Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
☒ | Accelerated filer | ☐ | ||
Non-accelerated filer | ☐ | Smaller reporting company | ||
Emerging growth company |
Page | ||
PART I - FINANCIAL INFORMATION | ||
Item 1. Financial Statements | ||
Condensed Consolidated Balance Sheets (Unaudited) | ||
Condensed Consolidated Statements of Operations (Unaudited) | ||
Condensed Consolidated Statements of Comprehensive Income (Unaudited) | ||
Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) | ||
Condensed Consolidated Statements of Cash Flows (Unaudited) | ||
Notes to Condensed Consolidated Financial Statements (Unaudited) | ||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | ||
Item 3. Quantitative and Qualitative Disclosures About Market Risk | ||
Item 4. Controls and Procedures | ||
PART II - OTHER INFORMATION | ||
Item 1. Legal Proceedings | ||
Item 1A. Risk Factors | ||
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | ||
Item 3. Defaults Upon Senior Securities | ||
Item 4. Mine Safety Disclosures | ||
Item 5. Other Information | ||
Item 6. Exhibits | ||
Signatures | ||
ACL | Allowance for Credit Losses | FDIC | Federal Deposit Insurance Corporation | |
ACLL | Allowance for Credit Losses on Loans (excludes allowance for securities and allowance for unfunded commitments) | FHLB | Federal Home Loan Bank | |
ASC | Accounting Standards Codification | GAAP | Generally Accepted Accounting Principles (United States) | |
ASU | Accounting Standards Update | LIBOR | London Interbank Offered Rate | |
Bank | Enterprise Bank & Trust | MD&A | Management’s Discussion and Analysis of Financial Condition and Results of Operations | |
C&I | Commercial and Industrial | PCD | Purchased Credit Deteriorated | |
CECL | Current Expected Credit Loss | PCI | Purchased Credit Impaired | |
Company | Enterprise Financial Services Corp and Subsidiaries | PPP | Paycheck Protection Program | |
CRE | Commercial Real Estate | SBA | Small Business Administration | |
DCF | Discounted Cash Flow | SEC | Securities and Exchange Commission | |
EFSC | Enterprise Financial Services Corp | SOFR | Secured Overnight Financing Rate | |
Enterprise | Enterprise Financial Services Corp and Subsidiaries | Trinity | Trinity Capital Corporation | |
FASB | Financial Accounting Standards Board |
(in thousands, except share and per share data) | June 30, 2020 | December 31, 2019 | |||||
Assets | |||||||
Cash and due from banks | $ | $ | |||||
Federal funds sold | |||||||
Interest-earning deposits (including $47,085 and $15,285 pledged as collateral, respectively) | |||||||
Total cash and cash equivalents | |||||||
Interest-earning deposits greater than 90 days | |||||||
Securities available-for-sale | |||||||
Securities held-to-maturity, net | |||||||
Loans held-for-sale | |||||||
Loans | |||||||
Less: Allowance for credit losses on loans | |||||||
Total loans, net | |||||||
Other investments | |||||||
Fixed assets, net | |||||||
Goodwill | |||||||
Intangible assets, net | |||||||
Other assets | |||||||
Total assets | $ | $ | |||||
Liabilities and Shareholders' Equity | |||||||
Noninterest-bearing deposit accounts | $ | $ | |||||
Interest-bearing transaction accounts | |||||||
Money market accounts | |||||||
Savings accounts | |||||||
Certificates of deposit: | |||||||
Brokered | |||||||
Other | |||||||
Total deposits | |||||||
Subordinated debentures and notes | |||||||
FHLB advances | |||||||
Other borrowings | |||||||
Notes payable | |||||||
Other liabilities | |||||||
Total liabilities | $ | $ | |||||
Commitments and contingent liabilities (Note 5) | |||||||
Shareholders' equity: | |||||||
Preferred stock, $0.01 par value; 5,000,000 shares authorized; 0 shares issued and outstanding | |||||||
Common stock, $0.01 par value; 45,000,000 shares authorized; 28,176,087 and 28,067,087 shares issued, respectively | |||||||
Treasury stock, at cost; 1,980,093 and 1,523,842 shares, respectively | ( | ) | ( | ) | |||
Additional paid in capital | |||||||
Retained earnings | |||||||
Accumulated other comprehensive income | |||||||
Total shareholders' equity | |||||||
Total liabilities and shareholders' equity | $ | $ |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
(in thousands, except per share data) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Interest income: | |||||||||||||||
Interest and fees on loans | $ | $ | $ | $ | |||||||||||
Interest on debt securities: | |||||||||||||||
Taxable | |||||||||||||||
Nontaxable | |||||||||||||||
Interest on interest-earning deposits | |||||||||||||||
Dividends on equity securities | |||||||||||||||
Total interest income | |||||||||||||||
Interest expense: | |||||||||||||||
Deposits | |||||||||||||||
Subordinated debentures and notes | |||||||||||||||
FHLB advances | |||||||||||||||
Notes payable and other borrowings | |||||||||||||||
Total interest expense | |||||||||||||||
Net interest income | |||||||||||||||
Provision for credit losses | |||||||||||||||
Net interest income after provision for credit losses | |||||||||||||||
Noninterest income: | |||||||||||||||
Service charges on deposit accounts | |||||||||||||||
Wealth management revenue | |||||||||||||||
Card services revenue | |||||||||||||||
Tax credit income | ( | ) | |||||||||||||
Miscellaneous income | |||||||||||||||
Total noninterest income | |||||||||||||||
Noninterest expense: | |||||||||||||||
Employee compensation and benefits | |||||||||||||||
Occupancy | |||||||||||||||
Data processing | |||||||||||||||
Professional fees | |||||||||||||||
Merger-related expenses | |||||||||||||||
Other | |||||||||||||||
Total noninterest expense | |||||||||||||||
Income before income tax expense | |||||||||||||||
Income tax expense | |||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||
Earnings per common share | |||||||||||||||
Basic | $ | $ | $ | $ | |||||||||||
Diluted |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
(in thousands) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Net income | $ | $ | $ | $ | |||||||||||
Other comprehensive income (loss), after-tax: | |||||||||||||||
Change in unrealized gain on available-for-sale debt securities | |||||||||||||||
Reclassification adjustment for realized (gain) loss on sale of available-for-sale debt securities | ( | ) | |||||||||||||
Reclassification of (gain) loss on held-to-maturity securities | ( | ) | (485 | ) | 5 | ||||||||||
Change in unrealized loss on cash flow hedges arising during the period | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Reclassification of loss on cash flow hedges | |||||||||||||||
Total other comprehensive income, after-tax | |||||||||||||||
Comprehensive income | $ | $ | $ | $ |
Three and six months ended June 30, 2020 | |||||||||||||||||||||||
(in thousands, except per share data) | Common Stock | Treasury Stock | Additional paid in capital | Retained earnings | Accumulated other comprehensive income (loss) | Total shareholders’ equity | |||||||||||||||||
Balance at March 31, 2020 | $ | $ | ( | ) | $ | $ | $ | $ | |||||||||||||||
Net income | |||||||||||||||||||||||
Other comprehensive income | |||||||||||||||||||||||
Comprehensive income | |||||||||||||||||||||||
Cash dividends paid on common shares, $0.18 per share | ( | ) | ( | ) | |||||||||||||||||||
Issuance under equity compensation plans, 35,485 shares, net | |||||||||||||||||||||||
Share-based compensation | |||||||||||||||||||||||
Balance at June 30, 2020 | $ | $ | ( | ) | $ | $ | $ | $ | |||||||||||||||
Balance at December 31, 2019 | $ | $ | ( | ) | $ | $ | $ | $ | |||||||||||||||
Net income | |||||||||||||||||||||||
Other comprehensive income | |||||||||||||||||||||||
Total comprehensive income | |||||||||||||||||||||||
Cash dividends paid on common shares, $0.36 per share | ( | ) | ( | ) | |||||||||||||||||||
Repurchase of common shares | ( | ) | ( | ) | |||||||||||||||||||
Issuance under equity compensation plans, 109,000 shares, net | ( | ) | ( | ) | |||||||||||||||||||
Share-based compensation | |||||||||||||||||||||||
Reclassification for the adoption of ASU 2016-13 (CECL) | ( | ) | ( | ) | |||||||||||||||||||
Balance at June 30, 2020 | $ | $ | ( | ) | $ | $ | $ | $ | |||||||||||||||
Three and six months ended June 30, 2019 | |||||||||||||||||||||||
(in thousands, except per share data) | Common Stock | Treasury Stock | Additional paid in capital | Retained earnings | Accumulated other comprehensive income (loss) | Total shareholders’ equity | |||||||||||||||||
Balance at March 31, 2019 | $ | $ | ( | ) | $ | $ | $ | $ | |||||||||||||||
Net income | |||||||||||||||||||||||
Other comprehensive income | |||||||||||||||||||||||
Comprehensive income | |||||||||||||||||||||||
Cash dividends paid on common shares, $0.15 per share | ( | ) | ( | ) | |||||||||||||||||||
Issuance under equity compensation plans, 28,341 shares, net | |||||||||||||||||||||||
Share-based compensation | |||||||||||||||||||||||
Balance at June 30, 2019 | $ | $ | ( | ) | $ | $ | $ | $ | |||||||||||||||
Balance at December 31, 2018 | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | |||||||||||||
Net income | |||||||||||||||||||||||
Other comprehensive income | |||||||||||||||||||||||
Total comprehensive income | |||||||||||||||||||||||
Cash dividends paid on common shares, $0.29 per share | ( | ) | ( | ) | |||||||||||||||||||
Issuance under equity compensation plans, 103,430 shares, net | ( | ) | ( | ) | |||||||||||||||||||
Share-based compensation | |||||||||||||||||||||||
Shares issued in connection with acquisition of Trinity Capital Corporation, 3,990,822 shares | |||||||||||||||||||||||
Balance at June 30, 2019 | $ | $ | ( | ) | $ | $ | $ | $ |
Six months ended June 30, | |||||||
(in thousands, except share data) | 2020 | 2019 | |||||
Cash flows from operating activities: | |||||||
Net income | $ | $ | |||||
Adjustments to reconcile net income to net cash provided by operating activities | |||||||
Depreciation | |||||||
Provision for credit losses | |||||||
Deferred income taxes | ( | ) | |||||
Net amortization of debt securities | |||||||
Amortization of intangible assets | |||||||
Mortgage loans originated-for-sale | ( | ) | ( | ) | |||
Proceeds from mortgage loans sold | |||||||
Loss (gain) on: | |||||||
Sale of investment securities | ( | ) | |||||
Sale of other real estate | ( | ) | |||||
Sale of state tax credits | ( | ) | ( | ) | |||
Share-based compensation | |||||||
Net accretion of loan discount | ( | ) | ( | ) | |||
Changes in other assets and liabilities, net | ( | ) | ( | ) | |||
Net cash provided by operating activities | |||||||
Cash flows from investing activities: | |||||||
Acquisition cash purchase price, net of cash and cash equivalents acquired | ( | ) | |||||
Net increase in loans | ( | ) | ( | ) | |||
Proceeds received from: | |||||||
Sale of debt securities, available-for-sale | |||||||
Paydown or maturity of debt securities, available-for-sale | |||||||
Paydown or maturity of debt securities, held-to-maturity | |||||||
Redemption of other investments | |||||||
Sale of state tax credits held for sale | |||||||
Sale of other real estate | |||||||
Settlement of bank-owned life insurance policies | |||||||
Payments for the purchase of: | |||||||
Available-for-sale debt securities | ( | ) | ( | ) | |||
Other investments | ( | ) | ( | ) | |||
State tax credits held for sale | ( | ) | ( | ) | |||
Fixed assets, net | ( | ) | ( | ) | |||
Net cash used in investing activities | ( | ) | ( | ) | |||
Cash flows from financing activities: | |||||||
Net increase (decrease) in noninterest-bearing deposit accounts | ( | ) | |||||
Net increase (decrease) in interest-bearing deposit accounts | ( | ) | |||||
Proceeds from FHLB advances, net | |||||||
Proceeds from notes payable | |||||||
Repayments of notes payable | ( | ) | ( | ) | |||
Proceeds from issuance of subordinated debentures, net | |||||||
Net decrease in other borrowings | ( | ) | ( | ) | |||
Cash dividends paid on common stock | ( | ) | ( | ) | |||
Payments for the repurchase of common stock | ( | ) | |||||
Payments for the issuance of equity instruments, net | ( | ) | ( | ) | |||
Net cash provided by financing activities | |||||||
Net increase (decrease) in cash and cash equivalents | ( | ) | |||||
Cash and cash equivalents, beginning of period | |||||||
Cash and cash equivalents, end of period | $ | $ | |||||
Supplemental disclosures of cash flow information: | |||||||
Cash paid during the period for: | |||||||
Interest | $ | $ | |||||
Income taxes | |||||||
Noncash transactions: | |||||||
Transfer to other real estate owned in settlement of loans | $ | $ | |||||
Sales of other real estate financed | |||||||
Right-of-use assets obtained in exchange for lease obligations | |||||||
Common shares issued in connection with acquisition | |||||||
Transfer of securities from available for sale to held to maturity |
($ in thousands) | December 31, 2019 | Impact of Adoption | January 1, 2020 | ||||||||
Assets: | |||||||||||
Loans | $ | $ | $ | ||||||||
Allowance for credit losses on loans | |||||||||||
Allowance for credit losses on held-to-maturity debt securities | |||||||||||
Deferred tax asset | |||||||||||
Liabilities: | |||||||||||
Reserve for unfunded commitments | |||||||||||
Shareholders’ Equity | |||||||||||
Retained Earnings | ( | ) |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
(in thousands, except per share data) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Net income as reported | $ | $ | $ | $ | |||||||||||
Weighted average common shares outstanding | |||||||||||||||
Additional dilutive common stock equivalents | |||||||||||||||
Weighted average diluted common shares outstanding | |||||||||||||||
Basic earnings per common share: | $ | $ | $ | $ | |||||||||||
Diluted earnings per common share: | $ | $ |
June 30, 2020 | |||||||||||||||||||
(in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Allowance for Credit Losses | Fair Value | ||||||||||||||
Available-for-sale securities: | |||||||||||||||||||
Obligations of U.S. Government-sponsored enterprises | $ | $ | $ | $ | $ | ||||||||||||||
Obligations of states and political subdivisions | ( | ) | |||||||||||||||||
