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 ☒ NoOctoberJuly 31, 20172021 was 29,643,990.28,489,474.PagePage 894057595959606062conditions.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 20162020 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) | June 30, 2021 (unaudited) | December 31, 2020 | |||||||||
ASSETS | |||||||||||
Cash and due from banks, noninterest-bearing | $ | 83,851 | 93,724 | ||||||||
Due from banks, interest-bearing | 391,375 | 273,566 | |||||||||
Total cash and cash equivalents | 475,226 | 367,290 | |||||||||
Securities available for sale | 2,115,153 | 1,453,132 | |||||||||
Securities held to maturity (fair values of $292,774 and $170,734) | 291,728 | 167,551 | |||||||||
Presold mortgages in process of settlement at fair value | 13,762 | 42,271 | |||||||||
SBA Loans held for sale | 5,480 | 6,077 | |||||||||
Loans | 4,782,064 | 4,731,315 | |||||||||
Allowance for credit losses on loans | (65,022) | (52,388) | |||||||||
Net loans | 4,717,042 | 4,678,927 | |||||||||
Premises and equipment | 123,395 | 120,502 | |||||||||
Operating right-of-use lease assets | 16,432 | 17,514 | |||||||||
Accrued interest receivable | 20,357 | 20,272 | |||||||||
Goodwill | 231,906 | 239,272 | |||||||||
Other intangible assets | 11,062 | 15,366 | |||||||||
Foreclosed properties | 826 | 2,424 | |||||||||
Bank-owned life insurance | 108,209 | 106,974 | |||||||||
Other assets | 70,004 | 52,179 | |||||||||
Total assets | $ | 8,200,582 | 7,289,751 | ||||||||
LIABILITIES | |||||||||||
Deposits: Noninterest bearing checking accounts | $ | 2,651,143 | 2,210,012 | ||||||||
Interest bearing checking accounts | 1,378,865 | 1,172,022 | |||||||||
Money market accounts | 1,820,475 | 1,581,364 | |||||||||
Savings accounts | 593,629 | 519,266 | |||||||||
Time deposits of $100,000 or more | 510,722 | 564,365 | |||||||||
Other time deposits | 216,524 | 226,567 | |||||||||
Total deposits | 7,171,358 | 6,273,596 | |||||||||
Borrowings | 61,252 | 61,829 | |||||||||
Accrued interest payable | 710 | 904 | |||||||||
Operating lease liabilities | 16,893 | 17,868 | |||||||||
Other liabilities | 45,859 | 42,133 | |||||||||
Total liabilities | 7,296,072 | 6,396,330 | |||||||||
Commitments and contingencies | 0 | 0 | |||||||||
SHAREHOLDERS’ EQUITY | |||||||||||
Preferred stock, no par value per share. Authorized: 5,000,000 shares | |||||||||||
Issued & outstanding: NaN and NaN | 0 | 0 | |||||||||
Common stock, no par value per share. Authorized: 40,000,000 shares | |||||||||||
Issued & outstanding: 28,491,633 and 28,579,335 shares | 397,704 | 400,582 | |||||||||
Retained earnings | 507,531 | 478,489 | |||||||||
Stock in rabbi trust assumed in acquisition | (1,928) | (2,243) | |||||||||
Rabbi trust obligation | 1,928 | 2,243 | |||||||||
Accumulated other comprehensive income (loss) | (725) | 14,350 | |||||||||
Total shareholders’ equity | 904,510 | 893,421 | |||||||||
Total liabilities and shareholders’ equity | $ | 8,200,582 | 7,289,751 |
($ in thousands, except share data-unaudited) | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
INTEREST INCOME | |||||||||||||||||||||||
Interest and fees on loans | $ | 52,295 | 51,964 | 103,368 | 107,261 | ||||||||||||||||||
Interest on investment securities: | |||||||||||||||||||||||
Taxable interest income | 7,789 | 4,771 | 13,702 | 10,245 | |||||||||||||||||||
Tax-exempt interest income | 474 | 117 | 797 | 281 | |||||||||||||||||||
Other, principally overnight investments | 581 | 788 | 1,281 | 1,886 | |||||||||||||||||||
Total interest income | 61,139 | 57,640 | 119,148 | 119,673 | |||||||||||||||||||
INTEREST EXPENSE | |||||||||||||||||||||||
Savings, checking and money market accounts | 1,136 | 1,333 | 2,450 | 3,692 | |||||||||||||||||||
Time deposits of $100,000 or more | 681 | 2,323 | 1,539 | 5,247 | |||||||||||||||||||
Other time deposits | 182 | 418 | 398 | 908 | |||||||||||||||||||
Borrowings | 381 | 942 | 764 | 2,443 | |||||||||||||||||||
Total interest expense | 2,380 | 5,016 | 5,151 | 12,290 | |||||||||||||||||||
Net interest income | 58,759 | 52,624 | 113,997 | 107,383 | |||||||||||||||||||
Provision for loan losses | 0 | 19,298 | 0 | 24,888 | |||||||||||||||||||
Provision for unfunded commitments | 1,939 | 0 | 1,939 | 0 | |||||||||||||||||||
Total provision for credit losses | 1,939 | 19,298 | 1,939 | 24,888 | |||||||||||||||||||
Net interest income after provision for credit losses | 56,820 | 33,326 | 112,058 | 82,495 | |||||||||||||||||||
NONINTEREST INCOME | |||||||||||||||||||||||
Service charges on deposit accounts | 2,824 | 2,289 | 5,557 | 5,626 | |||||||||||||||||||
Other service charges, commissions and fees | 6,496 | 4,624 | 12,018 | 8,693 | |||||||||||||||||||
Fees from presold mortgage loans | 2,274 | 3,020 | 6,818 | 4,861 | |||||||||||||||||||
Commissions from sales of insurance and financial products | 2,466 | 2,090 | 4,656 | 4,158 | |||||||||||||||||||
SBA consulting fees | 2,187 | 3,739 | 4,951 | 4,766 | |||||||||||||||||||
SBA loan sale gains | 2,996 | 1,965 | 5,326 | 2,612 | |||||||||||||||||||
Bank-owned life insurance income | 614 | 629 | 1,234 | 1,271 | |||||||||||||||||||
Securities gains (losses), net | 0 | 8,024 | 0 | 8,024 | |||||||||||||||||||
Other gains (losses), net | 1,517 | (187) | 1,483 | (113) | |||||||||||||||||||
Total noninterest income | 21,374 | 26,193 | 42,043 | 39,898 | |||||||||||||||||||
NONINTEREST EXPENSES | |||||||||||||||||||||||
Salaries expense | 21,187 | 20,606 | 41,318 | 40,716 | |||||||||||||||||||
Employee benefits expense | 4,084 | 3,847 | 8,658 | 8,394 | |||||||||||||||||||
Total personnel expense | 25,271 | 24,453 | 49,976 | 49,110 | |||||||||||||||||||
Occupancy expense | 2,668 | 2,724 | 5,572 | 5,682 | |||||||||||||||||||
Equipment related expenses | 1,053 | 1,020 | 2,098 | 2,165 | |||||||||||||||||||
Merger and acquisition expenses | 411 | 0 | 411 | 0 | |||||||||||||||||||
Intangibles amortization expense | 845 | 978 | 1,742 | 2,033 | |||||||||||||||||||
Foreclosed property (gains) losses, net | (173) | 35 | (16) | 194 | |||||||||||||||||||
Other operating expenses | 10,910 | 9,691 | 21,267 | 19,793 | |||||||||||||||||||
Total noninterest expenses | 40,985 | 38,901 | 81,050 | 78,977 | |||||||||||||||||||
Income before income taxes | 37,209 | 20,618 | 73,051 | 43,416 | |||||||||||||||||||
Income tax expense | 7,924 | 4,266 | 15,572 | 8,884 | |||||||||||||||||||
Net income | $ | 29,285 | 16,352 | 57,479 | 34,532 | ||||||||||||||||||
Earnings per common share: | |||||||||||||||||||||||
Basic | $ | 1.03 | 0.56 | 2.02 | 1.18 | ||||||||||||||||||
Diluted | 1.03 | 0.56 | 2.02 | 1.18 | |||||||||||||||||||
Dividends declared per common share | $ | 0.20 | 0.18 | 0.40 | 0.36 | ||||||||||||||||||
Weighted average common shares outstanding: | |||||||||||||||||||||||
Basic | 28,331,456 | 28,799,828 | 28,344,633 | 29,015,308 | |||||||||||||||||||
Diluted | 28,490,031 | 28,969,728 | 28,513,942 | 29,184,421 |
($ in thousands-unaudited) | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
Net income | $ | 29,285 | 16,352 | 57,479 | 34,532 | ||||||||||||||||||
Other comprehensive income (loss): | |||||||||||||||||||||||
Unrealized gains (losses) on securities available for sale: | |||||||||||||||||||||||
Unrealized holding gains (losses) arising during the period, pretax | 4,326 | 2,772 | (19,909) | 23,537 | |||||||||||||||||||
Tax (expense) benefit | (994) | (637) | 4,575 | (5,409) | |||||||||||||||||||
Reclassification to realized (gains) losses | 0 | (8,024) | 0 | (8,024) | |||||||||||||||||||
Tax expense (benefit) | 0 | 1,844 | 0 | 1,844 | |||||||||||||||||||
Postretirement Plans: | |||||||||||||||||||||||
Amortization of unrecognized net actuarial loss | 205 | 180 | 376 | 358 | |||||||||||||||||||
Tax benefit | (77) | (42) | (117) | (83) | |||||||||||||||||||
Other comprehensive income (loss) | 3,460 | (3,907) | (15,075) | 12,223 | |||||||||||||||||||
Comprehensive income | $ | 32,745 | 12,445 | 42,404 | 46,755 |
($ 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 June 30, 2020 | |||||||||||||||||||||||||||||||||||||||||
Balances, April 1, 2020 | 29,041 | $ | 410,236 | 430,709 | (2,602) | 2,602 | 21,253 | 862,198 | |||||||||||||||||||||||||||||||||
Net income | 16,352 | 16,352 | |||||||||||||||||||||||||||||||||||||||
Cash dividends declared ($0.18 per common share) | (5,215) | (5,215) | |||||||||||||||||||||||||||||||||||||||
Change in Rabbi Trust obligation | 385 | (385) | 0 | ||||||||||||||||||||||||||||||||||||||
Stock repurchases | (104) | (2,432) | (2,432) | ||||||||||||||||||||||||||||||||||||||
Stock-based compensation | 40 | 895 | 895 | ||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | (3,907) | (3,907) | |||||||||||||||||||||||||||||||||||||||
Balances, June 30, 2020 | 28,977 | $ | 408,699 | 441,846 | (2,217) | 2,217 | 17,346 | 867,891 | |||||||||||||||||||||||||||||||||
Three Months Ended June 30, 2021 | |||||||||||||||||||||||||||||||||||||||||
Balances, April 1, 2021 | 28,489 | $ | 397,094 | 483,944 | (2,256) | 2,256 | (4,185) | 876,853 | |||||||||||||||||||||||||||||||||
Net income | 29,285 | 29,285 | |||||||||||||||||||||||||||||||||||||||
Cash dividends declared ($0.20 per common share) | (5,698) | (5,698) | |||||||||||||||||||||||||||||||||||||||
Change in Rabbi Trust obligation | 328 | (328) | 0 | ||||||||||||||||||||||||||||||||||||||
Stock withheld for payment of taxes | (4) | (221) | (221) | ||||||||||||||||||||||||||||||||||||||
Stock-based compensation | 7 | 831 | 831 | ||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | 3,460 | 3,460 | |||||||||||||||||||||||||||||||||||||||
Balances, June 30, 2021 | 28,492 | $ | 397,704 | 507,531 | (1,928) | 1,928 | (725) | 904,510 |
($ 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 | ||||||||||||||||||||||||||||||||||||||||
Six Months Ended June 30, 2020 | |||||||||||||||||||||||||||||||||||||||||
Balances, January 1, 2020 | 29,601 | $ | 429,514 | 417,764 | (2,587) | 2,587 | 5,123 | 852,401 | |||||||||||||||||||||||||||||||||
Net income | 34,532 | 34,532 | |||||||||||||||||||||||||||||||||||||||
Cash dividends declared ($0.36 per common share) | (10,450) | (10,450) | |||||||||||||||||||||||||||||||||||||||
Change in Rabbi Trust Obligation | 370 | (370) | 0 | ||||||||||||||||||||||||||||||||||||||
Stock repurchases | (680) | (22,432) | (22,432) | ||||||||||||||||||||||||||||||||||||||
Stock-based compensation | 56 | 1,617 | 1,617 | ||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | 12,223 | 12,223 | |||||||||||||||||||||||||||||||||||||||
Balances, June 30, 2020 | 28,977 | $ | 408,699 | 441,846 | (2,217) | 2,217 | 17,346 | 867,891 | |||||||||||||||||||||||||||||||||
Six Months Ended June 30, 2021 | |||||||||||||||||||||||||||||||||||||||||
Balances, January 1, 2021 | 28,579 | 400,582 | 478,489 | (2,243) | 2,243 | 14,350 | 893,421 | ||||||||||||||||||||||||||||||||||
Adoption of new accounting standard | (17,051) | (17,051) | |||||||||||||||||||||||||||||||||||||||
Net income | 57,479 | 57,479 | |||||||||||||||||||||||||||||||||||||||
Cash dividends declared $0.40 per common share) | (11,386) | (11,386) | |||||||||||||||||||||||||||||||||||||||
Change in Rabbi Trust Obligation | 315 | (315) | 0 | ||||||||||||||||||||||||||||||||||||||
Stock repurchases | (107) | (4,036) | (4,036) | ||||||||||||||||||||||||||||||||||||||
Stock withheld for payment of taxes | (7) | (324) | (324) | ||||||||||||||||||||||||||||||||||||||
Stock-based compensation | 27 | 1,482 | 1,482 | ||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | (15,075) | (15,075) | |||||||||||||||||||||||||||||||||||||||
Balances, June 30, 2021 | 28,492 | $ | 397,704 | 507,531 | (1,928) | 1,928 | (725) | 904,510 |
($ in thousands-unaudited) | Six Months Ended June 30, | ||||||||||
2021 | 2020 | ||||||||||
Cash Flows From Operating Activities | |||||||||||
Net income | $ | 57,479 | 34,532 | ||||||||
Reconciliation of net income to net cash provided by operating activities: | |||||||||||
Provision for credit losses | 1,939 | 24,888 | |||||||||
Net security premium amortization | 6,342 | 1,605 | |||||||||
Loan discount accretion | (4,972) | (3,234) | |||||||||
Other purchase accounting accretion and amortization, net | 61 | 32 | |||||||||
Foreclosed property (gains) losses and write-downs, net | (16) | 194 | |||||||||
Gains on securities available for sale | 0 | (8,024) | |||||||||
Other (gains) losses | (1,483) | 113 | |||||||||
Increase in net deferred loan fees | 1,084 | 8,789 | |||||||||
