WASHINGTON,
FORM 10-Q
Commission File Number 0-15572
North Carolina56-1421916North Carolina 56-1421916 (State or Other Jurisdiction of (I.R.S. EmployerIncorporation or Organization) (I.R.S. Employer Identification Number) 300 SW Broad St., Southern Pines, North Carolina 28387 (Address of Principal Executive Offices) (Zip Code) (Registrant's telephone number, including area code) (910) 246-2500 Title of each class Trading Symbol Name of each exchange on which registered: Common Stock, No Par Value FBNC The Nasdaq Global Select Market xYESoNO☒ Yes ☐ Noand posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).xYESoNO☒ Yes ☐ Noor a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one)oLarge Accelerated Filer xAccelerated Filer oNon-Accelerated Filer oSmaller Reporting CompanyIndicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter.oEmerging growth companyLarge Accelerated Filer ☒ Accelerated Filer ☐ Non-Accelerated Filer ☐ Smaller Reporting Company ☐ Emerging growth company ☐ o☐oYESxNO☐ Yes ☒ No20172020 was 29,643,990.28,630,058.PagePage 8957595959606062conditions.conditions, including the impact of the current pandemic. For additional information about factors that could affect the matters discussed in this paragraph, see the “Risk Factors” section of our 20162019 Annual Report on Form 10-K.10-K and Item 1A of Part II of this report.
($ in thousands-unaudited) | September 30, 2017 | December 31, 2016 (audited) | September 30, 2016 | |||||||||
ASSETS | ||||||||||||
Cash and due from banks, noninterest-bearing | $ | 82,758 | 71,645 | 64,145 | ||||||||
Due from banks, interest-bearing | 326,089 | 234,348 | 217,188 | |||||||||
Total cash and cash equivalents | 408,847 | 305,993 | 281,333 | |||||||||
Securities available for sale | 198,924 | 199,329 | 199,156 | |||||||||
Securities held to maturity (fair values of $124,878, $130,195, and $139,514) | 123,156 | 129,713 | 135,808 | |||||||||
Presold mortgages in process of settlement | 17,426 | 2,116 | 4,094 | |||||||||
Loans | 3,429,755 | 2,710,712 | 2,651,459 | |||||||||
Allowance for loan losses | (24,593 | ) | (23,781 | ) | (24,575 | ) | ||||||
Net loans | 3,405,162 | 2,686,931 | 2,626,884 | |||||||||
Premises and equipment | 95,762 | 75,351 | 76,731 | |||||||||
Accrued interest receivable | 11,445 | 9,286 | 8,785 | |||||||||
Goodwill | 144,667 | 75,042 | 75,392 | |||||||||
Other intangible assets | 15,634 | 4,433 | 4,603 | |||||||||
Foreclosed real estate | 9,356 | 9,532 | 10,103 | |||||||||
Bank-owned life insurance | 88,081 | 74,138 | 73,613 | |||||||||
Other assets | 72,687 | 42,998 | 40,978 | |||||||||
Total assets | $ | 4,591,147 | 3,614,862 | 3,537,480 | ||||||||
LIABILITIES | ||||||||||||
Deposits: Noninterest bearing checking accounts | $ | 1,016,947 | 756,003 | 749,256 | ||||||||
Interest bearing checking accounts | 683,113 | 635,431 | 593,065 | |||||||||
Money market accounts | 795,572 | 685,331 | 659,741 | |||||||||
Savings accounts | 396,192 | 209,074 | 207,494 | |||||||||
Time deposits of $100,000 or more | 517,770 | 422,687 | 451,622 | |||||||||
Other time deposits | 241,647 | 238,827 | 249,662 | |||||||||
Total deposits | 3,651,241 | 2,947,353 | 2,910,840 | |||||||||
Borrowings | 397,525 | 271,394 | 236,394 | |||||||||
Accrued interest payable | 1,143 | 539 | 523 | |||||||||
Other liabilities | 28,737 | 27,475 | 24,775 | |||||||||
Total liabilities | 4,078,646 | 3,246,761 | 3,172,532 | |||||||||
Commitments and contingencies | ||||||||||||
SHAREHOLDERS’ EQUITY | ||||||||||||
Preferred stock, no par value per share. Authorized: 5,000,000 shares | ||||||||||||
Series C, convertible, issued & outstanding: none, none, and 728,706 shares | — | — | 7,287 | |||||||||
Common stock, no par value per share. Authorized: 40,000,000 shares | ||||||||||||
Issued & outstanding: 24,723,929, 20,844,505, and 20,119,411 shares | 263,493 | 147,287 | 139,979 | |||||||||
Retained earnings | 251,790 | 225,921 | 219,233 | |||||||||
Stock in rabbi trust assumed in acquisition | (3,571 | ) | — | — | ||||||||
Rabbi trust obligation | 3,571 | — | — | |||||||||
Accumulated other comprehensive income (loss) | (2,782 | ) | (5,107 | ) | (1,551 | ) | ||||||
Total shareholders’ equity | 512,501 | 368,101 | 364,948 | |||||||||
Total liabilities and shareholders’ equity | $ | 4,591,147 | 3,614,862 | 3,537,480 |
($ in thousands) | September 30, 2020 (unaudited) | December 31, 2019 | |||||||||
ASSETS | |||||||||||
Cash and due from banks, noninterest-bearing | $ | 92,465 | 64,519 | ||||||||
Due from banks, interest-bearing | 304,731 | 166,783 | |||||||||
Total cash and cash equivalents | 397,196 | 231,302 | |||||||||
Securities available for sale | 1,168,706 | 821,945 | |||||||||
Securities held to maturity (fair values of $112,114 and $68,333) | 110,200 | 67,932 | |||||||||
Presold mortgages in process of settlement | 34,028 | 19,712 | |||||||||
SBA Loans held for sale | 15,012 | 0 | |||||||||
Loans | 4,813,736 | 4,453,466 | |||||||||
Allowance for loan losses | (49,226) | (21,398) | |||||||||
Net loans | 4,764,510 | 4,432,068 | |||||||||
Premises and equipment | 118,568 | 114,859 | |||||||||
Operating right-of-use lease assets | 18,400 | 19,669 | |||||||||
Accrued interest receivable | 19,646 | 16,648 | |||||||||
Goodwill | 240,972 | 234,368 | |||||||||
Other intangible assets | 14,517 | 17,217 | |||||||||
Foreclosed properties | 2,741 | 3,873 | |||||||||
Bank-owned life insurance | 106,345 | 104,441 | |||||||||
Other assets | 53,427 | 59,605 | |||||||||
Total assets | $ | 7,064,268 | 6,143,639 | ||||||||
LIABILITIES | |||||||||||
Deposits: Noninterest bearing checking accounts | $ | 2,121,354 | 1,515,977 | ||||||||
Interest bearing checking accounts | 1,102,343 | 912,784 | |||||||||
Money market accounts | 1,524,710 | 1,173,107 | |||||||||
Savings accounts | 492,946 | 424,415 | |||||||||
Time deposits of $100,000 or more | 586,408 | 649,947 | |||||||||
Other time deposits | 232,465 | 255,125 | |||||||||
Total deposits | 6,060,226 | 4,931,355 | |||||||||
Borrowings | 61,816 | 300,671 | |||||||||
Accrued interest payable | 1,305 | 2,154 | |||||||||
Operating lease liabilities | 18,716 | 19,855 | |||||||||
Other liabilities | 41,387 | 37,203 | |||||||||
Total liabilities | 6,183,450 | 5,291,238 | |||||||||
Commitments and contingencies | |||||||||||
SHAREHOLDERS’ EQUITY | |||||||||||
Preferred stock, no par value per share. Authorized: 5,000,000 shares | |||||||||||
Issued & outstanding: none and none | 0 | 0 | |||||||||
Common stock, no par value per share. Authorized: 40,000,000 shares | |||||||||||
Issued & outstanding: 28,687,832 and 29,601,264 shares | 403,351 | 429,514 | |||||||||
Retained earnings | 459,988 | 417,764 | |||||||||
Stock in rabbi trust assumed in acquisition | (2,230) | (2,587) | |||||||||
Rabbi trust obligation | 2,230 | 2,587 | |||||||||
Accumulated other comprehensive income (loss) | 17,479 | 5,123 | |||||||||
Total shareholders’ equity | 880,818 | 852,401 | |||||||||
Total liabilities and shareholders’ equity | $ | 7,064,268 | 6,143,639 |
($ in thousands, except share data-unaudited) | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
INTEREST INCOME | |||||||||||||||||||||||
Interest and fees on loans | $ | 52,739 | 55,142 | 160,000 | 164,754 | ||||||||||||||||||
Interest on investment securities: | |||||||||||||||||||||||
Taxable interest income | 4,958 | 5,130 | 15,203 | 14,859 | |||||||||||||||||||
Tax-exempt interest income | 189 | 212 | 470 | 820 | |||||||||||||||||||
Other, principally overnight investments | 802 | 1,898 | 2,688 | 6,705 | |||||||||||||||||||
Total interest income | 58,688 | 62,382 | 178,361 | 187,138 | |||||||||||||||||||
INTEREST EXPENSE | |||||||||||||||||||||||
Savings, checking and money market accounts | 1,440 | 2,560 | 5,132 | 6,904 | |||||||||||||||||||
Time deposits of $100,000 or more | 1,747 | 3,519 | 6,994 | 10,219 | |||||||||||||||||||
Other time deposits | 346 | 518 | 1,254 | 1,375 | |||||||||||||||||||
Borrowings | 422 | 2,007 | 2,865 | 7,092 | |||||||||||||||||||
Total interest expense | 3,955 | 8,604 | 16,245 | 25,590 | |||||||||||||||||||
Net interest income | 54,733 | 53,778 | 162,116 | 161,548 | |||||||||||||||||||
Provision for loan losses | 6,120 | (1,105) | 31,008 | (913) | |||||||||||||||||||
Net interest income after provision for loan losses | 48,613 | 54,883 | 131,108 | 162,461 | |||||||||||||||||||
NONINTEREST INCOME | |||||||||||||||||||||||
Service charges on deposit accounts | 2,567 | 3,388 | 8,193 | 9,543 | |||||||||||||||||||
Other service charges, commissions and fees | 6,190 | 5,067 | 14,883 | 14,623 | |||||||||||||||||||
Fees from presold mortgage loans | 4,864 | 1,275 | 9,725 | 2,677 | |||||||||||||||||||
Commissions from sales of insurance and financial products | 2,357 | 2,203 | 6,515 | 6,436 | |||||||||||||||||||
SBA consulting fees | 1,956 | 663 | 6,722 | 2,847 | |||||||||||||||||||
SBA loan sale gains | 2,929 | 1,917 | 5,541 | 7,048 | |||||||||||||||||||
Bank-owned life insurance income | 633 | 651 | 1,904 | 1,928 | |||||||||||||||||||
Securities gains (losses), net | 0 | 97 | 8,024 | 97 | |||||||||||||||||||
Other gains (losses), net | (44) | (105) | (157) | (331) | |||||||||||||||||||
Total noninterest income | 21,452 | 15,156 | 61,350 | 44,868 | |||||||||||||||||||
NONINTEREST EXPENSES | |||||||||||||||||||||||
Salaries expense | 22,127 | 19,833 | 62,843 | 58,530 | |||||||||||||||||||
Employee benefits expense | 3,918 | 4,144 | 12,312 | 13,150 | |||||||||||||||||||
Total personnel expense | 26,045 | 23,977 | 75,155 | 71,680 | |||||||||||||||||||
Occupancy expense | 2,856 | 2,786 | 8,538 | 8,269 | |||||||||||||||||||
Equipment related expenses | 1,049 | 1,231 | 3,214 | 3,783 | |||||||||||||||||||
Merger and acquisition expenses | 0 | 0 | 0 | 213 | |||||||||||||||||||
Intangibles amortization expense | 928 | 1,163 | 2,961 | 3,737 | |||||||||||||||||||
Foreclosed property losses, net | 90 | 273 | 284 | 899 | |||||||||||||||||||
Other operating expenses | 9,471 | 9,016 | 29,264 | 28,723 | |||||||||||||||||||
Total noninterest expenses | 40,439 | 38,446 | 119,416 | 117,304 | |||||||||||||||||||
Income before income taxes | 29,626 | 31,593 | 73,042 | 90,025 | |||||||||||||||||||
Income tax expense | 6,329 | 6,574 | 15,213 | 18,862 | |||||||||||||||||||
Net income | $ | 23,297 | 25,019 | 57,829 | 71,163 | ||||||||||||||||||
Earnings per common share: | |||||||||||||||||||||||
Basic | $ | 0.81 | 0.84 | 1.99 | 2.39 | ||||||||||||||||||
Diluted | 0.81 | 0.84 | 1.99 | 2.39 | |||||||||||||||||||
Dividends declared per common share | $ | 0.18 | 0.12 | 0.54 | 0.36 | ||||||||||||||||||
Weighted average common shares outstanding: | |||||||||||||||||||||||
Basic | 28,857,111 | 29,542,001 | 28,962,576 | 29,585,383 | |||||||||||||||||||
Diluted | 28,940,018 | 29,684,105 | 29,102,953 | 29,759,459 |
($ in thousands-unaudited) | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
Net income | $ | 23,297 | 25,019 | 57,829 | 71,163 | ||||||||||||||||||
Other comprehensive income (loss): | |||||||||||||||||||||||
Unrealized gains (losses) on securities available for sale: | |||||||||||||||||||||||
Unrealized holding gains (losses) arising during the period, pretax | 19 | 2,210 | 23,556 | 19,814 | |||||||||||||||||||
Tax (expense) benefit | (4) | (508) | (5,413) | (4,602) | |||||||||||||||||||
Reclassification to realized (gains) losses | 0 | (97) | (8,024) | (97) | |||||||||||||||||||
Tax expense (benefit) | 0 | 22 | 1,844 | 22 | |||||||||||||||||||
Postretirement Plans: | |||||||||||||||||||||||
Amortization of unrecognized net actuarial loss | 153 | 155 | 511 | 611 | |||||||||||||||||||
Tax benefit | (35) | (36) | (118) | (153) | |||||||||||||||||||
Other comprehensive income (loss) | 133 | 1,746 | 12,356 | 15,595 | |||||||||||||||||||
Comprehensive income | $ | 23,430 | 26,765 | 70,185 | 86,758 |
($ in thousands, except share data - unaudited) | Common Stock | Retained Earnings | Stock in Rabbi Trust Assumed in Acquisition | Rabbi Trust Obligation | Accumulated Other Comprehensive Income (Loss) | Total Shareholders’ Equity | |||||||||||||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||||||||||||||||
Three Months Ended September 30, 2019 | |||||||||||||||||||||||||||||||||||||||||
Balances, July 1, 2019 | 29,717 | $ | 432,533 | 380,748 | (2,866) | 2,866 | 1,888 | 815,169 | |||||||||||||||||||||||||||||||||
Net income | 25,019 | 25,019 | |||||||||||||||||||||||||||||||||||||||
Cash dividends declared ($0.12 per common share) | (3,555) | (3,555) | |||||||||||||||||||||||||||||||||||||||
Change in Rabbi Trust Obligation | 289 | (289) | 0 | ||||||||||||||||||||||||||||||||||||||
Equity issued related to acquisition earnout | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||
Stock repurchases | (100) | (3,476) | (3,476) | ||||||||||||||||||||||||||||||||||||||
Stock option exercises | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||
Stock withheld for payment of taxes | (12) | (467) | (467) | ||||||||||||||||||||||||||||||||||||||
Stock-based compensation | 0 | 546 | 546 | ||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | 1,746 | 1,746 | |||||||||||||||||||||||||||||||||||||||
Balances, September 30, 2019 | 29,605 | $ | 429,136 | 402,212 | (2,577) | 2,577 | 3,634 | 834,982 | |||||||||||||||||||||||||||||||||
Three Months Ended September 30, 2020 | |||||||||||||||||||||||||||||||||||||||||
Balances, July 1, 2020 | 28,977 | $ | 408,699 | 441,846 | (2,217) | 2,217 | 17,346 | 867,891 | |||||||||||||||||||||||||||||||||
Net income | 23,297 | 23,297 | |||||||||||||||||||||||||||||||||||||||
Cash dividends declared ($0.18 per common share) | (5,155) | (5,155) | |||||||||||||||||||||||||||||||||||||||
Change in Rabbi Trust Obligation | (13) | 13 | 0 | ||||||||||||||||||||||||||||||||||||||
Equity issued related to acquisition | 24 | 494 | 494 | ||||||||||||||||||||||||||||||||||||||
Stock repurchases | (306) | (6,269) | (6,269) | ||||||||||||||||||||||||||||||||||||||
Stock withheld for payment of taxes | (7) | (178) | (178) | ||||||||||||||||||||||||||||||||||||||
Stock-based compensation | 0 | 605 | 605 | ||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | 133 | 133 | |||||||||||||||||||||||||||||||||||||||
Balances, September 30, 2020 | 28,688 | $ | 403,351 | 459,988 | (2,230) | 2,230 | 17,479 | 880,818 |
($ in thousands, except share data - unaudited) | Common Stock | Retained Earnings | Stock in Rabbi Trust Assumed in Acquisition | Rabbi Trust Obligation | Accumulated Other Comprehensive Income (Loss) | Total Shareholders’ Equity | |||||||||||||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||||||||||||||||
Nine Months Ended September 30, 2019 | |||||||||||||||||||||||||||||||||||||||||
Balances, January 1, 2019 | 29,725 | $ | 434,453 | 341,738 | (3,235) | 3,235 | (11,961) | 764,230 | |||||||||||||||||||||||||||||||||
Net income | 71,163 | 71,163 | |||||||||||||||||||||||||||||||||||||||
Cash dividends declared ($0.36 per common share) | (10,689) | (10,689) | |||||||||||||||||||||||||||||||||||||||
Change in Rabbi Trust Obligation | 658 | (658) | 0 | ||||||||||||||||||||||||||||||||||||||
Equity issued related to acquisition earnout | 78 | 3,070 | 3,070 | ||||||||||||||||||||||||||||||||||||||
Stock repurchases | (282) | (10,000) | (10,000) | ||||||||||||||||||||||||||||||||||||||
Stock option exercises | 9 | 129 | 129 | ||||||||||||||||||||||||||||||||||||||
Stock withheld for payment of taxes | (15) | (558) | (558) | ||||||||||||||||||||||||||||||||||||||
Stock-based compensation | 90 | 2,042 | 2,042 | ||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | 15,595 | 15,595 | |||||||||||||||||||||||||||||||||||||||
Balances, September 30, 2019 | 29,605 | $ | 429,136 | 402,212 | (2,577) | 2,577 | 3,634 | 834,982 | |||||||||||||||||||||||||||||||||
Nine Months Ended September 30, 2020 | |||||||||||||||||||||||||||||||||||||||||
Balances, January 1, 2020 | 29,601 | 429,514 | 417,764 | (2,587) | 2,587 | 5,123 | 852,401 | ||||||||||||||||||||||||||||||||||
Net income | 57,829 | 57,829 | |||||||||||||||||||||||||||||||||||||||
Cash dividends declared ($0.54 per common share) | (15,605) | (15,605) | |||||||||||||||||||||||||||||||||||||||
Change in Rabbi Trust Obligation | 357 | (357) | 0 | ||||||||||||||||||||||||||||||||||||||
Equity issued related to acquisition | 24 | 494 | 494 | ||||||||||||||||||||||||||||||||||||||
Stock repurchases | (986) | (28,701) | (28,701) | ||||||||||||||||||||||||||||||||||||||
Stock withheld for payment of taxes | (7) | (178) | (178) | ||||||||||||||||||||||||||||||||||||||
Stock-based compensation | 56 | 2,222 | 2,222 | ||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | 12,356 | 12,356 | |||||||||||||||||||||||||||||||||||||||
Balances, September 30, 2020 | 28,688 | $ | 403,351 | 459,988 | (2,230) | 2,230 | 17,479 | 880,818 |
($ in thousands-unaudited) | Nine Months Ended September 30, | ||||||||||
2020 | 2019 | ||||||||||
Cash Flows From Operating Activities | |||||||||||
Net income | $ | 57,829 | 71,163 | ||||||||
Reconciliation of net income to net cash provided by operating activities: | |||||||||||
Provision (reversal) for loan losses | 31,008 | (913) | |||||||||
Net security premium amortization | 2,832 | 1,827 | |||||||||
Loan discount accretion | (4,789) | (4,473) | |||||||||
Other purchase accounting accretion and amortization, net | 55 | (16) | |||||||||
Foreclosed property losses and write-downs, net | 284 | 899 | |||||||||
Gains on securities available for sale | (8,024) | (97) | |||||||||
Other losses | 157 | 331 | |||||||||
Increase (decrease) in net deferred loan costs | 7,380 | (261) | |||||||||
Depreciation of premises and equipment | 4,392 | 4,326 | |||||||||
Amortization of operating lease right-of-use assets | 1,522 | 1,372 | |||||||||
Repayments of lease obligations | (1,392) | (1,250) | |||||||||
Stock-based compensation expense | 2,013 | 1,748 | |||||||||
Amortization of intangible assets | 2,961 | 3,737 | |||||||||
Amortization of SBA servicing assets | 1,231 | 975 | |||||||||
Fees/gains from sale of presold mortgages and SBA loans | (15,266) | (9,725) | |||||||||
Origination of presold mortgage loans in process of settlement | (294,270) | (108,723) | |||||||||
Proceeds from sales of presold mortgage loans in process of settlement | 290,657 | 99,606 | |||||||||
Origination of SBA loans for sale | (117,412) | (125,982) | |||||||||
Proceeds from sales of SBA loans | 82,998 | 101,349 | |||||||||
Increase in accrued interest receivable | (2,998) | (293) | |||||||||
Increase in other assets | (7,454) | (4,061) | |||||||||
(Decrease) increase in accrued interest payable | (849) | 193 | |||||||||
Increase in other liabilities | 1,180 | 1,690 | |||||||||
Net cash provided by operating activities | 34,045 | 33,422 | |||||||||
Cash Flows From Investing Activities | |||||||||||
Purchases of securities available for sale | (701,201) | (339,030) | |||||||||
Purchases of securities held to maturity | (69,899) | 0 | |||||||||
Proceeds from maturities/issuer calls of securities available for sale | 156,108 | 114,003 | |||||||||
Proceeds from maturities/issuer calls of securities held to maturity | 26,989 | 26,316 | |||||||||
Proceeds from sales of securities available for sale | 219,697 | 39,797 | |||||||||
Redemptions of FRB and FHLB stock, net | 9,853 | 4,088 | |||||||||
Net increase in loans | (327,496) | (116,664) | |||||||||
Proceeds from sales of foreclosed properties | 1,880 | 4,628 | |||||||||
Purchases of premises and equipment | (8,983) | (2,714) | |||||||||
Proceeds from sales of premises and equipment | 189 | 1,148 | |||||||||
Net cash paid in acquisition | (9,559) | 0 | |||||||||
Net cash used by investing activities | (702,422) | (268,428) | |||||||||
Cash Flows From Financing Activities | |||||||||||
Net increase in deposits | 1,128,951 | 216,195 | |||||||||
Net decrease in short-term borrowings | (148,000) | (55,000) | |||||||||
Proceeds from long-term borrowings | 150,000 | 0 | |||||||||
Payments on long-term borrowings | (252,003) | (51,089) | |||||||||
Cash dividends paid – common stock | (15,798) | (10,108) | |||||||||
Repurchases of common stock | (28,701) | (10,000) | |||||||||
Proceeds from stock option exercises | 0 | 129 | |||||||||
Payment of taxes related to stock withheld | (178) | (558) | |||||||||
Net cash provided by financing activities | 834,271 | 89,569 | |||||||||
Increase (decrease) in cash and cash equivalents | 165,894 | (145,437) | |||||||||
Cash and cash equivalents, beginning of period | 231,302 | 462,898 | |||||||||
Cash and cash equivalents, end of period | $ | 397,196 | 317,461 | ||||||||
Supplemental Disclosures of Cash Flow Information: | |||||||||||
Cash paid during the period for interest | $ | 17,094 | 25,397 | ||||||||
Cash paid during the period for income taxes | 21,302 | 20,106 | |||||||||
Non-cash: Unrealized gain (loss) on securities available for sale, net of taxes | 18,143 | 15,137 | |||||||||
Non-cash: Foreclosed loans transferred to other real estate | 1,032 | 2,676 | |||||||||
Non-cash: Initial recognition of operating lease right-of-use assets and operating lease liabilities | 253 | 19,406 | |||||||||
Non-cash: Equity issued related to acquisitions | 494 | 3,070 | |||||||||
Non-cash: Loans acquired | 14,633 | 0 | |||||||||
Non-cash: Other assets acquired | 451 | 0 | |||||||||
Non-cash: Borrowings assumed | 11,671 | 0 |
Consolidated Statements of Income
($ in thousands, except share data-unaudited) | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
INTEREST INCOME | ||||||||||||||||
Interest and fees on loans | $ | 41,549 | 29,919 | 114,908 | 90,301 | |||||||||||
Interest on investment securities: | ||||||||||||||||
Taxable interest income | 2,004 | 1,688 | 5,830 | 5,472 | ||||||||||||
Tax-exempt interest income | 399 | 435 | 1,269 | 1,312 | ||||||||||||
Other, principally overnight investments | 1,059 | 213 | 2,299 | 612 | ||||||||||||
Total interest income | 45,011 | 32,255 | 124,306 | 97,697 | ||||||||||||
INTEREST EXPENSE | ||||||||||||||||
Savings, checking and money market accounts | 685 | 401 | 1,892 | 1,204 | ||||||||||||
Time deposits of $100,000 or more | 1,053 | 657 | 2,641 | 1,931 | ||||||||||||
Other time deposits | 172 | 196 | 511 | 725 | ||||||||||||
Borrowings | 1,462 | 647 | 3,411 | 1,750 | ||||||||||||
Total interest expense | 3,372 | 1,901 | 8,455 | 5,610 | ||||||||||||
Net interest income | 41,639 | 30,354 | 115,851 | 92,087 | ||||||||||||
Provision (reversal) for loan losses | — | — | 723 | (23 | ) | |||||||||||
Net interest income after provision (reversal) for loan losses | 41,639 | 30,354 | 115,128 | 92,110 | ||||||||||||
NONINTEREST INCOME | ||||||||||||||||
Service charges on deposit accounts | 2,945 | 2,710 | 8,525 | 7,960 | ||||||||||||
Other service charges, commissions and fees | 3,468 | 2,996 | 10,195 | 8,869 | ||||||||||||
Fees from presold mortgage loans | 1,842 | 710 | 4,121 | 1,491 | ||||||||||||
Commissions from sales of insurance and financial products | 1,426 | 969 | 3,304 | 2,844 | ||||||||||||
SBA consulting fees | 864 | 1,178 | 3,174 | 1,898 | ||||||||||||
SBA loan sale gains | 1,692 | 694 | 3,241 | 694 | ||||||||||||
Bank-owned life insurance income | 579 | 514 | 1,667 | 1,526 | ||||||||||||
Foreclosed property gains (losses), net | (216 | ) | (266 | ) | (439 | ) | (189 | ) | ||||||||
FDIC indemnification asset income (expense), net | — | (5,711 | ) | — | (10,255 | ) | ||||||||||
Securities gains (losses), net | — | — | (235 | ) | 3 | |||||||||||
Other gains (losses), net | (238 | ) | 1,363 | 493 | 1,237 | |||||||||||
Total noninterest income | 12,362 | 5,157 | 34,046 | 16,078 | ||||||||||||
NONINTEREST EXPENSES | ||||||||||||||||
Salaries | 16,550 | 13,430 | 46,799 | 37,465 | ||||||||||||
Employee benefits expense | 3,375 | 2,608 | 10,709 | 7,892 | ||||||||||||
Total personnel expense | 19,925 | 16,038 | 57,508 | 45,357 | ||||||||||||
Net occupancy expense | 2,439 | 2,005 | 6,981 | 5,791 | ||||||||||||
Equipment related expenses | 1,070 | 904 | 3,277 | 2,693 | ||||||||||||
Merger and acquisition expenses | 1,329 | 600 | 4,824 | 1,286 | ||||||||||||
Intangibles amortization expense | 902 | 387 | 2,509 | 834 | ||||||||||||
Other operating expenses | 8,719 | 7,784 | 26,441 | 22,677 | ||||||||||||
Total noninterest expenses | 34,384 | 27,718 | 101,540 | 78,638 | ||||||||||||
Income before income taxes | 19,617 | 7,793 | 47,634 | 29,550 | ||||||||||||
Income tax expense | 6,531 | 3,115 | 15,839 | 10,396 | ||||||||||||
Net income | 13,086 | 4,678 | 31,795 | 19,154 | ||||||||||||
Preferred stock dividends | — | (58 | ) | — | (175 | ) | ||||||||||
Net income available to common shareholders | $ | 13,086 | 4,620 | 31,795 | 18,979 | |||||||||||
Earnings per common share: | ||||||||||||||||
Basic | $ | 0.53 | 0.23 | 1.34 | 0.95 | |||||||||||
Diluted | 0.53 | 0.23 | 1.33 | 0.93 | ||||||||||||
Dividends declared per common share | $ | 0.08 | 0.08 | 0.24 | 0.24 | |||||||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 24,607,516 | 20,007,518 | 23,728,262 | 19,904,226 | ||||||||||||
Diluted | 24,695,295 | 20,785,689 | 23,827,011 | 20,697,125 |
See accompanying notes to consolidated financial statements.
