Notes to Unaudited Consolidated Financial Statements
September 30, 2017
NOTE 1 – BASIS OF PRESENTATION AND ACCOUNTING POLICIES
Nature of Business
Ameris Bancorp (the “Company” or “Ameris”) is a financial holding company headquartered in Moultrie, Georgia. Ameris conducts substantially all of its operations through its wholly owned banking subsidiary, Ameris Bank (the “Bank”). At
September 30, 2017
, the Bank operated
97
branches in select markets in Georgia, Alabama, Florida and South Carolina. Our business model capitalizes on the efficiencies of a large financial services company while still providing the community with the personalized banking service expected by our customers. We manage our Bank through a balance of decentralized management responsibilities and efficient centralized operating systems, products and loan underwriting standards. The Company’s Board of Directors and senior managers establish corporate policy, strategy and administrative policies. Within our established guidelines and policies, the banker closest to the customer responds to the differing needs and demands of his or her unique market.
Basis of Presentation
The accompanying unaudited consolidated financial statements for Ameris have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and Regulation S-X. Accordingly, the financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statement presentation. The interim consolidated financial statements included herein are unaudited but reflect all adjustments (consisting of normal recurring accruals) which, in the opinion of management, are necessary for a fair presentation of the consolidated financial position and results of operations for the interim periods presented. All significant intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the period ended
September 30, 2017
are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the financial statements and notes thereto and the report of our registered independent public accounting firm included in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2016
.
Accounting Policy Update
Other Investments
–
Other investments include Federal Home Loan Bank (“FHLB”) stock, Federal Reserve Bank stock and a minority equity investment in US Premium Finance Holding Company, a Florida corporation (“USPF”). These investments do not have readily determinable fair values and are carried at cost. They are periodically reviewed for impairment based on ultimate recovery of par value or cost basis. Both stock and cash dividends are reported as income. For additional information regarding the Company’s minority equity investment in USPF, see Note 2.
Reclassifications
Certain reclassifications of prior year amounts have been made to conform with the current year presentations.
Accounting Standards Adopted in
2017
ASU 2016-09 –
Improvements to Employee Share-Based Payment Accounting
(“ASU 2016-09”). ASU 2016-09 simplifies various aspects of how share-based payments are accounted for and presented in the financial statements. Under ASU 2016-09, companies will record all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement and will no longer record excess tax benefits and certain tax deficiencies in additional paid-in capital. The standard eliminates the requirement that excess tax benefits be realized before companies can recognize them. The excess tax benefits will be reported as an operating activity on the statement of cash flows, and the cash paid to a tax authority when shares are withheld to satisfy a company’s statutory income tax withholding obligation will be reported as a financing activity on its statement of cash. In addition, the standard increases the amount an employer can withhold to cover income taxes on awards and still qualify for the exception to liability classification for shares used to satisfy the employer’s statutory income tax withholding obligation. ASU 2016-09 permits companies to make an accounting policy election for the impact of forfeitures on the recognition of expense for share-based payment awards. Forfeitures can be estimated, as required today, or recognized when they occur. The Company has elected to recognize forfeitures as they occur. ASU 2016-09 became effective on January 1, 2017 and did not have a material impact on the consolidated financial statements.
Accounting Standards Pending Adoption
ASU 2017-12 –
"Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities
("ASU 2017-12"). The purposes of ASU 2017-12 are to (1) improve the transparency and understandability of information conveyed in financial statements about an entity’s risk management activities by better aligning the entity’s financial reporting for hedging relationships with the economic objectives of those risk management activities and (2) reduce the complexity of and simplify the application of hedge accounting by preparers. ASU 2017-12 is effective for interim and annual reporting periods beginning after December 15, 2018 with early adoption in an interim period permitted. ASU 2017-12 requires a modified retrospective transition method in which the Company will recognize the cumulative effect of the change on the opening balance of each affected component of equity in the statement of financial position as of the beginning of the fiscal year of adoption. The Company is currently evaluating the provisions of ASU 2017-12 to determine the potential impact the new standard will have on the Company’s results of operations, financial position and disclosures, but it is not expected to have a material impact.
ASU 2017-09 –
“Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting
(“ASU 2017-09”). ASU 2017-09 clarifies when changes to the terms of a share-based award must be accounted for as a modification. Companies must apply the modification accounting guidance if any of the following change: the shard-based award’s fair value, vesting provisions or classification as an equity instrument or a liability instrument. The new guidance should reduce diversity in practice and result in fewer changes to the terms of share-based awards being accounted for as modifications, as the guidance will allow companies to make certain non-substantive changes to share-based awards without accounting for them as modifications. ASU 2017-09 is effective for interim and annual reporting periods beginning after December 15, 2017 with early adoption permitted. ASU 2017-09 is not expected to have a material impact on the Company’s results of operations, financial position or disclosures.
ASU 2017-08 –
“Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities
(“ASU 2017-08”). ASU 2017-08 shortens the amortization period for certain purchased callable debt securities held at a premium, shortening such period to the earliest call date. Under the current guidance, entities generally amortize the premium on a callable debt security as an adjustment of yield over the contractual life (to maturity date) of the instrument. This ASU does not require any accounting change in the accounting for debt securities held at a discount; the discount continues to be amortized as an adjustment of yield over the contractual life (to maturity) of the instrument. ASU 2017-08 is effective for interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. Upon adoption, ASU 2017-08 provides for a modified retrospective transition by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is adopted. The Company is currently evaluating the provisions of ASU 2017-08 to determine the potential impact the new standard will have on the Company’s results of operations, financial position and disclosures, but it is not expected to have a material impact.
ASU 2017-04 –
Intangibles: Goodwill and Other: Simplifying the Test for Goodwill Impairment
(“ASU 2017-04”). ASU 2017-04 eliminates Step 2 from the goodwill impairment test to simplify the subsequent measurement of goodwill. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, the income tax effects of tax deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable. ASU 2017-04 also eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the qualitative impairment test is necessary. The standard must be adopted using a prospective basis and the nature and reason for the change in accounting principle should be disclosed upon transition. ASU 2017-04 is effective for annual or any interim goodwill impairment tests in reporting periods beginning after December 15, 2019. Early adoption is permitted on testing dates after January 1, 2017. The Company is currently evaluating the impact this standard will have on the Company’s results of operations, financial position and disclosures, but it is not expected to have a material impact.
ASU 2017-01 –
Business Combinations (Topic 805): Clarifying the Definition of a Business
(“ASU 2017-01”). ASU 2017-01 provides a framework to use in determining when a set of assets and activities is a business. The standard provides more consistency in applying the business combination guidance, reduces the costs of application, and makes the definition of a business more operable. ASU 2017-01 is effective for interim and annual periods within those annual periods beginning after December 15, 2017. The Company is currently evaluating the impact this standard will have on the Company’s results of operations, financial position and disclosures, but it is not expected to have a material impact.
ASU 2016-13
- Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
(“ASU 2016-13”). ASU 2016-13 significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The standard will replace the current incurred loss approach with an expected loss model, referred to as the current expected credit loss (“CECL”) model. The new standard will apply to
financial assets subject to credit losses and measured at amortized cost and certain off-balance-sheet credit exposures, which include, but are not limited to, loans, leases, held-to-maturity securities, loan commitments and financial guarantees. ASU 2016-13 simplifies the accounting for purchased credit-impaired debt securities and loans and expands the disclosure requirements regarding an entity’s assumptions, models and methods for estimating the allowance for loan and lease losses. In addition, entities will need to disclose the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination. ASU 2016-13 is effective for interim and annual reporting periods beginning after December 15, 2019. Early adoption is permitted for interim and annual reporting periods beginning after December 15, 2018. Upon adoption, ASU 2016-13 provides for a modified retrospective transition by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is effective. While the Company is currently evaluating the impact this standard will have on the results of operations, financial position and disclosures, the Company expects to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective. The Company has established a steering committee which includes the appropriate members of management to evaluate the impact this ASU will have on Company’s financial position, results of operations and financial statement disclosures and determine the most appropriate method of implementing the amendments in this ASU as well as any resources needed to implement the amendments. This committee has identified the software vendor of choice for implementation, established an implementation timeline and continues to stay current on implementation issues and concerns.
ASU 2016-02 –
Leases (Topic 842)
(“ASU 2016-02”). ASU 2016-02 amends the existing standards for lease accounting effectively requiring most leases be carried on the balance sheets of the related lessees by requiring them to recognize a right-of-use asset and a corresponding lease liability. ASU 2016-02 includes qualitative and quantitative disclosure requirements intended to provide greater insight into the nature of an entity’s leasing activities. The standard must be adopted using a modified retrospective transition with a cumulative-effect adjustment to equity as of the beginning of the period in which it is adopted. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods with early adoption permitted. The Company has several leased facilities, which are currently treated as operating leases, and are not currently shown on the Company’s consolidated balance sheet. After ASU 2016-02 is implemented, the Company expects to begin reporting these lease agreements on the balance sheet as a right-of-use asset and a corresponding liability. The Company is currently evaluating the impact this standard will have on the Company’s consolidated statement of income and comprehensive income, consolidated statement of stockholders’ equity and consolidated statement of cash flows, but it is not expected to have a material impact.
ASU 2014-09 –
Revenue from Contracts with Customers
(“ASU 2014-09”). ASU 2014-09 provides guidance that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 is effective prospectively, for annual and interim periods, beginning after December 15, 2017. Management has substantially completed its evaluation of the impact ASU 2014-09 will have on the Company’s consolidated financial statements. Based on this evaluation to date, management has determined that for the revenue streams of the Company within the scope of ASU 2014-09, the new accounting guidance will not change the timing or amount of revenue recognized. The adoption of ASU 2014-09 is not expected to have a material impact on the Company's consolidated financial statements.
NOTE 2 – INVESTMENT IN US PREMIUM FINANCE HOLDING COMPANY
On December 15, 2016, the Bank entered into a Management and License Agreement with William J. Villari and USPF pursuant to which Mr. Villari will manage a division of the Bank to be operated under the name “US Premium Finance” and which is to be engaged in the business of soliciting, originating, servicing, administering and collecting loans made for purposes of funding insurance premiums and other loans made to persons engaged in the insurance business.
Also on December 15, 2016, the Company entered into a Stock Purchase Agreement with Mr. Villari pursuant to which the Company agreed to purchase from Mr. Villari
4.99%
of the outstanding shares of common stock of USPF. As consideration for such shares, the Company agreed to issue to Mr. Villari
128,572
unregistered shares of its common stock in a private placement transaction pursuant to the exemptions from registration provided in Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506 of Regulation D promulgated thereunder. Those transactions closed on January 18, 2017, and a registration statement was filed with the Securities and Exchange Commission on February 13, 2017 to register the resale or other disposition of the shares of common stock that were issued to Mr. Villari.
The Company’s
4.99%
investment in USPF was valued at
$5.8 million
, based upon the closing price of the Company’s common stock immediately prior to the parties’ execution of the Stock Purchase Agreement, as follows:
|
|
|
|
|
(dollars in thousands, except per share amount)
|
|
|
Ameris common shares issued
|
128,572
|
|
Price per share of the Company's common stock
|
$
|
45.45
|
|
Fair value of consideration transferred
|
$
|
5,844
|
|
Because USPF does not have a readily determinable fair value and Ameris does not exercise significant influence over USPF, the investment is carried at cost and is included in other investments in the Company’s consolidated balance sheet. The net carrying value of the Company’s investment in USPF was
$5.8 million
as of
September 30, 2017
.
NOTE 3 – INVESTMENT SECURITIES
The Company’s investment policy blends the Company’s liquidity needs and interest rate risk management with its desire to increase income and provide funds for expected growth in loans. The investment securities portfolio consists primarily of U.S. government-sponsored mortgage-backed securities and state, county and municipal securities. The Company’s portfolio and investing philosophy concentrate activities in obligations where the credit risk is limited. For the small portion of the Company’s portfolio found to present credit risk, the Company has reviewed the investments and financial performance of the obligors and believes the credit risk to be acceptable.
The amortized cost and estimated fair value of investment securities available for sale, along with unrealized gains and losses, are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Estimated
Fair
Value
|
September 30, 2017
|
|
|
|
|
|
|
|
|
U.S. government sponsored agencies
|
|
$
|
1,000
|
|
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
1,004
|
|
State, county and municipal securities
|
|
140,190
|
|
|
3,271
|
|
|
(74
|
)
|
|
143,387
|
|
Corporate debt securities
|
|
46,704
|
|
|
661
|
|
|
(116
|
)
|
|
47,249
|
|
Mortgage-backed securities
|
|
626,927
|
|
|
3,774
|
|
|
(2,748
|
)
|
|
627,953
|
|
Total debt securities
|
|
$
|
814,821
|
|
|
$
|
7,710
|
|
|
$
|
(2,938
|
)
|
|
$
|
819,593
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
U.S. government sponsored agencies
|
|
$
|
999
|
|
|
$
|
21
|
|
|
$
|
—
|
|
|
$
|
1,020
|
|
State, county and municipal securities
|
|
149,899
|
|
|
2,605
|
|
|
(469
|
)
|
|
152,035
|
|
Corporate debt securities
|
|
32,375
|
|
|
167
|
|
|
(370
|
)
|
|
32,172
|
|
Mortgage-backed securities
|
|
641,362
|
|
|
2,700
|
|
|
(6,554
|
)
|
|
637,508
|
|
Total debt securities
|
|
$
|
824,635
|
|
|
$
|
5,493
|
|
|
$
|
(7,393
|
)
|
|
$
|
822,735
|
|
The amortized cost and fair value of available-for-sale securities at
September 30, 2017
by contractual maturity are summarized in the table below. Expected maturities for mortgage-backed securities may differ from contractual maturities because in certain cases borrowers can prepay obligations without prepayment penalties. Therefore, these securities are not included in the following maturity summary.
|
|
|
|
|
|
|
|
|
|
(
dollars in thousands)
|
|
Amortized
Cost
|
|
Estimated
Fair
Value
|
Due in one year or less
|
|
$
|
14,094
|
|
|
$
|
14,205
|
|
Due from one year to five years
|
|
57,385
|
|
|
58,204
|
|
Due from five to ten years
|
|
77,194
|
|
|
79,093
|
|
Due after ten years
|
|
39,221
|
|
|
40,138
|
|
Mortgage-backed securities
|
|
626,927
|
|
|
627,953
|
|
|
|
$
|
814,821
|
|
|
$
|
819,593
|
|
Securities with a carrying value of approximately
$238.6 million
serve as collateral to secure public deposits, securities sold under agreements to repurchase and for other purposes required or permitted by law at
September 30, 2017
, compared with
$618.2 million
at
December 31, 2016
.
The following table details the gross unrealized losses and fair value of securities aggregated by category and duration of continuous unrealized loss position at
September 30, 2017
and
December 31, 2016
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Than 12 Months
|
|
12 Months or More
|
|
Total
|
(dollars in thousands)
|
|
Estimated
Fair
Value
|
|
Unrealized
Losses
|
|
Estimated
Fair
Value
|
|
Unrealized
Losses
|
|
Estimated
Fair
Value
|
|
Unrealized
Losses
|
September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government sponsored agencies
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
State, county and municipal securities
|
|
11,333
|
|
|
(18
|
)
|
|
4,240
|
|
|
(56
|
)
|
|
15,573
|
|
|
(74
|
)
|
Corporate debt securities
|
|
8,131
|
|
|
(35
|
)
|
|
10,854
|
|
|
(81
|
)
|
|
18,985
|
|
|
(116
|
)
|
Mortgage-backed securities
|
|
225,258
|
|
|
(1,685
|
)
|
|
54,465
|
|
|
(1,063
|
)
|
|
279,723
|
|
|
(2,748
|
)
|
Total debt securities
|
|
$
|
244,722
|
|
|
$
|
(1,738
|
)
|
|
$
|
69,559
|
|
|
$
|
(1,200
|
)
|
|
$
|
314,281
|
|
|
$
|
(2,938
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government sponsored agencies
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
State, county and municipal securities
|
|
47,647
|
|
|
(469
|
)
|
|
—
|
|
|
—
|
|
|
47,647
|
|
|
(469
|
)
|
Corporate debt securities
|
|
18,377
|
|
|
(363
|
)
|
|
493
|
|
|
(7
|
)
|
|
18,870
|
|
|
(370
|
)
|
Mortgage-backed securities
|
|
414,300
|
|
|
(6,177
|
)
|
|
11,791
|
|
|
(377
|
)
|
|
426,091
|
|
|
(6,554
|
)
|
Total debt securities
|
|
$
|
480,324
|
|
|
$
|
(7,009
|
)
|
|
$
|
12,284
|
|
|
$
|
(384
|
)
|
|
$
|
492,608
|
|
|
$
|
(7,393
|
)
|
As of
September 30, 2017
, the Company’s securities portfolio consisted of
421
securities,
119
of which were in an unrealized loss position. The majority of unrealized losses are related to the Company’s mortgage-backed securities, as discussed below.
At
September 30, 2017
, the Company held
101
mortgage-backed securities that were in an unrealized loss position, all of which were issued by U.S. government-sponsored entities and agencies. Because the decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality, and because the Company does not have the intent to sell these mortgage-backed securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at
September 30, 2017
.
