cade-10q_20180331.htm

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “accelerated filer”, “ large accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

	March 31, 2018			December 31, 2017
(In thousands, except share data)	(Unaudited)
ASSETS
Cash and due from banks	$	130,704		$	238,707
Interest-bearing deposits with banks		281,297			482,568
Federal funds sold		4,695			9,536
Total cash and cash equivalents		416,696			730,811
Securities available-for-sale		1,246,005			1,257,063
Securities held-to-maturity (estimated fair value of $311 at December 31, 2017)		—			290
Equity securities with readily determinable fair values not held for trading		5,829			5,885
Other securities - FRB and FHLB stock		50,662			50,009
Loans held for sale		37,446			61,359
Loans		8,646,987			8,253,427
Less: allowance for credit losses		(91,537	)		(87,576	)
Net loans		8,555,450			8,165,851
Interest receivable		47,813			47,793
Premises and equipment, net		62,092			63,432
Other real estate owned		6,642			7,605
Cash surrender value of life insurance		108,393			108,148
Net deferred tax asset		41,342			30,774
Goodwill		317,817			317,817
Other intangible assets, net		9,430			10,223
Other assets		93,765			91,866
Total Assets	$	10,999,382		$	10,948,926
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Noninterest-bearing deposits	$	2,040,977		$	2,242,765
Interest-bearing deposits		7,007,994			6,768,750
Total deposits		9,048,971			9,011,515
Securities sold under agreements to repurchase		1,298			1,026
Federal Home Loan Bank advances		150,000			150,000
Senior debt		184,700			184,629
Subordinated debt		98,746			98,687
Junior subordinated debentures		36,591			36,472
Other liabilities		121,973			107,541
Total liabilities		9,642,279			9,589,870
Shareholders' Equity:
Common Stock $0.01 par value, authorized 300,000,000 shares; 83,625,000 shares issued and outstanding at March 31, 2018 and December 31, 2017		836			836
Additional paid-in capital		1,037,493			1,037,040
Retained earnings		369,585			340,213
Accumulated other comprehensive loss ("OCI")		(50,811	)		(19,033	)
Total shareholders' equity		1,357,103			1,359,056
Total Liabilities and Shareholders' Equity	$	10,999,382		$	10,948,926

See accompanying notes to the unaudited condensed consolidated financial statements.

	Three Months Ended March 31,
(In thousands, except per share data)	2018		2017
INTEREST INCOME
Interest and fees on loans	$	102,791	$	80,810
Interest and dividends on securities:
Taxable		5,118		4,301
Tax-exempt		3,266		3,414
Other interest income		1,918		1,094
Total interest income		113,093		89,619
INTEREST EXPENSE
Interest on time deposits		7,491		4,122
Interest on other deposits		9,139		5,643
Interest on borrowed funds		5,352		5,096
Total interest expense		21,982		14,861
Net interest income		91,111		74,758
Provision for credit losses		4,380		5,786
Net interest income after provision for credit losses		86,731		68,972
NONINTEREST INCOME
Service charges on deposit accounts		3,960		3,815
Other service fees		1,333		972
Credit related fees		3,577		2,747
Trust services revenue		5,015		5,231
Mortgage banking income		577		866
Investment advisory revenue		5,299		4,916
Securities gains, net		12		81
Other income		5,210		5,477
Total noninterest income		24,983		24,105
NONINTEREST EXPENSE
Salaries and employee benefits		37,353		34,267
Premises and equipment		7,591		6,693
Intangible asset amortization		792		1,241
Other expense		16,203		12,120
Total noninterest expense		61,939		54,321
Income before income taxes		49,775		38,756
Income tax expense		10,950		12,639
Net income	$	38,825	$	26,117
Weighted average common shares outstanding (Basic)		83,625,000		75,000,000
Weighted average common shares outstanding (Diluted)		84,674,807		75,672,750
Earnings per common share (Basic)	$	0.46	$	0.35
Earnings per common share (Diluted)	$	0.46	$	0.35

See accompanying notes to the unaudited condensed consolidated financial statements.

