Attached files
file | filename |
---|---|
EX-10.28 - EX-10.28 - FCB FINANCIAL HOLDINGS, INC. | d161827dex1028.htm |
EX-31.1 - EX-31.1 - FCB FINANCIAL HOLDINGS, INC. | d161827dex311.htm |
EX-32.2 - EX-32.2 - FCB FINANCIAL HOLDINGS, INC. | d161827dex322.htm |
EX-32.1 - EX-32.1 - FCB FINANCIAL HOLDINGS, INC. | d161827dex321.htm |
EX-31.2 - EX-31.2 - FCB FINANCIAL HOLDINGS, INC. | d161827dex312.htm |
EX-10.27 - EX-10.27 - FCB FINANCIAL HOLDINGS, INC. | d161827dex1027.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2016
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 001-36586
FCB FINANCIAL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware | 001-36586 | 27-0775699 | ||
(State or other jurisdiction of incorporation) |
(Commission file number) |
(IRS Employer Identification Number) |
2500 Weston Road, Suite 300
Weston, Florida 33331
(Address of principal executive offices)
(954) 984-3313
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of accelerated filer, large accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act (Check one):
Large accelerated filer | x | Accelerated filer | ¨ | |||
Non-accelerated filer | ¨ | Smaller reporting company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) ¨ Yes x No
As of April 29, 2016, the registrant had 37,185,551 shares of Class A Common Stock and 3,427,045 shares of Class B Non-voting Common Stock outstanding.
Table of Contents
FORM 10-Q
INDEX
PART I. |
FINANCIAL INFORMATION |
| ||||
Item 1. |
Consolidated Financial Statements (Unaudited) |
| ||||
3 | ||||||
4 | ||||||
5 | ||||||
6 | ||||||
7 | ||||||
8 | ||||||
Item 2. |
Managements Discussion and Analysis of Financial Condition and Results of Operations |
33 | ||||
Item 3. |
55 | |||||
Item 4. |
55 | |||||
PART II. |
||||||
Item 1. |
56 | |||||
Item 1A. |
56 | |||||
Item 2. |
56 | |||||
Item 3. |
56 | |||||
Item 4. |
56 | |||||
Item 5. |
56 | |||||
Item 6. |
56 | |||||
57 |
2
Table of Contents
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except share and per share data)
March 31, 2016 |
December 31, 2015 |
|||||||
Assets: |
||||||||
Cash and due from banks |
$ | 48,449 | $ | 44,696 | ||||
Interest-earning deposits in other banks |
77,624 | 57,764 | ||||||
Investment securities: |
||||||||
Available for sale securities, at fair value |
1,525,145 | 1,524,622 | ||||||
Federal Home Loan Bank and other bank stock, at cost |
59,321 | 59,477 | ||||||
|
|
|
|
|||||
Total investment securities |
1,584,466 | 1,584,099 | ||||||
|
|
|
|
|||||
Loans held for sale |
900 | 2,514 | ||||||
Loans: |
||||||||
New loans |
5,108,538 | 4,610,763 | ||||||
Acquired loans |
535,129 | 582,424 | ||||||
Allowance for loan losses |
(31,995 | ) | (29,126 | ) | ||||
|
|
|
|
|||||
Loans, net |
5,611,672 | 5,164,061 | ||||||
|
|
|
|
|||||
Premises and equipment, net |
36,686 | 36,954 | ||||||
Other real estate owned |
43,522 | 39,340 | ||||||
Goodwill |
81,204 | 81,204 | ||||||
Core deposit intangible |
5,501 | 5,880 | ||||||
Deferred tax assets, net |
74,420 | 75,176 | ||||||
Bank-owned life insurance |
169,531 | 168,246 | ||||||
Other assets |
102,149 | 71,552 | ||||||
|
|
|
|
|||||
Total assets |
$ | 7,836,124 | $ | 7,331,486 | ||||
|
|
|
|
|||||
Liabilities and Stockholders Equity |
||||||||
Liabilities: |
||||||||
Deposits: |
||||||||
Transaction accounts: |
||||||||
Noninterest-bearing |
$ | 737,875 | $ | 637,047 | ||||
Interest-bearing |
3,276,896 | 2,935,418 | ||||||
|
|
|
|
|||||
Total transaction accounts |
4,014,771 | 3,572,465 | ||||||
Time deposits |
1,887,608 | 1,858,173 | ||||||
|
|
|
|
|||||
Total deposits |
5,902,379 | 5,430,638 | ||||||
Borrowings (including FHLB advances of $774,850 and $806,500, respectively) |
950,462 | 983,183 | ||||||
Other liabilities |
93,984 | 41,556 | ||||||
|
|
|
|
|||||
Total liabilities |
6,946,825 | 6,455,377 | ||||||
|
|
|
|
|||||
Commitments and contingencies (Note 11) |
||||||||
Stockholders Equity: |
||||||||
Class A common stock, par value $0.001 per share; 100 million shares authorized; 39,471,472; 39,103,945 issued and 37,072,534; 37,126,571 outstanding |
39 | 39 | ||||||
Class B common stock, par value $0.001 per share; 50 million shares authorized; 3,715,385; 3,926,014 issued and 3,523,253; 3,733,882 outstanding |
4 | 4 | ||||||
Additional paid-in capital |
853,726 | 850,609 | ||||||
Retained earnings |
110,987 | 88,535 | ||||||
Accumulated other comprehensive income (loss) |
(8,240 | ) | (9,443 | ) | ||||
Treasury stock, at cost; 2,398,938; 1,977,374 Class A and 192,132; 192,132 Class B common shares |
(67,217 | ) | (53,635 | ) | ||||
|
|
|
|
|||||
Total stockholders equity |
889,299 | 876,109 | ||||||
|
|
|
|
|||||
Total liabilities and stockholders equity |
$ | 7,836,124 | $ | 7,331,486 | ||||
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements
3
Table of Contents
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Unaudited)
(Dollars in thousands, except share and per share data)
Three Months Ended March 31, | ||||||||
2016 | 2015 | |||||||
Interest income: |
||||||||
Interest and fees on loans |
$ | 61,288 | $ | 43,306 | ||||
Interest and dividends on investment securities |
14,374 | 12,110 | ||||||
Other interest income |
66 | 33 | ||||||
|
|
|
|
|||||
Total interest income |
75,728 | 55,449 | ||||||
|
|
|
|
|||||
Interest expense: |
||||||||
Interest on deposits |
9,293 | 5,585 | ||||||
Interest on borrowings |
1,993 | 980 | ||||||
|
|
|
|
|||||
Total interest expense |
11,286 | 6,565 | ||||||
|
|
|
|
|||||
Net interest income |
64,442 | 48,884 | ||||||
Provision for loan losses |
1,440 | 1,349 | ||||||
|
|
|
|
|||||
Net interest income after provision for loan losses |
63,002 | 47,535 | ||||||
|
|
|
|
|||||
Noninterest income: |
||||||||
Service charges and fees |
806 | 757 | ||||||
Loan and other fees |
2,014 | 2,497 | ||||||
Bank-owned life insurance income |
1,285 | 1,097 | ||||||
FDIC loss share indemnification loss |
| (65,529 | ) | |||||
Income from resolution of acquired assets |
680 | 3,372 | ||||||
Gain (loss) on sales of other real estate owned |
(110 | ) | 1,565 | |||||
Gain (loss) on investment securities |
(54 | ) | 1,007 | |||||
Other noninterest income (loss) |
813 | 1,145 | ||||||
|
|
|
|
|||||
Total noninterest income |
5,434 | (54,089 | ) | |||||
|
|
|
|
|||||
Noninterest expense: |
||||||||
Salaries and employee benefits |
18,645 | 16,575 | ||||||
Occupancy and equipment expenses |
3,572 | 3,277 | ||||||
Loan and other real estate related expenses |
1,820 | 2,076 | ||||||
Professional services |
1,337 | 1,406 | ||||||
Data processing and network |
2,863 | 2,718 | ||||||
Regulatory assessments and insurance |
2,117 | 2,119 | ||||||
Amortization of intangibles |
379 | 424 | ||||||
Other operating expenses |
2,567 | 2,055 | ||||||
|
|
|
|
|||||
Total noninterest expense |
33,300 | 30,650 | ||||||
|
|
|
|
|||||
Income (loss) before income tax expense (benefit) |
35,136 | (37,204 | ) | |||||
Income tax expense (benefit) |
12,684 | (20,330 | ) | |||||
|
|
|
|
|||||
Net income (loss) |
$ | 22,452 | $ | (16,874 | ) | |||
|
|
|
|
|||||
Earnings (loss) per share: |
||||||||
Basic |
$ | 0.55 | $ | (0.41 | ) | |||
Diluted |
$ | 0.52 | $ | (0.41 | ) | |||
Weighted average shares outstanding: |
||||||||
Basic |
40,698,866 | 41,421,854 | ||||||
Diluted |
42,840,157 | 41,421,854 |
The accompanying notes are an integral part of these consolidated financial statements
4
Table of Contents
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(Dollars in thousands)
Three Months Ended March 31, | ||||||||
2016 | 2015 | |||||||
Net income (loss) |
$ | 22,452 | $ | (16,874 | ) | |||
Other comprehensive income (loss): |
||||||||
Unrealized net holding gains (losses) on investment securities available for sale, net of taxes of $(1,029) and $(6,622), respectively |
1,641 | 10,546 | ||||||
Reclassification adjustment for realized (gains) losses on investment securities available for sale included in net income, net of taxes of $275 and $423, respectively |
(438 | ) | (673 | ) | ||||
|
|
|
|
|||||
Total other comprehensive income (loss) |
1,203 | 9,873 | ||||||
|
|
|
|
|||||
Total comprehensive income (loss) |
$ | 23,655 | $ | (7,001 | ) | |||
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements
5
Table of Contents
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
(Unaudited)
(Dollars in thousands, except for share data)
Common Stock Shares Outstanding |
Common Stock Issued |
Additional Paid in Capital |
Retained Earnings (Deficit) |
Treasury Stock |
Accumulated Other Comprehensive Income (Loss) |
Total Stockholders Equity |
||||||||||||||||||||||||||||||
Class A | Class B | Class A | Class B | |||||||||||||||||||||||||||||||||
Balance as of January 1, 2015 |
34,469,650 | 6,940,048 | $ | 36 | $ | 7 | $ | 834,538 | $ | 35,144 | $ | (18,751 | ) | $ | 679 | $ | 851,653 | |||||||||||||||||||
Net income (loss) |
| | | | | (16,874 | ) | | | (16,874 | ) | |||||||||||||||||||||||||
Exchange of B shares to A shares |
775,379 | (775,379 | ) | 1 | (1 | ) | | | | | | |||||||||||||||||||||||||
Stock-based compensation, RSU and warrant expense |
| | | | 1,079 | | | | 1,079 | |||||||||||||||||||||||||||
Excess tax benefit of stock-based compensation |
| | | | 432 | | | | 432 | |||||||||||||||||||||||||||
Exercise of stock options |
33,333 | 670 | 670 | |||||||||||||||||||||||||||||||||
Other |
| | | | 1 | | | | 1 | |||||||||||||||||||||||||||
Other comprehensive income (loss) |
| | | | | | | 9,873 | 9,873 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Balance as of March 31, 2015 |
35,278,362 | 6,164,669 | $ | 37 | $ | 6 | $ | 836,720 | $ | 18,270 | $ | (18,751 | ) | $ | 10,552 | $ | 846,834 | |||||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Balance as of January 1, 2016 |
37,126,571 | 3,733,882 | $ | 39 | $ | 4 | $ | 850,609 | $ | 88,535 | $ | (53,635 | ) | $ | (9,443 | ) | $ | 876,109 | ||||||||||||||||||
Net income (loss) |
| | | | | 22,452 | | | 22,452 | |||||||||||||||||||||||||||
Exchange of B shares to A shares |
210,629 | (210,629 | ) | | | | | | | | ||||||||||||||||||||||||||
Stock-based compensation, RSU and warrant expense |
| | | | 1,038 | | | | 1,038 | |||||||||||||||||||||||||||
Treasury stock purchases |
(421,564 | ) | | | | | (13,582 | ) | (13,582 | ) | ||||||||||||||||||||||||||
Exercise of stock options and warrants |
156,898 | | | | 2,093 | | | | 2,093 | |||||||||||||||||||||||||||
Other |
| | | | (14 | ) | | | | (14 | ) | |||||||||||||||||||||||||
Other comprehensive income (loss) |
| | | | | | | 1,203 | 1,203 | |||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|||||||||||||||||||
Balance as of March 31, 2016 |
37,072,534 | 3,523,253 | $ | 39 | $ | 4 | $ | 853,726 | $ | 110,987 | $ | (67,217 | ) | $ | (8,240 | ) | $ | 889,299 | ||||||||||||||||||
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The accompanying notes are an integral part of these consolidated financial statements
6
Table of Contents
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Three Months Ended March 31, | ||||||||
2016 | 2015 | |||||||
Cash Flows From Operating Activities: |
||||||||
Net income (loss) |
$ | 22,452 | $ | (16,874 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
||||||||
Provision for loan losses |
1,440 | 1,349 | ||||||
Amortization of intangible assets |
379 | 424 | ||||||
Depreciation and amortization of premises and equipment |
906 | 976 | ||||||
Amortization of discount on loans |
(207 | ) | (853 | ) | ||||
Net amortization (accretion) of premium (discount) on investment securities |
387 | 552 | ||||||
Net amortization (accretion) of premium (discount) on time deposits |
(23 | ) | (177 | ) | ||||
Net amortization (accretion) on FHLB advances and other borrowings |
(653 | ) | (642 | ) | ||||
Impairment of other real estate owned |
90 | 104 | ||||||
FDIC Loss share indemnification loss |
| 65,529 | ||||||
(Gain) loss on investment securities |
54 | (1,007 | ) | |||||
(Gain) loss on sale of loans |
(386 | ) | | |||||
(Gain) loss on sale of other real estate owned |
110 | (1,565 | ) | |||||
(Gain) loss on sale of premises and equipment |
35 | 94 | ||||||
Deferred tax expense |
| (36,929 | ) | |||||
Stock-based compensation, RSU and warrant expense |
1,038 | 1,079 | ||||||
Increase in cash surrender value of BOLI |
(1,285 | ) | (1,097 | ) | ||||
Net change in operating assets and liabilities: |
||||||||
Net change in loans held for sale |
2,000 | (601 | ) | |||||
Settlement of FDIC loss share agreement |
| (14,815 | ) | |||||
Net change in other assets |
(13,804 | ) | (9,553 | ) | ||||
Net change in other liabilities |
12,180 | 3,763 | ||||||
|
|
|
|
|||||
Net cash provided by (used in) operating activities |
24,713 | (10,243 | ) | |||||
|
|
|
|
|||||
Cash Flows From Investing Activities: |
||||||||
Purchase of investment securities available for sale |
(110,410 | ) | (215,215 | ) | ||||
Sales of investment securities available for sale |
117,243 | 116,755 | ||||||
Paydown and maturities of investment securities available for sale |
17,617 | 26,557 | ||||||
Purchase of FHLB and other bank stock |
(32,612 | ) | (19,226 | ) | ||||
Sales of FHLB and other bank stock |
32,768 | 20,828 | ||||||
Net change in loans |
(294,372 | ) | (107,407 | ) | ||||
Purchase of loans |
(192,195 | ) | (93,582 | ) | ||||
