Attached files
| file | filename |
|---|---|
| EX-32.2 - EXHIBIT 32.2 - FCB FINANCIAL HOLDINGS, INC. | fcb6302016ex322.htm |
| EX-32.1 - EXHIBIT 32.1 - FCB FINANCIAL HOLDINGS, INC. | fcb6302016ex321.htm |
| EX-31.2 - EXHIBIT 31.2 - FCB FINANCIAL HOLDINGS, INC. | fcb6302016ex312.htm |
| EX-31.1 - EXHIBIT 31.1 - FCB FINANCIAL HOLDINGS, INC. | fcb6302016ex311.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 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
(Registrant’s 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. ý 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). ý 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 | ý | 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 ý No
As of August 1, 2016, the registrant had 37,801,757 shares of Class A Common Stock and 2,804,070 shares of Class B Non-voting Common Stock outstanding.
FCB FINANCIAL HOLDINGS, INC.
FORM 10-Q
INDEX
1
PART I. FINANCIAL INFORMATION
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except share and per share data)
The accompanying notes are an integral part of these consolidated financial statements
June 30, 2016 | December 31, 2015 | |||||||
Assets: | ||||||||
Cash and due from banks | $ | 51,277 | $ | 44,696 | ||||
Interest-earning deposits in other banks | 107,588 | 57,764 | ||||||
Investment securities: | ||||||||
Available for sale securities, at fair value | 1,562,049 | 1,524,622 | ||||||
Federal Home Loan Bank and other bank stock, at cost | 51,557 | 59,477 | ||||||
Total investment securities | 1,613,606 | 1,584,099 | ||||||
Loans held for sale | 5,363 | 2,514 | ||||||
Loans: | ||||||||
New loans | 5,523,071 | 4,610,763 | ||||||
Acquired loans | 474,076 | 582,424 | ||||||
Allowance for loan losses | (33,706 | ) | (29,126 | ) | ||||
Loans, net | 5,963,441 | 5,164,061 | ||||||
Premises and equipment, net | 37,939 | 36,954 | ||||||
Other real estate owned | 29,290 | 39,340 | ||||||
Goodwill | 81,204 | 81,204 | ||||||
Core deposit intangible | 5,204 | 5,880 | ||||||
Deferred tax assets, net | 66,213 | 75,176 | ||||||
Bank-owned life insurance | 170,817 | 168,246 | ||||||
Other assets | 89,280 | 71,552 | ||||||
Total assets | $ | 8,221,222 | $ | 7,331,486 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Liabilities: | ||||||||
Deposits: | ||||||||
Transaction accounts: | ||||||||
Noninterest-bearing | $ | 789,019 | $ | 637,047 | ||||
Interest-bearing | 3,490,188 | 2,935,418 | ||||||
Total transaction accounts | 4,279,207 | 3,572,465 | ||||||
Time deposits | 2,188,459 | 1,858,173 | ||||||
Total deposits | 6,467,666 | 5,430,638 | ||||||
Borrowings (including FHLB advances of $591,250 and $806,500, respectively) | 756,759 | 983,183 | ||||||
Other liabilities | 73,625 | 41,556 | ||||||
Total liabilities | 7,298,050 | 6,455,377 | ||||||
Commitments and contingencies (Note 12) | ||||||||
Stockholders’ Equity: | ||||||||
Class A common stock, par value $0.001 per share; 100 million shares authorized; 40,233,817; 39,103,945 issued and 37,638,893; 37,126,571 outstanding | 40 | 39 | ||||||
Class B common stock, par value $0.001 per share; 50 million shares authorized; 3,091,152; 3,926,014 issued and 2,899,020; 3,733,882 outstanding | 3 | 4 | ||||||
Additional paid-in capital | 857,721 | 850,609 | ||||||
Retained earnings | 134,491 | 88,535 | ||||||
Accumulated other comprehensive income (loss) | 4,816 | (9,443 | ) | |||||
