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 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
(Address of principal executive office) | (Zip Code) |
☒ | Accelerated Filer | ☐ | ||||
Non-accelerated Filer | ☐ | Smaller Reporting Company | ||||
Emerging Growth Company |
Title of each class | Trading symbol(s) | Name of each exchange on which registered |
a Share of 6.625% Perpetual Preferred Stock, Series B | ||
a Share of 6.60% Perpetual Preferred Stock, Series C | ||
a Share of 6.100% Perpetual Preferred Stock, Series D |
Page | |
Part I. Financial Information | |
Item 1. Financial Statements (unaudited) | |
(unaudited) | |||||||
(in thousands, except share data) | March 31, 2020 | December 31, 2019 | |||||
Assets | |||||||
Cash and due from banks | $ | $ | |||||
Interest-bearing deposits in other banks | |||||||
Total cash and cash equivalents | |||||||
Securities available for sale, at fair value | |||||||
Securities held to maturity (fair values of $186,396 and $189,899, respectively) | |||||||
Mortgage loans held for sale, at fair value | |||||||
Loans and leases, net of unearned income | |||||||
Allowance for loan and lease losses | ( | ) | ( | ) | |||
Loans and leases, net | |||||||
Premises and equipment, net | |||||||
Goodwill | |||||||
Other intangible assets | |||||||
Other assets | |||||||
Total Assets | $ | $ | |||||
Liabilities | |||||||
Deposits: | |||||||
Non-interest-bearing | $ | $ | |||||
Interest-bearing | |||||||
Total deposits | |||||||
Short-term borrowings | |||||||
Long-term debt | |||||||
Other liabilities | |||||||
Total Liabilities | |||||||
Shareholders’ Equity | |||||||
Preferred stock, $1 par value - 5,000,000 shares authorized | |||||||
Non-cumulative perpetual, liquidation preference $10,000 per share; 23,750 shares issued and outstanding, including related surplus | |||||||
Common stock, $1 par value - 100,000,000 shares authorized; 52,618,287 and 52,419,519 shares issued and outstanding, respectively | |||||||
Additional paid-in capital | |||||||
Retained earnings | |||||||
Accumulated other comprehensive income (loss) | |||||||
Total Shareholders’ Equity | |||||||
Total Liabilities and Shareholders’ Equity | $ | $ |
Three Months Ended March 31, | |||||||
(in thousands, except per share data) | 2020 | 2019 | |||||
Interest and dividend income | |||||||
Loans and leases, including fees | $ | $ | |||||
Mortgage loans held for sale, including fees | |||||||
Taxable securities | |||||||
Tax-exempt securities | |||||||
Other | |||||||
Total interest and dividend income | |||||||
Interest expense | |||||||
Deposits | |||||||
Short-term borrowings | |||||||
Long-term debt | |||||||
Total interest expense | |||||||
Net interest income | |||||||
Provision for expected credit losses | |||||||
Net interest income after provision for expected credit losses | |||||||
Non-interest income | |||||||
Mortgage income | |||||||
Service charges on deposit accounts | |||||||
Title revenue | |||||||
Commission income | |||||||
Broker commissions | |||||||
ATM and debit card fee income | |||||||
Credit card and merchant-related income | |||||||
Trust department income | |||||||
Income from bank owned life insurance | |||||||
Other non-interest income | |||||||
Total non-interest income | |||||||
Non-interest expense | |||||||
Salaries and employee benefits | |||||||
Net occupancy and equipment | |||||||
Communication and delivery | |||||||
Marketing and business development | |||||||
Computer services expense | |||||||
Professional services | |||||||
Credit and other loan-related expense | |||||||
Insurance | |||||||
Travel and entertainment | |||||||
Amortization of acquisition intangibles | |||||||
Impairment of long-lived assets and other losses | |||||||
Other non-interest expense | |||||||
Total non-interest expense | |||||||
Income before income tax expense |
Income tax expense | |||||||
Net income | |||||||
Less: Preferred stock dividends | |||||||
Net income available to common shareholders | $ | $ | |||||
Income available to common shareholders - basic | $ | $ | |||||
Less: Earnings allocated to unvested restricted stock | |||||||
Earnings allocated to common shareholders | $ | $ | |||||
Earnings per common share - basic | $ | $ | |||||
Earnings per common share - diluted | |||||||
Cash dividends declared per common share | |||||||
Comprehensive income | |||||||
Net income | $ | $ | |||||
Other comprehensive income (loss), net of tax: | |||||||
Unrealized gains on securities: | |||||||
Unrealized holding gains arising during the period (net of tax effects of $17,342 and $10,675, respectively) | |||||||
Unrealized gains on securities, net of tax | |||||||
Fair value of derivative instruments designated as cash flow hedges: | |||||||
Change in fair value of derivative instruments designated as cash flow hedges during the period (net of tax effects of $3,209 and $471, respectively) | ( | ) | |||||
Less: Reclassification adjustment for gains (losses) included in net income (net of tax effects of $136 and $75, respectively) | ( | ) | |||||
Fair value of derivative instruments designated as cash flow hedges, net of tax | ( | ) | |||||
Other comprehensive income (loss), net of tax | |||||||
Comprehensive income | $ | $ |
For the Three Months Ended | |||||||||||||||||||||||||||||
Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total | ||||||||||||||||||||||||||
Preferred Stock | Common Stock | ||||||||||||||||||||||||||||
(in thousands, except share and per share data) | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
Balance, December 31, 2018 | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
Cumulative-effect adjustment due to the adoption of ASU 2016-02 (1) | — | — | — | — | — | — | |||||||||||||||||||||||
Net income | — | — | — | — | — | — | |||||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | — | — | |||||||||||||||||||||||
Cash dividends declared, $0.43 per share | — | — | — | — | — | ( | ) | — | ( | ) | |||||||||||||||||||
Preferred stock dividends | — | — | — | — | — | ( | ) | — | ( | ) | |||||||||||||||||||
Common stock issued under incentive plans, net of shares surrendered in payment | — | — | ( | ) | — | — | ( | ) | |||||||||||||||||||||
Common stock repurchases | — | — | ( | ) | ( | ) | ( | ) | — | — | ( | ) | |||||||||||||||||
Share-based compensation expense | — | — | — | — | — | — | |||||||||||||||||||||||
Balance, March 31, 2019 | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
Balance, December 31, 2019 | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
Cumulative-effect adjustment due to the adoption of ASU 2016-13 (2) | — | — | — | — | — | ( | ) | — | ( | ) | |||||||||||||||||||
Net income | — | — | — | — | — | — | |||||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | — | — | |||||||||||||||||||||||
Cash dividends declared, $0.47 per share | — | — | — | — | — | ( | ) | — | ( | ) | |||||||||||||||||||
Preferred stock dividends | — | — | — | — | — | ( | ) | — | ( | ) | |||||||||||||||||||
Common stock issued under incentive plans, net of shares surrendered in payment | — | — | ( | ) | — | — | ( | ) | |||||||||||||||||||||
Share-based compensation expense | — | — | — | — | — | — | |||||||||||||||||||||||
Balance, March 31, 2020 | $ | $ | $ | $ | $ | $ |
(1) | Cumulative-effect adjustment to beginning retained earnings related to the recognition of pre-existing lease liabilities and previously deferred gains on sale-leaseback transactions in accordance with ASU 2016-02, adopted as of January 1, 2019. | ||||||||||||||||
(2) | Cumulative-effect adjustment to beginning retained earnings related to the adoption of the current expected credit loss (CECL) methodology for estimating credit losses in accordance with ASU 2016-13, adopted as of January 1, 2020. |
For the Three Months Ended March 31, | |||||||
(in thousands) | 2020 | 2019 | |||||
Cash Flows from Operating Activities | |||||||
Net income | $ | $ | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation, amortization, and accretion, including amortization of purchase accounting adjustments and market value adjustments | |||||||
Provision for expected credit losses | |||||||
Share-based compensation expense - equity awards | |||||||
(Gain) loss on sale of OREO and long-lived assets, net of impairment | ( | ) | |||||
Deferred income tax expense | |||||||
Originations of mortgage loans held for sale | ( | ) | ( | ) | |||
Proceeds from sales of mortgage loans held for sale | |||||||
Realized and unrealized gain on mortgage loans held for sale, net | ( | ) | ( | ) | |||
Other operating activities, net | ( | ) | |||||
Net Cash Provided by Operating Activities | |||||||
Cash Flows from Investing Activities | |||||||
Proceeds from maturities, prepayments and calls of securities available for sale | |||||||
Purchases of securities available for sale | ( | ) | ( | ) | |||
Proceeds from maturities, prepayments and calls of securities held to maturity | |||||||
Purchases of equity securities | ( | ) | |||||
Proceeds from sales of equity securities | |||||||
Increase in loans | ( | ) | ( | ) | |||
Proceeds from sales of premises and equipment | |||||||
Purchases of premises and equipment | ( | ) | ( | ) | |||
Proceeds from dispositions of OREO | |||||||
Cash paid for additional investment in tax credit entities | ( | ) | ( | ) | |||
Other investing activities, net | ( | ) | |||||
Net Cash Used in Investing Activities | ( | ) | ( | ) | |||
Cash Flows from Financing Activities | |||||||
Increase in deposits | |||||||
Net change in short-term borrowings | ( | ) | |||||
Proceeds from long-term debt | |||||||
Repayments of long-term debt | ( | ) | ( | ) | |||
Cash dividends paid on common stock | ( | ) | ( | ) | |||
Cash dividends paid on preferred stock | ( | ) | ( | ) | |||
Net share-based compensation stock transactions | ( | ) | ( | ) | |||
Payments to repurchase common stock | ( | ) | |||||
Net Cash Provided by Financing Activities | |||||||
Net Increase (Decrease) In Cash and Cash Equivalents | ( | ) | |||||
Cash and Cash Equivalents at Beginning of Period | |||||||
Cash and Cash Equivalents at End of Period | $ | $ | |||||
Supplemental Schedule of Non-cash Activities | |||||||
Acquisition of real estate in settlement of loans | $ | $ | |||||
Supplemental Disclosures | |||||||
Cash paid for: | |||||||
Interest on deposits and borrowings | $ | $ |
• | a reduction of the stated interest rate for the remaining original life of the loan, |
• | extension of the maturity date or dates at a stated interest rate lower than the current market rate for new loans with similar risk characteristics, |
• | reduction of the face amount or maturity amount of the loan as stated in the agreement, or |
• | reduction of accrued interest receivable on the loan. |
• | whether the customer is currently in default on its existing loan(s), or is in an economic position where it is probable the customer will be in default on its loan(s) in the foreseeable future without a modification, |
• | whether the customer has declared bankruptcy, |
• | whether there is substantial doubt about the customer’s ability to continue as a going concern, |
• | whether, based on its projections of the customer’s current capabilities, the Company believes the customer’s future cash flows will be insufficient to service the loan, including interest, in accordance with the contractual terms of the existing agreement for the foreseeable future, and |
• | whether the customer cannot obtain sufficient funds from other sources at an effective interest rate equal to the current market rate for a similar loan for a non-troubled debtor. |
(in thousands) | December 31, 2019 | CECL Adoption | January 1, 2020 | ||||||||
Allowance for Expected Credit Losses | |||||||||||
Real estate - construction | $ | $ | $ | ||||||||
Real estate - owner-occupied | ( | ) | |||||||||
Real estate - non-owner occupied | |||||||||||
Commercial & industrial | ( | ) | |||||||||
Residential mortgage | |||||||||||
Home equity | |||||||||||
Other consumer loans | ( | ) | |||||||||
Total | $ | $ | $ | ||||||||
Retained Earnings | |||||||||||
Increase in allowance for expected credit losses | $ | ||||||||||
Balance sheet reclassification | |||||||||||
Total pre-tax effect | |||||||||||
Tax effect | |||||||||||
Decrease to retained earnings | $ |
March 31, 2020 | |||||||||||||||
(in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||
Securities available for sale: | |||||||||||||||
U.S. Government-sponsored enterprise obligations | $ | $ | $ | $ | |||||||||||
Obligations of state and political subdivisions | |||||||||||||||
Mortgage-backed securities: | |||||||||||||||
Residential agency | ( | ) | |||||||||||||
Commercial agency | ( | ) | |||||||||||||
Other securities | ( | ) | |||||||||||||
Total securities available for sale | $ | $ | $ | ( | ) | $ | |||||||||
Amortized Cost | Gross Unrecognized Gains | Gross Unrecognized Losses | Estimated Fair Value | ||||||||||||
Securities held to maturity: | |||||||||||||||
Obligations of state and political subdivisions | $ | $ | $ | $ | |||||||||||
Mortgage-backed securities: | |||||||||||||||
Residential agency | ( | ) | |||||||||||||
Total securities held to maturity | $ | $ | $ | ( | ) | $ |
December 31, 2019 | |||||||||||||||
(in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||
Securities available for sale: | |||||||||||||||
U.S. Government-sponsored enterprise obligations | $ | $ | $ | $ | |||||||||||
Obligations of state and political subdivisions | |||||||||||||||
Mortgage-backed securities: | |||||||||||||||
Residential agency | ( | ) | |||||||||||||
Commercial agency | ( | ) | |||||||||||||
Other securities | ( | ) | |||||||||||||
Total securities available for sale | $ | $ | $ | ( | ) | $ | |||||||||
Amortized Cost | Gross Unrecognized Gains | Gross Unrecognized Losses | Estimated Fair Value | ||||||||||||
Securities held to maturity: | |||||||||||||||
Obligations of state and political subdivisions | $ | $ | $ | $ | |||||||||||
Mortgage-backed securities: | |||||||||||||||
Residential agency | ( | ) | |||||||||||||
Total securities held to maturity | $ | $ | $ | ( | ) | $ |
March 31, 2020 | |||||||||||||||||||||||
Less Than Twelve Months | Twelve Months or More | Total | |||||||||||||||||||||
(in thousands) | Gross Unrealized Losses | Estimated Fair Value | Gross Unrealized Losses | Estimated Fair Value | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||||||
Securities available for sale: | |||||||||||||||||||||||
Mortgage-backed securities: | |||||||||||||||||||||||
Residential agency | $ | ( | ) | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
Commercial agency | ( | ) | ( | ) | |||||||||||||||||||
Other securities | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Total securities available for sale | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||
Less Than Twelve Months | Twelve Months or More | Total | |||||||||||||||||||||
Gross Unrecognized Losses | Estimated Fair Value | Gross Unrecognized Losses | Estimated Fair Value | Gross Unrecognized Losses | Estimated Fair Value | ||||||||||||||||||
Securities held to maturity: | |||||||||||||||||||||||
Mortgage-backed securities: | |||||||||||||||||||||||
Residential agency | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||
Total securities held to maturity | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ |
December 31, 2019 | |||||||||||||||||||||||
Less Than Twelve Months | Twelve Months or More | Total | |||||||||||||||||||||
(in thousands) | Gross Unrealized Losses | Estimated Fair Value | Gross Unrealized Losses | Estimated Fair Value | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||||||
Securities available for sale: | |||||||||||||||||||||||
Obligations of state and political subdivisions | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Mortgage-backed securities: | |||||||||||||||||||||||
Residential agency | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Commercial agency | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Other securities | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Total securities available for sale | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||
Less Than Twelve Months | Twelve Months or More | Total | |||||||||||||||||||||
Gross Unrecognized Losses | Estimated Fair Value | Gross Unrecognized Losses | Estimated Fair Value | Gross Unrecognized Losses | Estimated Fair Value | ||||||||||||||||||
Securities held to maturity: | |||||||||||||||||||||||
Mortgage-backed securities: | |||||||||||||||||||||||
Residential agency | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||
Total securities held to maturity | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ |
(in thousands) | March 31, 2020 | December 31, 2019 | |||||
Number of securities | |||||||
Mortgage-backed securities: | |||||||
Residential agency | |||||||
Commercial agency | |||||||
Other securities | |||||||
Amortized Cost Basis | |||||||
Mortgage-backed securities: | |||||||
Residential agency | $ | $ | |||||
Commercial agency | |||||||
Other securities | |||||||
$ | $ | ||||||
Unrealized Loss | |||||||
Mortgage-backed securities: | |||||||
Residential agency | $ | $ | |||||
Commercial agency | |||||||
Other securities | |||||||
$ | $ |
March 31, 2020 | ||||
Securities Held to Maturity | ||||
Credit Rating | Obligations of State and Political Subdivisions (in thousands) | |||
Aaa / AAA | $ | |||
Aa1 / AA+ | ||||
Aa2/ AA | ||||
Aa3 / AA- | ||||
A2 / A | ||||
Total | $ |
Securities Available for Sale | Securities Held to Maturity | ||||||||||||||||||||
(in thousands) | Weighted Average Yield | Amortized Cost | Estimated Fair Value | Weighted Average Yield | Amortized Cost | Estimated Fair Value | |||||||||||||||
Within one year or less | % | $ | $ | % | $ | $ | |||||||||||||||
One through five years | |||||||||||||||||||||
After five through ten years | |||||||||||||||||||||
Over ten years | |||||||||||||||||||||
% | $ | $ | % | $ | $ |
(in thousands) | March 31, 2020 | December 31, 2019 | |||||
Federal Home Loan Bank stock | $ | $ | |||||
Federal Reserve Bank stock | |||||||
CRA and Community Development Investment Funds | |||||||
Other investments | |||||||
$ | $ |
(in thousands) | March 31, 2020 | December 31, 2019 | |||||
Commercial loans and leases: | |||||||
Real estate - construction | $ | $ | |||||
Real estate - owner-occupied | |||||||
Real estate - non-owner-occupied | |||||||
Commercial and industrial (C&I) (1) | |||||||
Consumer and other loans: | |||||||
Residential mortgage | |||||||
Home equity | |||||||
Other | |||||||
Total loans and leases | $ | $ |
(1) | Includes equipment financing leases |
March 31, 2020 | |||||||||||||||||||||||||||
Age Analysis of Past Due Loans and Leases | |||||||||||||||||||||||||||
(in thousands) | 30-59 Days Past Due | 60-89 Days Past Due | Greater than 90 Days Past Due | Total Past Due | Current | Total | Accruing Loans Greater Than 90 Days Past Due | ||||||||||||||||||||
Real estate- construction | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
Real estate- owner-occupied | |||||||||||||||||||||||||||
Real estate- non-owner-occupied | |||||||||||||||||||||||||||
Commercial and industrial | |||||||||||||||||||||||||||
Residential mortgage | |||||||||||||||||||||||||||
Home equity | |||||||||||||||||||||||||||
Other | |||||||||||||||||||||||||||
Total | $ | $ | $ | $ | $ | $ | $ |
December 31, 2019 | |||||||||||||||||||||||||||
Age Analysis of Past Due Loans and Leases | |||||||||||||||||||||||||||
(in thousands) | 30-59 Days Past Due | 60-89 Days Past Due | Greater than 90 Days Past Due | Total Past Due | Current | Total | Accruing Loans Greater Than 90 Days Past Due | ||||||||||||||||||||
Real estate- construction | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
Real estate- owner-occupied | |||||||||||||||||||||||||||
Real estate- non-owner-occupied | |||||||||||||||||||||||||||
Commercial and industrial | |||||||||||||||||||||||||||
Residential mortgage | |||||||||||||||||||||||||||
Home equity | |||||||||||||||||||||||||||
Other | |||||||||||||||||||||||||||
Total | $ | $ | $ | $ | $ | $ | $ |
Amortized Cost of Non-accrual Loans and Leases | Non-accrual Loans and Leases With No Related Allowance for Expected Credit Losses | Interest Income Recognized on Non-accrual Loans and Leases | |||||||||||||||||||||||||
(in thousands) | March 31, 2020 | December 31, 2019 | December 31, 2018 | March 31, 2020 | December 31, 2019 | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | ||||||||||||||||||||
Real estate- construction | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||
