Shareholders' Equity

12 Months Ended

Dec. 31, 2020

Note 11. Shareholders’ Equity

Regulatory Capital

The table below sets forth the minimum required capital amounts and ratios for well capitalized institutions and the actual capital amounts and ratios for the Company and the Bank as of December 31, 2020, and December 31, 2019:

(dollars in thousands)	Well Capitalized Minimum Ratio			Company			Bank
As of December 31, 2020
Shareholders’ Equity				$	1,374,507		$	1,290,455
Common Equity Tier 1 Capital					1,361,915			1,289,435
Tier 1 Capital					1,361,915			1,289,435
Total Capital					1,503,784			1,431,106
Common Equity Tier 1 Capital Ratio		6.5	%		12.06	%		11.43	%
Tier 1 Capital Ratio		8.0	%		12.06	%		11.43	%
Total Capital Ratio		10.0	%		13.31	%		12.69	%
Tier 1 Leverage Ratio		5.0	%		6.71	%		6.35	%

As of December 31, 2019
Shareholders’ Equity				$	1,286,832		$	1,229,775
Common Equity Tier 1 Capital					1,289,424			1,243,939
Tier 1 Capital					1,289,424			1,243,939
Total Capital					1,406,273			1,360,788
Common Equity Tier 1 Capital Ratio		6.5	%		12.18	%		11.76	%
Tier 1 Capital Ratio		8.0	%		12.18	%		11.76	%
Total Capital Ratio		10.0	%		13.28	%		12.87	%
Tier 1 Leverage Ratio		5.0	%		7.25	%		7.01	%

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can result in certain mandatory, and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classifications are also subject to qualitative judgments by regulators about the components of regulatory capital, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios of Common Equity Tier 1, Tier 1 and Total Capital. Both Common Equity Tier 1 Capital and Tier 1 Capital are common shareholders’ equity, reduced by certain intangible assets, postretirement benefit liability adjustments, and unrealized gains and losses on investment securities. Total Capital is Tier 1 Capital plus an allowable amount of the reserve for credit losses. Risk-weighted assets are calculated by taking assets and credit equivalent amounts of off-balance-sheet items and assigning them to one of several broad risk categories. Four capital ratios are used to measure capital adequacy: Common Equity Tier 1 Capital divided by risk-weighted assets, as defined; Tier 1 Capital divided by risk-weighted assets; Total Capital divided by risk-weighted assets; and the Tier 1 Leverage ratio, which is Tier 1 Capital divided by quarterly adjusted average total assets.

In addition to the minimum risk-based capital requirements, all banks must hold additional capital, referred to as the capital conservation buffer (which is in the form of common equity) under the U.S. Basel III capital framework, to avoid being subject to limits on capital distributions and certain discretionary bonus payments to officers. The capital conservation buffer which was fully phased-in on January 1, 2019, is a minimum of 2.5% of additional capital in addition to the minimum risk-based capital ratios.

As of December 31, 2020, the Company and the Bank were well capitalized as defined in the regulatory framework for prompt corrective action. The capital conservation buffer requirements do not currently result in any limitations on distributions or discretionary bonuses for the Company or the Bank. There were no conditions or events since December 31, 2020, that management believes have changed the Company or the Bank’s capital classifications.

We have elected to apply the modified transition provision related to the impact of the CECL accounting standard on regulatory capital, as provided by the US banking agencies’ March 2020 interim final rule. Under the modified CECL transition provision, the regulatory capital impact of the Day 1 adjustment to the allowance for credit losses (after-tax), upon the January 1, 2020, CECL adoption date, has been deferred, and will phase in to regulatory capital at 25% per year commencing January 1, 2022. For the ongoing impact of CECL, we are allowed to defer the regulatory capital impact of the allowance for credit losses in an amount equal to 25% of the change in the allowance for credit losses (pre-tax) recognized through earnings for each period between January 1, 2020, and December 31, 2021. The cumulative adjustment to the allowance for credit losses between January 1, 2020, and December 31, 2021, will also phase in to regulatory capital at 25% per year commencing January 1, 2022.

