UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
____________
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended |
June 30, 2016 |
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from |
to |
Commission file number 001-32964
THE FIRST OF LONG ISLAND CORPORATION | |
(Exact name of registrant as specified in its charter) | |
|
|
New York |
11-2672906 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
|
|
10 Glen Head Road, Glen Head, NY |
11545 |
(Address of principal executive offices) |
(Zip Code) |
(516) 671-4900 |
(Registrant's telephone number, including area code) |
|
Not Applicable |
(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 X 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 X 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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] |
Accelerated filer [X] |
|
|
Non-accelerated filer [ ] |
Smaller reporting company [ ] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No X
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Title of Each Class |
Outstanding at July 29, 2016 |
Common stock, $.10 par value per share |
15,670,062 |
TABLE OF CONTENTS | ||
PART I. |
FINANCIAL INFORMATION |
|
ITEM 1. |
Financial Statements |
|
Consolidated Balance Sheets (Unaudited) – June 30, 2016 and December 31, 2015 |
1 | |
Consolidated Statements of Income (Unaudited) – Six and Three Months Ended June 30, 2016 and 2015 |
2 | |
Consolidated Statements of Comprehensive Income (Unaudited) – Six and Three Months Ended June 30, 2016 and 2015 |
3 | |
Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) – Six Months Ended June 30, 2016 and 2015 |
4 | |
Consolidated Statements of Cash Flows (Unaudited) – Six Months Ended June 30, 2016 and 2015 |
5 | |
Notes to Unaudited Consolidated Financial Statements |
6 | |
ITEM 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
21 |
ITEM 3. |
Quantitative and Qualitative Disclosures About Market Risk |
28 |
ITEM 4. |
Controls and Procedures |
30 |
PART II. |
OTHER INFORMATION |
|
ITEM 1. |
Legal Proceedings |
30 |
ITEM 1A. |
Risk Factors |
31 |
ITEM 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
31 |
ITEM 3. |
Defaults Upon Senior Securities |
31 |
ITEM 4. |
Mine Safety Disclosures |
31 |
ITEM 5. |
Other Information |
31 |
ITEM 6. |
Exhibits |
31 |
Signatures |
33 |
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
June 30, |
December 31, |
|||||||
(dollars in thousands) |
2016 |
2015 |
||||||
Assets: |
||||||||
Cash and cash equivalents |
$ | 51,026 | $ | 39,635 | ||||
Investment securities: |
||||||||
Held-to-maturity, at amortized cost (fair value of $12,637 and $14,910) |
12,206 | 14,371 | ||||||
Available-for-sale, at fair value |
862,001 | 737,700 | ||||||
874,207 | 752,071 | |||||||
Loans held-for-sale |
- | 105 | ||||||
Loans: |
||||||||
Commercial and industrial |
105,106 | 93,056 | ||||||
Secured by real estate: |
||||||||
Commercial mortgages |
1,043,560 | 1,036,331 | ||||||
Residential mortgages |
1,110,977 | 1,025,215 | ||||||
Home equity lines |
87,971 | 87,848 | ||||||
Consumer and other |
5,998 | 5,733 | ||||||
2,353,612 | 2,248,183 | |||||||
Allowance for loan losses |
(27,677 | ) | (27,256 | ) | ||||
2,325,935 | 2,220,927 | |||||||
Restricted stock, at cost |
23,074 | 28,435 | ||||||
Bank premises and equipment, net |
31,527 | 30,330 | ||||||
Bank-owned life insurance |
32,914 | 32,447 | ||||||
Pension plan assets, net |
14,451 | 14,337 | ||||||
Other assets |
14,154 | 12,056 | ||||||
$ | 3,367,288 | $ | 3,130,343 | |||||
Liabilities: |
||||||||
Deposits: |
||||||||
Checking |
$ | 765,392 | $ | 777,994 | ||||
Savings, NOW and money market |
1,562,740 | 1,195,968 | ||||||
Time, $100,000 and over |
190,606 | 198,147 | ||||||
Time, other |
106,117 | 112,566 | ||||||
2,624,855 | 2,284,675 | |||||||
Short-term borrowings |
57,666 | 211,502 | ||||||
Long-term debt |
359,212 | 365,712 | ||||||
