UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One) | |||||||||||
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||||||||
For the quarterly period ended | September 30, 2021 | ||||||||||
OR | |||||||||||
☐ | 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 333-236022
BANCPLUS CORPORATION
(Exact name of registrant as specified in its charter)
Mississippi | 64-0655312 | |||||||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
1068 Highland Colony Parkway
Ridgeland, Mississippi 39157
(601) 898-8300
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||||||||
None | N/A | N/A |
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 ☒ No☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||||||||||
Non-accelerated filer | ☒ | Smaller reporting company | ☐ | |||||||||||
Emerging growth company | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
Shares of the registrant’s Common Stock, par value $1.00 per share, issued and outstanding as of November 8, 2021: 10,112,254
BANCPLUS CORPORATION
FORM 10-Q
For the Quarter Ended SEPTEMBER 30, 2021
INDEX
Page Number | |||||
Condensed Consolidated Balance Sheets at September 30, 2021 (unaudited), and December 31, 2020 | |||||
Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2021 and 2020 (unaudited) | |||||
Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2021 and 2020 (unaudited) | |||||
Condensed Consolidated Statements of Shareholders’ Equity for the three and nine months ended September 30, 2021 and 2020 (unaudited) | |||||
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020 (unaudited) | |||||
1
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
BancPlus Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(In Thousands, Except Share and Per Share Data)
September 30, 2021 | December 31, 2020 | ||||||||||
(unaudited) | |||||||||||
Assets: | |||||||||||
Cash and due from banks | $ | 57,417 | $ | 109,233 | |||||||
Interest bearing deposits with banks | 637,652 | 508,196 | |||||||||
Federal funds sold | — | 20,116 | |||||||||
Total cash and cash equivalents | 695,069 | 637,545 | |||||||||
Securities available for sale | 540,883 | 311,373 | |||||||||
Securities held to maturity - fair value: $78,905 - 2021; $94,436 - 2020 | 78,423 | 93,766 | |||||||||
Loans held for sale | 13,904 | 28,684 | |||||||||
Loans | 3,526,086 | 3,378,732 | |||||||||
Less: Allowance for loan losses | 44,001 | 36,000 | |||||||||
Net loans | 3,482,085 | 3,342,732 | |||||||||
Premises and equipment | 101,715 | 102,967 | |||||||||
Operating lease right-of-use assets | 35,305 | 35,936 | |||||||||
Accrued interest receivable | 17,120 | 18,061 | |||||||||
Goodwill | 2,616 | 2,616 | |||||||||
Other assets | 146,204 | 137,240 | |||||||||
$ | 5,113,324 | $ | 4,710,920 | ||||||||
Liabilities: | |||||||||||
Deposits | $ | 4,529,868 | $ | 4,152,810 | |||||||
Advances from Federal Home Loan Bank and other borrowings | 31,026 | 33,771 | |||||||||
Subordinated debentures | 111,411 | 111,124 | |||||||||
Operating lease liabilities | 36,458 | 37,127 | |||||||||
Accrued interest payable | 2,647 | 2,709 | |||||||||
Other liabilities | 16,028 | 18,129 | |||||||||
Total liabilities | 4,727,438 | 4,355,670 | |||||||||
Redeemable common stock owned by the ESOP | 96,623 | 74,278 | |||||||||
Shareholders' equity: | |||||||||||
Common Stock, par value $1.00 per share. | |||||||||||
40,000,000 authorized at September 30, 2021 and December 31, 2020; 10,112,254 and 10,079,277 issued and outstanding at September 30, 2021 and December 31, 2020, respectively | 10,112 | 10,079 | |||||||||
Unearned Employee Stock Ownership Plan compensation | (1,609) | (2,650) | |||||||||
Additional paid-in capital | 66,767 | 67,742 | |||||||||
Retained earnings | 307,269 | 273,204 | |||||||||
Accumulated other comprehensive income, net | 3,347 | 6,875 | |||||||||
385,886 | 355,250 | ||||||||||
Less: Redeemable common stock owned by the ESOP | (96,623) | (74,278) | |||||||||
Total shareholders' equity | 289,263 | 280,972 | |||||||||
$ | 5,113,324 | $ | 4,710,920 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
BancPlus Corporation and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
(In Thousands, Except Per Share Data)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
Interest income: | |||||||||||||||||||||||
Interest and fees on loans | $ | 43,835 | $ | 44,083 | $ | 129,066 | $ | 113,710 | |||||||||||||||
Taxable securities | 2,097 | 1,815 | 6,024 | 5,157 | |||||||||||||||||||
Tax-exempt securities | 455 | 573 | 1,473 | 1,942 | |||||||||||||||||||
Interest bearing bank balances and other | 242 | 113 | 493 | 1,329 | |||||||||||||||||||
Total interest income | 46,629 | 46,584 | 137,056 | 122,138 | |||||||||||||||||||
Interest expense: | |||||||||||||||||||||||
Deposits | 1,746 | 3,193 | 5,873 | 11,259 | |||||||||||||||||||
Short-term borrowings | — | — | — | 2 | |||||||||||||||||||
Advances from Federal Home Loan Bank | 78 | 79 | 233 | 239 | |||||||||||||||||||
Other borrowings | 1,371 | 1,420 | 4,112 | 2,673 | |||||||||||||||||||
Total interest expense | 3,195 | 4,692 | 10,218 | 14,173 | |||||||||||||||||||
Net interest income | 43,434 | 41,892 | 126,838 | 107,965 | |||||||||||||||||||
Provision for loan losses | 1,469 | 4,671 | 7,395 | 7,706 | |||||||||||||||||||
Net interest income after provision for loan losses | 41,965 | 37,221 | 119,443 | 100,259 | |||||||||||||||||||
Other operating income: | |||||||||||||||||||||||
Service charges on deposit accounts | 7,484 | 5,690 | 19,226 | 16,674 | |||||||||||||||||||
Mortgage origination income | 1,999 | 2,827 | 6,726 | 5,974 | |||||||||||||||||||
Debit card interchange | 2,390 | 1,909 | 7,634 | 5,412 | |||||||||||||||||||
Securities gains, net | — | 6 | 4 | 57 | |||||||||||||||||||
Other income | 7,193 | 8,193 | 24,490 | 17,265 | |||||||||||||||||||
Total other operating income | 19,066 | 18,625 | 58,080 | 45,382 | |||||||||||||||||||
Other operating expenses: | |||||||||||||||||||||||
Salaries and employee benefits expenses | 25,218 | 23,162 | 72,365 | 65,349 | |||||||||||||||||||
Net occupancy expenses | 3,606 | 3,459 | 10,779 | 9,709 | |||||||||||||||||||
Furniture, equipment and data processing expenses | 6,282 | 5,801 | 18,322 | 15,621 | |||||||||||||||||||
Other expenses | 7,716 | 7,490 | 19,931 | 19,834 | |||||||||||||||||||
Total other operating expenses | 42,822 | 39,912 | 121,397 | 110,513 | |||||||||||||||||||
Income before income taxes | 18,209 | 15,934 | 56,126 | 35,128 | |||||||||||||||||||
Income tax expense | 4,012 | 3,334 | 10,593 | 7,613 | |||||||||||||||||||
Net income | $ | 14,197 | $ | 12,600 | $ | 45,533 | $ | 27,515 | |||||||||||||||
Earnings per common share - basic | $ | 1.43 | $ | 1.25 | $ | 4.58 | $ | 2.98 | |||||||||||||||
Earnings per common share - diluted | $ | 1.41 | $ | 1.24 | $ | 4.53 | $ | 2.96 | |||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
BancPlus Corporation and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
(In Thousands)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
Net income | $ | 14,197 | $ | 12,600 | $ | 45,533 | $ | 27,515 | |||||||||||||||
Other comprehensive income (loss), net of tax: | |||||||||||||||||||||||
Unrealized gains (losses) on securities available for sale | (2,340) | (225) | (4,698) | 9,498 | |||||||||||||||||||
Tax effect | 583 | 56 | 1,170 | (2,365) | |||||||||||||||||||
Total other comprehensive income (loss), net of tax | (1,757) | (169) | (3,528) | 7,133 | |||||||||||||||||||
Comprehensive income | $ | 12,440 | $ | 12,431 | $ | 42,005 | $ | 34,648 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
BancPlus Corporation and Subsidiaries
Condensed Consolidated Statements of Shareholders’ Equity
(Unaudited)
(In Thousands, Except Share and Per Share Data)
Unearned ESOP Compensation | Additional Paid-In Capital | Accumulated Other Comprehensive Income | Less: Redeemable Common Stock Owned by the ESOP | Total Shareholders' Equity | ||||||||||||||||||||||
Common Stock | Retained Earnings | |||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||
July 1, 2020 | 10,126,817 | $ | 10,127 | $ | (3,375) | $ | 70,173 | $ | 255,990 | $ | 7,584 | $ | (57,545) | $ | 282,954 | |||||||||||
Net income | — | — | — | — | 12,600 | — | — | 12,600 | ||||||||||||||||||
Other comprehensive loss, net | — | — | — | — | — | (169) | — | (169) | ||||||||||||||||||
Purchase of Company stock | (12,791) | (13) | — | (588) | — | — | — | (601) | ||||||||||||||||||
Issuance of restricted stock | 18,850 | 19 | — | (19) | — | — | — | — | ||||||||||||||||||
Stock based compensation | — | — | — | 367 | — | — | — | 367 | ||||||||||||||||||
Net change fair value of ESOP shares | — | — | — | — | — | — | (10,977) | (10,977) | ||||||||||||||||||
Common stock released by ESOP | — | — | 433 | — | — | — | — | 433 | ||||||||||||||||||
Dividends declared ($0.35 per share) | — | — | — | — | (3,527) | — | — | (3,527) | ||||||||||||||||||
September 30, 2020 | 10,132,876 | $ | 10,133 | $ | (2,942) | $ | 69,933 | $ | 265,063 | $ | 7,415 | $ | (68,522) | $ | 281,080 | |||||||||||
January 1, 2020 | 7,652,957 | $ | 7,653 | $ | (4,476) | $ | 811 | $ | 247,241 | $ | 282 | $ | (79,308) | $ | 172,203 | |||||||||||
Net income | — | — | — | — | 27,515 | — | — | 27,515 | ||||||||||||||||||
Other comprehensive income, net | — | — | — | — | — | 7,133 | — | 7,133 | ||||||||||||||||||
Acquisition of State Capital Corp. | 2,453,827 | 2,454 | — | 68,707 | — | — | — | 71,161 | ||||||||||||||||||
Purchase of Company stock | (12,791) | (13) | — | (588) | — | — | — | (601) | ||||||||||||||||||
Issuance of restricted stock | 39,155 | 39 | — | (39) | — | — | — | — | ||||||||||||||||||
Shares withheld to satisfy withholding obligation in the vesting of restricted stock | (272) | — | — | (10) | — | — | — | (10) | ||||||||||||||||||
Stock based compensation | — | — | — | 1,052 | — | — | — | 1,052 | ||||||||||||||||||
Net change fair value of ESOP shares | — | — | — | — | — | — | 10,786 | 10,786 | ||||||||||||||||||
Common stock released by ESOP | — | — | 1,534 | — | — | — | — | 1,534 | ||||||||||||||||||
Dividends declared ($1.05 per share) | — | — | — | — | (9,693) | — | — | (9,693) | ||||||||||||||||||
September 30, 2020 | 10,132,876 | $ | 10,133 | $ | (2,942) | $ | 69,933 | $ | 265,063 | $ | 7,415 | $ | (68,522) | $ | 281,080 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
BancPlus Corporation and Subsidiaries
Condensed Consolidated Statements of Shareholders’ Equity (Continued)
(Unaudited)
(In Thousands, Except Share and Per Share Data)
Unearned ESOP Compensation | Additional Paid-In Capital | Accumulated Other Comprehensive Income | Less: Redeemable Common Stock Owned by the ESOP | Total Shareholders' Equity | ||||||||||||||||||||||
Common Stock | Retained Earnings | |||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||
July 1, 2021 | 10,111,045 | $ | 10,111 | $ | (1,957) | $ | 66,152 | $ | 296,900 | $ | 5,104 | $ | (87,794) | $ | 288,516 | |||||||||||
Net income | — | — | — | — | 14,197 | — | — | 14,197 | ||||||||||||||||||
Other comprehensive loss, net | — | — | — | — | — | (1,757) | — | (1,757) | ||||||||||||||||||
Issuance of restricted stock | 1,209 | 1 | — | (1) | — | — | — | — | ||||||||||||||||||
Stock based compensation | — | — | — | 616 | — | — | — | 616 | ||||||||||||||||||
Net change in fair value of ESOP shares | — | — | — | — | — | — | (8,829) | (8,829) | ||||||||||||||||||
Common stock released by ESOP | — | — | 348 | — | — | — | — | 348 | ||||||||||||||||||
Dividends declared ($0.38 per share) | — | — | — | — | (3,828) | — | — | (3,828) | ||||||||||||||||||
September 30, 2021 | 10,112,254 | $ | 10,112 | $ | (1,609) | $ | 66,767 | $ | 307,269 | $ | 3,347 | $ | (96,623) | $ | 289,263 | |||||||||||
January 1, 2021 | 10,079,277 | $ | 10,079 | $ | (2,650) | $ | 67,742 | $ | 273,204 | $ | 6,875 | $ | (74,278) | $ | 280,972 | |||||||||||
Net income | — | — | — | — | 45,533 | — | — | 45,533 | ||||||||||||||||||
Other comprehensive loss, net | — | — | — | — | — | (3,528) | — | (3,528) | ||||||||||||||||||
Issuance of restricted stock | 83,317 | 83 | — | (83) | — | — | — | — | ||||||||||||||||||
Shares withheld to satisfy withholding obligation in the vesting of restricted stock | (4,477) | (4) | — | (225) | — | — | — | (229) | ||||||||||||||||||
Purchase of Company stock | (45,863) | (46) | — | (2,387) | — | — | — | (2,433) | ||||||||||||||||||
Stock based compensation | — | — | — | 1,720 | — | — | — | 1,720 | ||||||||||||||||||
Net change fair value of ESOP shares | — | — | — | — | — | — | (22,345) | (22,345) | ||||||||||||||||||
Common stock released by ESOP | — | — | 1,041 | — | — | — | — | 1,041 | ||||||||||||||||||
Dividends declared ($1.14 per share) | — | — | — | — | (11,468) | — | — | (11,468) | ||||||||||||||||||
September 30, 2021 | 10,112,254 | $ | 10,112 | $ | (1,609) | $ | 66,767 | $ | 307,269 | $ | 3,347 | $ | (96,623) | $ | 289,263 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
BancPlus Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In Thousands)
Nine Months Ended September 30, | |||||||||||
2021 | 2020 | ||||||||||
Cash flows from operating activities: | |||||||||||
Net income per condensed consolidated statements of income | $ | 45,533 | $ | 27,515 | |||||||
Adjustments to reconcile net income to net cash from operating activities: | |||||||||||
Provision for loan losses | 7,395 | 7,706 | |||||||||
Depreciation and amortization | 5,818 | 4,663 | |||||||||
Net loss on sales of premises and equipment | 279 | 294 | |||||||||
Net gain on sales of other real estate owned | (169) | (354) | |||||||||
Write-downs of other real estate-owned | 186 | 106 | |||||||||
Deferred income tax expense | 399 | 935 | |||||||||
Federal Home Loan Bank stock dividends | (9) | (41) | |||||||||
Common stock released by ESOP | 1,041 | 1,534 | |||||||||
Stock based compensation expense | 1,720 | 1,052 | |||||||||
Origination of loans held for sale | (300,866) | (274,668) | |||||||||
Proceeds from loans held for sale | 315,646 | 264,489 | |||||||||
Earnings on bank-owned life insurance | (5,858) | (1,526) | |||||||||
Bargain purchase gain on merger | — | (1,078) | |||||||||
Net change in: | |||||||||||
Accrued interest receivable and other assets | 5,849 | (2,987) | |||||||||
Accrued interest payable and other liabilities | (2,163) | (3,928) | |||||||||
Net cash from operating activities | 74,801 | 23,712 | |||||||||
Cash flows from investing activities: | |||||||||||
Purchases of securities available for sale | (317,600) | (77,290) | |||||||||
Maturities and calls of securities available for sale | 81,015 | 112,835 | |||||||||
Purchases of securities held to maturity | (19,103) | (777) | |||||||||
Maturities, prepayments and calls of securities held to maturity | 34,318 | 12,071 | |||||||||
Net increase in loans | (151,332) | (465,459) | |||||||||
Purchases of premises and equipment | (5,188) | (6,992) | |||||||||
Proceeds from sales of premises and equipment | 31 | 40 | |||||||||
Proceeds from sales of other real estate owned | 4,672 | 4,955 | |||||||||
Investment in unconsolidated entities, net | (96) | (289) | |||||||||
Purchase of bank-owned life insurance | (10,000) | — | |||||||||
Proceeds from bank-owned life insurance | 5,987 | — | |||||||||
Purchases or redemptions of Federal Home Loan Bank stock | (163) | 2,562 | |||||||||
Cash received in excess of cash paid for acquisition | — | 75,303 | |||||||||
Net cash used in investing activities | (377,459) | (343,041) |
7
BancPlus Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows (continued)
(Unaudited)
(In Thousands)
Nine Months Ended September 30, | |||||||||||
2021 | 2020 | ||||||||||
Cash flows from financing activities: | |||||||||||
Net increase (decrease) in: | |||||||||||
Noninterest-bearing deposits | $ | 168,926 | $ | 390,152 | |||||||
Money market, negotiable order of withdrawal, and savings deposits | 265,081 | 21,169 | |||||||||
Certificates of deposit | (56,950) | (36,389) | |||||||||
Payments on Federal Home Loan Bank advances | (120) | (14,884) | |||||||||
Proceeds from issuance of subordinated debentures | — | 60,000 | |||||||||
Payment of subordinated debt issuance costs | — | (1,439) | |||||||||
Payments on other borrowings | (2,625) | (2,625) | |||||||||
Cash dividends paid on common stock | (11,468) | (9,693) | |||||||||
Purchase of Company stock | (2,433) | (601) | |||||||||
Shares withheld to pay taxes on restricted stock vesting | (229) | (10) | |||||||||
Net cash from financing activities | 360,182 | 405,680 | |||||||||
Net change in cash and cash equivalents | 57,524 | 86,351 | |||||||||
Cash and cash equivalents at beginning of period | 637,545 | 312,972 | |||||||||
Cash and cash equivalents at end of period | $ | 695,069 | $ | 399,323 | |||||||
Supplemental cash flow information: | |||||||||||
Interest paid | $ | 10,280 | $ | 10,889 | |||||||
Federal and state income tax payments | 9,950 | 7,175 | |||||||||
Acquisition of real estate in non-cash foreclosures | 4,924 | 5,836 | |||||||||
Fair value of assets acquired net of liabilities assumed | — | 72,251 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
8
BancPlus Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1: Basis of Presentation
BancPlus Corporation (the “Company”) is a bank holding company headquartered in Ridgeland, Mississippi operating in 1 reportable segment. BankPlus (the “Bank”), the principal operating subsidiary and sole banking subsidiary of the Company, is a commercial bank primarily engaged in the business of commercial and consumer banking. In addition to general and consumer banking, other products and services offered though the Bank’s subsidiaries include certain insurance and annuity services, asset and investment management and financial planning services. Oakhurst Development, Inc. (“Oakhurst”) is a real estate subsidiary originally formed by the Company to liquidate a real estate development that was acquired by the Bank through foreclosure in 2002. Oakhurst became active again in March 2009 and holds loans and other real estate.
The unaudited interim condensed consolidated financial statements include the accounts of the Company and all other entities in which the Company has a controlling financial interest, and reflect all adjustments (consisting of normal recurring adjustments) that are necessary in the opinion of the Company’s management to fairly present the financial position, results of operations and cash flows of the Company. They have been derived from the audited consolidated financial statements for the fiscal year ended December 31, 2020; however, certain notes and information have been omitted from the interim periods. Therefore, these unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2020. All significant intercompany balances and transactions have been eliminated in consolidation. Certain reclassifications have been made to prior period amounts to conform to the current period presentation. The accounting and financial reporting policies followed by the Company conform, in all material respects, to the accounting principles generally accepted in the United States (“GAAP”) and to general practices within the financial services industry. The results of operations for the interim periods are not necessarily indicative of the results to be expected for future interim periods or for the entire year.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Particularly given the effects of the COVID-19 pandemic, the allowance for loan losses, provision for loan losses, the fair value of financial instruments and the status of contingencies are particularly subject to change. Material estimates that are subject to significant change in the near term are the allowance for loan losses, provision for loan losses, valuation of other real estate owned and fair values of financial instruments. Actual results could differ from these estimates.
Recently Issued But Not Yet Effective Accounting Standards
Accounting Standards Update 2016-13 (“ASU 2016-13”), “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, which requires earlier measurement of credit losses and enhances disclosures. The main objective of ASU 2016-13 is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses over the life of the loan. ASU 2016-13 was originally effective for the Company for annual and interim periods beginning on January 1, 2021. Subsequently, FASB approved a deferral of the effective date. ASU 2016-13 will now be effective for the Company for annual and interim periods beginning on January 1, 2023. The Company has formed a cross functional team that is assessing data and system needs and evaluating the impact of adopting the new guidance. The Company expects to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the Company adopts the new standard, but has not yet determined the magnitude of the one-time adjustment or the overall impact on the Company’s consolidated financial statements.
Accounting Standards Update 2020-04 (“ASU 2020-04”), “Reference Rate Reform - Topic 848.” In March 2020, the FASB issued ASU 2020-04, which provides temporary optional expedients and exceptions to the GAAP guidance on contract modifications, hedge accounting, and other transactions affected that reference the London Inter-Bank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued. ASU 2020-04 is effective upon issuance and can be applied through December 31, 2022. The company is still evaluating the impact of ASU 2020-04, but does not expect it to have a material impact on the Company’s consolidated financial statements.
9
Note 2: Earnings Per Share
Basic earnings per share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income available to common shareholders by the weighted number of common shares outstanding during the period and the number of common shares that would have been outstanding assuming the issuance of common shares for all dilutive potential common shares outstanding during the reporting period.
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
(In thousands except per share data) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
Net income | $ | 14,197 | $ | 12,600 | $ | 45,533 | $ | 27,515 | |||||||||||||||
Weighted average common shares outstanding | 9,934 | 10,070 | 9,936 | 9,231 | |||||||||||||||||||
Diluted effect of unallocated stock | 116 | 64 | 105 | 72 | |||||||||||||||||||
Diluted common shares | 10,050 | 10,134 | 10,041 | 9,303 | |||||||||||||||||||
Basic earnings per common share | $ | 1.43 | $ | 1.25 | $ | 4.58 | $ | 2.98 | |||||||||||||||
Diluted earnings per common share | $ | 1.41 | $ | 1.24 | $ | 4.53 | $ | 2.96 | |||||||||||||||
Note 3: Business Combinations
State Capital Corp.
On April 1, 2020, the Company completed its previously announced merger with State Capital Corp. (“SCC”), the holding company of State Bank & Trust Company (“State Bank”). Pursuant to the terms of the Agreement and Plan of Share Exchange and Merger, dated September 18, 2019, by and among the Company, the Bank, SCC, and State Bank (the “Merger Agreement”), following BancPlus’ acquisition of SCC by a statutory share exchange, SCC was merged with and into the Company, with the Company surviving the merger (the “Merger”). Immediately thereafter, State Bank was merged with and into the Bank, with the Bank surviving the merger. As a result of the Merger, the Company’s geographic footprint expanded in Mississippi, Louisiana and Alabama, providing access to new markets and deposits.
Pursuant to the Merger Agreement, holders of SCC common stock received 0.6950 shares of the Company’s common stock, par value $1.00 per share, for each share of SCC common stock, par value $1.25 per share, held immediately prior to the effective time of the Merger, plus cash in lieu of fractional shares. The Company issued 2,453,827 shares of common stock to holders of SCC common stock, in addition to approximately $12,000 in lieu of fractional shares. In connection with the Merger, the Company incurred approximately $6.4 million of acquisition expenses, of which approximately $6.2 million were incurred during the nine months ended September 30, 2020. These expenses are recorded in other operating expenses and furniture, equipment and data processing expenses in the Company’s Condensed Consolidated Statement of Income for the nine months ended September 30, 2020.
The excess fair value of net assets acquired over cost paid was recorded as a gain on bargain purchase during 2020. The gain on bargain purchase was primarily the result of changes in the value of the Company’s common stock due to the timing of the closing of the Merger relative to when the Merger Agreement was signed and declines in the overall market as a result of the COVID-19 pandemic over that period.
10
The following table reflects the consideration paid and the fair value allocation of assets acquired and liabilities assumed as of the acquisition date:
(In thousands) | |||||||||||
Purchase price allocation: | |||||||||||
Common stock issued | $ | 71,161 | |||||||||
Cash paid for fractional shares | 12 | ||||||||||
Total purchase price | $ | 71,173 | |||||||||
Assets acquired: | |||||||||||
Cash and due from banks | $ | 75,315 | |||||||||
Securities, Federal Home Loan Bank (“FHLB”) stock and First National Bankers Bankshares, Inc. stock | 97,910 | ||||||||||
Loans, net | 880,390 | ||||||||||
Premises and equipment | 29,968 | ||||||||||
Accrued interest receivable | 3,664 | ||||||||||
Bank-owned life insurance | 28,441 | ||||||||||
Core deposit intangible | 6,045 | ||||||||||
Taxes receivable | 7,787 | ||||||||||
Deferred tax asset, net | 5,972 | ||||||||||
Other assets | 3,330 | ||||||||||
Total assets acquired | $ | 1,138,822 | |||||||||
Liabilities assumed: | |||||||||||
Deposits | $ | 1,024,381 | |||||||||
Advances from FHLB and other borrowings | 14,563 | ||||||||||
Subordinated debentures | 11,121 | ||||||||||
Deferred compensation | 10,310 | ||||||||||
Other liabilities | 6,196 | ||||||||||
Total liabilities assumed | $ | 1,066,571 | |||||||||
Net assets acquired | 72,251 | ||||||||||
Excess of fair value of net assets acquired over consideration paid - Gain on bargain purchase | $ | (1,078) |
In connection with the Merger, the Company recorded a $6.0 million core deposit intangible, which will be amortized over 10 years. The Company also acquired loans with a fair value of $880.4 million, net of a $19.1 million fair value discount, which included a credit mark discount of $11.6 million.