Dividends

Dividends paid by the Parent are substantially funded from dividends received from the Bank. The Bank is subject to federal and state regulatory restrictions that limit cash dividends and loans to the Parent. These restrictions generally require advanced approval from the Bank’s regulator for payment of dividends in excess of the sum of net income for the current calendar year and the retained net income of the prior two calendar years.

Common Stock Repurchase Program

The Parent has a common stock repurchase program in which shares repurchased are held in treasury stock for reissuance in connection with share-based compensation plans and for general corporate purposes. For the year ended December 31, 2020, the Parent repurchased 156,358 shares of common stock under its share repurchase program at an average cost per share of $89.32 and total cost of $14.0 million. From the beginning of the stock repurchase program in July 2001 through December 31, 2020, the Parent repurchased a total of 57.1 million shares of common stock at an average cost of $40.51 per share and total cost of $2.3 billion. On March 17, 2020, we suspended share repurchases in light of the COVID-19 pandemic. The actual amount and timing of future share repurchases, if any, will depend on market conditions, applicable SEC rules and various other factors.

Accumulated Other Comprehensive Income

The following table presents the components of other comprehensive income (loss), net of tax:

(dollars in thousands)	Before Tax			Tax Effect			Net of Tax
Year Ended December 31, 2020
Net Unrealized Gains (Losses) on Investment Securities:
Net Unrealized Gains (Losses) Arising During the Period	$	58,763		$	15,600		$	43,163
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) that (Increase) Decrease Net Income:
(Gain) Loss on Sale		(77	)		(50	)		(27	)
Amortization of Unrealized Holding (Gains) Losses on Held-to-Maturity Securities ¹		397			105			292
Net Unrealized Gains (Losses) on Investment Securities		59,083			15,655			43,428
Defined Benefit Plans:
Net Actuarial Gains (Losses) Arising During the Period		(8,187	)		(2,170	)		(6,017	)
Amortization of Net Actuarial Losses (Gains)		2,318			614			1,704
Amortization of Prior Service Credit		(246	)		(65	)		(181	)
Defined Benefit Plans, Net		(6,115	)		(1,621	)		(4,494	)
Other Comprehensive Income (Loss)	$	52,968		$	14,034		$	38,934

Year Ended December 31, 2019
Net Unrealized Gains (Losses) on Investment Securities:
Net Unrealized Gains (Losses) Arising During the Period	$	30,169		$	8,001		$	22,168
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) that (Increase) Decrease Net Income:
(Gain) Loss on Sale		(152	)		(49	)		(103	)
Amortization of Unrealized Holding (Gains) Losses on Held-to-Maturity Securities ¹		833			221			612
Net Unrealized Gains (Losses) on Investment Securities		30,850			8,173			22,677
Defined Benefit Plans:
Net Actuarial Gains (Losses) Arising During the Period		(5,046	)		(1,337	)		(3,709	)
Amortization of Net Actuarial Losses (Gains)		1,598			423			1,175
Amortization of Prior Service Credit		(288	)		(76	)		(212	)
Defined Benefit Plans, Net		(3,736	)		(990	)		(2,746	)
Other Comprehensive Income (Loss)	$	27,114		$	7,183		$	19,931

Year Ended December 31, 2018
Net Unrealized Gains (Losses) on Investment Securities:
Net Unrealized Gains (Losses) Arising During the Period	$	(11,051	)	$	(2,931	)	$	(8,120	)
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) that (Increase) Decrease Net Income:
Amortization of Unrealized Holding (Gains) Losses on Held-to-Maturity Securities¹		2,164			569			1,595
Net Unrealized Gains (Losses) on Investment Securities		(8,887	)		(2,362	)		(6,525	)
Defined Benefit Plans:
Net Actuarial Gains (Losses) Arising During the Period		(4,468	)		(1,184	)		(3,284	)
Amortization of Net Actuarial Losses (Gains)		1,835			460			1,375
Amortization of Prior Service Credit		(567	)		(150	)		(417	)
Defined Benefit Plans, Net		(3,200	)		(874	)		(2,326	)
Other Comprehensive Income (Loss)	$	(12,087	)	$	(3,236	)	$	(8,851	)

The amount relates to the amortization/accretion of unrealized gains and losses related to the Company's reclassification of available-for-sale investment securities to the held-to-maturity category. The unrealized net gains/losses will be amortized/accreted over the remaining life of the investment securities as an adjustment of yield.

