Cover Page
Cover Page - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Feb. 14, 2020 | Jun. 30, 2019 | |
Cover page. | |||
Document Type | 10-K | ||
Document Annual Report | true | ||
Document Period End Date | Dec. 31, 2019 | ||
Document Transition Report | false | ||
Entity File Number | 0-6233 | ||
Entity Registrant Name | 1st Source Corporation | ||
Entity Incorporation, State or Country Code | IN | ||
Entity Tax Identification Number | 35-1068133 | ||
Entity Address, Address Line One | 100 North Michigan Street | ||
Entity Address, City or Town | South Bend, | ||
Entity Address, State or Province | IN | ||
Entity Address, Postal Zip Code | 46601 | ||
City Area Code | 574 | ||
Local Phone Number | 235-2000 | ||
Title of 12(b) Security | Common Stock — without par value | ||
Trading Symbol | SRCE | ||
Security Exchange Name | NASDAQ | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Small Business | false | ||
Entity Emerging Growth Company | false | ||
Entity Shell Company | false | ||
Entity Public Float | $ 921,284,157 | ||
Entity Common Stock, Shares Outstanding | 25,525,562 | ||
Documents Incorporated by Reference | Portions of the 2020 Proxy Statement for the 2020 annual meeting of shareholders to be held April 23, 2020, are incorporated by reference into Part III. | ||
Entity Central Index Key | 0000034782 | ||
Current Fiscal Year End Date | --12-31 | ||
Document Fiscal Year Focus | 2019 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false |
CONSOLIDATED STATEMENTS OF FINA
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
ASSETS | ||
Cash and due from banks | $ 67,215 | $ 94,907 |
Federal funds sold and interest bearing deposits with other banks | 16,150 | 4,172 |
Investment securities available-for-sale | 1,040,583 | 990,129 |
Other investments | 28,414 | 28,404 |
Mortgages held for sale | 20,277 | 11,290 |
Loans and leases, net of unearned discount: | ||
Total loans and leases | 5,085,527 | 4,835,464 |
Reserve for loan and lease losses | (111,254) | (100,469) |
Net loans and leases | 4,974,273 | 4,734,995 |
Equipment owned under operating leases, net | 111,684 | 134,440 |
Net premises and equipment | 52,219 | 52,139 |
Goodwill and intangible assets | 83,971 | 83,998 |
Accrued income and other assets | 227,990 | 159,271 |
Total assets | 6,622,776 | 6,293,745 |
Deposits: | ||
Noninterest-bearing demand | 1,216,834 | 1,217,120 |
Interest-bearing demand | 1,677,200 | 1,614,959 |
Savings | 814,794 | 822,477 |
Time | 1,648,498 | 1,467,766 |
Total interest-bearing deposits | 4,140,492 | 3,905,202 |
Total deposits | 5,357,326 | 5,122,322 |
Short-term borrowings: | ||
Federal funds purchased and securities sold under agreements to repurchase | 120,459 | 113,627 |
Other short-term borrowings | 25,434 | 85,717 |
Total short-term borrowings | 145,893 | 199,344 |
Long-term debt and mandatorily redeemable securities | 71,639 | 71,123 |
Subordinated notes | 58,764 | 58,764 |
Accrued expenses and other liabilities | 140,518 | 78,602 |
Total liabilities | 5,774,140 | 5,530,155 |
SHAREHOLDERS’ EQUITY | ||
Preferred stock; no par value Authorized 10,000,000 shares; none issued or outstanding | 0 | 0 |
Common stock; no par value Authorized 40,000,000 shares; issued 28,205,674 shares at December 31,2019 and 2018 | 436,538 | 436,538 |
Retained earnings | 463,269 | 398,980 |
Cost of common stock in treasury (2,696,200 shares at December 31, 2019 and 2,421,946 shares at December 31, 2018 | (76,702) | (62,760) |
Accumulated other comprehensive income (loss) | 5,172 | (10,676) |
Total shareholders’ equity | 828,277 | 762,082 |
Noncontrolling interests | 20,359 | 1,508 |
Total equity | 848,636 | 763,590 |
Total liabilities and equity | 6,622,776 | 6,293,745 |
Commercial and agricultural | ||
Loans and leases, net of unearned discount: | ||
Total loans and leases | 1,132,791 | 1,073,205 |
Reserve for loan and lease losses | (23,671) | (17,063) |
Auto and light truck | ||
Loans and leases, net of unearned discount: | ||
Total loans and leases | 588,807 | 559,987 |
Reserve for loan and lease losses | (14,400) | (14,689) |
Medium and heavy duty truck | ||
Loans and leases, net of unearned discount: | ||
Total loans and leases | 294,824 | 283,544 |
Reserve for loan and lease losses | (4,612) | (4,303) |
Aircraft | ||
Loans and leases, net of unearned discount: | ||
Total loans and leases | 784,040 | 803,111 |
Reserve for loan and lease losses | (31,058) | (33,047) |
Construction equipment | ||
Loans and leases, net of unearned discount: | ||
Total loans and leases | 705,451 | 645,239 |
Reserve for loan and lease losses | (14,120) | (10,922) |
Commercial real estate | ||
Loans and leases, net of unearned discount: | ||
Total loans and leases | 908,177 | 809,886 |
Reserve for loan and lease losses | (18,350) | (15,705) |
Residential real estate and home equity | ||
Loans and leases, net of unearned discount: | ||
Total loans and leases | 532,003 | 523,855 |
Reserve for loan and lease losses | (3,609) | (3,425) |
Consumer | ||
Loans and leases, net of unearned discount: | ||
Total loans and leases | 139,434 | 136,637 |
Reserve for loan and lease losses | $ (1,434) | $ (1,315) |
CONSOLIDATED STATEMENTS OF FI_2
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Parenthetical) - $ / shares | Dec. 31, 2019 | Dec. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Preferred Stock, Par or Stated Value Per Share | $ 0 | $ 0 |
Preferred stock, Authorized shares | 10,000,000 | 10,000,000 |
Preferred stock, issued shares | 0 | 0 |
Preferred stock, outstanding shares | 0 | 0 |
Common Stock, Par or Stated Value Per Share | $ 0 | $ 0 |
Common stock, Authorized shares | 40,000,000 | 40,000,000 |
Common stock, issued shares | 28,205,674 | 28,205,674 |
Cost of common stock in treasury, shares | 2,696,200 | 2,421,946 |
CONSOLIDATED STATEMENTS OF INCO
CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Interest income: | |||
Loans and leases | $ 258,348 | $ 234,455 | $ 194,726 |
Investment securities, taxable | 20,946 | 19,356 | 13,853 |
Investment securities, tax-exempt | 1,351 | 1,857 | 2,413 |
Other | 2,232 | 1,648 | 1,393 |
Total interest income | 282,877 | 257,316 | 212,385 |
Interest expense: | |||
Deposits | 50,495 | 34,631 | 19,202 |
Short-term borrowings | 1,934 | 2,838 | 1,115 |
Subordinated notes | 3,677 | 3,625 | 4,002 |
Long-term debt and mandatorily redeemable securities | 2,905 | 2,316 | 2,435 |
Total interest expense | 59,011 | 43,410 | 26,754 |
Net interest income | 223,866 | 213,906 | 185,631 |
Provision for loan and lease losses | 15,833 | 19,462 | 8,980 |
Net interest income after provision for loan and lease losses | 208,033 | 194,444 | 176,651 |
Noninterest income: | |||
Mortgage banking | 4,698 | 3,844 | 4,796 |
Insurance commissions | 6,761 | 6,502 | 5,889 |
Income related to lease payments | 30,741 | 31,793 | 30,381 |
(Losses) gains on investment securities available-for-sale | 0 | (345) | |
(Losses) gains on investment securities available-for-sale (including equity securities) | 4,340 | ||
Other | 13,019 | 10,362 | 9,922 |
Total noninterest income | 101,130 | 97,050 | 98,706 |
Noninterest expense: | |||
Salaries and employee benefits | 97,098 | 93,857 | 86,912 |
Net occupancy | 10,528 | 10,041 | 10,624 |
Furniture and equipment | 24,815 | 23,433 | 20,769 |
Professional fees | 6,952 | 7,680 | 6,810 |
Supplies and communication | 6,454 | 6,320 | 5,355 |
FDIC and other insurance | 1,795 | 2,923 | 2,537 |
Business development and marketing | 6,303 | 6,112 | 7,477 |
Loan and lease collection and repossession | 3,402 | 3,375 | 2,724 |
Other | 6,534 | 6,478 | 5,574 |
Total noninterest expense | 189,009 | 186,467 | 173,997 |
Income before income taxes | 120,154 | 105,027 | 101,360 |
Income tax expense | 28,139 | 22,613 | 33,309 |
Net income | 92,015 | 82,414 | 68,051 |
Net (income) loss attributable to noncontrolling interests | (55) | 0 | 0 |
Net income available to common shareholders | $ 91,960 | $ 82,414 | $ 68,051 |
Basic net income per common share, in dollars per share | $ 3.57 | $ 3.16 | $ 2.60 |
Diluted net income per common share, in dollars per share | $ 3.57 | $ 3.16 | $ 2.60 |
Trust and wealth advisory | |||
Noninterest income: | |||
Trust and wealth advisory, service charges on deposit accounts, and debit card income | $ 20,692 | $ 21,071 | $ 20,980 |
Service charges on deposit accounts | |||
Noninterest income: | |||
Trust and wealth advisory, service charges on deposit accounts, and debit card income | 11,010 | 10,454 | 10,589 |
Debit card | |||
Noninterest income: | |||
Trust and wealth advisory, service charges on deposit accounts, and debit card income | 14,209 | 13,369 | 11,809 |
Leased equipment | |||
Noninterest expense: | |||
Depreciation | $ 25,128 | $ 26,248 | $ 25,215 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Statement of Comprehensive Income [Abstract] | |||
Net income | $ 92,015 | $ 82,414 | $ 68,051 |
Other comprehensive income (loss): | |||
Unrealized appreciation (depreciation) of investment securities available-for-sale | 20,875 | (9,073) | (3,147) |
Reclassification adjustment for realized losses (gains) included in net income | 0 | 345 | (4,340) |
Income tax effect | (5,027) | 2,102 | 2,811 |
Other comprehensive income (loss), net of tax | 15,848 | (6,626) | (4,676) |
Comprehensive income | 107,863 | 75,788 | 63,375 |
Comprehensive (income) loss attributable to noncontrolling interests | (55) | 0 | 0 |
Comprehensive income available to common shareholders | $ 107,808 | $ 75,788 | $ 63,375 |
CONSOLIDATED STATEMENTS OF SHAR
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($) $ in Thousands | Total | Common Stock | Retained Earnings | Cost of Common Stock in Treasury | Accumulated Other Comprehensive Income (Loss), Net | Total Shareholders' Equity | Noncontrolling Interests |
Increase (Decrease) in Stockholders' Equity | |||||||
Cumulative-effect adjustment | $ (65) | $ (65) | $ (65) | ||||
Balance, adjusted | 672,585 | $ 436,538 | 290,759 | $ (56,056) | $ 1,344 | 672,585 | |
Balance at Dec. 31, 2016 | 672,650 | 436,538 | 290,824 | (56,056) | 1,344 | 672,650 | |
Increase (Decrease) in Stockholders' Equity | |||||||
Net income | 68,051 | 68,051 | 68,051 | ||||
Other comprehensive income (loss) | (4,676) | (4,676) | (4,676) | ||||
Issuance of 51,533, 47,977, and 61,899 common shares under stock based compensation awards for 2019, 2018 and 2017, respectively | 2,377 | 908 | 1,469 | 2,377 | |||
Cost of 325,787, 201,013, and 900 shares of common stock acquired for treasury for 2019, 2018 and 2017, respectively | (41) | (41) | (41) | ||||
Common stock dividend ($1.10, $0.96, and $0.76 per share for 2019, 2018 and 2017, respectively) | (19,759) | (19,759) | (19,759) | ||||
Balance at Dec. 31, 2017 | 718,537 | 436,538 | 339,959 | (54,628) | (3,332) | 718,537 | |
Increase (Decrease) in Stockholders' Equity | |||||||
Cumulative-effect adjustment | 0 | 718 | (718) | 0 | |||
Balance, adjusted | 718,537 | 436,538 | 340,677 | (54,628) | (4,050) | 718,537 | |
Net income | 82,414 | 82,414 | 82,414 | ||||
Other comprehensive income (loss) | (6,626) | (6,626) | (6,626) | ||||
Issuance of 51,533, 47,977, and 61,899 common shares under stock based compensation awards for 2019, 2018 and 2017, respectively | 1,980 | 841 | 1,139 | 1,980 | |||
Cost of 325,787, 201,013, and 900 shares of common stock acquired for treasury for 2019, 2018 and 2017, respectively | (9,271) | (9,271) | (9,271) | ||||
Common stock dividend ($1.10, $0.96, and $0.76 per share for 2019, 2018 and 2017, respectively) | (24,952) | (24,952) | (24,952) | ||||
Contributions from noncontrolling interests | 1,508 | 0 | $ 1,508 | ||||
Balance at Dec. 31, 2018 | 763,590 | 436,538 | 398,980 | (62,760) | (10,676) | 762,082 | 1,508 |
Increase (Decrease) in Stockholders' Equity | |||||||
Cumulative-effect adjustment | (301) | (301) | (301) | ||||
Balance, adjusted | 763,289 | 436,538 | 398,679 | (62,760) | (10,676) | 761,781 | 1,508 |
Net income | 92,015 | 91,960 | 91,960 | 55 | |||
Other comprehensive income (loss) | 15,848 | 15,848 | 15,848 | ||||
Issuance of 51,533, 47,977, and 61,899 common shares under stock based compensation awards for 2019, 2018 and 2017, respectively | 2,005 | 862 | 1,143 | 2,005 | |||
Cost of 325,787, 201,013, and 900 shares of common stock acquired for treasury for 2019, 2018 and 2017, respectively | (15,085) | (15,085) | (15,085) | ||||
Common stock dividend ($1.10, $0.96, and $0.76 per share for 2019, 2018 and 2017, respectively) | (28,232) | (28,232) | (28,232) | ||||
Contributions from noncontrolling interests | 18,934 | 0 | 18,934 | ||||
Distributions to noncontrolling interests | (138) | 0 | (138) | ||||
Balance at Dec. 31, 2019 | $ 848,636 | $ 436,538 | $ 463,269 | $ (76,702) | $ 5,172 | $ 828,277 | $ 20,359 |
CONSOLIDATED STATEMENTS OF SH_2
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Parenthetical) - $ / shares | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Statement of Stockholders' Equity [Abstract] | |||
Issuance of common shares per stock based compensation awards, shares | 51,533 | 47,977 | 61,899 |
Common stock acquired for treasury, shares | 325,787 | 201,013 | 900 |
Common stock dividend (in dollars per share) | $ 1.10 | $ 0.96 | $ 0.76 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOW - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Net income | $ 92,015 | $ 82,414 | $ 68,051 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Provision for loan and lease losses | 15,833 | 19,462 | 8,980 |
Depreciation of premises and equipment | 5,786 | 5,620 | 5,658 |
Stock-based compensation | 2,765 | 3,553 | 2,963 |
Amortization of investment securities premiums and accretion of discounts, net | 4,014 | 3,477 | 5,449 |
Amortization of mortgage servicing rights | 1,312 | 956 | 1,092 |
Amortization of right of use assets | 3,046 | 0 | 0 |
Deferred income taxes | (5,730) | (550) | 2,767 |
Losses (gains) on investment securities available-for-sale | 0 | 345 | |
Losses (gains) on investment securities available-for-sale (including equity securities) | (4,340) | ||
Originations of loans held for sale, net of principal collected | (145,097) | (78,450) | (101,104) |
Proceeds from the sales of loans held for sale | 139,050 | 82,127 | 106,811 |
Net gains on sale of loans held for sale | (2,940) | (1,844) | (2,981) |
Net gains on sale of other real estate and repossessions | (487) | (561) | (251) |
Net gain on sale of premises and equipment | (1,251) | (128) | (300) |
Change in interest receivable | (245) | (1,747) | (2,119) |
Change in interest payable | 4,968 | 2,997 | 1,222 |
Change in other assets | 11,213 | (7,048) | 551 |
Change in other liabilities | 13,492 | 21,884 | 19,364 |
Other | 1,734 | 940 | 2,670 |
Net change in operating activities | 164,606 | 159,695 | 139,698 |
Investing activities: | |||
Proceeds from sales of investment securities available-for-sale | 0 | 11,392 | |
Proceeds from sales of investment securities available-for-sale (including equity securities) | 228,715 | ||
Proceeds from maturities and paydowns of investment securities available-for-sale | 317,295 | 145,167 | 177,466 |
Purchases of investment securities available-for-sale | (351,189) | (255,205) | |
Purchases of investment securities available-for-sale (including equity securities) | (469,385) | ||
Net change in partnership investments | (33,840) | (13,669) | (24,489) |
Net change in other investments | (10) | (2,451) | (3,495) |
Loans sold or participated to others | 53,369 | 22,835 | 32,004 |
Proceeds from principal payments on direct finance leases | 69,188 | 50,457 | 75,268 |
Net change in loans and leases | (392,475) | (405,961) | (457,654) |
Net change in equipment owned under operating leases | (2,495) | (21,107) | (46,003) |
Purchases of premises and equipment | (8,033) | (3,058) | (5,444) |
Proceeds from disposal of premises and equipment | 3,418 | 216 | 2,180 |
Proceeds from sales of other real estate and repossessions | 10,855 | 13,433 | 6,194 |
Net change in investing activities | (333,917) | (457,951) | (484,643) |
Financing activities: | |||
Net change in demand deposits and savings accounts | 54,272 | 171,799 | 205,649 |
Net change in time deposits | 180,732 | 197,793 | 213,321 |
Net change in short-term borrowings | (53,451) | (15,251) | (77,348) |
Proceeds from issuance of long-term debt | 0 | 0 | 19,999 |
Payments on long-term debt | (2,695) | (1,735) | (26,628) |
Stock issued under stock purchase plans | 49 | 145 | 153 |
Acquisition of treasury stock | (15,085) | (9,271) | (41) |
Net change in noncontrolling interests | 18,796 | 1,508 | 0 |
Cash dividends paid on common stock | (29,021) | (25,686) | (20,431) |
Net change in financing activities | 153,597 | 319,302 | 314,674 |
Net change in cash and cash equivalents | (15,714) | 21,046 | (30,271) |
Cash and cash equivalents, beginning of year | 99,079 | 78,033 | 108,304 |
Cash and cash equivalents, end of year | 83,365 | 99,079 | 78,033 |
Non-cash transactions: | |||
Loans transferred to other real estate and repossessions | 14,807 | 11,007 | 8,135 |
Common stock matching contribution to Employee Stock Ownership and Profit Sharing Plan | 300 | 583 | 1,426 |
Right of use assets obtained in exchange for lease obligation | 17,064 | 0 | 0 |
Cash paid for: | |||
Interest | 54,043 | 40,413 | 25,531 |
Income taxes | 5,585 | 8,272 | 10,567 |
Leased equipment | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation | $ 25,128 | $ 26,248 | $ 25,215 |
Accounting Policies
Accounting Policies | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
Accounting Policies | Accounting Policies 1st Source Corporation is a bank holding company headquartered in South Bend, Indiana that provides, through its subsidiaries (collectively referred to as “1st Source” or “the Company”), a broad array of financial products and services. 1st Source Bank (“Bank”), its banking subsidiary, offers commercial and consumer banking services, trust and wealth advisory services, and insurance to individual and business clients in Indiana, Michigan and Florida. The following is a summary of significant accounting policies followed in the preparation of the consolidated financial statements. Basis of Presentation — The financial statements consolidate 1st Source, its subsidiaries (principally the Bank) and any variable interest entities (“VIEs”) for which the Company has concluded it has significant involvement in and the ability to direct the activities that impact the entity’s economic performance. All significant intercompany balances and transactions have been eliminated. For purposes of the parent company only financial information presented in Note 22, investments in subsidiaries are carried at equity in the underlying net assets. Use of Estimates in the Preparation of Financial Statements — Financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) require the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Business Combinations — Business combinations are accounted for under the purchase method of accounting. Under the purchase method, assets and liabilities of the business acquired are recorded at their estimated fair values as of the date of acquisition with any excess of the cost of the acquisition over the fair value of the net tangible and intangible assets acquired recorded as goodwill. Results of operations of the acquired business are included in the income statement from the date of acquisition. Cash Flows — For purposes of the consolidated and parent company only statements of cash flows, the Company considers cash and due from banks, federal funds sold and interest bearing deposits with other banks with original maturities of three months or less as cash and cash equivalents. Securities — Securities that the Company has the ability and positive intent to hold to maturity are classified as investment securities held-to-maturity. Held-to-maturity investment securities, when present, are carried at amortized cost. As of December 31, 2019 and 2018 , the Company held no securities classified as held-to-maturity. Securities that may be sold in response to, or in anticipation of, changes in interest rates and resulting prepayment risk, or for other factors, are classified as available-for-sale and are carried at fair value. Unrealized gains and losses on debt securities are reported, net of applicable taxes, as a separate component of accumulated other comprehensive income (loss) in shareholders’ equity. Unrealized gains and losses on equity securities are reflected, net of applicable taxes, in earnings. The initial indication of potential other-than-temporary impairment (OTTI) for debt securities is a decline in fair value below amortized cost. Quarterly, any impaired securities are analyzed on a qualitative and quantitative basis in determining OTTI. Declines in the fair value of available-for-sale debt securities below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses to the extent the impairment is related to credit losses. The amount of impairment related to other factors is recognized in other comprehensive income. In estimating OTTI impairment losses, the Company considers among other things, (i) the length of time and the extent to which fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, and (iii) whether it is more likely than not that the Company will not have to sell any such securities before an anticipated recovery of cost. Debt and equity securities that are purchased and held principally for the purpose of selling them in the near term are classified as trading account securities and are carried at fair value with unrealized gains and losses reported in earnings. Realized gains and losses on the sales of all securities are reported in earnings and computed using the specific identification cost basis. Other investments consist of shares of Federal Home Loan Bank of Indianapolis (FHLBI) and Federal Reserve Bank stock. As restricted member stocks, these investments are carried at cost. Both cash and stock dividends received on the stocks are reported as income. Quarterly, the Company reviews its investment in FHLBI for impairment. Factors considered in determining impairment are: history of dividend payments; determination of cause for any net loss; adequacy of capital; and review of the most recent financial statements. As of December 31, 2019 and 2018 , it was determined that the Company’s investment in FHLBI stock is appropriately valued at cost, which equates to par value. In addition, other investments include interest bearing deposits with other banks with original maturities of greater than three months. These investments are in denominations, including accrued interest, that are fully insured by the FDIC. Loans and Leases — Loans are stated at the principal amount outstanding, net of unamortized deferred loan origination fees and costs and net of unearned income. Interest income is accrued as earned based on unpaid principal balances. Origination fees and direct loan and lease origination costs are deferred, and the net amount amortized to interest income over the estimated life of the related loan or lease. Loan commitment fees are deferred and amortized into other income over the commitment period. Direct financing leases are carried at the aggregate of lease payments plus estimated residual value of the leased property, net of unamortized deferred lease origination fees and costs and unearned income. As part of the leasing standard that became effective January 1, 2019, only those costs incurred as a direct result of closing a lease transaction are capitalized. Interest income on direct financing leases is recognized over the term of the lease to achieve a constant periodic rate of return on the outstanding investment. All existing deferrals will continue to be amortized over the estimated life of the lease while all new incremental direct costs are expensed immediately. The accrual of interest on loans and leases is discontinued when a loan or lease becomes contractually delinquent for 90 days, or when an individual analysis of a borrower’s credit worthiness indicates a credit should be placed on nonperforming status, except for residential mortgage loans and consumer loans that are well secured and in the process of collection. Residential mortgage loans are placed on nonaccrual at the time the loan is placed in foreclosure. When interest accruals are discontinued, interest credited to income in the current year is reversed and interest accrued in the prior year is charged to the reserve for loan and lease losses. However, in some cases, the Company may elect to continue the accrual of interest when the net realizable value of collateral is sufficient to cover the principal and accrued interest. When a loan or lease is classified as nonaccrual and the future collectability of the recorded loan or lease balance is doubtful, collections on interest and principal are applied as a reduction to principal outstanding. Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured, which is typically evidenced by a sustained repayment performance of at least six months . A loan or lease is considered impaired, based on current information and events, if it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan or lease agreement. Interest on impaired loans and leases, which are not classified as nonaccrual, is recognized on the accrual basis. The Company evaluates loans and leases exceeding $100,000 where the internal credit quality grade is at or below a predetermined classification for impairment and establishes a specific reserve as a component of the reserve for loan and lease losses when it is probable all amounts due will not be collected pursuant to the contractual terms of the loan or lease and the recorded investment in the loan or lease exceeds its fair value. Loans and leases that have been modified and economic concessions have been granted to borrowers who have experienced financial difficulties are considered a troubled debt restructuring (TDR) and, by definition, are deemed an impaired loan. These concessions typically result from the Company’s loss mitigation activities and may include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. Certain TDRs are classified as nonperforming at the time of restructuring and typically are returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period of at least six months. When the Company modifies loans and leases in a TDR, it evaluates any possible impairment similar to other impaired loans based on the present value of expected future cash flows, discounted at the contractual interest rate of the original loan or lease agreement, or uses the current fair value of the collateral, less selling costs for collateral dependent loans. If the Company determines that the value of the modified loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), impairment is recognized through a reserve for loan and lease losses estimate or a charge-off to the reserve for loan and lease losses. In periods subsequent to modification, the Company evaluates all TDRs, including those that have payment defaults, for possible impairment and recognizes impairment through the reserve for loan and lease losses. The Company sells mortgage loans to the Government National Mortgage Association (GNMA) in the normal course of business and retains the servicing rights. The GNMA programs under which the loans are sold allow the Company to repurchase individual delinquent loans that meet certain criteria from the securitized loan pool. At its option, and without GNMA’s prior authorization, the Company may repurchase a delinquent loan for an amount equal to 100% of the remaining principal balance on the loan. Once the Company has the unconditional ability to repurchase a delinquent loan, the Company is deemed to have regained effective control over the loan and the Company is required to recognize the loan on its balance sheet and record an offsetting liability, regardless of its intent to repurchase the loan. At December 31, 2019 and 2018 , residential real estate portfolio loans included $1.44 million and $1.39 million , respectively, of loans available for repurchase under the GNMA optional repurchase programs with the offsetting liability recorded within other short-term borrowings. Mortgage Banking Activities — Loans held for sale are composed of performing one-to-four family residential mortgage loans originated for resale. Mortgage loans originated with the intent to sell are carried at fair value. The Company recognizes the rights to service mortgage loans for others as separate assets, whether the servicing rights are acquired through a separate purchase or through the sale of originated loans with servicing rights retained. The Company allocates a portion of the total proceeds of a mortgage loan to servicing rights based on the relative fair value. These assets are amortized as reductions of mortgage servicing fee income over the estimated servicing period in proportion to the estimated servicing income to be received. Gains and losses on the sale of MSRs are recognized in Noninterest Income on the Statements of Income in the period in which such rights are sold. MSRs are evaluated for impairment at each reporting date. For purposes of impairment measurement, MSRs are stratified based on the predominant risk characteristics of the underlying servicing, principally by loan type. If temporary impairment exists within a tranche, a valuation allowance is established through a charge to income equal to the amount by which the carrying value exceeds the fair value. If it is later determined all or a portion of the temporary impairment no longer exists for a particular tranche, the valuation allowance is reduced through a recovery of income. MSRs are also reviewed for other-than-temporary impairment. Other-than-temporary impairment exists when recoverability of a recorded valuation allowance is determined to be remote considering historical and projected interest rates, prepayments, and loan pay-off activity. When this situation occurs, the unrecoverable portion of the valuation allowance is applied as a direct write-down to the carrying value of the MSRs. Unlike a valuation allowance, a direct write-down permanently reduces the carrying value of the MSRs and the valuation allowance, precluding subsequent recoveries. As part of mortgage banking operations, the Company enters into commitments to originate loans whereby the interest rate on these loans is determined prior to funding (“rate lock commitments”). Similar to loans held for sale, the fair value of rate lock commitments is subject to change primarily due to changes in interest rates. Under the Company’s risk management policy, these fair values are hedged primarily by selling forward contracts on agency securities or obtaining corresponding best-efforts forward sales commitments with an investor to sell the loans at an agreed-upon price at the time the interest rate locks are issued to the customers. The rate lock commitments on mortgage loans intended to be sold and the related hedging instruments are recorded at fair value with changes in fair value recorded in current earnings. Reserve for Loan and Lease Losses — The reserve for loan and lease losses is maintained at a level believed to be appropriate by the Company to absorb probable losses inherent in the loan and lease portfolio. The determination of the reserve requires significant judgment reflecting the Company’s best estimate of probable loan and lease losses related to specifically identified impaired loans and leases as well as probable losses in the remainder of the various loan and lease portfolios. For purposes of determining the reserve, the Company has segmented loans and leases into classes based on the associated risk within these segments. The Company has determined that eight classes exist within the loan and lease portfolio. The methodology for assessing the appropriateness of the reserve consists of several key elements, which include: specific reserves for impaired loans, formula reserves for each business lending division portfolio including percentage allocations for special attention loans and leases not deemed impaired, and reserves for pooled homogenous loans and leases. The Company’s evaluation is based upon a continuing review of these portfolios, estimates of customer performance, collateral values and dispositions, and assessments of economic and geopolitical events, all of which are subject to judgment and will change. Specific reserves are established for certain business and specialty finance credits based on a regular analysis of special attention loans and leases. This analysis is performed by the Credit Policy Committee (CPC), the Loan Review Department, Credit Administration, and the Loan Workout Departments. The specific reserves are based on an analysis of underlying collateral values, cash flow considerations and, if applicable, guarantor capacity. Sources for determining collateral values include appraisals, evaluations, auction values and industry guides. Generally, for loans secured by commercial real estate and dependent on cash flows from the underlying collateral to service the debt, a new appraisal is obtained at the time the credit is deemed to be impaired. For non-income producing commercial real estate, an appraisal or evaluation is ordered depending on an analysis of the underlying factors, including an assessment of the overall credit worthiness of the borrower, the value of non-real estate collateral supporting the transaction and the date of the most recent existing appraisal or evaluation. An evaluation may be performed in lieu of obtaining a new appraisal for less complex transactions secured by local market properties. Values based on evaluations are discounted more heavily than those determined by appraisals when calculating loan impairment. Appraisals, evaluations and industry guides are used to determine aircraft values. Appraisals, industry guides and auction values are used to determine construction equipment, truck and auto values. The formula reserves determined for each business lending division portfolio are calculated quarterly by applying loss factors to outstanding loans and leases based upon a review of historical loss experience and qualitative factors, which include but are not limited to, economic trends, current market risk assessment by industry, recent loss experience in particular segments of the portfolios, movement in equipment values collateralizing specialized industry portfolios, concentrations of credit, delinquencies, trends in volume, experience and depth of relationship managers and division management, and the effects of changes in lending policies and practices, including changes in quality of the loan and lease origination, servicing and risk management processes. Special attention loans and leases without specific reserves receive a higher percentage allocation ratio than credits not considered special attention. Pooled loans and leases are smaller credits and are homogenous in nature, such as consumer credits and residential mortgages. Pooled loan and lease loss reserves are based on historical net charge-offs, adjusted for delinquencies, the effects of lending practices and programs and current economic conditions, and current trends in the geographic markets which the Company serves. A comprehensive analysis of the reserve is performed on a quarterly basis by reviewing all loans and leases over a fixed dollar amount ( $100,000 ) where the internal credit quality grade is at or below a predetermined classification. Although the Company determines the amount of each element of the reserve separately and relies on this process as an important credit management tool, the entire reserve is available for the entire loan and lease portfolio. The actual amount of losses incurred can vary significantly from the estimated amounts both positively and negatively. The Company’s methodology includes several factors intended to minimize the difference between estimated and actual losses. These factors allow the Company to adjust its estimate of losses based on the most recent information available. Impaired loans are reviewed quarterly to assess the probability of being able to collect the portion considered impaired. When a review and analysis of the underlying credit and collateral indicates ultimate collection is improbable, the deficiency is charged-off and deducted from the reserve. Loans and leases, which are deemed uncollectible or have a low likelihood of collection, are charged-off and deducted from the reserve, while recoveries of amounts previously charged-off are credited to the reserve. A (recovery of) provision for loan and lease losses is credited or charged to operations based on the Company’s periodic evaluation of the factors previously mentioned, as well as other pertinent factors. Equipment Owned Under Operating Leases — As a lessor, the Company finances various types of construction equipment, medium and heavy duty trucks, automobiles and other equipment under leases classified as operating leases. The equipment underlying the operating leases is reported at cost, net of accumulated depreciation, on the Consolidated Statements of Financial Condition. These operating lease arrangements require the lessee to make a fixed monthly rental payment over a specified lease term generally ranging from three years to seven years . Revenue consists of the contractual lease payments and is recognized on a straight-line basis over the lease term and reported in Noninterest Income on the Consolidated Statements of Income. Leased assets are depreciated on a straight-line method over the lease term to the estimate of the equipment’s fair market value at lease termination, also referred to as “residual” value. The depreciation of these operating lease assets is reported in Noninterest Expense on the Consolidated Statements of Income. For automobile leases, fair value is based upon published industry market guides. For other equipment leases, fair value may be based upon observable market prices, third-party valuations, or prices received on sales of similar assets at the end of the lease term. These residual values are reviewed annually to ensure the recorded amount does not exceed the fair market value at the lease termination. At the end of the lease, the operating lease asset is either purchased by the lessee or returned to the Company. The Company is responsible for the payment of personal property taxes which is reported in Other Expense on the Consolidated Statements of Income. The lessee is responsible for reimbursing the Company for personal property taxes which is reported in Other Income on the Consolidated Statements of Income. The Company excludes sales taxes and other similar taxes from being reported as lease revenue with an associated expense. Lease Commitments — The Company leases certain banking center locations, office space, land and billboards. In determining whether a contract contains a lease, the Company examines the contract to ensure an asset was specifically identified and that the Company has control of use over the asset. To determine whether a lease is classified as operating or finance, the Company performs an economic life test on all building leases with greater than a twenty years term. Further, the Company performs a fair value test to identify any leases that have a present value of future lease payments over the lease term that is greater than 90% of the fair value of the building. The Company only capitalizes leases with an initial lease liability of $2,000 or greater. At lease inception, the Company determines the lease term by adding together the minimum lease term and all optional renewal periods that it is reasonably certain to renew. The Company determines this on each lease by considering all relevant contract-based, asset-based, market-based, and entity-based economic factors. Generally, the exercise of lease renewal options is at the Company’s sole discretion. The lease term is used to determine whether a lease is operating or finance and is used to calculate straight-line rent expense. Additionally, the depreciable life of leasehold improvements is limited by the expected lease term. Operating lease rentals are expensed on a straight-line basis over the life of the lease beginning on the date the Company takes possession of the property. Rent expense and variable lease costs are included in Net Occupancy Expense on the Consolidated Statements of Income. Included in variable lease costs are leases with rent escalations based on recent financial indices, such as the Consumer Price Index, where the Company estimates future rent increases and records the actual difference to variable costs. Certain leases require the Company to pay common area maintenance, real estate taxes, insurance and other operating expenses associated with the leases premises. These expenses are classified in Net Occupancy Expense on the Consolidated Statements of Income, consistent with similar costs for owned locations. There are no residual value guarantees, restrictions or covenants imposed by leases. The Company accounts for lease and nonlease components together as a single lease component by class of underlying asset. Operating lease obligations with an initial term longer than 12 months are recorded with a right of use asset and a lease liability on the Consolidated Statements of Financial Condition. The discount rate used in determining the lease liability and related right of use asset is based upon what would be obtained by the Company for similar loans as an incremental rate as of the date of origination or renewal. Other Real Estate — Other real estate acquired through partial or total satisfaction of nonperforming loans is included in Other Assets on the Consolidated Statements of Financial Condition and recorded at fair value less anticipated selling costs based upon the property’s appraised value at the date of transfer, with any difference between the fair value of the property less cost to sell, and the carrying value of the loan charged to the reserve for loan and lease losses or other income, if a positive adjustment. Subsequent fair value write-downs or write-ups, to the extent of previous write-downs, property maintenance costs, and gains or losses recognized upon the sale of other real estate are recognized in Noninterest Expense on the Consolidated Statements of Income. Gains or losses resulting from the sale of other real estate are recognized on the date of sale. As of December 31, 2019 and 2018 , other real estate had carrying values of $0.52 million and $0.30 million , respectively, and is included in Other Assets on the Consolidated Statements of Financial Condition. Repossessed Assets — Repossessed assets may include fixtures and equipment, inventory and receivables, aircraft, construction equipment, and vehicles acquired from business banking and specialty finance activities. Repossessed assets are included in Other Assets on the Consolidated Statements of Financial Condition at fair value of the equipment or vehicle less estimated selling costs. At the time of repossession, the recorded amount of the loan or lease is written down to the fair value of the equipment or vehicle by a charge to the reserve for loan and lease losses or other income, if a positive adjustment. Subsequent fair value write-downs or write-ups, to the extent of previous write-downs, equipment maintenance costs, and gains or losses recognized upon the sale of repossessions are recognized in Noninterest Expense on the Consolidated Statements of Income. Gains or losses resulting from the sale of repossessed assets are recognized on the date of sale. Repossessed assets totaled $8.62 million and $6.66 million , as of December 31, 2019 and 2018 , respectively, and are included in Other Assets on the Consolidated Statements of Financial Condition. Premises and Equipment — Premises and equipment are stated at cost, less accumulated depreciation and amortization. The provision for depreciation is computed by the straight-line method, primarily with useful lives ranging from three years to 31.5 years . Maintenance and repairs are charged to expense as incurred, while improvements, which extend the useful life, are capitalized and depreciated over the estimated remaining life. Goodwill and Intangibles — Goodwill represents the excess of the cost of businesses acquired over the fair value of the net assets acquired. Other intangible assets represent purchased assets that also lack physical substance but can be distinguished from goodwill because of contractual or other legal rights or because the asset is capable of being sold or exchanged either on its own or in combination with a related contract, asset, or liability. Goodwill is reviewed for impairment at least annually or on an interim basis if an event occurs or circumstances change that would more likely than not reduce the carrying amount. Goodwill is allocated into two reporting units. Fair value for each reporting unit is estimated using stock price multiples or earnings before interest, tax, depreciation and amortization (EBITDA) multiples. Intangible assets that have finite lives are amortized over their estimated useful lives and are subject to impairment testing. All of the Company’s other intangible assets have finite lives and are amortized on a straight-line basis over varying periods not exceeding twenty-five years . The Company performed the required annual impairment test of goodwill during the fourth quarter of 2019 and determined that no impairment exists. Partnership Investments — The partnerships in which the Company has investments account for their investments at fair value. As a result, the Company’s investments in these partnerships reflect the underlying fair value of the partnerships’ investments. The Company accounts for its investments in partnerships for which it owns three percent or more of the partnership on the equity method. The Company accounts for its investments in partnerships of which it owns less than three percent at fair value less impairment. The Company has elected to use the practical expedient to estimate fair value of an investment in an investment company using the net asset value of its partnership interest. The Company uses the hypothetical liquidation book value (HLBV) method for equity investments when the liquidation rights and priorities as defined by an equity investment agreement differ from what is reflected by the underlying percentage ownership interests. The HLBV method is commonly applied to equity investments in the renewable energy industry, where cash percentages vary at different points in time and are not directly linked to an investor’s ownership percentage. A calculation is prepared at each balance sheet date to determine the amount that the Company would receive if an equity investment entity were to liquidate all of its assets (as valued in accordance with GAAP) and distribute that cash to the investors based on the contractually defined liquidation priorities. The difference between the calculated liquidation distribution amounts at the beginning and the end of the reporting period, after adjusting for capital contributions and distributions, is 1st Source’s share of the earnings or losses from the equity investment for the period. Investments in partnerships are included in Other Assets on the Consolidated Statements of Financial Condition. The balances as of December 31, 2019 and 2018 were $61.08 million and $23.46 million , respectively. Short-Term Borrowings — Short-term borrowings consist of Federal funds purchased, securities sold under agreements to repurchase, commercial paper, Federal Home Loan Bank notes, and borrowings from non-affiliated banks. Federal funds purchased, securities sold under agreements to repurchase, and other short-term borrowings mature within one day to 365 days of the transaction date. Commercial paper matures within seven days to 270 days . Other short-term borrowings on the Consolidated Statements of Financial Condition include the Company’s liability related to mortgage loans available for repurchase under GNMA optional repurchase programs. Securities purchased under agreements to resell and securities sold under agreements to repurchase are treated as collateralized financing transactions and are recorded at the amounts at which the securities were acquired or sold plus accrued interest. The fair value of collateral either received from or provided to a third-party is continually monitored and additional collateral obtained or requested to be returned to the Company as deemed appropriate. Revenue Recognition — The Company recognizes revenues as they are earned based on contractual terms, as transactions occur, or as services are provided and collectability is reasonably assured. The Company’s principal source of revenue is interest income from loans and leases and investment securities. The Company also earns noninterest income from various banking and financial services offered primarily through 1st Source Bank and its subsidiaries. Interest Income — The largest source of revenue for the Company is interest income which is primarily recognized on an accrual basis according to nondiscretionary formulas in writ |
