WASHINGTON,
FORM 10-Q
Commission File Number 0-15572
North 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 ☒ No20172019 was 29,643,990.29,604,830.
Page 894057 59Part II. Other Information 5959606220162018 Annual Report on Form 10-K.
($ in thousands-unaudited) | September 30, 2017 | December 31, 2016 (audited) | September 30, 2016 | |||||||||
ASSETS | ||||||||||||
Cash and due from banks, noninterest-bearing | $ | 82,758 | 71,645 | 64,145 | ||||||||
Due from banks, interest-bearing | 326,089 | 234,348 | 217,188 | |||||||||
Total cash and cash equivalents | 408,847 | 305,993 | 281,333 | |||||||||
Securities available for sale | 198,924 | 199,329 | 199,156 | |||||||||
Securities held to maturity (fair values of $124,878, $130,195, and $139,514) | 123,156 | 129,713 | 135,808 | |||||||||
Presold mortgages in process of settlement | 17,426 | 2,116 | 4,094 | |||||||||
Loans | 3,429,755 | 2,710,712 | 2,651,459 | |||||||||
Allowance for loan losses | (24,593 | ) | (23,781 | ) | (24,575 | ) | ||||||
Net loans | 3,405,162 | 2,686,931 | 2,626,884 | |||||||||
Premises and equipment | 95,762 | 75,351 | 76,731 | |||||||||
Accrued interest receivable | 11,445 | 9,286 | 8,785 | |||||||||
Goodwill | 144,667 | 75,042 | 75,392 | |||||||||
Other intangible assets | 15,634 | 4,433 | 4,603 | |||||||||
Foreclosed real estate | 9,356 | 9,532 | 10,103 | |||||||||
Bank-owned life insurance | 88,081 | 74,138 | 73,613 | |||||||||
Other assets | 72,687 | 42,998 | 40,978 | |||||||||
Total assets | $ | 4,591,147 | 3,614,862 | 3,537,480 | ||||||||
LIABILITIES | ||||||||||||
Deposits: Noninterest bearing checking accounts | $ | 1,016,947 | 756,003 | 749,256 | ||||||||
Interest bearing checking accounts | 683,113 | 635,431 | 593,065 | |||||||||
Money market accounts | 795,572 | 685,331 | 659,741 | |||||||||
Savings accounts | 396,192 | 209,074 | 207,494 | |||||||||
Time deposits of $100,000 or more | 517,770 | 422,687 | 451,622 | |||||||||
Other time deposits | 241,647 | 238,827 | 249,662 | |||||||||
Total deposits | 3,651,241 | 2,947,353 | 2,910,840 | |||||||||
Borrowings | 397,525 | 271,394 | 236,394 | |||||||||
Accrued interest payable | 1,143 | 539 | 523 | |||||||||
Other liabilities | 28,737 | 27,475 | 24,775 | |||||||||
Total liabilities | 4,078,646 | 3,246,761 | 3,172,532 | |||||||||
Commitments and contingencies | ||||||||||||
SHAREHOLDERS’ EQUITY | ||||||||||||
Preferred stock, no par value per share. Authorized: 5,000,000 shares | ||||||||||||
Series C, convertible, issued & outstanding: none, none, and 728,706 shares | — | — | 7,287 | |||||||||
Common stock, no par value per share. Authorized: 40,000,000 shares | ||||||||||||
Issued & outstanding: 24,723,929, 20,844,505, and 20,119,411 shares | 263,493 | 147,287 | 139,979 | |||||||||
Retained earnings | 251,790 | 225,921 | 219,233 | |||||||||
Stock in rabbi trust assumed in acquisition | (3,571 | ) | — | — | ||||||||
Rabbi trust obligation | 3,571 | — | — | |||||||||
Accumulated other comprehensive income (loss) | (2,782 | ) | (5,107 | ) | (1,551 | ) | ||||||
Total shareholders’ equity | 512,501 | 368,101 | 364,948 | |||||||||
Total liabilities and shareholders’ equity | $ | 4,591,147 | 3,614,862 | 3,537,480 |
($ in thousands) | September 30, 2019 (unaudited) | December 31, 2018 | ||||
ASSETS | ||||||
Cash and due from banks, noninterest-bearing | $ | 52,621 | 56,050 | |||
Due from banks, interest-bearing | 264,840 | 406,848 | ||||
Total cash and cash equivalents | 317,461 | 462,898 | ||||
Securities available for sale | 705,224 | 501,351 | ||||
Securities held to maturity (fair values of $74,465 and $99,906) | 74,265 | 101,237 | ||||
Presold mortgages in process of settlement | 16,269 | 4,279 | ||||
Loans | 4,396,544 | 4,249,064 | ||||
Allowance for loan losses | (19,260 | ) | (21,039 | ) | ||
Net loans | 4,377,284 | 4,228,025 | ||||
Premises and equipment | 136,668 | 119,000 | ||||
Accrued interest receivable | 16,297 | 16,004 | ||||
Goodwill | 234,368 | 234,368 | ||||
Other intangible assets | 18,456 | 21,112 | ||||
Foreclosed properties | 4,589 | 7,440 | ||||
Bank-owned life insurance | 103,806 | 101,878 | ||||
Other assets | 64,224 | 66,524 | ||||
Total assets | $ | 6,068,911 | 5,864,116 | |||
LIABILITIES | ||||||
Deposits: Noninterest bearing checking accounts | $ | 1,491,494 | 1,320,131 | |||
Interest bearing checking accounts | 894,777 | 916,374 | ||||
Money market accounts | 1,124,614 | 1,035,523 | ||||
Savings accounts | 418,043 | 432,389 | ||||
Time deposits of $100,000 or more | 686,554 | 690,922 | ||||
Other time deposits | 259,900 | 264,000 | ||||
Total deposits | 4,875,382 | 4,659,339 | ||||
Borrowings | 300,656 | 406,609 | ||||
Accrued interest payable | 2,169 | 1,976 | ||||
Other liabilities | 55,722 | 31,962 | ||||
Total liabilities | 5,233,929 | 5,099,886 | ||||
Commitments and contingencies | ||||||
SHAREHOLDERS’ EQUITY | ||||||
Preferred stock, no par value per share. Authorized: 5,000,000 shares | ||||||
Issued & outstanding: none and none | — | — | ||||
Common stock, no par value per share. Authorized: 40,000,000 shares | ||||||
Issued & outstanding: 29,604,830 and 29,724,874 shares | 429,136 | 434,453 | ||||
Retained earnings | 402,212 | 341,738 | ||||
Stock in rabbi trust assumed in acquisition | (2,577 | ) | (3,235 | ) | ||
Rabbi trust obligation | 2,577 | 3,235 | ||||
Accumulated other comprehensive income (loss) | 3,634 | (11,961 | ) | |||
Total shareholders’ equity | 834,982 | 764,230 | ||||
Total liabilities and shareholders’ equity | $ | 6,068,911 | 5,864,116 |
($ in thousands, except share data-unaudited) | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||
INTEREST INCOME | ||||||||||||
Interest and fees on loans | $ | 55,142 | 52,407 | 164,754 | 154,028 | |||||||
Interest on investment securities: | ||||||||||||
Taxable interest income | 5,130 | 2,501 | 14,859 | 7,552 | ||||||||
Tax-exempt interest income | 212 | 367 | 820 | 1,115 | ||||||||
Other, principally overnight investments | 1,898 | 2,944 | 6,705 | 7,320 | ||||||||
Total interest income | 62,382 | 58,219 | 187,138 | 170,015 | ||||||||
INTEREST EXPENSE | ||||||||||||
Savings, checking and money market accounts | 2,560 | 1,334 | 6,904 | 3,445 | ||||||||
Time deposits of $100,000 or more | 3,519 | 2,302 | 10,219 | 5,627 | ||||||||
Other time deposits | 518 | 270 | 1,375 | 740 | ||||||||
Borrowings | 2,007 | 2,468 | 7,092 | 6,619 | ||||||||
Total interest expense | 8,604 | 6,374 | 25,590 | 16,431 | ||||||||
Net interest income | 53,778 | 51,845 | 161,548 | 153,584 | ||||||||
Provision (reversal) for loan losses | (1,105 | ) | 87 | (913 | ) | (4,282 | ) | |||||
Net interest income after provision for loan losses | 54,883 | 51,758 | 162,461 | 157,866 | ||||||||
NONINTEREST INCOME | ||||||||||||
Service charges on deposit accounts | 3,388 | 3,221 | 9,543 | 9,606 | ||||||||
Other service charges, commissions and fees | 5,814 | 4,942 | 16,848 | 14,101 | ||||||||
Fees from presold mortgage loans | 1,275 | 576 | 2,677 | 2,231 | ||||||||
Commissions from sales of insurance and financial products | 2,203 | 2,425 | 6,436 | 6,484 | ||||||||
SBA consulting fees | 663 | 1,287 | 2,847 | 3,554 | ||||||||
SBA loan sale gains | 1,917 | 2,373 | 7,048 | 8,773 | ||||||||
Bank-owned life insurance income | 651 | 641 | 1,928 | 1,892 | ||||||||
Securities gains (losses), net | 97 | — | 97 | — | ||||||||
Foreclosed property gains (losses), net | (273 | ) | (192 | ) | (899 | ) | (579 | ) | ||||
Other gains (losses), net | (105 | ) | (101 | ) | (331 | ) | 811 | |||||
Total noninterest income | 15,630 | 15,172 | 46,194 | 46,873 | ||||||||
NONINTEREST EXPENSES | ||||||||||||
Salaries expense | 19,833 | 18,771 | 58,530 | 56,615 | ||||||||
Employee benefits expense | 4,144 | 4,061 | 13,150 | 12,752 | ||||||||
Total personnel expense | 23,977 | 22,832 | 71,680 | 69,367 | ||||||||
Occupancy expense | 2,786 | 2,742 | 8,269 | 8,087 | ||||||||
Equipment related expenses | 1,231 | 1,438 | 3,783 | 3,931 | ||||||||
Merger and acquisition expenses | — | 167 | 213 | 3,568 | ||||||||
Intangibles amortization expense | 1,163 | 1,452 | 3,737 | 4,518 | ||||||||
Other operating expenses | 9,763 | 10,403 | 30,948 | 31,683 | ||||||||
Total noninterest expenses | 38,920 | 39,034 | 118,630 | 121,154 | ||||||||
Income before income taxes | 31,593 | 27,896 | 90,025 | 83,585 | ||||||||
Income tax expense | 6,574 | 5,905 | 18,862 | 18,191 | ||||||||
Net income | $ | 25,019 | 21,991 | 71,163 | 65,394 | |||||||
Earnings per common share: | ||||||||||||
Basic | $ | 0.84 | 0.74 | 2.39 | 2.21 | |||||||
Diluted | 0.84 | 0.74 | 2.39 | 2.21 | ||||||||
Dividends declared per common share | $ | 0.12 | 0.10 | 0.36 | 0.30 | |||||||
Weighted average common shares outstanding: | ||||||||||||
Basic | 29,542,001 | 29,530,203 | 29,585,383 | 29,536,273 | ||||||||
Diluted | 29,684,105 | 29,621,130 | 29,759,459 | 29,639,126 |
($ in thousands-unaudited) | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||
Net income | $ | 25,019 | 21,991 | 71,163 | 65,394 | |||||||
Other comprehensive income (loss): | ||||||||||||
Unrealized gains (losses) on securities available for sale: | ||||||||||||
Unrealized holding gains (losses) arising during the period, pretax | 2,210 | (927 | ) | 19,814 | (10,229 | ) | ||||||
Tax (expense) benefit | (508 | ) | 216 | (4,602 | ) | 2,390 | ||||||
Reclassification to realized (gains) losses | (97 | ) | — | (97 | ) | — | ||||||
Tax expense (benefit) | 22 | — | 22 | — | ||||||||
Postretirement Plans: | ||||||||||||
Amortization of unrecognized net actuarial loss | 155 | (87 | ) | 611 | 16 | |||||||
Tax benefit | (36 | ) | 20 | (153 | ) | (4 | ) | |||||
Other comprehensive income (loss) | 1,746 | (778 | ) | 15,595 | (7,827 | ) | ||||||
Comprehensive income | $ | 26,765 | 21,213 | 86,758 | 57,567 |
($ in thousands, except share data - unaudited) | Common Stock | Retained Earnings | Stock in Rabbi Trust Assumed in Acquisition | Rabbi Trust Obligation | Accumulated Other Comprehensive Income (Loss) | Total Shareholders’ Equity | |||||||||||||||
Shares | Amount | ||||||||||||||||||||
Three Months Ended September 30, 2018 | |||||||||||||||||||||
Balances, July 1, 2018 | 29,703 | $ | 434,117 | 301,800 | (3,214 | ) | 3,214 | (11,195 | ) | 724,722 | |||||||||||
Net income | 21,991 | 21,991 | |||||||||||||||||||
Cash dividends declared ($0.10 per common share) | (2,969 | ) | (2,969 | ) | |||||||||||||||||
Change in Rabbi Trust Obligation | (10 | ) | 10 | — | |||||||||||||||||
Stock option exercises | — | — | — | ||||||||||||||||||
Stock withheld for payment of taxes | (3 | ) | (264 | ) | (264 | ) | |||||||||||||||
Stock-based compensation | 29 | 374 | 374 | ||||||||||||||||||
Other comprehensive income (loss) | (778 | ) | (778 | ) | |||||||||||||||||
Balances, September 30, 2018 | 29,729 | $ | 434,227 | 320,822 | (3,224 | ) | 3,224 | (11,973 | ) | 743,076 | |||||||||||
Three Months Ended September 30, 2019 | |||||||||||||||||||||
Balances, July 1, 2019 | 29,717 | 432,533 | 380,748 | (2,866 | ) | 2,866 | 1,888 | 815,169 | |||||||||||||
Net income | 25,019 | 25,019 | |||||||||||||||||||
Cash dividends declared ($0.12 per common share) | (3,555 | ) | (3,555 | ) | |||||||||||||||||
Change in Rabbi Trust Obligation | 289 | (289 | ) | — | |||||||||||||||||
Equity issued related to acquisition earn-out | — | — | — | ||||||||||||||||||
Stock repurchases | (100 | ) | (3,476 | ) | (3,476 | ) | |||||||||||||||
Stock option exercises | — | — | — | ||||||||||||||||||
Stock withheld for payment of taxes | (12 | ) | (467 | ) | (467 | ) | |||||||||||||||
Stock-based compensation | — | 546 | 546 | ||||||||||||||||||
Other comprehensive income (loss) | 1,746 | 1,746 | |||||||||||||||||||
Balances, September 30, 2019 | 29,605 | $ | 429,136 | 402,212 | (2,577 | ) | 2,577 | 3,634 | 834,982 |
($ in thousands, except share data - unaudited) | Common Stock | Retained Earnings | Stock in Rabbi Trust Assumed in Acquisition | Rabbi Trust Obligation | Accumulated Other Comprehensive Income (Loss) | Total Shareholders’ Equity | |||||||||||||||
Shares | Amount | ||||||||||||||||||||
Nine Months Ended September 30, 2018 | |||||||||||||||||||||
Balances, January 1, 2018 | 29,639 | $ | 432,794 | 264,331 | (3,581 | ) | 3,581 | (4,146 | ) | 692,979 | |||||||||||
Net income | 65,394 | 65,394 | |||||||||||||||||||
Cash dividends declared ($0.30 per common share) | (8,903 | ) | (8,903 | ) | |||||||||||||||||
Change in Rabbi Trust Obligation | 357 | (357 | ) | — | |||||||||||||||||
Stock option exercises | 25 | 324 | 324 | ||||||||||||||||||
Stock withheld for payment of taxes | (7 | ) | (264 | ) | (264 | ) | |||||||||||||||
Stock-based compensation | 72 | 1,373 | 1,373 | ||||||||||||||||||
Other comprehensive income (loss) | (7,827 | ) | (7,827 | ) | |||||||||||||||||
September 30, 2018 | 29,729 | $ | 434,227 | 320,822 | (3,224 | ) | 3,224 | (11,973 | ) | 743,076 | |||||||||||
Nine Months Ended September 30, 2019 | |||||||||||||||||||||
Balances, January 1, 2019 | 29,725 | 434,453 | 341,738 | (3,235 | ) | 3,235 | (11,961 | ) | 764,230 | ||||||||||||
Net income | 71,163 | 71,163 | |||||||||||||||||||
Cash dividends declared ($0.36 per common share) | (10,689 | ) | (10,689 | ) | |||||||||||||||||
Change in Rabbi Trust Obligation | 658 | (658 | ) | — | |||||||||||||||||
Equity issued related to acquisition earn-out | 78 | 3,070 | 3,070 | ||||||||||||||||||
Stock repurchases | (282 | ) | (10,000 | ) | (10,000 | ) | |||||||||||||||
Stock option exercises | 9 | 129 | 129 | ||||||||||||||||||
Stock withheld for payment of taxes | (15 | ) | (558 | ) | (558 | ) | |||||||||||||||
Stock-based compensation | 90 | 2,042 | 2,042 | ||||||||||||||||||
Other comprehensive income (loss) | 15,595 | 15,595 | |||||||||||||||||||
Balances, September 30, 2019 | 29,605 | $ | 429,136 | 402,212 | (2,577 | ) | 2,577 | 3,634 | 834,982 |
($ in thousands-unaudited) | Nine Months Ended September 30, | |||||
2019 | 2018 | |||||
Cash Flows From Operating Activities | ||||||
Net income | $ | 71,163 | 65,394 | |||
Reconciliation of net income to net cash provided by operating activities: | ||||||
Provision (reversal) for loan losses | (913 | ) | (4,282 | ) | ||
Net security premium amortization | 1,827 | 2,184 | ||||
Loan discount accretion | (4,473 | ) | (5,982 | ) | ||
Other purchase accounting accretion and amortization, net | (16 | ) | (165 | ) | ||
Foreclosed property (gains) losses and write-downs, net | 899 | 579 | ||||
Gains on securities available for sale | (97 | ) | — | |||
Other losses (gains) | 331 | (811 | ) | |||
Increase in net deferred loan costs | (261 | ) | (1,475 | ) | ||
Depreciation of premises and equipment | 4,326 | 4,420 | ||||
Amortization of operating lease right-of-use assets | 1,372 | — | ||||
Repayments of lease obligations | (1,250 | ) | — | |||
Stock-based compensation expense | 1,748 | 1,201 | ||||
Amortization of intangible assets | 3,737 | 4,518 | ||||
Amortization of SBA servicing assets | 975 | 555 | ||||
Fees/gains from sale of presold mortgages and SBA loans | (9,725 | ) | (11,004 | ) | ||
Origination of presold mortgage loans in process of settlement | (108,723 | ) | (97,081 | ) | ||
Proceeds from sales of presold mortgage loans in process of settlement | 99,606 | 105,506 | ||||
Origination of SBA loans for sale | (125,982 | ) | (162,782 | ) | ||
Proceeds from sales of SBA loans | 101,349 | 130,460 | ||||
Increase in accrued interest receivable | (293 | ) | (888 | ) | ||
Increase in other assets | (4,061 | ) | (893 | ) | ||
Increase in accrued interest payable | 193 | 681 | ||||
Increase (decrease) in other liabilities | 1,690 | (6,448 | ) | |||
Net cash provided by operating activities | 33,422 | 23,687 | ||||
Cash Flows From Investing Activities | ||||||
Purchases of securities available for sale | (339,030 | ) | (48,975 | ) | ||
Proceeds from maturities/issuer calls of securities available for sale | 114,003 | 27,609 | ||||
Proceeds from maturities/issuer calls of securities held to maturity | 26,316 | 12,841 | ||||
Proceeds from sales of securities available for sale | 39,797 | — | ||||
Redemptions (purchases) of FRB and FHLB stock, net | 4,088 | (6,129 | ) | |||
Net increase in loans | (116,664 | ) | (103,091 | ) | ||
Proceeds from sales of foreclosed properties | 4,628 | 6,829 | ||||
Purchases of premises and equipment | (2,714 | ) | (6,656 | ) | ||
Proceeds from sales of premises and equipment | 1,148 | 2,739 | ||||
Net cash used by investing activities | (268,428 | ) | (114,833 | ) | ||
Cash Flows From Financing Activities | ||||||
