UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter ended June 30, 201March 31, 20187
Commission File Number 1-357461-35746
Bryn Mawr Bank Corporation
(Exact name of registrant as specified in its charter)
Pennsylvania | 23-2434506 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer identification No.) |
801 Lancaster Avenue, Bryn Mawr, Pennsylvania | 19010 |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code (610) 525-1700
Not Applicable
Former name, former address and fiscal year, if changed since last report.
Indicate by checkmark whether the registrant (1) has filed all reports to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.Act..
| Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐ |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Classes | Outstanding at | |
Common Stock, par value $1 |
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BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDEDJune 30March 31, 2018, 2017
PART I - |
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ITEM 1. |
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ITEM 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | Page 43 |
ITEM 3. | Page 60 | |
ITEM 4. | Page 60 | |
PART II - | Page 61 | |
ITEM | Page 61 | |
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ITEM | Page 62 | |
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PART I.FINANCIAL FINANCIAL INFORMATION
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets - Unaudited
(unaudited) | ||||||||
June 30, | December 31, | |||||||
(dollars in thousands) | 2017 | 2016 | ||||||
Assets | ||||||||
Cash and due from banks | $ | 19,352 | $ | 16,559 | ||||
Interest bearing deposits with banks | 30,806 | 34,206 | ||||||
Cash and cash equivalents | 50,158 | 50,765 | ||||||
Investment securities available for sale, at fair value (amortized cost of $444,354 and $568,890as of June 30, 2017 and December 31, 2016 respectively) | 443,687 | 566,996 | ||||||
Investment securities held to maturity, at amortized cost (fair value of $5,102 and $2,818as of June 30, 2017 and December 31, 2016, respectively) | 5,161 | 2,879 | ||||||
Investment securities, trading | 4,021 | 3,888 | ||||||
Loans held for sale | 8,590 | 9,621 | ||||||
Portfolio loans and leases, originated | 2,409,964 | 2,240,987 | ||||||
Portfolio loans and leases, acquired | 256,687 | 294,438 | ||||||
Total portfolio loans and leases | 2,666,651 | 2,535,425 | ||||||
Less: Allowance for originated loan and lease losses | (16,374 | ) | (17,458 | ) | ||||
Less: Allowance for acquired loan and lease losses | (25 | ) | (28 | ) | ||||
Total allowance for loans and lease losses | (16,399 | ) | (17,486 | ) | ||||
Net portfolio loans and leases | 2,650,252 | 2,517,939 | ||||||
Premises and equipment, net | 44,446 | 41,778 | ||||||
Accrued interest receivable | 8,717 | 8,533 | ||||||
Mortgage servicing rights | 5,683 | 5,582 | ||||||
Bank owned life insurance | 39,680 | 39,279 | ||||||
Federal Home Loan Bank stock | 15,168 | 17,305 | ||||||
Goodwill | 107,127 | 104,765 | ||||||
Intangible assets | 22,084 | 20,405 | ||||||
Other investments | 8,682 | 8,627 | ||||||
Other assets | 24,763 | 23,168 | ||||||
Total assets | $ | 3,438,219 | $ | 3,421,530 | ||||
Liabilities | ||||||||
Deposits: | ||||||||
Non-interest-bearing | $ | 818,475 | $ | 736,180 | ||||
Interest-bearing | 1,863,288 | 1,843,495 | ||||||
Total deposits | 2,681,763 | 2,579,675 | ||||||
Short-term borrowings | 130,295 | 204,151 | ||||||
Long-term FHLB advances | 164,681 | 189,742 | ||||||
Subordinated notes | 29,559 | 29,532 | ||||||
Accrued interest payable | 2,830 | 2,734 | ||||||
Other liabilities | 34,114 | 34,569 | ||||||
Total liabilities | 3,043,242 | 3,040,403 | ||||||
Shareholders' equity | ||||||||
Common stock, par value $1; authorized 100,000,000 shares;issued 21,162,457 and 21,110,968 shares as of June 30, 2017 and December 31, 2016, respectively,and outstanding of 16,989,849 and 16,939,715 as of June 30, 2017 and December 31, 2016, respectively | 21,162 | 21,111 | ||||||
Paid-in capital in excess of par value | 234,654 | 232,806 | ||||||
Less: Common stock in treasury at cost - 4,172,608 and 4,171,253 shares as of June 30, 2017and December 31, 2016, respectively | (67,091 | ) | (66,950 | ) | ||||
Accumulated other comprehensive loss, net of tax | (1,564 | ) | (2,409 | ) | ||||
Retained earnings | 207,816 | 196,569 | ||||||
Total shareholders' equity | 394,977 | 381,127 | ||||||
Total liabilities and shareholders' equity | $ | 3,438,219 | $ | 3,421,530 |
The accompanying notes are an integral part of the unaudited consolidated financial statements.
March 31, | December 31, | |||||||
(dollars in thousands) | 2018 | 2017 | ||||||
Assets | ||||||||
Cash and due from banks | $ | 7,804 | $ | 11,657 | ||||
Interest bearing deposits with banks | 24,589 | 48,367 | ||||||
Cash and cash equivalents | 32,393 | 60,024 | ||||||
Investment securities available for sale, at fair value (amortized cost of $544,428 and $692,824 as of March 31, 2018 and December 31, 2017 respectively) | 534,103 | 689,202 | ||||||
Investment securities held to maturity, at amortized cost (fair value of $7,629 and $7,851 as of March 31, 2018 and December 31, 2017, respectively) | 7,885 | 7,932 | ||||||
Investment securities, trading | 8,211 | 4,610 | ||||||
Loans held for sale | 5,522 | 3,794 | ||||||
Portfolio loans and leases, originated | 2,564,827 | 2,487,296 | ||||||
Portfolio loans and leases, acquired | 740,968 | 798,562 | ||||||
Total portfolio loans and leases | 3,305,795 | 3,285,858 | ||||||
Less: Allowance for originated loan and lease losses | (17,570 | ) | (17,475 | ) | ||||
Less: Allowance for acquired loan and lease losses | (92 | ) | (50 | ) | ||||
Total allowance for loans and lease losses | (17,662 | ) | (17,525 | ) | ||||
Net portfolio loans and leases | 3,288,133 | 3,268,333 | ||||||
Premises and equipment, net | 54,986 | 54,458 | ||||||
Accrued interest receivable | 12,521 | 14,246 | ||||||
Mortgage servicing rights | 5,706 | 5,861 | ||||||
Bank owned life insurance | 56,946 | 56,667 | ||||||
Federal Home Loan Bank stock | 15,499 | 20,083 | ||||||
Goodwill | 182,200 | 179,889 | ||||||
Intangible assets | 25,087 | 25,966 | ||||||
Other investments | 11,720 | 12,470 | ||||||
Other assets | 59,464 | 46,185 | ||||||
Total assets | $ | 4,300,376 | $ | 4,449,720 | ||||
Liabilities | ||||||||
Deposits: | ||||||||
Non-interest-bearing | $ | 863,118 | $ | 924,844 | ||||
Interest-bearing | 2,452,421 | 2,448,954 | ||||||
Total deposits | 3,315,539 | 3,373,798 | ||||||
Short-term borrowings | 173,704 | 237,865 | ||||||
Long-term FHLB advances | 107,784 | 139,140 | ||||||
Subordinated notes | 98,448 | 98,416 | ||||||
Junior subordinated debentures | 21,456 | 21,416 | ||||||
Accrued interest payable | 4,814 | 3,527 | ||||||
Other liabilities | 45,570 | 47,439 | ||||||
Total liabilities | 3,767,315 | 3,921,601 | ||||||
Shareholders' equity | ||||||||
Common stock, par value $1; authorized 100,000,000 shares; issued 24,438,758 and 24,360,049 shares as of March 31, 2018 and December 31, 2017, respectively, and outstanding of 20,229,896 and 20,161,395 as of March 31, 2018 and December 31, 2017, respectively | 24,439 | 24,360 | ||||||
Paid-in capital in excess of par value | 371,319 | 371,486 | ||||||
Less: Common stock in treasury at cost - 4,208,862 and 4,198,654 shares as of March 31, 2018 and December 31, 2017, respectively | (68,787 | ) | (68,179 | ) | ||||
Accumulated other comprehensive loss, net of tax | (9,664 | ) | (4,414 | ) | ||||
Retained earnings | 216,438 | 205,549 | ||||||
Total Bryn Mawr Bank Corporation shareholders' equity | 533,745 | 528,802 | ||||||
Noncontrolling interest | (684 | ) | (683 | ) | ||||
Total shareholders' equity | 533,061 | 528,119 | ||||||
Total liabilities and shareholders' equity | $ | 4,300,376 | $ | 4,449,720 |
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income - Unaudited
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(dollars in thousands, except per share data) | ||||||||||||||||
Interest income: | ||||||||||||||||
Interest and fees on loans and leases | $ | 29,143 | $ | 27,679 | $ | 57,625 | $ | 54,375 | ||||||||
Interest on cash and cash equivalents | 35 | 42 | 101 | 88 | ||||||||||||
Interest on investment securities: | ||||||||||||||||
Taxable | 1,906 | 1,384 | 3,529 | 2,735 | ||||||||||||
Non-taxable | 101 | 126 | 211 | 254 | ||||||||||||
Dividends | 52 | 55 | 97 | 103 | ||||||||||||
Total interest income | 31,237 | 29,286 | 61,563 | 57,555 | ||||||||||||
Interest expense: | ||||||||||||||||
Interest on deposits | 1,983 | 1,402 | 3,811 | 2,478 | ||||||||||||
Interest on short-term borrowings | 237 | 20 | 264 | 37 | ||||||||||||
Interest on FHLB advances and other borrowings | 682 | 867 | 1,380 | 1,775 | ||||||||||||
Interest on subordinated notes | 370 | 370 | 740 | 736 | ||||||||||||
Total interest expense | 3,272 | 2,659 | 6,195 | 5,026 | ||||||||||||
Net interest income | 27,965 | 26,627 | 55,368 | 52,529 | ||||||||||||
Provision for loan and lease losses | (83 | ) | 445 | 208 | 1,855 | |||||||||||
Net interest income after provision for loan and lease losses | 28,048 | 26,182 | 55,160 | 50,674 | ||||||||||||
Non-interest income: | ||||||||||||||||
Fees for wealth management services | 9,807 | 9,431 | 19,110 | 18,263 | ||||||||||||
Insurance commissions | 943 | 845 | 1,706 | 2,121 | ||||||||||||
Capital markets revenue | 953 | - | 953 | - | ||||||||||||
Service charges on deposits | 630 | 713 | 1,277 | 1,415 | ||||||||||||
Loan servicing and other fees | 519 | 539 | 1,022 | 1,031 | ||||||||||||
Net gain on sale of loans | 520 | 857 | 1,149 | 1,562 | ||||||||||||
Net (loss) gain on sale of investment securities available for sale | - | (43 | ) | 1 | (58 | ) | ||||||||||
Net loss on sale of other real estate owned ("OREO") | (12 | ) | - | (12 | ) | (76 | ) | |||||||||
Dividends on FHLB and FRB stock | 218 | 263 | 432 | 477 | ||||||||||||
Other operating income | 1,207 | 1,176 | 2,374 | 2,199 | ||||||||||||
Total non-interest income | 14,785 | 13,781 | 28,012 | 26,934 | ||||||||||||
Non-interest expenses: | ||||||||||||||||
Salaries and wages | 13,580 | 12,197 | 26,030 | 23,935 | ||||||||||||
Employee benefits | 2,475 | 2,436 | 5,034 | 4,921 | ||||||||||||
Occupancy and bank premises | 2,247 | 2,367 | 4,773 | 4,855 | ||||||||||||
Furniture, fixtures, and equipment | 1,869 | 1,895 | 3,843 | 3,814 | ||||||||||||
Advertising | 405 | 372 | 791 | 656 | ||||||||||||
Amortization of intangible assets | 687 | 889 | 1,380 | 1,780 | ||||||||||||
Impairment of mortgage servicing rights | 43 | 599 | 46 | 682 | ||||||||||||
Due diligence, merger-related and merger integration expenses | 1,236 | - | 1,747 | - | ||||||||||||
Professional fees | 1,049 | 946 | 1,760 | 1,759 | ||||||||||||
Pennsylvania bank shares tax | 297 | 640 | 961 | 1,278 | ||||||||||||
Information technology | 821 | 875 | 1,695 | 1,923 | ||||||||||||
Other operating expenses | 3,786 | 3,004 | 7,095 | 5,613 | ||||||||||||
Total non-interest expenses | 28,495 | 26,220 | 55,155 | 51,216 | ||||||||||||
Income before income taxes | 14,338 | 13,743 | 28,017 | 26,392 | ||||||||||||
Income tax expense | 4,905 | 4,810 | 9,540 | 9,137 | ||||||||||||
Net income | $ | 9,433 | $ | 8,933 | $ | 18,477 | $ | 17,255 | ||||||||
Basic earnings per common share | $ | 0.56 | $ | 0.53 | $ | 1.09 | $ | 1.03 | ||||||||
Diluted earnings per common share | $ | 0.55 | $ | 0.52 | $ | 1.07 | $ | 1.02 | ||||||||
Dividends declared per share | $ | 0.21 | $ | 0.20 | $ | 0.42 | $ | 0.40 | ||||||||
Weighted-average basic shares outstanding | 16,984,563 | 16,812,219 | 16,969,431 | 16,830,211 | ||||||||||||
Dilutive shares | 248,204 | 215,200 | 238,381 | 123,905 | ||||||||||||
Adjusted weighted-average diluted shares | 17,232,767 | 17,027,419 | 17,207,812 | 16,954,116 |
The accompanying notes are an integral part of the unaudited consolidated financial statements.
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income - Unaudited
(dollars in thousands) | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net income | $ | 9,433 | $ | 8,933 | $ | 18,477 | $ | 17,255 | ||||||||
Other comprehensive income (loss): | ||||||||||||||||
Net change in unrealized gains (losses) on investment securities available for sale: | ||||||||||||||||
Net unrealized gains arising during the period, net of tax expense of $221, $537,$430, and $1,588, respectively | 411 | 942 | 799 | 2,853 | ||||||||||||
Less: reclassification adjustment for net losses (gains) on sales realized in net income, net of tax (benefit) expense of $0, $(15) ,$0,and $(20), respectively | - | 28 | (1 | ) | 38 | |||||||||||
Unrealized investment gains, net of tax expense of $221, $522, $430 and $1,568, respectively | 411 | 970 | 798 | 2,891 | ||||||||||||
Net change in unfunded pension liability: | ||||||||||||||||
Change in unfunded pension liability related to unrealized loss, prior service cost and transition obligation,net of tax expense (benefit) of $9, $9, $25 and $5, respectively | 15 | 16 | 47 | 9 | ||||||||||||
Total other comprehensive income | 426 | 986 | 845 | 2,900 | ||||||||||||
Total comprehensive income | $ | 9,859 | $ | 9,919 | $ | 19,322 | $ | 20,155 |
The accompanying notes are an integral part of the unaudited consolidated financial statements.
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows - Unaudited
(dollars in thousands) | Six Months Ended June 30, | |||||||
2017 | 2016 | |||||||
Operating activities: | ||||||||
Net Income | $ | 18,477 | $ | 17,255 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Provision for loan and lease losses | 208 | 1,855 | ||||||
Depreciation of fixed assets | 2,792 | 2,818 | ||||||
Net amortization of investment premiums and discounts | 1,352 | 1,589 | ||||||
Net (gain) loss on sale of investment securities available for sale | (1 | ) | 58 | |||||
Net gain on sale of loans | (1,149 | ) | (1,656 | ) | ||||
Stock based compensation cost | 915 | 789 | ||||||
Amortization and net impairment of mortgage servicing rights | 387 | 998 | ||||||
Net accretion of fair value adjustments | (1,264 | ) | (2,310 | ) | ||||
Amortization of intangible assets | 1,381 | 1,780 | ||||||
Impairment of other real estate owned ("OREO") and other repossessed assets | 200 | - | ||||||
Net loss on sale of OREO | 12 | 76 | ||||||
Net increase in cash surrender value of bank owned life insurance ("BOLI") | (401 | ) | (465 | ) | ||||
Other, net | (1,810 | ) | (2,651 | ) | ||||
Loans originated for resale | (57,248 | ) | (63,480 | ) | ||||
Proceeds from loans sold | 58,940 | 61,739 | ||||||
Provision for deferred income taxes | 614 | 225 | ||||||
Change in income taxes payable/receivable | (3,580 | ) | 1,278 | |||||
Change in accrued interest receivable | (184 | ) | (275 | ) | ||||
Change in accrued interest payable | 96 | (5 | ) | |||||
Net cash provided by operating activities | 19,737 | 19,618 | ||||||
Investing activities: | ||||||||
Purchases of investment securities available for sale | (115,841 | ) | (75,999 | ) | ||||
Purchases of investment securities held to maturity | (2,335 | ) | (2,928 | ) | ||||
Proceeds from maturity and paydowns of investment securities available for sale | 234,043 | 28,358 | ||||||
Proceeds from maturity and paydowns of investment securities held to maturity | 42 | 18 | ||||||
Proceeds from sale of investment securities available for sale | 130 | 132 | ||||||
Net change in FHLB stock | 2,137 | 2,324 | ||||||
Proceeds from calls of investment securities | 4,864 | 33,801 | ||||||
Net change in other investments | (55 | ) | 738 | |||||
Purchase of domain name | (152 | ) | - | |||||
Net portfolio loan and lease originations | (131,702 | ) | (153,480 | ) | ||||
Purchases of premises and equipment | (3,731 | ) | (1,152 | ) | ||||
Acquisitions, net of cash acquired | (4,792 | ) | - | |||||
Capitalize costs to OREO | - | (28 | ) | |||||
Proceeds from sale of OREO | 68 | 1,806 | ||||||
Net cash used in investing activities | (17,324 | ) | (166,410 | ) | ||||
Financing activities: | ||||||||
Change in deposits | 102,125 | 157,137 | ||||||
Change in short-term borrowings | (73,856 | ) | (75,037 | ) | ||||
Dividends paid | (7,127 | ) | (6,732 | ) | ||||
Change in long-term FHLB advances and other borrowings | (25,000 | ) | (30,000 | ) | ||||
Cash payments to taxing authorities on employees' behalf from shares withheld from stock-based compensation | (98 | ) | (63 | ) | ||||
Net (purchase of) proceeds from sale of treasury stock for deferred compensation plans | (69 | ) | (65 | ) | ||||
Net purchase of treasury stock through publicly announced plans | - | (7,971 | ) | |||||
Proceeds from exercise of stock options | 1,005 | 647 | ||||||
Net cash (used in) provided by financing activities | (3,020 | ) | 37,916 | |||||
Change in cash and cash equivalents | (607 | ) | (108,876 | ) | ||||
Cash and cash equivalents at beginning of period | 50,765 | 143,067 | ||||||
Cash and cash equivalents at end of period | $ | 50,158 | $ | 34,191 | ||||
Supplemental cash flow information: | ||||||||
Cash paid during the year for: | ||||||||
Income taxes | $ | 12,481 | $ | 7,712 | ||||
Interest | $ | 6,099 | $ | 5,031 | ||||
Non-cash information: | ||||||||
Change in other comprehensive loss | $ | 845 | $ | 2,900 | ||||
Change in deferred tax due to change in comprehensive income | $ | 455 | $ | 1,573 | ||||
Transfer of loans to other real estate owned and repossessed assets | $ | 309 | $ | - | ||||
Acquisition of noncash assets and liabilities: | ||||||||
Assets acquired | $ | 7,284 | $ | - | ||||
Liabilities assumed | $ | 2,492 | $ | - |
The accompanying notes are an integral part of the unaudited consolidated financial statements. Unaudited Consolidated Financial Statements.