At
September 30, 2017
, the Company held
nine
state, county and municipal securities and
nine
corporate debt securities that were in an unrealized loss position. Because the decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality, and because the Company does not have the intent to sell these securities and it is likely that it will not be required to sell the securities before their anticipated recovery, the Company does not consider these securities to be other-than-temporarily impaired at
September 30, 2017
.
The Company’s investments in corporate debt include investments in regional and super-regional banks on which the Company prepares regular analysis through review of financial information and credit ratings. Investments in preferred securities are also concentrated in the preferred obligations of regional and super-regional banks through non-pooled investment structures. The Company did not have investments in “pooled” trust preferred securities at
September 30, 2017
or
December 31, 2016
.
Management and the Company’s Asset and Liability Committee (the “ALCO Committee”) evaluate securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market conditions warrant such evaluation. While the majority of the unrealized losses on debt securities relate to changes in interest rates, corporate debt securities have also been affected by reduced levels of liquidity and higher risk premiums. Occasionally, management engages independent third parties to evaluate the Company’s position in certain corporate debt securities to aid management and the ALCO Committee in its determination regarding the status of impairment. The Company believes that each investment poses minimal credit risk and further, that the Company does not intend to sell these investment securities at an unrealized loss position at
September 30, 2017
, and it is more likely than not that the Company will not be required to sell these securities prior to recovery or maturity. Therefore, at
September 30, 2017
, these investments are not considered impaired on an other-than-temporary basis.
At
September 30, 2017
and
December 31, 2016
, all of the Company’s mortgage-backed securities were obligations of government-sponsored agencies.
The following table is a summary of sales activities in the Company’s investment securities available for sale for the
nine months ended
September 30, 2017
and
2016
:
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
September 30,
2017
|
|
September 30,
2016
|
Gross gains on sales of securities
|
|
$
|
38
|
|
|
$
|
312
|
|
Gross losses on sales of securities
|
|
(1
|
)
|
|
(218
|
)
|
Net realized gains on sales of securities available for sale
|
|
$
|
37
|
|
|
$
|
94
|
|
|
|
|
|
|
Sales proceeds
|
|
$
|
3,090
|
|
|
$
|
53,026
|
|
NOTE 4 – LOANS
The Bank engages in a full complement of lending activities, including real estate-related loans, agriculture-related loans, commercial and financial loans and consumer installment loans within select markets in Georgia, Alabama, Florida and South Carolina. The Bank purchased residential mortgage loan pools during 2015 and 2016 collateralized by properties located outside our Southeast markets, specifically in California, Washington and Illinois. During the third quarter of 2016, the Bank began purchasing from an unrelated third party consumer installment home improvement loans made to borrowers throughout the United States. As of
September 30, 2017
and
December 31, 2016
, the net carrying value of these consumer installment home improvement loans was approximately
$148.0 million
and
$60.8 million
, respectively. During the fourth quarter of 2016, the Bank purchased a pool of commercial insurance premium finance loans made to borrowers throughout the United States and began to originate, administer and service these types of loans. As of
September 30, 2017
and
December 31, 2016
, the net carrying value of commercial insurance premium loans was approximately
$487.9 million
and
$353.9 million
, respectively, and such loans are reported in the commercial, financial and agricultural loan category.
The Bank concentrates the majority of its lending activities in real estate loans. While risk of loss in the Company’s portfolio is primarily tied to the credit quality of the various borrowers, risk of loss may increase due to factors beyond the Company’s control, such as local, regional and/or national economic downturns. General conditions in the real estate market may also impact the relative risk in the real estate portfolio. A substantial portion of the Bank’s loans are secured by real estate in the Bank’s primary market area. In addition, a substantial portion of the OREO is located in those same markets. Accordingly, the ultimate collectability of a substantial portion of the Bank’s loan portfolio and the recovery of a substantial portion of the carrying amount of OREO are susceptible to changes in real estate conditions in the Bank’s primary market area.
Commercial, financial and agricultural loans include both secured and unsecured loans for working capital, expansion, crop production, commercial insurance premium finance, and other business purposes. Commercial, financial and agricultural loans also include SBA loans and municipal loans. Short-term working capital loans are secured by non-real estate collateral such as accounts receivable, crops, inventory and equipment. The Bank evaluates the financial strength, cash flow, management, credit history of the borrower and the quality of the collateral securing the loan. The Bank often requires personal guarantees and secondary sources of repayment on commercial, financial and agricultural loans.
Real estate loans include construction and development loans, commercial and farmland loans and residential loans. Construction and development loans include loans for the development of residential neighborhoods, one-to-four family home residential construction loans to builders and consumers, and commercial real estate construction loans, primarily for owner-occupied properties. The Company limits its construction lending risk through adherence to established underwriting procedures. Commercial real estate loans include loans secured by owner-occupied commercial buildings for office, storage, retail, farmland and warehouse space. They also include non-owner occupied commercial buildings such as leased retail and office space. Commercial real estate loans may be larger in size and may involve a greater degree of risk than one-to-four family residential mortgage loans. Payments on such loans are often dependent on successful operation or management of the properties. The Company’s residential loans represent permanent mortgage financing and are secured by residential properties located within the Bank's market areas, along with warehouse lines of credit secured by residential mortgages.
Consumer installment loans and other loans include home improvement loans, automobile loans, boat and recreational vehicle financing, and secured and unsecured personal loans. Consumer loans carry greater risks than other loans, as the collateral can consist of rapidly depreciating assets such as automobiles and equipment that may not provide an adequate source of repayment of the loan in the case of default.
Loans are stated at unpaid balances, net of unearned income and deferred loan fees. Balances within the major loans receivable categories are presented in the following table, excluding purchased loans:
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
September 30,
2017
|
|
December 31,
2016
|
Commercial, financial and agricultural
|
$
|
1,307,209
|
|
|
$
|
967,138
|
|
Real estate – construction and development
|
550,189
|
|
|
363,045
|
|
Real estate – commercial and farmland
|
1,558,882
|
|
|
1,406,219
|
|
Real estate – residential
|
969,289
|
|
|
781,018
|
|
Consumer installment
|
183,314
|
|
|
96,915
|
|
Other
|
5,795
|
|
|
12,486
|
|
|
$
|
4,574,678
|
|
|
$
|
3,626,821
|
|
Purchased loans are defined as loans that were acquired in bank acquisitions including those that are covered by a loss-sharing agreement with the Federal Deposit Insurance Corporation (the “FDIC”). Purchased loans totaling $
917.1 million
and
$1.07 billion
at
September 30, 2017
and
December 31, 2016
, respectively, are not included in the above schedule.
Purchased loans are shown below according to major loan type as of the end of the periods shown:
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
September 30,
2017
|
|
December 31,
2016
|
Commercial, financial and agricultural
|
$
|
80,895
|
|
|
$
|
96,537
|
|
Real estate – construction and development
|
68,583
|
|
|
81,368
|
|
Real estate – commercial and farmland
|
500,169
|
|
|
576,355
|
|
Real estate – residential
|
264,312
|
|
|
310,277
|
|
Consumer installment
|
3,167
|
|
|
4,654
|
|
|
$
|
917,126
|
|
|
$
|
1,069,191
|
|
A rollforward of purchased loans for the
nine months ended
September 30, 2017
and
2016
is shown below:
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
September 30,
2017
|
|
September 30,
2016
|
Balance, January 1
|
$
|
1,069,191
|
|
|
$
|
909,083
|
|
Charge-offs, net of recoveries
|
(1,761
|
)
|
|
(3,122
|
)
|
Additions due to acquisitions
|
—
|
|
|
402,942
|
|
Accretion
|
9,023
|
|
|
12,926
|
|
Transfers to purchased other real estate owned
|
(4,294
|
)
|
|
(6,262
|
)
|
Payments received
|
(155,033
|
)
|
|
(186,276
|
)
|
Other
|
—
|
|
|
90
|
|
Ending balance
|
$
|
917,126
|
|
|
$
|
1,129,381
|
|
The following is a summary of changes in the accretable discounts of purchased loans during the
nine months ended
September 30, 2017
and
2016
:
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
September 30,
2017
|
|
September 30,
2016
|
Balance, January 1
|
$
|
30,624
|
|
|
$
|
33,848
|
|
Additions due to acquisitions
|
—
|
|
|
9,991
|
|
Accretion
|
(9,023
|
)
|
|
(12,926
|
)
|
Accretable discounts removed due to charge-offs
|
(15
|
)
|
|
(161
|
)
|
Transfers between non-accretable and accretable discounts, net
|
923
|
|
|
2,544
|
|
Ending balance
|
$
|
22,509
|
|
|
$
|
33,296
|
|
Purchased loan pools are defined as groups of residential mortgage loans that were not acquired in bank acquisitions or FDIC-assisted transactions. As of
September 30, 2017
, purchased loan pools totaled
$465.2 million
and consisted of whole-loan, adjustable rate residential mortgages on properties outside the Company’s markets, with principal balances totaling
$459.1 million
and
$6.1 million
of remaining purchase premium paid at acquisition. As of
December 31, 2016
, purchased loan pools totaled
$568.3 million
with principal balances totaling
$559.4 million
and
$8.9 million
of remaining purchase premium paid at acquisition. At
September 30, 2017
and
December 31, 2016
, one loan in the purchased loan pools with a principal balance of
$915,000
and
$925,000
, respectively, was classified as a troubled debt restructuring and risk-rated grade 40, while all other loans included in the purchased loan pools were performing current loans risk-rated grade 20. During the second quarter of 2017, this troubled debt restructuring defaulted on its restructured terms and was placed on nonaccrual status. At
September 30, 2017
and
December 31, 2016
, the Company had allocated
$1.5 million
and
$1.8 million
, respectively, of allowance for loan losses for the purchased loan pools. As part of the due diligence process prior to purchasing an individual mortgage pool, a complete re-underwrite of the individual loan files was conducted. The underwriting process included a review of all income, asset, credit and property related documentation that was used to originate the loan. Underwriters utilized the originating lender’s program guidelines, as well as general prudent mortgage lending standards, to assess each individual loan file. Additional research was conducted to assess the real estate market conditions and market expectations in the geographic areas where a collateral concentration existed. As part of this review, an automated valuation model was employed to provide current collateral valuations and to support individual loan-to-value ratios. Additionally, a sample of site inspections was completed to provide further assurance. The results of the due diligence review were evaluated by officers of the Company in order to determine overall conformance to the Bank’s credit and lending policies.
Nonaccrual and Past-Due Loans
A loan is placed on nonaccrual status when, in management’s judgment, the collection of the interest income appears doubtful. Interest receivable that has been accrued and is subsequently determined to have doubtful collectability is charged against interest income. Interest on loans that are classified as nonaccrual is subsequently applied to principal until the loans are returned to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Past-due loans are loans whose principal or interest is past due
30
days or more. In some cases, where borrowers are experiencing financial difficulties, loans may be restructured to provide terms significantly different from the original contractual terms.
The following table presents an analysis of loans accounted for on a nonaccrual basis, excluding purchased loans:
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
September 30,
2017
|
|
December 31,
2016
|
Commercial, financial and agricultural
|
$
|
2,409
|
|
|
$
|
1,814
|
|
Real estate – construction and development
|
735
|
|
|
547
|
|
Real estate – commercial and farmland
|
5,705
|
|
|
8,757
|
|
Real estate – residential
|
5,984
|
|
|
6,401
|
|
Consumer installment
|
492
|
|
|
595
|
|
|
$
|
15,325
|
|
|
$
|
18,114
|
|
The following table presents an analysis of purchased loans accounted for on a nonaccrual basis:
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
September 30,
2017
|
|
December 31,
2016
|
Commercial, financial and agricultural
|
$
|
2,086
|
|
|
$
|
692
|
|
Real estate – construction and development
|
3,255
|
|
|
2,611
|
|
Real estate – commercial and farmland
|
6,974
|
|
|
10,174
|
|
Real estate – residential
|
6,646
|
|
|
9,476
|
|
Consumer installment
|
88
|
|
|
13
|
|
|
$
|
19,049
|
|
|
$
|
22,966
|
|
The following table presents an analysis of past-due loans, excluding purchased past-due loans as of
September 30, 2017
and
December 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
Loans
30-59
Days Past
Due
|
|
Loans
60-89
Days
Past Due
|
|
Loans 90
or More
Days Past
Due
|
|
Total
Loans
Past Due
|
|
Current
Loans
|
|
Total
Loans
|
|
Loans 90
Days or
More Past
Due and
Still
Accruing
|
September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial and agricultural
|
$
|
5,388
|
|
|
$
|
2,488
|
|
|
$
|
5,025
|
|
|
$
|
12,901
|
|
|
$
|
1,294,308
|
|
|
$
|
1,307,209
|
|
|
$
|
2,941
|
|
Real estate – construction and development
|
341
|
|
|
52
|
|
|
517
|
|
|
910
|
|
|
549,279
|
|
|
550,189
|
|
|
—
|
|
Real estate – commercial and farmland
|
2,369
|
|
|
1,097
|
|
|
5,203
|
|
|
8,669
|
|
|
1,550,213
|
|
|
1,558,882
|
|
|
—
|
|
Real estate – residential
|
3,293
|
|
|
1,938
|
|
|
4,165
|
|
|
9,396
|
|
|
959,893
|
|
|
969,289
|
|
|
—
|
|
Consumer installment loans
|
1,034
|
|
|
408
|
|
|
338
|
|
|
1,780
|
|
|
181,534
|
|
|
183,314
|
|
|
—
|
|
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,795
|
|
|
5,795
|
|
|
—
|
|
Total
|
$
|
12,425
|
|
|
$
|
5,983
|
|
|
$
|
15,248
|
|
|
$
|
33,656
|
|
|
$
|
4,541,022
|
|
|
$
|
4,574,678
|
|
|
$
|
2,941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial and agricultural
|
$
|
565
|
|
|
$
|
82
|
|
|
$
|
1,293
|
|
|
$
|
1,940
|
|
|
$
|
965,198
|
|
|
$
|
967,138
|
|
|
$
|
—
|
|
Real estate – construction and development
|
908
|
|
|
446
|
|
|
439
|
|
|
1,793
|
|
|
361,252
|
|
|
363,045
|
|
|
—
|
|
Real estate – commercial and farmland
|
6,329
|
|
|
1,711
|
|
|
6,945
|
|
|
14,985
|
|
|
1,391,234
|
|
|
1,406,219
|
|
|
—
|
|
Real estate – residential
|
6,354
|
|
|
1,282
|
|
|
5,302
|
|
|
12,938
|
|
|
768,080
|
|
|
781,018
|
|
|
—
|
|
Consumer installment loans
|
624
|
|
|
263
|
|
|
350
|
|
|
1,237
|
|
|
95,678
|
|
|
96,915
|
|
|
—
|
|
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12,486
|
|
|
12,486
|
|
|
—
|
|
Total
|
$
|
14,780
|
|
|
$
|
3,784
|
|
|
$
|
14,329
|
|
|
$
|
32,893
|
|
|
$
|
3,593,928
|
|
|
$
|
3,626,821
|
|
|
$
|
—
|
|
The following table presents an analysis of purchased past-due loans as of
September 30, 2017
and
December 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
Loans
30-59
Days Past
Due
|
|
Loans
60-89
Days
Past Due
|
|
Loans 90
or More
Days Past
Due
|
|
Total
Loans
Past Due
|
|
Current
Loans
|
|
Total
Loans
|
|
Loans 90
Days or
More Past
Due and
Still
Accruing
|
September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial and agricultural
|
$
|
2,674
|
|
|
$
|
2
|
|
|
$
|
288
|
|
|
$
|
2,964
|
|
|
$
|
77,931
|
|
|
$
|
80,895
|
|
|
$
|
—
|
|
Real estate – construction and development
|
1,221
|
|
|
935
|
|
|
1,713
|
|
|
3,869
|
|
|
64,714
|
|
|
68,583
|
|
|
—
|
|
Real estate – commercial and farmland
|
2,842
|
|
|
1,318
|
|
|
1,823
|
|
|
5,983
|
|
|
494,186
|
|
|
500,169
|
|
|
—
|
|
Real estate – residential
|
3,308
|
|
|
440
|
|
|
3,435
|
|
|
7,183
|
|
|
257,129
|
|
|
264,312
|
|
|
—
|
|
Consumer installment loans
|
1
|
|
|
4
|
|
|
43
|
|
|
48
|
|
|
3,119
|
|
|
3,167
|
|
|
—
|
|
Total
|
$
|
10,046
|
|
|
$
|
2,699
|
|
|
$
|
7,302
|
|
|
$
|
20,047
|
|
|
$
|
897,079
|
|
|
$
|
917,126
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial and agricultural
|
$
|
113
|
|
|
$
|
18
|
|
|
$
|
593
|
|
|
$
|
724
|
|
|
$
|
95,813
|
|
|
$
|
96,537
|
|
|
$
|
—
|
|
Real estate – construction and development
|
161
|
|
|
11
|
|
|
2,518
|
|
|
2,690
|
|
|
78,678
|
|
|
81,368
|
|
|
—
|
|
Real estate – commercial and farmland
|
2,034
|
|
|
326
|
|
|
7,152
|
|
|
9,512
|
|
|
566,843
|
|
|
576,355
|
|
|
—
|
|
Real estate – residential
|
4,566
|
|
|
698
|
|
|
6,835
|
|
|
12,099
|
|
|
298,178
|
|
|
310,277
|
|
|
—
|
|
Consumer installment loans
|
22
|
|
|
—
|
|
|
13
|
|
|
35
|
|
|
4,619
|
|
|
4,654
|
|
|
—
|
|
Total
|
$
|
6,896
|
|
|
$
|
1,053
|
|
|
$
|
17,111
|
|
|
$
|
25,060
|
|
|
$
|
1,044,131
|
|
|
$
|
1,069,191
|
|
|
$
|
—
|
|
Impaired Loans
Loans are considered impaired when, based on current information and events, it is probable the Company will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreements. Impaired loans include loans on nonaccrual status and accruing troubled debt restructurings. When determining if the Company will be unable to collect all principal and interest payments due in accordance with the contractual terms of the loan agreement, the Company considers the borrower’s capacity to pay, which includes such factors as the borrower’s current financial statements, an analysis of global cash flow sufficient to pay all debt obligations and an evaluation of secondary sources of repayment, such as guarantor support and collateral value. The Company individually assesses for impairment all nonaccrual loans greater than
$100,000
and all troubled debt restructurings greater than
$100,000
(including all troubled debt restructurings, whether or not currently classified as such). The tables below include all loans deemed impaired, whether or not individually assessed for impairment. If a loan is deemed impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured, in which case interest is recognized on a cash basis.