Net increase in deposits | 216,195 | 121,719 | ||||
Net decrease in borrowings | (106,089 | ) | (1,086 | ) | ||
Cash dividends paid – common stock | (10,108 | ) | (8,308 | ) | ||
Repurchases of common stock | (10,000 | ) | — | |||
Proceeds from stock option exercises | 129 | 324 | ||||
Stock withheld for payment of taxes | (558 | ) | (264 | ) | ||
Net cash provided by financing activities | 89,569 | 112,385 | ||||
(Decrease) increase in cash and cash equivalents | (145,437 | ) | 21,239 | |||
Cash and cash equivalents, beginning of period | 462,898 | 489,490 | ||||
Cash and cash equivalents, end of period | $ | 317,461 | 510,729 | |||
Supplemental Disclosures of Cash Flow Information: | ||||||
Cash paid during the period for interest | $ | 25,397 | 15,750 | |||
Cash paid during the period for income taxes | 20,106 | 17,333 | ||||
Non-cash transactions: | ||||||
Unrealized gain (loss) on securities available for sale, net of taxes | 15,137 | (7,839 | ) | |||
Foreclosed loans transferred to other real estate | 2,676 | 2,159 | ||||
Initial recognition of operating lease right-of-use assets | 19,459 | — | ||||
Initial recognition of operating lease liabilities | 19,459 | — |
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 January 2016, the FASB amended the Financial Instruments topic of the Accounting Standards Codification to address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. This update is intended to improve the recognition and measurement of financial instruments and it requires an entity to: (i) measure equity investments at fair value through net income, with certain exceptions; (ii) present in other comprehensive income the changes in instrument-specific credit risk for financial liabilities measured using the fair value option; (iii) present financial assets and financial liabilities by measurement category and form of financial asset; (iv) calculate the fair value of financial instruments for disclosure purposes based on an exit price and; (v) assess a valuation allowance on deferred tax assets related to unrealized losses of available for sale debt securities in combination with other deferred tax assets. The guidance also provides an election to subsequently measure certain nonmarketable equity investments at cost less any impairment and adjusted for certain observable price changes and requires a qualitative impairment assessment of such equity investments and amends certain fair value disclosure requirements. The amendments will be effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company will apply the guidance by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values will be applied prospectively to equity investments that exist as of the date of adoption of the amendments. The Company does not expect these amendments to have a material effect on its financial statements.
In February 2016, the FASB issued new guidance on accounting for leases, which generally requires all leases to be recognized in the statement of financial position by recording an asset representing its right to use the underlying asset and recording a liability, which represents the Company’s obligation to make lease payments. The provisionsnew standard was adopted by the Company on January 1, 2019. The guidance provides for a modified retrospective transition approach requiring lessees to recognize and measure leases on the balance sheet at the beginning of either the earliest period presented or as of the beginning of the period of adoption. The Company elected to apply the guidance as of the beginning of the period of adoption (January 1, 2019) and will not restate comparative periods. Adoption of the guidance resulted in the recognition of lease liabilities and the recognition of right-of-use assets totaling $19.4 million as of the date of adoption. Lease liabilities and right-of-use assets are reflected in other liabilities and premises and equipment, respectively. The initial balance sheet gross-up upon adoption was related to operating leases of certain real estate properties. The Company has no finance leases or material subleases or leasing arrangements for which it is the lessor of property or equipment. The Company elected to apply the package of practical expedients allowed by the new standard under which the Company need not reassess whether any expired or existing contracts are leases or contain leases, the Company need not reassess the lease classification for any expired or existing lease, and the Company need not reassess initial direct costs for any existing leases. Adoption of this guidance are effective for reporting periods beginning after December 15, 2018; early adoption is permitted. The Company doesdid not expect these amendments to have a material effectimpact on its financial statements.
Page 9
In March 2016,2017, the FASB amended the Liabilitiesrequirements in the Receivables—Nonrefundable Fees and Other Costs topic of the Accounting Standards Codification to address the current and potential future diversity in practice related to the derecognition ofamortization period for certain purchased callable debt securities held at a prepaid stored-value product liability.premium. The amendments will be effectiveshorten the amortization period 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 adjustmentpremium 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.earliest call date. 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 the2019 and adoption of the equity method. The Company’s adoption of this amendment did not have a material effect on its financial statements.
In August 2016, The impact of adoption is expected to be significantly influenced by the FASB amended the Statement of Cash Flows topiccomposition, characteristics and quality of the Accounting Standards Codification to clarify how certain cash receiptsCompany's loan and cash payments are presentedsecurities portfolios as well as the prevailing economic conditions and classified in the statement of cash flows. The amendments will be effective for the Company for fiscal years beginning after December 15, 2017, including interim periods within those years. The Company does not expect these amendments to have a material effect on its financial statements.
In October 2016, the FASB amended the Consolidation topicforecasts as 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.
date.
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 May 2017, the FASB amended the requirements in the Compensation—Stock Compensation topic of the Accounting Standards Codification related to changes to the terms or conditions of a share-based payment award. The amendments provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The amendments will be effective for the Company for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.
Since January 1, 2016, the Company completed the acquisitions described below. The results of each acquired company/branch are included in the Company’s results beginning on its respective acquisition date.
Page 11
Bankingport was an insurance agency based in Sanford, North Carolina. This acquisition represented an opportunity to expand the insurance agency operations into a contiguous and significant banking market for the Company. Also, this acquisition provided the Company with a larger platform for leveraging insurance services throughout the Company’s bank branch network. The deal value was $2.2 million and the transaction was completed on January 1, 2016 with the Company paying $0.7 million in cash and issuing 79,012 shares of its common stock, which had a value of approximately $1.5 million. In connection with the acquisition, the Company also paid $1.1 million to purchase the office space previously leased by Bankingport.
This acquisition was accounted for using the purchase method of accounting for business combinations, and accordingly, the assets and liabilities of Bankingport were recorded based on estimates of fair values as of January 1, 2016. In connection with this transaction, the Company recorded $1.7 million in goodwill, which is non-deductible for tax purposes, and $0.7 million in other amortizable intangible assets.
This acquisition was accounted for using the purchase method of accounting for business combinations, and accordingly, the assets and liabilities of SBA Complete were recorded based on estimates of fair values, which according to applicable accounting guidance, are subject to change for twelve months following the acquisition. In connection with this transaction, the Company originally recorded $5.6 million in goodwill, which was non-deductible for tax purposes, and $2.0 million in other amortizable intangible assets.
In the second quarter of 2017, the Company recorded a measurement period adjustment to reduce the earn-out liability and goodwill by $1.2 million.
In connection with the sale, the Company sold $150.6 million in loans, $5.7 million in premises and equipment and $134.3 million in deposits to First Community Bank. In connection with the sale, the Company received a deposit premium of $3.8 million, removed $1.0 million of allowance for loan losses associated with the sold loans, allocated and wrote-off $3.5 million of previously recorded goodwill, and recorded a net gain of $1.5 million in this transaction.
In connection with the purchase transaction, the Company acquired assets with a fair value of $157.2 million, including $152.2 million in loans and $3.4 million in premises and equipment. Additionally, the Company assumed $111.3 million in deposits and $0.2 million in other liabilities. In connection with the purchase, the Company recorded: i) a discount on acquired loans of $1.5 million, ii) a premium on deposits of $0.3 million, iii) a $1.2 million core deposit intangible, and iv) $5.4 million in goodwill.
The branch acquisition was accounted for using the purchase method of accounting for business combinations, and accordingly, the assets and liabilities of the acquired branches were recorded on the Company’s balance sheet at their fair values as of July 15, 2016 and were subject to change for twelve months following the acquisition. The related results of operations for the acquired branches have been included in the Company’s consolidated statement of income since that date. The goodwill recorded in the branch exchange is deductible for tax purposes.
Page 12
Carolina Bank Holdings, Inc. was the parent company of Carolina Bank, a North Carolina state-chartered bank with eight bank branches located in the North Carolina cities of Greensboro, High Point, Burlington, Winston-Salem, and Asheboro, and mortgage offices in Burlington, Hillsborough, and Sanford. The acquisition complements the Company’s recent expansion into several of these high-growth markets and increases its market share in others with facilities, operations and experienced staff already in place. The Company was willing to record goodwill primarily due to the reasons just noted, as well as the positive earnings of Carolina Bank. The total merger consideration consisted of $25.3 million in cash and 3,799,471 million shares of the Company’s common stock, with each share of Carolina Bank common stock being exchanged for either $20.00 in cash or 1.002 shares of the Company’s stock, subject to the total consideration being 75% stock / 25% cash. The issuance of common stock was valued at $114,478,000 and was based on the Company’s closing stock price on March 3, 2017 of $30.13 per share.
This acquisition was accounted for using the purchase method of accounting for business combinations, and accordingly, the assets and liabilities of Carolina Bank were recorded based on estimates of fair values as of March 3, 2017. The Company may change its valuations of acquired Carolina Bank assets and liabilities for up to one year after the acquisition date. The table below is a condensed balance sheet disclosing the amount assigned to each major asset and liability category of Carolina Bank on March 3, 2017, and the related fair value adjustments recorded by the Company to reflect the acquisition. The $65.5 million in goodwill that resulted from this transaction is non-deductible for tax purposes.
($ in thousands)
| As Recorded by Carolina Bank | Initial Fair Value Adjustments | Measurement Period Adjustments | As Recorded by First Bancorp | ||||||||||||
Assets | ||||||||||||||||
Cash and cash equivalents | $ | 81,466 | (2 | ) | (a) | — | 81,464 | |||||||||
Securities | 49,629 | (261 | ) | (b) | — | 49,368 | ||||||||||
Loans, gross | 505,560 | (5,469 | ) | (c) | 146 | (l) | 497,522 | |||||||||
(2,715 | ) | (d) | — | |||||||||||||
Allowance for loan losses | (5,746 | ) | 5,746 | (e) | — | — | ||||||||||
Premises and equipment | 17,967 | 4,251 | (f) | (319 | ) | (m) | 21,899 | |||||||||
Core deposit intangible | — | 8,790 | (g) | — | 8,790 | |||||||||||
Other | 34,976 | (4,804 | ) | (h) | 2,225 | (n) | 32,397 | |||||||||
Total | 683,852 | 5,536 | 2,052 | 691,440 | ||||||||||||
Liabilities | ||||||||||||||||
Deposits | $ | 584,950 | 431 | (i) | — | 585,381 | ||||||||||
Borrowings | 21,855 | (2,855 | ) | (j) | (262 | ) | (o) | 18,738 | ||||||||
Other | 12,855 | 225 | (k) | — | 13,080 | |||||||||||
Total | 619,660 | (2,199 | ) | (262 | ) | 617,199 | ||||||||||
Net identifiable assets acquired | 74,241 | |||||||||||||||
Total cost of acquisition | ||||||||||||||||
Value of stock issued | $ | 114,478 | ||||||||||||||
Cash paid in the acquisition | 25,279 | |||||||||||||||
Total cost of acquisition | 139,757 | |||||||||||||||
Goodwill recorded related to acquisition of Carolina Bank | $ | 65,516 | ||||||||||||||
Explanation of Fair Value Adjustments
Page 13
The following unaudited pro forma financial information presents the combined results of the Company and Carolina Bank as if the acquisition had occurred as of January 1, 2016, after giving effect to certain adjustments, including amortization of the core deposit intangible, and related income tax effects. The pro forma financial information does not necessarily reflect the results of operations that would have occurred had the Company and Carolina Bank constituted a single entity during such period.
($ in thousands, except share data) | Pro Forma Combined Nine Months Ended September 30, 2017 | Pro Forma Combined Nine Months Ended September 30, 2016 | ||||||
Net interest income | $ | 119,899 | 109,787 | |||||
Noninterest income | 35,236 | 24,818 | ||||||
Total revenue | 155,135 | 134,605 | ||||||
Net income available to common shareholders | 35,176 | 16,584 | ||||||
Earnings per common share | ||||||||
Basic | $ | 1.43 | 0.70 | |||||
Diluted | 1.43 | 0.68 |
For purposes of the supplemental pro forma information, merger-related expenses of $4.4 million that were recorded in the Company’s consolidated statements of income for the nine months ended September 30, 2017 and $4.6 million of merger-related expenses that were recorded by Carolina Bank in 2017 prior to the merger date are reflected above in the pro forma presentation for 2016.
Page 14
Bear Insurance, an insurance agency based in Albemarle, North Carolina, with four locations in Stanly, Cabarrus, and Montgomery counties and annual commission income of approximately $4 million, represented an opportunity to complement the insurance agency operations in these markets and the surrounding areas. Also, this acquisition provided the Company with a larger platform for leveraging insurance services throughout the Company’s bank branch network. The transaction value was $9.8 million and the transaction was completed on September 1, 2017 with the Company paying $7.9 million in cash and issuing 13,374 shares of its common stock, which had a value of approximately $0.4 million. Per the terms of the agreement, the Company also recorded an earn-out liability valued at $1.2 million, which will be paid as a cash distribution after a four-year period if pre-determined goals are met for the periods.
This acquisition was accounted for using the purchase method of accounting for business combinations, and accordingly, the assets and liabilities of Bear Insurance were recorded based on estimates of fair values as of September 1, 2017. In connection with this transaction, the Company recorded $5.3 million in goodwill, which is deductible for tax purposes, and $3.9 million in other amortizable intangible assets, which are also deductible for tax purposes.