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes In Shareholders’ EquityIncome - Unaudited
(dollars in thousands, except per share information)
For the Six Months Ended June 30, 2017 | ||||||||||||||||||||||||||||
Shares of Common Stock Issued | Common Stock | Paid-in Capital | Treasury Stock | Accumulated Other Comprehensive Loss | Retained Earnings | Total Shareholders' Equity | ||||||||||||||||||||||
Balance December 31, 2016 | 21,110,968 | $ | 21,111 | $ | 232,806 | $ | (66,950 | ) | $ | (2,409 | ) | $ | 196,569 | $ | 381,127 | |||||||||||||
Net income | - | - | - | - | - | 18,477 | 18,477 | |||||||||||||||||||||
Dividends declared, $0.42 per share | - | - | - | - | - | (7,230 | ) | (7,230 | ) | |||||||||||||||||||
Other comprehensive income, net of tax expense of $455 | - | - | - | - | 845 | - | 845 | |||||||||||||||||||||
Stock based compensation | - | - | 915 | - | - | - | 915 | |||||||||||||||||||||
Form S-4 stock issuance costs | - | - | (108 | ) | - | - | (108 | ) | ||||||||||||||||||||
Retirement of treasury stock | (2,628 | ) | (3 | ) | (23 | ) | 26 | - | - | - | ||||||||||||||||||
Net purchase of treasury stock from stock awards for statutory tax withholdings | - | - | - | (98 | ) | - | - | (98 | ) | |||||||||||||||||||
Net purchase of treasury stock for deferred compensation trusts | - | - | - | (69 | ) | - | - | (69 | ) | |||||||||||||||||||
Common stock issued through share-based awards and options exercises | 54,117 | 54 | 1,064 | - | - | - | 1,118 | |||||||||||||||||||||
Balance June 30, 2017 | 21,162,457 | $ | 21,162 | $ | 234,654 | $ | (67,091 | ) | $ | (1,564 | ) | $ | 207,816 | $ | 394,977 |
Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
(dollars in thousands, except per share data) | ||||||||
Interest income: | ||||||||
Interest and fees on loans and leases | $ | 40,689 | $ | 28,482 | ||||
Interest on cash and cash equivalents | 53 | 66 | ||||||
Interest on investment securities: | ||||||||
Taxable | 2,706 | 1,623 | ||||||
Non-taxable | 84 | 110 | ||||||
Dividends | 2 | 45 | ||||||
Total interest income | 43,534 | 30,326 | ||||||
Interest expense: | ||||||||
Interest on deposits | 3,472 | 1,828 | ||||||
Interest on short-term borrowings | 630 | 27 | ||||||
Interest on FHLB advances and other borrowings | 562 | 698 | ||||||
Interest on subordinated notes | 1,143 | 370 | ||||||
Interest on junior subordinated debentures | 288 | - | ||||||
Total interest expense | 6,095 | 2,923 | ||||||
Net interest income | 37,439 | 27,403 | ||||||
Provision for loan and lease losses | 1,030 | 291 | ||||||
Net interest income after provision for loan and lease losses | 36,409 | 27,112 | ||||||
Noninterest income: | ||||||||
Fees for wealth management services | 10,308 | 9,303 | ||||||
Insurance commissions | 1,693 | 763 | ||||||
Capital markets revenue | 666 | - | ||||||
Service charges on deposits | 713 | 647 | ||||||
Loan servicing and other fees | 686 | 503 | ||||||
Net gain on sale of loans | 518 | 629 | ||||||
Net gain on sale of investment securities available for sale | 7 | 1 | ||||||
Net gain on sale of other real estate owned ("OREO") | 176 | - | ||||||
Dividends on FHLB and FRB stock | 431 | 214 | ||||||
Other operating income | 4,338 | 1,167 | ||||||
Total noninterest income | 19,536 | 13,227 | ||||||
Noninterest expenses: | ||||||||
Salaries and wages | 15,982 | 12,450 | ||||||
Employee benefits | 3,708 | 2,489 | ||||||
Occupancy and bank premises | 3,050 | 2,526 | ||||||
Furniture, fixtures, and equipment | 1,898 | 1,974 | ||||||
Advertising | 461 | 386 | ||||||
Amortization of intangible assets | 879 | 693 | ||||||
Due diligence, merger-related and merger integration expenses | 4,319 | 511 | ||||||
Professional fees | 748 | 711 | ||||||
Pennsylvania bank shares tax | 473 | 664 | ||||||
Information technology | 1,195 | 874 | ||||||
Other operating expenses | 3,317 | 3,382 | ||||||
Total noninterest expenses | 36,030 | 26,660 | ||||||
Income before income taxes | 19,915 | 13,679 | ||||||
Income tax expense | 4,630 | 4,635 | ||||||
Net income | $ | 15,285 | $ | 9,044 | ||||
Add: Net loss attributable to noncontrolling interest | 1 | - | ||||||
Net income attributable to Bryn Mawr Bank Corporation | $ | 15,286 | $ | 9,044 | ||||
Basic earnings per common share | $ | 0.76 | $ | 0.53 | ||||
Diluted earnings per common share | $ | 0.75 | $ | 0.53 | ||||
Dividends declared per share | $ | 0.22 | $ | 0.21 | ||||
Weighted-average basic shares outstanding | 20,202,969 | 16,954,132 | ||||||
Dilutive shares | 247,525 | 228,557 | ||||||
Adjusted weighted-average diluted shares | 20,450,494 | 17,182,689 |
The accompanying notes are an integral part of the unaudited consolidated financial statements.Unaudited Consolidated Financial Statements.
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income - Unaudited
(dollars in thousands) | Three Months Ended March 31, | |||||||
2018 | 2017 | |||||||
Net income attributable to Bryn Mawr Bank Corporation | $ | 15,286 | $ | 9,044 | ||||
Other comprehensive (loss) income: | ||||||||
Net change in unrealized (losses) gains on investment securities available for sale: | ||||||||
Net unrealized (losses) gains arising during the period, net of tax (benefit) expense of $(1,319) and $208, respectively | (4,961 | ) | 388 | |||||
Reclassification adjustment for net (gain) on sale realized in net income, net of tax (expense) benefit of $(1) and $0, respectively | (6 | ) | (1 | ) | ||||
Reclassification adjustment for net (gain) realized on transfer of investment securities available for sale to trading, net of tax (expense) benefit of $(88) and $0, respectively | (329 | ) | - | |||||
Unrealized investment (losses) gains, net of tax (benefit) expense of $(1,408) and $208, respectively | (5,296 | ) | 387 | |||||
Net change in unfunded pension liability: | ||||||||
Change in unfunded pension liability related to unrealized loss, prior service cost and transition obligation, net of tax expense of $12 and $17, respectively | 46 | 32 | ||||||
Total other comprehensive (loss) income | (5,250 | ) | 419 | |||||
Total comprehensive income | $ | 10,036 | $ | 9,463 |
The accompanying notes are an integral part of the Unaudited Consolidated Financial Statements.
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows - Unaudited
(dollars in thousands) | Three Months Ended March 31, | |||||||
2018 | 2017 | |||||||
Operating activities: | ||||||||
Net income attributable to Bryn Mawr Bank Corporation | $ | 15,286 | $ | 9,044 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Provision for loan and lease losses | 1,030 | 291 | ||||||
Depreciation of fixed assets | 1,493 | 1,392 | ||||||
Net amortization of investment premiums and discounts | 761 | 673 | ||||||
Net gain on sale of investment securities available for sale | (7 | ) | (1 | ) | ||||
Net gain on sale of loans | (518 | ) | (629 | ) | ||||
Stock based compensation | 620 | 484 | ||||||
Amortization and net impairment of mortgage servicing rights | 171 | 172 | ||||||
Net accretion of fair value adjustments | (3,004 | ) | (795 | ) | ||||
Amortization of intangible assets | 879 | 693 | ||||||
Net gain on sale of OREO | (176 | ) | - | |||||
Net increase in cash surrender value of bank owned life insurance ("BOLI") | (279 | ) | (200 | ) | ||||
Other, net | (17,436 | ) | (6,380 | ) | ||||
Loans originated for resale | (19,534 | ) | (26,064 | ) | ||||
Proceeds from loans sold | 18,265 | 33,023 | ||||||
Provision for deferred income taxes | 656 | 167 | ||||||
Change in income taxes payable/receivable | 3,819 | 4,324 | ||||||
Change in accrued interest receivable | 1,725 | 141 | ||||||
Change in accrued interest payable | 1,287 | (12 | ) | |||||
Net cash provided by operating activities | 5,038 | 16,323 | ||||||
Investing activities: | ||||||||
Purchases of investment securities available for sale | (74,029 | ) | (42,842 | ) | ||||
Purchases of investment securities held to maturity | - | (2,335 | ) | |||||
Proceeds from maturity and paydowns of investment securities available for sale | 218,393 | 217,539 | ||||||
Proceeds from maturity and paydowns of investment securities held to maturity | 39 | 15 | ||||||
Proceeds from sale of investment securities available for sale | 7 | 65 | ||||||
Net change in FHLB stock | 4,584 | 8,800 | ||||||
Proceeds from calls of investment securities | 65 | 1,134 | ||||||
Net change in other investments | 500 | (89 | ) | |||||
Purchase of domain name | - | (152 | ) | |||||
Net portfolio loan and lease originations | (21,230 | ) | (20,108 | ) | ||||
Purchases of premises and equipment | (2,063 | ) | (162 | ) | ||||
Proceeds from sale of OREO | 217 | 39 | ||||||
Net cash provided by investing activities | 126,483 | 161,904 | ||||||
Financing activities: | ||||||||
Change in deposits | (57,879 | ) | 56,909 | |||||
Change in short-term borrowings | (64,161 | ) | (180,538 | ) | ||||
Dividends paid | (4,523 | ) | (3,559 | ) | ||||
Change in long-term FHLB advances | (31,371 | ) | (15,000 | ) | ||||
Cash payments to taxing authorities on employees' behalf from shares withheld from stock-based compensation | (626 | ) | (19 | ) | ||||
Net sale of treasury stock for deferred compensation plans | 171 | - | ||||||
Repurchase of warrants from U.S. Treasury | (1,755 | ) | - | |||||
Proceeds from exercise of stock options | 992 | 650 | ||||||
Net cash used in financing activities | (159,152 | ) | (141,557 | ) | ||||
Change in cash and cash equivalents | (27,631 | ) | 36,670 | |||||
Cash and cash equivalents at beginning of period | 60,024 | 50,765 | ||||||
Cash and cash equivalents at end of period | $ | 32,393 | $ | 87,435 | ||||
Supplemental cash flow information: | ||||||||
Cash paid during the year for: | ||||||||
Income taxes | $ | 146 | $ | 117 | ||||
Interest | $ | 4,808 | $ | 2,935 | ||||
Non-cash information: | ||||||||
Change in other comprehensive loss | $ | (5,250 | ) | $ | 419 | |||
Change in deferred tax due to change in comprehensive income | $ | (1,396 | ) | $ | 225 | |||
Transfer of loans to other real estate owned and repossessed assets | $ | 37 | $ | - |
The accompanying notes are an integral part of the Unaudited Consolidated Financial Statements.
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes In Shareholders’ Equity - Unaudited
(dollars in thousands, except per share data)
For the Three Months Ended March 31, 2018 | ||||||||||||||||||||||||||||||||
Shares of Common Stock Issued | Common Stock | Paid-in Capital | Treasury Stock | Accumulated Other Comprehensive Loss | Retained Earnings | Noncontrolling Interest | Total Shareholders' Equity | |||||||||||||||||||||||||
Balance December 31, 2017 | 24,360,049 | $ | 24,360 | $ | 371,486 | $ | (68,179 | ) | $ | (4,414 | ) | $ | 205,549 | $ | (683 | ) | $ | 528,119 | ||||||||||||||
Net income attributable to Bryn Mawr Bank Corporation | - | - | - | - | - | 15,286 | - | 15,286 | ||||||||||||||||||||||||
Net loss attributable to noncontrolling interest | - | - | - | - | - | - | (1 | ) | (1 | ) | ||||||||||||||||||||||
Dividends declared, $0.22 per share | - | - | - | - | - | (4,495 | ) | - | (4,495 | ) | ||||||||||||||||||||||
Other comprehensive loss, net of tax expense of $1,396 | - | - | - | - | (5,250 | ) | - | - | (5,250 | ) | ||||||||||||||||||||||
Stock based compensation | - | - | 620 | - | - | - | - | 620 | ||||||||||||||||||||||||
Net purchase of treasury stock from stock awards for statutory tax withholdings | - | - | - | (626 | ) | - | - | - | (626 | ) | ||||||||||||||||||||||
Net sale of treasury stock for deferred compensation trusts | - | - | 153 | 18 | - | - | - | 171 | ||||||||||||||||||||||||
Repurchase of warrants from U.S. Treasury | - | - | (1,853 | ) | - | - | 98 | - | (1,755 | ) | ||||||||||||||||||||||
Common stock issued: | ||||||||||||||||||||||||||||||||
Common stock issued through share-based awards and options exercises | 78,709 | 79 | 913 | - | - | - | - | 992 | ||||||||||||||||||||||||
Balance March 31, 2018 | 24,438,758 | $ | 24,439 | $ | 371,319 | $ | (68,787 | ) | $ | (9,664 | ) | $ | 216,438 | $ | (684 | ) | $ | 533,061 |
The accompanying notes are an integral part of the Unaudited Consolidated Financial Statements.
BRYN MAWR BANK CORPORATION AND SUBSIDIARIES
Notes toConsolidated FinancialStatements
(Unaudited)
Note 1 - Basis of Presentation
The unaudited consolidated financial statementsUnaudited Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). In the opinion of Bryn Mawr Bank Corporation’s (the “Corporation”) management, all adjustments necessary for a fair presentation of the consolidated financial position and the results of operations for the interim periods presented have been included. These unaudited consolidated financial statementsUnaudited Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statementsConsolidated Financial Statements and notes thereto in the Corporation’s Annual Report on Form 10-K10-K for the twelve months ended December 31, 2016 (the “20162017 (the “2017 Annual Report”).
The results of operations for the three and six months ended June 30, 2017 March 31, 2018 are not necessarily indicative of the results to be expected for the full year.
Principles of Consolidation
The Unaudited Consolidated Financial Statements include the accounts of the Corporation and its wholly owned subsidiaries; the Corporation’s primary subsidiary is the Bank. In connection with the RBPI Merger (defined in Note 3 – Business Combinations below), the Corporation acquired two Delaware trusts, Royal Bancshares Capital Trust I and Royal Bancshares Capital Trust II. These two entities are notconsolidated per requirements under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, “Consolidation” (“ASC Topic 810”). All significant intercompany balances and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to the current-year presentation.
Note 2 - Earnings per Common ShareRecent Accounting Pronouncements
Basic earnings per common share excludes dilution and is computed by dividing income available to common shareholdersThe following Financial Accounting Standards Board ("FASB") Accounting Standards Updates ("ASUs") are divided into pronouncements which have been adopted by the weighted-average common shares outstandingCorporation since January 1, 2018, and those which are not yet effective and have been evaluated or are currently being evaluated by management as of March 31, 2018.
Adopted Pronouncements:
FASB ASU 2014-09 (Topic 606), “Revenue from Contracts with Customers”
The Corporation adopted ASU 2014-09Revenue from Contracts with Customers and all subsequent amendments to the ASU (collectively, “ASC 606”), which (i) creates a single framework for recognizing revenue from contracts with customers that fall within its scope and (ii) revises when it is appropriate to recognize a gain (loss) from the transfer of nonfinancial assets, such as other real estate owned (“OREO”). The majority of the Corporation’s revenues come from interest income and other sources, including loans, leases, investment securities and derivatives, that are outside the scope of ASC 606. The Corporation’s services that fall within the scope of ASC 606 are presented within noninterest income and are recognized as revenue as the Corporation satisfies its obligation to the customer. Services within the scope of ASC 606 include service charges on deposits, interchange income, wealth management fees, investment brokerage fees, and the net gain on sale of OREO. Refer to Note 17Revenue from Contracts with Customers for further discussion on the Corporation’s accounting policies for revenue sources within the scope of ASC 606. The adoption of this ASU did not have an impact to our Consolidated Financial Statements.
FASB ASU 2017-01 (Topic 805), “Business Combinations”
The Corporation adopted ASU 2017-01, which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The adoption of this ASU did not have a material impact on our Consolidated Financial Statements and related disclosures.
FASB ASU 2016-15 (Topic 320), “Classification of Certain Cash Receipts and Cash Payments”
The Corporation adopted ASU 2016-15, which provides guidance on eight specific cash flow issues and their disclosure in the consolidated statements of cash flows. The issues addressed include debt prepayment, settlement of zero-coupon debt, contingent consideration in business combinations, proceeds from settlement of insurance claims, proceeds from settlement of BOLI, distributions received from equity method investees, beneficial interests in securitization transactions, and separately identifiable cash flows and application of the predominance principle. The adoption of this ASU did not have a material impact on our Consolidated Financial Statements and related disclosures.
FASB ASU 2016-01 (Subtopic 825-10), “Financial Instruments – Overall, Recognition and Measurement of Financial Assets and Financial Liabilities”
The Corporation adopted ASU 2016-01 which requires that equity investments be measured at fair value with changes in fair value recognized in net income. The Corporation’s equity investments with a readily determinable fair value are currently included within trading securities and are measured at fair value with changes in fair value recognized in net income. In connection with the adoption of this ASU, the Corporation elected the practicability exception to fair value measurement for investments in equity securities without a readily determinable fair value (other than our FHLB, FRB, and Atlantic Central Bankers Bank stock, which are outside of the scope of this ASU). Under the practicability exception, the investments are measured at cost, less impairment, plus or minus observable price changes (in orderly transactions) of an identical or similar investment of the same issuer. The adoption of this ASU did not have a material impact on our Consolidated Financial Statements.
FASB ASU 2017-07 – Compensation – Retirement Benefits (Topic 715): “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”
On January 1, 2018, the Corporation adopted ASU 2017-07 and all subsequent amendments to the ASU, which requires that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. Diluted earnings per common share takes into accountThe other components of net benefit cost are required to be presented in the potential dilution computed pursuantincome statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed. The amendments in this update also allow only the service cost component to be eligible for capitalization when applicable (for example, as a cost of internally manufactured inventory or a self-constructed asset).
Upon adoption, the components of net periodic benefit cost other than the service cost component were reclassified retrospectively from “Employee benefits” to “Other operating expenses” in the Consolidated Statements of Income. Since both “Employee benefits” and “Other operating expenses” line items of these income statement line items are within “Non-interest expenses”, there was no impact to total “Non-interest expenses” or “Net income.” The components of net periodic benefit cost are currently disclosed in Note 17 – “Pension and Postretirement Benefit Plans” in the Notes to Consolidated Financial Statements found in our 2017 Annual Report. Additionally, the Corporation does not currently capitalize any components of its net periodic benefit costs. The adoption of this ASU did not have a material impact on our Consolidated Financial Statements and related disclosures.
Pronouncements Not Yet Effective:
FASB ASU 2017-04 (Topic 350), “Intangibles – Goodwill and Others”
Issued in January 2017, ASU 2017-04 simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. ASU 2017-04 is effective for annual periods beginning after December 15, 2019 including interim periods within those periods. Management does not expect the adoption of this ASU to have a material impact on our Consolidated Financial Statements and related disclosures.