Recent Accounting Pronouncement
Recent Accounting Pronouncements | 12 Months Ended |
Dec. 31, 2019 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Partnership Investments and Derivatives: In January 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2020-01 “Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815.” These amendments, among other things, clarify that a company should consider observable transactions that require a company to either apply or discontinue the equity method of accounting under Topic 323, Investments-Equity Method and Joint Ventures, for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method. The amendments also clarify that, when determining the accounting for certain forward contracts and purchased options a company should not consider, whether upon settlement or exercise, if the underlying securities would be accounted for under the equity method or fair value option. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early application is permitted, including early adoption in an interim period. An entity should apply ASU 2020-01 prospectively at the beginning of the interim period that includes the adoption date. The Company is assessing ASU 2020-01 and its impact on its accounting and disclosures. Income Taxes: In December 2019, the FASB issued ASU 2019-12 “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” These amendments remove specific exceptions to the general principles in Topic 740 in GAAP. It eliminates the need for an organization to analyze whether the following apply in a given period: exception to the incremental approach for intraperiod tax allocation; exceptions to accounting for basis differences where there are ownership changes in foreign investments; and exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses. It also improves financial statement preparers’ application of income tax-related guidance and simplifies GAAP for: franchise taxes that are partially based on income; transactions with a government that result in a step up in the tax basis of goodwill; separate financial statements of legal entities that are not subject to tax; and enacts changes in tax laws in interim periods. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted. The Company is assessing ASU 2019-12 and its impact on its accounting and disclosure. Leases: In March 2019, the FASB issued ASU No. 2019-01 “Leases (Topic 842): Codification Improvements.” These amendments align the guidance for fair value of the underlying asset by lessors that are not manufacturers or dealers in Topic 842 with that of existing guidance. The ASU also requires lessors within the scope of Topic 842, Financial Services-Depository Lending, to present all “principal payments received under leases” within investing activities on the Consolidated Statements of Cash Flows. Finally, the ASU exempts both lessees and lessors from having to provide certain interim disclosures in the fiscal year in which a company adopts the new leases standard. The guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early application is permitted. An entity should apply the amendments as of the date that it first applied Topic 842, using the same transition methodology in accordance with paragraph 842-10-65-1(c). The Company adopted Topic 842 on January 1, 2019 and applied the amendments in ASU 2019-01 as of the same date and it did not have a material impact on its accounting and disclosures. Intangibles - Internal-Use Software: In August 2018, the FASB issued ASU No. 2018-15 “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” These amendments align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contact with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by these amendments. The guidance is effective for public business entities for annual periods, including interim periods within those annual periods, beginning after December 15, 2019. Early adoption is permitted. The Company adopted ASU 2018-15 on January 1, 2020 and it did not have a material impact on its accounting and disclosures. Disclosure Requirements for Fair Value Measurement: In August 2018, the FASB issued ASU No. 2018-13 “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.” These amendments modify the disclosure requirements in Topic 820 as follows: Removals: the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; the policy for timing of transfers between levels; and the valuation processes for Level 3 fair value measurements. Modifications: for investments in certain entities that calculate net asset value, an entity is required to disclose the timing of liquidation of an investee’s assets and the date when restrictions from redemption might lapse only if the investee has communicated the timing to the entity or announced the timing publicly; and the amendments clarify that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date. Additions: the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period; and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The guidance is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should all be applied prospectively for only the most recent interim or annual period presented in the initial year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted. An entity is permitted to early adopt any removed or modified disclosures upon issuance of ASU No. 2018-13 and delay adoption of the additional disclosures until their effective date. The Company adopted ASU 2018-13 on January 1, 2020 and it did not have a material impact on its accounting and disclosures. Premium Amortization: In March 2017, the FASB issued ASU No. 2017-08 “ Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities.” These amendments shorten the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. If an entity early adopts in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The amendments should be applied on a modified retrospective basis, with a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company adopted ASU 2017-08 on January 1, 2019 and recognized a cumulative-effect adjustment to retained earnings of $0.30 million . Simplifying the Test for Goodwill Impairment: In January 2017, the FASB issued ASU No. 2017-04 “ Intangibles - Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment.” These amendments eliminate Step 2 from the goodwill impairment test. The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The guidance is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. ASU 2017-04 should be adopted on a prospective basis. The Company adopted ASU 2017-04 on January 1, 2020 and it did not have a material impact on its accounting and disclosures. Measurement of Credit Losses on Financial Instruments: In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments (CECL).” The provisions of ASU 2016-13 were issued to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments that are not accounted for at fair value through net income, including loans held for investment, held-to-maturity debt securities, trade and other receivables, net investment in leases and other commitments to extend credit held by a reporting entity at each reporting date. ASU 2016-13 requires that financial assets measured at amortized cost be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The amendments in ASU 2016-13 eliminate the probable incurred loss recognition in current GAAP and reflect an entity’s current estimate of all expected credit losses. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the financial assets. Credit losses relating to available-for-sale debt securities will be recorded through an allowance for credit losses rather than as a direct write-down to the security. The FASB issued additional ASUs containing clarifying guidance, transition relief provisions and minor updates to the original ASU. These include ASU 2018-19 (issued November 2018), ASU 2019-04 (issued April 2019), ASU 2019-05 (issued May 2019), ASU 2019-10 (issued November 2019) and ASU 2019-11 (issued November 2019). ASU 2016-13 and subsequent ASUs are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. This amendment is required to be adopted using a modified retrospective approach with a cumulative-effect adjustment to beginning retained earnings, as of the beginning of the first reporting period in which the guidance is effective. As previously disclosed, the Company formed a cross-functional team to work through its implementation plan. The Company’s cross-functional team is substantially complete with the assessment and documentation of processes, internal controls, data and model validation testing, parallel testing, qualitative factors and forecast periods as well as model development. The Company implemented a third-party software solution to assist in the application of the new standard including portfolio segmentation according to shared risk characteristics and modeling methodologies. The Company has not finalized the results of its CECL estimate as of year-end since it is in the final stages of completing the formal review and approval process. The Company estimates the adoption of ASU 2016-13 on January 1, 2020 will result in a one-time cumulative effect adjustment through retained earnings in a decrease of up to $1 million or an increase of up to $3 million on its allowance for credit losses. The Company does not expect to record an allowance on January 1, 2020 with respect to its available-for-sale debt securities as the majority of these securities are government agency-backed securities for which the risk of loss is minimal. The adoption of ASU 2016-13 is not expected to have a significant impact on the Company’s regulatory capital ratios. |
Investment Securities
Investment Securities | 12 Months Ended |
Dec. 31, 2019 | |
Investments, Debt and Equity Securities [Abstract] | |
Investment Securities | Investment Securities Available-For-Sale The following table shows investment securities available-for-sale. (Dollars in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value December 31, 2019 U.S. Treasury and Federal agencies securities $ 524,896 $ 2,538 $ (470 ) $ 526,964 U.S. States and political subdivisions securities 83,566 1,048 (109 ) 84,505 Mortgage-backed securities - Federal agencies 372,458 3,948 (1,017 ) 375,389 Corporate debt securities 52,151 890 (16 ) 53,025 Foreign government and other securities 700 — — 700 Total investment securities available-for-sale $ 1,033,771 $ 8,424 $ (1,612 ) $ 1,040,583 December 31, 2018 U.S. Treasury and Federal agencies securities $ 537,913 $ 196 $ (6,886 ) $ 531,223 U.S. States and political subdivisions securities 95,346 172 (936 ) 94,582 Mortgage-backed securities - Federal agencies 324,390 718 (6,875 ) 318,233 Corporate debt securities 45,843 — (451 ) 45,392 Foreign government and other securities 700 — (1 ) 699 Total investment securities available-for-sale $ 1,004,192 $ 1,086 $ (15,149 ) $ 990,129 At December 31, 2019 , the residential mortgage-backed securities held by the Company consisted primarily of GNMA, FNMA and FHLMC pass-through certificates which are guaranteed by those respective agencies of the United States government (Government Sponsored Enterprise, GSEs). The Company did not hold any marketable equity securities at December 31, 2019 and 2018 . The following table shows the contractual maturities of investments in debt securities available-for-sale at December 31, 2019 . Expected maturities will differ from contractual maturities, because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. (Dollars in thousands) Amortized Cost Fair Value Due in one year or less $ 147,306 $ 147,629 Due after one year through five years 482,118 485,745 Due after five years through ten years 31,209 31,173 Due after ten years 680 647 Mortgage-backed securities 372,458 375,389 Total debt securities available-for-sale $ 1,033,771 $ 1,040,583 The following table summarizes gross unrealized losses and fair value by investment category and age. At December 31, 2019 , the Company’s available-for-sale securities portfolio consisted of 629 securities, 152 of which were in an unrealized loss position. Less than 12 Months 12 months or Longer Total (Dollars in thousands) Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses December 31, 2019 U.S. Treasury and Federal agencies securities $ 87,352 $ (171 ) $ 69,053 $ (299 ) $ 156,405 $ (470 ) U.S. States and political subdivisions securities 9,283 (107 ) 1,042 (2 ) 10,325 (109 ) Mortgage-backed securities - Federal agencies 81,951 (383 ) 51,165 (634 ) 133,116 (1,017 ) Corporate debt securities — — 8,091 (16 ) 8,091 (16 ) Foreign government and other securities — — — — — — Total temporarily impaired available-for-sale securities $ 178,586 $ (661 ) $ 129,351 $ (951 ) $ 307,937 $ (1,612 ) December 31, 2018 U.S. Treasury and Federal agencies securities $ 55,491 $ (177 ) $ 424,269 $ (6,709 ) $ 479,760 $ (6,886 ) U.S. States and political subdivisions securities 21,059 (61 ) 45,365 (875 ) 66,424 (936 ) Mortgage-backed securities - Federal agencies 65,554 (511 ) 198,221 (6,364 ) 263,775 (6,875 ) Corporate debt securities 21,496 (143 ) 23,896 (308 ) 45,392 (451 ) Foreign government and other securities 699 (1 ) — — 699 (1 ) Total temporarily impaired available-for-sale securities $ 164,299 $ (893 ) $ 691,751 $ (14,256 ) $ 856,050 $ (15,149 ) At December 31, 2019 , the Company does not have the intent to sell any of the available-for-sale securities in the table above and believes that it is more likely than not that it will not have to sell any such securities before an anticipated recovery of cost. The unrealized losses on debt securities are due to market volatility. The fair value is expected to recover on all debt securities as they approach their maturity date or repricing date or if market yields for such investments decline. The Company does not believe any of the securities are impaired due to reasons of credit quality. The following table shows the gross realized gains and losses from the securities available-for-sale portfolio, including marketable equity securities. (Dollars in thousands) 2019 2018 2017 Gross realized gains $ — $ 2 $ 7,425 Gross realized losses — (347 ) (2,895 ) OTTI losses — — (190 ) Net realized (losses) gains $ — $ (345 ) $ 4,340 At December 31, 2019 and 2018 , investment securities with carrying values of $281.38 million and $242.31 million , respectively, were pledged as collateral for security repurchase agreements and for other purposes. |
Loan and Lease Financings
Loan and Lease Financings | 12 Months Ended |
Dec. 31, 2019 | |
Receivables [Abstract] | |
Loan and Lease Financings | Loan and Lease Financings Total loans and leases outstanding were recorded net of unearned income and deferred loan fees and costs at December 31, 2019 and 2018 , and totaled $5.09 billion and $4.84 billion , respectively. At December 31, 2019 and 2018 , net deferred loan and lease costs were $5.06 million and $4.54 million , respectively. In the ordinary course of business, the Company has extended loans to certain directors, executive officers, and principal shareholders of equity securities of 1st Source and to their affiliates. In the opinion of management, these loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with persons not related to the Company and did not involve more than the normal risk of collectability, or present other unfavorable features. The loans are consistent with sound banking practices and within applicable regulatory and lending limitations. The aggregate dollar amounts of these loans were $17.08 million and $11.38 million at December 31, 2019 and 2018 , respectively. During 2019 , $6.69 million of new loans and other additions were made and repayments and other reductions totaled $0.99 million . The Company evaluates loans and leases for credit quality at least annually but more frequently if certain circumstances occur (such as material new information which becomes available and indicates a potential change in credit risk). The Company uses two methods to assess credit risk: loan or lease credit quality grades and credit risk classifications. The purpose of the loan or lease credit quality grade is to document the degree of risk associated with individual credits as well as inform management of the degree of risk in the portfolio taken as a whole. Credit risk classifications are used to categorize loans by degree of risk and to designate individual or committee approval authorities for higher risk credits at the time of origination. Credit risk classifications include categories for: Acceptable, Marginal, Special Attention, Special Risk, Restricted by Policy, Regulated and Prohibited by Law. All loans and leases, except residential real estate and home equity loans and consumer loans, are assigned credit quality grades on a scale from 1 to 12 with grade 1 representing superior credit quality. The criteria used to assign grades to extensions of credit that exhibit potential problems or well-defined weaknesses are primarily based upon the degree of risk and the likelihood of orderly repayment, and their effect on our safety and soundness. Loans or leases graded 7 or weaker are considered “special attention” credits and, as such, relationships in excess of $100,000 are reviewed quarterly as part of management’s evaluation of the appropriateness of the reserve for loan and lease losses. Grade 7 credits are defined as “watch” and contain greater than average credit risk and are monitored to limit our exposure to increased risk; grade 8 credits are “special mention” and, following regulatory guidelines, are defined as having potential weaknesses that deserve management’s close attention. Credits that exhibit well-defined weaknesses and a distinct possibility of loss are considered ‘‘classified’’ and are graded 9 through 12 corresponding to the regulatory definitions of “substandard” (grades 9 and 10) and the more severe ‘‘doubtful’’ (grade 11) and ‘‘loss’’ (grade 12). The following table shows the credit quality grades of the recorded investment in loans and leases, segregated by class. Credit Quality Grades (Dollars in thousands) 1-6 7-12 Total December 31, 2019 Commercial and agricultural $ 1,080,933 $ 51,858 $ 1,132,791 Auto and light truck 569,234 19,573 588,807 Medium and heavy duty truck 293,736 1,088 294,824 Aircraft 764,564 19,476 784,040 Construction equipment 668,076 37,375 705,451 Commercial real estate 888,154 20,023 908,177 Total $ 4,264,697 $ 149,393 $ 4,414,090 December 31, 2018 Commercial and agricultural $ 1,043,019 $ 30,186 $ 1,073,205 Auto and light truck 528,174 31,813 559,987 Medium and heavy duty truck 281,834 1,710 283,544 Aircraft 768,442 34,669 803,111 Construction equipment 625,579 19,660 645,239 Commercial real estate 787,376 22,510 809,886 Total $ 4,034,424 $ 140,548 $ 4,174,972 For residential real estate and home equity and consumer loans, credit quality is based on the aging status of the loan and by payment activity. The following table shows the recorded investment in residential real estate and home equity and consumer loans by performing or nonperforming status. Nonperforming loans are those loans which are on nonaccrual status or are 90 days or more past due. (Dollars in thousands) Performing Nonperforming Total December 31, 2019 Residential real estate and home equity $ 529,557 $ 2,446 $ 532,003 Consumer 138,951 483 139,434 Total $ 668,508 $ 2,929 $ 671,437 December 31, 2018 Residential real estate and home equity $ 521,846 $ 2,009 $ 523,855 Consumer 136,423 214 136,637 Total $ 658,269 $ 2,223 $ 660,492 The following table shows the recorded investment of loans and leases, segregated by class, with delinquency aging and nonaccrual status. (Dollars in thousands) Current 30-59 Days Past Due 60-89 Days Past Due 90 Days or More Past Due and Accruing Total Accruing Loans Nonaccrual Total Financing Receivables December 31, 2019 Commercial and agricultural $ 1,131,704 $ 118 $ — $ — $ 1,131,822 $ 969 $ 1,132,791 Auto and light truck 586,212 1,268 77 — 587,557 1,250 588,807 Medium and heavy duty truck 293,736 14 — — 293,750 1,074 294,824 Aircraft 772,846 7,026 3,293 — 783,165 875 784,040 Construction equipment 702,671 819 609 — 704,099 1,352 705,451 Commercial real estate 906,468 58 — — 906,526 1,651 908,177 Residential real estate and home equity 528,844 561 152 257 529,814 2,189 532,003 Consumer 138,132 632 187 54 139,005 429 139,434 Total $ 5,060,613 $ 10,496 $ 4,318 $ 311 $ 5,075,738 $ 9,789 $ 5,085,527 December 31, 2018 Commercial and agricultural $ 1,070,530 $ 22 $ — $ — $ 1,070,552 $ 2,653 $ 1,073,205 Auto and light truck 544,022 3,154 1,437 — 548,613 11,374 559,987 Medium and heavy duty truck 283,284 154 — — 283,438 106 283,544 Aircraft 790,233 4,149 1,168 — 795,550 7,561 803,111 Construction equipment 641,270 1,643 — — 642,913 2,326 645,239 Commercial real estate 807,793 109 — — 807,902 1,984 809,886 Residential real estate and home equity 520,124 1,267 455 295 522,141 1,714 523,855 Consumer 135,591 682 150 73 136,496 141 136,637 Total $ 4,792,847 $ 11,180 $ 3,210 $ 368 $ 4,807,605 $ 27,859 $ 4,835,464 Interest income for the years ended December 31, 2019 , 2018 , and 2017 , would have increased by approximately $0.69 million , $2.18 million , and $1.14 million , respectively, if the nonaccrual loans and leases had earned interest at their full contract rate. The following table shows impaired loans and leases, segregated by class, and the corresponding reserve for impaired loan and lease losses. (Dollars in thousands) Recorded Investment Unpaid Principal Balance Related Reserve December 31, 2019 With no related reserve recorded: Commercial and agricultural $ 218 $ 218 $ — Auto and light truck 853 853 — Medium and heavy duty truck 1,074 1,074 — Aircraft 875 875 — Construction equipment 615 615 — Commercial real estate 1,487 1,487 — Residential real estate and home equity — — — Consumer — — — Total with no related reserve recorded 5,122 5,122 — With a reserve recorded: Commercial and agricultural 10,366 10,366 3,003 Auto and light truck 278 278 30 Medium and heavy duty truck — — — Aircraft — — — Construction equipment 736 736 75 Commercial real estate — — — Residential real estate and home equity 337 339 117 Consumer — — — Total with a reserve recorded 11,717 11,719 3,225 Total impaired loans $ 16,839 $ 16,841 $ 3,225 December 31, 2018 With no related reserve recorded: Commercial and agricultural $ 2,471 $ 2,471 $ — Auto and light truck 7,504 7,504 — Medium and heavy duty truck 106 106 — Aircraft 556 556 — Construction equipment 905 905 — Commercial real estate 1,131 1,131 — Residential real estate and home equity — — — Consumer — — — Total with no related reserve recorded 12,673 12,673 — With a reserve recorded: Commercial and agricultural — — — Auto and light truck 3,840 3,840 372 Medium and heavy duty truck — — — Aircraft 7,004 7,004 1,255 Construction equipment 1,340 1,340 279 Commercial real estate 759 759 51 Residential real estate and home equity 344 346 126 Consumer — — — Total with a reserve recorded 13,287 13,289 2,083 Total impaired loans $ 25,960 $ 25,962 $ 2,083 The following table shows average recorded investment and interest income recognized on impaired loans and leases, segregated by class, for years ending December 31, 2019 , 2018 and 2017 . 2019 2018 2017 (Dollars in thousands) Average Recorded Investment Interest Income Average Recorded Investment Interest Income Average Recorded Investment Interest Income Commercial and agricultural $ 5,983 $ 242 $ 2,812 $ — $ 4,526 $ 1 Auto and light truck 2,721 — 9,352 — 766 — Medium and heavy duty truck 244 — 247 — 658 — Aircraft 2,409 8 9,987 20 4,873 5 Construction equipment 1,664 — 1,663 — 1,011 — Commercial real estate 1,715 — 2,303 — 3,220 2 Residential real estate and home equity 340 19 347 15 355 15 Consumer loans — — — — — — Total $ 15,076 $ 269 $ 26,711 $ 35 $ 15,409 $ 23 The following table shows the number of loans and leases classified as troubled debt restructuring (TDR) during 2019 , 2018 and 2017 , segregated by class, as well as the recorded investment as of December 31. The classification between nonperforming and performing is shown at the time of modification. Modification programs focused on extending maturity dates or modifying payment patterns with most TDRs experiencing a combination of concessions. The modifications did not result in the contractual forgiveness of principal or interest. There was one modification during 2019 , no modifications during 2018 , and one modification during 2017 that resulted in an interest rate reduction below market rate. Consequently, the financial impact of the modifications was immaterial. 2019 2018 2017 (Dollars in thousands) Number of Modifications Recorded Investment Number of Modifications Recorded Investment Number of Modifications Recorded Investment Performing TDRs: Commercial and agricultural 1 $ 9,901 — $ — — $ — Auto and light truck — — — — — — Medium and heavy duty truck — — — — — — Aircraft — — — — — — Construction equipment — — — — — — Commercial real estate — — — — — — Residential real estate and home equity — — — — — — Consumer — — — — — — Total performing TDR modifications 1 9,901 — — — — Nonperforming TDRs: Commercial and agricultural 1 465 — — 1 — Auto and light truck — — 1 285 — — Medium and heavy duty truck — — — — — — Aircraft — — — — — — Construction equipment — — — — — — Commercial real estate — — — — — — Residential real estate and home equity — — — — — — Consumer — — — — — — Total nonperforming TDR modifications 1 465 1 285 1 — Total TDR modifications 2 $ 10,366 1 $ 285 1 $ — There was one nonperforming auto and light truck TDR with a recorded investment of $0.00 million which had a payment default within the twelve months following modification for the year ended December 31, 2019, no TDRs which had a payment default within the twelve months following modification during the year ended December 31, 2018 and one nonperforming construction equipment TDR with a recorded investment of $0.41 million which had a payment default within the twelve months following modification for the year ended December 31, 2017. The classification between nonperforming and performing is shown at the time of modification. Default occurs when a loan or lease is 90 days or more past due under the modified terms or transferred to nonaccrual. The following table shows the recorded investment of loans and leases classified as troubled debt restructurings as of December 31. Year Ended December 31 (Dollars in thousands) 2019 2018 Performing TDRs $ 10,238 $ 344 Nonperforming TDRs 486 316 Total TDRs $ 10,724 $ 660 |
Reserve for Loan and Lease Loss
Reserve for Loan and Lease Losses | 12 Months Ended |
Dec. 31, 2019 | |
Financing Receivable, Allowance for Credit Loss, Additional Information [Abstract] | |
Reserve for Loan and Lease Losses | Reserve for Loan and Lease Losses The following table shows the changes in the reserve for loan and lease losses, segregated by class, for each of the three years ended December 31. (Dollars in thousands) Commercial and agricultural Auto and light truck Medium and heavy duty truck Aircraft Construction equipment Commercial real estate Residential real estate and home equity Consumer Total 2019 Balance, beginning of year $ 17,063 $ 14,689 $ 4,303 $ 33,047 $ 10,922 $ 15,705 $ 3,425 $ 1,315 $ 100,469 Charge-offs 1,040 991 1,132 3,066 238 5 53 1,066 7,591 Recoveries 664 97 32 1,143 160 75 85 287 2,543 Net charge-offs 376 894 1,100 1,923 78 (70 ) (32 ) 779 5,048 Provision (recovery of provision) 6,984 605 1,409 (66 ) 3,276 2,575 152 898 15,833 Balance, end of year $ 23,671 $ 14,400 $ 4,612 $ 31,058 $ 14,120 $ 18,350 $ 3,609 $ 1,434 $ 111,254 2018 Balance, beginning of year $ 16,228 $ 10,103 $ 4,844 $ 34,619 $ 9,343 $ 14,792 $ 3,666 $ 1,288 $ 94,883 Charge-offs 229 3,308 23 12,222 288 70 63 909 17,112 Recoveries 222 68 — 2,499 100 53 23 271 3,236 Net charge-offs (recoveries) 7 3,240 23 9,723 188 17 40 638 13,876 Provision (recovery of provision) 842 7,826 (518 ) 8,151 1,767 930 (201 ) 665 19,462 Balance, end of year $ 17,063 $ 14,689 $ 4,303 $ 33,047 $ 10,922 $ 15,705 $ 3,425 $ 1,315 $ 100,469 2017 Balance, beginning of year $ 14,668 $ 8,064 $ 4,740 $ 34,352 $ 8,207 $ 13,677 $ 3,550 $ 1,285 $ 88,543 Charge-offs 2,415 774 — 1,872 164 344 124 836 6,529 Recoveries 984 1,153 — 227 298 851 109 267 3,889 Net charge-offs (recoveries) 1,431 (379 ) — 1,645 (134 ) (507 ) 15 569 2,640 Provision (recovery of provision) 2,991 1,660 104 1,912 1,002 608 131 572 8,980 Balance, end of year $ 16,228 $ 10,103 $ 4,844 $ 34,619 $ 9,343 $ 14,792 $ 3,666 $ 1,288 $ 94,883 The following table shows the reserve for loan and lease losses and recorded investment in loans and leases, segregated by class, separated by individually and collectively evaluated for impairment as of December 31, 2019 and 2018 . (Dollars in thousands) Commercial and agricultural Auto and light truck Medium and heavy duty truck Aircraft Construction equipment Commercial real estate Residential real estate and home equity Consumer Total December 31, 2019 Reserve for loan and lease losses Ending balance, individually evaluated for impairment $ 3,003 $ 30 $ — $ — $ 75 $ — $ 117 $ — $ 3,225 Ending balance, collectively evaluated for impairment 20,668 14,370 4,612 31,058 14,045 18,350 3,492 1,434 108,029 Total reserve for loan and lease losses $ 23,671 $ 14,400 $ 4,612 $ 31,058 $ 14,120 $ 18,350 $ 3,609 $ 1,434 $ 111,254 Recorded investment in loans Ending balance, individually evaluated for impairment $ 10,584 $ 1,131 $ 1,074 $ 875 $ 1,351 $ 1,487 $ 337 $ — $ 16,839 Ending balance, collectively evaluated for impairment 1,122,207 587,676 293,750 783,165 704,100 906,690 531,666 139,434 5,068,688 Total recorded investment in loans $ 1,132,791 $ 588,807 $ 294,824 $ 784,040 $ 705,451 $ 908,177 $ 532,003 $ 139,434 $ 5,085,527 December 31, 2018 Reserve for loan and lease losses Ending balance, individually evaluated for impairment $ — $ 372 $ — $ 1,255 $ 279 $ 51 $ 126 $ — $ 2,083 Ending balance, collectively evaluated for impairment 17,063 14,317 4,303 31,792 10,643 15,654 3,299 1,315 98,386 Total reserve for loan and lease losses $ 17,063 $ 14,689 $ 4,303 $ 33,047 $ 10,922 $ 15,705 $ 3,425 $ 1,315 $ 100,469 Recorded investment in loans Ending balance, individually evaluated for impairment $ 2,471 $ 11,344 $ 106 $ 7,560 $ 2,245 $ 1,890 $ 344 $ — $ 25,960 Ending balance, collectively evaluated for impairment 1,070,734 548,643 283,438 795,551 642,994 807,996 523,511 136,637 4,809,504 Total recorded investment in loans $ 1,073,205 $ 559,987 $ 283,544 $ 803,111 $ 645,239 $ 809,886 $ 523,855 $ 136,637 $ 4,835,464 |
Lease Investments
Lease Investments | 12 Months Ended |
Dec. 31, 2019 | |
Leases [Abstract] | |
Lease Investments | Lease Investments As a lessor, the Company’s loan and lease portfolio includes direct finance leases, which are included in commercial and agricultural, auto and light truck, medium and heavy duty truck, aircraft, and construction equipment on the Consolidated Statements of Financial Condition. The Company also finances various types of construction equipment, medium and heavy duty trucks, automobiles and other equipment under leases classified as operating leases, which are included in Equipment Owned Under Operating Leases, net, on the Consolidated Statements of Financial Condition. The following table shows the components of the investment in direct finance and operating leases as of December 31. (Dollars in thousands) 2019 2018 Direct finance leases: Minimum lease payments $ 190,879 $ 257,398 Estimated unguaranteed residual values 41 41 Less: Unearned income (30,568 ) (46,709 ) Net investment in direct finance leases $ 160,352 $ 210,730 Operating leases: Gross investment in operating leases $ 176,485 $ 199,954 Accumulated depreciation (64,801 ) (65,514 ) Net investment in operating leases $ 111,684 $ 134,440 The following table shows future minimum lease payments due from clients on direct finance and operating leases at December 31, 2019 . (Dollars in thousands) Direct Finance Leases Operating Leases 2020 $ 42,940 $ 33,015 2021 34,966 20,036 2022 33,577 12,800 2023 29,027 7,208 2024 16,001 2,968 Thereafter 34,368 934 Total $ 190,879 $ 76,961 To mitigate the risk of loss, the Company seeks to diversify both the type of equipment leased and the industries in which the lessees participate. In addition, a portion of our leases are terminal rental adjustment clause or “TRAC” leases where the lessee effectively guarantees the full residual value through a rental adjustment at the end of term or those where partial value is guaranteed (“split-TRAC”), which has a limited residual risk. Under a split-TRAC structure, the limited residual risk would be satisfied first by the net sale proceeds of the leased asset. The lessee’s at-risk portion, or top risk, is satisfied last and is subject to repayment as additional rent, if the TRAC amount is not satisfied by the net sale proceeds. The carrying amount of residual assets covered by residual value guarantees was $69.09 million and $87.61 million at December 31, 2019 and December 31, 2018 , respectively. The following table shows interest income recognized from direct finance lease payments and operating lease equipment rental income and related depreciation expense. (Dollars in thousands) 2019 2018 2017 Direct finance leases: Interest income on lease receivable $ 10,985 $ 13,052 $ 11,482 Operating leases: Income related to lease payments $ 30,741 $ 31,793 $ 30,381 Depreciation expense 25,128 26,248 25,215 Income related to reimbursements from lessees for personal property tax on operating leased equipment for the year ended December 31, 2019 was $0.73 million . Expense related to personal property tax payments on operating leased equipment for the year ended December 31, 2019 was $0.73 million . |
Premises and Equipment
Premises and Equipment | 12 Months Ended |
Dec. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
Premises and Equipment | Premises and Equipment The following table shows premises and equipment as of December 31. (Dollars in thousands) 2019 2018 Land $ 15,222 $ 15,223 Buildings and improvements 59,508 59,691 Furniture and equipment 41,831 40,789 Total premises and equipment 116,561 115,703 Accumulated depreciation and amortization (64,342 ) (63,564 ) Net premises and equipment $ 52,219 $ 52,139 Depreciation and amortization of properties and equipment totaled $5.79 million in 2019 , $5.62 million in 2018 , and $5.66 million in 2017 . During 2019 , 2018 and 2017 , the Company recorded long-lived asset impairment charges totaling zero , $100,000 and $410,000 , respectively. The impairment charges were recorded as a result of appraisals on buildings and were recognized in Other Expense on the Consolidated Statements of Income. |
Mortgage Servicing Rights
Mortgage Servicing Rights | 12 Months Ended |
Dec. 31, 2019 | |
Transfers and Servicing of Financial Assets [Abstract] | |
Mortgage Servicing Rights | Mortgage Servicing Rights The unpaid principal balance of residential mortgage loans serviced for third parties was $740.91 million at December 31, 2019 , compared to $734.30 million at December 31, 2018 , and $752.99 million at December 31, 2017 . Amortization expense on MSRs is expected to total $0.76 million , $0.64 million , $0.53 million , $0.43 million , and $0.36 million in 2020 , 2021 , 2022 , 2023 and 2024 , respectively. Projected amortization excludes the impact of future asset additions or disposals. The following table shows changes in the carrying value of MSRs and the associated valuation allowance. (Dollars in thousands) 2019 2018 Mortgage servicing rights: Balance at beginning of year $ 4,283 $ 4,349 Additions 1,229 890 Amortization (1,312 ) (956 ) Sales — — Carrying value before valuation allowance at end of year 4,200 4,283 Valuation allowance: Balance at beginning of year — — Impairment recoveries — — Balance at end of year $ — $ — Net carrying value of mortgage servicing rights at end of year $ 4,200 $ 4,283 Fair value of mortgage servicing rights at end of year $ 5,986 $ 7,238 At December 31, 2019 , the fair value of MSRs exceeded the carrying value reported on the Consolidated Statements of Financial Condition by $1.79 million . This difference represents increases in the fair value of certain MSRs that could not be recorded above cost basis. Funds held in trust at 1st Source for the payment of principal, interest, taxes and insurance premiums applicable to mortgage loans being serviced for others, were approximately $16.77 million and $10.28 million at December 31, 2019 and December 31, 2018 , respectively. Mortgage loan contractual servicing fees, including late fees and ancillary income, were $2.64 million , $2.61 million , and $2.70 million for 2019 , 2018 , and 2017 , respectively. Mortgage loan contractual servicing fees are included in Mortgage Banking Income on the Consolidated Statements of Income. |
Intangible Assets and Goodwill
Intangible Assets and Goodwill | 12 Months Ended |
Dec. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets and Goodwill | Intangible Assets and Goodwill At December 31, 2019 , intangible assets consisted of goodwill of $83.87 million and other intangible assets of $0.10 million , which was net of accumulated amortization of $0.10 million . At December 31, 2018 , intangible assets consisted of goodwill of $83.87 million and other intangible assets of $0.13 million , which was net of accumulated amortization of $0.07 million . Intangible asset amortization was $0.03 million , $0.08 million , and $0.36 million for 2019 , 2018 , and 2017 , respectively. Amortization on other intangible assets is expected to total $0.02 million , $0.02 million , $0.02 million , $0.02 million , and $0.02 million in 2020 , 2021 , 2022 , 2023 , and 2024 , respectively. The following table shows a summary of other intangible assets as of December 31. (Dollars in thousands) 2019 2018 Other intangibles: Gross carrying amount $ 204 $ 204 Less: accumulated amortization (100 ) (71 ) Net carrying amount $ 104 $ 133 |
Deposits
Deposits | 12 Months Ended |
Dec. 31, 2019 | |
Banking and Thrift [Abstract] | |