Real estate- owner-occupied | |||||||||||||||||||||||||||
Real estate- non-owner-occupied | |||||||||||||||||||||||||||
Commercial and industrial | |||||||||||||||||||||||||||
Residential mortgage | |||||||||||||||||||||||||||
Home equity | |||||||||||||||||||||||||||
Other | |||||||||||||||||||||||||||
Total | $ | $ | $ | $ | $ | $ | $ |
(in thousands) | 2019 | ||
Balance at beginning of period | $ | ||
Transfers from non-accretable difference to accretable yield | ( | ) | |
Accretion | ( | ) | |
Changes in expected cash flows not affecting non-accretable differences (1) | ( | ) | |
Balance at end of period | $ |
(1) | Includes changes in cash flows expected to be collected due to the impact of changes in actual or expected timing of liquidation events, modifications, changes in interest rates and changes in prepayment assumptions. |
Three Months Ended March 31, | |||||||
(in thousands) | 2020 | 2019 | |||||
Extended maturities | $ | $ | |||||
Maturity and interest rate adjustment | |||||||
Movement to or extension of interest-rate only payments | |||||||
Interest rate adjustment | |||||||
Forbearance | |||||||
Other concession(s) (1) | |||||||
Total | $ | $ |
(1) | Other concessions may include covenant waivers, forgiveness of principal or interest associated with a customer bankruptcy, or a combination of any of the above concessions. |
Three Months Ended March 31, | |||||||||||||||||||||
2020 | 2019 | ||||||||||||||||||||
(in thousands, except number of loans) | Number of Loans | Pre-Modification Outstanding Recorded Investment | Post-Modification Outstanding Recorded Investment | Number of Loans | Pre-Modification Outstanding Recorded Investment | Post-Modification Outstanding Recorded Investment | |||||||||||||||
Real estate- construction | $ | $ | $ | $ | |||||||||||||||||
Real estate- owner-occupied | |||||||||||||||||||||
Real estate- non-owner-occupied | |||||||||||||||||||||
Commercial and industrial | |||||||||||||||||||||
Residential mortgage | |||||||||||||||||||||
Home equity | |||||||||||||||||||||
Other | |||||||||||||||||||||
Total | $ | $ | $ | $ |
Three Months Ended March 31, | |||||||||||||
2020 | 2019 | ||||||||||||
(in thousands, except number of loans) | Number of Loans | Recorded Investment | Number of Loans | Recorded Investment | |||||||||
Real estate- construction | $ | $ | |||||||||||
Real estate- owner-occupied | |||||||||||||
Real estate- non-owner-occupied | |||||||||||||
Commercial and industrial | |||||||||||||
Residential mortgage | |||||||||||||
Home equity | |||||||||||||
Other | |||||||||||||
Total | $ | $ |
(in thousands) | 2020 | 2019 | ||||||
Allowance for loan and lease losses at beginning of period | $ | $ | ||||||
Transition adjustment for ASC 326 | ||||||||
Allowance for loan and lease losses, as adjusted | ||||||||
Provision for loan and lease losses | ||||||||
Transfer of balance to OREO and other | ( | ) | ||||||
Charge-offs | ( | ) | ( | ) | ||||
Recoveries | ||||||||
Allowance for loan and lease losses at end of period | $ | $ | ||||||
Reserve for unfunded commitments at beginning of period | $ | $ | ||||||
Transition adjustment for ASC 326 | ( | ) | ||||||
Reserve for unfunded lending commitments, as adjusted | ||||||||
Provision for unfunded lending commitments | ||||||||
Reserve for unfunded commitments at end of period | $ | $ | ||||||
Allowance for expected credit losses at end of period | $ | $ |
Three Months Ended March 31, 2020 | |||||||||||||||||||||||||||||||
Commercial | |||||||||||||||||||||||||||||||
Real Estate | Consumer | ||||||||||||||||||||||||||||||
(in thousands) | Construction | Owner-occupied | Non-owner-occupied | Commercial and Industrial | Residential Mortgage | Home Equity | Other | Total | |||||||||||||||||||||||
Allowance for loan and lease losses at beginning of period | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
Transition adjustment for ASC 326 | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
Allowance for loan and lease losses, as adjusted | |||||||||||||||||||||||||||||||
Provision for loan and lease losses | |||||||||||||||||||||||||||||||
Charge-offs | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Recoveries | |||||||||||||||||||||||||||||||
Allowance for loan and lease losses at end of period | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
Reserve for unfunded lending commitments at beginning of period | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
Transition adjustment for ASC 326 | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||
Reserve for unfunded lending commitments, as adjusted | |||||||||||||||||||||||||||||||
Provision for (reversal of) unfunded commitments | ( | ) | |||||||||||||||||||||||||||||
Reserve for unfunded lending commitments at end of period | |||||||||||||||||||||||||||||||
Allowance for expected credit losses at end of period | $ | $ | $ | $ | $ | $ | $ | $ |
Three Months Ended March 31, 2019 | |||||||||||||||||||||||||||||||
Commercial | |||||||||||||||||||||||||||||||
Real Estate | Consumer | ||||||||||||||||||||||||||||||
(in thousands) | Construction | Owner-occupied | Non-owner-occupied | Commercial and Industrial | Residential Mortgage | Home Equity | Other | Total | |||||||||||||||||||||||
Allowance for loan and lease losses at beginning of period | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
Provision for loan and lease losses | |||||||||||||||||||||||||||||||
Transfer of balance to OREO and other | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
Charge-offs | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
Recoveries | |||||||||||||||||||||||||||||||
Allowance for loan and lease losses at end of period | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
Reserve for unfunded commitments at beginning of period | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
Provision for unfunded commitments | |||||||||||||||||||||||||||||||
Reserve for unfunded commitments at end of period | |||||||||||||||||||||||||||||||
Allowance for credit losses at end of period | $ | $ | $ | $ | $ | $ | $ | $ |
Term Loans | |||||||||||||||||||||||||||||||||||
(in thousands) | 2020 | 2019 | 2018 | 2017 | 2016 | Prior | Revolving loans | Revolving loans Converted to Term | Total | ||||||||||||||||||||||||||
Commercial loans and leases | |||||||||||||||||||||||||||||||||||
Real Estate- Construction | |||||||||||||||||||||||||||||||||||
Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||
Special Mention | |||||||||||||||||||||||||||||||||||
Substandard | |||||||||||||||||||||||||||||||||||
Doubtful | |||||||||||||||||||||||||||||||||||
Total Real Estate- Construction | |||||||||||||||||||||||||||||||||||
Real Estate- Owner- occupied | |||||||||||||||||||||||||||||||||||
Pass | |||||||||||||||||||||||||||||||||||
Special Mention | |||||||||||||||||||||||||||||||||||
Substandard | |||||||||||||||||||||||||||||||||||
Doubtful | |||||||||||||||||||||||||||||||||||
Total Real Estate- Owner-occupied | |||||||||||||||||||||||||||||||||||
Real Estate- Non-owner-occupied | |||||||||||||||||||||||||||||||||||
Pass | |||||||||||||||||||||||||||||||||||
Special Mention | |||||||||||||||||||||||||||||||||||
Substandard | |||||||||||||||||||||||||||||||||||
Doubtful | |||||||||||||||||||||||||||||||||||
Total Real Estate- Non-owner-occupied | |||||||||||||||||||||||||||||||||||
Commercial and Industrial (1) | |||||||||||||||||||||||||||||||||||
Pass | |||||||||||||||||||||||||||||||||||
Special Mention | |||||||||||||||||||||||||||||||||||
Substandard | |||||||||||||||||||||||||||||||||||
Doubtful | |||||||||||||||||||||||||||||||||||
Total Commercial and Industrial | |||||||||||||||||||||||||||||||||||
Total Commercial Loans and Leases | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||
(1) Includes equipment financing leases |
Term Loans | |||||||||||||||||||||||||||||||||||
(in thousands) | 2020 | 2019 | 2018 | 2017 | 2016 | Prior | Revolving loans | Revolving loans Converted to Term | Total | ||||||||||||||||||||||||||
Consumer Loans: | |||||||||||||||||||||||||||||||||||
Residential Mortgage | |||||||||||||||||||||||||||||||||||
781 and above | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||
723-780 | |||||||||||||||||||||||||||||||||||
700-722 | |||||||||||||||||||||||||||||||||||
660-699 | |||||||||||||||||||||||||||||||||||
620-659 | |||||||||||||||||||||||||||||||||||
580-619 | |||||||||||||||||||||||||||||||||||
579 and below | |||||||||||||||||||||||||||||||||||
Total Residential Mortgage | |||||||||||||||||||||||||||||||||||
Home Equity | |||||||||||||||||||||||||||||||||||
781 and above | |||||||||||||||||||||||||||||||||||
723-780 | |||||||||||||||||||||||||||||||||||
700-722 | |||||||||||||||||||||||||||||||||||
660-699 | |||||||||||||||||||||||||||||||||||
620-659 | |||||||||||||||||||||||||||||||||||
580-619 | |||||||||||||||||||||||||||||||||||
579 and below | |||||||||||||||||||||||||||||||||||
Total Home Equity | |||||||||||||||||||||||||||||||||||
Other Consumer Loans | |||||||||||||||||||||||||||||||||||
781 and above | |||||||||||||||||||||||||||||||||||
723-780 | |||||||||||||||||||||||||||||||||||
700-722 | |||||||||||||||||||||||||||||||||||
660-699 | |||||||||||||||||||||||||||||||||||
620-659 | |||||||||||||||||||||||||||||||||||
580-619 | |||||||||||||||||||||||||||||||||||
579 and below | |||||||||||||||||||||||||||||||||||
Total Other Consumer | |||||||||||||||||||||||||||||||||||
Total Consumer Loans | |||||||||||||||||||||||||||||||||||
Total Loans and Leases | $ | $ | $ | $ | $ | $ | $ | $ | $ |
(in thousands) | March 31, 2020 | December 31, 2019 | |||||
IBERIABANK | $ | $ | |||||
Mortgage | |||||||
LTC | |||||||
Total | $ | $ |
March 31, 2020 | December 31, 2019 | ||||||||||||||||||||||||||||||
Gross Carrying Amount | Valuation Allowance | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Valuation Allowance | Accumulated Amortization | Net Carrying Amount | ||||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||||||||||
Mortgage servicing rights | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | $ |
March 31, 2020 | December 31, 2019 | ||||||||||||||||||||||
(in thousands) | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||
Core deposit intangible assets | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | |||||||||||||
Customer relationship intangible asset | ( | ) | ( | ) | |||||||||||||||||||
Non-compete agreement | ( | ) | ( | ) | |||||||||||||||||||
Total | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ |
Derivative Assets - Fair Value | Derivative Liabilities - Fair Value | |||||||||||||||
(in thousands) | March 31, 2020 | December 31, 2019 | March 31, 2020 | December 31, 2019 | ||||||||||||
Derivatives designated as hedging instruments: | ||||||||||||||||
Interest rate contracts | $ | $ | $ | $ | ||||||||||||
Total derivatives designated as hedging instruments | $ | $ | $ | $ | ||||||||||||
Derivatives not designated as hedging instruments: | ||||||||||||||||
Interest rate contracts: | ||||||||||||||||
Customer swaps - upstream | $ | $ | $ | $ | ||||||||||||
Customer swaps - downstream | ||||||||||||||||
Forward sales contracts | ||||||||||||||||
Written and purchased options | ||||||||||||||||
Other contracts | ||||||||||||||||
Total derivatives not designated as hedging instruments | $ | $ | $ | $ | ||||||||||||
Total | $ | $ | $ | $ |
Derivative Assets - Notional Amount | Derivative Liabilities - Notional Amount | ||||||||||||||||||
(in thousands) | March 31, 2020 | December 31, 2019 | March 31, 2020 | December 31, 2019 | |||||||||||||||
Derivatives designated as hedging instruments: | |||||||||||||||||||
Interest rate contracts | $ | $ | $ | $ | |||||||||||||||
Total derivatives designated as hedging instruments | $ | $ | $ | $ | |||||||||||||||
Derivatives not designated as hedging instruments: | |||||||||||||||||||
Interest rate contracts: | |||||||||||||||||||
Customer swaps - upstream | $ | $ | $ | $ | |||||||||||||||
Customer swaps - downstream | |||||||||||||||||||
Forward sales contracts | |||||||||||||||||||
Written and purchased options | |||||||||||||||||||
Other contracts | |||||||||||||||||||
Total derivatives not designated as hedging instruments | $ | $ | $ | $ | |||||||||||||||
Total | $ | $ | $ | $ |
March 31, 2020 | |||||||||||||||
Gross Amounts Presented in the Balance Sheet | Gross Amounts Not Offset in the Balance Sheet | Net | |||||||||||||
(in thousands) | Derivatives | Collateral | |||||||||||||
Derivatives subject to master netting arrangements | |||||||||||||||
Derivative assets | |||||||||||||||
Interest rate contracts designated as hedging instruments | $ | $ | $ | $ | |||||||||||
Interest rate contracts not designated as hedging instruments | ( | ) | |||||||||||||
Written and purchased options | |||||||||||||||
Total derivative assets subject to master netting arrangements | $ | $ | ( | ) | $ | $ | |||||||||
Derivative liabilities | |||||||||||||||
Interest rate contracts designated as hedging instruments | $ | $ | $ | $ | |||||||||||
Interest rate contracts not designated as hedging instruments | ( | ) | |||||||||||||
Written and purchased options | |||||||||||||||
Total derivative liabilities subject to master netting arrangements | $ | $ | ( | ) | $ | $ |
December 31, 2019 | |||||||||||||||
Gross Amounts Presented in the Balance Sheet | Gross Amounts Not Offset in the Balance Sheet | Net | |||||||||||||
(in thousands) | Derivatives | Collateral | |||||||||||||
Derivatives subject to master netting arrangements | |||||||||||||||
Derivative assets | |||||||||||||||
Interest rate contracts designated as hedging instruments | $ | $ | $ | $ | |||||||||||
Interest rate contracts not designated as hedging instruments | ( | ) | |||||||||||||
Written and purchased options | |||||||||||||||
Total derivative assets subject to master netting arrangements | $ | $ | ( | ) | $ | $ | |||||||||
Derivative liabilities | |||||||||||||||
Interest rate contracts not designated as hedging instruments | $ | $ | ( | ) | $ | $ | |||||||||
Written and purchased options | |||||||||||||||
Total derivative liabilities subject to master netting arrangements | $ | $ | ( | ) | $ | $ |
Amount of Gain (Loss) Recognized in OCI, net of taxes | Location of Gain (Loss) Reclassified from AOCI into Income | Amount of Gain (Loss) Reclassified from AOCI into Income, net of taxes | Location of Gain (Loss) Recognized in Income on Derivatives (Amount Excluded from Effectiveness Testing) | Amount of Gain (Loss) Recognized in Income on Derivatives (Amount Excluded from Effectiveness Testing) | |||||||||||||||||||||||||||||||||||||
Total | Including Component | Excluding Component | Total | Including Component | Excluding Component | Total | Including Component | Excluding Component | |||||||||||||||||||||||||||||||||
(in thousands) | For the Three Months Ended March 31, | ||||||||||||||||||||||||||||||||||||||||
Derivatives in Cash Flow Hedging Relationships | 2020 | 2020 | 2020 | ||||||||||||||||||||||||||||||||||||||
Interest rate contracts | $ | $ | $ | ( | ) | Interest expense | $ | $ | $ | ( | ) | Interest expense | $ | $ | $ | ||||||||||||||||||||||||||
2019 | 2019 | 2019 | |||||||||||||||||||||||||||||||||||||||
Interest rate contracts | $ | ( | ) | $ | ( | ) | $ | Interest expense | $ | ( | ) | $ | ( | ) | $ | ( | ) | Interest expense | $ | $ | $ |
Location of Gain (Loss) Recognized in Income on Derivatives | Amount of Gain (Loss) Recognized in Income on Derivatives | ||||||||
For the Three Months Ended March 31, | |||||||||
(in thousands) | 2020 | 2019 | |||||||
Interest rate contracts (1) | Commission income | $ | $ | ||||||
Foreign exchange contracts | Other income | ||||||||
Forward sales contracts | Mortgage income | ( | ) | ( | ) | ||||
Written and purchased options | Mortgage income | ||||||||
Other contracts | Other income | ( | ) | ( | ) | ||||
Total | $ | $ | |||||||
(1) Includes fees associated with customer interest rate contracts |
March 31, 2020 | December 31, 2019 | |||||||||||||||||
(in thousands) | Issuance Date | Earliest Redemption Date | Annual Dividend Rate | Liquidation Amount | Carrying Amount | Carrying Amount | ||||||||||||
Series B Preferred Stock | 8/5/2015 | 8/1/2025 | % | $ | $ | $ | ||||||||||||
Series C Preferred Stock | 5/9/2016 | 5/1/2026 | % | |||||||||||||||
Series D Preferred Stock | 4/4/2019 | 5/1/2024 | % | |||||||||||||||
$ | $ | $ |
(in thousands) | March 31, 2020 | |||||||||||||||||
Minimum | Well-Capitalized | Actual | ||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||
Tier 1 Leverage | ||||||||||||||||||
Consolidated | $ | % | N/A | N/A | $ | % | ||||||||||||
IBERIABANK | ||||||||||||||||||
Common Equity Tier 1 (CET1) | ||||||||||||||||||
Consolidated | $ | % | N/A | N/A | $ | % | ||||||||||||
IBERIABANK | ||||||||||||||||||
Tier 1 Risk-Based Capital | ||||||||||||||||||
Consolidated | $ | % | N/A | N/A | $ | % | ||||||||||||
IBERIABANK | ||||||||||||||||||
Total Risk-Based Capital | ||||||||||||||||||
Consolidated | $ | % | N/A | N/A | $ | % | ||||||||||||
IBERIABANK |
(in thousands) | December 31, 2019 | |||||||||||||||||
Minimum | Well-Capitalized | Actual | ||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||
Tier 1 Leverage | ||||||||||||||||||
Consolidated | $ | % | N/A | N/A | $ | % | ||||||||||||
IBERIABANK | ||||||||||||||||||
Common Equity Tier 1 (CET1) | ||||||||||||||||||
Consolidated | $ | % | N/A | N/A | $ | % | ||||||||||||
IBERIABANK | ||||||||||||||||||
Tier 1 Risk-Based Capital | ||||||||||||||||||
Consolidated | $ | % | N/A | N/A | $ | % | ||||||||||||
IBERIABANK | ||||||||||||||||||
Total Risk-Based Capital | ||||||||||||||||||
Consolidated | $ | % | N/A | N/A | $ | % | ||||||||||||
IBERIABANK |
Three Months Ended March 31, | |||||||
(in thousands, except per share data) | 2020 | 2019 | |||||
Earnings Per Common Share - Basic: | |||||||
Net income | $ | $ | |||||
Preferred stock dividends | ( | ) | ( | ) | |||
Dividends and undistributed earnings allocated to unvested restricted shares | ( | ) | ( | ) | |||
Earnings allocated to common shareholders - basic | $ | $ | |||||
Weighted average common shares outstanding | |||||||
Earnings per common share - basic | $ | $ | |||||
Earnings Per Common Share - Diluted: | |||||||
Earnings allocated to common shareholders - basic | $ | $ | |||||
Adjustment for undistributed earnings allocated to unvested restricted shares | ( | ) | ( | ) | |||
Earnings allocated to common shareholders - diluted | $ | $ | |||||
Weighted average common shares outstanding | |||||||
Dilutive potential common shares | |||||||
Weighted average common shares outstanding - diluted | |||||||
Earnings per common share - diluted | $ | $ |
March 31, 2020 | |||||||||||||||
(in thousands) | Level 1 | Level 2 | Level 3 | Total | |||||||||||
Assets | |||||||||||||||
Securities available for sale | $ | $ | $ | $ | |||||||||||
Mortgage loans held for sale | |||||||||||||||
Mortgage loans held for investment, at fair value option | |||||||||||||||
Derivative instruments | |||||||||||||||
Total | $ | $ | $ | $ | |||||||||||
Liabilities | |||||||||||||||
Derivative instruments | $ | $ | $ | $ | |||||||||||
Total | $ | $ | $ | $ | |||||||||||
December 31, 2019 | |||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets | |||||||||||||||
Securities available for sale | $ | $ | $ | $ | |||||||||||
Mortgage loans held for sale | |||||||||||||||
Mortgage loans held for investment, at fair value option | |||||||||||||||
Derivative instruments | |||||||||||||||
Total | $ | $ | $ | $ | |||||||||||
Liabilities | |||||||||||||||
Derivative instruments | $ | $ | $ | $ | |||||||||||
Total | $ | $ | $ | $ |
March 31, 2020 | |||||||||||||||
(in thousands) | Level 1 | Level 2 | Level 3 | Total | |||||||||||
Assets | |||||||||||||||
Impaired loans | $ | $ | $ | $ | |||||||||||
OREO, net | |||||||||||||||
Total | $ | $ | $ | $ | |||||||||||
December 31, 2019 | |||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets | |||||||||||||||
Impaired loans | $ | $ | $ | $ | |||||||||||
OREO, net | |||||||||||||||
Total | $ | $ | $ | $ |
March 31, 2020 | December 31, 2019 | ||||||||||||||||||||||
(in thousands) | Aggregate Fair Value | Aggregate Unpaid Principal | Aggregate Fair Value Less Unpaid Principal | Aggregate Fair Value | Aggregate Unpaid Principal | Aggregate Fair Value Less Unpaid Principal | |||||||||||||||||
Mortgage loans held for sale, at fair value | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Mortgage loans held for investment, at fair value | ( | ) | ( | ) |
Net Gains (Losses) Resulting From Changes in Fair Value | |||||||
