UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________________________________
FORM 10-Q
______________________________________________
(Mark One)
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| |
x | Quarterly report pursuant to section 13 or 15 (d) of the Securities Exchange Act of 1934 |
For the quarterly period ended September 30, 2012March 31, 2013
or
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| |
o | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from to
Commission File Number: 000-50245
______________________________________________
BBCN BANCORP, INC.
(Exact name of registrant as specified in its charter)
______________________________________________
|
| | |
Delaware | | 95-4849715 |
(State or other jurisdiction of incorporation or organization) | | (IRS Employer Identification Number) |
| | |
3731 Wilshire Boulevard, Suite 1000, Los Angeles, California | | 90010 |
(Address of Principal executive offices) | | (ZIP Code) |
(213) 639-1700
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
______________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required 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 x No o
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 x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
|
| | | | |
Large accelerated filer | ox | | Accelerated filer | xo |
| | | | |
Non-accelerated filer | o | | Smaller Reporting Company | o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of October 31, 2012,May 6, 2013, there were 78,041,51178,981,401 outstanding shares of the issuer’s Common Stock, $0.001 par value.
Table of Contents
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Item 1. | | |
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Item 2 | | |
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Item 3. | | |
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Item 4. | | |
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Item 1. | | |
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Item 1A. | | |
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Item 2. | | |
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Item 3. | | |
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Item 4. | | |
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Item 5. | | |
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Item 6. | | |
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| Certifications | |
Forward-Looking Information
Certain matters discussed in this report may constitute forward-looking statements under Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. There can be no assurance that the results described or implied in such forward-looking statements will, in fact, be achieved and actual results, performance, and achievements could differ materially because our business involves inherent risks and uncertainties. The risks and uncertainties include: possible deterioration in economic conditions in our areas of operation; interest rate risk associated with volatile interest rates and related asset-liability matching risk; liquidity risks; risk of significant non-earning assets, and net credit losses that could occur, particularly in times of weak economic conditions or times of rising interest rates; and regulatory risks associated with current and future regulations. For additional information concerning these and other risk factors, see "Part II, Item 1A. Risk Factors" contained herein and “Part I, Item 1A. Risk Factors” contained in our Annual Report on Form 10-K for the year ended December 31, 2011.2012.
PART I
FINANCIAL INFORMATION
| |
Item 1. | Financial Statements |
BBCN BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION | |
BBCN BANCORP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION | | BBCN BANCORP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION |
| | (Unaudited) | | | (Unaudited) | | |
| September 30, 2012 | | December 31, 2011 | March 31, 2013 | | December 31, 2012 |
ASSETS | (In thousands, except share data) | (In thousands, except share data) |
Cash and cash equivalents: | | | | | | |
Cash and due from banks | $ | 74,441 |
| | $ | 81,785 |
| $ | 73,125 |
| | $ | 88,506 |
|
Interest-earning deposit at Federal Reserve Bank | 155,202 |
| | 217,800 |
| |
Federal funds sold | 0 |
| | 525 |
| |
Interest-earning deposit at the Federal Reserve Bank (the "FRB") | | 207,688 |
| | 224,410 |
|
Total cash and cash equivalents | 229,643 |
| | 300,110 |
| 280,813 |
| | 312,916 |
|
Term federal funds sold, original maturities more than 90 days | 0 |
| | 40,000 |
| |
Securities available for sale, at fair value | 687,059 |
| | 740,920 |
| 717,441 |
| | 704,403 |
|
Loans held for sale, at the lower of cost or fair value | 58,484 |
| | 42,407 |
| 48,941 |
| | 51,635 |
|
Loans receivable, net of allowance for loan losses (September 30, 2012 - $65,952; December 31, 2011 - $61,952) | 4,003,542 |
| | 3,676,874 |
| |
Other real estate owned, net | 4,135 |
| | 7,624 |
| |
Loans receivable, net of allowance for loan losses (March 31, 2013 - $73,268; December 31, 2012 - $66,941) | | 4,426,778 |
| | 4,229,311 |
|
Other real estate owned ("OREO"), net | | 8,419 |
| | 2,698 |
|
Federal Home Loan Bank ("FHLB") stock, at cost | 23,500 |
| | 27,373 |
| 24,308 |
| | 22,495 |
|
Premises and equipment, net of accumulated depreciation and amortization (September 30, 2012 - $21,473; December 31, 2011 - $19,018) | 22,672 |
| | 20,913 |
| |
Premises and equipment, net of accumulated depreciation and amortization (March 31, 2013 - $23,198; December 31, 2012 - $22,201) | | 22,960 |
| | 22,609 |
|
Accrued interest receivable | 12,881 |
| | 13,439 |
| 13,271 |
| | 12,117 |
|
Deferred tax assets, net | 63,497 |
| | 72,604 |
| 65,298 |
| | 60,240 |
|
Customers’ liabilities on acceptances | 10,373 |
| | 10,515 |
| 12,200 |
| | 10,493 |
|
Bank owned life insurance | 43,416 |
| | 42,514 |
| 44,079 |
| | 43,767 |
|
Investments in affordable housing partnerships | 13,776 |
| | 15,367 |
| 12,641 |
| | 13,164 |
|
Goodwill | 89,882 |
| | 90,473 |
| 93,404 |
| | 89,878 |
|
Other intangible assets, net | 3,335 |
| | 4,276 |
| 3,401 |
| | 3,033 |
|
Prepaid FDIC insurance | 8,212 |
| | 9,720 |
| 7,157 |
| | 7,574 |
|
FDIC loss share receivable | 7,325 |
| | 10,819 |
| 4,386 |
| | 5,797 |
|
Other assets | 50,247 |
| | 40,656 |
| 48,100 |
| | 48,531 |
|
Total assets | $ | 5,331,979 |
| | $ | 5,166,604 |
| $ | 5,833,597 |
| | $ | 5,640,661 |
|
| | | | | | |
(Continued) | (Continued) | | (Continued) | |
BBCN BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION | |
BBCN BANCORP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION | | BBCN BANCORP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION |
| | (Unaudited) | | | (Unaudited) | | |
| September 30, 2012 | | December 31, 2011 | March 31, 2013 | | December 31, 2012 |
LIABILITIES AND STOCKHOLDERS’ EQUITY | (In thousands, except share data) | (In thousands, except share data) |
LIABILITIES: | | | | | | |
Deposits: | | | | | | |
Non-interest bearing | $ | 1,105,161 |
| | $ | 984,350 |
| $ | 1,182,509 |
| | $ | 1,184,285 |
|
Interest bearing: | | | | | | |
Money market and NOW accounts | 1,145,304 |
| | 1,237,378 |
| 1,269,388 |
| | 1,248,304 |
|
Savings deposits | 185,709 |
| | 198,063 |
| 192,208 |
| | 180,686 |
|
Time deposits of $100,000 or more | 892,941 |
| | 759,923 |
| 1,237,366 |
| | 1,088,611 |
|
Other time deposits | 723,409 |
| | 761,178 |
| 674,203 |
| | 682,149 |
|
Total deposits | 4,052,524 |
| | 3,940,892 |
| 4,555,674 |
| | 4,384,035 |
|
Federal Home Loan Bank borrowings | 460,815 |
| | 344,402 |
| |
FHLB advances | | 421,632 |
| | 420,722 |
|
Subordinated debentures | 41,809 |
| | 52,102 |
| 45,996 |
| | 41,846 |
|
Accrued interest payable | 5,451 |
| | 6,519 |
| 4,325 |
| | 4,355 |
|
Acceptances outstanding | 10,373 |
| | 10,515 |
| 12,200 |
| | 10,493 |
|
Other liabilities | 26,552 |
| | 16,235 |
| 21,495 |
| | 28,106 |
|
Total liabilities | 4,597,524 |
| | 4,370,665 |
| 5,061,322 |
| | 4,889,557 |
|
STOCKHOLDERS’ EQUITY: | | | | | | |
Preferred stock, $0.001 par value - authorized 10,000,000 undesignated shares; issued and outstanding 122,000 shares as of December 31, 2011 | | | | |
Series A, Fixed Rate Cumulative Perpetual Preferred Stock, issued and outstanding 67,000 shares at December 31, 2011, net, with a liquidation preference of $67,428,000 at December 31, 2011 | 0 |
| | 65,158 |
| |
Series B, Fixed Rate Cumulative Perpetual Preferred Stock, issued and outstanding 55,000 shares at December 31, 2011, net, with a liquidation preference of $55,229,000 at December 31, 2011 | 0 |
| | 54,192 |
| |
Common stock, $0.001 par value; authorized 150,000,000 shares at September 30, 2012 and December 31, 2011; issued and outstanding, 78,016,260 and 77,984,252 shares at September 30, 2012 and December 31, 2011, respectively | 78 |
| | 78 |
| |
Common stock, $0.001 par value; authorized 150,000,000 shares at March 31, 2013 and December 31, 2012; issued and outstanding, 78,812,140 and 78,041,511 shares at March 31, 2013 and December 31, 2012, respectively | | 79 |
| | 78 |
|
Additional paid-in capital | 524,608 |
| | 524,644 |
| 535,091 |
| | 525,354 |
|
Retained earnings | 198,964 |
| | 142,909 |
| 230,149 |
| | 216,590 |
|
Accumulated other comprehensive income, net | 10,805 |
| | 8,958 |
| 6,956 |
| | 9,082 |
|
Total stockholders’ equity | 734,455 |
| | 795,939 |
| 772,275 |
| | 751,104 |
|
Total liabilities and stockholders’ equity | $ | 5,331,979 |
| | $ | 5,166,604 |
| $ | 5,833,597 |
| | $ | 5,640,661 |
|
See accompanying notesNotes to condensed consolidated financial statements (unaudited)Condensed Consolidated Financial Statements (Unaudited).
BBCN BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the three and nine months ended September 30, 2012 and 2011
(Unaudited)
| BBCN BANCORP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) | | BBCN BANCORP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | Three Months Ended March 31, |
| 2012 | | 2011 | | 2012 | | 2011 | 2013 | | 2012 |
| (In thousands, except share data) | (In thousands, except share data) |
INTEREST INCOME: | | | | | | | | | | |
Interest and fees on loans | $ | 61,553 |
| | $ | 34,902 |
| | $ | 187,476 |
| | $ | 101,137 |
| $ | 63,029 |
| | $ | 63,419 |
|
Interest on securities | 3,782 |
| | 3,843 |
| | 12,940 |
| | 11,738 |
| 3,427 |
| | 4,909 |
|
Interest on federal funds sold and other investments | 120 |
| | 182 |
| | 537 |
| | 540 |
| 287 |
| | 227 |
|
Total interest income | 65,455 |
| | 38,927 |
| | 200,953 |
| | 113,415 |
| 66,743 |
| | 68,555 |
|
INTEREST EXPENSE: | | | | | | | | | | |
Interest on deposits | 5,214 |
| | 4,977 |
| | 15,862 |
| | 15,198 |
| 5,408 |
| | 5,403 |
|
Interest on FHLB advances | 1,603 |
| | 2,438 |
| | 4,832 |
| | 7,422 |
| 1,224 |
| | 1,626 |
|
Interest on other borrowings | 407 |
| | 459 |
| | 1,667 |
| | 1,528 |
| 395 |
| | 667 |
|
Total interest expense | 7,224 |
| | 7,874 |
| | 22,361 |
| | 24,148 |
| 7,027 |
| | 7,696 |
|
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES | 58,231 |
| | 31,053 |
| | 178,592 |
| | 89,267 |
| 59,716 |
| | 60,859 |
|
PROVISION FOR LOAN LOSSES | 6,900 |
| | 3,483 |
| | 16,682 |
| | 18,792 |
| 7,506 |
| | 2,600 |
|
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES | 51,331 |
| | 27,570 |
| | 161,910 |
| | 70,475 |
| 52,210 |
| | 58,259 |
|
NON-INTEREST INCOME: | | | | | | | | | | |
Service fees on deposit accounts | 3,121 |
| | 1,352 |
| | 9,550 |
| | 4,262 |
| 2,875 |
| | 3,160 |
|
International service fees | 1,183 |
| | 603 |
| | 3,810 |
| | 1,842 |
| 1,238 |
| | 1,224 |
|
Loan servicing fees, net | 1,031 |
| | 464 |
| | 3,178 |
| | 1,345 |
| 969 |
| | 1,337 |
|
Wire transfer fees | 833 |
| | 343 |
| | 2,349 |
| | 1,013 |
| 816 |
| | 741 |
|
Other income and fees | 1,364 |
| | 534 |
| | 4,058 |
| | 1,598 |
| 1,249 |
| | 1,340 |
|
Net gains on sales of SBA loans | 0 |
| | 823 |
| | 5,426 |
| | 6,337 |
| 2,694 |
| | 2,963 |
|
Net gains (losses) on sales of other loans | 0 |
| | (30) |
| | 146 |
| | (30 | ) | |
Net gains on sales and calls of securities available for sale | 133 |
| | 64 |
| | 949 |
| | 70 |
| |
Net valuation gains (losses) on interest rate swaps and caps | 11 |
| | (3) |
| | 24 |
| | (120 | ) | |
Net gains (losses) on sales of OREO | (12) |
| | 108 |
| | 41 |
| | 135 |
| |
Net gains on sales of other loans | | 43 |
| | — |
|
Net gains on sales of securities available for sale | | 54 |
| | 816 |
|
Net valuation gains on interest rate swaps and caps | | — |
| | 3 |
|
Net gains on sales of OREO | | 2 |
| | 61 |
|
Total non-interest income | 7,664 |
| | 4,258 |
| | 29,531 |
| | 16,452 |
| 9,940 |
| | 11,645 |
|
NON-INTEREST EXPENSE: | | | | | | | | | | |
Salaries and employee benefits | 13,611 |
| | 7,657 |
| | 42,348 |
| | 22,436 |
| 16,332 |
| | 14,079 |
|
Occupancy | 3,910 |
| | 2,480 |
| | 11,788 |
| | 7,362 |
| 4,011 |
| | 3,646 |
|
Furniture and equipment | 1,495 |
| | 984 |
| | 4,181 |
| | 2,853 |
| 1,573 |
| | 1,218 |
|
Advertising and marketing | 1,159 |
| | 354 |
| | 4,142 |
| | 1,527 |
| 1,273 |
| | 1,458 |
|
Data processing and communications | 1,659 |
| | 813 |
| | 4,843 |
| | 2,719 |
| 1,644 |
| | 1,611 |
|
Professional fees | 876 |
| | 612 |
| | 2,558 |
| | 2,090 |
| 1,301 |
| | 613 |
|
FDIC assessments | 644 |
| | 983 |
| | 1,732 |
| | 3,149 |
| 694 |
| | 1,037 |
|
Credit related expenses | 2,497 |
| | 867 |
| | 6,967 |
|
| 2,615 |
| 1,715 |
| | 2,180 |
|
Merger and integration expense | 183 |
| | 574 |
| | 3,304 |
| | 1,465 |
| 1,305 |
| | 1,773 |
|
Other | 2,736 |
| | 1,493 |
| | 8,419 |
| | 4,182 |
| 3,427 |
| | 2,820 |
|
Total non-interest expense | 28,770 |
| | 16,817 |
| | 90,282 |
| | 50,398 |
| 33,275 |
| | 30,435 |
|
INCOME BEFORE INCOME TAX PROVISION | 30,225 |
| | 15,011 |
| | 101,159 | | 36,529 |
| 28,875 |
| | 39,469 |
|
INCOME TAX PROVISION | 11,827 |
| | 5,196 |
| | 39,463 |
| | 13,650 |
| 11,414 |
| | 15,535 |
|
NET INCOME | $ | 18,398 |
| | $ | 9,815 |
| | $ | 61,696 |
| | $ | 22,879 |
| $ | 17,461 |
| | $ | 23,934 |
|
DIVIDENDS AND DISCOUNT ACCRETION ON PREFERRED STOCK | $ | 0 |
| | $ | (1,077 | ) | | $ | (5,640 | ) | | $ | (3,227 | ) | $ | — |
| | $ | (1,869 | ) |
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS | $ | 18,398 |
| | $ | 8,738 |
| | $ | 56,056 |
| | $ | 19,652 |
| $ | 17,461 |
| | $ | 22,065 |
|
EARNINGS PER COMMON SHARE | | | | | | | | | | |
Basic | $ | 0.24 |
| | $ | 0.23 |
| | $ | 0.72 |
| | $ | 0.52 |
| $ | 0.22 |
| | $ | 0.28 |
|
Diluted | $ | 0.24 |
| | $ | 0.23 |
| | $ | 0.72 |
| | $ | 0.52 |
| $ | 0.22 |
| | $ | 0.28 |
|
See accompanying notesNotes to condensed consolidated financial statements (unaudited)Condensed Consolidated Financial Statements (Unaudited).
BBCN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the three and ninemonths ended September 30, 2012 and 2011
(Unaudited)
| BBCN BANCORP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) | | BBCN BANCORP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | Three Months Ended March 31, |
| 2012 | | 2011 | | 2012 | | 2011 | 2013 | | 2012 |
| (In thousands) | (In thousands) |
Net income | $ | 18,398 |
| | $ | 9,815 |
| | $ | 61,696 |
| | $ | 22,879 |
| $ | 17,461 |
| | $ | 23,934 |
|
Other comprehensive income (loss): | | | | | | | | |
Unrealized gain on securities available for sale and interest only strips | 3,374 |
| | 3,479 |
| | 3,867 |
| | 6,606 |
| |
Other comprehensive income: | | | | |
Unrealized loss on securities available for sale and interest only strips | | (3,653 | ) | | (312 | ) |
Reclassification adjustments for gains realized in income(1) | (133 | ) | | (64 | ) | | (949 | ) | | (70 | ) | (54 | ) | | (816 | ) |
Tax expense (benefit) | 1,261 |
| | 1,308 |
| | 1,051 |
| | 2,532 |
| |
Tax benefit | | (1,581 | ) | | (474 | ) |
Change in unrealized gain on securities available for sale and interest only strips | 1,980 |
| | 2,107 |
| | 1,867 |
| | 4,004 |
| (2,126 | ) | | (654 | ) |
| | | | | | | | | | |
Reclassification adjustment for the deferred gain on early settlement of interest-rate caps | (11 | ) | | (11 | ) | | (33 | ) | | (33 | ) | — |
| | (11 | ) |
Tax benefit | (5 | ) | | (4 | ) | | (13 | ) | | (13 | ) | — |
| | (4 | ) |
Change in unrealized gain on interest-rate caps | (6 | ) | | (7 | ) | | (20 | ) | | (20 | ) | |
Change in unrealized gain on interest-rate caps, net of tax | | — |
| | (7 | ) |
| | | | | | | | | | |
Total other comprehensive gain (loss) | 1,974 |
| | 2,100 |
| | 1,847 |
| | 3,984 |
| |
Total other comprehensive loss | | (2,126 | ) | | (661 | ) |
Total comprehensive income | $ | 20,372 |
| | $ | 11,915 |
| | $ | 63,543 |
| | $ | 26,863 |
| $ | 15,335 |
| | $ | 23,273 |
|
| |
(1) | Reclassification adjustments realized in income were included in net gains on sales of securities available for sale. |
See accompanying notesNotes to condensed consolidated financial statements (unaudited)Condensed Consolidated Financial Statements (Unaudited).
BBCN BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | |
| | | Common stock | | | | | | |
| Preferred stock | | Shares | | Amount | | Additional paid-in capital | | Retained earnings | | Accumulated other comprehensive income (loss), net |
| (In thousands, except share data) |
| | | | | | | | | | | |
BALANCE, JANUARY 1, 2011 | $ | 64,203 |
| | 37,983,027 |
|
| $ | 38 |
|
| $ | 171,364 |
|
| $ | 120,361 |
|
| $ | 2,597 |
|
Issuance of additional shares pursuant to various stock plans |
| | 112,233 |
|
|
|
| 510 |
|
|
|
|
|
Tax effects of stock plans |
| |
|
|
|
| 139 |
|
|
|
|
|
Stock-based compensation |
| |
|
|
|
| 52 |
|
|
|
|
|
Preferred stock cash dividends accrued (5%) |
| |
|
|
|
|
|
| (2,512 | ) |
|
|
Accretion of preferred stock discount | 715 |
| |
|
|
|
|
|
| (715 | ) |
|
|
Comprehensive income: |
| |
|
|
|
|
|
|
|
|
|
Net income |
| |
|
|
|
|
|
| 22,879 |
|
|
|
Other comprehensive income (loss): |
| |
|
|
|
|
|
|
|
|
|
Change in unrealized gain on securities available for sale, net of tax |
| |
|
|
|
|
|
|
|
| 3,999 |
|
Change in unrealized gain on interest-only strips, net of tax |
| |
|
|
|
|
|
|
|
| 5 |
|
Change in unrealized gain (loss) on interest rate swaps, net of tax |
| |
|
|
|
|
|
|
|
| (20 | ) |
BALANCE, SEPTEMBER 30, 2011 | $ | 64,918 |
| | 38,095,260 |
| | $ | 38 |
| | $ | 172,065 |
| | $ | 140,013 |
| | $ | 6,581 |
|
| | | | | | | | | | | |
BALANCE, JANUARY 1, 2012 | $ | 119,350 |
|
| 77,984,252 |
|
| $ | 78 |
|
| $ | 524,644 |
|
| $ | 142,909 |
|
| $ | 8,958 |
|
Redemption of 122,000 shares of TARP preferred stock | (122,000 | ) | | | | | | | | | | |
Issuance of additional shares pursuant to various stock plans |
|
| 32,008 |
|
|
|
|
| 200 |
|
|
|
|
|
|
|
Tax effects of stock plans |
|
|
|
|
|
|
|
| (6 | ) |
|
|
|
|
|
|
Stock-based compensation |
|
|
|
|
|
|
|
| 1,959 |
|
|
|
|
|
|
|
Redemption of common stock warrant | | | | | | | (2,189 | ) | | | | |
Preferred stock cash dividends accrued (5%) |
|
|
|
|
|
|
|
|
|
|
| (2,991 | ) |
|
|
|
Accretion of preferred stock discount | 2,650 |
|
|
|
|
|
|
|
|
|
|
| (2,650 | ) |
|
|
|
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
| 61,696 |
|
|
|
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized gain on securities available for sale, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,840 |
|
Change in unrealized gain on interest-only strips, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 27 |
|
Change in unrealized gain (loss) on interest rate swaps, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (20 | ) |
BALANCE, SEPTEMBER 30, 2012 | $ | 0 |
|
| 78,016,260 |
|
| $ | 78 |
|
| $ | 524,608 |
|
| $ | 198,964 |
|
| $ | 10,805 |
|
| | | | | | | | | | | |
BBCN BANCORP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited) |
| | | | | | | | | | | | | | | | | | | | | | |
| | | Common stock | | | | | | |
| Preferred stock | | Shares | | Amount | | Additional paid-in capital | | Retained earnings | | Accumulated other comprehensive income (loss), net |
| (In thousands, except share data) |
| | | | | | | | | | | |
BALANCE, JANUARY 1, 2012 | $ | 119,350 |
| | 77,984,252 |
| | $ | 78 |
| | $ | 524,644 |
| | $ | 142,909 |
| | $ | 8,958 |
|
Issuance of additional shares pursuant to various stock plans |
| | 12,139 |
| |
| | 81 |
| |
| |
|
Stock-based compensation |
| |
| |
| | 398 |
| |
| |
|
Preferred stock cash dividends accrued (5%) |
| |
| |
| |
| | (1,525 | ) | |
|
Accretion of preferred stock discount | 344 |
| |
| |
| |
| | (344 | ) | |
|
Comprehensive income: |
| |
| |
| |
| |
| |
|
Net income |
| |
| |
| |
| | 23,934 |
| |
|
Other comprehensive loss |
| |
| |
| |
| |
| | (661 | ) |
BALANCE, MARCH 31, 2012 | $ | 119,694 |
| | 77,996,391 |
| | $ | 78 |
| | $ | 525,123 |
| | $ | 164,974 |
| | $ | 8,297 |
|
| | | | | | | | | | | |
BALANCE, JANUARY 1, 2013 | $ | — |
| | 78,041,511 |
| | $ | 78 |
| | $ | 525,354 |
| | $ | 216,590 |
| | $ | 9,082 |
|
Acquisition of Pacific International Bank | | | 663,843 |
| | 1 |
| | 8,640 |
| | | | |
Issuance of additional shares pursuant to various stock plans |
| | 106,786 |
| |
|
| | 414 |
| |
|
| |
|
|
Tax effect of stock plans | | | | | | | (26 | ) | | | | |
Stock-based compensation |
| |
|
| |
|
| | 709 |
| |
|
| |
|
|
Cash dividend declared on common stock ($0.05 per share) |
| |
|
| |
|
| |
|
| | (3,902 | ) | |
|
|
Comprehensive income: |
| |
|
| |
|
| |
|
| |
|
| |
|
|
Net income |
| |
|
| |
|
| |
|
| | 17,461 |
| |
|
|
Other comprehensive loss |
| |
|
| |
|
| |
|
| |
|
| | $ | (2,126 | ) |
BALANCE, MARCH 31, 2013 | $ | — |
| | 78,812,140 |
| | $ | 79 |
| | $ | 535,091 |
| | $ | 230,149 |
| | $ | 6,956 |
|
| | | | | | | | | | | |
See accompanying notesNotes to condensed consolidated financial statements (unaudited)Condensed Consolidated Financial Statements (Unaudited).
BBCN BANCORP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011
| BBCN BANCORP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) | | BBCN BANCORP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) |
|
| Nine Months Ended September 30, | Three Months Ended March 31 |
| 2012 |
| 2011 | 2013 | | 2012 |
| (In thousands) | (In thousands) |
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
| |
|
Net income | $ | 61,696 |
|
| $ | 22,879 |
| $ | 17,461 |
| | $ | 23,934 |
|
Adjustments to reconcile net income to net cash from operating activities: |
|
|
|
|
|
| |
|
|
Depreciation, amortization, net of discount accretion | (18,518 | ) |
| 6,242 |
| (2,717 | ) | | 2,023 |
|
Stock-based compensation expense | 1,959 |
|
| 52 |
| 709 |
| | 398 |
|
Provision for loan losses | 16,682 |
|
| 18,792 |
| 7,506 |
| | 2,600 |
|
Valuation adjustment of loans held for sale | 703 |
|
| 35 |
| — |
| | 668 |
|
Valuation adjustment of OREO | 2,659 |
|
| 491 |
| 115 |
| | 390 |
|
Proceeds from sales of loans | 90,022 |
|
| 82,849 |
| 29,144 |
| | 37,904 |
|
Originations of loans held for sale | (97,968 | ) |
| (57,713 | ) | (23,713 | ) | | (43,822 | ) |
Net gains on sales of SBA and other loans | (6,014 | ) |
| (6,307 | ) | (2,737 | ) | | (2,963 | ) |
Net change in bank owned life insurance | (902 | ) |
| (560 | ) | (312 | ) | | (305 | ) |
Net gains on sales and calls of securities available for sale | (949 | ) |
| (70 | ) | |
Net gains on sales of securities available for sale | | (54 | ) | | (816 | ) |
Net gains on sales of OREO | (41 | ) |
| (135 | ) | (2 | ) | | (61 | ) |
Net valuation (gains) losses on interest rate swaps and caps | (24 | ) |
| 120 |
| |
Net valuation gains on interest rate swaps and caps | | — |
| | (3 | ) |
Change in accrued interest receivable | 558 |
|
| 391 |
| (730 | ) | | 1,186 |
|
Change in deferred income taxes | 7,625 |
|
| 6,524 |
| 1,524 |
| | 6,058 |
|
Change in prepaid FDIC insurance | 1,508 |
|
| 2,995 |
| 614 |
| | 960 |
|
Change in investments in affordable housing partnership | 1,591 |
|
| 0 |
| 523 |
| | 513 |
|
Change in FDIC loss share receivable | 3,743 |
|
| 0 |
| 1,411 |
| | (27 | ) |
Change in other assets | (9,532 | ) |
| (9,377 | ) | 675 |
| | (5,227 | ) |
Change in accrued interest payable | (1,068 | ) |
| (1,078 | ) | (104 | ) | | (34 | ) |
Change in other liabilities | 11,754 |
|
| 1,017 |
| (9,836 | ) | | 12,197 |
|
Net cash provided by operating activities | 65,484 |
|
| 67,147 |
| 19,477 |
| | 35,573 |
|
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | |
Net change in loans receivable | (326,194 | ) |
| (171,323 | ) | (69,771 | ) | | (1,028 | ) |
Proceeds from sales of securities available for sale | 28,446 |
|
| 0 |
| 6,636 |
| | 1,883 |
|
Proceeds from sales of OREO | 4,341 |
|
| 2,945 |
| 849 |
| | 2,066 |
|
Proceeds from matured term federal funds | 100,000 |
|
| 0 |
| — |
| | 40,000 |
|
Proceeds from sales of equipment | 3 |
|
| 0 |
| — |
| | 3 |
|
Purchase of premises and equipment | (5,572 | ) |
| (833 | ) | (1,671 | ) | | (752 | ) |
Purchase of securities available for sale | (111,696 | ) |
| (64,517 | ) | (69,821 | ) | | — |
|
Purchase of Federal Reserve Bank stock | 0 |
| | (5 | ) | |
Redemption of Federal Home Loan Bank Stock | 3,873 |
|
| 2,156 |
| |
Purchase of FRB stock | | — |
| | 1,309 |
|
Redemption of FHLB stock | | 16 |
| | — |
|
Purchase of term federal funds | (60,000 | ) |
| 0 |
| — |
| | (20,000 | ) |
Proceeds from matured, called, or paid-down securities available for sale | 135,686 |
|
| 139,903 |
| |
Proceeds from matured or paid-down securities available for sale | | 52,488 |
| | 39,334 |
|
Net cash received from acquisition | | 25,968 |
| | — |
|
Redemption of preferred stock upon the acquisition | | (7,475 | ) | | — |
|
Net cash used in investing activities | (231,113 | ) |
| (91,674 | ) | (62,781 | ) | | 62,815 |
|
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | |
Net change in deposits | 114,344 |
|
| 91,082 |
| 28,412 |
| | (20,428 | ) |
Net change in secured borrowings | 0 |
|
| (11,057 | ) | |
Redemption of subordinated debenture | (10,400 | ) | | 0 |
| |
Redemption of preferred stock | (122,000 | ) | | 0 |
| |
Payment of cash dividends on Preferred Stock | (3,648 | ) |
| (2,512 | ) | |
Proceeds from FHLB borrowings | 625,000 |
|
| 0 |
| |
Repayment of FHLB borrowings | (506,145 | ) |
| (50,000 | ) | |
Cash dividends paid on Preferred Stock | | — |
| | (1,410 | ) |
Proceeds from FHLB advances | | 90,000 |
| | — |
|
Repayment of FHLB advances | | (103,697 | ) | | (11,062 | ) |
Cash dividends paid on Common Stock | | (3,902 | ) | | — |
|
Issuance of additional stock pursuant to various stock plans | 200 |
|
| 510 |
| 388 |
| | 81 |
|
Redemption of common stock warrant | (2,189 | ) | | 0 |
| |
Net cash used in financing activities | 95,162 |
|
| 28,023 |
| 11,201 |
| | (32,819 | ) |
NET CHANGE IN CASH AND CASH EQUIVALENTS | (70,467 | ) |
| 3,496 |
| (32,103 | ) | | 65,569 |
|
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 300,110 |
|
| 172,331 |
| 312,916 |
| | 300,110 |
|
CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 229,643 |
|
| $ | 175,827 |
| $ | 280,813 |
| | $ | 365,679 |
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION |
|
|
|
|
|
| |
|
|
Interest paid | $ | 23,429 |
|
| $ | 25,226 |
| $ | 7,057 |
| | $ | 7,730 |
|
Income taxes paid | $ | 26,663 |
|
| $ | 15,182 |
| $ | 16,291 |
| | $ | (4,250 | ) |
SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES | | | | | | |
Transfer from loans receivable to other real estate owned | $ | 3,470 |
|
| $ | 6,558 |
| |
Transfer from loan receivables to loans held for sale | $ | 2,820 |
|
| $ | 23,279 |
| |
Transfer from loans receivable to OREO | | $ | 1,985 |
| | $ | 412 |
|
Non-cash goodwill adjustment, net | $ | 591 |
|
| $ | 0 |
| $ | — |
| | $ | 591 |
|
Pacific International Bank Acquisition: | | | | |
Assets acquired | | $ | 178,732 |
| | $ | — |
|
Liabilities assumed | | $ | (165,828 | ) | | $ | — |
|
See accompanying notesNotes to condensed consolidated financial statements (unaudited)Condensed Consolidated Financial Statements (Unaudited).
BBCN BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
BBCN Bancorp, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
BBCN Bancorp, Inc. ("BBCN Bancorp", on a parent-only basis, and the "Company", "we" or "our" on a consolidated basis), formerly named Nara Bancorp, Inc., is a bank holding company headquartered in Los Angeles, California.California, is the holding company for BBCN Bank ("BBCN Bank" or "the Bank"), formerly named Nara Bank, opened for business in June 1989 under the name “United Citizens National Bank” as a national banking association, was renamed “Nara Bank, National Association” in January 1994 and, in January 2005, became “Nara Bank” upon converting to a California state-chartered bank. On November 30, 2011, we merged with Center Financial Corporation ("Center Financial" or "Center""Bank") in a merger of equals transaction. Concurrently with the merger, Nara Bancorp, Inc. ("Nara") changed its name to "BBCN Bancorp, Inc." At the bank level, Nara Bank merged into Center Bank and, concurrently with the merger, Center Bank changed its name to "BBCN Bank.". The Bank has branches in California, the New York, metropolitan area, New Jersey, the Seattle area of Washington and Chicago,Illinois, as well as loan production offices in the Atlanta, Dallas, Denver, Northern California and Seattle.Seattle markets. The Company is a corporation organized under the laws of Delaware and a financial holding company and bank holding company registered under the Bank Holding Company Act of 1956, as amended.
OurThe condensed consolidated financial statements included herein have been prepared without an audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”(the “SEC”)., except for the Condensed Consolidated Statement of Financial Condition as of December 31, 2012 which was derived from audited financial statements included in the Company's 2012 Annual Report on Form 10-K. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such SEC rules and regulations.
The condensed consolidated financial statements include the accounts of BBCN Bancorp and its wholly-owned subsidiaries, principally BBCN Bank. All intercompany transactions and balances have been eliminated in consolidation.
We believe that we haveThe Company has made all adjustments, consisting solely of normal recurring accruals, that in the opinion of management, are necessary to fairly present ourthe Company's financial position at September 30, 2012March 31, 2013 and the results of our operations for the three and nine months then ended. Certain reclassifications have been made to prior period amounts to conform to the current year presentation. The results of operations for the interim periods are not necessarily indicative of results to be anticipated for the full year.
The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are susceptible to change in the near term relate to the determination of the allowance and provision for loan losses, the evaluation of other than temporary impairment of investment securities, accounting for derivatives and hedging activities, the determination of the carrying value for cash surrender value of life insurance, the determination of the carrying value of goodwill and other intangible assets, accounting for deferred tax assets and related valuation allowances, the determination of the fair values of investment securities and other financial instruments, accounting for lease arrangements, accounting for incentive compensation, profit sharing and bonus payments, and the valuation of servicing assets.assets, and the determination of the fair values of acquired assets and liabilities including the fair value of loans acquired with credit deterioration.
These unaudited condensed consolidated financial statements should be read along with the audited consolidated financial statements and accompanying notes included in ourthe Company's 20112012 Annual Report on Form 10-K.
Recent Accounting Pronouncements:
FASB ASC 350 – In September 2011, the FASB issued an update (ASUASU No. 2011-08, Testing Goodwill for Impairment) impacting FASB ASC 350-20, Intangibles – Goodwill and Other. The amendments in this update permit2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” - ASU 2013-02 requires an entity to first assess qualitative factorsprovide information about the amounts reclassified out of accumulated other comprehensive income by component and to determine whether it is more likely than not thatpresent either on the fair value of a reporting unit is less than the carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. The more likely than not threshold is defined as having a likelihood of more than 50 percent. If after assessing the totality of events or circumstances, it is not more likely than not that the fair valueface of the reporting unitstatement where net income is less than its carryingpresented, or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income, but only if the amount then performing the two-step impairment test is unnecessary. If an entity concludes that it is more likely than not that the fair value of the reporting unit is less than the carrying amount, the entityreclassified is required to performbe reclassified to net income in its entirety in the first step of the two-step impairment. If the carrying amount of asame reporting unit exceeds its fair value, then the entity is required to perform the second step of the goodwill impairment test to measure the amount of the impairment loss. This update became effectiveperiod. The Company adopted ASU 2013-02 for the Company for annualreporting period ending March 31, 2013, and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The Company has performed an analysis under this approach and itits adoption did not have a material impacteffect on the Company's consolidated financial statements.
8
The Company applies the acquisition method of accounting for business combinations under ASC 805 - Business Combinations. Under the acquisition method, the acquiring entity in a business combination recognizes 100 percent of the assets acquired and liabilities assumed at their acquisition date fair values. Management utilizes valuation techniques appropriate for the asset or liability being measured in determining these fair values. Any excess of the purchase price over amounts allocated to assets acquired, including identifiable intangible assets, and liabilities assumed is recorded as goodwill. Where amounts allocated to assets acquired and liabilities assumed is greater than the purchase price, a bargain purchase gain is recognized. Acquisition-related costs are expensed as incurred as merger and integration expenses.
FASB ASC 220 –
Pacific International Bancorp
On February 15, 2013, the Company completed the acquisition of Pacific International Bancorp, Inc. ("PIB"), a Seattle based company, pursuant to an Agreement and Plan of Merger, dated October 22, 2012. The Company acquired PIB in order to increase the Company's presence in terms of branch offices and deposit market share in the Seattle market. PIB's primary subsidiary, Pacific International Bank, a Washington state-chartered bank, operated four bank branches in the Seattle metropolitan area.
In December 2011,connection with the FASB issued an update (ASU No. 2011-12, Deferralacquisition, the consideration paid, the assets acquired, and the liabilities assumed are summarized in the following table:
|
| | | | |
| (In thousands) |
|
Consideration paid: | |
| BBCN common stock issued | $ | 8,437 |
|
| Cash in lieu of fractional shares paid to PIB stockholders | 1 |
|
| Redemption of Preferred Stock | 7,475 |
|
| Total consideration paid | $ | 15,913 |
|
| | |
Assets Acquired: | |
| Cash and cash equivalents | $ | 25,968 |
|
| Investment securities available for sale | 7,810 |
|
| Loans, net | 131,589 |
|
| FRB and FHLB stock | 1,829 |
|
| OREO | 3,418 |
|
| Deferred tax assets, net | 5,000 |
|
| Other assets | 3,118 |
|
Liabilities Assumed: | |
| Deposits | (143,665 | ) |
| Borrowings | (14,698 | ) |
| Subordinated debentures | (4,108 | ) |
| Other liabilities | (3,874 | ) |
Total identifiable net assets | $ | 12,387 |
|
Excess of consideration paid over fair value of net assets acquired (goodwill) | $ | 3,526 |
|
The Company estimated the fair value for most loans acquired from PIB by utilizing a methodology wherein loans with comparable characteristics were aggregated by type of collateral, remaining maturity, and repricing terms. Cash flows for each pool were determined by estimating future credit losses and the Effective Date for Amendments to the Presentationrate of Reclassifications of Items out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05) impacting FASB ASC 220, Comprehensive Income. This update defers the requirementprepayments. Projected monthly cash flows were then discounted to present items that are reclassified from accumulated other comprehensive income to net income in bothvalue using a risk-adjusted market rate for similar loans. To estimate the statement where net income is presented and the statement where other comprehensive income is presented. An entity should continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect before ASU No. 2011-05. This update became effective for the Company for interim and annual reporting periods beginning after December 15, 2011 and did not have a material impact on the consolidated financial statements.
FASB ASC 805 – In October 2012, the FASB issued an update (ASU No. 2012-06, Subsequent Accounting for an Indemnification Asset Recognized at the Acquisition Date as a Result of a Government-Assisted Acquisition of a Financial Institution) impacting FASB ASC 805, Business Combinations. This update specifies that when an entity recognizes an indemnification asset as a result of a government-assisted acquisition of a financial institution and subsequently a change in the cash flows expected to be collected on the indemnification asset occurs, the entity should subsequently account for the change in the measurement of the indemnification asset on the same basis as the change in the assets subject to indemnification. Any amortization of changes in value should be limited to the contractual term of the indemnification agreement (the lesser of the term of the indemnification agreement and the remaining life of the indemnified assets). This update becomes effective for interim and annual periods beginning on or after December 15, 2012, and is consistent with the Company’s current accounting treatment of changes in expected cash flows and the indemnification asset and will not have a material impact on the consolidated financial statements.
On November 30, 2011, the merger of Center and Nara (the "Merger") was completed. Pursuant to the merger agreement, holders of Center common stock received 0.7805 shares of BBCN common stock for each share of Center common stock held immediately prior to the effective time of the merger. The total Company shares issued to each Center shareholder was rounded down to the nearest whole share and cash was paid for any remaining fractional shares. Approximately 31.2 million shares of Company common stock, with a Merger date fair value of $292 million,the remaining loans, management analyzed the value of the underlying collateral of the loans, assuming the fair values of the loans were issuedderived from the eventual sale of the collateral. The value of the collateral was based on recently completed appraisals adjusted to Center shareholders. Outstanding Center stock optionsthe valuation date based on recognized industry indices. We discounted those values using market derived rates of return, with consideration given to the period of time and restricted stock awardscosts associated with the foreclosure and disposition of the collateral. There was no carryover of PIB’s allowance for loan losses associated with the loans we acquired as the loans were converted into stock options with respect to shares of BBCN common stock or shares of BBCN common stock, respectively, with appropriate adjustments to reflect the share exchange ratio.