Deposits | Deposits The aggregate amount of certificates of deposit of $250,000 or more and other time deposits of $250,000 or more outstanding at December 31, 2019 and 2018 was $749.44 million and $666.89 million , respectively. The following table shows the amount of certificates of deposit of $250,000 or more and other time deposits of $250,000 or more outstanding at December 31, 2019 , by time remaining until maturity. (Dollars in thousands) Under 3 months $ 199,375 4 – 6 months 170,902 7 – 12 months 156,874 Over 12 months 222,284 Total $ 749,435 The following table shows scheduled maturities of time deposits, including both private and public funds, at December 31, 2019 . (Dollars in thousands) 2020 $ 1,256,577 2021 227,115 2022 105,218 2023 49,999 2024 7,496 Thereafter 2,093 Total $ 1,648,498 |
Borrowed Funds and Mandatorily
Borrowed Funds and Mandatorily Redeemable Securities | 12 Months Ended |
Dec. 31, 2019 | |
Debt Disclosure [Abstract] | |
Borrowed Funds And Mandatorily Redeemable Securities | Borrowed Funds and Mandatorily Redeemable Securities The following table shows the details of long-term debt and mandatorily redeemable securities as of December 31, 2019 and 2018 . (Dollars in thousands) 2019 2018 Federal Home Loan Bank borrowings (1.04% – 5.04%) $ 45,819 $ 46,444 Mandatorily redeemable securities 17,972 16,542 Other long-term debt 7,848 8,137 Total long-term debt and mandatorily redeemable securities $ 71,639 $ 71,123 Annual maturities of long-term debt outstanding at December 31, 2019 , for the next five years and thereafter beginning in 2020 , are as follows (in thousands): $2,759 ; $3,047 ; $4,709 ; $1,928 ; $11,065 ; and $48,131 . At December 31, 2019 , the Federal Home Loan Bank borrowings represented a source of funding for community economic development activities, agricultural loans and general funding for the bank and consisted of 17 fixed rate notes with maturities ranging from 2021 to 2027 . These notes were collateralized by $57.25 million of certain real estate loans. Mandatorily redeemable securities as of December 31, 2019 and 2018 , of $17.97 million and $16.54 million , respectively reflected the “book value” shares under the 1st Source Executive Incentive Plan. See Note 16 - Stock Based Compensation (Stock Award Plans) for additional information. Dividends paid on these shares and changes in book value per share are recorded as other interest expense. Total interest expense recorded for 2019 , 2018 , and 2017 was $2.22 million , $1.61 million , and $1.68 million , respectively. The following table shows the details of short-term borrowings as of December 31, 2019 and 2018 . 2019 2018 (Dollars in thousands) Amount Weighted Average Rate Amount Weighted Average Rate Federal funds purchased $ — — % $ 10,000 2.70 % Security repurchase agreements 120,459 0.23 103,627 0.25 Commercial paper 3,993 0.29 4,325 0.29 Federal Home Loan Bank advances 20,000 1.61 80,000 2.57 Other short-term borrowings 1,441 — 1,392 — Total short-term borrowings $ 145,893 0.42 % $ 199,344 1.30 % |
Variable Interest Entities
Variable Interest Entities | 12 Months Ended |
Dec. 31, 2019 | |
Variable Interest Entities | |
Variable Interest Entities | Variable Interest Entities A variable interest entity (VIE) is a partnership, limited liability company, trust or other legal entity that meets any one of the following criteria: • The entity does not have sufficient equity to conduct its activities without additional subordinated financial support from another party. • The entity’s investors lack the power to direct the activities that most significantly affect the entity’s economic performance. • The entity’s at-risk holders do not have the obligation to absorb the losses or the right to receive residual returns. • The voting rights of some investors are not proportional to their economic interests in the entity, and substantially all of the entity’s activities involve, or are conducted on behalf of, investors with disproportionately few voting rights. The Company is involved in various entities that are considered to be VIEs. The Company’s investments in VIEs are primarily related to investments promoting affordable housing, community development and renewable energy sources. Some of these tax-advantaged investments support the Company’s regulatory compliance with the Community Reinvestment Act. The Company’s investments in these entities generate a return primarily through the realization of federal and state income tax credits, and other tax benefits, such as tax deductions from operating losses of the investments, over specified time periods. These tax credits are recognized as a reduction of tax expense or, for investments qualifying as investment tax credits, as a reduction to the related investment asset. The Company recognized federal and state income tax credits related to its affordable housing and community development tax-advantaged investments in tax expense of $1.55 million , $1.29 million and $1.15 million for the years ended December 31, 2019 , 2018 and 2017 , respectively. The Company also recognized $15.86 million , $10.45 million and $18.16 million of investment tax credits for the years ended December 31, 2019 , 2018 and 2017 , respectively. The Company is not required to consolidate VIEs in which it has concluded it does not have a controlling financial interest, and thus is not the primary beneficiary. In such cases, the Company does not have both the power to direct the entities’ most significant activities and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIEs. As a limited partner in these operating partnerships, we are allocated credits and deductions associated with the underlying properties. The Company has determined that it is not the primary beneficiary of these investments because the general partners have the power to direct activities that most significantly influence the economic performance of their respective partnerships. The Company’s investments in these unconsolidated VIEs are carried in Other Assets on the Consolidated Statements of Financial Condition. The Company’s unfunded capital and other commitments related to these unconsolidated VIEs are generally carried in Other Liabilities on the Consolidated Statements of Financial Condition. The Company’s maximum exposure to loss from these unconsolidated VIEs include the investment recorded on the Consolidated Statements of Financial Condition, net of unfunded capital commitments, and previously recorded tax credits which remain subject to recapture by taxing authorities based on compliance features required to be met at the project level. While the Company believes potential losses from these investments are remote, the maximum exposure was determined by assuming a scenario where the community-based business, housing projects and renewable energy projects completely fail and do not meet certain taxing authority compliance requirements resulting in recapture of the related tax credits. The following table provides a summary of investments in affordable housing, community development and renewable energy VIEs that the Company has not consolidated as of December 31, 2019 and 2018 . (Dollars in thousands) 2019 2018 Investment carrying amount $ 19,843 $ 15,083 Unfunded capital and other commitments 17,420 6,449 Maximum exposure to loss 37,904 40,705 The Company is required to consolidate VIEs in which it has concluded it has significant involvement in and the ability to direct the activities that impact the entity’s economic performance. The Company is the managing general partner of entities to which it shares interest in tax-advantaged investments with a third party. At December 31, 2019 and 2018 , approximately $41.24 million and $8.38 million , respectively, of the Company’s assets and $18.68 million and $6.70 million , respectively, of its liabilities included on the Consolidated Statements of Financial Condition were related to tax-advantaged investment VIEs which the Company has consolidated. The assets of the consolidated VIE are reported in Other Assets, the liabilities are reported in Other Liabilities and the non-controlling interest is reported in Equity on the Consolidated Statements of Financial Condition. The assets of a particular VIE are the primary source of funds to settle its obligations. The creditors of the VIE do not have recourse to the general credit of the Company. The Company’s exposure to the consolidated VIE is generally limited to the carrying value of its variable interest plus any related tax credits previously recognized. Additionally, the Company sponsors one trust, 1st Source Master Trust (Capital Trust) of which 100% of the common equity is owned by the Company. The Capital Trust was formed in 2007 for the purpose of issuing corporation-obligated mandatorily redeemable capital securities (the capital securities) to third-party investors and investing the proceeds from the sale of the capital securities solely in junior subordinated debenture securities of the Company (the subordinated notes). The subordinated notes held by the Capital Trust are the sole assets of the Capital Trust. The Capital Trust qualifies as a variable interest entity for which the Company is not the primary beneficiary and therefore reported in the financial statements as an unconsolidated subsidiary. The junior subordinated debentures are reflected as subordinated notes on the Consolidated Statements of Financial Condition with the corresponding interest distributions reflected as Interest Expense on the Consolidated Statements of Income. The common shares issued by the Capital Trust are included in Other Assets on the Consolidated Statements of Financial Condition. Distributions on the capital securities issued by the Capital Trust are payable quarterly at a rate per annum equal to the interest rate being earned by the Capital Trust on the subordinated notes held by the Capital Trust. The capital securities are subject to mandatory redemption, in whole or in part, upon repayment of the subordinated notes. The Company has entered into agreements which, taken collectively, fully and unconditionally guarantee the capital securities subject to the terms of each of the guarantees. The capital securities held by the Capital Trust qualify as Tier 1 capital under Federal Reserve Board guidelines. The following table shows subordinated notes at December 31, 2019 . (Dollars in thousands) Amount of Subordinated Notes Interest Rate Maturity Date June 2007 issuance (1) $ 41,238 7.22 % 6/15/2037 August 2007 issuance (2) 17,526 3.37 % 9/15/2037 Total $ 58,764 (1) Fixed rate through life of debt. (2) 3-Month LIBOR + 1.48% through remaining life of debt. |
Earnings Per Share
Earnings Per Share | 12 Months Ended |
Dec. 31, 2019 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Earnings Per Share Earnings per common share is computed using the two-class method. Basic earnings per common share is computed by dividing net income by the weighted-average number of common shares outstanding during the applicable period, excluding outstanding participating securities. Participating securities include non-vested restricted stock awards. Non-vested restricted stock awards are considered participating securities to the extent the holders of these securities receive non-forfeitable dividends at the same rate as holders of common stock. Diluted earnings per common share is computed using the weighted-average number of shares determined for the basic earnings per common share computation plus the dilutive effect of stock compensation using the treasury stock method. Stock options, where the exercise price was greater than the average market price of the common shares, were excluded from the computation of diluted earnings per common share because the result would have been antidilutive. No stock options were considered antidilutive as of December 31, 2019 , 2018 and 2017 . The following table presents a reconciliation of the number of shares used in the calculation of basic and diluted earnings per common share for the three years ending December 31. (Dollars in thousands - except per share amounts) 2019 2018 2017 Distributed earnings allocated to common stock $ 28,188 $ 24,894 $ 19,701 Undistributed earnings allocated to common stock 63,254 56,975 47,830 Net earnings allocated to common stock 91,442 81,869 67,531 Net earnings allocated to participating securities 518 545 520 Net income allocated to common stock and participating securities $ 91,960 $ 82,414 $ 68,051 Weighted average shares outstanding for basic earnings per common share 25,600,138 25,937,599 25,925,820 Dilutive effect of stock compensation — — — Weighted average shares outstanding for diluted earnings per common share 25,600,138 25,937,599 25,925,820 Basic earnings per common share $ 3.57 $ 3.16 $ 2.60 Diluted earnings per common share $ 3.57 $ 3.16 $ 2.60 |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Income | 12 Months Ended |
Dec. 31, 2019 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Accumulated Other Comprehensive Income | Accumulated Other Comprehensive Income The following table presents reclassifications out of accumulated other comprehensive income related to unrealized gains and losses on available-for-sale securities for the two years ending December 31. (Dollars in thousands) 2019 2018 Affected Line Item in the Statements of Income Realized (losses) gains included in net income $ — $ (345 ) (Losses) gains on investment securities available-for-sale — (345 ) Income before income taxes Tax effect — 83 Income tax expense Net of tax $ — $ (262 ) Net income |
Employee Benefit Plans
Employee Benefit Plans | 12 Months Ended |
Dec. 31, 2019 | |
Retirement Benefits [Abstract] | |
Employee Benefit Plans | Employee Benefit Plans The 1st Source Corporation Employee Stock Ownership and Profit Sharing Plan (as amended, the “Plan”) includes an employee stock ownership component, which is designed to invest in and hold 1st Source common stock, and a 401(k) plan component, which holds all Plan assets not invested in 1st Source common stock. The Plan encourages diversification of investments with opportunities to change investment elections and contribution levels. Employees are eligible to participate in the Plan the first of the month following 90 days of employment. The Company matches dollar for dollar on the first 4% of deferred compensation, plus 50 cents on the dollar of the next 2% deferrals. The Company will also contribute to the Plan an amount designated as a fixed 2% employer contribution. The amount of fixed contribution is equal to two percent of the participant’s eligible compensation. Additionally, each year the Company may, in its sole discretion, make a discretionary profit sharing contribution. As of December 31, 2019 and 2018 , there were 852,128 and 1,007,611 shares, respectively, of 1st Source Corporation common stock held in relation to employee benefit plans. The Company contributions are allocated among the participants on the basis of compensation. Each participant’s account is credited with cash and/or shares of 1st Source common stock based on that participant’s compensation earned during the year. After completing 5 years of service in which they worked at least 1,000 hours per year, a participant will be completely vested in the Company’s contribution. An employee is always 100% vested in their deferral. Plan participants are entitled to receive distributions from their Plan accounts in-service and upon termination of service, retirement, or death. Contribution expense for the years ended December 31, 2019 , 2018 , and 2017 , amounted to $5.48 million , $4.87 million , and $4.88 million , respectively. In addition to the 1st Source Corporation Employee Stock Ownership and Profit Sharing Plan, the Company provides a limited health care and life insurance benefit for some of its retired employees. Effective March 31, 2009, the Company amended the plan so that no new retirees would be covered by the plan. The amendment will have no effect on the coverage for retirees covered at the time of the amendment. Prior to amendment, all full-time employees became eligible for these retiree benefits upon reaching age 55 with 20 years of credited service. The retiree medical plan pays a stated percentage of eligible medical expenses reduced by any deductibles and payments made by government programs and other group coverage. The lifetime maximum benefit payable under the medical plan is $15,000 and for life insurance is $3,000 . The Company’s net periodic post retirement benefit (recovery) cost recognized in Salaries and Employee Benefits on the Consolidated Statements of Income for the years ended December 31, 2019 , 2018 and 2017 , amounted to zero , $(0.01) million , and $(0.01) million , respectively. The accrued post retirement benefit cost was not material at December 31, 2019 , 2018 , and 2017 . |
Stock Based Compensation
Stock Based Compensation | 12 Months Ended |
Dec. 31, 2019 | |
Share-based Payment Arrangement [Abstract] | |
Stock Based Compensation | Stock Based Compensation As of December 31, 2019 , the Company had four active stock-based employee compensation plans. These plans include three executive stock award plans, the Executive Incentive Plan (EIP), the Restricted Stock Award Plan (RSAP), the Strategic Deployment Incentive Plan (SDP); and the Employee Stock Purchase Plan (ESPP). The 2011 Stock Option Plan was approved by the shareholders on April 21, 2011 but the Company had not made any grants through December 31, 2019 . These stock-based employee compensation plans were established to help retain and motivate key employees. All of the plans have been approved by the shareholders of 1st Source Corporation. The Executive Compensation and Human Resources Committee (the “Committee”) of the 1st Source Corporation Board of Directors has sole authority to select the employees, establish the awards to be issued, and approve the terms and conditions of each award under the stock-based compensation plans. Stock-based compensation to employees is recognized as compensation cost on the Consolidated Statements of Income based on their fair values on the measurement date, which, for 1st Source, is the date of grant. Stock-based compensation expense is recognized ratably over the requisite service period for all awards. The total fair value of share awards vested was $3.35 million during 2019 , $3.53 million in 2018 , and $2.37 million in 2017 . The following table shows the combined summary of activity regarding active stock option and stock award plans. Non-Vested Stock Awards Outstanding Shares Available for Grant Number of Shares Weighted-Average Grant-Date Fair Value Balance, January 1, 2017 714,005 276,615 $ 23.94 Shares authorized - 2017 EIP 59,064 — — Granted (98,625 ) 98,625 33.54 Stock awards vested — (76,858 ) 22.71 Forfeited 2,000 (2,456 ) 29.93 Balance, December 31, 2017 676,444 295,926 27.41 Shares authorized - 2018 EIP 70,461 — — Granted (74,981 ) 74,981 29.11 Stock awards vested — (106,513 ) 25.79 Forfeited 3,135 (10,575 ) 27.51 Balance, December 31, 2018 675,059 253,819 28.59 Shares authorized - 2019 EIP 62,538 — — Granted (74,336 ) 74,336 31.44 Stock awards vested — (100,299 ) 28.35 Forfeited 1,241 (8,865 ) 30.28 Balance, December 31, 2019 664,502 218,991 $ 29.60 Stock Option Plans — Incentive stock option plans include the 2011 Stock Option Plan (the “2011 Plan”). Each award from the plan is evidenced by an award agreement that specifies the option price, the duration of the option, the number of shares to which the option pertains, and such other provisions as the Committee determines. The option price is equal to the fair market value of a share of 1st Source Corporation’s common stock on the date of grant. Options granted expire at such time as the Committee determines at the date of grant and in no event does the exercise period exceed a maximum of ten years . Upon merger, consolidation, or other corporate consolidation in which 1st Source Corporation is not the surviving corporation, as defined in the plans, all outstanding options immediately vest. There were zero stock options exercised during 2019 , 2018 or 2017 . All shares issued in connection with stock option exercises and non-vested stock awards are issued from available treasury stock. No stock-based compensation expense related to stock options was recognized in 2019 , 2018 or 2017 . The fair value of each option on the date of grant is estimated using the Black-Scholes option pricing model. Expected volatility is based on the historical volatility estimated over a period equal to the expected life of the options. In estimating the fair value of stock options under the Black-Scholes valuation model, separate groups of employees that have similar historical exercise behavior are considered separately. The expected life of the options granted is derived based on past experience and represents the period of time that options granted are expected to be outstanding. Stock Award Plans — Incentive stock award plans include the EIP, the SDP and the RSAP. The EIP is administered by the Committee. Awards under the EIP and SDP include “book value” shares and “market value” shares of common stock. These shares are awarded annually based on weighted performance criteria and generally vest over a period of five years . The EIP book value shares may only be sold to 1st Source and such sale is mandatory in the event of death, retirement, disability, or termination of employment. The RSAP is designed for key employees. Awards under the RSAP are made to employees recommended by the Chief Executive Officer and approved by the Committee. Shares granted under the RSAP vest over a period of up to ten years and vesting is based upon meeting certain various criteria, including continued employment with 1st Source. Stock-based compensation expense relating to the EIP, SDP and RSAP totaled $2.76 million in 2019 , $3.55 million in 2018 , and $2.96 million in 2017 . The total income tax benefit recognized in the accompanying Consolidated Statements of Income related to stock-based compensation was $0.65 million in 2019 , $0.86 million in 2018 , and $1.11 million in 2017 . Unrecognized stock-based compensation expense related to non-vested stock awards (EIP/SDP/RSAP) was $4.91 million at December 31, 2019 . At such date, the weighted-average period over which this unrecognized expense was expected to be recognized was 2.88 years . The fair value of non-vested stock awards for the purposes of recognizing stock-based compensation expense is market price of the stock on the measurement date, which, for the Company’s purposes is the date of the award. Employee Stock Purchase Plan — The Company offers an ESPP for substantially all employees with at least two years of service on the effective date of an offering under the plan. Eligible employees may elect to purchase any dollar amount of stock, so long as such amount does not exceed 25% of their base rate of pay and the aggregate stock accrual rate for all offerings does not exceed $25,000 in any calendar year. The purchase price for shares offered is the lower of the closing market bid price for the offering date or the average market bid price for the five business days preceding the offering date. The purchase price and premium/(discount) to the actual market closing price on the offering date for the 2019 , 2018 , and 2017 offerings were $43.81 ( 0.14% ), $53.84 ( -0.09% ), and $46.18 ( -1.32% ), respectively. Payment for the stock is made through payroll deductions over the offering period, and employees may discontinue the deductions at any time and exercise the option or take the funds out of the program. The most recent offering began June 3, 2019 and runs through June 3, 2021, with $139,290 in stock value to be purchased at $43.81 per share. |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The following table shows the composition of income tax expense. Year Ended December 31 (Dollars in thousands) 2019 2018 2017 Current: Federal $ 28,130 $ 20,167 $ 26,012 State 5,739 2,996 4,530 Total current 33,869 23,163 30,542 Deferred: Federal (5,135 ) (875 ) 5,869 State (595 ) 1,200 (488 ) Deferred tax liability remeasurement — (875 ) (2,614 ) Total deferred (5,730 ) (550 ) 2,767 Total provision $ 28,139 $ 22,613 $ 33,309 The following table shows the reasons for the difference between income tax expense and the amount computed by applying the statutory federal income tax rate ( 21% for 2019 and 2018 and 35% for 2017) to income before income taxes. 2019 2018 2017 Year Ended December 31 (Dollars in thousands) Amount Percent of Pretax Income Amount Percent of Pretax Income Amount Percent of Pretax Income Statutory federal income tax $ 25,232 21.0 % $ 22,056 21.0 % $ 35,476 35.0 % (Decrease) increase in income taxes resulting from: Tax-exempt interest income (552 ) (0.5 ) (650 ) (0.6 ) (1,197 ) (1.2 ) State taxes, net of federal income tax benefit 4,064 3.4 3,315 3.2 2,627 2.6 Deferred tax liability remeasurement — — (875 ) (0.8 ) (2,614 ) (2.6 ) Other (605 ) (0.5 ) (1,233 ) (1.3 ) (983 ) (0.9 ) Total $ 28,139 23.4 % $ 22,613 21.5 % $ 33,309 32.9 % The tax expense related to (losses) gains on investment securities available-for-sale for the years 2019 , 2018 , and 2017 was approximately $0 , $(83,000) , and $1,629,000 , respectively. The following table shows the composition of deferred tax assets and liabilities as of December 31, 2019 and 2018 . (Dollars in thousands) 2019 2018 Deferred tax assets: Reserve for loan and lease losses $ 28,792 $ 25,386 Operating lease liability 5,899 — Accruals for employee benefits 2,842 2,974 Net unrealized losses on securities available-for-sale — 3,386 Other 222 127 Total deferred tax assets 37,755 31,873 Deferred tax liabilities: Differing depreciable bases in premises and leased equipment 18,614 21,184 Right of use assets - leases 5,899 — Differing bases in assets related to acquisitions 4,092 4,021 Tax advantaged partnerships 4,383 4,354 Net unrealized gains on securities available-for-sale 1,640 — Mortgage servicing 394 586 Capitalized loan costs 1,207 1,110 Prepaid expenses 297 273 Other 544 364 Total deferred tax liabilities 37,070 31,892 Net deferred tax asset (liability) $ 685 $ (19 ) No valuation allowance for deferred tax assets was recorded at December 31, 2019 and 2018 as the Company believes it is more likely than not that all of the deferred tax assets will be realized. The following table shows a reconciliation of the beginning and ending amounts of unrecognized tax benefits. (Dollars in thousands) 2019 2018 2017 Balance, beginning of year $ — $ 1,112 $ 762 Additions based on tax positions related to the current year — — 350 Additions for tax positions of prior years — — — Reductions for tax positions of prior years — — — Reductions due to lapse in statute of limitations — — — Settlements — (1,112 ) — Balance, end of year $ — $ — $ 1,112 The total amount of unrecognized tax benefits that would affect the effective tax rate if recognized was zero at December 31, 2019 and 2018 and $0.72 million at December 31, 2017 . Interest and penalties are recognized through the income tax provision. For the years 2019 , 2018 and 2017 , the Company recognized approximately $0.00 million , $(0.09) million and $0.05 million in interest, net of tax effect, and penalties, respectively. There were no accrued interest and penalties at December 31, 2019 and 2018 and $0.09 million at December 31, 2017 . Tax years that remain open and subject to audit include the federal 2016-2019 years and the Indiana 2016-2019 years. Additionally, in 2018 the Company reached a state tax settlement for the 2015-2017 years and as a result, recorded a reduction of unrecognized tax benefits in the amount of $1.11 million. The Company does not anticipate a significant change in the amount of uncertain tax positions within the next 12 months. The Tax Cuts and Jobs Act was enacted on December 22, 2017. The Act reduced the U.S. federal corporate tax rate from 35% to 21% . At December 31, 2017, the Company had not fully completed its accounting for the tax effects of enactment of the Act and recorded a provisional benefit of $2.61 million which is included as a component of Income Tax Expense on the Consolidated Statements of Income related to the remeasurement of its deferred tax balance. During the third quarter of 2018, the Company completed its accounting for the provisional amounts recognized at December 31, 2017 and recorded an additional $0.88 million benefit as provided by the SEC’s Staff Accounting Bulletin No. 118 , Income Tax Accounting Implications of the Tax Cuts and Jobs Act . |
Contingent Liabilities, Commitm
Contingent Liabilities, Commitments, and Financial Instruments with Off-Balance-Sheet Risk | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingent Liabilities, Commitments, and Financial Instruments with Off-Balance-Sheet Risk | Contingent Liabilities, Commitments, and Financial Instruments with Off-Balance-Sheet Risk Contingent Liabilities —1st Source and its subsidiaries are defendants in various legal proceedings arising in the normal course of business. In the opinion of management, based upon present information including the advice of legal counsel, the ultimate resolution of these proceedings will not have a material effect on the Company’s consolidated financial position or results of operations. 1st Source Bank sells residential mortgage loans to Fannie Mae as well as FHA-insured, USDA-insured and VA-guaranteed loans in Ginnie Mae mortgage-backed securities. Additionally, the Bank has sold loans on a service released basis to various other financial institutions in the past. The agreements under which the Bank sells these mortgage loans contain various representations and warranties regarding the acceptability of loans for purchase. On occasion, the Bank may be required to indemnify the loan purchaser for credit losses on loans that were later deemed ineligible for purchase or may be required to repurchase a loan. Both circumstances are collectively referred to as “repurchases.” The Company’s liability for repurchases, included in Accrued Expenses and Other Liabilities on the Consolidated Statements of Financial Condition, was $0.29 million and $0.29 million as of December 31, 2019 and 2018 , respectively. The mortgage repurchase liability represents the Company’s best estimate of the loss that it may incur. The estimate is based on specific loan repurchase requests and a historical loss ratio with respect to origination dollar volume. Because the level of mortgage loan repurchase losses are dependent on economic factors, investor demand strategies and other external conditions that may change over the life of the underlying loans, the level of liability for mortgage loan repurchase losses is difficult to estimate and requires considerable management judgment. Lease Commitments — The Company and its subsidiaries are obligated under operating leases for certain office premises and equipment. The following table shows operating lease right of use assets and operating lease liabilities as of December 31, 2019 . (Dollars in thousands) Statement of Financial Condition classification 2019 Operating lease right of use assets Accrued income and other assets $ 24,147 Operating lease liabilities Accrued expenses and other liabilities $ 24,319 During 2019 , the Company amended the lease agreement for its corporate office building by extending the lease term which resulted in an increase to its operating lease right of use assets of $14.65 million and an increase to its operating lease liabilities of $14.64 million . The following table shows the components of operating leases expense for the year ended December 31, 2019 . (Dollars in thousands) Statement of Income classification 2019 Operating lease cost Net occupancy expense $ 3,506 Short-term lease cost Net occupancy expense 41 Variable lease cost Net occupancy expense — Total operating lease cost $ 3,547 Gross rental expense for the years ended 2018 and 2017 was $3.73 million and $4.18 million , respectively. The following table shows future minimum rental commitments for all noncancellable operating leases with an initial term longer than 12 months for the next five years and thereafter. (Dollars in thousands) 2020 $ 3,477 2021 3,800 2022 3,714 2023 2,653 2024 2,552 Thereafter 11,508 Total lease payments 27,704 Less: imputed interest (3,385 ) Present value of operating lease liabilities $ 24,319 The following table shows the weighted average remaining operating lease term, the weighted average discount rate and supplemental Consolidated Statement of Cash Flows information for operating leases at December 31, 2019 . (Dollars in thousands) 2019 Weighted average remaining lease term 10.88 years Weighted average discount rate 2.83 % Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 950 During the year ended December 31, 2019 , the Company recognized a net gain on the sale of an office building in the amount of $1.31 million . The Company commenced an operating lease with the buyer of the building to lease a portion of it for office space resulting in a new right of use asset and operating lease liability. There are no new significant leases that have not yet commenced as of December 31, 2019 . Financial Instruments with Off-Balance-Sheet Risk — To meet the financing needs of our clients, 1st Source and its subsidiaries are parties to financial instruments with off-balance-sheet risk in the normal course of business. These off-balance-sheet financial instruments include commitments to originate and sell loans and standby letters of credit. The instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated statements of financial condition. Financial instruments, whose contract amounts represent credit risk as of December 31, were as follows: (Dollars in thousands) 2019 2018 Amounts of commitments: Loan commitments to extend credit $ 1,095,054 $ 1,095,053 Standby letters of credit $ 27,549 $ 31,133 Commercial and similar letters of credit $ 2,332 $ 2,500 The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instruments for loan commitments and standby letters of credit is represented by the dollar amount of those instruments. The Company uses the same credit policies and collateral requirements in making commitments and conditional obligations as it does for on-balance-sheet instruments. Loan commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company grants mortgage loan commitments to borrowers subject to normal loan underwriting standards. The interest rate risk associated with these loan commitments is managed by entering into contracts for future deliveries of loans. Standby letters of credit are conditional commitments issued to guarantee the performance of a client to a third party. The credit risk involved in and collateral obtained when issuing standby letters of credit are essentially the same as those involved in extending loan commitments to clients. Standby letters of credit generally have terms ranging from two months to one year . Commercial letters of credit are issued specifically to facilitate commerce and typically result in the commitment being drawn on when the underlying transaction is consummated between the customer and the third party. Commercial letters of credit generally have terms ranging from two months to six months . |
Derivative Financial Instrument
Derivative Financial Instruments | 12 Months Ended |
Dec. 31, 2019 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Financial Instruments | Derivative Financial Instruments Commitments to originate residential mortgage loans held for sale and forward commitments to sell residential mortgage loans are considered derivative instruments. See Note 18 for further information. The Company has certain interest rate derivative positions that are not designated as hedging instruments. Derivative assets and liabilities are recorded at fair value on the Consolidated Statements of Financial Condition and do not take into account the effects of master netting agreements. Master netting agreements allow the Company to settle all derivative contracts held with a single counterparty on a net basis, and to offset net derivative positions with related collateral, where applicable. These derivative positions relate to transactions in which the Company enters into an interest rate swap with a client while at the same time entering into an offsetting interest rate swap with another financial institution. In connection with each transaction, the Company agrees to pay interest to the client on a notional amount at a variable interest rate and receive interest from the client on the same notional amount at a fixed interest rate. At the same time, the Company agrees to pay another financial institution the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount. The transaction allows the client to effectively convert a variable rate loan to a fixed rate. Because the terms of the swaps with the customers and the other financial institution offset each other, with the only difference being counterparty credit risk, changes in the fair value of the underlying derivative contracts are not materially different and do not significantly impact the Company’s results of operations. The following table shows the amounts of non-hedging derivative financial instruments at December 31, 2019 and 2018 . Asset derivatives Liability derivatives (Dollars in thousands) Notional or contractual amount Statement of Financial Condition classification Fair value Statement of Financial Condition classification Fair value Interest rate swap contracts $ 1,074,809 Other assets $ 21,975 Other liabilities $ 22,352 Loan commitments 9,950 Mortgages held for sale 185 N/A — Forward contracts - mortgage loan 23,632 N/A — Mortgages held for sale 38 Total - December 31, 2019 $ 1,108,391 $ 22,160 $ 22,390 Interest rate swap contracts $ 855,848 Other assets $ 7,124 Other liabilities $ 7,250 Loan commitments 5,871 Mortgages held for sale 112 N/A — Forward contracts - mortgage loan 14,087 N/A — Mortgages held for sale 135 Total - December 31, 2018 $ 875,806 $ 7,236 $ 7,385 The following table shows the amounts included on the Consolidated Statements of Income for non-hedging derivative financial instruments at December 31, 2019 , 2018 and 2017 . Gain (loss) (Dollars in thousands) Statement of Income classification 2019 2018 2017 Interest rate swap contracts Other expense $ (252 ) $ (30 ) $ 26 Interest rate swap contracts Other income 1,356 1,028 1,585 Loan commitments Mortgage banking 73 46 23 Forward contracts - mortgage loan Mortgage banking 97 (125 ) (232 ) Total $ 1,274 $ 919 $ 1,402 The following table shows the offsetting of financial assets and derivative assets at December 31, 2019 and 2018 . Gross Amounts Not Offset in the Statement of Financial Condition (Dollars in thousands) Gross Amounts of Recognized Assets Gross Amounts Offset in the Statement of Financial Condition Net Amounts of Assets Presented in the Statement of Financial Condition Financial Instruments Cash Collateral Received Net Amount December 31, 2019 Interest rate swaps $ 22,279 $ 304 $ 21,975 $ — $ — $ 21,975 December 31, 2018 Interest rate swaps $ 7,128 $ 4 $ 7,124 $ 177 $ 610 $ 6,337 The following table shows the offsetting of financial liabilities and derivative liabilities at December 31, 2019 and 2018 . Gross Amounts Not Offset in the Statement of Financial Condition (Dollars in thousands) Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Statement of Financial Condition Net Amounts of Liabilities Presented in the Statement of Financial Condition Financial Instruments Cash Collateral Pledged Net Amount December 31, 2019 Interest rate swaps $ 22,656 $ 304 $ 22,352 $ 23,482 $ — $ (1,130 ) Repurchase agreements 120,459 — 120,459 120,459 — — Total $ 143,115 $ 304 $ 142,811 $ 143,941 $ — $ (1,130 ) December 31, 2018 Interest rate swaps $ 7,254 $ 4 $ 7,250 $ 1,700 $ — $ 5,550 Repurchase agreements 103,627 — 103,627 103,627 — — Total $ 110,881 $ 4 $ 110,877 $ 105,327 $ — $ 5,550 If a default in performance of any obligation of a repurchase or derivative agreement occurs, each party will set-off property held, or loan indebtedness owing, in respect of transactions against obligations owing in respect of any other transactions. At December 31, 2019 and December 31, 2018 , repurchase agreements had a remaining contractual maturity of $119.45 million and $102.34 million in overnight and $1.01 million and $1.29 million in up to 30 days, respectively and were collateralized by U.S. Treasury and Federal agencies securities. |
Regulatory Matters
Regulatory Matters | 12 Months Ended |
Dec. 31, 2019 | |
Broker-Dealer, Net Capital Requirement, SEC Regulation [Abstract] | |
Regulatory Matters | Regulatory Matters The Company is subject to various regulatory capital requirements administered by the Federal banking agencies. Failure to meet minimum capital requirements can result in certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. Capital amounts and classification are subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios of total capital, Tier 1 capital, and common equity Tier 1 capital to risk-weighted assets and of Tier 1 capital to average assets. The Company believes that it meets all capital adequacy requirements to which it is subject. The most recent notification from the Federal bank regulators categorized 1st Source Bank, the largest of its subsidiaries, as “well capitalized” under the regulatory framework for prompt corrective action. To be categorized as “well capitalized” the Bank must maintain minimum total risk-based, Tier 1 risk-based, common equity Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table below. There are no conditions or events since that notification that the Company believes will have changed the institution’s category. As discussed in Note 12, the capital securities held by the Capital Trusts qualify as Tier 1 capital under Federal Reserve Board guidelines. The following table shows the actual and required capital amounts and ratios for 1st Source Corporation and 1st Source Bank as of December 31, 2019 and 2018 . Actual Minimum Capital Adequacy Minimum Capital Adequacy with Capital Buffer (1) To Be Well Capitalized Under Prompt Corrective Action Provisions (Dollars in thousands) Amount Ratio Amount Ratio Amount Ratio Amount Ratio 2019 Total Capital (to Risk-Weighted Assets): 1st Source Corporation $ 882,453 14.90 % $ 473,782 8.00 % $ 621,839 10.50 % $ 592,227 10.00 % 1st Source Bank 804,131 13.57 474,189 8.00 622,373 10.50 592,736 10.00 Tier 1 Capital (to Risk-Weighted Assets): 1st Source Corporation 807,926 13.64 355,336 6.00 503,393 8.50 473,782 8.00 1st Source Bank 729,541 12.31 355,642 6.00 503,826 8.50 474,189 8.00 Common Equity Tier 1 Capital (to Risk-Weighted Assets): 1st Source Corporation 743,467 12.55 266,502 4.50 414,559 7.00 384,948 6.50 1st Source Bank 722,082 12.18 266,731 4.50 414,915 7.00 385,279 6.50 Tier 1 Capital (to Average Assets): 1st Source Corporation 807,926 12.19 265,122 4.00 N/A N/A 331,402 5.00 1st Source Bank 729,541 11.03 264,500 4.00 N/A N/A 330,625 5.00 2018 Total Capital (to Risk-Weighted Assets): 1st Source Corporation $ 821,975 14.68 % $ 447,909 8.00 % $ 552,888 9.875 % $ 559,887 10.00 % 1st Source Bank 744,326 13.29 448,152 8.00 553,188 9.875 560,190 10.00 Tier 1 Capital (to Risk-Weighted Assets): 1st Source Corporation 751,575 13.42 335,932 6.00 440,911 7.875 447,909 8.00 1st Source Bank 673,888 12.03 336,114 6.00 441,150 7.875 448,152 8.00 Common Equity Tier 1 Capital (to Risk-Weighted Assets): 1st Source Corporation 693,067 12.38 251,949 4.50 356,928 6.375 363,926 6.50 1st Source Bank 672,380 12.00 252,086 4.50 357,121 6.375 364,124 6.50 Tier 1 Capital (to Average Assets): 1st Source Corporation 751,575 12.06 249,185 4.00 N/A N/A 311,481 5.00 1st Source Bank 673,888 10.82 249,052 4.00 N/A N/A 311,315 5.00 (1) The capital conservation buffer requirement was fully phased in as of December 31, 2019. The Bank was not required to maintain noninterest bearing cash balances with the Federal Reserve Bank as of December 31, 2019 and 2018 . Dividends that may be paid by a subsidiary bank to the parent company are subject to certain legal and regulatory limitations and also may be affected by capital needs, as well as other factors. Due to the Company’s mortgage activities, 1st Source Bank is required to maintain minimum net worth capital requirements established by various governmental agencies. 1st Source Bank’s net worth requirements are governed by the Department of Housing and Urban Development and GNMA. As of December 31, 2019 , 1st Source Bank met its minimum net worth capital requirements. |
