FORM10-Q
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
| Tennessee | 20-8839445 | |||||
(State or other jurisdiction of
| (I.R.S. Employer
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N/A
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
| Common Stock, no par value | FSB | New York Stock Exchange | ||||||
| Large accelerated filer | ☐ | Accelerated filer | ☒ | ||||||||||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ☐ | ||||||||||||||||
| Emerging growth company | ☐ | ||||||||||||||||||
14,919,433.
23456727474848484949494950
Impact of the COVID-19 Pandemic ASSETS Cash and due from financial institutions Certificates of deposit at other financial institutions Securities available for sale Securities held to maturity (fair value 2017—$220,089 and 2016—$227,892) Loans held for sale, at fair value Loans Allowance for loan losses Net loans Restricted equity securities, at cost Premises and equipment, net Accrued interest receivable Bank owned life insurance Deferred tax asset Foreclosed assets Servicing rights, net Goodwill Core deposit intangible, net Other assets Total assets LIABILITIES AND EQUITY Deposits Non-interest bearing Interest bearing Total deposits Federal Home Loan Bank advances Federal funds purchased and repurchase agreements Subordinated notes, net Accrued interest payable Other liabilities Total liabilities Equity Preferred stock, no par value: 1,000,000 shares authorized; no shares outstanding at September 30, 2017 and December 31, 2016 Common stock, no par value: 30,000,000 and 20,000,000 shares authorized at September 30, 2017 and December 31, 2016, respectively; 13,209,055 and 13,036,954 issued at September 30, 2017 and December 31, 2016, respectively Retained earnings Accumulated other comprehensive loss Total shareholders’ equity Noncontrolling interest in consolidated subsidiary Total equity Total liabilities and equity Three Months Ended September 30, Nine Months Ended September 30, Interest income and dividends Loans, including fees Securities: Taxable Tax-Exempt Dividends on restricted equity securities Federal funds sold and other Total interest income Interest expense Deposits Federal funds purchased and repurchase agreements Federal Home Loan Bank advances Subordinated notes and other borrowings Total interest expense Net interest income Provision for loan losses Net interest income after provision for loan losses Noninterest income Service charges on deposit accounts Other service charges and fees Net gains on sale of loans Wealth management Loan servicing fees, net Gain on sale or call of securities Net (loss) gain on sale of foreclosed assets Other Total noninterest income Noninterest expense Salaries and employee benefits Occupancy and equipment FDIC assessment expense Marketing Professional fees Amortization of core deposit intangible Other Total noninterest expense Income before income tax expense Income tax expense Net income Earnings attributable to noncontrolling interest Dividends paid on Series A preferred stock Net income available to common shareholders Earnings per share: Basic Diluted Three Months Ended September 30, Nine Months Ended September 30, Net income Other comprehensive income, net of tax: Unrealized gains on securities: Unrealized holding gain (loss) arising during the period Reclassification adjustment for gains included in net income Net unrealized gains (losses) Tax effect Total other comprehensive income (loss) Comprehensive income March 31, 2019 Accumulated Other Balance at December 31, 2015 Exercise of common stock options, net Exercise of common stock warrants Redemption of Series A preferred stock Dividends paid on Series A preferred stock Stock based compensation expense, net of restricted share forfeitures Stock issued (divestment) in conjunction with 401(k) employer match, net of distributions Net income Other comprehensive income Balance at September 30, 2016 Balance at December 31, 2016 Exercise of common stock options, net Exercise of common stock warrants Stock based compensation expense, net of restricted share forfeitures Stock issued (divestment) in conjunction with 401(k) employer match, net of distributions Earnings attributable to noncontrolling interest Net income Other comprehensive income Balance at September 30, 2017 Nine Months Ended September 30, Cash flows from operating activities Net income Adjustments to reconcile net income to net cash from operating activities Depreciation and amortization on premises and equipment Accretion of purchase accounting adjustments Net amortization of securities Amortization of loan servicing right asset Amortization of core deposit intangible Amortization of debt issuance costs Provision for loan losses Deferred income tax benefit Origination of loans held for sale Proceeds from sale of loans held for sale Net gain on sale of loans Gain on sale of available for sale securities Income from bank owned life insurance Net loss/(gain) on foreclosed assets Loss on sale of assets held for sale Stock-based compensation Compensation expense related to common stock issued to 401(k) plan Deferred gain on sale of loans Net change in: Accrued interest receivable and other assets Accrued interest payable and other liabilities Net cash from operating activities Cash flows from investing activities Securities available for sale : Sales Purchases Maturities, prepayments and calls Securities held to maturity : Purchases Maturities, prepayments and calls Net change in loans Proceeds from sale of assets held for sale Purchase of restricted equity securities Proceeds from sale of foreclosed assets Purchases of premises and equipment, net Capitalization of foreclosed assets Increase in certificates of deposits at other financial institutions Net cash from investing activities Cash flows from financing activities Increase in deposits Decrease in federal funds purchased and repurchase agreements Proceeds from Federal Home Loan Bank advances Repayment of Federal Home Loan Bank advances Proceeds from other borrowings Repayment of other borrowings Proceeds from issuance of subordinated notes, net of issuance costs Proceeds from exercise of common stock warrants Proceeds from exercise of common stock options Divestment of common stock issued to 401(k) plan Redemption of Series A preferred stock Dividends paid on preferred stock Earnings attributable to noncontrolling interest Net cash from financing activities Net change in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Supplemental information: Interest paid Income taxes paid Non-cash supplemental information: Transfers from loans to foreclosed assets Transfers from loans to loans held for sale September 30, 2017 U.S. government sponsored entities and agencies Mortgage-backed securities: residential Mortgage-backed securities: commercial State and political subdivisions U.S Treasury bills Total December 31, 2016 Mortgage-backed securities: residential Mortgage-backed securities: commercial State and political subdivisions Total September 30, 2017 Mortgage backed securities: residential State and political subdivisions Total December 31, 2016 U.S. government sponsored entities and agencies Mortgage backed securities: residential State and political subdivisions Total 2019. Three Months Ended September 30, Nine Months Ended September 30, Proceeds Gross gains Gross losses Available for sale One year or less Over one year through five years Over five years through ten years Over ten years Mortgage-backed securities: residential Mortgage-backed securities: commercial Total Held to maturity Over one year through five years Over five years through ten years Over ten years Mortgage-backed securities: residential Total deposits. September 30, 2017 Available for sale U.S. government sponsored entities and agencies Mortgage-backed securities: Residential Mortgage-backed securities: Commercial State and political subdivisions U.S. Treasury bills Total available for sale Held to maturity Mortgage-backed securities: residential State and political subdivisions Total held to maturity December 31, 2016 Available for sale Mortgage-backed securities: residential Mortgage-backed securities: commercial State and political subdivisions Total available for sale Held to maturity Mortgage-backed securities: residential State and political subdivisions Total held to maturity Loans that are not PCI loans Construction and land development Commercial real estate: Nonfarm, nonresidential Other Residential real estate: Closed-end1-4 family Other Commercial and industrial Consumer and other Loans before net deferred loan fees Deferred loan fees, net Total loans that are not PCI loans Total PCI loans Allowance for loan losses Total loans, net of allowance for loan losses Three Months Ended September 30, 2017 Allowance for loan losses: Beginning balance Provision for loan losses Loanscharged-off Recoveries Total ending allowance balance Three Months Ended September 30, 2016 Allowance for loan losses: Beginning balance Provision for loan losses Loanscharged-off Recoveries Total ending allowance balance Nine Months Ended September 30, 2017 Allowance for loan losses: Beginning balance Provision for loan losses Loanscharged-off Recoveries Total ending allowance balance Nine Months Ended September 30, 2016 Allowance for loan losses: Beginning balance Provision for loan losses Loanscharged-off Recoveries Total ending allowance balance 2019: September 30, 2017 Allowance for loan losses: Ending allowance balance attributable to loans: Individually evaluated for impairment Collectively evaluated for impairment Purchased credit-impaired loans Total ending allowance balance Loans: Individually evaluated for impairment Collectively evaluated for impairment Purchased credit-impaired loans Total ending loans balance December 31, 2016 Allowance for loan losses: Ending allowance balance attributable to loans: Individually evaluated for impairment Collectively evaluated for impairment Purchased credit-impaired loans Total ending allowance balance Loans: Individually evaluated for impairment Collectively evaluated for impairment Purchased credit-impaired loans Total ending loans balance September 30, 2017 With no allowance recorded: Construction and land development Commercial real estate: Nonfarm, nonresidential Residential real estate: Closed-end1-4 family Other Commercial and industrial Consumer and other Subtotal With an allowance recorded: Commercial and industrial Subtotal Total December 31, 2016 With no allowance recorded: Construction and land development Commercial real estate: Nonfarm, nonresidential Residential real estate: Closed-end1-4 family Other Commercial and industrial Subtotal With an allowance recorded: Commercial and industrial Subtotal Total 2019: Three Months Ended September 30, Nine Months Ended September 30, Average Recorded Investment With no allowance recorded: Construction and land development Commercial real estate: Nonfarm, nonresidential Residential real estate: Closed-end1-4 family Other Commercial and industrial Consumer and other Subtotal With an allowance recorded: Commercial and industrial Residential real estate: Closed-end1-4 family Subtotal Total 2019: 2019. September 30, 2017 Residential real estate: Closed-end1-4 family Other Commercial and industrial Total December 31, 2016 Construction and land development Commercial real estate: Nonfarm, nonresidential Residential real estate: Closed-end1-4 family Other Commercial and industrial Total 2019: September 30, 2017 Construction and land development Commercial real estate: Nonfarm, nonresidential Other Residential real estate: Closed-end1-4 family Other Commercial and industrial Consumer and other December 31, 2016 Construction and land development Commercial real estate: Nonfarm, nonresidential Other Residential real estate: Closed-end1-4 family Other Commercial and industrial Consumer and other September 30, 2017 Construction and land development Commercial real estate: Nonfarm, nonresidential Other Residential real estate: Closed-end1-4 family Other Commercial and industrial Consumer and other December 31, 2016 Construction and land development Commercial real estate: Nonfarm, nonresidential Other Residential real estate: 1-4 family Other Commercial and industrial Consumer and other 2019: the CARES Act provided clarity to accounting for modifications whereby under certain circumstances, such modifications would not be considered troubled debt restructurings ("TDRs"). As such, the aforementioned modified loans have not been classified as TDRs. Loan portfolios serviced for: Federal Home Loan Mortgage Corporation Other Loan servicing fees, net: Loan servicing fees Amortization of loan servicing fees Change in impairment Total Stock warrants exercised: Intrinsic value of warrants exercised Cash received from warrants exercised The 2007 Plan Risk-free interest rate Expected term Expected stock price volatility Dividend yield March 31, 2019 was $10.01. Outstanding at beginning of year Granted Exercised Forfeited, expired, or cancelled Outstanding at period end Vested or expected to vest Exercisable at period end Stock options exercised: Intrinsic value of options exercised Cash received from options exercised Tax benefit realized from option exercises Non-vested Shares Non-vested at December 31, 2016 Granted Vested Forfeited Non-vested at September 30, 2017 Plan. The cost is expected to be recognized over a weighted-average period of 2.25 years. September 30, 2017 Company common equity Tier 1 capital to risk-weighted assets Company Total Capital to risk weighted assets Company Tier 1 (Core) Capital to risk weighted assets Company Tier 1 (Core) Capital to average assets Bank common equity Tier 1 capital to risk-weighted assets Bank Total Capital to risk weighted assets Bank Tier 1 (Core) Capital to risk weighted assets Bank Tier 1 (Core) Capital to average assets December 31, 2016 Company common equity Tier 1 capital to risk-weighted assets Company Total Capital to risk weighted assets Company Tier 1 (Core) Capital to risk weighted assets Company Tier 1 (Core) Capital to average assets Bank common equity Tier 1 capital to risk-weighted assets Bank Total Capital to risk weighted assets Bank Tier 1 (Core) Capital to risk weighted assets Bank Tier 1 (Core) Capital to average assets for the Bank as of March 31, 2020, and December 31, 2019, based on the Basel III Capital Rules discussed above. by the Bank. estimated net cash flows based on industry market data. The valuation model incorporates assumptions that market participants would use in estimating future net cash flows resulting in a Level 3 classification. Financial Assets Securities available for sale U.S. government sponsored entities and agencies Mortgage-backed securities-residential Mortgage-backed securities-commercial State and political subdivisions U.S. Treasury bills Total securities available for sale Loans held for sale Mortgage banking derivatives Financial Liabilities Mortgage banking derivatives Financial Assets Securities available for sale Mortgage-backed securities-residential Mortgage-backed securities-commercial State and political subdivisions Total securities available for sale Loans held for sale Mortgage banking derivatives Financial Liabilities Mortgage banking derivatives values at March 31, 2020 and December 31, 2019. Financial assets Cash and cash equivalents Certificates of deposit held at other financial institutions Securities available for sale Securities held to maturity Loans held for sale Net loans Restricted equity securities Servicing rights, net Mortgage banking derivative assets Accrued interest receivable Financial liabilities Deposits Repurchase agreements Federal Home Loan Bank advances Subordinated notes, net Mortgage banking derivative liabilities Accrued interest payable Financial assets Cash and cash equivalents Certificates of deposit held at other financial institutions Securities available for sale Securities held to maturity Loans held for sale Net loans Restricted equity securities Servicing rights, net Mortgage banking derivative assets Accrued interest receivable Financial liabilities Deposits Federal funds purchased and repurchase agreements Federal Home Loan Bank advances Subordinated notes, net Mortgage banking derivative liabilities Accrued interest payable value. Three Months Ended September 30, Nine Months Ended September 30, Basic Net income available to common shareholders Less: earnings allocated to participating securities Net income allocated to common shareholders Weighted average common shares outstanding including participating securities Less: Participating securities Average shares Basic earnings per common share Diluted Net income allocated to common shareholders Weighted average common shares outstanding for basic earnings per common share Add: Dilutive effects of assumed exercises of stock options Add: Dilutive effects of assumed exercises of stock warrants Average shares and dilutive potential common shares Diluted earnings per common share Principal amount issued Maturity date Initial fixed interest rate Initial interest rate period First interest rate change date Interest payment frequency through year five* Interest payment frequency after five years* Interest repricing index and margin plus 5.636% plus 6.04% Repricing frequency after five years (All dollar values in this section are in thousands.) (ALLL) ALLL. MARCH 31, 2019 and 2019 quarter. 2019. For the 2019. 2019 with the organic growth in the loan portfolio. For the same period during 2019. 2019: ASSETS: Loans(1)(6) Securities available for sale(6) Securities held to maturity(6) Restricted equity securities Certificates of deposit at other financial institutions Federal funds sold and other(2) TOTAL INTEREST EARNING ASSETS Allowance for loan losses All other assets TOTAL ASSETS LIABILITIES & EQUITY Deposits: Interest checking Money market Savings Time deposits Federal Home Loan Bank advances Federal funds purchased and other(3) Subordinated notes and other borrowings TOTAL INTEREST BEARING LIABILITIES Demand deposits Other liabilities Total equity TOTAL LIABILITIES AND EQUITY NET INTEREST SPREAD(4) NET INTEREST INCOME NET INTEREST MARGIN(5) ASSETS: Loans(1)(6) Securities available for sale(6) Securities held to maturity(6) Restricted equity securities Certificates of deposit at other financial institutions Federal funds sold and other(2) TOTAL INTEREST EARNING ASSETS Allowance for loan losses All other assets TOTAL ASSETS LIABILITIES & EQUITY Deposits: Interest checking Money market Savings Time deposits Federal Home Loan Bank advances Federal funds purchased and other(3) Subordinated notes and other borrowings TOTAL INTEREST BEARING LIABILITIES Demand deposits Other liabilities Total equity TOTAL LIABILITIES AND EQUITY NET INTEREST SPREAD(4) NET INTEREST INCOME NET INTEREST MARGIN(5) INTEREST INCOME Loans Securities available for sale Securities held to maturity Restricted equity securities Certificates of deposit at other financial institutions Federal funds sold and other TOTAL INTEREST INCOME INTEREST EXPENSE Deposits Interest checking Money market accounts Savings Time deposits Federal Home Loan Bank advances Fed funds purchased and other borrowed funds Subordinated Notes and other borrowings TOTAL INTEREST EXPENSE NET INTEREST INCOME INTEREST INCOME Loans Securities available for sale Securities held to maturity Restricted equity securities Certificates of deposit at other financial institutions Federal funds sold and other TOTAL INTEREST INCOME INTEREST EXPENSE Deposits Interest checking Money market accounts Savings Time deposits Federal Home Loan Bank advances Fed funds purchased and other borrowed funds Subordinated notes and other borrowings TOTAL INTEREST EXPENSE NET INTEREST INCOME COVID-19. Service charges on deposit accounts Other service charges and fees Net gains on sale of loans Wealth management Loan servicing fees, net Gain on sales of investment securities, net Net gain on foreclosed assets Other Totalnon-interest income Service charges on deposit accounts Other service charges and fees Net gains on sale of loans Wealth management Loan servicing fees, net Gain on sales of investment securities, net Net gain on foreclosed assets Other Totalnon-interest income its balance sheet management initiatives. Salaries and employee benefits Occupancy and equipment FDIC assessment expense Marketing Professional fees Amortization of core deposit intangible Other Totalnon-interest expense Salaries and employee benefits Occupancy and equipment FDIC assessment expense Marketing Professional fees Amortization of core deposit intangible Other Totalnon-interest expense 2019. The primary drivers are from pre-tax income decreasing $5,321 compared to the same quarter in 2019 as a result of recognizing $7,967 more in provision for loan losses when compared to the same period in 2019. 2020 and December 31, 2019 portfolio. markets. Types of Loans Total loans, excluding purchased credit impaired (“PCI”) loans Real estate: Construction and land development Commercial Residential Commercial and industrial Consumer and other Total loans—gross, excluding PCI loans Total PCI loans Total gross loans Less: deferred loan fees, net Allowance for loan losses Total loans, net allowance for loan losses credit at March 31, 2020, the Company estimates approximately $273,300, or approximately 37%, are available to be drawn by customers without further approval by the Bank. This portfolio has remained steady in absolute dollar terms since 2017, representing a lower corresponding portion of the loan portfolio. March 31, 2020. Real estate: Construction and land development Commercial Residential Commercial and industrial Consumer and other Total Fixed interest rate Variable interest rate Total (ALLL)Quarterly Report on Form10-Q contains “forward-looking statements” as defined under U.S. federal securities laws. Theseforward-looking statements regarding, among other things, our anticipated financial and operating results, the transaction with FB Financial Corporation, the impact of the COVID-19 pandemic, our plans regarding reductions in non-core banking activities and our Corporate and Healthcare loan portfolio. The Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect our management’s current knowledge, assumptions, beliefs, estimates, and expectations and express management’s current views of future performance, results, and trends and may be identified by their use of termsexpectations. Words such as “may,“anticipate,” “would,“believe,” “could,” “should,” “will,“estimate,” “expect,” “anticipate,” “predict,” “project,” “potential,” “continue,” “contemplate,” “seek,” “assume,” “believe,” “intend,” “plan,” “forecast,“objective,” “goal,“may,” “could,” “would,” “should,” “hope,” “pursue,” “seek,” and “estimate,” and other similar terms.expressions are intended to identify forward-looking statements. While we believe that the expectations reflected in our forward-looking statements are reasonable, we can give no assurance that such expectations will prove correct. Forward-looking statements are subject to a number of risks and uncertainties that could cause our actual results to differ materially from those describedthe future results, performance, or achievements expressed in or implied by any forward-looking statement we make. Some of the relevant risks and uncertainties that could cause our actual performance to differ materially from the forward-looking statements.statements contained in this report are discussed under the heading “Risk Factors” and elsewhere in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 16, 2020, and in this Form 10-Q. We caution readers that these discussions of important risks and uncertainties are not exclusive, and our business may be subject to other risks and uncertainties which are not detailed there. Readers shouldare cautioned not to place undue reliance on our forward-looking statements. SuchWe make forward-looking statements are made as of the date ofon which this Quarterly Report on Form10-Q is filed with the SEC, and we undertakeassume no obligation to update suchthe forward-looking statements after this date.Risks and uncertaintiesthe date hereof whether as a result of new information or events, changed circumstances, or otherwise, except as required by law.describedindicated in these forward-looking statements, include those discussedincluding, but not limited to, the following:filingstarget markets, particularly in Middle Tennessee and the geographic areas in which we operate;Securitiessections entitled “Risk Factors” and Exchange Commission (“SEC”), including those described“Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 1A of our Annual Report on Form10-K filed March 16, 2020 with the SEC, as well as the section below entitled “Statement Regarding the Impact of the COVID-19 Pandemic” and the section entitled “Risk Factors” in this Form 10-Q. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from our forward-looking statements. New risks and uncertainties may emerge from time to time, and it is not possible for us to predict their occurrence or how they will affect us.year ended December 31, 2016. September 30,