	Three Months Ended March 31,
(In thousands)	2018			2017
Net income	$	38,825		$	26,117
Other comprehensive loss, net of tax:
Net unrealized (losses) gains on securities available-for-sale:
Unrealized (losses) gains arising during the period (net of $7,030 and $(644) tax effect, respectively)		(23,392	)		1,112
Reclassification adjustments for gains realized in net income (net of $3 and $30 tax effect, respectively)		(9	)		(51	)
Net unrealized (losses) gains on securities available-for-sale		(23,401	)		1,061
Net unrealized losses on derivative instruments designated as cash flow hedges:
Unrealized losses arising during the period (net of $2,645 and $580 tax effect, respectively)		(8,633	)		(1,010	)
Reclassification adjustments for losses (gains) realized in net income (net of $(77) and $688 tax effect, respectively)		256			(1,179	)
Net change in unrealized losses on derivative instruments		(8,377	)		(2,189	)
Other comprehensive loss, net of tax		(31,778	)		(1,128	)
Comprehensive income	$	7,047		$	24,989

See accompanying notes to the unaudited condensed consolidated financial statements.

			Additional								Total
	Common		Paid-in		Retained			Accumulated			Shareholders'
(In thousands)	Stock		Capital		Earnings			OCI			Equity
Balance, December 31, 2017	$	836	$	1,037,040	$	340,213		$	(19,033	)	$	1,359,056
Equity-based compensation cost		—		453		—			—			453
Net income		—		—		38,825			—			38,825
Cash dividends declared ($0.125 per common share)		—		—		(10,453	)		—			(10,453	)
Cumulative effect of adoption of new accounting principle		—		—		1,000			—			1,000
Other comprehensive loss		—		—		—			(31,778	)		(31,778	)
Balance, March 31, 2018	$	836	$	1,037,493	$	369,585		$	(50,811	)	$	1,357,103

See accompanying notes to the unaudited condensed consolidated financial statements.

	Three Months Ended March 31,
(In thousands)	2018			2017
NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES	$	72,788		$	62,510
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of securities available-for-sale		(111,422	)		(101,087	)
Proceeds from sales of securities available-for-sale		64,536			84,696
Proceeds from maturities, calls and paydowns of securities available-for-sale		26,982			22,939
Proceeds from sale of commercial loans held for sale		3,500			9,925
Increase in loans, net		(397,496	)		(171,010	)
Purchase of premises and equipment		(2,347	)		(937	)
Proceeds from disposition of foreclosed property		2,529			1,295
Other, net		(460	)		(16,542	)
Net cash used in investing activities		(414,178	)		(170,721	)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in deposits, net		37,456			(175,029	)
Net change in securities sold under agreements to repurchase		272			77
Advances from FHLB		—			360,000
Repayment of senior debt		—			(9,600	)
Cash dividends paid on common stock		(10,453	)		—
Net cash provided by financing activities		27,275			175,448
Net (decrease) increase in cash and cash equivalents		(314,115	)		67,237
Cash and cash equivalents at beginning of period		730,811			248,925
Cash and cash equivalents at end of period	$	416,696		$	316,162

See accompanying notes to the unaudited condensed consolidated financial statements.

Cadence Bancorporation (the “Company”) is a Delaware corporation and a bank holding company whose primary asset is its investment in its wholly owned subsidiary bank, Cadence Bank, N.A., a national banking association (the “Bank”).

The accompanying unaudited condensed consolidated financial statements for the Company have been prepared in accordance with instructions to the SEC Form 10-Q and Article 10 of Regulation S-X; therefore, they do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, comprehensive income, and cash flows in conformity with accounting principles generally accepted in the United States of America (“GAAP”). All adjustments consisting of normally recurring accruals that, in the opinion of management, are necessary for a fair presentation of the consolidated financial position and results of operations for the periods covered by this report have been included. These interim financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2017. Operating results for the period ended March 31, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018.