Bank-owned life insurance income | (1,234) | (1,271) | |||||||||
Depreciation of premises and equipment | 2,928 | 2,963 | |||||||||
Amortization of operating lease right-of-use assets | 808 | 1,010 | |||||||||
Repayments of lease obligations | (697) | (920) | |||||||||
Stock-based compensation expense | 1,228 | 1,408 | |||||||||
Amortization of intangible assets | 1,742 | 2,033 | |||||||||
Amortization of SBA servicing assets | 1,014 | 1,416 | |||||||||
Fees/gains from sale of presold mortgages and SBA loans | (12,144) | (7,473) | |||||||||
Origination of presold mortgage loans in process of settlement | (170,132) | (170,961) | |||||||||
Proceeds from sales of presold mortgage loans in process of settlement | 204,588 | 165,223 | |||||||||
Origination of SBA loans for sale | (60,135) | (58,396) | |||||||||
Proceeds from sales of SBA loans | 55,380 | 45,306 | |||||||||
Increase in accrued interest receivable | (85) | (3,295) | |||||||||
Decrease (increase) in other assets | 2,467 | (6,935) | |||||||||
Increase in net deferred income tax asset | (44) | (7,661) | |||||||||
Decrease in accrued interest payable | (194) | (629) | |||||||||
(Decrease) increase in other liabilities | (4,826) | 23,784 | |||||||||
Net cash provided by operating activities | 81,098 | 44,497 | |||||||||
Cash Flows From Investing Activities | |||||||||||
Purchases of securities available for sale | (857,070) | (252,256) | |||||||||
Purchases of securities held to maturity | (133,916) | (50,272) | |||||||||
Proceeds from maturities/issuer calls of securities available for sale | 169,819 | 91,976 | |||||||||
Proceeds from maturities/issuer calls of securities held to maturity | 8,718 | 22,907 | |||||||||
Proceeds from sales of securities available for sale | 0 | 219,697 | |||||||||
Redemptions of FRB and FHLB stock, net | 1,836 | 7,754 | |||||||||
Net increase in loans | (40,288) | (311,493) | |||||||||
Proceeds from sales of foreclosed properties | 2,462 | 1,354 | |||||||||
Purchases of premises and equipment | (6,317) | (4,428) | |||||||||
Proceeds from sales of premises and equipment | 218 | 192 | |||||||||
Net cash paid from sale of insurance operations | (555) | 0 | |||||||||
Net cash used by investing activities | (855,093) | (274,569) | |||||||||
Cash Flows From Financing Activities | |||||||||||
Net increase in deposits | 897,789 | 899,841 | |||||||||
Net decrease in short-term borrowings | 0 | (98,000) | |||||||||
Proceeds from long-term borrowings | 0 | 150,000 | |||||||||
Payments on long-term borrowings | (665) | (240,562) | |||||||||
Cash dividends paid – common stock | (10,833) | (10,563) | |||||||||
Repurchases of common stock | (4,036) | (22,432) | |||||||||
Payment of taxes related to stock withheld | (324) | 0 | |||||||||
Net cash provided by financing activities | 881,931 | 678,284 | |||||||||
Increase in cash and cash equivalents | 107,936 | 448,212 | |||||||||
Cash and cash equivalents, beginning of period | 367,290 | 231,302 | |||||||||
Cash and cash equivalents, end of period | $ | 475,226 | 679,514 | ||||||||
Supplemental Disclosures of Cash Flow Information: | |||||||||||
Cash paid during the period for interest | $ | 5,345 | 12,919 | ||||||||
Cash paid during the period for income taxes | 16,326 | 1,110 | |||||||||
Non-cash: Unrealized (loss) gain on securities available for sale, net of taxes | (15,334) | 18,128 | |||||||||
Non-cash: Foreclosed loans transferred to other real estate | 848 | 662 | |||||||||
Non-cash: Initial recognition of operating lease right-of-use assets and operating lease liabilities | 444 | 0 | |||||||||
Non-cash: Receivable recorded related to sale of insurance operations | 12,955 | 0 | |||||||||
Non-cash: Derecognition of intangible assets related to sale of insurance operations | (10,229) | 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 |
In May 2014, the Financial
2021
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.relevant. 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, 20172021 and the adoption of this amendment did not have a material effect on its financial statements.
In June 2016,
In August 2016,credit losses, management adjusts the FASB amendedeffective interest rate used to discount expected cash flows to incorporate expected prepayments.
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 assetsextension 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 be effective for the Company for reporting periods beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect this amendment to have a material effect on its financial statements.
In March 2017, the FASB amended the requirements in the Compensation—Retirement Benefits topic of the Accounting Standards Codification related to the income statement presentation of the components of net periodic benefit cost for an entity’s sponsored defined benefit pension and other postretirement plans. The amendments require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by pertinent employees during the period. The other components of net periodic benefit cost are required to be presented in the income statement separately from the service cost component. The amendments will be effective for the Company for interim and 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.
In March 2017, the FASB amended the requirements in the Receivables—Nonrefundable Fees and Other Costs topic of the Accounting Standards Codification related to the amortization period for certain purchased callable debt securities held at a premium. The amendments shorten the amortization period for the premium to the earliest call date. The amendments will be effective for the Company for interim and annual 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.
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.
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.
Note 3 – Reclassifications
Certain amounts reported in the period ended September 30, 2016 have been reclassified to conform to the presentation for September 30, 2017. These reclassifications had no effect on net income or shareholders’ equity for the periods presented, nor did they materially impact trends in financial information.
Note 4 – Acquisitions
Since January 1, 2016, the Company completed the acquisitions described below. The results of each acquired company/branchrenewal options are included in the Company’s results beginningoriginal or modified contract at the reporting date and are not unconditionally cancellable by the Company.
Bankingport was
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 dueportfolio level applied to the reasons just noted, as well as the positive earningsamount 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, subjectcommitments expected 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 Marchfund.
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$831,000 and $146,000$895,000 for the three months ended SeptemberJune 30, 20172021 and 2016,2020, respectively, and $860,000$1,228,000 and $527,000$1,408,000 for the ninesix months ended SeptemberJune 30, 20172021 and 2016, respectively. Of2020, respectively, which includes the $860,000 in expense that was recorded in 2017, approximately $320,000 relatedvalue of the 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$191,000 and $206,000 of income tax benefits related to stock basedstock-based compensation expense in the income statement for the ninethree months ended SeptemberJune 30, 20172021 and 2016,2020, respectively, and $282,000 and $324,000 for the six months ended June 30, 2021 and 2020, respectively.
Recent equity grants For the last several years, the only equity-based compensation granted by the Company has been shares of restricted stock, as it relates to employees, have either had performanceand unrestricted stock as it relates to non-employee directors.
provided, the awards become immediately vested.
vest. The Company typically grantsissues new shares of common stock when restricted stock is granted.
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, 2021 | 172,105 | $ | 33.80 | |||||||||||
Granted during the period | 26,350 | 35.19 | ||||||||||||
Vested during the period | (19,415) | 41.03 | ||||||||||||
Forfeited or expired during the period | (8,011) | 38.00 | ||||||||||||
Nonvested at June 30, 2021 | 171,029 | $ | 33.00 |
At September 30, 2017, there were 40,689 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 monthsremaining quarters 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
During the three and nine months ended September 30, 2017, the Company received $0 and $287,000, respectively, as a result of stock option exercises. During the three and nine months ended September 30, 2016, the Company received $0 and $375,000, respectively, as a result of stock option exercises.
Basic Earnings Per Common Share is calculated by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period, excluding unvested shares of restricted stock. Diluted Earnings Per Common Share is computed by assuming the issuance of common shares for all potentially dilutive common shares outstanding during the reporting period. For the periods presented, the Company’s potentially dilutive common stock issuances related to unvested shares of restricted stock and stock option grants under the Company’s equity-based plans and the Company’s Series C Preferred stock, which was exchanged for common stock at a one-for-one ratio on December 22, 2016 - see Note 19 of the Company’s 2016 Annual Report on Form 10-K for additional detail.
In computing Diluted Earnings Per Common Share, adjustments are made to the computation of Basic Earnings Per Common shares, as follows. As it relates to unvested shares of restricted stock, the number of shares added to the denominator is equal to the number of unvested shares less the number of shares assumed to be bought back by the Company in the open market at the average market price with the amount of proceeds being equal to the average deferred compensation for the reporting period. As it relates to stock options, it is assumed that all dilutive stock options are exercised during the reporting period at their respective exercise prices, with the proceeds from the exercises used by the Company to buy back stock in the open market at the average market price in effect during the reporting period. The difference between the number of shares assumed to be exercised and the number of shares bought back is included in the calculation of dilutive securities. As it relates to the preferred stock that was outstanding during the periods in 2016, dividends on the preferred stock were added back to net income and the preferred shares assumed to be converted were included in the number of shares outstanding.
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 June 30, 2021 2020 ($ in thousands except per
share amounts)Income
(Numerator)Shares
(Denominator)Per Share
AmountIncome
(Numerator)Shares
(Denominator)Per Share
AmountBasic EPS: Net income $ 29,285 $ 16,352 Less: income allocated to participating securities (163) (96) Basic EPS per common share $ 29,122 28,331,456 $ 1.03 $ 16,256 28,799,828 $ 0.56 Diluted EPS: Net income $ 29,285 28,331,456 $ 16,352 28,799,828 Effect of Dilutive Securities 0 158,575 0 169,900 Diluted EPS per common share $ 29,285 28,490,031 $ 1.03 $ 16,352 28,969,728 $ 0.56
For the Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||
2021 | 2020 | |||||||||||||||||||||||||||||||||||||
($ in thousands except per share amounts) | Income (Numerator) | Shares (Denominator) | Per Share Amount | Income (Numerator) | Shares (Denominator) | Per Share Amount | ||||||||||||||||||||||||||||||||
Basic EPS: | ||||||||||||||||||||||||||||||||||||||
Net income | $ | 57,479 | $ | 34,532 | ||||||||||||||||||||||||||||||||||
Less: income allocated to participating securities | $ | (341) | $ | (200) | ||||||||||||||||||||||||||||||||||
Basic EPS per common share | $ | 57,138 | 28,344,633 | $ | 2.02 | $ | 34,332 | 29,015,308 | $ | 1.18 | ||||||||||||||||||||||||||||
Diluted EPS: | ||||||||||||||||||||||||||||||||||||||
Net income | $ | 57,479 | 28,344,633 | $ | 34,532 | 29,015,308 | ||||||||||||||||||||||||||||||||
Effect of Dilutive Securities | 0 | 169,309 | 0 | 169,113 | ||||||||||||||||||||||||||||||||||
Diluted EPS per common share | $ | 57,479 | 28,513,942 | $ | 2.02 | $ | 34,532 | 29,184,421 | $ | 1.18 |
For both
periods presented.