Proceeds from sale of loans |
30,378 | | ||||||
Proceeds from sale of other real estate owned |
2,963 | 13,638 | ||||||
Purchase of premises and equipment |
(673 | ) | (399 | ) | ||||
Proceeds from life insurance |
| 1,193 | ||||||
|
|
|
|
|||||
Net cash provided by (used in) investing activities |
(429,293 | ) | (256,858 | ) | ||||
|
|
|
|
|||||
Cash Flows From Financing Activities: |
||||||||
Net change in deposits |
471,764 | 247,643 | ||||||
Net change in FHLB advances |
(31,650 | ) | (13,316 | ) | ||||
Net change in repurchase agreements |
(418 | ) | 37,095 | |||||
Repurchase of stock |
(13,582 | ) | | |||||
Exercise of stock options |
2,093 | 670 | ||||||
Other |
(14 | ) | 1 | |||||
|
|
|
|
|||||
Net cash provided by (used in) financing activities |
428,193 | 272,093 | ||||||
|
|
|
|
|||||
Net Change in Cash and Cash Equivalents |
23,613 | 4,992 | ||||||
Cash and Cash Equivalents at Beginning of Period |
102,460 | 107,085 | ||||||
|
|
|
|
|||||
Cash and Cash Equivalents at End of Period |
$ | 126,073 | $ | 112,077 | ||||
|
|
|
|
|||||
Supplemental Disclosures of Cash Flow Information: |
||||||||
Interest paid |
$ | 10,770 | $ | 6,466 | ||||
Income taxes paid |
4,053 | 13,800 | ||||||
Supplemental disclosure of noncash investing and financing activities: |
||||||||
Transfer of loans to other real estate owned |
$ | 7,345 | $ | 12,667 |
The accompanying notes are an integral part of these consolidated financial statements
7
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (SEC). Accordingly, they do not include all information and notes to the consolidated financial statements necessary for a complete presentation of financial position, results of operations, comprehensive income and cash flows in conformity with U.S. generally accepted accounting principles (U.S. GAAP) and should be read in conjunction with the audited consolidated financial statements and the notes thereto for FCB Financial Holdings, Inc. (the Company) previously filed with the SEC in the Companys Annual Report on Form 10-K for the year ended December 31, 2015. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year or any other interim period.
Nature of Operations
FCB Financial Holdings, Inc. (the Company) is a national bank holding company with one wholly-owned national bank subsidiary, Florida Community Bank, N.A. (Florida Community Bank or the Bank), headquartered in Weston, Florida, offering a comprehensive range of traditional banking products and services to individual and corporate customers through 47 banking centers located in Florida at March 31, 2016.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiary, the Bank, and the Banks subsidiaries, which consist of a group of real estate holding companies. Intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates
The Companys financial reporting and accounting policies conform to U.S. GAAP. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Material estimates subject to significant change include the allowance for loan losses, valuation of and accounting for loans covered by loss sharing arrangements with the FDIC and the related loss share receivable, valuation of and accounting for acquired loans, the carrying value of OREO, the fair value of financial instruments, the valuation of goodwill and other intangible assets, contingent consideration liabilities, acquisition-related fair value computations, stock-based compensation and deferred taxes.
Recently Adopted Accounting Pronouncements
In June 2014, the FASB issued ASU No. 2014-12, Compensation- Stock Compensation (Topic 718) Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could be Achieved after the Requisite Service Period. This update provides specific guidance on whether to treat a performance target that could be achieved after the requisite service period as a performance condition that affects vesting or as a non-vesting condition that affects the grant-date fair value of an award. The amendments in this update became effective for the first quarter ended March 31, 2016. The adoption of this ASU did not have a material impact on the Companys consolidated financial statements.
In November 2014, the FASB issued ASU No. 2014-16, Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share is More Akin to Debt or Equity a consensus of the FASB Emerging Issues Task Force (ASC 815, Derivatives and Hedging). This update requires an entity to determine the nature of an instrument by evaluating all economic characteristics and risks of the entire hybrid instrument when determining whether the host is more akin to debit or equity. The amendments in this update became effective for the first quarter ended March 31, 2016. The adoption of this ASU did not have a material impact on the Companys consolidated financial statements.
In February 2015, the FASB issued ASU No. 2015-02, Amendments to the Consolidated Analysis (ASC 810, Consolidation) which amends the consolidation requirements of ASC 810 by reducing the number of consolidation models. The guidance places more emphasis on risk of loss when determining a controlling financial interest; reduces the frequency of the application of related-party guidance when determining a controlling financial interest and changes the consolidation requirements of limited partnerships. The amendments in this update became effective for the first quarter ended March 31, 2016. The adoption of this ASU did not have a material impact on the Companys consolidated financial statements.
8
Table of Contents
In January 2015, the FASB issued ASU No. 2015-01, Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items (ASC 225-20, Extraordinary and Unusual Items) which eliminates the concept of extraordinary items. Under the ASU, extraordinary items will no longer be segregated from the results of ordinary operations and presented separately on the consolidated financial statements. The amendments in this update became effective for the first quarter ended March 31, 2016. The adoption of this ASU did not have a material impact on the Companys consolidated financial statements.
In September 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments which requires an acquirer to recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments in this ASU require that the acquirer record, in the same periods financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. The amendments in this update became effective for the first quarter ended March 31, 2016. The adoption of this ASU did not have a material impact on the Companys consolidated financial statements.
Recently Issued Accounting Pronouncements
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities which:
| Requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer. |
| Simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value. |
| Eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet. |
| Requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. |
| Requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. |
| Requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements. |
| Clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entitys other deferred tax assets. |
For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early application by public business entities to financial statements of fiscal years or interim periods that have not yet been issued or, by all other entities, that have not yet been made available for issuance of the following amendments in this Update are permitted as of the beginning of the fiscal year of adoption:
1. | An entity should present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk if the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. |
2. | Entities that are not public business entities are not required to apply the fair value of financial instruments disclosure guidance in the General Subsection of Section 825-10-50. |
Except for the early application guidance discussed above, early adoption of the amendments in this Update is not permitted.
An entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values (including disclosure requirements) should be applied prospectively to equity investments that exist as of the date of adoption of the Update. The Company is currently evaluating this guidance to determine the impact on its consolidated financial position, results of operations or cash flows.
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In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) which created Topic 842, Leases, and supersedes the leases requirements in Topic 840, Leases. Topic 842 specifies the accounting for leases. The core principal of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and liabilities. For public entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application of the amendments in this Update is permitted. The Company is currently evaluating this guidance to determine the impact on its consolidated financial position, results of operations or cash flows.
In March 2016, the FASB issued ASU No. 2016-06, Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments which clarifies the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. An entity performing the assessment under the amendments in this update is required to assess the embedded call (put) options solely in accordance with the four-stop decision sequence. The amendments are an improvement to GAAP because they eliminate diversity in practice in assessing embedded contingent call (put) options in debt instruments. For public business entities, the amendments in this Update are effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. An entity should apply the amendments in this Update on a modified retrospective basis to existing debt instruments as of the beginning of the fiscal year for which the amendments are effective. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The adoption of this ASU is not expected to have a material impact on the Companys consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-07, Investments-Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting which eliminate the requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held. The amendments require that the equity method investor add the cost of acquiring the additional interest in the investee to the current basis of the investors previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. Therefore, upon qualifying for the equity method of accounting, no retroactive adjustment of the investment is required. The amendments in this Update require that an entity that has an available-for-sale equity security that becomes qualified for the equity method of accounting recognize through earnings the unrealized holding gain or loss in accumulated other comprehensive income at the date the investment becomes qualified for use of the equity method. The amendments in this Update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. The amendments should be applied prospectively upon their effective date to increases in the level of ownership interest or degree of influence that result in the adoption of the equity method. Earlier application is permitted. The adoption of this ASU is not expected to have a material impact on the Companys consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting which simplifies several aspects of the accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The Update eliminates equity treatment for tax benefits or deficiencies that result from differences between the compensation cost recognized for GAAP purposes and the related tax deduction at settlement or expiration with such changes recognized in income tax expense and excludes excess tax benefits and tax deficiencies from the calculation of assumed proceeds for earnings per share purposes since such amounts are recognized in the income statement, which will result in greater volatility in earnings per share. In addition, this Update simplifies the statements of cash flows by eliminating the bifurcation of excess tax benefits from operating activities to financing activities. Upon adoption, the amendments in this Update provide for a tiered transition approach whereby amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements and forfeitures should be applied using a modified retrospective transition method by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is adopted. Amendments related to the presentation of employee taxes paid on the statement of cash flows when an employer withholds shares to meet the minimum statutory withholding requirement should be applied retrospectively. Amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement should be applied prospectively. An entity may elect to apply the amendments related to the presentation of excess tax benefits on the statement of cash flows using either a prospective transition method or a retrospective transition method. This Update is effective for annual reporting periods beginning after December 15, 2016, and interim periods within those annual periods with early adoption permitted. The Company is currently evaluating this guidance to determine the impact on its consolidated financial position, results of operations or cash flows.