Revenues and earnings of the acquired company since the Merger date have not been disclosed as it is not practicable as SCC was merged into BancPlus and separate financial information for SCC is not available. The following table presents unaudited pro forma information as if the Merger with SCC had occurred on January 1, 2020. This pro forma information combines the historic condensed consolidated results of operations of BancPlus and SCC after giving effect to certain adjustments, including purchase accounting fair value adjustments and amortization of intangibles, as well as the related income tax effects of those adjustments. The pro forma information does not necessarily reflect the results of operations that would have occurred had the Merger occurred on January 1, 2020.
11
Three Months Ended | Nine Months Ended | |||||||||||||||||||
(In thousands, except per share data) | September 30, 2020 | September 30, 2020 | ||||||||||||||||||
Net interest income | $ | 43,828 | $ | 123,958 | ||||||||||||||||
Other operating income | 18,626 | 47,034 | ||||||||||||||||||
Net income available to common shareholders | 13,993 | 27,539 | ||||||||||||||||||
Earnings per common share: | ||||||||||||||||||||
Basic | $ | 1.39 | $ | 2.74 | ||||||||||||||||
Diluted | 1.38 | 2.72 |
First Trust Corporation
On September 28, 2021, the Company entered in an Agreement and Plan of Share Exchange and Merger with First Trust Corporation (“FTC”), the parent company of First Bank and Trust (“FBT”), whereby the Company will acquire FTC and the Bank will acquire FBT (the “transaction”). The transaction is expected to close in the first quarter of 2022, subject to customary closing conditions, including receipt of required regulatory approvals and the approval by shareholders of FTC.
Note 4: Investment Securities
The following is a summary of the amortized cost and fair value of securities available for sale.
Amortized | Gross Unrealized | Fair | |||||||||||||||||||||
(In thousands) | Cost | Gains | Losses | Value | |||||||||||||||||||
September 30, 2021: | |||||||||||||||||||||||
U.S. Government agency obligations | $ | 301,619 | $ | 421 | $ | 2,199 | $ | 299,841 | |||||||||||||||
Residential mortgage-backed securities | 118,554 | 3,522 | 230 | 121,846 | |||||||||||||||||||
Commercial mortgage-backed securities | 14,764 | 146 | 16 | 14,894 | |||||||||||||||||||
Asset-backed securities | 13,068 | 506 | 35 | 13,539 | |||||||||||||||||||
Corporate investments | 43,000 | 1,210 | 60 | 44,150 | |||||||||||||||||||
State and political subdivisions | 45,422 | 1,310 | 119 | 46,613 | |||||||||||||||||||
Total available for sale | $ | 536,427 | $ | 7,115 | $ | 2,659 | $ | 540,883 | |||||||||||||||
December 31, 2020: | |||||||||||||||||||||||
U.S. Government agency obligations | $ | 12,092 | $ | 342 | $ | — | $ | 12,434 | |||||||||||||||
Residential mortgage-backed securities | 181,569 | 5,644 | 1 | 187,212 | |||||||||||||||||||
Commercial mortgage-backed securities | 16,793 | 538 | — | 17,331 | |||||||||||||||||||
Asset backed securities | 13,990 | 543 | 86 | 14,447 | |||||||||||||||||||
Corporate investments | 32,750 | 420 | 22 | 33,148 | |||||||||||||||||||
State and political subdivisions | 45,025 | 1,833 | 57 | 46,801 | |||||||||||||||||||
Total available for sale | $ | 302,219 | $ | 9,320 | $ | 166 | $ | 311,373 |
Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.
12
The following is a summary of the amortized cost and fair value of securities held to maturity.
Amortized | Gross Unrealized | Fair | |||||||||||||||||||||
(In thousands) | Cost | Gains | Losses | Value | |||||||||||||||||||
September 30, 2021: | |||||||||||||||||||||||
States and political subdivisions | $ | 78,423 | $ | 482 | $ | — | $ | 78,905 | |||||||||||||||
Total held to maturity | $ | 78,423 | $ | 482 | $ | — | $ | 78,905 | |||||||||||||||
December 31, 2020: | |||||||||||||||||||||||
States and political subdivisions | $ | 93,766 | $ | 670 | $ | — | $ | 94,436 | |||||||||||||||
Total held to maturity | $ | 93,766 | $ | 670 | $ | — | $ | 94,436 |
All mortgage-backed securities in the above tables were issued or guaranteed by U.S. government agencies or sponsored agencies.
Provided below is a summary of investment securities that were in an unrealized loss position and the length of time that individual securities have been in a continuous loss position.
Less Than 12 Months | 12 Months or More | Total | |||||||||||||||||||||||||||||||||
Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | ||||||||||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||||||||
September 30, 2021: | |||||||||||||||||||||||||||||||||||
Available for sale: | |||||||||||||||||||||||||||||||||||
U.S. Government agencies | $ | 255,063 | $ | 2,199 | $ | — | $ | — | 255,063 | $ | 2,199 | ||||||||||||||||||||||||
Residential mortgage-backed securities | 12,031 | 230 | — | — | 12,031 | 230 | |||||||||||||||||||||||||||||
Commercial mortgage-backed securities | 3,174 | 16 | — | — | 3,174 | 16 | |||||||||||||||||||||||||||||
Asset backed securities | — | — | 2,271 | 35 | 2,271 | 35 | |||||||||||||||||||||||||||||
Corporate investments | 6,941 | 60 | — | — | 6,941 | 60 | |||||||||||||||||||||||||||||
States and political subdivisions | 5,636 | 119 | — | — | 5,636 | 119 | |||||||||||||||||||||||||||||
$ | 282,845 | $ | 2,624 | $ | 2,271 | $ | 35 | 285,116 | $ | 2,659 | |||||||||||||||||||||||||
December 31, 2020: | |||||||||||||||||||||||||||||||||||
Available for sale: | |||||||||||||||||||||||||||||||||||
Residential mortgage-backed securities | $ | 4,471 | $ | 1 | $ | — | $ | — | 4,471 | $ | 1 | ||||||||||||||||||||||||
Commercial mortgage-backed securities | 305 | — | — | — | 305 | — | |||||||||||||||||||||||||||||
Asset backed securities | 2,492 | 86 | — | — | 2,492 | 86 | |||||||||||||||||||||||||||||
Corporate investments | 9,229 | 22 | — | — | 9,229 | 22 | |||||||||||||||||||||||||||||
States and political subdivisions | 3,028 | 57 | — | — | 3,028 | 57 | |||||||||||||||||||||||||||||
$ | 19,525 | $ | 166 | $ | — | $ | — | 19,525 | $ | 166 |
The number of debt securities in an unrealized loss position increased from 13 at December 31, 2020 to 62 at September 30, 2021. The unrealized losses shown above are due to increases in market rates over the yields available at the time of purchase of the underlying securities and not credit quality. Because the Company does not intend to sell these securities and it is more likely than not that the Company will not be required to sell the investments before recovery of their amortized cost bases, which may be at maturity, the Company does not consider these investments to be impaired on an other-than-temporary basis at September 30, 2021.
The amortized cost and fair value of debt securities, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because borrowers have the right to call or prepay certain obligations with, or without, call or prepayment penalties.
13
Available for Sale | Held to Maturity | ||||||||||||||||||||||
Amortized | Fair | Amortized | Fair | ||||||||||||||||||||
(In thousands) | Cost | Value | Cost | Value | |||||||||||||||||||
September 30, 2021: | |||||||||||||||||||||||
One year or less | $ | 11,330 | $ | 11,402 | $ | 12,437 | $ | 12,455 | |||||||||||||||
After one through five years | 179,898 | 179,041 | 46,344 | 46,558 | |||||||||||||||||||
After five through ten years | 204,514 | 205,651 | 16,887 | 17,137 | |||||||||||||||||||
After ten years | 140,685 | 144,789 | 2,755 | 2,755 | |||||||||||||||||||
$ | 536,427 | $ | 540,883 | $ | 78,423 | $ | 78,905 |
The following is a summary of the amortized cost and fair value for investment securities which were pledged to secure public deposits and for other purposes required or permitted by law.
Available for Sale | Held to Maturity | ||||||||||||||||||||||
Amortized | Fair | Amortized | Fair | ||||||||||||||||||||
(In thousands) | Cost | Value | Cost | Value | |||||||||||||||||||
September 30, 2021 | $ | 441,300 | $ | 444,560 | $ | 44,697 | $ | 45,144 | |||||||||||||||
December 31, 2020 | $ | 251,913 | $ | 260,351 | $ | 57,110 | $ | 57,770 |
Note 5: Loans
The following is a summary of the Company’s loan portfolio by loan class.
(In thousands) | September 30, 2021 | December 31, 2020 | |||||||||
Secured by real estate: | |||||||||||
Residential properties | $ | 773,928 | $ | 738,340 | |||||||
Construction and land development | 465,564 | 403,496 | |||||||||
Farmland | 212,645 | 217,104 | |||||||||
Other commercial | 1,339,214 | 1,224,633 | |||||||||
Total real estate | 2,791,351 | 2,583,573 | |||||||||
Commercial and industrial loans | 534,160 | 635,714 | |||||||||
Agricultural production and other loans to farmers | 101,973 | 85,469 | |||||||||
Consumer and other loans | 98,602 | 73,976 | |||||||||
Total loans before allowance for loan losses | $ | 3,526,086 | $ | 3,378,732 |
Loans are stated at the amount of unpaid principal, before allowance for loan losses. Interest on loans is calculated using the simple interest method on daily balances of the principal amount outstanding.
Loan Origination/Risk Management/Credit Concentration - The Company has certain lending policies and procedures in place that are designed to maximize loan income within an acceptable level of risk. The Company’s Board of Directors reviews and approves these policies and procedures on a regular basis. Although the Company has a diversified loan portfolio, the Company has concentrations of credit risks related to the real estate market, including residential, commercial, and construction and land development lending. Most of the Company’s lending activity occurs within Mississippi, Louisiana, and Alabama.
The risk characteristics of the Company’s material portfolio segments are as follows:
Residential Real Estate Loans - The residential real estate loan portfolio consists of residential loans for single and multifamily properties. Residential loans are generally secured by owner occupied 1-4 family residences. Repayment of these loans is primarily dependent on the personal income and credit rating of the borrowers and can be impacted by economic conditions within their market area. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.
14
Commercial Real Estate Loans - Commercial real estate loans include construction and land development loans, loans secured by farmland and other commercial real estate loans.
Construction and land development loans are usually based upon estimates of costs and estimated value of the completed project and include independent appraisal reviews and a financial analysis of the developers and property owners. Sources of repayment of these loans may include permanent loans, sales of developed property or an interim loan commitment from the Company until permanent financing is obtained. These loans are considered to be higher risk than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, general economic conditions and the availability of long-term financing.
Farmland loans are generally made for the purpose of acquiring land devoted to crop production or livestock, the propagation of timber or the operation of a similar type of business on the secured property. Sources of repayment for these loans generally include income generated from operations of a business on the property, rental income, or sales of timber. Repayment may be impacted by changes in economic conditions which affect underlying collateral values.
Commercial real estate loans typically involve larger principal amounts and repayment of these loans is generally dependent on the successful operations of the property securing the loan or the business conducted on the property securing the loan. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Management monitors and evaluates commercial real estate loans based on collateral and risk grade criteria.
Commercial and Industrial Loans - The commercial and industrial loan portfolio consists of loans to commercial customers for use in normal business operations to finance working capital needs, equipment purchase or other expansion projects. Commercial loan underwriting standards are designed to promote relationship banking rather than transactional banking and are underwritten based on the borrower’s expected ability to profitably operate its business. The cash flows of borrowers, however, may not be as expected and collateral securing these loans may fluctuate in value. Most commercial loans are secured by assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee. In the case of loans secured by accounts receivable, the availability of funds for repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.
Consumer and Other Loans - The consumer and other loan portfolio consists of various term and line of credit loans such as automobile loans and loans for other personal purposes. Repayment for these types of loans will come from a borrower’s income sources that are typically independent of the loan purpose. Credit risk is driven by consumer economic factors (such as unemployment and general economic conditions in the Company’s market area) and the creditworthiness of a borrower.
Loans that are 30 days or more past due based on payments received and applied to the loan are considered delinquent. Accrual of interest is discontinued on a loan when management believes, after considering economic and business conditions and collection efforts, that a borrower's financial condition is such that collection of interest, but not necessarily principal, is doubtful. A loan is typically placed on non-accrual when the contractual payment of principal or interest becomes 90 days past due unless the loan is well-secured and in the process of collection. Loans may be placed on non-accrual status regardless of whether or not such loans are considered past due. Current year interest previously recorded, but deemed not collectible, is reversed and charged against current year income. Prior year interest previously recorded, but deemed not collectible, is charged against the allowance.
Payments subsequently received on non-accrual loans are applied to principal. Interest income is recognized to the extent that cash payments are received in excess of principal due. A loan may return to accrual status when principal and interest payments are no longer past due and collectability is reasonably assured.
The following table presents the recorded investment in nonaccrual loans, segregated by class.
15
(In thousands) | September 30, 2021 | December 31, 2020 | |||||||||
Secured by real estate: | |||||||||||
Residential properties | $ | 3,318 | $ | 3,869 | |||||||
Construction and land development | 58 | 1,863 | |||||||||
Farmland | 1,893 | 158 | |||||||||
Other commercial | 2,324 | 7,947 | |||||||||
Total real estate | 7,593 | 13,837 | |||||||||
Commercial and industrial loans | 106 | 12 | |||||||||
Agricultural production and other loans to farmers | 135 | 85 | |||||||||
Consumer and other loans | 210 | 177 | |||||||||
Total nonaccrual loans | $ | 8,044 | $ | 14,111 |
An age analysis of past due loans (including both accruing and non-accruing loans) segregated by class of loans is as follows:
(In thousands) | Past Due 30-89 Days | Past Due 90 Days or More | Total Past Due | Current | Total Loans | Past Due 90 Days or More and Accruing | |||||||||||||||||||||||||||||
September 30, 2021 | |||||||||||||||||||||||||||||||||||
Secured by real estate: | |||||||||||||||||||||||||||||||||||
Residential properties | $ | 5,427 | $ | 2,008 | $ | 7,435 | $ | 766,493 | $ | 773,928 | $ | 696 | |||||||||||||||||||||||
Construction and land development | 307 | 1,331 | 1,638 | 463,926 | 465,564 | 1,331 | |||||||||||||||||||||||||||||
Farmland | 189 | 515 | 704 | 211,941 | 212,645 | 46 | |||||||||||||||||||||||||||||
Other commercial | 4,037 | 317 | 4,354 | 1,334,860 | 1,339,214 | 14 | |||||||||||||||||||||||||||||
Total real estate | 9,960 | 4,171 | 14,131 | 2,777,220 | 2,791,351 | 2,087 | |||||||||||||||||||||||||||||
Commercial and industrial loans | 1,144 | 192 | 1,336 | 532,824 | 534,160 | 94 | |||||||||||||||||||||||||||||
Agricultural production and other loans to farmers | 23 | 226 | 249 | 101,724 | 101,973 | 94 | |||||||||||||||||||||||||||||
Consumer loans | 338 | 234 | 572 | 98,030 | 98,602 | 24 | |||||||||||||||||||||||||||||
Total | $ | 11,465 | $ | 4,823 | $ | 16,288 | $ | 3,509,798 | $ | 3,526,086 | $ | 2,299 |
(In thousands) | Past Due 30-89 Days | Past Due 90 Days or More | Total Past Due | Current | Total Loans | Past Due 90 Days or More and Accruing | |||||||||||||||||||||||||||||
December 31, 2020 | |||||||||||||||||||||||||||||||||||
Secured by real estate: | |||||||||||||||||||||||||||||||||||
Residential properties | $ | 5,836 | $ | 2,016 | $ | 7,852 | $ | 730,488 | $ | 738,340 | $ | 1,174 | |||||||||||||||||||||||
Construction and land development | 713 | 3,086 | 3,799 | 399,697 | 403,496 | 1,843 | |||||||||||||||||||||||||||||
Farmland | 373 | 779 | 1,152 | 215,952 | 217,104 | 618 | |||||||||||||||||||||||||||||
Other commercial | 3,956 | 3,084 | 7,040 | 1,217,593 | 1,224,633 | 2,417 | |||||||||||||||||||||||||||||
Total real estate | 10,878 | 8,965 | 19,843 | 2,563,730 | 2,583,573 | 6,052 | |||||||||||||||||||||||||||||
Commercial and industrial loans | 2,195 | 135 | 2,330 | 633,384 | 635,714 | 135 | |||||||||||||||||||||||||||||
Agricultural production and other loans to farmers | 319 | 15 | 334 | 85,135 | 85,469 | 15 | |||||||||||||||||||||||||||||
Consumer loans | 444 | 278 | 722 | 73,254 | 73,976 | 101 | |||||||||||||||||||||||||||||
Total | $ | 13,836 | $ | 9,393 | $ | 23,229 | $ | 3,355,503 | $ | 3,378,732 | $ | 6,303 |
Impaired Loans - Impaired loans include nonperforming loans, loans modified in troubled debt restructurings (“TDRs”) where concessions have been granted to borrowers experiencing financial difficulties, and certain other loans identified by management. Certain other loans identified by management consist of performing loans with specific allocations of the allowance for loan loss. Impaired loans, or portions thereof, are charged-off when deemed uncollectible.
16
Impaired loans, segregated by class were as follows:
September 30, 2021 | |||||||||||||||||
Principal | Recorded | Related | |||||||||||||||
(In thousands) | Balance | Balance (1) | Allowance | ||||||||||||||
Impaired loans with no related allowance: | |||||||||||||||||
Secured by real estate: | |||||||||||||||||
Residential properties | $ | 7,666 | $ | 5,099 | $ | — | |||||||||||
Construction and land development | 3,669 | 1,656 | — | ||||||||||||||
Farmland | 11,994 | 11,439 | — | ||||||||||||||
Other commercial | 4,015 | 2,448 | — | ||||||||||||||
Total real estate | 27,344 | 20,642 | — | ||||||||||||||
Commercial and industrial | 19,723 | 19,393 | — | ||||||||||||||
Agricultural production and other loans to farmers | 289 | 147 | — | ||||||||||||||
Consumer and other loans | 236 | 210 | — | ||||||||||||||
Total | $ | 47,592 | $ | 40,392 | $ | — | |||||||||||
Impaired loans with related allowance: | |||||||||||||||||
Secured by real estate: | |||||||||||||||||
Residential properties | $ | 1,060 | $ | 1,060 | $ | 9 | |||||||||||
Construction and land development | — | — | — | ||||||||||||||
Farmland | — | — | — | ||||||||||||||
Other commercial | 1,948 | 1,948 | 276 | ||||||||||||||
Total real estate | 3,008 | 3,008 | 285 | ||||||||||||||
Commercial and industrial | 2,324 | 2,324 | 991 | ||||||||||||||
Agricultural production and other loans to farmers | — | — | — | ||||||||||||||
Consumer and other loans | — | — | — | ||||||||||||||
Total | 5,332 | 5,332 | 1,276 | ||||||||||||||
Total impaired loans | $ | 52,924 | $ | 45,724 | $ | 1,276 |
(1) Recorded balance represents the carrying value – the contractual principal obligation due from the customer less charge offs and payments applied.
December 31, 2020 | |||||||||||||||||
Principal | Recorded | Related | |||||||||||||||
(In thousands) | Balance | Balance (1) | Allowance | ||||||||||||||
Impaired loans with no related allowance: | |||||||||||||||||
Secured by real estate: | |||||||||||||||||
Residential properties | $ | 8,474 | $ | 5,795 | $ | — | |||||||||||
Construction and land development | 5,530 | 3,462 | — | ||||||||||||||
Farmland | 11,024 | 10,584 | — | ||||||||||||||
Other commercial | 8,439 | 5,149 | — | ||||||||||||||
Total real estate | 33,467 | 24,990 | — | ||||||||||||||
Commercial and industrial | 10,386 | 9,962 | — | ||||||||||||||
Agricultural production and other loans to farmers | 156 | 97 | — | ||||||||||||||
Consumer and other loans | 216 | 177 | — | ||||||||||||||
Total | $ | 44,225 | $ | 35,226 | $ | — | |||||||||||
Impaired loans with related allowance: | |||||||||||||||||
Secured by real estate: | |||||||||||||||||
Residential properties | $ | 1,073 | $ | 1,073 | $ | 9 | |||||||||||
Construction and land development | — | — | — | ||||||||||||||
Farmland | — | — | — | ||||||||||||||
Other commercial | 6,072 | 6,039 | 2,028 | ||||||||||||||
Total real estate | 7,145 | 7,112 | 2,037 | ||||||||||||||
Commercial and industrial | 4,430 | 4,430 | 2,158 | ||||||||||||||
Agricultural production and other loans to farmers | — | — | — | ||||||||||||||
Consumer and other loans | — | — | — | ||||||||||||||
Total | 11,575 | 11,542 | 4,195 | ||||||||||||||
Total impaired loans | $ | 55,800 | $ | 46,768 | $ | 4,195 |
(1)Recorded balance represents the carrying value – the contractual principal obligation due from the customer less charge-offs and payments applied.
17
The average recorded investment and interest recognized for impaired loans for the three and nine months ended September 30, 2021 and 2020 are presented below.
Three Months Ended September 30, | |||||||||||||||||||||||
2021 | 2020 | ||||||||||||||||||||||
Average | Interest | Average | Interest | ||||||||||||||||||||
(In thousands) | Investment | Recognized | Investment | Recognized | |||||||||||||||||||
Secured by real estate: | |||||||||||||||||||||||
Residential properties | $ | 6,123 | $ | 42 | $ | 6,934 | $ | 38 | |||||||||||||||
Construction and land development | 1,139 | 23 | 2,026 | 31 | |||||||||||||||||||
Farmland | 11,150 | 104 | 10,515 | 127 | |||||||||||||||||||
Other commercial | 5,046 | 14 | 12,389 | 61 | |||||||||||||||||||
Total real estate | 23,458 | 183 | 31,864 | 257 | |||||||||||||||||||
Commercial and industrial | 21,728 | 281 | 1,133 | 7 | |||||||||||||||||||
Agricultural production and other loans to farmers | 146 | 3 | 97 | — | |||||||||||||||||||
Consumer loans | 210 | — | 180 | — | |||||||||||||||||||
Total | $ | 45,542 | $ | 467 | $ | 33,274 | $ | 264 |
Nine Months Ended September 30, | |||||||||||||||||||||||
2021 | 2020 | ||||||||||||||||||||||
Average | Interest | Average | Interest | ||||||||||||||||||||
(In thousands) | Investment | Recognized | Investment | Recognized | |||||||||||||||||||
Secured by real estate: | |||||||||||||||||||||||
Residential properties | $ | 6,489 | $ | 106 | $ | 5,773 | $ | 114 | |||||||||||||||
Construction and land development | 2,107 | 80 | 2,013 | 96 | |||||||||||||||||||
Farmland | 10,452 | 356 | 10,517 | 382 | |||||||||||||||||||
Other commercial | 6,827 | 129 | 11,876 | 176 | |||||||||||||||||||
Total real estate | 25,875 | 671 | 30,179 | 768 | |||||||||||||||||||
Commercial and industrial | 20,076 | 753 | 689 | 20 | |||||||||||||||||||
Agricultural production and other loans to farmers | 94 | 3 | 78 | — | |||||||||||||||||||
Consumer loans | 191 | — | 182 | — | |||||||||||||||||||
Total | $ | 46,236 | $ | 1,427 | $ | 31,128 | $ | 788 |
There were no modifications classified as TDRs for the nine months ended September 30, 2021 or 2020. Although there were additional modifications of terms on some loans, the prevailing modifications during the reported periods were related to converting the loans to interest only for a period of time, reductions in the interest rates, and/or extensions of payment dates or maturity dates. Because the majority of these loans were classified as impaired loans before restructuring, the modifications did not materially impact the Company’s determination of the allowance for loan losses. The Company did not forgive any principal on the above loans. The allowance for loan losses attributable to restructured loans was $169,000 and $2.0 million at September 30, 2021 and December 31, 2020, respectively. The primary reason for the decrease in the allowance for loan losses attributable to restructured loans was a $1.8 million payment received in the first quarter of 2021 related to a loan classified as a TDR in 2019. The Company defines a payment default as a payment received more than 90 days after its due date.
Note 6: Allowance for Loan Losses
As management evaluates the allowance for loan losses, it is categorized as follows: (1) specific allocations; (2) allocations for classified assets with no specific allowance, based on historical loan experience for similar loans with similar characteristics, adjusted as necessary, to reflect the impact of current conditions; and (3) general allocations for each major loan category for loans not deemed impaired or classified, segmented by loan class based on historical loss experience and other risk factors. In assessing general economic conditions, management monitors several factors, including regional and national economic conditions, real estate market conditions and recently enacted regulations with potential economic effects.
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Credit Quality Indicators – The Company utilizes a risk grading matrix to assign a grade to each of its commercial and real estate loans. Loans are rated on a scale of 1 to 10. A description of the general characteristics of the 10 risk ratings is as follows:
•Risk Grades 1, 2, 3, 4 and 5 – These grades include loans to borrowers of solid credit quality with no higher than normal risk of loss. Borrowers in these categories have satisfactory financial strength and adequate cash flow coverage to service debt requirements. Collateral type and quality, as well as protection, are adequate. The borrower’s management is strong and capable, financial information is timely and accurate, and guarantor support is strong.
•Risk Grade 6 – Pass and Watch – Loans in this category are currently protected, but risks are emerging that warrant more than normal attention and have above average risk of loss. These factors require a higher level of monitoring and may include emerging balance sheet weaknesses, strained liquidity, increased leverage ratio, and weakening management. Collateral support is less marketable or limited use and, although the protection is sufficient, the loan-to-value ratio may not meet policy guidelines. Guarantors may have a limited ability and willingness to provide intermediate support. Also, considerations surrounding industry deterioration, increased competition and minor policy exceptions concerning structure or amortization may affect the rating of these loans.