FASB ASU 2016-13 (Topic 326), “Measurement of Credit Losses on Financial Instruments”
Issued in June 2016, ASU 2016-13 significantly changes how companies measure and recognize credit impairment for many financial assets. The new current expected credit loss (“CECL”) model will require companies to immediately recognize an estimate of credit losses expected to occur over the remaining life of the financial assets that are in the scope of the standard. The ASU also makes targeted amendments to the treasury stock methodcurrent impairment model for available-for-sale debt securities. ASU 2016-13 is effective for the annual and interim periods in fiscal years beginning after December 15, 2019, with early adoption permitted. Adoption of this new guidance can be applied only on a prospective basis as a cumulative-effect adjustment to retained earnings.
It is expected that could occur if stock options were exercisedthe new model will include different assumptions used in calculating credit losses, such as estimating losses over the estimated life of a financial asset, and converted into common stock,will consider expected future changes in macroeconomic conditions. The adoption of this ASU may result in an increase to the Corporation’s allowance for credit losses, which will depend upon the nature and characteristics of the Corporation 's portfolio at the adoption date, as well as the effectmacroeconomic conditions and forecasts at the adoption date. The Corporation has engaged the services of restricteda third-party consultant as well as invested in software designed to assist management in the development and performanceimplementation of the new CECL model. Management is currently in the process of validating historical data uploaded within the third-party software to replicate the current ALLL model. The adoption of this ASU will also require the addition of an allowance for held-to-maturity debt securities. The Corporation currently does not intend to early adopt this new guidance.
FASB ASU 2016-02 (Topic 842), “Leases”
Issued in February 2016, ASU 2016-02 revises the accounting related to lessee accounting. Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset for all leases. The new lease guidance also simplifies the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. ASU 2016-02 is effective for the first interim period within annual periods beginning after December 15, 2018, with early adoption permitted. The standard is required to be adopted using the modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Management has begun to inventory the Corporation’s various leases and is currently computing the lease liability and a right-of-use asset for all leases. Management is aware that the adoption of this ASU will impact the Corporation’s balance sheet for the recording of assets and liabilities for operating leases. Any additional assets recorded as a result of implementation will have a negative impact on the Corporation and Bank capital ratios under current regulatory guidance.
Note 3 - Business Combinations
Royal Bancshares of Pennsylvania, Inc.
On December 15, 2017, the previously announced merger of Royal Bancshares of Pennsylvania, Inc. (“RBPI”) with and into the Corporation (the “RBPI Merger”), and the merger of Royal Bank America with and into the Bank, as contemplated by the Agreement and Plan of Merger, by and between RBPI and the Corporation, dated as of January 30, 2017 (the “Agreement”) were completed. In accordance with the Agreement, the aggregate share consideration paid to RBPI shareholders consisted of 3,098,754 shares becoming unrestrictedof the Corporation’s common stock. Shareholders of RBPI received 0.1025 shares of Corporation common stock for each share of RBPI Class A common stock and 0.1179 shares of Corporation common stock for each share of RBPI Class B common stock owned as of the effective date of the RBPI Merger, with cash-in-lieu of fractional shares totaling $7 thousand. Holders of in-the-money options to purchase RBPI Class A common stock received cash totaling $112 thousand. In addition, 1,368,040 warrants to purchase Class A common stock of RBPI, valued at $1.9 million, were converted to 140,224 warrants to purchase Corporation common stock. In accordance with the acquisition method of accounting, assets acquired and liabilities assumed were preliminarily adjusted to their fair values as of the date of the RBPI Merger. The excess of consideration paid above the fair value of net assets acquired was recorded as goodwill. This goodwill is not amortizable nor is it deductible for income tax purposes.
In connection with the RBPI Merger, the consideration paid and the estimated fair value of identifiable assets acquired and liabilities assumed as of the date of the RBPI Merger, which include the effects of stock optionsany measurement period adjustments in accordance with ASC 805-10, are excluded fromsummarized in the computationfollowing table:
(dollars in thousands) | ||||
Consideration paid: | ||||
Common shares issued (3,098,754) | $ | 136,655 | ||
Cash in lieu of fractional shares | 7 | |||
Cash-out of certain options | 112 | |||
Fair value of warrants assumed | 1,853 | |||
Value of consideration | $ | 138,627 | ||
Assets acquired: | ||||
Cash and due from banks | $ | 17,092 | ||
Investment securities available for sale | 121,587 | |||
Loans | 567,308 | |||
Premises and equipment | 8,264 | |||
Deferred income taxes | 34,380 | |||
Bank-owned life insurance | 16,550 | |||
Core deposit intangible | 4,670 | |||
Favorable lease asset | 566 | |||
Other assets | 13,996 | |||
Total assets | $ | 784,413 | ||
Liabilities assumed: | ||||
Deposits | $ | 593,172 | ||
FHLB and other long-term borrowings | 59,568 | |||
Short-term borrowings | 15,000 | |||
Junior subordinated debentures | 21,416 | |||
Unfavorable lease liability | 322 | |||
Other liabilities | 31,381 | |||
Total liabilities | $ | 720,859 | ||
Net assets acquired | $ | 63,554 | ||
Goodwill resulting from acquisition of RBPI | $ | 75,073 |
Provisional Estimates of Fair Value of Certain Assets Acquired in periodsthe RBPI Merger
As of March 31, 2018, the accounting for the estimates of fair value for certain loans acquired in the RBPI Merger is incomplete. The Corporation is in the process of obtaining new information that will allow management to better estimate fair values that existed as of December 15, 2017. When this information is obtained, management anticipates an adjustment to the provisional fair value assigned to certain acquired loans. These adjustments will result in corresponding adjustments to goodwill and net deferred tax asset. In accordance with ASC 805-10, the adjustments will be recorded in the period in which the effect would be anti-dilutive. All weighted average shares, actual sharesnew information about facts and per share informationcircumstances that existed as of the acquisition date is obtained and reviewed.
During the three months ended March 31, 2018, the Corporation adjusted certain provisional fair value estimates related to the RBPI Merger. The following table details the changes in fair value of the net assets acquired and liabilities assumed as of December 15, 2017 from the amounts originally reported in the financial statements have been adjusted retroactivelyCorporation’s Form 10-K for the effect of stock dividendsyear ended December 31, 2017:
(dollars in thousands) | ||||
Goodwill resulting from the acquisition of RBPI reported as of December 31, 2017 | $ | 72,762 | ||
Fair Value Adjustments: | ||||
Loans | 3,065 | |||
Other assets | 491 | |||
Deferred income taxes | (1,245 | ) | ||
Total Fair Value Adjustments | 2,311 | |||
Goodwill from the acquisition of RBPI as of March 31, 2018 | $ | 75,073 |
Methods Used to Fair Value Assets and splits.Liabilities
For information regarding the valuation methodologies used to estimate the fair values of major categories of assets acquired and liabilities assumed, refer to Note 2 in the Notes to Consolidated Financial Statements in our 2017 Annual Report.
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
(dollars in thousands except per share data) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Numerator: | ||||||||||||||||
Net income available to common shareholders | $ | 9,433 | $ | 8,933 | $ | 18,477 | $ | 17,255 | ||||||||
Denominator for basic earnings per share –weighted average shares outstanding | 16,984,563 | 16,812,219 | 16,969,431 | 16,830,211 | ||||||||||||
Effect of dilutive common shares | 248,204 | 215,200 | 238,381 | 123,905 | ||||||||||||
Denominator for diluted earnings per share – adjusted weighted average shares outstanding | 17,232,767 | 17,027,419 | 17,207,812 | 16,954,116 | ||||||||||||
Basic earnings per share | $ | 0.56 | $ | 0.53 | $ | 1.09 | $ | 1.03 | ||||||||
Diluted earnings per share | $ | 0.55 | $ | 0.52 | $ | 1.07 | $ | 1.02 | ||||||||
Antidilutive shares excluded from computation of average dilutive earnings per share | — | — | — | — |
Loans held for investment
During the three months ended March 31, 2018, new information became available related to certain loans acquired from RBPI. This new information resulted in an adjustment to the fair value mark applied to the acquired loan portfolio. Adjustments were made to the fair value of loans acquired with evidence of credit quality deterioration. Loans meeting this definition were reviewed by comparing the contractual cash flows to expected collectible cash flows. The aggregate expected cash flows less the acquisition date fair value results in an accretable yield amount. The accretable yield amount will be recognized over the life of the loans or over the recovery period of the underlying collateral on a level yield basis as an adjustment to yield. As a result of the adjustments, the Corporation recorded a $3.0 million increase in nonaccretable difference. The adjustment to the aggregate expected cash flows less the acquisition date fair value resulted in an increase in accretable yield of $207 thousand.
The following table provides an updated summary of the acquired impaired loans and leases as of December 15, 2017, which include the effects of any measurement period adjustments in accordance with ASC 805-10, resulting from the RBPI Merger:
(dollars in thousands) | ||||
Contractually required principal and interest payments | $ | 38,404 | ||
Contractual cash flows not expected to be collected (nonaccretable difference) | (16,025 | ) | ||
Cash flows expected to be collected | 22,379 | |||
Interest component of expected cash flows (accretable yield) | (2,526 | ) | ||
Fair value of loans acquired with deterioration of credit quality | $ | 19,853 |
Note 3 - Business Combinations
HarryHarry R. Hirshorn & Company, Inc., d/b/a Hirshorn Boothby (“Hirshorn”)
The acquisition of Hirshorn, an insurance agency headquartered in the Chestnut Hill section of Philadelphia, was completed on May 24, 2017. Immediately after the acquisition, Hirshorn was merged into the Bank’s existing insurance subsidiary, BMT Insurance Advisors, Inc., formerly known as Powers Craft Parker and Beard, Inc.Inc (“PCPB”). The consideration paid by the Bank was $7.5$7.5 million, of which $5.8$5.8 million was paid at closing, with three contingent cash payments, not to exceed $575$575 thousand each, to be payable on each of May 24, 2018, May 24, 2019, and May 24, 2020, subject to the attainment of certain revenue targets during the related periods. The acquisition enhanced the Bank’s ability to offer comprehensive insurance solutions to both individual and business clients and continues the strategy of selectively establishing specialty offices in targeted areas.
In connection with the Hirshorn acquisition, the following table details the consideration paid, the initial estimated fair value of identifiable assets acquired and liabilities assumed as of the date of acquisition and the resulting goodwill recorded:
(dollars in thousands) | ||||
Consideration paid: | ||||
Cash paid at closing | $ | 5,770 | ||
Contingent payment liability (present value) | 1,690 | |||
Value of consideration | 7,460 | |||
Assets acquired: | ||||
Cash operating accounts | 978 | |||
Intangible assets – trade name | 195 | |||
Intangible assets – customer relationships | 2,672 | |||
Intangible assets – non-competition agreements | 41 | |||
Premises and equipment | 1,795 | |||
Accounts receivable | 192 | |||
Other assets | 27 | |||
Total assets | 5,900 | |||
Liabilities assumed: | ||||
Accounts payable | 800 | |||
Other liabilities | 2 | |||
Total liabilities | 802 | |||
Net assets acquired | 5,098 | |||
Goodwill resulting from acquisition of Hirshorn | $ | 2,362 |
(dollars in thousands) | ||||
Consideration paid: | ||||
Cash paid at closing | $ | 5,770 | ||
Contingent payment liability (present value) | 1,690 | |||
Value of consideration | 7,460 | |||
Assets acquired: | ||||
Cash operating accounts | 978 | |||
Intangible assets – trade name | 195 | |||
Intangible assets – customer relationships | 2,672 | |||
Intangible assets – non-competition agreements | 41 | |||
Premises and equipment | 1,795 | |||
Accounts receivable | 192 | |||
Other assets | 27 | |||
Total assets | 5,900 | |||
Liabilities assumed: | ||||
Accounts payable | 800 | |||
Other liabilities | 2 | |||
Total liabilities | 802 | |||
Net assets acquired | 5,098 | |||
Goodwill resulting from acquisition ofHirshorn | $ | 2,362 |
As of December 31, 2017, the estimates of the fair value of identifiable assets acquired and liabilities assumed in the Hirshorn acquisition were final.
Pending Business Combination – Royal Bancshares of Pennsylvania, Inc.Pro Forma Income Statements (unaudited)
On The following table presents the pro forma income statement of the combined institution (RBPI and the Corporation) for the three months ended March 31,2017 as if the RBPI Merger had occurred on January 30, 2017,1,2017. The pro forma income statement adjustments are limited to the Corporation entered into a definitive Agreementeffects of purchase accounting fair value mark amortization and Planaccretion and intangible asset amortization. No cost savings or additional merger expenses have been included in the pro forma income statement. Due to the immaterial contribution to net income of Merger to acquire Royal Bancshares of Pennsylvania, Inc. (“RBPI”), parent company of Royal Bank America (“RBA”), in a transaction with an aggregate value of $127.7 million (the “RBPI Acquisition”). In connection with the Acquisition, RBPI will merge with and into the Corporation and RBA will merge with and into the Bank. The RBPI Acquisition,Hirshorn acquisition, which is expected to add approximately $602 million in loans and $630 million in deposits (based on December 31, 2016 financial information), strengthens the Corporation’s position as the largest community bank in Philadelphia’s western suburbs and, based on deposits, ranks it as the eighth largest community bank headquartered in Pennsylvania. The RBPI Acquisition, which will expand the Corporation's distribution network by providing entry into the new markets of New Jersey and Berks County, Pennsylvania, and an expanded physical presence in Philadelphia County, Pennsylvania, is expected to closeoccurred during the third quarteryear shown in the table, the pro forma effects of 2017.
the Hirshorn acquisition have been excluded.
(dollars in thousands) | Three Months Ended March 31, 2017 | |||
Total interest income | $ | 41,227 | ||
Total interest expense | 4,562 | |||
Net interest income | 36,665 | |||
Provision for loan and lease losses | 588 | |||
Net interest income after provision for loan and lease losses | 36,077 | |||
Total non-interest income | 13,738 | |||
Total non-interest expenses* | 32,295 | |||
Income before income taxes | 17,520 | |||
Income tax expense | 5,936 | |||
Net income | $ | 11,584 | ||
Per share data**: | ||||
Weighted-average basic shares outstanding | 20,052,886 | |||
Dilutive shares | 256,176 | |||
Adjusted weighted-average diluted shares | 20,309,062 | |||
Basic earnings per common share | $ | 0.58 | ||
Diluted earnings per common share | $ | 0.57 |
* Total non-interest expense includes RBPI Net Income Attributable to Noncontrolling Interest and Preferred Stock Series A Accumulated Dividend and Accretion for pro forma presentation.
** Assumes that the shares of RBPI common stock outstanding as of December 31, 2017 were outstanding for the full three month period ended March 31, 2017.
Due Diligence, Merger-Related and Merger IntegrationExpenses
Due diligence, merger-related and merger integration expenses may include consultant costs, investment banker fees, contract breakage fees, retention bonuses for severed employees, and salary and wages for redundant staffing involved in the integration of the institutions.institutions and bonus accruals for members of the merger integration team. The following table details the costs identified and classified as due diligence, merger-related and merger integration costs for the periods indicated:
Three Months Ended June 30, | Six Months Ended June 30, | Three Months Ended March 31, | ||||||||||||||||||||||
(dollars in thousands) | 2017 | 2016 | 2017 | 2016 | 2018 | 2017(1) | ||||||||||||||||||
Advertising | $ | 59 | $ | — | ||||||||||||||||||||
Employee Benefits | 203 | — | ||||||||||||||||||||||
Occupancy and bank premises | 1,856 | — | ||||||||||||||||||||||
Furniture, fixtures, and equipment | 179 | — | ||||||||||||||||||||||
Information technology | 112 | — | ||||||||||||||||||||||
Professional fees | 747 | 396 | ||||||||||||||||||||||
Salaries and wages | $ | 320 | $ | — | $ | 400 | $ | — | 346 | 80 | ||||||||||||||
Employee benefits | 5 | — | 5 | — | ||||||||||||||||||||
Advertising | 19 | — | 19 | — | ||||||||||||||||||||
Professional fees | 542 | — | 938 | — | ||||||||||||||||||||
Information technology | 259 | — | 259 | — | ||||||||||||||||||||
Other | 91 | — | 126 | — | 817 | 35 | ||||||||||||||||||
Total due diligence and merger-related expenses | $ | 1,236 | $ | — | $ | 1,747 | $ | — | ||||||||||||||||
Total due diligence, merger-related and merger integration expenses | $ | 4,319 | $ | 511 |
(1) Total due diligence, merger-related and merger integration expenses for the three months ended March 31, 2017 were primarily related to the acquisition of Hirshorn.