Page 5
First Bancorp and Subsidiaries
Consolidated Statements of Comprehensive Income
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
($ in thousands-unaudited) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income | $ | 13,086 | 4,678 | 31,795 | 19,154 | |||||||||||
Other comprehensive income (loss): | ||||||||||||||||
Unrealized gains (losses) on securities available for sale: | ||||||||||||||||
Unrealized holding gains (losses) arising during the period, pretax | 186 | 241 | 3,288 | 3,131 | ||||||||||||
Tax (expense) benefit | (69 | ) | (94 | ) | (1,213 | ) | (1,223 | ) | ||||||||
Reclassification to realized (gains) losses | — | — | 235 | (3 | ) | |||||||||||
Tax expense (benefit) | — | — | (87 | ) | 1 | |||||||||||
Postretirement Plans: | ||||||||||||||||
Amortization of unrecognized net actuarial (gain) loss | 53 | 50 | 158 | 152 | ||||||||||||
Tax expense (benefit) | (20 | ) | (20 | ) | (56 | ) | (59 | ) | ||||||||
Other comprehensive income (loss) | 150 | 177 | 2,325 | 1,999 | ||||||||||||
Comprehensive income | $ | 13,236 | 4,855 | 34,120 | 21,153 | |||||||||||
See accompanying notes to consolidated financial statements.
Page 6
First Bancorp and Subsidiaries
Consolidated Statements of Shareholders’ Equity
(In thousands, except per share - unaudited) | Preferred | Common Stock | Retained | Stock in Directors’ | Directors’ Deferred Fees | Accumulated Other Compre- hensive Income | Total Share- holders’ | |||||||||||||||||||||||||
Stock | Shares | Amount | Earnings | Rabbi Trust | Obligation | (Loss) | Equity | |||||||||||||||||||||||||
Balances, January 1, 2016 | $ | 7,287 | 19,748 | $ | 133,393 | 205,060 | — | — | (3,550 | ) | 342,190 | |||||||||||||||||||||
Net income | 19,154 | 19,154 | ||||||||||||||||||||||||||||||
Cash dividends declared ($0.24 per common share) | (4,806 | ) | (4,806 | ) | ||||||||||||||||||||||||||||
Preferred stock dividends | (175 | ) | (175 | ) | ||||||||||||||||||||||||||||
Equity issued pursuant to acquisitions | 279 | 5,509 | 5,509 | |||||||||||||||||||||||||||||
Stock option exercises | 23 | 375 | 375 | |||||||||||||||||||||||||||||
Stock-based compensation | 69 | 702 | 702 | |||||||||||||||||||||||||||||
Other comprehensive income (loss) | 1,999 | 1,999 | ||||||||||||||||||||||||||||||
Balances, September 30, 2016 | $ | 7,287 | 20,119 | $ | 139,979 | 219,233 | — | — | (1,551 | ) | 364,948 | |||||||||||||||||||||
Balances, January 1, 2017 | $ | — | 20,845 | $ | 147,287 | 225,921 | — | — | (5,107 | ) | 368,101 | |||||||||||||||||||||
Net income | 31,795 | 31,795 | ||||||||||||||||||||||||||||||
Cash dividends declared ($0.24 per common share) | (5,926 | ) | (5,926 | ) | ||||||||||||||||||||||||||||
Equity issued pursuant to acquisitions | 3,813 | 114,893 | (7,688 | ) | 7,688 | 114,893 | ||||||||||||||||||||||||||
Payment of deferred fees | 4,117 | (4,117 | ) | — | ||||||||||||||||||||||||||||
Stock option exercises | 16 | 287 | 287 | |||||||||||||||||||||||||||||
Stock-based compensation | 50 | 1,026 | 1,026 | |||||||||||||||||||||||||||||
Other comprehensive income (loss) | 2,325 | 2,325 | ||||||||||||||||||||||||||||||
Balances, September 30, 2017 | $ | — | 24,724 | $ | 263,493 | 251,790 | (3,571 | ) | 3,571 | (2,782 | ) | 512,501 |
See accompanying notes to consolidated financial statements.
Page 7
First Bancorp and Subsidiaries
Consolidated Statements of Cash Flows
Nine Months Ended September 30, | ||||||||
($ in thousands-unaudited) | 2017 | 2016 | ||||||
Cash Flows From Operating Activities | ||||||||
Net income | $ | 31,795 | 19,154 | |||||
Reconciliation of net income to net cash provided (used) by operating activities: | ||||||||
Provision (reversal) for loan losses | 723 | (23 | ) | |||||
Net security premium amortization | 2,165 | 2,418 | ||||||
Loan discount accretion | (5,073 | ) | (3,553 | ) | ||||
Purchase accounting accretion and amortization, net | (142 | ) | 9,993 | |||||
Foreclosed property losses and write-downs (gains), net | 439 | 189 | ||||||
Loss (gain) on securities available for sale, net | 235 | (3 | ) | |||||
Other losses (gains), net | (493 | ) | 126 | |||||
Decrease (increase) in net deferred loan costs | 388 | 675 | ||||||
Depreciation of premises and equipment | 4,023 | 3,405 | ||||||
Stock-based compensation expense | 860 | 527 | ||||||
Amortization of intangible assets | 2,509 | 834 | ||||||
Fees/gains from sale of presold mortgage and SBA loans | (7,362 | ) | (2,185 | ) | ||||
Origination of presold mortgages in process of settlement | (169,021 | ) | (56,260 | ) | ||||
Proceeds from sales of presold mortgages in process of settlement | 165,341 | 58,015 | ||||||
Origination of SBA loans | (54,714 | ) | (8,471 | ) | ||||
Proceeds from sales of SBA loans | 44,259 | 9,165 | ||||||
Gain on sale of branches | — | (1,356 | ) | |||||
Decrease (increase) in accrued interest receivable | (642 | ) | 381 | |||||
Increase in other assets | (13,112 | ) | (1,530 | ) | ||||
Increase (decrease) in accrued interest payable | 340 | (20 | ) | |||||
Increase (decrease) in other liabilities | (12,377 | ) | 185 | |||||
Net cash provided (used) by operating activities | (9,859 | ) | 31,666 | |||||
Cash Flows From Investing Activities | ||||||||
Purchases of securities available for sale | (35,034 | ) | (99,896 | ) | ||||
Purchases of securities held to maturity | (291 | ) | — | |||||
Proceeds from maturities/issuer calls of securities available for sale | 29,156 | 68,206 | ||||||
Proceeds from maturities/issuer calls of securities held to maturity | 18,021 | 17,652 | ||||||
Proceeds from sales of securities available for sale | 45,601 | 8 | ||||||
Purchases of Federal Reserve and Federal Home Loan Bank stock, net | (10,372 | ) | (2,263 | ) | ||||
Net increase in loans | (206,948 | ) | (138,044 | ) | ||||
Payments related to FDIC loss share agreements | — | (1,554 | ) | |||||
Payment to FDIC for termination of loss share agreements | — | (2,012 | ) | |||||
Proceeds from sales of foreclosed real estate | 6,468 | 6,670 | ||||||
Purchases of premises and equipment | (3,040 | ) | (6,876 | ) | ||||
Proceeds from sales of premises and equipment | 114 | 21 | ||||||
Proceeds from branch sale | — | 26,211 | ||||||
Net cash received (paid) in acquisitions | 48,636 | (53,640 | ) | |||||
Net cash used by investing activities | (107,689 | ) | (185,517 | ) | ||||
Cash Flows From Financing Activities | ||||||||
Net increase in deposits | 118,752 | 122,476 | ||||||
Net increase in borrowings | 106,980 | 50,000 | ||||||
Cash dividends paid – common stock | (5,617 | ) | (4,760 | ) | ||||
Cash dividends paid – preferred stock | — | (175 | ) | |||||
Proceeds from stock option exercises | 287 | 375 | ||||||
Net cash provided by financing activities | 220,402 | 167,916 | ||||||
Increase in cash and cash equivalents | 102,854 | 14,065 | ||||||
Cash and cash equivalents, beginning of period | 305,993 | 267,268 | ||||||
Cash and cash equivalents, end of period | $ | 408,847 | 281,333 | |||||
Supplemental Disclosures of Cash Flow Information: | ||||||||
Cash paid during the period for: | ||||||||
Interest | $ | 8,115 | 5,672 | |||||
Income taxes | 15,275 | 10,511 | ||||||
Non-cash transactions: | ||||||||
Unrealized gain (loss) on securities available for sale, net of taxes | 2,223 | 1,906 | ||||||
Foreclosed loans transferred to other real estate | 3,897 | 6,968 |
See accompanying notes to consolidated financial statements.
Page 8
First Bancorp and Subsidiaries
(unaudited) | For the |
and Risks and Uncertainties
In May 2014,
In January 2016, the FASB amended the Financial Instruments topic of the Accounting Standards Codification to address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. This update is intended to improve the recognition and measurement of financial instruments and it requires an entity to: (i) measure equity investments at fair value through net income, with certain exceptions; (ii) present in other comprehensive income the changes in instrument-specific credit risk for financial liabilities measured using the fair value option; (iii) present financial assets and financial liabilities by measurement category and form of financial asset; (iv) calculate the fair value of financial instruments for disclosure purposes based on an exit price and; (v) assess a valuation allowance on deferred tax assets related to unrealized losses of available for sale debt securities in combination with other deferred tax assets. The guidance also provides an election to subsequently measure certain nonmarketable equity investments at cost less any impairment and adjusted for certain observable price changes and requires a qualitative impairment assessment of such equity investments and amends certain fair value disclosure requirements. The amendments will be effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company will apply the guidance by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values will be applied prospectively to equity investments that exist as of the date of adoption of the amendments. The Company does not expect these amendments to have a material effect on its financial statements.
In February 2016, the FASB issued new guidance on accounting for leases, which generally requires all leases to be recognized in the statement of financial position by recording an asset representing its right to use the underlying asset and recording a liability, which represents the Company’s obligation to make lease payments. The provisions of this guidance are effective for reporting periods beginning after December 15, 2018; early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.
Page 9
In March 2016, the FASB amended the Liabilities topic of the Accounting Standards Codification to address the current and potential future diversity in practice related to the derecognition of a prepaid stored-value product liability. The amendments will be effective for financial statements issued for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company will apply the guidance using a modified retrospective transition method by means of a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year in which the guidance is effective to each period presented. The Company does not expect these amendments to have a material effect on its financial statements.
In March 2016, the FASB amended the Investments—Equity Method and Joint Ventures topic of the Accounting Standards Codification to eliminate the requirement to retroactively adopt the equity method of accounting and instead apply the equity method of accounting starting with the date it qualifies for that method. The amendments were effective for the Company on January 1, 2017. The Company will apply the guidance prospectively to any increases in the level of ownership interest or degree of influence that result in the adoption of the equity method. The Company’s adoption of this amendment did not have a material effect on its financial statements.
In March 2016, the FASB issued guidance to simplify several aspects of the accounting for share-based payment award transactions including the income tax consequences, the classification of awards as either equity or liabilities, and the classification on the statement of cash flows. Additionally, the guidance simplifies two areas specific to entities other than public business entities allowing them apply a practical expedient to estimate the expected term for all awards with performance or service conditions that have certain characteristics and also allowing them to make a one-time election to switch from measuring all liability-classified awards at fair value to measuring them at intrinsic value. The amendments were effective for the Company on January 1, 2017 and the adoption of this amendment did not have a material effect on its financial statements.
In June 2016, the FASB issued guidance to change the accounting for credit losses. The guidance requires an entity to utilize a new impairment model known as the current expected credit loss ("CECL") model to estimate its lifetime "expected credit loss" and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset. The CECL model is expected to result in earlier recognition of credit losses. The guidance also requires new disclosures for financial assets measured at amortized cost, loans and available-for-sale debt securities. The Company will apply the amendments through a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption. While early adoption is permitted beginning in first quarter 2019, the Company does not expect to elect that option. The updated guidance is effective for interim and annual reporting periods beginning after December 15, 2019. The Company is currently evaluating the impact of this guidance on its consolidated financial statements, however, the Company expects the adoption of this guidance to result in an increase in the recorded allowance for loan losses.
In August 2016, the FASB amended the Statement of Cash Flows topic of the Accounting Standards Codification to clarify how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments will be effective for the Company for fiscal years beginning after December 15, 2017, including interim periods within those years. The Company does not expect these amendments to have a material effect on its financial statements.
In October 2016, the FASB amended the Consolidation topic of the Accounting Standards Codification to revise the consolidation guidance on how a reporting entity that is the single decision maker of a variable interest entity (VIE) should treat indirect interests in the entity held through related parties that are under common control with the reporting entity when determining whether it is the primary beneficiary of that VIE. The amendments were effective for the Company on January 1, 2017 and the Company’s adoption of this amendment did not have a material effect on its financial statements.
In November 2016, the FASB amended the Statement of Cash Flows topic of the Accounting Standards Codification to clarify how restricted cash is presented and classified in the statement of cash flows. The amendments will be effective for the Company for fiscal years beginning after December 15, 2017 including interim periods within those fiscal years. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.
In January 2017, the FASB issued guidance to clarify the definition of a business in the Business Combinations topic of the Accounting Standards Codification with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendment is intended to address concerns that the existing definition of a business has been applied too broadly and has resulted in many transactions being recorded as business acquisitions that in substance are more akin to asset acquisitions. The guidance will be effective for the Company for reporting periods beginning after December 15, 2017.Early adoption is permitted. The Company does not expect this amendment to have a material effect on its financial statements.
Page 10
In January 2017, the FASB issued amended the Goodwill and Other Intangibles topic of the Accounting Standards Codification to simplify the accounting for goodwill impairment for public business entities and other entities that have goodwill reported in their financial statements and have not elected the private company alternative for the subsequent measurement of goodwill. The amendment removes Step 2 of the goodwill impairment test. The amount of goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The effective date and transition requirements for the technical corrections will bewere effective for the Company on January 1, 2020 and the adoption of this amendment did not have a material effect on the Company's financial statements. The Company's policy is to test goodwill for impairment annually on October 31 or on an interim basis if an event triggering impairment may have occurred. During the period ended March 31, 2020, the economic turmoil and market volatility resulting from the COVID-19 crisis resulted in a substantial decrease in the Company's stock price and market capitalization. Management believed such decrease was a triggering indicator requiring an interim goodwill impairment quantitative analysis. The results of the March 31, 2020 determined that none of the Company's goodwill was impaired as of March 31, 2020. Due to lingering economic turmoil and market volatility, the Company updated this analysis qualitatively as of June 30, 2020 and quantitatively at September 30, 2020 and again determined that there was no impairment of its goodwill on either date. Management will continue to evaluate the economic conditions at future reporting periods beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performedapplicable changes.
In May 2017, the FASB amended the requirements in the Compensation—Stock Compensation topic of the Accounting Standards Codification related to changes to the terms or conditions of a share-based payment award. The amendments provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The amendments will be effective for the Company for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.
Since January 1, 2016, the Company completed the acquisitions described below. The results of each acquired company/branch are included in the Company’s results beginning on its respective acquisition date.
Page 11
Bankingport was an insurance agency based in Sanford, North Carolina. This acquisition represented an opportunity to expand the insurance agency operations into a contiguous and significant banking market for the Company. Also, this acquisition provided the Company with a larger platform for leveraging insurance services throughout the Company’s bank branch network. The deal value was $2.2 million and the transaction was completed on January 1, 2016 with the Company paying $0.7 million in cash and issuing 79,012 shares of its common stock, which had a value of approximately $1.5 million. In connection with the acquisition, the Company also paid $1.1 million to purchase the office space previously leased by Bankingport.
This acquisition was accounted for using the purchase method of accounting for business combinations, and accordingly, the assets and liabilities of Bankingport were recorded based on estimates of fair values as of January 1, 2016. In connection with this transaction, the Company recorded $1.7 million in goodwill, which is non-deductible for tax purposes, and $0.7 million in other amortizable intangible assets.
This acquisition was accounted for using the purchase method of accounting for business combinations, and accordingly, the assets and liabilities of SBA Complete were recorded based on estimates of fair values, which according to applicable accounting guidance, are subject to change for twelve months following the acquisition. In connection with this transaction, the Company originally recorded $5.6 million in goodwill, which was non-deductible for tax purposes, and $2.0 million in other amortizable intangible assets.
In the second quarter of 2017, the Company recorded a measurement period adjustment to reduce the earn-out liability and goodwill by $1.2 million.
In connection with the sale, the Company sold $150.6 million in loans, $5.7 million in premises and equipment and $134.3 million in deposits to First Community Bank. In connection with the sale, the Company received a deposit premium of $3.8 million, removed $1.0 million of allowance for loan losses associated with the sold loans, allocated and wrote-off $3.5 million of previously recorded goodwill, and recorded a net gain of $1.5 million in this transaction.
In connection with the purchase transaction, the Company acquired assets with a fair value of $157.2 million, including $152.2 million in loans and $3.4 million in premises and equipment. Additionally, the Company assumed $111.3 million in deposits and $0.2 million in other liabilities. In connection with the purchase, the Company recorded: i) a discount on acquired loans of $1.5 million, ii) a premium on deposits of $0.3 million, iii) a $1.2 million core deposit intangible, and iv) $5.4 million in goodwill.
The branch acquisition was accounted for using the purchase method of accounting for business combinations, and accordingly, the assets and liabilities of the acquired branches were recorded on the Company’s balance sheet at their fair values as of July 15, 2016 and were subject to change for twelve months following the acquisition. The related results of operations for the acquired branches have been included in the Company’s consolidated statement of income since that date. The goodwill recorded in the branch exchange is deductible for tax purposes.
Page 12
Carolina Bank Holdings, Inc. was the parent company of Carolina Bank, a North Carolina state-chartered bank with eight bank branches located in the North Carolina cities of Greensboro, High Point, Burlington, Winston-Salem, and Asheboro, and mortgage offices in Burlington, Hillsborough, and Sanford. The acquisition complements the Company’s recent expansion into several of these high-growth markets and increases its market share in others with facilities, operations and experienced staff already in place. The Company was willing to record goodwill primarily due to the reasons just noted, as well as the positive earnings of Carolina Bank. The total merger consideration consisted of $25.3 million in cash and 3,799,471 million shares of the Company’s common stock, with each share of Carolina Bank common stock being exchanged for either $20.00 in cash or 1.002 shares of the Company’s stock, subject to the total consideration being 75% stock / 25% cash. The issuance of common stock was valued at $114,478,000 and was based on the Company’s closing stock price on March 3, 2017 of $30.13 per share.
This acquisition was accounted for using the purchase method of accounting for business combinations, and accordingly, the assets and liabilities of Carolina Bank were recorded based on estimates of fair values as of March 3, 2017. The Company may change its valuations of acquired Carolina Bank assets and liabilities for up to one year after the acquisition date. The table below is a condensed balance sheet disclosing the amount assigned to each major asset and liability category of Carolina Bank on March 3, 2017, and the related fair value adjustments recorded by the Company to reflect the acquisition. The $65.5 million in goodwill that resulted from this transaction is non-deductible for tax purposes.
($ in thousands)
| As Recorded by Carolina Bank | Initial Fair Value Adjustments | Measurement Period Adjustments | As Recorded by First Bancorp | ||||||||||||
Assets | ||||||||||||||||
Cash and cash equivalents | $ | 81,466 | (2 | ) | (a) | — | 81,464 | |||||||||
Securities | 49,629 | (261 | ) | (b) | — | 49,368 | ||||||||||
Loans, gross | 505,560 | (5,469 | ) | (c) | 146 | (l) | 497,522 | |||||||||
(2,715 | ) | (d) | — | |||||||||||||
Allowance for loan losses | (5,746 | ) | 5,746 | (e) | — | — | ||||||||||
Premises and equipment | 17,967 | 4,251 | (f) | (319 | ) | (m) | 21,899 | |||||||||
Core deposit intangible | — | 8,790 | (g) | — | 8,790 | |||||||||||
Other | 34,976 | (4,804 | ) | (h) | 2,225 | (n) | 32,397 | |||||||||
Total | 683,852 | 5,536 | 2,052 | 691,440 | ||||||||||||
Liabilities | ||||||||||||||||
Deposits | $ | 584,950 | 431 | (i) | — | 585,381 | ||||||||||
Borrowings | 21,855 | (2,855 | ) | (j) | (262 | ) | (o) | 18,738 | ||||||||
Other | 12,855 | 225 | (k) | — | 13,080 | |||||||||||
Total | 619,660 | (2,199 | ) | (262 | ) | 617,199 | ||||||||||
Net identifiable assets acquired | 74,241 | |||||||||||||||
Total cost of acquisition | ||||||||||||||||
Value of stock issued | $ | 114,478 | ||||||||||||||
Cash paid in the acquisition | 25,279 | |||||||||||||||
Total cost of acquisition | 139,757 | |||||||||||||||
Goodwill recorded related to acquisition of Carolina Bank | $ | 65,516 | ||||||||||||||
Explanation of Fair Value Adjustments
Page 13
The following unaudited pro forma financial information presents the combined results of the Company and Carolina Bank as if the acquisition had occurred as of January 1, 2016, after giving effect to certain adjustments, including amortization of the core deposit intangible, and related income tax effects. The pro forma financial information does not necessarily reflect the results of operations that would have occurred had the Company and Carolina Bank constituted a single entity during such period.
($ in thousands, except share data) | Pro Forma Combined Nine Months Ended September 30, 2017 | Pro Forma Combined Nine Months Ended September 30, 2016 | ||||||
Net interest income | $ | 119,899 | 109,787 | |||||
Noninterest income | 35,236 | 24,818 | ||||||
Total revenue | 155,135 | 134,605 | ||||||
Net income available to common shareholders | 35,176 | 16,584 | ||||||
Earnings per common share | ||||||||
Basic | $ | 1.43 | 0.70 | |||||
Diluted | 1.43 | 0.68 |
For purposes of the supplemental pro forma information, merger-related expenses of $4.4 million that were recorded in the Company’s consolidated statements of income for the nine months ended September 30, 2017 and $4.6 million of merger-related expenses that were recorded by Carolina Bank in 2017 prior to the merger date are reflected above in the pro forma presentation for 2016.
Page 14
Bear Insurance, an insurance agency based in Albemarle, North Carolina, with four locations in Stanly, Cabarrus, and Montgomery counties and annual commission income of approximately $4 million, represented an opportunity to complement the insurance agency operations in these markets and the surrounding areas. Also, this acquisition provided the Company with a larger platform for leveraging insurance services throughout the Company’s bank branch network. The transaction value was $9.8 million and the transaction was completed on September 1, 2017 with the Company paying $7.9 million in cash and issuing 13,374 shares of its common stock, which had a value of approximately $0.4 million. Per the terms of the agreement, the Company also recorded an earn-out liability valued at $1.2 million, which will be paid as a cash distribution after a four-year period if pre-determined goals are met for the periods.
This acquisition was accounted for using the purchase method of accounting for business combinations, and accordingly, the assets and liabilities of Bear Insurance were recorded based on estimates of fair values as of September 1, 2017. In connection with this transaction, the Company recorded $5.3 million in goodwill, which is deductible for tax purposes, and $3.9 million in other amortizable intangible assets, which are also deductible for tax purposes.
Note 5 – Equity-Based Compensation Plans
The Company recorded total stock-based compensation expense of $204,000$606,000 and $146,000$546,000 for the three months ended September 30, 20172020 and 2016,2019, respectively, and $860,000$2,013,000 and $527,000$1,748,000 for the nine months ended September 30, 20172020 and 2016, respectively. Of2019, respectively, which includes the $860,000 in expense that was recorded in 2017, approximately $320,000 relatedvalue of stock grants to the June 1, 2017 director grants, and is classifieddirectors as “other operating expenses” in the Consolidated Statements of Income. The remaining $540,000 in expense relates to the employee grants discussed below and is recorded as “salaries expense.” Stock based compensation is reflected as an adjustment to cash flows from operating activities on the Company’s Consolidated Statement of Cash Flows.below. The Company recognized $318,000$139,000 and $206,000$125,000 of income tax benefits related to stock basedstock-based compensation expense in the income statement for the three months ended September 30, 2020 and 2019, respectively, and $463,000 and $402,000 for the nine months ended September 30, 20172020 and 2016,2019, respectively.
provided, the awards become immediately vested.
vest. The Company typically grantsissues new shares of common stock when options are exercised.
Page 15
The Company’s senior officers receive their annual bonus earned under the Company’s annual incentive plan in a mix of 50% cash and 50% stock, with the stock being subject to a three year vesting term. In the last three years, a total of 55,648 shares of restricted stock have been granted related to performance in the preceding fiscal years. Total compensation expense associated with thosedirector grants was $758,000 and is being recognized overclassified as "other operating expense" in the respective vesting periods. The Company recorded $66,000 and $55,000 in compensation expense during the three months ended September 30, 2017 and 2016, respectively, and $216,000 and $165,000 for the nine months ended September 30, 2017 and 2016, respectively, related to these grants and expects to record $66,000 in compensation expense during the last remaining quarterConsolidated Statements of 2017.