Note 5 – Equity-BasedStock-Based Compensation Plans
directors.
provided, the awards become immediately vested.
vest. The Company typically grantsissues new shares of common stock when options are exercised.
Page 15
The Company’s senior officers receive their annual bonus earned under the Company’s annual incentive plan in a mix of 50% cash and 50% stock, with the stock being subject to a three year vesting term. In the last three years, a total of 55,648 shares of restricted stock have been granted related to performance in the preceding fiscal years. Total compensation expense associated with thosedirector grants was $758,000 and is being recognized overclassified as "other operating expense" in the respective vesting periods. The Company recorded $66,000 and $55,000 in compensation expense during the three months ended September 30, 2017 and 2016, respectively, and $216,000 and $165,000 for the nine months ended September 30, 2017 and 2016, respectively, related to these grants and expects to record $66,000 in compensation expense during the last remaining quarterConsolidated Statements of 2017.
In the last three years, the Compensation Committee of the Company’s Board of Directors also granted 130,059 shares of stock to various employees of the Company to promote retention. The total value associated with these grants amounted to $2.8 million, and is being recorded as an expense over their three year vesting periods. For the three months ended September 30, 2017 and 2016, total compensation expense related to these grants was $138,000 and $92,000, respectively, and for the nine months ended September 30, 2017 and 2016, total compensation expense was $324,000 and $234,000, respectively. The Company expects to record $167,000 in compensation expense during the fourth quarter of 2017. All grants were issued based on the closing price of the Company’s common stock on the date of the grant.
Income.
Long-Term Restricted Stock | ||||||||
Number of Units | Weighted-Average Grant-Date Fair Value | |||||||
Nonvested at January 1, 2017 | 91,790 | $ | 18.65 | |||||
Granted during the period | 48,322 | 31.05 | ||||||
Vested during the period | (2,282 | ) | 18.27 | |||||
Forfeited or expired during the period | (8,535 | ) | 18.34 | |||||
Nonvested at September 30, 2017 | 129,295 | $ | 23.31 |
In years prior
Long-Term Restricted Stock | |||||||
Number of Units | Weighted-Average Grant-Date Fair Value | ||||||
Nonvested at January 1, 2019 | 129,251 | $ | 32.39 | ||||
Granted during the period | 82,826 | 36.36 | |||||
Vested during the period | (37,961 | ) | 21.69 | ||||
Forfeited or expired during the period | (954 | ) | 41.93 | ||||
Nonvested at September 30, 2019 | 173,162 | $ | 36.58 |
At September 30, 2017,2019, there were 40,6890 stock options outstanding related to the two First Bancorp plans, with exercise prices ranging from $14.35 to $16.81.
outstanding. The following table presents information regarding the activity for the first nine months of 20172019 related to the Company’s outstanding 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
Options Outstanding | |||||||||||||
Number of Shares | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Term (years) | Aggregate Intrinsic Value | ||||||||||
Balance at January 1, 2019 | 9,000 | $ | 14.35 | ||||||||||
Granted | — | — | |||||||||||
Exercised | (9,000 | ) | 14.35 | ||||||||||
Forfeited | — | — | |||||||||||
Expired | — | — | |||||||||||
Outstanding at September 30, 2019 | — | $ | — | 0 | $ | — | |||||||
Exercisable at September 30, 2019 | — | $ | — | 0 | $ | — |
as well as contingently issuable shares.
that are included in the calculation of
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 |
Page 17
For the Three Months Ended September 30, | ||||||||||||||||||||||
2019 | 2018 | |||||||||||||||||||||
($ in thousands except per share amounts) | Per Share Amount | Shares (Denominator) | Per Share Amount | Income (Numerator) | Shares (Denominator) | Per Share Amount | ||||||||||||||||
Basic EPS: | ||||||||||||||||||||||
Net income | $ | 25,019 | $ | 21,991 | ||||||||||||||||||
Less: income allocated to participating securities | (119 | ) | — | |||||||||||||||||||
Basic EPS per common share | $ | 24,900 | 29,542,001 | $ | 0.84 | $ | 21,991 | 29,530,203 | $ | 0.74 | ||||||||||||
Diluted EPS: | ||||||||||||||||||||||
Net income | $ | 25,019 | 29,542,001 | $ | 21,991 | 29,530,203 | ||||||||||||||||
Effect of Dilutive Securities | — | 142,104 | — | 90,927 | ||||||||||||||||||
Diluted EPS per common share | $ | 25,019 | 29,684,105 | $ | 0.84 | $ | 21,991 | 29,621,130 | $ | 0.74 |
For the Nine Months Ended September | ||||||||||||||||||||||
2019 | 2018 | |||||||||||||||||||||
($ in thousands except per share amounts) | Per Share Amount | Shares (Denominator) | Per Share Amount | Income (Numerator) | Shares (Denominator) | Per Share Amount | ||||||||||||||||
Basic EPS: | ||||||||||||||||||||||
Net income | $ | 71,163 | $ | 65,394 | ||||||||||||||||||
Less: income allocated to participating securities | (329 | ) | — | |||||||||||||||||||
Basic EPS per common share | $ | 70,834 | 29,585,383 | $ | 2.39 | $ | 65,394 | 29,536,273 | $ | 2.21 | ||||||||||||
Diluted EPS: | ||||||||||||||||||||||
Net income | $ | 71,163 | 29,585,383 | $ | 65,394 | 29,536,273 | ||||||||||||||||
Effect of Dilutive Securities | — | 174,076 | — | 102,853 | ||||||||||||||||||
Diluted EPS per common share | $ | 71,163 | 29,759,459 | $ | 2.39 | $ | 65,394 | 29,639,126 | $ | 2.21 |
September 30, 2017 | December 31, 2016 | |||||||||||||||||||||||||||||||
Amortized | Fair | Unrealized | Amortized | Fair | Unrealized | |||||||||||||||||||||||||||
($ in thousands) | Cost | Value | Gains | (Losses) | Cost | Value | Gains | (Losses) | ||||||||||||||||||||||||
Securities available for sale: | ||||||||||||||||||||||||||||||||
Government-sponsored enterprise securities | $ | 9,000 | 8,992 | 1 | (9 | ) | 17,497 | 17,490 | — | (7 | ) | |||||||||||||||||||||
Mortgage-backed securities | 155,684 | 155,535 | 713 | (862 | ) | 151,001 | 148,065 | 155 | (3,091 | ) | ||||||||||||||||||||||
Corporate bonds | 33,802 | 34,397 | 660 | (65 | ) | 33,833 | 33,600 | 91 | (324 | ) | ||||||||||||||||||||||
Equity securities | — | — | — | — | 83 | 174 | 96 | (5 | ) | |||||||||||||||||||||||
Total available for sale | $ | 198,486 | 198,924 | 1,374 | (936 | ) | 202,414 | 199,329 | 342 | (3,427 | ) | |||||||||||||||||||||
Securities held to maturity: | ||||||||||||||||||||||||||||||||
Mortgage-backed securities | $ | 67,708 | 67,529 | 15 | (194 | ) | 80,585 | 79,283 | — | (1,302 | ) | |||||||||||||||||||||
State and local governments | 55,448 | 57,349 | 1,908 | (7 | ) | 49,128 | 50,912 | 1,815 | (31 | ) | ||||||||||||||||||||||
Total held to maturity | $ | 123,156 | 124,878 | 1,923 | (201 | ) | 129,713 | 130,195 | 1,815 | (1,333 | ) |
($ in thousands) | September 30, 2019 | December 31, 2018 | ||||||||||||||||||||||
Amortized Cost | Fair Value | Unrealized | Amortized Cost | Fair Value | Unrealized | |||||||||||||||||||
Gains | (Losses) | Gains | (Losses) | |||||||||||||||||||||
Securities available for sale: | ||||||||||||||||||||||||
Government-sponsored enterprise securities | $ | 30,000 | 30,053 | 55 | (2 | ) | 82,995 | 82,662 | 63 | (396 | ) | |||||||||||||
Mortgage-backed securities | 634,176 | 640,488 | 7,794 | (1,482 | ) | 396,995 | 385,551 | 39 | (11,483 | ) | ||||||||||||||
Corporate bonds | 33,721 | 34,683 | 1,052 | (90 | ) | 33,751 | 33,138 | 76 | (689 | ) | ||||||||||||||
Total available for sale | $ | 697,897 | 705,224 | 8,901 | (1,574 | ) | 513,741 | 501,351 | 178 | (12,568 | ) | |||||||||||||
Securities held to maturity: | ||||||||||||||||||||||||
Mortgage-backed securities | $ | 43,968 | 43,801 | — | (167 | ) | 52,048 | 50,241 | — | (1,807 | ) | |||||||||||||
State and local governments | 30,297 | 30,664 | 369 | (2 | ) | 49,189 | 49,665 | 525 | (49 | ) | ||||||||||||||
Total held to maturity | $ | 74,265 | 74,465 | 369 | (169 | ) | 101,237 | 99,906 | 525 | (1,856 | ) |
2019 and December 31, 2018.
($ 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 |
2019:
($ 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 | $ | 4,998 | 2 | — | — | 4,998 | 2 | |||||||||||
Mortgage-backed securities | 123,726 | 625 | 118,579 | 1,024 | 242,305 | 1,649 | ||||||||||||
Corporate bonds | — | — | 910 | 90 | 910 | 90 | ||||||||||||
State and local governments | — | — | 940 | 2 | 940 | 2 | ||||||||||||
Total temporarily impaired securities | $ | 128,724 | 627 | 120,429 | 1,116 | 249,153 | 1,743 |
($ in thousands) | Securities in an Unrealized Loss Position for Less than 12 Months | Securities in an Unrealized Loss Position for More than 12 Months | Total | |||||||||||||||||||||
Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||||||||
Government-sponsored enterprise securities | $ | 7,990 | 7 | — | — | 7,990 | 7 | |||||||||||||||||
Mortgage-backed securities | 196,999 | 3,841 | 19,001 | 552 | 216,000 | 4,393 | ||||||||||||||||||
Corporate bonds | 27,027 | 259 | 935 | 65 | 27,962 | 324 | ||||||||||||||||||
Equity securities | — | — | 7 | 5 | 7 | 5 | ||||||||||||||||||
State and local governments | 801 | 31 | — | — | 801 | 31 | ||||||||||||||||||
Total temporarily impaired securities | $ | 232,817 | 4,138 | 19,943 | 622 | 252,760 | 4,760 |
($ in thousands) | Securities in an Unrealized Loss Position for Less than 12 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 | $ | 4,921 | 78 | 13,682 | 318 | 18,603 | 396 | |||||||||||
Mortgage-backed securities | 82,525 | 351 | 294,305 | 12,939 | 376,830 | 13,290 | ||||||||||||
Corporate bonds | 20,704 | 433 | 5,817 | 256 | 26,521 | 689 | ||||||||||||
State and local governments | 595 | 1 | 6,641 | 48 | 7,236 | 49 | ||||||||||||
Total temporarily impaired securities | $ | 108,745 | 863 | 320,445 | 13,561 | 429,190 | 14,424 |
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 impairment charge for any of these equity securities that remains in an unrealized loss position for twelve consecutive months unless the amount is insignificant.
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 | $ | — | — | 1,165 | 1,168 | |||||||
Due after one year but within five years | 58,721 | 59,661 | 21,645 | 21,925 | ||||||||
Due after five years but within ten years | — | — | 6,673 | 6,718 | ||||||||
Due after ten years | 5,000 | 5,075 | 814 | 853 | ||||||||
Mortgage-backed securities | 634,176 | 640,488 | 43,968 | 43,801 | ||||||||
Total securities | $ | 697,897 | 705,224 | 74,265 | 74,465 |
2018.
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) | September 30, 2019 | December 31, 2018 | |||||||||||
Amount | Percentage | Amount | Percentage | ||||||||||
All loans: | |||||||||||||
Commercial, financial, and agricultural | $ | 486,768 | 11 | % | $ | 457,037 | 11 | % | |||||
Real estate – construction, land development & other land loans | 471,326 | 11 | % | 518,976 | 12 | % | |||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 1,093,619 | 25 | % | 1,054,176 | 25 | % | |||||||
Real estate – mortgage – home equity loans / lines of credit | 343,378 | 8 | % | 359,162 | 8 | % | |||||||
Real estate – mortgage – commercial and other | 1,928,931 | 44 | % | 1,787,022 | 42 | % | |||||||
Installment loans to individuals | 70,962 | 1 | % | 71,392 | 2 | % | |||||||
Subtotal | 4,394,984 | 100 | % | 4,247,765 | 100 | % | |||||||
Unamortized net deferred loan costs | 1,560 | 1,299 | |||||||||||
Total loans | $ | 4,396,544 | $ | 4,249,064 |
($ in thousands) | September 30, 2019 | December 31, 2018 | ||||
Guaranteed portions of SBA Loans included in table above | $ | 47,280 | 53,205 | |||
Unguaranteed portions of SBA Loans included in table above | 112,976 | 97,572 | ||||
Total SBA loans included in the table above | $ | 160,256 | 150,777 | |||
Sold portions of SBA loans with servicing retained - not included in table above | $ | 308,842 | 230,424 |
($ 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 | $ | — |
credit impaired (“PCI”) loans.
PCI loans | For the Nine Months Ended September 30, 2019 | For the Year Ended September 30, 2018 | ||||
Balance at beginning of period | $ | 17,393 | 23,165 | |||
Change due to payments received and accretion | (3,694 | ) | (2,994 | ) | ||
Change due to loan charge-offs | (11 | ) | — | |||
Transfers to foreclosed real estate | — | (10 | ) | |||
Other | 110 | 28 | ||||
Balance at end of period | $ | 13,798 | 20,189 |
($ in thousands)
Purchased Credit Impaired Loans | Accretable Yield | Carrying Amount | ||||||
Balance at January 1, 2016 | $ | — | 1,970 | |||||
Change due to payments received | — | (1,386 | ) | |||||
Change due to loan charge-off | — | (70 | ) | |||||
Balance at December 31, 2016 | — | 514 | ||||||
Additions due to acquisition of Carolina Bank | 3,617 | 19,254 | ||||||
Accretion | (1,326 | ) | 1,326 | |||||
Change due to payments received | — | (5,585 | ) | |||||
Transfer to foreclosed real estate | — | (69 | ) | |||||
Other | — | (406 | ) | |||||
Balance at September 30, 2017 | $ | 2,291 | 15,034 |
loans.
Accretable Yield for PCI loans | For the Nine Months Ended September 30, 2019 | For the Nine Months Ended September 30, 2018 | ||||
Balance at beginning of period | $ | 4,750 | 4,688 | |||
Accretion | (1,050 | ) | (1,169 | ) | ||
Reclassification from (to) nonaccretable difference | 583 | 712 | ||||
Other, net | 211 | 831 | ||||
Balance at end of period | $ | 4,494 | 5,062 |
Page 21
Nonperforming assets are defined as nonaccrual loans, troubled debt restructured (“TDR”) loans, loans past due 90 or more days and still accruing interest, nonperforming loans held for sale, and foreclosed real estate. Nonperforming assets are summarized as follows:
ASSET QUALITY DATA($ in thousands) | September 30, 2017 | December 31, 2016 | September 30, 2016 | |||||||||
Nonperforming assets | ||||||||||||
Nonaccrual loans | $ | 23,350 | 27,468 | 32,796 | ||||||||
Restructured loans - accruing | 20,330 | 22,138 | 27,273 | |||||||||
Accruing loans > 90 days past due | — | — | — | |||||||||
Total nonperforming loans | 43,680 | 49,606 | 60,069 | |||||||||
Foreclosed real estate | 9,356 | 9,532 | 10,103 | |||||||||
Total nonperforming assets | $ | 53,036 | 59,138 | 70,172 | ||||||||
Purchased credit impaired loans not included above (1) | $ | 15,034 | — | — |
follows.
($ in thousands) | September 30, 2019 | December 31, 2018 | ||||
Nonperforming assets | ||||||
Nonaccrual loans | $ | 19,720 | 22,575 | |||
TDRs- accruing | 9,566 | 13,418 | ||||
Accruing loans > 90 days past due | — | — | ||||
Total nonperforming loans | 29,286 | 35,993 | ||||
Foreclosed real estate | 4,589 | 7,440 | ||||
Total nonperforming assets | $ | 33,875 | 43,433 | |||
Purchased credit impaired loans not included above (1) | $ | 13,798 | 17,393 | |||
($ in thousands) | September 30, 2017 | December 31, 2016 | ||||||
Commercial, financial, and agricultural | $ | 996 | 1,842 | |||||
Real estate – construction, land development & other land loans | 1,565 | 2,945 | ||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 14,878 | 16,017 | ||||||
Real estate – mortgage – home equity loans / lines of credit | 2,250 | 2,355 | ||||||
Real estate – mortgage – commercial and other | 3,534 | 4,208 | ||||||
Installment loans to individuals | 127 | 101 | ||||||
Total | $ | 23,350 | 27,468 | |||||
($ in thousands) | September 30, 2019 | December 31, 2018 | ||||
Commercial, financial, and agricultural | $ | 2,472 | 919 | |||
Real estate – construction, land development & other land loans | 1,235 | 2,265 | ||||
Real estate – mortgage – residential (1-4 family) first mortgages | 7,661 | 10,115 | ||||
Real estate – mortgage – home equity loans / lines of credit | 1,878 | 1,685 | ||||
Real estate – mortgage – commercial and other | 6,370 | 7,452 | ||||
Installment loans to individuals | 104 | 139 | ||||
Total | $ | 19,720 | 22,575 |
($ 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 |
2019.