Fair Value Measurements
Fair Value Measurements | 12 Months Ended |
Dec. 31, 2019 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Fair Value Measurements The Company determines the fair values of its financial instruments based on the fair value hierarchy, which requires an entity to maximize the use of quoted prices and observable inputs and to minimize the use of unobservable inputs when measuring fair value. The Company elected fair value accounting for mortgages held for sale and for its best-efforts forward sales commitments. The Company economically hedges its mortgages held for sale by either selling corresponding forward contracts on agency securities (free-standing derivatives) or obtaining best-efforts forward sales commitments with an investor to sell the loans at an agreed-upon price at the time the interest rate locks are issued to the customers. The Company believes the election for mortgages held for sale will reduce certain timing differences and better match changes in the value of these assets with changes in the value of the derivatives or best-efforts forward sales commitments. At December 31, 2019 and 2018 , all mortgages held for sale are carried at fair value. The following table shows the differences between fair value carrying amount of mortgages held for sale measured at fair value and the aggregate unpaid principal amount the Company is contractually entitled to receive at maturity on December 31, 2019 and 2018 . (Dollars in thousands) Fair value carrying amount Aggregate unpaid principal Excess of fair value carrying amount over (under) unpaid principal December 31, 2019 Mortgages held for sale reported at fair value: Total Loans $ 20,277 $ 19,890 $ 387 (1) December 31, 2018 Mortgages held for sale reported at fair value: Total Loans $ 11,290 $ 11,076 $ 214 (1) (1) The excess of fair value carrying amount over (under) unpaid principal is included in mortgage banking income and includes changes in fair value at and subsequent to funding and gains and losses on the related loan commitment prior to funding. Financial Instruments on Recurring Basis: The following is a description of the valuation methodologies used for financial instruments measured at fair value on a recurring basis: Investment securities available-for-sale are valued primarily by a third-party pricing agent. Prices supplied by the independent pricing agent, as well as their pricing methodologies and assumptions, are reviewed by the Company for reasonableness and to ensure such prices are aligned with market levels. In general, the Company’s investment securities do not possess a complex structure that could introduce greater valuation risk. The portfolio mainly consists of traditional investments including U.S. Treasury and Federal agencies securities, federal agency mortgage pass-through securities, and general obligation and revenue municipal bonds. Pricing for such instruments is fairly generic and is easily obtained. On a quarterly basis, prices supplied by the pricing agent are validated by comparison to prices obtained from other third party sources for a material portion of the portfolio. The valuation policy and procedures for Level 3 fair value measurements of available-for-sale debt securities are decided through collaboration between management of the Corporate Accounting and Funds Management departments. The changes in fair value measurement for Level 3 securities are analyzed on a periodic basis under a collaborative framework with the aforementioned departments. The methodology and variables used for input are derived from the combination of observable and unobservable inputs. The unobservable inputs are determined through internal assumptions that may vary from period to period due to external factors, such as market movement and credit rating adjustments. Both the market and income valuation approaches are implemented using the following types of inputs: • U.S. treasuries are priced using the market approach and utilizing live data feeds from active market exchanges for identical securities. • Government-sponsored agency debt securities and corporate bonds are primarily priced using available market information through processes such as benchmark curves, market valuations of like securities, sector groupings and matrix pricing. • Other government-sponsored agency securities, mortgage-backed securities and some of the actively traded REMICs and CMOs, are primarily priced using available market information including benchmark yields, prepayment speeds, spreads and volatility of similar securities. • Inactively traded government-sponsored agency securities are primarily priced using consensus pricing and dealer quotes. • State and political subdivisions are largely grouped by characteristics, i.e., geographical data and source of revenue in trade dissemination systems. Since some securities are not traded daily and due to other grouping limitations, active market quotes are often obtained using benchmarking for like securities. Local direct placement municipal securities, with very little market activity, are priced using an appropriate market yield curve which incorporates a credit spread assumption. Mortgages held for sale and the related loan commitments and forward contracts (hedges) are valued using a market value approach and utilizing an appropriate current market yield and a loan commitment closing rate based on historical analysis. Interest rate swap positions, both assets and liabilities, are valued by a third-party pricing agent using an income approach and utilizing models that use as their basis readily observable market parameters. This valuation process considers various factors including interest rate yield curves, time value and volatility factors. Validation of third-party agent valuations is accomplished by comparing those values to the Company’s swap counterparty valuations. Management believes an adjustment is required to “mid-market” valuations for derivatives tied to its performing loan portfolio to recognize the imprecision and related exposure inherent in the process of estimating expected credit losses as well as velocity of deterioration evident with systemic risks embedded in these portfolios. Any change in the mid-market derivative valuation adjustment will be recognized immediately through the Consolidated Statements of Income. The following table shows the balance of assets and liabilities measured at fair value on a recurring basis. (Dollars in thousands) Level 1 Level 2 Level 3 Total December 31, 2019 Assets: Investment securities available-for-sale: U.S. Treasury and Federal agencies securities $ 80,393 $ 446,571 $ — $ 526,964 U.S. States and political subdivisions securities — 82,213 2,292 84,505 Mortgage-backed securities - Federal agencies — 375,389 — 375,389 Corporate debt securities — 53,025 — 53,025 Foreign government and other securities — 700 — 700 Total debt securities available-for-sale 80,393 957,898 2,292 1,040,583 Mortgages held for sale — 20,277 — 20,277 Accrued income and other assets (interest rate swap agreements) — 21,975 — 21,975 Total $ 80,393 $ 1,000,150 $ 2,292 $ 1,082,835 Liabilities: Accrued expenses and other liabilities (interest rate swap agreements) $ — $ 22,352 $ — $ 22,352 Total $ — $ 22,352 $ — $ 22,352 December 31, 2018 Assets: Investment securities available-for-sale: U.S. Treasury and Federal agencies securities $ 33,746 $ 497,477 $ — $ 531,223 U.S. States and political subdivisions securities — 93,557 1,025 94,582 Mortgage-backed securities - Federal agencies — 318,233 — 318,233 Corporate debt securities — 45,392 — 45,392 Foreign government and other securities — 699 — 699 Total debt securities available-for-sale 33,746 955,358 1,025 990,129 Mortgages held for sale — 11,290 — 11,290 Accrued income and other assets (interest rate swap agreements) — 7,124 — 7,124 Total $ 33,746 $ 973,772 $ 1,025 $ 1,008,543 Liabilities: Accrued expenses and other liabilities (interest rate swap agreements) $ — $ 7,250 $ — $ 7,250 Total $ — $ 7,250 $ — $ 7,250 The following table shows the changes in Level 3 assets and liabilities measured at fair value on a recurring basis. (Dollars in thousands) U.S. States and political subdivisions securities Foreign government and other securities Investment securities available-for-sale Beginning balance January 1, 2019 $ 1,025 $ — $ 1,025 Total gains or losses (realized/unrealized): Included in earnings — — — Included in other comprehensive income (35 ) — (35 ) Purchases 5,600 — 5,600 Issuances — — — Sales — — — Settlements — — — Maturities (4,298 ) — (4,298 ) Transfers into Level 3 — — — Transfers out of Level 3 — — — Ending balance December 31, 2019 $ 2,292 $ — $ 2,292 Beginning balance January 1, 2018 $ 2,155 $ 710 $ 2,865 Total gains or losses (realized/unrealized): Included in earnings — — — Included in other comprehensive income 6 (11 ) (5 ) Purchases — 200 200 Issuances — — — Sales — — — Settlements — — — Maturities (1,136 ) (200 ) (1,336 ) Transfers into Level 3 — — — Transfers out of Level 3 — (699 ) (699 ) Ending balance December 31, 2018 $ 1,025 $ — $ 1,025 There were no gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at December 31, 2019 or 2018 . No transfers between levels occurred during 2019 . A foreign government debt security was transferred from Level 3 to Level 2 during 2018 due to the Company’s periodic review of valuation methodologies and inputs. The Company determined that the observable inputs used in determining fair value warranted a transfer to Level 2 as the unobservable inputs were deemed to be insignificant to the overall fair value measurement. The following table shows the valuation methodology and unobservable inputs for Level 3 assets and liabilities measured at fair value on a recurring basis. (Dollars in thousands) Fair value Valuation Methodology Unobservable Inputs Range of Inputs December 31, 2019 Debt securities available-for-sale Direct placement municipal securities $ 2,292 Discounted cash flows Credit spread assumption 0.12% - 2.85% December 31, 2018 Debt securities available-for-sale Direct placement municipal securities $ 1,025 Discounted cash flows Credit spread assumption 0.17% - 3.02% The sensitivity to changes in the unobservable inputs and their impact on the fair value measurement can be significant. The significant unobservable input for direct placement municipal securities are the credit spread assumptions used to determine the fair value measure. An increase (decrease) in the estimated spread assumption of the market will decrease (increase) the fair value measure of the securities. Financial Instruments on Non-recurring Basis: The Company may be required, from time to time, to measure certain other financial assets at fair value on a non-recurring basis in accordance with GAAP. These adjustments to fair value usually result from application of lower of cost or market accounting or impairment charges of individual assets. The Credit Policy Committee (CPC), a management committee, is responsible for overseeing the valuation processes and procedures for Level 3 measurements of impaired loans, other real estate and repossessions. The CPC reviews these assets on a quarterly basis to determine the accuracy of the observable inputs, generally third-party appraisals, auction values, values derived from trade publications and data submitted by the borrower, and the appropriateness of the unobservable inputs, generally discounts due to current market conditions and collection issues. The CPC establishes discounts based on asset type and valuation source; deviations from the standard are documented. The discounts are reviewed periodically, annually at a minimum, to determine they remain appropriate. Consideration is given to current trends in market values for the asset categories and gain and losses on sales of similar assets. The Loan and Funds Management Committee of the Board of Directors is responsible for overseeing the CPC. Discounts vary depending on the nature of the assets and the source of value. Aircraft are generally valued using quarterly trade publications adjusted for engine time, condition, maintenance programs, discounted by 10% . Likewise, autos are valued using current auction values, discounted by 10% ; medium and heavy duty trucks are valued using trade publications and auction values, discounted by 15% . Construction equipment is generally valued using trade publications and auction values, discounted by 20% . Real estate is valued based on appraisals or evaluations, discounted by 20% at a minimum with higher discounts for property in poor condition or property with characteristics which may make it more difficult to market. Commercial loans subject to borrowing base certificates are generally discounted by 20% for receivables and 40% - 75% for inventory with higher discounts when monthly borrowing base certificates are not required or received. Impaired loans and related write-downs are based on the fair value of the underlying collateral if repayment is expected solely from the collateral. Collateral values are reviewed quarterly and estimated using customized discounting criteria, appraisals and dealer and trade magazine quotes which are used in a market valuation approach. In accordance with fair value measurements, only impaired loans for which a reserve for loan loss has been established based on the fair value of collateral require classification in the fair value hierarchy. As a result, only a portion of the Company’s impaired loans are classified in the fair value hierarchy. The Company has established MSRs valuation policies and procedures based on industry standards and to ensure valuation methodologies are consistent and verifiable. MSRs and related adjustments to fair value result from application of lower of cost or fair value accounting. For purposes of impairment, MSRs are stratified based on the predominant risk characteristics of the underlying servicing, principally by loan type. The fair value of each tranche of the servicing portfolio is estimated by calculating the present value of estimated future net servicing cash flows, taking into consideration actual and expected mortgage loan prepayment rates, discount rates, servicing costs, and other economic factors. Prepayment rates and discount rates are derived through a third-party pricing agent. Changes in the most significant inputs, including prepayment rates and discount rates, are compared to the changes in the fair value measurements and appropriate resolution is made. A fair value analysis is also obtained from an independent third-party agent and compared to the internal valuation for reasonableness. MSRs do not trade in an active, open market with readily observable prices and though sales of MSRs do occur, precise terms and conditions typically are not readily available and the characteristics of the Company’s servicing portfolio may differ from those of any servicing portfolios that do trade. Other real estate is based on the fair value of the underlying collateral less expected selling costs. Collateral values are estimated primarily using appraisals and reflect a market value approach. Fair values are reviewed quarterly and new appraisals are obtained annually. Repossessions are similarly valued. For assets measured at fair value on a nonrecurring basis the following represents impairment charges (recoveries) recognized on these assets during the year ended December 31, 2019 and 2018 , respectively: impaired loans - $4.29 million and $12.46 million ; MSRs - $0.00 million and $0.00 million ; repossessions - $2.25 million and $1.92 million , and other real estate - $0.00 million and $0.00 million . The following table shows the carrying value of assets measured at fair value on a non-recurring basis. (Dollars in thousands) Level 1 Level 2 Level 3 Total December 31, 2019 Impaired loans - collateral based $ — $ — $ 8,492 $ 8,492 Accrued income and other assets (mortgage servicing rights) — — 4,200 4,200 Accrued income and other assets (repossessions) — — 8,623 8,623 Accrued income and other assets (other real estate) — — 522 522 Total $ — $ — $ 21,837 $ 21,837 December 31, 2018 Impaired loans - collateral based $ — $ — $ 7,306 $ 7,306 Accrued income and other assets (mortgage servicing rights) — — 4,283 4,283 Accrued income and other assets (repossessions) — — 6,666 6,666 Accrued income and other assets (other real estate) — — 299 299 Total $ — $ — $ 18,554 $ 18,554 The following table shows the valuation methodology and unobservable inputs for Level 3 assets and liabilities measured at fair value on a non-recurring basis. (Dollars in thousands) Carrying Value Fair value Valuation Methodology Unobservable Inputs Range of Inputs December 31, 2019 Impaired loans $ 8,492 $ 8,492 Collateral based measurements including appraisals, trade publications, and auction values Discount for lack of marketability and current conditions 0% - 90% Mortgage servicing rights 4,200 5,986 Discounted cash flows Constant prepayment rate (CPR) 10.2% - 28.1% Discount rate 9.3% - 12.1% Repossessions 8,623 9,211 Appraisals, trade publications and auction values Discount for lack of marketability 3% - 25% Other real estate 522 564 Appraisals Discount for lack of marketability 0% - 11% December 31, 2018 Impaired loans $ 7,306 $ 7,306 Collateral based measurements including appraisals, trade publications, and auction values Discount for lack of marketability and current conditions 20% - 35% Mortgage servicing rights 4,283 7,238 Discounted cash flows Constant prepayment rate (CPR) 7.2% - 24.8% Discount rate 10.3% - 13.1% Repossessions 6,666 6,991 Appraisals, trade publications and auction values Discount for lack of marketability 4% - 6% Other real estate 299 305 Appraisals Discount for lack of marketability 0% - 10% GAAP requires disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring or non-recurring basis. The following table shows the fair values of the Company’s financial instruments. (Dollars in thousands) Carrying or Contract Value Fair Value Level 1 Level 2 Level 3 December 31, 2019 Assets: Cash and due from banks $ 67,215 $ 67,215 $ 67,215 $ — $ — Federal funds sold and interest bearing deposits with other banks 16,150 16,150 16,150 — — Investment securities, available-for-sale 1,040,583 1,040,583 80,393 957,898 2,292 Other investments 28,414 28,414 28,414 — — Mortgages held for sale 20,277 20,277 — 20,277 — Loans and leases, net of reserve for loan and lease losses 4,974,273 4,992,684 — — 4,992,684 Mortgage servicing rights 4,200 5,986 — — 5,986 Accrued interest receivable 19,125 19,125 — 19,125 — Interest rate swaps 21,975 21,975 — 21,975 — Liabilities: Deposits $ 5,357,326 $ 5,362,633 $ 3,708,828 $ 1,653,805 $ — Short-term borrowings 145,893 145,893 120,891 25,002 — Long-term debt and mandatorily redeemable securities 71,639 71,084 — 71,084 — Subordinated notes 58,764 61,469 — 61,469 — Accrued interest payable 13,918 13,918 — 13,918 — Interest rate swaps 22,352 22,352 — 22,352 — Off-balance-sheet instruments * — 281 — 281 — December 31, 2018 Assets: Cash and due from banks $ 94,907 $ 94,907 $ 94,907 $ — $ — Federal funds sold and interest bearing deposits with other banks 4,172 4,172 4,172 — — Investment securities, available-for-sale 990,129 990,129 33,746 955,358 1,025 Other investments 28,404 28,404 28,404 — — Mortgages held for sale 11,290 11,290 — 11,290 — Loans and leases, net of reserve for loan and lease losses 4,734,995 4,689,267 — — 4,689,267 Mortgage servicing rights 4,283 7,238 — — 7,238 Accrued interest receivable 18,880 18,880 — 18,880 — Interest rate swaps 7,124 7,124 — 7,124 — Liabilities: Deposits $ 5,122,322 $ 5,111,711 $ 3,654,556 $ 1,457,155 $ — Short-term borrowings 199,344 199,344 113,734 85,610 — Long-term debt and mandatorily redeemable securities 71,123 68,751 — 68,751 — Subordinated notes 58,764 45,874 — 45,874 — Accrued interest payable 8,950 8,950 — 8,950 — Interest rate swaps 7,250 7,250 — 7,250 — Off-balance-sheet instruments * — 259 — 259 — * Represents estimated cash outflows required to currently settle the obligations at current market rates. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. These estimates are subjective in nature and require considerable judgment to interpret market data. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange, nor are they intended to represent the fair value of the Company as a whole. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. The fair value estimates presented herein are based on pertinent information available to management as of the respective balance sheet date. Although the Company is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued since the presentation dates, and therefore, estimates of fair value after the balance sheet date may differ significantly from the amounts presented herein. Other significant assets, such as premises and equipment, other assets, and liabilities not defined as financial instruments, are not included in the above disclosures. Also, the fair value estimates for deposits do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market. |
1st Source Corporation (Parent
1st Source Corporation (Parent Company Only) Financial Information | 12 Months Ended |
Dec. 31, 2019 | |
Condensed Financial Information Disclosure [Abstract] | |
1st Source Corporation (Parent Company Only) Financial Information | 1st Source Corporation (Parent Company Only) Financial Information STATEMENTS OF FINANCIAL CONDITION December 31 (Dollars in thousands) 2019 2018 ASSETS Cash and cash equivalents $ 107,285 $ 106,647 Short-term investments with bank subsidiary 500 500 Investments in: Bank subsidiaries 806,192 740,697 Non-bank subsidiaries 1 1 Right of use assets 17,106 — Other assets 4,442 4,191 Total assets $ 935,526 $ 852,036 LIABILITIES AND SHAREHOLDERS’ EQUITY Commercial paper $ 3,993 $ 4,325 Long-term debt and mandatorily redeemable securities 25,819 24,676 Subordinated notes 58,764 58,764 Operating lease liability 17,329 — Other liabilities 1,344 2,189 Total liabilities 107,249 89,954 Total shareholders’ equity 828,277 762,082 Total liabilities and shareholders’ equity $ 935,526 $ 852,036 STATEMENTS OF INCOME AND COMPREHENSIVE INCOME Year Ended December 31 (Dollars in thousands) 2019 2018 2017 Income: Dividends from bank subsidiary $ 46,735 $ 45,080 $ 38,317 Dividends from non-bank subsidiary — — 958 Rental income from subsidiaries 2,505 2,613 2,354 Other 366 367 422 Investment securities and other investment gains (losses) 109 (180 ) 6,431 Total income 49,715 47,880 48,482 Expenses: Interest on subordinated notes 3,677 3,625 4,002 Interest on long-term debt and mandatorily redeemable securities 2,228 1,624 1,685 Interest on commercial paper and other short-term borrowings 13 14 17 Occupancy 1,861 1,774 2,070 Other 586 642 1,733 Total expenses 8,365 7,679 9,507 Income before income tax benefit and equity in undistributed income of subsidiaries 41,350 40,201 38,975 Income tax benefit 987 1,009 204 Income before equity in undistributed income of subsidiaries 42,337 41,210 39,179 Equity in undistributed income of subsidiaries: Bank subsidiaries 49,678 41,204 28,872 Non-bank subsidiaries — — — Net income $ 92,015 $ 82,414 $ 68,051 Comprehensive income $ 107,863 $ 75,788 $ 63,375 STATEMENTS OF CASH FLOWS Year Ended December 31 (Dollars in thousands) 2019 2018 2017 Operating activities: Net income $ 92,015 $ 82,414 $ 68,051 Adjustments to reconcile net income to net cash provided by operating activities: Equity (undistributed) distributed in excess of income of subsidiaries (49,678 ) (41,204 ) (28,872 ) Depreciation of premises and equipment 2 2 2 Amortization of right of use assets 1,350 — — Stock-based compensation 78 71 48 Realized/unrealized investment securities and other investment (gains) losses (109 ) 180 (6,431 ) Other 533 45 4,122 Net change in operating activities 44,191 41,508 36,920 Investing activities: Proceeds from sales and maturities of investment securities — — 6,327 Net change in partnership investments (260 ) (980 ) (62 ) Capital contribution to subsidiary (325 ) — — Return of capital from subsidiaries — — 854 Net change in investing activities (585 ) (980 ) 7,119 Financing activities: Net change in commercial paper (332 ) (1,790 ) 354 Proceeds from issuance of long-term debt and mandatorily redeemable securities 1,611 1,867 1,248 Payments on long-term debt and mandatorily redeemable securities (2,068 ) (1,064 ) (667 ) Stock issued under stock purchase plans 49 145 153 Net proceeds from issuance of treasury stock 1,878 1,763 2,176 Acquisition of treasury stock (15,085 ) (9,271 ) (41 ) Cash dividends paid on common stock (29,021 ) (25,686 ) (20,431 ) Net change in financing activities (42,968 ) (34,036 ) (17,208 ) Net change in cash and cash equivalents 638 6,492 26,831 Cash and cash equivalents, beginning of year 106,647 100,155 73,324 Cash and cash equivalents, end of year $ 107,285 $ 106,647 $ 100,155 |
Accounting Policies (Policies)
Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation — The financial statements consolidate 1st Source, its subsidiaries (principally the Bank) and any variable interest entities (“VIEs”) for which the Company has concluded it has significant involvement in and the ability to direct the activities that impact the entity’s economic performance. All significant intercompany balances and transactions have been eliminated. For purposes of the parent company only financial information presented in Note 22, investments in subsidiaries are carried at equity in the underlying net assets. |
Use of Estimates in the Preparation of Financial Statements | Use of Estimates in the Preparation of Financial Statements — Financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) require the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. |
Business Combinations | Business Combinations — Business combinations are accounted for under the purchase method of accounting. Under the purchase method, assets and liabilities of the business acquired are recorded at their estimated fair values as of the date of acquisition with any excess of the cost of the acquisition over the fair value of the net tangible and intangible assets acquired recorded as goodwill. Results of operations of the acquired business are included in the income statement from the date of acquisition. |
Cash Flows | Cash Flows — For purposes of the consolidated and parent company only statements of cash flows, the Company considers cash and due from banks, federal funds sold and interest bearing deposits with other banks with original maturities of three months or less as cash and cash equivalents. |
Securities | Securities — Securities that the Company has the ability and positive intent to hold to maturity are classified as investment securities held-to-maturity. Held-to-maturity investment securities, when present, are carried at amortized cost. As of December 31, 2019 and 2018 , the Company held no securities classified as held-to-maturity. Securities that may be sold in response to, or in anticipation of, changes in interest rates and resulting prepayment risk, or for other factors, are classified as available-for-sale and are carried at fair value. Unrealized gains and losses on debt securities are reported, net of applicable taxes, as a separate component of accumulated other comprehensive income (loss) in shareholders’ equity. Unrealized gains and losses on equity securities are reflected, net of applicable taxes, in earnings. The initial indication of potential other-than-temporary impairment (OTTI) for debt securities is a decline in fair value below amortized cost. Quarterly, any impaired securities are analyzed on a qualitative and quantitative basis in determining OTTI. Declines in the fair value of available-for-sale debt securities below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses to the extent the impairment is related to credit losses. The amount of impairment related to other factors is recognized in other comprehensive income. In estimating OTTI impairment losses, the Company considers among other things, (i) the length of time and the extent to which fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, and (iii) whether it is more likely than not that the Company will not have to sell any such securities before an anticipated recovery of cost. Debt and equity securities that are purchased and held principally for the purpose of selling them in the near term are classified as trading account securities and are carried at fair value with unrealized gains and losses reported in earnings. Realized gains and losses on the sales of all securities are reported in earnings and computed using the specific identification cost basis. Other investments consist of shares of Federal Home Loan Bank of Indianapolis (FHLBI) and Federal Reserve Bank stock. As restricted member stocks, these investments are carried at cost. Both cash and stock dividends received on the stocks are reported as income. Quarterly, the Company reviews its investment in FHLBI for impairment. Factors considered in determining impairment are: history of dividend payments; determination of cause for any net loss; adequacy of capital; and review of the most recent financial statements. As of December 31, 2019 and 2018 , it was determined that the Company’s investment in FHLBI stock is appropriately valued at cost, which equates to par value. In addition, other investments include interest bearing deposits with other banks with original maturities of greater than three months. These investments are in denominations, including accrued interest, that are fully insured by the FDIC. |
Loans and Leases | Loans and Leases — Loans are stated at the principal amount outstanding, net of unamortized deferred loan origination fees and costs and net of unearned income. Interest income is accrued as earned based on unpaid principal balances. Origination fees and direct loan and lease origination costs are deferred, and the net amount amortized to interest income over the estimated life of the related loan or lease. Loan commitment fees are deferred and amortized into other income over the commitment period. Direct financing leases are carried at the aggregate of lease payments plus estimated residual value of the leased property, net of unamortized deferred lease origination fees and costs and unearned income. As part of the leasing standard that became effective January 1, 2019, only those costs incurred as a direct result of closing a lease transaction are capitalized. Interest income on direct financing leases is recognized over the term of the lease to achieve a constant periodic rate of return on the outstanding investment. All existing deferrals will continue to be amortized over the estimated life of the lease while all new incremental direct costs are expensed immediately. The accrual of interest on loans and leases is discontinued when a loan or lease becomes contractually delinquent for 90 days, or when an individual analysis of a borrower’s credit worthiness indicates a credit should be placed on nonperforming status, except for residential mortgage loans and consumer loans that are well secured and in the process of collection. Residential mortgage loans are placed on nonaccrual at the time the loan is placed in foreclosure. When interest accruals are discontinued, interest credited to income in the current year is reversed and interest accrued in the prior year is charged to the reserve for loan and lease losses. However, in some cases, the Company may elect to continue the accrual of interest when the net realizable value of collateral is sufficient to cover the principal and accrued interest. When a loan or lease is classified as nonaccrual and the future collectability of the recorded loan or lease balance is doubtful, collections on interest and principal are applied as a reduction to principal outstanding. Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured, which is typically evidenced by a sustained repayment performance of at least six months . A loan or lease is considered impaired, based on current information and events, if it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan or lease agreement. Interest on impaired loans and leases, which are not classified as nonaccrual, is recognized on the accrual basis. The Company evaluates loans and leases exceeding $100,000 where the internal credit quality grade is at or below a predetermined classification for impairment and establishes a specific reserve as a component of the reserve for loan and lease losses when it is probable all amounts due will not be collected pursuant to the contractual terms of the loan or lease and the recorded investment in the loan or lease exceeds its fair value. Loans and leases that have been modified and economic concessions have been granted to borrowers who have experienced financial difficulties are considered a troubled debt restructuring (TDR) and, by definition, are deemed an impaired loan. These concessions typically result from the Company’s loss mitigation activities and may include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. Certain TDRs are classified as nonperforming at the time of restructuring and typically are returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period of at least six months. When the Company modifies loans and leases in a TDR, it evaluates any possible impairment similar to other impaired loans based on the present value of expected future cash flows, discounted at the contractual interest rate of the original loan or lease agreement, or uses the current fair value of the collateral, less selling costs for collateral dependent loans. If the Company determines that the value of the modified loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), impairment is recognized through a reserve for loan and lease losses estimate or a charge-off to the reserve for loan and lease losses. In periods subsequent to modification, the Company evaluates all TDRs, including those that have payment defaults, for possible impairment and recognizes impairment through the reserve for loan and lease losses. The Company sells mortgage loans to the Government National Mortgage Association (GNMA) in the normal course of business and retains the servicing rights. The GNMA programs under which the loans are sold allow the Company to repurchase individual delinquent loans that meet certain criteria from the securitized loan pool. At its option, and without GNMA’s prior authorization, the Company may repurchase a delinquent loan for an amount equal to 100% of the remaining principal balance on the loan. Once the Company has the unconditional ability to repurchase a delinquent loan, the Company is deemed to have regained effective control over the loan and the Company is required to recognize the loan on its balance sheet and record an offsetting liability, regardless of its intent to repurchase the loan. At December 31, 2019 and 2018 , residential real estate portfolio loans included $1.44 million and $1.39 million , respectively, of loans available for repurchase under the GNMA optional repurchase programs with the offsetting liability recorded within other short-term borrowings. |
Mortgage Banking Activities | Mortgage Banking Activities — Loans held for sale are composed of performing one-to-four family residential mortgage loans originated for resale. Mortgage loans originated with the intent to sell are carried at fair value. The Company recognizes the rights to service mortgage loans for others as separate assets, whether the servicing rights are acquired through a separate purchase or through the sale of originated loans with servicing rights retained. The Company allocates a portion of the total proceeds of a mortgage loan to servicing rights based on the relative fair value. These assets are amortized as reductions of mortgage servicing fee income over the estimated servicing period in proportion to the estimated servicing income to be received. Gains and losses on the sale of MSRs are recognized in Noninterest Income on the Statements of Income in the period in which such rights are sold. MSRs are evaluated for impairment at each reporting date. For purposes of impairment measurement, MSRs are stratified based on the predominant risk characteristics of the underlying servicing, principally by loan type. If temporary impairment exists within a tranche, a valuation allowance is established through a charge to income equal to the amount by which the carrying value exceeds the fair value. If it is later determined all or a portion of the temporary impairment no longer exists for a particular tranche, the valuation allowance is reduced through a recovery of income. MSRs are also reviewed for other-than-temporary impairment. Other-than-temporary impairment exists when recoverability of a recorded valuation allowance is determined to be remote considering historical and projected interest rates, prepayments, and loan pay-off activity. When this situation occurs, the unrecoverable portion of the valuation allowance is applied as a direct write-down to the carrying value of the MSRs. Unlike a valuation allowance, a direct write-down permanently reduces the carrying value of the MSRs and the valuation allowance, precluding subsequent recoveries. As part of mortgage banking operations, the Company enters into commitments to originate loans whereby the interest rate on these loans is determined prior to funding (“rate lock commitments”). Similar to loans held for sale, the fair value of rate lock commitments is subject to change primarily due to changes in interest rates. Under the Company’s risk management policy, these fair values are hedged primarily by selling forward contracts on agency securities or obtaining corresponding best-efforts forward sales commitments with an investor to sell the loans at an agreed-upon price at the time the interest rate locks are issued to the customers. The rate lock commitments on mortgage loans intended to be sold and the related hedging instruments are recorded at fair value with changes in fair value recorded in current earnings. |
Reserve for Loan and Lease Losses | Reserve for Loan and Lease Losses — The reserve for loan and lease losses is maintained at a level believed to be appropriate by the Company to absorb probable losses inherent in the loan and lease portfolio. The determination of the reserve requires significant judgment reflecting the Company’s best estimate of probable loan and lease losses related to specifically identified impaired loans and leases as well as probable losses in the remainder of the various loan and lease portfolios. For purposes of determining the reserve, the Company has segmented loans and leases into classes based on the associated risk within these segments. The Company has determined that eight classes exist within the loan and lease portfolio. The methodology for assessing the appropriateness of the reserve consists of several key elements, which include: specific reserves for impaired loans, formula reserves for each business lending division portfolio including percentage allocations for special attention loans and leases not deemed impaired, and reserves for pooled homogenous loans and leases. The Company’s evaluation is based upon a continuing review of these portfolios, estimates of customer performance, collateral values and dispositions, and assessments of economic and geopolitical events, all of which are subject to judgment and will change. Specific reserves are established for certain business and specialty finance credits based on a regular analysis of special attention loans and leases. This analysis is performed by the Credit Policy Committee (CPC), the Loan Review Department, Credit Administration, and the Loan Workout Departments. The specific reserves are based on an analysis of underlying collateral values, cash flow considerations and, if applicable, guarantor capacity. Sources for determining collateral values include appraisals, evaluations, auction values and industry guides. Generally, for loans secured by commercial real estate and dependent on cash flows from the underlying collateral to service the debt, a new appraisal is obtained at the time the credit is deemed to be impaired. For non-income producing commercial real estate, an appraisal or evaluation is ordered depending on an analysis of the underlying factors, including an assessment of the overall credit worthiness of the borrower, the value of non-real estate collateral supporting the transaction and the date of the most recent existing appraisal or evaluation. An evaluation may be performed in lieu of obtaining a new appraisal for less complex transactions secured by local market properties. Values based on evaluations are discounted more heavily than those determined by appraisals when calculating loan impairment. Appraisals, evaluations and industry guides are used to determine aircraft values. Appraisals, industry guides and auction values are used to determine construction equipment, truck and auto values. The formula reserves determined for each business lending division portfolio are calculated quarterly by applying loss factors to outstanding loans and leases based upon a review of historical loss experience and qualitative factors, which include but are not limited to, economic trends, current market risk assessment by industry, recent loss experience in particular segments of the portfolios, movement in equipment values collateralizing specialized industry portfolios, concentrations of credit, delinquencies, trends in volume, experience and depth of relationship managers and division management, and the effects of changes in lending policies and practices, including changes in quality of the loan and lease origination, servicing and risk management processes. Special attention loans and leases without specific reserves receive a higher percentage allocation ratio than credits not considered special attention. Pooled loans and leases are smaller credits and are homogenous in nature, such as consumer credits and residential mortgages. Pooled loan and lease loss reserves are based on historical net charge-offs, adjusted for delinquencies, the effects of lending practices and programs and current economic conditions, and current trends in the geographic markets which the Company serves. A comprehensive analysis of the reserve is performed on a quarterly basis by reviewing all loans and leases over a fixed dollar amount ( $100,000 ) where the internal credit quality grade is at or below a predetermined classification. Although the Company determines the amount of each element of the reserve separately and relies on this process as an important credit management tool, the entire reserve is available for the entire loan and lease portfolio. The actual amount of losses incurred can vary significantly from the estimated amounts both positively and negatively. The Company’s methodology includes several factors intended to minimize the difference between estimated and actual losses. These factors allow the Company to adjust its estimate of losses based on the most recent information available. Impaired loans are reviewed quarterly to assess the probability of being able to collect the portion considered impaired. When a review and analysis of the underlying credit and collateral indicates ultimate collection is improbable, the deficiency is charged-off and deducted from the reserve. Loans and leases, which are deemed uncollectible or have a low likelihood of collection, are charged-off and deducted from the reserve, while recoveries of amounts previously charged-off are credited to the reserve. A (recovery of) provision for loan and lease losses is credited or charged to operations based on the Company’s periodic evaluation of the factors previously mentioned, as well as other pertinent factors. |
