management of our short-term investment portfolio and the impact upon our liquidity in general.
Deposits
Total deposits were $22.4$23.4 billion at September 30, 2018,March 31, 2019, up $182.5$230.1 million, or 1%, from June 30,December 31, 2018, and up $883.9$894.6 million, or 4%, from September 30, 2017.March 31, 2018. Average deposits for the thirdfirst quarter of 20182019 were $22.0$23.1 billion, down $79.9 million, or less than 1%, from the second quarter of 2018 and up $671.7$616.0 million, or 3%, from the thirdfourth quarter of 2017.
2018 and up $1.1 billion, or 5%, from the first quarter of 2018.
Noninterest-bearing demand deposits were $8.1$8.2 billion at September 30, 2018,March 31, 2019, down $25.3$340.4 million, or less than4%, compared to December 31, 2018, and down $71.4 million, or 1%, linked quarter, and up $244.1 million, or 3%, year over year.compared to March 31, 2018. Noninterest-bearing demand deposits comprised 36%35% of total deposits at September 30, 2018,March 31, 2019, and 37% at June 30,December 31, 2018 and September 30, 2017.
March 31, 2018.
Interest-bearing transaction and savings accounts of $8.0$8.2 billion at September 30, 2018March 31, 2019 increased $260.9$224 million, or 3%, compared to June 30,December 31, 2018 and increased $165.4 million, or 2%, compared to March 31, 2018, with the year-over-year increase mainly dueattributable to $229 million of customer deposits related toassumed in the trust and asset management acquisition, and increased $78.9 million, or 1%, compared to September 30, 2017. acquisition.
Interest-bearing public fund deposits totaled $2.6$3.2 billion at September 30, 2018, down $241March 31, 2019, up $223.1 million, or 8%7%, from June 30,December 31, 2018, consistent with seasonal trends,primarily due to both new and down $148.2enhanced business relationships, and up $121.6 million, or 5%4%, compared to September 30, 2017.March 31, 2018. Time deposits other than public funds totaled $3.7 billion at September 30, 2018March 31, 2019 up $187.8$123.3 million from June 30,December 31, 2018, driven by promotional certificate of deposit offers across our markets.markets and a $21.2 million increase in brokered certificates of deposit. Time deposits other than public funds waswere up $709.1$679.0 million, or 24%22.0%, compared to September 30, 2017,March 31, 2018, due to both increasedlargely an increase in retail and brokered deposits.certificates of deposit.
Short-Term Borrowings
At September 30, 2018,March 31, 2019, short-term borrowings totaled $2.3$1.4 billion, down $37.5$200.4 million from June 30,December 31, 2018, as FHLB borrowings decreased $50.3$250.1 million and securities sold under repurchase agreements decreased $37.0 million, and federal funds purchased increased $49.8$49.7 million. Short-term borrowings increased $539.5decreased $63.4 million from September 30, 2017.March 31, 2018.
Average short-term borrowings of $2.6$1.7 billion in the thirdfirst quarter of 20182019 were up $620.8down $645.4 million, or 31%28%, compared to the secondfourth quarter of 2018, and up $700.8down $138.1 million, or 37%8%, compared to the thirdfirst quarter of 2017. 2018. The decrease compared to prior periods was due in part to a portfolio restructure late in the fourth quarter where proceeds from the sale of loans and securities were used to pay down a portion of FHLB borrowings.
Customer repurchase agreements and FHLB borrowings are the major sources of short-term borrowings. Customer repurchase agreements are offered mainly to commercial customers to assist them with their cash management strategies or to provide a temporary investment vehicle for their excess liquidity pending redeployment for corporate or investment purposes. While customer repurchase agreements provide a recurring source of funds to the Bank, the amounts available over time can be volatile.will vary. FHLB borrowings are funds from the Federal Home Loan Bank that are collateralized by single family and commercial real estate loans included in the Bank’s loan portfolio, subject to specific criteria.