Accrued expenses and other liabilities |
9,497 | 12,313 | ||||||
Deferred income taxes payable |
10,406 | 5,205 | ||||||
3,061,636 | 2,879,407 | |||||||
Stockholders' Equity: |
||||||||
Common stock, par value $.10 per share: |
||||||||
Authorized, 40,000,000 shares; Issued and outstanding, 15,590,694 and 14,116,677 shares |
1,559 | 1,412 | ||||||
Surplus |
96,273 | 56,931 | ||||||
Retained earnings |
194,128 | 185,069 | ||||||
291,960 | 243,412 | |||||||
Accumulated other comprehensive income, net of tax |
13,692 | 7,524 | ||||||
305,652 | 250,936 | |||||||
$ | 3,367,288 | $ | 3,130,343 |
See notes to unaudited consolidated financial statements
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Six Months Ended June 30, |
Three Months Ended June 30, |
|||||||||||||||
(dollars in thousands, except per share data) |
2016 |
2015 |
2016 |
2015 |
||||||||||||
Interest and dividend income: |
||||||||||||||||
Loans |
$ | 40,055 | $ | 33,691 | $ | 20,241 | $ | 17,140 | ||||||||
Investment securities: |
||||||||||||||||
Taxable |
3,910 | 4,242 | 2,020 | 2,124 | ||||||||||||
Nontaxable |
6,823 | 6,792 | 3,420 | 3,403 | ||||||||||||
50,788 | 44,725 | 25,681 | 22,667 | |||||||||||||
Interest expense: |
||||||||||||||||
Savings, NOW and money market deposits |
2,343 | 1,150 | 1,410 | 605 | ||||||||||||
Time deposits |
2,674 | 3,070 | 1,299 | 1,489 | ||||||||||||
Short-term borrowings |
131 | 94 | 7 | 13 | ||||||||||||
Long-term debt |
3,666 | 4,111 | 1,692 | 2,066 | ||||||||||||
8,814 | 8,425 | 4,408 | 4,173 | |||||||||||||
Net interest income |
41,974 | 36,300 | 21,273 | 18,494 | ||||||||||||
Provision for loan losses |
392 | 1,353 | 139 | 942 | ||||||||||||
Net interest income after provision for loan losses |
41,582 | 34,947 | 21,134 | 17,552 | ||||||||||||
Noninterest income: |
||||||||||||||||
Investment Management Division income |
990 | 1,039 | 514 | 532 | ||||||||||||
Service charges on deposit accounts |
1,290 | 1,325 | 656 | 669 | ||||||||||||
Net gains on sales of securities |
1,844 | 1,133 | 1,844 | 1,133 | ||||||||||||
Other |
1,361 | 1,542 | 717 | 749 | ||||||||||||
5,485 | 5,039 | 3,731 | 3,083 | |||||||||||||
Noninterest expense: |
||||||||||||||||
Salaries |
11,049 | 10,020 | 5,471 | 4,968 | ||||||||||||
Employee benefits |
3,449 | 2,739 | 1,780 | 1,376 | ||||||||||||
Occupancy and equipment |
4,579 | 4,569 | 2,202 | 2,111 | ||||||||||||
Debt extinguishment |
1,756 | 1,084 | 1,756 | 1,084 | ||||||||||||
Other |
6,470 | 4,777 | 3,663 | 2,503 | ||||||||||||
27,303 | 23,189 | 14,872 | 12,042 | |||||||||||||
Income before income taxes |
19,764 | 16,797 | 9,993 | 8,593 | ||||||||||||
Income tax expense |
4,714 | 4,036 | 2,373 | 2,317 | ||||||||||||
Net income |
$ | 15,050 | $ | 12,761 | $ | 7,620 | $ | 6,276 | ||||||||
Earnings per share: |
||||||||||||||||
Basic |
$ | 1.03 | $ | .91 | $ | .51 | $ | .45 | ||||||||
Diluted |
1.02 | .90 | .50 | .44 | ||||||||||||
Cash dividends declared per share |
.40 | .38 | .20 | .19 |
See notes to unaudited consolidated financial statements
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
Six Months Ended |
Three Months Ended |
|||||||||||||||
June 30, |
June 30, |
|||||||||||||||
(dollars in thousands) |
2016 |
2015 |
2016 |
2015 |
||||||||||||
Net income |
$ | 15,050 | $ | 12,761 | $ | 7,620 | $ | 6,276 | ||||||||
Other comprehensive income (loss): |
||||||||||||||||
Change in net unrealized holding gains on available-for-sale securities |
10,653 | (6,861 | ) | 5,511 | (9,445 | ) | ||||||||||
Change in funded status of pension plan |
122 | - | 61 | - | ||||||||||||
Other comprehensive income (loss) before income taxes |
10,775 | (6,861 | ) | 5,572 | (9,445 | ) | ||||||||||
Income tax expense (benefit) |
4,607 | (2,862 | ) | 2,335 | (3,839 | ) | ||||||||||
Other comprehensive income (loss) |
6,168 | (3,999 | ) | 3,237 | (5,606 | ) | ||||||||||
Comprehensive income |
$ | 21,218 | $ | 8,762 | $ | 10,857 | $ | 670 |