The Merger was accounted for by BBCN using the acquisition method of accounting under ASC 805, Business Combinations. Accordingly, the assets and liabilities of Center wereinitially recorded at their respective fair values and represent management's estimates based on available information. Through the Merger wevalue. The loans acquired Center Bank's 21 full-service branch offices, two loan production offices, $326 million in cash, loans with a fair valuedeteriorated credit quality from PIB as of $1.4 billion, deposits with a fair value of $1.8 billion and borrowings with a fair value of $149 million. Goodwill of approximately $88 million was initially recorded in conjunction with the transaction. The goodwill related to the Merger represents the future economic benefit arising from the acquisition of Center Financial. The future economic benefits include the creation of a platform that can support future operations; strengthening our existing presence in Southern California; expanding our national presence through the addition of offices in Chicago, Seattle and Northern California; and future cost synergies. The results of Center's operationsFebruary 15, 2013 are included in our Consolidated Statements of Income subsequent to the date of the Merger.
The change in goodwill during the three and nine months ended September 30, 2012 and 2011 is as follows:
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2012 | | 2011 | | 2012 | | 2011 |
| (In thousands) |
Beginning of period | $ | 89,882 |
| | $ | 2,509 |
| | $ | 90,473 |
| | $ | 2,509 |
|
Adjustment | 0 |
| | 0 |
| | (591 | ) | | 0 |
|
Impairment | 0 |
| | 0 |
| | 0 |
| | 0 |
|
End of period | $ | 89,882 |
| | $ | 2,509 |
| | $ | 89,882 |
| | $ | 2,509 |
|
The goodwill arising from the Merger was reduced by a net $591 thousand to $87.4 million due to adjustments of certain acquisition date fair value asset and liability estimates during first quarter 2012. Estimates made in the acquisition date accounting are subject to revisions during the subsequent one-year measurement period. Due to the immateriality of the
|
| | | |
| (In thousands) |
Contractually required principal and interest at acquisition | $ | 54,462 |
|
Contractual cash flows not expected to be collected (nonaccretable discount) | 9,687 |
|
Expected cash flows at acquisition | 44,775 |
|
Interest component of expected cash flows (accretable discount) | 4.945 |
|
Fair value of acquired loans | $ | 39,830 |
|
The fair value of savings and transactional deposit accounts acquired from PIB was assumed to approximate the carrying value as these accounts have no stated maturity and are payable on demand. Certificates of deposit were valued by comparing the contractual cost of the the portfolio to an identical portfolio bearing current market rates. The projected cash flows from maturing certificates were calculated based on contractual rates. The fair value of the certificates of deposit was calculated by discounting their contractual cash flows at a market rate for a certificate of deposit with a corresponding maturity
The fair value of borrowings assumed was determined by estimating projected future cash outflows and discounting them at a market rate of interest.
The fair value of the net deferred tax assets acquired from PIB is provisional as of March 31, 2013, and adjustments to the provisional amount may occur during the measurement period as the Company elected not to retrospectively adjustobtains additional information about the facts and circumstances that existed as of the acquisition date accountingdate.
The $3.5 million of goodwill recognized in the PIB acquisition represents the future economic benefit arising from the acquisition including: the creation of a platform that can support future operations and instead recordedstrengthening the adjustmentsCompany's existing presence in first quarter 2012.the Pacific Northwest market. Goodwill is not amortized for book purposes and is not deductible for tax purposes.
|
| | | |
| For the three months ended March 31, 2013 |
| (In thousands) |
Balance, beginning of period | $ | 89,878 |
|
Acquired goodwill | 3,526 |
|
Impairment | — |
|
Balance, end of period | $ | 93,404 |
|
The operating results of PIB from the date of acquisition through March 31, 2013 are included in the Condensed Consolidated Statement of Income for 2013 and are not material to the total consolidated operating results for the three month period ended March 31, 2013 and, consequently, no pro forma information is presented. Direct costs related to the Mergeracquisition were expensed as incurred. During theincurred as merger related expenses. The Company incurred $1.3 million in PIB acquisition related expenses during three months ended September 30, 2012, we incurred $183 thousand in merger and integrationMarch 31, 2013. These expenses including $33 thousand inwere comprised of salaries and benefits, occupancy expenses, professional services, and $other non-interest expense.150 thousand in professional fees. During the three months ended September 30, 2011, we incurred $574 thousand in merger and integration expenses. During the nine months ended September 30, 2012, we incurred $3.3 million in merger and integration expenses, including $1.1 million in salaries and benefits and $2.2 million in professional fees. During the nine months ended September 30, 2011, we incurred $1.5 million in merger and integration expenses.
| |
4. | Stock-Based Compensation |
The Company has a stock-based incentive plan, the 2007 BBCN Bancorp Equity Incentive Plan (“2007(the “2007 Plan”). The 2007 Plan, approved by our stockholders on May 31, 2007, was amended and restated on July 25, 2007 and again on December 1, 2011. The 2007 Plan provides for grants of stock options, stock appreciation rights (“SARs”), restricted stock, performance shares and performance units (sometimes referred to individually or collectively as “awards”) to non-employee directors, officers, employees and consultants of the Company. Stock options may be either “incentiveincentive stock options”options (“ISOs”), as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), or nonqualified stock options (“NQSOs”).
The 2007 Plan gives the Company flexibility to (i) attract and retain qualified non-employee directors, executives and other key employees and consultants with appropriate equity-based awards, (ii) motivate high levels of performance, (iii) recognize employee contributions to the Company’s success, and (iv) align the interests of Plan participants with those of the Company’s stockholders. The exercise price for shares under an ISO may not be less than 100% of fair market value (“FMV”) on the date the award is granted under Code Section 422. Similarly, under the terms of the 2007 Plan the exercise price for SARs and NQSOs may not be less than 100% of FMV on the date of grant. Performance units are awarded to a
participant at the market price of the Company’s common stock on the date of award (after the lapse of the restriction period and the attainment of the performance criteria). No minimum exercise price is prescribed for performance shares and restricted stock awarded under the 2007 Plan.
ISOs, SARs and NQSOs have vesting periods of three to five years and have 10-year contractual terms. Restricted stock, performance shares, and performance units will be granted with a restriction period of not less than one year from the grant date for performance-based awards and not more than three years from the grant date for time-based vesting of grants. Compensation expense for awards is recordedrecognized over the vesting period.
Concurrently with the merger, Center'sThe Company has another stock-based incentive plan, the Center Financial Corporation 2006 Stock Incentive Plan, adopted April 12, 2006, as amended and restated June 13, 2007 ("2006(the "2006 Plan"), which was assumed by BBCN,the Company during the merger with the outstanding share awards of 585,860 shares and the 2,443,513 shares available for future grants at November 30, 2011 being converted at an exchange ratio of 0.7805.Center Bank.
The 2006 Plan provides for the granting of incentive stock options to officers and employees, and non-qualified stock options and restricted stock awards to employees (including officers) and non-employee directors. The option prices of all options granted under the 2006 Plan must be not less than 100% of the fair market value at the date of grant. All options granted generally vest at the rate of 20% per year except that the options granted to the non-employee directors vest at the rate of 33% per year. All options not exercised generally expire ten years after the date of grant.
Under the 2007 and 2006 plansPlans 2,630,0502,649,025 shares were available for future grants as of September 30, 2012March 31, 2013.
The total shares reserved for issuance will serve as the underlying value for all equity awards under the 2007 Plan and the 2006 Plan.Plans. With the exception of the shares underlying stock options and restricted stock awards, the board of directors may choose to settle the awards by paying the equivalent cash value or by delivering the appropriate number of shares.
The following is a summary of stock option activity under the 2007 and 2006 Plans for the ninethree months ended September 30,March 31, 20122013:
|
| | | | | | | | | | | | |
| Number of Shares | | Weighted- Average Exercise Price Per Share | | Weighted- Average Remaining Contractual Life (Years) | | Aggregate Intrinsic Value |
Outstanding - January 1, 2012 | 830,011 |
| | $ | 16.35 |
| | | | |
Granted | 0 |
| | 0 |
| | | | |
Exercised | (28,639 | ) | | 7.11 |
| | | | |
Forfeited | 0 |
| | 0 |
| | | | |
Outstanding - September 30, 2012 | 801,372 |
| | $ | 16.68 |
| | 5.68 | | $ | 992,000 |
|
Options exercisable - September 30, 2012 | 798,484 |
| | $ | 16.68 |
| | 5.67 | | $ | 992,000 |
|
Unvested options expected to vest after September 30, 2012 | 2,888 |
| | $ | 15.95 |
| | 9.17 | | $ | 0 |
|
|
| | | | | | | | | | | | |
| Number of Shares | | Weighted- Average Exercise Price Per Share | | Weighted- Average Remaining Contractual Life (Years) | | Aggregate Intrinsic Value |
Outstanding - January 1, 2013 | 797,805 |
| | $ | 16.70 |
| | | | |
Granted | — |
| | — |
| | | | |
Exercised | (48,000 | ) | | 8.64 |
| | | | |
Forfeited | — |
| | — |
| | | | |
Outstanding - March 31, 2013 | 749,805 |
| | $ | 17.21 |
| | 2.56 | | $ | 856,000 |
|
Options exercisable - March 31, 2013 | 741,805 |
| | $ | 17.31 |
| | 2.48 | | $ | 820,000 |
|
Unvested options expected to vest after March 31, 2013 | 8,000 |
| | $ | 8.64 |
| | 9.51 | | $ | 36,000 |
|
The following is a summary of restricted and performance unit activity under the 2007 and 2006 Plans for the ninethree months ended September 30,March 31, 20122013:
| | | Number of Shares | | Weighted- Average Grant Date Fair Value | | Weighted- Average Remaining Contractual Life (Years) | Number of Shares | | Weighted- Average Grant Date Fair Value | | Weighted- Average Remaining Contractual Life (Years) |
Outstanding - January 1, 2012 | 52,480 |
| | $ | 7.42 |
| | |
Outstanding - January 1, 2013 | | 512,183 |
| | $ | 9.78 |
| |
Granted | 502,710 |
| | 10.45 |
| | 5,000 |
| | 13.15 |
| |
Vested | (9,401 | ) | | 6.69 |
| | (58,740 | ) | | 9.40 |
| |
Forfeited | (4,599 | ) | | 7.46 |
| | (16,650 | ) | | 10.42 |
| |
Outstanding - September 30, 2012 | 541,190 |
| | $ | 10.31 |
| | 9.31 | |
Outstanding - March 31, 2013 | | 441,793 |
| | $ | 9.84 |
| | 8.81 |
The total fair value of performance units vested for the ninethree months ended September 30, 2012March 31, 2013 and 20112012 was $100718 thousand and $56 thousand0, respectively.
The amount charged against income related to stock-based payment arrangements was $709 thousand and $398 thousand, before income tax benefit of $32867 thousand and $5169 thousand, in relation to the stock-based payment arrangements, was $818 thousand and $13 thousand for the three months ended September 30, 2012March 31, 2013 and 2011, respectively. The amount charged against income, before income tax benefit of $805 thousand and $21 thousand, in relation to the stock-based payment arrangements, was $2.0 million and $52 thousand for the nine months ended September 30, 2012 and 2011, respectively. At September 30, 2012March 31, 2013, unrecognized compensation expense related to non-vested stock option grants and restricted and performance units aggregated $3.62.0 million, and is expected to be recognized over a remaining weighted average vesting period of 1.681.83 years.
The estimated annual stock-based compensation expense as of September 30, 2012March 31, 2013 for each of the succeeding years is indicated in the table below:
| | | Stock Based Compensation Expense | Stock Based Compensation Expense |
| (In thousands) | (In thousands) |
Remainder of 2012 | $ | 751 |
| |
Remainder of 2013 | | $ | 651 |
|
For the year ended December 31: | | |
2013 | 1,412 |
| |
2014 | 659 |
| 610 |
|
2015 | 639 |
| 589 |
|
2016 | 101 |
| 96 |
|
2017 | 7 |
| 7 |
|
Total | $ | 3,569 |
| $ | 1,953 |
|
| |
5. | Earnings Per Share (“EPS”) |
Basic EPS does not reflect the possibility of dilution that could result from the issuance of additional shares of common stock upon exercise or conversion of outstanding securities, and is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if stock options or other contracts to issue common stock were exercised or converted to common stock that would then share in our earnings. For the three months ended September 30, 2012March 31, 2013 and 20112012, stock options and restricted shares awards for approximately 565 thousand565,000 shares and 381 thousand shares of common stock, respectively, were excluded in computing diluted earnings per common share because they were antidilutive. For the nine months ended September 30, 2012 and 2011, stock options and restricted shares awards for approximately 564 thousand and 376 thousand564,000 shares of common stock, respectively, were excluded in computing diluted earnings per common share because they were antidilutive. Additionally, warrants to purchase 337,00018,045 shares of common stock (related to the TARP Capital Purchase Plan) were antidilutive and excluded for the three and nine337,480 months ended September 30, 2012. Warrants to purchase 521,000 shares of common stock (related to the TARP Capital Purchase Plan) were antidilutive and excluded for the three and ninemonths ended September 30, 2011March 31, 2013. and 2012.
The following table shows the computation of basic and diluted EPS for the three and six months ended September 30, 2012March 31, 2013 and 20112012.
| | | For the three months ended September 30, | For the three months ended March 31, |
| 2012 | | 2011 | 2013 | | 2012 |
| Net income available to common stockholders (Numerator) | | Shares (Denominator) | | Per Share (Amount) | | Net income available to common stockholders (Numerator) | | Shares (Denominator) | | Per Share (Amount) | Net income available to common stockholders (Numerator) | | Shares (Denominator) | | Per Share (Amount) | | Net income available to common stockholders (Numerator) | | Shares (Denominator) | | Per Share (Amount) |
| (In thousands, except share and per share data) | (In thousands, except share and per share data) |
Net income as reported | $ | 18,398 |
| | | | | | $ | 9,815 |
| | | | | $ | 17,461 |
| | | | | | $ | 23,934 |
| | | | |
Less: preferred stock dividends and accretion of preferred stock discount | 0 |
| | | | | | (1,077 | ) | | | | | — |
| | | | | | (1,869 | ) | | | | |
Basic EPS - common stock | $ | 18,398 |
| | 78,015,960 |
| | $ | 0.24 |
| | $ | 8,738 |
| | 38,098,142 |
| | $ | 0.23 |
| $ | 17,461 |
| | 78,389,434 |
| | $ | 0.22 |
| | $ | 22,065 |
| | 77,987,342 |
| | $ | 0.28 |
|
Effect of Dilutive Securities: | | | | | | | | | | | | | | | | | | | | | | |
Stock Options and Performance Units | | | 87,835 |
| | | | | | 5,541 |
| | | | | 79,311 |
| | | | | | 73,323 |
| | |
Common stock warrants | | | 0 |
| | | | | | 0 |
| | | | | 11,926 |
| | | | | | 41,153 |
| | |
Diluted EPS - common stock | $ | 18,398 |
| | 78,103,795 |
| | $ | 0.24 |
| | $ | 8,738 |
| | 38,103,683 |
| | $ | 0.23 |
| $ | 17,461 |
| | 78,480,671 |
| | $ | 0.22 |
| | $ | 22,065 |
| | 78,101,818 |
| | $ | 0.28 |
|
|
| | | | | | | | | | | | | | | | | | | | | |
| For the nine months ended September 30, |
| 2012 | | 2011 |
| Net income available to common stockholders (Numerator) | | Shares (Denominator) | | Per Share (Amount) | | Net income available to common stockholders (Numerator) | | Shares (Denominator) | | Per Share (Amount) |
| (In thousands, except share and per share data) |
Net income as reported | $ | 61,696 |
| | | | | | $ | 22,879 |
| | | | |
Less: preferred stock dividends and accretion of preferred stock discount | (5,640 | ) | | | | | | (3,227 | ) | | | | |
Basic EPS - common stock | $ | 56,056 |
| | 78,004,458 |
| | $ | 0.72 |
| | $ | 19,652 |
| | 38,044,625 |
| | $ | 0.52 |
|
Effect of Dilutive Securities: | | | | | | | | | | | |
Stock Options and Performance Units | | | 77,601 |
| | | | | | 25,516 |
| | |
Common stock warrants | | | 0 |
| | | | | | 0 |
| | |
Diluted EPS - common stock | $ | 56,056 |
| | 78,082,059 |
| | $ | 0.72 |
| | $ | 19,652 |
| | 38,070,141 |
| | $ | 0.52 |
|
6. Securities Available for Sale
The following is a summary of securities available for sale as of the dates indicated:
| | | At September 30, 2012 | At March 31, 2013 |
| Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Estimated Fair Value | Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Estimated Fair Value |
| (In thousands) | (In thousands) |
Debt securities: | | | | | | | | | | | | | | |
U.S. Treasury | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| |
GSE collateralized mortgage obligations* | 230,819 |
| | 4,875 |
| | (25 | ) | | 235,669 |
| $ | 299,271 |
| | $ | 4,451 |
| | $ | (1,138 | ) | | $ | 302,584 |
|
GSE mortgage-backed securities* | 414,487 |
| | 13,243 |
| | (141 | ) | | 427,589 |
| 381,570 |
| | 9,150 |
| | (994 | ) | | 389,726 |
|
Trust preferred security | 4,498 |
| | 0 |
| | (961 | ) | | 3,537 |
| |
Trust preferred securities | | 4,505 |
| | — |
| | (573 | ) | | 3,932 |
|
Municipal bonds | 4,506 |
| | 633 |
| | 0 |
| | 5,139 |
| 5,706 |
| | 575 |
| | — |
| | 6,281 |
|
Total debt securities | 654,310 |
| | 18,751 |
| | (1,127 | ) | | 671,934 |
| 691,052 |
| | 14,176 |
| | (2,705 | ) | | 702,523 |
|
Mutual funds - GSE mortgage related securities | 14,710 |
| | 415 |
| | 0 |
| | 15,125 |
| 14,710 |
| | 208 |
| | — |
| | 14,918 |
|
| $ | 669,020 |
| | $ | 19,166 |
| | $ | (1,127 | ) | | $ | 687,059 |
| $ | 705,762 |
| | $ | 14,384 |
| | $ | (2,705 | ) | | $ | 717,441 |
|
| At December 31, 2011 | | | | | | | |
| Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Estimated Fair Value | At December 31, 2012 |
| (In thousands) | Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Estimated Fair Value |
| | (In thousands) |
Debt securities: | | | | | | | | | | | | | | |
U.S. Treasury | $ | 300 |
| | $ | 0 |
| | $ | 0 |
| | $ | 300 |
| |
GSE collateralized mortgage obligations* | 222,400 |
| | 5,480 |
| | (44 | ) | | 227,836 |
| $ | 249,373 |
| | $ | 5,649 |
| | $ | (110 | ) | | $ | 254,912 |
|
GSE mortgage-backed securities* | 477,555 |
| | 10,322 |
| | (123 | ) | | 487,754 |
| 415,925 |
| | 10,277 |
| | (662 | ) | | 425,540 |
|
Trust preferred securities | 5,532 |
| | 0 |
| | (1,184 | ) | | 4,348 |
| 4,502 |
| | — |
| | (665 | ) | | 3,837 |
|
Municipal bonds | 5,257 |
| | 507 |
| | 0 |
| | 5,764 |
| 4,506 |
| | 612 |
| | — |
| | 5,118 |
|
Total debt securities | 711,044 |
| | 16,309 |
| | (1,351 | ) | | 726,002 |
| 674,306 |
| | 16,538 |
| | (1,437 | ) | | 689,407 |
|
Mutual funds - GSE mortgage related securities | 14,710 |
| | 227 |
| | (19 | ) | | 14,918 |
| 14,710 |
| | 286 |
| | — |
| | 14,996 |
|
| $ | 725,754 |
| | $ | 16,536 |
| | $ | (1,370 | ) | | $ | 740,920 |
| $ | 689,016 |
| | $ | 16,824 |
| | $ | (1,437 | ) | | $ | 704,403 |
|
| |
* | Government Sponsored Enterprises (GSE) investments were issued by GNMA, FNMA and FHLMC and are all residential mortgage-backed investments. |
As of September 30, 2012March 31, 2013 and December 31, 20112012, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders' equity.
For the three months ended March 31, 2013 and 2012, $3.7 million and $1.1 million of gross unrealized losses, respectively, were included in accumulated other comprehensive income during the period. A total of $54 thousand and $816 thousand were reclassified out of accumulated other comprehensive income into earnings for the three months ended March 31, 2013 and 2012, respectively, as a result of securities being sold. The proceeds from sales of securities and the associated gross gains and losses recorded in earnings are listed below:
| | | For the three months ended September 30, | | For the nine months ended September 30, | For the three months ended March 31, |
| 2012 | | 2011 | | 2012 | | 2011 | 2013 | | 2012 |
| (In thousands) | (In thousands) |
Proceeds | $ | 26,563 |
| | $ | 0 |
| | $ | 28,446 |
| | $ | 0 |
| $ | 6,636 |
| | $ | 1,883 |
|
Gross gains | 132 |
| | 0 |
| | 948 |
| | 0 |
| 54 |
| | 816 |
|
Gross losses | 0 |
| | 0 |
| | 0 |
| | 0 |
| — |
| | — |
|
The amortized cost and estimated fair value of debt securities at September 30, 2012March 31, 2013, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.
| | | Amortized Cost | | Estimated Fair Value | Amortized Cost | | Estimated Fair Value |
| (In thousands) | (In thousands) |
Available for sale: | | | | | | |
Due within one year | $ | 0 |
| | $ | 0 |
| $ | — |
| | $ | — |
|
Due after one year through five years | 340 |
| | 358 |
| 340 |
| | 356 |
|
Due after five years through ten years | 3,883 |
| | 4,451 |
| 3,883 |
| | 4,393 |
|
Due after ten years | 4,781 |
| | 3,867 |
| 5,988 |
| | 5,464 |
|
GSE collaterized mortgage obligations | 230,819 |
| | 235,669 |
| |
GSE collateralized mortgage obligations | | 299,271 |
| | 302,584 |
|
GSE mortgage-backed securities | 414,487 |
| | 427,589 |
| 381,570 |
| | 389,726 |
|
Mutual funds - GSE mortgage related securities | 14,710 |
| | 15,125 |
| 14,710 |
| | 14,918 |
|
| $ | 669,020 |
| | $ | 687,059 |
| $ | 705,762 |
| | $ | 717,441 |
|
Securities with carrying values of approximately $348.9346.0 million and $425.5338.6 million at September 30, 2012March 31, 2013 and December 31, 20112012, respectively, were pledged to secure public deposits, various borrowings and for other purposes as required or permitted by law.
The following table shows our investments’ gross unrealized losses and estimated fair value, aggregated by investment category and the length of time that the individual securities have been in a continuous unrealized loss position as of the dates indicated.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At September 30, 2012 |
| Less than 12 months | | 12 months or longer | | Total |
Description of Securities | Number of Securities | | Fair Value | | Gross Unrealized Losses | | Number of Securities | | Fair Value | | Gross Unrealized Losses | | Number of Securities | | Fair Value | | Gross Unrealized Losses |
| (In thousands) |
GSE collaterized mortgage obligations | 4 |
| | $ | 7,323 |
| | $ | (25 | ) | | 0 |
| | $ | 0 |
| | $ | 0 |
| | 4 |
| | $ | 7,323 |
| | $ | (25 | ) |
GSE mortgage-backed securities | 6 |
| | 9,541 |
| | (107 | ) | | 1 |
| | 3,756 |
| | (34 | ) | | 7 |
| | 13,297 |
| | (141 | ) |
Trust preferred security | 0 |
| | 0 |
| | 0 |
| | 1 |
| | 3,537 |
| | (961 | ) | | 1 |
| | 3,537 |
| | (961 | ) |
Mutual funds - GSE mortgage related security | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
|
| 10 |
| | $ | 16,864 |
| | $ | (132 | ) | | 2 |
| | $ | 7,293 |
| | $ | (995 | ) | | 12 |
| | $ | 24,157 |
| | $ | (1,127 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At March 31, 2013 |
| Less than 12 months | | 12 months or longer | | Total |
Description of Securities | Number of Securities | | Fair Value | | Gross Unrealized Losses | | Number of Securities | | Fair Value | | Gross Unrealized Losses | | Number of Securities | | Fair Value | | Gross Unrealized Losses |
| (In thousands) |
GSE collateralized mortgage obligations | 10 |
| | $ | 109,327 |
| | $ | (1,138 | ) | | — |
| | $ | — |
| | $ | — |
| | 10 |
| | $ | 109,327 |
| | $ | (1,138 | ) |
GSE mortgage-backed securities | 10 |
| | 43,668 |
| | (925 | ) | | 3 |
| | 7,675 |
| | (69 | ) | | 13 |
| | 51,343 |
| | (994 | ) |
Trust preferred securities | — |
| | — |
| | — |
| | 1 |
| | 3,932 |
| | (573 | ) | | 1 |
| | 3,932 |
| | (573 | ) |
| 20 |
| | $ | 152,995 |
| | $ | (2,063 | ) | | 4 |
| | $ | 11,607 |
| | $ | (642 | ) | | 24 |
| | $ | 164,602 |
| | $ | (2,705 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At December 31, 2011 |
| Less than 12 months | | 12 months or longer | | Total |
Description of Securities | Number of Securities | | Fair Value | | Gross Unrealized Losses | | Number of Securities | | Fair Value | | Gross Unrealized Losses | | Number of Securities | | Fair Value | | Gross Unrealized Losses |
| (In thousands) |
GSE collaterized mortgage obligations | 2 |
| | $ | 3,305 |
| | $ | (28 | ) | | 1 |
| | $ | 14,007 |
| | $ | (16 | ) | | 3 |
| | $ | 17,312 |
| | $ | (44 | ) |
GSE mortgage-backed securities | 5 |
| | 38,082 |
| | (123 | ) | | 0 |
| | 0 |
| | 0 |
| | 5 |
| | 38,082 |
| | (123 | ) |
Trust Preferred security | 0 |
| | 0 |
| | 0 |
| | 1 |
| | 3,303 |
| | (1,184 | ) | | 1 |
| | 3,303 |
| | (1,184 | ) |
Mutual funds - GSE mortgage related security | 1 |
| | 5,229 |
| | (19 | ) | | 0 |
| | 0 |
| | 0 |
| | 1 |
| | 5,229 |
| | (19 | ) |
| 8 |
| | $ | 46,616 |
| | $ | (170 | ) | | 2 |
| | $ | 17,310 |
| | $ | (1,200 | ) | | 10 |
| | $ | 63,926 |
| | $ | (1,370 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At December 31, 2012 |
| Less than 12 months | | 12 months or longer | | Total |
Description of Securities | Number of Securities | | Fair Value | | Gross Unrealized Losses | | Number of Securities | | Fair Value | | Gross Unrealized Losses | | Number of Securities | | Fair Value | | Gross Unrealized Losses |
| (In thousands) |
GSE collateralized mortgage obligations | 3 |
| | $ | 18,009 |
| | $ | (110 | ) | | — |
| | $ | — |
| | $ | — |
| | 3 |
| | $ | 18,009 |
| | $ | (110 | ) |
GSE mortgage-backed securities | 7 |
| | 32,406 |
| | (597 | ) | | 3 |
| | 8,251 |
| | (65 | ) | | 10 |
| | 40,657 |
| | (662 | ) |
Trust Preferred securities | — |
| | — |
| | — |
| | 1 |
| | 3,837 |
| | (665 | ) | | 1 |
| | 3,837 |
| | (665 | ) |
| 10 |
| | $ | 50,415 |
| | $ | (707 | ) | | 4 |
| | $ | 12,088 |
| | $ | (730 | ) | | 14 |
| | $ | 62,503 |
| | $ | (1,437 | ) |
We evaluateThe Company evaluates securities for other-than-temporary-impairment ("OTTI") on at least a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to the financial condition and near-term prospects of the issuer, the length of time and the extent to which the fair valuevalues of the securities hashave been less than ourthe cost forof the securities, and ourmanagement's intention to sell, or whether it is more likely than not that wemanagement will be
required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. In analyzing an issuer’s financial condition, we considerthe Company considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition.
The trust preferred securitysecurities at September 30, 2012March 31, 2013 hashad an amortized cost of $4.5 million and an unrealized loss of $1.0 million573 thousand at September 30, 2012March 31, 2013. The trust preferred security issecurities are scheduled to mature in May 2047, and had a first call date option in May 2012. Management determined this unrealized loss did not represent OTTI at September 30, 2012 as the investment is2047. These securities are rated investment grade and there are no credit quality concerns with the obligor. The market value decline is deemed to be due toCertain of the current market volatilityCompany's GSE securities were in an unrealized loss position at March 31, 2013. All of the Company's GSE investments have high credit ratings ("AA" grade) upon purchase and is not reflective of management’s expectations of our ability to fully recover this investment, which may be at maturity.there have been no credit rating changes since the purchase. Interest on the trust preferred securitysecurities and the GSE securities have been paid as agreed, and management believes this will continue in the future and that the trust preferred securitysecurities will be repaid in full as scheduled. The market value declines for these securities are deemed to be due to the current market volatility and are not reflective of management’s expectations of its ability to fully recover these investments, which may be at maturity. For these reasons, no OTTI was recognized on the trust preferred securitysecurities, GSE collateralized mortgage obligations and GSE mortgage-backed securities that are in an unrealized loss position at September 30, 2012March 31, 2013.
We considerThe Company considers the losses on ourthe investments in unrealized loss positions at September 30, 2012March 31, 2013 to be temporary based on: 1) the likelihood of recovery; 2) the information relative to the extent and duration of the decline in market value; and 3) the Company’s intention not to sell, and ourmanagement's determination that it is more likely than not that wemanagement will not be required to sell a security in an unrealized loss position before recovery of its amortized cost basis.
| |
7. | Loans Receivable and Allowance for Loan Losses |
The following is a summary of loans receivable by major category:
| | | September 30, 2012 | | December 31, 2011 | March 31, 2013 | | December 31, 2012 |
| (In thousands) | (In thousands) |
Loan portfolio composition | | | | | | |
Real estate loans: | | | | | | |
Residential | $ | 3,354 |
| | $ | 2,043 |
| $ | 10,667 |
| | $ | 9,247 |
|
Commercial & industrial | 2,881,079 |
| | 2,631,880 |
| 3,294,978 |
| | 3,100,466 |
|
Construction | 56,433 |
| | 44,756 |
| 69,087 |
| | 65,045 |
|
Total real estate loans | 2,940,866 |
| | 2,678,679 |
| 3,374,732 |
| | 3,174,758 |
|
Commercial business | 898,977 |
| | 849,576 |
| 943,860 |
| | 921,556 |
|
Trade finance | 177,285 |
| | 146,684 |
| 134,393 |
| | 152,070 |
|
Consumer and other | 54,442 |
| | 66,631 |
| 48,881 |
| | 49,954 |
|
Total loans outstanding | 4,071,570 |
| | 3,741,570 |
| 4,501,866 |
| | 4,298,338 |
|
Less: deferred loan fees | (2,076 | ) | | (2,744 | ) | (1,820 | ) | | (2,086 | ) |
Gross loans receivable | 4,069,494 |
| | 3,738,826 |
| 4,500,046 |
| | 4,296,252 |
|
Less: allowance for loan losses | (65,952 | ) | | (61,952 | ) | (73,268 | ) | | (66,941 | ) |
Loans receivable, net | $ | 4,003,542 |
| | $ | 3,676,874 |
| $ | 4,426,778 |
| | $ | 4,229,311 |
|
Our loan portfolio is made up of four segments: real estate loans, commercial business, trade finance and consumer and other. These segments are further segregated between loans accounted for under the amortized cost method (referred to as "Legacy("Legacy Loans") and acquired loans that were originally recorded at fair value with no carryover of the related pre-acquisition allowance for loan losses (referred to as "Acquired("Acquired Loans"). The loans acquired from CenterAcquired Loans are further segregated between Acquired Credit Impaired Loans (loans with credit deterioration aton the time of the Mergeracquisition date and accounted for under ASC 310-30) and Acquired Performing Loans (loans that were pass graded aton the timeacquisition date and the fair value adjustment is amortized over the contractual life under ASC 310-20). The outstanding principal balance and the related carrying amount of the Merger).acquired PIB loans included in the statement of financial condition as of March 31, 2013 was $148.7 million and $130.0 million, respectively.
The following table presents changes in the accretable discount on the acquiredAcquired Credit Impaired Loans in the merger for the three and nine months ended September 30, March 31, 2013 and 2012:
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | Three Months Ended March 31, |
| 2012 | | 2011 | | 2012 | | 2011 | 2013 | | 2012 |
| (In thousands) | (In thousands) |
Balance at beginning of period | $ | 22,966 |
| | $ | 0 |
| | $ | 31,999 |
| | $ | 0 |
| $ | 18,652 |
| | $ | 31,999 |
|
Additions due to acquisitions during the period | | 4,945 |
| | — |
|
Accretion | (3,415 | ) | | 0 |
| | (10,866 | ) | | 0 |
| (3,446 | ) | | (3,561 | ) |
Changes in expected cash flows | 516 |
| | 0 |
| | (1,066 | ) | | 0 |
| 3,259 |
| | 1,350 |
|
Balance at end of period | $ | 20,067 |
| | $ | 0 |
| | $ | 20,067 |
| | $ | 0 |
| $ | 23,410 |
| | $ | 29,788 |
|
On the acquisition date, the amount by which the undiscounted expected cash flows exceed the estimated fair value of the acquired loansAcquired Credit Impaired Loans is the “accretable yield”. The accretable yield is then measured at each financial reporting date and represents the difference between the remaining undiscounted expected cash flows and the current carrying value of the loans. The accretable yield will change from period to period due to the followings:following: 1) estimates of the remaining life of acquired loans will affect the amount of future interest income, 2) indiciesindices for variable rates of interest on acquired loansAcquired Credit Impaired Loans may change; and 3) estimates of the amount of the contractual principal and interest that will not be collected (nonaccretable difference) may change.
The following tables detail the activity in the allowance for loan losses by portfolio segment for the three and nine months ended September 30, 2012March 31, 2013 is as follows:and 2012:
| | | Legacy | | Acquired | | Total | For the three months ended March 31, 2013 |
| Real Estate | | Commercial Business | | Trade Finance | | Consumer and Other | | Real Estate | | Commercial Business | | Trade Finance | | Consumer and Other | | Legacy | | Acquired | | Total |
| (In thousands) | Real Estate | | Commercial Business | | Trade Finance | | Consumer and Other | | Real Estate | | Commercial Business | | Trade Finance | | Consumer and Other | |
Three Months Ended September 30, 2012 | |
| | (In thousands) |
Three Months Ended March 31, 2013 | | Three Months Ended March 31, 2013 |
Balance, beginning of period | $ | 37,237 |
| | $ | 20,880 |
| | $ | 3,164 |
| | $ | 1,115 |
| | $ | 2,283 |
| | $ | 397 |
| | $ | 340 |
| | $ | 89 |
| | $ | 65,505 |
| $ | 41,505 |
| | $ | 16,490 |
| | $ | 2,349 |
| | $ | 658 |
| | $ | 4,718 |
| | $ | 1,115 |
| | $ | 3 |
| | $ | 103 |
| | $ | 66,941 |
|
Provision (credit) for loan losses | 5,499 |
| | 988 |
| | (495 | ) | | (418 | ) | | 750 |
| | 784 |
| | (157 | ) | | (51 | ) | | 6,900 |
| 3,069 |
| | 39 |
| | (625 | ) | | (129 | ) | | 5,320 |
| | (189 | ) | | (3 | ) | | 24 |
| | 7,506 |
|
Loans charged off | (1,832 | ) | | (5,574 | ) | | 0 |
| | (2 | ) | | (242 | ) | | (118 | ) | | 0 |
| | (1 | ) | | (7,769 | ) | (905 | ) | | (183 | ) | | (26 | ) | | (7 | ) | | (151 | ) | | (124 | ) | | — |
| | (33 | ) | | (1,429 | ) |
Recoveries of charged offs | 973 |
| | 275 |
| | 0 |
| | 24 |
| | 0 |
| | 15 |
| | 0 |
| | 29 |
| | 1,316 |
| 40 |
| | 176 |
| | — |
| | 16 |
| | 2 |
| | 7 |
| | — |
| | 9 |
| | 250 |
|
Balance, end of period | $ | 41,877 |
| | $ | 16,569 |
| | $ | 2,669 |
| | $ | 719 |
| | $ | 2,791 |
| | $ | 1,078 |
| | $ | 183 |
| | $ | 66 |
| | $ | 65,952 |
| $ | 43,709 |
| | $ | 16,522 |
| | $ | 1,698 |
| | $ | 538 |
| | $ | 9,889 |
| | $ | 809 |
| | $ | — |
| | $ | 103 |
| | $ | 73,268 |
|
Nine Months Ended September 30, 2012 | | | | | | | | | | | | | | | | | | |
Balance, beginning of period | $ | 39,040 |
| | $ | 20,681 |
| | $ | 1,786 |
| | $ | 445 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 61,952 |
| |
Provision (credit) for loan losses | 6,831 |
| | 3,203 |
| | 823 |
| | 700 |
| | 2,899 |
| | 1,701 |
| | 483 |
| | 42 |
| | 16,682 |
| |
Loans charged off | (6,095 | ) | | (8,470 | ) | | 0 |
| | (485 | ) | | (411 | ) | | (755 | ) | | (300 | ) | | (244 | ) | | (16,760 | ) | |
Recoveries of charged offs | 2,101 |
| | 1,155 |
| | 60 |
| | 59 |
| | 303 |
| | 132 |
| | 0 |
| | 268 |
| | 4,078 |
| |
Balance, end of period | $ | 41,877 |
| | $ | 16,569 |
| | $ | 2,669 |
| | $ | 719 |
| | $ | 2,791 |
| | $ | 1,078 |
| | $ | 183 |
| | $ | 66 |
| | $ | 65,952 |
| |
The activity in the allowance for loan losses by portfolio segment for the three and nine months endedSeptember 30, 2011 is as follows:
| | | Legacy | | Total | For the three months ended March 31, 2012 |
| Real Estate | | Commercial Business | | Trade Finance | | Consumer and Other | | Legacy | | Acquired | | Total |
| (In thousands) | Real Estate | | Commercial Business | | Trade Finance | | Consumer and Other | | Real Estate | | Commercial Business | | Trade Finance | | Consumer and Other | |
Three Months Ended September 30, 2011 | | | | | | | | | | |
| | (In thousands) |
Three Months Ended March 31, 2012 | | Three Months Ended March 31, 2012 |
Balance, beginning of period | $ | 39,063 |
| | $ | 20,058 |
| | $ | 188 |
| | $ | 387 |
| | $ | 59,696 |
| $ | 39,040 |
| | $ | 20,681 |
| | $ | 1,786 |
| | $ | 445 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 61,952 |
|
Provision (credit) for loan losses | (429 | ) | | 2,007 |
| | 1,602 |
| | 303 |
| | 3,483 |
| (1,317 | ) | | 1,627 |
| | (23 | ) | | 548 |
| | 1,254 |
| | 477 |
| | 16 |
| | 18 |
| | 2,600 |
|
Loans charged off | (2,358 | ) | | (1,479 | ) | | 0 |
| | (133 | ) | | (3,970 | ) | (1,934 | ) | | (1,362 | ) | | — |
| | — |
| | (14 | ) | | (47 | ) | | — |
| | (25 | ) | | (3,382 | ) |
Recoveries of charged offs | 455 |
| | 321 |
| | 0 |
| | 24 |
| | 800 |
| 20 |
| | 645 |
| | 60 |
| | 17 |
| | 303 |
| | 87 |
| | — |
| | 7 |
| | 1,139 |
|
Balance, end of period | $ | 36,731 |
| | $ | 20,907 |
| | $ | 1,790 |
| | $ | 581 |
| | $ | 60,009 |
| $ | 35,809 |
| | $ | 21,591 |
| | $ | 1,823 |
| | $ | 1,010 |
| | $ | 1,543 |
| | $ | 517 |
| | $ | 16 |
| | $ | — |
| | $ | 62,309 |
|
Nine Months Ended September 30, 2011 | | | | | | | | | | |
Balance, beginning of period | $ | 36,563 |
| | $ | 24,930 |
| | $ | 192 |
| | $ | 635 |
| | $ | 62,320 |
| |
Provision (credit) for loan losses | 17,161 |
| | 62 |
| | 1,598 |
| | (28 | ) | | 18,793 |
| |
Loans charged off | (18,193 | ) | | (6,022 | ) | | 0 |
| | (256 | ) | | (24,471 | ) | |
Recoveries of charged offs | 1,200 |
| | 1,937 |
| | 0 |
| | 230 |
| | 3,367 |
| |
Balance, end of period | $ | 36,731 |
| | $ | 20,907 |
| | $ | 1,790 |
| | $ | 581 |
| | $ | 60,009 |
| |
The following table disaggregatestables disaggregate the allowance for loan losses and the loans receivables by impairment methodology at September 30, 2012March 31, 2013 and December 31, 20112012:
| | | September 30, 2012 | March 31, 2013 |
| Legacy | | Acquired | | Total | Legacy | | Acquired | | Total |
| Real Estate | | Commercial Business | | Trade Finance | | Consumer and Other | | Real Estate | | Commercial Business | | Trade Finance | | Consumer and Other | | Real Estate | | Commercial Business | | Trade Finance | | Consumer and Other | | Real Estate | | Commercial Business | | Trade Finance | | Consumer and Other | |
| (In thousands) | (In thousands) |
Allowance for loan losses: | Individually evaluated for impairment | $ | 4,510 |
| | $ | 2,529 |
| | $ | 82 |
| | $ | 0 |
| | $ | 678 |
| | $ | 905 |
| | $ | 0 |
| | $ | 0 |
| | $ | 8,704 |
| $ | 6,121 |
| | $ | 2,692 |
| | $ | 77 |
| | $ | 10 |
| | $ | 5,355 |
| | $ | 807 |
| | $ | — |
| | $ | — |
| | $ | 15,062 |
|
Collectively evaluated for impairment | 37,367 |
| | 14,040 |
| | 2,587 |
| | 719 |
| | 1 |
| | 173 |
| | 183 |
| | 66 |
| | 55,136 |
| 37,588 |
| | 13,830 |
| | 1,621 |
| | 528 |
| | — |
| | 2 |
| | — |
| | 103 |
| | 53,672 |
|
Loans acquired with credit deterioration | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 2,112 |
| | 0 |
| | 0 |
| | 0 |
| | 2,112 |
| |
Acquired Credit Impaired Loans | | — |
| | — |
| | — |
| | — |
| | 4,534 |
| | — |
| | — |
| | — |
| | 4,534 |
|
Total | $ | 41,877 |
| | $ | 16,569 |
| | $ | 2,669 |
| | $ | 719 |
| | $ | 2,791 |
| | $ | 1,078 |
| | $ | 183 |
| | $ | 66 |
| | $ | 65,952 |
| $ | 43,709 |
| | $ | 16,522 |
| | $ | 1,698 |
| | $ | 538 |
| | $ | 9,889 |
| | $ | 809 |
| | $ | — |
| | $ | 103 |
| | $ | 73,268 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans outstanding: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | $ | 35,031 |
| | $ | 24,912 |
| | $ | 5,968 |
| | $ | 134 |
| | $ | 13,611 |
| | $ | 2,663 |
| | $ | 0 |
| | $ | 0 |
| | $ | 82,319 |
| $ | 41,077 |
| | $ | 20,912 |
| | $ | 6,886 |
| | $ | 534 |
| | $ | 28,488 |
| | $ | 3,351 |
| | $ | — |
| | $ | 784 |
| | $ | 102,032 |
|
Collectively evaluated for impairment | 2,152,581 |
| | 689,949 |
| | 161,907 |
| | 28,014 |
| | 635,692 |
| | 133,098 |
| | 9,102 |
| | 23,197 |
| | 3,833,540 |
| 2,545,220 |
| | 751,927 |
| | 127,016 |
| | 27,247 |
| | 644,708 |
| | 116,308 |
| | — |
| | 17,582 |
| | 4,230,008 |
|
Loans acquired with credit deterioration | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 103,951 |
| | 48,355 |
| | 308 |
| | 3,097 |
| | 155,711 |
| |
Acquired Credit Impaired Loans | | — |
| | — |
| | — |
| | — |
| | 115,239 |
| | 51,362 |
| | 491 |
| | 2,734 |
| | 169,826 |
|
Total | $ | 2,187,612 |
| | $ | 714,861 |
| | $ | 167,875 |
| | $ | 28,148 |
| | $ | 753,254 |
| | $ | 184,116 |
| | $ | 9,410 |
| | $ | 26,294 |
| | $ | 4,071,570 |
| $ | 2,586,297 |
| | $ | 772,839 |
| | $ | 133,902 |
| | $ | 27,781 |
| | $ | 788,435 |
| | $ | 171,021 |
| | $ | 491 |
| | $ | 21,100 |
| | $ | 4,501,866 |
|
| | | December 31, 2011 | December 31, 2012 |
| Legacy | | Acquired | | Total | Legacy | | Acquired | | Total |
| Real Estate | | Commercial Business | | Trade Finance | | Consumer and Other | | Real Estate | | Commercial Business | | Trade Finance | | Consumer and Other | | Real Estate | | Commercial Business | | Trade Finance | | Consumer and Other | | Real Estate | | Commercial Business | | Trade Finance | | Consumer and Other | |
| (In thousands) | (In thousands) |
Allowance for loan losses: | Individually evaluated for impairment | $ | 10,525 |
| | $ | 7,168 |
| | $ | 342 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 18,035 |
| $ | 4,723 |
| | $ | 3,084 |
| | $ | 96 |
| | $ | — |
| | $ | 183 |
| | $ | 1,074 |
| | $ | — |
| | $ | — |
| | $ | 9,160 |
|
Collectively evaluated for impairment | 28,515 |
| | 13,513 |
| | 1,444 |
| | 445 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 43,917 |
| 36,782 |
| | 13,406 |
| | 2,253 |
| | 658 |
| | — |
| | 41 |
| | 3 |
| | 103 |
| | 53,246 |
|
Loans acquired with credit deterioration | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| |
Acquired Credit Impaired Loans | | — |
| | — |
| | — |
| | — |
| | 4,535 |
| | — |
| | — |
| | — |
| | 4,535 |
|
Total | $ | 39,040 |
| | $ | 20,681 |
| | $ | 1,786 |
| | $ | 445 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 61,952 |
| $ | 41,505 |
| | $ | 16,490 |
| | $ | 2,349 |
| | $ | 658 |
| | $ | 4,718 |
| | $ | 1,115 |
| | $ | 3 |
| | $ | 103 |
| | $ | 66,941 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans outstanding: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Individually evaluated for impairment | $ | 53,023 |
| | $ | 34,922 |
| | $ | 4,963 |
| | $ | 149 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 93,057 |
| $ | 37,394 |
| | $ | 23,951 |
| | $ | 6,199 |
| | $ | 536 |
| | $ | 17,951 |
| | $ | 3,323 |
| | $ | — |
| | $ | 802 |
| | $ | 90,156 |
|
Collectively evaluated for impairment | 1,744,740 |
| | 529,195 |
| | 100,658 |
| | 13,963 |
| | 780,152 |
| | 223,928 |
| | 40,110 |
| | 48,700 |
| | 3,481,446 |
| 2,387,080 |
| | 729,904 |
| | 144,173 |
| | 27,284 |
| | 628,449 |
| | 114,621 |
| | 242 |
| | 18,257 |
| | 4,050,010 |
|
Loans acquired with credit deterioration | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 100,764 |
| | 61,531 |
| | 953 |
| | 3,819 |
| | 167,067 |
| |
Acquired Credit Impaired Loans | | — |
| | — |
| | — |
| | — |
| | 103,884 |
| | 49,757 |
| | 1,456 |
| | 3,075 |
| | 158,172 |
|
Total | $ | 1,797,763 |
| | $ | 564,117 |
| | $ | 105,621 |
| | $ | 14,112 |
| | $ | 880,916 |
| | $ | 285,459 |
| | $ | 41,063 |
| | $ | 52,519 |
| | $ | 3,741,570 |
| $ | 2,424,474 |
| | $ | 753,855 |
| | $ | 150,372 |
| | $ | 27,820 |
| | $ | 750,284 |
| | $ | 167,701 |
| | $ | 1,698 |
| | $ | 22,134 |
| | $ | 4,298,338 |
|
As of September 30, 2012March 31, 2013 and December 31, 20112012, we had athe liability for unfunded commitments ofwas $802 thousand and $686 thousand, respectively.for both periods. For the three months ended September 30,March 31, 20122013 and 20112012, we recognizedno provision for credit losses was recognized related to our unfunded commitments of $0 and $0. For the nine months ended September 30,2012 and 2011, we recognized provision for credit losses related to our unfunded commitments of $116 thousand and $0.commitments.