Long-Term DebtOperating Leases
At September 30, 2018, long-term debt totaled $215.9Effective January 1, 2019, the Company adopted the amended provisions of Financial Accounting Standards Codification Topic 842, “Leases,” using the modified retrospective approach, impacting the reporting and disclosures for operating leases. The core principle of Topic 842 is that a lessee should recognize in the statement of financial position a liability representing the present value of future lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset over the lease term, as well as the disclosure of key information about operating leasing arrangements. Upon adoption, the Company recorded a gross-up of assets and liabilities in its consolidated balance sheet, with approximately $116 million down $50.1for right-of-use assets and $131 million from June 30, 2018. The decreaseof lease payment obligations offset by the elimination of $15 million of existing lease incentive and other deferred rent liabilities. Accounting for leases in long-term debt duringaccordance with Topic 842 has not had a material impact upon our consolidated results of operations, and is not expected to in future periods. Refer to Note 5 – Operating Leases for further information related to the third quarter 2018 reflects a $50 million early payoff of the Parent’s term scheduled to mature in December 2018.operating lease accounting policy, practical expedient elections for adoption and operating leasing information at adoption.
55
61
OFF-BALANCE SHEET ARRANGEMENTS
Loan Commitments and Letters of Credit
In the normal course of business, the Bank enters into financial instruments, such as commitments to extend credit and letters of credit, to meet the financing needs of their customers. Such instruments are not reflected in the accompanying consolidated financial statements until they are funded, although they expose the Bank to varying degrees of credit risk and interest rate risk in much the same way as funded loans. Under regulatory capital guidelines, the Company and Bank must include unfunded commitments meeting certain criteria in risk-weighted capital calculations.
Commitments to extend credit include revolving commercial credit lines, nonrevolving loan commitments issued mainly to finance the acquisition and development or construction of real property or equipment, and credit card and personal credit lines. The availability of funds under commercial credit lines and loan commitments generally depends on whether the borrower continues to meet credit standards established in the underlying contract and has not violated other contractual conditions. Loan commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee by the borrower. Credit card and personal credit lines are generally subject to cancellation if the borrower’s credit quality deteriorates. A number of commercial and personal credit lines are used only partially or, in some cases, not at all before they expire, and the total commitment amounts do not necessarily represent future cash requirements of the Company.
A substantial majority of the letters of credit are standby agreements that obligate the Bank to fulfill a customer’s financial commitments to a third party if the customer is unable to perform. The Bank issues standby letters of credit primarily to provide credit enhancement to its customers’ other commercial or public financing arrangements and to help them demonstrate financial capacity to vendors of essential goods and services.
The contract amounts of these instruments reflect the Company's exposure to credit risk. The Company undertakes the same credit evaluation in making loan commitments and assuming conditional obligations as it does for on-balance sheet instruments and may require collateral or other credit support.
The following table shows the commitments to extend credit and letters of credit at September 30, 2018March 31, 2019 according to expiration date.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
|
|
|
|
| Expiration Date | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Expiration Date |
| |||||||||||||
|
|
|
|
| Less than |
| 1-3 |
| 3-5 |
| More than |
|
|
|
|
| Less than |
|
| 1-3 |
|
| 3-5 |
|
| More than |
| ||||||||
(in thousands) |
| Total |
| 1 year |
| years |
| years |
| 5 years |
| Total |
|
| 1 year |
|
| years |
|
| years |
|
| 5 years |
| ||||||||||
Commitments to extend credit |
| $ | 7,212,886 |
| $ | 2,963,452 |
| $ | 1,414,145 |
| $ | 1,507,202 |
| $ | 1,328,087 |
| $ | 7,198,032 |
|
| $ | 3,275,846 |
|
| $ | 1,543,306 |
|
| $ | 1,456,399 |
|
| $ | 922,481 |
|
Letters of credit |
|
| 353,490 |
|
| 266,377 |
|
| 36,895 |
|
| 50,218 |
|
| — |
|
| 336,419 |
|
|
| 250,652 |
|
|
| 35,805 |
|
|
| 49,962 |
|
|
| — |
|
Total |
| $ | 7,566,376 |
| $ | 3,229,829 |
| $ | 1,451,040 |
| $ | 1,557,420 |
| $ | 1,328,087 |
| $ | 7,534,451 |
|
| $ | 3,526,498 |
|
| $ | 1,579,111 |
|
| $ | 1,506,361 |
|
| $ | 922,481 |
|
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
There were no material changes or developments with respect to methodologies that the Company uses when applying what management believes are critical accounting policies and developing critical accounting estimates as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2017. 2018.