The Company and its subsidiaries follow accounting principles generally accepted in the United States of America, including, where applicable, general practices within the banking industry. The consolidated financial statements include the accounts of the Company and its subsidiaries. Significant intercompany accounts and transactions have been eliminated in consolidation. The assessment of whether or not the Company has a controlling interest (i.e., the primary beneficiary) in a variable-interest entity (“VIE”) is performed on an on-going basis. All equity investments in non-consolidated VIEs are included in “other assets” in the Company’s consolidated balance sheets (Note 20).

Certain amounts reported in prior years have been reclassified to conform to the 2018 presentation. These reclassifications did not materially impact the Company’s consolidated balance sheets or consolidated statements of income.

The Bank operates under a national bank charter and is subject to regulation by the Office of the Comptroller of the Currency (OCC). The Bank provides lending services in Georgia and full banking services in five southern states: Alabama, Florida, Mississippi, Tennessee, and Texas.

The Company and the Bank also have certain other non-operating and immaterial subsidiaries.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are susceptible to significant change in the near term are the allowance for credit losses, valuation of and accounting for acquired credit impaired loans, valuation of goodwill, intangible assets and deferred income taxes.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” (ASU 2014-09), which is intended to improve and converge the financial reporting requirements for revenue contracts with customers. Previous accounting guidance comprised broad revenue recognition concepts along with numerous industry-specific requirements. The new

guidance establishes a five-step model which entities must follow to recognize revenue and removes inconsistencies and weaknesses in existing guidance. Our major sources of revenue are from financial instruments that have been excluded from the scope of the new standard (including loans, derivatives, debt and equity securities, etc.). The standard required us to change how we recognize certain recurring revenue streams within insurance commissions and fees and other categories of noninterest income. The adoption at January 1, 2018 of ASU 2014-09 did not have a material effect on the Company’s financial statements.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities”. ASU 2016-1, among other things, (i) requires equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income, (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment, (iii) eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheets, (iv) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, (v) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments, (vi) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheets or the accompanying notes to the financial statements and (viii) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale. The adoption at January 1, 2018 of ASU 2016-01 resulted in an adjustment to retained earnings of $1.0 million at January 1, 2018 related to fair value measurement changes to equity securities and certain limited partnership investments (See Notes 2, 16 and 20).

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments”, in order to reduce current diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The adoption at January 1, 2018 of ASU 2016-15 did not have a material effect on the Company’s financial statements.

In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business”, which introduces amendments that are intended to clarify the definition of a business to assist companies and other reporting organizations with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments are intended to narrow the current interpretation of a business. The adoption at January 1, 2018 of ASU No. 2017-01 did not have a material effect on the Company’s financial statements.

In March 2017, the FASB issued ASU 2017-07, “Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Costs,” to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost. The amendments require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. The amendments also allow only the service cost component to be eligible for capitalization when applicable. The Company adopted the standard effective January 1, 2018 and did not have a material impact on the Company’s financial statements.

In May, 2017, the FASB issued ASU 2017-09, “Stock Compensation (Topic 718): Scope of Modification Accounting”, which clarifies when modification accounting should be applied to changes in terms or conditions of share-based payment awards. The amendments narrow the scope of modification accounting by clarifying that modification accounting should be applied to awards if the change affects the fair value, vesting conditions, or classification of the award. The amendments do not impact current disclosure requirements for modifications, regardless of whether modification accounting is required under the new guidance. The adoption of ASU 2017-09 at January 1, 2018 did not have a material effect on the Company’s financial statements.

In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815) - Targeted Improvements to Accounting for Hedging Activities.” ASU 2017-12 amends the hedge accounting recognition and presentation requirements in ASC 815 to improve the transparency and understandability of information conveyed to financial statement users about an entity’s risk management activities to better align the entity’s financial reporting for hedging relationships with those risk management activities and to reduce the complexity of and simplify the application of hedge accounting. The Company elected to early adopt the provisions of ASU 2017-12 at January 1, 2018 which did not have a material effect on the Company’s financial statements.