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NOTE 2. INVESTMENT SECURITIES
The amortized cost, gross unrealized gains and losses and approximate fair values of securities available for sale are as follows:
Amortized Cost |
Unrealized | Fair Value |
||||||||||||||
March 31, 2016 |
Gains | Losses | ||||||||||||||
(Dollars in thousands) | ||||||||||||||||
Available for sale: |
||||||||||||||||
U.S. Government agencies and sponsored enterprises obligations |
$ | 19,074 | $ | 147 | $ | 53 | $ | 19,168 | ||||||||
U.S. Government agencies and sponsored enterprises mortgage-backed securities |
385,583 | 7,624 | 336 | 392,871 | ||||||||||||
State and municipal obligations |
2,239 | 206 | | 2,445 | ||||||||||||
Asset-backed securities |
499,276 | 51 | 15,225 | 484,102 | ||||||||||||
Corporate bonds and other debt securities |
481,535 | 5,862 | 6,581 | 480,816 | ||||||||||||
Preferred stock and other equity securities |
150,852 | 64 | 5,173 | 145,743 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total available for sale |
$ | 1,538,559 | $ | 13,954 | $ | 27,368 | $ | 1,525,145 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Amortized Cost |
Unrealized | Fair Value |
||||||||||||||
December 31, 2015 |
Gains | Losses | ||||||||||||||
(Dollars in thousands) | ||||||||||||||||
Available for sale: |
||||||||||||||||
U.S. Government agencies and sponsored enterprises obligations |
$ | 20,930 | $ | 100 | $ | 142 | $ | 20,888 | ||||||||
U.S. Government agencies and sponsored enterprises mortgage-backed securities |
392,123 | 2,587 | 1,595 | 393,115 | ||||||||||||
State and municipal obligations |
2,041 | 174 | | 2,215 | ||||||||||||
Asset-backed securities |
503,240 | 383 | 9,689 | 493,934 | ||||||||||||
Corporate bonds and other debt securities |
450,489 | 1,596 | 7,190 | 444,895 | ||||||||||||
Preferred stock and other equity securities |
171,170 | 1,153 | 2,748 | 169,575 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total available for sale |
$ | 1,539,993 | $ | 5,993 | $ | 21,364 | $ | 1,524,622 | ||||||||
|
|
|
|
|
|
|
|
As part of the Companys liquidity management strategy, the Company pledges loans and securities to secure borrowings from the FHLB. The Company also pledges securities to collateralize public deposits, repurchase agreements and interest rate swaps. The carrying value of all pledged securities totaled $820.6 million and $939.6 million at March 31, 2016 and December 31, 2015, respectively.
The amortized cost and estimated fair value of securities available for sale, by contractual maturity, are as follows:
March 31, 2016 |
Amortized Cost |
Fair Value |
||||||
(Dollars in thousands) | ||||||||
Available for sale: |
||||||||
Due in one year or less |
$ | 5,000 | $ | 5,043 | ||||
Due after one year through five years |
130,536 | 130,563 | ||||||
Due after five years through ten years |
72,727 | 70,833 | ||||||
Due after ten years |
275,511 | 276,822 | ||||||
U.S. Government agencies and sponsored enterprises obligations, mortgage-backed securities and asset-backed securities |
903,933 | 896,141 | ||||||
Preferred stock and other equity securities |
150,852 | 145,743 | ||||||
|
|
|
|
|||||
Total available for sale |
$ | 1,538,559 | $ | 1,525,145 | ||||
|
|
|
|
For purposes of the maturity table, U.S Government agencies and sponsored enterprises obligations, agency mortgage-backed securities and asset-backed securities, the principal of which are repaid periodically, are presented as a single amount. The expected lives of these securities will differ from contractual maturities because borrowers may have the right to prepay the underlying loans with or without prepayment penalties.
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The following tables present the estimated fair values and gross unrealized losses on investment securities available for sale, aggregated by investment category and length of time individual securities have been in a continuous unrealized loss position as of the periods presented:
Less than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||
March 31, 2016 |
Fair Value |
Unrealized Loss |
Fair Value |
Unrealized Loss |
Fair Value |
Unrealized Loss |
||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Available for sale: |
||||||||||||||||||||||||
U.S. Government agencies and sponsored enterprises obligations |
$ | 14,134 | $ | 53 | $ | | $ | | $ | 14,134 | $ | 53 | ||||||||||||
U.S. Government agencies and sponsored enterprises mortgage-backed securities |
49,047 | 173 | 15,558 | 163 | 64,605 | 336 | ||||||||||||||||||
State and municipal obligations |
| | | | | | ||||||||||||||||||
Asset-backed securities |
367,799 | 10,531 | 81,892 | 4,694 | 449,691 | 15,225 | ||||||||||||||||||
Corporate bonds and other debt securities |
236,053 | 6,410 | 20,298 | 171 | 256,351 | 6,581 | ||||||||||||||||||
Preferred stock and other equity securities |
100,663 | 2,984 | 32,963 | 2,189 | 133,626 | 5,173 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total available for sale |
$ | 767,696 | $ | 20,151 | $ | 150,711 | $ | 7,217 | $ | 918,407 | $ | 27,368 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Less than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||
December 31, 2015 |
Fair Value |
Unrealized Loss |
Fair Value |
Unrealized Loss |
Fair Value |
Unrealized Loss |
||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Available for sale: |
||||||||||||||||||||||||
U.S. Government agencies and sponsored enterprises obligations |
$ | 15,687 | $ | 142 | $ | | $ | | $ | 15,687 | $ | 142 | ||||||||||||
U.S. Government agencies and sponsored enterprises mortgage-backed securities |
225,109 | 1,391 | 12,584 | 204 | 237,693 | 1,595 | ||||||||||||||||||
State and municipal obligations |
| | | | | | ||||||||||||||||||
Asset-backed securities |
354,912 | 6,290 | 78,112 | 3,399 | 433,024 | 9,689 | ||||||||||||||||||
Corporate bonds and other debt securities |
347,302 | 7,190 | | | 347,302 | 7,190 | ||||||||||||||||||
Preferred stock and other equity securities |
96,543 | 1,740 | 19,000 | 1,008 | 115,543 | 2,748 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total available for sale |
$ | 1,039,553 | $ | 16,753 | $ | 109,696 | $ | 4,611 | $ | 1,149,249 | $ | 21,364 | ||||||||||||
|
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|
|
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|
|
|
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|
|
At March 31, 2016, the Companys security portfolio consisted of 308 securities, of which 162 securities were in an unrealized loss position. A total of 131 were in an unrealized loss position for less than 12 months. The unrealized losses for these securities resulted primarily from changes in interest rates.
The Company monitors its investment securities for OTTI. Impairment is evaluated on an individual security basis considering numerous factors, and its relative significance varying by situation. The Company has evaluated the nature of unrealized losses in the investment securities portfolio to determine if OTTI exists. The unrealized losses relate to changes in market interest rates and specific market conditions that do not represent credit-related impairments. Furthermore, the Company does not intend to sell nor is it more likely than not that it will be required to sell these investments before the recovery of their amortized cost basis. Management has completed an assessment of each security in an unrealized loss position for credit impairment, including securities with existing characteristics that are covered under the Volcker Rule, and has determined that no individual security was other-than-temporarily impaired at March 31, 2016. The following describes the basis under which the Company has evaluated OTTI:
U.S. Government Agencies and Sponsored Enterprises Obligations and Agency Mortgage-Backed Securities (MBS):
The unrealized losses associated with U.S. Government agencies and sponsored enterprises obligations and agency MBS are primarily driven by changes in interest rates. These securities have either an explicit or implicit U.S. government guarantee.
Asset-Backed Securities and Corporate Bonds & Other Debt Securities:
Securities were generally underwritten in accordance with the Companys investment standards prior to the decision to purchase, without relying on a bond issuers guarantee in making the investment decision. These investments are investment grade and will continue to be monitored as part of the Companys ongoing impairment analysis, but are expected to perform in accordance with their terms.
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Preferred Stock and Other Equity Securities:
The unrealized losses associated with preferred stock and other equity securities in large U.S. financial institutions are primarily driven by changes in interest rates. These securities were generally underwritten in accordance with the Companys investment standards prior to the decision to purchase.
Gross realized gains and losses on the sale of securities available for sale are shown below. The cost of securities sold is based on the specific identification method.
Three Months Ended March 31, | ||||||||
2016 | 2015 | |||||||
(Dollars in thousands) | ||||||||
Gross realized gains |
$ | 888 | $ | 1,112 | ||||
Gross realized losses |
(942 | ) | (69 | ) | ||||
|
|
|
|
|||||
Net realized gains (losses) |
$ | (54 | ) | $ | 1,043 | |||
|
|
|
|
NOTE 3. LOANS, NET
The Companys loan portfolio consists of New and Acquired loans. The Company classifies originated loans and purchased loans not acquired through business combinations as New loans. The Company classifies loans acquired through business combinations as Acquired loans. A portion of the acquired loan portfolio exhibited evidence of deterioration in credit quality since origination, and are accounted for under ASC 310-30. The remaining portfolio of acquired loans consists of loans that were not considered ASC 310-30 loans at acquisition and are classified as Non-ASC 310-30 loans.
The following tables summarize the Companys loans by portfolio and segment as of the periods presented, net of deferred fees, costs, premiums and discounts:
March 31, 2016 |
ASC 310-30 Loans |
Non-ASC 310-30 Loans |
New Loans (1) |
Total | ||||||||||||
Real estate loans: |
||||||||||||||||
Commercial real estate |
$ | 212,041 | $ | 55,731 | $ | 1,067,594 | $ | 1,335,366 | ||||||||
Owner-occupied commercial real estate |
| 20,814 | 558,659 | 579,473 | ||||||||||||
1-4 single family residential |
40,061 | 80,199 | 1,833,190 | 1,953,450 | ||||||||||||
Construction, land and development |
27,973 | 6,338 | 543,540 | 577,851 | ||||||||||||
Home equity loans and lines of credit |
| 47,362 | 34,973 | 82,335 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total real estate loans |
$ | 280,075 | $ | 210,444 | $ | 4,037,956 | $ | 4,528,475 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Other loans: |
||||||||||||||||
Commercial and industrial |
$ | 33,413 | $ | 8,478 | $ | 1,064,873 | $ | 1,106,764 | ||||||||
Consumer |
2,287 | 432 | 5,709 | 8,428 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total other loans |
35,700 | 8,910 | 1,070,582 | 1,115,192 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total loans held in portfolio |
$ | 315,775 | $ | 219,354 | $ | 5,108,538 | $ | 5,643,667 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Allowance for loan losses |
(31,995 | ) | ||||||||||||||
|
|
|||||||||||||||
Loans held in portfolio, net |
$ | 5,611,672 | ||||||||||||||
|
|
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Table of Contents
December 31, 2015 |
ASC 310-30 Loans |
Non-ASC 310-30 Loans |
New Loans (1) |
Total | ||||||||||||
Real estate loans: |
||||||||||||||||
Commercial real estate |
$ | 247,628 | $ | 55,985 | $ | 998,141 | $ | 1,301,754 | ||||||||
Owner-occupied commercial real estate |
| 21,101 | 524,728 | 545,829 | ||||||||||||
1-4 single family residential |
40,922 | 84,111 | 1,541,255 | 1,666,288 | ||||||||||||
Construction, land and development |
28,017 | 6,338 | 537,494 | 571,849 | ||||||||||||
Home equity loans and lines of credit |
| 49,407 | 30,945 | 80,352 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total real estate loans |
$ | 316,567 | $ | 216,942 | $ | 3,632,563 | $ | 4,166,072 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Other loans: |
||||||||||||||||
Commercial and industrial |
$ | 36,783 | $ | 9,312 | $ | 972,803 | $ | 1,018,898 | ||||||||
Consumer |
2,390 | 430 | 5,397 | 8,217 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total other loans |
39,173 | 9,742 | 978,200 | 1,027,115 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total loans held in portfolio |
$ | 355,740 | $ | 226,684 | $ | 4,610,763 | $ | 5,193,187 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Allowance for loan losses |
(29,126 | ) | ||||||||||||||
|
|
|||||||||||||||
Loans held in portfolio, net |
$ | 5,164,061 | ||||||||||||||
|
|
(1) | Balance includes $8.7 million and $7.1 million of deferred fees, costs, and premium and discount as of March 31, 2016 and December 31, 2015, respectively. |
At March 31, 2016 and December 31, 2015, the unpaid principle balance of ASC 310-30 loans were $387.1 million and $457.9 million, respectively. At March 31, 2016 and December 31, 2015, the Company had pledged loans as collateral for FHLB advances of $2.14 billion and $2.13 billion, respectively. The recorded investments of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process as of March 31, 2016 totaled $4.9 million. The Company held $466.7 million and $464.2 million of syndicated national loans as of March 31, 2016 and December 31, 2015, respectively.
During the three months ended March 31, 2016 and 2015, the Company purchased approximately $189.2 million and $89.6 million in loans from third parties.
During the three months ended March 31, 2016 and 2015, the Company sold approximately $36.2 million and $7.9 million, respectively in loans to third parties.
The accretable discount on ASC 310-30 loans represents the amount by which the undiscounted expected cash flows on such loans exceed their carrying value. The change in expected cash flow for certain ASC 310-30 loan pools resulted in the reclassification of $(9.9) million and $6.7 million between non-accretable and accretable discount during the three months ended March 31, 2016 and 2015, respectively.