Note 4 - Investment Securities
Note 4 - Investment Securities
The amortized cost and fair value of investment securitiesavailable for sale as of March 31, 2018 and December 31, 2017 are as follows:
As ofJune 30, 2017
(dollars in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
U.S. Treasury securities | $ | 101 | $ | — | $ | — | $ | 101 | ||||||||
Obligations of the U.S. government and agencies | 127,167 | 196 | (895 | ) | 126,468 | |||||||||||
Obligations of state and political subdivisions | 27,470 | 47 | (35 | ) | 27,482 | |||||||||||
Mortgage-backed securities | 230,137 | 1,338 | (858 | ) | 230,617 | |||||||||||
Collateralized mortgage obligations | 43,211 | 68 | (730 | ) | 42,549 | |||||||||||
Other investments | 16,268 | 238 | (36 | ) | 16,470 | |||||||||||
Total | $ | 444,354 | $ | 1,887 | $ | (2,554 | ) | $ | 443,687 |
As of DecemberMarch 31, 20182016
(dollars in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses |
Fair Value | ||||||||||||||||||||||||
U.S. Treasury securities | $ | 200,094 | $ | 3 | $ | — | $ | 200,097 | $ | 100 | $ | — | $ | — | $ | 100 | ||||||||||||||||
Obligations of the U.S. government and agencies | 83,111 | 167 | (1,080 | ) | 82,198 | 178,863 | 34 | (3,790 | ) | 175,107 | ||||||||||||||||||||||
Obligations of state and political subdivisions | 33,625 | 26 | (121 | ) | 33,530 | 19,992 | 8 | (83 | ) | 19,917 | ||||||||||||||||||||||
Mortgage-backed securities | 185,997 | 1,260 | (1,306 | ) | 185,951 | 309,071 | 511 | (5,680 | ) | 303,902 | ||||||||||||||||||||||
Collateralized mortgage obligations | 49,488 | 108 | (902 | ) | 48,694 | 35,302 | 2 | (1,324 | ) | 33,980 | ||||||||||||||||||||||
Other investments | 16,575 | 105 | (154 | ) | 16,526 | |||||||||||||||||||||||||||
Other investment securities | 1,100 | — | (3 | ) | 1,097 | |||||||||||||||||||||||||||
Total | $ | 568,890 | $ | 1,669 | $ | (3,563 | ) | $ | 566,996 | $ | 544,428 | $ | 555 | $ | (10,880 | ) | $ | 534,103 |
As of December 31, 2017
(dollars in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses |
Fair Value | ||||||||||||
U.S. Treasury securities | $ | 200,077 | $ | 11 | $ | — | $ | 200,088 | ||||||||
Obligations of the U.S. government and agencies | 153,028 | 75 | (2,059 | ) | 151,044 | |||||||||||
Obligations of state and political subdivisions | 21,352 | 11 | (53 | ) | 21,310 | |||||||||||
Mortgage-backed securities | 275,958 | 887 | (1,855 | ) | 274,990 | |||||||||||
Collateralized mortgage obligations | 37,596 | 14 | (948 | ) | 36,662 | |||||||||||
Other investment securities | 4,813 | 318 | (23 | ) | 5,108 | |||||||||||
Total | $ | 692,824 | $ | 1,316 | $ | (4,938 | ) | $ | 689,202 |
The following tables detailpresent the aggregate amount of investment securitiesgross unrealized losses as of March 31, 2018 and December 31, 2017 on available for sale that wereinvestment securities classified according to the amount of time those securities have been in ana continuous unrealized loss position as of the dates indicated:
position:
As ofJune 30, 2017March 31, 2018
Less than 12 | 12 Months | Total | Less than 12 | 12 Months | Total | |||||||||||||||||||||||||||||||||||||||||||
(dollars in thousands) | Fair | Unrealized Losses | Fair | Unrealized Losses | Fair | Unrealized Losses | Fair | Unrealized Losses | Fair | Unrealized Losses | Fair | Unrealized Losses | ||||||||||||||||||||||||||||||||||||
Obligations of the U.S. government and agencies | $ | 90,259 | $ | (895 | ) | $ | — | $ | — | $ | 90,259 | $ | (895 | ) | $ | 128,699 | $ | (2,688 | ) | $ | 26,389 | $ | (1,102 | ) | $ | 155,088 | $ | (3,790 | ) | |||||||||||||||||||
Obligations of state and political subdivisions | 11,196 | (22 | ) | 918 | (13 | ) | 12,114 | (35 | ) | 9,758 | (26 | ) | 2,122 | (57 | ) | 11,880 | (83 | ) | ||||||||||||||||||||||||||||||
Mortgage-backed securities | 116,531 | (858 | ) | — | — | 116,531 | (858 | ) | 236,886 | (4,620 | ) | 29,840 | (1,060 | ) | 266,726 | (5,680 | ) | |||||||||||||||||||||||||||||||
Collateralized mortgage obligations | 32,050 | (730 | ) | — | — | 32,050 | (730 | ) | 7,726 | (112 | ) | 25,143 | (1,212 | ) | 32,869 | (1,324 | ) | |||||||||||||||||||||||||||||||
Other investments | 1,807 | (36 | ) | — | — | 1,807 | (36 | ) | ||||||||||||||||||||||||||||||||||||||||
Other investment securities | 797 | (3 | ) | — | — | 797 | (3 | ) | ||||||||||||||||||||||||||||||||||||||||
Total | $ | 251,843 | $ | (2,541 | ) | $ | 918 | $ | (13 | ) | $ | 252,761 | $ | (2,554 | ) | $ | 383,866 | $ | (7,449 | ) | $ | 83,494 | $ | (3,431 | ) | $ | 467,360 | $ | (10,880 | ) |
As of December 31, 2017
Less than 12 | 12 Months | Total | ||||||||||||||||||||||
(dollars in thousands) | Fair | Unrealized Losses | Fair | Unrealized Losses | Fair | Unrealized Losses | ||||||||||||||||||
Obligations of the U.S. government and agencies | $ | 114,120 | $ | (1,294 | ) | $ | 26,726 | $ | (765 | ) | $ | 140,846 | $ | (2,059 | ) | |||||||||
Obligations of state and political subdivisions | 11,144 | (29 | ) | 2,709 | (24 | ) | 13,853 | (53 | ) | |||||||||||||||
Mortgage-backed securities | 177,919 | (1,293 | ) | 31,787 | (562 | ) | 209,706 | (1,855 | ) | |||||||||||||||
Collateralized mortgage obligations | 5,166 | (47 | ) | 26,686 | (901 | ) | 31,852 | (948 | ) | |||||||||||||||
Other investment securities | 1,805 | (23 | ) | — | — | 1,805 | (23 | ) | ||||||||||||||||
Total | $ | 310,154 | $ | (2,686 | ) | $ | 87,908 | $ | (2,252 | ) | $ | 398,062 | $ | (4,938 | ) |
As of December 31,2016
Less than 12 | 12 Months | Total | ||||||||||||||||||||||
(dollars in thousands) | Fair | Unrealized Losses | Fair | Unrealized Losses | Fair | Unrealized Losses | ||||||||||||||||||
Obligations of the U.S. government and agencies | $ | 62,211 | $ | (1,080 | ) | $ | — | $ | — | $ | 62,211 | $ | (1,080 | ) | ||||||||||
Obligations of state and political subdivisions | 24,482 | (121 | ) | — | — | 24,482 | (121 | ) | ||||||||||||||||
Mortgage-backed securities | 101,433 | (1,306 | ) | — | — | 101,433 | (1,306 | ) | ||||||||||||||||
Collateralized mortgage obligations | 35,959 | (902 | ) | — | — | 35,959 | (902 | ) | ||||||||||||||||
Other investments | 2,203 | (93 | ) | 11,895 | (61 | ) | 14,098 | (154 | ) | |||||||||||||||
Total | $ | 226,288 | $ | (3,502 | ) | $ | 11,895 | $ | (61 | ) | $ | 238,183 | $ | (3,563 | ) |
Management evaluates the Corporation’s investment securities available for sale that are in an unrealized loss position in order to determine if the decline in fair value is other than temporary. The available for sale investment portfolio includes debt securities issued by U.S. government agencies, U.S. government-sponsored agencies, state and local municipalities and other issuers. All fixed income investment securities in the Corporation’s available for sale investment portfolio are rated as investment grade.investment-grade or higher. Factors considered in the evaluation include the current economic climate, the length of time and the extent to which the fair value has been below cost, interest rates and the bond rating of each security. The unrealized losses presented in the tables above are temporary in nature and are primarily related to market interest rates rather than the underlying credit quality of the issuers. The Corporationissuers or collateral. Management does not believe that these unrealized losses are other-than-temporary. The CorporationManagement does not have the intent to sell these securities prior to their maturity or the recovery of their cost bases and believes that it is more likely than not that it will not have to sell these securities prior to their maturity or the recovery of their cost bases.
As of June 30, 2017March 31, 2018 and December 31, 2016,2017, securities having a fair valuesvalue of $96.4$121.6 million and $119.4$126.2 million, respectively, were specifically pledged as collateral for public funds, trust deposits, the Federal Reserve Bank of PhiladelphiaFRB discount window program, Federal Home Loan Bank of Pittsburgh (“FHLB”) borrowings and other purposes. The FHLB has a blanket lien on non-pledged, mortgage-related loans and securities as part of the Corporation’s borrowing agreement with the FHLB.
The amortized cost and fair value of available for sale investment and mortgage-related securities available for sale as of March 31, 2018 and December 31, 2017, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
March 31, 2018 | December 31, 2017 | |||||||||||||||
(dollars in thousands) | Amortized Cost | Fair Value | Amortized Cost | Fair Value | ||||||||||||
Investment securities: | ||||||||||||||||
Due in one year or less | $ | 11,932 | $ | 11,922 | $ | 211,019 | $ | 211,019 | ||||||||
Due after one year through five years | 149,967 | 146,773 | 126,452 | 124,797 | ||||||||||||
Due after five years through ten years | 23,413 | 22,910 | 23,147 | 22,804 | ||||||||||||
Due after ten years | 14,743 | 14,616 | 15,439 | 15,421 | ||||||||||||
Subtotal | 200,055 | 196,221 | 376,057 | 374,041 | ||||||||||||
Mortgage-related securities(1) | 344,373 | 337,882 | 313,554 | 311,652 | ||||||||||||
Mutual funds with no stated maturity | — | — | 3,213 | 3,509 | ||||||||||||
Total | $ | 544,428 | $ | 534,103 | $ | 692,824 | $ | 689,202 |
(1)Expected maturities of mortgage-related securities maydiffer from contractual maturities as borrowers mayhave the right to call or prepay obligations with or without call or prepayment penalties.
The amortized cost and fair value of investment securitiesavailable for saleheld to maturity as of June 30, 2017 March 31, 2018 and December 31, 2016, by contractual maturity, 2017 are detailed below:as follows:
June 30, 2017 | December 31,2016 | |||||||||||||||
(dollars in thousands) | Amortized Cost | Fair Value | Amortized Cost | Fair Value | ||||||||||||
Investment securities1: | ||||||||||||||||
Due in one year or less | $ | 12,880 | $ | 12,884 | $ | 213,876 | $ | 213,885 | ||||||||
Due after one year through five years | 84,120 | 83,799 | 40,335 | 40,270 | ||||||||||||
Due after five years through ten years | 42,097 | 41,654 | 45,840 | 44,914 | ||||||||||||
Due after ten years | 16,741 | 16,813 | 18,079 | 18,055 | ||||||||||||
Subtotal | 155,838 | 155,150 | 318,130 | 317,124 | ||||||||||||
Mortgage-related securities1 | 273,348 | 273,166 | 235,485 | 234,644 | ||||||||||||
Mutual funds with no stated maturity | 15,168 | 15,371 | 15,275 | 15,228 | ||||||||||||
Total | $ | 444,354 | $ | 443,687 | $ | 568,890 | $ | 566,996 |
As of March 31, 2018
(dollars in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses |
Fair Value | ||||||||||||
Mortgage-backed securities | $ | 7,885 | $ | — | $ | (256 | ) | $ | 7,629 |
|
|
As of December 31, 2017
(dollars in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses |
Fair Value | ||||||||||||
Mortgage-backed securities | $ | 7,932 | $ | 5 | $ | (86 | ) | $ | 7,851 |
The following tables present the aggregate amount of gross unrealized losses as of March 31, 2018 and December 31, 2017 on held to maturity securities classified according to the amount of time those securities have been in a continuous unrealized loss position:
As of March 31, 2018
Less than 12 | 12 Months | Total | ||||||||||||||||||||||
(dollars in thousands) | Fair | Unrealized Losses | Fair | Unrealized Losses | Fair Value | Unrealized Losses | ||||||||||||||||||
Mortgage-backed securities | $ | 4,953 | $ | (143 | ) | $ | 2,676 | $ | (113 | ) | $ | 7,629 | $ | (256 | ) |
As of December 31, 2017
Less than 12 | 12 Months | Total | ||||||||||||||||||||||
(dollars in thousands) | Fair | Unrealized Losses | Fair | Unrealized Losses | Fair | Unrealized Losses | ||||||||||||||||||
Mortgage-backed securities | $ | 2,756 | $ | (25 | ) | $ | 3,866 | $ | (61 | ) | $ | 6,622 | $ | (86 | ) |
The amortized cost and fair value of investment securitiesheld to maturity investment securities as of June 30, 2017 March 31, 2018 and December 31, 2016 are detailed below:
As ofJune 30, 2017
(dollars in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
Mortgage-backed securities | $ | 5,161 | $ | 4 | $ | (63 | ) | $ | 5,102 | |||||||
Total | $ | 5,161 | $ | 4 | $ | (63 | ) | $ | 5,102 |
As ofDecember 31, 2016
(dollars in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
Mortgage-backed securities | $ | 2,879 | $ | — | $ | (61 | ) | $ | 2,818 | |||||||
Total | $ | 2,879 | $ | — | $ | (61 | ) | $ | 2,818 |
The following tables detail the amount ofheld to maturitysecurities that were in an unrealized loss position as of June 30, 2017, and December 31, 2016:
As ofJune 30, 2017
Less than 12 | 12 Months | Total | ||||||||||||||||||||||
(dollars in thousands) | Fair | Unrealized Losses | Fair | Unrealized Losses | Fair | Unrealized Losses | ||||||||||||||||||
Mortgage-backed securities | $ | 3,858 | $ | (63 | ) | $ | — | $ | — | $ | 3,858 | $ | (63 | ) | ||||||||||
Total | $ | 3,858 | $ | (63 | ) | $ | — | $ | — | $ | 3,858 | $ | (63 | ) |
As ofDecember 31, 2016
Less than 12 | 12 Months | Total | ||||||||||||||||||||||
(dollars in thousands) | Fair | Unrealized Losses | Fair | Unrealized Losses | Fair | Unrealized Losses | ||||||||||||||||||
Mortgage-backed securities | $ | 2,818 | $ | (61 | ) | $ | — | $ | — | $ | 2,818 | $ | (61 | ) | ||||||||||
Total | $ | 2,818 | $ | (61 | ) | $ | — | $ | — | $ | 2,818 | $ | (61 | ) |
The amortized cost and fair value of investment securitiesheld to maturity as of June 30, 2017 and December 31, 2016, by contractual maturity, are detailedshown below:
June 30, 2017 | December 31,2016 | |||||||||||||||
(dollars in thousands) | Amortized Cost | Fair Value | Amortized Cost | Fair Value | ||||||||||||
Mortgage-related securities1 | $ | 5,161 | $ | 5,102 | $ | 2,879 | $ | 2,818 | ||||||||
Total | $ | 5,161 | $ | 5,102 | $ | 2,879 | $ | 2,818 |
|
|
March 31, 2018 | December 31, 2017 | |||||||||||||||
(dollars in thousands) | Amortized Cost | Fair Value | Amortized Cost | Fair Value | ||||||||||||
Mortgage-backed securities(1) | $ | 7,885 | $ | 7,629 | $ | 7,932 | $ | 7,851 |
(1)Expected maturities of mortgage-related securities maydiffer from contractual maturities as borrowers mayhave the right to call or prepay obligations with or without call or prepayment penalties.
As of June 30, 2017March 31, 2018 and December 31, 2016,2017, the Corporation’s investment securities held intrading accounts totaled $4.0$8.2 million and $3.9$4.6 million, respectively, and consisted solely of deferred compensation trust accounts which wereare invested in listed mutual funds whose diversification is at the discretion of the deferred compensation plan participants.participants and, as of March 31, 2018, a rabbi trust account established to fund certain unqualified pension obligations. Investment securities held in trading accounts are reported at fair value, with adjustments in fair value reported through income.
Note 5 - Loans and Leases
The loan and lease portfolio consists of loans and leases originated by the Corporation, as well as loans acquired in mergers and acquisitions. These mergers and acquisitions include the December 2017 RBPI Merger, the January 2015 acquisition of CBH,Continental Bank Holdings, Inc. Merger, the November 2012 transaction with First Bank of Delaware, (“FBD”) and the July 2010 acquisition of First Keystone Financial, Inc. (“FKF”). Many of theCertain tables in this footnote are presented for all loans as well as supplemental tables forwith a breakdown between originatedandacquired loans.loans and leases.
A. The table below detailsallportfolioloans and leases as of the dates indicated:
June 30, 2017 | December 31, 2016 | |||||||
Loans held for sale | $ | 8,590 | $ | 9,621 | ||||
Real estate loans: | ||||||||
Commercial mortgage | $ | 1,197,936 | $ | 1,110,898 | ||||
Home equity lines and loans | 208,480 | 207,999 | ||||||
Residential mortgage | 416,488 | 413,540 | ||||||
Construction | 156,581 | 141,964 | ||||||
Total real estate loans | 1,979,485 | 1,874,401 | ||||||
Commercial and industrial | 599,203 | 579,791 | ||||||
Consumer | 28,485 | 25,341 | ||||||
Leases | 59,478 | 55,892 | ||||||
Total portfolio loans and leases | 2,666,651 | 2,535,425 | ||||||
Total loans and leases | $ | 2,675,241 | $ | 2,545,046 | ||||
Loans with fixed rates | $ | 1,158,959 | $ | 1,130,172 | ||||
Loans with adjustable or floating rates | 1,516,282 | 1,414,874 | ||||||
Total loans and leases | $ | 2,675,241 | $ | 2,545,046 | ||||
Net deferred loan origination fees included in the above loan table | $ | (888 | ) | $ | (735 | ) |
The table below details the Corporation’soriginatedportfolio loans and leases as of the dates indicated:
June 30, 2017 | December 31, 2016 | |||||||
Loans held for sale | $ | 8,590 | $ | 9,621 | ||||
Real estate loans: | ||||||||
Commercial mortgage | $ | 1,057,797 | $ | 946,879 | ||||
Home equity lines and loans | 182,531 | 178,450 | ||||||
Residential mortgage | 352,335 | 342,268 | ||||||
Construction | 156,581 | 141,964 | ||||||
Total real estate loans | 1,749,244 | 1,609,561 | ||||||
Commercial and industrial | 572,872 | 550,334 | ||||||
Consumer | 28,370 | 25,200 | ||||||
Leases | 59,478 | 55,892 | ||||||
Total portfolio loans and leases | 2,409,964 | 2,240,987 | ||||||
Total loans and leases | $ | 2,418,554 | $ | 2,250,608 | ||||
Loans with fixed rates | $ | 1,039,144 | $ | 992,917 | ||||
Loans with adjustable or floating rates | 1,379,410 | 1,257,691 | ||||||
Total originated loans and leases | $ | 2,418,554 | $ | 2,250,608 | ||||
Net deferred loan origination fees included in the above loan table | $ | (888 | ) | $ | (735 | ) |
March 31, 2018 | December 31, 2017 | |||||||||||||||||||||||
(dollars in thousands) | Originated | Acquired | Total Loans and Leases | Originated | Acquired | Total Loans and Leases | ||||||||||||||||||
Loans held for sale | $ | 5,522 | $ | — | $ | 5,522 | $ | 3,794 | $ | — | $ | 3,794 | ||||||||||||
Real Estate Loans: | ||||||||||||||||||||||||
Commercial mortgage | $ | 1,151,578 | $ | 389,879 | $ | 1,541,457 | $ | 1,122,327 | $ | 401,050 | $ | 1,523,377 | ||||||||||||
Home equity lines and loans | 178,624 | 32,845 | 211,469 | 183,283 | 34,992 | 218,275 | ||||||||||||||||||
Residential mortgage | 360,242 | 93,413 | 453,655 | 360,935 | 97,951 | 458,886 | ||||||||||||||||||
Construction | 135,480 | 66,688 | 202,168 | 128,266 | 84,188 | 212,454 | ||||||||||||||||||
Total real estate loans | $ | 1,825,924 | $ | 582,825 | $ | 2,408,749 | $ | 1,794,811 | $ | 618,181 | $ | 2,412,992 | ||||||||||||
Commercial and industrial | 613,315 | 113,916 | 727,231 | 589,304 | 130,008 | 719,312 | ||||||||||||||||||
Consumer | 45,731 | 2,692 | 48,423 | 35,146 | 3,007 | 38,153 | ||||||||||||||||||
Leases | 79,857 | 41,535 | 121,392 | 68,035 | 47,366 | 115,401 | ||||||||||||||||||
Total portfolio loans and leases | $ | 2,564,827 | $ | 740,968 | $ | 3,305,795 | $ | 2,487,296 | $ | 798,562 | $ | 3,285,858 | ||||||||||||
Total loans and leases | $ | 2,570,349 | $ | 740,968 | $ | 3,311,317 | $ | 2,491,090 | $ | 798,562 | $ | 3,289,652 | ||||||||||||
Loans with fixed rates | $ | 1,081,414 | $ | 473,855 | $ | 1,555,269 | $ | 1,034,542 | $ | 538,510 | $ | 1,573,052 | ||||||||||||
Loans with adjustable or floating rates | 1,488,935 | 267,113 | 1,756,048 | 1,456,548 | 260,052 | 1,716,600 | ||||||||||||||||||
Total loans and leases | $ | 2,570,349 | $ | 740,968 | $ | 3,311,317 | $ | 2,491,090 | $ | 798,562 | $ | 3,289,652 | ||||||||||||
Net deferred loan origination fees included in the above loan table | $ | 1,226 | $ | — | $ | 1,226 | $ | 887 | $ | — | $ | 887 |
The table below details the Corporation’sacquired portfolio loans as of the dates indicated:
June 30, 2017 | December 31, 2016 | |||||||
Real estate loans: | ||||||||
Commercial mortgage | $ | 140,139 | $ | 164,019 | ||||
Home equity lines and loans | 25,949 | 29,549 | ||||||
Residential mortgage | 64,153 | 71,272 | ||||||
Total real estate loans | 230,241 | 264,840 | ||||||
Commercial and industrial | 26,331 | 29,457 | ||||||
Consumer | 115 | 141 | ||||||
Total portfolio loans and leases | 256,687 | 294,438 | ||||||
Total loans and leases | $ | 256,687 | $ | 294,438 | ||||
Loans with fixed rates | $ | 119,815 | $ | 137,255 | ||||
Loans with adjustable or floating rates | 136,872 | 157,183 | ||||||
Total acquired loans and leases | $ | 256,687 | $ | 294,438 |
B. Components of the net investment in leases are detailed as follows:
March 31, 2018 | December 31, 2017 | |||||||||||||||||||||||||||||||
(dollars in thousands) | June 30, 2017 | December 31, 2016 | Originated | Acquired | Total Leases | Originated | Acquired | Total Leases | ||||||||||||||||||||||||
Minimum lease payments receivable | $ | 66,140 | $ | 62,379 | $ | 88,752 | $ | 47,549 | $ | 136,301 | $ | 75,592 | $ | 55,219 | $ | 130,811 | ||||||||||||||||
Unearned lease income | (8,817 | ) | (8,608 | ) | (12,523 | ) | (7,336 | ) | (19,859 | ) | (10,338 | ) | (9,523 | ) | (19,861 | ) | ||||||||||||||||
Initial direct costs and deferred fees | 2,155 | 2,121 | 3,628 | 1,322 | 4,950 | 2,781 | 1,670 | 4,451 | ||||||||||||||||||||||||
Total | $ | 59,478 | $ | 55,892 | ||||||||||||||||||||||||||||
Total Leases | $ | 79,857 | $ | 41,535 | $ | 121,392 | $ | 68,035 | $ | 47,366 | $ | 115,401 |
C. Non-Performing Loans and Leases(1)(1)
March 31, 2018 | December 31, 2017 | |||||||||||||||||||||||
(dollars in thousands) | Originated | Acquired | Total Loans and Leases | Originated | Acquired | Total Loans and Leases | ||||||||||||||||||
Commercial mortgage | $ | 89 | $ | 49 | $ | 138 | $ | 90 | $ | 782 | $ | 872 | ||||||||||||
Home equity lines and loans | 1,693 | 256 | 1,949 | 1,221 | 260 | 1,481 | ||||||||||||||||||
Residential mortgage | 1,491 | 1,113 | 2,604 | 1,505 | 2,912 | 4,417 | ||||||||||||||||||
Commercial and industrial | 1,926 | 573 | 2,499 | 826 | 880 | 1,706 | ||||||||||||||||||
Leases | 189 | 154 | 343 | 103 | — | 103 | ||||||||||||||||||
Total non-performing loans and leases | $ | 5,388 | 2,145 | $ | 7,533 | $ | 3,745 | $ | 4,834 | $ | 8,579 |
The following
(1)Purchased credit-impaired loans, which have been recorded at their fair values at acquisition, and which are performing, are excluded from this table, detailswith theall non-performing portfolioexception of $107thousand and $167 thousand of purchased credit-impaired loans and leases as of the dates indicated:
(dollars in thousands) | June 30, 2017 | December 31, 2016 | ||||||
Non-accrual loans and leases: | ||||||||
Commercial mortgage | $ | 818 | $ | 320 | ||||
Home equity lines and loans | 1,535 | 2,289 | ||||||
Residential mortgage | 2,589 | 2,658 | ||||||
Commercial and industrial | 2,112 | 2,957 | ||||||
Consumer | 10 | 2 | ||||||
Leases | 173 | 137 | ||||||
Total | $ | 7,237 | $ | 8,363 |
|
|
The following table details non-performingoriginated portfolio loans March 31, 2018and leases as of the dates indicated:December 31, 2017, respectively, which became non-performing subsequent to acquisition.