For the Three Months Ended March 31, | |||||||
(in thousands) | 2020 | 2019 | |||||
Fair value option | |||||||
Mortgage loans held for sale, at fair value | $ | $ | |||||
Mortgage loans held for investment, at fair value |
March 31, 2020 | ||||||||||||||||||||
(in thousands) | Carrying Amount | Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||||
Measurement Category | ||||||||||||||||||||
Fair Value | ||||||||||||||||||||
Financial Assets | ||||||||||||||||||||
Securities available for sale | $ | $ | $ | $ | $ | |||||||||||||||
Mortgage loans held for sale | ||||||||||||||||||||
Mortgage loans held for investment, at fair value option | ||||||||||||||||||||
Derivative instruments | ||||||||||||||||||||
Financial Liabilities | ||||||||||||||||||||
Derivative instruments | ||||||||||||||||||||
Amortized Cost | ||||||||||||||||||||
Financial Assets | ||||||||||||||||||||
Cash and cash equivalents | $ | $ | $ | $ | $ | |||||||||||||||
Securities held to maturity | ||||||||||||||||||||
Loans and leases, carried at amortized cost, net of unearned income and allowance for loan and lease losses | ||||||||||||||||||||
Financial Liabilities | ||||||||||||||||||||
Deposits | ||||||||||||||||||||
Short-term borrowings | ||||||||||||||||||||
Long-term debt |
December 31, 2019 | ||||||||||||||||||||
(in thousands) | Carrying Amount | Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||||
Measurement Category | ||||||||||||||||||||
Fair Value | ||||||||||||||||||||
Financial Assets | ||||||||||||||||||||
Securities available for sale | $ | $ | $ | $ | $ | |||||||||||||||
Mortgage loans held for sale | ||||||||||||||||||||
Mortgage loans held for investment, at fair value option | ||||||||||||||||||||
Derivative instruments | ||||||||||||||||||||
Financial Liabilities | ||||||||||||||||||||
Derivative instruments | ||||||||||||||||||||
Amortized Cost | ||||||||||||||||||||
Financial Assets | ||||||||||||||||||||
Cash and cash equivalents | $ | $ | $ | $ | $ | |||||||||||||||
Securities held to maturity | ||||||||||||||||||||
Loans and leases, carried at amortized cost, net of unearned income and allowance for loan and lease losses | ||||||||||||||||||||
Financial Liabilities | ||||||||||||||||||||
Deposits | ||||||||||||||||||||
Short-term borrowings | ||||||||||||||||||||
Long-term debt |
• | Elimination of interest income and interest expense representing interest earned by IBERIABANK on interest-bearing checking accounts held by related companies, as well as the elimination of the related deposit balances at the IBERIABANK segment; |
• | Elimination of investment in subsidiary balances on certain operating segments included in total and average segment assets; and |
• | Elimination of intercompany due to and due from balances on certain operating segments that are included in total and average segment assets. |
Three Months Ended March 31, 2020 | |||||||||||||||
(in thousands) | IBERIABANK | Mortgage | LTC | Consolidated | |||||||||||
Interest and dividend income | $ | $ | $ | $ | |||||||||||
Interest expense | |||||||||||||||
Net interest income | |||||||||||||||
Provision for (reversal of) expected credit losses | |||||||||||||||
Mortgage income | |||||||||||||||
Title revenue | |||||||||||||||
Other non-interest income (expense) | |||||||||||||||
Allocated expenses (income) | ( | ) | |||||||||||||
Non-interest expense | |||||||||||||||
Income before income tax expense | |||||||||||||||
Income tax expense | |||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||
Total loans, leases, and loans held for sale, net of unearned income | $ | $ | $ | $ | |||||||||||
Total assets | |||||||||||||||
Total deposits | |||||||||||||||
Average assets |
Three Months Ended March 31, 2019 | |||||||||||||||
(in thousands) | IBERIABANK | Mortgage | LTC | Consolidated | |||||||||||
Interest and dividend income | $ | $ | $ | $ | |||||||||||
Interest expense | |||||||||||||||
Net interest income | |||||||||||||||
Provision for (reversal of) credit losses | ( | ) | |||||||||||||
Mortgage income | |||||||||||||||
Title revenue | |||||||||||||||
Other non-interest income (expense) | ( | ) | ( | ) | |||||||||||
Allocated expenses (income) | ( | ) | |||||||||||||
Non-interest expense | |||||||||||||||
Income before income tax expense | |||||||||||||||
Income tax expense | |||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||
Total loans, leases, and loans held for sale, net of unearned income | $ | $ | $ | $ | |||||||||||
Total assets | |||||||||||||||
Total deposits | |||||||||||||||
Average assets |
(in thousands) | March 31, 2020 | December 31, 2019 | |||||
Commitments to extend credit | $ | $ | |||||
Unfunded commitments under lines of credit | |||||||
Commercial and standby letters of credit | |||||||
Reserve for unfunded lending commitments |
• | economic or business conditions in our markets or nationally, including the future impacts of the novel coronavirus disease (COVID-19) outbreak and measures taken in response for which future developments are highly uncertain and difficult to predict; |
• | the level of market volatility; |
• | our ability to execute our growth strategy, including the availability of future bank acquisition opportunities; |
• | our ability to execute on our revenue and efficiency improvement initiatives; |
• | unanticipated delays, losses, business disruptions and diversion of management time related to the completion and integration of mergers and acquisitions; |
• | actual results deviating from the Company’s current estimates and assumptions of timing and amounts of cash flows; |
• | credit risk of our customers; |
• | effects of decreases in oil and other energy prices; |
• | effects of residential real estate prices and levels of home sales; |
• | our ability to satisfy capital and liquidity standards; |
• | sufficiency of our allowance for expected credit losses and the accuracy of the assumptions or estimates used in preparing our financial statements, including those related to the new CECL accounting guidance; |
• | changes in interest rates; |
• | access to funding sources; |
• | reliance on the services of executive management; |
• | competition for loans, deposits and investment dollars; |
• | competition from competitors with greater financial resources; |
• | reputational risks and social factors; |
• | changes in Financial Accounting Standards Board accounting standards and their interpretations; |
• | changes in government regulations and legislation, including tax regulations; |
• | increases in FDIC insurance assessments; |
• | geographic concentration of our markets; |
• | rapid changes in the financial services industry; |
• | significant litigation; |
• | cyber-security risks including dependence on our operational, technological, and organizational systems and infrastructure and those of third party providers of those services; |
• | hurricanes and other adverse weather events; |
• | valuation of intangible assets; and |
• | merger-related risks, including: |
◦ | possible negative impact on our stock price and future business and financial results, |
◦ | uncertainties while the merger is pending which could have a negative effect, |
◦ | termination of the merger agreement, |
◦ | uncertainty regarding the market price of First Horizon National Corporation common stock at closing, |
◦ | receipt of required regulatory approvals with adverse conditions, and |
◦ | current or future adverse legislation or regulation. |
• | Net income available to common shareholders for the quarter ended March 31, 2020 totaled $32.8 million, or $0.62 diluted EPS, compared to $96.5 million, or $1.75 diluted EPS, for the same period of 2019. Non-GAAP core EPS, which excludes merger-related costs and other items, was $0.67 for the first quarter of 2020 compared to $1.72 for the same period of 2019. Refer to Table 16 - Non-GAAP Measures in this MD&A for further information on non-GAAP items. |
• | Net interest income was $230.3 million for the first quarter of 2020, a $20.1 million, or 8%, decrease compared to the same quarter of 2019. Net interest margin on a tax-equivalent basis decreased 42 basis points to 3.17% from 3.59%, primarily attributable to lower yields on loans and investment securities as well as lower average investment securities balances. Asset yields were unfavorably impacted by cuts to the target federal funds rate and the corresponding impact to LIBOR over the past 12 months. |
• | Non-interest income increased $12.1 million, or 23%, to $64.7 million for the quarter ended March 31, 2020, primarily driven by higher mortgage income. |
• | Non-interest expense for the first quarter of 2020 increased $18.7 million, or 12%, to $177.4 million compared to the same period of 2019, primarily from $5.5 million in credit valuation adjustments on customer derivatives and higher non-core expenses, primarily related to salaries and employee benefits. Non-interest expenses in the first quarter of 2019 were favorably impacted by interest received on refunds from the Company’s federal income tax filings. |
• | Income tax expense decreased $18.2 million, or 60%, to $12.2 million for the quarter ended March 31, 2020, primarily as a result of lower income before income taxes. |
• | Total assets at March 31, 2020 were $32.2 billion, up $526.5 million, or 2%, from December 31, 2019, primarily driven by organic loan growth. |
• | Total loans and leases increased $520.1 million, or 2%, to $24.5 billion from December 31, 2019, driven by strong loan growth in the Corporate Asset Finance (equipment financing and leasing business) and Energy (reserve-based and midstream lending) groups, as well as in the Houston, New Orleans, and New York markets. |
• | Effective January 1, 2020, the Company adopted the current expected credit loss (CECL) methodology for estimating its credit losses, which resulted in an $82.3 million increase in the allowance for expected credit losses, increasing the allowance coverage of total loans and leases from 0.68% to 1.02% upon adoption. |
• | The Company recorded a provision for expected credit losses of $69.0 million for the quarter ended March 31, 2020, a $55.2 million increase from the provision recorded for the same period of 2019, primarily driven by the expected impact of the COVID-19 pandemic on future losses and to a much lesser extent the increase attributable to reserving for expected lifetime losses under CECL. |
• | Credit quality remained strong. Non-performing assets to total assets were 0.60% at March 31, 2020 compared to 0.54% at December 31, 2019. Net charge-offs to average loans and leases on an annualized basis increased three basis points to 0.16% for the three months ended March 31, 2020 compared to 0.13% for the comparable 2019 period. |
• | Total deposits increased $306.9 million, or 1%, to $25.5 billion at March 31, 2020, attributable to growth in demand deposits, including $309.1 million in non-interest-bearing deposit growth, offset by maturing time deposits. Deposit growth was strongest in the Palm Beach/Broward, Southwest Louisiana, Birmingham, and New Orleans markets, as well as the Energy group. |
As of and For the Three Months Ended March 31, | |||||
2020 | 2019 | ||||
Key Ratios (1) | |||||
Return on average assets | 0.46 | % | 1.32 | % | |
Core return on average assets (Non-GAAP) (2) | 0.49 | 1.29 | |||
Return on average common equity | 3.21 | 9.85 | |||
Core return on average tangible common equity (Non-GAAP) (2) (3) | 5.53 | 15.03 | |||
Equity to assets at end of period | 13.48 | 13.25 | |||
Earning assets to interest-bearing liabilities at end of period | 143.60 | 142.25 | |||
Interest rate spread (4) | 2.74 | 3.15 | |||
Net interest margin (TE) (4) (5) | 3.17 | 3.59 | |||
Non-interest expense to average assets (annualized) | 2.23 | 2.09 | |||
Efficiency ratio (6) | 60.1 | 52.4 | |||
Core tangible efficiency ratio (TE) (Non-GAAP) (2) (3) (5) (6) | 57.4 | 51.3 | |||
Common stock dividend payout ratio | 75.3 | 24.3 | |||
Asset Quality Data | |||||
Non-performing assets to total assets at end of period (7) | 0.60 | % | 0.58 | % | |
Allowance for expected credit losses to non-performing loans and leases at end of period (7) | 171.80 | 104.46 | |||
Allowance for expected credit losses to total loans and leases at end of period | 1.24 | 0.69 | |||
Consolidated Capital Ratios | |||||
Tier 1 leverage ratio | 9.93 | % | 9.67 | % | |
Common equity tier 1 (CET1) | 10.44 | 10.73 | |||
Tier 1 risk-based capital ratio | 11.28 | 11.25 | |||
Total risk-based capital ratio | 12.48 | 12.33 |
(1) | With the exception of end-of-period ratios, all ratios are based on average daily balances during the respective periods. |
(2) | See Table 16 for GAAP to Non-GAAP reconciliations. |
(3) | Tangible calculations eliminate the effect of goodwill and acquisition-related intangible assets and the corresponding amortization expense on a tax-effected basis where applicable. |
(4) | Interest rate spread represents the difference between the weighted average yield on earning assets and the weighted average cost of interest-bearing liabilities. Net interest margin represents net interest income as a percentage of average earning assets. |
(5) | Fully taxable equivalent (TE) calculations include the tax benefit associated with related income sources that are tax-exempt using a rate of 21%. |
(6) | The efficiency ratio represents non-interest expense as a percentage of total revenues. Total revenues are the sum of net interest income and non-interest income. |
(7) | Non-performing loans consist of non-accruing loans and accruing loans 90 days or more past due. Non-performing assets consist of non-performing loans and other real estate owned, including repossessed assets. |
• | Risk ratings assigned to individual commercial loans and unfunded credit commitments. All commercial loans are assigned a risk rating in accordance with the borrower’s financial strength which is used to assign a PD and LGD rating to the loan. The scorecards are prepared by various experienced individuals, such as underwriters, relationship managers or portfolio managers and are subject to periodic review by an internal team of credit specialists. |
• | Forecasts of future economic conditions used in the model-based component of the AECL. Forecasts of future economic conditions are extremely complex and require a significant amount of judgment. The interdependencies of economic variables within a forecast increase the uncertainty inherently present in all forecasts. The Company uses multiple externally developed macroeconomic scenarios to establish a reasonable and supportable forecast that takes into consideration available information and assumptions regarding the evolution of the economy over time. Forecasts of a stable economic environment produce lower estimates of expected credit losses than forecasts of slower near-term growth or with recessionary concerns. |
• | Application of qualitative adjustments to the quantitative model-based component of the AECL. This reflects management’s judgment of risk for imprecision of certain assumptions and uncertainties inherent in the model-based component and considers model assumptions and performance, process risk, and other considerations. |
Three Months Ended March 31, | |||||||||||||||||||||
2020 | 2019 | ||||||||||||||||||||
(in thousands) | Average Balance | Interest Income/Expense (1) | Yield/ Rate (TE)(2) | Average Balance | Interest Income/Expense (1) | Yield/ Rate (TE)(2) | |||||||||||||||
Earning Assets: | |||||||||||||||||||||
Loans and leases: | |||||||||||||||||||||
Commercial loans and leases | $ | 16,791,766 | $ | 188,063 | 4.52 | % | $ | 15,253,655 | $ | 194,510 | 5.19 | % | |||||||||
Residential mortgage loans | 4,800,131 | 50,457 | 4.20 | % | 4,385,634 | 47,829 | 4.36 | % | |||||||||||||
Consumer and other loans | 2,561,285 | 33,226 | 5.22 | % | 2,960,397 | 42,540 | 5.83 | % | |||||||||||||
Total loans and leases | 24,153,182 | 271,746 | 4.53 | % | 22,599,686 | 284,879 | 5.11 | % | |||||||||||||
Mortgage loans held for sale | 189,597 | 1,678 | 3.54 | % | 95,588 | 1,054 | 4.41 | % | |||||||||||||
Investment securities(3) | 4,035,469 | 25,402 | 2.56 | % | 5,052,922 | 36,125 | 2.90 | % | |||||||||||||
Other earning assets | 960,762 | 4,103 | 1.72 | % | 533,745 | 4,026 | 3.06 | % | |||||||||||||
Total earning assets | 29,339,010 | 302,929 | 4.17 | % | 28,281,941 | 326,084 | 4.68 | % | |||||||||||||
Allowance for loan and lease losses | (231,914 | ) | (140,915 | ) | |||||||||||||||||
Non-earning assets | 2,879,043 | 2,692,474 | |||||||||||||||||||
Total assets | $ | 31,986,139 | $ | 30,833,500 | |||||||||||||||||
Interest-bearing liabilities: | |||||||||||||||||||||
Deposits: | |||||||||||||||||||||
Interest-bearing demand deposits | $ | 4,834,171 | $ | 9,962 | 0.83 | % | $ | 4,458,634 | $ | 11,396 | 1.04 | % | |||||||||
Savings and money market accounts | 9,930,353 | 31,244 | 1.27 | % | 9,089,099 | 28,762 | 1.28 | % | |||||||||||||
Time deposits | 4,149,574 | 22,470 | 2.18 | % | 3,859,354 | 20,077 | 2.11 | % | |||||||||||||
Total interest-bearing deposits (4) | 18,914,098 | 63,676 | 1.35 | % | 17,407,087 | 60,235 | 1.40 | % | |||||||||||||
Short-term borrowings | 226,665 | 266 | 0.47 | % | 1,151,219 | 5,716 | 2.01 | % | |||||||||||||
Long-term debt | 1,341,943 | 8,645 | 2.59 | % | 1,463,862 | 9,649 | 2.67 | % | |||||||||||||
Total interest-bearing liabilities | 20,482,706 | 72,587 | 1.43 | % | 20,022,168 | 75,600 | 1.53 | % | |||||||||||||
Non-interest-bearing deposits | 6,540,532 | 6,271,313 | |||||||||||||||||||
Non-interest-bearing liabilities | 623,868 | 434,516 | |||||||||||||||||||
Total liabilities | 27,647,106 | 26,727,997 | |||||||||||||||||||
Total shareholders’ equity | 4,339,033 | 4,105,503 | |||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 31,986,139 | $ | 30,833,500 | |||||||||||||||||
Net earning assets | $ | 8,856,304 | $ | 8,259,773 | |||||||||||||||||
Net interest income / Net interest spread | $ | 230,342 | 2.74 | % | $ | 250,484 | 3.15 | % | |||||||||||||
Net interest income (TE) / Net interest margin (TE) (1) | $ | 231,653 | 3.17 | % | $ | 251,833 | 3.59 | % |
(1) | Interest income includes loan fees of $0.8 and $1.0 million for the three-month periods ended March 31, 2020 and 2019, respectively. |
(2) | Fully taxable equivalent (TE) calculations include the tax benefit associated with related income sources that are tax-exempt using a rate of 21%. |
(3) | Balances exclude unrealized gains or losses on securities available for sale and the impact of trade date accounting. |
(4) | Total deposit costs for the three months ended March 31, 2020 and 2019 were 1.01% and 1.03%, respectively. |
Three months ended March 31, 2020 compared to March 31, 2019 | |||||||||||
Change Attributable To | |||||||||||
(in thousands) | Volume | Rate | Net Increase (Decrease) | ||||||||
Earning assets: | |||||||||||
Loans and leases: | |||||||||||
Commercial loans and leases | $ | 19,741 | $ | (26,188 | ) | $ | (6,447 | ) | |||
Residential mortgage loans | 4,403 | (1,775 | ) | 2,628 | |||||||
Consumer and other loans | (4,932 | ) | (4,382 | ) | (9,314 | ) | |||||
Mortgage loans held for sale | 866 | (242 | ) | 624 | |||||||
Investment securities | (6,748 | ) | (3,975 | ) | (10,723 | ) | |||||
Other earning assets | 2,047 | (1,970 | ) | 77 | |||||||
Net change in income on earning assets | 15,377 | (38,532 | ) | (23,155 | ) | ||||||
Interest-bearing liabilities: | |||||||||||
Deposits: | |||||||||||
Interest-bearing demand deposits | 986 | (2,420 | ) | (1,434 | ) | ||||||
Savings and money market accounts | 3,347 | (865 | ) | 2,482 | |||||||
Time deposits | 1,730 | 663 | 2,393 | ||||||||
Borrowings | (3,917 | ) | (2,537 | ) | (6,454 | ) | |||||
Net change in expense on interest-bearing liabilities | 2,146 | (5,159 | ) | (3,013 | ) | ||||||
Change in net interest income | $ | 13,231 | $ | (33,373 | ) | $ | (20,142 | ) |
March 31, 2020 | December 31, 2019 | $ Change | % Change | ||||||||||||||||
(in thousands) | Balance | Mix | Balance | Mix | |||||||||||||||
Commercial loans and leases: | |||||||||||||||||||
Real estate- construction | $ | 1,322,627 | 5 | % | $ | 1,321,663 | 6 | % | 964 | — | |||||||||
Real estate- owner-occupied | 2,424,139 | 10 | 2,475,326 | 10 | (51,187 | ) | (2 | ) | |||||||||||
Real estate- non-owner-occupied | 6,484,257 | 27 | 6,267,106 | 26 | 217,151 | 3 | |||||||||||||
Commercial and industrial (1) | 6,909,841 | 28 | 6,547,538 | 27 | 362,303 | 6 | |||||||||||||
Total commercial loans and leases | 17,140,864 | 70 | 16,611,633 | 69 | 529,231 | 3 | |||||||||||||