Changes in accretable discount for ASC 310-30 loans for the three months ended March 31, 2016 and 2015, were as follows:
Three Months Ended March 31, | ||||||||
2016 | 2015 | |||||||
(Dollars in thousands) | ||||||||
Balance at January 1, |
$ | 144,152 | $ | 156,197 | ||||
Accretion |
(15,680 | ) | (12,542 | ) | ||||
Reclassifications from (to) non-accretable difference |
(9,888 | ) | 6,650 | |||||
|
|
|
|
|||||
Balance at March 31, |
$ | 118,584 | $ | 150,305 | ||||
|
|
|
|
NOTE 4. ALLOWANCE FOR LOAN LOSSES
The Companys accounting method for loans and the corresponding allowance for loan losses (ALL) differs depending on whether the loans are New or Acquired. The Company assesses and monitors credit risk and portfolio performance using distinct methodologies for Acquired loans, both ASC 310-30 Loans and Non-ASC 310-30 Loans, and New loans. Within each of these portfolios, the Company further disaggregates the portfolios into the following segments: Commercial real estate, Owner-occupied commercial real estate, 1-4 single family residential, Construction, land and development, Home equity loans and lines of credit, Commercial and industrial and Consumer. The ALL reflects managements estimate of probable credit losses inherent in each of the segments.
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Table of Contents
Changes in the ALL by loan portfolio and segment for the three months ended March 31, 2016 and 2015 are as follows:
Commercial Real Estate |
Owner- Occupied Commercial Real Estate |
1-4 Single Family Residential |
Construction, Land and Development |
Home Equity Loans and Lines of Credit |
Commercial and Industrial |
Consumer | Total | |||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||
Balance at January 1, 2016 |
$ | 8,450 | $ | 2,243 | $ | 6,425 | $ | 3,404 | $ | 483 | $ | 7,665 | $ | 456 | $ | 29,126 | ||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Provision (credit) for ASC 310-30 loans |
(198 | ) | | 1 | (10 | ) | | (2 | ) | (4 | ) | (213 | ) | |||||||||||||||||||
Provision (credit) for non-ASC 310-30 loans |
(855 | ) | (58 | ) | (24 | ) | | 23 | (3 | ) | 6 | (911 | ) | |||||||||||||||||||
Provision (credit) for New loans |
492 | 97 | 907 | 51 | 28 | 984 | 5 | 2,564 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total provision |
(561 | ) | 39 | 884 | 41 | 51 | 979 | 7 | 1,440 | |||||||||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
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|
|
|||||||||||||||||
Charge-offs for ASC 310-30 loans |
| | | (30 | ) | | (75 | ) | | (105 | ) | |||||||||||||||||||||
Charge-offs for non-ASC 310-30 loans |
| (1 | ) | | | (35 | ) | | (6 | ) | (42 | ) | ||||||||||||||||||||
Charge-offs for New loans |
| | | | | | | | ||||||||||||||||||||||||
|
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|
|
|
|
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|
|
|
|
|
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|
|||||||||||||||||
Total charge-offs |
| (1 | ) | | (30 | ) | (35 | ) | (75 | ) | (6 | ) | (147 | ) | ||||||||||||||||||
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|
|
|
|
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|
|||||||||||||||||
Recoveries for ASC 310-30 loans |
761 | | | | | 11 | | 772 | ||||||||||||||||||||||||
Recoveries for non-ASC 310-30 loans |
804 | | | | | | | 804 | ||||||||||||||||||||||||
Recoveries for New loans |
| | | | | | | | ||||||||||||||||||||||||
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|
|
|
|
|
|
|
|||||||||||||||||
Total recoveries |
1,565 | | | | | 11 | | 1,576 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Ending ALL balance |
||||||||||||||||||||||||||||||||
ASC 310-30 loans |
2,461 | | 27 | 288 | | 387 | 402 | 3,565 | ||||||||||||||||||||||||
Non-ASC 310-30 loans |
1,033 | 404 | 308 | 36 | 279 | 57 | 4 | 2,121 | ||||||||||||||||||||||||
New loans |
5,960 | 1,877 | 6,974 | 3,091 | 220 | 8,136 | 51 | 26,309 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Balance at March 31, 2016 |
$ | 9,454 | $ | 2,281 | $ | 7,309 | $ | 3,415 | $ | 499 | $ | 8,580 | $ | 457 | $ | 31,995 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Commercial Real Estate |
Owner- Occupied Commercial Real Estate |
1-4 Single Family Residential |
Construction, Land and Development |
Home Equity Loans and Lines of Credit |
Commercial and Industrial |
Consumer | Total | |||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||
Balance at January 1, 2015 |
$ | 8,206 | $ | 1,020 | $ | 4,740 | $ | 2,456 | $ | 355 | $ | 5,745 | $ | 358 | $ | 22,880 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Provision (credit) for ASC 310-30 loans |
(81 | ) | | 64 | (20 | ) | | (24 | ) | 42 | (19 | ) | ||||||||||||||||||||
Provision (credit) for non-ASC 310-30 loans |
32 | 3 | 56 | (7 | ) | 4 | 3 | 1 | 92 | |||||||||||||||||||||||
Provision (credit) for New loans |
853 | 229 | 383 | (181 | ) | 39 | (43 | ) | (4 | ) | 1,276 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total provision |
804 | 232 | 503 | (208 | ) | 43 | (64 | ) | 39 | 1,349 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Charge-offs for ASC 310-30 loans |
(96 | ) | | (86 | ) | (56 | ) | | (30 | ) | (60 | ) | (328 | ) | ||||||||||||||||||
Charge-offs for non-ASC 310-30 loans |
| | (65 | ) | | | | | (65 | ) | ||||||||||||||||||||||
Charge-offs for New loans |
| | | | | | | | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total charge-offs |
(96 | ) | | (151 | ) | (56 | ) | | (30 | ) | (60 | ) | (393 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Recoveries for ASC 310-30 loans |
382 | | 121 | 120 | | 49 | | 672 | ||||||||||||||||||||||||
Recoveries for non-ASC 310-30 loans |
| | | | | | | | ||||||||||||||||||||||||
Recoveries for New loans |
| | | | | 5 | | 5 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total recoveries |
382 | | 121 | 120 | | 54 | | 677 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Ending ALL balance |
||||||||||||||||||||||||||||||||
ASC 310-30 loans |
3,460 | | 424 | 702 | | 953 | 272 | 5,811 | ||||||||||||||||||||||||
Non-ASC 310-30 loans |
527 | 61 | 405 | 68 | 289 | 52 | 7 | 1,409 | ||||||||||||||||||||||||
New loans |
5,309 | 1,191 | 4,384 | 1,542 | 109 | 4,700 | 58 | 17,293 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Balance at March 31, 2015 |
$ | 9,296 | $ | 1,252 | $ | 5,213 | $ | 2,312 | $ | 398 | $ | 5,705 | $ | 337 | $ | 24,513 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Quality Indicators
In evaluating credit risk, the Company looks at multiple factors; however, management considers delinquency status to be the most meaningful indicator of the credit quality of 1-4 single family residential, home equity loans and lines of credit and consumer loans. Delinquency statistics are updated at least monthly. Internal risk ratings are considered the most meaningful indicator of credit quality for Non-ASC 310-30 and New commercial, construction, land and development and commercial real estate loans. Internal risk ratings are updated on a continuous basis.
15
Table of Contents
The following tables present an aging analysis of the recorded investment for delinquent loans by portfolio and segment (excluding loans accounted for under ASC 310-30):
Accruing | ||||||||||||||||||||
March 31, 2016 |
30 to 59 Days Past Due |
60 to 89 Days Past Due |
90 Days or More Past Due |
Non- Accrual |
Total | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
New loans: |
||||||||||||||||||||
Real estate loans: |
||||||||||||||||||||
Commercial real estate |
$ | | $ | | $ | | $ | | $ | | ||||||||||
Owner-occupied commercial real estate |
| | | | | |||||||||||||||
1-4 single family residential |
14,623 | | | 815 | 15,438 | |||||||||||||||
Construction, land and development |
| | | | | |||||||||||||||
Home equity loans and lines of credit |
63 | | | | 63 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total real estate loans |
14,686 | | | 815 | 15,501 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Other loans: |
||||||||||||||||||||
Commercial and industrial |
| | | | | |||||||||||||||
Consumer |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total other loans |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total new loans |
$ | 14,686 | $ | | $ | | $ | 815 | $ | 15,501 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Acquired loans: |
||||||||||||||||||||
Real estate loans: |
||||||||||||||||||||
Commercial real estate |
$ | | $ | | $ | | $ | 5,220 | $ | 5,220 | ||||||||||
Owner-occupied commercial real estate |
| | | 2,280 | 2,280 | |||||||||||||||
1-4 single family residential |
1,279 | | | 3,397 | 4,676 | |||||||||||||||
Construction, land and development |
| | | | | |||||||||||||||
Home equity loans and lines of credit |
689 | 93 | | 2,501 | 3,283 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total real estate loans |
1,968 | 93 | | 13,398 | 15,459 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Other loans: |
||||||||||||||||||||
Commercial and industrial |
192 | | | 877 | 1,069 | |||||||||||||||
Consumer |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total other loans |
192 | | | 877 | 1,069 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total acquired loans |
$ | 2,160 | $ | 93 | $ | | $ | 14,275 | $ | 16,528 | ||||||||||
|
|
|
|
|
|
|
|
|
|
16
Table of Contents
Accruing | ||||||||||||||||||||
December 31, 2015 |
30 to 59 Days Past Due |
60 to 89 Days Past Due |
90 Days or More Past Due |
Non- Accrual |
Total | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
New loans: |
||||||||||||||||||||
Real estate loans: |
||||||||||||||||||||
Commercial real estate |
$ | | $ | | $ | | $ | | $ | | ||||||||||
Owner-occupied commercial real estate |
| 113 | | | 113 | |||||||||||||||
1-4 single family residential |
9,439 | 869 | | 1,454 | 11,762 | |||||||||||||||
Construction, land and development |
467 | | | | 467 | |||||||||||||||
Home equity loans and lines of credit |
64 | | | | 64 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total real estate loans |
9,970 | 982 | | 1,454 | 12,406 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Other loans: |
||||||||||||||||||||
Commercial and industrial |
| | | | | |||||||||||||||
Consumer |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total other loans |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total new loans |
$ | 9,970 | $ | 982 | $ | | $ | 1,454 | $ | 12,406 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Acquired Loans: |
||||||||||||||||||||
Real estate loans: |
||||||||||||||||||||
Commercial real estate |
$ | 63 | $ | | $ | | $ | 5,282 | $ | 5,345 | ||||||||||
Owner-occupied commercial real estate |
| 95 | | 2,247 | 2,342 | |||||||||||||||
1-4 single family residential |
1,393 | 697 | | 3,016 | 5,106 | |||||||||||||||
Construction, land and development |
| | | | | |||||||||||||||
Home equity loans and lines of credit |
490 | 97 | | 2,295 | 2,882 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total real estate loans |
1,946 | 889 | | 12,840 | 15,675 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Other loans: |
||||||||||||||||||||
Commercial and industrial |
90 | | | 877 | 967 | |||||||||||||||
Consumer |
| | | 23 | 23 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total other loans |
90 | | | 900 | 990 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total acquired loans |
$ | 2,036 | $ | 889 | $ | | $ | 13,740 | $ | 16,665 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Loans exhibiting potential credit weaknesses that deserve managements close attention and that if left uncorrected may result in deterioration of the repayment capacity of the borrower are categorized as special mention. Loans with well-defined credit weaknesses including payment defaults, declining collateral values, frequent overdrafts, operating losses, increasing balance sheet leverage, inadequate cash flow, project cost overruns, unreasonable construction delays, past due real estate taxes or exhausted interest reserves are assigned an internal risk rating of substandard. A loan with a weakness so severe that collection in full is highly questionable or improbable will be assigned an internal risk rating of doubtful.