(dollars in thousands) | June 30, 2017 | December 31, 2016 | ||||||
Non-accrual originated loans and leases: | ||||||||
Commercial mortgage | $ | 768 | $ | 265 | ||||
Home equity lines and loans | 1,184 | 2,169 | ||||||
Residential mortgage | 1,297 | 1,654 | ||||||
Commercial and industrial | 855 | 941 | ||||||
Consumer | 10 | 2 | ||||||
Leases | 173 | 137 | ||||||
Total | $ | 4,287 | $ | 5,168 |
The following table details non-performingacquired portfolio loans(1) as of the dates indicated:
(dollars in thousands) | June 30, 2017 | December 31, 2016 | ||||||
Non-accrual acquired loans and leases: | ||||||||
Commercial mortgage | $ | 50 | $ | 55 | ||||
Home equity lines and loans | 351 | 120 | ||||||
Residential mortgage | 1,292 | 1,004 | ||||||
Commercial and industrial | 1,257 | 2,016 | ||||||
Total | $ | 2,950 | $ | 3,195 |
|
|
D. Purchased Credit-Impaired Loans
D. Purchased Credit-Impaired Loans
The outstanding principal balance and related carrying amount of purchased credit-impaired loans, for which the Corporation applies ASC 310-30,310-30,Accounting for Purchased Loans with Deteriorated Credit Quality, to account for the interest earned, as of the dates indicated, are as follows:
(dollars in thousands) | June 30, 2017 | December 31, 2016 | ||||||
Outstanding principal balance | $ | 17,044 | $ | 18,091 | ||||
Carrying amount(1) | $ | 11,738 | $ | 12,432 |
(dollars in thousands) March 31, 2018 December 31, 2017 Outstanding principal balance Carrying amount(1) (1)Includes $109 thousand and $173 thousand of purchased credit-impaired loans as of March 31, 2018 and December 31, 2017, respectively, for which the Corporation could not estimate the timing or amount of expected cash flows to be collected at acquisition, and for which no accretable yield is recognized. Additionally, the table above includes $107 thousand and $167 thousand of purchased credit-impaired loans as of March 31, 2018 and December 31, 2017, respectively, which became non-performing subsequent to acquisition, which are disclosed in Note 5C, above, and which also have no accretable yield. |
|
The following table presents changes in the accretable discount on purchased credit-impaired loans, for which the Corporation applies ASC 310-30,310-30, for the sixthree months ended June 30, 2017:March 31, 2018:
(dollars in thousands) | Accretable | Accretable | ||||||
Balance, December 31, 2016 | $ | 3,233 | ||||||
Balance, December 31, 2017 | $ | 4,083 | ||||||
Accretion | (779 | ) | (685 | ) | ||||
Reclassifications from nonaccretable difference | — | 5 | ||||||
Additions/adjustments | 666 | 212 | ||||||
Disposals | — | — | ||||||
Balance, June 30, 2017 | $ | 3,120 | ||||||
Balance, March 31, 2018 | $ | 3,615 |
E.E. Age Analysis of Past Due Loans and Leases
The following tables present an aging ofall portfolio loans and leases as of the dates indicated:
Accruing Loans and Leases | Accruing Loans and Leases | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(dollars in thousands)
As of June 30, 2017 | 30 – 59 Days | 60 – 89 Days | Over 89 Days | Total Past Due | Current* | Total Accruing Loans and Leases | Nonaccrual Loans and Leases | Total Loans and Leases | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
As of March 31, 2018 (dollars in thousands) | 30 – 59 Days | 60 – 89 Days | Over 89 Days | Total Past Due | Current* | Total Accruing Loans and Leases | Nonaccrual Loans and Leases | Total Loans and Leases | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial mortgage | $ | 68 | $ | 1,009 | $ | — | $ | 1,077 | $ | 1,196,041 | $ | 1,197,118 | $ | 818 | $ | 1,197,936 | $ | 533 | $ | 391 | $ | — | $ | 924 | $ | 1,540,395 | $ | 1,541,319 | $ | 138 | $ | 1,541,457 | ||||||||||||||||||||||||||||||||
Home equity lines and loans | 250 | — | — | 250 | 206,695 | 206,945 | 1,535 | 208,480 | 150 | — | — | 150 | 209,370 | 209,520 | 1,949 | 211,469 | ||||||||||||||||||||||||||||||||||||||||||||||||
Residential mortgage | 2,704 | 1,301 | — | 4,005 | 409,894 | 413,899 | 2,589 | 416,488 | 1,119 | — | — | 1,119 | 449,932 | 451,051 | 2,604 | 453,655 | ||||||||||||||||||||||||||||||||||||||||||||||||
Construction | — | — | — | — | 156,581 | 156,581 | — | 156,581 | 333 | — | — | 333 | 201,835 | 202,168 | — | 202,168 | ||||||||||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | 350 | 83 | — | 433 | 596,658 | 597,091 | 2,112 | 599,203 | 499 | — | — | 499 | 724,233 | 724,732 | 2,499 | 727,231 | ||||||||||||||||||||||||||||||||||||||||||||||||
Consumer | — | 5 | — | 5 | 28,470 | 28,475 | 10 | 28,485 | — | — | — | — | 48,423 | 48,423 | — | 48,423 | ||||||||||||||||||||||||||||||||||||||||||||||||
Leases | 234 | 254 | — | 488 | 58,817 | 59,305 | 173 | 59,478 | 2,640 | 881 | — | 3,521 | 117,528 | 121,049 | 343 | 121,392 | ||||||||||||||||||||||||||||||||||||||||||||||||
$ | 3,606 | $ | 2,652 | �� | $ | — | $ | 6,258 | $ | 2,653,156 | $ | 2,659,414 | $ | 7,237 | $ | 2,666,651 | ||||||||||||||||||||||||||||||||||||||||||||||||
Total portfolio loans and leases | $ | 5,274 | $ | 1,272 | $ | — | $ | 6,546 | $ | 3,291,716 | $ | 3,298,262 | $ | 7,533 | $ | 3,305,795 |
Accruing Loans and Leases | ||||||||||||||||||||||||||||||||
As of December 31, 2017 (dollars in thousands) | 30 – 59 Days | 60 – 89 Days | Over 89 Days | Total Past Due | Current* | Total Accruing Loans and Leases | Nonaccrual Loans and Leases | Total Loans and Leases | ||||||||||||||||||||||||
Commercial mortgage | $ | 1,366 | $ | 2,428 | $ | — | $ | 3,794 | $ | 1,518,711 | $ | 1,522,505 | $ | 872 | $ | 1,523,377 | ||||||||||||||||
Home equity lines and loans | 338 | 10 | — | 348 | 216,446 | 216,794 | 1,481 | 218,275 | ||||||||||||||||||||||||
Residential mortgage | 1,386 | 79 | — | 1,465 | 453,004 | 454,469 | 4,417 | 458,886 | ||||||||||||||||||||||||
Construction | — | — | — | — | 212,454 | 212,454 | — | 212,454 | ||||||||||||||||||||||||
Commercial and industrial | 658 | 286 | — | 944 | 716,662 | 717,606 | 1,706 | 719,312 | ||||||||||||||||||||||||
Consumer | 1,106 | — | — | 1,106 | 37,047 | 38,153 | — | 38,153 | ||||||||||||||||||||||||
Leases | 125 | 177 | — | 302 | 114,996 | 115,298 | 103 | 115,401 | ||||||||||||||||||||||||
Total portfolio loans and leases | $ | 4,979 | $ | 2,980 | $ | — | $ | 7,959 | $ | 3,269,320 | $ | 3,277,279 | $ | 8,579 | $ | 3,285,858 |
Accruing Loans and Leases | ||||||||||||||||||||||||||||||||
(dollars in thousands)
As of December 31, 2016 | 30 – 59 Days | 60 – 89 Days | Over 89 Days | Total Past Due | Current* | Total Accruing Loans and Leases | Nonaccrual Loans and Leases | Total Loans and Leases | ||||||||||||||||||||||||
Commercial mortgage | $ | 666 | $ | 722 | $ | — | $ | 1,388 | $ | 1,109,190 | $ | 1,110,578 | $ | 320 | $ | 1,110,898 | ||||||||||||||||
Home equity lines and loans | 11 | — | — | 11 | 205,699 | 205,710 | 2,289 | 207,999 | ||||||||||||||||||||||||
Residential mortgage | 823 | 490 | — | 1,313 | 409,569 | 410,882 | 2,658 | 413,540 | ||||||||||||||||||||||||
Construction | — | — | — | — | 141,964 | 141,964 | — | 141,964 | ||||||||||||||||||||||||
Commercial and industrial | 36 | — | — | 36 | 576,798 | 576,834 | 2,957 | 579,791 | ||||||||||||||||||||||||
Consumer | 10 | 5 | — | 15 | 25,324 | 25,339 | 2 | 25,341 | ||||||||||||||||||||||||
Leases | 177 | 86 | — | 263 | 55,492 | 55,755 | 137 | 55,892 | ||||||||||||||||||||||||
$ | 1,723 | $ | 1,303 | $ | — | $ | 3,026 | $ | 2,524,036 | $ | 2,527,062 | $ | 8,363 | $ | 2,535,425 |
*includedIncluded as “current” are $2.4$1.8 million and $15.3$4.1 million of loans and leases as ofJune 30, 2017 March 31, 2018 andDecember 31, 2016,2017, respectively, which are classified as Administratively Delinquent.administratively delinquent. An Administratively Delinquentadministratively delinquent loan is one which has been approved for a renewal or extension but has not had all the required documents fully executed as of the reporting date. The Corporation does not consider these loans to be delinquent.
The following tables present an aging oforiginated portfolio loans and leases as of the dates indicated:
Accruing Loans and Leases | Accruing Loans and Leases | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(dollars in thousands)
As of June 30, 2017 | 30 – 59 Days | 60 – 89 Days | Over 89 Days | Total Past Due | Current* | Total Accruing Loans and Leases | Nonaccrual Loans and Leases | Total Loans and Leases | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
As of March 31, 2018 (dollars in thousands) | 30 – 59 Days | 60 – 89 Days | Over 89 Days | Total Past Due | Current* | Total Accruing Loans and Leases | Nonaccrual Loans and Leases | Total Loans and Leases | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial mortgage | $ | — | $ | 84 | $ | — | $ | 84 | $ | 1,056,945 | $ | 1,057,029 | $ | 768 | $ | 1,057,797 | $ | 425 | $ | 391 | $ | — | $ | 816 | $ | 1,150,673 | $ | 1,151,489 | $ | 89 | $ | 1,151,578 | ||||||||||||||||||||||||||||||||
Home equity lines and loans | 250 | — | — | 250 | 181,097 | 181,347 | 1,184 | 182,531 | 150 | — | — | 150 | 176,781 | 176,931 | 1,693 | 178,624 | ||||||||||||||||||||||||||||||||||||||||||||||||
Residential mortgage | 620 | 1,080 | — | 1,700 | 349,338 | 351,038 | 1,297 | 352,335 | 647 | — | — | 647 | 358,104 | 358,751 | 1,491 | 360,242 | ||||||||||||||||||||||||||||||||||||||||||||||||
Construction | — | — | — | — | 156,581 | 156,581 | — | 156,581 | — | — | — | — | 135,480 | 135,480 | — | 135,480 | ||||||||||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | 350 | 83 | — | 433 | 571,584 | 572,017 | 855 | 572,872 | 99 | — | — | 99 | 611,290 | 611,389 | 1,926 | 613,315 | ||||||||||||||||||||||||||||||||||||||||||||||||
Consumer | — | 5 | — | 5 | 28,355 | 28,360 | 10 | 28,370 | — | — | — | — | 45,731 | 45,731 | — | 45,731 | ||||||||||||||||||||||||||||||||||||||||||||||||
Leases | 234 | 254 | — | 488 | 58,817 | 59,305 | 173 | 59,478 | 788 | 503 | — | 1,291 | 78,377 | 79,668 | 189 | 79,857 | ||||||||||||||||||||||||||||||||||||||||||||||||
$ | 1,454 | $ | 1,506 | $ | — | $ | 2,960 | $ | 2,402,717 | $ | 2,405,677 | $ | 4,287 | $ | 2,409,964 | |||||||||||||||||||||||||||||||||||||||||||||||||
Total originated portfolio loans and leases | $ | 2,109 | $ | 894 | $ | — | $ | 3,003 | $ | 2,556,436 | $ | 2,559,439 | $ | 5,388 | $ | 2,564,827 |
Accruing Loans and Leases | Accruing Loans and Leases | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(dollars in thousands)
As of December 31, 2016 | 30 – 59 Days | 60 – 89 Days | Over 89 Days | Total Past Due | Current* | Total Accruing Loans and Leases | Nonaccrual Loans and Leases | Total Loans and Leases | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
As of December 31, 2017 (dollars in thousands) | 30 – 59 Days | 60 – 89 Days | Over 89 Days | Total Past Due | Current* | Total Accruing Loans and Leases | Nonaccrual Loans and Leases | Total Loans and Leases | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial mortgage | $ | — | $ | 722 | $ | — | $ | 722 | $ | 945,892 | $ | 946,614 | $ | 265 | $ | 946,879 | $ | 1,255 | $ | 81 | $ | — | $ | 1,336 | $ | 1,120,901 | $ | 1,122,237 | $ | 90 | $ | 1,122,327 | ||||||||||||||||||||||||||||||||
Home equity lines and loans | 11 | — | — | 11 | 176,270 | 176,281 | 2,169 | 178,450 | 26 | — | — | 26 | 182,036 | 182,062 | 1,221 | 183,283 | ||||||||||||||||||||||||||||||||||||||||||||||||
Residential mortgage | 773 | 64 | — | 837 | 339,778 | 340,615 | 1,653 | 342,268 | 721 | — | — | 721 | 358,709 | 359,430 | 1,505 | 360,935 | ||||||||||||||||||||||||||||||||||||||||||||||||
Construction | — | — | — | — | 141,964 | 141,964 | — | 141,964 | — | — | — | — | 128,266 | 128,266 | — | 128,266 | ||||||||||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | — | — | — | — | 549,393 | 549,393 | 941 | 550,334 | 439 | 236 | — | 675 | 587,803 | 588,478 | 826 | 589,304 | ||||||||||||||||||||||||||||||||||||||||||||||||
Consumer | 10 | 5 | — | 15 | 25,183 | 25,198 | 2 | 25,200 | 21 | — | — | 21 | 35,125 | 35,146 | — | 35,146 | ||||||||||||||||||||||||||||||||||||||||||||||||
Leases | 177 | 86 | — | 263 | 55,492 | 55,755 | 137 | 55,892 | 125 | 177 | — | 302 | 67,630 | 67,932 | 103 | 68,035 | ||||||||||||||||||||||||||||||||||||||||||||||||
$ | 971 | $ | 877 | $ | — | $ | 1,848 | $ | 2,233,972 | $ | 2,235,820 | $ | 5,167 | $ | 2,240,987 | |||||||||||||||||||||||||||||||||||||||||||||||||
Total originated portfolio loans and leases | $ | 2,587 | $ | 494 | $ | — | $ | 3,081 | $ | 2,480,470 | $ | 2,483,551 | $ | 3,745 | $ | 2,487,296 |
*includedIncluded as “current” are $2.4$1.8 million and $13.5$4.0 million of loans and leases as ofJune 30, 2017 March 31, 2018 andDecember 31, 2016,2017, respectively, which are classified as Administratively Delinquent.administratively delinquent. An Administratively Delinquentadministratively delinquent loan is one which has been approved for a renewal or extension but has not had all the required documents fully executed as of the reporting date. The Corporation does not consider these loans to be delinquent.