Consumer and other loans: | |||||||||||||||||||
Residential mortgage | 4,849,119 | 20 | 4,739,075 | 20 | 110,044 | 2 | |||||||||||||
Home equity | 1,926,753 | 8 | 1,987,336 | 8 | (60,583 | ) | (3 | ) | |||||||||||
Other | 624,896 | 2 | 683,455 | 3 | (58,559 | ) | (9 | ) | |||||||||||
Total consumer and other loans | 7,400,768 | 30 | 7,409,866 | 31 | (9,098 | ) | — | ||||||||||||
Total loans and leases | $ | 24,541,632 | 100 | % | $ | 24,021,499 | 100 | % | 520,133 | 2 |
(1) | Includes equipment financing leases |
(in thousands) | March 31, 2020 | December 31, 2019 | $ Change | % Change | |||||||||
Louisiana | $ | 3,664,488 | $ | 3,586,091 | 78,397 | 2 | |||||||
Florida | 4,875,938 | 4,802,565 | 73,373 | 2 | |||||||||
Alabama | 1,598,919 | 1,568,307 | 30,612 | 2 | |||||||||
Texas (1) | 2,917,050 | 2,780,641 | 136,409 | 5 | |||||||||
Georgia | 1,186,970 | 1,188,253 | (1,283 | ) | — | ||||||||
Arkansas | 759,920 | 766,781 | (6,861 | ) | (1 | ) | |||||||
Tennessee | 499,423 | 504,235 | (4,812 | ) | (1 | ) | |||||||
New York | 143,770 | 110,503 | 33,267 | 30 | |||||||||
South Carolina and North Carolina | 224,657 | 210,014 | 14,643 | 7 | |||||||||
Other (2) | 1,269,729 | 1,094,243 | 175,486 | 16 | |||||||||
Total | $ | 17,140,864 | $ | 16,611,633 | 529,231 | 3 |
(1) | Texas loans include $1.3 billion and $1.2 billion in Energy group loans at March 31, 2020 and December 31, 2019, respectively. |
(2) | Other loans include primarily equipment financing and corporate asset financing loans and leases, which the Company does not classify by state. |
(in thousands) | March 31, 2020 | December 31, 2019 | $ Change | % Change | |||||||||
Louisiana | $ | 1,538,831 | $ | 1,564,325 | (25,494 | ) | (2 | ) | |||||
Florida | 3,411,439 | 3,418,268 | (6,829 | ) | — | ||||||||
Alabama | 434,969 | 434,327 | 642 | — | |||||||||
Texas | 624,719 | 581,754 | 42,965 | 7 | |||||||||
Georgia | 310,540 | 294,047 | 16,493 | 6 | |||||||||
Arkansas | 326,204 | 330,775 | (4,571 | ) | (1 | ) | |||||||
Tennessee | 76,523 | 82,115 | (5,592 | ) | (7 | ) | |||||||
New York | 410,197 | 396,092 | 14,105 | 4 | |||||||||
South Carolina and North Carolina | 11,154 | 8,102 | 3,052 | 38 | |||||||||
Other (1) | 256,192 | 300,061 | (43,869 | ) | (15 | ) | |||||||
Total | $ | 7,400,768 | $ | 7,409,866 | (9,098 | ) | — |
(1) | Other loans include primarily credit card and indirect consumer loans, which the Company does not classify by state. |
(in thousands) | March 31, 2020 | December 31, 2019 | |||||
Above 720 | $ | 4,617,815 | $ | 4,538,571 | |||
660-720 | 1,378,817 | 1,328,041 | |||||
Below 660 | 1,404,136 | 1,543,254 | |||||
Total | $ | 7,400,768 | $ | 7,409,866 |
(in thousands) | March 31, 2020 | December 31, 2019 | $ Change | % Change | |||||||||
Non-accrual loans and leases: | |||||||||||||
Commercial | $ | 84,712 | $ | 76,287 | 8,425 | 11 | |||||||
Mortgage | 48,067 | 34,833 | 13,234 | 38 | |||||||||
Consumer and other | 33,784 | 27,785 | 5,999 | 22 | |||||||||
Total non-accrual loans and leases | 166,563 | 138,905 | 27,658 | 20 | |||||||||
Accruing loans and leases 90 days or more past due | 10,963 | 3,257 | 7,706 | 237 | |||||||||
Total non-performing loans and leases (1) | 177,526 | 142,162 | 35,364 | 25 | |||||||||
OREO and foreclosed property (2) | 15,893 | 27,985 | (12,092 | ) | (43 | ) | |||||||
Total non-performing assets | 193,419 | 170,147 | 23,272 | 14 | |||||||||
Performing troubled debt restructurings (3) | 68,113 | 67,972 | 141 | — | |||||||||
Total non-performing assets and performing troubled debt restructurings | $ | 261,532 | $ | 238,119 | 23,413 | 10 | |||||||
Non-performing loans and leases to total loans and leases (1) | 0.72 | % | 0.59 | % | |||||||||
Non-performing assets to total assets | 0.60 | % | 0.54 | % | |||||||||
Non-performing assets and performing troubled debt restructurings to total assets (2) | 0.81 | % | 0.75 | % | |||||||||
Allowance for expected credit losses to non-performing loans and leases | 171.80 | % | 114.82 | % | |||||||||
Allowance for expected credit losses to total loans and leases | 1.24 | % | 0.68 | % |
(1) | Non-performing loans exclude acquired impaired loans, even if contractually past due or if the Company does not expect to receive payment in full, as the Company was currently accreting interest income over the expected life of the loans prior to January 1, 2020. Total non-performing assets at March 31, 2020 included $14.7 million in non-accrual loans and leases and $1.7 million in accruing loans and leases 90 days or more past due that are PCD loans. |
(2) | There were no former bank properties held for development or resale at March 31, 2020 or December 31, 2019. |
(3) | Performing troubled debt restructurings for March 31, 2020 and December 31, 2019 exclude $62.2 million and $64.9 million, respectively, in troubled debt restructurings that meet non-performing asset criteria. |
March 31, 2020 | December 31, 2019 | ||||||||||||||||||
(in thousands) | Amount | % of Outstanding Balance | Amount | % of Outstanding Balance | $ Change | % Change | |||||||||||||
Accruing loans and leases | |||||||||||||||||||
30-59 days past due | $ | 62,372 | 0.25 | $ | 44,119 | 0.19 | 18,253 | 41 | |||||||||||
60-89 days past due | 18,330 | 0.07 | 24,085 | 0.10 | (5,755 | ) | (24 | ) | |||||||||||
90-119 days past due | 9,023 | 0.04 | 2,217 | 0.01 | 6,806 | 307 | |||||||||||||
120 days past due or more | 1,940 | 0.01 | 1,040 | — | 900 | 87 | |||||||||||||
91,665 | 0.37 | 71,461 | 0.30 | 20,204 | 28 | ||||||||||||||
Non-accrual loans and leases | 166,563 | 0.68 | 138,905 | 0.58 | 27,658 | 20 | |||||||||||||
Total past due and non-accrual loans and leases | $ | 258,228 | 1.05 | $ | 210,366 | 0.88 | 47,862 | 23 |
(1) | Prior to January 1, 2020, past due and non-accrual loan amounts exclude PCD loans, even if contractually past due, or if the Company did not expect to receive payment in full, as the Company was accreting interest income over the expected life of the loans. |
(in thousands) | March 31, 2020 | March 31, 2019 | |||||
Allowance for loan and lease losses at beginning of period | $ | 146,588 | $ | 140,571 | |||
Transition adjustment for ASC 326 | 83,194 | — | |||||
Allowance for loan and lease losses, as adjusted | 229,782 | 140,571 | |||||
Provision for loan and lease losses | 66,431 | 12,612 | |||||
Transfer of balance to OREO and other | — | (2,885 | ) | ||||
Charge-offs | (12,119 | ) | (8,918 | ) | |||
Recoveries | 2,591 | 1,586 | |||||
Allowance for loan and lease losses at end of period | $ | 286,685 | $ | 142,966 | |||
Reserve for unfunded commitments at beginning of period | 16,637 | 14,830 | |||||
Transition adjustment for ASC 326 | (875 | ) | — | ||||
Reserve for unfunded lending commitments, as adjusted | 15,762 | 14,830 | |||||
Provision for unfunded lending commitments | 2,540 | 1,151 | |||||
Reserve for unfunded lending commitments at end of period | 18,302 | 15,981 | |||||
Allowance for expected credit losses at end of period | $ | 304,987 | $ | 158,947 |
March 31, 2020 | December 31, 2019 | ||||||||||||||||||
(in thousands) | Ending Balance | Mix | Ending Balance | Mix | $ Change | % Change | |||||||||||||
Non-interest-bearing deposits | $ | 6,628,901 | 26 | % | $ | 6,319,806 | 25 | % | 309,095 | 5 | |||||||||
Interest-bearing demand deposits | 5,046,434 | 20 | 4,821,252 | 19 | 225,182 | 5 | |||||||||||||
Money market accounts | 9,305,923 | 36 | 9,121,283 | 36 | 184,640 | 2 | |||||||||||||
Savings accounts | 703,862 | 3 | 683,366 | 3 | 20,496 | 3 | |||||||||||||
Time deposits | 3,841,117 | 15 | 4,273,642 | 17 | (432,525 | ) | (10 | ) | |||||||||||
Total deposits | $ | 25,526,237 | 100 | % | $ | 25,219,349 | 100 | % | 306,888 | 1 |
Ratio | Entity | Well- Capitalized Minimums | March 31, 2020 | December 31, 2019 | |||||||
Actual | Actual | ||||||||||
Tier 1 Leverage | IBERIABANK Corporation | N/A | 9.93 | % | 9.90 | % | |||||
IBERIABANK | 5.00 | % | 9.82 | 9.69 | |||||||
Common Equity Tier 1 (CET1) | IBERIABANK Corporation | N/A | 10.44 | 10.52 | |||||||
IBERIABANK | 6.50 | % | 11.16 | 11.14 | |||||||
Tier 1 Risk-Based Capital | IBERIABANK Corporation | N/A | 11.28 | 11.38 | |||||||
IBERIABANK | 8.00 | % | 11.16 | 11.14 | |||||||
Total Risk-Based Capital | IBERIABANK Corporation | N/A | 12.48 | 12.43 | |||||||
IBERIABANK | 10.00 | % | 11.94 | 11.76 |
Shift in Interest Rates (in bps) | % Change in Projected Net Interest Income | |
+200 | 4.9% | |
+100 | 3.8% | |
-100 | -6.3% | |
-200 | -3.2% |
(in thousands) | 2Q 2020 | 3Q 2020 | 4Q 2020 | 1Q 2021 | Total less than one year | ||||||||||||||
Investment securities | $ | 536,908 | $ | 317,277 | $ | 303,271 | $ | 241,952 | $ | 1,399,408 | |||||||||
Fixed rate loans | 850,779 | 688,231 | 631,080 | 602,788 | 2,772,878 | ||||||||||||||
Variable rate loans | 12,022,412 | 463,435 | 390,681 | 342,923 | 13,219,451 | ||||||||||||||
Total | $ | 13,410,099 | $ | 1,468,943 | $ | 1,325,032 | $ | 1,187,663 | $ | 17,391,737 |
(in thousands) | 2Q 2020 | 3Q 2020 | 4Q 2020 | 1Q 2021 | Total less than one year | ||||||||||||||
Time deposits | $ | 1,413,567 | $ | 1,018,747 | $ | 544,535 | $ | 441,557 | $ | 3,418,406 | |||||||||
Short-term borrowings | 390,747 | — | — | — | 390,747 | ||||||||||||||
Long-term debt | 240,645 | 150,430 | 256,784 | 50,335 | 698,194 | ||||||||||||||
Total | $ | 2,044,959 | $ | 1,169,177 | $ | 801,319 | $ | 491,892 | $ | 4,507,347 |
Three Months Ended | |||||||||||||||||||||||
March 31, 2020 | March 31, 2019 | ||||||||||||||||||||||
(in thousands, except per share amounts) | Pre-tax | After-tax | Per share (2) | Pre-tax | After-tax | Per share (2) | |||||||||||||||||
Net income | $ | 48,600 | $ | 36,425 | $ | 0.69 | $ | 130,477 | $ | 100,131 | $ | 1.82 | |||||||||||
Less: Preferred stock dividends | — | 3,598 | 0.07 | — | 3,598 | 0.07 | |||||||||||||||||
Income available to common shareholders (GAAP) | $ | 48,600 | $ | 32,827 | $ | 0.62 | $ | 130,477 | $ | 96,533 | $ | 1.75 | |||||||||||
Non-interest expense adjustments (1): | |||||||||||||||||||||||
Merger-related expense | 2,734 | 2,157 | 0.04 | (334 | ) | (254 | ) | — | |||||||||||||||
Hazard-related expense | 281 | 213 | — | — | — | — | |||||||||||||||||
Compensation-related expense | — | — | — | (9 | ) | (7 | ) | — | |||||||||||||||
Impairment of long-lived assets, net of (gain) loss on sale | (4 | ) | (3 | ) | — | 986 | 749 | 0.01 | |||||||||||||||
Other non-core non-interest expense | — | — | — | (3,129 | ) | (2,378 | ) | (0.04 | ) | ||||||||||||||
Total non-interest expense adjustments | 3,011 | 2,367 | 0.04 | (2,486 | ) | (1,890 | ) | (0.03 | ) | ||||||||||||||
Income tax expense (benefit) - other | — | 241 | 0.01 | — | — | — | |||||||||||||||||
Core earnings (Non-GAAP) | 51,611 | 35,435 | 0.67 | 127,991 | 94,643 | 1.72 | |||||||||||||||||
Provision for expected credit losses (1) | 68,971 | 52,418 | 13,763 | 10,460 | |||||||||||||||||||
Pre-provision earnings, as adjusted (Non-GAAP) | $ | 120,582 | $ | 87,853 | $ | 141,754 | $ | 105,103 |
(1) | Excluding preferred stock dividends and merger-related expense, after-tax amounts are calculated using a tax rate of 24%, which approximates the marginal tax rate. |
(2) | Diluted per share amounts may not appear to foot due to rounding. |
As of and For the Three Months Ended March 31, | |||||||
(in thousands) | 2020 | 2019 | |||||
Net interest income (GAAP) | $ | 230,342 | $ | 250,484 | |||
Taxable equivalent benefit | 1,311 | 1,349 | |||||
Net interest income (TE) (Non-GAAP) (1) | $ | 231,653 | $ | 251,833 | |||
Non-interest income (GAAP) | $ | 64,656 | $ | 52,509 | |||
Taxable equivalent benefit | 484 | 478 | |||||
Non-interest income (TE) (Non-GAAP) (1) | 65,140 | 52,987 | |||||
Taxable equivalent revenues (Non-GAAP) (1) | 296,793 | 304,820 | |||||
Securities (gains) losses and other non-core non-interest income | — | — | |||||
Core taxable equivalent revenues (Non-GAAP) (1) | $ | 296,793 | $ | 304,820 | |||
Total non-interest expense (GAAP) | $ | 177,427 | $ | 158,753 | |||
Less: Intangible amortization expense | 4,187 | 5,009 | |||||
Tangible non-interest expense (Non-GAAP) (2) | 173,240 | 153,744 | |||||
Less: Merger-related expense | 2,734 | (334 | ) | ||||
Hazard-related expense | 281 | — | |||||
Compensation-related expense | — | (9 | ) | ||||
Impairment of long-lived assets, net of (gain) loss on sale | (4 | ) | 986 | ||||
Other non-core non-interest expense | — | (3,129 | ) | ||||
Core tangible non-interest expense (Non-GAAP)(2) | $ | 170,229 | $ | 156,230 | |||
Average assets (GAAP) | $ | 31,986,139 | $ | 30,833,500 | |||
Less: Average intangible assets, net | 1,295,180 | 1,313,368 | |||||
Total average tangible assets (Non-GAAP) (2) | $ | 30,690,959 | $ | 29,520,132 | |||
Total shareholders’ equity (GAAP) | $ | 4,347,107 | $ | 4,141,831 | |||
Less: Goodwill and other intangibles | 1,292,910 | 1,310,458 | |||||
Preferred stock | 228,485 | 132,097 | |||||
Tangible common equity (Non-GAAP) (2) | $ | 2,825,712 | $ | 2,699,276 | |||
Average shareholders’ equity (GAAP) | $ | 4,339,033 | $ | 4,105,503 | |||
Less: Average preferred equity | 228,485 | 132,097 | |||||
Average common equity | 4,110,548 | 3,973,406 | |||||
Less: Average intangible assets, net | 1,295,180 | 1,313,368 | |||||
Average tangible common shareholders’ equity (Non-GAAP) (2) | $ | 2,815,368 | $ | 2,660,038 | |||
Return on average assets (GAAP) | 0.46 | % | 1.32 | % | |||
Effect of non-core revenues and expenses | 0.03 | (0.03 | ) | ||||
Core return on average assets (Non-GAAP) | 0.49 | % | 1.29 | % | |||
Return on average common equity (GAAP) | 3.21 | % | 9.85 | % | |||
Effect of non-core revenues and expenses | 0.26 | (0.19 | ) | ||||
Core return on average common equity (Non-GAAP) | 3.47 | % | 9.66 | % | |||
Effect of intangibles (2) | 2.06 | 5.37 | |||||
Core return on average tangible common equity (Non-GAAP) (2) | 5.53 | % | 15.03 | % | |||
Efficiency ratio (GAAP) | 60.1 | % | 52.4 | % | |||
Effect of tax benefit related to tax-exempt income | (0.3 | ) | (0.3 | ) | |||
Efficiency ratio (TE) (Non-GAAP) (1) | 59.8 | % | 52.1 | % | |||
Effect of amortization of intangibles | (1.3 | ) | (1.6 | ) |
Effect of non-core items | (1.1 | ) | 0.8 | ||||
Core tangible efficiency ratio (TE) (Non-GAAP) (1) (2) | 57.4 | % | 51.3 | % | |||
Total assets (GAAP) | $ | 32,239,983 | $ | 31,260,189 | |||
Less: Goodwill and other intangibles | 1,292,910 | 1,310,458 | |||||
Tangible assets (Non-GAAP) (2) | $ | 30,947,073 | $ | 29,949,731 | |||
Tangible common equity ratio (Non-GAAP) (2) | 9.13 | % | 9.01 | % | |||
Cash Yield: | |||||||
Earning assets average balance (GAAP) | $ | 29,339,010 | $ | 28,281,941 | |||
Add: Adjustments | 94,709 | 136,415 | |||||
Earning assets average balance, as adjusted (Non-GAAP) | $ | 29,433,719 | $ | 28,418,356 | |||
Net interest income (GAAP) | $ | 230,342 | $ | 250,484 | |||
Add: Adjustments | (7,338 | ) | (10,881 | ) | |||
Net interest income, as adjusted (Non-GAAP) | $ | 223,004 | $ | 239,603 | |||
Yield, as reported | 3.17 | % | 3.59 | % | |||
Add: Adjustments | (0.11 | ) | (0.17 | ) | |||
Yield, as adjusted (Non-GAAP) | 3.06 | % | 3.42 | % |
Term | Definition |
2019 10-K | Annual Report on Form 10-K for the year ended December 31, 2019 |
AECL | Allowance for expected credit losses |
Acquired loans | Loans acquired in a business combination |
AFS | Securities available for sale |
ALCO | Asset and Liability Committee |
ALLL | Allowance for loan and lease losses |
AOCI | Accumulated other comprehensive income (loss) |
ARRC | Alternative Reference Rates Committee |
ASC | Accounting Standards Codification |
ASU | Accounting Standards Update |
CECL | Current expected credit loss |
C&I | Commercial and Industrial loans |
CEO | Chief Executive Officer |
CET1 | Common Equity Tier 1 Capital defined by Basel III capital rules |
CFO | Chief Financial Officer |
CRA | Community Reinvestment Act |
Company | IBERIABANK Corporation and Subsidiaries |
DOJ | Department of Justice |
EPS | Earnings per common share |
Exchange Act | Securities Exchange Act of 1934 |
FASB | Financial Accounting Standards Board |
FDIC | Federal Deposit Insurance Corporation |
FHA | Federal Housing Administration |
FHLB | Federal Home Loan Bank |
First Horizon | First Horizon National Corporation |
FOMC | Federal Open Market Committee |
FRB | Board of Governors of the Federal Reserve System |
GAAP | Accounting principles generally accepted in the United States of America |
Gibraltar | Gibraltar Private Bank & Trust Co. |
GSE | Government-sponsored enterprises |
HTM | Securities held-to-maturity |
HUD | U.S. Department of Housing and Urban Development |
IBERIABANK | Banking subsidiary of IBERIABANK Corporation |
IBKC | IBERIABANK Corporation |
MD&A | Management's Discussion and Analysis |
Legacy loans | Loans that were originated directly or otherwise underwritten by the Company |
LIBOR | London Interbank Borrowing Offered Rate |
LTC | Lenders Title Company |
LGD | Loss given default |
NASDAQ | National Association of Securities Dealers, Inc. Automated Quotation Composite Index |
Non-GAAP | Financial measures determined by methods other than in accordance with GAAP |
OCI | Other comprehensive income |
OREO | Other real estate owned |
OTTI | Other than temporary impairment |
Parent | IBERIABANK Corporation |
PCD | Purchase credit deteriorated |
PD | Probability of default |
PPP | Paycheck Protection Program |
ROU | Right-of-Use |
RRP | Recognition and Retention Plan |
Sabadell United | Sabadell United Bank, N.A. |
SEC | Securities and Exchange Commission |
SOFR | Secured Overnight Financing Rate |
TE | Fully taxable equivalent |
TDR | Troubled debt restructuring |
U.S. | United States of America |
Exhibit 3.1 | |
Exhibit No. 31.1 | |
Exhibit No. 31.2 | |
Exhibit No. 32.1 | |
Exhibit No. 32.2 | |
Exhibit No. 101.INS | XBRL Instance Document. |
Exhibit No. 101.SCH | XBRL Taxonomy Extension Schema. |
Exhibit No. 101.CAL | XBRL Taxonomy Extension Calculation Linkbase. |
Exhibit No. 101.DEF | XBRL Taxonomy Extension Definition Linkbase. |
Exhibit No. 101.LAB | XBRL Taxonomy Extension Label Linkbase. |
Exhibit No. 101.PRE | XBRL Taxonomy Extension Presentation Linkbase. |
Exhibit No. 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
IBERIABANK Corporation | ||||
Date: May 8, 2020 | By: | /s/ Daryl G. Byrd | ||
Daryl G. Byrd | ||||
President and Chief Executive Officer | ||||
Date: May 8, 2020 | By: | /s/ Anthony J. Restel | ||
Anthony J. Restel | ||||
Vice Chairman and Chief Financial Officer |
(1) | May participate in the meeting of the shareholders; and |
(2) | May be considered present in person and may vote at the meeting of the shareholders, whether the meeting is held at a designated place or solely by means of remote communication, if: |
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 the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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. |
Date: | May 8, 2020 | /s/ Daryl G. Byrd | |
Daryl G. Byrd | |||
President and Chief Executive Officer |
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 the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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. |
Date: | May 8, 2020 | /s/ Anthony J. Restel | |
Anthony J. Restel | |||
Vice Chairman and Chief Financial Officer |
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods covered in the Report. |
Date: | May 8, 2020 | /s/ Daryl G. Byrd | |
Daryl G. Byrd | |||
President and Chief Executive Officer |
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods covered in the Report. |
Date: | May 8, 2020 | /s/ Anthony J. Restel | |
Anthony J. Restel | |||
Vice Chairman and Chief Financial Officer |
Commitments and Contingencies - Summary of Financial Instruments Outstanding (Detail) - USD ($) $ in Thousands |
Mar. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Commitments and Contingencies Disclosure [Abstract] | ||
Commitments to extend credit | $ 677,297 | $ 806,164 |
Unfunded commitments under lines of credit | 7,006,974 | 7,240,808 |
Commercial and standby letters of credit | 277,415 | 327,336 |
Reserve for unfunded lending commitments | $ 18,302 | $ 16,637 |
Fair Value of Financial Instruments (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Estimated Fair Values and Carrying Amounts of Financial Instruments | The carrying amount and estimated fair values of the Company’s financial instruments, as well as the level within the fair value hierarchy, are included in the tables below. See Note 1, Summary of Significant Accounting Policies, in the 2019 10-K, for a description of how fair value measurements are determined.