Agency mortgage-backed securities | ( | ) | |||||||||||||||||
U.S. Treasury bills | |||||||||||||||||||
Corporate debt securities | — | ||||||||||||||||||
Total securities available for sale | $ | $ | $ | ( | ) | $ | $ | ||||||||||||
Held-to-maturity securities: | |||||||||||||||||||
Obligations of states and political subdivisions | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||
Agency mortgage-backed securities | ( | ) | |||||||||||||||||
Corporate debt securities | ( | ) | |||||||||||||||||
Total securities held-to-maturity | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||
Less: Allowance for credit losses | |||||||||||||||||||
Total securities held-to-maturity, net | $ |
December 31, 2019 | |||||||||||||||
(in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||
Available-for-sale securities: | |||||||||||||||
Obligations of U.S. Government-sponsored enterprises | $ | $ | $ | $ | |||||||||||
Obligations of states and political subdivisions | ( | ) | |||||||||||||
Agency mortgage-backed securities | ( | ) | |||||||||||||
U.S. Treasury Bills | |||||||||||||||
Total securities available for sale | $ | $ | $ | ( | ) | $ | |||||||||
Held-to-maturity securities: | |||||||||||||||
Obligations of states and political subdivisions | $ | $ | $ | $ | |||||||||||
Agency mortgage-backed securities | |||||||||||||||
Corporate debt securities | ( | ) | |||||||||||||
Total securities held to maturity | $ | $ | $ | ( | ) | $ |
Available for sale | Held to maturity | ||||||||||||||
(in thousands) | Amortized Cost | Estimated Fair Value | Amortized Cost | Estimated Fair Value | |||||||||||
Due in one year or less | $ | $ | $ | $ | |||||||||||
Due after one year through five years | |||||||||||||||
Due after five years through ten years | |||||||||||||||
Due after ten years | |||||||||||||||
Agency mortgage-backed securities | |||||||||||||||
$ | $ | $ | $ |
June 30, 2020 | |||||||||||||||||||||||
Less than 12 months | 12 months or more | Total | |||||||||||||||||||||
(in thousands) | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||||||
Obligations of states and political subdivisions | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Agency mortgage-backed securities | |||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
The following table represents a summary of investment securities that had an unrealized loss: | |||||||||||||||||||||||
December 31, 2019 | |||||||||||||||||||||||
Less than 12 months | 12 months or more | Total | |||||||||||||||||||||
(in thousands) | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||||||
Obligations of states and political subdivisions | |||||||||||||||||||||||
Agency mortgage-backed securities | |||||||||||||||||||||||
Corporate debt securities | |||||||||||||||||||||||
$ | $ | $ | $ | $ | $ |
(in thousands) | June 30, 2020 | December 31, 2019 | |||||
Commercial and industrial | $ | $ | |||||
Real estate: | |||||||
Commercial - investor owned | |||||||
Commercial - owner occupied | |||||||
Construction and land development | |||||||
Residential | |||||||
Total real estate loans | |||||||
Other | |||||||
Loans, before unearned loan fees | |||||||
Unearned loan fees, net | ( | ) | ( | ) | |||
Loans, including unearned loan fees | $ | $ |
(in thousands) | Commercial and industrial | CRE - investor owned | CRE - owner occupied | Construction and land development | Residential real estate | Other | Total | ||||||||||||||||||||
Allowance for credit losses on loans: | |||||||||||||||||||||||||||
Balance at March 31, 2020 | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
Provision for credit losses | |||||||||||||||||||||||||||
Charge-offs | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Recoveries | |||||||||||||||||||||||||||
Balance at June 30, 2020 | $ | $ | $ | $ | $ | $ | $ |
(in thousands) | Commercial and industrial | CRE - investor owned | CRE - owner occupied | Construction and land development | Residential real estate | Other | Total | ||||||||||||||||||||
Allowance for credit losses on loans: | |||||||||||||||||||||||||||
Balance at December 31, 2019 | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
CECL adoption | ( | ) | |||||||||||||||||||||||||
PCD loans immediately charged off | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Balance at January 1, 2020 | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
Provision for credit losses | |||||||||||||||||||||||||||
Charge-offs | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||
Recoveries | |||||||||||||||||||||||||||
Balance at June 30, 2020 | $ | $ | $ | $ | $ | $ | $ |
June 30, 2020 | |||||||||||||||||||
(in thousands) | Nonaccrual | Restructured, accruing | Loans over 90 days past due and still accruing interest | Total nonperforming loans | Nonaccrual loans with no allowance | ||||||||||||||
Commercial and industrial | $ | $ | $ | $ | $ | ||||||||||||||
Real estate: | |||||||||||||||||||
Commercial - investor owned | |||||||||||||||||||
Commercial - owner occupied | |||||||||||||||||||
Construction and land development | |||||||||||||||||||
Residential | |||||||||||||||||||
Other | |||||||||||||||||||
Total | $ | $ | $ | $ | $ |
December 31, 2019 | |||||||||||||||
(in thousands) | Nonaccrual | Restructured, accruing | Loans over 90 days past due and still accruing interest | Total nonperforming loans | |||||||||||
Commercial and industrial | $ | $ | $ | $ | |||||||||||
Real estate: | |||||||||||||||
Commercial - investor owned | |||||||||||||||
Commercial - owner occupied | |||||||||||||||
Residential | |||||||||||||||
Other | |||||||||||||||
Total | $ | $ | $ | $ |
Type of Collateral | |||||||||||
(in thousands) | Commercial Real Estate | Residential Real Estate | Blanket Lien | ||||||||
Commercial and industrial | $ | $ | $ | ||||||||
Real estate: | |||||||||||
Commercial - investor owned | |||||||||||
Commercial - owner occupied | |||||||||||
Construction and land development | |||||||||||
Residential | |||||||||||
Total | $ | $ | $ |
June 30, 2020 | June 30, 2019 | ||||||||||||||||||||
(in thousands, except for number of loans) | Number of loans | Pre-Modification Outstanding Recorded Balance | Post-Modification Outstanding Recorded Balance | Number of loans | Pre-Modification Outstanding Recorded Balance | Post-Modification Outstanding Recorded Balance | |||||||||||||||
Commercial and industrial | $ | $ | $ | $ | |||||||||||||||||
Real estate: | |||||||||||||||||||||
Commercial - owner occupied | |||||||||||||||||||||
Residential | |||||||||||||||||||||
Total | $ | $ | $ | $ |
June 30, 2020 | |||||||||||||||||||
(in thousands) | 30-89 Days Past Due | 90 or More Days Past Due | Total Past Due | Current | Total | ||||||||||||||
Commercial and industrial | $ | $ | $ | $ | $ | ||||||||||||||
Real estate: | |||||||||||||||||||
Commercial - investor owned | |||||||||||||||||||
Commercial - owner occupied | |||||||||||||||||||
Construction and land development | |||||||||||||||||||
Residential | |||||||||||||||||||
Other | |||||||||||||||||||
Total | $ | $ | $ | $ | $ |
• | Grades 1, 2, and 3 – Includes loans to borrowers with a continuous record of strong earnings, sound balance sheet condition and capitalization, ample liquidity with solid cash flow, and whose management team has experience and depth within their industry. |
• | Grade 4 – Includes loans to borrowers with positive trends in profitability, satisfactory capitalization and balance sheet condition, and sufficient liquidity and cash flow. |
• | Grade 5 – Includes loans to borrowers that may display fluctuating trends in sales, profitability, capitalization, liquidity, and cash flow. |
• | Grade 6 – Includes loans to borrowers where an adverse change or perceived weakness has occurred, but may be correctable in the near future. Alternatively, this rating category may also include circumstances where the borrower is starting to reverse a negative trend or condition, or has recently been upgraded from a 7, 8, or 9 rating. |
• | Grade 7 – Watch credits are borrowers that have experienced financial setback of a nature that is not determined to be severe or influence ‘ongoing concern’ expectations. Although possible, no loss is anticipated at this time, due to strong collateral and/or guarantor support. |
• | Grade 8 – Substandard credits include those borrowers characterized by significant losses and sustained downward trends in balance sheet condition, liquidity, and cash flow. Repayment reliance may have shifted to secondary sources. Collateral exposure may exist and additional reserves may be warranted. |
• | Grade 9 – Doubtful credits include borrowers that may show deteriorating trends that are unlikely to be corrected. Collateral values may appear insufficient for full recovery, therefore requiring a partial charge-off, or debt renegotiation with the borrower. The borrower may have declared bankruptcy or bankruptcy is likely in the near term. All doubtful rated credits will be on nonaccrual. |
Term Loans by Origination Year | ||||||||||||||||||||||||||||||||||||
(in thousands) | 2020 | 2019 | 2018 | 2017 | 2016 | Prior | Revolving Loans Converted to Term Loans | Revolving Loans | Total | |||||||||||||||||||||||||||
Commercial and industrial | ||||||||||||||||||||||||||||||||||||
Pass (1-6) | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Watch (7) | ||||||||||||||||||||||||||||||||||||
Classified (8-9) | ||||||||||||||||||||||||||||||||||||
Total Commercial and industrial | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Commercial real estate-investor owned | ||||||||||||||||||||||||||||||||||||
Pass (1-6) | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Watch (7) | ||||||||||||||||||||||||||||||||||||
Classified (8-9) | ||||||||||||||||||||||||||||||||||||
Total Commercial real estate-investor owned | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Commercial real estate-owner occupied | ||||||||||||||||||||||||||||||||||||
Pass (1-6) | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Watch (7) | ||||||||||||||||||||||||||||||||||||
Classified (8-9) | ||||||||||||||||||||||||||||||||||||
Total Commercial real estate-owner occupied | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Construction real estate | ||||||||||||||||||||||||||||||||||||
Pass (1-6) | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Watch (7) | ||||||||||||||||||||||||||||||||||||
Classified (8-9) | ||||||||||||||||||||||||||||||||||||
Total Construction real estate | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Residential real estate | ||||||||||||||||||||||||||||||||||||
Pass (1-6) | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Watch (7) | ||||||||||||||||||||||||||||||||||||
Classified (8-9) | ||||||||||||||||||||||||||||||||||||
Total residential real estate | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Other | ||||||||||||||||||||||||||||||||||||
Pass (1-6) | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Watch (7) | ||||||||||||||||||||||||||||||||||||
Classified (8-9) | ||||||||||||||||||||||||||||||||||||
Total Other | $ | $ | $ | $ | $ | $ | $ | $ | $ |
June 30, 2020 | ||||||||||||
(in thousands) | Performing | Non Performing | Total | |||||||||
Commercial and industrial | $ | $ | $ | |||||||||
Real estate: | ||||||||||||
Residential | ||||||||||||
Other | ||||||||||||
Total | $ | $ | $ |
December 31, 2019 | |||||||||||||||
(in thousands) | Pass (1-6) | Watch (7) | Classified (8 & 9) | Total* | |||||||||||
Commercial and industrial | $ | $ | $ | $ | |||||||||||
Real estate: | |||||||||||||||
Commercial - investor owned | |||||||||||||||
Commercial - owner occupied | |||||||||||||||
Construction and land development | |||||||||||||||
Residential | |||||||||||||||
Other | |||||||||||||||
Total | $ | $ | $ | $ |
(in thousands) | June 30, 2020 | December 31, 2019 | |||||
Commitments to extend credit | $ | $ | |||||
Letters of credit |
Derivative Assets | Derivative Liabilities | ||||||||||||||||||||||
June 30, 2020 | December 31, 2019 | June 30, 2020 | December 31, 2019 | ||||||||||||||||||||
(in thousands) | Notional Amount | Balance Sheet Location | Fair Value | Notional Amount | Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | |||||||||||||
Derivatives Designated as Hedging Instruments | |||||||||||||||||||||||
Interest rate swap | $ | Other Assets | $ | $ | Other Assets | $ | Other Liabilities | $ | Other Liabilities | $ | |||||||||||||
Total | $ | $ | $ | $ | |||||||||||||||||||
Derivatives not Designated as Hedging Instruments | |||||||||||||||||||||||
Interest rate swap | $ | Other Assets | $ | $ | Other Assets | $ | Other Liabilities | $ | Other Liabilities | $ | |||||||||||||
Total | $ | $ | $ | $ |
As of June 30, 2020 | |||||||||||||||||||||||
Gross Amounts Not Offset in the Statement of Financial Position | |||||||||||||||||||||||
(in thousands) | Gross Amounts Recognized | Gross Amounts Offset in the Statement of Financial Position | Net Amounts of Assets presented in the Statement of Financial Position | Financial Instruments | Fair Value Collateral Posted | Net Amount | |||||||||||||||||
Assets: | |||||||||||||||||||||||
Interest rate swap | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Liabilities: | |||||||||||||||||||||||
Interest rate swap | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Securities sold under agreements to repurchase | |||||||||||||||||||||||
As of December 31, 2019 | |||||||||||||||||||||||
Gross Amounts Not Offset in the Statement of Financial Position | |||||||||||||||||||||||
(in thousands) | Gross Amounts Recognized | Gross Amounts Offset in the Statement of Financial Position | Net Amounts of Assets presented in the Statement of Financial Position | Financial Instruments | Fair Value Collateral Posted | Net Amount | |||||||||||||||||
Assets: | |||||||||||||||||||||||
Interest rate swap | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Liabilities: | |||||||||||||||||||||||
Interest rate swap | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Securities sold under agreements to repurchase |
June 30, 2020 | |||||||||||||||
(in thousands) | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total Fair Value | |||||||||||