The following tables present an aging ofacquiredacquired portfolio loans and leases as of the dates indicated:
Accruing Loans and Leases | Accruing Loans and Leases | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(dollars in thousands)
As of June 30, 2017 | 30 – 59 Days | 60 – 89 Days | Over 89 Days | Total Past Due | Current* | Total Accruing Loansand Leases | Nonaccrual Loans and Leases | Total Loans and Leases | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
As of March 31, 2018 (dollars in thousands) | 30 – 59 Days | 60 – 89 Days | Over 89 Days | Total Past Due | Current* | Total Accruing Loans and Leases | Nonaccrual Loans and Leases | Total Loans and Leases | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial mortgage | $ | 68 | $ | 925 | $ | — | $ | 993 | $ | 139,096 | $ | 140,089 | $ | 50 | $ | 140,139 | $ | 108 | $ | — | $ | — | $ | 108 | $ | 389,722 | $ | 389,830 | $ | 49 | $ | 389,879 | ||||||||||||||||||||||||||||||||
Home equity lines and loans | — | — | — | — | 25,598 | 25,598 | 351 | 25,949 | — | — | — | — | 32,589 | 32,589 | 256 | 32,845 | ||||||||||||||||||||||||||||||||||||||||||||||||
Residential mortgage | 2,084 | 221 | — | 2,305 | 60,556 | 62,861 | 1,292 | 64,153 | 472 | — | — | 472 | 91,828 | 92,300 | 1,113 | 93,413 | ||||||||||||||||||||||||||||||||||||||||||||||||
Construction | 333 | — | — | 333 | 66,355 | 66,688 | — | 66,688 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | — | — | — | — | 25,074 | 25,074 | 1,257 | 26,331 | 400 | — | — | 400 | 112,943 | 113,343 | 573 | 113,916 | ||||||||||||||||||||||||||||||||||||||||||||||||
Consumer | — | — | — | — | 115 | 115 | — | 115 | — | — | — | — | 2,692 | 2,692 | — | 2,692 | ||||||||||||||||||||||||||||||||||||||||||||||||
$ | 2,152 | $ | 1,146 | $ | — | $ | 3,298 | $ | 250,439 | $ | 253,737 | $ | 2,950 | $ | 256,687 | |||||||||||||||||||||||||||||||||||||||||||||||||
Leases | 1,852 | 378 | — | 2,230 | 39,151 | 41,381 | 154 | 41,535 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total acquired portfolio loans and leases | $ | 3,165 | $ | 378 | $ | — | $ | 3,543 | $ | 735,280 | $ | 738,823 | $ | 2,145 | $ | 740,968 |
Accruing Loans and Leases | ||||||||||||||||||||||||||||||||
As of December 31, 2017 (dollars in thousands) | 30 – 59 Days | 60 – 89 Days | Over 89 Days | Total Past Due | Current* | Total Accruing Loans and Leases | Nonaccrual Loans and Leases | Total Loans and Leases | ||||||||||||||||||||||||
Commercial mortgage | $ | 111 | $ | 2,347 | $ | — | $ | 2,458 | $ | 397,810 | $ | 400,268 | $ | 782 | $ | 401,050 | ||||||||||||||||
Home equity lines and loans | 312 | 10 | — | 322 | 34,410 | 34,732 | 260 | 34,992 | ||||||||||||||||||||||||
Residential mortgage | 665 | 79 | — | 744 | 94,295 | 95,039 | 2,912 | 97,951 | ||||||||||||||||||||||||
Construction | — | — | — | — | 84,188 | 84,188 | — | 84,188 | ||||||||||||||||||||||||
Commercial and industrial | 219 | 50 | — | 269 | 128,859 | 129,128 | 880 | 130,008 | ||||||||||||||||||||||||
Consumer | 1,085 | — | — | 1,085 | 1,922 | 3,007 | — | 3,007 | ||||||||||||||||||||||||
Leases | — | — | — | — | 47,366 | 47,366 | — | 47,366 | ||||||||||||||||||||||||
Total acquired portfolio loans and leases | $ | 2,392 | $ | 2,486 | $ | — | $ | 4,878 | $ | 788,850 | $ | 793,728 | $ | 4,834 | $ | 798,562 |
Accruing Loans and Leases | ||||||||||||||||||||||||||||||||
(dollars in thousands)
As of December 31, 2016 | 30 – 59 Days | 60 – 89 Days | Over 89 Days | Total Past Due | Current* | Total Accruing Loans and Leases | Nonaccrual Loans and Leases | Total Loans and Leases | ||||||||||||||||||||||||
Commercial mortgage | $ | 666 | $ | — | $ | — | $ | 666 | $ | 163,298 | $ | 163,964 | $ | 55 | $ | 164,019 | ||||||||||||||||
Home equity lines and loans | — | — | — | — | 29,429 | 29,429 | 120 | 29,549 | ||||||||||||||||||||||||
Residential mortgage | 50 | 426 | — | 476 | 69,791 | 70,267 | 1,005 | 71,272 | ||||||||||||||||||||||||
Commercial and industrial | 36 | — | — | 36 | 27,405 | 27,441 | 2,016 | 29,457 | ||||||||||||||||||||||||
Consumer | — | — | — | — | 141 | 141 | — | 141 | ||||||||||||||||||||||||
$ | 752 | $ | 426 | $ | — | $ | 1,178 | $ | 290,064 | $ | 291,242 | $ | 3,196 | $ | 294,438 |
*includedIncluded as “current” are $0$0 and $1.8 million$102 thousand of loans and leases as ofJune 30, 2017 March 31, 2018 andDecember 31, 2016,2017, respectively, which are classified as Administratively Delinquent.administratively delinquent. An Administratively Delinquentadministratively delinquent loan is one which has been approved for a renewal or extension but has not had all the required documents fully executed as of the reporting date. The Corporation does not consider these loans to be delinquent.
F.F. Allowance for Loan and Lease Losses (the “Allowance”)
The following tables detail the roll-forward of the Allowance for the three and six months ended June 30, March 31, 2018 and 2017:
(dollars in thousands) | Commercial | Home Equity | Residential | Construction | Commercial | Consumer | Leases | Unallocated | Total | Commercial | Home Equity | Residential | Construction | Commercial | Consumer | Leases | Unallocated | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2017 | $ | 6,410 | $ | 1,243 | $ | 1,798 | $ | 2,195 | $ | 4,747 | $ | 135 | $ | 579 | $ | — | $ | 17,107 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2017 | $ | 7,550 | $ | 1,086 | $ | 1,926 | $ | 937 | $ | 5,038 | $ | 246 | $ | 742 | $ | — | $ | 17,525 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Charge-offs | — | (169 | ) | (43 | ) | — | (200 | ) | (18 | ) | (307 | ) | — | (737 | ) | — | (25 | ) | — | — | (283 | ) | (49 | ) | (596 | ) | — | (953 | ) | |||||||||||||||||||||||||||||||||||||||||||
Recoveries | 3 | — | — | 1 | 15 | 2 | 91 | — | 112 | 3 | — | — | 1 | — | 1 | 55 | — | 60 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Provision for loan and lease losses | 195 | 140 | 21 | (1,085 | ) | 251 | 58 | 337 | — | (83 | ) | (379 | ) | (16 | ) | (28 | ) | (94 | ) | 606 | 93 | 848 | — | 1,030 | ||||||||||||||||||||||||||||||||||||||||||||||||
Balance, June 30, 2017 | $ | 6,608 | $ | 1,214 | $ | 1,776 | $ | 1,111 | $ | 4,813 | $ | 177 | $ | 700 | $ | — | $ | 16,399 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2018 | $ | 7,174 | $ | 1,045 | $ | 1,898 | $ | 844 | $ | 5,361 | $ | 291 | $ | 1,049 | $ | — | $ | 17,662 |
(dollars in thousands) | Commercial | Home Equity | Residential | Construction | Commercial | Consumer | Leases | Unallocated | Total | Commercial | Home Equity | Residential | Construction | Commercial | Consumer | Leases | Unallocated | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2016 | $ | 6,227 | $ | 1,255 | $ | 1,917 | $ | 2,233 | $ | 5,142 | $ | 153 | $ | 559 | $ | — | $ | 17,486 | $ | 6,227 | $ | 1,255 | $ | 1,917 | $ | 2,233 | $ | 5,142 | $ | 153 | $ | 559 | $ | — | $ | 17,486 | ||||||||||||||||||||||||||||||||||||
Charge-offs | — | (606 | ) | (70 | ) | — | (259 | ) | (59 | ) | (513 | ) | — | (1,507 | ) | — | (438 | ) | (27 | ) | — | (59 | ) | (41 | ) | (206 | ) | — | (771 | ) | ||||||||||||||||||||||||||||||||||||||||||
Recoveries | 6 | — | — | 2 | 15 | 4 | 185 | — | 212 | 3 | — | — | 1 | — | 2 | 95 | — | 101 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Provision for loan and lease losses | 375 | 565 | (71 | ) | (1,124 | ) | (85 | ) | 79 | 469 | — | 208 | 180 | 426 | (92 | ) | (39 | ) | (336 | ) | 21 | 131 | — | 291 | ||||||||||||||||||||||||||||||||||||||||||||||||
Balance, June 30, 2017 | $ | 6,608 | $ | 1,214 | $ | 1,776 | $ | 1,111 | $ | 4,813 | $ | 177 | $ | 700 | $ | — | $ | 16,399 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2017 | $ | 6,410 | $ | 1,243 | $ | 1,798 | $ | 2,195 | $ | 4,747 | $ | 135 | $ | 579 | $ | — | $ | 17,107 |
The following table details the roll-forward of the Allowance for the three and six months ended June 30, 2016:
(dollars in thousands) | Commercial | Home Equity | Residential | Construction | Commercial | Consumer | Leases | Unallocated | Total | |||||||||||||||||||||||||||
Balance, March 31, 2016 | $ | 5,856 | $ | 1,126 | $ | 1,868 | $ | 1,902 | $ | 5,445 | $ | 120 | $ | 528 | $ | — | $ | 16,845 | ||||||||||||||||||
Charge-offs | — | (11 | ) | (267 | ) | — | (4 | ) | (32 | ) | (111 | ) | — | (425 | ) | |||||||||||||||||||||
Recoveries | 3 | — | 5 | 62 | 48 | 2 | 51 | — | 171 | |||||||||||||||||||||||||||
Provision for loan and lease losses | 162 | 70 | 343 | 180 | (444 | ) | 37 | 97 | — | 445 | ||||||||||||||||||||||||||
Balance, June 30, 2016 | $ | 6,021 | $ | 1,185 | $ | 1,949 | $ | 2,144 | $ | 5,045 | $ | 127 | $ | 565 | $ | — | $ | 17,036 |
(dollars in thousands) | Commercial | Home Equity | Residential | Construction | Commercial | Consumer | Leases | Unallocated | Total | |||||||||||||||||||||||||||
Balance, December 31, 2015 | $ | 5,199 | $ | 1,307 | $ | 1,740 | $ | 1,324 | $ | 5,609 | $ | 142 | $ | 518 | $ | 18 | $ | 15,857 | ||||||||||||||||||
Charge-offs | (110 | ) | (85 | ) | (271 | ) | — | (33 | ) | (66 | ) | (411 | ) | (976 | ) | |||||||||||||||||||||
Recoveries | 6 | 4 | 44 | 63 | 51 | 16 | 116 | 300 | ||||||||||||||||||||||||||||
Provision for loan and lease losses | 926 | (41 | ) | 436 | 757 | (582 | ) | 35 | 342 | (18 | ) | 1,855 | ||||||||||||||||||||||||
Balance June 30, 2016 | $ | 6,021 | $ | 1,185 | $ | 1,949 | $ | 2,144 | $ | 5,045 | $ | 127 | $ | 565 | $ | — | $ | 17,036 |
The following table detailstables detail the allocation of the Allowance forall portfolio loans and leases by portfolio segment based on the methodology used to evaluate the loans and leases for impairment as of June 30, 2017 March 31, 2018 and December 31, 2016:2017:
(dollars in thousands)
As of June 30, 2017 | Commercial | Home Equity | Residential | Construction | Commercial | Consumer | Leases | Unallocated | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
As of March 31, 2018 (dollars in thousands) | Commercial | Home Equity | Residential | Construction | Commercial | Consumer | Leases | Unallocated | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance on loans and leases: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | — | $ | 3 | $ | 112 | $ | — | $ | — | $ | 14 | $ | — | $ | — | $ | 129 | $ | — | $ | 19 | $ | 224 | $ | — | $ | 41 | $ | 4 | $ | — | $ | — | $ | 288 | ||||||||||||||||||||||||||||||||||||
Collectively evaluated for impairment | 6,608 | 1,211 | 1,664 | 1,111 | 4,813 | 163 | 700 | — | 16,270 | 7,174 | 1,026 | 1,674 | 844 | 5,320 | 287 | 1,049 | — | 17,374 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Purchased credit-impaired(1) | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | $ | 6,608 | $ | 1,214 | $ | 1,776 | $ | 1,111 | $ | 4,813 | $ | 177 | $ | 700 | $ | — | $ | 16,399 | $ | 7,174 | $ | 1,045 | $ | 1,898 | $ | 844 | $ | 5,361 | $ | 291 | $ | 1,049 | $ | — | $ | 17,662 | ||||||||||||||||||||||||||||||||||||
As of December 31,2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance on loans and leases: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | — | $ | — | $ | 73 | $ | — | $ | 5 | $ | 8 | $ | — | $ | — | $ | 86 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Collectively evaluated for impairment | 6,227 | 1,255 | 1,844 | 2,233 | 5,137 | 145 | 559 | — | 17,400 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Purchased credit-impaired(1) | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | $ | 6,227 | $ | 1,255 | $ | 1,917 | $ | 2,233 | $ | 5,142 | $ | 153 | $ | 559 | $ | — | $ | 17,486 |
(1)Purchased credit-impaired loans are evaluated for impairment on an individual basis. |
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The following table detailstables detail the carrying value forall portfolio loans and leases by portfolio segment based on the methodology used to evaluate the loans and leases for impairment as of June 30, 2017 March 31, 2018 and December 31, 2016:2017:
(dollars in thousands)
As of June 30, 2017 | Commercial | Home Equity | Residential | Construction | Commercial | Consumer | Leases | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
As of March 31, 2018 (dollars in thousands) | Commercial | Home Equity | Residential | Construction | Commercial and Industrial | Consumer | Leases | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Carrying value of loans and leases: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | 2,070 | $ | 1,534 | $ | 6,950 | $ | — | $ | 2,139 | $ | 38 | $ | — | $ | 12,731 | $ | 1,394 | $ | 2,626 | $ | 5,350 | $ | — | $ | 2,754 | $ | 27 | $ | — | $ | 12,151 | ||||||||||||||||||||||||||||||||
Collectively evaluated for impairment | 1,185,929 | 206,851 | 409,538 | 156,581 | 595,358 | 28,447 | 59,478 | 2,642,182 | 1,525,887 | 208,333 | 448,305 | 186,559 | 721,545 | 48,396 | 121,392 | 3,260,417 | ||||||||||||||||||||||||||||||||||||||||||||||||
Purchased credit-impaired(1) | 9,937 | 95 | — | — | 1,706 | — | — | 11,738 | 14,176 | 510 | — | 15,609 | 2,932 | — | — | 33,227 | ||||||||||||||||||||||||||||||||||||||||||||||||
Total | $ | 1,197,936 | $ | 208,480 | $ | 416,488 | $ | 156,581 | $ | 599,203 | $ | 28,485 | $ | 59,478 | $ | 2,666,651 | $ | 1,541,457 | $ | 211,469 | $ | 453,655 | $ | 202,168 | $ | 727,231 | $ | 48,423 | $ | 121,392 | $ | 3,305,795 | ||||||||||||||||||||||||||||||||
As of December 31,2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Carrying value of loans and leases: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | 1,576 | $ | 2,354 | $ | 7,266 | $ | — | $ | 2,946 | $ | 31 | $ | — | $ | 14,173 | ||||||||||||||||||||||||||||||||||||||||||||||||
Collectively evaluated for impairment | 1,098,788 | 205,540 | 406,271 | 141,964 | 575,055 | 25,310 | 55,892 | 2,508,820 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Purchased credit-impaired(1) | 10,534 | 105 | 3 | — | 1,790 | — | — | 12,432 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | $ | 1,110,898 | $ | 207,999 | $ | 413,540 | $ | 141,964 | $ | 579,791 | $ | 25,341 | $ | 55,892 | $ | 2,535,425 |
(1)Purchased credit-impaired loans are evaluated for impairment on an individual basis.
|
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As of December 31, 2017 (dollars in thousands) | Commercial | Home Equity | Residential | Construction | Commercial and Industrial | Consumer | Leases | Total | ||||||||||||||||||||||||
Carrying value of loans and leases: | ||||||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | 2,128 | $ | 2,162 | $ | 7,726 | $ | — | $ | 1,897 | $ | 27 | $ | — | $ | 13,940 | ||||||||||||||||
Collectively evaluated for impairment | 1,503,825 | 215,604 | 451,160 | 204,088 | 712,865 | 38,126 | 115,401 | 3,241,069 | ||||||||||||||||||||||||
Purchased credit-impaired(1) | 17,424 | 509 | — | 8,366 | 4,550 | — | — | 30,849 | ||||||||||||||||||||||||
Total | $ | 1,523,377 | $ | 218,275 | $ | 458,886 | $ | 212,454 | $ | 719,312 | $ | 38,153 | $ | 115,401 | $ | 3,285,858 |
(1)Purchased credit-impaired loans are evaluated for impairment on an individual basis.