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) | June 30, 2021 | December 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||
Amortized Cost | Fair Value | Unrealized | Amortized Cost | Fair Value | Unrealized | ||||||||||||||||||||||||||||||||||||||||||
Gains | (Losses) | Gains | (Losses) | ||||||||||||||||||||||||||||||||||||||||||||
Securities available for sale: | |||||||||||||||||||||||||||||||||||||||||||||||
Government-sponsored enterprise securities | $ | 70,015 | 67,872 | 0 | (2,143) | 70,016 | 70,206 | 371 | (181) | ||||||||||||||||||||||||||||||||||||||
Mortgage-backed securities | 2,000,949 | 2,002,319 | 18,541 | (17,171) | 1,318,998 | 1,337,706 | 20,832 | (2,124) | |||||||||||||||||||||||||||||||||||||||
Corporate bonds | 43,650 | 44,962 | 1,458 | (146) | 43,670 | 45,220 | 1,760 | (210) | |||||||||||||||||||||||||||||||||||||||
Total available for sale | $ | 2,114,614 | 2,115,153 | 19,999 | (19,460) | 1,432,684 | 1,453,132 | 22,963 | (2,515) | ||||||||||||||||||||||||||||||||||||||
Securities held to maturity: | |||||||||||||||||||||||||||||||||||||||||||||||
Mortgage-backed securities | $ | 24,267 | 25,236 | 969 | 0 | 29,959 | 30,900 | 941 | 0 | ||||||||||||||||||||||||||||||||||||||
State and local governments | 267,461 | 267,538 | 2,278 | (2,201) | 137,592 | 139,834 | 2,407 | (165) | |||||||||||||||||||||||||||||||||||||||
Total held to maturity | $ | 291,728 | 292,774 | 3,247 | (2,201) | 167,551 | 170,734 | 3,348 | (165) |
2021 and December 31, 2020, 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 |
2021:
($ 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 | $ | 67,872 | 2,143 | 0 | 0 | 67,872 | 2,143 | ||||||||||||||||||||||||||||
Mortgage-backed securities | 1,189,049 | 16,975 | 12,596 | 196 | 1,201,645 | 17,171 | |||||||||||||||||||||||||||||
Corporate bonds | 0 | 0 | 4,853 | 146 | 4,853 | 146 | |||||||||||||||||||||||||||||
State and local governments | 90,880 | 2,201 | 0 | 0 | 90,880 | 2,201 | |||||||||||||||||||||||||||||
Total unrealized loss position | $ | 1,347,801 | 21,319 | 17,449 | 342 | 1,365,250 | 21,661 |
($ 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 |
Page 18
($ 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 | $ | 29,812 | 181 | 0 | 0 | 29,812 | 181 | ||||||||||||||||||||||||||||
Mortgage-backed securities | 497,992 | 1,957 | 6,168 | 167 | 504,160 | 2,124 | |||||||||||||||||||||||||||||
Corporate bonds | 3,956 | 45 | 835 | 165 | 4,791 | 210 | |||||||||||||||||||||||||||||
State and local governments | 23,310 | 165 | 0 | 0 | 23,310 | 165 | |||||||||||||||||||||||||||||
Total unrealized loss position | $ | 555,070 | 2,348 | 7,003 | 332 | 562,073 | 2,680 |
The Company has also concluded that each of the equity securities in an unrealized loss position at December 31, 2016 was in such a position due to temporary fluctuations in the market prices of the securities. The Company’s policy is to record an
adoption of CECL as it relates to the securities portfolio.
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 | 1,262 | 1,283 | ||||||||||||||||||
Due after one year but within five years | 28,650 | 29,931 | 537 | 553 | |||||||||||||||||||
Due after five years but within ten years | 74,015 | 72,409 | 8,766 | 8,825 | |||||||||||||||||||
Due after ten years | 11,000 | 10,494 | 256,896 | 256,877 | |||||||||||||||||||
Mortgage-backed securities | 2,000,949 | 2,002,319 | 24,267 | 25,236 | |||||||||||||||||||
Total securities | $ | 2,114,614 | 2,115,153 | 291,728 | 292,774 |
In the first nine months of 2017, the Company received proceeds from sales of securities of $45,601,000 and recorded losses of $235,000 from the sales. In the first nine months of 2016, the Company received proceeds from sales of securities of $8,000 and recorded $3,000 in gains from the sales.
Prior to September 22, 2016, the Company’s banking subsidiary, First Bank, had certain loans and foreclosed real estate that were covered by loss share agreements between the FDIC and First Bank which afforded First Bank significant loss protection - see Note 2 to the financial statements included in the Company’s 2011 Annual Report on Form 10-K for detailed information regarding FDIC-assisted purchase transactions. On September 22, 2016, the Company terminated all of the loss share agreements with the FDIC, such that all future losses and recoveries on loans and foreclosed real estate associated with the failed banks acquired through FDIC-assisted transactions will be borne solely by First Bank.
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 classified 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 this acquisition, the Company recorded loans with a fair value of $497.5 million. Of those loans, $19.3 million were considered to be purchased credit impaired (“PCI”) loans, which are loans for which it is probable at acquisition date that all contractually required payments will not be collected. The remaining loans are considered to be purchased non-impaired loans and their related fair value discount or premium is recognized as an adjustment to yield over the remaining life of each loan.
The following table relates to Carolina Bank acquired PCI loans and summarizes the contractually required payments, which includes principal and interest, expected cash flows to be collected, and the fair value of acquired PCI loans at the acquisition date.
($ 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 provides 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 summary 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 |
($ in thousands) | June 30, 2021 | December 31, 2020 | |||||||||||||||||||||
Amount | Percentage | Amount | Percentage | ||||||||||||||||||||
All loans: | |||||||||||||||||||||||
Commercial, financial, and agricultural | $ | 704,096 | 15 | % | $ | 782,549 | 17 | % | |||||||||||||||
Real estate – construction, land development & other land loans | 566,417 | 12 | % | 570,672 | 12 | % | |||||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 914,318 | 19 | % | 972,378 | 21 | % | |||||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | 285,595 | 6 | % | 306,256 | 6 | % | |||||||||||||||||
Real estate – mortgage – commercial and other | 2,262,492 | 47 | % | 2,049,203 | 43 | % | |||||||||||||||||
Consumer loans | 53,928 | 1 | % | 53,955 | 1 | % | |||||||||||||||||
Subtotal | 4,786,846 | 100 | % | 4,735,013 | 100 | % | |||||||||||||||||
Unamortized net deferred loan fees | (4,782) | (3,698) | |||||||||||||||||||||
Total loans | $ | 4,782,064 | $ | 4,731,315 |
($ in thousands) | June 30, 2021 | December 31, 2020 | |||||||||
Guaranteed portions of non-PPP SBA loans included in table above | $ | 32,315 | 33,959 | ||||||||
Unguaranteed portions of non-PPP SBA loans included in table above | 126,380 | 135,703 | |||||||||
Total non-PPP SBA loans included in the table above | $ | 158,695 | 169,662 | ||||||||
Sold portions of SBA loans with servicing retained - not included in tables above | $ | 426,940 | 395,398 |
($ 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 | $ | — |
The following table presents information regarding allaccretable yield for PCI loans since January 1, 2016.
($ 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 |
for the six months ended June 30, 2020.
Accretable Yield for PCI loans | For the Six Months Ended June 30, 2020 | ||||
Balance at beginning of period | $ | 4,149 | |||
Accretion | (742) | ||||
Reclassification from (to) nonaccretable difference | 366 | ||||
Other, net | (510) | ||||
Balance at end of period | 3,263 |
Page 21
Nonperforming assets are defined as nonaccrual loans, troubled debt restructured loans (TDRs), 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 | — | — |
(1) In the March 3, 2017 acquisition of Carolina Bank Holdings, Inc., the Company acquired $19.3 million in purchased credit impaired loans in accordance with ASC 310-30 accounting guidance. These loans are excluded from nonperforming loans, including $0.4 million in purchased credit impaired loans at Septemberfollows.
($ in thousands) | June 30, 2021 | December 31, 2020 | |||||||||
Nonperforming assets | |||||||||||
Nonaccrual loans | $ | 32,993 | 35,076 | ||||||||
TDRs - accruing | 8,026 | 9,497 | |||||||||
Accruing loans > 90 days past due | 0 | 0 | |||||||||
Total nonperforming loans | 41,019 | 44,573 | |||||||||
Foreclosed real estate | 826 | 2,424 | |||||||||
Total nonperforming assets | $ | 41,845 | 46,997 | ||||||||
At September 30, 20172021 and December 31, 2016,2020, the Company had $0.9$2.6 million and $1.7$1.9 million in residential mortgage loans in process of foreclosure, respectively.
($ 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 | |||||
CECL Incurred Loss ($ in thousands) June 30,
2021December 31,
2020Nonaccrual Loans with No Allowance Nonaccrual Loans with an Allowance Total Nonaccrual Loans Nonaccrual Loans Commercial, financial, and agricultural $ 0 9,476 9,476 9,681 Real estate – construction, land development & other land loans 221 172 393 643 Real estate – mortgage – residential (1-4 family) first mortgages 1,759 4,006 5,765 6,048 Real estate – mortgage – home equity loans / lines of credit 378 967 1,345 1,333 Real estate – mortgage – commercial and other 11,467 4,419 15,886 17,191 Consumer loans 0 128 128 180 Total $ 13,825 19,168 32,993 35,076
($ in thousands) | For the Six Months Ended June 30, 2021 | ||||
Commercial, financial, and agricultural | $ | 156 | |||
Real estate – construction, land development & other land loans | 0 | ||||
Real estate – mortgage – residential (1-4 family) first mortgages | 15 | ||||
Real estate – mortgage – home equity loans / lines of credit | 7 | ||||
Real estate – mortgage – commercial and other | 390 | ||||
Consumer loans | 0 | ||||
Total | $ | 568 |
($ 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 |
2021.
($ 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 | $ | 634 | 33 | 0 | 9,476 | 693,953 | 704,096 | ||||||||||||||||||||||||||||
Real estate – construction, land development & other land loans | 65 | 0 | 0 | 393 | 565,959 | 566,417 | |||||||||||||||||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 672 | 610 | 0 | 5,765 | 907,271 | 914,318 | |||||||||||||||||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | 474 | 159 | 0 | 1,345 | 283,617 | 285,595 | |||||||||||||||||||||||||||||
Real estate – mortgage – commercial and other | 1,425 | 0 | 0 | 15,886 | 2,245,181 | 2,262,492 | |||||||||||||||||||||||||||||
Consumer loans | 84 | 57 | 0 | 128 | 53,659 | 53,928 | |||||||||||||||||||||||||||||
Total | $ | 3,354 | 859 | 0 | 32,993 | 4,749,640 | 4,786,846 | ||||||||||||||||||||||||||||
Unamortized net deferred loan fees | (4,782) | ||||||||||||||||||||||||||||||||||
Total loans | $ | 4,782,064 |
($ 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 $ 1,464 1,101 0 9,681 770,166 782,412 Real estate – construction, land development & other land loans 572 0 0 643 569,307 570,522 Real estate – mortgage – residential (1-4 family) first mortgages 10,146 869 0 6,048 951,088 968,151 Real estate – mortgage – home equity loans / lines of credit 1,088 42 0 1,333 303,693 306,156 Real estate – mortgage – commercial and other 2,540 3,111 0 17,191 2,022,422 2,045,264 Consumer loans 180 36 0 180 53,521 53,917 Purchased credit impaired 328 112 719 0 7,432 8,591 Total $ 16,318 5,271 719 35,076 4,677,629 4,735,013 Unamortized net deferred loan fees (3,698) Total loans $ 4,731,315
($ in thousands) | Residential Property | Business Assets | Land | Commercial Property | Other | Total Collateral-Dependent Loans | |||||||||||||||||||||||||||||
Commercial, financial, and agricultural | $ | 0 | 5,522 | 0 | 0 | 0 | 5,522 | ||||||||||||||||||||||||||||
Real estate – construction, land development & other land loans | 0 | 0 | 513 | 0 | 0 | 513 | |||||||||||||||||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 2,475 | 0 | 0 | 0 | 0 | 2,475 | |||||||||||||||||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | 378 | 0 | 0 | 0 | 0 | 378 | |||||||||||||||||||||||||||||
Real estate – mortgage – commercial and other | 0 | 0 | 135 | 14,187 | 0 | 14,322 | |||||||||||||||||||||||||||||
Consumer loans | 0 | 0 | 0 | 0 | 4 | 4 | |||||||||||||||||||||||||||||
Total | $ | 2,853 | 5,522 | 648 | 14,187 | 4 | 23,214 |
($ 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 June 30, 2021 Beginning balance $ 13,606 10,134 8,996 4,309 26,507 2,297 0 65,849 Charge-offs (550) 0 (76) (8) (1,324) (173) 0 (2,131) Recoveries 153 392 236 218 78 227 0 1,304 Provisions 1,600 (422) (505) (782) 97 12 0 0 Ending balance $ 14,809 10,104 8,651 3,737 25,358 2,363 0 65,022 As of and for the six months ended June 30, 2021 Beginning balance $ 11,316 5,355 8,048 2,375 23,603 1,478 213 52,388 Adjustment for implementation of CECL 3,067 6,140 2,584 2,580 (257) 674 (213) 14,575 Charge-offs (1,988) (66) (114) (139) (1,834) (307) 0 (4,448) Recoveries 667 686 323 229 340 262 0 2,507 Provisions 1,747 (2,011) (2,190) (1,308) 3,506 256 0 0 Ending balance $ 14,809 10,104 8,651 3,737 25,358 2,363 0 65,022
($ 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, 2020 Beginning balance $ 4,553 1,976 3,832 1,127 8,938 972 0 21,398 Charge-offs (5,608) (51) (478) (524) (968) (873) 0 (8,502) Recoveries 745 1,552 754 487 621 294 0 4,453 Provisions 11,626 1,878 3,940 1,285 15,012 1,085 213 35,039 Ending balance $ 11,316 5,355 8,048 2,375 23,603 1,478 213 52,388 Ending balances as of December 31, 2020: Allowance for loan losses Individually evaluated for impairment $ 3,546 30 800 0 2,175 0 0 6,551 Collectively evaluated for impairment $ 7,742 5,325 7,141 2,375 21,428 1,475 213 45,699 Purchased credit impaired $ 28 0 107 0 0 3 0 138 Loans receivable as of December 31, 2020: Ending balance – total $ 782,549 570,672 972,378 306,256 2,049,203 53,955 0 4,735,013 Unamortized net deferred loan fees (3,698) Total loans $ 4,731,315 Ending balances as of December 31, 2020: Loans Individually evaluated for impairment $ 7,700 677 9,303 15 18,582 4 0 36,281 Collectively evaluated for impairment $ 774,712 569,845 958,848 306,141 2,026,682 53,913 0 4,690,141 Purchased credit impaired $ 137 150 4,227 100 3,939 38 0 8,591
($ 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 June 30, 2020 Beginning balance $ 4,204 2,599 4,373 1,394 10,913 1,015 0 24,498 Charge-offs (1,471) (5) (279) (313) (282) (110) 0 (2,460) Recoveries 260 353 224 83 55 31 0 1,006 Provisions 2,996 2,730 4,021 1,195 8,069 287 0 19,298 Ending balance $ 5,989 5,677 8,339 2,359 18,755 1,223 0 42,342 As of and for the six months ended June 30, 2020 Beginning balance $ 4,553 1,976 3,832 1,127 8,938 972 0 21,398 Charge-offs (3,931) (45) (474) (381) (545) (397) 0 (5,773) Recoveries 477 643 315 166 102 126 0 1,829 Provisions 4,890 3,103 4,666 1,447 10,260 522 0 24,888 Ending balance $ 5,989 5,677 8,339 2,359 18,755 1,223 0 42,342 Ending balance as of June 30, 2020: Allowance for loan losses Individually evaluated for impairment $ 830 67 817 0 1,052 0 0 2,766 Collectively evaluated for impairment $ 5,117 5,610 7,412 2,359 17,699 1,215 0 39,412 Purchased credit impaired $ 42 0 110 0 4 8 0 164 Loans receivable as of June 30, 2020 Ending balance – total $ 723,053 648,590 1,076,411 318,618 1,959,078 51,161 0 4,776,911 Unamortized net deferred loan fees (6,848) Total loans $ 4,770,063 Ending balances as of June 30, 2020: Loans Individually evaluated for impairment $ 6,736 965 9,743 325 17,697 0 0 35,466 Collectively evaluated for impairment $ 716,132 644,747 1,061,470 318,198 1,940,059 51,097 0 4,731,703 Purchased credit impaired $ 185 2,878 5,198 95 1,322 64 0 9,742
The following table presents loans individually evaluated for impairment by class of loans, excluding PCI loans, as of September 30, 2017.