($ 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 | $ | 5,995 | 95 | — | 2,472 | 477,964 | 486,526 | ||||||||||||
Real estate – construction, land development & other land loans | 803 | — | — | 1,235 | 469,119 | 471,157 | |||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 2,392 | 1,185 | — | 7,661 | 1,076,708 | 1,087,946 | |||||||||||||
Real estate – mortgage – home equity loans / lines of credit | 712 | 399 | — | 1,878 | 340,180 | 343,169 | |||||||||||||
Real estate – mortgage – commercial and other | 3,376 | 121 | — | 6,370 | 1,911,677 | 1,921,544 | |||||||||||||
Installment loans to individuals | 299 | 46 | — | 104 | 70,395 | 70,844 | |||||||||||||
Purchased credit impaired | 6 | 390 | 1,065 | — | 12,337 | 13,798 | |||||||||||||
Total | $ | 13,583 | 2,236 | 1,065 | 19,720 | 4,358,380 | 4,394,984 | ||||||||||||
Unamortized net deferred loan costs | 1,560 | ||||||||||||||||||
Total loans | $ | 4,396,544 |
($ 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 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 | $ | 191 | 5 | — | 919 | 455,691 | 456,806 | ||||||||||||
Real estate – construction, land development & other land loans | 849 | 212 | — | 2,265 | 515,472 | 518,798 | |||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 14,178 | 1,369 | — | 10,115 | 1,022,262 | 1,047,924 | |||||||||||||
Real estate – mortgage – home equity loans / lines of credit | 1,048 | 254 | — | 1,685 | 355,831 | 358,818 | |||||||||||||
Real estate – mortgage – commercial and other | 709 | 520 | — | 7,452 | 1,768,205 | 1,776,886 | |||||||||||||
Installment loans to individuals | 359 | 220 | — | 139 | 70,422 | 71,140 | |||||||||||||
Purchased credit impaired | 990 | 138 | 583 | — | 15,682 | 17,393 | |||||||||||||
Total | $ | 18,324 | 2,718 | 583 | 22,575 | 4,203,565 | 4,247,765 | ||||||||||||
Unamortized net deferred loan costs | 1,299 | ||||||||||||||||||
Total loans | $ | 4,249,064 |
($ 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 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 | Unallocated | Total | |||||||||||||||||
As of and for the three months ended September 30, 2019 | |||||||||||||||||||||||||
Beginning balance | $ | 3,218 | 1,815 | 4,123 | 1,271 | 8,852 | 1,211 | 299 | 20,789 | ||||||||||||||||
Charge-offs | (288 | ) | (47 | ) | (194 | ) | (70 | ) | (617 | ) | (119 | ) | — | (1,335 | ) | ||||||||||
Recoveries | 163 | 308 | 139 | 58 | 176 | 67 | — | 911 | |||||||||||||||||
Provisions | (226 | ) | (270 | ) | (112 | ) | (122 | ) | (199 | ) | (141 | ) | (35 | ) | (1,105 | ) | |||||||||
Ending balance | $ | 2,867 | 1,806 | 3,956 | 1,137 | 8,212 | 1,018 | 264 | 19,260 | ||||||||||||||||
As of and for the nine months ended September 30, 2019 | |||||||||||||||||||||||||
Beginning balance | $ | 2,889 | 2,243 | 5,197 | 1,665 | 7,983 | 952 | 110 | 21,039 | ||||||||||||||||
Charge-offs | (1,224 | ) | (340 | ) | (379 | ) | (216 | ) | (1,455 | ) | (555 | ) | — | (4,169 | ) | ||||||||||
Recoveries | 768 | 797 | 521 | 513 | 550 | 154 | — | 3,303 | |||||||||||||||||
Provisions | 434 | (894 | ) | (1,383 | ) | (825 | ) | 1,134 | 467 | 154 | (913 | ) | |||||||||||||
Ending balance | $ | 2,867 | 1,806 | 3,956 | 1,137 | 8,212 | 1,018 | 264 | 19,260 | ||||||||||||||||
Ending balance as of September 30, 2019: Allowance for loan losses | |||||||||||||||||||||||||
Individually evaluated for impairment | $ | 168 | 45 | 828 | — | 230 | — | — | 1,271 | ||||||||||||||||
Collectively evaluated for impairment | $ | 2,657 | 1,761 | 3,060 | 1,137 | 7,925 | 1,005 | 264 | 17,809 | ||||||||||||||||
Purchased credit impaired | $ | 42 | — | 68 | — | 57 | 13 | — | 180 | ||||||||||||||||
Loans receivable as of September 30, 2019 | |||||||||||||||||||||||||
Ending balance – total | $ | 486,768 | 471,326 | 1,093,619 | 343,378 | 1,928,931 | 70,962 | — | 4,394,984 | ||||||||||||||||
Unamortized net deferred loan costs | 1,560 | ||||||||||||||||||||||||
Total loans | $ | 4,396,544 | |||||||||||||||||||||||
Ending balances as of September 30, 2019: Loans | |||||||||||||||||||||||||
Individually evaluated for impairment | $ | 1,090 | 804 | 9,942 | 338 | 6,941 | — | — | 19,115 | ||||||||||||||||
Collectively evaluated for impairment | $ | 485,436 | 470,353 | 1,078,004 | 342,831 | 1,914,603 | 70,844 | — | 4,362,071 | ||||||||||||||||
Purchased credit impaired | $ | 242 | 169 | 5,673 | 209 | 7,387 | 118 | — | 13,798 |
($ 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 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 | Unallocated | Total | |||||||||||||||||
As of and for the year ended December 31, 2018 | |||||||||||||||||||||||||
Beginning balance | $ | 3,111 | 2,816 | 6,147 | 1,827 | 6,475 | 950 | 1,972 | 23,298 | ||||||||||||||||
Charge-offs | (2,128 | ) | (158 | ) | (1,734 | ) | (711 | ) | (1,459 | ) | (781 | ) | — | (6,971 | ) | ||||||||||
Recoveries | 1,195 | 4,097 | 833 | 364 | 1,503 | 309 | — | 8,301 | |||||||||||||||||
Provisions | 711 | (4,512 | ) | (49 | ) | 185 | 1,464 | 474 | (1,862 | ) | (3,589 | ) | |||||||||||||
Ending balance | $ | 2,889 | 2,243 | 5,197 | 1,665 | 7,983 | 952 | 110 | 21,039 | ||||||||||||||||
Ending balances as of December 31, 2018: Allowance for loan losses | |||||||||||||||||||||||||
Individually evaluated for impairment | $ | 226 | 134 | 955 | 48 | 906 | — | — | 2,269 | ||||||||||||||||
Collectively evaluated for impairment | $ | 2,661 | 2,109 | 4,143 | 1,608 | 7,070 | 941 | 110 | 18,642 | ||||||||||||||||
Purchased credit impaired | $ | 2 | — | 99 | 9 | 7 | 11 | — | 128 | ||||||||||||||||
Loans receivable as of December 31, 2018: | |||||||||||||||||||||||||
Ending balance – total | $ | 457,037 | 518,976 | 1,054,176 | 359,162 | 1,787,022 | 71,392 | — | 4,247,765 | ||||||||||||||||
Unamortized net deferred loan costs | 1,299 | ||||||||||||||||||||||||
Total loans | $ | 4,249,064 | |||||||||||||||||||||||
Ending balances as of December 31, 2018: Loans | |||||||||||||||||||||||||
Individually evaluated for impairment | $ | 696 | 1,345 | 12,391 | 296 | 9,525 | — | — | 24,253 | ||||||||||||||||
Collectively evaluated for impairment | $ | 456,111 | 517,453 | 1,035,532 | 358,522 | 1,767,361 | 71,140 | — | 4,206,119 | ||||||||||||||||
Purchased credit impaired | $ | 230 | 178 | 6,253 | 344 | 10,136 | 252 | — | 17,393 |
($ 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 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 | Unallocated | Total | ||||||||||||||||
As of and for the three months ended September 30, 2018 | ||||||||||||||||||||||||
Beginning balance | $ | 2,268 | 2,692 | 7,059 | 2,250 | 7,295 | 897 | 837 | 23,298 | |||||||||||||||
Charge-offs | (933 | ) | (126 | ) | (1,183 | ) | (192 | ) | (1,086 | ) | (232 | ) | — | (3,752 | ) | |||||||||
Recoveries | 159 | 181 | 155 | 51 | 209 | 158 | — | 913 | ||||||||||||||||
Provisions | 1,221 | (366 | ) | (664 | ) | (330 | ) | 753 | 79 | (606 | ) | 87 | ||||||||||||
Ending balance | $ | 2,715 | 2,381 | 5,367 | 1,779 | 7,171 | 902 | 231 | 20,546 | |||||||||||||||
As of and for the nine months ended September 30, 2018 | ||||||||||||||||||||||||
Beginning balance | $ | 3,111 | 2,816 | 6,147 | 1,827 | 6,475 | 950 | 1,972 | 23,298 | |||||||||||||||
Charge-offs | (1,542 | ) | (158 | ) | (1,598 | ) | (378 | ) | (1,398 | ) | (494 | ) | — | (5,568 | ) | |||||||||
Recoveries | 971 | 3,568 | 671 | 294 | 1,333 | 261 | — | 7,098 | ||||||||||||||||
Provisions | 175 | (3,845 | ) | 147 | 36 | 761 | 185 | (1,741 | ) | (4,282 | ) | |||||||||||||
Ending balance | $ | 2,715 | 2,381 | 5,367 | 1,779 | 7,171 | 902 | 231 | 20,546 | |||||||||||||||
Ending balances as of September 30, 2018: Allowance for loan losses | ||||||||||||||||||||||||
Individually evaluated for impairment | $ | 126 | — | 1,004 | — | 502 | — | — | 1,632 | |||||||||||||||
Collectively evaluated for impairment | $ | 2,585 | 2,335 | 4,306 | 1,765 | 6,662 | 887 | 231 | 18,771 | |||||||||||||||
Purchased credit impaired | $ | 4 | 46 | 57 | 14 | 7 | 15 | — | 143 | |||||||||||||||
Loans receivable as of September 30, 2018 | ||||||||||||||||||||||||
Ending balance – total | $ | 435,730 | 559,450 | 1,038,436 | 362,829 | 1,723,598 | 70,096 | — | 4,190,139 | |||||||||||||||
Unamortized net deferred loan fees | 489 | |||||||||||||||||||||||
Total loans | 4,190,628 | |||||||||||||||||||||||
Ending balances as of September 30, 2018: Loans | ||||||||||||||||||||||||
Individually evaluated for impairment | $ | 1,981 | 2,642 | 12,617 | 22 | 10,490 | — | — | 27,752 | |||||||||||||||
Collectively evaluated for impairment | $ | 433,485 | 556,283 | 1,019,645 | 362,462 | 1,700,519 | 69,804 | — | 4,142,198 | |||||||||||||||
Purchased credit impaired | $ | 264 | 525 | 6,174 | 345 | 12,589 | 292 | — | 20,189 |
($ 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 |
2019.
($ in thousands) | Recorded Investment | Unpaid Principal Balance | Related Allowance | Average Recorded Investment | ||||||||
Impaired loans with no related allowance recorded: | ||||||||||||
Commercial, financial, and agricultural | $ | 18 | 20 | — | 89 | |||||||
Real estate – mortgage – construction, land development & other land loans | 227 | 263 | — | 403 | ||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 3,713 | 3,951 | — | 4,443 | ||||||||
Real estate – mortgage –home equity loans / lines of credit | 338 | 358 | — | 100 | ||||||||
Real estate – mortgage –commercial and other | 2,781 | 3,758 | — | 3,390 | ||||||||
Installment loans to individuals | — | — | — | — | ||||||||
Total impaired loans with no allowance | $ | 7,077 | 8,350 | — | 8,425 | |||||||
Impaired loans with an allowance recorded: | ||||||||||||
Commercial, financial, and agricultural | $ | 1,072 | 1,125 | 168 | 866 | |||||||
Real estate – mortgage – construction, land development & other land loans | 577 | 577 | 45 | 589 | ||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 6,229 | 6,466 | 828 | 6,446 | ||||||||
Real estate – mortgage –home equity loans / lines of credit | — | — | — | 69 | ||||||||
Real estate – mortgage –commercial and other | 4,160 | 4,795 | 230 | 4,689 | ||||||||
Installment loans to individuals | — | — | — | — | ||||||||
Total impaired loans with allowance | $ | 12,038 | 12,963 | 1,271 | 12,659 |
($ 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 |
2018.
($ in thousands) | Recorded Investment | Unpaid Principal Balance | Related Allowance | Average Recorded Investment | ||||||||
Impaired loans with no related allowance recorded: | ||||||||||||
Commercial, financial, and agricultural | $ | 310 | 310 | — | 957 | |||||||
Real estate – mortgage – construction, land development & other land loans | 485 | 803 | — | 2,366 | ||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 4,626 | 4,948 | — | 4,804 | ||||||||
Real estate – mortgage –home equity loans / lines of credit | 22 | 31 | — | 91 | ||||||||
Real estate – mortgage –commercial and other | 3,475 | 4,237 | — | 3,670 | ||||||||
Installment loans to individuals | — | — | — | — | ||||||||
Total impaired loans with no allowance | $ | 8,918 | 10,329 | — | 11,888 | |||||||
Impaired loans with an allowance recorded: | ||||||||||||
Commercial, financial, and agricultural | $ | 386 | 387 | 226 | 422 | |||||||
Real estate – mortgage – construction, land development & other land loans | 860 | 864 | 134 | 385 | ||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 7,765 | 7,904 | 955 | 8,963 | ||||||||
Real estate – mortgage –home equity loans / lines of credit | 274 | 275 | 48 | 184 | ||||||||
Real estate – mortgage –commercial and other | 6,050 | 6,054 | 906 | 5,911 | ||||||||
Installment loans to individuals | — | — | — | 2 | ||||||||
Total impaired loans with allowance | $ | 15,335 | 15,484 | 2,269 | 15,867 |
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 (Pass) | 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 (Fail) | Consumer loans (<$500,000) with a well-defined weakness, such as exceptions of any kind with no mitigating factors, history of paying outside the terms of the note, insufficient income to support the current level of debt, etc. |
Page 28
The following table presents the Company’s recorded investment in loans by credit quality indicators as of September 30, 2017.
($ in thousands) | ||||||||||||||||||||
Pass | Special Mention Loans | Classified Accruing Loans | Classified Nonaccrual Loans | Total | ||||||||||||||||
Commercial, financial, and agricultural | $ | 365,505 | 8,974 | 1,210 | 996 | 376,685 | ||||||||||||||
Real estate – construction, land development & other land loans | 435,960 | 6,009 | 6,336 | 1,565 | 449,870 | |||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 729,341 | 15,298 | 33,395 | 14,878 | 792,912 | |||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | 304,114 | 1,262 | 6,985 | 2,250 | 314,611 | |||||||||||||||
Real estate – mortgage – commercial and other | 1,384,255 | 23,736 | 10,584 | 3,534 | 1,422,109 | |||||||||||||||
Installment loans to individuals | 58,444 | 224 | 176 | 127 | 58,971 | |||||||||||||||
Purchased credit impaired | 6,748 | 5,002 | 3,284 | — | 15,034 | |||||||||||||||
Total | $ | 3,284,367 | 60,505 | 61,970 | 23,350 | 3,430,192 | ||||||||||||||
Unamortized net deferred loan fees | (437 | ) | ||||||||||||||||||
Total loans | 3,429,755 |
2019.