Treasury stock, at cost; 2,594,924; 1,977,374 Class A and 192,132; 192,132 Class B common shares | (73,899 | ) | (53,635 | ) | ||||
Total stockholders’ equity | 923,172 | 876,109 | ||||||
Total liabilities and stockholders’ equity | $ | 8,221,222 | $ | 7,331,486 | ||||
1
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Unaudited)
(Dollars in thousands, except share and per share data)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Interest income: | ||||||||||||||||
Interest and fees on loans | $ | 62,642 | $ | 44,202 | $ | 123,930 | $ | 87,508 | ||||||||
Interest and dividends on investment securities | 14,470 | 13,169 | 28,844 | 25,279 | ||||||||||||
Other interest income | 96 | 40 | 162 | 73 | ||||||||||||
Total interest income | 77,208 | 57,411 | 152,936 | 112,860 | ||||||||||||
Interest expense: | ||||||||||||||||
Interest on deposits | 10,340 | 5,991 | 19,633 | 11,576 | ||||||||||||
Interest on borrowings | 1,938 | 1,246 | 3,931 | 2,226 | ||||||||||||
Total interest expense | 12,278 | 7,237 | 23,564 | 13,802 | ||||||||||||
Net interest income | 64,930 | 50,174 | 129,372 | 99,058 | ||||||||||||
Provision for loan losses | 1,976 | 2,470 | 3,416 | 3,819 | ||||||||||||
Net interest income after provision for loan losses | 62,954 | 47,704 | 125,956 | 95,239 | ||||||||||||
Noninterest income: | ||||||||||||||||
Service charges and fees | 842 | 778 | 1,648 | 1,535 | ||||||||||||
Loan and other fees | 2,248 | 1,906 | 4,262 | 4,403 | ||||||||||||
Bank-owned life insurance income | 1,286 | 1,097 | 2,571 | 2,194 | ||||||||||||
FDIC loss share indemnification loss | — | — | — | (65,529 | ) | |||||||||||
Income from resolution of acquired assets | 478 | 2,898 | 1,158 | 6,270 | ||||||||||||
Gain (loss) on sales of other real estate owned | 2,102 | 5,605 | 1,992 | 7,170 | ||||||||||||
Gain (loss) on investment securities | 324 | 761 | 270 | 1,768 | ||||||||||||
Other noninterest income (loss) | 942 | 1,107 | 1,755 | 2,252 | ||||||||||||
Total noninterest income | 8,222 | 14,152 | 13,656 | (39,937 | ) | |||||||||||
Noninterest expense: | ||||||||||||||||
Salaries and employee benefits | 19,614 | 17,856 | 38,259 | 34,431 | ||||||||||||
Occupancy and equipment expenses | 3,034 | 3,806 | 6,606 | 7,083 | ||||||||||||
Loan and other real estate related expenses | 2,235 | 1,425 | 4,055 | 3,501 | ||||||||||||
Professional services | 1,105 | 1,189 | 2,442 | 2,595 | ||||||||||||
Data processing and network | 2,796 | 2,801 | 5,659 | 5,519 | ||||||||||||
Regulatory assessments and insurance | 1,840 | 2,092 | 3,957 | 4,211 | ||||||||||||
Amortization of intangibles | 297 | 407 | 676 | 831 | ||||||||||||
Other operating expenses | 3,054 | 2,471 | 5,621 | 4,526 | ||||||||||||
Total noninterest expense | 33,975 | 32,047 | 67,275 | 62,697 | ||||||||||||
Income (loss) before income tax expense (benefit) | 37,201 | 29,809 | 72,337 | (7,395 | ) | |||||||||||
Income tax expense (benefit) | 13,697 | 10,433 | 26,381 | (9,897 | ) | |||||||||||
Net income (loss) | $ | 23,504 | $ | 19,376 | $ | 45,956 | $ | 2,502 | ||||||||
Earnings (loss) per share: | ||||||||||||||||
Basic | $ | 0.58 | $ | 0.47 | $ | 1.13 | $ | 0.06 | ||||||||
Diluted | $ | 0.55 | $ | 0.45 | $ | 1.07 | $ | 0.06 | ||||||||
Weighted average shares outstanding: | ||||||||||||||||
Basic | 40,646,498 | 41,428,588 | 40,672,682 | 41,425,240 | ||||||||||||