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Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | FAIR VALUE MEASUREMENTS Recurring fair value measurements The following table presents information about the Company's assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2020 and December 31, 2019 and their classification within the fair value hierarchy. See Note 1, Summary of Significant Accounting Policies, in the 2019 10-K, for a description of how fair value measurements are determined.
Non-recurring fair value measurements The Company holds certain assets that are measured at fair value only in certain circumstances, such as impairment. The following table presents information about the Company's assets that are measured at fair value and still held as of March 31, 2020 and December 31, 2019 for which a non-recurring fair value adjustment was recorded during the periods then ended. See Note 1, Summary of Significant Accounting Policies, in the 2019 10-K, for a description of how fair value measurements are determined.
The Company did not record any liabilities at fair value for which measurement of the fair value was made on a non-recurring basis as of March 31, 2020 and December 31, 2019. Fair value option The Company has elected the fair value option for originated residential mortgage loans held for sale, which allows for a more effective offset of the changes in fair values of the loans and the derivative instruments used to hedge them without the burden of complying with the requirements for hedge accounting. The Company also has a portion of mortgage loans held for investment for which the fair value option was elected upon origination and which continue to be accounted for at fair value at March 31, 2020 and December 31, 2019, respectively. The following table summarizes the difference between the aggregate fair value and the aggregate unpaid principal balance for mortgage loans held for sale and mortgage loans held for investment measured at fair value:
Interest income on mortgage loans held for sale and mortgage loans held for investment at fair value option is recognized based on contractual rates and is reflected in interest income on loans held for sale in the consolidated statements of comprehensive income. The following table details net gains (losses) resulting from the change in fair value of loans that were recorded in mortgage income in the consolidated statements of comprehensive income for the three months ended March 31, 2020 and 2019. The changes in fair value are mostly offset by economic hedging activities, with an insignificant portion of these changes attributable to changes in instrument-specific credit risk.
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Goodwill and Other Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Other Intangible Assets | GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill Goodwill allocated to each reporting unit at March 31, 2020 and December 31, 2019 is provided in the following table:
The Company performed the required annual goodwill impairment test as of October 1, 2019. The Company’s annual impairment test did not indicate impairment in any of the Company’s reporting units as of the testing date. During the first quarter of 2020 and through the date of the filing of this Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, management evaluated the events and changes in certain circumstances that could indicate that goodwill might be impaired. In light of the COVID-19 pandemic and its impact on macroeconomic conditions, the unprecedented economic uncertainty, and the significant declines in the Company's stock price and overall prices in the equity markets, management concluded that an interim quantitative test was necessary for all reporting units. The Company factored in multiple economic scenarios, in an effort to take into account the unprecedented economic uncertainty, and determined that the estimated fair value of each reporting unit exceeded its carrying value. Therefore, the goodwill of each reporting unit was considered not to be impaired as of the testing date. The goodwill impairment evaluation requires management to utilize significant judgments and assumptions which are based on the best information available at the time. Results of future tests, if required, could vary in subsequent reporting periods if conditions differ substantially from the assumptions utilized in completing the evaluations. The conclusion that no impairment exists may change if the pandemic continues for an extended period of time or a recovery in economic activity is delayed. Mortgage Servicing Rights Mortgage servicing rights are recorded at the lower of cost or market value in other intangible assets on the Company's consolidated balance sheets and amortized over the remaining servicing life of the loans, with consideration given to prepayment assumptions. Mortgage servicing rights had the following carrying values as of the periods indicated:
Intangible assets subject to amortization Definite-lived intangible assets included in other intangible assets on the Company’s consolidated balance sheets had the following carrying values as of the periods indicated:
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Recent Accounting Pronouncements |
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Recent Accounting Pronouncements | RECENT ACCOUNTING PRONOUNCEMENTS Pronouncements adopted during the quarter ended March 31, 2020: ASU No. 2016-13, ASU No. 2019-04 (portion related to ASC 326), ASU No. 2019-05, ASU No. 2019-11, and ASU No. 2020-03 In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (ASC 326): Measurement of Credit Losses on Financial Instruments. The guidance, along with subsequent related updates issued during 2019, introduces an impairment model that is based on expected credit losses (ECL) rather than incurred losses, to estimate credit losses on certain types of financial instruments, such as loans and held-to-maturity (HTM) securities, including certain off-balance sheet financial instruments, such as loan commitments. The measurement of ECL should consider historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments, over the contractual term. Financial instruments with similar risk characteristics must be grouped together when estimating ECL. In addition, ASC 326 expands credit quality disclosures. ASC 326 also provides for a simplified accounting model for purchased financial assets with a more-than-insignificant amount of credit deterioration since their origination (purchased credit deteriorated). The initial estimate of expected credit losses for purchase credit deteriorated financial assets is recognized as an AECL with an offset (i.e., increase) to the cost basis of the related financial asset at acquisition. Additionally, ASC 326 amends the current AFS security impairment model for debt securities. The new model will require an estimate of ECL when the fair value is below the amortized cost of the asset. The credit-related impairment (and subsequent recoveries) are recognized as an allowance on the balance sheet with a corresponding adjustment to the income statement. Non-credit related losses will continue to be recognized through OCI. The Company adopted these ASUs as of January 1, 2020 through a cumulative-effect adjustment to opening retaining earnings. Estimation Methodology The Company has developed multiple current expected credit loss models (ECL Models) which segment the Company’s loan and lease portfolio by borrower type (i.e. commercial and consumer) and loan type to estimate lifetime expected credit losses for loans and leases. The ECL Models primarily use a probability-of-default methodology to estimate expected credit losses. Within each ECL Model, loans and leases are further segregated based on additional risk characteristics specific to that loan or leases type, such as risk rating, industry sector, company and/or loan size, collateral type, geographic location and FICO score. The Company uses both internal and external historical loss data in the ECL Models, as appropriate. The estimate of expected credit losses is inherently subjective, as it requires management to exercise judgment in determining appropriate factors to be used to determine the allowance. Following are some of the most significant factors used to estimate expected credit losses under ASC 326: Economic Forecasts: Management selected economic variables it believes to be the most relevant for estimating losses based on the composition of the loan and leases portfolio and customer base, including property values, employment and unemployment levels, oil prices and other key economic measures. The Company considers a variety of economic forecasts and selects multiple economic forecasts it believes represent future changes in macroeconomic conditions. The Company uses a blend of the selected economic forecasts to estimate credit losses. Forecast Period: Management believes that it can reasonably forecast credit losses over an eighteen month period, taking into consideration historical information, current information, and reasonable and supportable economic forecasts. Management will re-evaluate the forecast period on a quarterly basis and may adjust the forecast period in response to changes in the economic environment and other factors. Reversion Methodology: For contractual periods beyond the eighteen month forecast period, the Company reverts over a twelve-month period to longer term historical loss experience on a straight-line basis to arrive at lifetime expected credit losses. Management will re-evaluate the reversion methodology on a quarterly basis. Credit losses for loans and leases which no longer share risk characteristics with other loans or leases, primarily non-accrual and TDR loans are individually assessed for impairment. A specific allowance is determined for these loans and leases determined using either the present value of expected cash flows or the fair value of the underlying collateral. The AECL calculated by the ECL Models for the Company’s loan and lease portfolio is allocated between the ALLL and the reserve for unfunded commitments based on the loan’s percentage funded and future funding expectations of the loan. The Company elected not to measure an allowance for expected credit losses for accrued interest as its reverses uncollectible accrued interest through interest income in a timely manner. Accrued interest will continue to be reported within other assets in the consolidated balance sheet. The Company did not elect the one-time fair value option transition expedient for financial instruments recorded at amortized cost. Additionally, the Company elected to discontinue the use of pools to account for purchased credit deteriorated financial assets. ASC 326 also requires an estimate of expected credit losses on the HTM and AFS debt securities portfolios. Most of these portfolios consist of agency-backed securities that inherently have an immaterial risk of loss. For non-agency-backed HTM securities, the Company estimates expected credit losses by segmenting the portfolio by credit rating and duration and applying external historical loss data, taking into consideration management's forecast of future economic conditions, as discussed above. For non-agency-backed AFS securities where amortized cost exceeds fair value, the Company reviews each security to determine if any portion of the unrealized loss is credit-related. Impact of Adoption The impact of the adoption of ASC 326 on the Company's loan and lease portfolio was as follows:
The increase in the AECL primarily relates to required increases for loans previously classified as acquired non-impaired. The AECL for residential mortgage loans increased due to the requirement to estimate lifetime expected credit losses and the remaining length of time to maturity for these loans versus a loss emergence period. The AECL for non-owner-occupied commercial real estate loans also increased reflecting higher LGDs under the CECL model. The balance sheet reclassification represents the adjustment to the amortized cost basis of purchased credit deteriorated loans to reflect the addition of the allowance for expected credit losses at the date of adoption. At the time of adoption, the Company recognized the economy was vulnerable to major shocks, fiscal policy missteps, other geopolitical events and the outcome of the pending U.S. elections. The transition adjustment reflected the Company's view of a relatively stable macroeconomic environment over the next eighteen months. While ASC 326 results in a higher AECL, it does not change the overall credit risk in the Company’s loan and lease portfolios or the ultimate losses therein. The Company expects future changes in the AECL to be more volatile under ASC 326 as the AECL in future periods will be based on a variety of factors, including changes in loan and lease volumes, the credit quality of the loan and lease portfolio, and forecasts of future economic conditions, which are outside of the Company’s control. The adoption of ASC 326 for the Company’s HTM and AFS debt securities was not material. ASU No. 2018-13 In August 2018, the FASB released ASU No. 2018-13, Fair Value Measurement (ASC 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates, adds and modifies certain disclosure requirements for fair value measurements. The ASU is effective for fiscal years beginning after December 15, 2019, including interim periods, with early adoption permitted. The Company adopted ASU No. 2018-13 as of January 1, 2020. While adoption of this ASU will result in changes to existing disclosures, it did not have an impact on the Company’s financial position or results of operations. ASU No. 2018-17 In October 2018, the FASB released ASU No. 2018-17, Consolidation (ASC 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities, which improves the consistency of the application of the variable interest entity (VIE) related party guidance for common control arrangements. This ASU requires reporting entities to consider indirect interests held through related parties under common control on a proportional basis rather than as the equivalent of a direct interest in its entirety (as currently required in GAAP) when determining whether a decision-making fee is a variable interest. ASU No. 2018-17 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and early adoption is permitted. The guidance will be applied retrospectively with a cumulative-effect adjustment to retained earnings at the beginning of the earliest period presented. The Company adopted ASU No. 2018-17 as of January 1, 2020. The adoption of the ASU did not have a material impact to the Company’s consolidated financial statements. Based on the Company’s invested interests at adoption, no transition adjustment was needed. ASU No. 2019-04 In April 2019, the FASB released ASU No. 2019-04, Codification Improvements to Financial Instruments-Credit Losses (ASC 326), Derivatives and Hedging (ASC 815), and Financial Instruments (ASC 825). The amendments in the ASU improve the Codification by eliminating inconsistencies and providing clarifications. The amendments related to the credit losses standard are discussed above under ASU 2016-13. With respect to hedge accounting, the ASU addresses partial-term fair value hedges, fair value hedge basis adjustments, and certain transition requirements, among other things. For recognizing and measuring financial instruments, the ASU addresses the scope of the guidance, the requirement for re-measurement under ASC 820 when using the measurement alternative, certain disclosure requirements and which equity securities have to be re- measured at historical exchange rates. Since the Company early adopted the guidance in ASU No. 2017-12, Derivatives and Hedging (ASC 815): Targeted Improvements to Accounting for Hedging Activities in 2018, the amended hedge accounting guidance in ASU No. 2019-04 is effective as of the beginning of the first annual reporting period beginning after April 25, 2019 with early adoption permitted on any date after the issuance of this ASU. The Company adopted ASU No. 2017-08 as of January 1, 2020. The adoption of the ASU did not have a material impact to the Company’s consolidated financial statements. Pronouncements issued but not yet adopted: ASU No. 2019-12 In December 2019, the FASB released ASU No. 2019-12, Income Taxes (ASC 740): Simplifying the Accounting for Income Taxes, as part of their initiative to reduce complexity in accounting standards. The ASU simplifies the accounting for income taxes by eliminating certain exceptions to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The ASU also simplifies aspects of the accounting for enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. ASU No. 2019-12 will be effective for fiscal years beginning after December 15, 2020, including interim periods, with early adoption permitted. The transition method for ASU No. 2019-12 varies between the simplification items. The Company is currently evaluating the impact of the ASU on the Company’s consolidated financial statements. ASU No. 2020-01 In January 2020, the FASB released ASU No. 2020-01, Investments-Equity Securities (ASC 321), Investments- Equity Method and Joint Ventures (ASC 323), and Derivatives and Hedging (ASC 815): Clarifying the Interactions between ASC 321, ASC 323, and ASC 815, a consensus of the FASB’s Emerging Issues Task Force (EITF). The ASU clarifies that a company should consider observable transactions that require a company to either apply or discontinue the equity method of accounting under ASC 323 for the purposes of applying the measurement alternative in accordance with ASC 321 immediately before applying or upon discontinuing the equity method. The ASU also clarifies that, when determining the accounting for certain forward contracts and purchased options, a company should not consider, whether upon settlement or exercise, if the underlying securities would be accounted for under the equity method or fair value option. ASU No. 2020-01 will be effective for fiscal years beginning after December 15, 2020, including interim periods, with early adoption permitted. The Company is currently evaluating the impact of the ASU on the Company’s consolidated financial statements. ASU No. 2020-04 In March 2020, the FASB released ASU No. 2020-04, “Reference Rate Reform (Topic 848),” which provides relief for entities preparing for discontinuation of interest rates such as LIBOR. The ASU provides optional expedients and exceptions to ease the accounting impacts associated with contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. For contracts, this ASU allows entities to account for certain contract modifications as a continuation of the existing contract without additional analysis. For hedging relationships, this ASU allows hedge accounting to continue when certain critical terms of a hedging relationship charge and assess effectiveness in ways that disregard certain potential sources of ineffectiveness. Additionally, the ASU allows entities to make a one-time sale and/or transfer of certain debt securities from held-to-maturity to available-for-sale or trading. ASU No. 2020-04 is effective from the beginning of the interim period that includes March 12, 2020. An entity may elect to apply the ASU prospectively through December 31, 2022. The expedients and exceptions provided by the ASU do not apply to contract modifications made or hedging relationships entered into or evaluated after December 31, 2022, with certain exceptions for hedging relationships existing as of December 31, 2022. The Company is currently evaluating the impact of the ASU on its consolidated financial statements.
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Loans and Leases (Tables) |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Non-Covered and Covered Loans | The following is the amortized cost of loans and leases as of March 31, 2020 and December 31, 2019, excluding accrued interest of $65.9 million and $65.7 million, which is included in other assets in the unaudited consolidated balance sheets:
(1) Includes equipment financing leases
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Schedule of Aging of Loans | The following tables provide an analysis of the aging of loans and leases as of March 31, 2020 and December 31, 2019.
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Schedule of nonaccrual loans | Additional information on non-accrual loans and leases as of March 31, 2020 and December 31, 2019 is presented in the following table.
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Summary of Changes in Accretable Yields of Acquired Loans | The following is a summary of changes in the accretable difference for all loans accounted for under ASC 310-30 during the three months ended March 31, 2019:
(1) Includes changes in cash flows expected to be collected due to the impact of changes in actual or expected timing of liquidation events, modifications, changes in interest rates and changes in prepayment assumptions.
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Schedule of Modified TDRs | The following table provides information on how the TDRs were modified during the periods indicated:
(1) Other concessions may include covenant waivers, forgiveness of principal or interest associated with a customer bankruptcy, or a combination of any of the above concessions.
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Schedule of Subsequently Defaulted TDRs | The following table presents the end of period balance for loans modified in a TDR during the periods indicated:
Information detailing TDRs that defaulted during the three-month periods ended March 31, 2020 and 2019, and were modified in the previous twelve months (i.e., the twelve months prior to the default) is presented in the following tables. The Company has defined a default as any loan with a payment that is currently past due greater than 30 days, or was past due greater than 30 days at any point during the respective periods, or since the date of modification, whichever is shorter.
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Related Party Transactions |
3 Months Ended |
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Mar. 31, 2020 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | RELATED PARTY TRANSACTIONS In the ordinary course of business, the Company may execute transactions with various related parties. Examples of such transactions may include lending or deposit arrangements, transfers of financial assets, services for administrative support, and other miscellaneous items. The Company has granted loans to executive officers and directors and their affiliates. These loans, including the related principal additions, principal payments, and unfunded commitments are not material to the consolidated financial statements at March 31, 2020 and December 31, 2019. There were no outstanding loans to such related parties classified as non-accrual, past due, or troubled debt restructurings at March 31, 2020 and December 31, 2019. Deposits from related parties held by the Company were not material at March 31, 2020 and December 31, 2019.
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Loans and Leases - Summary of Changes in Accretable Yields of Acquired Loans (Detail) $ in Thousands |
3 Months Ended |
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Mar. 31, 2019
USD ($)
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Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Accretable Yield Movement Schedule [Roll Forward] | |
Balance at beginning of period | $ 133,342 |
Transfers from non-accretable difference to accretable yield | (3,640) |
Accretion | (10,086) |
Changes in expected cash flows not affecting non-accretable differences | (272) |
Balance at end of period | $ 119,344 |
Allowance for Expected Credit Losses and Credit Quality (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Allowance for Loan Losses for Covered and Non-Covered Loan Portfolios | A summary of changes in the allowance for expected credit losses for the three months ended March 31 was as follows:
A summary of changes in the allowance for expected credit losses, by loan portfolio type, for the three months ended March 31 was as follows:
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Investment in Legacy and Acquired Loans by Credit Quality Indicator |
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Basis of Presentation (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Principles of Consolidation | All significant intercompany balances and transactions have been eliminated in consolidation. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reclassification | Certain amounts reported in prior periods have been reclassified to conform to the current period presentation. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment Securities | Management determines the appropriate accounting classification of debt and equity securities at the time of acquisition and re-evaluates such designations at least quarterly. Debt securities that management has the ability and intent to hold to maturity are classified as HTM and carried at cost, adjusted for amortization of premiums and accretion of discounts using methods approximating the interest method. Securities acquired with the intent of recognizing short-term profits or which are actively bought and sold are classified as trading securities and reported at fair value. Securities not classified as HTM or trading are classified as AFS and reported at fair value. The Company evaluates its investment securities portfolio for impairment on a quarterly basis as follows: HTM Securities: The Company maintains an allowance for expected credit losses appropriate to absorb estimated lifetime credit losses for HTM securities where there is a risk of credit loss. HTM securities where there is a risk of credit loss are segmented by credit rating and duration and an allowance for expected credit losses is calculated based on external historical loss data, taking into consideration management’s forecast of future economic conditions. The allowance of expected credit losses, if required, is recognized on the consolidated balance sheet with a corresponding adjustment to earnings. AFS Securities: Declines in the fair value of individual AFS securities below their amortized cost basis are reviewed to determine if the decline is due to credit-related factors. Impairment that is not credit-related is recognized in other comprehensive income, net of applicable taxes. Credit-related impairment is recognized as an allowance for expected credit losses on the consolidated balance sheet with a corresponding adjustment to earnings. However, if the Company intends to sell the impaired AFS security or it is more likely than not that the Company will be required to sell such a security before recovering the amortized cost basis of the security, the AFS security’s amortized cost basis is reduced by the decline in fair value with the entire credit loss recognized in the consolidated statement of income. Prior to January 1, 2020, investment securities were evaluated for indicators of other than temporary impairment (OTTI) on a quarterly basis. Declines in the fair value of individual HTM and AFS securities below their amortized cost basis were reviewed to determine whether the declines were other than temporary. In estimating OTTI losses, management considered 1) the length of time and the extent to which the fair value had been less than the amortized cost basis, 2) the financial condition and near-term prospects of the issuer, 3) its intent to sell and whether it was more likely than not that the Company would be required to sell those securities before the anticipated recovery of the amortized cost basis, and 4) for debt securities, the recovery of contractual principal and interest. For securities that the Company did not expect to sell, or it was not more likely than not it would be required to sell prior to recovery of its amortized cost basis, the credit component of an OTTI was recognized in earnings and the non-credit component was recognized in OCI. For securities that the Company did expect to sell, or it was more likely than not that it would be required to sell prior to recovery of its amortized cost basis, both the credit and non-credit component of an OTTI were recognized in earnings. Subsequent to recognition of OTTI, an increase in expected cash flows was recognized as a yield adjustment over the remaining expected life of the security based on an evaluation of the nature of the increase. Other equity securities primarily consist of stock acquired for regulatory purposes, such as Federal Home Loan Bank stock and Federal Reserve Bank stock and are included in “other assets." Gains or losses on securities sold are recorded on the trade date, using the specific identification method.