The following is a summary of information pertaining to impaired loans, excluding purchased loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the Period Ended
|
(dollars in thousands)
|
September 30,
2017
|
|
December 31,
2016
|
|
September 30,
2016
|
Nonaccrual loans
|
$
|
15,325
|
|
|
$
|
18,114
|
|
|
$
|
16,570
|
|
Troubled debt restructurings not included above
|
12,452
|
|
|
14,209
|
|
|
14,013
|
|
Total impaired loans
|
$
|
27,777
|
|
|
$
|
32,323
|
|
|
$
|
30,583
|
|
|
|
|
|
|
|
Quarter-to-date interest income recognized on impaired loans
|
$
|
297
|
|
|
$
|
225
|
|
|
$
|
252
|
|
Year-to-date interest income recognized on impaired loans
|
$
|
857
|
|
|
$
|
1,033
|
|
|
$
|
808
|
|
Quarter-to-date foregone interest income on impaired loans
|
$
|
233
|
|
|
$
|
267
|
|
|
$
|
239
|
|
Year-to-date foregone interest income on impaired loans
|
$
|
753
|
|
|
$
|
977
|
|
|
$
|
710
|
|
The following table presents an analysis of information pertaining to impaired loans, excluding purchased loans as of
September 30, 2017
,
December 31, 2016
and
September 30, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
Unpaid
Contractual
Principal
Balance
|
|
Recorded
Investment
With No
Allowance
|
|
Recorded
Investment
With
Allowance
|
|
Total
Recorded
Investment
|
|
Related
Allowance
|
|
Three
Month
Average
Recorded
Investment
|
|
Nine
Month
Average
Recorded
Investment
|
September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial and agricultural
|
$
|
2,924
|
|
|
$
|
1,121
|
|
|
$
|
1,331
|
|
|
$
|
2,452
|
|
|
$
|
379
|
|
|
$
|
2,478
|
|
|
$
|
2,380
|
|
Real estate – construction and development
|
1,655
|
|
|
532
|
|
|
627
|
|
|
1,159
|
|
|
81
|
|
|
1,179
|
|
|
1,160
|
|
Real estate – commercial and farmland
|
11,451
|
|
|
536
|
|
|
9,938
|
|
|
10,474
|
|
|
806
|
|
|
10,669
|
|
|
11,416
|
|
Real estate – residential
|
15,211
|
|
|
4,558
|
|
|
8,636
|
|
|
13,194
|
|
|
1,058
|
|
|
13,683
|
|
|
14,814
|
|
Consumer installment loans
|
538
|
|
|
498
|
|
|
—
|
|
|
498
|
|
|
—
|
|
|
507
|
|
|
554
|
|
Total
|
$
|
31,779
|
|
|
$
|
7,245
|
|
|
$
|
20,532
|
|
|
$
|
27,777
|
|
|
$
|
2,324
|
|
|
$
|
28,516
|
|
|
$
|
30,324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
Unpaid
Contractual
Principal
Balance
|
|
Recorded
Investment
With No
Allowance
|
|
Recorded
Investment
With
Allowance
|
|
Total
Recorded
Investment
|
|
Related
Allowance
|
|
Three
Month
Average
Recorded
Investment
|
|
Twelve
Month
Average
Recorded
Investment
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial and agricultural
|
$
|
3,068
|
|
|
$
|
204
|
|
|
$
|
1,656
|
|
|
$
|
1,860
|
|
|
$
|
134
|
|
|
$
|
1,613
|
|
|
$
|
1,684
|
|
Real estate – construction and development
|
2,047
|
|
|
—
|
|
|
1,233
|
|
|
1,233
|
|
|
273
|
|
|
1,590
|
|
|
2,018
|
|
Real estate – commercial and farmland
|
13,906
|
|
|
6,811
|
|
|
6,065
|
|
|
12,876
|
|
|
1,503
|
|
|
12,948
|
|
|
12,845
|
|
Real estate – residential
|
15,482
|
|
|
2,238
|
|
|
13,503
|
|
|
15,741
|
|
|
3,080
|
|
|
15,525
|
|
|
14,453
|
|
Consumer installment loans
|
671
|
|
|
—
|
|
|
613
|
|
|
613
|
|
|
5
|
|
|
576
|
|
|
506
|
|
Total
|
$
|
35,174
|
|
|
$
|
9,253
|
|
|
$
|
23,070
|
|
|
$
|
32,323
|
|
|
$
|
4,995
|
|
|
$
|
32,252
|
|
|
$
|
31,506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
Unpaid
Contractual
Principal
Balance
|
|
Recorded
Investment
With No
Allowance
|
|
Recorded
Investment
With
Allowance
|
|
Total
Recorded
Investment
|
|
Related
Allowance
|
|
Three
Month
Average
Recorded
Investment
|
|
Nine
Month
Average
Recorded
Investment
|
September 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial and agricultural
|
$
|
2,568
|
|
|
$
|
252
|
|
|
$
|
1,114
|
|
|
$
|
1,366
|
|
|
$
|
118
|
|
|
$
|
1,736
|
|
|
$
|
1,640
|
|
Real estate – construction and development
|
2,972
|
|
|
—
|
|
|
1,946
|
|
|
1,946
|
|
|
537
|
|
|
2,001
|
|
|
2,214
|
|
Real estate – commercial and farmland
|
14,015
|
|
|
5,499
|
|
|
7,520
|
|
|
13,019
|
|
|
873
|
|
|
12,776
|
|
|
12,837
|
|
Real estate – residential
|
14,350
|
|
|
2,046
|
|
|
11,667
|
|
|
13,713
|
|
|
2,648
|
|
|
13,686
|
|
|
13,516
|
|
Consumer installment loans
|
586
|
|
|
—
|
|
|
539
|
|
|
539
|
|
|
6
|
|
|
492
|
|
|
479
|
|
Total
|
$
|
34,491
|
|
|
$
|
7,797
|
|
|
$
|
22,786
|
|
|
$
|
30,583
|
|
|
$
|
4,182
|
|
|
$
|
30,691
|
|
|
$
|
30,686
|
|
The following is a summary of information pertaining to purchased impaired loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the Period Ended
|
(dollars in thousands)
|
September 30,
2017
|
|
December 31,
2016
|
|
September 30,
2016
|
Nonaccrual loans
|
$
|
19,049
|
|
|
$
|
22,966
|
|
|
$
|
23,827
|
|
Troubled debt restructurings not included above
|
20,205
|
|
|
23,543
|
|
|
21,117
|
|
Total impaired loans
|
$
|
39,254
|
|
|
$
|
46,509
|
|
|
$
|
44,944
|
|
|
|
|
|
|
|
Quarter-to-date interest income recognized on impaired loans
|
$
|
493
|
|
|
$
|
377
|
|
|
$
|
1,493
|
|
Year-to-date interest income recognized on impaired loans
|
$
|
1,246
|
|
|
$
|
2,755
|
|
|
$
|
2,378
|
|
Quarter-to-date foregone interest income on impaired loans
|
$
|
356
|
|
|
$
|
354
|
|
|
$
|
346
|
|
Year-to-date foregone interest income on impaired loans
|
$
|
958
|
|
|
$
|
1,637
|
|
|
$
|
1,283
|
|
The following table presents an analysis of information pertaining to purchased impaired loans as of
September 30, 2017
,
December 31, 2016
and
September 30, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
Unpaid
Contractual
Principal
Balance
|
|
Recorded
Investment
With No
Allowance
|
|
Recorded
Investment
With
Allowance
|
|
Total
Recorded
Investment
|
|
Related
Allowance
|
|
Three
Month
Average
Recorded
Investment
|
|
Nine
Month
Average
Recorded
Investment
|
September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial and agricultural
|
$
|
5,333
|
|
|
$
|
345
|
|
|
$
|
1,741
|
|
|
$
|
2,086
|
|
|
$
|
800
|
|
|
$
|
1,128
|
|
|
$
|
831
|
|
Real estate – construction and development
|
9,268
|
|
|
1,189
|
|
|
3,088
|
|
|
4,277
|
|
|
537
|
|
|
3,885
|
|
|
3,807
|
|
Real estate – commercial and farmland
|
16,492
|
|
|
1,516
|
|
|
11,766
|
|
|
13,282
|
|
|
1,140
|
|
|
13,658
|
|
|
16,063
|
|
Real estate – residential
|
22,462
|
|
|
7,224
|
|
|
12,297
|
|
|
19,521
|
|
|
762
|
|
|
20,088
|
|
|
21,308
|
|
Consumer installment loans
|
97
|
|
|
88
|
|
|
—
|
|
|
88
|
|
|
—
|
|
|
58
|
|
|
40
|
|
Total
|
$
|
53,652
|
|
|
$
|
10,362
|
|
|
$
|
28,892
|
|
|
$
|
39,254
|
|
|
$
|
3,239
|
|
|
$
|
38,817
|
|
|
$
|
42,049
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
Unpaid
Contractual
Principal
Balance
|
|
Recorded
Investment
With No
Allowance
|
|
Recorded
Investment
With
Allowance
|
|
Total
Recorded
Investment
|
|
Related
Allowance
|
|
Three
Month
Average
Recorded
Investment
|
|
Twelve
Month
Average
Recorded
Investment
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial and agricultural
|
$
|
5,031
|
|
|
$
|
370
|
|
|
$
|
322
|
|
|
$
|
692
|
|
|
$
|
—
|
|
|
$
|
783
|
|
|
$
|
2,206
|
|
Real estate – construction and development
|
24,566
|
|
|
493
|
|
|
3,477
|
|
|
3,970
|
|
|
153
|
|
|
3,888
|
|
|
4,279
|
|
Real estate – commercial and farmland
|
36,174
|
|
|
3,598
|
|
|
15,036
|
|
|
18,634
|
|
|
385
|
|
|
17,806
|
|
|
19,872
|
|
Real estate – residential
|
27,022
|
|
|
7,883
|
|
|
15,306
|
|
|
23,189
|
|
|
1,088
|
|
|
23,201
|
|
|
23,163
|
|
Consumer installment loans
|
37
|
|
|
24
|
|
|
—
|
|
|
24
|
|
|
—
|
|
|
51
|
|
|
96
|
|
Total
|
$
|
92,830
|
|
|
$
|
12,368
|
|
|
$
|
34,141
|
|
|
$
|
46,509
|
|
|
$
|
1,626
|
|
|
$
|
45,729
|
|
|
$
|
49,616
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
Unpaid
Contractual
Principal
Balance
|
|
Recorded
Investment
With No
Allowance
|
|
Recorded
Investment
With
Allowance
|
|
Total
Recorded
Investment
|
|
Related
Allowance
|
|
Three
Month
Average
Recorded
Investment
|
|
Nine
Month
Average
Recorded
Investment
|
September 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial, financial and agricultural
|
$
|
5,097
|
|
|
$
|
648
|
|
|
$
|
225
|
|
|
$
|
873
|
|
|
$
|
—
|
|
|
$
|
838
|
|
|
$
|
2,251
|
|
Real estate – construction and development
|
24,253
|
|
|
296
|
|
|
3,509
|
|
|
3,805
|
|
|
184
|
|
|
3,946
|
|
|
4,075
|
|
Real estate – commercial and farmland
|
41,098
|
|
|
1,861
|
|
|
15,116
|
|
|
16,977
|
|
|
402
|
|
|
18,196
|
|
|
19,569
|
|
Real estate – residential
|
26,908
|
|
|
7,473
|
|
|
15,740
|
|
|
23,213
|
|
|
935
|
|
|
23,103
|
|
|
22,893
|
|
Consumer installment loans
|
98
|
|
|
76
|
|
|
—
|
|
|
76
|
|
|
—
|
|
|
80
|
|
|
105
|
|
Total
|
$
|
97,454
|
|
|
$
|
10,354
|
|
|
$
|
34,590
|
|
|
$
|
44,944
|
|
|
$
|
1,521
|
|
|
$
|
46,163
|
|
|
$
|
48,893
|
|
Credit Quality Indicators
The Company uses a nine category risk grading system to assign a risk grade to each loan in the portfolio. The following is a description of the general characteristics of the grades:
Grade 10 – Prime Credit
– This grade represents loans to the Company’s most creditworthy borrowers or loans that are secured by cash or cash equivalents.
Grade 15 – Good Credit
– This grade includes loans that exhibit one or more characteristics better than that of a Satisfactory Credit. Generally, the debt service coverage and borrower’s liquidity is materially better than required by the Company’s loan policy.
Grade 20 – Satisfactory Credit
– This grade is assigned to loans to borrowers who exhibit satisfactory credit histories, contain acceptable loan structures and demonstrate ability to repay.
Grade 23 – Performing, Under-Collateralized Credit
– This grade is assigned to loans that are currently performing and supported by adequate financial information that reflects repayment capacity but exhibits a loan-to-value ratio greater than
110%
, based on a documented collateral valuation.
Grade 25 – Minimum Acceptable Credit
– This grade includes loans which exhibit all the characteristics of a Satisfactory Credit, but warrant more than normal level of banker supervision due to (i) circumstances which elevate the risks of performance (such as start-up operations, untested management, heavy leverage and interim losses); (ii) adverse, extraordinary events that have affected, or could affect, the borrower’s cash flow, financial condition, ability to continue operating profitability or refinancing (such as death of principal, fire and divorce); (iii) loans that require more than the normal servicing requirements (such as any type of construction financing, acquisition and development loans, accounts receivable or inventory loans and floor plan loans); (iv) existing technical exceptions which raise some doubts about the Bank’s perfection in its collateral position or the continued financial capacity of the borrower; or (v) improvements in formerly criticized borrowers, which may warrant banker supervision.
Grade 30 – Other Asset Especially Mentioned
– This grade includes loans that exhibit potential weaknesses that deserve management’s close attention. If left uncorrected, these weaknesses may result in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date.
Grade 40 – Substandard
– This grade represents loans which are inadequately protected by the current credit worthiness and paying capacity of the borrower or of the collateral pledged, if any. These assets exhibit a well-defined weakness or are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. These weaknesses may be characterized by past due performance, operating losses or questionable collateral values.
Grade 50 – Doubtful
– This grade includes loans which exhibit all of the characteristics of a substandard loan with the added provision that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable or improbable.
Grade 60 – Loss
– This grade is assigned to loans which are considered uncollectible and of such little value that their continuance as active assets of the Bank is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing it off.