($ 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 |
Interest income on impaired loans recognized during the nine months ended September 30, 2017 was insignificant.
($ 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 |
2020.
($ in thousands) | Recorded Investment | Unpaid Principal Balance | Related Allowance | Average Recorded Investment | |||||||||||||||||||
Impaired loans with no related allowance recorded: | |||||||||||||||||||||||
Commercial, financial, and agricultural | $ | 3,688 | 4,325 | — | 750 | ||||||||||||||||||
Real estate – mortgage – construction, land development & other land loans | 554 | 694 | — | 308 | |||||||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 4,115 | 4,456 | — | 4,447 | |||||||||||||||||||
Real estate – mortgage –home equity loans / lines of credit | 15 | 27 | — | 264 | |||||||||||||||||||
Real estate – mortgage –commercial and other | 11,763 | 13,107 | — | 9,026 | |||||||||||||||||||
Consumer loans | 4 | 4 | — | 1 | |||||||||||||||||||
Total impaired loans with no allowance | $ | 20,139 | 22,613 | — | 14,796 | ||||||||||||||||||
Impaired loans with an allowance recorded: | |||||||||||||||||||||||
Commercial, financial, and agricultural | $ | 4,012 | 4,398 | 3,546 | 5,139 | ||||||||||||||||||
Real estate – mortgage – construction, land development & other land loans | 123 | 131 | 30 | 502 | |||||||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 5,188 | 5,361 | 800 | 5,186 | |||||||||||||||||||
Real estate – mortgage –home equity loans / lines of credit | 0 | 0 | 0 | 21 | |||||||||||||||||||
Real estate – mortgage –commercial and other | 6,819 | 7,552 | 2,175 | 5,786 | |||||||||||||||||||
Consumer loans | 0 | 0 | 0 | 0 | |||||||||||||||||||
Total impaired loans with allowance | $ | 16,142 | 17,442 | 6,551 | 16,634 |
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 (<$500,000) with a well-defined weakness, such as exceptions of any kind with no mitigating factors, history of paying outside the terms of the note, insufficient income to support the current level of debt, etc. |
($ 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 |
2021.
Term Loans by Year of Origination | |||||||||||||||||||||||||||||||||||||||||||||||
($ in thousands) | 2021 | 2020 | 2019 | 2018 | 2017 | Prior | Revolving | Total | |||||||||||||||||||||||||||||||||||||||
Commercial, financial, and agricultural | |||||||||||||||||||||||||||||||||||||||||||||||
Pass | $ | 196,025 | 183,879 | 96,149 | 78,898 | 18,263 | 24,935 | 88,325 | 686,474 | ||||||||||||||||||||||||||||||||||||||
Special Mention | 17 | 600 | 3,199 | 2,713 | 202 | 34 | 664 | 7,429 | |||||||||||||||||||||||||||||||||||||||
Classified | 0 | 103 | 1,382 | 8,019 | 193 | 53 | 443 | 10,193 | |||||||||||||||||||||||||||||||||||||||
Total commercial, financial, and agricultural | 196,042 | 184,582 | 100,730 | 89,630 | 18,658 | 25,022 | 89,432 | 704,096 | |||||||||||||||||||||||||||||||||||||||
Real estate – construction, land development & other land loans | |||||||||||||||||||||||||||||||||||||||||||||||
Pass | 211,053 | 251,155 | 50,615 | 10,583 | 12,887 | 10,797 | 12,915 | 560,005 | |||||||||||||||||||||||||||||||||||||||
Special Mention | 220 | 761 | 4,283 | 1 | 114 | 28 | 12 | 5,419 | |||||||||||||||||||||||||||||||||||||||
Classified | 86 | 415 | 122 | 186 | 59 | 123 | 2 | 993 | |||||||||||||||||||||||||||||||||||||||
Total real estate – construction, land development & other land loans | 211,359 | 252,331 | 55,020 | 10,770 | 13,060 | 10,948 | 12,929 | 566,417 | |||||||||||||||||||||||||||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | |||||||||||||||||||||||||||||||||||||||||||||||
Pass | 103,275 | 213,061 | 124,409 | 85,317 | 92,248 | 264,553 | 7,931 | 890,794 | |||||||||||||||||||||||||||||||||||||||
Special Mention | 1,182 | 1,310 | 205 | 167 | 373 | 3,170 | 96 | 6,503 | |||||||||||||||||||||||||||||||||||||||
Classified | 370 | 164 | 548 | 1,398 | 541 | 13,122 | 878 | 17,021 | |||||||||||||||||||||||||||||||||||||||
Total real estate – mortgage – residential (1-4 family) first mortgages | 104,827 | 214,535 | 125,162 | 86,882 | 93,162 | 280,845 | 8,905 | 914,318 | |||||||||||||||||||||||||||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | |||||||||||||||||||||||||||||||||||||||||||||||
Pass | 1,358 | 424 | 758 | 1,379 | 282 | 1,334 | 272,050 | 277,585 | |||||||||||||||||||||||||||||||||||||||
Special Mention | 0 | 0 | 17 | 0 | 0 | 19 | 1,151 | 1,187 | |||||||||||||||||||||||||||||||||||||||
Classified | 12 | 111 | 66 | 0 | 0 | 635 | 5,999 | 6,823 | |||||||||||||||||||||||||||||||||||||||
Total real estate – mortgage – home equity loans / lines of credit | 1,370 | 535 | 841 | 1,379 | 282 | 1,988 | 279,200 | 285,595 | |||||||||||||||||||||||||||||||||||||||
Real estate – mortgage – commercial and other | |||||||||||||||||||||||||||||||||||||||||||||||
Pass | 624,944 | 648,750 | 306,306 | 182,547 | 163,321 | 253,697 | 43,030 | 2,222,595 | |||||||||||||||||||||||||||||||||||||||
Special Mention | 3,889 | 5,245 | 2,593 | 2,780 | 2,290 | 1,479 | 817 | 19,093 | |||||||||||||||||||||||||||||||||||||||
Classified | 4,540 | 3,032 | 2,520 | 5,438 | 4,618 | 656 | 0 | 20,804 | |||||||||||||||||||||||||||||||||||||||
Total real estate – mortgage – commercial and other | 633,373 | 657,027 | 311,419 | 190,765 | 170,229 | 255,832 | 43,847 | 2,262,492 | |||||||||||||||||||||||||||||||||||||||
Consumer loans | |||||||||||||||||||||||||||||||||||||||||||||||
Pass | 9,564 | 25,411 | 4,660 | 2,393 | 987 | 861 | 9,703 | 53,579 | |||||||||||||||||||||||||||||||||||||||
Special Mention | 0 | 0 | 0 | 0 | 0 | 0 | 3 | 3 | |||||||||||||||||||||||||||||||||||||||
Classified | 4 | 74 | 26 | 17 | 9 | 60 | 156 | 346 | |||||||||||||||||||||||||||||||||||||||
Total consumer loans | 9,568 | 25,485 | 4,686 | 2,410 | 996 | 921 | 9,862 | 53,928 | |||||||||||||||||||||||||||||||||||||||
Total | $ | 1,156,539 | 1,334,495 | 597,858 | 381,836 | 296,387 | 575,556 | 444,175 | 4,786,846 | ||||||||||||||||||||||||||||||||||||||
Unamortized net deferred loan fees | (4,782) | ||||||||||||||||||||||||||||||||||||||||||||||
Total loans | 4,782,064 |
($ 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 |
2020.
($ in thousands) | Pass | Special Mention Loans | Classified Accruing Loans | Classified Nonaccrual Loans | Total | ||||||||||||||||||||||||
Commercial, financial, and agricultural | $ | 762,091 | 9,553 | 1,087 | 9,681 | 782,412 | |||||||||||||||||||||||
Real estate – construction, land development & other land loans | 560,845 | 7,877 | 1,157 | 643 | 570,522 | ||||||||||||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 943,455 | 7,609 | 11,039 | 6,048 | 968,151 | ||||||||||||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | 297,795 | 1,468 | 5,560 | 1,333 | 306,156 | ||||||||||||||||||||||||
Real estate – mortgage – commercial and other | 1,988,684 | 34,588 | 4,801 | 17,191 | 2,045,264 | ||||||||||||||||||||||||
Consumer loans | 53,488 | 80 | 169 | 180 | 53,917 | ||||||||||||||||||||||||
Purchased credit impaired | 6,901 | 85 | 1,605 | 0 | 8,591 | ||||||||||||||||||||||||
Total | $ | 4,613,259 | 61,260 | 25,418 | 35,076 | 4,735,013 | |||||||||||||||||||||||
Unamortized net deferred loan fees | (3,698) | ||||||||||||||||||||||||||||
Total loans | 4,731,315 |
All loans classified as troubled debt restructurings are considered to be impaired and are evaluated as such for determination of the allowance for loan losses.
As of June 30, 2021, the Company had granted short-term deferrals related to the COVID-19 pandemic for $2.1 million of loans that were otherwise performing prior to modification. Pursuant to the CARES Act and banking regulator guidance, these loans are not considered TDRs.
($ 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 June 30, 2021 | For the three months ended June 30, 2020 | |||||||||||||||||||||||||||||||||
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 | 1 | 67 | 67 | |||||||||||||||||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 1 | 33 | 33 | 2 | 75 | 78 | |||||||||||||||||||||||||||||
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 | 2 | 715 | 715 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
Real estate – construction, land development & other land loans | 1 | 75 | 75 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 1 | 263 | 263 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
Real estate – mortgage – commercial and other | 3 | 1,569 | 1,569 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
Consumer loans | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
Total TDRs arising during period | 8 | $ | 2,655 | $ | 2,655 | 3 | $ | 142 | $ | 145 |
($ 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 | — | $ | — | $ | — | — | $ | — | $ | — |
2020.
($ in thousands) | For the six months ended June 30, 2021 | For the six months ended June 30, 2020 | |||||||||||||||||||||||||||||||||
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 | 2 | $ | 143 | $ | 143 | |||||||||||||||||||||||||
Real estate – construction, land development & other land loans | 0 | 0 | 0 | 1 | 67 | 67 | |||||||||||||||||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 1 | 33 | 33 | 2 | 75 | 78 | |||||||||||||||||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
Real estate – mortgage – commercial and other | 1 | 160 | 160 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
Consumer loans | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
TDRs – Nonaccrual | |||||||||||||||||||||||||||||||||||
Commercial, financial, and agricultural | 3 | 826 | 823 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
Real estate – construction, land development & other land loans | 1 | 75 | 75 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 1 | 263 | 263 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
Real estate – mortgage – commercial and other | 3 | 1,569 | 1,569 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
Consumer loans | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||
Total TDRs arising during period | 10 | $ | 2,926 | $ | 2,923 | 5 | $ | 285 | $ | 288 |
|
| |||||||||||||||
|
|
|
| |||||||||||||
($ in thousands) | For the Three Months Ended June 30, 2021 | For the Three Months Ended June 30, 2020 | |||||||||||||||||||||
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 | 1 | 274 | |||||||||||||||||||
Total accruing TDRs that subsequently defaulted | 0 | $ | 0 | 1 | $ | 274 |
($ 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 |
($ in thousands) | For the Six Months Ended June 30, 2021 | For the Six Months Ended June 30, 2020 | |||||||||||||||||||||
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 | 1 | 274 | |||||||||||||||||||
Total accruing TDRs that subsequently defaulted | 0 | $ | 0 | 1 | $ | 274 |
2. The amountallowance for credit losses for unfunded loan commitments of loans shown$10.0 million and $0.6 million at June 30, 2021 and December 31, 2020, respectively, is separately classified on the Consolidated Balance Sheets includes net deferred loan (fees) costs of approximately ($437,000), ($49,000),balance sheet within the line items "Other Liabilities". The following table presents the balance and $198,000 at September 30, 2017, December 31, 2016, and September 30, 2016, respectively.