Diluted | 42,997,811 | 43,106,131 | 42,935,862 | 42,752,814 | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements
2
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(Dollars in thousands)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net income (loss) | $ | 23,504 | $ | 19,376 | $ | 45,956 | $ | 2,502 | ||||||||
Other comprehensive income (loss): | ||||||||||||||||
Unrealized net holding gains (losses) on investment securities available for sale, net of taxes of $(8,360), $6,121, $(9,389) and $(501), respectively | 13,297 | (9,747 | ) | 14,938 | 799 | |||||||||||
Reclassification adjustment for realized (gains) losses on investment securities available for sale included in net income, net of taxes of $153, $456, $428 and $879, respectively | (241 | ) | (727 | ) | (679 | ) | (1,400 | ) | ||||||||
Total other comprehensive income (loss) | 13,056 | (10,474 | ) | 14,259 | (601 | ) | ||||||||||
Total comprehensive income (loss) | $ | 36,560 | $ | 8,902 | $ | 60,215 | $ | 1,901 | ||||||||
The accompanying notes are an integral part of these consolidated financial statements
3
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) | — | — | — | — | — | 2,502 | — | — | 2,502 | ||||||||||||||||||
Exchange of B shares to A shares | 2,366,406 | (2,366,406 | ) | 1 | (1 | ) | — | — | — | — | — | ||||||||||||||||
Stock-based compensation, RSU and warrant expense | — | — | — | — | 3,874 | — | — | — | 3,874 | ||||||||||||||||||
Treasury stock purchases | (30,000 | ) | — | — | — | — | — | (802 | ) | — | (802 | ) | |||||||||||||||
Exercise of stock options | 43,501 | 873 | 873 | ||||||||||||||||||||||||
Other | — | — | — | — | (20 | ) | — | — | — | (20 | ) | ||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | — | — | — | (601 | ) | (601 | ) | ||||||||||||||||
Balance as of June 30, 2015 | 36,849,557 | 4,573,642 | 37 | 6 | 839,265 | 37,646 | (19,553 | ) | 78 | 857,479 | |||||||||||||||||
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) | — | — | — | — | — | 45,956 | — | — | 45,956 | ||||||||||||||||||
Exchange of B shares to A shares | 834,862 | (834,862 | ) | 1 | (1 | ) | — | — | — | — | — | ||||||||||||||||
Stock-based compensation, RSU and warrant expense | — | — | — | — | 2,238 | — | — | — | 2,238 | ||||||||||||||||||
Treasury stock purchases | (617,550 | ) | — | — | — | — | (20,264 | ) | (20,264 | ) | |||||||||||||||||
Exercise of stock options and warrants | 293,891 | — | — | — | 4,889 | — | — | — | 4,889 | ||||||||||||||||||
Restricted stock units (RSUs) | 1,119 | — | — | — | — | — | — | — | — | ||||||||||||||||||
Other | — | — | — | — | (15 | ) | — | — | — | (15 | ) | ||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | — | — | — | 14,259 | 14,259 | ||||||||||||||||||
Balance as of June 30, 2016 | 37,638,893 | 2,899,020 | 40 | 3 | 857,721 | 134,491 | (73,899 | ) | 4,816 | 923,172 | |||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements
4
FCB FINANCIAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Six Months Ended June 30, | ||||||||
2016 | 2015 | |||||||
Cash Flows From Operating Activities: | ||||||||
Net income (loss) | $ | 45,956 | $ | 2,502 | ||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
Provision for loan losses | 3,416 | 3,819 | ||||||
Amortization of intangible assets | 676 | 831 | ||||||
Depreciation and amortization of premises and equipment | 1,713 | 1,940 | ||||||