Assets | |||||||||||||||
Securities available for sale | |||||||||||||||
Obligations of U.S. Government-sponsored enterprises | $ | $ | $ | $ | |||||||||||
Obligations of states and political subdivisions | |||||||||||||||
Agency mortgage-backed securities | |||||||||||||||
U.S. Treasury bills | |||||||||||||||
Corporate debt securities | — | ||||||||||||||
Total securities available for sale | |||||||||||||||
Derivatives | |||||||||||||||
Total assets | $ | $ | $ | $ | |||||||||||
Liabilities | |||||||||||||||
Derivatives | $ | $ | $ | $ | |||||||||||
Total liabilities | $ | $ | $ | $ |
December 31, 2019 | |||||||||||||||
(in thousands) | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total Fair Value | |||||||||||
Assets | |||||||||||||||
Securities available for sale | |||||||||||||||
Obligations of U.S. Government-sponsored enterprises | $ | $ | $ | $ | |||||||||||
Obligations of states and political subdivisions | |||||||||||||||
Residential mortgage-backed securities | |||||||||||||||
U.S. Treasury bills | |||||||||||||||
Total securities available-for-sale | |||||||||||||||
Derivative financial instruments | |||||||||||||||
Total assets | $ | $ | $ | $ | |||||||||||
Liabilities | |||||||||||||||
Derivatives | $ | $ | $ | $ | |||||||||||
Total liabilities | $ | $ | $ | $ |
(1) | (1) | (1) | (1) | ||||||||||||||||||||
(in thousands) | Total Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total losses for the three months ended June 30, 2020 | Total losses for the six months ended June 30, 2020 | |||||||||||||||||
Impaired loans | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Other real estate | |||||||||||||||||||||||
Total | $ | $ | $ | $ | $ | $ | |||||||||||||||||
(1) The amounts represent only balances measured at fair value during the period and still held as of the reporting date. |
June 30, 2020 | December 31, 2019 | ||||||||||||||
(in thousands) | Carrying Amount | Estimated fair value | Level | Carrying Amount | Estimated fair value | Level | |||||||||
Balance sheet assets | |||||||||||||||
Securities held-to-maturity, net | Level 2 | Level 2 | |||||||||||||
Other investments | Level 2 | Level 2 | |||||||||||||
Loans held for sale | Level 2 | Level 2 | |||||||||||||
Loans, net | Level 3 | Level 3 | |||||||||||||
State tax credits, held for sale | Level 3 | Level 3 | |||||||||||||
Balance sheet liabilities | |||||||||||||||
Certificates of deposit | Level 3 | Level 3 | |||||||||||||
Subordinated debentures and notes | Level 2 | Level 2 | |||||||||||||
FHLB advances | Level 2 | Level 2 | |||||||||||||
Other borrowings and notes payable | Level 2 | Level 2 |
Amount | Maturity Date | Initial Call Date(1) | Interest Rate | ||||||||||
(in thousands) | June 30, 2020 | December 31, 2019 | |||||||||||
EFSC Clayco Statutory Trust I | $ | $ | Floats @ 3MO LIBOR + 2.85% | ||||||||||
EFSC Capital Trust II | Floats @ 3MO LIBOR + 2.65% | ||||||||||||
EFSC Statutory Trust III | Floats @ 3MO LIBOR + 1.97% | ||||||||||||
EFSC Clayco Statutory Trust II | Floats @ 3MO LIBOR + 1.83% | ||||||||||||
EFSC Statutory Trust IV | Floats @ 3MO LIBOR + 1.44% | ||||||||||||
EFSC Statutory Trust V | Floats @ 3MO LIBOR + 1.60% | ||||||||||||
EFSC Capital Trust VI | Floats @ 3MO LIBOR + 1.60% | ||||||||||||
EFSC Capital Trust VII | Floats @ 3MO LIBOR + 2.25% | ||||||||||||
JEFFCO Stat Trust I(2) | Fixed @ 10.20% | ||||||||||||
JEFFCO Stat Trust II(2) | Floats @ 3MO LIBOR + 2.75% | ||||||||||||
Trinity Capital Trust III(2) | Floats @ 3MO LIBOR + 2.70% | ||||||||||||
Trinity Capital Trust IV(2) | Fixed @ 6.88% | ||||||||||||
Trinity Capital Trust V(2) | Floats @ 3MO LIBOR + 1.65% | ||||||||||||
Total junior subordinated debentures | |||||||||||||
5.75% Fixed-to-floating rate subordinated notes | Fixed @ 5.75% until June 1, 2025, then floats @ Benchmark rate (3 month term SOFR) + 5.66% | ||||||||||||
4.75% Fixed-to-floating rate subordinated notes | Fixed @ 4.75% until November 1, 2021, then floats @ 3MO LIBOR + 3.387% | ||||||||||||
Debt issuance costs | ( | ) | ( | ) | |||||||||
Total fixed-to-floating rate subordinated notes | |||||||||||||
Total subordinated debentures and notes | $ | $ | |||||||||||
(1) Callable each quarter after initial call date. | |||||||||||||
(2) Purchase accounting adjustments are reflected in the balance and also impact the effective interest rate. | |||||||||||||
(in thousands) | Net Unrealized Gain (Loss) on Available-for-Sale Debt Securities | Unamortized Gain (Loss) on Held-to-Maturity Securities | Net Unrealized Loss on Cash Flow Hedges | Total | |||||||||||
Balance, March 31, 2020 | $ | $ | $ | ( | ) | $ | |||||||||
Net change | ( | ) | ( | ) | |||||||||||
Transfer from available-for-sale to held-to-maturity | $ | ( | ) | $ | $ | $ | |||||||||
Balance, June 30, 2020 | $ | $ | $ | ( | ) | $ | |||||||||
Balance, December 31, 2019 | $ | $ | $ | ( | ) | $ | |||||||||
Net change | ( | ) | ( | ) | |||||||||||
Transfer from available-for-sale to held-to-maturity | $ | ( | ) | $ | $ | $ | |||||||||
Balance, June 30, 2020 | $ | $ | $ | ( | ) | $ | |||||||||
(in thousands) | Net Unrealized Gain (Loss) on Available-for-Sale Debt Securities | Unamortized Gain (Loss) on Held-to-Maturity Securities | Net Unrealized Loss on Cash Flow Hedges | Total | |||||||||||
Balance, March 31, 2019 | $ | $ | ( | ) | $ | ( | ) | $ | |||||||
Net change | ( | ) | |||||||||||||
Balance, June 30, 2019 | $ | $ | ( | ) | $ | ( | ) | $ | |||||||
Balance, December 31, 2018 | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | |||||
Net change | ( | ) | |||||||||||||
Balance, June 30, 2019 | $ | $ | ( | ) | $ | ( | ) | $ |
Three months ended June 30, | |||||||||||||||||||||||
(in thousands) | 2020 | 2019 | |||||||||||||||||||||
Pre-tax | Tax effect | After-tax | Pre-tax | Tax effect | After-tax | ||||||||||||||||||
Change in unrealized gain on available-for-sale debt securities | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Reclassification of (gain) loss on held-to-maturity securities(b) | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Change in unrealized loss on cash flow hedges arising during the period | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||
Reclassification of loss on cash flow hedges(b) | |||||||||||||||||||||||
Total other comprehensive income | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Six months ended June 30, | |||||||||||||||||||||||
2020 | 2019 | ||||||||||||||||||||||
Pre-tax | Tax effect | After-tax | Pre-tax | Tax effect | After-tax | ||||||||||||||||||
Change in unrealized gain on available-for-sale debt securities | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Reclassification adjustment for realized (gain) loss on sale of available-for-sale debt securities(a) | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Reclassification of (gain) loss on held-to-maturity securities(b) | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Change in unrealized loss on cash flow hedges arising during the period | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||
Reclassification of loss on cash flow hedges(b) | |||||||||||||||||||||||
Total other comprehensive income | $ | $ | $ | $ | $ | $ |
(in thousands, except per share data) | At or for the three months ended | At or for the six months ended | |||||||||||||
June 30, 2020 | June 30, 2019 | June 30, 2020 | June 30, 2019 | ||||||||||||
EARNINGS | |||||||||||||||
Total interest income | $ | 73,191 | $ | 79,201 | $ | 149,879 | $ | 146,818 | |||||||
Total interest expense | 7,358 | 17,486 | 20,678 | 32,760 | |||||||||||
Net interest income | 65,833 | 61,715 | 129,201 | 114,058 | |||||||||||
Provision for credit losses | 19,591 | 1,722 | 41,855 | 3,198 | |||||||||||
Net interest income after provision for credit losses | 46,242 | 59,993 | 87,346 | 110,860 | |||||||||||
Total noninterest income | 9,960 | 11,964 | 23,368 | 21,194 | |||||||||||
Total noninterest expense | 37,912 | 49,054 | 76,585 | 88,892 | |||||||||||
Income before income tax expense | 18,290 | 22,903 | 34,129 | 43,162 | |||||||||||
Income tax expense | 3,656 | 4,479 | 6,627 | 8,582 | |||||||||||
Net income | $ | 14,634 | $ | 18,424 | $ | 27,502 | $ | 34,580 | |||||||
Basic earnings per share | $ | 0.56 | $ | 0.69 | $ | 1.04 | $ | 1.36 | |||||||
Diluted earnings per share | $ | 0.56 | $ | 0.68 | $ | 1.04 | $ | 1.36 | |||||||
Return on average assets | 0.72 | % | 1.05 | % | 0.71 | % | 1.07 | % | |||||||
Return on average common equity | 6.78 | % | 9.09 | % | 6.38 | % | 9.45 | % | |||||||
Return on average tangible common equity1 | 9.28 | % | 12.92 | % | 8.76 | % | 12.93 | % | |||||||
Net interest margin (tax equivalent) | 3.53 | % | 3.86 | % | 3.65 | % | 3.87 | % | |||||||
Core net interest margin1 | 3.50 | % | 3.80 | % | 3.60 | % | 3.80 | % | |||||||
Efficiency ratio | 50.02 | % | 66.58 | % | 50.20 | % | 65.72 | % | |||||||
Core efficiency ratio1 | 50.66 | % | 53.30 | % | 50.94 | % | 53.65 | % | |||||||
Book value per common share | $ | 33.13 | $ | 30.68 | |||||||||||
Tangible book value per common share1 | $ | 24.22 | $ | 21.74 | |||||||||||
ASSET QUALITY | |||||||||||||||
Net charge-offs | $ | 309 | $ | 970 | $ | 1,491 | $ | 2,796 | |||||||
Nonperforming loans | 41,473 | 19,842 | |||||||||||||
Classified assets | 96,678 | 91,715 | |||||||||||||
Nonperforming loans to total loans | 0.68 | % | 0.39 | % | |||||||||||
Nonperforming assets to total assets | 0.55 | % | 0.42 | % | |||||||||||
ACLL to total loans | 1.80 | % | 0.85 | % | |||||||||||
Net charge-offs to average loans (annualized) | 0.02 | % | 0.08 | % | 0.05 | % | 0.12 | % | |||||||
(1) A non-GAAP measure. A reconciliation has been included in this section under the caption “Use of Non-GAAP Financial Measures.” |
• | The Company was active in supporting its customers in the PPP. Details of the PPP loans are noted in the following table: |
Quarter ended | |||
(in thousands) | June 30, 2020 | ||
PPP loans outstanding, net of unearned fees | $ | 807,814 | |
Average PPP loans outstanding, net | 634,632 | ||
PPP average loan size | 224 | ||
PPP interest and fee income | 4,083 | ||
PPP unearned fees | 22,414 | ||
PPP average yield | 2.59 | % |
• | For the three and six months ended June 30, 2020, the Company had net income of $14.6 million and $27.5 million, respectively, compared to $18.4 million and $34.6 million, respectively, for the prior year periods. Earnings per diluted share for the three and six months ended June 30, 2020, was $0.56 and $1.04 per diluted share, respectively, and $0.68 and $1.36 per diluted share, for the same periods in 2019. Net income and earnings per share for the three and six months ended June 30, 2020 were impacted from $19.6 million and $41.9 million, respectively, on a pretax basis ($14.8 million and $31.5 million, respectively, after tax), of provision for credit losses. The increase in the provision for credit losses for the three and six months ending June 30, 2020 was primarily due to deterioration in the economic forecast. Net income and earnings per share for the three and six months ended June 30, 2019 were impacted from $10.3 million and $17.6 million, respectively, on a pretax basis ($8.0 million and $13.7 million, respectively, after tax), of merger-related expenses. |
• | Net interest income for the three and six months ended June 30, 2020 increased 7% and 13%, respectively, over the prior year periods primarily from higher loan and investment volumes, both of which benefited from the Trinity acquisition and growth in the loan portfolio. The three-month period also benefited from higher loan volume due to PPP loans. The benefit to net interest income from higher earning-asset volumes and a decrease in funding costs was partially offset by the decrease in LIBOR in both the three and six months ended June 30, 2020. |
• | Noninterest income for the three and six months ended June 30, 2020 decreased $2.0 million and increased $2.2 million, respectively, compared to the prior year periods. For the second quarter 2020, the increase in deposit balances provided more earnings credits to business customers on analysis, resulting in lower service charge income compared to the prior year quarter. Lower transaction volumes on credit and debit cards impacted card services revenue for the three months ended June 30, 2020. For the six months ended June 30, noninterest income increased due to a full period of income from the Trinity acquisition in wealth management and card services revenue. Tax credit income, swap fees and a claim on bank-owned life insurance also contributed to the year-over-year increase. |
• | Noninterest expense for the three and six months ended June 30, 2020 decreased $11.1 million and $12.3 million, respectively, compared to the prior year periods. The decrease is primarily due to a reduction in merger-related expenses. |
• | Deposits – Total deposits grew $928.6 million, or 15.5%, to $6.7 billion as of June 30, 2020 primarily due to PPP related deposits, government stimulus checks and organic growth. Noninterest deposit accounts represented 29.3% of total deposits at June 30, 2020, and the loan to deposit ratio was 91.6%. |
• | Asset quality – The allowance for credit losses on loans to total loans increased to 1.80% at June 30, 2020 from 0.81% at December 31, 2019. Nonperforming assets to total assets was 0.55% at June 30, 2020 compared to 0.45% at December 31, 2019. The adoption of CECL on January 1, 2020, increased nonperforming loans by $6.8 million due to the reclassification of loans previously accounted for in performing pools of loans. |
• | Subordinated notes - In the second quarter 2020, the Company issued $63.3 million of 5.75% fixed-to-floating rate subordinated notes due in 2030. The notes are callable beginning in 2025 and are included in tier 2 capital. |
• | Shareholders’ equity – Total shareholders’ equity was $868.0 million and the tangible common equity to tangible assets ratio1 was 7.81% at June 30, 2020 compared to 8.89% at December 31, 2019. Balance sheet growth from the PPP was the primary cause of the decline in the tangible common equity to tangible assets ratio. Bank regulatory capital ratios remain “well-capitalized,” with a common equity tier 1 ratio of 11.75% and a total risk-based capital ratio of 13.00%. |