See notes to unaudited consolidated financial statements
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
Six Months Ended June 30, 2016 |
||||||||||||||||||||||||
Accumulated |
||||||||||||||||||||||||
Other |
||||||||||||||||||||||||
Common Stock |
Retained |
Comprehensive |
||||||||||||||||||||||
(dollars in thousands) |
Shares |
Amount |
Surplus |
Earnings |
Income |
Total |
||||||||||||||||||
Balance, January 1, 2016 |
14,116,677 | $ | 1,412 | $ | 56,931 | $ | 185,069 | $ | 7,524 | $ | 250,936 | |||||||||||||
Net income |
15,050 | 15,050 | ||||||||||||||||||||||
Other comprehensive income |
6,168 | 6,168 | ||||||||||||||||||||||
Common stock issued in public offering, net of issuance costs |
1,300,000 | 130 | 35,132 | 35,262 | ||||||||||||||||||||
Repurchase of common stock |
(13,393 | ) | (1 | ) | (369 | ) | (370 | ) | ||||||||||||||||
Common stock issued under stock compensation plans, including tax benefit |
82,762 | 8 | 776 | 784 | ||||||||||||||||||||
Common stock issued under dividend reinvestment and stock purchase plan |
104,648 | 10 | 2,889 | 2,899 | ||||||||||||||||||||
Stock-based compensation |
914 | 914 | ||||||||||||||||||||||
Cash dividends declared |
(5,991 | ) | (5,991 | ) | ||||||||||||||||||||
Balance, June 30, 2016 |
15,590,694 | $ | 1,559 | $ | 96,273 | $ | 194,128 | $ | 13,692 | $ | 305,652 |
Six Months Ended June 30, 2015 |
||||||||||||||||||||||||
Accumulated |
||||||||||||||||||||||||
Other |
||||||||||||||||||||||||
Common Stock |
Retained |
Comprehensive |
||||||||||||||||||||||
(dollars in thousands) |
Shares |
Amount |
Surplus |
Earnings |
Income |
Total |
||||||||||||||||||
Balance, January 1, 2015 |
13,887,134 | $ | 1,389 | $ | 51,009 | $ | 170,120 | $ | 10,785 | $ | 233,303 | |||||||||||||
Net income |
12,761 | 12,761 | ||||||||||||||||||||||
Other comprehensive loss |
(3,999 | ) | (3,999 | ) | ||||||||||||||||||||
Repurchase of common stock |
(12,227 | ) | (1 | ) | (286 | ) | (287 | ) | ||||||||||||||||
Common stock issued under stock compensation plans, including tax benefit |
61,138 | 6 | 461 | 467 | ||||||||||||||||||||
Common stock issued under dividend reinvestment and stock purchase plan |
59,576 | 6 | 1,428 | 1,434 | ||||||||||||||||||||
Stock-based compensation |
746 | 746 | ||||||||||||||||||||||
Cash dividends declared |
(5,312 | ) | (5,312 | ) | ||||||||||||||||||||
Balance, June 30, 2015 |
13,995,621 | $ | 1,400 | $ | 53,358 | $ | 177,569 | $ | 6,786 | $ | 239,113 |
See notes to unaudited consolidated financial statements
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended June 30, |
||||||||
(dollars in thousands) |
2016 |
2015 |
||||||
Cash Flows From Operating Activities: |
||||||||
Net income |
$ | 15,050 | $ | 12,761 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Provision for loan losses |
392 | 1,353 | ||||||
Provision for deferred income taxes |
594 | 420 | ||||||
Depreciation and amortization |
1,590 | 1,543 | ||||||
Premium amortization on investment securities, net |
1,880 | 2,581 | ||||||
Net gains on sales of securities |
(1,844 | ) | (1,133 | ) | ||||
Net loss on sales of loans held-for-sale |
5 | - | ||||||
Loss on debt extinguishment |
1,756 | 1,084 | ||||||
Stock-based compensation expense |
914 | 746 | ||||||
Accretion of cash surrender value on bank-owned life insurance |
(467 | ) | (447 | ) | ||||
Pension expense (credit) |
9 | (245 | ) | |||||
Increase in other assets |
(2,098 | ) | (849 | ) | ||||
Decrease in accrued expenses and other liabilities |
(3,138 | ) | (892 | ) | ||||
Net cash provided by operating activities |
14,643 | 16,922 | ||||||
Cash Flows From Investing Activities: |
||||||||
Proceeds from sales of investment securities: |
||||||||
Held-to-maturity |
123 | 243 | ||||||
Available-for-sale |
40,989 | 66,140 | ||||||
Proceeds from maturities and redemptions of investment securities: |
||||||||
Held-to-maturity |
3,384 | 3,599 | ||||||