Amortization of discount on loans | (506 | ) | (1,833 | ) | ||||
Net amortization (accretion) of premium (discount) on investment securities | 744 | 1,094 | ||||||
Net amortization (accretion) of premium (discount) on time deposits | (37 | ) | (258 | ) | ||||
Net amortization (accretion) on FHLB advances and other borrowings | (1,306 | ) | (1,292 | ) | ||||
Impairment of other real estate owned | 886 | 173 | ||||||
FDIC Loss share indemnification loss | — | 65,529 | ||||||
(Gain) loss on investment securities | (270 | ) | (1,768 | ) | ||||
(Gain) loss on sale of loans | (816 | ) | — | |||||
(Gain) loss on sale of other real estate owned | (1,992 | ) | (7,170 | ) | ||||
(Gain) loss on sale of premises and equipment | 44 | 112 | ||||||
Deferred tax expense | — | (30,386 | ) | |||||
Stock-based compensation, RSU and warrant expense | 2,238 | 3,442 | ||||||
Increase in cash surrender value of BOLI | (2,571 | ) | (2,194 | ) | ||||
Net change in operating assets and liabilities: | ||||||||
Net change in loans held for sale | (2,033 | ) | (4,075 | ) | ||||
Settlement of FDIC loss share agreement | — | (14,815 | ) | |||||
Net change in other assets | 8,811 | (3,021 | ) | |||||
Net change in other liabilities | 5,532 | (5,741 | ) | |||||
Net cash provided by (used in) operating activities | 60,485 | 6,889 | ||||||
Cash Flows From Investing Activities: | ||||||||
Purchase of investment securities available for sale | (222,112 | ) | (462,125 | ) | ||||
Sales of investment securities available for sale | 174,766 | 318,927 | ||||||
Paydown and maturities of investment securities available for sale | 32,665 | 76,680 | ||||||
Purchase of FHLB and other bank stock | (52,477 | ) | (36,852 | ) | ||||
Sales of FHLB and other bank stock | 60,397 | 33,238 | ||||||
Net change in loans | (677,978 | ) | (369,060 | ) | ||||
Purchase of loans | (192,195 | ) | (241,727 | ) | ||||
Proceeds from sale of loans | 57,261 | — | ||||||
Proceeds from sale of other real estate owned | 21,778 | 53,705 | ||||||
Purchase of premises and equipment | (2,744 | ) | (731 | ) | ||||
Proceeds from the sale of premises and equipment | 2 | — | ||||||
Proceeds from life insurance | — | 1,193 | ||||||
Net cash provided by (used in) investing activities | (800,637 | ) | (626,752 | ) | ||||
Cash Flows From Financing Activities: | ||||||||
Net change in deposits | 1,037,065 | 487,810 | ||||||
Net change in FHLB advances | (215,250 | ) | 109,414 | |||||
Net change in repurchase agreements | (9,868 | ) | 56,790 | |||||
Repurchase of stock | (20,264 | ) | (802 | ) | ||||
Exercise of stock options | 4,889 | 873 | ||||||
Other | (15 | ) | (21 | ) | ||||
Net cash provided by (used in) financing activities | 796,557 | 654,064 | ||||||
Net Change in Cash and Cash Equivalents | 56,405 | 34,201 | ||||||
Cash and Cash Equivalents at Beginning of Period | 102,460 | 107,085 | ||||||
Cash and Cash Equivalents at End of Period | $ | 158,865 | $ | 141,286 | ||||
Supplemental Disclosures of Cash Flow Information: | ||||||||
Interest paid | $ | 23,057 | $ | 13,768 | ||||
Income taxes paid | 28,642 | 4,786 | ||||||
Supplemental disclosure of noncash investing and financing activities: | ||||||||
Transfer of loans to other real estate owned | $ | 10,622 | $ | 14,835 | ||||
The accompanying notes are an integral part of these consolidated financial statements
5
FCB FINANCIAL HOLDINGS, INC.