Three months ended June 30, | |||||||||||||||||||||
2020 | 2019 | ||||||||||||||||||||
(in thousands) | Average Balance | Interest Income/Expense | Average Yield/ Rate | Average Balance | Interest Income/Expense | Average Yield/ Rate | |||||||||||||||
Assets | |||||||||||||||||||||
Interest-earning assets: | |||||||||||||||||||||
Taxable portfolio loans (1) | $ | 5,982,117 | $ | 63,250 | 4.25 | % | $ | 5,056,172 | $ | 68,093 | 5.40 | % | |||||||||
Tax-exempt portfolio loans (2) | 36,864 | 447 | 4.88 | 26,821 | 453 | 6.77 | |||||||||||||||
Non-core acquired loans - contractual | 13,095 | 172 | 5.28 | 12,188 | 284 | 9.35 | |||||||||||||||
Non-core acquired loans - incremental accretion | 719 | 22.08 | 910 | 29.95 | |||||||||||||||||
Total loans | 6,032,076 | 64,588 | 4.31 | 5,095,181 | 69,740 | 5.49 | |||||||||||||||
Taxable debt and equity investments | 1,076,158 | 6,814 | 2.55 | 1,120,526 | 8,009 | 2.87 | |||||||||||||||
Non-taxable debt and equity investments (2) | 285,695 | 2,406 | 3.39 | 126,003 | 1,143 | 3.64 | |||||||||||||||
Short-term investments | 177,267 | 87 | 0.20 | 111,291 | 703 | 2.53 | |||||||||||||||
Total securities and short-term investments | 1,539,120 | 9,307 | 2.43 | 1,357,820 | 9,855 | 2.91 | |||||||||||||||
Total interest-earning assets | 7,571,196 | 73,895 | 3.93 | 6,453,001 | 79,595 | 4.95 | |||||||||||||||
Noninterest-earning assets | 587,008 | 604,604 | |||||||||||||||||||
Total assets | $ | 8,158,204 | $ | 7,057,605 | |||||||||||||||||
Liabilities and Shareholders' Equity | |||||||||||||||||||||
Interest-bearing liabilities: | |||||||||||||||||||||
Interest-bearing transaction accounts | $ | 1,487,467 | $ | 244 | 0.07 | % | $ | 1,384,090 | $ | 2,134 | 0.62 | % | |||||||||
Money market accounts | 1,941,874 | 995 | 0.21 | 1,576,333 | 6,996 | 1.78 | |||||||||||||||
Savings | 590,104 | 45 | 0.03 | 562,503 | 231 | 0.16 | |||||||||||||||
Certificates of deposit | 718,529 | 3,099 | 1.73 | 815,138 | 3,758 | 1.85 | |||||||||||||||
Total interest-bearing deposits | 4,737,974 | 4,383 | 0.37 | 4,338,064 | 13,119 | 1.21 | |||||||||||||||
Subordinated debentures | 169,311 | 2,316 | 5.50 | 141,059 | 1,958 | 5.57 | |||||||||||||||
FHLB advances | 251,231 | 455 | 0.73 | 263,384 | 1,696 | 2.58 | |||||||||||||||
Securities sold under agreements to repurchase | 192,117 | 57 | 0.12 | 164,037 | 338 | 0.83 | |||||||||||||||
Other borrowed funds | 32,842 | 147 | 1.80 | 40,338 | 375 | 3.73 | |||||||||||||||
Total interest-bearing liabilities | 5,383,475 | 7,358 | 0.55 | 4,946,882 | 17,486 | 1.42 | |||||||||||||||
Noninterest bearing liabilities: | |||||||||||||||||||||
Demand deposits | 1,813,760 | 1,244,008 | |||||||||||||||||||
Other liabilities | 92,806 | 53,609 | |||||||||||||||||||
Total liabilities | 7,290,041 | 6,244,499 | |||||||||||||||||||
Shareholders' equity | 868,163 | 813,106 | |||||||||||||||||||
Total liabilities & shareholders' equity | $ | 8,158,204 | $ | 7,057,605 | |||||||||||||||||
Net interest income | $ | 66,537 | $ | 62,109 | |||||||||||||||||
Net interest spread | 3.38 | % | 3.53 | % | |||||||||||||||||
Net interest margin | 3.53 | % | 3.86 | % | |||||||||||||||||
Core net interest margin (3) | 3.50 | % | 3.80 | % |
(1) | Average balances include nonaccrual loans. The income on such loans is included in interest but is recognized only upon receipt. Loan fees, net of amortization of deferred loan origination fees and costs, included in interest income are approximately $3.6 million and $0.9 million for the three months ended June 30, 2020 and 2019 respectively. |
(2) | Non-taxable income is presented on a tax-equivalent basis using a 24.7% tax rate in 2020 and 2019. The tax-equivalent adjustments were $0.7 million and $0.4 million for the three months ended June 30, 2020 and 2019, respectively. |
(3) | A non-GAAP measure. A reconciliation has been included in this section under the caption “Use of Non-GAAP Financial measures.” |
Six months ended June 30, | |||||||||||||||||||||
2020 | 2019 | ||||||||||||||||||||
(in thousands) | Average Balance | Interest Income/Expense | Average Yield/ Rate | Average Balance | Interest Income/Expense | Average Yield/ Rate | |||||||||||||||
Assets | |||||||||||||||||||||
Interest-earning assets: | |||||||||||||||||||||
Taxable portfolio loans (1) | $ | 5,640,977 | $ | 128,569 | 4.58 | % | $ | 4,763,916 | $ | 127,320 | 5.39 | % | |||||||||
Tax-exempt portfolio loans (2) | 37,019 | 938 | 5.10 | 27,418 | 878 | 6.46 | |||||||||||||||
Non-core acquired loans - contractual | 14,163 | 379 | 5.38 | 13,564 | 605 | 8.99 | |||||||||||||||
Non-core acquired loans - incremental accretion | 1,992 | 28.29 | 2,067 | 30.74 | |||||||||||||||||
Total loans | 5,692,159 | 131,878 | 4.66 | 4,804,898 | 130,870 | 5.49 | |||||||||||||||
Taxable debt and equity investments | 1,096,703 | 14,544 | 2.67 | 976,875 | 13,707 | 2.83 | |||||||||||||||
Non-taxable debt and equity investments (2) | 257,707 | 4,384 | 3.42 | 95,823 | 1,737 | 3.66 | |||||||||||||||
Short-term investments | 134,758 | 387 | 0.58 | 106,752 | 1,150 | 2.17 | |||||||||||||||
Total securities and short-term investments | 1,489,168 | 19,315 | 2.61 | 1,179,450 | 16,594 | 2.84 | |||||||||||||||
Total interest-earning assets | 7,181,327 | 151,193 | 4.23 | 5,984,348 | 147,464 | 4.97 | |||||||||||||||
Noninterest-earning assets | 579,577 | 525,540 | |||||||||||||||||||
Total assets | $ | 7,760,904 | $ | 6,509,888 | |||||||||||||||||
Liabilities and Shareholders' Equity | |||||||||||||||||||||
Interest-bearing liabilities: | |||||||||||||||||||||
Interest-bearing transaction accounts | $ | 1,431,311 | $ | 1,581 | 0.22 | % | $ | 1,231,537 | $ | 3,924 | 0.64 | % | |||||||||
Money market accounts | 1,876,482 | 5,735 | 0.61 | 1,549,255 | 13,511 | 1.76 | |||||||||||||||
Savings | 566,549 | 188 | 0.07 | 431,843 | 414 | 0.19 | |||||||||||||||
Certificates of deposit | 755,871 | 6,767 | 1.80 | 763,988 | 7,090 | 1.87 | |||||||||||||||
Total interest-bearing deposits | 4,630,213 | 14,271 | 0.62 | 3,976,623 | 24,939 | 1.26 | |||||||||||||||
Subordinated debentures | 155,303 | 4,235 | 5.48 | 132,653 | 3,606 | 5.48 | |||||||||||||||
FHLB advances | 235,842 | 1,350 | 1.15 | 239,535 | 3,094 | 2.60 | |||||||||||||||
Securities sold under agreements to repurchase | 197,002 | 419 | 0.43 | 175,603 | 611 | 0.70 | |||||||||||||||
Other borrowed funds | 33,556 | 403 | 2.42 | 27,689 | 510 | 3.71 | |||||||||||||||
Total interest-bearing liabilities | 5,251,916 | 20,678 | 0.79 | 4,552,103 | 32,760 | 1.45 | |||||||||||||||
Noninterest bearing liabilities: | |||||||||||||||||||||
Demand deposits | 1,564,513 | 1,166,595 | |||||||||||||||||||
Other liabilities | 77,876 | 52,994 | |||||||||||||||||||
Total liabilities | 6,894,305 | 5,771,692 | |||||||||||||||||||
Shareholders' equity | 866,599 | 738,196 | |||||||||||||||||||
Total liabilities & shareholders' equity | $ | 7,760,904 | $ | 6,509,888 | |||||||||||||||||
Net interest income | $ | 130,515 | $ | 114,704 | |||||||||||||||||
Net interest spread | 3.44 | % | 3.52 | % | |||||||||||||||||
Net interest margin | 3.65 | % | 3.87 | % | |||||||||||||||||
Core net interest margin (3) | 3.60 | % | 3.80 | % | |||||||||||||||||
(1) | Average balances include non-accrual loans. The income on such loans is included in interest but is recognized only upon receipt. Loan fees, net of amortization of deferred loan origination fees and costs, included in interest income are approximately $4.9 million and $2.1 million for the six months ended June 30, 2020 and 2019 respectively. |
(2) | Non-taxable income is presented on a fully tax-equivalent basis using a 24.7% tax rate in 2020 and 2019. The tax-equivalent adjustments were $1.3 million and $0.6 million for the six months ended June 30, 2020 and 2019, respectively. |
(3) | A non-GAAP measure. A reconciliation has been included in this MD&A section under the caption "Use of Non-GAAP Financial measures." |
2020 compared to 2019 | |||||||||||||||||||||||
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
Increase (decrease) due to | Increase (decrease) due to | ||||||||||||||||||||||
(in thousands) | Volume(1) | Rate(2) | Net | Volume(1) | Rate(2) | Net | |||||||||||||||||
Interest earned on: | |||||||||||||||||||||||
Taxable loans | $ | 11,129 | $ | (15,972 | ) | $ | (4,843 | ) | $ | 21,761 | $ | (20,512 | ) | $ | 1,249 | ||||||||
Tax-exempt loans (3) | 141 | (147 | ) | (6 | ) | 269 | (209 | ) | 60 | ||||||||||||||
Non-core acquired loans | 83 | (386 | ) | (303 | ) | 116 | (417 | ) | (301 | ) | |||||||||||||
Taxable debt and equity investments | (313 | ) | (882 | ) | (1,195 | ) | 1,646 | (809 | ) | 837 | |||||||||||||
Non-taxable debt and equity investments (3) | 1,346 | (83 | ) | 1,263 | 2,766 | (119 | ) | 2,647 | |||||||||||||||
Short-term investments | 264 | (880 | ) | (616 | ) | 245 | (1,008 | ) | (763 | ) | |||||||||||||
Total interest-earning assets | $ | 12,650 | $ | (18,350 | ) | $ | (5,700 | ) | $ | 26,803 | $ | (23,074 | ) | $ | 3,729 | ||||||||
Interest paid on: | |||||||||||||||||||||||
Interest-bearing transaction accounts | $ | 147 | $ | (2,037 | ) | $ | (1,890 | ) | $ | 557 | $ | (2,900 | ) | $ | (2,343 | ) | |||||||
Money market accounts | 1,313 | (7,314 | ) | (6,001 | ) | 2,415 | (10,191 | ) | (7,776 | ) | |||||||||||||
Savings | 10 | (196 | ) | (186 | ) | 102 | (328 | ) | (226 | ) | |||||||||||||
Certificates of deposit | (426 | ) | (233 | ) | (659 | ) | (71 | ) | (252 | ) | (323 | ) | |||||||||||
Subordinated debentures | 383 | (25 | ) | 358 | 628 | 1 | 629 | ||||||||||||||||
FHLB advances | (75 | ) | (1,166 | ) | (1,241 | ) | (47 | ) | (1,697 | ) | (1,744 | ) | |||||||||||
Securities sold under agreements to repurchase | 50 | (331 | ) | (281 | ) | 68 | (260 | ) | (192 | ) | |||||||||||||
Other borrowings | (60 | ) | (168 | ) | (228 | ) | 94 | (201 | ) | (107 | ) | ||||||||||||
Total interest-bearing liabilities | 1,342 | (11,470 | ) | (10,128 | ) | 3,746 | (15,828 | ) | (12,082 | ) | |||||||||||||
Net interest income | $ | 11,308 | $ | (6,880 | ) | $ | 4,428 | $ | 23,057 | $ | (7,246 | ) | $ | 15,811 |
2020 compared to 2019 | |||||||||||||||||||||||||||||
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||
(in thousands) | 2020 | 2019 | Increase (decrease) | 2020 | 2019 | Increase (decrease) | |||||||||||||||||||||||
Service charges on deposit accounts | $ | 2,616 | $ | 3,366 | $ | (750 | ) | (22 | )% | $ | 5,759 | $ | 6,301 | $ | (542 | ) | (9 | )% | |||||||||||
Wealth management revenue | 2,326 | 2,661 | (335 | ) | (13 | )% | 4,827 | 4,653 | 174 | 4 | % | ||||||||||||||||||
Card services revenue | 2,225 | 2,461 | (236 | ) | (10 | )% | 4,472 | 4,251 | 221 | 5 | % | ||||||||||||||||||
Tax credit income | (221 | ) | 572 | (793 | ) | (139 | )% | 1,815 | 730 | 1,085 | 149 | % | |||||||||||||||||
Miscellaneous income | 3,014 | 2,904 | 110 | 4 | % | 6,495 | 5,259 | 1,236 | 24 | % | |||||||||||||||||||
Total noninterest income | $ | 9,960 | $ | 11,964 | $ | (2,004 | ) | (17 | )% | $ | 23,368 | $ | 21,194 | $ | 2,174 | 10 | % | ||||||||||||
2020 compared to 2019 | |||||||||||||||||||||||||||||
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||
(in thousands) | 2020 | 2019 | Increase (decrease) | 2020 | 2019 | Increase (decrease) | |||||||||||||||||||||||
Employee compensation and benefits | $ | 22,389 | $ | 20,687 | $ | 1,702 | 8 | % | $ | 44,074 | $ | 40,039 | $ | 4,035 | 10 | % | |||||||||||||
Occupancy | 3,185 | 3,188 | (3 | ) | — | % | 6,532 | 5,825 | 707 | 12 | % | ||||||||||||||||||
Data processing | 2,144 | 2,458 | (314 | ) | (13 | )% | 4,226 | 4,364 | (138 | ) | (3 | )% | |||||||||||||||||
Professional fees | 1,287 | 1,037 | 250 | 24 | % | 2,149 | 1,783 | 366 | 21 | % | |||||||||||||||||||
Merger-related expenses | — | 10,306 | (10,306 | ) | (100 | )% | — | 17,576 | (17,576 | ) | (100 | )% | |||||||||||||||||
Other | 8,907 | 11,378 | (2,471 | ) | (22 | )% | 19,604 | 19,305 | 299 | 2 | % | ||||||||||||||||||
Total noninterest expense | $ | 37,912 | $ | 49,054 | $ | (11,142 | ) | (23 | )% | $ | 76,585 | $ | 88,892 | $ | (12,307 | ) | (14 | )% | |||||||||||
Efficiency ratio | 50.02 | % | 66.58 | % | (16.56 | )% | 50.20 | % | 65.72 | % | (15.52 | )% | |||||||||||||||||
Core efficiency ratio1 | 50.66 | % | 53.30 | % | (2.64 | )% | 50.94 | % | 53.65 | % | (2.71 | )% | |||||||||||||||||
1A non-GAAP measure. A reconciliation has been included in this section under the caption “Use of Non-GAAP Financial Measures.” |
(in thousands) | June 30, 2020 | December 31, 2019 | Increase (decrease) | |||||||||||
Total cash and cash equivalents | $ | 348,727 | $ | 167,256 | $ | 181,471 | 108 | % | ||||||
Securities | 1,343,895 | 1,316,483 | 27,412 | 2 | % | |||||||||
Loans held for investment | 6,140,051 | 5,457,517 | 682,534 | 13 | % | |||||||||
Total assets | 8,357,501 | 7,333,791 | 1,023,710 | 14 | % | |||||||||
Deposits | 6,699,580 | 5,771,023 | 928,557 | 16 | % | |||||||||
Total liabilities | 7,489,538 | 6,466,606 | 1,022,932 | 16 | % | |||||||||
Total shareholders’ equity | 867,963 | 867,185 | 778 | — | % |
(in thousands) | June 30, 2020 | December 31, 2019 | Increase (decrease) | |||||||||||
Commercial and industrial | $ | 3,143,197 | $ | 2,361,157 | $ | 782,040 | 33 | % | ||||||
Commercial real estate - investor owned | 1,309,895 | 1,299,884 | 10,011 | 1 | % | |||||||||
Commercial real estate - owner occupied | 738,549 | 697,437 | 41,112 | 6 | % | |||||||||
Construction and land development | 481,221 | 457,273 | 23,948 | 5 | % | |||||||||
Residential real estate | 326,992 | 366,261 | (39,269 | ) | (11 | )% | ||||||||
Other | 140,197 | 132,325 | 7,872 | 6 | % | |||||||||
Loans held for investment | $ | 6,140,051 | $ | 5,314,337 | $ | 825,714 | 16 | % |
(in thousands) | June 30, 2020 | December 31, 2019 | Increase (decrease) | |||||||||||
C&I - general | $ | 1,057,899 | $ | 1,186,667 | $ | (128,768 | ) | (11 | )% | |||||
CRE investor owned - general | 1,302,235 | 1,290,258 | 11,977 | 1 | % | |||||||||