The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and with those generally practiced within the banking industry which require management to make estimates and assumptions about future events. Estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, and the resulting estimates form the basis for making judgments about the carrying values of certain assets and liabilities not readily apparent from other sources. Actual results could differ significantly from those estimates.
NEW ACCOUNTING PRONOUNCEMENTS
Refer to Note 16 to our Consolidated Financial Statements included elsewhere in this report.
56
62
Item 3. Quantitative and QualitativeQualitative Disclosures About Market Risk
The Company’s net income is materially dependent on net interest income. The Company’s primary market risk is interest rate risk which stems from uncertainty with respect to absolute and relative levels of future market interest rates that affect financial products and services. In order to manage the exposures to interest rate risk, management measures the sensitivity of net interest income and cash flows under various market interest rate scenarios, establishes interest rate risk management policies and implements asset/liability management strategies designed to produce a relatively stable net interest margin under varying rate environments.
The Company measures itsfollowing table presents an analysis of our interest rate sensitivity primarilyrisk as measured by running variousthe estimated changes in net interest income simulations. The Company’s balance sheet is asset sensitive over a two-year period due to a larger volume of rate sensitive assets than rate sensitive liabilities. The model measures annual net interest income sensitivity relative to a base case scenario and incorporates assumptions regarding balance sheet growth and the mix of earning assets and funding sources as well as pricing, repricing and maturity characteristics of the existing and projected balance sheet.
The table below presents the results of simulations run as of September 30, 2018 for year 1 and year 2, assuming the indicatedresulting from an instantaneous and sustained parallel shift in rates at March 31, 2019. Shifts are measured in 100 basis point increments in a range from -500 to +500 basis points from base case, with -200 through +300 basis points presented in the yield curve attable below. Our interest rate sensitivity modeling incorporates a number of assumptions including loan and deposit repricing characteristics, the measurement date.rate of loan prepayments and other factors. The results demonstrate an increasebase scenario assumes that the current interest rate environment is held constant over a 24-month forecast period and is the scenario to which all others are compared in order to measure the change in net interest income. Policy limits on the change in net interest income as rates riseunder a variety of interest rate scenarios are approved by the Board. All policy scenarios assume a static volume forecast where the balance sheet is held constant, although other scenarios are modeled.
|
| Estimated Increase |
| |||||
|
| (Decrease) in NII |
| |||||
Change in Interest Rates |
| Year 1 |
|
| Year 2 |
| ||
(basis points) |
|
|
|
|
|
|
|
|
-200 |
|
| (9.96 | )% |
|
| (13.82 | )% |
-100 |
|
| (4.27 | )% |
|
| (5.69 | )% |
+100 |
|
| 3.10 | % |
|
| 3.92 | % |
+200 |
|
| 5.77 | % |
|
| 7.13 | % |
+300 |
|
| 8.12 | % |
|
| 9.80 | % |
The results indicate a general asset sensitivity across most scenarios driven primarily by repricing in variable rate loans and a decline should rates fall as comparedfunding mix which is composed of material volumes of non-interest bearing and lower rate sensitive deposits. When deemed prudent, management has taken actions to mitigate exposure to interest rate risk with on- or off-balance sheet financial instruments and intends to do so in the stablefuture. Possible actions include, but are not limited to, changes in the pricing of loan and deposit products, modifying the composition of earning assets and interest-bearing liabilities, and adding to, modifying or terminating existing interest rate environment assumedswap agreements or other financial instruments used for the base case.interest rate risk management purposes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Estimated Increase | ||||
|
| (Decrease) in NII | ||||
Change in Interest Rates |
| Year 1 |
| Year 2 | ||
(basis points) |
|
|
|
|
|
|
- 100 |
| (2.45) | % |
| (3.51) | % |
+100 |
| 1.71 | % |
| 2.50 | % |
+200 |
| 3.04 | % |
| 4.43 | % |
+300 |
| 4.13 | % |
| 5.86 | % |
Note: DecreaseEven if interest rates change in the designated amounts, there can be no assurance that our assets and liabilities would perform as anticipated. Additionally, a change in the U.S. Treasury rates in the designated amounts accompanied by a change in the shape of the U.S. Treasury yield curve would cause significantly different changes to net interest income than indicated above. Strategic management of our balance sheet and earnings is fluid and would be adjusted to accommodate these movements. As with any method of measuring interest rate risk, certain shortcomings are inherent in the methods of analysis presented above. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Certain assets such as adjustable-rate loans have features which restrict changes in interest rates limitedon a short-term basis and over the life of the asset. Also, the ability of many borrowers to 100 basis pointsservice their debt may decrease in the currentevent of an interest rate environmentincrease. We consider all of these factors in monitoring exposure to interest rate risk.