In the last three years, the Compensation Committee of the Company’s Board of Directors also granted 130,059 shares of stock to various employees of the Company to promote retention. The total value associated with these grants amounted to $2.8 million, and is being recorded as an expense over their three year vesting periods. For the three months ended September 30, 2017 and 2016, total compensation expense related to these grants was $138,000 and $92,000, respectively, and for the nine months ended September 30, 2017 and 2016, total compensation expense was $324,000 and $234,000, respectively. The Company expects to record $167,000 in compensation expense during the fourth quarter of 2017. All grants were issued based on the closing price of the Company’s common stock on the date of the grant.
Income.
Long-Term Restricted Stock | ||||||||
Number of Units | Weighted-Average Grant-Date Fair Value | |||||||
Nonvested at January 1, 2017 | 91,790 | $ | 18.65 | |||||
Granted during the period | 48,322 | 31.05 | ||||||
Vested during the period | (2,282 | ) | 18.27 | |||||
Forfeited or expired during the period | (8,535 | ) | 18.34 | |||||
Nonvested at September 30, 2017 | 129,295 | $ | 23.31 |
In years prior
Long-Term Restricted Stock | ||||||||||||||
Number of Units | Weighted-Average Grant-Date Fair Value | |||||||||||||
Nonvested at January 1, 2020 | 159,366 | $ | 36.79 | |||||||||||
Granted during the period | 41,966 | 28.58 | ||||||||||||
Vested during the period | (42,464) | 33.13 | ||||||||||||
Forfeited or expired during the period | 0 | 0 | ||||||||||||
Nonvested at September 30, 2020 | 158,868 | $ | 35.60 |
At September 30, 2017,2020, there were 40,6890 stock options outstanding related to the two First Bancorp plans, with exercise prices ranging from $14.35 to $16.81.
The following table presents information regarding the activity for the first nine months of 2017 related to the Company’s stock options outstanding:
Options Outstanding | ||||||||||||||||
Number of Shares | Weighted- Average Exercise Price | Weighted- Average Contractual Term (years) | Aggregate Intrinsic Value | |||||||||||||
Balance at January 1, 2017 | 59,948 | $ | 17.18 | |||||||||||||
Granted | — | — | ||||||||||||||
Exercised | (19,259 | ) | 19.44 | $ | 193,844 | |||||||||||
Forfeited | — | — | ||||||||||||||
Expired | — | — | ||||||||||||||
Outstanding at September 30, 2017 | 40,689 | $ | 16.11 | 0.9 | $ | 744,619 | ||||||||||
Exercisable at September 30, 2017 | 40,689 | $ | 16.11 | 0.9 | $ | 744,619 |
Page 16
outstanding. During the three and nine months ended September 30, 2017, the Company received $0 and $287,000, respectively, as a result of2020, there were 0 stock option exercises. During the three and nine months ended September 30, 2016, the Company received $0 and $375,000, respectively, as a result of2019, there were $129,000 in stock option exercises.
as well as contingently issuable shares.
that are included in the calculation of dilutive securities is based on the weighted average number of shares that would have been issuable if the end of the reporting period were the end of the contingency period. If any of the potentially dilutive common stock issuances have an anti-dilutive effect, the potentially dilutive common stock issuance is disregarded.
For the Three Months Ended September 30, | ||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||
($ in thousands except per share amounts) | Income (Numer- ator) | Shares (Denom- inator) | Per Share Amount | Income (Numer- ator) | Shares (Denom- inator) | Per Share Amount | ||||||||||||||||||
Basic EPS | ||||||||||||||||||||||||
Net income available to common shareholders | $ | 13,086 | 24,607,516 | $ | 0.53 | $ | 4,620 | 20,007,518 | $ | 0.23 | ||||||||||||||
Effect of Dilutive Securities | — | 87,779 | 58 | 778,171 | ||||||||||||||||||||
Diluted EPS per common share | $ | 13,086 | 24,695,295 | $ | 0.53 | $ | 4,678 | 20,785,689 | $ | 0.23 |
For the Nine Months September 30, | ||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||
($ in thousands except per share amounts) | Income (Numer- ator) | Shares (Denom- inator) | Per Share Amount | Income (Numer- ator) | Shares (Denom- inator) | Per Share Amount | ||||||||||||||||||
Basic EPS | ||||||||||||||||||||||||
Net income available to common shareholders | $ | 31,795 | 23,728,262 | $ | 1.34 | $ | 18,979 | 19,904,226 | $ | 0.95 | ||||||||||||||
Effect of Dilutive Securities | — | 98,749 | 175 | 792,899 | ||||||||||||||||||||
Diluted EPS per common share | $ | 31,795 | 23,827,011 | $ | 1.33 | $ | 19,154 | 20,697,125 | $ | 0.93 |
For the Three Months Ended September 30, 2020 2019 ($ in thousands except per
share amounts)Per Share
AmountShares
(Denominator)Per Share
AmountIncome
(Numerator)Shares
(Denominator)Per Share
AmountBasic EPS: Net income $ 23,297 $ 25,019 Less: income allocated to participating securities (67) (119) Basic EPS per common share $ 23,230 28,857,111 $ 0.81 $ 24,900 29,542,001 $ 0.84 Diluted EPS: Net income $ 23,297 28,857,111 $ 25,019 29,542,001 Effect of Dilutive Securities 0 82,907 0 142,104 Diluted EPS per common share $ 23,297 28,940,018 $ 0.81 $ 25,019 29,684,105 $ 0.84
For the Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||
2020 | 2019 | |||||||||||||||||||||||||||||||||||||
($ in thousands except per share amounts) | Income (Numerator) | Shares (Denominator) | Per Share Amount | Income (Numerator) | Shares (Denominator) | Per Share Amount | ||||||||||||||||||||||||||||||||
Basic EPS: | ||||||||||||||||||||||||||||||||||||||
Net income | $ | 57,829 | $ | 71,163 | ||||||||||||||||||||||||||||||||||
Less: income allocated to participating securities | $ | (279) | $ | (329) | ||||||||||||||||||||||||||||||||||
Basic EPS per common share | $ | 57,550 | 28,962,576 | $ | 1.99 | $ | 70,834 | 29,585,383 | $ | 2.39 | ||||||||||||||||||||||||||||
Diluted EPS: | ||||||||||||||||||||||||||||||||||||||
Net income | $ | 57,829 | 28,962,576 | $ | 71,163 | 29,585,383 | ||||||||||||||||||||||||||||||||
Effect of Dilutive Securities | 0 | 140,377 | 0 | 174,076 | ||||||||||||||||||||||||||||||||||
Diluted EPS per common share | $ | 57,829 | 29,102,953 | $ | 1.99 | $ | 71,163 | 29,759,459 | $ | 2.39 |
For both the three and nine months ended September 30, 2017, there were no options that were antidilutive. For both the three and nine months ended September 30, 2016, there were 16,250 options that were antidilutive because the exercise price exceeded the average market price for the period, and thus are not included in the calculation to determine the effect of dilutive securities.
September 30, 2017 | December 31, 2016 | |||||||||||||||||||||||||||||||
Amortized | Fair | Unrealized | Amortized | Fair | Unrealized | |||||||||||||||||||||||||||
($ in thousands) | Cost | Value | Gains | (Losses) | Cost | Value | Gains | (Losses) | ||||||||||||||||||||||||
Securities available for sale: | ||||||||||||||||||||||||||||||||
Government-sponsored enterprise securities | $ | 9,000 | 8,992 | 1 | (9 | ) | 17,497 | 17,490 | — | (7 | ) | |||||||||||||||||||||
Mortgage-backed securities | 155,684 | 155,535 | 713 | (862 | ) | 151,001 | 148,065 | 155 | (3,091 | ) | ||||||||||||||||||||||
Corporate bonds | 33,802 | 34,397 | 660 | (65 | ) | 33,833 | 33,600 | 91 | (324 | ) | ||||||||||||||||||||||
Equity securities | — | — | — | — | 83 | 174 | 96 | (5 | ) | |||||||||||||||||||||||
Total available for sale | $ | 198,486 | 198,924 | 1,374 | (936 | ) | 202,414 | 199,329 | 342 | (3,427 | ) | |||||||||||||||||||||
Securities held to maturity: | ||||||||||||||||||||||||||||||||
Mortgage-backed securities | $ | 67,708 | 67,529 | 15 | (194 | ) | 80,585 | 79,283 | — | (1,302 | ) | |||||||||||||||||||||
State and local governments | 55,448 | 57,349 | 1,908 | (7 | ) | 49,128 | 50,912 | 1,815 | (31 | ) | ||||||||||||||||||||||
Total held to maturity | $ | 123,156 | 124,878 | 1,923 | (201 | ) | 129,713 | 130,195 | 1,815 | (1,333 | ) |
($ in thousands) | September 30, 2020 | December 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||
Amortized Cost | Fair Value | Unrealized | Amortized Cost | Fair Value | Unrealized | ||||||||||||||||||||||||||||||||||||||||||
Gains | (Losses) | Gains | (Losses) | ||||||||||||||||||||||||||||||||||||||||||||
Securities available for sale: | |||||||||||||||||||||||||||||||||||||||||||||||
Government-sponsored enterprise securities | $ | 75,016 | 75,653 | 637 | 0 | 20,000 | 20,009 | 17 | (8) | ||||||||||||||||||||||||||||||||||||||
Mortgage-backed securities | 1,024,735 | 1,047,922 | 24,194 | (1,007) | 758,491 | 767,285 | 9,463 | (669) | |||||||||||||||||||||||||||||||||||||||
Corporate bonds | 43,680 | 45,131 | 1,743 | (292) | 33,711 | 34,651 | 1,025 | (85) | |||||||||||||||||||||||||||||||||||||||
Total available for sale | $ | 1,143,431 | 1,168,706 | 26,574 | (1,299) | 812,202 | 821,945 | 10,505 | (762) | ||||||||||||||||||||||||||||||||||||||
Securities held to maturity: | |||||||||||||||||||||||||||||||||||||||||||||||
Mortgage-backed securities | $ | 33,222 | 34,161 | 939 | 0 | 41,423 | 41,542 | 125 | (6) | ||||||||||||||||||||||||||||||||||||||
State and local governments | 76,978 | 77,953 | 975 | 0 | 26,509 | 26,791 | 285 | (3) | |||||||||||||||||||||||||||||||||||||||
Total held to maturity | $ | 110,200 | 112,114 | 1,914 | 0 | 67,932 | 68,333 | 410 | (9) |
2020 and December 31, 2019, respectively.
($ in thousands) | Securities in an Unrealized Loss Position for Less than 12 Months | Securities in an Unrealized Loss Position for More than 12 Months | Total | |||||||||||||||||||||
Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||||||||
Government-sponsored enterprise securities | $ | 6,491 | 9 | — | — | 6,491 | 9 | |||||||||||||||||
Mortgage-backed securities | 110,437 | 555 | 24,250 | 501 | 134,687 | 1,056 | ||||||||||||||||||
Corporate bonds | — | — | 935 | 65 | 935 | 65 | ||||||||||||||||||
State and local governments | — | — | 813 | 7 | 813 | 7 | ||||||||||||||||||
Total temporarily impaired securities | $ | 116,928 | 564 | 25,998 | 573 | 142,926 | 1,137 |
2020:
($ in thousands) | Securities in an Unrealized Loss Position for Less than 12 Months | Securities in an Unrealized Loss Position for More than 12 Months | Total | ||||||||||||||||||||||||||||||||
Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | ||||||||||||||||||||||||||||||
Government-sponsored enterprise securities | $ | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||
Mortgage-backed securities | 212,533 | 816 | 6,639 | 191 | 219,172 | 1,007 | |||||||||||||||||||||||||||||
Corporate bonds | 13,907 | 93 | 801 | 199 | 14,708 | 292 | |||||||||||||||||||||||||||||
State and local governments | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
Total temporarily impaired securities | $ | 226,440 | 909 | 7,440 | 390 | 233,880 | 1,299 |
($ in thousands) | Securities in an Unrealized Loss Position for Less than 12 Months | Securities in an Unrealized Loss Position for More than 12 Months | Total | |||||||||||||||||||||
Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||||||||
Government-sponsored enterprise securities | $ | 7,990 | 7 | — | — | 7,990 | 7 | |||||||||||||||||
Mortgage-backed securities | 196,999 | 3,841 | 19,001 | 552 | 216,000 | 4,393 | ||||||||||||||||||
Corporate bonds | 27,027 | 259 | 935 | 65 | 27,962 | 324 | ||||||||||||||||||
Equity securities | — | — | 7 | 5 | 7 | 5 | ||||||||||||||||||
State and local governments | 801 | 31 | — | — | 801 | 31 | ||||||||||||||||||
Total temporarily impaired securities | $ | 232,817 | 4,138 | 19,943 | 622 | 252,760 | 4,760 |
($ in thousands) Securities in an Unrealized
Loss Position for
Less than 12 MonthsSecurities in an Unrealized
Loss Position for
More than 12 MonthsTotal Fair Value Unrealized
LossesFair Value Unrealized
LossesFair Value Unrealized
LossesGovernment-sponsored enterprise securities $ 4,992 8 0 0 4,992 8 Mortgage-backed securities 77,274 293 50,851 382 128,125 675 Corporate bonds 0 0 915 85 915 85 State and local governments 0 0 934 3 934 3 Total temporarily impaired securities $ 82,266 301 52,700 470 134,966 771
The Company has also concluded
position.
Securities Available for Sale | Securities Held to Maturity | |||||||||||||||
Amortized | Fair | Amortized | Fair | |||||||||||||
($ in thousands) | Cost | Value | Cost | Value | ||||||||||||
Debt securities | ||||||||||||||||
Due within one year | $ | — | — | 1,872 | 1,883 | |||||||||||
Due after one year but within five years | 10,008 | 10,037 | 23,907 | 24,681 | ||||||||||||
Due after five years but within ten years | 27,794 | 28,242 | 23,979 | 25,040 | ||||||||||||
Due after ten years | 5,000 | 5,110 | 5,690 | 5,745 | ||||||||||||
Mortgage-backed securities | 155,684 | 155,535 | 67,708 | 67,529 | ||||||||||||
Total securities | $ | 198,486 | 198,924 | 123,156 | 124,878 |
Securities Available for Sale | Securities Held to Maturity | ||||||||||||||||||||||
($ in thousands) | Amortized Cost | Fair Value | Amortized Cost | Fair Value | |||||||||||||||||||
Securities | |||||||||||||||||||||||
Due within one year | $ | 0 | 0 | 1,496 | 1,509 | ||||||||||||||||||
Due after one year but within five years | 28,680 | 30,423 | 3,957 | 4,075 | |||||||||||||||||||
Due after five years but within ten years | 79,016 | 79,560 | 5,877 | 5,985 | |||||||||||||||||||
Due after ten years | 11,000 | 10,801 | 65,648 | 66,384 | |||||||||||||||||||
Mortgage-backed securities | 1,024,735 | 1,047,922 | 33,222 | 34,161 | |||||||||||||||||||
Total securities | $ | 1,143,431 | 1,168,706 | 110,200 | 112,114 |
Prior to September 22, 2016,
($ in thousands) | September 30, 2020 | December 31, 2019 | |||||||||||||||||||||
Amount | Percentage | Amount | Percentage | ||||||||||||||||||||
All loans: | |||||||||||||||||||||||
Commercial, financial, and agricultural | $ | 804,831 | 17 | % | $ | 504,271 | 11 | % | |||||||||||||||
Real estate – construction, land development & other land loans | 653,120 | 14 | % | 530,866 | 12 | % | |||||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 1,017,087 | 21 | % | 1,105,014 | 25 | % | |||||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | 310,326 | 6 | % | 337,922 | 8 | % | |||||||||||||||||
Real estate – mortgage – commercial and other | 1,983,622 | 41 | % | 1,917,280 | 43 | % | |||||||||||||||||
Consumer loans | 50,189 | 1 | % | 56,172 | 1 | % | |||||||||||||||||
Subtotal | 4,819,175 | 100 | % | 4,451,525 | 100 | % | |||||||||||||||||
Unamortized net deferred loan costs (fees) | (5,439) | 1,941 | |||||||||||||||||||||
Total loans | $ | 4,813,736 | $ | 4,453,466 |
($ in thousands) | September 30, 2020 | December 31, 2019 | |||||||||
Guaranteed portions of non-PPP SBA loans included in table above | $ | 46,085 | 54,400 | ||||||||
Unguaranteed portions of SBA Loans included in table above | 134,953 | 110,782 | |||||||||
Total non-PPP SBA loans included in the table above | $ | 181,038 | 165,182 | ||||||||
Sold portions of SBA with servicing retained - not included in tables above | $ | 379,123 | 316,730 |
In the information presented below, the term “covered” is used to describe assets that were subject to FDIC loss share agreements, while the term “non-covered” refers to the Company’s legacy assets, which were not included in any type of loss share arrangement. As discussed previously, all loss share agreements were terminated during 2016 and thus the entire loan portfolio is now classifiedportfolios as non-covered. Certain prior period disclosures will continue to present the breakout of the loan portfolio between covered and non-covered.
Page 19
On March 3, 2017, the Company acquired Carolina Bank (see Note 4 for more information). As a result of thismerger and acquisition transactions. In these transactions, the Company recorded loans with aat their fair value of $497.5 million. Of those loans, $19.3 millionas required by applicable accounting guidance. Included in these loan portfolios were considered to be purchased credit impaired (“PCI”) loans, which are loans for which it is probable at acquisition date that all contractually required payments will not be collected. The remaining loans arewere considered to be purchased non-impaired loans and their related fair value discount or premium is being recognized as an adjustment to yield over the remaining life of each loan.
The following table relates
($ in thousands)
| Carolina Bank Acquisition on March 3, 2017 | |||
Contractually required payments | $ | 27,108 | ||
Nonaccretable difference | (4,237 | ) | ||
Cash flows expected to be collected at acquisition | 22,871 | |||
Accretable yield | (3,617 | ) | ||
Fair value of PCI loans at acquisition date | $ | 19,254 |
The following table relates to acquired Carolina Bank purchased non-impaired loans and providesloans. The discounts are amortized as yield adjustments over the contractually required payments, fair value, and estimate of contractual cash flows not expected to be collected at the acquisition date.
($ in thousands)
| Carolina Bank Acquisition on March 3, 2017 | |||
Contractually required payments | $ | 569,980 | ||
Fair value of acquired loans at acquisition date | 478,515 | |||
Contractual cash flows not expected to be collected | 3,650 |
Page 20
The following is a summaryrespective lives of the major categories of total loans, outstanding:
($ in thousands) | September 30, 2017 | December 31, 2016 | September 30, 2016 | |||||||||||||||||||||
Amount | Percentage | Amount | Percentage | Amount | Percentage | |||||||||||||||||||
All loans: | ||||||||||||||||||||||||
Commercial, financial, and agricultural | $ | 376,940 | 11% | $ | 261,813 | 9% | $ | 248,877 | 9% | |||||||||||||||
Real estate – construction, land development & other land loans | 450,746 | 13% | 354,667 | 13% | 327,863 | 12% | ||||||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 796,222 | 23% | 750,679 | 28% | 756,880 | 29% | ||||||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | 315,322 | 9% | 239,105 | 9% | 239,049 | 9% | ||||||||||||||||||
Real estate – mortgage – commercial and other | 1,431,934 | 42% | 1,049,460 | 39% | 1,026,328 | 39% | ||||||||||||||||||
Installment loans to individuals | 59,028 | 2% | 55,037 | 2% | 52,264 | 2% | ||||||||||||||||||
Subtotal | 3,430,192 | 100% | 2,710,761 | 100% | 2,651,261 | 100% | ||||||||||||||||||
Unamortized net deferred loan costs (fees) | (437 | ) | (49 | ) | 198 | |||||||||||||||||||
Total loans | $ | 3,429,755 | $ | 2,710,712 | $ | 2,651,459 |
so long as the loans perform.
($ in thousands)
| ||||
Carrying amount of nonimpaired covered loans at January 1, 2016 | $ | 101,252 | ||
Principal repayments | (7,997 | ) | ||
Transfers to foreclosed real estate | (1,036 | ) | ||
Net loan recoveries | 1,784 | |||
Accretion of loan discount | 1,908 | |||
Transfer to non-covered loans due to expiration of loss-share agreement, April 1, 2016 | (17,530 | ) | ||
Transfer to non-covered loans due to termination of loss-share agreements, September 22, 2016 | (78,381 | ) | ||
Carrying amount of nonimpaired covered loans at September 30, 2016 | $ | — |
PCI loans.
PCI loans | For the Nine Months Ended September 30, 2020 | For the Nine Months Ended September 30, 2019 | |||||||||
Balance at beginning of period | $ | 12,664 | 17,393 | ||||||||
Change due to payments received and accretion | (3,062) | (3,694) | |||||||||
Change due to loan charge-offs | (13) | (11) | |||||||||
Transfers to foreclosed real estate | 0 | 0 | |||||||||
Other | 27 | 110 | |||||||||
Balance at end of period | $ | 9,616 | 13,798 |
($ in thousands)
Purchased Credit Impaired Loans | Accretable Yield | Carrying Amount | ||||||
Balance at January 1, 2016 | $ | — | 1,970 | |||||
Change due to payments received | — | (1,386 | ) | |||||
Change due to loan charge-off | — | (70 | ) | |||||
Balance at December 31, 2016 | — | 514 | ||||||
Additions due to acquisition of Carolina Bank | 3,617 | 19,254 | ||||||
Accretion | (1,326 | ) | 1,326 | |||||
Change due to payments received | — | (5,585 | ) | |||||
Transfer to foreclosed real estate | — | (69 | ) | |||||
Other | — | (406 | ) | |||||
Balance at September 30, 2017 | $ | 2,291 | 15,034 |
loans.
Accretable Yield for PCI loans | For the Nine Months Ended September 30, 2020 | For the Nine Months Ended September 30, 2019 | |||||||||
Balance at beginning of period | $ | 4,149 | 4,750 | ||||||||
Accretion | (927) | (1,050) | |||||||||
Reclassification from (to) nonaccretable difference | 400 | 583 | |||||||||
Other, net | (481) | 211 | |||||||||
Balance at end of period | $ | 3,141 | 4,494 |
Page 21
Nonperforming assets are defined as nonaccrual loans, restructured loans, loans past due 90 or more days and still accruing interest, nonperforming loans held for sale, and foreclosed real estate. Nonperforming assets are summarized as follows:
ASSET QUALITY DATA($ in thousands) | September 30, 2017 | December 31, 2016 | September 30, 2016 | |||||||||
Nonperforming assets | ||||||||||||
Nonaccrual loans | $ | 23,350 | 27,468 | 32,796 | ||||||||
Restructured loans - accruing | 20,330 | 22,138 | 27,273 | |||||||||
Accruing loans > 90 days past due | — | — | — | |||||||||
Total nonperforming loans | 43,680 | 49,606 | 60,069 | |||||||||
Foreclosed real estate | 9,356 | 9,532 | 10,103 | |||||||||
Total nonperforming assets | $ | 53,036 | 59,138 | 70,172 | ||||||||
Purchased credit impaired loans not included above (1) | $ | 15,034 | — | — |
follows.
($ in thousands) | September 30, 2020 | December 31, 2019 | |||||||||
Nonperforming assets | |||||||||||
Nonaccrual loans | $ | 31,656 | 24,866 | ||||||||
TDR's - accruing | 9,896 | 9,053 | |||||||||
Accruing loans > 90 days past due | 0 | 0 | |||||||||
Total nonperforming loans | 41,552 | 33,919 | |||||||||
Foreclosed real estate | 2,741 | 3,873 | |||||||||
Total nonperforming assets | $ | 44,293 | 37,792 | ||||||||
Purchased credit impaired loans not included above (1) | $ | 9,616 | 12,664 | ||||||||
($ in thousands) | September 30, 2017 | December 31, 2016 | ||||||
Commercial, financial, and agricultural | $ | 996 | 1,842 | |||||
Real estate – construction, land development & other land loans | 1,565 | 2,945 | ||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 14,878 | 16,017 | ||||||
Real estate – mortgage – home equity loans / lines of credit | 2,250 | 2,355 | ||||||
Real estate – mortgage – commercial and other | 3,534 | 4,208 | ||||||
Installment loans to individuals | 127 | 101 | ||||||
Total | $ | 23,350 | 27,468 | |||||
($ in thousands) | September 30, 2020 | December 31, 2019 | |||||||||
Commercial, financial, and agricultural | $ | 8,473 | 5,518 | ||||||||
Real estate – construction, land development & other land loans | 872 | 1,067 | |||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 5,742 | 7,552 | |||||||||
Real estate – mortgage – home equity loans / lines of credit | 1,594 | 1,797 | |||||||||
Real estate – mortgage – commercial and other | 14,795 | 8,820 | |||||||||
Consumer loans | 180 | 112 | |||||||||
Total | $ | 31,656 | 24,866 |
($ in thousands) | Accruing 30-59 Days Past Due | Accruing 60-89 Days Past Due | Accruing 90 Days or More Past Due | Nonaccrual Loans | Accruing Current | Total Loans Receivable | ||||||||||||||||||
Commercial, financial, and agricultural | $ | 325 | — | — | 996 | 375,364 | 376,685 | |||||||||||||||||
Real estate – construction, land development & other land loans | 432 | — | — | 1,565 | 447,873 | 449,870 | ||||||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 4,911 | 472 | — | 14,878 | 772,651 | 792,912 | ||||||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | 2,455 | — | — | 2,250 | 309,906 | 314,611 | ||||||||||||||||||
Real estate – mortgage – commercial and other | 1,094 | 469 | — | 3,534 | 1,417,012 | 1,422,109 | ||||||||||||||||||
Installment loans to individuals | 145 | 79 | — | 127 | 58,620 | 58,971 | ||||||||||||||||||
Purchased credit impaired | 611 | — | 449 | — | 13,974 | 15,034 | ||||||||||||||||||
Total | $ | 9,973 | 1,020 | 449 | 23,350 | 3,395,400 | 3,430,192 | |||||||||||||||||
Unamortized net deferred loan fees | (437 | ) | ||||||||||||||||||||||
Total loans | $ | 3,429,755 |
2020. Due to the onset of the COVID-19 pandemic not occurring until late in the first quarter of 2020, as well as the Company's COVID-19 deferral program and the SBA's relief program, whereby the SBA is making six months of principal and interest payments on most SBA loans held in the Company's portfolio, the past due amounts below were not negatively impacted by the pandemic in a significant manner.