The following table presents the loan portfolio, excluding purchased loans, by risk grade as of
September 30, 2017
and
December 31, 2016
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk
Grade
|
|
Commercial,
Financial and
Agricultural
|
|
Real Estate -
Construction and
Development
|
|
Real Estate -
Commercial and
Farmland
|
|
Real Estate -
Residential
|
|
Consumer
Installment
Loans
|
|
Other
|
|
Total
|
September 30, 2017
|
10
|
|
$
|
495,116
|
|
|
$
|
—
|
|
|
$
|
6,029
|
|
|
$
|
49
|
|
|
$
|
9,068
|
|
|
$
|
—
|
|
|
$
|
510,262
|
|
15
|
|
559,781
|
|
|
959
|
|
|
75,462
|
|
|
55,759
|
|
|
256
|
|
|
—
|
|
|
692,217
|
|
20
|
|
117,904
|
|
|
48,640
|
|
|
1,005,945
|
|
|
800,557
|
|
|
24,332
|
|
|
5,795
|
|
|
2,003,173
|
|
23
|
|
343
|
|
|
4,403
|
|
|
4,242
|
|
|
5,986
|
|
|
3
|
|
|
—
|
|
|
14,977
|
|
25
|
|
121,558
|
|
|
488,956
|
|
|
431,862
|
|
|
86,702
|
|
|
148,891
|
|
|
—
|
|
|
1,277,969
|
|
30
|
|
8,350
|
|
|
4,458
|
|
|
17,568
|
|
|
5,674
|
|
|
93
|
|
|
—
|
|
|
36,143
|
|
40
|
|
4,150
|
|
|
2,773
|
|
|
17,774
|
|
|
14,562
|
|
|
671
|
|
|
—
|
|
|
39,930
|
|
50
|
|
7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
60
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
$
|
1,307,209
|
|
|
$
|
550,189
|
|
|
$
|
1,558,882
|
|
|
$
|
969,289
|
|
|
$
|
183,314
|
|
|
$
|
5,795
|
|
|
$
|
4,574,678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
10
|
|
$
|
397,093
|
|
|
$
|
—
|
|
|
$
|
8,814
|
|
|
$
|
125
|
|
|
$
|
8,532
|
|
|
$
|
—
|
|
|
$
|
414,564
|
|
15
|
|
376,323
|
|
|
5,390
|
|
|
102,893
|
|
|
54,136
|
|
|
405
|
|
|
—
|
|
|
539,147
|
|
20
|
|
97,057
|
|
|
36,307
|
|
|
889,539
|
|
|
609,583
|
|
|
25,026
|
|
|
12,486
|
|
|
1,669,998
|
|
23
|
|
366
|
|
|
6,803
|
|
|
8,533
|
|
|
7,470
|
|
|
14
|
|
|
—
|
|
|
23,186
|
|
25
|
|
92,066
|
|
|
307,903
|
|
|
357,151
|
|
|
88,370
|
|
|
62,098
|
|
|
—
|
|
|
907,588
|
|
30
|
|
144
|
|
|
719
|
|
|
22,986
|
|
|
5,197
|
|
|
126
|
|
|
—
|
|
|
29,172
|
|
40
|
|
4,089
|
|
|
5,923
|
|
|
16,303
|
|
|
16,038
|
|
|
714
|
|
|
—
|
|
|
43,067
|
|
50
|
|
—
|
|
|
—
|
|
|
—
|
|
|
99
|
|
|
—
|
|
|
—
|
|
|
99
|
|
60
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
$
|
967,138
|
|
|
$
|
363,045
|
|
|
$
|
1,406,219
|
|
|
$
|
781,018
|
|
|
$
|
96,915
|
|
|
$
|
12,486
|
|
|
$
|
3,626,821
|
|
The following table presents the purchased loan portfolio by risk grade as of
September 30, 2017
and
December 31, 2016
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk
Grade
|
|
Commercial,
Financial and
Agricultural
|
|
Real Estate -
Construction and
Development
|
|
Real Estate -
Commercial and
Farmland
|
|
Real Estate -
Residential
|
|
Consumer
Installment
Loans
|
|
Other
|
|
Total
|
September 30, 2017
|
10
|
|
$
|
3,377
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
662
|
|
|
$
|
—
|
|
|
$
|
4,039
|
|
15
|
|
4,969
|
|
|
—
|
|
|
5,327
|
|
|
96,570
|
|
|
231
|
|
|
—
|
|
|
107,097
|
|
20
|
|
9,497
|
|
|
13,548
|
|
|
198,960
|
|
|
52,646
|
|
|
1,204
|
|
|
—
|
|
|
275,855
|
|
23
|
|
—
|
|
|
2,302
|
|
|
6,936
|
|
|
10,621
|
|
|
—
|
|
|
—
|
|
|
19,859
|
|
25
|
|
47,822
|
|
|
40,500
|
|
|
243,216
|
|
|
79,374
|
|
|
864
|
|
|
—
|
|
|
411,776
|
|
30
|
|
12,817
|
|
|
7,617
|
|
|
22,829
|
|
|
7,378
|
|
|
55
|
|
|
—
|
|
|
50,696
|
|
40
|
|
2,413
|
|
|
4,616
|
|
|
22,901
|
|
|
17,723
|
|
|
151
|
|
|
—
|
|
|
47,804
|
|
50
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
60
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
$
|
80,895
|
|
|
$
|
68,583
|
|
|
$
|
500,169
|
|
|
$
|
264,312
|
|
|
$
|
3,167
|
|
|
$
|
—
|
|
|
$
|
917,126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
10
|
|
$
|
5,722
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
814
|
|
|
$
|
—
|
|
|
$
|
6,536
|
|
15
|
|
1,266
|
|
|
—
|
|
|
7,619
|
|
|
31,331
|
|
|
570
|
|
|
—
|
|
|
40,786
|
|
20
|
|
16,204
|
|
|
10,686
|
|
|
194,168
|
|
|
111,712
|
|
|
1,583
|
|
|
—
|
|
|
334,353
|
|
23
|
|
22
|
|
|
3,643
|
|
|
9,019
|
|
|
14,791
|
|
|
—
|
|
|
—
|
|
|
27,475
|
|
25
|
|
67,123
|
|
|
56,006
|
|
|
323,242
|
|
|
121,379
|
|
|
1,276
|
|
|
—
|
|
|
569,026
|
|
30
|
|
5,072
|
|
|
7,271
|
|
|
15,039
|
|
|
7,605
|
|
|
45
|
|
|
—
|
|
|
35,032
|
|
40
|
|
1,128
|
|
|
3,762
|
|
|
27,268
|
|
|
23,459
|
|
|
366
|
|
|
—
|
|
|
55,983
|
|
50
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
60
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
$
|
96,537
|
|
|
$
|
81,368
|
|
|
$
|
576,355
|
|
|
$
|
310,277
|
|
|
$
|
4,654
|
|
|
$
|
—
|
|
|
$
|
1,069,191
|
|
Troubled Debt Restructurings
The restructuring of a loan is considered a “troubled debt restructuring” if both (i) the borrower is experiencing financial difficulties and (ii) the Company has granted a concession. Concessions may include interest rate reductions to below market interest rates, principal forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses. The Company has exhibited the greatest success for rehabilitation of the loan by a reduction in the rate alone (maintaining the amortization of the debt) or a combination of a rate reduction and the forbearance of previously past due interest or principal. This has most typically been evidenced in certain commercial real estate loans whereby a disruption in the borrower’s cash flow resulted in an extended past due status, of which the borrower was unable to catch up completely as the cash flow of the property ultimately stabilized at a level lower than its original level. A reduction in rate, coupled with a forbearance of unpaid principal and/or interest, allowed the net cash flows to service the debt under the modified terms.
The Company’s policy requires a restructure request to be supported by a current, well-documented credit evaluation of the borrower’s financial condition and a collateral evaluation that is no older than six months from the date of the restructure. Key factors of that evaluation include the documentation of current, recurring cash flows, support provided by the guarantor(s) and the current valuation of the collateral. If the appraisal in the file is older than six months, an evaluation must be made as to the continued reasonableness of the valuation. For certain income-producing properties, current rent rolls and/or other income information can be utilized to support the appraisal valuation, when coupled with documented cap rates within our markets and a physical inspection of the collateral to validate the current condition.
The Company’s policy states that in the event a loan has been identified as a troubled debt restructuring, it should be assigned a grade of substandard and placed on nonaccrual status until such time the borrower has demonstrated the ability to service the loan payments based on the restructured terms – generally defined as six months of satisfactory payment history. Missed payments under the original loan terms are not considered under the new structure; however, subsequent missed payments are considered non-performance and are not considered toward the six month required term of satisfactory payment history. The Company’s loan policy states that a nonaccrual loan may be returned to accrual status when (i) none of its principal and interest is due and unpaid, and the Company expects repayment of the remaining contractual principal and interest or (ii) it otherwise becomes well secured and in the process of collection. Restoration to accrual status on any given loan must be supported by a well-documented credit evaluation of the borrower’s financial condition and the prospects for full repayment and approved by the Company’s Chief Credit Officer.
In the normal course of business, the Company renews loans with a modification of the interest rate or terms that are not deemed as troubled debt restructurings because the borrower is not experiencing financial difficulty. The Company modified loans in the first
nine
months of
2017
and
2016
totaling
$36.6 million
and
$58.2 million
, respectively, under such parameters.
As of
September 30, 2017
and
December 31, 2016
, the Company had a balance of
$14.2 million
and
$18.2 million
, respectively, in troubled debt restructurings, excluding purchased loans. The Company has recorded
$2.8 million
and
$1.2 million
in previous charge-offs on such loans at
September 30, 2017
and
December 31, 2016
, respectively. The Company’s balance in the allowance for loan losses allocated to such troubled debt restructurings was
$1.2 million
and
$3.1 million
at
September 30, 2017
and
December 31, 2016
, respectively. At
September 30, 2017
, the Company did not have any commitments to lend additional funds to debtors whose terms have been modified in troubled restructurings.
During the
nine months ended
September 30, 2017
and
2016
, the Company modified loans as troubled debt restructurings, excluding purchased loans, with principal balances of
$783,000
and
$2.9 million
, respectively, and these modifications did not have a material impact on the Company’s allowance for loan loss. The following table presents the loans by class modified as troubled debt restructurings, excluding purchased loans, which occurred during the
nine months ended
September 30, 2017
and
2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
September 30, 2016
|
Loan Class
|
#
|
|
Balance
(in thousands)
|
|
#
|
|
Balance
(in thousands)
|
Commercial, financial and agricultural
|
1
|
|
$
|
4
|
|
|
5
|
|
$
|
59
|
|
Real estate – construction and development
|
—
|
|
—
|
|
|
2
|
|
251
|
|
Real estate – commercial and farmland
|
2
|
|
226
|
|
|
4
|
|
1,658
|
|
Real estate – residential
|
10
|
|
526
|
|
|
7
|
|
887
|
|
Consumer installment
|
6
|
|
27
|
|
|
9
|
|
44
|
|
Total
|
19
|
|
$
|
783
|
|
|
27
|
|
$
|
2,899
|
|
Troubled debt restructurings, excluding purchased loans, with an outstanding balance of
$1.2 million
and
$793,000
defaulted during the
nine months ended
September 30, 2017
and
2016
, respectively, and these defaults did not have a material impact on the Company’s allowance for loan loss. The following table presents for loans, excluding purchased loans, the troubled debt restructurings by class that defaulted (defined as
30
days past due) during the
nine months ended
September 30, 2017
and
2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
September 30, 2016
|
Loan Class
|
#
|
|
Balance
(in thousands)
|
|
#
|
|
Balance
(in thousands)
|
Commercial, financial and agricultural
|
4
|
|
$
|
58
|
|
|
5
|
|
$
|
51
|
|
Real estate – construction and development
|
1
|
|
25
|
|
|
—
|
|
—
|
|
Real estate – commercial and farmland
|
4
|
|
200
|
|
|
5
|
|
517
|
|
Real estate – residential
|
12
|
|
878
|
|
|
3
|
|
219
|
|
Consumer installment
|
7
|
|
25
|
|
|
2
|
|
6
|
|
Total
|
28
|
|
$
|
1,186
|
|
|
15
|
|
$
|
793
|
|
The following table presents the amount of troubled debt restructurings by loan class, excluding purchased loans, classified separately as accrual and nonaccrual at
September 30, 2017
and
December 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
Accruing Loans
|
|
Non-Accruing Loans
|
Loan Class
|
#
|
|
Balance
(in thousands)
|
|
#
|
|
Balance
(in thousands)
|
Commercial, financial and agricultural
|
4
|
|
$
|
44
|
|
|
13
|
|
$
|
129
|
|
Real estate – construction and development
|
7
|
|
424
|
|
|
2
|
|
34
|
|
Real estate – commercial and farmland
|
16
|
|
4,769
|
|
|
5
|
|
210
|
|
Real estate – residential
|
78
|
|
7,209
|
|
|
16
|
|
1,212
|
|
Consumer installment
|
4
|
|
6
|
|
|
36
|
|
130
|
|
Total
|
109
|
|
$
|
12,452
|
|
|
72
|
|
$
|
1,715
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
Accruing Loans
|
|
Non-Accruing Loans
|
Loan Class
|
#
|
|
Balance
(in thousands)
|
|
#
|
|
Balance
(in thousands)
|
Commercial, financial and agricultural
|
4
|
|
$
|
47
|
|
|
15
|
|
$
|
114
|
|
Real estate – construction and development
|
8
|
|
686
|
|
|
2
|
|
34
|
|
Real estate – commercial and farmland
|
16
|
|
4,119
|
|
|
5
|
|
2,970
|
|
Real estate – residential
|
82
|
|
9,340
|
|
|
15
|
|
739
|
|
Consumer installment
|
7
|
|
17
|
|
|
32
|
|
130
|
|
Total
|
117
|
|
$
|
14,209
|
|
|
69
|
|
$
|
3,987
|
|
As of
September 30, 2017
and
December 31, 2016
, the Company had a balance of
$26.0 million
and
$28.1 million
, respectively, in troubled debt restructurings included in purchased loans. The Company has recorded
$1.5 million
in previous charge-offs on such loans at both
September 30, 2017
and
December 31, 2016
. At
September 30, 2017
, the Company did not have any commitments to lend additional funds to debtors whose terms have been modified in troubled restructurings.
During the
nine months ended
September 30, 2017
and
2016
, the Company modified purchased loans as troubled debt restructurings, with principal balances of
$1.0 million
and
$1.9 million
, respectively, and these modifications did not have a material impact on the Company’s allowance for loan loss. The following table presents the purchased loans by class modified as troubled debt restructurings, which occurred during the
nine months ended
September 30, 2017
and
2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
September 30, 2016
|
Loan Class
|
#
|
|
Balance
(in thousands)
|
|
#
|
|
Balance
(in thousands)
|
Commercial, financial and agricultural
|
—
|
|
$
|
—
|
|
|
1
|
|
$
|
76
|
|
Real estate – construction and development
|
—
|
|
—
|
|
|
—
|
|
—
|
|
Real estate – commercial and farmland
|
—
|
|
—
|
|
|
3
|
|
708
|
|
Real estate – residential
|
8
|
|
1,005
|
|
|
8
|
|
1,130
|
|
Consumer installment
|
—
|
|
—
|
|
|
—
|
|
—
|
|
Total
|
8
|
|
$
|
1,005
|
|
|
12
|
|
$
|
1,914
|
|
Troubled debt restructurings included in purchased loans with an outstanding balance of
$2.3 million
and
$733,000
defaulted during the
nine months ended
September 30, 2017
and
2016
, respectively, and these defaults did not have a material impact on the Company’s allowance for loan loss.
The following table presents purchased loan troubled debt restructurings by class that defaulted (defined as
30
days past due) during the
nine months ended
September 30, 2017
and
2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
September 30, 2016
|
Loan Class
|
#
|
|
Balance
(in thousands)
|
|
#
|
|
Balance
(in thousands)
|
Commercial, financial and agricultural
|
1
|
|
$
|
5
|
|
|
2
|
|
$
|
76
|
|
Real estate – construction and development
|
—
|
|
—
|
|
|
1
|
|
10
|
|
Real estate – commercial and farmland
|
5
|
|
1,945
|
|
|
1
|
|
207
|
|
Real estate – residential
|
7
|
|
333
|
|
|
11
|
|
440
|
|
Consumer installment
|
1
|
|
3
|
|
|
—
|
|
—
|
|
Total
|
14
|
|
$
|
2,286
|
|
|
15
|
|
$
|
733
|
|
The following table presents the amount of troubled debt restructurings by loan class of purchased loans, classified separately as accrual and nonaccrual at
September 30, 2017
and
December 31, 2016
.
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
Accruing Loans
|
|
Non-Accruing Loans
|
Loan Class
|
#
|
|
Balance
(in thousands)
|
|
#
|
|
Balance
(in thousands)
|
Commercial, financial and agricultural
|
—
|
|
$
|
—
|
|
|
3
|
|
$
|
18
|
|
Real estate – construction and development
|
3
|
|
1,022
|
|
|
6
|
|
349
|
|
Real estate – commercial and farmland
|
15
|
|
6,308
|
|
|
11
|
|
3,834
|
|
Real estate – residential
|
119
|
|
12,875
|
|
|
25
|
|
1,627
|
|
Consumer installment
|
—
|
|
—
|
|
|
2
|
|
6
|
|
Total
|
137
|
|
$
|
20,205
|
|
|
47
|
|
$
|
5,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
Accruing Loans
|
|
Non-Accruing Loans
|
Loan Class
|
#
|
|
Balance
(in thousands)
|
|
#
|
|
Balance
(in thousands)
|
Commercial, financial and agricultural
|
1
|
|
$
|
1
|
|
|
4
|
|
$
|
91
|
|
Real estate – construction and development
|
6
|
|
1,358
|
|
|
3
|
|
30
|
|
Real estate – commercial and farmland
|
20
|
|
8,460
|
|
|
5
|
|
2,402
|
|
Real estate – residential
|
123
|
|
13,713
|
|
|
33
|
|
2,077
|
|
Consumer installment
|
3
|
|
11
|
|
|
1
|
|
—
|
|
Total
|
153
|
|
$
|
23,543
|
|
|
46
|
|
$
|
4,600
|
|
Allowance for Loan Losses
The allowance for loan losses represents an allowance for probable incurred losses in the loan portfolio. The adequacy of the allowance for loan losses is evaluated periodically based on a review of all significant loans, with a particular emphasis on non-accruing, past-due and other loans that management believes might be potentially impaired or warrant additional attention. The Company segregates the loan portfolio by type of loan and utilizes this segregation in evaluating exposure to risks within the portfolio. In addition, based on internal reviews and external reviews performed by regulatory authorities, the Company further segregates the loan portfolio by loan grades based on an assessment of risk for a particular loan or group of loans. Certain reviewed loans are assigned specific allowances when a review of relevant data determines that a general allocation is not sufficient or when the review affords management the opportunity to adjust the amount of exposure in a given credit. In establishing allowances, management considers historical loan loss experience but adjusts this data with a significant emphasis on current loan quality trends, current economic conditions and other factors in the markets where the Company operates. Factors considered include, among others, current valuations of real estate in the Company’s markets, unemployment rates, the effect of weather conditions on agricultural related entities and other significant local economic events, such as major plant closings.