CRE owner occupied - general | 599,800 | 582,579 | 17,221 | 3 | % | |||||||||
PPP | 807,814 | — | 807,814 | NM | ||||||||||
Enterprise value lending1 | 382,828 | 428,896 | (46,068 | ) | (11 | )% | ||||||||
Life insurance premium financing1 | 520,705 | 472,822 | 47,883 | 10 | % | |||||||||
Residential real estate - general | 326,697 | 366,261 | (39,564 | ) | (11 | )% | ||||||||
Construction and land development - general | 455,686 | 428,681 | 27,005 | 6 | % | |||||||||
Tax credits1 | 363,222 | 294,210 | 69,012 | 23 | % | |||||||||
Agriculture1 | 191,093 | 139,873 | 51,220 | 37 | % | |||||||||
Other | 132,072 | 124,090 | 7,982 | 6 | % | |||||||||
Total loans | $ | 6,140,051 | $ | 5,314,337 | $ | 825,714 | 16 | % | ||||||
Note: Certain prior period amounts have been reclassified among the categories to conform to the current period presentation. | ||||||||||||||
1Specialized categories may include a mix of C&I, CRE, construction and land development, or other loans. |
(in thousands) | June 30, 2020 | ||
Commercial and industrial | $ | 171,108 | |
Commercial real estate | 404,295 | ||
Construction and land development | 88,368 | ||
Residential real estate | 21,762 | ||
Other | 134 | ||
Loans held for investment | $ | 685,667 |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
(in thousands) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Allowance, at beginning of period | $ | 92,187 | $ | 43,095 | $ | 43,288 | $ | 43,476 | |||||||
CECL adoption | — | — | 28,387 | — | |||||||||||
PCD loans immediately charged-off | — | — | (1,680 | ) | — | ||||||||||
Allowance at beginning of period, adjusted for adoption of CECL | 92,187 | 43,095 | 69,995 | 43,476 | |||||||||||
Charge-offs: | |||||||||||||||
Commercial and industrial | (3,303 | ) | (1,380 | ) | (3,366 | ) | (3,233 | ) | |||||||
Real estate: | |||||||||||||||
Commercial | (224 | ) | (431 | ) | (226 | ) | (587 | ) | |||||||
Construction and land development | — | — | (31 | ) | (45 | ) | |||||||||
Residential | (32 | ) | (26 | ) | (154 | ) | (93 | ) | |||||||
Other | (105 | ) | (53 | ) | (191 | ) | (182 | ) | |||||||
Total charge-offs | (3,664 | ) | (1,890 | ) | (3,968 | ) | (4,140 | ) | |||||||
Recoveries: | |||||||||||||||
Commercial and industrial | 293 | 32 | 797 | 61 | |||||||||||
Real estate: | |||||||||||||||
Commercial | 2,763 | 58 | 2,846 | 67 | |||||||||||
Construction and land development | 29 | 489 | 69 | 498 | |||||||||||
Residential | 226 | 124 | 383 | 488 | |||||||||||
Other | 45 | 217 | 62 | 230 | |||||||||||
Total recoveries | 3,356 | 920 | 4,157 | 1,344 | |||||||||||
Net (charge-offs) recoveries | (308 | ) | (970 | ) | 189 | (2,796 | ) | ||||||||
Provision for credit losses | 18,391 | 1,722 | 40,086 | 3,198 | |||||||||||
Other | — | (25 | ) | — | (56 | ) | |||||||||
Allowance, at end of period | $ | 110,270 | $ | 43,822 | $ | 110,270 | $ | 43,822 |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
(in thousands) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Provision for loan losses | $ | 18,391 | $ | 1,722 | $ | 40,086 | $ | 3,198 | |||||||
Provision for off-balance sheet commitments | 1,206 | — | 2,055 | — | |||||||||||
Provision for held-to-maturity securities | 342 | — | 342 | — | |||||||||||
Recovery for accrued interest | (348 | ) | — | (628 | ) | — | |||||||||
Provision for credit losses | $ | 19,591 | $ | 1,722 | $ | 41,855 | $ | 3,198 |
(in thousands) | June 30, 2020 | December 31, 2019 | June 30, 2019 | ||||||||
Nonaccrual loans | $ | 36,867 | $ | 26,096 | $ | 15,659 | |||||
Loans past due 90 days or more and still accruing interest | 886 | 250 | 3,999 | ||||||||
Troubled debt restructurings | 3,720 | 79 | 184 | ||||||||
Total nonperforming loans | 41,473 | 26,425 | 19,842 | ||||||||
Other real estate | 4,874 | 6,344 | 10,531 | ||||||||
Total nonperforming assets | $ | 46,347 | $ | 32,769 | $ | 30,373 | |||||
Total assets | $ | 8,357,501 | $ | 7,333,791 | $ | 7,181,855 | |||||
Total loans | 6,140,051 | 5,314,337 | 5,149,497 | ||||||||
Nonperforming loans to total loans | 0.68 | % | 0.50 | % | 0.39 | % | |||||
Nonperforming assets to total assets | 0.55 | % | 0.45 | % | 0.42 | % | |||||
ACLL to nonperforming loans | 266 | % | 164 | % | 221 | % |
(in thousands) | June 30, 2020 | December 31, 2019 | June 30, 2019 | ||||||||
Commercial and industrial | $ | 31,938 | $ | 22,578 | $ | 15,112 | |||||
Commercial real estate | 4,789 | 2,516 | 1,670 | ||||||||
Construction and land development | 207 | — | — | ||||||||
Residential real estate | 4,499 | 1,330 | 3,060 | ||||||||
Other | 40 | 1 | — | ||||||||
Total | $ | 41,473 | $ | 26,425 | $ | 19,842 |
Six months ended June 30, | |||||||
(in thousands) | 2020 | 2019 | |||||
Nonperforming loans, beginning of period | $ | 26,425 | $ | 16,745 | |||
CECL adoption | 8,462 | — | |||||
PCD loans immediately charged off | (1,680 | ) | — | ||||
Nonperforming loans, January 1 | $ | 33,207 | $ | 16,745 | |||
Additions to nonaccrual loans | 12,154 | 10,605 | |||||
Additions to restructured loans | 3,750 | — | |||||
Charge-offs | (3,970 | ) | (3,965 | ) | |||
Other principal reductions | (4,250 | ) | (5,136 | ) | |||
Moved to other real estate | — | (1,732 | ) | ||||
Moved to performing | (6 | ) | (674 | ) | |||
Loans past due 90 days or more and still accruing interest | 588 | 3,999 | |||||
Nonperforming loans, end of period | $ | 41,473 | $ | 19,842 |
Six months ended June 30, | |||||||
(in thousands) | 2020 | 2019 | |||||
Other real estate beginning of period | $ | 6,344 | $ | 469 | |||
Additions and expenses capitalized to prepare property for sale | — | 7,783 | |||||
Additions from acquisition | — | 4,512 | |||||
Writedowns in value | (856 | ) | — | ||||
Sales | (615 | ) | (2,233 | ) | |||
Other real estate end of period | $ | 4,873 | $ | 10,531 |
(in thousands) | June 30, 2020 | December 31, 2019 | Increase (decrease) | |||||||||||
Noninterest-bearing deposit accounts | $ | 1,965,868 | $ | 1,327,348 | $ | 638,520 | 48 | % | ||||||
Interest-bearing transaction accounts | 1,508,535 | 1,367,444 | 141,091 | 10 | % | |||||||||
Money market accounts | 1,962,916 | 1,713,615 | 249,301 | 15 | % | |||||||||
Savings accounts | 603,095 | 536,169 | 66,926 | 12 | % | |||||||||
Certificates of deposit: | ||||||||||||||
Brokered | 85,414 | 215,758 | (130,344 | ) | (60 | )% | ||||||||
Other | 573,752 | 610,689 | (36,937 | ) | (6 | )% | ||||||||
Total deposits | $ | 6,699,580 | $ | 5,771,023 | $ | 928,557 | 16 | % | ||||||
Non-time deposits / total deposits | 90 | % | 86 | % | ||||||||||
Demand deposits / total deposits | 29 | % | 23 | % |
• | increase from net income of $27.5 million, |
• | net increase in fair value of securities and cash flow hedges of $15.1 million, |
• | decrease from CECL adoption of $18.1 million, |
• | decrease from dividends paid on common shares of $9.5 million, |
• | increase from the issuance under equity compensation plans of $1.1 million, and |
• | decrease from share repurchases of $15.3 million. |
(in thousands) | June 30, 2020 | December 31, 2019 | Well Capitalized Minimum % | Minimum Capital Requirement Including Capital Conservation Buffer | ||||||||
Total capital to risk-weighted assets | 14.40 | % | 12.90 | % | N/A | 10.50 | % | |||||
Tier 1 capital to risk-weighted assets | 11.37 | 11.40 | N/A | 8.50 | ||||||||
Common equity tier 1 capital to risk-weighted assets | 9.91 | 9.90 | N/A | 7.00 | ||||||||
Leverage ratio (Tier 1 capital to average assets) | 9.16 | 10.05 | N/A | 4.00 | ||||||||
Tangible common equity to tangible assets1 | 7.81 | 8.89 | N/A | |||||||||
Total risk-based capital | $ | 919,693 | $ | 804,273 | ||||||||
Tier 1 capital | 726,574 | 710,480 | ||||||||||
Common equity tier 1 capital | 632,919 | 616,825 | ||||||||||
1 Not a required regulatory capital ratio |
(in thousands) | June 30, 2020 | December 31, 2019 | Well Capitalized Minimum % | Minimum Capital Requirement Including Capital Conservation Buffer | |||||||||
Total capital to risk-weighted assets | 13.00 | % | 12.40 | % | 10.00 | % | 10.50 | % | |||||
Tier 1 capital to risk-weighted assets | 11.75 | 11.70 | 8.00 | 8.50 | |||||||||
Common equity tier 1 capital to risk-weighted assets | 11.75 | 11.69 | 6.50 | 7.00 | |||||||||
Leverage ratio (Tier 1 capital to average assets) | 9.48 | 10.31 | 5.00 | 4.00 | |||||||||
Total risk-based capital | $ | 829,134 | $ | 769,254 | |||||||||
Tier 1 capital | 749,402 | 725,461 | |||||||||||
Common equity tier 1 capital | 749,347 | 725,406 |
For the three months ended | At or for the six months ended | ||||||||||||||
(in thousands) | June 30, 2020 | June 30, 2019 | June 30, 2020 | June 30, 2019 | |||||||||||
Net interest income | $ | 65,833 | $ | 61,715 | $ | 129,201 | $ | 114,058 | |||||||
Less: Incremental accretion income | 719 | 910 | 1,992 | 2,067 | |||||||||||
Core net interest income | 65,114 | 60,805 | 127,209 | 111,991 | |||||||||||
Total noninterest income | 9,960 | 11,964 | 23,368 | 21,194 | |||||||||||
Less: Gain on sale of investment securities | — | — | 4 | — | |||||||||||
Less: Other income from non-core acquired assets | — | 2 | — | 367 | |||||||||||
Less: Other non-core income | 265 | 266 | 265 | 266 | |||||||||||
Core noninterest income | 9,695 | 11,696 | 23,099 | 20,561 | |||||||||||
Total core revenue | 74,809 | 72,501 | 150,308 | 132,552 | |||||||||||
Total noninterest expense | 37,912 | 49,054 | 76,585 | 88,892 | |||||||||||
Less: Other expenses related to non-core acquired loans | 12 | 103 | 24 | 206 | |||||||||||
Less: Merger related expenses | — | 10,306 | — | 17,576 | |||||||||||
Core noninterest expense | 37,900 | 38,645 | 76,561 | 71,110 | |||||||||||
Core efficiency ratio | 50.66 | % | 53.30 | % | 50.94 | % | 53.65 | % |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
(in thousands) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Net interest income | $ | 66,537 | $ | 62,109 | $ | 130,515 | $ | 114,704 | |||||||
Less: Incremental accretion income | 719 | 910 | 1,992 | 2,067 | |||||||||||
Core net interest income, tax equivalent | $ | 65,818 | $ | 61,199 | $ | 128,523 | $ | 112,637 | |||||||
Average earning assets | $ | 7,571,196 | $ | 6,453,005 | $ | 7,181,327 | $ | 5,984,348 | |||||||
Reported net interest margin | 3.53 | % | 3.86 | % | 3.65 | % | 3.87 | % | |||||||
Core net interest margin | 3.50 | % | 3.80 | % | 3.60 | % | 3.80 | % |
(in thousands) | June 30, 2020 | December 31, 2019 | |||||
Total shareholders' equity | $ | 867,963 | $ | 867,185 | |||
Less: Goodwill | 210,344 | 210,344 | |||||
Less: Intangible assets | 23,196 | 26,076 | |||||
Tangible common equity | $ | 634,423 | $ | 630,765 | |||
Total assets | $ | 8,357,501 | $ | 7,333,791 | |||
Less: Goodwill | 210,344 | 210,344 | |||||
Less: Intangible assets, net | 23,196 | 26,076 | |||||
Tangible assets | $ | 8,123,961 | $ | 7,097,371 | |||
Tangible common equity to tangible assets | 7.81 | % | 8.89 | % |
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
(in thousands) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Average shareholder’s equity | $ | 868,163 | $ | 813,106 | $ | 866,599 | $ | 738,196 | |||||||
Less: Average goodwill | 210,344 | 211,251 | 210,344 | 176,529 | |||||||||||
Less: Average intangible assets, net | 23,873 | 29,965 | 24,587 | 22,261 | |||||||||||
Average tangible common equity | $ | 633,946 | $ | 571,890 | $ | 631,668 | $ | 539,406 |
Rate Shock1 | Annual % change in net interest income |
+ 300 bp | 7.8% |
+ 200 bp | 4.9% |
+ 100 bp | 2.1% |
1 Due to the current levels of interest rates, the downward shock scenarios are not shown. |
Exhibit No. | Description |
2.1 |
3.1 |
3.2 |
3.3 |
3.4 |
3.5 |
3.6 |
3.7 |
3.8 |
3.9 |
4.1 | Long-term borrowing instruments are omitted pursuant to Item 601(b)(4)(iii) of Regulation S-K. The Company undertakes to furnish copies of such instruments to the Securities and Exchange Commission upon request. |
*31.1 |
*31.2 |
**32.1 |
**32.2 |
101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
101.SCH | XBRL Taxonomy Extension Schema Document. |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. |
101.DEF | XBRL Taxonomy Extension Definitions Linkbase Document. |
104 | The cover page of Enterprise Financial Services Corp’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, formatted in Inline XBRL (contained in Exhibit 101). |
ENTERPRISE FINANCIAL SERVICES CORP | |||
By: | /s/ James B. Lally | ||
James B. Lally | |||
Chief Executive Officer | |||
By: | /s/ Keene S. Turner | ||
Keene S. Turner | |||
Chief Financial Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Enterprise Financial Services Corp; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
By: | /s/ James B. Lally | Date: | July 24, 2020 |
James B. Lally | |||
Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Enterprise Financial Services Corp; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
By: | /s/ Keene S. Turner | Date: | July 24, 2020 |
Keene S. Turner | |||
Chief Financial Officer |
/s/ James B. Lally |
/s/ Keene S. Turner |
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Jun. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Assets | ||
Collateral pledged | $ 47,085 | $ 15,285 |
Shareholders' equity: | ||
Preferred stock, par value | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 45,000,000 | 45,000,000 |
Common stock, shares issued | 28,176,087 | 28,067,087 |
Treasury stock, shares | 1,980,093 | 1,523,842 |
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 14,634 | $ 18,424 | $ 27,502 | $ 34,580 |
Other comprehensive income (loss), after-tax: | ||||
Change in unrealized gain on available-for-sale debt securities | 10,984 | 12,842 | 21,548 | 24,344 |
Reclassification adjustment for realized (gain) loss on sale of available-for-sale debt securities | 0 | 0 | (3) | 220 |
Reclassification of (gain) loss on held-to-maturity securities | (329) | 3 | (485) | 5 |
Change in unrealized loss on cash flow hedges arising during the period | (1,177) | (1,265) | (6,357) | (2,217) |
Reclassification of loss on cash flow hedges | 234 | 4 | 357 | 4 |
Total other comprehensive income, after-tax | 9,712 | 11,584 | 15,060 | 22,356 |
Comprehensive income | $ 24,346 | $ 30,008 | $ 42,562 | $ 56,936 |