Available-for-sale |
48,646 | 60,186 | ||||||
Purchases of investment securities: |
||||||||
Held-to-maturity |
(1,287 | ) | (1,619 | ) | ||||
Available-for-sale |
(203,374 | ) | (65,742 | ) | ||||
Proceeds from sales of loans held-for-sale |
100 | - | ||||||
Net increase in loans |
(105,400 | ) | (167,866 | ) | ||||
Net decrease in restricted stock |
5,361 | 4,526 | ||||||
Purchases of premises and equipment, net |
(2,787 | ) | (2,709 | ) | ||||
Net cash used in investing activities |
(214,245 | ) | (103,242 | ) | ||||
Cash Flows From Financing Activities: |
||||||||
Net increase in deposits |
340,180 | 223,640 | ||||||
Net decrease in short-term borrowings |
(153,836 | ) | (100,028 | ) | ||||
Proceeds from long-term debt |
23,500 | 54,612 | ||||||
Repayment of long-term debt |
(31,756 | ) | (74,584 | ) | ||||
Proceeds from issuance of common stock, net |
38,161 | 1,434 | ||||||
Proceeds from exercise of stock options |
470 | 303 | ||||||
Tax benefit from stock compensation plans |
314 | 164 | ||||||
Repurchase and retirement of common stock |
(370 | ) | (287 | ) | ||||
Cash dividends paid |
(5,670 | ) | (5,291 | ) | ||||
Net cash provided by financing activities |
210,993 | 99,963 | ||||||
Net increase in cash and cash equivalents |
11,391 | 13,643 | ||||||
Cash and cash equivalents, beginning of year |
39,635 | 32,944 | ||||||
Cash and cash equivalents, end of period |
$ | 51,026 | $ | 46,587 | ||||
Supplemental Information: |
||||||||
Cash paid for: |
||||||||
Interest |
$ | 12,048 | $ | 8,509 | ||||
Income taxes |
4,857 | 4,535 | ||||||
Noncash investing and financing activities: |
||||||||
Cash dividends payable |
3,144 | 2,659 |
See notes to unaudited consolidated financial statements
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1 - BASIS OF PRESENTATION
The accounting and reporting policies of The First of Long Island Corporation (“Corporation”) reflect banking industry practice and conform to generally accepted accounting principles in the United States. In preparing the consolidated financial statements, management is required to make estimates, such as the allowance for loan losses, and assumptions that affect the reported asset and liability balances, revenue and expense amounts, and the disclosure of contingent assets and liabilities. Actual results could differ significantly from those estimates.
The consolidated financial statements include the accounts of the Corporation and its wholly-owned subsidiary, The First National Bank of Long Island (“Bank”). The Bank has two wholly owned subsidiaries: FNY Service Corp., an investment company, and The First of Long Island Agency, Inc., a licensed insurance agency under the laws of the State of New York. The Bank and FNY Service Corp. jointly own another subsidiary, The First of Long Island REIT, Inc., a real estate investment trust. The consolidated entity is referred to as the “Corporation” and the Bank and its subsidiaries are collectively referred to as the “Bank.” All intercompany balances and amounts have been eliminated. For further information refer to the consolidated financial statements and notes thereto included in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2015.
The consolidated financial information included herein as of and for the periods ended June 30, 2016 and 2015 is unaudited. However, such information reflects all adjustments which are, in the opinion of management, necessary for a fair statement of results for the interim periods. The December 31, 2015 consolidated balance sheet was derived from the Corporation's December 31, 2015 audited consolidated financial statements. When appropriate, items in the prior year financial statements are reclassified to conform to the current period presentation.
2 – EARNINGS PER SHARE
The following table is a reconciliation of basic and diluted earnings per share (“EPS”) for the periods indicated.