($ in thousands) | Pass | Special Mention Loans | Classified Accruing Loans | Classified Nonaccrual Loans | Total | ||||||||||
Commercial, financial, and agricultural | $ | 471,225 | 7,735 | 5,094 | 2,472 | 486,526 | |||||||||
Real estate – construction, land development & other land loans | 463,122 | 4,640 | 2,160 | 1,235 | 471,157 | ||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 1,047,592 | 15,193 | 17,500 | 7,661 | 1,087,946 | ||||||||||
Real estate – mortgage – home equity loans / lines of credit | 334,054 | 1,267 | 5,970 | 1,878 | 343,169 | ||||||||||
Real estate – mortgage – commercial and other | 1,888,049 | 20,081 | 7,044 | 6,370 | 1,921,544 | ||||||||||
Installment loans to individuals | 70,122 | 218 | 400 | 104 | 70,844 | ||||||||||
Purchased credit impaired | 8,279 | 2,797 | 2,722 | — | 13,798 | ||||||||||
Total | $ | 4,282,443 | 51,931 | 40,890 | 19,720 | 4,394,984 | |||||||||
Unamortized net deferred loan costs | 1,560 | ||||||||||||||
Total loans | 4,396,544 |
($ 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 |
2018.
($ in thousands) | Pass | Special Mention Loans | Classified Accruing Loans | Classified Nonaccrual Loans | Total | ||||||||||
Commercial, financial, and agricultural | $ | 452,372 | 3,056 | 459 | 919 | 456,806 | |||||||||
Real estate – construction, land development & other land loans | 509,251 | 5,668 | 1,614 | 2,265 | 518,798 | ||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 1,004,458 | 12,238 | 21,113 | 10,115 | 1,047,924 | ||||||||||
Real estate – mortgage – home equity loans / lines of credit | 348,792 | 1,688 | 6,653 | 1,685 | 358,818 | ||||||||||
Real estate – mortgage – commercial and other | 1,750,810 | 14,484 | 4,140 | 7,452 | 1,776,886 | ||||||||||
Installment loans to individuals | 70,357 | 231 | 413 | 139 | 71,140 | ||||||||||
Purchased credit impaired | 8,355 | 5,214 | 3,824 | — | 17,393 | ||||||||||
Total | $ | 4,144,395 | 42,579 | 38,216 | 22,575 | 4,247,765 | |||||||||
Unamortized net deferred loan costs | 1,299 | ||||||||||||||
Total loans | 4,249,064 |
Page 29
The following table presents information related to loans modified in a troubled debt restructuring during the three months ended September 30, 20172019 and 2016.
($ in thousands) | For three months ended September 30, 2017 | For the three months ended September 30, 2016 | ||||||||||||||||||||||
Number of Contracts | Pre- Modification Restructured Balances | Post- Modification Restructured Balances | Number of Contracts | Pre- Modification Restructured Balances | Post- Modification Restructured Balances | |||||||||||||||||||
TDRs – Accruing | ||||||||||||||||||||||||
Commercial, financial, and agricultural | — | $ | — | $ | — | 1 | $ | 1,071 | $ | 1,071 | ||||||||||||||
Real estate – construction, land development & other land loans | — | — | — | — | — | — | ||||||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | — | — | — | — | — | — | ||||||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | — | — | — | — | — | — | ||||||||||||||||||
Real estate – mortgage – commercial and other | — | — | — | — | — | — | ||||||||||||||||||
Installment loans to individuals | — | — | — | — | — | — | ||||||||||||||||||
TDRs – Nonaccrual | ||||||||||||||||||||||||
Commercial, financial, and agricultural | — | — | — | — | — | — | ||||||||||||||||||
Real estate – construction, land development & other land loans | — | — | — | — | — | — | ||||||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | — | — | — | — | — | — | ||||||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | — | — | — | — | — | — | ||||||||||||||||||
Real estate – mortgage – commercial and other | — | — | — | — | — | — | ||||||||||||||||||
Installment loans to individuals | — | — | — | — | — | — | ||||||||||||||||||
Total TDRs arising during period | — | $ | — | $ | — | 1 | $ | 1,071 | $ | 1,071 | ||||||||||||||
Total covered TDRs arising during period included above | — | $ | — | $ | — | — | $ | — | $ | — |
($ in thousands) | For the three months ended September 30, 2019 | For the three months ended September 30, 2018 | |||||||||||||||||||
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 | — | $ | — | $ | — | — | $ | — | $ | — | |||||||||||
Real estate – construction, land development & other land loans | — | — | — | — | — | — | |||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 1 | 133 | 133 | — | — | — | |||||||||||||||
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 | $ | 133 | $ | 133 | — | $ | — | $ | — |
($ in thousands) | For nine months ended September 30, 2017 | For the nine months ended September 30, 2016 | ||||||||||||||||||||||
Number of Contracts | Pre- Modification Restructured Balances | Post- Modification Restructured Balances | Number of Contracts | Pre- Modification Restructured Balances | Post- Modification Restructured Balances | |||||||||||||||||||
TDRs – Accruing | ||||||||||||||||||||||||
Commercial, financial, and agricultural | — | $ | — | $ | — | 1 | $ | 1,071 | $ | 1,071 | ||||||||||||||
Real estate – construction, land development & other land loans | — | — | — | — | — | — | ||||||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | — | — | — | — | — | — | ||||||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | — | — | — | — | — | — | ||||||||||||||||||
Real estate – mortgage – commercial and other | 5 | 3,550 | 3,525 | — | — | — | ||||||||||||||||||
Installment loans to individuals | — | — | — | — | — | — | ||||||||||||||||||
TDRs – Nonaccrual | ||||||||||||||||||||||||
Commercial, financial, and agricultural | — | — | — | — | — | — | ||||||||||||||||||
Real estate – construction, land development & other land loans | 1 | 32 | 32 | — | — | — | ||||||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 1 | 215 | 215 | — | — | — | ||||||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | — | — | — | — | — | — | ||||||||||||||||||
Real estate – mortgage – commercial and other | — | — | — | — | — | — | ||||||||||||||||||
Installment loans to individuals | — | — | — | — | — | — | ||||||||||||||||||
Total TDRs arising during period | 7 | $ | 3,797 | $ | 3,772 | 1 | $ | 1,071 | $ | 1,071 | ||||||||||||||
Total covered TDRs arising during period included above | — | $ | — | $ | — | — | $ | — | $ | — |
2018.
($ in thousands) | For the nine months ended September 30, 2019 | For the nine months ended September 30, 2018 | |||||||||||||||||||
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 | $ | 143 | $ | 143 | — | $ | — | $ | — | |||||||||||
Real estate – construction, land development & other land loans | — | — | — | — | — | — | |||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 3 | 387 | 391 | 1 | 18 | 18 | |||||||||||||||
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 | — | — | — | 1 | 61 | 61 | |||||||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | — | — | — | 2 | 254 | 264 | |||||||||||||||
Real estate – mortgage – home equity loans / lines of credit | — | — | — | — | — | — | |||||||||||||||
Real estate – mortgage – commercial and other | — | — | — | — | — | — | |||||||||||||||
Installment loans to individuals | — | — | — | — | — | — | |||||||||||||||
Total TDRs arising during period | 4 | $ | 530 | $ | 534 | 4 | $ | 333 | $ | 343 |
|
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Page 31
Accruing restructured loans that were modified in the previous 12 months and that defaulted during the nine months ended September 30, 20172019 and 20162018 are presented in the table below.
($ in thousands) | For the nine months ended September 30, 2017 | For the nine months ended September 30, 2016 | ||||||||||||||
Number of Contracts | Recorded Investment | Number of Contracts | Recorded Investment | |||||||||||||
Accruing TDRs that subsequently defaulted | ||||||||||||||||
Commercial, financial, and agricultural | — | $ | — | 1 | $ | 44 | ||||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 2 | 880 | — | — | ||||||||||||
Real estate – mortgage – commercial and other | — | — | 1 | 21 | ||||||||||||
Total accruing TDRs that subsequently defaulted | 2 | $ | 880 | 2 | $ | 65 | ||||||||||
Total covered accruing TDRs that subsequently defaulted included above | — | $ | — | 1 | $ | 44 |
Note 9 – Deferred Loan (Fees) Costs
The amount of
($ in thousands) | For the Nine Months Ended September 30, 2019 | For the Nine Months Ended September 30, 2018 | |||||||||||
Number of Contracts | Recorded Investment | Number of Contracts | Recorded Investment | ||||||||||
Accruing TDRs that subsequently defaulted | |||||||||||||
Real estate – mortgage – residential (1-4 family first mortgages) | 1 | $ | 93 | 1 | $ | 60 | |||||||
Real estate – mortgage – commercial and other | — | — | 3 | 1,333 | |||||||||
Total accruing TDRs that subsequently defaulted | 1 | $ | 93 | 4 | $ | 1,393 |
Note 10 – FDIC Indemnification Asset
The Company terminated all loss share agreements with the FDIC effective September 22, 2016. As a result, the remaining balance in the FDIC Indemnification Asset, which represented the estimated amount to be received from the FDIC under the loss share agreements, was written off as indemnification asset expense as of the termination date.
The following presents a rollforward of the FDIC indemnification asset from January 1, 2016 through the date of termination.
($ in thousands) | ||||
Balance at January 1, 2016 | $ | 8,439 | ||
Decrease related to favorable changes in loss estimates | (2,246 | ) | ||
Increase related to reimbursable expenses | 205 | |||
Cash paid (received) | 1,554 | |||
Related to accretion of loan discount | (2,005 | ) | ||
Other | (236 | ) | ||
Write off of asset balance upon termination of FDIC loss share agreements effective September 22, 2016 | (5,711 | ) | ||
Balance at September 30, 2016 | $ | — |
September 30, 2017 | December 31, 2016 | September 30, 2016 | ||||||||||||||||||||||
($ in thousands) | Gross Carrying Amount | Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | ||||||||||||||||||
Amortizable intangible assets: | ||||||||||||||||||||||||
Customer lists | $ | 6,013 | 953 | 2,369 | 746 | 2,369 | 668 | |||||||||||||||||
Core deposit premiums | 18,520 | 10,084 | 9,730 | 8,143 | 9,730 | 7,902 | ||||||||||||||||||
Other | 1,303 | 471 | 1,032 | 224 | 1,032 | 166 | ||||||||||||||||||
Total | $ | 25,836 | 11,508 | 13,131 | 9,113 | 13,131 | 8,736 | |||||||||||||||||
SBA servicing asset | $ | 1,306 | 415 | 208 | ||||||||||||||||||||
Unamortizable intangible assets: | ||||||||||||||||||||||||
Goodwill | $ | 144,667 | 75,042 | 75,392 |
Page 32
September 30, 2019 | December 31, 2018 | ||||||||||||
($ in thousands) | Gross Carrying Amount | Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | |||||||||
Amortizable intangible assets: | |||||||||||||
Customer lists | $ | 6,013 | 2,048 | 6,013 | 1,637 | ||||||||
Core deposit intangibles | 28,440 | 19,650 | 28,440 | 16,469 | |||||||||
SBA servicing asset | 7,528 | 2,028 | 5,472 | 1,053 | |||||||||
Other | 1,303 | 1,102 | 1,303 | 957 | |||||||||
Total | $ | 43,284 | 24,828 | 41,228 | 20,116 | ||||||||
Unamortizable intangible assets: | |||||||||||||
Goodwill | $ | 234,368 | 234,368 |
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):
In addition to the above acquisition related activity, the
loans and are tested for impairment on a quarterly basis. SBA servicing asset amortization expense is recorded within noninterest income to offset SBA servicing fees.
($ 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 | ||
($ in thousands) | Estimated Amortization Expense | |||
October 1 to December 31, 2019 | $ | 1,121 | ||
2020 | 3,841 | |||
2021 | 2,927 | |||
2022 | 2,022 | |||
2023 | 1,041 | |||
Thereafter | 2,004 | |||
Total | $ | 12,956 |
For the Three Months Ended September 30, | ||||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2017 Total | 2016 Total | |||||||||||||||||||
($ in thousands) | Pension Plan | Pension Plan | SERP | SERP | Both Plans | Both Plans | ||||||||||||||||||
Service cost | $ | — | — | 29 | 27 | 29 | 27 | |||||||||||||||||
Interest cost | 361 | 375 | 57 | 60 | 418 | 435 | ||||||||||||||||||
Expected return on plan assets | (702 | ) | (675 | ) | — | — | (702 | ) | (675 | ) | ||||||||||||||
Amortization of transition obligation | — | — | — | — | — | — | ||||||||||||||||||
Amortization of net (gain)/loss | 61 | 59 | (8 | ) | (9 | ) | 53 | 50 | ||||||||||||||||
Amortization of prior service cost | — | — | — | — | — | — | ||||||||||||||||||
Net periodic pension (income)/cost | $ | (280 | ) | (241 | ) | 78 | 78 | (202 | ) | (163 | ) |
cost.
For the Three Months Ended September 30, | ||||||||||||||||||
($ in thousands) | 2019 Pension Plan | 2018 Pension Plan | 2019 SERP | 2018 SERP | 2019 Total Both Plans | 2018 Total Both Plans | ||||||||||||
Service cost | $ | — | — | — | 32 | — | 32 | |||||||||||
Interest cost | 367 | 328 | 82 | 40 | 449 | 368 | ||||||||||||
Expected return on plan assets | (360 | ) | (177 | ) | — | — | (360 | ) | (177 | ) | ||||||||
Amortization of net (gain)/loss | 282 | (93 | ) | (127 | ) | 6 | 155 | (87 | ) | |||||||||
Net periodic pension cost | $ | 289 | 58 | (45 | ) | 78 | 244 | 136 |
For the Nine Months Ended September 30, | ||||||||||||||||||
($ in thousands) | 2019 Pension Plan | 2018 Pension Plan | 2019 SERP | 2018 SERP | 2019 Total Both Plans | 2018 Total Both Plans | ||||||||||||
Service cost | $ | — | — | — | 94 | — | 94 | |||||||||||
Interest cost | 1,111 | 984 | 164 | 150 | 1,275 | 1,134 | ||||||||||||
Expected return on plan assets | (1,154 | ) | (836 | ) | — | — | (1,154 | ) | (836 | ) | ||||||||
Amortization of net (gain)/loss | 733 | 26 | (122 | ) | (10 | ) | 611 | 16 | ||||||||||
Net periodic pension cost | $ | 690 | 174 | 42 | 234 | 732 | 408 |
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 2019.
($ in thousands)
| September 30, 2017 | December 31, 2016 | September 30, 2016 | |||||||||
Unrealized gain (loss) on securities available for sale | $ | 438 | (3,085 | ) | 1,964 | |||||||
Deferred tax asset (liability) | (162 | ) | 1,138 | (767 | ) | |||||||
Net unrealized gain (loss) on securities available for sale | 276 | (1,947 | ) | 1,197 | ||||||||
Additional pension asset (liability) | (4,854 | ) | (5,012 | ) | (4,505 | ) | ||||||
Deferred tax asset (liability) | 1,796 | 1,852 | 1,757 | |||||||||
Net additional pension asset (liability) | (3,058 | ) | (3,160 | ) | (2,748 | ) | ||||||
Total accumulated other comprehensive income (loss) | $ | (2,782 | ) | (5,107 | ) | (1,551 | ) |
($ in thousands) | September 30, 2019 | December 31, 2018 | ||||
Unrealized gain (loss) on securities available for sale | $ | 7,327 | (12,390 | ) | ||
Deferred tax asset (liability) | (1,684 | ) | 2,896 | |||
Net unrealized gain (loss) on securities available for sale | 5,643 | (9,494 | ) | |||
Additional pension asset (liability) | (2,609 | ) | (3,220 | ) | ||
Deferred tax asset (liability) | 600 | 753 | ||||
Net additional pension asset (liability) | (2,009 | ) | (2,467 | ) | ||
Total accumulated other comprehensive income (loss) | $ | 3,634 | (11,961 | ) |
($ 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 | Additional Pension Asset (Liability) | Total | ||||||
Beginning balance at January 1, 2019 | $ | (9,494 | ) | (2,467 | ) | (11,961 | ) | ||
Other comprehensive income (loss) before reclassifications | 15,212 | — | 15,212 | ||||||
Amounts reclassified from accumulated other comprehensive income | (75 | ) | 458 | 383 | |||||
Net current-period other comprehensive income (loss) | 15,137 | 458 | 15,595 | ||||||
Ending balance at September 30, 2019 | $ | 5,643 | (2,009 | ) | 3,634 |
($ 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 | Additional Pension Asset (Liability) | Total | ||||||
Beginning balance at January 1, 2018 | $ | (1,694 | ) | (2,452 | ) | (4,146 | ) | ||
Other comprehensive income (loss) before reclassifications | (7,839 | ) | — | (7,839 | ) | ||||
Amounts reclassified from accumulated other comprehensive income | — | 12 | 12 | ||||||
Net current-period other comprehensive income (loss) | (7,839 | ) | 12 | (7,827 | ) | ||||
Ending balance at September 30, 2018 | $ | (9,533 | ) | (2,440 | ) | (11,973 | ) |
Page 35
The following table summarizes the Company’s financial instruments that were measured at fair value on a recurring and nonrecurring basis at September 30, 2017.