17
Table of Contents
The following table summarizes the Companys commercial Non-ASC 310-30 and New loans by key indicators of credit quality. Loans accounted for under ASC 310-30 are excluded from the following analysis because their related allowance is determined by loan pool performance:
March 31, 2016 |
Pass | Special Mention |
Substandard | Doubtful | ||||||||||||
(Dollars in thousands) | ||||||||||||||||
New loans: |
||||||||||||||||
Commercial real estate |
$ | 1,067,594 | $ | | $ | | $ | | ||||||||
Owner-occupied commercial real estate |
558,659 | | | | ||||||||||||
Construction, land and development |
543,540 | | | | ||||||||||||
Commercial and industrial |
1,064,873 | | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total new loans |
$ | 3,234,666 | $ | | $ | | $ | | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Acquired loans: |
||||||||||||||||
Commercial real estate |
$ | 50,139 | $ | | $ | 5,592 | $ | | ||||||||
Owner-occupied commercial real estate |
18,534 | | 2,280 | | ||||||||||||
Construction, land and development |
6,338 | | | | ||||||||||||
Commercial and industrial |
7,236 | | 1,242 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total aquired loans |
$ | 82,247 | $ | | $ | 9,114 | $ | | ||||||||
|
|
|
|
|
|
|
|
|||||||||
December 31, 2015 |
Pass | Special Mention |
Substandard | Doubtful | ||||||||||||
(Dollars in thousands) | ||||||||||||||||
New loans: |
||||||||||||||||
Commercial real estate |
$ | 998,141 | $ | | $ | | $ | | ||||||||
Owner-occupied commercial real estate |
524,728 | | | | ||||||||||||
Construction, land and development |
537,494 | | | | ||||||||||||
Commercial and industrial |
972,803 | | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total new loans |
$ | 3,033,166 | $ | | $ | | $ | | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Acquired loans: |
||||||||||||||||
Commercial real estate |
$ | 50,328 | $ | | $ | 5,657 | $ | | ||||||||
Owner-occupied commercial real estate |
18,854 | | 2,247 | | ||||||||||||
Construction, land and development |
6,338 | | | | ||||||||||||
Commercial and industrial |
6,715 | 1,352 | 1,245 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total acquired loans |
$ | 82,235 | $ | 1,352 | $ | 9,149 | $ | | ||||||||
|
|
|
|
|
|
|
|
Internal risk ratings are a key factor in identifying loans to be individually evaluated for impairment and impact managements estimates of loss factors used in determining the amount of the ALL.
18
Table of Contents
The following table shows the Companys investment in loans disaggregated based on the method of evaluating impairment:
Loans - Recorded Investment | Allowance for Credit Loss | |||||||||||||||||||||||
March 31, 2016 |
Individually Evaluated for Impairment |
Collectively Evaluated for Impairment |
ASC 310- 30 Loans |
Individually Evaluated for Impairment |
Collectively Evaluated for Impairment |
ASC 310- 30 Loans |
||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
New loans: |
||||||||||||||||||||||||
Real estate loans: |
||||||||||||||||||||||||
Commercial real estate |
$ | | $ | 1,067,594 | $ | | $ | | $ | 5,960 | $ | | ||||||||||||
Owner-occupied commercial real estate |
| 558,659 | | | 1,877 | | ||||||||||||||||||
1-4 single family residential |
| 1,833,190 | | | 6,974 | | ||||||||||||||||||
Construction, land and development |
| 543,540 | | | 3,091 | | ||||||||||||||||||
Home equity loans and lines of credit |
| 34,973 | | | 220 | | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total real estate loans |
$ | | $ | 4,037,956 | $ | | $ | | $ | 18,122 | $ | | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Other loans |
||||||||||||||||||||||||
Commercial and industrial |
$ | | $ | 1,064,873 | $ | | $ | | $ | 8,136 | $ | | ||||||||||||
Consumer |
| 5,709 | | | 51 | | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total other loans |
$ | | $ | 1,070,582 | $ | | $ | | $ | 8,187 | $ | | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Acquired loans: |
||||||||||||||||||||||||
Real estate loans: |
||||||||||||||||||||||||
Commercial real estate |
$ | 5,220 | $ | 50,511 | $ | 212,041 | $ | 774 | $ | 259 | $ | 2,461 | ||||||||||||
Owner-occupied commercial real estate |
2,185 | 18,629 | | 340 | 64 | | ||||||||||||||||||
1-4 single family residential |
267 | 79,932 | 40,061 | | 308 | 27 | ||||||||||||||||||
Construction, land and development |
| 6,338 | 27,973 | | 36 | 288 | ||||||||||||||||||
Home equity loans and lines of credit |
907 | 46,455 | | | 279 | | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total real estate loans |
$ | 8,579 | $ | 201,865 | $ | 280,075 | $ | 1,114 | $ | 946 | $ | 2,776 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Other loans |
||||||||||||||||||||||||
Commercial and industrial |
$ | 877 | $ | 7,601 | $ | 33,413 | $ | | $ | 57 | $ | 387 | ||||||||||||
Consumer |
| 432 | 2,287 | | 4 | 402 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total other loans |
$ | 877 | $ | 8,033 | $ | 35,700 | $ | | $ | 61 | $ | 789 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
19
Table of Contents
Loans - Recorded Investment | Allowance for Credit Loss | |||||||||||||||||||||||
December 31, 2015 |
Individually Evaluated for Impairment |
Collectively Evaluated for Impairment |
ASC 310- 30 Loans |
Individually Evaluated for Impairment |
Collectively Evaluated for Impairment |
ASC 310- 30 Loans |
||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
New loans: |
||||||||||||||||||||||||
Real estate loans: |
||||||||||||||||||||||||
Commercial real estate |
$ | | $ | 998,141 | $ | | $ | | $ | 5,468 | $ | | ||||||||||||
Owner-occupied commercial real estate |
| 524,728 | | | 1,780 | | ||||||||||||||||||
1-4 single family residential |
| 1,541,255 | | | 6,067 | | ||||||||||||||||||
Construction, land and development |
| 537,494 | | | 3,040 | | ||||||||||||||||||
Home equity loans and lines of credit |
| 30,945 | | | 192 | | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total real estate loans |
$ | | $ | 3,632,563 | $ | | $ | | $ | 16,547 | $ | | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Other loans |
||||||||||||||||||||||||
Commercial and industrial |
$ | | $ | 972,803 | $ | | $ | | $ | 7,152 | $ | | ||||||||||||
Consumer |
| 5,397 | | | 46 | | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total other loans |
$ | | $ | 978,200 | $ | | $ | | $ | 7,198 | $ | | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Acquired Loans: |
||||||||||||||||||||||||
Real estate loans: |
||||||||||||||||||||||||
Commercial real estate |
$ | 5,282 | $ | 50,703 | $ | 247,628 | $ | 829 | $ | 255 | $ | 1,898 | ||||||||||||
Owner-occupied commercial real estate |
2,244 | 18,857 | | 399 | 64 | | ||||||||||||||||||
1-4 single family residential |
263 | 83,848 | 40,922 | | 332 | 26 | ||||||||||||||||||
Construction, land and development |
| 6,338 | 28,017 | | 36 | 328 | ||||||||||||||||||
Home equity loans and lines of credit |
916 | 48,491 | | | 291 | | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total real estate loans |
$ | 8,705 | $ | 208,237 | $ | 316,567 | $ | 1,228 | $ | 978 | $ | 2,252 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Other loans |
||||||||||||||||||||||||
Commercial and industrial |
$ | 877 | $ | 8,435 | $ | 36,783 | $ | | $ | 60 | $ | 453 | ||||||||||||
Consumer |
| 430 | 2,390 | | 4 | 406 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total other loans |
$ | 877 | $ | 8,865 | $ | 39,173 | $ | | $ | 64 | $ | 859 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
20
Table of Contents
The following tables set forth certain information regarding the Companys impaired loans (excluding loans accounted for under ASC 310-30) that were evaluated for specific reserves:
Impaired Loans - With Allowance | Impaired Loans - With no Allowance |
|||||||||||||||||||
March 31, 2016 |
Recorded Investment |
Unpaid Principal Balance |
Related Allowance |
Recorded Investment |
Unpaid Principal Balance |
|||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
New loans: |
||||||||||||||||||||
Real estate loans: |
||||||||||||||||||||
Commercial real estate |
$ | | $ | | $ | | $ | | $ | | ||||||||||
Owner-occupied commercial real estate |
| | | | | |||||||||||||||
1-4 single family residential |
| | | | | |||||||||||||||
Construction, land and development |
| | | | | |||||||||||||||
Home equity loans and lines of credit |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total real estate loans |
$ | | $ | | $ | | $ | | $ | | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Other loans |
||||||||||||||||||||
Commercial and industrial |
$ | | $ | | $ | | $ | | $ | | ||||||||||
Consumer |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total other loans |
$ | | $ | | $ | | $ | | $ | | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Acquired loans: |
||||||||||||||||||||
Real estate loans: |
||||||||||||||||||||
Commercial real estate |
$ | 4,500 | $ | 4,923 | $ | 774 | $ | 720 | $ | 747 | ||||||||||
Owner-occupied commercial real estate |
2,185 | 2,289 | 340 | | | |||||||||||||||
1-4 single family residential |
| | | 267 | 267 | |||||||||||||||
Construction, land and development |
| | | | | |||||||||||||||
Home equity loans and lines of credit |
| | | 907 | 1,048 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total real estate loans |
$ | 6,685 | $ | 7,212 | $ | 1,114 | $ | 1,894 | $ | 2,062 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Other loans |
||||||||||||||||||||
Commercial and industrial |
$ | | $ | | $ | | $ | 877 | $ | 1,825 | ||||||||||
Consumer |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total other loans |
$ | | $ | | $ | | $ | 877 | $ | 1,825 | ||||||||||
|
|
|
|
|
|
|
|
|
|
21
Table of Contents
Impaired Loans - With Allowance | Impaired Loans - With no Allowance |
|||||||||||||||||||
December 31, 2015 |
Recorded Investment |
Unpaid Principal Balance |
Related Allowance |
Recorded Investment |
Unpaid Principal Balance |
|||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
New loans: |
||||||||||||||||||||
Real estate loans: |
||||||||||||||||||||
Commercial real estate |
$ | | $ | | $ | | $ | | $ | | ||||||||||
Owner-occupied commercial real estate |
| | | | | |||||||||||||||
1-4 single family residential |
| | | | | |||||||||||||||
Construction, land and development |
| | | | | |||||||||||||||
Home equity loans and lines of credit |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total real estate loans |
$ | | $ | | $ | | $ | | $ | | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Other loans |
||||||||||||||||||||
Commercial and industrial |
$ | | $ | | $ | | $ | | $ | | ||||||||||
Consumer |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total other loans |
$ | | $ | | $ | | $ | | $ | | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Acquired loans: |
||||||||||||||||||||
Real estate loans: |
||||||||||||||||||||
Commercial real estate |
$ | 4,555 | $ | 4,924 | $ | 829 | $ | 727 | $ | 750 | ||||||||||
Owner-occupied commercial real estate |
2,244 | 2,310 | 399 | | | |||||||||||||||
1-4 single family residential |
| | | 263 | 264 | |||||||||||||||
Construction, land and development |
| | | | | |||||||||||||||
Home equity loans and lines of credit |
| | | 916 | 1,048 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total real estate loans |
$ | 6,799 | $ | 7,234 | $ | 1,228 | $ | 1,906 | $ | 2,062 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Other loans |
||||||||||||||||||||
Commercial and industrial |
$ | | $ | | $ | | $ | 877 | $ | 1,825 | ||||||||||
Consumer |
| | | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total other loans |
$ | | $ | | $ | | $ | 877 | $ | 1,825 | ||||||||||
|
|
|
|
|
|
|
|
|
|
22
Table of Contents
Three Months Ended March 31, | ||||||||||||||||
2016 | 2015 | |||||||||||||||
Average Recorded Investment |
Interest Income Recognized |
Average Recorded Investment |
Interest Income Recognized |
|||||||||||||
(Dollars in thousands) | ||||||||||||||||
Impaired loans with no related allowance: |
||||||||||||||||
Real estate loans: |
||||||||||||||||
Commercial real estate |
$ | 723 | $ | | $ | 4,321 | $ | | ||||||||
Owner-occupied commercial real estate |
| | | | ||||||||||||
1-4 single family residential |
266 | | | | ||||||||||||
Construction, land and development |
| | | | ||||||||||||
Home equity loans and lines of credit |
912 | | 975 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total real estate loans |
$ | 1,901 | $ | | $ | 5,296 | $ | | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Other loans: |
||||||||||||||||
Commercial and industrial |
$ | 877 | $ | | $ | | $ | | ||||||||
Consumer |
| | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total other loans |
$ | 877 | $ | | $ | | $ | | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Impaired loans with an allowance: |
||||||||||||||||
Real estate loans: |
||||||||||||||||
Commercial real estate |
$ | 4,524 | $ | | $ | 340 | $ | | ||||||||
Owner-occupied commercial real estate |
2,215 | | | | ||||||||||||
1-4 single family residential |
| | | | ||||||||||||
Construction, land and development |
| | | | ||||||||||||
Home equity loans and lines of credit |
| | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total real estate loans |
$ | 6,739 | $ | | $ | 340 | $ | | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Other loans: |
||||||||||||||||
Commercial and industrial |
$ | | $ | | $ | | $ | | ||||||||
Consumer |
| | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total other loans |
$ | | $ | | $ | | $ | | ||||||||
|
|
|
|
|
|
|
|
NOTE 5. DERIVATIVES
The Company is a party to interest rate derivatives that are not designated as hedging instruments. These derivatives are interest rate swaps that the Company enters into with customers to allow customers to convert variable rate loans to fixed rates. At the same time the interest rate swap is entered into with the customer, an offsetting interest rate swap is entered into with another financial institution. The changes in the fair value of the swaps offset each other, except for any differences in the credit risk of the counterparties, which is determined by considering the risk rating, probability of default and loss of given default of each counterparty. The Company recorded $1.2 million and $1.7 million of customer swap fees in noninterest income in the accompanying consolidated statement of income for the three months ended March 31, 2016 and 2015, respectively.