The foregoing disclosures related to our market risk should be read in conjunction with our audited consolidated financial statements, related notes and management’s discussion and analysis included in our Annual Report on Form 10-K for the year ended December 31, 2017.2018.
Item 4. Controls and Procedures
In connection with the preparation of this Quarterly Report on Form 10-Q, an evaluation was carried out by the Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2018,March 31, 2019, the Company’s disclosure controls and procedures were effective.
57
Our management, including the Chief Executive Officer and Chief Financial Officer, identified no change in our internal control over financial reporting that occurred during the three month period ended September 30, 2018,March 31, 2019, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
58
63
PART II
. OTHERPART II. OTHER INFORMATION
The Company, including subsidiaries, is party to various legal proceedings arising in the ordinary course of business. We do not believe that loss contingencies, if any, arising from pending litigation and regulatory matters will have a material adverse effect on our consolidated financial position or liquidity.
The Company disclosed risk factors in its Annual Report on Form 10-K for the year ended December 31, 2017.2018. The risks described may not be the only risks facing us. Additional risks and uncertainties not currently known to us or that are currently considered to not be material also may materially adversely affect our business, financial condition, and/or operating results. The following risk factor regarding cybersecurity matters has been included in this Quarterly Report on Form 10-Q in response to the SEC’s Statement and Guidance on Public Company Cybersecurity Disclosures published on February 26, 2018.
Our operational and communications systems and infrastructure may fail or may be the subject of a breach or cyber-attack that, if successful, could adversely affect our business and disrupt business continuity.
We depend on our ability to process, record and monitor a large number of client transactions and to communicate with clients and other institutions on a continuous basis. As client, industry, public and regulatory expectations regarding operational and information security have increased, our operational systems and infrastructure continue to be safeguarded and monitored for potential failures, disruptions and breakdowns, whether as a result of events beyond our control or otherwise.
Our business, financial, accounting, data processing, or other operating systems and facilities may stop operating properly or become disabled or damaged as a result of a number of factors, including events that are wholly or partially beyond our control. For example, there could be sudden increases in client transaction volume; electrical or telecommunications outages; natural disasters such as earthquakes, tornadoes, floods, and hurricanes; disease pandemics; events arising from local or larger scale political or social matters, including terrorist acts; occurrences of employee error, fraud, or malfeasance; and, as described below, cyber-attacks.
Although we have business continuity plans and other safeguards in place, our operations and communications may be adversely affected by significant and widespread disruption to our systems and infrastructure that support our businesses and clients. While we continue to evolve and modify our business continuity plans, there can be no assurance in an escalating threat environment that they will be effective in avoiding disruption and business impacts. Our insurance may not be adequate to compensate us for all resulting losses, and the cost to obtain adequate coverage may increase for us or the industry.