•Risk Grade 7 – Special Mention – The Company’s special mention rating is intended to closely align with the regulatory definition. A special mention asset has potential weaknesses that deserve management’s close attention. If left uncorrected, these weaknesses may result in deterioration of repayment prospects. These weaknesses may include deteriorating balance sheets, strained liquidity and elevated leverage ratios. Cash flow and profitability are marginally sufficient to service debt and collateral is exhibiting signs of decline in value; however, protection is currently sufficient. Limited management experience or weaknesses have emerged requiring more than normal supervision and uncertainties regarding the quality of the financials are not explained. Guarantor has very limited ability and willingness to provide short-term support. Moderate policy exceptions concerning structure or amortization may be considered in order to provide relief to the borrower. Special mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.
•Risk Grade 8 – Substandard – A loan in this category is inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged. Assets so classified have a well-defined weakness that jeopardizes the liquidation of the debt. Factors affecting these loans may include balance sheet deterioration that has resulted in illiquid, highly leveraged or deficit net worth, cash flow that is not able to service debts as structured, collateral protection that may be inadequate, guarantor support that may be virtually non-existent, and management that is poor. Loans may require a major policy exception concerning structure or amortization. They are characterized by the distinct possibility that the Company will incur some loss if the deficiencies are not corrected.
•Risk Grade 9 – Doubtful – Loans classified doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions and values, highly questionable and improbable.
•Risk Grade 10 – Loss – Loans are considered uncollectible and of such little value that continuing to carry them as an active asset is not warranted. It does not mean that there will be no recovery, but, rather, it is not practical or desirable to defer writing off these assets even though a partial recovery may be possible in the future.
Classified loans for the Company include loans in Risk Grades 8, 9 and 10. Loans may be classified but not considered impaired, due to one of the following reasons: (i) the loan falls below the established minimum dollar thresholds for loan impairment testing or (ii) the loan was tested for impairment, but not deemed to be impaired.
The following table summarizes the credit quality of the Company’s loan portfolio by loan class for the period indicated:
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Risk Grades | Risk Grade | Risk Grade | Risk Grade | ||||||||||||||||||||||||||
(In thousands) | 1-6 | 7 | 8 | 9 | Total | ||||||||||||||||||||||||
September 30, 2021 | |||||||||||||||||||||||||||||
Secured by real estate: | |||||||||||||||||||||||||||||
Residential properties | $ | 759,167 | $ | 21 | $ | 14,740 | $ | — | $ | 773,928 | |||||||||||||||||||
Construction and land development | 460,712 | 4,107 | 745 | — | 465,564 | ||||||||||||||||||||||||
Farmland | 199,608 | — | 13,037 | — | 212,645 | ||||||||||||||||||||||||
Other commercial | 1,330,515 | 1,001 | 7,621 | 77 | 1,339,214 | ||||||||||||||||||||||||
Total real estate | 2,750,002 | 5,129 | 36,143 | 77 | 2,791,351 | ||||||||||||||||||||||||
Commercial and industrial | 510,359 | — | 23,756 | 45 | 534,160 | ||||||||||||||||||||||||
Agricultural production and other loans to farmers | 101,549 | 71 | 353 | — | 101,973 | ||||||||||||||||||||||||
Consumer and other loans | 98,302 | — | 300 | — | 98,602 | ||||||||||||||||||||||||
Total | $ | 3,460,212 | $ | 5,200 | $ | 60,552 | $ | 122 | $ | 3,526,086 |
Risk Grades | Risk Grade | Risk Grade | Risk Grade | ||||||||||||||||||||||||||
(In thousands) | 1-6 | 7 | 8 | 9 | Total | ||||||||||||||||||||||||
December 31, 2020 | |||||||||||||||||||||||||||||
Secured by real estate: | |||||||||||||||||||||||||||||
Residential properties | $ | 721,024 | $ | — | $ | 17,316 | $ | — | $ | 738,340 | |||||||||||||||||||
Construction and land development | 401,347 | — | 2,149 | — | 403,496 | ||||||||||||||||||||||||
Farmland | 205,211 | — | 11,893 | — | 217,104 | ||||||||||||||||||||||||
Other commercial | 1,209,365 | — | 15,041 | 227 | 1,224,633 | ||||||||||||||||||||||||
Total real estate | 2,536,947 | — | 46,399 | 227 | 2,583,573 | ||||||||||||||||||||||||
Commercial and industrial | 619,086 | 51 | 16,526 | 51 | 635,714 | ||||||||||||||||||||||||
Agricultural production and other loans to farmers | 85,197 | 91 | 181 | — | 85,469 | ||||||||||||||||||||||||
Consumer and other loans | 73,560 | — | 416 | — | 73,976 | ||||||||||||||||||||||||
Total | $ | 3,314,790 | $ | 142 | $ | 63,522 | $ | 278 | $ | 3,378,732 |
Transactions in the allowance for loan losses and balances in the loan portfolio by loan segment are as follows:
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(In thousands) | Commercial and Industrial | Commercial Real Estate | Residential | Consumer and other | Total | ||||||||||||||||||||||||
Three Months Ended September 30, 2021 | |||||||||||||||||||||||||||||
Allowance for loan losses: | |||||||||||||||||||||||||||||
Beginning balance | $ | 6,493 | $ | 23,051 | $ | 10,234 | $ | 2,226 | $ | 42,004 | |||||||||||||||||||
Provision for loan losses | (565) | 616 | 352 | 1,066 | 1,469 | ||||||||||||||||||||||||
Recoveries on loans | 175 | 1,625 | 59 | 449 | 2,308 | ||||||||||||||||||||||||
Loans charged off | (37) | (349) | (122) | (1,272) | (1,780) | ||||||||||||||||||||||||
Ending balance | $ | 6,066 | $ | 24,943 | $ | 10,523 | $ | 2,469 | $ | 44,001�� | |||||||||||||||||||
Nine Months Ended September 30, 2021 | |||||||||||||||||||||||||||||
Allowance for loan losses: | |||||||||||||||||||||||||||||
Beginning balance | $ | 6,337 | $ | 20,163 | $ | 7,900 | $ | 1,600 | $ | 36,000 | |||||||||||||||||||
Provision for loan losses | (433) | 3,481 | 2,581 | 1,766 | 7,395 | ||||||||||||||||||||||||
Recoveries on loans | 479 | 2,277 | 340 | 2,046 | 5,142 | ||||||||||||||||||||||||
Loans charged off | (317) | (978) | (298) | (2,943) | (4,536) | ||||||||||||||||||||||||
Ending balance | $ | 6,066 | $ | 24,943 | $ | 10,523 | $ | 2,469 | $ | 44,001 | |||||||||||||||||||
Period End Allowance Balance Allocated To: | |||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | 991 | $ | 276 | $ | 9 | $ | — | $ | 1,276 | |||||||||||||||||||
Collectively evaluated for impairment | 5,075 | 24,667 | 10,514 | 2,469 | 42,725 | ||||||||||||||||||||||||
Ending balance | $ | 6,066 | $ | 24,943 | $ | 10,523 | $ | 2,469 | $ | 44,001 |
(In thousands) | Commercial and Industrial | Commercial Real Estate | Residential | Consumer and other | Unallocated | Total | |||||||||||||||||||||||||||||
Three Months Ended September 30, 2020 | |||||||||||||||||||||||||||||||||||
Allowance for loan losses: | |||||||||||||||||||||||||||||||||||
Beginning balance | $ | 3,269 | $ | 12,580 | $ | 5,968 | $ | 1,340 | $ | 902 | $ | 24,059 | |||||||||||||||||||||||
Provision for loan losses | 2,812 | 1,835 | 170 | (82) | (64) | 4,671 | |||||||||||||||||||||||||||||
Recoveries on loans | 34 | 103 | 140 | 827 | — | 1,104 | |||||||||||||||||||||||||||||
Loans charged off | (261) | (1,960) | (34) | (731) | — | (2,986) | |||||||||||||||||||||||||||||
Balance, end of year | $ | 5,854 | $ | 12,558 | $ | 6,244 | $ | 1,354 | $ | 838 | $ | 26,848 | |||||||||||||||||||||||
Nine Months Ended September 30, 2020 | |||||||||||||||||||||||||||||||||||
Allowance for loan losses: | |||||||||||||||||||||||||||||||||||
Beginning balance | $ | 2,773 | $ | 10,766 | $ | 5,568 | $ | 1,135 | $ | 1,258 | $ | 21,500 | |||||||||||||||||||||||
Provision for loan losses | 3,427 | 3,824 | 707 | 168 | (420) | 7,706 | |||||||||||||||||||||||||||||
Recoveries on loans | 148 | 150 | 237 | 2,619 | — | 3,154 | |||||||||||||||||||||||||||||
Loans charged off | (494) | (2,182) | (268) | (2,568) | — | (5,512) | |||||||||||||||||||||||||||||
Ending balance | $ | 5,854 | $ | 12,558 | $ | 6,244 | $ | 1,354 | $ | 838 | $ | 26,848 | |||||||||||||||||||||||
Period End Allowance Balance Allocated To: | |||||||||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | 471 | $ | 1,949 | $ | 17 | $ | — | $ | — | $ | 2,437 | |||||||||||||||||||||||
Collectively evaluated for impairment | 5,383 | 10,609 | 6,227 | 1,354 | 838 | 24,411 | |||||||||||||||||||||||||||||
Ending balance | $ | 5,854 | $ | 12,558 | $ | 6,244 | $ | 1,354 | $ | 838 | $ | 26,848 |
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The following table provides the recorded investment in loans, net of unearned income, based on the Company’s impairment methodology as of the dates presented:
(In thousands) | Commercial and Industrial | Commercial Real Estate | Residential | Consumer and other | Total | ||||||||||||||||||||||||
September 30, 2021 | |||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | 21,611 | $ | 14,046 | $ | 2,369 | $ | 174 | $ | 38,200 | |||||||||||||||||||
Collectively evaluated for impairment | 512,549 | 2,003,377 | 771,559 | 200,401 | 3,487,886 | ||||||||||||||||||||||||
Ending balance | $ | 534,160 | $ | 2,017,423 | $ | 773,928 | $ | 200,575 | $ | 3,526,086 | |||||||||||||||||||
December 31, 2020 | |||||||||||||||||||||||||||||
Individually evaluated for impairment | $ | 14,392 | $ | 25,234 | $ | 6,868 | $ | 274 | $ | 46,768 | |||||||||||||||||||
Collectively evaluated for impairment | 621,322 | 1,819,999 | 731,472 | 159,171 | 3,331,964 | ||||||||||||||||||||||||
Ending balance | $ | 635,714 | $ | 1,845,233 | $ | 738,340 | $ | 159,445 | $ | 3,378,732 |
Note 7: Regulatory Matters
The Company (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by state and federal banking agencies. Failure to meet minimum capital requirements triggers certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the consolidated financial statements. 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 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.
The U.S. capital rules, which in substance adopted the international Basel III Capital Rules and accordingly are referred to as the Basel III rules, became effective for both the Company and the Bank on January 1, 2015, with full compliance with all of the requirements being phased in over a multi-year schedule and fully phased in by January 1, 2019. The Basel III rules require banking institutions to comply with three minimum risk-based capital ratios for common equity Tier 1 (“CET1”) capital, Tier 1 capital, and total capital, as well as a minimum leverage ratio based on Tier 1 capital.
Under the Basel III rules, the Company must maintain a capital conservation buffer of CET1 capital above the minimum risk-based capital ratios. The capital conservation buffer is designed to absorb losses during periods of economic stress and effectively increases the minimum required risk-weighted capital ratios. If, after deducting the buffer amount from its CET1 capital, Tier 1 capital, and total capital, any of these amounts results in a risk-based capital ratio below the minimum, a banking institution will face constraints on dividends, equity repurchases and compensation based on the amount of the shortfall. The capital conservation buffer, which was 2.50% at September 30, 2021 and December 31, 2020, is included in the minimum capital requirements relative to risk-weighted assets in the following table. Management believes as of September 30, 2021 and December 31, 2020, the Company and the Bank met Basel III minimum capital requirements to which they are subject.
The Bank is also subject to capital requirements under the prompt corrective action regime. As of September 30, 2021, the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. The prompt corrective action framework applies only to insured depository institutions, such as the Bank, and not to their holding companies, such as the Company. To be categorized as well capitalized, an insured depository institution must maintain certain ratios of CET1 capital, Tier 1 capital and total capital to risk-weighted assets, and of Tier 1 capital to adjusted quarterly average assets. There are no conditions or events since that notification that management believes have changed the Bank’s category. The amounts of the Bank’s capital relative to the standards for well capitalized status are set forth in the following table.
The Company’s and the Bank’s CET1 capital includes total common equity reduced by goodwill and other intangible assets, net of associated deferred tax liabilities. In connection with the adoption of Basel III, the Company elected to opt out of the requirement to include most components of accumulated other comprehensive income (loss) in CET1 capital.
22
Tier 1 capital includes CET1 capital and additional Tier 1 capital. For the Company, additional Tier 1 capital at September 30, 2021 and December 31, 2020 included $51.0 million and $50.7 million of trust preferred securities issued by the trusts (net of investment in the trusts), respectively. The Bank did not have any additional Tier 1 capital beyond CET1 capital as of September 30, 2021 and December 31, 2020.
Total capital includes Tier 1 capital and Tier 2 capital. Tier 2 capital for both the Company and the Bank includes a permissible portion of the allowance for loan losses. In addition, Tier 2 capital at September 30, 2021 and December 31, 2020 for the Company includes $58.8 million and $58.6 million, respectively, of subordinated debentures. Capital levels required to be considered well capitalized are based upon prompt corrective action regulations, as amended to reflect the changes under Basel III.
The following table presents actual and required capital ratios for the Company and the Bank under the Basel III rules.
Actual | Minimum Requirement | Required to be Well Capitalized | |||||||||||||||||||||||||||||||||
(In thousands) | Capital Amount | Ratio | Capital Amount | Ratio | Capital Amount | Ratio | |||||||||||||||||||||||||||||
September 30, 2021: | |||||||||||||||||||||||||||||||||||
Company: | |||||||||||||||||||||||||||||||||||
CET1 Capital to Risk-Weighted Assets | $ | 374,642 | 9.57 | % | $ | 273,936 | 7.00 | % | N/A | N/A | |||||||||||||||||||||||||
Tier 1 Capital to Risk-Weighted Assets | 425,598 | 10.88 | % | 332,636 | 8.50 | % | N/A | N/A | |||||||||||||||||||||||||||
Total Capital to Risk-Weighted Assets | 580,350 | 13.50 | % | 410,904 | 10.50 | % | N/A | N/A | |||||||||||||||||||||||||||
Tier 1 Capital to Average Assets | 425,598 | 8.40 | % | 202,413 | 4.00 | % | N/A | N/A | |||||||||||||||||||||||||||
Bank: | |||||||||||||||||||||||||||||||||||
CET1 Capital to Risk-Weighted Assets | $ | 420,455 | 10.77 | % | $ | 273,372 | 7.00 | % | $ | 253,845 | 6.50 | % | |||||||||||||||||||||||
Tier 1 Capital to Risk-Weighted Assets | 420,455 | 10.77 | % | 331,951 | 8.50 | % | 312,425 | 8.00 | % | ||||||||||||||||||||||||||
Total Capital to Risk-Weighted Assets | 464,456 | 11.89 | % | 410,058 | 10.50 | % | 390,531 | 10.00 | % | ||||||||||||||||||||||||||
Tier 1 Capital to Average Assets | 420,455 | 8.32 | % | 202,059 | 4.00 | % | 252,574 | 5.00 | % | ||||||||||||||||||||||||||
December 31, 2020: | |||||||||||||||||||||||||||||||||||
Company: | |||||||||||||||||||||||||||||||||||
CET1 Capital to Risk-Weighted Assets | $ | 339,936 | 9.94 | % | $ | 239,437 | 7.00 | % | N/A | N/A | |||||||||||||||||||||||||
Tier 1 Capital to Risk-Weighted Assets | 390,713 | 11.42 | % | 290,745 | 8.50 | % | N/A | N/A | |||||||||||||||||||||||||||
Total Capital to Risk-Weighted Assets | 485,357 | 14.19 | % | 359,155 | 10.50 | % | N/A | N/A | |||||||||||||||||||||||||||
Tier 1 Capital to Average Assets | 390,713 | 8.55 | % | 182,853 | 4.00 | % | N/A | N/A | |||||||||||||||||||||||||||
Bank: | |||||||||||||||||||||||||||||||||||
CET1 Capital to Risk-Weighted Assets | $ | 387,231 | 11.36 | % | $ | 238,629 | 7.00 | % | $ | 221,584 | 6.50 | % | |||||||||||||||||||||||
Tier 1 Capital to Risk-Weighted Assets | 387,231 | 11.36 | % | 289,763 | 8.50 | % | 272,719 | 8.00 | % | ||||||||||||||||||||||||||
Total Capital to Risk-Weighted Assets | 423,231 | 12.42 | % | 357,943 | 10.50 | % | 340,898 | 10.00 | % | ||||||||||||||||||||||||||
Tier 1 Capital to Average Assets | 387,231 | 8.49 | % | 182,531 | 4.00 | % | 228,164 | 5.00 | % |
The ability of the Company to pay future dividends, pay its expenses and retire its debt is dependent upon future income tax benefits and dividends paid to the Company by the Bank. The Bank is subject to dividend restrictions as imposed by Federal and state regulatory authorities.
23
Note 8: Fair Value
Financial Instruments Measured at Fair Value
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company groups its assets and liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. Valuations within these levels are based upon:
Level 1
Unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access as of the measurement date
Level 2
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 for substantially the full term of the assets or liabilities
Level 3
Unobservable inputs that are significant to the fair value of the assets or liabilities that reflect a company’s own assumptions about the assumptions that market participants would use in pricing assets or liabilities
Management monitors the availability of observable market data to assess the appropriate classification of assets and liabilities within the fair value hierarchy. Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another. In such instances, the transfer is reported at the beginning of the reporting period. There were no transfers of financial instruments between fair value levels for any period presented.
The Company used the following methods and significant assumptions to estimate fair value.
Securities - The Company utilizes an independent pricing service to advise it on the value of the securities portfolio. Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows. For these investments, the inputs used by the pricing service to determine fair value may include one, or a combination of several, observable inputs such as benchmark yields, reported trades, benchmark securities, bids, offers and reference data market research publications and are classified within Level 2 of the valuation hierarchy. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. For Level 3 securities, in addition to the inputs noted above, inputs used by the pricing service to determine fair value may also include estimated duration, municipal bond interest rate curve, and tax effected yield. There were no Level 3 securities as of September 30, 2021 or December 31, 2020. The Company’s treasury department and Asset Liability Management Committee review the aggregate fair values of the securities portfolio.
Impaired loans - Loans for which it is probable that the Company will not collect all principal and interest due according to contractual terms are measured for impairment on a non-recurring basis. Allowable methods for determining the amount of impairment include estimating fair value using the fair value of the collateral for collateral-dependent loans. Specific allowances for impaired loans are based on comparisons of the recorded carrying values of the loans to the present value of the estimated cash flows of these loans at each loan’s effective interest rate or the fair value of the collateral net of selling costs if the loan is collateral dependent. Impaired loans are primarily collateral dependent loans and are assessed using a fair value approach. Fair value estimates for collateral dependent loans are derived from appraised values based on the current market value or as-is value of the property being appraised. Appraisals are based on certain assumptions, which may include construction or development status and the highest and best use of the property. The appraisals are reviewed by the Company’s appraisal department to ensure they are acceptable. Impaired loans are classified within Level 3 of the fair value hierarchy. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted in accordance with the allowance policy.
Other Real Estate Owned - Other real estate owned is initially recorded at fair value less cost to sell at the date of foreclosure, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated cost to sell. Fair value estimates begin with obtaining a current independent appraisal or internal evaluation of the collateral value. Subsequent
24
to foreclosure, valuations are performed periodically by the Company’s appraisal department and any subsequent reduction in value is recognized by a charge to income.
Appraisals for both collateral-dependent impaired loans and other real estate owned are performed by certified appraisers whose qualifications and licenses have been reviewed by the Company. These appraisals are reviewed by a member of the Company’s appraisal department to ensure they are acceptable. Appraised values are adjusted down for costs associated with asset disposal. The significant unobservable inputs (Level 3) used in the fair value measurement of collateral for collateral impaired loans and other real estate owned are primarily based on appraisals, observable market conditions, and other factors which may affect collectability. The appraisals use marketability and comparability discounts, which generally range from 5% to 15%. Assessment of the significance of a specific input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset. It is reasonably possible that a change in the estimated fair value for assets measured using Level 3 inputs could occur in the future.
Assets and liabilities measured at fair value on a recurring basis are summarized below:
Fair | Fair Value Measurements Using | ||||||||||||||||||||||
(In thousands) | Value | Level 1 | Level 2 | Level 3 | |||||||||||||||||||
September 30, 2021 | |||||||||||||||||||||||
U.S. Government agency obligations | $ | 299,841 | $ | — | $ | 299,841 | $ | — | |||||||||||||||
Residential mortgage-backed securities | 121,846 | — | 121,846 | — | |||||||||||||||||||
Commercial mortgage-backed securities | 14,894 | — | 14,894 | — | |||||||||||||||||||
Asset-backed securities | 13,539 | — | 13,539 | — | |||||||||||||||||||
Corporate investments | 44,150 | — | 44,150 | — | |||||||||||||||||||
State and political subdivisions | 46,613 | — | 46,613 | — | |||||||||||||||||||
Total securities available for sale | $ | 540,883 | $ | — | $ | 540,883 | $ | — |
December 31, 2020 | |||||||||||||||||||||||
U.S. Government agency obligations | $ | 12,434 | $ | — | $ | 12,434 | $ | — | |||||||||||||||
Residential mortgage-backed securities | 187,212 | — | 187,212 | — | |||||||||||||||||||
Commercial mortgage-backed securities | 17,331 | — | 17,331 | — | |||||||||||||||||||
Asset backed securities | 14,447 | — | 14,447 | — | |||||||||||||||||||
Corporate investments | 33,148 | — | 33,148 | — | |||||||||||||||||||
State and political subdivisions | 46,801 | — | 46,801 | — | |||||||||||||||||||
Total securities available for sale | $ | 311,373 | $ | — | $ | 311,373 | $ | — |
Assets measured at fair value on a non-recurring basis are summarized below.
Fair | Fair Value Measurements Using | ||||||||||||||||||||||
(In thousands) | Value | Level 1 | Level 2 | Level 3 | |||||||||||||||||||
Impaired loans, net of allowance for loan losses: | |||||||||||||||||||||||
September 30, 2021 | $ | 44,448 | $ | — | $ | — | $ | 44,448 | |||||||||||||||
December 31, 2020 | $ | 42,573 | $ | — | $ | — | $ | 42,573 | |||||||||||||||
Other real estate owned: | |||||||||||||||||||||||
September 30, 2021 | $ | 6,989 | $ | — | $ | — | $ | 6,989 | |||||||||||||||
December 31, 2020 | $ | 6,754 | $ | — | $ | — | $ | 6,754 |
The following table presents quantitative information about Level 3 fair value measurements for assets measured at fair value on a non-recurring basis.
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Qualitative Information about Level 3 Fair Value Measurements | |||||||||||||||||||||||||||||
(In thousands) | Carrying Value | Valuation Methods | Unobservable Inputs | Range | Weighted Average | ||||||||||||||||||||||||
September 30, 2021 | |||||||||||||||||||||||||||||
Impaired loans, net of specific allowance | $ | 44,448 | Third-party appraisals | Selling costs | 5% - 10% | 6% | |||||||||||||||||||||||
Other real estate owned | $ | 6,989 | Third-party appraisals and internal evaluations | Selling costs | 5% - 10% | 6% |
Qualitative Information about Level 3 Fair Value Measurements | |||||||||||||||||||||||||||||
(In thousands) | Carrying Value | Valuation Methods | Unobservable Inputs | Range | Weighted Average | ||||||||||||||||||||||||
December 31, 2020 | |||||||||||||||||||||||||||||
Impaired loans, net of specific allowance | $ | 42,573 | Third-party appraisals | Selling costs | 5% - 10% | 6% | |||||||||||||||||||||||
Other real estate owned | $ | 6,754 | Third-party appraisals and internal evaluations | Selling costs | 5% - 10% | 6% |
Fair Value of Financial Instruments
GAAP requires disclosure of fair value information about financial instruments, whether or not recognized on the balance sheet, that are not measured and reported at fair value on a recurring or non-recurring basis. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions significantly affect the estimates and, as such, the derived fair value may not be indicative of the value negotiated in an actual sale and may not be comparable to that reported by other financial institutions. In addition, the fair value estimates are based on existing financial instruments without attempting to estimate the value of anticipated business and the value of assets and liabilities that are not considered financial instruments. In addition, the tax ramifications related to the realization of unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.
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The following table presents estimated fair values of the Company’s financial instruments not previously disclosed:
September 30, 2021 | December 31, 2020 | ||||||||||||||||||||||
(In thousands) | Carrying Value | Fair Value | Carrying Value | Fair Value | |||||||||||||||||||
Financial assets: | |||||||||||||||||||||||
Level 1 inputs: | |||||||||||||||||||||||
Cash and cash equivalents | $ | 695,069 | $ | 695,069 | $ | 637,545 | $ | 637,545 | |||||||||||||||
Level 2 inputs: | |||||||||||||||||||||||
Securities held to maturity | 78,423 | 78,905 | 93,766 | 94,436 | |||||||||||||||||||
FHLB stock | 2,729 | 2,729 | 2,557 | 2,557 | |||||||||||||||||||
Accrued interest receivable | 17,120 | 17,120 | 18,061 | 18,061 | |||||||||||||||||||
Level 3 inputs: | |||||||||||||||||||||||
Loans held for sale | 13,904 | 13,904 | 28,684 | 28,684 | |||||||||||||||||||
Loans, net | 3,482,085 | 3,462,588 | 3,342,732 | 3,348,872 | |||||||||||||||||||
Financial liabilities: | |||||||||||||||||||||||
Level 2 inputs: | |||||||||||||||||||||||
Deposits | 4,529,868 | 4,435,783 | 4,152,810 | 4,153,402 | |||||||||||||||||||
FHLB and other borrowings | 31,026 | 31,778 | 33,771 | 34,941 | |||||||||||||||||||
Subordinated debentures | 111,411 | 111,411 | 111,124 | 111,124 | |||||||||||||||||||
Accrued interest payable | 2,647 | 2,647 | 2,709 | 2,709 |
Note 9: Subordinated Debentures and Trust Preferred Securities
On June 4, 2020, the Company entered into a Subordinated Note Purchase Agreement with certain qualified institutional buyers and institutional accredited investors pursuant to which the Company issued and sold $60.0 million in aggregate principal amount of its 6.000% Fixed-to-Floating Rate Subordinated Notes due June 15, 2030 (the “Notes”). The Company incurred issuance costs of $1.4 million in conjunction with the issuance of the Notes. These issuance costs are netted with the balance of the Notes on the Company’s Condensed Consolidated Balance Sheets and will be amortized over the life of the Notes. The Notes initially bear interest at a rate of 6.000% per annum from and including June 4, 2020, to but excluding June 15, 2025 or the early redemption date, with interest during this period payable semiannually in arrears. From and including June 15, 2025, to but excluding the maturity date or early redemption date, the interest rate will reset quarterly to an annual floating rate equal to Three-Month Term Secured Overnight Financing Rate plus 586 basis points, with interest during this period payable quarterly in arrears. The Company used the proceeds of the private placement for general corporate purposes, including improving the Company’s liquidity and capital position.