The Company has developed a methodology for determining the adequacy of the allowance for loan losses which is monitored by the Company’s Chief Credit Officer. Procedures provide for the assignment of a risk rating for every loan included in the total loan portfolio. Mortgage warehouse lines of credit, overdraft protection loans, commercial insurance premium finance loans, and certain consumer and mortgage loans serviced by outside processors are treated as pools for risk rating purposes. The risk rating schedule provides nine ratings of which five ratings are classified as pass ratings and four ratings are classified as criticized ratings. Each risk rating is assigned a percentage factor to be applied to the loan balance to determine the adequate amount of reserve. The Bank’s independent internal loan review department reviews on an annual basis a sample of relationships in excess of
$500,000
. Sampling is based on a number of factors unique to the Bank’s portfolio risks, including, but not limited to, lending divisions, industry, risk grades, and new originations. As a result of these loan reviews, certain loans may be identified as having deteriorating
credit quality. Other loans that surface as problem loans may also be assigned specific reserves. Past-due loans are assigned risk ratings based on the number of days past due. The calculation of the allowance for loan losses, including underlying data and assumptions, is reviewed regularly by the Company’s Chief Financial Officer and the independent internal loan review department.
Loan losses are charged against the allowance when management believes the collection of a loan’s principal is unlikely. Subsequent recoveries are credited to the allowance. Consumer loans are charged-off in accordance with the Federal Financial Institutions Examination Council’s (“FFIEC”) Uniform Retail Credit Classification and Account Management Policy. Commercial loans are charged-off when they are deemed uncollectible, which usually involves a triggering event within the collection effort. If the loan is collateral dependent, the loss is more easily identified and is charged-off when it is identified, usually based upon receipt of an appraisal. However, when a loan has guarantor support, the Company may carry the estimated loss as a reserve against the loan while collection efforts with the guarantor are pursued. If, after collection efforts with the guarantor are complete, the deficiency is still considered uncollectible, the loss is charged-off and any further collections are treated as recoveries. In all situations, when a loan is downgraded to an Asset Quality Rating of
60
(Loss per the regulatory guidance), the uncollectible portion is charged-off.
The following tables detail activity in the allowance for loan losses by portfolio segment for the
three and nine
-month periods ended
September 30, 2017
, the year ended
December 31, 2016
and the
three and nine
-month periods ended
September 30, 2016
. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
Commercial,
Financial and
Agricultural
|
|
Real Estate –
Construction and
Development
|
|
Real Estate –
Commercial and
Farmland
|
|
Real Estate –
Residential
|
|
Consumer
Installment
Loans and
Other
|
|
Purchased
Loans
|
|
Purchased
Loan
Pools
|
|
Total
|
Three Months Ended
September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2017
|
$
|
3,302
|
|
|
$
|
3,756
|
|
|
$
|
7,869
|
|
|
$
|
5,605
|
|
|
$
|
1,155
|
|
|
$
|
1,791
|
|
|
$
|
1,623
|
|
|
$
|
25,101
|
|
Provision for loan losses
|
910
|
|
|
(587
|
)
|
|
68
|
|
|
127
|
|
|
670
|
|
|
745
|
|
|
(146
|
)
|
|
1,787
|
|
Loans charged off
|
(1,091
|
)
|
|
(1
|
)
|
|
(18
|
)
|
|
(852
|
)
|
|
(320
|
)
|
|
(161
|
)
|
|
—
|
|
|
(2,443
|
)
|
Recoveries of loans previously charged off
|
409
|
|
|
126
|
|
|
26
|
|
|
56
|
|
|
17
|
|
|
887
|
|
|
—
|
|
|
1,521
|
|
Balance, September 30, 2017
|
$
|
3,530
|
|
|
$
|
3,294
|
|
|
$
|
7,945
|
|
|
$
|
4,936
|
|
|
$
|
1,522
|
|
|
$
|
3,262
|
|
|
$
|
1,477
|
|
|
$
|
25,966
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2016
|
$
|
2,192
|
|
|
$
|
2,990
|
|
|
$
|
7,662
|
|
|
$
|
6,786
|
|
|
$
|
827
|
|
|
$
|
1,626
|
|
|
$
|
1,837
|
|
|
$
|
23,920
|
|
Provision for loan losses
|
2,535
|
|
|
155
|
|
|
540
|
|
|
(9
|
)
|
|
1,539
|
|
|
1,428
|
|
|
(360
|
)
|
|
5,828
|
|
Loans charged off
|
(1,896
|
)
|
|
(95
|
)
|
|
(413
|
)
|
|
(2,031
|
)
|
|
(922
|
)
|
|
(1,472
|
)
|
|
—
|
|
|
(6,829
|
)
|
Recoveries of loans previously charged off
|
699
|
|
|
244
|
|
|
156
|
|
|
190
|
|
|
78
|
|
|
1,680
|
|
|
—
|
|
|
3,047
|
|
Balance, September 30, 2017
|
$
|
3,530
|
|
|
$
|
3,294
|
|
|
$
|
7,945
|
|
|
$
|
4,936
|
|
|
$
|
1,522
|
|
|
$
|
3,262
|
|
|
$
|
1,477
|
|
|
$
|
25,966
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period-end allocation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment
(1)
|
$
|
509
|
|
|
$
|
81
|
|
|
$
|
1,380
|
|
|
$
|
1,058
|
|
|
$
|
—
|
|
|
$
|
3,262
|
|
|
$
|
105
|
|
|
$
|
6,395
|
|
Loans collectively evaluated for impairment
|
3,021
|
|
|
3,213
|
|
|
6,565
|
|
|
3,878
|
|
|
1,522
|
|
|
—
|
|
|
1,372
|
|
|
19,571
|
|
Ending balance
|
$
|
3,530
|
|
|
$
|
3,294
|
|
|
$
|
7,945
|
|
|
$
|
4,936
|
|
|
$
|
1,522
|
|
|
$
|
3,262
|
|
|
$
|
1,477
|
|
|
$
|
25,966
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
(1)
|
$
|
3,204
|
|
|
$
|
627
|
|
|
$
|
10,512
|
|
|
$
|
8,636
|
|
|
$
|
—
|
|
|
$
|
32,032
|
|
|
$
|
915
|
|
|
$
|
55,926
|
|
Collectively evaluated for impairment
|
1,304,005
|
|
|
549,562
|
|
|
1,548,370
|
|
|
960,653
|
|
|
189,109
|
|
|
763,271
|
|
|
464,303
|
|
|
5,779,273
|
|
Acquired with deteriorated credit quality
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
121,823
|
|
|
—
|
|
|
121,823
|
|
Ending balance
|
$
|
1,307,209
|
|
|
$
|
550,189
|
|
|
$
|
1,558,882
|
|
|
$
|
969,289
|
|
|
$
|
189,109
|
|
|
$
|
917,126
|
|
|
$
|
465,218
|
|
|
$
|
5,957,022
|
|
(1) At
September 30, 2017
, loans individually evaluated for impairment includes all nonaccrual loans greater than
$100,000
and all troubled debt restructurings greater than
$100,000
, including all troubled debt restructurings and not only those currently classified as troubled debt restructurings.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
Commercial,
Financial and
Agricultural
|
|
Real Estate –
Construction and
Development
|
|
Real Estate –
Commercial and
Farmland
|
|
Real Estate –
Residential
|
|
Consumer
Installment
Loans and
Other
|
|
Purchased
Loans
|
|
Purchased
Loan
Pools
|
|
Total
|
Twelve Months Ended
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 1, 2016
|
$
|
1,144
|
|
|
$
|
5,009
|
|
|
$
|
7,994
|
|
|
$
|
4,760
|
|
|
$
|
1,574
|
|
|
$
|
—
|
|
|
$
|
581
|
|
|
$
|
21,062
|
|
Provision for loan losses
|
2,647
|
|
|
(1,921
|
)
|
|
107
|
|
|
2,757
|
|
|
(523
|
)
|
|
(232
|
)
|
|
1,256
|
|
|
4,091
|
|
Loans charged off
|
(1,999
|
)
|
|
(588
|
)
|
|
(708
|
)
|
|
(1,122
|
)
|
|
(351
|
)
|
|
(1,559
|
)
|
|
—
|
|
|
(6,327
|
)
|
Recoveries of loans previously charged off
|
400
|
|
|
490
|
|
|
269
|
|
|
391
|
|
|
127
|
|
|
3,417
|
|
|
—
|
|
|
5,094
|
|
Balance, December 31, 2016
|
$
|
2,192
|
|
|
$
|
2,990
|
|
|
$
|
7,662
|
|
|
$
|
6,786
|
|
|
$
|
827
|
|
|
$
|
1,626
|
|
|
$
|
1,837
|
|
|
$
|
23,920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period-end allocation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment
(1)
|
$
|
120
|
|
|
$
|
266
|
|
|
$
|
1,502
|
|
|
$
|
2,893
|
|
|
$
|
—
|
|
|
$
|
1,626
|
|
|
$
|
—
|
|
|
$
|
6,407
|
|
Loans collectively evaluated for impairment
|
2,072
|
|
|
2,724
|
|
|
6,160
|
|
|
3,893
|
|
|
827
|
|
|
—
|
|
|
1,837
|
|
|
17,513
|
|
Ending balance
|
$
|
2,192
|
|
|
$
|
2,990
|
|
|
$
|
7,662
|
|
|
$
|
6,786
|
|
|
$
|
827
|
|
|
$
|
1,626
|
|
|
$
|
1,837
|
|
|
$
|
23,920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
(1)
|
$
|
501
|
|
|
$
|
659
|
|
|
$
|
12,423
|
|
|
$
|
12,697
|
|
|
$
|
—
|
|
|
$
|
34,141
|
|
|
$
|
—
|
|
|
$
|
60,421
|
|
Collectively evaluated for impairment
|
966,637
|
|
|
362,386
|
|
|
1,393,796
|
|
|
768,321
|
|
|
109,401
|
|
|
886,516
|
|
|
568,314
|
|
|
5,055,371
|
|
Acquired with deteriorated credit quality
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
148,534
|
|
|
—
|
|
|
148,534
|
|
Ending balance
|
$
|
967,138
|
|
|
$
|
363,045
|
|
|
$
|
1,406,219
|
|
|
$
|
781,018
|
|
|
$
|
109,401
|
|
|
$
|
1,069,191
|
|
|
$
|
568,314
|
|
|
$
|
5,264,326
|
|
(1) At
December 31, 2016
, loans individually evaluated for impairment includes all nonaccrual loans greater than
$100,000
and all troubled debt restructurings greater than
$100,000
, including all troubled debt restructurings and not only those currently classified as troubled debt restructurings.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
Commercial,
Financial and
Agricultural
|
|
Real Estate –
Construction and
Development
|
|
Real Estate –
Commercial and
Farmland
|
|
Real Estate –
Residential
|
|
Consumer
Installment
Loans and
Other
|
|
Purchased
Loans
|
|
Purchased
Loan
Pools
|
|
Total
|
Three Months Ended
September 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2016
|
$
|
1,667
|
|
|
$
|
3,599
|
|
|
$
|
7,459
|
|
|
$
|
4,263
|
|
|
$
|
2,160
|
|
|
$
|
1,387
|
|
|
$
|
1,199
|
|
|
$
|
21,734
|
|
Provision for loan losses
|
677
|
|
|
(521
|
)
|
|
(554
|
)
|
|
2,649
|
|
|
(1,595
|
)
|
|
(654
|
)
|
|
809
|
|
|
811
|
|
Loans charged off
|
(326
|
)
|
|
(60
|
)
|
|
—
|
|
|
(292
|
)
|
|
(74
|
)
|
|
(699
|
)
|
|
—
|
|
|
(1,451
|
)
|
Recoveries of loans previously charged off
|
119
|
|
|
131
|
|
|
13
|
|
|
40
|
|
|
78
|
|
|
1,488
|
|
|
—
|
|
|
1,869
|
|
Balance, September 30, 2016
|
$
|
2,137
|
|
|
$
|
3,149
|
|
|
$
|
6,918
|
|
|
$
|
6,660
|
|
|
$
|
569
|
|
|
$
|
1,522
|
|
|
$
|
2,008
|
|
|
$
|
22,963
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2015
|
$
|
1,144
|
|
|
$
|
5,009
|
|
|
$
|
7,994
|
|
|
$
|
4,760
|
|
|
$
|
1,574
|
|
|
$
|
—
|
|
|
$
|
581
|
|
|
$
|
21,062
|
|
Provision for loan losses
|
1,987
|
|
|
(2,010
|
)
|
|
(559
|
)
|
|
2,415
|
|
|
(932
|
)
|
|
53
|
|
|
1,427
|
|
|
2,381
|
|
Loans charged off
|
(1,273
|
)
|
|
(324
|
)
|
|
(708
|
)
|
|
(883
|
)
|
|
(192
|
)
|
|
(1,261
|
)
|
|
—
|
|
|
(4,641
|
)
|
Recoveries of loans previously charged off
|
279
|
|
|
474
|
|
|
191
|
|
|
368
|
|
|
119
|
|
|
2,730
|
|
|
—
|
|
|
4,161
|
|
Balance, September 30, 2016
|
$
|
2,137
|
|
|
$
|
3,149
|
|
|
$
|
6,918
|
|
|
$
|
6,660
|
|
|
$
|
569
|
|
|
$
|
1,522
|
|
|
$
|
2,008
|
|
|
$
|
22,963
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period-end allocation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans individually evaluated for impairment
(1)
|
$
|
107
|
|
|
$
|
529
|
|
|
$
|
883
|
|
|
$
|
2,629
|
|
|
$
|
—
|
|
|
$
|
1,522
|
|
|
$
|
—
|
|
|
$
|
5,670
|
|
Loans collectively evaluated for impairment
|
2,030
|
|
|
2,620
|
|
|
6,035
|
|
|
4,031
|
|
|
569
|
|
|
—
|
|
|
2,008
|
|
|
17,293
|
|
Ending balance
|
$
|
2,137
|
|
|
$
|
3,149
|
|
|
$
|
6,918
|
|
|
$
|
6,660
|
|
|
$
|
569
|
|
|
$
|
1,522
|
|
|
$
|
2,008
|
|
|
$
|
22,963
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for impairment
(1)
|
$
|
424
|
|
|
$
|
1,154
|
|
|
$
|
11,699
|
|
|
$
|
11,571
|
|
|
$
|
—
|
|
|
$
|
34,991
|
|
|
$
|
—
|
|
|
$
|
59,839
|
|
Collectively evaluated for impairment
|
625,523
|
|
|
327,154
|
|
|
1,285,883
|
|
|
755,362
|
|
|
72,269
|
|
|
939,243
|
|
|
624,886
|
|
|
4,630,320
|
|
Acquired with deteriorated credit quality
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
155,147
|
|
|
—
|
|
|
155,147
|
|
Ending balance
|
$
|
625,947
|
|
|
$
|
328,308
|
|
|
$
|
1,297,582
|
|
|
$
|
766,933
|
|
|
$
|
72,269
|
|
|
$
|
1,129,381
|
|
|
$
|
624,886
|
|
|
$
|
4,845,306
|
|
(1) At
September 30, 2016
, loans individually evaluated for impairment includes all nonaccrual loans greater than
$100,000
and all troubled debt restructurings greater than
$100,000
, including all troubled debt restructurings and not only those currently classified as troubled debt restructurings.
NOTE 5 – ASSETS ACQUIRED IN FDIC-ASSISTED ACQUISITIONS
From October 2009 through July 2012, the Company participated in
ten
FDIC-assisted acquisitions whereby the Company purchased certain failed institutions out of the FDIC’s receivership. These institutions include the following:
|
|
|
|
|
|
|
|
Bank Acquired
|
|
Location
|
|
Branches
|
|
Date Acquired
|
American United Bank (“AUB”)
|
|
Lawrenceville, Ga.
|
|
1
|
|
October 23, 2009
|
United Security Bank (“USB”)
|
|
Sparta, Ga.
|
|
2
|
|
November 6, 2009
|
Satilla Community Bank (“SCB”)
|
|
St. Marys, Ga.
|
|
1
|
|
May 14, 2010
|
First Bank of Jacksonville (“FBJ”)
|
|
Jacksonville, Fl.
|
|
2
|
|
October 22, 2010
|
Tifton Banking Company (“TBC”)
|
|
Tifton, Ga.
|
|
1
|
|
November 12, 2010
|
Darby Bank & Trust (“DBT”)
|
|
Vidalia, Ga.
|
|
7
|
|
November 12, 2010
|
High Trust Bank (“HTB”)
|
|
Stockbridge, Ga.
|
|
2
|
|
July 15, 2011
|
One Georgia Bank (“OGB”)
|
|
Midtown Atlanta, Ga.
|
|
1
|
|
July 15, 2011
|
Central Bank of Georgia (“CBG”)
|
|
Ellaville, Ga.
|
|
5
|
|
February 24, 2012
|
Montgomery Bank & Trust (“MBT”)
|
|
Ailey, Ga.
|
|
2
|
|
July 6, 2012
|
The determination of the initial fair values of loans at the acquisition date and the initial fair values of the related FDIC indemnification assets involves a high degree of judgment and complexity. The carrying values of the acquired loans and the FDIC indemnification assets reflect management’s best estimate of the fair value of each of these assets as of the date of acquisition.