As of March 31, 2016, the Company has not recorded any credit adjustments related to the credit risk of the counterparties. There was no change in the fair value of derivative assets and derivative liabilities attributable to credit risk included in noninterest expense on the statements of income for the three months ended March 31, 2016 or 2015.
No derivative positions held by the Company as of March 31, 2016 were designated as hedging instruments under ASC 815-10.
23
Table of Contents
The following tables summarize the Companys derivatives outstanding included in other assets and other liabilities in the accompanying consolidated balance sheets:
March 31, 2016 |
Derivative Assets | Derivative Liabilities | ||||||||||||||
Notional | Fair Value | Notional | Fair Value | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Derivatives not designated as hedging instruments under ASC 815-10 |
||||||||||||||||
Interest rate contracts - pay floating, receive fixed |
$ | 740,085 | $ | 38,344 | $ | 8,298 | $ | | ||||||||
Interest rate contracts - pay fixed, receive floating |
| | 731,787 | 38,344 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total derivatives |
$ | 740,085 | $ | 38,344 | $ | 740,085 | $ | 38,344 | ||||||||
|
|
|
|
|
|
|
|
December 31, 2015 |
Derivative Assets | Derivative Liabilities | ||||||||||||||
Notional | Fair Value | Notional | Fair Value | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Derivatives not designated as hedging instruments under ASC 815-10 |
||||||||||||||||
Interest rate contracts - pay floating, receive fixed |
$ | 690,175 | $ | 21,553 | $ | 8,298 | $ | 2 | ||||||||
Interest rate contracts - pay fixed, receive floating |
| | 698,474 | 21,551 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total derivatives |
$ | 690,175 | $ | 21,553 | $ | 706,772 | $ | 21,553 | ||||||||
|
|
|
|
|
|
|
|
The derivative transactions entered into with a financial institution are subject to an enforceable master netting arrangement. The following table summarizes the gross and net fair values of the Companys derivatives outstanding with this counterparty included in other liabilities in the accompanying consolidated balance sheets:
March 31, 2016 |
Gross amounts of recognized liabilities |
Gross amounts offset in the consolidated balance sheets |
Net amounts in the consolidated balance sheets |
|||||||||
(Dollars in thousands) | ||||||||||||
Offsetting derivative liabilities |
||||||||||||
Counterparty A - Interest rate contracts |
$ | 38,344 | $ | | $ | 38,344 | ||||||
|
|
|
|
|
|
|||||||
Total |
$ | 38,344 | $ | | $ | 38,344 | ||||||
|
|
|
|
|
|
December 31, 2015 |
Gross amounts of recognized liabilities |
Gross amounts offset in the consolidated balance sheets |
Net amounts in the consolidated balance sheets |
|||||||||
(Dollars in thousands) | ||||||||||||
Offsetting derivative liabilities |
||||||||||||
Counterparty A - Interest rate contracts |
$ | 21,553 | $ | (2 | ) | $ | 21,551 | |||||
|
|
|
|
|
|
|||||||
Total |
$ | 21,553 | $ | (2 | ) | $ | 21,551 | |||||
|
|
|
|
|
|
At March 31, 2016, the Company has pledged investment securities available for sale with a carrying amount of $37.2 million as collateral for the interest rate swaps in a liability position. The amount of collateral required to be posted by the Company varies based on the settlement value of outstanding swaps.
As of March 31, 2016 and December 31, 2015, substantially all of the floating rate terms within the interest rate contracts held by the Company were indexed to 1-month LIBOR.
The fair value of the derivative assets and liabilities are included in a table in Note 12 Fair Value Measurements, in the line items Derivative assets and Derivative liabilities.
24
Table of Contents
NOTE 6. DEPOSITS
The following table sets forth the Companys deposits by category:
March 31, | December 31, | |||||||
2016 | 2015 | |||||||
(Dollars in thousands) | ||||||||
Noninterest-bearing demand deposits |
$ | 737,875 | $ | 637,047 | ||||
Interest-bearing demand deposits |
647,824 | 608,454 | ||||||
Interest-bearing NOW accounts |
441,476 | 347,832 | ||||||
Savings and money market accounts |
2,187,596 | 1,979,132 | ||||||
Time deposits |
1,887,608 | 1,858,173 | ||||||
|
|
|
|
|||||
Total deposits |
$ | 5,902,379 | $ | 5,430,638 | ||||
|
|
|
|
|||||
Time deposits $100,000 and greater |
$ | 1,353,034 | $ | 1,323,520 | ||||
Time deposits greater than $250,000 |
605,922 | 587,590 |
The aggregate amount of overdraft demand deposits reclassified to loans was $381 thousand at March 31, 2016. The aggregate amount of maturities for time deposits for each of the five years as of March 31, 2016 totaled $914.4 million, $701.1 million, $252.7 million, $7.1 million and $12.4 million, respectively. The Company holds brokered deposits through an insured deposit sweep program of $489.4 million and $425.1 million at March 31, 2016 and December 31, 2015, respectively. The Company holds brokered certificates of deposit of $3.3 million at March 31, 2016 and December 31, 2015.
NOTE 7. ACCUMULATED OTHER COMPREHENSIVE INCOME
Changes in AOCI for the periods indicated are summarized as follows:
Three Months Ended March 31, | ||||||||||||||||||||||||
2016 | 2015 | |||||||||||||||||||||||
Before Tax |
Tax Effect |
Net of Tax |
Before Tax |
Tax Effect |
Net of Tax |
|||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Balance at beginning of period |
$ | (15,371 | ) | $ | 5,928 | $ | (9,443 | ) | $ | 1,106 | $ | (427 | ) | $ | 679 | |||||||||
Unrealized gain (loss) on investment securities available for sale: |
||||||||||||||||||||||||
Net unrealized holdings gain (loss) arising during the period |
2,670 | (1,029 | ) | 1,641 | 17,168 | (6,622 | ) | 10,546 | ||||||||||||||||
Amounts reclassified to (gain) loss on investment securities |
(713 | ) | 275 | (438 | ) | (1,096 | ) | 423 | (673 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance at end of period |
$ | (13,414 | ) | $ | 5,174 | $ | (8,240 | ) | $ | 17,178 | $ | (6,626 | ) | $ | 10,552 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 8. BASIC AND DILUTED EARNINGS PER SHARE
Basic earnings per share (EPS) is calculated by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS reflect the effect of common stock equivalents, including stock options and unvested shares, calculated using the treasury stock method. Common stock equivalents are excluded from the computation of diluted EPS in periods in which the effect is anti-dilutive.
25
Table of Contents
The following table presents the computation of basic and diluted EPS:
Three Months Ended March 31, | ||||||||
2016 | 2015 | |||||||
(Dollars in thousands, except share and per share data) | ||||||||
Net income (loss) available to common stockholders |
$ | 22,452 | $ | (16,874 | ) | |||
|
|
|
|
|||||
Weighted average number of common shares - basic |
40,698,866 | 41,421,854 | ||||||
Effect of dilutive securities: |
||||||||
Employee stock-based compensation awards and warrants |
2,141,291 | | ||||||
|
|
|
|
|||||
Weighted average number of common shares - diluted |
42,840,157 | 41,421,854 | ||||||
|
|
|
|
|||||
Basic earnings (loss) per share |
$ | 0.55 | $ | (0.41 | ) | |||
|
|
|
|
|||||
Diluted earnings (loss) per share |
$ | 0.52 | $ | (0.41 | ) | |||
|
|
|
|
|||||
Anti-dilutive warrants, stock options and RSUs |
148,540 | 9,682,030 |
NOTE 9. INCOME TAXES
The Company uses an estimated annual effective tax rate method in computing its interim tax provision. This effective tax rate is based on forecasted annual pre-tax income, permanent tax differences and statutory tax rates.
The effective tax rates for the three months ended March 31, 2016 and 2015 were 36.1% and 54.6%, respectively. The decrease in the effective tax rate for the first quarter of 2016 was primarily due to the prior year loss associated with the early termination of the FDIC loss share agreements and a deferred tax asset benefit associated with the revaluation of net unrealized built-in losses related to the Companys acquisition of Great Florida Bank resulting in a prior year tax benefit of $20.3 million as compared to a tax expense of $12.7 million for the three months ended March 31, 2016.
NOTE 10. STOCK-BASED COMPENSATION AND OTHER BENEFIT PLANS
2009 Stock Option Plan
Option grant activities for the periods indicated are summarized as follows:
2009 Option Plan | ||||||||
Options | Weighted Average Exercise Price |
|||||||
(Shares in thousands) | ||||||||
Outstanding at January 1, 2016 |
3,707,898 | $ | 20.67 | |||||
Granted |
| | ||||||
Exercised |
(34,632 | ) | 19.97 | |||||
Forfeited |
(14,995 | ) | 21.82 | |||||
Expired |
(417 | ) | 22.97 | |||||
|
|
|||||||
Outstanding at March 31, 2016 |
3,657,854 | 20.67 | ||||||
|
|
|||||||
Exercisable at March 31, 2016 |
3,204,459 | 20.54 | ||||||
|
|
|||||||
Vested at March 31, 2016 |
3,204,459 | 20.54 | ||||||
|
|
|||||||
Vested and expected to vest at March 31, 2016 |
3,657,854 | 20.67 | ||||||
|
|
The total unrecognized compensation cost of $2.0 million related to the 2009 Stock Option Plan for share awards outstanding at March 31, 2016 will be recognized over a weighted average remaining period of 1.52 years.
26
Table of Contents
2013 Stock Incentive Plan
Option grant activities for the periods indicated are summarized as follows:
2013 Plan Options | ||||||||
Options | Weighted Average Exercise Price |
|||||||
(Shares in thousands) | ||||||||
Outstanding at January 1, 2016 |
2,367,187 | $ | 20.37 | |||||
Granted |
80,000 | 29.98 | ||||||
Exercised |
(44,514 | ) | 21.82 | |||||
Forfeited |
(22,501 | ) | 22.52 | |||||
Expired |
| | ||||||
|
|
|||||||
Outstanding at March 31, 2016 |
2,380,172 | 20.64 | ||||||
|
|
|||||||
Exercisable at March 31, 2016 |
1,522,149 | 20.22 | ||||||
|
|
|||||||
Vested at March 31, 2016 |
2,022,149 | 20.10 | ||||||
|
|
|||||||
Vested and expected to vest at March 31, 2016 |
2,380,172 | 20.64 | ||||||
|
|
The total unrecognized compensation cost of $1.6 million related to the 2013 Stock Incentive Plan for share awards outstanding at March 31, 2016 will be recognized over a weighted average remaining period of 1.19 years.
NOTE 11. COMMITMENTS AND CONTINGENCIES
The Company issues off-balance sheet financial instruments in connection with its lending activities and to meet the financing needs of its customers. These financial instruments include commitments to fund loans and lines of credit as well as commercial and standby letters of credit. These commitments expose the Company to varying degrees of credit and market risk which are essentially the same as those involved in extending loans to customers. The Company follows the same credit policies in making commitments as it does for instruments recorded on the Companys consolidated balance sheet. Collateral is obtained based on managements assessment of the customers credit risk.
The Companys exposure to credit loss is represented by the contractual amount of these commitments. As of March 31, 2016 and December 31, 2015, the Companys reserve for unfunded commitments totaled $1.4 million and $1.5 million, respectively.
Fees collected on off-balance sheet financial instruments represent the fair value of those commitments and are deferred and amortized over their term.
Financial Instruments Commitments
Unfunded commitments are as follows:
March 31, 2016 |
December 31, 2015 |
|||||||
(Dollars in thousands) | ||||||||
Commitments to fund loans |
$ | 660,325 | $ | 578,730 | ||||
Unused lines of credit |
354,532 | 358,601 | ||||||
Commercial and standby letters of credit |
15,085 | 14,410 | ||||||
|
|
|
|
|||||
Total |
$ | 1,029,942 | $ | 951,741 | ||||
|
|
|
|
Commitments to fund loans:
Commitments to fund loans are agreements to lend funds to customers as long as there is no violation of any condition established in the contract. To accommodate the financial needs of customers, the Company makes commitments under various terms to lend funds to consumers and businesses. Commitments to fund loans generally have fixed expiration dates or other termination clauses and may require payment of a fee. Many of these commitments are expected to expire without being funded and, therefore, the total commitment amounts do not necessarily represent future liquidity requirements.
The Company evaluates each customers creditworthiness on a case-by-case basis. The amount of collateral required in connection with a commitment to fund is based on managements credit evaluation of the counterparty.