2017 December 31,
2016 (Unaudited) $ 155,842 $ 90,927 2,365 1,055 980,737 754,755 217,312 228,894 11,823 23,699 2,115,930 1,773,592 (19,944 ) (16,553 ) 2,095,986 1,757,039 18,472 11,843 11,217 9,551 11,156 9,931 23,732 23,267 13,592 15,013 1,503 — 3,639 3,621 9,124 9,124 1,117 1,480 7,663 2,990 $ 3,565,278 $ 2,943,189 $ 257,177 $ 233,781 2,567,648 2,158,037 2,824,825 2,391,818 337,000 132,000 32,862 83,301 58,470 58,337 2,597 1,924 5,827 5,448 3,261,581 2,672,828 — — 221,642 218,354 85,075 59,386 (3,123 ) (7,482 ) 303,594 270,258 103 103 $ 303,697 $ 270,361 $ 3,565,278 $ 2,943,189 March 31,
2020December 31,
2019(Unaudited) ASSETS Cash and due from financial institutions $ 173,482 $ 234,991 Certificates of deposit at other financial institutions 3,345 3,590 Securities available for sale 543,225 652,132 Loans held for sale, at fair value 42,682 43,162 Loans held for investment 2,855,768 2,812,444 Allowance for loan losses (38,403) (45,436) Net loans 2,817,365 2,767,008 Restricted equity securities, at cost 24,844 24,802 Premises and equipment, net 48,470 12,141 Accrued interest receivable 12,043 12,362 Bank owned life insurance 57,082 56,726 Deferred tax asset 12,846 14,229 Servicing rights, net 3,057 3,246 Goodwill 18,176 18,176 Core deposit intangible, net 354 448 Other assets 34,630 53,149 Total assets $ 3,791,601 $ 3,896,162 LIABILITIES AND EQUITY Deposits Non-interest bearing $ 387,195 $ 319,373 Interest bearing 2,750,276 2,888,211 Total deposits 3,137,471 3,207,584 Federal Home Loan Bank advances 135,000 155,000 Subordinated notes, net 58,916 58,872 Accrued interest payable 3,179 4,201 Other liabilities 48,187 60,079 Total liabilities 3,382,753 3,485,736 Commitments and Contingencies (Note 9) Equity Preferred stock, no par value: 1.0 million shares authorized; 0 shares outstanding at March 31, 2020 and December 31, 2019 — — Common stock, no par value: 30.0 million authorized; 14.9 million issued and outstanding at March 31, 2020 and 14.8 million issued and outstanding December 31, 2019, respectively 277,341 275,412 Retained earnings 131,061 133,102 Accumulated other comprehensive income 353 1,819 Total shareholders’ equity 408,755 410,333 Non-controlling interest in consolidated subsidiary 93 93 Total equity 408,848 410,426 Total liabilities and equity $ 3,791,601 $ 3,896,162 2017 2016 2017 2016 $ 25,973 $ 20,192 $ 73,195 $ 56,864 5,041 3,889 16,358 11,402 2,217 1,457 6,449 3,776 269 133 663 354 280 53 667 175 33,780 25,724 97,332 72,571 7,311 3,683 19,118 10,118 92 69 309 237 968 215 2,228 511 1,083 1,082 3,239 1,820 9,454 5,049 24,894 12,686 24,326 20,675 72,438 59,885 590 1,392 3,018 4,095 23,736 19,283 69,420 55,790 39 44 114 139 787 845 2,297 2,245 1,517 2,942 5,918 6,859 643 446 1,884 1,343 70 (40 ) 230 (2 ) 350 430 470 1,535 (16 ) 30 (10 ) 36 179 179 554 432 3,569 4,876 11,457 12,587 9,011 7,979 26,172 22,099 2,399 2,001 6,689 5,563 900 570 2,675 1,388 192 206 744 611 821 935 2,558 3,006 115 138 363 431 1,840 1,879 5,636 5,354 15,278 13,708 44,837 38,542 12,027 10,451 36,040 29,925 3,138 3,314 10,343 9,047 8,889 7,137 25,697 20,878 — — (8 ) — — — — (23 ) $ 8,889 $ 7,137 $ 25,689 $ 20,855 $ 0.67 $ 0.67 $ 1.96 $ 1.96 0.65 0.63 1.86 1.84 Three Months Ended
March 31,2020 2019 Interest income and dividends Loans, including fees $ 37,038 $ 38,338 Securities: Taxable 2,424 6,394 Tax-Exempt 1,383 1,470 Dividends on restricted equity securities 162 334 Federal funds sold and other 600 987 Total interest income 41,607 47,523 Interest expense Deposits 12,246 16,990 Federal funds purchased and repurchase agreements 14 72 Federal Home Loan Bank advances and other borrowings 801 1,959 Subordinated notes 1,082 1,082 Total interest expense 14,143 20,103 Net interest income 27,464 27,420 Provision for loan losses 13,022 5,055 Net interest income after provision for loan losses 14,442 22,365 Noninterest income Service charges on deposit accounts 92 74 Other service charges and fees 897 757 Mortgage banking revenue 2,685 1,672 Wealth management 814 627 Gain on sale or call of securities 1,396 149 Net loss on sale of loans held for investment (416) (217) Net gain on sale of foreclosed assets 2 4 Other 423 420 Total noninterest income 5,893 3,486 Noninterest expense Salaries and employee benefits 12,580 14,743 Occupancy and equipment 3,086 3,113 FDIC assessment (income) expense 450 990 Marketing 245 319 Professional fees 3,068 923 Amortization of core deposit intangible 94 145 Other 2,898 2,383 Total noninterest expense 22,421 22,616 (Loss) income before income tax expense (2,086) 3,235 Income tax (benefit) expense (938) 334 Net (loss) income (1,148) 2,901 Earnings attributable to noncontrolling interest — — Net (loss) income available to common shareholders $ (1,148) $ 2,901 (Loss) earnings per share: Basic $ (0.08) $ 0.20 Diluted (0.08) 0.19 2017 2016 2017 2016 $ 8,889 $ 7,137 $ 25,697 $ 20,878 1,610 (3,664 ) 7,641 13,910 (350 ) (430 ) (470 ) (1,535 ) 1,260 (4,094 ) 7,171 12,375 (494 ) 1,606 (2,812 ) (4,854 ) 766 (2,488 ) 4,359 7,521 $ 9,655 $ 4,649 $ 30,056 $ 28,399 Three Months Ended
March 31,2020 2019 Net (loss) income $ (1,148) $ 2,901 Other comprehensive income (loss), net of tax: Unrealized gains/losses on securities: Unrealized holding gains (losses) arising during the period 1,739 13,111 Reclassification adjustment for losses (gains) on sales, calls, and prepayments of securities included in net income (1,396) (149) Tax effect, includes $365 and $58, respectively, income tax (benefit) expense from sales of securities (80) (4,208) Net unrealized gains (losses) on securities 263 8,754 Unrealized gain/loss on cash flow hedge: Unrealized holding gain (loss) arising during the period (2,341) — Tax effect 612 — Net unrealized gains (losses) on cash flow hedge (1,729) — Total other comprehensive (loss) income (1,466) 8,754 Comprehensive (loss) income $ (2,614) $ 11,655 NineSeptember 30, 2017March 31, 2020 and 2016 Preferred Common Stock Retained Comprehensive Noncontrolling Total Stock Shares Amount Earnings Income (Loss) Interest Equity $ 10,000 10,571,377 $ 147,784 $ 31,352 $ (320 ) $ — $ 188,816 — 152,003 1,357 — 1,357 — 6,575 79 — 79 (10,000 ) — — — — — (10,000 ) — — — (23 ) — — (23 ) — 34,480 1,201 — — — 1,201 — (6,952 ) (185 ) — — — (185 ) — — — 20,878 — — 20,878 — — — — 7,521 — 7,521 $ — 10,757,483 $ 150,236 $ 52,207 $ 7,201 — $ 209,644 $ — 13,036,954 $ 218,354 $ 59,386 $ (7,482 ) 103 $ 270,361 — 138,007 1,361 — — — 1,361 — 12,461 150 — — — 150 — 26,718 1,970 — — — 1,970 — (5,085 ) (193 ) — — — (193 ) — — — (8 ) — — (8 ) — — — 25,697 — — 25,697 — — — — 4,359 — 4,359 $ — 13,209,055 $ 221,642 $ 85,075 $ (3,123 ) $ 103 $ 303,697 Shareholders’ Equity Preferred Stock Common Stock Retained Earnings Accumulated
Other
Comprehensive Income (Loss)Noncontrolling Interest Total Equity Shares Amount Balance at January 1, 2019 $ — 14,538,085 $ 264,905 $ 123,176 $ (15,341) $ 93 $ 372,833 (2,244) (2,244) Exercise of common stock options, includes net settlement of shares — 35,046 524 — — — 524 Stock based compensation expense, net of restricted share forfeitures — — 1,329 — — — 1,329 Issuance of restricted stock awards, net of forfeitures — 1,208 — — — — — Cash Dividends - common stock ($0.04 per share) (583) (583) Net income — — — 2,901 — — 2,901 Other comprehensive income — — — — 8,754 — 8,754 Balance at March 31, 2019 $ — 14,574,339 $ 266,758 $ 123,250 $ (6,587) $ 93 $ 383,514 Balance at January 1, 2020 $ — 14,821,594 $ 275,412 $ 133,102 $ 1,819 $ 93 $ 410,426 Exercise of common stock options, includes net settlement of shares — 37,416 417 — — — 417 Stock based compensation expense, net of restricted share forfeitures — — 1,512 — — — 1,512 Issuance of restricted stock awards, net of forfeitures, and vesting of restricted stock units — 694 — — — — — Cash dividends - common stock ($0.06 per share) — — — (893) — — (893) Net loss — — — (1,148) — — (1,148) Other comprehensive loss — — — — (1,466) — (1,466) Balance at March 31, 2020 $ — 14,859,704 $ 277,341 $ 131,061 $ 353 $ 93 $ 408,848 2017 2016 $ 25,697 $ 20,878 1,118 986 (873 ) (488 ) 7,654 5,428 721 905 363 431 133 79 3,018 4,095 (1,394 ) (1,015 ) (270,876 ) (260,598 ) 290,669 253,701 (5,918 ) (6,859 ) (470 ) (1,535 ) (465 ) (486 ) 10 (36 ) — 98 1,970 1,201 — 404 (58 ) (46 ) (5,949 ) (1,033 ) 1,120 2,261 46,470 18,371 122,837 74,203 (455,700 ) (223,432 ) 108,339 64,502 (1,996 ) (92,646 ) 12,110 14,088 (346,595 ) (349,944 ) — 1,542 (6,629 ) (3,831 ) 1,330 336 (2,784 ) (2,142 ) (35 ) — (1,310 ) (805 ) (570,433 ) (518,129 ) 433,007 403,915 (50,439 ) (55,243 ) 370,000 305,000 (165,000 ) (200,000 ) — 10,000 — (10,000 ) — 58,213 150 79 1,361 1,357 (193 ) (185 ) — (10,000 ) — (23 ) (8 ) — 588,878 503,113 64,915 3,355 90,927 52,394 $ 155,842 $ 55,749 $ 24,221 $ 11,931 12,380 9,650 $ 2,818 $ — 2,685 — Three Months Ended March 31, 2020 2019 Cash flows from operating activities Net income $ (1,148) $ 2,901 Adjustments to reconcile net income to net cash from operating activities Depreciation and amortization on premises and equipment 585 410 Accretion of purchase accounting adjustments (108) (172) Net amortization of securities 1,335 1,212 Amortization of loan servicing right asset 358 225 Amortization of core deposit intangible 94 145 Amortization of debt issuance costs 44 45 Provision for loan losses 13,022 5,055 Impairment charges on loan servicing right asset 225 — Deferred income tax benefit 1,914 (2,115) Excess tax benefit related to stock compensation (210) (113) Origination of loans held for sale (186,974) (85,008) Proceeds from sale of loans held for sale 188,952 75,791 Net gain on sale of loans held for sale (1,892) (1,598) (Gain) Loss on sale of loans held for investment 416 223 Gain on sale of available for sale securities (1,396) (149) Income from bank owned life insurance (356) (375) Stock-based compensation 1,512 1,329 Deferred gain on sale of loans (4) (4) Deferred gain on sale of foreclosed assets (2) (4) Net change in: Accrued interest receivable and other assets (361) (12,900) Accrued interest payable and other liabilities (4,248) 3,646 Net cash from operating activities $ 11,758 (11,456) Cash flows from investing activities Securities available for sale : Sales and calls 102,426 259,613 Purchases (369) (80,360) Maturities and prepayments 15,663 62,050 Securities held to maturity : Maturities, prepayments and calls — 2,448 Net change in loans (87,662) (142,678) Proceeds from sale of loans held for investment 23,975 — Purchase of restricted equity securities (42) (972) Purchases of premises and equipment, net (36,914) (721) Decrease in certificates of deposits at other financial institutions 245 — Net cash from investing activities $ 17,322 $ 99,380 Cash flows from financing activities (Decrease) increase in deposits (70,113) (115,964) Proceeds from Federal Home Loan Bank advances 95,000 190,000 Repayment of Federal Home Loan Bank advances (115,000) (142,000) Proceeds from exercise of common stock options 417 524 Dividends paid on common stock (893) (583) Net cash from financing activities (90,589) (68,023) Net change in cash and cash equivalents (61,509) 19,901 Cash and cash equivalents at beginning of period 234,991 280,212 Cash and cash equivalents at end of period $ 173,482 $ 300,113 Supplemental information: Interest paid $ 15,166 $ 19,762 Income taxes paid — 1,428 Non-cash supplemental information: Establishment and extinguishment of lease liability and right-of use asset $ (20,243) $ 43,723 Transfers from securities held to maturity to securities available for sale $ — $ 1,206 The accompanying unaudited consolidated financial statements have been prepared in accordance with instructions to Form10-Q and therefore do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, and cash flows in conformity with U.S. generally accepted accounting principles (U.S. GAAP). All adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the periods reported have been included as required by RegulationS-X, Rule10-01. All such adjustments are of a normal recurring nature. It is suggested that these interim consolidated financial statements and notes be read in conjunction with the financial statements and accompanying notes included in the Company’s Annual Report onForm 10-K filed with the SEC on March 16, 2017.available for saleavailable-for-sale portfolio at September 30, 2017March 31, 2020 and December 31, 20162019 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income. Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair
Value $ 20,147 $ — $ (65 ) $ 20,082 729,014 1,113 (5,460 ) 724,667 15,675 — (65 ) 15,610 161,223 2,197 (2,855 ) 160,565 59,816 1 (4 ) 59,813 $ 985,875 $ 3,311 $ (8,449 ) $ 980,737 Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair
Value $ 614,344 $ 949 $ (8,208 ) $ 607,085 19,439 27 (132 ) 19,334 133,280 238 (5,182 ) 128,336 $ 767,063 $ 1,214 $ (13,522 ) $ 754,755 The amortized cost and fair value of theMarch 31, 2020 Mortgage-backed securities: residential $ 286,307 $ 8,369 $ (4) $ 294,672 Mortgage-backed securities: commercial 17,445 336 (86) 17,695 Corporate notes 4,500 108 (85) 4,523 State and political subdivisions 230,728 3,447 (7,840) 226,335 Total $ 538,980 $ 12,260 $ (8,015) $ 543,225 Amortized
CostGross
Unrealized
GainsGross
Unrealized
LossesFair
ValueDecember 31, 2019 Mortgage-backed securities: residential $ 374,923 $ 1,876 $ (856) $ 375,943 Mortgage-backed securities: commercial 17,858 56 (134) 17,780 Corporate notes 32,825 539 (3) 33,361 State and political subdivisions 222,624 2,566 (142) 225,048 Total $ 648,230 $ 5,037 $ (1,135) $ 652,132 held to maturity portfolioheld-to-maturity at September 30, 2017 andMarch 31, 2020 or December 31, 2016 and the corresponding amounts of gross unrecognized gains and losses were as follows: Amortized
Cost Gross
Unrecognized
Gains Gross
Unrecognized
Losses Fair
Value $ 95,560 $ 354 $ (1,502 ) $ 94,412 121,752 3,957 (32 ) 125,677 $ 217,312 $ 4,311 $ (1,534 ) $ 220,089 Gross
Amortized
Cost Gross
Unrecognized
Gains Gross
Unrecognized
Losses Fair
Value $ 203 $ 6 $ — $ 209 106,169 328 (2,343 ) 104,154 122,522 1,214 (207 ) 123,529 $ 228,894 $ 1,548 $ (2,550 ) $ 227,892 callsprepayments of securities available for sale securities and the associated gains and losses were as follows: 2017 2016 2017 2016 $ 61,647 $ 11,939 $ 122,837 $ 74,203 414 430 659 1,920 (64 ) — (189 ) (385 ) Three Months Ended
March 31,2020 2019 Proceeds $ 102,426 $ 259,613 Gross gains 1,424 1,801 Gross losses (28) (1,652) September 30, 2017 Amortized
Cost Fair
Value $ 74,815 $ 74,800 20,147 20,082 4,681 4,811 141,543 140,767 729,014 724,667 15,675 15,610 $ 985,875 $ 980,737 $ 1,607 $ 1,665 6,322 6,496 113,823 117,516 95,560 94,412 $ 217,312 $ 220,089 March 31, 2020 Available-for-sale Over one year through five years $ 1,606 $ 1,642 Over five years through ten years 8,959 8,821 Over ten years 224,663 220,395 Mortgage-backed securities: residential 286,307 294,672 Mortgage-backed securities: commercial 17,445 17,695 Total $ 538,980 $ 543,225 September 30, 2017March 31, 2020, and December 31, 20162019 had a carrying amount of $944,463$287,371 and $808,224,$294,585, respectively, andthat were pledged to secure public deposits and repurchase agreements.September 30, 2017March 31, 2020 and December 31, 2016,2019, there were no holdings of securities of any one issuer, other than the U.S. government-sponsored entities and agencies, in an amount greater than 10% of shareholders’ equity.September 30, 2017March 31, 2020 and December 31, 2016,2019, aggregated by major security type and length of time in a continuous unrealized loss position: Less Than 12 Months 12 Months or Longer Total Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses $ 20,082 $ (65 ) $ — $ — $ 20,082 $ (65 ) 369,300 (2,279 ) 130,043 (3,181 ) 499,343 (5,460 ) 15,610 (65 ) — — 15,610 (65 ) 22,134 (82 ) 61,297 (2,773 ) 83,431 (2,855 ) 19,827 (4 ) — — 19,827 (4 ) $ 446,953 $ (2,495 ) $ 191,340 $ (5,954 ) $ 638,293 $ (8,449 ) Less Than 12 Months 12 Months or Longer Total Fair
Value Unrecognized
Losses Fair
Value Unrecognized
Losses Fair
Value Unrecognized
Losses $ 25,405 $ (335 ) $ 55,224 $ (1,167 ) $ 80,629 $ (1,502 ) 263 (1 ) 1,154 (31 ) 1,417 (32 ) $ 25,668 $ (336 ) $ 56,378 $ (1,198 ) $ 82,046 $ (1,534 ) Less Than 12 Months 12 Months or Longer Total Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses $ 465,416 $ (7,833 ) $ 9,907 $ (375 ) $ 475,323 $ (8,208 ) 15,752 (132 ) — — 15,752 (132 ) 100,020 (5,182 ) — — 100,020 (5,182 ) $ 581,188 $ (13,147 ) $ 9,907 $ (375 ) $ 591,095 $ (13,522 ) Less Than 12 Months 12 Months or Longer Total Fair
Value Unrecognized
Losses Fair
Value Unrecognized
Losses Fair
Value Unrecognized
Losses $ 89,523 $ (2,244 ) $ 3,025 $ (99 ) $ 92,548 $ (2,343 ) 18,907 (207 ) — — 18,907 (207 ) $ 108,430 $ (2,451 ) $ 3,025 $ (99 ) $ 111,455 $ (2,550 ) Less Than 12 Months 12 Months or Longer Total March 31, 2020 Available-for-sale Mortgage-backed securities: residential $ 349 $ (3) $ 1,246 $ (1) $ 1,595 $ (4) Mortgage-backed securities: commercial — — 3,193 (86) 3,193 (86) Corporate notes 1,915 (85) — — 1,915 (85) State and political subdivisions 121,212 (7,840) — — 121,212 (7,840) Total available-for-sale $ 123,476 $ (7,928) $ 4,439 $ (87) $ 127,915 $ (8,015) Less Than 12 Months 12 Months or Longer Total December 31, 2019 Available-for-sale Mortgage-backed securities: residential $ 49,390 $ (172) $ 91,644 $ (684) $ 141,034 $ (856) Asset-backed securities 4,436 (29) 7,286 (105) 11,722 (134) Corporate notes 997 (3) — — 997 (3) State and political subdivisions 29,843 (142) — — 29,843 (142) Total available-for-sale $ 84,666 $ (346) $ 98,930 $ (789) $ 183,596 $ (1,135) quality (rated AA or higher),quality. As of March 31, 2020, management does not intend to sell and it is more likely than not that management will not be required to sell the securities prior to their anticipated recovery, and the decline in fair value is largely due to changes in interest rates and other market conditions. The fair value is expected to recover as the bonds approach maturity.September 30, 2017March 31, 2020 and December 31, 20162019 were as follows: September 30,
2017 December 31,
2016 $ 514,934 $ 489,562 565,536 458,569 33,310 38,571 373,536 254,474 158,577 150,515 464,747 376,476 3,933 3,359 2,114,573 1,771,526 (1,201 ) (793 ) 2,113,372 1,770,733 2,558 2,859 (19,944 ) (16,553 ) $ 2,095,986 $ 1,757,039 March 31,
2020December 31,
2019Loans Construction and land development $ 627,178 $ 591,541 Commercial real estate: Nonfarm, nonresidential 955,348 944,021 Other 42,610 49,891 Residential real estate: Closed-end 1-4 family 456,610 455,920 Other 191,976 187,681 Commercial and industrial 581,598 582,641 Consumer and other 4,454 4,769 Loans before net deferred loan fees 2,859,774 2,816,464 Deferred loan fees, net (4,006) (4,020) Total loans 2,855,768 2,812,444 Allowance for loan losses (38,403) (45,436) Total loans, net of allowance for loan losses $ 2,817,365 $ 2,767,008 three monththree-month periods ended September 30, 2017March 31, 2020 and 2016: Construction
and Land
Development Commercial
Real
Estate Residential
Real
Estate Commercial
and
Industrial Consumer
and
Other Total $ 3,796 $ 5,011 $ 2,939 $ 6,894 $ 49 $ 18,689 (507 ) 212 169 707 9 590 — — — (9 ) (11 ) (20 ) 668 — 14 — 3 685 $ 3,957 $ 5,223 $ 3,122 $ 7,592 $ 50 $ 19,944 $ 3,624 $ 3,865 $ 2,060 $ 4,655 $ 49 $ 14,253 427 43 451 455 16 1,392 (11 ) — (40 ) — (19 ) (70 ) — — 13 — 2 15 $ 4,040 $ 3,908 $ 2,484 $ 5,110 $ 48 $ 15,590 The following table presents the activity in the allowance for loan losses by portfolio segment for the nine-month periods ended September 30, 2017 and 2016: Construction
and Land
Development Commercial
Real
Estate Residential
Real
Estate Commercial
and
Industrial Consumer
and
Other Total $ 3,776 $ 4,266 $ 2,398 $ 6,068 $ 45 $ 16,553 (487 ) 957 687 1,833 28 3,018 — — (1 ) (309 ) (36 ) (346 ) 668 — 38 — 13 719 $ 3,957 $ 5,223 $ 3,122 $ 7,592 $ 50 $ 19,944 Construction
and Land
Development Commercial
Real
Estate Residential
Real
Estate Commercial
and
Industrial Consumer
and