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Loans, Leases and Portfolio Segmentation | Loans The Company offers commercial and consumer loans for its customers. Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at amortized cost, which represents the principal amount outstanding less charge-offs, net of any unearned income, unamortized net loan origination fees and direct costs on originated loans, and net premiums or discounts on acquired loans. Interest income is accrued as earned over the term of the loans based on the principal balance outstanding. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield. Accrued interest is reported within other assets in the consolidated balance sheet. Acquired loans are recorded at fair value on the acquisition date. The determination of fair value includes credit risk assumptions and any resulting credit discounts as well as estimates related to discount rates, expected prepayments, and the amount and timing of undiscounted expected principal, interest, and other cash flows. Additionally, at the time of acquisition, acquired loans are classified as either purchased credit deteriorated (PCD) or non-purchased credit deteriorated (non-PCD). Acquired loans which have experienced more-than-insignificant deterioration in credit since origination are classified as PCD Loans. All acquired loans not considered to be purchased credit deteriorated loans are classified as acquired non-PCD Loans. An initial allowance for expected credit losses (AECL) is established at the acquisition date for acquired loans and the classification of PCD or non-PCD determines how the initial AECL is recorded. For PCD Loans, the AECL is recorded with a corresponding increase to the amortized cost basis of the loan by reducing the purchase premium or discount recognized on the acquired loan. For acquired non-PCD loans, the AECL is recorded with a corresponding charge to earnings. Subsequent to acquisition, the AECL for both PCD Loans and acquired non-PCD loans is determined using the same methodology as originated loans. The non-credit related purchase premium or discount on acquired loans is amortized or accreted to income over the estimated life of the loans as an adjustment to yield using the effective interest rate calculated at the acquisition date. Prior to January 1, 2020, acquired loans that reflected credit deterioration since origination to the extent that it was probable that the Company would be unable to collect all contractually required payments were classified as purchased impaired loans (“acquired impaired loans”). All other acquired loans were classified as purchased non-impaired loans (“acquired non-impaired loans”). At the time of acquisition, acquired impaired loans were accounted for individually or aggregated into loan pools with similar characteristics. From these pools, the Company used certain loan information to estimate the expected cash flows for each loan pool. For acquired impaired loans, the expected cash flows at the acquisition date in excess of the fair value of loans were recorded as interest income over the life of the loans using a level yield method if the timing and amount of future cash flows was reasonably estimable. For acquired non-impaired loans, the difference between the fair value and unpaid principal balance of the loan at acquisition, referred to as a purchase premium or discount, was amortized or accreted to income over the estimated life of the loans as an adjustment to yield. Subsequent to acquisition, the Company performed cash flow re-estimations at least quarterly for each acquired impaired loan or loan pool. Increases in estimated cash flows above those expected at the time of acquisition were recognized on a prospective basis as interest income over the remaining life of the loan and/or pool. Decreases in expected cash flows subsequent to acquisition generally resulted in recognition of a provision for credit loss. The measurement of cash flows involved several assumptions and judgments, including prepayments, default rates and loss severity among other factors. All of these factors were inherently subjective and significant changes in the cash flow estimations could result over the life of the loan. Leases The Company leases equipment to commercial customers primarily through direct financing and sales-type leases. Equipment financing leases are reported at the net lease investment, which represents the sum of minimum lease payments over the lease term and the estimated residual value, less unearned interest income. Interest income is accrued as earned over the term of the lease based on the net investment in leases. Fees incurred to originate the lease are deferred and recognized as an adjustment of the yield on the lease. Portfolio Segmentation The Company’s loan portfolio is disaggregated into two portfolio segments: commercial loans and leases and consumer loans. The Company further disaggregates the commercial loans and leases and the consumer loans portfolio segment into receivable classes for purposes of monitoring and assessing credit quality. Receivable classes within the commercial loan and lease portfolio segment include commercial real estate-construction, commercial real estate-owner occupied, commercial real estate-non-owner occupied, and commercial and industrial, which includes equipment financing leases. Receivable classes within the consumer loan portfolio segment include residential mortgage, home equity, and other consumer. Prior to January 1, 2020, the Company’s loan portfolio was disaggregated into three portfolio segments: commercial, residential mortgage, and consumer and other loans. Receivable classes within the commercial loan portfolio segment included commercial real estate-construction, commercial real estate-owner-occupied, commercial real estate-non-owner occupied, and commercial and industrial. Receivable classes within the consumer and other loans portfolio segment included home equity, indirect automobile, credit card and other.
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Troubled Debt Restructurings | Troubled Debt Restructurings The Company periodically grants concessions to its customers in an attempt to protect as much of its investment as possible and minimize risk of loss. These concessions may include restructuring the terms of a loan to alleviate the burden of the customer’s near-term cash requirements. In order to be classified as a TDR, the Company must conclude that the restructuring constitutes a concession and the customer is experiencing financial difficulties. The Company defines a concession to the customer as a modification of existing terms for economic or legal reasons that it would otherwise not consider. The concession is either granted through an agreement with the customer or is imposed by a court of law. Concessions include modifying original loan terms to reduce or defer cash payments required as part of the loan agreement, including but not limited to:
In its determination of whether the customer is experiencing financial difficulties, the Company considers numerous indicators, including, but not limited to:
If the Company concludes that both a concession has been granted and the customer is experiencing financial difficulties, the Company identifies the loan as a TDR. Prior to January 2020, all TDRs were considered impaired loans and acquired impaired loans accounted for within pools were not reviewed for TDR classification if modified.
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Non-accrual and Past Due Loans and Leases | Non-accrual and Past Due Loans and Leases (Including Loan Charge-offs) Loans and leases are generally considered past due when contractual payments of principal and interest have not been received within 30 days after the contractual due date. Residential mortgage loans are considered past due when contractual payments have not been received for two consecutive payment dates. Loans and leases are placed on non-accrual status when any of the following occur: 1) the loan or lease is maintained on a cash basis because of deterioration in the financial condition of the borrower; 2) collection of the full contractual amount of principal and interest is not expected even if the loan or lease is currently paying as agreed; or 3) when principal or interest has been in default for a period of 90 days or more, unless the loan or lease is both well-secured and in the process of collection. Factors considered in determining the collection of the full contractual amount of principal and interest include assessment of the borrower’s cash flow, valuation of underlying collateral, and the ability and willingness of guarantors to provide credit support. Certain commercial loans and leases are also placed on non-accrual status when payment is not past due and full payment of principal and interest is expected, but the Company has doubt about the borrower’s ability to comply with existing repayment terms. Consideration will be given to placing a loan or lease on non-accrual due to the deterioration of the debtor’s repayment ability, the repayment of the loan or lease becoming dependent on the liquidation of collateral, an existing collateral deficiency, the loan or lease being classified as "doubtful" or "loss," the client filing for bankruptcy, and/or foreclosure being initiated. For all commercial loans and leases, the determination of a borrower’s ability to make the required principal and interest payments is based on an examination of the borrower’s current financial statements, industry, management capabilities, and other qualitative factors. Loans and leases are evaluated for potential charge-off in accordance with the parameters discussed in the following paragraph or when the loan or lease is placed on non-accrual status, whichever is earlier. Prior to January 1, 2020, acquired impaired loans were placed on non-accrual status when the Company could not reasonably estimate cash flows on the loan or loan pool. Loans and leases within the commercial portfolio are generally evaluated for charge-off at 90 days past due, unless both well-secured and in the process of collection. Closed and open-end consumer loans and leases are evaluated for charge-off no later than 120 days past due. Any outstanding loan balance in excess of the fair value of the collateral less costs to sell is charged-off no later than 120 days past due for loans secured by real estate. For non-real estate secured loans and leases, in lieu of charging off the entire balance, loans or leases may be written down to the fair value of the collateral less costs to sell if repossession of collateral is assured and in process. Prior to January 1, 2020, acquired impaired loans were not generally evaluated for charge-off. The accrual of interest, as well as the amortization/accretion of any remaining unamortized net deferred fees or costs and discount or premium, is discontinued at the time the loan or lease is placed on non-accrual status. Accrued but uncollected interest for all loans and leases that are placed on non-accrual status is generally reversed through interest income at 90 days past due. As accrued but uncollected interest is reversed on a timely basis, the Company does not estimate an AECL for accrued interest. Cash receipts received on non-accrual loans or leases are generally applied against principal until the loan or lease has been collected in full, after which time any additional cash receipts are recognized as interest income (i.e., cost recovery method). However, interest may be accounted for under the cash-basis method as long as the remaining recorded investment in the loan is deemed fully collectible. Loans and leases are returned to accrual status when the borrower has demonstrated a capacity to continue payment of the debt (generally a minimum of six months of sustained repayment performance) and collection of contractually required principal and interest associated with the debt is reasonably assured. Additionally, for a non-accrual TDR to be returned to accrual status, a current, well-documented credit analysis is required and the borrower must have complied with all terms of the modification. At such time, the accrual of interest and amortization/accretion of any remaining unamortized net deferred fees or costs and discount or premium shall resume. Any interest income which was applied to the principal balance shall not be reversed and subsequently will be recognized as an adjustment to yield over the remaining life of the loan.
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Individually Assessed Loans and Leases/Impaired Loans | Individually Assessed Loans and Leases/Impaired Loans When a loan or lease no longer shares risk characteristics with other loans or leases, it is individually assessed for impairment. While management considers a variety of factors in determining when a loan no longer shares risk characteristics with other loans, generally all TDR and non-accrual loans above certain thresholds are considered to meet this requirement and are individually assessed for impairment. Impairment losses are measured on a loan-by-loan basis for these commercial and consumer loans and leases, based on either the present value of expected future cash flows discounted at the loan or lease’s effective interest rate or the fair value of the collateral if the loan or lease is collateral-dependent. This measurement requires significant judgment and use of estimates, and the actual loss ultimately recognized by the Company may differ significantly from the estimates. Prior to January 1, 2020, a loan was considered to be impaired when, based on current information and events, it was probable that the Company would be unable to collect the scheduled payments of principal and/or interest in accordance with the contractual terms of the loan agreement. Generally all TDRs regardless of the outstanding balance amount or portfolio classification, and all acquired impaired loans were considered to be impaired. Loans that experienced insignificant payment delays and payment shortfalls generally were not classified as impaired. Impairment losses were measured on a loan-by-loan basis for commercial and certain residential mortgage or consumer loans, based on either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the fair value of the collateral if the loan was collateral-dependent.
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Allowance for Credit Losses | Allowance for Expected Credit Losses The Company maintains the AECL at a level that management believes appropriate to absorb estimated lifetime credit losses, including losses associated with unfunded commitments. The AECL includes the allowance for loan and lease losses (ALLL) (contra asset) and the reserve for unfunded commitments (liability). Determination of the appropriate AECL involves a high degree of complexity and requires significant judgment regarding the credit quality of the loan portfolio and management’s view of future economic conditions. Several factors are taken into consideration in the determination of the overall AECL which include, but are not limited to, the overall risk profiles of the loan and lease portfolios, net charge-off experience, the level of loans and leases that require an individual assessment for impairment, the level of non-performing loans and leases, the level of 90 days past due loans and leases, the value of collateral, among other factors. The Company also considers forecasts of future national and regional economic conditions, overall asset quality trends, changes in lending practices and procedures, trends in the nature and volume of the loan portfolio (including the existence and effect of any portfolio concentrations), changes in experience and depth of lending staff, the Company’s legal, regulatory and competitive environment, and data availability and applicability that might impact the portfolio or the manner in which it estimates losses, risk rating accuracy, and risk identification. The Company has developed multiple current expected credit loss models (ECL Models) which segment the Company’s loan and lease portfolio by borrower type (i.e. commercial and consumer) and loan or lease type to estimate lifetime expected credit losses for loans and leases that share similar risk characteristics. These ECL Models primarily use a probability-of-default methodology to estimate expected credit losses for all loan and lease commitments. Within each ECL Model, PDs and LGDs are established at the individual loan or lease commitment level based on various loan or lease specific characteristics. For commercial loans and leases, these characteristics include customer size, industry sector, geographic region, risk rating and collateral/property type, among others. For consumer loans, these characteristics include geographic region, loan size, customer size, fixed or variable rate, lien position, and FICO score, among others. The ECL Models use both internal and external historical loss data, as appropriate, for all available historical periods and a blend of multiple economic forecasts as approved by ALCO to estimate expected credit losses over a reasonable and supportable forecast period. The ECL Models then revert to longer term historical loss experience on a straight-line basis to arrive at lifetime expected credit losses. The selection of the economic forecasts, the forecast period and reversion period and methodology are reviewed and approved quarterly. The ECL Models also take into consideration the effects of prepayments and draw-down assumptions for any unfunded commitments, as applicable. Qualitative adjustments are incorporated into the ECL Model-based estimate of expected credit losses to accommodate for the imprecision of certain assumptions and uncertainties inherent in the calculation. Loans or leases that no longer share similar risk characteristics with other loans or leases in the portfolio must be individually evaluated for impairment. For these loans and leases, the AECL is determined on an individual loan and lease commitment basis, taking into consideration facts and circumstances specific to each borrower. As discussed above, the AECL for individually assessed loans or leases is based on the difference between the recorded investment in the loan or lease and either the estimated net present value of projected cash flows or the estimated value of the collateral associated with a collateral-dependent loan, less cost to sell. The overall AECL is allocated between the ALLL and the reserve for unfunded commitments based on the loan’s percentage funded and the future funding expectations of the loan. Prior to January 1, 2020, the allowance for credit losses was maintained at a level appropriate to absorb estimated probable credit losses incurred in the loan portfolio, including unfunded commitments as of the consolidated balance sheet date. The manner in which the allowance for credit losses was determined was based on 1) the accounting method applied to the underlying loans and 2) whether the loan was required to be measured for impairment. The Company delineated between loans accounted for under the contractual yield method, legacy loans (originated loans), acquired non-impaired loans, and acquired impaired loans. Further, for legacy and acquired non-impaired loans, the Company attributed portions of the allowance for credit losses to loans and loan commitments that it measured individually, and groups of homogeneous loans and loan commitments that it measured collectively for impairment. Prior to January 1, 2020, the allowance for loan losses for all impaired loans (excluding acquired impaired loans) was determined on an individual loan basis, considering the facts and circumstances specific to each borrower. The allowance was based on the difference between the recorded investment in the loan and generally either the estimated net present value of projected cash flows or the estimated value of the collateral associated with a collateral-dependent loan. The determination of the allowance for loan losses for acquired impaired loans prior to January 1, 2020 is further discussed in the “Loans” section of this footnote. Prior to January 1, 2020, the allowance for loan losses for all non-impaired loans (excluding acquired impaired loans) was calculated based on pools of loans with similar characteristics. The pool-level allowance was calculated through the application of PD and LGD factors for each individual loan. PDs and LGDs were determined based on historical default and loss information for similar loans. For purposes of establishing estimated loss percentages for pools of loans that shared common risk characteristics, the Company’s loan portfolio was segmented by various loan characteristics including loan type, risk rating for commercial, Vantage or FICO score for residential mortgage and consumer, past due status for residential mortgage and consumer and call report code. The default and loss information was measured over an appropriate period for each loan pool and adjusted as deemed appropriate. Qualitative adjustments were incorporated into the pool-level analysis to accommodate for the imprecision of certain assumptions and uncertainties inherent in the calculation.