The recorded investment in individually impaired loans was as follows:
| | | September 30, 2012 | | December 31, 2011 | March 31, 2013 | | December 31, 2012 |
| (In thousands) | (In thousands) |
With Allocated Allowance | | | | | | |
Without charge-off | $ | 72,827 |
| | $ | 67,262 |
| $ | 72,518 |
| | $ | 65,526 |
|
With charge-off | 448 |
| | 341 |
| 1,125 |
| | 2,599 |
|
With No Allocated Allowance | | | | | | |
Without charge-off | 5,111 |
| | 19,064 |
| 23,096 |
| | 17,536 |
|
With charge-off | 3,933 |
| | 6,390 |
| 5,293 |
| | 4,495 |
|
Allowance on Impaired Loans | (8,704 | ) | | (18,035 | ) | (15,062 | ) | | (9,160 | ) |
Impaired Loans, net of allowance | $ | 73,615 |
| | $ | 75,022 |
| $ | 86,970 |
| | $ | 80,996 |
|
The following tables detail impaired loans (Legacy and Acquired) as of September 30, 2012March 31, 2013 and December 31, 20112012 and for the three and nine months ended September 30, 2012March 31, 2013 and for the year ended December 31, 20112012. Loans with no related allowance for loan losses are believed by management to have adequate collateral securing their carrying value.
| | | | As of September 30, 2012 | | For the nine months ended September 30, 2012 | | For the three months ended September 30, 2012 | | As of March 31, 2013 | | For the three months ended March 31, 2013 | | For the three months ended March 31, 2012 |
Total Impaired Loans | | Recorded Investment* | | Unpaid Contractual Principal Balance | | Related Allowance | | Average Recorded Investment* | | Interest Income Recognized during Impairment | | Average Recorded Investment* | | Interest Income Recognized during Impairment | | Recorded Investment* | | Unpaid Contractual Principal Balance | | Related Allowance | | Average Recorded Investment* | | Interest Income Recognized during Impairment | | Average Recorded Investment* | | Interest Income Recognized during Impairment |
| | (In thousands) | | (In thousands) |
With Related Allowance: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real Estate—Residential | | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Real Estate—Commercial | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Retail | | 4,453 |
| | 4,608 |
| | (585 | ) | | 3,021 |
| | 124 |
| | 3,872 |
| | 39 |
| | 7,680 |
| | 7,885 |
| | 1,387 |
| | 6,578 |
| | 51 |
| | 2,169 |
| | 12 |
|
Hotel & Motel | | 15,580 |
| | 16,932 |
| | (2,457 | ) | | 19,673 |
| | 327 |
| | 19,349 |
| | 106 |
| | 12,138 |
| | 12,138 |
| | 2,859 |
| | 10,564 |
| | 137 |
| | 19,997 |
| | 211 |
|
Gas Station & Car Wash | | 1,688 |
| | 1,726 |
| | (539 | ) | | 3,162 |
| | 69 |
| | 2,496 |
| | 23 |
| | 1,379 |
| | 2,194 |
| | 69 |
| | 1,635 |
| | 11 |
| | 3,827 |
| | 71 |
|
Mixed Use | | 1,837 |
| | 1,914 |
| | (260 | ) | | 3,753 |
| | 0 |
| | 3,540 |
| | 0 |
| | 952 |
| | 970 |
| | 276 |
| | 926 |
| | 13 |
| | 3,965 |
| | 73 |
|
Industrial & Warehouse | | 2,248 |
| | 2,332 |
| | (443 | ) | | 3,297 |
| | 67 |
| | 1,845 |
| | 22 |
| | 11,127 |
| | 11,750 |
| | 5,485 |
| | 6,600 |
| | 6 |
| | 4,748 |
| | 58 |
|
Other | | 15,249 |
| | 17,293 |
| | (904 | ) | | 13,675 |
| | 483 |
| | 13,596 |
| | 160 |
| | 11,157 |
| | 12,199 |
| | 1,400 |
| | 13,670 |
| | 159 |
| | 13,754 |
| | 100 |
|
Real Estate—Construction | | 0 |
| | 0 |
| | 0 |
| | 32 |
| | 0 |
| | 0 |
| | 0 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 64 |
| | — |
|
Commercial Business | | 26,191 |
| | 28,873 |
| | (3,434 | ) | | 23,850 |
| | 1,048 |
| | 24,899 |
| | 341 |
| | 22,270 |
| | 24,686 |
| | 3,499 |
| | 24,312 |
| | 242 |
| | 23,033 |
| | 179 |
|
Trade Finance | | 5,968 |
| | 6,417 |
| | (82 | ) | | 2,856 |
| | 108 |
| | 3,243 |
| | 63 |
| | 6,886 |
| | 7,884 |
| | 77 |
| | 6,543 |
| | 73 |
| | 2,468 |
| | 7 |
|
Consumer and Other | | 60 |
| | 60 |
| | 0 |
| | 135 |
| | 3 |
| | 30 |
| | 2 |
| | 54 |
| | 54 |
| | 10 |
| | 55 |
| | 1 |
| | 240 |
| | — |
|
| | $ | 73,274 |
| | $ | 80,155 |
| | $ | (8,704 | ) | | $ | 73,454 |
| | $ | 2,229 |
| | $ | 72,870 |
| | $ | 756 |
| | $ | 73,643 |
| | $ | 79,760 |
| | $ | 15,062 |
| | $ | 70,883 |
| | $ | 693 |
| | $ | 74,265 |
| | $ | 711 |
|
With No Related Allowance | | | | | | | | | | | | | | | |
With No Related Allowance: | | | | | | | | | | | | | | | |
Real Estate—Residential | | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Real Estate—Commercial | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Retail | | 948 |
| | 3,847 |
| | 0 |
| | 1,384 |
| | 0 |
| | 939 |
| | 0 |
| | 1,310 |
| | 2,886 |
| | — |
| | 1,913 |
| | — |
| | 1,829 |
| | 5 |
|
Hotel & Motel | | 333 |
| | 2,338 |
| | 0 |
| | 154 |
| | 0 |
| | 308 |
| | 0 |
| | 6,125 |
| | 8,715 |
| | — |
| | 6,168 |
| | — |
| | — |
| | — |
|
Gas Station & Car Wash | | 2,649 |
| | 5,593 |
| | 0 |
| | 1,382 |
| | 0 |
| | 2,158 |
| | 0 |
| | 4,232 |
| | 6,682 |
| | — |
| | 2,981 |
| | 15 |
| | 883 |
| | — |
|
Mixed Use | | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 881 |
| | 916 |
| | — |
| | 890 |
| | — |
| | — |
| | — |
|
Industrial & Warehouse | | 376 |
| | 2,814 |
| | 0 |
| | 3,644 |
| | 0 |
| | 3,125 |
| | 0 |
| | 4,844 |
| | 7,766 |
| | — |
| | 4,618 |
| | 3 |
| | 4,985 |
| | — |
|
Other | | 1,569 |
| | 2,528 |
| | 0 |
| | 2,269 |
| | 0 |
| | 1,750 |
| | 0 |
| | 6,057 |
| | 10,321 |
| | — |
| | 4,214 |
| | 39 |
| | 3,175 |
| | 8 |
|
Real Estate—Construction | | 1,710 |
| | 1,710 |
| | 0 |
| | 1,710 |
| | 85 |
| | 1,710 |
| | 28 |
| | 1,683 |
| | 1,683 |
| | — |
| | 1,697 |
| | 22 |
| | 1,710 |
| | 28 |
|
Commercial Business | | 1,384 |
| | 3,818 |
| | 0 |
| | 9,442 |
| | 15 |
| | 5,818 |
| | 5 |
| | 1,993 |
| | 3,777 |
| | — |
| | 1,456 |
| | 16 |
| | 13,682 |
| | 181 |
|
Trade Finance | | 0 |
| | 0 |
| | 0 |
| | 2,295 |
| | 0 |
| | 2,226 |
| | 0 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 2,364 |
| | 41 |
|
Consumer and Other | | 74 |
| | 93 |
| | 0 |
| | 126 |
| | 0 |
| | 105 |
| | 0 |
| | 1,264 |
| | 1,312 |
| | — |
| | 1,273 |
| | 5 |
| | 147 |
| | — |
|
| | $ | 9,043 |
| | $ | 22,741 |
| | $ | 0 |
| | $ | 22,406 |
| | $ | 100 |
| | $ | 18,139 |
| | $ | 33 |
| | $ | 28,389 |
| | $ | 44,058 |
| | $ | — |
| | $ | 25,210 |
| | $ | 100 |
| | $ | 28,775 |
| | $ | 263 |
|
Total | | $ | 82,317 |
| | $ | 102,896 |
| | $ | (8,704 | ) | | $ | 95,860 |
| | $ | 2,329 |
| | $ | 91,009 |
| | $ | 789 |
| | $ | 102,032 |
| | $ | 123,818 |
| | $ | 15,062 |
| | $ | 96,093 |
| | $ | 793 |
| | $ | 103,040 |
| | $ | 974 |
|
| |
* | Unpaid contractual principal balance less charge-offs, interest applied to principal and purchase discounts. |
| | | | As of September 30, 2012 | | For the nine months ended September 30, 2012 | | For the three months ended September 30, 2012 | | As of March 31, 2013 | | For the three months ended March 31, 2013 | | For the three months ended March 31, 2012 |
Acquired Impaired Loans | | Recorded Investment* | | Unpaid Contractual Principal Balance | | Related Allowance | | Average Recorded Investment* | | Interest Income Recognized during Impairment | | Average Recorded Investment* | | Interest Income Recognized during Impairment | |
Impaired Acquired Loans | | | Recorded Investment* | | Unpaid Contractual Principal Balance | | Related Allowance | | Average Recorded Investment* | | Interest Income Recognized during Impairment | | Average Recorded Investment* | | Interest Income Recognized during Impairment |
| | (In thousands) | | (In thousands) |
With Related Allowance: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Real Estate—Residential | | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Real Estate—Commercial | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Retail | | 2,144 |
| | 2,186 |
| | (148 | ) | | 828 |
| | 86 |
| | 1,546 |
| | 26 |
| | 2,079 |
| | 2,117 |
| | 51 |
| | 1,683 |
| | 25 |
| | 111 |
| | 4 |
|
Hotel & Motel | | 6,051 |
| | 7,375 |
| | (351 | ) | | 4,595 |
| | 0 |
| | 6,082 |
| | 0 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 3,107 |
| | — |
|
Gas Station & Car Wash | | 0 |
| | 0 |
| | 0 |
| | 71 |
| | 0 |
| | 0 |
| | 0 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 142 |
| | — |
|
Mixed Use | | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Industrial & Warehouse | | 822 |
| | 889 |
| | (57 | ) | | 206 |
| | 27 |
| | 411 |
| | 9 |
| | 10,273 |
| | 10,870 |
| | 5,092 |
| | 5,552 |
| | — |
| | — |
| | — |
|
Other | | 3,484 |
| | 4,467 |
| | (123 | ) | | 880 |
| | 216 |
| | 1,742 |
| | 72 |
| | 3,146 |
| | 3,184 |
| | 212 |
| | 3,709 |
| | 62 |
| | 17 |
| | — |
|
Real Estate—Construction | | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| |
|
|
Commercial Business | | 2,282 |
| | 3,176 |
| | (905 | ) | | 837 |
| | 69 |
| | 1,413 |
| | 21 |
| | 3,153 |
| | 3,665 |
| | 807 |
| | 3,063 |
| | 8 |
| | 299 |
| | 2 |
|
Trade Finance | | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Consumer and Other | | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| | $ | 14,783 |
| | $ | 18,093 |
| | $ | (1,584 | ) | | $ | 7,417 |
| | $ | 398 |
| | $ | 11,194 |
| | $ | 128 |
| | $ | 18,651 |
| | $ | 19,836 |
| | $ | 6,162 |
| | $ | 14,007 |
| | $ | 95 |
| | $ | 3,676 |
| | $ | 6 |
|
With No Related Allowance | | | | | | | | | | | | | | | |
With No Related Allowance: | | | | | | | | | | | | | | | |
Real Estate—Residential | | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Real Estate—Commercial | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Retail | | 4 |
| | 224 |
| | 0 |
| | 1 |
| | 0 |
| | 2 |
| | 0 |
| | 59 |
| | 103 |
| | — |
| | 430 |
| | — |
| | — |
| | — |
|
Hotel & Motel | | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 5,929 |
| | 7,375 |
| | — |
| | 5,959 |
| | — |
| | — |
| | — |
|
Gas Station & Car Wash | | 272 |
| | 1,872 |
| | 0 |
| | 162 |
| | 0 |
| | 237 |
| | 0 |
| | 1,856 |
| | 3,001 |
| | — |
| | 1,315 |
| | 15 |
| | 327 |
| | — |
|
Mixed Use | | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Industrial & Warehouse | | 0 |
| | 0 |
| | 0 |
| | 1,709 |
| | 0 |
| | 1,839 |
| | 0 |
| | 3,399 |
| | 3,659 |
| | — |
| | 3,294 |
| | 3 |
| | 1,514 |
| | — |
|
Other | | 835 |
| | 1,248 |
| | 0 |
| | 655 |
| | 0 |
| | 796 |
| | 0 |
| | 1,747 |
| | 4,282 |
| | — |
| | 1,276 |
| | 8 |
| | 831 |
| | 8 |
|
Real Estate—Construction | | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Commercial Business | | 381 |
| | 515 |
| | 0 |
| | 521 |
| | 15 |
| | 769 |
| | 5 |
| | 198 |
| | 214 |
| | — |
| | 273 |
| | — |
| | 600 |
| | 18 |
|
Trade Finance | | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Consumer and Other | | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 784 |
| | 832 |
| | — |
| | 793 |
| | — |
| | — |
| | — |
|
| | $ | 1,492 |
| | $ | 3,859 |
| | $ | 0 |
| | $ | 3,048 |
| | $ | 15 |
| | $ | 3,643 |
| | $ | 5 |
| | $ | 13,972 |
| | $ | 19,466 |
| | $ | — |
| | $ | 13,340 |
| | $ | 26 |
| | $ | 3,272 |
| | $ | 26 |
|
Total | | $ | 16,275 |
| | $ | 21,952 |
| | $ | (1,584 | ) | | $ | 10,465 |
| | $ | 413 |
| | $ | 14,837 |
| | $ | 133 |
| | $ | 32,623 |
| | $ | 39,302 |
| | $ | 6,162 |
| | $ | 27,347 |
| | $ | 121 |
| | $ | 6,948 |
| | $ | 32 |
|
| |
* | Unpaid contractual principal balance less charge-offs, interest applied to principal and purchase discounts. |
The table above includes only Acquired Loans that became impaired.
| | | For the nine months ended September 30, 2011 | | For the three months ended September 30, 2011 | | As of December 31, 2012 | | For the year ended December 31, 2012 |
| Average Recorded Investment* | | Interest Income Recognized during Impairment | | Average Recorded Investment* | | Interest Income Recognized during Impairment | |
Total Impaired Loans | | | Recorded Investment* | | Unpaid Contractual Principal Balance | | Related Allowance | | Average Recorded Investment* | | Interest Income Recognized during Impairment |
| (In thousands) | | (In thousands) |
With Related Allowance: | | | | | | | | | | | | | | | | | |
Real Estate—Residential | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Real Estate—Commercial | | | | | | | | | | | | | | | | | |
Retail | 3,891 |
| | 25 |
| | 2,713 |
| | 8 |
| | 5,477 |
| | 5,610 |
| | 1,167 |
| | 3,512 |
| | 255 |
|
Hotel & Motel | 13,866 |
| | 764 |
| | 17,448 |
| | 246 |
| | 8,990 |
| | 8,995 |
| | 1,860 |
| | 17,536 |
| | 426 |
|
Gas Station & Car Wash | 2,964 |
| | 71 |
| | 2,591 |
| | 24 |
| | 1,892 |
| | 2,440 |
| | 73 |
| | 2,908 |
| | — |
|
Mixed Use | 1,336 |
| | 52 |
| | 1,234 |
| | 17 |
| | 900 |
| | 976 |
| | 250 |
| | 3,182 |
| | — |
|
Industrial & Warehouse | 4,967 |
| | 231 |
| | 4,163 |
| | 77 |
| | 2,074 |
| | 2,153 |
| | 567 |
| | 3,052 |
| | 66 |
|
Other | 4,000 |
| | 382 |
| | 7,400 |
| | 127 |
| | 16,184 |
| | 16,389 |
| | 989 |
| | 14,322 |
| | 805 |
|
Real Estate—Construction | 3,099 |
| | 0 |
| | 0 |
| | 0 |
| | — |
| | — |
| | — |
| | 26 |
| | — |
|
Commercial Business | 23,808 |
| | 327 |
| | 22,188 |
| | 115 |
| | 26,354 |
| | 29,073 |
| | 4,158 |
| | 25,227 |
| | 1,252 |
|
Trade Finance | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 6,199 |
| | 7,173 |
| | 96 |
| | 3,510 |
| | 248 |
|
Consumer and Other | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 55 |
| | 56 |
| | — |
| | 119 |
| | 4 |
|
| $ | 57,931 |
| | $ | 1,852 |
| | $ | 57,737 |
| | $ | 614 |
| | $ | 68,125 |
| | $ | 72,865 |
| | $ | 9,160 |
| | $ | 73,394 |
| | $ | 3,056 |
|
With No Related Allowance | | | | | | | | |
With No Related Allowance: | | | | | | | | | | | |
Real Estate—Residential | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Real Estate—Commercial | | | | | | | | | | | | | | | | | |
Retail | 5,742 |
| | 0 |
| | 3,838 |
| | 0 |
| | 2,516 |
| | 5,404 |
| | — |
| | 1,602 |
| | 48 |
|
Hotel & Motel | 5,182 |
| | 0 |
| | 2,369 |
| | 0 |
| | 6,212 |
| | 8,202 |
| | — |
| | 1,365 |
| | — |
|
Gas Station & Car Wash | 3,204 |
| | 0 |
| | 2,307 |
| | 0 |
| | 1,731 |
| | 4,359 |
| | — |
| | 1,775 |
| | — |
|
Mixed Use | 2,606 |
| | 0 |
| | 1,861 |
| | 0 |
| | 899 |
| | 923 |
| | — |
| | 180 |
| | — |
|
Industrial & Warehouse | 2,313 |
| | 0 |
| | 2,571 |
| | 0 |
| | 4,392 |
| | 6,450 |
| | — |
| | 4,408 |
| | 160 |
|
Other | 12,629 |
| | 40 |
| | 8,878 |
| | 13 |
| | 2,371 |
| | 6,283 |
| | — |
| | 2,598 |
| | — |
|
Real Estate—Construction | 3,673 |
| | 84 |
| | 3,421 |
| | 28 |
| | 1,710 |
| | 1,710 |
| | — |
| | 1,710 |
| | 111 |
|
Commercial Business | 11,480 |
| | 133 |
| | 10,887 |
| | 43 |
| | 920 |
| | 1,368 |
| | — |
| | 8,028 |
| | 18 |
|
Trade Finance | 831 |
| | 0 |
| | 1,076 |
| | 0 |
| | — |
| | — |
| | — |
| | 946 |
| | — |
|
Consumer and Other | 144 |
| | 0 |
| | 154 |
| | 0 |
| | 1,280 |
| | 1,316 |
| | — |
| | 357 |
| | 20 |
|
| $ | 47,804 |
| | $ | 257 |
| | $ | 37,362 |
| | $ | 84 |
| | $ | 22,031 |
| | $ | 36,015 |
| | $ | — |
| | $ | 22,969 |
| | $ | 357 |
|
Total | $ | 105,735 |
| | $ | 2,109 |
| | $ | 95,099 |
| | $ | 698 |
| | $ | 90,156 |
| | $ | 108,880 |
| | $ | 9,160 |
| | $ | 96,363 |
| | $ | 3,413 |
|
| |
* | Unpaid contractual principal balance less charge-offs, interest applied to principal and purchase discounts. |
| | | | As of December 31, 2011 | | For the year ended December 31, 2011 | | As of December 31, 2012 | | For the year ended December 31, 2012 |
| | Recorded Investment* | | Unpaid Contractual Principal Balance** | | Related Allowance | | Average Recorded Investment* | | Interest Income Recognized during Impairment | |
Impaired Acquired Loans | | | Recorded Investment* | | Unpaid Contractual Principal Balance | | Related Allowance | | Average Recorded Investment* | | Interest Income Recognized during Impairment |
| | (In thousands) | | (In thousands) |
With Related Allowance: | | | | | | | | | | | | | | | | | | | | |
Real Estate—Residential | | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Real Estate—Commercial | | | | | | | | | | | | | | | | | | | | |
Retail | | 1,810 |
| | 2,686 |
| | (668 | ) | | 3,611 |
| | 34 |
| | 1,286 |
| | 1,286 |
| | 9 |
| | 920 |
| | 64 |
|
Hotel & Motel | | 17,441 |
| | 17,459 |
| | (4,093 | ) | | 14,581 |
| | 1,013 |
| | — |
| | — |
| | — |
| | 3,676 |
| | — |
|
Gas Station & Car Wash | | 2,265 |
| | 2,669 |
| | (550 | ) | | 2,824 |
| | 95 |
| | — |
| | — |
| | — |
| | 57 |
| | — |
|
Mixed Use | | 2,822 |
| | 2,840 |
| | (128 | ) | | 1,705 |
| | 158 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Industrial & Warehouse | | 4,242 |
| | 4,246 |
| | (407 | ) | | 4,822 |
| | 310 |
| | 832 |
| | 887 |
| | 2 |
| | 331 |
| | 36 |
|
Other | | 14,982 |
| | 14,994 |
| | (4,630 | ) | | 6,300 |
| | 298 |
| | 4,272 |
| | 4,461 |
| | 172 |
| | 1,711 |
| | 288 |
|
Real Estate—Construction | | 128 |
| | 128 |
| | (49 | ) | | 2,504 |
| | 0 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Commercial Business | | 19,416 |
| | 20,248 |
| | (7,168 | ) | | 24,941 |
| | 538 |
| | 2,974 |
| | 3,072 |
| | 1,074 |
| | 1,625 |
| | 26 |
|
Trade Finance | | 4,497 |
| | 4,497 |
| | (342 | ) | | 899 |
| | 71 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Consumer and Other | | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| | $ | 67,603 |
| | $ | 69,767 |
| | $ | (18,035 | ) | | $ | 62,187 |
| | $ | 2,517 |
| | $ | 9,364 |
| | $ | 9,706 |
| | $ | 1,257 |
| | $ | 8,320 |
| | $ | 414 |
|
With No Related Allowance | | | | | | | | | | | |
With No Related Allowance: | | | | | | | | | | | |
Real Estate—Residential | | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Real Estate—Commercial | | | | | | | | | | | | | |
| | | | | | |
Retail | | 2,067 |
| | 4,789 |
| | 0 |
| | 4,871 |
| | 0 |
| | 800 |
| | 840 |
| | — |
| | 161 |
| | 48 |
|
Hotel & Motel | | 0 |
| | 0 |
| | 0 |
| | 4,146 |
| | 0 |
| | 5,990 |
| | 7,375 |
| | — |
| | 1,198 |
| | — |
|
Gas Station & Car Wash | | 287 |
| | 2,851 |
| | 0 |
| | 2,621 |
| | 0 |
| | 774 |
| | 1,865 |
| | — |
| | 608 |
| | — |
|
Mixed Use | | 0 |
| | 0 |
| | 0 |
| | 2,013 |
| | 0 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Industrial & Warehouse | | 2,662 |
| | 8,346 |
| | 0 |
| | 2,383 |
| | 0 |
| | 3,190 |
| | 3,302 |
| | — |
| | 2,005 |
| | 160 |
|
Other | | 2,605 |
| | 4,252 |
| | 0 |
| | 10,521 |
| | 0 |
| | 807 |
| | 3,156 |
| | — |
| | 993 |
| | — |
|
Real Estate—Construction | | 1,710 |
| | 1,710 |
| | 0 |
| | 3,280 |
| | 113 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Commercial Business | | 15,506 |
| | 16,905 |
| | 0 |
| | 10,274 |
| | 203 |
| | 349 |
| | 681 |
| | — |
| | 680 |
| | 15 |
|
Trade Finance | | 467 |
| | 467 |
| | 0 |
| | 758 |
| | 30 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Consumer and Other | | 150 |
| | 180 |
| | 0 |
| | 145 |
| | 0 |
| | 802 |
| | 836 |
| | — |
| | 160 |
| | — |
|
| | $ | 25,454 |
| | $ | 39,500 |
| | $ | 0 |
| | $ | 41,012 |
| | $ | 346 |
| | $ | 12,712 |
| | $ | 18,055 |
| | $ | — |
| | $ | 5,805 |
| | $ | 223 |
|
Total | | $ | 93,057 |
| | $ | 109,267 |
| | $ | (18,035 | ) | | $ | 103,199 |
| | $ | 2,863 |
| | $ | 22,076 |
| | $ | 27,761 |
| | $ | 1,257 |
| | $ | 14,125 |
| | $ | 637 |
|
| |
* | Unpaid contractual principal balance less charge-offs, interest applied to principal and purchase discounts. |
| |
** | The table has been revised to present unpaid contractual principal balances, whereas the Company had previously disclosed unpaid contractual principal balances that were net of charge-offs, interest applied to principal and purchase discounts. |
Generally, loans are placed on nonaccrual status if principal or interest payments become 90 days past due and/or management deems the collectibilitycollectability of the principal and/or interest to be in question, as well as when required by regulatory requirements. Loans to a customer whose financial condition has deteriorated are considered for non-accrualnonaccrual status whether or not the loan is 90 days or more past due. Generally, payments received on non-accrualnonaccrual loans are recorded as principal reductions. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
The following tables present the aging of past due loans as of September 30, 2012March 31, 2013 and December 31, 20112012 by class of loans:
| | | As of September 30, 2012 | As of March 31, 2013 |
| 30-59 Days Past Due | | 60-89 Days Past Due | | Greater than 90 Days Past Due | | Total Past Due | | Non-accrual loans | | Total Delinquent loans | | Greater than 90 days and accruing | Past Due and Accruing | | | | |
| (In thousands) | 30-59 Days Past Due | | 60-89 Days Past Due | | 90 or More Days Past Due | | Total | | Nonaccrual Loans (3) | | Total Delinquent Loans |
Legacy Loans | | |
| | (In thousands) |
Legacy Loans: | | |
Real estate—Residential | $ | 29 |
| | $ | 0 |
| | $ | 0 |
| | $ | 29 |
| | $ | 0 |
| | $ | 29 |
| | $ | 0 |
| $ | 22 |
| | $ | — |
| | $ | — |
| | $ | 22 |
| | $ | — |
| | $ | 22 |
|
Real estate—Commercial | | | | | | | | | | | | | | | | | | | | | | | | |
Retail | 1,670 |
| | 0 |
| | 0 |
| | 1,670 |
| | 2,291 |
| | 3,961 |
| | 0 |
| — |
| | 2,272 |
| | — |
| | 2,272 |
| | 5,001 |
| | 7,273 |
|
Hotel & Motel | 0 |
| | 0 |
| | 364 |
| | 364 |
| | 1,021 |
| | 1,385 |
| | 364 |
| — |
| | — |
| | — |
| | — |
| | 195 |
| | 195 |
|
Gas Station & Car Wash | 362 |
| | 0 |
| | 0 |
| | 362 |
| | 2,904 |
| | 3,266 |
| | 0 |
| 355 |
| | — |
| | — |
| | 355 |
| | 2,696 |
| | 3,051 |
|
Mixed Use | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 1,837 |
| | 1,837 |
| | 0 |
| — |
| | — |
| | — |
| | — |
| | 1,018 |
| | 1,018 |
|
Industrial & Warehouse | 125 |
| | 0 |
| | 0 |
| | 125 |
| | 758 |
| | 883 |
| | 0 |
| 221 |
| | — |
| | — |
| | 221 |
| | 1,807 |
| | 2,028 |
|
Other | 0 |
| | 263 |
| | 0 |
| | 263 |
| | 6,150 |
| | 6,413 |
| | 0 |
| — |
| | — |
| | — |
| | — |
| | 1,944 |
| | 1,944 |
|
Real estate—Construction | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Commercial business | 855 |
| | 254 |
| | 0 |
| | 1,109 |
| | 4,843 |
| | 5,952 |
| | 0 |
| 553 |
| | 139 |
| | — |
| | 692 |
| | 3,972 |
| | 4,664 |
|
Trade finance | 50 |
| | 0 |
| | 0 |
| | 50 |
| | 50 |
| | 100 |
| | 0 |
| — |
| | — |
| | — |
| | — |
| | 941 |
| | 941 |
|
Consumer and other | 17 |
| | 0 |
| | 0 |
| | 17 |
| | 74 |
| | 91 |
| | 0 |
| 23 |
| | — |
| | — |
| | 23 |
| | — |
| | 23 |
|
Subtotal | $ | 3,108 |
| | $ | 517 |
| | $ | 364 |
| | $ | 3,989 |
| | $ | 19,928 |
| | $ | 23,917 |
| | $ | 364 |
| $ | 1,174 |
| | $ | 2,411 |
| | $ | — |
| | $ | 3,585 |
| | $ | 17,574 |
| | $ | 21,159 |
|
Acquired Loans (1) | | | | | | | | | | | | | | |
Acquired Loans: (1) | | | | | | | | | | | | |
Real estate—Residential | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Real estate—Commercial | | | | | | | | | | | | | | | | | | | | | | | | |
Retail | 810 |
| | 22 |
| | 1,930 |
| | 2,762 |
| | 4 |
| | 2,766 |
| | 1,930 |
| 2,447 |
| | — |
| | 1,574 |
| | 4,021 |
| | 60 |
| | 4,081 |
|
Hotel & Motel | 0 |
| | 1,549 |
| | 938 |
| | 2,487 |
| | 6,051 |
| | 8,538 |
| | 938 |
| 4,339 |
| | 1,505 |
| | 3,286 |
| | 9,130 |
| | 5,929 |
| | 15,059 |
|
Gas Station & Car Wash | 232 |
| | 0 |
| | 3,134 |
| | 3,366 |
| | 272 |
| | 3,638 |
| | 3,134 |
| 3,725 |
| | 1,198 |
| | 2,209 |
| | 7,132 |
| | 782 |
| | 7,914 |
|
Mixed Use | 467 |
| | 0 |
| | 2,811 |
| | 3,278 |
| | 0 |
| | 3,278 |
| | 2,811 |
| 90 |
| | — |
| | 244 |
| | 334 |
| | — |
| | 334 |
|
Industrial & Warehouse | 18 |
| | 119 |
| | 0 |
| | 137 |
| | 0 |
| | 137 |
| | 0 |
| 243 |
| | — |
| | 361 |
| | 604 |
| | 13,552 |
| | 14,156 |
|
Other | 543 |
| | 52 |
| | 5,402 |
| | 5,997 |
| | 965 |
| | 6,962 |
| | 5,402 |
| 891 |
| | — |
| | 3,995 |
| | 4,886 |
| | 767 |
| | 5,653 |
|
Real estate—Construction | 0 |
| | 0 |
| | 6,305 |
| | 6,305 |
| | 0 |
| | 6,305 |
| | 6,305 |
| — |
| | — |
| | 6,167 |
| | 6,167 |
| | — |
| | 6,167 |
|
Commercial business | 1,592 |
| | 676 |
| | 1,147 |
| | 3,415 |
| | 1,315 |
| | 4,730 |
| | 1,147 |
| 10,361 |
| | 806 |
| | 3,346 |
| | 14,513 |
| | 2,678 |
| | 17,191 |
|
Trade finance | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| 58 |
| | 68 |
| | — |
| | 126 |
| | — |
| | 126 |
|
Consumer and other | 349 |
| | 20 |
| | 423 |
| | 792 |
| | 833 |
| | 1,625 |
| | 423 |
| 398 |
| | 271 |
| | 439 |
| | 1,108 |
| | 927 |
| | 2,035 |
|
Subtotal | 4,011 |
| | 2,438 |
| | 22,090 |
| | 28,539 |
| | 9,440 |
| | 37,979 |
| | 22,090 |
| |
Subtotal(2) | | $ | 22,552 |
| | $ | 3,848 |
| | $ | 21,621 |
| | $ | 48,021 |
| | $ | 24,695 |
| | $ | 72,716 |
|
TOTAL | 7,119 |
| | 2,955 |
| | 22,454 |
| | 32,528 |
| | 29,368 |
| | 61,896 |
| | 22,454 |
| $ | 23,726 |
| | $ | 6,259 |
| | $ | 21,621 |
| | $ | 51,606 |
| | $ | 42,269 |
| | $ | 93,875 |
|
| |
(1) | The acquired loansAcquired Loans include Acquired Credit Impaired Loans (ASC 310-30 loans) and Acquired Performing Loans (loans that were pass graded at the time of acquisition). |
| |
(2) | The past due and accruing Acquired Loans include Acquired Credit Impaired Loans accounted for under ASC 310-30 of $20.2 million, $3.8 million and $21.6 million that were 30-59 days, 60-89 days and 90 or more days past due, respectively. |
| |
(3) | Nonaccrual loans exclude the guaranteed portion of delinquent SBA loans that are in liquidation totaling $18.6 million. |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2012 |
| Past Due and Accruing | | | | |
| 30-59 Days Past Due | | 60-89 Days Past Due | | 90 or More Days Past Due | | Total | | Nonaccrual Loans (3) | | Total Delinquent Loans |
| (In Thousands) |
Legacy Loans: | |
Real estate—Residential | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Real estate—Commercial | | | | | | | | | | | |
Retail | 87 |
| | — |
| | — |
| | 87 |
| | 3,316 |
| | 3,403 |
|
Hotel & Motel | — |
| | — |
| | — |
| | — |
| | 437 |
| | 437 |
|
Gas Station & Car Wash | 359 |
| | — |
| | — |
| | 359 |
| | 2,848 |
| | 3,207 |
|
Mixed Use | 34 |
| | — |
| | — |
| | 34 |
| | 1,799 |
| | 1,833 |
|
Industrial & Warehouse | — |
| | — |
| | — |
| | — |
| | 1,950 |
| | 1,950 |
|
Other | — |
| | 115 |
| | — |
| | 115 |
| | 2,379 |
| | 2,494 |
|
Real estate—Construction | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Commercial business | 298 |
| | 234 |
| | — |
| | 532 |
| | 4,942 |
| | 5,474 |
|
Trade finance | — |
| | — |
| | — |
| | — |
| | 869 |
| | 869 |
|
Consumer and other | 190 |
| | — |
| | — |
| | 190 |
| | — |
| | 190 |
|
Subtotal | $ | 968 |
| | $ | 349 |
| | $ | — |
| | $ | 1,317 |
| | $ | 18,540 |
| | $ | 19,857 |
|
Acquired Loans: (1) | | | | | | | | | | | |
Real estate—Residential | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Real estate—Commercial | | | | | | | | | | | |
Retail | 1,126 |
| | 6,604 |
| | 1,190 |
| | 8,920 |
| | — |
| | 8,920 |
|
Hotel & Motel | 1,522 |
| | 2,668 |
| | 944 |
| | 5,134 |
| | 5,990 |
| | 11,124 |
|
Gas Station & Car Wash | 2,218 |
| | 1,109 |
| | 875 |
| | 4,202 |
| | 774 |
| | 4,976 |
|
Mixed Use | 985 |
| | 1,918 |
| | 1,507 |
| | 4,410 |
| | — |
| | 4,410 |
|
Industrial & Warehouse | 53 |
| | 3,320 |
| | 61 |
| | 3,434 |
| | — |
| | 3,434 |
|
Other | 50 |
| | 25 |
| | 5,542 |
| | 5,617 |
| | 937 |
| | 6,554 |
|
Real estate—Construction | — |
| | — |
| | 5,972 |
| | 5,972 |
| | — |
| | 5,972 |
|
Commercial business | 1,359 |
| | 1,174 |
| | 1,236 |
| | 3,769 |
| | 2,442 |
| | 6,211 |
|
Trade finance | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Consumer and other | 98 |
| | 17 |
| | 415 |
| | 530 |
| | 970 |
| | 1,500 |
|
Subtotal(2) | $ | 7,411 |
| | $ | 16,835 |
| | $ | 17,742 |
| | $ | 41,988 |
| | $ | 11,113 |
| | $ | 53,101 |
|
TOTAL | $ | 8,379 |
| | $ | 17,184 |
| | $ | 17,742 |
| | $ | 43,305 |
| | $ | 29,653 |
| | $ | 72,958 |
|
| |
(1) | The Acquired Loans include Acquired Credit Impaired Loans (ASC 310-30 loans) and Acquired Performing Loans (loans that were pass graded at the time of the Merger)acquisition). |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2011 |
| 30-59 Days Past Due | | 60-89 Days Past Due | | Greater than 90 Days Past Due | | Total Past Due | | Non-accrual loans | | Total Delinquent loans | | Greater than 90 days and accruing |
| (In Thousands) |
Legacy Loans | |
Real estate—Residential | $ | 36 |
| | $ | 0 |
| | $ | 0 |
| | $ | 36 |
| �� | $ | 0 |
| | $ | 36 |
| | $ | 0 |
|
Real estate—Commercial | | | | | | | | | | | | | |
Retail | 428 |
| | 0 |
| | 0 |
| | 428 |
| | 2,615 |
| | 3,043 |
| | 0 |
|
Hotel & Motel | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 481 |
| | 481 |
| | 0 |
|
Gas Station & Car Wash | 627 |
| | 0 |
| | 0 |
| | 627 |
| | 1,367 |
| | 1,994 |
| | 0 |
|
Mixed Use | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 820 |
| | 820 |
| | 0 |
|
Industrial & Warehouse | 360 |
| | 0 |
| | 0 |
| | 360 |
| | 3,066 |
| | 3,426 |
| | 0 |
|
Other | 0 |
| | 119 |
| | 0 |
| | 119 |
| | 10,992 |
| | 11,111 |
| | 0 |
|
Real estate—Construction | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 128 |
| | 128 |
| | 0 |
|
Commercial business | 1,388 |
| | 388 |
| | 0 |
| | 1,776 |
| | 11,477 |
| | 13,253 |
| | 0 |
|
Trade finance | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 117 |
| | 117 |
| | 0 |
|
Consumer and other | 3 |
| | 0 |
| | 0 |
| | 3 |
| | 150 |
| | 153 |
| | 0 |
|
Subtotal | 2,842 |
| | 507 |
| | 0 |
| | 3,349 |
| | 31,213 |
| | 34,562 |
| | 0 |
|
Acquired Loans (1) | | | | | | | | | | | | | |
Real estate—Residential | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
|
Real estate—Commercial | | | | | | |
|
| | | |
|
| | |
Retail | 145 |
| | 64 |
| | 1,675 |
| | 1,884 |
| | 0 |
| | 1,884 |
| | 1,675 |
|
Hotel & Motel | 0 |
| | 45 |
| | 0 |
| | 45 |
| | 0 |
| | 45 |
| | 0 |
|
Gas Station & Car Wash | 2,536 |
| | 175 |
| | 820 |
| | 3,531 |
| | 0 |
| | 3,531 |
| | 820 |
|
Mixed Use | 1,178 |
| | 1,677 |
| | 389 |
| | 3,244 |
| | 0 |
| | 3,244 |
| | 389 |
|
Industrial & Warehouse | 3,372 |
| | 0 |
| | 110 |
| | 3,482 |
| | 0 |
| | 3,482 |
| | 110 |
|
Other | 1,467 |
| | 226 |
| | 4,237 |
| | 5,930 |
| | 0 |
| | 5,930 |
| | 4,237 |
|
Real estate—Construction | 0 |
| | 4,499 |
| | 0 |
| | 4,499 |
| | 0 |
| | 4,499 |
| | 0 |
|
Commercial business | 1,739 |
| | 1,383 |
| | 9,132 |
| | 12,254 |
| | 0 |
| | 12,254 |
| | 9,132 |
|
Trade finance | 0 |
| | 0 |
| | 202 |
| | 202 |
| | 0 |
| | 202 |
| | 202 |
|
Consumer and other | 701 |
| | 369 |
| | 700 |
| | 1,770 |
| | 0 |
| | 1,770 |
| | 700 |
|
Subtotal | $ | 11,138 |
| | $ | 8,438 |
| | $ | 17,265 |
| | $ | 36,841 |
| | $ | 0 |
| | $ | 36,841 |
| | $ | 17,265 |
|
TOTAL | $ | 13,980 |
| | $ | 8,945 |
| | $ | 17,265 |
| | $ | 40,190 |
| | $ | 31,213 |
| | $ | 71,403 |
| | $ | 17,265 |
|
| |
(1)(2) | The acquired loanspast due and accruing Acquired Loans include Acquired Credit Impaired Loans (ASCaccounted for under ASC 310-30 loans)of $7.0 million, $12.1 million and Performing Loans (loans$17.7 million that were pass graded at the time of the Merger).30-59 days, 60-89 days and 90 or more days past due, respectively. |
(3) Nonaccrual loans exclude guaranteed portion of delinquent SBA loans that are in liquidation totaling $17.6 million.