Condensed Consolidated Statements of Shareholders' Equity - USD ($) $ in Thousands |
Total |
Common Stock [Member] |
Treasury Stock [Member] |
Additional Paid-in Capital [Member] |
Retained Earnings [Member] |
Total |
---|---|---|---|---|---|---|
Beginning balance at Dec. 31, 2018 | $ 603,804 | $ 239 | $ (42,655) | $ 350,936 | $ 304,566 | $ (9,282) |
Net income | 34,580 | 0 | 0 | 0 | 34,580 | 0 |
Other comprehensive income | 22,356 | 0 | 0 | 0 | 0 | 22,356 |
Comprehensive income | 56,936 | 0 | 0 | 0 | 34,580 | 22,356 |
Cash dividends paid on common shares | (7,798) | 0 | 0 | 0 | (7,798) | 0 |
Issuance under equity compensation plans, net | (1,233) | 1 | 0 | (1,234) | 0 | 0 |
Share-based Payment Arrangement, Noncash Expense | 1,907 | 0 | 0 | 1,907 | 0 | 0 |
Shares issued in connection with acquisition | 171,885 | 40 | 0 | 171,845 | 0 | 0 |
Ending balance at Jun. 30, 2019 | 825,501 | 280 | (42,655) | 523,454 | 331,348 | 13,074 |
Beginning balance at Mar. 31, 2019 | 797,835 | 280 | (42,655) | 521,761 | 316,959 | 1,490 |
Net income | 18,424 | 0 | 0 | 0 | 18,424 | 0 |
Other comprehensive income | 11,584 | 0 | 0 | 0 | 0 | 11,584 |
Comprehensive income | 30,008 | 0 | 0 | 0 | 18,424 | 11,584 |
Cash dividends paid on common shares | (4,035) | 0 | 0 | 0 | 4,035 | 0 |
Issuance under equity compensation plans, net | 707 | 0 | 0 | 707 | 0 | 0 |
Share-based Payment Arrangement, Noncash Expense | 986 | 0 | 0 | 986 | 0 | 0 |
Ending balance at Jun. 30, 2019 | 825,501 | 280 | (42,655) | 523,454 | 331,348 | 13,074 |
Beginning balance at Dec. 31, 2019 | 867,185 | 281 | (58,181) | 526,599 | 380,737 | 17,749 |
Net income | 27,502 | 0 | 0 | 0 | 27,502 | 0 |
Other comprehensive income | 15,060 | 0 | 0 | 0 | 0 | 15,060 |
Comprehensive income | 42,562 | 0 | 0 | 0 | 27,502 | 15,060 |
Cash dividends paid on common shares | (9,458) | 0 | 0 | 0 | (9,458) | 0 |
Repurchase of common stock | (15,347) | 0 | (15,347) | 0 | 0 | 0 |
Issuance under equity compensation plans, net | (894) | 0 | 0 | (894) | 0 | 0 |
Share-based Payment Arrangement, Noncash Expense | 2,029 | 0 | 0 | 2,029 | 0 | 0 |
Reclassification for the adoption of new accounting standards | (18,114) | 0 | 0 | 0 | (18,114) | 0 |
Ending balance at Jun. 30, 2020 | 867,963 | 281 | (73,528) | 527,734 | 380,667 | 32,809 |
Beginning balance at Mar. 31, 2020 | 846,436 | 281 | (73,528) | 525,838 | 370,748 | 23,097 |
Net income | 14,634 | 0 | 0 | 0 | 14,634 | 0 |
Other comprehensive income | 9,712 | 0 | 0 | 0 | 0 | 9,712 |
Comprehensive income | 24,346 | 0 | 0 | 0 | 14,634 | 9,712 |
Cash dividends paid on common shares | (4,715) | 0 | 0 | 0 | (4,715) | 0 |
Issuance under equity compensation plans, net | 827 | 0 | 0 | 827 | 0 | 0 |
Share-based Payment Arrangement, Noncash Expense | 1,069 | 0 | 0 | 1,069 | 0 | 0 |
Ending balance at Jun. 30, 2020 | $ 867,963 | $ 281 | $ (73,528) | $ 527,734 | $ 380,667 | $ 32,809 |
Condensed Consolidated Statements of Shareholders' Equity (Parenthetical) - $ / shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Cash dividends paid on common shares, per share | $ 0.36 | $ 0.29 |
Issuance under equity compensation plans, shares | 109,000 | 103,430 |
Summary of Significant Accounting Policies |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies used by Enterprise Financial Services Corp (the “Company,” “EFSC,” or “Enterprise”) in the preparation of the condensed consolidated financial statements are summarized below: Business and Consolidation Enterprise is a financial holding company that provides a full range of banking and wealth management services to individuals and corporate customers located in the Arizona, Kansas, Missouri, and New Mexico markets through its banking subsidiary, Enterprise Bank & Trust. Operating results for the three and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for any other interim period or for the year ending December 31, 2020. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC. Basis of Financial Statement Presentation The accompanying unaudited condensed consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Except as disclosed herein, there has been no material change in the information disclosed in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. The condensed consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. All intercompany accounts and transactions have been eliminated. In the opinion of management, the consolidated financial statements contain all adjustments (consisting of normal recurring accruals) considered necessary for the fair presentation of the statements of financial position, results of operations, and cash flow for the interim periods. Recently Adopted Accounting Pronouncements On January 1, 2020, the Company adopted ASU 2016-13 “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which replaces the incurred loss methodology with an expected loss methodology commonly referred to as the CECL methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures such as loan commitments, standby letters of credit, financial guarantees, and other similar instruments. In addition, this standard made changes to the accounting for available-for-sale debt securities, including the requirement for credit losses to be presented as an allowance rather than as a write-down on available-for-sale debt securities. The Company adopted this standard using the modified retrospective method for all financial assets measured at amortized cost, and off-balance-sheet credit exposures. Results for reporting periods beginning after January 1, 2020 are presented under the new standard while prior period amounts continue to be reported in accordance with previously applicable GAAP. The Company recorded an after-tax decrease to retained earnings of $18.1 million as of January 1, 2020 for the cumulative effect of adopting this standard. The Company adopted this standard using the prospective transition approach for PCD assets that were previously classified as PCI assets. Management did not reassess whether PCI assets met the criteria of PCD assets as of the date of the adoption. The Company elected not to maintain PCI pools for certain loans which are now accounted for individually. Thus they are now included in nonperforming and classified loans. Management did not reassess whether modifications to individual acquired financial assets accounted for in pools were troubled debt restructurings as of the date of adoption. The following table illustrates the impact of adoption:
The Company also adopted ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement” on January 1, 2020. The Company previously selected the option to adopt the removal or modification of disclosures during the second quarter of 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty are applied prospectively for only the most recent interim or annual period presented. All other amendments are applied retrospectively to all periods presented upon their effective date. The adoption of this update did not have a material effect on the Company's consolidated financial statements. Accounting Standards Issued but not yet Adopted FASB ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” In March 2020, the FASB issued “Reference Rate Reform (Topic 848)” which provides optional expedients and exceptions for contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The guidance is effective for contract modifications as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the optional expedients and exceptions and has not yet determined the impact this standard may have on its consolidated financial statements. Loans The Company has elected to present the accrued interest receivable balance separate from amortized cost basis, to exclude accrued interest receivable balances from the tabular disclosures, and not to estimate an ACL on accrued interest receivable as these amounts are timely written off as a credit loss expense. Accrued interest receivable totaled $19.7 million at June 30, 2020 and was reported in Other Assets on the consolidated balance sheets. PCD Loans The Company has purchased loans, some of which have experienced more than insignificant credit deterioration since origination. PCD loans are recorded at the amount paid. An ACL is determined using the same methodology as other loans held for investment. The initial ACL determined on a collective basis is allocated to individual loans. The sum of the loan’s purchase price and ACL becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan. Subsequent changes to the ACL are recorded through provision expense. Allowance for Credit Losses on Loans The ACLL is a valuation account that is deducted from the amortized cost basis to present the net amount expected to be collected. Loans are charged-off against the allowance when management believes the uncollectibility of a loan balance is confirmed. Management estimates the allowance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environmental conditions, such as changes in unemployment rates, property values, or other relevant factors. The ACLL is measured on a collective basis when similar risk characteristics exist. The Company has identified the following portfolio segments: C&I – C&I loans consist of loans to small and medium-sized businesses in a wide variety of industries. These loans are generally collateralized by inventory, accounts receivable, equipment, real estate and other commercial assets, and may be supported by other credit enhancements such as personal guarantees. Risk arises primarily due to a difference between expected and actual cash flows of the borrower. However, the recoverability of these loans is also dependent on other factors primarily dictated by the type of collateral securing these loans. The fair value of the collateral securing these loans may fluctuate as market conditions change. Included within C&I are revolving loans supported by borrowing bases that fluctuate depending on the amount of underlying collateral. A portion of C&I loans consists of enterprise value lending, which are loans with senior debt exposure to private equity backed companies. CRE – CRE loans include various types of loans for which the Company holds real property as collateral. Commercial real estate lending activity is typically restricted to owner-occupied properties or to investor properties that are owned by customers with a current banking relationship. The primary risks of CRE loans include the borrower’s inability to pay, material decreases in the value of the real estate being held as collateral and significant increases in interest rates, which may make the real estate mortgage loan unprofitable. Real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. Construction and Land Development – The Company originates loans to finance construction projects including one- to four-family residences, multifamily residences, commercial office, and industrial projects. Construction loans are generally collateralized by first liens on the real estate and have floating interest rates. Construction loans are considered to have higher risks due to construction completion and timing risk, and the ultimate repayment being sensitive to interest rate changes, governmental regulation of real property and the availability of long-term financing. Additionally, economic conditions may impact the Company’s ability to recover its investment in construction loans. Adverse economic conditions may negatively impact the real estate market which could affect the borrowers’ ability to complete and sell the project. Additionally, the fair value of the underlying collateral may fluctuate as market conditions change. Residential Real Estate – The Company originates loans to finance one- to four-family residences, secured by both first and second liens. Repayment of these loans is dependent on the borrowers’ ability to pay and the fair value of the underlying collateral. Residential loans with a second lien are inherently riskier due to the junior lien position. Agricultural – Agricultural loans are generally secured with equipment, cattle, crops or other non-real property and at times the underlying real property. Agricultural loans are primarily included as a component of CRE and C&I loans. Consumer – The Company provides a broad range of consumer loans to customers, including personal lines of credit, credit cards and automobile loans. Repayment of these loans is dependent on the borrowers’ ability to pay and the fair value of the underlying collateral. Consumer loans are included as a component of Other loans. The Company utilizes a DCF method to measure the ACL on loans collectively evaluated that are sub-segmented by credit risk levels. The DCF method incorporates assumptions for probability of default, loss given default, prepayments and curtailments over the contractual term of the loans. In determining the probability of default, the Company utilized a regression analysis to determine certain economic factors that are relevant loss drivers in the portfolio segments based on historical or peer evaluations. National unemployment is a loss driver used in nearly all portfolios, except Consumer. The annual percentage change in gross domestic product is also used in C&I, Construction, Agricultural and Consumer portfolios. The annual percentage change in a commercial real estate index, national house price index and the consumer price index are used in the CRE, Residential Real Estate and Consumer portfolios, respectively. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a troubled debt restructuring will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company. The Company uses a one-year reasonable and supportable forecast that considers baseline, upside and downside economic scenarios. For periods beyond the forecast period, the Company reverts to historical loss rates on a straight-line basis over a six-month period. Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not also included in the collective evaluation. When management determines that foreclosure is probable, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.