Security risks for financial institutions such as ours have dramatically increased in recent years, in part because of the proliferation of new technologies, the use of the internet and telecommunications technologies to conduct financial transactions, and the increased sophistication, resources and activities of hackers, terrorists, activists, organized crime, and other external parties, including nation state actors. In addition, clients may use devices or software to access our products and services that are beyond our control environment, which may provide additional avenues for attackers to gain access to confidential information. Although we have information security procedures and controls in place, our technologies, systems, networks, and clients’ devices and software may become the target of cyber-attacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss, change or destruction of our or our clients’ confidential, proprietary and other information (including personal identifying information of individuals), or otherwise disrupt our or our clients’ or other third parties’ business operations. Other U.S. financial institutions and financial service companies have reported breaches in the security of their websites or other systems, including attempts to shut down access to their networks and systems in an attempt to extract compensation from them to regain control. Financial institutions have experienced distributed denial-of-service attacks, a sophisticated and targeted attack intended to disable or degrade internet service or to sabotage systems.
We and others in our industry are regularly the subject of attempts by attackers to gain unauthorized access to our networks, systems, and data, or to obtain, change, or destroy confidential data (including personal identifying information of individuals) through a variety of means, including computer viruses, malware, and phishing. In the future, these attacks may result in unauthorized individuals obtaining access to our confidential information or that of our clients, or otherwise accessing, damaging, or disrupting our systems or infrastructure.
We are continuously enhancing our controls, processes and practices designed to protect our systems, computers, software, data and networks from attack, damage or unauthorized access. This continued enhancement will require us to expend additional resources, including to investigate and remediate any information security vulnerabilities that may be detected. Despite our ongoing investments in security resources, talent, and business practices, we are unable to assure that security measures will be effective.
If our systems and infrastructure were to be breached, damaged, or disrupted, or if we were to experience a loss of our confidential information or that of our clients, we could be subject to serious negative consequences, including disruption of our operations,
64
damage to our reputation, a loss of trust in us on the part of our clients, vendors or other counterparties, client attrition, reimbursement or other costs, increased compliance costs, significant litigation exposure and legal liability, or regulatory fines, penalties or intervention. Any of these could materially and adversely affect our results of operations, our financial condition, and/or our share price.
Item 2.2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
(a) Exhibits:
Exhibit Number |
| Description |
| Filed Herewith |
| Form |
| Exhibit |
| Filing Date |
3.1 |
|
|
|
| 8-K |
| 3.1 |
| 5/24/2018 | |
3.2 |
|
|
|
| 8-K |
| 3.2 |
| 5/24/2018 | |
31.1 |
|
| X |
|
|
|
|
|
| |
31.2 |
|
| X |
|
|
|
|
|
| |
32.1 |
|
| X |
|
|
|
|
|
| |
32.2 |
|
| X |
|
|
|
|
|
| |
101 |
| XBRL Interactive Data |
| X |
|
|
|
|
|
|
59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exhibit |
|
|
| Filed |
| Incorporated by Reference | ||||
Number |
| Description |
| Herewith |
| Form |
| Exhibit |
| Filing Date |
3.1 |
|
|
|
| 8-K |
| 3.1 |
| 5/24/2018 | |
3.2 |
|
|
|
| 8-K |
| 3.2 |
| 5/24/2018 | |
*10.1 |
|
| X |
|
|
|
|
|
| |
31.1 |
| Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| X |
|
|
|
|
|
|
31.2 |
| Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| X |
|
|
|
|
|
|
32.1 |
| Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| X |
|
|
|
|
|
|
32.2 |
| Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| X |
|
|
|
|
|
|
101 |
| XBRL Interactive Data |
| X |
|
|
|
|
|
|
* Compensatory plan or arrangement
65
TURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Hancock Whitney Corporation | ||||
|
|
| ||
By: |
| /s/ John M. Hairston | ||
|
| John M. Hairston | ||
|
| President & Chief Executive Officer | ||
|
| (Principal Executive Officer) | ||
|
|
| ||
|
| /s/ Michael M. Achary | ||
|
| Michael M. Achary | ||
|
| Senior Executive Vice President & Chief Financial Officer (Principal Financial Officer) | ||
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| /s/ Stephen E. Barker | ||
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| Stephen E. Barker | ||
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| Executive Vice President & Chief Accounting Officer
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May 7, 2019 |
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