Six Months Ended June 30, |
Three Months Ended June 30, |
|||||||||||||||
(dollars in thousands, except per share data) |
2016 |
2015 |
2016 |
2015 |
||||||||||||
Net income |
$ | 15,050 | $ | 12,761 | $ | 7,620 | $ | 6,276 | ||||||||
Income allocated to participating securities (1) |
64 | - | 33 | - | ||||||||||||
Income allocated to common stockholders |
$ | 14,986 | $ | 12,761 | $ | 7,587 | $ | 6,276 | ||||||||
Weighted average: |
||||||||||||||||
Common shares |
14,601,611 | 13,958,339 | 15,019,503 | 13,991,519 | ||||||||||||
Dilutive stock options and restricted stock units (1) |
146,286 | 153,321 | 139,708 | 156,417 | ||||||||||||
14,747,897 | 14,111,660 | 15,159,211 | 14,147,936 | |||||||||||||
Earnings per share: |
||||||||||||||||
Basic |
$ | 1.03 | $ | .91 | $ | .51 | $ | .45 | ||||||||
Diluted |
1.02 | .90 | .50 | .44 |
(1) Restricted stock units (“RSUs”) awarded in January 2016 accrue dividends at the same rate as the dividends declared by the Board of Directors on the Corporation’s common stock. For purposes of computing EPS, these RSUs are considered to participate with common stock in the undistributed earnings of the Corporation and, therefore, the Corporation is required to calculate basic and diluted EPS using the two-class method. Under the two-class method, net income for the period is allocated between common stockholders and participating securities according to dividends declared and participation rights in undistributed earnings. See Note 6 for additional details on the RSUs awarded in 2016.
3 - COMPREHENSIVE INCOME
Comprehensive income includes net income and other comprehensive income. Other comprehensive income includes revenues, expenses, gains and losses that under generally accepted accounting principles are included in comprehensive income but excluded from net income. Other comprehensive income for the Corporation consists of unrealized holding gains or losses on available-for-sale securities and changes in the funded status of the Bank’s defined benefit pension plan, both net of related income taxes. Accumulated other comprehensive income is recognized as a separate component of stockholders’ equity.
The components of other comprehensive income (loss) and the related tax effects are as follows:
Six Months Ended June 30, |
Three Months Ended June 30, |
|||||||||||||||
2016 |
2015 |
2016 |
2015 |
|||||||||||||
(in thousands) |
||||||||||||||||
Change in net unrealized holding gains on available-for-sale securities: |
||||||||||||||||
Change arising during the period |
$ | 12,480 | $ | (5,736 | ) | $ | 7,338 | $ | (8,320 | ) | ||||||
Reclassification adjustment for gains included in net income (1) |
(1,827 | ) | (1,125 | ) | (1,827 | ) | (1,125 | ) | ||||||||
Change in net unrealized holding gains on available-for-sale securities |
10,653 | (6,861 | ) | 5,511 | (9,445 | ) | ||||||||||
Tax effect |
4,608 | (2,825 | ) | 2,310 | (3,839 | ) | ||||||||||
6,045 | (4,036 | ) | 3,201 | (5,606 | ) | |||||||||||
Change in funded status of pension plan: |
||||||||||||||||
Amortization of net actuarial loss included in pension expense (2) |
122 | - | 61 | - | ||||||||||||
Tax effect |
(1 | ) | (37 | ) | 25 | - | ||||||||||
123 | 37 | 36 | - | |||||||||||||
Other comprehensive income (loss) |
$ | 6,168 | $ | (3,999 | ) | $ | 3,237 | $ | (5,606 | ) |
(1) Reclassification adjustment represents net realized gains arising from the sale of available-for-sale securities. The net realized gains are included in the consolidated statements of income in the line item, “Net gains on sales of securities.” See “Note 4 – Investment Securities” for the income tax expense related to the net realized gains.
(2) Represents the amortization into expense of net actuarial loss relating to the Bank’s defined benefit pension plan. This item is included in net periodic pension cost (see Note 7) and in the consolidated statements of income in the line item, “Employee benefits.” The related income tax expense is included in the consolidated statements of income in the line item, “Income tax expense.”
The following table sets forth the components of accumulated other comprehensive income, net of tax:
Current |
||||||||||||
Balance |
Period |
Balance |
||||||||||
12/31/15 |
Change |
6/30/16 |
||||||||||
(in thousands) |
||||||||||||
Unrealized holding gains on available-for-sale securities |
$ | 11,675 | $ | 6,045 | $ | 17,720 | ||||||
Unrealized actuarial losses on pension plan |
(4,151 | ) | 123 | (4,028 | ) | |||||||
Accumulated other comprehensive income, net of tax |
$ | 7,524 | $ | 6,168 | $ | 13,692 |
4 - INVESTMENT SECURITIES
The following tables set forth the amortized cost and estimated fair values of the Bank’s investment securities.