Loans accounted for under ASC 310-30 are generally considered accruing and performing loans and the accretable discount is accreted to interest income over the estimated life of the loan when cash flows are reasonably estimable. Accordingly, Acquired Credit Impaired Loans that are contractually past due are still considered to be accruing and performing loans. The loans may be classified as nonaccrual if the timing and amount of future cash flows is not reasonably estimable.
We categorize loans into risk categories based on relevant information about the ability of borrowers to service their debt, including, but not limited to, current financial information, historical payment experience, credit documentation, public information, and current economic trends. We analyze loans individually by classifying the loans as to credit risk. This analysis includes all non-homogeneous loans. This analysis is performed at least on a quarterly basis. We use the following definitions for risk ratings:
Pass: Loans that meet a preponderance or more of the Company's underwriting criteria and evidence an acceptable level of risk.
Special Mention: Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.
Substandard: Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the repayment of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
Doubtful/Loss: Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with
the added characteristic that the weaknesses make collection or repayment in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.
Loans assigned aThe following tables present the risk rating of Special Mention or worse are referred to as Criticizedfor Legacy Loans and loans assigned a risk rating of Substandard or worse are referred toAcquired Loans as Classified Loans. As of September 30, 2012March 31, 2013 and December 31, 20112012, Criticized Loans by class of loans were as follows:loans:
| | | As of September 30, 2012 | As of March 31, 2013 |
| Special Mention | | Substandard | | Doubtful/Loss | | Total | Pass | | Special Mention | | Substandard | | Doubtful/Loss | | Total |
| (In thousands) | (In thousands) |
Legacy Loans: | | | | |
Real estate—Residential | $ | 0 |
| | $ | 29 |
| | $ | 0 |
| | $ | 29 |
| $ | 9,955 |
| | $ | — |
| | $ | 23 |
| | $ | — |
| | $ | 9,978 |
|
Real estate—Commercial | | | | | | | | | | | | | | | | |
Retail | 3,059 |
| | 12,188 |
| | 0 |
| | 15,247 |
| 643,204 |
| | 3,500 |
| | 14,599 |
| | — |
| | 661,303 |
|
Hotel & Motel | 3,692 |
| | 16,565 |
| | 0 |
| | 20,257 |
| 466,140 |
| | 1,880 |
| | 16,462 |
| | — |
| | 484,482 |
|
Gas Station & Car Wash | 1,658 |
| | 9,399 |
| | 0 |
| | 11,057 |
| 411,935 |
| | 1,014 |
| | 9,453 |
| | — |
| | 422,402 |
|
Mixed Use | 1,774 |
| | 3,480 |
| | 0 |
| | 5,254 |
| 237,996 |
| | 2,117 |
| | 3,440 |
| | — |
| | 243,553 |
|
Industrial & Warehouse | 4,036 |
| | 2,943 |
| | 382 |
| | 7,361 |
| 211,181 |
| | 12,342 |
| | 4,149 |
| | 362 |
| | 228,034 |
|
Other | 2,958 |
| | 14,695 |
| | 0 |
| | 17,653 |
| 458,547 |
| | 1,213 |
| | 15,869 |
| | — |
| | 475,629 |
|
Real estate—Construction | 0 |
| | 1,710 |
| | 0 |
| | 1,710 |
| 59,233 |
| | — |
| | 1,683 |
| | — |
| | 60,916 |
|
Commercial business | 7,638 |
| | 23,924 |
| | 215 |
| | 31,777 |
| 728,412 |
| | 23,577 |
| | 20,735 |
| | 115 |
| | 772,839 |
|
Trade finance | 7,893 |
| | 5,968 |
| | 0 |
| | 13,861 |
| 112,989 |
| | 14,027 |
| | 6,886 |
| | — |
| | 133,902 |
|
Consumer and other | 0 |
| | 954 |
| | 0 |
| | 954 |
| 26,766 |
| | 11 |
| | 1,004 |
| | — |
| | 27,781 |
|
Subtotal | $ | 32,708 |
| | $ | 91,855 |
| | $ | 597 |
| | $ | 125,160 |
| $ | 3,366,358 |
| | $ | 59,681 |
| | $ | 94,303 |
| | $ | 477 |
| | $ | 3,520,819 |
|
Acquired Loans: | | | | | | | | | | | | | | | | |
Real estate—Residential | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| $ | 229 |
| | $ | 251 |
| | $ | 209 |
| | $ | — |
| | $ | 689 |
|
Real estate—Commercial | | | | | | | | | | | | | | | | |
Retail | 13,042 |
| | 7,296 |
| | 0 |
| | 20,338 |
| 219,918 |
| | 5,235 |
| | 13,382 |
| | 60 |
| | 238,595 |
|
Hotel & Motel | 17,726 |
| | 13,287 |
| | 0 |
| | 31,013 |
| 123,518 |
| | 13,149 |
| | 18,908 |
| | — |
| | 155,575 |
|
Gas Station & Car Wash | 6,301 |
| | 5,894 |
| | 0 |
| | 12,195 |
| 39,774 |
| | 5,561 |
| | 12,944 |
| | — |
| | 58,279 |
|
Mixed Use | 2,320 |
| | 4,017 |
| | 0 |
| | 6,337 |
| 37,073 |
| | 6,643 |
| | 5,321 |
| | — |
| | 49,037 |
|
Industrial & Warehouse | 1,370 |
| | 6,109 |
| | 0 |
| | 7,479 |
| 104,167 |
| | 1,455 |
| | 19,311 |
| | — |
| | 124,933 |
|
Other | 4,739 |
| | 16,327 |
| | 0 |
| | 21,066 |
| 131,057 |
| | 4,946 |
| | 17,154 |
| | — |
| | 153,157 |
|
Real estate—Construction | 0 |
| | 7,383 |
| | 0 |
| | 7,383 |
| 2,003 |
| | — |
| | 6,167 |
| | — |
| | 8,170 |
|
Commercial business | 15,728 |
| | 31,078 |
| | 188 |
| | 46,994 |
| 119,344 |
| | 15,037 |
| | 35,618 |
| | 1,022 |
| | 171,021 |
|
Trade finance | 303 |
| | 6 |
| | 0 |
| | 309 |
| — |
| | — |
| | 491 |
| | — |
| | 491 |
|
Consumer and other | 422 |
| | 4,226 |
| | 91 |
| | 4,739 |
| 16,668 |
| | 445 |
| | 3,893 |
| | 94 |
| | 21,100 |
|
Subtotal | $ | 61,951 |
| | $ | 95,623 |
| | $ | 279 |
| | $ | 157,853 |
| $ | 793,751 |
| | $ | 52,722 |
| | $ | 133,398 |
| | $ | 1,176 |
| | $ | 981,047 |
|
Total | $ | 94,659 |
| | $ | 187,478 |
| | $ | 876 |
| | $ | 283,013 |
| $ | 4,160,109 |
| | $ | 112,403 |
| | $ | 227,701 |
| | $ | 1,653 |
| | $ | 4,501,866 |
|
|
| | | | | | | | | | | | | | | | | | | |
| As of December 31, 2012 |
| Pass | | Special Mention | | Substandard | | Doubtful/Loss | | Total |
| (In thousands) |
Legacy Loans: | | | |
Real estate—Residential | $ | 9,223 |
| | $ | — |
| | $ | 24 |
| | $ | — |
| | $ | 9,247 |
|
Real estate—Commercial | | | | | | | | | |
Retail | 589,720 |
| | 3,584 |
| | 12,303 |
| | — |
| | 605,607 |
|
Hotel & Motel | 453,908 |
| | 1,894 |
| | 16,795 |
| | — |
| | 472,597 |
|
Gas Station & Car Wash | 370,803 |
| | 1,288 |
| | 9,982 |
| | — |
| | 382,073 |
|
Mixed Use | 233,687 |
| | 2,131 |
| | 3,423 |
| | — |
| | 239,241 |
|
Industrial & Warehouse | 202,066 |
| | 1,010 |
| | 4,295 |
| | 370 |
| | 207,741 |
|
Other | 431,685 |
| | 1,219 |
| | 17,084 |
| | — |
| | 449,988 |
|
Real estate—Construction | 56,270 |
| | — |
| | 1,710 |
| | — |
| | 57,980 |
|
Commercial business | 726,073 |
| | 6,164 |
| | 21,514 |
| | 104 |
| | 753,855 |
|
Trade finance | 136,197 |
| | 7,976 |
| | 6,199 |
| | — |
| | 150,372 |
|
Consumer and other | 26,801 |
| | 13 |
| | 1,006 |
| | — |
| | 27,820 |
|
Subtotal | $ | 3,236,433 |
| | $ | 25,279 |
| | $ | 94,335 |
| | $ | 474 |
| | $ | 3,356,521 |
|
Acquired Loans: | | | |
Real estate—Residential | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Real estate—Commercial | | | | | | | | | |
Retail | 225,982 |
| | 6,469 |
| | 17,331 |
| | — |
| | 249,782 |
|
Hotel & Motel | 105,032 |
| | 16,150 |
| | 13,215 |
| | — |
| | 134,397 |
|
Gas Station & Car Wash | 33,360 |
| | 7,192 |
| | 4,119 |
| | — |
| | 44,671 |
|
Mixed Use | 34,927 |
| | 3,826 |
| | 6,526 |
| | — |
| | 45,279 |
|
Industrial & Warehouse | 114,616 |
| | 1,385 |
| | 9,470 |
| | — |
| | 125,471 |
|
Other | 121,667 |
| | 4,473 |
| | 17,479 |
| | — |
| | 143,619 |
|
Real estate—Construction | 1,093 |
| | — |
| | 5,972 |
| | — |
| | 7,065 |
|
Commercial business | 119,026 |
| | 14,057 |
| | 34,047 |
| | 571 |
| | 167,701 |
|
Trade finance | 242 |
| | 334 |
| | 1,122 |
| | — |
| | 1,698 |
|
Consumer and other | 17,292 |
| | 424 |
| | 4,329 |
| | 89 |
| | 22,134 |
|
Subtotal | $ | 773,237 |
| | $ | 54,310 |
| | $ | 113,610 |
| | $ | 660 |
| | $ | 941,817 |
|
Total | $ | 4,009,670 |
| | $ | 79,589 |
| | $ | 207,945 |
| | $ | 1,134 |
| | $ | 4,298,338 |
|
|
| | | | | | | | | | | | | | | |
| As of December 31, 2011 |
| Special Mention | | Substandard | | Doubtful/Loss | | Total |
| (In thousands) |
Legacy Loans: | |
Real estate—Residential | $ | 0 |
| | $ | 36 |
| | $ | 0 |
| | $ | 36 |
|
Real estate—Commercial | | | | | | | |
Retail | 3,434 |
| | 13,468 |
| | 0 |
| | 16,902 |
|
Hotel & Motel | 5,005 |
| | 17,876 |
| | 0 |
| | 22,881 |
|
Gas Station & Car Wash | 3,491 |
| | 2,552 |
| | 0 |
| | 6,043 |
|
Mixed Use | 2,281 |
| | 3,019 |
| | 0 |
| | 5,300 |
|
Industrial & Warehouse | 3,992 |
| | 7,227 |
| | 404 |
| | 11,623 |
|
Other | 5,904 |
| | 15,500 |
| | 0 |
| | 21,404 |
|
Real estate—Construction | 0 |
| | 1,838 |
| | 0 |
| | 1,838 |
|
Commercial business | 11,360 |
| | 30,116 |
| | 6,007 |
| | 47,483 |
|
Trade finance | 273 |
| | 4,963 |
| | 0 |
| | 5,236 |
|
Consumer and other | 0 |
| | 1,079 |
| | 0 |
| | 1,079 |
|
Subtotal | $ | 35,740 |
| | $ | 97,674 |
| | $ | 6,411 |
| | $ | 139,825 |
|
Acquired Loans: | |
Real estate—Residential | $ | 0 |
| | $ | 0 |
| | $ | 0 |
| | $ | 0 |
|
Real estate—Commercial | | | | | | | |
Retail | 11,562 |
| | 11,286 |
| | 0 |
| | 22,848 |
|
Hotel & Motel | 13,081 |
| | 16,677 |
| | 0 |
| | 29,758 |
|
Gas Station & Car Wash | 5,645 |
| | 5,755 |
| | 0 |
| | 11,400 |
|
Mixed Use | 3,500 |
| | 2,823 |
| | 0 |
| | 6,323 |
|
Industrial & Warehouse | 2,659 |
| | 3,750 |
| | 0 |
| | 6,409 |
|
Other | 6,673 |
| | 12,579 |
| | 0 |
| | 19,252 |
|
Real estate—Construction | 0 |
| | 5,485 |
| | 0 |
| | 5,485 |
|
Commercial business | 16,062 |
| | 39,536 |
| | 353 |
| | 55,951 |
|
Trade finance | 126 |
| | 827 |
| | 0 |
| | 953 |
|
Consumer and other | 1,658 |
| | 2,518 |
| | 0 |
| | 4,176 |
|
Subtotal | $ | 60,966 |
| | $ | 101,236 |
| | $ | 353 |
| | $ | 162,555 |
|
Total | $ | 96,706 |
| | $ | 198,910 |
| | $ | 6,764 |
| | $ | 302,380 |
|
The following table presents loans sold from loans held for investment or transfered from held for investment to held for sale during the three and nine months ended September 30, 2012 and 2011 by portfolio segment:
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2012 | | 2011 | | 2012 | | 2011 |
Sales or reclassification to held for sale | (In thousands) |
Real estate - Commercial | $ | 2,163 |
| | $ | 5,970 |
| | $ | 2,819 |
| | $ | 18,679 |
|
Real estate - Construction | 0 |
| | 0 |
| | 0 |
| | 4,600 |
|
Commercial Business | 0 |
| | 0 |
| | 0 |
| | 0 |
|
Total | $ | 2,163 |
| | $ | 5,970 |
| | $ | 2,819 |
| | $ | 23,279 |
|
The adequacy of the allowance for loan losses is determined by management based upon an evaluation and review of the credit quality of the loan portfolio, consideration of historical loan loss experience, relevant internal and external factors that affect the collection of a loan, and other pertinent factors.
The Migration Analysis is a formula methodology based on the Bank's actual historical net charge-off experience for each loan class (type) pool, and risk grade. The migration analysis is centered on the Bank's internal credit risk rating system. Our internal loan review and external contracted credit review examinations are used to determine and validate loan risk grades. This credit review system takes into consideration factors such as: borrower's background and experience; historical and current financial condition; credit history and payment performance; economic conditions and their impact on various industries; type, fair value and volatility of the fair value of collateral; lien position; and the financial strength of any guarantors.
A general loan loss allowance is provided on loans not specifically identified as impaired (“non-impaired loans”). The Bank's general loan loss allowance has two components: quantitative and qualitative risk factors. The quantitative risk factors are based on a historical loss migration methodology. The loans are classified by class and risk grade and the historical loss migration is tracked for the various classes. Loss experience is quantified for the most recent 12 quartersa specified period and then weighted to place more significance to the most recent loss history. That loss experience is then applied to the stratified portfolio at each quarter end. For the Acquired Performing Loans, acquired from Center, a general loan loss allowance is provided to the extent that there has been credit deterioration since the Merger. date of acquisition.
The quantitative general loan loss allowance was $20.719.4 million ($20.319.3 million for legacy loansLegacy Loans and $0.40.1 million for acquired loans)Acquired Loans) at September 30, 2012March 31, 2013, compared to $20.420.6 million ($20.5 million for Legacy Loans and $0.1 million for Acquired Loans) at December 31, 2011.2012.
Additionally, in order to systematically quantify the credit risk impact of other trends and changes within the loan portfolio, the Bank utilizes qualitative adjustments to the Migration Analysis within established parameters. The parameters for making adjustments are established under a Credit Risk Matrix that provides seven possible scenarios for each of the factors below. The matrix allows for up to three positive (Major, Moderate, and Minor), three negative (Major, Moderate, and Minor), and one neutral credit risk scenarios within each factor for each loan type pool. Generally, the factors are considered to have no significant impact (neutral) to our historical migration ratios. However, if information exists to warrant adjustment to the Migration Analysis, changes are made in accordance with the established parameters supported by narrative and/or statistical analysis. The Credit Risk Matrix and the nine possible scenarios enable the Bank to qualitatively adjust the Loss Migration Ratio by as much as 50 basis points in either direction (positive or negative) for each loan type pool. This matrix considers the following nine factors, which are patterned after the guidelines provided under the FFIEC Interagency Policy Statement on the Allowance for Loan and Lease Losses:
Changes in lending policies and procedures, including underwriting standards and collection, charge-off, and recovery practices.practices;
Changes in national and local economic and business conditions and developments, including the condition of various market segments.segments;
Changes in the nature and volume of the loan portfolio.portfolio;
Changes in the experience, ability and depth of lending management and staff.staff;
Changes in the trends of the volume and severity of past due loans, Classified Loans, non-accrualnonaccrual loans, troubled debt restructurings and other loan modifications.modifications;
Changes in the quality of our loan review system and the degree of oversight by the Directors.Directors;
Changes in the value of underlying collateral for collateral-dependent loans.loans;
The existence and effect of any concentrations of credit and changes in the level of such concentrations.concentrations; and
The effect of external factors, such as competition and legal and regulatory requirements, on the level of estimated losses in our loan portfolio.
The qualitative loan loss allowance on the loan portfolio was $34.134.3 million at September 30, 2012March 31, 2013, compared to $23.532.6 million at December 31, 20112012.
We also establish specific loss allowances for loans where we have identified potential credit risk conditions or circumstances related to a specific individual credit. The specific allowance amounts are determined by a method prescribed by FASB ASC 310-10-35-22, Measurement of Impairment. The loans identified as impaired will be accounted for in accordance with one of the three acceptable valuation methods: 1) the present value of future cash flows discounted at the loan's effective interest rate; 2) the loan's observable market price; or 3) the fair value of the collateral, if the loan is collateral dependent. For the collateral dependent impaired loans, we obtain a new appraisal to determine the amount of impairment as of the date that the loan became impaired. The appraisals are based on an “as is” valuation. To ensure that appraised values remain current, we either obtain updated appraisals every twelve months from a qualified independent appraiser or an internal re-valuationevaluation of the collateral is performed by qualified personnel. If the third party market data indicates that the value of our collateral property has declined since the most recent valuation date, we adjust the value of the property downward to reflect current market conditions. If the fair value of the collateral, less cost to sell, is less than the recorded amount of the loan, we then recognize
impairment by creating or adjusting an existing valuation allowance with a corresponding charge to the provision for loan losses. If an impaired loan is expected to be collected through liquidation of the underlying collateral, the loan is deemed to be collateral dependent and the amount of impairment is charged off against the allowance for loan losses.
The Bank considers a loan to be impaired when it is probable that not all amounts due (principal and interest) will be collectible in accordance with the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. The significance of payment delays and payment shortfalls is determined on a case-by-case basis by taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower's prior payment record and the amount of the shortfall in relation to the principal and interest owed.
For commercial business loans, real estate loans and certain consumer loans, we base the measurement of loan impairment on the present value of the expected future cash flows, discounted at the loan's effective interest rate or on the fair value of the loan's collateral, less estimated costs to sell, if the loan is collateral dependent. We evaluate most consumer loans for impairment on a collective basis because these loans generally have smaller balances and are homogeneous in the underwriting of terms and conditions and in the type of collateral.
For our Acquired Credit Impaired Loans, the allowance for loan losses is based upon expected cash flows for these loans. To the extent that a deterioration in borrower credit quality results in a decrease in expected cash flows subsequent to the acquisition of the loans, an allowance for loan losses would be established based on our estimate of future credit losses over the remaining life of the loans.
The following table presents loans by portfolio segment and impairment method at September 30, 2012March 31, 2013 and December 31, 20112012:
| | | As of September 30, 2012 | As of March 31, 2013 |
| Real estate - Residential | | Real estate - Commercial | | Real estate - Construction | | Commercial business | | Trade finance | | Consumer and other | | Total | Real estate - Residential | | Real estate - Commercial | | Real estate - Construction | | Commercial business | | Trade finance | | Consumer and other | | Total |
| (In thousands) | (In thousands) |
Impaired loans (Gross carrying value) | $ | 0 |
| | $ | 46,930 |
| | $ | 1,710 |
| | $ | 27,575 |
| | $ | 5,968 |
| | $ | 134 |
| | $ | 82,317 |
| $ | — |
| | $ | 67,882 |
| | $ | 1,683 |
| | $ | 24,263 |
| | $ | 6,886 |
| | $ | 1,318 |
| | $ | 102,032 |
|
Specific allowance | $ | 0 |
| | $ | 5,188 |
| | $ | 0 |
| | $ | 3,434 |
| | $ | 82 |
| | $ | 0 |
| | $ | 8,704 |
| $ | — |
| | $ | 11,476 |
| | $ | — |
| | $ | 3,499 |
| | $ | 77 |
| | $ | 10 |
| | $ | 15,062 |
|
Loss coverage ratio | 0.0 | % | | 11.1 | % | | 0.0 | % | | 12.5 | % | | 1.4 | % | | 0.0 | % | | 10.6 | % | — | % | | 16.9 | % | | — | % | | 14.4 | % | | 1.1 | % | | 0.8 | % | | 14.8 | % |
Non-impaired loans | $ | 3,354 |
| | $ | 2,834,149 |
| | $ | 54,723 |
| | $ | 871,402 |
| | $ | 171,317 |
| | $ | 54,308 |
| | $ | 3,989,253 |
| $ | 10,667 |
| | $ | 3,227,096 |
| | $ | 67,404 |
| | $ | 919,597 |
| | $ | 127,507 |
| | $ | 47,563 |
| | $ | 4,399,834 |
|
General allowance | $ | 32 |
| | $ | 38,640 |
| | $ | 808 |
| | $ | 14,213 |
| | $ | 2,770 |
| | $ | 785 |
| | $ | 57,248 |
| $ | 84 |
| | $ | 41,119 |
| | $ | 919 |
| | $ | 13,832 |
| | $ | 1,621 |
| | $ | 631 |
| | $ | 58,206 |
|
Loss coverage ratio | 1.0 | % | | 1.4 | % | | 1.5 | % | | 1.6 | % | | 1.6 | % | | 1.4 | % | | 1.4 | % | 0.8 | % | | 1.3 | % | | 1.4 | % | | 1.5 | % | | 1.3 | % | | 1.3 | % | | 1.3 | % |
Total loans | $ | 3,354 |
| | $ | 2,881,079 |
| | $ | 56,433 |
| | $ | 898,977 |
| | $ | 177,285 |
| | $ | 54,442 |
| | $ | 4,071,570 |
| $ | 10,667 |
| | $ | 3,294,978 |
| | $ | 69,087 |
| | $ | 943,860 |
| | $ | 134,393 |
| | $ | 48,881 |
| | $ | 4,501,866 |
|
Total allowance for loan losses | $ | 32 |
| | $ | 43,828 |
| | $ | 808 |
| | $ | 17,647 |
| | $ | 2,852 |
| | $ | 785 |
| | $ | 65,952 |
| $ | 84 |
| | $ | 52,595 |
| | $ | 919 |
| | $ | 17,331 |
| | $ | 1,698 |
| | $ | 641 |
| | $ | 73,268 |
|
Loss coverage ratio | 1.0 | % | | 1.5 | % | | 1.4 | % | | 2.0 | % | | 1.6 | % | | 1.4 | % | | 1.6 | % | 0.8 | % | | 1.6 | % | | 1.3 | % | | 1.8 | % | | 1.3 | % | | 1.3 | % | | 1.6 | % |
| | | As of December 31, 2011 | As of December 31, 2012 |
| Real estate - Residential | | Real estate - Commercial | | Real estate - Construction | | Commercial business | | Trade finance | | Consumer and other | | Total | Real estate - Residential | | Real estate - Commercial | | Real estate - Construction | | Commercial business | | Trade finance | | Consumer and other | | Total |
| (In thousands) | (In thousands) |
Impaired loans (Gross carrying value) | $ | 0 |
| | $ | 51,183 |
| | $ | 1,838 |
| | $ | 34,922 |
| | $ | 4,964 |
| | $ | 150 |
| | $ | 93,057 |
| $ | — |
| | $ | 53,634 |
| | $ | 1,710 |
| | $ | 27,274 |
| | $ | 6,199 |
| | $ | 1,338 |
| | $ | 90,155 |
|
Specific allowance | $ | 0 |
| | $ | 10,476 |
| | $ | 49 |
| | $ | 7,168 |
| | $ | 342 |
| | $ | 0 |
| | $ | 18,035 |
| $ | — |
| | $ | 4,906 |
| | $ | — |
| | $ | 4,158 |
| | $ | 96 |
| | $ | — |
| | $ | 9,160 |
|
Loss coverage ratio | 0.0 | % | | 20.5 | % | | 2.7 | % | | 20.5 | % | | 6.9 | % | | 0.0 | % | | 19.4 | % | 0.0 | % | | 9.1 | % | | 0.0 | % | | 15.2 | % | | 1.5 | % | | 0.0 | % | | 10.2 | % |
Non-impaired loans | $ | 2,043 |
| | $ | 2,580,697 |
| | $ | 42,918 |
| | $ | 814,654 |
| | $ | 141,720 |
| | $ | 66,481 |
| | $ | 3,648,513 |
| $ | 9,247 |
| | $ | 3,046,832 |
| | $ | 63,335 |
| | $ | 894,282 |
| | $ | 145,871 |
| | $ | 48,616 |
| | $ | 4,208,183 |
|
General allowance | $ | 9 |
| | $ | 27,831 |
| | $ | 675 |
| | $ | 13,513 |
| | $ | 1,444 |
| | $ | 445 |
| | $ | 43,917 |
| $ | 74 |
| | $ | 40,256 |
| | $ | 986 |
| | $ | 13,448 |
| | $ | 2,256 |
| | $ | 761 |
| | $ | 57,781 |
|
Loss coverage ratio | 0.4 | % | | 1.1 | % | | 1.6 | % | | 1.7 | % | | 1.0 | % | | 0.7 | % | | 1.2 | % | 0.8 | % | | 1.3 | % | | 1.6 | % | | 1.5 | % | | 1.5 | % | | 1.6 | % | | 1.4 | % |
Total loans | $ | 2,043 |
| | $ | 2,631,880 |
| | $ | 44,756 |
| | $ | 849,576 |
| | $ | 146,684 |
| | $ | 66,631 |
| | $ | 3,741,570 |
| $ | 9,247 |
| | $ | 3,100,466 |
| | $ | 65,045 |
| | $ | 921,556 |
| | $ | 152,070 |
| | $ | 49,954 |
| | $ | 4,298,338 |
|
Total allowance for loan losses | $ | 9 |
| | $ | 38,307 |
| | $ | 724 |
| | $ | 20,681 |
| | $ | 1,786 |
| | $ | 445 |
| | $ | 61,952 |
| $ | 74 |
| | $ | 45,162 |
| | $ | 986 |
| | $ | 17,606 |
| | $ | 2,352 |
| | $ | 761 |
| | $ | 66,941 |
|
Loss coverage ratio | 0.4 | % | | 1.5 | % | | 1.6 | % | | 2.4 | % | | 1.2 | % | | 0.7 | % | | 1.7 | % | 0.8 | % | | 1.5 | % | | 1.5 | % | | 1.9 | % | | 1.5 | % | | 1.5 | % | | 1.6 | % |
Under certain circumstances, we provide borrowers relief through loan modifications. These modifications are either temporary in nature (“temporary modifications”) or are more substantive. At September 30, 2012March 31, 2013, total modified loans were $45.164.5 million, compared to $32.851.5 million at December 31, 20112012. The temporary modifications generally consist of interest only payments for a three to six month period, whereby principal payments are deferred. At the end of the modification period, the remaining principal balance is re-amortized based on the original maturity date. Loans subject to temporary modifications are
generally downgraded to SubstandardSpecial Mention or Special Mention.Substandard. At the end of the modification period, the loan either 1) returns to the original contractual terms; 2) is further modified and accounted for as a troubled debt restructuring in accordance with ASC 310-10-35; or 3) is disposed of through foreclosure or liquidation.
Troubled Debt Restructurings (“TDRs”) of loans are defined by ASC 310-40, “Troubled Debt Restructurings by Creditors” and ASC 470-60, “Troubled Debt Restructurings by Debtors” and evaluated for impairment in accordance with ASC 310-10-35. The concessions may be granted in various forms, including reduction in the stated interest rate, reduction in the amount of principal amortization, forgiveness of a portion of a loan balance or accrued interest, or extension of the maturity date. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed ofon the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under our internal underwriting policy.
A summary of TDRs on accrual and non-accrualnonaccrual by type of concession as of September 30, 2012March 31, 2013 and December 31, 20112012 is presented below:
| | | As of September 30, 2012 | As of March 31, 2013 |
| TDR on accrual | | TDR on non-accrual | | TOTAL | TDRs on Accrual | | TDRs on Nonaccrual | | Total |
| Real estate - Commercial | | Commercial Business | | Other | | Total | | Real estate - Commercial | | Commercial Business | | Other | | Total | | Real estate - Commercial | | Commercial Business | | Other | | Total | | Real estate - Commercial | | Commercial Business | | Other | | Total | |
| (In thousands) | (In thousands) |
Payment concession | $ | 2,491 |
| | $ | 2,028 |
| | $ | 0 |
| | $ | 4,519 |
| | $ | 8,871 |
| | $ | 3,299 |
| | $ | 0 |
| | $ | 12,170 |
| | $ | 16,689 |
| $ | 10,548 |
| | $ | 2,785 |
| | $ | — |
| | $ | 13,333 |
| | $ | 14,899 |
| | $ | 3,319 |
| | $ | 784 |
| | $ | 19,002 |
| | $ | 32,335 |
|
Maturity / Amortization concession | 398 |
| | 4,267 |
| | 60 |
| | 4,725 |
| | 662 |
| | 1,810 |
| | 74 |
| | 2,546 |
| | 7,271 |
| 544 |
| | 3,811 |
| | 534 |
| | 4,889 |
| | 623 |
| | 2,156 |
| | 941 |
| | 3,720 |
| | 8,609 |
|
Rate concession | 11,896 |
| | 1,035 |
| | 0 |
| | 12,931 |
| | 8,055 |
| | 47 |
| | 0 |
| | 8,102 |
| | 21,033 |
| 12,829 |
| | 1,198 |
| | — |
| | 14,027 |
| | 9,482 |
| | — |
| | — |
| | 9,482 |
| | 23,509 |
|
Principal forgiveness | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 67 |
| | 0 |
| | 67 |
| | 67 |
| — |
| | — |
| | — |
| | — |
| | — |
| | 59 |
| | — |
| | 59 |
| | 59 |
|
| $ | 14,785 |
| | $ | 7,330 |
| | $ | 60 |
| | $ | 22,175 |
| | $ | 17,588 |
| | $ | 5,223 |
| | $ | 74 |
| | $ | 22,885 |
| | $ | 45,060 |
| $ | 23,921 |
| | $ | 7,794 |
| | $ | 534 |
| | $ | 32,249 |
| | $ | 25,004 |
| | $ | 5,534 |
| | $ | 1,725 |
| | $ | 32,263 |
| | $ | 64,512 |
|
| | | As of December 31, 2011 | As of December 31, 2012 |
| TDR on accrual | | TDR on non-accrual | | TOTAL | TDRs on Accrual | | TDRs on Nonaccrual | | Total |
| Real estate - Commercial | | Commercial Business | | Other | | Total | | Real estate - Commercial | | Commercial Business | | Other | | Total | | Real estate - Commercial | | Commercial Business | | Other | | Total | | Real estate - Commercial | | Commercial Business | | Other | | Total | |
| (In thousands) | (In thousands) |
Payment concession | $ | 947 |
| | $ | 1,364 |
| | $ | 0 |
| | $ | 2,311 |
| | $ | 3,840 |
| | $ | 3,438 |
| | $ | 0 |
| | $ | 7,278 |
| | $ | 9,589 |
| $ | 9,608 |
| | $ | 687 |
| | $ | — |
| | $ | 10,295 |
| | $ | 4,735 |
| | $ | 4,618 |
| | $ | 802 |
| | $ | 10,155 |
| | $ | 20,450 |
|
Maturity / Amortization concession | 0 |
| | 1,355 |
| | 0 |
| | 1,355 |
| | 1,181 |
| | 1,738 |
| | 0 |
| | 2,919 |
| | 4,274 |
| 348 |
| | 3,847 |
| | 536 |
| | 4,731 |
| | 652 |
| | 1,941 |
| | 869 |
| | 3,462 |
| | 8,193 |
|
Rate concession | 12,375 |
| | 2,735 |
| | 0 |
| | 15,110 |
| | 3,344 |
| | 397 |
| | 0 |
| | 3,741 |
| | 18,851 |
| 13,594 |
| | 1,229 |
| | — |
| | 14,823 |
| | 7,923 |
| | — |
| | — |
| | 7,923 |
| | 22,746 |
|
Principal forgiveness | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 78 |
| | 0 |
| | 78 |
| | 78 |
| — |
| | — |
| | — |
| | — |
| | — |
| | 62 |
| | — |
| | 62 |
| | 62 |
|
| $ | 13,322 |
| | $ | 5,454 |
| | $ | 0 |
| | $ | 18,776 |
| | $ | 8,365 |
| | $ | 5,651 |
| | $ | 0 |
| | $ | 14,016 |
| | $ | 32,792 |
| $ | 23,550 |
| | $ | 5,763 |
| | $ | 536 |
| | $ | 29,849 |
| | $ | 13,310 |
| | $ | 6,621 |
| | $ | 1,671 |
| | $ | 21,602 |
| | $ | 51,451 |
|
TDRs on accrual status are comprised of loans that were accruing at the time of restructuring and for which the Bank anticipates full repayment of both principal and interest under the restructured terms. TDRs that are on non-accrualnonaccrual can be returned to accrual status after a period of sustained performance, generally determined to be six months of timely payments as modified. Sustained performance includes the periods prior to the modification if the prior performance met or exceeded the modified terms. TDRs on accrual status at September 30, 2012March 31, 2013 were comprised of 914 commercial real estate loans totaling $14.823.9 million and 2722 commercial business loans totaling $7.37.8 million, and 2 consumer loans totaling $534 thousand. TDRs on accrual status at December 31, 20112012 were comprised of 612 commercial real estate loans totaling $13.323.6 million and 1920 commercial business loans totaling $5.55.8 million, and 2 consumer loans totaling $536 thousand. We expectThe Company expects that the TDRs on accrual status as of September 30, 2012March 31, 2013, which were all performing in accordance with their restructured terms, to continue to comply with the restructured terms because of the reduced principal or interest payments on these loans. TDRs that were restructured at market interest rates and had sustained performance as agreed under the modified loan terms may be reclassified as non-TDRs after each year end but are still monitored for potential impairment.
We have allocated $12.4 million and $6.3 million of specific reserves to TDRs as of March 31, 2013 and December 31, 2012, respectively. As of March 31, 2013 and December 31, 2012, we did not have any outstanding commitments to extend additional funds to these borrowers.