Equipment Owned Under Operating Leases | Equipment Owned Under Operating Leases — As a lessor, the Company finances various types of construction equipment, medium and heavy duty trucks, automobiles and other equipment under leases classified as operating leases. The equipment underlying the operating leases is reported at cost, net of accumulated depreciation, on the Consolidated Statements of Financial Condition. These operating lease arrangements require the lessee to make a fixed monthly rental payment over a specified lease term generally ranging from three years to seven years . Revenue consists of the contractual lease payments and is recognized on a straight-line basis over the lease term and reported in Noninterest Income on the Consolidated Statements of Income. Leased assets are depreciated on a straight-line method over the lease term to the estimate of the equipment’s fair market value at lease termination, also referred to as “residual” value. The depreciation of these operating lease assets is reported in Noninterest Expense on the Consolidated Statements of Income. For automobile leases, fair value is based upon published industry market guides. For other equipment leases, fair value may be based upon observable market prices, third-party valuations, or prices received on sales of similar assets at the end of the lease term. These residual values are reviewed annually to ensure the recorded amount does not exceed the fair market value at the lease termination. At the end of the lease, the operating lease asset is either purchased by the lessee or returned to the Company. The Company is responsible for the payment of personal property taxes which is reported in Other Expense on the Consolidated Statements of Income. The lessee is responsible for reimbursing the Company for personal property taxes which is reported in Other Income on the Consolidated Statements of Income. The Company excludes sales taxes and other similar taxes from being reported as lease revenue with an associated expense. |
Lease Commitments | Lease Commitments — The Company leases certain banking center locations, office space, land and billboards. In determining whether a contract contains a lease, the Company examines the contract to ensure an asset was specifically identified and that the Company has control of use over the asset. To determine whether a lease is classified as operating or finance, the Company performs an economic life test on all building leases with greater than a twenty years term. Further, the Company performs a fair value test to identify any leases that have a present value of future lease payments over the lease term that is greater than 90% of the fair value of the building. The Company only capitalizes leases with an initial lease liability of $2,000 or greater. At lease inception, the Company determines the lease term by adding together the minimum lease term and all optional renewal periods that it is reasonably certain to renew. The Company determines this on each lease by considering all relevant contract-based, asset-based, market-based, and entity-based economic factors. Generally, the exercise of lease renewal options is at the Company’s sole discretion. The lease term is used to determine whether a lease is operating or finance and is used to calculate straight-line rent expense. Additionally, the depreciable life of leasehold improvements is limited by the expected lease term. Operating lease rentals are expensed on a straight-line basis over the life of the lease beginning on the date the Company takes possession of the property. Rent expense and variable lease costs are included in Net Occupancy Expense on the Consolidated Statements of Income. Included in variable lease costs are leases with rent escalations based on recent financial indices, such as the Consumer Price Index, where the Company estimates future rent increases and records the actual difference to variable costs. Certain leases require the Company to pay common area maintenance, real estate taxes, insurance and other operating expenses associated with the leases premises. These expenses are classified in Net Occupancy Expense on the Consolidated Statements of Income, consistent with similar costs for owned locations. There are no residual value guarantees, restrictions or covenants imposed by leases. The Company accounts for lease and nonlease components together as a single lease component by class of underlying asset. Operating lease obligations with an initial term longer than 12 months are recorded with a right of use asset and a lease liability on the Consolidated Statements of Financial Condition. The discount rate used in determining the lease liability and related right of use asset is based upon what would be obtained by the Company for similar loans as an incremental rate as of the date of origination or renewal. |
Other Real Estate | Other Real Estate — Other real estate acquired through partial or total satisfaction of nonperforming loans is included in Other Assets on the Consolidated Statements of Financial Condition and recorded at fair value less anticipated selling costs based upon the property’s appraised value at the date of transfer, with any difference between the fair value of the property less cost to sell, and the carrying value of the loan charged to the reserve for loan and lease losses or other income, if a positive adjustment. Subsequent fair value write-downs or write-ups, to the extent of previous write-downs, property maintenance costs, and gains or losses recognized upon the sale of other real estate are recognized in Noninterest Expense on the Consolidated Statements of Income. Gains or losses resulting from the sale of other real estate are recognized on the date of sale. As of December 31, 2019 and 2018 , other real estate had carrying values of $0.52 million and $0.30 million , respectively, and is included in Other Assets on the Consolidated Statements of Financial Condition. |
Repossessed Assets | Repossessed Assets — Repossessed assets may include fixtures and equipment, inventory and receivables, aircraft, construction equipment, and vehicles acquired from business banking and specialty finance activities. Repossessed assets are included in Other Assets on the Consolidated Statements of Financial Condition at fair value of the equipment or vehicle less estimated selling costs. At the time of repossession, the recorded amount of the loan or lease is written down to the fair value of the equipment or vehicle by a charge to the reserve for loan and lease losses or other income, if a positive adjustment. Subsequent fair value write-downs or write-ups, to the extent of previous write-downs, equipment maintenance costs, and gains or losses recognized upon the sale of repossessions are recognized in Noninterest Expense on the Consolidated Statements of Income. Gains or losses resulting from the sale of repossessed assets are recognized on the date of sale. Repossessed assets totaled $8.62 million and $6.66 million , as of December 31, 2019 and 2018 , respectively, and are included in Other Assets on the Consolidated Statements of Financial Condition. |
Premises and Equipment | Premises and Equipment — Premises and equipment are stated at cost, less accumulated depreciation and amortization. The provision for depreciation is computed by the straight-line method, primarily with useful lives ranging from three years to 31.5 years . Maintenance and repairs are charged to expense as incurred, while improvements, which extend the useful life, are capitalized and depreciated over the estimated remaining life. |
Goodwill and Intangibles | Goodwill and Intangibles — Goodwill represents the excess of the cost of businesses acquired over the fair value of the net assets acquired. Other intangible assets represent purchased assets that also lack physical substance but can be distinguished from goodwill because of contractual or other legal rights or because the asset is capable of being sold or exchanged either on its own or in combination with a related contract, asset, or liability. Goodwill is reviewed for impairment at least annually or on an interim basis if an event occurs or circumstances change that would more likely than not reduce the carrying amount. Goodwill is allocated into two reporting units. Fair value for each reporting unit is estimated using stock price multiples or earnings before interest, tax, depreciation and amortization (EBITDA) multiples. Intangible assets that have finite lives are amortized over their estimated useful lives and are subject to impairment testing. All of the Company’s other intangible assets have finite lives and are amortized on a straight-line basis over varying periods not exceeding twenty-five years . The Company performed the required annual impairment test of goodwill during the fourth quarter of 2019 and determined that no impairment exists. |
Partnership Investment | Partnership Investments — The partnerships in which the Company has investments account for their investments at fair value. As a result, the Company’s investments in these partnerships reflect the underlying fair value of the partnerships’ investments. The Company accounts for its investments in partnerships for which it owns three percent or more of the partnership on the equity method. The Company accounts for its investments in partnerships of which it owns less than three percent at fair value less impairment. The Company has elected to use the practical expedient to estimate fair value of an investment in an investment company using the net asset value of its partnership interest. The Company uses the hypothetical liquidation book value (HLBV) method for equity investments when the liquidation rights and priorities as defined by an equity investment agreement differ from what is reflected by the underlying percentage ownership interests. The HLBV method is commonly applied to equity investments in the renewable energy industry, where cash percentages vary at different points in time and are not directly linked to an investor’s ownership percentage. A calculation is prepared at each balance sheet date to determine the amount that the Company would receive if an equity investment entity were to liquidate all of its assets (as valued in accordance with GAAP) and distribute that cash to the investors based on the contractually defined liquidation priorities. The difference between the calculated liquidation distribution amounts at the beginning and the end of the reporting period, after adjusting for capital contributions and distributions, is 1st Source’s share of the earnings or losses from the equity investment for the period. Investments in partnerships are included in Other Assets on the Consolidated Statements of Financial Condition. The balances as of December 31, 2019 and 2018 were $61.08 million and $23.46 million , respectively. |
Short-Term Borrowings | Short-Term Borrowings — Short-term borrowings consist of Federal funds purchased, securities sold under agreements to repurchase, commercial paper, Federal Home Loan Bank notes, and borrowings from non-affiliated banks. Federal funds purchased, securities sold under agreements to repurchase, and other short-term borrowings mature within one day to 365 days of the transaction date. Commercial paper matures within seven days to 270 days . Other short-term borrowings on the Consolidated Statements of Financial Condition include the Company’s liability related to mortgage loans available for repurchase under GNMA optional repurchase programs. Securities purchased under agreements to resell and securities sold under agreements to repurchase are treated as collateralized financing transactions and are recorded at the amounts at which the securities were acquired or sold plus accrued interest. The fair value of collateral either received from or provided to a third-party is continually monitored and additional collateral obtained or requested to be returned to the Company as deemed appropriate. |
Revenue Recognition | Revenue Recognition — The Company recognizes revenues as they are earned based on contractual terms, as transactions occur, or as services are provided and collectability is reasonably assured. The Company’s principal source of revenue is interest income from loans and leases and investment securities. The Company also earns noninterest income from various banking and financial services offered primarily through 1st Source Bank and its subsidiaries. Interest Income — The largest source of revenue for the Company is interest income which is primarily recognized on an accrual basis according to nondiscretionary formulas in written contracts, such as loan and lease agreements or investment securities contracts. Noninterest Income — The Company earns noninterest income through a variety of financial and transaction services provided to corporate and consumer clients such as trust and wealth advisory, deposit account, debit card, mortgage banking, insurance, and equipment rental services. Revenue is recorded for noninterest income based on the contractual terms for the service or transaction performed. In certain circumstances, noninterest income is reported net of associated expenses. |
Trust and Wealth Advisory Fees | Trust and Wealth Advisory Fees — Trust and wealth advisory fees are recognized on the accrual basis. |
Income Taxes | Income Taxes — 1st Source and its subsidiaries file a consolidated Federal income tax return. The provision for incomes taxes is based upon income in the consolidated financial statements, rather than amounts reported on the income tax return. 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. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income or expense in the period that includes the enactment date. A valuation allowance, if needed, reduces deferred tax assets to the expected amount most likely to be realized. Realization of deferred tax assets is dependent upon the generation of a sufficient level of future taxable income and recoverable taxes paid in prior years. Although realization is not assured, the Company believes it is more likely than not that all of the deferred tax assets will be realized. The Company uses the deferral method of accounting on investments that generate investment tax credits. Under this method, the investment tax credits are recognized as a reduction to the related asset. The expense on certain qualified affordable housing investments is included in Tax Expense on the Consolidated Statements of Income. Positions taken in the tax returns may be subject to challenge by the taxing authorities upon examination. Uncertain tax positions are initially recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions are both initially and subsequently measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement with the tax authority, assuming full knowledge of the position and all relevant facts. The Company provides for interest and, in some cases, penalties on tax positions that may be challenged by the taxing authorities. Interest expense is recognized beginning in the first period that such interest would begin accruing. Penalties are recognized in the period that the Company claims the position in the tax return. Interest and penalties on income tax uncertainties are classified within Income Tax Expense on the Consolidated Statements of Income. |
Net Income Per Common Share | Net Income Per Common Share — Basic earnings per common share is computed by dividing net income available to common shareholders by the weighted-average number of shares of common stock outstanding. Diluted earnings per common share is computed by dividing net income available to common shareholders by the weighted-average number of shares of common stock outstanding, plus the dilutive effect of outstanding stock options, stock warrants and nonvested stock-based compensation awards. |
Stock-Based Employee Compensation | Stock-Based Employee Compensation — The Company recognizes stock-based compensation as compensation cost on the Consolidated Statements of Income based on their fair values on the measurement date, which, for its purposes, is the date of grant. The Company recognizes forfeitures as they occur. |
Segment Information | Segment Information — 1st Source has one principal business segment, commercial banking. While our chief decision makers monitor the revenue streams of various products and services, the identifiable segments’ operations are managed and financial performance is evaluated on a company-wide basis. Accordingly, all of the Company’s financial service operations are considered to be aggregated in one reportable operating segment. |
Derivative Financial Instruments | Derivative Financial Instruments — The Company occasionally enters into derivative financial instruments as part of its interest rate risk management strategies. These derivative financial instruments consist primarily of interest rate swaps. All derivative instruments are recorded on the Consolidated Statements of Financial Condition, as either an asset or liability, at their fair value. The accounting for the gain or loss resulting from the change in fair value depends on the intended use of the derivative. For a derivative used to hedge changes in fair value of a recognized asset or liability, or an unrecognized firm commitment, the gain or loss on the derivative will be recognized in earnings together with the offsetting loss or gain on the hedged item. This results in an earnings impact only to the extent that the hedge is ineffective in achieving offsetting changes in fair value. If it is determined that the derivative instrument is not highly effective as a hedge, hedge accounting is discontinued and the adjustment to fair value of the derivative instrument is recorded in earnings. For a derivative used to hedge changes in cash flows associated with forecasted transactions, the gain or loss on the effective portion of the derivative will be deferred, and reported as accumulated other comprehensive income, a component of shareholders’ equity, until such time the hedged transaction affects earnings. For derivative instruments not accounted for as hedges, changes in fair value are recognized in noninterest income/expense on the Consolidated Statements of Income. Deferred gains and losses from derivatives that are terminated and were in a cash flow hedge are amortized over the shorter of the original remaining term of the derivative or the remaining life of the underlying asset or liability. |
Fair Value Measurements | Fair Value Measurements — The Company records certain assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Securities available for sale, mortgage loans held for sale, and derivative instruments are carried at fair value on a recurring basis. Fair value measurements are also utilized to determine the initial value of certain assets and liabilities, to perform impairment assessments, and for disclosure purposes. The Company uses quoted market prices and observable inputs to the maximum extent possible when measuring fair value. In the absence of quoted market prices, various valuation techniques are utilized to measure fair value. When possible, observable market data for identical or similar financial instruments are used in the valuation. When market data is not available, fair value is determined using valuation models that incorporate management’s estimates of the assumptions a market participant would use in pricing the asset or liability. Fair value measurements are classified within one of three levels based on the observability of the inputs used to determine fair value, as follows: Level 1 — The valuation is based on quoted prices in active markets for identical instruments. Level 2 — The valuation is based on observable inputs such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. Level 3 — The valuation is based on unobservable inputs that are supported by minimal or no market activity and that are significant to the fair value of the instrument. Level 3 valuations are typically performed using pricing models, discounted cash flow methodologies, or similar techniques that incorporate management’s own estimates of assumptions that market participants would use in pricing the instrument, or valuations that require significant management judgment or estimation. |
Reclassifications | Reclassifications — Certain amounts in the prior periods consolidated financial statements have been reclassified to conform with the current year presentation. These reclassifications had no effect on total assets, shareholders’ equity or net income as previously reported. |
Investment Securities (Tables)
Investment Securities (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Investments, Debt and Equity Securities [Abstract] | |
Schedule of investment securities available-for-sale | The following table shows investment securities available-for-sale. (Dollars in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value December 31, 2019 U.S. Treasury and Federal agencies securities $ 524,896 $ 2,538 $ (470 ) $ 526,964 U.S. States and political subdivisions securities 83,566 1,048 (109 ) 84,505 Mortgage-backed securities - Federal agencies 372,458 3,948 (1,017 ) 375,389 Corporate debt securities 52,151 890 (16 ) 53,025 Foreign government and other securities 700 — — 700 Total investment securities available-for-sale $ 1,033,771 $ 8,424 $ (1,612 ) $ 1,040,583 December 31, 2018 U.S. Treasury and Federal agencies securities $ 537,913 $ 196 $ (6,886 ) $ 531,223 U.S. States and political subdivisions securities 95,346 172 (936 ) 94,582 Mortgage-backed securities - Federal agencies 324,390 718 (6,875 ) 318,233 Corporate debt securities 45,843 — (451 ) 45,392 Foreign government and other securities 700 — (1 ) 699 Total investment securities available-for-sale $ 1,004,192 $ 1,086 $ (15,149 ) $ 990,129 |
Schedule of contractual maturities of investments in debt securities available-for-sale | The following table shows the contractual maturities of investments in debt securities available-for-sale at December 31, 2019 . Expected maturities will differ from contractual maturities, because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. (Dollars in thousands) Amortized Cost Fair Value Due in one year or less $ 147,306 $ 147,629 Due after one year through five years 482,118 485,745 Due after five years through ten years 31,209 31,173 Due after ten years 680 647 Mortgage-backed securities 372,458 375,389 Total debt securities available-for-sale $ 1,033,771 $ 1,040,583 |
Schedule of gross unrealized losses and fair value by investment category and age | The following table summarizes gross unrealized losses and fair value by investment category and age. At December 31, 2019 , the Company’s available-for-sale securities portfolio consisted of 629 securities, 152 of which were in an unrealized loss position. Less than 12 Months 12 months or Longer Total (Dollars in thousands) Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses December 31, 2019 U.S. Treasury and Federal agencies securities $ 87,352 $ (171 ) $ 69,053 $ (299 ) $ 156,405 $ (470 ) U.S. States and political subdivisions securities 9,283 (107 ) 1,042 (2 ) 10,325 (109 ) Mortgage-backed securities - Federal agencies 81,951 (383 ) 51,165 (634 ) 133,116 (1,017 ) Corporate debt securities — — 8,091 (16 ) 8,091 (16 ) Foreign government and other securities — — — — — — Total temporarily impaired available-for-sale securities $ 178,586 $ (661 ) $ 129,351 $ (951 ) $ 307,937 $ (1,612 ) December 31, 2018 U.S. Treasury and Federal agencies securities $ 55,491 $ (177 ) $ 424,269 $ (6,709 ) $ 479,760 $ (6,886 ) U.S. States and political subdivisions securities 21,059 (61 ) 45,365 (875 ) 66,424 (936 ) Mortgage-backed securities - Federal agencies 65,554 (511 ) 198,221 (6,364 ) 263,775 (6,875 ) Corporate debt securities 21,496 (143 ) 23,896 (308 ) 45,392 (451 ) Foreign government and other securities 699 (1 ) — — 699 (1 ) Total temporarily impaired available-for-sale securities $ 164,299 $ (893 ) $ 691,751 $ (14,256 ) $ 856,050 $ (15,149 ) |
Schedule of gross realized gains and losses from securities available-for-sale portfolio | The following table shows the gross realized gains and losses from the securities available-for-sale portfolio, including marketable equity securities. (Dollars in thousands) 2019 2018 2017 Gross realized gains $ — $ 2 $ 7,425 Gross realized losses — (347 ) (2,895 ) OTTI losses — — (190 ) Net realized (losses) gains $ — $ (345 ) $ 4,340 |
Loan and Lease Financings (Tabl
Loan and Lease Financings (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Receivables [Abstract] | |
Schedule of credit quality grades of the recorded investment in loans and leases, segregated by class | The following table shows the credit quality grades of the recorded investment in loans and leases, segregated by class. Credit Quality Grades (Dollars in thousands) 1-6 7-12 Total December 31, 2019 Commercial and agricultural $ 1,080,933 $ 51,858 $ 1,132,791 Auto and light truck 569,234 19,573 588,807 Medium and heavy duty truck 293,736 1,088 294,824 Aircraft 764,564 19,476 784,040 Construction equipment 668,076 37,375 705,451 Commercial real estate 888,154 20,023 908,177 Total $ 4,264,697 $ 149,393 $ 4,414,090 December 31, 2018 Commercial and agricultural $ 1,043,019 $ 30,186 $ 1,073,205 Auto and light truck 528,174 31,813 559,987 Medium and heavy duty truck 281,834 1,710 283,544 Aircraft 768,442 34,669 803,111 Construction equipment 625,579 19,660 645,239 Commercial real estate 787,376 22,510 809,886 Total $ 4,034,424 $ 140,548 $ 4,174,972 |
Schedule of recorded investment in residential real estate and home equity and consumer loans by performing or nonperforming status | The following table shows the recorded investment in residential real estate and home equity and consumer loans by performing or nonperforming status. Nonperforming loans are those loans which are on nonaccrual status or are 90 days or more past due. (Dollars in thousands) Performing Nonperforming Total December 31, 2019 Residential real estate and home equity $ 529,557 $ 2,446 $ 532,003 Consumer 138,951 483 139,434 Total $ 668,508 $ 2,929 $ 671,437 December 31, 2018 Residential real estate and home equity $ 521,846 $ 2,009 $ 523,855 Consumer 136,423 214 136,637 Total $ 658,269 $ 2,223 $ 660,492 |
Schedule of recorded investment of loans and leases, segregated by class, with delinquency aging and nonaccrual status | The following table shows the recorded investment of loans and leases, segregated by class, with delinquency aging and nonaccrual status. (Dollars in thousands) Current 30-59 Days Past Due 60-89 Days Past Due 90 Days or More Past Due and Accruing Total Accruing Loans Nonaccrual Total Financing Receivables December 31, 2019 Commercial and agricultural $ 1,131,704 $ 118 $ — $ — $ 1,131,822 $ 969 $ 1,132,791 Auto and light truck 586,212 1,268 77 — 587,557 1,250 588,807 Medium and heavy duty truck 293,736 14 — — 293,750 1,074 294,824 Aircraft 772,846 7,026 3,293 — 783,165 875 784,040 Construction equipment 702,671 819 609 — 704,099 1,352 705,451 Commercial real estate 906,468 58 — — 906,526 1,651 908,177 Residential real estate and home equity 528,844 561 152 257 529,814 2,189 532,003 Consumer 138,132 632 187 54 139,005 429 139,434 Total $ 5,060,613 $ 10,496 $ 4,318 $ 311 $ 5,075,738 $ 9,789 $ 5,085,527 December 31, 2018 Commercial and agricultural $ 1,070,530 $ 22 $ — $ — $ 1,070,552 $ 2,653 $ 1,073,205 Auto and light truck 544,022 3,154 1,437 — 548,613 11,374 559,987 Medium and heavy duty truck 283,284 154 — — 283,438 106 283,544 Aircraft 790,233 4,149 1,168 — 795,550 7,561 803,111 Construction equipment 641,270 1,643 — — 642,913 2,326 645,239 Commercial real estate 807,793 109 — — 807,902 1,984 809,886 Residential real estate and home equity 520,124 1,267 455 295 522,141 1,714 523,855 Consumer 135,591 682 150 73 136,496 141 136,637 Total $ 4,792,847 $ 11,180 $ 3,210 $ 368 $ 4,807,605 $ 27,859 $ 4,835,464 |
Schedule of impaired loans and leases, segregated by class, and the corresponding reserve for impaired loan and lease losses | The following table shows impaired loans and leases, segregated by class, and the corresponding reserve for impaired loan and lease losses. (Dollars in thousands) Recorded Investment Unpaid Principal Balance Related Reserve December 31, 2019 With no related reserve recorded: Commercial and agricultural $ 218 $ 218 $ — Auto and light truck 853 853 — Medium and heavy duty truck 1,074 1,074 — Aircraft 875 875 — Construction equipment 615 615 — Commercial real estate 1,487 1,487 — Residential real estate and home equity — — — Consumer — — — Total with no related reserve recorded 5,122 5,122 — With a reserve recorded: Commercial and agricultural 10,366 10,366 3,003 Auto and light truck 278 278 30 Medium and heavy duty truck — — — Aircraft — — — Construction equipment 736 736 75 Commercial real estate — — — Residential real estate and home equity 337 339 117 Consumer — — — Total with a reserve recorded 11,717 11,719 3,225 Total impaired loans $ 16,839 $ 16,841 $ 3,225 December 31, 2018 With no related reserve recorded: Commercial and agricultural $ 2,471 $ 2,471 $ — Auto and light truck 7,504 7,504 — Medium and heavy duty truck 106 106 — Aircraft 556 556 — Construction equipment 905 905 — Commercial real estate 1,131 1,131 — Residential real estate and home equity — — — Consumer — — — Total with no related reserve recorded 12,673 12,673 — With a reserve recorded: Commercial and agricultural — — — Auto and light truck 3,840 3,840 372 Medium and heavy duty truck — — — Aircraft 7,004 7,004 1,255 Construction equipment 1,340 1,340 279 Commercial real estate 759 759 51 Residential real estate and home equity 344 346 126 Consumer — — — Total with a reserve recorded 13,287 13,289 2,083 Total impaired loans $ 25,960 $ 25,962 $ 2,083 |
Schedule of average recorded investment and interest income recognized on impaired loans and leases, segregated by class | The following table shows average recorded investment and interest income recognized on impaired loans and leases, segregated by class, for years ending December 31, 2019 , 2018 and 2017 . 2019 2018 2017 (Dollars in thousands) Average Recorded Investment Interest Income Average Recorded Investment Interest Income Average Recorded Investment Interest Income Commercial and agricultural $ 5,983 $ 242 $ 2,812 $ — $ 4,526 $ 1 Auto and light truck 2,721 — 9,352 — 766 — Medium and heavy duty truck 244 — 247 — 658 — Aircraft 2,409 8 9,987 20 4,873 5 Construction equipment 1,664 — 1,663 — 1,011 — Commercial real estate 1,715 — 2,303 — 3,220 2 Residential real estate and home equity 340 19 347 15 355 15 Consumer loans — — — — — — Total $ 15,076 $ 269 $ 26,711 $ 35 $ 15,409 $ 23 |
Schedule of loans and leases classified as troubled debt restructuring and number of modifications | The following table shows the number of loans and leases classified as troubled debt restructuring (TDR) during 2019 , 2018 and 2017 , segregated by class, as well as the recorded investment as of December 31. The classification between nonperforming and performing is shown at the time of modification. Modification programs focused on extending maturity dates or modifying payment patterns with most TDRs experiencing a combination of concessions. The modifications did not result in the contractual forgiveness of principal or interest. There was one modification during 2019 , no modifications during 2018 , and one modification during 2017 that resulted in an interest rate reduction below market rate. Consequently, the financial impact of the modifications was immaterial. 2019 2018 2017 (Dollars in thousands) Number of Modifications Recorded Investment Number of Modifications Recorded Investment Number of Modifications Recorded Investment Performing TDRs: Commercial and agricultural 1 $ 9,901 — $ — — $ — Auto and light truck — — — — — — Medium and heavy duty truck — — — — — — Aircraft — — — — — — Construction equipment — — — — — — Commercial real estate — — — — — — Residential real estate and home equity — — — — — — Consumer — — — — — — Total performing TDR modifications 1 9,901 — — — — Nonperforming TDRs: Commercial and agricultural 1 465 — — 1 — Auto and light truck — — 1 285 — — Medium and heavy duty truck — — — — — — Aircraft — — — — — — Construction equipment — — — — — — Commercial real estate — — — — — — Residential real estate and home equity — — — — — — Consumer — — — — — — Total nonperforming TDR modifications 1 465 1 285 1 — Total TDR modifications 2 $ 10,366 1 $ 285 1 $ — |
Schedule of recorded investment in loans and leases classified as troubled debt restructuring | The following table shows the recorded investment of loans and leases classified as troubled debt restructurings as of December 31. Year Ended December 31 (Dollars in thousands) 2019 2018 Performing TDRs $ 10,238 $ 344 Nonperforming TDRs 486 316 Total TDRs $ 10,724 $ 660 |
Reserve for Loan and Lease Lo_2
Reserve for Loan and Lease Losses (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Financing Receivable, Allowance for Credit Loss, Additional Information [Abstract] | |
Schedule of changes in reserve for loan and lease losses, segregated by class | The following table shows the changes in the reserve for loan and lease losses, segregated by class, for each of the three years ended December 31. (Dollars in thousands) Commercial and agricultural Auto and light truck Medium and heavy duty truck Aircraft Construction equipment Commercial real estate Residential real estate and home equity Consumer Total 2019 Balance, beginning of year $ 17,063 $ 14,689 $ 4,303 $ 33,047 $ 10,922 $ 15,705 $ 3,425 $ 1,315 $ 100,469 Charge-offs 1,040 991 1,132 3,066 238 5 53 1,066 7,591 Recoveries 664 97 32 1,143 160 75 85 287 2,543 Net charge-offs 376 894 1,100 1,923 78 (70 ) (32 ) 779 5,048 Provision (recovery of provision) 6,984 605 1,409 (66 ) 3,276 2,575 152 898 15,833 Balance, end of year $ 23,671 $ 14,400 $ 4,612 $ 31,058 $ 14,120 $ 18,350 $ 3,609 $ 1,434 $ 111,254 2018 Balance, beginning of year $ 16,228 $ 10,103 $ 4,844 $ 34,619 $ 9,343 $ 14,792 $ 3,666 $ 1,288 $ 94,883 Charge-offs 229 3,308 23 12,222 288 70 63 909 17,112 Recoveries 222 68 — 2,499 100 53 23 271 3,236 Net charge-offs (recoveries) 7 3,240 23 9,723 188 17 40 638 13,876 Provision (recovery of provision) 842 7,826 (518 ) 8,151 1,767 930 (201 ) 665 19,462 Balance, end of year $ 17,063 $ 14,689 $ 4,303 $ 33,047 $ 10,922 $ 15,705 $ 3,425 $ 1,315 $ 100,469 2017 Balance, beginning of year $ 14,668 $ 8,064 $ 4,740 $ 34,352 $ 8,207 $ 13,677 $ 3,550 $ 1,285 $ 88,543 Charge-offs 2,415 774 — 1,872 164 344 124 836 6,529 Recoveries 984 1,153 — 227 298 851 109 267 3,889 Net charge-offs (recoveries) 1,431 (379 ) — 1,645 (134 ) (507 ) 15 569 2,640 Provision (recovery of provision) 2,991 1,660 104 1,912 1,002 608 131 572 8,980 Balance, end of year $ 16,228 $ 10,103 $ 4,844 $ 34,619 $ 9,343 $ 14,792 $ 3,666 $ 1,288 $ 94,883 The following table shows the reserve for loan and lease losses and recorded investment in loans and leases, segregated by class, separated by individually and collectively evaluated for impairment as of December 31, 2019 and 2018 . (Dollars in thousands) Commercial and agricultural Auto and light truck Medium and heavy duty truck Aircraft Construction equipment Commercial real estate Residential real estate and home equity Consumer Total December 31, 2019 Reserve for loan and lease losses Ending balance, individually evaluated for impairment $ 3,003 $ 30 $ — $ — $ 75 $ — $ 117 $ — $ 3,225 Ending balance, collectively evaluated for impairment 20,668 14,370 4,612 31,058 14,045 18,350 3,492 1,434 108,029 Total reserve for loan and lease losses $ 23,671 $ 14,400 $ 4,612 $ 31,058 $ 14,120 $ 18,350 $ 3,609 $ 1,434 $ 111,254 Recorded investment in loans Ending balance, individually evaluated for impairment $ 10,584 $ 1,131 $ 1,074 $ 875 $ 1,351 $ 1,487 $ 337 $ — $ 16,839 Ending balance, collectively evaluated for impairment 1,122,207 587,676 293,750 783,165 704,100 906,690 531,666 139,434 5,068,688 Total recorded investment in loans $ 1,132,791 $ 588,807 $ 294,824 $ 784,040 $ 705,451 $ 908,177 $ 532,003 $ 139,434 $ 5,085,527 December 31, 2018 Reserve for loan and lease losses Ending balance, individually evaluated for impairment $ — $ 372 $ — $ 1,255 $ 279 $ 51 $ 126 $ — $ 2,083 Ending balance, collectively evaluated for impairment 17,063 14,317 4,303 31,792 10,643 15,654 3,299 1,315 98,386 Total reserve for loan and lease losses $ 17,063 $ 14,689 $ 4,303 $ 33,047 $ 10,922 $ 15,705 $ 3,425 $ 1,315 $ 100,469 Recorded investment in loans Ending balance, individually evaluated for impairment $ 2,471 $ 11,344 $ 106 $ 7,560 $ 2,245 $ 1,890 $ 344 $ — $ 25,960 Ending balance, collectively evaluated for impairment 1,070,734 548,643 283,438 795,551 642,994 807,996 523,511 136,637 4,809,504 Total recorded investment in loans $ 1,073,205 $ 559,987 $ 283,544 $ 803,111 $ 645,239 $ 809,886 $ 523,855 $ 136,637 $ 4,835,464 |
Lease Investments Lease Investm
Lease Investments Lease Investments (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Leases [Abstract] | |
Schedule of components of lease investments by category | The following table shows the components of the investment in direct finance and operating leases as of December 31. (Dollars in thousands) 2019 2018 Direct finance leases: Minimum lease payments $ 190,879 $ 257,398 Estimated unguaranteed residual values 41 41 Less: Unearned income (30,568 ) (46,709 ) Net investment in direct finance leases $ 160,352 $ 210,730 Operating leases: Gross investment in operating leases $ 176,485 $ 199,954 Accumulated depreciation (64,801 ) (65,514 ) Net investment in operating leases $ 111,684 $ 134,440 |
Minimum future lease payments due from clients | The following table shows future minimum lease payments due from clients on direct finance and operating leases at December 31, 2019 . (Dollars in thousands) Direct Finance Leases Operating Leases 2020 $ 42,940 $ 33,015 2021 34,966 20,036 2022 33,577 12,800 2023 29,027 7,208 2024 16,001 2,968 Thereafter 34,368 934 Total $ 190,879 $ 76,961 |
Schedule of the components of income from direct finance and operating lease equipment | The following table shows interest income recognized from direct finance lease payments and operating lease equipment rental income and related depreciation expense. (Dollars in thousands) 2019 2018 2017 Direct finance leases: Interest income on lease receivable $ 10,985 $ 13,052 $ 11,482 Operating leases: Income related to lease payments $ 30,741 $ 31,793 $ 30,381 Depreciation expense 25,128 26,248 25,215 |
Premises and Equipment (Tables)
Premises and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
Schedule of premises and equipment | The following table shows premises and equipment as of December 31. (Dollars in thousands) 2019 2018 Land $ 15,222 $ 15,223 Buildings and improvements 59,508 59,691 Furniture and equipment 41,831 40,789 Total premises and equipment 116,561 115,703 Accumulated depreciation and amortization (64,342 ) (63,564 ) Net premises and equipment $ 52,219 $ 52,139 |
Mortgage Servicing Rights (Tabl
Mortgage Servicing Rights (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Transfers and Servicing of Financial Assets [Abstract] | |
Schedule of changes in carrying value of mortgage servicing rights and the associated valuation allowance | The following table shows changes in the carrying value of MSRs and the associated valuation allowance. (Dollars in thousands) 2019 2018 Mortgage servicing rights: Balance at beginning of year $ 4,283 $ 4,349 Additions 1,229 890 Amortization (1,312 ) (956 ) Sales — — Carrying value before valuation allowance at end of year 4,200 4,283 Valuation allowance: Balance at beginning of year — — Impairment recoveries — — Balance at end of year $ — $ — Net carrying value of mortgage servicing rights at end of year $ 4,200 $ 4,283 Fair value of mortgage servicing rights at end of year $ 5,986 $ 7,238 |
Intangible Assets and Goodwill
Intangible Assets and Goodwill (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Summary of core deposit intangible and other intangible assets | The following table shows a summary of other intangible assets as of December 31. (Dollars in thousands) 2019 2018 Other intangibles: Gross carrying amount $ 204 $ 204 Less: accumulated amortization (100 ) (71 ) Net carrying amount $ 104 $ 133 |
Deposits (Tables)
Deposits (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Banking and Thrift [Abstract] | |
Schedule of certificates of deposit of $250,000 or more and other time deposits of $250,000 or more by time remaining until maturity | The following table shows the amount of certificates of deposit of $250,000 or more and other time deposits of $250,000 or more outstanding at December 31, 2019 , by time remaining until maturity. (Dollars in thousands) Under 3 months $ 199,375 4 – 6 months 170,902 7 – 12 months 156,874 Over 12 months 222,284 Total $ 749,435 |
Schedule of maturities of time deposits, including both private and public funds | The following table shows scheduled maturities of time deposits, including both private and public funds, at December 31, 2019 . (Dollars in thousands) 2020 $ 1,256,577 2021 227,115 2022 105,218 2023 49,999 2024 7,496 Thereafter 2,093 Total $ 1,648,498 |
Borrowed Funds and Mandatoril_2
Borrowed Funds and Mandatorily Redeemable Securities (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Debt Disclosure [Abstract] | |
Schedule of long-term debt and mandatorily redeemable securities | The following table shows the details of long-term debt and mandatorily redeemable securities as of December 31, 2019 and 2018 . (Dollars in thousands) 2019 2018 Federal Home Loan Bank borrowings (1.04% – 5.04%) $ 45,819 $ 46,444 Mandatorily redeemable securities 17,972 16,542 Other long-term debt 7,848 8,137 Total long-term debt and mandatorily redeemable securities $ 71,639 $ 71,123 |
Schedule of short-term borrowings | The following table shows the details of short-term borrowings as of December 31, 2019 and 2018 . 2019 2018 (Dollars in thousands) Amount Weighted Average Rate Amount Weighted Average Rate Federal funds purchased $ — — % $ 10,000 2.70 % Security repurchase agreements 120,459 0.23 103,627 0.25 Commercial paper 3,993 0.29 4,325 0.29 Federal Home Loan Bank advances 20,000 1.61 80,000 2.57 Other short-term borrowings 1,441 — 1,392 — Total short-term borrowings $ 145,893 0.42 % $ 199,344 1.30 % |
Variable Interest Entities (Tab
Variable Interest Entities (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Variable Interest Entities | |
Schedule of unconsolidated variable interest entities | The following table provides a summary of investments in affordable housing, community development and renewable energy VIEs that the Company has not consolidated as of December 31, 2019 and 2018 . (Dollars in thousands) 2019 2018 Investment carrying amount $ 19,843 $ 15,083 Unfunded capital and other commitments 17,420 6,449 Maximum exposure to loss 37,904 40,705 |