The following table detailstables detail the allocation of the Allowance fororiginated portfolio loans and leases by portfolio segment based on the methodology used to evaluate the loans and leases for impairment as of June 30, 2017 March 31, 2018 and December 31, 2016:2017:
(dollars in thousands)
As of June 30, 2017 | Commercial | Home Equity | Residential | Construction | Commercial | Consumer | Leases | Unallocated | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
As of March 31, 2018 (dollars in thousands) | Commercial | Home Equity | Residential | Construction | Commercial | Consumer | Leases | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance on loans and leases: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | — | $ | 3 | $ | 87 | $ | — | $ | — | $ | 14 | $ | — | $ | — | $ | 104 | $ | — | $ | 19 | $ | 168 | $ | — | $ | 5 | $ | 4 | $ | — | $ | 196 | ||||||||||||||||||||||||||||||||||
Collectively evaluated for impairment | 6,608 | 1,211 | 1,664 | 1,111 | 4,813 | 163 | 700 | — | 16,270 | 7,174 | 1,026 | 1,674 | 844 | 5,320 | 287 | 1,049 | 17,374 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Total | $ | 6,608 | $ | 1,214 | $ | 1,751 | $ | 1,111 | $ | 4,813 | $ | 177 | $ | 700 | $ | — | $ | 16,374 | $ | 7,174 | $ | 1,045 | $ | 1,842 | $ | 844 | $ | 5,325 | $ | 291 | $ | 1,049 | $ | 17,570 | ||||||||||||||||||||||||||||||||||
As of December 31,2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance on loans and leases: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | — | $ | — | $ | 45 | $ | — | $ | 5 | $ | 8 | $ | — | $ | — | $ | 58 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Collectively evaluated for impairment | 6,227 | 1,255 | 1,844 | 2,233 | 5,137 | 145 | 559 | — | 17,400 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | $ | 6,227 | $ | 1,255 | $ | 1,889 | $ | 2,233 | $ | 5,142 | $ | 153 | $ | 559 | $ | — | $ | 17,458 |
As of December 31, 2017 (dollars in thousands) | Commercial | Home Equity | Residential | Construction | Commercial | Consumer | Leases | Total | ||||||||||||||||||||||||
Allowance on loans and leases: | ||||||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | — | $ | 19 | $ | 180 | $ | — | $ | 5 | $ | 4 | $ | — | $ | 208 | ||||||||||||||||
Collectively evaluated for impairment | 7,550 | 1,067 | 1,696 | 937 | 5,033 | 242 | 742 | 17,267 | ||||||||||||||||||||||||
Total | $ | 7,550 | $ | 1,086 | $ | 1,876 | $ | 937 | $ | 5,038 | $ | 246 | $ | 742 | $ | 17,475 |
The following table detailstables detail the carrying value fororiginated portfolio loans and leases by portfolio segment based on the methodology used to evaluate the loans and leases for impairment as of June 30, 2017 March 31, 2018 and December 31, 2016:2017:
(dollars in thousands)
As of June 30, 2017 | Commercial | Home Equity | Residential | Construction | Commercial | Consumer | Leases | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
As of March 31, 2018 (dollars in thousands) | Commercial | Home Equity | Residential | Construction | Commercial | Consumer | Leases | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Carrying value of loans and leases: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | 2,020 | $ | 1,264 | $ | 3,684 | $ | — | $ | 1,075 | $ | 38 | $ | — | $ | 8,081 | $ | 1,345 | $ | 2,370 | $ | 3,637 | $ | — | $ | 2,288 | $ | 27 | $ | — | $ | 9,667 | ||||||||||||||||||||||||||||||||
Collectively evaluated for impairment | 1,055,777 | 181,267 | 348,651 | 156,581 | 571,797 | 28,332 | 59,478 | 2,401,883 | 1,150,233 | 176,254 | 356,605 | 135,480 | 611,027 | 45,704 | 79,857 | 2,555,160 | ||||||||||||||||||||||||||||||||||||||||||||||||
Total | $ | 1,057,797 | $ | 182,531 | $ | 352,335 | $ | 156,581 | $ | 572,872 | $ | 28,370 | $ | 59,478 | $ | 2,409,964 | $ | 1,151,578 | $ | 178,624 | $ | 360,242 | $ | 135,480 | $ | 613,315 | $ | 45,731 | $ | 79,857 | $ | 2,564,827 | ||||||||||||||||||||||||||||||||
As of December 31,2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Carrying value of loans and leases: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | 1,521 | $ | 2,319 | $ | 4,111 | $ | — | $ | 1,190 | $ | 31 | $ | — | $ | 9,172 | ||||||||||||||||||||||||||||||||||||||||||||||||
Collectively evaluated for impairment | 945,358 | 176,131 | 338,157 | 141,964 | 549,144 | 25,169 | 55,892 | 2,231,815 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | $ | 946,879 | $ | 178,450 | $ | 342,268 | $ | 141,964 | $ | 550,334 | $ | 25,200 | $ | 55,892 | $ | 2,240,987 |
As of December 31, 2017 | Commercial | Home Equity | Residential | Construction | Commercial | Consumer | Leases | Total | ||||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||||||||||
Carrying value of loans and leases: | ||||||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | 1,345 | $ | 1,902 | $ | 4,418 | $ | — | $ | 1,186 | $ | 27 | $ | — | $ | 8,878 | ||||||||||||||||
Collectively evaluated for impairment | 1,120,982 | 181,381 | 356,517 | 128,266 | 588,118 | 35,119 | 68,035 | 2,478,418 | ||||||||||||||||||||||||
Total | $ | 1,122,327 | $ | 183,283 | $ | 360,935 | $ | 128,266 | $ | 589,304 | $ | 35,146 | $ | 68,035 | $ | 2,487,296 |
The following table detailstables detail the allocation of the Allowance foracquired portfolio loans and leases by portfolio segment based on the methodology used to evaluate the loans and leases for impairment as of June 30, 2017 March 31, 2018 and December 31, 2016:2017:
(dollars in thousands)
As of June 30, 2017 | Commercial | Home Equity | Residential | Construction | Commercial | Consumer | Leases | Unallocated | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
As of March 31, 2018 (dollars in thousands) | Commercial | Home Equity | Residential | Construction | Commercial | Consumer | Leases | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance on loans and leases: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | — | $ | — | $ | 25 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 25 | $ | — | $ | — | $ | 56 | $ | — | $ | 36 | $ | — | $ | — | $ | 92 | ||||||||||||||||||||||||||||||||||
Collectively evaluated for impairment | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Purchased credit-impaired(1) | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Total | $ | — | $ | — | $ | 25 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 25 | $ | — | $ | — | $ | 56 | $ | — | $ | 36 | $ | — | $ | — | $ | 92 | ||||||||||||||||||||||||||||||||||
As of December 31,2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance on loans and leases: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | — | $ | — | $ | 28 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 28 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Collectively evaluated for impairment | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Purchased credit-impaired(1) | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | $ | — | $ | — | $ | 28 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 28 |
| (1)Purchased credit-impaired loans are evaluated for impairment on an individual basis.
(1)Purchased credit-impaired loans are evaluated for impairment on an individual basis.
The following
(1) Purchased credit-impaired loans are evaluated for impairment on an individual basis. Page
As part of the process of determining the Allowance for the different segments of the loan and lease portfolio, Management considers certain credit quality indicators. For the commercial mortgage, construction and commercial and industrial loan segments, periodic reviews of the individual loans are performed by both in-house staff as well as external loan reviewers. The result of these reviews is reflected in the risk grade assigned to each loan. These internally assigned grades are as follows:
Doubtful - Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.
In addition, for the remaining segments of the loan and lease portfolio, which include residential mortgage, home equity lines and loans, consumer, and leases, the credit quality indicator used to determine this component of the Allowance is based on performance status.
The following tables detail the carrying value ofall portfolio loans and leases by portfolio segment based on the credit quality indicators used to determine the Allowance as of
Credit Risk Profile by Internally Assigned Grade
Credit Risk Profile by Payment Activity
The following tables detail the carrying value oforiginatedportfolio loans and leases by portfolio segment based on the credit quality indicators used to determine the Allowance as of
Credit Risk Profile by Internally Assigned Grade
Page
Credit Risk Profile by Payment Activity
The following tables detail the carrying value ofacquiredportfolio loans and leases by portfolio segment based on the credit quality indicators used to determine the Allowance as of
Credit Risk Profile by Internally Assigned Grade
Credit Risk Profile by Payment Activity
G. Troubled Debt Restructurings (“TDRs”)
The restructuring of a loan is considered a “troubled debt restructuring” if both of the following conditions are met: (i) the borrower is experiencing financial difficulties, and (ii) the creditor has granted a concession. The most common concessions granted include one or more modifications to the terms of the debt, such as (a) a reduction in the interest rate for the remaining life of the debt, (b) an extension of the maturity date at an interest rate lower than the current market rate for new debt with similar risk, (c) a temporary period of interest-only payments, (d) a reduction in the contractual payment amount for either a short period or remaining term of the loan, and (e) for leases, a reduced lease payment. A less common concession granted is the forgiveness of a portion of the principal.
The determination of whether a borrower is experiencing financial difficulties takes into account not only the current financial condition of the borrower, but also the potential financial condition of the borrower, were a concession not granted. Similarly, the determination of whether a concession has been granted is very subjective in nature. For example, simply extending the term of a loan at its original interest rate or even at a higher interest rate could be interpreted as a concession unless the borrower could readily obtain similar credit terms from a different lender.
The following table presents the balance of TDRs as of the indicated dates:
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The following table presents information regarding loan and lease modifications categorized as TDRs for the three months ended
The following table presents information regarding the types of loan and lease modifications made for the three months ended
During the three
H. Impaired Loans
The following tables detail the recorded investment and principal balance of impaired loans by portfolio segment, their related
*The table above does not include the recorded investment of $510 thousand of impaired leases without a related allowance for loan and lease losses. **Recorded investment equals principal balance less partial charge-offs and interest payments on non-performing loans that have been applied to principal.
*The table above does not include the recorded investment of $232 thousand of impaired leases without a related allowance for loan and lease losses. **Recorded investment equals principal balance less partial charge-offs and interest payments on non-performing loans that have been applied to principal.
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Loans acquired in mergers and acquisitions are recorded at fair value as of the date of the transaction. This adjustment to the acquired principal amount is referred to as the “Loan Mark”. With the exception of purchased credit impaired loans, The following tables detail, foracquired loans, the outstanding principal, remaining loan mark, and recorded investment, by portfolio segment, as of the dates indicated:
Note 6 - Mortgage Servicing Rights The following table summarizes the Corporation’s activity related to mortgage servicing rights (“MSRs”) for the three months ended March 31, 2018 and 2017:
As of March 31, 2018, and December 31, 2017, key economic assumptions and the sensitivity of the current fair value of MSRs to immediate 10 and 20 percent adverse changes in those assumptions are as follows:
* Represents the weighted average prepayment rate for the life of the MSR asset. At March 31, 2018 and December 31, 2017 the fair value of the MSRs was $6.8 million and $6.4 million, respectively. The fair value of the MSRs for these dates was determined using values obtained from a third party which utilizes a valuation model which calculates the present value of estimated future servicing income. The model incorporates assumptions that market participants use in estimating future net servicing income, including estimates of prepayment speeds and discount rates. Mortgage loan prepayment speed is the annual rate at which borrowers are forecasted to repay their mortgage loan principal and is based on historical experience. The discount rate is used to determine the present value of future net servicing income. Another key assumption in the model is the required rate of return the market would expect for an asset with similar risk. These assumptions can, and generally will, change quarterly valuations as market conditions and interest rates change. Management reviews, annually, the process utilized by its independent third-party valuation experts. These assumptions and sensitivities are hypothetical and should be used with caution. As the figures indicate, changes in fair value based on a 10% variation in assumptions generally cannot be extrapolated because the relationship of the change in assumptions to the change in fair value may not be linear. Also, the effect of a variation in a particular assumption on the fair value of the MSRs is calculated without changing any other assumption. In reality, changes in one factor may result in changes in another, which could magnify or counteract the sensitivities.
Note 7 - Goodwill and Other Intangibles
The following table presents activity in the Corporation's goodwill by its reporting units and finite-lived and indefinite-lived intangible assets, other than MSRs, for the three months ended March 31, 2018:
Management conducted its annual impairment tests for goodwill and indefinite-lived intangible assets as of October 31,2017 using generally accepted valuation methods. Management determined that no impairment of goodwill or indefinite-lived intangible assets was identified as a result of the annual impairment analyses. Future impairment testing will be conducted each October 31, unless a triggering event occurs in the interim that would suggest possible impairment, in which case it would be tested as of the date of the triggering event. For the five months ended March 31, 2018, management determined there were no events that would necessitate impairment testing of goodwill or indefinite-lived intangible assets.
Note
The following table details the components of deposits:
Note
A. Short-term borrowings
The Corporation’s short-term borrowings (original maturity of one year or less), which consist of
A summary of short-term borrowings is as follows:
*
The following table sets forth information concerning short-term borrowings:
As of March 31, 2018 and December 31, 2017, the Corporation had $107.8 million and $139.1 million, respectively, of long-term FHLB advances
The following table presents the remaining periods until maturity of
The following table presents rate and maturity information on
C. Other Borrowings Information
The Corporation
Note
On aggregate principal amount of fixed-to-floating rate subordinated notes due 2027 (the "2027 Notes") in an underwritten public offering. On
The following tables detail
(1) The 2027 Notes bear interest at an annual fixed rate of 4.25% from the date of issuance until December 14, 2022, and will thereafter bear interest at a variable rate that will reset quarterly to a level equal to the then-current three-month LIBOR rate plus 2.050% until December 15, 2027, or any early redemption date. (2) The 2025 Notes bear interest at an annual fixed rate of 4.75% from the date of issuance until August 14, 2020, and will thereafter bear interest at a variable rate that will reset quarterly to a level equal to the then-current three-month LIBOR rate plus 3.068% until August 15, 2025, or any early redemption date. Note 11 – Junior Subordinated Debentures In connection with the RBPI Merger, the Corporation acquired Royal Bancshares Capital Trust I (“Trust I”) and Royal Bancshares Capital Trust II (“Trust II”) (collectively, the “Trusts”), which were utilized for the
Each of Trust I and Trust II issued an aggregate principal amount of $12.5 million of capital securities initially bearing fixed and/or fixed/floating interest rates corresponding to the debt securities held by each trust to an unaffiliated investment vehicle and an aggregate principal amount of $387 thousand of common securities bearing fixed and/or fixed/floating interest rates corresponding to the debt securities held by each trust to the Corporation. As a result of the RBPI Merger, the Corporation has fully and unconditionally guaranteed all of the obligations of the Trusts, including any distributions and payments on liquidation or redemption of the capital securities.
The rights of holders of common securities of the Trusts are subordinate to the rights of the holders of capital securities only in the event of a default; otherwise, the common securities’ economic and voting rights are pari passu with the capital securities. The capital and common securities of the Trusts are subject to mandatory redemption upon the maturity or call of the junior subordinated debentures held by each. Unless earlier dissolved, the Trusts will dissolve on December 15, 2034. The junior subordinated debentures are the sole assets of Trusts, mature on December 15, 2034, and may be called at par by the Corporation any time after December 15, 2009. The Corporation records its investments in the Trusts’ common securities of $387,000 each as investments in unconsolidated entities and records dividend income upon declaration by Trust I and Trust II.
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Note
Derivative financial instruments involve, to varying degrees, interest rate, market and credit risk. The Corporation manages these risks as part of its asset and liability management process and through credit policies and procedures. The Corporation seeks to minimize counterparty credit risk by establishing credit limits and collateral agreements and utilizes certain derivative financial instruments to enhance its ability to manage interest rate risk that exists as part of its ongoing business operations. The derivative transactions entered into by the Corporation are an economic hedge of a derivative
Customer Derivatives – Interest Rate Swaps. The Corporation enters into interest rate swaps that allow commercial loan customers to effectively convert a variable-rate commercial loan agreement to a fixed-rate commercial loan agreement. Under these agreements, the Corporation originates variable-rate loans with customers in addition to interest rate swap agreements, which serve to effectively swap the customers’ variable-rate loans into the credit risk associated with a loan structure which includes a derivative instrument, in exchange for fee income commensurate with the risk assumed. This type of derivative is referred to as an “RPA sold”. In addition, in an effort to reduce the credit risk associated with an interest rate swap agreement with a borrower for whom the Corporation has provided a loan structured with a derivative, the Corporation may purchase a risk participation agreement from an institution participating in the facility in exchange for a fee commensurate with the risk shared. This type of derivative is referred to as an “RPA purchased”.
The following
The
respectively.
Note 13 - Accounting for Uncertainty in Income Taxes
The Corporation recognizes the financial statement benefit of a tax position only after determining that the Corporation would be more likely than not to sustain the position following The Corporation is subject to The Corporation’s policy is to record interest and penalties on uncertain tax positions as income tax expense. No interest or penalties were accrued for the three
Note 1
Dividend
On
In March 2015, the Corporation filed a shelf registration statement on Form S-3, SEC File No. 333-202805 (the “Shelf Registration Statement”)
In addition, the Corporation has in place
For the three months ended March 31, 2018, the Corporation did not issue any shares through the Plan. No RFWs were approved during the three months ended March 31, 2018. No other sales of equity securities were executed under the Shelf Registration Statement during the three months ended March 31, 2018. O
Stock Repurchases
On August 6, 2015, the Corporation announced a stock repurchase program (the Note 15 – Accumulated Other Comprehensive Income (Loss)
The following table details the amounts reclassified from each component of accumulated other comprehensive loss to each component’s applicable income statement line, for the three months ended March 31, 2018 and 2017:
*Accumulated other comprehensive loss components are included in the computation of net periodic pension cost. Note Basic earnings per common share excludes dilution and is computed by dividing income available to common shareholders by the weighted-average common shares outstanding during the period. Diluted earnings per common share takes into account the potential dilution that would occur if in-the-money stock options were exercised and converted into common shares and restricted stock awards and performance-based stock awards were vested. Proceeds assumed to have been received on option exercises are assumed to be used to purchase shares of the Corporation’s common stock at the average market price during the period, as required by the treasury stock method of accounting. The effects of stock options are excluded from the computation of diluted earnings per share in periods in which the effect would be antidilutive.
Note 17 - All of the Corporation’s revenue from contracts with customers in the scope of ASC 606 is recognized within noninterest income. The following table presents the Corporation’s noninterest income by revenue stream and reportable segment for the three months ended March 31, 2018 and 2017. Items outside the scope of ASC 606 are noted as such.
(1) Not within the scope of ASC 606. (2) Other operating income includes merchant interchange fees, safe deposit box rentals, and rent income totaling $521 thousand and $479 thousand for the three-months ended March 31, 2018 and 2017, respectively, which are within the scope of ASC 606. A description of the Corporation’s revenue streams accounted for under ASC 606 follows: Service Charges on Deposit Accounts: The Corporation earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Transaction-based fees, which include services such as ATM use fees, stop payment charges, statement rendering, and ACH fees, are recognized at the time the transaction is executed as that is the point in time the Corporation fulfills the customer’s request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Corporation satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer’s account balance. Wealth Management Fees: The Corporation earns wealth management fee revenue from a variety of sources including fees from trust administration and other related fiduciary services, custody, investment management and advisory services, employee benefit account and IRA administration, estate settlement, tax service fees, shareholder service fees and brokerage. Fees that are determined based on the market value of the assets held in their accounts are generally billed monthly, in arrears, based on the market value of assets at the end of the previous billing period. Other related services that are based on a fixed fee schedule are recognized when the services are rendered. Fees that are transaction based, including trade execution services, are recognized at the point in time that the transaction is executed, i.e. the trade date. Included in other assets on the balance sheet is a receivable for wealth management fees that have been earned but not yet collected. Interchange Income: The Corporation earns interchange income fees from debit cardholder transactions conducted through the Visa payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. Gains/Losses on Sales of OREO: The Corporation records a gain or loss from the sale of OREO when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. Note 18 – Stock- A. General Information
The Corporation Prior to April 25, 2007, all shares authorized for grant as stock-based compensation were limited to grants of stock options. On April 25,2007, the shareholders approved the Corporation’s “2007 Long-Term Incentive Plan” (the “2007 LTIP”) under which a total of 428,996 shares of the Corporation’s common stock were made available for award grants. On April 28, 2010, the shareholders approved the Corporation’s “2010 Long Term Incentive Plan” under which a total of 445,002 shares of the Corporation’s common stock were made available for award grants and on April 30, 2015, the shareholders approved an amendment and restatement of such plan (as amended and restated, the “2010 LTIP”) to, among other things, increase the number of shares available for award grants by 500,000 to 945,002. In addition to the shareholder-approved plans mentioned in the preceding paragraph, the Corporation periodically authorizes grants of stock-based compensation as inducement awards to new employees. This type of award does not require shareholder approval in accordance with Rule 5635(c)(4) of the Nasdaq listing rules. The equity awards are authorized to be in the form of, among others, options to purchase the Corporation’s common stock, restricted stock units (“RSUs”) and performance stock units (“PSUs”). RSUs have a restriction based on the passage of time. The grant date fair value of the RSUs is based on the closing price on the date of the grant. PSUs have a restriction based on a performance criteria and may also havea restriction based on the passage of time. The performance criteria may be a market-based criteria measured by the Corporation’s total shareholder return (“TSR”) relative to the performance of the community bank index for the respective period. The fair value of the PSUs based on the Corporation’s TSR relative to the performance of a designated peer group or the NASDAQ Community Bank Index is calculated using the Monte Carlo Simulation method. The performance criteria may also be based on a non-market-based criteria such as return on average equity relative to that designated peer group. The grant date fair value of these PSUs is based on the closing price of the Corporation’s stock on the date of the grant. PSU grants may have a vesting percent ranging from 0% to 150%. B. Other Stock Option Information The following table provides information about options outstanding for the three months ended March 31, 2018:
As of March 31, 2018 there were no unvested options. Proceeds, related tax
The following
C. Restricted Stock and Performance Stock and Units
The Corporation RSUs
The RSUs is measured based on the market price of the stock on the day prior to the grant date and is recognized on a straight-line basis over the vesting period.