The following table presents loans by class modified as TDRs that occurred during the three and nine months ended September 30, 2012March 31, 2013:
| | | Three Months Ended September 30, 2012 | | Nine Months Ended September 30, 2012 | Three Months Ended March 31, 2013 |
| Number of Loans | Pre- Modification | Post- Modification | | Number of Loans | Pre- Modification | Post- Modification | Number of Loans | | Pre- Modification | | Post- Modification |
| (Dollars in thousand) | (Dollars in thousand) |
Legacy Loans: | | | | | | | | | | |
Real estate - Commercial | | |
| |
| | | | | | |
| | |
|
Retail | 0 |
| $ | 0 |
| $ | 0 |
| | 4 |
| $ | 976 |
| $ | 935 |
| 2 |
| | $ | 712 |
| | $ | 709 |
|
Hotel & Motel | 0 |
| 0 |
| 0 |
| | 1 |
| 1,479 |
| 1,447 |
| — |
| | — |
| | — |
|
Gas Station & Car Wash | 0 |
| 0 |
| 0 |
| | 1 |
| 216 |
| 97 |
| 1 |
| | 1,371 |
| | 967 |
|
Mixed Use | 0 |
| 0 |
| 0 |
| |
|
| 0 |
| 0 |
| — |
| | — |
| | — |
|
Industrial & Warehouse | 0 |
| 0 |
| 0 |
| | 1 |
| 1,060 |
| 1,045 |
| 1 |
| | 370 |
| | 362 |
|
Other | 0 |
| 0 |
| 0 |
| | 2 |
| 8,604 |
| 5,581 |
| — |
| | — |
| | — |
|
Real estate - Construction | 0 |
| 0 |
| 0 |
| | 0 |
| 0 |
| 0 |
| — |
| | — |
| | — |
|
Commercial business | 4 |
| 2,299 |
| 2,251 |
| | 11 |
| 3,666 |
| 4,528 |
| 3 |
| | 1,156 |
| | 1,155 |
|
Trade Finance | 0 |
| 0 |
| 0 |
| | 1 |
| 0 |
| 50 |
| — |
| | — |
| | — |
|
Subtotal | 4 |
| $ | 2,299 |
| $ | 2,251 |
| | 21 |
| $ | 16,001 |
| $ | 13,683 |
| 7 |
| | $ | 3,609 |
| | $ | 3,193 |
|
Acquired Loans: | | | | | | | | | | |
Real estate - Commercial | | |
| |
| | | | | | |
| | |
|
Retail | 1 |
| $ | 401 |
| $ | 398 |
| | 2 |
| $ | 1,458 |
| $ | 1,341 |
| — |
| | $ | — |
| | $ | — |
|
Hotel & Motel | 0 |
| 0 |
| 0 |
| | 1 |
| 6,165 |
| 6,051 |
| — |
| | — |
| | — |
|
Gas Station & Car Wash | 0 |
| 0 |
| 0 |
| | 0 |
| 0 |
| 0 |
| 1 |
| | 165 |
| | 171 |
|
Mixed Use | 0 |
| 0 |
| 0 |
| | 0 |
| 0 |
| 0 |
| — |
| | — |
| | — |
|
Industrial & Warehouse | 0 |
| 0 |
| 0 |
| | 0 |
| 0 |
| 0 |
| 1 |
| | 10,248 |
| | 10,273 |
|
Other | 1 |
| 654 |
| 643 |
| | 1 |
| 670 |
| 643 |
| 1 |
| | 980 |
| | 980 |
|
Real estate - Construction | 0 |
| 0 |
| 0 |
| | 0 |
| 0 |
| 0 |
| — |
| | — |
| | — |
|
Commercial business | 1 |
| 241 |
| 230 |
| | 5 |
| 748 |
| 1,425 |
| 2 |
| | 848 |
| | 190 |
|
Trade Finance | 0 |
| 0 |
| 0 |
| | 0 |
| 0 |
| 0 |
| — |
| | — |
| | — |
|
Subtotal | 3 |
| $ | 1,296 |
| $ | 1,271 |
| | 9 |
| $ | 9,041 |
| $ | 9,460 |
| 5 |
| | $ | 12,241 |
| | $ | 11,614 |
|
Total | 7 |
| $ | 3,595 |
| $ | 3,522 |
| | 30 |
| $ | 25,042 |
| $ | 23,143 |
| 12 |
| | $ | 15,850 |
| | $ | 14,807 |
|
| | | | | | | | | | |
The specific reserves for the TDRs described above as of September 30, 2012March 31, 2013 were $1.95.7 million and thethere were $0 charge offs for the three and nine months ended September 30, 2012 were $6 thousand and $124 thousand, respectively.March 31, 2013.
The following table presents loans by class for TDRs that have been modified within the previous twelve months and have subsequently had a payment default during the three and nine months ended September 30, 2012March 31, 2013:
| | | Three Months Ended September 30, 2012 | | Nine Months Ended September 30, 2012 | Three Months Ended March 31, 2013 |
| Number of Loans | Balance | | Number of Loans | Balance | Number of Loans | | Balance |
| (Dollars In thousands) | (Dollars In thousands) |
Legacy Loans: | | | | | | | | |
Real estate - Commercial | | | | | | | | |
Retail | 0 |
| $ | 0 |
| | 0 |
| $ | 0 |
| 1 |
| | $ | 1,433 |
|
Gas Station & Car Wash | 1 |
| 215 |
| | 1 |
| 215 |
| — |
| | — |
|
Industrial & Warehouse | 0 |
| 0 |
| | 1 |
| 1,045 |
| — |
| | — |
|
Other | 1 |
| 718 |
| | 1 |
| 718 |
| — |
| | — |
|
Commercial Business | 2 |
| 45 |
| | 2 |
| 45 |
| 2 |
| | 78 |
|
Subtotal | 4 |
| $ | 978 |
| | 5 |
| $ | 2,023 |
| 3 |
| | $ | 1,511 |
|
Acquired Loans: | | | | | | | | |
Real estate - Commercial | |
| |
| | | | |
| | |
|
Retail | 0 |
| $ | 0 |
| | 0 |
| $ | 0 |
| — |
| | $ | — |
|
Gas Station & Car Wash | | 1 |
| | 171 |
|
Hotel & Motel | 0 |
| 0 |
| | 1 |
| 6,051 |
| — |
| | — |
|
Industrial & Warehouse | 0 |
| 0 |
| | 0 |
| 0 |
| — |
| | — |
|
Other | 0 |
| 0 |
| | 0 |
| 0 |
| — |
| | — |
|
Commercial Business | 1 |
| 148 |
| | 1 |
| 148 |
| 2 |
| | 1,098 |
|
Subtotal | 1 |
| $ | 148 |
| | 2 |
| $ | 6,199 |
| 3 |
| | $ | 1,269 |
|
| 5 |
| $ | 1,126 |
| | 7 |
| $ | 8,222 |
| 6 |
| | $ | 2,780 |
|
A loan is considered to be in payment default once it is 30 days contractually past due under the modified terms. The specific reserves for the TDRs described above as of September 30, 2012March 31, 2013 were $113808 thousand and the charge offs for the three and nine months ended September 30, 2012March 31, 2013 were $6$0.
The three Legacy Loans that subsequently defaulted during the three months ended March 31, 2013 were modified as follows: one Commercial Business loan totaling $42 thousand and $was modified through a payment concession, 124one Commercial Business loan totaling $36 thousand, respectively. was modified through a maturity/amortization concession, and one Real Estate Commercial - Retail loan totaling $1.4 million was modified through a rate concession.
We have allocated $The 6.1three Acquired Loans that subsequently defaulted during the three months ended March 31, 2013 were modified as follows: two Commercial Business loans totaling $1.1 million and $6.4 million of specific reserves to TDRs as of September 30, 2012were modified through payment concessions and December 31, 2011, respectively. As of September 30, 2012one andReal Estate Commercial - Gas Station & Car Wash loan totaling December 31, 2011,$171 thousand we did not have any outstanding commitments to extend additional funds to these borrowers.was modified through a payment concession.
Covered Loans
On April 16, 2010, the Department of Financial Institutions closed Innovative Bank, California, and appointed the FDIC as its receiver. On the same date, Centerthe Bank assumed the banking operations of Innovative Bank from the FDIC under a purchase and assumption agreement and two related loss sharing agreements with the FDIC. Upon the merger between Nara Bancorp and Center Financial, the Company assumed the loss sharing agreements with the FDIC.
Covered nonperforming assets totaled $2.31.4 million and $3.6 million$882 thousand at September 30, 2012March 31, 2013 and December 31, 20112012, respectively. These covered nonperforming assets are subject to the loss sharing agreements with the FDIC. The covered nonperforming assets at September 30, 2012March 31, 2013 and December 31, 20112012 were as follows:
| | | September 30, 2012 | | December 31, 2011 | March 31, 2013 | | December 31, 2012 |
| (In thousands) | (In thousands) |
Covered loans on non-accrual status | $ | 476 |
| | $ | 0 |
| |
Covered other real estate owned | 1,821 |
| | 3,575 |
| |
Covered loans on nonaccrual status | | $ | 629 |
| | $ | 489 |
|
Covered OREO | | 738 |
| | 393 |
|
Total covered nonperforming assets | $ | 2,297 |
| | $ | 3,575 |
| $ | 1,367 |
| | $ | 882 |
|
| | | | | | |
Acquired covered loans | $ | 78,141 |
| | $ | 89,959 |
| $ | 69,112 |
| | $ | 72,528 |
|
Related Party Loans accounted for under ASC 310-30 are generally considered accruing and performing loans and
In the accretable discount is accreted to interest income overordinary course of business, the estimate lifeCompany entered into loan transactions with certain of the loan when cash flows are reasonably estimable. Accordingly, acquired impaired loans that are contractually past due are still considered to be accruing and performing loans.its directors or associates of such directors (“Related Parties”). The loans may be classified as nonaccrual ifto Related Parties are on substantially the timingsame terms and amount of future cash flows is not reasonably estimable.conditions, including
interest rates and collateral, as those prevailing at the same time for comparable transactions with unrelated parties. In management’s opinion, these transactions did not involve more than normal credit risk or present other unfavorable features. All loans to Related Parties were current as of March 31, 2013 and December 31, 2012, and the outstanding principal balance as of March 31, 2013 and December 31, 2012 was $7.5 million and $11.1 million, respectively.
We maintain a secured credit facility with the Federal Home Loan Bank of San Francisco (“FHLB”)FHLB against which the Bank may take advances. The borrowing capacity is limited to the lower of 25%30% of the Bank’s total assets or the Bank’s collateral capacity, which was $1.50 billion at March 31, 2013 and $1.3 billion at September 30, 2012 and December 31, 20112012. The terms of this credit facility require the Company to pledge eligible collateral with the FHLB equal to at least 100% of outstanding advances.
At September 30, 2012March 31, 2013 and December 31, 20112012, real estate secured loans with a carrying amount of approximately $2.02.18 billion and $2.04 billion, respectively, were pledged as collateral for borrowings from the FHLB. At September 30, 2012March 31, 2013 and December 31, 20112012, other than FHLB stock, no securities totaling $0 and $3.0 million, respectively, were pledged as collateral for borrowings from the FHLB.
At September 30, 2012March 31, 2013 and December 31, 20112012, FHLB borrowingsadvances were $460.8421.6 million and $344.4420.7 million, had a weighted average interest rate of 1.33%1.12% and 1.93%1.24%, respectively, and had various maturities through September 2017February 2018. At September 30, 2012March 31, 2013 and December 31, 20112012, $80.066.6 million and $205.066.7 million, respectively, of the advances were putable advances with various putable dates and strike prices. The cost of FHLB borrowingsadvances as of September 30, 2012March 31, 2013 ranged between 0.28%0.25% and 3.93%3.89%. At September 30, 2012March 31, 2013, the Company had a remaining borrowing capacity of $836.7 million1.08 billion.
At September 30, 2012March 31, 2013, the contractual maturities for FHLB borrowingsadvances were as follows:
| |
| Contractual Maturities |
| Maturity/ Put Date | Contractual Maturities |
| Maturity/ Put Date |
| (In thousands) | (In thousands) |
Due within one year | $ | 194,000 |
| | $ | 245,815 |
| $ | 90,000 |
| | $ | 141,632 |
|
Due after one year through five years | 266,815 |
| | 215,000 |
| 331,632 |
| | 280,000 |
|
Due after five years through ten years | 0 |
| | 0 |
| |
| $ | 460,815 |
| | $ | 460,815 |
| $ | 421,632 |
| | $ | 421,632 |
|
In addition, as a member of the Federal Reserve BankFRB system, we may also borrow from the Federal Reserve BankFRB of San Francisco. The maximum amount that we may borrow from the Federal Reserve Bank’sFRB’s discount window is up to 95% of the outstanding principal balance of the qualifying loans and the fair value of the securities that we pledge. At September 30, 2012March 31, 2013, the outstanding principal balance of the qualifying loans was $480.2 million and the collateral value of investment securities were $0.6509.3 million, and no borrowings were outstanding against this line.
| |
9. | Subordinated Debentures |
At September 30, 2012March 31, 2013, 4four wholly-owned subsidiary grantor trusts established by former Nara Bancorp had issued $28 million of pooled Trust Preferred Securities (“trust preferred securities”) and 1one wholly-owned subsidiary grantor trust established by former Center Financial Corporation had issued $18 million of trust preferred securities. Upon the acquisition of PIB, the Company assumed one grantor trust established by former PIB which issued $4.0 million of trust preferred securities, which the Company will redeem on the earliest redemption date of June 17, 2013. Trust preferred securities accrue and pay distributions periodically at specified annual rates as provided in the indentures. The trusts used the net proceeds from the offering to purchase a like amount of subordinated debentures (the “Debentures”) of BBCN Bancorp. The Debentures are the sole assets of the trusts. BBCN Bancorp’s obligations under the subordinated debentures and related documents, taken together, constitute a full and unconditional guarantee by BBCN Bancorp of the obligations of the trusts. The trust preferred securities are mandatorily redeemable upon the maturity of the Debentures, or upon earlier redemption as provided in the indentures. BBCN Bancorp has the right to redeem the Debentures in whole (but not in part) on or after specific dates, at a redemption price specified in the indentures plus any accrued but unpaid interest to the redemption date. BBCN Bancorp also has a right to defer consecutive payments of interest on the debentures for up to five years.
The following table is a summary of trust preferred securities and debentures at September 30, 2012March 31, 2013:
| | Issuance Trust |
| Issuance Date |
| Trust Preferred Security Amount |
| Subordinated Debentures Amount |
| Rate Type |
| Initial Rate |
| Coupon Rate at September 30, 2012 |
| Maturity Date |
| Issuance Date |
| Trust Preferred Security Amount |
| Subordinated Debentures Amount |
| Rate Type |
| Initial Rate |
| Coupon Rate at March 31, 2013 |
| Maturity Date |
| | (Dollars in thousands) | | | | | | | (Dollars in thousands) | | | | | |
Nara Capital Trust III |
| 6/5/2003 |
| $ | 5,000 |
|
| $ | 5,155 |
|
| Variable |
| 4.44 | % |
| 3.54 | % |
| 6/15/2033 |
| 6/5/2003 |
| $ | 5,000 |
|
| $ | 5,155 |
|
| Variable |
| 4.44 | % |
| 3.43 | % |
| 6/15/2033 |
Nara Statutory Trust IV |
| 12/22/2003 |
| 5,000 |
|
| 5,155 |
|
| Variable |
| 4.02 | % |
| 3.31 | % |
| 1/7/2034 |
| 12/22/2003 |
| 5,000 |
|
| 5,155 |
|
| Variable |
| 4.02 | % |
| 3.15 | % |
| 1/7/2034 |
Nara Statutory Trust V |
| 12/17/2003 |
| 10,000 |
|
| 10,310 |
|
| Variable |
| 4.12 | % |
| 3.34 | % |
| 12/17/2033 |
| 12/17/2003 |
| 10,000 |
|
| 10,310 |
|
| Variable |
| 4.12 | % |
| 3.23 | % |
| 12/17/2033 |
Nara Statutory Trust VI |
| 3/22/2007 |
| 8,000 |
|
| 8,248 |
|
| Variable |
| 7.00 | % |
| 2.04 | % |
| 6/15/2037 |
| 3/22/2007 |
| 8,000 |
|
| 8,248 |
|
| Variable |
| 7.00 | % |
| 1.93 | % |
| 6/15/2037 |
Center Capital Trust I |
| 12/30/2003 |
| 18,000 |
|
| 12,941 |
|
| Variable |
| 4.01 | % |
| 3.31 | % | * | 1/7/2034 |
| 12/30/2003 |
| 18,000 |
|
| 13,014 |
|
| Variable |
| 4.01 | % |
| 3.15 | % | (1) | 1/7/2034 |
PIB Trust I | | | 6/28/2005 | | 4,000 |
| | 4,114 |
| | Variable | | 5.23 | % | | 2.03 | % | (2) | 9/15/2035 |
TOTAL ISSUANCE |
| $ | 46,000 |
|
| $ | 41,809 |
|
|
|
|
|
|
|
|
| $ | 50,000 |
|
| $ | 45,996 |
|
|
|
|
|
|
|
|
| |
*(1) | The Center Capital Trust I trust preferred security was assumed in the Merger.merger with Center Financial Corporation. The remaining discount was $5.65.5 million at September 30, 2012March 31, 2013 and the effective rate of the security, including the effect of the discount accretion, was 6.03% at September 30, 2012March 31, 2013. |
| |
(2) | The PIB Trust I trust preferred security was assumed in the acquisition of PIB. The remaining discount was $10 thousand at March 31, 2013 and the effective rate of the security, including the effect of the discount accretion was 3.28% at March 31, 2013 |
The Company’s investment in the common trust securities of the issuer trusts of $1.41.7 million and $2.01.6 million at September 30, 2012March 31, 2013 and December 31, 20112012, respectively, is included in other assets. Although the subordinated debt issued by the trusts are not included as a component of stockholders' equity in the consolidated balance sheets, the debt is treated as capital for regulatory purposes. The trust preferred security debt issuances are includable in Tier I capital up to a maximum of 25% of capital on an aggregate basis. Any amount that exceeds 25% qualifies as Tier 2 capital. At September 30, 2012March 31, 2013, all of the $4650.0 million of the trusts’ securities qualified as Tier 1 capital. In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) was signed into law which, among other things, limits the ability of bank holding companies with total assets of more than $15 billion to treat trust preferred security debt issuances as Tier 1 capital. Since the Company had less than $15 billion in assets at September 30, 2012March 31, 2013, we will be able to continue to include its existing trust preferred securities in Tier 1 capital under the Dodd-Frank Act.
| |
10. | Derivative Financial Instruments and Hedging Activities |
As part of our asset and liability management strategy, the Company may enter into derivative financial instruments, such as interest rate swaps, caps and floors, with the overall goal of minimizing the impact of interest rate fluctuations on our net interest margin. Interest rate swaps and caps involve the exchange of fixed-rate and variable-rate interest payment obligations without the exchange of the underlying notional amounts.
During the first quarter of 2010, the Company entered into a three-year interest rate cap agreement with an aggregate notional amount of $50.0 million., which expired in February 2013. Under this cap agreement, the Company receivesreceived quarterly payments from the counterparty when the quarterly resetting 3 Month London-Interbank Offered Rate exceedsexceeded the strike level of 2.00%. The upfront fee paid to the counterparty in entering into this interest rate cap agreement was $890 thousand.
TheseThe interest rate cap agreements areagreement was considered “free-standing” due to the non-designation of a hedge relationship to any of itsthe Company's financial assets or liabilities. Under FASB ASC 815, valuation gains or losses on interest rate caps not designated as hedging instruments are recognized in earnings. At September 30, 2012, the aggregate fair value of the outstanding interest rate caps was $0, and we recognized mark-to-market losses on valuation of $0 and $9 thousandfor the three and nine months endedSeptember 30, 2012.
At September 30, 2012 and December 31, 2011, summary information about these interest-rate caps is as follows:
|
| | | | | | |
| September 30, 2012 | December 31, 2011 |
Notional amounts | $ | 50 | million | $ | 50 | million |
Weighted average pay rates | N/A |
| N/A |
|
Weighted average receive rates | N/A |
| N/A |
|
Weighted average maturity | 0.41 years |
| 1.16 years |
|
Fair value of combined interest rate caps | $ | 0 |
| $ | 9 | thousand |
The effect of derivative instruments on the Consolidated Statement of Income for the three and nine months ended September 30, 2012March 31, 2013 and 20112012 are as follows:
| |
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, |
| | Three Months Ended March 31, |
|
| 2012 |
| 2011 |
| 2012 |
| 2011 |
| | 2013 |
| 2012 |
| Location of Gain or (Loss) Recognized in Income on Derivatives | Amount of Gain or (Loss) Recognized in Income on Derivatives |
| Amount of Gain or (Loss) Recognized in Income on Derivatives | Location of Gain or (Loss) Recognized in Income on Derivatives | | Amount of Gain or (Loss) Recognized in Income on Derivatives |
| | (In thousands) | | (In thousands) |
Derivatives not designated as hedging instruments under FASB ASC 815: |
|
|
|
|
|
|
|
|
| |
|
|
|
Interest rate contracts (1) | Other income | $ | — |
|
| $ | (14 | ) |
| $ | (9 | ) |
| $ | (153 | ) | Other income | | $ | — |
|
| $ | (8 | ) |
| |
(1) | Includes amounts representing the net interest payments as stated in the contractual agreements and the valuation gains or (losses) on interest rate contracts not designated as hedging instruments. |
The Company and its subsidiaries are subject to U.S. federal income tax as well as state income taxes. The Company had total unrecognized tax benefits of $7341.68 million and $748 thousand at September 30, 2012March 31, 2013 and $569 thousand at December 31, 20112012, respectively, that relate primarily to uncertainties related to California enterprise zone loan interest deductions.deductions and anticipated adjustments from the 2010 Internal Revenue Service (IRS) examination.
We anticipate an increase of approximately $220 thousand in the unrecognized tax benefit related to the California enterprise zone loan interest deductionand a decrease of approximately $971 thousand in the unrecognized tax benefit related to an expected settlement with the IRS for the 2010 tax year within the next twelve months. The Company is subject to U.S. federal income taxes, California franchise taxes and various other state income and franchise taxes.
The statute of limitations related to the consolidated Federal income tax return is closed for all tax years up to and including 2008. The expiration of the statute of limitations related to the various state income and franchise tax returns varies by state. We wereThe Company is currently under examination by IRS for the 2010 tax year and was recently contacted for examination by the California Franchise Tax Board (FTB) for the 2009 and 2010 tax years. While the outcome of the FTB examination is unknown, the Company expects no material adjustments. Within the last twelve months, examinations by the City of New York City for thetax years 2007, 2008, and 2009, tax years. New York City tax authority recently closedand the examinationFTB for the 2007, 2008 and 2009 tax years 2007 and 2008, were concluded with an immaterial adjustment.no material adjustments.
We recognize interest and penalties related to income tax matters in income tax expense. We had approximately $5874 thousand and $7752 thousand for interest and penalties accrued at September 30, 2012March 31, 2013 and December 31, 20112012, respectively.
Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all, of the deferred tax asset will not be realized. In assessing the realization of deferred tax assets, management evaluates both positive and negative evidence, including the existence of any cumulative losses in the current year and the prior two years, the amount of taxes paid in available carry-back years, the forecasts of future income, applicable tax planning strategies, and assessments of current and future economic and business conditions. This analysis is updated quarterly and adjusted as necessary. Based on the analysis, the Company has determined that a valuation allowance for deferred tax assets was not required as of September 30, 2012March 31, 2013.
| |
12. | Fair Value Measurements |
FASB ASC 820, Fair Value Measurements and Disclosures, establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3: Significant unobservable inputs that reflect estimates of assumptions that market participants would use in pricing
the asset or liability.
| |
Level 1: | Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. |
| |
Level 2: | Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. |
| |
Level 3: | Significant unobservable inputs that reflect estimates of assumptions that market participants would use in pricing the asset or liability. |
Securities Available for Sale
The fair values of securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs).
The fair values of the Company's Level 3 securities available for sale were measured using an income approach valuation technique. The primary inputs and assumptions used in the fair value measurement were derived from the securities' underlying collateral which included discount rates, prepayment speeds, payment delays, and an assessment of the risk of default of the underlying collateral, among other factors. Significant increases or decreases in any of the inputs or assumptions would result in a significant increase or decrease in the fair value measurement.
Impaired Loans
The fair values of impaired loans are generally measured for impairment using the practical expedients permitted by FASB ASC 310-10-35 including impaired loans measured at an observable market price (if available), or at the fair value of the loan’s collateral (if the loan is collateral dependent). Fair value of the loan’s collateral, when the loan is dependent on collateral, is determined by appraisals or independent valuation, less costs to sell and result in a Level 2.
Derivatives
The fair value of our derivative financial instruments, including interest rate swaps and caps, is based on derivative valuation models using market data inputs as of the valuation date that can generally be verified and do not typically involve significant management judgments.judgments (Level 2 inputs).
Other Real Estate OwnedOREO
Other real estate ownedOREO is fair valued at the time the loan is foreclosed upon and the asset is transferred to other real estate owned.OREO. The value is based primarily on third party appraisals, less costs to sell and result in a Level 2 classification of the inputs for determining fair value. Other real estate ownedOREO is reviewed and evaluated on at least an annual basis for additional impairment and adjusted to lower of cost or market accordingly, based on the same factors identified above.
Loans held for sale
Loans held for sale are carried at the lower of cost or fair value, as determined by outstanding commitments from investors, or based on recent comparable sales (Level 2 inputs), if available, and if not available, are based on discounted cash flows using current market rates applied to the estimated life and credit risk (Level 3 inputs) or may be assessed based upon the fair value of the collateral which is obtained from recent real estate appraisals (Level 3 inputs). These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in Level 3 classification of the inputs for determining fair value.
Assets and liabilities measured at fair value on a recurring basis are summarized below:
| | | |
| Fair Value Measurements at the End of the Reporting Period Using | |
| Fair Value Measurements at the End of the Reporting Period Using |
| September 30, 2012 |
| Quoted Prices in Active Markets for Identical Assets (Level 1) |
| Significant Other Observable Inputs (Level 2) |
| Significant Unobservable Inputs (Level 3) | March 31, 2013 |
| Quoted Prices in Active Markets for Identical Assets (Level 1) |
| Significant Other Observable Inputs (Level 2) |
| Significant Unobservable Inputs (Level 3) |
| (In thousands) | (In thousands) |
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GSE collateralized mortgage obligations | $ | 235,669 |
|
| $ | 0 |
|
| $ | 235,669 |
|
| $ | 0 |
| $ | 302,584 |
|
| $ | — |
|
| $ | 302,584 |
|
| $ | — |
|
GSE mortgage-backed securities | 427,589 |
|
| 0 |
|
| 427,589 |
|
| 0 |
| 389,726 |
|
| — |
|
| 389,726 |
|
| — |
|
Trust preferred security | 3,537 |
|
| 0 |
|
| 3,537 |
|
| 0 |
| |
Trust preferred securities | | 3,932 |
|
| — |
|
| 3,932 |
|
| — |
|
Municipal bonds | 5,139 |
|
| 0 |
|
| 5,139 |
|
| 0 |
| 6,281 |
|
| — |
|
| 5,075 |
|
| 1,206 |
|
Mutual funds | 15,125 |
|
| 15,125 |
|
| 0 |
|
| 0 |
| 14,918 |
|
| 14,918 |
|
| — |
|
| — |
|
| | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | |
| | | Fair Value Measurements at the End of the Reporting Period Using |
| December 31, 2012 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
| (In thousands) |
Assets: | | | | | | | |
Securities available for sale: | | | | | | | |
GSE collateralized mortgage obligations | $ | 254,912 |
| | $ | — |
| | $ | 254,912 |
| | $ | — |
|
GSE mortgage-backed securities | 425,540 |
| | — |
| | 425,540 |
| | — |
|
Trust preferred securities | 3,837 |
| | — |
| | 3,837 |
| | — |
|
Municipal bonds | 5,118 |
| | — |
| | 5,118 |
| | — |
|
Mutual funds | 14,996 |
| | 14,996 |
| | — |
| | — |
|
There were no transfers between Level 1, 2 and 3 during the period ended September 30, 2012March 31, 2013. and 2012. There were no gains or losses recognized in earnings
The table below presents a reconciliation and income statement classification of gains and losses for all assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2013:
|
| | | | |
| | Securities Available for Sale Municipal Bonds |
| | (in thousands) |
Beginning Balance, January 1, 2013 | | $ | — |
|
Purchases, issuances, and settlements | | 1,200 |
|
Total gains or (losses) included in earnings | | — |
|
Total gains or (losses) included in other comprehensive income | | 6 |
|
Ending Balance, March 31, 2013 | | $ | 1,206 |
|
|
| | | | | | | | | | | | | | | |
| | | Fair Value Measurements at the End of the Reporting Period Using |
| December 31, 2011 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
| (In thousands) |
Assets: | | | | | | | |
Securities available for sale: | | | | | | | |
U.S. Treasury | $ | 300 |
| | $ | 0 |
| | $ | 300 |
| | $ | 0 |
|
GSE collateralized mortgage obligations | 227,836 |
| | 0 |
| | 227,836 |
| | 0 |
|
GSE mortgage-backed securities | 487,754 |
| | 0 |
| | 487,754 |
| | 0 |
|
Trust preferred security | 4,348 |
| | 0 |
| | 4,348 |
| | 0 |
|
Municipal bonds | 5,764 |
| | 0 |
| | 5,764 |
| | 0 |
|
Mutual funds | 14,918 |
| | 14,918 |
| | 0 |
| | 0 |
|
Derivatives - Interest rate caps | 9 |
| | 0 |
| | 9 |
| | 0 |
|
Fair value adjustments for interest rate caps resulted in a net expense of $9 thousand for the nine months ended September 30, 2012 and $157 thousand for the year ended December 31, 2011.
Assets measured at fair value on a non-recurring basis are summarized below:
| | | |
| Fair Value Measurements at the End of the Reporting Period Using |
|
| | | |
| Fair Value Measurements at the End of the Reporting Period Using |
| September 30, 2012 |
| Quoted Prices in Active Markets for Identical Assets (Level 1) |
| Significant Other Observable Inputs (Level 2) |
| Significant Unobservable Inputs (Level 3) |
| Total Gains (Losses) for the Nine Months Ended September 30, 2012 | | Total Gains (Losses) for the Three Months Ended September 30, 2012 | March 31, 2013 |
| Quoted Prices in Active Markets for Identical Assets (Level 1) |
| Significant Other Observable Inputs (Level 2) |
| Significant Unobservable Inputs (Level 3) |
| (In thousands) | | | (In thousands) |
Assets: |
|
|
|
|
|
|
|
|
| | |
|
|
|
|
|
|
|
Impaired loans at fair value: |
|
|
|
|
|
|
|
|
| | |
|
|
|
|
|
|
|
Real estate loans | $ | 7,928 |
|
| $ | 0 |
|
| $ | 7,928 |
|
| $ | 0 |
|
| $ | (1,794 | ) | | $ | (800 | ) | $ | 13,752 |
|
| $ | — |
|
| $ | 13,752 |
|
| $ | — |
|
Commercial business | 727 |
|
| 0 |
| 727 |
| 0 |
|
| (494 | ) | | (160 | ) | 1,027 |
|
| — |
|
| 1,027 |
|
| — |
|
Loans held for sale, net | 2,725 |
|
| 0 |
|
| 2,725 |
|
| 0 |
|
| (536 | ) | | (380 | ) | |
Other real estate owned | 4,072 |
|
| 0 |
|
| 4072 |
|
| 0 |
|
| (2,433 | ) | | (1,611 | ) | |
OREO | | 477 |
|
| — |
|
| 477 |
|
| — |
|
| | | | | Fair Value Measurements at the End of the Reporting Period Using | | | | | Fair Value Measurements at the End of the Reporting Period Using |
| December 31, 2011 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Total Gains (Losses) for the Twelve Months Ended December 31, 2011 | December 31, 2012 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
| (In thousands) | (In thousands) |
Assets: | | | | | | | | | | | | | | | | |
Impaired loans at fair value: |
| |
| |
| |
| |
| | | | | | | |
Real estate loans | $ | 15,485 |
| | $ | 0 |
| | $ | 15,485 |
| | $ | 0 |
| | $ | (6,018 | ) | $ | 4,443 |
| | $ | — |
| | $ | 4,443 |
| | $ | — |
|
Commercial business | 6,360 |
| | 0 | | 6360 | | 0 |
| | (2,553 | ) | 1,164 |
| | — |
| | 1,164 |
| | — |
|
Loans held for sale, net | 6,901 |
| | 0 |
| | 6,901 |
| | 0 |
| | (3,393 | ) | 803 |
| | — |
| | 803 |
| | — |
|
Other real estate owned | 3,471 |
| | 0 |
| | 3471 |
| | 0 |
| | (1,031 | ) | |
OREO | | 2,636 |
| | — |
| | 2,636 |
| | — |
|
For assets measured at fair value on a non-recurring basis, the total net (losses) gains, which include charge offs, recoveries, specific reserves, and gains and losses on sales recognized are summarized below:
|
| | | | | | | |
| For the three months ended March 31, |
| 2013 | | 2012 |
| (In thousands) |
Assets: | | | |
Impaired loans at fair value: | | | |
Real estate loans | $ | (7,584 | ) | | $ | 1,603 |
|
Commercial business | 535 |
| | (2,184 | ) |
Loans held for sale, net | — |
| | (668 | ) |
OREO | (114 | ) | | (329 | ) |
Fair Value of Financial Instruments
Carrying amounts and estimated fair values of financial instruments, not previously presented, at September 30, 2012March 31, 2013 and December 31, 20112012 were as follows:
| | | September 30, 2012 | March 31, 2013 |
| Carrying Amount |
| Estimated Fair Value | | Fair Value Measurement Using | Carrying Amount |
| Estimated Fair Value | | Fair Value Measurement Using |
| (In thousands) | (In thousands) |
Financial Assets: |
|
|
| |
|
|
|
| |
|
Cash and cash equivalents | $ | 229,643 |
|
| $ | 229,643 |
| | Level 1 | $ | 280,813 |
|
| $ | 280,813 |
| | Level 1 |
Term federal funds sold | 0 |
|
| 0 |
| | Level 1 | |
Loans held for sale | 58,484 |
|
| 64,501 |
| | Level 2 | 48,941 |
|
| 55,380 |
| | Level 2 |
Loans receivable—net | 4,003,542 |
|
| 4,301,334 |
| | Level 3 | 4,426,778 |
|
| 4,872,847 |
| | Level 3 |
Federal Home Loan Bank stock | 23,500 |
|
| N/A |
| | N/A | |
Accrued interest receivable | 12,881 |
|
| 12,881 |
| | Level 2 | |
FHLB stock | | 24,308 |
|
| N/A |
| | N/A |
FDIC loss share receivable | 7,325 |
|
| 7,325 |
| | Level 3 | 4,386 |
|
| 4,386 |
| | Level 3 |
Customers’ liabilities on acceptances | 10,373 |
|
| 10,373 |
| | Level 2 | 12,200 |
|
| 12,200 |
| | Level 2 |
Financial Liabilities: |
|
|
| |
|
|
|
| |
|
Noninterest-bearing deposits | $ | 1,105,161 |
|
| $ | 1,105,161 |
| | Level 2 | $ | 1,182,509 |
|
| $ | 1,182,509 |
| | Level 2 |
Saving and other interest bearing demand deposits | 1,331,013 |
|
| 1,331,013 |
| | Level 2 | 1,461,596 |
|
| 1,461,596 |
| | Level 2 |
Time deposits | 1,616,350 |
|
| 1,611,240 |
| | Level 2 | 1,911,569 |
|
| 1,914,546 |
| | Level 2 |
Borrowings from Federal Home Loan Bank | 460,815 |
|
| 458,392 |
| | Level 2 | |
FHLB advances | | 421,632 |
|
| 426,278 |
| | Level 2 |
Subordinated debentures | 41,809 |
|
| 32,822 |
| | Level 2 | 45,996 |
|
| 47,524 |
| | Level 2 |
Accrued interest payable | 5,451 |
|
| 5,451 |
| | Level 2 | |
Bank’s liabilities on acceptances outstanding | 10,373 |
|
| 10,373 |
| | Level 2 | 12,200 |
|
| 12,200 |
| | Level 2 |
| December 31, 2011 | | December 31, 2012 |
| Carrying Amount |
| Estimated Fair Value | | Carrying Amount |
| Estimated Fair Value | | Fair Value Measurement Using |
| (In thousands) | | (In thousands) |
Financial Assets: |
|
|
| |
|
|
| |
Cash and cash equivalents | $ | 300,110 |
|
| $ | 300,110 |
| | $ | 312,916 |
|
| $ | 312,916 |
| | Level 1 |
Term federal funds sold | 40,000 |
|
| 40,000 |
| | |
Loans held for sale | 42,407 |
|
| 43,782 |
| | 51,635 |
|
| 57,856 |
| | Level 2 |
Loans receivable—net | 3,676,874 |
|
| 3,933,710 |
| | 4,229,311 |
|
| 4,591,685 |
| | Level 3 |
Federal Home Loan Bank stock | 27,373 |
|
| N/A |
| | |
Accrued interest receivable | 13,439 |
|
| 13,439 |
| | |
FHLB stock | | 22,495 |
|
| N/A |
| | N/A |
FDIC loss share receivable | 10,819 |
|
| 10,819 |
| | 5,797 |
|
| 5,797 |
| | Level 3 |
Customers’ liabilities on acceptances | 10,515 |
|
| 10,515 |
| | 10,493 |
|
| 10,493 |
| | Level 2 |
Financial Liabilities: |
|
|
|
|
| | | | | |
Noninterest-bearing deposits | 984,350 |
|
| 984,350 |
| | $ | 1,184,285 |
|
| $ | 1,184,285 |
| | Level 2 |
Saving and other interest bearing demand deposits | 1,435,441 |
|
| 1,435,441 |
| | 1,428,990 |
|
| 1,428,990 |
| | Level 2 |
Time deposits | 1,521,101 |
|
| 1,532,152 |
| | 1,770,760 |
|
| 1,772,778 |
| | Level 2 |
Borrowings from Federal Home Loan Bank | 344,402 |
|
| 349,311 |
| | |
FHLB advances | | 420,722 |
|
| 425,107 |
| | Level 2 |
Subordinated debentures | 52,102 |
|
| 53,757 |
| | 41,846 |
|
| 32,218 |
| | Level 2 |
Accrued interest payable | 6,519 |
|
| 6,519 |
| | |
Bank’s liabilities on acceptances outstanding | 10,515 |
|
| 10,515 |
| | 10,493 |
|
| 10,493 |
| | Level 2 |
The methods and assumptions used to estimate fair value are described as follows.follows:
The carrying amount is the estimated fair value for cash and cash equivalents, savings and other interest bearing demand deposits, accrued interest receivable and payable, customer’s and Bank’s liabilities on acceptances, non-interest-bearing deposits, short-term debt, secured borrowings, and variable rate loans or deposits that reprice frequently and fully. For fixed rate loans or deposits and for variable rate loans or deposits with infrequent repricing or repricing limits, fair value is based on discounted cash flows using current market rates applied to the estimated life and credit risk. The allowance for loan losses is considered to be a reasonable estimate of discount for credit quality concerns. Fair value of SBA loans held for sale is based on market quotes. For fair value of non-SBA loans held for sale, see the measurement method discussed previously. Fair value of
time deposits and debt is based on current rates for similar financing. It was not practicable to determine the fair value of Federal Reserve BankFRB stock or Federal Home Loan BankFHLB stock due to restrictions placed on their transferability. The fair value of commitments to fund loans represents fees currently charged to enter into similar agreements with similar remaining maturities and is not presented herein. The fair value of these financial instruments is not material to the consolidated financial statements.
| |
13. | Stockholders’ Equity and Regulatory Matters |
The Company and the Bank are subject to various regulatory capital requirements administered by the federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s and the Bank’s financial statements, such as restrictions on the growth, expansion or the payment of dividends or other capital distributions or management fees. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Prompt corrective action provisions are not applicable to bank holding companies.
Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined). Management believes that, as of September 30, 2012March 31, 2013 and December 31, 20112012, the Company and the Bank met all capital adequacy requirements to which they are subject.
As of September 30, 2012March 31, 2013 and December 31, 20112012, the most recent regulatory notification categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier I risk-based and Tier I leverage ratios as set forth in the table below. There are no conditions or events since the notification that management believes have changed the Bank’s category.
On November 21, 2008,In June 2012, the Company received $redeemed 67$55 million from the U.S. Treasury through its TARP capital purchase plan and issued 67,000 shares of cumulative preferred stock, Series A. The preferred stock paid cumulative dividends at the rate of 5% per year for the first five years and 9% per year thereafter. The shares are callable by the Company at par after three years if the repurchase is made with proceeds of a new offering or placement of common equity or of certain preferred stock treated as Tier 1 capital under applicable Federal banking regulations.
In conjunction with the purchase of the Company’s preferred stock, the U.S. Treasury received a warrant to purchase 1,042,531 shares of the Company’s common stock at $9.64 per share. The term of the warrant was ten years. On December 3, 2009, US Treasury approved the Company’s request for an adjustment to the Company’s warrant share position due to a qualified equity offering in November 2009. The adjusted number of warrant shares is 521,266, which is 50% of original number of warrant shares 1,042,531.