($ in thousands) | Accruing 30-59 Days Past Due | Accruing 60-89 Days Past Due | Accruing 90 Days or More Past Due | Nonaccrual Loans | Accruing Current | Total Loans Receivable | |||||||||||||||||||||||||||||
Commercial, financial, and agricultural | $ | 629 | 116 | 0 | 8,473 | 795,437 | 804,655 | ||||||||||||||||||||||||||||
Real estate – construction, land development & other land loans | 41 | 0 | 0 | 872 | 652,057 | 652,970 | |||||||||||||||||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 1,122 | 1,307 | 0 | 5,742 | 1,003,741 | 1,011,912 | |||||||||||||||||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | 678 | 40 | 0 | 1,594 | 307,918 | 310,230 | |||||||||||||||||||||||||||||
Real estate – mortgage – commercial and other | 466 | 0 | 0 | 14,795 | 1,964,390 | 1,979,651 | |||||||||||||||||||||||||||||
Consumer loans | 113 | 37 | 0 | 180 | 49,811 | 50,141 | |||||||||||||||||||||||||||||
Purchased credit impaired | 0 | 13 | 799 | 0 | 8,804 | 9,616 | |||||||||||||||||||||||||||||
Total | $ | 3,049 | 1,513 | 799 | 31,656 | 4,782,158 | 4,819,175 | ||||||||||||||||||||||||||||
Unamortized net deferred loan costs (fees) | (5,439) | ||||||||||||||||||||||||||||||||||
Total loans | $ | 4,813,736 |
($ in thousands) | Accruing 30-59 Days Past Due | Accruing 60-89 Days Past Due | Accruing 90 Days or More Past Due | Nonaccrual Loans | Accruing Current | Total Loans Receivable | ||||||||||||||||||
Commercial, financial, and agricultural | $ | 92 | — | — | 1,842 | 259,879 | 261,813 | |||||||||||||||||
Real estate – construction, land development & other land loans | 473 | 168 | — | 2,945 | 351,081 | 354,667 | ||||||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 4,487 | 443 | — | 16,017 | 729,732 | 750,679 | ||||||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | 1,751 | 178 | — | 2,355 | 234,821 | 239,105 | ||||||||||||||||||
Real estate – mortgage – commercial and other | 1,482 | 449 | — | 4,208 | 1,042,807 | 1,048,946 | ||||||||||||||||||
Installment loans to individuals | 186 | 193 | — | �� | 101 | 54,557 | 55,037 | |||||||||||||||||
Purchased credit impaired | — | — | — | — | 514 | 514 | ||||||||||||||||||
Total | $ | 8,471 | 1,431 | — | 27,468 | 2,673,391 | 2,710,761 | |||||||||||||||||
Unamortized net deferred loan fees | (49 | ) | ||||||||||||||||||||||
Total loans | $ | 2,710,712 |
($ in thousands) Accruing
30-59
Days
Past
DueAccruing
60-89
Days
Past
DueAccruing
90 Days
or More
Past
DueNonaccrual
LoansAccruing
CurrentTotal Loans
ReceivableCommercial, financial, and agricultural $ 752 0 0 5,518 497,788 504,058 Real estate – construction, land development & other land loans 37 152 0 1,067 529,444 530,700 Real estate – mortgage – residential (1-4 family) first mortgages 10,858 5,056 0 7,552 1,076,205 1,099,671 Real estate – mortgage – home equity loans / lines of credit 770 300 0 1,797 334,832 337,699 Real estate – mortgage – commercial and other 4,257 0 0 8,820 1,897,573 1,910,650 Consumer loans 344 137 0 112 55,490 56,083 Purchased credit impaired 218 38 762 0 11,646 12,664 Total $ 17,236 5,683 762 24,866 4,402,978 4,451,525 Unamortized net deferred loan costs 1,941 Total loans $ 4,453,466
($ in thousands) | Commercial, Financial, and Agricultural | Real Estate – Construction, Land Development & Other Land Loans | Real Estate – Residential (1-4 Family) First Mortgages | Real Estate – Mortgage – Home Equity Lines of Credit | Real Estate – Mortgage – Commercial and Other | Installment Loans to Individuals | Unallo -cated | Total | ||||||||||||||||||||||||
As of and for the three months ended September 30, 2017 | ||||||||||||||||||||||||||||||||
Beginning balance | $ | 3,430 | 2,676 | 7,085 | 2,057 | 6,153 | 1,074 | 1,550 | 24,025 | |||||||||||||||||||||||
Charge-offs | (131 | ) | (43 | ) | (499 | ) | (213 | ) | (159 | ) | (162 | ) | — | (1,207 | ) | |||||||||||||||||
Recoveries | 330 | 809 | 170 | 120 | 275 | 71 | — | 1,775 | ||||||||||||||||||||||||
Provisions | (314 | ) | (973 | ) | (281 | ) | (49 | ) | (271 | ) | 45 | 1,843 | — | |||||||||||||||||||
Ending balance | $ | 3,315 | 2,469 | 6,475 | 1,915 | 5,998 | 1,028 | 3,393 | 24,593 | |||||||||||||||||||||||
As of and for the nine months ended September 30, 2017 | ||||||||||||||||||||||||||||||||
Beginning balance | $ | 3,829 | 2,691 | 7,704 | 2,420 | 5,098 | 1,145 | 894 | 23,781 | |||||||||||||||||||||||
Charge-offs | (1,335 | ) | (312 | ) | (1,746 | ) | (791 | ) | (573 | ) | (521 | ) | — | (5,278 | ) | |||||||||||||||||
Recoveries | 848 | 2,280 | 806 | 250 | 973 | 210 | — | 5,367 | ||||||||||||||||||||||||
Provisions | (27 | ) | (2,190 | ) | (289 | ) | 36 | 500 | 194 | 2,499 | 723 | |||||||||||||||||||||
Ending balance | $ | 3,315 | 2,469 | 6,475 | 1,915 | 5,998 | 1,028 | 3,393 | 24,593 | |||||||||||||||||||||||
Ending balances as of September 30, 2017: Allowance for loan losses | ||||||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | 144 | 23 | 929 | — | 487 | — | — | 1,583 | |||||||||||||||||||||||
Collectively evaluated for impairment | $ | 3,171 | 2,446 | 5,546 | 1,915 | 5,511 | 1,028 | 3,393 | 23,010 | |||||||||||||||||||||||
Purchased credit impaired | $ | — | — | — | — | — | — | — | — | |||||||||||||||||||||||
Loans receivable as of September 30, 2017: | ||||||||||||||||||||||||||||||||
Ending balance – total | $ | 376,940 | 450,746 | 796,222 | 315,322 | 1,431,934 | 59,028 | — | 3,430,192 | |||||||||||||||||||||||
Unamortized net deferred loan fees | (437 | ) | ||||||||||||||||||||||||||||||
Total loans | $ | 3,429,755 | ||||||||||||||||||||||||||||||
Ending balances as of September 30, 2017: Loans | ||||||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | 490 | 3,072 | 14,987 | 52 | 9,443 | — | — | 28,044 | |||||||||||||||||||||||
Collectively evaluated for impairment | $ | 376,195 | 446,798 | 777,925 | 314,559 | 1,412,666 | 58,971 | — | 3,387,114 | |||||||||||||||||||||||
Purchased credit impaired | $ | 255 | 876 | 3,310 | 711 | 9,825 | 57 | — | 15,034 |
($ in thousands) Commercial,
Financial,
and
AgriculturalReal Estate
–
Construction,
Land
Development
& Other Land
LoansReal Estate
–
Residential
(1-4 Family)
First
MortgagesReal Estate
– Mortgage
– Home
Equity
Lines of
CreditReal Estate
– Mortgage
–
Commercial
and OtherConsumer Loans Unallocated Total As of and for the three months ended September 30, 2020 Beginning balance $ 5,989 5,677 8,339 2,359 18,755 1,223 0 42,342 Charge-offs (325) (6) (4) (23) 0 (310) 0 (668) Recoveries 126 213 279 207 482 125 0 1,432 Provisions 2,986 388 82 (83) 2,369 308 70 6,120 Ending balance $ 8,776 6,272 8,696 2,460 21,606 1,346 70 49,226 As of and for the nine months ended September 30, 2020 Beginning balance $ 4,553 1,976 3,832 1,127 8,938 972 0 21,398 Charge-offs (4,256) (51) (478) (404) (545) (707) 0 (6,441) Recoveries 603 856 594 373 584 251 0 3,261 Provisions 7,876 3,491 4,748 1,364 12,629 830 70 31,008 Ending balance $ 8,776 6,272 8,696 2,460 21,606 1,346 70 49,226 Ending balance as of September 30, 2020: Allowance for loan losses Individually evaluated for impairment $ 1,814 56 820 0 1,624 0 0 4,314 Collectively evaluated for impairment $ 6,921 6,216 7,760 2,460 19,982 1,342 70 44,751 Purchased credit impaired $ 41 0 116 0 0 4 0 161 Loans receivable as of September 30, 2020 Ending balance – total $ 804,831 653,120 1,017,087 310,326 1,983,622 50,189 0 4,819,175 Unamortized net deferred loan fees (5,439) Total loans $ 4,813,736 Ending balances as of September 30, 2020: Loans Individually evaluated for impairment $ 7,001 853 9,657 319 16,349 0 0 34,179 Collectively evaluated for impairment $ 797,654 652,117 1,002,254 309,911 1,963,303 50,141 0 4,775,380 Purchased credit impaired $ 176 150 5,176 96 3,970 48 0 9,616
($ in thousands) | Commercial, Financial, and Agricultural | Real Estate – Construction, Land Development & Other Land Loans | Real Estate – Residential (1-4 Family) First Mortgages | Real Estate – Mortgage – Home Equity Lines of Credit | Real Estate – Mortgage – Commercial and Other | Installment Loans to Individuals | Unallo -cated | Covered | Total | |||||||||||||||||||||||||||
As of and for the year ended December 31, 2016 | ||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 4,742 | 3,754 | 7,832 | 2,893 | 5,816 | 1,051 | 696 | 1,799 | 28,583 | ||||||||||||||||||||||||||
Charge-offs | (2,271 | ) | (1,101 | ) | (3,815 | ) | (969 | ) | (1,005 | ) | (1,008 | ) | (1 | ) | (244 | ) | (10,414 | ) | ||||||||||||||||||
Recoveries | 805 | 1,422 | 1,060 | 250 | 836 | 354 | — | 1,958 | 6,685 | |||||||||||||||||||||||||||
Transfer from covered status | 56 | 65 | 839 | 293 | 127 | — | 1 | (1,381 | ) | — | ||||||||||||||||||||||||||
Removed due to branch loan sale | (263 | ) | (39 | ) | (347 | ) | (110 | ) | (228 | ) | (63 | ) | — | — | (1,050 | ) | ||||||||||||||||||||
Provisions | 760 | (1,410 | ) | 2,135 | 63 | (448 | ) | 811 | 198 | (2,132 | ) | (23 | ) | |||||||||||||||||||||||
Ending balance | $ | 3,829 | 2,691 | 7,704 | 2,420 | 5,098 | 1,145 | 894 | — | 23,781 | ||||||||||||||||||||||||||
Ending balances as of December 31, 2016: Allowance for loan losses | ||||||||||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | 7 | 184 | 1,339 | 5 | 105 | — | — | — | 1,640 | ||||||||||||||||||||||||||
Collectively evaluated for impairment | $ | 3,822 | 2,507 | 6,365 | 2,415 | 4,993 | 1,145 | 894 | — | 22,141 | ||||||||||||||||||||||||||
Purchased credit impaired | $ | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
Loans receivable as of December 31, 2016: | ||||||||||||||||||||||||||||||||||||
Ending balance – total | $ | 261,813 | 354,667 | 750,679 | 239,105 | 1,049,460 | 55,037 | — | — | 2,710,761 | ||||||||||||||||||||||||||
Unamortized net deferred loan fees | (49 | ) | ||||||||||||||||||||||||||||||||||
Total loans | $ | 2,710,712 | ||||||||||||||||||||||||||||||||||
Ending balances as of December 31, 2016: Loans | ||||||||||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | 644 | 4,001 | 20,807 | 280 | 6,494 | — | — | — | 32,226 | ||||||||||||||||||||||||||
Collectively evaluated for impairment | $ | 261,169 | 350,666 | 729,872 | 238,825 | 1,042,452 | 55,037 | — | — | 2,678,021 | ||||||||||||||||||||||||||
Purchased credit impaired | $ | — | — | — | — | 514 | — | — | — | 514 |
($ in thousands) Commercial,
Financial,
and
AgriculturalReal Estate
–
Construction,
Land
Development
& Other Land
LoansReal Estate
–
Residential
(1-4 Family)
First
MortgagesReal Estate
– Mortgage
– Home
Equity
Lines of
CreditReal Estate
– Mortgage
–
Commercial
and OtherConsumer Loans Unallocated Total As of and for the year ended December 31, 2019 Beginning balance $ 2,889 2,243 5,197 1,665 7,983 952 110 21,039 Charge-offs (2,473) (553) (657) (307) (1,556) (757) 0 (6,303) Recoveries 980 1,275 705 629 575 235 0 4,399 Provisions 3,157 (989) (1,413) (860) 1,936 542 (110) 2,263 Ending balance $ 4,553 1,976 3,832 1,127 8,938 972 0 21,398 Ending balances as of December 31, 2019: Allowance for loan losses Individually evaluated for impairment $ 1,791 50 750 0 983 0 0 3,574 Collectively evaluated for impairment $ 2,720 1,926 2,976 1,127 7,931 961 0 17,641 Purchased credit impaired $ 42 0 106 0 24 11 0 183 Loans receivable as of December 31, 2019: Ending balance – total $ 504,271 530,866 1,105,014 337,922 1,917,280 56,172 0 4,451,525 Unamortized net deferred loan costs 1,941 Total loans $ 4,453,466 Ending balances as of December 31, 2019: Loans Individually evaluated for impairment $ 4,957 796 9,546 333 9,570 0 0 25,202 Collectively evaluated for impairment $ 499,101 529,904 1,090,125 337,366 1,901,080 56,083 0 4,413,659 Purchased credit impaired $ 213 166 5,343 223 6,630 89 0 12,664
($ in thousands) | Commercial, Financial, and Agricultural | Real Estate – Construction, Land Development, & Other Land Loans | Real Estate – Residential (1-4 Family) First Mortgages | Real Estate – Mortgage – Home Equity Lines of Credit | Real Estate – Mortgage – Commercial and Other | Installment Loans to Individuals | Unallo -cated | Covered | Total | |||||||||||||||||||||||||||
As of and for the three months ended September 30, 2016 | ||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 4,282 | 2,899 | 7,860 | 2,285 | 5,571 | 1,480 | 572 | 1,074 | 26,023 | ||||||||||||||||||||||||||
Charge-offs | (495 | ) | (161 | ) | (692 | ) | (196 | ) | (288 | ) | (223 | ) | — | — | (2,055 | ) | ||||||||||||||||||||
Recoveries | 252 | 588 | 377 | 69 | 317 | 55 | — | — | 1,658 | |||||||||||||||||||||||||||
Transfer from covered status | — | 3 | 788 | 281 | 1 | — | 1 | (1,074 | ) | — | ||||||||||||||||||||||||||
Removed due to branch loan sale | (263 | ) | (39 | ) | (347 | ) | (110 | ) | (228 | ) | (63 | ) | (1 | ) | — | (1,051 | ) | |||||||||||||||||||
Provisions | 755 | (612 | ) | (492 | ) | 54 | (165 | ) | (38 | ) | 498 | — | — | |||||||||||||||||||||||
Ending balance | $ | 4,531 | 2,678 | 7,494 | 2,383 | 5,208 | 1,211 | 1,070 | — | 24,575 | ||||||||||||||||||||||||||
As of and for the nine months ended September 30, 2016 | ||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 4,742 | 3,754 | 7,832 | 2,893 | 5,816 | 1,051 | 696 | 1,799 | 28,583 | ||||||||||||||||||||||||||
Charge-offs | (1,229 | ) | (638 | ) | (3,383 | ) | (930 | ) | (850 | ) | (741 | ) | — | (244 | ) | (8,015 | ) | |||||||||||||||||||
Recoveries | 554 | 799 | 672 | 188 | 602 | 308 | — | 1,958 | 5,081 | |||||||||||||||||||||||||||
Transfer from covered status | 56 | 65 | 839 | 293 | 127 | — | 1 | (1,381 | ) | — | ||||||||||||||||||||||||||
Removed due to branch loan sale | (263 | ) | (39 | ) | (347 | ) | (110 | ) | (228 | ) | (63 | ) | (1 | ) | — | (1,051 | ) | |||||||||||||||||||
Provisions | 671 | (1,263 | ) | 1,881 | 49 | (259 | ) | 656 | 374 | (2,132 | ) | (23 | ) | |||||||||||||||||||||||
Ending balance | $ | 4,531 | 2,678 | 7,494 | 2,383 | 5,208 | 1,211 | 1,070 | — | 24,575 | ||||||||||||||||||||||||||
Ending balances as of September 30, 2016: Allowance for loan losses | ||||||||||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | 9 | 169 | 1,306 | 5 | 444 | — | — | — | 1,933 | ||||||||||||||||||||||||||
Collectively evaluated for impairment | $ | 4,522 | 2,509 | 6,188 | 2,372 | �� | 4,764 | 1,211 | 1,070 | — | 22,636 | |||||||||||||||||||||||||
Loans acquired with deteriorated credit quality | $ | — | — | — | 6 | — | — | — | — | 6 | ||||||||||||||||||||||||||
Loans receivable as of September 30, 2016: | ||||||||||||||||||||||||||||||||||||
Ending balance – total | $ | 248,877 | 327,863 | 756,880 | 239,049 | 1,026,328 | 52,264 | — | — | 2,651,261 | ||||||||||||||||||||||||||
Unamortized net deferred loan costs | 198 | |||||||||||||||||||||||||||||||||||
Total loans | $ | 2,651,459 | ||||||||||||||||||||||||||||||||||
Ending balances as of September 30, 2016: Loans | ||||||||||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | 1,732 | 4,181 | 21,611 | 310 | 11,291 | 1 | — | — | 39,126 | ||||||||||||||||||||||||||
Collectively evaluated for impairment | $ | 247,145 | 323,682 | 735,062 | 238,733 | 1,014,506 | 52,263 | — | — | 2,611,391 | ||||||||||||||||||||||||||
Loans acquired with deteriorated credit quality | $ | — | — | 207 | 6 | 531 | — | — | — | 744 |
($ in thousands) Commercial,
Financial,
and
AgriculturalReal Estate
–
Construction,
Land
Development
& Other Land
LoansReal Estate
–
Residential
(1-4 Family)
First
MortgagesReal Estate
– Mortgage
– Home
Equity
Lines of
CreditReal Estate
– Mortgage
–
Commercial
and OtherConsumer Loans Unallocated Total As of and for the three months ended September 30, 2019 Beginning balance $ 3,218 1,815 4,123 1,271 8,852 1,211 299 20,789 Charge-offs (288) (47) (194) (70) (617) (119) 0 (1,335) Recoveries 163 308 139 58 176 67 0 911 Provisions (226) (270) (112) (122) (199) (141) (35) (1,105) Ending balance $ 2,867 1,806 3,956 1,137 8,212 1,018 264 19,260 As of and for the nine months ended September 30, 2019 Beginning balance $ 2,889 2,243 5,197 1,665 7,983 952 110 21,039 Charge-offs (1,224) (340) (379) (216) (1,455) (555) 0 (4,169) Recoveries 768 797 521 513 550 154 0 3,303 Provisions 434 (894) (1,383) (825) 1,134 467 154 (913) Ending balance $ 2,867 1,806 3,956 1,137 8,212 1,018 264 19,260 Ending balance as of September 30, 2019: Allowance for loan losses Individually evaluated for impairment $ 168 45 828 0 230 0 0 1,271 Collectively evaluated for impairment $ 2,657 1,761 3,060 1,137 7,925 1,005 264 17,809 Purchased credit impaired $ 42 0 68 0 57 13 0 180 Loans receivable as of September 30, 2019 Ending balance – total $ 486,768 471,326 1,093,619 343,378 1,928,931 70,962 0 4,394,984 Unamortized net deferred loan costs 1,560 Total loans $ 4,396,544 Ending balances as of September 30, 2019: Loans Individually evaluated for impairment $ 1,090 804 9,942 338 6,941 0 0 19,115 Collectively evaluated for impairment $ 485,436 470,353 1,078,004 342,831 1,914,603 70,844 0 4,362,071 Purchased credit impaired $ 242 169 5,673 209 7,387 118 0 13,798
($ in thousands) | Recorded Investment | Unpaid Principal Balance | Related Allowance | Average Recorded Investment | ||||||||||||
Impaired loans with no related allowance recorded: | ||||||||||||||||
Commercial, financial, and agricultural | $ | 185 | 425 | — | 299 | |||||||||||
Real estate – mortgage – construction, land development & other land loans | 2,838 | 4,023 | — | 2,871 | ||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 6,461 | 7,029 | — | 7,533 | ||||||||||||
Real estate – mortgage –home equity loans / lines of credit | 52 | 79 | — | 70 | ||||||||||||
Real estate – mortgage –commercial and other | 2,158 | 2,394 | — | 3,162 | ||||||||||||
Installment loans to individuals | — | — | — | 1 | ||||||||||||
Total impaired loans with no allowance | $ | 11,694 | 13,950 | — | 13,936 | |||||||||||
Impaired loans with an allowance recorded: | ||||||||||||||||
Commercial, financial, and agricultural | $ | 305 | 305 | 144 | 169 | |||||||||||
Real estate – mortgage – construction, land development & other land loans | 234 | 243 | 23 | 570 | ||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 8,526 | 8,721 | 929 | 10,198 | ||||||||||||
Real estate – mortgage –home equity loans / lines of credit | — | — | — | 83 | ||||||||||||
Real estate – mortgage –commercial and other | 7,285 | 7,392 | 487 | 5,354 | ||||||||||||
Installment loans to individuals | — | — | — | — | ||||||||||||
Total impaired loans with allowance | $ | 16,350 | 16,661 | 1,583 | 16,374 |
2020.
($ in thousands) | Recorded Investment | Unpaid Principal Balance | Related Allowance | Average Recorded Investment | |||||||||||||||||||
Impaired loans with no related allowance recorded: | |||||||||||||||||||||||
Commercial, financial, and agricultural | $ | 12 | 16 | — | 15 | ||||||||||||||||||
Real estate – mortgage – construction, land development & other land loans | 316 | 494 | — | 246 | |||||||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 4,336 | 4,674 | — | 4,530 | |||||||||||||||||||
Real estate – mortgage –home equity loans / lines of credit | 319 | 357 | — | 327 | |||||||||||||||||||
Real estate – mortgage –commercial and other | 10,959 | 12,004 | — | 8,342 | |||||||||||||||||||
Consumer loans | 0 | 0 | — | 0 | |||||||||||||||||||
Total impaired loans with no allowance | $ | 15,942 | 17,545 | — | 13,460 | ||||||||||||||||||
Impaired loans with an allowance recorded: | |||||||||||||||||||||||
Commercial, financial, and agricultural | $ | 6,989 | 7,042 | 1,814 | 5,421 | ||||||||||||||||||
Real estate – mortgage – construction, land development & other land loans | 537 | 546 | 56 | 597 | |||||||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 5,321 | 5,498 | 820 | 5,185 | |||||||||||||||||||
Real estate – mortgage –home equity loans / lines of credit | 0 | 0 | 0 | 26 | |||||||||||||||||||
Real estate – mortgage –commercial and other | 5,390 | 6,231 | 1,624 | 5,528 | |||||||||||||||||||
Consumer loans | 0 | 0 | 0 | 0 | |||||||||||||||||||
Total impaired loans with allowance | $ | 18,237 | 19,317 | 4,314 | 16,757 |
($ in thousands) | Recorded Investment | Unpaid Principal Balance | Related Allowance | Average Recorded Investment | ||||||||||||
Impaired loans with no related allowance recorded: | ||||||||||||||||
Commercial, financial, and agricultural | $ | 593 | 706 | — | 816 | |||||||||||
Real estate – mortgage – construction, land development & other land loans | 3,221 | 4,558 | — | 3,641 | ||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 10,035 | 12,220 | — | 11,008 | ||||||||||||
Real estate – mortgage –home equity loans / lines of credit | 114 | 146 | — | 139 | ||||||||||||
Real estate – mortgage –commercial and other | 4,598 | 5,112 | — | 8,165 | ||||||||||||
Installment loans to individuals | — | 2 | — | 1 | ||||||||||||
Total impaired loans with no allowance | $ | 18,561 | 22,744 | — | 23,770 | |||||||||||
Impaired loans with an allowance recorded: | ||||||||||||||||
Commercial, financial, and agricultural | $ | 51 | 51 | 7 | 202 | |||||||||||
Real estate – mortgage – construction, land development & other land loans | 780 | 798 | 184 | 844 | ||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 10,772 | 11,007 | 1,339 | 13,314 | ||||||||||||
Real estate – mortgage –home equity loans / lines of credit | 166 | 166 | 5 | 324 | ||||||||||||
Real estate – mortgage –commercial and other | 1,896 | 1,929 | 105 | 4,912 | ||||||||||||
Installment loans to individuals | — | — | — | 49 | ||||||||||||
Total impaired loans with allowance | $ | 13,665 | 13,951 | 1,640 | 19,645 |
2019.
($ in thousands) | Recorded Investment | Unpaid Principal Balance | Related Allowance | Average Recorded Investment | |||||||||||||||||||
Impaired loans with no related allowance recorded: | |||||||||||||||||||||||
Commercial, financial, and agricultural | $ | 16 | 19 | — | 74 | ||||||||||||||||||
Real estate – mortgage – construction, land development & other land loans | 221 | 263 | — | 366 | |||||||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 4,300 | 4,539 | — | 4,415 | |||||||||||||||||||
Real estate – mortgage –home equity loans / lines of credit | 333 | 357 | — | 147 | |||||||||||||||||||
Real estate – mortgage –commercial and other | 2,643 | 3,328 | — | 3,240 | |||||||||||||||||||
Consumer loans | 0 | 0 | — | 0 | |||||||||||||||||||
Total impaired loans with no allowance | $ | 7,513 | 8,506 | — | 8,242 | ||||||||||||||||||
Impaired loans with an allowance recorded: | |||||||||||||||||||||||
Commercial, financial, and agricultural | $ | 4,941 | 4,995 | 1,791 | 1,681 | ||||||||||||||||||
Real estate – mortgage – construction, land development & other land loans | 575 | 575 | 50 | 586 | |||||||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 5,246 | 5,469 | 750 | 6,206 | |||||||||||||||||||
Real estate – mortgage –home equity loans / lines of credit | 0 | 0 | 0 | 55 | |||||||||||||||||||
Real estate – mortgage –commercial and other | 6,927 | 7,914 | 983 | 5,136 | |||||||||||||||||||
Consumer loans | 0 | 0 | 0 | 0 | |||||||||||||||||||
Total impaired loans with allowance | $ | 17,689 | 18,953 | 3,574 | 13,664 |
Page 27
The Company tracks credit quality based on its internal risk ratings. Upon origination, a loan is assigned an initial risk grade, which is generally based on several factors such as the borrower’s credit score, the loan-to-value ratio, the debt-to-income ratio, etc. Loans that are risk-graded as substandard during the origination process are declined. After loans are initially graded, they are monitored regularly for credit quality based on many factors, such as payment history, the borrower’s financial status, and changes in collateral value. Loans can be downgraded or upgraded depending on management’s evaluation of these factors. Internal risk-grading policies are consistent throughout each loan type.