The Notes are not redeemable by the Company, in whole or in part, prior to the fifth anniversary of the original date of issue, except that the Notes may be redeemed at any time in whole but not in part in the event of a Tier 2 Capital Event, a Tax Event, or an Investment Company Event, each as defined and described in the Notes. On or after the fifth anniversary of the original date of issue, the Notes shall be redeemable on any interest payment date at the option of the Company, in whole or in part in integral multiples of $1,000, at an amount equal to 100% of the outstanding principal amount redeemed plus accrued but unpaid interest thereon. Any partial redemption will be made on a pro rata basis as to the holders of the Notes. Any redemption of the Notes is subject to any applicable regulatory requirements and approvals.
The Company also owns the outstanding common stock of business trusts that have issued preferred capital securities to third parties. These preferred capital securities have qualified as Tier 1 capital for the Company, subject to regulatory rules and limits. These trusts used the proceeds from the issuance of the common stock and the preferred capital securities to purchase subordinated debentures issued by the Company. These subordinated debentures are these trusts’ only assets, and quarterly interest payments on these subordinated debentures are the sole source of cash for these trusts to pay quarterly distributions on the common stock and preferred capital securities. The Company has fully and unconditionally guaranteed the trusts’ obligations with respect to the preferred capital securities.
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The Company has the right to defer the payment of interest on the subordinated debentures at any time, or from time to time, for periods not exceeding five years. If interest payments on the subordinated debentures are deferred, the distributions on the trust preferred securities are also deferred. Interest on the subordinated debentures and distributions on the trust preferred securities are cumulative.
The following is a summary of subordinated debentures payable to statutory trusts.
(In thousands) | Year of Maturity | Interest Rate | September 30, 2021 | December 31, 2020 | |||||||||||||||||||
First Bancshares of Baton Rouge Statutory Trust I | 2034 | 3 month LIBOR, plus 2.50% | $ | 4,124 | $ | 4,124 | |||||||||||||||||
State Capital Statutory Trust IV | 2035 | 3 month LIBOR, plus 1.99% | 5,155 | 5,155 | |||||||||||||||||||
BancPlus Statutory Trust II | 2036 | 3 month LIBOR, plus 1.50% | 20,619 | 20,619 | |||||||||||||||||||
BancPlus Statutory Trust III | 2037 | 3 month LIBOR, plus 1.35% | 20,619 | 20,619 | |||||||||||||||||||
State Capital Master Trust | 2037 | 3 month LIBOR, plus 1.46% | 6,186 | 6,186 | |||||||||||||||||||
$ | 56,703 | $ | 56,703 |
The subordinated debentures payable to statutory trusts vary from the amount carried on the Condensed Consolidated Balance Sheets at September 30, 2021 due to the remaining purchase discount of $4.0 million, which was established upon the Merger with SCC and is being amortized over the remaining life of the debentures.
Interest rates adjust quarterly for the subordinated debentures with rates that are indexed with LIBOR. We are currently monitoring the actions of LIBOR’s regulator and the implementation of alternative reference rates in advance of the expected discontinuation of LIBOR to determine any potential impact on the subordinated debentures.
The Company has the right to redeem the subordinated debentures prior to maturity. Upon redemption of the subordinated debentures payable to a statutory trust, the trust will also liquidate its common stock and preferred capital securities.
Note 10: Employee Benefits
The Company has an Employee Stock Ownership Plan (“ESOP”) that covers all employees of the Bank who are at least 21 years of age and work in a position requiring at least 1000 hours of service annually. The plan also has 401(k) provisions that allow for employee tax deferred contributions. Participants may make contributions to the ESOP in accordance with applicable regulations and the ESOP’s provisions. The Company makes a 3% “safe harbor” matching contribution, plus an additional matching contribution equal to 50% of the next 2% of an employee’s salary deferral contributions in excess of 3%. Additional contributions are made to the ESOP at the discretion of the Company’s Board of Directors.
The ESOP owned 1,500,732 and 1,499,459 shares of the Company's common stock at September 30, 2021 and December 31, 2020, respectively. The ESOP entered into loans, collateralized by ESOP shares, with the Company in connection with the repurchase of shares of Company stock that were sold by participants in accordance with diversification provisions of the ESOP. A total of 176,786 shares were repurchased through 2011, an additional 77,000 shares were repurchased under this program in 2012, and 27,594 shares were repurchased under this program in 2019. These unallocated shares are released to participants proportionately as the loan is repaid. Dividends on allocated shares are recorded as dividends and charged to retained earnings. Dividends on unallocated shares that are used to repay the loan are treated as compensation expense.
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The following table presents information related to the Company’s ESOP-owned shares.
(In thousands, except share data) | September 30, 2021 | December 31, 2020 | |||||||||
Allocated shares | 1,469,547 | 1,449,335 | |||||||||
Unearned shares | 31,185 | 50,124 | |||||||||
Total ESOP shares | 1,500,732 | 1,499,459 | |||||||||
Fair value of unearned shares | $ | 2,050 | $ | 2,569 |
Distributions of the ESOP may be either in cash or Company common stock. The allocated shares are subject to a put option, whereby the Company will provide a market for a specified period of time for shares distributed to participants. The put price is the appraised value of the stock. The fair value of shares of common stock held by the ESOP are deducted from permanent shareholders’ equity in the Condensed Consolidated Balance Sheets and reflected in a line item below liabilities and above shareholders’ equity. This presentation is necessary in order to recognize the put option within the ESOP-owned shares, consistent with U.S. Securities and Exchange Commission guidelines, that is present as long as the Company is not publicly traded. The Company uses a valuation by an external third party to determine the maximum possible cash obligation related to these securities. Increases or decreases in the value of the cash obligation are included in a separate line item in the Condensed Consolidated Statements of Shareholders’ Equity. The fair value of shares held by the ESOP at September 30, 2021 was $96.6 million, based on the Company’s previously disclosed appraised value of $65.75 per share of common stock. The fair value at December 31, 2020 was $74.3 million, based on the Company’s previously disclosed appraised value of $51.25 per share of common stock. As previously disclosed, these appraised values were determined solely for purposes of the ESOP’s administration and are therefore subject to certain limitations, qualifications and assumptions and may not reflect the fair value of the Company’s common stock and should not be relied on for any reason. In particular, the COVID-19 pandemic has had a significant impact on the trading markets for equity securities, including the value of equity securities of banking institutions. Neither the Company nor the ESOP has any obligation to seek an adjusted valuation, to use these appraised values for any other purpose or, if the Company or the ESOP obtains a new appraised value, to disclose such new appraised value.
State Bank Employee Stock Ownership Plan
In connection with the Company’s Merger with SCC, the State Bank & Trust Company Employee Stock Ownership Plan (“State Bank ESOP”) was amended on March 17, 2020, to be terminated effective March 31, 2020. As of March 31, 2020, all State Bank ESOP participants were fully vested in their respective account balances, no additional contributions were permitted by either the Company or the State Bank ESOP participants, and no additional participants were permitted to enter the State Bank ESOP. All shares of SCC common stock held in the State Bank ESOP were allocated to participants. The Company has no contribution obligations or compensation expense with respect to the State Bank ESOP. The Company received approval of the termination from the Internal Revenue Service (“IRS”) and all assets held by the State Bank ESOP have been distributed in accordance with its terms.
In connection with the Merger, all shares of SCC common stock held in the State Bank ESOP were converted into shares of the Company’s common stock using the exchange ratio provided for in the Merger Agreement. Distributions from the State Bank ESOP may be either in cash or Company common stock. The shares of Company common stock distributed by the State Bank ESOP were subject to a put option so long as the Company was not publicly traded and the valuation obtained for purposes of the ESOP was used to determine the put option price under the State Bank ESOP. As of September 30, 2021 and December 31, 2020, the State Bank ESOP held zero and 52,204 shares of Company common stock, respectively.
State Bank Defined Contribution Plan
On March 31, 2020, the State Bank & Trust Company 401(k) Plan (“State Bank 401(k)”) was amended to be terminated effective as of the same date in connection with the Merger. As of March 31, 2020, all State Bank 401(k) participants were fully vested in their respective account balances, no additional contributions were permitted by either the Company or the State Bank 401(k) participants, and no additional participants were permitted to enter into the State Bank 401(k). The Company has no contribution obligations or compensation expense with respect to the State Bank 401(k). The Company received approval of the termination from the IRS and has distributed all assets held by the State Bank 401(k) in accordance with its terms.
State Bank Defined Benefit Pension Plan
As a result of the Merger, the Company assumed the Mississippi Southern Bank Pension Plan (“State Bank Pension Plan”), a defined benefit pension plan which was closed to new participants and benefits were frozen effective as of December 31, 2002.
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While no additional benefits accrue, the Company’s cumulative obligation is subject to adjustment due to changes in actuarial assumptions such as expected mortality and changes in interest rates. Net periodic pension costs for the quarterly period ended September 30, 2021 were not material to the Company’s Condensed Consolidated Statements of Income. The Company received approval of the termination of the State Bank Pension Plan from the IRS and plans to distribute all assets held by the State Bank Pension Plan in accordance with its terms as soon as reasonably possible.
Note 11: Equity
The Company’s Articles of Incorporation authorize 10,000,000 shares of preferred stock with no par value, which may be issued from time to time and in one or more classes or series upon authorization of the Board of Directors. At September 30, 2021 and December 31, 2020, there were zero shares of preferred stock issued and outstanding.
Note 12: Stock Based Compensation
Under the Company’s long-term incentive program, certain officers, employees and directors are eligible to receive equity-based awards under the 2018 Long-Term Incentive Plan (“LTIP”). Restricted stock awards (“RSAs”) granted under the LTIP generally vest over one to five years. Unvested RSAs are included in the Company’s common stock outstanding. Compensation expense for RSAs granted under the LTIP is recognized over the vesting period of the awards based on the fair value of the stock at the grant date, with forfeitures recognized as they occur.
Stock based compensation that has been charged against income was $1.7 million for the nine months ended September 30, 2021 and $1.1 million for same period of 2020. There were 1,830 and zero shares forfeited during the nine months ended September 30, 2021 and 2020, respectively. As of September 30, 2021, there was $6.0 million of total unrecognized compensation cost related to unvested RSAs. The cost is expected to be recognized over a remaining weighted average period of 3.0 years.
A summary of the Company’s equity-based award activity and related information for the Company’s RSAs is as follows:
Nine Months Ended | |||||||||||||||||||||||
September 30, 2021 | September 30, 2020 | ||||||||||||||||||||||
Number of Shares | Weighted Average Grant Date Fair Value | Number of Shares | Weighted Average Grant Date Fair Value | ||||||||||||||||||||
Beginning of period | 91,109 | $ | 50.60 | 69,097 | $ | 53.67 | |||||||||||||||||
Granted | 85,147 | 51.59 | 39,155 | 45.36 | |||||||||||||||||||
Vested | (33,545) | 52.03 | (17,143) | 51.03 | |||||||||||||||||||
Forfeited | (1,830) | 49.46 | — | — | |||||||||||||||||||
End of period | 140,881 | $ | 50.88 | 91,109 | $ | 50.60 |
Note 13: Contingencies
On March 20, 2019, a complaint (the “Complaint”), Mills v. BankPlus, et al., Case #3:19-cv-00196-CWR-FKB, was filed in the United States District Court for the Southern District of Mississippi, Northern Division, by Alysson Mills, in her capacity as Court-appointed Receiver for Arthur Lamar Adams (“Adams”) and Madison Timber Properties, LLC (“Madison Timber”), naming the Bank, 3 former Bank employees, 1 then-current Bank employee and other defendants, including defendants affiliated and unaffiliated with the Bank (“Defendants”). The Complaint seeks to recover damages from the Defendants for the benefit of the receivership estate related to certain investors who were allegedly defrauded by Adams and Madison Timber, whose actions were allegedly attributable to the actions of the Defendants that allegedly enabled negligent, illegal or fraudulent activities engaged in by Adams and Madison Timber. A brief description of the cause of action on the cover sheet filed with the Complaint includes securities, civil conspiracy, aiding and abetting, negligence, and other possible causes of action. The amount of damages (including punitive damages) requested against the Defendants in the Complaint is unspecified. On January 4, 2021, the plaintiff, Mills, filed an Amended Complaint. Answers and/or Motions to Dismiss the Amended complaint were filed by the Defendants. On July 8, 2021, the Court denied the Motion to Dismiss filed by the Bank. A related motion for reconsideration was filed by the Bank on August 9, 2021. On September 30, 2021, an order was entered to consolidate for purposes of discovery this case (No.
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3:19-cv-00196-CWR-FKB) with three other related cases filed by Mills, the Receiver. By subsequent text-only order (No. 3:18-cv-00866-CWR-FKB) dated October 10, 2021, the four consolidated cases are stayed until January 31, 2022.
In addition to the above, the Company, including subsidiaries, is party to various legal proceedings arising in the ordinary course of business. We do not believe that loss contingencies, if any, arising from pending litigation and regulatory matters will have a material adverse effect on our consolidated financial position or liquidity.
Note 14: COVID-19
In response to the economic impact of the COVID-19 pandemic, on March 27, 2020, Congress enacted the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. It contained substantial lending, tax and spending provisions, including creating and appropriating an initial $39 billion of funding to the Paycheck Protection Program (“PPP”), designed to aid small and medium-sized businesses through federally guaranteed, forgivable loans distributed by banks. On April 24, 2020, Congress enacted the Paycheck Protection Program and Healthcare Enhancement Act (the “Enhancement Act”) to, among other things, increase the available funding under the PPP by $310 billion to a total of $659 billion. The deadline for the first round of loan applications was August 8, 2020.
The Consolidated Appropriations Act, enacted on December 27, 2020, provided additional funding for the PPP of approximately $284 billion and allowed eligible borrowers, including certain borrowers who already received a PPP loan, to apply for PPP loans through March 31, 2021. Subsequently, the American Rescue Plan Act of 2021, enacted on March 11, 2021, expanded the eligibility criteria for both first and second draw PPP loans and revised the exclusions from payroll costs for purposes of loan forgiveness. The PPP Extension Act of 2021, enacted on March 30, 2021, extended the PPP through May 31, 2021.
As of September 30, 2021, 5,756 Bank PPP loans totaling $348.7 million had been forgiven and paid by the Small Business Administration or paid off by the customer. As of September 30, 2021, the Company held 1,948 loans for customers under the PPP, totaling approximately $101.0 million. The loans have maturities ranging from February 2022 to April 2028. The Company expects to recognize total fee income of approximately $5.2 million over the lives of the remaining loans.
The CARES Act and related guidance from the federal banking agencies also provide financial institutions the option to temporarily suspend requirements under GAAP related to classification of certain loan modifications as TDRs, to account for the current and anticipated effects of COVID-19. The CARES Act, as amended by the Consolidated Appropriations Act, 2021, specified that COVID-19 related loan modifications executed between March 1, 2020 and the earlier of (i) 60 days after the date of termination of the national emergency declared by the President and (ii) January 1, 2022, on loans that were current as of December 31, 2019 are not subject to TDR accounting requirements under GAAP. Additionally, under April 2020 interagency guidance from the federal banking agencies, other short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not TDRs under Accounting Standards Codification Subtopic 310-40, “Troubled Debt Restructuring by Creditors.” These modifications include short-term (e.g., up to six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or delays in payment that are insignificant. The federal banking agencies also have encouraged banks to work with their borrowers to modify loans as may be appropriate.
As of September 30, 2021, the Company had granted temporary modifications on 1,892 outstanding loans totaling approximately $735.0 million, or 20.8% of total outstanding loans, primarily secured by 1-4 family residences and multi-tenant retail commercial real estate. As of September 30, 2021, 3 loans totaling $27.2 million, or 0.8% of the Company’s loan portfolio, were still in deferment.
Economic uncertainties have arisen which may negatively affect the financial position, results of operations and cash flows of the Company. The duration of these uncertainties and ultimate financial effects cannot be reasonably estimated at this time.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Unless otherwise indicated, references in this report to “we”, “us”, “our company”, “the Company”, or “BancPlus” refer to BancPlus Corporation and its subsidiaries, on a consolidated basis. All references to “BankPlus” or “the Bank” refer to BankPlus, our wholly-owned subsidiary.
In November 2020, the Securities and Exchange Commission (the “SEC”) issued Release No. 33-10890 (the “Release”), “Management’s Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information” which will become fully effective for a company’s first fiscal year that ends on or after August 9, 2021, with voluntary compliance permitted on or after February 10, 2021. BancPlus has adopted early this Release in this Quarterly Report on Form 10-Q, and has eliminated from this document the items that are no longer required, including the contractual obligations table, as well as
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incorporating the other required changes intended by the Release to modernize, simplify and enhance certain financial disclosure requirements. The following discussion and analysis of BancPlus’ financial condition and results of operations should be read in conjunction with the unaudited interim condensed consolidated financial statements and related notes contained in Item 1 of this report.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains estimates, predictions, opinions, projections and other “forward-looking statements” as that phrase is defined in the Private Securities Litigation Reform Act of 1995 about BancPlus. Such statements include, without limitation, references to the Company’s predictions or expectations of future business or financial performance as well as its goals and objectives for future operations, financial and business trends, business prospects, and management’s outlook or expectations for earnings, revenues, expenses, capital levels, liquidity levels, asset quality or other future financial or business performance, strategies or expectations, and are subject to risks and uncertainties. These statements often, but not always, are preceded by, followed by or otherwise include the words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “continue,” “seek,” “plan,” “can,” “should,” “could,” “would,” “will,” “to be,” “predict,” “potential,” “may,” “likely,” “will likely result,” “target,” “project” and “outlook” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry based on certain assumptions and beliefs of the Company’s management, many of which, by their nature, are inherently uncertain and beyond the Company’s control. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.
There are or will be important risk factors that could cause actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following:
•the effects of the novel coronavirus and variants thereof, including the delta variant (“COVID-19”) pandemic, on our business, financial condition and results of operations and on our customers, our employees, our third-party service providers and the economy, especially as a vaccine becomes widely available;
•our ability to adequately measure and limit our credit risk;
•factors that can impact the performance of our loan portfolio, including real estate values and liquidity in our primary market areas, the financial health of our commercial borrowers and the success of construction projects that we finance, including any loans acquired in acquisition transactions;
•possible additional loan losses and impairment of the collectability of loans, particularly as a result of the policies and programs implemented by the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, including its automatic loan forbearance provisions, the Paycheck Protection Program (“PPP”) and complying with government-imposed foreclosure moratoriums;
•our ability to prudently manage our growth and execute our strategy;
•our ability to complete the pending acquisition of First Trust Corporation (“FTC”) on the terms proposed, which is subject to a number of conditions, risks and uncertainties, including the possibility that the proposed acquisition does not close when expected or at all because all conditions to closing are not received or satisfied on a timely basis or at all, the failure to close for any other reason, diversion of management time on acquisition-related issues and the reaction to the acquisition of our customers, employees and counterparties;
•our ability to successfully integrate and fully realize the cost savings and other benefits of our acquisitions, manage risks related to business disruption following those acquisitions, and post-acquisition customer acceptance of the Company’s products and services and related customer disintermediation, including our pending acquisition of FTC;
•the composition of our management team and our ability to attract and retain key personnel;
•changes in management personnel;
•geographic concentration of our business within Mississippi, Alabama and Louisiana;
•our ability to attract and retain customers;
•increased competition in the financial services industry, particularly from regional and national institutions;
•further government restrictions on overdraft programs;
•failure of our risk management framework;
•systems failures, unauthorized access, cyber-crime and other threats to data security or interruptions involving our information technology and telecommunications systems or third-party servicers, particularly in light of widespread remote work arrangements due to the COVID-19 pandemic or due to our recent core processing software conversion;
•difficult market conditions and unfavorable economic trends in the United States generally, and particularly in the markets in which we operate and in which our loans are concentrated, including declines in housing markets, an increase in unemployment levels and slowdowns in economic growth, including as a result of the COVID-19 pandemic;
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•our ability to maintain our historical rate of growth;
•our ability to manage the risks associated with our growth and expansion through de novo branching;
•our ability to identify potential candidates for, consummate, and achieve synergies resulting from, potential future acquisitions;
•deterioration of our asset quality;
•changes in the value of collateral securing our loans;
•changes in the laws, rules, regulations, interpretations, policies or stimulus programs relating to financial institution, accounting, tax, trade, monetary and fiscal matters, and the uncertainty of the short- and long-term impacts of such changes;
•further government intervention in the U.S. financial system, particularly in response to the COVID-19 pandemic;
•the effects of regional or national civil unrest (including any resulting branch closures or damage);
•compliance with governmental and regulatory requirements, including relating to banking, consumer protection, securities and tax matters;
•operational risks associated with our business;
•volatility and direction of market interest rates, including as a result of the COVID-19 pandemic;
•our ability to maintain important deposit customer relationships and our reputation or otherwise avoid liquidity risks;
•the obligations associated with being a public reporting company;
•the commencement and outcome of litigation and other legal proceedings against us or to which we may become subject;
•natural disasters and adverse weather, public health crises, acts of terrorism, outbreaks of hostilities or other international or domestic calamities, and other matters beyond our control; and
•other factors that are discussed in the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the annual period ended December 31, 2020, our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2021 and June 30, 2021 and in this Quarterly Report on Form 10-Q.
New factors emerge from time to time, and it is not possible for us to predict which will arise. The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in our Annual Report on Form 10-K for the year ended December 31, 2020, our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2021 and June 30, 2021 and in this Quarterly Report on Form 10-Q. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to publicly update or revise any forward-looking statement, whether written or oral, and whether as a result of new information, future developments or otherwise, except as specifically required by law.
Overview
BancPlus is a bank holding company headquartered in Ridgeland, Mississippi. Its wholly-owned bank subsidiary, BankPlus, offers a full suite of products and services to a broad spectrum of customers, including individuals, businesses and public entities. As of September 30, 2021, we operated 79 branch offices across Mississippi, Louisiana and Alabama. Our franchise is built on a community banking approach focused on personalized, relationship-driven service combined with local market management and expertise. We have one reportable segment.
BancPlus’ business strategy is to provide exceptional community banking services and financial solutions within its markets, which enables us to fulfill our core purpose of enriching lives and building stronger communities. We believe our team of local, experienced and relationship-focused bankers, along with strong brand recognition in our communities, differentiate us from our competitors. As a result, we have a granular, stable deposit mix and a diversified loan portfolio. As of September 30, 2021, BancPlus held $4.530 billion of total deposits, and our deposit base consisted of 96.3% core deposits, defined as total deposits less brokered deposits and time deposits greater than $250,000, with a total deposit cost of 0.18%. Our loan portfolio was comprised of 75.3% commercial loans and 24.7% consumer loans for the same period. BancPlus currently holds meaningful market share in a number of attractive markets in Mississippi, including the number three position based on deposits in the Jackson, Mississippi metropolitan statistical area as of June 30, 2021, and we believe we are well-positioned for future growth.
2021 Third Quarter Highlights
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•Net income for the nine months ended September 30, 2021 was $45.5 million, compared with $27.5 million for the same period of 2020
•Diluted earnings per share for the nine months ended September 30, 2021 were $4.53, compared with $2.96 for the same period of 2020
•Net interest income was $126.8 million for the nine months ended September 30, 2021, compared with $108.0 million for the same period of 2020
•Total loans held for investment were $3.526 billion at September 30, 2021, compared with $3.379 billion at December 31, 2020
Recent Developments
First Trust Corporation
On September 28, 2021, the Company entered in an Agreement and Plan of Share Exchange and Merger (the “definitive agreement”) with FTC, the parent company of First Bank and Trust (“FBT”), whereby the Company will acquire FTC and the Bank will acquire FBT (the “transaction”). The transaction is expected to close in the first quarter of 2022, subject to customary closing conditions, including receipt of required regulatory approvals and the approval by shareholders of FTC.
Other recent developments at September 30, 2021 did not significantly change from the recent developments as of December 31, 2020, which are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020, and as of June 30, 2021 and March 31, 2021, which are disclosed in our Quarterly Reports on Form 10-Q for the quarters ended June 30, 2021 and March 31, 2021.
Results of Operations
The following discussion of BancPlus’ results of operations compares the three and nine months ended September 30, 2021 to the three and nine months ended September 30, 2020. The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2021.
Net Income
Net income for the three months ended September 30, 2021 and 2020 was $14.2 million and $12.6 million, respectively. BancPlus’ annualized return on average assets for the three months ended September 30, 2021 and 2020 was 1.11% and 1.10%, respectively. BancPlus’ annualized return on average equity for the three months ended September 30, 2021 and 2020 was 14.67% and 14.59%, respectively.
Net income for the nine months ended September 30, 2021 and 2020 was $45.5 million and $27.5 million, respectively. BancPlus’ annualized return on average assets for the nine months ended September 30, 2021 and 2020 was 1.22% and 0.92%, respectively. BancPlus’ annualized return on average equity for the nine months ended September 30, 2021 and 2020 was 16.36% and 11.83%, respectively.