However, the amount that the Company realizes on these assets could differ materially from the carrying values reflected in the financial statements included in this report, based upon the timing and amount of collections on the acquired loans in future periods. Because of the loss-sharing agreements with the FDIC on these assets, the Company does not expect to incur any significant losses. To the extent the actual values realized for the acquired loans are different from the estimates, the indemnification assets will generally be affected in an offsetting manner due to the loss-sharing support from the FDIC.
FASB ASC 310-30,
Loans and Debt Securities Acquired with Deteriorated Credit Quality
(“ASC 310-30”), applies to a loan with evidence of deterioration of credit quality since origination, acquired by completion of a transfer for which it is probable, at acquisition, that the investor will be unable to collect all contractually required payments receivable. ASC 310-30 prohibits carrying over or creating an allowance for loan losses upon initial recognition for loans which fall under the scope of this statement. At the acquisition dates, a majority of these loans were valued based on the liquidation value of the underlying collateral because the future cash flows are primarily based on the liquidation of underlying collateral. There was no allowance for credit losses established related to these ASC 310-30 loans at the acquisition dates, based on the provisions of this statement. Over the life of the acquired loans, the Company continues to estimate cash flows expected to be collected. If the expected cash flows expected to be collected increases, then the Company adjusts the amount of accretable discount recognized on a prospective basis over the loan’s remaining life. If the expected cash flows expected to be collected decreases, then the Company records a provision for loan loss in its consolidated statements of income and comprehensive income.
Each acquisition with loss-sharing agreements has separate agreements for the single family residential assets (“SFR”) and the non-single family assets (“NSF”). The SFR agreements cover losses and recoveries for
ten
years. The NSF agreements are for
eight
years. During the first
five
years, losses and recoveries are covered. During the final
three
years, only recoveries, net of expenses, are covered. The AUB SFR agreement was terminated during 2012 and Ameris received a payment of
$87,000
. The AUB and USB NSF agreements passed their
five
-year anniversaries during the fourth quarter of 2014, the SCB NSF agreement passed its
five
-year anniversary during the second quarter of 2015, the FBJ, TBC and DBT NSF agreements passed their
five
-year anniversaries during the fourth quarter of 2015, the HTB and OGB NSF agreements passed their
five
-year anniversaries during the third quarter of 2016, and the CBG NSF passed its
five
-year anniversary during the first quarter of 2017. Losses will no longer be reimbursed on these agreements. MBT did not have a loss-sharing agreement.
At
September 30, 2017
, the Company’s FDIC loss-sharing payable totaled
$8.2 million
, which is comprised of an accrued clawback liability of
$9.6 million
, less
$419,000
in current activity incurred but not yet received from the FDIC (net charge-offs offset by reimbursable expenses) and remaining indemnification of
$1.0 million
(for reimbursements associated with anticipated losses in future quarters).
The following table summarizes components of all covered assets at
September 30, 2017
and
December 31, 2016
and their origin:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
Covered
Loans
|
|
Less: Fair
Value
Adjustments
|
|
Total
Covered
Loans
|
|
OREO
|
|
Less: Fair
Value
Adjustments
|
|
Total
Covered
OREO
|
|
Total
Covered
Assets
|
|
FDIC Loss-
Share
Receivable
(Payable)
|
September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AUB
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
USB
|
2,763
|
|
|
12
|
|
|
2,751
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,751
|
|
|
(1,752
|
)
|
SCB
|
2,541
|
|
|
27
|
|
|
2,514
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,514
|
|
|
(169
|
)
|
FBJ
|
3,647
|
|
|
394
|
|
|
3,253
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,253
|
|
|
(312
|
)
|
DBT
|
9,663
|
|
|
356
|
|
|
9,307
|
|
|
81
|
|
|
—
|
|
|
81
|
|
|
9,388
|
|
|
(4,442
|
)
|
TBC
|
1,667
|
|
|
—
|
|
|
1,667
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,667
|
|
|
(8
|
)
|
HTB
|
1,856
|
|
|
28
|
|
|
1,828
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,828
|
|
|
27
|
|
OGB
|
930
|
|
|
31
|
|
|
899
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
899
|
|
|
(1,032
|
)
|
CBG
|
10,329
|
|
|
678
|
|
|
9,651
|
|
|
161
|
|
|
—
|
|
|
161
|
|
|
9,812
|
|
|
(502
|
)
|
Total
|
$
|
33,396
|
|
|
$
|
1,526
|
|
|
$
|
31,870
|
|
|
$
|
242
|
|
|
$
|
—
|
|
|
$
|
242
|
|
|
$
|
32,112
|
|
|
$
|
(8,190
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AUB
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(27
|
)
|
USB
|
3,199
|
|
|
13
|
|
|
3,186
|
|
|
51
|
|
|
—
|
|
|
51
|
|
|
3,237
|
|
|
(1,642
|
)
|
SCB
|
4,019
|
|
|
51
|
|
|
3,968
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,968
|
|
|
(32
|
)
|
FBJ
|
3,767
|
|
|
452
|
|
|
3,315
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,315
|
|
|
(234
|
)
|
DBT
|
12,166
|
|
|
565
|
|
|
11,601
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11,601
|
|
|
(4,591
|
)
|
TBC
|
1,679
|
|
|
—
|
|
|
1,679
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,679
|
|
|
(33
|
)
|
HTB
|
1,913
|
|
|
33
|
|
|
1,880
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,880
|
|
|
734
|
|
OGB
|
1,077
|
|
|
32
|
|
|
1,045
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,045
|
|
|
(993
|
)
|
CBG
|
33,449
|
|
|
1,963
|
|
|
31,486
|
|
|
1,161
|
|
|
4
|
|
|
1,157
|
|
|
32,643
|
|
|
505
|
|
Total
|
$
|
61,269
|
|
|
$
|
3,109
|
|
|
$
|
58,160
|
|
|
$
|
1,212
|
|
|
$
|
4
|
|
|
$
|
1,208
|
|
|
$
|
59,368
|
|
|
$
|
(6,313
|
)
|
The shared-loss agreements are subject to the servicing procedures as specified in the agreement with the FDIC. The expected reimbursements under the shared-loss agreements were recorded as an indemnification asset at their estimated fair values on the acquisition dates. As of
September 30, 2017
and
December 31, 2016
, the Company has recorded a clawback liability of
$9.6 million
and
$9.3 million
, respectively, which represents the obligation of the Company to reimburse the FDIC should actual losses be less than certain thresholds established in each loss-share agreement.
Changes in the FDIC shared-loss payable for the
nine months ended
September 30, 2017
and
2016
are as follows:
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
September 30,
2017
|
|
September 30,
2016
|
Beginning balance, January 1
|
|
$
|
(6,313
|
)
|
|
$
|
6,301
|
|
Payments to (received from) FDIC
|
|
97
|
|
|
(4,770
|
)
|
Amortization
|
|
(747
|
)
|
|
(3,351
|
)
|
Changes in clawback liability
|
|
(326
|
)
|
|
(682
|
)
|
Increase in receivable due to:
|
|
|
|
|
|
|
Net recoveries on covered loans
|
|
(1,097
|
)
|
|
(4,118
|
)
|
Loss (gain) on covered other real estate owned
|
|
(76
|
)
|
|
203
|
|
Reimbursable expenses on covered assets
|
|
401
|
|
|
604
|
|
Other activity, net
|
|
(129
|
)
|
|
(1,962
|
)
|
Ending balance
|
|
$
|
(8,190
|
)
|
|
$
|
(7,775
|
)
|
The FDIC loss-sharing payable is included in other liabilities in the consolidated balance sheets. The FDIC loss-sharing receivable is included in other assets in the consolidated balance sheets.
NOTE 6 – OTHER REAL ESTATE OWNED
The following is a summary of the activity in other real estate owned during the
nine months ended
September 30, 2017
and
2016
:
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
September 30,
2017
|
|
September 30,
2016
|
Beginning balance, January 1
|
$
|
10,874
|
|
|
$
|
16,147
|
|
Loans transferred to other real estate owned
|
4,043
|
|
|
2,101
|
|
Net gains (losses) on sale and write-downs recorded in statement of income
|
(766
|
)
|
|
(1,276
|
)
|
Sales proceeds
|
(4,760
|
)
|
|
(6,580
|
)
|
Ending balance
|
$
|
9,391
|
|
|
$
|
10,392
|
|
The following is a summary of the activity in purchased other real estate owned during the
nine months ended
September 30, 2017
and
2016
:
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
September 30,
2017
|
|
September 30,
2016
|
Beginning balance, January 1
|
$
|
12,540
|
|
|
$
|
19,344
|
|
Loans transferred to other real estate owned
|
4,294
|
|
|
6,262
|
|
Acquired in acquisitions
|
—
|
|
|
1,838
|
|
Portion of gains (losses) on sale and write-downs payable to (receivable from) the FDIC under loss-sharing agreements
|
76
|
|
|
—
|
|
Net gains (losses) on sale and write-downs recorded in statement of income
|
265
|
|
|
(568
|
)
|
Sales proceeds
|
(7,229
|
)
|
|
(11,750
|
)
|
Ending balance
|
$
|
9,946
|
|
|
$
|
15,126
|
|
NOTE 7 – SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
The Company classifies the sales of securities under agreements to repurchase as short-term borrowings. The amounts received under these agreements are reflected as a liability in the Company’s consolidated balance sheets and the securities underlying these agreements are included in investment securities in the Company’s consolidated balance sheets. At
September 30, 2017
and
December 31, 2016
, all securities sold under agreements to repurchase mature on a daily basis. The market value of the securities fluctuate on a daily basis due to market conditions. The Company monitors the market value of the securities underlying these agreements on a daily basis and is required to transfer additional securities if the market value of the securities fall below the repurchase agreement price. The Company maintains an unpledged securities portfolio that it believes is sufficient to protect against a decline in the market value of the securities sold under agreements to repurchase.
The following is a summary of the Company’s securities sold under agreements to repurchase at
September 30, 2017
and
December 31, 2016
.
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
September 30,
2017
|
|
December 31, 2016
|
Securities sold under agreements to repurchase
|
$
|
14,156
|
|
|
$
|
53,505
|
|
At
September 30, 2017
and
December 31, 2016
, the investment securities underlying these agreements were comprised of state, county and municipal securities and mortgage-backed securities.
NOTE 8 – OTHER BORROWINGS
The Company has, from time to time, utilized certain borrowing arrangements to fund growth in earning assets or provide additional liquidity when appropriate spreads can be realized. At
September 30, 2017
and
December 31, 2016
, there were
$808.6 million
and
$492.3 million
, respectively, in outstanding other borrowings.
Other borrowings consist of the following:
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
September 30,
2017
|
|
December 31,
2016
|
FHLB borrowings:
|
|
|
|
|
|
Daily Rate Credit from FHLB with a variable interest rate (1.32% at September 30, 2017 and 0.80% at December 31, 2016)
|
$
|
168,000
|
|
|
$
|
150,000
|
|
Advance from FHLB due October 6, 2017; fixed interest rate of 1.16%
|
565,000
|
|
|
—
|
|
Advance from FHLB due January 6, 2017; fixed interest rate of 0.56%
|
—
|
|
|
292,500
|
|
Advance from FHLB due January 9, 2017; fixed interest rate of 1.40%
|
—
|
|
|
4,002
|
|
Advance from FHLB due May 30, 2017; fixed interest rate of 1.23%
|
—
|
|
|
5,006
|
|
Subordinated notes payable:
|
|
|
|
|
|
Subordinated notes payable due March 15, 2027 net of unamortized debt issuance cost of $1,238; fixed interest rate of 5.75% through March 14, 2022; variable interest rate thereafter at three-month LIBOR plus 3.616%
|
73,762
|
|
|
—
|
|
Other debt:
|
|
|
|
|
|
Advance from correspondent bank due October 5, 2019; secured by a loan receivable; fixed interest rate of 4.25%
|
56
|
|
|
77
|
|
Advance from correspondent bank due September 5, 2026; secured by a loan receivable; fixed interest rate of 2.09%
|
1,754
|
|
|
1,886
|
|
Advances under revolving credit agreement with a regional bank due September 26, 2020; secured by subsidiary bank stock; variable interest rate at 90-day LIBOR plus 3.50% (4.43% at December 31, 2016)
|
—
|
|
|
38,000
|
|
Advances under revolving credit agreement with a regional bank due January 7, 2017; fixed interest rate of 8.00%
|
—
|
|
|
850
|
|
Total
|
$
|
808,572
|
|
|
$
|
492,321
|
|
The advances from the FHLB are collateralized by a blanket lien on all first mortgage loans and other specific loans in addition to FHLB stock. At
September 30, 2017
,
$347.4 million
was available for borrowing on lines with the FHLB.
At
September 30, 2017
,
$30.0 million
was available for borrowing under the revolving credit agreement with a regional bank, secured by subsidiary bank stock.
As of
September 30, 2017
, the Company maintained credit arrangements with various financial institutions to purchase federal funds up to
$82.0 million
.
The Company also participates in the Federal Reserve discount window borrowings program. At
September 30, 2017
, the Company had
$1.04 billion
of loans pledged at the Federal Reserve discount window and had
$678.1 million
available for borrowing.
Subordinated Notes Payable
On March 13, 2017, the Company
completed the public offering and sale of
$75.0 million
in aggregate principal amount of its
5.75%
Fixed-To-Floating Rate Subordinated Notes due 2027 (the “subordinated notes”). The subordinated notes were sold to the public at par pursuant to an underwriting agreement and were issued pursuant to an indenture and a supplemental indenture. The subordinated notes will mature on March 15, 2027 and through March 14, 2022 will bear a fixed rate of interest of
5.75%
per annum, payable semi-annually in arrears on September 15 and March 15 of each year. Beginning
March 15, 2022, the interest rate on the subordinated notes resets quarterly to a floating rate per annum equal to the then-current three-month LIBOR plus
3.616%
, payable quarterly in arrears on June 15, September 15, December 15, and March 15 of each year to the maturity date or earlier redemption.
On any scheduled interest payment date beginning March 15, 2022, the Company may, at its option, redeem the subordinated notes, in whole or in part, at a redemption price equal to
100%
of the principal amount plus accrued and unpaid interest.
The subordinated notes are unsecured and rank equally with all other unsecured subordinated indebtedness of the Company, including any subordinated indebtedness issued in the future under the indenture governing the subordinated notes. The subordinated notes are subordinated in right of payment to all senior indebtedness of the Company. The subordinated notes are obligations of the Company only and are not guaranteed by any subsidiaries, including the Bank. Additionally, the subordinated notes are structurally subordinated to all existing and future indebtedness and other liabilities of the Company’s subsidiaries, meaning that creditors of the Company’s subsidiaries (including, in the case of the Bank, its depositors) generally will be paid from those subsidiaries’ assets before holders of the subordinated notes have any claim to those assets.
For regulatory capital adequacy purposes, the subordinated notes qualify as Tier 2 capital for the Company. If in the future the subordinated notes no longer qualify as Tier 2 capital, the subordinated notes may be redeemed by the Company at a redemption price equal to
100%
of the principal amount plus accrued and unpaid interest, subject to prior approval by the Board of Governors of the Federal Reserve System.
NOTE 9 – COMMITMENTS AND CONTINGENCIES
Loan Commitments
The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. They involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amount recognized in the Company’s balance sheets.
The Company’s exposure to credit loss is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.
A summary of the Company’s commitments is as follows:
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
September 30,
2017
|
|
December 31,
2016
|
Commitments to extend credit
|
$
|
1,096,702
|
|
|
$
|
1,101,257
|
|
Unused home equity lines of credit
|
63,951
|
|
|
62,586
|
|
Financial standby letters of credit
|
13,192
|
|
|
14,257
|
|
Mortgage interest rate lock commitments
|
113,056
|
|
|
91,426
|
|
Mortgage forward contracts with positive fair value
|
—
|
|
|
150,000
|
|
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. These commitments, predominantly at variable interest rates, generally have fixed expiration dates of one year or less or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the customer.
Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. Collateral is required in instances which the Company deems necessary.
Other Commitments
As of
September 30, 2017
, a
$75.0 million
letter of credit issued by the FHLB was used to guarantee the Bank’s performance related to public fund deposit balances.
Contingencies
Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed.