The following table presents the changes in each component of accumulated other comprehensive income (loss), net of tax:

(dollars in thousands)	Investment Securities- Available- For-Sale			Investment Securities- Held-To- Maturities			Defined Benefit Plans			Accumulated Other Comprehensive Income (Loss)
Year Ended December 31, 2020
Balance at Beginning of Period	$	8,359		$	(715	)	$	(38,756	)	$	(31,112	)
Other Comprehensive Income (Loss) Before Reclassifications		43,163			—			(6,017	)		37,146
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)		(27	)		292			1,523			1,788
Total Other Comprehensive Income (Loss)		43,136			292			(4,494	)		38,934
Balance at End of Period	$	51,495		$	(423	)	$	(43,250	)	$	7,822

Year Ended December 31, 2019
Balance at Beginning of Period	$	(10,447	)	$	(4,586	)	$	(36,010	)	$	(51,043	)
Other Comprehensive Income (Loss) Before Reclassifications		22,168			—			(3,709	)		18,459
Cumulative Effect of ASU 2019-04		(3,259	)		3,259			—			—
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)		(103	)		612			963			1,472
Total Other Comprehensive Income (Loss)		18,806			3,871			(2,746	)		19,931
Balance at End of Period	$	8,359		$	(715	)	$	(38,756	)	$	(31,112	)

Year Ended December 31, 2018
Balance at Beginning Period	$	(1,915	)	$	(5,085	)	$	(27,715	)	$	(34,715	)
Other Comprehensive Income (Loss) Before Reclassifications		(8,120	)		—			(3,284	)		(11,404	)
Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)		—			1,595			958			2,553
Total Other Comprehensive Income (Loss)		(8,120	)		1,595			(2,326	)		(8,851	)
Reclassification of the Income Tax Effects of the Tax Act from AOCI		(412	)		(1,096	)		(5,969	)		(7,477	)
Balance at End of Period	$	(10,447	)	$	(4,586	)	$	(36,010	)	$	(51,043	)

The following table presents the amounts reclassified out of each component of accumulated other comprehensive income (loss):

Details about Accumulated Other Comprehensive Income (Loss) Components	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)¹									Affected Line Item in the Statement Where Net Income Is Presented
(dollars in thousands)	Year Ended December 31,
	2020			2019			2018
Amortization of Unrealized Holding Gains (Losses) on Investment Securities Held-to-Maturity	$	(397	)	$	(833	)	$	(2,164	)	Interest Income
		105			221			569		Provision for Income Tax
		(292	)		(612	)		(1,595	)	Net of Tax
Sales of Investment Securities Available-for-Sale		77			152			—		Investment Securities Gains (Losses), Net
		(50	)		(49	)		—		Provision for Income Tax
		27			103			—		Net of Tax

Amortization of Defined Benefit Plans Items
Prior Service Credit ²		246			288			567
Net Actuarial Losses ²		(2,318	)		(1,598	)		(1,835	)
		(2,072	)		(1,310	)		(1,268	)	Total Before Tax
		549			347			310		Provision for Income Tax
		(1,523	)		(963	)		(958	)	Net of Tax

Total Reclassifications for the Period	$	(1,788	)	$	(1,472	)	$	(2,553	)	Net of Tax

¹	^{Amounts in parentheses indicate reductions to net income.}

²	^{These accumulated other comprehensive income (loss) components are included in the computation of net periodic benefit cost and are included in Other Noninterest Expense on the consolidated statements of income (see Note 14 Pension Plans and Postretirement Benefit Plan for additional details).}