Note 10 – FDIC Indemnification Asset
The Company terminated all loss share agreements with the FDIC effective September 22, 2016. As a result, the remaining balanceactivity in the FDIC Indemnification Asset, which representedallowance for credit losses for unfunded loan commitments for the estimated amountsix months ended June 30, 2021.
($ in thousands) | Total Allowance for Credit Losses - Unfunded Loan Commitments | ||||
Beginning balance at December 31, 2020 | $ | 582 | |||
Adjustment for implementation of CECL on January 1, 2021 | 7,504 | ||||
Charge-offs | 0 | ||||
Recoveries | 0 | ||||
Provisions for credit losses on unfunded commitments | 1,939 | ||||
Ending balance at June 30, 2021 | $ | 10,025 |
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 | $ | — |
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 |
Activity related to transactions during the periods presented includes the following (See Note 4 to the Consolidated Financial Statements for more information on each of these transactions):
SBA |
In addition to the above acquisition related activity, the Company recorded $415,000 in net servicing assets associated withare recorded for the guaranteed portionportions of SBA loans originated and sold during the third and fourth quarters of 2016. During the first nine months of 2017,that the Company recorded an additional $1,003,000 in servicing assets, as well as $112,000 in amortization expense.has sold but continues 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 June 30, 2021 with a remaining book value of $6,089,000. The Company recorded $1,315,000 and $704,000 in servicing assets associated with the guaranteed portion of SBA loans sold during the first six months of 2021 and 2020, respectively. During the first six months of 2021 and 2020, the Company recorded $1,014,000 and $1,416,000, respectively, in related amortization expense. Included in the amortization expense for the first six months of 2020 was an impairment charge of approximately $500,000 due to a decrease in the fair value of the asset resulting from deterioration in market conditions at March 31, 2020. At June 30, 2021 and December 31, 2020, the Company serviced for others SBA loans totaling $426.9 million and $395.4 million, respectively.
($ 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 | |||||||
July 1, 2021 to December 31, 2021 | $ | 1,337 | ||||||
2022 | 1,994 | |||||||
2023 | 1,037 | |||||||
2024 | 392 | |||||||
2025 | 213 | |||||||
Thereafter | 0 | |||||||
Total | $ | 4,973 |
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 June 30, | |||||||||||||||||||||||||||||||||||
($ in thousands) | 2021 Pension Plan | 2020 Pension Plan | 2021 SERP | 2020 SERP | 2021 Total Both Plans | 2020 Total Both Plans | |||||||||||||||||||||||||||||
Service cost | $ | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||
Interest cost | 104 | 305 | 20 | 55 | 124 | 360 | |||||||||||||||||||||||||||||
Expected return on plan assets | (203) | (325) | 0 | 0 | (203) | (325) | |||||||||||||||||||||||||||||
Amortization of net (gain)/loss | 158 | 221 | 47 | (41) | 205 | 180 | |||||||||||||||||||||||||||||
Net periodic pension cost | $ | 59 | 201 | 67 | 14 | 126 | 215 |
Six Months Ended June 30, 2021 | |||||||||||||||||||||||||||||||||||
($ in thousands) | 2021 Pension Plan | 2020 Pension Plan | 2021 SERP | 2020 SERP | 2021 Total Both Plans | 2020 Total Both Plans | |||||||||||||||||||||||||||||
Service cost | $ | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||
Interest cost | 410 | 613 | 59 | 110 | 469 | 723 | |||||||||||||||||||||||||||||
Expected return on plan assets | (528) | (650) | 0 | 0 | (528) | (650) | |||||||||||||||||||||||||||||
Amortization of net (gain)/loss | 368 | 440 | 8 | (82) | 376 | 358 | |||||||||||||||||||||||||||||
Net periodic pension cost | $ | 250 | 403 | 67 | 28 | 317 | 431 |
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 2021.
Comprehensive income (loss) is defined as the change in equity during a period for non-owner transactions and is divided into net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) includes revenues, expenses, gains, and losses that are excluded from earnings under current accounting standards.
($ 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) | June 30, 2021 | December 31, 2020 | |||||||||
Unrealized gain (loss) on securities available for sale | $ | 539 | 20,448 | ||||||||
Deferred tax asset (liability) | (124) | (4,699) | |||||||||
Net unrealized gain (loss) on securities available for sale | 415 | 15,749 | |||||||||
Postretirement plans asset (liability) | (1,441) | (1,817) | |||||||||
Deferred tax asset (liability) | 301 | 418 | |||||||||
Net postretirement plans asset (liability) | (1,140) | (1,399) | |||||||||
Total accumulated other comprehensive income (loss) | $ | (725) | 14,350 |
($ 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, 2021 | $ | 15,749 | (1,399) | 14,350 | |||||||||||||
Other comprehensive income (loss) before reclassifications | (15,334) | 0 | (15,334) | ||||||||||||||
Amounts reclassified from accumulated other comprehensive income | 0 | 259 | 259 | ||||||||||||||
Net current-period other comprehensive income (loss) | (15,334) | 259 | (15,075) | ||||||||||||||
Ending balance at June 30, 2021 | $ | 415 | (1,140) | (725) |
($ 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, 2020 | $ | 7,504 | (2,381) | 5,123 | |||||||||||||
Other comprehensive income (loss) before reclassifications | 18,128 | 0 | 18,128 | ||||||||||||||
Amounts reclassified from accumulated other comprehensive income | (6,180) | 275 | (5,905) | ||||||||||||||
Net current-period other comprehensive income (loss) | 11,948 | 275 | 12,223 | ||||||||||||||
Ending balance at June 30, 2020 | $ | 19,452 | (2,106) | 17,346 |
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 SeptemberJune 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 |
2021.
($ in thousands) | ||||||||||||||||||||||||||
Description of Financial Instruments | Fair Value at June 30, 2021 | 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 | $ | 67,872 | 0 | 67,872 | 0 | |||||||||||||||||||||
Mortgage-backed securities | 2,002,319 | 0 | 2,002,319 | 0 | ||||||||||||||||||||||
Corporate bonds | 44,962 | 0 | 44,962 | 0 | ||||||||||||||||||||||
Total available for sale securities | $ | 2,115,153 | 0 | 2,115,153 | 0 | |||||||||||||||||||||
Presold mortgages in process of settlement | $ | 13,762 | 13,762 | 0 | 0 | |||||||||||||||||||||
Nonrecurring | ||||||||||||||||||||||||||
Collateral-dependent loans | $ | 13,963 | 0 | 0 | 13,963 | |||||||||||||||||||||
Foreclosed real estate | 378 | 0 | 0 | 378 |
($ 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 |
2020.
($ in thousands) | ||||||||||||||||||||||||||
Description of Financial Instruments | Fair Value at December 31, 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 | $ | 70,206 | 0 | 70,206 | 0 | |||||||||||||||||||||
Mortgage-backed securities | 1,337,706 | 0 | 1,337,706 | 0 | ||||||||||||||||||||||
Corporate bonds | 45,220 | 0 | 45,220 | 0 | ||||||||||||||||||||||
Total available for sale securities | $ | 1,453,132 | 0 | 1,453,132 | 0 | |||||||||||||||||||||
Presold mortgages in process of settlement | $ | 42,271 | 42,271 | 0 | 0 | |||||||||||||||||||||
Nonrecurring | ||||||||||||||||||||||||||
Impaired loans | $ | 22,142 | 0 | 0 | 22,142 | |||||||||||||||||||||
Foreclosed real estate | 1,484 | 0 | 0 | 1,484 |
Page 36
ImpairedIndividually evaluated loans — Fair values for impairedindividually evaluated 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 loancredit 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 June 30, 2021 | Valuation Technique | Significant Unobservable Inputs | Range (Weighted Average) | ||||||||||||||||||||||
Individually evaluated loans - collateral-dependent | $ | 9,203 | Appraised value | Discounts applied for estimated costs to sell | 10% | |||||||||||||||||||||
Individually evaluated loans - cash flow dependent | 4,760 | PV of expected cash flows | Discount rates used in the calculation of the present value ("PV") of expected cash flows | 4%-11% (6.12%) | ||||||||||||||||||||||
Foreclosed real estate | 378 | 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 at December 31, 2020 | Valuation Technique | Significant Unobservable Inputs | Range (Weighted Average) | ||||||||||||||||||||||
Impaired loans - valued at collateral value | $ | 16,000 | Appraised value | Discounts applied for estimated costs to sell | 10% | |||||||||||||||||||||
Impaired loans - valued at PV of expected cash flows | 6,142 | PV of expected cash flows | Discount rates used in the calculation of PV of expected cash flows | 4%-11% (6.21%) | ||||||||||||||||||||||
Foreclosed real estate | 1,484 | 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.
June 30, 2021 | December 31, 2020 | ||||||||||||||||||||||||||||
($ 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 | $ | 83,851 | 83,851 | 93,724 | 93,724 | |||||||||||||||||||||||
Due from banks, interest-bearing | Level 1 | 391,375 | 391,375 | 273,566 | 273,566 | ||||||||||||||||||||||||
Securities held to maturity | Level 2 | 291,728 | 292,774 | 167,551 | 170,734 | ||||||||||||||||||||||||
SBA loans held for sale | Level 2 | 5,480 | 6,297 | 6,077 | 7,465 | ||||||||||||||||||||||||
Total loans, net of allowance | Level 3 | 4,717,042 | 4,704,356 | 4,678,927 | 4,661,197 | ||||||||||||||||||||||||
Accrued interest receivable | Level 1 | 20,357 | 20,357 | 20,272 | 20,272 | ||||||||||||||||||||||||
Bank-owned life insurance | Level 1 | 108,209 | 108,209 | 106,974 | 106,974 | ||||||||||||||||||||||||
SBA Servicing Asset | Level 3 | 6,089 | 7,066 | 5,788 | 6,569 | ||||||||||||||||||||||||
Deposits | Level 2 | 7,171,358 | 7,172,244 | 6,273,596 | 6,275,329 | ||||||||||||||||||||||||
Borrowings | Level 2 | 61,252 | 53,962 | 61,829 | 53,321 | ||||||||||||||||||||||||
Accrued interest payable | Level 2 | 710 | 710 | 904 | 904 | ||||||||||||||||||||||||
Commitments to extend credit | Level 3 | 0 | 10,025 | 0 | 461 |
On December 21, 2012, the Company issued 2,656,294 shares of its common stock and 728,706 sharesRevenue from Contracts with Customers
For the Three Months Ended | For the Six Months Ended | ||||||||||||||||||||||
$ in thousands | June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | |||||||||||||||||||
Noninterest Income | |||||||||||||||||||||||
In-scope of ASC 606: | |||||||||||||||||||||||
Service charges on deposit accounts: | $ | 2,824 | 2,289 | 5,557 | 5,626 | ||||||||||||||||||
Other service charges, commissions, and fees: | |||||||||||||||||||||||
Interchange income | 4,409 | 3,086 | 7,933 | 5,972 | |||||||||||||||||||
Other service charges and fees | 2,087 | 1,538 | 4,085 | 2,721 | |||||||||||||||||||
Commissions from sales of insurance and financial products: | |||||||||||||||||||||||
Insurance income | 1,393 | 1,363 | 2,719 | 2,561 | |||||||||||||||||||
Wealth management income | 1,073 | 727 | 1,937 | 1,597 | |||||||||||||||||||
SBA consulting fees | 2,187 | 3,739 | 4,951 | 4,766 | |||||||||||||||||||
Noninterest income (in-scope of ASC 606) | 13,973 | 12,742 | 27,182 | 23,243 | |||||||||||||||||||
Noninterest income (out-of-scope of ASC 606) | 7,401 | 13,451 | 14,861 | 16,655 | |||||||||||||||||||
Total noninterest income | $ | 21,374 | 26,193 | 42,043 | 39,898 |
On December 22, 2016, the Company, and the holderCompany recognizes the revenue. Performance-based commissions from insurance companies are recognized at a point in time as policies are sold. See Note 15 regarding the Company's sale of its insurance agency operations.