Other Total $ 3,186 $ 3,146 $ 1,861 $ 3,358 $ 36 $ 11,587 865 762 609 1,817 42 4,095 (11 ) — (39 ) (65 ) (35 ) (150 ) — — 53 — 5 58 $ 4,040 $ 3,908 $ 2,484 $ 5,110 $ 48 $ 15,590 Construction
and Land
DevelopmentCommercial
Real
EstateResidential
Real
EstateCommercial
and
IndustrialConsumer
and
OtherTotal Three Months Ended March 31, 2020 Allowance for loan losses: Beginning balance $ 4,847 $ 8,113 $ 4,462 $ 27,957 $ 57 $ 45,436 Provision for loan losses 1,570 905 312 10,222 13 13,022 Loans charged-off — — (8) (20,501) (21) (20,530) Recoveries — — 1 468 6 475 Total ending allowance balance $ 6,417 $ 9,018 $ 4,767 $ 18,146 $ 55 $ 38,403 Three Months Ended March 31, 2019 Allowance for loan losses: Beginning balance $ 4,743 $ 6,725 $ 4,743 $ 7,166 $ 74 $ 23,451 Provision for loan losses (1) 302 80 4,631 43 5,055 Loans charged-off — — (15) (568) (70) (653) Recoveries — — 2 — 2 4 Total ending allowance balance $ 4,742 $ 7,027 $ 4,810 $ 11,229 $ 49 $ 27,857 September 30, 2017March 31, 2020 and December 31, 2016.2019. For purposes of this disclosure, recorded investment in loans excludes accrued interest receivable and net deferred loan fees net due to immateriality. Construction
and Land
Development Commercial
Real
Estate Residential
Real
Estate Commercial
and
Industrial Consumer
and
Other Total $ — $ — $ — $ 1,011 $ — $ 1,011 3,957 5,223 3,122 6,581 50 18,933 — — — — — — $ 3,957 $ 5,223 $ 3,122 $ 7,592 $ 50 $ 19,944 $ — $ — $ 116 $ 3,090 $ — $ 3,206 514,934 598,846 531,997 461,657 3,933 2,111,367 — 387 182 1,989 — 2,558 $ 514,934 $ 599,233 $ 532,295 $ 466,736 $ 3,933 $ 2,117,131 $ — $ — $ — $ 1,024 $ — $ 1,024 3,776 4,266 2,398 5,044 45 15,529 — — — — — — $ 3,776 $ 4,266 $ 2,398 $ 6,068 $ 45 $ 16,553 $ 1,275 $ 2,836 $ 2,190 $ 3,608 $ — $ 9,909 488,287 494,304 402,799 372,868 3,359 1,761,617 — 394 496 1,969 — 2,859 $ 489,562 $ 497,534 $ 405,485 $ 378,445 $ 3,359 $ 1,774,385 Construction
and Land
DevelopmentCommercial
Real
EstateResidential
Real
EstateCommercial
and
IndustrialConsumer
and
OtherTotal March 31, 2020 Allowance for loan losses: Ending allowance balance attributable to loans: Individually evaluated for impairment $ — $ — $ — $ 6,760 $ — $ 6,760 Collectively evaluated for impairment 6,417 9,018 4,767 11,386 55 31,643 Total ending allowance balance $ 6,417 $ 9,018 $ 4,767 $ 18,146 $ 55 $ 38,403 Loans: Individually evaluated for impairment $ — $ 3,460 $ 3,255 $ 20,719 $ — $ 27,434 Collectively evaluated for impairment 627,178 994,498 645,331 560,879 4,454 2,832,340 Total ending loans balance $ 627,178 $ 997,958 $ 648,586 $ 581,598 $ 4,454 $ 2,859,774 December 31, 2019 Allowance for loan losses: Ending allowance balance attributable to loans: Individually evaluated for impairment $ — $ — $ 17 $ 20,754 $ — $ 20,771 Collectively evaluated for impairment 4,847 8,113 4,445 7,203 57 24,665 Total ending allowance balance $ 4,847 $ 8,113 $ 4,462 $ 27,957 $ 57 $ 45,436 Loans: Individually evaluated for impairment $ 30 $ — $ 2,477 $ 24,528 $ — $ 27,035 Collectively evaluated for impairment 591,511 993,912 641,124 558,113 4,769 2,789,429 Total ending loans balance $ 591,541 $ 993,912 $ 643,601 $ 582,641 $ 4,769 $ 2,816,464 September 30, 2017March 31, 2020 include certain acquired loans. At September 30, 2017,March 31, 2020, thesenon-PCI non-purchased credit impaired (PCI) loans had a carrying value of $57,663,$51,882, comprised of contractually unpaid principal totaling $59,227$52,588 and discounts totaling $1,564.$706. Management evaluated these loans for credit deterioration since acquisition and determined that $11 inan allowance for loan losses of $56 was necessary at September 30, 2017. AsMarch 31, 2020.September 30, 2017March 31, 2020 and December 31, 2016: Unpaid
Principal
Balance Recorded
Investment Allowance for
Loan Losses
Allocated $ — $ — $ — — — — — — — 116 116 — 92 92 — — — — 208 208 — 2,998 2,998 1,011 2,998 2,998 1,011 $ 3,206 $ 3,206 $ 1,011 $ 1,275 $ 1,275 $ — 4,423 2,836 — 2,069 2,069 — 121 121 — 934 934 — 8,822 7,235 — 2,864 2,674 1,024 2,864 2,674 1,024 $ 11,686 $ 9,909 $ 1,024 Unpaid
Principal
BalanceRecorded
InvestmentAllowance for
Loan Losses
AllocatedMarch 31, 2020 With no allowance recorded: Commercial real estate: Nonfarm, nonresidential $ 3,460 $ 3,460 $ — Residential real estate: Closed-end 1-4 family 950 942 — Other 2,313 2,313 — Commercial and industrial 13,391 13,391 — Subtotal 20,114 20,106 — With an allowance recorded: Commercial and industrial 7,328 7,328 6,760 Subtotal 7,328 7,328 6,760 Total $ 27,442 $ 27,434 $ 6,760 December 31, 2019 With no allowance recorded: Construction and land development $ 30 $ 30 $ — Residential real estate: Closed-end 1-4 family 319 311 — Other 1,523 1,523 — Commercial and industrial 11 11 — Subtotal 1,883 1,875 — With an allowance recorded: Residential real estate: Closed-end 1-4 family 643 643 17 Commercial and industrial 24,517 24,517 20,754 Subtotal 25,160 25,160 20,771 Total $ 27,043 $ 27,035 $ 20,771 and nine months ended September 30, 2017March 31, 2020 and 2016: 2017 2016 2017 2016 $ 1,348 $ — $ 1,199 $ 340 812 1,427 2,394 1,307 112 451 863 533 199 837 245 768 499 46 657 110 — — 1 10 2,970 2,761 5,359 3,068 $ 2,998 $ 490 $ 2,820 $ 247 — 70 — 23 2,998 560 2,820 270 $ 5,968 $ 3,321 $ 8,179 $ 3,338 Three Months Ended
March 31,Average Recorded Investment 2020 2019 With no allowance recorded: Construction and land development $ 10 $ 768 Commercial real estate: Nonfarm, nonresidential 4,584 51 Residential real estate: Closed-end 1-4 family 1,260 806 Other 2,840 1,264 Commercial and industrial 19,162 — Subtotal $ 27,856 $ 2,889 With an allowance recorded: Construction and land development $ — $ 183 Commercial real estate: Nonfarm, nonresidential 156 — Residential real estate: Closed-end 1-4 family 213 — Commercial and industrial — 3,170 Subtotal 369 3,353 Total average recorded investment $ 28,225 $ 6,242 and nine months ended September 30, 2017March 31, 2020 and 2016.September 30, 2017March 31, 2020 and December 31, 2016: Nonaccrual Loans Past Due
Over 90 Days $ — $ 262 116 — 2,466 16 $ 2,582 $ 278 $ — $ 1,950 835 — — 452 121 — 2,674 150 $ 3,630 $ 2,552 Nonaccrual Loans Past Due
Over 90 Days And
Still Accruing InterestMarch 31, 2020 Commercial real estate: Nonfarm, nonresidential $ 3,460 $ — Residential real estate: Closed-end 1-4 family 942 — Other 2,313 — Commercial and industrial 20,719 — Total $ 27,434 $ — December 31, 2019 Construction and land development $ 30 $ — Residential real estate: Closed-end 1-4 family 954 — Other 1,523 — Commercial and industrial 24,528 654 Total $ 27,035 $ 654 September 30, 2017March 31, 2020 and December 31, 20162019 by class of loans: 30-59
Days
Past Due 60-89
Days
Past Due Greater
Than 89
Days
Past Due Nonaccrual Total
Past Due
and
Nonaccrual Loans
Not
Past Due PCI
Loans Total $ 1,370 $ — $ — $ — $ 1,370 $ 513,564 $ — $ 514,934 — — — — — 565,536 387 565,923 — — — — — 33,310 — 33,310 939 1,007 262 — 2,208 371,328 182 373,718 150 — — 116 266 158,311 — 158,577 511 301 16 2,466 3,294 461,453 1,989 466,736 5 — — — 5 3,928 — 3,933 $ 2,975 $ 1,308 $ 278 $ 2,582 $ 7,143 $ 2,107,430 $ 2,558 $ 2,117,131 $ 380 $ — $ 1,950 $ — $ 2,330 $ 487,232 $ — $ 489,562 664 — — 835 1,499 457,070 394 458,963 — — — — — 38,571 — 38,571 428 10 452 — 890 253,584 496 254,970 231 — — 121 352 150,163 — 150,515 155 39 150 2,674 3,018 373,458 1,969 378,445 — — — — 3,359 — 3,359 $ 1,858 $ 49 $ 2,552 $ 3,630 $ 8,089 $ 1,763,437 $ 2,859 $ 1,774,385 30-59
Days
Past Due60-89
Days
Past DueGreater
Than 89
Days
Past DueTotal
Past DueLoans
Not
Past DueTotal March 31, 2020 Construction and land development $ 1,753 $ 2,484 $ — $ 4,237 $ 622,941 $ 627,178 Commercial real estate: Nonfarm, nonresidential 8,149 — 3,460 11,609 943,739 955,348 Other — — — — 42,610 42,610 Residential real estate: Closed-end 1-4 family 4,729 2 — 4,731 451,879 456,610 Other 916 — 395 1,311 190,665 191,976 Commercial and industrial 3,857 619 15,311 19,787 561,811 581,598 Consumer and other — — — — 4,454 4,454 $ 19,404 $ 3,105 $ 19,166 $ 41,675 $ 2,818,099 $ 2,859,774 December 31, 2019 Construction and land development $ 508 $ — $ 30 $ 538 $ 591,003 $ 591,541 Commercial real estate: Nonfarm, nonresidential 3,981 — — 3,981 940,040 944,021 Other — — — — 49,891 49,891 Residential real estate: Closed-end 1-4 family 2,688 224 8 2,920 453,000 455,920 Other 85 961 555 1,601 186,080 187,681 Commercial and industrial 663 7,156 735 8,554 574,087 582,641 Consumer and other — — — — 4,769 4,769 $ 7,925 $ 8,341 $ 1,328 $ 17,594 $ 2,798,870 $ 2,816,464 “Substandard”September 30, 2017March 31, 2020 and December 31, 2016: Pass Special
Mention Substandard Total $ 512,912 $ — $ 2,022 $ 514,934 548,792 12,322 4,809 565,923 32,927 — 383 33,310 371,149 — 2,569 373,718 156,820 — 1,757 158,577 445,736 12,649 8,351 466,736 3,928 5 — 3,933 $ 2,072,264 $ 24,976 $ 19,891 $ 2,117,131 Pass Special
Mention Substandard Total $ 488,287 $ — $ 1,275 $ 489,562 449,373 1,847 7,743 458,963 38,571 — — 38,571 251,919 — 3,051 254,970 149,504 — 1,011 150,515 373,243 — 5,202 378,445 3,359 — — 3,359 $ 1,754,256 $ 1,847 $ 18,282 $ 1,774,385 Pass Special
MentionSubstandard Total March 31, 2020 Construction and land development $ 627,178 $ — $ — $ 627,178 Commercial real estate: Nonfarm, nonresidential 946,120 4,012 5,216 955,348 Other 42,610 — — 42,610 Residential real estate: Closed-end 1-4 family 453,892 819 1,899 456,610 Other 188,830 — 3,146 191,976 Commercial and industrial 543,565 600 37,433 581,598 Consumer and other 4,454 — — 4,454 $ 2,806,649 $ 5,431 $ 47,694 $ 2,859,774 Pass Special
MentionSubstandard Total December 31, 2019 Construction and land development $ 591,293 $ 248 $ — $ 591,541 Commercial real estate: Nonfarm, nonresidential 941,260 997 1,764 944,021 Other 49,891 — — 49,891 Residential real estate: Closed-end 1-4 family 452,363 825 2,732 455,920 Other 185,170 — 2,511 187,681 Commercial and industrial 539,442 943 42,256 582,641 Consumer and other 4,769 — — 4,769 $ 2,764,188 $ 3,013 $ 49,263 $ 2,816,464 both September 30, 2017 and DecemberMarch 31, 2016,2020, the Company’s loan portfolio contains one2 loans that have been modified in troubled debt restructurings with a balance of $6,903. As of December 31, 2019, the Company’s loan portfolio contained 1 loan that hashad been modified in a troubled debt restructuring with a balance of $608$311. The above disclosed troubled debt restructurings were not related to COVID-19 modifications.$698, respectively.September 30, 2017March 31, 2020 and December 31, 20162019 are as follows: September 30,
2017 December 31,
2016 $ 506,345 $ 499,385 4,662 2,954 March 31,
2020December 31,
2019Loan portfolios serviced for: Federal Home Loan Mortgage Corporation $ 498,705 $ 488,790 Federal National Mortgage Association 17,146 10,221 Other 3,455 3,504 Three Months Ended
March 31,2020 2019 Servicing rights: Beginning of period $ 3,246 $ 3,403 Additions 394 188 Amortized to expense (358) (225) Change in impairment (225) — End of period $ 3,057 $ 3,366 and nine months ended September 30, 2017March 31, 2020 and 20162019 were as follows: Three Months Ended
September 30, Nine Months Ended
September 30, 2017 2016 2017 2016 $ 312 $ 309 $ 951 $ 903 (242 ) (349 ) (721 ) (905 ) — — — — $ 70 $ (40 ) $ 230 $ (2 ) Three Months Ended
March 31,2020 2019 Loan servicing fees, net: Loan servicing fees $ 322 $ 306 Amortization of loan servicing fees (358) (225) Change in impairment (225) — Total $ (261) $ 81 $4,916$3,057 at September 30, 2017.March 31, 2020. Fair value for September 30, 2017March 31, 2020 was determined using a weighted average discount rate of 10.5%9.5% and a weighted average prepayment speed of 10.2%22.3%. At December 31, 2016,2019, the fair value of servicing rights was estimated by management to be approximately $5,015.$3,922. Fair value for December 31, 20162019 was determined using a weighted average discount rate of 10.5%9.5% and a weighted average prepayment speed of 9.9%16.8%.SECURITIES SOLD UNDER AGREEMENT TO REPURCHASEOur subsidiary bank enters into borrowing arrangements with our retail business customers and correspondent banks through agreements to repurchase (“securities sold under agreements to repurchase”) underLEASESbank pledges investment securities ownedCompany is the lessee are comprised of real estate property for branches and under its controloffice space with terms extending through 2034. The Company has one existing finance lease for additional office space with a lease term through 2033. On February 5, 2020, the Company purchased the properties at Columbia Avenue and 120 9th Avenue in Franklin, Tennessee, therefore ending these lease agreements that represented approximately $19,000 and $20,000 in right-of-use assets and lease liabilities, respectively.collateral against these short-term borrowing arrangements. At maturity the securities underlying the agreements are returned to the Company. At September 30, 2017of March 31, 2020, and December 31, 2016, these short-term borrowings totaled $32,862 and $36,496, respectively, and were secured by securities with carrying amounts2019.Lease right-of-use assets Classification March 31, 2020 December 31, 2019 Operating lease right-of-use assets Other Assets $ 19,579 39,594 Finance lease right-of-use assets Other Assets 2,768 2,819 Total lease right-of-use assets $ 22,347 42,413 Lease liabilities Classification March 31, 2020 December 31, 2019 Operating lease right-of-use assets Other Liabilities $ 20,509 41,308 Finance lease right-of-use assets Other Liabilities 2,913 2,942 Total lease liabilities $ 23,422 44,250 In connection with the Company’s 2010 private offering, 32,425 warrants were issued to shareholders, one warrant for every twenty shares of common stock purchased. Each warrant allowed the shareholders to purchase an additional share of common stock at $12.00 per share. The warrants were issued with an effective date of March 30, 2010 and were exercisable in whole or in part up to seven years following the date of issuance, and they expired on March 30, 2017. The warrants were detachable from the common stock. There were 12,461 and 6,575 warrants exercised during the nine months ended September 30, 2017 and 2016, respectively. A summary of the stock warrant activity for the nine months ended September 30, 2017 and 2016 follows: September 30,
2017 September 30,
2016 $ 329 $ 136 150 79 The warrants expired on March 30, 2017; therefore at September 30, 2017, there were no outstanding warrants associated with the 2010 offering.two2 share based compensation plans as described below. Total compensation cost that has been charged against income for those plans was $735 and $406 and $1,970 and $1,201$1,512, for the three and nine months ended September 30, 2017March 31, 2020 and 2016, respectively.$1,329 for the three months ended March 31, 2019. The total income tax benefit, which is shown on the Consolidated Statements of Income as a reduction of income tax expense, was $261 and $711$210 for the three and nine months ended September 30, 2017. The total income tax benefitMarch 31, 2020 and was $113 for the three and nine months ended September 30, 2016 was $107 and $616,March 31, 2019, respectively.providesprovided for authorized shares up to 4,000,000. At September 30, 2017, there were 1,960,041 authorized shares available for issuance under the 2007 Plan, although the Company has ceased issuing awards under the 2007 Plan.providesprovided that no options intended to be ISOs may be granted after April 9, 2017. As a result, the Company’s board of directors approved, and recommended to its shareholders for approval, a newan equity incentive plan, the 2017 Omnibus Equity Incentive Plan. ThePlan which the Company’s shareholders approved the 2017 Omnibus Equity Incentive Plan at the 2017 annual meeting of shareholders. On April 12, 2018, the Company’s Board of Directors approved the Amended and Restated 2017 Omnibus Equity Incentive Plan (the “Amended and Restated 2017 Plan”) to make certain changes in response to feedback received from the Company's shareholders. The terms of the Amended and Restated 2017 Omnibus Equity Incentive Plan are substantially similar to the terms of the 2007 Omnibus Equity Incentive Plan it was intended to replace. The Amended and Restated 2017 Omnibus Equity Incentive Plan provides for authorized shares up to 5,000,000.3,500,000. At September 30, 2017,March 31, 2020, there were 4,762,7502,410,364 authorized shares available for issuance under the Amended and Restated 2017 Omnibus Equity Incentive Plan.period of three to five years and have aten-year contractual term.requirements. The Company assigns discretion to its Board of DirectorsCompensation Committee to make grants either as qualified incentive stock options or asnon-qualified stock options. All employee grants are intended to be treated as qualified incentive stock options, if allowable. All other grants are expected to be treated asnon-qualified.a peer group.the Company. The Company uses historical data to estimate option exercise and post-vesting termination behavior. September 30,
2017 September 30,
2016 2.16 % 1.60 % 6.8 years 7.5 years 32.32 % 30.09 % 0.03 % 0.24 % March 31, 2019 Risk-free interest rate 2.31 % Expected term 7 years Expected stock price volatility 30.44 % Dividend yield 0.50 % ninethree months ended September 30, 2017 and 2016 were $14.51 and $9.78, respectively.ninethree months ended September 30, 2017March 31, 2020 follows: Shares Weighted
Average
Exercise
Price Weighted
Average
Remaining
Contractual
Term Aggregate
Intrinsic
Value 1,395,016 $ 16.70 6.39 $ 35,090 267,195 38.04 (146,944 ) 11.73 (3,113 ) 25.37 1,512,154 $ 20.93 6.65 $ 22,256 1,436,546 $ 20.93 6.65 $ 21,143 787,451 $ 13.43 4.96 $ 17,498 For the nine months
ended September 30, 2017 2016 $ 4,141 $ 3,463 1,361 1,357 406 522 Shares Outstanding at January 1, 2020 1,502,070 $ 22.39 Granted — — Exercised (37,416) 11.19 Forfeited, expired, or cancelled (6,274) 25.24 Outstanding at period end 1,458,380 $ 26.24 6.30 $ 2,921 Vested or expected to vest 1,385,461 $ 26.24 5.77 $ 2,775 Exercisable at period end 335,225 $ 11.68 5.77 $ 2,921 For the Three Months Ended
March 31,2020 2019 Stock options exercised: Intrinsic value of options exercised $ 943 $ 623 Cash received from options exercised 417 524 Tax benefit realized from option exercises 210 113 September 30, 2017,March 31, 2020, there was $6,054$2,768 of total unrecognized compensation cost related tonon-vested stock options granted under the plans. The cost is expected to be recognized over a weighted-average period of 1.81.36 years.Omnibus Equity Incentive Plan and the Amended and Restated 2017 Omnibus Equity Incentive Plan each provides for the granting of restricted share awards and other performance related incentives. When the restricted shares are awarded, a participant receives voting and dividend rights with respect to the shares, but is not able to transfer the shares until the restrictions have lapsed. In April 2019, the Company began awarding restricted stock units which participants do not have voting rights or dividend rights until the restrictions have lapsed. These awards typically have a vesting period of three to five years and vest in equal annual installments on the anniversary date of the grant.ninethree months ended September 30, 2017March 31, 2020 is as follows: Shares Weighted-
Average
Grant-
Date
Fair Value 106,458 $ 19.81 27,282 37.35 (36,767 ) 18.22 (564 ) 28.66 96,409 $ 25.32 Non-vested Shares Shares Weighted-
Average
Grant-
Date
Fair ValueNon-vested at January 1, 2020 90,992 $ 32.54 Granted — — Vested (468) 28.52 Forfeited (122) 31.18 Non-vested at March 31, 2020 90,402 September 30, 2017,March 31, 2020, there was $2,080$595 of total unrecognized compensation cost related tonon-vested shares granted under the 2007 Plan and Amended and Restated 2017 Plan. The cost is expected to be recognized over a weighted-average period of 3.61.13 years.total fair value of shares vested during the nine months ended September 30, 2017 and 2016 was $1,457 and $974, respectively.The total income tax benefit realized from the vesting ofCompany began granting restricted stock was $215 and $4 and $305 and $170units in 2019. The following table outlines restricted stock units that were outstanding, grouped by similar vesting criteria, as of March 31, 2020:Grant year Units Awarded Service period in years Period in which units to be settled into shares of common stock 2019 2,870 5.0 2024 2019 152,048 3.0 2022 2020 120,824 3.0 2023 and nine months ended September 30,March 31, 2020 was $678. There was 0 expense related to restricted stock units in 2019. This stock compensation is recognized on a straight-line basis over the time period that the restrictions associated with the awards lapse based on the total cost of the award at the grant date. As of March 31, 2020, there was $7,943 of total unrecognized compensation cost related to non-vested restricted stock units granted under the Amended and Restated 2017 and 2016, respectively.became effective for the Company on January 1, 2016 with full compliance with all of the requirements being phased in over a multi-year schedule, and fully phased in by January 1, 2019.The Basel III rules additionally provide for countercyclicalcounter cyclical capital requirements so that the required amount of capital increases in times of economic expansion and decreases in times of economic contraction, consistent with safety and soundness. Under the Basel III rules, banks must maintain a capital conservation buffer consisting of additional Common Equity Tier 1 Capital equal tonew capital conservation buffer requirement was phased in beginning became fully effective for the Company as ofJanuary 2016 at 0.625% of risk-weighted assets and will increase each year until fully implemented at 2.5% in January1, 2019. The capital conservation buffer in effect for 2017 is 1.25%.September 30, 2017,March 31, 2020, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. Management believes that, as of September 30, 2017,March 31, 2020, the Company and Bank met all capital adequacy requirements to which they are subject. There are no conditions or events since that notification that management believes have changed the institution’s category.Actualrequiredis consistent with Section 201 of the Economic Growth, Regulatory Relief and Consumer Protection Act. The Framework is optional and is designed to reduce burden by removing requirements for calculating and reporting risk-based capital amountsratios. Depository institutions and ratiosdepository institution holding companies that have less than $10 billion in total consolidated assets and meet other qualifying criteria, including a leverage ratio of greater than 9%, are presentedconsidered qualifying community banking organizations and are eligible to opt into the Framework. The final rule became effective January 1, 2020, and organizations that opt into the Framework and meet the criteria established by the rule can use the Framework for regulatory reports for the quarter ended March 31, 2020. In April 2020, the Agencies announced two interim final rules to provide relief associated with Section 4012 of the CARES Act. For institutions that elect the Framework, the interim rules temporarily lower the leverage ratio requirement to 8% for the second quarter of 2020 through the end of calendar year 2020 and to 8.5% for the 2021 calendar year. An institution will have until January 1, 2022 before the 9% leverage ratio requirement is re-established. The Company and the Bank have elected to opt into the Framework and will file their regulatory capital reports in accordance with the Framework’s guidance.as of September 30, 2017 and December 31, 2016estimated regulatory capital ratios for the Company and Bank: Actual Required