($ in thousands) | ||||||||||||||||
Description of Financial Instruments | Fair Value at September 30, 2017 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||
Recurring | ||||||||||||||||
Securities available for sale: | ||||||||||||||||
Government-sponsored enterprise securities | $ | 8,992 | — | 8,992 | — | |||||||||||
Mortgage-backed securities | 155,535 | — | 155,535 | — | ||||||||||||
Corporate bonds | 34,397 | — | 34,397 | — | ||||||||||||
Total available for sale securities | $ | 198,924 | — | 198,924 | — | |||||||||||
Nonrecurring | ||||||||||||||||
Impaired loans | $ | 14,932 | — | — | 14,932 | |||||||||||
Foreclosed real estate | 9,356 | — | — | 9,356 |
2019.
($ in thousands) | |||||||||||||
Description of Financial Instruments | Fair Value at September 30, 2019 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||
Recurring | |||||||||||||
Securities available for sale: | |||||||||||||
Government-sponsored enterprise securities | $ | 30,053 | — | 30,053 | — | ||||||||
Mortgage-backed securities | 640,488 | — | 640,488 | — | |||||||||
Corporate bonds | 34,683 | — | 34,683 | — | |||||||||
Total available for sale securities | $ | 705,224 | — | 705,224 | — | ||||||||
Nonrecurring | |||||||||||||
Impaired loans | $ | 12,406 | — | — | 12,406 | ||||||||
Foreclosed real estate | 2,294 | — | — | 2,294 |
($ 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 |
2018.
($ in thousands) | |||||||||||||
Description of Financial Instruments | Fair Value at December 31, 2018 | 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 | $ | 82,662 | — | 82,662 | — | ||||||||
Mortgage-backed securities | 385,551 | — | 385,551 | — | |||||||||
Corporate bonds | 33,138 | — | 33,138 | — | |||||||||
Total available for sale securities | $ | 501,351 | — | 501,351 | — | ||||||||
Nonrecurring | |||||||||||||
Impaired loans | $ | 13,071 | — | — | 13,071 | ||||||||
Foreclosed real estate | 7,440 | — | — | 7,440 |
Page 36
Impaired loans — Fair values for impaired loans in the above table are measured on a non-recurring basis and are based on the underlying collateral values securing the loans, adjusted for estimated selling costs, or the net present value of the cash flows expected to be received for such loans. Collateral may be in the form of real estate or business assets including equipment, inventory and accounts receivable. The vast majority of the collateral is real estate. The value of real estate collateral is determined 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). Any fair value adjustments are recorded in the period incurred as provision for loan losses on the Consolidated Statements of Income.
($ in thousands) | ||||||||||
Description | Fair Value at September 30, 2017 | Valuation Technique | Significant Unobservable Inputs | General Range of Significant Unobservable Input Values | ||||||
Impaired loans | $ | 14,932 | Appraised value; PV of expected cash flows | Discounts to reflect current market conditions, ultimate collectability, and estimated costs to sell | 0-10% | |||||
Foreclosed real estate | 9,356 | Appraised value; List or contract price | Discounts to reflect current market conditions, abbreviated holding period and estimated costs to sell | 0-10% | ||||||
($ in thousands) | ||||||||||
Description | Fair Value at September 30, 2019 | Valuation Technique | Significant Unobservable Inputs | Range of Significant Unobservable Input Values | ||||||
Impaired loans | $ | 12,406 | 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 | 2,294 | 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 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% | ||||||
($ in thousands) | ||||||||||
Description | Fair Value at December 31, 2018 | Valuation Technique | Significant Unobservable Inputs | Range of Significant Unobservable Input Values | ||||||
Impaired loans | $ | 13,071 | 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 | 7,440 | Appraised value; List or contract price | Discounts to reflect current market conditions and estimated costs to sell | 0-10% | ||||||
Page 37
For the nine months ended September 30, 20172019 and 2016,2018, the increase (decrease) in the fair value of securities available for sale was $3,523,000$19,814,000 and $3,128,000,($10,229,000), respectively, which is included in other comprehensive income (net of tax expensebenefit (expense) of $1,300,000($4,602,000) and $1,222,000,$2,390,000, respectively). Fair value measurement methods at September 30, 20172019 and 20162018 are consistent with those used in prior reporting periods.
September 30, 2017 | December 31, 2016 | |||||||||||||||||
($ in thousands) | Level in Fair Value Hierarchy | Carrying Amount | Estimated Fair Value | Carrying Amount | Estimated Fair Value | |||||||||||||
Cash and due from banks, noninterest-bearing | Level 1 | $ | 82,758 | 82,758 | 71,645 | 71,645 | ||||||||||||
Due from banks, interest-bearing | Level 1 | 326,089 | 326,089 | 234,348 | 234,348 | |||||||||||||
Securities available for sale | Level 2 | 198,924 | 198,924 | 199,329 | 199,329 | |||||||||||||
Securities held to maturity | Level 2 | 123,156 | 124,878 | 129,713 | 130,195 | |||||||||||||
Presold mortgages in process of settlement | Level 1 | 17,426 | 17,426 | 2,116 | 2,116 | |||||||||||||
Total loans, net of allowance | Level 3 | 3,405,162 | 3,396,635 | 2,686,931 | 2,650,820 | |||||||||||||
Accrued interest receivable | Level 1 | 11,445 | 11,445 | 9,286 | 9,286 | |||||||||||||
Bank-owned life insurance | Level 1 | 88,081 | 88,081 | 74,138 | 74,138 | |||||||||||||
Deposits | Level 2 | 3,651,241 | 3,647,532 | 2,947,353 | 2,944,968 | |||||||||||||
Borrowings | Level 2 | 397,525 | 388,477 | 271,394 | 263,255 | |||||||||||||
Accrued interest payable | Level 2 | 1,143 | 1,143 | 539 | 539 |
Fair value methods and assumptions are set forth below for the Company’s financial instruments.
Cash and Amounts Due from Banks, Presold Mortgages in Process of Settlement, Accrued Interest Receivable, and Accrued Interest Payable-The carrying amounts approximate their fair value because of the short maturity of these financial instruments.
Available for Sale and Held to Maturity Securities-Fair values are provided by a third-party and are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments or matrix pricing.
Loans-For nonimpaired loans, fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as commercial, financial and agricultural, real estate construction, real estate mortgages and installment loans to individuals. Each loan category is further segmented into fixed and variable interest rate terms. The fair value for each category is determined by discounting scheduled future cash flows using current interest rates offered on loans with similar risk characteristics. Fair values for impaired loans are primarily based on estimated proceeds expected upon liquidation of the collateral or the present value of expected cash flows.
Bank-Owned Life Insurance – The carrying value of life insurance approximates fair value because this investment is carried at cash surrender value, as determined by the issuer.
Deposits-The fair value of deposits with no stated maturity, such as noninterest-bearing checking accounts, savings accounts, interest-bearing checking accounts, and money market accounts, is equal to the amount payable on demand as of the valuation date. The fair value of certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered in the marketplace for deposits of similar remaining maturities.
Borrowings-The fair value of borrowings is based on the discounted value of the contractual cash flows. The discount rate is estimated using the rates currently offered by the Company’s lenders for debt of similar maturities.
September 30, 2019 | December 31, 2018 | |||||||||||||
($ 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 | $ | 52,621 | 52,621 | 56,050 | 56,050 | ||||||||
Due from banks, interest-bearing | Level 1 | 264,840 | 264,840 | 406,848 | 406,848 | |||||||||
Securities available for sale | Level 2 | 705,224 | 705,224 | 501,351 | 501,351 | |||||||||
Securities held to maturity | Level 2 | 74,265 | 74,465 | 101,237 | 99,906 | |||||||||
Presold mortgages in process of settlement | Level 1 | 16,269 | 16,269 | 4,279 | 4,279 | |||||||||
Total loans, net of allowance | Level 3 | 4,377,284 | 4,341,770 | 4,228,025 | 4,181,139 | |||||||||
Accrued interest receivable | Level 1 | 16,297 | 16,297 | 16,004 | 16,004 | |||||||||
Bank-owned life insurance | Level 1 | 103,806 | 103,806 | 101,878 | 101,878 | |||||||||
SBA Servicing Asset | Level 3 | 5,500 | 5,966 | 4,419 | 4,617 | |||||||||
Deposits | Level 2 | 4,875,382 | 4,874,274 | 4,659,339 | 4,653,522 | |||||||||
Borrowings | Level 2 | 300,656 | 294,913 | 406,609 | 402,556 | |||||||||
Accrued interest payable | Level 2 | 2,169 | 2,169 | 1,976 | 1,972 |
Page 38
Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial assets or liabilities include net premises and equipment, intangible and other assets such as deferred income taxes, prepaid expense accounts, income taxes currently payable and other various accrued expenses. In addition, the income tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in any of the estimates.
On December 21, 2012, the Company issued 2,656,294 shares of its common stock and 728,706 sharesRevenue from Contracts with Customers
On December 22, 2016, the Company and the holder of the Series C Preferred Stock entered into an agreement to effectively convert the preferred stock into common stock. The Company exchanged 728,706 shares of preferred stocknoninterest income for the same number of shares of the Company’s common stock. As a result of the exchange, the Company has no shares of preferred stock currently outstanding.
The Series C Preferred Stock qualified as Tier 1 capital and was Convertible Perpetual Preferred Stock, with dividend rights equal to the Company’s Common Stock. The Series C Preferred Stock was non-voting, except in limited circumstances.
The Series C Preferred Stock paid a dividend per share equal to that of the Company’s common stock. During the three and nine months ended September 30, 2019 and 2018. Items outside the scope of Topic 606 are noted as such.
For the Three Months Ended | For the Nine Months Ended | |||||||||||
$ in thousands | September 30, 2019 | September 30, 2018 | September 30, 2019 | September 30, 2018 | ||||||||
Noninterest Income | ||||||||||||
In-scope of Topic 606: | ||||||||||||
Service charges on deposit accounts: | $ | 3,388 | 3,221 | 9,543 | 9,606 | |||||||
Other service charges, commissions, and fees: | ||||||||||||
Interchange income | 3,975 | 3,374 | 11,754 | 9,917 | ||||||||
Other service charges and fees | 1,839 | 1,568 | 5,094 | 4,184 | ||||||||
Commissions from sales of insurance and financial products: | ||||||||||||
Insurance income | 1,355 | 1,627 | 4,027 | 4,530 | ||||||||
Wealth management income | 848 | 798 | 2,409 | 1,954 | ||||||||
SBA consulting fees | 663 | 1,287 | 2,847 | 3,554 | ||||||||
Foreclosed property gains (losses), net | (273 | ) | (192 | ) | (899 | ) | (579 | ) | ||||
Noninterest income (in-scope of Topic 606) | 11,795 | 11,683 | 34,775 | 33,166 | ||||||||
Noninterest income (out-of-scope of Topic 606) | 3,835 | 3,489 | 11,419 | 13,707 | ||||||||
Total noninterest income | $ | 15,630 | 15,172 | 46,194 | 46,873 |
($ in thousands) | Maturity Analysis of Lease Liabilities | ||
October 1 to December 31, 2019 | $ | 583 | |
2020 | 2,504 | ||
2021 | 2,329 | ||
2022 | 1,941 | ||
2023 | 1,848 | ||
Thereafter | 21,145 | ||
Total estimated lease payments | 30,350 | ||
Less effect of discounting | (9,607 | ) | |
Present value of estimated lease payments (lease liability) | $ | 20,743 |
($ in thousands) | Future obligations for minimum rentals under noncancelable operating leases | ||
2019 | $ | 2,268 | |
2020 | 1,973 | ||
2021 | 1,344 | ||
2022 | 869 | ||
2023 | 768 | ||
Thereafter | 4,082 | ||
Total estimated lease payments | $ | 11,304 |
Note 16 – Subsequent Event
On October 1, 2017, the Company completed its acquisition of ASB Bancorp, Inc. (“ASB Bancorp”), the parent company of Asheville Savings Bank, SSB, headquartered in Asheville, North Carolina, pursuant to an Agreement and Plan of Merger and Reorganization dated May 1, 2017. Asheville Savings Bank, SSB, operated 13 banking locations in the Asheville, Marion and Brevard markets. The acquisition complements the Company’s existing three branches in the Asheville market.
The total merger consideration consisted of $17.9 million in cash and 4.9 million shares of the Company’s common stock. Asterms of the acquisition date, ASB Bancorp had assetsagreement, the former owners of $793 million, gross loansSBA Complete were eligible for a contingent earn-out payment to be paid in shares of $617Company stock based on achieving predetermined profitability goals over a cumulative three year period. The Company initially valued the earn-out at $3.0 million and deposits of $679 million. Asadjusted the value quarterly thereafter based on updated estimates. On May 5, 2019, the three year earn-out period concluded, and based on the terms of the filing of this report,earn-out, the Company has not completed the fairissued 78,353 shares of common stock with a value measurements of the assets, liabilities, and identifiable intangible assets of ASB Bancorp.
Page 40
Intangible Assets
Page 41
For purchased credit-impaired (“PCI”) loans, the excess of the cash flows initially expected to be collected over the fair value of the loans at the acquisition date (i.e., the accretable yield) is accreted into interest income over the estimated remaining life of the loans using the effective yield method, provided that the timing and the amount of future cash flows is reasonably estimable. Accordingly, such loans are not classified as nonaccrual and they are considered to be accruing because their interest income relates to the accretable yield recognized under accounting for PCI loans and not to contractual interest payments. The difference between the contractually required payments and the cash flows expected to be collected at acquisition, considering the impact of prepayments, is referred to as the nonaccretable difference.
RESULTS OF OPERATIONS
Overview
adopted and accounting standards that are pending adoption.
The third quarter of 2016 results included two non-recurring items that impacted diluted earnings per share negatively by a net of approximately $0.17 per diluted common share: 1) the termination of our loss share agreements with the FDIC, which resulted in the Company recording additional indemnification asset expense of $5.7 million during the three months ended September 30, 2016, and 2) the exchange of branches with First Community Bank that resulted in a gain of $1.4 million.
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 and earnings for Asheville Savings Bank are not included in the Company’s results for the third quarter.
2018.
Page 42
Also contributing to the increase in net interest income was a higher net interest margin for the period.
The net interest margins for both periods were also impacted by higher amountscombination of lower loan discount accretion associated with acquired loan portfolios. The Companyand funding costs that rose by more than asset yields.
Provision for Loan Losses and Asset Quality
We recorded no provision for loan losses in the third quarters of 2017 or 2016.2018. For the nine months ended September 30, 2017, we2019 and 2018, loan discount accretion amounted to $4.5 million and $6.0 million, respectively. The lower loan discount accretion accounted for approximately 3 basis points out of the 8 basis point decline in the net interest margin when comparing the third quarter of 2019 to 2018
including low loan charge-offs.
Core noninterest income for2018.
The primary reason for the increase in core noninterest income in 2017 was the acquisition of Carolina Bank, 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.
a former branch location.
2.5%, which became effective January 1, 2019.
result of the strong retail deposit growth, we have been able to reduce to our level of brokered deposits, which have declined by $112 million, or 46.8%, since December 31, 2018. Additionally, we have paid down our borrowings by $106 million, or 26.1%, over that same time period.
Page 43
Note Regarding December 31, 2018.
For the periods in 2016 presented, our results of operations were significantly affected by the accounting for two FDIC-assisted failed bank acquisitions. In the discussion above and in the accompanying tables, the term “covered” is used to describe assets that were included in FDIC loss share agreements, while the term “non-covered” refers to our legacy assets, which are not included in any type of loss share arrangement. As previously discussed, all loss share agreements were terminated in the third quarter of 2016 and thus the entire loan portfolio is now classified as non-covered. Certain prior period disclosures will continue to present the breakout of the loan portfolio between covered and non-covered. See the Company’s 2016 Annual Report on Form 10-K filed with the Securities and Exchange Commission for additional discussion regarding the accounting and presentation related to the Company’s two FDIC-assisted failed bank acquisitions.
Components of Earnings
Three Months Ended September 30, | ||||||||
($ in thousands) | 2017 | 2016 | ||||||
Net interest income, as reported | $ | 41,639 | 30,354 | |||||
Tax-equivalent adjustment | 702 | 534 | ||||||
Net interest income, tax-equivalent | $ | 42,341 | 30,888 |
Three Months Ended September 30, | ||||||
($ in thousands) | 2019 | 2018 | ||||
Net interest income, as reported | $ | 53,778 | 51,845 | |||
Tax-equivalent adjustment | 413 | 428 | ||||
Net interest income, tax-equivalent | $ | 54,191 | 52,273 |
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 |
2018.