Risk Grade | Description | |||||||
Pass: | ||||||||
1 | Loans with virtually no risk, including cash secured loans. | |||||||
2 | Loans with documented significant overall financial strength. These loans have minimum chance of loss due to the presence of multiple sources of repayment – each clearly sufficient to satisfy the obligation. | |||||||
3 | Loans with documented satisfactory overall financial strength. These loans have a low loss potential due to presence of at least two clearly identified sources of repayment – each of which is sufficient to satisfy the obligation under the present circumstances. | |||||||
4 | Loans to borrowers with acceptable financial condition. These loans could have signs of minor operational weaknesses, lack of adequate financial information, or loans supported by collateral with questionable value or marketability. | |||||||
5 | Loans that represent above average risk due to minor weaknesses and warrant closer scrutiny by management. Collateral is generally required and felt to provide reasonable coverage with realizable liquidation values in normal circumstances. Repayment performance is satisfactory. | |||||||
P
| Consumer loans (<$500,000) that are of satisfactory credit quality with borrowers who exhibit good personal credit history, average personal financial strength and moderate debt levels. These loans generally conform to Bank policy, but may include approved mitigated exceptions to the guidelines. | |||||||
Special Mention: | ||||||||
6 | Existing loans with defined weaknesses in primary source of repayment that, if not corrected, could cause a loss to the Bank. | |||||||
Classified: | ||||||||
7 | An existing loan inadequately protected by the current sound net worth and paying capacity of the obligor or the collateral pledged, if any. These loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. | |||||||
8 | Loans that have a well-defined weakness that make the collection or liquidation in full highly questionable and improbable. Loss appears imminent, but the exact amount and timing is uncertain. | |||||||
9 | Loans that are considered uncollectible and are in the process of being charged-off. This grade is a temporary grade assigned for administrative purposes until the charge-off is completed. | |||||||
F
| Consumer loans (<$500,000) with a well-defined weakness, such as exceptions of any kind with no mitigating factors, history of paying outside the terms of the note, insufficient income to support the current level of debt, etc. |
Page 28
The following table presents the Company’s recorded investment in loans by credit quality indicators as of September 30, 2017.
($ in thousands) | ||||||||||||||||||||
Pass | Special Mention Loans | Classified Accruing Loans | Classified Nonaccrual Loans | Total | ||||||||||||||||
Commercial, financial, and agricultural | $ | 365,505 | 8,974 | 1,210 | 996 | 376,685 | ||||||||||||||
Real estate – construction, land development & other land loans | 435,960 | 6,009 | 6,336 | 1,565 | 449,870 | |||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 729,341 | 15,298 | 33,395 | 14,878 | 792,912 | |||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | 304,114 | 1,262 | 6,985 | 2,250 | 314,611 | |||||||||||||||
Real estate – mortgage – commercial and other | 1,384,255 | 23,736 | 10,584 | 3,534 | 1,422,109 | |||||||||||||||
Installment loans to individuals | 58,444 | 224 | 176 | 127 | 58,971 | |||||||||||||||
Purchased credit impaired | 6,748 | 5,002 | 3,284 | — | 15,034 | |||||||||||||||
Total | $ | 3,284,367 | 60,505 | 61,970 | 23,350 | 3,430,192 | ||||||||||||||
Unamortized net deferred loan fees | (437 | ) | ||||||||||||||||||
Total loans | 3,429,755 |
2020.
($ in thousands) | Pass | Special Mention Loans | Classified Accruing Loans | Classified Nonaccrual Loans | Total | ||||||||||||||||||||||||
Commercial, financial, and agricultural | $ | 778,593 | 16,517 | 1,072 | 8,473 | 804,655 | |||||||||||||||||||||||
Real estate – construction, land development & other land loans | 643,826 | 7,058 | 1,214 | 872 | 652,970 | ||||||||||||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 985,925 | 7,634 | 12,611 | 5,742 | 1,011,912 | ||||||||||||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | 300,708 | 1,854 | 6,074 | 1,594 | 310,230 | ||||||||||||||||||||||||
Real estate – mortgage – commercial and other | 1,928,787 | 32,052 | 4,017 | 14,795 | 1,979,651 | ||||||||||||||||||||||||
Consumer loans | 49,658 | 85 | 218 | 180 | 50,141 | ||||||||||||||||||||||||
Purchased credit impaired | 7,778 | 86 | 1,752 | 0 | 9,616 | ||||||||||||||||||||||||
Total | $ | 4,695,275 | 65,286 | 26,958 | 31,656 | 4,819,175 | |||||||||||||||||||||||
Unamortized net deferred loan costs | (5,439) | ||||||||||||||||||||||||||||
Total loans | 4,813,736 |
($ in thousands) | ||||||||||||||||||||
Pass | Special Mention Loans | Classified Accruing Loans | Classified Nonaccrual Loans | Total | ||||||||||||||||
Commercial, financial, and agricultural | $ | 247,451 | 10,560 | 1,960 | 1,842 | 261,813 | ||||||||||||||
Real estate – construction, land development & other land loans | 335,068 | 8,762 | 7,892 | 2,945 | 354,667 | |||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 678,878 | 16,998 | 38,786 | 16,017 | 750,679 | |||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | 226,159 | 1,436 | 9,155 | 2,355 | 239,105 | |||||||||||||||
Real estate – mortgage – commercial and other | 1,005,687 | 26,032 | 13,019 | 4,208 | 1,048,946 | |||||||||||||||
Installment loans to individuals | 54,421 | 256 | 259 | 101 | 55,037 | |||||||||||||||
Purchased credit impaired | — | 514 | — | — | 514 | |||||||||||||||
Total | $ | 2,547,664 | 64,558 | 71,071 | 27,468 | 2,710,761 | ||||||||||||||
Unamortized net deferred loan fees | (49 | ) | ||||||||||||||||||
Total loans | 2,710,712 |
2019.
($ in thousands) | Pass | Special Mention Loans | Classified Accruing Loans | Classified Nonaccrual Loans | Total | ||||||||||||||||||||||||
Commercial, financial, and agricultural | $ | 486,081 | 7,998 | 4,461 | 5,518 | 504,058 | |||||||||||||||||||||||
Real estate – construction, land development & other land loans | 522,767 | 4,075 | 2,791 | 1,067 | 530,700 | ||||||||||||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 1,063,735 | 13,187 | 15,197 | 7,552 | 1,099,671 | ||||||||||||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | 328,903 | 1,258 | 5,741 | 1,797 | 337,699 | ||||||||||||||||||||||||
Real estate – mortgage – commercial and other | 1,873,594 | 20,800 | 7,436 | 8,820 | 1,910,650 | ||||||||||||||||||||||||
Consumer loans | 55,203 | 413 | 355 | 112 | 56,083 | ||||||||||||||||||||||||
Purchased credit impaired | 8,098 | 2,590 | 1,976 | 0 | 12,664 | ||||||||||||||||||||||||
Total | $ | 4,338,381 | 50,321 | 37,957 | 24,866 | 4,451,525 | |||||||||||||||||||||||
Unamortized net deferred loan costs | 1,941 | ||||||||||||||||||||||||||||
Total loans | 4,453,466 |
As previously noted, under the CARES Act and banking regulator guidance, which the Company has applied, modifications deemed to be COVID-19-related are not considered a TDR if the loan was not more than 30 days past due as of December 31, 2019 and the deferral was executed between March 1, 2020 and the earlier of 60 days after the date of termination of the COVID-19 national emergency or December 31, 2020. As the initial 90 day deferrals began to expire late in the second quarter and early in the third quarter, the Company approved second deferral requests of another 90 days based on the circumstances of each borrower. Under these terms, as of September 30, 2020, the Company had payment deferrals for 207 loans with an aggregate loan balance of $186 million, and for the reasons previously noted, these loans are not included in the TDR's disclosed in this report. Approximately $158 million of the $186 million in deferrals were second deferrals and for $100 million of the total deferrals, the borrower is scheduled to make interest payments with only principal being deferred. The Company continues to accrue interest on these loans during the deferral period.
Page 29
($ in thousands) | For three months ended September 30, 2017 | For the three months ended September 30, 2016 | ||||||||||||||||||||||
Number of Contracts | Pre- Modification Restructured Balances | Post- Modification Restructured Balances | Number of Contracts | Pre- Modification Restructured Balances | Post- Modification Restructured Balances | |||||||||||||||||||
TDRs – Accruing | ||||||||||||||||||||||||
Commercial, financial, and agricultural | — | $ | — | $ | — | 1 | $ | 1,071 | $ | 1,071 | ||||||||||||||
Real estate – construction, land development & other land loans | — | — | — | — | — | — | ||||||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | — | — | — | — | — | — | ||||||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | — | — | — | — | — | — | ||||||||||||||||||
Real estate – mortgage – commercial and other | — | — | — | — | — | — | ||||||||||||||||||
Installment loans to individuals | — | — | — | — | — | — | ||||||||||||||||||
TDRs – Nonaccrual | ||||||||||||||||||||||||
Commercial, financial, and agricultural | — | — | — | — | — | — | ||||||||||||||||||
Real estate – construction, land development & other land loans | — | — | — | — | — | — | ||||||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | — | — | — | — | — | — | ||||||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | — | — | — | — | — | — | ||||||||||||||||||
Real estate – mortgage – commercial and other | — | — | — | — | — | — | ||||||||||||||||||
Installment loans to individuals | — | — | — | — | — | — | ||||||||||||||||||
Total TDRs arising during period | — | $ | — | $ | — | 1 | $ | 1,071 | $ | 1,071 | ||||||||||||||
Total covered TDRs arising during period included above | — | $ | — | $ | — | — | $ | — | $ | — |
($ in thousands) | For the three months ended September 30, 2020 | For the three months ended September 30, 2019 | |||||||||||||||||||||||||||||||||
Number of Contracts | Pre- Modification Restructured Balances | Post- Modification Restructured Balances | Number of Contracts | Pre- Modification Restructured Balances | Post- Modification Restructured Balances | ||||||||||||||||||||||||||||||
TDRs – Accruing | |||||||||||||||||||||||||||||||||||
Commercial, financial, and agricultural | 0 | $ | 0 | $ | 0 | 0 | $ | 0 | $ | 0 | |||||||||||||||||||||||||
Real estate – construction, land development & other land loans | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 0 | 0 | 0 | 1 | 133 | 133 | |||||||||||||||||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
Real estate – mortgage – commercial and other | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
Consumer loans | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
TDRs – Nonaccrual | |||||||||||||||||||||||||||||||||||
Commercial, financial, and agricultural | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
Real estate – construction, land development & other land loans | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
Real estate – mortgage – commercial and other | 1 | 2,344 | 2,344 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
Consumer loans | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
Total TDRs arising during period | 1 | $ | 2,344 | $ | 2,344 | 1 | $ | 133 | $ | 133 |
($ in thousands) | For nine months ended September 30, 2017 | For the nine months ended September 30, 2016 | ||||||||||||||||||||||
Number of Contracts | Pre- Modification Restructured Balances | Post- Modification Restructured Balances | Number of Contracts | Pre- Modification Restructured Balances | Post- Modification Restructured Balances | |||||||||||||||||||
TDRs – Accruing | ||||||||||||||||||||||||
Commercial, financial, and agricultural | — | $ | — | $ | — | 1 | $ | 1,071 | $ | 1,071 | ||||||||||||||
Real estate – construction, land development & other land loans | — | — | — | — | — | — | ||||||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | — | — | — | — | — | — | ||||||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | — | — | — | — | — | — | ||||||||||||||||||
Real estate – mortgage – commercial and other | 5 | 3,550 | 3,525 | — | — | — | ||||||||||||||||||
Installment loans to individuals | — | — | — | — | — | — | ||||||||||||||||||
TDRs – Nonaccrual | ||||||||||||||||||||||||
Commercial, financial, and agricultural | — | — | — | — | — | — | ||||||||||||||||||
Real estate – construction, land development & other land loans | 1 | 32 | 32 | — | — | — | ||||||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 1 | 215 | 215 | — | — | — | ||||||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | — | — | — | — | — | — | ||||||||||||||||||
Real estate – mortgage – commercial and other | — | — | — | — | — | — | ||||||||||||||||||
Installment loans to individuals | — | — | — | — | — | — | ||||||||||||||||||
Total TDRs arising during period | 7 | $ | 3,797 | $ | 3,772 | 1 | $ | 1,071 | $ | 1,071 | ||||||||||||||
Total covered TDRs arising during period included above | — | $ | — | $ | — | — | $ | — | $ | — |
2019.
($ in thousands) | For the nine months ended September 30, 2020 | For the nine months ended September 30, 2019 | |||||||||||||||||||||||||||||||||
Number of Contracts | Pre- Modification Restructured Balances | Post- Modification Restructured Balances | Number of Contracts | Pre- Modification Restructured Balances | Post- Modification Restructured Balances | ||||||||||||||||||||||||||||||
TDRs – Accruing | |||||||||||||||||||||||||||||||||||
Commercial, financial, and agricultural | 2 | $ | 143 | $ | 143 | 1 | $ | 143 | $ | 143 | |||||||||||||||||||||||||
Real estate – construction, land development & other land loans | 1 | 67 | 67 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 2 | 75 | 78 | 4 | 523 | 527 | |||||||||||||||||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
Real estate – mortgage – commercial and other | 0 | 0 | 0 | 1 | 965 | 965 | |||||||||||||||||||||||||||||
Consumer loans | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
TDRs – Nonaccrual | |||||||||||||||||||||||||||||||||||
Commercial, financial, and agricultural | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
Real estate – construction, land development & other land loans | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
Real estate – mortgage – commercial and other | 1 | 2,344 | 2,344 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
Consumer loans | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
Total TDRs arising during period | 6 | $ | 2,629 | $ | 2,632 | 6 | $ | 1,631 | $ | 1,635 |
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Page 31
($ in thousands) | For the Three Months Ended September 30, 2020 | For the Three Months Ended September 30, 2019 | |||||||||||||||||||||
Number of Contracts | Recorded Investment | Number of Contracts | Recorded Investment | ||||||||||||||||||||
Accruing TDRs that subsequently defaulted | |||||||||||||||||||||||
Real estate – mortgage – residential (1-4 family first mortgages) | 0 | $ | 0 | 0 | $ | 0 | |||||||||||||||||
Real estate – mortgage – commercial and other | 0 | 0 | 0 | 0 | |||||||||||||||||||
Total accruing TDRs that subsequently defaulted | 1 | $ | 274 | 1 | $ | 93 |
($ in thousands) | For the nine months ended September 30, 2017 | For the nine months ended September 30, 2016 | ||||||||||||||
Number of Contracts | Recorded Investment | Number of Contracts | Recorded Investment | |||||||||||||
Accruing TDRs that subsequently defaulted | ||||||||||||||||
Commercial, financial, and agricultural | — | $ | — | 1 | $ | 44 | ||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 2 | 880 | — | — | ||||||||||||
Real estate – mortgage – commercial and other | — | — | 1 | 21 | ||||||||||||
Total accruing TDRs that subsequently defaulted | 2 | $ | 880 | 2 | $ | 65 | ||||||||||
Total covered accruing TDRs that subsequently defaulted included above | — | $ | — | 1 | $ | 44 |
Note 9 – Deferred Loan (Fees) Costs
The amount of loans shown on the Consolidated Balance Sheets includes net deferred loan (fees) costs of approximately ($437,000), ($49,000), and $198,000 at September 30, 2017, December 31, 2016, and September 30, 2016, respectively.
Note 10 – FDIC Indemnification Asset
The Company terminated all loss share agreements with the FDIC effective September 22, 2016. As a result, the remaining balance in the FDIC Indemnification Asset, which represented the estimated amount to be received from the FDIC under the loss share agreements, was written off as indemnification asset expense as of the termination date.
The following presents a rollforward of the FDIC indemnification asset from January 1, 2016 through the date of termination.
($ in thousands) | ||||
Balance at January 1, 2016 | $ | 8,439 | ||
Decrease related to favorable changes in loss estimates | (2,246 | ) | ||
Increase related to reimbursable expenses | 205 | |||
Cash paid (received) | 1,554 | |||
Related to accretion of loan discount | (2,005 | ) | ||
Other | (236 | ) | ||
Write off of asset balance upon termination of FDIC loss share agreements effective September 22, 2016 | (5,711 | ) | ||
Balance at September 30, 2016 | $ | — |
($ in thousands) | For the Nine Months Ended September 30, 2020 | For the Nine Months Ended September 30, 2019 | |||||||||||||||||||||
Number of Contracts | Recorded Investment | Number of Contracts | Recorded Investment | ||||||||||||||||||||
Accruing TDRs that subsequently defaulted | |||||||||||||||||||||||
Real estate – mortgage – residential (1-4 family first mortgages) | 0 | $ | 0 | 1 | $ | 93 | |||||||||||||||||
Real estate – mortgage – commercial and other | 1 | 274 | 0 | 0 | |||||||||||||||||||
Total accruing TDRs that subsequently defaulted | 1 | $ | 274 | 1 | $ | 93 |
September 30, 2017 | December 31, 2016 | September 30, 2016 | ||||||||||||||||||||||
($ in thousands) | Gross Carrying Amount | Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | ||||||||||||||||||
Amortizable intangible assets: | ||||||||||||||||||||||||
Customer lists | $ | 6,013 | 953 | 2,369 | 746 | 2,369 | 668 | |||||||||||||||||
Core deposit premiums | 18,520 | 10,084 | 9,730 | 8,143 | 9,730 | 7,902 | ||||||||||||||||||
Other | 1,303 | 471 | 1,032 | 224 | 1,032 | 166 | ||||||||||||||||||
Total | $ | 25,836 | 11,508 | 13,131 | 9,113 | 13,131 | 8,736 | |||||||||||||||||
SBA servicing asset | $ | 1,306 | 415 | 208 | ||||||||||||||||||||
Unamortizable intangible assets: | ||||||||||||||||||||||||
Goodwill | $ | 144,667 | 75,042 | 75,392 |
Page 32
September 30, 2020 | December 31, 2019 | |||||||||||||||||||||||||
($ in thousands) | Gross Carrying Amount | Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | ||||||||||||||||||||||
Amortizable intangible assets: | ||||||||||||||||||||||||||
Customer lists | $ | 6,013 | 2,575 | 6,013 | 2,185 | |||||||||||||||||||||
Core deposit intangibles | 28,440 | 23,112 | 28,440 | 20,610 | ||||||||||||||||||||||
SBA servicing asset | 9,268 | 3,624 | 7,776 | 2,393 | ||||||||||||||||||||||
Other | 1,303 | 1,196 | 1,303 | 1,127 | ||||||||||||||||||||||
Total | $ | 45,024 | 30,507 | 43,532 | 26,315 | |||||||||||||||||||||
Unamortizable intangible assets: | ||||||||||||||||||||||||||
Goodwill | $ | 240,972 | 234,368 |
Activity related to transactions during the periods presented includes the following (See Note 4 to the Consolidated Financial Statements
In addition to the above acquisition related activity,SBA loans, or portions thereof, that the Company recorded $415,000 in net servicing assets associated with the guaranteed portion of SBA loans originated andhas sold during the third and fourth quarters of 2016. During the first nine months of 2017, the Company recorded an additional $1,003,000 in servicing assets, as well as $112,000 in amortization expense.but continue to service for a fee. Servicing assets are initially recorded at fair value and amortized over the expected lives of the related loans.
loans and are tested for impairment on a quarterly basis. SBA servicing asset amortization expense is recorded within noninterest income as an offset to SBA servicing fees within the line item "Other service charges, commissions, and fees." As derived from the table above, the Company had a SBA servicing asset at September 30, 2020 with a remaining book value of $5,644,000. The Company recorded $1,492,000 and $2,057,000 in servicing assets associated with the guaranteed portion of SBA loans sold during the first nine months of 2020 and 2019, respectively. During the first nine months of 2020 and 2019, the Company recorded $1,231,000 and $975,000, respectively, in related amortization expense.
($ in thousands)
| Estimated Amortization Expense | |||
October 1 to December 31, 2017 | $ | 902 | ||
2018 | 3,262 | |||
2019 | 2,654 | |||
2020 | 2,090 | |||
2021 | 1,628 | |||
Thereafter | 3,792 | |||
Total | $ | 14,328 | ||
Page 33
($ in thousands) | Estimated Amortization Expense | |||||||
October 1 to December 31, 2020 | $ | 880 | ||||||
2021 | 2,927 | |||||||
2022 | 2,022 | |||||||
2023 | 1,041 | |||||||
2024 | 404 | |||||||
Thereafter | 1,599 | |||||||
Total | $ | 8,873 |
For the Three Months Ended September 30, | ||||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2017 Total | 2016 Total | |||||||||||||||||||
($ in thousands) | Pension Plan | Pension Plan | SERP | SERP | Both Plans | Both Plans | ||||||||||||||||||
Service cost | $ | — | — | 29 | 27 | 29 | 27 | |||||||||||||||||
Interest cost | 361 | 375 | 57 | 60 | 418 | 435 | ||||||||||||||||||
Expected return on plan assets | (702 | ) | (675 | ) | — | — | (702 | ) | (675 | ) | ||||||||||||||
Amortization of transition obligation | — | — | — | — | — | — | ||||||||||||||||||
Amortization of net (gain)/loss | 61 | 59 | (8 | ) | (9 | ) | 53 | 50 | ||||||||||||||||
Amortization of prior service cost | — | — | — | — | — | — | ||||||||||||||||||
Net periodic pension (income)/cost | $ | (280 | ) | (241 | ) | 78 | 78 | (202 | ) | (163 | ) |
cost.
For the Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||
($ in thousands) | 2020 Pension Plan | 2019 Pension Plan | 2020 SERP | 2019 SERP | 2020 Total Both Plans | 2019 Total Both Plans | |||||||||||||||||||||||||||||
Service cost | $ | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||
Interest cost | 303 | 367 | 55 | 82 | 358 | 449 | |||||||||||||||||||||||||||||
Expected return on plan assets | (325) | (360) | 0 | 0 | (325) | (360) | |||||||||||||||||||||||||||||
Amortization of net (gain)/loss | 194 | 282 | (41) | (127) | 153 | 155 | |||||||||||||||||||||||||||||
Net periodic pension cost | $ | 172 | 289 | 14 | (45) | 186 | 244 |
Nine Months Ended September 30, 2020 | |||||||||||||||||||||||||||||||||||
($ in thousands) | 2020 Pension Plan | 2019 Pension Plan | 2020 SERP | 2019 SERP | 2020 Total Both Plans | 2019 Total Both Plans | |||||||||||||||||||||||||||||
Service cost | $ | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||
Interest cost | 917 | 1,111 | 165 | 164 | 1,082 | 1,275 | |||||||||||||||||||||||||||||
Expected return on plan assets | (976) | (1,154) | 0 | 0 | (976) | (1,154) | |||||||||||||||||||||||||||||
Amortization of net (gain)/loss | 634 | 733 | (123) | (122) | 511 | 611 | |||||||||||||||||||||||||||||
Net periodic pension cost | $ | 575 | 690 | 42 | 42 | 617 | 732 |
For the Nine Months Ended September 30, | ||||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2017 Total | 2016 Total | |||||||||||||||||||
($ in thousands) | Pension Plan | Pension Plan | SERP | SERP | Both Plans | Both Plans | ||||||||||||||||||
Service cost – benefits earned during the period | $ | — | — | 88 | 80 | 88 | 80 | |||||||||||||||||
Interest cost | 1,086 | 1,127 | 170 | 178 | 1,256 | 1,305 | ||||||||||||||||||
Expected return on plan assets | (2,107 | ) | (2,025 | ) | — | — | (2,107 | ) | (2,025 | ) | ||||||||||||||
Amortization of transition obligation | — | — | — | — | — | — | ||||||||||||||||||
Amortization of net (gain)/loss | 183 | 179 | (25 | ) | (27 | ) | 158 | 152 | ||||||||||||||||
Amortization of prior service cost | — | — | — | — | — | — | ||||||||||||||||||
Net periodic pension (income)/cost | $ | (838 | ) | (719 | ) | 233 | 231 | (605 | ) | (488 | ) |
cost are included in other noninterest expense.
the remainder of 2020.
Page 34
($ in thousands)
| September 30, 2017 | December 31, 2016 | September 30, 2016 | |||||||||
Unrealized gain (loss) on securities available for sale | $ | 438 | (3,085 | ) | 1,964 | |||||||
Deferred tax asset (liability) | (162 | ) | 1,138 | (767 | ) | |||||||
Net unrealized gain (loss) on securities available for sale | 276 | (1,947 | ) | 1,197 | ||||||||
Additional pension asset (liability) | (4,854 | ) | (5,012 | ) | (4,505 | ) | ||||||
Deferred tax asset (liability) | 1,796 | 1,852 | 1,757 | |||||||||
Net additional pension asset (liability) | (3,058 | ) | (3,160 | ) | (2,748 | ) | ||||||
Total accumulated other comprehensive income (loss) | $ | (2,782 | ) | (5,107 | ) | (1,551 | ) |
($ in thousands) | September 30, 2020 | December 31, 2019 | |||||||||
Unrealized gain (loss) on securities available for sale | $ | 25,275 | 9,743 | ||||||||
Deferred tax asset (liability) | (5,808) | (2,239) | |||||||||
Net unrealized gain (loss) on securities available for sale | 19,467 | 7,504 | |||||||||
Postretirement plans asset (liability) | (2,581) | (3,092) | |||||||||
Deferred tax asset (liability) | 593 | 711 | |||||||||
Net postretirement plans asset (liability) | (1,988) | (2,381) | |||||||||
Total accumulated other comprehensive income (loss) | $ | 17,479 | 5,123 |
($ in thousands)
| Unrealized Gain (Loss) on Securities Available for Sale | Additional Pension Asset (Liability) | Total | |||||||||
Beginning balance at January 1, 2017 | $ | (1,947 | ) | (3,160 | ) | (5,107 | ) | |||||
Other comprehensive income (loss) before reclassifications | 2,075 | — | 2,075 | |||||||||
Amounts reclassified from accumulated other comprehensive income | 148 | 102 | 250 | |||||||||
Net current-period other comprehensive income (loss) | 2,223 | 102 | 2,325 | |||||||||
Ending balance at September 30, 2017 | $ | 276 | (3,058 | ) | (2,782 | ) |
($ in thousands) | Unrealized Gain (Loss) on Securities Available for Sale | Postretirement Plans Asset (Liability) | Total | ||||||||||||||
Beginning balance at January 1, 2020 | $ | 7,504 | (2,381) | 5,123 | |||||||||||||
Other comprehensive income (loss) before reclassifications | 18,143 | 0 | 18,143 | ||||||||||||||
Amounts reclassified from accumulated other comprehensive income | (6,180) | 393 | (5,787) | ||||||||||||||
Net current-period other comprehensive income (loss) | 11,963 | 393 | 12,356 | ||||||||||||||
Ending balance at September 30, 2020 | $ | 19,467 | (1,988) | 17,479 |
($ in thousands)
| Unrealized Gain (Loss) on Securities Available for Sale | Additional Pension Asset (Liability) | Total | |||||||||
Beginning balance at January 1, 2016 | $ | (709 | ) | (2,841 | ) | (3,550 | ) | |||||
Other comprehensive income before reclassifications | 1,908 | — | 1,908 | |||||||||
Amounts reclassified from accumulated other comprehensive income | (2 | ) | 93 | 91 | ||||||||
Net current-period other comprehensive income | 1,906 | 93 | 1,999 | |||||||||
Ending balance at September 30, 2016 | $ | 1,197 | (2,748 | ) | (1,551 | ) |
($ in thousands) | Unrealized Gain (Loss) on Securities Available for Sale | Postretirement Plans Asset (Liability) | Total | ||||||||||||||
Beginning balance at January 1, 2019 | $ | (9,494) | (2,467) | (11,961) | |||||||||||||
Other comprehensive income (loss) before reclassifications | 15,212 | 0 | 15,212 | ||||||||||||||
Amounts reclassified from accumulated other comprehensive income | (75) | 458 | 383 | ||||||||||||||
Net current-period other comprehensive income (loss) | 15,137 | 458 | 15,595 | ||||||||||||||
Ending balance at September 30, 2019 | $ | 5,643 | (2,009) | 3,634 |
Relevant accounting guidance establishes
Page 35
The following table summarizes the Company’s financial instruments that were measured at fair value on a recurring and nonrecurring basis at September 30, 2017.