A former borrower of the Company has filed a claim related to a loan previously made by the Company asserting lender liability. The case was tried without a jury and a judgment was issued by the court against the Company awarding the borrower approximately
$2.9 million
on August 8, 2013. The judgment was appealed to the South Carolina Court of Appeals. On May 24, 2017, the Court of Appeals filed its decision and unanimously found in favor of the Company and reversed the trial court judgment. The plaintiff has a filed a petition for rehearing with the Court of Appeals, which has been denied. The plaintiff has filed a writ of certiorari asking the Supreme Court of South Carolina to hear the case. The Company believes the likelihood the Supreme Court will hear the case is not probable, and, accordingly the Company does not expect to incur any loss as a result of this case. Accordingly, the Company has not established any reserves related to this legal matter. In the event that the Company's assumptions used to evaluate this matter as neither probable nor estimable change in future periods, it may be required to record a liability for an adverse outcome.
NOTE 10 – SHAREHOLDERS’ EQUITY
On January 18, 2017, the Company issued
128,572
unregistered shares of its common stock to William J. Villari in exchange for
4.99%
of the outstanding shares of common stock of USPF. A registration statement was filed with the Securities and Exchange Commission on February 13, 2017 to register the resale or other disposition of these shares. The issuance of the
128,572
common shares was valued at
$45.45
per share, resulting in an increase in shareholders’ equity of
$5.8 million
. For additional information regarding the investment in USPF, see Note 2.
On March 6, 2017, the Company completed an underwritten public offering of
2,012,500
shares of the Company’s common stock at a price to the public of
$46.50
per share. The Company received net proceeds from the issuance of approximately
$88.7 million
, after deducting
$4.9 million
in underwriting discounts and commissions and other issuance costs.
In March 2017, the Company made a capital contribution to the Bank in the amount of
$110.0 million
, using the net proceeds of the March 6, 2017 issuance of common stock as well as a portion of the net proceeds of the March 13, 2017 issuance of the Company’s
5.75%
Fixed-To-Floating Rate Subordinated Notes due 2027 discussed in Note 8.
NOTE 11 – ACCUMULATED OTHER COMPREHENSIVE INCOME
Accumulated other comprehensive income for the Company consists of changes in net unrealized gains and losses on investment securities available for sale and an interest rate swap derivative designated as a cash flow hedge. The following tables present a summary of the accumulated other comprehensive income balances, net of tax, as of
September 30, 2017
and
2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Unrealized
Gain (Loss)
on Derivatives
|
|
Unrealized
Gain (Loss)
on Securities
|
|
Accumulated
Other Comprehensive
Income (Loss)
|
Balance, January 1, 2017
|
|
$
|
176
|
|
|
$
|
(1,234
|
)
|
|
$
|
(1,058
|
)
|
Reclassification for gains included in net income, net of tax
|
|
—
|
|
|
(24
|
)
|
|
(24
|
)
|
Current year changes, net of tax
|
|
(38
|
)
|
|
4,361
|
|
|
4,323
|
|
Balance, September 30, 2017
|
|
$
|
138
|
|
|
$
|
3,103
|
|
|
$
|
3,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Unrealized
Gain (Loss)
on Derivatives
|
|
Unrealized
Gain (Loss)
on Securities
|
|
Accumulated
Other Comprehensive
Income (Loss)
|
Balance, January 1, 2016
|
|
$
|
152
|
|
|
$
|
3,201
|
|
|
$
|
3,353
|
|
Reclassification for gains included in net income, net of tax
|
|
—
|
|
|
(61
|
)
|
|
(61
|
)
|
Current year changes, net of tax
|
|
(567
|
)
|
|
7,724
|
|
|
7,157
|
|
Balance, September 30, 2016
|
|
$
|
(415
|
)
|
|
$
|
10,864
|
|
|
$
|
10,449
|
|
NOTE 12 – WEIGHTED AVERAGE SHARES OUTSTANDING
Earnings per share have been computed based on the following weighted average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
(share data in thousands)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Average common shares outstanding
|
37,225
|
|
|
34,870
|
|
|
36,690
|
|
|
34,156
|
|
Common share equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
70
|
|
|
108
|
|
|
70
|
|
|
100
|
|
Nonvested restricted share grants
|
258
|
|
|
217
|
|
|
257
|
|
|
214
|
|
Average common shares outstanding, assuming dilution
|
37,553
|
|
|
35,195
|
|
|
37,017
|
|
|
34,470
|
|
For the
three and nine
-month periods ended
September 30, 2017
and
2016
, there were no potential common shares with strike prices that would cause them to be anti-dilutive.
NOTE 13 – FAIR VALUE MEASURES
The fair value of an asset or liability is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various assets and liabilities. In cases where quoted market prices are not available, fair value is based on discounted cash flows or other valuation techniques. These techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the asset or liability. The accounting standard for disclosures about the fair value measures excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.
The Company’s loans held for sale are carried at fair value and are comprised of the following:
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
September 30,
2017
|
|
December 31,
2016
|
Mortgage loans held for sale
|
$
|
132,201
|
|
|
$
|
105,924
|
|
SBA loans held for sale
|
5,191
|
|
|
—
|
|
Total loans held for sale
|
$
|
137,392
|
|
|
$
|
105,924
|
|
The Company has elected to record mortgage loans held for sale at fair value in order to eliminate the complexities and inherent difficulties of achieving hedge accounting and to better align reported results with the underlying economic changes in value of the loans and related hedge instruments. This election impacts the timing and recognition of origination fees and costs, as well as servicing value, which are now recognized in earnings at the time of origination. Interest income on mortgage loans held for sale is recorded on an accrual basis in the consolidated statements of income and comprehensive income under the heading interest income – interest and fees on loans. The servicing value is included in the fair value of the interest rate lock commitments (“IRLCs”) with borrowers. The mark to market adjustments related to mortgage loans held for sale and the associated economic hedges are captured in mortgage banking activities. Net gains of
$5.7 million
and
$4.9 million
resulting from fair value changes of these mortgage loans were recorded in income during the
nine months ended
September 30, 2017
and
2016
, respectively. The amount does not reflect changes in fair values of related derivative instruments used to hedge exposure to market-related risks associated with these mortgage loans. The change in fair value of both mortgage loans held for sale and the related derivative instruments are recorded in mortgage banking activity in the consolidated statements of income and comprehensive income. The Company’s valuation of mortgage loans held for sale incorporates an assumption for credit risk; however, given the short-term period that the Company holds these loans, valuation adjustments attributable to instrument-specific credit risk is nominal.
The following table summarizes the difference between the fair value and the principal balance for mortgage loans held for sale measured at fair value as of
September 30, 2017
and
December 31, 2016
:
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
September 30,
2017
|
|
December 31,
2016
|
Aggregate fair value of mortgage loans held for sale
|
$
|
132,201
|
|
|
$
|
105,924
|
|
Aggregate unpaid principal balance
|
126,503
|
|
|
103,691
|
|
Past-due loans of 90 days or more
|
—
|
|
|
—
|
|
Nonaccrual loans
|
—
|
|
|
—
|
|
The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Securities available for sale, mortgage loans held for sale and derivatives are recorded at fair value on a recurring basis. From time to time, the Company may be required to record at fair value other assets on a nonrecurring basis, such as impaired loans and OREO. Additionally, the Company is required to disclose, but not record, the fair value of other financial instruments.
Fair Value Hierarchy
The Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:
Level 1
–
Quoted prices in active markets for identical assets or liabilities.
Level 2
–
Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3
–
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The following methods and assumptions were used by the Company in estimating the fair value of its assets and liabilities recorded at fair value and for estimating the fair value of its financial instruments:
Cash, Due From Banks, Federal Funds Sold and Interest-Bearing Accounts:
The carrying amount of cash, due from banks, federal funds sold and interest-bearing deposits in banks approximates fair value.
Investment Securities Available for Sale:
The fair value of securities available for sale is determined by various valuation methodologies. Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows. Level 2 securities include certain U.S. agency bonds, mortgage-backed securities, collateralized mortgage and debt obligations, and municipal securities. The Level 2 fair value pricing is provided by an independent third party and is based upon similar securities in an active market. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy and include certain residual municipal securities and other less liquid securities.
Other Investments:
FHLB stock, Federal Reserve Bank stock and the Company’s minority equity investment in USPF are included in other investment securities at original cost basis. These investments do not have readily determinable fair values and are carried at original cost basis. It is not practical to determine the fair value of these investments due to restrictions placed on transferability. These investments are periodically evaluated for impairment based on ultimate recovery of par value or cost basis. Cost basis approximates fair value for these investments.
Loans Held for Sale:
The Company records loans held for sale at fair value. The fair value of loans held for sale is determined on outstanding commitments from third party investors in the secondary markets and is classified within Level 2 of the valuation hierarchy.
Loans:
The carrying amount of variable-rate loans that reprice frequently and have no significant change in credit risk approximates fair value. The fair value of fixed-rate loans is estimated based on discounted contractual cash flows, using interest rates currently being offered for loans with similar terms to borrowers with similar credit quality. The fair value of impaired loans is estimated based on discounted contractual cash flows or underlying collateral values, where applicable. A loan is determined to be impaired if the Company believes it is probable that all principal and interest amounts due according to the terms of the note will not be collected as scheduled. The fair value of impaired loans is determined in accordance with ASC 310-10,
Accounting by Creditors for Impairment of a Loan
, and generally results in a specific reserve established through a charge to the provision for loan losses. Losses on impaired loans are charged to the allowance when management believes the uncollectability of a loan is confirmed. Management has determined that the majority of impaired loans are Level 3 assets due to the extensive use of market appraisals.
Other Real Estate Owned:
The fair value of other real estate owned (“OREO”) is determined using certified appraisals and internal evaluations that value the property at its highest and best uses by applying traditional valuation methods common to the industry. The Company does not hold any OREO for profit purposes and all other real estate is actively marketed for sale. In most
cases, management has determined that additional write-downs are required beyond what is calculable from the appraisal to carry the property at levels that would attract buyers. Because this additional write-down is not based on observable inputs, management has determined that other real estate owned should be classified as Level 3.
Intangible Assets:
Intangible assets consist of core deposit premiums acquired in connection with business combinations and are based on the established value of acquired customer deposits. The core deposit premium is initially recognized based on a valuation performed as of the consummation date and is amortized over an estimated useful life of
seven
to
ten
years.
FDIC Loss-Share Receivable/Payable:
Because the FDIC will reimburse the Company for certain acquired loans should the Company experience a loss, an indemnification asset is recorded at fair value at the acquisition date. The indemnification asset is recognized at the same time as the indemnified loans, and measured on the same basis, subject to collectability or contractual limitations. The shared loss agreements on the acquisition date reflect the reimbursements expected to be received from the FDIC, using an appropriate discount rate, which reflects counterparty credit risk and other uncertainties. The shared loss agreements continue to be measured on the same basis as the related indemnified loans, and the loss-share receivable/payable is impacted by changes in estimated cash flows associated with these loans.
Accrued Interest Receivable/Payable:
The carrying amount of accrued interest receivable and accrued interest payable approximates fair value.
Cash Value of Bank Owned Life Insurance:
The carrying value of cash value of bank owned life insurance approximates fair value.
Deposits:
The carrying amount of demand deposits, savings deposits and variable-rate certificates of deposit approximates fair value. The fair value of fixed-rate certificates of deposit is estimated based on discounted contractual cash flows using interest rates currently being offered for certificates of similar maturities.
Securities Sold under Agreements to Repurchase and Other Borrowings:
The carrying amount of variable rate borrowings and securities sold under repurchase agreements approximates fair value and are classified as Level 1. The fair value of fixed rate other borrowings is estimated based on discounted contractual cash flows using the current incremental borrowing rates for similar borrowing arrangements and are classified as Level 2.
Subordinated Deferrable Interest Debentures:
The fair value of the Company’s trust preferred securities is based primarily upon discounted cash flows using rates for securities with similar terms and remaining maturities and are classified as Level 2.
Off-Balance-Sheet Instruments:
Because commitments to extend credit and standby letters of credit are typically made using variable rates and have short maturities, the carrying value and fair value are immaterial for disclosure.
Derivatives:
The Company has entered into derivative financial instruments to manage interest rate risk. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the derivatives. This analysis reflects the contractual terms of the derivative, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The fair value of the derivatives is determined using the market standard methodology of netting the discounted future fixed cash receipts and the discounted expected variable cash payments. The variable cash payments are based on an expectation of future interest rates (forward curves derived from observable market interest rate curves).
The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting any applicable credit enhancements such as collateral postings, thresholds, mutual puts and guarantees.
Although the Company has determined that the majority of the inputs used to value its derivative fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself or the counterparty. However, as of
September 30, 2017
and
December 31, 2016
, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustment is not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuation in its entirety is classified in Level 2 of the fair value hierarchy.
The following table presents the fair value measurements of assets and liabilities measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall as of
September 30, 2017
and
December 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recurring Basis
Fair Value Measurements
|
|
September 30, 2017
|
(dollars in thousands)
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government sponsored agencies
|
$
|
1,004
|
|
|
$
|
—
|
|
|
$
|
1,004
|
|
|
$
|
—
|
|
State, county and municipal securities
|
143,387
|
|
|
—
|
|
|
143,387
|
|
|
—
|
|
Corporate debt securities
|
47,249
|
|
|
—
|
|
|
45,749
|
|
|
1,500
|
|
Mortgage-backed securities
|
627,953
|
|
|
—
|
|
|
627,953
|
|
|
—
|
|
Loans held for sale
|
137,392
|
|
|
—
|
|
|
137,392
|
|
|
—
|
|
Mortgage banking derivative instruments
|
3,836
|
|
|
—
|
|
|
3,836
|
|
|
—
|
|
Total recurring assets at fair value
|
$
|
960,821
|
|
|
$
|
—
|
|
|
$
|
959,321
|
|
|
$
|
1,500
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments
|
$
|
723
|
|
|
$
|
—
|
|
|
$
|
723
|
|
|
$
|
—
|
|
Mortgage banking derivative instruments
|
237
|
|
|
—
|
|
|
237
|
|
|
—
|
|
Total recurring liabilities at fair value
|
$
|
960
|
|
|
$
|
—
|
|
|
$
|
960
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recurring Basis
Fair Value Measurements
|
|
December 31, 2016
|
(dollars in thousands)
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government sponsored agencies
|
$
|
1,020
|
|
|
$
|
—
|
|
|
$
|
1,020
|
|
|
$
|
—
|
|
State, county and municipal securities
|
152,035
|
|
|
—
|
|
|
152,035
|
|
|
—
|
|
Corporate debt securities
|
32,172
|
|
|
—
|
|
|
30,672
|
|
|
1,500
|
|
Mortgage-backed securities
|
637,508
|
|
|
—
|
|
|
637,508
|
|
|
—
|
|
Loans held for sale
|
105,924
|
|
|
—
|
|
|
105,924
|
|
|
—
|
|
Mortgage banking derivative instruments
|
4,314
|
|
|
—
|
|
|
4,314
|
|
|
—
|
|
Total recurring assets at fair value
|
$
|
932,973
|
|
|
$
|
—
|
|
|
$
|
931,473
|
|
|
$
|
1,500
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments
|
$
|
978
|
|
|
$
|
—
|
|
|
$
|
978
|
|
|
$
|
—
|
|
Total recurring liabilities at fair value
|
$
|
978
|
|
|
$
|
—
|
|
|
$
|
978
|
|
|
$
|
—
|
|
The following table presents the fair value measurements of assets measured at fair value on a non-recurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy as of
September 30, 2017
and
December 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonrecurring Basis
Fair Value Measurements
|
(dollars in thousands)
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans carried at fair value
|
$
|
28,790
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
28,790
|
|
Other real estate owned
|
435
|
|
|
—
|
|
|
—
|
|
|
435
|
|
Purchased other real estate owned
|
9,946
|
|
|
—
|
|
|
—
|
|
|
9,946
|
|
Total nonrecurring assets at fair value
|
$
|
39,171
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
39,171
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans carried at fair value
|
$
|
28,253
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
28,253
|
|
Other real estate owned
|
1,172
|
|
|
—
|
|
|
—
|
|
|
1,172
|
|
Purchased other real estate owned
|
12,540
|
|
|
—
|
|
|
—
|
|
|
12,540
|
|
Total nonrecurring assets at fair value
|
$
|
41,965
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
41,965
|
|
The inputs used to determine estimated fair value of impaired loans include market conditions, loan terms, underlying collateral characteristics and discount rates. The inputs used to determine fair value of other real estate owned include market conditions, estimated marketing period or holding period, underlying collateral characteristics and discount rates.
For the
nine months ended
September 30, 2017
and the year ended
December 31, 2016
, there was not a change in the methods and significant assumptions used to estimate fair value.