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Recent Accounting Pronouncements | RECENT ACCOUNTING PRONOUNCEMENTS Pronouncements adopted during the quarter ended March 31, 2020: ASU No. 2016-13, ASU No. 2019-04 (portion related to ASC 326), ASU No. 2019-05, ASU No. 2019-11, and ASU No. 2020-03 In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (ASC 326): Measurement of Credit Losses on Financial Instruments. The guidance, along with subsequent related updates issued during 2019, introduces an impairment model that is based on expected credit losses (ECL) rather than incurred losses, to estimate credit losses on certain types of financial instruments, such as loans and held-to-maturity (HTM) securities, including certain off-balance sheet financial instruments, such as loan commitments. The measurement of ECL should consider historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments, over the contractual term. Financial instruments with similar risk characteristics must be grouped together when estimating ECL. In addition, ASC 326 expands credit quality disclosures. ASC 326 also provides for a simplified accounting model for purchased financial assets with a more-than-insignificant amount of credit deterioration since their origination (purchased credit deteriorated). The initial estimate of expected credit losses for purchase credit deteriorated financial assets is recognized as an AECL with an offset (i.e., increase) to the cost basis of the related financial asset at acquisition. Additionally, ASC 326 amends the current AFS security impairment model for debt securities. The new model will require an estimate of ECL when the fair value is below the amortized cost of the asset. The credit-related impairment (and subsequent recoveries) are recognized as an allowance on the balance sheet with a corresponding adjustment to the income statement. Non-credit related losses will continue to be recognized through OCI. The Company adopted these ASUs as of January 1, 2020 through a cumulative-effect adjustment to opening retaining earnings. Estimation Methodology The Company has developed multiple current expected credit loss models (ECL Models) which segment the Company’s loan and lease portfolio by borrower type (i.e. commercial and consumer) and loan type to estimate lifetime expected credit losses for loans and leases. The ECL Models primarily use a probability-of-default methodology to estimate expected credit losses. Within each ECL Model, loans and leases are further segregated based on additional risk characteristics specific to that loan or leases type, such as risk rating, industry sector, company and/or loan size, collateral type, geographic location and FICO score. The Company uses both internal and external historical loss data in the ECL Models, as appropriate. The estimate of expected credit losses is inherently subjective, as it requires management to exercise judgment in determining appropriate factors to be used to determine the allowance. Following are some of the most significant factors used to estimate expected credit losses under ASC 326: Economic Forecasts: Management selected economic variables it believes to be the most relevant for estimating losses based on the composition of the loan and leases portfolio and customer base, including property values, employment and unemployment levels, oil prices and other key economic measures. The Company considers a variety of economic forecasts and selects multiple economic forecasts it believes represent future changes in macroeconomic conditions. The Company uses a blend of the selected economic forecasts to estimate credit losses. Forecast Period: Management believes that it can reasonably forecast credit losses over an eighteen month period, taking into consideration historical information, current information, and reasonable and supportable economic forecasts. Management will re-evaluate the forecast period on a quarterly basis and may adjust the forecast period in response to changes in the economic environment and other factors. Reversion Methodology: For contractual periods beyond the eighteen month forecast period, the Company reverts over a twelve-month period to longer term historical loss experience on a straight-line basis to arrive at lifetime expected credit losses. Management will re-evaluate the reversion methodology on a quarterly basis. Credit losses for loans and leases which no longer share risk characteristics with other loans or leases, primarily non-accrual and TDR loans are individually assessed for impairment. A specific allowance is determined for these loans and leases determined using either the present value of expected cash flows or the fair value of the underlying collateral. The AECL calculated by the ECL Models for the Company’s loan and lease portfolio is allocated between the ALLL and the reserve for unfunded commitments based on the loan’s percentage funded and future funding expectations of the loan. The Company elected not to measure an allowance for expected credit losses for accrued interest as its reverses uncollectible accrued interest through interest income in a timely manner. Accrued interest will continue to be reported within other assets in the consolidated balance sheet. The Company did not elect the one-time fair value option transition expedient for financial instruments recorded at amortized cost. Additionally, the Company elected to discontinue the use of pools to account for purchased credit deteriorated financial assets. ASC 326 also requires an estimate of expected credit losses on the HTM and AFS debt securities portfolios. Most of these portfolios consist of agency-backed securities that inherently have an immaterial risk of loss. For non-agency-backed HTM securities, the Company estimates expected credit losses by segmenting the portfolio by credit rating and duration and applying external historical loss data, taking into consideration management's forecast of future economic conditions, as discussed above. For non-agency-backed AFS securities where amortized cost exceeds fair value, the Company reviews each security to determine if any portion of the unrealized loss is credit-related. Impact of Adoption The impact of the adoption of ASC 326 on the Company's loan and lease portfolio was as follows:
The increase in the AECL primarily relates to required increases for loans previously classified as acquired non-impaired. The AECL for residential mortgage loans increased due to the requirement to estimate lifetime expected credit losses and the remaining length of time to maturity for these loans versus a loss emergence period. The AECL for non-owner-occupied commercial real estate loans also increased reflecting higher LGDs under the CECL model. The balance sheet reclassification represents the adjustment to the amortized cost basis of purchased credit deteriorated loans to reflect the addition of the allowance for expected credit losses at the date of adoption. At the time of adoption, the Company recognized the economy was vulnerable to major shocks, fiscal policy missteps, other geopolitical events and the outcome of the pending U.S. elections. The transition adjustment reflected the Company's view of a relatively stable macroeconomic environment over the next eighteen months. While ASC 326 results in a higher AECL, it does not change the overall credit risk in the Company’s loan and lease portfolios or the ultimate losses therein. The Company expects future changes in the AECL to be more volatile under ASC 326 as the AECL in future periods will be based on a variety of factors, including changes in loan and lease volumes, the credit quality of the loan and lease portfolio, and forecasts of future economic conditions, which are outside of the Company’s control. The adoption of ASC 326 for the Company’s HTM and AFS debt securities was not material. ASU No. 2018-13 In August 2018, the FASB released ASU No. 2018-13, Fair Value Measurement (ASC 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates, adds and modifies certain disclosure requirements for fair value measurements. The ASU is effective for fiscal years beginning after December 15, 2019, including interim periods, with early adoption permitted. The Company adopted ASU No. 2018-13 as of January 1, 2020. While adoption of this ASU will result in changes to existing disclosures, it did not have an impact on the Company’s financial position or results of operations. ASU No. 2018-17 In October 2018, the FASB released ASU No. 2018-17, Consolidation (ASC 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities, which improves the consistency of the application of the variable interest entity (VIE) related party guidance for common control arrangements. This ASU requires reporting entities to consider indirect interests held through related parties under common control on a proportional basis rather than as the equivalent of a direct interest in its entirety (as currently required in GAAP) when determining whether a decision-making fee is a variable interest. ASU No. 2018-17 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and early adoption is permitted. The guidance will be applied retrospectively with a cumulative-effect adjustment to retained earnings at the beginning of the earliest period presented. The Company adopted ASU No. 2018-17 as of January 1, 2020. The adoption of the ASU did not have a material impact to the Company’s consolidated financial statements. Based on the Company’s invested interests at adoption, no transition adjustment was needed. ASU No. 2019-04 In April 2019, the FASB released ASU No. 2019-04, Codification Improvements to Financial Instruments-Credit Losses (ASC 326), Derivatives and Hedging (ASC 815), and Financial Instruments (ASC 825). The amendments in the ASU improve the Codification by eliminating inconsistencies and providing clarifications. The amendments related to the credit losses standard are discussed above under ASU 2016-13. With respect to hedge accounting, the ASU addresses partial-term fair value hedges, fair value hedge basis adjustments, and certain transition requirements, among other things. For recognizing and measuring financial instruments, the ASU addresses the scope of the guidance, the requirement for re-measurement under ASC 820 when using the measurement alternative, certain disclosure requirements and which equity securities have to be re- measured at historical exchange rates. Since the Company early adopted the guidance in ASU No. 2017-12, Derivatives and Hedging (ASC 815): Targeted Improvements to Accounting for Hedging Activities in 2018, the amended hedge accounting guidance in ASU No. 2019-04 is effective as of the beginning of the first annual reporting period beginning after April 25, 2019 with early adoption permitted on any date after the issuance of this ASU. The Company adopted ASU No. 2017-08 as of January 1, 2020. The adoption of the ASU did not have a material impact to the Company’s consolidated financial statements. Pronouncements issued but not yet adopted: ASU No. 2019-12 In December 2019, the FASB released ASU No. 2019-12, Income Taxes (ASC 740): Simplifying the Accounting for Income Taxes, as part of their initiative to reduce complexity in accounting standards. The ASU simplifies the accounting for income taxes by eliminating certain exceptions to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The ASU also simplifies aspects of the accounting for enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. ASU No. 2019-12 will be effective for fiscal years beginning after December 15, 2020, including interim periods, with early adoption permitted. The transition method for ASU No. 2019-12 varies between the simplification items. The Company is currently evaluating the impact of the ASU on the Company’s consolidated financial statements. ASU No. 2020-01 In January 2020, the FASB released ASU No. 2020-01, Investments-Equity Securities (ASC 321), Investments- Equity Method and Joint Ventures (ASC 323), and Derivatives and Hedging (ASC 815): Clarifying the Interactions between ASC 321, ASC 323, and ASC 815, a consensus of the FASB’s Emerging Issues Task Force (EITF). The ASU clarifies that a company should consider observable transactions that require a company to either apply or discontinue the equity method of accounting under ASC 323 for the purposes of applying the measurement alternative in accordance with ASC 321 immediately before applying or upon discontinuing the equity method. The ASU also clarifies that, when determining the accounting for certain forward contracts and purchased options, a company should not consider, whether upon settlement or exercise, if the underlying securities would be accounted for under the equity method or fair value option. ASU No. 2020-01 will be effective for fiscal years beginning after December 15, 2020, including interim periods, with early adoption permitted. The Company is currently evaluating the impact of the ASU on the Company’s consolidated financial statements. ASU No. 2020-04 In March 2020, the FASB released ASU No. 2020-04, “Reference Rate Reform (Topic 848),” which provides relief for entities preparing for discontinuation of interest rates such as LIBOR. The ASU provides optional expedients and exceptions to ease the accounting impacts associated with contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. For contracts, this ASU allows entities to account for certain contract modifications as a continuation of the existing contract without additional analysis. For hedging relationships, this ASU allows hedge accounting to continue when certain critical terms of a hedging relationship charge and assess effectiveness in ways that disregard certain potential sources of ineffectiveness. Additionally, the ASU allows entities to make a one-time sale and/or transfer of certain debt securities from held-to-maturity to available-for-sale or trading. ASU No. 2020-04 is effective from the beginning of the interim period that includes March 12, 2020. An entity may elect to apply the ASU prospectively through December 31, 2022. The expedients and exceptions provided by the ASU do not apply to contract modifications made or hedging relationships entered into or evaluated after December 31, 2022, with certain exceptions for hedging relationships existing as of December 31, 2022. The Company is currently evaluating the impact of the ASU on its consolidated financial statements.
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Fair Value Measurements - Financial Assets and Liabilities Measured at Fair Value on Nonrecurring Basis (Detail) - Nonrecurring - USD ($) $ in Thousands |
Mar. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Assets | ||
Impaired loans | $ 87,227 | $ 74,763 |
OREO, net | 6,869 | 4,907 |
Total | 94,096 | 79,670 |
Level 1 | ||
Assets | ||
Impaired loans | 0 | 0 |
OREO, net | 0 | 0 |
Total | 0 | 0 |
Level 2 | ||
Assets | ||
Impaired loans | 0 | 0 |
OREO, net | 0 | 0 |
Total | 0 | 0 |
Level 3 | ||
Assets | ||
Impaired loans | 87,227 | 74,763 |
OREO, net | 6,869 | 4,907 |
Total | $ 94,096 | $ 79,670 |
Shareholders' Equity, Capital Ratios and Other Regulatory Matters - Actual Capital Amounts and Ratios (Detail) - USD ($) $ in Thousands |
Mar. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Total Risk-Based Capital | ||
Capital Conversion Buffer | 4.48% | |
Consolidated | ||
Tier 1 Leverage | ||
Minimum amount | $ 1,228,618 | $ 1,220,289 |
Minimum ratio | 4.00% | 4.00% |
Actual amount | $ 3,051,243 | $ 3,021,004 |
Actual ratio | 9.93% | 9.90% |
Common Equity Tier 1 (CET1) | ||
Minimum amount | $ 1,216,954 | $ 1,194,765 |
Minimum ratio | 4.50% | 4.50% |
Actual amount | $ 2,822,758 | $ 2,792,520 |
Actual Ratio | 10.44% | 10.52% |
Tier 1 Risk-Based Capital | ||
Minimum amount | $ 1,622,605 | $ 1,593,020 |
Minimum ratio | 6.00% | 6.00% |
Actual amount | $ 3,051,243 | $ 3,021,004 |
Actual ratio | 11.28% | 11.38% |
Total Risk-Based Capital | ||
Minimum amount | $ 2,163,474 | $ 2,124,026 |
Minimum ratio | 8.00% | 8.00% |
Actual amount | $ 3,375,550 | $ 3,300,730 |
Actual ratio | 12.48% | 12.43% |
IBERIABANK | ||
Tier 1 Leverage | ||
Minimum amount | $ 1,225,516 | $ 1,217,638 |
Minimum ratio | 4.00% | 4.00% |
Well capitalized amount | $ 1,531,895 | $ 1,522,048 |
Well capitalized ratio | 5.00% | 5.00% |
Actual amount | $ 3,008,038 | $ 2,949,533 |
Actual ratio | 9.82% | 9.69% |
Common Equity Tier 1 (CET1) | ||
Minimum amount | $ 1,212,501 | $ 1,191,062 |
Minimum ratio | 4.50% | 4.50% |
Well capitalized amount | $ 1,751,390 | $ 1,720,423 |
Well capitalized ratio | 6.50% | 6.50% |
Actual amount | $ 3,008,038 | $ 2,949,533 |
Actual Ratio | 11.16% | 11.14% |
Tier 1 Risk-Based Capital | ||
Minimum amount | $ 1,616,668 | $ 1,588,083 |
Minimum ratio | 6.00% | 6.00% |
Well capitalized amount | $ 2,155,557 | $ 2,117,444 |
Well capitalized ratio | 8.00% | 8.00% |
Actual amount | $ 3,008,038 | $ 2,949,533 |
Actual ratio | 11.16% | 11.14% |
Total Risk-Based Capital | ||
Minimum amount | $ 2,155,557 | $ 2,117,444 |
Minimum ratio | 8.00% | 8.00% |
Well capitalized amount | $ 2,694,446 | $ 2,648,805 |
Well capitalized ratio | 10.00% | 10.00% |
Actual amount | $ 3,215,845 | $ 3,112,758 |
Actual ratio | 11.94% | 11.76% |
Capital Conversion Buffer | 3.94% |
Investment Securities - Schedule of Securities in Other Assets on Company's Consolidated Balance Sheets (Detail) - USD ($) $ in Thousands |
Mar. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Investments, Debt and Equity Securities [Abstract] | ||
Federal Home Loan Bank (FHLB) stock | $ 70,914 | $ 70,386 |
Federal Reserve Bank Stock | 85,630 | 85,630 |
CRA and Community Development Investment Funds | 1,988 | 1,948 |
Other Investments | 22,098 | 21,118 |
Marketable Securities | $ 180,630 | $ 179,082 |
Commitments and Contingencies (Detail) - USD ($) $ in Millions |
Feb. 02, 2018 |
Dec. 11, 2017 |
Mar. 31, 2020 |
Dec. 31, 2019 |
---|---|---|---|---|
Commitments and Contingencies Disclosure [Abstract] | ||||
Fair value of guarantees under commercial and standby letters of credit | $ 2.8 | $ 3.3 | ||
Settled Litigation | ||||
Loss Contingencies [Line Items] | ||||
Settlement amount | $ 11.7 | |||
Pending Litigation | ||||
Loss Contingencies [Line Items] | ||||
Damages sought | $ 11.7 |
Goodwill and Other Intangible Assets - Schedule of Carrying Amount of Goodwill (Detail) $ in Thousands |
Mar. 31, 2020
USD ($)
|
---|---|
Goodwill [Roll Forward] | |
Balance at beginning of the period | $ 1,235,533 |
Balance at end of the period | 1,235,533 |
Operating Segments | |
Goodwill [Roll Forward] | |
Balance at beginning of the period | 1,235,533 |
Balance at end of the period | 1,235,533 |
Operating Segments | IBERIABANK | |
Goodwill [Roll Forward] | |
Balance at beginning of the period | 1,203,810 |
Balance at end of the period | 1,203,810 |
Operating Segments | IMC | |
Goodwill [Roll Forward] | |
Balance at beginning of the period | 23,178 |
Balance at end of the period | 23,178 |
Operating Segments | LTC | |
Goodwill [Roll Forward] | |
Balance at beginning of the period | 8,545 |
Balance at end of the period | $ 8,545 |
Fair Value Measurements (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Asset and Liabilities Measured at Fair Value on Recurring Basis | The following table presents information about the Company's assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2020 and December 31, 2019 and their classification within the fair value hierarchy. See Note 1, Summary of Significant Accounting Policies, in the 2019 10-K, for a description of how fair value measurements are determined.
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Financial Asset and Liabilities Measured at Fair Value on Nonrecurring Basis | The following table presents information about the Company's assets that are measured at fair value and still held as of March 31, 2020 and December 31, 2019 for which a non-recurring fair value adjustment was recorded during the periods then ended. See Note 1, Summary of Significant Accounting Policies, in the 2019 10-K, for a description of how fair value measurements are determined.
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Summary of Difference Between the Aggregate Fair Value and the Aggregate Unpaid Principal Balance for Mortgage Loans Held for Sale | The following table summarizes the difference between the aggregate fair value and the aggregate unpaid principal balance for mortgage loans held for sale and mortgage loans held for investment measured at fair value:
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Fair Value Option, Disclosures | The following table details net gains (losses) resulting from the change in fair value of loans that were recorded in mortgage income in the consolidated statements of comprehensive income for the three months ended March 31, 2020 and 2019. The changes in fair value are mostly offset by economic hedging activities, with an insignificant portion of these changes attributable to changes in instrument-specific credit risk.
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Derivative Instruments and Other Hedging Activities |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Other Hedging Activities | DERIVATIVE INSTRUMENTS AND OTHER HEDGING ACTIVITIES The Company enters into derivative financial instruments to manage interest rate risk, exposures related to liquidity and credit risk, and to facilitate customer transactions. The primary types of derivatives utilized by the Company for its risk management strategies include interest rate swap agreements, interest rate collars, interest rate floors, interest rate lock commitments, forward sales commitments, written and purchased options, and credit derivatives. All derivative instruments are recognized on the consolidated balance sheets as other assets or other liabilities at fair value, regardless of whether a right of offset exists. Cash flow hedge relationships mitigate exposure to the variability of future cash flows or other forecasted transactions. The Company enters into interest rate swap agreements in a cash flow hedge to convert forecasted variable interest payments to a fixed rate on its junior subordinated debt. In addition, the Company has entered into interest rate collars and interest rate floors and designated the instruments as cash flow hedges of the risk of fluctuations in interest rates, thereby reducing the Company's exposure to variability in cash flows from variable-rate loans. For cash flow hedges, the effective and ineffective portions of the gain or loss related to the derivative instrument is initially reported as a component of other comprehensive income and subsequently reclassified into earnings when the forecasted transaction affects earnings or when the hedge is terminated. In applying hedge accounting for derivatives, the Company establishes and documents a method for assessing the effectiveness of the hedging derivative and a measurement approach for determining the ineffective aspect of the hedge upon the inception of the hedge. For derivative instruments that are not designated as hedging instruments, changes in the fair value of the derivatives are recognized in earnings immediately. Information pertaining to outstanding derivative instruments was as follows:
The Company has entered into risk participation agreements with counterparties to transfer or assume credit exposures related to interest rate derivatives. The notional amounts of risk participation agreements sold were $251.2 million and $183.2 million at March 31, 2020 and December 31, 2019, respectively. Assuming all underlying third party customers referenced in the swap contracts defaulted at March 31, 2020 and December 31, 2019, the exposure from these agreements would not be material based on the fair value of the underlying swaps. The Company is party to collateral agreements with certain derivative counterparties. Such agreements require that the Company maintain collateral based on the fair values of individual derivative transactions. In the event of default by the Company, the counterparty would be entitled to the collateral. At March 31, 2020 and December 31, 2019, the Company was required to post $226.8 million and $79.6 million, respectively, in variation margin payments for its derivative transactions, which is required to be netted against the fair value of the derivatives in other assets or other liabilities on the consolidated balance sheets. The Company does not anticipate additional assets will be required to be posted as collateral, nor does it believe additional assets would be required to settle its derivative instruments immediately if contingent features were triggered at March 31, 2020. The Company’s master netting agreements represent written, legally enforceable bilateral agreements that (1) create a single legal obligation for all individual transactions covered by the master agreement and (2) in the event of default, provide the non-defaulting counterparty the right to accelerate, terminate, and close-out on a net basis all transactions under the agreement and to promptly liquidate or set-off collateral posted by the defaulting counterparty. The Company does not offset fair value amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral against recognized fair value amounts of derivatives executed with the same counterparty under a master netting agreement. The following table reconciles the gross amounts presented in the consolidated balance sheets to the net amounts that would result in the event of offset.
During the three months ended March 31, 2020 and 2019, the Company did not reclassify into earnings any gain or loss as a result of the discontinuance of cash flow hedges because it was probable the original forecasted transaction would not occur by the end of the originally specified term. At March 31, 2020, the Company did not expect to reclassify a material amount from accumulated other comprehensive income into interest income over the next twelve months for derivatives that will be settled. At March 31, 2020 and 2019, and for the three months then ended, information pertaining to the effect of the hedging instruments on the consolidated financial statements was as follows:
Information pertaining to the effect of derivatives not designated as hedging instruments on the consolidated financial statements as of March 31, was as follows:
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Investment Securities |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment Securities | INVESTMENT SECURITIES The following table summarizes the amortized cost and estimated fair value of securities available for sale and securities held to maturity as of March 31, 2020 and December 31, 2019, excluding accrued interest of $13.3 million and $15.1 million, respectively, which is included in other assets in the unaudited consolidated balance sheets, and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) and gross unrecognized gains and losses:
Securities with carrying values of $2.4 billion and $2.2 billion were pledged to support repurchase transactions, public funds deposits, and certain long-term borrowings at March 31, 2020 and December 31, 2019, respectively. Information pertaining to securities with gross unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous loss position, was as follows:
The Company held certain investment securities where amortized cost exceeded fair value, resulting in unrealized loss positions, as shown in the tables above. The Company evaluates its investment securities portfolio for impairment on a quarterly basis. For HTM securities, the Company maintains an allowance for expected credit losses appropriate to absorb estimated lifetime credit losses. HTM securities where there is a risk of credit loss are segmented by credit rating and duration and an allowance for expected credit losses is calculated based on external historical loss data, taking into consideration management's forecast of future economic conditions. The Company has assessed the risk of credit loss and has determined the allowance for expected credit losses for HTM securities to be immaterial as of March 31, 2020. For AFS securities, declines in the fair value of individual securities below their amortized cost basis are reviewed to determine if the decline is due to credit-related factors. As of March 31, 2020, unrealized losses on AFS securities have not been recognized into income because the issuers are of high credit quality, management does not intend to sell and it is likely that management will not be required to sell the securities prior to their anticipated recovery, and the decline in fair value is largely due to changes in interest rates and other market conditions. Therefore, no allowance for expected credit losses has been recorded for AFS securities as of March 31, 2020 and the unrealized losses are recognized in other comprehensive income. Prior to January 1, 2020, management evaluated HTM and AFS securities for other-than-temporary impairment. Impairment was considered to be other-than-temporary if the Company (1) intended to sell the security, (2) more likely than not would be required to sell the security before recovering its cost, or (3) did not expect to recover the security's entire amortized cost basis. As of December 31, 2019, the Company did not intend to sell any of these securities, did not expect to be required to sell these securities, and expected to recover the entire amortized cost of all these securities. As a result of the Company's analysis, no declines in the estimated fair value of the Company's investment securities were deemed to be other-than-temporary at December 31, 2019. At March 31, 2020, 13 debt securities had unrealized losses of 0.82% of the securities’ amortized cost basis. At December 31, 2019, 123 debt securities had unrealized losses of 0.58% of the securities’ amortized cost basis. Additional information on securities that were in a continuous loss position for over twelve months at March 31, 2020 and December 31, 2019 is presented in the following table.
Credit Quality Indicators A substantial portion of the Company's HTM securities portfolio consists of obligations of state and political subdivisions. The Company monitors the credit quality of these securities through the use of credit ratings on a quarterly basis. The following table summarizes the amortized cost of HTM obligations of state and political subdivisions at March 31, 2020, aggregated by credit quality indicator:
At March 31, 2020, the Company also held HTM residential agency mortgage-backed securities with an amortized cost of $15.6 million. This portfolio includes Frannie Mae and Freddie Mac securities which are considered to be government sponsored enterprises (GSEs). While securities issued by GSEs do carry credit risk, the company considered the risks and determined that the risk of credit loss for these securities was zero. There were no HTM securities on non-accrual or past due status as of March 31, 2020. The amortized cost and estimated fair value of investment securities by maturity at March 31, 2020 are presented in the following table. Securities are classified according to their contractual maturities without consideration of principal amortization, potential prepayments or call options. Accordingly, actual maturities may differ from contractual maturities. Weighted average yields are calculated on the basis of the yield to maturity based on the amortized cost of each security.