($ in thousands) | ||||||||||||||||
Description of Financial Instruments | Fair Value at September 30, 2017 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
Recurring | ||||||||||||||||
Securities available for sale: | ||||||||||||||||
Government-sponsored enterprise securities | $ | 8,992 | — | 8,992 | — | |||||||||||
Mortgage-backed securities | 155,535 | — | 155,535 | — | ||||||||||||
Corporate bonds | 34,397 | — | 34,397 | — | ||||||||||||
Total available for sale securities | $ | 198,924 | — | 198,924 | — | |||||||||||
Nonrecurring | ||||||||||||||||
Impaired loans | $ | 14,932 | — | — | 14,932 | |||||||||||
Foreclosed real estate | 9,356 | — | — | 9,356 |
2020.
($ in thousands) | ||||||||||||||||||||||||||
Description of Financial Instruments | Fair Value at September 30, 2020 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||
Recurring | ||||||||||||||||||||||||||
Securities available for sale: | ||||||||||||||||||||||||||
Government-sponsored enterprise securities | $ | 75,653 | 0 | 75,653 | 0 | |||||||||||||||||||||
Mortgage-backed securities | 1,047,922 | 0 | 1,047,922 | 0 | ||||||||||||||||||||||
Corporate bonds | 45,131 | 0 | 45,131 | 0 | ||||||||||||||||||||||
Total available for sale securities | $ | 1,168,706 | 0 | 1,168,706 | 0 | |||||||||||||||||||||
Presold mortgages in process of settlement | $ | 34,028 | 34,028 | 0 | 0 | |||||||||||||||||||||
Nonrecurring | ||||||||||||||||||||||||||
Impaired loans | $ | 16,547 | 0 | 0 | 16,547 | |||||||||||||||||||||
Foreclosed real estate | 1,253 | 0 | 0 | 1,253 |
($ in thousands) | ||||||||||||||||
Description of Financial Instruments | Fair Value at December 31, 2016 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
Recurring | ||||||||||||||||
Securities available for sale: | ||||||||||||||||
Government-sponsored enterprise securities | $ | 17,490 | — | 17,490 | — | |||||||||||
Mortgage-backed securities | 148,065 | — | 148,065 | — | ||||||||||||
Corporate bonds | 33,600 | — | 33,600 | — | ||||||||||||
Equity securities | 174 | — | 174 | — | ||||||||||||
Total available for sale securities | $ | 199,329 | — | 199,329 | — | |||||||||||
Nonrecurring | ||||||||||||||||
Impaired loans | $ | 12,284 | — | — | 12,284 | |||||||||||
Foreclosed real estate | 9,532 | — | — | 9,532 |
2019.
($ in thousands) | ||||||||||||||||||||||||||
Description of Financial Instruments | Fair Value at December 31, 2019 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||
Recurring | ||||||||||||||||||||||||||
Securities available for sale: | ||||||||||||||||||||||||||
Government-sponsored enterprise securities | $ | 20,009 | 0 | 20,009 | 0 | |||||||||||||||||||||
Mortgage-backed securities | 767,285 | 0 | 767,285 | 0 | ||||||||||||||||||||||
Corporate bonds | 34,651 | 0 | 34,651 | 0 | ||||||||||||||||||||||
Total available for sale securities | $ | 821,945 | 0 | 821,945 | 0 | |||||||||||||||||||||
Presold mortgages in process of settlement | $ | 19,712 | 19,712 | 0 | 0 | |||||||||||||||||||||
Nonrecurring | ||||||||||||||||||||||||||
Impaired loans | $ | 16,215 | 0 | 0 | 16,215 | |||||||||||||||||||||
Foreclosed real estate | 1,830 | 0 | 0 | 1,830 |
Page 36
Impaired loans — Fair values for impaired loans in the above table are measured on a non-recurring basis and are based on the underlying collateral values securing the loans, adjusted for estimated selling costs, or the net present value of the cash flows expected to be received for such loans. Collateral may be in the form of real estate or business assets including equipment, inventory and accounts receivable. The vast majority of the collateral is real estate. The value of real estate collateral is generally determined by third-party appraisers using an income or market valuation approach based on an appraisal conducted by an independent, licensed third party appraiser (Level 3). The value of business equipment is based upon an outside appraisal if deemed significant, or the net book value on the applicable borrower’s financial statements if not considered significant. Likewise, values for inventory and accounts receivable collateral are based on borrower financial statement balances or aging reports on a discounted basis as appropriate (Level 3). Appraisals used in this analysis are generally obtained at least annually based on when the loans first became impaired, and thus the appraisals are not necessarily as of the period ends presented. Any fair value adjustments are recorded in the period incurred as provision for loan losses on the Consolidated Statements of Income.
($ in thousands) | ||||||||||
Description | Fair Value at September 30, 2017 | Valuation Technique | Significant Unobservable Inputs | General Range of Significant Unobservable Input Values | ||||||
Impaired loans | $ | 14,932 | Appraised value; PV of expected cash flows | Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell | 0-10% | |||||
Foreclosed real estate | 9,356 | Appraised value; List or contract price | Discounts to reflect current market conditions, abbreviated holding period and estimated costs to sell | 0-10% | ||||||
($ in thousands) | ||||||||||||||||||||||||||
Description | Fair Value at September 30, 2020 | Valuation Technique | Significant Unobservable Inputs | Range (Weighted Average) | ||||||||||||||||||||||
Impaired loans - valued at collateral value | $ | 10,746 | Appraised value | Discounts applied for estimated costs to sell | 10% | |||||||||||||||||||||
Impaired loans - valued at PV of expected cash flows | 5,801 | PV of expected cash flows | Discount rates used in the calculation of PV of expected cash flows | 4-11% (6.2%) | ||||||||||||||||||||||
Foreclosed real estate | 1,253 | Appraised value | Discounts for estimated costs to sell | 10% | ||||||||||||||||||||||
($ in thousands) | ||||||||||
Description | Fair Value at December 31, 2016 | Valuation Technique | Significant Unobservable Inputs | General Range of Significant Unobservable Input Values | ||||||
Impaired loans | $ | 12,284 | Appraised value; PV of expected cash flows | Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell | 0-10% | |||||
Foreclosed real estate | 9,532 | Appraised value; List or contract price | Discounts to reflect current market conditions, abbreviated holding period and estimated costs to sell | 0-10% | ||||||
Transfers of assets or liabilities between levels within the fair value hierarchy are recognized when an event or change in circumstances occurs. There were no transfers between Level 1 and Level 2 for assets or liabilities measured on a recurring basis during the three or nine months ended September 30, 2017 or 2016.
Page 37
($ in thousands) | ||||||||||||||||||||||||||
Description | Fair Value atDecember 31, 2019 | Valuation Technique | Significant Unobservable Inputs | Range (Weighted Average) | ||||||||||||||||||||||
Impaired loans - valued at collateral value | $ | 10,718 | Appraised value | Discounts applied for estimated costs to sell | 10% | |||||||||||||||||||||
Impaired loans - valued at PV of expected cash flows | 5,497 | PV of expected cash flows | Discount rates used in the calculation of PV of expected cash flows | 4-11% (6.50%) | ||||||||||||||||||||||
Foreclosed real estate | 1,830 | Appraised value | Discounts for estimated costs to sell | 10% | ||||||||||||||||||||||
For the nine months ended September 30, 2017 and 2016, the increase in the fair value of securities available for sale was $3,523,000 and $3,128,000, respectively, which is included in other comprehensive income (net of tax expense of $1,300,000 and $1,222,000, respectively). Fair value measurement methods at September 30, 2017 and 2016 are consistent with those used in prior reporting periods.
September 30, 2017 | December 31, 2016 | |||||||||||||||||
($ in thousands) | Level in Fair Value Hierarchy | Carrying Amount | Estimated Fair Value | Carrying Amount | Estimated Fair Value | |||||||||||||
Cash and due from banks, noninterest-bearing | Level 1 | $ | 82,758 | 82,758 | 71,645 | 71,645 | ||||||||||||
Due from banks, interest-bearing | Level 1 | 326,089 | 326,089 | 234,348 | 234,348 | |||||||||||||
Securities available for sale | Level 2 | 198,924 | 198,924 | 199,329 | 199,329 | |||||||||||||
Securities held to maturity | Level 2 | 123,156 | 124,878 | 129,713 | 130,195 | |||||||||||||
Presold mortgages in process of settlement | Level 1 | 17,426 | 17,426 | 2,116 | 2,116 | |||||||||||||
Total loans, net of allowance | Level 3 | 3,405,162 | 3,396,635 | 2,686,931 | 2,650,820 | |||||||||||||
Accrued interest receivable | Level 1 | 11,445 | 11,445 | 9,286 | 9,286 | |||||||||||||
Bank-owned life insurance | Level 1 | 88,081 | 88,081 | 74,138 | 74,138 | |||||||||||||
Deposits | Level 2 | 3,651,241 | 3,647,532 | 2,947,353 | 2,944,968 | |||||||||||||
Borrowings | Level 2 | 397,525 | 388,477 | 271,394 | 263,255 | |||||||||||||
Accrued interest payable | Level 2 | 1,143 | 1,143 | 539 | 539 |
Fair value methods and assumptions are set forth below for the Company’s financial instruments.
Cash and Amounts Due from Banks, Presold Mortgages in Process of Settlement, Accrued Interest Receivable, and Accrued Interest Payable-The carrying amounts approximate their fair value because of the short maturity of these financial instruments.
Available for Sale and Held to Maturity Securities-Fair values are provided by a third-party and are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments or matrix pricing.
Loans-For nonimpaired loans, fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as commercial, financial and agricultural, real estate construction, real estate mortgages and installment loans to individuals. Each loan category is further segmented into fixed and variable interest rate terms. The fair value for each category is determined by discounting scheduled future cash flows using current interest rates offered on loans with similar risk characteristics. Fair values for impaired loans are primarily based on estimated proceeds expected upon liquidation of the collateral or the present value of expected cash flows.
Bank-Owned Life Insurance – The carrying value of life insurance approximates fair value because this investment is carried at cash surrender value, as determined by the issuer.
Deposits-The fair value of deposits with no stated maturity, such as noninterest-bearing checking accounts, savings accounts, interest-bearing checking accounts, and money market accounts, is equal to the amount payable on demand as of the valuation date. The fair value of certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered in the marketplace for deposits of similar remaining maturities.
Borrowings-The fair value of borrowings is based on the discounted value of the contractual cash flows. The discount rate is estimated using the rates currently offered by the Company’s lenders for debt of similar maturities.
September 30, 2020 | December 31, 2019 | ||||||||||||||||||||||||||||
($ in thousands) | Level in Fair Value Hierarchy | Carrying Amount | Estimated Fair Value | Carrying Amount | Estimated Fair Value | ||||||||||||||||||||||||
Cash and due from banks, noninterest-bearing | Level 1 | $ | 92,465 | 92,465 | 64,519 | 64,519 | |||||||||||||||||||||||
Due from banks, interest-bearing | Level 1 | 304,731 | 304,731 | 166,783 | 166,783 | ||||||||||||||||||||||||
Securities held to maturity | Level 2 | 110,200 | 112,114 | 67,932 | 68,333 | ||||||||||||||||||||||||
SBA loans held for sale | Level 2 | 15,012 | 16,645 | 0 | 0 | ||||||||||||||||||||||||
Total loans, net of allowance | Level 3 | 4,764,510 | 4,750,959 | 4,432,068 | 4,407,610 | ||||||||||||||||||||||||
Accrued interest receivable | Level 1 | 19,646 | 19,646 | 16,648 | 16,648 | ||||||||||||||||||||||||
Bank-owned life insurance | Level 1 | 106,345 | 106,345 | 104,441 | 104,441 | ||||||||||||||||||||||||
SBA Servicing Asset | Level 3 | 5,644 | 6,714 | 5,383 | 5,649 | ||||||||||||||||||||||||
Deposits | Level 2 | 6,060,226 | 6,062,358 | 4,931,355 | 4,930,751 | ||||||||||||||||||||||||
Borrowings | Level 2 | 61,816 | 53,099 | 300,671 | 295,399 | ||||||||||||||||||||||||
Accrued interest payable | Level 2 | 1,305 | 1,305 | 2,154 | 2,154 |
Page 38
Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial assets or liabilities include net premises and equipment, intangible and other assets such as deferred income taxes, prepaid expense accounts, income taxes currently payable and other various accrued expenses. In addition, the income tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of the estimates.
On December 21, 2012, the Company issued 2,656,294 shares of its common stock and 728,706 sharesRevenue from Contracts with Customers
On December 22, 2016, the Company and the holder of the Series C Preferred Stock entered into an agreement to effectively convert the preferred stock into common stock. The Company exchanged 728,706 shares of preferred stocknoninterest income for the same number of shares of the Company’s common stock. As a result of the exchange, the Company has no shares of preferred stock currently outstanding.
The Series C Preferred Stock qualified as Tier 1 capital and was Convertible Perpetual Preferred Stock, with dividend rights equal to the Company’s Common Stock. The Series C Preferred Stock was non-voting, except in limited circumstances.
The Series C Preferred Stock paid a dividend per share equal to that of the Company’s common stock. During the three and nine months ended September 30, 2016,2020 and 2019. Items outside the scope of ASC 606 are noted as such.
For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||||||||
$ in thousands | September 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 | |||||||||||||||||||
Noninterest Income | |||||||||||||||||||||||
In-scope of ASC 606: | |||||||||||||||||||||||
Service charges on deposit accounts: | $ | 2,567 | 3,388 | 8,193 | 9,543 | ||||||||||||||||||
Other service charges, commissions, and fees: | |||||||||||||||||||||||
Interchange income | 3,608 | 3,228 | 9,580 | 9,529 | |||||||||||||||||||
Other service charges and fees | 2,582 | 1,839 | 5,303 | 5,094 | |||||||||||||||||||
Commissions from sales of insurance and financial products: | |||||||||||||||||||||||
Insurance income | 1,477 | 1,355 | 4,058 | 4,027 | |||||||||||||||||||
Wealth management income | 880 | 848 | 2,457 | 2,409 | |||||||||||||||||||
SBA consulting fees | 1,956 | 663 | 6,722 | 2,847 | |||||||||||||||||||
Noninterest income (in-scope of ASC 606) | 13,070 | 11,321 | 36,313 | 33,449 | |||||||||||||||||||
Noninterest income (out-of-scope of ASC 606) | 8,382 | 3,835 | 25,037 | 11,419 | |||||||||||||||||||
Total noninterest income | $ | 21,452 | 15,156 | 61,350 | 44,868 |
($ in thousands) | |||||
October 1 to December 31, 2020 | $ | 643 | |||
2021 | 2,297 | ||||
2022 | 1,925 | ||||
2023 | 1,775 | ||||
2024 | 1,574 | ||||
Thereafter | 19,564 | ||||
Total undiscounted lease payments | 27,778 | ||||
Less effect of discounting | (9,062) | ||||
Present value of estimated lease payments (lease liability) | $ | 18,716 |
first nine months months of 2020, the Company repurchased approximately 985,795 shares of the Company's common stock at an average stock price of $29.11 per share, which totaled $28.7 million, under a $40 million repurchase authorization publicly announced in November 2019. The Company has $11.3 million remaining of the $40 million repurchase authorization.
Description | Due date | Call Feature | September 30, 2020 | Interest Rate | ||||||||||||||||||||||
FHLB Principal Reducing Credit | 7/24/2023 | None | $ | 135 | 1.00% fixed | |||||||||||||||||||||
FHLB Principal Reducing Credit | 12/22/2023 | None | 1,001 | 1.25% fixed | ||||||||||||||||||||||
FHLB Principal Reducing Credit | 1/15/2026 | None | 5,500 | 1.98% fixed | ||||||||||||||||||||||
FHLB Principal Reducing Credit | 6/26/2028 | None | 237 | 0.25% fixed | ||||||||||||||||||||||
FHLB Principal Reducing Credit | 7/17/2028 | None | 51 | 0.00% fixed | ||||||||||||||||||||||
FHLB Principal Reducing Credit | 8/18/2028 | None | 176 | 1.00% fixed | ||||||||||||||||||||||
FHLB Principal Reducing Credit | 8/22/2028 | None | 176 | 1.00% fixed | ||||||||||||||||||||||
FHLB Principal Reducing Credit | 12/20/2028 | None | 358 | 0.50% fixed | ||||||||||||||||||||||
Other Borrowing | 4/7/2022 | None | 103 | 1.00% fixed | ||||||||||||||||||||||
Trust Preferred Securities | 1/23/2034 | Quarterly by Company beginning 1/23/2009 | 20,620 | 2.97% at 9/30/2020 adjustable rate 3 month LIBOR + 2.70% | ||||||||||||||||||||||
Trust Preferred Securities | 6/15/2036 | Quarterly by Company beginning 6/15/2011 | 25,774 | 1.64% at 9/30/2020 adjustable rate 3 month LIBOR + 1.39% | ||||||||||||||||||||||
Trust Preferred Securities | 1/7/2035 | Quarterly by Company beginning 1/7/2010 | 10,310 | 2.28% at 9/30/2020 adjustable rate 3 month LIBOR + 2.00% | ||||||||||||||||||||||
Total borrowings/ weighted average rate as of | September 30, 2020 | $ | 64,441 | 2.26% | ||||||||||||||||||||||
Unamortized discount on acquired borrowings | (2,625) | |||||||||||||||||||||||||
Total borrowings | $ | 61,816 |
Description | Due date | Call Feature | December 31, 2019 | Interest Rate | ||||||||||||||||||||||
FHLB Term Note | 1/30/2020 | None | $ | 100,000 | 1.70% fixed | |||||||||||||||||||||
FHLB Term Note | 1/31/2020 | None | 68,000 | 1.70% fixed | ||||||||||||||||||||||
FHLB Term Note | 1/31/2020 | None | 30,000 | 1.70% fixed | ||||||||||||||||||||||
FHLB Term Note | 5/29/2020 | None | 40,000 | 1.62% fixed | ||||||||||||||||||||||
FHLB Principal Reducing Credit | 7/24/2023 | None | 168 | 1.00% fixed | ||||||||||||||||||||||
FHLB Principal Reducing Credit | 12/22/2023 | None | 1,029 | 1.25% fixed | ||||||||||||||||||||||
FHLB Principal Reducing Credit | 1/15/2026 | None | 6,500 | 1.98% fixed | ||||||||||||||||||||||
FHLB Principal Reducing Credit | 6/26/2028 | None | 245 | 0.25% fixed | ||||||||||||||||||||||
FHLB Principal Reducing Credit | 7/17/2028 | None | 55 | 0.00% fixed | ||||||||||||||||||||||
FHLB Principal Reducing Credit | 8/18/2028 | None | 181 | 1.00% fixed | ||||||||||||||||||||||
FHLB Principal Reducing Credit | 8/22/2028 | None | 181 | 1.00% fixed | ||||||||||||||||||||||
FHLB Principal Reducing Credit | 12/20/2028 | None | 367 | 0.50% fixed | ||||||||||||||||||||||
Trust Preferred Securities | 1/23/2034 | Quarterly by Company beginning 1/23/2009 | 20,620 | 4.64% at 12/31/2019 adjustable rate 3 month LIBOR + 2.70% | ||||||||||||||||||||||
Trust Preferred Securities | 6/15/2036 | Quarterly by Company beginning 6/15/2011 | 25,774 | 3.28% at 12/31/2019 adjustable rate 3 month LIBOR + 1.39% | ||||||||||||||||||||||
Trust Preferred Securities | 1/7/2035 | Quarterly by Company beginning 1/7/2010 | 10,310 | 3.99% at 12/31/2019 adjustable rate 3 month LIBOR + 2.00% | ||||||||||||||||||||||
Total borrowings / weighted average rate as of December 31, 2019 | $ | 303,430 | 2.12% | |||||||||||||||||||||||
Unamortized discount on acquired borrowings | (2,759) | |||||||||||||||||||||||||
Total borrowings | $ | 300,671 |
- Acquisition
The total merger consideration consisted of $17.9Company paying $9.5 million in cash and 4.9 millionissuing 24,096 shares of its common stock, which had a value of approximately $0.5 million.
data such. In 2020, we have included environmental factors related to the COVID-19 pandemic. See additional discussion the "Summary of Loan Loss Experience."
Page 40
Intangible Assets
Based on the results of the September 30, 2020 step-one goodwill impairment analysis, management has concluded that none of the reporting units are at risk of failing a step-one goodwill impairment analysis, however management will continue to evaluate the economic conditions at future reporting periods for applicable changes and take appropriate actions.
Page 41
For purchased credit-impaired (“PCI”) loans, the excess of the cash flows initially expected to be collected over the fair value of the loans at the acquisition date (i.e., the accretable yield) is accreted into interest income over the estimated remaining life of the loans using the effective yield method, provided that the timing and the amount of future cash flows is reasonably estimable. Accordingly, such loans are not classified as nonaccrual and they are considered to be accruing because their interest income relates to the accretable yield recognized under accounting for PCI loans and not to contractual interest payments. The difference between the contractually required payments and the cash flows expected to be collected at acquisition, considering the impact of prepayments, is referred to as the nonaccretable difference.
RESULTS OF OPERATIONS
Overview
adopted and accounting standards that are pending adoption.
The third quarter of 2016 results included two non-recurring items that impacted diluted earnings per share negatively by a net of approximately $0.17 per diluted common share: 1) the termination of our loss share agreements with the FDIC, which resulted in the Company recording additional indemnification asset expense of $5.7 million during the three months ended September 30, 2016, and 2) the exchange of branches with First Community Bank that resulted in a gain of $1.4 million.
Comparisons2019.
As discussed at Note 16 to the consolidated financial statements, on October 1, 2017, the Company acquired ASB Bancorp, Inc., the parent company of Asheville Savings Bank, SSB, headquartered in Asheville, North Carolina (“Asheville Savings Bank”), which operated through 13 branches in the Asheville area. As of the acquisition date, Asheville Savings Bank reported total assets of approximately $793 million, including $617 million in loans and $679 million in deposits. Because this transaction closed in the fourth quarter, the financial position and earnings for Asheville Savings Bank are not included in the Company’s results for the third quarter.
additional discussion below.
Page 42
Also contributing to the increase in net interest income was a higher net interest margin for the period.
The net interest margins for both periods were also impacted by higher amounts of loan discount accretion associated with acquired loan portfolios. The Company recorded loan discount accretion amounting to $1.7 million3.95% realized in the third quarter of 2017, compared to $0.8 million in the third quarter of 2016. For the first nine months of 2017 and 2016, loan discount accretion amounted to $5.1 million and $3.6 million, respectively. The increase in loan discount accretion is primarily due to the loan discounts recorded in the acquisition of Carolina Bank.
Provision for Loan Losses and Asset Quality
We recorded no provision for loan losses in the third quarters of 2017 or 2016.2019. For the nine months ended September 30, 2017, we2020, our net interest margin was 3.63% compared to 4.02% for the same period in 2019. The lower margins were primarily due to the impact of lower interest rates.
2019 amounted to ($0.8 million) and $0.4 million, respectively, or (0.06%) and 0.04% of average loans on an annualized basis, respectively. For the nine months ended September 30, 2020 and 2019, total net charge-offs were $3.2 million and $0.9 million, respectively, which on an annualized basis amounted to 0.09% and 0.03%, respectively.
Corerespectively. The increases in noninterest income for the third quarterin 2020 are primarily due to fees earned as a result of 2017 was $12.8 million, an increase of 31.2% from the $9.8 million reported for the third quarter of 2016. For the first nine months of 2017, core noninterest income amounted to $34.2 million, a 35.4% increase from the $25.3 million recorded in the comparable period of 2016. Core noninterest income includes i) service charges on deposit accounts, ii) other service charges, commissions, and fees, iii) fees from presoldhigh mortgage loans, iv) commissions from sales of insurance and financial products, v)loan activity, SBA consulting fees vi) SBA loan sale gains,related to client assistance with PPP originations, and vii) bank-owned life insurance income.
The primary reason for the increase in core noninterest income in 2017 was the acquisition of Carolina Bank, as well as income derivedan $8.0 million gain realized from the Company’s SBA consulting fees and SBA loan sale gains, which begansecurities sales in the second and third quartersquarter of 2016.
2020.
Balance Sheet and Capital
Total assets atnine months ended September 30, 2017 amounted to $4.62020 was $1.1 billion, a 29.8% increase from a year earlier. Total loans at September 30, 2017 amounted to $3.4 billion, a 29.4% increase from a year earlier, and total deposits amounted to $3.7 billion at September 30, 2017, a 25.4% increase from a year earlier.
or 30.5% on an annualized basis. In addition to deposits arising from PPP loans, this high deposit growth is believed to be due to a combination of stimulus funds and changes in customer behaviors during the growth realizedpandemic.
Page 43
Note Regarding December 31, 2019.
For the periods in 2016 presented, our results of operations were significantly affected by the accounting for two FDIC-assisted failed bank acquisitions. In the discussion above and in the accompanying tables, the term “covered” is used to describe assets that were included in FDIC loss share agreements, while the term “non-covered” refers to our legacy assets, which are not included in any type of loss share arrangement. As previously discussed, all loss share agreements were terminated in the third quarter of 2016 and thus the entire loan portfolio is now classified as non-covered. Certain prior period disclosures will continue to present the breakout of the loan portfolio between covered and non-covered. See the Company’s 2016 Annual Report on Form 10-K filed with the Securities and Exchange Commission for additional discussion regarding the accounting and presentation related to the Company’s two FDIC-assisted failed bank acquisitions.
Components of Earnings
Three Months Ended September 30, | ||||||||
($ in thousands) | 2017 | 2016 | ||||||
Net interest income, as reported | $ | 41,639 | 30,354 | |||||
Tax-equivalent adjustment | 702 | 534 | ||||||
Net interest income, tax-equivalent | $ | 42,341 | 30,888 |
Nine Months Ended September 30, | ||||||||
($ in thousands) | 2017 | 2016 | ||||||
Net interest income, as reported | $ | 115,851 | 92,087 | |||||
Tax-equivalent adjustment | 1,979 | 1,510 | ||||||
Net interest income, tax-equivalent | $ | 117,830 | 93,597 |
2019.