June 30, 2016 |
||||||||||||||||
Gross |
Gross |
|||||||||||||||
Amortized |
Unrealized |
Unrealized |
Fair |
|||||||||||||
Cost |
Gains |
Losses |
Value |
|||||||||||||
Held-to-Maturity Securities: |
(in thousands) | |||||||||||||||
State and municipals |
$ | 11,041 | $ | 331 | $ | - | $ | 11,372 | ||||||||
Pass-through mortgage securities |
438 | 49 | - | 487 | ||||||||||||
Collateralized mortgage obligations |
727 | 51 | - | 778 | ||||||||||||
$ | 12,206 | $ | 431 | $ | - | $ | 12,637 | |||||||||
Available-for-Sale Securities: |
||||||||||||||||
State and municipals |
$ | 436,647 | $ | 25,990 | $ | (6 | ) | $ | 462,631 | |||||||
Pass-through mortgage securities |
215,153 | 1,600 | (37 | ) | 216,716 | |||||||||||
Collateralized mortgage obligations |
179,919 | 2,901 | (166 | ) | 182,654 | |||||||||||
$ | 831,719 | $ | 30,491 | $ | (209 | ) | $ | 862,001 | ||||||||
December 31, 2015 |
||||||||||||||||
Held-to-Maturity Securities: |
||||||||||||||||
State and municipals |
$ | 12,922 | $ | 410 | $ | - | $ | 13,332 | ||||||||
Pass-through mortgage securities |
576 | 67 | - | 643 | ||||||||||||
Collateralized mortgage obligations |
873 | 62 | - | 935 | ||||||||||||
$ | 14,371 | $ | 539 | $ | - | $ | 14,910 | |||||||||
Available-for-Sale Securities: |
||||||||||||||||
State and municipals |
$ | 416,957 | $ | 18,892 | $ | (156 | ) | $ | 435,693 | |||||||
Pass-through mortgage securities |
148,402 | 810 | (1,947 | ) | 147,265 | |||||||||||
Collateralized mortgage obligations |
152,712 | 2,720 | (690 | ) | 154,742 | |||||||||||
$ | 718,071 | $ | 22,422 | $ | (2,793 | ) | $ | 737,700 |
At June 30, 2016 and December 31, 2015, investment securities with a carrying value of $469,334,000 and $405,769,000, respectively, were pledged as collateral to secure public deposits and borrowed funds.
There were no holdings of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders’ equity at June 30, 2016 and December 31, 2015.
Securities With Unrealized Losses. The following tables set forth securities with unrealized losses presented by the length of time the securities have been in a continuous unrealized loss position.
June 30, 2016 |
||||||||||||||||||||||||
Less than |
12 Months |
|||||||||||||||||||||||
12 Months |
or More |
Total |
||||||||||||||||||||||
Fair |
Unrealized |
Fair |
Unrealized |
Fair |
Unrealized |
|||||||||||||||||||
Value |
Loss |
Value |
Loss |
Value |
Loss |
|||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
State and municipals |
$ | 2,647 | $ | (6 | ) | $ | - | $ | - | $ | 2,647 | $ | (6 | ) | ||||||||||
Pass-through mortgage securities |
10,546 | (29 | ) | 8,966 | (8 | ) | 19,512 | (37 | ) | |||||||||||||||
Collateralized mortgage obligations |
250 | (2 | ) | 9,361 | (164 | ) | 9,611 | (166 | ) | |||||||||||||||
Total temporarily impaired |
$ | 13,443 | $ | (37 | ) | $ | 18,327 | $ | (172 | ) | $ | 31,770 | $ | (209 | ) | |||||||||
December 31, 2015 |
||||||||||||||||||||||||
State and municipals |
$ | 13,148 | $ | (78 | ) | $ | 5,837 | $ | (78 | ) | $ | 18,985 | $ | (156 | ) | |||||||||
Pass-through mortgage securities |
98,504 | (1,348 | ) | 27,365 | (599 | ) | 125,869 | (1,947 | ) | |||||||||||||||
Collateralized mortgage obligations |
39,133 | (305 | ) | 12,743 | (385 | ) | 51,876 | (690 | ) | |||||||||||||||
Total temporarily impaired |
$ | 150,785 | $ | (1,731 | ) | $ | 45,945 | $ | (1,062 | ) | $ | 196,730 | $ | (2,793 | ) |
Because the unrealized losses reflected in the preceding tables are deemed by management to be attributable to changes in interest rates and not credit losses, and because management does not have the intent to sell these securities and it is not more likely than not that it will be required to sell these securities before their anticipated recovery, the Bank does not consider these securities to be other-than-temporarily impaired at June 30, 2016.