($ in thousands) | |||||
July 1, 2021 to December 31, 2021 | $ | 1,028 | |||
2022 | 1,659 | ||||
2023 | 1,592 | ||||
2024 | 1,499 | ||||
2025 | 1,318 | ||||
Thereafter | 18,380 | ||||
Total undiscounted lease payments | 25,476 | ||||
Less effect of discounting | (8,583) | ||||
Present value of estimated lease payments (lease liability) | $ | 16,893 |
Description | Due date | Call Feature | June 30, 2021 | Interest Rate | ||||||||||||||||||||||
FHLB Principal Reducing Credit | 7/24/2023 | None | $ | 102 | 1.00% fixed | |||||||||||||||||||||
FHLB Principal Reducing Credit | 12/22/2023 | None | 972 | 1.25% fixed | ||||||||||||||||||||||
FHLB Principal Reducing Credit | 1/15/2026 | None | 5,000 | 1.98% fixed | ||||||||||||||||||||||
FHLB Principal Reducing Credit | 6/26/2028 | None | 230 | 0.25% fixed | ||||||||||||||||||||||
FHLB Principal Reducing Credit | 7/17/2028 | None | 47 | 0.00% fixed | ||||||||||||||||||||||
FHLB Principal Reducing Credit | 8/18/2028 | None | 170 | 1.00% fixed | ||||||||||||||||||||||
FHLB Principal Reducing Credit | 8/22/2028 | None | 170 | 1.00% fixed | ||||||||||||||||||||||
FHLB Principal Reducing Credit | 12/20/2028 | None | 348 | 0.50% fixed | ||||||||||||||||||||||
Trust Preferred Securities | 1/23/2034 | Quarterly by Company beginning 1/23/2009 | 20,620 | 2.89% at 6/30/21 adjustable rate 3 month LIBOR + 2.70% | ||||||||||||||||||||||
Trust Preferred Securities | 6/15/2036 | Quarterly by Company beginning 6/15/2011 | 25,774 | 1.51% at 6/30/21 adjustable rate 3 month LIBOR + 1.39% | ||||||||||||||||||||||
Trust Preferred Securities | 1/7/2035 | Quarterly by Company beginning 1/7/2010 | 10,310 | 2.18% at 6/30/21 adjustable rate 3 month LIBOR + 2.00% | ||||||||||||||||||||||
Total borrowings/ weighted average rate as of | June 30, 2021 | $ | 63,743 | 2.17% | ||||||||||||||||||||||
Unamortized discount on acquired borrowings | (2,491) | |||||||||||||||||||||||||
Total borrowings | $ | 61,252 |
Description | Due date | Call Feature | December 31, 2020 | Interest Rate | ||||||||||||||||||||||
FHLB Principal Reducing Credit | 7/24/2023 | None | 124 | 1.00% fixed | ||||||||||||||||||||||
FHLB Principal Reducing Credit | 12/22/2023 | None | 991 | 1.25% fixed | ||||||||||||||||||||||
FHLB Principal Reducing Credit | 1/15/2026 | None | 5,500 | 1.98% fixed | ||||||||||||||||||||||
FHLB Principal Reducing Credit | 6/26/2028 | None | 235 | 0.25% fixed | ||||||||||||||||||||||
FHLB Principal Reducing Credit | 7/17/2028 | None | 49 | 0.00% fixed | ||||||||||||||||||||||
FHLB Principal Reducing Credit | 8/18/2028 | None | 174 | 1.00% fixed | ||||||||||||||||||||||
FHLB Principal Reducing Credit | 8/22/2028 | None | 174 | 1.00% fixed | ||||||||||||||||||||||
FHLB Principal Reducing Credit | 12/20/2028 | None | 355 | 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 | 2.91% at 12/31/2020 adjustable rate 3 month LIBOR + 2.70% | ||||||||||||||||||||||
Trust Preferred Securities | 6/15/2036 | Quarterly by Company beginning 6/15/2011 | 25,774 | 1.61% at 12/31/2020 adjustable rate 3 month LIBOR + 1.39% | ||||||||||||||||||||||
Trust Preferred Securities | 1/7/2035 | Quarterly by Company beginning 1/7/2010 | 10,310 | 2.24% at 12/31/2020 adjustable rate 3 month LIBOR + 2.00% | ||||||||||||||||||||||
Total borrowings / weighted average rate as of December 31, 2020 | $ | 64,409 | 2.22% | |||||||||||||||||||||||
Unamortized discount on acquired borrowings | (2,580) | |||||||||||||||||||||||||
Total borrowings | $ | 61,829 |
Bankers Insurance, LLC with a value of $0.6 million. The Series C Preferred Stock qualifiedremaining $0.5 million in cash is due to be received in the fourth quarter of 2021. Effective with the close of the sale on June 30, 2021, Bankers Insurance, LLC assumed $555,000 in cash that was held at First Bank Insurance Services, which is reflected as Tier 1 capital and was Convertible Perpetual Preferred Stock, with dividend rights equalcash paid related to the Company’s Common Stock. The Series C Preferred Stock was non-voting, exceptsale in limited circumstances.
The Series C Preferred Stock paid a dividend per share equal to thatthe Consolidated Statement of Cash Flows for the Company’s common stock. During the three and nine monthssix month period ended SeptemberJune 30, 2016,2021.
Note 16 – Subsequent Event
On October 1, 2017, the Company completed its acquisitionsigning of ASBa definitive merger agreement to acquire Select Bancorp, Inc. (“ASB Bancorp”Select”), the parent company of Asheville SavingsSelect Bank SSB, headquarteredand Trust Company ("Select Bank"), in Asheville, North Carolina, pursuantan all-stock transaction with a total value of approximately $314.3 million, or $18.10 per share, based on the Company’s closing stock price on May 28, 2021. Subject to an Agreement and Planthe terms of Merger and Reorganization dated May 1, 2017. Asheville Savingsthe merger agreement, Select shareholders will receive 0.408 shares of First Bancorp's common stock for each share of Select common stock.
The total merger consideration consisted of $17.9 million in cash and 4.9 million shares of the Company’s common stock. As of the acquisition date, ASB Bancorp hadVirginia. Select reported assets of $793 million,$1.8 billion, gross loans of $617 million$1.3 billion and deposits of $679 million. As$1.6 billion as of March 31, 2021. The acquisition would increase the filingCompany's market share in several existing markets, including the Triad, Triangle and Charlotte markets of this report, the Company has not completed the fair value measurements of the assets, liabilities,North Carolina, as well as provide entry into several new markets, including Dunn, Goldsboro and identifiable intangible assets of ASB Bancorp.
Due to the estimation process on Loans and the potential materialityUnfunded Commitments
Our determinationrecorded within Other Liabilities require high degrees of the adequacyjudgement. Each of the allowance is based primarily on a mathematical model that estimates the appropriate allowance for loan losses. This model has two components. The first component involves the estimation of losses on individually evaluated “impaired loans.” A loan is considered to be impaired when, based on current information and events, it is probable we will be unable to collect all amounts due according to the contractual terms of the loan agreement. A loan is specifically evaluated for an appropriate valuation allowance if the loan balance is above a prescribed evaluation threshold (which varies based on credit quality, accruing status, troubled debt restructured status, and type of collateral) and the loan is determined to be impaired. The estimated valuation allowance is the difference, if any, between the loan balance outstanding and the value of the impaired loan as determined by either 1) an estimate of the cash flows that we expect to receive from the borrower discounted at the loan’s effective rate, or 2) in the case of a collateral-dependent loan, the fair value of the collateral.
The second component of the allowance model is anthese allowances reflects management’s estimate of losses that will result from the inability of our borrowers to make required loan payments. Management uses a systematic methodology to determine its allowance for allcredit losses on loans not considered to be impaired loans (“general reserve loans”). General reserve loans are segregated into pools by loan type and risk gradeoff-balance-sheet credit exposures. Management considers the effects of past events, current conditions, and estimated loss percentages are assigned to each loan pool basedreasonable and supportable forecasts on historical losses. The historical loss percentages are then adjusted for any environmental factors used to reflect changes in the collectability of the portfolio not captured by historical data.
loan portfolio. The reserves estimatedCompany’s estimate of these items involves a high degree of judgment; therefore, management’s process for individually evaluated impaired loans are then added to the reserve estimated for general reserve loans. This becomes our “allocated allowance.” The allocated allowance is compared to the actual allowance for loandetermining expected credit losses recorded on our books and any adjustment necessary for the recorded allowance to absorb losses inherent in the portfolio is recorded as a provision for loan losses. The provision for loan losses is a direct charge to earnings in the period recorded. Any remaining difference between the allocated allowance and the actual allowance for loan losses recorded on our books is our “unallocated allowance.”
Purchased loans are recorded at fair value at the acquisition date. Therefore, amounts deemed uncollectible at the acquisition date represent a discount to the loan value and become a part of the fair value calculation and are excluded from the allowance for loan losses. Subsequent decreases in the amount expected to be collectedmay result in a provisionrange of expected credit losses. It is possible that others, given the same information, may at any point in time reach a different reasonable conclusion. The Company’s allowances for loancredit losses with a corresponding increaseon loans and unfunded commitments reflect management’s best estimates within the range of expected credit losses. The Company recognizes in the allowance for loan losses. Subsequent increases innet income the amount needed to adjust either of these items for management’s current estimate of expected to be collected are accreted into income over the lifecredit losses. See Note 2 - Summary of the loanSignificant Accounting Policies in this Quarterly Report on Form 10-Q for further detailed descriptions of our estimation process and this accretion is referred to as “loan discount accretion.”
Although we use the best information available to make evaluations, future material adjustments may be necessary if economic, operational, or other conditions change. In addition, various regulatory agencies, as an integral part of their examination process, periodically review our allowance for loan losses. Such agencies may require us to recognize additionsmethodology related to the allowance basedACL. See also Note 6 — Loans, Allowance for Credit Losses and Asset Quality Information - in this Quarterly Report on the examiners’ judgment about information available to them at the time of their examinations.
For further discussion, see “Nonperforming Assets”Form 10-Q, and “Summary of Loan Loss Experience”“Allowance for Credit Losses and Provision for Credit Losses” below.
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Intangible Assets
Subsequent to the initial recording of the identifiable intangible assets and goodwill,
Fair Value and Discount Accretion of Acquired Loans
We consider the determination of the initial fair value of acquired loans and the subsequent discount accretion of the purchased loans to involve a high degree of judgment and complexity.
We determine fair value accounting estimates of newly assumed assets and liabilities in accordance with relevant accounting guidance. However, the amount that we realize on these assets could differ materially from the carrying value reflected in our financial statements, based upon the timing of collections on the acquired loans in future periods. Because of inherent credit losses and interest rate marks associated with acquired loans, the amount that we record as the fair values for the loans is generally less than the contractual unpaid principal balance due from the borrowers, with the difference being referred to as the “discount” on the acquired loans. For non-impaired purchased loans, we accrete the discount over the lives of the loans in a manner consistent with the guidance for accounting for loan origination fees and costs.
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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.
Subsequent to an acquisition, estimates of cash flows expected to be collected are updated periodically based on updated assumptions regarding default rates, loss severities, and other factors that are reflective of current market conditions. If there is a decrease in cash flows expected to be collected, the provision for loan losses is charged, resulting in an increase to the allowance for loan losses. If the Company has a probable increase in cash flows expected to be collected, we will first reverse any previously established allowance for loan losses and then increase interest income as a prospective yield adjustment over the remaining life of the loan. The impact of changes in variable interest rates is recognized prospectively as adjustments to interest income.
RESULTS OF OPERATIONS
Overview
2020, an increase of 71.2%. 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.
Comparisons for the financial periods presented are significantly impacted by our March 3, 2017 acquisition of Carolina Bank, which operated eight branches and three mortgage loan offices, primarily in the Triad region of North Carolina (consists of Greensboro, Winston-Salem, and High Point and the surrounding areas). See Note 4 to the consolidated financial statements for more information on this transaction
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 andhigher earnings for Asheville Savings Bank are not includedboth periods in the Company’s results for the third quarter.
2021 were primarily driven by lower credit costs compared to 2020.
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Also contributing to the increase inwhich were partially offset by lower net interest income was a higher net interest margin for the period. margins. See additional discussion below.
The net interest margins for both periods2021 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 million 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 inimpact of lower interest rates and the acquisition of Carolina Bank.
Provisionlower incremental reinvestment rates realized from funds provided by high deposit growth.
total assets, compared to $50 million, or 0.65% of total assets, at December 31, 2020. During the second quarter of 2021, we sold a nonaccrual relationship totaling $5.6 million that was primarily responsible for the decline in nonaccrual loans during the period.
Core noninterest income for the third quarter2021, exclusive of 2017 was $12.8$86 million of net PPP loan decreases related to forgiveness, amounted to $136 million, an annualized growth rate of 6.1%. Total loans amounted to $4.8 billion at June 30, 2021, an increase of 31.2%$51 million, or 1.1% from December 31, 2020. Excluding PPP loans, our level of outstanding loans has been impacted by high mortgage loan refinancing activity, commercial loan payoffs, and until the second quarter of 2021, lower demand resulting from the $9.8 million reported for the third quarter of 2016. Forpandemic.
The primary reason for the increase in core noninterest income in 2017 was the acquisition of Carolina Bank,a flight to quality to FDIC-insured banks, as well as income derived from the Company’s SBA consulting fees and SBA loan sale gains, which began in the second and third quarters of 2016.
Noninterest Expenses
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 the Company’s acquisition of Carolina Bank.
Balance Sheet and Capital
Total assets at September 30, 2017 amounted to $4.6 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.
In addition to the growth realized from the acquisition of Carolina Bank in March 2017, we have experienced strong organic loan andour ongoing deposit growth during 2017. For the first nine months of 2017, organic loan growth (i.e. excluding loan balances assumed from Carolina Bank) amounted to $221.5 million, or 10.9% annualized. For the first nine months of 2017, organic deposit growth amounted to $118.5 million, or 5.4% annualized. The strong growth was a result of ongoing internal initiatives to drive loan and deposit growth, including our recent expansion into higher growth markets, including Charlotte, Raleigh, and the Triad.
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Note Regarding Components of Earnings
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,substantially 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 coveredoperating assets of our property and non-covered. See the Company’s 2016 Annual Report on Form 10-K filed with the Securitiescasualty insurance agency subsidiary, First Bank Insurance Services, to Bankers Insurance, LLC for an initial purchase price valued at $13.0 million and Exchange Commission for additional discussion regarding the accounting and presentationa future earn-out payment of up to $1.0 million. We recorded a gain of $1.7 million related to the Company’s two FDIC-assisted failed bank acquisitions.
sale. Approximately $10.2 million of intangible assets were derecognized from our balance sheet as a result of this transaction, including $7.4 million in goodwill and $2.8 million in other intangibles.
Three Months Ended September 30, | ||||||||
($ 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 |
2020. Net interest income on a tax-equivalent basis for the six
($ in thousands) | Three Months Ended June 30 | Six Months Ended June 30, | |||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
Net interest income, as reported | $ | 58,759 | 52,624 | $ | 113,997 | 107,383 | |||||||||||||||||
Tax-equivalent adjustment | 517 | 330 | 959 | 664 | |||||||||||||||||||
Net interest income, tax-equivalent | $ | 59,276 | 52,954 | $ | 114,956 | 108,047 | |||||||||||||||||
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The following table presents an analysis of net interest income analysisincome.