($ in thousands) | Three Months Ended September 30, | ||||||||||
2020 | 2019 | ||||||||||
Net interest income, as reported | $ | 54,733 | 53,778 | ||||||||
Tax-equivalent adjustment | 347 | 413 | |||||||||
Net interest income, tax-equivalent | $ | 55,080 | 54,191 | ||||||||
Nine Months Ended September 30, | |||||||||||
2020 | 2019 | ||||||||||
Net interest income, as reported | $ | 162,116 | 161,548 | ||||||||
Tax-equivalent adjustment | 1,011 | 1,260 | |||||||||
Net interest income, tax-equivalent | $ | 163,127 | 162,808 |
Page 44
The following table presents an analysis of net interest income analysis onincome.
For the Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||
2020 | 2019 | ||||||||||||||||||||||||||||||||||
($ in thousands) | Average Volume | Average Rate | Interest Earned or Paid | Average Volume | Average Rate | Interest Earned or Paid | |||||||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||||||||
Loans (1) | $ | 4,785,848 | 4.38 | % | $ | 52,739 | $ | 4,354,477 | 5.02 | % | $ | 55,142 | |||||||||||||||||||||||
Taxable securities | 973,183 | 2.03 | % | 4,958 | 747,044 | 2.72 | % | 5,129 | |||||||||||||||||||||||||||
Non-taxable securities | 39,754 | 1.89 | % | 189 | 27,711 | 3.04 | % | 212 | |||||||||||||||||||||||||||
Short-term investments, primarily interest-bearing cash | 495,771 | 0.64 | % | 802 | 310,781 | 2.42 | % | 1,898 | |||||||||||||||||||||||||||
Total interest-earning assets | 6,294,556 | 3.71 | % | 58,688 | 5,440,013 | 4.55 | % | 62,381 | |||||||||||||||||||||||||||
Cash and due from banks | 89,282 | 54,132 | |||||||||||||||||||||||||||||||||
Premises and equipment | 116,660 | 117,342 | |||||||||||||||||||||||||||||||||
Other assets | 403,614 | 410,492 | |||||||||||||||||||||||||||||||||
Total assets | $ | 6,904,112 | $ | 6,021,979 | |||||||||||||||||||||||||||||||
Liabilities | |||||||||||||||||||||||||||||||||||
Interest bearing checking | $ | 1,065,485 | 0.10 | % | $ | 273 | $ | 883,002 | 0.15 | % | $ | 338 | |||||||||||||||||||||||
Money market deposits | 1,407,314 | 0.29 | % | 1,014 | 1,124,240 | 0.68 | % | 1,915 | |||||||||||||||||||||||||||
Savings deposits | 483,089 | 0.12 | % | 152 | 416,732 | 0.29 | % | 307 | |||||||||||||||||||||||||||
Time deposits >$100,000 | 604,887 | 1.15 | % | 1,747 | 692,417 | 2.02 | % | 3,519 | |||||||||||||||||||||||||||
Other time deposits | 236,672 | 0.58 | % | 347 | 261,424 | 0.79 | % | 518 | |||||||||||||||||||||||||||
Total interest-bearing deposits | 3,797,447 | 0.37 | % | 3,533 | 3,377,815 | 0.77 | % | 6,597 | |||||||||||||||||||||||||||
Borrowings | 81,362 | 2.06 | % | 422 | 300,714 | 2.65 | % | 2,006 | |||||||||||||||||||||||||||
Total interest-bearing liabilities | 3,878,809 | 0.41 | % | 3,955 | 3,678,529 | 0.93 | % | 8,603 | |||||||||||||||||||||||||||
Noninterest bearing checking | 2,085,345 | 1,460,759 | |||||||||||||||||||||||||||||||||
Other liabilities | 61,633 | 55,777 | |||||||||||||||||||||||||||||||||
Shareholders’ equity | 878,325 | 826,914 | |||||||||||||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 6,904,112 | $ | 6,021,979 | |||||||||||||||||||||||||||||||
Net yield on interest-earning assets and net interest income | 3.46 | % | $ | 54,733 | 3.92 | % | $ | 53,778 | |||||||||||||||||||||||||||
Net yield on interest-earning assets and net interest income – tax-equivalent (2) | 3.48 | % | $ | 55,080 | 3.95 | % | $ | 54,191 | |||||||||||||||||||||||||||
Interest rate spread | 3.30 | % | 3.62 | % | |||||||||||||||||||||||||||||||
Average prime rate | 3.25 | % | 5.27 | % |
For the Three Months Ended September 30, | ||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||
($ in thousands) | Average Volume | Average Rate | Interest Earned or Paid | Average Volume | Average Rate | Interest Earned or Paid | ||||||||||||||||||
Assets | ||||||||||||||||||||||||
Loans (1) | $ | 3,404,862 | 4.84% | $ | 41,549 | $ | 2,635,707 | 4.52% | $ | 29,919 | ||||||||||||||
Taxable securities | 275,544 | 2.89% | 2,004 | 296,873 | 2.26% | 1,688 | ||||||||||||||||||
Non-taxable securities (2) | 54,606 | 8.00% | 1,101 | 49,371 | 7.81% | 969 | ||||||||||||||||||
Short-term investments | 305,245 | 1.38% | 1,059 | 145,268 | 0.58% | 213 | ||||||||||||||||||
Total interest-earning assets | 4,040,257 | 4.49% | 45,713 | 3,127,219 | 4.17% | 32,789 | ||||||||||||||||||
Cash and due from banks | 80,191 | 60,951 | ||||||||||||||||||||||
Premises and equipment | 96,596 | 77,117 | ||||||||||||||||||||||
Other assets | 297,365 | 178,450 | ||||||||||||||||||||||
Total assets | $ | 4,514,409 | $ | 3,443,737 | ||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||
Interest bearing checking | $ | 688,739 | 0.06% | $ | 105 | $ | 584,232 | 0.06% | $ | 92 | ||||||||||||||
Money market deposits | 794,788 | 0.19% | 372 | 642,201 | 0.18% | 283 | ||||||||||||||||||
Savings deposits | 402,330 | 0.21% | 208 | 205,044 | 0.05% | 26 | ||||||||||||||||||
Time deposits >$100,000 | 494,680 | 0.84% | 1,053 | 400,043 | 0.65% | 657 | ||||||||||||||||||
Other time deposits | 246,475 | 0.28% | 172 | 259,215 | 0.30% | 196 | ||||||||||||||||||
Total interest-bearing deposits | 2,627,012 | 0.29% | 1,910 | 2,090,735 | 0.24% | 1,254 | ||||||||||||||||||
Borrowings | 331,122 | 1.75% | 1,462 | 228,273 | 1.13% | 647 | ||||||||||||||||||
Total interest-bearing liabilities | 2,958,134 | 0.45% | 3,372 | 2,319,008 | 0.33% | 1,901 | ||||||||||||||||||
Noninterest bearing checking | 1,005,307 | 732,520 | ||||||||||||||||||||||
Other liabilities | 30,536 | 26,456 | ||||||||||||||||||||||
Shareholders’ equity | 520,432 | 365,753 | ||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 4,514,409 | $ | 3,443,737 | ||||||||||||||||||||
Net yield on interest-earning assets and net interest income | 4.16% | $ | 42,341 | 3.93% | $ | 30,888 | ||||||||||||||||||
Interest rate spread | 4.04% | 3.84% | ||||||||||||||||||||||
Average prime rate | 4.25% | 3.50% |
For the Nine Months Ended September 30, | ||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||
($ in thousands) | Average Volume | Average Rate | Interest Earned or Paid | Average Volume | Average Rate | Interest Earned or Paid | ||||||||||||||||||
Assets | ||||||||||||||||||||||||
Loans (1) | $ | 3,211,844 | 4.78% | $ | 114,908 | $ | 2,576,605 | 4.68% | $ | 90,301 | ||||||||||||||
Taxable securities | 284,588 | 2.74% | 5,830 | 304,669 | 2.40% | 5,472 | ||||||||||||||||||
Non-taxable securities (2) | 56,092 | 7.74% | 3,249 | 50,221 | 7.51% | 2,822 | ||||||||||||||||||
Short-term investments, principally federal funds | 283,601 | 1.08% | 2,299 | 142,156 | 0.58% | 612 | ||||||||||||||||||
Total interest-earning assets | 3,836,125 | 4.40% | 126,286 | 3,073,651 | 4.31% | 99,207 | ||||||||||||||||||
Cash and due from banks | 74,135 | 57,943 | ||||||||||||||||||||||
Premises and equipment | 92,042 | 76,339 | ||||||||||||||||||||||
Other assets | 267,231 | 175,302 | ||||||||||||||||||||||
Total assets | $ | 4,269,533 | $ | 3,383,235 | ||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||
Interest bearing checking | $ | 676,939 | 0.06% | $ | 320 | $ | 585,052 | 0.06% | $ | 284 | ||||||||||||||
Money market deposits | 771,826 | 0.18% | 1,067 | 652,017 | 0.17% | 846 | ||||||||||||||||||
Savings deposits | 362,164 | 0.19% | 505 | 197,204 | 0.05% | 74 | ||||||||||||||||||
Time deposits >$100,000 | 473,200 | 0.75% | 2,641 | 394,403 | 0.65% | 1,931 | ||||||||||||||||||
Other time deposits | 248,985 | 0.27% | 511 | 277,123 | 0.35% | 725 | ||||||||||||||||||
Total interest-bearing deposits | 2,533,114 | 0.27% | 5,044 | 2,105,799 | 0.24% | 3,860 | ||||||||||||||||||
Borrowings | 294,650 | 1.55% | 3,411 | 200,427 | 1.17% | 1,750 | ||||||||||||||||||
Total interest-bearing liabilities | 2,827,764 | 0.40% | 8,455 | 2,306,226 | 0.32% | 5,610 | ||||||||||||||||||
Noninterest bearing checking | 932,233 | 695,718 | ||||||||||||||||||||||
Other liabilities | 31,782 | 23,350 | ||||||||||||||||||||||
Shareholders’ equity | 477,754 | 357,941 | ||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 4,269,533 | $ | 3,383,235 | ||||||||||||||||||||
Net yield on interest-earning assets and net interest income | 4.11% | $ | 117,831 | 4.07% | $ | 93,597 | ||||||||||||||||||
Interest rate spread | 4.00% | 3.99% | ||||||||||||||||||||||
Average prime rate | 4.03% | 3.50% |
For the Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||
2020 | 2019 | ||||||||||||||||||||||||||||||||||
($ in thousands) | Average Volume | Average Rate | Interest Earned or Paid | Average Volume | Average Rate | Interest Earned or Paid | |||||||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||||||||
Loans (1) | $ | 4,679,479 | 4.57 | % | $ | 160,000 | $ | 4,322,078 | 5.10 | % | $ | 164,754 | |||||||||||||||||||||||
Taxable securities | 859,800 | 2.36 | % | 15,203 | 706,300 | 2.81 | % | 14,859 | |||||||||||||||||||||||||||
Non-taxable securities | 26,471 | 2.37 | % | 470 | 34,833 | 3.15 | % | 820 | |||||||||||||||||||||||||||
Short-term investments, primarily interest-bearing cash | 432,782 | 0.83 | % | 2,688 | 347,335 | 2.58 | % | 6,705 | |||||||||||||||||||||||||||
Total interest-earning assets | 5,998,532 | 3.97 | % | $ | 178,361 | 5,410,546 | 4.62 | % | 187,138 | ||||||||||||||||||||||||||
Cash and due from banks | 80,523 | 54,579 | |||||||||||||||||||||||||||||||||
Premises and equipment | 115,303 | 118,152 | |||||||||||||||||||||||||||||||||
Other assets | 411,290 | 403,364 | |||||||||||||||||||||||||||||||||
Total assets | $ | 6,605,648 | $ | 5,986,641 | |||||||||||||||||||||||||||||||
Liabilities | |||||||||||||||||||||||||||||||||||
Interest bearing checking | $ | 979,339 | 0.13 | % | $ | 948 | $ | 894,488 | 0.14 | % | $ | 966 | |||||||||||||||||||||||
Money market deposits | 1,302,021 | 0.37 | % | 3,617 | 1,093,736 | 0.62 | % | 5,036 | |||||||||||||||||||||||||||
Savings deposits | 454,805 | 0.17 | % | 568 | 419,210 | 0.29 | % | 903 | |||||||||||||||||||||||||||
Time deposits >$100,000 | 627,025 | 1.49 | % | 6,996 | 709,247 | 1.93 | % | 10,221 | |||||||||||||||||||||||||||
Other time deposits | 243,404 | 0.69 | % | 1,251 | 262,424 | 0.70 | % | 1,372 | |||||||||||||||||||||||||||
Total interest-bearing deposits | 3,606,594 | 0.50 | % | 13,380 | 3,379,105 | 0.73 | % | 18,498 | |||||||||||||||||||||||||||
Borrowings | 228,295 | 1.68 | % | 2,865 | 343,431 | 2.76 | % | 7,092 | |||||||||||||||||||||||||||
Total interest-bearing liabilities | 3,834,889 | 0.57 | % | 16,245 | 3,722,536 | 0.92 | % | 25,590 | |||||||||||||||||||||||||||
Noninterest bearing checking | 1,840,133 | 1,405,830 | |||||||||||||||||||||||||||||||||
Other liabilities | 61,056 | 57,047 | |||||||||||||||||||||||||||||||||
Shareholders’ equity | 869,570 | 801,228 | |||||||||||||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 6,605,648 | $ | 5,986,641 | |||||||||||||||||||||||||||||||
Net yield on interest-earning assets and net interest income | 3.61 | % | $ | 162,116 | 3.99 | % | $ | 161,548 | |||||||||||||||||||||||||||
Net yield on interest-earning assets and net interest income – tax-equivalent (2) | 3.63 | % | $ | 163,127 | 4.02 | % | $ | 162,808 | |||||||||||||||||||||||||||
Interest rate spread | 3.40 | % | 3.70 | % | |||||||||||||||||||||||||||||||
Average prime rate | 3.64 | % | 5.42 | % |
The mix of our loan portfolio remained substantially the same atthree and nine months ended September 30, 20172020, respectively, compared to December 31, 2016, with approximately 87%the prior respective periods.
third quarter of 2019 ($311 million). For the nine months ended September 30, 2020, average short-term investments outstanding increased $85 million, or 24.6%, compared to the first nine months of 2019. The higher levels of interest-bearing cash in 2020 were also due to the high deposit growth experienced, as discussed in the following paragraph.
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Average borrowings increasedthe balance sheet growth discussed above was that our average interest-earning assets for the three and nine months ended September 30, 2017 to $294.7 million from the $200.4 million2020 were 15.7% and 10.9% higher than for the same period of 2016. Carolina Bank had approximately $19 millioncomparable periods in borrowings on the date of acquisition. Our cost of funds,2019, respectively, which, includes noninterest bearing checking accounts at a zero percent cost, was 0.30% in the first nine months of 2017 compared to 0.25% in the first nine months of 2016, with the increase being dueas it relates to the increased costs associated withnet interest income we recorded, slightly more than offset the impact of the decline in our higher levels of borrowings.
net interest margin, which is discussed below.
Our52 basis point decline in the cost of our interest-bearing liabilities. For the nine months ended September 30, 2020, our interest-earning asset yield declined by 65 basis points compared to a 35 basis point decline in the cost of our interest-bearing liabilities. See additional discussion in Item 3 - Quantitative and Qualitative Disclosures About Market Risk.
that portfolio.
Our provision for loan loss levels have been impacted by continued improvement in asset quality. Nonperforming assets amounted to $53.0$0.9 million at September 30, 2017, a decrease of 24.4% from the $70.2 million one year earlier. Our nonperforming assets to total assets ratio was 1.16% at September 30, 2017 compared to 1.98% at September 30, 2016. Also, our provision for loan loss levels were impacted by lower net loan charge-offs in 2017. We experienced net loan recoveries of $0.1 million for the first nine months of 2017, compared to net loan charge-offs of $2.9 million for the first nine months of 2016. The ratio of annualized net charge-offs to average loans for the nine months ended September 30, 2017 was 0.00%, compared to 0.15% for the same period of 2016.
2019. The increases in 2020 were primarily related to estimated probable losses arising from the economic impact of COVID-19. With the onset of the pandemic in March 2020, we worked with many of our borrowers and provided the option of loan payment deferrals, with loans on deferral status amounting to $186 million, or 3.9% of total loans, at September 30, 2020, a decrease from $774 million, or 16.2% of total loans, at June 30, 2020. See the section entitled "Allowance for Loan Losses and Provision for Loan Losses" below for additional information
As shown in the table below, core noninterest income for the third quarter of 2017 was $12.82020 compared to $3.4 million an increase of 31.2% from the $9.8 million reported forin the third quarter of 2016.2019. For the first nine months of 2017, core noninterest income amounted to $34.2 million, a 35.4% increase from the $25.3 million recorded in the comparable period of 2016. Core noninterest income includes i) service charges on deposit accounts, ii) other service charges, commissions,2020 and fees, iii) fees from presold mortgage loans, iv) commissions from sales of insurance and financial products, v) SBA consulting fees, vi) SBA loan sale gains, and vii) bank-owned life insurance income.
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The following table presents our core noninterest income for the three and nine month periods ending September 30, 2017 and 2016, respectively.
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
$ in thousands | September 30, 2017 | September 30, 2016 | September 30, 2017 | September 30, 2016 | ||||||||||||
Service charges on deposit accounts | $ | 2,945 | 2,710 | 8,525 | 7,960 | |||||||||||
Other service charges, commissions, and fees | 3,468 | 2,996 | 10,195 | 8,869 | ||||||||||||
Fees from presold mortgage loans | 1,842 | 710 | 4,121 | 1,491 | ||||||||||||
Commissions from sales of insurance and financial products | 1,426 | 969 | 3,304 | 2,844 | ||||||||||||
SBA consulting fees | 864 | 1,178 | 3,174 | 1,898 | ||||||||||||
SBA loan sale gains | 1,692 | 694 | 3,241 | 694 | ||||||||||||
Bank-owned life insurance income | 579 | 514 | 1,667 | 1,526 | ||||||||||||
Core noninterest income | $ | 12,816 | 9,771 | 34,227 | 25,282 | |||||||||||
As shown in the table above, service charges on deposit accounts increased from $2.7 million in the third quarter of 2016 to $2.9 million in the third quarter of 2017. For the nine months ended September 30, 2017,2019, service charges on deposit accounts amounted to $8.5$8.2 million which is a $0.5and $9.5 million, increase from the $8.0 million recorded in the comparable period of 2016.respectively. The increases for both periodsdecreases are primarily due to fewer instances of overdraft fees that we believe is likely associated with the service charges from accounts assumed in the Carolina Bank acquisition.
generally higher levels of deposits maintained by our customers during 2020.
2019.
origination volume arising from historically low mortgage loan interest rates.
One of the primary reasons for the increasesPPP. SBA Complete recorded approximately $0.8 million and $3.8 million in core noninterest incomePPP fees for the three and nine months ended September 30, 2017 was2020. SBA Complete also recorded $1.6 million in deferred revenue in the additionsecond quarter of SBA consulting fees and 2020 that will be recorded as income upon the forgiveness portion of the PPP.
Bank-owned life insurance income was relatively unchanged for the periods presented, amounting to $0.6 million in the third quarter of 2017 compared to $0.5 million in the third quarter of 2016, and $1.7 million to $1.5 million for the first nine months of 2017 and 2016, respectively.
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Within the noncore components of noninterest income, the largest variance for the periods presented related to indemnification asset expense. As discussed previously, in the third quarter of 2016, we terminated our FDIC loss share agreements, and thus there was no indemnification asset income or expense in 2017. In 2016, we recorded indemnification asset expense of $5.7 million and $10.3 million for the three and nine months ended September 30, 2016, respectively.
During the nine months ended September 30, 2017, we recorded $0.2 million in losses from sales of securities. For the comparable period of 2016, we recorded an insignificant amount of gain.
Other gains and losses for the 2017 periods presented represent the net effects of miscellaneous gains and losses that are non-routine in nature. In the third quarter of 2016, the Company recorded a net gain of $1.4 million as a result of a branch exchange transaction.
Noninterest expenses amounted to $34.4 million in the third quarter of 2017 compared to $27.7 million recorded in the third quarter of 2016. Noninterest expenses for the nine months ended September 30, 2017 amounted to $101.5 million compared to $78.6 million in 2016. The majority of the increase in noninterest expenses in 2017 relates to our acquisition of Carolina Bank.
Salaries expense increased to $16.6 million in the third quarter of 2017 from the $13.4 million recorded in the third quarter of 2016. Salaries expense for the first nine months of 2017 amounted to $46.8 million compared to $37.5 million in 2016. The primary reason for the increase in salaries expense in 2017 was the addition of personnel assumed in the Carolina Bank acquisition. Also impacting salaries expense is the 2016 acquisition and continued growth of the Company’s SBA consulting firm which was acquired in May 2016 and the SBA national lending division, which began operations in the third quarter of 2016.
Employee benefits expense was $3.4 million in the third quarter of 2017 compared to $2.6 million in the third quarter of 2016. For the first nine months of 2017, employee benefits expense amounted to $10.7 million compared to $7.9 million in 2016. This increase in 2017 was primarily due to the acquisition and growth initiatives discussed above.
Occupancy and equipment expense increased in 2017 primarily due to the acquisitions discussed above. For the three months ended September 30, 2017, occupancy and equipment expense totaled $3.5 million compared to $2.9 million in the third quarter of 2016. For the nine months ended September 30, 2017, occupancy and equipment expense totaled $10.3 million compared to $8.5 million in the first nine months of 2016.
Merger and acquisition expenses amounted to $1.3 million and $0.6$1.9 million for the three months ended September 30, 20172020 and 2016,2019, respectively, compared to $5.5 million and $7.0 million for the nine months ended September 30, 2020 and 2019, respectively. Origination of SBA loans generally declined in the first and second quarters of 2020 due to the economic impact of COVID-19, while during the third quarter of 2020, SBA loan sales increased due to increased market activity.
Intangibles amortization expense increased from $0.4 million in the third quarter of 2016 to $0.9 million in the third quarter of 2017 and from $0.8 million in the first nine months of 2016 to $2.5 million in the first nine months of 2017, primarily as a result of the amortization of intangible assets that were recorded in connection with our acquisitions.
Other operating expenses amounted to $8.7 million and $7.8 million for the third quarters of 2017 and 2016, respectively, and $26.4 million in the first nine months of 2017 compared to $22.7 million in the first nine months of 2016. The increases were primarily due to the Company’s growth, including the acquisitions of the SBA consulting firm and Carolina Bank.
For the third quarter of 2017,2019, the provision for income taxes was $6.5$15.2 million, an effective tax rate of 33.3%20.8%, compared to $3.1and $18.9 million, for the same period of 2016, which is an effective tax rate of 40.0%.21.0%, respectively.
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The Consolidated Statements of Comprehensive Income reflect other comprehensive income of $0.2 million during each of the third quarters of 2017 and 2016. During the nine months ended September 30, 2017 and 2016, we recorded other comprehensive income of $2.3$12.4 million and $2.0$15.6 million, respectively. The primary component of other comprehensive income for the periods presented was changes in unrealized holding gains (losses) of our available for sale securities.securities resulting from declines in interest rates. Our available for sale securities portfolio is predominantly comprised of fixed rate bonds that generally increase in value when market yields for fixed rate bonds decrease and decline in value when market yields for fixed rate bonds increase. Management has evaluated any unrealized losses on individual securities at each period end and determined that there is no other-than-temporary impairment.
December 31, 2019.
October 1, 2016 to September 30, 2017 | Balance at beginning of period | Internal Growth, net | Growth from Acquisitions (1) | Balance at end of period | Total percentage growth | Internal percentage growth | ||||||||||||||||||
Loans outstanding | $ | 2,651,459 | 280,774 | 497,522 | 3,429,755 | 29.4% | 10.6% | |||||||||||||||||
Deposits – Noninterest bearing checking | 749,256 | 120,782 | 146,909 | 1,016,947 | 35.7% | 16.1% | ||||||||||||||||||
Deposits – Interest bearing checking | 593,065 | 28,277 | 61,771 | 683,113 | 15.2% | 4.8% | ||||||||||||||||||
Deposits – Money market | 658,166 | 35,562 | 100,191 | 793,919 | 20.6% | 5.4% | ||||||||||||||||||
Deposits – Savings | 207,494 | 521 | 188,177 | 396,192 | 90.9% | 0.3% | ||||||||||||||||||
Deposits – Brokered | 147,406 | 56,732 | 11,477 | 215,615 | 46.3% | 38.5% | ||||||||||||||||||
Deposits – Internet time | — | (3,253 | ) | 11,248 | 7,995 | — | — | |||||||||||||||||
Deposits – Time>$100,000 | 306,041 | (46,818 | ) | 36,783 | 296,006 | -3.3% | -15.3% | |||||||||||||||||
Deposits – Time<$100,000 | 249,412 | (36,783 | ) | 28,825 | 241,454 | -3.2% | -14.7% | |||||||||||||||||
Total deposits | $ | 2,910,840 | 155,020 | 585,381 | 3,651,241 | 25.4% | 5.3% | |||||||||||||||||
January 1, 2017 to September 30, 2017 | ||||||||||||||||||||||||
Loans outstanding | $ | 2,710,712 | 221,521 | 497,522 | 3,429,755 | 26.5% | 8.2% | |||||||||||||||||
Deposits – Noninterest bearing checking | 756,003 | 114,035 | 146,909 | 1,016,947 | 34.5% | 15.1% | ||||||||||||||||||
Deposits – Interest bearing checking | 635,431 | (14,089 | ) | 61,771 | 683,113 | 7.5% | -2.2% | |||||||||||||||||
Deposits – Money market | 683,680 | 10,048 | 100,191 | 793,919 | 16.1% | 1.5% | ||||||||||||||||||
Deposits – Savings | 209,074 | (1,059 | ) | 188,177 | 396,192 | 89.5% | -0.5% | |||||||||||||||||
Deposits – Brokered | 136,466 | 67,672 | 11,477 | 215,615 | 58.0% | 49.6% | ||||||||||||||||||
Deposits – Internet time | — | (3,253 | ) | 11,248 | 7,995 | — | — | |||||||||||||||||
Deposits – Time>$100,000 | 287,939 | (28,716 | ) | 36,783 | 296,006 | 2.8% | -10.0% | |||||||||||||||||
Deposits – Time<$100,000 | 238,760 | (26,131 | ) | 28,825 | 241,454 | 1.1% | -10.9% | |||||||||||||||||
Total deposits | $ | 2,947,353 | 118,507 | 585,381 | 3,651,241 | 23.9% | 4.0% |
2020.