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Earnings Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | EARNINGS PER SHARE Basic earnings per common share data is calculated by dividing net income by the weighted average number of common shares outstanding during the period. Common shares outstanding include common stock and restricted stock awards where recipients have satisfied the vesting terms. Diluted earnings per common share gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method. The following table presents a summary of per common share data and amounts for the periods indicated.
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Investments |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments | INVESTMENTS The following table presents the amortized cost, gross unrealized gains and losses, allowance of credit losses and fair value of securities available for sale and held to maturity:
During the second quarter of 2020, the Company transferred municipal securities and agency mortgage-backed securities with a book value of $163.6 million and fair value of $175.1 million from available-for-sale to held-to-maturity. The Company believes the held- to-maturity category is more consistent with the Company’s intent for these securities. The transfer of securities was made at fair value at the time of transfer. The unamortized portion of the $11.5 million unrealized holding gain at the time of transfer is retained in accumulated other comprehensive income and in the carrying value of held-to-maturity securities. Such amounts are amortized over the remaining life of the securities. At June 30, 2020 and December 31, 2019, there were no holdings of securities of any one issuer in an amount greater than 10% of shareholders’ equity, other than U.S. Government agencies and sponsored enterprises. The agency mortgage-backed securities are all issued by U.S. Government agencies and sponsored enterprises. Securities having a fair value of $449.9 million and $484.8 million at June 30, 2020 and December 31, 2019, respectively, were pledged as collateral to secure deposits of public institutions and for other purposes as required by law or contract provisions. The amortized cost and estimated fair value of debt securities at June 30, 2020, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. The weighted average life of the mortgage-backed securities is approximately 3 years.
The following table represents a summary of available-for-sale investment securities that had an unrealized loss:
The unrealized losses at both June 30, 2020 and December 31, 2019, were primarily attributable to changes in market interest rates since the securities were purchased. Management systematically evaluates investment securities for other-than-temporary declines in fair value on a quarterly basis. This analysis requires management to consider various factors, which include among other considerations (1) the present value of the cash flows expected to be collected compared to the amortized cost of the security, (2) duration and magnitude of the decline in value, (3) the financial condition of the issuer or issuers, (4) structure of the security, and (5) the intent to sell the security or whether it is more likely than not the Company would be required to sell the security before its anticipated recovery in market value. At June 30, 2020, management performed its quarterly analysis of all securities with an unrealized loss and concluded no individual securities were other-than-temporarily impaired. Accrued interest receivable on available-for-sale debt securities totaled $3.6 million at June 30, 2020 and is excluded from the estimate of credit losses. Accrued interest receivable on held-to-maturity debt securities totaled $2.3 million at June 30, 2020 and is excluded from the estimate of expected credit losses. The estimate of expected credit losses considers historical credit loss information adjusted for current conditions and reasonable and supportable forecasts. At June 30, 2020, the ACL on held-to-maturity securities was $0.6 million.
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Loans |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Portfolio Loans | LOANS Below is a summary of loans by category at June 30, 2020 and December 31, 2019:
PPP loans totaled $830.2 million at June 30, 2020, or $807.8 million net of unearned fees of $22.4 million. The loan balance at June 30, 2020 also includes a discount on acquired loans of $22.2 million. At June 30, 2020 loans of $2.4 billion were pledged to FHLB and the Federal Reserve Bank. A summary of the activity in the ACLL by category for the three and six months ended June 30, 2020 is as follows:
Reserves on enterprise value lending and agricultural lending, which are included in the categories above, represented $15.8 million and $2.4 million, respectively. On January 1, 2020, the Company adopted the CECL methodology which added $28.4 million to the ACLL. Upon adoption, $1.7 million of nonaccrual PCD loans that were less than $100,000 were immediately charged-off. Under the CECL method, the Company recorded a $18.4 million and $40.1 million provision for credit losses on loans in the three and six months ended June 30, 2020, respectively, compared to a $1.7 million and $3.2 million provision for loan losses in the prior year periods, respectively, under the incurred loss method. The increase in the provision for credit losses on loans is primarily due to the Company’s forecast of macroeconomic factors over the next 12 months, which significantly deteriorated in the first quarter 2020 due to the COVID-19 pandemic. The forecast continued to worsen in the second quarter of 2020. The CECL methodology incorporates various economic scenarios. The Company utilizes three forecasts in the model, a Moody’s baseline, a stronger near-term growth and a moderate recession forecast. The Company weights these scenarios at 80%, 10%, and 10%, respectively. These forecasts incorporate an accommodative monetary policy and the current and anticipated impact of government stimulus. Accordingly, the CECL model has not been adjusted for negative qualitative factors, such as the potential loss mitigation of loan deferrals and the PPP. Some of the key risks to the forecasts that could result in future provision for credit losses are additional shutdowns and self-quarantines if a second wave of COVID hits, small-business bankruptcies occur at higher levels or unemployment increases. The 80/10/10 weighting adds approximately $1.0 million to the ACL. The recorded investment in nonperforming loans by category at June 30, 2020 and December 31, 2019, is as follows:
There was no interest income recognized on nonaccrual loans during the six months ended June 30, 2020.
The following table presents the amortized cost basis of collateral-dependent nonperforming loans by class of loan at June 30, 2020:
There were no troubled debt restructurings that occurred during the three months ended June 30, 2020. The recorded investment by category for troubled debt restructurings that occurred during the six months ended June 30, 2020 and the three and six months ended June 30, 2019 are as follows:
There were no troubled debt restructured loans that subsequently defaulted during the three or six months ended June 30, 2020 or 2019. In response to the COVID-19 pandemic, the Company has implemented short-term deferral programs allowing customers to primarily defer payments for up to 90 days. Deferrals under the CARES Act or interagency guidance are not included above as troubled debt restructurings. As of June 30, 2020, $685.7 million in loans have participated in the programs, including $361.4 million in loans deferring full principal and interest payments and $324.3 million in loans deferring principal only. Interest of $4.0 million has been deferred and will be collected upon final maturity. The Company has moved all loans that have requested deferrals to a level six risk rating for additional monitoring. The aging of the recorded investment in past due loans by class at June 30, 2020 is shown below.
The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as current financial information, payment experience, credit documentation, and current economic factors among other factors. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk ratings:
The recorded investment by risk category of the loans by class at June 30, 2020, which is based upon the most recent analysis performed is as follows:
In the table above, loan originations in 2020 and 2019 with a classification of watch or classified primarily represent renewals or modifications initially underwritten and originated in prior years. For certain loans, primarily credit cards, the Company evaluates credit quality based on the aging status. The following table presents the recorded investment on loans based on payment activity:
The recorded investment by risk category of loans by class at December 31, 2019, was as follows:
*Excludes $90.3 million of loans accounted for as PCI
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Commitments |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Commitments | COMMITMENTS AND CONTINGENCIES The Company issues financial instruments with off balance sheet risk in the normal course of the business of meeting the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments may involve, to varying degrees, elements of credit and interest rate risk in excess of the amounts recognized in the consolidated balance sheets. The Company’s extent of involvement and maximum potential exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of these instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for financial instruments included on its consolidated balance sheets. The contractual amounts of off-balance-sheet financial instruments as of June 30, 2020, and December 31, 2019, are as follows:
Off-Balance Sheet Credit Risk 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. Commitments usually have fixed expiration dates or other termination clauses, may have significant usage restrictions, and may require payment of a fee. Of the total commitments to extend credit at June 30, 2020, and December 31, 2019, approximately $161.3 million and $144.8 million, respectively, represent fixed rate loan commitments. Since certain of the commitments may expire without being drawn upon or may be revoked, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the borrower. Collateral held varies, but may include accounts receivable, inventory, premises and equipment, and real estate. Other liabilities includes $4.9 million and $0.4 million for estimated losses attributable to the unadvanced commitments at June 30, 2020, and December 31, 2019, respectively. Standby letters of credit are conditional commitments issued by the Company to guarantee the performance or payment of a customer to a third party. These standby letters of credit are issued to support contractual obligations of the Company’s customers. The credit risk involved in issuing letters of credit is essentially the same as the risk involved in extending loans to customers. As of June 30, 2020, the approximate remaining terms of standby letters of credit range from 1 month to 4 years. Contingencies The Company and its subsidiaries are, from time to time, parties to various legal proceedings arising out of their businesses. Management believes there are no such proceedings pending or threatened against the Company or its subsidiaries which, if determined adversely, would have a material adverse effect on the business, consolidated financial condition, results of operations or cash flows of the Company or any of its subsidiaries.
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Derivative Financial Instruments |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Financial Instruments | DERIVATIVE FINANCIAL INSTRUMENTS Risk Management Objective of Using Derivatives The Company is exposed to certain risk arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s borrowings. The Company does not enter into derivative financial instruments for trading purposes. Cash Flow Hedges of Interest Rate Risk The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. These derivatives were used to hedge the variable cash flows associated with existing variable-rate debt. These cash flow hedges include: (1) swaps of variable three-month LIBOR on $62.0 million of junior subordinated debentures to a weighted-average-fixed rate of 2.62% over approximately six years, (2) a swap of the federal funds effective rate on $100.0 million of rolling FHLB overnight advances to a fixed rate of 1.12% for three years, and (3) a swap of three-month LIBOR on $100.0 million of rolling three-month FHLB advances for five years. For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in accumulated other comprehensive income and subsequently reclassified into interest expense in the same period(s) during which the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are paid on the Company’s variable-rate debt. During the next twelve months, the Company estimates that an additional $2.8 million will be reclassified as an increase to interest expense. Non-designated Hedges Derivatives not designated as hedges are not considered speculative and result from a service the Company provides to certain customers. The Company executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies. Those interest rate swaps are simultaneously hedged by offsetting derivatives the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. As the interest rate derivatives associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings as a component of other noninterest income. The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Balance Sheet as of June 30, 2020 and December 31, 2019.
The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company’s financial instruments that are subject to offsetting as of June 30, 2020 and December 31, 2019. The gross amounts of assets or liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value provides the location that financial assets and liabilities are presented on the Balance Sheet.
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Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | FAIR VALUE MEASUREMENTS The following table summarizes financial instruments measured at fair value on a recurring basis as of June 30, 2020 and December 31, 2019, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:
From time to time, the Company measures certain assets at fair value on a nonrecurring basis. These include assets measured at the lower of cost or fair value that were recognized at fair value below cost at the end of the period.
Following is a summary of the carrying amounts and fair values of the Company’s financial instruments on the consolidated balance sheets at June 30, 2020 and December 31, 2019.
For information regarding the methods and assumptions used to estimate the fair value of each class of financial instruments refer to Note 19 – Fair Value Measurements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC. |
Subordinated Debentures |
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Subordinated Borrowings [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Subordinated Debentures | NOTE 8 - SUBORDINATED DEBENTURES The amounts and terms of each issuance of the Company’s subordinated debentures at June 30, 2020 and December 31, 2019 were as follows:
On May 21, 2020, the Company issued $63.3 million of 5.75% fixed-to-floating rate subordinated notes due in 2030 in a public offering (the “2030 Notes”). From and including the date of issuance to, but excluding June 1, 2025, the 2030 Notes will bear interest at a rate equal to 5.75% per annum, payable semiannually in arrears on each June 1 and December 1. From and including June 1, 2025 to, but excluding the maturity date or the date of earlier redemption, the 2030 Notes will bear interest at a floating rate per annum equal to a benchmark rate (which is expected to be three-month term SOFR (as defined in the Indenture, dated May 21, 2020, between the Company and U.S. Bank National Association, as trustee, and subsequent First Supplemental Indenture)), plus 566.0 basis points, payable quarterly in arrears on March 1, June 1, September 1 and December 1 of each year, commencing on September 1, 2025. Notwithstanding the foregoing, in the event that the benchmark rate is less than zero, then the benchmark rate shall be deemed to be zero.