Nine Months Ended September 30, | ||||||
($ in thousands) | 2019 | 2018 | ||||
Net interest income, as reported | $ | 161,548 | 153,584 | |||
Tax-equivalent adjustment | 1,260 | 1,151 | ||||
Net interest income, tax-equivalent | $ | 162,808 | 154,735 |
For the Three Months Ended September 30, | |||||||||||||||||||||
2019 | 2018 | ||||||||||||||||||||
($ in thousands) | Average Volume | Average Rate | Interest Earned or Paid | Average Volume | Average Rate | Interest Earned or Paid | |||||||||||||||
Assets | |||||||||||||||||||||
Loans (1) | $ | 4,354,477 | 5.02 | % | $ | 55,142 | $ | 4,191,751 | 4.96 | % | $ | 52,407 | |||||||||
Taxable securities | 747,044 | 2.72 | % | 5,129 | 400,861 | 2.48 | % | 2,501 | |||||||||||||
Non-taxable securities | 27,711 | 3.04 | % | 212 | 50,373 | 2.89 | % | 367 | |||||||||||||
Short-term investments, primarily overnight funds | 310,781 | 2.42 | % | 1,898 | 500,435 | 2.33 | % | 2,944 | |||||||||||||
Total interest-earning assets | 5,440,013 | 4.55 | % | 62,381 | 5,143,420 | 4.49 | % | 58,219 | |||||||||||||
Cash and due from banks | 54,132 | 78,078 | |||||||||||||||||||
Premises and equipment | 136,468 | 113,812 | |||||||||||||||||||
Other assets | 391,366 | 377,630 | |||||||||||||||||||
Total assets | $ | 6,021,979 | $ | 5,712,940 | |||||||||||||||||
Liabilities | |||||||||||||||||||||
Interest bearing checking | $ | 883,002 | 0.15 | % | $ | 338 | 862,065 | 0.11 | % | $ | 235 | ||||||||||
Money market deposits | 1,124,240 | 0.68 | % | 1,915 | 1,018,933 | 0.34 | % | 869 | |||||||||||||
Savings deposits | 416,732 | 0.29 | % | 307 | 435,579 | 0.21 | % | 230 | |||||||||||||
Time deposits >$100,000 | 692,417 | 2.02 | % | 3,519 | 658,479 | 1.39 | % | 2,302 | |||||||||||||
Other time deposits | 261,424 | 0.79 | % | 518 | 272,468 | 0.39 | % | 270 | |||||||||||||
Total interest-bearing deposits | 3,377,815 | 0.77 | % | 6,597 | 3,247,524 | 0.48 | % | 3,906 | |||||||||||||
Borrowings | 300,714 | 2.65 | % | 2,006 | 406,652 | 2.41 | % | 2,468 | |||||||||||||
Total interest-bearing liabilities | 3,678,529 | 0.93 | % | 8,603 | 3,654,176 | 0.69 | % | 6,374 | |||||||||||||
Noninterest bearing checking | 1,460,759 | 1,278,488 | |||||||||||||||||||
Other liabilities | 55,777 | 42,716 | |||||||||||||||||||
Shareholders’ equity | 826,914 | 737,560 | |||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 6,021,979 | 5,712,940 | ||||||||||||||||||
Net yield on interest-earning assets and net interest income | 3.92 | % | $ | 53,778 | 4.00 | % | $ | 51,845 | |||||||||||||
Net yield on interest-earning assets and net interest income – tax-equivalent (2) | 3.95 | % | $ | 54,191 | 4.03 | % | $ | 52,273 | |||||||||||||
Interest rate spread | 3.62 | % | 3.80 | % | |||||||||||||||||
Average prime rate | 5.27 | % | 5.01 | % |
For the Nine Months Ended September 30, | |||||||||||||||||||||
2019 | 2018 | ||||||||||||||||||||
($ in thousands) | Average Volume | Average Rate | Interest Earned or Paid | Average Volume | Average Rate | Interest Earned or Paid | |||||||||||||||
Assets | |||||||||||||||||||||
Loans (1) | $ | 4,322,078 | 5.10 | % | $ | 164,754 | $ | 4,141,645 | 4.97 | % | $ | 154,028 | |||||||||
Taxable securities | 706,300 | 2.81 | % | 14,859 | 406,975 | 2.48 | % | 7,552 | |||||||||||||
Non-taxable securities | 34,833 | 3.15 | % | 820 | 51,283 | 2.91 | % | 1,115 | |||||||||||||
Short-term investments, primarily overnight funds | 347,335 | 2.58 | % | 6,705 | 457,908 | 2.14 | % | 7,320 | |||||||||||||
Total interest-earning assets | 5,410,546 | 4.62 | % | 187,138 | 5,057,811 | 4.49 | % | 170,015 | |||||||||||||
Cash and due from banks | 54,579 | 88,596 | |||||||||||||||||||
Premises and equipment | 136,550 | 114,656 | |||||||||||||||||||
Other assets | 384,966 | 383,629 | |||||||||||||||||||
Total assets | $ | 5,986,641 | $ | 5,644,692 | |||||||||||||||||
Liabilities | |||||||||||||||||||||
Interest bearing checking | $ | 894,488 | 0.14 | % | $ | 966 | $ | 874,921 | 0.10 | % | $ | 646 | |||||||||
Money market deposits | 1,093,736 | 0.62 | % | 5,036 | 1,019,399 | 0.28 | % | 2,151 | |||||||||||||
Savings deposits | 419,210 | 0.29 | % | 903 | 442,345 | 0.20 | % | 648 | |||||||||||||
Time deposits >$100,000 | 709,247 | 1.93 | % | 10,221 | 629,175 | 1.20 | % | 5,627 | |||||||||||||
Other time deposits | 262,424 | 0.70 | % | 1,372 | 278,950 | 0.35 | % | 740 | |||||||||||||
Total interest-bearing deposits | 3,379,105 | 0.73 | % | 18,498 | 3,244,790 | 0.40 | % | 9,812 | |||||||||||||
Borrowings | 343,431 | 2.76 | % | 7,092 | 406,954 | 2.17 | % | 6,619 | |||||||||||||
Total interest-bearing liabilities | 3,722,536 | 0.92 | % | 25,590 | 3,651,744 | 0.60 | % | 16,431 | |||||||||||||
Noninterest bearing checking | 1,405,830 | 1,236,002 | |||||||||||||||||||
Other liabilities | 57,047 | 37,964 | |||||||||||||||||||
Shareholders’ equity | 801,228 | 718,982 | |||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 5,986,641 | $ | 5,644,692 | |||||||||||||||||
Net yield on interest-earning assets and net interest income | 3.99 | % | $ | 161,548 | 4.06 | % | $ | 153,584 | |||||||||||||
Net yield on interest-earning assets and net interest income – tax-equivalent (2) | 4.02 | % | $ | 162,808 | 4.09 | % | $ | 154,735 | |||||||||||||
Interest rate spread | 3.70 | % | 3.89 | % | |||||||||||||||||
Average prime rate | 5.42 | % | 4.78 | % |
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% |
Page 45
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% |
Average loans outstanding for the third quarter of 20172019 were $3.405$4.354 billion, which was $769$163 million, or 29.2%3.9%, higher than the average loans outstanding for the third quarter of 20162018 ($2.6364.192 billion). Average loans forFor the first nine months ended September 30, 2017of 2019, average loans outstanding were $3.212$4.322 billion, which was 24.7%$180 million, or 4.4% higher than the average loans outstanding for the nine months ended September 30, 2016comparable period of 2018 ($2.5774.142 billion). The higher amount of average loans outstanding in 20172019 was due to a combination of acquired growth and organic growth. The acquisition of Carolina Bank on March 3, 2017 added $497 million in loans as of the acquisition date. Also,primarily due to our loan growth initiatives, including our continued focus and expansion into higher growth markets, our hiring of experienced bankers and improved loan demandour emphasis on SBA lending.
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.
Page 46
The funding provided by the growth in deposits also allowed us to pay down our borrowings in 2019. Average borrowings increased fordecreased by $106 million, or 26.1%, and $63.5 million, or 15.6%, during the three and nine months ended September 30, 2017 to $294.7 million from the $200.4 million for the same period of 2016. Carolina Bank had approximately $19 million2019, respectively, in borrowings on the date of acquisition. Our cost of funds, 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 duecomparison to the increased costs associated with our higher levels of borrowings.
prior periods.
Our net interest margin benefits from the net accretion of purchase accounting premiums/discounts associated with acquired loans and deposits. yields.
2018.
2018. In the first quarter of 2018, we experienced net loan recoveries of $3.7 million, resulting in the negative provision during 2018. Our provision for loan losses has remained at low levels over the past several years as a result of strong asset quality, including low loan charge-offs.
2018.
2018.
For the Three Months Ended | For the Nine Months Ended | ||||||||||
$ in thousands | September 30, 2019 | September 30, 2018 | September 30, 2019 | September 30, 2018 | |||||||
Service charges on deposit accounts | $ | 3,388 | 3,221 | 9,543 | 9,606 | ||||||
Other service charges, commissions, and fees | 5,814 | 4,942 | 16,848 | 14,101 | |||||||
Fees from presold mortgage loans | 1,275 | 576 | 2,677 | 2,231 | |||||||
Commissions from sales of insurance and financial products | 2,203 | 2,425 | 6,436 | 6,484 | |||||||
SBA consulting fees | 663 | 1,287 | 2,847 | 3,554 | |||||||
SBA loan sale gains | 1,917 | 2,373 | 7,048 | 8,773 | |||||||
Bank-owned life insurance income | 651 | 641 | 1,928 | 1,892 | |||||||
Foreclosed property gains (losses), net | (273 | ) | (192 | ) | (899 | ) | (579 | ) | |||
Securities gains (losses), net | 97 | — | 97 | — | |||||||
Other gains (losses), net | (105 | ) | (101 | ) | (331 | ) | 811 | ||||
Noninterest income | $ | 15,630 | 15,172 | 46,194 | 46,873 | ||||||
Non-GAAP adjustments - Exclude: | |||||||||||
Foreclosed property losses from above | 273 | 192 | 899 | 579 | |||||||
Securities gains (losses), net | (97 | ) | — | (97 | ) | — | |||||
Other gains and losses from above | 105 | 101 | 331 | (811 | ) | ||||||
Adjusted noninterest income | $ | 15,911 | 15,465 | 47,327 | 46,641 |
Page 47
The following table presents our core noninterest income for the three and nine month periods ending September 30, 2017 and 2016, respectively.
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
$ in thousands | September 30, 2017 | September 30, 2016 | September 30, 2017 | September 30, 2016 | ||||||||||||
Service charges on deposit accounts | $ | 2,945 | 2,710 | 8,525 | 7,960 | |||||||||||
Other service charges, commissions, and fees | 3,468 | 2,996 | 10,195 | 8,869 | ||||||||||||
Fees from presold mortgage loans | 1,842 | 710 | 4,121 | 1,491 | ||||||||||||
Commissions from sales of insurance and financial products | 1,426 | 969 | 3,304 | 2,844 | ||||||||||||
SBA consulting fees | 864 | 1,178 | 3,174 | 1,898 | ||||||||||||
SBA loan sale gains | 1,692 | 694 | 3,241 | 694 | ||||||||||||
Bank-owned life insurance income | 579 | 514 | 1,667 | 1,526 | ||||||||||||
Core noninterest income | $ | 12,816 | 9,771 | 34,227 | 25,282 | |||||||||||
As shown in the table above, service charges on deposit accounts increased from $2.7$3.2 million in the third quarter of 20162018 to $2.9$3.4 million in the third quarter of 2017.2019, an increase that we believe is due to promotion of new deposit products. For the nine months ended September 30, 2017,2019, service charges on deposit accounts amounted to $8.5$9.5 million, which is a $0.5$0.1 million increasedecrease from the $8.0$9.6 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.
2018.
product
industry due to declining interest rates.
Onelosses of the primary reasons for the increases$0.1 million and $0.3 million in core noninterest income for the three and nine months ended September 30, 2017 was the addition2019, respectively, and losses 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$0.1 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 $1.9gains of $0.8 million for the three and nine months ended September 30, 2016, respectively. In2018. Losses in 2019 were due to miscellaneous items, whereas in the thirdsecond quarter of 2016,2018, we launchedrecorded a national SBA lending division offering SBA loans to small business owners throughout the United States. The SBA division earned $1.7$0.9 million and $3.2 million from gainsgain on the salessale of the guaranteed portions of these loans during the three and nine months ended September 30, 2017, respectively, in comparisona former branch location.
Bank-owned life insurance income was relatively unchanged for the periods presented, amounting to $0.6$38.9 million in the third quarter of 2017 compared to $0.5 million in2019, a 0.3% decrease from the third quarter of 2016, and $1.7 million to $1.5 million for the first nine months of 2017 and 2016, respectively.
Page 48
Within the noncore components of noninterest income, the largest variance for the periods presented related to indemnification asset expense. As discussed previously, in the third quarter of 2016, we terminated our FDIC loss share agreements, and thus there was no indemnification asset income or expense in 2017. In 2016, we recorded indemnification asset expense of $5.7 million and $10.3 million for the three and nine months ended September 30, 2016, respectively.
During the nine months ended September 30, 2017, we recorded $0.2 million in losses from sales of securities. For the comparable period of 2016, we recorded an insignificant amount of gain.
Other gains and losses for the 2017 periods presented represent the net effects of miscellaneous gains and losses that are non-routine in nature. In the third quarter of 2016, the Company recorded a net gain of $1.4 million as a result of a branch exchange transaction.
Noninterest expenses amounted to $34.4 million in the third quarter of 2017 compared to $27.7$39.0 million recorded in the third quarter of 2016.2018. Noninterest expenses for the nine months ended September 30, 20172019 amounted to $101.5$118.6 million compared to $78.6$121.2 million in 2016. The majority2018, a decrease of the increase in noninterest expenses in 2017 relates to our acquisition of Carolina Bank.
Salaries2.1%.
Employee benefits expense was $3.4$22.8 million in the third quarter of 20172018. For the first nine months of 2019, personnel expense increased 3.3% to $71.7 million from $69.4 million in the prior year period. The increases in 2019 were primarily due to the Company's growth initiatives.
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 2016.2018. For the nine months ended September 30, 2017, occupancy2019 merger and equipment expense totaled $10.3acquisition expenses amounted to $0.2 million compared to $8.5$3.6 million for the same period in 2018. The higher merger and acquisition expenses recorded in 2018 related to the Asheville Savings Bank acquisition which converted its operations into First Bank in the first quarter of 2018.
Merger and acquisition expenses amounted2018 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$3.7 million in the first nine months of 2016 to $2.5 million in the first nine months of 2017,2019. 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.
ForCompany, we recorded no FDIC insurance expense for the third quarter of 2017,2019 and also reversed a $400,000 expense accrual
Page 49
The Consolidated Statements of Comprehensive Income reflect2019 compared other comprehensive incomeloss of $0.2$0.8 million during each of the third quartersquarter of 2017 and 2016.2018. During the nine months ended September 30, 20172019 and 2016,2018, we recorded other comprehensive income of $2.3$15.6 million and $2.0other comprehensive loss of $7.8 million, respectively. The primary component of other comprehensive income for the periods presented was changes in unrealized holding gains (losses) of our available for sale securities. Our available for sale securities portfolio is predominantly comprised of fixed rate bonds that generally increase in value when market yields for fixed rate bonds decrease and decline in value when market yields for fixed rate bonds increase. Management has evaluated any unrealized losses on individual securities at each period end and determined that there is no other-than-temporary impairment.
December 31, 2018.
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% |
2019.
January 1, 2019 to September 30, 2019 | Balance at beginning of period | Internal Growth, net | Balance at end of period | Total percentage growth | |||||||||
Total loans | $ | 4,249,064 | 147,480 | 4,396,544 | 3.5 | % | |||||||
Deposits – Noninterest bearing checking | 1,320,131 | 171,363 | 1,491,494 | 13.0 | % | ||||||||
Deposits – Interest bearing checking | 916,374 | (21,597 | ) | 894,777 | (2.4 | )% | |||||||
Deposits – Money market | 1,035,523 | 89,091 | 1,124,614 | 8.6 | % | ||||||||
Deposits – Savings | 432,389 | (14,346 | ) | 418,043 | (3.3 | )% | |||||||
Deposits – Brokered | 239,875 | (112,356 | ) | 127,519 | (46.8 | )% | |||||||
Deposits – Internet time | 3,428 | (1,983 | ) | 1,445 | (57.8 | )% | |||||||
Deposits – Time>$100,000 | 447,619 | 109,971 | 557,590 | 24.6 | % | ||||||||
Deposits – Time<$100,000 | 264,000 | (4,100 | ) | 259,900 | (1.6 | )% | |||||||
Total deposits | $ | 4,659,339 | 216,043 | 4,875,382 | 4.6 | % | |||||||
Page 50
The mix of our loan portfolio remains substantially the same at September 30, 20172019 compared to December 31, 2016.2018. The majority of our real estate loans are personal and commercial loans where real estate provides additional security for the loan.