Sales of Available-for-Sale Securities. Sales of available-for-sale securities were as follows:
Six Months Ended June 30, |
Three Months Ended June 30, |
|||||||||||||||
2016 |
2015 |
2016 |
2015 |
|||||||||||||
(in thousands) |
||||||||||||||||
Proceeds |
$ | 40,989 | $ | 66,140 | $ | 40,989 | $ | 66,140 | ||||||||
Gross gains |
$ | 1,845 | $ | 1,501 | $ | 1,845 | $ | 1,501 | ||||||||
Gross losses |
(18 | ) | (376 | ) | (18 | ) | (376 | ) | ||||||||
Net gain |
$ | 1,827 | $ | 1,125 | $ | 1,827 | $ | 1,125 |
Income tax expense related to the net realized gains was $761,000 for the six and three months ended June 30, 2016, and $463,000 for the six and three months ended June 30, 2015.
Sales of Held-to-Maturity Securities. During the second quarter of 2016, the Bank sold one mortgage-backed security that was classified as held-to-maturity. The sale occurred after the Bank collected 85% or more of the principal outstanding at acquisition. The security sold had a carrying value of $106,000 at the time of sale and the Bank realized a gain upon sale of $17,000.
During the second quarter of 2015, the Bank sold one municipal security that was classified as held-to-maturity. The sale was in response to a significant deterioration in the creditworthiness of the issuer. The security sold had a carrying value of $235,000 at the time of sale and the Bank realized a gain upon sale of $8,000.
Maturities. The following table sets forth by maturity the amortized cost and fair value of the Bank’s state and municipal securities at June 30, 2016 based on the earlier of their stated maturity or, if applicable, their pre-refunded date. The remaining securities in the Bank’s investment securities portfolio are mortgage-backed securities, consisting of pass-through securities and collateralized mortgage obligations. Although these securities are expected to have substantial periodic repayments they are reflected in the table below in aggregate amounts.
Amortized Cost |
Fair Value |
|||||||
(in thousands) |
||||||||
Held-to-Maturity Securities: | ||||||||
Within one year |
$ | 2,854 | $ | 2,877 | ||||
After 1 through 5 years |
5,742 | 5,966 | ||||||
After 5 through 10 years |
2,077 | 2,142 | ||||||
After 10 years |
368 | 387 | ||||||
Mortgage-backed securities |
1,165 | 1,265 | ||||||
$ | 12,206 | $ | 12,637 | |||||
Available-for-Sale Securities: |
||||||||
Within one year |
$ | 12,245 | $ | 12,428 | ||||
After 1 through 5 years |
49,308 | 51,591 | ||||||
After 5 through 10 years |
170,101 | 180,119 | ||||||
After 10 years |
204,993 | 218,493 | ||||||
Mortgage-backed securities |
395,072 | 399,370 | ||||||
$ | 831,719 | $ | 862,001 |
5 – LOANS
The following tables set forth by class of loans the amount of loans individually and collectively evaluated for impairment and the portion of the allowance for loan losses allocable to such loans.