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 Company’s 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
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 June 30, 2016.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiary, the Bank, and the Bank’s subsidiaries, which consist of a group of real estate holding companies. Intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates
The Company’s 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 ASU 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 ASU became effective for the first quarter ended March 31, 2016. The adoption of this ASU did not have a material impact on the Company’s 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 ASU 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 ASU became effective for the first quarter ended March 31, 2016. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.
6
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 ASU became effective for the first quarter ended March 31, 2016. The adoption of this ASU did not have a material impact on the Company’s 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 ASU became effective for the first quarter ended March 31, 2016. The adoption of this ASU did not have a material impact on the Company’s 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 period’s 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 ASU became effective for the first quarter ended March 31, 2016. The adoption of this ASU did not have a material impact on the Company’s 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. |
• | 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 entity’s other deferred tax assets. |
For public business entities, the amendments in this ASU 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 ASU 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 ASU is not permitted.
7
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 ASU. The Company is currently evaluating this guidance to determine the impact on its consolidated financial position, results of operations or cash flows.
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 ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application of the amendments in this ASU 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 ASU 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 ASU 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 ASU 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 Company’s 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 investor’s 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 ASU 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 ASU 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 Company’s 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. This ASU 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 ASU 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 ASU 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.
8
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 ASU 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.
In May 2016, the FASB issued ASU No. 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing.” The amendments in this ASU do not change the core principle of the guidance in Topic 606. Rather, the amendments in this ASU clarify the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. The amendments in this ASU affect the guidance in ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”, which is not yet effective. The effective date and transition requirements for the amendments in this ASU are the same as the effective date and transition requirements in Topic 606 (and any other Topic amended by ASU 2014-09). ASU 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date”, deferred the effective date of ASU 2014-09 by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. The Company is currently evaluating this guidance to determine the impact on its consolidated financial position, results of operations or cash flows.
In May 2016, the FASB issued ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients.” The amendments in this ASU do not change the core principle of the guidance in Topic 606. Rather, the amendments in this ASU clarify the guidance on assessing collectability, presentation of sales taxes, noncash consideration, and completed contracts and contract modifications at transition. The amendments in this ASU affect the guidance in ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which is not yet effective. The effective date and transition requirements for the amendments in this ASU are the same as the effective date and transition requirements in Topic 606 (and any other Topic amended by ASU 2014-09). ASU 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date”, deferred the effective date of ASU 2014-09 by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. The Company is currently evaluating this guidance to determine the impact on its consolidated financial position, results of operations or cash flows.
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit losses (Topic 326): Measurement of credit losses on financial instruments.” Topic 326 amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available for sale debt securities, credit losses should be measured in a manner similar to current GAAP, however Topic 326 will require that credit losses be presented as an allowance rather than as a write-down. This ASU affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. For public business entities that are SEC filers, the amendments in this ASU are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. For all other public business entities, the amendments in this ASU are effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. All entities may adopt the amendments in this ASU earlier as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. An entity will apply the amendments in this ASU through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified-retrospective approach). A prospective transition approach is required for debt securities for which an other-than-temporary impairment had been recognized before the effective date. The effect of a prospective transition approach is to maintain the same amortized cost basis before and after the effective date of this ASU. Amounts previously recognized in accumulated other comprehensive income as of the date of adoption that relate to improvements in cash flows expected to be collected should continue to be accreted into income over the remaining life of the asset. Recoveries of amounts previously written off relating to improvements in cash flows after the date of adoption should be recorded in earnings when received. 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 | ||||||||||||||
June 30, 2016 | Gains | Losses | ||||||||||||||
(Dollars in thousands) | ||||||||||||||||
Available for sale: | ||||||||||||||||
U.S. Government agencies and sponsored enterprises obligations | $ | 19,045 | $ | 173 | $ | — | $ | 19,218 | ||||||||
U.S. Government agencies and sponsored enterprises mortgage-backed securities | 390,121 | 10,614 | 117 | 400,618 | ||||||||||||
State and municipal obligations | 2,238 | 237 | — | 2,475 | ||||||||||||
Asset-backed securities | 497,700 | 685 | 6,933 | 491,452 | ||||||||||||
Corporate bonds and other debt securities | 496,423 | 11,308 | 5,343 | 502,388 | ||||||||||||
Preferred stock and other equity securities | 148,673 | 364 | 3,139 | 145,898 | ||||||||||||
Total available for sale | $ | 1,554,200 | $ | 23,381 | $ | 15,532 | $ | 1,562,049 | ||||||||
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 Company’s liquidity management strategy, the Company pledges loans and securities to secure borrowings from the Federal Home Loan Bank of Atlanta ("FHLB'). The Company also pledges securities to collateralize public deposits, repurchase agreements and interest rate swaps. The carrying value of all pledged securities totaled $638.5 million and $939.6 million at June 30, 2016 and December 31, 2015, respectively.