Net Interest Income
Net interest income represents interest income less interest expense. BancPlus generates interest income from interest, dividends and fees received on interest-earning assets, including loans and investment securities. BancPlus incurs interest expense from interest paid on interest-bearing liabilities, including interest-bearing deposits, borrowings and other forms of indebtedness. Net interest income typically is the most significant contributor to BancPlus’ net income. To evaluate net interest income, BancPlus measures and monitors: (i) yields on its loans and other interest-earning assets; (ii) the costs of its deposits and other funding sources; (iii) its net interest spread; and (iv) its net interest margin. Net interest spread is the difference between rates earned on interest-earning assets and rates paid on interest-bearing liabilities. Net interest margin is calculated as the annualized net interest income divided by average interest-earning assets. Because noninterest-bearing sources of funds, such as noninterest-bearing deposits and shareholders’ equity, also fund interest-earning assets, net interest margin includes the benefit of these noninterest-bearing sources.
Changes in market interest rates and interest BancPlus earns on interest-earning assets or pays on interest-bearing liabilities, as well as the volume and types of interest-earning assets, interest-bearing and noninterest-bearing liabilities and shareholders’ equity, usually have the largest impact on periodic changes in its net interest spread, net interest margin and net interest income. BancPlus measures net interest income before and after the provision for loan losses that BancPlus maintains.
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For the three months ended September 30, 2021, net interest income was $43.4 million, an increase of $1.5 million, or 3.7%, compared to net interest income of $41.9 million for the three months ended September 30, 2020. The increase in net interest income was primarily the result of increased interest-earning assets as a result of organic loan growth and the increase in our securities portfolio in the current year.
Net interest margin for the three months ended September 30, 2021 decreased 36 basis points to 3.66% from 4.02% for the same period of 2020 as the result of the lower interest rate environment in the current year.
For the nine months ended September 30, 2021, net interest income was $126.8 million, an increase of $18.9 million, or 17.5%, compared to net interest income of $108.0 million for the same period of 2020. The increase was primarily the result of increased interest-earning assets as a result of organic loan growth and the increase in our securities portfolio in the current year.
Net interest margin for the nine months ended September 30, 2021 decreased 25 basis points to 3.65% from 3.90% for the same period of 2020 as the result of the lower interest rate environment in the current year.
Our average interest-earning assets at September 30, 2021, increased $942.0 million, or 25.49%, to $4.637 billion from $3.695 billion at September 30, 2020. BancPlus’ average interest-bearing liabilities at September 30, 2021 increased $556.2 million, or 20.74%, to $3.238 billion from $2.682 billion at September 30, 2020. This increase in BancPlus’ average interest-earning assets and interest-bearing liabilities was primarily due to our previously disclosed merger with State Capital Corp. (“SCC”), in which BancPlus acquired SCC, the holding company of State Bank & Trust Company (“State Bank”) by a statutory share exchange and SCC was merged with and into BancPlus and State Bank was merged with and into BankPlus, with BancPlus and BankPlus surviving the mergers, which closed on April 1, 2020, as well as organic loan growth and increases in our securities portfolio. The ratio of BancPlus’ average interest-earning assets to average interest-bearing liabilities was 143.2% and 137.7% at September 30, 2021 and 2020, respectively.
BancPlus’ average interest-earning assets produced a tax-equivalent yield of 3.93% and 3.94% for the three and nine months ended September 30, 2021, respectively, compared to 4.47% and 4.41% for the three and nine months ended September 30, 2020, respectively. The average rate paid on interest-bearing liabilities was 0.39% and 0.42% for the three and nine months ended September 30, 2021, respectively, compared to 0.63% and 0.70% for the three and nine months ended September 30, 2020, respectively. These year over year decreases in yields reflect the current low interest rate environment.
Average Balances and Yields
The following tables show, for the three and nine months ended September 30, 2021 and 2020, the average balances of each principal category of BancPlus’ assets, liabilities and shareholders’ equity, and an analysis of net interest income. The average balances are principally daily averages and, for loans, include both performing and nonperforming balances. These tables are presented on a tax-equivalent basis, if applicable.
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Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||
2021 | 2020 | ||||||||||||||||||||||||||||||||||
(Dollars in thousands) | Average Balance | Interest & Fees | Yield / Rate (4) | Average Balance | Interest & Fees | Yield / Rate (4) | |||||||||||||||||||||||||||||
ASSETS: | |||||||||||||||||||||||||||||||||||
Interest-earning assets: | |||||||||||||||||||||||||||||||||||
Cash investments: | |||||||||||||||||||||||||||||||||||
Interest-bearing cash deposits | $ | 596,624 | $ | 231 | 0.15 | % | $ | 278,871 | $ | 75 | 0.11 | % | |||||||||||||||||||||||
Federal funds sold | — | — | — | % | 44,307 | 31 | 0.28 | % | |||||||||||||||||||||||||||
596,624 | 231 | 0.15 | % | 323,178 | 106 | 0.13 | % | ||||||||||||||||||||||||||||
Investment securities: | |||||||||||||||||||||||||||||||||||
Taxable investment securities | 549,569 | 2,097 | 1.53 | % | 345,536 | 1,815 | 2.10 | % | |||||||||||||||||||||||||||
Tax-exempt investment securities | 79,118 | 455 | 2.30 | % | 98,198 | 573 | 2.33 | % | |||||||||||||||||||||||||||
Total securities | 628,687 | 2,552 | 1.62 | % | 443,734 | 2,388 | 2.15 | % | |||||||||||||||||||||||||||
Loans (1) | 3,517,978 | 43,835 | 4.98 | % | 3,395,441 | 44,083 | 5.19 | % | |||||||||||||||||||||||||||
Federal Home Loan Bank (“FHLB”) stock | 3,576 | 11 | 1.23 | % | 5,025 | 7 | 0.56 | % | |||||||||||||||||||||||||||
Total interest-earning assets | 4,746,865 | 46,629 | 3.93 | % | 4,167,378 | 46,584 | 4.47 | % | |||||||||||||||||||||||||||
Noninterest-earning assets | 329,425 | 378,971 | |||||||||||||||||||||||||||||||||
Total assets | $ | 5,076,290 | $ | 4,546,349 | |||||||||||||||||||||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY: | |||||||||||||||||||||||||||||||||||
Interest-bearing liabilities: | |||||||||||||||||||||||||||||||||||
Interest-bearing transaction deposits | $ | 1,468,126 | $ | 717 | 0.20 | % | $ | 1,213,970 | $ | 1,313 | 0.43 | % | |||||||||||||||||||||||
Savings and money market deposits | 1,021,448 | 186 | 0.07 | % | 876,706 | 357 | 0.16 | % | |||||||||||||||||||||||||||
Time deposits | 641,501 | 843 | 0.53 | % | 719,566 | 1,523 | 0.85 | % | |||||||||||||||||||||||||||
Federal funds purchased | — | — | — | % | — | — | — | % | |||||||||||||||||||||||||||
FHLB advances | 20,534 | 78 | 1.52 | % | 20,725 | 79 | 1.52 | % | |||||||||||||||||||||||||||
Other borrowings | 11,223 | 110 | 3.92 | % | 14,723 | 144 | 3.91 | % | |||||||||||||||||||||||||||
Subordinated debentures | 111,344 | 1,261 | 4.53 | % | 110,982 | 1,276 | 4.60 | % | |||||||||||||||||||||||||||
Total interest-bearing liabilities | 3,274,176 | 3,195 | 0.39 | % | 2,956,672 | 4,692 | 0.63 | % | |||||||||||||||||||||||||||
Noninterest-bearing liabilities: | |||||||||||||||||||||||||||||||||||
Noninterest-bearing transaction deposits | 1,364,915 | 1,175,118 | |||||||||||||||||||||||||||||||||
Other noninterest-bearing liabilities | 53,245 | 71,018 | |||||||||||||||||||||||||||||||||
Total noninterest-bearing liabilities | 1,418,160 | 1,246,136 | |||||||||||||||||||||||||||||||||
Shareholders’ equity (6) | 383,954 | 343,541 | |||||||||||||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 5,076,290 | $ | 4,546,349 | |||||||||||||||||||||||||||||||
Net interest income/net interest margin (2) | 43,434 | 3.66 | % | 41,892 | 4.02 | % | |||||||||||||||||||||||||||||
Net interest spread (5) | 3.54 | % | 3.84 | % | |||||||||||||||||||||||||||||||
Taxable equivalent adjustment: | |||||||||||||||||||||||||||||||||||
Tax-exempt investment securities (3) | 146 | 184 | |||||||||||||||||||||||||||||||||
Net interest income/net interest margin (2) | $ | 43,580 | 3.67 | % | $ | 42,076 | 4.04 | % |
________________________________
(1)Average loan balances include nonaccrual loans.
(2)Net interest margin during the periods presented represents: (i) the difference between interest income on interest-earning assets and the interest expense on interest-bearing liabilities, divided by (ii) average interest-earning assets for the period.
(3)Interest income and averages rates for tax exempt securities are presented on a tax-equivalent basis, assuming a combined federal and state income tax rate of 25% for 2021 and 2020.
(4)Yields and rates are annualized.
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(5)Net interest spread is the yield on BancPlus’ total interest-earning assets less the yield on its interest-bearing liabilities.
(6)Includes Employee Stock Ownership-owned shares.
Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||
2021 | 2020 | ||||||||||||||||||||||||||||||||||
(Dollars in thousands) | Average Balance | Interest & Fees | Yield / Rate (4) | Average Balance | Interest & Fees | Yield / Rate (4) | |||||||||||||||||||||||||||||
ASSETS: | |||||||||||||||||||||||||||||||||||
Interest-earning assets: | |||||||||||||||||||||||||||||||||||
Cash investments: | |||||||||||||||||||||||||||||||||||
Interest-bearing cash deposits | $ | 559,746 | $ | 465 | 0.11 | % | $ | 283,267 | $ | 1,046 | 0.49 | % | |||||||||||||||||||||||
Federal funds sold | 7,070 | 11 | 0.21 | % | 55,101 | 241 | 0.58 | % | |||||||||||||||||||||||||||
566,816 | 476 | 0.11 | % | 338,368 | 1,287 | 0.51 | % | ||||||||||||||||||||||||||||
Investment securities: | |||||||||||||||||||||||||||||||||||
Taxable investment securities | 511,923 | 6,024 | 1.57 | % | 392,228 | 5,157 | 1.75 | % | |||||||||||||||||||||||||||
Tax-exempt investment securities | 84,939 | 1,473 | 2.31 | % | 47,192 | 1,942 | 5.49 | % | |||||||||||||||||||||||||||
Total securities | 596,862 | 7,497 | 1.67 | % | 439,420 | 7,099 | 2.15 | % | |||||||||||||||||||||||||||
Loans (1) | 3,469,520 | 129,066 | 4.96 | % | 2,912,471 | 113,710 | 5.21 | % | |||||||||||||||||||||||||||
FHLB stock | 3,509 | 17 | 0.65 | % | 4,481 | 42 | 1.25 | % | |||||||||||||||||||||||||||
Total interest-earning assets | 4,636,707 | 137,056 | 3.94 | % | 3,694,740 | 122,138 | 4.41 | % | |||||||||||||||||||||||||||
Noninterest-earning assets | 333,231 | 316,742 | |||||||||||||||||||||||||||||||||
Total assets | $ | 4,969,938 | $ | 4,011,482 | |||||||||||||||||||||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY: | |||||||||||||||||||||||||||||||||||
Interest-bearing liabilities: | |||||||||||||||||||||||||||||||||||
Interest-bearing transaction deposits | $ | 1,452,965 | $ | 2,278 | 0.21 | % | $ | 1,175,152 | $ | 4,691 | 0.53 | % | |||||||||||||||||||||||
Savings and money market deposits | 982,220 | 696 | 0.09 | % | 779,321 | 1,973 | 0.34 | % | |||||||||||||||||||||||||||
Time deposits | 659,361 | 2,899 | 0.59 | % | 615,619 | 4,595 | 1.00 | % | |||||||||||||||||||||||||||
Federal funds purchased | — | — | — | % | 201 | 2 | 1.33 | % | |||||||||||||||||||||||||||
FHLB advances | 20,567 | 233 | 1.51 | % | 22,222 | 239 | 1.43 | % | |||||||||||||||||||||||||||
Other borrowings | 12,087 | 352 | 3.88 | % | 15,585 | 453 | 3.88 | % | |||||||||||||||||||||||||||
Subordinated debentures | 111,248 | 3,760 | 4.51 | % | 74,151 | 2,220 | 3.99 | % | |||||||||||||||||||||||||||
Total interest-bearing liabilities | 3,238,448 | 10,218 | 0.42 | % | 2,682,251 | 14,173 | 0.70 | % | |||||||||||||||||||||||||||
Noninterest-bearing liabilities: | |||||||||||||||||||||||||||||||||||
Noninterest-bearing transaction deposits | 1,306,105 | 948,275 | |||||||||||||||||||||||||||||||||
Other noninterest-bearing liabilities | 53,169 | 70,339 | |||||||||||||||||||||||||||||||||
Total noninterest-bearing liabilities | 1,359,274 | 1,018,614 | |||||||||||||||||||||||||||||||||
Shareholders’ equity (6) | 372,216 | 310,617 | |||||||||||||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 4,969,938 | $ | 4,011,482 | |||||||||||||||||||||||||||||||
Net interest income/net interest margin (2) | 126,838 | 3.65 | % | 107,965 | 3.90 | % | |||||||||||||||||||||||||||||
Net interest spread (5) | 3.52 | % | 3.70 | % | |||||||||||||||||||||||||||||||
Taxable equivalent adjustment: | |||||||||||||||||||||||||||||||||||
Tax-exempt investment securities (3) | 474 | 638 | |||||||||||||||||||||||||||||||||
Net interest income/net interest margin (2) | $ | 127,312 | 3.66 | % | $ | 108,603 | 3.92 | % |
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(1)Average loan balances include nonaccrual loans.
(2)Net interest margin during the periods presented represents: (i) the difference between interest income on interest-earning assets and the interest expense on interest-bearing liabilities, divided by (ii) average interest-earning assets for the period.
(3)Interest income and averages rates for tax exempt securities are presented on a tax-equivalent basis, assuming a combined federal and state income tax rate of 25% for 2021 and 2020.
(4)Yields and rates are annualized.
(5)Net interest spread is the yield on BancPlus’ total interest-earning assets less the yield on its interest-bearing liabilities.
(6)Includes Employee Stock Ownership-owned shares.
Rate/Volume Analysis
Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates. The following table presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities. It distinguishes between the changes related to the outstanding balances and those due to changes in interest rates. The change in interest attributable to rate has been determined by applying the change in rate between periods to average balances outstanding in the earlier period. The change in interest due to volume has been determined by applying the rate from the later period to the change in average balances outstanding between periods. The following table presents the changes in the volume and rate of BancPlus’ interest-bearing assets and liabilities for the dates indicated:
Three Months Ended September 30, 2021 Compared with Three Months Ended September 30, 2020 | |||||||||||||||||
Change Due To: | |||||||||||||||||
(Dollars in thousands) | Volume | Rate | Interest Variance | ||||||||||||||
Interest-earning assets: | |||||||||||||||||
Cash investments | $ | 106 | $ | 19 | $ | 125 | |||||||||||
Investment securities: | |||||||||||||||||
Taxable investment securities | 779 | (497) | 282 | ||||||||||||||
Tax-exempt investment securities | (110) | (8) | (118) | ||||||||||||||
Total securities | 669 | (505) | 164 | ||||||||||||||
Loans, net | 1,527 | (1,775) | (248) | ||||||||||||||
Federal Home Loan Bank stock | (4) | 8 | 4 | ||||||||||||||
Total interest-earning assets | $ | 2,298 | $ | (2,253) | $ | 45 | |||||||||||
Interest-bearing liabilities: | |||||||||||||||||
Interest-bearing transaction deposits | $ | 124 | $ | (720) | $ | (596) | |||||||||||
Savings and money market deposits | 26 | (197) | (171) | ||||||||||||||
Time deposits | (103) | (577) | (680) | ||||||||||||||
Federal funds purchased | — | — | — | ||||||||||||||
FHLB advances | (1) | — | (1) | ||||||||||||||
Other borrowings | (34) | — | (34) | ||||||||||||||
Subordinated debentures | 4 | (19) | (15) | ||||||||||||||
Total interest-bearing liabilities | $ | 16 | $ | (1,513) | $ | (1,497) | |||||||||||
Net interest income | $ | 2,282 | $ | (740) | $ | 1,542 |
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Nine Months Ended September 30, 2021 Compared with Nine Months Ended September 30, 2020 | |||||||||||||||||
Change Due To: | |||||||||||||||||
(Dollars in thousands) | Volume | Rate | Interest Variance | ||||||||||||||
Interest-earning assets: | |||||||||||||||||
Cash investments | $ | 192 | $ | (1,003) | $ | (811) | |||||||||||
Investment securities: | |||||||||||||||||
Taxable investment securities | 1,408 | (541) | 867 | ||||||||||||||
Tax-exempt investment securities | 655 | (1,124) | (469) | ||||||||||||||
Total securities | 2,063 | (1,665) | 398 | ||||||||||||||
Loans, net | 20,722 | (5,366) | 15,356 | ||||||||||||||
Federal Home Loan Bank stock | (5) | (20) | (25) | ||||||||||||||
Total interest-earning assets | $ | 22,972 | $ | (8,054) | $ | 14,918 | |||||||||||
Interest-bearing liabilities: | |||||||||||||||||
Interest-bearing transaction deposits | $ | 436 | $ | (2,849) | $ | (2,413) | |||||||||||
Savings and money market deposits | 144 | (1,421) | (1,277) | ||||||||||||||
Time deposits | 192 | (1,888) | (1,696) | ||||||||||||||
Federal funds purchased | — | (2) | (2) | ||||||||||||||
FHLB advances | (19) | 13 | (6) | ||||||||||||||
Other borrowings | (102) | 1 | (101) | ||||||||||||||
Subordinated debentures | 1,254 | 286 | 1,540 | ||||||||||||||
Total interest-bearing liabilities | $ | 1,905 | $ | (5,860) | $ | (3,955) | |||||||||||
Net interest income | $ | 21,067 | $ | (2,194) | $ | 18,873 |
Provision for Loan Losses
The provision for loan losses is the amount of expense that, based on BancPlus’ judgment, is required to maintain the allowance for loan losses at an adequate level to absorb probable losses inherent in the loan portfolio at the balance sheet date and that, in management’s judgment, is appropriate under relevant accounting guidance. The determination of the provision for loan losses is complex and involves a high degree of judgment and subjectivity.
For the three months ended September 30, 2021, the provision for loan losses was $1.5 million, compared to $4.7 million for the same period of 2020, a decrease of $3.2 million, or 68.6%. For the nine months ended September 30, 2021, the provision for loan losses was $7.4 million, compared to $7.7 million for the same period of 2020, a decrease of $311,000, or 4.0%. The decrease for these year to date periods is primarily attributable to the impact of the COVID-19 pandemic on the prior year period, including the impact of the CARES Act measures to support individuals and businesses in maintaining solvency through monetary relief, including in the form of financing, loan forgiveness and automatic forbearance.
Noninterest Income
Noninterest income consists of, among other things: (i) service charges on deposit accounts; (ii) mortgage origination income; (iii) debit card interchange fees; (iv) income from fiduciary activities; (v) ATM income; and (vi) other noninterest income. BancPlus’ income from service charges on deposit accounts and debit card interchange fees are largely impacted by the volume, growth and type of deposits BancPlus holds, which are impacted by prevailing market conditions for BancPlus’ deposit products, market interest rates, marketing efforts, and other factors.
Service charges on deposit accounts includes fees and miscellaneous charges on deposit products offered by BancPlus. Mortgage origination income represents the gains recorded on the sale of mortgages originated by BancPlus. Debit card interchange represents income from the use of checkcards by our customers. Income from fiduciary activities includes retirement and management fee income from our wealth management group. ATM income is comprised of fees from our ATM network. Other
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income includes various types of income including gains on sale of other real estate, personalized check sales, and wire transfer fees.
Noninterest income was $19.1 million for the three months ended September 30, 2021, compared to $18.6 million for the same period of 2020, an increase of $441,000, or 2.4%, primarily due to increases in service charges on deposit accounts of $1.8 million, or 31.5%; debit card interchange of $481,000, or 25.2%; income from fiduciary activities of $436,000 or 27.6%; life insurance income of $598,000, or 105.7%; partially offset by decreases in other income of $1.8 million, or 60.8%, and mortgage origination income of $828,000, or 29.3%.
The following table presents the major components of noninterest income for three months ended September 30, 2021, compared to the three months ended September 30, 2020:
Three Months Ended September 30, | |||||||||||||||||||||||
(Dollars in thousands) | 2021 | 2020 | $ Change | % Change | |||||||||||||||||||
Noninterest income: | |||||||||||||||||||||||
Service charges on deposit accounts | $ | 7,484 | $ | 5,690 | $ | 1,794 | 31.5 | % | |||||||||||||||
Mortgage origination income | 1,999 | 2,827 | (828) | (29.3) | % | ||||||||||||||||||
Debit card interchange | 2,390 | 1,909 | 481 | 25.2 | % | ||||||||||||||||||
Income from fiduciary activities | 2,015 | 1,579 | 436 | 27.6 | % | ||||||||||||||||||
ATM income | 1,566 | 1,754 | (188) | (10.7) | % | ||||||||||||||||||
Brokerage and insurance fees and commissions | 648 | 533 | 115 | 21.6 | % | ||||||||||||||||||
Life insurance income | 1,164 | 566 | 598 | 105.7 | % | ||||||||||||||||||
Community Development Financial Institution (“CDFI”) grants | 645 | 823 | (178) | (21.6) | % | ||||||||||||||||||
Other income | 1,155 | 2,944 | (1,789) | (60.8) | % | ||||||||||||||||||
Total | $ | 19,066 | $ | 18,625 | $ | 441 | 2.4 | % |
Service charges on deposit accounts increased $1.8 million, or 31.5%, to $7.5 million for the three months ended September 30, 2021, compared to $5.7 million for the same period of 2020. The increase was the result of the impact on the prior year period of increased customer liquidity as a result of various economic stimulus programs and reduced customer spending as a result of quarantine restrictions related to the COVID-19 pandemic.
Debit card interchange increased $481,000, or 25.2%, to $2.4 million for the three months ended September 30, 2021, compared to $1.9 million for the same period of 2020. The increase was attributable to increased card spending and transaction levels for the current year period compared to the same period of 2020 which was negatively affected by quarantine restrictions related to the COVID-19 pandemic.
Income from fiduciary activities increased $436,000, or 27.6%, to $2.0 million for the three months ended September 30, 2021, compared to $1.6 million for the same period of 2020. The increase is primarily attributable to increases in assets under management as a result of higher equity markets in the current year.
Life insurance income increased $598,000, or 105.7%, to $1.2 million for the three months ended September 30, 2021, compared to $566,000 for the same period of 2020. The increase is primarily related to death benefits paid in the current year on policies held by the BancPlus.
Mortgage origination income decreased $828,000, or 29.3%, to $2.0 million for the three months ended September 30, 2021, compared to $2.8 million for the same period of 2020. The decrease was primarily the result of decreased mortgage origination activity in the three months ended September 30, 2021 as refinancing activity began to slow from increased levels seen over the previous 12 months.
Other income decreased $1.8 million, or 60.8%, to $1.2 million for the three months ended September 30, 2021, compared to $2.9 million for the same period of 2020. The decrease was primarily the result of the gain on the bargain purchase of $1.1 million recorded in the prior year period related to the merger with SCC.
Noninterest income was $58.1 million for the first nine months of 2021, compared to $45.4 million for the first nine months of 2020, an increase of $12.7 million, or 28.0%, primarily due to increases in service charges on deposit accounts of $2.6, or 15.3%;
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mortgage origination income of $752,000, or 12.6%; debit card interchange of $2.2 million, or 41.1%; income from fiduciary activities of $1.1 million, or 23.9%; ATM income of $835,000, or 21.0%; life insurance income of $4.3 million, or 284.1%; and CDFI grants of $1.6 million, or 200.2%; partially offset by a decrease in other income of $1.0 million, or 20.9%.
The following table presents the major components of noninterest income for the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020:
Nine Months Ended September 30, | |||||||||||||||||||||||
(Dollars in thousands) | 2021 | 2020 | $ Change | % Change | |||||||||||||||||||
Noninterest income: | |||||||||||||||||||||||
Service charges on deposit accounts | $ | 19,226 | $ | 16,674 | $ | 2,552 | 15.3 | % | |||||||||||||||
Mortgage origination income | 6,726 | 5,974 | 752 | 12.6 | % | ||||||||||||||||||
Debit card interchange | 7,634 | 5,412 | 2,222 | 41.1 | % | ||||||||||||||||||
Income from fiduciary activities | 5,681 | 4,585 | 1,096 | 23.9 | % | ||||||||||||||||||
ATM income | 4,809 | 3,974 | 835 | 21.0 | % | ||||||||||||||||||
Brokerage and insurance fees and commissions | 1,802 | 1,516 | 286 | 18.9 | % | ||||||||||||||||||
Life insurance income | 5,858 | 1,525 | 4,333 | 284.1 | % | ||||||||||||||||||
CDFI grants | 2,471 | 823 | 1,648 | 200.2 | % | ||||||||||||||||||
Other income | 3,873 | 4,899 | (1,026) | (20.9) | % | ||||||||||||||||||
Total | $ | 58,080 | $ | 45,382 | $ | 12,698 | 28.0 | % |
Service charges on deposit accounts increased $2.6 million, or 15.3%, to $19.2 million for the nine months ended September 30, 2021, compared to $16.7 million for the same period of 2020. The increase was the result of the impact on the prior year period of increased customer liquidity as a result of various economic stimulus programs and reduced customer spending as a result of quarantine restrictions related to the COVID-19 pandemic.
Mortgage origination income increased $752,000, or 12.6%, to $6.7 million for the nine months ended September 30, 2021, compared to $6.0 million for the same period of 2020. The increase primarily related to increased mortgage origination activity in the first nine months of the current year as a result of the lower interest rate environment seen for much of 2021.
Debit card interchange increased $2.2 million, or 41.1%, to $7.6 million for the nine months ended September 30, 2021, compared to $5.4 million for the same period of 2020. The increase was attributable to increased card spending and transaction levels for the current year period compared to the same period of 2020 which was negatively affected by quarantine restrictions related to the COVID-19 pandemic as well as an additional three months of income in 2021 related to the merger with SCC.