For the Three Months Ended June 30, | |||||||||||||||||||||||||||||||||||
2021 | 2020 | ||||||||||||||||||||||||||||||||||
($ in thousands) | Average Volume | Average Rate | Interest Earned or Paid | Average Volume | Average Rate | Interest Earned or Paid | |||||||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||||||||
Loans (1) (2) | $ | 4,679,119 | 4.48 | % | $ | 52,295 | $ | 4,738,702 | 4.41 | % | $ | 51,964 | |||||||||||||||||||||||
Taxable securities | 2,157,475 | 1.45 | % | 7,789 | 770,441 | 2.49 | % | 4,771 | |||||||||||||||||||||||||||
Non-taxable securities | 131,692 | 1.45 | % | 474 | 17,795 | 2.64 | % | 117 | |||||||||||||||||||||||||||
Short-term investments, primarily interest-bearing cash | 418,321 | 0.56 | % | 581 | 575,074 | 0.55 | % | 788 | |||||||||||||||||||||||||||
Total interest-earning assets | 7,386,607 | 3.32 | % | 61,139 | 6,102,012 | 3.80 | % | 57,640 | |||||||||||||||||||||||||||
Cash and due from banks | 85,742 | 88,727 | |||||||||||||||||||||||||||||||||
Premises and equipment | 123,172 | 114,911 | |||||||||||||||||||||||||||||||||
Other assets | 370,260 | 422,112 | |||||||||||||||||||||||||||||||||
Total assets | $ | 7,965,781 | $ | 6,727,762 | |||||||||||||||||||||||||||||||
Liabilities | |||||||||||||||||||||||||||||||||||
Interest bearing checking | $ | 1,278,969 | 0.07 | % | $ | 225 | $ | 972,580 | 0.11 | % | $ | 267 | |||||||||||||||||||||||
Money market deposits | 1,776,344 | 0.18 | % | 799 | 1,294,462 | 0.29 | % | 920 | |||||||||||||||||||||||||||
Savings deposits | 582,081 | 0.08 | % | 112 | 454,791 | 0.13 | % | 147 | |||||||||||||||||||||||||||
Time deposits >$100,000 | 526,706 | 0.52 | % | 681 | 632,319 | 1.48 | % | 2,324 | |||||||||||||||||||||||||||
Other time deposits | 218,463 | 0.33 | % | 182 | 242,754 | 0.69 | % | 416 | |||||||||||||||||||||||||||
Total interest-bearing deposits | 4,382,563 | 0.18 | % | 1,999 | 3,596,906 | 0.46 | % | 4,074 | |||||||||||||||||||||||||||
Borrowings | 61,312 | 2.49 | % | 381 | 288,997 | 1.31 | % | 942 | |||||||||||||||||||||||||||
Total interest-bearing liabilities | 4,443,875 | 0.21 | % | 2,380 | 3,885,903 | 0.52 | % | 5,016 | |||||||||||||||||||||||||||
Noninterest bearing checking | 2,568,960 | 1,905,449 | |||||||||||||||||||||||||||||||||
Other liabilities | 58,968 | 64,915 | |||||||||||||||||||||||||||||||||
Shareholders’ equity | 893,978 | 871,495 | |||||||||||||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 7,965,781 | $ | 6,727,762 | |||||||||||||||||||||||||||||||
Net yield on interest-earning assets and net interest income | 3.19 | % | $ | 58,759 | 3.47 | % | $ | 52,624 | |||||||||||||||||||||||||||
Net yield on interest-earning assets and net interest income – tax-equivalent (3) | 3.22 | % | $ | 59,276 | 3.49 | % | $ | 52,954 | |||||||||||||||||||||||||||
Interest rate spread | 3.11 | % | 3.28 | % | |||||||||||||||||||||||||||||||
Average prime rate | 3.25 | % | 3.25 | % |
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 Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||
2021 | 2020 | ||||||||||||||||||||||||||||||||||
($ in thousands) | Average Volume | Average Rate | Interest Earned or Paid | Average Volume | Average Rate | Interest Earned or Paid | |||||||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||||||||
Loans (1) | $ | 4,681,604 | 4.45 | % | $ | 103,368 | $ | 4,625,798 | 4.66 | % | $ | 107,261 | |||||||||||||||||||||||
Taxable securities | 1,906,549 | 1.45 | % | 13,702 | 802,485 | 2.57 | % | 10,245 | |||||||||||||||||||||||||||
Non-taxable securities | 99,622 | 1.62 | % | 797 | 19,757 | 2.86 | % | 281 | |||||||||||||||||||||||||||
Short-term investments, primarily interest-bearing cash | 456,066 | 0.57 | % | 1,281 | 400,934 | 0.95 | % | 1,886 | |||||||||||||||||||||||||||
Total interest-earning assets | 7,143,841 | 3.36 | % | $ | 119,148 | 5,848,974 | 4.11 | % | 119,673 | ||||||||||||||||||||||||||
Cash and due from banks | 83,486 | 75,984 | |||||||||||||||||||||||||||||||||
Premises and equipment | 122,485 | 114,624 | |||||||||||||||||||||||||||||||||
Other assets | 373,472 | 416,009 | |||||||||||||||||||||||||||||||||
Total assets | $ | 7,723,284 | $ | 6,455,591 | |||||||||||||||||||||||||||||||
Liabilities | |||||||||||||||||||||||||||||||||||
Interest bearing checking | $ | 1,241,662 | 0.08 | % | $ | 491 | $ | 935,792 | 0.14 | % | $ | 674 | |||||||||||||||||||||||
Money market deposits | 1,713,714 | 0.20 | % | 1,717 | 1,248,796 | 0.42 | % | 2,602 | |||||||||||||||||||||||||||
Savings deposits | 560,550 | 0.09 | % | 242 | 440,508 | 0.19 | % | 416 | |||||||||||||||||||||||||||
Time deposits >$100,000 | 540,865 | 0.57 | % | 1,539 | 638,216 | 1.65 | % | 5,247 | |||||||||||||||||||||||||||
Other time deposits | 221,239 | 0.36 | % | 398 | 246,807 | 0.74 | % | 908 | |||||||||||||||||||||||||||
Total interest-bearing deposits | 4,278,030 | 0.21 | % | 4,387 | 3,510,119 | 0.56 | % | 9,847 | |||||||||||||||||||||||||||
Borrowings | 61,356 | 2.51 | % | 764 | 302,566 | 1.62 | % | 2,443 | |||||||||||||||||||||||||||
Total interest-bearing liabilities | 4,339,386 | 0.24 | % | 5,151 | 3,812,685 | 0.65 | % | 12,290 | |||||||||||||||||||||||||||
Noninterest bearing checking | 2,436,138 | 1,716,212 | |||||||||||||||||||||||||||||||||
Other liabilities | 57,895 | 61,570 | |||||||||||||||||||||||||||||||||
Shareholders’ equity | 889,865 | 865,124 | |||||||||||||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 7,723,284 | $ | 6,455,591 | |||||||||||||||||||||||||||||||
Net yield on interest-earning assets and net interest income | 3.22 | % | $ | 113,997 | 3.69 | % | $ | 107,383 | |||||||||||||||||||||||||||
Net yield on interest-earning assets and net interest income – tax-equivalent (2) | 3.24 | % | $ | 114,956 | 3.71 | % | $ | 108,047 | |||||||||||||||||||||||||||
Interest rate spread | 3.12 | % | 3.46 | % | |||||||||||||||||||||||||||||||
Average prime rate | 3.25 | % | 3.84 | % |
The mix of our loan portfolio remained substantially the same at September 30, 2017 compared to December 31, 2016, with approximately 87% of our loans being real estate loans, 11% being commercial, financial, and agricultural loans, and the remaining 2% being consumer installment loans. The majority of our real estate loans are personal and commercial loans where real estate provides additional security for the loan.
following paragraph.
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Average borrowings increasedthe balance sheet growth discussed above was that our average interest-earning assets for the ninethree and six months ended SeptemberJune 30, 20172021 were 21.1% and 22.1% higher than for the comparable periods in 2020, respectively. As it relates to $294.7 millionthe net interest income we recorded, the impact from the $200.4 million forhigher average interest-earning assets more than offset the same periodimpact of 2016. Carolina Bank had approximately $19 millionthe decline in borrowings on the date of acquisition. Our cost of funds,our net interest margin, 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 due to the increased costs associated with our higher levels of borrowings.
is discussed below.
Our41 basis point decline in the cost of our interest-bearing liabilities. See additional discussion in Item 3 - Quantitative and Qualitative Disclosures About Market Risk.
net interest margin.
Our2021, using the CECL methodology, we recorded a $1.9 million in provision for unfunded commitments. The provision was recorded primarily due to an increase in construction and land development loan loss levels havecommitments during the second quarter of 2021 that had not been impacted by continued improvement in asset quality. Nonperforming assetsfunded as of quarter end. Our allowance for unfunded commitments at June 30, 2021 amounted to $53.0 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.
Total noninterest income was $12.4$10.0 million and $5.2 million foris recorded within the three months ended September 30, 2017 and September 30, 2016, respectively. For the nine months ended September 30, 2017, noninterest income amounted to $34.0 million compared to $16.1 million for the same period of 2016.
As shown in the table below, coreline item "Other liabilities".
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The following table presents our core noninterest incomeamounted to $2.8 million 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 thirdsecond quarter of 2016 to $2.92021, a 23.4% increase over the $2.3 million infor the thirdsecond quarter of 2017.2020, with the second quarter of 2020 having declined significantly from historical levels at the onset of the pandemic. For each of the ninesix months ended SeptemberJune 30, 2017,2021 and 2020, service charges on deposit accounts amounted to $8.5 million, which is a $0.5 million increase from the $8.0 million recorded in the comparable period of 2016. The increases for both periods are primarily due to the service charges from accounts assumed in the Carolina Bank acquisition.
$5.6 million.
Fees from presold mortgage loans increased to $1.8 million for the third quarter of 2017 from $0.7 million in the third quarter of 2016.2020. For the first ninesix months of 2017,2021 and 2020, fees from presold mortgage loansmortgages amounted to $6.8 million and $4.9 million, respectively. Mortgage loan volumes increased to $4.1 million from the $1.5 million recordedsignificantly beginning in the comparable periodsecond quarter of 2016. The increases were2020 at the onset of the pandemic primarily due to declines in interest rates. In the acquisitionsecond quarter of Carolina Bank in March 2017, which had a significant2021, mortgage loan operation.
volumes declined due to increases in mortgage interest rates.
One of the primary reasons for the increases in core noninterest income for the three and nine months ended September 30, 2017 was the addition of SBA consulting fees and SBA loan sale gains beginning in 2016. On May 5, 2016, we completed the acquisition of a firm that specializes in consulting with financial institutions across the country related to SBA loan origination and servicing. We recorded $0.9 million and $3.2 million in SBA consulting fees related to this business during the three and nine months ended September 30, 2017, respectively, in comparison to $1.2 million and $1.9$2.7 million for the three and ninesix months ended SeptemberJune 30, 2016, respectively.2021 and $5.4 million for calendar year 2020. In the thirdfuture, we are eligible to receive referral fees from Bankers Insurance, but expect the portion of this line item related to First Bank Insurance Services to be minimal for the near future. Our wealth management division was not included in, and is not impacted, by the sale.
Bank-owned life insurance income was relatively unchanged forequipment expense did not vary significantly among the periods presented, amounting to $0.6$3.7 million infor each of the third quarter of 2017 compared to $0.5three month periods ending June 30, 2021 and 2020, and $7.7 million in the third quarter of 2016, and $1.7 million to $1.5$7.8 million for the first nine months of 2017six month periods ending June 30, 2021 and 2016,2020, respectively.
Page 48
Within the noncore components of noninterest income, the largest variance for the periods presented relatedMerger expenses amounted 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$0.4 million for the three and ninesix months ended SeptemberJune 30, 2016, respectively.
During2021, compared to none in 2020. As discussed previously at Note 16 to 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,Consolidated Financial Statements, on June 1, 2021, the Company recorded a net gain of $1.4 million as a result of a branch exchange transaction.
Noninterest expenses amounted to $34.4announced an acquisition agreement with Select Bancorp, Inc.
Salaries expense increased to $16.6$0.8 million in the thirdsecond quarter of 20172021, and decreased 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$2.0 million in the first ninesix months of 2016.
Merger and acquisition expenses amounted2020 to $1.3 million and $0.6 million for the three months ended September 30, 2017 and 2016, respectively. For the nine months ended September 30, 2017 and 2016, merger and acquisition expenses amounted to $4.8 million and $1.3 million, respectively. Merger and acquisition expenses represent transaction related costs associated primarily with the acquisitions of Carolina Bank and Asheville Savings Bank.
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$1.7 million in the first ninesix months of 2016 to $2.5 million in the first nine months of 2017,2021. The declines were primarily as a result of the amortization of intangible assets associated with acquisitions that were recorded in connection with our acquisitions.
typically have amortization schedules that decline over time.
technology expenses.
Page 49
The Consolidated Statementsconsolidated statements of Comprehensive Incomecomprehensive income reflect other comprehensive income of $0.2$3.5 million during eachthe second quarter of 2021 compared to other comprehensive loss of $3.9 million during the third quarterssecond quarter of 2017 and 2016. During2020. For the ninefirst six months ended September 30, 2017 and 2016, we recordedof 2021, the consolidated statements of comprehensive income reflect other comprehensive loss of $15.1 million compared to other comprehensive income of $2.3$12.2 million and $2.0 million, respectively.for the comparable period of 2020. The primary component of other comprehensive income for the periods presented was changes in unrealized holding gains (losses) of our available for sale securities. 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. The variances in unrealized gains/losses for the periods presented were consistent with the changes in market interest rates. 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, 2020.