The amortized cost and estimated fair value of securities available for sale, by contractual maturity, are as follows:
June 30, 2016 | Amortized Cost | Fair Value | ||||||
(Dollars in thousands) | ||||||||
Available for sale: | ||||||||
Due in one year or less | $ | 5,000 | $ | 5,021 | ||||
Due after one year through five years | 126,091 | 127,994 | ||||||
Due after five years through ten years | 110,523 | 109,109 | ||||||
Due after ten years | 257,047 | 262,739 | ||||||
U.S. Government agencies and sponsored enterprises obligations, mortgage-backed securities and asset-backed securities | 906,866 | 911,288 | ||||||
Preferred stock and other equity securities | 148,673 | 145,898 | ||||||
Total available for sale | $ | 1,554,200 | $ | 1,562,049 | ||||
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
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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.
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 | ||||||||||||||||||||||
June 30, 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 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
U.S. Government agencies and sponsored enterprises mortgage-backed securities | 584 | 1 | 14,352 | 116 | 14,936 | 117 | ||||||||||||||||||
State and municipal obligations | — | — | — | — | — | — | ||||||||||||||||||
Asset-backed securities | 210,195 | 1,999 | 182,833 | 4,934 | 393,028 | 6,933 | ||||||||||||||||||
Corporate bonds and other debt securities | 100,399 | 2,944 | 43,668 | 2,399 | 144,067 | 5,343 | ||||||||||||||||||
Preferred stock and other equity securities | 37,926 | 999 | 75,114 | 2,140 | 113,040 | 3,139 | ||||||||||||||||||
Total available for sale | $ | 349,104 | $ | 5,943 | $ | 315,967 | $ | 9,589 | $ | 665,071 | $ | 15,532 | ||||||||||||
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 | ||||||||||||
At June 30, 2016, the Company’s security portfolio consisted of 322 securities, of which 125 securities were in an unrealized loss position. A total of 60 were in an unrealized loss position for less than 12 months. The unrealized losses for these securities resulted primarily from changes in interest rates and spreads.
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 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 June 30, 2016. The following describes the basis under which the Company has evaluated OTTI:
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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 underwritten in accordance with the Company’s investment standards prior to the decision to purchase, without relying on a bond issuer’s guarantee in making the investment decision. These investments are investment grade and will continue to be monitored as part of the Company’s ongoing impairment analysis, but are expected to perform in accordance with their terms.
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 and spreads. These securities were generally underwritten in accordance with the Company’s 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 June 30, | Six Months Ended June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
Gross realized gains | $ | 321 | $ | 849 | $ | 1,209 | $ | 1,961 | ||||||||
Gross realized losses | (54 | ) | (844 | ) | (996 | ) | (913 | ) | ||||||||
Net realized gains (losses) | $ | 267 | $ | 5 | $ | 213 | $ | 1,048 | ||||||||
NOTE 3. LOANS, NET
The Company’s 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. All acquired loans not specifically excluded under ASC 310-30 are accounted for under ASC 310-30. The remaining portfolio of acquired loans excluded under ASC 310-30 are accounted for under ASC 310-20 and are classified as Non-ASC 310-30 loans.