For Capital
Adequacy Purposes To Be Well
Capitalized Under
Prompt Corrective
Action Regulations Amount Ratio Amount Ratio Amount Ratio $ 293,004 11.58 % $ 113,908 4.50 % N/A N/A $ 371,510 14.68 % $ 202,502 8.00 % N/A N/A $ 293,004 11.58 % $ 151,877 6.00 % N/A N/A $ 293,004 8.58 % $ 136,609 4.00 % N/A N/A $ 347,043 13.71 % $ 113,901 �� 4.50 % $ 164,523 6.50 % $ 367,079 14.50 % $ 202,490 8.00 % $ 253,112 10.00 % $ 347,043 13.71 % $ 151,867 6.00 % $ 202,490 8.00 % $ 347,043 10.17 % $ 136,511 4.00 % $ 170,639 5.00 % $ 263,693 11.75 % $ 101,022 4.50 % N/A N/A $ 338,675 15.09 % $ 179,595 8.00 % N/A N/A $ 263,693 11.75 % $ 134,696 6.00 % N/A N/A $ 263,693 9.28 % $ 113,697 4.00 % N/A N/A $ 319,005 14.18 % $ 101,216 4.50 % $ 146,201 6.50 % $ 335,650 14.92 % $ 179,939 8.00 % $ 224,924 10.00 % $ 319,005 14.18 % $ 134,954 6.00 % $ 179,939 8.00 % $ 319,005 11.22 % $ 113,697 4.00 % $ 142,122 5.00 % Actual Required
For Capital
Adequacy PurposesTo Be Well
Capitalized Under
Prompt Corrective
Action RegulationsAmount Ratio Amount Ratio Amount Ratio March 31, 2020 Company-Level Company common equity Tier 1 capital to RWA $ 388,222 12.0 % $ 146,134 4.5 % N/A N/A Company Total Capital to RWA $ 485,625 15.0 % $ 259,793 8.0 % N/A N/A Company Tier 1 (Core) Capital to RWA $ 388,222 12.0 % $ 194,845 6.0 % N/A N/A Company Tier 1 (Core) Capital to average assets $ 388,222 10.1 % $ 154,131 4.0 % N/A N/A Bank-Level Bank common equity Tier 1 capital to RWA $ 442,454 13.6 % $ 146,039 4.5 % $ 210,946 6.5 % Bank Total Capital to RWA $ 480,940 14.8 % $ 259,626 8.0 % $ 324,532 10.0 % Bank Tier 1 (Core) Capital to RWA $ 442,454 13.6 % $ 194,719 6.0 % $ 259,626 8.0 % Bank Tier 1 (Core) Capital to average assets $ 442,454 11.5 % $ 153,905 4.0 % $ 192,381 5.0 % December 31, 2019 Company-Level Company common equity Tier 1 capital to RWA $ 388,199 11.9 % $ 146,711 4.5 % N/A N/A Company Total Capital to RWA $ 487,966 15.0 % $ 260,819 8.0 % N/A N/A Company Tier 1 (Core) Capital to RWA $ 388,199 11.9 % $ 195,614 6.0 % N/A N/A Company Tier 1 (Core) Capital to average assets $ 388,199 10.3 % $ 151,456 4.0 % N/A N/A Bank-Level Bank common equity Tier 1 capital to RWA $ 441,348 13.6 % $ 146,491 4.5 % $ 211,599 6.5 % Bank Total Capital to RWA $ 482,183 14.8 % $ 260,429 8.0 % $ 325,536 10.0 % Bank Tier 1 (Core) Capital to RWA $ 441,348 13.6 % $ 195,322 6.0 % $ 260,429 8.0 % Bank Tier 1 (Core) Capital to average assets $ 441,348 11.7 % $ 151,255 4.0 % $ 189,069 5.0 % Neithernorentered into 16 swap transactions with a notional amount of $101,205 designated as fair value hedges. These derivatives are intended to protect against the Bankeffects of changing interest rates on the fair values of fixed rate securities.March 31, 2020 December 31, 2019 Balance Sheet Location Weighted Average Remaining Maturity (In Years) Weighted Average Pay Rate Receive Rate Notional Amount Estimated Fair Value Notional Amount Estimated Fair Value Liability derivative Interest rate swap agreements - securities Other liabilities 6.55 2.527% 3 month LIBOR $ 101,205 $ 13,362 $ 101,205 $ 4,954 Three Months Ended March 31, Gain (loss) on fair value hedging relationship 2020 2019 Interest rate swap agreements - securities: Hedged items $ 13,362 $ 1,118 Derivative designated as hedging instruments (13,362) (1,118) Carrying Amount of the Hedged Assets (in thousands) Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets Line item on the balance sheet March 31, 2020 December 31, 2019 March 31, 2020 December 31, 2019 Securities available-for-sale $101,205 $101,205 $13,362 $4,954 March 31, 2020 December 31, 2019 Balance Sheet Location Weighted Average Remaining Maturity (In Years) Weighted Average Pay Rate Receive Rate Notional Amount Estimated Fair Value Notional Amount Estimated Fair Value Liability derivatives Interest rate swap agreements Other liabilities 2.1 2.232% 1 month LIBOR 100,000 $ 3,933 $ 100,000 $ 1,592 Amount of Gain (Loss) Recognized in Other Comprehensive Income (Loss) Three Months Ended March 31, 2020 2019 Liability derivatives Interest rate swap agreements $ (1,729) $ — currently pay dividendsexceed our expected funding requirements, especially during a challenging economic environment when our client companies may be more dependent on our credit commitments due to the lack of available credit elsewhere, the increasing costs of credit, or the limited availability of financings from other sources. Any failure to meet our unfunded credit commitments in accordance with the actual borrowing needs of our customers may have a material adverse effect on our business, financial condition, results of operations or reputation.March 31, 2020 December 31, 2019 Fixed
RateVariable
RateTotal Fixed
RateVariable
RateTotal Unused lines of credit $ 88,571 $ 649,618 $ 738,189 $ 89,040 $ 701,326 $ 790,366 Standby letters of credit 7,098 46,165 53,263 7,119 48,750 55,869 Mortgage loan commitments 156,421 — 156,421 48,999 — 48,999 prior writtenfurther approval from its primary regulatory agencies.8—10—FAIR VALUEFair Value Measurements at March 31,
2020 Using:Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)Significant
Other
Observable
Inputs
(Level 2)Significant
Unobservable
Inputs
(Level 3)Financial Assets Securities available-for-sale Mortgage-backed securities-residential — 294,672 — Mortgage-backed securities-commercial — 17,695 — Corporate notes — 4,523 — State and political subdivisions — 226,335 — Total securities available-for-sale $ — $ 543,225 $ — Loans held for sale $ — $ 42,682 $ — Derivative assets $ — $ 1,166 $ — Financial Liabilities Derivative liabilities $ — $ 18,905 $ — Fair Value Measurements at December 31,
2019 Using:Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)Significant
Other
Observable
Inputs
(Level 2)Significant
Unobservable
Inputs
(Level 3)Financial Assets Securities available-for-sale Mortgage-backed securities-residential — 375,943 — Asset-backed securities — 17,780 — Corporate notes — 33,361 — State and political subdivisions — 225,048�� — Total securities available for sale $ — $ 652,132 $ — Loans held-for-sale $ — $ 43,162 $ — Derivative assets $ — $ 225 $ — Financial Liabilities Derivative liabilities $ — $ 6,619 $ — For securities where quoted prices or market prices of similar securitiesnot available,certain assets carried at fair values are calculated using discounted cash flows or other market indicators (Level 3).Derivatives: The fair values of derivatives are based on valuation models using observable market data as ofvalue and interest rate locks associated with the measurement date (Level 2).Impaired Loans:mortgage loan pipeline. The fair value of the mortgage loan pipeline rate locks is based upon the projected sales price of the underlying loans, taking into account market interest rates and other market factors at the measurement date, net of the projected fallout rate. These assets are valued using similar observable data that occurs in the market (Level 2).Total carrying value in the
consolidated balance sheetQuoted market prices in
an active market
(Level 1)Models with significant
observable market parameters
(Level 2)Models with significant
unobservable market parameters
(Level 3)Total losses for the period ended March 31, 2020 Commercial and industrial $ 570 $ — $ — $ 570 $ — Servicing rights, net 3,057 — — 3,057 225 Total $ 3,627 $ — $ — $ 3,627 $ 225 December 31, 2019 Residential real estate: Closed-end 1-4 family $ 626 $ — $ — $ 626 $ — Commercial and industrial 3,763 — 3,650 113 — Total $ 4,389 $ — $ 3,650 $ 739 $ — with specific allocationsand servicing rights. The table above includes those loans and servicing rights that are impaired and have a carrying balance as of March 31, 2020 and December 31, 2019.allowance for loan lossesagreement. Impairment is generallymeasured by estimating the fair value of the loan based on recentthe present value of expected cash flows, the market price of the loan, or the underlying fair value of the loan's collateral. For real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classificationloans, fair value of the impaired loan's collateral is determined by third party appraisals, which are then adjusted for the estimated selling and closing costs related to liquidation of the collateral. For this asset class, the actual valuation methods (income, sales comparable, or cost) vary based on the status of the project or property. The unobservable inputs may vary depending on the individual assets with no one of the three methods being the predominant approach. The Company reviews the third party appraisal for determiningappropriateness and adjusts the value downward to consider selling and closing costs, which typically is 10% of the appraised value. For non-real estate collateral loans, the unobservable inputs will vary depending on the credit. The fair value.Non-real estatevalue of the impaired loan's collateral may be valueddetermined using ana third party appraisal, net booktransactional values, discounted cash flows ("DCF"), sales comparisons, asset value, per the borrower’s financial statements, or aging reports, adjusted or discounteddiscounted. As of March 31, 2020, the fair value of the non-real estate collateral loans was determined primarily based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business,DCF method, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted accordingly. Appraisals for impaired loans are generally obtained annually but may be obtained more frequentlychanging circumstances as partvaluation models that calculate the present value of the aforementioned quarterly evaluation.Loans Held For Sale: has elected themeasures certain assets at fair value option foron a non-recurring basis including impaired loans (excluding PCI loans), loans held for sale, to align with other accounting policies related to mortgage banking, such as mortgage banking derivatives.and OREO (i.e. real estate acquired through foreclosure or deed in lieu of foreclosure). These fair value adjustments result from impairments recognized during the period, application of the lower of cost or fair value on loans are typically sold to an investor following loan originationheld for sale, and the application of fair value of such accounts are readily available basedless cost to sell on direct quotes from investors or similar transactions experienced in the secondary loan market. Fair value adjustments, as well as realized gainsOREO. The following tables present valuation techniques and losses are recorded in current earnings. Fair value is determined by market pricesunobservable inputs for similar transactions adjusted for specific attributes of that loan (Level 2).Assets and liabilitiesassets measured at fair value on a recurringnon-recurring basis including financial assets and liabilities for which the Company has elected theutilized Level 3 inputs to determine fair value option, are summarized below: Fair Value Measurements at
September 30, 2017 Using: Quoted Prices
in Active
Markets for
Identical Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) $ — $ 20,082 $ — — 724,667 — — 15,610 — — 160,565 — — 59,813 — $ — $ 980,737 $ — $ — $ 11,823 $ — $ — $ 501 $ — $ — $ (88 ) $ — Fair Value Measurements at
December 31, 2016 Using: Quoted Prices
in Active
Markets for
Identical Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) $ — $ 607,085 $ — — 19,334 — — 128,336 — $ — $ 754,755 $ — $ — $ 23,699 $ — $ — $ 229 $ — $ — $ (66 ) $ — September 30, 2017,March 31, 2020, the unpaid principal balance of loans held for sale was $11,524$40,710 resulting in an unrealized gain of $299$1,972 included in gains on sale of loans. As of December 31, 2016,2019, the unpaid principal balance of loans held for sale was $23,457,$42,152, resulting in an unrealized gain of $242$1,010 included in gains on sale of loans. For the three months ended September 30, 2017 and 2016, the change in fair value related to loans held for sale, which is included in gain on sale of loans, was $(48) and $326, respectively. For the nine months ended September 30, 2017 and 2016, the change in fair value related to loans held for sale, which is included in gain on sale of loans, was $57 and $558, respectively. None of thesethe loans wereas of March 31, 2020, or December 31, 2019 are 90 days or more past due or on nonaccrualnonaccrual.Fair Value Measurements at March 31,
2020 Using:Carrying
AmountLevel 1 Level 2 Level 3 Total Financial assets Cash and cash equivalents $ 173,482 $ 173,482 $ — $ — $ 173,482 Certificates of deposit held at other financial institutions 3,345 — 3,345 — 3,345 Securities available for sale 543,225 — 543,225 — 543,225 Loans held for sale 42,682 — 42,682 — 42,682 Net loans 2,817,365 — — 2,736,626 2,736,626 Other assets 1,166 — 1,166 — 1,166 Accrued interest receivable 12,043 36 3,183 8,824 12,043 Financial liabilities Deposits $ 3,137,471 $ 2,506,175 $ 638,714 $ — $ 3,144,889 Federal Home Loan Bank advances 135,000 — 135,080 — 135,080 Subordinated notes, net 58,916 — — 58,716 58,716 Other liabilities 18,905 — 18,905 — 18,905 Accrued interest payable 3,179 127 2,702 350 3,179 Fair Value Measurements at December 31,
2019 Using:Carrying
AmountLevel 1 Level 2 Level 3 Total Financial assets Cash and cash equivalents $ 234,991 $ 234,991 $ — $ — $ 234,991 Certificates of deposit held at other financial institutions 3,590 — 3,590 — 3,590 Securities available-for-sale 652,132 — 652,132 — 652,132 Loans held for sale 43,162 — 43,162 — 43,162 Net loans 2,767,008 — — 2,753,761 2,753,761 Other assets 225 — 225 — 225 Accrued interest receivable 12,362 96 3,775 8,491 12,362 Financial liabilities Deposits $ 3,207,584 $ 2,458,555 $ 749,656 $ — $ 3,208,211 Federal Home Loan Bank advances 155,000 — 155,090 — 155,090 Subordinated notes, net 58,872 — — 60,922 60,922 Other liabilities 6,619 — 6,619 — 6,619 Accrued interest payable 4,201 154 687 3,360 4,201 September 30, 2017 andMarch 31, 2020, or December 31, 2016.There were no transfers between level 12019, and 2 during 2017 or 2016.Assets measured at fair value on anon-recurring basis are summarized below:There were two collateral-dependent commercial and industrial impaired loans carried at fair value of $1,987 as of September 30, 2017 and one collateral-dependent commercial and industrial impaired loan carried at fair value of $1,650 as of December 31, 2016. For the three and nine months ended September 30, 2017,accordingly, there was no additional provision for loan losses recorded related to impaired loans recorded at fair value of collateral. For the three and nine months ended September 30, 2016, $115 additional provision for loan losses was recorded related to impaired loans recorded at fair value of collateral.Foreclosed assets measured at fair value less costs to sell, had a net carrying amount of $1,503 as of September 30, 2017 and $0 as of December 31, 2016. The foreclosed property was previously collateral for a commercial real estate loan. There were no properties at September 30, 2017March 31, 2020 or 2016December 31, 2019 that had required write-downs to fair value resulting in no write downs for the three and nine months ended September 30, 2017 and 2016, respectively.The carrying amounts and estimated fair values of financial instruments at September 30, 2017 and December 31, 2016 are as follows: Carrying
Amount Fair Value Measurements at
September 30, 2017 Using: Level 1 Level 2 Level 3 Total $ 155,842 $ 155,842 $ — $ — $ 155,842 2,365 — 2,365 — 2,365 980,737 — 980,737 — 980,737 217,312 — 220,089 — 220,089 11,823 — 11,823 — 11,823 2,115,930 — — 2,074,102 2,074,102 18,472 n/a n/a n/a n/a 3,639 — — 4,916 4,916 501 — 501 — — 11,156 (13 ) 5,603 5,566 11,156 $ 2,824,825 $ 1,438,459 $ 1,352,945 $ — $ 2,791,404 32,862 — 32,862 — 32,862 337,000 — 355,910 — 355,910 58,470 — — 61,576 61,576 (88 ) — (88 ) — — 2,597 35 2,212 350 2,597 Carrying
Amount Fair Value Measurements at
December 31, 2016 Using: Level 1 Level 2 Level 3 Total $ 90,927 $ 90,927 $ — $ — $ 90,927 1,055 — 1,055 — 1,055 754,755 — 754,755 — 754,755 228,894 — 227,892 — 227,892 23,699 — 23,699 — 23,699 1,757,039 — — 1,727,188 1,727,188 11,843 n/a n/a n/a n/a 3,621 — — 5,015 5,015 229 — 229 — — 9,931 — 5,172 4,759 9,931 $ 2,391,818 $ 1,551,461 $ 836,444 $ — $ 2,387,905 83,301 — 83,301 — 83,301 132,000 — 131,098 — 131,098 58,337 — — 61,762 61,762 (66 ) — (66 ) — — 1,924 154 1,075 695 1,924 Equivalents:Equivalents: The carrying amounts of cash and short-term instruments approximate fair values and are classified as Level 1.Loans:Loans: Fair values of loans, excluding loans held for sale, are estimated as follows: For variable rate loans that reprice frequently andIn accordance with no significant change in credit risk, fair values are based on carrying values resulting in a Level 3 classification. Fair values for other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality resulting in a Level 3 classification. Impaired loans are valued at the lower of cost or fair value as described previously. The methods utilized to estimateASU 2016-01, the fair value of loans do not necessarily represent an exit price.(c) Restricted Equity Securities: It is not practical to determine theheld for investment, excluding previously presented impaired loans measured at fair value on a non-recurring basis, is estimated using a cash flow projection methodology that relies on three primary assumptions: (1)the expected prepayment rate of Federal Home Loan Bank or Federal Reserve Bank stock due to restrictions placed on its transferability.(d) Mortgage Servicing Rights: Fair valueloans; (2)the magnitude of mortgage servicing rights isfuture net losses based on valuation models that calculate expected default rate and severity of loss; and (3)the present value of estimated netdiscount rate applicable to the expected cash flows based on industry market data. The valuation model incorporates assumptions that market participants would use in estimating future net cash flows resulting inof the loan portfolio. Loans are considered a Level 3 classification.(e)(f)ninety90 days, approximate their fair values resulting in a Level 2 classification.(g)(h)Notes:Notes: The fair values of the Company’s subordinated notes are estimated using discounted cash flow analyses based on the current borrowing rates for similar types of borrowing arrangements resulting in a Level 3 classification.(i)Payable:Payable: The carrying amounts of accrued interest approximate fair value resulting in a Level 1, Level 2 or Level 3 classification based on the asset/liability with which they are associated.(j)Instruments:Instruments: Fair values foroff-balance sheet, credit-related financial instruments are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. The fair value of commitments is not material.9—11—EARNINGS PER SHARE 2017 2016 2017 2016 $ 8,889 $ 7,137 $ 25,689 $ 20,855 (66 ) (70 ) (206 ) (219 ) $ 8,823 $ 7,067 $ 25,483 $ 20,636 13,188,761 10,721,253 13,119,170 10,652,223 (97,842 ) (105,343 ) (105,350 ) (111,937 ) 13,090,919 10,615,910 13,013,820 10,540,286 $ 0.67 $ 0.67 $ 1.96 $ 1.96 $ 8,823 $ 7,067 $ 25,483 $ 20,636 13,090,919 10,615,910 13,013,820 10,540,286 584,778 668,674 662,890 652,272 — 13,370 2,104 12,937 13,675,697 11,297,954 13,678,814 11,205,495 $ 0.65 $ 0.63 $ 1.86 $ 1.84 Three Months Ended
March 31,2020 2019 Basic Net income available to common shareholders $ (1,148) $ 2,901 Less: earnings allocated to participating securities (7) (34) Net income allocated to common shareholders $ (1,155) $ 2,867 Weighted average common shares outstanding including participating securities 14,849,535 14,561,721 Less: Participating securities (90,575) (168,638) Average shares 14,758,960 14,393,083 Basic earnings per common share $ (0.08) $ 0.20 Three Months Ended
March 31,2020 2019 Diluted Net income allocated to common shareholders $ (1,155) $ 2,867 Weighted average common shares outstanding for basic earnings per common share 14,758,960 14,393,083 Add: Dilutive effects of assumed exercises of stock options — 411,747 Add: Dilutive effects of assumed restricted stock units — — Average shares and dilutive potential common shares 14,758,960 14,804,830 Dilutive earnings per common share $ (0.08) $ 0.19 September 30, 2017March 31, 2020 and 2016,2019, stock options for 352,042988,504 and 272,087768,458 shares of common stock, respectively, were not considered in computing diluted earnings per common share because they were antidilutive. For the three months ended March 31, 2020 restricted stock units for 254,498 shares of common stock were not considered in computing diluted earnings per common share because they were antidilutive. Stock options for 254,204 and 151,544 shares of common stock were not considered in computing diluted earnings per common share for the nine months ended September 30, 2017 and 2016 because they were antidilutive.10—12—SUBORDINATED DEBT ISSUANCE$58,470$58,916 and $58,337$58,872 at September 30, 2017March 31, 2020 and at December 31, 2016,2019, respectively. For regulatory capital purposes, the subordinated notes are treated as Tier 2 capital, subject to certain limitations, and are included in total regulatory capital when calculating the Company’s total capital to risk weighted assets ratio as indicated in Note 7 of these consolidated financial statements.The7.00%7% fixed-to-floating rate subordinated notes (the “June 2016 Subordinated Notes”) were issued to certain accredited institutional investors in a private offering. The subordinated notes are unsecured and will rank at least equally with all of the Company’s other unsecured subordinated indebtedness and will be effectively subordinated to all of our secured debt to the extent of the value of the collateral securing such debt. The subordinated notes will be subordinated in right of payment to all of our existing and future senior indebtedness, and will rank structurally junior to all existing and future liabilities of our subsidiaries including, in theten-yearten-year term of the March 2016 Subordinated Notes. The issuance costs related to the June 2016 Subordinated Notes were $404 and are being amortized as interest expense over theten-yearten-year term of the June 2016 Subordinated Notes. For the three months ended September 30, 2017March 31, 2020 and 2016,2019, amortization of issuance costs has amounted toremained consistent at $44 and $45, for both periods. For the nine months ended September 30, 2017 and 2016, amortization of issuance costs has amounted to $133 and $79, respectively. March 2016