Summary of subordinated notes | The following table shows subordinated notes at December 31, 2019 . (Dollars in thousands) Amount of Subordinated Notes Interest Rate Maturity Date June 2007 issuance (1) $ 41,238 7.22 % 6/15/2037 August 2007 issuance (2) 17,526 3.37 % 9/15/2037 Total $ 58,764 (1) Fixed rate through life of debt. (2) 3-Month LIBOR + 1.48% through remaining life of debt. |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Earnings Per Share [Abstract] | |
Schedule of reconciliation of the number of shares used in the calculation of basic and diluted earnings per common share | The following table presents a reconciliation of the number of shares used in the calculation of basic and diluted earnings per common share for the three years ending December 31. (Dollars in thousands - except per share amounts) 2019 2018 2017 Distributed earnings allocated to common stock $ 28,188 $ 24,894 $ 19,701 Undistributed earnings allocated to common stock 63,254 56,975 47,830 Net earnings allocated to common stock 91,442 81,869 67,531 Net earnings allocated to participating securities 518 545 520 Net income allocated to common stock and participating securities $ 91,960 $ 82,414 $ 68,051 Weighted average shares outstanding for basic earnings per common share 25,600,138 25,937,599 25,925,820 Dilutive effect of stock compensation — — — Weighted average shares outstanding for diluted earnings per common share 25,600,138 25,937,599 25,925,820 Basic earnings per common share $ 3.57 $ 3.16 $ 2.60 Diluted earnings per common share $ 3.57 $ 3.16 $ 2.60 |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Income (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Schedule of reclassifications out of accumulated other comprehensive income | The following table presents reclassifications out of accumulated other comprehensive income related to unrealized gains and losses on available-for-sale securities for the two years ending December 31. (Dollars in thousands) 2019 2018 Affected Line Item in the Statements of Income Realized (losses) gains included in net income $ — $ (345 ) (Losses) gains on investment securities available-for-sale — (345 ) Income before income taxes Tax effect — 83 Income tax expense Net of tax $ — $ (262 ) Net income |
Stock Based Compensation (Table
Stock Based Compensation (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Share-based Payment Arrangement [Abstract] | |
Summary of activity regarding active stock option and stock award plans | The following table shows the combined summary of activity regarding active stock option and stock award plans. Non-Vested Stock Awards Outstanding Shares Available for Grant Number of Shares Weighted-Average Grant-Date Fair Value Balance, January 1, 2017 714,005 276,615 $ 23.94 Shares authorized - 2017 EIP 59,064 — — Granted (98,625 ) 98,625 33.54 Stock awards vested — (76,858 ) 22.71 Forfeited 2,000 (2,456 ) 29.93 Balance, December 31, 2017 676,444 295,926 27.41 Shares authorized - 2018 EIP 70,461 — — Granted (74,981 ) 74,981 29.11 Stock awards vested — (106,513 ) 25.79 Forfeited 3,135 (10,575 ) 27.51 Balance, December 31, 2018 675,059 253,819 28.59 Shares authorized - 2019 EIP 62,538 — — Granted (74,336 ) 74,336 31.44 Stock awards vested — (100,299 ) 28.35 Forfeited 1,241 (8,865 ) 30.28 Balance, December 31, 2019 664,502 218,991 $ 29.60 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Schedule of income tax expense | The following table shows the composition of income tax expense. Year Ended December 31 (Dollars in thousands) 2019 2018 2017 Current: Federal $ 28,130 $ 20,167 $ 26,012 State 5,739 2,996 4,530 Total current 33,869 23,163 30,542 Deferred: Federal (5,135 ) (875 ) 5,869 State (595 ) 1,200 (488 ) Deferred tax liability remeasurement — (875 ) (2,614 ) Total deferred (5,730 ) (550 ) 2,767 Total provision $ 28,139 $ 22,613 $ 33,309 |
Schedule of reasons for the difference between income tax expense and the amount computed by applying the statutory federal income tax rate | The following table shows the reasons for the difference between income tax expense and the amount computed by applying the statutory federal income tax rate ( 21% for 2019 and 2018 and 35% for 2017) to income before income taxes. 2019 2018 2017 Year Ended December 31 (Dollars in thousands) Amount Percent of Pretax Income Amount Percent of Pretax Income Amount Percent of Pretax Income Statutory federal income tax $ 25,232 21.0 % $ 22,056 21.0 % $ 35,476 35.0 % (Decrease) increase in income taxes resulting from: Tax-exempt interest income (552 ) (0.5 ) (650 ) (0.6 ) (1,197 ) (1.2 ) State taxes, net of federal income tax benefit 4,064 3.4 3,315 3.2 2,627 2.6 Deferred tax liability remeasurement — — (875 ) (0.8 ) (2,614 ) (2.6 ) Other (605 ) (0.5 ) (1,233 ) (1.3 ) (983 ) (0.9 ) Total $ 28,139 23.4 % $ 22,613 21.5 % $ 33,309 32.9 % |
Schedule of deferred tax assets and liabilities | The following table shows the composition of deferred tax assets and liabilities as of December 31, 2019 and 2018 . (Dollars in thousands) 2019 2018 Deferred tax assets: Reserve for loan and lease losses $ 28,792 $ 25,386 Operating lease liability 5,899 — Accruals for employee benefits 2,842 2,974 Net unrealized losses on securities available-for-sale — 3,386 Other 222 127 Total deferred tax assets 37,755 31,873 Deferred tax liabilities: Differing depreciable bases in premises and leased equipment 18,614 21,184 Right of use assets - leases 5,899 — Differing bases in assets related to acquisitions 4,092 4,021 Tax advantaged partnerships 4,383 4,354 Net unrealized gains on securities available-for-sale 1,640 — Mortgage servicing 394 586 Capitalized loan costs 1,207 1,110 Prepaid expenses 297 273 Other 544 364 Total deferred tax liabilities 37,070 31,892 Net deferred tax asset (liability) $ 685 $ (19 ) |
Schedule of reconciliation of the beginning and ending amounts of unrecognized tax benefits | The following table shows a reconciliation of the beginning and ending amounts of unrecognized tax benefits. (Dollars in thousands) 2019 2018 2017 Balance, beginning of year $ — $ 1,112 $ 762 Additions based on tax positions related to the current year — — 350 Additions for tax positions of prior years — — — Reductions for tax positions of prior years — — — Reductions due to lapse in statute of limitations — — — Settlements — (1,112 ) — Balance, end of year $ — $ — $ 1,112 |
Contingent Liabilities, Commi_2
Contingent Liabilities, Commitments, and Financial Instruments with Off-Balance-Sheet Risk (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Operating lease right of use assets and operating lease liabilities | The following table shows operating lease right of use assets and operating lease liabilities as of December 31, 2019 . (Dollars in thousands) Statement of Financial Condition classification 2019 Operating lease right of use assets Accrued income and other assets $ 24,147 Operating lease liabilities Accrued expenses and other liabilities $ 24,319 |
Components of operating lease expense | The following table shows the components of operating leases expense for the year ended December 31, 2019 . (Dollars in thousands) Statement of Income classification 2019 Operating lease cost Net occupancy expense $ 3,506 Short-term lease cost Net occupancy expense 41 Variable lease cost Net occupancy expense — Total operating lease cost $ 3,547 |
Future minimum rental commitments for noncancellable operating leases | The following table shows future minimum rental commitments for all noncancellable operating leases with an initial term longer than 12 months for the next five years and thereafter. (Dollars in thousands) 2020 $ 3,477 2021 3,800 2022 3,714 2023 2,653 2024 2,552 Thereafter 11,508 Total lease payments 27,704 Less: imputed interest (3,385 ) Present value of operating lease liabilities $ 24,319 |
Operating lease weighted average remaining term, discount rate, and supplmental cash flows information | The following table shows the weighted average remaining operating lease term, the weighted average discount rate and supplemental Consolidated Statement of Cash Flows information for operating leases at December 31, 2019 . (Dollars in thousands) 2019 Weighted average remaining lease term 10.88 years Weighted average discount rate 2.83 % Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 950 |
Schedule of financial instruments whose contract amounts represent credit risk | Financial instruments, whose contract amounts represent credit risk as of December 31, were as follows: (Dollars in thousands) 2019 2018 Amounts of commitments: Loan commitments to extend credit $ 1,095,054 $ 1,095,053 Standby letters of credit $ 27,549 $ 31,133 Commercial and similar letters of credit $ 2,332 $ 2,500 |
Derivative Financial Instrume_2
Derivative Financial Instruments (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of amounts of non-hedging derivative financial instruments | The following table shows the amounts of non-hedging derivative financial instruments at December 31, 2019 and 2018 . Asset derivatives Liability derivatives (Dollars in thousands) Notional or contractual amount Statement of Financial Condition classification Fair value Statement of Financial Condition classification Fair value Interest rate swap contracts $ 1,074,809 Other assets $ 21,975 Other liabilities $ 22,352 Loan commitments 9,950 Mortgages held for sale 185 N/A — Forward contracts - mortgage loan 23,632 N/A — Mortgages held for sale 38 Total - December 31, 2019 $ 1,108,391 $ 22,160 $ 22,390 Interest rate swap contracts $ 855,848 Other assets $ 7,124 Other liabilities $ 7,250 Loan commitments 5,871 Mortgages held for sale 112 N/A — Forward contracts - mortgage loan 14,087 N/A — Mortgages held for sale 135 Total - December 31, 2018 $ 875,806 $ 7,236 $ 7,385 |
Schedule of amounts included in the consolidated statements of income for non-hedging derivative financial instruments | The following table shows the amounts included on the Consolidated Statements of Income for non-hedging derivative financial instruments at December 31, 2019 , 2018 and 2017 . Gain (loss) (Dollars in thousands) Statement of Income classification 2019 2018 2017 Interest rate swap contracts Other expense $ (252 ) $ (30 ) $ 26 Interest rate swap contracts Other income 1,356 1,028 1,585 Loan commitments Mortgage banking 73 46 23 Forward contracts - mortgage loan Mortgage banking 97 (125 ) (232 ) Total $ 1,274 $ 919 $ 1,402 |
Schedule of offsetting of financial assets and derivative assets | The following table shows the offsetting of financial assets and derivative assets at December 31, 2019 and 2018 . Gross Amounts Not Offset in the Statement of Financial Condition (Dollars in thousands) Gross Amounts of Recognized Assets Gross Amounts Offset in the Statement of Financial Condition Net Amounts of Assets Presented in the Statement of Financial Condition Financial Instruments Cash Collateral Received Net Amount December 31, 2019 Interest rate swaps $ 22,279 $ 304 $ 21,975 $ — $ — $ 21,975 December 31, 2018 Interest rate swaps $ 7,128 $ 4 $ 7,124 $ 177 $ 610 $ 6,337 |
Schedule of offsetting of financial liabilities and derivative liabilities | The following table shows the offsetting of financial liabilities and derivative liabilities at December 31, 2019 and 2018 . Gross Amounts Not Offset in the Statement of Financial Condition (Dollars in thousands) Gross Amounts of Recognized Liabilities Gross Amounts Offset in the Statement of Financial Condition Net Amounts of Liabilities Presented in the Statement of Financial Condition Financial Instruments Cash Collateral Pledged Net Amount December 31, 2019 Interest rate swaps $ 22,656 $ 304 $ 22,352 $ 23,482 $ — $ (1,130 ) Repurchase agreements 120,459 — 120,459 120,459 — — Total $ 143,115 $ 304 $ 142,811 $ 143,941 $ — $ (1,130 ) December 31, 2018 Interest rate swaps $ 7,254 $ 4 $ 7,250 $ 1,700 $ — $ 5,550 Repurchase agreements 103,627 — 103,627 103,627 — — Total $ 110,881 $ 4 $ 110,877 $ 105,327 $ — $ 5,550 |
Regulatory Matters (Tables)
Regulatory Matters (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Broker-Dealer, Net Capital Requirement, SEC Regulation [Abstract] | |
Schedule of actual and required capital amounts and ratios | The following table shows the actual and required capital amounts and ratios for 1st Source Corporation and 1st Source Bank as of December 31, 2019 and 2018 . Actual Minimum Capital Adequacy Minimum Capital Adequacy with Capital Buffer (1) To Be Well Capitalized Under Prompt Corrective Action Provisions (Dollars in thousands) Amount Ratio Amount Ratio Amount Ratio Amount Ratio 2019 Total Capital (to Risk-Weighted Assets): 1st Source Corporation $ 882,453 14.90 % $ 473,782 8.00 % $ 621,839 10.50 % $ 592,227 10.00 % 1st Source Bank 804,131 13.57 474,189 8.00 622,373 10.50 592,736 10.00 Tier 1 Capital (to Risk-Weighted Assets): 1st Source Corporation 807,926 13.64 355,336 6.00 503,393 8.50 473,782 8.00 1st Source Bank 729,541 12.31 355,642 6.00 503,826 8.50 474,189 8.00 Common Equity Tier 1 Capital (to Risk-Weighted Assets): 1st Source Corporation 743,467 12.55 266,502 4.50 414,559 7.00 384,948 6.50 1st Source Bank 722,082 12.18 266,731 4.50 414,915 7.00 385,279 6.50 Tier 1 Capital (to Average Assets): 1st Source Corporation 807,926 12.19 265,122 4.00 N/A N/A 331,402 5.00 1st Source Bank 729,541 11.03 264,500 4.00 N/A N/A 330,625 5.00 2018 Total Capital (to Risk-Weighted Assets): 1st Source Corporation $ 821,975 14.68 % $ 447,909 8.00 % $ 552,888 9.875 % $ 559,887 10.00 % 1st Source Bank 744,326 13.29 448,152 8.00 553,188 9.875 560,190 10.00 Tier 1 Capital (to Risk-Weighted Assets): 1st Source Corporation 751,575 13.42 335,932 6.00 440,911 7.875 447,909 8.00 1st Source Bank 673,888 12.03 336,114 6.00 441,150 7.875 448,152 8.00 Common Equity Tier 1 Capital (to Risk-Weighted Assets): 1st Source Corporation 693,067 12.38 251,949 4.50 356,928 6.375 363,926 6.50 1st Source Bank 672,380 12.00 252,086 4.50 357,121 6.375 364,124 6.50 Tier 1 Capital (to Average Assets): 1st Source Corporation 751,575 12.06 249,185 4.00 N/A N/A 311,481 5.00 1st Source Bank 673,888 10.82 249,052 4.00 N/A N/A 311,315 5.00 (1) The capital conservation buffer requirement was fully phased in as of December 31, 2019. |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Fair value measurements | |
Schedule of differences between the fair value carrying amount of mortgages held for sale measured at fair value and the aggregate unpaid principal amount | The following table shows the differences between fair value carrying amount of mortgages held for sale measured at fair value and the aggregate unpaid principal amount the Company is contractually entitled to receive at maturity on December 31, 2019 and 2018 . (Dollars in thousands) Fair value carrying amount Aggregate unpaid principal Excess of fair value carrying amount over (under) unpaid principal December 31, 2019 Mortgages held for sale reported at fair value: Total Loans $ 20,277 $ 19,890 $ 387 (1) December 31, 2018 Mortgages held for sale reported at fair value: Total Loans $ 11,290 $ 11,076 $ 214 (1) (1) The excess of fair value carrying amount over (under) unpaid principal is included in mortgage banking income and includes changes in fair value at and subsequent to funding and gains and losses on the related loan commitment prior to funding. |
Schedule of assets and liabilities measured at fair value on a recurring basis | The following table shows the balance of assets and liabilities measured at fair value on a recurring basis. (Dollars in thousands) Level 1 Level 2 Level 3 Total December 31, 2019 Assets: Investment securities available-for-sale: U.S. Treasury and Federal agencies securities $ 80,393 $ 446,571 $ — $ 526,964 U.S. States and political subdivisions securities — 82,213 2,292 84,505 Mortgage-backed securities - Federal agencies — 375,389 — 375,389 Corporate debt securities — 53,025 — 53,025 Foreign government and other securities — 700 — 700 Total debt securities available-for-sale 80,393 957,898 2,292 1,040,583 Mortgages held for sale — 20,277 — 20,277 Accrued income and other assets (interest rate swap agreements) — 21,975 — 21,975 Total $ 80,393 $ 1,000,150 $ 2,292 $ 1,082,835 Liabilities: Accrued expenses and other liabilities (interest rate swap agreements) $ — $ 22,352 $ — $ 22,352 Total $ — $ 22,352 $ — $ 22,352 December 31, 2018 Assets: Investment securities available-for-sale: U.S. Treasury and Federal agencies securities $ 33,746 $ 497,477 $ — $ 531,223 U.S. States and political subdivisions securities — 93,557 1,025 94,582 Mortgage-backed securities - Federal agencies — 318,233 — 318,233 Corporate debt securities — 45,392 — 45,392 Foreign government and other securities — 699 — 699 Total debt securities available-for-sale 33,746 955,358 1,025 990,129 Mortgages held for sale — 11,290 — 11,290 Accrued income and other assets (interest rate swap agreements) — 7,124 — 7,124 Total $ 33,746 $ 973,772 $ 1,025 $ 1,008,543 Liabilities: Accrued expenses and other liabilities (interest rate swap agreements) $ — $ 7,250 $ — $ 7,250 Total $ — $ 7,250 $ — $ 7,250 |
Schedule of changes in Level 3 assets and liabilities measured at fair value on a recurring basis | The following table shows the changes in Level 3 assets and liabilities measured at fair value on a recurring basis. (Dollars in thousands) U.S. States and political subdivisions securities Foreign government and other securities Investment securities available-for-sale Beginning balance January 1, 2019 $ 1,025 $ — $ 1,025 Total gains or losses (realized/unrealized): Included in earnings — — — Included in other comprehensive income (35 ) — (35 ) Purchases 5,600 — 5,600 Issuances — — — Sales — — — Settlements — — — Maturities (4,298 ) — (4,298 ) Transfers into Level 3 — — — Transfers out of Level 3 — — — Ending balance December 31, 2019 $ 2,292 $ — $ 2,292 Beginning balance January 1, 2018 $ 2,155 $ 710 $ 2,865 Total gains or losses (realized/unrealized): Included in earnings — — — Included in other comprehensive income 6 (11 ) (5 ) Purchases — 200 200 Issuances — — — Sales — — — Settlements — — — Maturities (1,136 ) (200 ) (1,336 ) Transfers into Level 3 — — — Transfers out of Level 3 — (699 ) (699 ) Ending balance December 31, 2018 $ 1,025 $ — $ 1,025 |
Schedule of carrying value of assets measured at fair value on a non-recurring basis | The following table shows the carrying value of assets measured at fair value on a non-recurring basis. (Dollars in thousands) Level 1 Level 2 Level 3 Total December 31, 2019 Impaired loans - collateral based $ — $ — $ 8,492 $ 8,492 Accrued income and other assets (mortgage servicing rights) — — 4,200 4,200 Accrued income and other assets (repossessions) — — 8,623 8,623 Accrued income and other assets (other real estate) — — 522 522 Total $ — $ — $ 21,837 $ 21,837 December 31, 2018 Impaired loans - collateral based $ — $ — $ 7,306 $ 7,306 Accrued income and other assets (mortgage servicing rights) — — 4,283 4,283 Accrued income and other assets (repossessions) — — 6,666 6,666 Accrued income and other assets (other real estate) — — 299 299 Total $ — $ — $ 18,554 $ 18,554 |
Schedule of fair values of financial instruments | The following table shows the fair values of the Company’s financial instruments. (Dollars in thousands) Carrying or Contract Value Fair Value Level 1 Level 2 Level 3 December 31, 2019 Assets: Cash and due from banks $ 67,215 $ 67,215 $ 67,215 $ — $ — Federal funds sold and interest bearing deposits with other banks 16,150 16,150 16,150 — — Investment securities, available-for-sale 1,040,583 1,040,583 80,393 957,898 2,292 Other investments 28,414 28,414 28,414 — — Mortgages held for sale 20,277 20,277 — 20,277 — Loans and leases, net of reserve for loan and lease losses 4,974,273 4,992,684 — — 4,992,684 Mortgage servicing rights 4,200 5,986 — — 5,986 Accrued interest receivable 19,125 19,125 — 19,125 — Interest rate swaps 21,975 21,975 — 21,975 — Liabilities: Deposits $ 5,357,326 $ 5,362,633 $ 3,708,828 $ 1,653,805 $ — Short-term borrowings 145,893 145,893 120,891 25,002 — Long-term debt and mandatorily redeemable securities 71,639 71,084 — 71,084 — Subordinated notes 58,764 61,469 — 61,469 — Accrued interest payable 13,918 13,918 — 13,918 — Interest rate swaps 22,352 22,352 — 22,352 — Off-balance-sheet instruments * — 281 — 281 — December 31, 2018 Assets: Cash and due from banks $ 94,907 $ 94,907 $ 94,907 $ — $ — Federal funds sold and interest bearing deposits with other banks 4,172 4,172 4,172 — — Investment securities, available-for-sale 990,129 990,129 33,746 955,358 1,025 Other investments 28,404 28,404 28,404 — — Mortgages held for sale 11,290 11,290 — 11,290 — Loans and leases, net of reserve for loan and lease losses 4,734,995 4,689,267 — — 4,689,267 Mortgage servicing rights 4,283 7,238 — — 7,238 Accrued interest receivable 18,880 18,880 — 18,880 — Interest rate swaps 7,124 7,124 — 7,124 — Liabilities: Deposits $ 5,122,322 $ 5,111,711 $ 3,654,556 $ 1,457,155 $ — Short-term borrowings 199,344 199,344 113,734 85,610 — Long-term debt and mandatorily redeemable securities 71,123 68,751 — 68,751 — Subordinated notes 58,764 45,874 — 45,874 — Accrued interest payable 8,950 8,950 — 8,950 — Interest rate swaps 7,250 7,250 — 7,250 — Off-balance-sheet instruments * — 259 — 259 — * Represents estimated cash outflows required to currently settle the obligations at current market rates. |
Recurring | |
Fair value measurements | |
Schedule of valuation methodology and unobservable inputs for Level 3 assets and liabilities measured at fair value on a recurring and non-recurring basis | The following table shows the valuation methodology and unobservable inputs for Level 3 assets and liabilities measured at fair value on a recurring basis. (Dollars in thousands) Fair value Valuation Methodology Unobservable Inputs Range of Inputs December 31, 2019 Debt securities available-for-sale Direct placement municipal securities $ 2,292 Discounted cash flows Credit spread assumption 0.12% - 2.85% December 31, 2018 Debt securities available-for-sale Direct placement municipal securities $ 1,025 Discounted cash flows Credit spread assumption 0.17% - 3.02% |
Non-recurring | |
Fair value measurements | |
Schedule of valuation methodology and unobservable inputs for Level 3 assets and liabilities measured at fair value on a recurring and non-recurring basis | The following table shows the valuation methodology and unobservable inputs for Level 3 assets and liabilities measured at fair value on a non-recurring basis. (Dollars in thousands) Carrying Value Fair value Valuation Methodology Unobservable Inputs Range of Inputs December 31, 2019 Impaired loans $ 8,492 $ 8,492 Collateral based measurements including appraisals, trade publications, and auction values Discount for lack of marketability and current conditions 0% - 90% Mortgage servicing rights 4,200 5,986 Discounted cash flows Constant prepayment rate (CPR) 10.2% - 28.1% Discount rate 9.3% - 12.1% Repossessions 8,623 9,211 Appraisals, trade publications and auction values Discount for lack of marketability 3% - 25% Other real estate 522 564 Appraisals Discount for lack of marketability 0% - 11% December 31, 2018 Impaired loans $ 7,306 $ 7,306 Collateral based measurements including appraisals, trade publications, and auction values Discount for lack of marketability and current conditions 20% - 35% Mortgage servicing rights 4,283 7,238 Discounted cash flows Constant prepayment rate (CPR) 7.2% - 24.8% Discount rate 10.3% - 13.1% Repossessions 6,666 6,991 Appraisals, trade publications and auction values Discount for lack of marketability 4% - 6% Other real estate 299 305 Appraisals Discount for lack of marketability 0% - 10% |
1st Source Corporation (Paren_2
1st Source Corporation (Parent Company Only) Financial Information (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Condensed Financial Information Disclosure [Abstract] | |
Schedule of statements of financial condition | STATEMENTS OF FINANCIAL CONDITION December 31 (Dollars in thousands) 2019 2018 ASSETS Cash and cash equivalents $ 107,285 $ 106,647 Short-term investments with bank subsidiary 500 500 Investments in: Bank subsidiaries 806,192 740,697 Non-bank subsidiaries 1 1 Right of use assets 17,106 — Other assets 4,442 4,191 Total assets $ 935,526 $ 852,036 LIABILITIES AND SHAREHOLDERS’ EQUITY Commercial paper $ 3,993 $ 4,325 Long-term debt and mandatorily redeemable securities 25,819 24,676 Subordinated notes 58,764 58,764 Operating lease liability 17,329 — Other liabilities 1,344 2,189 Total liabilities 107,249 89,954 Total shareholders’ equity 828,277 762,082 Total liabilities and shareholders’ equity $ 935,526 $ 852,036 |
Schedule of statements of income | STATEMENTS OF INCOME AND COMPREHENSIVE INCOME Year Ended December 31 (Dollars in thousands) 2019 2018 2017 Income: Dividends from bank subsidiary $ 46,735 $ 45,080 $ 38,317 Dividends from non-bank subsidiary — — 958 Rental income from subsidiaries 2,505 2,613 2,354 Other 366 367 422 Investment securities and other investment gains (losses) 109 (180 ) 6,431 Total income 49,715 47,880 48,482 Expenses: Interest on subordinated notes 3,677 3,625 4,002 Interest on long-term debt and mandatorily redeemable securities 2,228 1,624 1,685 Interest on commercial paper and other short-term borrowings 13 14 17 Occupancy 1,861 1,774 2,070 Other 586 642 1,733 Total expenses 8,365 7,679 9,507 Income before income tax benefit and equity in undistributed income of subsidiaries 41,350 40,201 38,975 Income tax benefit 987 1,009 204 Income before equity in undistributed income of subsidiaries 42,337 41,210 39,179 Equity in undistributed income of subsidiaries: Bank subsidiaries 49,678 41,204 28,872 Non-bank subsidiaries — — — Net income $ 92,015 $ 82,414 $ 68,051 Comprehensive income $ 107,863 $ 75,788 $ 63,375 |
Schedule of statements of cash flow | STATEMENTS OF CASH FLOWS Year Ended December 31 (Dollars in thousands) 2019 2018 2017 Operating activities: Net income $ 92,015 $ 82,414 $ 68,051 Adjustments to reconcile net income to net cash provided by operating activities: Equity (undistributed) distributed in excess of income of subsidiaries (49,678 ) (41,204 ) (28,872 ) Depreciation of premises and equipment 2 2 2 Amortization of right of use assets 1,350 — — Stock-based compensation 78 71 48 Realized/unrealized investment securities and other investment (gains) losses (109 ) 180 (6,431 ) Other 533 45 4,122 Net change in operating activities 44,191 41,508 36,920 Investing activities: Proceeds from sales and maturities of investment securities — — 6,327 Net change in partnership investments (260 ) (980 ) (62 ) Capital contribution to subsidiary (325 ) — — Return of capital from subsidiaries — — 854 Net change in investing activities (585 ) (980 ) 7,119 Financing activities: Net change in commercial paper (332 ) (1,790 ) 354 Proceeds from issuance of long-term debt and mandatorily redeemable securities 1,611 1,867 1,248 Payments on long-term debt and mandatorily redeemable securities (2,068 ) (1,064 ) (667 ) Stock issued under stock purchase plans 49 145 153 Net proceeds from issuance of treasury stock 1,878 1,763 2,176 Acquisition of treasury stock (15,085 ) (9,271 ) (41 ) Cash dividends paid on common stock (29,021 ) (25,686 ) (20,431 ) Net change in financing activities (42,968 ) (34,036 ) (17,208 ) Net change in cash and cash equivalents 638 6,492 26,831 Cash and cash equivalents, beginning of year 106,647 100,155 73,324 Cash and cash equivalents, end of year $ 107,285 $ 106,647 $ 100,155 |
Accounting Policies (Details)
Accounting Policies (Details) | 12 Months Ended | |
Dec. 31, 2019USD ($)unitclasssegmentRate | Dec. 31, 2018USD ($) | |
Securities | ||
Held-to-maturity investment securities | $ 0 | $ 0 |
Loans and leases | ||
Percentage of the principal balance that may be repurchased of a delinquent Ginnie Mae (GNMA) mortgage loan (as a percent) | 100.00% | |
Reserve for loan and lease losses | ||
Number of classes within loan and lease portfolio | class | 8 | |
Lease Commitments | ||
Minimum lease liability for capitalization | $ 2,000 | |
Residual value guarantees or restriction or covenants imposed by leases | no | |
Minimum initial lease term for recording right of use asset and lease liability | 12 months | |
Other real estate | ||
Carrying value of other real estate | $ 520,000 | 300,000 |
Repossessed assets | ||
Repossessed assets value | $ 8,620,000 | 6,660,000 |
Goodwill and intangibles | ||
Number of reportable units used in goodwill allocation | unit | 2 | |
Goodwill impairment | $ 0 | |
Partnership investment | ||
Minimum percentage of partnership accounted for as equity investment | Rate | 3.00% | |
Investment in partnership | $ 61,080,000 | 23,460,000 |
Segment reporting | ||
Number of business segments aggregated as reportable operating segments | segment | 1 | |
Residential real estate portfolio | ||
Loans and leases | ||
Loans available for repurchase | $ 1,440,000 | $ 1,390,000 |
Minimum | ||
Loans and leases | ||
Period of sustained performance required to change from non-performing to performing status | 6 months | |
Amount necessary for impairment evaluation | $ 100,000 | |
Reserve for loan and lease losses | ||
Threshold value of loan or lease for evaluation of the appropriateness of the impairment reserve | $ 100,000 | |
Equipment owned under operating lease | ||
Lease term | 3 years | |
Lease Commitments | ||
Economic life test to determine lease classification | P20Y | |
Fair value test percentage of the fair value of the asset | Rate | 90.00% | |
Premises and equipment | ||
Useful life of premises and equipment | 3 years | |
Income taxes | ||
Tax benefit realized on settlement, percentage | 50.00% | |
Minimum | Federal funds purchased | ||
Short-term borrowings: | ||
Term of short-term debt | 1 day | |
Minimum | Security repurchase agreements | ||
Short-term borrowings: | ||
Term of short-term debt | 1 day | |
Minimum | Other short-term borrowings | ||
Short-term borrowings: | ||
Term of short-term debt | 1 day | |
Minimum | Commercial paper | ||
Short-term borrowings: | ||
Term of short-term debt | 7 days | |
Maximum | ||
Equipment owned under operating lease | ||
Lease term | 7 years | |
Premises and equipment | ||
Useful life of premises and equipment | 31 years 6 months | |
Goodwill and intangibles | ||
Useful life of finite lived assets | 25 years | |
Maximum | Federal funds purchased | ||
Short-term borrowings: | ||
Term of short-term debt | 365 days | |
Maximum | Security repurchase agreements | ||
Short-term borrowings: | ||
Term of short-term debt | 365 days | |
Maximum | Other short-term borrowings | ||
Short-term borrowings: | ||
Term of short-term debt | 365 days | |
Maximum | Commercial paper | ||
Short-term borrowings: | ||
Term of short-term debt | 270 days |
Recent Accounting Pronounceme_2
Recent Accounting Pronouncements (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Jan. 01, 2019 | Dec. 31, 2018 | |
Item Effected | |||
Retained earnings | $ 463,269 | $ 398,980 | |
Accounting Standards Update 2017-08 | |||
Item Effected | |||
Retained earnings | $ 300 | ||
Maximum | Accounting Standards Update 2016-13 | |||
Item Effected | |||
Estimated decrease to allowance for credit losses | 1,000 | ||
Estimated increase to allowance for credit losses | $ 3,000 |
Investment Securities (Details)
Investment Securities (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Contractual maturities of investments in debt securities available-for-sale, Amortized Cost | ||
Due in one year or less | $ 147,306 | |
Due after one year through five years | 482,118 | |
Due after five years through ten years | 31,209 | |
Due after ten years | 680 | |
Mortgage-backed securities | 372,458 | |
Total debt securities available-for-sale | 1,033,771 | $ 1,004,192 |
Contractual maturities of investments in debt securities available-for-sale, Fair Value | ||
Due in one year or less | 147,629 | |
Due after one year through five years | 485,745 | |
Due after five years through ten years | 31,173 | |
Due after ten years | 647 | |
Mortgage-backed securities | 375,389 | |
Total debt securities available-for-sale | 1,040,583 | 990,129 |
U.S. Treasury and Federal agencies securities | ||
Contractual maturities of investments in debt securities available-for-sale, Amortized Cost | ||
Total debt securities available-for-sale | 524,896 | 537,913 |
Contractual maturities of investments in debt securities available-for-sale, Fair Value | ||
Total debt securities available-for-sale | 526,964 | 531,223 |
U.S. States and political subdivisions securities | ||
Contractual maturities of investments in debt securities available-for-sale, Amortized Cost | ||
Total debt securities available-for-sale | 83,566 | 95,346 |
Contractual maturities of investments in debt securities available-for-sale, Fair Value | ||
Total debt securities available-for-sale | 84,505 | 94,582 |
Mortgage-backed securities - Federal agencies | ||
Contractual maturities of investments in debt securities available-for-sale, Amortized Cost | ||
Total debt securities available-for-sale | 372,458 | 324,390 |
Contractual maturities of investments in debt securities available-for-sale, Fair Value | ||
Total debt securities available-for-sale | 375,389 | 318,233 |
Corporate debt securities | ||
Contractual maturities of investments in debt securities available-for-sale, Amortized Cost | ||
Total debt securities available-for-sale | 52,151 | 45,843 |
Contractual maturities of investments in debt securities available-for-sale, Fair Value | ||
Total debt securities available-for-sale | 53,025 | 45,392 |
Foreign government and other securities | ||
Contractual maturities of investments in debt securities available-for-sale, Amortized Cost | ||
Total debt securities available-for-sale | 700 | 700 |
Contractual maturities of investments in debt securities available-for-sale, Fair Value | ||
Total debt securities available-for-sale | $ 700 | $ 699 |
Investment Securities (Details
Investment Securities (Details 2) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019USD ($) | Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) | |
Schedule Of Available For Sale Debt Securities [Line Items] | |||
Total debt securities available-for-sale | $ 1,033,771 | $ 1,004,192 | |
Gross Unrealized Gains | 8,424 | 1,086 | |
Gross Unrealized Losses | (1,612) | (15,149) | |
Investment securities available-for-sale | 1,040,583 | 990,129 | |
Fair Value | |||
Less than 12 Months | 178,586 | 164,299 | |
12 Months or Longer | 129,351 | 691,751 | |
Total fair value | 307,937 | 856,050 | |
Unrealized Losses | |||
Less than 12 Months | (661) | (893) | |
12 Months or Longer | (951) | (14,256) | |
Total unrealized losses | (1,612) | (15,149) | |
Gross realized gains and losses | |||
Gross realized gains | 0 | 2 | |
Gross realized gains (including equity securities) | $ 7,425 | ||
Gross realized losses | 0 | (347) | |
Gross realized losses (including equity securities) | (2,895) | ||
OTTI losses | 0 | 0 | |
OTTI losses (including equity securities) | (190) | ||
Net realized (losses) gains | 0 | (345) | |
Net realized (losses) gains (including equity securities) | $ 4,340 | ||
Investment securities pledged as collateral | $ 281,380 | 242,310 | |
Number of available-for-sale debt securities | 629 | ||
Number of available-for-sale debt securities in an unrealized loss position | 152 | ||
U.S. Treasury and Federal agencies securities | |||
Schedule Of Available For Sale Debt Securities [Line Items] | |||
Total debt securities available-for-sale | $ 524,896 | 537,913 | |
Gross Unrealized Gains | 2,538 | 196 | |
Gross Unrealized Losses | (470) | (6,886) | |
Investment securities available-for-sale | 526,964 | 531,223 | |
Fair Value | |||
Less than 12 Months | 87,352 | 55,491 | |
12 Months or Longer | 69,053 | 424,269 | |
Total fair value | 156,405 | 479,760 | |
Unrealized Losses | |||
Less than 12 Months | (171) | (177) | |
12 Months or Longer | (299) | (6,709) | |
Total unrealized losses | (470) | (6,886) | |
U.S. States and political subdivisions securities | |||
Schedule Of Available For Sale Debt Securities [Line Items] | |||
Total debt securities available-for-sale | 83,566 | 95,346 | |
Gross Unrealized Gains | 1,048 | 172 | |
Gross Unrealized Losses | (109) | (936) | |
Investment securities available-for-sale | 84,505 | 94,582 | |
Fair Value | |||
Less than 12 Months | 9,283 | 21,059 | |
12 Months or Longer | 1,042 | 45,365 | |
Total fair value | 10,325 | 66,424 | |
Unrealized Losses | |||
Less than 12 Months | (107) | (61) | |
12 Months or Longer | (2) | (875) | |
Total unrealized losses | (109) | (936) | |
Mortgage-backed securities - Federal agencies | |||
Schedule Of Available For Sale Debt Securities [Line Items] | |||
Total debt securities available-for-sale | 372,458 | 324,390 | |
Gross Unrealized Gains | 3,948 | 718 | |
Gross Unrealized Losses | (1,017) | (6,875) | |
Investment securities available-for-sale | 375,389 | 318,233 | |
Fair Value | |||
Less than 12 Months | 81,951 | 65,554 | |
12 Months or Longer | 51,165 | 198,221 | |
Total fair value | 133,116 | 263,775 | |
Unrealized Losses | |||
Less than 12 Months | (383) | (511) | |
12 Months or Longer | (634) | (6,364) | |
Total unrealized losses | (1,017) | (6,875) | |
Corporate debt securities | |||
Schedule Of Available For Sale Debt Securities [Line Items] | |||
Total debt securities available-for-sale | 52,151 | 45,843 | |
Gross Unrealized Gains | 890 | 0 | |
Gross Unrealized Losses | (16) | (451) | |
Investment securities available-for-sale | 53,025 | 45,392 | |
Fair Value | |||
Less than 12 Months | 0 | 21,496 | |
12 Months or Longer | 8,091 | 23,896 | |
Total fair value | 8,091 | 45,392 | |
Unrealized Losses | |||
Less than 12 Months | 0 | (143) | |
12 Months or Longer | (16) | (308) | |
Total unrealized losses | (16) | (451) | |
Foreign government and other securities | |||
Schedule Of Available For Sale Debt Securities [Line Items] | |||
Total debt securities available-for-sale | 700 | 700 | |
Gross Unrealized Gains | 0 | 0 | |
Gross Unrealized Losses | 0 | (1) | |
Investment securities available-for-sale | 700 | 699 | |
Fair Value | |||
Less than 12 Months | 0 | 699 | |
12 Months or Longer | 0 | 0 | |
Total fair value | 0 | 699 | |
Unrealized Losses | |||
Less than 12 Months | 0 | (1) | |
12 Months or Longer | 0 | 0 | |
Total unrealized losses | $ 0 | $ (1) |
Loan and Lease Financings (Deta
Loan and Lease Financings (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Receivables [Abstract] | ||
Total loans and leases | $ 5,085,527 | $ 4,835,464 |
Deferred loan and lease costs | 5,060 | 4,540 |
Loans to certain directors, executive officers, and principal shareholders of equity securities of the entity and to their affiliates | ||
Loan to related parties | 17,080 | $ 11,380 |
New loans and other additions to related parties | 6,690 | |
Repayments and other reductions of loan given to related parties | $ 990 |
Loan and Lease Financings (De_2
Loan and Lease Financings (Details 2) | 12 Months Ended | |
Dec. 31, 2019USD ($)method | Dec. 31, 2018USD ($) | |
Receivables [Abstract] | ||
Number of methods to assess credit risk | method | 2 | |
Loan and Lease Financings | ||
Recorded investment in loans and leases | $ 5,085,527,000 | $ 4,835,464,000 |
Loan and lease financings excluding residential real estate and consumer loans | ||
Loan and Lease Financings | ||
Recorded investment in loans and leases | 4,414,090,000 | 4,174,972,000 |
Commercial and agricultural | ||
Loan and Lease Financings | ||
Recorded investment in loans and leases | 1,132,791,000 | 1,073,205,000 |
Auto and light truck | ||
Loan and Lease Financings | ||
Recorded investment in loans and leases | 588,807,000 | 559,987,000 |
Medium and heavy duty truck | ||
Loan and Lease Financings | ||
Recorded investment in loans and leases | 294,824,000 | 283,544,000 |
Aircraft | ||
Loan and Lease Financings | ||
Recorded investment in loans and leases | 784,040,000 | 803,111,000 |
Construction equipment | ||
Loan and Lease Financings | ||
Recorded investment in loans and leases | 705,451,000 | 645,239,000 |
Commercial real estate | ||
Loan and Lease Financings | ||
Recorded investment in loans and leases | 908,177,000 | 809,886,000 |
Credit Quality Grades 1-6 | Loan and lease financings excluding residential real estate and consumer loans | ||
Loan and Lease Financings | ||
Recorded investment in loans and leases | 4,264,697,000 | 4,034,424,000 |
Credit Quality Grades 1-6 | Commercial and agricultural | ||
Loan and Lease Financings | ||
Recorded investment in loans and leases | 1,080,933,000 | 1,043,019,000 |
Credit Quality Grades 1-6 | Auto and light truck | ||
Loan and Lease Financings | ||
Recorded investment in loans and leases | 569,234,000 | 528,174,000 |
Credit Quality Grades 1-6 | Medium and heavy duty truck | ||
Loan and Lease Financings | ||
Recorded investment in loans and leases | 293,736,000 | 281,834,000 |
Credit Quality Grades 1-6 | Aircraft | ||
Loan and Lease Financings | ||
Recorded investment in loans and leases | 764,564,000 | 768,442,000 |
Credit Quality Grades 1-6 | Construction equipment | ||
Loan and Lease Financings | ||
Recorded investment in loans and leases | 668,076,000 | 625,579,000 |
Credit Quality Grades 1-6 | Commercial real estate | ||
Loan and Lease Financings | ||
Recorded investment in loans and leases | 888,154,000 | 787,376,000 |
Credit Quality Grades 7-12 | ||
Loan and Lease Financings | ||
Threshold value of loan or lease for evaluation of the appropriateness of the impairment reserve | 100,000 | |
Credit Quality Grades 7-12 | Loan and lease financings excluding residential real estate and consumer loans | ||
Loan and Lease Financings | ||
Recorded investment in loans and leases | 149,393,000 | 140,548,000 |
Credit Quality Grades 7-12 | Commercial and agricultural | ||
Loan and Lease Financings | ||
Recorded investment in loans and leases | 51,858,000 | 30,186,000 |
Credit Quality Grades 7-12 | Auto and light truck | ||
Loan and Lease Financings | ||
Recorded investment in loans and leases | 19,573,000 | 31,813,000 |
Credit Quality Grades 7-12 | Medium and heavy duty truck | ||
Loan and Lease Financings | ||
Recorded investment in loans and leases | 1,088,000 | 1,710,000 |
Credit Quality Grades 7-12 | Aircraft | ||
Loan and Lease Financings | ||
Recorded investment in loans and leases | 19,476,000 | 34,669,000 |
Credit Quality Grades 7-12 | Construction equipment | ||
Loan and Lease Financings | ||
Recorded investment in loans and leases | 37,375,000 | 19,660,000 |
Credit Quality Grades 7-12 | Commercial real estate | ||
Loan and Lease Financings | ||
Recorded investment in loans and leases | $ 20,023,000 | $ 22,510,000 |
Loan and Lease Financings (De_3
Loan and Lease Financings (Details 3) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Loan and Lease Financings | ||
Recorded investment in loans and leases | $ 5,085,527 | $ 4,835,464 |
Residential real estate and consumer loans | ||
Loan and Lease Financings | ||
Recorded investment in loans and leases | 671,437 | 660,492 |
Residential real estate and home equity | ||
Loan and Lease Financings | ||
Recorded investment in loans and leases | 532,003 | 523,855 |
Consumer | ||
Loan and Lease Financings | ||
Recorded investment in loans and leases | 139,434 | 136,637 |
Performing | Residential real estate and consumer loans | ||
Loan and Lease Financings | ||
Recorded investment in loans and leases | 668,508 | 658,269 |
Performing | Residential real estate and home equity | ||
Loan and Lease Financings | ||
Recorded investment in loans and leases | 529,557 | 521,846 |
Performing | Consumer | ||
Loan and Lease Financings | ||
Recorded investment in loans and leases | $ 138,951 | 136,423 |
Nonperforming | ||
Loan and Lease Financings | ||
Classification of nonperforming loans, threshold period past due | 90 days | |
Nonperforming | Residential real estate and consumer loans | ||
Loan and Lease Financings | ||