Upon the merger with Center Financial, the Company issued 55,000 shares of a new series of our preferred stock, designated as our Fixed Rate Cumulative Perpetual Preferred Stock, Series B, having substantially the same rights, preferences, privileges and voting powers as our Series A Preferred Stock in exchange for the shares of similar preferred stock issued by Center Financial under the Treasury Department's TARP Capital Purchase Program. The ten-yearA ten-year warrant to purchase Center Financial common stock that was issued in connection with Center Financial's sale of preferred stock to the Treasury Department was converted into a warrant to purchase BBCN Bancorp common stock upon our merger with Center. Reflecting the merger exchange ratio of 0.7805, the warrant now entitles the holder of the warrant to purchase, in one or more exercises of the warrant, up to 337,480 shares of BBCN Bancorp common stock at a price of $12.22 per share.
In June 2012, the The Company redeemed $67 million and $55 million of the aforementioned Series A and Series B Preferred Stock, respectively.
On August 8, 2012, we purchased from the Treasury Department, the outstanding warrant dated November 21, 2008 relating to 521,266 shares of the Company's common stock, at a purchase price of $2.2 million. We havehas not reached an agreement with the Treasury Department regarding repurchase of thethis warrant.
In December 2008, PIB granted a ten-year warrant for theto purchase ofup to 337,480127,785 shares of its common stock (in relation to the TARP Capital Purchase Plan) which were assumed by the Company upon the acquisition of PIB. On the acquisition date of February 15, 2013, these warrants were canceled and converted into a warrant to purchase BBCN Bancorp common stock. The warrant entitles the holder to purchase, on one or more exercises of the Company'swarrant, up to 18,045 shares of BBCN Bancorp common stock that we issued in connectionat a price of $54.03 per share. The warrant expires on the December 12, 2018. The Company has not reached an agreement with our merger with Center Financial.the Treasury Department regarding repurchase of this warrant.
The Company’s and the Bank’s actual capital amounts and ratios are presented in the table below:
|
| | | | | | | | | | | | | | | | | | | | |
| Actual |
| Required For Capital Adequacy Purposes |
| Required To Be Well Capitalized under Prompt Corrective Action Provisions |
| Amount |
| Ratio |
| Amount |
| Ratio |
| Amount |
| Ratio |
| (Dollars in thousands) |
As of September 30, 2012 | |
| |
| |
| |
| |
| |
Total capital (to risk-weighted assets): |
|
|
|
|
|
|
|
|
|
|
|
Company | $ | 723,954 |
| | 16.5 | % |
| $ | 351,432 |
|
| 8.0 | % |
| N/A |
|
| N/A |
|
Bank | $ | 702,825 |
| | 16.0 | % |
| $ | 351,209 |
|
| 8.0 | % |
| $ | 439,011 |
|
| 10.0 | % |
Tier I capital (to risk-weighted assets): |
| |
|
|
|
|
|
|
|
|
|
Company | $ | 668,710 |
| | 15.2 | % |
| $ | 175,716 |
|
| 4.0 | % |
| N/A |
|
| N/A |
|
Bank | $ | 647,616 |
| | 14.8 | % |
| $ | 175,604 |
|
| 4.0 | % |
| $ | 263,407 |
|
| 6.0 | % |
Tier I capital (to average assets): |
| |
|
|
|
|
|
|
|
|
|
Company | $ | 668,710 |
| | 13.2 | % |
| $ | 203,354 |
|
| 4.0 | % |
| N/A |
|
| N/A |
|
Bank | $ | 647,616 |
| | 12.7 | % |
| $ | 203,307 |
|
| 4.0 | % |
| $ | 254,134 |
|
| 5.0 | % |
| Actual |
| Required For Capital Adequacy Purposes |
| Required To Be Well Capitalized under Prompt Corrective Action Provisions |
| Amount |
| Ratio |
| Amount |
| Ratio |
| Amount |
| Ratio |
| (Dollars in thousands) |
As of December 31, 2011 | |
| |
| |
| |
| |
| |
Total capital (to risk-weighted assets): |
|
|
|
|
|
|
|
|
|
|
|
Company | $ | 784,054 |
|
| 19.4 | % |
| $ | 323,144 |
|
| 8.0 | % |
| N/A |
|
| N/A |
|
Bank | $ | 721,551 |
|
| 17.9 | % |
| $ | 322,891 |
|
| 8.0 | % |
| $ | 403,613 |
|
| 10.0 | % |
Tier I capital (to risk-weighted assets): |
|
|
|
|
|
|
|
|
|
|
|
Company | $ | 733,319 |
|
| 18.2 | % |
| $ | 161,572 |
|
| 4.0 | % |
| N/A |
|
| N/A |
|
Bank | $ | 670,855 |
|
| 16.6 | % |
| $ | 161,445 |
|
| 4.0 | % |
| $ | 242,168 |
|
| 6.0 | % |
Tier I capital (to average assets): |
|
|
|
|
|
|
|
|
|
|
|
Company | $ | 733,319 |
|
| 19.8 | % |
| $ | 148,044 |
|
| 4.0 | % |
| N/A |
|
| N/A |
|
Bank | $ | 670,855 |
|
| 18.1 | % |
| $ | 148,038 |
|
| 4.0 | % |
| $ | 185,048 |
|
| 5.0 | % |
Under federal banking law, dividends declared by the Bank in any calendar year may not, without the approval of the regulatory agency, exceed its net income for that year combined with its retained income from the preceding two years. However, the regulatory agency has previously issued a bulletin to all banks outlining guidelines limiting the circumstances under which banks may pay dividends even if the banks are otherwise statutorily authorized to pay dividends. The limitations impose a requirement or in some cases suggest that prior approval of the regulatory agency should be obtained before a dividend is paid if a bank is the subject of administrative action or if the payment could be viewed by the regulatory agency as unsafe or unusual.
Under California Financial Code Section 1133, a bank, or a majority-owned subsidiary of a bank may, with the prior approval of the commissioner, make a distribution to the shareholders of such bank in an amount not exceeding the greatest of: a) the retained earnings of the bank; (b) the net income of the bank for its last fiscal year; or (c) the net income of the bank for its current fiscal year. |
| | | | | | | | | | | | | | | | | | | | |
| Actual |
| Required For Capital Adequacy Purposes |
| Required To Be Well Capitalized under Prompt Corrective Action Provisions |
| Amount |
| Ratio |
| Amount |
| Ratio |
| Amount |
| Ratio |
| (Dollars in thousands) |
As of March 31, 2013 | |
| |
| |
| |
| |
| |
Total capital (to risk-weighted assets): |
|
|
|
|
|
|
|
|
|
|
|
Company | $ | 772,633 |
| | 15.88 | % |
| $ | 389,134 |
|
| 8.00 | % |
| N/A |
|
| N/A |
|
Bank | $ | 760,006 |
| | 15.64 | % |
| $ | 388,835 |
|
| 8.00 | % |
| $ | 486,044 |
|
| 10.00 | % |
Tier I capital (to risk-weighted assets): |
| |
|
|
|
|
|
|
|
|
|
Company | $ | 711,574 |
| | 14.63 | % |
| $ | 194,567 |
|
| 4.00 | % |
| N/A |
|
| N/A |
|
Bank | $ | 698,992 |
| | 14.38 | % |
| $ | 194,418 |
|
| 4.00 | % |
| $ | 291,626 |
|
| 6.00 | % |
Tier I capital (to average assets): |
| |
|
|
|
|
|
|
|
|
|
Company | $ | 711,574 |
| | 12.64 | % |
| $ | 225,175 |
|
| 4.00 | % |
| N/A |
|
| N/A |
|
Bank | $ | 698,992 |
| | 12.42 | % |
| $ | 225,152 |
|
| 4.00 | % |
| $ | 281,440 |
|
| 5.00 | % |
| Actual |
| Required For Capital Adequacy Purposes |
| Required To Be Well Capitalized under Prompt Corrective Action Provisions |
| Amount |
| Ratio |
| Amount |
| Ratio |
| Amount |
| Ratio |
| (Dollars in thousands) |
As of December 31, 2012 | |
| |
| |
| |
| |
| |
Total capital (to risk-weighted assets): |
|
|
|
|
|
|
|
|
|
|
|
Company | $ | 746,396 |
|
| 16.16 | % |
| $ | 369,417 |
|
| 8.00 | % |
| N/A |
|
| N/A |
|
Bank | $ | 725,655 |
|
| 15.73 | % |
| $ | 369,134 |
|
| 8.00 | % |
| $ | 461,417 |
|
| 10.00 | % |
Tier I capital (to risk-weighted assets): |
|
|
|
|
|
|
|
|
|
|
|
Company | $ | 688,422 |
|
| 14.91 | % |
| $ | 184,708 |
|
| 4.00 | % |
| N/A |
|
| N/A |
|
Bank | $ | 667,725 |
|
| 14.47 | % |
| $ | 184,567 |
|
| 4.00 | % |
| $ | 276,850 |
|
| 6.00 | % |
Tier I capital (to average assets): |
|
|
|
|
|
|
|
|
|
|
|
Company | $ | 688,422 |
|
| 12.76 | % |
| $ | 215,861 |
|
| 4.00 | % |
| N/A |
|
| N/A |
|
Bank | $ | 667,725 |
|
| 12.38 | % |
| $ | 215,813 |
|
| 4.00 | % |
| $ | 269,767 |
|
| 5.00 | % |
| |
14. | Subsequent EventEvents |
On October 22, 2012,April 15, 2013, the Company announced that it has signedentered into an Agreement and Plan of Merger ("the Merger Agreement") with Foster Bankshares, Inc., a definitive agreement under which Pacific International Bancorp,Delaware Corporation ("Foster"), a Seattle-basedChicago-based company, will merge with the Company. Pacific International haspursuant to an Agreement and Plan of Merger, dated April 15, 2013. Foster had total assets of approximately $200412.6 million, and its primary subsidiary, Pacific International Bank, a Washington state-chartered bank, hasincluding four$326.9 million bank locationsof gross loans and$357.4 million in the Seattle metropolitan area. Upon completion of the transaction, which is expected to close during first quarter 2013, the Company will have six branches in the Seattle area.deposits.
Under the terms of the merger agreement, the stock-for-stock transaction is valued at approximately $8.2$4.6 million, valuing each outstanding share of Pacific InternationalFoster common stock at $1.75$34.67. As partFoster shareholders will have a choice between electing to receive the cash value per share or, for shareholders who qualify as accredited investors, 2.62771x shares of BBCN common stock for each share of Foster Bankshares or a combination thereof, with no limitations on the transaction, Pacific International’s $6.5 million in Series A Preferred Stock issued underconsideration mix. The consideration for the U.S. Treasury’s TARP Capital Purchase Program will be retired.
The transaction is subject to regulatory approval, the approval of the shareholders of Pacific International, and other customary closing conditions.reduction in certain events. Foster has no outstanding options or warrants.
| |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
The following discussion and analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 20112012 and the unaudited consolidated financial statements and notes set forth elsewhere in this report.
GENERAL
Selected Financial Data
The following table sets forth certain selected financial data concerning the periods indicated:
| | | At or for the Three Months Ended September 30, | | At or for the Nine Months Ended September 30, | At or for the Three Months Ended March 31, |
| 2012 | | 2011 | | 2012 | | 2011 | 2013 | | 2012 |
| (Dollars in thousands, except share and per share data) | (Dollars in thousands, except share and per share data) |
Income Statement Data: | | | | | | | | | | |
Interest income | $ | 65,455 |
| | $ | 38,927 |
| | $ | 200,953 |
| | $ | 113,415 |
| $ | 66,743 |
| | $ | 68,555 |
|
Interest expense | 7,224 |
| | 7,874 |
| | 22,361 |
| | 24,148 |
| 7,027 |
| | 7,696 |
|
Net interest income | 58,231 |
| | 31,053 |
| | 178,592 |
| | 89,267 |
| 59,716 |
| | 60,859 |
|
Provision for loan losses | 6,900 |
| | 3,483 |
| | 16,682 |
| | 18,792 |
| 7,506 |
| | 2,600 |
|
Net interest income after provision for loan losses | 51,331 |
| | 27,570 |
| | 161,910 |
| | 70,475 |
| 52,210 |
| | 58,259 |
|
Non-interest income | 7,664 |
| | 4,258 |
| | 29,531 |
| | 16,452 |
| 9,940 |
| | 11,645 |
|
Non-interest expense | 28,770 |
| | 16,817 |
| | 90,282 |
| | 50,398 |
| 33,275 |
| | 30,435 |
|
Income before income tax expense | 30,225 |
| | 15,011 |
| | 101,159 |
| | 36,529 |
| |
Income tax expense | 11,827 |
| | 5,196 |
| | 39,463 |
| | 13,650 |
| |
Income before income tax provision | | 28,875 |
| | 39,469 |
|
Income tax provision | | 11,414 |
| | 15,535 |
|
Net income | $ | 18,398 |
| | $ | 9,815 |
| | $ | 61,696 |
| | $ | 22,879 |
| $ | 17,461 |
| | $ | 23,934 |
|
Dividends and discount accretion on preferred stock | $ | 0 |
| | $ | (1,077 | ) | | $ | (5,640 | ) | | $ | (3,227 | ) | $ | — |
| | $ | (1,869 | ) |
Gain on repurchase of stock warrant | 193 |
| | 0 |
| | 193 |
| | 0 |
| |
Net income available to common stockholders | $ | 18,591 |
| | $ | 8,738 |
| | $ | 56,249 |
| | $ | 19,652 |
| $ | 17,461 |
| | $ | 22,065 |
|
Per Share Data: | | | | | | | | | | |
Earnings per common share - basic | $ | 0.24 |
| | $ | 0.23 |
| | $ | 0.72 |
| | $ | 0.52 |
| $ | 0.22 |
| | $ | — |
|
Earnings per common share - diluted | $ | 0.24 |
| | $ | 0.23 |
| | $ | 0.72 |
| | $ | 0.52 |
| $ | 0.22 |
| | $ | — |
|
Book value per common share (period end, excluding preferred stock and warrants) | $ | 9.41 |
| | $ | 8.30 |
| | $ | 9.41 |
| | $ | 8.30 |
| $ | 9.79 |
| | $ | 8.92 |
|
Tangible book value per common share (period end, excluding preferred stock and warrants) (12) | $ | 8.21 |
| | $ | 8.23 |
| | $ | 8.21 |
| | $ | 8.23 |
| |
Cash dividends declared per common share | | $ | .05 |
| | $ | — |
|
Tangible book value per common share (period end, excluding preferred stock and warrants) (11) | | $ | 8.57 |
| | $ | 7.72 |
|
Number of common shares outstanding (period end) | 78,016,260 |
| | 38,095,260 |
| | 78,016,260 |
| | 38,095,260 |
| 78,812,140 |
| | 77,996,391 |
|
Weighted average shares - basic | 78,015,960 |
| | 38,098,142 |
| | 78,004,458 |
| | 38,044,625 |
| 78,389,434 |
| | 77,987,342 |
|
Weighted average shares - diluted | 78,103,795 |
| | 38,103,683 |
| | 78,082,059 |
| | 38,070,141 |
| 78,480,671 |
| | 78,101,818 |
|
Tangible common equity ratio (9) | 12.23 | % | | 10.40 | % | | 12.23 | % | | 10.40 | % | 11.77 | % | | 11.86 | % |
Statement of Financial Condition Data - at Period End: | | | | | | | | | | |
Assets | $ | 5,331,979 |
| | $ | 3,016,127 |
| | $ | 5,331,979 |
| | $ | 3,016,127 |
| $ | 5,833,597 |
| | $ | 5,169,315 |
|
Securities available for sale | 687,059 |
| | 455,789 |
| | 687,059 |
| | 455,789 |
| 717,441 |
| | 697,808 |
|
Gross loans, net of deferred loan fees and costs (excludes loans held for sale) | 4,069,494 |
| | 2,257,667 |
| | 4,069,494 |
| | 2,257,667 |
| 4,500,046 |
| | 3,737,199 |
|
Deposits | 4,052,524 |
| | 2,267,196 |
| | 4,052,524 |
| | 2,267,196 |
| 4,555,674 |
| | 3,920,464 |
|
Federal Home Loan Bank borrowings | 460,815 |
| | 300,000 |
| | 460,815 |
| | 300,000 |
| |
FHLB advances | | 421,632 |
| | 332,109 |
|
Subordinated debentures | 41,809 |
| | 39,268 |
| | 41,809 |
| | 39,268 |
| 45,996 |
| | 52,137 |
|
Stockholders’ equity | 734,455 |
| | 383,615 |
| | 734,455 |
| | 383,615 |
| 772,275 |
| | 818,166 |
|
| | | At or for the Three Months Ended September 30, | | At or for the Nine Months Ended September 30, | At or for the Three Months Ended March 31, |
| 2012 | | 2011 | | 2012 | | 2011 | 2013 | | 2012 |
| (Dollars in thousands) | (Dollars in thousands) |
Average Balance Sheet Data: | | | | | | | | | | |
Assets | $ | 5,179,186 |
| | $ | 2,987,441 |
| | $ | 5,140,591 |
| | $ | 2,952,371 |
| $ | 5,727,738 |
| | $ | 5,139,396 |
|
Securities available for sale | 679,764 |
| | 486,009 |
| | 699,225 |
| | 504,402 |
| 691,984 |
| | 725,728 |
|
Gross loans, including loans held for sale | 4,007,402 |
| | 2,248,544 |
| | 3,878,080 |
| | 2,202,535 |
| 4,444,320 |
| | 3,777,495 |
|
Deposits | 3,962,379 |
| | 2,244,808 |
| | 3,906,834 |
| | 2,199,023 |
| 4,447,970 |
| | 3,903,661 |
|
Stockholders’ equity | 728,038 |
| | 377,654 |
| | 785,875 |
| | 370,155 |
| 765,230 |
| | 806,384 |
|
Selected Performance Ratios: | | | | | | | | | | |
Return on average assets (1) (8) | 1.42 | % | | 1.31 | % | | 1.60 | % | | 1.03 | % | 1.22 | % | | 1.86 | % |
Return on average stockholders’ equity (1) (8) | 10.11 | % | | 10.40 | % | | 10.47 | % | | 8.24 | % | 9.13 | % | | 11.87 | % |
Return on average tangible equity (1) (8) (11) | 11.60 | % | | 10.48 | % | | 11.89 | % | | 8.31 | % | |
Pre Tax- Pre Provision income to average assets (1) | 2.87 | % | | 2.48 | % | | 3.06 | % | | 2.50 | % | |
Average stockholders' equity to average assets | | 13.36 | % | | 15.69 | % |
Return on average tangible equity (1) (8) (10) | | 10.42 | % | | 13.44 | % |
Dividend payout ratio (dividends per share / earnings per share) | | 22.73 | % | | — | % |
Pre-Tax Pre-Provision income to average assets (1) | | 2.54 | % | | 3.27 | % |
Efficiency ratio (2) | 43.66 | % | | 47.63 | % | | 43.38 | % | | 47.67 | % | 47.77 | % | | 41.98 | % |
Net interest spread | | 4.26 | % | | 4.83 | % |
Net interest margin (3) | 4.79 | % | | 4.29 | % | | 4.97 | % | | 4.20 | % | 4.49 | % | | 5.11 | % |
Regulatory Capital Ratios (4) | | | | | | | | | | |
Leverage capital ratio (5) | 13.15 | % | | 13.50 | % | | 13.15 | % | | 13.50 | % | 12.64 | % | | 15.08 | % |
Tier 1 risk-based capital ratio | 15.22 | % | | 16.71 | % | | 15.22 | % | | 16.71 | % | 14.63 | % | | 18.85 | % |
Total risk-based capital ratio | 16.48 | % | | 17.98 | % | | 16.48 | % | | 17.98 | % | 15.88 | % | | 20.11 | % |
Tier 1 common -risk based capital ratio (13) | 14.26 | % | | 12.42 | % | | 14.26 | % | | 12.42 | % | |
Tier 1 common risk-based capital ratio (12) | | 13.72 | % | | 14.63 | % |
Asset Quality Ratios: | | | | | | | | | | |
Allowance for loan losses to gross loans, excluding loans held for sale | 1.62 | % | | 2.66 | % | | 1.62 | % | | 2.66 | % | 1.63 | % | | 1.67 | % |
Allowance for loan losses to legacy loans (10) | 2.00 | % | | 2.66 | % | | 2.00 | % | | 2.66 | % | |
Allowance for loan losses to non-accrual loans | 224.56 | % | | 215.94 | % | | 224.56 | % | | 215.94 | % | |
Allowance for loan losses to non-performing loans (6) | 89.13 | % | | 116.90 | % | | 89.13 | % | | 116.90 | % | |
Allowance for loan losses to non-performing assets (7) | 84.41 | % | | 106.83 | % | | 84.41 | % | | 106.83 | % | |
Allowance for loan losses to nonaccrual loans | | 173.34 | % | | 156.03 | % |
Allowance for loan losses to nonperforming loans (6) | | 76.21 | % | | 75.91 | % |
Allowance for loan losses to nonperforming assets (7) | | 70.07 | % | | 71.03 | % |
Nonaccrual loans to gross loans, excluding loans held for sale | 0.72 | % | | 1.23 | % | | 0.72 | % | | 1.23 | % | 0.94 | % | | 1.06 | % |
Nonperforming loans to gross loans, excluding loans held for sale (6) | 1.82 | % | | 2.26 | % | | 1.82 | % | | 2.26 | % | 2.14 | % | | 2.19 | % |
Nonperforming assets to gross loans and OREO (7) | 1.92 | % | | 2.47 | % | | 1.92 | % | | 2.47 | % | 2.32 | % | | 2.34 | % |
Total non-performing assets to total assets (7) | 1.47 | % | | 1.86 | % | | 1.47 | % | | 1.86 | % | |
Nonperforming assets to total assets (7) | | 1.79 | % | | 1.70 | % |
| |
(2) | Efficiency ratio is defined as non-interest expense divided by the sum of net interest income before provision for loan losses and non-interest income. |
| |
(3) | Net interest margin is calculated by dividing annualized net interest income by average total interest-earning assets. |
| |
(4) | The ratios required to meet the definition of a “well-capitalized” institution under certain banking regulations are 5% leverage capital, 6% tier I risk-based capital and 10% total risk-based capital. |
| |
(5) | Calculations are based on average quarterly asset balances. |
| |
(6) | Non-performingNonperforming loans include non-accrualnonaccrual loans, loans past due 90 days or more and still accruing interest, and accruing restructured loans. Loans 90 days or more past due and still accruing consist of acquired loans that were originally recorded at fair value upon acquisitions. These loans are considered to be accruing as we can reasonably estimate future cash flows on acquired loans and we expect to fully collect the carrying value of these loans. |
| |
(7) | Non-performingNonperforming assets include non-accrualnonaccrual loans, loans past due 90 days or more and still accruing interest, other real estate owned,OREO, and accruing restructured loans. |
| |
(8) | Based on net income before effect of dividends and discount accretion on preferred stock. |
| |
(9) | Excludes TARP preferred stock, net of discount, of $0 and $64.9$119.7 million and stock warrants of $378 thousand and $2.4$2.8 million at September 30, 2012March 31, 2013 and 2011,2012, respectively. |
| |
(10) | Legacy loans are those loans accounted for under the amortized cost method and do not include loans acquired from Center Financial Corporation on November 30, 2011. This is a non-GAAP measure that we believe provides investors with information |
that is useful in understanding our financial performance and position. Allowance for loan losses to legacy loans is calculated by dividing the gross legacy loan balance by allowance for loan losses.
| |
(11) | Average tangible equity is calculated by subtracting average goodwill and average other intangibles from average stockholders' equity. This is a non-GAAP measure that we believe provides investors with information that is useful in understanding our financial performance and position. |
| | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended March 31, |
| | 2012 | | 2011 | | 2012 | | 2011 | | 2013 | | 2012 |
| | (Dollars in thousands) | | (Dollars in thousands) |
Net income | | $ | 18,398 |
| | $ | 9,815 |
| | $ | 61,696 |
| | $ | 22,879 |
| | $ | 17,461 |
| | $ | 23,934 |
|
| | | | | | | | | | | | |
Average stockholders' equity | | $ | 728,038 |
| | $ | 377,654 |
| | $ | 785,875 |
| | $ | 370,155 |
| | $ | 765,230 |
| | $ | 806,384 |
|
Less: Average goodwill and other intangible assets, net | | (93,407 | ) | | (2,861 | ) | | (93,771 | ) | | (2,938 | ) | | (95,021 | ) | | (94,197 | ) |
Average tangible equity | | $ | 634,631 |
| | $ | 374,793 |
| | $ | 692,104 |
| | $ | 367,217 |
| | $ | 670,209 |
| | $ | 712,187 |
|
| | | | | | | | | | | | |
Net income (annualized) to average tangible equity | | 11.60 | % | | 10.48 | % | | 11.89 | % | | 8.31 | % | | 10.42 | % | | 13.44 | % |
| |
(12)(11) | Tangible book value per share is calculated by subtracting goodwill and other intangible assets from total stockholders' equity and dividing the difference by the number of shares of common stock outstanding. This is a non-GAAP measure that we believe provides investors with information that is useful in understanding our financial performance and position. |
| | | | September 30, 2012 | | September 30, 2011 | | March 31, 2013 | | March 31, 2012 |
| | (In thousands) | | (In thousands) |
Total stockholders' equity | | $ | 734,455 |
| | $ | 383,615 |
| | $ | 772,275 |
| | $ | 818,166 |
|
Less: Preferred stock, net of discount | | 0 |
| | (64,918 | ) | | 0 |
| | (119,694 | ) |
Common stock warrant | | (378 | ) | | (2,383 | ) | | (378 | ) | | (2,760 | ) |
Goodwill and other intangible assets, net | | (93,216 | ) | | (2,811 | ) | | (96,805 | ) | | (93,820 | ) |
Tangible common equity | | $ | 640,861 |
| | $ | 313,503 |
| | $ | 675,092 |
| | $ | 601,892 |
|
| | | | | | | | |
Common shares outstanding | | 78,016,260 |
| | 38,095,260 |
| | 78,812,140 |
| | 77,996,391 |
|
| | | | | | | | |
Tangible common equity per share | | $ | 8.21 |
| | $ | 8.23 |
| | $ | 8.57 |
| | $ | 7.72 |
|
| |
(13)(12) | Tier 1 common risk-based capital is calculated as Tier 1 capital less non-common elements, including perpetual preferred stock and related surplus, minority interest in subsidiaries, trust preferred securities and mandatory convertible preferred securities. |
| | | | September 30, 2012 | | September 30, 2011 | | March 31, 2013 | | March 31, 2012 |
| | (In thousands) | | (In thousands) |
Tier 1 capital | | $ | 666,652 |
| | $ | 401,441 |
| | $ | 711,574 |
| | $ | 759,784 |
|
Less: Preferred stock, net of discount | | 0 |
| | (64,918 | ) | | 0 |
| | (119,694 | ) |
Trust preferred securities less unamortized acquisition discount of $5,616 | | (40,384 | ) | | (38,000 | ) | |
Tier 1 common-risk based capital | | $ | 626,268 |
| | $ | 298,523 |
| |
Trust preferred securities less unamortized acquisition discount | | | (44,447 | ) | | (50,312 | ) |
Tier 1 common risk-based capital | | | $ | 667,127 |
| | $ | 589,778 |
|
| | | | | | | | |
Total risk weighted assets less disallowed allowance for loan losses | | 4,392,505 |
| | 2,402,920 |
| | 4,864,169 |
| | 4,030,387 |
|
| | | | | | | | |
Tier 1 common-risk based capital ratio | | 14.26 | % | | 12.42 | % | |
Tier 1 common risk-based capital ratio | | | 13.72 | % | | 14.63 | % |
Results of Operations
Overview
Total assets increased $165.4$192.9 million from $5.175.64 billion at December 31, 20112012 to $5.335.83 billion at September 30, 2012March 31, 2013. The increase in total assets was primarily due to a $326.7$197.5 million increase in loans receivable, net of allowance for loan losses, from $3.7$4.23 billion at December 31, 20112012 to $4.0$4.43 billion at September 30,March 31, 2013 and a $13.0 million increase in securities available for sale from $704.4 million at December 31, 2012. This increase was to $717.4 million at March 31, 2013 These increases were partially offset by a $70.5$32.1 million decrease in cash and cash equivalents from $300.1312.9 million at December 31, 20112012 to $229.6280.8 million at September 30, 2012, a $40.0 million decrease in term federal funds sold from $40.0 million at DecemberMarch 31, 2011 to none at September 30, 2012 and a $53.9 million decrease in securities available for sale from $740.9 million at December 31, 2011 to 687.1 million at September 30, 20122013. The increase in total assets was funded by a $111.6$171.6 million increase in deposits from $3.94$4.38 billion at December 31, 20112012 to $4.05$4.56 billion at September 30, 2012March 31, 2013, a $116.4 million$910 thousand increase in borrowingsFHLB advances from the FHLB from $344.4$420.7 million at December 31, 20112012 to $460.8$421.6 million at September 30, 2012March 31, 2013 and net income available to common stockholders of $56.1 million. The increases in deposits and net income available to common shareholders were partially offset by the $122$17.5 million redemption of the Series A and Series B Perpetual Preferred Stock issued under the U.S. Treasury's TARP Capital Purchase Program in June 2012. The redemption covered the total combined preferred stock investment by the U.S. Treasury of $67 million in the former Nara Bancorp, Inc. and $55 million in the former Center Financial Corporation ("Center").
The net income available to common stockholders for the thirdfirst quarter of 20122013 was $18.4$17.5 million, or $0.24$0.22 per diluted common share, compared to the net income available to common stockholders of $8.7$22.1 million, or $0.23$0.28 per diluted common share, for the same period of 2011, an increase2012, a decrease of $9.7$4.6 million, or 111%20.87%. The net income available to common stockholders for the nine months ended September 30, 2012 was $56.1 million, or $0.72 per diluted common share, compared to the net income available to common stockholders of $19.7 million, or $0.52 per diluted common share, for the same period of 2011, an increase of $36.4 million, or 185%. The merger with Center (the "Merger") impactsacquisitions impact the comparability of the operating results for the third quartersfirst quarter of 20122013 and 2011 and for the nine month periods ended September 30, 2012 and 2011 because the Merger closed in the fourth quarter of 2011 andacquisitions resulted in significant increases in interest earning assets, interest bearing liabilities, employees and branch locations. In addition, the acquired assets and liabilities of Center were recorded at fair value and certain acquisition premiums and discounts are being amortized or accreted into income or expense as adjustments to the yield/cost of the related asset or liability. The operating results for the three months ended September 30, 2012March 31, 2013 and 2011 and the nine months ended September 30, 2012 and 2011 include the following major pre-tax acquisition accounting adjustments and expenses related to the Merger.acquisitions.
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2012 | | 2011 | | 2012 | | 2011 |
| | (In thousands) |
Accretion of discount on Center loans (1) | | $ | 6,105 |
| | $ | 0 |
| | $ | 23,445 |
| | $ | 0 |
|
Amortization of premiums on Center FHLB borrowings (2) | | 307 |
| | 0 |
| | 2,442 |
| | 0 |
|
Accretion of discount on Center subordinated debt (3) | | (37 | ) | | 0 |
| | (108 | ) | | 0 |
|
Amortization of premium on Center time deposits (4) | | 650 |
| | 0 |
| | 2,712 |
| | 0 |
|
Amortization of core deposit intangibles from Center (5) | | (253 | ) | | 0 |
| | (796 | ) | | 0 |
|
Accretion of discounts on other Center assets (6) | | 158 |
| | 0 |
| | 272 |
| | 0 |
|
Amortization of unfavorable lease liability (7) | | 53 |
| | 0 |
| | 168 |
| | 0 |
|
Merger and integration expense (8) | | (183 | ) | | (574 | ) | | (3,304 | ) | | (1,466 | ) |
Increase (decrease) to pre-tax income | | $ | 6,800 |
| | $ | (574 | ) | | $ | 24,831 |
| | $ | (1,466 | ) |
|
| | | | | | | | |
| | Three Months Ended March 31, |
| | 2013 | | 2012 |
| | (Dollars in thousands) |
Accretion of discounts on acquired performing loans | | $ | 4,076 |
| | $ | 6,887 |
|
Accretion of discounts on acquired credit impaired loans | | 1,522 |
| | 2,757 |
|
Amortization of premiums on assumed FHLB advances | | 91 |
| | 1,231 |
|
Accretion of discounts on assumed subordinated debt | | (43 | ) | | (35 | ) |
Amortization of premiums on assumed time deposits | | 438 |
| | 1,275 |
|
Increase to pre-tax income | | $ | 6,084 |
| | $ | 12,115 |
|
(1) The fair value of the Center loans was estimated to be $118.0 million below the principal amount of such loans on the Merger date. The accretable portion of the discounts on the loans is being accreted into interest income over the remaining lives of the acquired loans.
(2) The fair value of the outstanding FHLB borrowings assumed from Center was estimated to be above the face amount of such debt. The premiums on FHLB borrowings are being amortized into interest expense over the remaining term of the debt.
(3) The fair value of the outstanding subordinated debt assumed from Center was estimated to be below the face amount of such debt. The discounts on the subordinated debt are being accreted into interest expense over the remaining term of the debt.
(4) The fair value of time deposits assumed from Center was estimated to be above the face amount of such deposits. The premiums on certificates of deposits are being amortized into interest expense over the remaining term of the deposits.
(5) A core deposit intangible arises in an acquisition of a financial institution or a financial institution branch having a deposit base comprised of stable customer relationships. These customer relationships provide a future benefit to the acquiring institution due to their favorable interest rates in comparison to market rates for alternative funding sources with terms similar to the length of time the customer relationships are expected to be retained. The initial value assigned to a core deposit intangible represents the present value of this future economic benefit. The core deposit intangible asset recognized as part of the Merger is being amortized over its estimated useful life of approximately seven years utilizing an accelerated amortization method.
(6) Discounts on other assets primarily relate to servicing assets, investments in affordable housing partnerships and the fair value of the favorable operating leases.
(7) Unfavorable lease liability relates to the Center facility lease contracts which had rental rates that exceeded market rental rates on the Merger date.
(8) Direct costs related to the Center merger were expensed as incurred. During the three months ended September 30, 2012, we incurred $183 thousand in merger and integration expenses, including $33 thousand in salaries and benefits and $150 thousand in professional fees. During the three months ended September 30, 2011, we incurred $574 thousand in merger and integration expenses. During the nine months ended September 30, 2012, we incurred $3.3 million in merger and integration expenses, including $1.1 million in salaries and benefits and $2.2 million in professional fees. During the nine months ended September 30, 2011, we incurred $1.5 million in merger and integration expenses.
The annualized return on average assets, before the effect of dividends and discount accretion on preferred stock on average assets, was 1.42%1.22% for the thirdfirst quarter of 20122013, compared to 1.31%1.86% for the same period of 2011.2012. The annualized return on average stockholders' equity, before the effect of dividends and discount accretion on preferred stock, was 10.11%9.13% for the thirdfirst quarter of 20122013, compared to 10.40%11.87% for the same period of 2011.2012. The efficiency ratio was 43.66%47.77% for the thirdfirst quarter of 20122013 compared to 47.63%41.98% for the same period of 2011.2012.
The annualized return on average assets, before the effect of dividends and discount accretion on preferred stock on average assets, was 1.60% for the nine months ended September 30, 2012 compared to 1.03% for the same period of 2011. The annualized return on average stockholders' equity, before the effect of dividends and discount accretion on preferred stock, was 10.47% for the nine months ended September 30, 2012 compared to 8.24% for the same period of 2011. The efficiency ratio was 43.38% for the nine months ended September 30, 2012 compared to 47.67% for the same period of 2011.
Net Interest Income and Net Interest Margin
Net Interest Income and Expense
A principal component of the Company's earnings is net interest income, which is the difference between the interest and fees earned on loans and investments and the interest paid on deposits and borrowed funds. Net interest income expressed as a percentage of average interest-earning assets is referred to as the net interest margin. The net interest spread is the yield on average interest-earning assets less the cost of average interest-bearing liabilities. Net interest income is affected by changes in the balances of interest-earning assets and interest-bearing liabilities and changes in the yields earned on interest-earning assets and the rates paid on interest-bearing liabilities.
Comparison of Three Months Ended September 30, 2012March 31, 2013 with the Same Period of 20112012
Net interest income before provision for loan losses was $58.259.7 million for the thirdfirst quarter of 2012, an increase2013, a decrease of $27.1$1.1 million, or 88%1.88%, compared to $31.160.9 million for the same period of 2011.2012. The increasedecrease was principally attributable to the higher level of interest earning assets and the improvementdecline in the net interest margin, followingwhich was partially offset by the merger. The netincrease in average interest margin increased to 4.79% for the third quarter of 2012, compared to 4.29% for the same period of 2011. The increase was principally due to the effect of acquisition accounting adjustments.earning assets.
Interest income for the thirdfirst quarter of 2012 was $65.566.7 million, an increasea decrease of $26.5$1.8 million, or 68%2.64%, compared to $38.968.6 million for the same period of 2011.2012. The increasedecrease resulted from a $28.211.4 million decrease in interest income due to a decrease
in the yield on average interest-earnings assets and partially offset by a $9.6 million increase in interest income due to an increase in average interest-earning assets which was partially offset by a $1.7 million decrease in interest income due to a decrease in the yield on average interest-earnings assets.
Interest expense for the third quarter of 2012 was $7.2 million, a decrease of $0.7 million, or 8%, compared to interest expense of $7.9 million for the same period of 2011. The decrease resulted from a $3.6 million decrease in interest expense due to a decrease in the rates paid on average interest-bearing liabilities, which was partially offset by a $2.9 million increase in interest expense due to an increase in average interest-bearing liabilities.
Comparison of Nine Months Ended September 30, 2012 with the Same Period of 2011
Net interest income before provision for loan losses was $178.6 million for the nine months ended September 30, 2012, an increase of $89.3 million, or 100%, compared to $89.3 million for the same period of 2011. The increase was principally due to the higher level of interest earning assets and the improvement in the net interest margin following the merger.
Interest income for the nine months ended September 30, 2012 was $201.0 million, an increase of $87.6 million, or 77%,
compared to $113.4 million for the same period of 2011. The increase resulted from a $2.6 million increase in interest income due to an increase in the yield on average interest-earnings assets and a $85.0 million increase in interest income due to an increase in average interest-earning assets.
Interest expense for the nine months ended September 30, 2012 was $22.4 million, a decrease of $1.7 million, or 7%, compared to interest expense of $24.1 million for the same period of 2011. The decrease resulted from a $10.1 million decrease in interest expense due to a decrease in the average rates paid on interest-bearing liabilities, which was partially offset by an $8.4 million increase in interest expense due to an increase in average interest-bearing liabilities.
Net Interest Margin
The net interest margin for the thirdfirst quarter of 20122013 was 4.79%4.49%, an increasea decrease of 5062 basis points from 4.29%5.11% for the same period of 2011. Net interest margin for2012. The decrease in thenine months ended September 30, 2012 was 4.97%, an increase of 77 basis points from 4.20% for the same period of 2011. The improvement in net interest margin was principally due to the effect of acquisition accounting adjustments, as summarized in the following table.
| | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended March 31, |
| | 2012 | | 2011 | | 2012 | | 2011 | | 2013 | | 2012 |
Net interest margin, excluding the effect of acquisition accounting adjustments | | 4.14 | % | | 4.29 | % | | 4.29 | % | | 4.20 | % | | 3.97 | % | | 4.04 | % |
Acquisition accounting adjustments (1) | | 0.65 |
| | 0.00 |
| | 0.68 |
| | 0.00 |
| | 0.52 |
| | 1.07 |
|
Reported net interest margin | | 4.79 | % | | 4.29 | % | | 4.97 | % | | 4.20 | % | | 4.49 | % | | 5.11 | % |
(1) Acquisition accounting adjustments is calculated by subtracting net interest margin, excluding effect of acquisition accounting adjustments, from reported net interest margin. | (1) Acquisition accounting adjustments is calculated by subtracting net interest margin, excluding effect of acquisition accounting adjustments, from reported net interest margin. | (1) Acquisition accounting adjustments is calculated by subtracting net interest margin, excluding effect of acquisition accounting adjustments, from reported net interest margin. |
Excluding the effect of acquisition accounting adjustments, the net interest margin for the thirdfirst quarter of 20122013 decreased 157 basis points to 4.14%3.97% compared to the net interest margin4.04% for the same period of 2011.2012. The decrease was primarily due to continued pricing pressure on loan interest rates which was partially offset by decreases in the rates paid on deposits and borrowings. Excluding the effect of acquisition accounting adjustments, the interest margin for the nine months ended September 30, 2012 increased 9 basis points to 4.29% compared to the net interest margin for the same period of 2011. The increase was principally due to the decrease in the weighted average cost of deposits and borrowings.