In February 2016, the FASB issued ASU 2016-02, “Leases”. This ASU requires lessees to recognize lease assets and lease liabilities generated by contracts longer than a year on their balance sheets. The ASU also requires companies to disclose in the footnotes to their financial statements information about the amount, timing, and uncertainty for the payments they make for the lease agreements. ASU 2016-02 will be effective for annual periods and interim periods within those annual periods beginning after December 15, 2018. The Company is evaluating the effect of adopting this new accounting guidance.

In June 2016, the FASB has issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. The guidance is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments. The guidance will replace the current incurred loss accounting model with an expected loss approach and requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The guidance requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is evaluating the effect of adopting this new accounting guidance.

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”, which simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Therefore, any carrying amount which exceeds the reporting unit’s fair value (up to the amount of goodwill recorded) will be recognized as an impairment loss. ASU No. 2017-04 will be effective for annual reporting periods beginning after December 15, 2019, including interim reporting periods within those periods. The amendments will be applied prospectively on or after the effective date. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. Based on recent goodwill impairments tests, which did not require the application of Step 2, the Company does not expect the adoption of this ASU to have an immediate impact.

In March 2017, the FASB issued ASU No. 2017-08, “Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities”, which will shorten the amortization period for callable debt securities held at a premium to the earliest call date instead of the maturity date. The amendments do not require an accounting change for securities held at a discount, which will continue to be amortized to the maturity date. ASU No. 2017-08 will be effective for annual reporting periods beginning after December 15, 2018, including interim reporting periods within those periods. The amendments should be applied using a modified-retrospective transition method as of the beginning of the period of adoption. Early adoption is permitted, including adoption in an interim period. The Company is currently assessing this pronouncement and it is not expected to have a material impact on the Company’s financial condition or results of operations.

A summary of amortized cost and estimated fair value of securities, excluding equity securities with readily determinable fair values not held for trading, at March 31, 2018 and December 31, 2017 is as follows:

(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
March 31, 2018
Securities available-for-sale:
U.S. Treasury securities	$	100,535	$	—	$	4,605	$	95,930
Obligations of U.S. government agencies		99,807		367		339		99,835
Mortgage-backed securities issued or guaranteed by U.S. agencies (MBS)
Residential pass-through:
Guaranteed by GNMA		99,529		261		2,248		97,542
Issued by FNMA and FHLMC		442,887		711		10,513		433,085
Other residential mortgage-backed securities		44,269		20		1,468		42,821
Commercial mortgage-backed securities		75,666		—		4,930		70,736
Total MBS		662,351		992		19,159		644,184
Obligations of states and municipal subdivisions		419,246		2,019		15,209		406,056
Total securities available-for-sale	$	1,281,939	$	3,378	$	39,312	$	1,246,005

(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
December 31, 2017
Securities available-for-sale:
U.S. Treasury securities	$	100,575	$	—	$	3,731	$	96,844
Obligations of U.S. government agencies		80,552		738		66		81,224
Mortgage-backed securities issued or guaranteed by U.S. agencies (MBS)
Residential pass-through:
Guaranteed by GNMA		106,461		676		1,110		106,027
Issued by FNMA and FHLMC		431,409		1,284		2,271		430,422
Other residential mortgage-backed securities		47,379		97		1,084		46,392
Commercial mortgage-backed securities		76,201		63		4,069		72,195
Total MBS		661,450		2,120		8,534		655,036
Obligations of states and municipal subdivisions		420,111		7,539		3,691		423,959
Total securities available-for-sale	$	1,262,688	$	10,397	$	16,022	$	1,257,063
Securities held-to-maturity:
Obligations of states and municipal subdivisions	$	290	$	21	$	—	$	311

The Company elected to reclassify the one held-to-maturity security as of December 31, 2017 to available-for-sale as of March 31, 2018 under the transition election guidance in ASC Topic 815.