Income from fiduciary activities increased $1.1 million, or 23.9%, to $5.7 million for the nine months ended September 30, 2021, compared to the $4.6 million for the same period of 2020. The increase is primarily attributable to increases in assets under management as a result of higher equity markets in the current year.
ATM income increased $835,000, or 21.0%, to $4.8 million for the nine months ended September 30, 2021, compared to $4.0 million for the same period of 2020. The increase is primarily related to increases in ATM usage in the current year period compared to same period of 2020 which was negatively affected by quarantine restrictions related to the COVID-19 pandemic as well as an additional three months of income in 2021 related to the merger with SCC.
Life insurance income increased $4.3 million, or 284.1%, to $5.9 million for the nine months ended September 30, 2021, compared to $1.5 million for the same period of 2020. The increase is primarily related to death benefits paid in the current year on policies held by BancPlus.
CDFI grant income increased $1.6 million, or 200.2%, to $2.5 million for the nine months ended September 30, 2021 from $823,000 for the same period of 2020. The current year period includes a $1.8 million grant received related to the CDFI Rapid Response Program, which was created in 2021 by the U.S. Department of the Treasury to provide capital for CDFI designated banks to respond to the economic challenges created by the COVID-19 pandemic.
Other income decreased $1.0 million, or 20.9%, to $3.9 million for the nine months ended September 30, 2021, compared to $4.9 million for the same period of 2020. The decrease was primarily the result of the gain on the bargain purchase of $1.1 million recorded in the prior year period related to the merger with SCC.
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Noninterest Expense
Noninterest expense includes: (i) salaries and employee benefits expenses; (ii) net occupancy expenses; (iii) furniture, equipment, and data processing expenses; (iv) marketing and promotional expenses; (v) other real estate expenses and losses; (vi) professional fees; and (vii) other expenses.
Salaries and employee benefits expenses includes compensation, employee benefits and tax expenses for BancPlus’ personnel. Net occupancy expenses include depreciation expense on BancPlus’ owned properties, lease expense on its leased properties and other occupancy-related expenses. Furniture and equipment expenses include depreciation and maintenance and other expenses related to its furniture, fixtures and equipment. Data processing expenses include costs related to maintenance and monitoring of its systems and expenses paid to its third-party data processing system providers. Marketing and promotional expenses include costs for advertising, promotions and sponsorships. Other real estate expenses and losses include taxes, insurance, maintenance and other expenses related to BancPlus’ foreclosed properties. Professional fees include accounting and auditing, consulting and legal fees. Other expenses include expenses associated with Federal Deposit Insurance Corporation (“FDIC”) assessments, Mississippi Department of Banking and Consumer Finance (“MDBCF”) assessments, communications, travel, meals, training, supplies and postage. Noninterest expenses generally increase as BancPlus grows its business. Noninterest expenses have increased commensurate with our growth over the past few years as BancPlus has grown organically and through the merger with SCC. Additionally, BancPlus has built out and modernized its operational infrastructure and implemented its plan to build an efficient, technology-driven banking operation with capacity for growth. BancPlus continues to focus efforts on supporting growth through sales efforts, product development, marketing and promotion, as well as investing in technology and its branch network, while also seeking to improve productivity and maintain appropriate cost structure and customer service levels.
For the three months ended September 30, 2021, noninterest expense totaled $42.8 million, an increase of $2.9 million, or 7.3%, from $39.9 million for the three months ended September 30, 2020, primarily due to increases in salaries and employee benefits expenses of $2.1 million, or 8.9%.
The following table presents the major components of noninterest expense for the three months ended September 30, 2021 compared to the three months ended September 30, 2020:
Three Months Ended September 30, | |||||||||||||||||||||||
(Dollars in thousands) | 2021 | 2020 | $ Change | % Change | |||||||||||||||||||
Noninterest expense: | |||||||||||||||||||||||
Salaries and employee benefits expenses | $ | 25,218 | $ | 23,162 | $ | 2,056 | 8.9 | % | |||||||||||||||
Net occupancy expenses | 3,606 | 3,459 | 147 | 4.2 | % | ||||||||||||||||||
Furniture, equipment and data processing expenses | 6,282 | 5,801 | 481 | 8.3 | % | ||||||||||||||||||
Marketing and promotional expenses | 1,154 | 1,000 | 154 | 15.4 | % | ||||||||||||||||||
Other real estate expenses and losses | 292 | 230 | 62 | 27.0 | % | ||||||||||||||||||
Professional fees | 1,232 | 1,651 | (419) | (25.4) | % | ||||||||||||||||||
Other expenses | 5,038 | 4,609 | 429 | 9.3 | % | ||||||||||||||||||
Total | $ | 42,822 | $ | 39,912 | $ | 2,910 | 7.3 | % |
Salaries and employee benefits expenses is the largest component of noninterest expense, representing 58.9% and 58.0% of total noninterest expense for the three months ended September 30, 2021 and 2020, respectively. During the three months ended September 30, 2021, salaries and employee benefits expense increased $2.1 million, or 8.9%, to $25.2 million, compared to $23.2 million for the three months ended September 30, 2020. The increase in salaries and employee benefits expense is primarily due to increased bonuses and normal annual salary increases for employees, as well as increased salary-related expenses in the third quarter of 2021 related to the Company’s recent core software conversion.
For the nine months ended September 30, 2021, noninterest expense totaled $121.4 million, an increase of $10.9 million, or 9.8%, from $110.5 million for the nine months ended September 30, 2020, primarily due to increases in salaries and employee benefits expenses of $7.0 million, or 10.7%; net occupancy expenses of $1.1 million, or 11.0%, furniture, equipment and data processing of $2.7 million, or 17.3%, and other expenses of $2.4 million, or 20.0%, partially offset by a decrease in professional fees of $2.2 million, or 46.7%.
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The following table presents the major components of noninterest expense for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020:
Nine Months Ended September 30, | |||||||||||||||||||||||
(Dollars in thousands) | 2021 | 2020 | $ Change | % Change | |||||||||||||||||||
Noninterest expense: | |||||||||||||||||||||||
Salaries and employee benefits expenses | $ | 72,365 | $ | 65,349 | $ | 7,016 | 10.7 | % | |||||||||||||||
Net occupancy expenses | 10,779 | 9,709 | 1,070 | 11.0 | % | ||||||||||||||||||
Furniture, equipment and data processing expenses | 18,322 | 15,621 | 2,701 | 17.3 | % | ||||||||||||||||||
Marketing and promotional expenses | 2,485 | 2,787 | (302) | (10.8) | % | ||||||||||||||||||
Other real estate expenses and losses | 744 | 506 | 238 | 47.0 | % | ||||||||||||||||||
Professional fees | 2,514 | 4,718 | (2,204) | (46.7) | % | ||||||||||||||||||
Other expenses | 14,188 | 11,823 | 2,365 | 20.0 | % | ||||||||||||||||||
Total | $ | 121,397 | $ | 110,513 | $ | 10,884 | 9.8 | % |
Salaries and employee benefits expenses is the largest component of noninterest expense, representing 59.6% and 59.1% of total noninterest expense for the nine months ended September 30, 2021 and 2020, respectively. During the nine months ended September 30, 2021, salaries and employee benefits expense increased $7.0 million, or 10.7%, to $72.4 million, compared to $65.3 million for the nine months ended September 30, 2020. The increase in salaries and employee benefits expenses is primarily due to the merger with SCC in addition to normal annual salary increases for employees.
Net occupancy expenses increased $1.1 million, or 11.0%, to $10.8 million for the nine months ended September 30, 2021, compared to $9.7 million for the nine months ended September 30, 2020. The increase was primarily attributable to increased maintenance expenses in the current year period related to the upkeep of branches across our footprint.
Furniture, equipment and data processing expenses for the nine months ended September 30, 2021 was $18.3 million, an increase of $2.7 million, or 17.3%, compared to $15.6 million for the nine months ended September 30, 2020. This increase was primarily attributable to increases in depreciation, data processing and software expenses resulting from the merger with SCC in addition to expenses related to BancPlus’ software conversion during the third quarter of 2021.
Professional fees decreased $2.2 million, or 46.7%, to $2.5 million for the nine months ended September 30, 2021, compared to $4.7 million for the nine months ended September 30, 2020, primarily due to expenses incurred in the same period of 2020 related to the merger with SCC.
Other expenses increased $2.4 million, or 20.0%, to $14.2 million for the nine months ended September 30, 2021, compared to $11.8 million for the nine months ended September 30, 2020, primarily due to an increase in FDIC and state assessment fees as a result of increased deposits as well as the merger with SCC.
Income Tax Expense
The provision for income taxes includes both federal and state taxes. Fluctuations in effective tax rates reflect the effect of the differences in the inclusion or deductibility of certain income and expenses for income tax purposes, the mix of BancPlus’ taxable and tax-free investments and loans, and its overall taxable income.
BancPlus recorded income tax expense of $4.0 million for the three months ended September 30, 2021, compared to $3.3 million for the same period of 2020, an increase of $678,000, or 20.3%. BancPlus’ effective tax rate for the three months ended September 30, 2021 was 22.0%, compared to 20.9% for the same period of 2020.
BancPlus recorded income tax expense of $10.6 million for the nine months ended September 30, 2021, compared to $7.6 million for the same period of 2020, an increase of $3.0 million, or 39.1%. BancPlus’ effective tax rate for the nine months ended September 30, 2021 was 18.9%, compared to 21.7% for the same period of 2020.
For both the three and nine month periods, the increase in income tax expense was the result of larger income before taxes in the current year period. The increase in the effective tax rate for the three months ended September 30, 2021 compared with the same period of 2020 was the result of the impact on the prior year period of permanent tax items. The decrease in effective tax rate for
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the year to date periods was the result of BancPlus taking advantage of tax credits offered by Mississippi in the current year, non-taxable life insurance proceeds recorded in 2021, and apportionment of state taxable income to Louisiana which exempts banks that pay a state tax on their shares of stock from their corporate income tax. BancPlus’ Louisiana locations were acquired in the merger with SCC.
Financial Condition
The following discussion compares BancPlus’ financial condition as of September 30, 2021 to December 31, 2020.
Assets
Total assets increased $402.4 million, or 8.5%, to $5.113 billion at September 30, 2021 from total assets of $4.711 billion at December 31, 2020. Total cash and cash equivalents increased $57.5 million, or 9.0%, to $695.1 million at September 30, 2021, compared to $637.5 million at December 31, 2020, primarily due to increases in interest bearing deposits with banks. Total loans increased $147.4 million, or 4.4%, to $3.526 billion at September 30, 2021, compared to $3.379 billion at December 31, 2020 as a result of organic loan growth. Investment securities increased $214.2 million, or 52.9%, from $405.1 million at December 31, 2020 to $619.3 million at September 30, 2021 as a result of increased purchases of available for sale securities.
Investment Securities Portfolio
BancPlus’ investment securities portfolio, which consists primarily of U.S. government agency obligations, mortgage-backed securities, municipal securities and corporate investments, is used as a source of liquidity and serves as collateral for certain types of deposits. BancPlus manages its investment securities portfolio according to a written investment policy. Balances in BancPlus’ investment securities portfolio change over time based on its funding needs and interest rate risk management objectives. BancPlus’ liquidity levels take into account anticipated future cash flows and all available sources of credit and are maintained at levels management believes ensure flexibility in meeting its anticipated funding needs.
As of September 30, 2021, 12.7% of BancPlus’ investment securities portfolio was classified as held to maturity and 87.3% was classified as available for sale. As of December 31, 2020, 23.1% of BancPlus’ investment securities portfolio was classified as held to maturity and 76.9% was classified as available for sale. Securities available for sale increased $229.5 million, or 73.7%, from $311.4 million at December 31, 2020 to $540.9 million at September 30, 2021. Early in the period, BancPlus took advantage of the steeper yield curve to invest excess liquidity. BancPlus used a disciplined approach to build a ladder of non-callable state tax-exempt agency bonds. As market conditions allow, BancPlus will continue this strategy to enhance net interest margin and provide predictable cash flows for future loan demand.
At September 30, 2021, U.S. government agency obligations represented 48.4%, mortgage-backed securities represented 22.1%, municipal securities represented 20.2% and corporate investments represented 7.1% of the investment securities portfolio. At December 31, 2020, mortgage-backed securities represented 50.5%, municipal securities represented 34.7%, corporate investments represented 8.2% and U.S. government agency obligations represented 3.1% of the investment securities portfolio. Other than the U.S. government and its agencies, BancPlus’ securities portfolio did not contain securities of any single issuer, including any securities issued by a state or political subdivision, that were payable from and secured by the same source of revenue or taxing authority where the aggregate carrying value of such securities exceeded 10% of shareholders’ equity.
The following table presents the carrying value of BancPlus’ investment securities portfolio as of the dates indicated:
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September 30, 2021 | December 31, 2020 | |||||||||||||||||||||||||
(Dollars in thousands) | Carrying Value | % of Total | Carrying Value | % of Total | ||||||||||||||||||||||
Held to Maturity: | ||||||||||||||||||||||||||
(At amortized cost) | ||||||||||||||||||||||||||
Issued by states and political subdivisions | $ | 78,423 | 12.66 | % | $ | 93,766 | 23.14 | % | ||||||||||||||||||
Total held-to-maturity | 78,423 | 12.66 | % | 93,766 | 23.14 | % | ||||||||||||||||||||
Available for Sale: | ||||||||||||||||||||||||||
(At fair value) | ||||||||||||||||||||||||||
U.S. Government agency obligations | 299,841 | 48.42 | % | 12,434 | 3.07 | % | ||||||||||||||||||||
Issued by states and political subdivisions | 46,613 | 7.53 | % | 46,801 | 11.55 | % | ||||||||||||||||||||
Mortgage-backed securities: | ||||||||||||||||||||||||||
Residential | 121,846 | 19.67 | % | 187,212 | 46.21 | % | ||||||||||||||||||||
Commercial | 14,894 | 2.40 | % | 17,331 | 4.28 | % | ||||||||||||||||||||
Asset-backed securities | 13,539 | 2.19 | % | 14,447 | 3.57 | % | ||||||||||||||||||||
Corporate investments | 44,150 | 7.13 | % | 33,148 | 8.18 | % | ||||||||||||||||||||
Total available for sale | 540,883 | 87.34 | % | 311,373 | 76.86 | % | ||||||||||||||||||||
Total securities | $ | 619,306 | 100.00 | % | $ | 405,139 | 100.00 | % |
The following tables present the carrying value of BancPlus’ investment securities portfolio by their stated maturities and the weighted average yields for each maturity range as of the dates indicated. Weighted-average yields have been computed on a fully tax equivalent basis using a tax rate of 21%.
Maturity as of September 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||
Due in One Year or Less | More Than One Year to Five Years | More Than Five Years to Ten Years | Due After Ten Years | ||||||||||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | Amount | Weighted Average Yield | Amount | Weighted Average Yield | Amount | Weighted Average Yield | Amount | Weighted Average Yield | |||||||||||||||||||||||||||||||||||||||
Held to maturity: | |||||||||||||||||||||||||||||||||||||||||||||||
Issued by states and political subdivisions | $ | 12,437 | 3.19 | % | $ | 46,344 | 2.81 | % | $ | 16,887 | 2.54 | % | $ | 2,755 | 4.17 | % | |||||||||||||||||||||||||||||||
Total held to maturity | 12,437 | 3.19 | % | 46,344 | 2.81 | % | 16,887 | 2.54 | % | 2,755 | 4.17 | % | |||||||||||||||||||||||||||||||||||
Available for sale: | |||||||||||||||||||||||||||||||||||||||||||||||
U.S. Government agency obligations | 5,037 | 2.60 | % | 163,773 | 0.45 | % | 126,630 | 1.19 | % | 4,402 | 1.75 | % | |||||||||||||||||||||||||||||||||||
Issued by states and political subdivisions | 2,346 | 4.64 | % | 14,770 | 2.64 | % | 22,141 | 3.13 | % | 7,356 | 3.17 | % | |||||||||||||||||||||||||||||||||||
Mortgage-backed securities: | |||||||||||||||||||||||||||||||||||||||||||||||
Residential | — | — | % | — | — | % | 4,650 | 1.85 | % | 117,196 | 2.41 | % | |||||||||||||||||||||||||||||||||||
Commercial | — | — | % | — | — | % | 13,659 | 1.54 | % | 1,234 | 2.48 | % | |||||||||||||||||||||||||||||||||||
Asset-backed securities | — | — | % | — | — | % | — | — | % | 13,539 | 1.88 | % | |||||||||||||||||||||||||||||||||||
Corporate investments | 4,019 | 2.13 | % | 498 | 2.75 | % | 38,571 | 4.14 | % | 1,062 | 4.50 | % | |||||||||||||||||||||||||||||||||||
Total available for sale | 11,402 | 2.85 | % | 179,041 | 0.64 | % | 205,651 | 1.99 | % | 144,789 | 2.39 | % | |||||||||||||||||||||||||||||||||||
Total securities | $ | 23,839 | 3.03 | % | $ | 225,385 | 1.08 | % | $ | 222,538 | 2.03 | % | $ | 147,544 | 2.43 | % |
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Maturity as of December 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||
Due in One Year or Less | More Than One Year to Five Years | More Than Five Years to Ten Years | Due After Ten Years | ||||||||||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | Amount | Weighted Average Yield | Amount | Weighted Average Yield | Amount | Weighted Average Yield | Amount | Weighted Average Yield | |||||||||||||||||||||||||||||||||||||||
Held to maturity: | |||||||||||||||||||||||||||||||||||||||||||||||
Issued by states and political subdivisions | $ | 15,891 | 3.02 | % | $ | 50,738 | 4.05 | % | $ | 24,247 | 3.67 | % | $ | 2,890 | 3.85 | % | |||||||||||||||||||||||||||||||
Total held to maturity | 15,891 | 3.02 | % | 50,738 | 4.05 | % | 24,247 | 3.67 | % | 2,890 | 3.85 | % | |||||||||||||||||||||||||||||||||||
Available for sale: | |||||||||||||||||||||||||||||||||||||||||||||||
U.S. Government agency obligations | — | — | % | 5,128 | 2.60 | % | 2,508 | 3.19 | % | 4,798 | 1.78 | % | |||||||||||||||||||||||||||||||||||
Issued by states and political subdivisions | 3,803 | 3.08 | % | 12,504 | 2.99 | % | 20,538 | 3.18 | % | 9,956 | 3.19 | % | |||||||||||||||||||||||||||||||||||
Mortgage-backed securities: | |||||||||||||||||||||||||||||||||||||||||||||||
Residential | — | — | % | — | — | % | 10,991 | 0.93 | % | 176,220 | 2.35 | % | |||||||||||||||||||||||||||||||||||
Commercial | 305 | 3.25 | % | — | — | % | 14,071 | 1.54 | % | 2,955 | 2.53 | % | |||||||||||||||||||||||||||||||||||
Asset-backed securities | — | — | % | — | — | % | — | — | % | 14,447 | 3.94 | % | |||||||||||||||||||||||||||||||||||
Corporate investments | — | — | % | 4,060 | 2.22 | % | 28,084 | 4.48 | % | 1,005 | 4.50 | % | |||||||||||||||||||||||||||||||||||
Total available for sale | 4,108 | 3.09 | % | 21,692 | 2.75 | % | 76,192 | 3.03 | % | 209,381 | 2.50 | % | |||||||||||||||||||||||||||||||||||
Total securities | $ | 19,999 | 3.03 | % | $ | 72,430 | 3.66 | % | $ | 100,439 | 3.19 | % | $ | 212,271 | 2.52 | % |
The objective of BancPlus’ investment policy is to invest funds to provide sufficient liquidity, optimize the total return of the portfolio, mitigate interest rate risk, and meet pledging requirements. In doing so, BancPlus balances the market and credit risks against the potential investment return, makes most investments compatible with the pledge requirements of any deposits of public funds, and maintains compliance with regulatory investment requirements. BancPlus’ investment policy allows portfolio holdings to include short-term securities purchased to provide needed liquidity and longer term securities purchased to generate stable income over periods of interest rate fluctuations.
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Loan Portfolio
The following tables detail composition and percentage composition of BancPlus’ loan portfolio, by category, as of the dates indicated:
As of September 30, 2021 | As of December 31, 2020 | ||||||||||||||||||||||
(Dollars in thousands) | Amount | Percent | Amount | Percent | |||||||||||||||||||
Secured by real estate: | |||||||||||||||||||||||
Residential properties | $ | 773,928 | 21.95 | % | $ | 738,340 | 21.85 | % | |||||||||||||||
Construction and land development | 465,564 | 13.20 | % | 403,496 | 11.94 | % | |||||||||||||||||
Farmland | 212,645 | 6.03 | % | 217,104 | 6.43 | % | |||||||||||||||||
Other commercial | 1,339,214 | 37.98 | % | 1,224,633 | 36.25 | % | |||||||||||||||||
Total real estate | 2,791,351 | 79.16 | % | 2,583,573 | 76.47 | % | |||||||||||||||||
Commercial and industrial | 534,160 | 15.15 | % | 635,714 | 18.82 | % | |||||||||||||||||
Agricultural production and other loans to farmers | 101,973 | 2.89 | % | 85,469 | 2.53 | % | |||||||||||||||||
Consumer and other | 98,602 | 2.80 | % | 73,976 | 2.19 | % | |||||||||||||||||
Total loans, gross | 3,526,086 | 100.00 | % | 3,378,732 | 100.00 | % | |||||||||||||||||
Allowance for loan losses | (44,001) | (36,000) | |||||||||||||||||||||
Total loans, net | $ | 3,482,085 | $ | 3,342,732 |
As a general practice, BancPlus originates substantially all of its loans, but BancPlus occasionally participates in syndications and other loan participations. At September 30, 2021, BancPlus’ loan portfolio included $290.8 million of loan participations purchased, or 8.25% of total loans, which includes $146.8 million of shared national credits. At December 31, 2020, BancPlus’ loan portfolio included $245.7 million of loan participations purchased, or 7.27% of total loans, which includes $93.8 million of shared national credits.
The following tables detail the contractual maturities and sensitivity to interest rate changes for BancPlus’ loan portfolio as of the dates indicated:
As of September 30, 2021 | |||||||||||||||||||||||||||||
(Dollars in thousands) | Due in One Year or Less | More Than One Year to Five | More Than Five Years to Fifteen | After Fifteen Years | Total | ||||||||||||||||||||||||
Secured by real estate: | |||||||||||||||||||||||||||||
Residential properties | $ | 82,492 | $ | 329,147 | $ | 332,387 | $ | 29,901 | $ | 773,927 | |||||||||||||||||||
Construction and land development | 142,510 | 260,274 | 53,777 | 9,004 | 465,565 | ||||||||||||||||||||||||
Farmland | 46,569 | 99,747 | 65,107 | 1,222 | 212,645 | ||||||||||||||||||||||||
Other commercial | 116,870 | 759,180 | 414,977 | 48,187 | 1,339,214 | ||||||||||||||||||||||||
Total real estate | 388,441 | 1,448,348 | 866,248 | 88,314 | 2,791,351 | ||||||||||||||||||||||||
Commercial and industrial | 69,926 | 345,296 | 118,887 | 51 | 534,160 | ||||||||||||||||||||||||
Agricultural production and other loans to farmers | 57,476 | 43,233 | 1,264 | — | 101,973 | ||||||||||||||||||||||||
Consumer and other loans | 29,347 | 64,777 | 4,463 | 15 | 98,602 | ||||||||||||||||||||||||
Total loans | $ | 545,190 | $ | 1,901,654 | $ | 990,862 | $ | 88,380 | $ | 3,526,086 |
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As of December 31, 2020 | |||||||||||||||||||||||||||||
(Dollars in thousands) | Due in One Year or Less | More Than One Year to Five | More Than Five Years to Fifteen | After Fifteen Years | Total | ||||||||||||||||||||||||
Secured by real estate: | |||||||||||||||||||||||||||||
Residential properties | $ | 115,367 | $ | 388,731 | $ | 229,269 | $ | 4,973 | $ | 738,340 | |||||||||||||||||||
Construction and land development | 160,382 | 187,403 | 49,445 | 6,266 | 403,496 | ||||||||||||||||||||||||
Farmland | 44,618 | 112,826 | 56,307 | 3,353 | 217,104 | ||||||||||||||||||||||||
Other commercial | 150,683 | 706,001 | 320,450 | 47,499 | 1,224,633 | ||||||||||||||||||||||||
Total real estate | 471,050 | 1,394,961 | 655,471 | 62,091 | 2,583,573 | ||||||||||||||||||||||||
Commercial and industrial | 102,129 | 473,283 | 60,302 | — | 635,714 | ||||||||||||||||||||||||
Agricultural production and other loans to farmers | 40,750 | 42,575 | 2,144 | — | 85,469 | ||||||||||||||||||||||||
Consumer and other loans | 18,814 | 53,319 | 1,828 | 15 | 73,976 | ||||||||||||||||||||||||
Total loans | $ | 632,743 | $ | 1,964,138 | $ | 719,745 | $ | 62,106 | $ | 3,378,732 |
As of September 30, 2021 | |||||||||||||||||
(Dollars in thousands) | Fixed Interest Rates | Floating or Adjustable Rates | Total | ||||||||||||||
Secured by real estate: | |||||||||||||||||
Residential properties | $ | 640,997 | $ | 132,930 | $ | 773,927 | |||||||||||
Construction and land development | 232,987 | 232,578 | 465,565 | ||||||||||||||
Farmland | 160,339 | 52,306 | 212,645 | ||||||||||||||
Other commercial | 1,097,871 | 241,343 | 1,339,214 | ||||||||||||||
Total real estate | 2,132,194 | 659,157 | 2,791,351 | ||||||||||||||
Commercial and industrial | 289,928 | 244,232 | 534,160 | ||||||||||||||
Agricultural production and other loans to farmers | 62,997 | 38,976 | 101,973 | ||||||||||||||
Consumer and other loans | 69,086 | 29,516 | 98,602 | ||||||||||||||
Total loans | $ | 2,554,205 | $ | 971,881 | $ | 3,526,086 |
As of December 31, 2020 | |||||||||||||||||
(Dollars in thousands) | Fixed Interest Rates | Floating or Adjustable Rates | Total | ||||||||||||||
Secured by real estate: | |||||||||||||||||
Residential properties | $ | 594,353 | $ | 143,987 | $ | 738,340 | |||||||||||
Construction and land development | 213,944 | 189,552 | 403,496 | ||||||||||||||
Farmland | 162,505 | 54,599 | 217,104 | ||||||||||||||
Other commercial | 1,016,580 | 208,053 | 1,224,633 | ||||||||||||||
Total real estate | 1,987,382 | 596,191 | 2,583,573 | ||||||||||||||
Commercial and industrial | 425,874 | 209,840 | 635,714 | ||||||||||||||
Agricultural production and other loans to farmers | 51,766 | 33,703 | 85,469 | ||||||||||||||
Consumer and other loans | 52,692 | 21,284 | 73,976 | ||||||||||||||
Total loans | $ | 2,517,714 | $ | 861,018 | $ | 3,378,732 |
As of September 30, 2021, the Company held 1,948 loans for customers under the PPP, totaling approximately $101.0 million, a decrease of $104.2 million, or 50.8%, from $205.2 million as of December 31, 2020. The decrease is the result of PPP loans
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being forgiven and paid off by the SBA or being paid off by the customer, partially offset by originations of new PPP loans in 2021 while the program was still active.