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Accumulated Other Comprehensive Income |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income | ACCUMULATED OTHER COMPREHENSIVE INCOME The following table presents the changes in accumulated other comprehensive income after-tax by component:
The following table presents the pre-tax and after-tax changes in the components of other comprehensive income:
(a)The pre-tax amount is reported in noninterest income/expense in the Consolidated Statements of Operations (b)The pre-tax amount is reported in interest income/expense in the Consolidated Statements of Operations
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Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business and Consolidation | Basis of Financial Statement Presentation The accompanying unaudited condensed consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Except as disclosed herein, there has been no material change in the information disclosed in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. The condensed consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned. All intercompany accounts and transactions have been eliminated. In the opinion of management, the consolidated financial statements contain all adjustments (consisting of normal recurring accruals) considered necessary for the fair presentation of the statements of financial position, results of operations, and cash flow for the interim periods. Recently Adopted Accounting Pronouncements On January 1, 2020, the Company adopted ASU 2016-13 “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which replaces the incurred loss methodology with an expected loss methodology commonly referred to as the CECL methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures such as loan commitments, standby letters of credit, financial guarantees, and other similar instruments. In addition, this standard made changes to the accounting for available-for-sale debt securities, including the requirement for credit losses to be presented as an allowance rather than as a write-down on available-for-sale debt securities. The Company adopted this standard using the modified retrospective method for all financial assets measured at amortized cost, and off-balance-sheet credit exposures. Results for reporting periods beginning after January 1, 2020 are presented under the new standard while prior period amounts continue to be reported in accordance with previously applicable GAAP. The Company recorded an after-tax decrease to retained earnings of $18.1 million as of January 1, 2020 for the cumulative effect of adopting this standard. The Company adopted this standard using the prospective transition approach for PCD assets that were previously classified as PCI assets. Management did not reassess whether PCI assets met the criteria of PCD assets as of the date of the adoption. The Company elected not to maintain PCI pools for certain loans which are now accounted for individually. Thus they are now included in nonperforming and classified loans. Management did not reassess whether modifications to individual acquired financial assets accounted for in pools were troubled debt restructurings as of the date of adoption. The following table illustrates the impact of adoption:
The Company also adopted ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement” on January 1, 2020. The Company previously selected the option to adopt the removal or modification of disclosures during the second quarter of 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty are applied prospectively for only the most recent interim or annual period presented. All other amendments are applied retrospectively to all periods presented upon their effective date. The adoption of this update did not have a material effect on the Company's consolidated financial statements. Accounting Standards Issued but not yet Adopted FASB ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” In March 2020, the FASB issued “Reference Rate Reform (Topic 848)” which provides optional expedients and exceptions for contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The guidance is effective for contract modifications as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the optional expedients and exceptions and has not yet determined the impact this standard may have on its consolidated financial statements. Loans The Company has elected to present the accrued interest receivable balance separate from amortized cost basis, to exclude accrued interest receivable balances from the tabular disclosures, and not to estimate an ACL on accrued interest receivable as these amounts are timely written off as a credit loss expense. Accrued interest receivable totaled $19.7 million at June 30, 2020 and was reported in Other Assets on the consolidated balance sheets. PCD Loans The Company has purchased loans, some of which have experienced more than insignificant credit deterioration since origination. PCD loans are recorded at the amount paid. An ACL is determined using the same methodology as other loans held for investment. The initial ACL determined on a collective basis is allocated to individual loans. The sum of the loan’s purchase price and ACL becomes its initial amortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which is amortized into interest income over the life of the loan. Subsequent changes to the ACL are recorded through provision expense. Allowance for Credit Losses on Loans The ACLL is a valuation account that is deducted from the amortized cost basis to present the net amount expected to be collected. Loans are charged-off against the allowance when management believes the uncollectibility of a loan balance is confirmed. Management estimates the allowance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environmental conditions, such as changes in unemployment rates, property values, or other relevant factors. The ACLL is measured on a collective basis when similar risk characteristics exist. The Company has identified the following portfolio segments: C&I – C&I loans consist of loans to small and medium-sized businesses in a wide variety of industries. These loans are generally collateralized by inventory, accounts receivable, equipment, real estate and other commercial assets, and may be supported by other credit enhancements such as personal guarantees. Risk arises primarily due to a difference between expected and actual cash flows of the borrower. However, the recoverability of these loans is also dependent on other factors primarily dictated by the type of collateral securing these loans. The fair value of the collateral securing these loans may fluctuate as market conditions change. Included within C&I are revolving loans supported by borrowing bases that fluctuate depending on the amount of underlying collateral. A portion of C&I loans consists of enterprise value lending, which are loans with senior debt exposure to private equity backed companies. CRE – CRE loans include various types of loans for which the Company holds real property as collateral. Commercial real estate lending activity is typically restricted to owner-occupied properties or to investor properties that are owned by customers with a current banking relationship. The primary risks of CRE loans include the borrower’s inability to pay, material decreases in the value of the real estate being held as collateral and significant increases in interest rates, which may make the real estate mortgage loan unprofitable. Real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. Construction and Land Development – The Company originates loans to finance construction projects including one- to four-family residences, multifamily residences, commercial office, and industrial projects. Construction loans are generally collateralized by first liens on the real estate and have floating interest rates. Construction loans are considered to have higher risks due to construction completion and timing risk, and the ultimate repayment being sensitive to interest rate changes, governmental regulation of real property and the availability of long-term financing. Additionally, economic conditions may impact the Company’s ability to recover its investment in construction loans. Adverse economic conditions may negatively impact the real estate market which could affect the borrowers’ ability to complete and sell the project. Additionally, the fair value of the underlying collateral may fluctuate as market conditions change. Residential Real Estate – The Company originates loans to finance one- to four-family residences, secured by both first and second liens. Repayment of these loans is dependent on the borrowers’ ability to pay and the fair value of the underlying collateral. Residential loans with a second lien are inherently riskier due to the junior lien position. Agricultural – Agricultural loans are generally secured with equipment, cattle, crops or other non-real property and at times the underlying real property. Agricultural loans are primarily included as a component of CRE and C&I loans. Consumer – The Company provides a broad range of consumer loans to customers, including personal lines of credit, credit cards and automobile loans. Repayment of these loans is dependent on the borrowers’ ability to pay and the fair value of the underlying collateral. Consumer loans are included as a component of Other loans. The Company utilizes a DCF method to measure the ACL on loans collectively evaluated that are sub-segmented by credit risk levels. The DCF method incorporates assumptions for probability of default, loss given default, prepayments and curtailments over the contractual term of the loans. In determining the probability of default, the Company utilized a regression analysis to determine certain economic factors that are relevant loss drivers in the portfolio segments based on historical or peer evaluations. National unemployment is a loss driver used in nearly all portfolios, except Consumer. The annual percentage change in gross domestic product is also used in C&I, Construction, Agricultural and Consumer portfolios. The annual percentage change in a commercial real estate index, national house price index and the consumer price index are used in the CRE, Residential Real Estate and Consumer portfolios, respectively. The contractual term excludes expected extensions, renewals, and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a troubled debt restructuring will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company. The Company uses a one-year reasonable and supportable forecast that considers baseline, upside and downside economic scenarios. For periods beyond the forecast period, the Company reverts to historical loss rates on a straight-line basis over a six-month period. Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not also included in the collective evaluation. When management determines that foreclosure is probable, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.
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Available-for-sale Securities | Management systematically evaluates investment securities for other-than-temporary declines in fair value on a quarterly basis. This analysis requires management to consider various factors, which include among other considerations (1) the present value of the cash flows expected to be collected compared to the amortized cost of the security, (2) duration and magnitude of the decline in value, (3) the financial condition of the issuer or issuers, (4) structure of the security, and (5) the intent to sell the security or whether it is more likely than not the Company would be required to sell the security before its anticipated recovery in market value. At June 30, 2020, management performed its quarterly analysis of all securities with an unrealized loss and concluded no individual securities were other-than-temporarily impaired. |
Summary of Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of New Accounting Pronouncements and Changes in Accounting Principles [Table Text Block] | The following table illustrates the impact of adoption:
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Earnings Per Share (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Per Common Share Data and Amounts | The following table presents a summary of per common share data and amounts for the periods indicated.
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Investments (Tables) |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Available-for-sale and Held-to-Maturity Securities Reconciliation | The following table presents the amortized cost, gross unrealized gains and losses, allowance of credit losses and fair value of securities available for sale and held to maturity:
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Schedule of Available-for-sale and Held-to-Maturity Securities Reconciliation | The following table presents the amortized cost, gross unrealized gains and losses, allowance of credit losses and fair value of securities available for sale and held to maturity:
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Investments Classified by Contractual Maturity Date | The amortized cost and estimated fair value of debt securities at June 30, 2020, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. The weighted average life of the mortgage-backed securities is approximately 3 years.
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Schedule of Unrealized Loss on Investments | The following table represents a summary of available-for-sale investment securities that had an unrealized loss:
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Loans (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-covered Loans [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Recorded Investment by Risk Category of Portfolio Loans by Portfolio Class and Category | The following table presents the recorded investment on loans based on payment activity:
The recorded investment by risk category of the loans by class at June 30, 2020, which is based upon the most recent analysis performed is as follows:
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Portfolio loans, net | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-covered Loans [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Portfolio Loans by Category | Below is a summary of loans by category at June 30, 2020 and December 31, 2019:
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Summary of Allowance for Loan Losses and the Recorded Investment in Portfolio Loans by Class and Category Based on Impairment Method | A summary of the activity in the ACLL by category for the three and six months ended June 30, 2020 is as follows:
Reserves on enterprise value lending and agricultural lending, which are included in the categories above, represented $15.8 million and $2.4 million, respectively. |
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Financing Receivable, Noncurrent, Allowance for Credit Loss | A summary of the activity in the ACLL by category for the three and six months ended June 30, 2020 is as follows:
Reserves on enterprise value lending and agricultural lending, which are included in the categories above, represented $15.8 million and $2.4 million, respectively. |
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Summary of Portfolio Loans Individually Evaluated for Impairment and Recorded Investment in Impaired Non-Covered Loans by Category | The recorded investment in nonperforming loans by category at June 30, 2020 and December 31, 2019, is as follows:
There was no interest income recognized on nonaccrual loans during the six months ended June 30, 2020.
The following table presents the amortized cost basis of collateral-dependent nonperforming loans by class of loan at June 30, 2020:
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Summary of Recorded Investment by Category for Portfolio Loans Restructured | The following table presents the amortized cost basis of collateral-dependent nonperforming loans by class of loan at June 30, 2020:
There were no troubled debt restructurings that occurred during the three months ended June 30, 2020. The recorded investment by category for troubled debt restructurings that occurred during the six months ended June 30, 2020 and the three and six months ended June 30, 2019 are as follows:
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Summary of Recorded Investment by Category for Portfolio Loans Restructured and Subsequently Defaulted | There were no troubled debt restructured loans that subsequently defaulted during the three or six months ended June 30, 2020 or 2019.
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Summary of Aging of Recorded Investment in Past Due Portfolio Loans by Portfolio Class and Category | The aging of the recorded investment in past due loans by class at June 30, 2020 is shown below.
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Summary of Recorded Investment by Risk Category of Portfolio Loans by Portfolio Class and Category | The recorded investment by risk category of the loans by class at June 30, 2020, which is based upon the most recent analysis performed is as follows:
In the table above, loan originations in 2020 and 2019 with a classification of watch or classified primarily represent renewals or modifications initially underwritten and originated in prior years. For certain loans, primarily credit cards, the Company evaluates credit quality based on the aging status. The following table presents the recorded investment on loans based on payment activity:
The recorded investment by risk category of loans by class at December 31, 2019, was as follows:
*Excludes $90.3 million of loans accounted for as PCI
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Commitments (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Schedule of Commitments | The contractual amounts of off-balance-sheet financial instruments as of June 30, 2020, and December 31, 2019, are as follows:
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Derivative Financial Instruments (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Derivative Instruments in Statement of Financial Position, Fair Value |
The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company’s financial instruments that are subject to offsetting as of June 30, 2020 and December 31, 2019. The gross amounts of assets or liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value provides the location that financial assets and liabilities are presented on the Balance Sheet.
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Fair Value Measurements (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Financial Instruments Measured at Fair Value on a Recurring Basis | The following table summarizes financial instruments measured at fair value on a recurring basis as of June 30, 2020 and December 31, 2019, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:
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Summary of Financial Instruments and Non-Financial Assets Measured at Fair Value on a Non-Recurring Basis |
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Summary of Carrying Amount and Fair Values of Financial Instruments Reported on the Balance Sheets | Following is a summary of the carrying amounts and fair values of the Company’s financial instruments on the consolidated balance sheets at June 30, 2020 and December 31, 2019.
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Subordinated Debentures (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Subordinated Borrowings [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Subordinated Debentures | The amounts and terms of each issuance of the Company’s subordinated debentures at June 30, 2020 and December 31, 2019 were as follows:
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Accumulated Other Comprehensive Income (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accumulated Other Comprehensive Income (Loss) | The following table presents the changes in accumulated other comprehensive income after-tax by component:
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Schedule of Pre-tax and After-tax Changes in the Components of Other Comprehensive Income | The following table presents the pre-tax and after-tax changes in the components of other comprehensive income:
(a)The pre-tax amount is reported in noninterest income/expense in the Consolidated Statements of Operations (b)The pre-tax amount is reported in interest income/expense in the Consolidated Statements of Operations
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Summary of Significant Accounting Policies (Details) $ in Millions |
Jun. 30, 2020
USD ($)
|
---|---|
Other Assets | |
Property, Plant and Equipment [Line Items] | |
Accrued interest receivable | $ 19.7 |
Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Earnings Per Share [Abstract] | ||||
Net income as reported | $ 14,634 | $ 18,424 | $ 27,502 | $ 34,580 |
Weighted average common shares outstanding (in shares) | 26,180,000 | 26,887,000 | 26,325,000 | 25,415,000 |
Additional dilutive common stock equivalents (in shares) | 15,000 | 53,000 | 29,000 | 73,000 |
Weighted average diluted common shares outstanding (in shares) | 26,195,000 | 26,940,000 | 26,354,000 | 25,488,000 |
Basic earnings per common share (in dollars per share) | $ 0.56 | $ 0.69 | $ 1.04 | $ 1.36 |
Diluted earnings per common share (in dollars per share) | $ 0.56 | $ 0.68 | $ 1.04 | $ 1.36 |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 157,000 | 130,000 | 147,000 | 99,000 |
Investments - Narrative (Details) - USD ($) $ in Thousands |
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2020 |
Jan. 01, 2020 |
Dec. 31, 2019 |
|
Debt Securities, Available-for-sale [Line Items] | |||
Debt Securities, Available-for-sale, Amortized Cost | $ 960,984 | $ 1,115,323 | |
Securities available for sale | 998,104 | $ 1,135,317 | |
accumulated other comprehensive income loss available for sale securities adjustment pre tax | $ 11,500 | ||
Maximum percentage of shareholders' equity security holdings held of one issuer | 10.00% | 10.00% | |
Securities pledged | $ 449,900 | $ 484,800 | |
Mortgage-backed securities, weighted average life | 3 years | ||
Accrued interest receivable, available-for-sale securities | $ 3,600 | ||
Accrued interest receivable, held-to-maturity securities | 2,300 | ||
Allowance for credit losses on held-to-maturity debt securities | 645 | $ 0 | |
Reclassified to Held to Maturity [Member] | |||
Debt Securities, Available-for-sale [Line Items] | |||
Debt Securities, Available-for-sale, Amortized Cost | 163,600 | ||
Securities available for sale | $ 175,100 |
Commitments (Details) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Jun. 30, 2020 |
Dec. 31, 2019 |
|
Unadvanced Commitment on Impaired Loan | ||
Schedule of Commitments [Line Items] | ||
Estimated losses attributable to unadvanced commitments on impaired loans | $ 4,900 | $ 400 |
Commitments to extend credit | ||
Schedule of Commitments [Line Items] | ||
Off-balance sheet financial instruments, contractual amounts | 1,659,225 | 1,469,413 |
Commitments to extend credit | Fixed Rate Loan Commitment | ||
Schedule of Commitments [Line Items] | ||
Off-balance sheet financial instruments, contractual amounts | 161,300 | 144,800 |
Letters of credit | ||
Schedule of Commitments [Line Items] | ||
Off-balance sheet financial instruments, contractual amounts | $ 51,798 | $ 47,969 |
Letters of credit | Maximum | ||
Schedule of Commitments [Line Items] | ||
Remaining term | 4 years | |
Letters of credit | Minimum | ||
Schedule of Commitments [Line Items] | ||
Remaining term | 1 month |
Fair Value Measurements - Narrative (Details) - USD ($) $ in Thousands |
Jun. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Other investments, at cost | $ 43,106 | $ 38,044 |
Estimated fair value | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
State Tax Credits Held For Sale, Fair Value Disclosure | $ 44,164 | $ 39,046 |
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