Gains or losses on securities sold are recorded on the trade date, using the specific identification method. For the three months ended March 31, 2020 and 2019, the Company did not have any realized gains or losses from the sale of securities classified as available for sale. The Company did not realize any gains on calls of securities held to maturity for the three months ended March 31, 2020 and 2019. Other Equity Securities The Company accounts for the following securities at cost less impairment plus or minus any observable price changes, which approximates fair value, with the exception of CRA and Community Development Investment Funds, which are recorded at fair value. Other equity securities, which are presented in other assets on the consolidated balance sheets, were as follows:
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Basis of Presentation |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||
Basis of Presentation | BASIS OF PRESENTATION, AND CHANGES IN SIGNIFICANT ACCOUNTING POLICIES IBERIABANK Corporation is a financial holding company based in Lafayette, Louisiana. The accompanying unaudited consolidated financial statements include the accounts of IBERIABANK Corporation and its consolidated subsidiaries (the Company). Through its subsidiaries, the Company provides a full range of commercial and consumer banking services, including private banking, small business, wealth and trust management, retail brokerage, mortgage, commercial leasing and equipment financing, and title insurance services through locations in Louisiana, Arkansas, Tennessee, Alabama, Texas, Florida, Georgia, South Carolina, North Carolina, Mississippi, Missouri, and New York. The accompanying unaudited consolidated financial statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and notes necessary for complete financial statements in accordance with GAAP. In the opinion of management, the accompanying unaudited consolidated financial statements contain all the significant adjustments, consisting of normal and recurring items, considered necessary for fair presentation. These interim financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes in the Annual Report on Form 10-K for the year ended December 31, 2019. Operating results for the interim period are not necessarily indicative of the results that may be expected for the full year. All significant intercompany balances and transactions have been eliminated in consolidation. Certain amounts reported in prior periods have been reclassified to conform to the current period presentation. See the Glossary of Defined Terms included in this Report for terms used herein. Pending Merger As previously disclosed, on November 3, 2019, the Company entered into a merger agreement to combine with First Horizon National Corporation (First Horizon) in an all-stock merger of equals. On April 24, 2020, the Company received shareholder approval for the merger. The merger is expected to be completed in the second quarter of 2020, pending receipt of the remaining regulatory approvals and other customary closing conditions. Changes in Significant Accounting Policies On January 1, 2020, the Company adopted ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326),” (ASC 326) which significantly changed the measurement of credit losses for certain financial investments, such as loans (including unfunded loan commitments) and investment securities. See Note, 2, Recent Accounting Pronouncements, in the accompanying consolidated financial statements for a complete discussion. The adoption of ASC 326 impacts the accounting policies for the following: Investment Securities; Loans and Leases; and Allowance for Expected Credit Losses. Other than the accounting policy updates below, there have been no changes to the accounting policies as described in the Company’s 2019 Form 10-K. Investment Securities Management determines the appropriate accounting classification of debt and equity securities at the time of acquisition and re-evaluates such designations at least quarterly. Debt securities that management has the ability and intent to hold to maturity are classified as HTM and carried at cost, adjusted for amortization of premiums and accretion of discounts using methods approximating the interest method. Securities acquired with the intent of recognizing short-term profits or which are actively bought and sold are classified as trading securities and reported at fair value. Securities not classified as HTM or trading are classified as AFS and reported at fair value. The Company evaluates its investment securities portfolio for impairment on a quarterly basis as follows: HTM Securities: The Company maintains an allowance for expected credit losses appropriate to absorb estimated lifetime credit losses for HTM securities where there is a risk of credit loss. HTM securities where there is a risk of credit loss are segmented by credit rating and duration and an allowance for expected credit losses is calculated based on external historical loss data, taking into consideration management’s forecast of future economic conditions. The allowance of expected credit losses, if required, is recognized on the consolidated balance sheet with a corresponding adjustment to earnings. AFS Securities: Declines in the fair value of individual AFS securities below their amortized cost basis are reviewed to determine if the decline is due to credit-related factors. Impairment that is not credit-related is recognized in other comprehensive income, net of applicable taxes. Credit-related impairment is recognized as an allowance for expected credit losses on the consolidated balance sheet with a corresponding adjustment to earnings. However, if the Company intends to sell the impaired AFS security or it is more likely than not that the Company will be required to sell such a security before recovering the amortized cost basis of the security, the AFS security’s amortized cost basis is reduced by the decline in fair value with the entire credit loss recognized in the consolidated statement of income. Prior to January 1, 2020, investment securities were evaluated for indicators of other than temporary impairment (OTTI) on a quarterly basis. Declines in the fair value of individual HTM and AFS securities below their amortized cost basis were reviewed to determine whether the declines were other than temporary. In estimating OTTI losses, management considered 1) the length of time and the extent to which the fair value had been less than the amortized cost basis, 2) the financial condition and near-term prospects of the issuer, 3) its intent to sell and whether it was more likely than not that the Company would be required to sell those securities before the anticipated recovery of the amortized cost basis, and 4) for debt securities, the recovery of contractual principal and interest. For securities that the Company did not expect to sell, or it was not more likely than not it would be required to sell prior to recovery of its amortized cost basis, the credit component of an OTTI was recognized in earnings and the non-credit component was recognized in OCI. For securities that the Company did expect to sell, or it was more likely than not that it would be required to sell prior to recovery of its amortized cost basis, both the credit and non-credit component of an OTTI were recognized in earnings. Subsequent to recognition of OTTI, an increase in expected cash flows was recognized as a yield adjustment over the remaining expected life of the security based on an evaluation of the nature of the increase. Other equity securities primarily consist of stock acquired for regulatory purposes, such as Federal Home Loan Bank stock and Federal Reserve Bank stock and are included in “other assets." Gains or losses on securities sold are recorded on the trade date, using the specific identification method. Loans and Leases Loans The Company offers commercial and consumer loans for its customers. Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at amortized cost, which represents the principal amount outstanding less charge-offs, net of any unearned income, unamortized net loan origination fees and direct costs on originated loans, and net premiums or discounts on acquired loans. Interest income is accrued as earned over the term of the loans based on the principal balance outstanding. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield. Accrued interest is reported within other assets in the consolidated balance sheet. Acquired loans are recorded at fair value on the acquisition date. The determination of fair value includes credit risk assumptions and any resulting credit discounts as well as estimates related to discount rates, expected prepayments, and the amount and timing of undiscounted expected principal, interest, and other cash flows. Additionally, at the time of acquisition, acquired loans are classified as either purchased credit deteriorated (PCD) or non-purchased credit deteriorated (non-PCD). Acquired loans which have experienced more-than-insignificant deterioration in credit since origination are classified as PCD Loans. All acquired loans not considered to be purchased credit deteriorated loans are classified as acquired non-PCD Loans. An initial allowance for expected credit losses (AECL) is established at the acquisition date for acquired loans and the classification of PCD or non-PCD determines how the initial AECL is recorded. For PCD Loans, the AECL is recorded with a corresponding increase to the amortized cost basis of the loan by reducing the purchase premium or discount recognized on the acquired loan. For acquired non-PCD loans, the AECL is recorded with a corresponding charge to earnings. Subsequent to acquisition, the AECL for both PCD Loans and acquired non-PCD loans is determined using the same methodology as originated loans. The non-credit related purchase premium or discount on acquired loans is amortized or accreted to income over the estimated life of the loans as an adjustment to yield using the effective interest rate calculated at the acquisition date. Prior to January 1, 2020, acquired loans that reflected credit deterioration since origination to the extent that it was probable that the Company would be unable to collect all contractually required payments were classified as purchased impaired loans (“acquired impaired loans”). All other acquired loans were classified as purchased non-impaired loans (“acquired non-impaired loans”). At the time of acquisition, acquired impaired loans were accounted for individually or aggregated into loan pools with similar characteristics. From these pools, the Company used certain loan information to estimate the expected cash flows for each loan pool. For acquired impaired loans, the expected cash flows at the acquisition date in excess of the fair value of loans were recorded as interest income over the life of the loans using a level yield method if the timing and amount of future cash flows was reasonably estimable. For acquired non-impaired loans, the difference between the fair value and unpaid principal balance of the loan at acquisition, referred to as a purchase premium or discount, was amortized or accreted to income over the estimated life of the loans as an adjustment to yield. Subsequent to acquisition, the Company performed cash flow re-estimations at least quarterly for each acquired impaired loan or loan pool. Increases in estimated cash flows above those expected at the time of acquisition were recognized on a prospective basis as interest income over the remaining life of the loan and/or pool. Decreases in expected cash flows subsequent to acquisition generally resulted in recognition of a provision for credit loss. The measurement of cash flows involved several assumptions and judgments, including prepayments, default rates and loss severity among other factors. All of these factors were inherently subjective and significant changes in the cash flow estimations could result over the life of the loan. Leases The Company leases equipment to commercial customers primarily through direct financing and sales-type leases. Equipment financing leases are reported at the net lease investment, which represents the sum of minimum lease payments over the lease term and the estimated residual value, less unearned interest income. Interest income is accrued as earned over the term of the lease based on the net investment in leases. Fees incurred to originate the lease are deferred and recognized as an adjustment of the yield on the lease. Portfolio Segmentation The Company’s loan portfolio is disaggregated into two portfolio segments: commercial loans and leases and consumer loans. The Company further disaggregates the commercial loans and leases and the consumer loans portfolio segment into receivable classes for purposes of monitoring and assessing credit quality. Receivable classes within the commercial loan and lease portfolio segment include commercial real estate-construction, commercial real estate-owner occupied, commercial real estate-non-owner occupied, and commercial and industrial, which includes equipment financing leases. Receivable classes within the consumer loan portfolio segment include residential mortgage, home equity, and other consumer. Prior to January 1, 2020, the Company’s loan portfolio was disaggregated into three portfolio segments: commercial, residential mortgage, and consumer and other loans. Receivable classes within the commercial loan portfolio segment included commercial real estate-construction, commercial real estate-owner-occupied, commercial real estate-non-owner occupied, and commercial and industrial. Receivable classes within the consumer and other loans portfolio segment included home equity, indirect automobile, credit card and other. Troubled Debt Restructurings The Company periodically grants concessions to its customers in an attempt to protect as much of its investment as possible and minimize risk of loss. These concessions may include restructuring the terms of a loan to alleviate the burden of the customer’s near-term cash requirements. In order to be classified as a TDR, the Company must conclude that the restructuring constitutes a concession and the customer is experiencing financial difficulties. The Company defines a concession to the customer as a modification of existing terms for economic or legal reasons that it would otherwise not consider. The concession is either granted through an agreement with the customer or is imposed by a court of law. Concessions include modifying original loan terms to reduce or defer cash payments required as part of the loan agreement, including but not limited to:
In its determination of whether the customer is experiencing financial difficulties, the Company considers numerous indicators, including, but not limited to:
If the Company concludes that both a concession has been granted and the customer is experiencing financial difficulties, the Company identifies the loan as a TDR. Prior to January 2020, all TDRs were considered impaired loans and acquired impaired loans accounted for within pools were not reviewed for TDR classification if modified. Non-accrual and Past Due Loans and Leases (Including Loan Charge-offs) Loans and leases are generally considered past due when contractual payments of principal and interest have not been received within 30 days after the contractual due date. Residential mortgage loans are considered past due when contractual payments have not been received for two consecutive payment dates. Loans and leases are placed on non-accrual status when any of the following occur: 1) the loan or lease is maintained on a cash basis because of deterioration in the financial condition of the borrower; 2) collection of the full contractual amount of principal and interest is not expected even if the loan or lease is currently paying as agreed; or 3) when principal or interest has been in default for a period of 90 days or more, unless the loan or lease is both well-secured and in the process of collection. Factors considered in determining the collection of the full contractual amount of principal and interest include assessment of the borrower’s cash flow, valuation of underlying collateral, and the ability and willingness of guarantors to provide credit support. Certain commercial loans and leases are also placed on non-accrual status when payment is not past due and full payment of principal and interest is expected, but the Company has doubt about the borrower’s ability to comply with existing repayment terms. Consideration will be given to placing a loan or lease on non-accrual due to the deterioration of the debtor’s repayment ability, the repayment of the loan or lease becoming dependent on the liquidation of collateral, an existing collateral deficiency, the loan or lease being classified as "doubtful" or "loss," the client filing for bankruptcy, and/or foreclosure being initiated. For all commercial loans and leases, the determination of a borrower’s ability to make the required principal and interest payments is based on an examination of the borrower’s current financial statements, industry, management capabilities, and other qualitative factors. Loans and leases are evaluated for potential charge-off in accordance with the parameters discussed in the following paragraph or when the loan or lease is placed on non-accrual status, whichever is earlier. Prior to January 1, 2020, acquired impaired loans were placed on non-accrual status when the Company could not reasonably estimate cash flows on the loan or loan pool. Loans and leases within the commercial portfolio are generally evaluated for charge-off at 90 days past due, unless both well-secured and in the process of collection. Closed and open-end consumer loans and leases are evaluated for charge-off no later than 120 days past due. Any outstanding loan balance in excess of the fair value of the collateral less costs to sell is charged-off no later than 120 days past due for loans secured by real estate. For non-real estate secured loans and leases, in lieu of charging off the entire balance, loans or leases may be written down to the fair value of the collateral less costs to sell if repossession of collateral is assured and in process. Prior to January 1, 2020, acquired impaired loans were not generally evaluated for charge-off. The accrual of interest, as well as the amortization/accretion of any remaining unamortized net deferred fees or costs and discount or premium, is discontinued at the time the loan or lease is placed on non-accrual status. Accrued but uncollected interest for all loans and leases that are placed on non-accrual status is generally reversed through interest income at 90 days past due. As accrued but uncollected interest is reversed on a timely basis, the Company does not estimate an AECL for accrued interest. Cash receipts received on non-accrual loans or leases are generally applied against principal until the loan or lease has been collected in full, after which time any additional cash receipts are recognized as interest income (i.e., cost recovery method). However, interest may be accounted for under the cash-basis method as long as the remaining recorded investment in the loan is deemed fully collectible. Loans and leases are returned to accrual status when the borrower has demonstrated a capacity to continue payment of the debt (generally a minimum of six months of sustained repayment performance) and collection of contractually required principal and interest associated with the debt is reasonably assured. Additionally, for a non-accrual TDR to be returned to accrual status, a current, well-documented credit analysis is required and the borrower must have complied with all terms of the modification. At such time, the accrual of interest and amortization/accretion of any remaining unamortized net deferred fees or costs and discount or premium shall resume. Any interest income which was applied to the principal balance shall not be reversed and subsequently will be recognized as an adjustment to yield over the remaining life of the loan. Individually Assessed Loans and Leases/Impaired Loans When a loan or lease no longer shares risk characteristics with other loans or leases, it is individually assessed for impairment. While management considers a variety of factors in determining when a loan no longer shares risk characteristics with other loans, generally all TDR and non-accrual loans above certain thresholds are considered to meet this requirement and are individually assessed for impairment. Impairment losses are measured on a loan-by-loan basis for these commercial and consumer loans and leases, based on either the present value of expected future cash flows discounted at the loan or lease’s effective interest rate or the fair value of the collateral if the loan or lease is collateral-dependent. This measurement requires significant judgment and use of estimates, and the actual loss ultimately recognized by the Company may differ significantly from the estimates. Prior to January 1, 2020, a loan was considered to be impaired when, based on current information and events, it was probable that the Company would be unable to collect the scheduled payments of principal and/or interest in accordance with the contractual terms of the loan agreement. Generally all TDRs regardless of the outstanding balance amount or portfolio classification, and all acquired impaired loans were considered to be impaired. Loans that experienced insignificant payment delays and payment shortfalls generally were not classified as impaired. Impairment losses were measured on a loan-by-loan basis for commercial and certain residential mortgage or consumer loans, based on either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the fair value of the collateral if the loan was collateral-dependent. Allowance for Expected Credit Losses The Company maintains the AECL at a level that management believes appropriate to absorb estimated lifetime credit losses, including losses associated with unfunded commitments. The AECL includes the allowance for loan and lease losses (ALLL) (contra asset) and the reserve for unfunded commitments (liability). Determination of the appropriate AECL involves a high degree of complexity and requires significant judgment regarding the credit quality of the loan portfolio and management’s view of future economic conditions. Several factors are taken into consideration in the determination of the overall AECL which include, but are not limited to, the overall risk profiles of the loan and lease portfolios, net charge-off experience, the level of loans and leases that require an individual assessment for impairment, the level of non-performing loans and leases, the level of 90 days past due loans and leases, the value of collateral, among other factors. The Company also considers forecasts of future national and regional economic conditions, overall asset quality trends, changes in lending practices and procedures, trends in the nature and volume of the loan portfolio (including the existence and effect of any portfolio concentrations), changes in experience and depth of lending staff, the Company’s legal, regulatory and competitive environment, and data availability and applicability that might impact the portfolio or the manner in which it estimates losses, risk rating accuracy, and risk identification. The Company has developed multiple current expected credit loss models (ECL Models) which segment the Company’s loan and lease portfolio by borrower type (i.e. commercial and consumer) and loan or lease type to estimate lifetime expected credit losses for loans and leases that share similar risk characteristics. These ECL Models primarily use a probability-of-default methodology to estimate expected credit losses for all loan and lease commitments. Within each ECL Model, PDs and LGDs are established at the individual loan or lease commitment level based on various loan or lease specific characteristics. For commercial loans and leases, these characteristics include customer size, industry sector, geographic region, risk rating and collateral/property type, among others. For consumer loans, these characteristics include geographic region, loan size, customer size, fixed or variable rate, lien position, and FICO score, among others. The ECL Models use both internal and external historical loss data, as appropriate, for all available historical periods and a blend of multiple economic forecasts as approved by ALCO to estimate expected credit losses over a reasonable and supportable forecast period. The ECL Models then revert to longer term historical loss experience on a straight-line basis to arrive at lifetime expected credit losses. The selection of the economic forecasts, the forecast period and reversion period and methodology are reviewed and approved quarterly. The ECL Models also take into consideration the effects of prepayments and draw-down assumptions for any unfunded commitments, as applicable. Qualitative adjustments are incorporated into the ECL Model-based estimate of expected credit losses to accommodate for the imprecision of certain assumptions and uncertainties inherent in the calculation. Loans or leases that no longer share similar risk characteristics with other loans or leases in the portfolio must be individually evaluated for impairment. For these loans and leases, the AECL is determined on an individual loan and lease commitment basis, taking into consideration facts and circumstances specific to each borrower. As discussed above, the AECL for individually assessed loans or leases is based on the difference between the recorded investment in the loan or lease and either the estimated net present value of projected cash flows or the estimated value of the collateral associated with a collateral-dependent loan, less cost to sell. The overall AECL is allocated between the ALLL and the reserve for unfunded commitments based on the loan’s percentage funded and the future funding expectations of the loan. Prior to January 1, 2020, the allowance for credit losses was maintained at a level appropriate to absorb estimated probable credit losses incurred in the loan portfolio, including unfunded commitments as of the consolidated balance sheet date. The manner in which the allowance for credit losses was determined was based on 1) the accounting method applied to the underlying loans and 2) whether the loan was required to be measured for impairment. The Company delineated between loans accounted for under the contractual yield method, legacy loans (originated loans), acquired non-impaired loans, and acquired impaired loans. Further, for legacy and acquired non-impaired loans, the Company attributed portions of the allowance for credit losses to loans and loan commitments that it measured individually, and groups of homogeneous loans and loan commitments that it measured collectively for impairment. Prior to January 1, 2020, the allowance for loan losses for all impaired loans (excluding acquired impaired loans) was determined on an individual loan basis, considering the facts and circumstances specific to each borrower. The allowance was based on the difference between the recorded investment in the loan and generally either the estimated net present value of projected cash flows or the estimated value of the collateral associated with a collateral-dependent loan. The determination of the allowance for loan losses for acquired impaired loans prior to January 1, 2020 is further discussed in the “Loans” section of this footnote. Prior to January 1, 2020, the allowance for loan losses for all non-impaired loans (excluding acquired impaired loans) was calculated based on pools of loans with similar characteristics. The pool-level allowance was calculated through the application of PD and LGD factors for each individual loan. PDs and LGDs were determined based on historical default and loss information for similar loans. For purposes of establishing estimated loss percentages for pools of loans that shared common risk characteristics, the Company’s loan portfolio was segmented by various loan characteristics including loan type, risk rating for commercial, Vantage or FICO score for residential mortgage and consumer, past due status for residential mortgage and consumer and call report code. The default and loss information was measured over an appropriate period for each loan pool and adjusted as deemed appropriate. Qualitative adjustments were incorporated into the pool-level analysis to accommodate for the imprecision of certain assumptions and uncertainties inherent in the calculation.
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Fair Value of Financial Instruments |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Financial Instruments | FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amount and estimated fair values of the Company’s financial instruments, as well as the level within the fair value hierarchy, are included in the tables below. See Note 1, Summary of Significant Accounting Policies, in the 2019 10-K, for a description of how fair value measurements are determined.
The fair value estimates presented herein are based upon pertinent information available to management as of March 31, 2020 and December 31, 2019. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since these dates and, therefore, current estimates of fair value may differ significantly from the amounts presented herein.
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Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2020 |
Mar. 31, 2019 |
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Income Statement [Abstract] | ||
Unrealized holding gains (losses) arising during the period, tax expense (benefit) | $ 17,342 | $ 10,675 |
Change in fair value of derivative instruments designated as cash flow hedges, tax expense | 3,209 | (471) |
Reclassification adjustment for gains (losses) included in net income, tax expense (benefit) | $ (136) | $ (75) |
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