Subordinated
Notes June 2016
Subordinated
Notes $40,000 $20,000 March 30, 2026 July 1, 2026 6.875% 7.00% 5 years 5 years March 30, 2021 July 1, 2021 Semiannually Semiannually Quarterly Quarterly 3-month LIBOR 3-month LIBOR Quarterly Quarterly *The Company currently may not make interest payments on either series of subordinated notes without prior written approval from its primary regulatory agencies. Through September 30, 2017 all interest payments have been made in accordance with the terms of the agreements.March 2016
Subordinated
NotesJune 2016
Subordinated
NotesPrincipal amount issued $40,000 $20,000 Maturity date March 30, 2026 July 1, 2026 Initial fixed interest rate 6.875% 7.00% Initial interest rate period 5 years 5 years First interest rate change date March 30, 2021 July 1, 2021 Interest payment frequency through year five Semiannually Semiannually Interest payment frequency after five years Quarterly Quarterly Interest repricing index and margin 3-month LIBOR plus 5.636% 3-month LIBOR plus 6.04% Repricing frequency after five years Quarterly Quarterly is intended to assistand analysis identifies significant factors that have affected our financial position and operating results during the periods included in the understanding and assessment of significant changes and trends related to the Company’s results of operations andaccompanying financial condition.statements. This discussion and analysis should be read in conjunction with the accompanying unaudited financial statements, the audited financial statements and accompanying notes included in the Company’s Annual Report on Form10-K filed with the SECSecurities and Exchange Commission (“SEC”) on March 16, 2017,2020, which includes additional information about critical accounting policies and practices and risk factors. Historical results and trends that might appear in the consolidated financial statements should not be interpreted as being indicative of future operations. All amounts are in thousands, except per share data or unless otherwise indicated.1215 branches and one loan production office in the demographically attractive and growing Williamson, Rutherford and Davidson Counties and one loan production and deposit production office in Wilson County, all within the Nashville metropolitan area.MSA. As used in this report, unless the context otherwise indicates, any reference to “Franklin Financial,” “our Company,” “the Company,” “us,” “we” and “our” refers to Franklin Financial Network, Inc. together with its consolidated subsidiaries (including Franklin Synergy)Synergy Bank), any reference to “FFN” refers to Franklin Financial Network, Inc. only and any reference to “Franklin Synergy” or the “Bank” refers to our banking subsidiary, Franklin Synergy Bank.April 30, 2020 COVID-19 Loan Deferrals Principal Balance Number of loans Total Loans Booked $ 644,229 422 Industries Commercial and industrial Commercial real estate owner occupied Commercial real estate non-owner occupied real estate Total % of Total Loans HFI Retail $ 6,488 $ 33,787 $ 238,912 $ 279,187 9.8 % Healthcare - institutional 306,343 — — 306,343 10.7 % Healthcare - non-institutional 18,666 5,702 21,302 45,670 1.6 % Total healthcare 325,009 5,702 21,302 352,013 12.3 % Hotels 200 — 142,320 142,520 5.0 % Restaurants 4,437 40,762 30,253 75,452 2.6 % Transportation and warehousing 19,492 — 5,276 24,768 0.9 % Total $ 355,626 $ 80,250 $ 438,063 $ 873,939 30.6 % Risk Rating Retail Healthcare - Institutional Healthcare - Non-Institutional Total Healthcare Hotels Restaurants Transportation and Warehousing Pass 93.2 % 86.5 % 95.9 % 87.7 % 100.0 % 99.8 % 93.5 % Watch 5.2 % 2.5 % 4.1 % 2.7 % — % — % 6.3 % Special mention 0.4 % — % — % — % — % — % 0.2 % Substandard or worse 1.2 % 11.0 % — % 9.6 % — % 0.2 % — % Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % The Company’sdetail in Note 1 of the notes to the consolidated financial statements in the Company’s Form10-K that was filed with the SEC(unaudited) which begins on March 16, 2017.page 9. The critical accounting policies require judgment to ascertain the valuation of assets, liabilities, commitments and contingencies. Management has established policies and control procedures that are intended to ensure valuation methods are well controlled and applied consistently from period to period. In addition, the policies and procedures are intended to ensure that the process for changing methodologies occurs in an appropriate manner. The following is a brief summary of the more significant policies.allowance for loan lossesALLL is a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed.has become uncollectible. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors.the Companywe will be unableTroubled debt restructuringstroubled debt restructuringTDR is considered to be a collateral dependent loan, the loan is reported, net, at the fair value of the collateral. For troubled debt restructuringsTDRs that subsequently default, the Company determineswe determine the amount of reserve in accordance with the accounting policy for the allowance for loan losses.economicqualitative factors based on the risks present for each portfolio segment. These economic factors include consideration of the following: levels of and trends in delinquencies and impaired loans; levels of and trends in charge-offs and recoveries; trends in volume and terms of loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of lending management and other relevant staff; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations.Recently AdoptedPronouncementsIn March 2016, the FASB issuedASU2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. UnderASU 2016-09 all excess tax benefits and tax deficiencies related to share-based payment awards are to be recognized as income tax expense or benefit in the income statement during the period in which they occur. Previously, such amounts were recorded in the pool of excess tax benefits included in additionalpaid-in capital, if such pool was available. Because excess tax benefits are no longer recognized in additionalpaid-in capital, the assumed proceeds from applying the treasury stock method when computing earnings per share excludes the amount of excess tax benefits that would have previously been recognized in additionalpaid-in capital. Additionally, excess tax benefits are classified along with other income tax cash flows as an operating activity rather than as a financing activity, as was previously the case.ASU 2016-09 also provides that an entity can make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest (current GAAP) or accountStandard for forfeitures when they occur.ASU 2016-09 changed the threshold to qualifyAllowance for equity classification (rather than as a liability) to permit withholding up to the maximum statutory tax rates (rather than the minimum as was previously the case) in the applicable jurisdictions. The Company elected to adopt this ASU in the fourth quarter of 2016, effective as ofCredit Losses2016. The adoption of this2020, ASU decreased income tax expense for the nine months ended September 30, 2016 by $616 and increased diluted earnings per share by $0.04. The adoption of this ASU also impacted previously reported quarterly earnings and earnings per share in the third quarter of 2016 by decreasing income tax expense by $107 and increasing diluted earnings per share by $0.01.Recent Accounting PronouncementsIn May 2014, the FASB issued ASU2014-09,Revenue from Contracts with Customers (Topic 606). ASU2014-09 creates a new topic in the FASB ASC, Topic 606. In addition to superseding and replacing nearly all existing U.S. GAAP revenue recognition guidance, including industry-specific guidance, ASU2014-09 establishes a new control-based revenue recognition model, changes the basis for deciding when revenue is recognized over time or at a point in time, provides new and more detailed guidance on specific topics and expands and improves disclosures about revenue. In addition, ASU2014-09 added a new Subtopic to the ASC, Other Assets and Deferred Costs: Contracts with Customers (“ASC340-40”), to provide guidance on costs related to obtaining a contract with a customer and costs incurred in fulfilling a contract with a customer that are not in the scope of another ASC Topic. The new guidance does not apply to certain contracts within the scope of other ASC Topics, such as lease contracts, insurance contracts, financing arrangements, financial instruments, guarantees other than product or service warranties, andnon-monetary exchanges between entities in the same line of business to facilitate sales to customers. The amendments are effective for annual periods and interim periods within those annual periods beginning after December 15, 2017. Most of the Company’s revenues come from financial instruments, like loans, investment securities and other financial instruments which are not included in the scope of this ASU. The Company’s revenue recognition pattern for revenue streams within the scope of ASU2014-09, including but not limited to service charges on deposit accounts, gains/losses on the sale of OREO and wealth management income, is not expected to change significantly from current practice. The standard permits the use of either the full retrospective or modified retrospective transition method. The Company is currently planning to use the modified retrospective transition method which requires application of ASU2014-09 to uncompleted contracts at the date of adoption. Periods prior to the date of adoption are not retrospectively revised, but a cumulative effect of adoption is recognized for the impact of the ASU on uncompleted contracts at the date of adoption. Adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial statements.In January 2016, the FASB issued ASU2016-01,2016-13 Financial Instruments (Topic 825): Recognition and Measurement of Financial Assets and Financial Liabilities, which amends prior guidance to require an entity to measure its equity investments (except those accounted for under the equity method of accounting) to be measured at fair value with changes in fair value recognized in net income. An entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer. The new guidance simplifies the impairment assessment of equity investments without readily determinable fair values, requires public entities to use the exit price notion when measuring fair value of financial instruments for disclosure purposes, requires an entity to present separately in other comprehensive income the portion of the total change in fair value of a liability resulting from changes in the instrument-specific credit risk when the entity has selected the fair value option for financial instruments and requires separate presentation of financial assets and liabilities by measurement category and form of financial asset. The amendments are effective for annual periods and interim periods within those annual periods beginning after December 15, 2017. Management has not yet determined the impact that adoption of this guidance will have on the Company’s financial statements.In February 2016, the FASB issued ASU2016-02 which createsTopic 842, Leases and supersedesTopic 840, Leases. ASU2016-02 is intended to improve financial reporting about leasing transactions, by increasing transparency and comparability among organizations. Under the new guidance, a lessee will be required to record all leases with lease terms of more than 12 months on their balance sheet as lease liabilities with a correspondingright-of-use asset. ASU2016-02 maintains the dual model for lease accounting, requiring leases to be classified as either operating or finance, with lease classification determined in a manner similar to existing lease guidance. The new guidance will be effective for the Company for fiscal years beginning on or after December 15, 2018. Early adoption is permitted for all entities. At the time this ASU is adopted, the Company will recognize aright-of-use asset, and a lease liability for all leases, which will initially be measured at the present value of lease payments, and a single lease cost calculated so that the costs of the leases are allocated over the terms of the Company’s leases on a generally straight-line basis. Since an asset will be recognized at the time of adoption, the Company’s regulatory capital ratios will be impacted. Management is evaluating the impact ASU2016-02 will have on the Company’s consolidated financial statements.In June 2016, the FASB issued ASU2016-13,Financial Instruments -– Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,. The ASU requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. The ASU requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. In addition, the ASU amends the accounting for credit losses onavailable-for-sale debt securities and purchased financial assets with credit deterioration. The ASU is became effective for the Company which replaces the existing incurred loss impairment methodology for fiscal years,loans that are collectively evaluated for impairment with a methodology that reflects management’s best estimate of lifetime expected credit losses and interim periodsrequires consideration of reasonable and supportable economic forecasts to develop a lifetime credit loss estimate. Topic 326 requires additional qualitative and quantitative disclosure to allow users to better understand the credit risk within those fiscal years, beginning afterthe portfolio and the methodologies for determining the ACL. The CECL standard also simplifies the accounting model for purchased credit impaired loans. Additionally, Topic 326 requires expected credit losses on AFS debt securities be recorded as an ACL. For certain types of debt securities, such as U.S. Treasuries and other securities with government guarantees, entities may expect zero credit losses.15, 2019 (i.e.,31, 2020, with an effective retrospective implementation date of January 1, 2020, for calendar year entities). Early application2020.There is increased uncertainty on the local, regional, and national economy as a result of local and state stay-at-home orders, as well as relief measures provided at a national, state, and local level.We have taken actions to mitigate the impact on credit losses including permitting short-term payment deferrals to current customers, as well as actively participating in the SBA’s PPP.These conditions significantly impact management’s determination of a reasonable and supportable forecast, an essential requirement in the calculation of expected credit losses under CECL methodology.We believes that the deferral will be permitted for all organizations for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently gathering information, reviewing possible vendors and has formed a committeeprovide time to formulatebetter assess the methodology to be used. Most importantly, the Company is gathering data to enable review scenarios and to determine which calculations will produce the most reliable results. The impact of adopting ASU2016-13 is not currently known.In August 2016, the FASB issued ASU2016-15,StatementCOVID-19 pandemic on the expected lifetime credit losses.Cash Flows (Topic 230): ClassificationCECL once the deferral period ceases.Management will continue to measure and monitor the estimated impacts of Certain Cash ReceiptsCECL adoption through continued parallel testing of model simulations based on our portfolio composition and Cash Payments. This Accounting Standards Update addresses the following eight specific cash flow issues: debt prepayment or debt extinguishment costs; settlementcurrent expectations ofzero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation future economic conditions. effective interest rateCARES Act being signed and our decision to delay the implementation of CECL, we were completing our CECL implementation plan, under the borrowing; contingent consideration payments made afterdirection of our Chief Financial Officer, Chief Credit Officer, Chief Operating Officer, and Controller. The working group also included individuals from various functional areas including credit, risk management, accounting and information technology, among others. Our implementation plan included assessment and documentation of processes, internal controls and data sources; model development, documentation and validation; Board approval of a business combination; proceeds fromCECL Policy; and system configuration, among other things. Additionally, a third-party vendor remains under contract to assist us in the settlementimplementation of insurance claims; proceeds from the settlement of corporate-owned life insurance policies (COLIs) (including bank-owned life insurance policies (BOLIs)); distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. The amendments in this UpdateCECL.effective for the Company for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. This ASU is not expected to have a material impact on the Company’s financial statements.In January 2017, the FASB issued ASU2017-04, Intangibles – Goodwill and Other (Topic 350):Simplifying the Test for Goodwill Impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. 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. All other goodwill impairment guidance will remain largely unchanged.ASU 2017-04 is effective for interim and annual reporting periods beginning after December 15, 2019, applied prospectively. Early adoption is permitted for any impairment tests performed after January 1, 2017. Adoption ofASU 2017-04 is not expected to have a material impact on the Company’s consolidated financial statements.In March 2017, the FASB issued ASU2017-08,Receivables—Nonrefundable Fees and Other Costs (Subtopic310-20): Premium Amortization on Purchased Callable Debt Securities. This Update shortens the amortization period for the premium on certain purchased callable debt securities to the earliest call date. The new guidance does not change the accounting for purchased callable debt securities held at a discount; the discount continues to be amortized to maturity.ASU 2017-08 is effective for interim and annual reporting periods beginning after December 15, 2018, and early adoption is permitted. The guidance calls for a modified retrospective transition approach under which a cumulative-effect adjustment will be made to retained earningsunable as of the beginning of the first reporting period in which the guidance is adopted. The Company is currently evaluating the provisions ofASU 2017-08 to determine the potential impact the new standard will have on the Company’s consolidated financial statements.In May 2017, the FASB issued ASU2017-09,Compensation - Stock Compensation (Subtopic 718): Scope of Modification Accounting. ASU2017-09 clarifies when changes to terms or conditions of a share-based payment award must be accounted for as a modification. Under the new guidance, an entity will not apply modification accounting to a share-based payment award if all of the following are the same immediately before and after the change: (i) the fair value of the award, (ii) the vesting conditions of the award, and (iii) the classification of the award as either an equity or liability instrument. ASU2017-09 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted. The guidance requires companies to apply the requirements prospectively to awards modified on or after the adoption date. ASU2017-09 is not expected to have a significant impact on the Company’s consolidated financial statements.In August 2017, the FASB issued ASU2017-12,Targeted Improvements to Accounting for Hedging Activities. The objectivedate of this ASU isreport to improveprovide an estimate of our allowance for loan losses under the financial reportingCECL model as of hedging relationships to better portrayMarch 31, 2020 and the economic resultsprovision for loan losses for the three months then ended.AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016The Company reportedincome of $8,889 and $25,697 for the three and nine months ended September 30, 2017, respectively, compared to $7,137 and $20,878 for the three and nine months ended September 30, 2016, respectively. After earnings attributable to noncontrolling interest and after the payment of preferred dividends on the shares of SeniorNon-Cumulative Perpetual Preferred Stock, Series A (the “Series A Preferred Stock”) issued to the United States Department of the Treasury (“Treasury”) pursuant to the Small Business Lending Fund (“SBLF”), the Company’s net earningsloss available to common shareholders of $1,148 for the three and nine months ended September 30, 2017 was $8,889 and $25,689, respectively,March 31, 2020 compared to $7,137 and $20,855a net income of $2,901 for the three and nine months ended September 30, 2016, respectively.March 31, 2019, a decrease of $4,049. The primary reasondecrease was primarily related to a loan loss provision of $13,022 for the increase in net earnings available to common shareholders for the three and nine months ended September 30, 2017 was increased interest income on loans and investment securities compared with the same periods in 2016. The increase in loans was due to significant organic growth. The growth in the securities portfolio is primarily attributable to the Company’s leverage program to utilize proceeds received from capital raised during the fourth quarter of 2016.earning assetsearning-assets less interest expense paid on interest-bearing liabilities and is the most significant component of our revenues. Net interest income for the three and nine months ended September 30, 2017, totaled $24,326 and $72,438, respectively, compared