27
Table of Contents
Unused lines of credit:
Unfunded commitments under lines of credit include commercial, commercial real estate, home equity and consumer lines of credit to existing customers. Some of these commitments may mature without being fully funded.
Commercial and standby letters of credit:
Letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Letters of credit are primarily issued to support trade transactions or guarantee arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Company generally holds collateral supporting those commitments if deemed necessary.
Other Commitments and Contingencies
Legal Proceedings
The Company, from time to time, is involved as plaintiff or defendant in various legal actions arising in the normal course of business. While the ultimate outcome of any such proceedings cannot be predicted with certainty, it is the opinion of management, based upon advice of legal counsel, that no proceedings exist, either individually or in the aggregate, which, if determined adversely to the Company, would have a material effect on the Companys consolidated balance sheet, results of operations or cash flows.
NOTE 12. FAIR VALUE MEASUREMENTS
When determining the fair value measurements for assets and liabilities and the related fair value hierarchy, the Company considers the principal or most advantageous market in which it would transact and the assumptions that market participants would use when pricing the asset or liability. When possible, the Company looks to active and observable markets to price identical assets or liabilities. When identical assets and liabilities are not traded in active markets, the Company looks to market observable data for similar assets and liabilities. It is the Companys policy to maximize the use of observable inputs, minimize the use of unobservable inputs and use unobservable inputs to measure fair value to the extent that observable inputs are not available. The need to use unobservable inputs generally results from the lack of market liquidity, resulting in diminished observability of both actual trades and assumptions that would otherwise be available to value these instruments, or the value of the underlying collateral is not market observable. Although third party price indications may be available for an asset or liability, limited trading activity would make it difficult to support the observability of these quotations.
Financial Instruments Carried at Fair Value on a Recurring Basis
The following is a description of the valuation methodologies used for financial instruments measured at fair value on a recurring basis, as well as the general classification of each instrument under the valuation hierarchy.
Investment SecuritiesInvestment securities available for sale are carried at fair value on a recurring basis. When available, fair value is based on quoted prices for the identical security in an active market and as such, would be classified as Level 1. If quoted market prices are not available, fair values are estimated using quoted prices of securities with similar characteristics, discounted cash flows or matrix pricing models. Investment securities available for sale for which Level 1 valuations are not available are classified as Level 2 if the valuation incorporates primarily observable inputs. Level 2 securities include U.S. Government agencies and sponsored enterprises obligations and agency mortgage-backed securities; state and municipal obligations; asset-backed securities; and corporate debt and other securities. Pricing of these securities is generally spread driven.
Observable inputs that may impact the valuation of these securities include benchmark yield curves, credit spreads, reported trades, dealer quotes, bids, issuer spreads, current rating, historical constant prepayment rates, historical voluntary prepayment rates, structural and waterfall features of individual securities, published collateral data, and for certain securities, historical constant default rates and default severities.
Interest Rate DerivativesInterest rate derivatives are reported at estimated fair value utilizing Level 2 inputs and are included in other assets and other liabilities and consist of interest rate swaps where there is no significant deterioration in the counterparties (loan customers) credit risk since origination of the interest rate swap. The Company values its interest rate swap positions using market prices provided by a third party which uses primarily observable market inputs. Interest rate derivatives are further described in Note 5 Derivatives.
For purposes of potential valuation adjustments to our derivative positions, the Company evaluates the credit risk of its counterparties as well as our own credit risk. Accordingly, the Company has considered factors such as the likelihood of default, expected loss given default, net exposures and remaining contractual life, among other things, in determining if any estimated fair value adjustments related to credit risk are required. The Company reviews counterparty exposure quarterly, and when necessary, appropriate adjustments are made to reflect the exposure.
28
Table of Contents
For the three months ended March 31, 2016 or 2015, the Company has not realized any losses due to a counterpartys inability to pay any net uncollateralized position. As of March 31, 2016, there were no interest rate derivatives classified as Level 3.
The following table presents the assets and liabilities measured at fair value on a recurring basis:
March 31, 2016 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Assets: |
||||||||||||||||
U.S. Government agencies and sponsored enterprises obligations |
$ | | $ | 19,168 | $ | | $ | 19,168 | ||||||||
U.S. Government agencies and sponsored enterprises mortgage-backed securities |
| 392,871 | | 392,871 | ||||||||||||
State and municipal obligations |
| 2,445 | | 2,445 | ||||||||||||
Asset-backed securities |
| 484,102 | | 484,102 | ||||||||||||
Corporate bonds and other debt securities |
| 480,816 | | 480,816 | ||||||||||||
Preferred stocks and other equity securities |
2,092 | 143,651 | | 145,743 | ||||||||||||
Derivative assets - Interest rate contracts |
| 38,344 | | 38,344 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 2,092 | $ | 1,561,397 | $ | | $ | 1,563,489 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Liabilities: |
||||||||||||||||
Derivative liabilities - Interest rate contracts |
$ | | $ | 38,344 | $ | | $ | 38,344 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | | $ | 38,344 | $ | | $ | 38,344 | ||||||||
|
|
|
|
|
|
|
|
December 31, 2015 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Assets: |
||||||||||||||||
U.S. Government agencies and sponsored enterprises obligations |
$ | | $ | 20,888 | $ | | $ | 20,888 | ||||||||
U.S. Government agencies and sponsored enterprises mortgage-backed securities |
| 393,115 | | 393,115 | ||||||||||||
State and municipal obligations |
| 2,215 | | 2,215 | ||||||||||||
Asset-backed securities |
| 493,934 | | 493,934 | ||||||||||||
Corporate bonds and other debt securities |
| 444,895 | | 444,895 | ||||||||||||
Preferred stocks and other equity securities |
2,052 | 167,523 | | 169,575 | ||||||||||||
Derivative assets - Interest rate contracts |
| 21,553 | | 21,553 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 2,052 | $ | 1,544,123 | $ | | $ | 1,546,175 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Liabilities: |
||||||||||||||||
Derivative liabilities - Interest rate contracts |
$ | | $ | 21,553 | $ | | $ | 21,553 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | | $ | 21,553 | $ | | $ | 21,553 | ||||||||
|
|
|
|
|
|
|
|
There were no transfers of financial assets between levels of the fair value hierarchy during the three months ended March 31, 2016 or 2015.
The inputs used to determine the estimated fair value of loans include market conditions, loan term, underlying collateral characteristics and discount rates. The inputs used to determine fair value of OREO include market conditions, estimated marketing period or holding period, underlying collateral characteristics and discount rates.
For the three months ended March 31, 2016 and 2015, there was not a change in the methods or significant assumptions used to estimate fair value.
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Table of Contents
Financial Instruments Measured at Fair Value on a Non-Recurring Basis
The following table shows significant unobservable inputs used in the non-recurring fair value measurement of level 3 assets and liabilities:
Level 3 Asset |
Fair value | Valuation Technique |
Unobservable Inputs |
Range | ||||||||
(Dollars in thousands) | ||||||||||||
Non-recurring: |
||||||||||||
Loans |
$ | 5,673,393 | Third party appraisals and discounted cash flows | Collateral discounts and discount rates | 0% - 100% | |||||||
Other real estate owned |
43,522 | Third party appraisals | Collateral discounts and estimated cost to sell | 10% |
The following is a description of the methodologies used to estimate the fair values of assets and liabilities measured at fair value on a non-recurring basis, and the level within the fair value hierarchy in which those measurements are typically classified.
Impaired loans and OREOThe carrying amount of collateral dependent impaired loans is typically based on the fair value of the underlying collateral, which may be real estate or other business assets, less estimated costs to sell. The carrying value of OREO is initially measured based on the fair value, less estimated cost to sell, of the real estate acquired in foreclosure and subsequently adjusted to the lower of cost or estimated fair value, less estimated cost to sell. Fair values of real estate collateral are typically based on real estate appraisals which utilize market and income valuation techniques incorporating both observable and unobservable inputs. When current appraisals are not available, the Company may use brokers price opinions, home price indices, or other available information about changes in real estate market conditions to adjust the latest appraised value available. These adjustments to appraised values may be subjective and involve significant management judgment. The fair value of collateral consisting of other business assets is generally based on appraisals that use market approaches to valuation, incorporating primarily unobservable inputs. Fair value measurements related to collateral dependent impaired loans and OREO are classified within level 3 of the fair value hierarchy.
The following tables provide information about certain assets measured at fair value on a non-recurring basis:
March 31, 2016 | December 31, 2015 | |||||||
(Dollars in thousands) | ||||||||
Assets that are still held (classified in Level 3): |
||||||||
Impaired loans |
$ | 9,456 | $ | 9,582 | ||||
Foreclosed real estate |
43,522 | 39,340 |
Three Months Ended March 31, | ||||||||
2016 | 2015 | |||||||
(Dollars in thousands) | ||||||||
Negative valuation adjustments: |
||||||||
Impaired loans |
$ | | $ | | ||||
Foreclosed real estate |
90 | 104 |
Impairment charges resulting from the non-recurring changes in fair value of the underlying collateral of impaired loans are included in the provision for loan losses in the consolidated statement of income. Impairment charges resulting from the non-recurring changes in fair value of OREO are included in other real estate and acquired assets resolution expenses in the consolidated statement of income.
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The carrying amounts and estimated fair values, as well as the level within the fair value hierarchy, of the Companys financial instruments are as follows:
March 31, 2016 |
Carrying Value |
Fair Value |
Level 1 | Level 2 | Level 3 | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Financial Assets: |
||||||||||||||||||||
Cash and cash equivalents |
$ | 126,073 | $ | 126,073 | $ | 126,073 | $ | | $ | | ||||||||||
Available for sale securities |
1,525,145 | 1,525,145 | 2,092 | 1,523,053 | | |||||||||||||||
FHLB and other bank stock |
59,321 | 59,321 | | 59,321 | | |||||||||||||||
Loans, net |
5,611,672 | 5,673,393 | | | 5,673,393 | |||||||||||||||
Loans held for sale |
900 | 900 | | 900 | | |||||||||||||||
Bank-owned life insurance |
169,531 | 169,531 | | 169,531 | | |||||||||||||||
Derivative assets - Interest rate contracts |
38,344 | 38,344 | | 38,344 | | |||||||||||||||
Financial Liabilities: |
||||||||||||||||||||
Deposits |
$ | 5,902,379 | $ | 5,907,850 | $ | | $ | 5,907,850 | $ | | ||||||||||
Advances from the FHLB and other borrowings |
950,462 | 950,775 | | 950,775 | | |||||||||||||||
Derivative liabilities - Interest rate contracts |
38,344 | 38,344 | | 38,344 | |
December 31, 2015 |
Carrying Value |
Fair Value |
Level 1 | Level 2 | Level 3 | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Financial Assets: |
||||||||||||||||||||
Cash and cash equivalents |
$ | 102,460 | $ | 102,460 | $ | 102,460 | $ | | $ | | ||||||||||
Available for sale securities |
1,524,622 | 1,524,622 | 2,052 | 1,522,570 | | |||||||||||||||
FHLB and other bank stock |
59,477 | 59,477 | | 59,477 | | |||||||||||||||
Loans, net |
5,164,061 | 5,207,971 | | | 5,207,971 | |||||||||||||||
Loans held for sale |
2,514 | 2,514 | | 2,514 | | |||||||||||||||
Bank-owned life insurance |
168,246 | 168,246 | | 168,246 | | |||||||||||||||
Derivative assets - Interest rate contracts |
21,553 | 21,553 | | 21,553 | | |||||||||||||||
Financial Liabilities: |
||||||||||||||||||||
Deposits |
$ | 5,430,638 | $ | 5,430,501 | $ | | $ | 5,430,501 | $ | | ||||||||||
Advances from the FHLB and other borrowings |
983,183 | 981,997 | | 981,997 | | |||||||||||||||
Derivative liabilities - Interest rate contracts |
21,553 | 21,553 | | 21,553 | |
Certain financial instruments are carried at amounts that approximate fair value due to their short-term nature and generally negligible credit risk. Financial instruments for which fair value approximates the carrying amount at March 31, 2016 and December 31, 2015, include cash and cash equivalents and due from FDIC.
The following methods and assumptions were used to estimate the fair value of each class of financial instruments.
FHLB and Other Bank Stock:
FHLB and other bank stock can be liquidated only by redemption by the issuer, as there is no market for these securities. These securities are carried at par, which has historically represented the redemption price and is therefore considered to approximate fair value.