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The following tables summarize the Company’s loans by portfolio and segment as of the periods presented, net of deferred fees, costs, premiums and discounts:
June 30, 2016 | ASC 310-30 Loans | Non-ASC 310-30 Loans | New Loans (1) | Total | ||||||||||||
(Dollars in thousands) | ||||||||||||||||
Real estate loans: | ||||||||||||||||
Commercial real estate | $ | 182,828 | $ | 44,680 | $ | 1,209,762 | $ | 1,437,270 | ||||||||
Owner-occupied commercial real estate | — | 19,256 | 571,558 | 590,814 | ||||||||||||
1-4 single family residential | 35,400 | 74,568 | 1,923,092 | 2,033,060 | ||||||||||||
Construction, land and development | 25,296 | 6,338 | 582,615 | 614,249 | ||||||||||||
Home equity loans and lines of credit | — | 46,269 | 43,730 | 89,999 | ||||||||||||
Total real estate loans | $ | 243,524 | $ | 191,111 | $ | 4,330,757 | $ | 4,765,392 | ||||||||
Other loans: | ||||||||||||||||
Commercial and industrial | $ | 28,984 | $ | 7,801 | $ | 1,187,788 | $ | 1,224,573 | ||||||||
Consumer | 2,216 | 440 | 4,526 | 7,182 | ||||||||||||
Total other loans | 31,200 | 8,241 | 1,192,314 | 1,231,755 | ||||||||||||
Total loans held in portfolio | $ | 274,724 | $ | 199,352 | $ | 5,523,071 | $ | 5,997,147 | ||||||||
Allowance for loan losses | (33,706 | ) | ||||||||||||||
Loans held in portfolio, net | $ | 5,963,441 | ||||||||||||||
December 31, 2015 | ASC 310-30 Loans | Non-ASC 310-30 Loans | New Loans (1) | Total | ||||||||||||
(Dollars in thousands) | ||||||||||||||||
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 $7.3 million and $7.1 million of deferred fees, costs, and premium and discount as of June 30, 2016 and December 31, 2015, respectively. |
At June 30, 2016 and December 31, 2015, the unpaid principal balance of ASC 310-30 loans were $332.3 million and $457.9 million, respectively. At June 30, 2016 and December 31, 2015, the Company had pledged loans as collateral for FHLB advances of $2.79 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 June 30, 2016 totaled $5.2 million. The Company held $458.4 million and $464.2 million of syndicated national loans as of June 30, 2016 and December 31, 2015, respectively.
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During the three and six months ended June 30, 2016, the Company purchased approximately $0 and $189.2 million in loans from third parties. During the three and six months ended June 30, 2015, the Company purchased approximately $144.0 million and $233.6 million, respectively, in loans from third parties.
During the three and six months ended June 30, 2016, the Company sold approximately $25.6 million and $61.8 million, respectively, loans to third parties. During the three and six months ended June 30, 2015, the Company sold approximately $11.6 million and $19.5 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 flows for certain ASC 310-30 loan pools resulted in the reclassification of $(19.7) million and $9.8 million between non-accretable and accretable discount during the six months ended June 30, 2016 and 2015, respectively.
Changes in accretable discount for ASC 310-30 loans for the six months ended June 30, 2016 and 2015, were as follows:
Six Months Ended June 30, | ||||||||
2016 | 2015 | |||||||
(Dollars in thousands) | ||||||||
Balance at January 1, | $ | 144,152 | $ | 156,197 | ||||
Accretion | (29,374 | ) | (23,667 | ) | ||||
Reclassifications from (to) non-accretable difference | (19,706 | ) | 9,760 | |||||
Balance at June 30, | $ | 95,072 | $ | 142,290 | ||||
NOTE 4. ALLOWANCE FOR LOAN LOSSES
The Company’s 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 management’s estimate of probable credit losses inherent in each of the segments.