The adoption of ASU 2016-01 resulted in a classification change of equity securities from securities available-for-sale to equity securities with readily determinable fair values not held for trading. The Company recorded an adjustment of $95 thousand to retained earnings for the adoption of the accounting principle.

The scheduled contractual maturities of securities available-for-sale and securities held-to-maturity at March 31, 2018 were as follows:

Gross gains and gross losses on sales of securities available for sale for the three months ended March 31, 2018 and 2017 are presented below. There were no other-than-temporary impairment charges included in gross realized losses for the three months ended March 31, 2018 and 2017. The specific identification method is used to reclassify gains and losses out of other comprehensive income at the time of sale.

Securities with a carrying value of $533.1 million and $507.3 million at March 31, 2018 and December 31, 2017, respectively, were pledged to secure public and trust deposits, FHLB borrowings, repurchase agreements and for other purposes as required or permitted by law.

The detail concerning securities classified as available-for-sale with unrealized losses as of March 31, 2018 and December 31, 2017 was as follows:

	Unrealized loss analysis
	Losses < 12 Months				Losses > 12 Months
			Gross				Gross
	Estimated		Unrealized		Estimated		Unrealized
(In thousands)	Fair Value		Losses		Fair Value		Losses
March 31, 2018
U.S. Treasury securities	$	—	$	—	$	95,930	$	4,605
Obligations of U.S. government agencies		58,217		245		11,531		94
Mortgage-backed securities		403,703		9,022		174,381		10,137
Obligations of states and municipal subdivisions		171,740		3,892		127,466		11,317
Total	$	633,660	$	13,159	$	409,308	$	26,153

	Unrealized loss analysis
	Losses < 12 Months				Losses > 12 Months
			Gross				Gross
	Estimated		Unrealized		Estimated		Unrealized
(In thousands)	Fair Value		Losses		Fair Value		Losses
December 31, 2017
U.S. Treasury securities	$	—	$	—	$	96,844	$	3,731
Obligations of U.S. government agencies		1,577		9		14,323		57
Mortgage-backed securities		306,274		1,490		172,324		7,044
Obligations of states and municipal subdivisions		2,601		22		134,870		3,669
Total	$	310,452	$	1,521	$	418,361	$	14,501

There were no securities classified as held-to-maturity with unrealized losses as of March 31, 2018 and December 31, 2017.

As of March 31, 2018 and December 31, 2017, approximately 84% and 58%, respectively, of the fair value of securities in the investment portfolio reflected an unrealized loss. As of March 31, 2018, there were 89 securities that had been in a loss position for more than twelve months, and 138 securities that had been in a loss position for less than 12 months. None of the unrealized losses relate to the marketability of the securities or the issuer’s ability to honor redemption of the obligations. The Company has adequate liquidity and, therefore, does not plan to sell and, more likely than not, will not be required to sell these securities before recovery of the indicated impairment. Accordingly, the unrealized losses on these securities have been determined to be temporary.

The following table presents total loans outstanding by portfolio segment and class of financing receivable as of March 31, 2018 and December 31, 2017. Outstanding balances also include Acquired Noncredit Impaired (“ANCI”) loans, originated loans and Acquired Credit Impaired (“ACI”) loans net of any remaining purchase accounting adjustments. Information about ACI loans is presented separately in the “Acquired Credit-Impaired Loans” section of this Note.