Recorded investment in loans and leases | $ 2,929 | 2,223 |
Nonperforming | Residential real estate and home equity | ||
Loan and Lease Financings | ||
Recorded investment in loans and leases | 2,446 | 2,009 |
Nonperforming | Consumer | ||
Loan and Lease Financings | ||
Recorded investment in loans and leases | $ 483 | $ 214 |
Loan and Lease Financings (De_4
Loan and Lease Financings (Details 4) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Recorded investment of loans and leases, segregated by class, with delinquency aging and nonaccrual status | |||
Current | $ 5,060,613 | $ 4,792,847 | |
90 Days or More Past Due and Accruing | 311 | 368 | |
Total Accruing Loans | 5,075,738 | 4,807,605 | |
Nonaccrual | 9,789 | 27,859 | |
Total loans and leases | 5,085,527 | 4,835,464 | |
Increase in interest income | 690 | 2,180 | $ 1,140 |
Commercial and agricultural | |||
Recorded investment of loans and leases, segregated by class, with delinquency aging and nonaccrual status | |||
Current | 1,131,704 | 1,070,530 | |
Total Accruing Loans | 1,131,822 | 1,070,552 | |
Nonaccrual | 969 | 2,653 | |
Total loans and leases | 1,132,791 | 1,073,205 | |
Auto and light truck | |||
Recorded investment of loans and leases, segregated by class, with delinquency aging and nonaccrual status | |||
Current | 586,212 | 544,022 | |
Total Accruing Loans | 587,557 | 548,613 | |
Nonaccrual | 1,250 | 11,374 | |
Total loans and leases | 588,807 | 559,987 | |
Medium and heavy duty truck | |||
Recorded investment of loans and leases, segregated by class, with delinquency aging and nonaccrual status | |||
Current | 293,736 | 283,284 | |
Total Accruing Loans | 293,750 | 283,438 | |
Nonaccrual | 1,074 | 106 | |
Total loans and leases | 294,824 | 283,544 | |
Aircraft | |||
Recorded investment of loans and leases, segregated by class, with delinquency aging and nonaccrual status | |||
Current | 772,846 | 790,233 | |
Total Accruing Loans | 783,165 | 795,550 | |
Nonaccrual | 875 | 7,561 | |
Total loans and leases | 784,040 | 803,111 | |
Construction equipment | |||
Recorded investment of loans and leases, segregated by class, with delinquency aging and nonaccrual status | |||
Current | 702,671 | 641,270 | |
Total Accruing Loans | 704,099 | 642,913 | |
Nonaccrual | 1,352 | 2,326 | |
Total loans and leases | 705,451 | 645,239 | |
Commercial real estate | |||
Recorded investment of loans and leases, segregated by class, with delinquency aging and nonaccrual status | |||
Current | 906,468 | 807,793 | |
Total Accruing Loans | 906,526 | 807,902 | |
Nonaccrual | 1,651 | 1,984 | |
Total loans and leases | 908,177 | 809,886 | |
Residential real estate and home equity | |||
Recorded investment of loans and leases, segregated by class, with delinquency aging and nonaccrual status | |||
Current | 528,844 | 520,124 | |
90 Days or More Past Due and Accruing | 257 | 295 | |
Total Accruing Loans | 529,814 | 522,141 | |
Nonaccrual | 2,189 | 1,714 | |
Total loans and leases | 532,003 | 523,855 | |
Consumer | |||
Recorded investment of loans and leases, segregated by class, with delinquency aging and nonaccrual status | |||
Current | 138,132 | 135,591 | |
90 Days or More Past Due and Accruing | 54 | 73 | |
Total Accruing Loans | 139,005 | 136,496 | |
Nonaccrual | 429 | 141 | |
Total loans and leases | 139,434 | 136,637 | |
30 to 59 Days Past Due | |||
Recorded investment of loans and leases, segregated by class, with delinquency aging and nonaccrual status | |||
Past Due | 10,496 | 11,180 | |
30 to 59 Days Past Due | Commercial and agricultural | |||
Recorded investment of loans and leases, segregated by class, with delinquency aging and nonaccrual status | |||
Past Due | 118 | 22 | |
30 to 59 Days Past Due | Auto and light truck | |||
Recorded investment of loans and leases, segregated by class, with delinquency aging and nonaccrual status | |||
Past Due | 1,268 | 3,154 | |
30 to 59 Days Past Due | Medium and heavy duty truck | |||
Recorded investment of loans and leases, segregated by class, with delinquency aging and nonaccrual status | |||
Past Due | 14 | 154 | |
30 to 59 Days Past Due | Aircraft | |||
Recorded investment of loans and leases, segregated by class, with delinquency aging and nonaccrual status | |||
Past Due | 7,026 | 4,149 | |
30 to 59 Days Past Due | Construction equipment | |||
Recorded investment of loans and leases, segregated by class, with delinquency aging and nonaccrual status | |||
Past Due | 819 | 1,643 | |
30 to 59 Days Past Due | Commercial real estate | |||
Recorded investment of loans and leases, segregated by class, with delinquency aging and nonaccrual status | |||
Past Due | 58 | 109 | |
30 to 59 Days Past Due | Residential real estate and home equity | |||
Recorded investment of loans and leases, segregated by class, with delinquency aging and nonaccrual status | |||
Past Due | 561 | 1,267 | |
30 to 59 Days Past Due | Consumer | |||
Recorded investment of loans and leases, segregated by class, with delinquency aging and nonaccrual status | |||
Past Due | 632 | 682 | |
60 to 89 Days Past Due | |||
Recorded investment of loans and leases, segregated by class, with delinquency aging and nonaccrual status | |||
Past Due | 4,318 | 3,210 | |
60 to 89 Days Past Due | Commercial and agricultural | |||
Recorded investment of loans and leases, segregated by class, with delinquency aging and nonaccrual status | |||
Past Due | 0 | 0 | |
60 to 89 Days Past Due | Auto and light truck | |||
Recorded investment of loans and leases, segregated by class, with delinquency aging and nonaccrual status | |||
Past Due | 77 | 1,437 | |
60 to 89 Days Past Due | Medium and heavy duty truck | |||
Recorded investment of loans and leases, segregated by class, with delinquency aging and nonaccrual status | |||
Past Due | 0 | 0 | |
60 to 89 Days Past Due | Aircraft | |||
Recorded investment of loans and leases, segregated by class, with delinquency aging and nonaccrual status | |||
Past Due | 3,293 | 1,168 | |
60 to 89 Days Past Due | Construction equipment | |||
Recorded investment of loans and leases, segregated by class, with delinquency aging and nonaccrual status | |||
Past Due | 609 | 0 | |
60 to 89 Days Past Due | Commercial real estate | |||
Recorded investment of loans and leases, segregated by class, with delinquency aging and nonaccrual status | |||
Past Due | 0 | 0 | |
60 to 89 Days Past Due | Residential real estate and home equity | |||
Recorded investment of loans and leases, segregated by class, with delinquency aging and nonaccrual status | |||
Past Due | 152 | 455 | |
60 to 89 Days Past Due | Consumer | |||
Recorded investment of loans and leases, segregated by class, with delinquency aging and nonaccrual status | |||
Past Due | $ 187 | $ 150 |
Loan and Lease Financings (De_5
Loan and Lease Financings (Details 5) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Impaired loans and leases | |||
Recorded Investment, With no related allowance recorded | $ 5,122 | $ 12,673 | |
Unpaid Principal Balance, With no related allowance recorded | 5,122 | 12,673 | |
Recorded Investment, With an allowance recorded | 11,717 | 13,287 | |
Unpaid Principal Balance, With an allowance recorded | 11,719 | 13,289 | |
Total Recorded Investment | 16,839 | 25,960 | |
Total Unpaid Principal Balance | 16,841 | 25,962 | |
Total Related Allowance | 3,225 | 2,083 | |
Average Recorded Investment | 15,076 | 26,711 | $ 15,409 |
Interest Income | 269 | 35 | 23 |
Commercial and agricultural | |||
Impaired loans and leases | |||
Recorded Investment, With no related allowance recorded | 218 | 2,471 | |
Unpaid Principal Balance, With no related allowance recorded | 218 | 2,471 | |
Recorded Investment, With an allowance recorded | 10,366 | 0 | |
Unpaid Principal Balance, With an allowance recorded | 10,366 | 0 | |
Total Related Allowance | 3,003 | 0 | |
Average Recorded Investment | 5,983 | 2,812 | 4,526 |
Interest Income | 242 | 0 | 1 |
Auto and light truck | |||
Impaired loans and leases | |||
Recorded Investment, With no related allowance recorded | 853 | 7,504 | |
Unpaid Principal Balance, With no related allowance recorded | 853 | 7,504 | |
Recorded Investment, With an allowance recorded | 278 | 3,840 | |
Unpaid Principal Balance, With an allowance recorded | 278 | 3,840 | |
Total Related Allowance | 30 | 372 | |
Average Recorded Investment | 2,721 | 9,352 | 766 |
Interest Income | 0 | 0 | 0 |
Medium and heavy duty truck | |||
Impaired loans and leases | |||
Recorded Investment, With no related allowance recorded | 1,074 | 106 | |
Unpaid Principal Balance, With no related allowance recorded | 1,074 | 106 | |
Recorded Investment, With an allowance recorded | 0 | 0 | |
Unpaid Principal Balance, With an allowance recorded | 0 | 0 | |
Total Related Allowance | 0 | 0 | |
Average Recorded Investment | 244 | 247 | 658 |
Interest Income | 0 | 0 | 0 |
Aircraft | |||
Impaired loans and leases | |||
Recorded Investment, With no related allowance recorded | 875 | 556 | |
Unpaid Principal Balance, With no related allowance recorded | 875 | 556 | |
Recorded Investment, With an allowance recorded | 0 | 7,004 | |
Unpaid Principal Balance, With an allowance recorded | 0 | 7,004 | |
Total Related Allowance | 0 | 1,255 | |
Average Recorded Investment | 2,409 | 9,987 | 4,873 |
Interest Income | 8 | 20 | 5 |
Construction equipment | |||
Impaired loans and leases | |||
Recorded Investment, With no related allowance recorded | 615 | 905 | |
Unpaid Principal Balance, With no related allowance recorded | 615 | 905 | |
Recorded Investment, With an allowance recorded | 736 | 1,340 | |
Unpaid Principal Balance, With an allowance recorded | 736 | 1,340 | |
Total Related Allowance | 75 | 279 | |
Average Recorded Investment | 1,664 | 1,663 | 1,011 |
Interest Income | 0 | 0 | 0 |
Commercial real estate | |||
Impaired loans and leases | |||
Recorded Investment, With no related allowance recorded | 1,487 | 1,131 | |
Unpaid Principal Balance, With no related allowance recorded | 1,487 | 1,131 | |
Recorded Investment, With an allowance recorded | 0 | 759 | |
Unpaid Principal Balance, With an allowance recorded | 0 | 759 | |
Total Related Allowance | 0 | 51 | |
Average Recorded Investment | 1,715 | 2,303 | 3,220 |
Interest Income | 0 | 0 | 2 |
Residential real estate and home equity | |||
Impaired loans and leases | |||
Recorded Investment, With no related allowance recorded | 0 | 0 | |
Unpaid Principal Balance, With no related allowance recorded | 0 | 0 | |
Recorded Investment, With an allowance recorded | 337 | 344 | |
Unpaid Principal Balance, With an allowance recorded | 339 | 346 | |
Total Related Allowance | 117 | 126 | |
Average Recorded Investment | 340 | 347 | 355 |
Interest Income | 19 | 15 | 15 |
Consumer | |||
Impaired loans and leases | |||
Recorded Investment, With no related allowance recorded | 0 | 0 | |
Unpaid Principal Balance, With no related allowance recorded | 0 | 0 | |
Recorded Investment, With an allowance recorded | 0 | 0 | |
Unpaid Principal Balance, With an allowance recorded | 0 | 0 | |
Total Related Allowance | 0 | 0 | |
Average Recorded Investment | 0 | 0 | 0 |
Interest Income | $ 0 | $ 0 | $ 0 |
Loan and Lease Financings (De_6
Loan and Lease Financings (Details 6) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019USD ($)defaultmodification | Dec. 31, 2018USD ($)defaultmodification | Dec. 31, 2017USD ($)defaultmodification | |
Loans and leases classified as TDR | |||
Financing Receivable, Troubled Debt Restructuring | $ 10,724 | $ 660 | |
Financing Receivable, Modifications, Number of Contracts | modification | 2 | 1 | 1 |
Financing Receivable, Troubled Debt Restructuring, Postmodification | $ 10,366 | $ 285 | $ 0 |
Troubled debt restructured loans and leases which had payment defaults within twelve months following modification | |||
Default threshold | 90 days | ||
Interest Rate Below Market Reduction | |||
Loans and leases classified as TDR | |||
Financing Receivable, Modifications, Number of Contracts | 1 | 0 | 1 |
Performing | |||
Loans and leases classified as TDR | |||
Financing Receivable, Troubled Debt Restructuring | $ 10,238 | $ 344 | |
Financing Receivable, Modifications, Number of Contracts | modification | 1 | 0 | 0 |
Financing Receivable, Troubled Debt Restructuring, Postmodification | $ 9,901 | $ 0 | $ 0 |
Financing Receivable, Troubled Debt Restructuring, Subsequent Default, Number of Contracts | default | 0 | 0 | 0 |
Nonperforming | |||
Loans and leases classified as TDR | |||
Financing Receivable, Troubled Debt Restructuring | $ 486 | $ 316 | |
Financing Receivable, Modifications, Number of Contracts | modification | 1 | 1 | 1 |
Financing Receivable, Troubled Debt Restructuring, Postmodification | $ 465 | $ 285 | $ 0 |
Financing Receivable, Troubled Debt Restructuring, Subsequent Default, Number of Contracts | default | 1 | 0 | 1 |
Commercial and agricultural | Performing | |||
Loans and leases classified as TDR | |||
Financing Receivable, Modifications, Number of Contracts | modification | 1 | 0 | 0 |
Financing Receivable, Troubled Debt Restructuring, Postmodification | $ 9,901 | $ 0 | $ 0 |
Commercial and agricultural | Nonperforming | |||
Loans and leases classified as TDR | |||
Financing Receivable, Modifications, Number of Contracts | modification | 1 | 0 | 1 |
Financing Receivable, Troubled Debt Restructuring, Postmodification | $ 465 | $ 0 | $ 0 |
Auto and light truck | Performing | |||
Loans and leases classified as TDR | |||
Financing Receivable, Modifications, Number of Contracts | modification | 0 | 0 | 0 |
Financing Receivable, Troubled Debt Restructuring, Postmodification | $ 0 | $ 0 | $ 0 |
Auto and light truck | Nonperforming | |||
Loans and leases classified as TDR | |||
Financing Receivable, Modifications, Number of Contracts | modification | 0 | 1 | 0 |
Financing Receivable, Troubled Debt Restructuring, Postmodification | $ 0 | $ 285 | $ 0 |
Financing Receivable, Troubled Debt Restructuring, Subsequent Default, Number of Contracts | default | 1 | ||
Financing Receivable, Troubled Debt Restructuring, Subsequent Default | $ 0 | ||
Medium and heavy duty truck | Performing | |||
Loans and leases classified as TDR | |||
Financing Receivable, Modifications, Number of Contracts | modification | 0 | 0 | 0 |
Financing Receivable, Troubled Debt Restructuring, Postmodification | $ 0 | $ 0 | $ 0 |
Medium and heavy duty truck | Nonperforming | |||
Loans and leases classified as TDR | |||
Financing Receivable, Modifications, Number of Contracts | modification | 0 | 0 | 0 |
Financing Receivable, Troubled Debt Restructuring, Postmodification | $ 0 | $ 0 | $ 0 |
Aircraft | Performing | |||
Loans and leases classified as TDR | |||
Financing Receivable, Modifications, Number of Contracts | modification | 0 | 0 | 0 |
Financing Receivable, Troubled Debt Restructuring, Postmodification | $ 0 | $ 0 | $ 0 |
Aircraft | Nonperforming | |||
Loans and leases classified as TDR | |||
Financing Receivable, Modifications, Number of Contracts | modification | 0 | 0 | 0 |
Financing Receivable, Troubled Debt Restructuring, Postmodification | $ 0 | $ 0 | $ 0 |
Construction equipment | Performing | |||
Loans and leases classified as TDR | |||
Financing Receivable, Modifications, Number of Contracts | modification | 0 | 0 | 0 |
Financing Receivable, Troubled Debt Restructuring, Postmodification | $ 0 | $ 0 | $ 0 |
Construction equipment | Nonperforming | |||
Loans and leases classified as TDR | |||
Financing Receivable, Modifications, Number of Contracts | modification | 0 | 0 | 0 |
Financing Receivable, Troubled Debt Restructuring, Postmodification | $ 0 | $ 0 | $ 0 |
Financing Receivable, Troubled Debt Restructuring, Subsequent Default, Number of Contracts | default | 1 | ||
Financing Receivable, Troubled Debt Restructuring, Subsequent Default | $ 410 | ||
Commercial real estate | Performing | |||
Loans and leases classified as TDR | |||
Financing Receivable, Modifications, Number of Contracts | modification | 0 | 0 | 0 |
Financing Receivable, Troubled Debt Restructuring, Postmodification | $ 0 | $ 0 | $ 0 |
Commercial real estate | Nonperforming | |||
Loans and leases classified as TDR | |||
Financing Receivable, Modifications, Number of Contracts | modification | 0 | 0 | 0 |
Financing Receivable, Troubled Debt Restructuring, Postmodification | $ 0 | $ 0 | $ 0 |
Residential real estate and home equity | Performing | |||
Loans and leases classified as TDR | |||
Financing Receivable, Modifications, Number of Contracts | modification | 0 | 0 | 0 |
Financing Receivable, Troubled Debt Restructuring, Postmodification | $ 0 | $ 0 | $ 0 |
Residential real estate and home equity | Nonperforming | |||
Loans and leases classified as TDR | |||
Financing Receivable, Modifications, Number of Contracts | modification | 0 | 0 | 0 |
Financing Receivable, Troubled Debt Restructuring, Postmodification | $ 0 | $ 0 | $ 0 |
Consumer | Performing | |||
Loans and leases classified as TDR | |||
Financing Receivable, Modifications, Number of Contracts | modification | 0 | 0 | 0 |
Financing Receivable, Troubled Debt Restructuring, Postmodification | $ 0 | $ 0 | $ 0 |
Consumer | Nonperforming | |||
Loans and leases classified as TDR | |||
Financing Receivable, Modifications, Number of Contracts | modification | 0 | 0 | 0 |
Financing Receivable, Troubled Debt Restructuring, Postmodification | $ 0 | $ 0 | $ 0 |
Reserve for Loan and Lease Lo_3
Reserve for Loan and Lease Losses (Details) - USD ($) $ in Thousands | 12 Months Ended | ||||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2019 | Dec. 31, 2018 | |
Changes in reserve for loan and lease losses | |||||
Balance at the beginning of the period | $ 100,469 | $ 94,883 | $ 88,543 | ||
Charge-offs | 7,591 | 17,112 | 6,529 | ||
Recoveries | 2,543 | 3,236 | 3,889 | ||
Net charge-offs (recoveries) | 5,048 | 13,876 | 2,640 | ||
Provision (recovery of provision) | 15,833 | 19,462 | 8,980 | ||
Balance at the end of the period | 111,254 | 100,469 | 94,883 | ||
Reserve for loan and lease losses | |||||
Ending balance, individually evaluated for impairment | $ 3,225 | $ 2,083 | |||
Ending balance, collectively evaluated for impairment | 108,029 | 98,386 | |||
Total reserve for loan and lease losses | 100,469 | 94,883 | 88,543 | 111,254 | 100,469 |
Recorded investment in loans | |||||
Ending balance, individually evaluated for impairment | 16,839 | 25,960 | |||
Ending balance, collectively evaluated for impairment | 5,068,688 | 4,809,504 | |||
Total loans and leases | 5,085,527 | 4,835,464 | |||
Commercial and agricultural | |||||
Changes in reserve for loan and lease losses | |||||
Balance at the beginning of the period | 17,063 | 16,228 | 14,668 | ||
Charge-offs | 1,040 | 229 | 2,415 | ||
Recoveries | 664 | 222 | 984 | ||
Net charge-offs (recoveries) | 376 | 7 | 1,431 | ||
Provision (recovery of provision) | 6,984 | 842 | 2,991 | ||
Balance at the end of the period | 23,671 | 17,063 | 16,228 | ||
Reserve for loan and lease losses | |||||
Ending balance, individually evaluated for impairment | 3,003 | 0 | |||
Ending balance, collectively evaluated for impairment | 20,668 | 17,063 | |||
Total reserve for loan and lease losses | 23,671 | 16,228 | 14,668 | 23,671 | 17,063 |
Recorded investment in loans | |||||
Ending balance, individually evaluated for impairment | 10,584 | 2,471 | |||
Ending balance, collectively evaluated for impairment | 1,122,207 | 1,070,734 | |||
Total loans and leases | 1,132,791 | 1,073,205 | |||
Auto and light truck | |||||
Changes in reserve for loan and lease losses | |||||
Balance at the beginning of the period | 14,689 | 10,103 | 8,064 | ||
Charge-offs | 991 | 3,308 | 774 | ||
Recoveries | 97 | 68 | 1,153 | ||
Net charge-offs (recoveries) | 894 | 3,240 | (379) | ||
Provision (recovery of provision) | 605 | 7,826 | 1,660 | ||
Balance at the end of the period | 14,400 | 14,689 | 10,103 | ||
Reserve for loan and lease losses | |||||
Ending balance, individually evaluated for impairment | 30 | 372 | |||
Ending balance, collectively evaluated for impairment | 14,370 | 14,317 | |||
Total reserve for loan and lease losses | 14,689 | 14,689 | 10,103 | 14,400 | 14,689 |
Recorded investment in loans | |||||
Ending balance, individually evaluated for impairment | 1,131 | 11,344 | |||
Ending balance, collectively evaluated for impairment | 587,676 | 548,643 | |||
Total loans and leases | 588,807 | 559,987 | |||
Medium and heavy duty truck | |||||
Changes in reserve for loan and lease losses | |||||
Balance at the beginning of the period | 4,303 | 4,844 | 4,740 | ||
Charge-offs | 1,132 | 23 | 0 | ||
Recoveries | 32 | 0 | 0 | ||
Net charge-offs (recoveries) | 1,100 | 23 | 0 | ||
Provision (recovery of provision) | 1,409 | (518) | 104 | ||
Balance at the end of the period | 4,612 | 4,303 | 4,844 | ||
Reserve for loan and lease losses | |||||
Ending balance, individually evaluated for impairment | 0 | 0 | |||
Ending balance, collectively evaluated for impairment | 4,612 | 4,303 | |||
Total reserve for loan and lease losses | 4,612 | 4,844 | 4,844 | 4,612 | 4,303 |
Recorded investment in loans | |||||
Ending balance, individually evaluated for impairment | 1,074 | 106 | |||
Ending balance, collectively evaluated for impairment | 293,750 | 283,438 | |||
Total loans and leases | 294,824 | 283,544 | |||
Aircraft | |||||
Changes in reserve for loan and lease losses | |||||
Balance at the beginning of the period | 33,047 | 34,619 | 34,352 | ||
Charge-offs | 3,066 | 12,222 | 1,872 | ||
Recoveries | 1,143 | 2,499 | 227 | ||
Net charge-offs (recoveries) | 1,923 | 9,723 | 1,645 | ||
Provision (recovery of provision) | (66) | 8,151 | 1,912 | ||
Balance at the end of the period | 31,058 | 33,047 | 34,619 | ||
Reserve for loan and lease losses | |||||
Ending balance, individually evaluated for impairment | 0 | 1,255 | |||
Ending balance, collectively evaluated for impairment | 31,058 | 31,792 | |||
Total reserve for loan and lease losses | 31,058 | 34,619 | 34,619 | 31,058 | 33,047 |
Recorded investment in loans | |||||
Ending balance, individually evaluated for impairment | 875 | 7,560 | |||
Ending balance, collectively evaluated for impairment | 783,165 | 795,551 | |||
Total loans and leases | 784,040 | 803,111 | |||
Construction equipment | |||||
Changes in reserve for loan and lease losses | |||||
Balance at the beginning of the period | 10,922 | 9,343 | 8,207 | ||
Charge-offs | 238 | 288 | 164 | ||
Recoveries | 160 | 100 | 298 | ||
Net charge-offs (recoveries) | 78 | 188 | (134) | ||
Provision (recovery of provision) | 3,276 | 1,767 | 1,002 | ||
Balance at the end of the period | 14,120 | 10,922 | 9,343 | ||
Reserve for loan and lease losses | |||||
Ending balance, individually evaluated for impairment | 75 | 279 | |||
Ending balance, collectively evaluated for impairment | 14,045 | 10,643 | |||
Total reserve for loan and lease losses | 10,922 | 10,922 | 8,207 | 14,120 | 10,922 |
Recorded investment in loans | |||||
Ending balance, individually evaluated for impairment | 1,351 | 2,245 | |||
Ending balance, collectively evaluated for impairment | 704,100 | 642,994 | |||
Total loans and leases | 705,451 | 645,239 | |||
Commercial real estate | |||||
Changes in reserve for loan and lease losses | |||||
Balance at the beginning of the period | 15,705 | 14,792 | 13,677 | ||
Charge-offs | 5 | 70 | 344 | ||
Recoveries | 75 | 53 | 851 | ||
Net charge-offs (recoveries) | (70) | 17 | (507) | ||
Provision (recovery of provision) | 2,575 | 930 | 608 | ||
Balance at the end of the period | 18,350 | 15,705 | 14,792 | ||
Reserve for loan and lease losses | |||||
Ending balance, individually evaluated for impairment | 0 | 51 | |||
Ending balance, collectively evaluated for impairment | 18,350 | 15,654 | |||
Total reserve for loan and lease losses | 15,705 | 15,705 | 14,792 | 18,350 | 15,705 |
Recorded investment in loans | |||||
Ending balance, individually evaluated for impairment | 1,487 | 1,890 | |||
Ending balance, collectively evaluated for impairment | 906,690 | 807,996 | |||
Total loans and leases | 908,177 | 809,886 | |||
Residential real estate and home equity | |||||
Changes in reserve for loan and lease losses | |||||
Balance at the beginning of the period | 3,425 | 3,666 | 3,550 | ||
Charge-offs | 53 | 63 | 124 | ||
Recoveries | 85 | 23 | 109 | ||
Net charge-offs (recoveries) | (32) | 40 | 15 | ||
Provision (recovery of provision) | 152 | (201) | 131 | ||
Balance at the end of the period | 3,609 | 3,425 | 3,666 | ||
Reserve for loan and lease losses | |||||
Ending balance, individually evaluated for impairment | 117 | 126 | |||
Ending balance, collectively evaluated for impairment | 3,492 | 3,299 | |||
Total reserve for loan and lease losses | 3,425 | 3,425 | 3,666 | 3,609 | 3,425 |
Recorded investment in loans | |||||
Ending balance, individually evaluated for impairment | 337 | 344 | |||
Ending balance, collectively evaluated for impairment | 531,666 | 523,511 | |||
Total loans and leases | 532,003 | 523,855 | |||
Consumer | |||||
Changes in reserve for loan and lease losses | |||||
Balance at the beginning of the period | 1,315 | 1,288 | 1,285 | ||
Charge-offs | 1,066 | 909 | 836 | ||
Recoveries | 287 | 271 | 267 | ||
Net charge-offs (recoveries) | 779 | 638 | 569 | ||
Provision (recovery of provision) | 898 | 665 | 572 | ||
Balance at the end of the period | 1,434 | 1,315 | 1,288 | ||
Reserve for loan and lease losses | |||||
Ending balance, individually evaluated for impairment | 0 | 0 | |||
Ending balance, collectively evaluated for impairment | 1,434 | 1,315 | |||
Total reserve for loan and lease losses | $ 1,434 | $ 1,288 | $ 1,288 | 1,434 | 1,315 |
Recorded investment in loans | |||||
Ending balance, individually evaluated for impairment | 0 | 0 | |||
Ending balance, collectively evaluated for impairment | 139,434 | 136,637 | |||
Total loans and leases | $ 139,434 | $ 136,637 |
Lease Investments (Details)
Lease Investments (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Schedule of the Components of Income from Direct Finance and Operating Lease Equipment [Line Items] | |||
Interest income on lease receivable | $ 10,985 | $ 13,052 | $ 11,482 |
Income related to lease payments | 30,741 | 31,793 | 30,381 |
Minimum lease payments | 190,879 | 257,398 | |
Estimated unguaranteed residual values | 41 | 41 | |
Less: unearned income | (30,568) | (46,709) | |
Net investment in direct finance lease financing | 160,352 | 210,730 | |
Gross investment in operating lease financing | 176,485 | 199,954 | |
Accumulated depreciation | (64,801) | (65,514) | |
Net investment in operating lease financings | 111,684 | 134,440 | |
Carrying amount of residual assets covered by residual value guarantees | 69,090 | 87,610 | |
Income from reimbursements for personal property tax payments on operating leased equipment | 730 | ||
Expense for payments of personal property taxes on operating leased equipment | 730 | ||
Leased equipment | |||
Schedule of the Components of Income from Direct Finance and Operating Lease Equipment [Line Items] | |||
Depreciation | $ 25,128 | $ 26,248 | $ 25,215 |
Lease Investments (Details 2)
Lease Investments (Details 2) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Direct financing minimum lease payments receivable | ||
2020 | $ 42,940 | |
2021 | 34,966 | |
2022 | 33,577 | |
2023 | 29,027 | |
2024 | 16,001 | |
Thereafter | 34,368 | |
Total | 190,879 | $ 257,398 |
Operating minimum lease payments receivable | ||
2020 | 33,015 | |
2021 | 20,036 | |
2022 | 12,800 | |
2023 | 7,208 | |
2024 | 2,968 | |
Thereafter | 934 | |
Total | $ 76,961 |
Premises and Equipment (Details
Premises and Equipment (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Premises and equipment | |||
Total premises and equipment | $ 116,561,000 | $ 115,703,000 | |
Accumulated depreciation and amortization | (64,342,000) | (63,564,000) | |
Net premises and equipment | 52,219,000 | 52,139,000 | |
Long-lived asset impairment charges | 0 | 100,000 | $ 410,000 |
Depreciation and amortization of properties and equipment | 5,786,000 | 5,620,000 | $ 5,658,000 |
Land | |||
Premises and equipment | |||
Total premises and equipment | 15,222,000 | 15,223,000 | |
Buildings and improvements | |||
Premises and equipment | |||
Total premises and equipment | 59,508,000 | 59,691,000 | |
Furniture and equipment | |||
Premises and equipment | |||
Total premises and equipment | $ 41,831,000 | $ 40,789,000 |
Mortgage Servicing Rights (Deta
Mortgage Servicing Rights (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Expected amortization expense on mortgage servicing rights | |||
2020 | $ 760 | ||
2021 | 640 | ||
2022 | 530 | ||
2023 | 430 | ||
2024 | 360 | ||
Residential mortgage loans | |||
Mortgage Servicing Rights | |||
Unpaid principal balance | $ 740,910 | $ 734,300 | $ 752,990 |
Mortgage Servicing Rights (De_2
Mortgage Servicing Rights (Details 2) - Residential mortgage loans - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Changes in mortgage servicing rights | |||
Balance at the beginning of the period | $ 4,283 | $ 4,349 | |
Additions | 1,229 | 890 | |
Amortization | (1,312) | (956) | |
Sales | 0 | 0 | |
Carrying value before valuation allowance at end of year | 4,200 | 4,283 | $ 4,349 |
Changes in valuation allowance | |||
Balance at the beginning of the period | 0 | 0 | |
Impairment (charges) recoveries | 0 | 0 | |
Balance at the end of the period | 0 | 0 | 0 |
Net carrying value of mortgage servicing rights at end of period | 4,200 | 4,283 | |
Fair value of mortgage servicing rights at end of period | 5,986 | 7,238 | |
Fair value of mortgage servicing rights exceeding the carrying value | 1,790 | ||
Funds held in trust | 16,770 | 10,280 | |
Mortgage loan contractual servicing fees | $ 2,640 | $ 2,610 | $ 2,700 |
Intangible Assets and Goodwil_2
Intangible Assets and Goodwill (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |||
Goodwill | $ 83,870 | $ 83,870 | |
Other intangible assets | 100 | 130 | |
Accumulated amortization on intangible assets | 100 | 70 | |
Intangible asset amortization | 30 | $ 80 | $ 360 |
Expected amortization on other intangible assets | |||
2020 | 20 | ||
2021 | 20 | ||
2022 | 20 | ||
2023 | 20 | ||
2024 | $ 20 |
Intangible Assets and Goodwil_3
Intangible Assets and Goodwill (Details 2) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Core deposit intangibles and other intangible assets | ||
Less: accumulated amortization | $ (100) | $ (70) |
Net carrying amount | 100 | 130 |
Other intangibles | ||
Core deposit intangibles and other intangible assets | ||
Gross carrying amount | 204 | 204 |
Less: accumulated amortization | (100) | (71) |
Net carrying amount | $ 104 | $ 133 |
Deposits (Details)
Deposits (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Amount of certificates of deposit and other time deposits of $250,000 or more outstanding | ||
Under 3 months | $ 199,375 | |
4-6 months | 170,902 | |
7-12 months | 156,874 | |
Over 12 months | 222,284 | |
Total | 749,435 | $ 666,890 |
Maturities of time deposits, including both private and public funds | ||
2020 | 1,256,577 | |
2021 | 227,115 | |
2022 | 105,218 | |
2023 | 49,999 | |
2024 | 7,496 | |
Thereafter | 2,093 | |
Total | $ 1,648,498 | $ 1,467,766 |
Borrowed Funds and Mandatoril_3
Borrowed Funds and Mandatorily Redeemable Securities (Details) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019USD ($)note | Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) | |
Borrowed funds and mandatorily redeemable securities | |||
Total long-term debt and mandatorily redeemable securities | $ 71,639 | $ 71,123 | |
Annual maturities of long-term debt | |||
2020 | 2,759 | ||
2021 | 3,047 | ||
2022 | 4,709 | ||
2023 | 1,928 | ||
2024 | 11,065 | ||
Thereafter | 48,131 | ||
Mandatorily redeemable securities | |||
Interest expense | 2,220 | 1,610 | $ 1,680 |
Securities subject to mandatory redemption | |||
Borrowed funds and mandatorily redeemable securities | |||
Mandatorily redeemable securities | 17,972 | 16,542 | |
Federal Home Loan Bank borrowings | |||
Borrowed funds and mandatorily redeemable securities | |||
Long-term debt | $ 45,819 | 46,444 | |
Annual maturities of long-term debt | |||
Number of Federal Home Loan Bank borrowings, fixed rate notes | note | 17 | ||
Collateral security | $ 57,250 | ||
Other long-term debt | |||
Borrowed funds and mandatorily redeemable securities | |||
Long-term debt | $ 7,848 | $ 8,137 | |
Minimum | Federal Home Loan Bank borrowings | |||
Borrowed funds and mandatorily redeemable securities | |||
Interest rate on Federal Home Loan Bank borrowings (as a percent) | 1.04% | ||
Maximum | Federal Home Loan Bank borrowings | |||
Borrowed funds and mandatorily redeemable securities | |||
Interest rate on Federal Home Loan Bank borrowings (as a percent) | 5.04% |
Borrowed Funds and Mandatoril_4
Borrowed Funds and Mandatorily Redeemable Securities (Details 2) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Short-term borrowings: | ||
Short-term borrowings | $ 145,893 | $ 199,344 |
Short-term borrowings, weighted average interest rate | 0.42% | 1.30% |
Federal funds purchased | ||
Short-term borrowings: | ||
Short-term borrowings | $ 0 | $ 10,000 |
Short-term borrowings, weighted average interest rate | 0.00% | 2.70% |
Security repurchase agreements | ||
Short-term borrowings: | ||
Short-term borrowings | $ 120,459 | $ 103,627 |
Short-term borrowings, weighted average interest rate | 0.23% | 0.25% |
Commercial paper | ||
Short-term borrowings: | ||
Short-term borrowings | $ 3,993 | $ 4,325 |
Short-term borrowings, weighted average interest rate | 0.29% | 0.29% |
Federal Home Loan Bank advances | ||
Short-term borrowings: | ||
Short-term borrowings | $ 20,000 | $ 80,000 |
Short-term borrowings, weighted average interest rate | 1.61% | 2.57% |
Other short-term borrowings | ||
Short-term borrowings: | ||
Short-term borrowings | $ 1,441 | $ 1,392 |
Short-term borrowings, weighted average interest rate | 0.00% | 0.00% |
Variable Interest Entities (Det
Variable Interest Entities (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Variable Interest Entities | |||
Federal tax credits recognized in tax expense | $ 1,550 | $ 1,290 | $ 1,150 |
Investment tax credits | 15,860 | 10,450 | $ 18,160 |
Unconsolidated investment carrying amount | 19,843 | 15,083 | |
Unconsolidated unfunded capital and other investments | 17,420 | 6,449 | |
Unconsolidated maximum exposure to loss | 37,904 | 40,705 | |
Consolidated investment carrying amount | 41,240 | 8,380 | |
Consolidated unfunded capital and other commitments | $ 18,680 | $ 6,700 |
Variable Interest Entities (D_2
Variable Interest Entities (Details 2) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019USD ($)trust | Dec. 31, 2018USD ($) | ||
Variable Interest Entities | |||
Number of trusts sponsored | trust | 1 | ||
Percentage of ownership interest | 100.00% | ||
Subordinated notes | |||
Amount of subordinated notes | $ 58,764 | $ 58,764 | |
June 2007 issuance | |||
Subordinated notes | |||
Amount of subordinated notes | $ 41,238 | ||
Interest Rate (as a percent) | [1] | 7.22% | |
Maturity date of subordinated notes | Jun. 15, 2037 | ||
August 2007 issuance | |||
Subordinated notes | |||
Amount of subordinated notes | $ 17,526 | ||
Interest Rate (as a percent) | [2] | 3.37% | |
Maturity date of subordinated notes | Sep. 15, 2037 | ||
London Interbank Offered Rate (LIBOR) | August 2007 issuance | |||
Subordinated notes | |||
Basis Spread on Variable Rate (as a percent) | 1.48% | ||
[1] | Fixed rate through life of debt. | ||
[2] | 3-Month LIBOR + 1.48% through remaining life of debt. |
Earnings Per Share (Details)
Earnings Per Share (Details) - shares | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Stock options | |||
Earnings Per Share | |||
Antidilutive securities (in shares) | 0 | 0 | 0 |
Earnings Per Share (Details 2)
Earnings Per Share (Details 2) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Earnings Per Share [Abstract] | |||
Distributed earnings allocated to common stock | $ 28,188 | $ 24,894 | $ 19,701 |
Undistributed earnings allocated to common stock | 63,254 | 56,975 | 47,830 |
Net earnings allocated to common stock | 91,442 | 81,869 | 67,531 |
Net earnings allocated to participating securities | 518 | 545 | 520 |
Net income available to common shareholders | $ 91,960 | $ 82,414 | $ 68,051 |
Weighted average shares outstanding for basic earnings per common share | 25,600,138 | 25,937,599 | 25,925,820 |
Dilutive effect of stock compensation (in shares) | 0 | 0 | 0 |
Weighted average shares outstanding for diluted earnings per common share | 25,600,138 | 25,937,599 | 25,925,820 |
Basic earnings per common share (in dollars per share) | $ 3.57 | $ 3.16 | $ 2.60 |
Diluted earnings per common share (in dollars per share) | $ 3.57 | $ 3.16 | $ 2.60 |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Income (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | |||
(Losses) gains on investment securities available-for-sale | $ 0 | $ (345) | |
Income before income taxes | 120,154 | 105,027 | $ 101,360 |
Income tax expense | (28,139) | (22,613) | (33,309) |
Net income | 92,015 | 82,414 | $ 68,051 |
Unrealized gains and losses on available-for-sale securities | Amount reclassified from Accumulated Other Comprehensive Income | |||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | |||
(Losses) gains on investment securities available-for-sale | 0 | (345) | |
Income before income taxes | 0 | (345) | |
Income tax expense | 0 | 83 | |
Net income | $ 0 | $ (262) |
Employee Benefit Plans (Details
Employee Benefit Plans (Details) | 12 Months Ended | ||
Dec. 31, 2019USD ($)hshares | Dec. 31, 2018USD ($)shares | Dec. 31, 2017USD ($) | |
Life insurance plan | Maximum | Retiree | |||
Employee benefit plans | |||
Benefits payable | $ 3,000 | ||
Medical plan | Maximum | Retiree | |||
Employee benefit plans | |||
Benefits payable | $ 15,000 | ||
Post retirement plan | |||
Employee benefit plans | |||
Minimum age required prior to amendment | 55 years | ||
Term of credited service before becoming eligible for retirement benefits before plan amendment | 20 years | ||
Net periodic post retirement benefit cost (recovery) recognized | $ 0 | $ (10,000) | $ (10,000) |
Employee Stock Ownership and Profit Sharing Plan | |||
Employee benefit plans | |||
Minimum service period required to participate in Plan | 90 days | ||
Percentage of employee's deferred compensation up to which the employer matches (as a percent) | 4.00% | ||
Employer's matching contribution on the next 2% of employee contribution (as a percent) | 50.00% | ||
Employee contribution after matching contribution of employer (as a percent) | 2.00% | ||
Employee's eligible compensation on which employer pays fixed contribution (as a percent) | 2.00% | ||
Common stock held in relation to employee benefit plans (in shares) | shares | 852,128 | 1,007,611 | |
Minimum service period required to be eligible to get employer's contribution | 5 years | ||
Minimum working hours required per year to be eligible to get employer's contribution | h | 1,000 | ||
Employee deferral that is always vested (as a percent) | 100.00% | ||
Contribution expense | $ 5,480,000 | $ 4,870,000 | $ 4,880,000 |
Stock Based Compensation (Detai
Stock Based Compensation (Details) | 12 Months Ended | ||
Dec. 31, 2019USD ($)plan$ / sharesshares | Dec. 31, 2018USD ($)$ / sharesshares | Dec. 31, 2017USD ($)$ / sharesshares | |
Stock-based compensation | |||
Number of stock-based employee compensation plans | plan | 4 | ||
Number of executive stock award plans | plan | 3 | ||
Total fair value of share awards vested | $ | $ 3,350,000 | $ 3,530,000 | $ 2,370,000 |
Shares Available for Grant | |||
Balance at the beginning of the period (in shares) | 675,059 | 676,444 | 714,005 |
Granted (in shares) | (74,336) | (74,981) | (98,625) |
Forfeited (in shares) | 1,241 | 3,135 | 2,000 |
Balance at the end of the period (in shares) | 664,502 | 675,059 | 676,444 |
Stock award plans | |||
Additional disclosures | |||
Stock-based compensation expense | $ | $ 2,760,000 | $ 3,550,000 | $ 2,960,000 |
Income tax benefit due to stock-based compensation expenses | $ | 650,000 | $ 860,000 | $ 1,110,000 |
Unrecognized stock-based compensation expense | $ | $ 4,910,000 | ||
Weighted-average period for unrecognized compensation cost to recognize | 2 years 10 months 17 days | ||
Executive Incentive Plan | |||
Shares Available for Grant | |||
Shares authorized | 62,538 | 70,461 | 59,064 |
Additional disclosures | |||
Vesting period | 5 years | ||
1982 Restricted Stock Plan | Maximum | |||
Additional disclosures | |||
Vesting period | 10 years | ||
Strategic Deployment Incentive Plan | |||
Additional disclosures | |||
Vesting period | 5 years | ||
Stock options | |||
Additional disclosures | |||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period | 0 | 0 | 0 |
Stock-based compensation expense | $ | $ 0 | $ 0 | $ 0 |
Stock options | Maximum | |||
Additional disclosures | |||
Contractual life | 10 years | ||
Non-vested stock awards outstanding | |||
Number of Shares | |||
Stock awards outstanding at the beginning of the period (in shares) | 253,819 | 295,926 | 276,615 |
Granted (in shares) | 74,336 | 74,981 | 98,625 |
Vested (in shares) | (100,299) | (106,513) | (76,858) |
Forfeited (in shares) | (8,865) | (10,575) | (2,456) |
Stock awards outstanding at the end of the period (in shares) | 218,991 | 253,819 | 295,926 |
Weighted-Average Grant-Date Fair Value | |||
Stock awards outstanding at the beginning of the period (in dollars per share) | $ / shares | $ 28.59 | $ 27.41 | $ 23.94 |
Granted (in dollars per share) | $ / shares | 31.44 | 29.11 | 33.54 |
Vested (in dollars per share) | $ / shares | 28.35 | 25.79 | 22.71 |
Forfeited (in dollars per share) | $ / shares | 30.28 | 27.51 | 29.93 |
Stock awards outstanding at the end of the period (in dollars per share) | $ / shares | $ 29.60 | 28.59 | 27.41 |
Employee Stock Purchase Plan | |||
Additional disclosures | |||
Required period of service | 2 years | ||
Maximum base rate of employee basic pay to purchase any dollar amount of stock (as a percent) | 25.00% | ||
Maximum stock which can be purchased by employee per year | $ | $ 25,000 | ||
Purchases price (in dollars per share) | $ / shares | $ 43.81 | $ 53.84 | $ 46.18 |
Percentage of the premium fair market value of common stock as on the offering date or the market value as on the purchase date (as a percent) | 0.14% | ||
Percentage of the discount fair market value of common stock as on the offering date or the market value as on the purchase date (as a percent) | (0.09%) | (1.32%) | |
ESPP offering through June 2021 | |||
Additional disclosures | |||
Value of shares to be purchased | $ | $ 139,290 | ||
Stock value of most recent offering (in dollars per share ) | $ / shares | $ 43.81 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Current: | |||
Federal | $ 28,130 | $ 20,167 | $ 26,012 |
State | 5,739 | 2,996 | 4,530 |
Total current | 33,869 | 23,163 | 30,542 |
Deferred: | |||
Federal | (5,135) | (875) | 5,869 |
State | (595) | 1,200 | (488) |
Deferred tax liability remeasurement | 0 | (875) | (2,614) |
Total deferred | (5,730) | (550) | 2,767 |
Total provision | $ 28,139 | $ 22,613 | $ 33,309 |
Income Taxes (Details 2)
Income Taxes (Details 2) - USD ($) | Dec. 22, 2017 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 |
Reasons for the difference between income tax expense and statutory federal income tax | ||||
Statutory federal income tax | $ 25,232,000 | $ 22,056,000 | $ 35,476,000 | |
Tax-exempt interest income | (552,000) | (650,000) | (1,197,000) | |
State taxes, net of federal income tax benefit | 4,064,000 | 3,315,000 | 2,627,000 | |
Deferred tax liability remeasurement | 0 | (875,000) | (2,614,000) | |
Other | (605,000) | (1,233,000) | (983,000) | |
Total provision | $ 28,139,000 | $ 22,613,000 | $ 33,309,000 | |
Reasons for the difference between income tax expense rate and statutory federal income tax rate | ||||
Statutory federal income tax (as a percent) | 21.00% | 21.00% | 21.00% | 35.00% |