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% |
2021.
$ in thousands | ||||||||||||||||||||||||||||||||
January 1, 2021 to June 30, 2021 | Balance at beginning of period | Internal Growth, net | Growth from Acquisitions | Balance at end of period | Total percentage growth | |||||||||||||||||||||||||||
Total loans | $ | 4,731,315 | 50,749 | — | 4,782,064 | 1.1 | % | |||||||||||||||||||||||||
Deposits – Noninterest bearing checking | 2,210,012 | 441,131 | — | 2,651,143 | 20.0 | % | ||||||||||||||||||||||||||
Deposits – Interest bearing checking | 1,172,022 | 206,843 | — | 1,378,865 | 17.6 | % | ||||||||||||||||||||||||||
Deposits – Money market | 1,581,364 | 239,111 | — | 1,820,475 | 15.1 | % | ||||||||||||||||||||||||||
Deposits – Savings | 519,266 | 74,363 | — | 593,629 | 14.3 | % | ||||||||||||||||||||||||||
Deposits – Brokered | 20,222 | (10,752) | — | 9,470 | (53.2) | % | ||||||||||||||||||||||||||
Deposits – Internet time | 249 | (249) | — | — | (100.0) | % | ||||||||||||||||||||||||||
Deposits – Time>$100,000 | 543,894 | (42,642) | — | 501,252 | (7.8) | % | ||||||||||||||||||||||||||
Deposits – Time<$100,000 | 226,567 | (10,043) | — | 216,524 | (4.4) | % | ||||||||||||||||||||||||||
Total deposits | $ | 6,273,596 | 897,762 | — | 7,171,358 | 14.3 | % |
Note 6 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 to fund the loan growth. Total brokered deposits amounted to $215.6 million at September 30, 2017, which is a 46% increase from the $147.4 million outstanding a year earlier. Borrowings have increased from $236.4 million31.4% at December 31, 2020 to $397.5 million over that same period.
39.9% at June 30, 2021.
ASSET QUALITY DATA($ 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 June 30, 2021 | As of/for the quarter ended December 31, 2020 | ||||||||||||
Nonperforming assets | ||||||||||||||
Nonaccrual loans | $ | 32,993 | 35,076 | |||||||||||
TDRs – accruing | 8,026 | 9,497 | ||||||||||||
Accruing loans >90 days past due | — | — | ||||||||||||
Total nonperforming loans | 41,019 | 44,573 | ||||||||||||
Foreclosed real estate | 826 | 2,424 | ||||||||||||
Total nonperforming assets | $ | 41,845 | 46,997 | |||||||||||
Asset Quality Ratios – All Assets | ||||||||||||||
Net charge-offs to average loans - annualized | 0.07 | % | 0.07 | % | ||||||||||
Nonperforming loans to total loans | 0.86 | % | 0.94 | % | ||||||||||
Nonperforming assets to total assets | 0.51 | % | 0.64 | % | ||||||||||
Allowance for loan losses to total loans | 1.36 | % | 1.11 | % | ||||||||||
Allowance for loan losses to nonperforming loans | 158.52 | % | 117.53 | % |
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, at SeptemberAt June 30, 2017,2021, total nonaccrual loans amounted to $23.4$33.0 million, compared to $27.5$35.1 million at December 31, 20162021. As noted above, the decrease was primarily driven by the sale of one borrower relationship.
($ in thousands) | At June 30, 2021 | At December 31, 2020 | |||||||||
Commercial, financial, and agricultural | $ | 9,476 | 9,681 | ||||||||
Real estate – construction, land development, and other land loans | 393 | 643 | |||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 5,765 | 6,048 | |||||||||
Real estate – mortgage – home equity loans/lines of credit | 1,345 | 1,333 | |||||||||
Real estate – mortgage – commercial and other | 15,886 | 17,191 | |||||||||
Consumer loans | 128 | 180 | |||||||||
Total nonaccrual loans | $ | 32,993 | 35,076 |
2021, are excluded from TDR consideration at June 30, 2021.
As of June 30, 2021 | |||||||||||||||||||||||
($ in thousands) | Total Nonperforming Loans | Total Loans | Nonperforming Loans to Total Loans | Total Foreclosed Real Estate | |||||||||||||||||||
Region (1) | |||||||||||||||||||||||
Eastern Region (NC) | $ | 5,932 | 1,128,429 | 0.53 | % | $ | 120 | ||||||||||||||||
Central Region (NC) | 6,016 | 863,229 | 0.70 | % | 305 | ||||||||||||||||||
Triad Region (NC) | 4,790 | 614,504 | 0.78 | % | — | ||||||||||||||||||
Western Region (NC) | 2,847 | 612,668 | 0.46 | % | 124 | ||||||||||||||||||
Triangle Region (NC) | 266 | 424,370 | 0.06 | % | — | ||||||||||||||||||
Charlotte Region (NC) | 962 | 385,990 | 0.25 | % | — | ||||||||||||||||||
Southern Piedmont Region (NC) | 2,012 | 159,518 | 1.26 | % | 65 | ||||||||||||||||||
South Carolina Region | 742 | 204,208 | 0.36 | % | 40 | ||||||||||||||||||
SBA loans | 17,307 | 158,695 | 10.91 | % | 135 | ||||||||||||||||||
SBA - PPP loans | — | 155,514 | — | % | — | ||||||||||||||||||
Other | 145 | 74,939 | 0.19 | % | 37 | ||||||||||||||||||
Total | $ | 41,019 | 4,782,064 | 0.86 | % | $ | 826 |
The following is the composition, by loan type, of all of our nonaccrual loans at each period end, as classified for regulatory purposes:
($ 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.
($ 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 |
($ in thousands) At June 30, 2021 At December 31, 2020 Vacant land and farmland $ 517 753 1-4 family residential properties 113 517 Commercial real estate 196 1,154 Total foreclosed real estate $ 826 2,424
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 | ||||||||||
Eastern North Carolina Region - New Hanover, Brunswick, Duplin, Dare, Beaufort, Pitt, Onslow, Carteret
Triangle North Carolina Region - Moore, Lee, Harnett, Chatham, Wake
Triad North Carolina Region - Montgomery, Randolph, Davidson, Rockingham, Guilford, Stanly, Forsyth, Alamance
Charlotte North Carolina Region - Iredell, Cabarrus, Rowan, Mecklenburg
Southern Piedmont North Carolina Region - Anson, Richmond, Scotland, Robeson, Bladen, Columbus, Cumberland
Western North Carolina Region – Buncombe
South Carolina Region - Chesterfield, Dillon, Florence
Virginia Region - Wythe, Washington, Montgomery, Roanoke
Summary of Loan Loss Experience
January 1, 2021.
second quarter of 2021.
The weak economic environment that began in 2008 resulted in elevated levels of classified and nonperforming assets, which generally led to higher provisions for loan losses compared to historical averages. Over the past several years, we have seen ongoing signs of a recovering economy in most of our market areas. Although we continue to have an elevated level of past due and adversely classified assets compared to historic averages, we believe the severity of the loss rate inherent in our current inventory of classified loans is less than in the recession years.
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 provision for
($ in thousands) | Six Months Ended June 30, 2021 | Twelve Months Ended December 31, 2020 | Six Months Ended June 30, 2020 | ||||||||||||||
Loans outstanding at end of period | $ | 4,782,064 | 4,731,315 | 4,770,063 | |||||||||||||
Average amount of loans outstanding | $ | 4,681,604 | 4,702,743 | 4,625,798 | |||||||||||||
Allowance for loan losses, at beginning of year | $ | 52,388 | 21,398 | 21,398 | |||||||||||||
Adoption of CECL | 14,575 | — | — | ||||||||||||||
Provision (reversal) for loan losses | — | 35,039 | 24,888 | ||||||||||||||
66,963 | 56,437 | 46,286 | |||||||||||||||
Loans charged off: | |||||||||||||||||
Commercial, financial, and agricultural | (1,988) | (5,608) | (3,931) | ||||||||||||||
Real estate – construction, land development & other land loans | (66) | (51) | (45) | ||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | (114) | (478) | (474) | ||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | (139) | (524) | (381) | ||||||||||||||
Real estate – mortgage – commercial and other | (1,834) | (968) | (545) | ||||||||||||||
Consumer loans | (307) | (873) | (397) | ||||||||||||||
Total charge-offs | (4,448) | (8,502) | (5,773) | ||||||||||||||
Recoveries of loans previously charged-off: | |||||||||||||||||
Commercial, financial, and agricultural | 667 | 745 | 477 | ||||||||||||||
Real estate – construction, land development & other land loans | 686 | 1,552 | 643 | ||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 323 | 754 | 315 | ||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | 229 | 487 | 166 | ||||||||||||||
Real estate – mortgage – commercial and other | 340 | 621 | 102 | ||||||||||||||
Consumer loans | 262 | 294 | 126 | ||||||||||||||
Total recoveries | 2,507 | 4,453 | 1,829 | ||||||||||||||
Net (charge-offs) recoveries | (1,941) | (4,049) | (3,944) | ||||||||||||||
Allowance for credit losses on loans, at end of period | $ | 65,022 | 52,388 | 42,342 | |||||||||||||
Ratios: | |||||||||||||||||
Net charge-offs (recoveries) as a percent of average loans (annualized) | 0.08 | % | 0.09 | % | 0.17 | % | |||||||||||
Allowance for loan losses as a percent of loans at end of period | 1.36 | % | 1.11 | % | 0.89 | % |
The allowance for loan losses amounted to $24.6 milliondeferrals at SeptemberJune 30, 2017, compared to $23.8 million at December 31, 2016 and $24.6 million at September 30, 2016. 2020.
line item "Other Liabilities."
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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.
Based on the results of our loan analysis and grading program and our evaluation of the allowance for loan losses at September 30, 2017, there have been no material changes to the allocation of the allowance for loan losses among the various categories of loans since December 31, 2016.
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.
2021.
2021.
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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 with regulatory capital requirements established by the Federal Reserve. Failure to meet minimum capital requirements can initiate certain mandatory,
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% |
June 30, 2021 | December 31, 2020 | ||||||||||
Risk-based capital ratios: | |||||||||||
Common equity Tier 1 to Tier 1 risk weighted assets | 12.81 | % | 13.19 | % | |||||||
Minimum required Common Equity Tier 1 capital | 7.00 | % | 7.00 | % | |||||||
Tier I capital to Tier 1 risk weighted assets | 13.80 | % | 14.28 | % | |||||||
Minimum required Tier 1 capital | 8.50 | % | 8.50 | % | |||||||
Total risk-based capital to Tier II risk weighted assets | 15.05 | % | 15.37 | % | |||||||
Minimum required total risk-based capital | 10.50 | % | 10.50 | % | |||||||
Leverage capital ratios: | |||||||||||
Tier 1 capital to quarterly average total assets | 9.43 | % | 9.88 | % | |||||||
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 reduction in our leverage ratio reflected in the table above was due to the acquisitionsignificant balance sheet growth experienced in the first six months of Carolina Bank2021, resulting primarily from a strong increase in March 2017 (see Note 4 todeposits. The decline in the Consolidated Financial Statements for more information on this transaction).
Page 56
In addition to regulatoryrisk based 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% atfrom December 31, 20162020 to June 30, 2021 was due to increases in securities and 8.03% at September 30, 2016.
loans balances.
Bank, our bank subsidiary.
We did not repurchase any
Page 57
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 September, at June 30, 2017,2021, we had $1.0over $2 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 interest rates, while interest rates on other types may lag behind changes in market rates. In addition to the effects of “when” various rate-sensitive products reprice, market rate changes may not result in uniform changes in rates among all products. For example, included in interest-bearing liabilities subject to interest rate changes within one year at SeptemberJune 30, 2017 are2021 were deposits totaling $1.87 billion$3.8 billion comprised of checking, savings, and certain types of money market deposits with interest rates set by management. These types of deposits historically have not repriced with, or in the same proportion, as general market indicators.
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, generally reset to lower rates soon after these interest rate cuts. We reduced our offering rates on most deposit products 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 in 2020 and 2021.
Page 58
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$3.7 million and $3.6$2.0 million for the ninefirst six months ended September 30, 2017of 2021 and 2016,2020, 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. For example, in the second quarter of 2021, we experienced pay-offs on five former failed-bank loans that resulted in the elevated level of discount accretion recorded for the quarter. Each of these factors is difficult to predict and susceptible to volatility. The remaining loan discount on acquired loans amounted to $16.9$5.3 million at SeptemberJune 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 yields2021 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.
$8.9 million at December 31, 2020.
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.
There are no material changes from the risk factors set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
Issuer Purchases of Equity Securities | |||||||||||||||||||||||||||||||||
Period | Total Number of Shares Purchased | 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) | |||||||||||||||||||||||||||||
— | $ | — | — | $ | 15,964,472 | ||||||||||||||||||||||||||||
— | — | — | 15,964,472 | ||||||||||||||||||||||||||||||
— | — | — | 15,964,472 | ||||||||||||||||||||||||||||||
Total | — | — | — | 15,964,472 |
During the three months ended September 30, 2017,
2.a |
2.b |
2.c |
2.d |
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2.e | |||||
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 |
FIRST BANCORP | |||||||
August 9, 2021 | BY:/s/ Richard H. Moore | ||||||
Richard H. Moore | |||||||
Chief Executive Officer | |||||||
(Principal Executive Officer), | and Director | ||||||
August 9, 2021 | |||||||
BY:/s/ Eric P. Credle | |||||||
Eric P. Credle | |||||||
Executive Vice President | |||||||
and Chief Financial Officer |