The following table shows significant unobservable inputs used in the fair value measurement of Level 3 assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Fair Value
|
|
Valuation
Technique
|
|
Unobservable Inputs
|
|
Range of
Discounts
|
|
Weighted
Average
Discount
|
September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
Recurring:
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities available for sale
|
|
$
|
1,500
|
|
|
Discounted par values
|
|
Credit quality of underlying issuer
|
|
0%
|
|
0%
|
Nonrecurring:
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
28,790
|
|
|
Third-party appraisals and discounted cash flows
|
|
Collateral discounts and
discount rates
|
|
10% - 100%
|
|
25%
|
Other real estate owned
|
|
$
|
435
|
|
|
Third-party appraisals and sales contracts
|
|
Collateral discounts and estimated
costs to sell
|
|
15% - 20%
|
|
13%
|
Purchased other real estate owned
|
|
$
|
9,946
|
|
|
Third-party appraisals
|
|
Collateral discounts and estimated
costs to sell
|
|
10% - 74%
|
|
16%
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
Recurring:
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities available for sale
|
|
$
|
1,500
|
|
|
Discounted par values
|
|
Credit quality of underlying issuer
|
|
0%
|
|
0%
|
Nonrecurring:
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
28,253
|
|
|
Third-party appraisals and discounted cash flows
|
|
Collateral discounts and
discount rates
|
|
15% - 100%
|
|
28%
|
Other real estate owned
|
|
$
|
1,172
|
|
|
Third-party appraisals and sales contracts
|
|
Collateral discounts and estimated
costs to sell
|
|
15% - 74%
|
|
22%
|
Purchased other real estate owned
|
|
$
|
12,540
|
|
|
Third-party appraisals
|
|
Collateral discounts and estimated
costs to sell
|
|
10% - 74%
|
|
15%
|
The carrying amount and estimated fair value of the Company’s financial instruments, not shown elsewhere in these financial statements, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements
|
|
|
|
September 30, 2017
|
(dollars in thousands)
|
Carrying
Amount
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
$
|
131,071
|
|
|
$
|
131,071
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
131,071
|
|
Federal funds sold and interest-bearing accounts
|
112,844
|
|
|
112,844
|
|
|
—
|
|
|
—
|
|
|
112,844
|
|
Loans, net
|
5,902,267
|
|
|
—
|
|
|
—
|
|
|
5,871,518
|
|
|
5,871,518
|
|
Accrued interest receivable
|
25,068
|
|
|
25,068
|
|
|
—
|
|
|
—
|
|
|
25,068
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
$
|
5,895,504
|
|
|
$
|
—
|
|
|
$
|
5,896,989
|
|
|
$
|
—
|
|
|
$
|
5,896,989
|
|
Securities sold under agreements to repurchase
|
14,156
|
|
|
14,156
|
|
|
—
|
|
|
—
|
|
|
14,156
|
|
Other borrowings
|
808,572
|
|
|
—
|
|
|
809,810
|
|
|
—
|
|
|
809,810
|
|
Subordinated deferrable interest debentures
|
85,220
|
|
|
—
|
|
|
70,984
|
|
|
—
|
|
|
70,984
|
|
FDIC loss-share payable
|
8,190
|
|
|
—
|
|
|
—
|
|
|
9,077
|
|
|
9,077
|
|
Accrued interest payable
|
2,313
|
|
|
2,313
|
|
|
—
|
|
|
—
|
|
|
2,313
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements
|
|
|
|
December 31, 2016
|
(dollars in thousands)
|
Carrying
Amount
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks
|
$
|
127,164
|
|
|
$
|
127,164
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
127,164
|
|
Federal funds sold and interest-bearing accounts
|
71,221
|
|
|
71,221
|
|
|
—
|
|
|
—
|
|
|
71,221
|
|
Loans, net
|
5,212,153
|
|
|
—
|
|
|
—
|
|
|
5,236,034
|
|
|
5,236,034
|
|
Accrued interest receivable
|
22,278
|
|
|
22,278
|
|
|
—
|
|
|
—
|
|
|
22,278
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
$
|
5,575,163
|
|
|
$
|
—
|
|
|
$
|
5,575,288
|
|
|
$
|
—
|
|
|
$
|
5,575,288
|
|
Securities sold under agreements to repurchase
|
53,505
|
|
|
53,505
|
|
|
—
|
|
|
—
|
|
|
53,505
|
|
Other borrowings
|
492,321
|
|
|
—
|
|
|
492,321
|
|
|
—
|
|
|
492,321
|
|
Subordinated deferrable interest debentures
|
84,228
|
|
|
—
|
|
|
67,321
|
|
|
—
|
|
|
67,321
|
|
FDIC loss-share payable
|
6,313
|
|
|
—
|
|
|
—
|
|
|
8,243
|
|
|
8,243
|
|
Accrued interest payable
|
1,501
|
|
|
1,501
|
|
|
—
|
|
|
—
|
|
|
1,501
|
|
NOTE 14 – SEGMENT REPORTING
The Company has the following
five
reportable segments: Banking Division, Retail Mortgage Division, Warehouse Lending Division, SBA Division and Premium Finance Division. The Banking Division derives its revenues from the delivery of full-service financial services, including commercial loans, consumer loans and deposit accounts. The Retail Mortgage Division derives its revenues from the origination, sales and servicing of one-to-four family residential mortgage loans. The Warehouse Lending Division derives its revenues from the origination and servicing of warehouse lines to other businesses that are secured by underlying one-to-four family residential mortgage loans. The SBA Division derives its revenues from the origination, sales and servicing of SBA loans. The Premium Finance Division derives its revenues from the origination and servicing of commercial insurance premium finance loans.
The Banking, Retail Mortgage, Warehouse Lending, SBA and Premium Finance Divisions are managed as separate business units because of the different products and services they provide. The Company evaluates performance and allocates resources based on profit or loss from operations. There are no material intersegment sales or transfers.
The following tables present selected financial information with respect to the Company’s reportable business segments for the three months ended
September 30, 2017
and
2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30, 2017
|
(dollars in thousands)
|
Banking
Division
|
|
Retail
Mortgage
Division
|
|
Warehouse
Lending
Division
|
|
SBA
Division
|
|
Premium
Finance
Division
|
|
Total
|
Interest income
|
$
|
59,130
|
|
|
$
|
5,862
|
|
|
$
|
2,022
|
|
|
$
|
1,413
|
|
|
$
|
7,895
|
|
|
$
|
76,322
|
|
Interest expense
|
5,530
|
|
|
1,597
|
|
|
487
|
|
|
432
|
|
|
1,421
|
|
|
9,467
|
|
Net interest income
|
53,600
|
|
|
4,265
|
|
|
1,535
|
|
|
981
|
|
|
6,474
|
|
|
66,855
|
|
Provision for loan losses
|
1,037
|
|
|
262
|
|
|
215
|
|
|
(1
|
)
|
|
274
|
|
|
1,787
|
|
Noninterest income
|
13,007
|
|
|
12,257
|
|
|
583
|
|
|
1,130
|
|
|
22
|
|
|
26,999
|
|
Noninterest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
20,554
|
|
|
9,792
|
|
|
129
|
|
|
858
|
|
|
1,250
|
|
|
32,583
|
|
Equipment and occupancy expenses
|
5,384
|
|
|
555
|
|
|
1
|
|
|
54
|
|
|
42
|
|
|
6,036
|
|
Data processing and telecommunications expenses
|
6,357
|
|
|
425
|
|
|
28
|
|
|
9
|
|
|
231
|
|
|
7,050
|
|
Other expenses
|
14,905
|
|
|
1,001
|
|
|
51
|
|
|
63
|
|
|
2,078
|
|
|
18,098
|
|
Total noninterest expense
|
47,200
|
|
|
11,773
|
|
|
209
|
|
|
984
|
|
|
3,601
|
|
|
63,767
|
|
Income before income tax expense
|
18,370
|
|
|
4,487
|
|
|
1,694
|
|
|
1,128
|
|
|
2,621
|
|
|
28,300
|
|
Income tax expense
|
4,850
|
|
|
1,475
|
|
|
580
|
|
|
394
|
|
|
843
|
|
|
8,142
|
|
Net income
|
$
|
13,520
|
|
|
$
|
3,012
|
|
|
$
|
1,114
|
|
|
$
|
734
|
|
|
$
|
1,778
|
|
|
$
|
20,158
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
$
|
6,296,159
|
|
|
$
|
531,897
|
|
|
$
|
236,024
|
|
|
$
|
94,531
|
|
|
$
|
491,209
|
|
|
$
|
7,649,820
|
|
Goodwill
|
125,532
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
125,532
|
|
Other intangible assets, net
|
14,437
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30, 2016
|
(dollars in thousands)
|
Banking
Division
|
|
Retail
Mortgage
Division
|
|
Warehouse
Lending
Division
|
|
SBA
Division
|
|
Premium
Finance
Division
|
|
Total
|
Interest income
|
$
|
55,369
|
|
|
$
|
3,679
|
|
|
$
|
2,073
|
|
|
$
|
1,089
|
|
|
$
|
—
|
|
|
$
|
62,210
|
|
Interest expense
|
3,716
|
|
|
1,054
|
|
|
225
|
|
|
148
|
|
|
—
|
|
|
5,143
|
|
Net interest income
|
51,653
|
|
|
2,625
|
|
|
1,848
|
|
|
941
|
|
|
—
|
|
|
57,067
|
|
Provision for loan losses
|
57
|
|
|
447
|
|
|
94
|
|
|
213
|
|
|
—
|
|
|
811
|
|
Noninterest income
|
13,949
|
|
|
13,198
|
|
|
555
|
|
|
1,162
|
|
|
—
|
|
|
28,864
|
|
Noninterest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
18,323
|
|
|
8,940
|
|
|
103
|
|
|
616
|
|
|
—
|
|
|
27,982
|
|
Equipment and occupancy expenses
|
5,490
|
|
|
433
|
|
|
1
|
|
|
65
|
|
|
—
|
|
|
5,989
|
|
Data processing and telecommunications expenses
|
5,794
|
|
|
364
|
|
|
26
|
|
|
1
|
|
|
—
|
|
|
6,185
|
|
Other expenses
|
11,533
|
|
|
1,303
|
|
|
26
|
|
|
181
|
|
|
—
|
|
|
13,043
|
|
Total noninterest expense
|
41,140
|
|
|
11,040
|
|
|
156
|
|
|
863
|
|
|
—
|
|
|
53,199
|
|
Income before income tax expense
|
24,405
|
|
|
4,336
|
|
|
2,153
|
|
|
1,027
|
|
|
—
|
|
|
31,921
|
|
Income tax expense
|
7,733
|
|
|
1,518
|
|
|
754
|
|
|
359
|
|
|
—
|
|
|
10,364
|
|
Net income
|
$
|
16,672
|
|
|
$
|
2,818
|
|
|
$
|
1,399
|
|
|
$
|
668
|
|
|
$
|
—
|
|
|
$
|
21,557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
$
|
5,841,207
|
|
|
$
|
356,755
|
|
|
$
|
203,334
|
|
|
$
|
92,199
|
|
|
$
|
—
|
|
|
$
|
6,493,495
|
|
Goodwill
|
122,545
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
122,545
|
|
Other intangible assets, net
|
18,472
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18,472
|
|
The following tables present selected financial information with respect to the Company’s reportable business segments for the
nine months ended
September 30, 2017
and
2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, 2017
|
(dollars in thousands)
|
Banking
Division
|
|
Retail
Mortgage
Division
|
|
Warehouse
Lending
Division
|
|
SBA
Division
|
|
Premium
Finance
Division
|
|
Total
|
Interest income
|
$
|
170,036
|
|
|
$
|
14,890
|
|
|
$
|
4,968
|
|
|
$
|
3,884
|
|
|
$
|
21,005
|
|
|
$
|
214,783
|
|
Interest expense
|
14,510
|
|
|
4,179
|
|
|
1,074
|
|
|
1,111
|
|
|
3,307
|
|
|
24,181
|
|
Net interest income
|
155,526
|
|
|
10,711
|
|
|
3,894
|
|
|
2,773
|
|
|
17,698
|
|
|
190,602
|
|
Provision for loan losses
|
4,510
|
|
|
617
|
|
|
159
|
|
|
98
|
|
|
444
|
|
|
5,828
|
|
Noninterest income
|
38,974
|
|
|
35,823
|
|
|
1,340
|
|
|
4,663
|
|
|
94
|
|
|
80,894
|
|
Noninterest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
58,757
|
|
|
24,771
|
|
|
403
|
|
|
2,339
|
|
|
3,239
|
|
|
89,509
|
|
Equipment and occupancy expenses
|
16,068
|
|
|
1,684
|
|
|
3
|
|
|
159
|
|
|
145
|
|
|
18,059
|
|
Data processing and telecommunications expenses
|
18,778
|
|
|
1,182
|
|
|
80
|
|
|
12
|
|
|
598
|
|
|
20,650
|
|
Other expenses
|
34,355
|
|
|
3,030
|
|
|
137
|
|
|
533
|
|
|
6,326
|
|
|
44,381
|
|
Total noninterest expense
|
127,958
|
|
|
30,667
|
|
|
623
|
|
|
3,043
|
|
|
10,308
|
|
|
172,599
|
|
Income before income tax expense
|
62,032
|
|
|
15,250
|
|
|
4,452
|
|
|
4,295
|
|
|
7,040
|
|
|
93,069
|
|
Income tax expense
|
17,801
|
|
|
5,337
|
|
|
1,559
|
|
|
1,503
|
|
|
2,471
|
|
|
28,671
|
|
Net income
|
$
|
44,231
|
|
|
$
|
9,913
|
|
|
$
|
2,893
|
|
|
$
|
2,792
|
|
|
$
|
4,569
|
|
|
$
|
64,398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, 2016
|
(dollars in thousands)
|
Banking
Division
|
|
Retail
Mortgage
Division
|
|
Warehouse
Lending
Division
|
|
SBA
Division
|
|
Premium
Finance
Division
|
|
Total
|
Interest income
|
$
|
158,682
|
|
|
$
|
9,992
|
|
|
$
|
4,714
|
|
|
$
|
2,721
|
|
|
$
|
—
|
|
|
$
|
176,109
|
|
Interest expense
|
10,726
|
|
|
2,383
|
|
|
458
|
|
|
450
|
|
|
—
|
|
|
14,017
|
|
Net interest income
|
147,956
|
|
|
7,609
|
|
|
4,256
|
|
|
2,271
|
|
|
—
|
|
|
162,092
|
|
Provision for loan losses
|
1,471
|
|
|
540
|
|
|
94
|
|
|
276
|
|
|
—
|
|
|
2,381
|
|
Noninterest income
|
39,702
|
|
|
36,126
|
|
|
1,328
|
|
|
4,373
|
|
|
—
|
|
|
81,529
|
|
Noninterest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
55,740
|
|
|
23,591
|
|
|
399
|
|
|
1,970
|
|
|
—
|
|
|
81,700
|
|
Equipment and occupancy expenses
|
16,541
|
|
|
1,326
|
|
|
3
|
|
|
190
|
|
|
—
|
|
|
18,060
|
|
Data processing and telecommunications expenses
|
17,299
|
|
|
974
|
|
|
71
|
|
|
3
|
|
|
—
|
|
|
18,347
|
|
Other expenses
|
39,040
|
|
|
3,392
|
|
|
77
|
|
|
542
|
|
|
—
|
|
|
43,051
|
|
Total noninterest expense
|
128,620
|
|
|
29,283
|
|
|
550
|
|
|
2,705
|
|
|
—
|
|
|
161,158
|
|
Income before income tax expense
|
57,567
|
|
|
13,912
|
|
|
4,940
|
|
|
3,663
|
|
|
—
|
|
|
80,082
|
|
Income tax expense
|
18,278
|
|
|
4,870
|
|
|
1,729
|
|
|
1,282
|
|
|
—
|
|
|
26,159
|
|
Net income
|
$
|
39,289
|
|
|
$
|
9,042
|
|
|
$
|
3,211
|
|
|
$
|
2,381
|
|
|
$
|
—
|
|
|
$
|
53,923
|
|
NOTE 15 – REGULATORY MATTERS
On December 16, 2016, the Bank entered into a Stipulation to the Issuance of a Consent Order with its bank regulatory agencies, the FDIC and the Georgia Department of Banking and Finance (the “GDBF”), consenting to the issuance of a consent order (the “Order”) relating to the Bank’s Bank Secrecy Act (together with its implementing regulations, the “BSA”) compliance program. In consenting to the issuance of the Order, the Bank did not admit or deny any charges of unsafe or unsound banking practices related to its BSA compliance program.
Under the terms of the Order, the Bank or its board of directors is required to take certain affirmative actions to comply with the Bank’s obligations under the BSA. These include, but are not limited to, the following: strengthening the board of directors’ oversight of BSA activities; enhancing and adopting a revised BSA compliance program; completing a BSA risk assessment; developing a revised system of internal controls designed to ensure full compliance with the BSA; reviewing and revising customer due diligence and risk assessment processes, policies and procedures; developing, adopting and implementing effective BSA training programs; assessing BSA staffing needs and resources and appointing a qualified BSA officer; establishing an independent BSA testing program; ensuring that all reports required by the BSA are accurately and properly filed; and engaging an independent firm to review past account activity to determine whether suspicious activity was properly identified and reported.
Prior to implementation, certain of the actions required by the Order were subject to review by, and approval or non-objection from, the FDIC and the GDBF. The Order will remain in effect and be enforceable until it is modified, terminated, suspended or
set aside by the FDIC and the GDBF. The Bank expects that it will continue to meet the required actions within the time periods specified in the Order based upon ongoing communications with its regulators.