	As of
(In thousands)	March 31, 2018			December 31, 2017
Commercial and Industrial
General C&I	$	3,005,397		$	2,746,454
Restaurant industry		1,078,904			1,035,538
Energy sector		984,200			935,371
Healthcare		432,274			416,423
Total commercial and industrial		5,500,775			5,133,786
Commercial Real Estate
Income producing		1,076,067			1,082,929
Land and development		80,343			75,472
Total commercial real estate		1,156,410			1,158,401
Consumer
Residential real estate		1,721,819			1,690,814
Other		63,059			74,922
Total consumer		1,784,878			1,765,736
Small Business Lending		235,337			221,855
Total (Gross of unearned discount and fees)		8,677,400			8,279,778
Unearned discount and fees		(30,413	)		(26,351	)
Total (Net of unearned discount and fees)	$	8,646,987		$	8,253,427

The ACL is management’s estimate of credit losses inherent in the loan portfolio at the balance sheet date. The Company has an established process to determine the adequacy of the ACL that assesses the losses inherent in our portfolio. While management attributes portions of the ACL to specific portfolio segments, the entire ACL is available to absorb credit losses inherent in the total loan portfolio.

The ACL process involves procedures that appropriately consider the unique risk characteristics of the loan portfolio segments based on management’s assessment of the underlying risks and cash flows. For each portfolio segment, losses are estimated collectively for groups of loans with similar characteristics, individually for impaired loans or, for ACI loans, based on the changes in cash flows expected to be collected on a pool or individual basis.

The level of the ACL is influenced by loan volumes, risk rating migration, historic loss experience influencing loss factors, and other conditions influencing loss expectations, such as economic conditions. The primary indicator of credit quality for the portfolio segments is its internal risk ratings. The assignment of loan risk ratings is the primary responsibility of the lending officer and is subject to independent review by internal credit review, which also performs ongoing, independent review of the risk management process. Credit review is centralized and independent of the lending function. The credit review results are reported to senior management and the Board of Directors.

A summary of the activity in the ACL for the three months ended March 31, 2018 and 2017:

	For the Three Months Ended March 31, 2018
(In thousands)	Commercial and Industrial			Commercial Real Estate			Consumer			Small Business			Total
As of December 31, 2017	$	55,919		$	11,990		$	14,983		$	4,684		$	87,576
Provision for loan losses		5,330			(513	)		(903	)		466			4,380
Charge-offs		(58	)		—			(301	)		(453	)		(812	)
Recoveries		18			209

Delaware		47-1329858
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

PART I: FINANCIAL INFORMATION		3

ITEM 1.	FINANCIAL STATEMENTS	3

	Condensed Consolidated Balance Sheets as of March 31, 2018 (Unaudited) and December 31, 2017	3
	Unaudited Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2018 and 2017	4
	Unaudited Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2018 and 2017	5
	Unaudited Condensed Consolidated Statements of Changes in Shareholders' Equity for the Three Months Ended March 31, 2018	6
	Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2018 and 2017	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	40

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK	75

ITEM 4.	CONTROLS AND PROCEDURES	77

PART II: OTHER INFORMATION		78

ITEM 1.	LEGAL PROCEEDINGS	78

ITEM 1A.	RISK FACTORS	78

ITEM 2.	UNREGISTERED SALES OF EQUITY AND USE OF PROCEEDS	78

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	78

ITEM 4.	MINE SAFETY DISCLOSURES	78

ITEM 5.	OTHER INFORMATION	78

ITEM 6.	EXHIBITS	78

☐	Large accelerated filer	☐	Accelerated filer

☒	Non-accelerated filer	☐	Smaller reporting company

		☒	Emerging growth company

Class A Common Stock, $0.01 Par Value		83,625,000
Class		Outstanding as of May 15, 2018

	Available-for-Sale
	Amortized		Estimated
(In thousands)	Cost		Fair Value
Due in one year or less	$	—	$	—
Due after one year through five years		109,319		104,751
Due after five years through ten years		15,984		15,994
Due after ten years		494,285		481,076
Mortgage-backed securities		662,351		644,184
Total	$	1,281,939	$	1,246,005

	For the Three Months Ended March 31,
(In thousands)	2018		2017
Gross realized gains	$	12	$	81
Gross realized losses		—		—
Realized gains on sale of securities available for sale, net	$	12	$	81