June 30, 2016 |
||||||||||||||||||||||||
Loans |
Allowance for Loan Losses |
|||||||||||||||||||||||
Individually Evaluated for Impairment |
Collectively Evaluated for Impairment |
Ending Balance |
Individually Evaluated for Impairment |
Collectively Evaluated for Impairment |
Ending Balance |
|||||||||||||||||||
(in thousands) |
||||||||||||||||||||||||
Commercial and industrial |
$ | - | $ | 105,106 | $ | 105,106 | $ | - | $ | 1,174 | $ | 1,174 | ||||||||||||
Commercial mortgages: |
||||||||||||||||||||||||
Multifamily |
- | 542,115 | 542,115 | - | 6,346 | 6,346 | ||||||||||||||||||
Other |
- | 368,768 | 368,768 | - | 3,828 | 3,828 | ||||||||||||||||||
Owner-occupied |
4,361 | 128,316 | 132,677 | - | 1,175 | 1,175 | ||||||||||||||||||
Residential mortgages: |
||||||||||||||||||||||||
Closed end |
3,727 | 1,107,250 | 1,110,977 | 408 | 13,740 | 14,148 | ||||||||||||||||||
Revolving home equity |
519 | 87,452 | 87,971 | - | 913 | 913 | ||||||||||||||||||
Consumer and other |
- | 5,998 | 5,998 | - | 93 | 93 | ||||||||||||||||||
$ | 8,607 | $ | 2,345,005 | $ | 2,353,612 | $ | 408 | $ | 27,269 | $ | 27,677 | |||||||||||||
December 31, 2015 |
||||||||||||||||||||||||
Commercial and industrial |
$ | - | $ | 93,056 | $ | 93,056 | $ | - | $ | 928 | $ | 928 | ||||||||||||
Commercial mortgages: |
||||||||||||||||||||||||
Multifamily |
- | 572,322 | 572,322 | - | 6,858 | 6,858 | ||||||||||||||||||
Other |
- | 348,909 | 348,909 | - | 3,674 | 3,674 | ||||||||||||||||||
Owner-occupied |
594 | 114,506 | 115,100 | - | 1,047 | 1,047 | ||||||||||||||||||
Residential mortgages: |
||||||||||||||||||||||||
Closed end |
3,797 | 1,021,418 | 1,025,215 | 428 | 13,211 | 13,639 | ||||||||||||||||||
Revolving home equity |
522 | 87,326 | 87,848 | - | 1,016 | 1,016 | ||||||||||||||||||
Consumer and other |
- | 5,733 | 5,733 | - | 94 | 94 | ||||||||||||||||||
$ | 4,913 | $ | 2,243,270 | $ | 2,248,183 | $ | 428 | $ | 26,828 | $ | 27,256 |
The following tables present the activity in the allowance for loan losses for the six and three months ended June 30, 2016 and 2015.
Balance at 1/1/16 |
Chargeoffs |
Recoveries |
Provision for Loan Losses (Credit) |
Balance at 6/30/16 |
||||||||||||||||
(in thousands) |
||||||||||||||||||||
Commercial and industrial |
$ | 928 | $ | - | $ | 4 | $ | 242 | $ | 1,174 | ||||||||||
Commercial mortgages: |
||||||||||||||||||||
Multifamily |
6,858 | - | - | (512 | ) | 6,346 | ||||||||||||||
Other |
3,674 | - | - | 154 | 3,828 | |||||||||||||||
Owner-occupied |
1,047 | - | - | 128 | 1,175 | |||||||||||||||
Residential mortgages: |
||||||||||||||||||||
Closed end |
13,639 | - | 8 | 501 | 14,148 | |||||||||||||||
Revolving home equity |
1,016 | - | 12 | (115 | ) | 913 | ||||||||||||||
Consumer and other |
94 | - | 5 | (6 | ) | 93 | ||||||||||||||
$ | 27,256 | $ | - | $ | 29 | $ | 392 | $ | 27,677 |
Balance at 4/1/16 |
Chargeoffs |
Recoveries |
Provision for Loan Losses (Credit) |
Balance at 6/30/16 |
||||||||||||||||
(in thousands) |
||||||||||||||||||||
Commercial and industrial |
$ | 1,112 | $ | - | $ | - | $ | 62 | $ | 1,174 | ||||||||||
Commercial mortgages: |
||||||||||||||||||||
Multifamily |
6,805 | - | - | (459 | ) | 6,346 | ||||||||||||||
Other |
3,853 | - | - | (25 | ) | 3,828 | ||||||||||||||
Owner-occupied |
1,093 | - | - | 82 | 1,175 | |||||||||||||||
Residential mortgages: |
||||||||||||||||||||
Closed end |
13,643 | - | - | 505 | 14,148 | |||||||||||||||
Revolving home equity |
927 | - | 9 | (23 | ) | 913 | ||||||||||||||
Consumer and other |
91 | - | 5 | (3 | ) | 93 | ||||||||||||||
$ | 27,524 | $ | - | $ | 14 | $ | 139 | $ | 27,677 |
Balance at 1/1/15 |
Chargeoffs |
Recoveries |
Provision for Loan Losses (Credit) |
Balance at 6/30/15 |
||||||||||||||||
(in thousands) |
||||||||||||||||||||
Commercial and industrial |
$ | 838 | $ | - | $ | 6 | $ | 142 | $ | 986 | ||||||||||
Commercial mortgages: |
||||||||||||||||||||
Multifamily |
7,207 | 67 | - | (110 | ) | 7,030 | ||||||||||||||
Other |
2,340 | - | 1 | (78 | ) | 2,263 | ||||||||||||||
Owner-occupied |