Loans:
Fair values for loans are based on a discounted cash flow methodology that considers various factors, including the type of loan and related collateral, classification status, fixed or variable interest rate, term of loan, whether or not the loan was amortizing and current discount rates. Loans are grouped together according to similar characteristics and are treated in the aggregate when applying various valuation techniques. The discount rates used for loans are based on current market rates for new originations of comparable credit risk and include adjustments for liquidity concerns. The ALL is considered a reasonable estimate of the required adjustment to fair value to reflect the impact of credit risk. This estimate may not represent an exit value as defined in ASC 820.
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Loans Held for Sale:
Fair values of mortgage loans held for sale are based on commitments on hand from investors or prevailing market prices.
Bank-owned Life Insurance:
The Company holds life insurance policies on certain officers. The carrying value of these policies approximates fair value as it is based on the cash surrender value adjusted for other charges or amounts due that are probable at settlement.
Deposits:
The fair value of demand deposits, savings accounts and money market deposits is the amount payable on demand at the reporting date. The fair value of fixed-maturity certificates of deposit is estimated using discounted cash flow analysis and using the rates currently offered for deposits of similar remaining maturities.
Advances from the FHLB and Other Borrowings:
The fair value of advances from the FHLB and other borrowings are estimated by discounting the future cash flows using the current rate at which similar borrowings with similar remaining maturities could be obtained.
32
Table of Contents
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis is intended to assist readers in understanding the financial condition and results of operations of the Company during the three month period ended March 31, 2016 and should be read in conjunction with the consolidated financial statements and notes thereto included in this report on Form 10-Q and the Companys Annual Report on Form 10-K filed for the year ended December 31, 2015 with the SEC.
In this report, unless the context suggests otherwise, references to FCB Financial Holdings, the Company, we, us, and our mean the business of FCB Financial Holdings, Inc. and its wholly-owned subsidiary, Florida Community Bank, National Association, and its consolidated subsidiaries; and references to the Bank refer to Florida Community Bank, National Association, and its consolidated subsidiaries. References to the Old Failed Banks include Premier American Bank, or Old Premier, Florida Community Bank, or Old FCB, Peninsula Bank, or Old Peninsula, Sunshine State Community Bank, or Old Sunshine, First National Bank of Central Florida, or Old FNBCF, Cortez Community Bank, or Old Cortez, Coastal Bank, or Old Coastal, First Peoples Bank, or Old FPB, in each case, before the acquisition of certain assets and assumption of certain liabilities of each of the Old Failed Banks by the Bank. References to Great Florida Bank, or GFB, refer to such bank before its acquisition by the Bank; Great Florida Bank and the Old Failed Banks are collectively referred to as the Old Banks. References to our Class A Common Stock refer to our Class A voting common stock, par value $0.001 per share; references to our Class B Common Stock refer to our Class B non-voting common stock, par value $0.001 per share; and references to our common stock include, collectively, our Class A Common Stock and our Class B Common Stock.
Cautionary Note Regarding Forward-Looking Information
This report may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, regarding the financial condition, results of operations, business plans and future performance of the Company. We generally identify forward looking statements by terminology such as outlook, believes, expects, potential, continues, may, will, could, should, seeks, approximately, predicts, intends, plans, estimates, anticipates or the negative version of those words or other comparable words. Any forward-looking statements contained in this report are based on our historical performance, the historical performance of the Old Banks or on our current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions relating to our operations, financial results, financial condition, business prospects, growth strategy and liquidity. If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may vary materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction with any other cautionary statements that are included elsewhere in this report. We do not undertake any obligation to publicly update or review any forward-looking statements, whether as a result of new information, future developments or otherwise. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements, including but not limited to, those factors described under Business, Risk Factors and Managements Discussion and Analysis of Financial Condition and Results of Operations included in the Companys Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC.
You should read this report and the documents that we reference in this report and have filed as exhibits to various reports and registration statements that we have filed with the SEC completely and with the understanding that our actual future results, levels of activity, performance and achievements may be different from what we expect and that these differences may be material.
Critical Accounting Policies
We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and conform to the accounting and reporting guidelines prescribed by bank regulatory authorities. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amount of revenues and expenses during the reporting period. The more critical accounting estimates and reporting policies include accounting for the ALL, determining fair value of financial instruments, valuation of goodwill and intangible assets, income taxes and the valuation of assets acquired and liabilities assumed in business combinations. Accordingly, the Companys critical accounting estimates are discussed in detail in Managements Discussion and Analysis of Financial Condition and Results of Operations in the Companys Annual Report on Form 10-K. The Companys significant accounting policies and changes in accounting principles and effects of new accounting pronouncements are discussed in detail in Note 1 Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements in the Companys Annual Report on Form 10-K. Additional disclosures regarding the effects of new accounting pronouncements are included in Note 1 Summary of Significant Accounting Policies included herein.
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Table of Contents
Corporate Profile
FCB Financial Holdings, Inc. is a bank holding company, headquartered in Weston, Florida, with one wholly-owned national bank subsidiary, Florida Community Bank, National Association. The Bank offers a comprehensive range of traditional banking products and services to individuals, small and medium-sized businesses, some large businesses, and other local organizations and entities through 47 branches in south and central Florida. The Bank targets retail and commercial customers engaged in a wide variety of industries including healthcare and professional services, retail and wholesale trade, tourism, agricultural services, manufacturing, distribution and distribution-related industries, technology, automotive, aviation, food products, building materials, residential housing and commercial real estate.
Primary Factors Used to Evaluate Our Business
As a financial institution, we manage and evaluate various aspects of both our results of operations and our financial condition. We evaluate the levels and trends of the line items included in our consolidated balance sheets and income statements, as well as various financial ratios that are commonly used in our industry. We analyze these ratios and financial trends against our own historical performance, our budgeted performance and the financial condition and performance of comparable financial institutions in our region and nationally.
Results of Operations
Our results of operations depend substantially on net interest income, which is the difference between interest income on interest-earning assets, consisting primarily of interest income on loans receivable, including accretion income on acquired loans, securities and other short-term investments, and interest expense on interest-bearing liabilities, consisting primarily of deposits and borrowings. Our results of operations are also dependent upon our generation of noninterest income, consisting of income from banking service fees, interest rate swap services, BOLI and recoveries on acquired assets. Other factors contributing to our results of operations include our provisions for loan losses, gains or losses on securities and income taxes, as well as the level of our noninterest expenses, such as compensation and benefits, occupancy and equipment and other miscellaneous operating expenses.
Net Interest Income
Net interest income, a significant contributor to our revenues and net income, represents interest income less interest expense. We generate interest income from interest, dividends and fees received on interest-earning assets, including loans and investment securities. We incur interest expense from interest paid on interest-bearing liabilities, including interest-bearing deposits, and borrowings. To evaluate net interest income, we measure and monitor (1) yields on our loans and other interest-earning assets, (2) the costs of our deposits and other funding sources, (3) our net interest spread, (4) our net interest margin and (5) our provision for loan losses. Net interest spread is the difference between rates earned on interest-earning assets and rates paid on interest-bearing liabilities. Net interest margin is calculated as net interest income divided by average interest-earning assets. Because noninterest-bearing sources of funds, such as noninterest-bearing deposits and stockholders equity, also fund interest-earning assets, net interest margin includes the benefit of these noninterest-bearing sources.
We also recognize income from the accretable discounts associated with the purchase of interest-earning assets. Our acquisitions in 2010 and 2011 and our January 31, 2014 acquisition of GFB, produce a portion of our interest income from the accretable discounts on acquired loans. This accretion will continue to have an impact on our net interest income as long as loans acquired with evidence of credit deterioration at acquisition represent a meaningful portion of our interest-earning assets.
Changes in the market interest rates and interest rates we earn on interest-earning assets or pay on interest-bearing liabilities, as well as the volume and types of interest-earning assets, interest-bearing and noninterest-bearing liabilities and stockholders equity, are usually the largest drivers of periodic changes in net interest spread, net interest margin and net interest income. In addition, our interest income includes the accretion of the fair value discounts on our acquired loans, which will also affect our net interest spread, net interest margin and net interest income. We measure net interest income before and after the provision for loan losses required to maintain our ALL at acceptable levels.
Noninterest Income
Our noninterest income includes the following:
| Service charges and fees; |
| Interest rate swap services; |
34
Table of Contents
| BOLI income; |
| Income from resolution of acquired assets; and |
| Net gains and losses from the sale of OREO assets and investment securities |
Noninterest Expense
Our noninterest expense includes the following:
| Salaries and employee benefits; |
| Occupancy and equipment expenses; |
| Other real estate and acquired loan resolution related expenses; |
| Professional services; |
| Data processing and network expense; |
| Regulatory assessments and insurance; and |
| Amortization of intangibles |
Financial Condition
The primary factors we use to evaluate and manage our financial condition include liquidity, asset quality and capital.
Liquidity
We manage liquidity based upon factors that include the amount of core deposits as a percentage of total deposits, the level of diversification of our funding sources, the allocation and amount of our deposits among deposit types, the short-term funding sources used to fund assets, the amount of non-deposit funding used to fund assets, the availability of unused funding sources, off-balance sheet obligations, the availability of assets to be readily converted into cash without undue loss, the amount of cash and liquid securities we hold, and the re-pricing characteristics and maturities of our assets when compared to the re-pricing characteristics of our liabilities, the ability to securitize and sell certain pools of assets and other factors.
Asset Quality
We manage the diversification and quality of our assets based upon factors that include the level, distribution, severity and trend of problem, classified, delinquent, nonaccrual, nonperforming and restructured assets, the adequacy of our ALL, discounts and reserves for unfunded loan commitments, the diversification and quality of loan and investment portfolios, the extent of counterparty risks and credit risk concentrations.
Capital
We manage capital based upon factors that include the level and quality of capital and overall financial condition of the Company, the trend and volume of problem assets, the adequacy of discounts and reserves, the level and quality of earnings, the risk exposures in our balance sheet, the levels of Tier 1 (core), risk-based and tangible equity capital, the ratios of Tier 1 (core), risk-based and tangible equity capital to total assets and risk-weighted assets and other factors.
Performance Highlights
Operating and financial highlights for the three months ended March 31, 2016 include the following:
| Net interest income of $64.4 million, an increase of 31.8% year-over-year |
| Total loan portfolio grew sequentially at an annualized rate of 35% |
| Demand deposits grew by $140 million, or 45% annualized during the quarter |
| ROA and Core ROA were 1.19% and 1.21%, respectively. |
| Tangible book value per share was $19.77 |
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Table of Contents
The reconciliation of certain non-GAAP financial measures, which management believes facilitates the assessment of its banking operations and peer comparability, are included in tabular form under Non-GAAP Financial Measures.
Analysis of Results of Operations
The Company reported net income available to common stockholders of $22.5 million, which generated diluted EPS of $0.52 in the first quarter of 2016. The Company reported a net loss to common stockholders of $16.9 million for the first quarter of 2015, which generated diluted EPS of $(0.41). The increase in earnings was primarily driven by the one-time, pre-tax charge of $65.5 million in conjunction with the early termination of the FDIC loss share agreements that occurred in the first quarter of 2015. The Companys results of operations for the first quarter of 2016 produced an annualized return on average assets of 1.19% and an annualized return on average common stockholders equity of 10.28% compared to prior year ratios of (1.13%) and (7.97%), respectively.
Net Interest Income and Net Interest Margin
Net interest income is the largest component of our income and is affected by the interest rate environment and the volume and composition of interest-earning assets and interest-bearing liabilities. Our interest-earning assets include loans, interest-bearing deposits in other banks and investment securities. Our interest-bearing liabilities include deposits, FHLB advances and other borrowings.
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Table of Contents
The following tables present, for the periods indicated, information about (i) average balances, the total dollar amount of interest income from interest-earning assets and the resultant average yields; (ii) average balances, the total dollar amount of interest expense on interest-bearing liabilities and the resultant average rates; (iii) net interest income; (iv) the interest rate spread; and (v) the net interest margin. Yields have been calculated on a pre-tax basis:
Three Months Ended March 31, |
||||||||||||||||||||||||
2016 | 2015 | |||||||||||||||||||||||
Average Balance (1) |
Interest/ Expense (2) |
Annualized Yield/Rate(3) |
Average Balance (1) |
Interest/ Expense (2) |
Annualized Yield/Rate(3) |
|||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
Interest-earning assets: |
||||||||||||||||||||||||
Interest-earning deposits in other banks |
$ | 86,711 | $ | 66 | 0.31 | % | $ | 78,344 | $ | 33 | 0.17 | % | ||||||||||||
New loans |
4,856,809 | 42,712 | 3.48 | % | 3,179,879 | 26,585 | 3.34 | % | ||||||||||||||||
Acquired loans (4)(5) |
556,923 | 18,576 | 13.34 | % | 796,571 | 16,721 | 8.40 | % | ||||||||||||||||
Investment securities |
1,576,617 | 14,374 | 3.61 | % | 1,483,886 | 12,110 | 3.26 | % | ||||||||||||||||
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