Additionally, BancPlus enters into various other transactions to meet the financing needs of its customers including commitments to extend credit and letters of credit. Commitments to extend credit beyond current funding are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Such commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. Letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. These guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions. At September 30, 2021, BancPlus had total off-balance sheet commitments of $1.230 billion.
Asset Quality
Federal regulations and BancPlus’ internal policies require that BancPlus utilize an asset classification system as a means of managing and reporting problem and potential problem assets. BancPlus has incorporated an internal asset classification system, substantially consistent with federal banking regulations, as part of its credit monitoring system. Federal banking regulations set forth a classification scheme for problem and potential problem assets as “substandard,” “doubtful” or “loss” assets. An asset is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard assets include those characterized by the distinct possibility that the insured institution will sustain some loss if the deficiencies are not corrected. Assets classified as doubtful have all the weaknesses inherent in those classified as substandard with the added characteristic that the weaknesses present make collection or liquidation in full on the basis of currently existing facts, conditions, and values highly questionable and improbable. Assets classified as loss are those considered uncollectible and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted. Assets which do not currently expose BancPlus to sufficient risk to warrant classification in one of the categories mentioned above but possess weakness are required to be designated “watch” or “special mention.” Loans modified under Section 4013 of the CARES Act and related interagency guidance are excluded from being reported as troubled debt restructuring (“TDR”) loans.
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The tables below set forth information on BancPlus’ asset classification as of the dates indicated. BancPlus had no assets classified as loss.
As of September 30, 2021 | |||||||||||||||||||||||
(Dollars in thousands) | Risk Grades 1-7 | Substandard | Doubtful | Total | |||||||||||||||||||
Secured by real estate: | |||||||||||||||||||||||
Residential properties | $ | 759,188 | $ | 14,740 | $ | — | $ | 773,928 | |||||||||||||||
Construction and land development | 464,819 | 745 | — | 465,564 | |||||||||||||||||||
Farmland | 199,608 | 13,037 | — | 212,645 | |||||||||||||||||||
Other commercial | 1,331,516 | 7,621 | 77 | 1,339,214 | |||||||||||||||||||
Total real estate | 2,755,131 | 36,143 | 77 | 2,791,351 | |||||||||||||||||||
Commercial and industrial | 510,359 | 23,756 | 45 | 534,160 | |||||||||||||||||||
Agricultural production and other loans to farmers | 101,620 | 353 | — | 101,973 | |||||||||||||||||||
Consumer and other | 98,302 | 300 | — | 98,602 | |||||||||||||||||||
Total | $ | 3,465,412 | $ | 60,552 | $ | 122 | $ | 3,526,086 |
As of December 31, 2020 | |||||||||||||||||||||||
(Dollars in thousands) | Risk Grades 1-7 | Substandard | Doubtful | Total | |||||||||||||||||||
Secured by real estate: | |||||||||||||||||||||||
Residential properties | $ | 721,024 | $ | 17,316 | $ | — | $ | 738,340 | |||||||||||||||
Construction and land development | 401,347 | 2,149 | — | 403,496 | |||||||||||||||||||
Farmland | 205,211 | 11,893 | — | 217,104 | |||||||||||||||||||
Other commercial | 1,209,365 | 15,041 | 227 | 1,224,633 | |||||||||||||||||||
Total real estate | 2,536,947 | 46,399 | 227 | 2,583,573 | |||||||||||||||||||
Commercial and industrial | 619,137 | 16,526 | 51 | 635,714 | |||||||||||||||||||
Agricultural production and other loans to farmers | 85,288 | 181 | — | 85,469 | |||||||||||||||||||
Consumer and other | 73,560 | 416 | — | 73,976 | |||||||||||||||||||
Total | $ | 3,314,932 | $ | 63,522 | $ | 278 | $ | 3,378,732 |
Nonperforming Assets
Nonperforming loans include loans accounted for on a nonaccrual basis and TDR loans that are accruing. Nonperforming assets consist of nonperforming loans plus foreclosed assets (i.e. real estate acquired through foreclosure).
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The following table summarizes BancPlus’ nonperforming assets, by category, as of the dates indicated:
(Dollars in thousands) | September 30, 2021 | December 31, 2020 | |||||||||
Nonaccrual loans: | |||||||||||
Real estate loans: | |||||||||||
Residential properties | $ | 3,318 | $ | 3,869 | |||||||
Construction and land development | 58 | 1,863 | |||||||||
Farmland | 1,893 | 158 | |||||||||
Other commercial | 2,324 | 7,947 | |||||||||
Total real estate | 7,593 | 13,837 | |||||||||
Commercial and industrial | 106 | 12 | |||||||||
Agricultural production and other loans to farmers | 135 | 85 | |||||||||
Consumer and other | 210 | 177 | |||||||||
Total nonaccrual loans | 8,044 | 14,111 | |||||||||
Troubled debt restructuring loans – accruing: | |||||||||||
Real estate loans: | |||||||||||
Residential properties | 1,898 | 1,916 | |||||||||
Construction and land development | 1,558 | — | |||||||||
Farmland | — | — | |||||||||
Other commercial | — | — | |||||||||
Total real estate | 3,456 | 1,916 | |||||||||
Commercial and industrial | 388 | — | |||||||||
Agricultural production and other loans to farmers | — | — | |||||||||
Consumer and other | — | — | |||||||||
Total troubled debt restructuring loans – accruing | 3,844 | 1,916 | |||||||||
Total nonperforming loans | 11,888 | 16,027 | |||||||||
Plus: foreclosed assets | 6,989 | 6,754 | |||||||||
Total nonperforming assets | $ | 18,877 | $ | 22,781 | |||||||
Nonaccrual loans to total loans | 0.23 | % | 0.42 | % | |||||||
Nonperforming loans to total loans | 0.34 | % | 0.47 | % | |||||||
Nonperforming assets to total assets | 0.37 | % | 0.48 | % | |||||||
Allowance for loan losses to nonaccrual loans | 547.00 | % | 255.12 | % | |||||||
90+ days past due and accruing | $ | 2,299 | $ | 6,303 | |||||||
Total troubled debt restructuring loans | $ | 4,018 | $ | 8,537 |
Total nonperforming assets decreased by $3.9 million, or 17.1%, from $22.8 million at December 31, 2020 to $18.9 million at September 30, 2021, primarily due to a decrease in nonaccrual loans as a result of payments and foreclosures during the current year on loans that were in nonaccrual status at December 31, 2020.
The balance of nonperforming assets can fluctuate due to changes in economic conditions. BancPlus has established a policy to discontinue accruing interest on a loan (that is, place the loan on nonaccrual status) after it has become 90 days delinquent as to payment of principal or interest, unless the loan is considered to be well-collateralized and is actively in the process of collection. When a loan is placed on nonaccrual status, current year interest previously accrued but uncollected on such loans is reversed and charged against current income, and prior year interest, if any, is charged off against the allowance for loan losses. Generally, payments received on nonaccrual loans are applied directly to principal.
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Allowance for Loan Losses
The allowance for loan losses is a reserve established through charges to earnings in the form of a provision for loan losses. BancPlus maintains an allowance for loan losses at a level management considers adequate to provide for known and probable incurred losses in the portfolio. The level of the allowance is based on management’s evaluation of estimated losses in the portfolio, after consideration of risk characteristics of the loans and prevailing economic conditions. Loan charge-offs (i.e. loans judged to be uncollectible) are charged against the reserve and any subsequent recovery is credited to the reserve. BancPlus’ officers analyze risk in the loan portfolio on an ongoing basis. A risk system, consisting of multiple grading categories for each portfolio class, is utilized as an analytical tool to assess risk and appropriate reserves. In addition to the risk system, management further evaluates risk characteristics of the loan portfolio under current and anticipated economic conditions and considers such factors as the financial condition of the borrower, past and expected loss experience, and other factors which management feels deserve recognition in establishing an appropriate reserve. These estimates are reviewed at least quarterly, and, as adjustments become necessary, they are recognized in the periods in which they become known. During the third quarter of 2021, the U.S. economy continued to experience volatility and there remains uncertainty surrounding future economic conditions as a result of the COVID-19 pandemic and development of the outbreak, including variants, such as the delta variant, and the severity of such variants, and the availability, effectiveness and acceptance of vaccines, all of which are also highly uncertain. The government’s response to these conditions includes certain provisions, such as automatic forbearance and forgiveness for certain federally backed loans that could affect these estimates. Although management strives to maintain an allowance it deems adequate, future economic changes, deterioration of borrowers’ creditworthiness, and the impact of examinations by regulatory agencies all could cause changes to BancPlus’ allowance for loan losses.
The allowance for loan losses was $44.0 million and $36.0 million, and the allowance for loan losses as a percentage of loans was 1.24% and 1.06%, at September 30, 2021 and December 31, 2020, respectively. Net charge-offs (recoveries) totaled $(606,000) and $2.4 million for the nine months ended September 30, 2021 and 2020, respectively. The $3.0 million variance is primarily the result of current year recoveries on consumer and other commercial categories as well as high charge offs in 2020 as a result of the COVID-19 pandemic.
The allowance for loan losses increased by $8.0 million, or 22.2%, to $44.0 million at September 30, 2021, from $36.0 million at December 31, 2020, primarily due to the increase in provision for loan losses in the current period as a result of the continuing impact of the COVID-19 pandemic, including the impact of the CARES Act measures to support individuals and businesses in maintaining solvency through monetary relief, including in the form of financing, loan forgiveness and automatic forbearance.
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The following is a summary of the activity in the allowance for loan loss reserve as of and for the year-to-date periods indicated:
(Dollars in thousands) | September 30, 2021 | September 30, 2020 | |||||||||
Balance, beginning of period | $ | 36,000 | $ | 21,500 | |||||||
Charge-offs: | |||||||||||
Residential properties | 298 | 268 | |||||||||
Construction and land development | 240 | 3 | |||||||||
Farmland | 157 | — | |||||||||
Other commercial | 581 | 2,179 | |||||||||
Total real estate | 1,276 | 2,450 | |||||||||
Commercial and industrial | 317 | 494 | |||||||||
Agricultural production and other loans to farmers | 111 | 2,270 | |||||||||
Consumer and other | 2,832 | 298 | |||||||||
Total charge-offs | 4,536 | 5,512 | |||||||||
Recoveries: | |||||||||||
Residential properties | 340 | 237 | |||||||||
Construction and land development | 143 | 56 | |||||||||
Farmland | 292 | — | |||||||||
Other commercial | 1,842 | 94 | |||||||||
Total real estate | 2,617 | 387 | |||||||||
Commercial and industrial | 479 | 148 | |||||||||
Agricultural production and other loans to farmers | 3 | 2,365 | |||||||||
Consumer and other | 2,043 | 254 | |||||||||
Total recoveries | 5,142 | 3,154 | |||||||||
Net charge-offs (recoveries) | (606) | 2,358 | |||||||||
Provision for loan losses | 7,395 | 7,706 | |||||||||
Balance, end of period | $ | 44,001 | $ | 26,848 | |||||||
Total loans, end of period | $ | 3,539,990 | $ | 3,447,458 | |||||||
Average loans | 3,469,520 | 2,912,471 | |||||||||
Net charge-offs (annualized) to average loans | (0.02) | % | 0.11 | % | |||||||
Allowance for loan losses to total loans | 1.24 | % | 0.78 | % |
The table below reflects net charge-offs to average loans outstanding, by category, during the periods presented.
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Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||
2021 | 2020 | ||||||||||||||||||||||||||||||||||
(Dollars in thousands) | Net Charge-offs | Average Loans | Net Charge-offs to Average Loans (Annualized) | Net Charge-offs | Average Loans | Net Charge-offs to Average Loans (Annualized) | |||||||||||||||||||||||||||||
Residential properties | $ | (42) | $ | 750,238 | (0.01) | % | $ | 31 | $ | 667,745 | 0.01 | % | |||||||||||||||||||||||
Construction and land development | 97 | 458,968 | 0.03 | % | (53) | 302,444 | (0.02) | % | |||||||||||||||||||||||||||
Farmland | (135) | 206,878 | (0.09) | % | — | 199,363 | — | % | |||||||||||||||||||||||||||
Other commercial | (1,261) | 1,274,874 | (0.13) | % | 2,085 | 1,003,236 | 0.28 | % | |||||||||||||||||||||||||||
Commercial and industrial | (162) | 589,070 | (0.04) | % | 346 | 561,457 | 0.08 | % | |||||||||||||||||||||||||||
Agricultural production and other loans to farmers | 108 | 89,773 | 0.16 | % | (95) | 92,571 | (0.14) | % | |||||||||||||||||||||||||||
Consumer and other | 789 | 83,432 | 1.26 | % | 44 | 69,307 | 0.08 | % | |||||||||||||||||||||||||||
Loans held for sale | — | 16,287 | — | % | — | 16,348 | — | % | |||||||||||||||||||||||||||
Total | $ | (606) | $ | 3,469,520 | (0.02) | % | $ | 2,358 | $ | 2,912,471 | 0.11 | % |
The following tables present a summary of the allocation of the allowance for loan losses by loan portfolio category, and the percentage of loans in each category, for the periods indicated:
September 30, 2021 | December 31, 2020 | ||||||||||||||||||||||
(Dollars in thousands) | Amount | Percent | Amount | Percent | |||||||||||||||||||
Residential properties | $ | 10,523 | 23.9 | % | $ | 7,900 | 21.9 | % | |||||||||||||||
Construction and land development | 5,915 | 13.4 | % | 4,618 | 12.8 | % | |||||||||||||||||
Farmland | 2,330 | 5.3 | % | 1,412 | 3.9 | % | |||||||||||||||||
Other commercial | 16,698 | 37.9 | % | 14,133 | 39.3 | % | |||||||||||||||||
Total real estate | 35,466 | 80.6 | % | 28,063 | 78.0 | % | |||||||||||||||||
Commercial and industrial | 6,066 | 13.8 | % | 6,337 | 17.6 | % | |||||||||||||||||
Agricultural production and other loans to farmers | 1,170 | 2.7 | % | 773 | 2.1 | % | |||||||||||||||||
Consumer and other | 1,299 | 3.0 | % | 827 | 2.3 | % | |||||||||||||||||
Total allowance for loan losses | $ | 44,001 | 100.0 | % | $ | 36,000 | 100.0 | % |
Goodwill and Other Intangible Assets
Goodwill was $2.6 million at both September 30, 2021 and December 31, 2020. Goodwill represents the excess of the consideration paid over the fair value of the net assets acquired by the Company in prior acquisitions. Goodwill is not amortized but is subject to, at a minimum, an annual test for impairment. Other intangible assets consist of acquired customer relationships from a 2014 acquisition and core deposit intangibles from the merger with SCC. Total other intangible assets at September 30, 2021 and December 31, 2020 were $5.3 million and $5.8 million, respectively. Other intangible assets are amortized over their estimated useful life.
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Deposits
The following table details composition and percentage composition of BancPlus’ deposit portfolio, by category, for the year to date periods indicated:
September 30, 2021 | December 31, 2020 | ||||||||||||||||||||||
(Dollars in thousands) | Average Balance | Average Rate | Percent | Average Balance | Average Rate | Percent | |||||||||||||||||
Non-interest bearing | $ | 1,306,105 | 0.00 | % | 29.68 | % | $ | 1,009,427 | 0.00 | % | 27.69 | % | |||||||||||
Interest bearing: | |||||||||||||||||||||||
Transaction accounts | 1,452,965 | 0.21 | % | 33.02 | % | 1,191,857 | 0.49 | % | 32.69 | % | |||||||||||||
Money market and other savings accounts | 982,220 | 0.09 | % | 22.32 | % | 806,652 | 0.29 | % | 22.13 | % | |||||||||||||
Certificates of deposit | 659,361 | 0.59 | % | 14.98 | % | 637,781 | 0.93 | % | 17.49 | % | |||||||||||||
Total deposits | $ | 4,400,651 | 0.18 | % | 100.00 | % | $ | 3,645,717 | 0.39 | % | 100.00 | % |
BancPlus relies on increasing its deposit base to fund loans and other asset growth. BancPlus competes for local deposits by offering a variety of products at competitive rates. The increase in total average deposits of $754.9 million, or 20.7%, to $4.401 billion at September 30, 2021 from $3.646 billion as of December 31, 2020 is primarily the result of recipients of PPP loans placing funds in deposit accounts held at the Bank. At September 30, 2021 and December 31, 2020, BancPlus held non-time deposits in excess of FDIC insurance limits estimated at $810.1 million and $889.3 million, respectively.
The following table shows the maturity of certificates of deposit as of September 30, 2021:
(Dollars in thousands) | $250,000 or Greater | Less than $250,000 | Total | Uninsured Portion | |||||||||||||||||||
3 months or less | $ | 39,438 | $ | 105,705 | $ | 145,143 | $ | 15,938 | |||||||||||||||
Over 3 months through 6 months | 26,404 | 87,066 | 113,470 | 12,404 | |||||||||||||||||||
Over 6 months through 12 months | 54,549 | 132,074 | 186,623 | 30,049 | |||||||||||||||||||
Over 12 months | 55,447 | 136,331 | 191,778 | 27,697 | |||||||||||||||||||
Total certificates of deposit | $ | 175,838 | $ | 461,176 | $ | 637,014 | $ | 86,088 |
Borrowed Funds
Short-term Borrowings. In addition to deposits, BancPlus uses short-term borrowings, which consist of federal funds purchased and securities sold under agreements to repurchase, to meet the daily liquidity needs of its customers and fund its loan growth. Federal funds purchased represent primarily overnight borrowings through relationships with correspondent banks. Securities sold under agreements to repurchase are considered overnight borrowings and are secured by U.S. Government agency securities. At September 30, 2021 and December 31, 2020, we had no short-term borrowings.
FHLB Advances and Other Borrowings. BankPlus is a member of the FHLB, and as a result, is eligible for advances from the FHLB pursuant to the terms of various borrowing agreements, which assist BancPlus in the funding of its loan and investment portfolios. BancPlus’ FHLB advances are collateralized by a blanket lien on first mortgage and other qualifying loans. At both September 30, 2021 and December 31, 2020, BancPlus had $20.5 million in FHLB borrowings, at a weighted average interest rate of 1.50%.
In October 2016, BancPlus entered into a five-year loan agreement with a correspondent bank under which BancPlus borrowed $35.0 million in connection with the redemption of BancPlus preferred stock. BancPlus pledged 100% of its shares of BankPlus stock as collateral for the loan. The loan required quarterly principal reductions of $875,000 and quarterly interest payments at a fixed 3.75% annual rate. The balance outstanding on this loan was $10.5 million and $13.1 million at September 30, 2021 and December 31, 2020, respectively. The Company repaid this loan at its maturity in October 2021.
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Required principal payments on FHLB advances and other borrowings were as follows:
(Dollars in thousands) | September 30, 2021 | December 31, 2020 | |||||||||
2021 | $ | 10,525 | $ | 13,171 | |||||||
2022 | 417 | 395 | |||||||||
2023 | 25 | 110 | |||||||||
2024 | 13 | — | |||||||||
2025 | 13 | — | |||||||||
Thereafter | 20,033 | 20,095 | |||||||||
Total | $ | 31,026 | $ | 33,771 |
Subordinated Debentures and Trust Preferred Securities. On June 4, 2020, the Company entered into a Subordinated Note Purchase Agreement with certain qualified institutional buyers and institutional accredited investors pursuant to which the Company issued and sold $60.0 million in aggregate principal amount of its 6.000% Fixed-to-Floating Rate Subordinated Notes due June 15, 2030 (the “Notes”). The Company incurred issuance costs of $1.4 million in conjunction with the issuance of the Notes. These issuance costs are netted with the balance of the Notes on the Company’s Condensed Consolidated Balance Sheets and will be amortized over the life of the Notes. The Notes initially bear interest at a rate of 6.000% per annum from and including June 4, 2020, to but excluding June 15, 2025 or early redemption date, with interest during this period payable semiannually in arrears. From and including June 15, 2025, to but excluding the maturity date or early redemption date, the interest rate will reset quarterly to an annual floating rate equal to Three-Month Term Secured Overnight Financing Rate plus 586 basis points, with interest during this period payable quarterly in arrears. The Company used the proceeds of the private placement for general corporate purposes, including improving the Company’s liquidity and capital position.
The Notes are not redeemable by the Company, in whole or in part, prior to the fifth anniversary of the original date of issue, except that the Notes may be redeemed at any time in whole but not in part in the event of a Tier 2 Capital Event, a Tax Event, or an Investment Company Event, each as defined and described in the Notes. On or after the fifth anniversary of the original date of issue, the Notes shall be redeemable on any interest payment date at the option of the Company, in whole or in part in integral multiples of $1,000, at an amount equal to 100% of the outstanding principal amount redeemed plus accrued but unpaid interest thereon. Any partial redemption will be made on a pro rata basis as to the holders of the Notes. Any redemption of the Notes is subject to any applicable regulatory requirements and approvals.
BancPlus also owns the outstanding common stock of business trusts that have issued preferred capital securities to third parties. The preferred capital securities have qualified as Tier 1 capital, subject to regulatory rules and limits. These trusts used the proceeds from the issuance of the common stock and preferred capital securities to purchase subordinated debentures that BancPlus issued. The subordinated debentures are these trusts’ only assets, and quarterly interest payments on these subordinated debentures are the sole source of cash for these trusts to pay quarterly distributions on the common stock and preferred capital securities. BancPlus has fully and unconditionally guaranteed the trusts’ obligations on preferred capital securities.
The following table is a summary of debentures payable to statutory trusts:
(Dollars in thousands) | Year of Maturity | Interest Rate | September 30, 2021 | December 31, 2020 | |||||||||||||||||||
First Bancshares of Baton Rouge Statutory Trust I | 2034 | 3 month LIBOR, plus 2.50% | $ | 4,124 | $ | 4,124 | |||||||||||||||||
State Capital Statutory Trust IV | 2035 | 3 month LIBOR, plus 1.99% | 5,155 | 5,155 | |||||||||||||||||||
BancPlus Statutory Trust II | 2036 | 3 month LIBOR, plus 1.50% | 20,619 | 20,619 | |||||||||||||||||||
BancPlus Statutory Trust III | 2037 | 3 month LIBOR, plus 1.35% | 20,619 | 20,619 | |||||||||||||||||||
State Capital Master Trust | 2037 | 3 month LIBOR, plus 1.46% | 6,186 | 6,186 | |||||||||||||||||||
$ | 56,703 | $ | 56,703 |
The subordinated debentures payable to statutory trusts vary from the amount carried on the Condensed Consolidated Balance Sheets at September 30, 2021 due to the remaining purchase discount of $4.0 million, which was established upon the merger with SCC and is being amortized over the remaining life of the debentures. We are currently monitoring the actions of LIBOR’s regulator and the implementation of alternative reference rates in advance of the expected discontinuation of LIBOR to determine any potential impact on the subordinated debentures.
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BancPlus believes that it will be able to meet its principal and interest payment obligations as they come due through maintenance of adequate cash levels or subsequent borrowings. BancPlus expects to maintain adequate cash levels through profitability, loan and securities repayment and maturity activity and continued deposit gathering activities. BancPlus has in place various borrowing mechanisms for both short-term and long-term liquidity needs.
Shareholders’ Equity
Shareholders’ equity is influenced primarily by earnings, quarterly dividend payments, changes in common stock outstanding, and changes in accumulated other comprehensive income (loss) caused primarily by fluctuations in unrealized holding gains or losses, net of taxes, on available for sale investment securities.
Shareholders’ equity increased $30.6 million, or 8.6%, to $385.9 million at September 30, 2021 from $355.3 million at December 31, 2020, primarily due to net income of $45.5 million partially offset by dividends paid of $11.5 million, and purchase of Company stock of $2.4 million for the year to date period. The purchase of Company stock was the result of members of the State Bank Employee Stock Ownership Plan (“State Bank ESOP”), who took a distribution of Company stock from the State Bank ESOP, exercising a put option available to them following their distribution. The put option is available for shares of Company stock distributed by the State Bank ESOP, so long as the Company is not publicly traded, for a period of 60 days following the distribution request.
Liquidity and Capital Resources
Bank Liquidity Management
Liquidity is BancPlus’ capacity to meet its cash and collateral obligations at a reasonable cost, having cash when BancPlus needs it and having the appropriate amount of cash and other assets that are quickly convertible into cash without incurring significant loss. BancPlus is expected to maintain adequate liquidity at BankPlus to meet the cash flow requirements of its customers who may be either depositors wishing to withdraw funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs. Maintaining an adequate level of liquidity depends on BancPlus’ ability to efficiently meet both expected and unexpected cash flows and collateral needs without adversely affecting either BancPlus’ daily operations or its financial condition. BancPlus’ Asset Liability Management Committee (“ALCO”), which is comprised of members of senior management, is responsible for managing commitments to meet the needs of customers while achieving its financial objectives. ALCO meets regularly to review balance sheet composition, funding capacities, and current and forecasted loan demand, and BancPlus’ Treasury Management department continuously monitors its liquidity position to ensure that assets and liabilities are managed in a manner that will meet all of its short-term and long-term cash requirements.