$ in thousands | ||||||||||||||||||||||||||||||||
January 1, 2020 to September 30, 2020 | Balance at beginning of period | Internal Growth, net | Growth from Acquisitions | Balance at end of period | Total percentage growth | |||||||||||||||||||||||||||
Total loans | $ | 4,453,466 | 345,637 | 14,633 | 4,813,736 | 8.1 | % | |||||||||||||||||||||||||
Deposits – Noninterest bearing checking | 1,515,977 | 605,377 | — | 2,121,354 | 39.9 | % | ||||||||||||||||||||||||||
Deposits – Interest bearing checking | 912,784 | 189,559 | — | 1,102,343 | 20.8 | % | ||||||||||||||||||||||||||
Deposits – Money market | 1,173,107 | 351,603 | — | 1,524,710 | 30.0 | % | ||||||||||||||||||||||||||
Deposits – Savings | 424,415 | 68,531 | — | 492,946 | 16.1 | % | ||||||||||||||||||||||||||
Deposits – Brokered | 86,141 | (49,405) | — | 36,736 | (57.4) | % | ||||||||||||||||||||||||||
Deposits – Internet time | 698 | (449) | — | 249 | (64.3) | % | ||||||||||||||||||||||||||
Deposits – Time>$100,000 | 563,108 | (13,685) | — | 549,423 | (2.4) | % | ||||||||||||||||||||||||||
Deposits – Time<$100,000 | 255,125 | (22,660) | — | 232,465 | (8.9) | % | ||||||||||||||||||||||||||
Total deposits | $ | 4,931,355 | 1,128,871 | — | 6,060,226 | 22.9 | % |
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The mix of our loan portfolio remains substantially the same at September 30, 20172020 compared to December 31, 2016. The2019, with PPP loans increasing the percentage of commercial and industrial loans at September 30, 2020. Also, the majority of our real estate loans are personal and commercial loans where real estate provides additional security for the loan.
Note 7 to the consolidated financial statements presents additional detailed information regarding our mix of loans.
While retail deposits (non-brokered) have experienced growth over recent periods, the loan growth we have experienced has exceeded the retail deposit growth. This is largely associated with our recent growth and expansion into the larger markets of North Carolina – Charlotte, Raleigh, and the Triad. When initially entering markets such as these, our experience has been that we are able to capture loan market share faster than deposit market share. This imbalance has resulted in higher use of brokeredtotal deposits and borrowings increased from 21.4% at December 31, 2019 to fund the loan growth. Total brokered deposits amounted to $215.6 million27.4% at September 30, 2017, which is a 46% increase from the $147.4 million outstanding a year earlier. Borrowings have increased from $236.4 million to $397.5 million over that same period.
2020.
ASSET QUALITY DATA($ in thousands) | As of/for the quarter ended September 30, 2017 | As of/for the quarter ended December 31, 2016 | As of/for the quarter ended September 30, 2016 | |||||||||
Nonperforming assets | ||||||||||||
Nonaccrual loans | $ | 23,350 | 27,468 | 32,796 | ||||||||
Restructured loans – accruing | 20,330 | 22,138 | 27,273 | |||||||||
Accruing loans >90 days past due | — | — | — | |||||||||
Total nonperforming loans | 43,680 | 49,606 | 60,069 | |||||||||
Foreclosed real estate | 9,356 | 9,532 | 10,103 | |||||||||
Total nonperforming assets | $ | 53,036 | 59,138 | 70,172 | ||||||||
Purchased credit impaired loans not included above (1) | $ | 15,034 | — | — | ||||||||
Asset Quality Ratios – All Assets | ||||||||||||
Net charge-offs to average loans - annualized | -0.07% | 0.12% | 0.06% | |||||||||
Nonperforming loans to total loans | 1.27% | 1.83% | 2.27% | |||||||||
Nonperforming assets to total assets | 1.16% | 1.64% | 1.98% | |||||||||
Allowance for loan losses to total loans | 0.72% | 0.88% | 0.93% | |||||||||
Allowance for loan losses to nonperforming loans | 56.30% | 47.94% | 40.91% |
ASSET QUALITY DATA ($ in thousands) | As of/for the quarter ended September 30, 2020 | As of/for the quarter ended December 31, 2019 | ||||||||||||
Nonperforming assets | ||||||||||||||
Nonaccrual loans | $ | 31,656 | 24,866 | |||||||||||
TDR's – accruing | 9,896 | 9,053 | ||||||||||||
Accruing loans >90 days past due | — | — | ||||||||||||
Total nonperforming loans | 41,552 | 33,919 | ||||||||||||
Foreclosed real estate | 2,741 | 3,873 | ||||||||||||
Total nonperforming assets | $ | 44,293 | 37,792 | |||||||||||
Purchased credit impaired loans not included above (1) | $ | 9,616 | 12,664 | |||||||||||
Asset Quality Ratios – All Assets | ||||||||||||||
Net charge-offs to average loans - annualized | (0.06) | % | 0.09 | % | ||||||||||
Nonperforming loans to total loans | 0.86 | % | 0.76 | % | ||||||||||
Nonperforming assets to total assets | 0.63 | % | 0.62 | % | ||||||||||
Allowance for loan losses to total loans | 1.02 | % | 0.48 | % | ||||||||||
Allowance for loan losses to nonperforming loans | 118.47 | % | 63.09 | % |
(1) In the March 3, 2017 acquisition of Carolina Bank |
Consistent with the weak economy experienced in much of our market associated with the onset of the recession in 2008, we experienced higher levels of loan losses, delinquencies and nonperforming assets compared to our historical averages. As the economic conditions have improved in our market area over the past several years, we have experienced steady declines in our levels of nonperforming assets.
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As noted in the table above, atAt September 30, 2017,2020, total nonaccrual loans amounted to $23.4$31.7 million, compared to $27.5$24.9 million at December 31, 2016 and $32.82019. As noted above, the increase was primarily driven by three loans. One of those three loans, with a balance of approximately $4 million, at September 30, 2016. “Restructuredhas a 75% SBA guarantee.
2020 are excluded from TDR consideration at September 30, 2020.
($ in thousands) | At September 30, 2017 | At December 31, 2016 | At September 30, 2016 | |||||||||
Commercial, financial, and agricultural | $ | 996 | 1,842 | 2,253 | ||||||||
Real estate – construction, land development, and other land loans | 1,565 | 2,945 | 3,858 | |||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 14,878 | 16,017 | 17,989 | |||||||||
Real estate – mortgage – home equity loans/lines of credit | 2,250 | 2,355 | 2,441 | |||||||||
Real estate – mortgage – commercial and other | 3,534 | 4,208 | 6,151 | |||||||||
Installment loans to individuals | 127 | 101 | 104 | |||||||||
Total nonaccrual loans | $ | 23,350 | 27,468 | 32,796 | ||||||||
The table above indicated decreases in most categories of nonaccrual loans. The decreases reflect stabilization in most of our market areas and our increased focus on the resolution of our nonperforming assets.
end.
($ in thousands) | At September 30, 2020 | At December 31, 2019 | ||||||||||||
Commercial, financial, and agricultural | $ | 8,473 | 5,518 | |||||||||||
Real estate – construction, land development, and other land loans | 872 | 1,067 | ||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 5,742 | 7,552 | ||||||||||||
Real estate – mortgage – home equity loans/lines of credit | 1,594 | 1,797 | ||||||||||||
Real estate – mortgage – commercial and other | 14,795 | 8,820 | ||||||||||||
Consumer loans | 180 | 112 | ||||||||||||
Total nonaccrual loans | $ | 31,656 | 24,866 |
($ in thousands) | At September 30, 2017 | At December 31, 2016 | At September 30, 2016 | |||||||||
Vacant land | $ | 3,617 | 3,221 | 3,324 | ||||||||
1-4 family residential properties | 3,257 | 4,345 | 4,538 | |||||||||
Commercial real estate | 2,482 | 1,966 | 2,241 | |||||||||
Total foreclosed real estate | $ | 9,356 | 9,532 | 10,103 |
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($ in thousands) | At September 30, 2020 | At December 31, 2019 | ||||||||||||
Vacant land and farmland | $ | 1,128 | 1,752 | |||||||||||
1-4 family residential properties | 648 | 974 | ||||||||||||
Commercial real estate | 965 | 1,147 | ||||||||||||
Total foreclosed real estate | $ | 2,741 | 3,873 |
As of September 30, 2017 | ||||||||||||||||
($ in thousands) | Total Nonperforming Loans | Total Loans | Nonperforming Loans to Total Loans | Total Foreclosed Real Estate | ||||||||||||
Region (1) | ||||||||||||||||
Eastern Region (NC) | $ | 10,505 | 819,000 | 1.3% | $ | 1,024 | ||||||||||
Triangle Region (NC) | 11,489 | 873,000 | 1.3% | 1,650 | ||||||||||||
Triad Region (NC) | 8,954 | 906,000 | 1.0% | 2,289 | ||||||||||||
Charlotte Region (NC) | 1,276 | 273,000 | 0.5% | 334 | ||||||||||||
Southern Piedmont Region (NC) | 6,882 | 286,000 | 2.4% | 773 | ||||||||||||
Western Region (NC) | 125 | 91,000 | 0.1% | 912 | ||||||||||||
South Carolina Region | 2,413 | 153,000 | 1.6% | 528 | ||||||||||||
Virginia Region (2) | 1,969 | 9,000 | 21.9% | 1,846 | ||||||||||||
Other | 67 | 20,000 | 0.3% | — | ||||||||||||
Total | $ | 43,680 | 3,430,000 | 1.3% | $ | 9,356 | ||||||||||
2020.
As of September 30, 2020 | |||||||||||||||||||||||
($ in thousands) | Total Nonperforming Loans | Total Loans | Nonperforming Loans to Total Loans | Total Foreclosed Real Estate | |||||||||||||||||||
Region (1) | |||||||||||||||||||||||
Eastern Region (NC) | $ | 5,379 | 1,054,310 | 0.51 | % | $ | 653 | ||||||||||||||||
Triangle Region (NC) | 5,885 | 974,628 | 0.60 | % | 848 | ||||||||||||||||||
Triad Region (NC) | 6,855 | 856,837 | 0.80 | % | 165 | ||||||||||||||||||
Charlotte Region (NC) | 1,406 | 374,189 | 0.38 | % | — | ||||||||||||||||||
Southern Piedmont Region (NC) | 3,005 | 265,982 | 1.13 | % | 106 | ||||||||||||||||||
Western Region (NC) | 3,385 | 633,268 | 0.53 | % | 23 | ||||||||||||||||||
South Carolina Region | 1,247 | 219,512 | 0.57 | % | 423 | ||||||||||||||||||
Former Virginia Region | 82 | — | — | % | 264 | ||||||||||||||||||
Other | 14,308 | 435,010 | 3.29 | % | 259 | ||||||||||||||||||
Total | $ | 41,552 | 4,813,736 | 0.86 | % | $ | 2,741 |
Henderson, McDowell, Madison, Transylvania
Summary
CECL until the earlier of the cessation of the national emergency or December 31, 2020 because of the challenges associated with developing a reliable forecast of losses that may result from the unprecedented COVID-19 pandemic. Accordingly, the Company's provision for loan losses for the first nine months of 2020 is based on the information available and the conditions that existed at September 30, 2020 related to COVID-19, according to the pre-CECL incurred loss methodology for determining loan losses. See further discussion below.
We recorded no provision for loan losses in the third quarters of 2017 or 2016. For the nine months ended September 30, 2017, we recorded total provision for loan losses of $0.7 million compared to a total negative provision for loan losses of $23,000 in the same period of 2016. The negative provision in 2016 was primarily due to significant recoveries on covered loans.
($ in thousands) | Nine Months Ended September 30, | Twelve Months Ended December 31, | Nine Months Ended September 30, | |||||||||
2017 | 2016 | 2016 | ||||||||||
Loans outstanding at end of period | $ | 3,429,755 | 2,710,712 | 2,651,459 | ||||||||
Average amount of loans outstanding | $ | 3,211,844 | 2,603,327 | 2,576,605 | ||||||||
Allowance for loan losses, at beginning of year | $ | 23,781 | 28,583 | 28,583 | ||||||||
Provision (reversal) for loan losses | 723 | (23 | ) | (23 | ) | |||||||
24,504 | 28,560 | 28,560 | ||||||||||
Loans charged off: | ||||||||||||
Commercial, financial, and agricultural | (1,335 | ) | (2,033 | ) | (1,273 | ) | ||||||
Real estate – construction, land development & other land loans | (312 | ) | (1,101 | ) | (638 | ) | ||||||
Real estate – mortgage – residential (1-4 family) first mortgages | (1,746 | ) | (3,894 | ) | (3,461 | ) | ||||||
Real estate – mortgage – home equity loans / lines of credit | (791 | ) | (1,010 | ) | (970 | ) | ||||||
Real estate – mortgage – commercial and other | (573 | ) | (1,088 | ) | (933 | ) | ||||||
Installment loans to individuals | (521 | ) | (1,288 | ) | (741 | ) | ||||||
Total charge-offs | (5,278 | ) | (10,414 | ) | (8,016 | ) | ||||||
Recoveries of loans previously charged-off: | ||||||||||||
Commercial, financial, and agricultural | 848 | 817 | 614 | |||||||||
Real estate – construction, land development & other land loans | 2,280 | 2,690 | 2,066 | |||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 806 | 1,207 | 820 | |||||||||
Real estate – mortgage – home equity loans / lines of credit | 250 | 279 | 217 | |||||||||
Real estate – mortgage – commercial and other | 973 | 1,286 | 1,052 | |||||||||
Installment loans to individuals | 210 | 406 | 312 | |||||||||
Total recoveries | 5,367 | 6,685 | 5,081 | |||||||||
Net (charge-offs)/recoveries | 89 | (3,729 | ) | (2,935 | ) | |||||||
Allowance removed related to sold loans | — | (1,050 | ) | (1,050 | ) | |||||||
Allowance for loan losses, at end of period | $ | 24,593 | 23,781 | 24,575 | ||||||||
Ratios: | ||||||||||||
Net charge-offs as a percent of average loans (annualized) | 0.00% | 0.14% | 0.15% | |||||||||
Allowance for loan losses as a percent of loans at end of period | 0.72% | 0.88% | 0.93% | |||||||||
The
($ in thousands) | Nine Months Ended September 30, 2020 | Twelve Months Ended December 31, 2019 | Nine Months Ended September 30, 2019 | ||||||||||||||
Loans outstanding at end of period | $ | 4,813,736 | 4,453,466 | 4,396,544 | |||||||||||||
Average amount of loans outstanding | $ | 4,679,479 | 4,346,331 | 4,322,078 | |||||||||||||
Allowance for loan losses, at beginning of year | $ | 21,398 | 21,039 | 21,039 | |||||||||||||
Provision (reversal) for loan losses | 31,008 | 2,263 | (913) | ||||||||||||||
52,406 | 23,302 | 20,126 | |||||||||||||||
Loans charged off: | |||||||||||||||||
Commercial, financial, and agricultural | (4,256) | (2,473) | (1,224) | ||||||||||||||
Real estate – construction, land development & other land loans | (51) | (553) | (340) | ||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | (478) | (657) | (379) | ||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | (404) | (307) | (216) | ||||||||||||||
Real estate – mortgage – commercial and other | (545) | (1,556) | (1,455) | ||||||||||||||
Consumer loans | (707) | (757) | (555) | ||||||||||||||
Total charge-offs | (6,441) | (6,303) | (4,169) | ||||||||||||||
Recoveries of loans previously charged-off: | |||||||||||||||||
Commercial, financial, and agricultural | 603 | 980 | 768 | ||||||||||||||
Real estate – construction, land development & other land loans | 856 | 1,275 | 797 | ||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 594 | 705 | 521 | ||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | 373 | 629 | 513 | ||||||||||||||
Real estate – mortgage – commercial and other | 584 | 575 | 550 | ||||||||||||||
Consumer loans | 251 | 235 | 154 | ||||||||||||||
Total recoveries | 3,261 | 4,399 | 3,303 | ||||||||||||||
Net (charge-offs) recoveries | (3,180) | (1,904) | (866) | ||||||||||||||
Allowance for loan losses, at end of period | $ | 49,226 | 21,398 | 19,260 | |||||||||||||
Ratios: | |||||||||||||||||
Net charge-offs (recoveries) as a percent of average loans (annualized) | 0.09 | % | 0.09 | % | 0.03 | % | |||||||||||
Allowance for loan losses as a percent of loans at end of period | 1.02 | % | 0.48 | % | 0.44 | % |
The allowance for loan losses amounted to $24.6$49.2 million at September 30, 2017, compared to $23.8 million at December 31, 2016 and $24.6 million at2020.
COVID-19 Loan Deferral Information at September 30, 2020 | |||||||||||
Deferrals | Total Loans | Percentage Deferred | |||||||||
Construction Loans | $ | 1,764 | 653,120 | 0.3 | % | ||||||
Farmland and Agriculture | 881 | 32,966 | 2.7 | % | |||||||
Home equity loans | 206 | 310,326 | 0.1 | % | |||||||
Residential first lien loans | 8,027 | 1,011,829 | 0.8 | % | |||||||
Multifamily loans | 23,441 | 197,424 | 11.9 | % | |||||||
Owner-Occupied Commercial Real Estate | 21,094 | 745,770 | 2.8 | % | |||||||
Non-Owner-Occupied Commercial Real Estate | 120,811 | 1,007,643 | 12.0 | % | |||||||
Commercial & Industrial Loans | 9,208 | 648,792 | 1.4 | % | |||||||
Loans to Municipalities | — | 138,353 | — | % | |||||||
Consumer Loans | 190 | 50,189 | 0.4 | % | |||||||
Other Loans | — | 17,324 | — | % | |||||||
$ | 185,622 | 4,813,736 | 3.9 | % |
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In addition, various regulatory agencies, as an integral part of their examination process, periodically review our allowance for loan losses and value of other real estate. Such agencies may require us to recognize adjustments to the allowance or the carrying value of other real estate based on their judgments about information available at the time of their examinations.
2019.
Thus far in the COVID-19 pandemic, we have seen our liquidity levels increase, with increases in deposits account balances leading to higher cash levels.
2019.
2020.
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The Company is regulated by the Board of Governors of the Federal Reserve Board (“Federal Reserve”FRB”) and is subject to the securities registration and public reporting regulations of the Securities and Exchange Commission. Our banking subsidiary, First Bank, is also regulated by the FRB and the North Carolina Office of the Commissioner of Banks. We must comply with regulatory capital requirements established by the FRB. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on our financial statements. We are not aware of any recommendations of regulatory authorities or otherwise which, if they were to be implemented, would have a material effect on our liquidity, capital resources, or operations.
We must comply
September 30, 2017 | December 31, 2016 | September 30, 2016 | ||||||||||
Risk-based capital ratios: | ||||||||||||
Common equity Tier 1 to Tier 1 risk weighted assets | 10.30% | 10.92% | 10.67% | |||||||||
Minimum required Common equity Tier 1 capital | 4.50% | 4.50% | 4.50% | |||||||||
Tier I capital to Tier 1 risk weighted assets | 11.74% | 12.49% | 12.57% | |||||||||
Minimum required Tier 1 capital | 6.00% | 6.00% | 6.00% | |||||||||
Total risk-based capital to Tier II risk weighted assets | 12.44% | 13.36% | 13.49% | |||||||||
Minimum required total risk-based capital | 8.00% | 8.00% | 8.00% | |||||||||
Leverage capital ratios: | ||||||||||||
Tier 1 capital to quarterly average total assets | 9.72% | 10.17% | 10.22% | |||||||||
Minimum required Tier 1 leverage capital | 4.00% | 4.00% | 4.00% |
September 30, 2020 | December 31, 2019 | |||||||||||||
Risk-based capital ratios: | ||||||||||||||
Common equity Tier 1 to Tier 1 risk weighted assets | 12.89 | % | 13.28 | % | ||||||||||
Minimum required Common Equity Tier 1 capital | 7.00 | % | 7.00 | % | ||||||||||
Tier I capital to Tier 1 risk weighted assets | 13.98 | % | 14.41 | % | ||||||||||
Minimum required Tier 1 capital | 8.50 | % | 8.50 | % | ||||||||||
Total risk-based capital to Tier II risk weighted assets | 15.01 | % | 14.89 | % | ||||||||||
Minimum required total risk-based capital | 10.50 | % | 10.50 | % | ||||||||||
Leverage capital ratios: | ||||||||||||||
Tier 1 capital to quarterly average total assets | 10.13 | % | 11.19 | % | ||||||||||
Minimum required Tier 1 leverage capital | 4.00 | % | 4.00 | % |
Our capital ratios are generally lower at September 30, 2017 compared to prior periods The 106 basis point reduction in our leverage ratio reflected in the table above was due to the acquisition of Carolina Banksignificant balance sheet growth experienced in March 2017 (see Note 4 to the Consolidated Financial Statements for more information on this transaction).
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In addition to regulatory capital ratios, we also closely monitor our ratio of tangible common equity to tangible assets (“TCE Ratio”). Our TCE ratio was 7.95% at September 30, 2017 compared to 8.16% at December 31, 2016 and 8.03% at September 30, 2016.
Bank, our bank subsidiary.
We did not repurchase any
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Using stated maturities for all fixed rate instruments except mortgage-backed securities (which are allocated in the periods of their expected payback) and securities and borrowings with call features that are expected to be called (which are shown in the period of their expected call). At, at September 30, 2017,2020, we had $1.0$1.9 billion more in interest-bearing liabilities that are subject to interest rate changes within one year than earning assets. This generally would indicate that net interest income would experience downward pressure in a rising interest rate environment and would benefit from a declining interest rate environment. However, this method of analyzing interest sensitivity only measures the magnitude of the timing differences and does not address earnings, market value, or management actions. Also, interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market
While there have been periods in the last few years that the yield curve has steepened somewhat,slightly, it currently remains relativelyvery flat. This flat yield curve and the intense competition for high-quality loans in our market areas have limited our ability to charge higherresulted in lower interest rates on loans,loans.
As noted earlier,global economy the Federal Reserve made no changescut interest rates by 75 basis points in the second half of 2019. And in March 2020, the Federal Reserve cut interest rates by an additional 150 basis points in response to the short termCOVID-19 pandemic. Our interest-bearing cash balances and most of our variable rate loans, which comprise approximately one-third of our loan portfolio, generally reset to lower rates soon after these interest rate cuts. We reduced our offering rates on most deposit products in March 2020 and our borrowing costs were also reduced by lower rates and repaying a significant portion of our outstanding borrowings. Overall however, the impact of the interest rate cuts negatively impacted our net interest margin and our earnings in the second quarter of 2020, with interest-earning asset yields declining from 4.46% in the first quarter of 2020 to 3.80% in the second quarter of 2020 a decline of 66 basis points, while our average cost of interest-bearing liabilities only declined by 26 basis points, from 0.78% in the first quarter of 2020 to 0.52% in the second quarter of 2020.
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As previously discussed in the section “Net Interest Income,” our net interest income has been impacted by certain purchase accounting adjustments related to the acquired banks. The purchase accounting adjustments related to the premium amortization on loans, deposits and borrowings are based on amortization schedules and are thus systematic and predictable. The accretion of the loan discount on acquired loans which amounted to $5.1$1.0 million for each of the three months ended September 30, 2020 and 2019, respectively, and $3.0 million and $3.6$3.4 million for the nine months ended September 30, 20172020 and 2016,2019, respectively, is less predictable and could be materially different among periods. This is because of the magnitude of the discounts that wereare initially recorded and the fact that the accretion being recorded is dependent on both the credit quality of the acquired loans and the impact of any accelerated loan repayments, including payoffs. If the credit quality of the loans declines, some, or all, of the remaining discount will cease to be accreted into income. If the underlying loans experience accelerated paydowns or improved performance expectations, the remaining discount will be accreted into income on an accelerated basis. In the event of total payoff, the remaining discount will be entirely accreted into income in the period of the payoff. Each of these factors is difficult to predict and susceptible to volatility. The remaining loan discount on acquired loans amounted to $16.9$9.7 million at September 30, 2017.
Based on our most recent interest rate modeling, which assumes one interest rate increase for the remainder of 2017 (federal funds rate = 1.50%, prime = 4.50%), we project that our net interest margin will likely remain fairly stable over the next twelve months. We expect the yields we earn on excess cash and investment security yields2020 compared to increase as a result of the recent and expected rate increases, while we expect loan yields to be stable, and deposit rates to gradually rise.
$12.7 million at December 31, 2019.
From time to time,
In our Quarterly Report on Form 10-Q for theaccounting period ended June 30, 2017, we reported thatin which a purported shareholder of ASB Bancorp, Inc. filed a lawsuit in the United States District Court, Western District of North Carolina, naming the Company, ASB Bancorp, and members of ASB Bancorp’s board of directors as defendants. The lawsuit alleged inadequate disclosures in ASB Bancorp’s proxy statement/prospectus, violations of the Securities Exchange Act of 1934 and other state law claims. The lawsuit sought, among other remedies, to enjoin the merger or, in the event the merger was completed, rescission of the merger or rescissory damages; to direct defendants to account for unspecified damages; and costs of the lawsuit, including attorneys’ and experts’ fees. This lawsuit was dismissed prior to the October 1, 2017 completion of the Company’s acquisition of ASB Bancorp, Inc. andloss is not expecteddeemed to be refiled.
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Issuer Purchases of Equity Securities | ||||||||||||||||||||||||||
Period | Total Number of Shares Purchased (2) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) | Maximum Number of Shares (or Approximate Dollar Value) that May Yet Be Purchased Under the Plans or Programs (1) | ||||||||||||||||||||||
July 1, 2020 to July 31, 2020 | — | $ | — | — | $ | 17,567,520 | ||||||||||||||||||||
August 1, 2020 to August 31, 2020 | — | — | — | $ | 17,567,520 | |||||||||||||||||||||
September 1, 2020 to September 30, 2020 | 305,100 | 20.55 | 305,100 | $ | 11,298,850 | |||||||||||||||||||||
Total | 305,100 | 23.32 | 305,100 | $ | 11,298,850 |
(1)All shares available for repurchase are pursuant to publicly announced share repurchase authorizations. As of September 30, 2020, the Company had the remaining authorization to repurchase up to $11.3 million of the Company's stock, which was authorized and announced on November 19, 2019. The repurchase authorization has an expiration date of December 31, 2020. (2)The table above does not include shares that were used by option holders to satisfy the exercise price of the options issued by the Company to its employees and directors pursuant to the Company’s stock option plans. |
During the three months ended September 30, 2017, the Company issued 13,374 shares of unregistered common stock in completing the acquisition of Bear Insurance Service — see Note 4 to the consolidated financial statements for additional information. The Company relied upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933 for transactions not involving any public offering due to the small number of shareholders of Bear Insurance Service, their level of financial sophistication and the absence of any general solicitation. There were no other unregistered sales of the Company’s securitiessuch transactions during the three months ended September 30, 2017.
2.a |
2.b |
2.c |
2.d |
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3.a | Articles of Incorporation of the Company and amendments thereto were filed asExhibits 3.a.i through 3.a.v to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2002, and are incorporated herein by reference. Articles of Amendment to the Articles of Incorporation were filed asExhibits 3.1and3.2tothe Company’s Current Report on Form 8-K filed on January 13, 2009, and are incorporated herein by reference. Articles of Amendment to the Articles of Incorporation were filed asExhibit 3.1.b to the Company’s Registration Statement on Form S-3D filed on June 29, 2010 |
3.b |
4.a |
31.1 | |||||
31.2 |
32.1 |
32.2 |
101 | The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, |
FIRST BANCORP | |||||||
November 9, | BY:/s/ Richard H. Moore | ||||||
Richard H. Moore | |||||||
Chief Executive Officer | |||||||
(Principal Executive Officer), | and Director | ||||||
November 9, | BY:/s/ Eric P. Credle | ||||||
Eric P. Credle | |||||||
Executive Vice President | |||||||
and Chief Financial Officer |