to $20,675 and $59,885 for the same periods in 2016, an increase of $3,651 and $12,553, or 17.7% and 21.0%, between the respective periods. For the three and nine months ended September 30, 2017, interest income increased $8,056 and $24,761, or 31.3% and 34.1%, respectively, compared with the same periods in 2016, due to growth in both the loan and investment securities portfolios. For the three and nine months ended September 30, 2017, interest expense increased $4,405 and $12,208, or 87.2% and 96.2%, respectively, compared with the same periods in 2016, as a result of increases in interest-bearing deposits, Federal Home Loan Bank (“FHLB”) advances and subordinated notes.Interest-earning assets averaged $3,351,421 and $2,576,294 during the three months ended September 30, 2017 and 2016, respectively, an increase of $775,127, or 30.1%. This increase was due to growth in all types of interest-earning assets, but the largest growth occurred in loans and investment securities. Average loans increased 26.5%, and investment securities increased 31.8%, when comparing the three months ended September 30, 2017 with the same period in 2016. When comparing the three months ended September 30, 2017 and 2016, the yield on average interest earning assets, adjusted for tax equivalent yield, increased five basis points in 2017 to 4.17% compared to 4.12% for the same period during 2016. For the three months ended September 30, 2017, the tax equivalent yield on available for sale securities was 2.61%, andremained consistent for the three months ended September 30, 2016, the tax equivalent yield on available for sale securities was 2.42%. For the three months ended September 30, 2017, the tax equivalent yield on held to maturity securities was 4.11%, and for the three months ended September 30, 2016, the tax equivalent yield on held to maturity securities was 3.75%. The primary driver for the increase in yields on securities for the three-month period ended September 30, 2017 was the volumeMarch 31, 2020 with a total oftax-exempt municipal securities purchased during the past 12 months, which increased tax equivalent yields when comparing the three-month period in 2017 with the same period in 2016.Interest-bearing liabilities averaged $2,856,337 during the three months ended September 30, 2017, $27,464 compared to $2,201,206$27,420 for the same period in 2016, an increase of $655,131, or 29.8%. Total average interest-bearing deposits grew $460,127, or 22.9%, including increases in average2019, a $44 increase.checking of $291,152 and average time deposits of $178,786margin for the three-month period ended September 30, 2017, asfirst quarter of 2020 was 3.02%, compared to the same period during 2016. Rapid growth2.80% in the loan portfolio also resulted in an increase in average FHLB advances of $202,445 when comparing the three months ended September 30, 2017 with the same period in 2016.For the three-month periods ended September 30, 2017 and 2016, the cost of average interest-bearing liabilities increased 40 basis points to 1.31% from 0.91%. The increase was due to rate increases in the cost of funds for interest-bearing deposits, FHLB advances and Federal funds purchased.Interest-earning assets averaged $3,304,558 and $2,427,824 during the nine months ended September 30, 2017 and 2016, respectively,2019, an increase of $876,734, or 36.1%. This increase22 basis points, which was dueprimarily driven by the 2019 balance sheet rotation and optimization strategies that have focused on the reduction in non-core assets and liabilities.growth in both the loan portfolio and the securities portfolio over the past year. Average loans increased 28.6%, and investment securities increased 46.8%, when comparing the nine months ended September 30, 2017 with$48,058 for the same period in 2016. When comparing the nine months ended September 30, 2017 and 2016, thelast year, a 12.3% decrease. The yield on average interest earning assets, adjusted for tax equivalent yield, decreased 227 basis points to 4.11% in 2017 compared4.55% from 4.82% when comparing the three months ended March 31, 2020 to 4.13% for the same period during 2016.ninethree months ended September 30, 2017 and 2016,March 31, 2020, the tax equivalent yield on loans held for investment was 4.96% and 4.95% respectively. For5.21%, compared to 5.61% during the three months ended September 30, 2017 and 2016, the tax equivalent yield on loans was 5.03% and 4.96%, respectively.same period in 2019. The primary driver for the increasedecrease in yields on loans forwas the three- and nine-month periods ended September 30, 2017 was an increasedecrease in loanmarket interest rates when compared withto the same periodsquarter in 2016.For the nineprevious year.September 30, 2017,March 31, 2020 and 2019, respectively, a decrease of $317,387, or 7.8%. This decrease was due to the tax equivalent yield on available for salestrategically planned asset rotation and decrease in the total investment securities. Average investment securities was 2.66%decreased $480,923, or 43.7%, and average loans held for the nine months ended September 30, 2016, the tax equivalent yield on available for sale securities was 2.48%. For the nine months ended September 30, 2017, the tax equivalent yield on held to maturity securities was 4.18%, and for the nine months ended September 30, 2016, the tax equivalent yield on held to maturity securities was 3.92%. The primary driver for the increase in yields on securities for the nine-month period ended September 30, 2017 was the volume oftax-exempt municipal securities purchased during the past 12 months, whichinvestment increased tax equivalent yields$69,762, or 2.5% when comparing the nine-month period in 2017three months ended March 31, 2020 with the same period in 2016.$2,839,188$3,076,269 and $3,493,260 and during the ninethree months ended September 30, 2017, compared to $2,044,661 for the same period in 2016, an increaseMarch 31, 2020 and 2019, respectively, a decrease of $794,527,$416,991, or 38.9%11.9%. Total average interest-bearingmoney market deposits grew $606,229, including increases in interest-bearing checking of $339,569increased $248,245, or 25.0%, and average time deposits of $259,409decreased $447,372, or 38.4% for the nine-month periodthree months ended September 30, 2017,March 31, 2020, as compared to the same period during 2016. Rapid growth in the loan portfolio also resulted in an increase in average2019. Average FHLB advances of $167,137, and subordinated notes and other borrowings increased $25,516,decreased $230,425 when comparing the ninethree months ended September 30, 2017March 31, 2020 with the same period in 2016.nine-month periodsthree months ended September 30, 2017March 31, 2020 and 2016,2019, the cost of average interest-bearing liabilities increased 34decreased 48 basis points to 1.85% from 0.83%2.33%.1.17%. The increase was due to increases in the cost of funds from interest-bearing deposits, FHLB advances, Federal funds purchased and repurchase agreements.and nine months ended September 30, 2017March 31, 2020 and 2016: Three Months Ended September 30, 2017 2016 Average
Balance Interest
Inc / Exp Average
Yield / Rate Average
Balance Interest
Inc / Exp Average
Yield / Rate $ 2,049,575 $ 26,006 5.03 % $ 1,620,347 $ 20,219 4.96 % 972,988 6,405 2.61 % 671,725 4,084 2.42 % 220,313 2,283 4.11 % 233,986 2,203 3.75 % 17,396 269 6.13 % 10,372 133 5.10 % 2,412 9 1.48 % 941 4 1.69 % 88,737 271 1.21 % 38,923 49 0.50 % $ 3,351,421 $ 35,243 4.17 % $ 2,576,294 $ 26,692 4.12 % (18,891 ) (14,508 ) 94,334 86,466 $ 3,426,864 $ 2,648,252 $ 552,502 $ 1,285 0.92 % $ 261,350 $ 256 0.39 % 604,416 1,703 1.12 % 617,913 957 0.62 % 54,921 42 0.30 % 51,235 40 0.31 % 1,259,452 4,281 1.35 % 1,080,666 2,430 0.89 % 289,228 968 1.33 % 86,783 215 0.99 % 37,374 92 0.98 % 44,974 69 0.61 % 58,444 1,083 7.35 % 58,285 1,082 7.39 % $ 2,856,337 $ 9,454 1.31 % $ 2,201,206 $ 5,049 0.91 % 261,127 224,387 11,312 16,650 298,088 206,009 $ 3,426,864 $ 2,648,252 2.86 % 3.21 % $ 25,789 $ 21,643 3.05 % 3.34 % Nine Months Ended September 30, 2017 2016 Average
Balance Interest
Inc / Exp Average
Yield / Rate Average
Balance Interest
Inc / Exp Average
Yield / Rate $ 1,975,592 $ 73,274 4.96 % $ 1,535,894 $ 56,933 4.95 % 1,002,118 19,958 2.66 % 641,270 11,917 2.48 % 224,174 7,012 4.18 % 194,326 5,698 3.92 % 15,830 663 5.60 % 9,256 354 5.11 % 2,178 24 1.47 % 751 11 1.96 % 84,666 643 1.02 % 46,327 164 0.47 % $ 3,304,558 $ 101,574 4.11 % $ 2,427,824 $ 75,077 4.13 % (18,182 ) (13,179 ) 92,425 41,988 $ 3,378,801 $ 2,456,633 $ 631,582 $ 3,586 0.76 % $ 292,013 $ 853 0.39 % 608,670 4,412 0.97 % 608,341 2,767 0.61 % 55,569 127 0.31 % 48,647 121 0.33 % 1,196,675 10,993 1.23 % 937,266 6,377 0.91 % 242,549 2,228 1.23 % 75,412 511 0.91 % 45,745 309 0.90 % 50,100 237 0.63 % 58,398 3,239 7.42 % 32,882 1,820 7.39 % $ 2,839,188 $ 24,894 1.17 % $ 2,044,661 $ 12,686 0.83 % 246,675 200,981 7,358 12,707 285,580 198,284 $ 3,378,801 $ 2,456,633 2.94 % 3.30 % $ 76,680 $ 62,391 3.10 % 3.43 % (1)Loan balances include both loans held in the Bank’s portfolio and mortgage loans held for sale and are net of deferred origination fees and costs.Non-accrual loans are included in total loan balances.(2)Includes federal funds sold and interest-bearing deposits at the Federal Reserve Bank and the Federal Home Loan Bank.(3)Includes repurchase agreements.(4)Represents the average rate earned on interest-earning assets minus the average rate paid on interest-bearing liabilities.(5)Represents net interest income (annualized) divided by total average earning assets.(6)Interest income and rates include the effects oftax-equivalent adjustments to adjusttax-exempt interest income ontax-exempt loans and investment securities to a fully taxable basis.(7)Average balances are average daily balances.Three Months Ended March 31, 2020 2019 Average
BalanceInterest
Inc / ExpAverage
Yield /
RateAverage
BalanceInterest
Inc / ExpAverage
Yield /
RateASSETS: $ 2,834,437 $ 36,707 5.21 % $ 2,764,675 $ 38,238 5.61 % Loans held for sale 36,668 379 4.16 9,438 115 4.94 Securities: Taxable 399,135 2,424 2.44 919,549 6,394 2.82 221,190 1,872 3.40 181,699 1,990 4.44 Restricted equity securities 24,824 162 2.62 22,082 332 6.10 Certificates of deposit at other financial institutions 3,426 20 2.35 3,592 20 2.26 207,164 579 1.12 143,196 969 2.74 TOTAL INTEREST EARNING ASSETS $ 3,726,844 $ 42,143 4.55 % $ 4,044,231 $ 48,058 4.82 % Allowance for loan and lease losses (45,100) (24,054) All other assets 198,380 200,078 TOTAL ASSETS $ 3,880,124 $ 4,220,255 LIABILITIES & EQUITY Deposits: Interest checking $ 877,751 $ 3,400 1.56 % $ 857,096 $ 4,420 2.09 % Money market 1,241,087 4,930 1.60 992,842 5,979 2.44 Savings 40,055 27 0.27 40,609 28 0.28 Time deposits 718,294 3,889 2.18 1,165,666 6,563 2.28 137,319 801 2.35 367,744 1,959 2.16 2,876 14 1.96 10,594 72 2.76 Subordinated notes 58,887 1,082 7.39 58,709 1,082 7.47 TOTAL INTEREST BEARING LIABILITIES $ 3,076,269 $ 14,143 1.85 % $ 3,493,260 $ 20,103 2.33 % Demand deposits 333,883 291,176 Other liabilities 53,454 58,703 Total equity 416,518 377,116 TOTAL LIABILITIES AND EQUITY $ 3,880,124 $ 4,220,255 2.70 % 2.49 % NET INTEREST INCOME $ 28,000 $ 27,955 3.02 % 2.80 % Net change three months ended
September 30, 2017 versus September 30, 2016 Volume Rate Net Change $ 5,425 $ 362 $ 5,787 1,855 466 2,321 (120 ) 200 80 91 45 136 6 (1 ) 5 63 159 222 $ 7,320 $ 1,231 $ 8,551 $ 291 $ 738 $ 1,029 (16 ) 762 746 3 (1 ) 2 391 1,460 1,851 505 248 753 (12 ) 35 23 7 (6 ) 1 $ 1,169 $ 3,236 $ 4,405 $ 6,151 $ (2,005 ) $ 4,146 Net change nine months ended
September 30, 2017 versus September 30, 2016 Volume Rate Net Change $ 16,193 $ 148 $ 16,341 6,692 1,349 8,041 878 436 1,314 251 58 309 21 (8 ) 13 131 348 479 $ 24,166 $ 2,331 $ 26,497 $ 985 $ 1,748 $ 2,733 6 1,639 1,645 14 (8 ) 6 1,752 2,864 4,616 1,136 581 1,717 (20 ) 92 72 1,406 13 1,419 $ 5,279 $ 6,929 $ 12,208 $ 18,887 $ (4,598 ) $ 14,289 Net change three months ended
March 31, 2020 versus March 31, 2019 Volume Rate Net Change INTEREST INCOME Loans $ 802 $ (2,333) $ (1,531) Loans held for sale 349 (85) 264 Securities Taxable (3,600) (370) (3,970) Tax-exempt 381 (499) (118) Restricted equity securities 40 (211) (171) Certificates of deposit at other financial institutions (1) 1 — Federal funds sold and other 426 (816) (390) TOTAL INTEREST INCOME $ (1,603) $ (4,313) $ (5,916) INTEREST EXPENSE Deposits Interest checking $ 103 $ (1,123) $ (1,020) Money market accounts 1,438 (2,487) (1,049) Savings — (1) (1) Time deposits (2,489) (185) (2,674) Federal Home Loan Bank advances (1,220) 62 (1,158) (52) (6) (58) Subordinated notes — — — TOTAL INTEREST EXPENSE $ (2,220) $ (3,740) $ (5,960) NET INTEREST INCOME $ 617 $ (573) $ 44 allowance for loan lossesALLL that, in management’s evaluation, should be adequate to provide coverage for the probable losses incurred in the loan portfolio. The allowance is increased by the provision for loan losses and is decreased by charge-offs, net of recoveries on prior loan charge-offs.$590$13,022 and $1,392$5,055 for the three months ended September 30, 2017March 31, 2020 and 2016, respectively,2019, respectively. Management determined the need to record an additional loan loss provision of $6,600 to provide specific reserves for one banking relationship, which was on nonaccrual status and $3,018was included in a portion of our classified assets, in our Healthcare and $4,095 forCorporate loan portfolios, as of December 31, 2019. Our determination to record this additional provision was primarily the nine months ended September 30, 2017result of certain developments and 2016, respectively.circumstances regarding the collectability of this relationship that arose during the first quarter of 2020, and these developments were amplified by various macroeconomic factors. The lowerbalance of this banking relationship was fully charged-off as of March 31, 2020. The remainder of the loan loss provision for the three and nine months ended September 30, 2017 comparedMarch 31, 2020 was attributable to the same periods in 2016 is based on the Company’s analysisa combination of its allowance for loan losses which, based on the loan portfolio’s risk profile and comparatively less loan growth required less provision be recorded. Nonperforming loans at September 30, 2017 totaled $2,860 comparedand increased quantitative loss factors, as well as an increase in qualitative risk factors due to $6,182 at December 31, 2016, representing 0.1% and 0.3% of total loans, respectively.and nine months ended September 30, 2017March 31, 2020 was $3,569 and $11,457, respectively,$5,893 compared to $4,876 and $12,587$3,486 for the same periods in 2016, respectively. 2019. The $2,407 increase was primarily the result of strong mortgage banking revenue, driven by the lower interest rates present during the quarter. Three Months Ended
September 30, $
Increase
(Decrease) %
Increase
(Decrease) 2017 2016 $ 39 $ 44 $ (5 ) (11.4 %) 787 845 (58 ) (6.9 %) 1,517 2,942 (1,425 ) (48.4 %) 643 446 197 44.2 % 70 (40 ) 110 275.0 % 350 430 (80 ) (18.6 %) (16 ) 30 (46 ) (153.3 %) 179 179 — — % $ 3,569 $ 4,876 $ (1,307 ) (26.8 %) Nine Months Ended
September 30, $
Increase
(Decrease) %
Increase
(Decrease) 2017 2016 $ 114 $ 139 $ (25 ) (18.0 %) 2,297 2,245 52 2.3 % 5,918 6,859 (941 ) (13.7 %) 1,884 1,343 541 40.3 % 230 (2 ) 232 11,600.0 % 470 1,535 (1,065 ) (69.4 %) (10 ) 36 (46 ) (127.8 %) 554 432 122 28.2 % $ 11,457 $ 12,587 $ (1,130 ) (9.0 %) Service charges on deposit accounts Three Months Ended
March 31,$
Increase
(Decrease)%
Increase
(Decrease)2020 2019 Service charges on deposit accounts $ 92 $ 74 $ 18 24.3 % Other service charges and fees 897 757 140 18.5 % Mortgage banking revenue 2,685 1,672 1,013 60.6 % Wealth management 814 627 187 29.8 % Gain on sale or call of securities 1,396 149 1,247 NM Net loss on sale of loans (416) (217) (199) 91.7 % Net gain on sale of foreclosed assets 2 4 (2) (50.0) % Other 423 420 3 0.7 % Total non-interest income $ 5,893 $ 3,486 $ 2,407 69.0 % and nine months ended September 30, 2017March 31, 2020, compared to the same period in 2019. The increase was due to the volume of mortgage loans originated, the sales related to those loans and more favorable market rates in 2020, which resulted in favorable fair value adjustments on mortgage derivatives. The Federal Reserve increased rates 100 basis points in 2018 but then decreased $5rates 75 basis points during the third and $25,fourth quarters of 2019 and then decreased rates by an additional 150 basis points in the first quarter of 2020, resulting in a current target rate range of zero to 25 basis points.11.4% and 18.0%, respectively, fromcall of securities increased $1,247 for the three months ended March 31, 2020, when compared with the same periods in 2016.2019. The decrease for the nine months ended September 30, 2017increase was due to the Company’s waiving service charges on deposit accountselection to sell certain securities to take advantage of the market conditions that existed during March 2017 while the Company was going through a core system conversion.Other service charges and fees for the three and nine months ended September 30, 2017 decreased $58 and increased $52, or 6.9% and 2.3%, respectively, from the same periods in 2016. The fluctuation for the nine months ended September 30, 2017 was duethat period, at which time, management elected to a combinationsell certain of increases and decreases, with the following typesits securities as part of fees having the largest fluctuation in the comparative periods: unused commitment fees ($108), ATM foreign surcharge fees ($42), and underwriting fees ($32).gainloss on sale of loans decreased $1,425, or 48.4% and $941, or 13.7%,was $416, an increase of $199 during the period ended March 31, 2020, when comparing the three and nine months ended September 30, 2017 to the same period in 2016, respectively. The changes in both periods were due to the volume of loans sold and the margins related to the loans sold.Wealth management income for the three and nine months ended September 30, 2017 increased $197 and $541, or 44.2% and 40.3%, respectively, in comparisoncompared with the same periods in 2016.2019. The increase was attributed to the growth in the client base and assets under management in the wealth management division, as well as improvement in the stock markets. As a comparison, the Company had assets under management at September 30, 2017 and 2016 of $351,932 and $262,879, respectively.Net loan servicing feesloss for the three and nine months ended September 30, 2017 increased $110 and $232, or 275.0% and 11,600.0%, respectively, in comparison with the same periods in 2016. The increase was attributed to the growth in the mortgage loans serviced and the related valuation increase of the mortgage servicing rights.Net gain on sale of investment securities decreased $80 and $1,065, or 18.6% and 69.4%, respectively, when comparing the three and nine months ended September 30, 2017 with the same periods in 2016. The decreases were primarily due to the gains on securities that were recognized in the third quarter of 2016, which were related to management selling a number of smaller securities to consolidate the number of securities carried in the portfolio, and selling securities of two municipalities whose credit rating had fallen below management’s credit score limit.Othernon-interest income remained consistent when comparing the three months ended September 30, 2017 withMarch 31, 2020 was attributed to sales of SNC relationships during the first quarter of 2020.20162019. The increases and increased by $122, or 28.2%, when comparing the nine months ended September 30, 2017 with the same period in 2016. The increase for the nine months ended September 30, 2017 is primarily attributed to the loss of $98 recorded on the sale of the Company’s real estate in downtown Murfreesboro, Tennessee during first quarter 2016.Non-Interest ExpenseNon-interest expense for the three and nine months ended September 30, 2017 was $15,278 and $44,837, respectively, compared to $13,708 and $38,452 for the same periods in 2016, respectively. The increasesdecreases were the result of the following components listed in the table below (in thousands): Three Months Ended
September 30, $
Increase
(Decrease) %
Increase
(Decrease) 2017 2016 $ 9,011 $ 7,979 $ 1,032 12.9 % 2,399 2,001 398 19.9 % 900 570 330 57.9 % 192 206 (14 ) (6.8 %) 821 935 (114 ) (12.2 %) 115 138 (23 ) (16.7 %) 1,840 1,879 (39 ) (2.1 %) $ 15,278 $ 13,708 $ 1,570 11.5 % Nine Months Ended
September 30, $
Increase
(Decrease) %
Increase
(Decrease) 2017 2016 $ 26,172 $ 22,099 $ 4,073 18.4 % 6,689 5,563 1,126 20.2 % 2,675 1,388 1,287 92.7 % 744 611 133 21.8 % 2,558 3,006 (448 ) (14.9 %) 363 431 (68 ) (15.8 %) 5,636 5,354 282 5.3 % $ 44,837 $ 38,452 $ 6,385 16.3 % The increase innon-interest expense noted in the table above is related to the Company’s overall growth. The Company’s largest increases for the three and nine months ended September 30, 2017, in comparison with the same periods of 2016, were in salaries and employee benefits, occupancy and equipment, FDIC assessment expense, and othernon-interest expense.Three Months Ended
March 31,$
Increase
(Decrease)%
Increase