The weighted average yield on loans decreased to 6.11%5.75% for the thirdfirst quarter of 20122013 from 6.16%6.75% for the thirdfirst quarter of 2011. The weighted average yield on loans increased to 6.46% for the nine months ended September 30, 2012 from 6.14% for the same period of 2011.2012. The change in the yield is largely attributablewas due to continued pricing pressure on loan interest rates and the accretiondecline in the effects of discounts on acquired loans,acquisition accounting adjustments, as summarized in the following table.
| | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended March 31, |
| | 2012 | | 2011 | | 2012 | | 2011 | | 2013 | | 2012 |
The weighted average yield on loans, excluding the effect of acquisition accounting adjustments | | 5.39 | % | | 6.16 | % | | 5.53 | % | | 6.14 | % | | 5.15 | % | | 5.61 | % |
Acquisition accounting adjustments (1) | | 0.72 |
| | 0.00 |
| | 0.93 |
| | 0.00 |
| | 0.60 |
| | 1.14 |
|
Reported weighted average yield on loans | | 6.11 | % | | 6.16 | % | | 6.46 | % | | 6.14 | % | | 5.75 | % | | 6.75 | % |
(1) Acquisition accounting adjustments is calculated by subtracting the weighted average yield on loans, excluding effect of acquisition accounting adjustments, from reported weighted average yield on loans. | |
(1) Acquisition accounting adjustments is calculated by subtracting the weighted average yield on loans, excluding the effect of acquisition accounting adjustments, from the reported weighted average yield on loans. | | (1) Acquisition accounting adjustments is calculated by subtracting the weighted average yield on loans, excluding the effect of acquisition accounting adjustments, from the reported weighted average yield on loans. |
Excluding the accretioneffects of discounts on acquired loans,acquisition accounting adjustments, the weighted average yield on loans for the thirdfirst quarter of 20122013 decreased 7746 basis points to 5.39%5.15% compared to the weighted average yield on loans5.61% for the same period of 2011. Excluding the accretion of discounts on acquired loans, the weighted average yield on loans for the nine months ended September 30, 2012 decreased 61 basis points to 5.53% compared to the weighted average yield on loans for the same period of 2011. These decreases were2012. This decrease was primarily due to the lower yields on the acquired loan portfolioportfolios and the reduction in market rates compared to a lesser extent,year ago due to continued pricing pressures in the market place.pressures. At September 30, 2012March 31, 2013, fixed rate loans accounted for 38%40% of the loan portfolio, compared to 44%39% at September 30, 2011March 31, 2012, reflecting the Company's focus on variable rate business loans. The weighted average yield on the
variable rate and fixed rate loan portfolios (excluding loan discount accretion) at September 30, 2012March 31, 2013 was 4.57%4.49% and 5.97%5.47%, respectively, compared with 4.60%4.61% and 6.25%6.49% at September 30, 2011March 31, 2012.
The weighted average yield on securities available for sale for the thirdfirst quarter of 20122013 was 2.23%1.98%, compared to 3.16%2.71% for the same period of 2011.2012. The weighted average yield on securities available for sale for the nine months ended September 30, 2012decrease was 2.47% compared to 3.10% for the same period of 2011. The decreases were primarily attributable to the replacement of maturing securities with lower yielding investments as market interest rates declined.
The weighted average cost of deposits for the thirdfirst quarter of 20122013 was 0.52%0.49%, a decrease of 367 basis points from 0.88%0.56% for the same period of 2011. The weighted average cost of deposits for the nine months ended September 30, 2012 was 0.54%, a decrease of 38 basis points from 0.92% for the same period of 2011.2012. The amortization of the premium on time deposits assumed in the Mergeracquisition positively affected the weighted average cost of deposits, as summarized in the following table.
| | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended March 31, |
| | 2012 | | 2011 | | 2012 | | 2011 | | 2013 | | 2012 |
The weighted average cost of deposits, excluding effect of acquisition accounting adjustments | | 0.59 | % | | 0.88 | % | | 0.64 | % | | 0.92 | % | | 0.53 | % | | 0.69 | % |
Acquisition accounting adjustments (1) | | (0.07 | ) | | 0.00 |
| | (0.10 | ) | | 0.00 |
| | (0.04 | ) | | (0.13 | ) |
Reported weighted average cost of deposits | | 0.52 | % | | 0.88 | % | | 0.54 | % | | 0.92 | % | | 0.49 | % | | 0.56 | % |
(1) Acquisition accounting adjustments is calculated by subtracting the weighted average cost of deposits, excluding effect of acquisition accounting adjustments, from reported weighted average cost of deposits. | |
(1) Acquisition accounting adjustments is calculated by subtracting the weighted average cost of deposits, excluding the effect of acquisition accounting adjustments, from the reported weighted average cost of deposits. | | (1) Acquisition accounting adjustments is calculated by subtracting the weighted average cost of deposits, excluding the effect of acquisition accounting adjustments, from the reported weighted average cost of deposits. |
Excluding the amortization of premiumpremiums on time deposits assumed from merger,in acquisitions, the weighted average cost of deposits was 0.59%0.53% for the thirdfirst quarter of 2012,2013, compared to 0.88%0.69% for the same period of 2011. Excluding amortization of premium on time deposits assumed from merger, the weighted average cost of deposits2012. The decrease was 0.64% for the nine months ended September 30, 2012, compared to 0.92% for the same period of 2011. The decreases were due to reductions in the cost of interest-bearing demand deposits and an increase in the proportion of non-interest bearing demand deposits to total deposits. Non-interest bearing demand deposits accounted for 27%26.0% of total deposits at September 30, 2012March 31, 2013, compared with 20%25.8% at September 30, 2011March 31, 2012.
The weighted average cost of FHLB advances for the thirdfirst quarter of 20122013 was 1.56%1.17%, a decrease of 16775 basis points from 3.23%1.92% for the same period of 2011.2012. The weighted average cost of FHLB advances for the nine months ended September 30, 2012decrease was 1.79%, a decrease of 143 basis points from 3.22% for the same period of 2011. The decreases were attributable to decreases in FHLB advance rates, andwhich was partially offset by the decline in the amortization of premiums on FHLB borrowingsadvances assumed in the Merger,acquisitions, as summarized in the following table.
| | | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended March 31, |
| | 2012 | | 2011 | | 2012 | | 2011 | | 2013 | | 2012 |
The weighted average cost on FHLB advances, excluding effect of acquisition accounting adjustments | | 1.87 | % | | 3.23 | % | | 2.72 | % | | 3.22 | % | | 1.27 | % | | 3.41 | % |
Acquisition accounting adjustments | | (0.31 | ) | | 0.00 |
| | (0.93 | ) | | 0.00 |
| | (0.10 | ) | | (1.49 | ) |
Reported weighted average cost on FHLB advances | | 1.56 | % | | 3.23 | % | | 1.79 | % | | 3.22 | % | | 1.17 | % | | 1.92 | % |
(1) Acquisition accounting adjustments is calculated by subtracting the weighted average cost on FHLB advances, excluding effect of acquisition accounting adjustments, from reported weighted average cost on FHLB advances. | |
(1) Acquisition accounting adjustments is calculated by subtracting the weighted average cost on FHLB advances, excluding the effect of acquisition accounting adjustments, from reported weighted average cost on FHLB advances. | | (1) Acquisition accounting adjustments is calculated by subtracting the weighted average cost on FHLB advances, excluding the effect of acquisition accounting adjustments, from reported weighted average cost on FHLB advances. |
Excluding amortization of premiums on FHLB borrowingsadvances assumed in the Merger,acquisitions, the weighted average cost of FHLB advances decreased to 1.87%1.27% for the thirdfirst quarter of 20122013 from 3.23%3.41% for the same period of 2011,2012, reflecting the addition of $175.0$470.0 million in new FHLB borrowingsadvances at aan average rate of 0.54%0.62%, which was substantially lower than the weighted average rate of the rest of thepaid on matured borrowings. The weighted average original maturity of the new borrowings was 2.102.60 years. In addition, a total of $85.0$390.1 million of FHLB borrowings,advances, with weighted average rates of 1.64%1.24%, matured duringover the quarter.past twelve months.
Excluding amortization of premiums on FHLB borrowings assumed in the Merger, the weighted average cost of FHLB advances decreased to 2.72% for the nine months ended September 30, 2012 compared with 3.22% for the same period of
2011. The decrease was attributed to decreases in FHLB advance rates.
Prepayment penalty income for the thirdfirst quarter of 2013 and 2012 and 2011 was $119$63 thousand and $175$116 thousand, respectively. Non-accrualNonaccrual interest income recognized (reversed) recognized was ($44)$236 thousand and $154($349) thousand for the thirdfirst quarter of 20122013 and 2011,2012, respectively. Excluding the effects of both non-accrualnonaccrual loan interest income and prepayment penalty income, the net interest margin for thirdfirst quarter 20122013 and 20112012 would have been as 4.78%4.46% and 4.24%5.13%, respectively.
Prepayment penalty income for the nine months ended September 30, 2012 and 2011 was $433 thousand and $438 thousand, respectively. Non-accrual interest income reversed was $793 thousand and $184 thousand for the nine months ended September 30, 2012 and 2011, respectively. Excluding the effects51
The following table presents our condensed consolidated average balance sheet information, together with interest rates earned and paid on the various sources and uses of funds for the periods indicated:
|
| | | | | | | | | | | | | | | | | | | | | |
| Three months ended September 30, 2012 | | Three months ended September 30, 2011 |
| Average Balance | | Interest Income/ Expense | | Average Yield/ Rate * | | Average Balance | | Interest Income/ Expense | | Average Yield/ Rate * |
| (Dollars in thousands) |
INTEREST EARNINGS ASSETS: | | | | | | | | | | | |
Loans(1) (2) | $ | 4,007,402 |
| | $ | 61,553 |
| | 6.11 | % | | $ | 2,248,544 |
| | $ | 34,902 |
| | 6.16 | % |
Securities available for sale(3) | 679,764 |
| | 3,782 |
| | 2.23 | % | | 486,009 |
| | 3,843 |
| | 3.16 | % |
FRB and FHLB stock and other investments | 155,590 |
| | 120 |
| | 0.30 | % | | 142,306 |
| | 182 |
| | 0.51 | % |
Federal funds sold | 0 |
| | 0 |
| | N/A |
| | 0 |
| | 0 |
| | N/A |
|
Total interest earning assets | $ | 4,842,756 |
| | $ | 65,455 |
| | 5.38 | % | | $ | 2,876,859 |
| | $ | 38,927 |
| | 5.37 | % |
INTEREST BEARING LIABILITIES: | | | | | | | | | | | |
Deposits: | | | | | | | | | | | |
Demand, interest-bearing | $ | 1,156,915 |
| | $ | 1,775 |
| | 0.61 | % | | $ | 701,109 |
| | $ | 1,490 |
| | 0.84 | % |
Savings | 184,219 |
| | 820 |
| | 1.77 | % | | 126,231 |
| | 764 |
| | 2.40 | % |
Time deposits: | | | | | | | | | | | |
$100,000 or more | 843,388 |
| | 1,533 |
| | 0.72 | % | | 363,155 |
| | 351 |
| | 0.38 | % |
Other | 672,861 |
| | 1,086 |
| | 0.64 | % | | 607,193 |
| | 2,372 |
| | 1.55 | % |
Total time deposits | 1,516,249 |
| | 2,619 |
| | 0.69 | % | | 970,348 |
| | 2,723 |
| | 1.11 | % |
Total interest bearing deposits | 2,857,383 |
| | 5,214 |
| | 0.73 | % | | 1,797,688 |
| | 4,977 |
| | 1.10 | % |
FHLB advances | 407,325 |
| | 1,603 |
| | 1.56 | % | | 300,000 |
| | 2,438 |
| | 3.23 | % |
Other borrowings | 40,407 |
| | 407 |
| | 3.95 | % | | 37,816 |
| | 459 |
| | 4.75 | % |
Total interest bearing liabilities | 3,305,115 |
| | $ | 7,224 |
| | 0.87 | % | | 2,135,504 |
| | $ | 7,874 |
| | 1.46 | % |
Non-interest bearing demand deposits | 1,104,996 |
| | | | | | 477,120 |
| | | | |
Total funding liabilities / cost of funds | $ | 4,410,111 |
| | | | 0.65 | % | | $ | 2,612,624 |
| | | | 1.21 | % |
Net interest income/net interest spread | | | $ | 58,231 |
| | 4.51 | % | | | | $ | 31,053 |
| | 3.91 | % |
Net interest margin | | | | | 4.79 | % | | | | | | 4.29 | % |
Net interest margin, excluding the effect of non-accrual loan income (expense)(4) | | | | | 4.79 | % | | | | | | 4.27 | % |
Net interest margin, excluding the effect of non-accrual loan income (expense) and prepayment fee income(4) (5) | | | | | 4.78 | % | | | | | | 4.24 | % |
Cost of deposits: | | | | | | | | | | | |
Non-interest bearing demand deposits | $ | 1,104,996 |
| | $ | 0 |
| | | | $ | 477,120 |
| | $ | 0 |
| | |
Interest bearing deposits | 2,857,383 |
| | 5,214 |
| | 0.73 | % | | 1,797,688 |
| | 4,977 |
| | 1.10 | % |
Total deposits | $ | 3,962,379 |
| | $ | 5,214 |
| | 0.52 | % | | $ | 2,274,808 |
| | $ | 4,977 |
| | 0.88 | % |
* Annualized |
| | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2013 | | Three Months Ended March 31, 2012 |
| Average Balance | | Interest Income/ Expense | | Average Yield/ Rate * | | Average Balance | | Interest Income/ Expense | | Average Yield/ Rate * |
| (Dollars in thousands) |
INTEREST EARNINGS ASSETS: | | | | | | | | | | | |
Loans(1) (2) | $ | 4,444,313 |
| | $ | 63,029 |
| | 5.75 | % | | $ | 3,777,495 |
| | $ | 63,419 |
| | 6.75 | % |
Securities available for sale(3) | 691,984 |
| | 3,427 |
| | 1.98 | % | | 725,728 |
| | 4,909 |
| | 2.71 | % |
FRB and FHLB stock and other investments | 257,526 |
| | 287 |
| | 0.45 | % | | 257,583 |
| | 178 |
| | 0.27 | % |
Federal funds sold | — |
| | — |
| | N/A |
| | 25,780 |
| | 49 |
| | 0.74 | % |
Total interest earning assets | $ | 5,393,823 |
| | $ | 66,743 |
| | 5.01 | % | | $ | 4,786,586 |
| | $ | 68,555 |
| | 5.76 | % |
INTEREST BEARING LIABILITIES: | | | | | | | | | | | |
Deposits: | | | | | | | | | | | |
Demand, interest-bearing | $ | 1,265,967 |
| | $ | 1,873 |
| | 0.60 | % | | $ | 1,232,763 |
| | $ | 2,123 |
| | 0.69 | % |
Savings | 186,189 |
| | 754 |
| | 1.64 | % | | 195,932 |
| | 922 |
| | 1.89 | % |
Time deposits: | | | | | | | | | | | |
$100,000 or more | 1,161,322 |
| | 1,730 |
| | 0.60 | % | | 767,171 |
| | 1,411 |
| | 0.74 | % |
Other | 695,802 |
| | 1,051 |
| | 0.61 | % | | 722,982 |
| | 947 |
| | 0.53 | % |
Total time deposits | 1,857,124 |
| | 2,781 |
| | 0.61 | % | | 1,490,153 |
| | 2,358 |
| | 0.64 | % |
Total interest bearing deposits | 3,309,280 |
| | 5,408 |
| | 0.66 | % | | 2,918,848 |
| | 5,403 |
| | 0.74 | % |
FHLB advances | 422,944 |
| | 1,224 |
| | 1.17 | % | | 339,964 |
| | 1,626 |
| | 1.92 | % |
Other borrowings | 42,264 |
| | 395 |
| | 3.74 | % | | 50,108 |
| | 667 |
| | 5.26 | % |
Total interest bearing liabilities | 3,774,488 |
| | $ | 7,027 |
| | 0.75 | % | | 3,308,920 |
| | $ | 7,696 |
| | 0.93 | % |
Non-interest bearing demand deposits | 1,138,690 |
| | | | | | 984,813 |
| | | | |
Total funding liabilities / cost of funds | $ | 4,913,178 |
| | | | 0.58 | % | | $ | 4,293,733 |
| | | | 0.72 | % |
Net interest income/net interest spread | | | $ | 59,716 |
| | 4.26 | % | | | | $ | 60,859 |
| | 4.83 | % |
Net interest margin | | | | | 4.49 | % | | | | | | 5.11 | % |
Net interest margin, excluding the effect of nonaccrual loan income (expense)(4) | | | | | 4.47 | % | | | | | | 5.14 | % |
Net interest margin, excluding the effect of nonaccrual loan income (expense) and prepayment fee income(4) (5) | | | | | 4.46 | % | | | | | | 5.13 | % |
Cost of deposits: | | | | | | | | | | | |
Non-interest bearing demand deposits | $ | 1,138,690 |
| | $ | — |
| | | | $ | 984,813 |
| | $ | — |
| | |
Interest bearing deposits | 3,309,280 |
| | 5,408 |
| | 0.66 | % | | 2,918,848 |
| | 5,403 |
| | 0.74 | % |
Total deposits | $ | 4,447,970 |
| | $ | 5,408 |
| | 0.49 | % | | $ | 3,903,661 |
| | $ | 5,403 |
| | 0.56 | % |
| |
(1) | Interest income on loans includes loan fees. |
| |
(2) | Average balances of loans are net of deferred loan fees and costs and include nonaccrual loans and loans held for sale. |
| |
(3) | Interest income and yields are not presented on a tax-equivalent basis. |
| |
(4) | Non-accrualNonaccrual interest income recognized (reversed) recognized was ($44 thousand)$236 thousand and $154($349) thousand for the three months ended September 30, 2012March 31, 2013 and 2011,2012, respectively.
|
| |
(5) | Loan prepayment fee income excluded was $119$63 thousand and $175$116 thousand for the three months ended September 30, 2012March 31, 2013 and 2011,2012, respectively. |
|
| | | | | | | | | | | | | | | | | | | | | |
| Nine months ended September 30, 2012 | | Nine months ended September 30, 2011 |
| Average Balance | | Interest Income/ Expense | | Average Yield/ Rate * | | Average Balance | | Interest Income/ Expense | | Average Yield/ Rate * |
| (Dollars in thousands) |
INTEREST EARNINGS ASSETS: | | | | | | | | | | | |
Loans(1) (2) | $ | 3,878,080 |
| | $ | 187,476 |
| | 6.46 | % | | $ | 2,202,535 |
| | $ | 101,137 |
| | 6.14 | % |
Securities available for sale(3) | 699,225 |
| | 12,940 |
| | 2.47 | % | | 504,402 |
| | 11,738 |
| | 3.10 | % |
FRB and FHLB stock and other investments | 205,540 |
| | 459 |
| | 0.29 | % | | 137,473 |
| | 540 |
| | 0.52 | % |
Federal funds sold | 15,136 |
| | 78 |
| | 0.68 | % | | 0 |
| | 0 |
| | N/A |
|
Total interest earning assets | $ | 4,797,981 |
| | $ | 200,953 |
| | 5.59 | % | | $ | 2,844,410 |
| | $ | 113,415 |
| | 5.33 | % |
INTEREST BEARING LIABILITIES: | | | | | | | | | | | |
Deposits: | | | | | | | | | | | |
Demand, interest-bearing | $ | 1,191,213 |
| | $ | 5,748 |
| | 0.64 | % | | $ | 697,513 |
| | $ | 4,500 |
| | 0.86 | % |
Savings | 189,322 |
| | 2,571 |
| | 1.81 | % | | 126,375 |
| | 2,202 |
| | 2.33 | % |
Time deposits: | | | | | | | | | | | |
$100,000 or more | 806,244 |
| | 4,428 |
| | 0.73 | % | | 333,532 |
| | 1,187 |
| | 0.48 | % |
Other | 682,903 |
| | 3,115 |
| | 0.61 | % | | 623,579 |
| | 7,309 |
| | 1.57 | % |
Total time deposits | 1,489,147 |
| | 7,543 |
| | 0.68 | % | | 957,111 |
| | 8,496 |
| | 1.19 | % |
Total interest bearing deposits | 2,869,682 |
| | 15,862 |
| | 0.74 | % | | 1,780,999 |
| | 15,198 |
| | 1.14 | % |
FHLB advances | 358,962 |
| | 4,832 |
| | 1.79 | % | | 308,114 |
| | 7,422 |
| | 3.22 | % |
Other borrowings | 45,981 |
| | 1,667 |
| | 4.77 | % | | 45,113 |
| | 1,528 |
| | 4.47 | % |
Total interest bearing liabilities | 3,274,625 |
| | $ | 22,361 |
| | 0.93 | % | | 2,134,226 |
| | $ | 24,148 |
| | 1.51 | % |
Non-interest bearing demand deposits | 1,037,152 |
| | | | | | 418,024 |
| | | | |
Total funding liabilities / cost of funds | $ | 4,311,777 |
| | | | 0.69 | % | | $ | 2,552,250 |
| | | | 1.26 | % |
Net interest income/net interest spread | | | $ | 178,592 |
| | 4.68 | % | | | | $ | 89,267 |
| | 3.82 | % |
Net interest margin | | | | | 4.97 | % | | | | | | 4.20 | % |
Net interest margin, excluding the effect of non-accrual loan income (expense)(4) | | | | | 4.99 | % | | | | | | 4.20 | % |
Net interest margin, excluding the effect of non-accrual loan income (expense) and prepayment fee income(4) (5) | | | | | 4.98 | % | | | | | | 4.18 | % |
Cost of deposits: | | | | | | | | | | | |
Non-interest bearing demand deposits | $ | 1,037,152 |
| | $ | 0 |
| | | | $ | 418,024 |
| | $ | 0 |
| | |
Interest bearing deposits | 2,869,682 |
| | 15,862 |
| | 0.74 | % | | 1,780,999 |
| | 15,198 |
| | 1.14 | % |
Total deposits | $ | 3,906,834 |
| | $ | 15,862 |
| | 0.55 | % | | $ | 2,199,023 |
| | $ | 15,198 |
| | 0.92 | % |
* Annualized
| |
(1) | Interest income on loans includes loan fees. |
| |
(2) | Average balances of loans are net of deferred loan fees and costs and include nonaccrual loans and loans held for sale. |
| |
(3) | Interest income and yields are not presented on a tax-equivalent basis. |
| |
(4) | Non-accrual interest income reversed was $793 thousand and $184 thousand for the nine months ended September 30, 2012 and 2011, respectively.
|
| |
(5) | Loan prepayment fee income excluded was $433 thousand and $438 thousand for the nine months ended September 30, 2012 and 2011, respectively.
|
Changes in net interest income are a function of changes in interest rates and volumes of interest-earning assets and interest-bearing liabilities. The following table sets forth information regarding the changes in interest income and interest expense for the periods indicated. The total change for each category of interest-earning assets and interest-bearing liabilities is segmented into the change attributable to variations in volume (changes in volume multiplied by the old rate) and the change attributable to variations in interest rates (changes in rates multiplied by the old volume). Nonaccrual loans are included in average loans used to compute this table.
|
| | | | | | | | | | | |
| Three months ended September 30, 2012 over September 30, 2011 |
| Net Increase (Decrease) | | | | |
| Change due to |
| Rate | | Volume |
| (In thousands) |
INTEREST INCOME: | | | | | |
Interest and fees on loans | $ | 26,651 |
| | $ | (286 | ) | | $ | 26,937 |
|
Interest on securities | (61 | ) | | (1,332 | ) | | 1,271 |
|
Interest on FRB and FHLB stock and other investments | (62 | ) | | (81 | ) | | 19 |
|
Total interest income | $ | 26,528 |
| | $ | (1,699 | ) | | $ | 28,227 |
|
INTEREST EXPENSE: | | | | | |
Interest on demand, interest bearing | $ | 285 |
| | $ | (485 | ) | | $ | 770 |
|
Interest on savings | 56 |
| | (234 | ) | | 290 |
|
Interest on time deposits | (104 | ) | | (1,260 | ) | | 1,156 |
|
Interest on FHLB advances | (835 | ) | | (1,528 | ) | | 693 |
|
Interest on other borrowings | (52 | ) | | (80 | ) | | 28 |
|
Total interest expense | $ | (650 | ) | | $ | (3,587 | ) | | $ | 2,937 |
|
Net Interest Income | $ | 27,178 |
| | $ | 1,888 |
| | $ | 25,290 |
|
| | | Nine months ended September 30, 2012 over September 30, 2011 | Three months ended March 31, 2013 over March 31, 2012 |
| Net Increase (Decrease) | | | | | Net Increase (Decrease) | | | | |
| Change due to | Change due to |
| Rate | | Volume | Rate | | Volume |
| (In thousands) | (Dollars in thousands) |
INTEREST INCOME: | | | | | | | | | | |
Interest and fees on loans | $ | 86,339 |
| | $ | 5,549 |
| | $ | 80,790 |
| $ | (390 | ) | | $ | (10,237 | ) | | $ | 9,847 |
|
Interest on securities | 1,202 |
| | (2,703 | ) | | 3,905 |
| (1,482 | ) | | (1,254 | ) | | (228 | ) |
Interest on FRB and FHLB stock and other investments | (81 | ) | | (293 | ) | | 212 |
| 109 |
| | 106 |
| | 3 |
|
Interest on federal funds sold | 78 |
| | 0 |
| | 78 |
| (49 | ) | | — |
| | (49 | ) |
Total interest income | $ | 87,538 |
| | $ | 2,553 |
| | $ | 84,985 |
| $ | (1,812 | ) | | $ | (11,385 | ) | | $ | 9,573 |
|
INTEREST EXPENSE: | | | | | | | | | | |
Interest on demand, interest bearing | $ | 1,248 |
| | $ | (1,368 | ) | | $ | 2,616 |
| $ | (250 | ) | | $ | (293 | ) | | $ | 43 |
|
Interest on savings | 369 |
| | (569 | ) | | 938 |
| (168 | ) | | (121 | ) | | (47 | ) |
Interest on time deposits | (953 | ) | | (4,551 | ) | | 3,598 |
| 423 |
| | (114 | ) | | 537 |
|
Interest on FHLB advances | (2,590 | ) | | (3,705 | ) | | 1,115 |
| (402 | ) | | (732 | ) | | 330 |
|
Interest on other borrowings | 139 |
| | 103 |
| | 36 |
| (272 | ) | | (175 | ) | | (97 | ) |
Total interest expense | $ | (1,787 | ) | | $ | (10,090 | ) | | $ | 8,303 |
| $ | (669 | ) | | $ | (1,435 | ) | | $ | 766 |
|
Net Interest Income | $ | 89,325 |
| | $ | 12,643 |
| | $ | 76,682 |
| $ | (1,143 | ) | | $ | (9,950 | ) | | $ | 8,807 |
|
Provision for Loan Losses
The provision for loan losses reflects our judgment of the current period cost associated with credit risk inherent in our loan portfolio. The loan loss provision for each period is dependent upon many factors, including loan growth, net charge-offs, changes in the composition of the loan portfolio, delinquencies, assessments by management, third parties’ and regulators’ examination of the loan portfolio, the value of the underlying collateral for problem loans and the general economic conditions
in our market areas. Specifically, the provision for loan losses represents the amount charged against current period earnings to achieve an allowance for loan losses that, in our judgment, is adequate to absorb probable incurred losses inherent in our loan portfolio. Periodic fluctuations in the provision for loan losses result from management’s assessment of the adequacy of theallowance for loan losses; however, actual loan losses may vary in material respects from current estimates. If the allowance for loan losses is inadequate, it may have a material adverse effect on our financial condition.
The provision for loan losses for the thirdfirst quarter of 20122013 was $6.9$7.5 million, an increase of $3.4$4.9 million, or 98%188.69%, from $3.5$2.6 million for the same period last year. The increase is primarily due to higher net charge-offs, strongthe addition of a new specific reserve of $5.1 million related to a TDR of an industrial warehouse loan, loan growth and allowance needs related to increased concentration risk associated with the growth in the CRE portfolio.portfolio, which were partially offset by a decrease in net charge-offs. Net charge-offs increaseddecreased to $6.5$1.2 million for the three months ended September 30, 2012March 31, 2013, compared to $3.2$2.2 million for the same period last year.
The provision for loan losses for the nine months ended September 30, 2012 was $16.7 million, a decrease of $2.1 million, or 11%, from $18.8 million for the same period last year. The decrease primarily due to improvement in the credit quality of the loan portfolio. Net charge-offs decreased to $12.7 million for the nine months ended September 30, 2012, compared to $21.1 million for the same period of 2011.
See Note 7 of the Notes to Condensed Consolidated Financial Statements (unaudited)(Unaudited) and Financial Condition-Loans Receivable and Allowance for Loan Losses for further discussion.
Non-interest Income
Non-interest income is primarily comprised of service fees on deposit accounts, fees received on trade finance letters of credit and net gains on sales of loans and securities available for sale.
Non-interest income for the thirdfirst quarter of 20122013 was $7.79.9 million, compared to $4.311.6 million for the same quarter of 2011, an increase2012, a decrease of $3.41.7 million, or 80%14.6%. The increasedecrease was principally due to the Merger, which was partially offset by a $0.8 million reductiondecreases in net gainsservice fees on sale of SBA loans from $0.8 million for the third quarter of 2011 to none for the third quarter of 2012.
Non-interest income for the nine months ended September 30, 2012 was $29.5 million, compared to $16.5 million for the same period of 2011, an increase of $13.1 million, or 79 %. The increase was principally due to the Merger. The $0.9 million increase indeposit accounts, loan servicing fees, net, net gains on sales of SBA loans and callsnet gains on sales of securities available for sale for the nine months ended sale.September 30, 2012 as compared to the same period
Non-interest income by category is summarized below:
|
| | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Increase (Decrease) |
| 2012 | | 2011 | | Amount | | Percent (%) |
| (Dollars in thousands) |
Service fees on deposit accounts | $ | 3,121 |
| | $ | 1,352 |
| | $ | 1,769 |
| | 130.8 | % |
International service fees | 1,183 |
| | 603 |
| | 580 |
| | 96.2 | % |
Loan servicing fees, net | 1,031 |
| | 464 |
| | 567 |
| | 122.2 | % |
Wire transfer fees | 833 |
| | 343 |
| | 490 |
| | 142.9 | % |
Other income and fees | 1,364 |
| | 534 |
| | 830 |
| | 155.4 | % |
Net gains on sales of SBA loans | 0 |
| | 823 |
| | (823 | ) | | (100.0 | )% |
Net losses on sales of other loans | 0 |
| | (30 | ) | | 30 |
| | 100.0 | % |
Net gains on sales and calls of securities available for sale | 133 |
| | 64 |
| | 69 |
| | 107.8 | % |
Net valuation gains (losses) on interest rate contracts | 11 |
| | (3 | ) | | 14 |
| | 466.7 | % |
Net gains (losses) on sales of OREO | (12 | ) | | 108 |
| | (120 | ) | | -111.1 | % |
Total non-interest income | $ | 7,664 |
| | $ | 4,258 |
| | $ | 3,406 |
| | 80.0 | % |
| | | Nine Months Ended September 30, | | Increase (Decrease) | Three Months Ended March 31, | | Increase (Decrease) |
| 2012 | | 2011 | | Amount | | Percent (%) | 2013 | | 2012 | | Amount | | % |
| (Dollars in thousands) | (Dollars in thousands) |
Service fees on deposit accounts | $ | 9,550 |
| | $ | 4,262 |
| | $ | 5,288 |
| | 124.1 | % | $ | 2,875 |
| | $ | 3,160 |
| | $ | (285 | ) | | (9.0 | )% |
International service fees | 3,810 |
| | 1,842 |
| | 1,968 |
| | 106.8 | % | 1,238 |
| | 1,224 |
| | 14 |
| | 1.1 | % |
Loan servicing fees, net | 3,178 |
| | 1,345 |
| | 1,833 |
| | 136.3 | % | 969 |
| | 1,337 |
| | (368 | ) | | (27.5 | )% |
Wire transfer fees | 2,349 |
| | 1,013 |
| | 1,336 |
| | 131.9 | % | 816 |
| | 741 |
| | 75 |
| | 10.1 | % |
Other income and fees | 4,058 |
| | 1,598 |
| | 2,460 |
| | 153.9 | % | 1,249 |
| | 1,340 |
| | (91 | ) | | (6.8 | )% |
Net gains on sales of SBA loans | 5,426 |
| | 6,337 |
| | (911 | ) | | (14.4 | %) | 2,694 |
| | 2,963 |
| | (269 | ) | | (9.1 | )% |
Net gains (losses) on sales of other loans | 146 |
| | (30 | ) | | 176 |
| | 586.7 | % | |
Net gains on sales and calls of securities available for sale | 949 |
| | 70 |
| | 879 |
| | 1,255.7 | % | |
Net losses on sales of other loans | | 43 |
| | — |
| | 43 |
| | — | % |
Net gains on sales of securities available for sale | | 54 |
| | 816 |
| | (762 | ) | | (93.4 | )% |
Net valuation gains (losses) on interest rate contracts | 24 |
| | (120 | ) | | 144 |
| | 120.0 | % | — |
| | 3 |
| | (3 | ) | | 100.0 | % |
Net gains on sales of OREO | 41 |
| | 135 |
| | (94 | ) | | (69.6 | %) | 2 |
| | 61 |
| | (59 | ) | | (96.7 | )% |
Total non-interest income | $ | 29,531 |
| | $ | 16,452 |
| | $ | 13,079 |
| | 79.5 | % | $ | 9,940 |
| | $ | 11,645 |
| | $ | (1,705 | ) | | (14.6 | )% |
Non-interest Expense
Non-interest expense for the thirdfirst quarter of 20122013 was $28.833.3 million, an increase of $12.02.8 million, or 71%9.3%, from $16.830.4 million for the same period of 2011. The increase was principally due to the Merger.2012. Salaries and employee benefits expense increased $6.02.3 million, or 78%, due to $13.6 million for the third quarterone-time costs incurrred as part of 2012, from $7.7 million for the same period of 2011. The increase was due toa management transition and an increase in the number of full-time equivalent (FTE) employees, which increased to 684762 at September 30, 2012March 31, 2013 from 377661 at September 30, 2011. The FTE employees as of September 30, 2011 on a pro forma basis was 696.March 31, 2012. Occupancy expense for the third quarterand furniture and equipment increased by a total of 2012 rose 58% to $3.9 million from $2.5 million for the same period of 2011,$720 thousand principally due to increased rental commitments during the period and due to increased number branches post-merger.depreciation expense for software and hard resulting recent equipment upgrades and purchases. Credit related expenses for thedecreased by third$465 thousand quarter of 2012 were $2.5 million, an increase of $1.6 million, or 188%, from $0.9 million for the same period of 2011. The increase was primarily due to OREOa decrease of $668 thousand in valuation allowances of $1.2 million and an increase in the number of OREO properties post-merger.expenses for loans held for sale. The FDIC assessment for the thirdfirst quarter of 2012 amounted to $6442013 decreased by $343 thousand, compared with $983 thousand for the same period of 2011. This decrease reflectsreflecting an upgrade of the Company's risk category.
Non-interest expense Professional fees increased by $688 thousand due to additional accounting services and consulting services for the nine months ended September 30, 2012 was $90.3 million, an increase of $39.9 million, or 79%, from $50.4 million forCompany's information systems. Merger and integration expenses decreased by $468 thousand, as the same period of 2011. The increase was principally dueCompany incurred greater salaries and benefits expenses and professional service fees related to the Merger. Salaries and benefits expense increased $19.9 million, or 89%, to $42.3 million for the the nine months ended September 30, 2012,merger with Center Financial compared to $22.4 million for the same periodacquisition of 2011. The increase was due to an increase in the FTE employees post-merger.PIB.
The breakdown of changes in non-interest expense by category is shown below:
|
| | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Increase (Decrease) |
| 2012 | | 2011 | | Amount | | Percent (%) |
| (Dollars in thousands) |
Salaries and employee benefits | $ | 13,611 |
| | $ | 7,657 |
| | $ | 5,954 |
| | 77.8 | % |
Occupancy | 3,910 |
| | 2,480 |
| | 1,430 |
| | 57.7 | % |
Furniture and equipment | 1,495 |
| | 984 |
| | 511 |
| | 51.9 | % |
Advertising and marketing | 1,159 |
| | 354 |
| | 805 |
| | 227.4 | % |
Data processing and communications | 1,659 |
| | 813 |
| | 846 |
| | 104.1 | % |
Professional fees | 876 |
| | 612 |
| | 264 |
| | 43.1 | % |
FDIC assessment | 644 |
| | 983 |
| | (339 | ) | | (34.5 | )% |
Credit related expenses | 2,497 |
| | 867 |
| | 1,630 |
| | 188.0 | % |
Merge and integration expenses | 183 |
| | 574 |
| | (391 | ) | | (68.1 | )% |
Other | 2,736 |
| | 1,493 |
| | 1,243 |
| | 83.3 | % |
Total non-interest expense | $ | 28,770 |
| | $ | 16,817 |
| | $ | 11,953 |
| | 71.1 | % |
| | | Nine Months Ended September 30, | | Increase (Decrease) | Three Months Ended March 31, | | Increase (Decrease) |
| 2012 | | 2011 | | Amount | | Percent (%) | 2013 | | 2012 | | Amount | | % |
| (Dollars in thousands) | (Dollars in thousands) |
Salaries and employee benefits | $ | 42,348 |
| | $ | 22,436 |
| | $ | 19,912 |
| | 88.8 | % | $ | 16,332 |
| | $ | 14,079 |
| | $ | 2,253 |
| | 16.0 | % |
Occupancy | 11,788 |
| | 7,362 |
| | 4,426 |
| | 60.1 | % | 4,011 |
| | 3,646 |
| | 365 |
| | 10.0 | % |
Furniture and equipment | 4,181 |
| | 2,853 |
| | 1,328 |
| | 46.5 | % | 1,573 |
| | 1,218 |
| | 355 |
| | 29.1 | % |
Advertising and marketing | 4,142 |
| | 1,527 |
| | 2,615 |
| | 171.3 | % | 1,273 |
| | 1,458 |
| | (185 | ) | | (12.7 | )% |
Data processing and communications | 4,843 |
| | 2,719 |
| | 2,124 |
| | 78.1 | % | 1,644 |
| | 1,611 |
| | 33 |
| | 2.0 | % |
Professional fees | 2,558 |
| | 2,090 |
| | 468 |
| | 22.4 | % | 1,301 |
| | 613 |
| | 688 |
| | 112.2 | % |
FDIC assessment | 1,732 |
| | 3,149 |
| | (1,417 | ) | | (45.0 | )% | 694 |
| | 1,037 |
| | (343 | ) | | (33.1 | )% |
Credit related expenses | 6,967 |
| | 2,615 |
| | 4,352 |
| | 166.4 | % | 1,715 |
| | 2,180 |
| | (465 | ) | | (21.3 | )% |
Merge and integration expenses | 3,304 |
| | 1,465 |
| | 1,839 |
| | 125.5 | % | |
Merger and integration expenses | | 1,305 |
| | 1,773 |
| | (468 | ) | | (26.4 | )% |
Other | 8,419 |
| | 4,182 |
| | 4,237 |
| | 101.3 | % | 3,427 |
| | 2,820 |
| | 607 |
| | 21.5 | % |
Total non-interest expense | $ | 90,282 |
| | $ | 50,398 |
| | $ | 39,884 |
| | 79.1 | % | $ | 33,275 |
| | $ | 30,435 |
| | $ | 2,840 |
| | 9.3 | % |
Provision for Income Taxes
Income tax expense was $11.811.4 million and $5.215.5 million for the third quarterquarters ended September 30, 2012March 31, 2013 and 2011,2012, respectively. The effective income tax rate for the quarters ended September 30, 2012March 31, 2013 and 20112012 was 39.1%39.5% and 34.6%39.4%, respectively. Income tax expense was $39.5 million and $13.7 million for the nine months ended September 30, 2012 and 2011, respectively. The effective income tax rate for the nine months ended September 30, 2012 and 2011 was 39.0% and 37.4%.
Financial Condition
At September 30, 2012March 31, 2013, our total assets were $5.335.83 billion, an increase of $165.4$192.9 million from $5.17$5.64 billion at December 31, 2011.2012. As previously discussed, the increase was principally due to a $326.7$197.5 million increase in loans receivable, net of allowance for loan losses, which was partially offset by decreases in cash and cash equivalents term federal funds sold and securities available for sale of $70.5 million, $40.0 million and $53.9 million, respectively.$32.1 million. The increase in total assets was funded by a $111.6$171.6 million increase in deposits, a $116.4 million$910 thousand increase in borrowings from the FHLB advances and net income available to common stockholders of $56.1$17.5 million. The increases in deposits and net income available to common shareholders were partially offset by the $122 million redemption of the Series A and Series B Perpetual Preferred Stock issued under the U.S. Treasury's TARP Capital Purchase Program in June 2012
Investment Securities Portfolio
As of September 30, 2012March 31, 2013, we had $687.1717.4 million in available-for-saleavailable for sale securities, compared to $740.9704.4 million at December 31, 2011.2012. The net unrealized gain on the available-for-saleavailable for sale securities at September 30, 2012March 31, 2013 was $18.0$11.7 million, compared to a net unrealized gain on such securities of $15.2$15.4 million at December 31, 2011.2012. During the ninethree months ended September 30, 2012March 31, 2013, $111.7$77.6 million in securities were purchased, $134.7$52.5 million in mortgage related securities were paid down, $1.1 million in securities were either called or matured, and $27.5$6.6 million in securities were sold. We recognized net gains of $949$54 thousand on the securities that were sold. No securities wereWe sold a $1.0 million corporate trust preferred security and recognized a gain of $816 thousand during the same period of last year. The weighted average duration (the weighted average of the times of the present values of all the cash flows) of the available-for-saleavailable for sale securities was 3.233.93 years and 3.543.26 years at September 30, 2012March 31, 2013 and December 31, 20112012, respectively. The weighted average life (the weighted average of the times of the principal repayments) of the available-for-saleavailable for sale securities was 3.474.27 years and 3.913.5 years at September 30, 2012March 31, 2013 and December 31, 20112012, respectively.
Loan Portfolio
As of September 30, 2012March 31, 2013, gross loans outstanding, net of deferred loan fees and costs and excluding loans held for sale, was $4.07$4.50 billion, an increase of $330.7$203.8 million from $3.74$4.30 billion at December 31, 2011.2012. Total loan originations during the ninethree months ended September 30, 2012March 31, 2013 were $721.8$220.9 million, including SBA loan originations of $165.4$49.5 million. Of the $49.5 million comparedin SBA loan originations, $31.7 million was included as additions to $319.6 millionloans held for sale during the same period of 2011.period.