The following
PSUs The Corporation recognized $332 thousand of expense related to the PSUs for the three months ended March 31, 2018. As of March 31, 2018, there was $2.1 million of unrecognized compensation cost related to PSUs. This cost will be recognized over a weighted average period of 1.5 years. The following table details the PSUs for the three months ended March 31, 2018:
Note 19 - Fair Value Measurement
FASB ASC 820, “Fair Value
The three levels of the fair value hierarchy under FASB ASC Topic 820 are: Level 1 –Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Level 2 – Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active and model derived valuations whose inputs are observable or whose significant value drivers are observable. Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity). A. Assets and liabilities measured on a recurring basis A description of the valuation methodologies used for financial instruments measured at fair value on a recurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. Investment Securities The value of the Corporation’s
U.S. Government
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The Corporation’s interest rate swaps and RPAs are reported at fair value utilizing Level 2 inputs. Prices of these instruments are obtained through an independent pricing source utilizing pricing information which may include market observed quotations for swaps, LIBOR rates, forward rates and rate volatility. When entering into a derivative contract, the Corporation is exposed to fair value changes due to interest rate movements, and the potential non-performance of our contract counterparty. The Corporation has developed a methodology to value the non-performance risk based on internal credit risk metrics and the unique characteristics of derivative instruments, which include notional exposure rather than principle at risk and interest payment netting. The results of this methodology are used to adjust the base fair value of the instrument for the potential counterparty credit risk.
The
There have been no transfers between levels during the three
Fair value is used on a nonrecurring basis to evaluate certain financial assets and financial liabilities in specific circumstances. Similarly, fair value is used on a nonrecurring basis for nonfinancial assets and nonfinancial liabilities such as foreclosed assets, other real estate owned, intangible assets, nonfinancial assets and liabilities evaluated in a goodwill impairment analysis and other nonfinancial assets measured at fair value for purposes of assessing impairment. A description of the valuation methodologies used for financial and nonfinancial assets and liabilities measured at fair value, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy, is set forth below. Impaired Loans
The Corporation evaluates and values impaired loans at the time the loan is identified as impaired, and the fair values of such loans are estimated using Level 3 inputs in the fair value hierarchy. Each loan’s collateral has a unique appraisal and management’s discount of the value is based on the factors unique to each impaired loan. The significant unobservable input in determining the fair value is management’s subjective discount on appraisals of the collateral securing the loan, which range from 10% - 50%. Collateral may consist of real estate and/or business assets including equipment, inventory and/or accounts receivable and the value of these assets is determined based on the appraisals by qualified licensed appraisers hired by the Corporation. Appraised and reported values may be discounted based on management’s historical knowledge, changes in market conditions from the time of valuation, estimated costs to sell, and/or management’s expertise and knowledge of the client and the client’s business.
The Corporation has an appraisal policy in which an appraisal is obtained for a commercial loan at the point at which the loan either becomes nonperforming or is downgraded to a substandard or worse classification. For consumer loans, the Corporation obtains updated appraisals when a loan becomes 90 days past due or when it receives other information that may indicate possible impairment. Based on the appraisals obtained by the Corporation,
Other Real Estate Owned Other real estate owned consists of properties acquired as a result of foreclosures and deeds in-lieu-of foreclosure. Properties are classified as OREO and are reported at the lower of cost or fair value less cost to sell, and are classified as Level 3 in the fair value hierarchy.
Mortgage Servicing Rights
MSRs do not trade in an active, open market with readily observable prices. Accordingly, the Corporation obtains the fair value of the MSRs using a The following tables present the Corporation’s assets measured at fair value on a non-recurring basis as of March 31, 2018 and December 31, 2017:
Fair value of assets measured on a non-recurring basis as of December 31, 2017:
During the three months ended March 31, 2018, an increase of $29 thousand was recorded in the Allowance as a result of adjusting the carrying value and estimated fair value of the impaired loans in the above tables.
FASB ASC 825, “Disclosures about Fair Value of Financial Instruments” requires disclosure of the fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate such value. The methodologies for estimating the fair value of financial assets and financial liabilities measured at fair value on a recurring and non-recurring basis are discussed above. The estimated fair value amounts have been determined by the Corporation using available market information and appropriate valuation methodologies and are based on the exit price notion set forth by ASU 2016-01 effective January 1, 2018 and applied to this disclosure on a prospective basis. Estimated fair value of assets and liabilities carried at cost at December 31, 2017 were based on an entry price notion. In cases where quoted market prices are not available, fair values are based on estimates using present value or other
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The carrying amount
*See Note Note 21 - Financial Instruments with Off-Balance Sheet Risk, Contingencies and Concentration of Credit Risk
The Corporation’s exposure to credit loss in the event of nonperformance by the counterparty to the financial instrument of commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Corporation uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet financial instruments. Commitments to extend credit, which include
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Legal Matters In the ordinary course of its operations, the Corporation and its subsidiaries are parties to various claims, litigation, investigations, and legal and administrative cases and proceedings. Such threatened claims, litigation, investigations, legal and administrative cases and proceedings typically entail matters that are considered incidental to the normal conduct of business. Claims for significant monetary damages may be asserted in On a regular basis, liabilities and contingencies in connection with outstanding legal proceedings are assessed utilizing the latest information available. For those matters where it is probable that the Corporation will incur a loss and the amount of the loss can be reasonably estimated, a liability may be recorded in the Consolidated Financial Statements. These legal reserves may be increased or Indemnifications In general, the Corporation does not sell loans with recourse, except to the extent that it arises from standard loan-sale contract provisions. These provisions cover violations of representations and warranties and, under certain circumstances, first payment default by borrowers. These indemnifications may include the repurchase of loans by the Concentrations of Credit Risk The Note 22 - Segment Information FASB Codification 280 – “Segment Reporting” identifies operating segments as components of The Corporation’s Banking segment consists of commercial and retail banking. The Banking segment is evaluated as a single strategic unit which generates revenues from a variety of products and services. The Banking segment generates interest income from its lending (including leases) and investing activities and is dependent on the gathering of lower cost
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The Wealth Management segment has responsibility for a number of activities within the Corporation, including trust administration, other related fiduciary services, custody, investment management and advisory services, employee benefits and IRA administration, estate settlement, tax services and brokerage. Bryn Mawr Trust of Delaware and Lau Associates are included in the Wealth Management segment of the Corporation since they have similar economic characteristics, products and services to those of the Wealth Management Division of the Corporation. BMT Investment Advisers, formed in May 2017, which serves as investment adviser to BMT Investment Funds, a Delaware statutory trust, is also reported under the Wealth Management segment. In addition, the Wealth Management Division oversees all insurance services of the Corporation, which are conducted through the Bank’s insurance subsidiary, BMT Insurance Advisors, Inc., and are reported in the Wealth Management segment. The accounting policies of the Corporation are applied by segment in the following tables. The segments are presented on a pre-tax basis. The following table details the Corporation’s segments for the three months ended March 31, 2018 and 2017:
*Inter-segment revenues consist of rental payments, interest on deposits and management fees. Wealth Management Segment Information
ITEM 2 Management’s
The following is the Corporation’s discussion and analysis of the significant changes in the financial condition, results of operations, capital resources and liquidity presented in the accompanying
Brief History of the Corporation
The Bryn Mawr Trust Company (the “Bank”) received its Pennsylvania banking charter in 1889 and is a member of the Federal Reserve System. In 1986, Bryn Mawr Bank Corporation (the “Corporation”) was formed and on January 2, 1987, the Bank became a wholly-owned subsidiary of the Corporation. The Bank and Corporation are headquartered in Bryn Mawr, Pennsylvania, a western suburb of Philadelphia. The Corporation and its subsidiaries offer a full range of personal and business banking services, consumer and commercial loans, equipment leasing, mortgages, insurance and wealth management services, including investment management, trust and estate administration, retirement planning, custody services, and tax planning and preparation from
The Corporation operates in a highly competitive market area that includes local, national and regional banks as competitors along with savings banks, credit unions, insurance companies, trust companies, registered investment advisors and mutual fund families. The Corporation and its subsidiaries are regulated by many agencies including the Securities and Exchange Commission (“SEC”), NASDAQ, Federal Deposit Insurance Corporation (“FDIC”), the Federal Reserve and the Pennsylvania Department of Banking and Securities. The goal of the Corporation is to become the preeminent community bank and wealth management organization in the Philadelphia area.
Critical Accounting Policies, Judgments and Estimates
The accounting and reporting policies of the Corporation and its subsidiaries conform with U.S. generally accepted accounting principles (“GAAP”). All inter-company transactions are eliminated in consolidation and certain reclassifications are made when necessary to conform the previous year’s financial statements to the current year’s presentation. In preparing the
These critical accounting policies, along with other significant accounting policies, are presented in Footnote 1 – Summary of Significant Accounting Policies, in the Notes to Consolidated Financial Statements in the Corporation’s
In addition to the critical accounting policies described and referenced above, as it relates to derivative financial instruments, the Corporation recognizes all derivative instruments at fair value as either assets or liabilities in other assets or other liabilities on the balance sheet. The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging
Recent Acquisitions and Expansions On In addition to the RBPI On May 12, 2017, the Corporation established a wealth management-focused office in Princeton, New Jersey which On May 1, 2018, BMT Insurance Advisors, Inc. acquired Domenick & Associates, a full-service insurance agency established in 1993 and headquartered in the Old City section of Philadelphia. Domenick & Associates has a specialty niche with nonprofit and social service organizations which aligns well with our banking and wealth management solutions in these specialty service areas. This acquisition furthers our objective of pursuing strategic growth opportunities to enhance, broaden, and diversify our revenue streams. Executive Overview
The following items highlight the Corporation’s results of operations for the three
Three Month Results of Operations
Changes in Financial Condition
Key Performance Ratios
Key financial performance ratios for the three months ended
The following table presents certain key period-end balances and ratios as of
The following sections discuss, in detail, the Corporation’s results of operations for the three
Components of Net Income
Net income is comprised of five major elements:
TAX-EQUIVALENT NET INTEREST INCOME
Net interest income is the primary source of the Corporation’s revenue. The below tables present a summary, for the three
Partially offsetting the
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Analyses of Interest Rates and Interest Differential
The
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Rate/Volume Analysis (tax-equivalent basis)* The rate/volume analysis in the table below analyzes dollar changes in the components of interest income and interest expense as they relate to the change in balances (volume) and the change in interest rates (rate) of tax-equivalent net interest income for the three months ended
*The tax rate used in the calculation of thetax-equivalent income is
Tax-Equivalent Net Interest Margin
The tax-equivalent net interest margin of
The tax-equivalent net interest margin and related components for the past five consecutive quarters are shown in the table below:
Interest Rate Sensitivity
Management utilizes several tools to measure
The following table demonstrates the annualized result of an interest rate simulation and the estimated effect that a parallel interest rate shift, or “shock”, in the yield curve and subjective adjustments in deposit pricing, might have on
This simulation assumes that there is no growth in interest-earning assets or interest-bearing liabilities over the next
Summary of Interest Rate Simulation
The above interest rate simulation suggests that the Corporation’s balance sheet is asset sensitive as of
Gap Analysis
The interest sensitivity, or gap analysis,
Non-maturity deposits (demand deposits in particular) are recognized by the Bank’s regulatory agencies to have different sensitivities to interest rate environments. Consequently, it is an accepted practice to spread non-maturity deposits over defined time periods to capture that sensitivity. Commercial demand deposits are often in the form of compensating balances, and fluctuate inversely to the level of interest rates; the maturity of these deposits is reported as having a shorter life than typical retail demand deposits. Additionally, the Bank’s regulatory agencies have suggested distribution limits for non-maturity deposits. However, management has taken a more conservative approach than these limits would suggest by forecasting these deposit types with a shorter maturity. The following table presents the Corporation’s
(1) Investment securities include available for sale, held to maturity and trading.
The table above indicates that the Corporation is asset-sensitive in the immediate 90-day time frame and may experience an increase in net interest income during that time period if rates rise. Conversely, if rates decline, net interest income may decline. It should be noted that the gap analysis is only one tool used to measure interest rate sensitivity and should be used in conjunction with other measures such as the interest rate simulation discussed above. The gap analysis measures the timing of changes in rate, but not the true weighting of any specific component of the Corporation’s balance sheet. The asset-sensitive position reflected in this gap analysis is similar to the Corporation’s position at December 31,
PROVISION FOR LOAN AND LEASE LOSSES
For the three months ended
Asset Quality and Analysis of Credit Risk
As of
As of
As of
As of
The Corporation continues to be diligent in its credit underwriting process and proactive with its loan review process, including the engagement of the services of an independent outside loan review firm, which helps identify developing credit issues. Proactive steps that are taken include the procurement of additional collateral (preferably outside the current loan structure) whenever possible and frequent contact with the borrower. The Corporation believes that timely identification of credit issues and appropriate actions early in the process serve to mitigate overall risk of loss.
Nonperforming Assets and Related Ratios
NONINTEREST INCOME Three Months Ended
Non-interest income of $19.5 million for the three months ended
The following table provides supplemental information regarding mortgage loan originations and sales:
The following table provides details ofother operating income for the three
Wealth Assets Under
Wealth Asset accounts are categorized into two groups; the first account group consists predominantly of clients whose fees are determined based on the market value of the assets held in their accounts (“Market Value” fee basis). The second account group consists predominantly of clients whose fees are set at fixed amounts (“Fixed Fee” basis), and, as such, are not affected by market value changes.
The following tables detail the composition of Wealth Assets as it relates to the calculation of fees for wealth management services:
The following tables detail the composition of fees for wealth management services for the periods indicated:
Customer Derivatives
To accommodate the risk management needs of qualified commercial customers, the Bank enters into financial derivative transactions consisting of interest rate swaps, options, risk participation agreements and foreign exchange contracts. Derivative financial instruments involve, to varying degrees, interest rate, market and credit risk. Market risk exposure from customer derivative positions is managed by simultaneously entering into matching transactions with institutional dealer counterparties that offset customer contracts in notional amount and term. Derivative contracts create counterparty credit risk with both the Bank’s customers and with institutional dealer counterparties. The Corporation manages customer counterparty credit risk through its credit policy, approval processes, monitoring procedures and by obtaining adequate collateral, when appropriate. The Bank seeks to minimize dealer counterparty credit risk by establishing credit limits and collateral agreements through industry standard
Three Months Ended
The following table provides details ofother operating expenses for the three months ended
BALANCE SHEET ANALYSIS
Total assets of $4.30 billion as of
Loans and Leases
The table below compares the portfolio loans and leases outstanding at
Cash and Investment Securities
As of
Investment securities available for sale as of
Deposits
Deposits
Borrowings Borrowings as of March 31, 2018 and December 31, 2017 were as follows:
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Capital
Consolidated shareholder’s equity of the Corporation was
(1) There is no official regulatory guideline for the tangible common equity to tangible asset ratio.
The capital ratios for the Bank and the Corporation, as of
Liquidity
The Corporation’s liquidity position is managed on a daily basis as part of the daily settlement function and continuously as part of the formal asset liability management process. The Bank’s liquidity is maintained by managing its core deposits as the primary source, purchasing federal funds, selling loans in the secondary market, borrowing from the FHLB and the Federal Reserve Bank, and purchasing and issuing wholesale certificates of deposit as its secondary sources.
Unused availability is detailed on the following table:
Quarterly, the ALCO reviews the Corporation’s liquidity needs and reports its findings to the Corporation’s Board of Directors.
The Corporation has an agreement with IND to provide up to $40 million, excluding accrued interest, of money market and NOW funds at an agreed upon interest rate equal to the current Fed Funds rate plus 20 basis points. The Corporation had
The Corporation continually evaluates the cost and mix of its retail and wholesale funding sources relative to earning assets and expected future earning-asset growth. The Corporation believes that with its current branch network, along with the available borrowing capacity at FHLB and other sources, it has sufficient capacity available to fund expected earning-asset growth.
Discussion of Segments
The Corporation has two principal segments as defined by FASB ASC 280, “Segment Reporting.”The segments are Banking and Wealth Management (see Note
The Wealth Management Segment recorded a pre-tax segment profit (“PTSP”) of
The Banking Segment recorded a PTSP of
Off Balance Sheet Risk
The Corporation is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit.
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the loan agreement. Total commitments to extend credit at
Standby letters of credit are conditional commitments issued by the Bank to a customer for a third party. Such standby letters of credit are issued to support private borrowing arrangements. The credit risk involved in issuing standby letters of credit is similar to that involved in granting loan facilities to customers. The Bank’s obligation under standby letters of credit at
Estimated fair values of the Corporation’s off-balance sheet instruments are based on fees and rates currently charged to enter into similar loan agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. Since fees and rates charged for off-balance sheet items are at market levels when set, there is no material difference between the stated amount and the estimated fair value of off-balance sheet instruments.
Contractual Cash Obligations of the Corporation as of
Other Information
Effects of Inflation
Inflation has some impact on the Corporation’s operating costs. Unlike many industrial companies, however, substantially all of the Corporation’s assets and liabilities are monetary in nature. As a result, interest rates have a more significant impact on the Corporation’s performance than the general level of inflation. Over short periods of time, interest rates may not necessarily move in the same direction or in the same magnitude as prices of goods and services.
Effects of Government Monetary Policies
The earnings of the Corporation are and will be affected by domestic economic conditions and the monetary and fiscal policies of the United States government and its agencies. An important function of the Federal Reserve Board is to regulate the money supply and interest rates. Among the instruments used to implement those objectives are open market operations in United States government securities and changes in reserve requirements against member bank deposits. These instruments are used in varying combinations to influence overall growth and distribution of bank loans, investments, and deposits, and their use may also affect rates charged on loans or paid for deposits.
The Corporation is a member of the Federal Reserve System and, therefore, the policies and regulations of the Federal Reserve Board have a significant effect on its deposits, loans and investment growth, as well as the rate of interest earned and paid, and are expected to affect the Corporation’s operations in the future. The effect of such policies and regulations upon the future business and earnings of the Corporation cannot be predicted.
Special Cautionary Notice Regarding Forward Looking Statements
Certain of the statements contained in this report and the documents incorporated by reference herein may constitute forward-looking statements for the purposes of the Securities Act of 1933, as amended and the Securities Exchange Act of 1934, as
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All written or oral forward-looking
ITEM 3. Quantitativeand QualitativeDisclosures About Market Risks
See the discussion of quantitative and qualitative disclosures about market risks in the Corporation’s
ITEM 4.
As of the end of the period covered by this report, the Corporation carried out an evaluation, under the supervision and with the participation of the Corporation’s management, including the Corporation’s Chief Executive Officer, Francis J. Leto, and Chief Financial Officer, Michael W. Harrington, of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon the evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures were effective as of
There were no changes in the Corporation’s internal controls over financial reporting during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.
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PARTII OTHERINFORMATION.
ITEM 1. LegalProceedings.
ITEM 1A. Risk Factors
ITEM 2. Unregistered
Share Repurchase
The following table presents the shares repurchased by the Corporation during the
ITEM 3. None.
ITEM 4.
ITEM 5.
None.
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ITEM 6. Exhibits
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
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