(Decrease)2020 2019 Salaries and employee benefits $ 12,580 $ 14,743 $ (2,163) (14.7) % Occupancy and equipment 3,086 3,113 (27) (0.9) % FDIC assessment expense 450 990 (540) (54.5) % Marketing 245 319 (74) (23.2) % Professional fees 3,068 923 2,145 232.4 % Amortization of core deposit intangible 94 145 (51) (35.2) % Other 2,898 2,383 515 21.6 % Total non-interest expense $ 22,421 $ 22,616 $ (195) (0.9) % increased $1,032 and $4,073,decreased $2,163, or 12.9% and 18.4%14.7%, respectively, when comparing the three and nine months ended September 30, 2017 with the same periods in 2016. The increases in both periods are primarily due to the Company’s staffing growth, during which the Company went from 261 full-time equivalent employees as of September 30, 2016, to 279 as of September 30, 2017, many of which were officer level positions as the Company has worked to enhance its management team to properly oversee the Company’s growth and to grow its team of lenders to further grow the loan portfolio. In addition to salaries, incentive expenseswhile professional fees increased $405 and $309, respectively, when comparing the three and nine months ended September 30, 2017 with the same periods of 2016 due to the Company’s financial performance during the three and nine months ended September 30, 2017. Stock-based compensation expense also increased $266 and $657, respectively, for the three and nine months ended September 30, 2017 in comparison with the same periods in 2016.Occupancy and equipment expense increased $398 and $1,126,$2,145, or 19.9% and 20.2%, respectively, when comparing the three and nine months ended September 30, 2017 with the same periods in 2016. The variance for the three months ended September 30, 2017 versus the three months ended September 30, 2016 is primarily attributable to increases in building rent expense ($222), software maintenance fees ($114), and software depreciation ($21). The variance when comparing the nine months ended September 30, 2017 with the nine months ended September 30, 2016 is attributable to increases in building rent expense ($634), software maintenance fees ($281) and leasehold improvement depreciation ($69).The Company’s FDIC assessment expense increased $330 and $1,287, or 57.9% and 92.7%, respectively, when comparing the three and nine months ended September 30, 2017 with the same periods in 2016. The increases are due to the year-over-year asset growth of the Company, on which FDIC assessments are calculated, and are also related to the change in the FDIC insurance assessment calculation in the third quarter of 2016, which caused an increase in the Company’s insurance assessments based on the calculation’s components.Professional fees decreased $114 and $448, or 12.2% and 14.9%, respectively, when comparing the three and nine months ended September 30, 2017 with the same periods in 2016. The decrease232.4% when comparing the three months ended September 30, 2017March 31, 2020 with the same period in 2016 is2019. Theses variations are attributable to employee-related adjustments occurring due to decreasesour pending strategic merger with FB Financial Corporation projected to close in other professional fees ($85) and compliance fees ($152). The decrease, when comparing the nine months ended September 30, 2017 and 2016, is due to decreases in merger-related expenses ($316), legal fees ($79) and SEC filing expense ($67). The decreases in other professional fees are related to the following 2016 expenses: (1) the design and implementationthird quarter 2020. the hiring of several key lending and management professionals.For the three months ended September 30, 2017, othernon-interest expenses decreased $39, or 2.1%, and for the nine months ended September 30, 2017, other noninterest expenses increased $282, or 5.3%, from the same comparative periods during 2016. The increase in othernon-interest expense for the nine months ended September 30, 2017 versus September 30, 2016 is attributedMarch 31, 2020 of increases in several types of expenses, but the following expense types represent the largest variances: insurance expense ($78); franchise taxes ($162); travel expenses ($74); management fees ($200); and loan servicing expense ($219). These variances were offset by decreases in various expense types, with the following account having the largest decrease: loan-related expenses ($283).Income Tax ExpenseThe Company recognized income tax expense of $334 for the three and nine months ended September 30, 2017, of $3,138 and $10,343, respectively, compared to $3,314 and $9,047, respectively, for the three and nine months ended September 30, 2016. The Company’syear-to-dateMarch 31, 2019. Our quarter-to-date income tax expensebenefit for the period ended September 30, 2017March 31, 2020 reflects an effective income tax rate of 28.7%, a decrease45.0% which is an increase compared to 30.2%10.3% for the same period in 2016.SEPTEMBER 30, 2017 AND DECEMBERMarch 31, 2016The Company’sincreaseddecreased by $622,089,$104,561, or 21.1%,a 10.8% annualized rate, from December 31, 20162019 to September 30, 2017.March 31, 2020. The increasedecrease in total assets has primarily been the result of the continued balance sheet rotation and optimization strategies and the planned sales of investment securities during the twelve months between March 31, 2020 and March 31, 2019, and a planned offset by organic growth in the loan portfolio and from purchases of additional investment securities.the Company’sour net interest income and is a major contributor to profitability. The loan portfolio is the largest component of earning assets, and therefore generates the largest portion of revenues. For purposes of the discussion in this section, the term “loans” refers to loans, excluding loans held for sale, unless otherwise noted.September 30, 2017March 31, 2020 and December 31, 20162019 were $2,115,930$2,855,768 and $1,773,592,$2,812,444, respectively, an increase of $342,338,$43,324 or 19.3%.6.2% annualized. As a percentage of total assets, total loans, net of deferred fees, at September 30, 2017March 31, 2020 and December 31, 20162019 were 59.3%75.3% and 60.3%72.2%, respectively. Growth in the loan portfolio is primarily due to increased market penetration and a healthywithin our local economy. The Company has also attracted a number of experienced commercial and mortgage lenders to help increase penetration in its primary markets in Middle Tennessee, Williamson County, Rutherford County and Davidson County. September 30, 2017 December 31, 2016 Amount % of Total
Loans Amount % of Total
Loans $ 514,934 24.3 % $ 489,562 27.6 % 598,846 28.3 % 497,140 28.0 % 532,113 25.1 % 404,989 22.8 % 464,747 22.0 % 376,476 21.2 % 3,933 0.2 % 3,359 0.2 % 2,114,573 99.9 % 1,771,526 99.8 % 2,558 0.1 % 2,859 0.2 % 2,117,131 100.0 % 1,774,385 100.0 % (1,201 ) (793 ) (19,944 ) (16,553 ) $ 2,095,986 $ 1,757,039 The discussion March 31, 2020 December 31, 2019 Types of Loans Amount % of Total
LoansAmount % of Total
LoansTotal loans Real estate: Construction and land development $ 627,178 21.9 % $ 591,541 21.0 % Commercial 997,958 34.9 % 993,912 35.3 % Residential 648,586 22.7 % 643,601 22.9 % Commercial and industrial 581,598 20.3 % 582,641 20.7 % Consumer and other 4,454 0.2 % 4,769 0.2 % Total gross loans 2,859,774 100.0 % 2,816,464 100.0 % Less: deferred loan fees, net (4,006) (4,020) Total loans, net of deferred loan fees 2,855,768 2,812,444 Less: allowance for loan losses (38,403) (45,436) Total loans, net allowance for loan losses $ 2,817,365 $ 2,767,008 following paragraphs includesSNC portfolio to a balance of $105,526, representing a 54.0% year-over-year and 91.6% annualized linked-quarter decrease. This is the PCIlowest SNC balance held by the Company during the last six quarters, representing 3.7% of loans HFI, which is almost half of the Company’s concentration of 9.3% of loans HFI at the peak of the SNC portfolio at December 31, 2018. Non-SNC loan growth in the breakdownfirst quarter was $74,456, representing annualized growth of 11.1% from the fourth quarter of 2019. The Company estimates approximately $32,000 of the various categories of loans.Total gross loans increased 19.3% during the first nine months of 2017,loan growth was due to organic growth as a resultincreased customer line of continued market penetration and the strength of the local economy. During this period, the Company experienced growth in real estate loans of 18.2% with growth occurring in the residential real estate (31.3%), commercial real estate (20.4%) and construction and land development (5.2%) segments. The Company also experienced growth of 23.3% in thecredit utilization, which was predominantly from commercial and industrial segment duringloan customers. Of the first nine months$738,189 unused lines of 2017.77.7%79.5% of the loan portfolio at September 30, 2017.March 31, 2020. The largest portion of the real estate segments as of September 30, 2017,March 31, 2020, was commercial real estate loans, which totaled 36.4%43.9% of real estate loans. Commercial real estate loans totaled $599,233$997,958 at September 30, 2017,March 31, 2020, and comprised 28.3%34.9% of the total loan portfolio. The commercial real estate loan classification primarily includes commercial-based mortgage loans that are secured by nonfarm, nonresidential real estate properties and multi-family residentialother properties.$514,934$627,178 at September 30, 2017,March 31, 2020, and comprised 31.3%27.6% of total real estate loans and 24.3%21.9% of the total loan portfolio. Loans in this classification provide financing for the construction and development of residential properties and commercial income properties, multi-family residential development, and land designated for future development.$532,295$648,586 and comprised 32.3%28.5% of real estate loans and 25.1%22.7% of total loans at September 30, 2017.$466,736$581,598 at September 30, 2017 and grew 23.3% during the first nine months of 2017.March 31, 2020. Loans in this classification comprised 22.0%20.3% of total loans at September 30, 2017.March 31, 2020. The commercial and industrial classification consists of commercial loans tosmall-to-medium sized businesses, shared national credits, and commercial healthcare loans.March 31,
2020December 31,
2019September 30,
2019June 30,
2019March 31,
2019QoQ
Change*YoY
ChangeCorporate $ 102,370 $ 139,840 $ 133,386 $ 170,125 $ 174,731 (107.8 %) (41.4 %) Portion SNC 36,011 59,339 58,544 112,756 122,452 (158.1 %) (70.6 %) Portion not SNC 66,359 80,501 74,842 57,369 52,279 (70.7 %) 26.9 % Healthcare 306,343 289,703 273,106 329,818 320,611 23.1 % (4.5 %) SNC 69,515 77,319 85,932 118,460 107,156 (40.6 %) (35.1 %) Non-SNC 236,828 212,384 187,174 211,358 213,455 46.3 % 10.9 % Total institutional $ 408,713 $ 429,543 $ 406,492 $ 499,943 $ 495,342 (19.5 %) (17.5 %) 579,751 580,696 576,018 666,025 635,673 (0.7 %) (8.8 %) Percent of institutional within
commercial and industrial70 % 74 % 71 % 75 % 78 % Total SNC $ 105,526 $ 136,658 $ 144,476 $ 231,216 $ 229,608 (91.6 %) (54.0 %) Percent of total loans HFI 3.7 % 4.9 % 5.2 % 8.0 % 8.1 % *Annualized Institutional loans asset quality March 31,
2020December 31,
2019September 30,
2019June 30,
2019March 31,
2019Corporate loans $ 102,370 $ 139,840 $ 133,386 $ 170,125 $ 174,731 Loans classified as criticized or worse — 17,608 17,598 — — Loans criticized or worse as % of corporate loans — % 12.6 % 13.2 % — % — % Loans requiring specific reserve $ — $ 17,608 $ — $ — $ — Specific reserve — 13,894 — — — Specific reserve as % impaired corporate loans — % 78.9 % — % — % — % Net (charge-offs) recoveries $ (20,428) $ — $ — $ — $ — Healthcare loans $ 306,343 $ 289,703 $ 273,106 $ 329,818 $ 320,611 Loans classified as criticized or worse 33,735 21,517 21,554 20,699 27,750 Loans criticized or worse as a % of healthcare loans 11.0 % 7.4 % 7.9 % 6.3 % 8.7 % Loans requiring specific reserve $ 6,592 $ 6,667 $ — $ 2,193 $ 9,177 Specific reserve 6,544 6,667 — 2,193 3,455 Specific reserve as % of impaired healthcare loans 99.3 % 100.0 % — % 100.0 % 37.6 % Net (charge-offs) recoveries $ — $ — $ (1,691) $ (7,563) $ — Total institutional $ 408,713 $ 429,543 $ 406,492 $ 499,943 $ 495,342 September 30, 2017,March 31, 2020, excluding net unearned net fees and costs. September 30, 2017 One year
or less Over one
year to five
years Over five
years Total $ 276,021 $ 165,429 $ 73,484 $ 514,934 28,239 154,309 416,685 599,233 37,849 116,899 377,547 532,295 75,035 308,537 83,164 466,736 2,249 1,281 403 3,933 $ 419,393 $ 746,455 $ 951,283 $ 2,117,131 $ 205,808 $ 306,701 $ 433,595 $ 946,104 213,585 439,754 517,688 1,171,027 $ 419,393 $ 746,455 $ 951,283 $ 2,117,131 March 31, 2020 One year
or lessOver one
year to five
yearsOver five
yearsTotal Real estate: Construction and land development $ 270,141 $ 197,995 $ 159,042 $ 627,178 Commercial 29,757 316,958 651,243 997,958 Residential 38,853 168,438 441,295 648,586 Commercial and industrial 70,535 424,807 86,256 581,598 Consumer and other 2,660 1,551 243 4,454 Total $ 411,946 $ 1,109,749 $ 1,338,079 $ 2,859,774 Fixed interest rate $ 119,827 $ 450,630 $ 448,928 $ 1,019,385 Variable interest rate 292,119 659,119 889,151 1,840,389 Total $ 411,946 $ 1,109,749 $ 1,338,079 $ 2,859,774 allowance for loan lossesALLL that management believes is adequate to absorb the probable incurred losses inherent in the Company’s loan portfolio. The allowance is increased by provisions for loan losses charged to earnings and is decreased by loan charge-offs net of recoveries of prior period loan charge-offs. The level of the allowance is determined on a quarterly
| September 30, 2017 | December 31, 2016 | Increase (Decrease) | ||||||||||||||||||||||||||||||||||
| Loan Balance | ALLL Balance | % | Loan Balance | ALLL Balance | % | Loan Balance | ALLL Balance | |||||||||||||||||||||||||||||
Non impaired loans | $ | 2,053,704 | $ | 18,922 | 0.92 | % | $ | 1,687,244 | $ | 15,506 | 0.92 | % | $ | 366,460 | $ | 3,416 | — | |||||||||||||||||||
Non-PCI acquired loans (Note 1) | 57,663 | 11 | 0.02 | % | 74,373 | 23 | 0.03 | % | (16,710 | ) | (12 | ) | -1 | bps | ||||||||||||||||||||||
Impaired loans | 3,206 | 1,011 | 31.53 | % | 9,909 | 1,024 | 10.33 | % | (6,703 | ) | (13 | ) | 2,120 | bps | ||||||||||||||||||||||
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Non-PCI loans | 2,114,573 | 19,944 | 0.94 | % | 1,771,526 | 16,553 | 0.93 | % | 343,047 | 3,391 | 1 | bps | ||||||||||||||||||||||||
PCI loans | 2,558 | — | — | % | 2,859 | — | — | % | (301 | ) | — | — | ||||||||||||||||||||||||
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Total loans | $ | 2,117,131 | $ | 19,944 | 0.94 | % | $ | 1,774,385 | $ | 16,553 | 0.93 | % | $ | 342,746 | $ | 3,391 | 1 | bps | ||||||||||||||||||
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Note 1: Loans acquired pursuant to2019.
| March 31, 2020 | December 31, 2019 | Increase (Decrease) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
HFI Loan Balance(1) | ALLL Balance | ALLL to % Total Loans HFI | HFI Loan Balance(1) | ALLL Balance | ALLL to % Total Loans HFI | Loan Balance | ALLL Balance | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non impaired loans | $ | 2,780,458 | $ | 31,587 | 1.14 | % | $ | 2,730,684 | $ | 24,588 | 0.90 | % | $ | 49,774 | $ | 6,999 | 24 bps | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquired loans (2) | 51,882 | 56 | 0.11 | % | 58,745 | 77 | 0.13 | % | (6,863) | (21) | (2) bps | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Impaired loans | 27,434 | 6,760 | 24.64 | % | 27,035 | 20,771 | 76.83 | % | 399 | (14,011) | (5,219) bps | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total loans | $ | 2,859,774 | $ | 38,403 | 1.34 | % | $ | 2,816,464 | $ | 45,436 | 1.61 | % | $ | 43,310 | $ | (7,033) | (27) bps | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(1) HFI loan balance is before net deferred loan fees and costs. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(2) Acquired loans are performing loans recorded at estimated fair value at the acquisition date. Based on the analysis performed by management as of March 31, 2020, $56 in ALLL was recorded at March 31, 2020 related to the loans acquired. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
At September 30, 2017, the allowance for loan losses was $19,944,$38,403, compared to $16,553$45,436 at December 31, 2016.2019. The allowance for loan lossesALLL as a percentage of total loans HFI was 0.94%1.34% at September 30, 2017 compared to 0.94%March 31, 2020 and 1.61% at December 31, 2016. Loan growth during2019. As of March 31, 2020, the first nine monthsCompany’s total non-performing assets ("NPAs") were 0.72% of 2017assets, or $27,434, a decrease of approximately $255 from December 31, 2019. The NPA/ALLL coverage ratio was 1.40 at March 31, 2020, a decrease of 24 basis points from the 1.64 coverage present at December 31, 2019. Criticized and Classified Assets were $53,125 at March 31, 2020, representing 1.86% of loans HFI, consistent with 1.86% of loans HFI at December 31, 2019.
impact of substandard nonaccrual loans.
| Nine Months Ended September 30, 2017 | Nine Months Ended September 30, 2016 | |||||||
Beginning balance | $ | 16,553 | $ | 11,587 | ||||
Loanscharged-off: | ||||||||
Construction & land development | — | 11 | ||||||
Commercial real estate | — | — | ||||||
Residential real estate | 1 | 39 | ||||||
Commercial & industrial | 309 | 65 | ||||||
Consumer & other | 36 | 35 | ||||||
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Total loanscharged-off | 346 | 150 | ||||||
Recoveries on loans previouslycharged-off: | ||||||||
Construction & land development | 668 | — | ||||||
Commercial real estate | — | — | ||||||
Residential real estate | 38 | 53 | ||||||
Commercial & industrial | — | — | ||||||
Consumer & other | 13 | 5 | ||||||
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Total loan recoveries | 719 | 58 | ||||||
Net recoveries (charge-offs) | 373 | (92 | ) | |||||
Provision for loan losses charged to expense | 3,018 | 4,095 | ||||||
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Total allowance at end of period | $ | 19,944 | $ | 15,590 | ||||
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Total loans, gross, at end of period(1) | $ | 2,117,131 | $ | 1,654,878 | ||||
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Average gross loans(1) | $ | 1,966,635 | $ | 1,525,359 | ||||
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Allowance to total loans | 0.94 | % | 0.94 | % | ||||
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Net charge-offs (recoveries) to average loans, annualized | (0.03 | %) | 0.01 | % | ||||
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| Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | |||||||||||||
| Beginning balance | $ | 45,436 | $ | 23,451 | ||||||||||
| Loans charged-off: | ||||||||||||||
| Residential real estate | 8 | 15 | ||||||||||||
| Commercial & industrial | 20,501 | 568 | ||||||||||||
| Consumer & other | 21 | 70 | ||||||||||||
| Total loans charged-off | 20,530 | 653 | ||||||||||||
| Recoveries on loans previously charged-off: | ||||||||||||||
| Residential real estate | 1 | 2 | ||||||||||||
| Commercial & industrial | 468 | — | ||||||||||||
| Consumer & other | 6 | 2 | ||||||||||||
| Total loan recoveries | 475 | 4 | ||||||||||||
| Net charge-offs | (20,055) | (649) | ||||||||||||
| Provision for loan losses charged to expense | 13,022 | 5,055 | ||||||||||||
| Total allowance at end of period | $ | 38,403 | $ | 27,857 | ||||||||||
Total loans, gross, at end of period(1) | $ | 2,859,774 | $ | 2,810,905 | ||||||||||
Average gross loans(1) | $ | 2,838,437 | $ | 2,764,675 | ||||||||||
| Allowance to total loans | 1.34 | % | 0.99 | % | ||||||||||
| Net charge-offs (recoveries) to average loans, annualized | 2.84 | % | 0.10 | % | ||||||||||
(1)Loan balances exclude loans held for sale | ||||||||||||||
| September 30, 2017 | December 31, 2016 | |||||||||||||||
| Amount | % of Loans to Total | Amount | % of Loans to Total | |||||||||||||
Real estate loans: | ||||||||||||||||
Construction and land development | $ | 3,957 | 24.3 | % | $ | 3,776 | 27.6 | % | ||||||||
Commercial | 5,223 | 28.3 | % | 4,266 | 28.0 | % | ||||||||||
Residential | 3,122 | 25.1 | % | 2,398 | 22.9 | % | ||||||||||
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Total real estate | 12,302 | 77.7 | % | 10,440 | 78.5 | % | ||||||||||
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Commercial and industrial | 7,592 | 22.1 | % | 6,068 | 21.3 | % | ||||||||||
Consumer and other | 50 | 0.2 | % | 45 | 0.2 | % | ||||||||||
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| $ | 19,944 | 100.0 | % | $ | 16,553 | 100.0 | % | |||||||||
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| March 31, 2020 | December 31, 2019 | |||||||||||||||||||||||||||||||||||||
| Amount | % of Loan Segment to Total Loans | Amount | % of Loan Segment to Total Loans | |||||||||||||||||||||||||||||||||||
| Real estate loans: | ||||||||||||||||||||||||||||||||||||||
| Construction and land development | $ | 6,417 | 21.9 | % | $ | 4,847 | 21.0 | % | ||||||||||||||||||||||||||||||
| Commercial | 9,018 | 34.9 | 8,113 | 35.3 | ||||||||||||||||||||||||||||||||||
| Residential | 4,767 | 22.7 | 4,462 | 22.8 | ||||||||||||||||||||||||||||||||||
| Total real estate | 20,202 | 79.5 | 17,422 | 79.1 | ||||||||||||||||||||||||||||||||||
| Commercial and industrial | 18,146 | 20.3 | 27,957 | 20.7 | ||||||||||||||||||||||||||||||||||
| Consumer and other | 55 | 0.2 | 57 | 0.2 | ||||||||||||||||||||||||||||||||||
| $ | 38,403 | 100.0 | % | $ | 45,436 | 100.0 | % | |||||||||||||||||||||||||||||||
| September 30, 2017 | December 31, 2016 | |||||||
Non-accrual loans | $ | 2,582 | $ | 3,630 | ||||
Past due loans 90 days or more and still accruing interest | 278 | 2,552 | ||||||
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Totalnon-performing loans | 2,860 | 6,182 | ||||||
Foreclosed real estate (“OREO”) | 1,503 | — | ||||||
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Totalnon-performing assets | 4,363 | 6,182 | ||||||
Totalnon-performing loans as a percentage of total loans | 0.1 | % | 0.3 | % | ||||
Totalnon-performing assets as a percentage of total assets | 0.1 | % | 0.2 | % | ||||
Allowance for loan losses as a percentage of non-performing loans | 697 | % | 268 | % | ||||
| March 31, 2020 | December 31, 2019 | ||||||||||
| Non-accrual loans | $ | 27,434 | $ | 27,035 | |||||||
| Past due loans 90 days or more and still accruing interest | — | 654 | |||||||||
| Total non-performing loans | 27,434 | 27,689 | |||||||||
| Foreclosed real estate and repossessed assets | — | — | |||||||||
| Total non-performing assets | 27,434 | 27,689 | |||||||||
| Total non-performing loans as a percentage of total loans | 0.96 | % | 0.98 | % | |||||||
| Total non-performing assets as a percentage of total assets | 0.72 | % | 0.71 | % | |||||||
| Allowance for loan losses as a percentage of non-performing loans | 140 | % | 164 | % | |||||||
| Total Amount | Percentage of Total Non-Accrual Loans | Number of Non-Accrual Loans | ||||||||||
Construction & land development | $ | — | — | % | — | |||||||
Commercial real estate | 116 | 4.5 | % | 1 | ||||||||
Residential real estate | — | — | % | — | ||||||||
Commercial & industrial | 2,466 | 95.5 | % | 2 | ||||||||
Consumer | — | — | % | — | ||||||||
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Totalnon-accrual loans | $ | 2,582 | 100.0 | % | 3 | |||||||
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| Total Amount | Percentage of Total Non-Accrual Loans | Number of Non-Accrual Loans | |||||||||||||||
| Commercial real estate | $ | 3,460 | 12.6 | % | 1 | ||||||||||||
| Residential real estate | 3,255 | 11.9 | 11 | ||||||||||||||
| Commercial & industrial | 20,719 | 75.5 | 18 | ||||||||||||||
| Total non-accrual loans | $ | 27,434 | 100.0 | % | 30 | ||||||||||||
Theheld-to-maturityended March 31, 2020.