BancPlus manages its liquidity by maintaining adequate levels of cash and other assets from on and off-balance sheet arrangements. Specifically, on-balance sheet liquidity consists of cash and due from banks and unpledged investment securities, which BancPlus considers its primary liquidity. Furthermore, a significant portion of these unencumbered liquid assets are comprised of U.S. government agency obligations, mortgage backed securities and other agency securities, which the regulatory bodies consider the most marketable and liquid, especially in a stress scenario. In regard to off-balance sheet capacity, BancPlus maintains available borrowing capacity under secured borrowing lines with the FHLB and the Federal Reserve Bank of St. Louis, as well as unsecured lines of credit for the purpose of overnight funds with various correspondent banks, which BancPlus considers its secondary liquidity. BancPlus also monitors its liquidity requirements in light of interest rate trends, changes in the economy and the scheduled maturity and interest rate sensitivity of the investment and loan portfolios, FHLB borrowings and deposits. As part of its liquidity management strategy, BancPlus is also focused on minimizing its costs of liquidity and attempting to decrease these costs by growing its noninterest-bearing and other low-cost deposits and replacing higher cost borrowed funds.
The following tables provide a summary of BancPlus’ primary and secondary liquidity levels.
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(Dollars in thousands) Primary Liquidity – On-Balance Sheet | September 30, 2021 | December 31, 2020 | |||||||||
Cash and cash equivalents | $ | 695,069 | $ | 637,545 | |||||||
Total securities | 619,306 | 405,139 | |||||||||
Less: pledged securities | (489,257) | (317,461) | |||||||||
Total primary liquidity | $ | 825,118 | $ | 725,223 | |||||||
Ratio of primary liquidity to total deposits | 18.2 | % | 17.5 | % |
Secondary Liquidity – Off-Balance Sheet Borrowing Capacity | September 30, 2021 | December 31, 2020 | |||||||||
Net secured borrowing capacity with the FHLB | $ | 1,499,630 | $ | 1,408,005 | |||||||
Net secured borrowing capacity with the Federal Reserve Bank | 210,239 | 211,407 | |||||||||
Unsecured borrowing capacity with correspondent lenders | 203,000 | 228,000 | |||||||||
Total secondary liquidity | $ | 1,912,869 | $ | 1,847,412 | |||||||
Ratio of primary and secondary liquidity to total deposits | 60.4 | % | 61.9 | % |
During the nine months ended September 30, 2021, BancPlus’ primary liquidity increased by $99.9 million to $825.1 million, compared to $725.2 million at December 31, 2020, primarily due an increase in securities partially offset by an increase in our pledged securities. Secondary liquidity increased by $65.5 million to $1.913 billion as of September 30, 2021 from $1.847 billion as of December 31, 2020. This increase was primarily due to an increase in BancPlus’ FHLB borrowing capacity.
In addition to its primary liquidity, BancPlus generates liquidity from cash flows from its loan and securities portfolios and from its large base of core customer deposits, defined as total deposits less brokered deposits and time deposits greater than $250,000. Core deposits totaled $4.363 billion and $3.973 billion and represented 96.3% and 95.7% of total deposits as of September 30, 2021 and December 31, 2020, respectively. These core deposits are normally less volatile, often with customer relationships tied to other products, which promote long-standing relationships and stable funding sources. Although BancPlus’ policy allows the use of brokered deposits, BankPlus did not utilize this funding source during the 2021 and 2020 year to date periods.
BancPlus’ liquidity policy includes both policy limits and policy guidelines for measuring and monitoring liquidity. BancPlus’ policy measures include an Internal Liquidity Ratio, an Internal Liquidity Ratio adjusted for FHLB, an Internal Dependency Ratio adjusted for FHLB and a Maximum Available Funds to Total Assets Ratio. These ratios are calculated monthly. BancPlus also utilizes eleven liquidity guidelines that are reported quarterly. As of September 30, 2021 and December 31, 2020, BancPlus was in compliance with all of its established liquidity policies.
Holding Company Liquidity Management
BancPlus is a corporation separate and apart from BankPlus and, therefore, it must provide for its own liquidity. BancPlus’ main source of funding is dividends declared and paid to it by BankPlus. Statutory and regulatory limitations exist that affect the ability of BankPlus to pay dividends to the holding company. BancPlus believes that these limitations will not impact the ability of the holding company to meet its ongoing short-term cash obligations.
Due to state banking laws, BankPlus may not declare dividends without the prior approval of the MDBCF. BankPlus received permission from the MDBCF to pay dividends of $11.5 million and $9.7 million for the year-to-date periods ended September 30, 2021 and September 30, 2020, respectively. These dividends were used by the holding company to pay dividends to the BancPlus shareholders, principal and interest payments on debt and general operating expenses.
Capital Management and Regulatory Capital Requirements
BancPlus is subject to various capital requirements administered by federal banking regulators. Failure to meet minimum capital requirements can trigger certain mandatory and possibly additional discretionary actions by federal banking regulators that, if undertaken, could have a direct material effect on BancPlus’ business operations.
Under the regulatory capital rules, BancPlus must maintain minimum amounts and ratios of common equity Tier 1 (“CET1”) capital, Tier 1 capital and total capital to risk-weighted assets and of Tier 1 capital to average consolidated assets, referred to as
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the leverage ratio. The adequacy of our capital levels is also subject to qualitative judgments by the federal banking regulators about components, risk weightings and other factors.
In addition, BancPlus must maintain a capital conservation buffer of 2.5%, consisting of CET1 capital, on top of the risk-based minimum capital ratios. A banking organization with a conservation buffer of less than the required amount of 2.5% will be subject to limitations on capital distributions, including dividend payments, and certain discretionary bonus payments to executive officers. Minimum capital requirements, including the capital conservation buffer, to which BankPlus and BancPlus are subject are summarized in the tables below.
Further, under prompt corrective action regulations, an insured depository institution is classified in one of several tiers based on its level of capital and other factors, and may be subject to an escalating series of remedial measures if it is less than “well capitalized.” An institution is deemed “well capitalized” if it satisfies certain capital ratios, summarized in the tables below, and is not subject to any written agreement, order, capital directive, or prompt corrective action directive to meet and maintain a specific capital level for any capital measure.
As of September 30, 2021 and December 31, 2020, BancPlus and BankPlus met all applicable capital adequacy requirements and BankPlus was deemed “well capitalized.” As a bank holding company, BancPlus is not subject to the prompt corrective action regime that applies to insured depository institutions, including BankPlus.
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BancPlus’ consolidated and BankPlus’ actual capital amounts and ratios are shown in the following tables as of the dates indicated (dollars in thousands):
Actual | Minimum For Capital Adequacy Purposes | Required to be Well Capitalized | |||||||||||||||||||||||||||||||||
As of September 30, 2021: | Capital Amount | Ratio | Capital Amount | Ratio | Capital Amount | Ratio | |||||||||||||||||||||||||||||
Consolidated: | |||||||||||||||||||||||||||||||||||
CET1 Capital to Risk-Weighted Assets | $ | 374,642 | 9.57 | % | $ | 273,936 | 7.00 | % | N/A | N/A | |||||||||||||||||||||||||
Tier 1 Capital to Risk-Weighted Assets | 425,598 | 10.88 | % | 332,636 | 8.50 | % | N/A | N/A | |||||||||||||||||||||||||||
Total Capital to Risk-Weighted Assets | 580,350 | 13.50 | % | 410,904 | 10.50 | % | N/A | N/A | |||||||||||||||||||||||||||
Tier 1 Capital to Average Assets | 425,598 | 8.40 | % | 202,413 | 4.00 | % | N/A | N/A | |||||||||||||||||||||||||||
Bank: | |||||||||||||||||||||||||||||||||||
CET1 Capital to Risk-Weighted Assets | $ | 420,455 | 10.77 | % | $ | 273,372 | 7.00 | % | $ | 253,845 | 6.50 | % | |||||||||||||||||||||||
Tier 1 Capital to Risk-Weighted Assets | 420,455 | 10.77 | % | 331,951 | 8.50 | % | 312,425 | 8.00 | % | ||||||||||||||||||||||||||
Total Capital to Risk-Weighted Assets | 464,456 | 11.89 | % | 410,058 | 10.50 | % | 390,531 | 10.00 | % | ||||||||||||||||||||||||||
Tier 1 Capital to Average Assets | 420,455 | 8.32 | % | 202,059 | 4.00 | % | 252,574 | 5.00 | % |
Actual | Minimum For Capital Adequacy Purposes | Required to be Well Capitalized | |||||||||||||||||||||||||||||||||
As of December 31, 2020: | Capital Amount | Ratio | Capital Amount | Ratio | Capital Amount | Ratio | |||||||||||||||||||||||||||||
Consolidated: | |||||||||||||||||||||||||||||||||||
CET1 Capital to Risk-Weighted Assets | $ | 339,936 | 9.94 | % | $ | 239,437 | 7.00 | % | N/A | N/A | |||||||||||||||||||||||||
Tier 1 Capital to Risk-Weighted Assets | 390,713 | 11.42 | % | 290,745 | 8.50 | % | N/A | N/A | |||||||||||||||||||||||||||
Total Capital to Risk-Weighted Assets | 485,357 | 14.19 | % | 359,155 | 10.50 | % | N/A | N/A | |||||||||||||||||||||||||||
Tier 1 Capital to Average Assets | 390,713 | 8.55 | % | 182,853 | 4.00 | % | N/A | N/A | |||||||||||||||||||||||||||
Bank: | |||||||||||||||||||||||||||||||||||
CET1 Capital to Risk-Weighted Assets | $ | 387,231 | 11.36 | % | $ | 238,629 | 7.00 | % | $ | 221,584 | 6.50 | % | |||||||||||||||||||||||
Tier 1 Capital to Risk-Weighted Assets | 387,231 | 11.36 | % | 289,763 | 8.50 | % | 272,719 | 8.00 | % | ||||||||||||||||||||||||||
Total Capital to Risk-Weighted Assets | 423,231 | 12.42 | % | 357,943 | 10.50 | % | 340,898 | 10.00 | % | ||||||||||||||||||||||||||
Tier 1 Capital to Average Assets | 387,231 | 8.49 | % | 182,531 | 4.00 | % | 228,164 | 5.00 | % |
Contractual Obligations
Contractual obligations as of September 30, 2021, totaled $827.6 million and were primarily comprised of deposits with maturities of $637.0 million, subordinated debentures of $111.4 million and operating lease obligations of $48.1 million. Contractual obligations due within the next twelve months were $460.6 million and were primarily related to time deposits with maturity dates. Contractual obligations due in more than 12 months were $367.0 million and were comprised of $191.8 million of time deposits with maturity dates and $111.4 million of subordinated debentures with maturities ranging from 2034 through 2037. BancPlus expects to have adequate liquidity to meet these short and long-term obligations through profitability, repayments from loans and investment securities, deposit gathering activity and access to borrowing sources.
Recent Accounting Pronouncements
ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, which requires earlier measurement of credit losses and enhances disclosures. The main objective of ASU 2016-13 is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and
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other commitments to extend credit held by a reporting entity at each reporting date. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses over the life of the loan. ASU 2016-13 is effective for the Company for annual and interim periods beginning on January 1, 2023. The Company has formed a cross functional team that is assessing data and system needs and evaluating the impact of adopting the new guidance. The Company expects to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective, but has not yet determined the magnitude of any such one-time adjustments or the overall impact on the Company’s financial statements.
ASU 2020-04, “Reference Rate Reform - Topic 848.” In March 2020, the FASB issued ASU 2020-04 which provides temporary optional expedients and exceptions to the accounting principles generally accepted in the United States (“GAAP”) guidance on contract modifications, hedge accounting, and other transactions affected that reference LIBOR or another reference rate expected to be discontinued. ASU 2020-04 is effective upon issuance and can be applied through December 31, 2022. The Company is still evaluating the impact of ASU 2020-04, but does not expect it to have a material impact on the Company’s consolidated financial statements.
Critical Accounting Policies and Estimates
BancPlus’ unaudited interim condensed consolidated financial statements are prepared based on the application of certain accounting policies, the most significant of which are described in the notes to its condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Certain of these policies require numerous estimates and strategic or economic assumptions that may prove inaccurate or subject to variation and may significantly affect its reported results and financial position for the current period or in future periods. The use of estimates, assumptions, and judgments are necessary when financial assets and liabilities are required to be recorded at, or adjusted to reflect, fair value. Assets carried at fair value inherently result in more financial statement volatility. Fair values and information used to record valuation adjustments for certain assets and liabilities are based on either quoted market prices or are provided by other independent third-party sources, when available. When such information is not available, management estimates valuation adjustments. Changes in underlying factors, assumptions or estimates in any of these areas could have a material impact on BancPlus’ future financial condition and results of operations.
The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) permits BancPlus, as an emerging growth company, to take advantage of an extended transition period for complying with new or revised accounting standards affecting public companies. BancPlus has elected to take advantage of this extended transition period, which means that the financial statements included in this Quarterly Report on Form 10-Q will not be subject to all new or revised accounting standards generally applicable to public companies for the transition period for so long as BancPlus remains an emerging growth company or until BancPlus affirmatively and irrevocably opts out of the extended transition period under the JOBS Act.
The following is a discussion of the critical accounting policies and significant estimates that BancPlus believes require BancPlus to make the most complex or subjective decisions or assessments. Additional information about these policies can be found in Note 1 of our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020.
Allowance for Loan Losses
The allowance for loan losses, sometimes referred to as the “allowance,” is established through a provision for loan losses which is charged to expense. Loan losses are charged against the allowance when management determines all or a portion of the loan balance to be uncollectible. Subsequent recoveries, if any, are credited to the allowance for cash received on previously charged-off amounts. If the allowance is considered inadequate to absorb future loan losses on existing loans for any reason, including but not limited to, increases in the size of the loan portfolio, increases in charge-offs or changes in the risk characteristics of the loan portfolio, the provision for loan losses is increased.
A loan is considered impaired when, based on current information and events, it is probable that BancPlus will be unable to collect all amounts due according to the original contractual terms of the loan agreement. The collection of all amounts due according to contractual terms means that both the contractual interest and principal payments of a loan will be collected as scheduled in the loan agreement. An impaired loan is measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate, or, as a practical expedient, at the loan’s observable market price, or the fair value of the underlying collateral. The fair value of collateral, reduced by costs to sell on a discounted basis, is used if a loan is collateral dependent.
In situations where, for economic or legal reasons related to a borrower’s financial difficulties, BancPlus grants a concession to the borrower that BancPlus would not otherwise consider, the related loan is classified as a TDR. BancPlus measures any loss on
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the TDR in accordance with the guidance concerning impaired loans set forth above. Additionally, TDRs are generally placed on non-accrual status at the time of restructuring and included in impaired loans. These loans are returned to accrual status after the borrower demonstrates performance with the modified terms for a sustained period of time and has the capacity to continue to perform in accordance with the modified terms of the restructured debt.
Investment Securities Impairment
Periodically, BancPlus may need to assess whether there have been any events or economic circumstances to indicate that a security on which there is an unrealized loss is impaired on an other-than-temporary basis. In any such instance, BancPlus would consider many factors, including the length of time and the extent to which the fair value has been less than the amortized cost basis, the market liquidity for the security, the financial condition and the near-term prospects of the issuer, expected cash flows, and its intent and ability to hold the investment for a period of time sufficient to recover the temporary loss. Securities on which there is an unrealized loss that is deemed to be other-than-temporary are written down to fair value, with the write-down recorded as a realized loss in securities gains (losses).
The fair values of investment securities are generally determined by various pricing models, monitoring credit ratings and periodic reviews of key metrics. BancPlus evaluates the methodologies used to develop the resulting fair values. BancPlus’ procedures include initial and ongoing review of pricing methodologies and trends. BancPlus seeks to ensure prices represent a reasonable estimate of fair value through the use of broker quotes, current sales transactions from its portfolio and pricing techniques, which are based on the net present value of future expected cash flows discounted at a rate of return market participants would require. As a result of this analysis, if BancPlus determines there is a more appropriate fair value, the price is adjusted accordingly.
Other Real Estate
Other real estate acquired through partial or total satisfaction of loans is initially carried at the fair value less cost to sell at the acquisition, establishing a new cost. Any loss incurred at the date of acquisition is charged to loan loss. Subsequent gains or loss on such assets and related operating income and expenses are reported in current operations when earned or incurred.
Income Tax Accounting
BancPlus uses the asset and liability method of accounting for income taxes as prescribed by GAAP. Under this method, 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. If currently available information indicates it is “more likely than not” that the deferred tax asset will not be realized, a valuation allowance is established. 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. Accounting for deferred income taxes is a critical accounting estimate because BancPlus exercises significant judgment in evaluating the amount and timing of recognition of the resulting tax liabilities and assets. Management’s determination of the realization of deferred tax assets is based upon management’s judgment of various future events and uncertainties, including the timing and amount of future income, reversing temporary differences which may offset, and the implementation of various tax plans to maximize realization of the deferred tax asset. These judgments and estimates are inherently subjective and reviewed on a continual basis as regulatory and business factors change. Any reduction in estimated future taxable income may require BancPlus to record a valuation allowance against its deferred tax assets.
Item 3. Qualitative and Quantitative Disclosures about Market Risk
Not applicable.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out by management with the participation of BancPlus’ Chief Executive Officer and Chief Financial Officer, of the effectiveness of BancPlus’ disclosure controls and procedures (as defined in Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that as of the end of the period covered by this Quarterly Report on Form 10-Q, BancPlus’ disclosure controls and procedures were effective to ensure that information required to be disclosed by BancPlus in the reports required to be filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within time periods specified in the SEC’s rules and forms.
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Changes in Internal Control over Financial Reporting
There has been no change in BancPlus’ internal control over financial reporting during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, BancPlus’ internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On March 20, 2019, a complaint (the “Complaint”), Mills v. BankPlus, et al., Case #3:19-cv-00196-CWR-FKB, was filed in the United States District Court for the Southern District of Mississippi, Northern Division, by Alysson Mills, in her capacity as Court-appointed Receiver for Arthur Lamar Adams (“Adams”) and Madison Timber Properties, LLC (“Madison Timber”), naming BankPlus, three former BankPlus employees, one then-current BankPlus employee and other defendants, including defendants affiliated and unaffiliated with BankPlus (“Defendants”). The Complaint seeks to recover damages from the Defendants for the benefit of the receivership estate related to certain investors who were allegedly defrauded by Adams and Madison Timber, whose actions were allegedly attributable to the actions of the Defendants that allegedly enabled negligent, illegal or fraudulent activities engaged in by Adams and Madison Timber. A brief description of the cause of action on the cover sheet filed with the Complaint includes securities, civil conspiracy, aiding and abetting, negligence, and other possible causes of action. The amount of damages (including punitive damages) requested against the Defendants in the Complaint is unspecified. On January 4, 2021, the plaintiff, Mills, filed an Amended Complaint. Answers and/or Motions to Dismiss the Amended complaint were filed by the Defendants. On July 8, 2021, the Court denied the Motion to Dismiss filed by BankPlus. A related motion for reconsideration was filed by BankPlus on August 9, 2021. On September 30, 2021, an order was entered to consolidate for purposes of discovery this case (No. 3:19-cv-00196-CWR-FKB) with three other related cases filed by Mills, the Receiver. By subsequent text-only order (No. 3:18-cv-00866-CWR-FKB) dated October 10, 2021, the four consolidated cases are stayed until January 31, 2022.
In addition to the above, the Company, including subsidiaries, is party to various legal proceedings arising in the ordinary course of business. We do not believe that loss contingencies, if any, arising from pending litigation and regulatory matters will have a material adverse effect on our consolidated financial position or liquidity.
Item 1A. Risk Factors
There have been no material changes to the risk factors previously disclosed under Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, previously filed with the SEC, except as noted below.
The acquisition of First Trust Corporation (“FTC”) by BancPlus and of First Bank and Trust by BankPlus, (the “transaction”) is subject to certain closing conditions that, if not satisfied or waived, will result in the transaction not being completed.
The transaction is subject to customary conditions to closing, including the receipt of required regulatory approvals and the approval of the shareholders of FTC. If any condition to the transaction is not satisfied or waived (to the extent waiver is legally permitted at all), the transaction will not be completed. In addition, BancPlus and FTC may terminate the definitive agreement under certain circumstances even if the transaction is approved by FTC’s shareholders, including but not limited to if the statutory share exchange has not been completed on or before March 31, 2022 (unless the required regulatory approvals are pending and have not been finally resolved, in which event such date shall be automatically extended to June 30, 2022), or if FTC fails to obtain the approval of its shareholders; provided, that the failure of the closing to occur by such date cannot be due to the failure of the party seeking to terminate the definitive agreement to perform or observe the covenants and agreements of such party as set forth in the definitive agreement. In the event the definitive agreement is terminated, BancPlus would not realize any of the expected benefits of having completed the transaction. If the transaction is not completed, additional risks could materialize, which could adversely affect the business, financial condition or results of operations of BancPlus.
BancPlus may not be able to successfully integrate FTC or realize the anticipated benefits of the transaction.
The transaction involves the combination of two bank holding companies and two banks that previously have operated and, until completion of the transaction, will continue to operate independently. A successful combination of the operations of the two entities will depend substantially on the BancPlus’ ability to consolidate operations, systems and procedures and to eliminate redundancies and costs. BancPlus may not be able to combine the operations of FTC with its operations without encountering difficulties, such as:
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•the loss of key employees and customers;
•the disruption of operations and business;
•inability to maintain and increase competitive presence;
•deposit attrition, customer loss and revenue loss;
•possible inconsistencies in standards, control procedures and policies;
•unexpected problems with costs, operations, personnel, technology and credit; and/or
•problems with the assimilation of new operations, sites or personnel, which could divert resources from regular banking operations.
Additionally, general market and economic conditions and governmental actions affecting the financial industry generally may inhibit BancPlus’ successful integration of FTC. Further, BancPlus entered into the definitive agreement with the expectation that the transaction will result in various benefits including, among other things, benefits relating to enhanced revenues, additional geographic markets, cross-selling opportunities, technology, cost savings and operating efficiencies. Achieving the anticipated benefits of the transaction is subject to a number of uncertainties, including whether BancPlus integrates FTC in an efficient and effective manner, and general competitive factors in the marketplace. BancPlus’ failure to achieve these anticipated benefits could result in increased costs, decreases in the amount of expected revenues and diversion of management’s time and energy and could adversely impact BancPlus’ business, financial condition or results of operation. In addition, the attention and effort devoted to the integration of FTC with BancPlus’ existing operations may divert management’s attention from other important issues and could seriously harm BancPlus’ business, financial condition or results of operation. Finally, any cost savings that are realized may be offset by losses in revenues or other charges to earnings.
BancPlus expects to incur substantial expenses related to the transaction.
BancPlus expects to incur substantial expenses in connection with consummation of the transaction and combining the business, operations, networks, systems, technologies, policies and procedures of FTC with BancPlus. Although BancPlus and FTC have assumed that a certain level of transaction and combination expenses would be incurred, there are a number of factors beyond their control that could affect the total amount or the timing of their combination expenses. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time. Due to these factors, the transaction and combination expenses associated with the transaction could, particularly in the near term, exceed the savings that BancPlus expects to achieve from the elimination of duplicative expenses and the realization of economies of scale and cost savings related to the combination of the businesses following the consummation of the transaction. As a result of these expenses, both BancPlus and FTC expect to take charges against their earnings before and after the completion of the transaction. The charges taken in connection with the transaction are expected to be significant, although the aggregate amount and timing of such charges are uncertain at present.
The transaction is subject to the receipt of consents and approvals from governmental entities that may impose conditions that could delay or prevent the completion of the transaction or have an adverse effect on the BancPlus following the transaction.
Before the transaction may be completed, various approvals or consents or waivers must be obtained from the Federal Reserve, FDIC, and the MDBCF. These governmental entities may request additional information regarding BancPlus’ and FTC’s regulatory applications and notices, and they may impose conditions on the completion of the transaction or require changes to the terms of the transaction. Such conditions or changes could have the effect of delaying or preventing completion of the transaction or imposing additional costs on, or limiting the revenues of, BancPlus following the transaction, any of which might have an adverse effect on BancPlus following the transaction. Such a condition may also constitute a burdensome condition that may allow FTC to terminate the definitive agreement after June 30, 2022.
BancPlus will be subject to business uncertainties and contractual restrictions while the transaction is pending.
Uncertainty about the effect of the transaction on employees, customers (including depositors and borrowers), suppliers and vendors may have an adverse effect on the business, financial condition or results of operations of BancPlus. These uncertainties may impair BancPlus’ or FTC’s ability to attract, retain and motivate key personnel and customers (including depositors and borrowers) pending the consummation of the transaction, as such personnel and customers may experience uncertainty about their future roles and relationships following the consummation of the transaction. In addition, these uncertainties could cause customers (including depositors and borrowers), vendors and others who deal with BancPlus and/or FTC to seek to change existing business relationships with BancPlus and/or FTC or fail to extend an existing relationship with BancPlus and/or FTC. Moreover, competitors may target each party’s existing customers by highlighting potential uncertainties and integration difficulties that may result from the transaction. The pursuit of the transaction and the preparation for the integration may place a burden on BancPlus’ management and internal resources. Any significant diversion of management attention away from ongoing business concerns and any difficulties encountered in the transition and integration process could adversely affect BancPlus’
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business, financial condition or results of operations. In addition, the definitive agreement restricts each party from taking certain actions without the other party’s consent while the transaction is pending. These restrictions could have an adverse effect on BancPlus’ business, financial condition or results of operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits
2.1* | |||||
2.2* | Agreement and Plan of Share Exchange and Merger, dated September 18, 2019, by and among BancPlus Corporation, BankPlus, State Capital Corp., and State Bank & Trust Company (incorporated by reference to Annex A of the Company's Registration Statement on Form S-4, as amended (File No. 333-236022), of the Registrant, filed on February 10, 2020) | ||||
3.1 | |||||
3.2 | |||||
4.1 | |||||
4.2 | |||||
10.1 | |||||
31.1 | |||||
31.2 | |||||
32.1 | |||||
32.2 | |||||
101 | Inline XBRL Interactive Data | ||||
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document in Exhibit 101) |
* Schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule will be furnished supplementally to the SEC upon request.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
BancPlus Corporation
Date: | November 15, 2021 | By: | /s/ William A. Ray | ||||||||
William A. Ray | |||||||||||
President and Chief Executive Officer |
Date: | November 15, 2021 | By: | /s/ M. Ann Southerland | ||||||||
M. Ann Southerland | |||||||||||
Senior Executive Vice President and Chief Financial Officer |
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