Tax-exempt interest income (as a percent) | (0.50%) | (0.60%) | (1.20%) | |
State taxes, net of federal income tax benefit (as a percent) | 3.40% | 3.20% | 2.60% | |
Deferred tax liability remeasurement (as a percent) | 0.00% | (0.80%) | (2.60%) | |
Other (as a percent) | (0.50%) | (1.30%) | (0.90%) | |
Total income tax expense (benefit) (as a percent) | 23.40% | 21.50% | 32.90% | |
Deferred tax assets: | ||||
Reserve for loan and lease losses | $ 28,792,000 | $ 25,386,000 | ||
Operating lease liability | 5,899,000 | 0 | ||
Accruals for employee benefits | 2,842,000 | 2,974,000 | ||
Net unrealized losses on securities available-for-sale | 0 | 3,386,000 | ||
Other | 222,000 | 127,000 | ||
Total deferred tax assets | 37,755,000 | 31,873,000 | ||
Deferred tax liabilities: | ||||
Differing depreciable bases in premises and leased equipment | 18,614,000 | 21,184,000 | ||
Right of use assets - leases | 5,899,000 | 0 | ||
Differing bases in assets related to acquisitions | 4,092,000 | 4,021,000 | ||
Tax advantaged partnerships | 4,383,000 | 4,354,000 | ||
Net unrealized gains on securities available-for-sale | 1,640,000 | 0 | ||
Mortgage servicing | 394,000 | 586,000 | ||
Capitalized loan costs | 1,207,000 | 1,110,000 | ||
Prepaid expenses | 297,000 | 273,000 | ||
Other | 544,000 | 364,000 | ||
Total deferred tax liabilities | 37,070,000 | 31,892,000 | ||
Net deferred tax asset | 685,000 | |||
Net deferred tax liability | (19,000) | |||
Reconciliation of the beginning and ending amounts of unrecognized tax benefits | ||||
Balance, at beginning of the period | 0 | 1,112,000 | $ 762,000 | |
Additions based on tax positions related to the current year | 0 | 0 | 350,000 | |
Additions for tax positions of prior years | 0 | 0 | 0 | |
Reductions for tax positions of prior years | 0 | 0 | 0 | |
Reductions due to lapse in statute of limitations | 0 | 0 | 0 | |
Settlements | 0 | (1,112,000) | 0 | |
Balance at end of the period | 0 | 0 | 1,112,000 | |
Valuation allowance for deferred tax assets | 0 | 0 | ||
Unrecognized tax benefits that would affect the effective tax rate if recognized | 0 | 0 | 720,000 | |
Interest and penalties net of tax recognized | 0 | (90,000) | 50,000 | |
Accrued interest and penalties | 0 | 0 | 90,000 | |
Investment securities available-for-sale | ||||
Reasons for the difference between income tax expense and statutory federal income tax | ||||
Total provision | $ 0 | $ (83,000) | $ 1,629,000 |
Contingent Liabilities, Commi_3
Contingent Liabilities, Commitments, and Financial Instruments with Off-Balance-Sheet Risk (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |||
Gross rental expense | $ 3,730 | $ 4,180 | |
Liability for repurchases | $ 290 | $ 290 | |
Operating lease right of use assets | 24,147 | ||
Operating Lease, Right-of-Use Asset, Corporate Office Building | 14,650 | ||
Operating lease liabilities | 24,319 | ||
Operating Lease, Liability, Corporate Office Building | $ 14,640 |
Contingent Liabilities, Commi_4
Contingent Liabilities, Commitments, and Financial Instruments with Off-Balance-Sheet Risk (Details 2) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019USD ($)Rate | Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) | |
Commitments and Contingencies Disclosure [Abstract] | |||
Operating lease cost | $ 3,506 | ||
Short-term lease cost | 41 | ||
Variable lease cost | 0 | ||
Total operating lease cost | 3,547 | ||
Operating Leases, Rent Expense, Net [Abstract] | |||
Gross rental expense | $ 3,730 | $ 4,180 | |
Lessee, Operating Lease, Liability, Payment, Due [Abstract] | |||
2020 | 3,477 | ||
2021 | 3,800 | ||
2022 | 3,714 | ||
2023 | 2,653 | ||
2024 | 2,552 | ||
Thereafter | 11,508 | ||
Total lease payments | 27,704 | ||
Imputed interest | (3,385) | ||
Operating lease liabilities | $ 24,319 | ||
Weighted average remaining lease term | 10 years 10 months 17 days | ||
Weighted average discount rate | Rate | 2.83% | ||
Operating cash flows from operating leases | $ 950 | ||
Net gain on sale of building with a subsequent operating lease | $ 1,310 | ||
Number of significant lessee leases that have not yet commenced | 0 |
Contingent Liabilities, Commi_5
Contingent Liabilities, Commitments, and Financial Instruments with Off-Balance-Sheet Risk (Details 3) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Commitments to extend credit | ||
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items] | ||
Off-balance-sheet instruments | $ 1,095,054 | $ 1,095,053 |
Standby letters of credit | ||
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items] | ||
Off-balance-sheet instruments | $ 27,549 | 31,133 |
Standby letters of credit | Minimum | ||
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items] | ||
Letter of credit term | 2 months | |
Standby letters of credit | Maximum | ||
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items] | ||
Letter of credit term | 1 year | |
Commercial and similar letters of credit | ||
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items] | ||
Off-balance-sheet instruments | $ 2,332 | $ 2,500 |
Commercial and similar letters of credit | Minimum | ||
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items] | ||
Letter of credit term | 2 months | |
Commercial and similar letters of credit | Maximum | ||
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items] | ||
Letter of credit term | 6 months |
Derivative Financial Instrume_3
Derivative Financial Instruments (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Non-hedging derivative financial instruments | ||
Derivative Financial Instruments | ||
Derivative, Notional Amount | $ 1,108,391 | $ 875,806 |
Asset derivatives, Fair value | 22,160 | 7,236 |
Liability derivatives, Fair value | 22,390 | 7,385 |
Interest rate swap contracts | ||
Derivative Financial Instruments | ||
Asset derivatives, Fair value | 22,279 | 7,128 |
Interest rate swap contracts | Non-hedging derivative financial instruments | ||
Derivative Financial Instruments | ||
Derivative, Notional Amount | 1,074,809 | 855,848 |
Asset derivatives, Fair value | 21,975 | 7,124 |
Liability derivatives, Fair value | 22,352 | 7,250 |
Loan commitments | Non-hedging derivative financial instruments | ||
Derivative Financial Instruments | ||
Derivative, Notional Amount | 9,950 | 5,871 |
Asset derivatives, Fair value | 185 | 112 |
Liability derivatives, Fair value | 0 | 0 |
Forward contracts - mortgage loan | Non-hedging derivative financial instruments | ||
Derivative Financial Instruments | ||
Derivative, Notional Amount | 23,632 | 14,087 |
Asset derivatives, Fair value | 0 | 0 |
Liability derivatives, Fair value | $ 38 | $ 135 |
Derivative Financial Instrume_4
Derivative Financial Instruments (Details 2) - Non-hedging derivative financial instruments - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Derivative Financial Instruments | |||
Gain (loss) | $ 1,274 | $ 919 | $ 1,402 |
Interest rate swap contracts | Other expense | |||
Derivative Financial Instruments | |||
Gain (loss) | (252) | (30) | 26 |
Interest rate swap contracts | Other income | |||
Derivative Financial Instruments | |||
Gain (loss) | 1,356 | 1,028 | 1,585 |
Loan commitments | Mortgage banking income | |||
Derivative Financial Instruments | |||
Gain (loss) | 73 | 46 | 23 |
Forward contracts - mortgage loan | Mortgage banking income | |||
Derivative Financial Instruments | |||
Gain (loss) | $ 97 | $ (125) | $ (232) |
Derivative Financial Instrume_5
Derivative Financial Instruments (Details 3) - Interest rate swap contracts - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Offsetting Assets | ||
Gross Amounts of Recognized Assets | $ 22,279 | $ 7,128 |
Gross Amounts Offset in the Statement of Financial Condition | 304 | 4 |
Net Amounts of Assets Presented in the Statement of Financial Condition | 21,975 | 7,124 |
Gross Amounts Not Offset in the Statement of Financial Condition | ||
Financial instruments | 0 | 177 |
Cash collateral received | 0 | 610 |
Net Amount | $ 21,975 | $ 6,337 |
Derivative Financial Instrume_6
Derivative Financial Instruments (Details 4) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Offsetting Liabilities | ||
Gross Amounts of Recognized Liabilities | $ 143,115 | $ 110,881 |
Gross Amounts Offset in the Statement of Financial Condition | 304 | 4 |
Net Amounts Offset in the Statement of Financial Condition | 142,811 | 110,877 |
Gross Amounts Not Offset in the Statement of Financial Condition | ||
Financial instruments | 143,941 | 105,327 |
Cash Collateral Pledged | 0 | 0 |
Net Amount | (1,130) | 5,550 |
Interest rate swap contracts | ||
Offsetting Liabilities | ||
Gross Amounts of Recognized Liabilities | 22,656 | 7,254 |
Gross Amounts Offset in the Statement of Financial Condition | 304 | 4 |
Net Amounts Offset in the Statement of Financial Condition | 22,352 | 7,250 |
Gross Amounts Not Offset in the Statement of Financial Condition | ||
Financial instruments | 23,482 | 1,700 |
Cash Collateral Pledged | 0 | 0 |
Net Amount | (1,130) | 5,550 |
Repurchase agreements | ||
Offsetting Liabilities | ||
Gross Amounts of Recognized Liabilities | 120,459 | 103,627 |
Gross Amounts Offset in the Statement of Financial Condition | 0 | 0 |
Net Amounts Offset in the Statement of Financial Condition | 120,459 | 103,627 |
Gross Amounts Not Offset in the Statement of Financial Condition | ||
Financial instruments | 120,459 | 103,627 |
Net Amount | 0 | 0 |
Repurchase agreements | ||
Gross Amounts Not Offset in the Statement of Financial Condition | ||
Cash Collateral Pledged | $ 0 | $ 0 |
Derivative Financial Instrume_7
Derivative Financial Instruments (Details 5) - U.S. Treasury and Federal agencies securities - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Overnight and Continuous | ||
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items] | ||
Repurchase agreements | $ 119,450 | $ 102,340 |
Up to 30 Days | ||
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items] | ||
Repurchase agreements | $ 1,010 | $ 1,290 |
Regulatory Matters (Details)
Regulatory Matters (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 | |
Total Capital (to Risk-Weighted Assets): | |||
Actual Amount | $ 882,453 | $ 821,975 | |
Actual Ratio (as a percent) | 14.90% | 14.68% | |
Minimum Capital Adequacy Amount | $ 473,782 | $ 447,909 | |
Minimum Capital Adequacy Ratio (as a percent) | 8.00% | 8.00% | |
Capital Required For Capital Adequacy With Capital Buffer | $ 621,839 | $ 552,888 | |
Capital Required for Capital Adequacy with Capital Buffer to Risk Weighted Assets | [1] | 10.50% | 9.875% |
To Be Well Capitalized Under Prompt Corrective Action Provisions Amount | $ 592,227 | $ 559,887 | |
To Be Well Capitalized Under Prompt Corrective Action Provisions Ratio (as a percent) | 10.00% | 10.00% | |
Tier I Capital (to Risk-Weighted Assets): | |||
Actual Amount | $ 807,926 | $ 751,575 | |
Actual Ratio (as a percent) | 13.64% | 13.42% | |
Minimum Capital Adequacy Amount | $ 355,336 | $ 335,932 | |
Minimum Capital Adequacy Ratio (as a percent) | 6.00% | 6.00% | |
Tier One Risk Based Capital Required for Capital Adequacy with Capital Buffer | $ 503,393 | $ 440,911 | |
Tier One Risk Based Capital Required for Capital Adequacy with Capital Buffer to Risk Weighted Assets | [1] | 8.50% | 7.875% |
To Be Well Capitalized Under Prompt Corrective Action Provisions Amount | $ 473,782 | $ 447,909 | |
To Be Well Capitalized Under Prompt Corrective Action Provisions Ratio (as a percent) | 8.00% | 8.00% | |
Common Equity Tier 1 Capital (to Risk-Weighted Assets): | |||
Actual Amount | $ 743,467 | $ 693,067 | |
Actual Ratio (as a percent) | 12.55% | 12.38% | |
Minimum Capital Adequacy Amount | $ 266,502 | $ 251,949 | |
Minimum Capital Adequacy Ratio (as a percent) | 4.50% | 4.50% | |
Common Equity Tier 1 Capita Required Form Minimum Capital Adequacy With Capital Buffer | $ 414,559 | $ 356,928 | |
Common Equity Tier 1 Capital Required For Capital Adequacy With Capital Buffer to Risk Weighted Assets | [1] | 7.00% | 6.375% |
To Be Well Capitalized Under Prompt Corrective Action Provisions Amount | $ 384,948 | $ 363,926 | |
To Be Well Capitalized Under Prompt Corrective Action Provisions Ratio (as a percent) | 6.50% | 6.50% | |
Tier I Capital (to Average Assets): | |||
Actual Amount | $ 807,926 | $ 751,575 | |
Actual Ratio (as a percent) | 12.19% | 12.06% | |
Minimum Capital Adequacy Amount | $ 265,122 | $ 249,185 | |
Minimum Capital Adequacy Ratio (as a percent) | 4.00% | 4.00% | |
To Be Well Capitalized Under Prompt Corrective Action Provisions Amount | $ 331,402 | $ 311,481 | |
To Be Well Capitalized Under Prompt Corrective Action Provisions Ratio (as a percent) | 5.00% | 5.00% | |
1st Source Bank | |||
Total Capital (to Risk-Weighted Assets): | |||
Actual Amount | $ 804,131 | $ 744,326 | |
Actual Ratio (as a percent) | 13.57% | 13.29% | |
Minimum Capital Adequacy Amount | $ 474,189 | $ 448,152 | |
Minimum Capital Adequacy Ratio (as a percent) | 8.00% | 8.00% | |
Capital Required For Capital Adequacy With Capital Buffer | $ 622,373 | $ 553,188 | |
Capital Required for Capital Adequacy with Capital Buffer to Risk Weighted Assets | [1] | 10.50% | 9.875% |
To Be Well Capitalized Under Prompt Corrective Action Provisions Amount | $ 592,736 | $ 560,190 | |
To Be Well Capitalized Under Prompt Corrective Action Provisions Ratio (as a percent) | 10.00% | 10.00% | |
Tier I Capital (to Risk-Weighted Assets): | |||
Actual Amount | $ 729,541 | $ 673,888 | |
Actual Ratio (as a percent) | 12.31% | 12.03% | |
Minimum Capital Adequacy Amount | $ 355,642 | $ 336,114 | |
Minimum Capital Adequacy Ratio (as a percent) | 6.00% | 6.00% | |
Tier One Risk Based Capital Required for Capital Adequacy with Capital Buffer | $ 503,826 | $ 441,150 | |
Tier One Risk Based Capital Required for Capital Adequacy with Capital Buffer to Risk Weighted Assets | [1] | 8.50% | 7.875% |
To Be Well Capitalized Under Prompt Corrective Action Provisions Amount | $ 474,189 | $ 448,152 | |
To Be Well Capitalized Under Prompt Corrective Action Provisions Ratio (as a percent) | 8.00% | 8.00% | |
Common Equity Tier 1 Capital (to Risk-Weighted Assets): | |||
Actual Amount | $ 722,082 | $ 672,380 | |
Actual Ratio (as a percent) | 12.18% | 12.00% | |
Minimum Capital Adequacy Amount | $ 266,731 | $ 252,086 | |
Minimum Capital Adequacy Ratio (as a percent) | 4.50% | 4.50% | |
Common Equity Tier 1 Capita Required Form Minimum Capital Adequacy With Capital Buffer | $ 414,915 | $ 357,121 | |
Common Equity Tier 1 Capital Required For Capital Adequacy With Capital Buffer to Risk Weighted Assets | [1] | 7.00% | 6.375% |
To Be Well Capitalized Under Prompt Corrective Action Provisions Amount | $ 385,279 | $ 364,124 | |
To Be Well Capitalized Under Prompt Corrective Action Provisions Ratio (as a percent) | 6.50% | 6.50% | |
Tier I Capital (to Average Assets): | |||
Actual Amount | $ 729,541 | $ 673,888 | |
Actual Ratio (as a percent) | 11.03% | 10.82% | |
Minimum Capital Adequacy Amount | $ 264,500 | $ 249,052 | |
Minimum Capital Adequacy Ratio (as a percent) | 4.00% | 4.00% | |
To Be Well Capitalized Under Prompt Corrective Action Provisions Amount | $ 330,625 | $ 311,315 | |
To Be Well Capitalized Under Prompt Corrective Action Provisions Ratio (as a percent) | 5.00% | 5.00% | |
[1] | (1) The capital conservation buffer requirement was fully phased in as of December 31, 2019. |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 | |
Fair value measurements | |||
Fair value carrying amount | $ 20,277 | $ 11,290 | |
Mortgages held for sale reported at fair value | |||
Fair value measurements | |||
Fair value carrying amount | 20,277 | 11,290 | |
Aggregate unpaid principal | 19,890 | 11,076 | |
Excess of fair value carrying amount over (under) unpaid principal | [1] | $ 387 | $ 214 |
[1] | The excess of fair value carrying amount over (under) unpaid principal is included in mortgage banking income and includes changes in fair value at and subsequent to funding and gains and losses on the related loan commitment prior to funding. |
Fair Value Measurements (Deta_2
Fair Value Measurements (Details 2) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Fair value measurements | ||
Investment securities available-for-sale | $ 1,040,583 | $ 990,129 |
Assets: | ||
Mortgages held for sale | 20,277 | 11,290 |
U.S. Treasury and Federal agencies securities | ||
Fair value measurements | ||
Investment securities available-for-sale | 526,964 | 531,223 |
U.S. States and political subdivisions securities | ||
Fair value measurements | ||
Investment securities available-for-sale | 84,505 | 94,582 |
Mortgage-backed securities - Federal agencies | ||
Fair value measurements | ||
Investment securities available-for-sale | 375,389 | 318,233 |
Corporate debt securities | ||
Fair value measurements | ||
Investment securities available-for-sale | 53,025 | 45,392 |
Foreign government and other securities | ||
Fair value measurements | ||
Investment securities available-for-sale | 700 | 699 |
Total | ||
Fair value measurements | ||
Investment securities available-for-sale | 1,040,583 | 990,129 |
Assets: | ||
Mortgages held for sale | 20,277 | 11,290 |
Level 1 | ||
Fair value measurements | ||
Investment securities available-for-sale | 80,393 | 33,746 |
Assets: | ||
Mortgages held for sale | 0 | 0 |
Level 2 | ||
Fair value measurements | ||
Investment securities available-for-sale | 957,898 | 955,358 |
Assets: | ||
Mortgages held for sale | 20,277 | 11,290 |
Level 3 | ||
Fair value measurements | ||
Investment securities available-for-sale | 2,292 | 1,025 |
Assets: | ||
Mortgages held for sale | 0 | 0 |
Recurring | Total | ||
Fair value measurements | ||
Investment securities available-for-sale | 1,040,583 | 990,129 |
Assets: | ||
Mortgages held for sale | 20,277 | 11,290 |
Total | 1,082,835 | 1,008,543 |
Liabilities: | ||
Total | 22,352 | 7,250 |
Recurring | Total | Interest rate swap contracts | ||
Assets: | ||
Accrued income and other assets | 21,975 | 7,124 |
Liabilities: | ||
Accrued expenses and other liabilities | 22,352 | 7,250 |
Recurring | Total | U.S. Treasury and Federal agencies securities | ||
Fair value measurements | ||
Investment securities available-for-sale | 526,964 | 531,223 |
Recurring | Total | U.S. States and political subdivisions securities | ||
Fair value measurements | ||
Investment securities available-for-sale | 84,505 | 94,582 |
Recurring | Total | Mortgage-backed securities - Federal agencies | ||
Fair value measurements | ||
Investment securities available-for-sale | 375,389 | 318,233 |
Recurring | Total | Corporate debt securities | ||
Fair value measurements | ||
Investment securities available-for-sale | 53,025 | 45,392 |
Recurring | Total | Foreign government and other securities | ||
Fair value measurements | ||
Investment securities available-for-sale | 700 | 699 |
Recurring | Level 1 | ||
Fair value measurements | ||
Investment securities available-for-sale | 80,393 | 33,746 |
Assets: | ||
Mortgages held for sale | 0 | 0 |
Total | 80,393 | 33,746 |
Liabilities: | ||
Total | 0 | 0 |
Recurring | Level 1 | Interest rate swap contracts | ||
Assets: | ||
Accrued income and other assets | 0 | 0 |
Liabilities: | ||
Accrued expenses and other liabilities | 0 | 0 |
Recurring | Level 1 | U.S. Treasury and Federal agencies securities | ||
Fair value measurements | ||
Investment securities available-for-sale | 80,393 | 33,746 |
Recurring | Level 1 | U.S. States and political subdivisions securities | ||
Fair value measurements | ||
Investment securities available-for-sale | 0 | 0 |
Recurring | Level 1 | Mortgage-backed securities - Federal agencies | ||
Fair value measurements | ||
Investment securities available-for-sale | 0 | 0 |
Recurring | Level 1 | Corporate debt securities | ||
Fair value measurements | ||
Investment securities available-for-sale | 0 | 0 |
Recurring | Level 1 | Foreign government and other securities | ||
Fair value measurements | ||
Investment securities available-for-sale | 0 | 0 |
Recurring | Level 2 | ||
Fair value measurements | ||
Investment securities available-for-sale | 957,898 | 955,358 |
Assets: | ||
Mortgages held for sale | 20,277 | 11,290 |
Total | 1,000,150 | 973,772 |
Liabilities: | ||
Total | 22,352 | 7,250 |
Recurring | Level 2 | Interest rate swap contracts | ||
Assets: | ||
Accrued income and other assets | 21,975 | 7,124 |
Liabilities: | ||
Accrued expenses and other liabilities | 22,352 | 7,250 |
Recurring | Level 2 | U.S. Treasury and Federal agencies securities | ||
Fair value measurements | ||
Investment securities available-for-sale | 446,571 | 497,477 |
Recurring | Level 2 | U.S. States and political subdivisions securities | ||
Fair value measurements | ||
Investment securities available-for-sale | 82,213 | 93,557 |
Recurring | Level 2 | Mortgage-backed securities - Federal agencies | ||
Fair value measurements | ||
Investment securities available-for-sale | 375,389 | 318,233 |
Recurring | Level 2 | Corporate debt securities | ||
Fair value measurements | ||
Investment securities available-for-sale | 53,025 | 45,392 |
Recurring | Level 2 | Foreign government and other securities | ||
Fair value measurements | ||
Investment securities available-for-sale | 700 | 699 |
Recurring | Level 3 | ||
Fair value measurements | ||
Investment securities available-for-sale | 2,292 | 1,025 |
Assets: | ||
Mortgages held for sale | 0 | 0 |
Total | 2,292 | 1,025 |
Liabilities: | ||
Total | 0 | 0 |
Recurring | Level 3 | Interest rate swap contracts | ||
Assets: | ||
Accrued income and other assets | 0 | 0 |
Liabilities: | ||
Accrued expenses and other liabilities | 0 | 0 |
Recurring | Level 3 | U.S. Treasury and Federal agencies securities | ||
Fair value measurements | ||
Investment securities available-for-sale | 0 | 0 |
Recurring | Level 3 | U.S. States and political subdivisions securities | ||
Fair value measurements | ||
Investment securities available-for-sale | 2,292 | 1,025 |
Recurring | Level 3 | Mortgage-backed securities - Federal agencies | ||
Fair value measurements | ||
Investment securities available-for-sale | 0 | 0 |
Recurring | Level 3 | Corporate debt securities | ||
Fair value measurements | ||
Investment securities available-for-sale | 0 | 0 |
Recurring | Level 3 | Foreign government and other securities | ||
Fair value measurements | ||
Investment securities available-for-sale | $ 0 | $ 0 |
Fair Value Measurements (Deta_3
Fair Value Measurements (Details 3) | 12 Months Ended | |
Dec. 31, 2019USD ($)item | Dec. 31, 2018USD ($)item | |
Changes in the fair value of Level 3 assets measured on a recurring basis | ||
Total gains or losses (unrealized): included in earnings | $ 0 | $ 0 |
Number of transfers between Level 1 and Level 2 | item | 0 | 0 |
Number of transfers between Level 2 and Level 3 | item | 0 | 1 |
U.S. States and political subdivisions securities | ||
Changes in the fair value of Level 3 assets measured on a recurring basis | ||
Balance at the beginning of the period | $ 1,025,000 | $ 2,155,000 |
Total gains or losses (realized/unrealized): included in earnings | 0 | 0 |
Total gains or losses (realized/unrealized): included in other comprehensive income | (35,000) | 6,000 |
Purchases | 5,600,000 | 0 |
Issuances | 0 | 0 |
Sales | 0 | 0 |
Settlements | 0 | 0 |
Maturities | (4,298,000) | (1,136,000) |
Transfers into Level 3 | 0 | 0 |
Transfers out of Level 3 | 0 | 0 |
Balance at the end of the period | 2,292,000 | 1,025,000 |
Foreign government and other securities | ||
Changes in the fair value of Level 3 assets measured on a recurring basis | ||
Balance at the beginning of the period | 0 | 710,000 |
Total gains or losses (realized/unrealized): included in earnings | 0 | 0 |
Total gains or losses (realized/unrealized): included in other comprehensive income | 0 | (11,000) |
Purchases | 0 | 200,000 |
Issuances | 0 | 0 |
Sales | 0 | 0 |
Settlements | 0 | 0 |
Maturities | 0 | (200,000) |
Transfers into Level 3 | 0 | 0 |
Transfers out of Level 3 | 0 | (699,000) |
Balance at the end of the period | 0 | 0 |
Investment securities available-for-sale | ||
Changes in the fair value of Level 3 assets measured on a recurring basis | ||
Balance at the beginning of the period | 1,025,000 | 2,865,000 |
Total gains or losses (realized/unrealized): included in earnings | 0 | 0 |
Total gains or losses (realized/unrealized): included in other comprehensive income | (35,000) | (5,000) |
Purchases | 5,600,000 | 200,000 |
Issuances | 0 | 0 |
Sales | 0 | 0 |
Settlements | 0 | 0 |
Maturities | (4,298,000) | (1,336,000) |
Transfers into Level 3 | 0 | 0 |
Transfers out of Level 3 | 0 | (699,000) |
Balance at the end of the period | $ 2,292,000 | $ 1,025,000 |
Fair Value Measurements (Deta_4
Fair Value Measurements (Details 4) $ in Thousands | Dec. 31, 2019USD ($) | Dec. 31, 2018USD ($) |
Valuation Methodology | ||
Investment securities, available-for-sale | $ 1,040,583 | $ 990,129 |
Level 3 | ||
Valuation Methodology | ||
Investment securities, available-for-sale | 2,292 | 1,025 |
Recurring | Level 3 | ||
Valuation Methodology | ||
Investment securities, available-for-sale | 2,292 | 1,025 |
Recurring | Level 3 | Discounted cash flows | Direct placement municipal securities | ||
Valuation Methodology | ||
Investment securities, available-for-sale | $ 2,292 | $ 1,025 |
Discount for lack of marketability | Non-recurring | Level 3 | Trade publications | Aircraft | ||
Unobservable Inputs | ||
Discount rate (as a percent) | 0.10 | |
Discount for lack of marketability | Non-recurring | Level 3 | Auction values | Autos | ||
Unobservable Inputs | ||
Discount rate (as a percent) | 0.10 | |
Discount for lack of marketability | Non-recurring | Level 3 | Trade publications and auction values | Medium and heavy duty trucks | ||
Unobservable Inputs | ||
Discount rate (as a percent) | 0.15 | |
Discount for lack of marketability | Non-recurring | Level 3 | Trade publications and auction values | Construction equipment | ||
Unobservable Inputs | ||
Discount rate (as a percent) | 0.20 | |
Discount for lack of marketability | Non-recurring | Level 3 | Appraisals | Real estate | ||
Unobservable Inputs | ||
Discount rate (as a percent) | 0.20 | |
Credit spread assumption | Recurring | Level 3 | Discounted cash flows | Direct placement municipal securities | Minimum | ||
Unobservable Inputs | ||
Debt securities available-for-sale unobservable inputs (as a percent) | 0.0012 | 0.0017 |
Credit spread assumption | Recurring | Level 3 | Discounted cash flows | Direct placement municipal securities | Maximum | ||
Unobservable Inputs | ||
Debt securities available-for-sale unobservable inputs (as a percent) | 0.0285 | 0.0302 |
Receivables | Discount for lack of marketability | Non-recurring | Level 3 | Commercial loans | ||
Unobservable Inputs | ||
Discount rate (as a percent) | 0.20 | |
Inventory | Discount for lack of marketability | Non-recurring | Level 3 | Minimum | Commercial loans | ||
Unobservable Inputs | ||
Discount rate (as a percent) | 0.40 | |
Inventory | Discount for lack of marketability | Non-recurring | Level 3 | Maximum | Commercial loans | ||
Unobservable Inputs | ||
Discount rate (as a percent) | 0.75 |
Fair Value Measurements (Deta_5
Fair Value Measurements (Details 5) - Non-recurring - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Impaired loans | ||
Fair value measurements | ||
Impairment charges (recoveries) | $ 4,290 | $ 12,460 |
Mortgage servicing rights | ||
Fair value measurements | ||
Impairment charges (recoveries) | 0 | 0 |
Repossessions | ||
Fair value measurements | ||
Impairment charges (recoveries) | 2,250 | 1,920 |
Other real estate | ||
Fair value measurements | ||
Impairment charges (recoveries) | 0 | 0 |
Total | ||
Fair value measurements | ||
Impaired loans - collateral based | 8,492 | 7,306 |
Assets measured at fair value | 21,837 | 18,554 |
Total | Mortgage servicing rights | ||
Fair value measurements | ||
Accrued income and other assets | 4,200 | 4,283 |
Total | Repossessions | ||
Fair value measurements | ||
Accrued income and other assets | 8,623 | 6,666 |
Total | Other real estate | ||
Fair value measurements | ||
Accrued income and other assets | 522 | 299 |
Level 3 | ||
Fair value measurements | ||
Impaired loans - collateral based | 8,492 | 7,306 |
Assets measured at fair value | 21,837 | 18,554 |
Level 3 | Mortgage servicing rights | ||
Fair value measurements | ||
Accrued income and other assets | 4,200 | 4,283 |
Level 3 | Repossessions | ||
Fair value measurements | ||
Accrued income and other assets | 8,623 | 6,666 |
Level 3 | Other real estate | ||
Fair value measurements | ||
Accrued income and other assets | $ 522 | $ 299 |
Fair Value Measurements (Deta_6
Fair Value Measurements (Details 6) - Non-recurring $ in Thousands | Dec. 31, 2019USD ($) | Dec. 31, 2018USD ($) |
Level 3 | ||
Valuation Methodology | ||
Assets measured at fair value | $ 21,837 | $ 18,554 |
Carrying Value | Level 3 | Collateral based measurements | Impaired loans | ||
Valuation Methodology | ||
Assets measured at fair value | 8,492 | 7,306 |
Carrying Value | Level 3 | Discounted cash flows | Mortgage servicing rights | ||
Valuation Methodology | ||
Assets measured at fair value | 4,200 | 4,283 |
Carrying Value | Level 3 | Appraisals trade publications and auction values | Repossessions | ||
Valuation Methodology | ||
Assets measured at fair value | 8,623 | 6,666 |
Carrying Value | Level 3 | Appraisals | Other real estate | ||
Valuation Methodology | ||
Assets measured at fair value | 522 | 299 |
Fair Value | ||
Valuation Methodology | ||
Assets measured at fair value | 21,837 | 18,554 |
Fair Value | Level 3 | Collateral based measurements | Impaired loans | ||
Valuation Methodology | ||
Assets measured at fair value | 8,492 | 7,306 |
Fair Value | Level 3 | Discounted cash flows | Mortgage servicing rights | ||
Valuation Methodology | ||
Assets measured at fair value | 5,986 | 7,238 |
Fair Value | Level 3 | Appraisals trade publications and auction values | Repossessions | ||
Valuation Methodology | ||
Assets measured at fair value | 9,211 | 6,991 |
Fair Value | Level 3 | Appraisals | Other real estate | ||
Valuation Methodology | ||
Assets measured at fair value | $ 564 | $ 305 |
Discount for lack of marketability and current conditions | Level 3 | Collateral based measurements | Impaired loans | Minimum | ||
Unobservable Inputs | ||
Impaired loans unobservable inputs (as a percent) | 0 | 0.20 |
Discount for lack of marketability and current conditions | Level 3 | Collateral based measurements | Impaired loans | Maximum | ||
Unobservable Inputs | ||
Impaired loans unobservable inputs (as a percent) | 0.90 | 0.35 |
Constant prepayment rate (CPR) | Level 3 | Discounted cash flows | Mortgage servicing rights | Minimum | ||
Unobservable Inputs | ||
Mortgage servicing rights unobservable inputs (as a percent) | 0.1020 | 0.0720 |
Constant prepayment rate (CPR) | Level 3 | Discounted cash flows | Mortgage servicing rights | Maximum | ||
Unobservable Inputs | ||
Mortgage servicing rights unobservable inputs (as a percent) | 0.2810 | 0.2480 |
Discount rate | Level 3 | Discounted cash flows | Mortgage servicing rights | Minimum | ||
Unobservable Inputs | ||
Mortgage servicing rights unobservable inputs (as a percent) | 0.0930 | 0.1030 |
Discount rate | Level 3 | Discounted cash flows | Mortgage servicing rights | Maximum | ||
Unobservable Inputs | ||
Mortgage servicing rights unobservable inputs (as a percent) | 0.1210 | 0.1310 |
Discount for lack of marketability | Level 3 | Appraisals trade publications and auction values | Repossessions | Minimum | ||
Unobservable Inputs | ||
Repossessions unobservable inputs (as a percent) | 0.03 | 0.04 |
Discount for lack of marketability | Level 3 | Appraisals trade publications and auction values | Repossessions | Maximum | ||
Unobservable Inputs | ||
Repossessions unobservable inputs (as a percent) | 0.25 | 0.06 |
Discount for lack of marketability | Level 3 | Appraisals | Other real estate | Minimum | ||
Unobservable Inputs | ||
Other real estate unobservable inputs (as a percent) | 0 | 0 |
Discount for lack of marketability | Level 3 | Appraisals | Other real estate | Maximum | ||
Unobservable Inputs | ||
Other real estate unobservable inputs (as a percent) | 0.11 | 0.10 |
Fair Value Measurements (Deta_7
Fair Value Measurements (Details 7) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 | |
Assets: | |||
Cash and due from banks | $ 67,215 | $ 94,907 | |
Federal funds sold and interest bearing deposits with other banks | 16,150 | 4,172 | |
Investment securities available-for-sale | 1,040,583 | 990,129 | |
Federal Home Loan Bank Stock and Federal Reserve Bank Stock | 28,414 | 28,404 | |
Mortgages held for sale | 20,277 | 11,290 | |
Loans and leases, net of reserve for loan and lease losses | 4,974,273 | 4,734,995 | |
Liabilities: | |||
Long-term debt and mandatorily redeemable securities | 71,639 | 71,123 | |
Subordinated notes | 58,764 | 58,764 | |
Carrying or Contract Value | |||
Assets: | |||
Cash and due from banks | 67,215 | 94,907 | |
Federal funds sold and interest bearing deposits with other banks | 16,150 | 4,172 | |
Investment securities available-for-sale | 1,040,583 | 990,129 | |
Federal Home Loan Bank Stock and Federal Reserve Bank Stock | 28,414 | 28,404 | |
Mortgages held for sale | 20,277 | 11,290 | |
Loans and leases, net of reserve for loan and lease losses | 4,974,273 | 4,734,995 | |
Mortgage servicing rights | 4,200 | 4,283 | |
Interest receivable | 19,125 | 18,880 | |
Interest rate swaps | 21,975 | 7,124 | |
Liabilities: | |||
Deposits | 5,357,326 | 5,122,322 | |
Short-term borrowings | 145,893 | 199,344 | |
Long-term debt and mandatorily redeemable securities | 71,639 | 71,123 | |
Subordinated notes | 58,764 | 58,764 | |
Interest payable | 13,918 | 8,950 | |
Interest rate swaps | 22,352 | 7,250 | |
Off-balance-sheet instruments | [1] | 0 | 0 |
Fair Value | |||
Assets: | |||
Cash and due from banks | 67,215 | 94,907 | |
Federal funds sold and interest bearing deposits with other banks | 16,150 | 4,172 | |
Investment securities available-for-sale | 1,040,583 | 990,129 | |
Federal Home Loan Bank Stock and Federal Reserve Bank Stock | 28,414 | 28,404 | |
Mortgages held for sale | 20,277 | 11,290 | |
Loans and leases, net of reserve for loan and lease losses | 4,992,684 | 4,689,267 | |
Mortgage servicing rights | 5,986 | 7,238 | |
Interest receivable | 19,125 | 18,880 | |
Interest rate swaps | 21,975 | 7,124 | |
Liabilities: | |||
Deposits | 5,362,633 | 5,111,711 | |
Short-term borrowings | 145,893 | 199,344 | |
Long-term debt and mandatorily redeemable securities | 71,084 | 68,751 | |
Subordinated notes | 61,469 | 45,874 | |
Interest payable | 13,918 | 8,950 | |
Interest rate swaps | 22,352 | 7,250 | |
Off-balance-sheet instruments | [1] | 281 | 259 |
Level 1 | |||
Assets: | |||
Cash and due from banks | 67,215 | 94,907 | |
Federal funds sold and interest bearing deposits with other banks | 16,150 | 4,172 | |
Investment securities available-for-sale | 80,393 | 33,746 | |
Federal Home Loan Bank Stock and Federal Reserve Bank Stock | 28,414 | 28,404 | |
Mortgages held for sale | 0 | 0 | |
Loans and leases, net of reserve for loan and lease losses | 0 | 0 | |
Mortgage servicing rights | 0 | 0 | |
Interest receivable | 0 | 0 | |
Interest rate swaps | 0 | 0 | |
Liabilities: | |||
Deposits | 3,708,828 | 3,654,556 | |
Short-term borrowings | 120,891 | 113,734 | |
Long-term debt and mandatorily redeemable securities | 0 | 0 | |
Subordinated notes | 0 | 0 | |
Interest payable | 0 | 0 | |
Interest rate swaps | 0 | 0 | |
Off-balance-sheet instruments | [1] | 0 | 0 |
Level 2 | |||
Assets: | |||
Cash and due from banks | 0 | 0 | |
Federal funds sold and interest bearing deposits with other banks | 0 | 0 | |
Investment securities available-for-sale | 957,898 | 955,358 | |
Federal Home Loan Bank Stock and Federal Reserve Bank Stock | 0 | 0 | |
Mortgages held for sale | 20,277 | 11,290 | |
Loans and leases, net of reserve for loan and lease losses | 0 | 0 | |
Mortgage servicing rights | 0 | 0 | |
Interest receivable | 19,125 | 18,880 | |
Interest rate swaps | 21,975 | 7,124 | |
Liabilities: | |||
Deposits | 1,653,805 | 1,457,155 | |
Short-term borrowings | 25,002 | 85,610 | |
Long-term debt and mandatorily redeemable securities | 71,084 | 68,751 | |
Subordinated notes | 61,469 | 45,874 | |
Interest payable | 13,918 | 8,950 | |
Interest rate swaps | 22,352 | 7,250 | |
Off-balance-sheet instruments | [1] | 281 | 259 |
Level 3 | |||
Assets: | |||
Cash and due from banks | 0 | 0 | |
Federal funds sold and interest bearing deposits with other banks | 0 | 0 | |
Investment securities available-for-sale | 2,292 | 1,025 | |
Federal Home Loan Bank Stock and Federal Reserve Bank Stock | 0 | 0 | |
Mortgages held for sale | 0 | 0 | |
Loans and leases, net of reserve for loan and lease losses | 4,992,684 | 4,689,267 | |
Mortgage servicing rights | 5,986 | 7,238 | |
Interest receivable | 0 | 0 | |
Interest rate swaps | 0 | 0 | |
Liabilities: | |||
Deposits | 0 | 0 | |
Short-term borrowings | 0 | 0 | |
Long-term debt and mandatorily redeemable securities | 0 | 0 | |
Subordinated notes | 0 | 0 | |
Interest payable | 0 | 0 | |
Interest rate swaps | 0 | 0 | |
Off-balance-sheet instruments | [1] | $ 0 | $ 0 |
[1] | Represents estimated cash outflows required to currently settle the obligations at current market rates. |
1st Source Corporation (Paren_3
1st Source Corporation (Parent Company Only) Financial Information (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
ASSETS | ||||
Cash and cash equivalents | $ 83,365 | $ 99,079 | $ 78,033 | $ 108,304 |
Operating lease right of use assets | 24,147 | |||
Other assets | 227,990 | 159,271 | ||
Total assets | 6,622,776 | 6,293,745 | ||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
Long-term debt and mandatorily redeemable securities | 71,639 | 71,123 | ||
Subordinated notes | 58,764 | 58,764 | ||
Operating lease liabilities | 24,319 | |||
Other liabilities | 140,518 | 78,602 | ||
Total liabilities | 5,774,140 | 5,530,155 | ||
Total shareholders’ equity | 828,277 | 762,082 | ||
Total liabilities and shareholders’ equity | 6,622,776 | 6,293,745 | ||
Parent | ||||
ASSETS | ||||
Cash and cash equivalents | 107,285 | 106,647 | $ 100,155 | $ 73,324 |
Operating lease right of use assets | 17,106 | 0 | ||
Other assets | 4,442 | 4,191 | ||
Total assets | 935,526 | 852,036 | ||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
Commercial paper | 3,993 | 4,325 | ||
Long-term debt and mandatorily redeemable securities | 25,819 | 24,676 | ||
Subordinated notes | 58,764 | 58,764 | ||
Operating lease liabilities | 17,329 | 0 | ||
Other liabilities | 1,344 | 2,189 | ||
Total liabilities | 107,249 | 89,954 | ||
Total shareholders’ equity | 828,277 | 762,082 | ||
Total liabilities and shareholders’ equity | 935,526 | 852,036 | ||
Parent | Bank subsidiaries | ||||
ASSETS | ||||
Short-term investments with bank subsidiary | 500 | 500 | ||
Investments in subsidiary | 806,192 | 740,697 | ||
Parent | Non-bank subsidiaries | ||||
ASSETS | ||||
Investments in subsidiary | $ 1 | $ 1 |
1st Source Corporation (Paren_4
1st Source Corporation (Parent Company Only) Financial Information (Details 2) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Income: | |||
Other | $ 13,019 | $ 10,362 | $ 9,922 |
Expenses: | |||
Interest on subordinated notes | 3,677 | 3,625 | 4,002 |
Interest on long-term debt and mandatorily redeemable securities | 2,905 | 2,316 | 2,435 |
Interest on commercial paper and other short-term borrowings | 1,934 | 2,838 | 1,115 |
Occupancy | 10,528 | 10,041 | 10,624 |
Other | 6,534 | 6,478 | 5,574 |
Income before income taxes | 120,154 | 105,027 | 101,360 |
Income tax benefit | (28,139) | (22,613) | (33,309) |
Comprehensive Income (Loss), Net of Tax, Attributable to Parent | 107,808 | 75,788 | 63,375 |
Parent | |||
Income: | |||
Rental income from subsidiaries | 2,505 | 2,613 | 2,354 |
Other | 366 | 367 | 422 |
Investment securities and other investment gains (losses) | 109 | (180) | 6,431 |
Total income | 49,715 | 47,880 | 48,482 |
Expenses: | |||
Interest on subordinated notes | 3,677 | 3,625 | 4,002 |
Interest on long-term debt and mandatorily redeemable securities | 2,228 | 1,624 | 1,685 |
Interest on commercial paper and other short-term borrowings | 13 | 14 | 17 |
Occupancy | 1,861 | 1,774 | 2,070 |
Other | 586 | 642 | 1,733 |
Total expenses | 8,365 | 7,679 | 9,507 |
Income before income taxes | 41,350 | 40,201 | 38,975 |
Income tax benefit | 987 | 1,009 | 204 |
Income before equity in undistributed income of subsidiaries | 42,337 | 41,210 | 39,179 |
Equity in undistributed income of subsidiaries | 49,678 | 41,204 | 28,872 |
Net income | 92,015 | 82,414 | 68,051 |
Comprehensive Income (Loss), Net of Tax, Attributable to Parent | 107,863 | 75,788 | 63,375 |
Parent | Bank subsidiaries | |||
Income: | |||
Dividends from bank subsidiary | 46,735 | 45,080 | 38,317 |
Expenses: | |||
Equity in undistributed income of subsidiaries | 49,678 | 41,204 | 28,872 |
Parent | Non-bank subsidiaries | |||
Income: | |||
Dividends from bank subsidiary | 0 | 0 | 958 |
Expenses: | |||
Equity in undistributed income of subsidiaries | $ 0 | $ 0 | $ 0 |
1st Source Corporation (Paren_5
1st Source Corporation (Parent Company Only) Financial Information (Details 3) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation of premises and equipment | $ 5,786 | $ 5,620 | $ 5,658 |
Amortization of right of use assets | 3,046 | 0 | 0 |
Stock-based compensation | 2,765 | 3,553 | 2,963 |
Other | 1,734 | 940 | 2,670 |
Investing activities: | |||
Net change in partnership investments | (33,840) | (13,669) | (24,489) |
Financing activities: | |||
Proceeds from issuance of long-term debt and mandatorily redeemable securities | 0 | 0 | 19,999 |
Payments on long-term debt and mandatorily redeemable securities | (2,695) | (1,735) | (26,628) |
Stock issued under stock purchase plans | 49 | 145 | 153 |
Acquisition of treasury stock | (15,085) | (9,271) | (41) |
Cash dividends paid on common stock | (29,021) | (25,686) | (20,431) |
Cash and cash equivalents, beginning of year | 99,079 | 78,033 | 108,304 |
Cash and cash equivalents, end of year | 83,365 | 99,079 | 78,033 |
Parent Company | |||
1st Source Corporation (Parent Company Only) Financial Information | |||
Net income | 92,015 | 82,414 | 68,051 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Equity (undistributed) distributed in excess of income of subsidiaries | (49,678) | (41,204) | (28,872) |
Depreciation of premises and equipment | 2 | 2 | 2 |
Amortization of right of use assets | 1,350 | 0 | 0 |
Stock-based compensation | 78 | 71 | 48 |
Realized/unrealized investment securities and other investment (gains) losses | (109) | 180 | (6,431) |
Other | 533 | 45 | 4,122 |
Net change in operating activities | 44,191 | 41,508 | 36,920 |
Investing activities: | |||
Proceeds from sales and maturities of investment securities | 0 | 0 | 6,327 |
Net change in partnership investments | (260) | (980) | (62) |
Payments to Acquire Businesses and Interest in Affiliates | (325) | 0 | 0 |
Return of capital from subsidiaries | 0 | 0 | 854 |
Net change in investing activities | (585) | (980) | 7,119 |
Financing activities: | |||
Net change in commercial paper | (332) | (1,790) | 354 |
Proceeds from issuance of long-term debt and mandatorily redeemable securities | 1,611 | 1,867 | 1,248 |
Payments on long-term debt and mandatorily redeemable securities | (2,068) | (1,064) | (667) |
Stock issued under stock purchase plans | 49 | 145 | 153 |
Net proceeds from issuance of treasury stock | 1,878 | 1,763 | 2,176 |
Acquisition of treasury stock | (15,085) | (9,271) | (41) |
Cash dividends paid on common stock | (29,021) | (25,686) | (20,431) |
Net change in financing activities | (42,968) | (34,036) | (17,208) |
Net change in cash and cash equivalents | 638 | 6,492 | 26,831 |
Cash and cash equivalents, beginning of year | 106,647 | 100,155 | 73,324 |
Cash and cash equivalents, end of year | $ 107,285 | $ 106,647 | $ 100,155 |