Note 6 to the consolidated financial statements presents additional detailed information regarding our mix of loans.
Whileour retail deposits (non-brokered) have experienced growth over recent periods, thein 2019 and comparatively lower loan growth we have experienced has exceeded the retail deposit growth. This is largely associated withallowed us to reduce 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 uselevel of brokered deposits over the periods presented, which have declined by $112 million, or 46.8%, since December 31, 2018. For those same reasons, we were able to pay down our borrowings by $106 million over the same period.
ASSET QUALITY DATA($ in thousands) | As of/for the quarter ended September 30, 2017 | As of/for the quarter ended December 31, 2016 | As of/for the quarter ended September 30, 2016 | |||||||||
Nonperforming assets | ||||||||||||
Nonaccrual loans | $ | 23,350 | 27,468 | 32,796 | ||||||||
Restructured loans – accruing | 20,330 | 22,138 | 27,273 | |||||||||
Accruing loans >90 days past due | — | — | — | |||||||||
Total nonperforming loans | 43,680 | 49,606 | 60,069 | |||||||||
Foreclosed real estate | 9,356 | 9,532 | 10,103 | |||||||||
Total nonperforming assets | $ | 53,036 | 59,138 | 70,172 | ||||||||
Purchased credit impaired loans not included above (1) | $ | 15,034 | — | — | ||||||||
Asset Quality Ratios – All Assets | ||||||||||||
Net charge-offs to average loans - annualized | -0.07% | 0.12% | 0.06% | |||||||||
Nonperforming loans to total loans | 1.27% | 1.83% | 2.27% | |||||||||
Nonperforming assets to total assets | 1.16% | 1.64% | 1.98% | |||||||||
Allowance for loan losses to total loans | 0.72% | 0.88% | 0.93% | |||||||||
Allowance for loan losses to nonperforming loans | 56.30% | 47.94% | 40.91% |
ASSET QUALITY DATA ($ in thousands) | As of/for the quarter ended September 30, 2019 | As of/for the quarter ended December 31, 2018 | |||||
Nonperforming assets | |||||||
Nonaccrual loans | $ | 19,720 | 22,575 | ||||
TDRs – accruing | 9,566 | 13,418 | |||||
Accruing loans >90 days past due | — | — | |||||
Total nonperforming loans | 29,286 | 35,993 | |||||
Foreclosed real estate | 4,589 | 7,440 | |||||
Total nonperforming assets | $ | 33,875 | 43,433 | ||||
Purchased credit impaired loans not included above (1) | $ | 13,798 | 17,393 | ||||
Asset Quality Ratios – All Assets | |||||||
Net charge-offs to average loans - annualized | 0.04 | % | 0.02 | % | |||
Nonperforming loans to total loans | 0.67 | % | 0.85 | % | |||
Nonperforming assets to total assets | 0.56 | % | 0.74 | % | |||
Allowance for loan losses to total loans | 0.44 | % | 0.50 | % | |||
Allowance for loan losses to nonperforming loans | 65.77 | % | 58.45 | % |
(1) | In the March 3, 2017 acquisition of Carolina Bank |
Consistent with the weak economy experienced in much of our market associated with the onset of the recession in 2008, we experienced higher levels of loan losses, delinquencies and nonperforming assets compared to our historical averages. As the economic conditions have improved in our market area over the past several years, we have experienced steady declines in our levels of nonperforming assets.
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As noted in the table above, at September 30, 2017,2019, total nonaccrual loans amounted to $23.4$19.7 million, compared to $27.5$22.6 million at December 31, 20162018. Nonaccrual loans are at low levels and $32.8 million at September 30, 2016. “Restructured loans – accruing”, or troubled debt restructurings (“TDRs”),have generally declined in recent years as our local economies have improved, and we continue to focus on resolving our problem assets.
2018.
($ 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 | ||||||||
($ in thousands) | At September 30, 2019 | At December 31, 2018 | |||||
Commercial, financial, and agricultural | $ | 2,472 | 919 | ||||
Real estate – construction, land development, and other land loans | 1,235 | 2,265 | |||||
Real estate – mortgage – residential (1-4 family) first mortgages | 7,661 | 10,115 | |||||
Real estate – mortgage – home equity loans/lines of credit | 1,878 | 1,685 | |||||
Real estate – mortgage – commercial and other | 6,370 | 7,452 | |||||
Installment loans to individuals | 104 | 139 | |||||
Total nonaccrual loans | $ | 19,720 | 22,575 |
($ in thousands) | At September 30, 2017 | At December 31, 2016 | At September 30, 2016 | |||||||||
Vacant land | $ | 3,617 | 3,221 | 3,324 | ||||||||
1-4 family residential properties | 3,257 | 4,345 | 4,538 | |||||||||
Commercial real estate | 2,482 | 1,966 | 2,241 | |||||||||
Total foreclosed real estate | $ | 9,356 | 9,532 | 10,103 |
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($ in thousands) | At September 30, 2019 | At December 31, 2018 | |||||
Vacant land and farmland | $ | 1,733 | 2,035 | ||||
1-4 family residential properties | 1,220 | 2,311 | |||||
Commercial real estate | 1,636 | 3,094 | |||||
Total foreclosed real estate | $ | 4,589 | 7,440 |
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 | ||||||||||
As of September 30, 2019 | |||||||||||||
($ in thousands) | Total Nonperforming Loans | Total Loans | Nonperforming Loans to Total Loans | Total Foreclosed Real Estate | |||||||||
Region (1) | |||||||||||||
Eastern Region (NC) | $ | 6,344 | 927,000 | 0.68 | % | $ | 617 | ||||||
Triangle Region (NC) | 7,426 | 951,000 | 0.78 | % | 706 | ||||||||
Triad Region (NC) | 4,305 | 885,000 | 0.49 | % | 480 | ||||||||
Charlotte Region (NC) | 950 | 332,000 | 0.29 | % | — | ||||||||
Southern Piedmont Region (NC) | 3,185 | 285,000 | 1.12 | % | 360 | ||||||||
Western Region (NC) | 673 | 667,000 | 0.10 | % | 738 | ||||||||
South Carolina Region | 765 | 163,000 | 0.47 | % | 822 | ||||||||
Former Virginia Region | 191 | 1,000 | 19.10 | % | 444 | ||||||||
Other | 5,447 | 186,000 | 2.93 | % | 422 | ||||||||
Total | $ | 29,286 | 4,397,000 | 0.67 | % | $ | 4,589 |
(1) | The counties comprising each region are as follows: |
Henderson, McDowell, Madison, Transylvania
We recorded no provision for loan losses in the third quarters of 2017 or 2016. For the nine months ended September 30, 2017, we recorded total provision for loan losses of $0.7 million compared to a total negative provision for loan losses of $23,000 in the same period of 2016. The negative provision in 2016 was primarily due to significant recoveries on covered loans.
($ in thousands) | Nine Months Ended September 30, | Twelve Months Ended December 31, | Nine Months Ended September 30, | |||||||||
2017 | 2016 | 2016 | ||||||||||
Loans outstanding at end of period | $ | 3,429,755 | 2,710,712 | 2,651,459 | ||||||||
Average amount of loans outstanding | $ | 3,211,844 | 2,603,327 | 2,576,605 | ||||||||
Allowance for loan losses, at beginning of year | $ | 23,781 | 28,583 | 28,583 | ||||||||
Provision (reversal) for loan losses | 723 | (23 | ) | (23 | ) | |||||||
24,504 | 28,560 | 28,560 | ||||||||||
Loans charged off: | ||||||||||||
Commercial, financial, and agricultural | (1,335 | ) | (2,033 | ) | (1,273 | ) | ||||||
Real estate – construction, land development & other land loans | (312 | ) | (1,101 | ) | (638 | ) | ||||||
Real estate – mortgage – residential (1-4 family) first mortgages | (1,746 | ) | (3,894 | ) | (3,461 | ) | ||||||
Real estate – mortgage – home equity loans / lines of credit | (791 | ) | (1,010 | ) | (970 | ) | ||||||
Real estate – mortgage – commercial and other | (573 | ) | (1,088 | ) | (933 | ) | ||||||
Installment loans to individuals | (521 | ) | (1,288 | ) | (741 | ) | ||||||
Total charge-offs | (5,278 | ) | (10,414 | ) | (8,016 | ) | ||||||
Recoveries of loans previously charged-off: | ||||||||||||
Commercial, financial, and agricultural | 848 | 817 | 614 | |||||||||
Real estate – construction, land development & other land loans | 2,280 | 2,690 | 2,066 | |||||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 806 | 1,207 | 820 | |||||||||
Real estate – mortgage – home equity loans / lines of credit | 250 | 279 | 217 | |||||||||
Real estate – mortgage – commercial and other | 973 | 1,286 | 1,052 | |||||||||
Installment loans to individuals | 210 | 406 | 312 | |||||||||
Total recoveries | 5,367 | 6,685 | 5,081 | |||||||||
Net (charge-offs)/recoveries | 89 | (3,729 | ) | (2,935 | ) | |||||||
Allowance removed related to sold loans | — | (1,050 | ) | (1,050 | ) | |||||||
Allowance for loan losses, at end of period | $ | 24,593 | 23,781 | 24,575 | ||||||||
Ratios: | ||||||||||||
Net charge-offs as a percent of average loans (annualized) | 0.00% | 0.14% | 0.15% | |||||||||
Allowance for loan losses as a percent of loans at end of period | 0.72% | 0.88% | 0.93% | |||||||||
The
($ in thousands) | Nine Months Ended September 30, 2019 | Twelve Months Ended December 31, 2018 | Nine Months Ended September 30, 2018 | ||||||
Loans outstanding at end of period | $ | 4,396,544 | 4,249,064 | 4,190,628 | |||||
Average amount of loans outstanding | $ | 4,322,078 | 4,161,838 | 4,141,645 | |||||
Allowance for loan losses, at beginning of year | $ | 21,039 | 23,298 | 23,298 | |||||
Provision (reversal) for loan losses | (913 | ) | (3,589 | ) | (4,282 | ) | |||
20,126 | 19,709 | 19,016 | |||||||
Loans charged off: | |||||||||
Commercial, financial, and agricultural | (1,224 | ) | (2,128 | ) | (1,542 | ) | |||
Real estate – construction, land development & other land loans | (340 | ) | (158 | ) | (158 | ) | |||
Real estate – mortgage – residential (1-4 family) first mortgages | (379 | ) | (1,734 | ) | (1,598 | ) | |||
Real estate – mortgage – home equity loans / lines of credit | (216 | ) | (711 | ) | (378 | ) | |||
Real estate – mortgage – commercial and other | (1,455 | ) | (1,459 | ) | (1,398 | ) | |||
Installment loans to individuals | (555 | ) | (781 | ) | (494 | ) | |||
Total charge-offs | (4,169 | ) | (6,971 | ) | (5,568 | ) | |||
Recoveries of loans previously charged-off: | |||||||||
Commercial, financial, and agricultural | 768 | 1,195 | 971 | ||||||
Real estate – construction, land development & other land loans | 797 | 4,097 | 3,568 | ||||||
Real estate – mortgage – residential (1-4 family) first mortgages | 521 | 833 | 671 | ||||||
Real estate – mortgage – home equity loans / lines of credit | 513 | 364 | 294 | ||||||
Real estate – mortgage – commercial and other | 550 | 1,503 | 1,333 | ||||||
Installment loans to individuals | 154 | 309 | 261 | ||||||
Total recoveries | 3,303 | 8,301 | 7,098 | ||||||
Net (charge-offs) recoveries | (866 | ) | 1,330 | 1,530 | |||||
Allowance for loan losses, at end of period | $ | 19,260 | 21,039 | 20,546 | |||||
Ratios: | |||||||||
Net charge-offs (recoveries) as a percent of average loans (annualized) | 0.03 | % | (0.03 | )% | (0.05 | )% | |||
Allowance for loan losses as a percent of loans at end of period | 0.44 | % | 0.50 | % | 0.49 | % |
The allowance for loan losses amounted to $24.6 million at September 30, 2017, compared to $23.8 million at December 31, 2016 and $24.6 million at September 30, 2016. recorded.
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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.
2018.
2018.
2019.
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The Company is regulated by the Board of Governors of the Federal Reserve Board (“Federal Reserve”) 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 North Carolina Office of the Commissioner of Banks. 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.
September 30, 2017 | December 31, 2016 | September 30, 2016 | ||||||||||
Risk-based capital ratios: | ||||||||||||
Common equity Tier 1 to Tier 1 risk weighted assets | 10.30% | 10.92% | 10.67% | |||||||||
Minimum required Common equity Tier 1 capital | 4.50% | 4.50% | 4.50% | |||||||||
Tier I capital to Tier 1 risk weighted assets | 11.74% | 12.49% | 12.57% | |||||||||
Minimum required Tier 1 capital | 6.00% | 6.00% | 6.00% | |||||||||
Total risk-based capital to Tier II risk weighted assets | 12.44% | 13.36% | 13.49% | |||||||||
Minimum required total risk-based capital | 8.00% | 8.00% | 8.00% | |||||||||
Leverage capital ratios: | ||||||||||||
Tier 1 capital to quarterly average total assets | 9.72% | 10.17% | 10.22% | |||||||||
Minimum required Tier 1 leverage capital | 4.00% | 4.00% | 4.00% |
September 30, 2019 | December 31, 2018 | |||||
Risk-based capital ratios: | ||||||
Common equity Tier 1 to Tier 1 risk weighted assets | 13.27 | % | 12.28 | % | ||
Minimum required Common equity Tier 1 capital | 7.00 | % | 6.375 | % | ||
Tier I capital to Tier 1 risk weighted assets | 14.44 | % | 13.48 | % | ||
Minimum required Tier 1 capital | 8.50 | % | 7.875 | % | ||
Total risk-based capital to Tier II risk weighted assets | 14.88 | % | 13.97 | % | ||
Minimum required total risk-based capital | 10.50 | % | 9.875 | % | ||
Leverage capital ratios: | ||||||
Tier 1 capital to quarterly average total assets | 11.17 | % | 10.47 | % | ||
Minimum required Tier 1 leverage capital | 4.00 | % | 4.00 | % |
Our capital ratios are generally lower at September 30, 2017 compared to prior periods due to the acquisition of Carolina Bank in March 2017 (see Note 4 to the Consolidated Financial Statements for more information on this transaction).
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In addition to regulatory capital ratios, we also closely monitor our ratio of tangible common equity to tangible assets (“TCE Ratio”). Our TCE ratio was 7.95% at September 30, 2017 compared to 8.16% at December 31, 2016 and 8.03% at September 30, 2016.
announced a quarterly cash dividend of $0.12 per share payable on October 25, 2019 to shareholders of record on September 30, 2019. The dividend rate represents a 20% increase over the previous dividend rate of $0.10 the Company declared in the third quarter of 2018.
Overall, the Company's interest rate modeling indicates that the Company is slightly asset sensitive in a 1-2 year horizon.
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 yields2019 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.
$17.3 million at December 31, 2018.
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.
Page 59
Issuer Purchases of Equity Securities | |||||||||||||||
Period | Total Number of Shares Purchased (2) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1) | |||||||||||
July 1, 2019 to July 31, 2019 | — | $ | — | $ | — | $ | 18,475,917 | ||||||||
August 1, 2019 to August 31, 2019 | 99,625 | 34.89 | 3,475,797 | $ | 15,000,120 | ||||||||||
September 1, 2019 to September 30, 2019 | — | — | — | $ | 15,000,120 | ||||||||||
Total | 99,625 | 34.89 | 3,475,797 | $ | 15,000,120 |
(1) | All shares available for repurchase are pursuant to publicly announced share repurchase authorizations. On |
(2) | The table above does not include shares that were used by option holders to satisfy the exercise price of the call options issued by the Company to its employees and directors pursuant to the Company’s stock option plans. There were no such exercises during the three months ended September 30, |
2.a |
2.b |
2.c |
2.d |
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3.a | Articles of Incorporation of the Company and amendments thereto were filed asExhibits 3.a.i through 3.a.v to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2002, and are incorporated herein by reference. Articles of Amendment to the Articles of Incorporation were filed asExhibits 3.1and3.2tothe Company’s Current Report on Form 8-K filed on January 13, 2009, and are incorporated herein by reference. Articles of Amendment to the Articles of Incorporation were filed asExhibit 3.1.b to the Company’s Registration Statement on Form S-3D filed on June 29, 2010 |
3.b |
4.a |
31.1 |
31.2 |
32.1 |
32.2 |
101 | The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, |
FIRST BANCORP | |||
November 8, 2019 | BY:/s/ Richard H. Moore | ||
Richard H. Moore Chief Executive Officer (Principal Executive Officer), and Director | |||
November 8, 2019 | |||
BY:/s/ Eric P. Credle | |||
Eric P. Credle | |||
Executive Vice President | |||
and Chief Financial Officer |