The following table summarizes our loan portfolio by amount and percentage of gross loans in each major loan category at the dates indicated:
| | | September 30, 2012 | | December 31, 2011 | March 31, 2013 | | December 31, 2012 |
| Amount | | Percent | | Amount | | Percent | Amount | | % | | Amount | | % |
| | | (Dollars in thousands) | | | | | (Dollars in thousands) | | |
Loan portfolio composition | | | | | | | | | | | | | | |
Real estate loans: | | | | | | | | | | | | | | |
Residential | $ | 3,354 |
| | 0 | % | | $ | 2,043 |
| | 0 | % | $ | 10,667 |
| | 0 | % | | $ | 9,247 |
| | 0 | % |
Commercial & industrial | 2,881,079 |
| | 71 | % | | 2,631,880 |
| | 70 | % | 3,294,978 |
| | 73 | % | | 3,100,466 |
| | 72 | % |
Construction | 56,433 |
| | 1 | % | | 44,756 |
| | 1 | % | 69,087 |
| | 2 | % | | 65,045 |
| | 2 | % |
Total real estate loans | 2,940,866 |
| | 72 | % | | 2,678,679 |
| | 73 | % | 3,374,732 |
| | 75 | % | | 3,174,758 |
| | 73 | % |
Commercial business | 898,977 |
| | 22 | % | | 849,576 |
| | 23 | % | 943,860 |
| | 21 | % | | 921,556 |
| | 21 | % |
Trade finance | 177,285 |
| | 4 | % | | 146,684 |
| | 4 | % | 134,393 |
| | 3 | % | | 152,070 |
| | 4 | % |
Consumer and other | 54,442 |
| | 1 | % | | 66,631 |
| | 2 | % | 48,881 |
| | 1 | % | | 49,954 |
| | 1 | % |
Total loans outstanding | 4,071,570 |
| | 100 | % | | 3,741,570 |
| | 100 | % | 4,501,866 |
| | 100 | % | | 4,298,338 |
| | 100 | % |
Less: deferred loan fees | (2,076 | ) | | | | (2,744 | ) | | | (1,820 | ) | | | | (2,086 | ) | | |
Gross loans receivable | 4,069,494 |
| | | | 3,738,826 |
| | | 4,500,046 |
| | | | 4,296,252 |
| | |
Less: allowance for loan losses | (65,952 | ) | | | | (61,952 | ) | | | (73,268 | ) | | | | (66,941 | ) | | |
Loans receivable, net | $ | 4,003,542 |
| | | | $ | 3,676,874 |
| | | $ | 4,426,778 |
| | | | $ | 4,229,311 |
| | |
SBA loans consisting principally of the unguaranteed portion, are included in commercial business loans and commercial and industrial real estate loans. SBA loans included in commercial business loans were $84.3$80.3 million at September 30, 2012March 31, 2013 and $81.6$69.8 million at December 31, 2011.2012. SBA loans included in commercial and industrial real estate loans were $148.7$172.7 million at September 30, 2012March 31, 2013 and $152.5$148.0 million at December 31, 2011.2012.
We normally do not extend lines of credit or make loan commitments to business customers for periods in excess of one year. We use the same credit policies in making commitments and conditional obligations as we do for providing loan facilities to our customers. We perform annual reviews of such commitments prior to renewal.
The following table shows our loan commitments and letters of credit outstanding at the dates indicated:
| | | September 30, 2012 | | December 31, 2011 | March 31, 2013 | | December 31, 2012 |
| (In thousands) | (Dollars in thousands) |
Loan commitments | $ | 571,150 |
| | $ | 458,096 |
| $ | 710,762 |
| | $ | 690,917 |
|
Standby letters of credit | 37,599 |
| | 29,028 |
| 39,639 |
| | 39,176 |
|
Other commercial letters of credit | 53,932 |
| | 49,457 |
| 60,623 |
| | 51,257 |
|
| $ | 662,681 |
| | $ | 536,581 |
| $ | 811,024 |
| | $ | 781,350 |
|
Nonperforming Assets
Nonperforming assets, which include non-accrualnonaccrual loans, loans past due 90 days or more past due and accruing,on accrual status, restructured loans, and other real estate owned,OREO, were $78.1$104.6 million at September 30, 2012March 31, 2013, compared to $74.9$79.9 million at December 31, 2011.2012. The ratio of nonperforming assets to gross loans plus OREO was 1.92%2.32% and 2.00%1.86% at September 30, 2012March 31, 2013 and December 31, 2011,2012, respectively.
The following table summarizes the composition of our nonperforming assets as of the dates indicated.
| | | September 30, 2012 | | December 31, 2011 | March 31, 2013 | | December 31, 2012 |
| (Dollars in thousands) | (Dollars in thousands) |
Nonaccrual loans(1) | $ | 29,369 |
| | $ | 31,213 |
| $ | 42,269 |
| | $ | 29,653 |
|
Delinquent loans 90 days or more on accrual status | 22,454 |
| | 17,265 |
| |
Loans 90 days or more days past due on accrual status (2) | | 21,621 |
| | 17,742 |
|
Accruing restructured loans | 22,175 |
| | 18,776 |
| 32,249 |
| | 29,849 |
|
Total Nonperforming Loans | 73,998 |
| | 67,254 |
| 96,139 |
| | 77,244 |
|
Other real estate owned | 4,135 |
| | 7,625 |
| |
OREO | | 8,419 |
| | 2,698 |
|
Total Nonperforming Assets | $ | 78,133 |
| | $ | 74,879 |
| $ | 104,558 |
| | $ | 79,942 |
|
Nonperforming loans to total gross loans, excluding loans held for sale | 1.82 | % | | 1.80 | % | 2.14 | % | | 1.80 | % |
Nonperforming assets to gross loans plus OREO | 1.92 | % | | 2.00 | % | 2.32 | % | | 1.86 | % |
Nonperforming assets to total assets | 1.47 | % | | 1.45 | % | 1.79 | % | | 1.42 | % |
Allowance for loan losses to non-performing loans (excludes delinquent loans 90 days or more on accrual status) | 127.95 | % | | 123.93 | % | |
Allowance for loan losses to non-performing assets | 84.41 | % | | 82.74 | % | |
Allowance for loan losses to nonperforming loans (excludes delinquent loans 90 days or more on accrual status) | | 98.32 | % | | 112.50 | % |
Allowance for loan losses to nonperforming assets | | 70.07 | % | | 83.74 | % |
| |
(1) | Nonaccrual loans exclude the guaranteed portion of delinquent SBA loans that are in liquidation totaling $18.6 million and $17.6 million as of March 31, 2013 and December 31, 2012, respectively. |
| |
(2) | Loans 90 days or more past due on accrual status are acquired loans accounted for under ASC 310-30. |
Allowance for Loan Losses
The allowance for loan losses was $66.0$73.3 million at September 30, 2012March 31, 2013, compared to $62.0$66.9 million at December 31, 2011.2012. We recorded a provision for loan losses of $16.7$7.5 million during the ninethree months ended September 30, 2012March 31, 2013, compared to $18.8$2.6 million for the same period of 2011.2012. The allowance for loan losses was 1.62%1.63% of gross loans at September 30, 2012March 31, 2013 and 1.66%1.56% of gross loans at December 31, 2011.2012. Impaired loans as defined by FASB ASC 310-10-35, “Accounting by Creditors for Impairment of a Loan,” totaled $82.3$102.0 million and $82.0$90.2 million as of September 30, 2012March 31, 2013 and December 31, 2011,2012, respectively, with specific allowances of $8.7$15.1 million and $18.0$9.2 million, respectively.
The following table reflects our allocation of the allowance for loan and lease losses ("ALLL") by loan type and the ratio of each loan category to total loans as of the dates indicated:
| | | Allocation of Allowance for Loan Losses | Allocation of Allowance for Loan Losses |
| September 30, 2012 | | December 31, 2011 | March 31, 2013 | | December 31, 2012 |
| Amount of allowance for loan losses | | Percent of loans to total loans | | Amount of allowance for loan losses | | Percent of loans to total loans | Amount of Allowance for Loan Losses | | Percent of ALLL to Total ALLL | | Amount of Allowance for Loan Losses | | Percent of ALLL to Total ALLL |
| (Dollars in thousands) | (Dollars in thousands) |
Loan Type | | | | | | | | | | | | | | |
Real estate - Residential | $ | 32 |
| | 0 | % | | $ | 9 |
| | 0 | % | $ | 84 |
| | — | % | | $ | 74 |
| | — | % |
Real estate - Commercial | 43,828 |
| | 71 | % | | 38,307 |
| | 70 | % | 52,595 |
| | 72 | % | | 45,162 |
| | 67 | % |
Real estate - Construction | 808 |
| | 1 | % | | 724 |
| | 1 | % | 919 |
| | 1 | % | | 986 |
| | 1 | % |
Commercial business | 17,647 |
| | 22 | % | | 20,681 |
| | 23 | % | 17,331 |
| | 24 | % | | 17,606 |
| | 26 | % |
Trade finance | 2,852 |
| | 5 | % | | 1,786 |
| | 4 | % | 1,698 |
| | 2 | % | | 2,352 |
| | 4 | % |
Consumer and other | 785 |
| | 1 | % | | 445 |
| | 2 | % | 641 |
| | 1 | % | | 761 |
| | 1 | % |
Total | $ | 65,952 |
| | 100 | % | | $ | 61,952 |
| | 100 | % | $ | 73,268 |
| | 100 | % | | $ | 66,941 |
| | 100 | % |
For a better understanding of the changes in the ALLL, the loan portfolio has been segmented for disclosures purposes between loans which are accounted for under the amortized cost method (referred to as "Legacy Loans")(Legacy Loans) and loans acquired from Center (referred to as "Acquired Loans")acquisitions (Acquired Loans). The Acquired Loans were further segregated between Credit Impaired Loans (loans with credit deterioration at the time of the Mergerthey were acquired and accounted for under ASC 310-30) and performing loans (loans that were pass graded at the time of the Merger)they were acquired). The activity in the ALLL for the three and ninemonths ended September 30, 2012March 31, 2013 is as follows:
| | | | | | Acquired Loans (2) | | | | | | Acquired Loans(2) | | |
For three months | | Legacy Loans (1) | | Credit Impaired Loans | | Performing Loans | | Total | |
| | | Legacy Loans(1) | | Credit Impaired Loans | | Performing Loans | | Total |
| | (Dollars in thousands) | | (Dollars in thousands) |
Balance, beginning of period | | $ | 62,396 |
| | $ | 1,914 |
| | $ | 1,195 |
| | $ | 65,505 |
| | $ | 61,002 |
| | $ | 4,534 |
| | $ | 1,405 |
| | $ | 66,941 |
|
Provision for loan losses | | 5,574 |
| | 198 |
| | 1,128 |
| | 6,900 |
| | 2,354 |
| | — |
| | 5,152 |
| | 7,506 |
|
Loans charged off | | (7,408 | ) | | 0 |
| | (361 | ) | | (7,769 | ) | | (1,121 | ) | | — |
| | (308 | ) | | (1,429 | ) |
Recoveries of charged offs | | 1,272 |
| | 0 |
| | 44 |
| | 1,316 |
| | 232 |
| | — |
| | 18 |
| | 250 |
|
Balance, end of period | | $ | 61,834 |
| | $ | 2,112 |
| | $ | 2,006 |
| | $ | 65,952 |
| | $ | 62,467 |
| | $ | 4,534 |
| | $ | 6,267 |
| | $ | 73,268 |
|
| | | | | | | | | | | | | | | | |
Gross loans, net of deferred loan fees and costs | | $ | 3,098,496 |
| | 155,712 |
| | 817,362 |
| | $ | 4,071,570 |
| | $ | 3,520,819 |
| | 169,826 |
| | 811,221 |
| | $ | 4,501,866 |
|
Loss coverage ratio | | 2.00 | % | | 1.36 | % | | 0.25 | % | | 1.62 | % | | 1.77 | % | | 2.67 | % | | 0.77 | % | | 1.63 | % |
| | | | | | | | | |
(1) Legacy Loans includes acquired loans that have been renewed or refinanced after being acquired. | | (1) Legacy Loans includes acquired loans that have been renewed or refinanced after being acquired. |
(2) Acquired loans were marked to fair value at the acquisition date and provisions for loan losses reflect credit deterioration since the acquisition date. | | (2) Acquired loans were marked to fair value at the acquisition date and provisions for loan losses reflect credit deterioration since the acquisition date. |
| | | | | | | | | |
|
| | | | | | | | | | | | | | | | |
| | | | Acquired Loans (2) | | |
For nine months | | Legacy Loans (1) | | Credit Impaired Loans | | Performing Loans | | Total |
| | (Dollars in thousands) |
Balance, beginning of period | | $ | 61,952 |
| | $ | 0 |
| | $ | 0 |
| | $ | 61,952 |
|
Provision for loan losses | | 11,558 |
| | 2,112 |
| | 3,012 |
| | 16,682 |
|
Loans charged off | | (15,051 | ) | | 0 |
| | (1,710 | ) | | (16,761 | ) |
Recoveries of charged offs | | 3,375 |
| | 0 |
| | 704 |
| | 4,079 |
|
Balance, end of period | | $ | 61,834 |
| | $ | 2,112 |
| | $ | 2,006 |
| | $ | 65,952 |
|
| | | | | | | | |
(1) Legacy Loans includes acquired loans that have been renewed or refinanced after the merger. |
(2) Acquired loans were marked to fair value at the acquisition date, and provisions for loan losses reflect credit deterioration since the acquisition date. |
The following table shows the provisions made for loan losses, the amount of loans charged off and the recoveries on loans previously charged off, together with the balance in the allowance for loan losses at the beginning and end of each period, the amount of average and gross loans outstanding, and certain other ratios as of the dates and for the periods indicated:
| | | At or for the Nine Months Ended September 30, | At or for the Three Months Ended March 31, |
| 2012 | | 2011 | 2013 | | 2012 |
| (Dollars in thousands) | (Dollars in thousands) |
LOANS | | | | | | |
Average gross loans receivable, including loans held for sale (net of deferred fees) | $ | 3,878,080 |
| | $ | 2,202,535 |
| $ | 4,444,320 |
| | $ | 3,777,495 |
|
Total gross loans receivables, excluding loans held for sale (net of deferred fees) | $ | 4,069,494 |
| | $ | 2,257,667 |
| $ | 4,500,046 |
| | $ | 3,737,199 |
|
ALLOWANCE: | | | | | | |
Balance-beginning of period | $ | 61,952 |
| | $ | 62,320 |
| $ | 66,941 |
| | $ | 61,952 |
|
Less: Loan charge-offs: | | | | | | |
Residential real estate | 0 |
| | 0 |
| |
Commercial & industrial real estate | (6,506 | ) | | (14,938 | ) | (1,056 | ) | | (1,934 | ) |
Construction | 0 |
| | (3,254 | ) | |
Commercial business loans | (9,225 | ) | | (6,023 | ) | (307 | ) | | (1,422 | ) |
Trade finance | (300 | ) | | 0 |
| (26 | ) | | 0 |
|
Consumer and other loans | (729 | ) | | (256 | ) | (40 | ) | | (26 | ) |
Total loans charged off | (16,760 | ) | | (24,471 | ) | (1,429 | ) | | (3,382 | ) |
Plus: Loan recoveries | | | | | | |
Commercial & industrial real estate | 2,404 |
| | 1,200 |
| 42 |
| | 323 |
|
Commercial business loans | 1,287 |
| | 1,937 |
| 183 |
| | 792 |
|
Trade Finance | 60 |
| | 0 |
| |
Consumer and other loans | 327 |
| | 231 |
| 25 |
| | 24 |
|
Total loans recoveries | 4,078 |
| | 3,368 |
| 250 |
| | 1,139 |
|
Net loan charge-offs | (12,682 | ) | | (21,103 | ) | (1,179 | ) | | (2,243 | ) |
Provision for loan losses | 16,682 |
| | 18,792 |
| 7,506 |
| | 2,600 |
|
Balance-end of period | $ | 65,952 |
| | $ | 60,009 |
| $ | 73,268 |
| | $ | 62,309 |
|
Net loan charge-offs to average gross loans, including loans held for sale (net of deferred fees) * | 0.44 | % | | 1.28 | % | 0.11 | % | | 0.24 | % |
Allowance for loan losses to gross loans at end of period | 1.62 | % | | 2.66 | % | 1.63 | % | | 1.67 | % |
Net loan charge-offs to beginning allowance * | 27.29 | % | | 45.15 | % | 7.05 | % | | 14.48 | % |
Net loan charge-offs to provision for loan losses | 76.02 | % | | 112.30 | % | 15.71 | % | | 86.27 | % |
* Annualized | | | | | | |
We believe the allowance for loan losses as of September 30, 2012March 31, 2013 is adequate to absorb probable incurred losses in the loan portfolio. However, no assurance can be given that actual losses will not exceed the estimated amounts.
Deposits and Other Borrowings
Deposits. Deposits are our primary source of funds used in our lending and investment activities. At September 30, 2012March 31, 2013, deposits increased $111.6$171.6 million, or 3%3.92%, to $4.05$4.56 billion from $3.94$4.38 billion at December 31, 20112012. RetailThe net increase in deposits totaled $3.49 billion at September 30, 2012, a decrease of $67is primarily due to the PIB acquisition during the quarter in which we assumed $143.7 million from $3.56 billion at December 31, 2011.in deposits. Interest-bearing demand deposits, including money market and Super Now accounts, totaled $1.33$1.46 billion at September 30, 2012March 31, 2013, a decreasean increase of $104$32.6 million from $1.44$1.43 billion at December 31, 2011. The decrease reflected the deposit mix shift to non-interest bearing deposits, which increased to $1.11 billion at September 30, 2012, from $984 million at December 31, 2011.2012.
At September 30, 2012March 31, 2013, 27.2%26% of total deposits were non-interest bearing demand deposits, 39.9%42% were time deposits and 32.9%32% were interest bearing demand and savings deposits. By comparison, at December 31, 2011, 25.0%2012, 27% of total deposits were non-interest bearing demand deposits, 38.6%40% were time deposits, and 36.4%33% were interest bearing demand and savingsavings deposits.
At September 30, 2012March 31, 2013, we had $259.2$336.9 million in wholesalebrokered deposits and $300.0 million in California State Treasurer
deposits, compared to $80.7$307.2 million and $300.0 million of such deposits at December 31, 2011,2012, respectively. The California State Treasurer deposits had three-month maturities with a weighted average interest rate of 0.13%0.12% at September 30, 2012March 31, 2013 and were collateralized with securities with a carrying value of $348.4 million.$346.0 million. The weighted average interest rate for wholesale deposits was 0.34%0.33% at September 30, 2012March 31, 2013.
The following is a schedule of CDcertificates of deposit maturities as of September 30, 2012March 31, 2013:
Maturity Schedule of Time Deposits
(Dollars in thousands)
|
| | | | | | |
| | | Weighted Average |
Quarter Ending | Balance | | Interest Rate |
December 31, 2012 | $ | 751,628 |
| | 0.57 | % |
March 31, 2013 | 329,130 |
| | 1.04 | % |
June 30, 2013 | 222,070 |
| | 0.97 | % |
September 30, 2013 | 213,164 |
| | 0.90 | % |
Total one year or less | 1,515,992 |
| | 0.78 | % |
Over one year | 100,358 |
| | 1.23 | % |
Total time deposits | $ | 1,616,350 |
| | 0.80 | % |
|
| | | | | | |
| | | |
| Balance | | % |
| (Dollars in thousands) |
Three months or less | $ | 753,687 |
| | 39 | % |
Over three months through six months | 276,670 |
| | 14 | % |
Over six months through nine months | 435,145 |
| | 23 | % |
Over nine months through twelve months | 248,119 |
| | 13 | % |
Over twelve months | 197,948 |
| | 10 | % |
Total time deposits | $ | 1,911,569 |
| | 100 | % |
Other Borrowings. Advances may be obtained from the FHLB as an alternative source of funds. Advances from the FHLB advances are typically secured by a pledge of commercial real estate loans and/or securities with a market value at least equal to the outstanding advances plus our investment in FHLB stock.
At September 30, 2012March 31, 2013, we had $460.8421.6 million of FHLB advances with average remaining maturities of 2.02.9 years, compared to $344.4420.7 million with average remaining maturities of 1.32.6 years at December 31, 2011.2012. The weighted average rate, including the acquisition accounting adjustments, was 1.33%1.17% and 1.93%1.31% at September 30, 2012March 31, 2013 and at December 31, 2011,2012, respectively.
During the second quarter of 2012, we retired a $10.0 million Trust Preferred Security (Nara Bancorp Capital Trust I), bearing a 10.18% interest rate. At September 30, 2012March 31, 2013, fivesix wholly-owned subsidiary grantor trusts ("Trusts") established by us had issued $46$50 million of pooled trust preferred securities (“Trust Preferred Securities”). The Trust Preferred Securities accrue and pay distributions periodically at specified annual rates as provided in the related indentures for the securities. The Trusts used the net proceeds from their respective offerings to purchase a like amount of subordinated debentures (the “Debentures”) issued by us. The Debentures are the sole assets of the trusts. Our obligations under the Debentures and related documents, taken together, constitute a full and unconditional guarantee by us of the obligations of the trusts. The Trust Preferred Securities are mandatorily redeemable upon the maturity of the Debentures, or upon earlier redemption as provided in the indentures. We have the right to redeem the Debentures in whole (but not in part) on or after specific dates, at redemption prices specified in the indentures plus any accrued but unpaid interest to the redemption date.
Off-Balance-Sheet Activities and Contractual Obligations
We routinely engage in activities that involve, to varying degrees, elements of risk that are not reflected, in whole or in part, in the consolidated financial statements. These activities are part of our normal course of business and include traditional off-balance-sheet credit-related financial instruments, interest rate swap contracts, operating leases and long-term debt.
Traditional off-balance-sheet credit-related financial instruments are primarily commitments to extend credit and standby letters of credit. These activities could require us to make cash payments to third parties if certain specified future events occur. The contractual amounts represent the extent of our exposure in these off-balance-sheet activities. However, since certain off-balance-sheetoff-balance sheet commitments, particularly standby letters of credit, are expected to expire or be only partially used, the total amount of commitments does not necessarily represent future cash requirements. These activities are necessary to meet the financing needs of our customers.
We enter into interest rate swap contracts under which we are required to either receive cash from or pay cash to counterparties depending on changes in interest rates. We also purchase interest rate caps to protect against increases in market interest rates. We utilize interest rate swap contracts and interest rate caps to help manage the risk of changing interest rates.
We do not anticipate that our current off-balance-sheet activities will have a material impact on our future results of operations or our financial condition. Further information regarding our financial instruments with off-balance-sheet risk can be found in Item 3 “Quantitative and Qualitative Disclosures about Market Risk”.
Our leased banking facilities and equipment are leased under non-cancelable operating leases under which we must make monthly payments over periods up to 2015 years.
Stockholders’ Equity and Regulatory Capital
Historically, our primary source of capital has been the retention of earnings, net of dividend payments to shareholders. We seek to maintain capital at a level sufficient to assure our stockholders, our customers, and our regulators that our company and our bank subsidiary are financially sound. For this purpose, we perform ongoing assessments of our components of capital, as well as projected sources and uses of capital in conjunction with projected increases in assets and levels of risks.
Total stockholders’ equity was $734.5772.3 million at September 30, 2012March 31, 2013 compared to $795.9751.1 million at December 31, 2011. The decrease was primarily due to the redemption of $122 million of Series A and Series B Preferred Stock issued under the U.S. Treasury's TARP Capital Purchase Program in June 2012, which was partially offset by the net income to common stockholders of $56.1 million for the nine months ended September 30, 2012. Our ratio of tangible common equity to tangible assets was 12.23% at September 30, 2012, compared to 11.42% at December 31, 2011. The increase was attributable to the increase in common stockholders' equity.2012.
The federal banking agencies require a minimum ratio of qualifying total capital to risk-weighted assets of 8% and a minimum ratio of Tier I capital to risk-weighted assets of 4%. In addition to the risk-based guidelines, federal banking regulators require banking organizations to maintain a minimum amount of Tier I capital to average total assets, referred to as the leverage ratio. Capital requirements apply to the Company and the Bank separately. In addition to these uniform risk-based capital guidelines and leverage ratios that apply across the industry, the regulators have the discretion to set individual minimum capital requirements for specific institutions at rates significantly above the minimum guidelines and ratios.
At September 30, 2012March 31, 2013, our Tier I capital, defined as stockholders’ equity less intangible assets, plus proceeds from the trust preferred securities (subject to limitations), was $668.7$711.6 million, compared to $733.3$688.4 million at December 31, 2011,2012, representing an increase of $64.6$23.2 million, or 9%3.36%. The decreaseincrease was primarily due to the redemptionincrease in additional paid-in capital from the net income during the quarter of $122$17.5 million and an increase in trust preferred securities of Series A and Series B Preferred Stock issued under$4.1 million assumed in the U.S. Treasury's TARP Capital Purchase Program in June 2012.acquisition of PIB during the quarter. At September 30, 2012March 31, 2013, the total capital to risk-weighted assets ratio was 16.48%15.88% and the Tier I capital to risk-weighted assets ratio was 15.22%14.63%. The Tier I leverage capital ratio was 13.15%12.64%.
As of September 30, 2012March 31, 2013 and December 31, 2011,2012, the most recent regulatory notification categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier I risk-based and Tier I leverage capital ratios as set forth in the table below.
| | | As of September 30, 2012 (Dollars in thousands) | As of March 31, 2013 (Dollars in thousands) |
| Actual | | To Be Well-Capitalized | | Excess | Actual | | To Be Well-Capitalized | | Excess |
| Amount | | Ratio | | Amount | | Ratio | | Amount | | Ratio | Amount | | Ratio | | Amount | | Ratio | | Amount | | Ratio |
BBCN Bancorp, Inc | | | | | | | | | | | | | | | | | | | | | | |
Total risk-based capital ratio | | $ | 772,633 |
| | 15.88 | % | | N/A |
| | N/A |
| | | | |
Tier 1 risk-based capital ratio | | $ | 711,574 |
| | 14.63 | % | | N/A |
| | N/A |
| | | | |
Tier 1 capital to total assets | $ | 668,710 |
| | 13.2 | % | | N/A |
| | N/A |
| |
|
| |
|
| $ | 711,574 |
| | 12.64 | % | | N/A |
| | N/A |
| |
|
| |
|
|
BBCN Bank | | | | | | | | | | | | |
Total risk-based capital ratio | | $ | 760,006 |
| | 15.64 | % | | $ | 486,044 |
| | 10.00 | % | | $ | 273,962 |
| | 5.64 | % |
Tier 1 risk-based capital ratio | $ | 668,710 |
| | 15.2 | % | | N/A |
| | N/A |
| |
|
| |
|
| $ | 698,992 |
| | 14.38 | % | | $ | 291,626 |
| | 6.00 | % | | $ | 407,366 |
| | 8.38 | % |
Total risk-based capital ratio | $ | 723,954 |
| | 16.5 | % | | N/A |
| | N/A |
| |
|
| |
|
| |
BBCN Bank | | | | | | | | | | | | |
Tier I capital to total assets | $ | 647,616 |
| | 12.7 | % | | $ | 254,134 |
| | 5.0 | % | | $ | 393,482 |
| | 7.7 | % | $ | 698,992 |
| | 12.42 | % | | $ | 281,440 |
| | 5.00 | % | | $ | 417,552 |
| | 7.42 | % |
Tier 1 risk-based capital ratio | $ | 647,616 |
| | 14.8 | % | | $ | 263,407 |
| | 6.0 | % | | $ | 384,209 |
| | 8.8 | % | |
Total risk-based capital ratio | $ | 702,825 |
| | 16.0 | % | | $ | 439,011 |
| | 10.0 | % | | $ | 263,814 |
| | 6.0 | % | |
| As of December 31, 2011 (Dollars in thousands) | As of December 31, 2012 (Dollars in thousands) |
| Actual | | To Be Well-Capitalized | | Excess | Actual | | To Be Well-Capitalized | | Excess |
| Amount | | Ratio | | Amount | | Ratio | | Amount | | Ratio | Amount | | Ratio | | Amount | | Ratio | | Amount | | Ratio |
BBCN Bancorp, Inc | | | | | | | | | | | | | | | | | | | | | | |
Total risk-based capital ratio | | $ | 746,396 |
| | 16.16 | % | | N/A |
| | N/A |
| | | | |
Tier 1 risk-based capital ratio | | $ | 688,422 |
| | 14.91 | % | | N/A |
| | N/A |
| | | | |
Tier 1 capital to total assets | $ | 733,319 |
| | 19.8 | % | | N/A |
| | N/A |
| |
|
| |
|
| $ | 688,422 |
| | 12.76 | % | | N/A |
| | N/A |
| |
|
| |
|
|
BBCN Bank | | | | | | | | | | | | |
Total risk-based capital ratio | | $ | 725,655 |
| | 15.73 | % | | $ | 461,417 |
| | 10.00 | % | | $ | 264,238 |
| | 5.73 | % |
Tier 1 risk-based capital ratio | $ | 733,319 |
| | 18.2 | % | | N/A |
| | N/A |
| |
|
| |
|
| $ | 667,725 |
| | 14.47 | % | | $ | 276,850 |
| | 6.00 | % | | $ | 390,875 |
| | 8.47 | % |
Total risk-based capital ratio | $ | 784,054 |
| | 19.4 | % | | N/A |
| | N/A |
| |
|
| |
|
| |
BBCN Bank | | | | | | | | | | | | |
Tier I capital to total assets | $ | 670,855 |
| | 18.1 | % | | $ | 185,048 |
| | 5.0 | % | | $ | 485,807 |
| | 13.1 | % | $ | 667,725 |
| | 12.38 | % | | $ | 269,767 |
| | 5.00 | % | | $ | 397,958 |
| | 7.38 | % |
Tier 1 risk-based capital ratio | $ | 670,855 |
| | 16.6 | % | | $ | 242,168 |
| | 6.0 | % | | $ | 428,687 |
| | 10.6 | % | |
Total risk-based capital ratio | $ | 721,551 |
| | 17.9 | % | | $ | 403,613 |
| | 10.0 | % | | $ | 317,938 |
| | 7.9 | % | |
Liquidity Management
Liquidity risk is the risk of reduction in our earnings or capital that would result if we were not able to meet our obligations when they come due without incurring unacceptable losses. Liquidity risk includes the risk of unplanned decreases or changes in funding sources and changes in market conditions that affect our ability to liquidate assets quickly and with minimum loss of value. Factors considered in liquidity risk management are the stability of the deposit base; the marketability, maturity, and pledging of our investments; the availability of alternative sources of funds; and our demand for credit. The objective of our liquidity management is to have funds available to meet cash flow requirements arising from fluctuations in deposit levels and the demands of daily operations, which include funding of securities purchases, providing for customers' credit needs, and ongoing repayment of borrowings.
Our primary sources of liquidity are derived from financing activities, which include customer and broker deposits, federal funds facilities, and borrowings from the Federal Home Loan Bank of San FranciscoFHLB and the Federal Reserve BankFRB Discount Window. These funding sources are augmented by payments of principal and interest on loans and securities, proceeds from sale of loans and the liquidation or sale of securities
from our available for sale portfolio. Primary uses of funds include withdrawal of and interest payments on deposits, originations of loans, purchases of investment securities, and payment of operating expenses.
At September 30, 2012March 31, 2013, our total borrowing capacity from the Federal Home Loan Bank of San FranciscoFHLB was $1.3$1.50 billion, of which $837 million$1.08 billion was unused and available to borrow. At September 30, 2012March 31, 2013, our total borrowing capacity from the Federal Reserve BankFRB was $378$406.8 million, of which $378$406.8 million was unused and available to borrow. In addition to these lines, our liquid assets, consisting of cash and cash equivalent, interest-bearing cash deposits with other banks, overnight federal funds sold to other banks, liquid investment securities available for sale, and loan repayments within 30 days, were $634.5$647.1 million at September 30, 2012March 31, 2013 compared to $689.8$661.3 million at December 31, 2011.2012. Cash and cash equivalents, including federal funds sold were $229.6280.8 million at September 30, 2012March 31, 2013 compared to $300.1$312.9 million at December 31, 2011.2012. We believe our liquidity sources to be stable and adequate to meet our day-to-day cash flow requirements.
| |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
The objective of our asset and liability management activities is to improve our earnings by adjusting the type and mix of assets and liabilities to effectively address changing conditions and risks. Through overall management of our balance sheet and by controlling various risks, we seek to optimize our financial returns within safe and sound parameters. Our operating strategies for attaining this objective include managing net interest margin through appropriate risk/return pricing of assets and liabilities and emphasizing growth in retail deposits, as a percentage of interest-bearing liabilities, to reduce our cost of funds. We also seek to improve earnings by controlling non-interest expense, and enhancing non-interest income. We also use risk management instruments to modify interest rate characteristics of certain assets and liabilities to hedge against our exposure to interest rate fluctuations with the objective of, reducing the effects these fluctuations might have on associated cash flows or values. Finally, we perform internal analysis to measure, evaluate and monitor risk.
Interest Rate Risk
Interest rate risk is the most significant market risk impacting us. Interest rate risk occurs when interest rate sensitive assets and liabilities do not reprice simultaneously and in equal volume. A key objective of asset and liability management is to manage interest rate risk associated with changing asset and liability cash flows and values of our assets and liabilities and market interest rate movements. The management of interest rate risk is governed by policies reviewed and approved annually by the Board of Directors. Our Board delegates responsibility for interest rate risk management to the Asset Liability Committee of the Board ("ALCO") and to the Asset and Liability Management Committee (“ALM”), which is composed of BBCNthe Bank’s senior executives and other designated officers.
Market risk is the risk of adverse impacts on our future earnings, the fair values of our assets and liabilities, or our future cash flows that may result from changes in the price of a financial instrument. The fundamental objective of our ALM is to manage our exposure to interest rate fluctuations while maintaining adequate levels of liquidity and capital. Our ALM meets regularly to monitor interest rate risk, the sensitivity of our assets and liabilities to interest rate changes, the book and market values of our assets and liabilities, and our investment activities. It also directs changes in the composition of our assets and liabilities .liabilities. Our strategy has been to reduce the sensitivity of our earnings to interest rate fluctuations by more closely matching the effective maturities or repricing characteristics of our assets and liabilities. Certain assets and liabilities, however, may react in different degrees to changes in market interest rates. Furthermore, interest rates on certain types of assets and liabilities may fluctuate prior to changes in market interest rates, while interest rates on other types may lag behind. We consider the anticipated effects of these factors when implementing our interest rate risk management objectives.
Interest Rate Sensitivity
We monitor interest rate risk through the use of a simulation model that provides us with the ability to simulate our net interest income. In order to measure, at September 30, 2012March 31, 2013, the sensitivity of our forecasted net interest income to changing interest rates, both rising and falling interest rate scenarios were projected and compared to base market interest rate forecasts. One application of our simulation model measures the impact of market interest rate changes on the net present value of estimated cash flows from our assets and liabilities, defined as our market value of equity. This analysis assesses the changes in market values of interest rate sensitive financial instruments that would occur in response to immediate and parallel changes in market interest rates.
The impacts on our net interest income and market value of equity exposed to immediate and parallel hypothetical changes in market interest rates as projected by the model we use for this purpose are illustrated in the following table.
| | | September 30, 2012 | | December 31, 2011 | March 31, 2013 | | December 31, 2012 |
Simulated | Estimated Net Interest Income Sensitivity | | Market Value Of Equity Volatility | | Estimated Net Interest Income Sensitivity | | Market Value Of Equity Volatility | Estimated Net Interest Income Sensitivity | | Market Value Of Equity Volatility | | Estimated Net Interest Income Sensitivity | | Market Value Of Equity Volatility |
Rate Changes | | |
+ 200 basis points | 6.02 | % | | (0.71 | )% | | 5.46 | % | | (4.61 | )% | 6.13 | % | | (3.55 | )% | | 5.31 | % | | (2.24 | )% |
+ 100 basis points | 2.72 | % | | 0.07 | % | | 2.91 | % | | (1.84 | )% | 2.57 | % | | (1.37 | )% | | 2.51 | % | | 1.01 | % |
- 100 basis points | (0.61 | )% | | 2.70 | % | | 0.77 | % | | 4.57 | % | (1.57 | )% | | 0.42 | % | | (3.78 | )% | | 3.06 | % |
- 200 basis points | (0.89 | )% | | 4.58 | % | | 0.83 | % | | 8.58 | % | (1.94 | )% | | 0.82 | % | | (4.52 | )% | | 4.68 | % |
The results obtained from using the simulation model are somewhat uncertain as the model does not take into account other impacts or changes and the effect they could have on Company’s business or changes in business strategy the Company might make in reaction to changes in the interest rate environment.
| |
Item 4. | Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
We conducted an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) for the period ended September 30, 2012March 31, 2013. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer determined that our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended September 30, 2012March 31, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II
OTHER INFORMATION
BBCN has received communications from the Small Business Administration ("SBA") asserting that the SBAWe are involved in routine litigation incidental to our business, none of which is entitledexpected to receive from BBCNhave a portion of the amounts to be paid to BBCN by the FDICmaterial adverse effect on us. There were no material developments in respect of SBA loans that are covered by the FDIC loss share agreements. The amounts claimed by the SBA with respect to covered SBA loans are basedlegal proceedings which were previously disclosed in our 2012 Annual Report on the SBA's guarantee percentage of the individual covered loans referred to in the communications. An aggregate of $55 million of SBA loans were subject to the loss share agreements at inception. BBCN disagrees with the SBA's position. The discussions with the SBA regarding this matter are at an early stage and BBCN is not presently able to determine the probable outcome.Form 10-K.
There were no material changes from risk factors previously disclosed in our 20112012 Annual Report on Form 10-K.
| |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
None
| |
Item 3. | Defaults Upon Senior Securities |
None
| |
Item 4. | Mine Safety Disclosures |
None
None
See “Index to Exhibits”.
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.
|
| | | |
| | BBCN BANCORP, INC. | |
| | | |
Date: | November 7, 2012May 8, 2013 | /s/ Alvin D. KangKevin S. Kim | |
| | Alvin D. KangKevin S. Kim | |
| | Chariman, President and Chief Executive Officer | |
| | | |
Date: | November 7, 2012May 8, 2013 | | |
| | | |
| | /s/ Philip E. GuldemanDouglas J. Goddard | |
| | Philip E. GuldemanDouglas J. Goddard | |
| | Executive Vice President and Chief Financial Officer | |
INDEX TO EXHIBITS
|
| | |
Exhibit Number | | Description |
| | |
3.1 | | Certificate of Incorporation of the Company, filed with the Delaware Secretary of State on June 5, 2000 (incorporated herein by reference to the Registration Statement on Form S-4 filed with the Securities and Exchange Commission (“SEC”) on November 16, 2000) |
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3.2 | | Certificate of Amendment of Certificate of Incorporation of the Company, filed with the Delaware Secretary of State on May 31, 2002 (incorporated herein by reference to the Registration Statement on Form S-8 Exhibit 3.3 filed with the SEC on February 5, 2003) |
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3.3 | | Certificate of Amendment of Certificate of Incorporation of the Company, filed with the Delaware Secretary of State on June 1, 2004 (incorporated herein by reference to the Registration Statement on Form 10-Q Exhibit 3.1.1 filed with the SEC on November 8, 2004) |
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3.4 | | Certificate of Amendment of Certificate of Incorporation of the Company, filed with the Delaware Secretary of State on November 2, 2005 (incorporated herein by reference to the Registration Statement on DEF14 A, Appendix B filed with the SEC on September 6, 2005) |
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3.5 | | Certificate of Amendment of Certificate of Incorporation of the Company, filed with the Delaware Secretary of State on July 20, 2007 (incorporated herein by reference to the Registration Statement on DEF14 A, Appendix C filed with the SEC on April 19, 2007) |
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3.6 | | Certificate of Merger, filed with the Delaware Secretary of State on November 30, 2011 (incorporated herein by reference to the Registration Statement on Form 10-Q Exhibit 3.6 filed with SEC on May 10, 2012)
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3.7 | | Amended and Restated Bylaws of BBCN Bancorp, Inc. (incorporated herein by reference to Current Report on Form 8-K Exhibit 5.1 filed with the SEC on February 1, 2012, SEC file number 000-50245)* |
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10.1 | | Definitive Agreement and Plan of Merger, dated as of October 22, 2012, between BBCN Bancorp, Inc. and Pacific International Bancorp, Inc
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10.2 | | CEO Employment Agreement between BBCN Bank and Soobong Min, dated April 30, 2013 and effective May 1, 2013* |
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31.1 | | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* |
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31.2 | | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* |
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32.1 | | Certification of Chief Executive Officer pursuant to Section 906 of the Public Company Accounting Reform and Investor Protection Act of 2002* |
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32.2 | | Certification of Chief Financial Officer pursuant to section 906 of the Public Company Accounting Reform and Investor Protection Act of 2002* |
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101.INS**99.1 | | XBRL Instance DocumentCertification of Principal Executive Officer and Principal Financial Officer pursuant to the Interim Final Rule - TARP Standards for Compensation and Corporate Governance at 31 CFR Part 30* |
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101.SCH**101.INS | | XBRL Taxonomy Extension Schema DocumentInstance Document** |
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101.CAL*101.SCH | | XBRL Taxonomy Extension Schema Document** |
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101.CAL | | XBRL Taxonomy Extension Calculation Linkbase DocumentDocument** |
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101.DEF**101.DEF | | XBRL Taxonomy Extension Definition Linkbase DocumentDocument** |
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101.LAB**101.LAB | | XBRL Taxonomy Extension Label Linkbase DocumentDocument** |
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101.PRE**101.PRE | | XBRL Taxonomy Extension Presentation Linkbase DocumentDocument** |