The combined portfolios represented 33.6% and 33.4% of total assets at September 30, 2017 and December 31, 2016, respectively. At September 30, 2017, the Company had no securities that were classified as having other than temporary impairment.
2019.
Deposits
Deposits representtherefore ending the Company’s largest source of funds. Thelease agreements by the Company competes with other bank and nonbank institutions for deposits, as well as with a growing number ofnon-deposit investment alternatives available to depositors, such as mutual funds, money market funds, annuities, and other brokerage investment products. Challenges to deposit growth include price changes on deposit products given movements in the rate environment and other competitive pricing pressures, and customer preferences regarding higher-costing deposit products ornon-deposit investment alternatives.
February 5, 2020.
2019. Included in the Company’s funding strategy are brokered deposits, public funds deposits and reciprocal deposits. Total brokered deposits increased from $472,515decreased $97,866, or 62.3% annualized, to $534,375 at March 31, 2020, when compared with $632,241 at December 31, 20162019, which reflects the Company’s strategy to $878,565reduce its dependence on non-core funding. Public funds deposits decreased $58,734, or 61.1% annualized, to $328,169 at September 30, 2017,March 31, 2020 when compared with $386,903 at December 31, 2019 due to the increased need for funding for the Bank’s loan growth and dueCompany’s strategy to the fluctuation in certain brokered deposits that are interest-bearing checking and money market accounts that can fluctuate daily.
Public funds deposits in the form of county deposits are a partredirect some of the Company’s funding strategy and are cyclical in nature, withlocal government customers into the peak ofreciprocal account relationships, thereby decreasing the Company’s requirements to collateralize those deposit balances occurring during the middle of the first quarter of each calendar year. Publicpublic funds declined $214,866,deposits. As a result, reciprocal deposits increased $67,099, or 32.9%, from $653,57256.0% annualized, to $548,840 at March 31, 2020, compared to $481,741 at December 31, 2016 to $438,706 at September 30, 2017.
2019.
15.2% annualized.
| September 30, 2017 | ||||
Three months or less | $ | 448,951 | ||
Three through six months | 92,911 | |||
Six through twelve months | 76,147 | |||
Over twelve months | 151,497 | |||
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Total | $ | 769,506 | ||
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| March 31, 2020 | |||||
| Three months or less | $ | 70,103 | |||
| Three through six months | 57,377 | ||||
| Six through twelve months | 82,817 | ||||
| Over twelve months | 119,611 | ||||
| Total | $ | 329,908 | |||
As of September 30, 2017, the
2019.
At September 30, 2017,$155,000, respectively, and the scheduled maturities and interest rates of these advances were as follows:
Scheduled Maturities | Amount | Weighted Average Rates | ||||||
2017 | $ | 75,000 | 1.17 | % | ||||
2018 | 157,000 | 1.19 | % | |||||
2019 | 50,000 | 1.41 | % | |||||
2020 | 55,000 | 1.72 | % | |||||
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Total | $ | 337,000 | 1.31 | % | ||||
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| Scheduled Maturities | Amount | Weighted Average Rates | |||||||||
| 2020 | $ | 135,000 | 1.13 | % | |||||||
Bank’s future earnings and capital needs.
no additional shares were purchased after December 31, 2019.
$53,263, and outstanding mortgage loan commitments of $156,421.
We believe thesenon-GAAP financial measures provide useful information to management and investors that is supplementary to our financial condition, results of operations and cash flows computed in accordance with GAAP; however, we acknowledge that ournon-GAAP financial measures have a number of limitations. As such, you should not view these disclosures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable tonon-GAAP financial measures that other companies use.
(Amounts in thousands, except share/per share data and percentages) | As of or for the Three Months Ended | |||||||||||||||||||
| Sept 30, 2017 | Jun 30, 2017 | Mar 31, 2017 | Dec 31, 2016 | Sept 30, 2016 | ||||||||||||||||
Total shareholders’ equity | $ | 303,594 | $ | 292,918 | $ | 278,407 | $ | 270,258 | $ | 209,644 | ||||||||||
Less: Preferred stock | — | — | — | — | — | |||||||||||||||
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Total common shareholders’ equity | 303,594 | 292,918 | 278,407 | 270,258 | 209,644 | |||||||||||||||
Less: Goodwill and other intangible assets | 10,294 | 10,356 | 10,477 | 10,633 | 10,774 | |||||||||||||||
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Tangible common shareholders’ equity | $ | 293,300 | $ | 282,562 | $ | 267,930 | $ | 259,625 | $ | 198,870 | ||||||||||
Common shares outstanding | 13,209,055 | 13,181,501 | 13,064,110 | 13,036,954 | 10,757,483 | |||||||||||||||
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Tangible book value per share | $ | 22.20 | $ | 21.44 | $ | 20.51 | $ | 19.91 | $ | 18.49 | ||||||||||
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Average total common equity | 298,088 | 285,659 | $ | 272,713 | $ | 235,984 | $ | 206,009 | ||||||||||||
Less: Average Goodwill and other intangible assets | 10,321 | 10,427 | 10,565 | 10,719 | 10,855 | |||||||||||||||
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Average tangible common shareholders’ equity | $ | 287,767 | $ | 275,232 | $ | 262,148 | $ | 225,265 | $ | 195,154 | ||||||||||
Net income available to common shareholders | 8,889 | 8,866 | 7,934 | 7,179 | 7,137 | |||||||||||||||
Average tangible common equity | 287,767 | 275,232 | 262,148 | 225,265 | 195,154 | |||||||||||||||
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Return on average tangible common equity | 12.26 | % | 12.92 | % | 12.27 | % | 12.68 | % | 14.55 | % | ||||||||||
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Efficiency Ratio: | ||||||||||||||||||||
Net interest income | $ | 24,326 | $ | 24,469 | $ | 23,643 | $ | 21,699 | $ | 20,675 | ||||||||||
Noninterest income | 3,569 | 3,880 | 4,008 | 2,553 | 4,876 | |||||||||||||||
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Operating revenue | 27,895 | 28,349 | 27,651 | 24,252 | 25,551 | |||||||||||||||
Expense | ||||||||||||||||||||
Total noninterest expense | 15,278 | 15,283 | 14,276 | 13,229 | 13,708 | |||||||||||||||
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Efficiency ratio | 54.77 | % | 53.91 | % | 51.63 | % | 54.55 | % | 53.65 | % | ||||||||||
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| As of or for the Three Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Amounts in thousands, except share/per share data and percentages) | March 31, 2020 | December 31, 2019 | September 30, 2019 | June 30, 2019 | March 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total shareholders’ equity | $ | 408,755 | $ | 410,333 | $ | 408,168 | $ | 393,516 | $ | 383,421 | |||||||||||||||||||||||||||||||||||||||||||
| Less: Preferred stock | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total common equity | 408,755 | 410,333 | 408,168 | 393,516 | 383,421 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Common shares outstanding | 14,859,704 | 14,821,594 | 14,636,484 | 14,628,287 | 14,574,339 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Book value per share | $ | 27.51 | $ | 27.68 | $ | 27.89 | $ | 26.90 | $ | 26.31 | |||||||||||||||||||||||||||||||||||||||||||
| Total common equity | 408,755 | 410,333 | 408,168 | 393,516 | 383,421 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Less: Goodwill and other intangible assets | 18,555 | 18,652 | 18,763 | 18,885 | 19,020 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Tangible common equity | $ | 390,200 | $ | 391,681 | $ | 389,405 | $ | 374,631 | $ | 364,401 | |||||||||||||||||||||||||||||||||||||||||||
| Common shares outstanding | 14,859,704 | 14,821,591 | 14,636,484 | 14,628,287 | 14,574,339 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Tangible book value per share | $ | 26.26 | $ | 26.43 | $ | 26.61 | $ | 25.61 | $ | 25.00 | |||||||||||||||||||||||||||||||||||||||||||
| Average total common equity | 416,518 | 414,251 | 399,096 | 388,460 | 377,116 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Less: Average Preferred stock | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| Less: Average Goodwill and other intangible assets | 18,615 | 18,809 | 18,763 | 18,971 | 19,109 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Average tangible common shareholders’ equity | $ | 397,903 | $ | 395,442 | $ | 380,333 | $ | 369,489 | $ | 358,007 | |||||||||||||||||||||||||||||||||||||||||||
| Net income available to common shareholders | (1,148) | (4,592) | 11,324 | 5,173 | 2,901 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Average tangible common equity | 397,903 | 395,442 | 380,333 | 369,489 | 358,007 | ||||||||||||||||||||||||||||||||||||||||||||||||
Return on average tangible common equity(1) | (1.2) | % | (4.6) | % | 11.8 | % | 5.6 | % | 3.3 | % | |||||||||||||||||||||||||||||||||||||||||||
| Efficiency Ratio: | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net interest income | $ | 27,464 | $ | 28,113 | $ | 28,262 | $ | 27,365 | $ | 27,420 | |||||||||||||||||||||||||||||||||||||||||||
| Noninterest income | 5,893 | 4,573 | 4,793 | 4,923 | 3,486 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Operating revenue | 33,357 | 32,686 | 33,055 | 32,288 | 30,906 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Expense | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total noninterest expense | 22,421 | 21,279 | 18,614 | 19,370 | 22,616 | ||||||||||||||||||||||||||||||||||||||||||||||||
Efficiency ratio(2) | 67.2 | % | 65.1 | % | 56.3 | % | 60.0 | % | 73.2 | % | |||||||||||||||||||||||||||||||||||||||||||
| As of and for the three months ended | ||||||||||||||||||||
| Sept 30, 2017 | Jun 30, 2017 | Mar 31, 2017 | Dec 31, 2016 | Sept 30, 2016 | ||||||||||||||||
Income Statement Data ($): |
| |||||||||||||||||||
Interest income | 33,780 | 33,011 | 30,541 | 27,336 | 25,724 | |||||||||||||||
Interest expense | 9,454 | 8,542 | 6,898 | 5,637 | 5,049 | |||||||||||||||
Net interest income | 24,326 | 24,469 | 23,643 | 21,699 | 20,675 | |||||||||||||||
Provision for loan losses | 590 | 573 | 1,855 | 1,145 | 1,392 | |||||||||||||||
Noninterest income | 3,569 | 3,880 | 4,008 | 2,553 | 4,876 | |||||||||||||||
Noninterest expense | 15,278 | 15,283 | 14,276 | 13,229 | 13,708 | |||||||||||||||
Net income before taxes | 12,027 | 12,493 | 11,520 | 9,878 | 10,451 | |||||||||||||||
Income tax expense(1) | 3,138 | 3,619 | 3,586 | 2,699 | 3,314 | |||||||||||||||
Net income(1) | 8,889 | 8,874 | 7,934 | 7,179 | 7,137 | |||||||||||||||
Earnings before interest and taxes | 21,481 | 21,035 | 18,418 | 15,515 | 15,500 | |||||||||||||||
Net income available to common shareholders | 8,889 | 8,866 | 7,934 | 7,179 | 7,137 | |||||||||||||||
Weighted average diluted common shares | 13,773,539 | 13,701,762 | 13,657,357 | 12,473,725 | 11,415,422 | |||||||||||||||
Earnings per share, basic | 0.67 | 0.68 | 0.61 | 0.61 | 0.67 | |||||||||||||||
Earnings per share, diluted | 0.65 | 0.64 | 0.58 | 0.58 | 0.63 | |||||||||||||||
Profitability (%) | ||||||||||||||||||||
Return on average assets | 1.03 | 1.03 | 0.99 | 1.00 | 1.07 | |||||||||||||||
Return on average equity | 11.83 | 12.46 | 11.80 | 12.10 | 13.78 | |||||||||||||||
Return on average tangible common equity(3) | 12.26 | 12.92 | 12.27 | 12.68 | 14.55 | |||||||||||||||
Efficiency ratio(3) | 54.77 | 53.91 | 51.63 | 54.55 | 53.65 | |||||||||||||||
Net interest margin(4) | 3.05 | 3.08 | 3.18 | 3.27 | 3.34 | |||||||||||||||
Balance Sheet Data ($): | ||||||||||||||||||||
Loans (including HFS) | 2,127,753 | 2,023,679 | 1,962,397 | 1,797,291 | 1,680,877 | |||||||||||||||
Loan loss reserve | 19,944 | 18,689 | 18,105 | 16,553 | 15,590 | |||||||||||||||
Cash | 155,842 | 96,741 | 114,664 | 90,927 | 56,804 | |||||||||||||||
Securities | 1,198,049 | 1,243,406 | 1,299,349 | 983,649 | 905,806 | |||||||||||||||
Goodwill | 9,124 | 9,124 | 9,124 | 9,124 | 9,124 | |||||||||||||||
Intangible assets (Sum of core deposit intangible and SBA servicing rights) | 1,170 | 1,232 | 1,353 | 1,509 | 1,650 | |||||||||||||||
Assets | 3,565,278 | 3,443,593 | 3,454,788 | 2,943,189 | 2,703,195 | |||||||||||||||
Deposits | 2,824,825 | 2,754,425 | 2,817,212 | 2,391,818 | 2,217,954 | |||||||||||||||
Liabilities | 3,261,581 | 3,150,572 | 3,176,278 | 2,672,828 | 2,493,551 | |||||||||||||||
Total equity | 303,697 | 293,021 | 278,510 | 270,361 | 209,644 | |||||||||||||||
Common equity | 303,594 | 292,918 | 278,407 | 270,258 | 209,644 | |||||||||||||||
Tangible common equity(3) | 293,300 | 282,562 | 267,930 | 259,625 | 198,870 | |||||||||||||||
Asset Quality (%) | ||||||||||||||||||||
Nonperforming loans/ total loans(2) | 0.14 | 0.19 | 0.21 | 0.35 | 0.10 | |||||||||||||||
Nonperforming assets / (total loans(2) + foreclosed assets) | 0.21 | 0.26 | 0.27 | 0.35 | 0.10 | |||||||||||||||
Loan loss reserve / total loans(2) | 0.94 | 0.93 | 0.93 | 0.93 | 0.94 | |||||||||||||||
Net charge-offs / average loans | (0.13 | ) | 0.00 | 0.07 | 0.04 | 0.01 | ||||||||||||||
Capital (%) | ||||||||||||||||||||
Tangible common equity to tangible assets(3) | 8.25 | 8.23 | 7.78 | 8.85 | 7.39 | |||||||||||||||
Leverage ratio | 8.58 | 8.21 | 8.36 | 9.28 | 7.15 | |||||||||||||||
Common Equity Tier 1 ratio | 11.58 | 11.54 | 11.32 | 11.75 | 9.09 | |||||||||||||||
Tier 1 risk-based capital ratio | 11.58 | 11.54 | 11.32 | 11.75 | 9.09 | |||||||||||||||
Total risk-based capital ratio | 14.68 | 14.69 | 14.51 | 15.09 | 12.66 | |||||||||||||||
52
(1)Net interest margins shown in the table above include tax-equivalent adjustments to adjust interest income on tax-exempt loans and tax-exempt investment securities to a fully taxable basis. (2)Total loans in this ratio exclude loans held for sale. (3)See Non-GAAP table in the preceding pages. (4)Annualized. Termination of | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Emerging Growth Company Status
The Company is an “emerging growth company,”
Further, the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply tonon-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, it adopts the new or revised standard at the time public companies adopt the new or revised standard. This election is irrevocable.
Other Events
On October 18, 2017, the Bank received regulatory approval from the Reserve Bank to open a new branch at 1605 Medical Center Parkway, Murfreesboro, Tennessee. The TDFI previously approved this new branch on July 14, 2017. The Bank plans to open this new branch during the fourth quarter of 2017.
On November 3, 2016, the Bank entered into an informal agreement with the Reserve Bank and the TDFI in the form of a Memorandum of Understanding (“MOU”). Under the terms of the MOU, the Bank agreed, among other things, to (1) enhance and periodically update its Commercial Real Estate (“CRE”) concentration risk management policy; (2) augment credit risk management practices; and (3) enhance capital and liquidity plans. The Bank has also agreed that it will seek prior written approval of the Reserve Bank and the TDFI to pay dividends to the Company, which dividends are used primarily for the purpose of servicing the Company’s subordinated debt. In addition, the Company currently may not make interest payments on its subordinated debt without prior written approval from its primary regulatory agencies.
The Company has also executed an agreement with the Board of Governors of the Federal Reserve System (the “Agreement”) under section 4(m)(2) of the Bank Holding Company Act, which includes specific actions designed to address the Bank’s risk profile and to strengthen the underlying condition of the Bank. Until the Bank and Company satisfy the requirements of the MOU and the Agreement, any plans for business combinations or location expansion will be limited and subject to prior written approval from the appropriate regulatory body.
company.
Projected Interest Rate Change | Net Interest Income | Net Interest Income $ Change from Base | % Change from Base | |||||||||
-200 | 90,629 | (5,024 | ) | (5.25 | %) | |||||||
-100 | 96,857 | 1,205 | 1.26 | % | ||||||||
Base | 95,652 | — | 0.00 | % | ||||||||
+100 | 92,762 | (2,890 | ) | (3.02 | %) | |||||||
+200 | 88,832 | (6,820 | ) | (7.13 | %) | |||||||
+300 | 84,852 | (10,800 | ) | (11.29 | %) | |||||||
+400 | 81,364 | (14,288 | ) | (14.94 | %) | |||||||
March 31, 2020.
| Projected Interest Rate Change | Net Interest Income $ | Net Interest Income $ Change from Base | % Change from Base | |||||||||||||||||
| -200 | 124,339 | 1,213 | 0.99 | % | ||||||||||||||||
| -100 | 127,503 | 4,377 | 3.55 | % | ||||||||||||||||
| Base | 123,126 | — | — | % | ||||||||||||||||
| +100 | 119,767 | (3,359) | (2.73) | % | ||||||||||||||||
| +200 | 118,276 | (4,850) | (3.94) | % | ||||||||||||||||
| +300 | 117,799 | (5,327) | (4.33) | % | ||||||||||||||||
| +400 | 117,546 | (5,580) | (4.53) | % | ||||||||||||||||
The model is a tool to indicate earnings trends in given interest rate scenarios and does not indicate actual expected results.
forms.
2020, with the exception of:
None.
None.
Not applicable.
None.
| Total Number of Shares Purchased(1) | Average Price paid Per Share | Total Number of Shares Purchased as part of Publicly Announced Plan or Programs(1) | Maximum Number (or Approximate Dollar Value) of Shares That may Yet Be Purchased Under the Plans or Programs (in thousands) | ||||||||||
| January 1, 2020 to January 31, 2020 | — | $ | — | — | $ | 29,283 | ||||||||
| February 1, 2020 to February 29, 2020 | — | — | — | — | ||||||||||
| March 1, 2020 to March 31, 2020 | — | — | — | — | ||||||||||
| Exhibit No. | Description | |||||
| 2.1 | ||||||
| 10.1 | ||||||
| 10.2 | ||||||
| 31.1* | ||||||
| 31.2* | ||||||
| 32** | ||||||
| XBRL Instance Document.-the instance document does not appear in the Interactive Data | ||||||
| 101.SCH* | XBRL Taxonomy Extension Schema Document. | |||||
| 101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document. | |||||
| 101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document. | |||||
| 101.LAB* | XBRL Taxonomy Extension Label Linkbase Document. | |||||
| 101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document. | |||||
| * | Filed herewith | ||||
| ** | Furnished herewith | ||||
| FRANKLIN FINANCIAL NETWORK, INC. | ||||||||||||||||
| By: | /s/ | |||||||||||||||
Executive Vice President and Chief Financial Officer | ||||||||||||||||
On behalf of the registrant and as Chief Financial Officer
| ||||||||||||||||