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Changes in the ALL by loan portfolio and segment for the three and six months ended June 30, 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 April 1, 2016 | $ | 9,454 | $ | 2,281 | $ | 7,309 | $ | 3,415 | $ | 499 | $ | 8,580 | $ | 457 | $ | 31,995 | ||||||||||||||||
Provision (credit) for ASC 310-30 loans | 5 | — | — | 1 | — | (20 | ) | (16 | ) | (30 | ) | |||||||||||||||||||||
Provision (credit) for non-ASC 310-30 loans | (98 | ) | (64 | ) | (26 | ) | 1 | (6 | ) | (2 | ) | — | (195 | ) | ||||||||||||||||||
Provision (credit) for New loans | 736 | 35 | 125 | 287 | 122 | 908 | (12 | ) | 2,201 | |||||||||||||||||||||||
Total provision | 643 | (29 | ) | 99 | 289 | 116 | 886 | (28 | ) | 1,976 | ||||||||||||||||||||||
Charge-offs for ASC 310-30 loans | (352 | ) | — | — | (3 | ) | — | (1 | ) | (2 | ) | (358 | ) | |||||||||||||||||||
Charge-offs for non-ASC 310-30 loans | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Charge-offs for New loans | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Total charge-offs | (352 | ) | — | — | (3 | ) | — | (1 | ) | (2 | ) | (358 | ) | |||||||||||||||||||
Recoveries for ASC 310-30 loans | — | — | 31 | 62 | — | — | — | 93 | ||||||||||||||||||||||||
Recoveries for non-ASC 310-30 loans | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Recoveries for New loans | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Total recoveries | — | — | 31 | 62 | — | — | — | 93 | ||||||||||||||||||||||||
Ending ALL balance | ||||||||||||||||||||||||||||||||
ASC 310-30 loans | 2,114 | — | 58 | 348 | — | 366 | 384 | 3,270 | ||||||||||||||||||||||||
Non-ASC 310-30 loans | 935 | 340 | 282 | 37 | 273 | 55 | 4 | 1,926 | ||||||||||||||||||||||||
New loans | 6,696 | 1,912 | 7,099 | 3,378 | 342 | 9,044 | 39 | 28,510 | ||||||||||||||||||||||||
Balance at June 30, 2016 | $ | 9,745 | $ | 2,252 | $ | 7,439 | $ | 3,763 | $ | 615 | $ | 9,465 | $ | 427 | $ | 33,706 | ||||||||||||||||
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 April 1, 2015 | $ | 9,296 | $ | 1,252 | $ | 5,213 | $ | 2,312 | $ | 398 | $ | 5,705 | $ | 337 | $ | 24,513 | ||||||||||||||||
Provision (credit) for ASC 310-30 loans | (784 | ) | — | (63 | ) | (178 | ) | — | 143 | 115 | (767 | ) | ||||||||||||||||||||
Provision (credit) for non-ASC 310-30 loans | 848 | (7 | ) | (7 | ) | (12 | ) | 143 | (11 | ) | (1 | ) | 953 | |||||||||||||||||||
Provision (credit) for New loans | 383 | 303 | 755 | 633 | 22 | 183 | 5 | 2,284 | ||||||||||||||||||||||||
Total provision | 447 | 296 | 685 | 443 | 165 | 315 | 119 | 2,470 | ||||||||||||||||||||||||
Charge-offs for ASC 310-30 loans | (109 | ) | — | (121 | ) | — | — | (45 | ) | — | (275 | ) | ||||||||||||||||||||
Charge-offs for non-ASC 310-30 loans | — | — | (63 | ) | — | — | — | — | (63 | ) | ||||||||||||||||||||||
Charge-offs for New loans | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Total charge-offs | (109 | ) | — | (184 | ) | — | — | (45 | ) | — | (338 | ) | ||||||||||||||||||||
Recoveries for ASC 310-30 loans | 18 | — | 30 | 269 | — | 82 | — | 399 | ||||||||||||||||||||||||
Recoveries for non-ASC 310-30 loans | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Recoveries for New loans | — | — | — | — | — | 2 | — | 2 | ||||||||||||||||||||||||
Total recoveries | 18 | — | 30 | 269 | ||||||||||||||||||||||||||||